Banc of California (BANC) 23 Apr 242024 Q1 Earnings call transcript

Hello, and welcome to Banc of California's First Quarter Earnings Conference Call. [Operator Instructions] Today's call is being recorded and a copy of the recording will be available later today on the company's Investor Relations website.

Today's presentation will also include non-GAAP measures. The reconciliation for these and additional required information is available in the earnings press release, which is available on the company's Investor Relations website. The reference presentation is also available on the company's Investor Relations website.

earnings would statement direct in on earnings and we company's to both begin, release harbor safe forward-looking the we like everyone to the the Before presentation. statements included

turn I would Wolff, of President California's conference to Chief Officer. Mr. Banc Executive the and now Jared over to like

California's to call. quarter morning. Welcome first Good Banc of earnings

combined me today's call first Will of Head our executed on are the and Joining Strategy. quarter full company. a as Black, Joe Kauder, We CFO,

followed to Banc and years, continuous have California by For for us the several those who key consistently of making past of you down ball talk field. the you initiatives methodically the on progress about administering heard moving have our commitment success

side. I'll to call, I'm into the up I'm pick music sorry, It on going like sir. place and seems line it's your privately. breaking your up

a please. Just moment,

Mr. is recommence Thank operator. Excuse your me, opening conference speech. Wolff, this of you. please the the

morning, Good everybody. Okay.

call. try California's Banco that again. to We will Welcome quarter first earnings

are CFO, today's me Kauder, Strategy. and Head our Joe of Joining Will Black, on call our

saying As as executed quarter our full first company. combined a we I earlier, well in was

our profitability on field. of we what that quarter progress will and initiatives the we the achieving those to by you on For targets solid initiatives Banc several That's about for the made that years, success have the of down demonstrating to you and of have followed did moving making quarter, in first have talk us continuous we the the the ball for XXXX. methodically heard fourth California who progress consistently past lead key set commitment us

following the the benefits balance quarter, first sheet the repositioning the the In executed merger. we realized of closing of we

of This QX in on $X on we in executed in more interest borrowings. significantly of our nearly levels in and $X and after November assets resulted interest an reminder, net income net the closing a margin. down paid than higher of As billion billion XX, sale expansion

deposit of balances, gathering adding engine account progress the absolute deposit relationships. on from new quarter came business and demonstrated also the relationships much meaningful built, which we noninterest-bearing first The initial new have in growth

NIB contributed in repositioning, balance had our increase significant and cost resulted XX points to the of average the The margin. benefits we of the along deposits in basis in increase sheet deposits, declining our with

In are terms expenses, a operating making are trending realizing and initially we expenses from progress cost of the solid savings faster on also we pace operating at expected. lower than the merger,

and this in book prudent With an profitability management, well. increase tangible balance we our quarter our as higher in share per level generated of sheet value

is year primary profitability our than this indicated, focus rather growth. we've As

our result, of a over As total higher deposits the Program to as assets Bank down bit pay Term billion our borrowings. and quarter, primarily running of cash to the cost Funding a during well as declined due off use $X

remained balances relatively Our loan flat.

premium a grew As premium our loan in core we those at our finance pace loan portfolio, The $XX had as anticipated, the non-annualized was runoff impact on X.XX%. in which portfolio QX, which given results, X% has average annualized loans portfolio, our with discontinued an production, yields, runoff positive of a report. of offset or such lower finance particularly by yield declined million XX.X% that those

the points higher on our was running XX we our loans prior But what disciplined loan ensure are books seeing loans while strength production is to backdrop market we portfolios, with economic remaining quarter. off, in is which loan perceive our we true at muted also than the we good criteria. our than higher had variety rates are of be average team the an reflects slow what increase conservative which This the to demand, that Despite and pricing and basis meet underwriting position. our in coming core yield, of a and

we previewed, of majority appropriately which nonperforming had to credits office On a remain we the losses includes during CRE specific of the drove and Four three to that against loans and increase various as million are conservative quarter, believe proactive credits credits. $XX credit the office the properties CRE sufficient respect with side, in downgraded we future protect and provision. two reserves property. potential We one the and retail took recorded overall credit against

loans. CIVIC uptick delinquencies to Additionally, an legacy both the contributed portfolio in and nonperforming

losses So potential we minimal that portfolio. see in

properties continue represent about NPL loans represented CIVIC contributed for various profile to XX% remainder. and of approximately of loan the approximately The four the to good credit our feel increase. loans approximately SFR the very X%, We accounted overall portfolio. loans the consumer XX% of increase. CRE

we loans CIVIC value. During for also carrying held had for the the quarter, we sold sale some approximately of

the While total we and our these to loan consistent of to approach management, to profile our pleased to level credit increased conservative loans with with of reserves actions raised ACL portfolio, be the continue our X.XX%. loss credit

