Pacific Premier Bancorp, Inc. Announces Second Quarter 2023 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share

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Second Quarter 2023 Summary

  • Net income of $57.6 million, or $0.60 per diluted share

  • Return on average assets of 1.09%, return on average equity of 8.11%, and return on average tangible common equity(1) of 12.66%

  • Pre-provision net revenue ("PPNR")(1) to average assets of 1.52%, annualized

  • Net interest margin of 3.33%

  • Cost of deposits of 1.27%, and cost of non-maturity deposits(1) of 0.71%

  • Nonperforming assets to total assets of 0.08%, and net charge-offs to average loans of 0.03%

  • Common equity tier 1 capital ratio of 14.34% and total risk-based capital ratio of 17.24%

  • Tangible book value per share(1) of $19.79; tangible common equity ratio(1) of 9.59%

  • Available liquidity of $10 billion; cash and cash equivalents increased to $1.46 billion and unused borrowing capacity of $8.53 billion at quarter end

IRVINE, Calif., July 27, 2023--(BUSINESS WIRE)--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the "Company" or "Pacific Premier"), the holding company of Pacific Premier Bank (the "Bank"), reported net income of $57.6 million, or $0.60 per diluted share, for the second quarter of 2023, compared with net income of $62.6 million, or $0.66 per diluted share, for the first quarter of 2023, and net income of $69.8 million, or $0.73 per diluted share, for the second quarter of 2022.

For the quarter ended June 30, 2023, the Company’s return on average assets ("ROAA") was 1.09%, return on average equity ("ROAE") was 8.11%, and return on average tangible common equity ("ROATCE")(1) was 12.66%, compared to 1.15%, 8.87%, and 13.89%, respectively, for the first quarter of 2023, and 1.29%, 10.10%, and 16.07%, respectively, for the second quarter of 2022. Total assets were $20.75 billion at June 30, 2023, compared to $21.36 billion at March 31, 2023, and $21.99 billion at June 30, 2022.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, "We delivered solid results during a challenging second quarter. Our performance reflects our disciplined focus on prudent and proactive risk, liquidity, and capital management, as well as our commitment to expanding our long-term client relationships.

"Our track record of sound enterprise risk management, including the strategic actions we implemented during the first half of last year, has positioned us well in the face of economic uncertainty and turbulence in our industry. We are well-prepared to expand our business when compelling opportunities arise and once risk-adjusted spreads on new loans become more attractive given the dynamics of today’s interest rate environment. As always, our bankers are continuing to provide best-in-class service to our clients.

"I am proud of our team's exceptional efforts during the quarter, focusing not only on existing clients but also cultivating new banking relationships. We anticipate the ongoing uncertainty and industry challenges to continue until the Federal Reserve completes its cycle of tighter monetary policy. Our organization remains committed to providing stability for our clients, communities, and employees while delivering long-term value for our stockholders."

____________________

(1)

Reconciliations of the non–U.S. generally accepted accounting principles ("GAAP") measures are set forth at the end of this press release.

FINANCIAL HIGHLIGHTS

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands, except per share data)

2023

2023

2022

Financial highlights (unaudited)

Net income

$

57,636

$

62,562

$

69,803

Net interest income

160,092

168,610

172,765

Diluted earnings per share

0.60

0.66

0.73

Common equity dividend per share paid

0.33

0.33

0.33

Return on average assets

1.09

%

1.15

%

1.29

%

Return on average equity

8.11

8.87

10.10

Return on average tangible common equity (1)

12.66

13.89

16.07

Pre-provision net revenue to average assets (1)

1.52

1.63

1.77

Net interest margin

3.33

3.44

3.49

Cost of deposits

1.27

0.94

0.06

Cost of non-maturity deposits (1)

0.71

0.54

0.04

Efficiency ratio (1)

54.1

51.7

49.0

Noninterest expense as a percent of average assets

1.91

1.87

1.83

Total assets

$

20,747,883

$

21,361,564

$

21,993,919

Total deposits

16,539,875

17,207,810

18,084,613

Non-maturity deposits as a percent of total deposits

81.4

%

82.6

%

92.0

%

Noninterest-bearing deposits as a percent of total deposits

35.6

36.1

38.3

Loan-to-deposit ratio

82.3

82.4

83.2

Book value per share

$

29.71

$

29.58

$

29.01

Tangible book value per share (1)

19.79

19.61

18.86

Tangible common equity ratio

9.59

%

9.20

%

8.52

%

Total capital ratio

17.24

16.33

14.41

____________________

(1)

Reconciliations of the non-GAAP measures are set forth at the end of this press release.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $160.1 million in the second quarter of 2023, a decrease of $8.5 million, or 5.1%, from the first quarter of 2023. The decrease in net interest income was primarily attributable to a higher cost of funds as a result of the current interest rate environment and lower average loans and investment securities balances, partially offset by higher yields on average interest-earning assets.

The net interest margin for the second quarter of 2023 decreased 11 basis points to 3.33%, from 3.44% in the prior quarter. The lower net interest margin was due to a higher cost of funds, partially offset by higher yields on interest-earning assets and higher loan prepayment fees.

