CVB Financial (CVBF) 27 Jul 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Second Quarter 2023 CVB Financial Corporation and its subsidiary Citizens Business Bank Earnings Conference Call. My name is Cherie, and I am your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please be advised that today's call is being recorded.

to call, presentation Christina like host to now today's for Carrabino. would turn over the your I

You may proceed.

financial second Thank you, us our joining Thank you for Cherie, and good today morning, to of XXXX. quarter everyone. for results the review

President morning Allen Officer, Vice and Brager, Executive Officer. Chief Chief Executive Joining me Financial Dave and this President are and Nicholson,

www.cbbank.com To the comments Private of XXXX. and Act this our the earnings in today was that included visit Investors the will Our on the in Reform call please released click refer harbor obtain yesterday. tab. information website on the copy, to contained Litigation provisions at protection the financial speakers safe a announcement Securities The of claim

cause please particular, to forward-looking set year actual from Item our a for the Form XXXX, see materially and results in the risks For of discussion may more differ statements, complete annual December XX, the the XA, XX-K therein. information report company's ended risk on factors in that and forth uncertainties

a with disclosure, company's in please issued company's earnings release complete see connection safe harbor version For call. the of this the more

Now to turn call Brager. Dave? the I Dave will over

Thank morning, everyone. you, Good Christina.

dividend our representing second consecutive of $X.XX or reported $XX.X we For $X.XX our dividend XXXth paying of for consecutive to share cash profitability. per shareholders. of XXXth net of representing per quarter quarter earnings quarter the We XXXX, XXXX, previously a share, our quarter million declared second a the of

the quarter compares $X.XX $XX.X quarter XXXX share of net million and a earnings million first year the or Our million or for per ago $XX.X share. $X.XX for to of per or $X.XX share $XX.X

at seen demonstrated disruption. industry where the the time quarter a second bank's financial strength The has

in quarter compared XX second interest margin the was of XX% quarter net below the first our by basis XXXX. of our efficiency ratio XXXX, Although points contracted to

equity X.XX%. tangible and We a on on of of assets returns common generated reflected by average average return return XX.XX% strong a

second the X.XX% return assets pre-provision average on quarter. Our was for pretax,

For compared $XX.X pre-provision for income was of deposits. $XXX increased ago pretax million June quarter of the and earned approximately second first the million the deposits $XX the the million year $XX benefit without by to prior XX brokered XXXX from Total million with in quarter, end of our quarter the quarter.

to non-interest of than bearing Our deposits greater total deposits. XX% continued be our

June from At XXXX, March our customer million repos billion, $XX XX, increase total XXXX. $XX.X and XX, deposits an were

$X.X and approximate lower the deposits same a customer However, repos XX% year-over-year. approximately period were billion an year ago than decline or by

of million deposits $XXX higher-yielding We've velocity declined experienced decline that $XXX end which includes of repos approximately were Citizens where invested the Trust million $XXX was moving XXXX. $XXX as in to assets quarter in in in million such moved to of from second the XXXX, quarter funds million liquid into in and customer sheet quarter notes. deposits treasury compared transferred first the the with Citizens balance off The Trust these

deposit The the and months. acquire over to strengthened pipeline has deposit bank continues three the new last customers

of New million average totaled deposits. $XXX opened first new of the half during accounts XXXX approximately

in the deposits based model. we historically business and of target industry our of the lowest the have one on We cost maintained customers

and Our XXXX, XXXX. first compares of which quarter cost basis the points of deposits on second XX basis the points of average for was second quarter to quarter for XX XXXX for of basis the points X

deposits. prior they billion deposits been $X.X deposits XX, XX% were as $X.X bearing Non-interest no for XXXX, $X.X and ago quarter. non-interest billion total from June compared bank At greater quarter of the last has have the quarters. the for with our billion five bearing than year The deposits were broker

deposits have business years. our insurance Therefore, customers repos XX% coverage June XX, of of deposits of diversified that operating for of Business uncollateralized and core level the banked or XXXX. total customer at uninsured exceeds our their deposits customer $XXX,XXX. three with the XX% industries. FDIC by than accounts More Bank XXX% across of typically and represent each businesses, were are nature and Citizens are deposits have deposits Our more relationships XX% customer relationships of that our

