Umpqua Holdings Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Umpqua Holdings Corporation second quarter earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker today, Ron Farnsworth, Chief Financial Officer. Thank you. Please go ahead, sir.

Okay. Thank you, Brandi. And good morning, and thank you for joining us today on our second 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 second 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 UmpquaBank.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. And I will now turn the call over to Court Waver.

Court Waver All right. Thanks, Ron. 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 second quarter, we reported earnings available to shareholders of $116 million. This represents EPS of 53 cents per share, an increase from both the 49 cents reported last quarter and the 24 cents reported in the second quarter of last year. The highlights of the quarter were record non-PPP organic loan growth, increased net interest income from the prior quarter, and our recently announced authorization of a new share repurchase program. Our previously stated optimism on loan growth due to our growing customer pipelines, continued talent acquisition, and brand momentum in our markets came to fruition this past quarter as non-PPP organic loan balances grew $650 million, representing a quarterly growth rate of 3.2% or over 12% annualized. This represents record quarterly loan growth for the company. and was balanced across all categories, including commercial real estate, commercial loans, and residential real estate. In regards to PPP loan balances, the decrease of $667 million was primarily related to forgiveness process during the quarter. PPP forgiveness was accelerated towards the back half of the quarter as the SBA processed approvals for PPP loans over $2 million at a faster pace than in the previous months. On the balance sheet, a robust $650 million in organic loan growth was offset by the $667 million in PPP loan balance forgiveness, resulting in a small net decrease. We are obviously very pleased to see the non-PP loan balances grow so substantially as we had previously guided. Total deposit balances grew $267 million, or 1% during the quarter, or 4% annualized. Recent deposit trends continued as interest-bearing DDA grew $222 million, non-interest-bearing DDA balances grew $218 million, and savings balances grew $112 million. And as we continue to manage down higher-cost deposits, our time deposits decreased by $291 million. Regarding capital, in May, we paid our shareholders a dividend of 21 cents per share consistent with historical payments. Yesterday, we announced that our Board of Directors authorized a new program to repurchase up to $400 million of common stock, and we intend to execute the program over the coming year through open market repurchases and ASR or potentially other methods. With our healthy levels of capital, we are well positioned to be more active in our capital management. Now for a quick update on NextGen 2.0 initiatives. First, balanced growth. By leveraging the positive brand awareness of our PPP work and the market disruptions that have provided us opportunities to attract both customers and talent, we've built strong momentum for growth as seen in last quarter's results. As mentioned on previous earnings calls, our customer pipelines were and remain elevated, which resulted in very strong balanced growth across our company this past quarter. We're excited about the future customer relationships. Our recently onboarded bankers and new teams are developing. On average, their new loan books start to show significant momentum a couple quarters after they join the bank, which we expect to support already strong pipelines. Our human digital initiatives remain critical to our long-term strategy as our customers continue to engage with us through digital channels at an accelerated pace. As we compare the first six months of the year compared to the same time period a year ago, we have experienced increases of 18% more mobile deposit transactions, 63% more Zelle transactions, and 6% more daily sessions within our mobile banking app. GoTo enrollments have climbed past 90,000, and customer messages within the GoTo platform were up 5%. Our human digital initiatives also supported our commercial customer acquisition efforts. This past quarter, we launched a new small business treasury management package called TM Essentials, which provides key treasury management products and small business services needed in their current operating environment. Additionally, we launched our pilot of consolidated payments. This will allow commercial and business clients to fully outsource their payments to OMCWA in a variety of formats, including checks, ACH, WIRES, AND COMMERCIAL CARD, COMPLETE WITH APIs TO COVER OVER 160 DIFFERENT ACCOUNTING PLATFORMS. IN REGARDS TO OPERATIONAL EXCELLENCE, WE ACCOMPLISHED QUITE A FEW INITIATIVES THIS PAST QUARTER. THE SALE OF ENCORE INVESTMENTS TO STEWART PARTNERS CLOSED DURING THE QUARTER, AND THE REDUCTION OF NON-INTEREST EXPENSES RELATED TO THIS BUSINESS STARTED MID Q2. THE CONSOLIDATION OF 12 STORE LOCATIONS ANNOUNCED EARLIER IN THE YEAR WAS COMPLETED which brings the total completed store rationalizations to 19. Yesterday, we announced internally our plans to consolidate another 16 locations by the end of the year, which will bring the total rationalizations under NextGen 2.0 to 35. Our goal of 30 to 50 locations by the end of 2022 remains a key target, and we will continue to work on initiatives to bring us closer to the top end of that range by the end of 2022. During the quarter, we also recorded some exit and disposal costs related to the exit of certain back office leases as we continue to rationalize our office space. The moves made this past quarter are a component of our overall plan to reduce space and save non-interest expense in the future periods. On slide three of the earnings presentation, we show the cumulative saves accomplished so far under Next Gen 2.0 program and what we expect to accomplish by the end of the year. One final comment before passing back to Ron. I remain highly enthusiastic the growth prospects within our markets and the momentum from our banking teams will continue to spur growth and will deliver shareholder value over the long term. We are expecting a strong finish here in 2021 and as we head into 2022. And with that, back to Ron.