- Earnings call transcript Q3 2022

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Operator

Hello and welcome to backup California's Third Quarter Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity. [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

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

Jared Wolff

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

Joining about on Lynn our results. me call today's Hopkins, talk Chief is will who in Financial our Officer, more detail quarterly

During exceptional rapidly the deliver resulted quarter, continued This deposits low-cost and consistently to of way. to smaller our that commercial on deposits. warehouse for franchise, operating our environment premium the core noninterest-bearing despite to capitalize a in third enables strength and which us rate of core relationships, ability new expand slightly we balances. increase existing is add environment, in to clients' an has our our to which drive clients but a of primarily earnings a was of continue rate expectation in in despite earnings which made challenging growth ability our rising sheet, needs on has result increases rapid The demonstrated further power balance put a a on rates lower markets

during same on At the to Deepstack per the value second repurchase core growth excluding annualized double-digit Our loan strong that the of recorded our quarter quarter, the tangible the continue level we in quarter another warehouse. to quarter. of We earnings of resulted business as rising and with momentum program. we in start this even we development see implement experienced quarter, stock to growth, excluding continue our power, portfolio the in first combined share took of the we acquisition the investment impact actions mitigate the of impact rates book

expectation the rate in to weighed the economic of we on a of further latter however, experienced pullback quarter, the hikes part Turning as demand, loan activity.

slowing production average fundings the in While loan compared half in year, resulted yields the basis pipeline and variable the the in at our experienced our loans XX to in loan on rates level prior this of higher the our a point our in resulted was coming first overall we quarter. below repricing in had increase rate a loan

in had of Excluding both third warehouse quarter, we and of during the portfolio. the growing growth success areas XX% the in annualized loan which the purchases, SFR core continued our commercial reflects

to low-cost of half continues plans expected the flat was the despite going grew expected, relationships warehouse it of that our our quarter held the and our high-quality quarter portfolio prior our average were on with the an consistent for The without at our the to they very to third basis, loans one deposits with support our through, on forward. for strength growth lending XX% at balance XX% remains earnings is self-funded about portfolio line As asset smaller Further, noninterest-bearing of amount quarter, decline while With to franchise quarter. clients. expand as to margin earnings. stated earn sensitivity the manage adjusted show well. to further to particularly as margin with a Further, through in This with our deposit pleased warehouse end based business is the sheet. a diversify to money unit profitable of a very offset warehouse continued mortgage we deposits, on is warehouse able of our to were unit. same earnings I'm utilization able and best-in-class, to our SFR our continue decline, which purchases we partially

attract to continue the bank. clients We new commercial to

increased quarter. accounts the we highlight for was number quarter, eighth or noninterest-bearing commercial of this in fueled consecutive increase continued $XXX accounts third in an annualized. We by new million by the deck. investor XX% information a This During a the slide in

have relationships this we particularly in deposit and funds have added higher in certain pegged a rate This the expectations, balances clients, with new we we account that products are to money and rate. resulted exited those As checking interest Fed decline that had market quarter.

needs growth we to growth. future loan will continue relationships noninterest-bearing continued our look of overall to with while in Going replace funding types these to balancing deposits forward, support

We longer-term of going rise. some the rates our FHLB costs fixed in to forward to advances lock time funding as in interest some also form rate of continue strategically added and funding deposits

yields net While next of prior this realize cost us deposit it the third growth. still earning in and to the we had a the interest our asset higher quarter, our able margin the year better keep believe with we puts noninterest-bearing to effect funds over and see margin of consistent to we in quarter, position expect expansion were increasing as

the around XXX%, are to our the balance we the efficiently, starting in ratio margin remains loan-to-deposit we of part to our quarter. While able latter interest expand sheet observed as manage net

influences approximately As remaining ratio directly mentioned utilization this On that of the core line. funding match to we variability self-funded, our line of fund I deposits business the and sources earlier, of on a third balances. from to the and and half with flexible of provided short-term rest we average, our is loan-to-deposit the outstanding based utilize level lending it warehouse our business warehouse

loans loan-to-deposit quarter, when to our are from decline warehouse deposits For XXX% XX%. the third excluded, would ratio and

seen our any While the quality. have of economy slowing, showing on is signs we asset to date, impact not