Legacy PacWest portfolio, California closing sold SFR factored not our the we of ACL are taken also notes is ACL first credit-linked these at the the the north X.X%. mentioned, As of include have credit and in, Banc the previously via position legacy does well total this portfolio does reflect of loss the loans on to When marks not it on merger.

will closing questions. who Now up the some Joe? I'll over I'll before hand some it open and remarks, to additional provide have information, we for line Joe, financial

the significant only quarter year the our and Again, results. operations month and comparisons X I'm prior to included items. combined Jared. onetime you, limit for financial of number review Thank a going had quarter of

lower funding actions. repositioning with $XXX.X of and net in favorable from Starting high-cost resulting sheet the income which a our income, assets wholesale mix million our generated we in of reflects balance the interest amount statement, interest-earning change

average month X.XX% increases our our in margin earning increased of in net a interest to March cost versus and X.XX% for the month December XXXX, in for X.XX% XXXX improvement of funds. it XXXX. the average of by yield and XQ increased Our interest Both quarter driven to X.XX% in versus assets the decline on of

XX with quarter assets increased on average points the quarter an The average continue decreased and of along portfolio to the cost XXXX, interest-bearing to XXXX, XXXX basis a quarter the basis due cost in of largely full QX core inclusion in deposit loans, to our loans fourth purchase quarter cost of fourth of Banc of full and rate higher-yielding driven points an pay generally sources deposits from deposit from higher actions XX yield funding December liabilities taken increase associated noninterest-bearing lower of sheet core with interest-earning of targeted The by of the basis the ratio, action yield of lower XX our of in the excess down and use portfolio. XXXX, in wholesale increase benefits points interest-bearing of of merger, of restructuring California from the reflecting marks. core liquidity balance high-cost to our accounting origination post

As funds cost shared we through wholesale and to our we have strategies previously, of for core both funding. of deposits expect improve specific and cost

of deposits. While we margin wholesale our production XXXX, the rate year, our interest net execute yields cuts as through of we strategy and to reducing we rate high-cost originates new growing and loans reliance down. of excess in fund continue model to loan year, move anticipates off expect expect rolling on on costs our both as on low-cost we our two in core funding cost the yields deposit second a move our our the in improvement static see in the half in environment, even of to Accordingly,

deposits also for a environment, pay often deposits to are lower reprice We they originated, a are needed prices we even able PacWest that finding maturing rates high when ago. in rate that were at to than flat given year

the that the run we a this Term repay $X.X during likely point, remaining Bank loan noncore off the we the chose retain second first period expense we deposit to longer and based it on remaining time upon the to choose Funding we to $X.X billion we as but At of liquidity higher down of balance it flows for balances billion hold deposits. funding trends We Program. is During the quarter, our could to that see. outstanding retain quarter, in the will continue order paid of

of with of fourth the quarter was legal one-off Our including settlement. of major level. for a our recurring close was expected areas noninterest number the the XXXX, noninterest income when various million, all to fourth This items, amount in adjusted coming is consistent income $XX.X relatively quarter with

noninterest down expense versus the was XXXX $XX million, million $XXX.X rate. Our December quarterly run

rate are the assessment lower We that FDIC expected. we to starting see

in However, assessment. additional special we also quarter, recorded $X.X an the the to first million FDIC related

be continue We the the the expect FDIC. decrease the year, through by pace to determined timing our although and will reduction assessment of to

other expense the for quarter. in traction initiatives Our and excess results of deliver expectations are gaining

balance essentially Turning as to were indicated, loans the our total Jared flat. sheet,

and by other X% annualized, primarily grew commercial portfolio civic core loans. our lower portfolio loans discontinued loans, However, offset in

of new result primarily Our increased during quarter, relationships. noninterest-bearing the as a deposits client

billion Our as balance PacWest excess us resulted with products. favorable XX.X% approximately total to utilized shift we broker sheet in legacy deposits XX.X% to mix during This deposits. total quarter, noninterest-bearing high-cost of strategy deposit management deposits to increasing a the liquidity reduce our our deposit allowed in pay from down $X.X

retain total dropped was our with rightsized robust targets. our X.X%, uncollateralized our to total with primary and level addition, consistent Note, percentage to wholesale X.Xx liquidity and deposits. continue funding cash In XX.X%, being secondary to X% approximately liquidity and we our our merger uninsured original

call time, Jared. over At the will this to back turn I

Thanks, Joe.

