Greetings, and welcome to the First Foundation's Third Quarter 2021 Earnings Conference Call. Today's call is being recorded. Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer; Kevin Thompson, Chief Financial Officer; and David DePillo, President. Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results. These forward-looking statements are made subject to the safe harbor statement, including in today's earnings release. In addition, some of the discussion may include non-GAAP financial measures. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures. See the company's filings with the Securities and Exchange Commission. And now I would like to turn the call over to Scott Kavanaugh.

Hello, and thank you for joining us. We would like to welcome all of you to our Third Quarter 2021 Earnings Conference Call. We will be providing some prepared comments regarding our activities, and then we will respond to questions. We had another strong quarter as each of our businesses contributed to our success. Our earnings for the quarter were $37.2 million or $0.83 per share. Total revenues were $89.9 million for the quarter, a 25% increase from the second quarter of 2021. Our tangible book value per share ended the quarter higher at $14.96, representing an 18.3% return on tangible common equity year-to-date. Our efficiency ratio continues to improve, and was 41.9% for the quarter. We also declared our third quarter cash dividend of $0.09 per share. While we wait for final regulatory approval on our acquisition of First Florida Integrity Bank, which we still expect to receive in the fourth quarter, we are making excellent progress on our expansion efforts in Texas, including opening our LPO in Irving, which I talked about last quarter; and our retail branch office in Plano, which we anticipate opening early next year. There is so much opportunity for First Foundation in Texas and we are grateful for the warm reception. We are actively recruiting in the area and speaking with bankers, wealth managers and others who want to join our Texas team as we ramp up the presence across the state as well as our corporate location in Dallas. Being located in Texas also affords us the opportunity to look at expansion into new regions. We experienced this with Florida, and we are now confident we can serve clients in other states. I used to say our expansion was focused in the region from the Rockies to the West. But now with our presence in Texas and soon Florida, I feel like our opportunities to expand just got larger. Speaking in Florida, we are very excited about having the employees of First Florida Integrity Bank join us and help lead our growth efforts in the state. Similar to Texas, there are great opportunities across the state of Florida. Once the merger is complete, we anticipate the core system conversion in the second quarter of 2022. We are also seeking trust powers in both Florida and Texas. Expanding into business-friendly states such as Texas and Florida has really proven to be a successful strategy for our next phase of growth. That said, we remain committed to our operations in California, Nevada and Hawaii. We recently expanded our presence in Los Angeles with the opening of our Sherman Oaks branch and that location has proven to be very successful. Even amidst the challenging business environment in the state, our teams in California have done an incredible job attracting deposits, funding high-quality loans and offering top-performing wealth management and trust services to our clients. Hawaii and Nevada also continue to play an important part of our story. There are great opportunities for us to serve businesses and individuals in these regions and our trust offering helps set us apart from many of the other firms in the area. I mentioned last quarter that the transformation of our business model has really taken shape and the diversification of our offering has only strengthened our position as a regional commercial bank. This is evidenced yet again by another strong quarter of high-quality C&I originations, which accounted for 43% of the $802 million total we originated this quarter. We also saw contributions from our equipment finance offering and our builder finance team, which is officially up and running and beginning to bring in new business. We're really excited about having this as part of our offering. We accomplished all this, while our single-family and multifamily lending teams continue to be strong, generating $79 million and $357 million in loans, respectively. Our ability to generate high-quality loans is something I'm very proud of, and our underwriting team has done an incredible job to ensure our NPAs stay at industry-leading levels, coming in at a low 24 basis points for the quarter. We had another successful securitization of $419 million of multifamily loans. These loan sales continue to be an important part of our business model and afford us the opportunity to meet the high demand for our lending solutions in the markets we serve. Dave will touch more on the current composition of our strong loan portfolio and pipeline. Looking at deposits, our core funding accounts were 98% of our total deposits, where our cost of funding continues to be favorable and deposit cost decreased to 15 basis points for the quarter. This attractive deposit profile is attributable to a significant reduction in our brokered deposits and an increase in more business-related operating accounts. We continue to have zero Federal Home Loan Bank advances, while at the same time, our loan-to-deposit ratio remains at 85% at the end of the quarter. Looking at the rest of our business, our in-house private wealth management offering reached peak levels of assets under management by adding $109 million of organic new net growth and ending the quarter at $5.4 billion. This important offering, which includes investment management, wealth planning and trust services provides meaningful value to our clients and generates additional sources of revenue for the company. The wealth management business is also proving to be a profitable business for us as the combined pretax profit margin for trust and wealth management was 19% for the quarter. This is the third straight quarter we have experienced scale at this level. We continue to pursue the cryptocurrency offering through our collaboration with NYDIG and Fiserv to bring Bitcoin into banking. We are closely working with our regulators on the scope of our solution, and we believe this is on track to launch in the coming months with the official rollout in Q1. We are grateful to have partnered with industry-leading firms such as NYDIG and Fiserv on this initiative. Speaking of our partners, our investments in technology allow us to offer best-in-class security and fraud prevention solutions for our clients. Whether it is in the branch or online, our teams remain vigilant about any security threats to our clients. We leverage the strictest industry protocols for secured technology, and we supplement this with education for both clients and our employees. All of what I've mentioned, our services, our expansion and our commitment to technology position us well as we seek to best serve our clients. As I have said before, our business model is designed to help clients wherever they are in their financial lives. And today's results indicate that our model is working very well across the diverse and dynamic markets we serve. I want to conclude my opening remarks by saying how pleased I am with the entire team of First Foundation. We have a great group of people who are very committed to serving clients and building a valuable business that we are committed to making this place the best place to work for each and every one of our employees. It's truly an honor to be able to lead this organization, and I'm very excited about our future. I will now turn the call over to our CFO, Kevin Thompson.

