Q4 2023 Pacific Premier Bancorp Inc Earnings Call
Participants
Steven Gardner; Chairman, President, and CEO; Pacific Premier Bancorp, Inc,
Ron Nicolas, Jr.; CFO and Senior Executive VP; Pacific Premier Bancorp, Inc.
David Feaster; Analyst; Raymond James
Chris McGratty; Analyst; Keefe, Bruyette, & Woods North America
Gary Tenner; Analyst; D.A Davidson & Company
Andrew Terell; Analyst; Stephens, Inc.
Adam Butler; Analyst; Piper Sandler Companies
Presentation
Operator
Good morning, and welcome to the Pacific Premier Bancorp Fourth Quarter 2023 conference call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) I would now like to turn the conference over to Steve Gardner, Chairman and CEO. Please go ahead.
Steven Gardner
Thank you, Gary, and good morning, everyone. I appreciate you joining us today. As you're all aware, we released our earnings report for the fourth quarter of 2023. Earlier this morning, we have also published an updated investor presentation with additional information and disclosures on our financial results.
If you've not done so already, we encourage you to visit our Investor Relations website to download a copy of the presentation and related materials. I note that our earnings release and investor presentation include the Safe Harbor statement relative to the forward-looking comments. I encourage each of you to carefully read that statement.
On today's call, I'll walk through some of the notable items related to our fourth-quarter performance. Ron Nicolas, our CFO, will also review a few of the details surrounding our financial results, and then we'll open up the call to questions. Our team delivered another solid quarter to close out 2023, which was an extraordinary year for the banking industry. Rapidly rising interest rates.
High-profile bank failures in rapid succession and heightened regulatory expectations, brought challenging dynamics to the market throughout it all, we maintained our focus on prudent and proactive capital, liquidity and credit risk management.
We have built our organization to be dynamic and adaptable to various operating environments. This served us and our stakeholders extremely well in 2023. For example, our bankers responded quickly to the industry challenges throughout the year. Collaborating across business lines to meet clients' needs and to reinforce the strength of our franchise.
This responsiveness and engagement, deepen existing relationships and lead to new business development opportunities for our teams. During the fourth quarter, we leveraged the strength of our balance sheet and strong capital levels to proactively reposition our securities portfolio. This transaction enhanced our future earnings profile, provided additional liquidity and is reflective of the optionality we have created within the franchise.
The securities repositioning produced immediate results, expanding our net interest margin by 16 basis points. I'd like to highlight a few key areas as many of the trends were similar to what we observed in the third quarter, although we reported quarterly net loss of $1.44 per share, excluding the one-time effects of the FDIC special assessment and our securities portfolio repositioning, our operating earnings per share was $0.51.
We saw some nice lift from our fee-based businesses as well as a reduction in non-interest expense compared to the third quarter. Excluding the FDIC special assessment, our commitment to capital accumulation in the current environment continues to drive our strong capital ratios, which remain top tier among our peers. Even after layering in the impact of the loss on the securities portfolio sale in the fourth quarter, our TCE ratio increased 85 basis points to 10.72%, and our tangible book value per share increased $0.33 to $20 in $0.22.
Our CYT. one ratio came in at 14.32%, and our total risk-based capital ratio was a healthy 17.29%. Our ability to deepen our relationships with existing customers and attract new clients to the bank generated meaningful growth in new deposit account openings while maintaining pricing discipline. The new account opening activity, coupled with our ability to opportunistically deploy liquidity generated from the security sale, supported the favorable remix of the balance sheet.
We redeployed a portion of the proceeds from the securities portfolio into cash in U.S. treasuries, while also reducing higher cost brokered deposits by $617 million and prepaying 200 million of FHLB term advances. Our available liquidity at the end of the fourth quarter totaled approximately $9.9 billion. We did see some customer deposit outflows and mix shift during the fourth quarter, which included seasonal outflows related to business tax payments.
Not surprisingly, some clients continue to pursue higher yielding non-bank alternatives. Ultimately, we saw non-maturity deposits increased to 84.7% of total deposits. Our content. Our constant client relationships and disciplined deposit pricing resulted in a well-controlled cost of non-maturity deposits of 102 basis points. On the asset side of the balance sheet, we saw a slight growth in our overall loan portfolio balances due to increased line utilization from commercial borrowers.
