Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the PacWest Bancorp Fourth Quarter 2022 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Bill Black, PacWest Bancorp.

William Black

Thank you. Good morning, and welcome to PacWest fourth quarter 2022 earnings conference call. Paul Mark President the Yung, our banking are; Thompson, CEO; leader today venture and CFO; our business. me Taylor, and our Kevin of With COO and

that over call today's are subject and Paul, call statements uncertainties that the risks, hand make forward-looking I please Before note assumptions. we to may during to

afternoon, actual see more materially yesterday from differ complete risks is our For X-K to filings which of a the and uncertainties on website. forward-looking statements, available results the discussion that SEC including could the cause also any filed Company’s

President I'd CEO, the like to call turn Taylor. over to our and Paul

Paul Taylor

Thank for We've thank made and future. the you, will the you today. leadership significant our that changes in call morning, Bill. several Good fourth stage for the everyone, quarter joining set

and Thompson John become Eggemeyer as joined who our of assume CEO, long-time role Kevin Wagner, has new Chairman; Financial Specifically, I and became has the Executive Director; CEO, replacing the Officer. us Chief Lead President our Matt

a us sharpened deposit-focused community different We PacWest long company's talented cultures. acquisitions to with one customer operating as by shareholder the business but a processes and brought exceeding history the strategic team on varied a returns plan announced that and expectations. to of bank great maximize strengths vision customers has and mission employees, of build also

corporate efficiently Now the and regardless function one as time line function. uniformly is right more company, or to a focus to on coming even together of business

requirements improve and to meeting to and while for to simplify our higher service valuable regulators' our exceeding soundness. will We more of an safety our or our and processes deliver even customers level shareholders

and PacWest I a strategic value. detailed and months is maximize the plan result This to plan building six the past assessing tactical shareholder of since work joined of vision

We are of sense a urgency. operating with

the made down Specifically, multifamily operations lending. finance to company wind the fourth quarter, its in the premium decision and in

us efficiencies time. refocus is accelerate growth reduce the core our These our to help businesses, restructuring improve realign and efforts profitability our our risk. over operations operational actions to addition, improve will on subsidiary company capital In its and

In billion and better a addition going control The across to in also was company. synergies above, to the higher strategic management and funding company balance systems the at which the define processing the bonds used sheet initiated sold quarter, operational $X the forward. cost loss position decisions pay team efficiency costs, to opportunistically an has reduce down in strategy

business quartile assets growth. of We deposits bank over top and efficiency achievable a ratio less; where for metrics non-performing core are our per in to time. perform and CETX earnings believe include created on and XX% we opportunity XXX% than see greater; ratio should XX-plus XX the and asset percent; financial less better; through basis These low-cost list growth have focusing our performance return customers or that points; of on XX% of to of core or equal ratio share or earnings building

steps actions that believe We in first comes the it across. fourth out quarter our meaningful towards goals, are the but taken

little, and hit enables XX% capital the target ratio sheet early actions CETX, would transformation. to the such, the our quarter CETX a end and as XXXX fourth delay our our of the While in to will This XX% balance timing accelerate we by minor remain of our expect delay XXXX. achieve in goals X.XX% us

slowing a base to to economy, a [indiscernible] return and and improve opportunity our Thank a challenges great but real for to there interest given our is PacWest and significant with rates additional ahead value employees. plan are our customer unlock There strong rising for a and shareholders shareholders, team, performance you.

William Black

on Bank to for announced highlight We foremost, points: unifying a silos strategic Community to around of and the want beginning our the PacWest. performance. an chapter marks businesses we vision quarter clear focus operational improve First the fourth the Strategically, main Paul. eliminating four Thanks, next and with

we quarter restructuring and a the see fourth in are urgency, the business of you sense lines of can sale another. a and with the on significant real exiting with as acting Second, of two

an this we hold ourselves the time. bar announced to to aggressive perform target and operating should what we company accountable set list Third, over believe

Lastly, challenges the in industry we the environment. are current like facing economic

are We thrown managing XXX% to cycle, the us. business whatever the through for at committed gets preparing

session. like financial CFO, our to commentary results to the And before Kevin, the now I'd we on into some turn Q&A specific over for go things

Kevin Thompson

strategic Thank our forward. look various join to you, at talented team capital was the Bill. to characterized fourth pleasure working quarter forward PacWest, and and all improve profitability you. The to It's I going actions with by a of position

