Q2 2024 Banc of California Inc Earnings Call

Good day.

Operator: and welcome to the Bank of California second quarter of 2024 earnings conference call. All participants will be in a listen-only mode.

Speaker Change: And welcome to the Banc of California's second quarter of 2024 earnings Conference call.

Speaker Change: All participants will be in a listen only mode and should you need any assistance during the call. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: And should you need any assistance during the call, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your touch-tone phone.

Speaker Change: After today's remarks, there will be an opportunity to ask questions.

Speaker Change: Can I ask a question you May press Star then one on your Touchtone phone. If you would like to withdraw question you May Press Star then two please.

Speaker Change: Please also note that this event is being recorded today.

Operator: If you would like to withdraw a question, you may press star, then 2 on your touch-tone phone. Please also note that this event is being recorded today. I would now like to turn the conference over to Anne DeVries, Head of Investor Relations. Please do so.

Anne <unk>: I would now like to turn the conference over to Anne <unk> head of Investor Relations. Please go ahead.

Anne <unk>: Good morning, and thank you for joining banc of California's second quarter earnings call. Today's call is being recorded and a copy of the recording will be available later today on our Investor Relations website. Today's presentation will also include non-GAAP measures. The reconciliations for these measures and additional required information is available in the earnings press release and earnings presentation.

Anne DeVries: Good morning, and thank you for joining Banc of California's second quarter earnings call. Today's call is being recorded, and a copy of the recording will be available later today on our Investor Relations website. Today's presentation will also include non-GAAP measures, the reconciliations for these measures, and additional required information is available in the earnings press release and earnings presentation, which are available on our Investor Relations website.

Anne <unk>: And which are available on our Investor Relations website.

Anne <unk>: Before we begin we would like to remind everyone that today's call may include forward looking statements, which are subject to risks uncertainties and other factors outside of our control and actual results may differ materially for a discussion of some of the risks that could affect our results. Please see our safe Harbor statement on forward looking statements included in both the earnings release and the earnings.

Anne DeVries: Before we begin, we would like to remind everyone that today's call may include forward-looking statements, which are subject to risks, uncertainties, and other factors outside of our control, and actual results may differ materially. For discussion of some of the risks that could affect our results, please see our safe harbor statement on forward-looking statements included in both the earnings release and the earnings presentation, as well as the risk factor section of our most recent 10-K.

Speaker Change: As well as the risk factors section of our most recent 10-K joining me on today's call are Jared Wolff, President Chief Executive Officer, and Joe Kelley, Our Chief Financial Officer. After our prepared remarks, we will be taking questions from the analyst community.

Anne DeVries: Joining me on today's call are Jared Wolff, President and Chief Executive Officer, and Joe Kauder, Chief Financial Officer. After our prepared remarks, we will be taking questions from the analyst community. I would like to now turn the conference call over to Jared. Thank you, Anne.

Speaker Change: Like to now turn the conference call over to Jared.

Jared M. Wolff: Thank you Anne.

Jared M. Wolff: Good morning, everyone and.

Jared M. Wolff: Good morning, everyone, and welcome to Banc of California's second quarter earnings call. I'd like to start off by highlighting our successful core system conversion that was completed this past weekend. As we have previously discussed, we made the decision to move on to the Legacy PacWest system, FIS, and ConvertBank of California customers. Our rationale was threefold.

Jared M. Wolff: And welcome to Banc of California's second quarter earnings call.

Speaker Change: I'd like to start off by highlighting our successful core system conversion that was completed this past weekend.

Speaker Change: As we have previously discussed we made the decision to move on to the legacy Pac West system F. I S.

Jared M. Wolff: Banc of California customers.

Jared M. Wolff: Our rationale was threefold first we would control risks by converting the smaller customer base.

Jared M. Wolff: First, we would control risk by converting the smaller customer base. Second, we were able to negotiate with FIS to deliver some outstanding enhancements that would benefit all of our customers and ensure we maintain a leadership position with our digital offerings. And third, the overall price was compelling and resulted in key savings for the combined company. Our team, in collaboration with FIS, has dedicated an extraordinary amount of effort over the past seven months and has successfully converted nearly 20,000 clients and over 55,000 accounts. We've had minimal disruptions to date, and while we continue to be vigilant, I'm very pleased with the conversion, and I want to congratulate our teams on another successful effort.

Jared M. Wolff: Second we were able to negotiate with F. I asked to deliver some outstanding enhancements that would benefit all of our customers and ensure we maintain a leadership position with our digital offerings.

Jared M. Wolff: And third the overall price was compelling and resulted in savings for the combined company.

Speaker Change: Our team in collaboration with Fas has dedicated an extraordinary amount of effort over the past seven months.

Speaker Change: Successfully converted nearly 20000 clients and over 55000 accounts we've.

Speaker Change: We have had minimal disruptions to date and while we continue to be vigilant I'm very pleased with the conversion and I want to congratulate our teams on another successful effort.

Jared M. Wolff: We effectively integrated a $10 billion bank onto a new system, and our team did an outstanding job. With this important merger milestone behind us, we are energized about bringing the full power of our platform to our expanded client base and new prospects. Additionally, last week, we completed the sale of approximately $1.95 billion of civic loans through a process we ran with Morgan Stanley, who had deep familiarity with the portfolio. Due to the quality of the portfolio, we received numerous bids and ultimately sold it at a price above 98% of the underpaid principal balance, which was at the higher end of our target range.

Speaker Change: We effectively integrated a $10 billion bank onto a new system and our team did an outstanding job.

Speaker Change: With this important merger milestone behind US we are energized about bringing the full power of our platform.

Speaker Change: <unk> client base and prospects.

Speaker Change: Additionally, last week, we completed the sale of approximately 1.95 billion of civic loans to a process. We ran with Morgan Stanley who had deep familiarity with the portfolio.

Jared M. Wolff: As a result, we have received net proceeds of approximately $1.9 billion and have freed up approximately $100 million in Tier 1 capital. We used about $545 million of the proceeds to pay down the outstanding portion of the BTFP, and we expect to use the remaining proceeds to retire expensive funding and support growth. Additionally, we expect that some of the capital may be used to help us reposition a portion of our securities portfolio into higher-yielding securities. We have several options we are evaluating, and we'll be able to share this more fully when we announce third-quarter earnings. Again, I want to congratulate our team on the terrific execution of this sale.

Speaker Change: Due to the quality of the portfolio, we received numerous bids and ultimately sold it at a price above 98% of the unpaid principal balance which was at the higher end of our target range.

Speaker Change: As a result, we have received net proceeds of approximately $1 9 billion.

Speaker Change: And have freed up approximately $100 million in tier one capital.

Speaker Change: We used about $545 million of the proceeds to pay down the outstanding portion of the V. P. F P.

Speaker Change: And expect to use the remaining proceeds to retire expensive funding and support growth.

Speaker Change: Additionally, we expect that some of the capital may be used to help us reposition a portion of our securities portfolio into higher yielding securities.

Speaker Change: We have several options, we are evaluating and will be able to share. This more fully when we announced third quarter earnings again, I want to congratulate our team on a terrific execution of itself.

Speaker Change: As we turn to discussing the quarter.

Jared M. Wolff: As we turn to discussing the quarter, these two initial efforts highlight our active transformation efforts, doing the work necessary to create a strong, well-positioned balance sheet that generates high quality and sustainable earnings. During the second quarter, we continued to execute well and made solid strides toward driving long-term profitability. We paid down $1 billion in higher-cost BTFP funding, which contributed to our NIM expansion during the quarter.

Speaker Change: These two initial efforts highlight our active transformation efforts do.

Speaker Change: Doing the work necessary to create a strong well positioned balance sheet that generates high quality sustainable earnings.

Speaker Change: During the second quarter, we continued to execute well.

It made solid strides toward driving long term profitability.

Speaker Change: We paid down $1 billion in higher cost Bts P funding, which contributed to our NIM expansion during the quarter.

Jared M. Wolff: Our bankers' efforts to deepen and expand client relationships have resulted in steady growth in new, non-issue-sparing deposits from new relationships to the bank, with $230 million generated in just two quarters. Our bankers also originated over $1 billion in loan commitments during the second quarter alone. We are on track to realize our expense-saving target.

Speaker Change: Our bankers efforts to deepen and expand client relationships have resulted in steady growth in new noninterest bearing deposits from new relationships to the bank with 230 million generated in just two quarters.

Speaker Change: Our bankers also originate over 1 billion in loan commitments during the second quarter alone.

Speaker Change: We are on track to realize our expense savings targets and we expect our operating expenses to continue to come down through the remainder of the year with the greatest.

Jared M. Wolff: And we expect our operating expenses to continue to come down through the remainder of the year, with the greatest part of this impact showing up in Q4. Restructurings take time, and we are moving at a fairly good pace. During the second half of the year, we will continue to optimize the balance sheet, bring down expenses to achieve our cost targets, build pipelines, and maintain strong credit quality, all while building up capital and growing earnings.

Speaker Change: As part of this impact showing up in Q4.

Speaker Change: Restructuring is take time.

Speaker Change: And we are moving at a fairly good pace.

Speaker Change: During the second half of the year, we will continue to optimize the balance sheet bring down expenses to achieve our cost targets build pipelines and maintain strong credit quality, all while building up capital and growing earnings we expect.

Jared M. Wolff: We expect these efforts will position us well to generate profitable, consistent growth as we look into next year. With respect to pipelines, while the overall climate for lending remains sluggish, we are seeing growth in certain areas, and pipelines are building, notably warehouse, fund finance, construction, and some core C&I continue to show momentum while traditional real estate lending remains slower. As was the case in the prior quarter, new loans are coming in at higher rates than what is paying off, so our loan production is accretive to our net interest margin. Our efforts to bring new relationships to the bank and capitalize on our market position continue to bear fruit as we average an I.B. Three percent quarter over quarter.

Speaker Change: These efforts will position us well to generate profitable consistent growth.

Speaker Change: Look into next year.

Speaker Change: With respect to pipeline, while the overall climate for lending remains sluggish we are seeing growth in certain areas and pipelines are building.

Speaker Change: Notably warehouse fund finance construction and some core C&I continue to show momentum, while traditional real estate lending remains slower.

Speaker Change: As was the case in the prior quarter and new loans are coming in the books at higher rates than what is paying off so our loan production is accretive to our net to our net interest margin.

Speaker Change: Our efforts to bring new relationships to the bank and capitalize on our market position continues to bear fruit as we grew average and <unk>, 3% quarter over quarter.

Jared M. Wolff: Our end-of-period balances of NIB were slightly lower than the prior quarter as we saw some volatility late in the quarter, but so far in the third quarter, we have seen balances continue to grow. During the second quarter, we also made the decision to move lender finance back to our core portfolio and resume efforts to grow this business line. Historically, the Lender Finance Book performed well with strong credit quality.

Speaker Change: Our end of period balances of Niv were slightly lower than the prior quarter as we saw some volatility late in the quarter, but so far in the third quarter, we have seen balances continue to grow.

Speaker Change: During the second quarter. We also made the decision to move lender finance back to our core portfolio and resume efforts to grow this business line here.

Speaker Change: Historically, the lender finance book performed well with strong credit quality.

Jared M. Wolff: PacWest made the decision to discontinue the portfolio due to some liquidity issues, as we all know. But this is an asset class that provides attractive risk-adjusted yields, and we have ample opportunities to steadily grow the portfolio by adding loans that meet our dispensable pricing criteria and underwriting standards. The movement of civic loans to help for sale had a positive impact on nearly all of our asset quality metrics in the quarter, with significant declines in non-performing loans and delinquencies, as our loan portfolio continues to perform well on a broad basis.

Speaker Change: Pac West made the decision to discontinue the portfolio due to some liquidity issues as we all know.

Speaker Change: But this is an asset class that provides attractive risk adjusted yields and we have ample opportunities to steadily grow the portfolio by adding loans that meet our disciplined pricing criteria and underwriting.

Speaker Change: The movement of civic loans to held for sale had a positive impact on nearly all of our asset quality metrics in the quarter.

Speaker Change: With significant declines in nonperforming loans and delinquencies.

Speaker Change: Our loan portfolio continues to perform well on a broad basis.

Jared M. Wolff: We did see an increase in criticized and classified loans as we downgraded several rate-sensitive loans in light of the current environment, as we had forecasted we would likely do. Past due and delinquent loans have remained at a relatively low level, which reflects the solid underlying credit quality that we have.

Speaker Change: We did see an increase in criticized and classified loans as we downgraded several rate sensitive loans in light of the current environment and as we had forecasted we were likely to do.

Speaker Change: Past due and delinquent loans have remained at a relatively low level.

Speaker Change: Which reflects the solid underlying credit quality that we have.

Jared M. Wolff: We're being vigilant and will continue to monitor our credit portfolio carefully to look for signs of stress. Our net charge-offs were elevated in the second quarter due to charge-offs related to Civic Portfolio moving to Help for Sale, as the sale price discount to book value runs through charge-offs. We also had $27 million in other net charge-offs, which were primarily related to several commercial real estate loans secured by office properties that had previously largely been reserved for in prior quarters.

Speaker Change: We're being vigilant and we'll continue to monitor our credit portfolio carefully to look for signs of stress.

Speaker Change: Our net charge offs were elevated in the second quarter due to charge offs related to the civic portfolio moving to held for sale as the sale price discount to book value runs through charge offs.

Speaker Change: We also had 12 $27 million and other net charge offs, which were primarily related to several commercial real estate loans secured by office properties that had previously largely been reserved for in prior quarters.

Jared M. Wolff: We maintain a solid level of reserves at 1.19% of total loans, which together with a decline in non-performing loans resulted in us ending the quarter with an NPL coverage ratio of 235%. Importantly, our ACL coverage ratio of 1.19% reflects an improvement from 1.15% at March 31st if you adjust for the Civic Loan Sale. I think it's also important to note that our economic coverage ratio, which incorporates the lost coverage from our credit link notes, as well as the unearned credit mark from purchased accounting, is substantially higher at 1.83% of loans. Now, I'll hand it over to Joe, who's going to provide some more financial information, and then I'll have closing remarks before opening up the line for questions. Joe

Speaker Change: We maintain a solid level of reserves at 1.19% of total loans, which together with the decline in nonperforming loans resulted us ending the quarter with an NPL coverage ratio of 235%.

Speaker Change: Importantly, our ACL coverage ratio of 1.19% reflects an improvement from 1.15% at March 31st if you adjust for the civic loan sale.

Speaker Change: I think it's also really.

Speaker Change: Important to note.

Speaker Change: That our economic coverage ratio, which incorporates the loss coverage from a credit linked notes.

Speaker Change: As well as the unearned credit Mark from purchase accounting is substantially higher at 1.83% of loans.

Speaker Change: Now, let me hand, it over to Joe Who's going to provide some more financial information and then I'll have closing remarks before opening up the line for questions Joe.

Joseph Kauder: Thank you Jared.

Joseph Kauder: Thank you, Jared. We reported earnings per share of $0.12 for the second quarter. There were a number of noteworthy items that impacted our reported results, and we laid out these items on slide 30 of the earnings presentation. Importantly, these items mostly canceled each other out so that there wasn't really much net impact on EPS, putting aside these items. Our core earnings drivers improved in Q2, resulting in an increase in pre-tax pre-provision

Joseph Kauder: We reported earnings per share of <unk> 12 cents for the second quarter.

Joseph Kauder: There were a number of noteworthy items that impacted our reported results and we laid out these items on slide 30 of the earnings presentation. Importantly, these items, mostly canceled each other out.

Joseph Kauder: So there wasn't really much net impact to EPS.

Joseph Kauder: Putting aside these items our core our core earnings drivers improved in Q2, resulting in an increase in pre tax pre provision income as.

