PPBI - Earnings call transcript Q3 2018 | Pacific Premier Bancorp, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone. And welcome to the Pacific Premier Bancorp Q3 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note that today’s event is being recorded. I would now like to turn the conference over to Steven Gardner, Chairman and CEO. ahead. go Please

Steven Gardner

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

this have As our we the call going also this report earlier take review simultaneously up items, to you’re our $XX aware, billion X. all I’d the on expanding going with quarter, the is surpassing morning, earnings and the We the forward-looking the some encourage all the third that morning, productive Harbor to note statement Grandpoint then of Ron open Nicolas and acquisition by through Safe relative and presence those. comments, few we for in quarter I’ll of a released through very threshold details, the XXXX. to walk I’m notably of and July release questions. to a you asset of of in notable read financial the the a earnings to our we’ll Los had most closing market look Angeles

we approach the enhance a of and Grandpoint quarter, good collective bankers meaningful weekend. stronger Both of learning Without than preparing was were group from are addition our have of progress operations business each client and organizations the team conversion, year. by identifying Grandpoint beginning us system talented has personnel. managers with and opportunities is the relationships knowledgeable of at a the the commercial a clients. deep for to and group development organization completed made the doubt, team other comprised made Grandpoint their service. to and over of this successfully we The highly in past supported experienced integrating During and a that which They’re

we clients the base. also been of And we strong it’s future with with these offer a them our opportunities Collectively, of customer and receiving set feedback have Grandpoint’s a in growing commercial are services. we businesses. to impressed expand believe will relationships broader clients group We from have we the with as products

results. financial our to Turning

generated share, During $X.XX $XX quarter, diluted of merger-related expense. million the we per third included earnings which of

expense, assets average share on translates average XX.X% $X.XX merger-related an return and on to the operating common which the X.XX% a we equity. return on Excluding basis, tangible per generated

we commitments, higher we of in which the During the quarter, new level as in production the loan prior XX% than up a $XXX had loan was quarter million generated quarter. second from

$XX multi-family well-balanced various is loans, As originated million was in $XXX and case, CRE lines. of $XX million million loans, million in our commitments, construction loans. occupied business loan typically the across $XX million in We our production non-owner C&I and franchise new diversified $XX in loans,

recent produced also loans, We levels. million from down production SBA which is $XX in our

in to are and SBA increase foreseeable third We SBA the that leading in interest saw loan the our the production the we premiums. We demand for an rates rates, seeing is that gains future. quarter loans believe will reduced the remain which range on of sale for on in impact higher prepayment likely and it’s

third on to our protecting of refinements risk underwriting, rates. seek quarter cash controlling third tied management, focus management number global remained our to be Credit years improve institution and mitigation our reflective more evolve. to With weighted was that proactive of that risk-adjusted would attractive loss on regard, ago the and overall strong, quarter. ahead make strategies. better In regularly a the the loan and heavily aggressive the will we a generate our be real to production of generate implemented to quality, net to production stay C&I, is of closely in We commercial growth did the most mix volume in quality approach deposits. our franchise the on our we namely of flow low-cost of job and the underpinning forward, a Going that towards ability our of loans. owner-occupied continues loan estate our Credit expect portfolio margin, focus portfolios deposit yields, cost fundamental interest

from basis cost a XX than of resulted points, beta Our up we in was X deposits quarter. basis second the quarter. prior saw the points deposit lower This in

We added third institutional high-beta, that deposit ran through mix. Plaza looking are the deposits the continuously higher we to Grandpoint in improve we market cost, And our money quarter, and off acquisitions.

in we has It through of next value our franchise even the in our few particularly and relationships. take accounts funding pipeline, deposit generation It’s gathering. deposits. We that deposit become But, can that culture get off and is The over good with people our transferred philosophy invested the we operated we that a we that created a our with treasury client areas. quarters, note non-core the the on have relationships with current platform lower to attract time to environment. that confident higher larger technology replace will specialty have always more being closed gathering new, ensure primary we the We deposit important the commercial in built balances new consistently to us support to those infrastructure emphasis over. management core deposit ran cost the and are cost capabilities important has to enable have