Paul our the used a of $X FHLB down We $XX million of securities sale billion proceeds loss. in available-for-sale As mentioned, pay borrowings. to resulted

As part recorded efforts lending Civic the to million. goodwill our to of subsidiary, restructure impairment we a $XX

on As impact no is a reminder, non-cash cash goodwill regulatory and flows a our has or ratios, liquidity position. charge capital

overall the the efficiency working bank. operational Finally, are we of dramatically improve to

recorded this expense we a retirement step early first million. a initiative, severance and $X.X As in of benefits

estate and been these fourth X.X%, leases would unusual on connected and by million $XXX or increased the in and would for the have share Adjusting portfolios. X.XX%. return mostly average our quarter $X.XX, Loans in our per residential earnings assets mortgage by items, to quarter, have construction real been

increases and costs. venture higher brokered in rates. due from retail $XXX wholesale offset by margin deposits non-maturity banking to in outflows deposit market time production quarter. This decreased at by in the points Deposits Loan by and driven quarter, basis and XX net X.XX% increased portfolio. interest the increasing deposits The in was the in to X.XX% mostly quarter million the the decreased prior by mix yields

basis by while to our basis increase interest increased [indiscernible] points average increased cost of rates, our points deposits With XX XX to the X.XX%. in X.XX% unprecedented

decreased to a As net by million result, interest income the our in quarter. $XXX million $XX.X

allowance allowance for points an Non-performing of low strong credit and with XX the all to loans by quarter, in loss losses X.XX%. to leases. loan remained remained at million credit ratio $XXX loan metrics million the total of our Credit basis due $X.X increased portfolios, for growth, in assets mostly

Excluding in lower decrease million XX.X% was the expense impairment of $X.X customer-related and million services higher due expenses quarter. related fees intangible ratio $X.X The the to early of severance, retirements asset lower and million The efficiency decreased the million. in quarter. goodwill $X.X by $XX and to offset amortization, non-interest was

Looking early of of full-year goal share year-end to the at CETX XXXX. the and plan just XXXX, I and you through outlook. current will are with reach X.XX% We capital while budgeting our our a year part in the of by process, reach ratio around we XX% our CETX to accrete completing

strategy as the balance strengthen loan capital our part to We and flat to be balances preserve the expect for sheet. year of

balances increases with flat on This We interest currently in deposit net a margin XXXX. anticipate the likely Reserve impact in XX renewed in to experienced more the deposit We point flat rate level relationships. full resulting community deposit as basis our and pricing, Federal from two well XXXX. will focus banking loan and expect

strategic quarter costs business focus our reduce With discontinued expense course to includes to expenses. on related the took operational lines, and compensation tightening the plan we fourth continue to controls, This we in reducing and projects. vendors, facilities around efficiency, especially

of expect we mid-XX%. XX% low efficiency a As goal with a the longer-term a area, result, ratio in full-year

from anticipate Our any reserves credit not and be quality presently continues to levels. do current increase strong, we

prepared This you remarks. could the questions. please concludes our Operator, for open line

Operator

King Instructions] question from we'll from Truist first sir. take much, [Operator Thank And Securities. you Brandon very our

Brandon King

Hey, good morning.

Paul Taylor

Brandon. Good morning,

Brandon King

lean your more to to the Paul, on Obviously, lines thoughts Good want you’re forward. any business you curious, not particularly the I business morning. strategy wanted you are Hey, level finance, multifamily. going so of get other into national I'm top lines? mentioned the doing premium what more,

Paul Taylor

Yes.

balance sheet, our a a do real mean, you very So it I thing of estate. we we do at as lot well of look and one is lot

then more then our lot continue community of more bank, units the that's that do But business no each more that. do. estate we one discontinued really also our some some commercial have that relationship relationship business, again, to nationwide will a items year, of type we the ones So type looked a more we This a to in of and C&I one on. are And we'll lines continue yield, real focused, at low and do business. of lending. we'll do continue that's And we've

that fairly to those. mean of was easy decision a I rid get So

Brandon King

mentioned Civic, Okay. of is and is Civic And in going the regard that? some there kind strategy forward restructuring you there. What for then the to outlook for

Paul Taylor

Yes.

all a be. we're and So and in sort integrated that. taken of analyzing overhead over, there is one PacWest. We're that than still we've the thing we The taken should lot more – into process of know there's

end And significant Mark expect on But and on offer that profitable the we'll forward hang and savings be looking is who's call he the that in with and all products of charge it and determining the of in at we helping which will the day, determinations. entity. company the to right today with. of of right now, ones the go Yung, us more those much put products from those he's here and profile company they that Civic, So also. We've Civic we're risk now at lowering a

Brandon King

I'll for the Thanks questions. taking my Okay. in back hop queue.