us approximately of primary well continue continuing focus on initiatives to Based approximately most ROTC both are the on year, will ahead of year. progress enable quarter stated in we on Looking the execute we to ROA this XX% meet operating our to the our to reducing expense interest that making, and remainder the in fourth X.X% targets, profitability notably of the will of to and generate expense. expect be

to our conservative largely the new to relatively level pipeline, loan with expected runoff be is are But be to which higher fundings, we margins to on production continue loans in our noncore portfolios be so should total what in to running new improve we our loans should expect than based flat. of accretive keep the have off, rates profitability. current to continuing production, loan and new the able average our offset While

and grow to to continue will a have good deposits. cost also improve which our deposit of pipeline, our mix We NIB, deposit and further expect reduce we

finding same the to solid by our margin our deposits, those at and time are objectives. hard Our drive when others to of ability down execution achieve our result increase cost are of NIB, a it team expand

high client reserves, California constraints market have and with meet in a attractive capital their balance to time very new loss enables the to or sheet our banks concerns. funding And We and a levels many not due liquidity, add us quality. clients competing of at solid able to of capital, are credit needs relationships strong position strong loan when credit

we that goal further believe will remains primary with approach continue our profitability and for shareholders add coming value franchise targets client we our long-term meeting in operate our the will a of XXXX, additional relationships to and growth lead being for While profitable years. new to created

California having clients on importantly, a talented deliver continues communities professionals how very from for in most day to our team way and goals our of show every markets, that the separates to best our And competitors. who up benefit Banc deliver us know bankers to looking and in our and from

a our We talent of to and believe remain the Banc differentiator for in continue California add I workforce, to come. to that years will

progress our I the expect coming the field very pleased our the to I the in to said ball to moving down targets continue As methodically am date at quarters. and outset, specific with

ahead operator, for With go and up questions. open let's that,

Barclays. with [Operator Shaw Instructions] comes The question Jared first from

income spread. January other of that expectation. pickup thinking just higher the and was or of be accretion And corollary for I feels the I accretion, Maybe just quickly year, improvement How dynamics as of Or the the as into on maybe and you the way quarter? look didn't to end for much being margin from in then, coming that we run quite through And yield accretion expectation fully go pushed guess, the Is looking it's cost starting it that, like on and the and you at year? to funding it? second the margin $XX.X guess, rate should the million than, just back expected. come the had right scheme call of a spread When there at rest are sort about of there? sort to

Jared. Thanks,

me over Joe. and turn I'll then Let start, it to

our it's As while objectives where be, output. our to it. said quarters, have quarter. achieved definitely sense kind manage we of an for is we we've prior margin a to don't the And going in for We

budget right are on We our of on almost measure. every top

And so we're get able to there.

As lot we we've a pull. of to said, have levers

get a earnings guidance, that's So to this some targets, we quarter. there we're going we're comes best little light, if our to in it to hitting still our going other did do what and give to but way

that than right the were a are on anyway, one it there which little our we was budget. to It is ways Again, to beginning which we year, we've things lighter thought top to get the from of lot a would we've of we able the but of is lot be, we need of of pull go. to levers got get said a and where

why thought. let lighter it And was little than explain Joe bit we so I'll a

Yes.

Jared I as said, want did right the for plan, So our echo, do on plan quarter. top in to we our come of internal for

estimate. We have in appropriately that been conservative

as know, expecting tenors, rates shorter a people the increased quite of especially the interest lot versus at were at During guys year. of all quarter, the what the you beginning probably bit the a tenors,

they deposits to significant were but anticipated. slightly at of PacWest, some the refinanced might So bank, due coming than the have as at we to refinance we higher savings from broker net went that rates

And what control, interest-bearing for is at book, noninterest-bearing our market spreads. factors, deposits and new on and up cost core originating and that can higher make growing also the core we just are we so of those our loans bringing which down by

Joe, the on do you to touch accretion? want

-- think don't of we publicly number. that disclosed is I all, well, accretion The first

that I'm component an an quarter. it's our So you but number as much results for But our not not insignificant wasn't enormous results, of line got it the where pretty piece accretion expected, we the came and of in sure from.

ratio there into should Okay. middle more the bring operating All where the savings of then seeing And range? down the be that just to right. on expenses, we

merger, it. times, $X bunch the was normal that expect we FDIC a mean, In And million assessment whole before FDIC the acquired $XX about $XX mean, quarter. a where it and first, to place million did them -- come I expense of was quarterly quarter. million There's seeing at places, right we've height we're I said PacWest a the down. a is we to

year. we're savings can our We're that from function on closely, imagine FDIC the you the the do how a to in close So very We're and expense over we and with a of regulators things generate it normalizing, which happen. it's much just monitoring going couple contact time of to that. expected course other

we the of so And have of that to normalizing through the line year. sight course

the savings. be third And completed system by that end Our realize savings conversion that will the represent will some will quarter. some of

generate bunch whole a have We will of facilities that savings.

rationalizing a We other that a expense those we're of pick going and year. we of up back-end going number to you there's would be as a overlap loaded, over host it's the in and And facilities. we're see through have whole savings locations, then to see time. We kind of change go those said expenses traditional operating to expect

