Pacific Premier Bancorp Q4 2024 Earnings Call Transcript

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January 23, 2025

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Earnings Conference Call
Pacific Premier Bancorp Q4 2024
00:00 / 00:00

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Operator

Good day, and welcome to the Pacific Premier Bancorp 4th Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. 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.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Great. Thank you, Gary. Good morning, everyone. I appreciate you joining us today. As you're all aware, we released our earnings report for the Q4 of 2024 earlier this morning.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

We have also published an updated investor presentation with additional information and disclosures on our financial results. If you have not done so already, we encourage you to visit our Investor Relations website to download a copy of the presentation and related materials. I note that our earnings release and investor presentation include a Safe Harbor statement relative to 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 Q4 performance. Ron Nicholas, our CFO, will also review a few of the details surrounding our financial results, and then we will open up the call to questions.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

I want to take a moment to discuss the events currently unfolding here in Southern California. Our hearts go out to everyone affected by the devastating California wildfires, including our colleagues, clients and neighbors in the Los Angeles area. We stand ready to support our communities' needs during this challenging time and in future rebuilding efforts. As always, we remain committed to serving as both a financial partner and a source of strength for the communities we proudly call home. In response, Pacific Premier will launch several initiatives in consumer and commercial lending with expanded products and services to support the displaced homeowners and businesses.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

With these enhanced product offerings, our goal is to create an efficient, streamlined process for those affected with the intention to provide the necessary financial support as soon as possible. Our restoration efforts begin. We will be there as a primary capital provider to the builders, contractors and related businesses as part of our Rebuild LA initiatives. Our teams are continuing to assess the direct and indirect impact of the wildfires on our clients' residents as well as their business. Of those clients personally affected by the fires, the preliminary indications are that approximately 4 loans totaling $8,000,000 have sustained some level of damage.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

However, of those loans, dollars 5,000,000 reflects a single credit that is well collateralized and secured by multiple properties. We are closely monitoring the ongoing situation and corresponding impacts on our clients and we stand ready to work with those in need over the coming weeks months. Looking now at the results, our team delivered a solid Q4 closing the year in a strong financial position. We generated earnings per share of $0.35 a return on average assets of 75 basis points and a return on tangible common equity of 7.2%. Our performance throughout 2024 highlighted the resiliency of our organization and the strength of our relationship based business model.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

This success was a testament to the outstanding business development efforts of our entire team, attracting new small business and middle market clients, deepening existing relationships and driving new customers to the bank. I'll note that late in Q4, the OCC approved our application to convert from a California chartered bank to a National Banking Association. This change in charter better aligns our West Coast business banking model that is supplemented by our complementary national lines of business. Amidst a more favorable economic outlook, borrower sentiment improved during the quarter, which drove a positive shift in our funding mix, effectively reducing higher cost deposits by $163,000,000 while increasing lower cost transaction deposits by $146,000,000 These encouraging trends allowed us to reinvest excess liquidity into loans and short term U. S.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Treasuries, enhancing our overall balance sheet position. While the absolute level of short term rates remained somewhat elevated, we made progress in lowering our funding costs as cost of funds decreased 9 basis points to 1.88 percent and our spot deposit costs at year end declined 8 basis points to 1.72%. Overall, our cost of deposits remains low on a relative basis when compared to our peers. As such, we will take a balanced approach toward funding loan growth while driving pricing down further, all of which will likely be impacted by the timing and magnitude of potential Fed moves. With the Federal Reserve having initiated interest rate cuts in September, coupled with the resolution of pre election uncertainty, we observed growing optimism among our clients about the future.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

These positive trends provide us with renewed confidence for stronger organic originations in commercial and business loans as well as high quality opportunities in construction, multifamily and CRE. Our loan portfolio increased slightly during the quarter driven by increased C and I and consumer loans. During the Q4, new origination activity accelerated with new loan commitments totaling $316,000,000 our highest level since the Q3 of 2022. As our loan pipelines ramp up and our teams build on the momentum established in the Q4, we will continue to complement organic loan growth with strategic loan purchases in participations in lines of business where we have established expertise. C and I loans we acquired are predominantly comprised of investment grade credits and not leverage loans.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

