Good morning, ladies and gentlemen, and welcome to the Third Quarter of 2022 CVB Financial Corporation and its subsidiary Citizens Business Bank Earnings Conference Call. My name is Sawada, and I am your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer period. Please note that this call is being recorded. I would now like to turn the presentation over to your host for today. Your speaker for today is Dave Brager. You may begin.

Good morning, everybody, and I apologize for the delay. Allen is going to start us off, and then he'll turn it over to me. Thank you.

All right. Good morning, everyone. Thanks for joining today. We're going to be reviewing our financial results for the third quarter of 2022. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com, and click on the Investors tab. The speakers on this call claim the protection of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2021. And in particular, the information set forth in Item 1A risk factors therein. For a more complete version of the company's safe harbor disclosure, please see the company's earnings release issued in connection with this call. I'm now going to turn the call back over to Dave Brager. Dave?

Thank you, Allen, and good morning, everyone. For the third quarter of 2022, we reported net earnings of $64.6 million or $0.46 per share, representing our 182nd consecutive quarter of profitability. We previously declared a $0.20 per share dividend for the third quarter of 2022, an increase of 5% compared to the second quarter of this year, which represented a dividend payout ratio of 43% of earnings. This dividend represented our 132nd consecutive quarter of paying a cash dividend to our shareholders. Third quarter net earnings of $64.6 million, or $0.46 per share, compared with $59.1 million for the second quarter of 2022, or $0.42 per share, and $49.8 million for the year-ago quarter, or $0.37 per share. Through the first nine months of 2022, we earned $169.3 million, or $1.20 per share, compared with $164.8 million, or $1.21 per share, for the first nine months of 2021. For the third quarter of 2022, our pre-tax, pre-provision income was $91.9 million compared with $85.7 million for the prior quarter and $65.7 million for the year-ago quarter. Our net interest margin grew by 30 basis points compared to the second quarter. Our earning assets benefited from the general increase in interest rates, including a 25 basis point increase in loan yields and a 19 basis point increase in the yield on our investment portfolio. As an overall result, our earning asset yield grew from 3.2% in the second quarter to 3.51% in the third quarter, while only experiencing a 1 basis point increase in our cost of funds to 5 basis points. We recorded a provision for credit losses of $2 million for the third quarter compared to $3.6 million for the second quarter and a recapture provision for credit losses of $4 million for the year-ago quarter. In February of this year, our board authorized a $10 million share repurchase program. During the third quarter, we repurchased 232,000 shares, bringing our total repurchase under the 10b5-1 plan to approximately 1.9 million shares through September 30, 2022. This is in addition to the 3 million shares we repurchased during the first half of the year through our accelerated share repurchase program. Now let's discuss loans in more detail. Our new loan production continued to remain strong for 2022. However, new loan commitments were approximately $450 million in the third quarter, which compared with approximately $560 million in the second quarter. The decline in the third quarter is primarily due to higher rates and economic uncertainty weighing on our borrowers. Total loans at quarter end were $8.8 billion and $81.9 million or about a 1% increase from the end of the second quarter. After excluding PPP loan forgiveness, third quarter loan growth was $131 million or approximately 6% annualized. The core loan growth in the third quarter when compared with the end of the second quarter, was led by continued growth in commercial real estate loans, which grew by $41.6 million or 2.5% annualized. C&I loans increased by $10.6 million or approximately 4.5% annualized. The line utilization rate for C&I loans was 32% at the end of the third quarter, the same as the second quarter. Dairy and livestock loans increased by approximately $43.5 million from the prior quarter due to new loan originations and a small increase in the line utilization rate from 66% in the second quarter to 67% at the end of the third quarter. Continued loan forgiveness for PPP loans resulted in a decline of $49.6 million in comparison to the second quarter. At the end of the third quarter, we had $17 million remaining in PPP loans. At quarter end, non-performing assets, defined as non-accrual loans plus other real estate owned, were $10.1 million compared with $13 million for the prior quarter and $8.4 million for the year-ago quarter. At quarter end, we had no OREO properties and the $10.1 million in non-performing loans represented 6 basis points of total assets. During the third quarter, we experienced credit charge-offs of $46,000 and total recoveries of $425,000, resulting in net recoveries of $379,000, compared with charge-offs of $8,000 and total recoveries of $511,000 resulting in net recoveries of $503,000 for the second quarter of 2022. For the first nine months of 2022, we experienced charge-offs of $70,000 and total recoveries of $947,000 resulting in net recoveries of $877,000. Classified loans for the third quarter were $64 million compared with $76 million for the prior quarter and $49.8 million for the year-ago quarter. As of September 30, 2022, classified loans include $14.4 million in loans acquired from Suncrest. Now, I would like to discuss our deposits. During the third quarter, non-interest-bearing deposits averaged $9 billion, an $86.9 million increase from the average balance in the second quarter and a $1 million increase in the average balance from the third quarter of 2021. Total deposits and customer repurchase agreements were $14.7 billion on average for the third quarter, essentially flat compared to the prior quarter and $1.4 billion higher than the third quarter of 2021. Non-interest-bearing deposits were approximately 63.4% of our average deposits for the third quarter of 2022 compared to 63% for both the prior quarter and the third quarter of 2021. At September 30, 2022, our total deposits and customer repurchase agreements were $14.3 billion compared with $14.6 billion at June 30, 2022, and $13.6 billion for the same period a year ago. At September 30, 2022, our non-interest-bearing deposits were $8.8 billion compared with $8.9 billion to the prior quarter and $8.3 billion from the year-ago quarter. The bank's funding is entirely core customer deposits and customer repos, which combined had a total cost of just five basis points in the third quarter. This five basis point cost of funds compares with four basis points in the prior quarter and four basis points for the year-ago quarter. We closely manage rates on deposits at a granular level with our focus continuing to be on deposits from core relationships and not on purely transactional accounts. I will now turn the call over to Alan to discuss our investments, the allowance for credit losses, and capital.