Prepayment activity was similar to the third quarter as business in commercial real estate clients continue to deploy excess cash reserves to pay down debt, our banker, and remain focused on generating high-quality relationships that meet our risk adjusted return requirements. As always, we are proactive in terms of portfolio management and credit monitoring.
We have ongoing communication with our clients relative to market trends in their businesses and industries. These updates on our clients' financial performance, liquidity and collateral values, and four from our approach to managing individual credits.
Our year end asset quality metrics remain solid as delinquencies were 0.08% of total loans and nonperforming assets were 0.13% of total assets. We are closely monitoring the trends in commercial real estate markets and proactively identifying and managing potentially weaker credits. Overall, our loan portfolio is well managed in all facets across the organization. With that, I will turn the call over to Ron to provide a few more details on our fourth quarter financial results.
Ron Nicolas, Jr.
Thanks, Steve, and good morning. For comparison purposes, my comments today are on a linked quarter basis unless otherwise noted. Let's begin with the quarter's results. For the fourth quarter, we recorded a net loss of $135.4 million, or $1.44 per share. Our reported results included the impact from two nonrecurring items, the $1.26 billion AFS securities sale that had a net after-tax loss of $182.3 million and $2.1 million of additional noninterest expense due to the special FDIC assessment.
Excluding these two items, our operating results were net income of $48.4 million, or $0.51 per diluted share, which yielded a return on average assets of 0.99% and return on average tangible common equity of 11.19%. Our operating efficiency ratio came in at 58.8%, and our adjusted pre-provision net revenue as a percentage of average assets was 1.34% for the quarter. Please refer to our non-GAAP reconciliation in our investor presentation and earnings release for more details.
Taking a closer look at the income statement, net interest income of $146.8 million, which was negatively impacted by lower average earning asset levels, partially offset by a favorable mix shift toward higher yielding earning assets as a result of the securities repositioning and the reduction of higher cost wholesale funding sources.
Our actions led to 16 basis points of net interest margin expansion to 3.28% due to an increase of 38 basis points on the investment securities for the quarter, as well as eight basis points of higher loan yields on a spot basis, excluding fees and discounts, the weighted average rate on our loan portfolio increased 11 basis points to 4.87%, reflecting higher lines of credit draws for the quarter.
Overall cost of funds was up only two basis points to 1.69%, reflecting the favorable mix change from paying down higher cost wholesale funding and our non-maturity deposits increased to 84.7% of total deposits, while costs were well controlled at 1.02%, with our cumulative total deposit beta of 29%, illustrating our disciplined pricing actions throughout this rate cycle. Notably, our spot deposit costs were 1.55% and ended the quarter one basis point lower than the average total deposit costs for the quarter of 1.56%.
For the first quarter, we expect further balance sheet optimization through a combination of lower cash levels and a reduction in higher cost wholesale funding. Namely, we expect both broker deposits and FHLB advances to trend lower from year-end levels. We believe the combination of these items will help partially mitigate net interest margin pressures. In the first quarter, our core fee-based businesses had a solid quarter, excluding the security sale loss of 245 $54.1 million.
Our non-interest income came in at $19.9 million. Our fundamental fee income trends were favorable as trusted income came in at $9.4 million and escrow and exchange fee income at 1.1 million, both up slightly over the prior quarter. For the first quarter of 2024, we expect our total noninterest income to be in the range of 20 $21 million with the benefit of PPT.s annual tax fees. Noninterest expense increased slightly to $102.8 million.
Compensations. Compensation and benefits expense decreased to $2.2 million, reflecting the benefit from the staff realignment across certain business lines during the quarter. From a staffing perspective, we ended the quarter with headcount of 1,345 compared to 1,355 as of September 30th, as our staffing levels continued to track with the overall size of the balance sheet, we remain focused on tightly managing our operating expenses, and we expect first quarter expenses in the range of 100 to $103 million.
With the anticipated higher first quarter payroll taxes, our provision for credit losses of $1.7 million decrease from the prior quarter as our ACL coverage ratio increased three basis points to 1.4 or 5%, consistent with the fourth quarter's loan composition level of new loan commitment activity and our economic outlook.
Turning now to the balance sheet, we finished the quarter at 19 billion in total assets with loans flat to the prior quarter. As noted, lower cash and securities enabled us to pay down higher cost wholesale funding in the form of brokered CDs and FHLB term borrowings. Total loans held for investment increased $19 million, driven by net draws on existing lines of credit of $355 million and new commission set e-payments sales and maturities of $455 million. Total deposits ended the quarter at 15 billion, a decrease of 1 billion, driven mostly by $617 million reduction in broker deposits.
