NASDAQ:PPBI Pacific Premier Bancorp Q4 2023 Earnings Report $20.60 -0.64 (-3.01%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$20.58 -0.02 (-0.10%) As of 04/25/2025 05:20 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Pacific Premier Bancorp EPS ResultsActual EPS$0.51Consensus EPS $0.48Beat/MissBeat by +$0.03One Year Ago EPS$0.77Pacific Premier Bancorp Revenue ResultsActual Revenue($17.00) millionExpected Revenue$169.50 millionBeat/MissMissed by -$186.50 millionYoY Revenue GrowthN/APacific Premier Bancorp Announcement DetailsQuarterQ4 2023Date1/29/2024TimeBefore Market OpensConference Call DateMonday, January 29, 2024Conference Call Time12:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Pacific Premier Bancorp Q4 2023 Earnings Call TranscriptProvided by QuartrJanuary 29, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:01Good morning, and welcome to the Pacific Premier Bancorp 4th Quarter 2023 Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Steve Gardner, Chairman and CEO. Please go ahead. Speaker 100:00:41Thank you, Gary, and good morning, everyone. I appreciate you joining us today. As you're all aware, we released our earnings report for the Q4 of 2023 earlier this morning. We have also published an updated investor presentation with additional information and disclosures on our financial results. If you've not done so already, we encourage you to visit our Investor Relations website to download a copy of the presentation and related materials. Speaker 100:01:12I note that our earnings release and investor presentation include a Safe Harbor statement relative to the forward looking comments. I encourage each of you to carefully read that statement. On today's call, I'll walk through some of the notable items related to our 4th quarter performance. Ron Nicholas, our CFO, We'll also review a few of the details surrounding our financial results and then we'll open up the call to questions. Our team delivered another solid quarter to close out 2023, which was an extraordinary year for the banking industry. Speaker 100:01:51Rapidly rising interest rates, high profile bank failures and rapid succession and heightened regulatory expectations brought challenging dynamics to the market. Throughout it all, we maintained our focus on prudent and proactive capital liquidity and credit risk management. We have built our organization to be dynamic and adaptable to various operating environments. This served us and our stakeholders extremely well in 2023. For example, Our bankers responded quickly to the industry challenges throughout the year, collaborating across business lines to meet clients' needs and to reinforce the strength of our franchise. Speaker 100:02:40This responsiveness and engagement deepened existing relationships and led to new business development opportunities for our teams. During the Q4, we leveraged the strength of our balance sheet and strong capital levels to proactively reposition our securities portfolio. This transaction enhanced our future earnings provided additional liquidity and is reflective of the optionality we have created within the franchise. The securities repositioning produced immediate results, expanding our net interest margin by 16 basis points. I'd like to highlight a few key areas as many of the trends were similar to what we observed in the 3rd quarter. Speaker 100:03:29Although we reported a quarterly net loss of $1.44 per share, excluding the one time effects of the FDIC special assessment and our securities portfolio repositioning, our operating earnings per share was $0.51 We saw some nice lift from our fee based businesses as well as a reduction in non interest expense compared to the 3rd quarter, excluding the FDIC Special Assessment. Our commitment to capital accumulation in the current environment continues to drive Our strong capital ratios, which remain top tier among our peers, even after layering in the impact of the loss on the securities portfolio sale. In the 4th quarter, our TCE ratio increased 85 basis points to 10.72 percent and our tangible book value per share increased $0.33 to $20.22 Our CET1 ratio came in at 14.32 percent And our total risk based capital ratio was a healthy 17.29%. Our ability to deepen our relationships with existing customers and attract new clients to the bank generated meaningful growth in new deposit account openings, while maintaining pricing discipline. The new account opening activity, coupled with our ability to opportunistically deploy Liquidity generated from the securities sale supported the favorable remix of the balance sheet. Speaker 100:05:14We redeployed a portion of the proceeds from the securities portfolio into cash and U. S. Treasuries, while also reducing higher cost broker deposits by $617,000,000 and prepaying $200,000,000 of FHLB term advances. Our available liquidity at the end of the 4th quarter totaled approximately $9,900,000,000 We did see some customer deposit outflows and mix shift during the Q4, which included seasonal outflows related to business tax payments. Not surprisingly, Some clients continue to pursue higher yielding non bank alternatives. Speaker 100:06:00Ultimately, We saw non maturity deposits increase to 84.7 percent of total deposits. Our constant emphasis on cultivating high quality client relationships and disciplined deposit pricing resulted in a well controlled cost of non maturity deposits of 102 basis points. On the asset side of the balance sheet, we saw slight growth in our overall loan portfolio balances due to increased line utilization from commercial borrowers. Prepayment activity was similar to the 3rd quarter as business in commercial real estate clients continue to deploy excess cash reserves to pay down debt. Our bankers remain focused on generating high quality relationships that meet our risk adjusted return requirements. Speaker 100:06:58As always, we are proactive in terms of portfolio management and credit monitoring. We have ongoing communication with our clients relative to market trends in their businesses and industries. These updates on our clients' financial performance, Liquidity and collateral values inform our approach to managing individual credits. Our year end asset quality metrics remain solid as delinquencies were 0.08% of total loans and non performing assets were 0.13% of total assets. We are closely monitoring the trends in commercial real estate markets and proactively identifying and managing potentially weaker credits. Speaker 100:07:46Overall, Our loan portfolio is well managed in all facets across the organization. With that, I will turn the call over to Ron to provide few more details on our 4th quarter financial results. Speaker 200:08:02Thanks, Steve, and good morning. For comparison purposes, my comments today are on a linked quarter basis unless otherwise noted. Let's begin with the quarter's results. For the 4th quarter, we recorded a net loss of 135,400,000 dollars or $1.44 per share. Our reported results included the impact from 2 non recurring items, The $1,260,000,000 AFS securities sale that had a net after tax loss of $182,300,000 and $2,100,000 of additional non interest expense due to the special FDIC assessment. Speaker 200:08:48Excluding these two items, our operating results were net income of $48,400,000 or $0.51 per diluted share, which yielded a return on average assets of 0.99% and a return on average tangible common equity of 11.19%. Our operating efficiency ratio came in at 58.8% And our adjusted pre provision net revenue as a percentage of average assets was 1.34% for the quarter. Please refer to our non GAAP reconciliation in our investor presentation and earnings release for more details. Taking a closer look at the income statement, net interest income of $146,800,000 was negatively impacted by lower average earning asset levels, partially offset by a favorable mix shift toward higher yielding earning assets as a result of the securities repositioning and the reduction of higher cost wholesale funding sources. Our actions led to 16 basis points of net interest margin expansion to 3 point to 8% due to an increase of 38 basis points on the investment securities for the quarter as well as 8 basis points of higher loan yields. Speaker 200:10:16On a spot basis, excluding fees and discounts, the weighted average rate on our loan portfolio increased 11 basis points to 4.87%, reflecting higher lines of credit draws for the quarter. Overall, cost of funds was up only 2 