Thanks, Dave. Good morning again everyone. Our investment portfolio declined by $159 million from the end of the second quarter to $5.9 billion, due to the decline in market value of investment securities available-for-sale or AFS securities. AFS securities totaled $3.3 billion at the end of the third quarter, inclusive of a pre-tax net unrealized loss of $540 million. Compared to the prior quarter, the market value decline in AFS securities was $194 million. Investment securities held-to-maturity or HTM securities totaled approximately $2.56 billion at September 30, 2022, which represents a $146 million increase from the second quarter. We purchased more than $197 million in new securities during the quarter, including $182 million of HTM securities, with yields of approximately 4%. The growth in our investment portfolio over the last year resulted in investments increasing by $1.2 billion and increasing as a percentage of average earning assets from 28% in the third quarter of 2021 to 39% on average in the third quarter of 2022. In addition to the increase in the size of our securities portfolio, the tax-equivalent yield on the portfolio grew from 1.54% in the third quarter of 2021 to 1.93% in the second quarter of 2022 and now to 2.12% in the third quarter. Our Fed balance averaged approximately $625 million for the third quarter compared to $800 million in the second quarter of this year. At September 30, 2022, our ending allowance for credit losses was $82.6 million or 0.94% of total loans, which compares to $80.2 million or 0.92% for total loans at June 30, 2022. For the quarter ended September 30, 2022, we recorded a provision for credit losses of $2 million compared to $3.6 million for the quarter ended June 30, 2022 and a $4 million recapture of provision for credit losses in the year-ago quarter. The provision for credit losses in the third quarter was driven by loan growth, which was approximately $132 million when excluding PPP loans as well as an increase in our projected life of loan loss rates. The two basis point increase in loss rates was a combination of a decrease in the expected loss on individually evaluated loans, which were identified as purchase credit deteriorated, or PCD loans at the time of the acquisition of Suncrest, and an economic forecast that assumes lower growth in GDP, lower commercial real estate values, and an unemployment rate of over 5% in both 2023 and 2024. Our economic forecast continues to be a blend of multiple forecasts produced by Moody's. These U.S. economic forecasts include a baseline forecast as well as a downside forecast. We continue to have the largest individual scenario weighting on the baseline forecast with downside risk weighted among multiple forecasts. As of September 30, the resulting forecast included a higher weighting for the stagflation scenario due to continued inflationary pressures observed in the economy. Our weighted forecast assumes GDP will increase by 0.4% in 2023, 1.6% for 2024 and then grow by 2.5% in 2025. The unemployment rate is forecasted to be 5% in 2023, 5.3% in 2024 and then decline to 5.1% for 2025. Now looking at our capital position. From the end of 2021, shareholders' equity decreased by $202.6 million to $1.9 billion as of September 30, 2022. Equity increased from the end of 2021 by $197 million for the issuance of 8.6 million shares to the former shareholders of Suncrest. Equity also increased due to year-to-date income of $169.3 million, which was offset by $80.2 million in dividends, representing a 47% dividend payout ratio year-to-date. Interest rates increased through the end of the third quarter, resulting in an increase in the unrealized loss on our available-for-sale securities and a $137 million decline in equity quarter-over-quarter due to the associated decrease in other comprehensive income. In combination, the ASR and the 10b5-1 stock repurchase plan have resulted in the year-to-date repurchase of approximately 4.9 million shares at an average share price of $23.40, which reduced our common stock by $115 million. During the early part of the third quarter, we repurchased 232,000 shares at an average share price of $23.88. Our overall capital position continues to be very strong. Our regulatory capital ratios are well above regulatory requirements to be considered well-capitalized and above the majority of our peers. At September 30, 2022, our common equity Tier 1 capital ratio was 13.5% and our total risk-based capital ratio was 14.3%. The company's tangible common equity ratio at September 30 was 7%. I'll now turn the call back to Dave for further discussion of our third quarter earnings.

