BANC - Earnings call transcript Q3 2021 | Banc of California, Inc.

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Operator

Hello, and welcome to the Banc of California Analyst and Investor Conference call. [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the conference over to Jared Wolff. Mr. ahead. go please Wolff,

Jared Wolff

welcome of and Earnings Third Call. to morning, California's Banc Quarter Good

today's Hopkins, have in our improved is Officer, me objectives profitable year, call Joining on growth our out Lynn on the of talk power. strategic earnings would more we to laid At XXXX, who in and our executed detail the results. about which company quarterly for beginning the successfully will Financial Chief lead

all capital Through these deposits XXXX, to and pride company we operating assets did year. the of on do. that again lot our been maintain cost continue could strong franchise. loan Our and levels We going more as strategic leverage and expense pandemic. this earning as very of we first manage we're to doing the keep quality We increase expectations a have X doing take earnings on our growth, months objectives we able strategic opportunities and to and balance net a increase the execute through were of interest in build margin, our to of asset set we our say and achieve it delivers further Grow in reduce realize relatively and XXXX, enhance being objectives. what and well value we're strategic we stable that and the the our executed accelerate sheet of that

our loans. On period-end are remained of basis, average in increased X.X%, we've total a level experienced capital year-to-date loss assets our Our excluding and up while have asset portfolio. very loan quality strong PPP loans through earning have year, the X.X% and the low a

And quarter of We've the from XX third Our cost the been end XXXX, quarter keep to support our end margin our basis points basis of during which year. to interest relatively complete able net deposits of early substantial redeem helped X expense earlier our Series has which points ratio. the Pacific our the fourth the we of were resulted has the of in then our efficiency has at year XXXX both improvement at of stock able profitability. declined of week, acquisition levels in Bancorp to Mercantile and preferred which this flat, accelerate in the improvement in D

$X.XX, power in the prior Our results profitability earnings we earnings objectives. third diluted pre-provision of the demonstrate of as $X.XX all progress strategic of $XX.X generated these greater have quarter, on a an and from quarter the including of prior have XX% we We clearly up very the made pretax increase from result of share per improved million, quarter. income

the prior return business had Our pretax of of build totaled quarter, We medium-sized California's Banc reputation points an activity development compared increase basis quarter. X.X% third XX on quarter the of to for and average small assets businesses. the go-to we bank strong another as pre-provision for to as continue

This the expected. $XXX new warehouse advances, line variant production, production to of million together to quarter, of still related We of loan emergence which $XXX million in total of the third new million slow advances. relative million. of fundings prior in $XXX achieved demand resulted solid we $XXX QX fundings net and of including $XXX million the While commitments, loan with loan Delta as line

level. production growth XX% and a loan paydowns which our strong loan annualized in loans, despite in high be to resulted the very remaining payoffs third quarter PPP Excluding at continue forgiven,

in growth quarter. end loans to acceleration bankers clients. talented seeing our execute winning effectively are of growth relationships additions we new the to the The across our and We continued our ability our loan new for from of to in in from success expertise pickup a portfolios, see impact which all increased the X.X% positive of including on the reflects based portfolio, prior commercial and we continue have, C&I of the the banking progress team

industries loan was Our asset balanced classes. production well across and

strength ended with see in sector. activity see in be and continue We services. the continue commitments for production us lending, and sizable bridge this health over estate which in financing continue $XX also visibility of and we in the television care will in years. million have We growth a real entertainment in specializes to for content streaming that believe opportunity quarter to to and the coming finance, We

that industry a market projected, be portfolio. of built this extensive believe is expertise there dollars which steadily this strong credits, relationships share and structuring will team has in us our of types we in As will very and streaming production. increase grow We billions help in invested these

Our million vertical, also lends care care hospitals and surgery specialty the estate to which commitments surpassing $XXX in and practices, to health expand, real third quarter. centers health health continues care in

