Good day. And welcome to the Pacific Premier Bancorp’s Second Quarter 2018 Conference Call. All participants will be listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Steve Gardner. Sir, please go ahead..

Thank you, Steven. Good morning everyone. I appreciate you joining us today. As you’re all aware, earlier this morning, we released our earnings report for the second quarter of 2018. I’m going to walk through some of the notable items, Ron Nicolas is going to review a few of the financial details, and then we’ll open up the call to questions.

I’ll also note that in our earnings release this morning, we have the Safe Harbor statement relative to the forward-looking comments and I’d encourage all of you to take a look and read through those. During the second quarter we made significant progress on a number of strategic priorities while delivering solid financial results.

Earlier this year, when we announced the acquisition of Grandpoint, we knew that we were putting a lot on our plate and challenging our team from an execution standpoint. As a result, it’s already been a busy year and I’m pleased with how we have delivered on our key initiatives.

During the first half of the year, we completed the system conversion and integration of Plaza Bancorp. We conducted due diligence, negotiated and signed the definitive agreement to acquire Grandpoint Capital.

We received regulatory and shareholder approvals and closed the Grandpoint deal in just over four months, which demonstrates our ability to close acquisitions timely, with minimal disruptions and to quickly begin realizing the benefits of the combined organizations.

We have substantially completed the integration of the Pacific Premier and Grandpoint teams. The system conversions will occur in mid October of this year. And we have largely completed our preparation for meeting the heightened regulatory requirements associated with surpassing the $10 billion asset threshold.

While executing on all of these major projects, we’ve continued to deliver consistent financial results. In the second quarter, we generated $0.58 per share, which included nearly $1 million of merger related expense. We generated good returns with a return on average assets of 1.35% and a return on average tangible common equity of 15.4%.

Excluding the merger related expense we generated $0.60 per share on an operating basis. While this performance was solid, it does not live up to the high standards we have set for ourselves. We believe we are capable of higher performance metrics across the organization.

Now that we have completed a number of key projects I expect our team to operate at a higher level. We believe in continuous improvement as an organization and we know there are a number of areas that we can improve and that is firmly what I expect. One area of opportunity for improvement is in our loan growth.

During the second quarter we had fairly strong loan production with $530 million of new loan commitments, an increase of nearly 9% from the prior quarter. As with the first quarter our loan production was heavily weighted towards our commercial relationship lending areas, as we good results from our discipline calling efforts.

During the second quarter we generated $126 million in new C&I loan commitments, 89 million in franchise loans, $86 million of owner occupied CRE loans, 65 million of SBA and 17 million in agribusiness and farmland loans. In aggregate, these commercial lending areas accounted for 66% of our total loan production in the second quarter.

Due to the strong production in these areas, our business loan categories increased at an annualized rate of approximately 10% in the quarter. And our continued focus on higher yielding asset classes had a positive impact on the average rate of our new loan production which increased to 5.35% from 5.27% last quarter.

However, similar to the first quarter, our overall net loan growth was negatively impacted by a heightened level of payoffs within our existing CRE portfolio and a lower level of new CRE loan production. Given the CRE concentration at Grandpoint, we believed it was prudent to moderate the growth of these portfolios as we move toward closing.

Following a large number of client meetings in conjunction with Grandpoint relationship managers and key executives, we are now comfortable expanding our CRE production given the high quality nature of the combined loan portfolios. We see this is an opportunity to prudently improve our growth rates.

Additionally, we saw elevated pay offs in the SBA portfolio as many of these borrowers are now able to acquire lower cost financing through conventional commercial loans.

In light of the current environment we’ve determined that we can be a bit more flexible on pricing in order to reduce some of the payoffs within the portfolio enable us to be more competitive on the higher quality deals we are seeing from our business development efforts.

We are going to maintain our disciplined approach to our credit standards and the pricing of risk, but we do see some opportunities to more strongly compete where appropriate. We have also made some enhancements to our loan production and workflow processes to reflect the structure that Grandpoint had in place.