Joseph Kauder: As a result of our financial performance and balance sheet management strategy, we also continued to build capital and further increase our tangible book value per share in the quarter. We generated $229 million in net interest income, which was slightly up from the prior quarter.

Joseph Kauder: As a result of our financial performance and balance sheet management strategies. We also continue to build capital and further increased our tangible book value per share in the quarter.

Joseph Kauder: We generated 229 million and net interest income, which was slightly up from the prior quarter while.

Joseph Kauder: While we had a smaller average balance sheet in the second quarter, this impact was offset by an increase in our net interest margin. Our net interest margin in the quarter increased 14 basis points to 2.80% due to higher average loan yields as new loans are coming on the books at higher rates than what is running off, as well as a further reduction in our cost of funds, partially due to a higher average balance of non-interest-bearing deposits resulting from the addition of new commercial deposit relationships.

Joseph Kauder: While we had a smaller average balance sheet in the second quarter. This impact was offset by an increase in our net interest margin.

Joseph Kauder: Our net interest margin in the quarter increased 14 basis points to 280% due to higher average loan yields as new loans are coming on the books at higher rates than what is running off.

Joseph Kauder: As well as a further reduction in our cost of funds, partially due to a higher average balance of noninterest bearing deposits, resulting from the addition of new commercial deposit relationships.

Joseph Kauder: Our net interest margin trended higher throughout the quarter with our June rate of 2.83%. During the quarter, we originated $1 billion of new loan commitments and an average yield of 8.12%, and we funded $382 million of new loans on our balance sheet at $7.8%. Our yield on gross loans increased 10 basis points in the quarter to 6.18%, and our yield on total earning assets increased nine basis points to 5.65.

Joseph Kauder: Our net interest margin trended higher throughout the quarter with a June rate of 283%.

Joseph Kauder: During the quarter, we originated 1 billion of new loan commitments and average yield of eight 1% 2%.

Joseph Kauder: And we funded 382 million of new loans on our balance sheet at seven 8%.

Joseph Kauder: Our yield and grow our yield on gross loans increased 10 basis points in the quarter to $6 one 8%.

Joseph Kauder: And our yield on total earning assets increased nine basis points to 565%.

Joseph Kauder: During the quarter, we repaid $1 billion of our outstanding balance on the bank term funding program and added some FHA Ob puttable advances, which are our lower rate in the Bts P.

Joseph Kauder: During the quarter, we repaid $1 billion of our outstanding balance in the bank term funding program and added some FHLB puttable advances, which are at a lower rate than the BTFP. We also added some short-term broker deposits to support our near-term liquidity, which we plan to run off with part of the proceeds from the sale of the CIVIC loan. Overall for the quarter, our cost of funds was down 7 basis points to 2.95%, and our cost of deposits was down 6 basis points to 2.60%, with the positive trends we are seeing in both average yield and earning assets, as well as our cost of funds, and the benefit we anticipate achieving from repurposing the capital freed up from the civic transaction.

Joseph Kauder: We also added some short term broker deposits to support our near term liquidity, which we plan to run off with part of the proceeds from the sale of the civic loans.

Overall for the quarter, our cost of funds was down seven basis points to 295% and our cost of deposits was down six basis points to 260%.

Joseph Kauder: With the positive trends, we are seeing in both average yield on earning assets and our cost of funds and the benefit we anticipate achieving from Repurposing. The capital freed up from the civic transaction. We expect further improvement in our net interest margin as we move through the year.

Joseph Kauder: We expect further improvement in our net interest margin as we move through the year. Our non-interest income was $29.8 million, down from the prior quarter primarily due to a lower level of other income from elevated mark-to-market adjustments on our credit link notes and our SBIC equity investments. These marks can fluctuate from quarter to quarter, and other key drivers of non-interest income relatively. Our total non-interest expense was $203.6 million and was impacted by several items, including adjustments to our acquisition-related costs.

Joseph Kauder: Our noninterest income was $29 8 million down from the prior quarter, primarily due to a lower level of other income from elevated mark to market adjustments on our credit linked notes and our S. B IC equity investments.

Joseph Kauder: These mark these market can fluctuate from quarter to quarter.

Joseph Kauder: Other key drivers of noninterest income relatively consistent.

Joseph Kauder: Our total noninterest expense was $203 6 million and was impacted by several items, including adjustments to our acquisition related cost.

Joseph Kauder: I repurchase reserve related to the Civic Loan Sale and continued elevation in our FDIC. Our tax rate was elevated at 32% for the quarter as a result of a couple of one-off tax items related to compensation. As noted, you can find greater detail on these items on slide 30 of the investor presentation. Putting these items aside, our controllable operating expenses declined 5% quarter over quarter primarily due to a reduction in compensation and occupancy costs as we continue to progress with the merger integration.

Joseph Kauder: Repurchase reserve related to the civic loan sale.

You'd elevation in our FDIC expenses.

Joseph Kauder: Our tax rate was elevated at 32% for the quarter as a result of a couple of one off tax items related to compensation.

Joseph Kauder: As noted you can find greater detail on these items on slide 30 of the Investor presentation.

Joseph Kauder: Putting these items aside our controllable operating expenses declined 5% quarter over quarter, primarily due to a reduction in compensation and occupancy costs as we continue to progress with the merger integration.

Joseph Kauder: We expect our total non-interest expense to approach $195-200 million in Q4 of this year, and this represents a 30% reduction year over year when normalizing 4Q23 to include a full quarter of combined company. Our target range anticipates significant reductions in both controllable and other equipment.

Joseph Kauder: We expect our total non interest expense to approach $195 million to $200 million in Q4 of this year and this represents a 30% reduction year over year when normalizing for Q 'twenty three to include a full quarter of combined company expenses are.

Joseph Kauder: Our target range and anticipate significant reductions in both controllable and other expenses.

Joseph Kauder: Turning to the balance sheet.

Joseph Kauder: Turning to the balance sheet, our total loans held for investment were down from the prior quarter, primarily due to the movement of $1.95 billion in civic loans to loans held for sale during the second quarter, the sale of which was completed last week, along with lower balances and other discontinued portfolio loans and runoff we are seeing in low-yielding CRE and multifamily. This was partially offset by the increase we had in mortgage warehouse and construction.

Joseph Kauder: Our total loans held for investment were down from the prior quarter, primarily due to the movement of 195 billion and civic loans to loans held for sale during the second quarter.

Joseph Kauder: In which the sale was completed last week.

Along with lower balances and other discontinued portfolio loans and run off we are seeing in low yielding CRE and multifamily loans.

Joseph Kauder: This was partially offset by the increase we had in mortgage warehouse and construction loans.

Joseph Kauder: Our total deposits were down slightly in the quarter as we continue to utilize our high level of liquidity, so let higher cost deposits run off.

Joseph Kauder: Our total deposits were down slightly in the quarter as we continue to utilize our high level of liquidity to let higher-cost deposits run off, which we are partially replacing with non-interest-bearing deposits generated from our new business development efforts. As I mentioned earlier, we added some short-term broker deposits to support our near-term liquidity, which we plan to run off as part of the proceeds from the sale this year. As we look ahead, we believe we are well positioned for potential rate cuts, with over 90% of our term deposits maturing in one year or less.

Joseph Kauder: Which were partially replacing with noninterest bearing deposits generated from our new business development efforts.

Joseph Kauder: As I mentioned earlier, we added some short term broker deposits to support our near term liquidity, which we plan to run off and part of the proceeds from the sale of the civic ones.

Joseph Kauder: As we look ahead, we believe we are well positioned for potential rate cuts with over 90% of our term deposits maturing in one year or less.

Joseph Kauder: Given the repositioning actions we are continuing to take with our ballot and the continued execution of our core strategy, we expect our net interest margin and overall profitability to expand in subsequent quarters. At this time, I will turn the call back over to Jared. Thanks, Joe.

Joseph Kauder: Given the repositioning actions, we are continue to take with our balance sheet and the continued execution of our core strategy. We expect our net interest margin and overall profitability to expand in subsequent quarters.

Joseph Kauder: At this time I will turn the call back over to Jared.

Okay.

Thanks, Joe.

Jared M. Wolff: Looking ahead to the remainder of the year.

Jared M. Wolff: Looking ahead to the remainder of the year, our primary focus will be on continuing to execute well on the repositioning initiatives that we believe will lead to improved profitability. As we've said before, we expect to consistently move the ball down the field each quarter, as we have consistently done over the last several years.

Jared M. Wolff: Our primary focus will be on continuing to execute well on the repositioning initiatives that we believe will lead to improved profitability.

Speaker Change: As we've said before we expect to consistently move the ball down the field each quarter as we have consistently done over the last several years.

Speaker Change: Specific loan sale is a terrific example of how we are repositioning our balance sheet.

Jared M. Wolff: The Civic Loan Sale is a terrific example of how we are repositioning our balance sheet to right size and optimize yield. This loan sale will provide significant benefits to our capital and liquidity ratios, and we'll improve our core earnings power as we redeploy this capital and liquidity. As mentioned earlier, this includes using the capital relief to reposition our investment securities to improve yields and to use proceeds from the transaction to also pay off higher-cost funding.

Speaker Change: Size and optimize yields.

Speaker Change: This loan sale will provide significant benefits to our capital and liquidity ratios and.

Speaker Change: We will improve our core earnings power as we redeploy this capital and liquidity.

Speaker Change: As mentioned earlier this includes using the capital relief to reposition our investment securities to improve yields and she used proceeds from the transaction to also pay off higher cost funding.

Speaker Change: With the expansion of our margin and reduction in our operating expense, we expect to see steady improvement in our level of profitability.

Jared M. Wolff: With the expansion in our margin and reduction in our operating expenses, we expect to see steady improvement in our level of profitability. Our actions will result in the bank ending this year in a position that will drive profitable growth in 2025 and lead us to our profitability target. Importantly, as we improve the balance sheet, we have taken an approach that rewards long-term profitability over short-term gain. Each quarter, we have the opportunity to improve profitability in the short term by extending the duration of some of our deposits. However, we have intentionally stayed intentionally very short, which means we are paying a higher cost today than we otherwise would.

Speaker Change: Our actions will result in the bank and even this year in a position that will drive profitable growth in 2025 and lead us to our profitability targets.

Speaker Change: Importantly.

Speaker Change: As we improve the balance sheet.

Speaker Change: We have taken an approach that rewards long term profitability over short term gains each.

Speaker Change: Each quarter, we have the opportunity to improve profitability in the short term.

Extending duration on some of our deposits.

Speaker Change: We have stayed intentionally very short, which means we are paying higher cost today.

Speaker Change: And then we otherwise what.

Jared M. Wolff: We believe the future benefit is much greater than the benefits we could realize today. Given our deposit profile and liability-sensitive position, we are well-poised to benefit significantly as interest rates move lower. I understand that it is perhaps challenging from the outside to see the profitability profile as we undertake these important steps, particularly when quarterly results have multiple moving parts. However, we have visibility to our goals and remain focused on our targets.

Speaker Change: We believe the future benefit is much greater than the benefits we can realize today.

Speaker Change: Given our deposit profile and liability sensitive position, we are well poised to benefit significantly as interest rates move lower.

Speaker Change: I understand that it is perhaps challenging from the outside to see the profitability profile as we undertake these important steps, particularly when quarterly results have multiple moving parts.

Speaker Change: However, we have visibility to our goals and remain focused on our targets.

Jared M. Wolff: What is important to us is not the specific quarter in which we achieve it, but the quality and sustainability of our profitability, so that when we are there, we cross that threshold and then have the strong balance sheet to keep moving beyond it with flexibility in various rate environments. We are doing that hard work now. In the meantime, we are focused on growing low-cost deposits, building solid pipelines, increasing operating efficiency through expense discipline, and ensuring credit quality remains strong.

Speaker Change: What is important to us is not a specific quarter in which we achieve it but the quality and sustainability of our profitability. So that when we are there we crossed that threshold and then have the strong balance sheet to keep moving beyond it with flexibility and various rate environments. We are doing that hard work now.

Speaker Change: In the meantime, we are focused on growing low cost deposits building solid pipelines, increasing operating efficiency through expense discipline and ensuring credit quality remained strong.

Jared M. Wolff: Furthermore, as we continue to build capital, we will be looking for ways to deploy it when we are confident our balance sheet moves are largely accomplished, and capital growth will continue. Our vision is to be a leading and high-performing commercial bank with strong core business deposits, excellent credit quality, and solid profitability. California is one of the most vibrant, attractive markets in the country, and we are proud to be the third largest bank headquartered there.

Speaker Change: Further as we continue to build capital.

Speaker Change: We will be looking for ways to deploy it when we are confident in our balance sheet moves are largely accomplished and capital growth will continue.

Speaker Change: Our vision is to be a leading and high performing commercial bank with strong core business deposits excellent credit quality and solid profitability.

Speaker Change: For me it was one of the most vibrant attractive markets in the country and we are proud to be the third largest bank headquartered here.

Jared M. Wolff: Now that the conversion is complete, we'll begin stronger marketing efforts as a combined company to grow our client base and recruit talent in all of our markets, and further the reputation we have built for providing a superior level of expertise, service, and technology, including robust treasury management and payment solutions. We continue to see opportunities to take advantage of our market position and strong balance sheet and add attractive new client relationships with commercial customers, above all else.

Speaker Change: Now that the conversion is complete we will begin stronger marketing efforts as a combined company to grow our client base and recruit talent in all of our markets.

Speaker Change: Further the reputation we have built for providing a superior level of expertise service and technology, including robust Treasury management and payment solutions.

Speaker Change: We continue to see opportunities to take advantage of our market position and strong balance sheet and add attractive new client relationships with commercial customers.

Speaker Change: Above all else.

Jared M. Wolff: Our business is a people business, and we benefit from having talented and dedicated colleagues across our company and across the country. I want to thank them for their continued efforts to build our company. We'd like to say Banc of California.

Speaker Change: Our business is a people business and we benefit from having talented and dedicated colleagues across our company and across the country.

Speaker Change: I want to thank them for their continued efforts to build our company.

Speaker Change: We like to say at Banc of California.

Operator: We'd like to say at Banc of California that banking is a team sport, and I couldn't be more proud of our team and all that we have accomplished together in just two full quarters. I am very confident in our success in the future. With that, Operator, let's go ahead and open up the line for questions. We will now begin the question and answer session. To ask a question, you may press the star, then 1 on your touch-tone phone.

Speaker Change: We'd like to say I think of California that banking is a team sport and I couldnt be more proud of our team and all that we've accomplished together and just two full quarters.

Speaker Change: I am very confident in our success ahead with.

Speaker Change: That operator, let's go ahead and open up the line for questions.

Speaker Change: We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

Operator: If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, you may press star, then... At this time, we will pause just momentarily to assemble our roster. And our first question today will come from Matthew Clark with Piper Sandler. Please go ahead. Hey, good morning, everyone. Good morning.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw. Your question you May Press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Yeah.

Speaker Change: And our first question today will come from Matthew Clark with Piper Sandler. Please go ahead.

Matthew Clark: Hey, good morning, everyone.

Matthew Clark: Good morning.

Matthew Clark:

Speaker Change: First on the FDIC.

Matthew Clark: First on the FDIC assessment costs, I mean, they have been elevated for a while. Legacy PacWest, I think, was running. $37 million in the last quarter before you all merged. And, you know, I think before, you know, before the turmoil, there were, you know, high single digits. So what are you assuming in terms of relief around FDIC assessment costs in the fourth quarter? And then how much do you think you might be able to?

Speaker Change: <unk> cost I mean, they have been elevated for a while legacy Pac West I think was running.

37 million last quarter.

Speaker Change: Before you all merged and I think you know before the turmoil there were high single digits. So.