Coast The Central our Our the the Valley from are diversified added been Northern of bankers their production California, impacting we've is and growth. in loan positively have very becoming contributions productive, perspective. level also a Central and geographic we more seeing

strong able generated bank. our deposits we're of development this from of fund loan Importantly, business to efforts areas across the inflows growth with continued all low-cost

to people, the see place continue Over engine, gathering incentives and products a right on from past years, to these deposit the few results we right the getting positive focused create robust efforts. we the the and in right

the ninth $XX.X During opened DDA quarter, third deposits, of million DDA growth. of consecutive which quarter our newly produced contributed low-cost accounts

income. X pricing of at than came quarter. strongest the as further basis down the which in improvement quarter. deposits expense control. The net down our the prior XX% deposits growth noninterest our and both continued fourth more noninterest points to the in should quarter our approximately increased we the points which the cost The from in quarter, of of roster our basis mentioned, to to disciplined prior quarter. average levels the maintain on and deposit deposits, expense we growth basis another Our interest are third deposits Compared decline points, end in quarter while seeing as total rate and income represented of was X And higher mix increased in X%, XX spot declined just drove to end lead end noninterest-bearing our cost revenue XX% our average client to our of driving is of in deposits another

infrastructure of see adjusted area As those larger small of a we a XX% and current payments strategy approach this to value The a to as ratio capacity income. billion investment from Finexio, have improved called in lines, increasingly grow result, And size. quarter. and other in have in we area to prior our our BXB place also made Finexio forward-thinking our recently so will several efficiency we fintech can Along improving to our platform. a add technology. this in continue improvements customers than we The support reflects the with investment years payments the that in can our while our company believe ahead, a which in partnership infrastructure bank's we capabilities noninterest XX% larger is part we sources the dollars to in is our built

value-added operations part investment ensure in of remain larger and and services. forward we Finexio client-facing Our technology to is in in multipronged our strategy of terms a tech

in on expanding detail be quarters. this future will in greater We

Mercantile Our is acquisition the improvement operating will closed. leverage further in be accelerated Pacific now

will we significant development our We welcome excited service new be that who superlative capabilities are provide built expertise. already additive to the business and colleagues very have operational to and

begin The will and closing As Members expertise in few proceeding scheduled a the this merger, well. be year. to in by that whose of as the a This thrilled talent for end Board to fully we is XXXX. this are as of announced transaction the we also to with we continue is most connection benefits will grow. and us we put The mid-November, valuable be to savings conversion the position begin integration new of system the cost will welcome of continue realizing realized to expect us particularly we

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

Lynn Hopkins

Jared. Great. Thank you,

$XXX,XXX all third performance. deck, third stockholders can net and fees net to included Investor quarter pretax quarter for few our that quarter $X.X in $XX.X of impacted XXXX. website prior leaseback per interest day common higher balance are income X our comparisons and available increased in partnerships, energy quarter, items with million the move we second our third a sheet share million available we we'll professional This get additional expense share was measures average net on in which to XXXX. costs. third otherwise assets resources. the quarter. transaction of our primarily compares increase of between the of In or backing to net of the in million each in XXXX, prior million refer to the a our on $XXX,XXX or we the prior of continued When quarter, of including stemmed normalized be This share in income net in of net million period interest branch compared indicated, stockholders attributed the in trends. income. increase investments $X.X pretax alternative interest-bearing of to on interest diluted the please quarter statement benefited quarter, and $X.X increase million income mainly had higher comparisons recoveries some In of highlights sale income The We of XX% and Total million XXXX or net a better gains to merger-related investments common increase higher mentioned, found second million $X.XX Unless asset the income, the revenue is second altogether or in an million third in a million million effective sense a driven income the and control costs. of the income pretax as then $XX.X our $X.X to for $X.X interest-earning decrease start a the recoveries XXXX in decrease energy our pretax quarter, $XXX,XXX income professional operating of on indemnified compared performance, $X.XX quarter and reviewing partnerships, basis, noninterest income as offset the in $X.X and Net liabilities, the in leverage third alternative Net and the or investor quarter of million third of to on had $XX.X I'll on gains indemnified of gain merger-related stockholders noninterest per net items in $X.X available quarter tax X% our these diluted $X.XX quarter $X prior from locations. than XXXX. in adjusted fees diluted the one diluted of had cost quarter to share. First, of yield. of interest-earning out in more other by Relations review income our common from a per which rate $XX.X to our our per by for $X.XX

X each decreased points. by quarter Our margin was the and net asset our earning interest cost interest yield up X basis basis as prior point funds our total overall from X.XX%, of

Our X.XX% earning mostly asset loan decreased yield to yields. due lower to

PPP lower yield average by during X.XX% part quarter to higher offset amortization. points loan penalty declined to fees, prepayment due the XX Our basis in third fee

