Jared Wolff: Just that we’re on track. I mean, as I’ve said before, I don’t want to give out numbers of customers and volume of transactions because I think it’s too low to be meaningful. We still believe that on a standalone basis, Deepstack in 2024 would contribute meaningfully to fee income and meaningfully enough that we would call it out and say what it is. And I think that’s where we’re going to get to by mid, late 2024. And we think the PacWest deal is only going to accelerate that. Obviously, in the combined company, it’ll be less material, but I think to provide context, we said it would be material on a standalone basis, and we’re excited to begin sharing that as we ramp it up.
Matthew Clark: Okay. And then the acquired credits that you addressed here in the quarter through the provision, were all those PCD loans and were all of them marked to some degree? Just trying to get a sense for whether or not they were identified at the time of the deal.
Jared Wolff: No, they weren’t all identified at the time of the deal. Two out of the three. So there were three charge offs. Two out of the three were marked at the time of the deal. And then – I’m sorry. And then there was one that wasn’t a charge off, but we substantially wrote it down and had to provide a provision for it. That one also was marked at the time of the deal. So three out of the four overall and three out of the four were Pacmer [ph] credit. So the three out of the four were marked, one wasn’t. I think it’s notable though, that we recorded a $5 million provision and we still hit consensus earnings and we just decided to accelerate stuff and we could have carried it along. But part of what I believe in is transparency.
And in the course of the deal in the Q4, obviously everything’s going to get jumbled together and there’s going to be a lot less transparency. And so part of it for me was being transparent about what we’re doing and just saying, okay, let’s move it along now and we’re still going to have a great quarter.
Matthew Clark: Got it. Okay, thanks again.
Jared Wolff: Thank you.
Operator: Our next question comes from Gary Tenner of DA Davidson. Please go ahead.
Gary Tenner: Thanks. Good morning. Hey. Wanted to ask about the plant disposition within the PackWest AFS portfolio, the $2.3 billion. Obviously, as you pointed out a moment ago with regard to AOCI, it’s got a bigger mark against it now. The plan was to sell about half of that portfolio. There would be greater hit, obviously, to regulatory capital if you were to do it at current fair value mark. So is the plan still to go forward with that full amount or would you adjust it and kind of manage to regulatory capital impact versus the previous plan?
Jared Wolff: So our pro formas currently have us still hitting our CT 1targets with the sale of the planned securities at closing, based on the marks they currently have, we can retain full flexibility. It’s just a timing question so we can retain flexibility and sell that stuff later if we choose to, if the marks accelerate and we’re like, all right, well, let’s hold a little more capital, let’s sell it a little later. But as of today or yesterday or whatever the last measurement date was, very recently, we were still hitting our CT 1ratio and executing day one on all the sales that we had announced that we planned to do. Joe, please correct me if that’s wrong.
Joseph Kauder: No, that’s correct. And what we’ve been doing, in addition to tracking the interest rates, is we’ve been updating all sorts of assumptions and estimates in the model. And I just want to reiterate what Jared said, that we forecast that even with the sale that we can hit our targeted our projected regulatory capital levels.
Gary Tenner: All right, great. Thank you. And then you kind of hit on my second question, which is with the kind of earlier timing of the sale relative to the range that you had put out initially, other than the Atlas repurchase agreement, which I think comes up in December, does everything else happen concurrent with closing? Or are there any other kind of timing items as far as the sales and dispositions?
Jared Wolff: Yeah, it’s around closing. I mean, it’s pretty fluid. Whether it’s sometime in December, I think we’d like to take the risk off the table and things that we can execute on, we just will, because it’ll allow us to reduce higher cost borrowings at PacWest much quicker. On the term funding facility, Atlas, as you mentioned, is something that we can take out in December. The bank term funding program is interesting, which is another kind of borrowing that they have that everybody’s familiar with because it’s a positive carry. And they get that benefit, I believe, until March. Bill, isn’t that right? I think you guys have that facility can be repaid through March, so that might be something. Even though we plan to pay it off at closing, since it’s a positive carry, because it’s a lower cost funding, we could carry it a little longer, make a little bit more money, and pay it off later.
So we’re looking at all those things. As of right now, though, we have it being paid off pretty quickly.
Gary Tenner: Okay, thanks, guys.
Jared Wolff: Thank you.
Operator: Our next question comes from Kelly Motta of KBW. Please go ahead.
Kelly Motta: Hi, thanks for the question.
Jared Wolff: Good morning, Kelly.
Kelly Motta: Good morning. Congrats on regulatory approvals as well. I was going through the S4 [ph] and I just wanted to confirm I couldn’t see any provisions in there that would allow or permit private equity to potentially renegotiate any of what they’ve committed. From what I can gather, that’s committed capital. Can you just enlighten us any sort of thresholds or any potential opportunity that could come from that side to change the terms of the deal?
Jared Wolff: Sure. So we are fully committed to the deal, as are our investors. We talked to them about the closing date. We all circled around the closing date and agreed on the closing date. We’re all excited to get this deal done. The agreements are publicly available and people can read them. But as a reminder, the private equity partners that we have, Warburg and Centerbridge, don’t have outs that we don’t have ourselves, and I don’t see any outs anytime soon. We’re all excited to get this deal done, and the outs are very narrow and very hard to hit because we were all committed to this deal. And as we’ve said, even with the marks that exist, we’re still hitting our target capital. And the other fundamentals of the deal are strong, and all the expense savings are there for us to do.
We believe if you can absorb a deal at the high watermark of AOCI marks, that’s only upside going forward. Which means we properly structured the deal, we properly sized the deal, we brought enough capital to the deal, and so we don’t see any outs that anybody could exercise at this point. And we’re fully committed to the deal.
Kelly Motta: Thank you for elaborating on that, Jared. I appreciate it.
Jared Wolff: No problem.
Kelly Motta: I was hoping to touch a bit about just the run rate of expenses. I appreciate the color on the FDIC charge that’s outsized at PacWest. I think the release cited tangible book value might be lighter because of PacWest earnings came in a bit light relative to what you had been expecting, and I think one of that was expenses. Just how much of that was related to timing. And how are you feeling? It seems like you still are on track for the $130 million cost saves, but I was hoping you could touch on just the run rate as you combine in the first combined quarter as a combined company and just the trajectory of full realization of those cost saves.
Jared Wolff: Sure. Joe, you want to take that?
