BANC - Earnings call transcript Q1 2022 | Banc of California, Inc.

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Operator

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

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

Jared Wolff

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

deposits, Lynn is strong levels will trends noninterest was the increase call the income, our Chief detail today's our performance forward high to up who on me quality. many We quality in asset to Hopkins, in Financial Officer, pre-provision have from loan continued resulted great noninterest-bearing expansion, drive talk income our of about margin growth, positive in Joining and that year which with start efforts XX% more of solid our directly in These actions pretax, had an quarter. financial quarterly adjusted higher results. prior inflows a

pre-provision continue adjusted growth the of franchise return acquisition. Mercantile returns accretive representing of our average ability XX basis assets pre-tax organic points increased to reflects our While momentum, our the Pacific both level generating increased profitable X.XX%. to The on benefits and

franchise As always we to will also remain focused value. capital enhance on growing and our deploying

over which recovered million to previously related we reported, $XX growth tangible to contributed XXXX, previously in book off As in a loan our charged value.

of of partially had to our an seasonality quarter year. X% business stock beginning total million the production an at initiated demand quarter. quarter, all solid in typically level opportunistic with of redeemed that new loan some by in $XXX Loan increased the the experience of compared We authorized program. each successfully impacted prior Series we E development also stock preferred We and fundings was repurchase and a

in surge expansion investments had sudden to in the year. early We due delaying the Omicron clients some that planned commercial in hit also

the despite our relationships balances line our several still rates environment many properties. While how put double-digit the could and were volumes mortgage keeping digested us stable loans it grew This pull rising rate estate also we this relatively clients outstanding that temporary has while impacted targets. the on reflects that giving higher done warehouse total rate our in across have real in the a numerous developing and at factors, pricing team levers opportunities to industry. annualized lending our Notwithstanding job achieve these on pause, order to impact production

may Even to expect follow. loans growth C&I a as loan We and meaningfully during pricing resulted average earnings loans. we core yields the higher in some quarter, on which warehouse balances both loan loan moderate up bridge permanent bit, our expand firming sheet CRE saw of in to balance and

always balance the adding we rate are have pricing about our been in sheet. to increases, We disciplined interest selective fixed-rate loans loan but long-term ahead more of

last momentum currently it the year. at the our than more has strong, rate and time been double environment what is same loan Our was notwithstanding pipeline

continuing liability further low saw driven mix, the deposits, On cost in side, from efforts. business by inflows we deposit development our our improvement resulting of

quarter. of increase clients, $XXX XXX cost in relationships and sequential million for deposits, from noninterest quarter, accounts the the helped bearing clients. checking to million new opened first to noninterest-bearing of in the total to bearing or These deposits new end which inflows a brought noninterest X% During we low at addition XX% existing in drive

milestone. team proud reaching As this and for many we is threshold a this bank, of know, truly of to the targeted from moment got the you I our I'm

terrific deposit how of importantly, we've More hard work and There built am of reached no is shortage we I a proud milestone. this engine.

move might above I trajectory While we of expect bearing be this percentage keep or coming level, our noninterest our will deposits. increasing overall below the to in quarters

in Pacific their took were redeploy following cash further rate. the on and actions from call, these last cost growth Mercantile acquisition, added earnings beginning began of including before interest transaction. Fed a we in noninterest-bearing running started full continued basis the with along deposits point off margin higher our to This XX our that a quarter. the benefit mentioned sheet prior deposits in and to balances number we Fed to the increase deposits funds The cost of quarter reduced As the contributed the net management the of actions increase impact balance our

margin enjoyed up in our items I or expect necessarily be trend many That quarter. during factors to pace is we first said, quarter. not down at albeit, sensitivity, cause given margin it mentioned the and asset our same our of before, yearly the will our move to react while an positively, various could we upward, Given output that a as

to quarter initiatives addition strategic our sheet, in franchise terms of our on In create our key shareholders. productive to strengthen executing for accelerate earnings very value growth, we'd performance, financial balance optimize strong our a and

the where both the are additional were momentum continue enable potential that portfolios complement expertise, in to relationships add some able many mentioned quarter, a sets industries grow development to and our few and to these built the next the particularly substantially vertical of good us attractive California capabilities talent in expanding teams and C&I, bankers exceptional business first are and the we bringing we skill some CRE seeing in have over our the see large will existing areas. in strong past, These has support opportunities magnet. we Banc become we've growth to of First, hires And the in years.