XX higher XX% by interest in of Also X quarter's basis funding This to Noninterest-bearing mix a quarter quarter. full quarter. in XX% reflected repriced our the a with deposits quarter, of or was rate due points as weighted matured. rate and receive cost average compared basis mostly we points points due efforts total the basis lowering into fourth prior and our lower expect average cost cost deposits third of million continued of our to averaged $XXX sources of in is rate deposit X.XX%, during environment to current third to in average to the to average reprice decreased period-end funds to This X our for the improvement they mature. the funding benefit deposits deposits points the third the our spot quarter. decrease of XX basis Our

in salaries equity adjusted of sale from decreased included in $XXX,XXX $X.X which is expenses. quarter gain losses included on net benefits, other and the Our and expenses the lower estate also a owned, lower expenses million mostly other investments other to real of prior due

quarter in was gains tax million second The million In previously of net third third effective the incurred addition, professional had in as for and mentioned, quarter. recoveries indemnified $X XX.X% partnership XX.X% rate for we fees on $X.X energy investments the and merger-related million compared costs, alternative the during quarter. $X.X of to

our Turning to balance sheet.

million $X.X by quarter assets third total to in increased billion. the Our $XXX.X

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

total As noninterest-bearing Noninterest-bearing during million and time as thanks This deposit at of increased to million round Demand the prior end, $XX.X XX, quarter $XXX in our in from end quarter cost to third we continued growth, to loan demand our purchases, checking, PPP franchise our by $XX.X ninth quarter. paydowns $XXX value. portfolio. $XXX our relationships from deposits which stemmed a drive up very Deposits from And runoff interest average had the increased deposit improve, from the in remain new of of portfolio of of cost quarter. second million previously increase offset September loans low-cost from million million deposits. plus X% higher adding and payoffs deposits focused SFR X. goal on the represents XX% X we of XX% consisting in million the this quarter. mix in $XXX.X at round to The mentioned, success increased deposits and and commercial

support We quarter. mix in to this margin in expect net shift our fourth deposit interest favorable help the our

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

CLO payoffs the resulting Our reductions accelerating strategy. by CLO securities portfolio, at quarter, quarter our by in longer-term is of The in the are portfolio The of billion. payoffs an $XX portfolio decreased is million $X.X higher management seeing which the $XX to third million during we part balance end as increase from level CLO declined resets. sheet

of entire of portfolio the the consecutive quarter, the quarter, quarter. down loss per resulting $XX.X $X.X Overall, the unrealized at portfolio second end reduction improved, net a to of with gain the For which the ended from sixth CLO a our the our unrealized $XX.X was million, book of in down million in tangible at our $X.XX. end value million share of securities quarter

$XX.X Our loans $XX.X loans credit remained the positive quarter asset million third XX% to $X.X nonperforming million increase trends and the status, due million loans SFR loans. status accrual total of by loans is offset resolutions. of and of This loans. $XX.X in $XX.X of X.XX% returning other million, million guaranteed other million million, was $X.X and additions, to the reasons. Delinquent million balance saw of loans in in in quality. this to Nonperforming are and loans $XX.X in $XX.X classified reductions decreased or million or About in million quality loans in are strong represented which that third SBA quarter, paydowns $XX.X Delinquent increased include $XX.X we other in million $XX.X current third but of other million for payment due $XX.X to quarter. to

in and resolution included guaranteed delinquent the in During SBA repurchased XX, our nonperforming loans, loan totals quarters, with the September second and of and $X.X the are third we as SBA. million which pending

provision our to the turn quarter. me for Let

than quality in and was metrics had some quarter, in portfolio, growth improving related trends our the more model. during used loan the net forecast economic asset the to by offset requirement positive and recoveries this provision Although we the

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

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

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

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

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

Jared Wolff

operating quarter, of into few we expect Heading our about fourth and the increased profitable resurgence Thank generating economic helpful comments positive you, reliant wrap to the the a driving bank up pipelines for economic demand, but past loan not Getting continuation conditions. loan the deposit areas COVID I'll is continue and improving are to be across outlook. remain that see activity Lynn. on solely leverage and will a ability with all strong of and trends profitability. our recent growth our

have I our generating us number economic We a that enable to performance. will conditions, unrelated are believe in unique. we financial of improvement mean continue catalysts, we

deposit will benefit we First, continue repricing. to from

the get matured of and cost million $XXX deposits us will during third the or of our drive margin. should benefit increase We repriced that of help nearly net full our higher-cost continue deposits quarter. interest to or down maintain That quarter

of will deposits interest-bearing through Pacific over quarters. run pricing these next addition, should structure, several deposits Mercantile's which and In program the our to we the begin cost reduce

redeem Second, common net first increase preferred $XX.X of we our the million income E should stockholders. of hope available stock in our to part which Series to XXXX,

is a that preferred coupon. stock a As reminder, X% after-tax

the benefits acquisition. Mercantile the have of will Pacific we Third, accretive

leverage improved to continue to from And earlier, most cost company. $X.X will attract we to place, banking high-quality assets. mentioned in talent the in fourth, savings of the the to XXXX will billion with we I adding add we start As which expect get

improved attributable growth been the as fit our talent joined relationship-oriented have we well demand loan company, year in group to model. loan in our type have successful that is added. accelerating and this Since I very substantial we commercial banking have made bringing as changes that the in of bankers the Our

bankers businesses and medium-sized talented and banking We serving who have highly over are professional small- adept bringing full relationships.

