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spk01: Greetings, and welcome to First Foundation's second quarter 2021 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Speaking today will be Scott Cavanaugh, First Foundation's Chief Executive Officer, Kevin Thompson, Chief Financial Officer, and David DiPillo, President. Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results. These forward-looking statements are made subject to the safe harbor statement included in today's earnings release. In addition, some of the discussion may include non-GAAP financial measures. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, see the company's filings with the Securities and Exchange Commission. And now I would like to hand the call over to Scott Cavanaugh. Please go ahead.
spk08: Scott Cavanaugh Hello, and thank you for joining us. We would like to welcome all of you to our second quarter 2021 earnings conference call. We will be providing some prepared comments regarding our activities, and then we will respond to questions. We delivered another strong quarter of results as our business model is performing well. a 17% increase over the first quarter of 2021 and a 46% increase year over year. Total revenues were 71.9 million for the quarter, a 9% increase for the first quarter of 2021, and a 25% increase year over year. Our tangible book value per share ended the quarter higher at $14.27. We declared and paid our second quarter cash dividend of $0.09 per share. The transformation of our business model has really taken shape. As I had mentioned on these calls before, we have been focused on transforming our balance sheet and diversifying our offering. This has only strengthened our position as a regional commercial bank. As we look at our business today, we are a much different bank than what we were just three short years ago. When many of you on the call first invested in us, let me elaborate on a few points related to this. Business and commercial loans now account for 28% of our loan portfolio. and no one sector accounts for more than 20% of our business lending portfolio, showcasing the diversity of the businesses we serve. We still do an amazing job with originating and funding multifamily loans, but our C&I division has been responsible for a significant uptick in originations, including 30% of the $1.1 billion we originated this quarter. to add to our commercial lending capability with the addition of new lending teams in Las Vegas and the Los Angeles area. And we brought on a new dedicated builder finance team that is focused on the construction lending, another way we are diversifying our loan offering. We also established our municipal finance team last year, and equipment finance continues to be a strong source of loan origination. and our single-family team is consistently adding high credit quality, low LTV loans to our portfolio. Looking at deposits, our core funding has also increased over the past quarters and today accounts for 98 percent of our total deposits, attributable to our significant reduction in our broker deposits and an increase in more business-related operating accounts. We have zero federal home loan bank advances today, while at the same time, our loan to deposit ratio improved to 85% at the end of the quarter. We think this updated profile of our bank's balance sheet has several meaningful benefits, two of which that I would like to highlight on this call. We have a solid pipeline of loans that generate attractive yields in spite of low interest rate environments. During a time when many banks are having trouble generating interest income, we have experienced net interest income growth of 20 percent year-over-year. Related to this, our funding costs have decreased to 18 basis points in the month of June, even as we have increased our total deposits by 26 percent year-over-year. This also means that we will not have an immediate need for home loan bank borrowings for the foreseeable future. In addition to the transformation of our balance sheet, I want to remind everyone that we have the added benefit of an in-house private wealth management offering, which also reached record levels of assets under management by adding $529 million and ending the quarter at $5.3 billion. This important offering includes investment management, wealth planning, trust services, and each provides meaningful value to our clients and generates additional sources of revenue for the company. Also, the wealth management business is continuing to gain scale as the combined pre-tax margin for trust and wealth management was 23% for the quarter. And soon, we will have a cryptocurrency offering through our collaboration with our partners NYDIG and FISO. This project is well underway, and we are closely working with our regulators on the scope of digital asset solutions that we can bring to traditional banking. We expect to roll out our offering in the fourth quarter