Pacwest Bancorp (PACW) 20 Oct 222022 Q3 Earnings call transcript

Company Profile

Participants

Bill Black	EVP, Strategy & Corporate Development
Matt Wagner	CEO
Bart Olson	CFO
Mark Yung	EVP and COO
Paul Taylor	President
Jared Shaw	Wells Fargo Securities
Christopher Marinac	Janney Montgomery Scott
Matthew Clark	Piper Sandler
Gary Tenner	D.A. Davidson
Brandon King	Truist Securities
Chris McGratty	KBW
David Long	Raymond James
Jon Arfstrom	RBC Capital

Call transcript

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Operator

Good day and welcome to the PacWest Bancorp Third Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Bill Black. Please go ahead.

Bill Black

Thank you. to quarter welcome call. earnings and morning PacWest’s XXXX third conference Good and our me CEO; and Olson, COO Wagner, are; Mark leader Taylor, our With Matt Bart Paul today Banking Venture business. our President; Yung, the of CFO;

Matt, assumptions. the make we during call to statements to subject note that that Before I are over risks, please hand today’s call may forward-looking uncertainties and

our actual any of available more risks and which see cause complete forward-looking could from materially discussion afternoon, the SEC the results a on including differ For that to yesterday website. filings X-K company’s statements, uncertainties the filed company’s also is

to like I’d Matt Wagner. over turn Now to our CEO, the call

Matt Wagner

Thank operating we are call about weaker comments activity a you, for few and But everyone want environment. you remains the for ahead. strong. by thank joining today. business overall are Overall making Bill. about our we thinking planning business environments and Good to morning, proceeding and I start as cautiously economic off

to balance focus to serve We desire capital there while on some We and the cycle. economic given making throughout of our environment more are our slowed customers, grow the attention continue optimizing our running we them sheet. businesses, sure time to and our rapidly, our

we our believe part to Given currently as Credit and to remains prudent monitor negative we any closely this the strong approach the portfolio of do backdrop, continue current thing credit. economic we trends credit and a loan is to do. conservative not see

turn of make cover component over we will we to each the to remains primary this our capital, decisions quarter. Finally, continue let With Bill key but that, to quarter most key a focus importantly, did highlights me day. in third the as it the building be and of

Bill Black

Matt. Thanks,

third quarter key a was of The couple events. by marked

regulatory of XX% to CETX our the increased march end CETX, increased including which as all the ratios XXXX. X.XX% by our target from and foremost, of X.XX% during quarter, of we capital First towards

grew grew $XXX Venture deposits two total but of billion. our decreases, importantly, deposit million after $XXX quarters $XX.X million. Second, stabilized And Banking to only our not

non-performing quality Third, basis the credit at assets quarter points and only charge-offs remained strong XX for of X with points. net basis

We continue net significant but two point. seeing and and growth businesses, to quarters remained not of prior and any this communicated. signs closely at broad-based loan Fourth, across are planned credit deterioration the the loan lower monitor portfolio our as as previously strong than the

Lastly, some Bart, our results now I’d was net last specific income up for go quarter. $XXX.X to interest X.X% into our on basis like CFO commentary the equivalent to Q&A. over things a from on we financial tax million, hand before

Bart Olson

and Page Bill X, going I’m earnings result. slide presentation view Thanks, we which of morning, condensed to our on comments financial focus to added my our new a a everyone. provides good

higher rates to income interest grew million ago, by quarter here, see balances during basis deposits grow, points, and driven also increasing can the higher expense you to cost of XX% wholesale a year up with average the increasing and As on $XXX and driven to by our rates. XX deposits. quarter continue Interest higher balances XX% during higher average from

that’s result limited a expansion quarter. during As our net the

less to to due a qualitative primarily growth, by decrease Turning provision provision, loan offset reserve, in $X the the slower decreased by COVID-related economic million, favorable forecast.

our of CECL X.XX%, above still end of CECL at Our level adoption ratio quarter the X.XX%.

in million our been for the that at would non-interest a $XXX the approximately a only of in was with I legal professional a XQ $X.X and million. and in during million sheet non-interest one our $X.X to insurance assessments million netted the non-interest of expense the of would of quarter end perspective, at $XX,XXX matter increase the excluding credit-linked the $X.X market rates. primarily and $XXX up the million related the $XXX.X as gain digital an loss loss quarter, attributable make to strategy, increase was day. the we a quarter related successful FDIC business at of of which $X.X AOCI fees contributors the a $XX items to is a XX $X illegal additional million continue sold our XQ $X.X this increase settlements, the of million and million legal to from million to in $X.X accrual, Meanwhile, a net and we income, for non-recurring as more $XXX transaction, non-interest to third along to notes to a outcome manage in in the second related Other income balance result From interest quarter. in up was compensation movement a Civic million related portfolio, wholesale primarily XXXX, expense went given increase FTEs, added accrual higher unrealized services litigation investment quarter note million increase end the due by million. bonds the during and to in were the down comments innovation actively to This credit-linked loss the Moving deposits have to

looking This Operator, for please you open you if you’re would on I our for our the our presentation Lastly, point questions? to remarks. concludes Slide quarter, in line materials. XX outlook the could fourth prepared

