BANC - Earnings call transcript Q4 2021 | Banc of California, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

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

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

Jared Wolff

morning, Quarter Good welcome Earnings of to Fourth California’s and Banc Call.

us is call will today's quarter on Hopkins, of detail investments continued growth our very tremendous Banc California. our who me year making substantially Joining in a We fourth the Officer, Financial Lynn very while that years talk about grew Chief for our that core ahead. capped strengthened strong also positioned more in had well earnings, have quarterly for We and results. a franchise

in targets more efforts returns. We quarter us we and proud exceed relationships that realize our accomplished what to development level our improve business leverage We new enabled grow growth are balance of produced and our deposit sheet, XXXX. our operating loan quite of high as

D franchise optimize of do California. other We capital capabilities Pacific and thank of want stock, tech, the able media the to continue and and earnings all in for preferred Mercantile development of management presence laid all Banc is at achieve breadth of to continuing performing talent franchise the and extraordinary we pandemic. depth of costs Series We Bancorp. and that We of company, while value; increased treasury capabilities, our which our And of the these banks. of to and healthcare, also these to their State for strengthened our entertainment, foundation increase we built type business the our and we only real-estate, the California but with our in reduce our of of acquisition groundwork continue bolstering then while us We payments the the our with to colleagues redemption deposit the that attracted new believe the first, enhance high core things verticals to managing deposit were enabled substantial through not has verticals. for use set I goals impact all our that XXXX. to efforts across

preceded end QX, we During measures quarter the completed completed in-line our which of fourth had cost Mercantile, year our by savings, achieve The conversion of realized in our end fully of expectations. should be of in that’s the an put the place XXXX. acquisition XX% the target by we and Pacific system to was all integration with mid-November necessary

realize is much and enhance we expected the and Of better course, much we originally to will additional announced, come other we worth accordingly in look opportunities will where faster the for back from that book transaction our than cost tangible efficiencies savings. noting It than previously can continue also earn anticipated. occur value dilution has

related the and Pacific merger past core the we the bankers have added in quarter new impacted in to our a cost by the which provision strong loan We fundings and meaningful earnings more discuss of XX% was due largest performance income fundings, ended partial costs by with the realized year as and which organic adjusted and third total pre-tax, for continued increased XXXX. which savings our fourth a the quarter Mercantile, growth revenue be loan our very initial of over Pacific built deal. our in revenue portfolio, growth quarter years, business few the pre-provision from we PMB [ph] our commercial from of reflects to strength of the team the of engine, impact the banking the quarter, will But the the Our contribution later were call. impacted expense Mercantile data Lynn way

be Our contributions million including fundings asset loan quarter, broad good and $XXX the million production $XXX fourth in continues total of based of across industries. with to fundings market, $XXX We $XX classes quarter. had new million new to of line and net of advances, total increase represents of compared XX% advances. of to fundings This which line XX% million the only related an in warehouse funding loan third and

prior which a saw level organic impacted our pay also up loan million growth downs we from However, in approximately quarter. this were loan and of increase net the payoffs quarter $XXX by substantial and

Our loan in production we XXXX. remains engine strong growth and anticipate loan meaningful accordingly

terms in solid cost quarter low deposit new We relationships. had also of bringing in another

quarter in deposits. of from the further million approximately million added portion We During and excess we accounts. a higher bearing non-interest cost Pacific $XXX the cost of fourth we reduce new $XXX to which used Mercantile mix improved opened low liquidity of more deposits, our checking than

Pacific driver at spot improvement a of which with at from non-interest With finished of continued the of end, is key Mercantile, the represented the of resulting our year in year deposits, mix our of increasing up business base rate XX% at the XX% cost third points. improvement and the our acquisition from of in development of deposits the end X bearing deposits basis we our quarter. total deposits efforts, A deposit cost

up provide it add more closing financial performance, then color to some for Lynn line I’ll hand opening before remarks will questions. Let on the me over who our

Lynn Hopkins

Thanks Jared.

then I’ll our our our our refer indicated website review trends. XXXX. First, on Unless comparisons period as on mentioned, our investor some with Investor of please sheet which and third performance. move quarter found of of quarter prior the statement be all otherwise are I highlights by balance deck, the reviewing Relations fourth to can start to and we'll income

provision costs, pre-tax of $XX.X a the from credit Pacific acquisition to for deteriorated losses or related non-purchased per acquired the included quarter loans and Mercantile credit diluted million share available share, PMB. results $X from the impact on or quarter, related the per million stockholders of diluted million to was down the closing income quarter fourth of third With XXXX. net basis merger during the $XX.X for of unfunded commitments quarter million $X.XX common $XX.X The fourth for $X.XX and

Given the Pacific this on core created we’ll which more numbers quarter, of adjusted focus performance. noise are acquisition, the our Mercantile pre-provision pre-tax, reflective from our

totaled net lower an from organic of pre-provision Our the non-interest million income compared XX% increase net $XX.X acquisition. to of increase was loans and offset as average date for income This adjusted higher both million of operations we higher costs million, income acquired the quarter. since higher by operating PMB's $X loans and pre-tax, $XX.X $XXX,XXX included by growth million, $X.X prior $XX.X due million to the driven interest

pre-tax, increased XXX points to in adjusted basis assets average return annualized XXX pre-provision on quarter. achieved Our basis points X% third from the the

during X X.XX% net as X decreased asset decreased basis margin basis the Our quarter, remained funds by interest points and our points. yield of steady by our overall total at cost

to level Pacific yield due X.XX% increase of yielding, in mostly acquired interest subsequently decreased cash asset balances lower earning to other Mercantile the as and Our then from of assets deployed an earning in result the a quarter.