Other deposit categories fell 395 million as we continued to see clients redeploying funds into higher-yielding alternatives, prepaying loans, as well as the impact of fourth quarter seasonal tax related outflows. Even with the continued mix shift, our non-interest bearing deposits remain a robust 33% of total deposits, reflecting our strong client relations chip business model. The successful execution of deposit pricing strategies is evident as our non-maturity deposits ended the year of 1.04%, only two basis points above the quarter's average of 1.02%, generating positive momentum for us.
Heading into the first quarter, the securities portfolio decreased 783 million to 2.9 billion, and the average yield on our investment portfolio increased 38 basis points to 3.08%, partially benefiting from the purchase of $539 million of short-term U.S. treasuries. We stand to benefit from a full quarter of the reinvested proceeds in the first quarter as a spot rate on our securities portfolio ended the year at 3.48%, not surprising given the rally in the yield curve late in 2023 and the and combined with the securities sold, our pretax accumulated other comprehensive loss on the total AFS portfolio improved to $36 million at December 31st.
Our capital ratios remained significantly higher than the required well-capitalized thresholds with our CYT. one and Tier one capital ratios at 14.32% and our total risk-based capital at 17.29%. We continue to rank in the top tier relative to our peers. In addition, our tangible common equity ratio now stands at a very healthy 10.72%, and our tangible book value per share grew $0.33 to $20 and $0.22. And lastly, from an asset quality standpoint, asset quality across all measurables remained solid.
Nonperforming assets were flat at 0.13% and total delinquency was also flat compared to the prior quarter at just eight basis points. Our total classified loans decreased five basis points to 1.07%. And our allowance for credit losses finished the quarter at $192.5 million, with our coverage ratio increasing to 1.4 or 5%. Total loss absorption, which includes the fair value discount on acquired loans, ended the quarter up one basis point at 1.77%. With that, I'll turn the call back over to Steve.
Steven Gardner
Great. Thanks, Ron. I'll conclude with a few comments about our outlook. We believe the actions we've taken over the past two years to purposefully moderate growth rates and prioritize capital and liquidity management have positioned us well. We were encouraged by the stabilization in the loan portfolio at year end.
However, we anticipate muted loan demand and what may be a lingering higher interest rate environment. We will continue to monitor our loan portfolio closely, and we are ready to respond. Decisively should we see elevated stresses for the near term? Pressure on deposit costs appear to have moderated future rate cuts if they were to materialize in 2024, would aid our ability to pay push funding costs down capital accumulation over balance sheet growth remains a priority.
However, as you saw with the securities repositioning transaction, we are regularly evaluating the opportunities to deploy capital and optimize the balance sheet to create long-term value for shareholders. Although challenges remain, thanks to the strength and expertise of the entire Pacific Premier team, some of the most talented in the industry. We remain in a position to act quickly to take advantage of opportunities if and when they arise.
In conclusion, as an industry, we will continue to face a significant amount of uncertainty in 2024 on various fronts. That said, we are optimistic and believe we are well positioned to leverage our organizational excellence and discipline to continue to deliver long-term value for our shareholders, clients, employees and the communities we serve. That concludes our prepared remarks. We'd be happy to answer any questions. Gary, please open up the call for questions.
Question and Answer Session
Operator
(Operator Instructions) David Feaster, Raymond James.
David Feaster
Morning, Mike.
Steven Gardner
Morning, David.
David Feaster
Maybe on I just wanted to start on the margin outlook. You guys have been incredibly active managing the balance sheet. Sounds like there's more coming in the first quarter. Curious how you think about the margin trajectory. If I hear your comments around it sounds like maybe some modest compression in the first quarter might be come in.
But just curious how you think about the margin trajectory going forward, especially considering potential rate cuts, given that seems like to be the expectation near term? Ron, I'm happy to take it or you can offer up some thoughts.
Ron Nicolas, Jr.
Sure. David, I would tell you that, um, you know here in the first quarter, we don't anticipate we're not modeling ourselves internally or any rate cuts. But I will say say you will see I mean, as evidenced here in the fourth quarter, we've done a pretty pretty good job at managing our deposit costs, continue to have to manage the balance sheet on and that's going to be pretty much the continuation.