Thank you, Allen. Net interest income before provision for credit losses was $133.3 million for the third quarter compared with $121.9 million for the second quarter and $103.3 million for the year-ago quarter. Third quarter earning assets decreased by $176.6 million on average from the second quarter due to a decrease of $172 million in average funds on deposit at the Federal Reserve. Our earning asset yield increased by 31 basis points compared to the prior quarter. The increase in our earning asset yield was the result of a 19 basis point increase in investment yields, a 25 basis point increase in loan yields, and a shift in the composition of earning assets with average loans growing from 55.5% to 56.6% of average earning assets, while our average amount of funds at the Federal Reserve declined from 5% to 4% of earning assets. Our balance sheet continues to be well-positioned for rising interest rates, although less sensitive to changes in interest rates with fewer dollars on deposit at the Federal Reserve. Our loan-to-deposit ratio continued to be 63% at the quarter end, and we anticipate funding future loan growth with cash flows from our investment portfolio, which are approximately $175 million per quarter. Our tax-equivalent net interest margin was 3.46% for the third quarter of 2022, compared with 3.16% for the second quarter and 2.89% for the third quarter of 2021. The increase in our net interest margin was the result of the increase in our earning asset yield while maintaining our very low cost of funds that migrated from 4 basis points in the second quarter to 5 basis points in the third quarter. During a period when the Federal Reserve increased the Fed funds rate by 150 basis points, loan yields were 4.56% for the third quarter, compared with 4.31% for the second quarter and 4.43% for the year-ago quarter. Total interest and fee income from PPP loans was approximately $1 million in the third quarter, compared with $1.4 million in the second quarter. Excluding the impact of PPP loans and interest income related to the purchase discount accretion, loan yields were 4.42% for the third quarter of 2022, 4.2% for the second quarter, and 4.14% for the third quarter of 2021. Yields on new production during the third quarter exceeded the overall loan yields, and most recent production has averaged greater than 5%. Our cost of deposits and customer repos as well as our total cost of funds for the third quarter was 5 basis points. Interest-bearing deposits and customer repos decreased on average by $22.4 million from the second quarter, while non-interest-bearing deposits grew by approximately $87 million on average. We are beginning to experience some pressure to increase deposit rates due to the recent increases in market rates. During the last rate rising cycle, short-term rates grew at a gradual pace by 225 basis points from 2014 to 2018, while our cost of funds increased by only 8 basis points during that same period. Over the last four quarters, the Fed has raised short-term interest rates by 300 basis points, while our cost of funds has increased by 1 basis point. Now moving on to non-interest income. Non-interest income was $11.6 million for the third quarter of 2022, compared with $14.7 million for the prior quarter and $10.5 million for the year-ago quarter. Our customer-related fees, including deposit services, international, and Merchant BankCard services, were essentially flat when comparing the third and second quarters of 2022, but these fees increased by approximately $800,000 or 13% compared to the third quarter of 2021. Our trust and wealth management fees declined by $95,000 compared to the prior quarter, but increased by 7% or $186,000 year-over-year. Market conditions continue to negatively impact assets under management and trust fee income. As we discussed earlier this year, a large trust relationship with more than $800 million in assets has recently transitioned to a financial institution outside of California. The transition is expected to be completed by the end of this year and will have the impact of decreasing our trust fees by