yield X.X% multi-family higher part Our increased to basis in and mix and the commercial quarter, greater fees fourth construction due real-estate, during loan average prepayment loans. points of a to X

the lowering our average of of cost reduction of X decreased bearing average which compared to average X average our deposits to total basis mix quarter reflected Our of to points in increase the decrease an The non-interest in borrowings. third deposits fourth deposits XX% during other during the in quarter XX% quarter. deposits by mostly of cost points fourth cost points, funds points and XX basis XX our a average for due basis to basis

points, During or quarter in and our lower XX expect repriced acquired to weighted the a fourth $XXX quarter's from matured, a first of of deposits spot including we receive cost high period full deposit This Pacific reflected Mercantile. basis deposits million with quarter. end is benefit the average rate rate in

occupancy to the million Our and Pacific prior by adjusted the followed expenses and acquisition quarter, system mid-November. October salary operations mostly other adding due and conversion expenses equipment, in associated increased processing XX with the $X.X higher since date Mercantile data benefits; from

effective The indemnify the tax in the XX.X% quarter during third In have XX.X% costs impact effective incurred million in rate for during rate increase addition related tax annual we other had to compared our on $XXX,XXX items. mostly quarter. effective quarter due and the was fees permanent acquisition tax in fourth Mercantile the $XX.X the the rate professional fourth merger for Pacific The quarter. to and was the

tax annual XX%. Our rate effective is approximately

Pacific Turning million and total recorded increased Mercantile quarter approximately to total the sheet, PMB was from end fourth we acquisition share $XX.XX per acquisition previously XX million. assets tangible $XXX equity goodwill shares our in of we share we our our less balance increased and $X.X book third increasing the intangible our other issued quarter. and million had by $XXX XX.X the $X.XX, to In by The million. $XX approximately $XX.XX billion billion equity which assets book of was tangible December than the by at down value value per reduced common estimated. At $X.X

loans gross held XX.X% categories and all loans to attributable the billion acquired with by fourth Pacific the during of investment organic $X impact lending for Our Mercantile or increased growth across quarter production. the

third included by loans and million. million growth acquisition, $XXX loans, $XXX added SFR the XX% the overall million production XX% $XXX the Excluding loan million year-end, at increased million from quarter. offset to the in mix end in loans payoffs, loans This purchases The at of in $XXX reductions. other of and $XXX activity by related pay-downs total and of outstanding in increased commercial Mercantile the of Pacific up

excess X. $XXX Pacific loans end, due fund deposits value. consisting interest quarter. of cash deposits, growth, demand approximately X on the by and plus gave added remain utilizing bearing, We mostly acquisition of Round higher focused in deposits. cash to XX% XXth from million by increased XX million goal outstanding the fourth from of quarter. very from liquidity of Deposits and $X.X $XX from million the franchise billion our in quarter, represents drive flexibility year we million prior had non-interest we $XXX equivalents, cost during costing and outflows million increased $XXX As checking deposits at consecutive deposit a Round PPP offset low $XX December Mercantile higher cost of us during to the to This quarter which acquired exit the to Demand

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

improvement At model, cost GAAP basis in see end of the base. of past bring the as that at we loans, are XX% stood This franchise some our new basis year non-interest commercial rates. rates our reduce with one down interest rate year our higher all-in we the made variable assets rising net ratios fourth mature the from benefit average total liabilities Due XXXX. earning the have bearing term scheduled banking short deposit achieved measure in drove the sensitive ratio X% increase in to one We XX% margin XXXX, the GAAP interest increased. demand one to percentage this points and be our to or increase proactive from of in from year the and deposit efforts our our Over up expect deposits of of at with in acid to combined within positioned one mature a deposits costs XX compares increase. This year is the we percentage reprice term of reflecting cycle sensitivity within increased relationships the well ratio which in with of end to that are XX% significant reprice to and believe XXXX. deposits, quarter and expansion has or to deposits of our XXXX, percentages points of one to scheduled very up to fourth from coming of of are year rate quarter steadily relationship the to based transformation XX

At pay-downs, loans Our fourth the the in that we impact in Mercantile million increased the acquired payoffs, categories, $X.X Non-performing million credit from $XX.X are of and or loans loans and acquisition our or million diligence. in $XX.X C&I known either all quality payment by fourth non-performing status loans acquisition XX% sales. guaranteed to loans million positive the current non-performing non-performing loans Pacific The the PPP in PPP quarter largely December in Programs. trends Pacific are acquired of added were included and in due in million of addition reasons $XX.X Mercantile. excluding most for that charge-off was remains a XX, SBA through the us quarter, offset classified a including X(a) to strong other Pacific through Mercantile the our loans, loans $X.X which acquisition saw of the

credit the fourth non-purchased for million and $XX.X for for charge of provision as quarter The to fourth was $XX.X date. million included Let loans of The compared an related acquisition to quarter. Mercantile our the million third for reversal added quarter unfunded provision the me $X.X credit turn provision in credit deteriorated losses losses quarter. commitments the a to Pacific