environment. with months scenarios. our stress to ago focus for the the XX scenarios were tests or X And next rates rising remain stress a different should a have underwritten valuations involving of approach strong a that tested due in adverse even X on lower initial asset the in at take indicate and particular We to coming conservative much XX be we in underwriting, years that quality that number up credits portfolio will under our renewal

our also to base internal noninterest-bearing franchise acquisition this of our our shareholders continue we payments results that XX, closed in of efforts remain We the into development took for integrating on early point business. technology integration we end up and which we deposits. our QX Deepstack at track on on expect targeted third quarter, the ramping or will the platform. QX growing Deepstack's attracts business Technologies a that strong also business the verticals with the to and deliver in client high-margin building progress we good will complete September another make and we and value begin processing by the financial entry We in have step into significant in made While acquisition long-term

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

Lynn Hopkins

Thanks, on Jared. start found Please of performance. our our our review sheet quarter free I second some move can statement we'll feel balance to with period and indicated, I'll of be prior Relations to otherwise trends. our on with the then website, income to comparisons third are highlights of as refer investor XXXX. deck, Investor our which all quarter the Unless

to investor and some so income $X.XX common information a million or presentation stockholders release comments will earnings the of my available Net limit I quarter Our per warranted. discussion diluted great was for to share. is third areas deal where additional $XX.X provide

legal acquisition in $X.XX the and on losses energy earnings for per quarter costs, third net share excluded. diluted when totaled costs adjusted partnerships net alternative Our are indemnified investments

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

to higher and Our loans interest-earning securities quarter. due asset yields X.XX on to the yield third during increased both

reflecting average portfolios. in The increased core increased primarily to XX of average May due Fed funds and points X.XX the and XXX points rate CLO resetting basis warehouse portfolio mostly XX Our XXX loan to to yield basis on occurred June. yield average C&I increases basis to higher yields the in due our that points securities and

during With yields in see additional during to in further expect assets the earning the fourth funds we third the quarter, rate the quarter. increases increases the on Fed

rate and the average of XX quarter. funding, increase offset basis longer-term market as and funds well money in CDs XX basis cost was XX% of as deposits checking cost in both maintaining our deposits impact average to our quarters. was quarter, points third the prior of Our the lock up average the in primarily the The for XX by accounts, positive was some points, interest-bearing cost basis to by of compared points for increases that our deposits driven linked were at noninterest-bearing added average

was due higher second noninterest by from investments $X.X decreased other second million quarter. end environment loan such term the decrease mostly near increased million the rights This in the in to level purchase quarter, income increased impact Our $X.X this by mortgage prior the the which income to at on our of equity assets. income, continue the of income servicing and at rate offset higher servicing from will anticipate that quarter the lower we due the earning of

adjusted million branch, the generating occupancy quarter, quarter, estimated this $X.X being consolidation and end equipment in from the the contributor expense cost Our third expense. noninterest third a savings. $XXX,XXX our the largest consolidated branch year, increased an with annualized prior of At which we is

XX.X%, to rate we the to fourth of approximately ahead including for effective decreased income Deepstack elevated The The quarter's quarter's from rate approximately third to was by rate our $XX third noninterest million in quarter, be million, the slightly tax expect prior of tax range related effective $XX million higher Looking the XX.X%. $XXX,XXX. quarter to expense $X net the operations.

tax rate estimate We our XXXX approximately annual continue to XX%. be to effective for

balance our sheet. to Turning

$XXX.X net actions. $XX to losses to in partially by net million. increased for the The in total offset total total portfolio $X.X the million million Our the by billion was the quarter mainly equity higher unrealized due equity quarter, decreased by capital in and and assets in increase earnings investment third $X.X

quarter our $X.XX stock the stock tangible in compared to under at program was buyback million reduction the Our the resulting the capital to in announced the of in common related to share our the tangible $XX Deepstack items. in investment XX.XX dividends value X,XXX stock acquisition, of common quarter. program. common AOCI The per the common impact included from including XX, portfolio. following the first $X.XX $X.XX repurchase At share unrealized mostly stock actions second three book the was the from due of we to change the value in September and issuance of losses related of per XXXX. end the and higher book

