- Earnings call transcript Q3 2022

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

Operator

Good morning, and welcome to the Luther Burbank Corporation Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions].

Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements that do not relate strictly to historical or facts. Luther Burbank Corporation does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. our forward-looking to statements. cause those materially could in described factors actual differ results from Numerous

Burbank companies. filed For performance efficiency see today believe reports and Luther provide the periods information contains relative company's website more on measures to about relative periodic to accessible those certain non-GAAP useful at earlier that The information the and SEC. with factors, financial please Corporation other presentation and we the operational our

measures financial comparable and limitations, more Please Simone to refer turn details is non-GAAP For our at to and the directly President these with Lagomarsino, available presentation most to and website to reconciliation the which www.lutherburbanksavings.com. GAAP their conference ahead. and investor release on go CEO. including please presentation, I over related on like yesterday's would the earnings financials, now

Simone Lagomarsino

morning, me our much. quarterly Lagomarsino, welcome Thank recent quarter with And earnings Good questions. share Laura review lines financial Today, our analysts' performance, trends, call. third on we'll the Corporation's President This for conference you everyone, open is Simone the Tarantino, our then today Luther our CEO. Burbank and CFO. observations and very is and to

rise $XX income of $X.X to $X.XX to million was million income quarter. Our quarter market as decline the in summarize net attributed as earnings rates. net in in the the The interest financial in diluted components compared $X.XX third for the share net share $XX.X per diluted the per Three or or was changes compared million linked second key to quarter. primarily

losses by increased by million $X provision $X by million. our $X.X for decreased expense our income non-interest interest net Our million, while declined loan and

in each more Let detail. these me of address

rate loan increased originations. and income as swaps loan earnings on growth, higher interest on earning of First, our loan coupons loan new prepayments, interest on greater slower result a assets

the second interest-earning on assets during to the by third quarter. points basis increased compared yield quarter Our XX

interest interest-bearing of expense points by to on given costs third balance cost increased resulted the more compared interest for rapidly liability-sensitive on rates in our the our increase borrowings liabilities deposits basis to the linked quarter. higher However, funding XX quarter and where sheet,

margin interest of the with the our we call. measured and provided from basis quarter linked the decline X.XX%, XX last line points quarter's a in guidance net Our quarter for that third during earnings

prior loans estate year-to-date, real our $XXX Our XX.X%. by loan or quarter. growth annualized the million from X% grew was And

both brokered portfolio for originating were during the property grew financial other was Like wholesale end, in our X.XX%, by respectively, million our which to similar the growth which speeds on due Although loan loan fell the advances for X.XX% single-family average to million rise. loan quarter the residential are income on deposit production and average respectively. by declined At during points institutions, loan quarter, yielded as we quarter X.XX% FHLB coupon funded within quarter income notably for retail primarily loans coupons the quarter. loan new basis, the and continued several loans the average from compared net originations the weighted prior was weighted that and including linked balances quarter. The by sources, our rates, single-family increase of linked market XXX higher loan an prepayment $XXX for $XXX on $XXX million, property percentage was, and declined. deposits, the pipelines that fourth the Growth quarter and to quarter a or And basis coupon to quarter.

deposits, our more wholesale growth support of than negative a our margin. funding our on can expensive quarter, by retail to $XX treasuries. retail the the opted customers some million During choices, deposits including U.S. impact decreased as for wholesale investment had be use third other funding net interest Because

retail deposits XX basis interest-bearing the of of cost a wholesale basis second our cost increase as from point quarter, the points XXX the third the deposits for quarter to in during period. rose same comparison, a compared As

also increase related Next, loan costs the lower I to due million in mentioned higher Non-interest This from in origination primarily amount expense to linked previously an to the earlier that origination XX% loan costs a expense advertising of increase $X.X volume, compensation our which non-interest was deposit due by a generation. retail with of associated $X.X capitalized to expense decline mentioned. quarter. I as which increased by was linked impacted compared quarter, million

recorded the benefited Finally, loan net $X primarily $XXX,XXX a quarter loan as quarter. net loan million We a loss income for provision in prior to from the for provisions compared reduction loss growth.

$X.X declined remain our the of during XX, quarter quarter of had loan At only delinquent XX by two total the portfolio. in loans loan basis a Our classified level points of more September the loans at portfolio. and assets than end, million low X,XXX we

balance quarter portfolio by asset our loans nonperforming paid of continue and basis end. expect well perform be proud ratio at extremely Our to I to non-accrual very total X any of our asset and downturn. quality loan to our economic points remains to measured current. are XX% credit only strong potential

by September -- sheet. advances -- to we from quarter FHLB prior our grew stockholders' net year-to-date equity by XX, $X growth by during prior driven X% balance the by previously and the grew grew turning a on Total the since and $X.X Total since basis million and million the XX% quarter, prior wholesale funded totaled assets $X billion quarter. loan primarily Now prior our deposits as discussed. quarter at and by sorry

net but of the losses of was our Our as by quarter offset available-for-sale capital on environment. securities our result a million of third interest rising $XX.X $XX unrealized net portfolio tax of the rate position during partially earnings benefited million, from

share. as per $XX.XX XX. on loss shareholders unrealized in $X.X position dividends form book net returned Our million quarter, grew available-for-sale of the we and during share investment $XX.X the our million totaled tangible our Also per portfolio of September cash value to to