Thank you, Scott. Earnings per diluted share of $0.83 in the third quarter included $384,000 of expenses related to our acquisition of TGR Financial. The return on assets was strong at 1.88% with a return on tangible common equity of 22.9%. Related to the multifamily loan securitization of $419 million this quarter we booked a gain of $18.1 million, including associated mortgage servicing rights of $2.7 million. As has been our practice in the past, we purchased $201 million of the resulting Freddie Mac securities with an approximate yield of 1.4%. The net interest margin decreased to 3.07% in the quarter, which was largely due to higher average cash and cash equivalent balances in the quarter. We maintained discipline in loan production with the average loan funding yield increasing 11 basis points to 3.46% from last quarter. We provided a new schedule in earnings release detailing our loan fundings. Excluding the securitization, loans would have increased $219 million or 3.6% compared to the prior quarter. Our cost of deposits continued to decrease in the quarter, dropping from 20 to 15 basis points. We earned $750,000 of net PPP fee income in the quarter, and we have $1.2 million of fees from $51 million of PPP loans that remain. The allowance for credit losses for loans decreased by $1.2 million in the quarter to $21 million as a result of lower loan balances related to securitization activity. This was offset by an increase in the allowance for credit losses for investments of $1 million, which was a result of the low-interest-rate environment and faster-than-expected prepayments that impacted the projected cash flows on interest-only strip securities. We also recognized an $825,000 valuation allowance on mortgage servicing rights in the quarter due to the same reasons. Asset management fees were strong with revenues of $9.3 million. And as Scott mentioned, our advisory and trust divisions achieved a combined pretax profit margin of 19%. Noninterest expense increased $2.8 million to $38.4 million in the quarter. This was largely from compensation and benefits that increased due to a 5.3% increase in FTE in the quarter, higher commission accruals due to strong year-to-date production in wealth management and other divisions, and lower deferred expenses due to seasonally lower loan production. Efficiency ratio was very strong at 41.9%. I will now turn the call over to David DePillo.