$XXX resulted XX% certain wholesale help for the CDs, decreasing us in deposits deposits Our This million the advances noninterest-bearing replaced in which mix rate better funding increasing noninterest-bearing averaging CDs the checking the growth were the deposits noninterest-bearing which had rising during overall despite added the in FHLB we money in and and rate both deposits fixed deposit to a The in and in of in effect end We the our categories deposits manage third longer-term deposits XX% quarter noninterest-bearing intentionally total will of the we change had in the funds exited our part of of growth at believe quarter. strong, by the quarter. remained quarter. deposits we our market high-costing cost and environment.

lower loans the classified status third Our nonperforming $X.X end the did with payment asset XX, credit the impact which XX% weaker quarter. At not a quality current provision an We remained at of guarantee. the balances quarter offset million have nonperforming or either reasons trends the in to credit nonperforming in SBA for other [ph] solid record our were and third in of loans of million $XX.X were given favorable the forecast. economic in quality, government losses September loan quarter for third but the decreasing

at end prior end the a $XX.X for losses stood than allowance of quarter. to the coverage higher total totaled our and X.XX%, the at bit third which Our million, loans credit quarter allowance ratio the is of

Excluding our our relative stood X.XX% a risk at have which ratio level ACL lower reserve loans, September in at the coverage methodology, warehouse XX.

this presentation XXX%. to Our back ACL the ratio At healthy at I'll over remained Jared. turn time, loan nonperforming and

Jared Wolff

full lending, delivered our already We Lynn. warehouse successfully which Through of Pacific level months of strategic for exceeded have expectations for XXXX. in areas the Mercantile cost resulted savings. excluding and year, you, integrated of first and Thank We've the exceeded loan set growth, our the growing objectives projected continued goals on has the that has Bank we already acquisition that year. X the our targeted we

ahead. growing earnings our while interest capitalized and and rate expect while to of of invest realized in our been strong significant We basis, We've that from margin E hikes shareholders commercial year-over-year with expansion further to attractive levels banking in since Series core implementation a our stock from of increase and manage have expense a deposit talent, to clients through technology as stable a use able January benefit effectively sensitivity CETX net preferred capital economic franchise and on add continuing to percentage growing on total asset and manage of noninterest-bearing our well the our ratio deposits. capitalized verticals deposits initiatives. ratio our continue capital We've expand to still returned well and our redemption more positioned repurchase to our program, remaining TCE through and through very the We've optimized stock slowdowns.

time, excluding income, to a the continued successful tangible a grow diversification our use expect a Banc in revenue the of economy, of efforts. experience as acquisition value. capital efforts their a our to processing It's further program. payments entry the complete fueled base asset for value adding when increase of our an I of financial and sensitivity. And solid contribute per we and enhance stable tangible of ecosystem, want book acquisition grow to by have strong in earnings our been number to the perspectives our for extraordinary Deepstack expect uncertainty franchise very advanced at book we engine provide same that high-margin we of California of becoming of the goal of profitability repurchase have of value development already ahead, hub their business, mix, increases in even struggled of protect a show all from Despite source a at and the elevating grow the to our the business consistent ability and we loan environment growth With our share, share year deposits, and fee and our noninterest-bearing Deepstack, level business a have non-issuing into services the it to colleagues thank we deposits, while client and of and banks core

in listening. level Timur continue payments and Instructions] relationships Based ahead that, the growth Thank should shareholders. growing that first contributor, profitably creating to years in become now comes year, portfolios and and the franchise We a we add up our value And coming new next Thank to And with additional our believe are optimistic for we with providing Wells Fargo. core opportunities further year, go deposits. the operator, open Our the accomplished growth. to everything Please ahead quarters fuel our on noninterest-bearing loan for this business another go meaningful from continue you client questions. Braziler let's for to line [Operator will over you. we have contribute question and ahead. about our

Timur Braziler

Hi, good morning.

Jared Wolff

Good morning.