approximately $425,000 next year. The overall decrease in non-interest income in the third quarter compared to the second quarter was driven by variances in our income on Bank-Owned Life Insurance, returns on investments made under the Community Reinvestment Act, and the $2.7 million gain on the sale of fixed assets realized in the second quarter of 2022. Revenue from Bank-Owned Life Insurance or BOLI increased by $1.4 million as a $2 million increase in death benefits was offset by a $600,000 decline in the market value of separate account life insurance policies that are related to our deferred compensation plans. Income on our CRA investments declined by $2.1 million from the second quarter due to both valuation changes and a $1.3 million gain from a distribution relating to one of those investments during the second quarter. Now expenses. Non-interest expense for the third quarter was $53 million compared with $50.9 million for the second quarter and $48.1 million for the year-ago quarter. Non-interest expense totaled 1.25% of average assets for the third quarter of 2022. This compares with 1.2% for the second quarter and 1.22% for the third quarter of 2021. Our efficiency ratio was 36.59% for the third quarter of 2022 compared with 37.24% for the prior quarter and 42.27% for the third quarter of 2021. Staff-related expenses increased by $1.7 million or 5% compared to the second quarter of 2022. Salary expense grew at approximately 5% or $1.2 million as annual salary increases were effective at the beginning of the quarter and our vacancy rate improved modestly. Although we continue to invest in technology to further automate and scale processes within the bank, we continue to be mindful of inflationary pressures and associate turnover. Additionally, the contra expense for loan origination costs contributed more than $300,000 of the increase from the prior quarter due to lower loan originations. The growth in non-interest expense over the third quarter of 2021 was $4.9 million, which includes the impact of acquiring Suncrest at the beginning of 2022. The $3.5 million increase in salary and employee expense includes the impact of adding associates from Suncrest as well as the salary increases and increased expense for stock grants. Occupancy and equipment expense grew by $657,000, including the net addition of the remaining five banking centers from Suncrest. With the pandemic receding, marketing expenses grew by $631,000 over the third quarter of 2021. Professional services increased by $813,000, including a $250,000 increase in employee recruiting fees and more than $500,000 increase in consulting expense, supporting system upgrades and new technology implementations. In addition, software expense grew by 7% or $223,000 for the same quarter last year. The California economy continues to face challenges related to supply chain issues, a tight labor market, wage inflation, and overall inflationary pressures, which have contributed to an uncertain business environment. Our customers in the bank have been impacted, and we will continue to focus on supporting those customers, our customers, associates, and shareholders. Despite the challenging times, we are thankful and excited about our results for the third quarter while remaining cautiously optimistic about the future. We reported record quarterly earnings and strong loan growth in the third quarter and produced a record $91.9 million in quarterly pretax pre-provision income, which is a 7% increase from the second quarter. Our net interest margin increased by 30 basis points from the second quarter, and we continue to manage expenses by searching for efficiencies in our processes through technology. Our earnings growth in the third quarter supported a 5% increase in our quarterly dividend, which represented a dividend payout ratio of approximately 43% for the quarter. We remain committed to our five core values of financial strength, superior people, customer focus, cost-effective operations, and having fun. This concludes today’s presentation. Now Allen and I will be happy to take any questions that you might have.