Thank you, Kevin. As Scott mentioned, the transformation of our balance sheet continues to develop nicely. And today, we are well positioned as a premier regional bank, sort of seeing a diverse client base. Adding some more detail to that, I would like to reiterate that our commercial business lending accounted for 43% of our originations for the quarter, totaling $346 million in C&I loans. This has been a key to the transformation of our balance sheet that we have disposed and continues to help us diversify our loan portfolio. Overall, as mentioned, we generated $802 million in loans in the third quarter. While this is still a very strong number, it is slightly off from our record highs we experienced last quarter. We believe this quarter's loan production reflects the typical slowdown we see in the summer months. We anticipate higher fundings for the fourth quarter and expect to close the year at or above our annual projections. Consistent with the last quarter, 52% of our C&I loans that were generated this quarter were largely adjustable commercial revolving lines of credit, which is a strategic move for us as we continue to shift the balance sheet to more rate neutral. The remaining C&I loans were comprised of $77 million of commercial term loans, $40 million of public finance loans, $28 million of commercial real estate loans, and $21 million of equipment finance loans. They are all high-quality business loans that generate strong yields while continuing to diversify our loan portfolio. Of note, we had no new PPP loan fundings during the quarter. Looking more broadly at the $802 million of loans that were originated in the third quarter, the percentage breakdowns are as follows: C&I, including owner-occupied commercial real estate 43%; multifamily 44%; single-family 10%; and 3% in the other. We continue to focus on originating high-quality loans with high underwriting standards. As mentioned, our NPAs remain very low at 24 basis points for the quarter. It's also worth mentioning that our loan forbearance and deferrals decreased to 6 basis points of total loans to a total of $3.4 million from 11 basis points and $6.7 million in the prior quarter. The loan pipeline remains strong ahead heading into the fourth quarter, and we expect seasonal cyclicality over the summer months to taper and demand to continue to increase. Speaking more specifically about loan yields. As mentioned, we achieved a weighted average rate of 3.46% on originations, which improved 11 basis points from the second quarter, up from 3.35%. This continues to demonstrate our ability to achieve strong volumes while still defending the yield on our loan portfolio. As of September 30, our loans held to maturity balances consist of 48% multifamily loans, 30% commercial business loans, 5% non-owner occupied CRE, 15% consumer and single-family, and 1% land and construction. Our deposit business also continues to perform well as our deposit profile continues to be very favorable. The $6.8 billion in deposits that we ended the quarter represents a combination of programmatic reductions in certain deposit accounts along with seasonal outflows. This programmatic reduction was done to improve our overall deposit profile including lowering our cost of deposits and making deposits less volatile and not subject to large inflows and outflows. Our noninterest-bearing deposits accounted for 44% of total deposits. The $262 million reduction in deposits during the third quarter of 2021 included decreases in balances in the commercial deposit service group of $281 million, offset by increases in the retail branches. Commercial business deposits for our channel serving complex treasury management customers and from our business banking customers served by our retail branches were 74% of total core deposits as of September 30. Core deposits continue to account for 98% of total deposits. Our cost of deposits has continued to improve and reached another favorable low of 15 basis points for the quarter. As Kevin mentioned, NIM was 3.07% during the quarter as the excess liquidity dragged slightly on the margin. While loan funding yields are starting to trend up again, improving from last quarter, the additional excess liquidity will likely continue to provide a drag on NIM into the next quarter. And finally, I want to touch on a few strategic projects we are working on. Our project to enhance our consumer online and mobile experience is getting close to launching. This will give clients the opportunity to access their accounts where they're most convenient for them, and will add benefit of security, to view and access accounts held at other institutions in one place. As Scott mentioned, cryptocurrency project with NYDIG and Fiserv continues to successfully move forward. We plan to have a very thoughtful offering for clients looking to access Bitcoin within the traditional banking system. Our data warehouse initiatives have been a very important part of our ability to scale. We continue to leverage the data warehouse and connect new data sources to provide critical information for decision making. We leverage the data to drive efficiency through dynamic processes and workflows with the integration strategy using API and AI technology. This provides a more scalable digital experience for our clients and a more effective delivery of service to our clients on an enterprise level. And finally, the success of the quarter would not have been achieved without the great team that we have in place. Like Scott, I am grateful for all the dedication and hard work. At this time, we are ready to take questions. I will hand it back to the operator.

