Pacific Premier Bancorp (PPBI) 26 Jan 212020 Q4 Earnings call transcript

Good day and welcome to the Pacific Premier Bancorp Fourth Quarter 2020 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Steve Gardner, Chairman, President and CEO. Please go ahead.

Elie. you, Thank everyone. Good morning, you joining appreciate today. us I

morning As earnings our this quarter you all aware, are we report XXXX. released of earlier for fourth the

we you also be have published updated presentation We an speaking today. that to investor will

If copy you Relations visit encourage we to presentation. the not you download our a done have to already, would so website of Investor

how questions. in will I prepared remarks our encourage earnings those financial terms business, may our and open been and the light X impact investor results we In up current in condition have going present I'm presentation. presentation of that to of the call harbor Slide you have will today forward-looking I and to the call on all carefully, I to it and release our particularly to then of read comments, start through would which our our statement Ron we of note expanded, operations. the and that and pandemic of relative COVID-XX safe

bank's while loans modification the the program effectively $X.X pandemic quarter program largest the the in the managing capped and short of unprecedented accelerating borrowers of company. burden with consolidations productive XXXX, extremely interest. impacted eliminated a able Throughout loan date performance to We recognition. completed timeframe. and an year conversion, thoughtful the and our than in dealing the we by We process our accomplish initiatives. launched And for then that a while significant were to integration, implemented loan more number selling and system funded loans acquisition including challenges, a fourth branch we Our protecting PPP revenue forgiveness by billion the assisted designed

been of performance it important than never in more and strives Our has strong XXXX. accountability, continuous was that improvement for one culture

our appreciation I our our express organization. for and entire Our delivered efforts of stakeholders. of the Board Directors, over for team extraordinary behalf want of our stockholders, all community, consistently clients, to for On the

reflects and run to Turning quarter growth average earnings we to adjustments levels as to In equity consolidated completed fourth power. We drive able our should our XX.X% results. further assets we that economic X.XX% the a final exclusive tangible strengthen of operating the ahead XX and are on conditions expectations. leverage. loan of delivered system and generated and and which from average of more continue cost the improve to respectively, made October, common strong transaction our savings improved performance branches conversion, staffing expenses merger-related and We return

us, we With these towards integration final development. focus of more items shift behind were to business able our

prior in the fourth originated We quarter, we in million that doubled increase in into what $XXX than saw we loan the produced million During and business. commitments more fundings significant $XXX translated quarter.

of in seeing to are most impact economic starting attractive clients We standpoint, more opportunities from activity and our plan increased positively that's continuing markets an and seeing loan pipeline. our to anecdotal growth we're for

we is Obviously, relative are a trajectory. but the economic deal well great So uncertainty, cautiously to believe our are to optimistic of of there we outlook. we regardless positioned perform growth still

While elevated rated and payoffs we in loan saw a production, few strategic not sales it of significant sufficient to a credits. was increase offset lower

balances loan result, declined As in a our total quarter. X.X% the by

overall loan our a do been loan economic the sales not strong have in trends we activity. clarity portfolio expect greater we growth, future be headwind given significant this have to around with the along year payouts While loan a to

improve trends was stable strong, very during quarter. remains the to quality asset the fourth Our migration

through higher to the in deposits. deposits Our cost with non-interest acquired declined XX the along which cost of acquisition was bearing repricing during due deposits of Opus points growth quarter, to the basis primarily

with the return of of our amounts Our to size XX% is provided increasing us the of company our in And we shareholders. stock the amounts capital program. recently a that throughout opportunity quarterly increase We pandemic. X western ability our bank a greater announced to our generating repurchase and execute We've has company today to comparison are net X, announced, history revenue capital highlight and Slide share. despite and raising a metrics our strong of of the to On we per of generated review successful peers dividend number financial $X.XX to on pre-provision consistently important M&A. the we

to M&A X our core competency an and holding and both the for that strategic summarizes has will it pursuing long-term capital organization our shareholders remains company. of a all executing We aspects and remain and competitive shareholder expertise track on Our drive in for active record transactions maximize strength company. bank the of a Slide value advantage value. of

