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PACIFIC PREMIER BANCORP INC (PPBI)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 EPS was $0.37, down from $0.43 in Q2 and $0.48 in Q3 2023, as net interest income fell to $130.9M and net interest margin compressed 10 bps to 3.16% on higher funding costs .
  • Core deposit mix improved: non-interest-bearing deposits rose to 32% of total and brokered CDs declined by $184M; PPBI also repaid a $200M FHLB term advance, reducing wholesale funding .
  • Asset quality strengthened: NPLs fell to 0.32% of loans, NPAs dropped to 0.22% of assets, and delinquency improved to 0.08%, while ACL coverage rose to 1.51% .
  • Capital optionality remains a key catalyst: CET1 increased to 16.83% and TCE ratio to 11.83%; management reiterated commitment to the $0.33 dividend and highlighted flexibility for organic growth, loan purchases, and potential strategic actions .
  • Near-term setup: management guided Q4 2024 net interest income to $120–$125M, expects deposit costs to be flat to slightly down, swap income to step down to $3–$4M, and year-end loans at $11.75B–$12.0B, setting expectations for trough NII before stabilization in early 2025 .

What Went Well and What Went Wrong

What Went Well

  • Deposit mix improvement and wholesale funding reduction: “Non-interest-bearing deposits comprised 32% of total deposits… decreasing brokered deposits by $184 million and repaying a $200 million FHLB term advance” .
  • Asset quality leadership: NPAs fell to 0.22% of assets and total delinquency to 0.08%; management emphasized positioning “among the strongest in the industry in terms of asset quality” .
  • Capital strength and optionality: CET1 at 16.83%, total capital at 20.05%, TCE ratio at 11.83% and TBV/share up to $20.81, enabling re-deployment into loans and shareholder returns in 2025 .
  • Management tone: “We are well-positioned to accelerate new originations in the coming quarters and we expect to stabilize the loan portfolio as we move into 2025” .

What Went Wrong

  • Margin and NII pressure: NIM decreased 10 bps to 3.16% and net interest income fell 4% q/q and 12.5% y/y due to higher funding costs and lower average loan balances .
  • Deposit costs moved higher: average cost of deposits rose to 1.84% from 1.73% in Q2 and 1.50% in Q3 2023, reflecting competitive pricing dynamics .
  • Balance sheet contraction: loans held for investment declined $454.9M q/q (3.6%) on elevated payoffs and muted production; total assets fell to $17.91B .
  • Efficiency deterioration: the efficiency ratio worsened to 66.1% vs 61.3% in Q2, reflecting higher legal/professional expenses and lower revenue .
  • Forthcoming swap income downdraft: Q4 SOFR swap income expected to fall to $3–$4M vs “just under $7M” in Q3, pressuring NII near term .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Millions)$168.10 $154.62 $149.77
Diluted EPS ($)$0.48 $0.43 $0.37
Net Interest Margin (%)3.12 3.26 3.16
Efficiency Ratio (%)59.0 61.3 66.1
ROAA (%)0.88 0.90 0.79
ROATCE (%)10.08 8.92 7.63
Net Interest Income ($USD Millions)$149.55 $136.39 $130.90
Noninterest Income ($USD Millions)$18.55 $18.22 $18.87

Deposit Composition

Deposit Category ($USD Millions)Q3 2023Q2 2024Q3 2024
Noninterest-bearing Checking$5,782.31 $4,616.12 $4,639.08
Interest-bearing Checking$2,598.45 $2,776.21 $2,763.35
Money Market/Savings$4,873.58 $4,844.58 $4,805.52
Retail CDs$1,525.92 $1,906.55 $1,972.96
Brokered/Wholesale CDs$1,227.19 $484.18 $300.02
Total Deposits$16,007.45 $14,627.65 $14,480.93
Cost of Deposits (%)1.50 1.73 1.84
Non-Maturity Deposits (% of Total)82.8 83.7 84.3

Loan Composition (Selected)

Loan Category ($USD Millions)Q3 2023Q2 2024Q3 2024
CRE Non-Owner-Occupied$2,514.06 $2,245.47 $2,202.27
Multifamily$5,719.21 $5,473.61 $5,388.85
C&I$1,588.77 $1,554.74 $1,316.52
Total Loans HFI$13,270.12 $12,489.95 $12,035.10
Loan-to-Deposit Ratio (%)82.9 85.4 83.1

Key KPIs

KPIQ3 2023Q2 2024Q3 2024
Nonperforming Loans / Loans (%)0.19 0.42 0.32
NPAs / Assets (%)0.13 0.28 0.22
ACL / Loans (%)1.42 1.47 1.51
CET1 (%)14.87 15.89 16.83
TCE Ratio (%)9.87 11.41 11.83
Tangible Book Value/Share ($)$19.89 $20.58 $20.81

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income ($M)Q4 2024N/A$120–$125 New (below Q3 actual $130.9)
Deposit CostsQ4 2024Q3: peak indicated Flat to slightly down Improved vs Q3
Swap Income ($M)Q4 2024Q3: “just under $7M” ~$3–$4 Lower
Noninterest Income ($M)Q4 2024$19–$20 for Q3 outlook ~ $19 Maintained/inline
Noninterest Expense ($M)Q4 2024$101–$102 for Q3 outlook $101–$102 Maintained
Loans HFI ($B)YE 2024N/A$11.75–$12.0 New
Brokered CDs Outstanding ($M)Q4 2024$484 at Q2 $300 remaining; $200 matures 2H25, $100 in Mar-26 Lower vs H1
FHLB AdvancesQ4 2024$200M maturity expected Repaid $200M term advance in Q3; will let remaining mature Lower borrowings

