PPBI - Earnings call transcript Q2 2022 | Pacific Premier Bancorp, Inc.

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Operator

Good morning, and welcome to the Pacific Premier Bancorp Inc.

Second Quarter Conference Call. [Operator Instructions] Please note this event has been recorded. I would now like to turn the conference over to Steve Gardner, Chairman, CEO and President. Please go ahead.

Steven Gardner

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

we As report earnings morning, of you're aware, earlier all released for our XXXX. this the quarter second

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

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

call of Ron carefully. our each terms the the review encourage the a items related forward-looking investor notable up safe to of of release include statement some the I also financial and of open questions. our you our I In that on presentation to will our details comments, call Nicolas, performance. earnings to note results, through harbor a read we'll CFO, relative today, few statement I'll the and walk then our through to and

at generated an environment. grow earnings strategy our to us disciplined the between value reflect to strengthen management, consistently of quarter, results create quarter has the which further positioned second and We a We the evolving our second higher as well compared to level the This delivered returns strong been risk while franchise. managing our our a franchise. has risk results same Our growth tenet during for have we and fundamental balance and grown time, prudent quarter. proactively to maintaining shareholders in approach of ability profitable prior

was on income $XX.X $X.XX share, return average net Our equity. XX% or in common per resulting million tangible a

along loss or capacity quarter more have of of with acquired value model. quarter, our ended million. incorporated total with the nearly absorbing CECL total discounts fair X.XX% a we the on into ACL X.XX% outlook the loans, we of $XXX During loans. And cautious an We

underwriting remain all well-diversified Our maintaining and production pricing quarter We position generated levels, liquidity and loan discipline. during capital the strong. while reserve

provide that and with to deep Our all levels of relationships the have expertise consistent business approach strong the we led new we development, clients to production. with along

pricing new earnings As XX the loan the indicated last on during quarter, first our basis loan translated a in call, started which point rates increase commitments during to late quarter. second in increase we into

Given actions annualized slight still $X.X that quarter. nearly from loan new Combined the of loan generated is in billion is it which we pricing, encouraging commitments, growth on this increase line rates, commercial with our to translated loan a XX%. prior utilization expanded

As a history. the we banking new result, the our of generating relationships attractive today some in are are most

for reassess market environment. With rates accelerating, demand the have credit as the in of we in investors the impact a rise CRE interest current slowing seen

We expect an the future decreased demand balance in also we our continue for rate portfolio in net risk From environment. and to in and a rising of anticipation bring slower response manage thus benefiting rate prepayments interest sheet perspective, growth credit to proactively will loan our payoffs, periods.

time As of and points and taken we which have equaled deposits, to the reflected excludes increase core cost in The our quarter. deposits sensitivity higher pricing the during asset funding actions costs. on control and basis new second four our brokered loans

years, the base deep, and innovative have year, complements we seen conditions we our beta. allow we model. deposit as the management payment stable earlier and provide what deposit which stability to past, access with invested over creating treasury our began specialty are ensure have as a our deposit been viewed the our that consistent this among have business experienced low Fed industries, commercial businesses added our tightening always shareholder base deposit for deposit-rich clients trends franchise, banking to the And to providing value. And in relationships we Since we grown we have have We relationship-driven in the foundation relatively us solutions financial technology generally build clients. have with to sustainable in have long-term our

contributing However, given few low. expansion I'm net an we in to added anticipate remain That interest likely year. see the seeing on call pricing market results. and half earning we the yields quarter higher said, the on Ron the turn it net our pressures. assets, is increases And unprecedented with are details our to to second expected interest will over to With rate to provide margin, deposit deposit higher relatively of that, financial second cost income forces, we going future over we of pace expect a our more

Ronald Nicolas

good and Steve, morning. Thanks,

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

statement highlights. Let's start income the with

driven X% $XX to share, the increase EPS million. a at came basis, increased end range revenue expense as almost million prior $X.XX the net quarter our interest increase expected million to increased compared linked-quarter on Non-interest total quarter quarter. $XXX in second at a to for by X% lower of the Second per income $X.X of

our our by a net $XX.X As interest-earning average closer yields. the income to a higher look million, in million Net income Taking and million interest $XXX $XX pre-provision result, million efficiency of improved asset average increased ratio to $XXX.X and primarily $X.X statement. balances driven revenue assets higher to or XX%. X.XX% million at increased loan

basis front, the cost increased points for point one deposits and essentially basis deposit core to On core our were the of flat, deposits four quarter.