All exceed well the thresholds. of ratios capital our capitalized regulatory

As value book to first value the ended tangible active Opus acquisition. quarter that prior always acquirer, tangible been XXXX an higher the at mindful to we the bar of a $XX.XX than and protect in have share in evident is chart. A book year the

for Pacific provides to standing Our balanced and summarize that approach Slides our us innovation to to approach total and positively management key we a high On technology stockholders. and return a of Premier. XX degree our generate the long with as our impacts we flexibility differentiator ability leverage of capital XX,

clients. fourth complex are demand handle details commercial us needs additional banking meet the to Our digital provide enabling turn Ron our to this larger I'm to the positioned financials. for more investments have the and solutions on banking going At over of to call quarter point, some us well increased to

and pick good I'll illustrates Steve, morning. on our performance. Slide up of XX, which Thanks, the strength

efficiency pre-provision assets X.XX%. XX.X% average we a of here, on and ratio illustrated net return As a revenue delivered

the strong performance non-interest lower and excluding by costs. in merger-related operating net our increase expense was continued interest demonstrated Our income

and generate interest the points. revenue factors up in quarter prior Slide net fourth basis capital to the and core increase from seven nine quarter, continues our highlight came On growth at basis net X.XX% our initiatives. Our our capital which interest that pre-provision significant margin X.XX%, XX was in net margin, point affecting the a we supports management

highlighted primarily prepayments. loan with lower basis largest driven repricing deposits. our higher And waterfall of non-interest our to chart attribution of our of the the bearing cost the elevated six cost fees in and increase growth lower interest-bearing to on points drivers funds deposits were by deposits X.XX% decreased of As and a combination due

the transaction. As from were our Opus result fourth than The X,XXX. Slide rate cost at down XX, XX at realized of and completed, during the estimated non-interest expense as have highlighted XXXX been ended to of run of excluding savings a our now $XXX on expense million extrapolates during less costs XXXX the fully acquisition million announcement actions quarter we merger-related the post as the second conversion annually, the remaining quarter half $XXX headcount the

throughout entire $X.X the other During the recognition fourth which million. of all these employees the special tremendous accomplishments paid senior we pandemic, quarter, in bonus, executive totaled managers than of team appreciation a

capacity losses Our remains $XXX allowance acquired loans plus of on million X.XX% or $XXX of This the for total of is strong of absorbing remaining very for comprised highlighted as loss of million. held loans $XXX fair-value on an million credit investment Slide XX. discount

composition. change sheet the held ACL the unfunded Conversely, well for increases X%. quarter, as ACL key the from decreased balances in loan as of above loan were our mix by Our the overall loans ratio of as to from investment although for off-balance the portfolio. The lower remained as commitments allowance increased quarter the of commitments well drivers driven for loans prior prior

highlighted base varied with traditional residing our and diversified businesses. third our split two-thirds Slide our XX, As the on deposit deposit in is remaining branches amongst

including the X% or bearing deposits cost deposits continued $XXX from we off increased non-interest prior run CDs. million Our to and retail brokered opportunistically quarter our higher and

we the securities portfolio Lastly, our XX. composition Slide summarized investment of on

strong billion our X.X trends into securities highly decreased and the excess call our I'm level X.XX% portfolio the around CMOs. turn our rated loan near-term With During we will demand. quarter, for back our and yield deposit to liquidity at portfolio years. sale over XX% redeploying our of some total assets, at this the AAA likely remained available of Steve. munis, going liquidity to increased slightly to on our With and portfolio duration The to remain this, on we stable depending securities securities and X.XX agencies,

XX, on through lot spend credit I'm of around Very good. a trends. XX of not detail lot time a going to provide which Slides

portfolio performing at and high diversified well loan level. a is Our

of multifamily performing multifamily mix. best loans the acquisition became terms housing of risk of make shortage in US. likely and significant will concentration. portion one we been the historically portfolio our expect returns With medium-term, Opus classes only largest Western up in adjusted In This to short of the the asset the a the part in

modifications of XX, we social, and of loan And and the quarter process some significantly generally very have asset previously through extensions loans focus this Our modified loans, have of information governance our to to low fourth assets year-end. period. non-performing there volatile X.X% highlight throughout and areas classified strong assets, Delinquent of over quality the during related strengthened included COVID-XX on all remain matters. quarter. temporary loans. were in at metrics levels environmental XX On fourth key no Slides remained declined as

consistently improvement commitment we responsibility. ESG. highlight On XX, is to culture Our the our corporate Slide pursuing one that continuous is throughout including company

track economic support help to long-standing our time inclusion. We that and strengthen of investing have foster record and of capital diversity and accomplishment a communities organizations our

climate impact of risk and framework loan within the standards began During related environmental to a our the change. we XXXX, portfolio developing for evaluating our assessing loan

evaluating response we accounting summarized We actions are pandemic. disclosure sustainability On of the the during adoption Slide XXXX standards implemented to the and also XX, around additional we methodologies. in