We may modestly add to this portfolio to supplement existing originations, but expect them to make up a relatively small portion of our overall loan production in the coming quarters. Prudent risk management continues to remain a priority, demonstrated by our robust capital ratios, which increased from September 30. Our tangible common equity ratio and total risk based capital ratio increased to 11.92%, 17.05% and 20.28% respectively at year end. On a year over year basis, our total risk based capital ratio increased nearly 300 basis points and all our capital ratios continue to rank near the top of the KBW Regional Banking Index. As we move into 2025, our strong momentum in robust capital levels position us well to adopt a more constructive approach in driving new business through loan and deposit growth.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Customer deposit trends during the quarter were positive as we saw an increase in lower cost deposits. We are cautiously optimistic that increased business and commercial real estate activity will lead to additional deposit growth as we move through the year. Looking ahead, our team of bankers are laser focused on expanding both new and existing loan and deposit relationships, enabling us to pursue attractive risk adjusted opportunities to drive higher levels of net interest income and increased earnings power. As of December 31, our loan to deposit ratio was 83.3 percent providing us with ample liquidity to fund our growth objectives. Regarding pricing, we will remain disciplined, but our ability to make immediate adjustments will be somewhat dependent on how the interest rate outlook unfolds.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Ron will provide additional detail in his comments regarding our forward assumptions within our full year guidance. Our long standing philosophy emphasizes that franchise value is built through deep client relationships as evidenced by our strong deposit base. It is important to note that our average client relationship has a tenure of over 13 years. As I discussed during our last call, we saw the benefit from the strategic actions we took during the summer to positively impact loan production. We have improved our competitive position in the market, which has translated into a nice pickup in new loan activity that carried an attractive weighted average rate on new originations of 6.92%.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

The team is successfully managing existing portfolio balances ahead of scheduled loan maturities and interest rate resets. As a result, we saw $95,000,000 in multifamily production for existing customers. Having moved past key factors that previously fueled broader uncertainty, we anticipate expanding our loan production efforts consistent with our ability to attract low cost deposits. In the coming quarters, we expect organic originations to meet or exceed the level of prepayments and payoffs. Asset quality results remain strong as non performing loans decreased $11,000,000 to $28,000,000 and total delinquencies fell to $2,600,000 or 0.02 percent of loans.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