Paul Taylor

Thank you.

Operator

our take question from Matthew we'll from Sandler. And Piper next you. Thank Clark

Matthew Clark

morning. Good

Paul Taylor

Good morning, Matt.

Matthew Clark

of Maybe confirm portfolios. you're the that just on just size the portfolios those unwinding businesses maybe or

– you Civic premium more just isolate I – think and much the have from think how the million, I that other mean, multifamily in year, about piece – areas? loans that’s is that over over runoff finance you I portion include of deliberate? $XXX related or mean maybe those the of flat a that, might and then some unwind does those as runoff being for question kind talked three areas of you to

Paul Taylor

those Yes. Bill, that? all got why you details. don't take You've

William Black

Yes.

– million about So north sit here XXX today. as we of was premium it's finance little a $XXX

we're real balance not to The was customer kind running customers. stuff going continue originating stuff, we're On over small-balance core little which a off multifamily there's exiting, group is and that a deposit multifamily. the our $X And small different separate base we There's multifamily that had a business, billion. tranches. to service two we're multifamily of

Paul Taylor

Hi for Matthew. I Matthew, I'll add down your will the growth hear loan those anticipate flat the good wind the add, does And year voice that entities. of to again.

Matthew Clark

through I and process, other, the unusual is And then as year? on kind can Okay. kind other question operating of ROA kind an maintain items of going additional excluding you do Great. guess, you're any you what this severance of restructuring think basis this

Paul Taylor

XXX going believe ROA somewhere but we the a maintain So and be for year, this that it's can we look ramping to around as up. we year, forward throughout

any it's at mean go. to going December Most Fed. or more we've but I probably go going a we're mean, the level do of an be what a I interesting level believe recession. us economists you in preface to be So enough like going of that out I'm the well, long there to like be could taking for to got are but of to from we're is smart I'm know going a not that. cause some think or items increases I have mean, XXXX anything some that, that type we're and quite don't And as But some going ROA how preparation, is flexible that into macro about XXX, so balance I actions will look type how like year. we figure to sheet variation. that's prepared that. could environment. some now

Matthew Clark

just Got then it. ROA on to close that the conversation. loop And

of plan from should In by Or more spoke about there pay about flattish, and and FHLB? securities year? how about end loans a is borrowings assets sell terms I we of overall being overall mean, the think here? denominator, you the but the off this assets what to

Kevin Thompson

Yes. at quite is looking table. we're I mean, the everything. Everything on honestly,

distressed bonds was it and look felt be in the loss, sell balance we're could sheet we them there's PacWest ahead sold and was about worthwhile of dip of things. these areas. looking and an I more that dollars that to groupings the bonds. profitable. of in some but the types the go $XX billion. But sheet, There in billion a reason at of all take sort again, smaller had in we a XX-year, mean We're it's at those that's there of part As sort balance you argument we

William Black

patience long-term those be of we level unrealized strategic. bonds There's what's losses in mature reverse. shareholder the back. if portfolio. our to of and needs We're an there's a the earn Also, bond thinking losses, And to hold it value unrealized of the here, you the element in overtime, need wait liquidity

we're So very this. through strategic being thoughtful and

Matthew Clark

on the some severance quarter. had And side, then it. you this Got here expense

cost you saves in in Just of expect savings curious it what potential Any magnitude the related that the the kind sounds year? that's savings order And of annualized we sounds this terms of or first the as It like step, that? you could from release. more. there's like mentioned see

William Black

more where – probably efficiency And looking we at the across other focus that saw Are we compensation an Yes, at annualized, more as have forward. board. working we're looking plan. of we about going right there have to things looking area strategic it's at now, efficiently? We're and projects. lot the so of severance through come have in level we're systems can We a operational much do that we our facilities, we're

Matthew Clark

step I'll Okay. back. Thanks.