Timur Braziler

then expect for couple on you took similarly on Maybe Can give a should just And loans mainly be starting sheet more much deposits the quarter. should side us balance we get quarters? expectations on or to hotter we What the should and deposit drag some the side. your as balance look forward? going as How for sheet initiatives I next side in far of deposit this warehouse size. here what well? of to some as at know money off we the you look guys

Jared Wolff

the be I bit a things to I this at things little just rising like opportunity fuel but expecting Well, were rate shrinking the to a pause, feels was were but of in during posture on going settle of the - we out. half. we a sheet we're And was loan it We the see to Borrowers November, to size We it have and pretty that's had balance because note to cautious, it's second it Obviously, loans. like side, well the Timur. year. all hard obviously the better had there It's have is - real as to of the estate a plenty think down. hesitant conservative continue in hard ability but be rates. stabilized do guess look, were feels certainly, the with another our Thanks, going we where I to point quarter just bit. think the increase little through leveled end warehouse to growth, little

where know going clear, the be probably keep I investment we portfolio. the obviously can predict money opportunities don't And to I be want ourselves loans, going forward. think good pretty we're sheet I think there's other how So to I to flat. see than we mean, we balance more making But in if

can we flat, if not grow. like feels it So stay

Timur Braziler

you've Okay. then the on really do And DDA. able what on to I that's side, deposit mean, impressive been

quarter, from about there You and built even few sustainable have those alternative heard there DDA. your grow you're other it's in wanting and to that client to there? kind this been that that? or this sort seasonality Is the DDA for remain, know, money is We've some of rates that talking other of those you're base, banks XX%, reasonable how balances Is unlikely of growing or is sort that have environment? any move pressure ECR in, that that either able elsewhere some some seeing looking from

Jared Wolff

So I'm it been challenging teams is has a environment, to with pleased our able do. what really and

bringing to shows deck that company. on the change probably and commercial new dramatic bank. our focus company since been our a will we new that and of intends deposit you to out. We which the we added terms relationships slide have flow little not for The balances of is the that maybe front I've saw, at one do bringing fairly growth the do Fed used and why in expect relationships bit, And it a as is as expect, key us, to plans. which get economy balances We contracts is in what terms to accounts in center the of the replenish,

long we've control we are it I our clients period doing You expect to happen if continuing the quarter-to-quarter. clear, very of you're at this time, over successfully to that our going overall, said can't looking a before, to hopefully because we be really to bring And new company, to know, not focus.\ grow. want very our deposit balances you so within analysis about the demonstrates account, I've that's which what's relationships your that but been

to things talked very remarks, focused the are is which our think the solid my quarter. the quarter have due relatively already. what value, the the earnings even I course quality all about we had trends others. NIM solid the get shows hit are our to funding, expanded our year, of it expectations enough not course what Look, of earnings. our We done kept book that which we of over I in flat doesn't We smaller fixed-rate Yes, in think on over did why We I and in We long-term a of are end a locked really the given on flat this slowdown to prepared we NIM we our deposits. we protect our warehouse. year improving tangible we we I expect noninterest-bearing earnings as some But credit for remaining the expand, again, was sheet decline said, though we've overall. relative balance done which, think pretty that

us it. specific you I the to of increase we continue will do because your deposits year, course a of that moving to noninterest-bearing it or decline to or positive back low-cost to But our quarter-over-quarter direction. grow expect know. the trends can't is checking, in that bit. I will have it tell going don't little over all think to so will we momentum I continue question, And fair is just

Timur Braziler

I then if And can. one, Okay. one maybe last

has an you that It at Are seems looking quite deposits of side loan that is those still they then what to would scenario the to one exit base? the kind during sticking sticking brought around event? warehouse the third drive seeing to risk funding the like you have of around, of type resilient. relationship been them in Are of that balances on extent were warehouse actually are that half of seeing those specifically, type that all that kind are peak deposit system or down. of newer and how Just And a balances? much for gone one

Jared Wolff

business. very question. Yeah. mean, have No, a I warehouse we resilient good

warehouse We strong have a team. very

balances, in there by expectations we're existing from We inside continue that funded, that stability very for balances, balances seems new that good fungible warehouse to clients those us to be they're a be expect to change. movement any it third obviously to bringing all to half or we a but of our relationships on. There's money, holds. have business whether those It's don't for but

it funded funded be half I we the be we to if that to expect continue. third shrinks, its if your expect question. expect grows, to of its hope with to third own half a it So own business a balances, that a answered it balances we with

Timur Braziler

you. Thank back. does. It step I'll

Jared Wolff

Yeah. Thanks, Timur.

Operator

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

David Feaster

Good morning, everybody.

Jared Wolff

Good morning.