of favorable due The points prepayments income an remix included the our was quarter million impact uptick quarter. saw higher advances. fees higher and eight FHLB of interest full funds X.XX% of interest increase seven of prior seven offset the margin X.XX%, prior of our quarter basis with higher-yielding and reflecting core loan to accretion $XXX compared expanded basis points towards core net we term as yields, loans margin flat the to and net reported in a to Our to by a by loan primarily point the cost basis

core to the the in X.XX% interest Looking expect of ahead to quarter, to net margin third our range we X.XX%. be

million rates. seasonal base, our annual excluding are positioned the actions prior to $XX.X -- interest $X.X expectations million due tax fixed lower of we deposit from Non-interest in the given taken quality fees well and income, rate largely to core we've recognized of million the quarter. the of gains the to decreased Given secure lower timing funding due cost for $X.X the higher income funding first trust quarter security the of

benefits compared incentives. $XX.X X,XXX $XX.X $XX at compensation forward, $XXX,XXX be quarter Non-interest million, of first in came Going employees. of in the the expect Staffing third $XX in up slightly to for expense sales. our to the million the range and million million, increased to Salary reflecting slightly range end excluding and quarter. lower we security higher noninterest to $XX decreased the our expense overall expected income million, to any at

this innovation. our optimize growth based to in purposes. levels our due our expense release $XXX,XXX mostly noted we to of morning, for legal to drive general on corporate objectives, As continuing to continue the timing technology increased Professional investments in while fees make staffing and outlook certain

the $XXX expense million the million in third of costs. $XXX million $X.X to quarter, noninterest impact should the Our approximate of excluding onetime severance

of to provision are and $XXX,XXX the due was with monitoring downside flat Our $XXX,XXX, prior current forecasted increasing the macroeconomic we and supply risks carefully of losses quarter's for environment. chain to probability the the inflation challenges, credit ongoing high

now to sheet. the Turning balance

and driven down compared higher to solid loan of growth utilization, or grew quarter, the $XX by line XX.X% prior a essentially by reflected from million were quarter. continued remain commitments $XXX but the to year-end which almost results $XXX of new XXXX increases deposits core in flat, of XXXX. from annualized and million million prior than nearly higher quarter XX.X% Period-end by loan second $X.X X.X% in million quarterly billion in The $XXX average June

liquidity provide able to balance Additionally, limit This we million added $XXX transferred to remaining is another flexibility. to approximately for securities $XXX where term interest we valuation rate at million sheet in to lock future attractive position due deposits changes municipal sale In rate we increases. source bolster broker to were held of our fixed in maturity rates. June, greater funding available to also and our

Our loan-to-deposit million at at just ratio over $XXX increased million quarter to and cash XX%, end. our $XXX flat balances remained

our mix. and closely monitor earning and liquidity to continue manage asset We

at as X.X% ratio XX. to $XX.XX quarter share Our common X.XX% tangible value decreased equity at book ended tangible the June per

was quality believe increased organic capital us the the prior from basis six classified for million bulk and well of points $X.X basis avenues. of and from and loans CETX growth credit. and supporting quality to by attributable Net of were earnings asset back through held Steve. Our finally, profile points one of X.XX% XX.XX% quarter future coverage and to fell dollars to bank charge-offs loans for a profile the which fell of and a ratio terms consolidated our allowance deploying held X.XX%, capital million in prior level. level variety loans a continue asset to macroeconomic position our that in remained in to for XX.XX% And the with an to standpoint, flat quarter, investment. opportunistically asset XX tempered We to I'll loans as effectively to that, Total was growth on our concerns. on was it from solid And hand current delinquency quality loss $XX credit X.X% as decreased And for ratio nonperforming improvement loan investment quarter. X.XX%