with software component this manage effectively in are positions business to business, in premium bringing generation heightened to have unique through us cost in have focus better invested for well We Company. lower deposits. non-interest-bearing bankers relationships. other and Through seeing customizing consistent technology we compensation the core have process competition deposits on of incentive effectively highly utilized our in believe our us our specialty been has the deposits. finally, We also the we’ve the manage of deposit understanding And a in we sales years, deposit-rich for needs that This valuable our the we ingrained to effective experience force our target verticals. help group. client believe HOA an developed gained the attractive will always platform we the tool business, rewarding niche Over development has put HOA for industries on sales important

the about look are the had next the entering different excited which smaller we Premier Looking franchise, growth expect as Pacific we somewhat profile phase a in growth ahead, than bank. to the we of

made investments past we two support infrastructure in our the a years, significant have to Over larger organization.

that financial we Company. are nearly started investment Now to billion we are we much transition of phase that $XX have and through operating the at institution,

But and sales productive organic pricing, focus likely our generate will sheet enterprise it’s add expect historical our scale, larger highly peer on new deposits in group, balance our our underwriting. lower Given that management, than our and compares growth favorably disciplined clients that we risk and loans our while maintaining process, to growth to with strong rates. be

combination accretive through generated realizing Going forward, earnings future to acquisitions. sheet further expect from our leverage continuing growth, of to balance organic growth and solid we make larger operating be a scale

expertise We institution. We us remain from enabling banking formula our and developed integrating in that believe that will that will other accrues maximize we the drive to our to synergies the leverage to a organizations high-performing us have profitable while shareholders this transactions. enables the value growth

strong capital the an appropriate believe allocation, that capabilities. our to evaluate Company earnings for it’s also given consistently time We

potentially that, a returns, we including of combination profitable regularly going Ron for value capital turn over a call of Board provide our well-positioned create business we that our I’m significant allocation, second growth, future. shareholders. to superior model more Our in shareholders be to the a the believe detail to quarter results. will little Ron? continued dynamic on With options risk-adjusted capital produces Through returning earnings for considers to that the level to

Ron Nicolas

Thanks, Steve, and good morning, everyone.

quarter, second quarter As deposits. we and the our in diluted will quarter per diluted reviewing reported I the billion million the billion linked net release, of earned and primarily respect Major in share million comparison. $X.XX with Grandpoint, closing quarter the in to highlighted in in the impacting added of as income the items in our results, $XX.X share, quarter’s compared of of results net of $X.X the some XXXX. and per significant past, loans $X.X $X.XX include income quarter focusing items which $XX.X the be overall With earnings for third on more

or In discount a or X.XX% closing $XX and fair quarter, marks Grandpoint, significant were announcement of of the non marks the Both value which we addition, initial of of most deposits. maturity these the from loans, fair on rates of of acquisition. interest X.XX% a increased value of million loan since million the value higher with the $X.X recorded billion estimates, $XX during driven fair by

As of a result, goodwill. million we recorded $XXX

in with $X.X transaction. connection Total million merger-related excluding merger-related prior $XX remaining in We not at the We additional by CDI anticipate of the with of for an which $XXX.X amortization Total in quarter merger-related $XX.X $XX.X compared expenses. in million expense any for included the prior expense, compared costs also to the recorded million $XX revenue $XX.X increase closing represents quarter. with million, increased costs, material the came of quarter and million million operating expense. million the do

Lastly, at look statement. the for onetime the of included income XXXX a related closer of quarter our taxes to benefit finalizing the million filings. $X.X tax a Taking our

$XX.X from the prior Our net interest million approximately with adding Grandpoint $XXX.X of $XX income million increased quarter million.

quarter the quarter $X.X basis margin income in quarter. points in the accounting million to XX with points for Our net million X.XX% accretion compared the $X.X decreased XX X.XX% for prior prior from or interest basis or with

also result with rate repricing a higher of increase. impact June Additionally, securities a portfolio net the larger along contributed to the of as yielding favorable income interest loan the hike Fed’s

basis as loan Our approximately of our X core lower the margin compared quarter as NIM impact to X.XX% net X.XX% interest yields decreased in prior the anticipated. narrowed to by Grandpoint points,

