Pacific Premier Bancorp(PPBI) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $69.8 million or$0.73 per share, resulting in a 16% return on average tangible common equity [6] - Total revenue increased by $7.2 million to$195 million, with net interest income rising almost 7% compared to the prior quarter [16] - The efficiency ratio improved to 49%, and pre-provision net revenue increased to $96 million or 1.77$10.9 million to $172.8 million, driven by higher average loan balances and interest-earning asset yields [18] - Non-interest income, excluding security gains, decreased by$1.5 million to $22.2 million due to lower trust income [20] - The company generated$1.5 billion in new loan commitments, translating to an annualized loan growth of nearly 10% [8] Market Data and Key Metrics Changes - The cost of core deposits was four basis points during the second quarter, reflecting a stable deposit base [11] - The loan-to-deposit ratio remained flat at just over 83%, with cash balances increasing by $164 million to$973 million at quarter end [26] - Nonperforming loans decreased to 0.3% of loans held for investment, and total delinquency fell to 0.24% [28] Company Strategy and Development Direction - The company is focused on maintaining a balance between profitable growth and prudent risk management, positioning itself for future growth [5] - There is an expectation of a decline in commercial real estate (CRE) production due to lower demand as investors reassess valuations [33] - The company continues to assess all areas for incremental cost savings, including a recent reduction of 53 positions, expected to yield annualized savings of approximately $7 million [35] Management's Comments on Operating Environment and Future Outlook - Management noted stable trends across loan portfolios and no general degradation in borrower cash flows, despite economic uncertainties [31] - The company is optimistic about its ability to navigate the current economic landscape, with commercial clients performing well [32] - There is a cautious outlook regarding credit demand, particularly in the CRE sector, but management believes they are well-positioned for future opportunities [34] Other Important Information - The common tangible equity ratio ended at 8.52$445 million of available-for-sale municipal securities to held-to-maturity to limit future valuation changes [25] - Management emphasized the importance of maintaining a low deposit cost and not overpaying for deposits to create franchise value [76] Q&A Session Summary Question: Follow-up on M&A commentary - Management indicated that M&A conversations have slowed due to current multiples and uncertain outlook, but they remain disciplined in their approach [43][44] Question: Growth and loan rates - Management acknowledged slower demand for credit, particularly in CRE, but expects high single-digit growth to remain sustainable [51][52] Question: Restructuring reasoning - The restructuring was described as trimming around the edges rather than being bloated, in line with activity level outlook [59] Question: NPA relationship and charge-offs - Charge-offs were predominantly related to one non-performing loan, which is expected to be resolved by the end of the quarter [60][61] Question: Deposit balances outlook - Management does not foresee significant roll-off of deposits and plans to manage deposit pricing cautiously [76] Question: Trust and escrow business impact - Fewer transactions in the escrow business may negatively impact earnings, but proactive growth efforts are expected to offset declines [82]