Net interest income for the second quarter of 2023 decreased $12.7 million, or 7.3%, compared to the second quarter of 2022. The decrease was attributable to a higher cost of funds and lower average loans and investment securities balances, partially offset by higher yields on average interest-earning assets.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

(Unaudited)

Three Months Ended

June 30, 2023

March 31, 2023

June 30, 2022

(Dollars in thousands)

Average
Balance

Interest
Income/
Expense

Average
Yield/
Cost

Average
Balance

Interest
Income/
Expense

Average
Yield/
Cost

Average
Balance

Interest
Income/
Expense

Average
Yield/
Cost

Assets

Cash and cash equivalents

$

1,433,137

$

16,600

4.65

%

$

1,335,611

$

13,594

4.13

%

$

702,663

$

1,211

0.69

%

Investment securities

3,926,568

25,936

2.64

4,165,681

26,791

2.57

4,254,961

17,560

1.65

Loans receivable, net (1) (2)

13,927,145

182,852

5.27

14,394,775

180,958

5.10

14,919,182

164,455

4.42

Total interest-earning assets

$

19,286,850

$

225,388

4.69

$

19,896,067

$

221,343

4.51

$

19,876,806

$

183,226

3.70

Liabilities

Interest-bearing deposits

$

10,797,708

$

53,580

1.99

%

$

11,104,624

$

40,234

1.47

%

$

10,722,522

$

2,682

0.10

%

Borrowings

1,131,465

11,716

4.15

1,319,114

12,499

3.83

933,417

7,779

3.34

Total interest-bearing liabilities

$

11,929,173

$

65,296

2.20

$

12,423,738

$

52,733

1.72

$

11,655,939

$

10,461

0.36

Noninterest-bearing deposits

$

6,078,543

$

6,219,818

$

7,030,205

Net interest income

$

160,092

$

168,610

$

172,765

Net interest margin (3)

3.33

%

3.44

%

3.49

%

Cost of deposits (4)

1.27

0.94

0.06

Cost of funds (5)

1.45

1.15

0.22

Cost of non-maturity deposits (6)

0.71

0.54

0.04

Ratio of interest-earning assets to interest-bearing liabilities

161.68

160.15

170.53

____________________

(1)

Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs, discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships.

(2)

Interest income includes net discount accretion of $2.9 million, $2.5 million, and $7.5 million for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively.

(3)

Represents annualized net interest income divided by average interest-earning assets.

(4)

Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.

(5)

Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

(6)

Reconciliations of the non-GAAP measures are set forth at the end of this press release.

Provision for Credit Losses

For the second quarter of 2023, the Company recorded $1.5 million of provision expense, compared to $3.0 million for the first quarter of 2023, and $469,000 for the second quarter of 2022. The provision for credit losses was impacted by changes to the overall size, composition, asset quality trends, and unfunded commitments of the loan portfolio, as well as changes in the Company's macroeconomic forecasts. The decrease in the provision expense for loan losses in the current quarter was primarily attributable to the decrease in loans held for investment.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Provision for credit losses

Provision for loan losses

$

610

$

3,021

$

3,803

Provision for unfunded commitments

1,003

(189

)

(3,402

)

Provision for held-to-maturity securities

(114

)

184

68

Total provision for credit losses

$

1,499

$

3,016

$

469

Noninterest Income

Noninterest income for the second quarter of 2023 was $20.5 million, a decrease of $647,000 from the first quarter of 2023. The decrease was primarily due to a $1.7 million decrease in trust custodial account fees driven by annual tax fees earned during the first quarter, partially offset by a $770,000 increase in other income.

Noninterest income for the second quarter of 2023 decreased $1.7 million, compared to the second quarter of 2022. The decrease was primarily due to a $994,000 decrease in trust custodial account fees, a $903,000 decrease in escrow and exchange fees attributable to the lower transaction activity in the commercial real estate market, and a $791,000 decrease in net gain from loan sales, partially offset by an $858,000 increase in other income.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Noninterest income

Loan servicing income

$

493

$

573

$

502

Service charges on deposit accounts

2,670

2,629

2,690

Other service fee income

315

296

366

Debit card interchange fee income

914

803

936

Earnings on bank owned life insurance

3,487

3,374

3,240

Net gain from sales of loans

345

29

1,136

Net gain (loss) from sales of investment securities

—

138

(31

)

Trust custodial account fees

9,360

11,025

10,354

Escrow and exchange fees

924

1,058

1,827

Other income

2,031

1,261

1,173

Total noninterest income

$

20,539

$

21,186

$

22,193

Noninterest Expense

Noninterest expense totaled $100.6 million for the second quarter of 2023, a decrease of $708,000 compared to the first quarter of 2023, primarily due to an $869,000 decrease in compensation and benefits from reduced staffing levels and payroll taxes, and a $785,000 decrease in legal and professional services expenses, partially offset by a $758,000 increase in deposit expense driven by higher deposit earnings credit rates.

Noninterest expense increased by $1.7 million compared to the second quarter of 2022. The increase was primarily due to a $5.1 million increase in deposit expense driven by higher deposit earnings credit rates, partially offset by a $4.1 million decrease in compensation and benefits from reduced staffing levels.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Noninterest expense

Compensation and benefits

$

53,424

$

54,293

$

57,562

Premises and occupancy

11,615

11,742

11,829

Data processing

7,488

7,265

6,604

Other real estate owned operations, net

8

...

