Pacific Premier Bancorp (PPBI) 20 Jan 222021 Q4 Earnings call transcript

Hello, everybody, and a warm welcome to today's Pacific Premier Bancorp Q4 2021 Conference Call. My name is Melissa, and I will be your Operator. [Operator Instructions] I now have the pleasure of handing over to our host, Steve Gardner, Chairman and CEO. Steve, please go ahead.

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

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

has financial also information have published updated presentation We an on performance. that our investor additional

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

then will earnings In we know. financial items. Ron notable some of terms of the the the up our open In investor of call our will today, review CFO, call I details I few and will release walk through questions. presentation. a Nicolas, to and our

quarter safe We strong reflects that strength -- our And to financial I of to encourage the commercial banking our harbor have another the all forward-looking carefully. comments. model. of statement relative those read performance all you through diversified would delivered We

generated $X.XX quarter, share to of During or million as we XXXX million per a net full-year the net income increased per or $XXX.X $X.XX income fourth share. record $XX.X

full-year record pandemic, XXXX revenues labor to impact year, the highlight year-over-year the sophistication disruptions and chain total the XX% increased as $XX.X capabilities a our including growing bankers, shortages, to million. presented of we billion. throughout total Despite of challenges by the Our and grew assets supply $XXX the results, X%

two XX remained of Asset points just total favorably points basis year the charge-offs basis representing as for and assets, of of trended and with quality we finish average non-performing the year. assets loans net

We value by X% entire million -- during Pacific the maintaining that to near-term, not profitability, of the strong financial performance, production, behalf to for only year to well in delivering another our outstanding the in franchise result results deliver XXXX. $XXX nearly as with the strong want thank of of for the increases generating deposit and share in to the new our a billion loan value of efforts solid nearly book us increased tangible long year capital to enables another balance quarter $X.X Board we Directors, team our as commitment returning of in finished Premier -term. cap shareholders between their but I development, and loan of On also while continuous improvement our business commitments. As per the

more our as benefiting production on increase also we year, commercial in loan the markets. existing Our among and merger earlier we're the was from to able new heavily-weighted in and saw capitalize within seeing than an disruptions activity towards clients. demand commercial loans We're from, that

more that Over we two the asset naturally the we and a on the years, have risk-adjusted pandemic. through basis during generated this presents past the acquisition office opportunities relationships multi-family added class loans, the given

business fourth the mix of production. of the Over and remains on clients. primary our quarter, term, longer serving shift commercial loan saw towards And back needs in we the banking focus our traditional

New more commitments prior than C&I XX% doubled. commitments franchise than while from loan increased quarter, more loan by the

utilization rates credit. loan combination in past resulted loan and Additionally, rates this quarter saw growth of of lines utilization we The an higher annualized of X%. on quarter, in new production of increase another

Our development disciplined the competitive business approach advantage. to in

our underwriting, the to be to business and XXX responsive seamlessly proprietary clients. treasury us new banking have work allows closing, Premier to relationships. our generate technology teams We consistently enables more Premier management production, highly XXX to and

an or of success important they the to they have knowing management to or than terms. last billion increased providing non-maturity reasons XX% our competing exceptional cash or So team deposits element building price with service deep, $X.X us clients Pacific win to deliver. turned and businesses It's business is needs, and additional on long-lasting relationships, deep been our on that count one Premier of on credit in when we relationships of can compared why Reflective rather client entrepreneurs year. the based

seasonality lower flows are Although largely of slightly deposits quarter, than business the continue this of of produce, result our a period-end business was positive clients. real bankers to were most high-quality for third deposit our relationships seeing in trends some key performance we Outside and commercial in across the estate the our of our areas metrics.

loan higher strong cost with in yielding into further margin net growth Our in which resulted interest us to our liquidity enabled redeploy quarter. a deposits, combined reduction this assets, of higher excess a

redeploy the maintain strategy of earnings effect meaningful highly provides improvement the last us duration and helped an of intentionally portion portfolio. more of As investment in short also call, we a to arise. we yielding of in earning liquid term ratio, our assets. the This mentioned portfolio This mix opportunities lowering as the the assets favorable flexibility has higher a on realize loan-to-deposit entire us quickly while our have with these into funds securities, strategy

fees been of We year. level also began maintain during majority Premier able second of had has half another materialize our higher solid across Pacific last the fee-generating the Trust, quarter of to that to businesses. the

as that, Our high turn synergies commercial going at results. we perform I'm businesses level, to escrow with to on our fourth our quarter call over few the realizing details provide and Ron, are lending continues to more to a exchange a teams. With

and morning. Thanks, Steve, good

on came my to included as income net income million fourth revenue linked-quarter $XX.X For statement, remarks non-interest Beginning income comparison million of total in the $XXX.X quarter a $XXX at basis. of purposes, million. and the highlights the interest for majority with are increased

the at Non-interest of net XX%. was ratio at our pre loan million in came expense from prior X.XX% revenue and efficiency contributions our fourth consistent assets, growth reflecting $XXX.X -provision million. Our quarter And $XX.X fee-based expectations higher revenue organic or strong with in was average our businesses.

