Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $46.0 million, or $0.48 per diluted share, for the third quarter of 2023, compared with net income of $57.6 million, or $0.60 per diluted share, for the second quarter of 2023, and net income of $73.4 million, or $0.77 per diluted share, for the third quarter of 2022.
For the quarter ended September 30, 2023, the Company’s return on average assets (“ROAA”) was 0.88%, return on average equity (“ROAE”) was 6.43%, and return on average tangible common equity (“ROATCE”)(1) was 10.08%, compared to 1.09%, 8.11%, and 12.66%, respectively, for the second quarter of 2023, and 1.35%, 10.57%, and 16.74%, respectively, for the third quarter of 2022. Total assets were $20.28 billion at September 30, 2023, compared to $20.75 billion at June 30, 2023, and $21.62 billion at September 30, 2022.
Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, “Our teams continue to deliver solid results in a challenging economic and interest rate environment. We maintained our disciplined focus on prudent and proactive risk, liquidity, and capital management during the quarter. Our relationship managers' extraordinary efforts to deepen existing client relationships and bring new clients into our franchise are producing tangible results. During the quarter, client deposit flows further stabilized in the face of significant pricing competition, and we were able to reduce higher cost brokered deposits by $490 million.
“Our asset quality remained solid during the quarter, as total delinquencies decreased to 0.08% of loans, and non-performing assets were just 0.13% of total assets. Our operating results were impacted by a shared national credit that resulted in two non-relationship loans to one borrower being placed on nonaccrual status during the quarter. This resulted in an interest accrual reversal of $1.7 million and a charge-off of $3.2 million. The borrower on this $13 million credit continues to make payments. Our total shared national credit portfolio, which is a line of business we acquired from Opus Bank in 2020 that we have since discontinued, is comprised of twenty-two loans totaling $201 million in outstanding balances, or 1.5% of total loans, at September 30th.
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(1) | Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release. | |
“During the past several quarters, we intentionally and proactively prioritized capital accumulation over balance sheet growth in light of the uncertain economic outlook, while at the same time continuing to provide best-in-class service to our clients and the communities we serve. As a result, we have created optionality for our organization to pursue organic and strategic growth opportunities that we believe will be accretive and aligned with our commitment to producing long-term value for our shareholders.
“I would like to thank all of the Pacific Premier employees for their outstanding efforts during the quarter, and our Board of Directors, shareholders, and stakeholders for continuing to support our organization through another dynamic period of time.”
FINANCIAL HIGHLIGHTS
Three Months Ended | ||||||||||||
September 30, | June 30, | September 30, | ||||||||||
(Dollars in thousands, except per share data) | 2023 | 2023 | 2022 | |||||||||
Financial highlights (unaudited) | ||||||||||||
Net income | $ | 46,030 | $ | 57,636 | $ | 73,363 | ||||||
Net interest income | 149,548 | 160,092 | 181,112 | |||||||||
Diluted earnings per share | 0.48 | 0.60 | 0.77 | |||||||||
Common equity dividend per share paid | 0.33 | 0.33 | 0.33 | |||||||||
Return on average assets | 0.88 | % | 1.09 | % | 1.35 | % | ||||||
Return on average equity | 6.43 | 8.11 | 10.57 | |||||||||
Return on average tangible common equity (1) | 10.08 | 12.66 | 16.74 | |||||||||
Pre-provision net revenue to average assets (1) | 1.27 | 1.52 | 1.85 | |||||||||
Net interest margin | 3.12 | 3.33 | 3.61 | |||||||||
Cost of deposits | 1.50 | 1.27 | 0.22 | |||||||||
