LBC - Earnings call transcript Q4 2020

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Operator

Good morning, and welcome to the Luther Burbank Corporation's Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity for the three analysts covering Luther Burbank Corporation to ask questions. [Operator Instructions].

would made remind be during statements. I of that considered begin, comments the this we like everyone to some forward-looking Before call may company's actual Form any this X-K year, certain factors projected XXXX Form The in cause forward-looking and differ identify for morning. the materially could reports those company's XX-Q on made quarterly to on fiscal reports current that XX-K Form results statements its the from result any The information of company a not statements does developments. new update future forward-looking or to events or as undertake The company company's company's the from periodic reports are website. or website available the SEC's the online on or with to like markets or margin sheet are would thinks it any the guidance. while prospects balance remind I establish the good, company's policy management the you that company's is earnings, performance for the company's to not would I and President conference like the turn now Simone over Lagomarsino, to to CEO. ahead. go Please

Simone Lagomarsino

you recording Thank and Officer. welcome begin time, The Luther unexpected same company XXXX a the knowing and highlights today with Financial year steady me loan Lagomarsino, our of our outlook. quarter Burbank conclude performance with last for reliable quarter Tarantino, with XXth the take Good our profitability. financial fourth Simone Officer and is to fourth our the that year-end and President our Corporation's After I earnings This Chief performer has shareholders. comfort of events and very year, marks our partner a results, of customers is I'll then Today, remained year and conclusion our much. at summarize our quarterly deposit Laura XXXX call. Executive consecutive calendar Chief and XXXX consistent to full-year morning, of conference

following our is and presentation. download reminder, this quarter this website available be available a webcast for on Presentation our fourth As will also on Investor

due diluted $X.XX for of common share, reduce pre-tax was linked common we and the million Fourth rate million, our and decline quarter decision share, or to $X.X an to net $X.XX net million and million the common interest earnings of advances. quarter impact share. prepayment impacted Our quarter. as to Home decision the Federal or of in income in $XX.X non-recurring not net diluted excluding linked of to a $X.X quarter compared fixed fourth would $XX.X made negatively pro per million penalties $XXX charges, quarter loan or holdings forma per million, by as cash the diluted these borrowings the stronger primarily have Had $XX.X the excess per prepay earnings compared income were incur prepay Bank Loan net income been to fourth increase $X.XX our This improvement to growth was production. long-term

as improvement low environment and year. Rather in deleverage margin deploy well As future elevated investment interest yields attributed to solid where potential. of into loan instead pace a yielding are the it our result believed of to interest management rate company's sheet continued the company advance the than equally balances grow of net the and the was this our retail to as deposit cash portfolio growth, best balance low, low prepayments throughout the interest cash earnings

extent bearing income. from assets. the point for our This in quarter a liabilities basis on fourth interest reduction of $X.X interest net the of was interest million the X.XX% cost XX quarter our to than margin the bearing declined interest net greater or improvement as greater yield Our linked resulted a

that $XX.X progress later not net the $X.XX year provision portfolio XXXX in as quarter less of share as XXXX been quarter loan than discuss the income for include million or loan performance trends in results more $XX.X losses compared fourth or prior-quarter, quarter-over-quarter. for costs the loan any pro income compensation discussed, per linked were in of as per was costs XXXX reflected detail share. share. penalties did our capitalized volume origination prepayment previously have net of new XX% to the increase $X.X Additionally, $X.XX net to fiscal in diluted improved. Similar this or presentation. loan excluding impact for I'll forma $X.XX million the $XX.X would the Annual common income million million, Again, per our

result higher was aside interest however, substantially year. of set pandemic. As improved compared the XXXX cheaply as during net greater year, in company's fiscal losses million respectively. for million compared loan in The from half the year, X.XX% loan prior net primarily of year potential reserves the $XX.X interest XXXX, X.XX% our XXXX income, the COVID-XX to the first as during by interest losses the $X.X income prior other to uncertainty margin possible company increase due the for The in net to our offset related provisions expansion for made to the to for by a

