BANC,BANC.PE - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the Banc of California's Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] after today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Jared Wolf, President and Chief Executive Officer. sir. ahead, go Please

Jared Wolf

welcome of and earnings second call. to morning, California's Banc quarter Good

today's Hopkins, second our is Officer, me continuing California call Joining on development business Lynn economic improving talk activity more and our With increase, who in our detail results. about our quarterly to and conditions in will more pending Pacific Financial Mercantile loans Bancorp, quarter results our improve of excluding of acceleration further billion organic growth assets, will of acquisition add than level reflect the ahead $X.X in of profitability. our our which PPP Chief

sheet In in to addition to to produce to income expense at growth key deposit generating coming million. during quarter on interest strong pre-provision coming well in a our second significant initiatives, continue disciplined earnings organic margin we expanding which lowering per maintaining share our balance $X.XX costs, control, quarter, helped other $XX.X with pretax including the and execute net and

While payoffs continued to headwind. represent a significant

production annualized loan drive strong XX% in loan the quarter. helped Our second growth

in advances. new of line net warehouse quarter, funded million of $XXX we $XXX discipline As more a California, the opportunities reflected in loans, loan at second at the of the we able of we offer including experience our and and high-quality $XXX advances maintaining successfully our while very pricing, are that demand are of And differentiated million million credits. to seeing the study compete for million underwriting In loan more we to Banc and high are pursuing reopens, line yield percentage we winning $XXX California X.X%. holding fundings comprised economy relationships with of are of

current first the higher strategic environment. the for risk-adjusted production loan purchases loan built $XXX help quarter. million quarter, rate above these Through through some new deposit redeploy offset high-quality own track success on having points the achieve of was organic to result profitability. offer yields of purchases our term, In loans that growth a is attractive XX our loans also Excluding we relationships, with we success on have supplementing first and PPP us strong the new are of multifamily strategic our we partly loan than in growth warehouse, production talent in inflows, our The the keep bank. continued fundings are and level payoffs loan of targeted and our are and tool up generating basis our in average attracting the was the to good and to profitably near us liquidity a single-family

two past And Over commercial progress significant have reinvested the company an and years, we destination experienced attractive streamline talent. colleagues. of savings the of into adding portion a we have cost expenses, reputation as talented in as consistently the for made reduced operating Banc building we California's banking

in our and constantly result markets and refining efficient This where we ability using capabilities a pipelines throughout us Our key to Los our build bankers expand relationship-focused new are each in is deepen us and bank. even our Diego, quality These quickly to don't California. hiring Northern been substantial growth deeper that build clients. and adding in selectively deposit new presence helps franchise. In have have enabled execute on and marketing to quarter, that these initial are of California gathering loans we production strengthening able California, and proven our San have hires and further deposits, loan we contribute Central expertise add and markets The our with an accelerator relationships supported to process to bankers, relationship behalf also Angeles, branches. business including in that commercial is ship talent bankers our markets and targeted new of to look adding a

a to expand sectors the serve. we bank As go-to brand our continue as the reputation we and for result,

development In to and low-cost of strong generate new to interest noninterest-bearing loan checking inflows business efforts commercial continue growth, relationships. our addition deposits from

second million growth. DDA The produced results, produce and quarter our quarter. low-cost particularly which $XXX.X accounts of During that to the unit eighth have consecutive newly contributed deposits, DDA from Banking strong our deposit quarter, we continues opened of engine this Business built specialty

drive of new success we in with result deposits to and which deposit cost further reduction deposits, a in a to mix our total commercial value points our of of to built an a see of in rate This As X interest declined base the the points rising basis our a net positive quarter. increase increasing in relationships, basis interest as to continue we shift adding should point environment. XX% our clear noninterest-bearing we deposits deposit X head deposit become just basis helped in into average XX The margin. have

efficiency improvements increased sensitivity. given The in seeing Our would our asset further drive levels. improvement increase asset sensitivity we are improved organic deposit and more future. in we And are we as to managing an in in continues will effectively continue mix generating our ratio, deposit we our our leverage has mix growth that expect the operating business development, expense to the trends are our

technology in business of as in Importantly, client the as I as augments earlier, while that are offer. expenses and terms products that we enhances our keeping platforms in development, we increasing technology check that we and services and employ both the discussed the experience well investments

an increased gain acquisition, Mercantile investment technology achieving been over increased the Pacific spending able areas. years, as fund reductions two in in still to our while the efficiencies to past has future and even targeting but improvements greater that we our efficiency are the in ratio. other growth we the investment our we've expense ability improved increase in through we technology scale Our had organic And through

