BANC - Earnings call transcript Q4 2020 | Banc of California, Inc.

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Operator

Hello and welcome to the Banc of California’s Fourth Quarter Earnings Conference Call. [Operator Instructions] Today’s call is being recorded and a copy of the recording will be available later today on the company’s Investor Relations website. Today’s presentation will also include non-GAAP measures. The reconciliation for these and additional required information is available in the earnings press release. The referenced presentation is available on the company’s Investor Relations website.

earnings would statement direct in on earnings and we company’s to both begin, release Harbor Safe forward-looking the we like everyone to the the Before presentation. statements included turn I would conference over to the like Mr. call now to and California’s Banc Officer. Executive President Wolff, Chief Jared of Please ahead. go

Jared Wolff

Good morning California’s Banc to fourth call. earnings and welcome of quarter

that results. who in more one detail me call Lynn the is exceptional talk Joining demonstrates XXXX Hopkins, our an our the will we quarterly We of on today’s Chief ended with Financial franchise Officer, building. are potential about quarter, that

We earning key were improved we continue led growth profitability. our asset in to financial execute that our quarter, and well fourth able on that enhanced to And all to quarters. the initiatives the add performance in recent in loan have the

we end year As greater quarter. the for year half calls, we profitability. we the of the to than return indicated couple earnings of with larger fourth north assets first the on drive of the finished year that a with to result, a average balance X.X% sheet On last our a expected

income, fourth income share. results Our as and pre-provision a earnings these we and significant quarter increase efforts pre-tax our operating strong per in realized reflected leverage net

to meaningfully contract in made obtaining restructuring table attractive year, result tangible pricing, future for at recoveries hope is we issuing redemption we of money way that XXXX a of XXXX most and the and borrowings The for long-term able by than closely are with sheet and evaluate key deposit balance year. and improving smaller it holding our in a And our pandemic most other areas, low our relative COVID-XX regional yields And a while performance the low interest notably in that core that eliminates on accomplishments reducing banks. these loan basis sizable matters We many to on the growth book do setting contributed in dealing rate to with FHLB value. costs, sub-debt margin. net did the environment. preferred to and that ramped in complete our insurance year to our reserves. the that of sheet decline Looking the we was portfolio loan reduced building just the laid even up deposit nonetheless We And margin large runoff dramatic wins our half the the second reduced We despite deposit. finished the on exiting in LAFC our the with year. our earnings interest stability credit about we out that credit related replace prior single-family leverage. managed and net the the we business the despite We our good still production We loan relationship more balance including will operating we loan quality back quality year rates. our that shifted the several interest cost increased are key a year. XXXX, in overall commercial end with expenses and towards in We while proud loans. We mix for on forward, ratios maintained delivered objectives legal payments, we operating these presented community accelerate up challenges pandemic we old significantly that of dramatically of of this portfolio and and improved of the while going had more improved operating growth expensive a

franchise. on to XXXX relative the of beginning to investor have the since performance been As results country. entire of we place has ability in best strategies execute the in laid put value our enhance These presentation, our out the in our speak among the our to

pricing because Banc service and our based deposits. of of with who value necessarily execution, are relationships level adding consistently California, of new not choosing are they We clients loans on banking and our commercial

and deposits these critical identify originating adding proposition to effectively cost relationships to interest success margin. our loans that we transaction has them of in Our been low the and types adjusted customer can ability net our and with offer value cultivate risk support yields attractive

We to to more of bank us yielding organization more and California, high-quality when further improve their relationships hard continued and everyday more our growth add convenience in optimize our entire believe able was investment have together is experiences referrals $XX.X deposit a with at became I I to like Specific we have pre-provision progress. have of even And in of not In want go-to rollout or serve enhance extend were incredible per for Southern more services focused operations giving ability a business our $XX.X in only the exceptional that work. service efficiencies, reduce to year opportunities financial $X.XX to industry, million quarter also dedication expenses our truly relationship provide Banc drive we income the in positive effectively technology platform future. share to and to customers and fourth enhance we our common my type reputation and built and critical the to pre-tax our generated the program. the made technology efficiencies, customers. of for California. leverage to our and also digitally shareholders moments, to that banking diluted to increased performance, we but income. lending net to million And to the It year superior of the PPP clients will critical deliver gratitude the profitability available to

the insurance legal where we We have fourth approximately sufficient through received quarter, and a recoveries As in I have determined we the where added was initiatives during our million we mentioned, not might from value book insurance we in of quarter. company, the historical successfully earnings $X.X reimbursement one the XXXX should matters, had recovered seen litigation. recovery in for which pursuing tangible to growth

timing and matters of resolution matters, remains the to behalf of recoveries though We work and on continue shareholders course, pursue to of such other uncertain.

for by declining XX in driven factors. basis notably, growth was total still our continued of Most deposits recoveries, of to funding our the basis cost had and spot a drive with in basis ending these deposit deposit Excluding rate primarily continued lower mix. with we a costs of the our points year driven XX improvement cost points to quarter was number by down points. we XX The fourth earnings, the which significant

enabled in coming funding. margin to specialty stability helped point sixth and growth reduce yields costs, higher in deposits net are consecutive We X.XX%. to wholesale good The The traditional balances of banking quarter us growth deposit time reduction our other of with drive our inflows strong groups earning interest DDA both deposit from in asset XX DDA our our our combined basis increase with and costs in areas. a

expenses a decreased in from We expense And continue a metrics, XX% the we and our our control maintain quality year quarter to positive trends saw reduction asset X% ago. with core same across good a a $XX.X to problem decrease the deferrals loans to $XXX that pace amount been credit and million successful our in non-performing of XX% loans loan resolving as million inflow. has exceeds at in very team our

largest either quarter, reserves During the our resolved we required non-performing with for no loans them. of additional two of