Operator

question do Yes, thank go And you. a have ahead. from [Operator Please Jared. we Instructions]

Jared Shaw

morning. Thanks good for Hey Everybody, the question. guys. Thanks.

as to guess beta You start what’s go the thoughts off a I beta be on you thinking through about know thought with? cycle you, room that here, how there’s we I know should Should or we into know the cycle thinking move your I little accelerated from maybe through guess be you think quarter. just the to we here on more

Bart Olson

Jared. Good morning. Yeah,

to the ahead for at total deposit increase to cycle leads, over months points current betas rising for for – XX the interest current XX% XX% the know total interest-bearing on XX% for we’re I’m environment, updated deposits You basis rate and deposits. interest-bearing forecast for looking our is deposits. that next and for XX

Jared Shaw

funding you you mentioned see slowing to we is Thanks. a funding pace? of going thinking that that on be How right. the you should know as loan keep be loan-to-deposit about all outlook that – we we the know growth growth. And the should in is Okay, assume we ratio, should thinking know that that deposit deposits that or beta know increase should you lagging you at continued then

Bart Olson

Well predominantly. have that to you on flat know we depending again, Venture is the guidance on you know deposits Banking up

think see where those deposit from perspective, obviously So loan loans. we’ll of slower goes that I part is growth that a

deposits we’ll as pace the at do You some with don’t probably loans. where wholesale, grow if same the obviously know funding

Jared Shaw

me, picture – the on Okay. Venture for question And bigger I maybe guess side. maybe just Mark for a finally

terms good ‘XX? be see the the you interested You to hear know on of potential there. deposit your know But of pace growth sentiment investment and go the we in maybe sort to as into end year sponsors of we’d the thoughts

Mark Yung

by QX, the Yeah, lookout more QX, would a mean, know it and would our for come US part you the I numbers are know robust seasonal out you in into I know back the end been picking of start Jared. Mark. Yeah aided slump. transaction of little QX broader say transaction that meaningfully did venture you Hi, had down actually summer bit levels getting I’m market, up here

to dry billion expecting still of powder. $XXX are We

be the powder. of estimated that for used know it’s investments $XXX billion dry – You new restated, of been numbers out it to is

do think under work pressure we you year will that later to here some put be VCs So, the end. before to know

levels, aided year So that XXXX transaction to again, by activities or you the come be believe dry like But pandemic ecosystem. in be should assisted continue into to and know XXXX it’s but to tremendous pre-pandemic more we it’s of powder levels, going transaction amount QX. up transaction the not going

QX to continue – end know where up here. we optimistic and you see we here we’ll So be we’ll cautiously into

Jared Shaw

Great, thanks very much.

Mark Yung

Yeah.

Operator

question Marinac. from And comes next our Christopher

Christopher Marinac

good that same out balance go percentage just ask I the on on to Yes, next I the line help sort year? of changing we play I’m as at kind you funding of about DDAs well. sheet. into of core morning. further as may see kind curious guess Do wanted of the

Bart Olson

that know on tied you think so guidance have, to to mean Venture it’s depending is with flat the I Yeah, funding Venture. know think we I think we I core you again up and know you

from driver. going think that’s core I perspective the So key probably to be a

we does. grow But decrease we and itself the know third Bank it in as Community expect you quarter. to typically think grow to continue expect I that to

Christopher Marinac

kind management wealth that materially overall? the off Bank balance the – we funds is that the Isn’t sheet? beta the of what see at And are different on is from

Bart Olson

in numbers, our it’s sheet right. so While that’s balance not off

what it those no bearing has betas be. So would

Matt Wagner

know we’re good a it. actually we is balance call up this I – that had we’re But for Matt, some lot Project it having it’s and of funding initiatives, We’ve with to you think Boomerang on course Chris, of success back sheet, bring money. paying that

Christopher Marinac

want – I That what that’s yeah. just Great, establish. to

for year you still gave that. then And the the that of Matt for for read me us is know part fourth applicable XXXX? the just follow-up number quarter. How Is I through of guide first for is that thanks, for is the that part good a that a going kind expense So on budgeting early next on?