Paul Taylor

Thanks.

Operator

And McGratty from from Perfect. question KBW. Chris next take our we'll

Paul Taylor

Good morning, Chris.

Christopher McGratty

Hey. everybody. Good morning,

$XXX You talked, Paul, on What on your a are are thoughts thoughts million about – $XX capital what accelerating I restructuring the with the getting that this seems raise? your mean, million. year. Like like

Paul Taylor

on say the would table. is I everything Again,

on at, be In – the it it'd to has pricing past the but again, in and week did very there's think levels time. been stock. of stock that be tough is would that at table, at think the preferred I to our no bit. this stock raise raise we've point a up weeks, We capital bit earlier plan year to I that but that buoyed the But a in the moved here. do

William Black

we'd with and associated other back that again, be less. dilute the options shareholders much thoughtful and would dilution that earn And about very shareholder

Paul Taylor

Absolutely.

Christopher McGratty

prepared If here. – from to to think remarks, most guess need that could guess I reserves your most... I hear I don't I wanted of you your think – Great. I in heard And correctly. add you

Paul Taylor

We see that that going preface there's and we're don't time. we and this that. Officer mean, our need really any or as a see add in quality no don't I any into with elevate feel year, year. but would Credit it we – today, signs credit substantial yesterday, of issues, probably recession this I to know could that at reserves. again, just concerns to issues point this don't Well, adequate. any we're But talked we I really We Chief with any credit

Christopher McGratty

buying Yes. current Okay. because you. just the think just Thank for aren't back. I of limitations it might the I'll but get investors I CECL, earnings. you would get of ahead stock your step

Paul Taylor

shop. a again, that at a credit good PacWest credit very, to with but our I are a of one this very make very time. my of PacWest is months, credit And I've want very, biggest it's just clear that's position very good shop. is only is here very handful comfortable we impressions sure that been

Operator

question. to go We'll next our

from Davidson. Our next D.A. question comes from Gary Tenner

Gary Tenner

Thanks. Good morning, everybody.

Paul Taylor

Good morning.

Gary Tenner

Bill, of that – premium multifamily, bulk of laid So or size terms front-end? is a runoff multifamily. maybe a couple I on premium runoff, quick and more pretty of right, the pretty the out of the runoff three in about on portfolios, I should portfolio finance assume you kind that's of the short-term we finance mean years but it that's a assume

William Black

business but will things clearly, So that, coming on flow, will it when agree itself a that's multifamily, and out. the of assumption a exiting. is Premium I when and reasonable upon mature, kind depending were they it would finance of underwriting pace ebb kind we're

them. It's we're that wouldn't to borrowers, it work going be be and to not going it communicated the with expect have to work instantaneous, we're immediate. to I and to going We out.

Gary Tenner

business? the opportunity kind business? Is appetite an sell think saw and so, market business ago I their finance there in that Texas or finance we Capital of half Is last any Truist. sold for to year year premium the at to there or a premium

Paul Taylor

at would that I that, right on again, everything We Well, again, but say the now. that on is table. – look nothing

Gary Tenner

a towards going the in And little of side, Okay. you pretty more for any half but flat. the sheet expectations the that year, in Obviously, flows Do the sounds do that knowing optimistically a DC some you to be deposit back of space? the terms balance of in base or heard Valley expectations kind the expectation maybe we've recovering year remixing deposit terms the channel? and the in then Silicon from of have flows later talk on have view it of like is deposit those

Paul Taylor

I absolutely I'd bit. deposits a very have you to deposits very, are very hard down Venture Well, to quite have you, love can come tell They venture frustrating. estimate. to tell increase. we'd it's

in We this declines of the we've at did seem but like second the in the past. look to year, I to the and floored we sort they're seem year, seen of have I half first half have flat. year, they of As mean, the nothing in be

to about like would we're think we So venture billion $XX deposits. in

like we'd hope dramatically Because I little cost bit. around So to we're out wholesale sort there, They'll down really will decrease allow funds. go right. planning we're of of of deposits base, that then see floor the somewhere out some for. and a and them deposit to get that's of remix And the the us what

Mark Yung

low time, the assets very careful to Paul's element point. we funds a because volatility. deposits of of stack what will we up same of It's the those cost But great at against be

William Black

agree market. a And and market people the well, towards but end cadence part are carrying better earlier Mark, earlier the of year we the of sensitive of slowed all through here – very softness that with as this dry I this kind a the There's again, news tremendous right, the saw rate in market would QX, investment of in the venture and amount obviously, is powder, year. And down year. tail have that's we expected

Gary Tenner

much. very Thanks

Operator

we'll Chiaverini you. question our And Wedbush from next from go Thank to David Securities.