Speaker Change: What are you assuming in terms of.

Speaker Change: Relief around FDIC.

Our assessment costs in the fourth quarter and then how much do you think you might be able to.

Matthew Clark: Eliminate, assume. You know, you get things right-sized by year-end, and you also get brokered CDs down to some normal level. It sounds like it's going to take a little bit of time, but... Just trying to get a sense for how much you're assuming in the fourth quarter and how much you would still consider as excess in 2025. Yeah, good question.

Speaker Change: Eliminate assuming.

Speaker Change: You get a you get things right sized by yearend.

You also get brokerage Cds down to some normal level. It sounds like it's going to take a little bit of time, but.

Speaker Change: I'm, just trying to get a sense for how much you're assuming in the fourth quarter and how much would you still consider as excess in 2025.

Jared M. Wolff: So a couple things. First of all, this quarter, you probably noticed that the increase was both on the normal assessment plus a catch-up for the special assessment. So there are those things.

Speaker Change: Yeah. Good question. So a couple of things first of all this quarter you probably noticed that the increase was both on the normal assessment plus a catch up for the special assessment.

Speaker Change: So there's there's those things when you may and just to remind everybody when you when we make our accrual and.

Jared M. Wolff: When you may, and just to remind everybody, when we make our accrual, in this period as we're changing the company, we don't have a history of consistent FDIC assessments. So we have to make an estimation of what our assessment will be, and we accrue for that, and then we have a catch-up. As we get to normal levels, it's going to be kind of a more predictable assessment, and so that accrual will probably be much closer to the actual numbers.

Speaker Change: In this period as we're changing the company.

Speaker Change: We don't have a history of consistent FDIC assessment. So we have to make an estimation of what our assessment will be and we accrue for that and then we have a catch up as we get to normal levels, it's going to be kind of a more predictable assessment and so that accrual will be probably much closer to the actual numbers.

Jared M. Wolff: PacWest in normal times, and let's call that early 2023, excuse me, early 2022, mid-2022, and when they were larger than us, had a quarterly assessment of $10 million, approximately. They ran at the end at about $36 million.

Speaker Change: Pac West in normal times, and let's call that early 2023 excuse me early 2020 to mid 2022 and.

And when they were larger than us.

Speaker Change: Quarterly assessment of 10 million Bucks approximately.

Speaker Change: They ran at the end at about 36 million Bucks.

Jared M. Wolff: We think we're going to get down to that $10 million level, maybe $12 million because there's been some increase in FDIC costs that they've applied to all banks. So I think a $10 to $12 million number is fair. And we think we can get there by the fourth quarter. But if it's the first quarter, it's the first quarter.

Speaker Change: We're going to get down to that $10 million level, maybe $12 million because there's been some increase in FDIC costs that they've applied to all banks.

Speaker Change: So I think a $10 million to $12 million number is fair and we think we can get there by the fourth quarter, but if it's the first quarters, the first quarter, but as of right. Now we think we can get there in the fourth quarter.

Jared M. Wolff: But as of right now, we think we can get there in the fourth quarter. Okay, but that sounds like it's not baked into your 4Q expense guide. Is that fair? I think it is. Joe, is that baked into our number? Yeah, we assume we can get down to the high end of that range by the fourth quarter. Okay. Got it. And then just on Civic... How much non-interest expense do we have?

Unknown Attendee: Fourth quarter. Okay, but it sounds like it's not baked into your four cue expense guide.

Speaker Change: Okay, but it sounds like it's not baked into your <unk> expense guide is that fair.

Unknown Attendee: Is that fair? I think I think it is.

Speaker Change: I think I think it is Joe is that baked into our number.

Jared Shaw: Joe, is that baked into our number? Yeah, we assume we can get down to the high end of that range by the fourth quarter.

Joseph Kauder: Yeah, we assume we can get down to the high end of that range by the fourth quarter.

Okay.

Joseph Kauder: Got it.

Joseph Kauder: And then just on civic, how much of non-interest expense, really, full you get from selling that portfolio? I think there were some expenses tied to that book. Yep, one of non-interest. We have, yeah, there's there's head count of expense and other expense. We are still servicing those loans. And we have commitments to, for on some of the loans that we sell, that will require some of that expense to continue. We think the relief is going to come at the end of the year. And it's, you know, you can think of how it is.

Joseph Kauder: And then just on civic.

Joseph Kauder: <unk>.

Speaker Change: How much of.

Joseph Kauder: Noninterest expense.

Jared M. Wolff: What relief will you get from selling that portfolio? I think there were some expenses tied to that, book on a non-interest rate. Yeah, there's headcount expenses and other expenses.

Joseph Kauder: Leif will you get from selling that portfolio I think there was some.

Joseph Kauder: Expenses tied to that.

Speaker Change: Book on a non should we haven't yes, there's head count expense and other expense were still servicing those loans and we have commitments to for on some of the loans that we sell that will require some of that expense to continue we think the relief is going to come at the end of the year.

Jared M. Wolff: We are still servicing those loans, and we have commitments on some of the loans that we sell that will require some of that expense to continue. We think the relief is going to come at the end of the year, and it's, you know, you can think about it as a lot of the expense is gone, but you can think about it as maybe two million bucks, three million bucks that will continue to dry up and probably show up in the fourth quarter.

Speaker Change: And it's you.

Speaker Change: You can think about it as a lot of the expense is gone, but you can think about it is maybe 2 million Bucks 3 million Bucks that will.

Joseph Kauder: A lot of the expenses gone, but you can think of how it is, maybe two million bucks, three million bucks that will continue to dry out and probably show up in the fourth quarter.

Speaker Change: Continuing to dry out and probably show up in the fourth quarter.

Joseph Kauder: Okay, and then on that loan sale, a 1.9 billion, how much do you think we'll go to pay down broker CDs? I think we're going to use, you know, probably somewhere north of half of that to pay down broker CDs. It just sort of depends on some of the other actions we might want to take with our balance sheet.

Speaker Change: Okay and then.

Jared M. Wolff: Okay, and then... On that loan sale of $1.9 billion, how much do you think will go to pay down the brokered CDs? I think we're going to use, you know, probably somewhere north of half of that to pay down the brokered CDs. It just sort of depends on some of the other actions we might want to take with our balance sheet. Okay, and then just on credit. [inaudible] Can you isolate the charge-offs tied to the two previously identified office credits and whether or not you think there's anything else behind that, within that portfolio? And then I'll just ask a quick one on classified, too. Yeah, but I don't expect it as of now, Matthew.

Speaker Change: On that.

Speaker Change: Loan sale of $1 9 billion, how much do you think will go to pay down brokered Cds.

Speaker Change: I think we're going to use you know probably somewhere north of half of that to pay down brokered Cds or just sort of depends on some of the other actions we might want to take with our balance sheet.

Matthew Clark: Okay, and then just on credit, can you isolate the charge-off tied to the two previously identified office credits and whether or not you think there's anything else behind that within that portfolio. And then I'll just ask a quick one on classified two. Yeah, I don't expect it as of now, Matthew. I mean, I look, we've been doing as much as we can on the portfolio to get ahead of things. I think we've signaled that we were going to be appropriately aggressive in terms of looking at credit and viewing things and moving migrating credit. But with the whole goal of making sure that credit in future periods doesn't become a headwind when we're done with restructuring and becoming earning assets story and start showing higher profitability.

Speaker Change: Okay.

Speaker Change: And then just on credit.

Speaker Change:

Speaker Change: Can you isolate the charge offs tied to the two previously identified office credits in.

Speaker Change: And whether or not you think there is anything else.

Speaker Change: Behind that within that portfolio.

Speaker Change: <unk>.

Speaker Change: And then I'll just ask a quick one on classified too.

Jared M. Wolff: I mean, look, we've been doing as much as we can on the portfolio to get ahead of things. I think we've, [inaudible] Obviously, we're environment dependent. And if there is some sort of economic downturn, if there's some sort of, you know, broader event in an office or in, you know, the credit environment generally, we're going to be subject to that. Some people think that rates are going to come down only if there is a recession, meaning rates will come down, but we're probably not going to escape a recession. I currently think that's probably not going to happen. It looks like they're going to stick the landing, but

Speaker Change: Yeah.

Speaker Change: I don't expect it as of now Matthew I mean look we've been doing as much as we can on the portfolio to get ahead of things I think we've.

Speaker Change: Signal that we were going to be appropriately aggressive in terms of looking at credit and viewing things and moving migrating credit, but with the whole goal of making sure that credit in future periods. It doesn't become a headwind when we're done with restructuring and become an earning asset story and start showing higher profitability. So we're trying to get ahead of it.

Matthew Clark: So we're trying to get ahead of it as much as we can. Obviously, we're environment dependent. And if there's some sort of economic downturn, if there's some sort of, you know, broader events in office or in, you know, the credit environment generally, we're going to be subject to that. Some people think that rates are going to come down only if there's a recession, meaning rates will come down, but we're probably not going to escape a recession. I currently think that's probably not going to happen. It looks like they're going to stick the landing, but it's hard to know.

Speaker Change: As much as we can.

Speaker Change: Obviously, we're environment dependent and if there is some sort of economic downturn, if theres some sort of.

Speaker Change: No broader events in <unk> and.

Speaker Change: In office or <unk>.

You know the credit environment generally we're going to be subject to that some people think that rates are going to come down only if there's a recession.

Speaker Change: Meaning rates will come down, but we're probably not going to skip a recession.

Speaker Change: Currently I think that's probably not going to happen it looks like they're going to stick the landing but.

Jared M. Wolff: It's hard to know. I mean, we are trying to be appropriately aggressive in looking at credit, migrating now what should be migrated so that we don't have headwinds when we want to show greater profitability. Okay, great. And then just the increase in classified sounds like... You're being a little proactive there on repricing risk. It looks like some of it showed up in commercial real estate. But can you just speak to the kind of specific types of businesses or industries that drove that and your view on loss potential? Yeah, it's mostly real estate.

Speaker Change: It's hard to know I mean, we are trying to be appropriately aggressive in <unk> and looking at credit migrating now what what should be migrated so that we don't have headwinds when we want to show greater profitability.

Matthew Clark: I mean, we are trying to be appropriately aggressive and for and looking at credit migrating now, what should be migrated. So that we don't have headwinds when we want to show greater profitability.

Speaker Change: Okay, Great and then just the increase in classified it sounds like.

Matthew Clark: And then just the increasing classified sounds like you're being a little proactive there on repricing risk. It looks like some of it shows up in commercial real estate, but can you just speak to.

Speaker Change: You are being a little proactive there on repricing risk it looks like some of it showed up in commercial real estate, but can you just speak to kind of spin.

Speaker Change: Specific types of businesses or industries that that drove that and yes.

Speaker Change: And it's most of the your view on your view on loss potential.

Speaker Change: Yes, it's mostly real estate.

Jared M. Wolff: And it's repricing risk if we think that, you know, we do the modeling and we say, look, even if these loans are well secured, and even if they have strong guarantors, uh... and strong support you know what does it look like when rates go higher before they come down relative to where they are now, And that doesn't mean we're going to lose a dime on them, but it means that we had to rate them differently in the current environment, and I think it was a proactive thing that our team did, but it's primarily real estate loans. And our next question will come from Jared Shaw with Barclays. Please go ahead.

Speaker Change: Its repricing risk if we think that.

Speaker Change: We do the modeling and we say look even if these loans are well secured and.

Speaker Change: And even if they have strong guarantors.

Speaker Change: And strong support.

Speaker Change: What does it look like when rates go higher before they come down relative to where they are now.

And that doesn't mean, we're going to lose a dime on them, but it means that we had to rate them differently.

Speaker Change: The current environment and I think it was a proactive thing that our team did but it's primarily real estate loans.

Speaker Change: Got it thanks.

Matthew Clark: Thank you Matthew.

Speaker Change: And our next question will come from Jared Shaw with Barclays. Please go ahead.

Jared M. Wolff: Hey, guys good morning.

Jared M. Wolff: Hey guys, good morning. You know, I think maybe to start off, when we look at where we exit 2024 from an earning asset point of view, with all the puts and takes from loan sales and some of the restructuring, where do you think a good spot from an earning asset standpoint would be to start 2025? I think it's going to be hard to say because it's going to depend on growth and some of the other portfolios and the pace of, uh... runoff, right? You know. I'll try to give you an answer this way. This quarter, we originated, we had a billion of new commitments this quarter. Only about 38% of it is funded, which is a very low percentage from my perspective relative to what I've seen in past periods.

Jared Shaw:

I think maybe to start off when we when we look at where we exit 2024 from an earning asset point of view.

Jared M. Wolff: With all the puts and takes from from loan sales and some of the restructuring where do you think a good spot from an earning asset standpoint would be to start 2025.

Okay.

Speaker Change: I think it's going to be hard to say, because it's going to depend on growth and some of the other portfolios in the pace of.

Speaker Change: Run off right.

Speaker Change: I'll try to give you an answer this way.

Speaker Change: This quarter, we originated we have a $1 billion of new commitments this quarter.

Speaker Change: Only about 38% of it funded.

Speaker Change: She is a very low percent from my perspective relative to what I've seen in past periods.

Jared M. Wolff: So we expect loan growth and outstandings to pick up as we get closer to 25 and, obviously, through 25 if the economy holds up. However, for now, it feels like runoff is going to outpace originations, which is what we said from the beginning of the year. If that's the case, and we just sold down $2 billion of Civic,

Speaker Change: So we expect loan growth in outstandings to pick up.

Speaker Change: As we get closer to 25, and obviously 325, if the economy holds up.

Speaker Change: However for now it feels like run off is going to.

Outpace originations, which is what we said from the beginning of the year.

Speaker Change: That's the case and we just sold down $2 billion of civic.

Jared M. Wolff: Loans could go lower from where we are right now. The other part of it is, though, we have about a billion loans that are going to reprice higher that carry coupons of about 4%, and those are going to come out of their fixed rate period and have to reprice higher. So we do have some good news on existing loans that are going to reprice higher as opposed to, you know, just on the origination side. But it's hard to know; it's hard to peg exactly what that number is.

Speaker Change: Loans could go lower from where we are right now.

Speaker Change: The other the other part of it is though we have about 1 billion of loans.

That are going to reprice higher that carry coupons of about 4%.

Speaker Change: And those are going to come out of their fixed rate period and have to reprice higher.

Speaker Change: So we do have some good news on existing loans.

That are going to reprice higher as opposed to just on the origination side.

Speaker Change:

Speaker Change: But it's hard to know it's hard to peg exactly what that number is.

Joseph Kauder: Joe, I don't know if you have a sense for what number we could guide to. Yeah, you know, I'm gonna give you a range of say, anywhere from like, $31, $30.5 billion up to maybe $32 billion is a good range of earnings. Okay. Okay.

Speaker Change: Joe I don't know if you have a sense for.

Joseph Kauder: What number we could guide to.

Speaker Change: Yes.

Joseph Kauder: I'm going to give you a range say anywhere from like.

Speaker Change:

Speaker Change: It's 31 35 billion up to like maybe 32 billion is a good range of earning assets.

Speaker Change: Okay, Okay, and as sort of a year and starting her as a starting point for next year year end this year.

Joseph Kauder: And as sort of a starting point for next year or as a starting point for this year, year-end this year. Yeah, as Jared said, it's going to depend upon, you know, how long growth manifests itself in the fourth quarter and the rest of the year. Yep, okay.

Speaker Change: Yes, I just said, it's going to depend upon.

Speaker Change: How loan growth manifest in the fourth and the rest of the year.

Jared M. Wolff: And then, you know, going looking at lender finance, you talked about reengaging there. How much of a challenge is that going to be? You know, if that's an area that you, you know, sort of telegraphed that that's, you know, you're exiting and you're stepping back? Is there a challenge to retain those relationships and reengage with those relationships?

