Joseph Kauder: Yeah. So we’re still on track for the cost saves that were in the original investor presentation, and in fact, we hope to exceed those. The FDIC normalizations we talked about earlier. Pack actually, I think our saves versus the investment presentation will probably be a little bit in excess because PacWest assessments went up in the third quarter related to the, you know, those two things together puts us on a really good run rate. With respect to the first quarter and by that I would think you would say the first quarter of 2024 we’ll start to realize cost savings then. But really the cost savings are going to be realized throughout and the assessments will happen immediately. But on the other cost savings, those will come in throughout the year.
Really, it’s really the back half of the year when they really start to pick up, starting the first and second quarter gain steam, and then the third and fourth quarter when the core cost savings really kick in hard.
Jared Wolff: Yeah, that’s a good point, Kelly. Our conversion date is at this point likely going to be in May, which is pretty quick and we want to do it right, but it’s a big deal and so that’s why some of that stuff won’t kick into the second half. There are people that are staying through transitions like conversion. There are a lot of costs that come out after you get the conversion done and so that’s going to trigger a whole bunch of stuff. And as of now, that’s targeted for May.
Kelly Motta: Got it. Maybe – maybe a last one for me. The new DDA accounts, I mean, it’s been a huge part of the bank of Cal story and it was nice to see the new accounts. You laid out about 50 million this quarter. Just wondering if there’s any kind of themes there in terms of types of new clients you’re winning, as well as on the PacWest side with the DDA runoff that has been seen there, if you’ve identified any opportunities to perhaps win back some core operating accounts there that have left.
Jared Wolff: Sure. So let me start with the PacWest first, and I’ll come back to Bank California. So we look at their daily deposit results daily, and they’re doing an excellent job. And without getting into their specifics because it’s for them to report, the trends are very positive, including at the Community Bank, which is a big part of their growth engine. And so I’m very pleased with what I’m seeing. They’ve put in place some programs that are going to jumpstart the combined company. I asked them and Paul’s been very cooperative and collaborative, as has the entire team in terms of putting in place programs that focus back on bringing in operating accounts as opposed to selling rate. I mean, they’re in the low 80s and loan to deposit ratio now, so there’s no need to worry about some of these higher cost deposits as necessary funding.
And their deposit base has stabilized remarkably well. And so I think that there’s going to be a lot of opportunity to bring back some depositors. On the other hand, they have some deposits that probably need to be moved off balance sheet that are higher cost deposits as well as deposits that might be more flexible, that are more liquid, that they carry, like on. The venture side and I’ve talked about that that there’s no reason to carry these highly liquid excess deposits on the balance sheet and make you think that they’re available for you at all times. And so they have an off balance sheet vehicle that I think is going to be effective to use. It keeps it in the family, it keeps it within the company, and you’re providing a very good option for the client.
But you don’t have to kid yourself about whether it’s true liquidity and a true stable deposit that you could lend against. And so that’s part of the conservatism that we’re going to build in here. And I think we’ll provide a benefit from an operating perspective to the company in terms of living within our means and making sure that we don’t have outsized deposits that pose concentration risk. I’ve talked about that from the day we announced this deal that we want to limit concentration risk equally on the deposit side as we do on the lending side. And that’s something that they’ve been I would say, the folks at PacWest are very focused on and they’re very good at addressing these sorts of things and we’re doing it together. So that combined with the programs that they’ve put in place, I’m very pleased with the momentum that we’re seeing.
And then at Bank of California, we’re not in a high growth lending environment right now. I think that we will see some lending expansion after the merger. There’s some whole bunch of stuff we’re looking at. But given our loan to deposit ratio, I’ve been holding back a little bit and prioritizing other lending for clients that’s been holding us back. That’s an opportunity for the combined company. And so to generate these sorts of deposits when we’re not lending the way that we were is a real bright spot. That proves out our deposit gathering engine that we can bring in new commercial relationships. You asked about the type that we’re bringing in. We’re bringing in businesses that are frustrated with a lot of them are at larger banks and a lot of them are at some of our mid sized competitors who are not getting the tailored solution that we can provide on the deposit side in terms of providing really dedicated treasury management.
If you’re a property management company and you’ve got 50 accounts and you can’t see them on a single screen and you can’t move money seamlessly between accounts and you can’t get statements printed the way you like and you’ve just been grinding it out, we can provide a better solution. A lot of commercial companies have multiple accounts and they need them handled the right way. We don’t overcharge our clients for treasury management services. We have a very competitive product and we realize that there is some scale involved here and it doesn’t cost us every time somebody writes a check the way the big banks might make you feel like it does. And so we’re trying to be efficient here in helping our clients. And as a result, I’ve said in this in the past, we’re not going to run with as much fee income off the deposit account side.
We’re going to get our fee income elsewhere and our payments business is going to be a big part of that. It is a tough environment. I mean, deposits are contracting but I firmly believe in the strategy of bringing new relationships to the bank every day and those relationships will grow with our bank. We are not losing clients. We are seeing deposit balances shrink as accounts shrink due to the economy contracting and we track it weekly, we see what sort of deposits are leaving, what sorts are going out, and whether we’re losing accounts. And fundamentally, we’re not. We’re growing our relationships. And so given the low lending that we’ve had relative to kind of the last year and quarters in the past, I’m pleased with the deposit results.
Kelly Motta: Thanks for all the color, Jared. I really appreciate it. I’ll step back.
Jared Wolff: Thank you, Kelly. Thank you.
Operato: Our next question comes from Andrew Terrell of Stevens. Please go ahead.
Andrew Terrell: Hey, good morning.
Jared Wolff: Hey, Andrew.
Andrew Terrell: Hey, Jared. Quick question on some of the asset dispositions. I know the single family, I think, was forward the BANC [ph] single family was forward sold when you announced. But any status update on the multifamily portfolio?
Jared Wolff: Joe, you want to take that?
Joseph Kauder: Yeah. We continue to in the process of marketing that portfolio. The timing trying to get the timing of that right in conjunction with the close now that we have a little bit more line of sight to the closing date. A lot of interest in the portfolio. Obviously, we’re in a slightly different interest rate environment than we were when we entered into the process, but we had a hedge on that portfolio for the interest rate component. So we feel pretty good about it and we’ll see how things play out here as we get to the close date.
Andrew Terrell: I’m surprised how much interest there’s been. Andrew, it’s been a robust Joe’s downplaying it a little bit. I mean, it’s been a robust process with tons of interest, and so we’re confident we’re going to get it sold. And obviously the hedge was a good idea.
Jared Wolff: Yeah, absolutely. So I guess the right way to think about the hedge and the gain you took this quarter is when you close the deal, the pricing on the multifamily could be a little bit worse. So technically, it’ll kind of wash out the gain that you saw this quarter. Is that fair?
