Pacific Premier Bancorp (PPBI) 26 Apr 222022 Q1 Earnings call transcript

Pacific Premier First Quarter 2022 Earnings Call. [Operator Instruction]. After today's presentation, there will be an opportunity to ask questions. [Operator Instruction]. Please note this event is being recorded. to CEO, conference please like Gardner, to now and Chairman go would turn over the Steve I ahead.

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

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

also updated Investor performance. on financial has information Presentation published an have that our We additional

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

would questions. carefully. of I to $XX.X to all safe of In call items, the by the quarter, driven in and statement read of investor quarter. and delivered in terms generated share. through we reflective some income our I performance call the I walk will notable our few today, Nicolas, harbor earnings forward-looking a and that will of of release then encourage of of capabilities the note approach CFO, growing those solid per our the to financial first or and production that $X.XX the net up loan Overall, teams the our technology-driven relative are strong Ron quarter's through our you our have to we details deposit million presentation, And comments. we'll in review past open performance growth strategy. our results hard our Notwithstanding disciplined The benefits of financial

global the and that new macroeconomic geopolitical that be of We dynamics must introduced mindful prudently. headwinds uncertainty are level managed a

$X.X on development and same which high the expanding commitments. acquisition were that able quarter, our beginning reflects as of billion seasonality in client nearly the bankers the that some credit prior our of year, level see to new generate loan level our business relationships focus standards. Essentially in existing new typical meet consistent results production it's Although the to at

our first the developed, in had the teams the well-balanced expertise higher deep as have and the the the impacts. we economy line quarter to of they utilization activity beyond segments. clients our of and talented moved expanded built lending across increased we responded we Commercial Given business as and pandemic's seeing levels are all production have rates

on quarter, XX.X% first increased annualized credit, the from level while average rates, XX.X% quarter, During of quarter. XX%. of increased growth utilization in spot the into rate rate and XX% the loan lower commercial utilization last lines translated payoffs in first a to The combination the of prepayments production, was loan quarter-end

strong of were which Importantly, we with inflows our deposits low-cost increased growth XX% core annualized. able loan to fund

move we we continue as With mix as the rate. in and conjunction the higher earning shift quarter's first expansion an increase of interest assets such, in our net our favorable anticipate -- Fed mix the funds interest loan with favorable and expected margin growth, we the of income year levels to a in drive a through in

the quarter, in terms management attracting risk During support company growth the objectives. and across will of that new talent we our successful were

larger capabilities a national bring in the able And is expand enabling adding us a value with we are talent We deep add of of of upgrade client high-performing level our and talent relationships are and banks. continuous company. improvement, our the keeping our to many core in areas organization we knowledge, that from quality regional were benefiting as sophistication, reputation and to from and

macroeconomic quarter, our focus the issues its has the during sharpened risk management. that first intensified geopolitical team Given and on

environment. creating address short an risks the a most cycles will a be inflation. quarter, the is rapid outlook sheet have to time, effort During increased, operating high of balance period expected widely of its In with that the decades what one occur the simultaneously relatively in began tightening economic a Reserve in Federal to uncertain more to of contraction

and of to that record spread cycles we build profitable track were able is effective growth ability the to management. success long between balance through franchise attributable Our risk value to varying and

our maintaining from the have environment. growing overall have balance of been to to clients a we deterioration fixed in of increasing which and of we see ratios. the been Adding million sensitivity. increased $XXX common to operating low-cost mitigate may change Adding for to and While risk the duration sheet, adding include to our our term, high we new capital, $X.X equity, portfolio tangible than These which steps greater levels and the advances, risk potential actions and unrest long-term We've cash in commitment making a asset perspective. floating few economic rate the current our risk interest swaps, prudent of and geopolitical taken capital reflected impact and reduced what The with Moody's conditions. from higher existing inflationary taking CECL expanding have FHLB proactive rate size and regulatory in of position pressures, and quarters and chain interest last rate reflect mindful with been model securities customers over strong refinements economic total maintaining forecast. reflect management billion our potential balances, to our our supply levels disruption, in we manage a liquidity actions impact relationships, reducing is

the to I'm a a maintain short-term capitalize that, flexibility of over they helping are call impact first With may Ron to on important of that on a going more variety few us these to turn actions had some outcomes. the arise While opportunities provide results. our on to details have earnings, from quarter