Paul Taylor

morning. Good

David Chiaverini

the taking Hi. Thanks. Good morning. question. Thanks for

I So discussion. on ask to wanted follow-ups the some ROA

the December, to You of mentioned to X.X% X.X%? Can overall getting is for target timing talk the X.X%. you getting And X.X%. XXXX then in about that

Kevin Thompson

voice. to good your hear Hello, David,

could year. Reserve – a of it Federal expecting increases XX We're mild As basis Paul could earlier, XXXX two mentioned recession. rate more interesting is points. see an be We

being sheet, of big our going from balance making and moves focused perspective efficiency some prepared we're operational on decisions and terms our forward. so And very in liquidity armoring a

but us in get in seen bank set has because should really this lot a you back chance the really may the that, to great So see XXXX to up of noise have a those XXXX and of XXXX, good well profitability to past.

Paul Taylor

a get push [Indiscernible] goals I'm can to we expect hard patient overall bit. we that a very going person, yesterday. not we and as to as so these little to that released we're have

David Chiaverini

expect retaining should of more businesses X.X%, helpful. business. around that That's multifamily you target finance, given exiting increased premium And of a volatile Civic that? but we Can you're presumably couple volatility any the of and discuss stable

Paul Taylor

we're to going to we earlier year as we're Yes. year, run get – actions throughout any more have I be trying in actions further the mean there's to take we and the better going a can go so rate.

there So think that it I the then into we year in half would should get will this some be be then volatility, as of smooth would this out second year, XXXX. into the beginning and of and

William Black

in of is terms So stable earnings this of big consistent, build David, to part more profile. a volatility, a

the And Paul on and well. expense so you're volatility the that's at equation the overall the said, side addressing in has yield. then as really And of velocity big reward where a of of what you're assets of as looking part the doing risk also, been terms

Paul Taylor

that's of one I our to take mean the goals, of too, is Yes. just PacWest earnings. And overarching comment. an out volatility

PacWest I and for predictable little a Street. smoother, earnings think volatile been to and we're hard to get a predict, have trying The better, and earnings historically typically they're more

David Chiaverini

to then business. multifamily same accelerate off portfolio. that I'll potentially finance everything And on premium selling sheet? that Would you selling in that. the question mentioned balance ask of of the the is you that kind on consider the the for table terms Thanks

Paul Taylor

this it definitely loss. significant sell such at very I difficult without to We accepting pretty that be that those are would. believe a rates time would

David Chiaverini

that portfolio, the the you Did billion, what over much could say mention time? how did did and right you size, come down on you – mention Civic of $X.X

Paul Taylor

to there had to still we're hands for we're – adopted to what which and out eliminate. you're – PacWest we're when see sort figure Well, in definitely acquired it installed figure type going in we going to just trying there business of week. out to Again, come a I he's there out a about been what offerings it keep down. method offerings and decentralized going they think about try Mark it, figure And to trying we're the off and really

Kevin Thompson

we the And had asset, in familiar entity from with course, but flow of as the bought former business. weren’t like past the the and

like the forward. profile we asset. the within trying so And risk to and going right size just our our find base capital It's

Paul Taylor

our But it that. around shrink earning I going and to again, are overall, mean, we it's assets, of below XX%

and that is I portfolio big of just are some it down. think XX% we a are are chunk, at area, we the markets a to also and up also bring sell that looking opening trying in too to – better of little

David Chiaverini

your one me is And the what for crypto in on FTX noticed you I you the guys curious, I mentioned venture banking Slide last does impact way was situation. customers? on banking. Are FTX XX, business?

Mark Yung

the impacts way it very their No, scrutiny this VCs increased to and is Mark. responsibility by and is simple, Yes, investors. the accountability just

a diligence, greater deals. of slower So cadence

David Chiaverini

Got it. Thanks very much.