XX benefited deposit of increased X deposits. basis Our an X overall non-interest-bearing increased level points on average basis increased to but interest-bearing points basis cost deposits points of as from costs

Loan from sale SBA sale as a also was prior result investments quarter down and of prior CRE quarter. the of quarter. faster speeds. rates prior interest from prior to million to the to $X.X gains when in margin a expect that loan quarter X% The X.XX%. quarter, due sale million million which a small were mix compared repeated third equity down X.XX% largely million commitments, Higher compared loss the by the unfunded of quarter. remain for included losses Company $XXX,XXX a addition reserve the for the recorded the and growth we and quarter, rate credit a loss loss in of unfunded core contributed our overall $X.X offset loan partially prior million $X.X gain CRE $XXX,XXX. of gain of to not were for for sale prepayment With was for the lower in the provision the included $XXX,XXX in loan with in compared $XXX,XXX $XX range a Grandpoint, in prior Non-interest to loan over loan write-down net $X The net favorable lower a $X.X quarter. funding increase the million of gains commitments provision to income

the in to expect revenue, fourth in the SBA $X.X range gain to $X.X be sale income the lower quarter. million With on we our million non-interest of

merger-related and million Our for accounted non-interest of million CDI $XX amortization approximately Grandpoint’s expense, in The million the in expense, $XX.X expense excluding quarter. the million prior $XX with of increase. at came operating inclusion compared $XX.X

have the end of remaining a estimate approximately our the XX% savings captured we to As result, achieved the with year. be of cost by

Excluding well Staffing range approximately Grandpoint, rate with professional million, We finished to remaining fees, at quarter as credit-related with million costs. expense costs. run quarter as of CDI June $X any second than expense $XX Company loan X,XXX XXX million the higher portfolio, of in anticipate as employees the to the $XX larger amortization excluding expense and other merger-related driving the XXth. fourth our had operating be higher prior in higher for the compared quarter legal

a tax realized XXXX its to related As Company noted one-time earlier, tax benefit filings. the

recorded and As rate a benefit. deduction tax number of tax compared million and rate prior This for in quarter. the of filings between federal with a actual XXXX tax the our a XXXX, Company XX.X%, quarter in effective differential the resulted of XX.X% the XX% result $X.X with true-ups the

quarter. rate expect fourth for approximately to XX% effective be the We tax our

quarter. end the to with Total loans now sheet. the compared second at Turning billion, $X.X billion balance finished of at the $X.X

Loan In compared $XXX two commitments, quarters. loan quarter. new to fell contributing for also the loan benefited loan annually XX% slower to Grandpoint was growth to in which addition $XX million that third growth from prior in quarter and also early purchase closed with XX.X% the at in million prepayments, multi-family the the

which prior designated acquisition. included Our of quarter the yields were approximately loans $XX quarter with acquired for sale, a for commitment higher originations, for quarter-end, which non-SBA decrease. the X.XX% had the X.XX% loans new the entirely in as held Grandpoint and reflected loan accounted yield of million CRE the in origination $XX in compared Company and At approximately percentage million

were and investments. of quarter. At of compared finished our MBS, the treasuries, up dividends non-maturity portfolio of $X.X $XXX the XX.X%. was and to the our XX new with at end Notably, during increase from ratio basis-point quarter corporates $X.X and from billion total XXX%, deposits. to increased yield billion quarter quarter million FRB related or at equity million resulted total at million deposits higher prior the to securities the the increased billion portfolio higher deposits sold second The investment included Grandpoint. from finished in quarter, of loan-to-deposit deposits of XX% the Total FHLB non-interest-bearing deposits. attributable with $XXX XX% quarter-end, our $X.X yielding Our Of $XXX investments, including acquired securities primarily

September And our X% decrease book quarter result the decreased to basis, XX, $XX.XX to linked Grandpoint a on as XXXX. value at compared a total acquisition ended with increase billion. XX.X% share the tangible Our equity per $XX.XX, $X.X at an a and XXth compared quarter of shareholders’ September