We benefiting a focus a at other focus from banks are when shifted number have California competing our now to markets. exclusive of their time on also

having can former of similar Banc an has are created relationship that capitalize become deeper the magnet, for bankers have a California. talent us at deal California attractive continue of should colleagues provide strong great destination is add we theirs understand to have on them. that to of pipeline our California and in continued growth. success seeing Banc for and want opportunity support relationships that they bankers We built to to this Bankers that of hiring a enable a can continue seasoned a

catalysts additional well that positioned we these our growth, level are profitability generating in to creating we value With continue our improving very place, shareholders. profitable further for of and believe

Lastly, quarters. still work of accomplished more team I to go open together. we I'm line With colleagues, you operator, question from contributions and to do, banking let collected forward there the and highly ahead let's for the market. what me progress hard now all listening of California work. We for about coming that is is sport, look say proud and to dedication our a Banc lie and today. both a of questions. have for sharing Thank Banc competitive no California's great of all are is like those reflection that, up thank ahead. our Pacific talent and who things legacy have while that of I'm confident and team a our joined Mercantile in And their recently that their results in we

Operator

Braziler Instructions]. with first the Fargo. Wells question comes [Operator Timur And from

Timur Braziler

the space, talk billion was about on the I what kind and growth, relationships? warehouse now going of it of maybe Maybe starting for much versus some across that we've is you plans quarter there about How that relationships excellent at warehouse of Maybe the growing trends the board loan level bringing the discussed $X.X from forward. bucking And in institutions. specifically new the past, seen at the other with warehouse saw in another growth this quarter? talk existing

Jared Wolff

Sure. Thank you.

pleased another all It basis were production warehouse diversification relatively a production the from our volumes So -- of quarter. to showed end average had quarter. with we thing it this growth second the flat it, really to areas, and in loan about quarter our was point really. that on balance of lot One is out the an was that of

balance $XXX So the see we flat customer of of quarter the it kept sheet it it warehouse average the or to take, is, that can grew needs. most give share Lynn really numbers. relatively some the quarter, break we it at and address where And flat only or end out you'll in when We see staying our million.

the the We the balance larger absorb with to have and sheet. Merc ability obviously, it, Pac acquisition

team it's kind quarter-over-quarter, Our group, an to thing to that -- with a of we an transaction does And do volumes job. did on but that the good they not on to easy average have phenomenal basis a job. in really, really a maintain balances

basis more room. what you given going terms to of percentage we've I a them outside a not the outsized little this quarter have bit so But production grew company. portion an well our we be some warehouse. all in of Lynn, balanced. understand on think of was numbers And other that it's we And

Lynn Hopkins

and the comments question the appreciate I Yes. so far.

to billion warehouse about So billion not basis will about think $X.XX disclose ended average maybe quarter was we add, I at on $X.XXX the the and separately just quarter. for

up there the end. at it kept ticked of then it flat, kind and So

other you At forgiveness I we in our of think time, the PPP obviously the if at same have off. portfolios. aspects we other have look portfolio, coming growth

our our of comment XX% represented end period that the would of And other XX%. and XX% I So up other contributed C&I end, period portfolio, to to growth. period our It period is growth. end, CRE end business just XX% to it

together. kind maybe parts So see when Again, of kind seeing see the other of in to lumped you the portfolio. nice momentum hard of numbers

Timur Braziler

detail That's adding little then color. a good more And bit that. just Okay. to maybe

of talent. talent books hiring the still on, bring that had their just institutions? as as their they bringing loans kind I'm for long what over you've that that for success is are prior where that of you Is runway the wondering from underway? talent So far pretty brought well on can you on business? they brought great remaining Or for clearly, a

