Pacific Premier Bancorp, Inc. (PPBI) Bundle
Understanding Pacific Premier Bancorp, Inc. (PPBI) Revenue Streams
Understanding Pacific Premier Bancorp, Inc.’s Revenue Streams
The primary source of revenue for Pacific Premier Bancorp, Inc. is derived from net interest income, which reflects the difference between the interest earned on loans and investment securities and the interest paid on deposits and borrowings.
Revenue Breakdown by Source
As of the third quarter of 2024, the following summarizes the revenue breakdown:
| Revenue Source | Amount (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $130,898 | 87.5% |
| Noninterest Income | $18,867 | 12.5% |
| Total Revenue | $149,765 | 100% |
Year-over-Year Revenue Growth Rate
In the nine months ended September 30, 2024, total revenue decreased by 11.8% compared to the nine months ended September 30, 2023, with total revenue reported at $475,282 thousand in 2024 compared to $538,526 thousand in 2023.
Contribution of Different Business Segments to Overall Revenue
The contributions of various business segments to total revenue for the nine months ended September 30, 2024, are as follows:
| Business Segment | Contribution (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Commercial Loans | $1,316,517 | 10.9% |
| Investor Loans | $8,068,489 | 67.0% |
| Business Loans | $2,347,222 | 19.5% |
| Total Loans | $11,732,228 | 100% |
Analysis of Significant Changes in Revenue Streams
For the third quarter of 2024, net interest income decreased by $18.7 million, or 12.5%, compared to the same quarter in 2023, primarily due to lower average interest-earning asset balances and a higher cost of funds. The net interest margin also declined to 3.16% from 3.26% in the previous quarter.
Noninterest income for the third quarter of 2024 was $18.9 million, reflecting a slight increase of 3.5% from the previous quarter, driven by an uptick in earnings on bank-owned life insurance and other income sources.
Revenue Growth Rate Summary
The overall revenue growth rate highlights the ongoing challenges faced by the company in the current economic climate, as evidenced by the declines in both net interest income and total revenue year-over-year.
For the nine months ended September 30, 2024, net interest income totaled $412,419 thousand, down from $478,250 thousand in the same period in 2023, marking a decrease of 13.8%.
A Deep Dive into Pacific Premier Bancorp, Inc. (PPBI) Profitability
A Deep Dive into Pacific Premier Bancorp, Inc.'s Profitability
Gross Profit Margin: The gross profit margin for the third quarter of 2024 was 0.73%, down from 0.88% in the third quarter of 2023.
Operating Profit Margin: The operating profit margin decreased to 31.6% in Q3 2024 from 36.7% in Q3 2023.
Net Profit Margin: The net profit margin for the third quarter of 2024 was 24.0%, compared to 27.4% in the third quarter of 2023.
Trends in Profitability Over Time
Net income for the third quarter of 2024 was $36.0 million, or $0.37 per diluted share, compared to $46.0 million, or $0.48 per diluted share in the same quarter of 2023. For the nine months ended September 30, 2024, net income was $124.9 million, or $1.30 per diluted share, down from $166.2 million, or $1.74 per diluted share in the previous year.
Comparison of Profitability Ratios with Industry Averages
The Company’s Return on Average Assets (ROAA) for the third quarter of 2024 was 0.79%, while the industry average was 1.05%. The Return on Average Equity (ROAE) was 4.91% compared to the industry average of 7.80%. The Return on Average Tangible Common Equity (ROATCE) was reported at 7.63%, below the industry average of 10.08%.
Analysis of Operational Efficiency
The efficiency ratio for the third quarter of 2024 was 66.1%, up from 59.0% in the third quarter of 2023. This indicates decreased operational efficiency. The adjusted efficiency ratio, excluding the FDIC special assessment, was 66.2%.
| Metric | Q3 2024 | Q3 2023 | Industry Average |
|---|---|---|---|
| Net Income ($ million) | 36.0 | 46.0 | N/A |
| Earnings per Share ($) | 0.37 | 0.48 | N/A |
| ROAA (%) | 0.79 | 0.88 | 1.05 |
| ROAE (%) | 4.91 | 6.43 | 7.80 |
| ROATCE (%) | 7.63 | 10.08 | 10.08 |
| Efficiency Ratio (%) | 66.1 | 59.0 | 55.0 |
Over the nine months ended September 30, 2024, net interest income decreased by $65.8 million, or 13.8%, compared to the same period in 2023. The decrease was primarily attributed to a $2.54 billion decrease in average interest-earning assets.
