Joe Kauder: Operating expense.
Andrew Terrell: Okay, perfect. I appreciate it.
Jared Wolff: Thank you, Andrew. Appreciate it.
Operator: Our next question comes from Timur Braziler from Wells Fargo. Please go ahead with your question.
Timur Braziler: Hi, good morning.
Jared Wolff: Good morning.
Timur Braziler: Jared, you had made a comment regarding loans that balance is more or less flat as demand is okay. But you’re continuing to see some runoff or maybe expecting some runoff. I’m just wondering, as we’re looking at the categories today, where could we see some additional trimming off of loan balances?
Jared Wolff: So in the discontinued portfolio, premium finance loans, like, we laid this out in a table in the deck of what the discontinued portfolios are versus kind of what we consider core portfolios going forward. And you have premium finance, lender finance, all those things. And lender finance is coming off at about $100 million quarter-over-quarter is what it was last quarter. And I don’t know if it’s going to continue at that pace, but that 732 is running down, and it’s a lower yield. It’s a little below 3.5%. We have some good yields on some of the other stuff. Civic’s is coming down for sure. A portion of that is bridge, and the other portion is kind of for rent single family. So those are two of the categories that I think, student loans, there’s barely national lending left, but the stuff’s running down.
We think the loan portfolio overall will be flat to slightly down. And this is obviously an environment where you can get reasonable yields with your liquidity relative to the stuff that’s paying off. But obviously, we want to deploy the funds in good loans because the rates right now are very good for lending. As Joe said, 7% to 8% is what we’re getting and in many cases, higher than that. And so we want to deploy in good loans, but we’re being conservative, and we’re making sure that it’s the right relationships, we really want to use our balance sheet for our clients and for full relationships. And so we’re ensuring that when we are lending today, it comes with a real relationship. With the reduction in banks overall, it’s easier for us to require larger components of the overall relationship to bank with us and to lend.
And in the past, it was much more complicated given the position of our bank and the options available to the clients that are speaking to us; we’re in a much better position to demand more. It’s not to say that every client is going to have a single bank relationship. I talked to somebody yesterday I ran into it a restaurant and a well-known real estate guy, and he said, can I call you after lunch, I said, of course, and he called me as he said he would. And he said, look, we’ve been with First Republic, which is now Chase. We’ve been with City National and they’re pulling back. And are you open to talking to us. We have about $40 million to $50 million in balances. We’re not going to put it all at one bank, but we do need to put our operating accounts somewhere.
And I said we’d love to talk to you. I said I want to make sure that we can serve you with what you need and how you need it. And so let us look at all that and then come back to you to make sure that we can meet you where you’re going. But there’s a lot of opportunities like that.
Timur Braziler: Okay. Great. And then maybe, again, just circling back to your comments about bringing back legacy PacWest deposits that left last year. I’m just wondering what industries those are in and to what extent you’re getting some of the venture tech-related deposits reengaging with the bank?
Jared Wolff: I would say the deposit outflows that PacWest had and that Banc of California had as well, but they were obviously more dramatic at PacWest. We’re in all areas and so there isn’t an area where we’re not looking to bring deposits back, but the headline, of course, was the deposits that went out on the venture side, and how PacWest classified those. I would say that my observation and the data that we have is that those relationships are very, very strong. We’ve been able to positively promote the strength of our bank. And this combination really, really gave people a lot of comfort. Our credit ratings came out, obviously very strong. And so we have been successful at bringing back relationships and deposits up left in those areas.
And we’re going to continue to do that. The area where I want to be careful is we all agree that we’re going to manage concentration better, so that we don’t end up with depositors that are too large for our balance sheet. And we have corporate asset management. We have a great tool that we can use to have balances in the family, but not on the balance sheet. So we might be successful more by bringing back relationships even if they don’t show up in our deposit numbers because they’re in asset management off balance sheet. And so we’re doing both. We want them back. We want them in the family. We want them here. We think we can serve them better than others, but we’re going to be careful what we keep on balance sheet and what we lend against.
Timur Braziler: Okay. And then I guess just last for me and you, again, you touched on this a little bit, but looking at the payment rollout and where Deepstack fits into all of this. Originally, when that was introduced, the update was kind of revenue contribution back end of 2023. I’m wondering if, a, the PacWest deal delayed that a little bit? And then b, if you can provide some update on the magnitude of what the payment vertical might look like and what PacWest does to that run rate?
Jared Wolff: Absolutely. So we said that deep stack on a stand-alone basis, old Banc of California, we said that Deepstack would start contributing meaningfully to fee income in 2024. PacWest has fee income historically at $10 million to $12 million per month and that is continuing. So the ability of Deepstack to make an impact on a fee basis, on a revenue basis, to the combined company is no longer there in 2024 to the way – to the same magnitude it would have done on a stand-alone Banc of California. So just to put it in context that on a stand-alone basis, it would have contributed meaningfully, but it’s obviously diluted now. The payments business that we’re building is three things. Its merchant processing, which is our ability to go direct to merchants to process credit cards without any third-party intermediaries.
It’s issuing, issuing credit cards directly on our balance sheet to clients to whom we have credit. This isn’t selling consumer credit cards broadly. This is giving card solutions to our existing clients to whom we already provide credit and benefiting from the interchange as the issue of those cards. And third is using our rails, our infrastructure that we’ve built and binds the identification numbers that we have with MasterCard and Visa to process third-party transactions for trusted partners like Worldpay, like others who are well known in the business. Those are the three layers of our ecosystem, and those are all rolling out now. And so I think – I’m hoping that later in this year or by the end of the year, it’s making enough that we want to call it out specifically.
