Good day, and welcome to the Pacific Premier third quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Steven R. Gardner, Chairman and CEO. Please go ahead. Great. Thank you, Sarah. Good morning, everyone. I appreciate you joining us today. As you are all aware, earlier this morning, we released our earnings report for the third quarter of 2022. We have also published an updated investor presentation that has additional information and disclosures on our financial performance. If you have not done so already, we encourage you to visit our investor relations website to download a copy of the presentation. In terms of our call today, I'll walk through some of the notable items related to our performance. Ron Nicolas, our CFO, will also review a few of the details on our financial results, and then we will open up the call to questions. I note that our earnings release and investor presentation include a safe harbor statement relative to the forward-looking comments. I encourage each of you to read through that statement carefully. Over the past several quarters, we have taken a number of balance sheet management actions with respect to interest rate sensitivity, designed to preserve our ability to deliver solid financial performance in an increasingly challenging and uncertain environment. These actions, along with the ongoing business development efforts of our talented commercial banking teams, served us well during the third quarter. Our earnings per share and pre-provision net revenue both increased from the prior quarter. Our net income was $73.4 million or $0.77 per share in the third quarter. Our PPNR return on average assets increased 8 basis points to 1.85%. Our regulatory capital ratios further strengthened over the prior quarter. Increased profitability was driven largely by net interest margin expansion from the prior quarter. During the third quarter, our net interest margin increased 12 basis points as we effectively managed our deposit costs while realizing higher yields on earning assets. We highlight in our investor presentation our core deposit base, which remains the foundation of our franchise. Our cost of core deposits remained relatively low at 11 basis points in the third quarter, which reflects our relationship focused business model that has resulted in more than 38% of our deposits comprised of non-interest-bearing deposits. Given the expectations for further rate increases over the coming months, it is likely we will see some acceleration in deposit costs going forward as we are not immune to market dynamics. In addition to deposit pricing impacts, the higher interest rate environment has led to recent deposit fluctuations in our Commerce Escrow and exchange business due to lower commercial real estate refinance and sales activity in the third quarter. A dynamic that may persist as we work through the economic cycle. Though we are taking steps to mitigate the potential impact, which I'll comment on a bit later. We held our loan-to-deposit ratio relatively flat at 84% as we added $400 million of brokered time deposits of varying maturities during the quarter. While incorporating time deposits into our funding mix will increase our deposit costs in the near term, we believe that locking in this longer-term funding ahead of additional rate increases will provide more funding flexibility and help us control our overall funding costs going forward. In terms of loan production, we saw decreased demand in the quarter while remaining disciplined in our pricing, underwriting, and overall credit risk management. This has been our approach throughout our management's tenure and has contributed to our strong asset quality throughout various cycles. Market conditions and implementation of our strategic pricing actions had the most pronounced effect on our new production of investor-owned CRE, multifamily, and construction loans as we methodically decided to pull back the volume of new originations in these areas. The lower production of real estate related loans, along with a decrease in utilization rates on lines of credit, resulted in a slight decline in total loans from the end of the prior quarter. Our teams are actively engaged with existing clients and are focused on developing new commercial banking relationships with attractive businesses that will drive future organic growth. As a result, our production of C&I loans was up from the prior quarter. The new banking relationships we are generating today continue to be attractive as the average yield on our new loan commitments increased 144 basis points from the prior quarter. Asset quality remains solid, with low levels of problem loans and net charge-offs totaling $1.1 million in the quarter. Overall, we are not seeing a degradation in our borrowers' cash flows or their ability to service their obligations. We have provided additional details on our loan portfolio segments in the investor presentation. Our loan to values and debt coverage ratios remain strong within each of our loan segments. Proactive monitoring of the loan portfolios, including ongoing analysis of the financial performance of our borrowers and the collateral supporting our loans, are fundamental tenets of our credit administration process. This active management of the portfolio, together