basis points to 1.69%, reflecting the favorable mix change from paying down higher cost wholesale funding. And our non maturity deposits increased to 84.7% of total deposits, While costs were well controlled at 1.02 percent with our cumulative total deposit beta of 29% illustrating our disciplined pricing actions throughout this rate cycle. Notably, our spot deposit costs were 1.55% and ended the quarter 1 basis point lower than the average total deposit cost for the quarter of 1.56%. For the Q1, we expect further balance sheet optimization through a combination of lower cash levels and a reduction in higher cost wholesale funding. Speaker 200:11:29Namely, we expect both broker deposits and FHLB advances to trend lower from year end levels. We believe the combination of these items will help partially mitigate net interest margin pressures in the 1st quarter. Our core fee based businesses had a solid quarter. Excluding the securities sale loss of $254,100,000 our non interest income came in at $19,900,000 Our fundamental fee income trends were favorable as trust income came in at $9,400,000 and escrow and exchange fee income at $1,100,000 both up slightly over the prior quarter. For the Q1 of 2024, We expect our total non interest income to be in the range of $20,000,000 to $21,000,000 with the benefit of PPT's annual tax fees. Speaker 200:12:30Non interest expense increased slightly to $102,800,000 Compensation and benefits expense decreased to $2,200,000 reflecting the benefit from the staff realignment across certain business lines during the quarter. From a staffing We ended the quarter with headcount of 1345 compared to 1355 as of September 30, as our staffing levels continue to track with the overall size of the balance sheet. We remain focused on tightly managing our operating expenses, and we expect 1st quarter expenses in the range of $102,000,000 to $103,000,000 with the anticipated higher first quarter payroll taxes. Our provision for credit losses of $1,700,000 decreased from the prior quarter as our ACL coverage ratio increased 3 basis points to 1.45%, consistent with the 4th quarter's loan composition, level of new loan commitment activity and our economic outlook. Turning now to the balance sheet. Speaker 200:13:48We finished the quarter at $19,000,000,000 in total assets with loans flat to the prior quarter. As noted, lower cash and securities enabled us to pay down higher cost wholesale funding in the form of brokered CDs and FHLB term borrowings. Total loans held for investment increased $19,000,000 driven by net draws on existing lines of credit of $355,000,000 and new commitments of $128,000,000 offsetting prepayments, sales and maturities of $455,000,000 Total deposits ended the quarter at $15,000,000,000 a decrease of $1,000,000,000 driven mostly by a $617,000,000 reduction in broker Other deposit categories fell $395,000,000 as we continued to see clients redeploying funds into higher yielding alternatives, prepaying loans as well as the impact of 4th quarter seasonal tax related outflows. Even with the continued mix shift, our non interest bearing deposits remain a robust 33% of total deposits, reflecting our strong client relationship business model. The successful execution of our deposit pricing strategies is evident as our non maturity deposits ended the year at 1.04%, only 2 basis points above the quarter's average of 1.02 percent, generating positive momentum for us heading into the Q1. Speaker 200:15:30The securities portfolio decreased $783,000,000 to $2,900,000,000 and the average yield on our investment portfolio increased 38 basis points to 3.08 percent, partially benefiting from the purchase of $539,000,000 of short term U. S. Treasuries. We stand to benefit from a full quarter of the reinvested proceeds in the Q1 as the spot rate on our securities portfolio not surprising given the rally in the yield curve late in 2023 And combined with the securities sold, our pre tax accumulated other comprehensive loss on the total AFS portfolio improved to $36,000,000 at December 31. Our capital ratios remain significantly higher than the required well capitalized thresholds. Speaker 200:16:25With our CET1 and Tier 1 capital ratios at 14 0.32% and our total risk based capital at 17.29%, we continue to rank in the top tier relative to our peers. In addition, our tangible common equity ratio now stands at a very healthy 10.72% And our tangible book value per share grew $0.33 to $20.22 And lastly, from an asset quality standpoint, asset quality across all measurables remain solid. Non performing assets were flat at 0.13% and total delinquency was also flat compared to the prior quarter at just 8 basis points. Our total classified loans decreased 5 basis points to 1.07 percent and our allowance for credit losses finished the quarter at $192,500,000 with our coverage ratio increasing to 1.45%. Our total loss absorption, which includes the fair value discount on acquired loans, ended the quarter up 1 basis point at 1.77%. Speaker 200:17:39With that, I'll turn the call back over to Steve. Speaker 100:17:42Great. Thanks, Ron. I'll conclude with a few comments about our outlook. We believe the actions we have taken over the past 2 years to purposefully moderate Growth rates and prioritized capital and liquidity management have positioned us well. We were encouraged by the stabilization in the loan portfolio at year end. Speaker 100:18:05However, we anticipate muted loan demand and what may be a lingering higher interest rate environment. We will continue to monitor our own portfolio closely, and we are ready to respond decisively should we see elevated stresses. For the near term, pressure on deposit costs appear to have moderated. Future rate cuts, if they were to materialize in 2024, would aid our ability to push funding costs down. Capital accumulation over balance sheet growth remains a priority. Speaker 100:18:39However, as you saw with the securities repositioning transaction, we are regularly evaluating opportunities to deploy capital and optimize the balance sheet to create long term value for shareholders. Although challenges remain, Thanks to the strength and expertise of the entire Pacific Premier team, some of the most talented in the industry. We remain in a position to act quickly to take advantage of opportunities if and when they arise. In conclusion, As an industry, we will continue to face a significant amount of uncertainty in 2024 on various fronts. That said, we are optimistic and believe we are well positioned to leverage our organizational excellence and discipline to continue to deliver long term value for our shareholders, clients, employees and the communities we serve. Speaker 100:19:38That concludes our prepared remarks. We'd be happy to answer any questions. Gary, please open up the call for questions. Operator00:20:12Our first question is from David Feaster with Raymond James. Please go ahead. Speaker 300:20:17Hey, good morning everybody. Speaker 100:20:19Morning, David. Speaker 400:20:20Maybe, I just want to Speaker 500:20:22start on the margin outlook. You guys have been incredibly active managing the balance sheet. Speaker 100:20:28It sounds like there's more coming in Speaker 500:20:29the Q1. Curious how you think about the margin trajectory? If I hear your comments, Ron, it Sounds like maybe some modest compression in the Q1 might be coming, but just curious how you think about the margin trajectory going forward, especially considering potential rate cuts, given that seems like to be the expectation near term? Speaker 100:20:54Ron, I'm happy to take it or you can offer up some thoughts. Speaker 200:20:59Sure. David, I would tell you that here in the Q1, we don't anticipate, we're not modeling ourselves internally here any rate cuts. But I will say, we'll see. I mean, as evidenced here in the Q4, we've done a pretty good job at managing our deposit costs, continue to manage the balance sheet and that's going to be pretty much the continuation. I will highlight though that of course we saw a nice yield uptick and that was driven by very variable rate draws on lines of credit. Speaker 200:21:40We'll see how that plays itself out here as we move through the Q1. So Those are kind of my initial thoughts there. Steve? Speaker 100:21:50Yes. I don't know that I have much to add. I think that covered it relatively well. Speaker 500:21:57Okay. And maybe just touching on the look, you've taken a pretty conservative standpoint for some time