{"id":8986,"date":"2023-05-15T13:23:18","date_gmt":"2023-05-15T17:23:18","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/pacific-premier-bancorp-over-7-dividend-yield-but-risks-are-too-high-nasdaqppbi\/"},"modified":"2023-05-15T13:23:19","modified_gmt":"2023-05-15T17:23:19","slug":"pacific-premier-bancorp-over-7-dividend-yield-but-risks-are-too-high-nasdaqppbi","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=8986","title":{"rendered":"Pacific Premier Bancorp: Over 7% Dividend Yield But Risks Are Too High (NASDAQ:PPBI)"},"content":{"rendered":"
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Earnings of Pacific Premier Bancorp, Inc. (NASDAQ:PPBI<\/span>) will most likely dip this year because both the average loan balance and the average margin will be lower this year relative to last year. I\u2019m expecting the company to report earnings of $2.56 per share for 2023, down 14% year-over-year. The year-end target price suggests a very high upside from the current market price. Further, Pacific Premier is offering a very high dividend yield of over 7%. Unfortunately, the company\u2019s risk level is also high. Considering these factors, I\u2019m adopting a Buy rating on Pacific Premier Bancorp.<\/span><\/p>\n

Loan Trend Likely to Turn Positive but Remain Close to Zero<\/h2>\n

The declining loan trend that started in the third quarter of 2022 worsened during the first quarter of 2023. The loan portfolio declined by 3.5% during the first quarter as originations were unable to keep up with pay downs and payoffs. There is another $1.3 billion of scheduled loan paydowns for the last three quarters of 2023, as mentioned in the <\/span>conference call. To put this number in perspective, $1.3 billion is a sizable 9% of total loans outstanding at the end of March 2023. Therefore, these paydowns will continue to exert pressure on the total loan portfolio size.<\/span><\/p>\n

Further, funding constraints amid a declining deposit trend can also restrict loan growth. Pacific Premier is headquartered in California, which has seen deposit runs that tanked SVB Financial (OTC:SIVBQ) and First Republic Bank (OTCPK:FRCB). Pacific Premier\u2019s deposit decline was quite small during the first quarter, so I\u2019m not worried that it will experience a full-fledged deposit run. However, it\u2019s likely that deposit growth will remain under pressure, which will also hurt loan growth.<\/p>\n

Moreover, the higher costs for borrowers amid the rising-rate environment will dampen credit demand in Pacific Premier Bancorp\u2019s markets.<\/p>\n

Nevertheless, I\u2019m hopeful the declining loan trend will turn around because of strength in local markets. Pacific Premier operates in major metropolitan markets of California, Washington, Arizona, and Nevada. With the exception of California, all of the states Pacific Premier Bancorp operates in currently have steeper trend lines for economic activity than the national average.<\/p>\n

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The Federal Reserve Bank of Philadelphia<\/span><\/p>\n<\/figcaption><\/figure>\n

Considering these factors, I\u2019m expecting the loan portfolio to grow by 0.5% in each of the last three quarters of 2023, leading to a full-year loan decline of 2%. The following table shows my balance sheet estimates.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n
Financial Position<\/td>\nFY18<\/td>\nFY19<\/td>\nFY20<\/td>\nFY21<\/td>\nFY22<\/td>\nFY23E<\/td>\n<\/tr>\n<\/thead>\n
Net Loans<\/td>\n8,801<\/td>\n8,687<\/td>\n12,968<\/td>\n14,098<\/td>\n14,481<\/td>\n14,187<\/td>\n<\/tr>\n
Growth of Net Loans<\/em><\/td>\n42.7%<\/em><\/td>\n(1.3)%<\/em><\/td>\n49.3%<\/em><\/td>\n8.7%<\/em><\/td>\n2.7%<\/em><\/td>\n(2.0)%<\/em><\/td>\n<\/tr>\n
Other Earning Assets<\/td>\n1,429<\/td>\n1,695<\/td>\n4,821<\/td>\n5,008<\/td>\n5,079<\/td>\n5,342<\/td>\n<\/tr>\n
Deposits<\/td>\n8,658<\/td>\n8,899<\/td>\n16,214<\/td>\n17,116<\/td>\n17,352<\/td>\n17,467<\/td>\n<\/tr>\n
Borrowings and Sub-Debt<\/td>\n778<\/td>\n732<\/td>\n533<\/td>\n889<\/td>\n1,331<\/td>\n1,148<\/td>\n<\/tr>\n
Common equity<\/td>\n1,970<\/td>\n2,013<\/td>\n2,747<\/td>\n2,886<\/td>\n2,798<\/td>\n2,817<\/td>\n<\/tr>\n
Book Value Per Share ($)<\/td>\n36.1<\/td>\n32.8<\/td>\n34.5<\/td>\n30.7<\/td>\n29.7<\/td>\n29.9<\/td>\n<\/tr>\n
Tangible BVPS ($)<\/td>\n21.3<\/td>\n19.6<\/td>\n22.2<\/td>\n20.4<\/td>\n19.6<\/td>\n19.8<\/td>\n<\/tr>\n
Source: SEC Filings, Earnings Releases, Author’s Estimates(In USD million unless otherwise specified)<\/td>\n<\/tr>\n<\/table>\n

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