108

—

FDIC insurance premiums

2,357

2,425

1,452

Legal and professional services

4,716

5,501

4,629

Marketing expense

1,879

1,838

1,926

Office expense

1,280

1,232

1,252

Loan expense

567

646

1,144

Deposit expense

9,194

8,436

4,081

Amortization of intangible assets

3,055

3,171

3,479

Other expense

5,061

4,695

5,016

Total noninterest expense

$

100,644

$

101,352

$

98,974

Income Tax

For the second quarter of 2023, income tax expense totaled $20.9 million, resulting in an effective tax rate of 26.6%, compared with income tax expense of $22.9 million and an effective tax rate of 26.8% for the first quarter of 2023, and income tax expense of $25.7 million and an effective tax rate of 26.9% for the second quarter of 2022.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.61 billion at June 30, 2023, a decrease of $561.5 million, or 4.0%, from March 31, 2023, and a decrease of $1.44 billion, or 9.6%, from June 30, 2022. The decrease from March 31, 2023 was attributable to higher loan prepayments, maturities, and loan sales. The decrease from June 30, 2022 was primarily driven by lower loan fundings due to our disciplined approach around credit risk management and lower loan demand, as well as loan sales.

During the second quarter of 2023, new loan commitments totaled $148.5 million, and loan fundings totaled $71.6 million, compared with $116.8 million in loan commitments and $66.9 million in new loan fundings for the first quarter of 2023, and $1.50 billion in loan commitments and $1.12 billion in new loan fundings for the second quarter of 2022. During the second quarter of 2023, new origination activity remained muted given the current environment compared to the production levels seen in the second quarter of 2022.

At June 30, 2023, the total loan-to-deposit ratio was 82.3%, consistent with 82.4% and 83.2% at March 31, 2023 and June 30, 2022, respectively.

The following table presents the primary loan roll-forward activities for total gross loans, including both loans held for investment and loans held for sale, during the quarters indicated:

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Beginning gross loan balance before basis adjustment

$

14,223,036

$

14,740,867

$

14,745,401

New commitments

148,482

116,835

1,504,186

Unfunded new commitments

(76,928

)

(49,891

)

(382,478

)

Net new fundings

71,554

66,944

1,121,708

Purchased loans

—

—

710

Amortization/maturities/payoffs

(582,948

)

(519,986

)

(936,893

)

Net draws on existing lines of credit

36,393

(53,436

)

200,255

Loan sales

(78,349

)

(803

)

(23,698

)

Charge-offs

(3,986

)

(3,664

)

(5,831

)

Transferred to other real estate owned

(104

)

(6,886

)

—

Net (decrease) increase

(557,440

)

(517,831

)

356,251

Ending gross loan balance before basis adjustment

$

13,665,596

$

14,223,036

$

15,101,652

Basis adjustment associated with fair value hedge (1)

(53,130

)

(50,005

)

(51,087

)

Ending gross loan balance

$

13,612,466

$

14,173,031

$

15,050,565

____________________

(1)

Represents the basis adjustment associated with the application of hedge accounting on certain loans.

The following table presents the composition of the loans held for investment as of the dates indicated:

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Investor loans secured by real estate

Commercial real estate ("CRE") non-owner-occupied

$

2,571,246

$

2,590,824

$

2,788,715

Multifamily

5,788,030

5,955,239

6,188,086

Construction and land

428,287

420,079

331,734

SBA secured by real estate (1)

38,876

40,669

44,199

Total investor loans secured by real estate

8,826,439

9,006,811

9,352,734

Business loans secured by real estate (2)

CRE owner-occupied

2,281,721

2,342,175

2,486,747

Franchise real estate secured

318,539

371,902

387,683

SBA secured by real estate (3)

57,084

60,527

67,191

Total business loans secured by real estate

2,657,344

2,774,604

2,941,621

Commercial loans (4)

Commercial and industrial

1,744,763

1,967,128

2,295,421

Franchise non-real estate secured

351,944

388,722

415,830

SBA non-real estate secured

9,688

10,437

11,008

Total commercial loans

2,106,395

2,366,287

2,722,259

Retail loans

Single family residential (5)

70,993

70,913

77,951

Consumer

2,241

3,174

4,130

Total retail loans

73,234

74,087

82,081

Loans held for investment before basis adjustment (6)

13,663,412

14,221,789

15,098,695

Basis adjustment associated with fair value hedge (7)

(53,130

)

(50,005

)

(51,087

)

Loans held for investment

13,610,282

14,171,784

15,047,608

Allowance for credit losses for loans held for investment

(192,333

)

(195,388

)

(196,075

)

Loans held for investment, net

$

13,417,949

$

13,976,396

$

14,851,533

Total unfunded loan commitments

$

2,202,647

$

2,413,169

$

2,872,934

Loans held for sale, at lower of cost or fair value

$

2,184

$

1,247

$

2,957

____________________

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

(6)

Includes unaccreted fair value net purchase discounts of $48.4 million, $52.2 million, and $63.6 million as of June 30, 2023, March 31, 2023, and June 30, 2022, respectively.