We liked how they operated from a regional based perspective and we have implemented a number of their decentralized processes to move the decision making closer to our clients.

From an overall perspective, we think demand is fairly strong in our markets and the adjustments we have made in our pricing strategy and organizational structure should help us to produce a higher level of quality loan growth going forward.

Looking at deposits we saw good inflow in the second quarter with total deposits up almost 7.5% annualized and our deposit mix remaining relatively consistent. From a pricing standpoint, we continue to see increasing pressure on deposit costs. To some extent this is a function of our expansion over the past few years.

With a larger branch network and customer base of retail deposits, we are seeing pressure on retail CD costs. Additionally we have not raised our posted rates across the board but we are getting a steady flow of requests from business clients with excess liquidity to increase rates on their money market deposits.

Managing our deposit cost is one of our top priorities and we believe the addition of the specialty deposits product team from Grandpoint will be helpful in our efforts. Prior to the acquisition closing we had already added personnel to this group to expand their business development capabilities.

They provide the expertise and product knowledge that net depositors in niche industries are looking for and we believe this group will be a valuable generator of low cost deposits in the coming years.

Looking ahead, we’ve put in a lot of work during the first half of the year to build a strong foundation that will further enhance the value of our franchise.

We’ve added in exceptionally good team of bankers and a great client base through Grandpoint and we believe we have attractive opportunities to expand our relationships with many of these clients.

With the addition of their team and the adjustments we’ve made, I believe that we’ll be able to resume generating stronger balance sheet growth in the second half of the year. That being said we continue to see growth that enhances our profitability and shareholder value while remaining disciplined in managing the risks of the business.

Given that we have largely completed the investments required of institutions that cross the $10 billion asset threshold, we are in better position to more fully absorb those costs and realize greater operating leverage going forward.

In addition once we fully integrate Grandpoint and realize the synergies from this transaction, we believe that the earnings power of the franchise we have built will become more clear as we enter 2019. I believe we are a stronger bank today than we were at the beginning of the year and we have more opportunities to continue growing our franchise.

We’ve expanded our footprint and entered new markets on the West Coast that provide exciting opportunities for both organic and acquisitive growth. One of the byproducts of having completed 10 acquisitions over the course of eight years is that we have consistently improved our M&A processes.

Our team executes exceedingly well on all aspects of the M&A from the upfront work required for due diligence and negotiation, to getting through the regulatory and shareholder approval process in the most efficient manner possible, to quickly integrating the teams, converting data and operating systems and then realizing the projected cost savings and benefits once the deal is closed.

Our team performs at an elite level and it’s a core competency and competitive advantage that we intend to continue leveraging in the future. With that I’m going to turn the call over to Ron to provide a little bit more detail on our second quarter results.

Ron?.

Thanks Steve and good morning everyone. As in the past, I will be reviewing some of the more significant items in the quarter focusing primarily on a linked quarter comparison.

Overall, as highlighted in our earnings release reported net income was 27.3 million for the quarter and we earned $0.58 per diluted share compared with net income of 28 million and $0.60 for the first quarter of 2018. As Steve mentioned, excluding merger related costs we earned $0.60 per share on a fully diluted basis.

Major items impacting the quarter’s results include total revenue, which increased 375,000 to 89.3 million for the second quarter, was negatively impacted by $1.8 million decrease in accretion income.

Lower provision expense of $1.8 million commensurate with lower loan growth and lower net charge offs for the quarter, total operating expense excluding merger related costs at 49.1 million compared with $48.9 million in the prior quarter.

And lastly our effective tax rate for the quarter which came in at 27% compared with 24% in the prior quarter as a result of our stock based compensation deduction heavily weighted to the first quarter.