now, right? Great to see an increase in loans. Curious, do you think this marks an inflection point? And just If so, what are kind of some of the key drivers of what's giving you confidence here maybe to start Put more capital to work in terms of loans, just kind of your thoughts on what you're seeing from a market dynamic and improving demand and those types of things? Speaker 100:22:29Sure. Well, as I said, we for the foreseeable future, we see pretty muted demand, David. I think until we have better clarity and certainty about the direction of rates, that's From all indications that we have from all the clients that we're talking to, whether it's small business or real estate investors, There remains to be a level of caution out there. So our expectation is muted demand. We're going to maintain our discipline on the quality of credits and the relationships that we're bringing into the bank. Speaker 100:23:13But I think as you saw in the Q4, we certainly benefited from some of those line draws that Ron just mentioned. The production picked up a little bit. We'll see how those trends materialize here in the first half of the year. Speaker 500:23:33Perfect. And maybe last one for me, nice to hear about some modest uptick in some benefits in the fee income lines. I know that's A big focus for you all. Just curious some of the underlying trends that you're seeing in the trust business. It sounds like some tax benefits there and what you're seeing in the escrow And then just high level thoughts, I know you guys have been investing a lot in technology, curious whether you're seeing any tangible benefits there and kind of your thoughts on investment on that front and where it's working? Speaker 100:24:05Sure. So there's a lot of subjects to cover there, David, that's all right. First, as far as the Trust team, we have invested pretty heavily in the Trust team and we were Very pleased with the results that they were able to put up last year in a number of different areas. And And I think we're finally approaching that operational excellence that we expect and have had at the bank level for some time. And that's helping, I think, from the production side in with the team and their confidence level in speaking to clients. Speaker 100:24:45And we have developed some great relationships with some of the largest wealth managers in the industry and really as they get to better understand our capabilities and how that plays in To their business, we've seen some nice growth in new accounts and we expect that to continue here this year and incremental improvement every month and every quarter. On the escrow business side, That frankly has really slowed down over the last couple of years, reflection of Much lower activity in the commercial real estate markets and transactions overall. I think that business until we get Some movement in rates and some better clarity on the commercial real estate markets more broadly. We'd expect that activity to be relatively muted as well. And then lastly, From the technology side, we are always investing in the business and that's technology, That's employees. Speaker 100:26:00We continue to improve in those areas. And I think as we move further away From some of the disruptions that occurred in the first and second quarter of last year And how that stabilization, we'll be able to play a little bit more offense and we certainly have the technology and resources there that aid our teams throughout the organization. Speaker 500:26:31That's helpful. I know it's Speaker 400:26:32a big question. Thank you. Operator00:26:35The next question is from Chris McGratty with KBW. Please go ahead. Speaker 600:26:40Great. Good afternoon. Ron, maybe a question just on broader net interest income, given the actions you took in the benefit on the margin, but the smaller balance Maybe thoughts on trough of NII, if we're not there, maybe when? And also, if we do stay in a higher for longer environment, maybe how the balance sheet pro form a now reacts to higher for longer versus kind of the futures market that's calling for more cuts? Thank you. Speaker 200:27:08Yes. I'll just echo a little bit, Chris, of what I stated earlier. We did see a nice expansion, the 16 basis points. I wouldn't go as far as to say that was the trough, but We've got some favorable aspects going here. Obviously, the reinvestment, there's Securities repositioning, that's going to add some lift here in the Q1 as well and some of the pay down on the wholesale That we've been doing and looking to continue to do, I think is going to offer up some additional benefits. Speaker 200:27:48The big wildcard of course is going to be the deposit costs and deposit flows in the mix. We continue to see challenges, the industry continues to see challenges across that aspect of it. And despite the fact the fact we've done a really nice job managing our deposit costs, again, I wouldn't go so far as to say that we've conquered that or slayed that dragon at this point in time. I think we'll still see some pressures in that area. But we're cautiously on that front. Speaker 600:28:25Great. Thanks, Ron. And Steve, maybe for you on capital. You talked about the flexibility and the actions you've taken. Do you expect opportunities to arise in to arise in 2024 at the industry levels given some of the stress and rates and maybe how you would maybe update us on your ranks of capital year for 2024? Speaker 600:28:42Thank you. Speaker 100:28:43Sure. Yes, I would say we do expect opportunities to rise, but I thought that in 2023 as well. And so we'll just see how the year plays out here. I think as I mentioned, given all the uncertainties in the environment, whether it's around The commercial real estate markets or a variety of other areas and just how the economy develops Given all of the geopolitical risks and tensions out there, I think our approach is going continue to be that we're going to retain capital where we see opportunities to put it to work, where It benefits the organization. Long term, we're going to do that. Speaker 100:29:38But overall, it remains There's a level of uncertainty and we are very comfortable having strong levels of capital. Speaker 400:29:51Thank you. Operator00:29:54The next question is from Gary Tenner with D. A. Davidson. Please go ahead. Speaker 300:29:59Thanks. Good morning, guys. Speaker 100:30:01Good morning, Gary. Speaker 300:30:02I wanted to ask about the 4th quarter non interest bearing outflow. Could you parse maybe how much of that you would chalk up to tax payment seasonality versus kind of ongoing shift in mix and A sense of timing of how rapidly the seasonality piece of it could come back on balance sheet? Speaker 100:30:25Yes. It's hard to put a specific measurement on it, Gary, as far as the From the tax payments and in all of the movements that are going on, as Rob mentioned, we're seeing clients continue to pay down or pay off loans and so that impacts both sides of the balance sheet naturally. Certainly, in 2023, in the State of California, we saw Later tax payments come out, some of the impacts on commerce, escrow. Our sense is though that, that magnitude, we don't expect to see that as we move through the year and typically some of those funds begin to return in the first half of the year. How much will come back is uncertain. Speaker 100:31:26Again, I think it in part has to deal with The yield curve, how businesses are feeling about the overall environment. So we'll just we'll see how things play out here. I think that one of the benefits we have is just the number of new accounts that we've opened in 2023. And as those get fully implemented and onboarded, we may pick up some benefit there. Speaker 300:31:58Appreciate that. And bigger picture, I guess, on the funding side, Pre pandemic, you'll often operate at the company atoratimeslightlyabove100 percent loan deposit ratio, even with the wholesale reductions in the 4th quarter and the net deposit moves there, you're back up, but only 89%. So as you're thinking about the longer term management of the balance sheet, how are your thoughts on that today relative to where they were a few years ago? Speaker 100:32:31Yes. I think that when you think about it pre pandemic, we were also quite a bit smaller In total assets, I don't see us running the business. We don't think it would be prudent at 100% loan to deposit ratio, but we could certainly see in the low to mid 90% range. Certainly, we'd like to get there by growing both sides of the