(7)

Represents the basis adjustment associated with the application of hedge accounting on certain loans.

The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at June 30, 2023 was 4.73%, compared to 4.68% at March 31, 2023, and 4.06% at June 30, 2022. The quarter-over-quarter and year-over-year increases reflect higher rates on new originations and the repricing of loans as a result of the increases in benchmark interest rates.

The following table presents the composition of loan commitments originated during the quarters indicated:

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Investor loans secured by real estate

CRE non-owner-occupied

$

1,470

$

1,200

$

195,896

Multifamily

53,522

4,464

540,263

Construction and land

24,525

—

192,852

SBA secured by real estate (1)

—

—

4,698

Total investor loans secured by real estate

79,517

5,664

933,709

Business loans secured by real estate (2)

CRE owner-occupied

3,062

6,562

220,936

Franchise real estate secured

—

3,217

17,500

SBA secured by real estate (3)

—

497

7,033

Total business loans secured by real estate

3,062

10,276

245,469

Commercial loans (4)

Commercial and industrial

58,730

93,150

255,922

Franchise non-real estate secured

1,853

1,666

49,604

SBA non-real estate secured

1,612

720

6,419

Total commercial loans

62,195

95,536

311,945

Retail loans

Single family residential (5)

3,708

5,359

13,063

Total retail loans

3,708

5,359

13,063

Total loan commitments

$

148,482

$

116,835

$

1,504,186

____________________

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

The weighted average interest rate on new loan commitments was 6.72% in the second quarter of 2023, compared to 7.43% in the first quarter of 2023, and 4.11% in the second quarter of 2022. The decrease in weighted average interest rate on new loan commitments from the linked quarter was largely driven by the change in the loan commitment mix.

Asset Quality and Allowance for Credit Losses

At June 30, 2023, our allowance for credit losses ("ACL") on loans held for investment was $192.3 million, a decrease of $3.1 million from March 31, 2023, and a decrease of $3.7 million from June 30, 2022. The slight decline in the ACL from March 31, 2023 and June 30, 2022 was commensurate with the relative decreases in loans held for investment balances.

During the second quarter of 2023, the Company incurred $3.7 million of net charge-offs, compared to $3.3 million during the first quarter of 2023, and $5.2 million during the second quarter of 2022.

The following table provides the allocation of the ACL for loans held for investment as well as the activity in the ACL attributed to various segments in the loan portfolio as of and for the period indicated:

Three Months Ended June 30, 2023

(Dollars in thousands)

Beginning
ACL Balance

Charge-offs

Recoveries

Provision for
Credit Losses

Ending
ACL Balance

Investor loans secured by real estate

CRE non-owner-occupied

$

31,715

$

(2,591

)

$

—

$

2,421

$

31,545

Multifamily

57,787

(73

)

1

(2,067

)

55,648

Construction and land

7,672

—

—

35

7,707

SBA secured by real estate (1)

2,291

—

—

40

2,331

Business loans secured by real estate (2)

CRE owner-occupied

29,334

(207

)

12

(624

)

28,515

Franchise real estate secured

7,790

—

—

(935

)

6,855

SBA secured by real estate (3)

4,415

—

80

16

4,511

Commercial loans (4)

Commercial and industrial

37,659

(225

)

169

1,983

39,586

Franchise non-real estate secured

15,721

—

—

(1,079

)

14,642

SBA non-real estate secured

401

—

59

(61

)

399

Retail loans

Single family residential (5)

392

—

—

63

455

Consumer loans

211

(890

)

—

818

139

Totals

$

195,388

$

(3,986

)

$

321

$

610

$

192,333

____________________

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

The ratio of allowance for credit losses to loans held for investment at June 30, 2023 increased to 1.41%, compared to 1.38% at March 31, 2023, and 1.30% at June 30, 2022. The fair value net discount on loans acquired through total bank acquisitions was $48.4 million, or 0.35% of total loans held for investment, as of June 30, 2023, compared to $52.2 million, or 0.37% of total loans held for investment, as of March 31, 2023, and $63.6 million, or 0.42% of total loans held for investment, as of June 30, 2022.

Nonperforming assets totaled $17.4 million, or 0.08% of total assets, at June 30, 2023, compared with $30.4 million, or 0.14% of total assets, at March 31, 2023, and $44.4 million, or 0.20% of total assets, at June 30, 2022. Loan delinquencies were $31.0 million, or 0.23% of loans held for investment, at June 30, 2023, compared to $20.8 million, or 0.15% of loans held for investment, at March 31, 2023, and $36.3 million, or 0.24% of loans held for investment, at June 30, 2022.

Classified loans totaled $119.9 million, or 0.88% of loans held for investment, at June 30, 2023, compared with $161.1 million, or 1.14% of loans held for investment, at March 31, 2023, and $106.2 million, or 0.71% of loans held for investment, at June 30, 2022.

The following table presents the asset quality metrics of the loan portfolio as of the dates indicated.