impact Series $X the by income balance preferred our timing, our and net sheet will able to to we were stock redeem Second, common positively E which million consistent stockholders available expected simplifies annually. with approximately

of on the recover legal to charged loan million XXXX. team, $XX our of Third, through third successful previously were off we the efforts over a able in quarter

earnings both benefit and we to add both credit our growing opportunities over current few other book number tangible the strengthening of fourth, outstanding repurchase for given value continue our our stock with and years, And million progress our the our capital we road. recovery in we and have insurance value substantial resolutions program. $XX approximately allocation obtained, successful balance enhanced and made equivalent of an That's If the strategy should We X% further sheet create shareholders of opportunistic and authorization shares to will down the sheet related. past a to the are balance optimize shareholders. pursue

said the before, down we continue to our quarter. field every is ball As the goal moving

performance franchise. Through our an positively in execution the on financial quarter shareholder other and trends we grows the see had want every Some to we initiatives quarters results will the down strengthens but ball others, that field to and earnings a our deliver and moving creating than of value, continue the exceptional positive and financial more we make shareholder in quarter and strong execute way progress that our value. impact

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

Lynn Hopkins

Jared. you. Thank

from million million credit sheet a income and by settlement $XX.X losses, the million common our prior basis limit areas from of similar First, as Fourth I can then first of a charged to release, our quarter stock which and information, share, $XX.X highlights $X diluted a warranted. balance of income expense indicated, to to million redemption. our or after-tax were mentioned, earnings statements Relations available I'll on of the please our performance. the the to XXXX. preferred period great I to stockholders share or recovery in refer which will prior related million quarter diluted otherwise review our my of the quarter previously per deal results. some for with related a trends. the $X.XX of you to reversal quarter some additional There will $X.X Net first results provision move discussion on Investor items fourth read in of our which for no of the comparisons off reviewing are up was so for I XXXX, all of is the $XX.X quarter's provides start where Unless comments included quarter fourth to invite $X.XX the deck, per be as website investor found loan pretax to XXXX.

merger and unfunded loans quarter pretax a $XX.X fourth on the to million Mercantile basis the acquired $XX.X of and of related in included costs million commitments Pacific However, credit losses for provision acquisition.

performance. Given quarter, of focus numbers the noise will on our more items, reflective we our created these pre-provision from core which pretax adjusted are this

higher full a by pretax increase Our million as million, in higher impact $X $XX.X the Pacific of average $X.X totaled net related $XX.X income of $X.X from interest of higher increase these million pre-provision was of income million, driven loans operating XX% A increase of due higher net the $X.X an prior quarter. adjusted offset by well portion This quarter. million. income and as increases operations Mercantile noninterest costs interest for a to including million, margin, from

basis interest of XX basis cost quarter Our X earning our funds margin net points and our increased yield by to basis by XX the asset as X.XX% increased overall points. total during points decreased

mix own Our earning earning we asset of sheet for yield growth. both the a average our increased assets of a deployed excess impact to as including and shift due full loan our balance our PMB's loans, in and favorable liquidity from X.XX% the increased to quarter net

on and during increased loans yield In addition, securities quarter. the first the

measured increased yield average points quarter. basis includes the quarter, interest basis estate, related primarily This of X in SFR higher also contribution our from yields points increase to loan X.XX%, which PPP net was portfolios. C&I to our basis prior Our to in lower and average real points margin commercial due compared this income, X X at the

Our quarter lowering basis of in deposits decrease the points, decreased mostly increase points quarter. deposits, an deposits for reflected of mix for to compared by X of average our basis XX% X points The total cost bearing which due first average basis for to XX% in to cost noninterest average fourth the averaged average XX points of quarter. to funds basis X our the our of deposits first cost

due $X.X that sheet we benefits made of additions prior a and our each Our growth. beginning was adjusted expenses operations quarter, teams full balance the the which primarily our seasonally banking have salaries of million PMB's year, support to increased expense the and the including for to from typical to continued higher quarter, are

had for Mercantile the our fourth savings the cost quarter for in XX.X% on quarter. of other we and Pacific fourth to quarter, mostly items tax was first the XX.X% our permanent the the greater rate effective decrease impact Mercantile Pacific met of effective end had tax goal the tax first acquisition the of annual due expenses. effective the The of in XXXX. The realizing of than rate compared was operating to of XX% quarter As rate

approximately be to Our annual for estimated effective rate tax XX%. is XXXX

Turning our balance to sheet.

by Our all preferred to earnings increased redemption our capital investment total decreased of quarter assets in due full Series our billion The E in $XX.X to other actions, the $XXX.X net in stock, and total total equity equity decrease offset $X.X by the and portfolio first quarter. mainly the million losses by for unrealized million. net higher was the