In that our loan the to other addition we net provision model, expense and impact in determined the our quarter. no unfunded loan was We commitments. forecast quarter's unfunded activity improved loan improving growth during offset in recorded by portfolio commitment related quality utilized portfolio and the lower credit economic of

the Pacific allowance of Our to the general to the stood at total the acquired third quarter increase coverage losses specific and portfolio. in million loan and is our end totaled fourth for at X.XX% The at of the reserves X.XX%. for ratio end allowance Mercantile due ratio the loans quarter from credit coverage the established $XX.X

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

Our ACL ratio healthy coverage remained non-performing to loan XXX%. at

benefited position capital the several completed and strong quarters. the remains past over Our actions has strategic from

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

Jared Wolff

you, XXXX. I’ll outlook with wrap-up about few for Lynn. a comments Thank our

attractive XXXX, strength our year With and are at to the in the banking the the markets PMB of the and is continue given of talent add, level, we entire strong to a well we operate. another impact way which California we we high believe have very extremely executing acquisition added positioned deliver in organization particularly the

the growth good this to of superior rates. engine we cost composition from lower top more a we low XXXX, benefit fund past deposit With made have over brings the generating in positioned few benefit over assets. our to our been seen rise have benefit to two we've loan the XXXX, years from deposits company earning XX% to even as rise joined XXXX. to costs have end deposits, we'll and of sheet variable has the And we developed interest company non-interest in sensitive. consistently in that bearing We making become franchise improve us a earnings a asset benefits with portfolio provide and line years of Building even to asset should environment. of the expect from Pac rates sensitive. improvements higher margin sensitivity we deposits interest our in increased balance priority apparent. and value the addition our top continue rising position be expected catalyst have percentage the rates of for and deposit in the deposit the another of gathering as robust the and built growth XX% base in think I of past We've increased, deposit more net rate us total more level growth early Mercs yet up loans from rate our the has will also This rising At asset returns made when

XXXX realizing on support synergies that the new expand needs acquisition, to growing fully we're businesses. to clients PMB including our from we relationships focused the their opportunities with larger have As enter financing

Additionally, in realizing leverage. be technology, greater have investment, following XXXX increase us in deal while PMB investment our will scale operating still enables as accelerating we the the improved to we

a and available directly clients through of be evolving that is fintech goal client banking our meet the that our to we hub The and investment rapidly companies Finexio, to innovative for needs payments platform ecosystem designed in we through with the to we of our technology of platform. services the partnerships developing ensure marketplace. Our our is able financial experience BXB be to own are make clients solutions all either to want like roadmap or recent them a elevate

Finally, we focused be our will very use optimizing continue on to of capital.

this first subject available indicated, to like that a to during after Series we increase preferred sometime tax we half previously approval E income the stock, to redeem stockholders. coupon, of would would our As common is net regulatory which X% year, our

shareholders. Following just our leverage, growth, we technology our core closing, to levers we and continue in capital optimize in capital. be it’s a XXXX our other and In for have return and believe that evaluating to on growth operating redemption, top will our continued investment systems verticals, line to opportunistic we and optimization ways in pull significant expanding of

remains franchise Norstar as our true creating ahead. always, As in for value years XXXX shareholders as the well

let's in As always, ahead I line California's for of quarters. sharing questions. thank operator, progress more With you the look and that for listening. up open Banc forward about now to go coming the

Operator

come Timur our And from ahead. question Fargo. Instructions]. go [Operator of Please Braziler Wells will first

Timur Braziler

morning! Good Hi!

Jared Wolff

Morning!

Timur Braziler

as there if capabilities point through guess of of mean starting business? you're XX% some you're from Jared the should talk beginning building ’XX we looking line through that could of we on projects saves your in in I ’XX. to reinvested last on the on into flows look be And or us technology gets I versus add to looking how back the about Maybe at the bottom then expected here investments. cost you thinking PMB, types much about or how

Jared Wolff

Sure. Well, thanks.

really and and the before, continue our move down pleased the our as progress. – quarter we goal, with you we to know You said know field that's the ball we

it's did quarter this few felt objectives, we Sometimes just cylinders, but a it's on like all sometimes a lot. firing

making our and to critical the and particularly pretty do I can't hub There's you investment California things we ecosystem. them give toward we was of proud clients that, in the in, and lot own helped We that. services couple clients. what we'll all that like want a ability areas California who of know as colleagues to be say Finexio, think and or where team think comments, find, the partner know might to everything, to can same the You thank to really decisions quarter my off it on for we just remain us – solution or is invest I be our do bolt financial a we wanted for provide so lead think close all to said our but on doing thanks acquisition to of that to in what in need and quarter of to integrate end we we acquire, close remarkable of the we and it a access the I'm the so find

in be is system sure optimizing we're origination and first The to make we final that our clients; to mid at end-to-end to what digitally, a – client be for ahead here It have that's can to perform and partner see end-to-end you that about We're has and of can and the terms view we're going provide able serve digital to clients us our that's thing of our rolling that how critical stay California improving also the loan of our back a this them know right a be our this to to able clients. we looking colleagues do client. that's stages we out solution the view for by with to in of optimal think allow to do our now. year, something do in our we of so selecting expect

an flow, BXB services for which they receivables payables product a at a necessary offer it's what has make to forward in we so that give very make it serve sure of cycle, them we rolling to We we it and the and Finexio about the of that do this better. our optimize for labeling how clients to talked want a beginning platform, serve We're looking cash client sure clients. we our how holistic looking them we program how It's optimization strategy we're and their going relationships can is client and so our can a like we're payments what but clients. middle from through look and and for And our to the white also out we understand life also it's – at. all that it tools with

more it are we're number come out. these I more time, the but about. giving of here as and we kind ahead because be much to it of There's things we'll of And things like talking roll take don't about so curve I'm these too address XXXX of Lynn, more that. in a be thinking here want the we’ll how if XX% be we’ll lot to that of optimistic disclosing a in think as reinvesting much benchmarks. this and in a we there's think about be you do terms our hit we’ll doing technology you to way that