X and of respectively, Tier capital tangible XX%, capital strong. and X.X% ratios Our remained

dividend a share paid November common declared be on Board Finally, that per $X.XX XX. of will yesterday, our Directors

quarter the recent a and yielded be rate respectively. this volatile assets continues on return the XX.X%, X.X% Although average our average for return to of environment challenging, on third net and equity year and income

totaled -- pipeline. XX% continue however, or rapidly in forward. fourth loan quarter the We the quarter of rates interest million challenge rising our by quarter. to the about its results production $XXX size end and short-term activity expect impacting to our higher will that looking level the the September as evidenced activity the refinancing market, third At rates pipeline second XX, at of to of Due loan decline interest our in we believe, in purchase

still the was and loan our net loan single-family as realize quarter. prepayment production one-third may by speeds in volume slow, declined growth as loan both to linked portfolio While approximately compared we income property

We to during rates the and fourth the based of continue Federal posturing offer increase on older cost deposit to as accounts term Board the current to of quarter current mature Governors. Reserve repriced expect and

Additionally, since continued the experienced and U.S. competition during the generally deposit strong throughout banking over quarter, deposit U.S. the fourth expect Consequently, the -- we deposit banking cost balance outflows since past we anticipate the acceleration quarter. XXXX. industry of

in to fourth that for Laura our our comments. yields our funding result, are additional in again the now And costs our and some turn outpace quarter. that, will improvements compress As assets, with on net interest-earning our call a interest over I'll margin will that projections the

Laura Tarantino

Simone. Thank you,

brief, consider some we're that provide I'll usual, and our our analyzing as more trends but granular we information, projections. As

quarter. The end fourth new quarter, added the of X.XX%. at to portfolio on third we expect coupons at loan volumes our the be the During rate exceeding X.XX% spot was

our is expected volume origination yields positive -- volume, repricing to should direction. loan Although prepayments and a portfolio slow, yields loan in slower move our new

Additionally, of months. of our weighted at quarter portfolio XX% floating, securities a were end, with repricing average invested frequency X.X currently

also rates rise. continue investment interest as yields So improve to see we should

Moving to deposits.

third was of grown total Although generated XX%. this retail the $XXX impressions, quarter from Digital of in customers advertising from which have first-time X.X the about which to bank. approximately our advertising to quarter, XX% money website, were bank's deposits visitors. new million declined yielded XX% with XX,XXX households Year-over-year, during million our campaigns, visitors the new we

mature. this of carrying million have we term XX average deposits, year, to $XXX weighted cost fourth the scheduled of During of basis points quarter a

and At advances $X.X X.XX% a and X.XX%. of totaled September, X.X During a of of the cost new to weighted average accounts years. average month term of carried weighted the end, FHLB was our renewed and maturity billion quarter cost average term

maturity. our results XX.X income quarter benefited carry points had a we interest from weighted third the $X.X totaled swaps quarter. with weighted of a average fixed $X.X rate of At Our positive was swap the of pay months swaps and that the basis to XXX Net average us amount net to existing our notional for books. September XX, billion, million on

we and our As earnings forward. Fed as derivative add balance our these would positions to move positions improve, funds to new to sheet from expect rise, we will continue

quarter as We anticipated. level higher volumes of non-interest $XX of is would resulting a result loan fourth approximately lower amount as expect and to of reduced compensation a Lastly, expense, the salaries. capitalized costs for million the

for line a those we As open have comments, to quarter. of through for should for last annual non-interest budgeting better the process, questions. next projection ask current we operator you expense work we'll our the XXXX With now

Operator

comes question Our Woody Instructions] KBW. [Operator from with Lay first

Your line open. is now

Woody Lay

Good morning, guys.

Simone Lagomarsino

Good morning, Woody.

Woody Lay

good Does back at about each NIM run going rate look NIM. feel expectations half points a forward last XX have first down like I you quarter, to basis still wanted that 'XX the changed? a the being over the quarter. guided I believe or quarter, of

Simone Lagomarsino

point, Laura the big just expected a our XX we NIM because looking digital at project and at quarterly point. greater to deposit that's So us are that seeing. this for large reduction in using you're part really costs, did that's to helping marketing detail this guide correct. think have because hard that NIM rates. variable to as not that just probably at Woody, we're into at -- that's basis. our would in too extent, various went different XX the deposits projected deposit in Last of market as on I in a basis to on we're us. conference great is bring volatile a we And call a And point quarter, it we our And we

Woody Lay

fund fund to will then do in some quarters, just growth do you growth in think mean can the expect loan extent I increases to look And some to market? it. Got you coming growth? that deposits -- the we Or it? wholesale do retail how you see the