And we'll take our first question from Steve Moss with B. Riley Securities.

Maybe just starting with, Dave, you kind of touched on loan pricing improving here. Kind of curious what you're seeing or how you're thinking about pricing these days as the 5 years kind of moved, call it, 40 basis points in the last month or so?

What's kind of interesting as we've discussed in previous calls, there's a little bit of lag effect to the market. So it takes a while for the competition to adjust. So we kind of feel that we're in on a little bit of a range-bound level, especially pricing around the 5- and 7-year. Our expectations is we'll continue to see pricing at or above the current level. But as we see from time to time, competition can drive that slightly lower. But our expectations are we'll continue to see improving yields. As we mix our percentage of C&I to real estate lending, we are starting to see those levels modestly improve. But I think one important aspect to that is all of those loans are variable. So as we see interest rates change, we should get positive benefits on the short end when that continues to move. So it's kind of a mix across the board. But I guess net-net expectations are we should start seeing some additional improvement.

Steve, I think that's an important comment that Dave just touched on. Only a couple of years ago, we were pretty liability sensitive. Today based on some of the research that we've done, we feel like that from an asset liability perspective, we're almost completely neutral. And with the combination of TGRF or First Florida Integrity, that should put us in a position where we believe we'll be asset sensitive. So that's a huge transformation from just 2 years ago with the way the balance sheet looked.

Right. No, absolutely. That's fair. And then maybe just in terms of the loan pipeline, I hear you guys expect to achieve basically your $4 billion type origination target for this year. Kind of curious with how you're thinking about next year, if you have any updated thoughts there?

So on our forecasting, we've included modest growth against our current origination levels that we expect this year. So we have kind of that expected compounded growth. We haven't factored in some of the newer groups that have been coming on board, significant volume increases. So I guess, what I would say is we still expect strong originations through the next few years. And the upside is as these new groups come in, as we've experienced in the past, we definitely should experience some lift from those groups as well.

Okay. And then on those new groups, I know in the release, you guys mentioned FTEs were up over 5% quarter-over-quarter. And I know you've had a number of hiring releases over the last several months. Just kind of curious, give us any incremental color as to geography where you hire those people and the type of what business line, if you will.

It's kind of been across the board. We've had a conservative effort obviously, in Texas to bring up - stand up our funding operation in Texas. So I would say last quarter, significant portion were in the state of Texas. But as we've mentioned, probably an equal amount were in new C&I groups, both in California and as well as our builder finance group that we've hired and are starting to staff up in California as well. So it's kind of in, I would say, equal between Texas and California. We are obviously, as we scale up, adding additional infrastructure into both operations to help support programmatic and expected higher loan origination levels as well as some additional staffing requirements that we're going to have for deposit services, as well as we are staffing up for expectation of compliance, audit and other risk areas as we complete the merger and expect to go over the $10 billion mark.

We'll take our next question from David Feaster with Raymond James.

I just wanted to follow up on that last question. And maybe just get a sense of how production has been in Texas in the new LPO there? And it sounds like we're still in the early innings within the builder finance and equipment finance. Just any updates on those themes? And what you think the production capacity is there? And whether there's any other verticals that you're considering expanding into?