William Black

have clear, be we do crypto any to David, direct not asset exposure.

Mark Yung

That's correct.

David Chiaverini

Didn't Yes. so. think

to Thank wanted Just clarify. you.

Operator

take We'll from Stephens. Terrell from question next our Andrew

William Black

morning. Good

Andrew Terrell

loans. seen you guess you or end, can have Hey, to to maybe past can dues I content move in of whether lost quantify quarter lower? those any bit And specifically if see a I quarter-to-quarter. bounce there? around Civic XX Hey, just to due And good also those so, magnitude? kind not past start, XX the to morning. the since ask know XX-day on wanted I XX you

William Black

Yes.

confluence month. answer December. the It the of sizably over So ended already month down some of has a from is number kind pretty That the how there and in still yes. was come

worried and we're or kind Andrew. – no, not how flow so And the any of and It's ebbs month particular the fee there. about just anything an ended,

Paul Taylor

quarter in and again, well. as some ebbs get, especially growth flows, as noise But year-end. the you near And

Andrew Terrell

Yes.

have I against duration? bit it's a Civic shorter you Okay. know the And remind the then you us can reserve portfolio?

Paul Taylor

think but I specific the portfolio, disclosed reserves we've Yes. by right. don't you're

Civic, it's months. the XX inside of one products For of

overall is X Our experience XXXX in bps. loss

a the out. imagine with So and would low CECL very you experience were reserves you tenure, of I loss leave a short come kind

Andrew Terrell

Yes.

plan on picture. bigger see announced Okay. congrats in this maybe Paul, short really announcing good to and It's And order. just then a

a the I picture, that aligned of maybe terms with help this how bigger the just plan. of you a targets can speak and of fully you incentive in us just kind remainder our compensation Can you with management team guess, aligned bit? understand is investors to maybe So this plan,

Paul Taylor

Yes.

up together, So this I brought the plan executive this plan together with came was together. team put we and

XXX% So targets close very overall be I then of XXXX. incentive announced so in that our our have there tell connection. And buy-in, should you also, that we goal would are some for

Andrew Terrell

for Okay. the Thank you questions. taking

Paul Taylor

You’re welcome.

Operator

our next from question We'll James. from Raymond David Long take

Paul Taylor

Good morning.

David Long

Good morning, everyone. Paul, technology acquisitions I to want in this together. July, improve you talked given about see new there the decisions be had number the your improving efficiency? put coincides to some operating PacWest overall how holes in of technology with – platform that your

Paul Taylor

Yes.

on quick plan on be on vision the a So I XXXX. exactly it's – you charge in still the to is call, for of we're a everything that? to give Maybe Mark in bank technology. rundown And do mean, It's we new for could Mark, who's need Yung, technology. same that

Mark Yung

technology our centered very much values. mean, I Yes. three is around

cloud. One is of them

digital really our focused here is And banking operational And are untouched. data API efficiencies. those are we one strategy. Obviously, Second on one fundamentally is our stream. our third

looking So very much milestones, cetera. fronts. three movement committed as those But to on every the project, forward Kevin we're revisiting fundamentally, et revisiting mentioned, and

David Long

it. guys. Got it. Thanks Appreciate

Paul Taylor

Sure.

Operator

our And Montgomery Christopher Janney next Scott. Perfect. from question from comes Marinac

Paul Taylor

Chris. morning, Good

Christopher Marinac

the and on you pricing this in compare of prices circle on big I just as to alleviate the back that anytime paying have quarter, I deposits Hello. described. past morning. want Can deposit not you just to picture it's two outlook? just venture deposits from core beyond presume of a Mark want what and Good on but to year? had Thanks. sort the the this focus the is possible continue quarters you kind

Paul Taylor

are I've read little other stretched XXXX. that. deposits deposits, We're from the lot in another liquidity going industry. So I rate are bumps. banks different challenging very be – announcements think couple I earnings a getting of got no would than in a we've the of to and

year. I of with to the the can we yield changes, remain sort rate that on throughout going lower deposits the or on that are We're hoping cost. the flat think mix deposits

and our requiring get our deposits loan that putting of their year, and lenders loan, to this deposits significant year. it incentives in of a we're gather One where to all they've things to order the this were deposit a got a that committee challenging have you've in amount got of we're and