I will highlight, though, that, you know, of course, we saw a nice yield uptick and that was driven by very variable rate draws on lines of credit. We'll see how that plays itself out here as we move through the first quarter. So those are kind of my initial thoughts there. Steve.?
Steven Gardner
Yes, I don't know that I have much to add. I think that covered at relatively well.
David Feaster
And maybe just touching on on the Lucky taking a pretty conservative standpoint for some time now, right, great to see an increase in loans. Curious, do you think this marks an inflection point? And if so, what are your order kind of some of the key drivers of what's giving you confidence here maybe on the term loans? Just wanted your thoughts on what you're seeing from a market dynamic in improving demand in those types of things.
Steven Gardner
Share will, as I said, we at for the foreseeable future, we see pretty muted demand, David. Um, I think until we have better clarity and certainty about the direction of rates hum, that's from all indications that we I have from all the clients that we're talking to, whether it's small business or real estate investors on that remains to be a level of caution out there.
So our expectation is muted demand. We're going to maintain our discipline on the quality of credits and the relationships that we're bringing into the bank. But I think as you saw in the fourth quarter, we certainly benefited from some of those line draws that Ron just mentioned on the production picked up a little bit.
We'll see how those how those trends materialize here in the first half of the year. Any last one for me. Nice to hear about some modest uptake in some benefits in the key income lines. I know that's been a big focus for you all. Just curious about underlying from what you're seeing on the trust business. It sounds like from some tax benefits there on what you're seeing and Asgrow side and and as a high level thoughts, I know you guys have been investing a lot in technology.
Curious whether you're seeing any tangible benefits there and kind of your thoughts on on investment on that front. And hardware assurance. So there's a lot of subjects to cover their. David, that's our eyes a hub. I'm first as far as the trustee, my we have invested pretty heavily in the trust team and we were very pleased with the results harm that they were able to put up last year at a number of different areas.
And and I think we're finally approaching that operational excellence that we expect and have had at the bank level for some time. And that's helped 19 from the production side in with the team high and their confidence level in speaking to clients. And we have developed some great relationships with some of the largest wealth managers in the industry.
And really as they get a better understand how our capabilities and and how that plays in to their business on. We've seen some some nice growth in new accounts and we expect that to continue here this year and an incremental improvement on every month and ever every quarter. On the escrow business side, high def, frankly, has really slowed down over the last couple of years or reflection of much lower activity in the commercial real estate markets and and transactions.
And overall, I think that business until we get some movement in rates and some better clarity on on the commercial real estate markets more broadly, we expect activity to be a relatively muted as well. And then lastly, from the technology side of We are always investing in the business and that's technology that's employed, Louise, we continue to improve on in those areas. And I think as we move further away from some of the disruptions that occurred in the first and second quarter of last year and and have that stabilization, how we'll be able to play a little a bit more offense.
And we certainly have the technology and resources there are that aid our teams throughout the throughout the organization, for example. I know the big question. Thank you.
Operator
Chris McGratty, KBW.
Chris McGratty
Great. Good afternoon. Ron, in your question, just on broader net interest income. Given the actions you took in the benefit on the margin for the smaller balance sheet come, maybe thoughts on trough of NI where we're not there may be when and also if we do stay in a higher for longer environment, maybe how the balance sheet pro forma now reflects the higher for longer versus kind of the futures market that content more?
Steven Gardner
Scott, thank you, Mike. Yes, you know, I'll just echo a little bit of curious of what I what I stated earlier. We did see a nice a nice expansion in the 60 basis points. I wouldn't I wouldn't go far as far as to say, that was the trough, but we've got some some favorable aspects going here. You know, obviously the reinvestment there's securities repositioning that's going to add some lift here in the first quarter as well.
And some of the paydown on the wholesale side that we've been doing and can look to continue to do, I think, is going to offer up some additional benefits. The big wildcard, of course, is going to be the deposit costs and deposit flows in the mix. We continue to see challenges.
The industry continues to see challenges across that aspect of it. And despite the fact we've done a really nice job managing our deposit costs. Again, I wouldn't go so far to say that we've we've conquered that the slate that Dragon at this point in time.
I think we'll still see some pressures in that in that area. Um, but we're cautiously optimistic on that front.
Chris McGratty
Great. Thanks. Thanks, Ron and CMA for you on capital, you talked about the flexibility and the actions we've taken. Do you expect opportunities to arise in 2024 at industry levels, given some of the strength of rate? And maybe how you would maybe update us on your rank for capital, you find great work.