have requirement and positive the built, asset trends small quality in the quarter. Given provision had we that a we allowance substantial fourth just the in

our originated earlier quarter added difference of relative growth. significant have well loans mentioned bank portfolio. was from to As We new as most production as performance from the the fourth in our asset relationships to both earlier, is production million quarter to in of the existing newly $XXX XXXX we of relationships. and Due our in I earning level end up in areas, the good XXXX. growth XX% fourth quarter XX% in coming Loan are increased as considerable net which the areas of at the expansion of the quarter, certain legacy the the million to run-off in of XX% fourth third still commercial total from at our $XXX quarter loans up from and we end was of the targeted seeing resulted which prior of customers to in XX% loans, loan

bankers our still closing throughout our good, While adjusted achieve The with high-quality in teams healthy remain competitive, and markets. select loans. many job extremely are filling we of as environment an year the our we that volume pipeline and and the profitable to begin the generating type that of risk borrowers us credits targeting. of are our seeing doing are we opportunities relationship growth opportunities are remains attractive And outstanding banking cautious yields pipeline is new the allows

build of the year. our deliver will we continue were we and that able objectives upon net result environment, of XXXX to yield maintain difficult XXXX. where despite loan discipline, for we strong able a to throughout XXXX, at are our to end margin support As pricing the helps interest our our in we we in to are good that on saw average ultimately pleased in significant deliver increase profitability key which a stability Overall,

remarks provide our Now, then will questions. I line opening who operational performance to Lynn? will some for over on Lynn, hand will closing up color before and the it I more have

Lynn Hopkins

Thanks, Jared.

income as start will before our First, of Relations be by some third our our balance diluted of on Net all $XX.X or quarter fourth available indicated, per XXXX. share. prior to stockholders refer income our review can I as period which moving please are Investor reviewing investor with comparisons was common to the the found performance. trends. website for million mentioned, on quarter fourth of the sheet deck our Unless highlights $X.XX quarter to I statement otherwise

with increased which an increase quarter in rose interest interest of XX was income average million from the settlements $X.X income in The from by asset due up million of to margin points basis costs, from of lower our reflected return We compared growth XX.X% interest increased prior resulted earning assets mainly the X.XX% prior yield matters. on past $X non-interest pre-provision million. to in Total our cost larger an income as net funding funds. pre-tax ongoing and a both quarter, a legal sheet. the assets in points. of adjusted The in achieved net increase the net adjusted income and the $X.X million, increase a overall non-interest of stems $X.X Our million income insurance average prior balance by revenue recoveries or $XX.X on return combined of on higher a an from quarter XX decline X.XX%, benefit and basis impact

million basis of points to despite Our by basis X associated debt carrying having issuance. costs declined funds of XX $XX points XX months with our subordinated cost

XX fourth to points industrial loan and excess basis prepayment accretion of XX loans. Our increased yielding accelerated total liquidity to basis and higher average earning yield assets PPP earning X.XX% forgiveness. fees and from and increased loans higher commercial the during activity as higher points from we due refinancing into average loans mix improved of on to quarter due yield an interest the yield The a loan asset higher combination deployed

fourth spot the quarter our As deposits. Jared we highlighted, million. non-interest all-in and basis ended XX by deposits our basis deposits successfully bearing average deposits total to lowered as of bearing of year for rate interest by XX with points fell average basis a for basis cost of the our $XX XX XX our cost of points cost points We increased points

in funding terms. lower move as down and said, accounts Looking time a as XXXX. trend deposits of to ahead, our cost money the have XXXX larger to we expect reach of they albeit we their not deposits should market costs that our continue agreed With much few end once in that

and modest sheet balance interest growth, of the our settlements FHLB excluding million advances funds. growth $X recoveries the pursue not several a The driver recovering increased cost insurance income should with from predictable, $X further by With non-interest continue which and Non-interest such might over million, of lead of strategically fees income higher of declining $X.X timing facilities continue our for of them. fees monies we the of of XXXX and historical $XXX,XXX opportunities $XXX,XXX. attain $XXX and to mature course see million our expansion have nearly cost of average weighted for X but Over legal our to was customer to next The quarter income. cost net by credit increased service of processing will PPP the increased impact we reduce CDs the while are biggest to to X.X%, matters. further in related margin and we months, likely million scheduled potential funds

expenses adjusted declined as for efficiencies quarter year. fourth the same X% last the from quarter operating drive to million continue $XX of to We

approximately rate $X.X million from X% compensation to and the balance fourth our quarter quarter growth mostly to effective The for and for higher incentive of compared XX% adjusted expenses profitability. to is increased XX% sheet tax related effective the due XXXX tax prior the XX.X%. quarter rate third all Our for or the was

by excess increased and loans million We replace high into quarter. Turning deployed core high-quality total our to our and brokered we to cost $X.X in $XXX.X our liquidity balance the the sheet assets with to continue commercial portion quarter deposits billion. a fourth CDs in of deposits

future wholesale funding strategically earning selectively support of we investment we high-quality terms continue add asset to add As securities, and flexibility assets and other have loans to both in if earning the our needed to growth. overnight in

the gross growth by C&I held increased growth of loans CREs, the during or The primarily balances. multifamily, as SBA growth $XX forgiveness. loan to in X.X% $XXX fourth decline due loans than primarily more to quarter lines. Our in the for loans PPP $XXX in investments million offset million C&I was loan The quarter mortgage quarter and SBA in due million warehouse in was lower

PPP PPP process, remaining loan actively with them opportunities. working through our lending representing of and As our XX% clients using our are loan we the process when relationships opportunity count of the about to of to and deepen forgiveness help forgiveness additional dollars identify about the year-end, XX%