Taking a closer look at the income statement, our net interest income of $81.2 million was essentially flat compared with the prior quarter of 81.3 million. Our net interest margin decreased to 4.41% from 4.50% in the prior quarter with accretion income accounting for $1.9 million for the quarter compared with 3.7 million in the prior quarter.

Excluding the impact of accretion, our core net interest margin expanded to 4.29% compared with 4.26% in the prior quarter.

Offsetting the lower accretion and higher deposit expense were higher earning asset yields driven principally by higher rates on our new loan production and higher yields on our loan and investment portfolios compared with the prior quarter.

Our overall cost of deposits increased 11 basis points to 50 basis points driven predominantly by higher money market and retail CD rates. With the addition of Grandpoint Bank, we expect our core net interest margin to reset in the 4.05% to 4.15% range.

The company recorded a provision for credit losses of 1.8 million in the quarter compared with 2.3 million in the prior quarter. Included, we added $400,000 for the loss reserve for unfunded commitments.

The decrease in our provision for credit losses was primarily due to lower loan growth as well as lower net charge offs compared with the prior quarter.

Noninterest income of 8.2 million included loan sale gains of 3.8 million compared with $3.0 million in the prior quarter and included our recurring SBA loan sales of 31.9 million as well as 20 million in CRE sales for $900,000 gain as we pruned our CRE portfolio in anticipation of the Grandpoint closing.

For the remainder of 2018 in combination with the Grandpoint acquisition, we expect our noninterest income to be in the range of $9 million to $10 million based upon our recurring income and normal business activities. Our noninterest expense came in at 50.1 million compared with $49.8 million in the prior quarter.

Both quarters included approximately $900,000 of merger related costs. First quarter staff growth related to our Grandpoint acquisition and the $10 billion threshold led to higher compensation costs in the second quarter, offset by lower payroll taxes. Staffing for the second quarter finished at 896 employees compared with 83 as of March 31.

The net increase of 13 employees was entirely attributable to our summer intern program. Separate from the intern program staff count was down one on a quarter-to-quarter basis.

Also contributing to the modest personnel increase is higher equity based compensation directly related to the expansion of the company’s stock award compensation program across the organization. We anticipate our quarterly expense run rate to be in the range of $63 million to $65 million excluding the merger related costs.

And will have realized 100% of the plaza operating expense savings by the end of the third quarter. By year end, we anticipate the full realization of the Grandpoint cost savings. Our effective tax rate was 27.2% in the second quarter compared with 24.1% for the first quarter.

Impacting the effective tax rate with the tax effect of exercised invested share based compensation awards resulting in $372,000 tax benefit to the company for the second quarter compared to 1.4 million in the first quarter. As we guided previously, we expect our estimated full year tax effective rate to be approximately 26% to 27%.

Turning now to the balance sheet, total loans came in at 6.3 billion, an increase of 35.7 million for the quarter. During the quarter we originated 530 million in new loan commitments compared with 488 in the first quarter an 8.6% increase.

However, loan growth for the quarter was impacted by higher prepayments of 266 million compared with 213 million in the prior quarter as well as higher loan sales of 52 million compared with 37 million in the prior quarter. Our business loans grew by approximately 9.5% annualized and in particular our C&I outstanding grew by 15% annualized.

Our new loan origination and commitment yields were at 5.35% for the quarter compared with 5.27% in the prior quarter. Our investment portfolio finished the quarter at 907 million compared with 888 million at the end of the first quarter.

We saw a 3 basis point increase in our securities portfolio yield primarily related to new investments and higher yielding MBS incorporates.

With the Grandpoint acquisition, we will be acquiring approximately 400 million of investment securities and anticipate repositioning that portfolio, growing our investment portfolio to $1.3 billion to $1.4 billion over the next couple of quarters.

Total deposits finished the quarter at 6.3 billion, growing 7.5% annualized with non-maturity deposits of 5.1 billion or 81% of total deposits. We saw solid growth and our non-interest bearing deposits of almost 6.5% annualized.