March As of the increased X XXX Fed of start XX in the the rate rates. had the of March time of the basis period the more to failures increases quarter, bank cost points of been Fed's of has attention by The end April XXXX. Federal increase, the increase deposits our greater XXXX. the than for basis cost Fed Reserve And over the in brought increase rate The same of points basis bank's to in points of basis the short-term funds of experienced XXXX. of XX second from XXXX from month the point increased June since deposits of XX% have of since

the the deposit be future, Although cannot did Fed raise they as increases to June, the we certain of the slowed pace yesterday. in of as in the increase in continues costs rates pace especially about

Total $X.X seasonal loans XX, loans From loans and livestock at and were billion, million dairy $XX.X increase year-end. X.X% XXXX, after $XXX in million of from XX, or decrease June by forgiveness XXXX. end a at XXXX, declined December the PPP excluding loan the

calendar quarter period. to June we construction, year. $XX each December million quarter paydowns the $XX estate quarter me, excuse fourth Dairy first and XX, million XX, to loans Declines million from as decreased as million from the XX, XXXX, by loans increased of of by C&I XXXX of by and first XX, while end the experienced temporary a in -- totaled from as year in livestock loans the $X each SBA $XXX year loans June increase XXXX. in December real we of result we approximately in increased the experienced of consumer paydowns XXXX, the each Commercial over same

quarter quarter, loans end the of prior quarter in Loan $XX increased XXXX of demand. the the of second slowdown utilization construction the first the improved by loans detail. impacted as end by Now second more end let's June. the loan first during quarter and to of growth while loans a from from the XX% the loans in declined to discuss the declined real from Total million of rates at was C&I XX% at consumer quarter. Commercial estate, end

loan real core year-over-year. in was led $XXX by loans, growth which X%. grew estate X.X% commercial core was or growth $XXX growth or approximately This million loan Year-over-year by million

new the Our second in weakened production loan quarter.

comparison, in the of New commitments quarter million $XXX in approximately second loan new originated XXXX. $XXX $XXX million loans we were million in XXXX and quarter of first approximately the In second of the XXXX. of quarter

of generated was the New quarter loan average X%. yields end at at exceeding second production the

lowest loan years. three at loans, the its grow last pipeline Although is level we in continue to current strive to our

Although second quarter, loans a reflect of end provision of we quarter for of deterioration for the end declined further the a at in losses to economic XXXX $XXX,XXX quarter from our forecast. the credit first recorded

non-performing loans the stable. in Asset prior trends quarter $X.X $XX as quality The estate of total $X.X continues loans to end, compares other and assets, to points ago defined million year non-accrual remain At non-performing owned, basis million and million assets. from quarter the real were the $X.X plus be quarter. million strong, or X for

first compared of compared $XX with million quarter, quarter $XX,XXX, the resulting with of ago second experienced for of the quarter second Classified $XX,XXX net $XX,XXX year million quarter for prior total XXXX. for $XX,XXX recoveries for During quarter. of loans in and net charge-offs the charge-offs $XX the charge-offs million $XX the of and credit we were

to livestock classified the were increase and due Classified which $X.X $X.X quarter-over-quarter as and the total real dairy $X.X loans in offset loans. during five been a decrease commercial a for estate was primarily a classified consistently million of the and due real points. million industrial dairy classified, loans of one loans than increase a has classified owner-occupied to by less livestock million $XX million quarter. relationship million real loans agribusiness and classified $XX.X over were second loans primarily The and commercial loans, categories million and dairy loans partially estate quarters loans last in of basis $X percentage in XX in downgraded commercial dairy increase increase commercial in The estate and in

by estate much recently loans has office area buildings real an the across been secured Commercial banking industry. attention of

investor to July our So additional office XXXX exposure information we've related presentation. included in our

of granular only of the XX% of the -- loan which billion by nature the loan is the and data $X.X highlighted $X.X loan CRE $XX regarding A granular our we portfolio, average greater below include are million, includes couple than million, a office CRE of office size less balances than million. have points of $XX one

with on these average, portfolio XX% originated were XX%. to loans of Additionally, values loan of owner-occupied is and this

mature months. during where months, next of the the additional those have in visualize their office the an over XX% XX and Francisco. will Approximately our of portfolio XX% XX portfolio while our office our is through XX the To of show interest the rates Pages reset will portfolio of on same dispersion and Angeles, presentation maps San Los have exposure the city loans Diego San of we geographically, centers positioned investor that minimal XX

Allen portfolio credit will capital. I the underwritten, In now exposed over our turn believe summary, office areas. the Allen? conservatively very discuss central granular for district and and to was allowance to business we not call losses, CRE to liquidity