Thank you. Our first question comes from Kelly Motta with KBW. Your line is open.

Hi, good morning. Thanks so much for the question. Great quarter.

Good morning, Kelly.

Good morning. I thought maybe we could start with margin, which expanded really nicely. Could you remind us kind of the percentage of loans that float versus fixed, and I think your loan yields increased 25 basis points this quarter, if there were any floors you got through and kind of how we should be thinking about loan betas on a go-forward basis?

Yes. Kelly, I would say approximately 30% of our loans are truly variable, meaning they would reset immediately or within about three months. And the remaining 70% is either adjustable or fixed. And so I would say for the most part, when we look at how the loan portfolios on the short end has changed, we’ve probably – we didn’t have a lot of floors in place and we’ve probably broken through a majority, if not all of those at this point. But obviously there’s a lot of optionality in our balance sheet and I would continue just to point to our disclosures in the 10-Q in terms of our asset sensitivity.

Yes. Kelly, the one thing I would add to that also is that when you have a 32% utilization rate on your C&I loans, the impact obviously is not felt unless they’re borrowing. So that low utilization also impacts that number that Allen mentioned of the 30% that’s truly variable.

Got it. Okay. That’s really helpful. And I appreciate the comments that you’re going to fund loan growth out of like cash flows out of the securities portfolio. Just wondering about the size of the balance sheet and the potential for continued deposit outflows, you obviously have plenty of liquidity and deposit costs increases have been negligible. Just wondering if there’s kind of any more earmarked for outflow in the deposits? Or potentially you could be running off to look for searching for higher costs elsewhere?

Yes. No, I think it’s definitely something that we’re focused on, and as I mentioned in the prepared remarks, we are focused on relationships. And so where we have deposit customers that have both non-interest bearing deposits and interest bearing deposits with us, we’re going to fight hard to keep all of those deposits. There is the issue of this inflationary world we’re living in and just the cash burn of our existing customers’ accounts, that’s something that’s harder for us to account for – to account for. We’re still driving to bring new deposit relationships to the bank, and we are doing that. And so, our goal is to remain flat to slightly up. But I can’t obviously estimate what’s going to happen with people’s deposits. And the advantage is we also have our citizens trust group, so we have the ability to flip those that are searching for those much higher rates to our trust group for them to be able to take advantage of the market rates today. So we have a lot of levers to pull, but we’re still focused on attracting the best deposit relationships and protecting our existing relationships. So you’ll start to see, I think some more impact of the rising rates. This is really unprecedented. 300 basis points in a short period of time definitely has an impact. But I think for the most part, we’ve done a really good job at keeping – we haven’t lost deposit relationships. There have been some that slipped to trust. There have been some that we’ve had to increase the rates, but so far it’s just starting to pick up, I would say.

Got it. That’s helpful. I’ll step back. Thanks so much for the questions.

Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of David Feaster with Raymond James. Your line is open.

Hey, good morning everybody.

Good morning, David.

Good morning.

I just wanted to touch on growth. I mean growth has been really solid. But just curious, as you look at your pipeline and think about growth going forward, I mean, have you started to see maybe a slowing in some demand as projects on CRE don’t pencil with higher rates? Just curious overall thoughts on growth, just given where we are in the economic cycle and how things are trending?

Yes, it’s a great question. If you had asked me this in the middle of the quarter, I definitely noticed a slowdown, but our current pipeline is stronger than I expected. However, I still believe our goal is to achieve loan growth in the 4% to 5% range. This doesn’t necessarily mean the balance sheet will grow, but we can adjust the mix of assets from more investments to higher-yielding loans. As I mentioned earlier, we are seeing loans with rates in the five range for the first time in a while, and possibly even some in the six range again. For the most part, that mid-single-digit goal is what we’re aiming for. So far, early in this quarter, we haven’t observed a significant slowdown, but there has definitely been some slowdown.

Okay. We just discussed your significant sensitivity to rates, which largely stems from the strength of your core deposit franchise. How do you approach managing that rate sensitivity? At what point do you consider reducing some of it? If and when you plan to address that, what strategies would you consider? Would you focus on more fixed rate lending or explore some synthetic options? I'm interested in your thoughts on this.

So David, I would say our model's sensitivity is fairly modest right now. If you look at our last quarter, I think we're pretty well positioned. I believe we'll be in an even better position in our next quarter. We feel very well positioned overall. Previously, our biggest risk was rates going down, and we attempted to address that through the structure of our investment portfolio. We like our current positioning and don't foresee utilizing any synthetic derivatives. However, we do have the capability to implement back-to-back swaps on the loan side to create more variable loans if that becomes economically beneficial. You might see that next year or later, but that's really the only derivative strategy we have, and I feel very comfortable with our current position; I think we’re well balanced.