Our non-maturity deposits grew just over 5% on an annualized basis and our loan to deposit ratio finished the quarter at 99.5%, down from the prior quarter of 100.8%. Our total shareholders’ equity ended the quarter at almost 1.3 billion and we finished the quarter with 46.7 million fully diluted shares outstanding.

Our tangible book value per share at June 30 rose to $16.21, a 15% increase on a link quarter basis and a 17% increase compared to June 30, 2017. Lastly, our TCE ratio increased to 9.91% compared to 9.63% in the prior quarter.

Finally taking a look at asset quality, our allowance for loan loss ended the quarter at 31.7 million, an increase of 1.2 million from the prior quarter. Our allowance to loans coverage ratio ended the quarter at 0.51% of total loans held for investment compared with 0.49% in the prior quarter.

We have approximately 40% of our total loan portfolio under fair value accounting with a total discount of 22.2 million or 0.35% of total loans held for investment. This puts our combined loss coverage ratio at 0.86%. Non-accrual loans, delinquent loans and corresponding asset quality measures all improved on a sequential quarter basis.

With that we would be happy to answer any questions you may have. Steven, please open the call up for questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Matthew Clark with Piper Jaffrey. Please go ahead..

Good morning guys..

Hi, Matt..

Hi, Matt..

Can you give us a sense for where you think the purchase accounting accretion might shake out for the third quarter? Just want to make sure that we’re all on the same page in terms of the likely run rate..

Yeah, Matt. It’s difficult to say right now as we’re still going through all of the fair value accounting work that needs to be accomplished obviously by the end of this quarter. Initially on the loans of course we had roughly about 1.4% mark which was roughly around 33 million.

If anything given the rise in interest rates I suspect that that number is probably going to go up a little bit.

The other thing I would say is what we’ve seen is we’ve seen it somewhat front loaded post our acquisition, so I would anticipate similar – where we’d see the first couple of quarters a little bit higher than probably normal if you will, a little bit higher than straight line and then tailing off as the quarters progress..

But I think key here Matt is as Ron said, we still have work to do to finalize all of those fair value marks and get those booked..

Yeah, great, okay and then the $63 million to $65 million noninterest expense run rate excluding merger charges, can you quantify the contribution from Grandpoint? I just want to kind of isolate legacy PBBI possible and then also want to confirm that the bump up in intangible amortization is included in that figure..

Yes, Matt, you hit the nail on the head; it does include the additional amortization see CD amortization that we anticipate or CDI amortization.

And it also includes – we’ve got the CECL project which we’ve commenced, we have a little bit of increasing rate there, but just to reaffirm it does also include the 40% cost savings we anticipate with the Grandpoint acquisition..

The 40% cost savings will not be fully phased in until the end of the year and so 2019, first quarter of 2019, we expect a clean run rate with those full cost savings than phased in..

And I think that would imply a run rate that’s lower than 63 in the first quarter then, that’s fair..

It is all things being equal that’s what we would expect obviously. As we move through the year here we’ll will have some further guidance in that regard, but yes..

Okay and then just on the – on step up and balance sheet growth, it sounds like you’re going to grow the securities portfolio also sounds like loan growth is going to pick up here.

It’s high single digit kind of a still a good way to think about it already and think maybe in the second half you could do better than that based on the pipeline and some of the changes you made?.

We’ll see where that shakes out, there’s a lot of moving pieces obviously and where the net loan growth comes out. At the moment we’re pretty encouraged, the pipeline is pushing a little over $950 million.

We’ll see what the pull through rate is there, we’ll see what the runoff rates are as well, we’ve – we put some polices in place that we think are going to improve both the production and then slow down the runoff rate and where that ultimately translates into as far as net loan growth.

We’ll see, I would certainly expect something in the high single digits, but at the same time we’re going to see.

Ultimately as we grow we’re going to remain disciplined around in particular credit risk there and assuming we’re comfortable with the credit risk and we can get the growth and I certainly think that in the high single digits is a reasonable place given our business model in the talent of our people..