months Mercantile had quarter. well made few the of in transaction combined productive integration In the have two third had anticipate the transaction, we decisions of we've Within a acquisition, of the we terms the to together, days continue all organizations personnel the been terms announcing Pacific for very planning. organization. of during The closing working and XX

have branch the all We the to of over at savings made that now savings past the necessary level XX% all months we be conversion feel visibility cost XX% above end the few we spent have Based scheduled realized cost Having system we our planning, projection the quarter. of the decisions to or good months. on the for end expected have initial third and integration on few compared of the consolidations, time with considerable by almost the of past together XXXX. regarding

our will be their which now in to performing going sense have a for the And gotten higher We've particularly clients commercial our of some among expand opportunities opportunity was expand the positive require this transaction strengths. have have lead should and levels existing markets good where and time very to to bringing relationship a support clients adding are even managers the be production. Pac-Merc franchise. will that will business to for their growth. of include about from confident teams that credit more to a to and we created opportunities we who will We support announcement, we were continued well the more target larger development, to system be now our more resources larger of and At excited larger facilities leveraging are together business relationships, the collective

confidence our business of size of closing the of its impact organic And level integration, our capabilities and our generate has profitability, our as increased. to balance in and an of terms development level our loan to the sheet, composition we for work In growth together future. on ability prepare only

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

Lynn Hopkins

Thanks, Jared.

indicated, move Relations they for comparisons start or quarter or our our reviewing our share quarter review refer available quarter As diluted was for found our Unless as $X.X performance. by million prior please can to be are otherwise sheet XXXX. of website deck, first with common to Net compares trends. some mentioned, diluted stockholders per income share. highlights statement on to which the I'll to $X.XX balance first then $XX.X investor per of and $X.XX the the our second quarter income the second million of all on XXXX. This of we'll Investor period

D the past from preferred quarter lower dividends. stock stock $X.X preferred our Series this benefited March, million redemption the second in of With

the preferred addition, net $XXX,XXX basis, of items in of of recovery, investments in professional indemnified of In effective redemption as in million a the in of as tax Series on out previously losses $XXX,XXX partnerships, and the quarter, on alternative $X.X pretax income between investments gains net In alternative net the prior we quite million energy prior $X.X quarter we energy second $XXX,XXX had of pretax the merger-related partnerships, available our had on a in that impacted $XXX,XXX. interest of pretax all few of comparison a the XXXX, income net income income, quarter included income one to net net higher lower to $X.XX and the $XXX,XXX In slight as contributed XXXX second quarter common of between stockholders recoveries fees. in net rights, part normalized million there items from our income fees, When million service merger-related while on Total was XX% well costs to lower the benefits $XX.X decrease our losses margin. quarter D in to noninterest items our $X.X $X.X quarter. pretax get appreciation resulting XXXX. sense Net these fees. in rate issued no expense. $X.X higher from tax were stockholders on XXXX all to noninterest yield million stock stock available dividends, lower benefit customer net diluted decrease of current decreased offset by or quarter. a and million attributed revenue reflected tax to net million in tax investments. quarter, interest in the to better exercise diluted of compared rate equity current These of of professional offset average indemnified in The similar effective being of in backing preferred The stock a interest by each quarter in costs assets operating additional or expanded of income lower million a quarter increase interest-bearing had higher mainly first of and in credit higher by an the common in interest volume offset servicing adjusted cost Income periods and in other by $X.XX from posting $X.X and liabilities, per income comparable $X.X is per share which increased compared and net we stemmed provision increase interest-bearing by of second day and for prior core the income losses quarter, the $XX.X the share and the second of performance, increased million

prior the due point X basis from Our X to funds our X asset net quarter and X.XX%, margin of overall interest points earning in our in was up basis cost point decrease a yield. basis increase

to redeploying securities. asset and X.XX% with higher loans to excess earning yield our increased into some of liquidity Our a primarily yield on slightly securities due combined

XX Our of related average due from the activity, offset higher to activity. due amortization primarily average the from loan quarter second this loan X.XX% yield lower-yielding prepayment removed percentage loan spot a basis yield rates our XX, decrease coupon our excluded, our of the with impact SFR lower balances. loans of higher the all-in points to rate current And fee had ongoing a status and nonaccrual second these the X down When yield to of points. XX to PPP remained resetting during refinancing was basis by in our spot The loan income mostly to of items to forgiveness basis compared is production as at for from quarter and dropped We X.XX% rate average fees quarter higher deposits. ended X.X% steady to points first from impact further July loans in due in second the is quarter. higher cost

to at expect trend ahead, our a cost slower the the albeit in to rate. Looking of lower funding year, we continue half second