Steven Gardner

outlook. capital enhanced Ron. sheet entering of a profitable levels to the wrap comments with balance Thanks, flexibility of about half and growth. our second liquidity, continue reserves I'll the few We're up generating year Great. with high greater ample

degradation loan trends we have Our at portfolios this asset seen are not general flows. across quality point, in borrower cash our remains strong. And stable a and seeing

Despite Given we management, credit perform of bank, the a navigate economic positive ability risk demand commercial rates. their standpoint positioned our result believe higher and the approach and and the slows. market about generally the are clients economic a loan clients chains, is as From evolving inflation, strength are to of we well continue standpoint, challenges we supply -- proactive current activity to markets the interest underlying landscape. our to in if loan well labor

a hurdles. no other make areas production reassess to demand with have CRE the expecting as the CRE opportunities. have the given in But diversified return where the are on new for there ability sense are business, as loans we valuations, of we some the half lower investments second current attractive seen Therefore, lending during our On year. decline we higher longer hand, focus investors

outlook, we eliminating all macro And XX assessing areas by this did staff are incremental organization we cost reduce positions. the month, the Given of savings. for

financial shareholders, performance result, annualized for a create Along savings cost As management and value deliver million. top a our priority. to strong of will capital with expect remain $X continuing approximately we

including assessments around strategy approach Board variety and ourselves a and acquisitions. XX accretive all generate completed we have on interest that that take capital comprehensive we those a M&A. disciplined transactions rigorous, on. equally of from our transactions our consistently approach important management to through did aspects the demonstrated growth cycles long-term of a passed closed ability We've This transactions value throughout from Our pride our have to and has not towards rate shareholders, and approach both strategic that management, economic for fit as

to developed, trend the of Given institutional in services continue of expertise strategy, its growth and expect industry there the have long-term M&A experience opportunities will part as our attractive continues be a and be future we consolidation. financial we the will

to better with to deliver take and strong of supporting the other. have behalf an because high However, they uncertain clients want of on than been their questions. we the executing that prepared our the may remarks, That of identify. have more Premier our efforts in That to outstanding more I said, the achieve results Today, and our has current capable excited the organization Board year. would any become for that transactions multiples is people ability over about conscientious and serving remain outlook, and half strategies happy confident approach first by it each difficult answer standards and the thank we ever we our the be positioned concludes for economic organic as Directors, throughout environment arise On them to shareholders are unfolds. of towards talented our opportunities the growth Pacific and

Operator

from [Operator with question Instructions] come James. Feaster first Raymond will Our David

may You now go ahead.

David Feaster

just if we all just you've M&A over disciplined couple like just could into of proven any just rationalized into at share may lines, extremely make Good We're I'm M&A seller other much mean, if commentary an how commentary that of the morning, bit. you valuation your have as years just capital. starting kind to Steve, I'd opportunity know I given in And sense. current be up at going M&A the especially conversations, past and are you're out, just core kind and M&A We dig mean M&A looking on having conversations conversations. a as and follow just on high-level the your going? touched But Look, of this maybe deploy between potentially acquirer. a theme your I on Maybe everybody. doesn't been we're bit. reading a dig expectations all? you're to math at continued have the repurchases little competency? to Whether

Steven Gardner

It past slow. the always given remarks, through we M&A periods in and is And conversations. uncertain the At out just And seem just have couple to more multiples of like times, the when there. has ebbs here, conversations Sure. I prepared for and quarters David. those having fewer typically, flows. seem you're outlook, volatility, seems to be be targets of years, indicated we going to our there for as

We're continue in a acquirer As you going been the mentioned, past. we've disciplined to that.

a comprehensive at approach the a variety more areas buyback transactions capital plan. difficult. so I certainly, just we of said, and a capital. we deploying also of management as But times And look take And to share have approved at bit it makes

been monitor year, this but something the we deploying closely opportunistically through discussions around. thinks we and to buybacks. Board that regularly, active haven't and have It's thus consider capital continue far We about

we'll the environment. so assess to And continue

David Feaster

that desk future would nature it that Okay. just probably did high? think came in up, -- across I range in your a just a of safe all And would opportunity criteria, picking of have more maybe versus level, towards distressed transformative? the today and end I and that deal that Or smaller be if your too high fit expectation guess be at bolt-on something your a cost was near we mean more larger potentially the something to something doing versus maybe maybe the it it's