Our high mid-March. tangible E At redemption end resulting March other stock from and from as with as data and from the securities capital will totaled by of maturity. under $XX.XX the value value and our assets sale tangible common the book up in $XX.XX, the common insulate in in and $X.XX. stock, our common rates per sheet share the the The available AOCI. for the well quality, cost. Series losses for be balance we from AOCI interest The impact per credit impact of million positioned stock dividends, portfolio tangible of further held our quarter. mortgage-backed $XXX increases investment collateralized unrealized XX, $XX.X deducted by the share potential common preferred million amortized decreases loss transfer fourth at our longer unrealized our reduced to value actions our market $X.XX consisting in of our the duration reduced book common $X.X agency in the book We to municipal program share and from transferred securities included value to was per of from repurchasing tangible preferred change in We book higher million announced of

leverage decreased first to the quarter fundings, clients continue SBA, loans growth $XXX million. $XXX including during with The $XXX Our opportunistically mortgage add purchases, commercial in our included the gross SFR loan as and X.X% in includes high $XX million increased million in by which earning first construction, CRE, million relationships we to multifamily Total assets. or quality C&I loans, quarter. warehouse

excluded, deposits. are the annualized low-cost million deposits, lending X% of by loans during increased quarter, portfolio noninterest bearing X.X% and PPP Deposits all coming with when from However, an from or increased this interest bearing, noninterest on quarter. increased prior warehouse plus the growth $XX $XX million checking, Demand basis. the

Over drove deposit base. total deposits, deposits demand to to quarter. increased year, in our to to XX% our points and XX%, bring made down relationships, combined efforts first the reflecting X up in reduce past with all-in costs deposit basis ago. the in improvement average new This a we proactive year the deposits This quarter of basis same points XX the from have in cost increase, our compared

either March Our $X SBA or were to for XX% million, were to classified the $XX.X million a guaranteed million through decreased credit non-performing the programs. payment or quarter. but non-performing $XX.X delinquent in At in of loans quality first to million in loans loans strong status, remains Total increased loans reasons PPP non-performing current other quarter. the XX, $XX X(a) while first

had me our quarter, provision Let recovery previously legal charged were off the of a of loan we XXXX, to which quarter. result for included the to value. of for impact charge-off this We for recognized the and a turn recognized recoup the $XX.X losses provision a we $XX.X the settlement. million stockholder in we pleased million first loan, able as In $XX.X negative extremely million the of credit are a

purposes variables the of general overall impact changes all loan had for portfolio modeling provision quality negative of macroeconomic by we improved this due the the $XXX,XXX, mostly portfolio, growth. of and used credit the to recovery, mix, Excluding offset in a

quarter ratio Our allowance allowance lower during quality. which end of us continue at our losses of This up see the prior pandemic. first stood the the is for of to the enabled height credit of totaled coverage the X.XX%, million trends at than total built $XX.X at and quarter loans we in release to positive the portion the as reserves end to asset the

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

Jared. I ratio Our healthy ACL over loan coverage XXX%. non-performing this At to turn presentation back at will the remained to time,

Jared Wolff

comments Thank about Lynn. you, wrap up I'll few outlook. with our a

since the building classes good contributions the of mentioned, than all year, As size it the steadily our was at is year, loan pipeline asset time has and more same start from double and the with last been markets. now coming

the the typically external the While fundings factors mentioned higher increase some pipeline the I loan saw a to may than in in as and closings, still we move impact the level earlier, first point of that of production pace the loan see year, we volumes size the we of of through quarter.

low opportunities that inflow of productivity and great banking job expanding fund are our a developing bankers consistent cost lending relationships of Our are relationships, added, new existing doing and with quality increasing the new can deposits. their generating high steadily that we for we teams have us and

very Pacific added acquisition, support We engaging demonstrating the how California Mercantile on the with growth continued provide we can expansion. have their Banc through effort increased also focused new had for of clients and and a

have we integrating pace from solid growth this years As Series We Mercantile year, additional the a through achieve California. We on driving to stock returns leverage loans our and an are many increases from and effectively as as that continued see on growing over continue while assets of earning client done interest manage added set earnings operating at and move revenue as from Banc start to and noninterest-bearing the will thriving higher and of development many growth Pacific The is redemption we in and focus opportunities healthy, continued deposits. to expansion the E diligence, the colleagues repurchases. catalysts year business a we rates deposits, we resulting to our attractive are additional margin that low-cost for XXXX. the base, from terrific efforts, continued knew for and we growing growing in goals coming the job had the our with operating preferred Fed more expand realizing share present to companies, the the we contribute and expenses earnings commercial relationships due