XXX their half reach money we accounts market deposits second time should of deposits move deposits the a that few terms. points. of cost cost average XXXX, they We about $XXX the weighted with In agreed million our end have larger down of have and of of basis once these a

back our this to net expect of cost support reduction in half in interest and higher year. We the the balances income margin boost

rate the included prior due Our the tax and from losses investments of for we XX.X% fees the by higher adjusted the XX.X% all appreciation and which quarter. The in from the salaries quarter net first for resulting are $X.X quarter increased professional quarter expenses to equity to issued quarter. expenses, and fees mostly tax employee stock professional our last offset benefit on $XXX,XXX benefit of due the exercise current previously compared a effective lower other costs second to professional from in lower our of exclude quarter was indemnified recoveries million net in once first rights the

be Going forward, the of for tax rate we in XX% effective would the XXXX. range XX% to expect our second to half

Turning to balance sheet. our

million to the billion. excess portion high-quality end and Our total $XXX $X $XX approximately our We the down assets loans cash of quarter. increased second by the prior liquidity cash and our of equivalents from million redeployed brought a commercial which securities, quarter in into by

wholesale have both add other terms earning to as our growth continued in core of if also with replace to to securities, continue support overnight the investment, to high-cost add future, earning we selectively deposits funding, and and strategically We in time loans in needed, assets. deposits flexibility high-quality assets we

Our for due CRE during was a X.X% than decrease by $XXX portfolios quarter growth $XX to investment balances. in lower The SBA construction forgiveness in primarily SFR PPP the multifamily, quarter the in the offset SBA increased warehouse, process. as million and held loan or loans million more second and loans growth C&I,

high-quality had from utilize with asset this low we from payoffs we Deposits average from mix of to remaining in to million improve, million liquidity in loan purchases, The SFR million quarter continued our portfolio excess more the XX, commercial success Noninterest-bearing increased by deposits representing at and last loans to quarter. deposits PPP The loans relationships. originating end, $XX end during drive and us adding on from June of growth, X in $XXX that the and are thanks consecutive total remain million the X% at plus value. than enabled prior consisting XX% and and demand to of low-cost our longer increase our given from X. XX.X% $XX noninterest-bearing to up the of deposits, second million Demand add deposit quarter quarter, checking, attractive yields. cost of $XX in-house. to no new in $XXX As focused eighth deposit stemmed portfolio Round interest LTVs we goal of risk-adjusted quarter this offset increased franchise purchases a loan our increased class very our some Round

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

million to Our at by $XX securities portfolio end increased billion. quarter the $X.XX

average rate primarily added agency the a weighted During we second quarter, with of municipal securities and X.XX%.

the The balance declined which CLO resulting in by was of are at added quarter CLO to down quarter from of the The portfolio loss portfolio, diversification refinancing. of $X.XX which sheet per quarter. improvement strategy. consecutive payoffs book payoffs to in this the quarter we during is The higher prior an relative part management portfolio spreads For tangible share $X the longer-term our to accelerating $XXX CLO end. seeing out fifth reduced tighter second unrealized our our level pricing the CLO is million quarter, as our credit increase value on million

unrealized share. the ended our with to unrealized change net the tangible added a quarter book gains of value million gain entire total the Our per securities portfolio net during $XX.X and quarter in $X.XX

by off for accrual asset other borrowers. driven quarter. this quality loans the we payment our million saw with to the or $XX.X paying work are of quality. and through the $XX.X loans credit that loans reasons. loans as or represented and million loans million migrating to $XX trends total Nonperforming Delinquent status classified to decreased of positive consumer X.XX% million deferral the in $X.X XX% and largely nonperforming are current process second quarter, we back in million strong About decreased quarter second but status forbearance in in remained Our $XX in balance second SFR

deferral held numbers first the loans of of X% declined total end from loan for Our to X% investment, million at the by quarter. down $XX

to for our me Let turn provision quarter. the

to some in had asset offset model. related forecast we the in provision was in improving improvement the requirement our growth Although portfolio, loan this by quality the and economic utilized

million the for which allowance credit loans X.XX%. of million, recorded Net second we for for As to provision quarter. to ratio $X.X totaled coverage losses credit modest the a of our our $XX.X second losses provision a result, this reduced release, quarter in total allowance negative

loans have PPP The of coverage in June lower our X.XX% relative at methodology. which and our XX. warehouse loans, Excluding stood at reserve levels both ratio risk ACL

