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PP

PACIFIC PREMIER BANCORP INC (PPBI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.35; adjusted revenue was $144.5M; net interest margin compressed to 3.02% as loan payoffs and lower swap income weighed on earning asset yields while deposit costs fell to 1.79% .
  • Deposit remix was positive: non‑maturity deposits rose $145.8M to 85.4% of total and spot deposit cost declined 8 bps to 1.72%, supporting funding cost improvement into 2025 .
  • Asset quality strengthened: nonperforming assets decreased to 0.16% of assets and delinquencies fell to 0.02% of loans; TCE ratio rose to 11.92% and TBV/share to $20.97 .
  • 2025 guidance introduced: net interest income $500–$525M, noninterest income $80–$85M, noninterest expense $405–$415M; management expects low‑to‑mid single‑digit loan growth and Q1 2025 NIM around current levels, with swap income of $2–$3M in Q1 .
  • Catalysts: deposit cost tailwinds, accelerating loan originations ($316M commitments) plus strategic loan purchases ($401M C&I; $116M SFR), robust capital enabling M&A and buybacks, and community-focused Rebuild L.A. initiatives post wildfires .

What Went Well and What Went Wrong

  • What Went Well

    • Deposit remix toward lower-cost transaction balances (+$145.8M) and spot deposit cost down to 1.72%, setting up further funding cost improvement and NIM stabilization; “we will take a balanced approach…while driving pricing down further” .
    • Asset quality improvement: NPLs decreased $11.1M to $28.0M (0.23% of loans) and delinquencies fell to 0.02%; management highlighted disciplined credit risk management .
    • Strong capital and liquidity: TCE 11.92%, total capital ratio 20.28%, $9.0B unused borrowing capacity; “significant optionality to capitalize on attractive opportunities” .
    • Management quote: “Our team delivered a solid fourth quarter…well‑positioned to accelerate growth over the coming quarters” .
    • Loan production momentum: $316M new commitments (highest since Q3’22) and $193.8M fundings; weighted average new commitment rate 6.92% .
    • Community impact: Rebuild L.A. initiatives post wildfires to support displaced homeowners and businesses .

  • What Went Wrong

    • Net interest margin contracted 14 bps q/q to 3.02% on lower average loan balances and yields, and reduced swap income; NII fell to $124.5M .
    • Early quarter runoff and lower C&I line utilization reduced average loan yields to 5.13%; “fundings occurred later in the quarter,” tempering average yield .
    • Noninterest expense included a $4.1M increase in legal/professional services due to a $3.5M insurance claim receivable reversal, partially offsetting cost reductions .
    • Deposits down modestly q/q (−$17.2M) as retail CDs declined; time deposits remained higher cost relative to transaction balances .
    • Year-over-year, NII declined 15.2% on lower average loan balances and higher cost of funds, reflecting the elevated rate environment’s lagged effects .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Diluted EPS ($)(1.44) 0.37 0.35
Adjusted Revenue ($MM)165.9 149.6 144.5
Net Interest Income ($MM)146.8 130.9 124.5
Noninterest Income ($MM)(234.2) 18.9 20.0
Net Interest Margin (%)3.28 3.16 3.02
Cost of Deposits (%)1.56 1.84 1.79
Efficiency Ratio (%)60.1 66.1 67.8
ROAA (%)(2.76) 0.79 0.75
ROATCE (%)(28.01) 7.63 7.15

Segment/Composition (Deposits):

Deposit Category ($000)Q4 2023Q3 2024Q4 2024
Noninterest-bearing checking4,932,817 4,639,077 4,617,013
Interest-bearing checking2,899,621 2,763,353 2,898,810
Money market/savings4,868,442 4,805,516 4,837,929
Retail CDs1,684,560 1,972,962 1,809,818
Brokered CDs610,186 300,019 300,132
Total deposits14,995,626 14,480,927 14,463,702
Non-maturity deposits (% of total)84.7% 84.3% 85.4%

KPIs:

KPIQ4 2023Q3 2024Q4 2024
New loan commitments ($000)128,102 104,080 316,047
New loan fundings ($000)103,673 39,374 193,823
Purchased loans ($000)— — 517,578 (401,300 C&I; 116,300 SFR)
Loan-to-deposit ratio (%)88.6 83.1 83.3
NPLs / Loans (%)0.19 0.32 0.23
Delinquency / Loans (%)0.08 0.08 0.02
TCE ratio (%)10.72 11.83 11.92
TBV per share ($)20.22 20.81 20.97