for decreases to by cash income million reduction due to in declined Additionally, Federal as prior-year. to dividends loan executed also sales loan of servicing of loan non-interest XXXX high speed fair prepayment as attributed in as rights gains well and to the during and income Home Loan absence related XXXX a Bank the compared servicing mortgage $X.X value the

in I'll our loan as Now, trends return portfolio. to promised, credit

outstanding to of of the We for loans financially granted company date. balance As half for X.X% payment those reported XXXX. XXX XXX loan same as applications one by assistance. partner our applications payment in or XXXX, portfolio approximately the of COVID-XX. year-end was we represented as of received proud modifications portfolio by temporary regard, This earlier impacted this borrowers our In offering for with our programs deferral during those

their one representing borrower million, X. report loans $X.X demonstrated of at payment indicated deferral two loans that indicated our recently end monthly routine of debt resiliency to just return and to to I'm return XXX making period, year-end XX% the is this payments as their The to of to to the end which specifically, they modified borrowers pleased As remarkable loan of have plan service More intent progressed, status. the the returned beginning returned year loans payments, payments of XXX of over to have have month. February and making

Finally, after totaling first half less loan which its to experiencing one our early issues balances million, deferral in single became quarter. portfolio, the the the payment its non-performing payment to one $X.X fourth was which year-end. than X% made or impaired pandemic of loan period That family residential loan by of ended, added delinquent subsequently was prior

not applications We Assistance since any Pandemic Payment have August. received for last

loans or payment includes assistance. initiated for applied in of repayment portfolio our non-residential reviewing that either real received The appropriately the to During approach estate ensure a and for. with risk-based the capacity credits or all to our fourth approach $X.X credit evaluate graded adequately greater proactive team such income quarter, balance were property million of reserved loans a that

either watchlist substandard XX of million. of debt as result status upgraded given or retained $X are majority our liquidity during property evidence loans by reviewed status downgraded of their quarter, were the assets were loans Primarily path hand. and this capacity a paying on borrower that criticized mention increased performing payment limited agreed special or as process or the While evaluation to fourth

loan XX% appear be exhibiting based of anticipating not all with average any to no assets increased, weighted a by value collateral XX% they greater secured criticized value and well loans we’re ultimate individual loan a than from to original on loan Although ratio of as these losses to appraisals.

year. in quarter, past last finance for type stable suburban and B the in class According recently held by over properties increased CoStar, the Angeles collateral that bedroom X% Los the markets XXXX. West typically discussed rents multifamily market during about data published metrics As has of one Coast residential C we to

according necessity the rents apartments. B shown last graph compared by Class and year, and volatility C rates as over remained published less Additionally, Matrix, relatively on a rent national to basis, by A Class vacancy have to stable have apartment Yardi Class

portfolio a the as we While, our established a of loss loan as grew prior-quarter. charge-offs balance no loan fourth reduction initially as the qualitative were quarter. criticized in no company small in criticized higher to during loans as compared offset loan quarter, entirely The light was fourth the period, by that well in total recorded in the impact for decline the loan balances COVID-XX of reserves provision recorded

on as portfolio. company million has the points points, XXXX, for our pandemic's set prior-year. And totaling loss XX XXXX, as basis end our X.XX% a reserves loans the recorded qualitative recording charge-offs year-end of net the aside at was net of coverage $XXX,XXX compared basis total quantitative At impact ratio of delinquent compared loan of during and and XX, we to $XXX,XXX as remained the At performing XXXX. levels loans percentage respectively. recoveries at of year-ended XXXX, and to low $XX.X of For December assets loan allowance both the non-performing XX uncertainty historically for X.XX%, the

to sheet. turn we'll Now the balance

December year-end of decrease totaled end for real decline exceeding million, volumes of since loan $XXX year. decrease in as due to XXXX. the curtailments The a origination a portfolio at estate was $X.X result million, family our a single loan loan of and assets payoffs or Our X% the