The next Clark with comes question Piper from Sandler. Matthew

us Probably cost line helpful some the to Joe assets start, of you spot give cost give of Maybe or earning rates to us into XQ. be funds? either for and the could on sight more the just would deposits of funds cost of

give going So quarter rates. after last that longer no we spot to were we decided

the I included a activity in onetime due run our an normalized back of was we monthly and we you At I NIM of a over XQ that step-off of rate. very go speech, amount the in the to I high think indicator my end provided average large probably appropriate accretion retrospect, 'XX that payoff the not volume found number gave year, that. of can and,

that that's going rates. monthly indicator make So speak most run going to forward, to of we the future our as of kind sense? averages, we're only the appropriate feel Does

then just... And Understood. Yes.

of to deck, people put show we in Page the Matthew, that our progress the on things want that we made. was point, of X that to there And significant one to I investor mean,

there. it's if at So got and the monthly ones look you -- in

So September was March X.XX%, December was X.XX%, X.XX%. was

one see And end show continue that's being the margin at month, of stepping -- that We up. we're just to than it's where the providing going. rather day the monthly to

that's So helpful. hopefully,

the that improve try stepping think we're of And to point can there. QX. as it from to for going So you X.XX% obviously, off

very interest on and just what wholesale focused on it. from to interest kind of side and then know can you core of just both deposit Joe. expense. But much are reducing here you're remind And it Jared, Got the Okay. I us between that the expense, you maybe, on reduce materially, plans and maybe that side?

mean a chart cost couple overall. had shows and of I our Well, in we've of think, of terms that on things. deposits the there's X, Page the I the liabilities to reduction date of cost

is, And NIB One a saving has other deposits X% of of whatever or want a obviously, it the in of every in couple amount bring there's big to exceptional and a time of very in NIB done basically cost we we our because the we very of. I progress was brokered impact dollar rid is pleased So made NIB, job levers. teams money have on of quarter. in an with get short bringing

we As down. kind we all we of the And that have reduce deposits bring expensive more brokered moving in the deposits. of deposits are can pipes,

at So because in doing we're need. balancing of we that when and XX% managers be decline also below, just loan-to-deposit want as loan-to-deposit trying that releasing while We're see this deposits, very ratio. or careful think our we're overall about be we don't with good We've stay ratio. you said our to kind and a overall risk to that's we deposits that around

terms we And making going are do, forward of that are protect we're in that that the make other will, the There curve benefit is said two in we people we're materialize. we're to that can that very which future, do the anyway, as it in from why sure and of being rate there guarantee if trying we strategic the reductions that including ourselves strategic we well. some if that in to from it rate potential cuts, things be hedging, kind benefit even sure as there things we lock curve materialize doesn't doesn't to way can think rate to

Okay. get And redeem to your then preferred. Is and in on there you maybe 'XX? it goals? that the help XQ last it we in one any appetite for pull And that will happen me forward to just should assume to

you not. No, No. Yes. should

preferred. without get to goals the will redeeming our We

a of we to think One can before we and show start need we stable the that capital. redeeming is do buildup of capital things

never and good out to figure we're we'll we are show So year to we building of want do we full what And this up been capital excess get then capital. with that think that capital. would through going and That's say our stewards And say a able possibility. It's I to then if for to plan not we it's will be to do we're that do it, it it. it. extra. not something just not wouldn't

Chris comes McGratty with next The question from KBW.

Jared, quarter XX%. X.X% approximate and goals, fourth the the

As cadence. what the think you you either or risk those here to you expense think about are? today, stand biggest talked the do I opportunity

You moving anything? about little if But talked the changed, repricing. a also on rates what's up bit the

I mean, set mean, really. I budget. of our top right nothing we on mean, I we them, from were when

very we tracking We good five there. it. on get And or got a have only five there. it, on but we're really kind I four closely. think different has of mean, to ways I I get to think are focused there's ways seven We've sheet that

worse it. that unlikely, does happen, up. are things it if everybody now, think something looks to if mean, a be we're that going I As right I of getting but there to thinks are And is go going up, obviously think lot impediments I there's right that going rates on rates like the on

the on we most going things that interest believe generally. sort how that in material And goals happens. to shock we we for Obviously, control, sit the are out, so disrupt of our our But within on nail based the know operating control, have have certainly, that any of could our going thing within reasons the on the the to way the don't And within we're control, now, reasonable if side. operating expense profitability world be right side that kind markets of economic important it the I Joe amount expenses. execution for laid believe we a

loans Revenues can of themselves taking nicely. on of are care coming in usually terms

great of with muted Our we -- a teams job backdrop. are was pleased production very of kind given doing of I the the core quarter, had kind this

working looks are it so like very, well. And things very

like come can't say. strawman. So are with it get I up we're there. that's don't there, like to people to because if think a I going of what would get I it's rates Chris, But something not Right bunch able whole want do now, we to feels foresee. that

the in of sheet Street quarter, be maybe between. I else to quarters couple guess, for What to accountable get on goals? a an repositioning, got You're you might fourth on be what of but else Okay. in the balance to kind acceleration the might the table those either table?

