Pacific Premier's (PPBI) Securities Repositioning to Drive NII
Pacific Premier Bancorp, Inc. PPBI completed a repositioning of its investment securities portfolio by selling $1.27 billion of available-for-sale (AFS) securities. The company intends to invest the proceeds in higher-yielding earning assets.
Particularly, the sold securities indicate 35% of the total securities and 66% of AFS securities as of Sep 30, 2023. It consisted primarily of lower-yielding agency and mortgage-backed debt securities, with an average yield of 1.34%.
PPBI expects to record an after-tax loss of $182.3 million related to the sale. The company expects to deploy the net proceeds in fourth-quarter 2023 in a mix of cash and higher-yielding earning assets, with an expected average yield of 5%. With this, PPBI expects the repositioning to be incremental to net interest income by $50.4 million and neutral to tangible book value per share in 2024. Management expects the repositioning to increase the net interest margin by 26 basis points and net income by $37.1 million in 2024.
Steven R. Gardner, chairman, chief executive officer and president of Pacific Premier, commented, “We elected to proactively reposition our securities portfolio during the fourth quarter, which we anticipate will provide significant earnings benefit as we enter 2024.”
He added, “Through this securities portfolio repositioning, we have significantly improved the company’s future earnings power, while simultaneously preserving our strong capital levels and further enhancing our liquidity. This is a logical step in our continued focus on optimizing our balance sheet and maintaining organizational flexibility so that we can capitalize on strategic opportunities to drive long-term shareholder value.”
We believe that the restructuring will enhance PPBI’s earnings profile and offer significant financial flexibility.
PPBI’s shares have lost 27% in the year-to-date period compared with the industry’s fall of 26.9%.
Image Source: Zacks Investment Research
The company currently has a Zacks Rank #5 (Strong Sell).
Stocks to Consider
A couple of better-ranked stocks from the banking space are First Citizens BancShares, Inc. FCNCA and Wells Fargo & Co WFC.
First Citizens BancShares currently carries a Zacks Rank #2 (Buy). Its earnings estimate for 2023 has been revised 3.7% upward over the past 30 days. In the past six months, FCNCA shares have improved 10.5%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimate for WFC has been revised 3.3% upward for 2023 over the past 30 days. Shares of WFC have rallied 3.3% in the past six months. WFC currently carries a Zacks Rank #2.
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Wells Fargo & Company (WFC) : Free Stock Analysis Report
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Pacific Premier Bancorp Inc (PPBI) : Free Stock Analysis Report