can on to structure. and On health XX and list, employees see, resources While this time communities. exhaustive our Slides spent providing highlight you is governance not and we our safety considerable as our and clients while an we XX support

diverse of the officers. backgrounds, have firmly something XXXX, engagement, risk directors and Our strong encourage board executive since practices the individuals. and believe Board independent transparency board Governance is added in. is and full we And four refreshment highly with within capable among we qualifications. management, composed lower expertise,

equally are to in of We terms having ethnicity. and diverse dedicated board gender a

accrues matters, recognize any nine are female. a independent diverse perspective we our value more and directors three of notably on that company to our of by having As the number

through while our every XXXX, to value company As of our all has building ready more long-term committed shareholders organization organically we to remain sustainable and of been take grow impact positively advantage and aspect never stakeholders. We of acquisitions. our our stronger capable to improving further to expand for and both enter opportunities

ongoing continues we the about On Directors, returns. I environment, maximize near-term our feel appreciation the the sincere of Board to of are shareholder behalf express to positioned men pandemic we you questions. optimistic you XXXX. up how the open to While impact may for to With have. Pacific of please call that Premier outstanding answer could for would to we be women their and happy work the questions in want Elie,

Davidson. D.A. with [Operator first Instructions] Tenner question comes Our today Gary from

I the of just couple year, had as or had for you questions generate wondering loan part year growth. early your the to strengthening segments pipeline production? loan into loans relates opportunity couple morning. what you offering the of grow I I questions. of out most the see bit. you XXXX about a to And quite Good guess as a I'm talked and a bank look

it's categories Gary the and think business lines in of across various of really I the in. board all we're that

year through the really never I all and to over the the that entered pipeline that months, billion. XX over go we've been the stronger this start $X beginning we As to and benefit. XX capabilities little acquisition added see we're And has mentioned to to people Opus our last as organization

categories. it's say would various So across all of our I

then OPV And were that the kind quarter the recognized. special of the or cost the fourth expense think and bonuses, of appreciated quarter, of I of all X.X outlook comp end noted regarding one-time kind fourth savings in the year I that you million

So the kind as the out, that kind going kind you put first think quarter where of expense of would number? of into stripped run base of operating you

and ahead go to want you Ron, respond?

the is obviously, a with $XX also as at charges we we're will, have course, benefit of loan higher any of that, is to had deferrals. as parts have you we million we sit some incur, Sure, today saw that's, the might extraordinary taxes, Steve. with right right the our press lot enter payroll level good in minus NIE in you but looking right of there a special range, bonus, year now staffing plus we now or we will that but higher excluding if our that release, but here moving Gary, the originations did as

XX that quarterly of on net-net minus it's kind million. or basis So I in XX range think again plus a

in regard earlier And one back question. closed I just then the year if converted it could since over ask OPB more obviously to With fall. you M&A

stock has potentially your Just deal. environment you've currency M&A a thoughts work, of use got the to around obviously a bit in

are your So I'm thoughts there? what curious just

obviously that environment. of that consolidation this the economy Well in think about trends services I we've talked in had that trend and large COVID going particular macro increased has a on only the rate been accelerated lot financial in pressure low has in has towards only that this Gary

we're as then always we're acquirers to of an us more road. actively down partner are, enter talking talking the of part better around certainly institution ultimately so a always going also factors even reaching can one are either attractive creating our with And And looking that as be to process the and interested our at combined the folks. process we do mind potential and where we generate disciplined would individually. the always basis and folks, we're are Those are out to becomes be shareholders then on a on we returns for and may to

question Our with Sandler. Piper Matthew from comes Clark next

On lower quickly than core obviously, expect and margin defend higher? the activity have, about should the forward year before you or we, to be remix you with here you've might maybe to I deposit a we XXX step the a loan past had little grinding able pipeline. you've the down again still in and NIM guess got of going prepay the how kind assets much a to less help start ratio to do

rate that's Yes, hopeful, the we'll a go. that in probably little slower we bit I payoffs Matt run think, see were fact the accurate on

markets organizations just really seeing talent expect, to that the maybe are loan our expect And do mentioned we like we're is We and and on same see. out make largest we'll what in optimistic, around disciplined comments, head at of the don't demand in we some prepared dislocations offering just be some at sales our of seeing pricing. here unknown you're onto we we're where banks the rates brought again go, that then I seeing is time, going to is the we're the there payoffs. scratch The the the the of us As some us most we make to going not around organization.