which primary partially not during by million, generally lending experienced loan in portfolio interest XX.X% XX.X% in in of XXXX. our growth for single Conversely, the fixed portfolio residential XXXX family the offset the of XX, mortgages, loans or family our beginning historically Our single decline balances loan portfolio represents product which single our $XXX CPR family loan at XX% low was attributed company. offered rates portfolio the of a a our year. XX-year declined loan multifamily decline product since is to rate by by December The

portfolio loan multifamily year-over-year. or million Our by increased $XXX X.X%,

the declined funding our or others excess company's prior-year, company deposits $XXX advances Bank and $XXX Retail wholesale the $XXX strong. million million, exit assets X.X% respectively was position to XX% Federal while since the in the from grew Although The during similar to deposit beginning year and year. decreased million of remains industry, in Brokered Home strong. deposits flow capital growth cash positions. total or utilized the XX.X% the Loan retail

challenging million we invest stock repurchase took activity. asset During of stock light environment market growth, in company $XX our to XXXX, a the opportunity of price through for the our in in over

$XX.XX. During million discount common our the X an a value XX% repurchased to of stock average December of at $X.XX shares of or year, tangible XX price book our we

the remain grew period. While ratios from our value over year-end same XXXX improved with or consistent year-end levels, share X.X% tangible per our book at prior capital slightly

during XX, shareholders closing based Additionally, dividend the on paid we December our price cumulative of yield a equating of per share shares of dividend $X.XX to our year, a XXXX. the on X.X% to

maintain to cash We're to As on shareholders early previously announce continue place. active at we At $X.XX of directors an current repurchase that share level. November, in quarterly payable declared of XX to X. board quarterly a February plan pleased this of February yesterday time, record of our dividends intend the per we the dividend announced, in have to share as

Before for like initial share to year company's I I'd XXXX. conclude, our outlooks the calendar

continues be Our asset primary goal smart to growth.

not have compared credit our we volume in that parameters terms, Although XXXX remaining XXXX. few expect have returned we pre-pandemic will to that as increase total a origination to

the million than loan XXXX Our approximately at prior-year year-end was higher end and level. pipeline XX% $XXX

intend we to Additionally, officers income to property year. this staff add loan

spot remain activity will we looking XX the of portfolio X.XX%, our continued December that and the also However, at rate interest prepayment current of brisk rate expect environment. given loan low at loan

XXXX portfolio, on we're to As to the our balance X% year. hedge the year. continue expiration using of the delever range third margin Based greater interest deposit and acceleration quarters with expect in positions, actions growth in a continued of looking in fourth our repricing throughout the the some for cash excess to for to result, asset sheet the improve we this and X% our net

points first our will per interest potentially is Our margin And three have expired range that of XXXX. a quarter the the then half net basis by once improve during positions preliminary expectation reach vaccination and of XXX approximately during cautiously the will forward during the half stimulus remain we additional current With the second the to expected, XXX year. improve environment pandemic points optimistic current of year. that basis moving programs hedge

of in COVID-XX moratoriums, as including loss provisions allowance our for we extension foreclosure beyond we quarter growth significant reserves deteriorate, may not first increase near-term. needed that eviction current Well, aside always, projected release adopt the given under potential of XXXX, number the does until loan modeling not we're However, anticipate and additional of expected the that the methodology set did be conditions levels indicate And, loan should to levels. any credit required. will not in CECL for the unknowns

branches or close We plans have XXXX. to during no administrative offices downsize

XXXX. $XX.X the non-recurring or the fourth over customers non-interest million Excluding of during efficiency was improve our incurred loans. to deposit improve we in expect experience estate and quarter, within per growth prepayment a originating in million plan than previously digital continue technology less to X% We quarter XXXX a of penalty $XX real our better to to to discussed, tight that range for invest expense the hold

$X projects spend pass for to new capital now some Our loan and for Laura presentation on in trends. details the brief million. XXXX approximate deposit I'll

Laura Tarantino

Thank you.

pipeline our loan Simone mentioned, healthy reflects As activity.