Simone Lagomarsino

the above. Probably of all

So we the that deposits efforts recently through Laura of in -- and rolled digital have been, retail actually out. have in for said, this this we growing quarter, some as more marketing successful

as So we wholesale retail, some then funding would expect some well. and growth also in possibly

Woody Lay

color. metrics, credit, just the Okay. good And then remain for looking at very clean. That's last me,

optimistic cautiously I just on the Or talk this macro pause that you -- -- you as or are front, as to you mean, uncertainty? borrowers, credit gives the Just at your anything there is given point? is

Simone Lagomarsino

to be the FICO of at debt particular, the continue over portfolio. But on on cautiously We our optimistic. quarter at the multifamily family, in at on we and got single-family portfolio, think scores And you X,XXX the were had a multifamily. And that X look loan-to-value you delinquent and loans. average our if the optimistic -- both look single loan really loans said, as we solid I just we've at end the coverage,

-- say in I but sound for provide So need as is we workforce hard low to And people. and strong. see like have vacancy Affordable it what housing rents think I and affordable people continue it live. been are is the a multifamily markets, to cliche, to in a may quite find, rates those housing we it, primarily place is

a cover we in strong and plateaued, our have loan-to-value portfolio. Although they have we very but ratio still think might debt

that So as to we we confident, the back point Great portfolio and Recession, and feel extremely look performed well. at well the fairly

Woody Lay

all that’s for great, me. you. all That’s Thank

Operator

Sandler. Our Butler with next question from comes Adam Piper

Your line is now open.

Adam Butler

recently Hi, on morning. campaign Clark. outlooks was to was what in growth is advertising curious for during I This calling a are see the everybody, if of you pretty successful Adam mentioned. level front? Deposit your in growth from similar Matthew that the you deposit quarter expect good Or that XQ?

Simone Lagomarsino

new And a digital and and it doing pricing different actually will if as on a marketing. digital see fine-tuning but as result similar different as our the we some we our in we level, regional what's different say are to of successful products of successful marketing to website pricing our and visitors quite campaign terms well of hard markets. in kind it's are in be digital So

home the a expect minute do growth that And a loan also through So couple we we federal wholesale expect with mentioned as deposits. deposits of campaign in or probably augment those. retail our other, all -- one or to see that ago, minutes funding, we to whether some wholesale but and banks ago both some of possibly

Adam Butler

wondering spot Thanks Great. end color you And on the Okay. there. September? have of as was guys of for deposits rate the if I the

Simone Lagomarsino

for write-off. Laura that I is have don't that. apologize. looking I

Adam Butler

Let's do question. another

expenses. lower increase that Just expect rate bit should slight going saw then to -- XQ, of on loan to little costs? a any into great. color be capitalized And do you based levels We ahead would and forward turning efforts? Or run advertising kind of offset over this increased be that expect to going go lower Or we quarter. origination see a by there

Simone Lagomarsino

Yes.

That capitalized for been we does expect, we've run fourth costs of expense, terms on because marketing I doing. we'll of million because and salaries lower $XX for our that and So rate include commented that's Laura, about the partly do quarter loan our will marketing additional we have both the be of think, levels. levels some in that lower production noninterest

Laura Tarantino

Sorry, deposit portfolio a X.XX% X.XX%. I have rate also spot retail your for of Adam, at

Adam Butler

Okay, all question. are Those awesome. you. Thank my

Operator

the D.A. Tenner next Our of question Instructions] [Operator comes Davidson. line from Gary with

Your open. is line now

Gary Tenner

book morning. were this believe get questions Good I -- second just Thanks. you've is to in thoughts stock the largely announced where tangible given I'd I that another love completed My capital around ask and point, authorization. one buyback. the topic. previously expectations but I at your the share would about you the thought know repurchase below around don't but quarter, asked, value,

Simone Lagomarsino

impact present or we margin to the compression our the has Sure. are Capital something very and we've portfolio -- earlier just it with And we doesn't seriously sense. talked considering that time, well, an has Thanks, monitor ratio think, -- consider more, rising rates. And do capital a and that our we about with at I makes on mark-to-market we as the is repurchase, some it to and interest a whether securities Gary. seen not do share take and role us perspective. ongoing part in that management not on

are capital, value the we regulatory For our book in as share well. impact seeing per

want that's and an think, now, So on and may where at into we -- that a -- to we we just preserve it recession. at change, -- look capital right of an in we're on particularly that heading ongoing but posture this point, we basis, the do possibility capital at

Gary Tenner

Simone. Thanks,

Operator

remarks. to That concludes today's question-and-answer for Lagomarsino session. the back I'd Simone like to turn closing call

Simone Lagomarsino

sharing We And call concludes you Thank all us. and Thank very appreciate with this joining our you. much. morning. this of you

Operator

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

Luther Burbank (LBC) 26 Oct 222022 Q3 Earnings call transcript