Okay, great and then last one for me just on the deposit re-pricing, how much of that do you think was kind of a catch up if at all or do you feel like this pace is –the pace of increases is likely to continue?.

It’s hard to say, I think that the pricing pressure is rightly going to continue. We’ve seen that there was an inflection point once the Fed got to whatever it was, 125, 150 and there doesn’t seem on Fed funds.

We just got another quarter point raise here in June and I think the markets have priced in about a 91% raise in September and we’re still looking at another high likelihood of a raise in December. I don’t see any reason why the pressure on deposit costs are going to abate.

We mentioned obviously we’re excited about the specialty deposit group that we’re bringing over from Grandpoint and have invested in personnel there and we think that that will help over time to moderate some of those pricing pressures..

Great, thank you..

Our next question comes from Jackie Bohlen with KBW. Please go ahead..

Hi, guys. Good morning..

Good morning, Jackie..

Sorry to touch space again on expenses, but I just want to make sure that I completely understand I’m – just given that the 63 million to 65 million range, does that include Grandpoint without the full cost saves stripped out of it? So meaning that it’s elevated based on where you see cost savings going..

Yes, so once we have the system conversion completed Jackie which will occur in mid to late October, we would suspect by.

And then there’s always a few folks that we have that helped with that transition after the conversion, but by December or early December all of the cost save should be in place and so we would look at Q1 of 2019 as a clean run rate for all of the cost savings to be achieved..

Okay, so that 63 to 65, you still anticipate 3Q being within that range even though you’re carrying excess cost from Grandpoint..

Correct and same thing – at this point same thing with Q4 as well..

Okay and I would assume you’ll have some cost savings in Q3 from individuals who may not be coming over, but then Q4 you’ll start to really – the bulk of that savings post the conversion, is that a reasonable way to think about it?.

Yes, it is that’s accurate..

Okay and then just to touch on some of the loan growth strategies that you have in place to increase growth going forward. You had mentioned looking in this year re-growth again, now that you’re more comfortable with exposures post Grandpoint and then the. SBA and be more flexible with pricing on good credits.

Was there anything else that I may have missed in terms of what you’re looking for just in addition to normal market work that your team is doing?.

I think is the benefit that we’re going to see from the changes that we implemented during Q2 on our work flow processes and approval processes by adopting some of the model that Grandpoint had, which was more on a regional basis and we think is certainly more scalable over the longer term and will allow us to be a little bit more efficient, move that approval process and loan pricing structuring to those regional managers will also benefit us as well.

We did a – we had a lot of work that we did during Q2 impacting our folks as we changed and developed those work flows to adopt that similar processes that that Grandpoint had..

Okay and then just lastly would you contemplate any loan sales from Grandpoint’s portfolio as you potentially look to reposition the loan portfolio?.

I think it is towards the total loan portfolio at this point and loan sales and loan purchases have always been a tool that we have to manage our growth, credit risk, liquidity risk and so that’s a possibility, but I’m very comfortable with the credit risk and that is in their portfolio, well-managed, we think that there are a lot of clients there that we can expand relationships with.

So at this point we’re not anticipating any loan sales other than our normal course SBA..

Okay, thank you that’s very helpful. I’ll step back now..

Our next question comes from Tyler Stafford with Stephens. Please go ahead..

Hey, good morning guys morning..

Good morning..

First, thanks for all the outlook and guidance for the back half of the year. To start maybe just on the core margin expectation with Grandpoint to 405 to 415, would you expect to be able to build off that with future rate hikes or to be more I guess relatively flattish with rate hikes given that the funding pressure..

I mean I would – it remains to be seen.

You’ve seen where we have been able to increase the yields on our new originations in the past three or four quarters and so I would think that we’ll be able to continue to build on our loan yields going forward no reason why we can’t at the same time we’ll see how much that will offset than any rise in deposit costs.