Well, why don't we start with - the Texas group started to put numbers on the board last quarter, and we'll see numbers coming on certainly in the fourth quarter. So we would expect them to start hitting what we would consider a normal run rate for that group going probably first quarter of next year. And we're talking - our expectation, at least from the group we have is $100 million to $150 million a year based on this current staffing and then we're going to build from there. But we would say equally on the builder finance group, they're starting to fund their first loans out now, and I would expect kind of consistent number from them, $100 million, $150 million. Their loans will revolve quicker. So the natural balances won't quite build as fast as we see in the income property area. Our LA group in the C&I area is starting to fund loans out as well. Our expectations are - hopefully, we'll have a pretty significant number from them. As far as new verticals, we really haven't strategically looked at adding any other traditional financing products. We're getting, I would say, to a level where we have a pretty holistic product offering. We've had a little bit of expansion in our consumer lending area and there may be some opportunity to expand in consumer. But I think what you'll see is consistent core growth in our C&I originations, consistent core growth in our income property originations, consistent growth in our residential mortgage and consumer products. And then across our other ancillary businesses within C&I, we're staffing and hopefully going to see growth in SBA, continued growth in equipment finance and again for the new groups that we've added. So I would say that we don't see any new business line that we expect to add at least in the foreseeable future.

I think it's more about geographic expansion at this point rather than seeing expansion into new vertical lines. I'm with Dave. I don't know what we would add, to be quite honest. I feel comfortable with the lines that we're in. And - but I think we can continue to see some growth in geography, which I think will be important for us as well.

Okay. That makes sense. And then just wanted to touch on the securitization, just given the strength that you guys have seen, does that change your appetite at all for additional loan sales near term? And then just given the diversified production and the inclusion of TGRF and expansion in Texas, just curious your thoughts on securitizations going forward.

Dave?

Yes, certainly. It's been a strategy in order to - as Scott mentioned in his opening comments to holistically balance our income property product offering. So we have large clients that have a need that can far outstrip our balance sheet capability. So it's been a great vow for us to continue to make more loans to those customers as well as keep our CRE concentration somewhat in line. So our expectations are as - we'll continue to originate and securitize about the same level of product, at least that's what we typically model going forward, there is great opportunity to deliver more. But it really is a balancing act between loan growth and net NII growth, which is how we make our core money. Certainly, gain on sale is additive to our strategy. And as we continue to expand into these other markets, we could have an opportunity to increase the size of our securitizations going forward. However, at the same time, we are going to have a bigger balance sheet to make sure that we can continue to grow as well as we still are dealing with an overhang of good quality core deposits that we need to deploy into loans and start earning what we would consider our normalized spread. Our margins getting a little impacted, at least temporarily because of the overhang of cash. So it's kind of balancing excess gain with normalized earnings going forward. And I think we're - I guess, net-net is kind of status quo going forward.

It really is just more a function of working with our regulators to make sure we're staying within the commercial real estate guidelines that we've kind of discussed. And as Dave said, legal lending limit to any one group, we don't want to turn away business because we don't have any more growth opportunities with the client.

I'll add, I think, it's important to appreciate the competitive advantage, our ability to securitize is, it's a process that takes the entire year. For next year's securitization, we're preparing now, we'll work really hard through the year. We have a number of people in the company who will be involved in that and outside vendors that assist us with that. It's a very complex process that not every bank can pull off. And having that ability to leverage that process and our expertise, I think, is really an underappreciated competitive advantage.

That's a great point. And kind of along those same lines, I just wanted to touch on the crypto partnership. Glad to hear that this is still on track to launch soon. Just wanted to kind of get an update on your thoughts on the timeline of the rollout? And maybe what products you expect to be rolled out first? And then just as you guys have gotten to know NYDIG and FIS more and that partnership has deepened, has that - the scope of that changed at all? And what kind of benefits you're expecting as this rollout occurs?