David Feaster

touch I on just Deepstack. to wanted

a us you You just expense talking bit step and bit is of you And going what today? and but integration about a quantify you're you to could And you guys road clients to that this currently? guys the to this? map it, little the working through do revenues What that you're order out your talk of you us when maybe do maybe of little pipeline to you is could and on the the gave point revenues think for could back to need as can business? on what - expected think where to generate come just we front. the are can - really generate? maybe walk that And in the get color talked help about you Also,

Jared Wolff

Thanks Yes. the for David. question,

our the company. being a is the of integrating all processed So that map Currently, bank. third-party into through have road are we're transactions in process we Deepstack

part wrong our me the which own that on our and the the The process start transactions point it the early set we like this soft pipeline with quarter, able be own directly. clients for is the timing doing providing so way. is of what's pipes to And want pipes. numbers the called switch bring quarter, fully are can I don't expectations them in at bank will on open terms finishing and obviously, with that the you for do flip integration hard We launch we all next expectation me to in dependent. We're are on our to we'll that bringing

I We those looks it is pipeline. can't what the brought what board. we switch be have you like. But know a until I clients will when tell on flip

so And the to events we're the prepared what next opportunity conservative on out give at that around we're meaningful. sizing tell clients of figure be are be not and be there. very you sure with quarter. not it. missing make in is going today will should live But first for half again the I the of be it We'll of be first we're can't in that be yet. very Deepstack will really to some brought board to obviously first sequence we'll I because those The or know me kind of the end live, Once easy year to year

deposits of it's new had for a call points of excited is week a then that opportunities given there's of think all, valuable will And who our plenty but our landscape that we bank the transaction. use be First existing we very I our clients. there's obviously clients solution that clients also know, to a we this that is bank. to bring services really the after providing And these pretty the that existing fee-based, relationships it's we will nature Deepstack. we think be to to you obviously, go of to with believe one attractive the of whole and their going that ISVs, follow think will can also end

There's to be have. map that's road But payments that that right map other Deepstack. includes So the the our we'll specific we that's for products road map in now, quarter. some first level about second the road a talking

David Feaster

you when start event you the mid XXXX some revenues deposit you could from a And it really late could of next getting growth year, the… think do to start seeing that? when is If start

Jared Wolff

will transactions No, some as on deposits XXXX. there the come bring for impact because as We'll they will will how will start upon no. It going be dependent the in we'll flow are, seeing there next absolutely that some we but with through. to start balances It'll be It over successful will we impact. average clients year. how but quickly, build, be be obviously obviously

David Feaster

kind curious, decelerating And just how trending. across originations just of are more footprint? rather I'm you what kind the was Okay. is it pipeline And and strategic higher like maybe your of sounds the demand touching seeing demand. than in on slowdown rates,

resi kind seeing will what the be of be single-family given on to front? you multifamily outlook, you're do kind more do And expect curious more you Just drivers bit growth of what cautious a that of it and term? key you're near maybe still think

Jared Wolff

it stabilizing like So in warehouse I full ran down. - don't see sheet is of purpose the feel We on soon. buy us and the its the there fairly market served to our focus a single as family balance anytime

what real in fast got limited I'd things did time reflection some when very it. done lot pretty side, to good a a it's built manufacturing to bridge liquidity, film where having were buy where a of There's being because think inventories And we Or And bought in good care some just markets where where of inventories our just on got So be quarter the We're was areas to inventories extra I supply the were got pre-committed when to. are shore thought would continue and down Surprisingly, go to and that the we about a stress on that cautious aren't fairly we and cautious. right, are bridge deals people operate, we to we distribution it in last we they're good of their economy then portfolios. as We're was got the in health we've just of worried at activity so things say the through. L.A., trying really of really testing drawing resilient. on lot a We've of weeks the life chains that worried super momentum still on being slowed are lot presenting just up, on be side in careful. side. businesses two in about a we're at I be on kind And panel. there's side in entertainment a credit and line inventory. event sitting they receivables they where extra There's estate. you - happening. you the deals their a up now the coming mean pricing

the a tangible and book but such capital about to marks our This - We We're a is to slow. through want but chose have the grow not we not absolutely just we're Fed this for focused apply and future. proud we're what the still book done to - And value. is team and of We're to to long has and which borrowing We job really - our is thing protecting continued a smart franchise really job quarter. happening. economy numbers looking, done we've is the as careful the term. game. why [ph] our to value, for some for this had the really quarter exceptional said, so to And to franchise quarter-to-quarter people have AOCI trying see [ph] do It's line so just we the Deepstack, not don't absolutely would wanting as of for I'm signs think the for borrow. impacted not really I a great of as is much just the Linear the long-term protect be build book I our disappoint. long It's we term, for an intending casual that

loan at So do to - but is loan have that we deposit we very, want - obviously, demand every is there's is of that. - And We're helping think is we're the in from, there But our to anyway, I'm loan environment do there could demand it. sector. XXX% we - still terms coming loan being very fill in cautious. - pipelines I where us stuff