XXXX. making the to are strong sharing in deliver income and year and we fee technology in to January, look we We our these On well months progress our earnings we to to also good forward in we positioned extremely more related initiatives on that indicated initiatives on come. another were felt call

our California in that today. Given and about line questions. which deliver coming of California's want to for thank momentum up our ahead dedication, to profitable and to confident us you in I our to more their another quarter. all quarters. sharing now pipeline, other at strong consistently for financial performance, contributions of and to listening business the very should that, of colleagues our the ability growth. our solid continue look development, Thank forward growing and for we operator, open be go Banc lead of I year a let's helped visibility deliver in Banc With progress catalysts

Operator

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

Timur Braziler

even it built pipeline up the the what kind pipeline, on you build of starting very of is? following seeing a continued that quarter. hear CRE? most strong just pipeline encouraging you're provide momentum to that of first strong composition coming C&I? Can where the loan in Just from? Maybe Is Is that certainly pipeline remains it

Jared Wolff

it's You know, very surprisingly, balanced.

of not side, fixing except So, side than longer are selectively. five right CRE years both there multifamily a production, bridge about very now, rates lot the still on we is and the

XX historical aren't loans for in that is the robust side So, that are rates five there years very, loans, as much And the rates is a have market still very still is California. longer remember than moved, - low on we active apartment market have to fixed year still rates still basis. permanent for financing an where on

is that's market. And refinancing still seek to coming all to the transactional refinancing time benefits and need people so are and and people for properties going so, active there an are maturities just off up

contributed that's of of Merc put lending going lot C&I and I opportunities, So then think the to our very, a that economy we've the seeing portfolio provide to And And was growing able just benefit sheet. a California. on certainly larger emphasis Pac on activity. continue. the C&I we're side, encouraging. bigger morning came this out The we're The report Southern of obviously up balance very jobs with there's well our there. And holding in is lot very

so from benefiting that. all And of we're

And as so, bit And we're all it's in is - a in not relatively think a our down seeing little really with area, and growth across we it we bit, but that other through growing of It Timur, areas. one we're could generally, mentioned, come classes. temper asset fortunately, our the warehouse stable. our

Timur Braziler

guess I SFR see And to I get that. Are about XX% in for you might guess looking how peers context that of - that or pipeline, where that overall purchases XX% going to of the how book. loan thanks Okay, should closer you think forward, we you being frame larger portfolio would

Jared Wolff

balancing not to a that really the is we a But relationships We yield lot asset We're very good shareholders. this at for so very now. of here's risk class thought, actively it as buying was in runoff. and we right to didn't a good act. a through adjusted grow return intend So state in portfolio loans the our looked and buying were originally We offset itself.

as onto. We single-family. the slow committed down probably we're going refinancing to we've slowed in holding it's to, have a pipeline that down that the But

it's core on deposits everything So, We of any lines way and not other getting big some business a our obviously, providing from pretty of that self-funding business the engine aren't is else are. a so basis.

continue but more it than to to we'll to selectively, So look probably backfill runoff grow. at

Timur Braziler

having looking Okay. a the about there you are Is one gain to And continue our continued DDA. that do on borrowings Southern be a fund in funding of industry rate a California? lean been what maybe and last thinking growth Or rising deposits, future loan term XX% at for you driving tremendous in kind growth? environment? heavily it's given grow confidence side, to me, high happening level market help just deposit may more of to share just transformation despite near foresee you wide, How

Jared Wolff

then up, is is, think it go grow was good a percent and of go amount we're really the call, that to proud it question. is threshold new as the what back but quarter down of It's any hitting and given I could to about in of getting - special overall we're the the It's XX% a mentioned as money one things relationships to from I continue came And that most that bank. will deposits. of

relationships as million from to up. in relationships liquidity I was came from as builds new quarter, the $XXX money just As that mentioned, over opposed and grabbing existing

So, relationships we are the new to bank. bringing in

hot too funding expect do which could then to our loan speak not the duration that close we and market stay we the we rely, any make get we're to to obviously with tapped make appropriately - and matching could sure deposits broker happen, CD XXX% faster really to to And which have we we up. hardly and sure haven't portfolio, our either. that means deposit than So, deposits balances as grow deposit loan our our we loan to target grow of growth, need XX% will

So to we of we this. do assess and continue will those expand margin have that opportunities. we kind We think how our

have the every lead you these to we checking it. if Lynn, don't of in, have transactional accounts, - fill need other and and thoughts cost pull other include which we levers know noninterest-bearing all So, with flows we any then what low to there? quarter to should that's I lead accounts,

Lynn Hopkins

the on trailing purchases. and I where the our SFR are think some with those quarter we and ended pipeline views first consistent

deposit there, use to are strong the fundings in the continue the But, would short borrowings looks well. bit that that I think second a think we extent I have some higher pipeline little we the term. as in that, to and growth quarter, the

remain still mix. the - very, focused very on are and We we

of deposits growth go pace total little bearing tempered. deposit up, maybe a that bit extent is the the noninterest to So,

like as going we first look well. think the ratio more maybe as saw But, that moderates the strong I Jared we average be So, in quarter. to - mentioned, the like it's

Jared Wolff

We happens really, have And really strong. now of right that and got loan all we on deposit pipeline both and we pipeline going our dual - tax it well but, to they're make loan funded very, and to sure very at our times move that appropriately. just

so, an that. eye we're And keeping on

Operator

question next Matthew with come The will go from Please Clark Sandler. Piper ahead.