of this year. All of these services position as well as we seek to serve our clients. Our business model is designed to help clients wherever they are in their financial lives, and today's results indicate that our model is working very well across the diverse and dynamic markets we serve. Related to our expansion efforts, our growth in Texas is going very well, and we are so grateful for the warm reception. As we operate today, our newly appointed general counsel, Kelly Brunsell, joins me in this space along with several other team members who are based here in Dallas. We are also pleased that we have officially opened our first LPO in Las Colinas in Texas, and we'll be looking for future growth in Plano and other areas. This includes signing space for our first retail branch. There are so many attractive markets in Texas that are business-friendly and a great fit for our offering. We are really pleased to be here. During the quarter, we announced our planned acquisition of Naples-based First Florida Integrity Bank. We are so pleased at the opportunity to expand into another business friendly state. Florida also excited about adding new talent from the existing team to our operation. At the close of the transaction, Gary Tice will join our board and Garrett Richter will become a regional president of our Florida operations. It will be really exciting to work with them and the FFIB team as we expand upon the legacy of what they have built. This truly is a merger of two firms with a common vision. In terms of a timeline related to the acquisition, there are still several steps to go, but we are making good progress. We have filed our S4 and expect regulatory approval by sometime next quarter. Then we would like to convert their operations onto the First Foundation bank platform in early 2022. There's a great presentation about the details of the merger on our investor relations page for those that would like more information. I want to say how pleased I am with the entire team at First Foundation. We have a great group of people who are very committed to serving clients and building a valuable business. have amazing clients who entrust us with their financial well-being. It is truly an honor to be able to lead this organization, and I am really excited about our future. Now, let me turn the call over to our CFO, Kevin Thompson.
spk03: Thank you, Scott. Earnings per diluted share of 58 cents in the second quarter included $1.2 million of expenses related to our acquisition of TGR Financial. The return on assets was strong at 1.4%, with a return on tangible common equity of 16.7%. Adjusting for the merger-related expenses, our return on assets would have been 1.45%, and our adjusted return on tangible common equity would have been 17.3%. The net interest margin expanded four basis points to 3.2% in the quarter as a result of strong loan growth and the continued success we've had in lowering deposit pricing. We maintained discipline in loan production with the average yield on loans dropping slightly by 11 basis points to 3.88%. Our cost of deposits decreased from 31 to 20 basis points in the quarter and continued the downward trend to 18 basis points in June. With strong C&I loan production and increasing core deposits over the past several quarters, our balance sheet is trending less liability sensitive. We completed a sell of $133 million of multifamily loans in the quarter, recognizing a $3.3 million gain. We recognized $905,000 of PPP fee income, or 16% of the total net PPP fees, bringing the cumulative fees realized 77% from the total PPP loans funded of $227 million. Excluding the effects of PPP, the NIM would have been 3.19% for the quarter. Credit metrics remained strong in all our loan portfolios, and the allowance for credit losses for loans decreased to 40 basis points of total loans. This was primarily a result of improvement in the economic scenario we utilized for the CECL calculation. We had net charge-offs of one basis point, and non-performing assets remained low at 20 basis points to total assets. We recognized a $1.3 million valuation allowance on mortgage servicing rights in the quarter as a result of changes in the interest rate environment and prepayment speeds. Asset management fees were strong, with revenues of $8.7 million, and as Scott referenced, our advisory and trust divisions achieved a combined pre-tax profit margin of 23% in the quarter. Assets under management at FFA increased to $5.3 billion, while trust assets under advisement at FFB remained strong at $1.2 billion. Our non-interest expense increased in the quarter, but excluding the $1.2 million in merger-related expenses was essentially flat. The efficiency ratio for the quarter was 47.3%. With strong expense management and the investments we have made in our infrastructure, we continue to realize benefits from operational leverage and efficiencies. I will now turn the call over to David DiPillo.
