Ronald Nicolas
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 fourth quarter, we recorded net income of $33.9 million or $0.35 per share. We had total revenue of $144.5 million and noninterest expense was $100.7 million, which translated to an efficiency ratio of 67.8% and preprovision net revenue of $43.8 million.
The quarter's results were influenced by the sizable churn of the loan portfolio which saw a 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.
Taking a closer look at the income statement, net interest income of $124.5 million came in at the high end of our third quarter guidance as growth in nonmaturity deposits resulted in a favorable funding mix shift and lower average funding costs.
Our noninterest margin net interest margin narrowed 14 basis points to 3.02%. As average earning asset yields declined to 4.74%. Due to lower swap income, lower rates on floating rate, earning assets and paydowns and payoffs of higher yielding loans partially offset by lower cost of funds which decrease nine basis points to 1.88%.
Our cost of deposits decreased to 1.79% and average nonmaturity deposit costs were flat at 1.28% with the spot cost of nonmaturity deposits decreasing to 1.24%. Our SOFR-based swap portfolio contributed 10 basis points to the net interest margin and we have $300 million remaining of notional swaps that matured during the first half of 2026. With our current rate expectations for two fed rate cuts in 2025, we anticipate approximately $2 million to $3 million of swap income for the first quarter.
Average loan yields decreased to 5.13% 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 fourth quarter. Average loan yields. It's important to note that the fourth 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 125 basis points rate cut in March and 125 basis points cut in September and expect full year net interest income to be in the $500 million to $525 million range. Noninterest income increased to $20 million as a result of higher investment income of $1.1 million for the full year 2025. We expect our total noninterest income to be in the range of $80 million to $85 million.
Noninterest expense decreased $1 million to $100.7 million attributable to a $3 million decrease in compensation expense as well as lower facilities and deposit costs partially offset by $4.1 million in higher legal and professional services. From a staffing perspective, we ended the quarter relatively flat with a headcount of 1,325 compared with 1,328 as of September 30.
Our expectations for full year 2025 are for noninterest expense to be in the range of $405 million to $415 million. 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 $17.9 billion in total assets, consistent with the level at September 30. As we deployed excess cash into loans and AFL securities, total loans held for investment were flat from the prior quarter at $12 million as increases in C&I and single family residential loans offset reductions in CRE multifamily and construction loan balances during the fourth quarter, new origination activity increased as new loan commitments totaled $316 million and fundings totaled $193.8 million.
In addition to organic loan growth, we purchased $401.3 million of investment grade C&I loans and $116.3 million of single family residential loans. Our C&I lines of credit outstanding as of December 31st were $536.8 million and the utilization rate was 33.5% compared with $743.1 million outstanding and a utilization rate of 40.1% at September 30.
I'll note the elevated level of prepayments and decreased line utilizations seen in the fourth 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.
Total deposits were $14.5 billion, a decrease of $17.2 million from the prior quarter. Nonmaturity deposits increased $145.8 million to $12.4 billion and the level of nonmaturity deposits increased to 85.4% of total deposits with noninterest 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%.
We saw our cash position trend more toward our historical levels ending the quarter at $610.6 million. 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 $365.1 million to $3.5 billion. And the average yield on our investment portfolio was 3.65%.
During the quarter, we purchased $705 million 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 $610.6 million of cash on hand.
A loan-to-deposit ratio of 83%, $9 billion of total available unused borrowing capacity, and $1.1 billion 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 nonperforming loans decreased $11.1 million to $28 million or 0.23% of loans total delinquency decreased six basis points to 0.02% and classified loans decreased 12 basis points to 0.88% of total loans.
Our ACL balance and ACL coverage ratio remained at healthy levels totaling $178.2 million. And our coverage ratio came in at 1.48% compared to 1.45% 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
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 confidence 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 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. 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 and 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 million of capacity. Under our current authorization the M&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&A agreements. Thus, we remain actively engaged in pursuing attractive partners and remain agnostic to which side of a transaction we are 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 that concludes our prepared remarks and we would be happy to answer any questions. Gary, please open up the call for questions.