million interest $X with $XXX provision and of drove the $XXX.X million. $XX.X the continue yield $X.X see of favorable recapture to Net prior credit of loss to $XX.X asset in interest results increased a million of quality loan recapture million. a we quarters fourth income Lastly, for million in average income quarter securities higher increase compared million higher the balances to

side, basis X to the had favorable funding basis our deposits the average points our a in deposit compared shift lowering in mix, points we to prior quarter. cost of On X

interest XX Our in quarter, X assets was quarter. of basis core came cash higher, points expansion principally average with in originations points million maturities points increase quarter. the and in a at during to favorable lower. $XXX with basis lower the XX new the the The X.XX% the Loan as basis an loan on fourth margin by loan X.XX%, balances margin of loan third yields rates decreased and million points basis earning Accretion driven third rates at the were than for from on contributed X.XX% and quarter. yields to XX average $XXX net quarter balances average remix compared margin repayments

the decreased the of quarter Non-interest core $X.X expect Looking to from $XX.X first decrease fees to our for ahead X.XX% a interest of transaction we million increased margin income net fees of million a be $X.X million certain $XXX adjustments in increased XXXX, volumes. attributable and primarily $XXX,XXX, prior to X.X% in and range. to investments. exchange as Trust million the valuation custodial escrow CRE equity result higher quarter,

million, market Consistent in our as $X.X to third the non-interest be in $XX income and Going Salaries reflecting to gains. for higher quarter. flat million, increased increased fees. million as remained non-interest well with range performance-based due million wage overall, employees. compared pressures. professional $XX.X first production expectations, to benefits at totaled of and Professional incentives, to legal security quarter, the -driven sale forward, expense $XX of million, the XXXX expect $XX the million $XX.X any excluding timing we expense, and our Staffing to certain

Our incentive non-interest $XX accruals. and lower expense loan $XX to approximate anticipated quarter million costs deferred offset origination the payroll taxes business due in the should first to by higher lower

as mentioned variables. fourth was million well in macro the quarter $XX.X environment current forecasted I by -- the As earlier, as the modeling key principally and driven continued of improvement recapture environment,

Turning Loans balance saw grew higher partially by prepayments. $XXX increased or sheet. line million levels as X% of another utilization, strong production offset annualized, we now of the and loan loan quarter to

of a total billion. notional in position rate In we overnight fixed-to-floating software-based, added $XXX swaps addition, million $X.X for

growth. Our securities million billion, liquidity $XXX the decreased fund portfolio provided incremental $X.X which additional loan to to

with consistently continues generate at and capital, strengthening With grew $XX.XX to manage to We our in growth compared will sheet conjunction book capital ratios. deposit $XX.XX balance continue December and to of supporting the with earnings, Company growth. the loan amounts value significant XX. solid portfolio XX, September securities Tangible at

charge-offs on release, Xth. in for declined with of at the February our $X.XX total prior basis As to February XX held record points compared quarter. finally, to noted assets earnings investment to quarter delinquencies standpoint. a asset from on $X unchanged declared recoveries of XX while classified Total payable XX the quality million net $X.X Board an totaled of for shareholders million in remained And assets of basis points. Net the Directors dividend loans

ended Great. that, with million at With few wrap the hand quarter to investment. discount a acquired of at absorbing capacity, the fair quarter it loans our remaining I comprised loans outlook. allowance value held Lastly, plus I'll will the our X.XX% $XXX.X credit losses allowance totaled the X.XX% for Thanks. on and back total for of end loss comments or Steve. up about

high are play we levels in While terms good levels in Reserve strong, economic fundamental of low looking which underpinnings to should of believe role shape, influencing environment, our and the West businesses actions Coast in activity. consumers a the the will savings, higher markets. capitalize debt has significant economy to certainly operating the the of The Federal levels year of on of this particularly to lead

should increases continued loan with rates growth level catalyst. to capability of further which balance and highest strength in in history, our commitments the entered those the have We to expansion commercial in lead utilization the be so will potential businesses, of We our support another XXXX, sheet.

sheet from in environment, the past, rates, in demonstrated we yield a have execute positioned from any rate curve. benefit able interest the new of is the balance of to as shape -- a rising to regardless rising we are Our interest

organic upon ability not recruiting new teams. While we are the growth outlook dependent to our always new for is generate banking talent, on

our consistently investing from leveraging productivity of technology, get also approach During from of we essentially total $X.X the from had gains the in development commitments X% Along our continuous our and in place XXXX, philosophy we organization banking new and we by with We same loan generated with benefit teams the improvement. in of benefit grew billion in XXXX. people. loans we the

We have And our that, increase us excellent enhanced highly we've Company, as scaled steadily efficiencies client contribution their consistently investments the have to from -- the productive allow benefited we deliver that, increased have technology developed steadily in service. and to growth. bankers have

returning capital of initiatives. to continue levels Finally, a support committed be we perspective. to organic capital capital maintaining strategic remain to to We sufficient our while growth from efficient management will and shareholders,

ensure to transaction always, make economic As M&A they our maintain we we discipline as strategic will and assess sense.