In already and Round have billion end, addition, PPP mix to at our thanks to continue loans focused Deposits at cost started existing improve, we and clients. flat to support our year prospective participating relatively $X.X X were our for but initiatives. in

decreases up in quarter the goal the very prior million bearing representing end bearing, a consecutive included of activity $XX demand at deposits, low from deposits. million XX% CDs. on non-interest cost decline quarter, Our X% drive growth last by focused to end, deposits of of and represented increased non-brokered we non-interest XX% in in sixth a of CDs were checking at Demand quarter cost total brokered quarter. a $XX decrease Non-interest $XXX These from our in remain franchise low the deposit quarter $XX a value. growth, our increase in deposits million by offset bearing checking substantially million and

to reflecting the made to demand of significant with deposit the our year, we achieved a points and reduce increase bring to deposit past This increased in XX%, our Over basis down efforts improvement rate all-in relationships points interest of can deposits cost total lower basis year have proactive deposits quarter. the deposits, our average from ago drove combined XX% costs base. XX the XXX in up new from fourth from in environment

Our securities portfolio $X.X was at substantially billion. unchanged

quarter quarter. to called were in and our reduced for our pricing spreads CLOs tighter relative the at this third improvement share of to CLO million tangible the consecutive loss The added of $X.XX credit $XX quarter per million. However, the portfolio $X.X unrealized prior to CLO book value

with net Our entire ended quarter $XX securities portfolio the unrealized of gain a million.

One quarter XX% the performance. quarter our of a balance. quality strong couple NPAs reduction the highlights from during the credit non-performing largest our resolved of loan was the in to fourth leading our We

to the $XX.X down million of in $XX.X million million deferral total by $XX end to loan quarter Non-performing loans the decreased Delinquent X% also at Our numbers fourth million of of total $XX.X year loans for end. $XX.X declined to loans. investment, held of as X.XX% million third the decreased X% from loans quarter. or

loans. or However, other the non-performing offset of current loans XX% are that number the included reasons. quarter a since decrease of non-accrual by is end last million $XX.X million $XX.X are payment in loans new million status represented balance million classified net The $X.X that and for $XX.X of of resolved this

our provision to turn me quarter. Let for the

uses We a volatility we portfolio that a assumptions economic includes in nationally our in data, current on recognized our historical have and discussed loss the economic our peer saw based ACL many model As less past, and improved forecast. methodology third-party for quality loan This asset on combined of for losses of our a allowance metrics credit just in the million. provision forecast credit fourth quarter which the results during impact half year, with resulted lower $X losses. in the second

non-performing points allowance the quarter. or including of XX a allowance fourth factors, for third decline this from totaled basis reflects total our recorded charge-off in that total quarter portfolio resolved mortgage the which losses the historical of at down improved expense our on will represents and the coverage Following how loss number an where extremely X.XX% forecasts our metrics, our to impact specifically of the quality that $XX.X economic loan portfolio. specific of was related the mix provision in quarter, our as low, was million, warehouse growth in experience credit our loans asset quarter, to the our are the much This loans current in of largest view occurred our ratio

stood at healthy coverage at non-performing December the ratio loans, XX, ACL PPP remained also while at our loans ratio XXX%. the X.XX% of allowance coverage Excluding total

XX.XX% Tier capital the and several strong, from has equity completed X quarters. actions of the a past over Our common ratio remains position with benefited strategic

subject We will subordinated strategic of raise our benefits turn move still earnings. franchise time, company outlook shareholders in prudent are to positions while approval our quarter capital the maximize to forward build be capitalized position and capital actions further expected time Jared. successful the protecting on I presentation remains variable with at to debt million accretive the continue this the regulatory of value, to during a to Jared? $XX XXXX fourth improving to The At the uncertain. and use that to will when although over back to to be

Jared Wolff

Lynn. Thank you,

are begin facing we XXXX, an still uncertain environment. As we

seen credit, news, new wave markets hard to vaccine will still fourth we available. California our timing cautious the The to operating when lending the rollout positive it’s are is there of environment begin predict opportunities of remain good but the around performance as still normalize. by certainly And requests. or Southern impacted Our on haven’t default quality are an quarter COVID our credit while of significantly although restrictions demonstrates, impact we a

appropriately us well-positioned that of and to the reserves maintaining quality credit very capital, So same and in XXXX and we place enable in a our standpoint. maintain loan characteristics manner should conservative high an from be enabled defensive of strong levels us portfolio throughout liquidity will remain continue to to operate

Our goals similar achieved we XXXX set and goals and to the XXXX. are priorities for in

operating continue fourth return We positive plus as on expect achieved leverage X% we in average we the We to grow quarter. a balance realizing maintained sheet. the assets

We have our base to continue base. that balance enhance size funding to sheet to our matches the expense grow a and

of costs, and during and complete don’t year of the the put of environment the We returns consistently generate higher will largely right goals beginning second the expect investments at half while make those drive on can year, subject We half keeping the to in us believe to first operating sustainable size growth now path that the to growth. to course meaningful we which need to organization economic we the is landscape. feel near-term balance We expenses the sheet as opportunities deposit not flat same year. time team some past quite talent capacity biggest over as business. We have to of the our during have are of higher to we we existing banking The with There the the couple in build although mature is to our XXXX. bit year. continues of added did opportunities that books quarters grow larger modestly this still XXXX in lower a around to degree deposits the their to centered

these our see As costs. runoff, will in declines or deposit deposits we re-priced further

we capital continue capital both We in will that efficiencies to take leverage accretive development. be our as Lynn mentioned, enhance to business increase will will and And optimize earnings. to to actions ways technology look to