Now rates, our activity weighted X.XX% XX% XX% then year-end low on the were full expected pipeline than in continued points less at refinances. refinance at for and The are the of XXXX. coupon loans was XX on in-house coupon preponderance given however, our of transaction, end or basis loan portfolio the approximately average

year-to-date, due this over not increase increase to has rates, an competitive in industry. benign XX-year growth Although treasury seen in the loan we have and likely pricing, five translated into the

Based the by portfolio points see the the reduction continued current levels experienced I've given XX coupon loan months. in metrics throughout portfolio, during our to year. on year this expect to degree would the loan but a our pricing several the than larger During high XXXX, on XXXX past throughout in basis we provided, decreased turnover

hand, XX to basis quarter. of to portfolio. deposit our the ending our linked deposit at December the compared other cost measured savings The we in end on points do see retail XX portfolio the On additional rate as X% at expect

basis $XXX recorded or rate rate reprice. December, money retail certificate on weighted are approximately X.XX% in XX points, average During XXXX, basis of and scheduled measures while CD XX average the renewals quarter points to new of an million The these less. was first retained at of accounts current

to XXX X% our retail decreased end by reduction point the in to drop per XXXX, start year a Fed deposit rates the expected this basis liquidity with month. up catalyst, year, largely two During to more basis year, first are gradual the to the greater repricing spot potential as a Retail a of from banking as deposit of serving well cost pick one system. improvements in the the as of result quarter as the be the point

is As to margin this expected last most of show Simone half previously noted, our the interest during the net year. improvement

ask set open and carry billion with current concludes one prepared And We in a remarks. operator at of swaps rate interest this half to points, XXX year. time, with June line the in $X our basis for of have This August expire to the negative both we'll this questions.

Operator

[Operator Instructions].

Clark Matthew from with comes question first Our Piper Sandler.

open. is Your line

Matthew Clark

the I that what On whether occur, --? of guess the did part just in quarter FHLB the late a to quarter get or trying prepayment, for sense not it or was

Simone Lagomarsino

mid-December. was it yes Mid-December,

Matthew Clark

And why savings might a us your remind and I have there the guess relief I the spread would not? terms remaining bit Is that is in over be more of borrowing costs. life? that little But it's thought on

Simone Lagomarsino

one? you do Laura, to want that take

Laura Tarantino

about the XXXX. late improvement XXXX all to results. The in be that in basis was else equal probably correct. That's for not being is going seeing because year, XX it points, you're But

Matthew Clark

FHLB advances? prepay appetite your to additional And what's Okay.

Simone Lagomarsino

say and trends I the take throughout it would to monitor depends, year. but going

Matthew Clark

swing production but run FAS in after guess fourth XX My Okay. rate steps is expenses. up materially anything I related kind year? XQ advertising And the mean, is past of in this first more maybe to of from to the this the relative else a year that's then strong there? uptick

Simone Lagomarsino

want you of taxes Well, employer QX just because And, increase. employment Laura, will to higher have normal definitely that? on do the QX taxes comment

Laura Tarantino

would changes expect I for some each And increase add we Sure. staff. at merit that year, for

Matthew Clark

where your going any Then, I forward? anything of the shakes lot active, update you on period. out the will assume the updated here stock kind blackout on thoughts okay. more But is the after any buyback Great, just on around it guys -- get assuming buyback,

Simone Lagomarsino

Right.

as the price. our think and is part of capital best current of levels focus the management a there's use balance what's share between capital the I and unknown our COVID of our of

total So continue a interested we in additional the use we're shares place of having that, -- we at $XX that see of of repurchased November last and focus million what's will having we'll set buyback buyback on there's in $XX number the as our -- certainly having best of of going the last this significant forward. year. buybacks million capital and aside conclusion year if a through And of of

Operator

you. Thank

comes with Jackie question next Our from KBW. Bohlen

line Your is open.