Steven Gardner

You at know our we our where about you what, look work. -- and challenging to math multiple we're it. again, it with makes that I think are, and it take going in disciplined for valuation, multiples rigorous But they think approach to particular,

in returns one regulatory size, to get right. price, organization soft very start approach It's always we before things all that prefer and it enticing. that the long to difficult attractive -- in all think hard would transactions. for certainly these at legal about is And bringing scale as that this MOE. so the executing you shareholders culture MOE-like really that illusion the start as think becomes I difficult then a it, we M&A -- But of mind, more day, term. for I the bank the There's somewhat know financial combination, and rarely from have we've it's of of to for matters these And end the history about very aspects difficult. of ultimately, they to together talked how those the gets one an why structure, structure long thought within and we've if delivering shareholders. that's that are to see larger to the requirements, an approvals But much And the created do value business, us in MOE a

up guide opportunities that the -- fact our across the think it management we us that We Board and wrapped stock. have a lot about executive helps come in the the as Given desk.

David Feaster

lot a sense. makes That of

still production read slow maybe loan to XX then it it at at kind of slow new we pushing if is increase Last obviously as of higher paydowns rates, didn't to just the quarter, could payoffs And in slow basis kind between talked you switching down Maybe growth. your commentary? down it loan to, single-digit kind the which outside having rates? quarter, Okay. probably are the we pushing yields, high a all obviously, in like has about originations. slow which higher -- saw Just Obviously, of And and in point and the just all. started decelerate higher sustainable were originations third still growth even lines, quarter. pace of do CRE feels growth of success

Steven Gardner

of the ends the year. net you where we slower there in I lot particular, mentioned, for Well, the accurately certainly, to up, in investors second -- of going up. going as here how to those are half rates credit, the discount as the loan applying natural that's And rate the those environment. reassess going properties rates Right. a cash on And to to out, they're they cap that growth a in side. -- are They're parts CRE valuations move as of point the higher are seeing moving are flows demand move up to

And out in so we coming are a of seeing quarters. a plays pause. see how We'll that bit the

business and development utilization part year. that through disciplined to I remaining move we of approach to it advantage, continue always an the of think expect the have us here technology given and we our the as around

David Feaster

kind Just up. of following

You credit. demand demand segments about you're What changed and potentially of or outlook given the for has for taken, at appetite your cautious the the tightening more all? tone demand Pacific about clients' we've kind economic any that talk on credit standards avoiding? Premier that your or Or maybe

Steven Gardner

I know and and looking there a thing levels the -- in have than at degradation high organization. credit risk. seeing per good they informs cash broadly that would And in they're We of their more business, there are way look tightening capital high is to they're at mentioned, going the any optimistic. And flows that the quality. have, our in environment, the that I we're they The credit forward. I is we strong singular our base and that and level teams look client as think always that we around we reserves, that And relatively the strong we not isn't others. that are approach at edges, the don't a se uncertainty area macro say

to business, going do to to resources that. to they the their provide grow and need the we're continue got we've So that funding

Operator

will Sandler. Matthew question Clark with come from next Piper Our

go ahead. now You may

Matthew Clark

for the Hi, questions. taking Thanks good morning.

to reasoning a sense I wanted get Most vacancies of looking have banks they're restructuring. the just for better behind on fill. First, that above-average it. an the to amount

that recent to certain able around function Or and acquisitions business are Was was it of and guys activity in trim. just feeling kind a You a lines? in of of slowdown anticipating looking little a obviously kind bloated?