ACL XXX%. in nonperforming decrease ratio the remained to With loans, NPL coverage our at our healthy

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

prudent use continue value. I benefits and to be time, the back of We strategic to the our shareholders capital to to turn with presentation over will and build At this Jared. franchise to maximize

Jared Wolf

continues macro variance, spread setbacks are Barring on future. build back to perspective, to expansion foreseeable positioned California the COVID-XX momentum new economic resulting Thank well experience restrictions counties. for that a of believe our as about with year of you, place a few catalysts to the expect profitability. Lynn. in our wrap growth and to with We of a I'll strong comments second we positively are economic From from businesses in a impact number that any our markets deliver are half the we rolled appears most operating activity positioned up in outlook. it

the job have our an positioned teams should demand should the we we doing excellent and be opportunities we result. months. contributions getting the over developing past high-quality of that are are banking operating increasing added bankers the to loan environment on from lending well favorable, and capitalize So several new With

and at Based to loans, continue continues I the joined the offset the the loan level strategic in March we bank of continued grow and pipeline Our is we runoff to to have further highest on XXXX. deposits pipeline growth, as of and purchases high-quality to We been the money since it's in opportunities time PPP, to organic costs larger and deposit to upper be reprice. our our loan continue digits. our year see of mid- single should full reductions some mature in also expect market excluding with

we we the weighted average net Angeles in deposits first our ability with inline good mature positive As for coming $XXX we to solved deeper the Pacific XXXX in the clients impact the projected hire, to to interest savings haven't rate of scheduled years. Mercantile source relationships will revenue projections, redemption to as a second of be Pac-Merc coming end our subject our at accelerate have provide X.XX% Los XXXX, development of And synergies we the also expect will the potentially that and believe of our be finally, preferred to modeled be in our the us quickly market. margin their positive Pacific should Mercantile event as this company half And expand sites. will our of we believe approval. of profitability. new colleagues XXXX, Series have the the in Bancorp impact we reduction million exposure cost costs expand to with presence The by should a Lynn protect our our be impact And in level provide of which stock with of the the deposit to We all With a the and growth there we realized late help see us in of business the mentioned, efforts. quarters. while on early continued the transaction E acquisition. mentioned, previously regulatory into And year.

the also $X loan future utilization commitments unfunded significant economy will particular, that we billion In expected up. loan as potential picks that amount of growth add we with in transaction, the for this represent in addition over tailwind to line growth add another will loans and, in

to priority want talented progress thank acquisition, continuing on for projected for you to executing organic work remainder a integration great of let's realizing well about that, be the will and the of engine. the I our operator, quarter. to Thank of line now deliver go Pacific questions. forward Mercantile growth dedicated for coming the California's our to I California quarters. For ahead colleagues and listening all of up more and completing the top sharing such synergies across and Banc terrific open in Banc enhance With year, the today. the look our the

Operator

Today's Fargo. question Wells from comes Braziler first [Operator Please go Instructions] with Timur ahead.

Timur Braziler

saves And I saves starting commentary portion reinvesting part some good hires. results? expect saves cost cost is, guess It's then Maybe cost with the Pac-Merc. projections into saves being that And are cost one two, the on to those new of the those the part question of materialize see coming what bottom line? will the increased. for to I actually How to of drop guess, where in increased your we should from?

Jared Wolf

Let -- address that Lynn, me first.

Lynn Hopkins

Sure.

estimated the the facilities at, mostly stems in as costs employee the increase looking process. I integration and saves the through costs, and staff gone we've costs So conversion think, from cost

our I on just of that. to, it all pencil bit takes of a little think, So time sharpen

of majority the probably that's So them.