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Asset quality

Nonperforming loans

$

17,151

$

24,872

$

44,445

Other real estate owned

270

5,499

—

Nonperforming assets

$

17,421

$

30,371

$

44,445

Total classified assets (1)

$

120,216

$

166,576

$

106,153

Allowance for credit losses

192,333

195,388

196,075

Allowance for credit losses as a percent of total nonperforming loans

1,121

%

786

%

441

%

Nonperforming loans as a percent of loans held for investment

0.13

0.18

0.30

Nonperforming assets as a percent of total assets

0.08

0.14

0.20

Classified loans to total loans held for investment

0.88

1.14

0.71

Classified assets to total assets

0.58

0.78

0.48

Net loan charge-offs for the quarter ended

$

3,665

$

3,284

$

5,245

Net loan charge-offs for the quarter to average total loans

0.03

%

0.02

%

0.04

%

Allowance for credit losses to loans held for investment (2)

1.41

1.38

1.30

Delinquent loans

30 - 59 days

$

649

$

761

$

6,915

60 - 89 days

31

1,198

—

90+ days

30,271

18,884

29,360

Total delinquency

$

30,951

$

20,843

$

36,275

Delinquency as a percentage of loans held for investment

0.23

%

0.15

%

0.24

%

____________________

(1)

Includes substandard loans and other real estate owned.

(2)

At June 30, 2023, 25% of loans held for investment include a fair value net discount of $48.4 million, or 0.35% of loans held for investment. At March 31, 2023, 26% of loans held for investment include a fair value net discount of $52.2 million, or 0.37% of loans held for investment. At June 30, 2022, 29% of loans held for investment include a fair value net discount of $63.6 million, or 0.42% of loans held for investment.

Investment Securities

At June 30, 2023, available-for-sale ("AFS") and held-to-maturity ("HTM") investment securities were $2.01 billion and $1.74 billion, respectively, compared to $2.11 billion and $1.75 billion, respectively, at March 31, 2023, and $2.68 billion and $1.39 billion, respectively, at June 30, 2022.

In total, investment securities were $3.75 billion at June 30, 2023, a decrease of $112.5 million from March 31, 2023, and a decrease of $320.4 million from June 30, 2022. The decrease in the second quarter of 2023 compared to the prior quarter was primarily the result of $90.9 million in principal payments, amortization, and redemptions, and an increase of $21.7 million in AFS securities mark-to-market unrealized loss.

The decrease in investment securities from June 30, 2022 was primarily the result of $535.3 million in sales, $352.7 million in principal payments, discounts from the AFS securities transferred to HTM, amortization, and redemptions, and an increase of $45.3 million in AFS securities mark-to-market unrealized loss, partially offset by $606.0 million in purchases.

Deposits

At June 30, 2023, total deposits were $16.54 billion, a decrease of $667.9 million, or 3.9%, from March 31, 2023, and a decrease of $1.54 billion, or 8.5%, from June 30, 2022.

At June 30, 2023, non-maturity deposits(1) totaled $13.46 billion, or 81.4% of total deposits, a decrease of $752.7 million, or 5.3%, from March 31, 2023, and a decrease of $3.17 billion, or 19.1%, from June 30, 2022. The decreases from prior quarters were largely driven by the industry-wide turmoil experienced in March and May 2023 and partially by clients redeploying funds into higher yielding alternatives.

At June 30, 2023, maturity deposits totaled $3.08 billion, an increase of $84.7 million, or 2.8%, from March 31, 2023, and an increase of $1.63 billion, or 111.8%, from June 30, 2022. The increase in the second quarter of 2023 compared to the prior quarter was primarily due to an increase of $108.9 million in retail certificates of deposit, partially offset by a $24.5 million decrease in brokered certificates of deposit. The increase from June 30, 2022 was primarily driven by increases in brokered and retail certificates of deposit.

The weighted average cost of total deposits for the second quarter of 2023 was 1.27%, compared to 0.94% for the first quarter of 2023, and 0.06% for the second quarter of 2022. The increases in the weighted average cost of deposits for the second quarter of 2023, compared to the first quarter of 2023 and the second quarter of 2022, were principally driven by higher pricing across deposit categories and a greater mix of maturity deposits. The weighted average cost of non-maturity deposits(1) for the second quarter of 2023 was 0.71%, compared to 0.54% for the first quarter of 2023, and 0.04% for the second quarter of 2022.

At June 30, 2023, the end-of-period weighted average rate of total deposits was 1.40%, compared to 1.15% at March 31, 2023, and 0.13% at June 30, 2022. At June 30, 2023, the end-of-period weighted average rate of non-maturity deposits was 0.78%, compared to 0.61% at March 31, 2023, and 0.06% at June 30, 2022.

____________________

(1)

Reconciliations of the non-GAAP measures are set forth at the end of this press release.

The following table presents the composition of deposits as of the dates indicated.