We of just the volume the sort aren't also help as going it to help have deposits but of which I XXXX. see that's specials, rate, standard deposits, for CD will

Kevin Thompson

to We add points basis two that. rate I'll expect And Fed do more each. XX increases,

we so date, overall cycle deposit have had a XX%. And to beta

So associated in half alleviate the in do anticipate the of beta the the we with that, year then half first of and some second some year. pressure

net decreasing our XXXX So then interest margin half possibly of end of increasing above and potentially end year. slightly first by levels

loan with beta catch where deposit So balance for deposit our unprecedented pricing to sheet rates quickly time an increased where up. and we're the in so period little that pricing fall it asset-sensitive a takes

here see some of year. and year second So that next the catching half in beta should we of loan up the into

William Black

loans between from on balance to both is think higher-yielding the the thing loans though, sides the P&L, going the look side. bigger when to lower-yielding then the and of both be Chris, interplay deposit I at you sheet remix the on

So in a any think see And quarter, to particular movement see there. over profitability, goal increase the there's obviously be so increased going I lot that the driving you time. of is But bounce margin could to around.

Christopher Marinac

There as helpful. on XXXX, of and only? deposits XXXX ago, see team point. once very past were Bill, point, loan with quarter, as acquisitions sort dedicated dedicated production all such. that own folks doing was to of that several the that's we're your still teams PacWest, work a deposits, at your who incented to in just No, And on Is yield to this sell just its you can that something can

William Black

listen, focus. I always our business been mean, deposit has

if people it's were you, So of yesterday, Paul deposits. about teams you on always call on was tell internal deposits, I pretty it, clear there's deposits. would the been about focused And all deposits,

core not line. the group, value. all a house way of the It's just the one the reinvigorated lenders everybody, to it's front It the from So to Chris. top is

Paul Taylor

why is with that's the banking low-cost deal bank to bother deposits. with mean that's deposits. is charter I sauce and a secret get those regulation And of we

So I mean, that's time. our biggest focus the all

Kevin Thompson

that to tweaking any have programs mentioned we're earlier, need more Paul are And well – approved, as a loans relationship. incentive deposit-focused to deposit be in as loans general, that

Christopher Marinac

to that Thank the goes uptick year? that just Last Great. you recession question small for that. all influences I we something in some the loans. Is know for possible back criticized me mentioned saw you this obviously, is that of reinforcement.

there's if curious quarter. this background any Just particular

William Black

Yes.

the to of up. loans. on is Civic sale about that have non-accruals, related off, that bump some we We've talking back particular, teed NPL you're already an if So the in seen being was, there some and

So we we ordinary of in, Chris. credit. that's anything indicative I we're mean an feel did quarter, I NPL last in not sale kind and seeing think, course,

we there. for really team the our sure you making The terms at good look Paul it's with job that book going granular about As were over example, years said, if fine-tooth to of is. has has really where non-accruals, the done the a our underwriting team solid, everything And comb. is great feel and past in in a through

of But points, basis And if of it's top non-performers averaged and they're low kind NPLs, stuff. history. stories about the you XX compared all example, individual at to look for absolute pretty XX level Our $X million. at

realize around. are obviously but although not we particular, where bounce at So see about driving to We end of given things of concerned see things you going. think anything just the a but operating we're paying lower of we lot are anything stuff, kind could in attention don't that, we're

Christopher Marinac

questions. our Thanks for again Great. all taking of

Paul Taylor

Thank you.

Operator

go And we'll Jon from next to RBC Markets. Capital Arfstrom

Paul Taylor

Good morning.

Jon Arfstrom

that baseline. margin? the A about strategic the XXXX should baseline as couple XXXX what margin the guide, of and thinking you're Is on thinking a ones. be the is you about XXX model of Good morning. for couple questions think I Kevin, we talked average

Kevin Thompson

Yes. XXX of first margin to dipping the XXX then probably average half. lower latter half year increasing and

Jon Arfstrom

in That's Okay. that then you the another the fair flat guide, are saying in about flat churn assets, that good. Is later lift to with assets relatively And it? way loan the earning think basically leads to likely year. but earning

Kevin Thompson

way to it. about a I good that's think think

Jon Arfstrom

to and that what me risk lower need in talking XXXX, credit, may Okay. On flat for of… guys provision, a model suggests not clean kind you provision the are flat but reserves, about which loans, loans