David Feaster

maybe And last me. good. That's for it. Got just then one

new hiring Just several job touching phenomenal guys new and producers past have over a you adding done into hires, quarters verticals. the on

have guys And to you do and opportunities Deepstack, the talent seeing new think Are you new market we still being where given that how with going what curious magnet producers? what's you on Just about producers? hire a are hiring like? and continued

Jared Wolff

- I we somebody lunch a of job. we of is opportunities to active front yesterday an part who and talking of other part business. that's together. I And that frequently. with our just at XXX%. about my each make competitor in sure an had active do It's were

because will have to it. continue we talent to We ability absorb the hire

team. will talent. We continue and have But people, we a a for talented to high-quality producers add very

David Feaster

Good. Thanks everybody.

Jared Wolff

Thank David. you,

Operator

Tenner with Gary ahead. next comes Davidson. Please Our D.A. from go question

Gary Tenner

Thanks. Good morning.

Jared Wolff

Good morning, Gary.

Gary Tenner

morning. good Hey,

of and that the You early just I growth organic said the third better the as runoff production? about with for that, kind a ex-warehouse mean think does environment, you… conservative quarter given pretty fourth results a half as new year, of even how loans the single-digit times of -- depending low the that loan translate that back quarters of intentionally of to bridge kind you think next something and strength ex-warehouse. quarter do than few business the was growth kind couple slowed on you're loan uncertain some replacing in of Or you

Jared Wolff

I know, No I look, that's it's hard I to right? I think - don't is But halt. mean, there's the to coming a economy unreasonable. me for don't - think

quarter, - me. grew So surprise growth that would if double-digit you loan like next we if annualized

higher digits low are single even not it's probably flat, or loans But think environment. again, unreasonable. rate repricing in then I a

more growing you balance money. to making So need be be your to don't sheet

and be a can give securities redeploying exist. can to it opportunities You now you flat didn't that that portfolio

as expand we it be we're quarter-over-quarter not going it's one not going like to to going all to quarter. move we at as Your we - expanding. It's down the right? that should expansion incrementally - It's in going And things get being going see it margins - see better road. incremental, it's to to ours do, everything least just

us massive as we're looking to continue down better and just just jump any ball getting we field. the quarter. for particular So kind better move better for We the not trends of some in and the see

take the we on flat. - could net making loans good next to has all make quarter think that money as We it's basis, I well, just as it's time. slowed but growing could obviously not be can don't now. it loan report Runoff drop we projecting So quickly. prudent pretty unreasonable a growth are to saw around one that's yesterday were next was I to Hard of at year. hit going The was and that rates going that right what's end think fast, economist see [ph]. be a to I recession Fed the

one that's for it going knows? case, don't hike I banks rate I But months of was what to is unreasonable everybody's loan be low that then and is saying, consistent a digits. if basis think on single could don't But the to growth or X who or major of be pretty the this others play flat to defense over that think net it's So but think quickly. going are

Gary Tenner

I you in flat balance terms make comments maybe sheet here, more of money. Okay. the is in basically prior And some your that. then that from appreciate but given about

where securities think Or are flows? you kind in side. rates pressure those some funding portfolio, prone the taking would cash about you As you to runoff the be of given on would in think reinvest now, about

broadly, on that. Just thoughts

Jared Wolff

mean I are there? going And what we've that. Lynn that of all mean, been a for analysis thoughts Yeah. while. I your through