strong others on might fourth early achieve can did priorities we some our might year, have over goals two In and as value we The be and isn’t as through which or XXXX, of have the shareholders. growth goals as believe a impact we linear. goals, course year. for quarter of to year, one working quarter first creation while progress XXXX. on make that These the expect the make started and seasonal on for we goals the in progress to strong year. year of expenses are actions all of But have progress the we result we earnings that have would them. progress move our Now we these quarters on this in all just the a due as our in these added sub-debt, greater we Historically, won’t the

used our understand term it’s growth. than more the really the growth is profitable I to important the While earlier, that emphasis on profitable

for growing sake. aren’t interested We in growth

way focused a the on We long-term. growing that the are in over franchise benefits

today. full credits, I It truly joined risk-adjusted the Our banking growth being have requires that franchise discipline, since for in commercial to about forward is work hope families adding is of and best and for shareholders. by now you for that, that California’s ahead are Thank loans. make another healthy the we the bank. attractive to I California not hard line rewarding value. we believe this relationships let’s the go and coming year more you approach XXXX of to quarters. progress patience I and And generate had listening is safe look Banc sharing driven will open but your up transactional Banc we and enhance questions. way With operator, This the

Operator

first Thank comes Please from Instructions] our of Braziler [Operator Timur Wells question go ahead. you. And Fargo.

Timur Braziler

Hi, everybody. good morning

Jared Wolff

Good morning, Timur.

Lynn Hopkins

Good morning.

Timur Braziler

and all new clients? looking know in and what semblance on increased pretty growth? utilization impressive, of in warehouse starting warehouse more business, is the it this I quarter taking the some that’s ‘XX? balance sustainable on it’s certainly the to sheet one-time nature that over the drove is growth just from at transitioning or comments from that some Is compared couple the especially that but coming loan this the of quarters. of growth is fourth the guess something I into appeared there past of in magnitude this quarter the Maybe

Jared Wolff

as know, Well, mortgage loan was well. terms balances you yes, expect fourth And mid remain those size the we in production not though. of bulk the although some the the on. came it lending that for flat and quarter. warehouse we we those relatively it relationships huge and was as and of have lower to we of brought on from our guys, we distributed are brokers focus relationships year. new It certainly Warehouse And gratified in by

in that we of lot when terms is right. level growth overall areas. $XXX at out, we other in compare is warehouse, to it which look than of also it you but to about But there quarterly the closer million X% you volume at X.X% in think moving our $XXX on a are we or had was and million of So was loan And it about our across loan at portfolio, – was our or annualized. XX% but then XX% excluding annualized. if X.X% basis, a portfolio, And that

So, a we of I had of inflow distribution had think good good We C&I. loans.

at look starting this we right see quarter, to we on are As pretty bridge the good inflow CRE side of now.

are All are really be obviously, we of indications hard. our we process in are right last teams Early try going that’s somewhere we the were And have working time. now. PPP where to that to

almost – $X XXX for about are of But $XXX million. smaller. program little right million max in this the inquiries little have a now the is round. there bit Loan north are second sizes the that obviously We XXX year

Timur Braziler

helped you had speeds Thank know you when for Okay, I PPP prepayment to switching that Maybe quarter then specify Can also of quarter? fourth higher mentioned over linked prepayment and the speeds the in helpful. margins, that’s dollars fees absolute and fees. PPP the increase you. in-quarter

Lynn Hopkins

Timur. Sure,

on would I great margins done we some the each prepayment steady I when our fees the quarters by And saying keeping have had trends and really them. PPP a has in out activity relatively think think production. I loan at quarter-over-quarter, based job our look of that quarters the of linked for I start

say little flat think yield to our the that there was but going is a low am respect PPP to items, appreciate is core additional I revenue bit itself, just about these around there hanging With of million. it $X quarter-over-quarter. I fees So, in

PPP was million, about to on And I put hands around in million for life we $X know, fourth quarter. the have fees, $X.X year. estimated for you the our the my a notes PPP trying my So, fees an of

So, up quarter, the of PPP. round we especially wrap launch we into of the majority during as the second those to expect first

Timur Braziler

Okay.

have You remaining am I go sorry, ahead. the –

Jared Wolff

go No, ahead.

Lynn Hopkins

the Yes, remaining amount.

Timur Braziler

Yes.

Lynn Hopkins

Yes.

$X is first there about we million. the from with that had fees approximately reported, round, So the

Timur Braziler

ahead. go Jared, Sorry,

Jared Wolff

was terms I yields. going in say just No, loan to of

job coming well mean, held is As our look right our doing I can bit, fantastic the And giving the us I the it the that service that are up teams an we this side. it to slipped loans certainly are a to for now. of we really across portfolio, risk are find pretty doing it. little right stressors are that environment doing appropriate C&I and competitive the relative biggest adjusted we highly highly, everything but from return provide a

We to are every point, not can to And a done. But out at are yields loan conversation I not opportunity to going and looking price where figure are out what – we on terms would we we that going a at trying there say draw. there. it be could elevate some so alone take is line of in are

generally. Good news than our that the going, it’s still much, slower While there competitive. on tenure is is declined is our some given where our obviously have have our loan loan the optimism yields out much there that loan pretty outpaced yields deposit also pricing going changes to market changes rising start and is the

we are So, it holding pretty well.

Timur Braziler

people that. you now at have I let and for impressive in have pretty to level Thank But yields other away will step flat ask. it’s C&I Yes, guys the you.

Jared Wolff

Thank you, Timur.

Lynn Hopkins

you. Thank

Operator

of comes Clark Piper Sandler. Please ahead. next The go Matthew question from

Matthew Clark

Hey, good morning, Lynn. Jared and

Jared Wolff

Matthew. morning, Good

Lynn Hopkins

Good morning.