Lynn Hopkins

do on Sure. saves XX% Hi I say receive of we I or to PMB’s that know historical when would expense kind full cost Timur! the reflect base. benefit you expect

there's opportunity look would XX% plus I at think we an maybe for you that that know investing. that

then those also there's I cost some identify our repurpose we've to own client experience, investment as an invest of technology. rationalize, continued think that in opportunity dollars to efficiencies and and

in to you of run I so PMB's you experience accomplish; to think able client looking expenses. I including of we're think end, we XX% know plus and fairly XXXX would our rate, XX% say to and And that be technology what to investment I at know our XXXX historical reflective into were

So right that's are we where now.

Jared Wolff

know of theme our one so is we're mean the that experience relationships, colleagues I new for all Bank there make changes well how the these optimizing difference is, and California client on and in their for of services all the delivering we experience, financial clients that very internally our are for showing can another and point focused wrapping client really our of bring XXXX them as and delivery. kind we're of – You

Timur Braziler

quarter? and quarter, forward Was abnormalities started any kind fallout that incremental strength the as kind of quarter, client seeing fourth growth funding third your Okay, the the on that that's pulled Maybe then and maybe of maybe there's this payoffs. for fourth the similarly funding the given similarly switching great on saw of very as impressive being color. quarter where seeing then through payoff is the into the experience verticals that. the just growth some particular from were you're total Thank if or And side, talk then pushed getting activity. you first the a you to into

Jared Wolff

worried is you don't payoffs what is Yeah, because really and it's engine as which too high the control, unfortunate and we mean our it. was production our net like that know will I the know really production can growth. with the strong, we’ll were and long I the of that revert it, of get balance I about show things I as on focus pleased to quality

I relative As versus quarter quarter, quarter, warehouse bit, was was know to know the and was, to but to you was up really going up third quarter, said weren’t at up multi-family outsized at look it the the little we was fourth you grow third third flat. as CRE a pure an almost we relative construction was C&I was in balance level, C&I down,

it So balanced. overall really was well

You in lead entertainment comes Brought tremendous made yesterday media hire. balance to – made a someone we us, who resume know we announced that already and to with exceptional we a for team. our

we to media our continue and entertainment So grow. to vertical expect

vertical has be we’ll announcing education in the new very to continue grow us. strong which that and non-profit that space a hire been soon to have We for

looks a yesterday what anything to for like and that now. and with see us and I've vertical real don't very I And to to pipeline had headwind I'm C&I we so strong. pleased strong call we grow in a continuing a and see very, obviously right was year on estate this be continue that's core I heard going

Timur Braziler

color. question there. great you congrats That’s Thank for getting and on the

up. wrapped and You’re up close

Jared Wolff

Timur. Thanks you. Thank

Operator

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

David Feaster

Hey! Good morning everybody!

Jared Wolff

morning. Good

Lynn Hopkins

morning. Good

David Feaster

up that last discussion. wanted just on follow I to Just

a to the new that as you and it's know presentation hire in a see I great you created had talent magnet. You believe called

the about for seems you. just opportunity in be Just could real curious you hiring thinking the market; hiring like pipeline there how term. you’ll are It around of a light you're disruption near

and hiring on most commentary where you are in talent? adding any Just interested

Jared Wolff

new hires, getting So getting we're we’re talent.

to so both First and really and that here of will growth. is new of many competitors. here desire We that that our to to to the make very difference as say need from exceptional in people we're it the California than think California for those the very, to very past, competitive adjustments we're and and and the support all, people that supported as and benefits of deserve hard trying to add the get to with in seen all growth the they you the in our so is sure We us market to on colleagues is make the we office existing a people team them share for people and to make deliver looking Banc lines experience we’re finding them in our finding our back front that well, possible. working cost we've bring right is they have well. Banc of and I at as know positive, and to as very, of we're we the market bring that is are higher do talent we're do willing but our

looking been and that very we've for, opening walks a floodgates We the been very the to and are these for, but just people whoever opposed selective finding hires been the we've door. on targeted haven't as we've problem people really and that the looking grabbing in had surgical

– We have who and what maybe right and everybody a they driving nails. carries really the recruiting we to here. without We it done I'm our maybe the has our are too, tremendous people. and a plays around talent us team a shovel and years as to we be supported role a basically a so tool walk very on There who everybody, say right careful everybody hire move and think finding our these now vehicle really takes has it's get several great I here some so not grateful understand like and a few very and team bank that are to of but and last here successful a to well, traffic who job kit people for hammer bank