Bart Olson

in point. But mean budget our midst now right go jumping process. closely of budgeting going a at I expenses off on, right a through we’re that we as taking the is is the process we probably Yeah, you’re good look are the

jumping go off through us that, be that’s probably point that’ll guide. for a so a but I And a big from we good think focus as

Matt Wagner

you’ll you that logically Chris, wouldn’t new people. slow going lot You you now. We kinds at in are And But including necessarily, look guess pretty formal them some coming in those things. know replacements it go you don’t but and activity that. the name we need activity if but rate of of going heavily down dramatically initiatives hiring scrutinized the lending names I’m it’s call see that we’re activity, and slow have freeze the like forward fixed every some you down I you’re a I Yeah you can so before us. necessarily and with from to less the a of to hire – businesses know not

Christopher Marinac

and Great. thank you, Thank you, Bart. Matt

Operator

Matthew is question Clark. next our And coming from

Matthew Clark

want morning. cost. on good give happen of have on the start the rate spot on you at into rate end you us quarter? to deposits visibility I September spot deposit next interest-bearing have – going Do – some the Hey, to do to the

Bart Olson

Yes, the spot was rate XX.

Matthew Clark

quarter, I on back but this it was okay. thought past have I that. circle to XXX Okay,

Bart Olson

– is XX Matt, That’s XX is total. the the total –

Matthew Clark

Total, thank you.

come came this take quarter. And we relates that you’ve borrowings Okay. Got terms then to deposits relative in down to it the duration willing willing rates to you of on, do? assume wholesale they know what it. they to the you’re seen as you’re continue down? And Should to

Bart Olson

that fund Yeah, gap going in wholesale with you to of has But growth was bit again, just whether you whether on quarter, little do how borrowings cheaper do to wholesale the fluctuate we going a borrowings than that’s we or narrowed. third lot through I demand overnight. we that and with mean know know decide the

know when a so the think and probably as overnight you And look then little in think I forward, have you wholesale bit well. use of know we you there I can

think that we know did it’ll depends So the are. quarter just I what mix the then the know third on do you did you during laddered. be process and rates throughout it’s a We really wholesale

so And you duration. range – goes. it’s do the to the on depending – X.X% – where know But that and to continue X% it you the probably we’ll know wholesale it’s on in see the

Matthew Clark

quarter. And guide just on fourth the then loan for growth the it. Got slower in

should are would to we from know think assets or flat talking here about And down? how You flat digits? overall low-to-mid-single be we earning

Bart Olson

looking if growth trying XXXX, some be of into but again, side loan we’re little will some I be out in you’ll towards the sheet the Well, the There flat. – see fourth hold more growth. And to quarter. will growth, there you think balance

Bill Black

of the Yeah. comment That couple to and for we’ve just asset in be overall is flattish come mix I be ebbs different should more about sheet. ‘XX. and loan of and last of And a quarters that the of out. would earning a optimizing the and to the net will result But things add that And optimizing Paul think the I that. Matt, talked grow that. of that sheet of net things obviously that the There’s portfolio different flattish balance and made balance going may flows balance

Matthew Clark

the know around Is you to NII some from get Okay. And kind higher you of like NIM? guide NIM your here. peak? a in on the Or lift you’re additional assuming just then going is that feel do modestly near

Bart Olson

the I loan was the think see deposit I to we know see limited you think that this mean, you will ahead. expand. in expansion will But we know No expect think we yields but NIM continue looking NIM to I quarter you the it cost. know rise, deposit because continuing expansion of to rise, costs

Matt Wagner

Yeah.

of remixing on it’s think I balance assets basically flat a the the the rates a earning and mixture of higher sheet.

Matthew Clark

Okay. I’ll step back. Thanks.

Operator

from comes Gary question next Our Tenner.

Gary Tenner

Thanks morning. good so much,

of you generation beyond Can Just as out know loan talk obviously XX portfolio growing CLN think next was have may wanted you’re know over I added ask any in transaction. in flattish But about and part addressed in just that relates a the bps goal or of you thinking about capital quarter, internal you XX as several additional you look we XX% it know to know the you terms transactions your by quarters? to this you this about talking bps that strategies CETX XXXX.

Bart Olson

Yeah.

CETX that end make to XX% I looking by think exceed we meet we’re the know everything ‘XX. or the you of at sure

the you’ll go we improve capital. through think company to and a be looking process. everything We’ll I see at things can So announcing

Matt Wagner

of a doing know properties You in loans. they’re have everything the not some refis obviously, you know, is is have of our know And rising to going maybe there course, sold not course because know like And also of grabs, going up quick normal business, environment, to loans kind activity you’re SFR with would rate amortization you’re of things Gary in as Matt. will as know you we’re our have where have you multifamily this same you you portfolio. to this the for going as be velocity

amortization have have to going to You’re people. you’re and going

a somewhat know you’ll you’re and activity and these multifamily people sort you going which to quarter payoffs is was it’s paid moved, think, see and of down this lot like we basis, You a sell projects, had which average more like – – but wasn’t going from have which downs And do quarterly off. their you know majority And know on $X.XX billion construction things are of is the yes completion certificate issued PacWest our thing. in that down. have kind we see to I and slow that refi to we pay lenders the the don’t and Mark, that still out. occupancies you’re nature expect of coming this we homes And not taking of of stepping just activity to and it, $X.X approximately of billion, in long-term