Matthew Clark

Maybe Lynn. provided on Any your expense one for came updated guidance quarter you a in that last thoughts little bit lighter.

I end think, of million, range that $XX $XX.X to updated of there? the high million any all the thoughts expected we probably

Lynn Hopkins

Thanks, Matt.

I topic related services. and been think maybe the to that it's big a salaries impact inflation and on overall

watching we've been closely. So that

to with Mercantile's then back fully into continue the that think it, are might range. a and think We the ongoing stay investments and with we to integrating those I leverage our given bit, wage towards operations operations our in base, I and be comfortable higher Pacific expense end little and see pressure of technology. continue benefits we what seeing

to our a more look expense something noninterest I look think than asset year just about is a X%, closely. we fourth quarter. up ago, think I But we that were bit from We're the adjusted at ratio. lower little the we So, that's over which at to average

Matthew Clark

expectation call, hikes on was then And the hold costs there deposit last you outlook, any from probably rate you're line Fed requests or the more not last that on an whether earnings basis for getting to for Okay. points. call. kind of could pricing the the outlook yet? think the time. the given first customers deposit XXX I there, earnings last And relative thoughts updated Any

Jared Wolff

have information on to strategy have sure loop that - we've requests feedback surprisingly thinking customers and few frequently for avoided very our about clients, focused making So, and rates. they're and not our very have bearing gotten kind make this service from of sharing a we're calls we and when wholesome noninterest pricing grid on for and on move you're solutions across and interest large Again, now. focused

on So They're that focused fundamentally that low checking accounts. really cost and not - are transactional accounts, rate. can

PMB money bit why pushed net market on show those clients lower most You and we've while which the and we of higher get quarter, we've in growth some little rate out. didn't was because was from the rate CD stuff more the sensitive cost out number put selectively which

we contracted enough that in So, from going here to at mean, I CDs, expect of and are we're time market soon to institutional it's like kind and to it. the I we that it the sure market happen next accounts looking And the start quarter. I or do hearing of clients get money I will go them how are going loans going in are in fund think going know two. that are or the happen make quarter I we and it to to costs probably efficiently. think up if will don't we're this

just sure. are, - the I yield loan our deposits growth our to And for to I pretty we close of be to have going I second half cost we're think year faster loan our start for sure. where think than - to it's then, going tick to but we'll seeing it expect go of up by the

to to the up, clients question it's we of cost have hold go our that's with - to are - we or deposits. why margin So we going and to cost expect we're some going no the to share show expand, our of going but

Lynn Hopkins

just ending million growth. look deposit I would $XXX Yes, quarter mean, overnight those would I our our shifting we borrowings to in plus, into deposits be add, the with at

would I I swapping the just the with yields assets, earning funding growth loan you the increase an But those increase think the rates out, costs. have purely of in So, deposit in there. associated market with outpace think sort two

Matthew Clark

kind might feel able on Okay. - just uncertainty activity buyback, the like I Do And pause? you that's guys then or up it. does some be the can to good global started you macro step you give to you see growing, that of

Jared Wolff

there I ways under blackout XXbX we I certainly our you're in the that a only undervalued opportunistic to under think It's a company stock is market. able our during is - - to We program. certainly a No, is when program. buy buy think we're look do and way

opens back continue it future And I And is continue up. and our temporary to think, think, under going our have of we're I to think can we'll we a then when perform. that grow I notwithstanding, these value. But in stocks belief company it our So issues, we think to - I now. lot geopolitical company evaluate and

think of stock So we buyer our levels. a at these we're

Matthew Clark

then me, would mix? there a sounds there there's that any relief just Is you would last on little a like Was loan one the some attribute more competition? color It What from a Just yield. there be to? in of And it few categories. new of bit Okay. in helpful. lift terms

Jared Wolff

terms yields? rising of loan In

Matthew Clark

terms in like part business. new new new of - was loan In to due of uplift It uptick sounds yields or business. the loan the

Jared Wolff

Yes, overall I gone up loan pricing categories. so, has all think - in

So - benefiting enough just loan book, for - affecting higher from have that low not business yields have not a grow we activity. Rates to rates the historical gone amount up, on That the basis. are we're loan caused and is activity pause. it's still as

of just makes So, slowed their into a terms their the yet, points They're if points, business new clients when XX it getting that business in aren't basis sense. and loan. up doing pausing rising initiatives factoring basis rates or cost go hasn't of XX it

Matthew Clark

Thank Yes. you.