Operator
(Operator Instructions) Matthew Clark, Piper Sandler.
Matthew Clark
Hey. Good morning, everyone.
Steven Gardner
Morning, Matthew.
Matthew Clark
Just a few quick ones around the margin. If you had the average margin 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 what you're doing on the funding side.
Ronald Nicolas
Hey, Matthew. Our December net interest margin was 3.03%. So 3.03%, and I would anticipate that our first-quarter margin is going to be right around where we're at now, at least that's what we're thinking. As we sit here today, we had some -- obviously some positive things come about with lower funding costs. 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 and 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 first quarter. And then as we move throughout 2025, we'll be able to improve on both sides of that equation, Matthew.
Matthew Clark
Okay. Fair enough. And then on the comp expense, it looks like there was a reversal of compa crus. Can you just quantify how much that was and kind of what we should anticipate for merit increases in 1Q?
Ronald Nicolas
There was a few diams that happened here in the fourth quarter. We had just overall lower staffing through the entire quarter. I think we finished the second quarter, about 350 people in our third quarter 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.
So we had a little bit of a windfall in that respect here in the fourth quarter. The first quarter, our budget's around 3%. We'll probably see a couple of million dollars there in increasing as well as with the payroll taxes and then we'll get back to a more normalized run rate.
Matthew Clark
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
Sure. Again, we use this tactically to supplement the production and is that 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&I commercial real estate and the like.
Matthew Clark
Great. Thank you.
Operator
Gary Tenner, DA Davidson.
Gary Tenner
Thanks, good morning. On the topic of being kind of not anti-CRE, do you talk about how, if your view on that changed at all here, you've got your CRE concentration ratio, just to tick over 300 right now. The first time you've been down to that level since the acquisition a few years ago. So has that -- does getting to that level materially change your appetite or view of that segment?
Steven Gardner
No, it doesn't materially change it. But I think that one we wanted to work that down over time historically, we have 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&I side. And then certainly just the dynamics that occurred with the pandemic postop acquisition and just the high quality nature of our business clients, we just saw rapid paydowns in those areas.
And in given our expertise in the multifamily, that is what we originated during that period of time, 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, 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 hunter basis points decline.
We'll see where that goes from here. 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, 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 -- we're not going to be growing it significantly or materially.
Gary Tenner
I appreciate the thoughts there and then as it relates to kind of the rebuilding of 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's even building permits issued as far as the regal and just because of the amount of cleanup that has to be done. What are the thoughts around that?
Steven Gardner
Yeah. No, I think that the cleanup is going to be significant. And just certainly the tightness in the construction trades and the industry overall right now finding those individuals. But I think it's encouraging hearing the policymakers, political leaders at the local and state level 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 underbuilding and underdevelopment of housing in the state and in that, that will hopefully benefit here those individuals that have been impacted.
So we'll see how things evolve here. And 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
Great, thanks. And Ron, just a quick bookkeeping question. Can you give us the total ACL including the loans for unfunded commitments at your end?
Ronald Nicolas
I don't have that off the top of my head here, Gary. Let me get back to you on that.
Gary Tenner
Okay, thank you.
Operator
Chris McGratty, KBW.
Chris McGratty
Great. Do kind of a two-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 your prepared remarks and I've got a follow-up on that. Thanks.
Steven Gardner
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 to just getting the election behind us and the smooth peaceful transfer of power was important and then I think widely expected is just a more constructive, business friendly environment that clients are sensing in 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.
Chris McGratty
That's great. Thank you. And my follow-up, maybe a comment on how M&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 there is a growing optimism for the economy and deregulation.
Steven Gardner
Yeah, I think certainly, conversations have picked up a little bit. Given that I think we all widely expect that the muted levels of M&A we've seen over the last couple of years that, 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.