Yes. We'll give you a little bit of update. And actually, our core provider, Fiserv would be upset if we didn't mention that it was an FIS, but they are also working with NYDIG as well. What we're really trying to accomplish is getting the first series of products to market. And we had talked about our digital delivery expansion and really providing what we would consider a modern-day mobile app or what we would consider a consolidated wallet for our customers to have a 360 view of their entire financial relationship. As part of that, it's giving them the ability to have execution with Bitcoin to be able to execute with NYDIG and we will be the reporting entity that will provide that through our traditional bank channel. That's really where our core focus is in delivering. There's probably a dozen of other great opportunities of product delivery through Fiserv and NYDIG as far as potentially down the road additional currencies as well as rewards programs. But first things first, we've got to get the first product delivery done, make sure our regulators are obviously very comfortable with our products in delivery. And then I think you'll see once that settles in, probably a more accelerated launch of products down the road.

I'll add. We believe it's very important for our mainstream clients, for banks to be involved in digital assets. The heights of the internet's adoption in history, the adoption rate was 63% growth a year. And digital assets are being adopted at 115% a year. It's the fastest adoption of technology in history. Our mainstream clients, we believe, don't want to have to deal with exchanges, some of the complex process. They want to deal with their trusted bank adviser. We're really a first mover in this area, but very conservative in sticking with our knitting, just providing Bitcoin investment opportunities within our environment for now and then add - with the potential of adding more products and services over time in this industry.

And we'll take our next question from Gary Tenner with D.A. Davidson.

David, you have gone into this a little bit as you were kind of talking through, I think, the deposit portfolio a bit. I'm curious on non-interest-bearing deposits. I mean some kind of wild swings, I guess, year-to-date, still up at September 30 versus March 31, but up $1.1 billion in the second quarter on non-interest bearing and down $300 million this quarter. You talked about commercial deposit services group being the source of some of that. But I just wonder if you could delve into that a little bit more. Because I don't recall there being any discussion about expectations that second quarter growth was at least short-term kind of transitory.

As we mentioned, we consciously made a decision to look at some of our larger depositors that have higher volatility. And effectively cap the amounts of deposits that we would accept from them. And because what we're seeing is tremendous amount of demand from great customers that we're continuing to board. And as we mentioned, about 73% of all our deposits are great core business deposits. And it's a balancing act. So we, as mentioned, made a conscious decision to exit some of those relationships and lower the limits of what we would take. And most of those are non-interest bearing. However, they do have other service costs related to them. So we focused on limiting some of them by size and some of them by volatility and some of them by - they were costing us a little more in interest - excuse me, in earning credits than our typical clients. So that's - it's a big balancing act. And with the securitization, we wanted to make sure that we didn't have too much in the way of outsized cash balances, even though they're higher than what we would like to see. But as Scott has mentioned in the past, it takes a long time to develop these clients, and we want to make sure that we don't knee jerk and just cosmetically lower balances to improve our financial metrics. Because as we have expectations of larger fundings down the road, those deposits will be needed. But we would say that it was a conscious effort to lower it. And then we had some seasonal runoff that we expect. And this quarter is typically where we see the higher runoff of our DA balances related to some of our larger MSR clients. But we see no slowdown of demand for deposits, and we could obviously grow them at a much greater rate than we are.

Yes. I think honestly, if we wanted to, we could pick up the pace a lot. I feel like we're asking people to sit on their hands a little bit with regards to deposits. And I'll be candid. We've had some real opportunities to hire some people, especially here in Texas. And we've been reluctant to do so just because of you're hiring somebody and then asking them to not do anything. So I think that's - it's a world-class problem to have, but that's kind of what's happening to us right now.

Okay. I appreciate that. Would you say that in terms of your kind of active management of some of those higher balance or higher volatility relationships, is that kind of settled out at September 30? Or is there more work to do to work any of those out of the bag or off the balance sheet.

I would say that we're kind of done for now. There's a couple of things that is going on. Obviously, we'll have some rundown in the fourth quarter on our traditional MSR relationship. So that will help with some of the excess overhang of cash. And then we obviously going into a close with TGR. They have a pretty large slug of excess liquidity as well, but there's great demand for us to deploy that. So we've kind of are back in the market and just booking relationships in normal course. So we don't expect much in the way of programmatic rundown. Any color on that, Scott, from your perspective?

