Pacific Continental's (PCBK) CEO Roger Busse on Q2 2016 Results - Earnings Call Transcript

| About: Pacific Continental (PCBK)

Pacific Continental Corporation (NASDAQ:PCBK)

Q2 2016 Earnings Conference Call

July 21, 2016 14:00 ET

Executives

Rick Sawyer - Chief Financial Officer

Roger Busse - President and Chief Executive Officer

Casey Hogan - Chief Operating Officer

Damon Rose - Chief Credit Officer

Analysts

Jeff Rulis - D.A. Davidson

Tim O’Brien - Sandler O’Neill

Jacque Chimera - KBW

Operator

Hello. My name is Mallory and I will be your conference operator today. At this time, I would like to welcome everyone to Pacific Continental Corporation’s Second Quarter 2016 Earnings Call and Webcast. [Operator Instructions] Thank you. I would now like to turn the conference over to Rick Sawyer, Chief Financial Officer. You may begin.

Rick Sawyer

Thank you, Mallory. Welcome to today’s conference call and webcast where we will be discussing financial and strategic results for the second quarter 2016. There is much to discuss today and we will be thorough in delineating each area for you. With me today are Roger Busse, CEO and President; Casey Hogan, Chief Operating Officer; and Damon Rose, Chief Credit Officer.

Before we commence the formal remarks, we advise you that the webcast contains forward-looking statements, which may include information about future profitability, loan growth, problem asset resolution, changes in the net interest margin and anticipated cost savings. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. We undertake no obligation to publicly revise or update any forward-looking statements to reflect events or circumstances that arise in the future. You should carefully review any risk factors described in the company’s periodic reports on Forms 10-K, 10-Q, 8-K and any other documents filed with or furnished to the Securities and Exchange Commission. This statement is included for the express purpose of invoking the Safe Harbor provisions for forward-looking statements under applicable law.

And now, I will turn the presentation over to Roger Busse, CEO and President.

Roger Busse

Thank you, Rick. For my portion of today’s presentation, I will arrange my comments into three categories: first, strategic accomplishments during the last 90 days; second, clarity on a noisy quarter; and third, our outlook for the remainder of 2016, including an update on the Foundation acquisition and our progress. The other presenters will provide more detail and color on these topics.

Let’s begin with the strategic accomplishments. During the second quarter, the Pacific Continental team significantly increased the future potential earnings power and value of this franchise. We reported record quarterly loan growth of over $54 million or an 11% year-to-date annualized growth as well as maintained our core NIM, which resulted in solid core earnings momentum. The bank also concluded a rather remarkable set of strategic initiatives to help drive future earnings and shareholder value. These included the following. On April 12, we opened our new Vancouver, Washington office to numerous accolades with hundreds of community leaders in attendance, noting that we are well ahead of our deposit growth goals in that office. On April 27, we announced the acquisition of Foundation Bank, a $422 million business bank in Bellevue, Washington. The acquisition creates a $567 million franchise for PCBK in the Seattle, Bellevue markets. The acquisition improves our market share from 29th position to 14th in the robust Puget Sound region. All regulatory applications have been filed and we still anticipate closing and full integration in the third quarter and early fourth quarters, respectively.

On May 9, the bank announced in its first quarter 10-Q, a tentative settlement on this litigation with no material financial impact to the bank anticipated. On May 26, the bank completed its annual safety and soundness examination, a joint examination with the state and FDIC. The bank also successfully completed its BSA, IT and compliance examinations. On June 9, management completed the due diligence process with the Kroll rating agency. Kroll released a rating of BBB+ for corporate senior and secured and A- the bank deposit rating.

On June 27, the corporation announced a successful $35 million subordinated debt capital raise at 5.875% fixed to floating, with an after-tax cost of approximately 4%. This capital compliments various strategic options, including additional accretive acquisition opportunities as we seek to accomplish our primary goal of being a $1 billion institution in each of our three primary markets, while avoiding dilution to shareholders. By quarter end, we crossed the $2 billion mark ranked as one of the best community banks in the nation. And with the acquisition of Foundation Bank, we will be $2.4 billion. And the bank was named one of the 100 Best Places to Work in Seattle for the sixth consecutive year.

I will now turn my attention to the cost and some noisy elements in the second quarter. First, core deposits contracted $125.9 million during the second quarter or $26 million year-to-date. However, this contraction was expected just earlier than expected and was centered in two customers primarily. Casey will provide some additional color on this in a few moments. There is nothing systemic evidenced in these deposit changes and our deposit pipelines are solid.