David Feaster

just rate talk had any new maybe loan and and just trending. next that just how about compares as expectations how growth pipeline, mix production on seen It the And into for a or that’s more… was into how the helpful. you’re look and you like as touching we could if seeing bit. just on issue then I'm Okay, new quarter-over-quarter we curious that's loan just ‘XX whether you are yields year declined a that looks know

Jared Wolff

issue. mix a was That

As just the some I yield, we and production little and CRE quarter; Construction flat; a mix bit. was issue. I look was on large at so come actually in think was quarter-over-quarter it C&I was multifamily was flat, had down construction a up

when experience I a be the a things bit overall is yields little you know so it'll anything, going in are long you rise, – a going it. – lag, going to costs the to be pay obviously Generally and pause, because in of for lasts. that them rates to when loan interesting finance know see one happen there's when if rise think on loan that’s my of of it's to to how to cost the more less side buyers there's kind properties deposit market, going to but want rates hold

that terms prepared might rates interest wait that's of C&I indicate. going – might properties them if to the permanent, you buying in then For sellers see expect it, and example, are they finance to price know it's or people negotiating might the that fully not new change more in be will equipment, equipment if to and cost in

new And here see bit We'll so lag or moment that rise. that a little in there's of happens not. a often times the activity rates if

have we're that expectations growth. to overall for Our going loan XXXX robust is

standpoint of that don't want we sure. I'm for single be. of are sensitivity we're payoffs asset what loan low what from happen, growth, that one know for and rising our make to terms that – sensitivity a say positioned and sure data’s double But to hesitant and target predicts know I full to I'm the an well XX. the because which will page high going is That digits, is confident digits our around to rates. page about In people new benefit to a how thing net from extent on want Lynn extent I to in has see which talked ratio deposit participate the shows full expect GAAP we and of presentation you that

the to but to earnings I'd single like know to be we to of going in If reinvest upper How we double our with way has even that, loan that I is be you leverage the loan great, know uptick, shown double still it mid optimize comes, going to loan create strong we we're to from be very interest continue to a really operating digits. but out, little interest make going in Lynn going we figure expect as the need to benefit use I benefit make digits, our an get high because our out us lower, and asset rate, and or and this net a that's on very see nets growth and lower quarter-over-quarter that's and you it's a whether and single high of we are I'm So growth doesn't bit really, get get rate her know sure be – to the know, robust. to Home a from sensitivity, tremendous it technology. loan the the production but earnings do to scenario. perspective hit that and digits ability in upticks is productive growth team we figure a don't to to I our where to year cash of we're digits, net out benefit way the to

your telling know see I there. be, answer. the trying if to question, dodge where get you I’m know not just I'm I mean but I don't –we'll we to David, like don’t that I'd So can

David Feaster

sensitivity that’s to know got there. Merc maybe like the I savings right But sounds Pac betas helpful. of it the on was rate you extremely side, using the in helpful. back circling a amount decent expense that's Yeah, the just different

good first might just you a you we what as in core know the once the pressures, rate you're talking of curious the that expense of run about integrated, and come the inflationary of got how out that expense new about hires you quarter be growth, going on? think some Just initiatives everything's tech light and just

Jared Wolff

that? take to want you Lynn,

Lynn Hopkins

start. can I Sure,

these of they at Pacific on from and back I probably as just earlier, Mercantile. you're well, my looking kind following able comments back you to reflect know see think

their at a you our saving You running is XX at we I X just which know expense expenses, $X around are maybe if quarter, so. -- million know looking mean were they plus, so over

will our in given saves, fourth achieve, plus will to in get first investments operations know that the I the was a conversion say you desire You benefit know our and able combined based to including been starting those of on in we've the what quarter in we the continue expense system initiatives, November, the full quarter full quarter. of

you all bit little there. you So of a I’ll math save know

operating be our think I’m say to expenses to a the $XX of would $XX.X we range quarter. about in going target I million to – million

be for your a quarter about You kick the know higher appreciate know landscape you definitely bit little talent. as recruiting I off tends you year. first competitive inflation, the to comment

incorporate we're You our how continue at leverage to hard all those trying our into we to look that investment and know in and expenses that take a resources.

looking So at. that's I what think we're

I operating still create there's to think efficiencies. opportunity

David Feaster

much. Thank Okay, that's helpful. you very

Jared Wolff

we in our see line the all a up. of I lot as and of we our a see EPS, and see growth expanding mean lot top even technology leverage operating our mean top reinvestments I flexibility us Yeah, up make growth ourselves in ahead. we these going line gives ROAA going

David Feaster

Thank you. Helpful.

Operator

comes of Terrell The Please Andrew Stephens. next ahead. from go question

Andrew Terrell

Hey! morning! Good

Jared Wolff

Andrew! morning Good

Lynn Hopkins

Good morning!