$X on in our a you an you’ve think So when general third. portfolio $XX is XX% and about billion the which annual runoff in between portfolio, got basis natural about billion XX%, of more than

out you so have our you a check, in like continue be making them customers loans deposits work flat-footed making And know to our have still we’re core not balance It’s provide be us do. going we still order going sitting and and know keep to to to that we’ll that. we to to around do there sheet at be lot the of to customers,

Gary Tenner

I’m talking about clear know make balance the then that sheet. sure optimizing Thank color, And as to on you you Matt. that for – thanks just you’re

asset kind if as not mix of optimizing is portfolio? the is overall, look now? you’re and shifting loan the categories of at Or the or balance of growing it broad where think it side, loans the you sheet from securities more the more within mix I that right cash As loan

Matt Wagner

it at portfolio know we’re a do unless can level. we that Well you neutral but not securities selling off know our you pretty

our maturities, yeah you as – So is million? as monthly know what $XX Mark?

Mark Yung

but is was know Yeah. $XX gone around It that forward-looking This the during down. about million. quarter, you

Matt Wagner

rates grow chunk customers growth. its going growth I’m probably still But you like And why so ‘XX of deposits, large I’m of at million – again think up our and year, to – we ‘XX next yeah, in also portfolio. – Venture. see we it’s our mean deposit some and and do the much – the it’s pretty are continue flushed but to that that’s good – never in to although possibly we to continue to as But pretty I flows I that. for loan what never now? And commitments you it’s I quarter know we of have optimizing have has I low you also they’ve loan been I just a securities would making particularly first improving, our it’s an to QX other Mark happy with are exciting particularly go some rate said, fixed to our had single-digit you going big runoff to – we so stabilize system don’t you honor, kind know flow depositors. won’t be still least more know a But been community-based mean the the that $XX going know Again, not through I and mean portfolio. of – want – see it’s much are so which way optimistic. through be in to the deposits think month

Mark Yung

think thing balance The when it. whole. optimizing it, a sheet add of the optimizing part you look Yeah. single the necessarily would is I to I not that It’s at one optimizing that is

And to of capital so we’re balance for really long-term and trying use liquidity sheet overall it. and the manage

the not sheet it’s when and will sheet whole. I flows balance than one So And necessarily the to less figures. the optimizing be maximize balance they the we’re this trying to are loans think part about be talking important me are will really it, that, it’s that ebbs of of or overall

Bart Olson

balance runs billion to that have about keep off $X.X we the And sheet mind in quarter. a

bucket. of and at fill of that can types the loans we loans best profitable that billion in is all So our we’re going most with going to $X.X looking

Matt Wagner

the we’ve gets the at quarter. CETX, It’s we can basis of of balance yet. you end how year. know I you a the matter a points if the sheet mean mean you Can a we do it, $X.XX it we just got XX the you that’s look it, see to and that. next that That’s the $X.XX the about we’re when of $X grow into optimizing XX% know capital back it that? profitability on is also side Absolutely. can’t at there. clear certainly path that’s billion quarter achieve by and talk at CETX that’s And Yeah. I Gary, and

customer-centric to customers pulling So a X% interest headed see – and made guy. talking going people other was of have make to going guys see and people know I I’m but mean you lot I today likely X.X% are West the that and mean you’re Coast very know I And as sense and thing. to it’s sort you not that sense that. to at aren’t back. you a projects to rates of at know I’m

keep they’re and So naturally so And that think are you throughout is the an country just slowing see customers customers. And and naturally banks. you to your got down you eye deposit we again, can our best best business our on with And know there customers. the be – the you know everything. I for

emphasize a don’t will, of and capital call take Mark be we’ll team and know we’ve are capital more you I and care we’ve you so take lot capital And if of both and never a Because you call, You quarter, which huge groups, in route, related over at a got they to look seeing if capital billion. for they to times. right was $XX.X you than tech, our I are of those in lending to just looking of a think loans little the a from mean life those but remarkable, businesses, there. chunk a sciences we you know deposits moderate our know billion I want been that’s X customers, one, giant call raise a environment. pretty kind a just know requests it’s that’s businesses, mean now. out be know calls, came his often probably $X of those again, this dynamic at we’re – because down these the our I Venture lending just

Gary Tenner

Great. that. I appreciate Thanks guys.