balance sheet, both the loans and deposit side to increase that over time prudently. Speaker 300:33:06I appreciate that. And one last question for me if I could. Ron, in terms of the hedges, I know you had added some in the 3rd quarter, doesn't look like you added any here in the quarter, but could you just remind us kind of what the maturity schedule is of those swaps? Speaker 200:33:22Sure, Gary. We've got about $1,300,000,000 in totality in the swap book. And approximately half of those hedges will mature by the end of this year. And then we've got another tranche, if you will, another 25% early in 2025. And then the rest are just laddered out just a little bit longer. Operator00:34:00The next question is from Andrew Terrell with Stephens. Please go ahead. Speaker 700:34:05Hey, good morning. Good morning. Speaker 400:34:10First question, Speaker 700:34:13Ron, can you just remind us the 600,000,000 termed FHLB advances you've got outstanding right now, what's the maturity schedule look like for those? Speaker 200:34:22Well, we've got A third of that tranche maturing this quarter. So we'll see that come off. And then I think we've got another tranche late in the year and then next year. Speaker 700:34:40Got it. Okay. Speaker 400:34:44And then Speaker 700:34:44can you just talk to us overall about the I guess, I'm trying to figure out what kind of the right cash position is on the balance sheet and then how you pair that against, I would assume that you use cash to pay down some of The term FHLB that matures this quarter potentially some more brokered. Can you just talk to us kind of about the cash balance where you'd like to see it set and then What the uses of that cash would be? Speaker 200:35:11Sure. So Obviously, the coming out of the post pandemic and given the rapid rate rise, us and many in the industry went much more heavily into the cash. I'd say under our normal operating levels were probably in the $400,000,000 $500,000,000 range. We're more than double that today. And so I could see us over time depending upon deposit flows, loan growth as we've talked a little bit about, We could see that coming back down to those normal levels as we move throughout the remainder of 2024. Speaker 200:35:56Of course, Notwithstanding any other challenges that come about from a macro standpoint. Speaker 700:36:08Okay. Got it. And then on the securities portfolio, do you have just what the spot yield was On the securities book at twelvethirty 1? Speaker 200:36:17Yes, 3.48%. Speaker 700:36:26And then one more question on the margin. I think in the Q3, there was an Interest accrual, that was a headwind in the 3rd quarter. So all else equal, that was, I think, if I recall 4 or 6 basis points positive to 4Q loan yields, just the falling off of that. So I guess the question is about kind of loan yields going into 2024 And just on a quarterly or annual basis, just as loans are coming up for renewal, what type of loan yield improvement you would kind of throughout the year just as adjustable rate loans reprice or the lower yielding fixed rate loans come off? Speaker 100:37:09There's a lot of moving pieces there, Andrew, to come up. We don't have an estimate out there that we've stated publicly, but obviously a lot of moving parts about how much of the maturing loans we end up retaining, What the how borrowers what their decisions are around loans that are adjusting frankly Some of the higher yielding stuff is paying off faster than some of the lower yielding loans. Certainly, What is the rate and volume of new production? Certainly, we like the yield of new loans that we're putting on today. They're pretty attractive from a risk adjusted basis. Speaker 100:37:55But as I mentioned, demand is pretty muted. Ron, what do you have anything to add there in particular? Speaker 200:38:02No, I think that's good, Steve. I was just going to confirm that the impact last quarter was that 4 basis points on that non accrual. So we didn't get some lift from that item alone. But that's I agree with what you just stated. Speaker 700:38:23Okay. Perfect. I appreciate it. Last but not a question, but Steve, I got a LinkedIn notification this morning reminding me to congratulate you on 24 years of Pacific Premier. I'm not sure what exactly the bank looked like in 2000, but I know there's been a lot of progress made since then, so congratulations. Speaker 100:38:42Thank you. It's a team effort. Operator00:38:51The next question is a follow-up from Gary Tenner with D. A. Davidson. Please go ahead. Speaker 300:38:57Thanks. I had just a quick question on credit. In your slide deck where you have the ACL kind of Waterfall, you talked about adding $20,000,000 related to the economic forecast and other updates. If my math is right, That your ACL or the allowance on the unfunded for unfunded commitments then came down, if again, rather my math is correct. So Curious about kind of the dynamics there of increasing the ACL on the funded piece and maybe bringing it down the unfunded unless it was just a function of commitment levels? Speaker 200:39:37Yes. You nailed it, Gary, there at the end with your last comment. The unfunded did come down, I think $4,000,000 or $5,000,000 and that was directly a function of lower commitment levels. We saw again with $355,000,000 of new draws, it effectively shifted That $355,000,000 from the unfunded bucket, if you will, to the funded bucket. So that was the if you will, that kind of the shift between those two elements of the ACL. Speaker 300:40:09Okay. So some of those were seasonal kind of Just temporarily over year end, you might just see that swing back the other direction? Speaker 100:40:20I mean, on the funding side, yes, that is a that's a possibility. Speaker 300:40:28Thank you. You're welcome. Operator00:40:31The next question is from Adam Butler with Piper Sandler. Please go ahead. Speaker 400:40:36Hey, everybody. This is Adam on for Matthew Clark. I'm not sure if this was touched on, but in terms of the origination rates on New loans this quarter. Is there a reason why there was a step down? Speaker 100:40:52Some of it was the mix. We did for various existing clients, some multifamily and that had an impact on the yield. Speaker 400:41:06Okay. I appreciate the color on that. And then it was nice to see Capital increased TCE quarter over quarter. In terms of Outside supporting organic growth and loan growth, if that doesn't shape out your expectations, do you have any excess capital deployment initiatives outside of that? Thanks. Speaker 100:41:31None specific. We obviously pay a very healthy dividend. And although we have a stock buyback plan in place, we haven't exercised it for a couple of years and really owing to the uncertain environment. Like everything, that changes over time. We'll see how things play out. Speaker 100:42:00But right now, we continue to retain higher levels of capital given the environment, but where we see Opportunities such as the securities repositioning transaction, in large measure given our high levels of capital, we were able to do a rather significant transaction there that over the long term will benefit shareholders And that's going to continue to be our approach here for the foreseeable future. Speaker 400:42:33Okay, great. Thank you. Operator00:42:37This concludes our question and answer session. I would like to turn the conference back over to Stephen Gardiner for any closing remarks. Speaker 100:42:43Thanks again, Gary, and thank you all for joining us today. Have a nice afternoon. Operator00:42:49The conference has now concluded.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallPacific Premier Bancorp Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Pacific Premier Bancorp Earnings HeadlinesPacific Premier Bancorp (NASDAQ:PPBI) Sees Large Volume Increase Following Earnings BeatApril 25 at 1:55 AM | americanbankingnews.comQ1 2025 Columbia Banking System Inc Earnings Call & PPBI Acquisition Announcement CallApril 25 at 12:43 AM | finance.yahoo.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 26, 2025 | Porter & Company (Ad)Pacific Premier price target lowered to $14.50 from $15.50 at Keefe BruyetteApril 24 at 7:41 PM | markets.businessinsider.comSHAREHOLDER ALERT: The M&A Class Action Firm Investigates the Merger of Pacific Premier Bancorp, Inc. - PPBIApril 24 at 3:58 PM | prnewswire.comSHAREHOLDER ALERT: Rigrodsky Law, P.A. Is Investigating Pacific Premier Bancorp, Inc. BuyoutApril 24 at 11:54 AM | investing.comSee More Pacific Premier Bancorp Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Pacific Premier Bancorp? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Pacific Premier Bancorp and other key companies, straight to your email. Email Address About Pacific Premier BancorpPacific Premier Bancorp (NASDAQ:PPBI) operates as the bank holding company for Pacific Premier Bank that provides various banking products and services in the United States. The company accepts deposit products, which includes checking, money market, savings accounts, and certificates of deposit. Its loan portfolio includes commercial real estate owner and non-owner-occupied, multifamily, construction and land, franchise real estate secured, and small business administration (SBA); revolving lines of credit, term loans, seasonal loans, and loans secured by liquid collateral; one-to-four family and home equity lines of credit loans; and small balance personal unsecured loans and savings account secured loans. It also offers cash management, online and mobile banking, and treasury management services, as well as payment processing, remote capture, and automated clearing house payment capabilities. In addition, it operates as a custodian for alternative assets held in qualified self-directed IRA accounts, including investments in private equity, real estate, notes, cash, and other non-exchange traded assets; and provides real-property and non-real property escrow services. The company serves small and middle-market businesses, corporations, professionals, real estate investors, non-profit organizations, and consumers. The company was founded in 1983 and is headquartered in Irvine, California.View Pacific Premier Bancorp ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:01Good morning, and welcome to the Pacific Premier Bancorp 4th Quarter 2023 Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Steve Gardner, Chairman and CEO. Please go ahead. Speaker 100:00:41Thank you, Gary, and good morning, everyone. I appreciate you joining us today. As you're all aware, we released our earnings report for the Q4 of 2023 earlier this morning. We have also published an updated investor presentation with additional information and disclosures on our financial results. If you've not done so already, we encourage you to visit our Investor Relations website to download a copy of the presentation and related materials. Speaker 100:01:12I note that our earnings release and investor presentation include a Safe Harbor statement relative to the forward looking comments. I encourage each of you to carefully read that statement. On today's call, I'll walk through some of the notable items related to our 4th quarter performance. Ron Nicholas, our CFO, We'll also review a few of the details surrounding our financial results and then we'll open up the call to questions. Our team delivered another solid quarter to close out 2023, which was an extraordinary year for the banking industry. Speaker 100:01:51Rapidly rising interest rates, high profile bank failures and rapid succession and heightened regulatory expectations brought challenging dynamics to the market. Throughout it all, we maintained our focus on prudent and proactive capital liquidity and credit risk management. We have built our organization to be dynamic and adaptable to various operating environments. This served us and our stakeholders extremely well in 2023. For example, Our bankers responded quickly to the industry challenges throughout the year, collaborating across business lines to meet clients' needs and to reinforce the strength of our franchise. Speaker 100:02:40This responsiveness and engagement deepened existing relationships and led to new business development opportunities for our teams. During the Q4, we leveraged the strength of our balance sheet and strong capital levels to proactively reposition our securities portfolio. This transaction enhanced our future earnings provided additional liquidity and is reflective of the optionality we have created within the franchise. The securities repositioning produced immediate results, expanding our net interest margin by 16 basis points. I'd like to highlight a few key areas as many of the trends were similar to what we observed in the 3rd quarter. Speaker 100:03:29Although we reported a quarterly net loss of $1.44 per share, excluding the one time effects of the FDIC special assessment and our securities portfolio repositioning, our operating earnings per share was $0.51 We saw some nice lift from our fee based businesses as well as a reduction in non interest expense compared to the 3rd quarter, excluding the FDIC Special Assessment. Our commitment to capital accumulation in the current environment continues to drive Our strong capital ratios, which remain top tier among our peers, even after layering in the impact of the loss on the securities portfolio sale. In the 4th quarter, our TCE ratio increased 85 basis points to 10.72 percent and our tangible book value per share increased $0.33 to $20.22 Our CET1 ratio came in at 14.32 percent And our total risk based capital ratio was a healthy 17.29%. Our ability to deepen our relationships with existing customers and attract new clients to the bank generated meaningful growth in new deposit account openings, while maintaining pricing discipline. The new account opening activity, coupled with our ability to opportunistically deploy Liquidity generated from the securities sale supported the favorable remix of the balance sheet. Speaker 100:05:14We redeployed a portion of the proceeds from the securities portfolio into cash and U. S. Treasuries, while also reducing higher cost broker deposits by $617,000,000 and prepaying $200,000,000 of FHLB term advances. Our available liquidity at the end of the 4th quarter totaled approximately $9,900,000,000 We did see some customer deposit outflows and mix shift during the Q4, which included seasonal outflows related to business tax payments. Not surprisingly, Some clients continue to pursue higher yielding non bank alternatives. Speaker 100:06:00Ultimately, We saw non maturity deposits increase to 84.7 percent of total deposits. Our constant emphasis on cultivating high quality client relationships and disciplined deposit pricing resulted in a well controlled cost of non maturity deposits of 102 basis points. On the asset side of the balance sheet, we saw slight growth in our overall loan portfolio balances due to increased line utilization from commercial borrowers. Prepayment activity was similar to the 3rd quarter as business in commercial real estate clients continue to deploy excess cash reserves to pay down debt. Our bankers remain focused on generating high quality relationships that meet our risk adjusted return requirements. Speaker 100:06:58As always, we are proactive in terms of portfolio management and credit monitoring. We have ongoing communication with our clients relative to market trends in their businesses and industries. These updates on our clients' financial performance, Liquidity and collateral values inform our approach to managing individual credits. Our year end asset quality metrics remain solid as delinquencies were 0.08% of total loans and non performing assets were 0.13% of total assets. We are closely monitoring the trends in commercial real estate markets and proactively identifying and managing potentially weaker credits. Speaker 100:07:46Overall, Our loan portfolio is well managed in all facets across the organization. With that, I will turn the call over to Ron to provide few more details on our 4th quarter financial results. Speaker 200:08:02Thanks, Steve, and good morning. For comparison purposes, my comments today are on a linked quarter basis unless otherwise noted. Let's begin with the quarter's results. For the 4th quarter, we recorded a net loss of 135,400,000 dollars or $1.44 per share. Our reported results included the impact from 2 non recurring items, The $1,260,000,000 AFS securities sale that had a net after tax loss of $182,300,000 and $2,100,000 of additional non interest expense due to the special FDIC assessment. Speaker 200:08:48Excluding these two items, our operating results were net income of $48,400,000 or $0.51 per diluted share, which yielded a return on average assets of 0.99% and a return on average tangible common equity of 11.19%. Our operating efficiency ratio came in at 58.8% And our adjusted pre provision net revenue as a percentage of average assets was 1.34% for the