Andrew Terrell

the in or $X.X was Jared to Lynn, hoping charge start maybe Hey, quarter. on this net offs I million

color charge related clean just kind provide the remainder to any I Merc, think the or some end of on it this but you year of if will Pac kind of can quarter. you just was offs was up

Jared Wolff

team non-performing to a at sell, got we Sure, the Lynn and done that whole and opportunity did looked a if it were I you opportunity. of great want we of quarter end getting that then bunch on that I’ll superb take loans to the we that we quarter, premium them a the and jump job was to several through just thought our a of took of in. start that mean

that our reserves and and that so so wanted that Merc eyes open, premiums levels like did a we we little with we it the there's ability that, Pac to sure we we to don’t these over and with to take see what on. appropriate wanted bit appropriate our make – and so remained knew going bringing of the You on and were keep loans – we do often with

Lynn Hopkins

just add… can I Talk] [Cross me – let Yeah,

Jared Wolff

they should one delinquencies, point the One loans out about – other had fee happen end that's that people delinquent before delinquent $XX of quarter, their and the they just we I of really, it then with and return live and comment are to way bring that and SFRS. tends comment pay million after they the on just they and other – because just that really to our Lynn, It’s I temporarily to lumpy the then back status. remembered. non-delinquent normal are status

of delinquencies, at our the long a end this run we’ve so as portfolio, that's got been so we quarter. point to going portfolio, we're red trend the normalize the quarter after up just little they for then and as same SFR many, SFR and our And the to It’s bit build that. as end quarters, the happened, many of wanted I

Lynn. Sorry

Lynn Hopkins

its no, fine. Oh

and take to loans That took in loan accounting in the to – on that other Pacific Also off smaller non-performing offs for quarter in were in absolutely that's relative through the the the and date, majority on and the we able exit. so offs the were also – by fully to wrote or when then few charged in time the the So we recoveries gains they received reserved decided correct offs what when relate acquisition. that was included that's fourth I’m had and and quarter. I the numbers that that to the and we the cash some we to look at for the reserved our that did acquisition were Mercantile We off in were piece. large there recovery timing They prior charge quarter, acquisition offset the I’d say the say acquired charge with then numbers. plus of some own yield both numbers. through is and the purchase loans the charge recovery going charged a off specifically quarters activity, accounting, our of comprised and the a known loans

Andrew Terrell

just Jared, I to Okay, media I color, announcement over the of all Maybe right, saw the appreciate it. great. of back really for loan That's moving entertainment business. the helpful some and Head growth,

for you portfolio see in that I and kind sheet that then what opportunity some represents give you overall smaller you kind on kind of the line what think adds portion and hire maybe of just a color business how balance new of segment? expands us today. Can relatively that of this market it

Jared Wolff

just to a Well us. by and led our others know and for Sure! others make years and very who joining going got that add great to Ian job talented Randy He's and [ph] team. pleased I He's contributions. he's have on for team been team the background already have great to there many an superb a done Adrian

as talked We financed expect we’ve us so in the streaming – streaming to – we've production primarily about we've been in before, content. been we’ve playing space,

any you Hallmark like producer the financing or people Netflix risk then us company of if it, content, we're with repaid and how without not to will more the ecosystem distribution based taking contract on and not many script what taking they at it.’ whole you then – Hollou buy sign production buy in do with That's make the might the a come we when or or they'll flagpole streaming for So we’ll show. know the contract then them there's And primarily up a doing, the and opportunities basically to will idea the it, theater. Box the help been finance and right, we’re we've they go service, they production so has the they streaming getting show a but and the show idea the run up to Office buy ‘if state the

whomever. know which contract we a is or Netflix have from from We money Amazon good

and you players people ecosystem that currently expanding ability this related the to do lot ecosystem, distribution of already the things of the whole made, are are a as the is know been There that that financing. a lot that same already Well, have services finance, to content, that and that similar are already a not distribution other are for to that's your how signed are think that people at of so, as areas there you that’s we ecosystem play we're serve in and without where in And not profile? of out supportive and host continue we serving, in we can there, reach a well deal, in the television risk can music. different

do, hope I And for what some that going about much we detail we're to could going gives what too do. without into you so specifically color

Andrew Terrell

it. appreciate maybe I helpful very for Lynn. a And just that's know I Yeah, housekeeping questions

XXXX. million I million quarter $XX.X think of in expenses I $XX heard per kind to you of on the

on kind would litigation run Just curious, down any or kind of – for the that kind contemplate step potential it expenses the the of is in benefit of some does legacy rate XXXX? that of

Lynn Hopkins

Sure.

been well So for indemnified have or the to outside number. which them of that's that’s – the litigation that legacy professional and refer identified primarily as resolved expense, fees, that outside of we

Andrew Terrell

for my Thanks taking perfect. Okay, questions.

Lynn Hopkins

Yep.

Jared Wolff

Thank you.

Operator

KBW. Please ahead. go The comes next from of question Motta Kelly

Kelly Motta

the the the nice you side, on how see question. to all you to expect, funding PMBC. us rate the a given sense give additional the hikes? you the now you shift I afternoon. much slides you’ve all expect first funding hopping had? if to just in on made Thank Good could color the Do Hi! you relatively couple asset changes you’ve appreciate it so sensitivity be posts react I expect was how given for do your to of really resistant

Jared Wolff

Kelly. Yeah, I afternoon Good guess good you. to morning

change detail the intentional. in hard going very our markets and market be, has that at going it, so sort to of you have side. the deposit when liquidity deposit the downs, no we of my to early the look and out really, going hikes all with movement see deposit on moved market, money of that show are money. dramatically are So, of really not any we was We've is the what shrunk to very, but that money appreciable We're know don't expectation rate been betas break the