These favorable asset quality results represent our effective approach to credit risk management demonstrated throughout our history and will continue to benefit us and our stakeholders. With that, I'll turn the call over to Ron to provide a few more details on our 4th quarter financial results.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Thanks, 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 Q4, we recorded net income of $33,900,000 or $0.35 per share. We had total revenue of $144,500,000 and non interest expense was $100,700,000 which translated to an efficiency ratio of 67.8 percent and pre provision net revenue of $43,800,000 The quarter's results were influenced by the sizable churn of the loan portfolio, which saw significant runoff early in the quarter, offset comparatively by stronger organic loan originations and supplemented by loan purchases in the back half of the quarter.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Taking a closer look at the income statement, net interest income of 120 $4,500,000 came in at the high end of our 3rd quarter guidance as growth in non maturity deposits resulted in a favorable funding mix shift and lower average funding costs. Our non interest margin net interest margin narrowed 14 basis points to 3.02% as average earning asset yields declined 4.74% due to lower swap income, lower rates on floating rate earning assets and pay downs and payoffs of higher yielding loans, partially offset by lower cost of funds, which decreased 9 basis points to 1.88%. Our cost of deposits decreased to 1.79 percent and average non maturity deposit costs were flat at 1.28 percent with the spot cost of non maturity deposits decreasing to 1.24%. Our SOFR based swap portfolio contributed 10 basis points to the net interest margin and we have $300,000,000 remaining of notional swaps that mature during the first half of twenty twenty six. With our current rate expectations for 2 Fed rate cuts in 2025, we anticipate approximately $2,000,000 to $3,000,000 of swap income for the Q1.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Average loan yields decreased to 5.13 percent due to lower rates on floating rate loans and combined prepayments carrying an average coupon rate of 7.23%. While we fully offset the elevated level of prepayments with new organic originations at an average rate of 6.92% and loan purchases that carried an average rate of 6.54%, the fundings occurred later in the quarter. This dynamic, along with the immediate repricing of floating rate loans and swaps, had a pronounced effect on the 4th quarter average loan yields. It's important to note that the 4th quarter total end of period weighted average interest rate on loans excluding fees, discounts and swaps decreased only 4 basis points to 4.78%. As highlighted in our investor presentation, we anticipate 1 25 basis point rate cut in March and 1 25 basis point cut in September and expect full year net interest income to be in the $500,000,000 to $525,000,000 range.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Non interest income increased to $20,000,000 as a result of higher investment income of $1,100,000 For the full year 2025, we expect our total non interest income to be in the range of $80,000,000 to $85,000,000 Non interest expense decreased $1,000,000 to $100,700,000 attributable to a $3,000,000 decrease in compensation expense as well as lower facilities and deposit costs, partially offset by $4,100,000 in higher legal and professional services. From a staffing perspective, we ended the quarter relatively flat with a headcount of 1325 compared with 1328 as of September 30. Our expectations for full year 2025 are for non interest expense to be in the range of 405 $1,000,000 to $415,000,000 as we continue to diligently manage our operating expense. We had a provision recapture of $814,000 compared to $486,000 of provision expense in the prior quarter commensurate with our loan portfolio mix shift and our current asset quality profile. As Steve noted, asset quality continues to trend favorably as we proactively manage our credit risk. Turning now to the balance sheet. We finished the quarter at $17,900,000,000 in total assets consistent with the level at September 30 as we deployed excess cash into loans and AFS securities. Total loans held for investment were flat from the prior quarter at $12,000,000 as increases in C and I and single family residential loans offset reductions in CRE, multifamily and construction loan balances.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

During the Q4, new origination activity increased as new loan commitments totaled $316,000,000 and fundings totaled $193,800,000 In addition to organic loan growth, we purchased $401,300,000 of investment grade C and I loans and $116,300,000 of single family residential loans. Our C and I lines of credit outstanding as of December 31 were $536,800,000 and the utilization rate was 33.5 percent compared with $743,100,000 outstanding and a utilization rate of 40.1% at September 30. I'll note the elevated level of prepayments and decreased line utilization seen in the 4th quarter was impacted by the planned exit of the large commercial relationship in early October. Looking ahead, our loan pipelines are building and we anticipate low to mid single digit loan growth in 2025. As Steve noted, we will continue to supplement organic loan originations with loan purchases to meet and exceed runoff.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Total deposits were $14,500,000,000 a decrease of $17,200,000 from the prior quarter. Non maturity deposits increased $145,800,000 to $12,400,000,000 and the level of non maturity deposits increased to 85.4 percent of total deposits with non interest bearing deposits remaining steady at 32%. The growth in non maturity deposits coupled with a deliberate reduction in higher cost time deposits resulted in an overall cost of deposits of 1.79 percent. We saw our cash position trend more toward our historical levels ending the quarter at $610,600,000 The remix of our balance sheet reflects the stability in our deposit base and moving forward, we anticipate our cash position will remain at this lower level. The securities portfolio increased $365,100,000 to $3,500,000,000 and the average yield on our investment portfolio was 3.65%.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