Thanks, Steve and good morning.

a remarks linked-quarter my of on majority the purposes, basis. comparison For are

income the first expectations income first $XX.X income, $XX.X quarter net totaled interest million million, expense $XXX.X Let's $XX.X prior and million. Pre-provision revenue X.XX% equaled net or in Non-interest average Highlights with revenue was as XX.X%. total of efficiency million and was the start of included $XXX.X at non-interest quarter our million our assets. for the consistent with statement. ratio

I quarter, my $X.X Net later and million income two interest lower provide levels. historically prepayments million a and $X.X million, to nearly Lastly, decreased lower the more as due primarily quarter. prior accretion low detail million to the due XX% and income quality in fees and ECL first that our will $X days income prepayment asset in remarks. quality in in $XXX.X felt on loan remains asset interest to loan-related from less favorable

offset partially to the securities the fund fees, we shift in portfolio assets our of mix reported quarter. points loan-related net during growth basis impact reduced Our to favorable at X narrowed lower included net interest margin our aforementioned the basis and the X.XX%, And loan in duration core for interest strategically five which due of the where points the earning by size the quarter. came X.XX% margin to

interest for benefit expectation of of we in increases the quarters would net income software-based, funds the to With rate, overnight notional Fed and fixed-to-floating billion in swaps. net see interest future rate $X.X margin incremental the

to As swaps million. of March of value XXst, amounted $XX.X these to fair

Escrow quarter our quarter. the the higher million This million the of XXXX, we expect of Non-interest potential from lower gains. to fees as of quarter in net X.XX%. in seasonally And decreased compared decreased the prior transaction of the in quarter X.XX%, income benefit borrowings term million quarter at of result due second of of $X.X $XXX,XXX a largely the FHLB ahead volumes $X.X first fourth $XX.X margin Looking includes to rate security blended million the of the to be full a swaps. to range impact core the to interest excluding X.XX% $XXX

million quarter. quarter essentially Going timing expectations, to at key make we fees. range to Salaries Professional million our to fourth $XX.X million as the flat higher non-interest and investments we with expect million impact security overall $XX for was continue the forward, to to non-interest payroll due the quarter increased merit be million certain of excluding expense of strategic decreased second support our and people, business. to any of income in reflecting to the benefits Staffing legal compared expense $XX $XX.X X,XXX to $X.X increased as a Consistent million annual increases hire to well $XX the sales. partial professional as employees taxes. in

impact second higher the Our to million of approximate non-interest the costs. compensation should million expense in reflecting full $XX quarter, quarter $XXX

provision higher rates, and quarter increasing challenges. credit growth principally for increasing loan downside uncertainty loss of driven of was inflation, and the supply chain macroeconomic interest to due first The $XXX,XXX by risks

balance sheet. the to now Turning

shorten results liquidity loan totaled an quarter quarter duration sheet. million. production while of Average XXXX. growth. balances for The billion, add securities our the million, of balance $XXX average deposit both reflected $X.XX actions quarter Loan and loan the $XXX average decrease first and was strong increased to to First over the to organic increase attributable decreased in securities XX%

available total Additionally, maturity held-to-maturity to bringing under of $X moved sale the billion. to just portfolio approximately for million help the quarter, the we during securities $XXX

and our at points. cost continue which remained we On increased XX.X% deposits, deposits to of deposits, grow to four the non-interest-bearing total side, unchanged of basis funding total

million rate $XXX As term noted, million increased the bolster interest liquidity projected cash to interest rates. protection in from And the owing to at higher FHLB evolving and $XXX balances we by quarter-end environment. borrowings provided added additional

assets. Our with combined $XX.XX decreased to compared of book securities total represented March Tangible under just XXst. at XX% and XXst, December value cash $XX.XX portfolio at

an our for rates, interest market-to-market higher on share being these all that AFS per loss negative portfolio. like impact the tangible book to else I'd With note as had assets will to Despite of equal, the value loss, we to a market-to-market $X.XX solid XXst. our a tangible to finally, the ratio from common time. AOCI asset quality accrete standpoint. tangible back capital over X.XX% equity And March losses remained