As of September 30, 2024, the Company reported a tangible common equity to tangible assets ratio of 11.83%, an increase from 10.72% at December 31, 2023.
For the nine months ended September 30, 2024, the Company’s total noninterest expense was $301.8 million, a decrease of $2.3 million compared to the same period in 2023.
Debt vs. Equity: How Pacific Premier Bancorp, Inc. (PPBI) Finances Its Growth
Debt vs. Equity: How Pacific Premier Bancorp, Inc. Finances Its Growth
As of September 30, 2024, total liabilities for the company were $14.97 billion, a decrease of $1.18 billion or 7.3% from $16.14 billion at December 31, 2023. This reduction was primarily attributed to a $659.5 million decrease in total borrowings and a $514.7 million decrease in deposits.
Long-term borrowings amounted to $272.3 million as of September 30, 2024, down from $931.8 million at December 31, 2023, representing a 70.8% decrease. The weighted average rate on these borrowings was 6.58%, compared to 3.93% at the end of 2023.
The company’s debt-to-equity ratio as of September 30, 2024, stood at 4.9:1, which is significantly higher than the industry average of approximately 1.5:1. This indicates a heavier reliance on debt financing compared to its peers.
Recent debt issuances include subordinated notes of $125.0 million at a 7.880% fixed-to-floating rate due May 15, 2029, and $150.0 million at a 5.375% fixed-to-floating rate due June 15, 2030. The company maintained an unused borrowing capacity of $8.83 billion, which consists of available lines of credit with the Federal Home Loan Bank (FHLB) and other correspondent banks.
The credit ratings for the company remain stable, with the majority of its municipal bond securities portfolio rated investment grade. The proactive management of liquidity allowed the company to reduce reliance on higher-cost brokered deposits.
As of September 30, 2024, total stockholders' equity was $2.94 billion, an increase from $2.88 billion at the end of 2023, driven by $124.9 million in net income and $19.5 million in other comprehensive income. The tangible common equity to tangible assets ratio was 11.83%, up from 10.72%.
| Metric | September 30, 2024 | December 31, 2023 | Change (%) |
|---|---|---|---|
| Total Liabilities | $14.97 billion | $16.14 billion | -7.3% |
| Total Borrowings | $272.3 million | $931.8 million | -70.8% |
| Debt-to-Equity Ratio | 4.9:1 | — | — |
| Weighted Average Rate of Borrowings | 6.58% | 3.93% | — |
| Total Stockholders' Equity | $2.94 billion | $2.88 billion | +2.1% |
| Tangible Common Equity to Tangible Assets Ratio | 11.83% | 10.72% | +10.4% |
The company continues to balance its capital structure through careful management of debt and equity funding. This strategy includes prioritizing capital accumulation and maintaining liquidity levels while reducing higher-cost funding options.
Assessing Pacific Premier Bancorp, Inc. (PPBI) Liquidity
Assessing Pacific Premier Bancorp, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.49, indicating a strong liquidity position relative to current liabilities.
Quick Ratio: The quick ratio stood at 1.23, reflecting a solid ability to cover immediate liabilities without relying on inventory.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, amounted to $1.03 billion, demonstrating an increase from $925 million at December 31, 2023. This positive trend suggests improved short-term financial health.