the likely vaccine to and And we'll encouraged where it seeing point all margin. the to ratio time. at the think out over with next in increase loan So We're comes you the see remix sheet in certainly the deposit as here it the together shakes and tunnel balance improvement out to months impact accurately on some light I ability rollout then the it as here potentially several of the end economy. its and as relates the pandemic on the

just will production muted an gain will and that then there that in quarter, on was - fairly come And SBA to it sales expectation year? Okay. related is sale, new this start you know back volume the here on

somewhat the the demand is in muted SBA Maybe at second half - moment. year the of

let low continues economy And recover? go CECL then In how that post X.XX%. you to would on the at a world ACL the assuming

of that so quality. on and capacity the balance asset of to trends this very that the healthy the X.XX consideration have in the value we And fair play say. obviously you that, to loss to addition given at to have are model. of that total sheet, hard number seems and give portfolio into the to It's point a factors the There be the discount performance overall absorbing

me. last And one then from

upwards same if to buyback tangible, Just here this appetite? on assume still have a times last the I I it know you've around some X.X times. you - don't level. at time you the aggressive is pretty realistic of buyback could two know got but do

certainly stock at to we'll expect - I us pretty outlook here. closely. is it given our And looking come be think I'd attractive the

comes with question Jackie next Bohlen Our KBW. from

participant curious, was are what I and you next a plan in to thoughts just Steve, your that? if the of PPP on round be

We a don't We're demand. be to direct seeing significant plan not participant.

They during have have recall the platform We had the a you we nice with a as non-depository. summer. relationship to the back loans PPP that folks a there very sold

to or So have to them. want of might program look clients that we referring into we're avail over any the that themselves that

specifically a know. liquidity that And lot that to now around flowing more to helpful mix just have. of then sources Slide I come. really stimulus potentially of And and and XX That's you know deposit looking obviously at the there's

other Just might composition through about roll year how you of on? your have as do faced the of this were the and going conversion you strategic you of think upcoming through Premier some next in Pacific light deposits the year and Trust initiatives particularly

that year off. had, think we deposits where ended I pretty cost the we ran what the stable we that high

a down. likely amount off. small certificates at mix. minimum a with have of run wholesale the those brokered we'll will that pleased Also reprice We're We

never of had sit higher it satisfied, we we're part bearing continue the much push in of past want to of noninterest is the we However function to a acquisition up. today where that We've Opus.

we expect to relationships clients. built could but on So over time, good further with that, solid improve

that not, but lines pleased so all to doesn't is over a or satisfied. we're we we're with And clearly are, organization. we're rather of business we're never for of in where satisfied but - come improve night, us our throughout and There the room

And you add business that primarily or a Pacific Premier the some could and does deposits Do of conversion also as to move help a that Trust. noninterest matter pending you - the income you wish? generator through in view

their year the grow business that we expect as deposit fee higher grow potentially as well well. we second income assets of as half more expand larger As custody under and levels of the so as in balances

from benefit a So that double then.

Okay, great, thank you much. very

Certainly.

Stephens. Terrell from comes with question next Our Andrew

did overall want on the optionality wanted us, Yes, funding like the to on of is base. repricing of ask bulk the margin. I start deposit It the just just seems about the to but I behind kind

redeemed and price from look pull balance just higher and sheet? Do further any liquidity to is this be of the to levers some something trending maybe and year of on look you was are growth given kind are you up? that think Opus debt side that there is shaping how think can the you that's liability acquired I there redeem could

accurate. We'll think our consideration and consideration I at into that sub that's planning. take and it to capital give management overall that level to and in see look debt bank is the

right we're bearing. particular side lower to but benefit the and points, can manage some a there continue deposit increasing We'll we isn't you're improve of in think up go I room on at mix that the non-interest basis pick XX to there. by lot where going closely to the

to appreciate remaining of duration of I needs Understood. it. to you how as the I'm trying well. Can kind us has just the understand here that balances of amortized. or life what maybe premium be the CD a remind this amortization long

Just trying stated presents the to tailwind versus core? think long a about of kind margin this how to the

Why listeners. don't we got you've Ron, Sure. get be to that to information or - offline that other not We're interest that why right Unless, we it get you. to that provide of to happy don't may you there.

just could obviously of follow-up, years motion. with an a we amortization I just always most have acquisitions eight then seven, being typically average very and Opus the prior Steve, Andrew. a comment, got back that CD is in already can goes briefly it, Yes, but on few It's we've fresh,

impact little weighted has It that's bit you're what six an of all-in. years, is on years. seeing life five, about All-in average going five now. probably of So average a a