During the quarter, we purchased $705,000,000 of AFS securities, consisting almost entirely of short term treasuries with a weighted average yield of 4.13%. From a liquidity perspective, we enter 2025 in a strong position with $610,600,000 of cash on hand, a loan to deposit ratio of 83%, dollars 9,000,000,000 of total available unused borrowing capacity and $1,100,000,000 of scheduled cash flow coming back from our investment portfolio. The combination of solid earnings, stable overall balance sheet size and a favorable loan mix shift strengthen our capital ratios with all ratios increasing over the prior quarter. Our tangible common equity ratio increased 9 basis points to 11.92% and our tangible book value per share increased $0.75 year over year to $20.97 Lastly, from an asset quality standpoint, we continue to see improvement overall in our asset quality numbers as non performing loans decreased $11,100,000 to $28,000,000 or 0.23 percent of loans. Total delinquency decreased 6 basis points to 0.02% and classified loans decreased 12 basis points to 0.88 percent of total loans.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Our ACL balance and ACL coverage ratio remained at healthy levels, totaling $178,200,000 and our coverage ratio came in at 1.48 percent compared to 1.45 percent at December 31, 2023. Our total loss absorption, which includes the fair value discount on loans acquired through acquisitions finished the quarter at 1.75%. With that, I'll turn the call back to Steve.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Great. Thanks, Ron. And I'll wrap up with a few comments as we move into the New Year. With the new administration and a more encouraging outlook, we have an increased covenants to grow the balance sheet in what is expected to be a more business friendly environment for our clients. The prospects of potential deregulation leading to increased productivity is expected to have a meaningful impact on our ability to generate new loan production as we work to gain market share.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

In terms of capital allocation, in the near term, we are committed to maintaining our dividend at the current level. And while earnings may be muted during the early part of 2025, our focus is to redeploy excess liquidity into more loans to grow and generate further earnings power. Moreover, we begin this year with good momentum and high levels of capital with a steadfast focus on reinvesting in the business to support organic growth. We believe we are entering a more constructive environment that should provide greater growth opportunities and better demand for credit. We have significant optionality to capitalize on any attractive opportunities that may arise.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

That said, as always, we are exploring a multitude of capital deployment options to act opportunistically and maximize shareholder value, which could include select loan purchases and participations to complement organic growth, further reduction of higher cost funding sources, including time deposits in the repayment of subordinated debt, strategic balance sheet restructurings in the form of exiting lower yielding CRE loans or securities, or share repurchases as we have roughly $100,000,000 of capacity under our current authorization. On the M and A front, we remain open to a broad range of strategic transactions that will maximize long term value for our shareholders. We firmly believe in the benefits of scale and that is best achieved through effectively structured M and A agreements. Thus, we remain actively engaged in pursuing attractive partners and remain agnostic to which side of a transaction we are on. On behalf of the Board of Directors and our entire executive leadership team, I want to thank every one of our colleagues for their dedication to Pacific Premier.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

That concludes our prepared remarks and we would be happy to answer any questions. Gary, please open up the call for questions.

Operator

We will now begin the question and answer session. The first question comes from Matthew Clark with Piper Sandler. Please go ahead.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Hey, good morning everyone.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Good morning, Matthew.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Just a few quick ones around the margin. If you had the average margin in the month of December and then kind of thoughts on the near term margin here in 1Q and where you might where you think you might exit 2025 given your growth prospects and where what you're doing on the funding side?

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Hey, Matthew. Our December net interest margin was 3.03%, percent, so 3.03%. And I would anticipate our Q1 margin is going to be right around where we're at now. At least that's what we're thinking right as we sit here today. We've had some obviously some positive things come about with lower funding costs.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

But as we talked a little bit about, we saw some higher yielding loans prepay off earlier in the quarter, but then we got some I think we've got some yield back here in the latter part with these with the originations in some of these purchases. So kind of net net, we're kind of thinking it's going to be right around this level for the Q1. And then as we move throughout 2025, we'll be able to improve on both sides of that equation, Matthew.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Okay, fair enough. And then on the comp expense, it looks like there was a reversal of comp accruals. Can you just quantify how much that was and kind of what we should anticipate for merit increases in 1Q?

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Yes. We had a there was a few dynamics that happened here in the Q4. We had just overall lower staffing through the entire quarter. I think we finished the 2nd quarter at about 13.50 people and our Q3 came down and then we stayed pretty much flat. So that gave rise to lower overall incentives for the full year, if you will, lower benefit costs, lower compensation costs.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

So we had a little bit of a windfall in that respect here in the Q4. The Q1, our budget is around 3%. We'll probably see a couple of $1,000,000 there increasing as well as with the payroll taxes and then we'll get back to a more normalized run rate.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Okay, great. And then last one for me, just on the loan purchases, saw the types of things you purchased, but can you just give us some more color on what you would like to purchase on the margin kind of incremental in terms of yield and type of assets?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Sure. It's really again we use this tactically to supplement the production and as the team ramps up further and depending upon market conditions, we continue to look to acquire non CRE, although we're not completely opposed to CRE purchases as long as it met our risk adjusted return thresholds, structure, price and the like. So we'll continue to look at a variety of product types. But again, it's within that spectrum of where our expertise lies in C and I, commercial real estate and the like.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Great. Thank you.