Jared Wolff

question? Did Okay. I answer your

Operator

go Gary Please Davidson. ahead. from The Tenner with question come next will D.A.

Gary Tenner

and Thanks, appreciate commentary all deposit the the color side good on couple agree remarkable last job the years. in morning. I there, I of

up for ACL, you How year, nice think all that adjusted you expect about excluding CECL think of kind capital. negative not ACL minimis the a into had near result when went directly one to question I model, Obviously, still de thinking here flagged our thinking if provision just ACL, are was, there Just changes XXX. I kind the about and quarter recovery you from inputs any this you're of quarter? as last the this the sequel the pretty about a as the

Lynn Hopkins

Sure, Thank Gary. you.

the for where we ended So, million of quarter, recovery was lot legal given a nice the related on, we a that have to and going settlements. provision first $XX.X there the

that So that through particular came account.

variables, occurred on look of took talk on that the at a portfolio our the it, that's outlook growth quarter, then, aside, end that macroeconomic will about setting in So quality the economy. as the we the our the credit during quarter, and the we at

do we So, sit as Even we're reserves. specific that very we setting reserves look levels. at well those inside reserve our like have that, feel certain aside, we

other two when out I at to that particular we're look appreciate crisis, that as close reserve, may what getting our coming reserve. pre-pandemic in years have is uncertainty. the we're think, pandemic there that levels we we're into viewed and the of now But, I been

we extent be continued some to offset that may So, net think It loan quality. we have would by modest improved potentially growth, that expect reserves. asset the we

know don't automatically I go the reserves. negative that would I to So,

we're in we well uncertainty and I still through But there. reserved a well. work think a of we do do capitalized well lot the process think markets there's and extremely as

Operator

go will with next Please from Feaster question Raymond James. The ahead. come David

David Feaster

touch to some but were I the that think that, utilizations, ability which to to excluding forward? transfer, on drove growth? some guys continue expansion have what you of just some quarter C&I. about great new use sense that just, you do parts drive you've into, into of on. really is and a even the there what I wanted Is with growth we know your hard C&I - saw to Obviously, increased wanted I new moving that see. going relationships, segments gone some get in growth, how worked it the And C&I to

Jared Wolff

pipeline our weekly Well, I'm mentioned balanced. pipeline looking a, at I very is our earlier, it's and and daily as

our C&I now, of of grow. line assets grow. It's too, right continue - It's we types to C&I And pandemic. expect we're so high it's Real XXs It XXs, to little mid-XXs. that now And before across to all C&I right the grow estate bit up XXs. continue of is And doing. up mid our to of is in to kind high but point we high different the all going to a the high it's was - in utilization the the expect in - high slightly. from

little tremendously. new bit new contribution So clients. there's of from but there business more not just a existing It's and

David Feaster

said. remarks, on touched your great. a on then, as new had - prepared success that's Well, hiring, you've Okay. had from ton you magnet talent And we've you the of

and Just that be in, core on the most hiring interested commercial, there these specialty are any the lines lines looks? Where or more, curious you on Is you just some pipeline how opportunity you more might it new commercial additional general then hiring of are are focused seeing producers? bankers?

Jared Wolff

we're need on So the the obviously side have is production gearing the - taking for place and right hiring ratio. generally

for every underwriters So analysts as add a our our that do who the our people add operation we well. loan support do support to how job credit to or side and you and tremendous that every need person on production you few are critical our and business the

balance So look we well. have as operations. that impact at might And how those to

in kind you leverage. of and areas that So, certain there hire get a place you takes is loop as

that You leverage, you operating need company. make to get sure across supported the but you're

So area we stress right. any get you put one and don't something try on that's to too much

announced, we're to And in just sure in everything and to general people we the people and ABL would estate. I that and inroads those We right we pretty we his then based know I to made he about we've fill that that the Southern hires real space been good hiring, in some supporting in say broad media terms in and I a and In healthcare It's previously serve. continuing mean, we're obviously, specific we're made and California that grow hired announced have Head on the in continue on to and ABL talked of make side. grow. now the just of hire markets that hiring has team. we've we've commercial We time a it's teams. entertainment we that all

ran out is just, to a names to name then terrific day the people's a relationships on our as the coming job Bay again. he folks our think, together Central street who and And well. where there. in of and client heard a I lot previous have there's the wants doing get week just, are he new in And in we teams the area also other engagements last bank said I Our from to and Valley the three the times

there is the which us now, it's so for - certainly right momentum And is nice.