with our conservative underwriting standards, has been, and we expect will continue to be, important to our ability to effectively manage asset quality throughout this cycle. With that, I'm gonna turn the call over to Ron to provide a few more details on our third quarter financial results. Thanks, Steve, and good morning. For comparison purposes, the majority of my remarks are on a linked quarter basis. Let's start with the quarter's financial highlights. Third quarter EPS increased to $0.77 per share, a 5% increase on a linked quarter basis, driven by a total revenue increase of $6.3 million to $201.3 million. Although fee income was slightly lower, operating costs were well controlled as non-interest expense for the third quarter came in at $100.9 million. As a result, our pre-provision net revenue increased $4 million to $100.4 million, or 1.85% of average assets, and our efficiency ratio improved to 48.3%. Taking a closer look at the income statement, net interest income increased $8.3 million to $181 million, driven primarily by a 26 basis point increase in our asset yields and slightly higher average loan balances. Additionally, our swap income added $4.2 million incrementally compared to the prior quarter. On the deposit front, total deposit costs came in at 22 basis points, and our cost of core deposits, which excludes brokered and time deposits, increased to 11 basis points for the quarter. As a result, our reported net interest margin expanded by 12 basis points to 3.61%, and our core net interest margin expanded 11 basis points to 3.44% as core loan yields increased 19 basis points to 4.40%. Non-interest income decreased $2 million from the prior quarter, driven mostly by a $679,000 decrease in net gain from the sale of loans and a $403, 000 decrease in trust custodial fees. Lower trust fees were driven primarily by lower asset market values, while the SBA business has slowed recently in connection with the higher interest rates. Going forward, we expect our non-interest income for the fourth quarter to be in the range of $20-$21 million, excluding any security sales. Non-interest expense came in at $100.9 million, an increase of $1.9 million, primarily due to a $2.5 million increase in other expense, which included a one-time $1.9 million expense for a client loss where our investigation concluded that our client's system was compromised. These items were partially offset by a $1.2 million decrease in compensation and benefits as overall staffing decreased to 1,481 employees. We anticipate our non-interest expense to be approximately $101 million-$102 million in the fourth quarter. Our provision for credit loss of $1.1 million increased slightly compared to the prior quarter's $469,000, and our credit quality was largely unchanged in the quarter. While we have not seen a meaningful deterioration in credit quality, we are closely monitoring the macroeconomic environment. Turning to the balance sheet, we saw a slight decline in gross loans of $122 million from the prior quarter, driven by lower loan fundings and commercial line utilization rates, which declined slightly to a quarterly average of 40.4% and a spot rate of 39.9% as of quarter end. Not surprising, given the interest rate environment, we also saw slower payoffs in the third quarter, somewhat offsetting the lower loan production. Period-end deposits were $17.7 billion, a decrease of $338 million from June 30, primarily driven by a $532 million decrease in deposits from the bank's escrow and exchange business due to lower transaction volumes and a $127 million decrease in municipal deposits. To help offset the escrow and exchange deposit flows, in early September, we added another $400 million in term broker deposits, which provided additional liquidity and enhanced our interest rate risk asset sensitivity. Notable on a year-over-year basis, our HOA deposit business grew 16% to $2.3 billion. The trust business deposits grew 5% to $1.7 billion, and escrow deposits grew 4% to $1 billion. Our securities portfolio remained flat compared with the second quarter at $4 billion, while our portfolio yield is currently at 2.12%. The available for sale portfolio also remained flat at $2.7 billion and our mark-to-market unrealized loss for the quarter as of 9/30 was $95 million. Our tangible common equity ratio ended the quarter at 8.59%, an increase of 7 basis points from June 30th. Our tangible book value per share decreased slightly to $18.68 from $18.86 at June 30. The decrease was primarily driven by the other comprehensive loss of $65 million from the impact of higher interest rates on our AFS securities portfolio compared to a $71 million loss in the second quarter. Along with the higher TCE ratio, we further strengthened our capital position this quarter with Common Equity Tier 1, Tier 1 risk-based and total risk-based capital ratios all increasing from June 30th. Finally, from an asset quality standpoint, asset quality remains solid as nonperforming loans and delinquency increased slightly at 0.41% and 0.28% of loans held for investment respectively, but well below industry historical averages. Our allowance for credit loss was effectively flat in terms of dollars and our coverage ratio at 1.31%. Our total loss absorption, which includes the fair value discount