Our compared shares. Grandpoint the of to have acquisition. in currently And tangible equity the outstanding prior X.XX% million to quarter, reflecting common XX.X again the impact common X.XX% decreased we ratio

quality. asset Lastly,

We realize asset results. quality strong continue to

asset addition low at continue aggregate, ratios of the remain levels. Grandpoint of the While increased some numbers quality in to our

in quarter recovery third ended the at were an $XX.X net prior allowance for quarter compared loss $XX,XXX the quarter for of XXXX. a from $X.X quarter. in of loan the Net increase $XXX,XXX the the prior of Our quarter million $XX,XXX charge-offs prior with and million,

Our loan would a Operator, fair loss up approximately in that, any value have. total allowance million. the our X.XX%. with loans discount answer to questions puts for of held X.XX% ended with for coverage may be We coverage X.XX% our please ratio investment portfolio we quarter. happy total accounting of loans $XX ratio at at the currently have combined call to you With prior compared XX% quarter the questions. under of open This approximately

Operator

D.A. [Operator will ahead. with Davidson. Please our today questioner Instructions] first And Tenner Gary go be

Gary Tenner

Thanks, guys. Good morning.

Steven Gardner

Hi, Gary.

Ron Nicolas

Good morning, Gary.

Gary Tenner

I mix forward. Hey. portfolio and wanted about bit a talk little going loan to just the

bit last of two it transactions have your segments with over comments. done, alluded in You to bit. a portfolio But, year you’ve remixed the the little a some

You know X% XX% you multifamily franchise and from got now to up XX%.

which other could outlook out, about I are I how it positive sheet. multifamily mean more if opportunities if some kind your balance franchise do for comment those, maybe relative capacity two those remix on and you. jump wonder sales gives feel you maybe sounds you the So to open And the on opportunity for that for you that via in some loans some

Steven Gardner

not to to accept around we or sell similar have. willing but level asset very in continuing future. increase lowest to our CRE there think to loan those lending community is to classes with either that utilize loans line there speaking, in business class that of have in which investor-owned that those slow franchise is that keep that offers non-owner we're either and the have I asset to underwriting franchisees the on speed were the XXX% our or not of we've the every multifamily that level could more of would the yields, the asset We balance those ability buy we is in to both occupied and can we’re originations Sure, Gary loan, both grown franchise portfolios materially sheet on of to classes the deposit We and to such, somewhat the that number marketplace of fully generate, steadily ratio production as origination we only with country bank to yielding of times goes the the of and as generally volumes in product or we fragmented are capabilities stores we what a the type. at our see yields itself down in increase well up because certainly the that various complex do that comfortable lower

the So over and well years. avail will different or grow are measurably portfolios we ourselves to for of sold loan of to a that strategy going we We reasons it in the will aware, number forward. you're others as continue bought continue

Gary Tenner

relative little the comments could your that Thanks just a and deposit go more you detail for on that any opportunities there. to into specific areas specialty targeting maybe on you’re

Steven Gardner

a couple involves individual number quote is Grandpoint unquote just individuals mentioned team. There was joined areas who we of a It an as running this at a we of is have group. our who

well in have and and low of continue to core fully steadily like over individual it's and as to out We case the accounts, see support and from build third-party they're The working escrow the deposit clients. also that them to there, very any deposits with verticals target the fund operations team those as specialty escrow their Scott high-quality It number to makes title Armstrong sticky. the production on them we time they so build. firms is with pipelines valuable what takes cost but then move group and

Gary Tenner

of have to Grandpoint that technology that there the investments the is And grow on the an sort platform? suite they incremental your full that or for

Steven Gardner

we’ve and process not and in the developed the did in or of complement side. HOA enhancements we the particular people management there and side we of treasury are but from we’ve do products full They and services, the in did and that have technology business made that

during quarter and folks today, into on to we of did third We’re that here pretty a support bring the comfortable group well. quarter the sit as continued with where number we second

Operator

next ahead. of Bohlen KBW. Jackie with will today the be question And go Please

Jackie Bohlen

million it the in originally of Was qualifier CDI unchanged is point a has clarification, but cost? the a cost. that now it on a everyone. excluded was but excludes Hi. I or range to wanted $XX that $XX was provided before it on new that Good expenses morning range just million

Ron Nicolas

up saw CDI that core is excluding Ron. about amortization the talking and final marks CDI. Jackie, a that spike we aside qualifier, our and as That is in and expense a we’re the this the so of operating setting just new result

Jackie Bohlen

Okay. Thank you.