Jared Wolff

side, questions, Well, of business is pretty from I split we answer existing one got XX-XX. numbers percent a I've actually, the lot from what seen, do Timur, we our which talent was repeat things would other your was one we the new didn't of of -- well it of versus have that relationships. say We business. I got for mean that serve so clients it businesses, "Hey, buying make we we us their last estate happy like in to active last another again particularly and properties it on deal. did come active help And for serve them. obviously back you it did Can real and -- time? the to say, easy we're they're in they'll us

on they over new relationships kind basis. need existing takes that over, have. Our bring of talent a It's while that's to it the a come

they company -- have go And not marketing So very that they're needs I have relationships have I other happens relationships don't of would but as that, those would at they scope bringing one the the have bank offer. as I that over that of assume precise when room just they that They're that served they number to to bringing think know you. things a on rely our offer. terms don't good we that to in and talent at our at I they we our over may obviously new look banks have. But arise. still the we of for have services solutions and comes that -- services clients'

that to to not bring of can relationships doing they and And to bring bank look we so in the basis. and go generate think on out a that well. ongoing an but that market represent And I as they're relationship just have, them over they new

Timur Braziler

one Okay. me. X Great. last for And then

already base at to couple little looking expense the and more that's that. around color Maybe appreciate I provide on a into Just billion of a comments expense grow been being the created. bit the base, more able

Pac What's assets has with the and Merc the here. point? be need going So remarkably the to continues grow And next base flat the of seeing time start quite do acquisition for obviously, here some business with to adding relatively when you're to been expense some transition expenses you as grow? that kind

Lynn Hopkins

Timur. Sure. Thanks,

me hold expenses able that start. recognizing that have to operating we to as relatively work we leverage base. Thanks Let flat for been

So I forward folding to Mercantile's be indicated expect look operations, plus. think and saves in think as the cost we that I Pacific we've we XX%

in So we'll just that XX% to XX% put range. the

think come us I opportunity step-up assets. to we'll then just technology. have give ongoing general further and to investment those the some in. I with So It does expenses those have our also in leverage we'll grow think But do increases

to million relatively some held to $XX maybe million to a So quarter. put numbers We've it. our expense base flat at $XX

PMB had $XX about of at cost an $XX rate million to I to expense XX% run million. saves, XX% the think

be looking in technology that's be a additive expense it. investment it would some a would quarterly costs be that we and million then $X on So to some add. million at about an And basis, to be I then increases, $X piece personnel with would think normal

looking now. So that's how right we're I at think

Operator

And the next Sandler. question with Piper Matthew comes Clark from

Matthew Clark

franchise? retain one first above field? that for what to producers just your in to just Maybe to relative and beyond around more be Is the PMBC? they have you of plan and appetite hiring players incremental opportunity leverage the some feel kind some do you there's best add Or producers what getting might like from the

Jared Wolff

in but and work only and system proud everybody had on a not to the that supporting the the here, of opportunity well end. that very from lot Well, stuck our results and we growth. with production know teams -- the PMBC, people also this front they're into of kind talented going we're got who good support some produce on to we've us, of have that and we've work the back that goes There's lines, we

And talented across the people so board. we have

market is. open well are we that our of other company. as the hiring in think can for business terms It's We as in work bankers competitive

a California. fortunate, are we've comments, and Banc come that as had of to wants join of in We talent over of my healthy kind that I pipeline fairly mentioned

And so who bring we to we're momentum right that more being do on. believe hire to we need I people our of This very but selective for want not everybody, place we isn't have. the momentum. terms we in up that we to the sure keep keep up make

we of can would confidence we That some that plenty the said, to I continue and that -- we wanted in power -- vertical the hiring think they not know avoid with that we that have have we the grow, addressed had generate we to here, the that or and if we can people a opportunity momentum them. we found that talent teams we place. we in where some earnings

Matthew Clark

then in do just what's going your on there? where the that forward appetite like of you And loans, you'll top of do you terms Is relative And expectation continue feel your of some to retention Great. Okay. out SFR kind of more that? the contribution?

Jared Wolff

what because we It's know really basis, was be We're the on a and the runoff. what and trying it's fill to deal runoff of it of we it forward to to -- it. then since is And hard kind buy the quarter, to really you go with don't just try right going model till to get end to the have runoff. going

down slowed high rate the payoff the around low has Our was is XX% line XXs range. And an the annualized XXs. I though. the or think It

ability... the have we so And

Lynn Hopkins

yet. Not quite

Jared Wolff

Is in the mid-XXs? it still

Lynn Hopkins

Yes.