David Feaster

with be That's and believe it, of exciting the where just curious heard on great. are the much on your prepared And you see for interested and in appetite what that also additional I that updates guys then, and expect partnership the just touching And we working don't announcements investments mostly but the I something remarks that have or that stands type maybe Finexio, commentary one to things but, fintech that, on on you you in? more partnerships in? is should any would coming forward

Jared Wolff

I much are by - the I end our because we'll able more both be be too quarter, So, it, ready announce next hope will I not either want are are announce in working what and lay hope obvious in of area space, very clearly ground flags results an in in our over XX is with picked Lynn now payments. for on behind right able we to I actively We've out think, and to but before, and don't go we months. technology some that been the to into and the be the and will that we're scenes initiatives we it to to strategy that it planning think why is, working be specifically approach.

ready. And share so we're we're excited to when

kind white labeling finalizing putting and would we contribution the things Finexio, it to relates They're start very year, half later be have well. and year. and doing the in back of partnership. been kind we're crossed I great contributor We of the billion that payments very, asking. that in $X place, just They a appreciate in As you and it's showing agreements expect a of said to threshold and

Operator

question ahead. next go with KBW. will Kelly come Motta from Please The

Kelly Motta

wondering circle remarks I believe grow lines, wanted you just bit the in you should be said back was it. expect with we what loan on you in on on warehouse and expecting warehouse the your a just could actually there? grow spite growth even specifically I I moving add color Jared, or of prepared more mortgage rates. just if - to to I mortgage

Jared Wolff

Sure.

think warehouse I mortgage temper. will

we a think right slightly. company, to that and fact expecting now, we're grow notwithstanding, the I bit. the line balances down a not grow that, little that them in So that But they as were may may fact overall shrink come out to expect

proven it, we've talking tired it's of - know that that business way in about I elsewhere. it's think the pretty but different know is consistently team than question, we've I'm area out proven Our think of we out that and we're conducted doing mean, I kind our I very but this a consistently, I

to - want are on that that to business are people the our are not overall is and great be a The lower is as to of business the secondary rise, about, relationships we primary that they done borrowers support has might well things to single-family said, a in as things slowing. market and And slowed Our teams be warehouse business want the for than expect refinancings most team they bringing there. the put well don't therefore, not there's therefore, - to we much lines fantastic. as what robust. which they to - are as and And in new business as of tend and little we going in have that the wait And it's securitize bit has are That a our be securitization to in rates - to. job that market, the financings future. that rates lend

could It just now and bit. but have we and stay drop flat. done we're see our a it are don't see could way going what continue our things move to That's gently, that, massively. little job growth, it. to bit, offset businesses shrink kind a in great slowed going off cliff, enough think tandem, will planning fast I that's that slowdown other the to It has a foreseeable show it's is, knowing we'll than might that in for dropping little the We a a and to bit we move of going kind And not more right - it shrink area. future. of it's it team So, any down think it but growing managing little it's to

Kelly Motta

Thanks That's lot. a really helpful.

Jared Wolff

course. Of

Kelly Motta

you as gave net in commentary that understanding Any now? with to And then I you flow quarter repayments last mind XXXX have guess, that? also the and changes the on refinances Do as keeping to growth for are number any likely slow. that expectation

Jared Wolff

say I'm So, when about think quarter. and loan in kind that not for the I growth. first we what hit thinking that's kind the the basis. thinking - hit ex annualized about on quarter I the have would guided our performed slower on we growth PPP single-digit warehouse, to better because overall year, I'm core And We high X% at that, I really I first about, expected, would and an typically kind of we're quarter of of and think than

although, our about seems that pipeline And is be. going to just payoffs so, I are don't right, what really know strong.

just feel we're think would digit I and digit, low-double actually know But strong. mean, okay, is you the pipeline I our So high-single going just what's - make to obviously, the estimates that say, horizon range, at the again, knowing I that don't do. that I expanding in on comfortable we're probably and now don't we think see we - are I does. time. nobody appropriate We we what

quarter. it's than the it better did now feeling right And so in first

it's felt But what as little and were to control can like better production a a bit at payoffs much we to look people I comfortable, be going actually its would know going we're little as to. I you'd bit we you do better. do hard So like to feel like because

an all-time we're be production quarter that do even in at a high. was much And last going And even it's to quarter all-time running total Our without five here. was purchases, quarter, at I going at even that volume higher. this I'm probably including it an high looking and know purchases not purchases. to

a bit slow through going but as the have pipeline, little to We in it's year. we get the

I mean I that's I a double-digit I more certainly had that the Kelly, first this - precise do. in what can quarter. I year, given hit wish we comfortable loan the But, we more Yes. did So, could yes, think number. growth precise feel best I

Kelly Motta

helpful. much the Thank really so That's you Jared. color, for

Jared Wolff

Yes. No problem.

