Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pacific Premier Bancorp Inc (PPBI, Financial) reported solid earnings of $36 million or $0.37 per share for the third quarter.
- Noninterest-bearing deposits increased, comprising 32% of total deposits, which helped reduce higher-cost wholesale funding.
- Capital ratios improved significantly, with the tangible common equity ratio increasing to 11.83% and the CET1 ratio to 16.83%.
- Asset quality remained strong, with nonperforming loans decreasing to $39 million and delinquencies falling to 0.08% of loans.
- The company is optimistic about future loan demand and has expanded its loan pipeline, expecting increased activity in the fourth quarter.
Negative Points
- The prolonged higher interest rate environment increased the average cost of deposits to 1.84%, impacting net interest income.
- Loan portfolio contracted due to elevated loan payoffs, particularly in the C&I portfolio, affecting both sides of the balance sheet.
- Net interest margin narrowed by 10 basis points to 3.16% due to rising funding costs and lower loan balances.
- Total loans held for investment declined by $454.9 million, driven by early payoffs and lower loan production.
- The company anticipates a decrease in net interest income for the fourth quarter, with guidance in the range of $120 million to $125 million.
Q & A Highlights
Q: How do you view the growth trajectory for loans as we move into 2025, and where do you see the most opportunity for growth?
A: Steven Gardner, CEO: The growth is predominantly in the C&I sector, with opportunities also in construction and SBA. We're not looking to expand significantly in multifamily due to concentration and yield considerations. We've also made adjustments to be more competitive in the consumer front, particularly with HELOC offerings. Overall, we're optimistic about the outlook, supported by recent growth in our loan pipeline.
Q: Can you discuss the strategic opportunities available given your strong capital position and the timeline for potential actions?
A: Steven Gardner, CEO: Our focus is on maintaining the current dividend and redeploying excess liquidity into loans to drive earnings growth. We are also considering tactical balance sheet repositioning and have a sizable repurchase plan in place. The Board consistently reassesses these options, considering factors like interest rates and strategic opportunities.
Q: What is your appetite for new hires, and where are you focusing these efforts?
A: Steven Gardner, CEO: We consistently look to upgrade talent, focusing on individuals with significant relationships in small businesses, middle market clients, and specialty areas like construction and SBA. Our focus is not geographically specific but rather on bringing in talented individuals who can positively impact the organization.
Q: Could you provide details on the swap revenue for this quarter and your strategy regarding swaps moving forward?
A: Ronald Nicolas, CFO: This quarter's swap revenue was just under $7 million. For the next quarter, we expect it to be in the range of $3 million to $4 million. Given the interest rate environment, the opportunity to mitigate the downdraft with new swaps is limited, but we have some long positions that remain profitable.
Q: With the potential for loan purchases, what types of assets are you considering, and who might the sellers be?
A: Steven Gardner, CEO: There is a wide variety of portfolios available, including single-family, HELOC, C&I, and commercial real estate. Sellers range from traditional banks to fintechs. We conduct thorough due diligence to ensure any purchases meet our risk-adjusted return thresholds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