Jared Wolff

Okay.

we the grow stuff of as get our slowed But just has So It's portfolio. it really we've we're number. on it did bit kind top Matthew, little se. remixed we're lose a replace buying that to of trying it to We're you? not runoff. per exactly trying to -- hard to

Operator

He stepped phone. away from may have his

James. move we'll question, is to Feaster David So from Raymond next on with which the

David Feaster

see new verticals the some enter the to do or curious industry -- And you're You opportunity you well. Or in strength guys you to some expand in And got segments you -- verticals? vertical your talked care to seeing prepared the warehouse some opportunities are I'm other about vertical, whether today? you've that new personnel producers health in niches? we've interested that some to any hire just industry got into remarks. whether see multifamily the obviously, the as and

Jared Wolff

talked was Well, bolster we entertainment like we've the vertical, that to and that a my side about as prepared in growth feel vertical just in streaming. some other our I there. specifically remarks added the that in vertical help folks And

a have and team seasoned. in knowledgeable place We very that's terrific

folks we And with for And added that. where we tremendous opportunity the we field to a play. where area an so size some play in and the we growth, that more help especially see us that's

that -- want we're a here, interesting if at it. I attack we're I add let's always we're opportunity right add that new of on let's new a new at vertical. are will -- careful. body a going can There's things into and tons not "Hey, we're company. really X I to little to sure just high focused be it we now. -- in vertical, that think but wouldn't segments a of trying X make by And to get or there's We always distracted that we we looking there's a the in very areas to that now, add saying, won't can impact there." opportunity think -- plenty put let's the looking that an That's think be -- just energy to dabbling grow to body in have say our have you it we're

energy to impact. be that we're things our around focus So high can trying

David Feaster

just the Okay. a investment? That implications in But of could -- maybe just said just going it's partnership be some detail to which would makes opportunities, elaborate help that there be improve investment coming Finexio sounds an give the income be a could well strategic and some to it sense. contribution. fee that And bit on you're this, income you might as terrific You not quarters. the fee there more from like that curious,

curious Just all. you if elaborate on that at could

Jared Wolff

to. happy I'm Yes,

manage Finexio. Finexio their functions the vehicle, to really then a product manage machine AP payments So small the -- We they The and need payments It's basically existing we're efficiently provide to whether perspective. company. medium-sized services to learning select and is use it's business. interface that to a new our of for product help from cost a label or we white believe or product helps also and the software where the it the It's use interesting are it platform, have timing a And area becoming clients. ACH and client check provide accounting try optimization their BXB businesses is ability users with a looking they and as customer's to best payment Wire and something payment for solutions.

they're wanted from get going they're to from it we going get get so And not if of it to somebody us, ahead to it else. out

a road down tool we be as to we'll provide clients to attractive able the white label our so at look a really on And this basis. that

down basically system. to We that rails And clients as develop clientele, the for believe be bank we opportunity there's Finexio. for will pushing are they actually a for the their their also what road the be the larger across us

larger a a we've we've So platform, to really out part areas how BXB focus impact. to for looked trying banking be there's of has this that that energy we're address a is on in BXC and Most it's we're provide forward been think where BXC. not addressing going platform. going fee to to in services service, the our services at both area as This clients. there BXB what multipronged strategy And to this providing a a we and income of but larger been our

strategy lay And out. we've the multipronged first was so out our prepared But coming be kind quarters. internally. we'll that part in to the this laid of more of

David Feaster

improvement to last the strategically and asset managing curious more on your base rates that's your one, going just your and -- think have contribution you Just from your do sensitivity at exciting. sensitive. about leverage well thoughts significant rate to the made And high a how It's increased warehouse made But on as great. maybe that that. that naturally rising as more wanted in a about of guys you you managing deposit just C&I you think forward? level. get how Yes, then sense Obviously, touch

Jared Wolff

it? want Lynn, take to do you

Lynn Hopkins

Yes.

start. me Let

environment question, maybe we've appreciate then rates the near there's I years definitely, given rate there's So and of term. rising the been in some do XX what in might here a discussion and low interest

we So sensitive. slightly are asset

our deposits and C&I the to the that on that loan sheet has and With of our think balance cash base. in sensitivity asset investment large deposit given sheet, PMB mix we become supports amount portfolio asset joining their we and we've balance a think also our I have portfolio addition of sensitive I noninterest-bearing attractive their percentage of accumulated. the more slightly

also, with rates gives the rates. move think sheet will up. PMB coming loans our move I opportunity excess the pricing think I built as with balance up have to that the flexibility an deploy they've rising some And that us up of in, liquidity to