spk04: Thank you, Kevin. As Scott mentioned, the transformation of our balance sheet continues to develop nicely, and today we are well positioned as a regional commercial bank servicing a diverse client base. Adding some more detail to that, I would like to highlight our commercial business lending accounted for 39% of our originations for the first six months of the year. In the quarter, we funded $336 million of CNI loans, which contributed to our third straight record quarter of originations of $1.1 billion for this quarter. 57% of our C&I loans in the quarter were adjustable commercial revolving lines of credit, which is a strategic move for us as we continue to shift the balance sheet to more rate-neutral from liability-sensitive. The remaining C&I originations were comprised of $73 million of commercial term loans, $34 million of public finance loans, $27 million of equipment finance loans, and $10 million of owner-occupied commercial real estate loans. They are all high-quality business loans that generate strong yields and continue to diversify our loan portfolio. Included in commercial term loan originations was $10.1 million of second round of PPP funding. Looking more broadly at the $1.1 billion of loans that we originated in the second quarter, the percentage breakdowns was as follows. C&I, including owner-occupied commercial real estate, 30%, multi-family, 64%, single-family, 5%, and 1% other. we continue to focus on high-quality loans to solid borrowers. It is always important to note that we accomplished this record quarter of originations without changing our high underwriting standards, and our MPAs fell to a low of 20 base points during the quarter. Loan pipeline remains strong heading into the third quarter, as we expect to have some seasonal cyclicality over the summer months. Speaking more specifically about loan yields, we achieved a weighted average interest rate of $335 on loan originations, which held steady from the first quarter, which was also $335. This continues to demonstrate our ability to achieve record volumes while defending the yields on our portfolio. As of June 30, 2021, our loans held for maturity consist of 51% multifamily loans, 28% CNI loans, 5% other CRE, 15% consumer and single-family loans, and 1% land and construction. Our deposit business also experienced historic levels of inflows with an increase of $861 million during the second quarter of 2021 to end the quarter at $7.1 billion, which reflects a 26% increase compared to the second quarter of 2020. Deposit growth during the second quarter of 2021 was primarily driven by an increase of $1.1 billion or 50% in non-interest-bearing demand deposits, largely attributed to our commercial deposits, service division, and retail branches. The increase in deposits were offset by a reduction in interest-bearing demand deposits of $116 million, a reduction in money market and savings accounts of $28 million, largely from our digital bank channel, in addition to a reduction in CDs of $89 million, primarily due to our intentional runoff of higher-cost and broker deposits. Our non-interest-bearing deposits now account for 46% of our total deposits. The $861 million growth in deposits during the second quarter of 2021 includes an increase in commercial deposit service group of $859 million and retail branch deposits of $76 million. Of the $892 million increase in core deposits, $884 million, or 99%, were attributed to commercial business deposits, both from our commercial deposit channel, serving complex treasury management, commercial customers, and from our business banking customers served by our retail branches. Commercial deposits were 74% of our total core deposits as of June 30th. Core deposits now account for 98% of total deposits. Our cost of deposits have continued to improve and reached a low point of 18 basis points in June. As noted, this reflects the benefit of our continued transformation to a commercial regional bank. Although, as Kevin mentioned, NIM expanded to 320 during the quarter, our robust deposit growth has provided us some additional excess liquidity. This excess liquidity will likely provide a Slight drag to NIM over the next couple of months as we put it to work through loan fundings, which tend to slow down during the summer but accelerate in the fourth quarter. Looking further out, we are preparing for our up-and-coming loan sale, which we expect to complete in the third quarter, which will be our seventh such deal to date and has become a routine part of our business. A few final points about our investment in technology. Our efforts in technology and digital innovation are going well with several key implementations already complete and some planned for later this year, including a significant enhancement to our digital offering for both our business and personal banking clients, as well as a new mobile app for those clients that choose to engage with us using mobile devices, including phones and tablets. These enhancements should put our digital offering on par with anything offered in by the fintechs or neobanks, but in a safe and secure environment of a traditional bank. We also continue to make further enhancements to our enterprise data that helps us better service our clients and improve operation efficiencies. With the addition of Texas and soon to be added Florida locations, these will be investments that are sure to pay off as we scale up these opportunities. All of the success in the Corps could not have been achieved without the great team we have in place. I am so grateful for their dedication and hard work. At this time, we are ready to take questions, and I will hand it back to the operator.