Jackie Bohlen

color next margin you and of wonderful terms for the start the just the see in I the pulls, all the in quarters pushes Thank to over months. and deposits. with and you coming want

start on put that Here place some that of you've to further repricing even an you've reshuffling you and as just look had moving things in keep update CD good impactful? Simone already down success in become less that what and to put you to place might trajectory at the see portfolio

Simone Lagomarsino

Sure.

to of XXXX, in outreach, community focused cross-sell offering customers attract employees done to So which And strong to more both higher existing branch XXXX to had and that hired really customers, a was sorry basically we first customers banking who honestly mid-year the us through very and individual in -- be bring all what a very and background number in activities. new the quite mid-year we from focused put approach for on newspapers programs of different has is historically, through new advertising sales which put we in a in is division XXXX, run he's a rates. us in our helping

probably, deposit. of across the are twofold addition in been So and successful obviously, industry and to what's there's just where in I how products think why industry some in new is But influx been bought the whole we that it's happening creating we've approach, new services. an

identify additional products more So granular of base. driven, of will we deposit less rate deposit and growth from the of and services efforts we've to support and both to continue and the we on more as those, them focused that's combination calling benefited support

Jackie Bohlen

Okay.

of And in consideration slow progressive guess kind taken margin a and as into costs your forward, should probably that move that I and just continued and the So well. would we new portfolio, aid that's churn as thoughts? deposit

Simone Lagomarsino

I Laura, it Correct. any opportunity. And don't know, add, I Laura, answer have I that want I more well, always I something, certainly know, you that like to offer but and to you give certainly if to I then you'd

Laura Tarantino

No.

culture it's house, the think of time deposit part, takes it implement. to As change a I summarized, side our really you in on

Jackie Bohlen

we then or thank I standards underwriting it I'm past, second in quarter know if can't tightened pandemic, in was know tightening, the stand of today apologize, Okay, where quarter, and the I generation released then, I to you at And this in that early the you. types wanted you've third discussion I of the remember where a had looking see some year-ago? of you're just you you the were where versus terms

Simone Lagomarsino

we assuming plays to our year, quality mind likely of quality out where be we regulations direction. And in that. can again, we the continued our the of keep most we're probably pandemic, change to want don't have each on credit were the what direction half changes other our performance first Certainly, not portfolio, our slowly pre-pandemic, back confident next, move of see and vaccine last legislation we quarter, prior portfolio our of go-forward. the of -- back to within to this feel and continue in everything we've We were the historical you terms credit of within year, portfolio, underwriting We're as we kind that will to pre-pandemic towards the course the in moved to criteria. over the of and existing underwriting where make the but and some we completely in back we that to and

Jackie Bohlen

you. thank Okay,

within were all where next months. back think we couple want to I to of we be pre-pandemic the

very you So, thank much.

Simone Lagomarsino

Jackie. you, Thank

Operator

Thank you.

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

line is open. Your

Gary Tenner

to this space, adding Thanks. Is Good in income real about or estate you're property that looking comment out multifamily non-multifamily year? the clarify loan in your of officers wanted year. is as the that kind for commercial I morning. just

Simone Lagomarsino

multifamily. In

Gary Tenner

that for Those excuse -- expansion are lost that as it had multifamily, relates [indiscernible] margin Thanks. question year okay. you're the And I I projecting then me apologize; just actually answered. the to

Simone Lagomarsino

okay. Gary. you, Thank That's

Operator

the turn remarks. further Simone this Thank at time. back currently for I'll closing I And over you. call show to no questions Lagomarsino

Simone Lagomarsino

thank Well call. conference you. XXXX you year-end in call. participating our conference all Great. concludes the for Thank This

Operator

That concludes us. website. available recorded copy the on our A you company's will joining today. Thank the be call for of call

Luther Burbank (LBC) 27 Jan 212020 Q4 Earnings call transcript