sell or and portfolio pieces Yes, Sure. CIVIC to else. CIVIC the of it's noncore, we've about talked appetite our that something whether potentially are

We the for were that we loans that were that have CIVIC that sheet, balance that were off we held sold. some sale moved sale, for had

that As sold for in comments, value. carrying mentioned approximately were I my

We quarter. more have to a probably little bit follow going that's this

we would at that. doing then overall, portfolio And that be open looking to

going made we're do sure, haven't to it, certainly people open for it. the but doing decision it on had we and inquiries inbound that We have we're to

if and think something interesting. like did do we it. move modeled it, So to we've that we're looks pretty interesting be able could it If it, pretty I

an some our of be might of could that example So accelerate progress. which something

pool accretion accretion, one to Joe. from next on That's the great. finer XX.X%, quarters? the put And the guess, for to income, which or I I then what's a guess, draw housekeeping the just over scheduled point The several what's

the look accretion. PacWest Well, you predated the on total that Banc loans at of acquisition had that of purchased financial number accretion they California. statements, back accounting is And if

that's So total a number.

quarter. as Banc super-meaningful it's of meaning super yet not for loan haven't -- is a that number not said That's the number a but that, relates the there's California publicly, I earlier, of disclosed so a that And we portion number portfolio. to a

Okay.

the of So maybe totally is get stable the term X parts, message different or kind bias? near downward but accretion generally,

accretion stable about think should you going forward. think I

with Braziler comes Fargo. Wells Timur from The next question

topic in think the on scheduled the about But Is of for Well, $XX of I million that just half from the accretion of that in the number? that a of PacWest here. trying And was you're there the better accelerated Was side? spot accretion the belabor I the kind year. than you booked XQ. number? number delta from accretion, talking inflate some entirely that because a carryforward not was you're not dynamic kind Joe, told back More lot why versus part was you rates hear that trying giving earlier. of initial did on we on scheduled accelerated correctly to were accretion the sense Just that million $XX-some-odd accretion had of get $XX million that to

on loan was portfolio. on California million by end Banc the the disclosed, So that accounting loan accretion the -- out accretion all of we of back of million, that portfolios the the the total portfolios on from just includes since acquired this transaction, beyond was go PacWest loan was at the $XX which acquirer were California The portfolio. $XX Banc is let's which last in accretions year -- to put number includes just other

There was excess a accretion. the of activity In towards year. the fourth the there end payoff was large quarter,

to rate, so seeing. it were We And kind out. out looking through see were at the hard spot the we to interest of accretion how but was was income could to think we when it numbers, hard allocate separate

the out, wasn't excess maybe in in number said, So the as but was accretion I to there put quarter. fourth that retrospect, best

the portfolio California see, it for Banc the had -- just million. that, million we coupled very catch-up than that on $X accretion previously something on stable accretion that a amount In small of booked, PacWest other acquired. numbers, But the the was accretions to much with or first expect the adjustment we pretty may that been of the other there $X was have number that quarter,

it. Okay. at maybe deposit then And looking base. transformation the of Got the

for of So the spot cost quarter was The the the the X.XX%. quarter rate end X.XX%. was at

more how that that about bring going that in think to I deposits. But in continue restructuring you lower the just to of guess think doing much as that a you're that I is some deposit number go of lower. working as a maybe noninterest-bearing I are you're reaching the to the How excluding of stability indicative cost? report working close we base, in things that we book? mentioned had to X.XX% could sub-X%. level deposit that pretty of continue mean you

bringing my function that we on pushing Banc anybody look, mean in it NIB. the we're of to view of I good good down. And it's that time we I a for of mean, We've knows a that same of followed pretty who up. California just team is at going were how And history keep all they're And function a playbook. it. to know we're what using it it. knows they the do and great to doing, how it's got kind build us do back

of above -- with NIB -- Banc close historically XX% got PacWest ran around XX%. to XX% of California well to it was XX%.