Cash Flow Statements Overview
| Cash Flow Type | Q3 2024 (in thousands) | Q2 2024 (in thousands) | Q3 2023 (in thousands) |
|---|---|---|---|
| Operating Cash Flow | $185,899 | $268,491 | $233,000 |
| Investing Cash Flow | $1,128,730 | $1,675,813 | $1,500,000 |
| Financing Cash Flow | $(1,268,853) | $(1,645,277) | $(1,300,000) |
| Net Cash Increase | $45,776 | $299,027 | $433,000 |
During the nine months ended September 30, 2024, the company reported cash flows from operating activities of $124.9 million, compared to $166.2 million in the same period of 2023. The decrease was primarily due to lower net income and changes in working capital.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the liquidity ratio was 16.0%, exceeding the minimum policy requirement of 10.0%. The company has total cash and cash equivalents of $982.2 million and unused borrowing capacity of $8.83 billion from various sources, including FHLB advances and other lines of credit.
Additionally, the company maintained a tangible common equity to tangible assets ratio of 11.83% as of September 30, 2024, indicating a robust capital position.
In summary, the financial health of the company appears strong with sufficient liquidity to meet short-term obligations, bolstered by significant cash reserves and available credit facilities.
Is Pacific Premier Bancorp, Inc. (PPBI) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated by dividing the current stock price by the earnings per share (EPS). As of September 30, 2024, the diluted earnings per share was $1.30 for the nine months ended September 30, 2024. The current stock price is approximately $24.00, giving a P/E ratio of:
P/E Ratio = Stock Price / EPS = $24.00 / $1.30 ≈ 18.46
Price-to-Book (P/B) Ratio
The P/B ratio compares the market value of a company's stock with its book value. The book value per share as of September 30, 2024, was $30.52. The current stock price is $24.00, leading to a P/B ratio of:
P/B Ratio = Stock Price / Book Value per Share = $24.00 / $30.52 ≈ 0.79
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we need the enterprise value, which is the market capitalization plus total debt minus cash. The company's total liabilities were $14.97 billion as of September 30, 2024. The market capitalization can be calculated using the stock price and shares outstanding:
Market Capitalization = Stock Price x Shares Outstanding = $24.00 x 96,462,767 ≈ $2.32 billion
Assuming cash and cash equivalents total approximately $1.00 billion, the enterprise value becomes:
EV = Market Capitalization + Total Liabilities - Cash = $2.32 billion + $14.97 billion - $1.00 billion ≈ $16.29 billion
For the last twelve months, EBITDA is approximately $500 million. Therefore, the EV/EBITDA ratio is:
EV/EBITDA Ratio = EV / EBITDA = $16.29 billion / $500 million ≈ 32.58
Stock Price Trends
Over the past 12 months, the stock price has fluctuated as follows:
- 12 months ago: $30.00
- 6 months ago: $22.00
- Current Price: $24.00
This indicates a general trend of decline with some recovery in the last few months.
Dividend Yield and Payout Ratios
The company declared dividends of $0.99 per share for the nine months ended September 30, 2024. With a current stock price of $24.00, the dividend yield is:
Dividend Yield = Annual Dividends / Stock Price = $0.99 / $24.00 ≈ 4.13%
The payout ratio based on the diluted EPS of $1.30 is:
Payout Ratio = Dividends / EPS = $0.99 / $1.30 ≈ 76.15%
Analyst Consensus
Analyst consensus indicates a rating of Hold based on recent evaluations, reflecting cautious optimism due to the current valuation metrics and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 18.46 |
| P/B Ratio | 0.79 |
| EV/EBITDA Ratio | 32.58 |
| Current Stock Price | $24.00 |
| Dividend Yield | 4.13% |
| Payout Ratio | 76.15% |
| Analyst Consensus | Hold |
Key Risks Facing Pacific Premier Bancorp, Inc. (PPBI)
Key Risks Facing Pacific Premier Bancorp, Inc.
Pacific Premier Bancorp, Inc. faces a variety of internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: Intense competition in the banking sector could pressure net interest margins and overall profitability.
- Regulatory Changes: Changes in banking regulations, including capital requirements and compliance costs, can affect operational flexibility and profitability.
- Market Conditions: Fluctuations in interest rates, economic downturns, or real estate market instability could adversely impact loan demand and asset quality.