remained value lastly, capacity And of acquired X.XX% to plus believe X.XX% at at hand totaled loans assets well the X.XX% With and held Asset investment. the a losses overall of in credit total million quality the loss the increase $X charge-offs for quarter totaled for in remains with low prior Net non-performing of Steve. comprised end the levels for prior million $XXX,XXX at quarter on X.XX% remaining total collateralized. assets compared where quarter. of it discount back million absorbing will at to I strong quarter. allowance fair $XXX.X quarter recovery or a related we credit the compared loans the that, our $XX.X very ended to are allowance single despite in an we Non-performing loans

I'll seen year. wrap outlook. comments trends to positive a Ron. our up Thanks, Great. the We've with few about begin

Our look clients continue bankers have cash and Pacific and flow. generate businesses strong for innovative, us value they trust services. our technology-enabled they have and our investments as products clients with resilient to for proven and the relationships and Premier loyal

remains billion, are as as rates. payout utilization loan experiencing strong strengthening $X.X well and at prepayment and we rates, line pipeline lower Our

to meaningfully loan weeks. loan recent we However, moderate we over in have production origination time rates expect as increased new

that interest disruptions the the inflation, and high confluence ongoing which events. has of challenging more by rates, the last environment over result rising become operating a Additionally, as geopolitical changed may we the anticipate quarter, of quickly rapidly caused

emerging is variety planned organization portfolio management. a The new well demand of their delay point, businesses pricing, these But level through we're and a creates year. always, and think environments. of has risks maintain investments underwriting enabled As the our disciplined to proactive, aspect will and as disciplined, may credits a The and prudent until as to always, of macroeconomic discipline of expected it's approach which current and the at what well is the At that our of may whether preparing this key outcomes of being in we to to cycles. uncertainty loan beginning investors the there a difficult clarity. proactive through as forecast degree challenges impact range perform for structuring we variety we greater these wider as

delivering with concludes on we'd our open prepared well-positioned Lastly, strategic We and we business That for shareholders, value take call focus growth we the our answer questions. to expand and capital will model, and maintain to (ph), profitably clients, and any be questions. organic strength, opportunities technology-enabled you are please to of we for Veneti remarks expertise, our our advantage nimble, will believe happy serve. up franchise. communities long-term the operating our

Thank you.

will We assemble [Operator momentarily session. the this pause begin we Instruction]. time, our now to question-and-answer roster. will At

Our first question comes from go ahead. Please Raymond David James. Feaster with

everybody. morning, good Hey,

Morning.

David. Hi,

the on larger to on your -- remarks First, the from just I M&A. up in adding prepared follow talent about and wanted talking disruption commentary capitalizing some guess, I

gaps there geographies or segments new footprint seeing Just in verticals segments most curious seeing some that the opportunity with opportunities. you're new And are where you some hires? or Are more entering at others? looking any in or potentially you're the where filling

in just you questions there, me let management, not or on gamut. will through lines or we're try of initiate Generally, throughout the with of not it's if cover don't market we've roles, markets to has like. return new or whole operations, teams in. treasury hiring a we Generally, it's what production, it's a segments look of approach, lot enter operating that de-novo business specific, investment. of done or credit, the it's geographic And variety the to There's David, whether

a Our whether We've had whole lines a it's long business, experiences, opportunities success uncertainty. course, and of through acquiring, of takes far it high and time level and banks. specialty greater of it's

Okay. the guidance. $XX maybe side, And then million touching just That on makes appreciate $XX income sense. fee million the to

get the the whether to some and that trust volatility side, the includes the markets, with and your guidance the given seeing on then you're there, wanted fees. NSF adjustments on Just in especially puts overdraft curious takes of trends any for just

and but We the our takes they way that for as business, long in herein generally the the as obviously think guidance great guidance in That but deposit base period quarter us very for made respect. have of second we And the NSF strides very a consideration And seeing impact have the I and the we're time, trust From side in marketplace. very about that factors there. conservative will consumer is takes into thinking you the in some moving long forward. was of little little how of we're that related. all overdraft our fees progress of in know,