quarter. Please refer to our non GAAP reconciliation in our investor presentation and earnings release for more details. Taking a closer look at the income statement, net interest income of $146,800,000 was negatively impacted by lower average earning asset levels, partially offset by a favorable mix shift toward higher yielding earning assets as a result of the securities repositioning and the reduction of higher cost wholesale funding sources. Our actions led to 16 basis points of net interest margin expansion to 3 point to 8% due to an increase of 38 basis points on the investment securities for the quarter as well as 8 basis points of higher loan yields. Speaker 200:10:16On a spot basis, excluding fees and discounts, the weighted average rate on our loan portfolio increased 11 basis points to 4.87%, reflecting higher lines of credit draws for the quarter. Overall, cost of funds was up only 2 basis points to 1.69%, reflecting the favorable mix change from paying down higher cost wholesale funding. And our non maturity deposits increased to 84.7% of total deposits, While costs were well controlled at 1.02 percent with our cumulative total deposit beta of 29% illustrating our disciplined pricing actions throughout this rate cycle. Notably, our spot deposit costs were 1.55% and ended the quarter 1 basis point lower than the average total deposit cost for the quarter of 1.56%. For the Q1, we expect further balance sheet optimization through a combination of lower cash levels and a reduction in higher cost wholesale funding. Speaker 200:11:29Namely, we expect both broker deposits and FHLB advances to trend lower from year end levels. We believe the combination of these items will help partially mitigate net interest margin pressures in the 1st quarter. Our core fee based businesses had a solid quarter. Excluding the securities sale loss of $254,100,000 our non interest income came in at $19,900,000 Our fundamental fee income trends were favorable as trust income came in at $9,400,000 and escrow and exchange fee income at $1,100,000 both up slightly over the prior quarter. For the Q1 of 2024, We expect our total non interest income to be in the range of $20,000,000 to $21,000,000 with the benefit of PPT's annual tax fees. Speaker 200:12:30Non interest expense increased slightly to $102,800,000 Compensation and benefits expense decreased to $2,200,000 reflecting the benefit from the staff realignment across certain business lines during the quarter. From a staffing We ended the quarter with headcount of 1345 compared to 1355 as of September 30, as our staffing levels continue to track with the overall size of the balance sheet. We remain focused on tightly managing our operating expenses, and we expect 1st quarter expenses in the range of $102,000,000 to $103,000,000 with the anticipated higher first quarter payroll taxes. Our provision for credit losses of $1,700,000 decreased from the prior quarter as our ACL coverage ratio increased 3 basis points to 1.45%, consistent with the 4th quarter's loan composition, level of new loan commitment activity and our economic outlook. Turning now to the balance sheet. Speaker 200:13:48We finished the quarter at $19,000,000,000 in total assets with loans flat to the prior quarter. As noted, lower cash and securities enabled us to pay down higher cost wholesale funding in the form of brokered CDs and FHLB term borrowings. Total loans held for investment increased $19,000,000 driven by net draws on existing lines of credit of $355,000,000 and new commitments of $128,000,000 offsetting prepayments, sales and maturities of $455,000,000 Total deposits ended the quarter at $15,000,000,000 a decrease of $1,000,000,000 driven mostly by a $617,000,000 reduction in broker Other deposit categories fell $395,000,000 as we continued to see clients redeploying funds into higher yielding alternatives, prepaying loans as well as the impact of 4th quarter seasonal tax related outflows. Even with the continued mix shift, our non interest bearing deposits remain a robust 33% of total deposits, reflecting our strong client relationship business model. The successful execution of our deposit pricing strategies is evident as our non maturity deposits ended the year at 1.04%, only 2 basis points above the quarter's average of 1.02 percent, generating positive momentum for us heading into the Q1. Speaker 200:15:30The securities portfolio decreased $783,000,000 to $2,900,000,000 and the average yield on our investment portfolio increased 38 basis points to 3.08 percent, partially benefiting from the purchase of $539,000,000 of short term U. S. Treasuries. We stand to benefit from a full quarter of the reinvested proceeds in the Q1 as the spot rate on our securities portfolio not surprising given the rally in the yield curve late in 2023 And combined with the securities sold, our pre tax accumulated other comprehensive loss on the total AFS portfolio improved to $36,000,000 at December 31. Our capital ratios remain significantly higher than the required well capitalized thresholds. Speaker 200:16:25With our CET1 and Tier 1 capital ratios at 14 0.32% and our total risk based capital at 17.29%, we continue to rank in the top tier relative to our peers. In addition, our tangible common equity ratio now stands at a very healthy 10.72% And our tangible book value per share grew $0.33 to $20.22 And lastly, from an asset quality standpoint, asset quality across all measurables remain solid. Non performing assets were flat at 0.13% and total delinquency was also flat compared to the prior quarter at just 8 basis points. Our total classified loans decreased 5 basis points to 1.07 percent and our allowance for credit losses finished the quarter at $192,500,000 with our coverage ratio increasing to 1.45%. Our total loss absorption, which includes the fair value discount on acquired loans, ended the quarter up 1 basis point at 1.77%. Speaker 200:17:39With that, I'll turn the call back over to Steve. Speaker 100:17:42Great. Thanks, Ron. I'll conclude with a few comments about our outlook. We believe the actions we have taken over the past 2 years to purposefully moderate Growth rates and prioritized capital and liquidity management have positioned us well. We were encouraged by the stabilization in the loan portfolio at year end. Speaker 100:18:05However, we anticipate muted loan demand and what may be a lingering higher interest rate environment. We will continue to monitor our own portfolio closely, and we are ready to respond decisively should we see elevated stresses. For the near term, pressure on deposit costs appear to have moderated. Future rate cuts, if they were to materialize in 2024, would aid our ability to push funding costs down. Capital accumulation over balance sheet growth remains a priority. Speaker 100:18:39However, as you saw with the securities repositioning transaction, we are regularly evaluating opportunities to deploy capital and optimize the balance sheet to create long term value for shareholders. Although challenges remain, Thanks to the strength and expertise of the entire Pacific Premier team, some of the most talented in the industry. We remain in a position to act quickly to take advantage of opportunities if and when they arise. In conclusion, As an industry, we will continue to face a significant amount of uncertainty in 2024 on various fronts. That said, we are optimistic and believe we are well positioned to leverage our organizational excellence and discipline to continue to deliver long term value for our shareholders, clients, employees and the communities we serve. Speaker 100:19:38That concludes our prepared remarks. We'd be happy to answer any questions. Gary, please open up the call for questions. Operator00:20:12Our first question is from David Feaster with Raymond James. Please go ahead. Speaker 300:20:17Hey, good morning everybody. Speaker 100:20:19Morning, David. Speaker 400:20:20Maybe, I just want to Speaker 500:20:22start on the margin outlook. You guys have been incredibly active managing the balance sheet. Speaker 100:20:28It sounds like there's more coming in Speaker 500:20:29the Q1. Curious how you think about the margin trajectory? If I hear your comments, Ron, it Sounds like maybe some modest compression in the Q1 might be coming, but just curious how you think about the margin trajectory going forward, especially considering potential rate cuts, given that seems like to be the expectation near term? Speaker 100:20:54Ron, I'm happy