Ron Nicolas, Jr.
Sure. Yes, I would say we do expect opportunities arise, but I thought that in 2023 as well. And so we'll just see how the year plays out here on. I think, as I mentioned, given all the uncertainties in the environment, whether it's around the commercial real estate markets or Homme, a variety of other areas and just how the economy develops in a given all of the geopolitical risks, intentions out there.
I think our approach is going to continue to be that we're going to retain capital, how we're we see opportunities to put it to work where it benefits the organization. Long term, we're going to do that. But overall, it remains hard. There's a there's a level of uncertainty and we are very comfortable having strong levels of capital.
Operator
Gary Tenner, D.A. Davidson.
Gary Tenner
Thanks. Good morning, guys. Our gearing to ask about the fourth quarter non-interest bearing outflow. Could you parse maybe how much of that you would chalk up to tax payment seasonality versus kind of ongoing shift in mix and a sense of timing of how rapidly the seasonality a piece of it could come back on balance sheet?
Steven Gardner
Hard to put a specific measurement on a Gary as far as that's from the tax payments in all of the movements that are going on, as Ron mentioned, we're seeing clients continue to pay down or payoff on loans. And so that impacts both sides of the bank balance sheet naturally high, certainly in 2023, in the state of California, we saw later tax payments come out. Some of the the impacts on commerce as grow.
Now our sense is, though that the DAB magnitude, we don't expect to see that as we move through the year and typically some of those funds begin to return in the first half of the year. How much will come back is on certain again, I think in Part D has to deal with the yield curve, how businesses are feeling about the overall environment. So we'll just we'll see how things play out here.
I think the one of the benefits we have is just the number of new accounts. So we've opened in 2023. And as those get fully implemented and onboarded, we may pick up some benefit there. Appreciate that bigger picture. I guess on the funding side, pre pandemic, you're often operated the Company at a time slightly by 100% loan deposit ratio. Even with the wholesale reductions in the fourth quarter and the net deposit moves there, you're back up but only 89%.
Gary Tenner
So as you're thinking about the long-term management of the balance sheet, are your thoughts on that today it relative to where they were a few years ago?
Steven Gardner
Yes, I think that when when you think about it pre-pandemic, we were also quite a bit smaller and total assets. I don't see us running the business. We don't think it would be prudent debt, 100% loan-to-deposit ratio, but we could certainly see in the low to mid 90% range. Certainly we'd like to get there by both by growing both sides of the balance sheet, both the loans and deposit side to to increase that over time prudently.
Gary Tenner
I appreciate that. And one last question for me, if I could run. In terms of the the hedges. I know you had added some in the third quarter. Doesn't like you added any here in the fourth quarter, but can you just remind us kind of what the maturity schedule is? Those are those swaps?
Steven Gardner
Sure, Gary. We've got about $1 billion, three in totality in the swap book and and approximately half of those hedges will mature by the end of this year. And then we've got another traunch, if you will, another 25% early in them in 2025. And then the rest are just laddered out just a little bit longer. Thanks very much. You're welcome again.
Operator
(Operator Instructions) Andrew Terrell, Stephens.
Andrew Terell
Hey, good morning. Good morning. First question from Ron. Can you remind us the 600 million of term to FHLB advances you've got outstanding right now? What's the maturity schedule look like for those?
Steven Gardner
Well, we've got it. We've got a third of that a traunch maturing this quarter. So we'll see that come off. And then I think we've got another traunch of late in the year and then next year.
Andrew Terell
Got it. Okay. I mean, can you just talk to us overall about the I guess I'm trying to figure out what kind of the right cash position as on the balance sheet and then how you compare that against. I would assume that you used cash to pay down some of the term FHLB and it matures this quarter, potentially some our broker. Can you just talk to us kind of about the cash balance where you'd like to see it sat? And then what the what the uses of cash.
Steven Gardner
Sure you know, so. So obviously, you know, the home coming out of the post pandemic and and given the rapid rate rise us and many in the industry went much more heavily into the cash, I'd say under our normal operating levels were probably in the four or $500 million range were more than double that today.
And so, you know, I could see us over time depending upon deposit flows, loan growth, as we've talked a little bit about, um, we could see that, that coming back down to those normal levels as we move throughout the remainder of 2020 for, of course, notwithstanding any of any other challenges that come about from a macro standpoint.