Next, let’s discuss the second quarter expenses and the provision. To begin, approximately $0.08 of EPS were expenses related to our pending acquisition of Foundation Bank as well as due diligence expenses related to other potential targets. Second was the provision, with about one-third of these costs associated with provisions for our record second quarter loan growth or $0.02. Additionally, we had one credit downgrade and a few minor charge-offs. Again, nothing systemic as evidenced. Our credit metrics actually improved. The impact of the downgrade in charge-offs accounted for an additional $0.03 of EPS.

Lastly, our healthcare cost associated with our partially self funded insurance plan, were higher than normal. We experienced unusually high claim activity during the first half of 2016. The large claim volume appears to have subsided and we anticipate more normal expense patterns going forward in the second half of 2016. This accounted for another $0.02 of EPS. Combined, these accounted for the majority of the second quarter’s increased expenses for between $0.14 and $0.15. Please note that we expect the third and fourth quarters will also be noisy by primarily due to our pending acquisition and related activities.

With regard to the Foundation Bank integration plan, we continue with excellent coordination on all fronts, including meeting with key clients, identification of leadership and marketing plans for the first 100 days after closing. Progress has been strong. By June, all management and frontline client-facing positions had been secured and a new market President was named along with two new Seattle directors, who will be added to the PCBK board. Our Chief Banking Officer, Mitch Hagstrom has moved to Seattle, to help oversee the successful client and staff integration into our single Bellevue office, Foundation Bank’s old headquarters to minimize client disruption. We are proven integrator, this being our core since 2005.

In sum, the bank’s core earnings power and our loan growth engine are strong. The second quarter was filled with multiple activities, costs and events. The majority of which were focused on strategic initiatives to position the bank for its future growth in earnings. We continue to focus on creating what I term scarcity value for our owners as we emerge as one of the most unique and attractive banking franchises in the Pacific Northwest. With these introductory comments, I will now turn the presentation over to Rick Sawyer, Chief Financial Officer, who will give you more color on the quarter.

Rick Sawyer

Thank you, Roger. For my portion of the presentation, I will provide additional information regarding non-interest income and non-interest expense as well as review our net interest margin and securities portfolio activity.

Our second quarter non-interest income was $1.75 million, which included a gain of $71,000 on sales of securities. Excluding the gain on security sales, our non-interest income was $1.68 million, which was slightly better than our estimate of $1.6 million stated at our last call. Excluding our securities gains in both the first and second quarters, our quarter-over-quarter non-interest income grew by about $90,000 led primarily by business credit card fees and interchange income.

Our non-interest expense for the second quarter was $14.9 million, which was significantly higher than our first quarter expenses. As Roger described earlier, this was a noisy quarter from an expense perspective. Of the $2.9 million increase, $2 million pertain to merger and acquisition costs associated with our pending acquisition of Foundation Bank. The majority of this expense related to de-conversion and contract termination with the core systems provider for foundation. We also incurred about $550,000 of higher than anticipated claims on our self funded insurance plan, which accounted for the quarter-over-quarter increase in our personnel expense category.

Legal and professional expenses were also up from the first quarter, as we incurred about $197,000 related to the litigation of our law suite, which is tentatively been settled and another $127,000 in costs associated with due diligence of other acquisition targets, which we have decided not to move forward on at this time. Excluding the expenses I just discussed, our operating expense categories were basically in line with the $12 million estimate provided in our last call. As we look to the third quarter, we expect expenses to settle a bit, borrowing costs associated with our pending acquisition as well as some additional costs associated with the lawsuit litigation. I really expect the lawsuit cost to be between $50,000 and $100,000. Keep in mind that the expectation that our acquisition will close in late August or early September, so we will see additional noise as we combine the organizations for a portion of the third quarter.

Our second quarter 2016 reported net interest margin was 4.27%, which was the same as what we reported for the first quarter. Accretion of loan fair value marks and non-recurring interest in the second quarter totaled $322,000 and added 7 basis points to our reported second quarter margin. The core net interest margin which removes non-recurring items and accretion of loan fair value marks was 4.2% for the second quarter, a 3 basis point improvement from the third quarter of 2016. While our margin held steady quarter-over-quarter, we do expect compression as we head into the remainder of 2016. In June – June 2016, we closed on subordinated debt offering a $35 million, which carries an interest rate of 5.875%. The interest carry on the new debt will reduce our margin by approximately 10 basis points moving forward. We are currently exploring options to prudently and safely invest the funds in order to help offset increased interest cost. Some of the funds will be used to fund future loan growth. Additionally, the low interest environment and competition for growth has lowered the yield on our loan portfolio by about 3 basis points. While the margin will compress, we are confident in our ability to grow net interest income based on our growth volume and low cost funding sources.