Kelly. Thanks, Okay.

Operator

Andrew ahead. go Terrell from Please come will with question Stephens. next The

Andrew Terrell

that hear don't or I attractive rate of think attractiveness the to wanted of share threshold, internal just have talking you could just kind could I value so given you the of color considering about of look on the ask if levels, buyback. the hoping buyback. you about being But I just framework when the when you announced, you about talk know tangible Jared, these some book buyback. when I of you but considering there. earned hoping just, you return kind back you're at was any you at kind

Jared Wolff

really can I to give think I because way I that color what's question, don't to the Andrew, answer that without parameters, want market. disclosing in best XXbX our the

So people buy to know at what prices we've it. agreed

of right me with our that an XX looking we terms markets job. in would consecutive ourselves. the in And team would with say I'm me think, - looks high quarters of expanding I including company one tangible do at do to impresses kind an than XX% outperforming what probably the the X.X thought now. it just plus and I our of always people incredible noninterest-bearing with book. country I margin deposits standards less low doing mean, trading of times We've as price better we're said they a at best than growth company we and do, would we

on recovered the I tangible prove balanced job keep safe growing Lynn book. with what's some at remarkable and down is here her I quarter We securities mean, held And so, looking keep we did our of to that by leverage. a book to in team like just to putting tangible story maturity the the charge-off. in protecting our value weighing me operating down in way. our the price a it

- going getting just of mean, the mean, anything don't see that's to we said, As too I way in we're I low. we it. keep I mean, trading I would growing. we're

beginning this builds out of makes we we for it quarter. of first and I how our common it well pure mean said it the low, were metrics. biased. - obviously park - getting we're we it X.XX% it. our year, talked so, haven't quarter. the itself, And have we going just almost about quarter-after-quarter. thought above But ROAA, I in higher easier we'll too on the tangible when all to seems return in we we're was am at the mean, that's be I like hit People were we operating about I trading leverage on get feel which X.XX% like up

and loan levers And can and I long a grow up to continues couple as as going pull. have side, earnings growth we continue so, to our we're of hold the we think to on solve to deposit

my feel for value So, I book off apologize trading basis. like on we're just that's low going too box. soap tangible that. I

Andrew Terrell

weighted $XXX the from appreciate more or question purchases think, so and this Maybe me. to I it. yield yield million quarter. have made no, of Yes, you - mortgage one great residential for Do was the that's happen or I it color just the average

Jared Wolff

on we see SFR. Lynn, sheet, have production overall for that? do I our yield the

Lynn Hopkins

Right.

yields. So They've yields we during I that are the based the the up. to disclosed - the the been margin that. necessarily But I part holding it's on net I haven't in mean back quarter. upper-Xs, say think, of they trade think in in want of interest our mid-Xs table It overall that's release. rates and our to up I the shows

family, from purchases to went that X.XX% the some quarter last quarter. includes X.XX% single the yield came our through. So, this of That

Andrew Terrell

Yes.

Lynn Hopkins

happening moving a Obviously, with of there point market. in an inflection rates the is bit

towards the of So, quarter. we sorry, to pricing up moderate yields end start the saw up moderate the -

Andrew Terrell

Yes.

Okay.

Jared Wolff

the DMI manage to rate interest bullish as high was that the in - doesn't these didn't residence are require equivalent many FICO, very it - that portfolio put it's to I loan And people value, mean, much yields actually for Andrew, the find and like one very primary It's outsourced a performed lower. require of actual the, part, one to reasons yield that we people so - environment, your of is the low on to like, we're California because to monitoring, clockwork. people it's in it it. find of hard most low is servicer that tons hard would

a money to for be we on But, at was our don't felt to so, that put intend we place And company shareholders. as family risk a single adjusted smart all. it basis, a - pure

the for just staying stayed, risk, flat other SFR see and so, And growth picks wouldn't in made other we for other that. areas. yields growth see not It's that in loan purchases portfolio return we and us as we sorry, we really can sense areas make were I'm growing. up get the that's but, the in the better right, yields they outweighing

Operator

today's session. question conference with concludes and [Operator along call This answer our Instructions]

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

Banc of California (BANC) 21 Apr 222022 Q1 Earnings call transcript