BANC
#Sure.
Within our seasoned loan portfolio, historically we've bought certain loans that we have a path to restructuring and holding.
These tend to be lower LTV loans or loans within our strategy.
What we saw this quarter is that there were loans within that portfolio that we were successfully able to restructure.
All of them continue to be within our purchase strategy and are consistent with our expectations when the loans were acquired.
<UNK>, would you like to add to that.
And I think you see that, right, as you haven't seen a material change from our provision exception from that front and so essentially while you've seen kind of a change in the categorization driven by kind of the accounting literature, our exceptions, as Steve mentioned, relative to the overall performance yield, cash flows, those points haven't changed.
No, this isn't ---+ I can tell you two things on the securities.
One is, we finished the quarter with the unrealized gains on our securities book, meaningfully above where they started the quarter.
So you saw meaningful unrealized gains within that portfolio during the first quarter.
So we're not looking at pulling forward unrealized gains that existed before the beginning of the quarter.
This is all intra-quarter.
What you really see here is that, from a portfolio and risk management approach, we're highly cognizant of the impacts of things like MSRs in our swap portfolio on ---+ the impact that rates can have on those securities.
And so we use and look to our overall balance sheet and balance sheet strategies to be able to offset fluctuations from those portfolios and to opportunistically manage our balance sheet so that instead of providing you adjusted core earnings, we strive to just have consistent core earnings.
And so the securities portfolio gains, in large part, were intra-quarter recognized gains that were correlated with the intra-quarter fair value losses you saw in the MSR and other financial instrument portfolios.
No, there's always the potential for volatility in NIM, but you have to remember, we managed our portfolio with both a held for investment and held for sale component, and we also manage our existing portfolio where we have the capital markets capabilities from time to time, if the market conditions require, to, you know, hold or sell loans or securities, you know, effectively.
So what you see, I think, from the new originations is a combination that a lot of our originations, especially for sale, tend to be asset classes that may have lower coupons than some of our originations that get held.
Thank you.
Good morning.
Look, we measure the organization regularly from a risk and kind of business standpoint, and a lot of the growth is driven by what we believe we can attract in a core, fundamentally sound way.
I remember back to early last year where we slowed our growth a little bit through additional sales, and received some questions about whether our platform could continue to grow at the pace we had historically grown.
I feel really good that we have the optionality to grow the NII through assets or to manage the portfolio and prune it through our capital markets function.
We look at that every quarter.
I would tell you we provided some guidance earlier that we expect our gain on sale from loan sales to revert back towards what we were seeing last year, and I think we gave a guidance that it is closer to $6 million to $8 million.
Not every quarter but kind of on an average run rate quarter.
And this quarter was materially below that.
So you also saw some HFF loan build where that number went up, and some of that resulted in the increased assets that we have.
So we have a larger inventory available for sale, we have confidence that that inventory would recognize prices above their carry prices, and we look to the market and to our business to determine what the right mix of asset growth versus gain on sale is from time to time.
I mean, sure, that's a fair summary.
We recognize that high quality deposits and loans that generate net interest income are the highest value and best long-term franchise builder for the bank, so if there are opportunities to achieve that without pressuring capital liquidity or operations or other risks, we'd look to achieve that.
So our best estimate that we've provided in the guidance is a balance of those factors, but, you know, we are seeing and, you know, even this week we've been fortunate enough to announce the addition of some really exciting new talent, especially in our commercial banking and FBA lending groups.
To the extent that we saw earlier attraction or accelerated traction from some of these folks or from our existing folks, you know, that could change our views.
Sure.
You know, the Palisades Group transaction is expected to close in the next few weeks, so we'll be able to provide kind of a day one accounting shortly after that.
We do anticipate a gain on sale, although not a materially large number.
That being said, we've retained an upside within this agreement where over the next several years, we could receive, you know, up to $20 million or more of payments that are subject to certain performance conditions.
We would expect that, you know, the first couple years, the first year or two, that might be more concentrated on whether those earn-outs would be realized.
We haven't filed the complete documents yet so I'm a little bit unable to get into materials that we haven't filed on the call, but, you know, we feel very good about the Palisades group, we think they have a bright future, we're really excited to continue to participate in their upside.
And we're equally excited about the simplifying effects of the transaction, the down side risk that's been taken off the table with the transaction, and the effects on our efficiency ratio and the focus of our management team and operations where our team can really focus on scaling and growing those businesses that are right in the our sweet spot without distraction.
<UNK> mentioned those two numbers, yes, related to the financial instrument fair value marks that we saw as directly related to the interest rate movements in the first quarter.
Good morning, <UNK>.
There was clearly a mix, however, a big part of that mix this last quarter was from new accounts.
We continue to see progress on existing account relationships and growing our pocket share within those accounts, but we're also really starting to see the benefits of some of the great new talent we've brought in and the relationships we've been starting to build here in California where we're seeing a lot more inward inquiry on relationships, we're seeing a lot better brand presence and exposure, and we believe that as we continue to grow out our teams, we're getting some of the best relationship managers in the region and we're very excited about that.
And, you know, are hopeful to continue to see promising returns from those investments.
Yes, it's more a flexibility issue.
I talked in my comments about our initiative to review all aspects of our balance sheet, and as we approach the $10 billion mark, including the impacts on DFAST.
What we found was having that flexibility capacity was very helpful when we think about our continuing source of liquidity, and it also is very helpful with our decision to call and repay our $85 million of senior debt, where we had been finding that a large amount of that senior debt that was outstanding at a 7.5% yield was sitting at our holding company and not being deployed into assets that earned back the cost of that debt.
So the expansion of the facility also enables us to have the confidence that we have the capital we need if we need it without having to take on a 7.5% yield in the meantime.
Hi, Abraham.
Well, thank you everyone for joining our call this morning.
We appreciate your support and interest in Banc of California and we look forward to keeping you updated throughout the rest of the year.