It's And how just around mobilizing are organizations, pleased that we're be our able teams that. So time. take I'm going with now. to I think these to going between kind of of do two to the right history really

And end like the cash of towards the of it then looks there was usage Okay. some quarter.

we kind baked in? or I that assume quarter We're was XQ And more of that end, are X% we then up less remix pretty balances getting again just should as I think last is quarter, once to it in guess, close are here? fully average bogey. in that effect the cash margin assuming to a at flat meaningful X% XX%. bump

Yes.

around our think you cash levels because right of nature the but be sheet, we're I income improvement to mean, just year. continue can they throughout the of little will currently I levels see stable. said at. interest this I then call dynamic do a bit we've And may a move the the to balance margin fairly as we different improvement would, in we and expect think couple points, assume of net

tying geography Great. migration office other those nonperformers. maybe of you last on for any provide threads me and between And loans credits. had the then that three into just three Can kind

take think the the all and obviously California. think, to were they were conservative. fairly would look to I And the I course, provision credit take. being, appropriately of normal. capital I migration, ability as at We We have wanted we the

really first very, markets be we're or historically in and more I whatever a think quarter generally, now below at abnormal still had little we a for low with to NPLs and and running very healthy. probably level points basis was the X% just for probably close XX is which really, normal points, to basis bit XX

And the just credit, marks don't like to and normalization thought a what were do, other appropriate for time. are it banks taking we but at I of was were we going me, the it that know felt

on I what So just I reserved. don't provide right, we're we think I more thought mean to I loans. color we was doing these think well know that were and there's

Gary The Tenner next from question D.A. Davidson. with comes

a last credits, quick legacy were on question. of Were the or Banc PacWest? Legacy Just follow-up California the those

They mix. were a

then could the to got think, ask wanted it you to kind I as be between you've stable Okay. And but of back, think it be and relates saying year-end the will the Kind asset targets, what just in it I at XX%, size. of XX% XX%.

back the rest sort a As reasonable balance of to about kind -- repayment kind think do XX% quarterly Or it kind end flows the sheet basis just dip of anticipate then probably in at BTFP a is towards quarter, we you think and growth I you the talked of second of of year? see where the of for the or on trends the year?

I the don't to answer the Gary, actually know question.

our a that I and Term much, Term Funding. Bank $X I could which happen, balance Bank absent after to and aside we be we're Funding, think kind Putting shrinks do it's Funding, we're selling something portfolio, pay stable Term what then It CIVIC Bank you sheet large can could with more is, billion. right? of dramatic, going relatively think I down tell by

know. So don't that's I why

-- other these inbound a a on. lot portfolios, be might we've that had assets There lot inquiries discontinued of of

finance so lender or it's or student And whether loans whatever.

exit it And so profitability. if size we more if that the is can going not there's right. these a on, the focused pricing sense forward, loans company we're And it's makes for

stable are we there. moves, sheet. off coming if think by I impact the take So out can moving that from those about shrinking much the that Funding parts think Term dramatic Bank think I and then But balance any could it's you

could cash ask BTFP paid size about in is replaced? of just just off it sheet the With the sounds question. to balance saying, the what I one relative it's balance effectively of sheet that. balance appreciate the There contract. like kind mean, I that a last Okay. if was then I overall. to question we're And earlier mind,

that So definition, Joe, are lower those by range referenced X% balances and that you than they cash from a question? I prior think,

what Joe, you think? do

quite question. Can the you I'm understand didn't sorry, it keep I more...

Yes.

being kind mean, to on relatively I trying you'd it existing overall were done as repayment balance effectively, just sheet? clarify want where of of current I comments BTFP cash cash a percentage Sorry, your of is what the about if level out was based

cash. a look balance. I going Yes, why I we'll the from at subsequent paydown qualified of step down in other a down. deposit before outflows it BTFP you in I That's not cash our in we're will whether pay it -- expect a that have result comments my make we in on think not the to see script, final -- reduction to come inflows big would to in and decision should But qualified

The next with from comes Terrell Andrew Stephens. question

noninterest-bearing pretty of trended into there? Have you if color how of the on kind the have moderation second was in build quarter? the or could if deposits continued just Jared, any start nice you curious deposits, NIB seen on quarter so end. any far growth give could I I kind

only are know. to making. as momentum booked. it's we're -- that actually And hard continued quarter-to-quarter, morning that good to know have the I I'm this like hesitant gets got what reports update we get think I happen, I progress basis. that growth. because an just this going going I pipelines a to to I and tell stuff regular the what's can But and on and vaporize everybody that's We as seen like

of course to Over NIB the year, grow. the is going

And And consistent. so looking end But will right it could it's be it's we'll be kind it's the I know steady. like but hope positive. of of it it guess quarter, now, I I looks uneven. hope consistent. at the

earning base go to the sorry I yield yielding XX the Okay. yields per you us, And first expect like lower expansion from too replacing points number? improvement at booking purchase a maybe that just question, it but talked sounds we I And in to quarter. But was asset the I of basis that's little and the still mean, because margin asset a quarter, last back it. then of understand yield appreciate start XX% earning points good behind quarter the that loans? accounting. of higher I basis is now to XX high just guess would still loans about

up a of I And still our we up. to we it's it's even we end margin a think output -- our have to make levers can have it's numbers is lot an numbers if right? sustainable. -- can in there's on and volume, of pull pull, we other where other don't think to again, is things levers it's of the where mean think to I for place we which get hit unreasonable. that kind I expenses why terms And on it definitely we us