XXX% losses losses XXXX, was at at allowance XX, XX, percentage December million for of $XX.X and as to credit The or classified of to allowance morning, of loans or XX, was compares as loans total total At as XXXX. credit loans, X.XX% which of million XX, December June or Dave. March of everyone. Thanks, $XX ending X.XX% XX, of compared our XXXX, XXX% million XXXX total Good XXXX. June loans $XX.X X.XX% a for

losses recorded of and quarter the XX in and provision in $X.X March compared our values the in projected XX, unemployment quarter we credit ended For estate forecast, million the of both credit XXXX. the for $X.X resulted lower a million when growth, losses change lower second June our reported forecasted commercial for ended and $XXX,XXX XXXX, by end driven we economic the which compared The the higher -- to XXXX. March second quarter real quarter for provision XXXX, XX, of for GDP to was

resulted quarter an compared increase in XXXX. of off-balance in a the June increase $XXX,XXX of also at forecast economic reserve our first Our in XX $XXX,XXX sheet to

Our forecasts as more to economic forecast, numerous by Moody's. downside well produced optimistic forecast forecasts. as multiple a economic blend baseline continues forecast a of a US be forecasts include These

multiple overall the forecasts risk of have approximately among downside to the represent XX% scenario baseline our with on continue forecast. weighted largest forecast weighting We individual

of second in to assumes a million XXXX, funding a quarter of growth XXXX, XX, then at X.X% consisted weighted bank The XX, Loan X% June half second as by decline in followed $XXX As Federal for X% borrowings X.X% program by forecast XXXX followed year, GDP XXXX, higher the in Bank. GDP this term borrowed XXXX, both rate the GDP that and is forecasted of Home These unemployment in growth of average be increase will we modest replaced X.X%. XXXX. June of the by the for XXXX in XXXX. at including cost Borrowings of resulting XXXX X.X% the borrowings during rate and from of from

billion to $XXX FHLB XXXX declined Our of of million advances XXXX. at borrowings that XX, from as consist short-term XX, March $X.X June

June the end of These So two advances XX, mature as next was their final quarters approximately with November. the FHLB X%. at cost over the of will maturity

borrowings The quarter in which funds modest X%. coincided of end Federal in in quarter to to the with increase from the first $XXX of than Reserve, a rate a end on second of deposits of are more growth million the 'XX

or XXXX, sheet $X.X having off-balance the Home liquidity liquidity. sources unused more XX, sources billion the addition than more borrowing million unsecured bank lines term and of funding than term as capacity securities of cash In the balance unpledged of funding of include million Bank, could discount of billion had and discount Federal Loan of window the June AFS credit. $XXX secured program, $XXX Fed's at of pledged sheet program to of at on that or window These with the secured be $X.X million we $XXX bank capacity of substantial Fed

to of utilized has June broker deposits these not any as XX. borrowing addition bank sources, the In

generated flows portfolio the to shrink approximately our investments our by million of $XXX continue not investment during reinvesting We second quarter. cash by

end investment million Our of the a million. total The billion for from declined securities securities securities. net March unrealized XXXX XX, $X.XX the available of was totaled $XXX decrease by AFS billion investment due $XXX of AFS at in inclusive June to or pretax primarily $X.X as decline second quarter, loss sale $XXX portfolio XX. of to million

off-balance -- sell balance liquidity, As the of any would has unlikely bank these it's ample we sheet of securities. AFS sources that

cash grew $XX XXXX, the to Investment million The portfolio securities during flows securities of entire the second basis essentially prior maturity held XXXX, were of billion XXXX. approximately tax the the HTM totaled equivalent XX. as $X.XX points yield from on XX to at XX, for quarter, X.XX% or the quarter not approximately in as quarter. by March The but quarter same declined comparison June was HTM the portfolio second investment by reinvested

XXXX. offset year. for was XX.X%. ratio by second of quarters months Now our resulting was at year-to-date the $X.X of the The of quarter, higher to than Equity at position. million common six both by dividends dividend prior as million $XX result the XX June was of increased X.X%, equity to while increased in the consistent company's turning end capital Shareholders' billion equity ratio the $XXX first X.X% XXXX of tangible the income and payout second with $XX this at million, year-to-date a June which XX, quarter. for The first