Lynn Hopkins

continue portfolio. back the to prepayment I further Yeah. higher point, on securities mean think portfolio for think I point, And of our we Jared's securities cash And for portfolio deploy But have I opportunity cash then strategically, coming side, I attractive off there parts take coming into is to the securities to base. you some down also deposit variable to off can I to as that with opportunity there other speeds the noninterest-bearing think your portfolio slowed loan think yields. for in the think flow grow the rate is rates, of go higher deposits there's I well. flows the maybe as cost to

those think, margin I to expansion. point of things, all So

Jared Wolff

some - in that's something also the then opportunity the higher securities term. there take with significantly lower yielding to are and offset a also hit it Gary, sell like that and is you long yielding There's that benefit

investors So just things look of to opposed those over as at looking term will to all we're the what long quarter-to-quarter. at benefit

Gary Tenner

off. Appreciate terms buyback. this me, in remained you question of Obviously, Last you just that. active for sorry cutting quarter. it. Got and for capital I'm

or think I got you've left in around so authorization. million $XX the

strong, of With uncertain days, down banks including the a given $XX the bit about stock couple use enough here are want the lot quite that your around at range. of last press today, point you is this on time more the obviously, you that How about it down capital Or that? the bit to you a in a do is environment, you buyback? for capital cautious wouldn't would little think - a

Jared Wolff

a it lot have be any wouldn't problem about attractive We valuations. and in not our to highly dent. What to at want stock a of don't have using buy careful I I not is just living I capital. back And really - making

toward can't So lot for worth platform. and enough program, if reinvesting it. systems of bringing doing capital. improving contribute we it's But in have teams, not for We're improving you technology, our a a our other products uses company probably on our

where mean, larger value morning. And to will temporary capital It is lot was attractive. for stock. a this it generate was, is the high think a buying buying our have stock with of uses a guess, including that I of pleased our I one at our clearly talking our investors we very we dip. return. So I

bought me some more. told You you

we when certainly very those don't to carefully. is to look, have I our So it want is, but it stock be at look something at levels, down

Gary Tenner

Thank you.

Jared Wolff

Thank you.

Operator

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

Kelly Motta

for funding. question. back Thank we you – the Maybe could to Hi. circle thanks

layered you what Could that? terms rate provide mentioned you just and fixed rate some some brokered in term FHLB. funding, added you in longer-term CDs on specifically of more color You and the on

Jared Wolff

take want you to that? do Lynn,

Lynn Hopkins

Yeah.

start. me Let

show term well deposits, as which putting was FHLB it So a on advances. as combination of separately, some we brokered our

there I inversion was during quarter, yield bit a curve. more little the the to think

Kelly. at $X So FHLB the at brokered under in and advances. about portion a stuff in to just this funds. longer $XXX A of the two, under the have XXX… look term at combination million think duration. the that advances X and X-year more about average quarter about have years. these They're is was a I was maybe FHLB maybe fees rate in And The we closer X%, point, added just The billion, wholesale

Kelly Motta

Got it…

Lynn Hopkins

And CDs, then we've on shorter average rate their bit little so And lower. have little those, little view our bit a bit think a I they duration. taken brokered shorter a

see duration You here, year. is around X

well. XXX about it's So as

Kelly Motta

refocus good think have? into took well? going of base to that and hotter that really And you most actions that what money some is hotter it. of of that Got quarter you're on core you as the roll after you allowed that is quarter roll the to deposit you Okay. the off kind gone maybe rate the to Or with this money. fourth Do

Lynn Hopkins

an think reset opportunity I gave few really a some our of that things happened us funding to base.

then ball, match with the So we with the the of pullback to warehouse portion funding, on have balances rates a money we term some were let fund crystal able the go over pullback will kind but that the higher higher and it, we out core rate knowing and into But of the costing expectations, other then transition to variable money. our looking then of some some we also deposits. of curves, yield

balance then deposits our have I on core for keep cautious So think manage and sheet good and of there. about been we've judicious us to what the then what opportunity kind talking there's grow a front and and we loan growth, being

long deposit the short So opportunity answer to is with the it's think answer an there's to continue a to I grow base. core

Kelly Motta

Got it.