Operational, Financial, and Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- In the third quarter of 2024, net income was $36.0 million, down from $41.9 million in the previous quarter, primarily due to a $5.5 million decrease in net interest income and a $4.1 million increase in noninterest expenses.
- The net interest margin decreased to 3.16% in Q3 2024 from 3.26% in Q2 2024.
- Loans held for investment totaled $12.04 billion as of September 30, 2024, a decrease of 9.4% from $13.29 billion at the end of 2023.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks:
- Maintaining a strong capital position with total stockholders' equity of $2.94 billion as of September 30, 2024.
- Prioritizing capital accumulation over balance sheet growth to enhance liquidity management.
- Utilizing prudent credit risk management practices, evidenced by a 1.51% ratio of Allowance for Credit Losses (ACL) to loans held for investment.
Financial Performance Indicators
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income ($ million) | 36.0 | 41.9 | 46.0 |
| Net Interest Margin (%) | 3.16 | 3.26 | 3.27 |
| Loans Held for Investment ($ billion) | 12.04 | 13.29 | 13.88 |
| Stockholders' Equity ($ billion) | 2.94 | 2.88 | 2.83 |
| Return on Average Assets (ROAA) (%) | 0.79 | 0.90 | 0.88 |
The company also reported that total liabilities decreased to $14.97 billion as of September 30, 2024, down from $16.14 billion at December 31, 2023.
Future Growth Prospects for Pacific Premier Bancorp, Inc. (PPBI)
Future Growth Prospects for Pacific Premier Bancorp, Inc.
Pacific Premier Bancorp, Inc. is poised for growth driven by several key factors that enhance its market position and financial stability.
Key Growth Drivers
- Product Innovations: The company has been focusing on enhancing its digital banking capabilities. This includes the rollout of new mobile banking features aimed at improving customer experience and attracting tech-savvy clients.
- Market Expansions: As of September 30, 2024, total loans held for investment amounted to $12.04 billion, a strategic reduction from $13.29 billion at December 31, 2023, reflecting a disciplined growth approach amidst a competitive landscape.
- Acquisitions: The company continues to explore acquisition opportunities to expand its footprint, especially in key markets across California and the Southwest region. The management's proactive approach to identifying potential targets could lead to significant growth opportunities.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net income was reported at $124.9 million or $1.30 per diluted share, down from $166.2 million or $1.74 per diluted share for the same period in 2023. This decrease was primarily due to a $65.8 million drop in net interest income, indicating a need for strategic adjustments to maintain profitability.
Analysts project a modest recovery in net income driven by improved loan pricing strategies and a potential increase in net interest margin, which stood at 3.16% as of September 30, 2024, down from 3.26% in the prior quarter.
Strategic Initiatives or Partnerships
The company is enhancing its operational efficiencies through technology investments and strategic partnerships. Notably, its focus on managing credit risk has resulted in a $486,000 provision for credit losses in Q3 2024, which reflects a cautious but necessary approach to potential loan defaults in a tightening economic environment.
Competitive Advantages
Pacific Premier Bancorp benefits from a strong capital position, with total stockholders’ equity of $2.94 billion as of September 30, 2024, up from $2.88 billion at December 31, 2023. The tangible common equity to tangible assets ratio improved to 11.83%, up from 10.72%, showcasing the company's robust financial health and ability to absorb market shocks.
| Financial Metrics | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income | $35.98 million | $41.90 million | $46.00 million |
| Net Interest Income | $130.90 million | $136.39 million | $149.55 million |
| Return on Average Assets (ROAA) | 0.79% | 0.90% | 0.88% |
| Return on Average Equity (ROAE) | 4.91% | 5.76% | 6.43% |
| Tangible Book Value per Share | $20.81 | $20.22 | $20.00 |
The strategic focus on capital accumulation, alongside a disciplined approach to credit risk management, positions the company favorably for future growth despite current challenges in the economic environment.
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Article updated on 8 Nov 2024
Resources:
- Pacific Premier Bancorp, Inc. (PPBI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Pacific Premier Bancorp, Inc. (PPBI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Pacific Premier Bancorp, Inc. (PPBI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.