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Deposit accounts

Noninterest-bearing checking

$

5,895,975

$

6,209,104

$

6,934,318

Interest-bearing:

Checking

2,759,855

2,871,812

4,149,432

Money market/savings

4,801,288

5,128,857

5,545,230

Total non-maturity deposits

13,457,118

14,209,773

16,628,980

Retail certificates of deposit

1,366,071

1,257,146

855,966

Wholesale/brokered certificates of deposit

1,716,686

1,740,891

599,667

Total maturity deposits

3,082,757

2,998,037

1,455,633

Total deposits

$

16,539,875

$

17,207,810

$

18,084,613

Cost of deposits

1.27

%

0.94

%

0.06

%

Cost of non-maturity deposits (1)

0.71

0.54

0.04

Noninterest-bearing deposits as a percent of total deposits

35.6

36.1

38.3

Non-maturity deposits as a percent of total deposits

81.4

82.6

92.0

Borrowings

At June 30, 2023, total borrowings amounted to $1.13 billion, remaining flat from March 31, 2023, and an increase of $200.6 million from June 30, 2022. Total borrowings at June 30, 2023 were comprised of $800.0 million of Federal Home Loan Bank of San Francisco ("FHLB") term advances and $331.5 million of subordinated debt. The increase in borrowings at June 30, 2023 as compared to June 30, 2022 was due to a $200.0 million increase in FHLB term advances that were utilized to manage interest rate risk and liquidity.

As of June 30, 2023, our unused borrowing capacity was $8.53 billion, which consists of available lines of credit with FHLB and other correspondent banks as well as access through the Federal Reserve Bank's discount window and the Bank Term Funding Program, neither of which were accessed during the second quarter of 2023.

Capital Ratios

At June 30, 2023, our common stockholder's equity was $2.85 billion, or 13.73% of total assets, compared with $2.83 billion, or 13.25%, at March 31, 2023, and $2.76 billion, or 12.53%, at June 30, 2022, with a book value per share of $29.71, compared with $29.58 at March 31, 2023, and $29.01 at June 30, 2022. At June 30, 2023, the ratio of tangible common equity to tangible assets(1) was 9.59%, compared with 9.20% at March 31, 2023, and 8.52% at June 30, 2022, and tangible book value per share(1) was $19.79, compared with $19.61 at March 31, 2023, and $18.86 at June 30, 2022.

____________________

(1)

Reconciliations of the non-GAAP measures are set forth at the end of this press release.

The Company implemented the current expected credit losses ("CECL") model on January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. In the first quarter of 2022, the Company began phasing into regulatory capital the cumulative adjustments at the end of the second year of the transition period at 25% per year. At June 30, 2023, the Company and Bank were in compliance with the capital conservation buffer requirement and exceeded the minimum Common Equity Tier 1, Tier 1, and total capital ratios, inclusive of the fully phased-in capital conservation buffer of 7.0%, 8.5%, and 10.5%, respectively, and the Bank qualified as "well capitalized" for purposes of the federal bank regulatory prompt corrective action regulations.

June 30,

March 31,

June 30,

Capital ratios

2023

2023

2022

Pacific Premier Bancorp, Inc. Consolidated

Tier 1 leverage ratio

10.90

%

10.41

%

9.90

%

Common equity tier 1 capital ratio

14.34

13.54

11.91

Tier 1 capital ratio

14.34

13.54

11.91

Total capital ratio

17.24

16.33

14.41

Tangible common equity ratio (1)

9.59

9.20

8.52

Pacific Premier Bank

Tier 1 leverage ratio

12.15

%

11.93

%

11.41

%

Common equity tier 1 capital ratio

15.99

15.52

13.72

Tier 1 capital ratio

15.99

15.52

13.72

Total capital ratio

17.05

16.55

14.54

Share data

Book value per share

$

29.71

$

29.58

$

29.01

Tangible book value per share (1)

19.79

19.61

18.86

Common equity dividends declared per share

0.33

0.33

0.33

Closing stock price (2)

20.68

24.02

29.24

Shares issued and outstanding

95,906,217

95,714,777

94,976,605

Market capitalization (2)(3)

$

1,983,341

$

2,299,069

$

2,777,116

____________________

(1)

Reconciliations of the non-GAAP measures are set forth at the end of this press release.

(2)

As of the last trading day prior to period end.

(3)

Dollars in thousands.

Dividend and Stock Repurchase Program

On July 25, 2023, the Company's Board of Directors declared a $0.33 per share dividend, payable on August 14, 2023 to stockholders of record as of August 7, 2023. In January 2021, the Company’s Board of Directors approved a stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock. During the second quarter of 2023, the Company did not repurchase any shares of common stock.