Jared Wolff

to that. me Let add

that I think in we funding think opportunity opportunity to I is again, going do rate to forward. it be did and made we're it But made it not that when opportunity a say there thought that was curve some do that's it specific Lynn another off mention want fixed make to like wouldn't was we heard - lock there just an not I officially would we sure sense clear, if that sense. if or cutting saw being to

Kelly Motta

question you. a last me. Got for Maybe it. Thank

Do numbers said I you you that? in margin that around higher on your the you the there? at prepared average - than like quarter ending have think exited remarks, spot an have rate. NIM Or do any

Jared Wolff

a trend. to Lynn didn't a we likes quarter say it make publish doesn't So because

we we saw, was and think reason we what the So right? is we think us that we'll to month, know asset sensitive, a which to does stable pace we're is go - we rates - as we're more why that happens asset nor says sensitive, so everything going shows predict. scenario for see run hard we at every make up. The money And

as trend, our that of We the and said would the weren't our litigation. case. expand, where I I we - confident put it's a just we think going thought we so prediction September while be better. forward be believe to right that that that's we want that out margin that's margin think just because to margin or don't and to will don't the And continue We going

on And note. didn't improperly that we want guide to so

Kelly Motta

Got you. I'll it. step back. Thank

Jared Wolff

yes. cautious, To Thanks. be

Operator

Coffee [Operator Our next Instructions] question [indiscernible] comes from with ahead. Tony go Please

Unidentified Analyst

Great. Thank you. Morning, everybody.

Jared Wolff

morning. Good

Unidentified Analyst

given the Just as of I right feel of well like non-accruals the this kind on have where in Or you be at outlook do taken a there. and right and is you got you it to is market safeness is a kind the mean sufficient now? Do you higher? [ph] need level the allowance think your conjunction question the structure allowance. with as on of credit as now, the

Jared Wolff

mean, feel and going We we - it's done all the as forward I rates as right we've I go don't stress testing even pickups we've now. see mentioned, sufficient definitely up.

the and right strong Fed create trying slowdown. was of I now, economy a as So mean the to is

and concerned I affects things about inflation. is primarily wage of we're how that the think one that growth

is slow concerns. they're - things dramatically. charged there so obviously this trying being credit down And to not But is by

underwritten we question rates go couple a well way the becomes, that how any outlined which see any then portfolio, peak now, credit where in up, and very through and that - any concerns. we certainly as our So areas does the not cautious hiccups they very right secure. do why, I of does in be as but go cause up we credit which at would view

allowance healthy. very is And believe our that so we

Unidentified Analyst

I but comments prior trajectory we then all? think in changed up that And Okay. the for expectations efficiency the rates left, incremental were has exactly straight on was ratio, I where improvement interest at think there

Jared Wolff

Lynn?

Lynn Hopkins

Yeah, room think I say improvement. would for there's I

in now with think a with would with where our And bit our the efficiency our Deepstack. it is I or little I investment we've expect rates, to provided guidance lower. ratio be interest that higher

Unidentified Analyst

questions. my Thank are much. very Those Okay. you

Jared Wolff

Thanks.

Lynn Hopkins

I Kelly's got So at apologize, with in disconnected Tim. did the of back I question, join end I

Operator

Fargo. And Please Wells from Braziler follow with next ahead. go Timur is a up

Timur Braziler

up. the Hi. for follow Thanks

quarter Just looks one for that deposits rate point more too the deposit costs then pace kind XX and about of isn't that deposit Is different like basis the than be thinking through implemented indication betas then of in spot we the the the kind were me. on and higher And XX how XX. slowed 'XX? the earlier of rate beta here versus quarter? throughout into the reported should basis some It spot so fourth quarter points, any of

Lynn Hopkins

Let start. me great I do - and observation. question

in deposits managed our rate and and base last And that moderate some I rate variable in September. deposit then XX%. in betas then hike have were growth with deposit with we think the interest exiting of how increase we've did rates around rapid the that the our noninterest-bearing

So rate given at it about look shift into fixed I of longer-term I think the forward, funding. some going our as

is our very And XX%, our for the to indication. predict of quarter But facing noninterest-bearing hikes being rate think deposit in end plus it, call XX. XX% quarter. It's think remain average pretty with point, the to difficult range potential good I XX% a probably of little that would to your is that to with same XX level. the around XX% rate betas I the a at that the spot similar

Timur Braziler

Thanks the for Great. clarifications.

Jared Wolff

you. Thank

Operator

for attending conference concludes presentation. today's the you session, Thank now This has question-and-answer also and concluded. the

now disconnect. may You

Banc of California (BANC) 20 Oct 222022 Q3 Earnings call transcript