The fair value accretion income decreased by $253,000 from the linked quarter. As we discussed in previous conference calls, the monthly and quarterly accretion can be very volatile, as accelerated loan payments, early loan payoffs or loan charge-offs in the acquired portfolios can significantly accelerate or reduce accretion of fair value marks. Now that the acquired portfolio from Capital Pacific has seasoned for over 12 months, we expect to see some more consistency in our accretion income. Accretion of loan fair value marks from our last two acquisitions, excluding any prepayments are expected to add a minimum of $180,000 in net interest income for the third quarter, which would improve our reported net interest margin by about 4 basis points.

As of June 30, 2016, we had $3.1 million of fair value and credit marks remaining on our balance sheet. Outside of prepayments and refinancing, our monthly accretion is accounted for in accordance with GAAP with the majority using the interest method. Lastly, once we close on the Foundation Bank acquisition, we will have more accretion volatility. This should have a positive impact on our fourth quarter reported margin and net interest income.

Turning to the investment portfolio, at June 30, our securities available for sale was $396 million or about 20% of total assets. The portfolio out of pretax unrealized gain of $11.4 million, an increase of $2.8 million from the prior quarter end, this increase was a result of continuing flattening of the long end of the yield curve, which has added value to our longer term holdings, such as agency bullets and municipal bonds. The average life and duration of our portfolio at June 30 was 4.7 years and 4.2 years. The average life and duration of the portfolio at March 31 was 4.1 years and 3.7 years, respectively. The increase from the linked quarter was purposeful, as we took on some additional expansion risk in order to generate additional interest income and yield on the portfolio. Our internal limit for portfolio life is 5 years.

During the quarter, we sold 22 securities totaling $34.9 million and recorded $71,000 of net gains on sales of securities. The sales were a planned strategy to extend the average life of the portfolio and generate some additional yield and interest income. The gains on the sales were merely a bi-product of the repositioning. Our yield on the portfolio increased to 2.66% for the second quarter compared to 2.57% for the first quarter. Additionally, we purchased 19 securities, totaling $57.8 million, as we replaced the $34.9 million of securities that were repositioned as well as growing the portfolio and the replacement of second quarter sales in principles cash flows.

Our strategic target is to maintain a portfolio between 19% and 20% of total assets, which allows us to maintain appropriate liquidity, generate interest income and remain within limits from the duration and interest rate risk perspective. Growth in the portfolio will correspond with overall growth in the balance sheet however, we may move slightly above or below the ranges depending on the current interest rate environment and associated risks.

That concludes my prepared remarks. And I will now turn the call over to Casey Hogan, our Chief Operating Officer.

Casey Hogan

Thank you, Rick. For my portion of the presentation, I will provide a brief update on the second quarter’s deposit contraction and record quarterly loan growth. I will begin with the deposits. As Roger mentioned earlier, core deposits contracted $125.9 million during the quarter, $26 million year-to-date. Let me begin by stating that there is nothing systemic evidence to this contraction and provide some additional color to demonstrate this.

First, the majority of the quarter’s contraction was centered at a long time client that was acquired by a national entity. Based on direct discussions with the acquirer, deposits were not expected to migrate out of the bank until 2017. For investment reasons, they decided to aggregate the deposits now, accelerated the date by a year. We had appropriately risk rated this deposit as of 10 or highly volatile, reported it in our previous 10-K and 10-Qs, since the third quarter of 2015 and had already excluded it from our liquidity calculations. Our practice is to risk rate all deposits over $2 million, a process we have had in place for some time and when that has been recognized positively by analysts, investors and regulators. With plenty of availability on borrowing lines and funding options already in place, our CFO, Rick Sawyer, simply accelerated on our plans to temporarily cover this transfer.

The second account where funds that were temporarily deposited with us, in the first quarter and as expected were distributed to investors during the second quarter. Again, we had advanced noticed and had risk rated this deposit appropriately. Combine these two changes accounted for the majority of the contraction, again there is nothing systemic evidence. During the second half of the year, core deposits typically expand within our deposit base, with our solid deposit pipelines in this typical seasonal pattern, we expect to stabilized core deposits and perhaps growth by year end.