spk01: Thank you. The floor is now open for questions. If you would like to ask a question, press star, then the number one on your telephone keypad. And your first question comes from Matthew Clark of Piper Sandler.
spk06: Hey, good morning, guys. Good morning. I just wanted to hone in on the non-interest-bearing deposit growth a little more. Can you give us a better sense of how much of that came from, you know, your Dallas initiative? How much of it might have come from, you know, cannabis efforts? And, you know, then just speak to kind of the more traditional types of projects. sources of growth. It's a pretty meaningful increase. It could be considered the size of a bank in one quarter.
spk08: Dallas has not really kicked in yet. The reality is we are just signing our first branch opportunity and that probably won't even be online until the first quarter of next year. Cannabis has slowly increased, but it's still a very minor portion. I would say that, you know, the increase is really attributable more to the traditional means and the people that we've had in staff for a while.
spk04: Yeah, I would just add that some of that is growth from existing clients. A lot of it is new client acquisition, but we would mention that we do have existing clients in the Dallas market that contributed a pretty significant growth during the second quarter. One particular point added several hundred million. So we are seeing growth out of that market. We so happen to start banking that client prior to our move to the headquarters. But, yeah, it's organic growth through our distribution channel and clearly demand us outstripping our ability to deploy deposits at this point.
spk06: Okay. And do you feel like those balances are sticky, or do you feel like there's some portion of that growth this quarter that, you know, is more of a timing issue that, you know, might move?
spk08: So I think they're very sticky, but the reality is there are high points and low points. with some of those clients. And right now, the balances are starting to build back, and they'll fall wide, Dave, in the fourth quarter slightly, and then build back up.
spk04: I would say we'll probably see a lot of the traditional balance growth of existing customers that Scott just stated typically hits during the third quarter and then the cyclicality nature of some of those will weed their way down during the fourth quarter and then start building up. However, we have made a concerted effort to diversify those business deposits away from some of the cyclicality that we see in some of the clients. So we probably won't see the level of movement. But again, Matthew, the demand out there from even new customers is so high. We're turning away deposits at record levels.
spk06: Okay. And then just shifting gears to the loan pipeline and kind of growth outlook, a lot stronger this quarter. Sounds like you expect some seasonality in the third quarter, but what are your overall thoughts on production in the back half and just
spk04: net growth in general? So we still expect the first quarter to be the low point. Third quarter will be obviously down from the second quarter just because of the summer months. And actually, you know, knock on wood, post-COVID, people are actually traveling. So we're seeing more of a, unlike last year, we had record lows in production mostly related to COVID during the third quarter. This will be a traditional cyclicality, but it still should be greater than what we experienced in the first quarter. But I would say that we traditionally had run, you know, anywhere from 2.5 to 2.8 billion. You know, our current run rate is 3.5 to 4 billion. Our expectation is we're going to continue at that run rate. And we don't see demand at this point falling off. So... You know, as we stated previously, we kind of built infrastructure and teams to support a much greater funding level than we've historically achieved in the past, and we're starting to see the fruits of those labor pay off.
spk06: Okay. Is it fair to assume with the acquisition that you'll probably be at $5 billion next year, roughly?
spk04: It all depends on how quickly we expand in that market. Their historical run rate, Kevin, correct me if I'm wrong, I think it's $200 million to $300 million a year, XPP. We think that's going to be a gradual increase as we expand in that market. So I'm not sure it's going to be a billion by next year, but it'll certainly be scaling up from what they historically have done. But, again – I think it depends –
spk08: I think it depends on what Florida can chip in. Texas is already gearing up pretty substantially on the loan side. They're approaching $100 million in a pipeline, which is pretty healthy considering the team's only been here for a couple of months. So that may be a little bit ambitious on the $5 billion, but...