At this point that the margin has been relatively stable here over the last few quarters ticking up a couple of basis points here and there and we expect moving forward that we’ll be able to achieve the same..

Okay, very good.

Just one more for me on expenses, I believe you said the remaining Plaza expenses will be done by the end of the third quarter just how much remaining is left from that acquisition?.

That is complete now. That is complete now Tyler, yeah..

Yeah, that was completed in Q2..

In Q2 itself..

We have converted their systems..

Okay..

Yeah, we realized a 100% of the cost savings related deposit this quarter..

Okay, okay. Got it.

And then just on future M&A at this point, I guess, there is seeming a lot and you play with Grandpoint, but, Steve, are you ready for more M&A now and do you feel like you need to take a temporary timeout to digest Grandpoint or are you ready to go?.

No, we are ready to go. I would – if you would have asked me that question three months ago, I would not have thought we would have made as much progress as we did. During Q2 I was really impressed with everything that the team was able to achieve and as I said the operational integration of the two teams is substantially complete.

We’ll be doing refinements as we always do, always looking to get better in the organization. But there is nothing at this point that would preclude us. Obviously each transaction is unique and different. And so we just depend upon the institution but we are looking at opportunities today..

Okay. Very good. And just last one for me. Any update you could share on just where we stand with the Grandpoint private equity, just anything you would share there? Thanks..

We are not aware of anything on the private equity side and their plans..

Our next question comes from Andrew Liesch with Sandler O’Neill. Please go ahead..

Good morning guys. Just a follow-up question on the M&A discussion the Grandpoint franchise gets you into some different markets or some newer markets out there.

Any areas where you are particularly looking for M&A or is Southern California still your main geographical region?.

No. As we’ve said in the past, Andrew, certainly California is ideal. We think there is opportunity to grow.

At the same time for the right organization, the right institution and size, we would look beyond California to the Pacific Northwest to anything, something along the Rocky Mountains, certainly if there was something that came up that we could continue to build out our presence either in Nevada or Arizona, we would be open to it.

And certainly as far as south is and the southwest is, maybe as far as the Dallas market goes, but to go outside of our primary markets, those would need to be sizable transactions that really move the needle and in particular would have to be similar relationship-focused banks, predominantly focused on serving business clients as opposed to something that was heavily consumer or retail-oriented..

Okay, great.

And then the provision guidance the 2.5 million to 3.5 million or so, just with loan growth where it’s been and even with some pickup and charge-offs where they’ve been and credit issues being pretty low and what would cause the provision to be near the higher end of that range?.

Loan growth –.

That covers it. Thanks..

Sure..

Our next question comes from Tim Coffey with FIG Partners. Please go ahead..

Thank you. Good morning gentlemen..

Hi, Tim..

Steve, was there any – anything about the timing of the pay downs that you saw in the quarter? Did they occur earlier in the quarter or are they pretty much spread out?.

It was pretty spread out..

So no reference there then?.

No..

You’ve been expecting merger related expenses of around, say, $32 million as part of the Grandpoint transaction. You’ve taken very little so far.

Are you expecting the balance of those will occur in the second half of this year?.

Yes, because we’ve closed the transaction on the first day of Q3. The majority of those merger related expenses will come through in Q3 with some trailing over into Q4 as well..

Okay, okay.

And then on the specialty deposit groups, we are talking about bankers that are targeting in HOAs and perhaps high resist audience?.

This is away from – this is separate than our HOA group, although I think we will leverage some of the technology processes and systems that we’ve employed in that group that has proven to be very successful. This is from a whole host of other lines of business whether it’s related to law firms, trustees, escrow title, a number of different areas..

All right, my other questions have been answered. Thank you..

Sure..

[Operator Instructions] And our next question comes from Gary Tenner with D.A. Davidson. Please go ahead..

Thanks. Good morning guys..

Good morning..