Our loan growth of $54.8 million was a new quarterly record for us. That brings our year-to-date loan growth to $80.1 million or 11% annualized. Our quarterly growth came primarily from our Eugene and Portland markets, which grew by $24.1 million and $13.6 million, respectively. We saw growth in primarily all loan categories, led by real estate loans, which grew by $42.5 million. Additionally, the dental portfolio grew by $18.9 million and now represents 24.9% of the total loan portfolio. Growth occurred both in market and nationally with the national dental portfolio now encompassing 42 states. Our loan pipeline remained strong suggesting continued growth into the third quarter. Now, we are very pleased with the excellent results of our lending teams and credit administration where we continue to focus on quality.

Lastly as Rick mentioned, loan yield compression will likely continue to be experienced during – due to flattening yield curves. However, quality volume can continue to drive earnings and our outlook for yield is not significantly different as it was in the first quarter due to the Fed not increasing rates and the outlook for no rate changes in the coming quarter or two.

That concludes my prepared remarks. I will now turn the presentation to Damon Rose, Executive Vice President and Chief Credit Officer.

Damon Rose

Thank you, Casey. In my portion of the presentation, I will address credit quality, trends and outlook and will outline our current expectations with regard to the allowance for loan loss reserves going forward.

Overall, the second quarter continued the positive trends observed in previous quarters with improvement in nearly all credit metrics, underscoring the credit quality of the portfolio. Non-performing loans to period-end loans were at 0.11%, an improvement over 0.18% at the prior quarter end. Overall loans 30 to 90 days past due were negligible at 0.02% of total loans. Dental loans past due 30 to 90 days were also nearly nonexistent at 0.01% of total dental loans. Net charge-offs were $419,000 for the quarter. Net charge-offs year-to-date totaled $369,000 equating to an annualized net charge-off to average loans of 0.05%.

Losses are considered minor, non-systemic and were comprised of only two relationships in the C&I portfolio. Losses in the dental portfolio remain nonexistent with a small net recovery year-to-date. Overall, credit quality continues to be strong. Positive trending is evidenced. And loan portfolio growth is being achieved without relaxing of credit standards through prudent underwriting and within the bank’s core niches. As Roger mentioned, the annual joint FDIC and State Safety and Soundness Exam was completed with no recommended downgrades in the credit portfolio.

With regard to the allowance for loan losses, the allowance as a percentage of outstanding loans was 1.29%, up from the prior quarter end at 1.23%. The bank did make a $1,950,000 provision for the quarter, up from the $245,000 provision in the prior quarter. Approximately one-third of the provision was required to support the quarter’s record loan growth. The balance was to account for net charge-offs of $419,000 and as mentioned previously, one large C&I relationship that was downgraded during the quarter.

The losses and downgrade are isolated incidents related to only three relationships. The coverage ratio of allowance to net non-performing loans remains exceptionally strong at 1,173%, an improvement from 666% as of the prior quarter end. As a result, we continue to believe that the loan loss reserve is adequate at this time. While credit quality remains strong, future provisions to the loan loss reserve will be made in support of growth and losses as required. We are not in a position today to predict the timing or amounts that maybe necessary.

Looking to the next quarter, our expectations are the credit quality metrics will continue their positive trending and growth will be comprised of quality, prudently underwritten loans. As stated in previous webcast, we will not sacrifice quality or loosen credit standards to achieve loan growth. That concludes my prepared remarks. And I will now turn the call over to Roger Busse.

Roger Busse

Thank you, Damon. Based on our comments today, we remain optimistic and look forward to the third and fourth quarters of 2016 and the closing of the Foundation transaction. Concurrent with our earnings release, we announced a dividend of $0.11 per share. We continue an active strategy of evaluating in-market acquisitions in the $100 million to $600 million range. We have identified targets and are disciplined in our approach to pricing and deal metrics and believe progress is evidenced in our activities.

With those final comments, we want to invite your questions. As a reminder, Rick Sawyer, Executive Vice President and Chief Financial Officer; Casey Hogan, Executive Vice President and Chief Operating Officer; and Damon Rose, Executive Vice President and Chief Credit Officer are available to answer your questions.

Mallory, please open the lines for our questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Jeff Rulis. Jeff, please state your company name.

Jeff Rulis

D.A. Davidson. Thank you.

Roger Busse

Hi, Jeff.

Jeff Rulis

Hi, sorry, I didn’t know I was live there. On the – just want to clarify a couple of the discussion on expense and margins, the expense outlook then I guess, X are pre-deal, where you are looking at back in the low 12 range on quarterly non-interest expense?