Operator

The next question is from Gary Tenner with D. A. Davidson. Please go ahead.

Gary Tenner
MD & Senior Research Analyst at D.A. Davidson Companies

Thanks. Good morning.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Good morning, Gary.

Gary Tenner
MD & Senior Research Analyst at D.A. Davidson Companies

Good morning. On the topic of being kind of not anti CRE, can you talk about how if your view on that's changed at all here?

Gary Tenner
MD & Senior Research Analyst at D.A. Davidson Companies

You've got your CRE concentration ratio just a tick over 300 right now, the first time you've been down to that level since the Opus acquisition a few years ago. So has that does getting to that level materially change your appetite or view of that segment?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

No, it doesn't materially change it. But I think that one, we wanted to work that down over time. Historically, we had done that more rapidly following acquisitions just principally because our primary focus is on banking, small businesses, middle market clients and that typically led to much greater activity on the C and I side. And then certainly just the dynamics that occurred with the pandemic post OPUS acquisition and just the high quality nature of our business clients, we just saw rapid pay downs in those areas. And given our expertise in the multifamily, that is what we originated during that period of time.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

But we certainly wanted to bring that concentration down. And certainly, there were a lot of uncertainties over the last couple of years on how CRE would perform. I think some of those have abated, but not fully. And that's really stemming from what we saw with the Fed beginning to remove the tightness in Fed funds rate last year with the 100 basis points decline. We'll see where that goes from here.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

But in addition to that, we were pretty confident in the performance of our own loan portfolio and we've certainly seen that very strong asset quality metrics across the board. Just all of that adds up, and we're just a bit more constructive here today. We're willing to add a little bit to it, but we certainly rather we're not going to be growing it significantly or materially.

Gary Tenner
MD & Senior Research Analyst at D.A. Davidson Companies

Great. Appreciate the thoughts there. And then as it relates to kind of the rebuilding in the wake of the wildfires, do you think that as we move to the back half of the year, you actually see a tangible benefit to growth? I've had some people suggest it could be an extended period of time until there is even building permits issued as far as the rebuild just because of the amount of cleanup that has to be done. What are the thoughts around that?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Yes. No, I think that the cleanup is going to be significant. And just certainly the tightness in the construction trades in the industry overall right now finding those individuals. But I think it's encouraging hearing the policymakers, political leaders at the local and state levels seeming to be very committed to temporarily suspending or removing a lot of this red tape that has existed for a long period of time that frankly has led to this under building and under development of housing in the state and that will hopefully benefit here those individuals that have been impacted. So we'll see how things evolve here.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

But I think that we are in a very unique position with our capital levels, with our knowledge, experience on the construction side, banking businesses and consumers and again, right within our own neighborhood that we expect to be very active in helping our communities rebuild.

Gary Tenner
MD & Senior Research Analyst at D.A. Davidson Companies

Great. Thanks. And Ron, just a quick bookkeeping question. Can you give us the total ACL including the allowance for unfunded commitments at year end?

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

I don't have that off the top of my head here, Gary. Let me get back to you on that.

Gary Tenner
MD & Senior Research Analyst at D.A. Davidson Companies

Okay. Thank you.