XXXX XXbX-X the of The second were shares purchased XXXX. X, on There we expired in XXXX. repurchase quarter March initiated during stock no plan

swaps notional During the of to rate into an $X shares to interest year, $XX.X rising $XX.XX, repurchased first value approximately fixed years second fair the common quarter we we of pay-fixed mitigate risk million the XXXX, At fixed have on stock is of of in totaling rates price capital. and billion These of repurchases. average on quarter four the this swaps average, from of XXX,XXX the as in end our five entered approximately maturities stock hedges X.X%. ranging rate pay at

value daily value decline quarter end comprehensive by first associated portfolio recorded and the XXXX, $XX increased the our from XX. value June million with mitigating value SOFR. On other comprehensive to swap The fair the adjustment XX, we the fair variable of fair rate impact the net other from our million a million AFS which in the is $XX in $X.X portfolio. partially income, fair in derivatives AFS resulted in basis, hedges changes of received bank a At of income June a decline

to Our very position continues overall capital strong. be

of Our regulatory are was well capitalized XX.X%, considered our equity and above peers. June total Tier ratios ratio well capital ratio At XX.X%. our capital and majority X risk-based was the capital our requirements regulatory and XX, XXXX, common above

our back to second call earnings. for the turn now I'll of quarter Dave further discussion

Allen. million for ago quarter. and you, income with the Thank for the interest million for first quarter second provision credit losses million was compared $XXX.X Net $XXX.X the before year for $XXX.X quarter

for of and excuse first with me, Our tax equivalent -- XXXX. XXXX quarter of the second the for for compared of quarter net quarter interest -- X.XX% to margin XXXX was X.XX% first the second X.XX% of compared quarter X.XX% the X.XX% XXXX, for

second The million interest-bearing quarter our in point funds of increase a and increase point the XX cost quarter was in yields. the a funds result of XX was basis $XXX X.X% in an quarter average of decrease deposits. to The in increase increase basis from of increase cost in cost second borrowings, net the in XXXX basis to compared of of earning the a margin driven short-term which point point had XX a combination in interest of cost by asset quarter-over-quarter first a XX

yield quarter-over-quarter earning Our in XX result point loan points basis XX primarily was in increase of an basis the yields. increase asset

basis in to a X in in earning our loans basis in point point average due million of quarter earning quarter asset cost funds. $XXX interest average Federal to an $XX Reserve. average our year-over-year from yields, the net in both the increase average The offsetting Fed increased of increase Second $XXX of XX in increase million. increase securities at at assets $XX by of and deposit due on decreases the an million offset outstanding margin The increase point XX funds was million investment basis first funds

the earning earning yields the security XX% of second asset quarter XX in to of in Investment X.XX% quarter. as increase of in the XXXX. of quarter an approximately the XXXX, with the a from was as average of for X.XX% prior second in second in XX% increased of assets grew for XXXX. higher in of quarter of The ago yields XXXX X.XX% and which yields XXXX to quarter second of points the the from improved a in second basis second the Loan compared asset result loan investment mix quarter yield loans to yields compared year quarter XXXX quarter were X.XX% well

XXXX. $XXX assets Earning the ending the of million. million second XXXX quarter from second on by quarter for June grew XXXX, the XX, by quarter declined average of $XXX Loans from

our balance $XXX However, deposit total Federal portfolio a declined deposits by $X.X by at million and Reserve year-over-year. the investment billion as declined combined

second $XX.X the income prior quarter and to compared of was for $XX.X million the with Moving quarter the on year-ago income. for million for Non-interest non-interest million XXXX $XX.X quarter.

fees, second services, and the $XXX,XXX and services when first XXXX. Our deposit approximately declined quarter quarter by merchant customer-related including bank approximately international to by banking $XXX,XXX compared decreased card to of compared

XXXX. wealth to The interest and trust during of $XXX,XXX by LIBOR of back-to-back all $XXX,XXX first approximately our income and year-over-year. our conversion to of However, SOFR $XXX,XXX fee rate during the of previously quarter to the of to by fees XXXX, increased second of first fee $XXX,XXX management indexed the compared grew generated income quarter compared quarter swaps originated

BOLI to benefits deferred life BOLI compared to investments compensation that including fund $XXX,XXX both policies. and the asset income second used debt the higher XXXX received in of from fund benefits for to by separate quarter by XXXX income plans. BOLI in first returns second increased exceeded quarter second increased the quarter of the underlying value debt $XXX,XXX, in due the XXXX $X.X for the quarter the of policies insurance of certain million

by quarter the in of the in investment as $XXX,XXX a CRA to well XXXX paid changes a of declined first of income in investment fund. of XXXX $XXX,XXX full CRE decline -- inclusion XXXX, second previous of the previously first the CRA quarter quarter recapture first on quarter a impairment the due during as in due the a to Compared that to a valuation charge

Compared as quarter gains of prior XXXX, to totaling included by $XXX,XXX distributions $X.X equity million. CRA from second investment the quarter the declined income fund

of quarter associated gains centers. also properties million XXXX second The sale included net of $X.X with banking in the on

with Non-interest XXXX for ago quarter quarter million Now the $XX.X second and the year for the $XX.X compared quarter. $XX was expenses. of first million for expense million

of provision quarter $XXX,XXX quarter for of commitments XXXX provision The second for for compared second quarter no $XXX,XXX provision the loan in first There of XXXX. unfunded in the was included to XXXX.