Rick Sawyer

Yes, hi, Jeff, it’s Rick Sawyer. Yes, you are absolutely correct. If taking out the noise of the pending acquisition, I would expect our expenses to be $12.1 million to $12.2 million as we head into the third quarter.

Jeff Rulis

And then Rick, on the margin, you talked about the 10 basis point hit on the debt, but also talking about additional core margin compression. So, that’s – is that on top of the 10 basis point?

Rick Sawyer

Yes, that’s correct. Yes, so the 10 basis point relates specifically to the new interest carry on the debt. We will put that money back to work. But if I look just at the debt, it’s about a 10 basis points impact. And then we will experience little bit of compression just overall.

Jeff Rulis

Great. Thanks. And then I guess focusing on the timing of the loan growth in the quarter, was that – was that spread pretty evenly or do they come earlier or later in the quarter, any color on that?

Casey Hogan

Hi, Jeff. This is Casey. It was pretty well spread out, pretty even I think probably more so in the middle of the quarter than at the beginning, but we had some good growth throughout the quarter.

Jeff Rulis

Got it. And then just in Seattle, specifically was this just timing of payoffs or something that led to kind of a softer quarter there or was there…

Rick Sawyer

Yes, exactly. We had – we continue to have some decent loan activity there, but we did have some runoff from some properties that had been refinanced or timing with the market up there had been sold. So, we are continuing to make some strides up there.

Jeff Rulis

Appreciate it. Thanks, guys.

Roger Busse

Thank you, Jeff.

Operator

[Operator Instructions] Your next question comes from Tim O’Brien. Tim, please state your company name.

Tim O’Brien

Good morning. Sandler O’Neill.

Roger Busse

Good morning, Tim.

Tim O’Brien

Alright. First question, how much in additional costs you guys expect to accrue over the next quarter or two?

Rick Sawyer

Hey, Tim. Rick Sawyer. So, when we put out the book on the acquisition, our estimates were about $8.4 million of total cost associated with the merger. About $6 million of that is on our side. So, we spent about $2 million and we have got another $4 million that’s going to come with the majority of that I would expect to come here during the third quarter.

Tim O’Brien

Great. That’s great help. And then another question for you, did you give the date that the Safety and Soundness was completed? I was scratching fiercely and I might have missed that, the actual date because you gave a bunch of dates like hard dates, so…

Roger Busse

Yes. Tim, it’s Roger. It’s May 26.

Tim O’Brien

May 26. Congratulations on that. Any color, in light of that, had you guys added staff for BSA last year or what preparations did you take in order to pass the BSA component given what other banks have experienced out there in a regulatory world?

Roger Busse

Tim, this is Casey, I will start and Roger probably add but we have got a very good compliance staff. We continue to add to that. And we have got folks – sorry about that, but we benefit a little bit from really we are a business bank. For the most part, we have very little retail type products or mortgage type products. So, it’s not as huge as you might think. But our folks are pretty good at keeping us move in the right direction.

Tim O’Brien

Great. And then another question for you, Casey, so you guys made it pretty clear that you had a pretty clear indication that the deposit – that these were volatile deposits. That second deposit that you talked about, what was its risk rating? And you rated liquidity risk I guess and so the first deposit relationship you mentioned, you said had a 10 rating up on a scale of 1 to 10, right, so what was the second rated?

Rick Sawyer

Yes. We brought it in as a 10, Tim, because we know it wasn’t going to stay or at least all of that wasn’t going to stay. So it came in as a 10 and then it kind of narrowed out. I think we have ended up with about $15 million that we kind of expect will stay long-term. So for that portion, we would adjust the risk rating appropriately.

Tim O’Brien

And then – so on that do you have other additional deposits and if so how many that are there risk rated 10 for liquidity, at this point?

Rick Sawyer

Hi Tim, this is Rick Sawyer again. So we have three clients that are risk rated 10. One of them is the client we had in the large runoff during the second quarter. They still had a little bit of funds remaining with us. So their remaining funds continue to be risk rated at 10 and I would expect those will move out sometime over the next six months. And then we have got two other clients that are 10 at this point.

Tim O’Brien

And how much in total dollars are we talking about there?

Rick Sawyer

It’s about $60 million, but I expect – again, it’s not going to be a fast runoff. We are in constant communication with these clients, especially as the risk rating moves up. And so I can’t try to get out ahead of it as best I can on timing. So I expect most of this to kind of funnel out of here over the next six months or so.