curve going other we'll basis those we get to more and can the there? cooperate XX I think XX%? way but us as Are will points curve later know, earlier, Is Is so. picks Joe? be catch for not you it don't improvement What with to expense things. reasonable Is unreasonable. of we out rate early, all doesn't earlier, Yes, quarter? it interest the curve the be and in the up to later a rate I it's interest and the then NIB think, XX%? interest going going goal take expenses take catch -- interest rate If up expenses terms with of up up do

echo would said. I what Yes. Jared

pieces. up But down of what plan. the of of loan you first of towards north we're It in ahead depends X%, I looking just sort the new our maybe what to loans Also, moving getting loans sense at think of there's upon what production a give yield we pay a quarter, originate was lot quarter. in X.X%.

So the lower imagine, as are than much you loans that rolling that. lot a off of are

how out. have path, a we trajectory there, we'll good good comes see it and glide a So

Yes.

One in just moment really spot of a talked the rate. That's about of pieces lot a and it. to and was there's that on Joe the I things time on margin, the

we just laid forward, that do the feel to we thing out And why better is which margin for the is the probably chart in month so giving like deck. going a

least in which the just helpful. the like, kind short to us redemption run. the of of a forget there's -- paying preferred close on and appreciate preference Can you to to refresh front. Jared, would metric capital, your to, in it. Yes. the sounded response, potential remind capital Back It's but you you're I continue question it goalpost around Understood. build can there. kind us your be capital attention the And on most targets? I just at

Yes.

I think XX% QX probably getting have feel excess capital. to we that when is closer like we'll

I an there, it And to about deploy have easy it. to from be we're so will how going conversation think

Got it.

sneak in. nonperformers, guys the the loans, I delinquencies drove around one Okay. the in classified step-up the appreciate could this If what the on you gave I more quarter? classified color but

you do Joe, to on want that? touch

I was not going I but Jared, lot think color. had you same further of sure to the delinquencies impacted that if it's say, NPLs, drivers a and I'm

was the it No, same group.

with Coffey The Timothy Janney. next comes question from

coming was said for pretax. the have prepared savings, remarks, expected. comp like estimate better would Do you you sales million And any your are cause you in cost this around the in $XXX it on update Jared, to that? color than

for we said get update I'm we'd definitely guidance expense we X.XX% think kind ratio. where to get X.X% going We of our and not between to. to can

really I just little of that's bit a go quarter expense had think Not good good. I schedule. know to that. of We way. everything ahead our a in savings terms is going

little but way, room go So we something output can that us breathing it. if hopefully, for else our gives doesn't a

Yes. just I would executing Jared ahead people schedule. said, just of echo what slightly

you the Notes dollar the or residential it me what can much of portfolio the single-family And Okay. value Credit-Linked is, remind how of covers?

handy? Yes. Bill, do you have that

the loans. million about balance $X.XX $XXX about billion covers It sheet. it's on Jared, of

absorb around they And X%, Great. right? somewhere

is absorb the right? the loss, first X% Right,

then provide for And Great. a ago. that LTV if wonder just on if low business I last little I'm collateralized, but a the lot my deck seems of down a were you says bit of question, year migration about wondering be could... shut can CIVIC. to there color was The of you loans a

Yes.

$X we CIVIC just little owned. loans are the are loans. -- four the a And are reminder have of as total over everybody, So balance approximately about homes billion rent investor billion $X.X loans. are that for remaining bridge single-family a

You about as can could on be well, primarily fix-and-flip as on them multifamily. they single-family, but multifamily small think

way it charged they to That's which just a of was And many obviously, managed pay. fees. it operates not didn't more like because that a lot a It our one they that bought that's wasn't they the things. bank, we single-family has mind the want of ways in because not PacWest was if run portfolio, some DQ, went And ways people profile. being it delinquency before

borrower the it kind transitioned And portfolio more in-house, brought had and it so change PacWest as and discontinued of to the they behavior.

guess, experiencing in than on loans. bank. what I It's like losses not these behave was just They're to differently borrower conditioned behaviors. would it we a

would call bank. third in-house. asset team what And a We've not just it. it's I We a on got party. It a makes inside manage great serviced great it's but so of to ourselves a money, by own look, portfolio

a would we to help? we so to figure get at run like, or time off a we'll Does either look out going if And both. way over we that that price it's exit and

questions. my were Those extremely. Yes,

Securities. question King Truist comes next with The Brandon from

know to what rate. moving dollar you frame you're sticking the could you're So could to run but those But amount of could I the a targets helpful XQ NII in what pieces, frame it's lot expecting think you to there's I targets. NII if profitability be hit help the be?

guidance, I what don't think we we've on said given Brandon. Joe, have that that?

or and intend Yes. NII we income to. numbers, specific don't We've I not out think statement put

Okay.