spk04: Yeah, I would say we have not modeled that. However, we have not completely integrated all of the modeling around post-acquisition, at least from our expectations outside of what we put, you know, redeployment of cash in the model. But, you know, I would say our plan is to step up their historical run rate and enter into new markets relatively rapidly as they were – planning to do that on their own, but had tended to be a little more capital constraint in the past.
spk06: Okay. And then just on the reserve, down a little bit, XPPP, I think roughly 41 basis points. I think some of that's macro factors, and I would assume some of it's also just less CNI contributing to the overall production this quarter relative to last. But what are your thoughts on the on the reserves? Should we expect that to kind of reset back to 50 basis points with the acquisition in the fourth quarter?
spk03: We haven't fully modeled that yet. Other than you can see when we announced the deal, that's our latest modeling. And you saw on our S4, we did some estimates as well. So more to come. We have a lot of work to do before we close to understand their loan portfolio better and to implement CECL as a smaller bank. They weren't subject to CECL requirements, so we'll run their loans through our model. And To your point, there are more commercial loans, so we do anticipate a higher reserve rate.
spk04: I wouldn't say it would be that significant, even the credit quality of their portfolios and the historical performance and the seasoning of it. You know, they're a very, very conservative bank, and their reserve levels are at 15, a little over. They're 1.5%. Yeah, but on – commercial real estate. The commercials, they're probably out there. Yeah. So it may drive us up a little, Matthew, but given their portfolio compared to ours in size, you know, the primary driver is obviously multifamily and residential mortgage tend to drive our ratio down since we do tend to reserve higher levels on C&I.
spk06: Yep, understood. Thank you.
spk01: Thank you. Your next question is from Steve Moss of B Reilly Securities.
spk07: Good morning. Thank you. Next quarter here, maybe just tying out loan growth a little bit further. You know, obviously sounds good on the pipeline and origination share price. You know, you do have a pickup in paydowns. As you think about the pace of growth, maybe even with TGRF, you know, are you guys comfortable kind of like a mid-teen type growth rate heading into next year?
spk04: Yeah, I think so. You know, like you say, it all really depends on where the market is as far as rates from a CPR standpoint. We have tended to step those up in our modeling recently to reflect current pay down rates. But if the CPRs stay where they're at, I would say mid-teens is probably where we expect them to be.
spk07: Okay, perfect. That's helpful. And then just in terms of the teams you guys added in Vegas and Los Angeles, I think it was this quarter, do you need a little more color as to what you're expecting from them and their business focus?
spk04: Sure. So LA is more mid-market and below. Traditional team that's been in the market for, I would say, several years now. So that would be kind of LA Metro, mid-market and below. Vegas is a little different animal. It's part of our corporate banking team. It's a team that originally came out of U.S. Bank and eventually made their way over to us, which have a strong hold in the western region on the corporate. So we would say that's mid-market and above. And they're hitting stride and have been very successful. The management team there is also helping in leveraging our overall corporate initiatives nationwide. So it was really to add. It was really additive not only from just a pure production standpoint, but just the depth and breadth to our corporate banking group.
spk08: Dave, you may also talk about the new builder finance team and their pipeline.
spk04: Yeah, we added a builder finance team that actually the individuals that worked with us at a bank several years ago, and it's been very successful. This is what we would consider more of an infill spec and owner builder program. They do infill as well as some multifamily construction as well. So This isn't large track or large builder finance, and it's primarily in California, the majority of their production. They're actually doing extremely well so far, building their pipeline, and we're adding the additional expertise. We always had a very, very strong – funds control and infrastructure, but we lacked a team to focus on really driving more scale in that production side. So we're very pleased. They've been here for a few months now and already have a nice pipeline building.