Operator

The next question is from Chris McGratty with KBW. Please go ahead.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

Great. Steve, kind of a 2 part question about the effects of what happened in November in the election. Maybe a comment on the increased optimism business friendly. You touched upon in your prepared remarks and I've got a follow-up on that.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Sure. No, I think that broadly, the increased level of optimism from business owners were a combination of factors. Again, the Fed beginning to reduce the Fed funds rate, I think, was a piece of that. 2, just getting the election behind us and the smooth, peaceful transfer of power was important.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

And then I think widely expected is just a more constructive business friendly environment that clients are sensing and where they have been reluctant to invest. I think they're just all of those factors have played into a bit more of an optimistic viewpoint on their outlook. And that's what they're indicating to us and that's what we're certainly sensing from the conversations that we're having with business owners and investors.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

That's great. Thank you. And my follow-up, maybe a comment on how M and A conversations have evolved in the last maybe 90 days, if there's been any change given bank stocks are working a little bit more and just as a growing optimism for the economy and deregulation?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Yes. I think certainly conversations have picked up a little bit given that I think we all widely expect that the muted levels of M and A we've seen over the last couple of years that as the regulators seem to become a bit more open to transactions and widely expected that they could move through the process a bit more smoothly, that's created also a level of optimism and we are actively pursuing opportunities.

Christopher Mcgratty
MD & Head of U.S. Bank Research at Keefe, Bruyette & Woods (KBW)

That's great. Thank you.

Operator

The next question is from Andrew Terrell with Stephens. Please go ahead.

Andrew Terrell
Managing Director at Stephens Inc

Hey, good morning.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Good morning, Andrew.

Andrew Terrell
Managing Director at Stephens Inc

Ron, I got to ask on the just the margin quickly. I think you said you were expecting $2,000,000 to $3,000,000 of swap income in the Q1. Can you just remind us how much you recognized in the Q4?

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

About $4,000,000 was recognized in the Q4, Andrew.

Andrew Terrell
Managing Director at Stephens Inc

Okay. And then I wanted to ask on some of the purchase strategy. For the C and I loans, I think your C and I book was up $170,000,000 or so this quarter. Was any of that snakes? And can you just quantify, I might have missed it, just how much of the C and I was purchased, how much of the single family was purchased this quarter?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

I don't have the exact amounts here on me. I mean there's certainly and Ron may have. There are some stakes in there in other loan types that we purchased and or participated in. As we mentioned, predominantly investment quality assets.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Andrew, it was 400,000,000 dollars on the C and I side and about 115 round numbers on the SFR.

Andrew Terrell
Managing Director at Stephens Inc

Got it. Okay. And then

Andrew Terrell
Managing Director at Stephens Inc

I wanted to ask on just back on the deposits quickly. I think you mentioned the spot rate 172 at year end on total deposits. I guess I'm just curious, does that 172, do you feel like there's more room to go in terms of repricing customer deposits absent any future rate decreases here kind of in the first half of the year? Or does that 172 really incorporate kind of all the actions you took post prior Fed meetings?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

No. We think there's some opportunity to continue to push deposit costs down as we grow quality relationships that lead to low cost transaction accounts.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Yes, we're seeing most of the pricing benefit on the time deposits. We have seen some on the transaction or the non maturity deposits. Our deposit beta overall is running around 35% to 40%, but we're seeing higher on that time than we are on the non maturity, albeit again. So there's some opportunity, some mix opportunity as Steve indicated. But obviously, we'll see how it plays out with the Fed and their our cost, of course, is already lower than the average.

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

Average. Yes, relatively speaking. So we have a little bit of room to give with the Fed funds lowering, whereas some folks who are right, their cost of deposits being much closer to much higher, they've immediately started to take advantage of those initial Fed cuts, Andrew.

Andrew Terrell
Managing Director at Stephens Inc

Yes. Okay. That makes sense. If I could sneak one more in just on the deposit expense in the OpEx line. There was a little bit of moderation this quarter, but I think my sense was that a lot of these were or this was pretty rate sensitive and might come down more than it did.

Andrew Terrell
Managing Director at Stephens Inc

I'm just curious for the conversations you're having with clients around ECR rate and the deposit operating expense you're paying. Does that feel more competitive as you have those conversations than your more traditional clients?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

I mean generally that's there's a good chunk of that. It's related to our community association, HOA, banking team. And over the last couple of years, we've seen some just a crazy, frankly, pricing by some folks that indicate to us at least a level of desperation. And it's just never been a game that we would play or enter. We focused on long term and keeping our deposit costs low and but at the same time remaining competitive where we can.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

So we'll see as we move through the year what options we have there to push some of those costs down.