Speaker Change: Yes, Okay and then.

Matthew Clark: And then, you know, looking at the lender financial talk about reengaging their, how much of a challenge is that going to be, you know, if that's, if that's an area that you, you know, sort of telegraph that that's, you know, you're, you're exiting and you're stepping back.

Speaker Change: Looking at the lender finance you talked about re engaging there how much of a challenge is that going to be.

Speaker Change: If that's an area that you yes.

Speaker Change: Sort of telegraph that that's you're exiting and you're stepping back.

Matthew Clark: Is there, is there a challenge to retain those relationships and reengage with those relationships, or did it not really get to that point in terms of actual relationship management? I don't think it got to that point. I mean, we have about just as, for perspective, I mean, I think with the 350 that we bought, the portfolio, I'm doing this from memory. So I mean, it'll look up to exact number. It's going to be as close to $700 million. So we have a good starting point in terms of a portfolio. Yeah, it was 438 at the end of the second quarter.

Speaker Change: Is there is there a challenge to retain those relationships and reengage with those relationships or did it not really get to that point in terms of actual relationship management.

Jared M. Wolff: Or did it not really get to that point in terms of actual relationship management? I don't think it got to that point. I mean, just for perspective, I think with the 350 that we bought, the portfolio, I'm doing this from memory, so I'm going to look up the exact number, is going to be close to $700 million. So we have a good starting point in terms of a portfolio. Yeah, it was $438 million at the end of the second quarter.

Speaker Change: I don't think it got to that point I mean, we have about.

Speaker Change: Just for perspective, I mean, I think with the $3 50 that we bought.

Speaker Change: The portfolio I'm doing this from memory, so I need to look up the exact number is going to be close to $700 million.

Speaker Change: We have a good starting point.

Terms of our portfolio, yes. It was 438 at the end of second quarter, we bought $3 50 somewhere close to 750 $800 million.

Jared M. Wolff: We bought $350 million, so we're close to $750 million, $800 million. We think that's a very strong base that we can grow from with great relationships. I don't want to talk about the team too much, but there will be more to come on that.

Matthew Timothy Clark: We bought 350, so we're close to eight. We were, you know, 7,500 million.

Matthew Clark: We think that's a very strong base that we can grow from with great relationships. You know, I don't want to talk about the team too much, but more to come on that. And I, I think it's something we're going to be looking at expanding, along with some other areas that we think, well, expand. I think warehouse is going to continue to pick up. We have a strong team there and sing good, good momentum. Construction has been picking up, and that's obviously loans that are funding that, you know, previously have, have originated and are starting to go vertical because usually they're, you know, the equity of the client goes in first, and then our piece picks up.

We think that's a very strong base that we can grow from with great relationships.

Speaker Change: I don't want to talk about the team too much but more to come on that and I think it's something we're going to be looking at expanding along with some other areas that we think will expand I think warehouse is going to continue to pick up we have a strong team there and seeing good good momentum construction has been picking up and that's obviously loans that are funding that previously have.

Jared M. Wolff: I think it's something we're going to be looking at expanding, along with some other areas that we think we'll expand. I think the warehouse is going to continue to pick up. We have a strong team there and are seeing good momentum. Construction has been picking up, and that's obviously loans that are funding that previously have... originated and are starting to go vertical because usually the equity of the client goes in first and then our.., www.bankofcalifornia.com Okay, and then on deposits, you know, obviously, you know, still a lot of movement there with different components as we go through this year but for 20

Speaker Change: Have a.

Originated and are starting to go vertical because usually they are the equity of the client goes in first and then rp's picks up but we're seeing some demand on new construction loans right now and we're leaning into that and I think there are some other other good C&I areas that seem to be picking up but specifically and lender financed I think we're starting with a strong base and I think the word is out that were.

Matthew Clark: But we're seeing some demand on new construction loans right now, and we're leaning into that. And I think there are some other good CNI areas that seem to be picking up. Specifically, a lender finance, I think we're starting with a strong base. And I think the word is out that we're in the market, and especially with buying back that area's portfolio was pretty competitive. And we got it, and there was a lot of news around us getting that. So I think I think the news, the word will help us.

Speaker Change: In the market and especially with buying back that that areas portfolio was pretty competitive.

Speaker Change: And we got it and there was a lot of news around us getting that so I think I think the news the work will help us.

Speaker Change: Okay, and then on deposits obviously.

Unknown Attendee: Okay, and then on deposits, you know, obviously, you know, so a lot of movement there with different components as we go through this year.

Speaker Change: So a lot of movement there with different components as we go through this year, but for 2025.

Unknown Attendee: But for 2025, how should we be thinking about sort of the longer-term growth trajectory of deposits sort of keeping in mind. The, you know, the guide that you're laying out in terms of the loan to deposit ratio and the DDAs as a percentage of deposits. Like, you know, what's, what's the, what's the view for longer term deposit growth rate. I just think we're going to, we're going to be able to maintain our loaned deposit ratio. You know, around the ban that we talked about. And so loans and deposits are going to move in a relative tandem.

Jared M. Wolff: How should we be thinking about sort of the longer-term growth trajectory of deposits, sort of keeping in mind the guide that you're laying out in terms of the loan-to-deposit ratio and the DDAs as a percentage of deposits, like, you know, what's the... What's the view for the longer-term deposit growth rate?

Speaker Change: How should we be thinking about sort of the longer term growth trajectory of deposits or keeping in mind the.

Speaker Change: The guide that you're laying out in terms of the loan to deposit ratio and the DDA as a percentage of deposits like what's what's the.

What's the view for longer term deposit growth rate.

Jared M. Wolff: I just think we're going to be able to maintain our loan to deposit ratio, you know, around the band that we talked about. And so loans and deposits are going to move in relative tandem. Obviously, we're closer to 85 now with the sale of Civic on a core basis, so I think that we're obviously going to let our loans float up without deposits keeping pace. But once we're there, I think they're going to keep pace with each other. It's important to me that we don't get out beyond our skis and that we always maintain growth in deposits and keep some balance there, which I'm confident that we can do. Okay. Thanks.

Speaker Change: I just think we're going to we're going to be able to maintain our loan to deposit ratio.

Speaker Change: Around the band that we talked about and so loans and deposits are going to move in a relative tandem obviously, where we are.

Jared Shaw: Obviously, we're closer to 85 now with the, with the sale of civic on a core basis. So I think that, you know, we're obviously going to let our loans float up without deposit keeping pace. But once we're there, I think they're going to keep pace with each other. I've been important to me that we don't get out above our, beyond our season that we always maintain growth in deposits and keep some balance there, which I'm confident that we can do.

Speaker Change: Closer to 85 now with the.

Speaker Change: With the sale of civic on a core basis. So I think that we're obviously going to let our loan slowed up.

Speaker Change: Without deposits keeping pace, but once we're there I think they're going to keep pace with each other it's important to me that we don't get out above and beyond our skis and that we always maintain a growth in deposits and keep some balance there.

Speaker Change: Which I am confident that we can do.

Okay. Thanks, and then just finally for me you know with the with the expectation that we're in that.

Jared M. Wolff: And just finally for me, you know, with the expectation that we're in that expense range of $195 to $200 in the fourth quarter, are you feeling optimistic around positive operating leverage for next year? Or should we be seeing a more measured, moderate pace of expense growth with the backdrop of broader growth? No, I think we're in a good spot to continue to show operating leverage and expand from there. One thing that we're trying to do, Jared, and I think this is probably coming across pretty clearly, is set the bar pretty low.

Jared Shaw: And it's just finally for me, you know, with the expectation that we're in that expense range of 195 to 200 in the fourth quarter. Are you feeling optimistic around positive operating leverage for next year? Should we be seeing more measured, moderate pace of expense growth with the backdrop of the broader growth? I think we're in a good spot to continue to show operating leverage and expand from there.

Speaker Change: Expense range of 195 to 204th quarter.

Speaker Change: Are you feeling optimistic around positive operating leverage for next year.

Speaker Change: Should we be seeing a more measured moderate pace of of expense growth with the backdrop of the broader growth.

Speaker Change: No I think we're I think we're in we're in a good spot to continue to show operating leverage and expand from there.

Jared Shaw: One thing that we're trying to do, Jared, and I think this is probably coming across pretty clearly, is set the bar pretty low. I mean, we obviously came out of the gate fairly hot, and I've been specific about this that we gave that guidance for 4th quarter of 24. There were a whole bunch of reasons why, when we announced the deal, we chose to do that. And, you know, hindsight is 20/20. What it did is it focused people on a specific event in a specific period, as opposed to the company that we're creating. And people ended up creating estimates off of that that backed into quarterly guidance that, you know, we didn't provide, but people are like, we're trying to do.

Speaker Change: One thing that we're trying to do Jared and I think this is probably coming across pretty clearly has set the bar.

Jared M. Wolff: I mean, we obviously came out of the gate fairly hot, and I've been specific about this, that we gave that guidance for the fourth quarter of 24. There were a whole bunch of reasons why, when we announced the deal, we chose to do that. And hindsight is 20-20.

Speaker Change: Pretty low I mean, we we obviously came out of the gate fairly hot and I've been I've been specific about this that we gave that guidance for fourth quarter of 'twenty. Four there were a whole bunch of reasons why when we announced the deal we chose to do that and.

Jared M. Wolff: What it did was it focused people on a specific event in a specific period, as opposed to the company that we were creating. And people ended up creating estimates off of that that backed into quarterly guidance that, you know, we didn't provide, but people were like, all right, if they're going to get there, then this must mean this, and this must mean this, which basically set us up for kind of negative delivery, regardless of what we tried to do. And We're trying to reset it.

Speaker Change: Hindsight is 2020, what it did is it focus people on a specific event in a specific period as opposed to the company that we're creating.

Speaker Change: And people ended up creating estimates off of that that backed into quarterly guidance that we didnt provide but people like alright, if theyre going to get there than dismiss paying this mismatch munis, which basically set us up for.

Speaker Change: Kind of negative delivery, regardless of what we tried to do and we're trying to reset it and I think it's really important that we reset the narrative about the franchise that we're creating we have a history of doing really good work.

Jared Shaw: And we're trying to reset it. And I think it's really important that we reset the narrative about the franchise that we're creating. We have a history of doing really good work in creating a really valuable franchise. Both at Banc of California and the teams at Pack West. And I'm very, very confident in what we're doing here. And, you know, the things that we've pulled off in a short amount of time are pretty damn heroic, and our team is fantastic. And so we are trying to reset the narrative. We're trying to set the bar lower. We're trying to set expectations lower so that we don't have to fight against kind of the narrative that we might have improperly created the first time out of the gate.

Jared M. Wolff: And I think it's really important that we reset the narrative about the franchise that we're creating. We have a history of doing really good work in creating a really valuable franchise, both at Bank of California and with the teams at PacWest. And I'm very, very confident in what we're doing here. And, you know, the things that we've pulled off in a short amount of time are... Pretty damn heroic, and our team is fantastic.

Speaker Change: <unk>, a really valuable franchise, both at Banc of California, and the teams at Pac West and I'm very very confident in what we're doing here and the things that we've pulled off in a short amount of time or.

Speaker Change: Pretty damn heroic and our team is fantastic and so we are trying to reset the narrative. We're trying to set the bar lower we're trying to set expectations slower. So that we don't have to fight against kind of the narrative that we might've been properly created a first time out of the gate and again Hindsight's 2020, we have not moved off our targets I think it's important that those profitability.

Jared M. Wolff: And so we are trying to reset the narrative. We're trying to set the bar lower. We're trying to set expectations lower so that we don't have to fight against the narrative that we might have improperly created the first time out of the gate. And again, hindsight is 20-20.

Jared Shaw: And again, hindsight is 2020. We have not moved off our targets. I think it's important that this profitability targets be established. And we did say that, as we got through the year, we would try to give better guidance. But it was very hard to do when we, you know, when we signed up the merger and when we just closed the deal.

Jared M. Wolff: We have not moved off our targets. I think it's important that those profitability targets be established. And we did say that as we got through the year, we would try to give better guidance, but it was very hard to do when we, you know, when we signed up for the merger and when we had just closed the deal. And so hopefully, people understand what we're trying to do. Okay, thanks. I'll step back. I appreciate it. And our next question will come from David Feaster with Raymond James. Please go ahead. Hey, good morning, everybody.

Speaker Change: We established and we did say that as we got through the year, we would try to give better guidance, but it was very hard to do when we when we signed the merger and when we had just closed the deal.

Jared Shaw: And so hopefully people understand what we're trying to do here.

Speaker Change: So hopefully people understand what we're trying to do here.

Unknown Attendee: Okay, thanks. I'll step back. Appreciate it.

Speaker Change: Okay. Thanks, I'll step back.

Speaker Change: Appreciate it.

Speaker Change: And our next question will come from David Feaster with Raymond James. Please go ahead.

David Feaster: And our next question will come from David Feester with Raymond James. Please go ahead.

Hey, good morning, everybody.

David Pipkin Feaster: Hi, good morning everybody. You know, we've talked a lot about, you know, creating a higher quality bank. And obviously, you've been very active executing on that.

David Pipkin Feaster: Morning. You know, we've talked a lot about creating a higher quality bank, and obviously, you've been very active executing on that. But, you know, the challenge with the earnings trajectory just in the short run is that there are a lot of loans and security that we need to reprice. I just, you touched on that a bit.

David Pipkin Feaster: Good morning.

Speaker Change: You know, we've talked a lot about creating Ah ha.

Speaker Change: Higher quality bank, and obviously, you've been very active executing on that but the challenge is the earnings trajectory just in the short run is theres a lot of loans and securities that we need to reprice.

David Feaster: But you know, the challenge that the earnings objective, just in the short run, is there's a lot of loans and security that we need to reprise. I just was; you touched a bit about it. I think you said about a billion in the back half of the year. But I'm just kind of curious how you think about the repricing dynamics of the book. If you could walk through some of the timing. You know, especially heading into the next year, whether we should expect that pace of repricing to maybe accelerate.

Jared M. Wolff: I think you said about a billion in the back half of the year, but I'm just kind of curious how you think about the repricing dynamics of a book. If you could walk through some of the timing, you know, especially heading into the next year, whether we should expect that pace of repricing to maybe accelerate. Sure, first of all, I think our margin is unique in that both our cost of deposits is going down, our cost of funds is going down, and our margin is expanding at a time when others are doing the opposite.

Speaker Change: You touched a bit about it.

Speaker Change: You said about $1 billion in the back half of the year, but I'm just kind of curious how you think about the repricing dynamics of the book if you could walk through some of the timing.

Speaker Change: Especially heading into next year, whether we should expect that pace of repricing to maybe accelerate.

Jared Shaw: Sure, first of all, I think our margin is unique and that we're, you know, both our cost of deposits are going down; our cost of funds are going down. And our margin is expanding at a time when others are doing the opposite.

Speaker Change: Sure first of all I think our margin is unique in that we're both our cost of deposits are going down our cost of funds are going down and our margin is expanding at a time when others are doing the opposite.

Jared M. Wolff: And this is not dissimilar to what we did at Banc of California, where we went in exactly the opposite direction. (Inaudible) When everybody else was trying to expand their margin, it was contracting, and ours was expanding.

Speaker Change: And this is not dissimilar to what we did at Banc of California, When we went in exactly the opposite direction.

Jared Shaw: And this is not similar to what we did at Bank of California when we went in the exactly the opposite direction. You know, when everybody else was trying to expand their margin, it was contracting, and ours was expanding. This is the same thing. We've done this before. Our deposits are really short right now. Our term deposits are all under a year. We're keeping them there.

Speaker Change: Hi.