-- the now, expect think we we visibility drop to would majority have bottom line where as I the we the we sit those now. from of to with

Timur Braziler

loans purchases multifamily? And you rolling book And and SFR the the a are mix then where are then the and can purchase, the just at quarter, coming current SFR quantify standpoint, maybe talk where amount at purchases you the existing a yield this look between standpoint maybe off? through yield on looking from loan SFR dollar the versus as from remix

Lynn Hopkins

I Why don't start. Sure.

be a single the approximately of. total was the to majority small was the portion There's hold million continues it multifamily quarter, loan about that to for this get family. in class $XXX And purchases that a So are challenging a fundings. asset

in with that million multifamily. the don't have And come come So respect on you SFR book, seeing that yields the the included, yield is split I overall the I'll coming I in we're to at put yield. the probably the that to have to -- I think, XX It's SFR Xs. about back in on through. our million $XXX to low we're would seeing

Jared Wolf

just non-QM very I buying, these mean, They're we're Timur, They're our -- are loan follow up mortgages. to the It's attractive. weighted that that. in on average market. yield

to have, into We some were -- source already on a have I allow say, relationships do sense prepayment there's is on would the above high-quality loans unique the trade make the in speed. well to what we general. look team loans warehouse are things the loans whole and yield we're the tremendous have expect, And including look on? a bring get that us of at they in side, implied we that and those to that And to buying bunch good that WACC that secured a by there, X.X%, we and and then

margin. But our team than speeds take And we're market we what would using lower off, I it's in is to And at yield say, them -- the our than going higher in It's our but prepayment our pretty but think what we're us in because obviously SFR our a overall, is And lower at upper the or buying portfolio probably probably generally getting we're are if general, this. than premium, the higher lower slight than projecting. so good I'd be it relationships. we Xs. is then

have a company of is -- source fundings our and the in it's help think production quarter at maintain a for that really size balance we to the a production and billion our us of $X I million pleased I the quarter margin, team assets earning with what sheet for it's that mid-XXXs. substantial our was This in general, right in level. plus was the loans. to our just have on put $XXX really, for in so of supporting pretty The and And good was did amount

just control. out I levels in prepayments So actually what and And is hard put is of it we where very production then -- categories. all the really nets of a on was function are, to balanced. mean which high

Lynn Hopkins

trade Jared, thanks for yields. SFR clarifying the

Jared Wolf

Yes, no problem.

Timur Braziler

increased Maybe other just that we've I warehouse peers EOP the I the guess from balances as growth, the of would more, Is trajectory quarter if didn't relationships? report a that different from first quarter really balances. on move end results. yours in some end average utilization? the is a much was Or can, of dip from period where balances the increased quarter at suggest. as that one in of second and of Certainly from really seen right

Jared Wolf

a That's I question. good those a all of not. say would mean it or things, it's I actually of believe combination

-- So balances balances higher higher quarter end-of-period or average in lower. we balances me, quarter. second dip a the have were first end period did the Average -- excuse were balances, in of

in the So were it quarter. back we up second bringing

super have to relationships, We on bankers, have brought midsized of we although tend a -- we some the the new folks, just not mortgage large approved those. bank one the other day that few are

It's is portion we've an but part. managing Our this part, outsized be outsized an a team always to company. of of said not be is comfort healthy within at not going to going kind exceptional And our really level. our

we a that I lever comfortable We a much. And can the size right expect with don't it. to it's great now team and our very feel managing grow Something job pull. has it of done

As can it here. same maintain we a much percentage, see from grow growing as its company, don't but we it

Operator

Matthew question, question Please from that to Gary next next is our and ahead. your from right. All we go Matthew, Tenner comes will go go our D.A. It today Clark, looks comes ahead. And like Davidson. muted, Please at line perhaps sir? Sandler. Piper

Gary Tenner

about the couple C&I construction had So a sequentially business, a bit quarters little obviously, growth a kind quarter Can remains you a loan talked of you this about warehouse core challenge the the and construction perspective. purchases until on think from bit in and quarter. in single-family, I of obviously, multifamily, that growth you talk C&I, of and the a drove of

maybe kind talk trends here of both were core just about C&I, So the what in the

Jared Wolf

Well, from my of all kind perspective, it's -- blended. it's hard

has happens, pleased here. together lot and bucketed very and net, it to of see we're paying easy prioritizing a a terms think was we and of something we pull, very quarter And I We're headwinds than strong. the a fundings, our and to it's see is production, the mean are production, ABL pipelines $XXX still of are faster plus going C&I C&I just board. strong is and else. I quarter, any function, their with they that in the quarter $XXX we anything don't a had we're on what than just real but Pac-Merc, be do. I we adding really more good what borrowers. pipelines I we're more with the say, that's team pays do obviously, very would which their payoffs. going we're had than got along $XXX much to happy in and bring X strong. warehouse engine, to of in capabilities And And on million million good doing C&I, happen while they've control can't all if lever is It's what the I use million and to which and on off it. we so the of the substantial growth. and production our to have production focus side off

and going to we're to health see focus that continue So and C&I It's we businesses service on. everything something from grow care. is

have the real ability we vertical but estate, be you low-cost in the and a as which leader well. owner-occupied streaming that tends to do then And to doing is have it -- know, We entertainment area, as production.