That makes sense. I'm curious about your perspective on the loans you are currently assessing regarding asset quality and credit management. What are your observations? Are there any concerns that you're monitoring closely? From a competitive standpoint, is there anything puzzling, or has the market stayed relatively rational?

That’s a great question. I’m not sure that I would describe the overall market as rational. There are still people doing things that I do not understand, not so much, I would say, from the credit structure perspective, but more from the pricing perspective. I’ll give you an example, a larger bank than us, we just lost a deal on a 10-year fixed at 3.5%. I don’t understand it. And I just said, well, that’s 200 basis points below where we would be. So, we’re not going to compete. But I think it – it’s kind of a combination of things, David. So I think, customers are definitely more uncertain and they’re cautious. I think, obviously, with the rising rates, that’s going to begin to impact our pipelines more. I – everything is held up really well as evidenced by our numbers. Last quarter we had that kind of tick up in our classified loans and I wish I could have mentioned, but I couldn’t that one deal that was, that causes to go up, we got, we had already solved that by the time we had the earnings call, but I couldn’t say that. And so, we are – I believe feeling pretty cautiously optimistic about credit. I still believe that, and we don’t have a lot of consumer, but just macro, I’d say consumer. And then for us where it’s more impactful, I’d say small business, C&I lending, and that’s just because I feel like it’s going to be a death by a thousand cuts. I mean, we’ve modified our debt yields on our commercial real estate up with the rising rates which drives a little bit lower, it sizes the loan to the cash flow which is what we care about. And so, we’ve done some things in our discipline, conservative, sales people say conservative and credit people say discipline. So we drive that discipline throughout the organization to make sure that we’re not going to be in a problem if things continue to go down, which I have a feeling they will. So I hope that answered your question, but that’s sort of where I see it.

Yes, no, that’s great color. I appreciate it. Thanks, guys.

Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is open.

Hi, Matthew. Good morning. We have Matthew?

Check to see if you’re on mute Matthew. Matthew, your line is open. I think he’s having phone issues.

We can move on to the next one and come back to him.

Okay. One moment, please standby for our next question. Our next question comes from the line of Gary Tenner with D.A. Davidson. Your line is open.

Hi, there. This is Clark right on for Gary Tenner this morning. I just had one, a lot of my questions were answered. But in terms of ag and kind of your outlook on seasonality heading into 4Q, where do you see business shaping up in that regard?

Yes, so, we always have an increase in our dairy & livestock loans in the fourth quarter due to deferrals. And we anticipate to have that again this year. We don’t really guide to a specific number in that area. But we will see, I would say similar type growth that we experienced last quarter or last year fourth quarter to this year fourth quarter. We did bring on a couple of new relationships in dairy and in agribusiness, which I – they’re very strong relationships, so that could impact it a little bit. But I would say it’s probably, we anticipated it to be pretty similar and maybe slightly higher just due to some increased costs but that's where I would say we would – we should end up.

And keep in mind Clark, I mean that really impacts our point-in-time balance sheet at year-end more than anything because the run ups so late year that the average balances don’t meaningfully change, I’d say, so...

And it goes away in the first couple weeks as the following year.

Got it. Thank you for that additional color. Appreciate it.

You're welcome.

Thank you. Please stand by for our next question. Our next question comes from the line of Tim Coffey with Janney Montgomery. Your line is open.

Thank you. Good morning gentlemen.

Good morning, Tim.

I had a question on non-interest expenses going forward. If loan growth is pulling back, as you know, does pull back this score, as you've kind of indicated all you've seen already, does that mean that expenses could be a similar level to the 3Q?

Well, I mean, I would certainly say Q3 to Q2 was unusual, obviously because of our mid-year salary increases and the deferrals declining. But I don't know that those are directly tied. I think we continue to manage expenses to be growing at a very low rate, but still we want to continue and invest in technology for the long-term. So I don't foresee us being flat, that was the question, Tim.

Yes. Okay. Okay. That is, that's helpful.