on loans acquired through bank acquisitions, finished the quarter at 1.70%. With that, I will hand it back to Steve. Great. Thanks, Ron. I'll wrap up with a few comments about our outlook. With the increasing likelihood of a material economic slowdown, we'll continue to place a priority on maintaining high levels of capital, liquidity, and reserves so that we can meet the needs of our clients and to be in a position to react to what could be unpredictable market dynamics. This foundational approach to risk management has served us well historically and has been critical to our track record of creating franchise value. Our relationship managers are providing exceptional service to our clients while our teams are collaborating well and highly focused on developing new long-term relationships with high-quality businesses and their owners. We continue to invest in technology and people, and that is benefiting us as we seek to expand and add new relationships throughout the bank. While the current environment for the escrow and exchange business is not as favorable, we believe we have good opportunities to add clients, expand market share and grow over the longer term. We have recently added additional personnel who we believe will be valuable in helping to grow the business and gain share during a time of market disruption. Following the considerable work we have done to optimize the operations of the trust business, we have started to accelerate our business development efforts in the area and continue to see attractive opportunities to add clients. In future periods, we expect both commercial escrow and trust businesses to steadily increase their contribution to our fee income and expand our base of low-cost deposits. It is likely that our level of loan production will be lower than what we have seen earlier this year. The mix will continue to be more heavily weighted towards high-quality commercial businesses as market dynamics limit the production of investor-owned CRE and multifamily loans. Ultimately, we will leverage the strength and talent of our leadership and bankers to deliver results for our shareholders while effectively managing risk in a rapidly evolving and uncertain environment. That concludes our prepared remarks, and we would be happy to answer any calls. Sarah, could you please open up the call for questions? Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from David Feaster with Raymond James. Please go ahead. Hey, good morning, everybody. Morning, David. Good morning. Maybe just touching on the deposit flows. Looking exclusive of the escrow impacts, that's not that surprising. You know, just exclusive of that, could you just talk about the flows that you're seeing in there and maybe how migration within the portfolio is trending? You know, whether you're seeing more cash burn at existing clients that might be driving some outflows within the existing book, or is it more rate sensitive customers that are looking to deploy their liquidity into higher yielding assets? Then just overall thoughts on how you think about deposit flows, especially as there might be some more migration within the escrow. Sure. There's a lot of questions wrapped up there, David. I tell you, that at this point, we're not seeing a cash burn on our borrowers. Although I think that, you know, businesses, individuals, investors are all being pressured by the high inflationary environment, still continued impacts from supply chain disruptions and the like. Overall, that's not what we're seeing. I think it is generally. I don't even know that I'd qualify most of our customers as rate sensitive. They're generally not. It's not why people have ever banked with us. In this environment where we've seen Fed funds be raised by 300 basis points in six months and likely to be at, you know, somewhere north of 4% by year-end, in a nine-month period of time. That's just simply unprecedented. The returns that one can get risk-free rate on Treasuries for some investors become attractive. I think those are the various dynamics. Our teams are doing a great job. We've certainly increased the level of communication in meeting with our clients and talking to them, and then working directly with them in many of these areas. Okay. As far as the mix and flows, you know, we've seen a little change, but nothing really material from any of our, you know, the businesses we bank or some of the other specialty areas, the HOA, the trust, escrow and exchange. At the same time, we do see some attractive opportunities to gain market share because there has clearly been disruption in the escrow and exchange business, where smaller firms are really being negatively impacted. In the trust business, seeing very attractive opportunities to add clients. As I said, we've accelerated our business development in that area and are seeing some preliminary nice results. Lastly, in the HOA side, that team has functioned very well, and we offer some market-leading technology there that has allowed us to grow that business. Throughout the organization, I think we see some pretty good opportunities. At the same time, this is an unprecedented type of environment that, you know, we'll see how things develop here in the coming months. Okay, that's helpful. You know, it was a couple