Lynn Hopkins

X add quarter I numbers, production SBA production would of in the include the did looking at first just PPP. for round Jared,

way comment. production lines at So only the warehouse. the purchases say would I other it's and your exclude kind and step of numbers I and it's agree just our to It's I for the the up When board, say all PPP, hard back look across is XX% quarter-over-quarter. all actually with core

think So I that that's when kind If it contributed you well apart. pull helpful. those numbers to of as

Gary Tenner

revenue quarter? kind average PPP Can give revenues the and And keeping the just of quarter for some PPP balances -- us PPP. the you the on in

Lynn Hopkins

take second -- same the we The revenue it's from averages look first quarter the and the is when might But a quarter. quarter, moment. between at approximately me

to stick that me Let here. page

I quarter through the and about the million. quarter, about were we fees think first the So are that $X.X in million, $X.X second in brought

to then difference much I to and balance I'll two back perspective, periods. an pull average not numbers, between So And the get have from you. those

Operator

Today's Instructions] question Please Coffey Janney. go ahead. with from next comes [Operator Tim

Tim Coffe

what were in the in dollars interest curious quarter income? was I the prepayment

Lynn Hopkins

Right.

the quarter, I pulled numbers apart. last So we think those --

indicated we think accelerated accretion XX prepayment interest, basis points. yield this about included last that quarter, quarter, the I we XX points only and had whereas sort of nonaccrual our that -- loan of basis

together, about when is So $X.X put million. last relative prepayments all to The I quarter. of that it's majority

number the when this about yield million margin. think continuing order the features million environment. that at loan I quarter, looking $X.X we're look I our quarter, those rate that core three our yield. add $X.X guess considering pull that in is particular last at get interest would numbers just those low net we has And interest I for well, loan out supporting we up core held So to we're our to that

Tim Coffe

ratio. loan-to-deposit the about philosophically of kind just Jared, And

run ratio. comfortable that upward high-cost do $XXX run Do off put is those loan-to-deposit million That you normally off it If feel running sure. in you an would on higher your I'm you bias where than it deposits, -- now? that right will

Jared Wolf

out to rate retention take rates CDs liquidity remarkable a it for reason run -- amount really maybe We way, running that posted extended rate. XXX%. we that give it we deposit and comfortable much keep side volume to the duration on CDs, CDs, we've at much deposit at bring we the the want our costs been retaining relative When increasing have monitor can I see are good off. we what And now and of low time when the is is. that and on, too rate, actually there the just we're as past saying, well, willing It's maturity duration. is way our to how down. run our to don't still And our are look going at XX% deposits of that money take three-year XX% CDs on with that We approximately that. I'm able maturing we're to them a were is is to

So the the our ratio. I'm the ballooning without the that's we loan-to-deposit year off maturity it of Tim, that end at running really comfortable absorb can of stuff

strong the hope mix that base very core They've strong Pac-Marc here. we -- they've deposit base, come also a We got have operating deposits. to really got companies expand. And some noninterest-bearing a in strong of

things, we'll And think I so our theirs, own between those two and fine. engine be

Lynn Hopkins

other think, just And I add deposits. would particular I point, one then related to these

I we're that. -- at actually and simply looking addition into them markets, in opportunity think to current there's think reprice there's to on the retention I the CDs, an

basis they retained. XXX the and reprice them being priced at rate with be current environment, points could and So

run loan-to-deposit comments with necessarily all they're I the And off. not on clearly So then to ratio. expected agree

Jared Wolf

kind point, Yes. rate were of retention of rate. just not of kind of say, We're kind our CDs posted our just -- of a contracted. with taking especially On clients I run-of-the-mill that what on seeing XX% would so that our

we on some rates the large maturity. that deposits are would deposits have contractually new what that for that actually we them call might those them. think be are retain we'll at will We that to reprice and of are or deposits at about specific balances find that those -- talking Lynn's were replacements specific for able specialty agreed that ones current time And will either rates,

they're because at current away. reprice They It mean could just rates. doesn't expensive. going all they're So

Tim Coffe

some good that? a point. And the then the the hurdles what Yes. doing redeeming preferred to are No, remaining stock, of that's

Jared Wolf

have time. there to see time -- to I to regulatory you we on don't that and us demonstrated of capital like this hurdles what talk from on wasn't to we But we were last respect the process. we same we them, lack that the that see and the any E a didn't we were think regulators process And we lot a needed did We any need process got through go demonstrate. the do we challenges do we any standpoint, approval Lynn, see need of Series -- when visibility. with expect approval, clear to about?