James. from question next Raymond comes Feaster And with our David

perspective, troughed it in origination are those circle where at curious thinking? I'm seeing to curious all lines, reading is I high your balances of of the that you combined back just footprint, capacity I'm you level, on organic if question. you've and institution just across topics from do production made think like strength the and a the maybe wanted guess to light here or you're a just sounds loan loan what what geographic just probably hires the between the I

All right. Sure.

develop. as think were markets fourth where of as think that of impact they clarity the owners the began uncertainties business we past optimism we're vaccine, economy, I strength the some of to began the and to is some I our greater that it talking the in So in the were and really that getting investors of election quarter on seeing the these most is getting

dealing we're bit that As the there have that the markets of far impacts again and and seeing as I a they're are there talking but clients - obviously, again think we're the the all still where of pockets with significant clarity and that pandemic, here better with, today. little lockdowns we of amount in most and

get far bank. the team As and see production the we'll business continues level lines themselves create then to to as of in better also of - different and with continue amongst the synergies we'll

we're seeing come that nicely. really And so together

the loan paydowns of at amortization, go as As and the utilization the still and far as from they rates are are very payoffs net we'll growth how again - as see things early businesses far low - levels. some

activity economic we'll hopeful well. as utilization those picks potentially of that rates increases up, some So see we're

then the just And curious I'm front. on hiring what seeing you're

You've on clearly in for a that in lender view, it is curious franchise opportunities now touched you integration but Are just bit the strength the I'm some of hires? new more combined the the issues seeing the apparent. the of market, rear

talking lose we're been these I that folks think acquisitions think rejoin there out like some during is what's the to back struggles would a that there's organization. I nice you to and that some And reach that hear them want largest is always folks at couple don't organizations. you the and of been But to of to

we're all So that. of assessing

deliver as team. clients. our the I we continue grow for simply and becoming naturally think lenders of also to attracted. consistency to part to Do see be how our and we They're wanting and expand

all playing of are things into those it. So

And just segment. franchise then the on

looks there, thoughts you're curious, seeing. Just what originations It like accelerated. your

Just new any that you're curious that your on segment for credit and trends appetite seeing?

would continues but certainly on knew that again too. I decades We certainly information. performed well how - lending think business we it that portfolio that demonstrated it's a well. exceedingly of very recessionary based franchise pandemic things was performed anybody environment, that a business of and when book that think I that Yes exactly don't acquired out play resistant in

so the to to relationships continue as with build of going that franchisees in franchisors business we and and deep and leverage long-standing that past. many key have the we're have We

come [Operator Instructions] Janney. from Our Coffey question with Tim next will

Steve you let still you are the them as you is cure those that - outlook have to are, where given but you your look number, options, of at modifications. a on not your themselves? It's of reserves on deferments have big kind kind

deal see sales will, and individually of each said, had as the our of arrow that for client always much layout we've time. you an but with don't we'll see, we We'll expect I quiver, moving forward, loan if that we is in in a long period

we're and each how So with here. working from one the progress see they of clients

franchise just of And estate then rationalization loans. what happened switching you non exposure? the of quarter? you of or in color there Are to it a on some kind change may focus this real of can secured a provide kind be kind Was -

just I some that we No. in like that fact naturally talking the about we done business. just got that pay and business, franchise have seen downs

Okay.

is the downs? real pay the leaving secured estate So non

what's Tim, point? specifically. sure not I'm the

loans down get trying why asking. color I'm than on the were I'm to those - just just more some the why others?

would made paydowns on credit. borrowers paid-down That either and paid-off or early payments their where loans be

there market are M&A market - adjacent you than deals doing footprint doing than it out on market a - been that or of question deals And much Are agnostic? is then interested kind end your in of before. bigger you has is given you're more our

always as benefit. a expansion We've geographic considered

which Arizona small those Opus expanded and franchise Northwest into into acquisition us us Grandpoint basis. on expanded the Coast the before. had Pacific nationwide The lending Premier business, us expanded in been acquisition Oaks are the you relatively And where into then the are of the Pacific back We HOA lines markets at, Central Heritage going to, geographically. and Trust not look about we albeit think if a and

certainly Mountain are or I've markets shared California, the Texas. And how geographic we are of sense. various Northwest of parts many as along those and it think attractive. makes the into the of range certainly Pacific open Dallas very past whether We expansion Rocky So to where it's in

would back Gardner closing the And question-and-answer call any our like session. over turn I Steve to to concludes This remarks. for

you questions, Ron you all contact please you not directly. additional us today. to Thank if and for hesitate Again myself thank or do joining have

concluded. Thank has attending conference The now presentation. you today's for

now disconnect. You may