We and have have of integrating record transactions change. for created structuring, identifying, track shareholders. that consistently will That a approach successfully long value not

our we With of the team. experience infrastructure the of and and organization, built, have depth robust strength our the management

We folks will you franchise Melissa, organic concludes get are well-positioned that growth the complement on our execute to how please? our value. strategy That queue, and remarks. enhance prepared into transactions let know to

you. mute question. ask Of unmute course. -- ensure you to Thank are when [Operator you that Please Instructions] you go

comes Piper Matthew today question Matthew Sandler. first go Our please of ahead. Clark from

business changed list Good quantify quarter, in just lend that's are a and you out franchise pipeline changed that's longer fourth that as lending just basis? and late? marketplace of to to, could morning. Is some franchise of the within Steve, or coming is you the dynamic there -- willing the the of what's

that, better has we business saw as fashion. we in -- well, the back that Matthew, but the And do in and at visibility a franchisors, in naturally began to they've changed year, of there. that. are we're we performed their quick-service the had principally couple on we any add couple regularly that as and do, the all that team fact last pandemic will cut the economy any Other of out, got with team mid-part to benefit played that going time. began, producers clients when restaurants in after, of The and made as list that that we we many the haven't of very significant benefiting review it changes to models we concepts -- so in the particular, we of from the haven't producers principally a

it? Okay. had size pipeline dollars of And the you then the if in

the pipeline lowest This billion. is the here seeing beginning pretty expected -- maybe months to weeks year the typically, The come in right is We're $X.X along the activity that that is around of come. point. and good

that do Ron, that? additional swaps, for maybe And your Okay. impacts any $XXX how just sense quantify then million on you could you asset of have if the sensitivity,

points. in rate XXX any XX out our asset Net or the to Probably hike. -- basis Sure, neighborhood Matt. a reprices of It obviously numbers. increases points XXX it kind initial immediately basis sensitivity. of with floating, swapping for of truth rate Round more

the lot hiring your just Then thoughts of for teams, with what's the the getting wage this disruption expense first attention your for the Okay. quarter, range Northwest? gave What all on inflation XQ outlook, are and on given a appetite beyond you quarter.

that think pressures wage I others look, as Yes, -- seeing the we're many are. us,

I That the think to haven't we're per some franchise. opportunities it -- our good last few West. there, recruit here And we'll been would and out an increased historically, months. always very the the the we're probably that's looking in here as of are think giving we to then continue pursued we relates teams ongoing And there's talented in process we'll manage certainly that se, effectively. that, teams and disruptions enhance it bankers but

Okay. Thank you.

our Matthew. James. go David of We'll David ahead. you, Thank please take Feaster from question Raymond

Good morning, everybody.

Morning, David.

think some But want going prepared moves to about you on touched rate a just improve other a Is added the follow duration additional you the good book taken again, on happy see in And potential follow up the there you're at now? how remarks. and -- want swaps. just asset of question I to Or it up sensitivity? to the mean, sensitivity you I the I do to your bit on we've where maybe, securities forward? with some down, additional are swaps. sitting moves

are I we think this point. at we're satisfied with where pretty

we I it historically, does And with has banks of primary because deposits, or risk base. past And and looked rate us, one over rates for the we you've on rate or loans. our the no think reacted David, around the on Premier thing is pay our rates cycle. interest Pacific deposit the sensitivity the offer way business at

business business very is a why to us. model, much relationship-based clients Ours of that's turn and

around think I particular strongest of So in that interest our is that rate aspect risks. the franchise and

we will continue think with steps appropriate, in We we swaps, I'm portfolio to comfortable the as where up stand very that but whether see securities right or take measured I it's now.

continued paying then just businesses, in invest to have Okay. job on and it escrow That's the And great. puts done guys -- those it's trust you the off. a great there,

each cross-sell where started some seeing underlying curious, see maybe to those you of we core X this see -- the the on curious, have of some growth, starting just Just segments. growth? of those to in trends businesses? is are legacy franchise? the or And across Just Are comments organic really we some

southern there an think opportunities focused are call it. there's principally Maybe in the opportunities of California I it business to of that townie. escrow certainly to and to the team Further, synergies business one from it it expand XXXX? business we think and is another. we seeing Orange Will exchange that line And a incentive think and expand months business. good L.A. is referring

converted Then lot done. opportunities got the in some the the that or of that move trust a mid-part -- last and that a the to we business, of we're as work team, through lot we we of there operational attractive So been business. the on around is year very systems grow think trust Once the year. rather considering and on that work there's we've here

be now don't the large don't that maybe and for I in that place. have institutional have, a that tools some want business desire it have just We scale we the they any think have clients. They that and generally we have competitors don't It's just something to given.