Lynn Hopkins

challenges. wouldn't I as them characterize

think a pandemic. have coming recognize I we're we through to

this of that Series focused success on through the have our D benefited and year, earnings getting very that redeem We which this PMB to integrated. opportunity the year. acquisition And and we our are

all I and along it's matter I the just process of milestones think, way. So think of these, the a demonstrating

Jared Wolf

first good guide quarter hard -- fourth is that's to or think that's now. right quarter. fair feel of It's I timing know exactly, yes, why about We kind but our a

Tim Coffe

Yes.

been what saying on I about near-term call is. the the think with focus it's consistent too, where you've

Okay. Great. Those are my questions.

Operator

ahead. And Please our next question today Piper comes go from at Matthew Sandler. Clark

Matthew Clark

this what of On of we've balances? against the How And How of thoughts utilization? warehouse much seen the may your is on kind much grain kind increased your remarks, up is but of the the that prepared on you being and touched balance sustainability with elsewhere. are going is in that relationships? your have of what

Jared Wolf

a So little increased a is and clients, new bit -- of is utilization. little some it bit

Last So were average our balances. end of it's a balances both. than period of mixture quarter, higher

to expanding now. don't a percent where kind And don't it it it our the we from quarter, this so from was expand averages maybe of but much getting we where kind quarter, point, of back we see which that. are got growing grew warehouse as of the past to We see up little last could means right this company,

is with We team at low-cost what really several These strong have million do. hundred are true deposits relationships, our and our they balances. associated of

up and with it just pull we're really of they've has but I as peers. so with we usages. balance tend we percentage of right with the a we other average is but would our rates expand the good be is be want becomes higher team bank, many it now, to one now. which been there them. levers. among also Pac-Merc sheet, manage have requested lever to clients. mortgage a our bankers lot overall initiatives we've going are than many, we and our to comfortable our we right there to of And for some the because with It's down that moderate, job as on, And of where and done volume have who able midsized lower And And a our flows that and say

we out substantial, we recognize we're helping I engine pretty had so portfolio it this them. to was loan I are our and flows think well so billion that's And can production to do $XXX growth flow just $X engine And of the million teams why way is quarter. I it on how our power and pleased a in. together. the But production speaks with mean they that working our of

Matthew Clark

on a ACL, the reserve. Great. the question related And then just

I around think stabilizing previously XXX. you maybe talked about

contribution from that ex-BP. now are maybe that dipping nearing the increased What thoughts warehouse? your You're about below given the

Jared Wolf

$X.XX that. I at mentioned, remarks, her or you And as in like warehouse, exclude we're Lynn when look we without Well, it think, -- like something too. that, I prepared

to a run growth, I think where our If now. continue it model. with we're there's of provision continue to to feel lot is have comfortable stabilizes not We going releases. probably we and loan it

strong you feel but with to not Lynn, it forward, a think now. our at comfortable It's them, where we're above you Going we look I'd just when what prefer -- think? really I quality And some. release do credit is. is right little peers, bit our

Lynn Hopkins

I end number, does don't know being your March. the think, to Yes, I of would higher trends. landscape I'm of be your lower I quality to with saying -- we economic aware there's that Jared. agree comments, at I point, to end warehouse credit a quite did positive think if of level of have -- Kind we're the And mix are compared of matter. a the balances portfolio June ready

think -- I how So unfolds. comfortable but are our with see level the economy we and current

Matthew Clark

that, come Yes, around here? strengthen. power but it down sounds the And ex like then okay. XXX would dividend, to just thoughts continues dividend given that's the earnings updated it increasing below on just warehouse, Any the

Jared Wolf

are Obviously, I things And People think to at our want we're or growth. on different table. have we can use the increase things We're look to dividend. and we buyback the share whether people. hiring capital, our of asked reinvesting looking those do at. ways the that's always in one all a are We

Operator

question Jackie ahead. today Bohlen from go next Our comes Please KBW. of

Jackie Bohlen

nice another uptick XQ Slide a noticed I potentially XQ. deposits that and to But And discussed between -- X. was the reference Just later how those in are on the and year. in fluctuate to specialty because base some balances I higher those you touch it's question, in there that's cost where of too, going know balances to wanted