Tim O’Brien

And even in the pace of that, you are still optimistic about net growth in core deposits?

Rick Sawyer

As I have said I think in my comments, we are hopeful of continuing to bridge that GAAP pipelines on the deposit generation is again very strong, particularly with our non-profit team as they continue to be very successful both in all three markets, really there is good growth there. So we are working very hard to make sure we balance of those losses on the larger deposits.

Roger Busse

Sorry Tim. It’s Roger. I will just add a little bit. In the second half of the year, we typically see seasonal growth pattern within our existing deposit bases now province collect only donations, etcetera. And so yes, we would expect it to be a wash or maybe slide growth by year end.

Tim O’Brien

Great. And then last quick question on credit, te downgraded credit this quarter $1.9 million-ish, was that – I know it was $2.3 million, correct?

Rick Sawyer

Yes. Tim, $2.3 million.

Tim O’Brien

And what was it downgraded to?

Rick Sawyer

It was downgraded to sub-standard or 8 rated credit.

Tim O’Brien

And then backing out, based on the provisioning and what you described on the call the narration, the provision set aside for that, given the other items a third to x and $419,000, that was about $900,000, you provisioned towards it?

Rick Sawyer

That’s a pretty good guess, it’s – let me do the math for you real quick here.

Tim O’Brien

It’s okay, I don’t need that yet just under $800,000 and what kind of credit is it, is it a real estate backed credit?

Rick Sawyer

No, it’s a C&I credit. This was- bridges very unique circumstance we had, death of an owner and a death of a key executive and so it’s one that we are keeping very close tabs on. We have got appraisals on assets and are working on plans today. So when we expect to get some resolution on. It was a longtime client Tim. And when you have this kind of tragic set up events in the company where our leadership dissipates quickly it can create some consternation and issues for a company. And so that’s why, we say it’s not systemic and isolated.

Tim O’Brien

And you – and three is someone on the other end still despite loss of leadership that you guys are working with them, I would imagine in trying to help them with the process to make – make them sound [indiscernible] stuff, right, that’s the commitment to a client like that?

Roger Busse

Yes. That’s right, on a daily basis probably.

Tim O’Brien

Great, alright. Good luck. Thanks.

Roger Busse

Thank you.

Rick Sawyer

Thanks Tim.

Operator

Your next question comes from Jacque Chimera. Jacque, please state your company name?

Jacque Chimera

KBW.

Roger Busse

Hi Jacquee.

Jacque Chimera

Hi, good morning everyone. I wondered if you could touch on Eugene area, I know we talked about it on the last conference call on the strength that you have been seeing there and you had good growth in the quarter, is that pipeline still strong and could it be a continued source of growth through the rest of the year and maybe even onward?

Casey Hogan

Jacque, this is Casey. Again I think as we have said, I have never seen a pipeline as strong as we have in this market right now. We have got a great group of bankers that are in front of deals and that pipeline just continues to grow. So we do look to that to be a continuing source of growth for this market. I won’t say the same thing about Portland and then frankly Seattle too to a lesser extent, but with the addition of Foundation up there, they are also seeing new deals coming into their pipeline. So I think you would without question see a lot of optimism with our banker right now.

Jacque Chimera

And when I think about Foundation, obviously Capital Pacific has done tremendous things for helping the growth in Portland, is Foundation seeing growth in Seattle that at this point, just given the amortization schedules that you are not seeing, so we could see Seattle pickup following that acquisition?

Roger Busse

So Jacque, this is Roger. What I will say is that we get reports and we are already in the process as you might expect with the definitive agreement of reviewing credits that are coming across the table, for certain size dollars. We are very pleased with what we see. We are very pleased with the engagement with management. We believe that things are stable, it’s not on the upside and we just finished last week, a comprehensive strategic planning process for the first 100 days and thereafter, which included five Board members, including our new Board members and existing Board member in Seattle. The leadership of that market along with the new Market Presidents and several key leaders of our bank, we are very excited about the future of their. And yet we haven’t seen of course anything yet materialize, because we haven’t closed. But all of the preparations that are in place are the same preparations we used when we brought the Capital Pacific folks together with our forks. And so, we look forward to the future.

Jacque Chimera

Okay, that’s great color. Everything else I had was already asked. Thank you.

Roger Busse

Thanks Jacque.

Operator

There are no further questions at this time.

Roger Busse

Very good. Thanks Mallory. We want to thank you all for your attention and your questions today. And wish you a good day. Take care.

Operator

This does conclude today’s conference call. You may now disconnect. Presenters please hold.

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