quarters ago that you started talking about using higher rates to strategically slow production, and we've seen it's been effective. You know, origination yields, looking at the table, were up huge. And you also mentioned in the prepared remarks talking about having less of an appetite for some of these real estate-backed loans. I'm just curious how you think about loan growth going forward, how the pipeline's looking. I mean, would you expect balances maybe to continue to decline near term? Or can slower payoffs and pay downs help offset some of these the slower originations, and then we could actually see balances grow? Just curious how you think about that. Yeah. I think that, you know, it's the latter part there, that given the fact that prepayments and pay downs have in fact slowed, and we would expect them to continue that trend here in the fourth quarter. That we're just gonna need less production to, you know, whether it's hold the portfolio flat, grow it a little, or the like. I mean, for us, always has been the regulator has always been around loan growth as how quickly we can bring in low-cost core deposits through client banking relationships. That's always been the governor. Now certainly following the Opus acquisition, and with the amount of fiscal and monetary stimulus that was shoved into the economy, liquidity at, you know, at all financial institutions increased. We deployed some of that, you know, into really strong credit quality loans such as multifamily. As we've seen these dynamics shift, as we tell our teams, we operate in a dynamic environment. Things are not static with the way that we manage the business and the way that we think about the future and the potential risks. We have slowed down, as I said, some of the commercial real estate, multifamily construction loans. Okay. That helps. You know, obviously just touching on the multifamily again. I mean, obviously that's a core competency for y'all. You talked about a decreased appetite for this segment and production clearly declined in the quarter. You know, historically I've always looked at, you know, the West Coast multifamily as providing really good risk-adjusted returns and a defensive asset class. Just curious, you know, obviously there's a lot of dynamics changing in the housing markets these days. Just curious how you think about multifamily more broadly and any other trends that you're seeing within that segment on the West Coast. Sure. I think that part of it, multifamily remains one of the most attractive asset classes, at least for the segment that we concentrate on, which is you could characterize it as workforce housing. We don't do the high-end, call it, if you will, class A type multifamily properties. That's just not what we've ever done. The occupancy levels remain very high. Cash flows are strong. We are stressing the portfolio to look at the impact on higher rates and debt coverage, and we're in a very good position. I think that the West Coast from a housing and certainly multifamily benefits from this is underbuilt significantly. Although there are projects that will come online in future periods, it has not been able to fill that gap, if you will, that exists for affordable, reasonable housing. With that, our expectation is that that asset class will continue to perform well. As Ron said, we're closely monitoring all of our portfolios and the overall macroeconomic environment. All right. Thanks, everybody. Certainly. Our next question comes from Matthew Clark with Piper Sandler. Please go ahead. Hey, good morning. First one just for Ron. I may have missed it in the prepared comments, but did you provide your near-term guide on the core NIM for the upcoming quarter? Go ahead, Ron. Yeah. We did not, Matt. You know, we expect obviously on the asset side, if the current what's baked into the market, if you will, for November, December, in terms of the Fed rate hikes, we do expect, you know, the asset side of that to move consistent with what we see here in the third quarter. That said, you know, the whole question mark around, you know, where deposit costs and deposit betas and all that is really up in the air right at this point in time. Yeah. I'd just add that you look at market dynamics that are going on. We're seeing a number of institutions out there that are putting some pretty aggressive pricing, and that's just not what we wanted to compete on. As I said, you know, we're not immune to market dynamics either. That's why we haven't provided any guidance on it and don't intend to. I think that the modeling is subject to so many differing variables and variance in what the outputs are. We didn't think it was appropriate to provide guidance on it. Okay. Then when you're, you know, working through your budgeting process or just looking out at your kind of internal forecast around deposit betas, I mean 18% last cycle, you're at 6% cycle to date. You know, you're expecting slower growth, so there should be less need for funding incrementally. I mean, do you feel like you can kind of match what you did last cycle? I know that it's a very fluid situation, but just any additional thoughts around deposit betas? Sure. I have no idea. I mean, this is. You see? I mean, look, Matt, all you have to do is take a step back and say, let's compare