Operator

King]. And King Bryan [sic coming our Brandon next question - is from

Brandon King

Brandon. this Hey, is

Civic curious strong was to the pretty hey, I interest quarter. get yes on you is loan And Just it production. high want is expecting if this know what and know an affecting house as it Just I – housing given they you’re update in there or if curious lower that, slowdown a outlook prices? can pace your for from rates, well? keep up demand

Bill Black

Hey Bill. Brandon, it’s

start higher that happen that as – through and you’ve to balance the naturally through. throughout rates So translate quarter that rates fourth includes is the production, in sheet Civic slow see ripples seen higher you’ll in

You’re are kick the maturation the a to of starting up. portfolio, seeing payoffs so

production, relatively obviously that remain saw And solid And good couple up growth I up. stats, years. for I good payoffs you kick our as consistent overall net rates will credit think so the thought the past underwritings of go and slow

Matt Wagner

want – might to since want Florida? you you Civic, up touch you on Bill, to might brought

Bill Black

Sure.

know went obviously And damaged that single-digit deep with we dollar where both than you all were within properties low of the properties through dive of a types policies a of severely disasters we’ve the and you more that exposures, in overall million had, insurance place. So Civic amount natural were we portfolio, handful, have little entire know externally. the the

but nice timeframe. on a I did terms of really disaster, outcome obviously doing diligence a think quick horrible team a to the having teams face a in the the great jump tight our really the work and phones of the So in job

with and So that the we’re the structure pleased there. underwriting

Matt Wagner

and good looks a And includes step nice And business. really rates the inflow amortized really They that $X.XX to that that that for in yield, have which their of We bump a lending was have quickly jump basis add I September, Florida, in points – raised I is and we Civic production about does good. had back continues. other it done XX that, would to had of in has trend there. still the and hopefully which – in nice of terms at quite yield a bank just

Bill Black

that it’s the through kind there I from mentioned creeping balance up pipe. origination creeping sheet. are of is there the seeing in fund pipeline that to of Matt of to through numbers the as keep terms kind mean you’re to what continues that flow pipeline going Yeah the the

Matt Wagner

XX Yeah. do. but these often were There almost to do it’s a them days we don’t going re-trade that deals we advance, Bill, application said committed And to right, more like in were know if – rate I lock, are I to what we don’t deals. we mean call

some in So have in through the in still works of that is more that Civic working It QX pipeline but QX, don’t the we through or really the I think in any pipeline. of core bank.

Brandon King

into Got kind downturn the it, got to a environment? you curious could want what level normalized touch net for a or it. credit. that going low general of have think an very while I And we’re economic in And then charge-offs on more go do slower been that’s consensus, of a of lastly kind now. charge-offs now economic to mean I I’m kind

Matt Wagner

know that You very to not in really actuarial. like tough peg it’s a ours. mean we’re bank I

hot that for And that. underwriting in great the you lessons are banks the we overall. and And and pretty deep do their think very continue portfolios, were on learned what lending. all recession to things like on we things buttons And are of our pretty within see more You consumer-ish. focusing and that. we you in and like I not headlines great know Again But were conservative banking more we’re on about – much know that I optimistic very think portfolio. optimistic our matter, dives we’re know properties office industry

do patches to that? don’t Bill, have see know you add to ahead. any anything I So you real ugly

Bill Black

in the What of the stated of inside past years to that, is Yeah. itself mind, years out really, numbers. I would Yeah. say to Brandon, my have that this terms company in X X played

historical at don’t really a the range. You’ve seen non-accruals, end special think that’s lower mentions, fluke. I criticized, of classifieds And our be

think think And done. content think or continued I a of for I to overall But bump you see it ever that’s here out you the individual all I is quarter you than look the quarter out, the it’s very as an balance work materially and out, I when direct is we’ve loss I terms think different prove of that’s know sure. could in result think in very, credit from been. there sheet the like The composition manageable.

– jive the you’re I of would the with criticized. near classifieds thoughts metrics we’ve I some don’t lowest that I special numbers And and here. to non-accrual credit had that think like the the mentions, all know that fact So the historically that point there’s ever have been other been

Matt doing metrics. So the on And I intense That’s we’re know strong to up you’re our scrutiny do. to about, daily you credit what get to loan in basis paid you it that show is know talked a pretty some going we continue see job. think

Matt Wagner

I mean, Bart, X what for think in was I net past venture been for years? instance, the what our charge-offs zero?

Bart Olson

very, very It’s Yeah. been low.

Matt Wagner

– what Which job. is just damper, a great pretty

Mark Yung

recovering million not about Matt, we’re this through $X.X year.

Matt Wagner

too, I previous I X were Yeah. positive recoveries. I think Yeah. mean the years, at in Mark, we and that’s but net – mean if like you

Mark Yung

‘XX, XXXX know – were yeah. well, we You as

Matt Wagner

you it that life Yeah. something mean in doughnut I business sciences, zero. It’s if goes wrong, goes that’s know a as that’s know a and you pretty remarkable tech to

done money, able recover a keep our customers a been can great that we’ve but billion, and you in to and most have often recovering think I we But level. people $XX.X high the you’re importantly job $XX.X at billion know keep deposits. Now, not

Brandon King

Got my it. Thanks for all taking color and questions. the for thanks

Matt Wagner

You bet.