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
Deposit pricing/betasNonmaturity cost 1.06%; cumulative beta 21%; rising deposit costs Cost of deposits 1.73%; spot 1.81% Cost 1.84%; management believes Q3 is peak, Q4 flat/down Improving from peak
Swap income and roll-off~20–21 bps NIM contribution; ~$6.7M swap income Similar contribution; $600M swaps laddered to mature Q3 “just under $7M”; Q4 ~$3–$4M expected Headwind in Q4
Loan demand/pipelineMuted; cautious optimism Expect stabilization H2; C&I utilization down Pipeline expanding; added RMs; aim to accelerate originations Improving
CRE/multifamily/regulatory toneMultifamily historically strong; one diversified relationship raised NPLs Sold substandard loans; regulators’ focus on CRE rising Asset quality improved; classified loans down to 1.0% Improving
Capital & optionalityVery strong capital; optionality for deployment Top-tier capital; considering repositioning/M&A CET1/TCE higher; dividend maintained; consider buybacks/M&A Stable/constructive
Fee businesses (Trust/Escrow)Trust income seasonally strong; focus on liquidity CRE-adjacent fees impacted by lower transactions Anticipate escrow/exchange activity pickup if rates decline Potential tailwind
Dividend$0.33 declared historically $0.33 declared $0.33 declared; willingness to maintain even >100% payout for a period Stable
Macro (rates/election)Rate path uncertain; manage neutral IRR Anticipating Sept rate cut; election clarity could help Assumes 125 bps in Q4 guidance; borrower sentiment improving post Fed move Improving sentiment

Management Commentary

  • “We leveraged these positive core deposit trends to further reduce higher-cost wholesale funding sources by decreasing brokered deposits by $184 million and repaying a $200 million FHLB term advance.” — Steven R. Gardner
  • “We are well-positioned to accelerate new originations in the coming quarters and we expect to stabilize the loan portfolio as we move into 2025.” — Steven R. Gardner
  • “We are cautiously optimistic that the third quarter represents a peak in deposit costs, and we see fourth quarter deposit costs holding flat to down slightly.” — CFO Ron Nicolas
  • “We anticipate net interest income to be in the $120 million to $125 million range [in Q4].” — CFO Ron Nicolas
  • “On the M&A front, we remain open to a broad range of strategic transactions… our peer-leading capital ratios… create significant optionality.” — Steven R. Gardner

Q&A Highlights

  • Loan growth trajectory: Focus on C&I, selective construction and SBA; pipeline expanding; not looking to grow multifamily concentration; competitive pricing adjustments to drive production .
  • Capital returns: Board committed to maintaining dividend even if payout temporarily exceeds 100% given strong capital/asset quality; revisiting buybacks with greater clarity .
  • Swap income outlook: Q3 revenue just under $7M; Q4 expected $3–$4M; limited ability to add profitable new SOFR swaps in current rate direction .
  • Balance sheet repositioning: Management evaluating securities/loan portfolio actions to offset swap roll-off and support NII growth into 2025; timing and magnitude depend on rate path and earn-back .
  • NII stabilization path: Target trough in Q4; aim to stabilize margin in early 2025 via deposit repricing and loan growth execution .

Estimates Context

  • S&P Global consensus (EPS and revenue) for Q3 2024 was unavailable due to a CIQ mapping error; attempted retrieval via GetEstimates but no mapping for PPBI was found. As a result, estimate comparisons could not be provided. Values would have been retrieved from S&P Global if available.*

Key Takeaways for Investors

  • Near-term earnings pressure is well telegraphed: Q4 NII guidance of $120–$125M and swap income step-down to $3–$4M suggest a likely trough before stabilization in early 2025 .
  • Margin relief potential: Management believes deposit costs peaked in Q3; expect flat to slightly lower in Q4, supporting margin stabilization alongside pipeline-driven originations .
  • Strong asset quality and capital create downside protection and optionality: NPAs and delinquency improved; CET1/TCE among top-tier provide flexibility for organic growth, tactical repositioning, or M&A .
  • Deposit mix improvement is constructive: rising non-interest-bearing deposits and reduction of brokered CDs lower funding costs and enhance stability .
  • Dividend durability: $0.33/share maintained; willingness to sustain even with temporary payout >100% underscores confidence in capital/credit .
  • Watch execution on loan growth and deposit repricing: Adding RMs, competitive pricing, and a growing pipeline should translate into balances by late Q4/early 2025; NII inflection depends on pace of deployment .
  • Strategic actions remain a catalyst: Management evaluating balance sheet repositioning and selective loan purchases; any move that shortens earn-back and boosts forward NII/TBV could be stock-moving .

Notes:

  • The Q3 2024 earnings information was sourced from the company’s press release and earnings call. An 8-K Item 2.02 filing specific to Q3 2024 results was not found in the document catalog; the press release and call were used as primary sources – –.
  • Additional relevant Q3-period press release (veterans’ medical debt relief partnership) provides CSR context .