that period of time in December of 2015 to 2018. What we went up by 225-250 basis points. The Fed began instituting quantitative tightening at half the level that they're doing today. It took them 2.5 years roughly to get to that level. Compare that to this environment where rates have moved up 300 basis points in six months, widely expected to get to 4.25 by the end of the year, nine months period of time. Quantitative tightening that began in June and increased in September is now running at more than twice the amount that the Fed had implemented during that period of time. I could tell you, we don't know. It's something that we're managing closely, monitoring closely as well. I think our relationships that we have with our clients are deep. But again, we're gonna be subject to, you know, the market dynamics, and they're rapidly evolving, the effects of the economy. It's difficult to know. Okay. Just on the provisional credit you guys took this quarter, can you just give us a sense for the likelihood and timing of getting that back? On that incident with the client. I don't know. It's a large, good client that we've had for a long period of time, so we went ahead and did the credit, something we don't do lightly. We'll see. It's hard to know with these kind of things. Okay, fair enough. Thanks. Our next question comes from Chris McGratty with KBW. Please go ahead. Hey, how's it going? This is Andrew Liesch on for Chris McGratty. Hi, Andrew. Hey, how's it going? Your credit trends continue to look solid, but I was just wondering how you're thinking about, you know, provisioning for the office and retail portfolios going forward, and if there are any specific markets you're concerned about. Thank you. Sure. When you take a look, and I point you to the slide that's in our investor presentation, where we do provide some additional disclosure and information around the portfolio. You look at the fact that from that retail segment, we're at a 49% average loan-to-value, weighted average, and a 1.80 DCR. You know, that portfolio is seasoned by 44 months. You have somewhat similar metrics on the office product. We've had historically minimal charge-off losses in those portfolios. We'll keep that in mind. We'll see how the economy evolves and the dynamics impacting either one of those segments, just as we do with all of the portfolio. We'll continue to think about it. I think, you know, I'd also point to the reserve levels that we have today at 130 on the ACL, and then we also have the credit marks and discounts on the existing portfolio, you know, really helping to improve, increase our total loss-absorbing capacity at up to 170 basis points. Okay. Thank you. Yeah, that slide's really helpful. Just looking at M&A, can you talk about any potential deal opportunities you're seeing within your markets, and if there are any newer expansion markets you would consider for a bank deal? Thanks. Sure. I mean, principally, we're looking on the West Coast for high-quality franchises that have a good, solid deposit bases, relationship based, that we think would be additive to our franchise. At the same time, though, we have always been a very disciplined acquirer, and that is going to continue. Then you look at the volatility that is going on in the equity markets, volatility and in the interest rate complex. I think it just adds to the challenge of finding the finish line with targets. Not that there are a lot out there for our institution. But we'll continue to look, and we know that these cycles always play out over time. The you know the fundamental reasons behind consolidation in financial services, those remain in place and frankly have intensified here, as this environment has played out. That's the way we're thinking about it. Okay. Thank you. I can't remember if you said this before, but have you disclosed how far east you'd be willing to look? Generally, we think about it from the franchise as a West Coast franchise. You know, our trust division is headquartered in the Denver market. You know, I think along the Mountain West, the Rocky Mountains there, we've got presence in Arizona, Nevada, Oregon, and the State of Washington. Something that is complementary to those geographic markets that we're in. Okay. Got it. Great. Thank you for all the questions. Certainly. Our next question comes from Gary Tenner with D.A. Davidson. Please go ahead. Hey, guys. Good morning. Morning, Gary. I want to ask about the C&I trends in the quarter. You know, you talked about broadly the last quarter or so about, you know, raising your offer rates and you know that would reduce some demand in other portfolios. But as it relates to C&I and the sequential decline in utilization and in dollars outstanding, do you have the sense that your better C&I customers are you know becoming I guess overly more cautious in terms of the environment and that's driving down some lower balances? Or do you think that the you know the higher cost of those variable rate C&I loans today relative to what maybe they're getting on their some excess deposits is driving some moderation in the balances? I think it's a combination of those factors. Look, every business is a little bit different in the way that they manage their capital and their balance sheet and the way they think