to take it or you can offer up some thoughts. Speaker 200:20:59Sure. David, I would tell you that here in the Q1, we don't anticipate, we're not modeling ourselves internally here any rate cuts. But I will say, we'll see. I mean, as evidenced here in the Q4, we've done a pretty good job at managing our deposit costs, continue to manage the balance sheet and that's going to be pretty much the continuation. I will highlight though that of course we saw a nice yield uptick and that was driven by very variable rate draws on lines of credit. Speaker 200:21:40We'll see how that plays itself out here as we move through the Q1. So Those are kind of my initial thoughts there. Steve? Speaker 100:21:50Yes. I don't know that I have much to add. I think that covered it relatively well. Speaker 500:21:57Okay. And maybe just touching on the look, you've taken a pretty conservative standpoint for some time now, right? Great to see an increase in loans. Curious, do you think this marks an inflection point? And just If so, what are kind of some of the key drivers of what's giving you confidence here maybe to start Put more capital to work in terms of loans, just kind of your thoughts on what you're seeing from a market dynamic and improving demand and those types of things? Speaker 100:22:29Sure. Well, as I said, we for the foreseeable future, we see pretty muted demand, David. I think until we have better clarity and certainty about the direction of rates, that's From all indications that we have from all the clients that we're talking to, whether it's small business or real estate investors, There remains to be a level of caution out there. So our expectation is muted demand. We're going to maintain our discipline on the quality of credits and the relationships that we're bringing into the bank. Speaker 100:23:13But I think as you saw in the Q4, we certainly benefited from some of those line draws that Ron just mentioned. The production picked up a little bit. We'll see how those trends materialize here in the first half of the year. Speaker 500:23:33Perfect. And maybe last one for me, nice to hear about some modest uptick in some benefits in the fee income lines. I know that's A big focus for you all. Just curious some of the underlying trends that you're seeing in the trust business. It sounds like some tax benefits there and what you're seeing in the escrow And then just high level thoughts, I know you guys have been investing a lot in technology, curious whether you're seeing any tangible benefits there and kind of your thoughts on investment on that front and where it's working? Speaker 100:24:05Sure. So there's a lot of subjects to cover there, David, that's all right. First, as far as the Trust team, we have invested pretty heavily in the Trust team and we were Very pleased with the results that they were able to put up last year in a number of different areas. And And I think we're finally approaching that operational excellence that we expect and have had at the bank level for some time. And that's helping, I think, from the production side in with the team and their confidence level in speaking to clients. Speaker 100:24:45And we have developed some great relationships with some of the largest wealth managers in the industry and really as they get to better understand our capabilities and how that plays in To their business, we've seen some nice growth in new accounts and we expect that to continue here this year and incremental improvement every month and every quarter. On the escrow business side, That frankly has really slowed down over the last couple of years, reflection of Much lower activity in the commercial real estate markets and transactions overall. I think that business until we get Some movement in rates and some better clarity on the commercial real estate markets more broadly. We'd expect that activity to be relatively muted as well. And then lastly, From the technology side, we are always investing in the business and that's technology, That's employees. Speaker 100:26:00We continue to improve in those areas. And I think as we move further away From some of the disruptions that occurred in the first and second quarter of last year And how that stabilization, we'll be able to play a little bit more offense and we certainly have the technology and resources there that aid our teams throughout the organization. Speaker 500:26:31That's helpful. I know it's Speaker 400:26:32a big question. Thank you. Operator00:26:35The next question is from Chris McGratty with KBW. Please go ahead. Speaker 600:26:40Great. Good afternoon. Ron, maybe a question just on broader net interest income, given the actions you took in the benefit on the margin, but the smaller balance Maybe thoughts on trough of NII, if we're not there, maybe when? And also, if we do stay in a higher for longer environment, maybe how the balance sheet pro form a now reacts to higher for longer versus kind of the futures market that's calling for more cuts? Thank you. Speaker 200:27:08Yes. I'll just echo a little bit, Chris, of what I stated earlier. We did see a nice expansion, the 16 basis points. I wouldn't go as far as to say that was the trough, but We've got some favorable aspects going here. Obviously, the reinvestment, there's Securities repositioning, that's going to add some lift here in the Q1 as well and some of the pay down on the wholesale That we've been doing and looking to continue to do, I think is going to offer up some additional benefits. Speaker 200:27:48The big wildcard of course is going to be the deposit costs and deposit flows in the mix. We continue to see challenges, the industry continues to see challenges across that aspect of it. And despite the fact the fact we've done a really nice job managing our deposit costs, again, I wouldn't go so far as to say that we've conquered that or slayed that dragon at this point in time. I think we'll still see some pressures in that area. But we're cautiously on that front. Speaker 600:28:25Great. Thanks, Ron. And Steve, maybe for you on capital. You talked about the flexibility and the actions you've taken. Do you expect opportunities to arise in to arise in 2024 at the industry levels given some of the stress and rates and maybe how you would maybe update us on your ranks of capital year for 2024? Speaker 600:28:42Thank you. Speaker 100:28:43Sure. Yes, I would say we do expect opportunities to rise, but I thought that in 2023 as well. And so we'll just see how the year plays out here. I think as I mentioned, given all the uncertainties in the environment, whether it's around The commercial real estate markets or a variety of other areas and just how the economy develops Given all of the geopolitical risks and tensions out there, I think our approach is going continue to be that we're going to retain capital where we see opportunities to put it to work, where It benefits the organization. Long term, we're going to do that. Speaker 100:29:38But overall, it remains There's a level of uncertainty and we are very comfortable having strong levels of capital. Speaker 400:29:51Thank you. Operator00:29:54The next question is from Gary Tenner with D. A. Davidson. Please go ahead. Speaker 300:29:59Thanks. Good morning, guys. Speaker 100:30:01Good morning, Gary. Speaker 300:30:02I wanted to ask about the 4th quarter non interest bearing outflow. Could you parse maybe how much of that you would chalk up to tax payment seasonality versus kind of ongoing shift in mix and A sense of timing of how rapidly the seasonality piece of it could come back on balance sheet? Speaker 100:30:25Yes. It's hard to put a specific measurement on it, Gary, as far as the From the tax payments and in all of the movements that are going on, as Rob mentioned, we're seeing clients continue to pay down or pay off loans and so that impacts both sides of the balance sheet naturally. Certainly, in 2023, in the State of California, we saw Later tax payments come out, some of the impacts on commerce, escrow. Our sense is though that, that magnitude, we don't expect to see that as we move through the year and typically some of those funds begin to return in the first half of the year. How much will come back is uncertain. Speaker 100:31:26Again, I think it in part has to deal with The yield curve, how businesses are feeling about the overall environment. So we'll just we'll see how things play out here. I think that one of the benefits we have is just the number of new accounts that we've