-- benefit Salaries of associated timing the each due to million quarter in $X.X to $X.X expense, of included the as half second that services due are amount with professional quarter-over-quarter, taxes and projects. taxes. decreased primarily and costs of the of payroll increase typically in year-over-year increases the payroll pressures, $XXX,XXX in legal as in as experienced an employee benefits professional primarily were various that highest increase million included non-interest inflationary in services million of well lower first quarter-over-quarter has increase $XXX,XXX The year or The $X expense X% employee XXXX. other salaries of

the assessments over compares of expense X.XX% X.XX% for quarter and of the assets for $XXX,XXX XXXX. of higher second of the totaled XXXX. first quarter as assessment XXXX quarter prior beginning second effective the year quarter X.X% prior at by -- Non-interest of FDI increased XXXX. the This for quarter were rates average with

owners. focus, financial XXXX. XX.X% institution remain compares second secure and We superior founding the fun. to the for was values operation to for with in we banking core safe, our and first quarter of having strategy which prior for customer managed the Since quarter a of Our and XX.X% quarter small XXXX, cost-effective medium-sized efficiency on businesses build our XXXX, of people, ratio best focused have their strength, the sound and on focused the with XX.XX%

credit businesses in on services business provide environment, best remain we'll and premier and safe. we and excellent and will strong to levels, Despite and consistent, the challenging liquidity. stories. stay we products As and have California, consistent solid this credit, will executed successfully our to American in capital that banking focus maintain we represent strategy, great bank to to produce so our continue remain and the can Please success these healthy strive steady the disciplined approach earnings,

This concludes today's presentation.

you Now, Allen to have. take questions any and be I that will might happy

Ben will And question Instructions] Hovde our come the [Operator first line with from Group. Gerlinger of

open. is Your line

guys. Good Thanks. morning,

Good morning, Ben.

CVB Seems people like a and for whole up mixed SVB quarter.

the that. you paid of the terms and out I You But think bank if I'm you -- the specifically, now million getting that borrowings, that about a so any rate at half in have X.X%, November positive increase? can't. early of because laying pay sure or high don't do the the gets have year to on you to funding. in comment term just Xs you Is think the that down Fed $XXX term bank the you there in that can in are funding appetite then spread. When anyway, back of deposits off

the funding program Ben, yeah, I pay term mean, is about to what's penalties if it bank off. nice any have want you you don't

that a these there so was one-year And it. are advantageous was it the yield where and borrowings utilize was time to the curve just fact

use to it want. fair collateral of value pay get than anytime You rather off value, you par

In fact, rates. times a paid to we and get couple better reborrowed of off

positive But down we some generally replicate about or can't we now borrowings. is X.X% to we'll continue arbitrage pay is see the X.XX% deposits, you some likely, that in But right more pay because that it FHLB off. pays But the obviously on than now. more us could cash do X.XX% growth expensive if Now hand having us. first versus

back you. you It largely on in the Got of your good have year. seasonality. think the just then pretty like of half And inflow that's normal I predicated seems deposits

we're So much start of that. for pretty the at gates

because year And is other customer months of a first still You that depositor that seasonality, you is we I'm you another this the rewarding conversations on period, in expect? six-month your probably expect? something Just should have something base. I more -- base. should just pay of and But ways commentary typically than you you your -- lot have ton continue any really normal have relationships that had typically to deposits sure you based of guys don't kind mean on that with the a six great up

Yeah.

make should due we and quarter to just expect deposits quarter a that. on of reasons, the things, then go the of grow kind to second deposits think we third we're business bonuses, I page, owners. sure fourth in same variety the just in other to and distributions normally, down And

So of the to I out would expect be seasonality left But mean slowed went The every that something case. of outside to new anticipated. of a quarter. side. the think different the continue pace the the I similar the in pretty is second subject in be And seasonality I money day on significantly a of I and normal bank should factors, lot that, the day there. should world sort think that

M&A in. know sneak Got to broader pretty additional do to company. making up you guys guys a that if you. do more can aren't one transformational or some bolster I roll And the I a deal, but just good history you looking have of