spk07: Yeah. And maybe on the, on the Texas LPO as well, I think Scott, you mentioned a hundred billion dollars, close to a hundred billion dollar pipeline. Just kind of curious what's, you know, the type of loans you're seeing and,
spk04: So that's traditional commercial real estate, mostly multifamily focused for us. As you know, Texas is a very large market for that. And these are individuals that have been servicing the market. We are doing some bridge financing around that as well. you know, because of the repositioning of some complexes within the market as that market continues to grow and prosper. So, I would say it's majority of its multifamily, multifamily bridge, and a little bit of CRE. We have plans to add additional C&I bankers in the market, but have been very, very selective in our approach to that market as it relates to C&I.
spk07: Okay, great. And then just, you know, with all the investments ongoing, you know, just excluding TGRF, I'm kind of curious as to how you guys are thinking about expenses and expense growth right here.
spk04: So because, you know, we've always not been shy about adding infrastructure as needed in order to continue to expand our profitability, and we kind of managed to an overall expense ratio. So we want to try to maintain that kind of 50% or below. from an efficiency standpoint, and I think you saw in the second quarter some of the investments we made in the previous quarter are now starting to pay off. We still are going to add additional production and infrastructure, but our expectations are we kind of target that 50% efficiency.
spk08: Yeah, the only thing I would add on that, Steve, is as we were – stuck at like 500 employees for a while until we decided to kind of ramp up the production side. And with that, we had to ramp up the underwriters, processors, funders, compliance people. You really have to have that same infrastructure build. And so we've gone just this year alone from 500 employees around the start of this year to I think it's about 540 or 550 employees. If not, we're leaning that way towards getting very close to it. So, but Dave's right. We're trying to do it lockstep with making sure that our efficiency ratio, you know, maintains around that 50-ish level until we can taper off and then hopefully get, you know, some efficiencies to scale.
spk03: And I will just add that with the acquisition of TGR Financial, we anticipate getting to the $9.4 billion level by year end and sometime next year dipping in the $10 billion area, which, as you know, brings a new regulatory regime and additional requirements for a bank. And we're well on the way of preparing for that. investing as we need to in talent. One of the nice things about TGR Financials, they come with a very talented team and a great addition to both our culture, but as well as the infrastructure we need to add in order to have a really high functioning team. So where normally you would see higher cost saves, we have opted to retain many really talented employees from TGR at close. so that we can be prepared for this $10 billion mark. So there will be expenses related to that, but to Dave's point, we anticipate being at or below the 50% efficiency ratio mark.
spk07: Okay. Great. Well, thanks very much, guys. Thank you, Steve.
spk01: Thank you. Your next question comes from Gary Tenner of D.A. Davidson.
spk05: Thanks. Good morning. I wanted to just touch on the margin for a second. The last couple of quarters or three quarters, you've been able to – kind of offset the decline and headwinds on the earning asset yield side by lowering deposit costs. Given where those deposit costs are right now, is there enough room to kind of sustain the margin at the current level? Or given kind of the new loan production rate in the low threes and drag on loan yields, are we likely to see a little bit of pressure?
spk08: I'll start with the deposit side. We've squeezed a fair amount out. And I would say that for the most part, we're probably drawing to a close on what we think we can really squeeze out of the marketplace. So, I mean, I think we've done an exceptional job of lowering the cost of deposits. But I don't think that you're going to see much more in the way of our cost of funds shrinking much more than the 18 basis points that was experienced in June.
spk04: I would say on the loan side, it's interesting, Gary. It's a little less to do whether or not we're adding loans, lower loan yields in our portfolio and really getting cash that's earning close to zero deployed into some earning asset above zero. So whether we fund at $335 or $325 or even $300 on new loans, it's getting that billion dollars of excess cash that's earning 20 basis points or less into an earning asset earning 3% or more. And that will probably have a much more material impact to maintain or margin than slightly lower loan yields. But as you can see, we've been funding in this range for quite some time. And whatever the yield curve does, you know, day in and day out, week in, week out, we pretty much have been funding at a floor rate for, I would say, well over a year. So our rate may vary 10 base points up or down, but That certainly has some impact, but it's really getting cash earning almost zero into something more than that is going to have the biggest impact.