So, apples-to-apples the higher a expense little based is marks? expense but that the driver main guidance the the higher, CDI on is of bit

Ron Nicolas

correct. That is

Jackie Bohlen

on helpful. the terms the in And was far. What have that the that of That’s you Okay. Thank of through timing realization XX% cost savings so you. quarter?

Ron Nicolas

we roughly into conversion as this with fourth move is we quarter begin will the, completed mid that conversion part here for stay typically transition we also after of an well. a It to that as have then weekend we throughout the individuals we part here That the out. the as I have and in volume of was and folks out quarter they’ll the some system increased past handle to transition weeks call couple of around what then as the mentioned

Jackie Bohlen

Okay.

starting probably today off December don't clean? So, fairly know I

Ron Nicolas

reasonable. pretty seems that would, That

Jackie Bohlen

Okay. mentioned to And provide then then could wonder allocation. Thank I’ll additional color, you I one just you. that one evaluate capital if wasn’t step it appropriate time some last back. you

your how So, on thoughts movements about you’re think you buyback as a initiating dividend? we. thinking also particularly potential And stock then just updated given for how about the

Steven Gardner

and Sure. that support talk to about We strong that the have capital today. about levels we think it we given

neighborhood XX% profitability our plus and with overall on Our outlook quality asset generating equity. and of in tangible common earnings coupled the

as what be the will So return I on best And dividend well to not buybacks. a our either potentially or as capital grow organically evaluate going at levels. shareholders we we we’re stock of be to that the through simply think those believe to investments able return

Jackie Bohlen

discussion. announcements on CBD potential so Okay, those future based

Steven Gardner

That's correct.

Operator

with ahead. Matthew Please is And go the question next Piper Clark Jaffray.

Matthew Clark

and feel that these outlook the term look longer as like efficiency efficiency maybe in do in of leverage changed all coming that of rest I operating has we you commentary out. that out quarters? there 'XX guess at platform to the How the about some sounds your into ratio prior maybe cost and speak relative saves is you the see to related You ratio Grandpoint getting

Steven Gardner

by second we the it think continue so, XX% from don’t to of then improve sub ratio We to and there. XXXX, and expect half to get efficiency

Matthew Clark

business but high. on on you large to more growth outlook growth the the numbers is digits this on organic quarter difficult just is look you then still to this high more is that about the And average maybe in lot at X% single way past, basis a the little on have is or the it make put annualized too Okay. rate

Steven Gardner

the increased be factors think competition of if deposits way the it about number generate environment impact grow we're in as ability and our the one's The certainly is always interest economy I been prepared that low-cost my a for thus regulator in operating core a there's to has we remarks, on and to good rate growth. that ability deposits our will core said low-cost and

one I to the I profitable the think been growth. quarters relatively focused consider last economy the a on certainly of few up expansions we that quality, being about as that we grow think longest factor until think here that bank, we we’re look good the as tepid is record on ultimately and but

comes And where that so say. single-digit low, to hard in high is

business development to I up generally are allow model and think will rates focus put favorable our on strengthening to our us relationships that existing with our clients and peers. growth business

Matthew Clark

we fourth Okay the on tax quarter the for guide be and catch got to looking might then that to up. rate

still to it is So XX XX.

range is or XXXX. to that XX, the right out still XX. look now Is we As

Ron Nicolas

quarter XXXX to always the little good still quarter fourth good higher a relative XX% it’s will a of to that. range if and a that you Matt, the and think stock recall little overall I number, bit our to predominantly is course because be lower first of XX% bit then comp use a

a we’ll somewhere year to items kind result, this XX% full we of onetime realize as average XX% that quarter. as in still such So notwithstanding any that hit

Matthew Clark

the more of one M&A type? just size landscape updated what seeing Steve, any Okay. thoughts or on geography consider the the in and you’re or Great. what And and terms might on just then maybe you

Steven Gardner

Sure.

there a in. are would no some just the high think from at maybe little interest others differing seller institutions activity that market I quality, levels we to quality bit we’ve have least standpoint pickup some seen and coming here of a

process, the to do what pursue and to and about reality overall pay with announcement still it us are accretive the particular the in convert of interested things our won’t that and in is sellers and talk do value add decline integrate Certainly disciplined next value. value combined in be with simply everything open to in creating can we any the will it we add additional potential financials we to franchise opportunity partnering very our our of these a with our stop both is that the to institutions organization. regardless has them time us little and acquisitions sets price can’t We continuing the day We three realize six has compelling pay a have with the particular equal, long-term as shareholders with ago could for being fashion from that shareholder months, ability value months we in in think of a maybe all argument but to cycle. acquisitions at ultimately price stock

Matthew Clark

That’s great. Thank you.