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income ($MM)FY 2025—500–525 New
Noninterest Income ($MM)FY 2025—80–85 New
Noninterest Expense ($MM)FY 2025—405–415 New
Loan GrowthFY 2025—Low-to-mid single digit New
Net Interest MarginQ1 2025—~current (~3.02%) New
Swap Income ($MM)Q1 2025—2–3 New
Dividend per share ($)Q1 2025$0.33$0.33 declared (maintained) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Loan originations & purchasesQ2: considering pool purchases; originations $151M; Q3: pipeline building Commitments $316M; purchased $401M C&I and $116M SFR Accelerating
Deposit costs & mixQ2 cost 1.73%; Q3 cost 1.84% with spot 1.80% Cost 1.79%; spot 1.72%; non‑maturity deposits +$146M Peak passed; easing
CRE appetite/concentrationQ2: cautious given regulatory focus Willing to add modestly; CRE concentration “just over 300” but not growing materially Constructively cautious
M&A optionalityQ2/Q3: open to strategic deals & buybacks Conversations picked up; actively pursuing; agnostic buyer/seller Increasing dialogue
Macro/regulatory backdropQ2: awaiting election clarity; Q3: improved borrower sentiment Fed cuts initiated; new administration; more business‑friendly outlook More favorable
Swaps & NIMQ2 swaps ~16 bps to NIM; Q3 swap rev < $7M Q4 swap rev ~$4M; Q1’25 guided $2–$3M; NIM ~flat near current Lower swap contribution
Wildfires/community—Launching Rebuild L.A.; initial loan impact ~4 loans/$8M, well‑collateralized New initiative
Sub debt—One issue reprices in June; evaluating paydown/refi Active consideration

Management Commentary

  • “Amidst a more favorable economic outlook…we made progress in lowering our funding costs…cost of funds decreased 9 bps to 1.88%…spot deposit cost at year‑end declined 8 bps to 1.72%” (CEO) .
  • “For the fourth quarter, we recorded net income of $33.9M…total revenue of $144.5M…efficiency ratio of 67.8%” (CFO) .
  • “We anticipate…full year net interest income to be in the $500M to $525M range…total noninterest income $80M to $85M…noninterest expense $405M to $415M” (CFO) .
  • “We remain open to a broad range of strategic transactions…agnostic to which side of a transaction we are on” (CEO) .
  • “We…have the resources…to rebuild LA…a primary capital provider to residents, builders, contractors and related businesses” (CEO) .

Q&A Highlights

  • Margin outlook: December NIM 3.03%; Q1 NIM expected around current levels as deposit cost tailwinds offset earlier loan payoffs; improvement expected through 2025 .
  • Swaps: Q4 swap income ~$4M; Q1 guided $2–$3M with $300M notional remaining through H1 2026 .
  • Deposit repricing: management sees room to push deposit costs lower, primarily via time deposits mix and growing transaction accounts; overall beta ~35–40% .
  • Loan purchases: focus on non‑CRE pools, but not opposed to CRE if risk‑adjusted returns meet thresholds; purchases supplement organic originations .
  • CRE appetite & concentration: concentration near ~300%; willing to add “a little,” not materially; confidence in portfolio performance amid easing Fed stance .
  • Subordinated debt: one tranche reprices in June; considering refi, paydown, or maintaining outstanding .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for PPBI in our SPGI mapping, so estimate comparisons for Q4 2024 EPS and revenue could not be provided. Values retrieved from S&P Global would normally be the default source; in this case, consensus data was unavailable in our system.

Key Takeaways for Investors

  • Deposit cost tailwinds and a favorable remix should stabilize NIM near current levels in Q1 2025, with scope for gradual improvement as loan pipelines convert and swap income headwinds abate .
  • Loan growth is re‑accelerating (commitments $316M) and strategically supplemented by purchased pools ($401M C&I; $116M SFR), supporting asset yields in an improving macro backdrop .
  • Robust capital (CET1 17.05%, total capital 20.28%) and ample liquidity ($9.0B capacity) provide optionality for organic growth, buybacks, and M&A—key stock catalysts as the rate cycle normalizes .
  • Asset quality is a differentiator: NPLs and delinquencies declined while coverage remained healthy (ACL 1.48% plus FV marks), de‑risking downside to earnings and book value .
  • 2025 guidance frames the earnings path (NII $500–$525M, opex $405–$415M) and signals cost discipline; execution on loan growth and deposit pricing will drive variance vs. targets .
  • Community initiatives (Rebuild L.A.) reinforce franchise positioning and could catalyze construction loan activity later in 2025, subject to permitting and post‑cleanup timelines .
  • Near-term trading: watch for deposit cost prints, swap income realization, loan purchase cadence, and any M&A or buyback actions; medium-term thesis hinges on NIM durability and loan growth conversion against a benign credit backdrop .