spk08: Agreed.
spk05: Yeah, that makes sense. So with the backdrop of obviously the liquidity bill being a headwind in terms of asset yields, can you talk about the decision to sell loans this quarter in advance of this globalization?
spk04: So that was an interesting – You know, dealing with the agencies, when we originally were talking to them, there was a focus on them securitizing assets that met a national VLI calculator. Very little of what we originate meets the national VLI scenario. So we said, well, we may move away from a single securitization and so on. to private institutions in smaller blocks. We completed one of those and then went back and the agency said, well, we can actually complete a transaction, which also benefited us. So net-net at the end of the day, we're probably doing a slightly smaller transaction in a bulk scenario versus what we sold in the second quarter. So that was really the primary reason why you have a little bit of sale in this quarter, and then we'll have a larger sale in the third quarter. Again, the majority of the reason we're selling these assets are to make room with existing customers in order to maintain our once-to-one borrower ratio. It's just, you know, our ability to service those customers year in and year out, and it's strategic for us to maintain that. the relationship, also the servicing through a bulk spiritization. But that's the reason why we had that split. I appreciate the call.
spk01: Thank you. Once again, if you would like to ask a question, press star, then the number one on your telephone keypad. And your next question is from David Chivarini of Wedbush Securities.
spk02: Hi, thanks. A couple questions for you. Follow-up on deposits, you mentioned about how the commercial deposit services channel serving complex treasury management commercial customers. I was curious, is there anything new with the product offering as you approach clients? Or was it this Las Vegas corporate banking team that was a big contributor there? I'm just curious if there's any change or anything new that helped drive this strong growth.
spk08: I would say that the main reason for or the main changes that came about, historically most of our clients have done more batch operations, and some of our clients have now gone to more of an online type banking situation, which has required some changes. So I would say we're much more dynamic than we previously were. in how we handle those clients, which overall has made our systems better. But frankly, there really hasn't been any product offerings or anything that has really changed other than meeting the demands of clients to upgrade IT
spk04: handle those types of uh online versus a batch yeah i would say in particular we did a conversion of our commercial system uh this year in order to service those clients as scott mentioned there's you know several complexities as far as open api environment and our ability to service those clients that have i would say more you know real-time needs for uh versus nightly batch which is a segment of the clientele so yeah strategically we made a an investment in our transformation of our cni platform uh to uh what we consider a best-in-class delivery mechanism and it can serve as you know clients From, you know, a million to a billion, it really doesn't matter. And our ability to handle large volumes of transactions significantly increased during that conversion process and post-conversion process. That and, as Scott mentioned, just outsized demand from our customers. client base. Not necessarily that much is driven by the Vegas group. They're particularly focused more on the loan side of the business, but they do provide us additional deposits through those relationships.
spk02: Got it. That's helpful. And then shifting gears, this is more of a housekeeping question, but I saw the professional services and marketing line item and expenses jumped up a little bit. Is that a function of the merger charge? Is that where that was?
spk03: Yes, all the merger charges are in that line. That's correct.
spk02: It's legal, right? Yeah, legal and professional. Got it. Thanks very much.
spk01: Thank you. We have no further questions at this time. I will turn the call back over to Mr. Scott Cavanaugh for closing remarks.
spk08: Thank you again for participating in today's call. Very proud at the results we reported. All of our business lines are doing exceptionally well, and I'm very pleased at the path we're on. There are great opportunities related to our geographic expansion in the Dallas-Fort Worth Metroplex and in Florida, and we continue to invest in serving our existing markets in California, Nevada, and Hawaii. As a reminder, our earnings report and investor presentation can be found on the investor relations section of our website. Thank you and have a great remainder of your day.
spk01: Thank you, everyone. This does conclude today's conference call. You may now disconnect.
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