Chris McGratty
That's great. Thank you.
Operator
Andrew Terrell, Stephens.
Andrew Terrell
Hey, good morning. Ron, I got to ask him the just the margin quickly. I think you said you were expecting $2 million to $3 million of swap income in the first quarter. Can you just remind us how much you recognize in the fourth quarter?
Ronald Nicolas
About $4 million was recognized in the fourth quarter, Andrew.
Andrew Terrell
Okay. And then I wanted to ask on some of the purchase strategy for the C&I loans. I think your C&I book goes up $170 million or so this quarter.
Was any of that (inaudible) and can you just quantify, I might have missed it, how much of the C&I was purchased, how much of the single family was purchased this quarter?
Steven Gardner
I don't have the exact amounts here on me. I mean, there's certainly a -- Ron may have -- there are some (inaudible) in there in other loan types that we purchased and/or participated in as we mentioned, predominantly investment quality assets.
Ronald Nicolas
Andrew, it was $400 million the C&I side and about [115] round numbers on the SFR.
Andrew Terrell
Got it. Okay. And I wanted to ask on just back on the deposits. Quickly, I think you mentioned that the spot rate 1.72% at year end on total deposits. I guess I'm just curious, does that 1.72% -- do you feel like there's more room to go in terms of repricing customer deposits, absent any future rate decreases here kind of the first half of the year? Or is that 1.72% really incorporate kind of all the actions you took post the prior Fed meetings?
Steven Gardner
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
Yeah, we're seeing most of the pricing benefit on the time deposits. We have seen some on the transaction or the nonmaturity deposits. Our deposit beta overall is running around 35% to 40% but we're seeing higher on that time than we are on the nonmaturity. Although albeit -- again, so there's some opportunities, some mixed opportunity as Steve indicated. But obviously we'll see how it plays out with the Fed and our cost of course, is already, lower than the average, 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
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 -- this was pretty rate sensitive and might come down more than it did. I'm just curious, for the conversations you're having with clients around ECR rate and the deposit operating expense you're paying it, does that feel more competitive as you have those conversations than your more traditional clients?
Steven Gardner
I mean, generally, there's a good chunk of that is related to our community association, ho a banking team and over the last couple of years we've seen, and 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. But at the same time remaining competitive where we can, so we'll see as we move through the year what options we have there to push some of those costs down.
Andrew Terrell
Okay. Thank you for taking the questions.
Operator
David Feaster, Raymond James.
David Feaster
Hi, good morning, everybody. 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 full 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 to get where you're trying to go?
Steven Gardner
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. 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 what we'll see, it somewhat depends on the level of paydowns and payoffs that we see in the portfolio. And I fully expect again depending upon market conditions. But 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
Okay. Terrific. 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 the fixed rate or pricing 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
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 sixes and same thing with some of the product that, 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. We've seen an unusual dynamic here for the last couple of years. As soon as those loans had moved to that adjustable rate, much higher borrowers were just paying us off with all cash or sometimes 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
Okay. That's great. And then just -- you touched on some of the capital priorities, notably the M&A side. Just curious kind of how you think about obviously dividends, maintaining the dividends top priority that some organic growth on the horizon, how do you think about buybacks or additional restructurings?
Steven Gardner
I mean, I think as I mentioned that we're looking at a multitude of options, we were 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 as I mentioned, we include that in the stock buybacks as well.
David Feaster
Right. Thanks, everybody.
Operator
Matthew Clark, Piper Sandler.
Matthew Clark
Yeah, thanks. Just on a sub deck. Can you remind us when that reprices 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
That's correct. I mean, one of them repriced last year or moved to adjustable rate. The other one I believe in June, right? That is correct. Yeah, 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
Okay, thank you.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Steven Gardner for any closing remarks.
Steven Gardner
Great. Thank you, Gary, and thank you all for joining us today.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