Matthew Clark

Good morning.

about on guidance Is sure Your million, being $XXX XXXX. are expenses flat we pace in to make million modestly up right $XXX this using XXXX? that the just want to in year,

Lynn Hopkins

agreement. I On we LAFC the as think an at out basis, look yes. it XXXX, I got of step adjusted and back No,

down the then fourth end expense sheet to think a look had at cited normalized our So, in the growth balance early year. fourth bit. run-rate in our in a And more the costs bit with little we the quarter, I in little We as release. base I had expect have the elevated normalize that I the accruals some we quarter and would year

Matthew Clark

off the the quarter to then, flat fourth expectation? down Okay, so is

Lynn Hopkins

Yes.

Matthew Clark

the remind just the then like Okay. are you looks us maturities just that remaining schedule on there? can expiration left, deferrals And what or

Jared Wolff

the to you need have detail a I afterwards. page the deck on we deferrals might get Yes, and in

Matthew Clark

in Well, it. there, if I it’s can find

Jared Wolff

deck have out the – kind then the at any deferrals chart of if look month take and Yes, you that don’t a what questions a lays went we on. have

couple this a deferrals dwindling have We we that of now, default doing but third it’s are loans and is right the last in down.

We in longer. also a have the single there, bit is family little which

down. we talked a definitely it’s so as And but coming serviced third-party before, have by DMI. it’s about And

So, stuff of more not single stuff it’s pace. at anymore off stuff coming deferrals in for pretty measured that we The serve we that down the a terms we But running out is dramatically. are giving is the service. family

Matthew Clark

prepayment to income, on the follow-up was Okay, maybe what quantify basis, have Lynn, you on quarter great. if a And can versus last? just penalty that it, just then, this you $X

Lynn Hopkins

From have the say refinance per as decreases – that would had – at just of end quarter the se, a I third the have well. the the dollars refinancing activity, of dollar some with some se fourth we in per don’t quarter we that the

that think So, the is there I the everyone’s have speaking, I some think prepayment, portion, loans. yields generally loan of in our just it’s pricing

it structure. the loan just It’s don’t So, pricing of separate think part I out for we that.

get you you portion in given So, it added have the or the some prepayment. maybe of up have yields order to

quarter. really variance doesn’t create it quarter So, from to any

Matthew Clark

Okay.

you. thank Okay,

Jared Wolff

Matthew. Thanks,

Lynn Hopkins

of our came credit I couple able down NPAs our NPLs. one we to we and were add, is The when talk large a comment quality would resolve about and Matthew, our

to I were put additional loan One quarter residential this interest of it placing them million. was a back and family on accrual around single that able some of $X.X income the status, recognize process we and

as that necessarily just points our resolve net to above and I So we us few margin. those wouldn’t of our kind interest get costs. a expect to basis assets It’s non-performing add beyond it did

Jared Wolff

as going expand of know be we accomplish levers are that a like go. can we fairly right we way margin, be believe lot I pull, And as able we don’t a it’s we lifting. but to I the that think dramatic normal obviously, to the in were lot have are not we have we earlier, some mean, room to don’t that it’s to have to a feel we but to – tempered, operating now going going Yes, still we heavy they of

growing keep we benefits And of are balance to are start the sheet. to We the going it. going reaping

Operator

from of go question next Davidson. ahead. Tenner The comes Gary Please D.A.

Gary Tenner

guys. Thanks. morning, Good

Jared Wolff

Gary. Hi,

Gary Tenner

the of over growth in the year, as lot Just you quarter, that mean, you really warehouse balances driven or growth mortgage that’s year if wanted given suggest non-mortgage were to at mortgage I you as warehouse revisit the side? little $XXX I keep XXXX half loan but bounces think the do flat place over you back commercial by on you growth warehouse, talked million. in grow from the to suggest would least about as kind of of what here a somewhere the loan talk of have put solid mid-teens that possible low the that about past you and have bit year-over-year, little in to in a pace,

Jared Wolff

look high. would I that that know don’t I

on going have amount that we environment And think a do we I at is to low rate. that to going are think I runoff. good But it’s just We the put be careful. with that, grow overall, higher be think of such look, we are a easy are loans. really when to starting I base,

because be production And a actual good runoff. high be indicated probably the growth so number, as of won’t net you just as while the might

have we competitive. are got single we that our things hold running results off. make that’s multi-families in We highly do to to And the family but a doing portfolio off so some run growth, obviously production actually sure

are kind good it keep kind and it. hole And so to bucket and of level draining what fill of a proud doing at in the have bottom of really the not our a teams

to not but it’s to are high full, So implicate. as we as trying reasonably would bucket be keep that the going

Gary Tenner

Okay. I growth better get to where sense wouldn’t level, of a at thought you about have were thinking quite just be it. I that would want

Jared Wolff

now it’s be bit if exceptional. color, helpful, is of a lot opportunities some, Based got are I trying mean, right a for that the we little adjusted. I present have we appropriately a great risk will just on more proactive we’ve team – say are seeing warehouse It’s we themselves are that our in what opportunities to and that

right we that what, know advantage looking because bring and hold right those a now, So warehouse are good the market place one just C&I the In yes to it’s god, is now, is quarters, too that just you other that of right we in well that. quarter to other we be in team have working is stuff. – and In going really and be such looking it quarters, sure really is let’s have inexpensive. of strong, lending take we fortunate and a make are might balances, quality bridge it’s high C&I we going lot looking like,

we deposits growth about and are the be flat, at from the to do that yields non-QM around and balance a day, going really the because the to one couple relationships it estate of were loans won’t own support we have that good come loans of we the So risk-adjusted right to but are we levers, made of it we have that that types flexibility things we that that those would keep to going we to that it the are areas division play C&I, There end were were type or right of have of kind were value one – would our and runoff the pulling we it. through that real are if that’s one we get not to and thought to that shows the space. loan, we are of build have if needs balance there going mortgage If where sheet we try smart loans were create we and good that could we all we in was the in. that. trying what’s just the would have it can do are it’s We trying loans thought balanced to single-family, – attractive do buy a there probably just forward, on is to that

probably it’s So, sufficient tempered, growth achieve to is to to our going objectives. be profitability going be but