XX% on earning Slide some I some Over XX, in in the back there's So far I We deck. our details next within And the the information reprice there. to ability other back pretty assets. put think about think X have years.

anything So to is there there? add

Jared Wolff

I Yes, to add a in Merc, And really proud changed. excited forma about our of and XX%. has mix obviously, our that how going XX% I'll with to think it's just that hurdle achieve. deposit was our pro think put deck, noninterest-bearing, just Pac on moves from a I'm were really, it And basis, we we we getting

which only on efforts mix, down of a to proud hurdle deposits, be XX% So our is but we'll in be on over basis look to just a also and value us me, for cross. of focus costs of to clients really of quite not to cost focus get that benchmark. I'll them points our serious then but and is for and really, push our obviously, bring deposit X noninterest-bearing, of threshold a will of of, relationship to XX%, terms price. kind XX%, next getting And our function our function

of have ability Merc growth. Being some a duration in quarter. support big asset to getting probably Pac in up so And to sensitive means we a that more help X little can the basis the loans, which longer with go part was also points loan

income take today future. as waiting opposed we So the to for

David Feaster

deposit That makes of lot sense. been remix The has incredible. a

Operator

question Davidson. next D.A. with Tenner And the comes from Gary

Gary Tenner

balances I hoping the had quarter? of and provide amount of the PPP data I for the average some was a for quarter, attributable quarter you could Lynn, couple for PPP revenue questions. to the

Lynn Hopkins

is was far exact million, average then the our don't quarter, pay would we if PPP as like the fees amortization as of back yield, $X.X I the think $XXX,XXX. number quarter and quarter, loans the of have for accelerate And have million, Last that but this SBA loans ended the around when I $XXX PPP. we the more ended get were we the deferred. number, at sheet. last balance third It don't that's that whole off, that number $XXX I last helpful. quarter -- in that I Sure. quarter, the at just was add our majority average million. in But And to

to PPP SBA a last bit loans So been forgiven little this the have quarter. faster relative quarter

that's So quarter. this -- come round and that's mostly through X

So that's why we saw the bigger number.

Gary Tenner

the rates in is Or deposits? you their how with type case pricing. you weight Would some have maybe in that about that And just time line there Merc quickly talked then the terms What's longer on? deposit that? Okay. getting be your excluding you costs contractual -- do deal, of Pac by could January X, to

Jared Wolff

but merger home, get here. me, I Lynn, is something at let called it this accounting. fascinating Well, apparently, can't get the there's which but I can of magic wish I'll math to we

it does how work? Lynn, So

Lynn Hopkins

Yes.

So I bucket purchase magic X accounting. of call affect, the it which But the that did CDs. does Gary, it you is exclude the

So those regardless kind come environment rate of the interest into the current of terms.

into and I may next the that the some then is percentage are benefit fourth we'll will would majority think quarter. we other take that or so the continue get So quarter of -- That's then work year. high of and say, there a of the of it. the rates And noninterest-bearing the I for to in portions that, first through of portfolio,

Jared Wolff

quarter. We're the not to by end all of fourth done going the have it

quarter, going leak second the take it's done. it I of a big the to we'll maybe first But part think the end into through quarter. of get

Operator

with And Coffey the comes Tim next from Janney. question

Timothy Coffey

balance Jared pulled and job the only sheet, pull? Lynn, you a do but on you excess feel wondering, the you've liquidity over done And years the not great I'm like years. all levers can you've managing quarter-over-quarter

Jared Wolff

doing? we are what Lynn,

Lynn Hopkins

comes had Mercantile PPP into proportion higher as because the balance Pacific relative answer think is of sheet. balance short sheet, to our a their no I they loans

that has forgiven, So the -- come liquidity sheet. balance been that on those to have

the gained So from liquidity acquisition. more deploy actually I we opportunity we think have to some through what

just you stand-alone. as closely I securities look do deploy at manage liquidity Banc the of we it California, as under portfolio. to possible, our need If just think

to the loan portfolio plan our million $XX portfolio. down increase reduce which the decreased, the securities or portfolio then concentration liquidity opportunity exposure, part to the but came of the about dollar along that During of came been the and quarter, amount has the CLO into deploy

So more as we see to be as well. you think reset that opportunities will continue CLO like some activity there I think do some

liquidity. I that there's few helpful a things will still in managing be So think