Andrew Terrell
Managing Director at Stephens Inc

Okay. Thank you for taking the questions.

Operator

The next question is from David Feaster with Raymond James. Please go ahead.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Hi. Good morning, everybody.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Good morning, David.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Just starting on the loan side, it seems like if I'm hearing you correctly, we're expecting organically to at least keep things stable and supplement the growth with pool purchases to kind of be the driver of growth. I guess what do you think it'll take to get organic growth to support that low to mid single digit pace of growth that you were talking about and maybe alleviate the need for purchases or participations? Do you have the team in place to do that? Are you interested in additional hires to maybe get where you're trying to go?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

No, we have the team in place. And I think it's look, as we really became obviously our market position improved. We did that from conscientiously in during the summer. And so the pipeline began to build from that point. And so we're still to an extent a little bit in the early stages.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

But we're encouraged by how engaged and the level of activity that we're seeing from our bankers and the opportunities that they're coming across. So we'll see. It somewhat depends on the level of pay downs and payoffs that we see in the portfolio. And I fully expect, again, depending upon market conditions within the next couple of quarters that the team should be funding we should be originating the product ourselves. And we'll just tactically utilize loan purchases, participations here along the way.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Okay. Terrific.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

And then just curious, what are you seeing on the new loan yield front? It seems like you're increasingly willing to compete on rate to drive growth, still getting really attractive yields, pushing 7% and yields held up pretty well despite Fed cuts. I'm just curious looking forward, how do you think about the loan yields and repricing taking into consider kind of rate repricing that you got on the book coming up this year and especially in 2026 and 2027. You got the swap headwind gone. So I'm just kind of curious how you think about the pace of yield improvement given some of these dynamics?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

I think it remains to be seen what does the Fed do one way or the other. But right now, the yield on the new originations is pretty attractive in the high 6s and same thing with some of the product that we purchased. So we're pretty encouraged. Also, we have a chunk of the multifamily and CRE that's repricing here this year. And hopefully, we can retain much of that.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

We've seen an unusual dynamic here over the last couple of years. As soon as those loans had moved to that adjustable rate and much higher, borrowers were just paying us off with all cash or sometimes to less extent moving to another institution to finance it. So I think we're encouraged here more so than we have been in the past about the ability to reprice the loan portfolio up over time. That's not going to happen overnight, but we're fairly constructive at this point.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Okay. That's great. And then just, we touched on some of the capital priorities, notably the M and A side. Just curious kind of how you think about obviously dividend maintaining the dividend's top priority, got some organic growth on the horizon. How do you think about buybacks or additional restructurings?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

I think, as I mentioned, that we're looking at a multitude of options. We're regularly assessing it. It comes with impacts, both positive and negative, if you will, and you've got to take all of those into consideration. And then you're making assumptions about the future, the ability to grow organically, to redeploy that liquidity and the like. So we'll continue to reassess it and we'll as I mentioned, we include that in the stock buybacks as well.

David Feaster
David Feaster
Director - Banking at Raymond James Financial

Correct. Thanks, everybody.

Operator

The next question is a follow-up from Matthew Clark with Piper Sandler. Please go ahead.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Yes, thanks. Just on the sub debt, can you remind us when that re prices and whether or not you would either refinance that or just pay it off? I mean that's the only those are the only borrowings you have left on the balance sheet?

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

That's correct. I mean one of them repriced last year or moved to adjustable rate. The other one, I believe, in June. June, right, Brian?

Ronald Nicolas
Senior EVP & CFO at Pacific Premier Bancorp

That is correct. Yes, June.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Yes. Look, we're looking at that as well, considering refinancing it, considering paying it off, considering leaving in place, all of those various options, we're looking at modeling and discussing internally.

Matthew Clark
Matthew Clark
MD & Senior Research Analyst at Piper Sandler Companies

Okay. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Stephen Gardiner for any closing remarks.

Steven Gardner
Chairman, President & CEO at Pacific Premier Bancorp

Great. Thank you, Gary, and thank you all for joining us today.

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