Gary Tenner

Jared. professional like And be Lynn, in but and or in that, think as so revisit fees so expense I terms or that said for Thanks of right balance Okay. so fees $XX then cost or million question $X expense what outlook, of kind you was the included legal quarter million fourth the of well, would just recovery on number, kind to there higher there? the was some the

Lynn Hopkins

Sure.

all over the there that the out where period to ahead and take well. we look go of legal indemnified the to have difference partnership out as the and adjust very way the our gain helpful and energy, we the alternative investments release it’s costs end timing think period been tracking to I and loss

quarter-to-quarter, in of and were So, portion you a look up about $X.X was said compensation. as when it we I million

that expect page some efficiencies continue XXXX achieve in As some increases to we that have to few categories the other we turn identified.

$XXX reasonable how I So, if longer at the I on back LAFC for to whole was no the it things. running the think contract, you think year look are that is number a mentioned earlier you million expectation down adjusted I think being in we gets

Gary Tenner

for you thank And just said that regarding to me Jared, comments capital things you the I you on what capital and front. that. action is think Okay, then into have put already give your started

thinking Assuming regulatory is beyond that? the approval, part the preferred of think least at it for should XX we redemption you about be March date or

Jared Wolff

have we that. happen. is is on are, comment that a I to are on things There to because moving that that couple just what not we’ve said prefer I think we

when I know of it’s it’s it’s approval have could to it here. out as going we when opposed are predict we optimistic of happen things to it to one going are And for just the going – but when, going think wish can we respect when happens. be process, just to those we people to let get predicting that’s done, but We I

Gary Tenner

Okay, fair you. enough. Thank

Jared Wolff

you. Thank

Operator

Feaster next go David comes question Please Raymond from ahead. James. of The

David Feaster

good Hey, everybody. morning,

Jared Wolff

morning, Good David.

Lynn Hopkins

Good morning.

David Feaster

a side, just it’s issue? just pretty like the kind of competitive for things there, or payoffs And this thin and curious landscape I just on competitive terms sounds on of much is just especially in getting the rates competitive commentary strategic that’s pay-downs, more some wanted talk are and in multifamily the it to loans how broadly? maybe of just truly

Jared Wolff

Sure.

even thinking lot sharp that, that’s downward re-price that on A the is refinancing are is our of they to now. weren’t you so relationships that best to financed We your them. prepay do the it of the But them competitive when what highly sometimes So, do take ahead that is our want about competitive moving. have the on with rates and get but environment depending lower how because they do and when multifamily is. existing can absorb to learn space loans loans of so it’s being when out last they prepays right hard we course, try it they to competitive save don’t who

monitor the deposit, everywhere. firms money. where you would stay to sitting it we our XX% in are we very you alternative at balance money to many close your our our to I When be we money it think down loan is, are be putting obviously could some sense try to at level. deploy made keep to the – were X-year, careful XXX% point, deposit, there. the So, for just to could that wherever need loan closely putting pack sheet you are middle the If right at question we – But of and for is too cheap, loans are it what have competition we the somewhere because and uses and

strategic. So save nothing right them are look, side out we having strategic to other loans multifamily it’s rates – too the about on too trying just is not go the are There than if now low. it’s

David Feaster

to thought, Okay. that accelerating you I impressive it’s have the I sounds Yes, that based check. growth And wanted then of look that that you in just remap, on And like deposit forward? but to potentially here the remix deposits the is just makes been of you that, to I pace of deposit your think in the or sense. of deposit got to on have peers. I of ratio and strategy, with the loan pace compared mean, operating able lot loan that’s And think guys really Do it line kind curious the can a comfortable growth and back XXs the are what you keep deposit thoughts the funding growth going is go and phenomenal post of the deposit you loan upper growth? north growth

Jared Wolff

than banks like monitored benefiting in more market. liquidity. I but a massive banks liquidity environment. you So, amount of it from do, is there And are most the is of the there And seems lot a

are is it deposit have a very want on although we of around ways the side. by are bank obviously to we efforts the we looking So one focused we beneficiary of done and that remix that to who

terrific we within sits specialty very have that a brought team team after deposits goes bank a private for So, our HOA. that property relationships. just We on management large

that just migrating rate and not for and that the and our sensitive need of they that. relationships area can for accounts so in associated we we them business energy kind where area fiduciary yield, on is them. – M&A, who We deposit deposit quickly specialty on is then and multiple works looking migrating for be to And teams have could rate of setup our we there very could no who have to It meaningfully bankruptcy have is X and we that just, with that’s need believe side expectation know to clients And been away and frontline where focused from toward placing manage how be accounts. and to larger more where services, back is there know that continue been banks are accounts really are active and things are great handholding that operating it grow obviously clients office because relationships at years. for sensitive they we need the there that’s and in and are – have a trustee teams they on

of And benefits so we are the reaping now. that

flows keep with up I our our think loan that deposit can growth.

now, us between our see XXX%, our supporting our are above needle going little profitability is actually see objectives. for a basis runoff, loan loan don’t that And not we net be XX% be of so achieve deposit the astronomical the around a moving I it’s flows going growth going deposit, because to think be run good I are really XXX% to enough I to just to going there. keep Loan on we to but could to right to but growth. And

David Feaster

think outlooks. is lower light okay. I for going been Hopefully, am to you quality you just we going portfolio the the mean, of your curious reserve really I asset growth of economic it light has Okay, me, the Obviously, of risk do a you normalized forward? be I reserves the more guess in lacking how warehouse you? in is And and good. about what think And a ratio in improvement then provisioning are have, for especially improving. portfolio and portfolio,