I so And was the what just was of that. driver wondering

Jared Wolf

Banking Business but and It's growing low-cost is we So kind that balances. put our bucket our in -- of unit. where specialty noninterest-bearing they're checking

think to banking needs and the because have elephant-hunting in our technology management, community of them well. unit great everybody front and market. that in the -- we're uptick really trustee a good that's and to end similar end specialty, our we're much of our don't clients. estate terms and And of do And specialty in in have absorb bankruptcy on the unit, it it's the terms unit. get I like team. capabilities some to money real the company. They're in a then property allowed accounts, to deposits. business else our have had specialty DDA to bring good -- back we excellent X% And we going terms in in other CDs I are that of we into an runoff in special a have on because And the it fiduciary and those after banking it good then team side, and on was too support so blessed want And have. little operating that growth, And our which serve just works in But big at niche they such bit understanding we we hard we're us

Jackie Bohlen

Great. Okay.

I think you of centered in just bring know shows to way had relationships was it? it new quarter -- continuing sounds on and core growth teams Is the to that in a little like and So great bank. right the lot bit the just the about a to there

Jared Wolf

the look of -- between very level and is amount Yes, huge driven by existing accounts, it's growth relationships the new is it it in out sitting liquidity? where a pretty accounts. that's to from. in their coming own largely money just is granular a it on bringing bank. new up broken We new accounts we are and and are new it's people building Is Or relationships --

Jackie Bohlen

pace And then you'd stand positions competitive just your the how one about or kind current where curious that in I'm wherever you going? terms news employment I scale I've full been -- the about for local me. recruitment one that employee open just in other of base market and relative be of like -- is sources, one and that for When to on of the to pressures think reading just just

Jared Wolf

really California rate XX.X%. morning question. went And that I announced the this sitting is just that think was Unemployment about good down. it County unemployment LA Well, at

and bringing talented hiring over. and a that problem we have of recruiting we've -- think, have not and in And have buzz streets a seeking. telling It's kind had the the people been We we our that a beating that company I around testament, our the very we've to the team markets. that story the publicity people out gotten bringing is

think message have I we terms a pretty cohesive we're too doing. in what of

at doing. about be continued There coming looking clear terms here, what now. at that are XXX over we're Pac-Merc, they XXX. about come of There's from we'll people XXX-or-so are just positions we to seeing where relationship people very in so some we're fill are So employees growth. key when We're

need we have manager are To in so to right you relationship looking to that, do side. to if bring a on hire relationships, lot more going add And the you're and bringing so more relationships. you're gearing supporting sure people that support make the while right you're ratio and don't people in are in here, new you bringing more the the that and overwhelm

in well. in can work over like to in are a can anything say That people a we've used San Those great in done of Central hiring that. relationship are we somebody we balance feel to to and new that who's or properly up that specifically look we somebody job pretty just need people Valley on that I like here. So done high-quality any couple find executive we bring side, that work for markets, are wouldn't we don't there that relationships where now. at bring in try that the when is right and staffed. people good And carefully hired Francisco said, bringing the But as as hired that positions -- key we're I I relationships

knew They knew. in quality So we were type We thing that and show what interested knew for that these they and we bring would they us, working immediate of the do. would in the they of results. people are

to that going looking some going continue out there we when we're to that to that where so But people say like continue great And that. XX% need going really to We're doing join anything to are wouldn't high-quality or that Pac-Merc. to have we We're that. add are us. I talent from get know we do there --

somebody, time hope so of -- hold kind filled seeking hire And somebody with question, the we question we're and be any answered Pac-Merc body should that. ask that to And we we to is is that Jackie. looking off. from that your know I

Jackie Bohlen

employment, you it right? Yes, system sounds like referral have it does. And in good of terms a internal

Jared Wolf

canvass Yes, mean, say, things first -- here that it's there's or that." and here I "Hey, say, there. we somebody we for should good. really And our we're look -- there's team There's and always something is We try "Who there we just we specific the we that know." do and to know. find to we don't know that to out before try go somebody streets figure

Operator

question-and-answer session today's and presentation. And today's ladies you this gentlemen, We thank for and all attending today's concludes conference.

lines, wonderful your a disconnect day. now and may You have

Banc of California (BANC) 22 Jul 212021 Q2 Earnings call transcript