Yes, I think you're right. I think the bottom line is we've squeezed the blood out of the turn up about as much as we can. I wouldn't expect to see deposit cost come down much. We've already, I think, done an exceptional job of getting deposits down. And now it's got to be that we continue to put money to work. And that's making sure that we keep our loan portfolio pipelines as active as we can and I'm very favorable on it.

Actually, I'll start off with a follow-up on what you were just mentioning about putting a little bit of the excess liquidity to work, it could help NIM. And earlier in the conversation, you mentioned about how excess liquidity may continue to drag on the NIM in the fourth quarter. So I was curious, and I know it's tough to gauge, but should we assume kind of a flattish NIM from here given the push and pull? Or are you kind of leaning one way or another?

I think the - for us as a stand-alone, we're probably flattish for a little bit, and then we start to rise. But we do have the acquisition coming in and they are sitting on a larger cash balance. So we'll probably expect a little bit of drag from them at close depending on when it closes. And then we'll - we - our expectations will gradually rise from there.

I agree. Dave referenced the seasonal outflows of deposits we have in the fourth quarter, which would benefit our NIM and will. Then you add - so we'll probably end up being a little bit flattish on a legacy basis. But you had TGR whose net interest margin is more in the mid-2s. They'll be a little dilutive to us. But as we deploy some of this cash into large loan growth as we continue to really monitor and control our deposit portfolio, we actually anticipate next year kind of settling in the mid-310 to 320 kind of range.

Great. Very helpful. And then I had a follow-up on the securitization and the gain on sale of $18 million. I was curious, is that margin, the gain on sale margin, and I calculate it to be like just over 4%, is that - how should we think about that as we look to next year's securitization? Is that kind of the middle of the range? Is that at the high end, how should we think about that?

It's really at the high end. And what I can say is we threaded a needle in every which way. Spreads were extremely tight on securities. The 5- and 10-year, we're sitting at pretty much the lowest levels that they had been. And then all of a sudden, we do the securitization, price it and the 10-year moves out, what, 40 basis points or so. We did not hedge the securitization this year, which is new, and it really had to do with the fact that we were able to put on more current coupon loans into the pool, which kind of dictated or said that we didn't see a reason to really hedge the pool early on. And so I think you take all that and it was very favorable. If you look at prior years, I would say - I think we've kind of said 1%. But I would say if you're not hedging, it's going to be a little greater. But it just was - I mean, we threaded the needle this year.

Just to add, typically, we expect credit spreads to be somewhere around 1%. That's we've - we've seen it tighter, and we've seen it wider than that. And then the current environment, they came in at, call it, the mid-20s, depending on the tranche. So significantly tighter. Three quarters of a percent translates into a few points. And then as Scott mentioned, we - the 5-year was, I think, at a little over 80 basis points when we locked in pricing and then it gapped out to over 1. So that's another 20 basis points there. So if you're 1% of excess coupon, that could be 3 points of execution depending on the duration. So if - we never know going in, if credit spreads are going to be wide or narrow and we just - like Scott said, we didn't hedge because of the seasonality of the pool was current, we just hit a favorable environment. So long story short, we think that's probably a high watermark for gain. But we could be surprised one way or the other.

We might sell the entire portfolio if we could achieve a 4 point gain on sale.

We have a lot of capital but a lot - too much cash.

And this concludes our allotted time for today's question-and-answer session. I will turn the call back over to Mr. Scott Kavanaugh for closing remarks.

Thank you again for participating in today's call. I'm very proud of the results we reported, and I'm very proud of our employees and the job well done. All of our business lines are doing well. and I'm very pleased with the path that we are on. As a reminder, our earnings report and investor presentation can be found on the Investor Relations section of our website. Thank you, and have a great remainder of your day.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.