Paul Taylor

year to got it will recession that with but dynamic. so little time, point could we preface we're And that. have have that we could We're to again not dynamic, at in be a be in, planning, is we remember that just that the a this

Kevin Thompson

happen some shift. replenishment of over that small There's charge-offs time mix

still there will So be large. provision we but not some anticipate,

Jon Arfstrom

talking So about we've not insignificant you're what quarterly seen in you're quarters? on basis, prior a from

Paul Taylor

XXXX. say to what insignificant Yes, way we've seen it. from Good in not

Jon Arfstrom

Good. Okay. you for Thank those two.

do and make to you production the you're to loan maybe refresh community the of make, of terms In investments lenders some need machine? the to going try investments in or changes bank

Paul Taylor

for was XXXX experienced growth. a teams. seasoned, lending really good year loan got very We've

to do Again, is think core like don't I that. anticipate anything credit. we really I need So here competency our

Jon Arfstrom

one I all we doing, the then you're EPS the and some momentum you restructuring top And about to of And that but that I out last little XXXX? in that? can this quartile us can refreshing know to guess a the start that see stands is later you there's Okay. this is something growth. bit the metrics one that to laid out, talk me

William Black

XX that think I CEO right? I now, there's has to is. been for that wood I a think, as days, right it of Jon, lot here mean, Paul chop,

Paul Taylor

Yes.

William Black

can want This And I think if pretty are where we the mean plan, plan, clear are think think a we we we're a ourselves to. mean good top I not think clear right? the really possible. I ultimate to I out think I that that on are. to that the And a be what get going execute do, I be is results metrics laid do can vision where if we there's we're trying of generate goal. to to kind quartile listen, to mediocre, push like for And think that's strong shareholders. But we not trying there we of we we think results.

Paul Taylor

Absolutely.

Jon Arfstrom

little growth, out, something bit capital one with quartile be EPS a the to the Yes, [indiscernible] the is and that top one efficiency the stands and others different growth? EPS got returns right, to and

Paul Taylor

Yes.

I and here, there you I from the changed. that is has think top been will results. better. it's of power take of what generate at PacWest we if I historically, drive can And And quartile those core don't you if it look the get earnings think types to think goal

Jon Arfstrom

it. Appreciate guys. Thanks, Okay.

Paul Taylor

you. Thank

Operator

question, last we'll our go for Clark Matthew And to back Sandler. from Piper

Matthew Clark

Thanks for follow-up. the

Can the pressure questions some I and spread speak those well? the you to to mean the you off of yields here? the Just margin you I borrowings around outlook. as the would quarter upcoming cost help in a FHLB ran couple that thought mitigate for of have securities would a have pickup

Kevin Thompson

That's right, Matthew.

about of we yielding X.X%. wound we've X.XX%. And out securities we're paid FHLB the about down, So

benefit that be we that loan that, yield there have the offset were but that a yes, year much So should through growth there, negative was experiencing. benefit but that a of we also

Paul Taylor

And that in really quarter. was late the

Kevin Thompson

That's right.

Matthew Clark

rate spot had just year at other you the or deposits it one? the if Okay. end interest-bearing And to deposits then total on of the

Kevin Thompson

rate Spot trending was deposits XXXs. on interest-bearing low Yes. to

Matthew Clark

then non-interest-bearing, just It some XX%. portion trying as deposits of around deposit XX%. is Okay. commentary to that view mean were are cost you will other get suggest want at necessarily you guess, there base to And there? help XX%? you that get getting low-cost to core low the Or you non-interest-bearing I doesn't that your to

Kevin Thompson

to Yes, DDA to we're trying take base XX%. the up

Matthew Clark

Easy Thanks. Okay. enough.

Kevin Thompson

you. Thank

Operator

And no for any back speakers to you. questions. our have closing further we it remarks. turn I'll Thank

Paul Taylor

interest want we all, to all thank PacWest you Bancorp. and of of calling your first for in in Well,

on Our out to online, our and we're to any numbers talk at time. happy are you

I calling in. appreciate guys again, So you

Operator

your have participation, does Ladies and you. today's conclude day. Thank We appreciate that gentlemen, wonderful conference. a and

Paul Taylor

you. Thank

Pacwest Bancorp (PACW) 27 Jan 232022 Q4 Earnings call transcript