Speaker Change: When everybody else is trying to expand them or expand their margin. It was contracting and ours was expanding this is the same thing we've done this before.

Jared M. Wolff: We've done this before. Our deposits are really short right now. Our term deposits are all under a year.

Speaker Change: Our deposits are really short right now our term deposits are all under a year, we're keeping them there like I said, we could pull forward a lot more profitability by just choosing to go longer duration on deposits and locking in two year money and we.

Jared M. Wolff: We're keeping them there. Like I said, we could pull in a lot more profitability by just choosing to go longer duration on deposits and locking in two-year money. It's worth millions of dollars every quarter, but we don't think that's the right thing for the long term. And so I think the repricing of deposits is going to be an important story for us over the next 12 months. You know, the timing of it is rate-dependent. It depends on when rates are, obviously, we're bringing in NIB, and that's bringing us down, but the accelerator will be when rates come down. And some people think it's going to happen this quarter.

Jared Shaw: Like I said, we could pull forward a lot more profitability by just choosing to go longer duration on deposits and locking in two-year money. And we, you know, it's worth millions of dollars every quarter, but we don't think that's the right thing for the long term. We think it's better to stay short, wait for rates to come down and, you know, gradually repriced deposits for the long term. So I think the repricing of deposits is going to be an important story for us over the next 12 months. You know, the timing of it is rate dependent.

It's worth millions of dollars every quarter, but we don't think that's the right thing for the long term, we think it's better to stay short.

Speaker Change: For rates to come down.

And <unk>.

Speaker Change: Gradually reprice deposits for the long term.

Speaker Change: And so I think.

Speaker Change: The repricing of deposits is going to be an important story for us over the next 12 months.

Jared M. Wolff: I don't know. But, you know, we have it happening in the back half of the year. Maybe it's September, maybe it's November, or December.

Yeah.

Speaker Change: The timing of it is rate dependent it depends on win rates.

Jared Shaw: It depends on when rates; obviously, we're bringing in an E, and that's bringing us down. But the accelerator will be when rates come down. And some people think it's going to happen this quarter. I don't know, but you know, we have it happening in the back half of the year. Maybe it's September, maybe it's November, December. But you know, when it happens, it happens, and I think we'll continue from there.

Speaker Change: Obviously, we're bringing in an IV and that's bringing us down, but the accelerator will be and when rates come down and some people think it's going to happen. This quarter I don't know, but we have it happening in the back half of the year, maybe September maybe it's November December but.

Jared M. Wolff: You know, when it happens, it happens, and I think we'll continue from there. And on the loan side... There's so much stuff running off that our loan yield is going to continue to climb even as rates come down, in my view, because the stuff that's running off is just so low that even as rates, in this current environment, we have enough buffer, even with rates coming down slightly, that our loans are still going to reprice higher than what's coming off the books. So overall, I feel like our margin will continue to expand for those reasons. It's hard to see it not expanding.

Speaker Change: You know when it happens it happens and I think we'll continue from there and on the loan side.

Jared Shaw: And on the loan side. We, there's so much stuff running off that our loan yield is going to continue to climb even as rates come down, in my view. Because the stuff that's running off is just so low that even as rates in this current environment. We have enough buffer, even with rates coming down slightly, that our loans are still going to repricire. Then what's coming off the books. So overall, I feel like our margin will continue to expand for those reasons. It's hard to see it not expanding. The pace at which it expands is a function of rates.

Speaker Change: There's so much stuff running off that our loan yield is going to continue to climb even as rates come down in my view.

Speaker Change: The stuff that's running off is just so low that even as rates in this current environment, we have enough buffer even with rates coming down slightly that our loans are still going to reprice higher than what's coming off the books. So overall I feel like our margin will continue to expand for those reasons, it's hard to see it not expanding.

Joseph Kauder: The pace at which it expands is a function of rates, but we've been able to make very steady progress on our margin. I don't know that I can be more specific than that, David, because it will depend upon, you know, the timing of rate cuts. Jared, I'll just say that on page 10 of the deck, you can see that about 40% of our assets are either floating rate, or we'll be repricing within a year.

Speaker Change: The pace at which expands as a function of rates, but we've been able to make very steady progress on our margin I don't know that I can be more specific than that David because it will depend upon.

Jared Shaw: But we've been able to make very steady progress on our margin. I don't know that I can be more specific than that, David, because it will depend upon, you know, the timing of rate cuts.

David Pipkin Feaster: The timing of rate cuts.

Unknown Attendee: Jared, I'll just offer that on page 10 of the deck.

David Pipkin Feaster: Jared I'll just I'll just offer that on page on page 10 of the deck you can see that about 40% of our.

David Feaster: You can see that about 40% of our assets are either floating right or we'll be repricing within a year. Okay, that's helpful.

Jared: Assets are either floating rate or will be repricing within a year.

David Pipkin Feaster: Okay. That's helpful.

Joseph Kauder: Okay, that's helpful. And then, you know, you talked a lot about bringing new relationships to the bank. You've obviously had a lot of success. I'm curious, from your perspective, what's attracting these new relationships to the bank? Where are you having success bringing these relationships from? And what segments are kind of driving it?

David Feaster: And then, you talked a lot about bringing new relationships to the bank. You've obviously had a lot of success. I'm curious from your perspective. What's attracting these new relationships to the bank? Where are you having success, bringing these relationships from? And what segments are kind of driving at? I think we've talked in the past about HOA and venture being a focus. But I'm just kind of curious where you're having success, and what do you think some of the drivers are?

And then you talked a lot about bringing new relationships to the bank. You've obviously had a lot of success I'm curious from your perspective whats attracting these new relationships to the bank where are you having success, bringing these relationships from and what what segments are kind of driving it I think we've talked in the past about HOA adventure.

Jared M. Wolff: I think we've talked in the past about HOA and venture being a focus, but I'm just kind of curious where you're having success and what do you think some of the drivers are. Yeah, well, first of all, I'd say it's very broad-based. Second, I would say that, um... I hope that we achieve more momentum because we've been a little bit, the last two months, I would say we've been very cautious about it because we didn't want to bring over customers and then have them go through a conversion.

Speaker Change: Being a focus but I'm just kind of curious.

Speaker Change: Where you're having success and what do you think some of the drivers are.

Matthew Clark: Yeah, well, first of all, I'd say it's very broad-based. Second, I would say that. I hope that we achieve more momentum because we've been a little bit the last two months. I would say we've been very cautious about it because we didn't want to bring over customers and then have them go through a conversion. And so, our marketing efforts are going to pick up now that conversion is through the gate. And you know, it's going to allow us to really unlock the full value of this combined franchise as one company on one system. And so it's going to make it a lot easier for our teams across the country to do what they're doing.

Speaker Change: Yeah, well first of all I'd say, it's very broad based.

Speaker Change: Second I would say that.

Speaker Change: I hope that we achieve more momentum because we've been a little bit.

Speaker Change: The last two months I would say, we've been very cautious about it because we didn't want to bring all of our customers and then have them go through a conversion.

Jared M. Wolff: And so our marketing efforts are going to pick up now that the conversion is through the gate. And you know, it's going to allow us to really unlock the full value of this combined franchise as one company on one system. And so it's going to make it a lot easier for our teams across the country to do what they're doing.

Speaker Change: And so our marketing efforts are going to pick up now that conversion is is through the gate and it's going to allow us to really unlock the full value of this combined franchise.

Speaker Change: As one company on one system and so it's going to make it a lot easier for our teams across the country to do what they're doing.

Matthew Clark: But there's a couple of differentiators, and I can tell you where we're getting it. So one is we're competing a lot with the disruption that is occurring at some of these larger banks. I'd like to say that, you know, for many of our competitors, their clients ended up with them that didn't choose them. If you're a Union Bank client, formally Union Bank, you ended up at US Bank; you didn't choose Union Bank. If you're a first you public client, you ended up at Chase; you didn't choose Chase. I realized some people could say the same thing is about Pack West clients ending up at Bank of California, but we were much more similar as companies.

Jared M. Wolff: But there are a couple differentiators, and I can tell you where we're getting it. So one is that we're competing a lot with the disruption that is occurring at some of these larger banks. I'd like to say that for many of our competitors, their clients ended up with them; they didn't choose them. If you're a Union Bank client... Formerly Union Bank, you ended up at U.S. Bank; you didn

Speaker Change: But there's a couple of Differentiators and I can tell you where we're getting it. So one is we're competing a lot with the disruption that is occurring at some of these larger banks.

Speaker Change: Like to say that for many of our competitors.

Speaker Change: Their clients ended up with them they didn't choose them if your union bank client.

Speaker Change: Formula Union Bank, you ended up at U S Bank, you didn't choose Union bank.

Jared M. Wolff: If you're a First Republic client, you ended up at Chase; you didn't choose Chase. I realize some people could say the same things about PacWest clients ending up at Banc of California, but we were much more similar as companies, and we had a much more common, I would say, DNA and thread across our company than those other banks that I described ending up in these larger banks. So there's been a lot of disruption in our markets, especially in California. You guys have heard me read off the list of banks that no longer exist.

Speaker Change: If you're a first Republic client you ended up at Chase you didn't choose chase I realize some people could say the same things about Pac west clients, sending up at Banc of California, but we were much more similar as companies and we had a much more common I would say DNA and thread across our company than those other banks that I described ending up in these larger banks, so theres been a lot.

Matthew Clark: And we had a much more common, I would say, DNA and thread across our company than those other banks that I described, ending up in these larger banks. So there's been a lot of disruption in our markets, especially in California. You guys have heard me read off the list of banks that no longer exist. And therefore, we're going after those disrupted relationships. You know, they're all good targets for us, and I would say it's a target-rich environment, and our Treasury management folks are deeply experienced and are brought in with our business teams across the company to help leverage kind of the tools that we have and the technology that we have and provide a compelling case why they should be banking with us. To bank with somebody that knows you and understands you is meaningful.

Speaker Change: Disruption.

Speaker Change: In our markets, especially in California, you guys have heard me read off the list of banks that no longer exist.

Jared M. Wolff: And therefore, we're going after those disrupted relationships. You know, they're all good targets for us, and I would say it's a target-rich environment. And our treasury management folks are deeply experienced and are brought in with our business teams across the company to help leverage the tools that we have and the technology that we have and provide a compelling case of why they should be banking with us. To bank with somebody that knows you and understands you is meaningful.

Speaker Change: And therefore, we're going after those disrupted relationships.

Speaker Change:

Speaker Change: They're all good targets for us and I would say, it's a target rich environment.

Speaker Change: Our Treasury management folks are deeply experienced and are brought in with our business teams across the company.

To help leverage kind of the tools that we have and the technology that we have and provide a compelling case for why they should be banking with us to bank with somebody that knows you and I understand you is meaningful another thing that I've shared and this is.

Matthew Clark: Another thing that I've shared, and this is in our market, that it might be, it might exist in other markets for other banks, is the nature of the relationship managers that we have. They're very, very experienced, and so a company that has five million revenue, fifty million revenue, a hundred million revenue, a hundred thousand deposits, or five million deposits are more than that. They're going to work with somebody that's very experienced that's fundamentally not an entry level employee. The levels that I just described at some of our larger competitors, they will be relegated to employees that are talented but are probably much more junior in that organization overall, and that really stands out when we speak with clients. They realize that they're working with very seasoned individuals, and so I would say that it's broad based.

Jared M. Wolff: Another thing that I've shared, and this is in our market, but it might exist in other markets for other banks, is the nature of the relationship managers that we have. They're very, very experienced. And so a company that has $5 million in revenue, $50 million in revenue, $100 million in revenue, $100,000 in deposits, or $5 million in deposits, or more than that, they're going to work with somebody that's very experienced, that's fundamentally not an entry-level employee. The levels that I just described are at some of our larger competitors. They will be relegated to employees that are talented but are probably much more junior in that organization overall.

Speaker Change: In our market, but it might be it might exist in other markets for other banks is the nature of the relationship managers that we have they're very very experienced and so a company that has $5 million of revenue.

Speaker Change: $50 million of revenue a $100 million revenue 100000 deposits were $5 million of deposits or more than that theyre going to work with somebody that's very experienced that's fundamentally not an entry level employee.

Speaker Change: The levels that I just described at some of our larger competitors.

Speaker Change: They will be relegated to employees that are our talented better probably much more junior.

Speaker Change: In that organization overall and that really stands out when we speak with clients as they realize that they are working with very seasoned individuals.

Jared M. Wolff: And that really stands out when we speak with clients is that they realize that they're working with very seasoned individuals. And so I would say that it's broad-based. We're just getting started. I like the momentum that we have. But again, we've held off on marketing because we didn't want to, you know, bring people into a bank that was going to get converted.

And so I would say that it's broad based we're just getting started I like the momentum that we have but again, we've held off on marketing because we didn't want to bring people into a bank that was going to get converted so let's.

Matthew Clark: We're just getting started. I like the momentum that we have, but again we've held off on marketing because we didn't want to bring people into a bank that was going to get converted. So let's see where we go from here, but I like the momentum so far.

Jared M. Wolff: So, let's see where we go from here, but I like the momentum so far. Okay, that's great, that's helpful, Culler. And then I know you've made a bunch of new hires lately and you've focused, you know, part of the strategy is focusing on being more tech forward and expanding the tech offerings. I'm just kind of curious, maybe, what are some of the things that you guys are working on right now? And, you know, any thoughts on the digital strategy and just, you know, the tech initiatives that you're primarily focused on? I could talk about this for hours.

Speaker Change: Let's see where we go from here, but I like the momentum so far.

Unknown Attendee: Okay, that's great.

Speaker Change: Okay. That's great. That's helpful color and then I know you've made a bunch of new hires lately.

Unknown Attendee: That's helpful color.

Matthew Clark: And then I know you've made a bunch of new hires lately, and you've focused, you know, part of the strategy is focusing on being more tech forward and expanding the tech offerings. I'm just kind of curious, maybe what are some of the things that you guys are working on right now. And, you know, just kind of any thoughts on the digital strategy and just, you know, the tech initiatives that you're primarily focused on.

Speaker Change: <unk> focused.

Speaker Change: Part of the strategy is focusing on being more tech forward and expanding the tech offerings I'm just kind of curious maybe.

What are some of the things that you guys are working on right now.

Speaker Change: And.

Speaker Change: Just kind of any thoughts on the digital strategy just.

Speaker Change #100: The tech initiatives that Youre.

Speaker Change: Primarily though.

Matthew Clark: I could talk about this for hours. I love the topic. You know, we are constantly investing in our company. We have a very focused list of objectives. And so, you know, you can get overwhelmed by your tech initiatives, and you know, you can fill up more hours than you have in terms of bodies. It's multiplied by the hours in the week, and you'll never get it all done, and you'll divide, and you will never conquer. And so, we're very focused on what we're going to do and how we're going to do it and have a priority list of things that we think are really going to move the needle.

Speaker Change #101: I could talk about this for hours I love the topic, we are constantly investing in our company we have.

Jared M. Wolff: I love the topic. You know, we are constantly investing in our company. We have a very focused list of objectives, and so you know you can get overwhelmed by your tech initiatives. And you know, you can fill up more hours than you have in terms of bodies multiplied by the hours in the week. And you'll never get it all done. And you'll divide, and you will never conquer.

Speaker Change: A very focused list of objectives and so you can get.

Jared M. Wolff: And so we are very focused on what we're going to do and how we're going to do it, and we have a priority list of things that we think are really going to move the needle. And it's divided among internal projects, things that will help our colleagues be more efficient. You know, we deployed ServiceNow, we have Salesforce up and running, and getting up and running. We have Encino that's doing that's a full workflow program for our employees, and some other specific back office and digital enhancements.