Steven Gardner

and I activity We the don't know bloated. just trimming in would characterize connection outlook -- as I as think our maybe is Matt, it on being edges, think around about don't levels. we with it, it

bit, trimming And have a workforce. prudently. in managed us always played those role all too, little expenses so of we X% here also, a of And back factors the roughly

Matthew Clark

on Were the can relationship and Okay. to that related -- that quarter. you charge-offs update relationship? or one us from relationship? then not, And was, you if give last if can update NPA just on us a status that Or it even

Steven Gardner

you'd charge-offs the predominantly we that this That any be end should by I the And Ron, should related like to quarter, -- we that should that worked is suspect provide? color would through think Yes. that here -- credit. is fully to I be other there resolved. of

Ronald Nicolas

You've loan correct, Steve. it quarter. the that got to non-performing last end by be it was exactly this of and one It quarter, resolved related will

Matthew Clark

some falling steady $XXX make kind to line? back the the in be to the bottom then looking And expense to million not Ron, quarter, fourth hold Maybe run maybe rate the on there from as if are on just you, mitigate range, circling but restructuring. run that for might though that Okay. kind investments that might saves that of sure the it able rate looks in you're of

Ronald Nicolas

Yes.

have team where the time, here. the the bit a well, bit right. those to little than areas, the we're areas in to Steve's that's So areas. half maybe while I all, we of continuing to production first first particular still I in strategic comment, investments. a earlier lower may same half And we're vacancies -- little see we certain think At making mean second be maybe always add

that's else So I equal, a Matt. know, fair point, else think course, think be get of assumption, But equal. all to as all we that we I being when won't

Matthew Clark

a uncertainty get for starting you so organic from you little that typically, opportunities? perspective tend one yourself little last Or more you an much cautious pull even I as being than might more opportunistic is a think a there you then been? are downturn, as those And Great. back, Okay. just to in have competitors to Steve, see me.

Steven Gardner

we're don't otherwise. than Yes. cautious I think that any being more

the economic at are are on information. time, is strong strong. that the we in are cash where I the than moving at sheet, clients, course, challenges there's rates and conditions September. think that with their in quickly inflation. think they're read around the from chains time of percentage relatively I to engaged the they're data tightened. faster decades, same they the various lot one coupled that changed. how activity. rapidly think, of in $XX the an clients all month this everything but a sheets with uncertainty, fact of sheets a has at I Consumer this environment And thing flows that And a their that slowdown views of confluence how just remain there's we've course, translates same quantitative we uncertainty And different optimistic. time, financial raising have, businesses our balance billion because talking is the balance hearing strong, their and magnitude creates to around that in supply seen discussions and is the how That reduction they're, of the $XX.X But Fed expected billion balance just in relatively dealing have tightening of in the economic The

that it a and coming in to believe opportunities plays they we'll all looking we're out. out. seeing four of So positioned the see But that materialize well how number are two, And to very different there we're three, all I how quarters. be think going play forward

Operator

D.A. will come Gary from Tenner Our next with Davidson. question

You may ahead. now go

Gary Tenner

slowdown. of guess across you putting sand growth. a because of is the that? I becoming question off seeing more have banks a Thanks. seems follow-up seeing -- the idea little first you hearing consistent anything being I for different opportunistic Are Good a slowdown their a loan Are I the that you, kind head don't pretty are little than you particularly I but in to in or morning. want actually a conservative? to the of to on people be everything ask in we're hear board bit growth, are lending expecting competitors

Steven Gardner

not, We're Gary. We'd No. agree.

of or lot a competitors seeing their commentary behaviors. heard haven't our change We

So no, yet. haven't seen it we

Gary Tenner

Okay. the some balance optimization. added, you've of then question, second couple Obviously, I last sheet you kind as sources appreciate that. terms out, different of funding. just quarters, pointed management And of the in of

You still a have securities pretty sizable portfolio.

think it's so total I about of XX% your or assets.

you can you'll think have half fund been. in growth a levers higher as you the target historically over year, growth about it's of time the than So about you bit has liquidity the to out talk on this that to securities loan that back the see there, mix given Obviously, that that's the it you'd to like number been front? push maybe

Steven Gardner

come over that be next It transpire growth have over amounts of of couple No, we Ron think sheet, do what into a Look, in of ultimately alluded I it nearly the the right. Again, just don't rates to, first appropriate the that's balance billion. of time. down what to quite we the we've going think Yes. think down to much I we it's $X has bit have on rapidly carry bit. it's there. seeing cash deposit we seen as think, a also here year. I about like pricing little whatever that we'd movements, to our point. that kind a core greater base gives upon may bit And part as see and more liquidity cash more quarters. and than us flexibility depends It see deploying come at But think Certainly, the ample we to of this we loans.

mentioned payoffs, I production come levels. there, there's of it's into play variables that paydowns and number As utilization earlier, whether rates, a line

Gary Tenner

for And last question me.

credit, and anything people of of suggest Anything be are course wanting the at regular C&I to look business beyond are -- that's to kind you out coming that potential folks that seeing defensive the something you to against of you As slowdown? you for commitments would planning?