Operator

question Chris from McGratty. And next our comes

Chris McGratty

Hey, good morning.

NII fourth put If guide, heard to I grow year comments the from on modest that pieces slow Do you NII your can for QX. on be XXXX? number that? sheet. into think I is down-ish, flattish together growth the quarter like there balance growth going margins. Or in the or pressure next On some

Bart Olson

in grow XXXX. it think We will

Chris McGratty

Okay.

then the non-interest $XX.X QX, your And said I it you great. is off Venture was portfolio? grow think composition deposit the within bearing? How in Where of versus second the So interest-bearing that much book, is billion.

Matt Wagner

Yeah –

Bill Black

that really have don’t breakdown I –

Bart Olson

you that? Mark, happen do to have

Mark Yung

for Venture – breakdown, not I specific don’t that have

Matt Wagner

Chris. will We you get on to it, back

Chris McGratty

Matt. then And maybe Okay. Thanks –

Matt Wagner

ahead. Go

Chris McGratty

No, go ahead, Matt.

Bart Olson

majority going be interest-bearing. to The is

Matt Wagner

what’s you mean that know in and population overall But are in Yeah. the I $XX million, have lot I portfolio over – over Yeah. $XX a the million. overall depositors Venture? there’s of rate on it’s you of market. that money mean you’re the

Mark Yung

XX points. It’s basis

Matt Wagner

Yeah. Yeah.

So more know it – hand over reasons, obvious rates it’s and by they at the – driven historic $XX you are interest put are lows, expensive leaves really going for big their out. it’s depositors their to million don’t from more care. depositors When

Chris McGratty

– it Got

Mark Yung

too. betas to just been against Venture here, I mean the other uprate tracking the well, bank as have cycles for make sure specifically And Chris,

there’s So in sense. that no here anomaly

Chris McGratty

it. Mark. yeah. Yeah, Got Thanks,

Just next for one the expenses year. on

of guys? how for you assessment think through. going I – go for assessment there’s magnitude to FDIC industry should that the Is that an we that’s the about think

Bart Olson

I mean out. higher like we I impact uptick of assessment, budget assessments. this going at because the had now sales Yeah. the that on saw on an QX Obviously an mean that and that an the have looking mentioned, and will impact those assessment. assessment we I quarter on we’re haven’t QX being so the calculated through process

that play And how at so based where the those costs look on to we’ll see go continues out you know then and we’ll increase.

Matt Wagner

I Chris, and have too, – go would modest we’ll calculate we add ahead. it me. have to But very to looks

Chris McGratty

– understood. thank you. Yep, Thanks Okay.

Operator

is from our question Long. And David next coming

David Long

really kinks in forecast? go take this guys point. need it What pressure Moody’s to have at been And to ahead. you see for no circle Is building back to you that sort up? peers of the Okay, Good lot know despite side a ahead morning, reserve you building something everyone. credit on their would reserves here I of of armor the change level any wanted your start of seeing things. it

Matt Wagner

you lot portfolios out a across risk you the to know going But our mean portfolio held up classifieds real you you see well. to there. I and see held really we components go up know some I see dramatically, really don’t through of you and of mean down look you if have mean, country, up I know waves has, portfolio, has the there. have mean it multifamily I our multifamily have

– mean I’m I You there don’t just comment has know it know I big I you maybe to but Paul? do got know. to change. or see eternal don’t don’t what be wave an know, a you I Bill, optimist, you happening,

BillBlack

us. is look, like preparing about gets No. What for say that thrown would I like we’re whatever at

reserves. not It’s and towards them. and single it not today that’s one amount we’re of know You just capital seeing

Paul Taylor

pretty XX mind, You is got is low. points, ratio which to keep our basis at NPA in

Matt Wagner

you When about our where is seasonal you is to think to I slightly. to I know have day you truth. the it – you above our ECL about you every And – tell it’s – about still still where think think we’re mean adoption know going

where are You you know leverage we’re be the and them. not hotspots can in finance,

bill. store, lot I is the but a spend ahead I there at inflation. lot of know from you I of a mean up don’t true think get in the the my a consumer. my mean there’s for much has cost, more consumer restaurant, mind I the higher I’m of comment lot grocery I time about I everything got understand trouble pay costs. dramatically when in – spouse I looking at thing. how of you go that usually look I we And to sort a it, know – our it’s what do is and I at bank.

