- Earnings Per Share (EPS): $0.43
- Return on Average Assets (ROAA): 0.90%
- Return on Tangible Common Equity (ROTCE): 8.9%
- Cost of Deposits: Increased 14 basis points to 1.73%
- Loan Production: $151 million
- Tangible Common Equity (TCE) Ratio: Increased 44 basis points to 11.41%
- Tangible Book Value Per Share: $20.58
- Common Equity Tier 1 (CET1) Ratio: 15.89%
- Total Risk-Based Capital Ratio: 19.01%
- Total Liquidity Position: Approximately $9.8 billion
- Net Income: $41.9 million
- Total Revenue: $154.6 million
- Non-Interest Expense: Decreased $5.1 million to $97.6 million
- Efficiency Ratio: 61.3%
- Net Interest Income: $136.4 million
- Net Interest Margin (NIM): Narrowed 13 basis points to 3.26%
- Non-Interest Income: $18.2 million
- Provision for Credit Losses: $1.3 million
- Total Assets: $18.3 billion
- Total Loans Held for Investment: Declined $522 million
- Total Deposits: $14.6 billion
- Investment Portfolio: Increased $155.7 million to $3.1 billion
- Non-Performing Loans: $52.1 million
- Non-Performing Assets: 28 basis points of total assets
- Classified Assets: Declined 9 basis points to 1% of total assets
- Net Charge-Offs: $10.3 million
- Allowance for Credit Losses (ACL): $183.8 million
- Coverage Ratio: 1.47%
Release Date: July 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 a strong capital position with a TCE ratio of 11.41% and a CET1 ratio of 15.89%, among the highest in the industry.
- The company generated earnings per share of $0.43, a return on average assets of 90 basis points, and a return on tangible common equity of 8.9%.
- Non-performing loans decreased by $11.7 million to $52.1 million, and non-performing assets ended the quarter at 28 basis points of total assets.
- The company has a total liquidity position of approximately $9.8 billion, double the level of uninsured deposits.
- Pacific Premier Bancorp Inc (PPBI) maintained disciplined deposit pricing practices, with an average cost on non-maturity deposits at 117 basis points for the second quarter.
Negative Points
- The prolonged higher interest rate environment continued to impact the cost of deposits, which increased 14 basis points to 1.73%.
- Loan production increased to $151 million but was offset by higher loan payoffs as clients utilized excess liquidity to reduce debt.
- Net interest income decreased to $136.4 million due to higher cost of funds and lower loan balances.
- Total loans held for investment declined by $522 million, driven by prepayments, paydowns, maturities, and lower C&I line utilization.
- The current deposit-gathering environment remains highly competitive, impacting the ability to attract new deposits.
Q & A Highlights
Q: I was hoping you could elaborate on your commentary about loan and deposit balances stabilizing in the back half here. What gives you confidence in that?
A: It's in part due to the conversations that we're hearing from the clients. Also, the fact that we did see a bit of seasonality here in the deposit outflows. We have matched the deposit outflows with contraction in the loan portfolio. Additionally, potential around declining rates and the certainty we will gain as the election approaches contribute to our confidence.
Q: Where are you seeing activity? Are you seeing potential activity in C&I originations?
A: We are seeing pretty good origination on the C&I side and a modest pickup in some of the construction lending, at least what's in the pipeline. We think that we potentially start to reach stabilization here, maybe before the end of the year.
Q: You talked about a war chest of capital and liquidity. What's your interest in deploying some of that today?
A: We are considering all options, including M&A, balance sheet repositioning, potential loan pool purchases, or another securities repositioning. We will be very thorough and thoughtful in our approach.
Q: How much was the swap revenue in net interest income this quarter?
A: It was about 16 basis points, adding about [22] to loans. We expect consistent results in the third quarter, assuming just one Fed move in September.
Q: How do you plan to approach deposit costs assuming rate cuts in September and December?
A: We think about probably some stability. If we see rate cuts, we will price based on competition and manage accordingly. However, the shift in deposit mix is less predictable, and a 25 basis point cut may not be a material move from a pricing standpoint.
Q: What are the plans for the $200 million of FHLB that you still have left?
A: They mature in the fourth quarter, and we plan to pay those off without renewals.
Q: Are you considering restructuring the AFS book or the HTM portfolio?
A: We are looking at all options, including the loan portfolio for low-yielding credits. We have the capital to take actions that may have a negative immediate impact but could drive earnings higher in the longer term.
Q: What do you view as your most constraining ratio, and what's the minimum level you would be willing to operate on?
A: Our most constraining factor is that we have a lot of capital. We have internal targets based on the risks we see in the broader economy and our balance sheet. We remain flexible to an extent.
Q: How much of the net charge-offs were related to the sale of substandard loans this quarter?
A: Just about all of the $10 million in net charge-offs were related to the sale of substandard loans.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