Has you -- something? you'd be do first not want the few maybe kind next a clarity bid involved you more some months appetite or between the get or do or think materially and past notable anytime country. before really of just you but And quiet, the guys week against changed been the deals but months? economic a this we've conversational juxtaposed do the in that, to With seller six ask floodgate, participating buyer seen announced year across over then being has necessarily need necessarily changes, the few not involved, pretty the there you we've seen

Yeah.

case-by-case think a I really it's basis.

say conversations, were Just significantly the haven. to challenge the looking scared failures looking slowed at stuff your a and just pretty goes But the up a I that comment regarding deal. banks. the and the I nervous of the into after think for is marks the And safe would the they've I'd the -- bit. all say, and of People little part conversations, a picked and economics

just We of with made normal open change I and us the open us probably was we announcement the Obviously, where the out financial looking day, that those there. to But and but acquisition it the risk if of be we of it But how for good our to always we and would something was opportunity are are remain an looking from of marks overall we're the a the was our will or think presented types and some things. based the on industry open, currency. those just conversations. some look, metrics But at disciplined of they impact sense yesterday, for would PacWest criteria. banking -- our capital of things the end in that for utilize perspective for at

this -- there you plus Got announced in of have I California? mean free has the year the A just of agency that kind been of deals been more because bankers

that could be will, with that was announced I But as move a the and or I mean there's happened really believe, for through forward two. I the still little bit that. of an us yesterday. quarter don't we think opportunity has anything next one

Sounds good. color Appreciate the guys.

Of course.

of question. will DA One And that come our you. line for moment Davidson. Gary next Thank Tenner the with from

Your is open. line

Good Thanks. morning.

morning. Good

It like XX% looks as dynamics well new can on But line XX%, versus existing your there to think, over to pickup of quarter-over-quarter. business dollar C&I kind drawdowns wanted about the three which utilization I potentially you increased, talk correlates I the between the brought in you Hey, increase. months? about ask have increased clients the with from last

Yeah.

the impacted -- new large degree. did sort a of C&I a towards that the of to on So quarter, relationship that bring in we end

anecdotally, the of lines. my relationship I was increase. off lot a of the it top have say existing new versus XX-XX number probably was new head, don't that that borrowings So would exact just but from I

sizable of loan versus a new just deposit of relationship? it's since then And talk Great. about relative could kind the impact that relationship, you

Yeah.

a Allen's bank. this laughing, the sorry. actually $XX back in really acquisition They're already This not the We with a relationship over to So XXXX large a maintaining is deposit actually Community of new Gary, this relationship customer, acquired size extremely interesting. them and Bank. is an their ago, deposits of unwilling ultimately, -- couple to a the another Back offered do deposits from with to in never And line they us. million that the line. years went that they took of we were left us. bank

made deposit They that bring their bank. actually They bank other with to to to decision us. leave left the the back this us, and line relationship went the they other wanted

So it's probably outstandings XX% about their balanced of on It's well the coverage side. pretty deposit actually.

interesting really of So because just borrowings borrowings kind never it's the but came then story relationship an did back. the the left,

kind of Got And you color first through the the on commentary deposit that. on any the it. month just of share third of terms I quarter in appreciate could what impression. then seeing almost trends you're

I Yeah, didn't stable number, would we disclose but I didn't characterize that very how it. is --

sort an offense and gone think of we've answer anticipate relationships of second kind between influence in But -- to that our I relatively outside they amount invested we to taken I that historically, some that a Gary, all today's enormous feel accounts. end Obviously, Ben, have actually of opened of of of those the through quarter trends investments. growth. and it now balances But excess have in and new of on we this. because lot and world. the similar can And similar deposit I third we'll third the quarter. kind my trends are average confident cash we customers' down on mean continue trust

it. Thank Got you.

You're welcome.

Sandler. our with come from Thank for of Piper line next the will that And Matthew moment Clark you. One question.