here due to inflation, raises to giving people and there. inflation and than the mean we real that’s past there’s in higher stay. out I have We’re much – it’s raises

think the every – hear consumer isn’t that it. with So keeping We day. up I and

I a to with You costs that going sort the is what’s raise news, gas on thing. listen know to X% going mean of and keep up food prices, if you with

which XX% from be is that and you to much. PacWest kind is in you there’s just non-bank going in more got we it other debt, which portfolio double-digit I the rates at out probably I after equity. and the see the bank lenders a have look aggressive. know itself think mind. a [inaudible] project, is, think are your And them a whether leverage. anywhere non-bank is the much large mean, you of of risk So manifests pain thing XX% I charging is [inaudible] is to XX% or the that real don’t then guys big there. have And then CRE been my lenders that, senior there’s office your commonly so like know any you you it’s know estate on When a

And you’re think going so I see to it.

be say most as thing the when you as we heard with stressed and even flexible it and borrower. recently years, could have do we through pandemic, to can this particularly a over that a do other went and know the borrower that as you The all probably me related times get bank hospitality, guys gets tough our

you could and CMBS, a the you not know know fight We’re structured off – for another we’re from not maybe or and to looking we back can customer. we CLO rate getting a that whatever a day while, improving loyalty

I’ve been kinds in know seen from been You this it’s about problem. which I’ve you know we transactions. well. And that know the way as happen and a in to can really you out in and CEO, And having decades, involved give up of That’s know it. you a some for business worked short-term, income I’ve those keep the go

David Long

No, you customers. to way color that’s and that guys great your the treat a testament

– part update So yield reserve portfolio? the the Do Civic. specific yield on that the you have of on a underwriting guys – appreciate the for I your

Bart Olson

do. that you treated we other loan We like It’s class Sure. have. do. every know We asset

outside. has its based it on the own So both and reserve history, inside

Matt Wagner

about for as know pay that going you of that tricky. mortgage, business, not. deals, just about need to and for X% huge considered out our our know you these you would $XXX,XXX. a size housing loan again, still on and lot mean and in real to there. starter going affordable out average go is a there’s again And category It’s know business, I payments as not, there’s people these And Bill you when those in think think know much up You you properties. equity X.X%, maybe I decent that do homes there’s get and does, be a down

portfolio up to we short-term. that Brent, of sizable end ends it a business So today the have where know could in could too, which fixed how this you and be that up do

still So have higher pretty optimistic. rates mean delinquency I in but portfolio. we that – much I’m

know as in you end, have thing. the don’t – have We a non-accruals But losses. take we sort percentage in that we higher of

those We people to into have whatever this willing clean be. it are might properties that to or other up step

Florida want rebuild And about be be it’s People to you to there’s pretty still be there. I’m in thing, to optimistic the clearly – going to Florida. that. know So fascinating, going going because there’s

the left these it. person got what’s home be rebuild. in hell and of desirable of built some It they’re kicked And the may value areas for not the be that land And state there. to some out that of house in that their that lives person selling may today, will be of most but going – something better

you’ve better Katrina. all I by mean, think All that I’ll better. disasters, – far, they think that know right build go seen I you think that towards do and I something later, get in yesterday back and I or it take anyway. back, natural

mean I saw think know see California, earthquake in anyway. we Yeah, I going So to to back definitely that way Northridge going you that you’re the that.

David Long

Got it. the Thanks Appreciate color. Thank guys. you.

Matt Wagner

Yeah.

Bart Olson

a chat. question the come had web We in through

update So for asking acquisition. an it HOA was the on

So you that? Bill, to talk about want maybe

Bill Black

Sure, yeah.

add asking believe HOA to betas spent So integrating the one was been the deposits the the business business majority business. of bank into starting about and there. as the vast that been well somebody I business as legacy has have Overall our combine us. We for XXXX a great platform HOA into with stable

of the Our that in that. lowest group bank betas in amounts terms in or the

for the plan that, that’s beyond. to ‘XX good we integrated then get and was – it we’ve looks Having So and where are. we get and say about in was produced. The that growth feel what plan

really hard good about we’re team about it feel us think we’re has work like about to of put the it’s what’s all bank. diversity the really and and done to the in. excited funding excited what we we gives come it for our that So together And

Matt Wagner

I going lose as to effectively And grow see on it the possible as it to you which really it. know and up. time I there really – we want and business haven’t. we to love it’s customers, our Yeah, took to concentrate not try staffing we’re to now ramp that integrate time and

Bart Olson

Operator, questions? more are any there

Operator

And Instructions] from take Jon [Operator our question next we’ll Arfstrom.

Jon Arfstrom

morning guys. Good Hey.