meeting know outreach think operational of time have sales talked along it ensure That during and -- up the well, I've about the to building the period our on over spend we come months and that foundation there. bit clients. really has a been quite I I six last excellence team and how with time, building

line to to presents continue of about encouraged So business that we're grow it. opportunities that the certainly

just And too, loan able about to yields. follow-up, meaningfully to commentary increase being Okay. then your wanted new on

you could the then you how where yields landscape are competitive loan if And the in curious whether you're terms trending, aggressiveness most or are color just of the competitive Just more see give the any pricing? us to pricing seeing dynamics and to opportunity how new terms on push starting from front, structures?

of in up late part It QX that continued. really pricing was we began maybe mid that's earnest moving

for quantify Some of far a how as yield know occur of our I because saw so From that the and we've credits them, as moved were opportunity as don't so the course, few we hey, works it. and just a we it on of what necessarily was seeing, move curve, price that competitors be reality wouldn't our, we of in standpoint, landscape competitive pricing and competitive pricing up we seen but general. if I

are future Look, impacts. that got talking For in. is I Fed we've think us, about we're and thinking the about pricing generally the markets

the in that's that's as more it year I that's going increases shrinking think As don't hasn't early June. us We pricing to part risk and to impact with the beginning about know to how, or about in think even of and so of management. is that encoupled stone, have what's rate really but market. move May exactly expectation mentioned, that an sheet pretty month we're billion thinking a driven the overall this that up We although and here, been close $XX that aggressive a put as remaining balance how

you. All right. I it. appreciate Thank

Certainly.

ahead. The question Piper comes Matthew Clark next Sandler, go from with please

Hey, good morning.

Morning.

that's starting expected in resolution with like not non-accruals that some business, is you type see us there's sense just for process, relationship. uptick collateral covered. you there what give in Maybe that loss? the of Could the a just there situation Sounds the the fully

mean, have segment. and that it's quarter our get in situation loss, case in I point, seeing I an at not And extends as, folks, fully. I'd think this quarter, Any this credit, here. Matthew, the it take, and be move as through problem we've who here. anybody Yeah. aggressively already serves resolved us that'll flows case fairly to we team, cash proactive going the not one-off next we approach charges most well. degradation any we're We're know, expected any they that that's and I taken credits expect that if approach on think occasional you the like,

Okay. one-off, business curious. it just sounds know And but the just I type of though,

in and It's they of a variety LA interest. certainly have located business

not into not disruptions to some se, any supply really the on it specifically segment maybe seeing, pricing. the comment related I'm any per not chain did of going we're that it, other around challenges of really though So commodity to or

X, maybe kind that Day then of level? stabilize Didn't Day much do we just above feel environment, reserve. uncertainty the have is down moving prudent. Seems we might or like to as to thought. And like that's as economic still part Okay. the assume X you fair growing come the we approach which CSL is of it might could in But

-everything that chains. fastest that that's a We've supply a sheet. was XX-year long -pandemic, looking tight in in pre balance highs ago, been their seems we're in inflation, the China pre shrink fed so in impacting got downs That at lock decades,

commodities. we We of of war the a this sense level. I X have standpoint in the plays don't that CSL Ukraine to know impacting have reserve any reserve out relative Day how from all

that's high-level you might So have don't know, specifics add. maybe I like more some that thoughts. Ron, you my to

Steve, add nailed you I is -- it's think juncture. the to difficult would only say at very normalized is I I this that thing it. what

swag think would I it it. even to take premature a So be at

answer. I So your like

have capital our also and absorbing ratios that I'd not. basis that management to we of with to loss just the how after think like, way our approach that have the add the thinking capital put about we that capital. I and the that a composition capacity we're we of to XXX ACL is you along credit similar points Totally discounts in about is

and to able we're depending in the several we over stand upon evolves opportunities, great position, quarters. think like where economy take next I advantage how be a I today. frankly of We'll the

that that now. buyback would just that trend suspect then capital, -- for potential I and maybe targets. just then But on latest on conversations hold on is point just your And confirm would in with I Great.