opened in 2023. And as those get fully implemented and onboarded, we may pick up some benefit there. Speaker 300:31:58Appreciate that. And bigger picture, I guess, on the funding side, Pre pandemic, you'll often operate at the company atoratimeslightlyabove100 percent loan deposit ratio, even with the wholesale reductions in the 4th quarter and the net deposit moves there, you're back up, but only 89%. So as you're thinking about the longer term management of the balance sheet, how are your thoughts on that today relative to where they were a few years ago? Speaker 100:32:31Yes. I think that when you think about it pre pandemic, we were also quite a bit smaller In total assets, I don't see us running the business. We don't think it would be prudent at 100% loan to deposit ratio, but we could certainly see in the low to mid 90% range. Certainly, we'd like to get there by growing both sides of the balance sheet, both the loans and deposit side to increase that over time prudently. Speaker 300:33:06I appreciate that. And one last question for me if I could. Ron, in terms of the hedges, I know you had added some in the 3rd quarter, doesn't look like you added any here in the quarter, but could you just remind us kind of what the maturity schedule is of those swaps? Speaker 200:33:22Sure, Gary. We've got about $1,300,000,000 in totality in the swap book. And approximately half of those hedges will mature by the end of this year. And then we've got another tranche, if you will, another 25% early in 2025. And then the rest are just laddered out just a little bit longer. Operator00:34:00The next question is from Andrew Terrell with Stephens. Please go ahead. Speaker 700:34:05Hey, good morning. Good morning. Speaker 400:34:10First question, Speaker 700:34:13Ron, can you just remind us the 600,000,000 termed FHLB advances you've got outstanding right now, what's the maturity schedule look like for those? Speaker 200:34:22Well, we've got A third of that tranche maturing this quarter. So we'll see that come off. And then I think we've got another tranche late in the year and then next year. Speaker 700:34:40Got it. Okay. Speaker 400:34:44And then Speaker 700:34:44can you just talk to us overall about the I guess, I'm trying to figure out what kind of the right cash position is on the balance sheet and then how you pair that against, I would assume that you use cash to pay down some of The term FHLB that matures this quarter potentially some more brokered. Can you just talk to us kind of about the cash balance where you'd like to see it set and then What the uses of that cash would be? Speaker 200:35:11Sure. So Obviously, the coming out of the post pandemic and given the rapid rate rise, us and many in the industry went much more heavily into the cash. I'd say under our normal operating levels were probably in the $400,000,000 $500,000,000 range. We're more than double that today. And so I could see us over time depending upon deposit flows, loan growth as we've talked a little bit about, We could see that coming back down to those normal levels as we move throughout the remainder of 2024. Speaker 200:35:56Of course, Notwithstanding any other challenges that come about from a macro standpoint. Speaker 700:36:08Okay. Got it. And then on the securities portfolio, do you have just what the spot yield was On the securities book at twelvethirty 1? Speaker 200:36:17Yes, 3.48%. Speaker 700:36:26And then one more question on the margin. I think in the Q3, there was an Interest accrual, that was a headwind in the 3rd quarter. So all else equal, that was, I think, if I recall 4 or 6 basis points positive to 4Q loan yields, just the falling off of that. So I guess the question is about kind of loan yields going into 2024 And just on a quarterly or annual basis, just as loans are coming up for renewal, what type of loan yield improvement you would kind of throughout the year just as adjustable rate loans reprice or the lower yielding fixed rate loans come off? Speaker 100:37:09There's a lot of moving pieces there, Andrew, to come up. We don't have an estimate out there that we've stated publicly, but obviously a lot of moving parts about how much of the maturing loans we end up retaining, What the how borrowers what their decisions are around loans that are adjusting frankly Some of the higher yielding stuff is paying off faster than some of the lower yielding loans. Certainly, What is the rate and volume of new production? Certainly, we like the yield of new loans that we're putting on today. They're pretty attractive from a risk adjusted basis. Speaker 100:37:55But as I mentioned, demand is pretty muted. Ron, what do you have anything to add there in particular? Speaker 200:38:02No, I think that's good, Steve. I was just going to confirm that the impact last quarter was that 4 basis points on that non accrual. So we didn't get some lift from that item alone. But that's I agree with what you just stated. Speaker 700:38:23Okay. Perfect. I appreciate it. Last but not a question, but Steve, I got a LinkedIn notification this morning reminding me to congratulate you on 24 years of Pacific Premier. I'm not sure what exactly the bank looked like in 2000, but I know there's been a lot of progress made since then, so congratulations. Speaker 100:38:42Thank you. It's a team effort. Operator00:38:51The next question is a follow-up from Gary Tenner with D. A. Davidson. Please go ahead. Speaker 300:38:57Thanks. I had just a quick question on credit. In your slide deck where you have the ACL kind of Waterfall, you talked about adding $20,000,000 related to the economic forecast and other updates. If my math is right, That your ACL or the allowance on the unfunded for unfunded commitments then came down, if again, rather my math is correct. So Curious about kind of the dynamics there of increasing the ACL on the funded piece and maybe bringing it down the unfunded unless it was just a function of commitment levels? Speaker 200:39:37Yes. You nailed it, Gary, there at the end with your last comment. The unfunded did come down, I think $4,000,000 or $5,000,000 and that was directly a function of lower commitment levels. We saw again with $355,000,000 of new draws, it effectively shifted That $355,000,000 from the unfunded bucket, if you will, to the funded bucket. So that was the if you will, that kind of the shift between those two elements of the ACL. Speaker 300:40:09Okay. So some of those were seasonal kind of Just temporarily over year end, you might just see that swing back the other direction? Speaker 100:40:20I mean, on the funding side, yes, that is a that's a possibility. Speaker 300:40:28Thank you. You're welcome. Operator00:40:31The next question is from Adam Butler with Piper Sandler. Please go ahead. Speaker 400:40:36Hey, everybody. This is Adam on for Matthew Clark. I'm not sure if this was touched on, but in terms of the origination rates on New loans this quarter. Is there a reason why there was a step down? Speaker 100:40:52Some of it was the mix. We did for various existing clients, some multifamily and that had an impact on the yield. Speaker 400:41:06Okay. I appreciate the color on that. And then it was nice to see Capital increased TCE quarter over quarter. In terms of Outside supporting organic growth and loan growth, if that doesn't shape out your expectations, do you have any excess capital deployment initiatives outside of that? Thanks. Speaker 100:41:31None specific. We obviously pay a very healthy dividend. And although we have a stock buyback plan in place, we haven't exercised it for a couple of years and really owing to the uncertain environment. Like everything, that changes over time. We'll see how things play out. Speaker 100:42:00But right now, we continue to retain higher levels of capital given the environment, but where we see Opportunities such as the securities repositioning transaction, in large measure given our high levels of capital, we were able to do a rather significant transaction there that over the long term will benefit shareholders And that's going to continue to be our approach here for the foreseeable future. Speaker 400:42:33Okay, great. Thank you. Operator00:42:37This concludes our question and answer session. I would like to turn the conference back over to Stephen Gardiner for any closing remarks. Speaker 100:42:43Thanks again, Gary, and thank you all for joining us today. Have a nice afternoon. Operator00:42:49The conference has now concluded.Read morePowered by