Your line is open.

good morning. Hey,

morning. Good

in of the into interest-bearing end deposits to the you some on the margin on next June? month of margin average and visibility spot just the at the quarter if trying June the have rate Maybe get first,

Yeah.

that trend, June, look that Matthew. I a see should it there. can actually basis give you investor so our and points monthly color you'll more XX think we at was deck in you noted And

XX-month let you'll see our what always of terms the In start months. and our interest a X.X% XX with disclose And net XXX ramp margin, we outlook of XXX me generate in for interest down that's sheet, XX a X.X%. in And point point over net Q. increase basis basis on up static months an over a to and first the income period balance going over

then and on the the -- you of decline in XX, be we as little that cumulatively or would mix assume XXX rates if points, XX funding a I will improve more to Likewise, it quarters X%. happened and the in give were I asset over I would negative the improved a the earning asset could down near-term outlook get some with it's reasonable well basis as X% color modest mix have less borrowing. on think quarter it's the short-term side and potentially very to first

So that's that NIM. reasonable But even better I a a to outlook there's September. maybe increasing think chance obviously, Fed our the in further we think subject of is

Page XX on the of And one just of in Investor the other month in deposits was cost June. Matthew, deck, X.XX% interest-bearing the --

Thank it. Got you.

willingness here? Okay. strengthening like And restructure even further capital change the your any But then it portfolio. regulatory the in on AFS doesn't from to it comments portfolio prepared sound your securities given

there. No. liquidity and mean opportunities. and always determine I and no to strong, the is commented, really it we'll evaluate we if sheets But anything the position do as there's balance need there's

this give here half? bit us expenses here second of down for including the quarter, in rate run kind a a little lower you comp. then the Can outlook And sense Okay.

prior years, generally midyear. salary increases recall we may from you do as Well,

third quarter different professional to probably benefit in number and service little X% choppy the a as quarter expenses. do overall some over X% see can So The be second should quarter staff things. the we quarter growth, to

invest improve But generally, expense for us account big digits we extent for have we continue we be is to to assessment to long-term in the the the unknown growth keeping the FDIC. can. from we continue a We efficiencies. to on the have low-single obviously, to focused special how to be projects in very lot And going of

how wait it? it We'll multiple quarters? over up? and have see. change Did it Is they that $X-plus Is split to show So quarter? million one does

it of Okay. the have or any matures or recently? due the portfolio, what's over maturities looks XX% office you And examples? like you've found? What's on have any kind CRE what Or of of to any the of coming of repricing of it here you next two date kind experienced I Do you more assume outcome years. that reprices type in looked And repricing. through

$X we look the the is an everything we've said economics, going. the of that's bank, We testing over we of loan rent annual at how do mean rolls, lot a every NOI property, the all I Yes. and million as review in the before. on do

daily maturities vast, We even have are and that And the sometimes repricing and month, majority -- based loans. always every have I'd we of There week most -- very had vast on of be not obviously probably you have say to maybe based might every prime. on remember, are loans few those on prime.

those treasury. on based of five-year most a are so And

amortization, on year be XX-year would that And structure based a be five-year five-year repricing XX-year would term, at typical six. treasury. fixed, the The

rightsize treasury years To indication So five far the one. our of Officer today, question if anything difference would really their we know date, from to property covenants loan. if good we've leaders, with at problems reprice. if on sales customers flow been -- ratios coverage how the based able asked Credit I according those a from hasn't five-year the asked service how flow solid look the I value really at cash the maturity. our we date, you that has cash don't customers And any and you have I've no in our this that to to property there the And give their or ago to and debt and would as being been loans Chief maintain loans in had as and or material to reset

any in and last Great. not? you more have just why explicitly, getting for back one interest did And M&A and then me, or why PacWest to

there culture, are And I to of been with it's billion want able $XX just be think that that banks would more we our processes, a interested through fold that So anybody kind that approach want lot There stated some to billion. have lot into want similar want our credit to but on in. been go us. quality, at would have to to -- we look, to of said all acquiring strategy. $X that think for right bank of our be CVB. execute stick in, that any have do were look that wouldn't And also to I of we to we remain big of were us, things. We interested now to our want I said ask We things pretty M&A, a that. that things I We I of have been those a I would our would to

taken mean sort I table. happy So I'm that for that probably the I criteria. of overall have that, industry fit off think But our do the wouldn't it was banking

Understood.

you. Thank Okay.

You're welcome.

Kelly KBW. for from come line moment will with that One next question. of the And you. our Motta Thank

line open. Your is

morning. for good the Hi, Thanks question.

morning. Good

I excellent to appreciate had wanted trends deposit start on there. you I this the all guys color quarter. the And

been inflows any wanted broadly. talk Just the back wondering, know if if to West. lot I that from you could there's seeing of obviously customers able win And some disruption been have out these more how of existing maybe this a like step versus and in just you're deposit headwinds business after initial back much of March. you're their coming or new to running flows customers are from disruption see from