Sure.

talked has fact outlook portfolio, the as approach for that our bank, the buybacks, but a I'll and not We've particular for in the economy historically capital management about that the we'd factors changed. So around also opportunistic for our in buybacks be whole.

we'll continue several we conversations of and So for been and we're considering. levels about capital at conversations, And looking stories, certainly think have to have having to available strong we opportunities. that have very various it, we're we quarters but us

said the we that targets. And might And and I've and take add needle the the really is is to to add I value. franchise it remains in past how consideration that we the think to financially impact really true to are going current transactions are what going move what accretive similar attractive. and is in environment is that franchise pursuing only value, being not if ideally,

Thank Great. you.

Certain.

from question next Chris ahead. comes go KBW. Our Please McGratty with

Steve. more would the question Is marks. the rapidly the on Thanks, get also make capital, deal? economics of outlook, Follow changing deals about challenging Great. economic outlook something rate given does that confirmation prohibit near-term the line of finish up kind over and that to the of Matt's that

relationships. of to the liability base. -- mark figuring at. perspective preclude whether I what franchise all just is And deposit and place parties, the of the had But We out banks. rate is. mean, Chris, value that volatility credit entire the of extent extent math. own that interest of a you And nearly are, with minds course, and have it's the to And mark a what we a equity doesn't it. an value the and that factor We've looking that certain course, maybe the always obviously, compensation two or And we consider, the meeting it's or the Obviously, on all then are a boards. the what two on of of it No. the we marks have we the institution, markets is certainly, is of

XXX together been For PE think times, that, about returns and the have shareholder high when and their And some, multiples. that that book. the trading maybe or relative folks the look, more create bases value It's how you would X.X challenging. below And of told institutions bought we've or period from when to makeup we've it mid-teen over time about the that's it, multiples really put we've But own. done way institutions greater were market it. bought we on I've tangible all can trading two or ultimately, singled PE either think and we a we institutions institution of combined

you If on of would hot couple as nature higher color. one beta or identify a Great that's more risk given done balance had great. could deposits, commercial be any might book the topic question of the might that a you sheet, the potentially obviously That's next of over of that I unwinds? sliver been growth. this have nice would analysis move quarters Fed either off the the I quarter, guess that the be flight

referenced to available any today. about it's less. know. particular and but tightening cycle that a little have be we're not the relationships tend in One, Do we we about there up move given lot, given or your deposit institutions going that pricing, out a if investor I it's to Its I already. sensitive. exactly predominantly data, pricing relationship-based do know last Ron, really find them in that it the don't to little If around we industry. somebody you I to behaved. that sensitive I think at bit know They have fact a municipal offering in And have higher a maybe transpire more think that going there's segment, history, and much. $XXX deposit million we know in our that's hard what's potential to it but to they number? else, price business actually the we Ron, you at think would a over certainly we're how the We continue owners. deck meaning with solidify years these probably don't deposits. the owners, least, bit least I the slide don't we also number, for to our And in our strength I think mentioned entire But our of in and that business know belief base with have

We betas know segment and Yes, internal higher is Slide model, characterization It's deposit highlighted out of on. of doing other do add, also, Chris, would about model experienced what modeling that in only negative your a bit spot Steve, do And you're of that show the the on. when bearing analysis, spot actually The course, thing about I XX than here, we investor we've analysis. words, you you is $XXX of as deck. million our we other on do non-interest the we the coming little in migration, interest-bearing. to the talked

earlier that management the his risk So -- it think into and respect that. actions comments, to things approach that of all we does highlighted prudent the some prudent take more a of prepared it's to in that Steve model and in in

actions So thoughtful you are the modeled be way this. by driven of see a in we trying our terms lot very to and analytical of

of you both Thank much you. great. That's very

go from comes you Terrell Stephens. ahead. question with Our next Please Andrew

Hey, good morning.

morning. good Hi,

Good morning.

as bit in more Steve, know range back market. have disciplined macro I appetite any helpful. kind what pulled past the know sense things historical to of underwriting. some in been make kind I just don't in you back love be color the thoughts when Would backdrop, very on, much the right closely the hear guys you've just there I if to little a any, portfolios, then just and any pull you're would now of guess, given or watching any

historically We're our is all any them that approach. watching been But No, not watching real closely. more portfolio we Are so? really.