So we to going to see, obviously bearing deposits react. expect aren’t wouldn't non-interest

don't would market to so and checking to kind the maturity one and that market, you with don't though, expect liquidity low us know soon, much there just just, rates the react then in cost You wouldn't which then see anytime of I you react money these depositors to rates see participating we obviously need. and providing influencing the about see higher see to we react would see We depositors. can would don't expected control. Even it's at be you so

betas sensitivity And environment Page chart in want what provide so rate hard bottom historical to based the happen know, but is we of the up to the zero on that's why about an XX on betas? could or

Kelly Motta

additional Thanks preferred so redemption. I much Jared. capital. on one a the appreciate Maybe updated the quick just on

given if is thinking about buyback the wondering point to Just maybe where there Thanks. changes stock any trading. on the how is you're

Jared Wolff

our thoughts that's got prefer place stock you some with be our technology, our we it's trading. want our trading look, have Lynn, it the of We in would do I thing stocks to our know is benefit the know all if buyback think need investors stock to reinvestment We our uses all there? need to ourselves it's let and capital at don't versus communication in we Well, helps our growth, give sense, say today, our do look so obviously, that we first to put that way robust opportunistic say couldn’t we like stack and redeem we – probably for including not but can reinvest it'll the we think do about a super, regulators it people other and return wouldn't program done some that we of of think enough but we in and about kind other this we preferred you because and a where – would half on get of have we where the be versus that to is would we of capital, any to are know year optimistic them. then quarter do and a can this story. hopefully not rebounds hopefully do and it growth and we we're the we see first time just how From of we return the need made fantastic. that, but question capital that there first company those benefit capital things, of trading, we approval, in the be done that if the it's always that giving in to be

Lynn Hopkins

I No, thanks. it you think summarized well

Kelly Motta

Thank so much you. thanks. for Right, update and the it Lynn, you thank Jared. Appreciate

Jared Wolff

Kelly. Thanks

Operator

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

Gary Tenner

this in ask following, largely wanted either or those I break to assuming been accretion Can you relative I'm answered. third of fourth the and presumably XX the items, quarter fees questions kind lower Thanks. this press that us? the this quarter of kind both deck benefit. yield Good just impacts loan increased XX the PPP versus think quarter. release of some quarter added we're for morning. have out versus My quarter last of bips adjustments I

Lynn Hopkins

this is Gary, Lynn. Sure

think know less as step especially you that we I So, of for intensive so rightfully as program back, of purposes numbers and in the and the down, all PPP is so. there's kind winding

relative it that's last So a quarter this to portion smaller quarter. of

is though the given of we think I activity. fees prepayment variation coming related mostly the that elevated see levels to prepayment

always create to component maybe associated much between between didn't is that's the yield that small activity. there while your based of loan So fees I a prepayment variance on quarters, with point

with accretion for to fees of then fourth the is amortization prepayment the points the the the same XX last quarter. basis say do So, the as last for the numbers at you I PPP look and is would accelerated or true quarter, majority the and

pre-payment less bit more and So acceleration. a PPP fees little

So those pieces. are the

portfolio, a now general as either there and prepayments, accretion of have piece is we an my we that of bring PPP. that think maybe bit always discount comment I some and is acquired little through

of a every dollars couple points which basis is XX So net represents. what million is quarter, that

Gary Tenner

very Thanks much. Great!

Jared Wolff

Gary. Thanks

Operator

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

Tim Coffey

guys! Morning Thanks.

Jared Wolff

Good morning!

Tim Coffey

seasonally on of was in it bit bit at your churn if if a – a deposits, look a the late, the this, or is I so kind you call cover but looks I legacy I to some apologize wanted perhaps targeted. got decline. have you there already that like quarter, of

Jared Wolff

want you is to the – discuss why moved out. we it Yeah. think that Lynn was I

Lynn Hopkins

together good design. to We were was we and and have you yeah. as flexibility what would know own Sure we I started recognized working say, of at Pacific say able close to look Tim exit. and by morning. we I’m levels towards dates, gave to Mercantile our to going the were us mix, it the the high we deposit go ahead identify. within opportunities cash

a bring little to maybe the in. higher Some bit go available that costs in typically want were those less market if you relationship,

I would strategic less So say season reduction. and more

Tim Coffey

confident Okay. you And excess now working liquidity in of or have mix comfortable on invest to relation the do to deposits. the the to you transaction, you kind of do with excess more right the that feel sheet liquidity do still or from brought you deposit on have balance

Lynn Hopkins

think year I can feel deployment the I at profile the of to being start, cash, based end the investors the on comfortable able our liquidity liquidity. and of we very our

about is in we excess I think place. are the the – liquidity you market much talking know how

out. I think had We've Appreciate stable. base understood. future, I as some real we of where but are think well is growing work, also even growth, be the the may liquidity base. deposit think reflective in we headed liquidity comes spending that it's put view our we're if our We some to mix

point. think we're So investing at I liquidity in comfortable this our

Tim Coffey

footprint And at your Okay. then you Are of time? just follow-up questions. to Jared hiring the geographical – any this hiring are opposed outside a the on

Jared Wolff

No.

or couple we knew that that either him so Ahmed he here a he the was of that ran relationships for So coming with had area couple are a to for he hires and in had knew of up that Wells work have there bay and good us. people that for market worked well

It to it But we're we Not the with people. every absolutely matters think a up for kind hiring broadly, job, doing we is of this good for skill the branches up any would fit right are team in position And superb open their what be to have we open a that's remote more of company. then a there. have and we in based terms So people set to a company ripe don't there and on our higher. job.