Andrew Terell
Okay. Got it. And then on the securities portfolio, do you have just what the spot yield was on the securities book at 12 31.3, 3.48%. And then one more question on the margin.
Steven Gardner
I think that's the third quarter. There was an interesting interest accrual that was a headwind in the third quarter. So all else equal it. I was wondering if I recall for six basis points positive to 4Q loan yields, just following up on that side. I guess the question is about kind of loan yields going into 2024 and just on a quarterly or annual basis, just as loans are coming for a new all on what type of what our loan yield improvement you would expect kind of throughout the year.
Just as adjustable rate loans reprice or the lower yielding fixed rate now fixed rate loans come off during the there's a lot there's a lot of moving pieces there, Andrew, to to come up when we don't have an estimate out there that we've stated publicly, but obviously a lot of moving parts about how much of the maturing loans we end up retaining on what the how borrowers, what their decisions are rounded loans that are adjusting, frankly, on some of the higher yielding stuff is paying off faster than than some of the lower yielding loans high.
Certainly what is the rate and volume of new production. Certainly, we'd like to yield of new loans that we're putting on today. They're pretty attractive from a risk adjusted basis. But as I mentioned, demand is pretty muted. Our Ron, what do you have anything to add there?
Ron Nicolas, Jr.
In particular? No, I think that's good, Steve. I was just to confirm that that we that the impact last quarter was that four basis points on that nonaccrual, you know us, so was that we did it get some lift from from that item alone. That's I agree with what you just stated.
Andrew Terell
Okay now. Perfect. I appreciate it. Last, but not a Question button on Steve. I got a linked and notification this morning. Reminding me congratulate you on 24 years that Pacific Premier time, but I know there's been a lot of progress made some sense. So congratulations.
Steven Gardner
Thank you. That's a team effort.
Operator
(Operator Instructions) Gary Tenner, D.A. Davidson.
Thanks. Ed. I just a quick question on credit on your slide deck where you have the ACL kind of a waterfall. You talk about adding $20 million related to the economic forecasts and other updates.
Gary Tenner
If my math is right, that your ACL, the allowance on the unfunded for unfunded commitments from came down again, pro rata, my math is correct. So I'm curious about the kind of be dynamics there of increasing Shell on the funded piece and maybe bring it down the unfunded unless it was just a function of commitment levels.
Steven Gardner
Yes, you nailed it, Gary, there at the end with your last comment, the unfunded did come down, I think four or 5 million, and that was directly a function of lower commitment levels. We saw again with $355 million of new draws effectively shifted that 300, 55 from the unfunded bucket, if you will, to the to the funded bucket. So that that was the, if you will, that kind of the shift between those two elements of the ACL.
Gary Tenner
Okay. So if some of those were seasonal kind of just tougher over temporarily over year-end, you might just see that swing back the other direction.
Steven Gardner
Yes. I mean the flood of on the funding side? Yes, that is a that's a possibility.
Gary Tenner
Got it.
Steven Gardner
You're welcome.
Operator
[Adam Butler], Piper Sandler.
Adam Butler
Hey, everybody. This is Adam on for Matthew Clark. I'm not I'm not sure if this was touched on, but in terms of the origination rates on new new loans this quarter, is there a reason why there was a step down? Some of it was the at the mix we did for various existing clients, some some multifamily, and that had an impact on the yield.
Okay. Appreciate the color on that. And then it was nice to see capital increased TC. quarter over quarter in terms of from our outside supporting organic growth in loan growth. If that doesn't ship out to your expectations, given the excess capital deployment initiatives that's tied to that takes and none none on a specific job.
Steven Gardner
We obviously pay a very healthy dividends. And although we have a stock buyback plan in place, we haven't exercised it for a couple of years and really owing to the uncertain environment, um, I'm like everything that changes over time. We'll see how things play out. But right now, we continue to retain higher levels of capital given the environment.
But where we see opportunities such as the securities repositioning the transaction high in large measure, given our high levels of capital, we were able to do that rather significant transaction there that over the long term will benefit our shareholders. And and that's going to continue to be our approach here for the foreseeable future.
Adam Butler
Okay, great. Thank you.
Operator
This concludes our question and answer session. I would like to turn the conference back over to Steve Gardner for any closing remarks.
Steven Gardner
Thanks again, Gary, and thank you all for joining us today. Have a nice afternoon.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