Speaker Change: <unk> by your tech initiatives and you can fill up more hours than you have in terms of bodies and multiplied by the hours in the week and you'll never get it all done and Youll divide and you will never conquer and so we're very focused on it on what we're what we're going to do and how we're going to do when you have a priority list of things that we think are really going to move the needle and it's.

Matthew Timothy Clark: And it's divided among internal projects, things that will help our colleagues be more efficient. You know, we deployed ServiceNow. We have Salesforce getting up and running. We have in Sino that's a full workflow program for our employees and some other specific back office and digital enhancements. In addition, we have client-facing things and things that are really going to help our clients. So, you know, on the payment side, you know, our team has done a really good job of launching our credit card platform and rolling out credit cards to clients. We are an issuer of cards, and we have a digital platform that accompanies it.

Speaker Change: It's divided among internal projects things that will help our colleagues to be more efficient we do.

Speaker Change #102: Deployed service now we have sales force up and running getting up and running we havent seen Oh, that's doing a full workflow program for our employees and some other specific back office and digital enhancements.

Jared M. Wolff: In addition, we have client-facing things and things that are really going to help our clients. So, you know, on the payment side, our team has done a really good job of launching our credit card platform and rolling out credit cards to clients. We are an issuer of cards, and we have a digital platform that accompanies it, and the adoption of cards is something that will make a bigger impact down the road. We rolled out DeepStack for HOA. So now DeepStack is the power behind our HOA platform, accepting payments from credit cards for those who want to pay their HOA fees.

Speaker Change #102: In addition, we have client facing things and things that are really going to help our clients. So you know on.

Speaker Change #102: On the payment side.

Speaker Change #102: Our team has done a really good job of launching a credit card platform and rolling out credit cards to clients. We are an issuer of cards.

Speaker Change #102: And we have a digital platform that accompanies it.

Matthew Clark: And, you know, the adoption of cards is something that will, you know, make a bigger impact down the road. We rolled out DeepStack for HOA. So, now DeepStack is the power behind our HOA platform, accepting payments for credit cards for those who want to pay their HOA payments. More issues like that are coming. And, obviously, DeepStack is something that we said is going to have a bigger impact in 25. I hope to have some announcements later in the year about that. But, we had to get through conversion first, and we have other technical issues which are going to follow.

Speaker Change #102: The adoption of of cards is something that will make a bigger impact down the road, we rolled out deep stack for HOA. So now deep stack as the power behind our HOA path platform accepting payments.

Speaker Change #102: For credit cards for those who want to pay the.

Speaker Change #102: The HOA payments.

Jared M. Wolff: More initiatives like that are coming, and obviously, DeepStack is something that we said is going to have a bigger impact in 2025. I hope to have some announcements later in the year about that, but we had to get through the conversion first, and we have other tech initiatives that are going to follow. That's helpful. Thanks, everybody. Thank you, David. And our next question will come from Chris McGratty with KBW. Please go ahead. Hey Jared,

Speaker Change #102: More initiatives like that are coming and obviously deep stack is something that we said is going to have a bigger impact in 'twenty five.

Speaker Change #102: I hope to have some announcements later in the year about that but.

Speaker Change #102: We had to get through conversion first and we have other tech initiatives, which are going to follow.

Unknown Attendee: Yeah, that's helpful.

Speaker Change #103: Okay. That's helpful. Thanks, everybody.

Unknown Attendee: Thanks, everybody.

Chris Mcgratty: Thank you, David. And our next question will come from Chris McGratty with KBW.

Thank you David.

Speaker Change #105: And our next question will come from Chris Mcgratty with <unk>. Please go ahead.

Chris Mcgratty: Please go ahead. Great, Jared.

Christopher McGratty: The rate component of your guide, or your long-term targets... fairly important. If the forward curve comes in, as we expect one to this year and roughly three to four more next year, can you get close to those targets by the end of next year? Can you...

Christopher McGratty: Okay great.

Chris Mcgratty: Morning. The rate component of your guide or your lunchroom targets is fairly important. If the Ford curve comes in, as we expect, one, two this year and roughly three to four more next year, can you get close to those targets by the end of next year?

Christopher McGratty: Good morning.

Christopher McGratty: The rate component of your guide or your long term targets.

Speaker Change #106: Really important.

Speaker Change #107: If the forward curve comes in as we expect one or two this year and roughly three to four more next year.

Speaker Change #108: Can you can you get close to those targets by the end of next year.

Speaker Change #108: Can you.

Chris Mcgratty: Chris, can you see your question? You cut out on my end, a little bit.

Christopher McGratty: I... Chris, can you see your question? You cut out on my end a little bit. Can you see your question?

Speaker Change #108: Chris can you see your question you cut out on my end, a little bit could you help us.

Jared Shaw: Could you say any more questions? Thank you. Yeah. So, so race or race or real a big piece of the timing of getting to your guide. If you get if the Ford curve is right, which generally is not, but if the Ford curve is right this year and you get one to two and then a few more next year, I guess how close can you get to those long-term targets by maybe exit 25 into 26? Do 1% one one one our way in the 13% return on tangible common if we like yeah because we have you know just kind of a well it's definitely going to accelerate us for sure. We're being as conservative as we can right now.

Speaker Change #109: Question. Thanks, Yeah. So rates are rates are a big piece of.

Christopher McGratty: Thanks. Yeah. So rates are a big piece of the timing of getting to your guide. If the forward curve is right, which it generally is not, but if the forward curve is right this year and you get one to two and then a few more next year, I guess how close you can get to those long-term targets by maybe exiting 25 and entering 26? The 1% ROA and the 13% return on tangible common, if we like, because we have, you know, just kind of, well, it's definitely going to accelerate us, for sure. We're being as conservative as we can right now.

Speaker Change #110: The timing of getting to your guide.

Speaker Change #111: If you get if the forward curve is right, which generally is not but if the forward curve is right. This year and you will get one to two and then a few more next year I guess, how close can you get to those long term targets, but maybe exit 'twenty five 'twenty six.

Speaker Change #112: The 1%.

Speaker Change #113: Norway and the 13% return on tangible common if we like because we have.

Speaker Change #114: Well, it's definitely going to accelerate us for sure were being as conservative as we can right now.

Speaker Change #113:

Jared Shaw: You know we're hell-bent on hitting our targets, and by the end of 25 I think that's fully reasonable.

Jared M. Wolff: You know, we're hell-bent on hitting our targets, and by the end of 25, I think that's... Fully reasonable. And then on Capital... Over time, can you just remind us the binding ratio when you might look at a buyback given your stocks below book and any other considerations? We've said that we think we need to show capital, sustainable, you know, get to 11. And then we can start those conversations in terms of CT1. And then the question is, do you need to maintain it at 11? Do you need to be, is it around 11?

Speaker Change #113: You know we are hell bent on hitting our targets.

Speaker Change #113: And by the end of 'twenty five I think that's it.

Speaker Change #115: Totally reasonable.

Speaker Change #113: Okay.

Joseph Kauder: Okay, and then on capital over time, can you just remind us the binding ratio when you might look at a buyback, giving your stocks below book and any other considerations. Thanks.

Speaker Change #113: And then on capital.

Speaker Change #116: Over time can you just remind us the binding ratio.

Speaker Change #117: When you might look at a buyback given your stocks below book and any other considerations.

Speaker Change #118: We've said that we think we need to show capital.

Joseph Kauder: We've said that we think we need to show capital sustainable, you know, get to 11, and then we can start those conversations in terms of CT1. So, and then the question is: do you need to maintain it at 11? Do you need to be, is it around 11? And so we're prepared to have those conversations when we're there and ahead of time, obviously, with our regulators. Yeah.

Speaker Change #119: Sustainable get to 11.

And then we can start those conversations in terms of.

Speaker Change #119: CET one.

Speaker Change #119: So.

Speaker Change #119: And then the question is do you need to maintain it at 11 do you need to be is it around 11.

Jared M. Wolff: And so we're prepared to have those conversations when we're there and ahead of time, obviously, with our regulators. And then Joe, maybe one... Okay, sorry, Joe. I was going to say we're looking at lots of different options in those scenarios as we generate capital from the civic sale of other properties, and you know how best to utilize that capital. That was the bond, the bond repositioning comment. Okay. And how about the tax rate, Joe, going forward after this quarter's elevated number? Yeah, we expected it to be back down to 27-28%. This was a one-time elevation.

Speaker Change #119: So we're prepared to have those conversations when we're when we're there and ahead of time, obviously with our regulators.

Speaker Change #120: Yep Okay.

Joseph Kauder: Okay, and then should Joe maybe once. Okay, sorry Joe. Obviously, we're looking at lots of different options in those scenarios as we generate capital from the civic sale from other actions. You know how best to utilize that capital.

Speaker Change #119: Okay.

Speaker Change #119: And then Joe maybe one okay, sorry, Jeff.

Joseph Kauder: But even if they were looking at lots of different options in those scenarios as we generate capital from the civic sales from other actions how best to utilize that capital.

Joseph Kauder: Okay, that was the bond. The bond repositioning comment, okay.

Joseph Kauder: Okay that was the bonds the bonds repositioning comment okay.

Joseph Kauder: And how about the tax rate Joe is going forward after this quarter is elevated number. Yeah, we expected to be back down to the 27 to 28 percent. This was a one-time elevation.

Joseph Kauder: And how about the tax rate Joe is going forward.

Joseph Kauder: After this quarter's elevated number.

Joseph Kauder: Yeah, we expect it to be back down to the 27% to 8%. This was a one time.

Joseph Kauder: Elevation.

Speaker Change #121: Okay perfect. Thank you.

Andrew Terrell: And our next question will come from Andrew Terrell with Stevens. Please go ahead. Hey, good morning.

Andrew Terrell: And our next question will come from Andrew <unk> with Stephens. Please go ahead.

Joseph Kauder: Okay, perfect. Thank you. And our next question will come from Andrew Terrell with Stevens. Please go ahead. Hey, good morning. Good morning.

Speaker Change #121: Sure.

Andrew Terrell: Hey, good morning.

Andrew Terrell: Good morning. I wanted to follow up to the last question around the kind of 11 percent CT1 maybe less than the context of buyback but then on the point of securities repositioning. I guess do you feel like you need to get to 11 percent or around 11 percent before you start repositioning the securities portfolio. I guess more of a question of kind of timing around potential security sales and if you're comfortable doing it before you reach 11. Yeah, we've started doing it now. That 11% was more about other uses of capital. We would certainly be willing to use some of that capital to reposition securities now.

Andrew Terrell: Morning.

Andrew Terrell: I wanted to follow up just on that last question around the kind of 11% CT1, maybe less in the context of buyback, but then on the point of securities repositioning, I guess, do you feel like you need to get to 11% or around 11% before you start repositioning the securities portfolio? I guess it's more of a question of kind of timing around potential security sales and if you're comfortable doing it before you reach 11. Yeah, I mean, yeah, we should start doing it now.

I wanted to follow up just on that last question around that.

Speaker Change #123: 11% CET, one maybe less in the context of a buyback, but then on the point of Securities repositioning I guess do you feel like you need to get to 11% or around 11% before you.

Speaker Change #124: Start repositioning the securities portfolio, I guess more of a question of kind of timing around potential security sales and if youre comfortable doing it before you reach 11.

Speaker Change #123: Yeah.

Speaker Change #125: Yeah, I mean, yeah, we'd start doing it now.

Speaker Change #125: That 11% was more about.

Jared M. Wolff: That wasn't that 11% was more about other uses of capital; we would certainly be willing to use some of that capital to reposition securities now. Joe, do you agree with that? Yeah, especially when we have one-off contributions to capital like the civic transaction. You know, we can use some of that capital to immediately reposition those securities, and higher yielding securities have an immediate beneficial impact on our earnings going forward and will help us generate more capital going forward.

Joseph Kauder: Other uses of capital we would certainly be willing to use some of that capital to reposition securities now Joe.

Joseph Kauder: Joe, do you agree with that?

Joseph Kauder: Agree with that.

Jared M. Wolff: So we're considering, you know, we're looking at that. We're looking at other options as well, consistently reevaluating and trying to optimize the balance sheet, optimize our capital levels, and our earnings profile. Yep, understood. And is there a level at which, as you contemplate securities repositioning transactions, a level at which you would not want to take CET1 below? I don't think we will.

Joseph Kauder: Yeah, especially when we have one-off contributions to capital like the Civic Transaction, we can use some of that capital to immediately reposition those securities and higher yield securities has an immediately beneficial impact on our earnings going forward and will help us generate more capital going forward. So we're considering, you know, we're looking at that, we're looking at other options as well, consistently re-evaluating and trying to optimize the balance sheet, optimize our capital levels and our earnings profile. Yep, understood.

Joseph Kauder: Yeah, especially when we have one off contribution to capital like the civic transaction.

Joseph Kauder: We could use some of that capital to immediately reposition those securities into higher yielding securities has immediately beneficial impact to our earnings going forward and will help us generate more capital going forward. So.

Joseph Kauder: We're considering we're looking at that we're looking at other options as well consistently reevaluating and trying to optimize the balance sheet.

Joseph Kauder: Optimize our capital levels and our earnings profile.

Yeah understood and is there a level in which kind of as you contemplate securities repositioning transactions on a level, which you would not want it takes 81 below.

Joseph Kauder: Is there a level in which, kind of as you contemplate securities reposition transactions, or a level which you would not want to take CT one below? I don't think we, I mean, we came out of the gate at 10%, but I don't think that's really our floor.

Joseph Kauder: Yeah.

Speaker Change #126: I don't think we I mean, we came out of the gate at 10%, but I don't think Thats really our floor. We liked it I think our goal is to continue to grow capital.

Jared M. Wolff: I mean, we came out of the gate at 10%, but I don't think that's really our ceiling. I think our goal is to continue to grow capital consistent with our earnings profile. And so I think the way to think about it is we like to show steady progress on that target, you know, that march towards 11% or so. And if we end up in situations where we have a little excess, we might use that to reposition securities or other actions that can improve the profitability of the franchise. Okay, that makes sense. I appreciate it.

Joseph Kauder: We like that we, I think our goal is to continue to grow capital, consistent with our earnings profile, and so I think the way to think about it is we like to show steady progress on that target, you know, that march towards 11% or so. And if we end up in situations where we have a little excess, we might use that to reposition securities or other actions that can improve the profitability of the franchise. Okay, make sense. I appreciate it.

Consistent with our earnings profile and so.

Speaker Change #126: So I think the way to think about it as we would like to show steady progress on that target that march towards towards.

Speaker Change #126: Towards 11% or so and if we end up in situations, where we have a lot of excess we might use that to reposition securities or other actions that can improve the profitability of the.

Speaker Change #126: The franchise.

Yeah.

Speaker Change #127: Okay makes sense I appreciate it.

Andrew Terrell: On the deposits this quarter, you know, it's good to see the non-interest bearing deposits really held in there. I wanted to ask about the interest checking bucket, which looked like it came down $520 or so million this quarter. Any color on the flows in there? I'm not sure if there were any broker deposits that show up in that category or not, but any color on what you're seeing in the interest checking category? There was no brokered deal in there.

Speaker Change #128: On the deposits this quarter, it's good to see the noninterest bearing deposits really held in there.

Andrew Terrell: On the deposits this quarter, you know, it's good to see that the knowledge is bearing deposits really held in there.

Joseph Kauder: I want to ask them the interest checking bucket. Look like it came down 520 or so a million of this quarter. Any color is to the flows in there. I'm not sure if there were any broker deposits to show up in that category or not, but any color I want, you're seeing in the interest checking category. There was no, there was no broker in there. A big part of that was movement that we saw at the end of the quarter that looks like it's come back a little bit, but I don't have a lot more detail for you now.