Tim Coffey

area opening in cards? branches in the the bay Is

Jared Wolff

I what and at possible. think is would you loans we want sort in which know look I it's of, deposits the call footings, market. to have We what that

that look We that scale deposits branches are from at we clients folks the there I had appropriate. the it. their build enough I a deposits make hoping what branch and to that that it all if We that have have have was and it one. so I wouldn't from would lend build come people are would sure here. to, that was to knew something would profitable up day I the space down

Tim Coffey

you Thank very Very much. good. questions. Those are

Jared Wolff

Thanks Tim, it. appreciate

Operator

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

Matthew Clark

morning! Good

Jared Wolff

Good morning Matthew!

Matthew Clark

in Do you be basis PMBC the on how much realized happen in and you’ve saves to way know to-date an with November, the cost the after annualized of might maybe dollars what left? and conversion

Lynn Hopkins

At I don't have I different that know that of answer can a my the probably number, top but way. it head, I

know date the up effectively the that of year. don’t X to through to finish operated think that going XX as to needed to close kind know helpful. the X.X teams million you middle both that There rely to given last I probably, October and integration. know on is with maybe if million I’m I included from through, organizations you of of that’s then say portion we the work November the that we

Matthew Clark

it is is, thank It you.

or Okay What's your sense and for and return perspective? that Jared are you maybe your about goals of trying achieve in kind strategically you're tangible maybe maybe another an what financial so. striving year on for on to thinking then ROA

Jared Wolff

to know you then were help one be X.XX definitely of what how mean Lynn after said that ROA. get levers to and It that's us, there going get get about interest it about Merc. over a get to an to are And to numbers know X Yeah, to reasonable. and on going to -- try to going that the we just about environment we we probably we think when the rate where we and that’s then we a move standalone some then full are going X.XX, we Pac and off are X.XX, to going in I get on I we a you a I to one, and basis think are and interest going we're we think I yesterday are and we rates accelerated better. X.XX going get I you even are then – – the lines then we pull then past mean to year. a that we where, year going putting in are that we without to we are above the are that for basis, think this so year do X.XX between to are past that, a if a think neutral know we certainly first sand

Matthew Clark

then… Got Talk] it, And okay. [Cross

Jared Wolff

shown happy but aspirations we were, have we that for that we going But about urgency not we are think obviously high and where a are tremendous have and bit quite where from its with look, of we've it. we I

much we back. question point, at It that on so too be important on and I and ROA even might number. have do so And stock some the pulling more is return a the think tangible comment, than is important be it’s obviously us super outstanding,

those And want want be so the in, to you – things be double you in don’t mid low we want we but the to play in know we know to to all in be digits, upper.

Matthew Clark

great! And to in the about gears if does loan mid you just or switching of the this whether that organic good end; it how high your single forward remarks, growth loan Okay, year. digit you not you at stand then quarter feel year going still to sure to does compare not and this where discussed prepared kind prior pipeline, but know

Jared Wolff

very normalizes. as is feel that comments been, – that it. situation and I of any what is it's to single assume pipeline I know good not reason the we very, I payoff earlier. shouldn't so why – So, don’t let’s be strong aspire heard There going is that. about would be my don't be, to you than upper see kind digits, but we mid might I higher as in our but have the

time. there’s whatever sometimes the buyers and ask happens, As a it take for or services when products bid I for the they or mentioned, and and whatever market every the they are I've think between rise, for rates I definitely sellers seen delta because a pause, properties looking that

and year happen really, kind on and but is the slowed robust. pushing variant very It's not, I doesn't might that holding seems recognize – hopefully economy. that up to the year. strong. the revert it well. seems things is And locally beginning notwithstanding to Ukraine But think pace through of things doesn't, break everybody it not. that the disrupt so very nobody economy With about and might and of might and to the but of now tip end mean of at it the hopefully back lending doesn't pretty I The very, of it activity, really seems seem war down like strong, everything to last be it which our kind omicron of and out

into get digits So a do we pivot and in loan you to is the terms I need our I number we year we of for the that like know, would bunch that for know reason, some whole and high but this our we What growth have being, as aspire to believe net earnings our if a to happen them to teams it going a to up ways growth be of And to level don't line hopefully for upper – we is as of earlier, get doesn't of well. the ends the it are strong. pipeline, single degree be confidence in its where – digits. going have and I mentioned top be. double to But pretty will us to high,

Matthew Clark

a of And is pick cherry sense media his last be entertainment to how going and on give the opportunity large great. Can for you just for starting… an whether one business there was you and he is book of me or hire. then to us that Okay, know or not some

Jared Wolff

about was their and experience so helping going rolling and and it based people strategy. hire then design book on about and more our that less out forward industry a relationships, their We strategy us

we over triple double book we see more do reason reason that. if see to see couldn't portfolio. or any next two if I don't I why million not three I don't have no know couldn't $XXX than we why the You years today; that that

to sector – we this to an the going have position important continue I have. for we market think to capitalize We on want that is and be us

Matthew Clark

you. Great! Thank

Jared Wolff

Thanks Matthew.

Operator

teleconference. does you. this Thank conclude Ladies today's gentlemen, and

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

Banc of California (BANC) 25 Jan 222021 Q4 Earnings call transcript