Umpqua Holdings Corporation

Good morning and welcome to Umpqua Holdings Corporation's first quarter 2021 earnings call. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you wish to remove yourself from the queue, please press the pound key. I will now turn the meeting over to Rowan Farnsworth, Chief Financial Officer.

Great. Thank you, Lara. Good morning, and thank you for joining us today on our first quarter 2021 earnings call. With me this morning are Court O'Haver, the president and CEO of Unqua Holdings Corporation, Tori Nixon, president of Unqua Bank, and Frank Namdar, our chief credit officer. After our prepared remarks, we will then take questions. Yesterday afternoon, we issued an earnings release discussing our first quarter 2021 results. We have also prepared a slide presentation, which we will refer to during our remarks this morning. Both of these materials can be found on our website at umquabank.com in the investor relations section. During today's call, we will make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to page two of our earnings conference call presentation as well as the disclosures contained within our SEC filings. I have an out on the call for DeCordo Haver.

Okay, thank you, Ron. Excuse me. I'll provide a brief recap of our performance and then pass to Ron to discuss financials. Frank will discuss credit, and then we'll take your questions. For the first quarter, we've reported earnings available to shareholders of $107.7 million, and this represents EPS of 49 cents per share and reflects a strong start to our year. First quarter earning highlights include both customer and balance sheet growth. Loan balances grew $381 million, or 1.8%. The components of loan growth included $84 million of organic, non-PPP loan balance growth and a net increase of PPP balances of $297 million. As mentioned on our last earnings call and throughout the investor conferences we participated in the past quarter, we feel very opportunistic about loan growth in 2021. Total deposit balances grew $1.3 billion, or 5.1 percent during the quarter. We generated strong growth in non-interest-bearing DDA of 865 million, or 9 percent, driven by continued customer acquisition and PPP Round 2 production. All deposit product categories show growth during the quarter, with the exception of CDs, down 374 million, or 13 percent, as we continue to manage down higher-cost deposits. Regarding capital, We announced to our shareholders in February a dividend of 21 cents per share consistent with historical payments and expect an announcement on the timing of our second quarter dividend soon. With our healthy levels of capital, we are consistently analyzing the best methods to enhance shareholder returns and have multiple options available to us. It's premature to announce anything today, but we are well positioned to be more active in our capital management. Now for a quick update on NextGen 2.0 initiatives, which are progressing very nicely. First, balanced growth. This is a central part of the NextGen 2.0, and we are making great progress. PPP and the economic uncertainty associated with the pandemic created significant disruption, particularly for businesses. Following the strategic transformation we implemented through NextGen 1.0, Umpqua is uniquely positioned to provide the kind of personalized banking experience companies are looking for to help them navigate ongoing change. And we're seeing very, very strong results. We've already been able to leverage the positive brand awareness of our PPP work and market disruption opportunities to attract both customers and new talent. Our proactive PPP outreach programs focused on both companies we helped directly who are brand new to the bank as well as others that had had a negative PPP experience elsewhere. There are close to 5,900 customers whose very first product with us was a PPP loan, and to date, we have converted over 2,000 of them, or 36%, to full relationships consisting of additional loan and deposit products. In addition, we've made nearly a dozen strategic customer-facing hires this year across our middle market, community banking, and commercial real estate teams. We're looking to add additional positions this year, and we'll focus on talent acquisition in the Greater Bay Area, Seattle, Portland, and Southern California markets. Our human digital technology initiatives also remain an important piece of our strategy, and our customers are engaging with us through digital channels more and more frequently, including year-over-year increases of 35 percent more mobile deposit transactions, 76 percent more Zelle transactions, and 16% more daily sessions within our mobile banking app compared to the first quarter of last year. In addition, GoTo enrollments have climbed past 80,000 customer messages within the GoTo platform, and they were up 49% this quarter. Another important aspect of our human digital strategy is how we empower our associates with best-in-class tools to give them an advantage in creating positive and memorable customer experience. One recent example is how we utilized our new loan origination system, Encino, to execute the second round of PPP, both improving the customer experience and operational efficiency. Leveraging this new technology allowed us to process the PPP requests with 75% less FTE compared to the first round and deliver funding to operating accounts more quickly and seamlessly. We're looking forward to implementing this new LOS to the rest of the bank later this year. On the commercial innovation side, we continue to execute on our ambitious roadmap, launching integrated receivables, adding APIs to our catalog, implementing enhancements to our commercial card solution, and upgrading waves of customers to a new and enhanced online banking experience. In regards to operational excellence, The sale of UMQA investments to Stewart Partners is scheduled to close officially tomorrow. We consider Stewart a strategic partner and are looking forward to partnering with them on referral agreements in the future. Earlier this quarter, we also announced plans to consolidate 12 store locations by the end of Q2. These 12 locations plus the store sales that were completed last fall bring our total next-gen 2.0 store rationalizations so far to 19. We remain on track to hit our 30 to 50 store rationalizations by the end of 2022 and are confident we will come in at the top end of that range. As we mentioned previously, as part of the reinventing of our go-forward UMCO workplace of the future, we're working to consolidate back office space to fit both the new working habits of our associates and reduce non-interest expenses. When those plans and the timing of additional expense reductions become official, will provide additional updates. And finally this quarter, we're sharing a change in our segment reporting that we've highlighted in both the earnings release and presentation. This change aligns with how we manage the bank and also provide greater transparency into the financial contribution of mortgage banking activities. While our mortgage banking teams had a great year in 2020, it took advantage of favorable market conditions we did not want their success to cloud the terrific results we're seeing from our core bank. As a brief recap, the core banking segment includes all lines of business except mortgage banking, but includes wholesale, retail, wealth management, as well as the operations, technology, and administrative functions of the bank and holding company. As a result of NextGen 1.0 initiatives, managing through the pandemic successfully and opportunistically, and the beginning phases of UMQAD NextGen 2.0 were reporting solid financial trends within the core bank, including loan portfolio growth, an increase in noninterest income, and lower noninterest expense. The core bank was responsible for 81% of our reported earnings this quarter. The mortgage banking segment includes the revenue earned from the production and sale of residential real estate loans, the servicing income from our service portfolio, the quarterly changes to the MSR asset, and specific expenses that are related to those activities, including variable commission expenses. Revenue and related expenses related to residential real estate loans held for investment are included in the core banking segment just discussed. And it's an anchor product for our consumer channels, and the origination of those portfolio loans can be can vary such as private bank-originated mortgages and permanent financing resulting from our construction to perm products. That's a mouthful. One current comment before passing to Ron. I'm incredibly enthusiastic about growth prospects within our markets, the momentum from our banking teams, our options for capital deployment, and all the results still to come from our next-gen 2.0 initiatives. And with that, Ron, take it away. Okay, thank you, Court.