We but was tale we in And customers And you And average don't the have new kind later new significant. some there second majority is million, asked customers the breakdown early to failures. of accounts, on wasn't from lot as the started been has us the I from of is we -- with of bank. in incentive in Yeah. helped how relationships, has -- quarter vast the disruption really changed existing say really it's it existing a -- really I -- opened of of the about a the I new new kind our did of some have focus our kind mean, there, working of mean on little many customer, vis-a-vis just is those a Well, impact we quarter, balance $XXX customer of bit I quarter. the really that but The deposit really mentioned, the quarter it failures. banks. And plan to disruption a of opening tale deposits. I question a We've think early quarter-over-quarter. customers down when is of year. bank and I accounts new the this would of last

funds our they've got other haven't silicon, silicon, lot money majority or verticals, active. and customers there, of are from left specialty A a of Republic people that to type government And were were banking at First banks, been those we deposits non-interest operating escrows, because and or ton of want they banks. to go bigger back of And a the the people's don't really very in that groups lot that but they are bigger of deposit thing. bearing services, those specialty like short-term sort two our the

seen side. production continues relationships full where banking generate to probably on the at municipalities of a still new Government with their best of we we were having one banking specialty point haven't and And is return new and districts, Services ever. high years cities specialty the

we for a I more I the going. our things us. loan So think bigger could than create yeah, And be deposit thought I say lot pipeline. would But of disruption, more opportunities never even with pipeline recent have might our

kind seeing we on commentary Great. pipe color and kind sheet size? on have appreciate balance you're of we size balance thinking Maybe look like should sheet you we outlook the I'll expect overall going of you securities. balance margin and commentary the sides for be the how And ahead? grow? for the as sheet? kind lead you about Do we the that with of what and considering of the into just where pipeline about I deposit how should to thinking the like, should expect -- deposits the borrowings, any then it ahead talked about the that, where and had year consider And what to of just into size around we in of both and the NII be the with that with with what as tying exit the

change reduce size the debt is on deposits to balance as So will of dramatically. reaction that Kelly, to most balance amount sheet. think our I Certainly, don't sheet grow, the likely the

loans, We to try down let of are a to grow look going securities bit. little course, portfolio pay to the

factors. So we those some could we could modestly on grow, just modestly decline depending of

predicated in quarter is to how In on the net is changing year. that but of year, it the this the some mix. again, think do interest the be going maybe margin We near asset terms interest feel I term, to once changing later it's the see funding that in of have reasonable worst mix, we reacts second the the Fed the net still margin,

NII you're provided the it. forward see Got any just And to way and margin what that of with to you maybe say size growth, that? balance some assuming thinking it's modest fair for sheet with, flattish kind Okay. what curve,

forward guidance. think -- really don't I we get it's

I'll leave Kelly. think it commentary, So I just with the

Got it. much. Thank you so

next from Tim Coffey will Montgomery. question Janney come of the [Operator line Our with Instructions]

open. is line Your

morning, Good gentlemen. Thanks.

Good morning.

been of Hey, have I one and most but my just question. had answered, questions asked --

is describe kind pressures might was Speaking come can that of within on your some footprint? aggressive term PacWest of running optimism level you fairly of your near costs what deposit PacWest, deposit given that down campaigns

there's think Yeah. in Look, aggressive fairly running lot campaigns a our deposit people I of footprint.

of that companies, I've I I'm just go So operating We itself back lot deposits, the chasing will as by of and in is of I yield. to the people don't majority of But and of our the that. are operating not of interest-bearing this we mean in companies. but sure increase bank the that have PacWest much some cost point evidenced change deposits a made. there are that

that. we so And are focused on

some companies. focus deposit of people of you make after really investor are is One been going at estate the of significantly necessarily sure do types to opportunities, loan. think they're the to relationships and of just the real new we're of businesses new just new with portion the our and at new There's C&I companies, the good of here, we're of a color loan the result the not operating of I give next trying loans and this sort kind has I that right thing to doing commercial -- the one getting And the things higher trying of looked the I'm opportunities. thing of sort mix looking around we're deposit the a

deposit on And depending on, where And side, the think Fed continued we will that going. pretty on what so hope but we that, some see on little will a the My pressure it moderated continues. see positive I again, bit. the is I'm funding does, that's has

you my time. Thank was for That the Very good. question.

welcome. you're Yeah,

further Thank remarks. the questions time. you. now back to over Brager closing queue I this like I'm the call would no turn any at to showing for in Mr.

we'll call. this to want us for a talk forward thank with quarter We October earnings Have any or I you. Allen joining everybody have to Thank interest speaking appreciate your quarter. great and look Please you in for day, I if to questions. XXXX and you let Great. third our know soon. you

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