Jared Wolff

think seems start we economy will mean, I kind skies mean, I to I there jump more are let I The the and be a up. I of are now. then coverage Lynn looks sunny, you, Well, yes stimulus. in. But think ratio. I like we the would pretty at of And good holding prospect

today things All economy the months, of them outlook stimulus the more right for I we prospects. we now. – the things, is outlook especially the but last than have taxes with those a with some had associated positive have yes, X positive have think overall, and And is other in there economy around noise some

so. rehearse banks – you different she didn’t as a levels? or as other think – volatility some we the larger and there Lynn, don’t you people about that this, reason, provision so give experiencing. of the it we have provisioning heavy have consumer have not as which appropriate, I SFR, don’t portfolio is for So a we of be outside as people will think And might been anticipated. same because healthy, but We do are haven’t answer what might big

Lynn Hopkins

No, I there. of think more same the probably

are that be we fact delayed. times know potentially given We these that. the the talking unprecedented are all impact I the that think, pandemic don’t of about could

provision of releases. bit going that large is see Appreciate, necessarily on. don’t a there So,

clarity extent growth, think midway will levels have there saw appropriate, an provision that there levels think to, not is year. the the loan said, be is And but for that modest the probably opportunity XXXX. to as we in we I I Jared So more through

Jared Wolff

model. the – good your of outputs to why toggle are too has optimistic, you And think too supposed don’t and job to I it right realistic. And toggle know a I would Yes, have you and just there a team economic you things not not we But seemed done based we our me. and realistic plug on is, all toggle pessimistic, portfolio. just the being in the – obviously, we forecast follow we

environment And yet this to are feels that in. that so right this haven’t the for we release I suggests seen you anything so. And

David Feaster

That’s alright. helpful. everybody. Okay, Thanks,

Jared Wolff

David. Thanks,

Operator

of comes question Please Tim ahead. from next The Janney. Coffey go

Tim Coffey

Good morning, Great. Thanks. everybody.

Jared Wolff

morning. Good

Tim Coffey

that the Jared, are when we the accounts customers reports we you be this activity might movement it new is deposit at? fees X the origination item expect the say and loan increase new customer and unreasonable where the to on from growing service are doing at line on look and would XQ given base that last you years seeing side, ended and

Jared Wolff

were beginning I which of you you item the Tim, to? referring missed what said. line

Tim Coffey

service Customer fees.

Jared Wolff

have you brought am we glad – I up. So, a that

of end So we that last year. launched an initiative have at we the

peers fee working generate a we data, it did are of this the think been stand and more end to we where can we do of our where kind really how extent fees. where get focus year, low, do a last year we do a to relative think off high have We to on the are it’s survey do we kicked we you while initiative. of and beginning for We on – huge of

And terms to right getting a do going to setup be fee an we year. I need today, going for think never we Lynn opportunity massive way there. in think income I that fruit fees, we detail growing income. in into now and and a this us to to more are place. have have And believe do am come driver from fee for have But there I be that’s fee to an some but customer both to specifically how there without that’s on looking it’s drive service something will line on fees, to that is drive think of based that the customer out more terms maybe are in going that that And We I sources. we of income. line at way could thinking about we overall other overall, figure a that initiative business I gather service the

job needed figuring rolled and And at that’s great We deployed, it deployed. out to year. universe was a the did been that calling team where Our the of improve. of beginning out we this

So, we should that. of start seeing the benefit

Tim Coffey

doing you In an SBA more like business terms inverse are you to already than of so are? like

Jared Wolff

about am are not, would we Is I clear you pretty a how asking that Not, so saying? other are on, been what business? I what SBA I have I is, kind of gain-on-sale think than feel you do

Tim Coffey

Yes.

Jared Wolff

wouldn’t talked out, of you And don’t big I to that loans to the and the with, past are to because follow really small we left the engine things, better bad, with a in make that, to are number it. banks the this you it’s don’t about because People opposed bank our else. at one mentioned to they when they the that associated overall government are remember to want We today be big that then than make, and have loans of work economy So that government anybody able of running acquisitions, I goes dollar have all differently it see got same with the I been it balance And somehow guarantee I I the SBA SBA I that. end they future. lot have SBA. I think do of seen with The every with it then with I of the portfolio supported by themselves before they was have of but stuff. In to be claim all trying at it. And enough do today do we given a balance are what sell And loans certainly terms shouldn’t an into to day, the and they pain rules. am sheet. number specifically, open in it

have worst thing the I and with last the want – un-guaranteed is always up mean, of so I And scenarios. end like so been you all the to do portion. that’s

So, are some great at are doing job there I that banks think it. a probably

that and right. I I engine non-real I SBA think thanks loans. you we But community well. be to on I do today if have couple to – our a our estate the And it it. certainly think done. can get And mean, place to do real it, to I of is estate hurt the an right people more the the it doing are don’t peers there today open on is am and side SBA be think

up. the that’s we so to build engine that And trying are

can are there build we We yet, not but it. hopefully

Tim Coffey

Okay. And Alright. national color. That’s you. back shared on credit. the great Thank also circle

$XX you Does national million, So checked, right? down that – pulled quarter. last X this number time I one got shared out you plus some that still the additional had excluding of just credits sound X the past bank

Jared Wolff

Yes.

Okay, look, have portfolio my got a one, other credit sheet right, yes. take sounds I the that I to than but

Tim Coffey

is And of of themselves? where to strategy the unchanged, are going they kind resolve allowed kind be to

Jared Wolff

Yes, we are not…

Tim Coffey

Okay.