about the world. I think that, you know, the ongoing challenges around the supply chain disruption, inflation, the impacts from labor. All of those are playing a factor. You look at the rising rates and the concerns about this Fed tightening cycle and that we still have a ways to go. That given that tighter rates act on the economy with long and varied lags, I think there's plenty of clients who are thinking about that in the future business activity. Then others that as you mentioned, who are sitting on excess liquidity, and they're seeing the cost of their debt increase are making decisions to pay some of that down, pay some of it off. I think though that, you know, the one thing that we talk about with our team, the reality is business is ongoing and different businesses see opportunity in environments like this, and they see opportunity to expand and grow. That's right where we're gonna be side by side with them, providing the capital, the Treasury Management services to do that. We think there's plenty of opportunity again to grow in these areas. Thanks. I appreciate that. As it relates to the deposit side and escrow and exchange balances down to $1 billion in the quarter, you know, there's obviously, as you just said a moment ago, there's always gonna be some level of activity. Do you have a sense of what maybe an ultimate floor could be for that business, even given just a very modest level of ongoing transaction activity? Is it half again what it is, or is that, you know, too aggressively low, do you think? I mean, my sense would be that is too aggressively low, but I don't I can't sit here and tell you. The one thing is that Commerce Escrow, as they're known, has been well established in the L.A., Southern California market for a long period of time and have a great reputation with investors. With some of the additional folks that we've recently brought on to expand that into some of the contiguous markets that we're in already, coupled with the disruptions that we're seeing longer term, we think that there is opportunity to take market share and grow our client base there. At the same time, it's gonna be dependent upon just the level of commercial real estate activity that is occurring in various markets. Hard to tell from where we sit today. Great. Just lastly from me, I apologize if I missed it, but did you say, Ron, what the average rate was on the $400 million of broker deposits added in September? No, we didn't. No, we did not. That came on in the beginning of September. Effectively, we had one month's impact on those, you know, those brokered deposits. We'll have a step up there given the full quarter's impact. All right. Thanks, guys. Appreciate it. Certainly. Our next question comes from Zach Sikora with Stephens Inc. Please go ahead. Hey, this is actually, Andrew Terrell at Stephens. Good morning. Hi, Andrew. Hey, Andrew. Hey, so I wanted to ask, thanks for the expense guidance. Wanted to ask as we think about kind of out into 2023, just given what sounds like maybe a little bit slower cadence of balance sheet growth, just how are you thinking about managing the expense base or the level of expense growth as we move into 2023? We're thinking about managing it tightly. We've always been an efficient operator, and we're gonna continue to do that and stay laser focused on managing expenses effectively. At the same time, we have also believed that you do not grow any business without investing in people and technology. That has always been the case for us, and it will continue to be the case that we'll invest in people and technology. We'll be managing expenses very tightly. Okay. Do you think from just an efficiency ratio standpoint, I mean, it was good to see the improvement this quarter. Do you think you can manage to a sub-50% efficiency kind of through the rate cycle or, maybe some of the other pressures maybe on deposit cost side keep you at that 50% or above level? I think it's uncertain. What this environment makes it very challenging to forecast, especially the speed and magnitude of changes in rates. Then as the economy adjusts to those changes as well. It makes it extremely difficult in forecasting. Although we are running forecasts and models under a variety of assumptions, regularly, and when Ron brings it into me, and although it is very detailed level, I let him know, thanks, but it's not worth the paper it's written on. You know, it gives us some insight. In other areas such as expenses that we have a bit more control on directly, you know, we can manage those. How they play out and where that lands on from an efficiency measure is dependent upon a number of other variables, obviously. Okay. I appreciate it. That's helpful color. I apologize if I missed this one. Ron, can you remind us how much just cash flow per month or per quarter the bond book kicks off? It varies a little bit. I would say it gives off in the range of about $75 million-$90 million a quarter. Okay. Well, thanks for taking my questions. Yep, certainly. This concludes our question and answer session. I would like to turn the conference back over to Steve Gardner for any closing remarks. Very good. Thank you, Sarah. Thank you all for joining us today. I hope you have a good week. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.