Matt Wagner

Good Jon. – Hi,

Jon Arfstrom

you Can average What the look you a little kept know I at bit quarter. like bit momentum [ph] a talk that little in [X.XX%] yields? you’ve your about production Civic, on today? touched for does but

Matt Wagner

to Do it you Mark? want take

Mark Yung

quarter so say in yields the second about loan you think to the significantly. We that would up move I rates going that. I the help shift is is production lot – about both you continue know in mix movement to what and talked how higher a see it pretty

to shift, I think higher you to talked of you’re be is stuff know right, going continue to higher see incremental And to mix the of same lot lot about, we’ve a production a that. that going going a rates, yield.

And you it’s specific be of it’s loan much on are but going keep there, to I super incremental rate that there. will – how will because from loans at classes, yields think our asset to it creeping wide you contribute see that. to is moved, variable up creep you continue type spreads things has up. where compared feel just the or that all to So to we depend just to pretty variances of SOFR if off to continue because can look are those see LIBOR hard will of between in going

Jon Arfstrom

Yeah.

quarter. You hiring? on And do feel just up have to you about what flattish a step couple talked That Okay. like the but left what’s in was big do a to – do? expenses, left Bart, you

Bart Olson

we’ve a you we’re replacement. it’s – as a – looking new new at hire, every Matt add Well know or you whether know we mentioned,

we a still have we that We to process September. XXXX. our committed you strategy, around in But implemented that our Vision know digital are innovation and

they investment going there FTEs QX. We in so and know the And the slow slow area. that QX you a Very the we start at about the in saw beginning of be in had first this up this talked quarter. year to ramp start was

we going to we slows hiring there some the do I look was the we’re there’s from where as next we’ll But think probably still that people where pace the fourth you and then hired goes just do year. to of But a through more that quarter. the but QX QX, they’ve just in down to get see be. have Although in already know that combination think overall. see I at FTEs we’ll taking little bit a hard And group

You know, if that? add you Paul, to to want

Paul Taylor

– every to it new in at and order of I – every a we know above replacement and as off got times sign more very you stated filled. on that’s call. Yeah are seriously going I call couple on during aggressive an we’ve it for VP that that this and be have that’s at look and to I’ve to we’re area hire get looking

we’re That’s in lot build the is Civic increase. So of on been getting FTEs. very of terms fully out serious FTEs. a

be that’s there’ll of about more So half Civic been creep increase. no our FTE

So very again, expenses going to we’re serious about here. get

Matt Wagner

not we got mean to industry. lone – I the I the going we’re mean I rangers think just be in –

right now. got look and nook You’ve at cranny to

Jon Arfstrom

and the hate of Paul deals answer. in you just actually question the behavior. on I’m that Okay. Last kind the I quality you’re seeing that competitive in Matt, or interested But just can question, touch but of

say people of assessment Other – peers to competitive are some larger know just CRE. banks, of competitor curious what annualized growth. the quality X% pulling XX% out you your loan your of You kind banks some But is putting of – environment are know of up and I’m the

Matt Wagner

Yeah.

of customers. really got very the out. the think curtailed pulling deal think good, first has you lot deal been all, been and you good know you deposit guys of a the And large exception the of has we’ve I I flow Jon, underwriting deal and know flow with flow, the

rates, You of summer, just but where spreads on at the was – up from clearly we are were lot certain a you kinds plus facing you were got those of know know guys somewhat so that we I mean, know projects, better looking – were the not $X.XX are you know maybe SOFR $X.XX. that you rates X% and

Paul Taylor

no in seen quality deal. real decline we’ve of the But the

Matt Wagner

No.

Paul Taylor

to trying us And of us think growth mean, got too. half had waters capital bit. rocky some for in we – rebuild most believe I got front we’ve of of to slow to little But I here. year. are we’re in prepare tremendous Again, know it We the the first you a there we’ve also

losses to So I think down by from too. potential that’s insulate slowing going us help

Matt Wagner

you right aggressive overly see being don’t know or willy-nilly being competitors now. I

Bart Olson

it’s The aggressiveness this we’ve year. but seen, specific not to

product, As somebody structure. priced to they a just not a right? It’s wants if win,

Matt Wagner

Right.

Paul Taylor

Very underwriting. in little decline

Matt Wagner

and I’m got on. happy found we a We’ve we we you fund. debt see mention mean, And But that’s that of I we about it by know a out special deals being in going is didn’t too. going hotel loss you you’re because couple week big like why once but into debt got if pay was just news. That’s very a taken you that have know out do we a potential deal you they’re it. to want generally to that they go it. other And And again, up fund. it fund, this to more listen, a one a which good debt give There was leverage.

Jon Arfstrom

Appreciate guys. it. thanks Well right. All news. good That’s

Matt Wagner

Jon. Thanks

Paul Taylor

Thanks, Jon.

Operator

And I have –

Bill Black

Okay, next great. appreciate Well, Thanks. quarter. with we questions. there’s you speaking no everybody’s to really and further forward look We attendance,

Matt Wagner

Thank very you much.

Operator

disconnect. This and concludes today’s may now call. your Thank participation, you you for

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