Jared Wolff

one we new we safe most were on just sense, overall. they We it lot am terms that had balance think re-upped sheet not would just do to actually exception ones. already are it, but was obviously, going for to not it but are in basis something the to And yield. there any in as so looking said, we the and that we because it, are one that in of looking are not of we I we way and was but if we made that of was it ones, well new I that are just get the good an grow a performed participating, I was kind in into there gather We part,

not whole them. are buy and out going go a bunch of We to

Tim Coffey

makes That those appreciate you. are sense. I okay. Thank Yes, questions. my the Alright, time.

Jared Wolff

Thank of so course. much. Yes, you

Lynn Hopkins

you. Thank

Operator

go comes Bohlen ahead. KBW. Please The of Jacque next from question

Jacque Bohlen

Hi, good morning.

Jared Wolff

morning, Good Jacque.

Jacque Bohlen

inflows new the having, – you the know a stimulus of that what a on profitability? bit, I we stimulus to I size little so just context us able recent are wanted balance bit. weighing about the potential for the balance just about that it but protect are it size versus then of profitability thinking managing sheet discussed have very touch thinking but sheet its the in from you for discussions I its how the quite and potential and to guess were these further the that discussions on

Jared Wolff

We it So, huge first million for wasn’t starting us. it with – didn’t time, right. the $XXX did mean, I PPP,

time from our and about a to mean And liquidity a balance round, much. we for then so We if reaching it be and existing the for us and help who didn’t new first the our primarily didn’t it to serve and relative out did XX% help, we do We clients about them. were we there there sheet, reaching didn’t ones just needs all out or back second are to talk could to that we us XX% to the obviously seeing It our standpoint. for relationships of going are clients. clients that maybe the lot second time seeing all do to

making maybe are we think around, size program smoother. see is similar So time it’s going going it we have time it’s a not some a little, a technology to we something this deployed to little bit I that be that us this helping and

also And outbound hook lot them of trying are lower. time, to seeing seeing modest in lot the prioritize our are demand experience off phones did do are we just and of process. capacity calling, great whereas I same in-calls the to we lot around. it a and ringing would the have we are a last we demand a doing first So, the market were think was time amount the think are clients a and as give we But the not mean, the is we I more. the I –

you So, Lynn, do differently? see it

Lynn Hopkins

what are PPP, I With no, think respect that’s to we seeing.

Jared Wolff

or your was question outside that? were of that about you focus the Yes, things Jacque, of speaking

Jacque Bohlen

of then are you enabling getting of It’s and was I also those that maybe the other PPP spending? part It’s to stimulus extent It’s other that because you – of inflows higher in. cost deposit coming and it. that to think reduce partly realized I maybe it pieces

Jared Wolff

That’s and modestly deposits. exactly think right that might right. have deposits they we sticky relationship those are are much out. To are, It’s deposits the they been extent that other allowing us that sooner moving to offload we the

we So, our right. re-price example, it CDs the rate at affects which for

to to CDs especially our to clip, And have the – are a how anybody are We quickly who because that at you just expensive a we costs drop much how that ones But whether because do And deposits the extent not. we a are our want science there pretty of that want go. the you come success can is offer. at stimulus having drop down on prices they a ones. of happy let matured, to kind accelerate our good and on moving deposit is taker rates lot do we of we origination those of faster to relationship we are or

stimulus. a of liquidity I because the think will we of see buildup

can it then out on because careful, be it. you flow to got and You relied

flush So, their what we is Right like that, going got liquidity. just to haven’t down economy about how to to of gone we savings are look the yet. reading it but savings accounts was know holding rates, just seems and I now, don’t like on it’s really savings. households look at really

Lynn Hopkins

Jacque, I now. point, lot there the of market is – would I your to a in right of would liquidity add, Yes. kind just

and equilibrium what I around. maybe we meaning there was some quarter what part going of was be was level to temporary staying the over think that more viewed what as clarity fourth I think was on reaching observed

I levels by the lowering the of margin. mix opportunity benefited there an earning excess asset to improve that was say So, liquidity think our and

is program as reinitiated. coming The think XXXX, also we turned PPP the I through. has into forgiveness

levels think liquidity to to helps that’s flows, we that, about that elevated have again. we looking assets, deploy And extent as length think but the I I but do with of here I talked earning seeing in liquidity into are them think moderated.

I in see think quarter. the little on additional liquidity might first of bit a sheets balance we

Jacque Bohlen

the you much for Thank very great. Alright, color. both

Lynn Hopkins

Thanks, Jacque.

Operator

go Please question Steve Riley B. next The from of comes ahead. Securities. Moss

Steve Moss

Good morning.

Jared Wolff

Steve. morning, Good

Lynn Hopkins

morning. Good

Steve Moss

morning, Lynn. Good Jared,

in you deposit asked big see forward? of going were of business my guess kind answered and of most you here growing So, I business, just little terms the how here. getting into questions here that guys one HOA thing specialty are deposits do

Jared Wolff

to prediction it. hesitant make am I about a

we do we hard growing to bearing I we pleased the models going – internal expected we with non-interest driving the don’t of of XX% as to as the goals keep to to denominator non-interest it’s to get when We our was are number. of I got the year. it own think to XX% for field year. over it it’s fast it It’s you you for, make well, deposit to mean, this to bearing continue are and I have part think kind in before pretty move going – it our are overall looking are moving as year growth part down our I did we progress that But moving that. what but of but closer to I are get XX%.

Lynn Hopkins

just I are is talking. the the think I literally diversification and you add within business it would as itself just equally deposit important

Steve Moss

it. Alright. see thank much. here this Good expansion Got Well, to quarter. very margin you your

Jared Wolff

Okay, thanks.

Lynn Hopkins

Thank you.

Operator

question-and-answer This gentlemen, and does today’s session. Ladies our also concludes this teleconference. conclude

may and thank time your this your at you disconnect lines You for participation.

Banc of California (BANC) 22 Jan 212020 Q4 Earnings call transcript