I was hoping, Steve, if you could elaborate on just the thought process with regard to commercial real estate heading into the Grandpoint deal, what you are wanting to see, what you saw, and then reason I ask is as it relates to your own production, I would have suspected even if you maybe were a little bit uncertain as to the acquired portfolio you would feel certainly more comfortable with your own production.

So can you talk about what you saw, what you are wanting to see and then the other part of it is with your expressed willingness to be a little more competitive on the pricing side, do you feel even that much better about commercial real estate than you may have previously?.

I think that, look, it’s a very competitive market obviously but I don’t know that that’s any different than it’s ever been. It’s always competitive.

We had begun moving up pricing on CRE in Q4 and had continued that in Q1 and we may have just gotten a little too aggressive however you want to position it or call it, we’re just a little bit too high and that really slowed things down and as we do, we refined it here towards the latter part of Q2 and set down and really discussed it with the team.

Also just looking at Grandpoint, they had a pretty – they had a sizable – they do have a sizable concentration in CRE.

And although we were comfortable of coming out of due diligence, we wanted to get in even further from a granular level, meet with many of the clients talk with them, here are their thoughts and as we did coming out of those various meetings that took place during the second quarter, I felt more comfortable.

So we would say a combination of factors and then CRE is something that we’ve done for a long period of time. I’m very comfortable with our process around being able to identify structure and price for the risks in the product type and so I’m hopeful and cautiously optimistic that we’ll be able to resume growing those portfolios..

Great. I appreciate the color there. And then, Ron, just a follow-up on the question about the discount accretion like I understand that it’s too early to tell in terms of the initial impact from Grandpoint.

But in terms of what you had in the first quarter from the previous deals, is there any reason to suspect there would be a material step down in 3Q from 2Q on that? Was that a pretty clean number or was there a lot of accelerated pay downs there?.

There was a little bit – go ahead, Ron..

It’s okay. You wouldn’t expect anything more.

Are you talking about 1Q versus 3Q?.

I’m talking about 1Q versus – I’m talking about this step down from 1Q versus 2Q..

Yeah, we had some accelerated in 1Q, which gave rise to a little bit larger number and then, of course, when it accelerates, it takes away from subsequent quarter. So we saw that difference a little bit magnified there. But for the most part again we’ve seen that with other deals.

Maybe now that pronounces this one in particular, but as Steve has indicated in talking about loans and prepayments, we’ve seen quite a bit of prepayment activity even on the acquired bank portfolios that we have done recently..

Yeah, I would not expect to see a step down from 37 is what we had in the first quarter to 1.9 million in the second quarter. It could come in a little bit wider than 19, it could come in a little bit more and that will naturally decline overtime as well..

Okay, but that 19 is a pretty clean number in terms of –.

Yes, it is..

So it’s already been asked. Okay, great. Thank you..

Our next question comes from Don Worthington with Raymond James. Please go ahead..

Thank you. Good morning..

Hi, Don..

Hi, Don..

It looks like Ag loans were down about 8% in the quarter, was this the seasonal variation in that portfolio?.

It was..

Okay and then it looks like the gain on sale premium was up on SBA loans, was that market issue or related specifically to loans that you were selling?.

No, I think it’s just a – just really the mix of loans. I don’t think that there was any substance of change in the marketplace. This is from quarter-over-quarter depending upon the mix of loans that we’re selling. The gain can vary a little bit..

Okay and I guess lastly on the prepayments, could you tell how much was related to like liquidity events where people were selling properties versus refinancing somewhere else?.

It was a mix. We don’t have a specific number, but it was a mix of those two events and then just also businesses that are sitting on excess liquidity, paying down loans or paying them off are not related to the sale of a property or the refinance of a loan..

Okay, alright, thank you..

Sure..

I’m showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to the management team for any closing remarks..

Thank you, Steven and I want to thank all of you for joining us again this morning. If you have any additional questions, please feel free to give either Ron or myself a call and we would be happy to talk with you..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..