Cost of non-maturity deposits (1) | 0.89 | 0.71 | 0.11 | |||||||||
Efficiency ratio (1) | 59.0 | 54.1 | 48.3 | |||||||||
Noninterest expense as a percent of average assets | 1.96 | 1.91 | 1.86 | |||||||||
Total assets | $ | 20,275,720 | $ | 20,747,883 | $ | 21,619,201 | ||||||
Total deposits | 16,007,447 | 16,539,875 | 17,746,374 | |||||||||
Non-maturity deposits as a percent of total deposits | 82.8 | % | 81.4 | % | 89.5 | % | ||||||
Noninterest-bearing deposits as a percent of total deposits | 36.1 | 35.6 | 38.2 | |||||||||
Loan-to-deposit ratio | 82.9 | 82.3 | 84.0 | |||||||||
Book value per share | $ | 29.78 | $ | 29.71 | $ | 28.79 | ||||||
Tangible book value per share (1) | 19.89 | 19.79 | 18.68 | |||||||||
Tangible common equity ratio | 9.87 | % | 9.59 | % | 8.59 | % | ||||||
Common equity tier 1 capital ratio | 14.87 | 14.34 | 12.36 | |||||||||
Total capital ratio | 17.74 | 17.24 | 14.83 | |||||||||
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(1) | Reconciliations of the non-GAAP measures are set forth at the end of this press release. | |
INCOME STATEMENT HIGHLIGHTS
Net Interest Income and Net Interest Margin
Net interest income totaled $149.5 million in the third quarter of 2023, a decrease of $10.5 million, or 6.6%, from the second quarter of 2023. The decrease in net interest income was primarily attributable to a higher cost of funds as a result of the current interest rate environment and lower average loans and investment securities balances, partially offset by higher interest-bearing cash balances.
The net interest margin for the third quarter of 2023 decreased 21 basis points to 3.12%, from 3.33% in the prior quarter. The lower net interest margin was due to a higher cost of funds and lower loan prepayment fees, partially offset by higher yields on interest-bearing cash balances and investment securities. The net interest margin was negatively impacted 4 basis points as a result of reversing $1.7 million of accrued interest for the shared national credit through September 30, 2023.
Net interest income for the third quarter of 2023 decreased $31.6 million, or 17.4%, compared to the third quarter of 2022. The decrease was attributable to a higher cost of funds and lower average loans and investment securities balances, partially offset by higher yields on average interest-earning assets.
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||
September 30, 2023 | June 30, 2023 | September 30, 2022 | |||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest Income/Expense | Average Yield/ Cost | Average Balance | Interest Income/Expense | Average Yield/ Cost | Average Balance | Interest Income/Expense | Average Yield/ Cost | ||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,695,508 | $ | 21,196 | 4.96 | % | $ | 1,433,137 | $ | 16,600 | 4.65 | % | $ | 665,510 | $ | 2,754 | 1.64 | % | |||||||||
Investment securities | 3,828,766 | 25,834 | 2.70 | 3,926,568 | 25,936 | 2.64 | 4,277,444 | 22,067 | 2.06 | ||||||||||||||||||
Loans receivable, net (1) (2) | 13,475,194 | 177,032 | 5.21 | 13,927,145 | 182,852 | 5.27 | 14,986,682 | 174,204 | 4.61 | ||||||||||||||||||
Total interest-earning assets | $ | 18,999,468 | $ | 224,062 | 4.68 | $ | 19,286,850 | $ | 225,388 | 4.69 | $ | 19,929,636 | $ | 199,025 | 3.96 | ||||||||||||
Liabilities | |||||||||||||||||||||||||||
Interest-bearing deposits | $ | 10,542,884 | $ | 62,718 | 2.36 | % | $ | 10,797,708 | $ | 53,580 | 1.99 | % | $ | 10,839,359 | $ | 9,873 | 0.36 | % | |||||||||
Borrowings | 1,131,656 | 11,796 | 4.15 | 1,131,465 | 11,716 | 4.15 | 966,981 | 8,040 | 3.31 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 11,674,540 | $ | 74,514 | 2.53 | $ | 11,929,173 | $ | 65,296 | 2.20 | $ | 11,806,340 | $ | 17,913 | 0.60 | ||||||||||||
Noninterest-bearing deposits | $ | 6,001,033 | $ | 6,078,543 | $ | 6,893,463 | |||||||||||||||||||||
Net interest income | $ | 149,548 | $ | 160,092 | $ | 181,112 | |||||||||||||||||||||