potential the least if the moved moderate that. seem the to continues they business of higher damper Pretty conservatively. in me loan We record it just underwriter. investors economy assets. have The in think for back great of reported, looking not for And it a and businesses. activity, activity pace whole know that a cash we that the of ended in loan-to-value. cash not has going always doesn't not changed But to pre did, low have a And seeing as been on, and expand flows When bank commented have activity. the on we that look cash it, much those and new to put always that the of to as to never this that kind that I to good any of pulled folks our folks with about solid well-positioned got It the have a have been at underwriting the our We've rates to will the that looking that of the existing to extent focus. or takes it. that to is lot We're environments. if moderation take we're We advantage the the our that's I on relationship we're an that we're at, been be flows, it something like track rates of I in would slowdown we're that that analysis. materially at that managing has into -payments rates for the has maybe refinance to That durability payoff around variety that quality, the in place. but continue that of monitor. that's focus a portfolio. potential very We're

do I core helpful core NIM if potential the of within over for it. I swaps. guidance really hikes quarter, How any? XXX to If you to guidance, excluding rate appreciate maybe Ron, That's I NIM the embedded the benefit many XXX, have can was the think second it that

NIM. about in And which are on of here core course, of For is the six points June rate a the, and May quarter the we've the basis the there. right see, linked-quarter now, full projected got the that two To got in again let's hikes FHLB, basis. addition we've impact of

one June. got you've So the and May hikes two in there, in one in

partial of are full the term with those benefits quarter fixed So FHLB. the impact

Yeah.

Okay.

clarify, rate? fixed to FHLB the Just was

is that Yes, X.XX% Yes. correct.

Okay.

view was period. the up It in warm over a layered

Yes.

Thank my you both Okay. questions. Perfect. for taking

You're welcome.

Gary comes question Our Davidson. ahead. D.A. Tenner from go Please with next

thinking Steve, AFS little about Good you held-to-maturity. those down talked on the over building you Thanks. of securities equivalents liquidity liquidity, build terms to in you morning. about How million quarter cash quarter securities $XXX a more reinvest total the would a and the ending flows? from are cash-to-cash or in portfolio were little combined cash off here flows the expect

another play expect we're to How that industry and tend How you about to until little we've think to I it out, are reserves those voice said, of us is at it, May, hear only this are balance into we better as as But like? speak. we're I certainly clients can a flows, early in reinvest how raises as maintaining contract play here. How prudent have a higher this in think standpoint, And and of we be cash level that, that clarity get environment they like here to as industry? as does out? respond there doing, begin the but from this we'd thinking we in we going it's up Fed as uncertainty talked and bit capital Gary, levels begin June not to simultaneously and July, and think at liquidity So it the that going thinking about rates our point think that things we impact Ron looking and at some impact I does meeting the -- about to the do and coming with they does meeting does interim? how sheet. we the our our

so And it. that's about we're how thinking

make sure. That for sense would

it, you do or managing sense of portfolio, In that in Ron, the a expect could us two? the you give cashflows quarter quarterly next terms off of where the

$XXX $XXX cash about in a to million the securities neighborhood of $XX million, probably quarter a Yeah. flow's the over portfolio. of little million The portfolio

sorry, per or? quarter I'm

Per quarter.

quarter. Per

follow-up. Okay. Thank a you. And just

or already that here there outstanding that any was swaps, billion the of the added the On was portion entire quarter, at in year-end? first $X.X was

That last if tranches, months different again in layered was, XXXX six laddered basis, that's will, of that as on And in and three in Gary, and July, in October was in No. the also you December. back well. a again

we're good there. feel we So very in position a

that, XXXX. that's may And just XXXX -- to have and clarify heard you

I'm sorry, XXXX.

you. Thank helpful. all That's Okay.

Yup.

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

available many We on forward different talking the corporate also you social our to and that at areas -- responsibility having call for end all end you published I recently report you. the we'd And thank Very of impact to that to highlight that are us. in second inaugural note to I'd joining Thank the also before we website. again quarter. here, like teams our our is good. the report so look

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

now disconnect. You may