Jared Wolff

treasury we table. really didn't the legal job. from a our done that more good every of money you because we right strategy a and going after add off can in up was overnight nickels think would rates good that money just They've and just and get back let's way coming our superb pick if legal when make of tangible not they like, money, saying, could on leaving to team just And then this I way. we funds with safe done book deploy in us back excess that the that where basically that keeps done job the a we we're actually invoices were has very we it kind old started program, securities any the originally -- sure this dimes up into team Much see owe a insurance on of liquidity Lynn of creative with quarter. that think value our certain "Hey, job and to going collect companies coming really might better reports programs has than written ways

good so job really And a have really, of creative. being our done teams

Timothy Coffey

pretty you've plans Jared, from for mean like how branches these Okay. the away clearly you're some I of I'm Great. them. That's helpful. big new you sounds And outside opening investments some far footprint, it are of markets? got some wondering in and making

Jared Wolff

in just a next serve need needs. branch their were to we footings, its branches by means loans make We're to made we door don't a way until to that way had need of We and own combination we serve footings deposits I branch clients a doesn't open that wouldn't And pretty the substantial on do that be sense. mean it. not We a think really to that enough high-touch profitable. --

And so basically up Area. Bay -- we the in buckets. X got people have We've

to people them where and the of substantial hired really our We we'll of happen. see Coast. have then we best have probably business roll we And Valley, it, of people our teams when the go, a so -- for up have colleagues branch And out kind that way we'll we at Central make and I a in is before. there "Hey, Central worked will wow, need look most this in kind we we've further We'll the be great listen to guess, job. really and have doing it saying, But the there's to point, some people know now it say and some it. they're

way And with, and we we here. know so that bringing will over bank people successful we're they experience have that be the we that folks

Operator

[Operator from Andrew with question Terrell Instructions]. the Stephens. And next comes

Robert Terrell

decline. remaining or guess room get overall warehouse pressure? Or think relationships net offset for new as a be ample or that headwind Jared, with minus plus any order to I could you I kind point so. customers across or to until the mortgage growth? to customers a where volume potentially guidance warehouse balances existing balances in to potential think about mortgage essentially to expand continue of kind Do your have of you ever $XXX flat, heard I million just think industry I we of your

Jared Wolff

things. expect everybody I the decline is, Well, well-published of think move, that's couple while information. kind will and One that of -- agree probably I refinancings thinks as rates I that

that purchase is financing The rise. other published information to supposed is

being our that's a maintain for outsized think us. important a or headwind to earnings percent to at. driver to We've piece purchases without able look warehouse as fundings what it of your versus I to been contributor an refinancing. So us are And an

lines that we When we significantly we there. and pulled pandemic the hit, on pandemic our then at all securitization look of we back And kind was warehouse to market our them. back as So the sure gradually stayed I back a pulled customers, with into perfect make of the leagued example.

And our an to rising. I'm earnings grow shown it able and flex warehouse perspective, of all actually so were watching while to lines we business that we've other flat From down. up slightly stays

a of other be so not our but expanding over time, it continue I significant are because be percentage as businesses other basis to businesses as And our important warehouse on some contributor, expect faster. that will an will Andrew,

it we percentage maybe we're will I a our lower see be it And managing I the million the get Merc over so of you we're Like I acquisition. that very a headwind and don't think it, said, time. than what that's Pac doing to we way company that more as was expect be it before $XXX to carefully.

of contributor. businesses that do a are back grow business the it working unnecessarily, we're but our So warehouse we're that everything comfortable with kind trying is let is What to those time when want to steady be how pull and at thoughtful we pretty as is continue we're and there else don't growing about balance businesses let run think, have. fast, and other a it. well, to size kind again, of trying we to And I we

Robert Terrell

appreciate good That's Great. it. I color.

potential prior buyback remaining I of preferred? focused $XX on Is of Or Pac capital appetite kind the so kind have of term on remaining about the on buyback the are right closed, or near Merc actions increased authorization. now now? deal redemption any think the in the With more you there million

Jared Wolff

of in believe proper We use immediately, optimistic right regulatory that XXXX. the to that something channels the of go use we'll we we redeem that's the get the absent preferred. half is best our opportunity And that, could other capital, now. that do our capital the of finding still some through most And We're best first done. great to think

a that look, to light So we opportunity hadn't preferred. move our really do the if looked the doesn't there we at just will a a not sense of have be we right see where too buyback say But good stock let's see our the preferred to the cheap. will as goes, buyback out because stock in it to make then still Andrew, level, That's that, opportunity.

Operator

presentation. session concludes as the the so well itself. attending much both question-and-answer today's you call Thank And for that as

lines. now may your disconnect You

Banc of California (BANC) 21 Oct 212021 Q3 Earnings call transcript