to this the into that future. grow So and year here we'll looking over be

for the in in then. great commitments. one improvement Last the me. utilization quarter see C&I It's And to Okay, that's the increase good in and color.

growth the Just curious, into about any and seeing might head seeing as C&I from what think you be hearing just Are are do you C&I your you And in more driving customers we segment the really segments there how next that's that, year? improvement? demand?

businesses third as into the recovery of pretty that past, the the Delta the as and in we part quarter good got think got fourth wave quarter. and the all about latter I feeling past

where businesses expansion in the seeing, relatively demand that's modest. overall still experiencing rates, and were although we Just the we're utilization the line

into I recruiting we're and by acerbated think bank challenges be of and its has productive. But new a retaining into getting that Omicron it's clients. certainly the existing to pass both It's that bringing round, the and seeing some that employees too and will time. work employees, in that demand relatively broad-based here the clients we're

Okay. That's everybody. Thanks, great color.

David. you, Thank

Our from ahead. of next Tenner question coming Gary Gary, be D.A. go Davidson. Q - please will

on questions, of the bit seasonality a of I guess Couple at side, you think I of morning. deposit the mentioned end first little Good the Thanks. Steve, year.

talked the increase activities? C&I companies any their put Or if with drawing the you and As some draw all in year? on deposit down would C&I balances utilization, you about that just in seasonality in towards would also conjunction late of lines you wondering really of utilization kind

for majority on some towards And and we late down relatively as I'd of put their the seasonality the escrow year in move that's the typical people closed. year-end, it business balances come to and transactions get exchange start.

of some utilizing the their see. don't, to we're least I related around so in really this utilization. relatively pretty think in equate lives, I any to this line increases good point, it pleased decrease slight businesses opportunities. deposits, in to at growth which are And seeing And at it's decrease they're

most pretty to mix having kind invested. end that you terms in the guess So the just of -- guys staying asset of stop shift in the at year, than a have earning increase had the fully gap I without address better was anymore. to FHLB the that outstanding job of done that

a growth a the XXXX perspective, base, mix, about the your or balancing and what as moving we're anything solid should how year earning asset of asset thinking loan pretty you're from be year. through through terms In balancing

balance what us rising a We it. that in environment want of against is rate -- think expect, to it likelihood, all sheet against I all balance

remained the fully We've - we've in securities mentioned, brought invested over last quarters have securities. highly we duration X time down portfolio, more short duration liquid over in same at the as We the got sitting or quarters. time, but that X

well we've number we're advances advances, historically, for And advances I think advances, eventuality. reasons. And any on any we'll overnight yes, FHLB position have to times. various FHLB utilize of utilized -- term for

how see things play we'll So year. develop the here out over and

Steve. Thank

Gary. Thanks

Thank Gary. you,

Q KBW. Chris, be Chris you. to Our coming over from MacGratty next of question - will

Hey, for how's Can the it seeing going? your how loan This [Indiscernible] just discuss in MacGratty. and in on Thanks. are rates the to portfolio? existing Chris pricing you compared markets what's you those

relatively it's to XX-year the and think competitive. to been I that. see Yes, We've in pleased look capture the movement recently

know As pricing will new his anything portfolio remarks. I is the yield Ron, And don't production overall on below. loans. touched add? is that did What to the on you Ron in yielding. The had you'd like have prepared

continues. on its of Yes. churn at originating of and ended Steve, spot I X.XX% around the natural XX/XX. we as as think the yield portfolio loan the the X.X% of We're portfolio

the Great. Thanks Thanks. color. Okay. for

at M&A, you are or you that what of expansion markets Are any terms potential looking new Just consider? seeing existing there in your opportunities? markets

the We're to around structure all from going markets Dallas, markets, franchises Texas around to call into the have the execute going are much more that's ensure West that to discipline the the that range deliver Rocky as pursue, principally maintain No. border we down as we'll down, long-term we are institutions. Coast, number to still or value. far -- have market. opportunity attractive discipline remain that Nothing some Those and there. and Mount of California, best There from attractive shareholder new the the We're the it's our it Pacific Canadian the Northwest, whether

the Thanks questions. great. That's for

Thank you, final Chris. question. our That's

the remarks. back come team let's So for management closing any to

joining Very good. for and thank Melissa, Thank us you, all you today.

This concludes today's everyone. call. Thanks

You disconnect. may now