Speaker Change #129: Can I ask on the interest checking bucket.

Speaker Change #130: It looked like it came down 520, or so million dollars this quarter.

Speaker Change #131: Any color as to the flows in there I'm not sure. If there were any broker deposits that show up in that category or not but any color on what youre seeing in the interest checking category.

Speaker Change #132: There was there was no there was no brokered in there.

Joseph Kauder: A big part of that was movement that we saw at the end of the quarter that looks like it's come back a little bit, but I don't have a lot more detail for you now. It just looked like normal movement. Yeah, we and you know, we also do things like that. I think we told stuff in the beginning that we had some higher-cost depositors that, over time, we were looking to move out and replace with lower cost funding.

A big part of that was movement that we saw at the end of the quarter that it looks like it's come back a little bit, but I don't have a lot more detail for you now it looked like just normal movements.

Joseph Kauder: It looks like just normal movements.

Joseph Kauder: And so some of that happened this quarter; we contributed a part of that. Okay, um, and then just maybe to clarify on the expenses, so the $195 million to $200 million 4Q, Expense guidance does include an assumption for the insurance assessment to come down to the call it 10-12 million dollar territory. Is that right? I'll say the high end of that.

Joseph Kauder: Yeah, we, you know, we also do, you know, that in the beginning that we had some higher cost depositors that over time we were looking to move out and replace with lower cost funding. And so some of that happened this quarter. We contributed to the part of that decrease.

Speaker Change #132: Yeah.

We also do you know I think we've told you that from the beginning that we had some higher cost depositors.

Speaker Change #132: Depositors.

Speaker Change #132: Over time, we were looking to move.

Speaker Change #132: Move out and replace with lower cost funding and so some of that happened this quarter.

Speaker Change #132: We contribute part of that decrease.

Speaker Change #133: Oh, okay.

Joseph Kauder: Okay, and then just maybe declare a file expenses. So the 195 to 200 million for your expense guidance does include an assumption for the insurance assessment to come down to the color 10, 12 million dollar territory. Is that right? Let's say the high end of that range.

Speaker Change #134: And then just maybe to clarify on the expenses. So the 195 to 200 million <unk> expense.

Speaker Change #135: The expense guidance does include an assumption for the insurance assessment to come down to the call it $10 million to $12 million territory is that right.

Speaker Change #136: Let's say the high end of that range.

Andrew Terrell: Okay, um... Thank you for taking the questions. Thank you, Andrew. Our next question will come from Brandon King with Truist Securities. Please go ahead.

Speaker Change #136: Okay.

Speaker Change #136: <unk>.

Unknown Attendee: Thank you for our technical questions.

Speaker Change #137: Thank you for taking the questions.

Brandon King: Thank you, Andrew. Our next question will come from Brandon King with Truest Securities.

Andrew Terrell: Thank you Andrew.

Speaker Change #138: Our next question will come from Brandon King with Truth Securities. Please go ahead.

Brandon King: Please go ahead. Hey, I'm a question on the the fourth you named guidance of 293%, but you just elaborate kind of what is one of the biggest swing factors you to get to the higher end or to the lowering of that. You know, there's a lot of uncertainty in the market right now with yields and other things and how rate cuts might impact customer behavior.

Brandon King: Hey, a question on the 4Q NIM guidance at 293%. Could you just elaborate kind of what one of the biggest swing factors for you to get to the higher end or to the lower end of that? You know, um...

Brandon King: Hey, a question on the <unk> NIM guidance of $2 93 per se. It could you just elaborate kind of what are the biggest swing factors to get to the.

Speaker Change #140: Hiring towards the lower end of that range.

Speaker Change #140:

Joseph Kauder: There's a lot of uncertainty in the market right now with yields and other things and how rate cuts might impact customer behavior. So, we're naturally being very cautious with our NIM guidance as we think through that. We should have some benefit in our NIM from, you know, the civic transaction just from, you know, if you look at those civic loans, they were only about a 1% spread of our marginal cost of borrowing, so that should benefit NIM. We should also get some benefit from those security-free positions.

Speaker Change #141: There's a lot of uncertainty in the market right now with yields and other things and how rate cuts might impact customer behavior. So we're naturally being very cautious with our NIM guidance as we think through that we should have some benefit in our NIM.

Joseph Kauder: So we're naturally being very cautious with our NIM guidance as we think through that. We should have some benefit in our NIM from, you know, the civic transaction just from, you know, that if you look at those civic loans that was only about a 1% spread of our marginal cost of borrowing. So that should benefit NIM. We should also get some benefit from the security repositioning and then continuing to grow NIB.

Speaker Change #141: From the civic transaction just from if.

Speaker Change #141: If you look at those civic loans that was only about a 1% spread over our marginal cost of borrowings so.

Speaker Change #141: That should benefit NIM, we should also get some benefit from the securities repositioning and then continuing to grow and so we look forward. If you are looking for what the higher end range that I think is a pretty good feel pretty comfortable with this range and we have potential upside if we would continue to grow faster or we have other.

Joseph Kauder: So, you know, we look for, you know, if you're looking for what the higher end range that I think we, you know, it's a pretty good, feel pretty comfortable with this range. And we have, you know, potential upside if we're continuing to grow NIB faster or if we have other contributions due to either accelerated rate cuts or other types of actions.

Other contributions.

Speaker Change #142: Do do either accelerated rate cuts or other types of actions.

Joseph Kauder: In that, I guess that cost of funds expectation over that 20 to 25 basis points decline, how much of that you think just based off of just interest rates moving lower versus, you know, the other action on the funding side of the balance sheet. Well, yeah, we haven't broken that out specifically with respect to interest rates, but we only have one cut baked into our forecast for the year. And the rest of it is from other actions, you know, civic. Just the civic action alone will contribute just, you know, just just just that 1% spread that contributes 5 to 10 basis points to lower cost of funds as we're going to use the liquidity generate from civic to pay down higher cost broker deposits.

Joseph Kauder: [inaudible] Okay, and that, I guess that... Cost of funds, expectation over that 20 to 25 basis point decline, how much of that do you think just based off of just interest rates moving lower versus you know, The other actions on the funding side of the balance. Well, we haven't broken that out specifically with respect to interest rates, but we only have one cut baked into our forecast for the year, and the rest of it is from other actions, you know, civic, just the civic action alone will contribute just, you know, just just just that that 1% spread that contributes five to 10 basis points to the lower cost of funds, https://www.youtube.com, So, you know, then when you so that would then I'd be and, are really the bigger drivers than right now.

Speaker Change #143: Okay, and then I guess that.

Speaker Change #144: Cost of funds expectation over that 20 to 25 basis point decline how much of that you think just based off of just interest rates moving lower versus you know.

Speaker Change #145: The other I'd say on the funding side of the balance sheet.

Speaker Change #146: Well, we haven't broken that out specifically with respect to interest rates, but we only have one card baked into our forecast for the year.

Speaker Change #146: And the rest of it is from other actions you know civic just specific.

Speaker Change #149: Actual alone will contribute just just just just that that 1% spread that contribute 5% to 10 basis points due to lower cost of funds.

Speaker Change #146: Because we use that as we're going to use the liquidity generated from civic to pay down our higher cost brokered deposits. So then when you so that with Niv and.

Joseph Kauder: So, you know, then when you, so that would NIB and, you know, are you are really the bigger drivers than rate cuts. Okay, yeah, it's trying to see. It seems like you can get that 20 basis points even without any rate because this year itself is kind of what I'm skinny to.

Speaker Change #147: Really the bigger drivers than rate cuts.

Joseph Kauder: Okay, yeah, it seems like you can get that 20 basis points even without any rate cuts this year, so that's kind of what I was getting to. Okay, and then a follow-up on the securities restructuring or potential securities restructuring. How are you thinking about a potential earn back for that sort of transaction? You know, we're looking, we have looked at that, and then we're still considering our options, but you know, it's probably in the, you know, somewhere a little bit north of two years, probably earned back, but we still think that's a benefit, pretty powerful. Yeah, when you have a one-time capital event, like the sale of Civic, and it generates as much capital as it did, the earnback analysis is important, but we're also looking at permanent enhancements of profitability.

Speaker Change #151: Okay, Yes.

So it seems like you can get that 20 basis points, even without any rate because you see yourselves kind of without getting too.

Joseph Kauder: Okay, and then follow up on the security structure and go potential security structure. How are you thinking about a potential earn back for that sort of transaction? You know, we're looking, we have looked at that and then we're still considering our options, but you know, it's probably in the, you know, somewhere a little bit north of two years probably earn back. But we still think that the benefit is pretty powerful. Yeah, when you have a one-time capital event like the sale of Civic and it generates as much capital as it did.

Speaker Change #147: Okay.

And then.

Speaker Change #148: A follow up on the securities restructuring or potential securities restructuring how are you thinking about a potential earn back for that sort of transaction.

Speaker Change #150: You know we're looking we have looked at that and then we're still considering our options, but it's probably in the somewhere a little bit north of two years probably earn back.

Speaker Change #148: But we still think that the benefit is pretty powerful.

Speaker Change #148: Yes, when you have a one time capital event like the sale of civic and it generates as much capital as it did.

Joseph Kauder: Urback analysis is important, but we're also looking at permanent enhancements profitability. And so, you know, you're weighing those things against each other.

Earn back analysis is important but we're also looking at permanent enhancement to profitability.

Joseph Kauder: And so... You know, you're weighing those things against each other. Okay, makes sense. I'll step back in queue.

Speaker Change #148: So.

Speaker Change #148: Youre weighing those things against each other.

Unknown Attendee: Okay, make sense.

Okay makes sense.

Unknown Attendee: I'll stay back and keep.

Speaker Change #152: Ill step back in queue.

Speaker Change #153: Thank you.

Gary Tenner: In our next question, we'll come from Gary Tenor with the A Davidson. Please go ahead. Gary, Gary, your line is open. Sorry about that. I was on mute.

Speaker Change #153: And our next question will come from Gary Tenner with D. A Davidson. Please go ahead.

Brandon King: Thank you. And our next question will come from Gary Tenner with D.A. Davidson. Please go ahead. Gary, Gary, your line is open. Sorry about that. I was on mute.

Speaker Change #153: Gary Gary Your line is open.

Sorry about that I was on mute.

Gary Tenner: Good morning. Joe, you just alluded to this answering question a moment ago, but in terms of the civic loan yield, you know, you talked about it just being a one percent spread. What was the yield in that portfolio actually on a full, you know, just on a yield basis? It was right around 6% to be right around there a little bit less. The loans we sold, so we still have a bridge portfolio, that's 250 million, that's a little bit higher yielding, that's a very short term. But the loans we sold were Joe's, right? It's around there, maybe 6 in a quarter.

Gary Peter Tenner: Good morning.

Gary Peter Tenner: Good morning. Joe, you just alluded to this answering a question a moment ago, but in terms of the civic loan yield, you talked about it just being a 1% spread. What was the yield in that portfolio, actually? I thought, you know, just on you. It was right around 6%, right around there, a little bit less.

Gary Peter Tenner: Morning, Joe you just alluded to this entering a question a moment ago, but in terms of the civic loan yield you talked about it just being a 1% spread.

Speaker Change #155: What what was the yield in that portfolio actually on a.

Speaker Change #156: So just on a yield basis.

Speaker Change #157: It was right around 6% maybe.

Speaker Change #158: Right around there a little bit less.

Joseph Kauder: Yeah, the loans we the loans we sold. So we still have a bridge portfolio. That's 250 million. That's a little bit higher yielding.

Speaker Change #159: The loans, we sold so we still have a bridge portfolio, that's $250 million, that's a little bit higher yielding that's very short term, but the loans. We sold were Joe's right around there maybe six a quarter.

Jared M. Wolff: That's very short term, but the loans we sold were Joe's right. It's around there, maybe six and a quarter.

Joseph Kauder: Okay, that's awful.

Speaker Change #159: Okay. That's that's helpful and then.

Joseph Kauder: That's helpful. And then, just to clarify, on your fourth quarter outlook slide, that NIM assumption of 290 to 3, is that inclusive of an assumed balance sheet repositioning, or would the repositioning be additive? It is inclusive. But as we said, you know, we've tried to be very cautious with our guidance given the uncertainty that's in the environment, um... and then, on the FDIC assessment comments you made, Jared, I was a little bit confused.

Joseph Kauder: And then just to clarify, on your fourth quarter outlook slide, that NIM assumption of 293, that is inclusive of an assumed balance sheet repositioning or the repositioning be added up to that. It is inclusive, but as we said, you know, we've tried to be very cautious with our NIM guidance given the uncertainty that's in the environment right now.

Speaker Change #160: Just to clarify on your fourth quarter outlook slide that that NIM assumption of $290. Three that is inclusive of an assumed balance sheet repositioning or the repositioning would be additive to that.

Speaker Change #160: It is inclusive but.

Speaker Change #161: As we said we've tried to be very cautious with our NIM guidance given the uncertainty that's in the book.

Speaker Change #161: Environment right now.

Joseph Kauder: Okay. And then on the FDIC assessment comments you made, Jared, I was a little bit confused. The increase this quarter was more related to; it looked like this slides to a first quarter reduction.

Speaker Change #161: Okay.

Speaker Change #162: And then.

Speaker Change #162: On the FDIC assessment.

Speaker Change #163: Comments, you've made yard I was I was a little bit confused.

Joseph Kauder: The increase this quarter was more related to, it looked like in the slides, a first-quarter reduction. Was this, was this quarter, anything unusual in this quarter other than just the ongoing PacWest elevated assessment level? Or is there some other noise in this quarter? I was confused by that.

Speaker Change #164: The increase this quarter was more related to it it looked like in the slides to our first quarter reduction. So was this is this quarter is there anything unusual in this quarter other than just the ongoing Pac west elevated assessment level or is there. Some other noise in this quarter I was there was there was a special assessment that was it.

Joseph Kauder: So was this, is this quarter, is there anything unusual in this quarter, either than just the ongoing Pack West elevated assessment level, or is there some other noise in this quarter? There was a, there was a special assessment that was assessed against all banks that we have to trip as well. Yeah. Okay. There was an increase. Yeah, you have to make an effort for that.

Gary Peter Tenner: There was a special assessment that was assessed against all banks that we have to true up as well. I was just going to say, there were some moving pieces in both quarters, and it gets kind of complicated because you get this bill and arrears, and then there's, you know, you have the core base, you have the core amount, then you have this, as Jared speaks to, the special assessment, but then you also have the FDIC will occasionally say, well, you know, here's an extra charge or here's a reduction in your charges related to some work we did for quarters in the past, and we're truing up for that, and so, you know, you get these bills late in arrears, and you just basically book to it, and I think due to some of the complexity with PacWest, that what they went through in 2023, that some, you know, we've had some true ups in our bills that have come through, and so it's just a little noise.

Speaker Change #165: First against all banks that we have to true up as well.

Speaker Change #166: Okay. So some portion of this.

Speaker Change #167: Measure up.

Gary Peter Tenner: Gary the rule for that.

Joseph Kauder: Go ahead, Joe. I was going to say there was some moving pieces in both quarters, and it gets kind of complicated because you get this bill in a rears, and then there's, you know, you have the core base, you have the core mount, then you have this, as Jared speaks to the special assessment. But then you also have the FDIC will occasionally say, well, you know, here's an extra charge, or here's a reduction in your charge is related to some work we did for quarters in the past, and we're chewing up for that. And so, you know, you get these bills late in the rears, and you just basically book to it, and I think due to some of the complexity with Pack West that what they went through in 2023 that some of, you know, we've had some true ups in our bills that have come through.

Speaker Change #167: Yep.

Speaker Change #168: I was just gonna say there was some moving pieces in both quarters and it gets kind of complicated because you get this bill in our rears than theirs.