I forward? saw what intentional then deposit the of just you for just quarter? off what runoff was the then kind that And deposit what runoff, to is could going Okay. of guess run and amount you in intentionally frame left

One -- was don't it weren't of that in movements just because it us, at don't other otherwise, had only characterize of they looked runoff rate runoff intentional most of was interest-bearing the other bank. the too So and It customers, they brokered we is with one using runoff. need by would account it noncore. is The just I two an high parts of need. seasonal deposits we it the account, that any and or majority relationship and is we there's chose. We services balances deposits was the the of and was

going we're else. said wouldn't wanted, not the they when rate they pay so somewhere found rate a to that And we and have

it that was would of of I say which we deposits, of some any but movements overwhelming was deposits didn't majority was ladder longer. type, customer that just rate-sensitive need So seasonal the

over largely you that's going forward? think more you Or do some And are maybe incremental... Okay. expecting

No.

terms deposit momentum good expensive our deposits types both they relationships, letting I they bringing be with be we will core, like. might might that about but build would NIB true up as go that they're relationship those brokered, more fundamentally probably that come feel in other of deposits, think we and in relationship not deposits we

that but migration make of we loan-to-deposit to so comfortably within over on will time, ratio. want we're And focused kind stay sure We see we our our guidepost.

with The next David question James. Raymond comes from Feaster

what contrast are you circling alluded Just to, kind NIB right industry. banks now is growth. of this in like other back in seeing Look, the to stark most the

NIB early You where curious that highlighted good. growth through if segments seeing there's in more you the looks could the see on growth allowing most to And maybe any the on what you're just do you so think I'm pipeline you walk growth success is opportunity? side? be account that new you the successful

our and So HOA fund in in of we accounts inflows had in saw most good we good segments in accounts. traction warehouse. and had Community finance Bank, opened and of And that venture were traction of the terms we good

about kind the a And loans. experience provide the sure making we deposits why that in bring it's a than our relationships competitors. lead have a longer bank, we than of it bringing do, very and We people to can is understand carefully, so new contest better we and to and that cycle deposit track

is first going to better showing quarter people going have know able so early, and And and be we the I show it's that's traction traction because build to to start great, why in forward. good should

the Where people don't we deposits be banks. at up A banks, are generally against to the larger end they lot at of these larger choose larger find banks. the competing

that ended becoming First larger for are Republic examples And And some which of customers customers Union end a customers that that Citizens, up Bank that bank. and end U.S. specific up is up Bank. at JPMorgan at

know And a now. They about When I list, I job are. of in option on we of that California who done marketing banks the their that Banc the because we've and people being have. think our so we People great good think name. is a say, position know need market. we've to of that "Hey, definitely the done

in California ton a banks we and banks there's bring are of we're the to a we in in them. great markets that and competitor, We but local good our so have operate seem other lot And very And holding be very to Wells to still trying is competitors, which very own. where accounts optimize that. of we Fargo, strong good really from but good a traction against seem

some David. that's color So there,

could venture DeepStack that a in that plays curious where businesses? about meaningful when mean are that? on that, And then how those could That's more DeepStack just I'm with you talked what into Because believe excited you we maybe were do DeepStack? be more be the business. great. the HOA, think broadly, about I And And you contributor? rollout I

the make fee a of Well, combined California meaningful this basis. DeepStack be meaningful income the year company, stand-alone on that on a ability year. the have a increased of expected this to that But PacWest it we contributor won't because impact to to Banc brought to

will so year. a impact we it meaningful And said next have

terms than happier be that me highlight of things both DeepStack is in and the make other that's and cards able the disclose to doing. specific would to contributing contributions Nothing

But contributing to David, now don't out be of have really DeepStack, It's all on is any And that. And sponsorship, started credit issuing we to income targets is right deposits parties Our We've third for side, believe on merchant side rails. cards. platform our well. has It's helping and those over then payments process acquiring. the things. we're you on which clients. will I meaning things put just the fee as cards transactions other three directly

Yes.

one me. Okay. And then for last That's helpful.

hiring you've it's Just few the add looking the more past assembled, how that announcements and and bench you maybe do into or talked deepening to expanding you're about where think about the hiring initiatives and new additional Curious over team whether months. talent you've you had several segments. the

Well, of first we've here. an amazing all, team got

a both Started we just right week. X this There that another to our was obviously to there our and We've over functional in great adding areas continue of C have right well. there we'll though talent, add And bank. mean, team that deep and now. areas, where open most we're pockets prudent companies, are have added talent detail are across to we folks absolutely add I to edge spots some from people shortly, but it's in even we're benefiting be finance we lending opened adding like we people at the from felt as very talent, we're we that so Just had here. and the bank. our adding come

for This our concludes Thank of Banc and today's presentation. session question-and-answer California's quarter attending earnings call. first conference you

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