Q : Priscilla, regarding the expansion in California, will it be organic, or do you foresee M&A playing a role? A : We are not announcing any M&A at this time. We see significant organic opportunities, particularly in the LA area and the East Bay. We are focusing on expanding our presence there with additional bankers, and any further developments will evolve over time as appropriate. – Priscilla Sims Brown, President & CEO

Provisioning may need to run at a higher level due to pressures in multi-family and green energy spaces, impacting financial stability.

The company has been recognized as the #1 most improved bank in the American Banker’s top-performing banks list, moving up nearly 50 spots in one year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Story Continues

Q: Jason, could you provide more details on the syndicated CNI credit, its industry, and the expected resolution timeline? A: The credit is part of our commercial solar portfolio, specifically to an originator of consumer solar renewable fixtures. The industry has faced stress, impacting this originator. We are actively working on sourcing credit bids to maintain servicing. The situation is fluid, and while there is good collateral, the resolution timeline is uncertain. – Jason Darby, Senior Executive VP & CFO

Q: Should we expect provisioning to run at a higher level due to pressures in multi-family or green energy spaces? A: We assess provisioning quarterly and loan by loan. Currently, we feel comfortable with our reserves. While there are potential pressures, such as changes in New York City and budget impacts, we believe our current coverage ratios reflect our portfolio’s credit quality. – Jason Darby, Senior Executive VP & CFO

Q: Can you provide insights on loan yields and their impact on the outlook? A: Loan yields for multi-family and CNI are in the 5-7% range. We expect slight increases in yields for the upcoming quarter. While Q3 margins may remain flat due to securities portfolio impacts, we anticipate margin expansion in Q4 as political deposits increase and we shift from securities to loan originations. – Jason Darby, Senior Executive VP & CFO

Q: What is the expected run rate for expenses next quarter, and how will it affect the full-year guidance? A: Expenses are expected to increase due to new hires and digital transformation costs. We aim to maintain a $170 million annual OpEx target. If there’s room for improvement in pre-tax pre-provision guidance, it will likely come from better expense management. – Jason Darby, Senior Executive VP & CFO

Q: Could you elaborate on your capital strategy, particularly regarding dividends and buybacks? A: We target a 20-25% payout ratio, balancing buybacks and dividends. We aim for a 2-2.5% yield, reflecting our growth stock status. We’ve increased dividends more frequently and may continue this trend, potentially raising dividends by more than $0.02 in the future. – Jason Darby, Senior Executive VP & CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.