Speaker Change #168: Core base. The core amount then you have this speaks.

Speaker Change #168: Speaks to the special assessment, but then you also have the FDIC will occasionally say well.

Speaker Change #168: Here's the here's an extra charge or here's a reduction in your charges related to some work we did.

Speaker Change #169: <unk> quarters in the past and were Truing up for that and so you get these bills late in arrears and you just basically book to it and I think due to some of the complexity with Pac West.

Speaker Change #169: What they went through in 2023 that some of you know we've had some true ups in our bills that have come through and so it's just a little noise in the two quarters.

Joseph Kauder: And so it's just a little noise in two quarters. Yeah, we that's why I think that the guy that we're giving for what normal would look like is important, and we're just trying to try to move to there. And you know, our outlook right now is higher end of that range than we gave 10 to 12 in Q4.

Speaker Change #170: Yes, we that's why I think that the guide that we're giving for what normal would look like is important.

Gary Peter Tenner: That's why I think that the guide that we're giving for what normal would look like is important, and we're just trying to try to move to there. And, you know, our outlook right now is at the higher end of that range that we gave 10 to 12 in Q4. Okay, thanks. The rest of my questions were asked. Thanks, Gary. As a reminder, if you have a question, you may press the star, then one. Our next question will come from David Chevrini with Wedbush Securities. Please go ahead.

Speaker Change #170: And we're just trying to trying to move to there.

Speaker Change #170: And.

Speaker Change #170: Our outlook right now is higher end of that range that we gave 10 to 12 in Q4.

Speaker Change #171: Okay. Thanks for the rest of my questions were asked.

Gary Peter Tenner: Thanks, Gary.

Unknown Attendee: As a reminder, if you have a question, you may press star, then one to join the queue.

Speaker Change #172: As a reminder, if you have a question you May press Star then one to join the queue.

David Chevarini: Our next question will come from David Chevarini with Wet Bush Securities. Please go ahead. Hi, thanks.

David Pipkin Feaster: Our next question will come from David <unk> with Wedbush Securities. Please go ahead.

David Pipkin Feaster: Hi, thanks. A couple of clarification questions. The first one related to the continuing optimization of the balance sheet is, could additional optimization include additional portfolio sales? Or is that more a reference to the securities repositioning? I think we're more likely to sell securities than sell portfolios at this point. We have some non-core portfolios, but it doesn't seem like... You know, it would be actionable to sell those right now, especially at the pace at which they're running off.

David Pipkin Feaster: Hi, Thanks, a couple of clarification questions.

Joseph Kauder: A couple clarification questions. The first one related to the continuing optimization of the balance sheet is could additional optimization include additional portfolio sales, or is that more reference? To the securities repositioning?

David Pipkin Feaster: First one related to the kantar.

Continuing optimization of the balance sheet is it could additional optimization include additional portfolio sales or is that more reference to the securities repositioning.

Joseph Kauder: I think we're more likely to sell securities than sell portfolios at this point. We have some non-core portfolios, but it doesn't seem like... You know, it would be actionable to sell those right now, especially the pace at which they're running off.

Speaker Change #173: I think we're more likely to sell securities than sell portfolios at this point, we have some noncore portfolios, but it doesn't seem like.

Speaker Change #174: It would be actionable.

Speaker Change #174: To sell those right now, especially with the pace at which they are running off.

David Pipkin Feaster: I would never say never because, you know, something comes up, and we see a portfolio we might want to sell, but at this point, it's more likely that we restructure securities than sell loan portfolios. Also, because I want to turn it into an earning asset story, and I think we have the ability to build up assets, and if you start, you know, Civic made complete sense to sell. It was really a negative carrier, at best neutral, and it was a lot of work, and it was throwing a lot of noise into our numbers. There aren't a lot of other portfolios in our book that look like that. There might be one or two that I'm thinking of, but at this point... It's most likely that we will only restructure security.

Joseph Kauder: I would never say never because, you know, something comes up and we see a portfolio might want to sell, but at this point, it's more likely that we restructure securities than sell loan portfolios. Also, because I want to turn into an earning asset story. And I think we have the ability to build up assets. And if you start, you know, civic made complete sense to sell. It was really a negative carry or had passed neutral. And it was a lot of work, and it was throwing a lot of noise into our numbers. There aren't a lot of other portfolios in our book that look like that.

Speaker Change #174: I would never say never because you know something comes up and we see a portfolio might want to sell but at this point.

Speaker Change #174: It's more likely that we restructure securities than sell loan portfolios also because I want to turn it into an earning asset story and I think we have the ability to build up assets and if you start civic.

Speaker Change #174: Civic made complete sense to sell it was really a negative carrier neutral and it was a lot of work and it was throwing a lot of noise into our numbers.

Speaker Change #174: There arent a lot of other portfolios in our in our in our book that looked like that there might be one or two that I'm thinking of but at this point.

Joseph Kauder: There might be one or two that I'm thinking of, but at this point, it's most likely that we will only restructure securities. God, thanks for that.

Speaker Change #174: Most likely that we will only restructured securities.

Speaker Change #175: Got it thanks for that and then a follow up on the expense outlook. It sounds like the $195 million to $200 million might be conservative given you get there from the FDIC assessment alone any other opportunities for expense savings or is that the main driver.

Jared M. Wolff: Got it. Thanks for that. And then a follow-up on the expense outlook. It sounds like the $195 to $200 million might be conservative given you get there, you know, from the FDIC assessment alone. Any other opportunities for expense savings, or is that the main driver? There's quite a few. Go ahead, Joe.

Joseph Kauder: And then a follow-up on the expense outlook. It sounds like the 195 to 200 million might be conservative given you get there, you know, from the FDIC assessment alone. Any other opportunities for expense savings, or is that the main driver?

Speaker Change #175: Well one thing is there's quite a few go ahead Joe.

Joseph Kauder: One thing I'll just say one thing I'll just point out when you say would be there from the FDIC alone, I just remind you that you look on page 30 of the deck that there were numerous noteworthy items and impacted expenses during the quarter. So while we do believe our core control expenses were down 5% in the quarter, total expenses probably weren't quite as good as maybe that number looked when you add back some of the things that were on that page. So we still have some work to do to achieve our target in the fourth quarter.

Joseph Kauder: I was just going to say, one thing I would just point out when you say we'll be there from the FDIC alone. I just remind you that, if you look on page 30 of the deck, there were numerous noteworthy items that impacted expenses during the quarter. So while we do believe our core controllable expenses were down 5% in the quarter, total expenses probably weren't quite as good as maybe that number looks when you add back.

I'll just say one thing I would just point out when you say it would be there from the FDIC alone I'll just remind you that you look on page 30 of the deck that there were numerous noteworthy items that impacted expenses during the quarter. So while we do believe are our core controllable expenses were down 5% in the quarter.

Speaker Change #176: Total expenses probably.

Speaker Change #177: Weren't quite as good as maybe that number look when you add back some of the things that were on that page.

Joseph Kauder: We still have some work to do to achieve our target in the fourth quarter. In terms of what further opportunities there are, we continue to optimize our operations, our platforms, our processes, our systems, and Looking for Opportunity and other large cost areas to drive our costs, while we continue to be able to invest in the platform and areas that we want to grow.

Speaker Change #177: So we do we still have some work to do to achieve our target in the fourth quarter now in terms of what.

Joseph Kauder: Now, in terms of what further opportunities are, you know, we continue to optimize our operations, our platforms, our processes, our systems, and looking for opportunities to reduce costs wherever we can. We're going through all of our vendors' spend line item by line item, and we are doing other initiatives that in facilities and other large cost areas to drive our costs down. While we continue to be able to invest in the platform in the areas that we want to grow.

Speaker Change #177: Further opportunities are as you know we continue to optimize our operations our platforms our processes, our systems and looking for opportunities to reduce costs wherever we can we're going through all of our vendor spend line item by line item and we are doing other initiatives that and facilities.

Speaker Change #177: Other large cost areas to drive our costs down while continue to be able to invest in the platform in areas that we want to grow.

Speaker Change #177: Yeah.

Joseph Kauder: Very helpful. Thank you.

Joseph Kauder: Very helpful. Thank you. Yeah, and David, on that point, Joe, that's well said, which is why we tried to draw a line to show that if we achieved our target at the end of the fourth quarter, it's going to be a 30 percent, you know, 30 percent, 30 percent plus from Q1 normalized or Q4 when we close the deal. And so, you know, even this quarter might not, like Q3, the OPEX might not look like a big drop because there was so much noise in the second quarter.

Speaker Change #178: Thank you.

Jared Shaw: David, on that point, Joe, that's well said. I think which is why we tried to draw a line to show that if we achieved our target at the end of the fourth quarter, it's going to be a 30% plus from Q1 normalized or Q4 when we closed the deal. And so, you know, even this quarter might not, like a Q3, the op-x might not look like a big drop because there was so much noise in the second quarter. So we're trying to show if we get to this number at the end of Q3, at the end of Q4, how much it was relative to our starting point.

Speaker Change #178: And David on that point, Joe that's well said I think.

Which is why we tried to draw a line to show that if we achieved our target at the end of the fourth quarter.

David Pipkin Feaster: It's going to be a 30%.

Speaker Change #179: 30%, 30% plus from Q1 normalized for Q4, when we closed the deal and so.

Speaker Change #180: Even this quarter.

Speaker Change #181: Might not like Q3, the opex might not look like a big drop because there was so much noise in the second quarter. So we're trying to show if we get to this number at the end of Q3 at the end of Q4, how much it was relative to our starting point.

Unknown Attendee: Got it.

Speaker Change #182: Got it thank you.

Speaker Change #183: Thank you.

Tim Coffee: And our next question will come from Tim Coffee with Jenny. Please go ahead.

And our next question will come from Tim Coffey with Janney. Please go ahead.

Jared M. Wolff: So we're trying to show, if we get to this number at the end of Q3, at the end of Q4, how much it was relative to our starting. Got it. Thank you. Thank you. And our next question will come from Tim Coffey with JANI. Please go ahead. Hey, thanks for coming, Jared. Good morning.

Tim Coffee: Hey, thanks for joining us. Good morning.

Timothy Coffey: Hey, Thanks, Good morning, Jack.

Speaker Change #183: Morning.

Speaker Change #183: Alright.

Timothy Coffey: So you've been around the PacWest portfolio now for half a year, and I'm wondering if you're starting to get a better feel for its puts and takes in terms of, you know, what comes in the pipeline and gets funded and what actually falls out. Getting there. In terms of the loan pipeline, yeah. Yeah, we're getting there. So we've been doing this for six months. I'd say we had good pipeline reports for four. (Inaudible) But I've been watching it and seeing stuff, and I'm getting a better sense for it. How do you feel about PacWest's portfolio credit quality? Hey, look.

Jared Shaw: All right. So you've been around the PacWestport folder now for half a year, and I'm wondering if you're starting to get a better feel for its puts and takes in terms of, you know, what comes in the pipeline and gets funded and what actually falls out. Getting there in terms of the loan pipeline. Yeah. Yeah, we're getting there.

Timothy Coffey: You've been around the Pac west portfolio now for half a year and I'm wondering if you're starting to get a better feel for it puts and takes in terms of what comes into pipeline that gets funded and what actually falls out.

Speaker Change #185: Getting there.

Speaker Change #186: In terms of the loan pipeline.

Speaker Change #187: Yeah Yeah.

Speaker Change #187: Yeah, we're getting there.

Jared Shaw: So we've been doing this for six months. I'd say we had good pipeline reports for four. And so we're, you know, we had to reorganize the teams; we slotted people, people changed roles. We gave them goals. They have to build that up themselves. You know, they remember they were in hunker down mode and we're now out there being the streets trying to generate loans. And so, as much as it's been six months that we've been a commodity fine company, you know, two full quarters. It's been about four months of pipelines. And so I, it's not that long.

Speaker Change #187: So we've been doing this for six months.

Speaker Change #187: I'd say, we had good pipeline reports for four.

Speaker Change #187: And so where you got to get we had to reorganize the teams we slotted people.

Speaker Change #187: People change roles.

Speaker Change #187: Give them goals they have to build that up themselves. They remember they were in a hunker down mode and we're out there, beating the street is trying to generate loans and so as much as it's been six months that we've been a combined company.

Speaker Change #187: Two full quarters its been about four months of pipelines and so it's not that long.

Jared Shaw: But I've been watching it and seeing stuff, and I'm getting a better sense for it.

Speaker Change #187: But I've been watching it and seeing stuff and I'm getting a better sense for it.

Jared Shaw: Okay. And how do you feel about the package portfolio credit quality? Terrific. I look. The office credits were what we were focused on from the outset. They've behaved as we thought they probably would. I think our reserve levels when you what I call our, you know, our economic coverage, which includes the first loss on the single family loans. And you have the marks on the bank, California; it's 1.8%. That's a, that's a big reserve. So I feel like we're well covered for the portfolio that we have. And I think we're on top of the loans that, you know, might pose risk.

Speaker Change #188: Okay, and how do you feel about the portfolio of credit quality.

Speaker Change #187: Terrific.

Luke: Hi, Luke.

Speaker Change #190: The office credits for what we were focused on from the outset, they've behaved as we thought they probably would.

Jared M. Wolff: The office credits were what we were focused on from the outset, and they've behaved as we thought they probably would. I think our reserve levels, what I call our economic coverage, which includes the first loss on the single-family loans and you have the marks on the Banc of California portfolio, are 1.8%. That's a big reserve. So I feel like we're well-covered for the portfolio that we have, and I think we're on top of the loans that might pose risk.

Speaker Change #190: I think our reserve levels when you.

Luke: What I call her or economic.

Luke: Coverage, which includes the.

Luke: The first loss on the single family loans and you have the marks on the banc of California.

Luke: One 8%.

Speaker Change #191: That's a big reserve so I feel like we're well covered for the portfolio that we have and I think were on top of the loans that might pose risk the <unk>.

Jared M. Wolff: The office loans, I think they're less than 4% of our combined portfolio at this point, and we migrated what we thought were repricing risk loans when they came off their fixed rate portfolio. I think those loans are going to be fine, but we thought it was smart to migrate them and make sure we got a little bigger reserve against them going forward.

Jared Shaw: The office loans, I think they're less than 4% of our combined portfolio at this point. And, you know, we migrated. Well, we thought we're repricing risk loans when they came off their fixed-rate portfolio. I think those loans are going to be fine. But we thought it was smart to migrate them and make sure we got a little bigger reserve against them going forward.

Speaker Change #191: Office phones, I think they are less than 4% of our combined.

Luke: Hi.

Luke: Portfolio at this point.

And we migrated what we thought were repricing risk loans when they came off their fixed rate portfolio I think those ones are going to be fine.

Luke: But we thought it was smart to migrate them and make sure we got a little bigger reserve against them going forward. So I think we're taking the right actions and we feel good about our portfolio.

Jared Shaw: So I think we're taking the right actions, and we feel good about our portfolio. Okay.

Jared M. Wolff: So I think we're taking the right actions, and we feel good about our portfolio. Okay, great. Thank you. These are my questions.

Speaker Change #192: Okay, great. Thank you those are my questions.

Unknown Attendee: Great.

Unknown Attendee: Thank you. Those are my questions.

Unknown Attendee: Thank you, Jim.

Timothy Coffey: Thank you, Tim. And with no remaining questions, we will conclude today's conference. Thank you all for attending today's presentation. You may now disconnect. Oh, I didn't mean to do that.

Tim: Thank you Tim.

Unknown Attendee: And with no remaining questions, we will conclude, conclude today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines. I need to do that.

Speaker Change #193: And with no remaining questions. We will conclude today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines.

Speaker Change #193: Hum.

Speaker Change #195: Do that.