Steven Gardner

We are not.

Operator

from come McGratty Chris will from question next KBW. Our

You may now go ahead.

Unidentified Analyst

for for rest I Andrew Chris roll quarter. McGratty. like said your forward? if you if that I feel This is provide balances essentially deposit for on some you core still there of thoughts the the just [indiscernible] working year. was I could flat there's for the were going deposits deposits can you wondering wondering off And know was

Steven Gardner

Yes. I this that. don't speak to not that at point, anything don't we -- we're seeing would --

paying I think franchise by believed and never up for that. we're to that we create how manage going deposit cautious be pricing very you deposits. around We've value

us. that's deep so Most the long-term clients have we have, going do help with to And of guide relationships we them.

so they of pricing us pay we because And don't deposits. bank with on that the

movement at So haven't this But see. we'll seen point, any we substantive there.

are I play. dynamics there at a lot think of

as I leads what as raising drains in it to out. my And system all Fed prepared impact well. as As doing of how remarks, are this our rates mentioned the plays liquidity the from just the competitors course, of

Unidentified Analyst

the spot at on the you be able that Okay. provide any line. rate like, And using I to hold deposit costs of updated deposit moving quarter? guess, beta on topic of costs, to the forward? the you're deposit obviously, And you end able were assumptions Would

Steven Gardner

do that? address Ron, to you want

Ronald Nicolas

end. rate core basis was points, The six quarter deposit spot Yes. at Steve,

Steven Gardner

those variety of in And assumptions, under deposit a we're not any we using although models, Andrew. beta run our models different assumptions

Operator

will next Stephens. Terrell from with question Andrew come Our

You go may ahead. now

Andrew Terrell

business. that in to a earnings Steve the Ron. estate kind you pace slower trust morning, maybe line, Steve, remind Can Morning just higher and us impact real start or just business outlook if all? maybe of transactions on how maybe rate at escrow of environment a

Steven Gardner

that that But the -- business relationships at refinance the for are business, the impact fewer transactions, negatively fewer grow transactions, have exchange there. being that same business. purchase we'll we segregate proactive XXXX would I Yes, them. that transactions, fewer we escrow in think time, and From well, looking to

We invested we've business activity. going activity, of and So to forward. that market we'd opportunities in expect on we we're over trust impact that team, plenty lot business a any continue grow that that. going in decline and general that are there And to think offset time. don't really it see Again, do the to to

Andrew Terrell

That move Ron, I really just some I appreciate modeling quick, to could kind Awesome. if Okay. very questions. helpful. was of it.

remind the And specifically? you for kind how on deposit us what of Just are where that deposit balances the have line the line Can you deposit that in classified gets then section item. in beta expectations P&L? non-interest expense expense much of

Ronald Nicolas

You're the expense? in talking operating about

Andrew Terrell

non-interest the expense. in Yes,

Ronald Nicolas

typically Yes. with the exactly that will -- with have It's respect I that. up don't number obviously, the minority deposit we our Andrew, base handy, can that. to but That it's minority of broader base. follow bit thoughts beta slower generally, deposit that deposit a if the composition you have. segment that But those little than have of on, we will, are the just maybe my deposit

Andrew Terrell

core also guidance earlier. if any are the Okay. from you just rate provided assume XQ in could Great. And Does then for place today? that NIM what hikes incremental clarify already I that

Ronald Nicolas

That July, September basis at XX the points XX there assumes and the Andrew. higher this the in basis time, probability in points

Operator

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

Steven Gardner

joining today. chatting Thank the for you with future. and in you, thank Anthony, you look all us We forward to

Operator

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

You may now disconnect.

Pacific Premier Bancorp (PPBI) 21 Jul 222022 Q2 Earnings call transcript