Yes. And Tim, one thing I will say that we haven't said anywhere yet, but at next Friday we are consolidating one of our offices as well that will be consolidating into an office that's within three miles. And so we just continue to look at opportunities to streamline and operate in an efficient manner, and so that's not something that's going to happen all the time, but that's definitely something that we will be reporting on in the fourth quarter that we will be doing. This is public knowledge. We had to send out customer notifications and everything, but we will be consolidating one of our offices as well, which should provide some savings, but not huge.

Okay. Okay. That's helpful, thank you. Then I got a question about deposit growth. The last 12 months, deposits have grown about 7%. If we look out 12 months, would you think that deposits would grow more or less than that?

I think it; my guess would be that it would be less. It doesn't mean that we're not going to strive to grow deposits at that same level, but I just think the inflationary pressures, the cash burn, the other alternatives all of those things are headwinds for us for sure.

Okay. And then a question on construction loans; can you kind of talk a little bit about your appetite for additional construction credits and then some color on the net growth that we saw this quarter?

Yes. So the growth this quarter was existing relationships and some draw downs on existing lines. I mean, it's not something that we're really going out and trying to attract, although it is an important part of what we do with some of our larger real estate investors and developers. And most of the projects we look at are infill projects, multi-family or industrial. So it is something that we want to continue to do, but I don't think it's an area that's going to drive our loan growth by any means.

And I think last quarter we're sort of a pretty low point for us in terms of that portfolio?

Correct.

Okay. Understood and then...

I mean, I will say Tim, we are seeing more construction requests because I think there's fewer banks out there that will do them at least going into this economic cycle. But I do think that we will remain focused on our existing relationships or the opportunity for deals that fit our box, which is much more narrow from the perspective of the credit underwriting.

Okay. And then I had a question – last question on commercial real estate. We've seen vacancy rates tick up in commercial real estate office mostly in the central business districts, but not necessarily in the adjacent markets or the suburban markets. And given that your footprint is fairly wide throughout Southern California; can you kind of describe what you're seeing?

Yes. No, I think that's exactly right. And I've been saying this for some time. I think that the suburban/rural office market has remained relatively strong. I don't – we're not seeing that stress in our office portfolio. We actually – I think we have zero loans that are classified loans in office. So I think we're in a pretty good spot there. But I definitely agree with what your – what you just stated and what you're seeing. I think it's a much more impactful situation for the money centers, large cities, L.A., San Francisco, Downtown San Diego than it is for Ontario or more suburban markets.

Yes. Okay, great. Well, thank you very much. Those are my questions.

Appreciate it. Have a good day.

Thank you. Our next question comes from Adam Butler with Piper Sandler. Your line is open.

Hey good morning. This is Adam, calling in for Matthew Clark.

Yes. Hi, Adam, how are you?

Good. How are you?

Good. Thank you.

I was wondering what the, if you guys have it, the weighted average rate on new loans during the quarter was?

Yes. So we don't ever quote the exact weighted average rate. But I will say that, as I mentioned in the prepared remarks, we were in the high 4s, low 5s throughout the quarter. And we are seeing loans now; I'd say the vast majority of them have five handles. And hopefully, we'll start to recognize maybe even some 6s if rates continue to go with the way they're going.

Okay. Great. And also if you guys have it as well, do you – what were the – what was the spot rate on deposits at the end of September?

The five basis points?

Are you asking about cost of deposits or the balance, which obviously is on our earnings?

The cost of deposits as at September 30.

Not meaningfully different than the quarter is how I'd characterize that.

Okay, thank you. And the buyback slowed during the quarter, should we assume you will remain active buying back stock going forward?

Well, the 10b5-1 is still in place, but it's priced at a – we're obviously trading at a pretty significant multiples. So early in the quarter, I think is what we mentioned in our press release, and you saw the average price, I think, at $23.88 of the buyback. So we're trading significantly higher than that. So it just depends on where the market is and what happens. But assuming we stay where we are, I wouldn't anticipate any share repurchases.

Okay, thank you.

You’re welcome.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Dave for closing remarks.

Thank you. I want to thank everybody for joining us this quarter. We appreciate your interest, and we look forward to speaking with you in January for our fourth quarter 2022 earnings call. Please let Allen or I know if you have any questions. Have a great day, and thanks for listening. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.