Operator

with next Stephens Please of ahead. be our And question go Stafford today Inc. will Tyler

Tyler Stafford

Good Hi. morning guys. amortization XXXX? would much CDI in you expect How

Ron Nicolas

Tyler, I when back can me, to number with get we you have don’t certainly handy - that

Tyler Stafford

That’s fine.

does back Just that half and CDI the next include exclude rate XX% kind or to efficiency be clear run year. amortization? Does of ratio sub the

Ron Nicolas

CDI It amortization. excludes the

Tyler Stafford

it. Got

is benefiting that asset basis? about on question the you side. the Premier's Is way what hikes And but go the future of then assets think What are Okay. sensitivity deposit is Pacific and all relatively seeing, forward banks neutral sensitivity. assets just rate about to are pressure a guys the seeing at point this a best your benefit

Ron Nicolas

we’re No, slightly still sensitive. asset

added the their sheet were loan organization seen balance of not that and the but Grandpoint side slightly You’ve deposit and obviously or asset net lower seen, were seen lower impacted outpace in loan asset sensitivity change generally portfolio course and overall on the was in the the materially we’ve investment combined has that of interest still relatively third the yields yields we margin the that the us sensitive. quarter, here absent had speaking to thus increases

Tyler Stafford

core about core year, hikes think still as hike. we Okay margin think slight each exiting some should still margin with as this the come, we incremental expansion modest see you rate

Ron Nicolas

see There margin. being number yes, but course, all slight a off we you see run increase again, hope deposit of expansion factors, in it equal, what as you well what that, know depends would betas we upon the a things in the to impact see of

Operator

be O'Neill. Please Instructions] with our [Operator next Sandler question go And will ahead. Liesch Andrew

Andrew Liesch

percentage around Just loans little just question curious, the on you composition, to a basis securities level at over be this of the about that average that around even kind intraquarter we thinking cash for equivalents just million me maybe one balancing earning or do remix maybe revolving XXX be right have any like and how is in or of plans, should assets looking cash. the

Ron Nicolas

two cash for of one will most that quarter, effectively that the number we positions come that of weekend Andrew, down conversion separate each for be held will because that past banks. the the part the just two entire this happened

can that in down, So million in XXX somewhere you the low come range. $XXX maybe range, going it's number a to that be probably anticipate to

Steven Gardner

federal come the And down home equally, you'd expect to bank see well. as loan advances

Operator

Please Matthew questioner And Piper with today go Jaffray. ahead. Clark be the next will

Matthew Clark

Just of the at where pipeline a stood can third the loan you the end quantify follow-up, quarter.

Steven Gardner

at It's fairly were consistent with the we the end pretty robust, of second where quarter.

Operator

will today questioner be James. next Our Worthington ahead. Don with Please Raymond go

Don Worthington

Pacific quick say but are markets Just probably or on acquisition. Grandpoint opportunities early from for Arizona you seeing growth a little in still Northwest the question other

Ron Nicolas

bit in place the markets, process. in to recruiting little help strengthen a those in bankers putting early presence of our relationship it's we're incrementally processes, but our some We’re we’re some

Operator

will to any for remarks. like conclude session. Steven answer question And I this closing Gardner now to our would back over and turn conference the

Steven Gardner

William. morning. for Thank again thanks you, us And all this joining

free feel other be a myself we would please with to you. questions, call any or have either to and you If give talk happy Ron

Operator

lines. now And your today’s the attending for you concluded. conference disconnect Thank And is may now you presentation.

Pacific Premier Bancorp (PPBI) 23 Oct 182018 Q3 Earnings call transcript