Subsequent Events

On July 12, 2023, as part of its interest rate sensitivity management, the Company entered into two $150.0 million in notional amount, $300.0 million in aggregate, of pay-fixed and receive-floating interest rate swaps associated with certain fixed rate loans, primarily multifamily and commercial real estate loans, to manage its exposure to changes in fair value on these instruments attributable to changes in the designated SOFR benchmark interest rate. These two interest rate swaps are structured as 15-month and 18-month terms, respectively, and designated as fair value hedges using the portfolio layer method. Under the swap agreement, the Company receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on July 27, 2023 to discuss its financial results. Analysts and investors may participate in the question-and-answer session. A live webcast will be available on the Webcasts page of the Company's investor relations website. An archived version of the webcast will be available in the same location shortly after the live call has ended. The conference call can be accessed by telephone at (866) 290-5977 and asking to be joined to the Pacific Premier Bancorp, Inc. conference call. Additionally, a telephone replay will be made available through August 3, 2023, at (877) 344-7529, conference ID 2138296.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. (Nasdaq: PPBI) is the parent company of Pacific Premier Bank, a California-based commercial bank focused on serving small, middle-market, and corporate businesses throughout the western United States in major metropolitan markets in California, Washington, Arizona, and Nevada. Founded in 1983, Pacific Premier Bank has grown to become one of the largest banks headquartered in the western region of the United States, with approximately $21 billion in total assets. Pacific Premier Bank provides banking products and services, including deposit accounts, digital banking, and treasury management services, to businesses, professionals, entrepreneurs, real estate investors, and nonprofit organizations. Pacific Premier Bank also offers a wide array of loan products, such as commercial business loans, lines of credit, SBA loans, commercial real estate loans, agribusiness loans, franchise lending, home equity lines of credit, and construction loans. Pacific Premier Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Commerce Escrow division. Pacific Premier Bank offers clients IRA custodial services through its Pacific Premier Trust division, which has approximately $17 billion of assets under custody and 37,000 client accounts comprised of self-directed investors, financial institutions, capital syndicators, and financial advisors. Additionally, Pacific Premier Bank provides nationwide customized banking solutions to Homeowners’ Associations and Property Management companies. Pacific Premier Bank is an Equal Housing Lender and Member FDIC. For additional information about Pacific Premier Bancorp, Inc. and Pacific Premier Bank, visit our website: www.ppbi.com.

FORWARD-LOOKING STATEMENTS

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, stockholder value creation, tax rates, and the impact of acquisitions we have made or may make.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; interest rate, liquidity, economic, market, credit, operational, and inflation risks associated with our business, including the speed and predictability of changes in these risks; our ability to attract and retain deposits and access to other sources of liquidity; business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the U.S. Federal budget or debt, or turbulence or uncertainty in domestic or foreign financial markets; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; possible impairment charges to goodwill, including any impairment that may result from increased volatility in our stock price; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; compliance risks, including the costs of monitoring, testing, and maintaining compliance with complex laws and regulations; the effectiveness of our risk management framework and quantitative models; the transition away from USD LIBOR and related uncertainty as well as the risk and costs related to our adoption of Secured Overnight Financing Rate ("SOFR"); the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission ("SEC"), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible credit-related impairments of securities held by us; changes in the level of our nonperforming assets and charge-offs; the impact of governmental efforts to restructure the U.S. financial regulatory system; the impact of recent or future changes in the FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; changes in consumer spending, borrowing, and savings habits; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; the possibility that we may reduce or discontinue the payments of dividends on our common stock; the possibility that we may discontinue, reduce or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to our stock repurchase program; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism, and/or military conflicts, including the war between Russia and Ukraine, which could impact business and economic conditions in the United States and abroad; public health crises and pandemics, including with respect to COVID-19, and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions; cybersecurity threats and incidents, and related potential costs and risks, including reputation, financial and litigation risks; climate change, including the enhanced regulatory, compliance, credit, and reputational risks and costs; natural disasters, earthquakes, fires, and severe weather; unanticipated regulatory or legal proceedings; and our ability to manage the risks involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2022 Annual Report on Form 10-K filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2023

2023

2022

2022

2022

ASSETS

Cash and cash equivalents

$

1,463,677

$

1,424,896

$

1,101,249

$

739,211

$

972,798

Interest-bearing time deposits with financial institutions

1,487

1,734

1,734

1,733

2,216

Investment securities held-to-maturity, at amortized cost, net of allowance for credit losses

1,737,604

1,749,030

1,388,103

1,385,502

1,390,682

Investment securities available-for-sale, at fair value

2,011,791

2,112,852

2,601,013

2,661,079

2,679,070

FHLB, FRB, and other stock

105,369

105,479

119,918

118,778

118,636

Loans held for sale, at lower of amortized cost or fair value

2,184

1,247

2,643

2,163

2,957

Loans held for investment

13,610,282

14,171,784

14,676,298

14,908,811

15,047,608

Allowance for credit losses

(192,333

)

(195,388

)

(195,651

)

(195,549

)

(196,075

)

Loans held for investment, net

13,417,949

13,976,396

14,480,647

14,713,262

14,851,533

Accrued interest receivable

70,093

69,660

73,784

66,192

66,898

Other real estate owned

270

5,499

—

—

—

Premises and equipment, net

61,527

63,450

64,543

65,651

68,435

Deferred income taxes, net

184,857

177,778

183,602

190,948

163,767

Bank owned life insurance

465,288

462,732

460,010

457,301

454,593

Intangible assets

49,362

52,417

55,588

59,028

62,500

Goodwill

901,312

901,312

901,312

901,312

901,312

Other assets

275,113

257,082

253,871

257,041

258,522

Total assets

$

20,747,883

$

21,361,564

$

21,688,017

$

21,619,201

$

21,993,919

LIABILITIES

Deposit accounts:

Noninterest-bearing checking

$

5,895,975

$

6,209,104

$

6,306,825

$

6,775,465

$

6,934,318

Interest-bearing:

Checking

2,759,855

2,871,812

3,119,850

3,605,498

4,149,432

Money market/savings

4,801,288

5,128,857

5,422,607

5,493,988

5,545,230

Retail certificates of deposit

1,366,071

1,257,146

1,086,423

872,421

855,966

Wholesale/brokered certificates of deposit

1,716,686

1,740,891

1,416,696

999,002

599,667

Total interest-bearing

10,643,900

10,998,706

11,045,576

10,970,909

11,150,295

Total deposits

16,539,875

17,207,810

17,352,401

17,746,374

18,084,613

FHLB advances and other borrowings

800,000

800,000

1,000,000

600,000

600,000

Subordinated debentures

331,523

331,364

331,204

331,045

330,886

Accrued expenses and other liabilities

227,351

191,229

206,023

206,386

223,201

Total liabilities

17,898,749

18,530,403

18,889,628

18,883,805

19,238,700

STOCKHOLDERS’ EQUITY

Common stock

937

937

933

933

933

Additional paid-in capital

2,366,639

2,361,830

2,362,663

2,357,731

2,353,361

Retained earnings

757,025

731,123

700,040

657,845

615,943

Accumulated other comprehensive loss

(275,467

)

(262,729

)

(265,247

)

(281,113

)

(215,018

)

Total stockholders' equity

2,849,134

2,831,161

2,798,389

2,735,396

2,755,219

Total liabilities and stockholders' equity

$

20,747,883

$

21,361,564

$

21,688,017

$

21,619,201

$

21,993,919

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

(Dollars in thousands, except per share data)

2023

2023

2022

2023

2022

INTEREST INCOME

Loans

$

182,852

$

180,958

$

164,455

$

363,810

$

315,059

Investment securities and other interest-earning assets

42,536

40,385

18,771

82,921

36,713

Total interest income

225,388

221,343

183,226

446,731

351,772

INTEREST EXPENSE

Deposits

53,580

40,234

2,682

93,814

4,355

FHLB advances and other borrowings

7,155

7,938

3,217

15,093

3,691

Subordinated debentures

4,561

4,561

4,562

9,122

9,122

Total interest expense

65,296

52,733

10,461

118,029

17,168

Net interest income before provision for credit losses

160,092

168,610

172,765

328,702

334,604

Provision for credit losses

1,499

3,016

469

4,515

917

Net interest income after provision for credit losses

158,593

165,594

172,296

324,187

333,687

NONINTEREST INCOME

Loan servicing income

493

573

502

1,066

921

Service charges on deposit accounts

2,670

2,629

2,690

5,299

5,305

Other service fee income

315

296

366

611

733

Debit card interchange fee income

914

803

936

1,717

1,772

Earnings on bank owned life insurance

3,487

3,374

3,240

6,861

6,461

Net gain from sales of loans

345

29

1,136

374

2,630

Net gain (loss) from sales of investment securities

—

138

(31

)

138

2,103

Trust custodial account fees

9,360

11,025

10,354

20,385

21,933

Escrow and exchange fees

924

1,058

1,827

1,982

3,488

Other income

2,031

1,261

1,173

3,292

2,741

Total noninterest income

20,539

21,186

22,193

41,725

48,087

NONINTEREST EXPENSE

Compensation and benefits

53,424

54,293

57,562

107,717

114,543

Premises and occupancy

11,615

11,742

11,829

23,357

23,781

Data processing

7,488

7,265

6,604

14,753

12,600

Other real estate owned operations, net

8

108

—

116

—

FDIC insurance premiums

2,357

2,425

1,452

4,782

2,848

Legal and professional services

4,716

5,501

4,629

10,217

8,697

Marketing expense

1,879

1,838

1,926

3,717

3,735

Office expense

1,280

1,232

1,252

2,512

2,455

Loan expense

567

646

1,144

1,213

2,278

Deposit expense

9,194

8,436

4,081

17,630

7,832

Amortization of intangible assets

3,055

3,171

3,479

6,226

7,071

Other expense

5,061

4,695

5,016

9,756

10,782

Total noninterest expense

100,644

101,352

98,974

201,996

196,622

Net income before income taxes

78,488

85,428

95,515

163,916

185,152

Income tax expense

20,852

22,866

25,712

43,718

48,445

Net income

$

57,636

$

62,562

$

69,803

$

120,198

$

136,707

EARNINGS PER SHARE

Basic

$

0.60

$

0.66

$

0.74

$

1.26

$

1.44

Diluted

$

0.60

$

0.66

$

0.73

$

1.26

$

1.44

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic

94,166,083

93,857,812

93,765,264

94,012,799

93,633,213

Diluted

94,215,967

94,182,522

94,040,691

94,192,341

93,983,057

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

(Unaudited)

Three Months Ended

June 30, 2023

March 31, 2023

June 30, 2022

(Dollars in thousands)

Average
Balance

Interest
Income/
Expense

Average
Yield/
Cost

Average
Balance

Interest
Income/
Expense

Average
Yield/
Cost

Average
Balance

Interest
Income/
Expense

Average
Yield/
Cost

Assets

Interest-earning assets:

Cash and cash equivalents

$

1,433,137

$

16,600

4.65

%

$

1,335,611

$

13,594

4.13

%

$

702,663

$

1,211

0.69

%

Investment securities

3,926,568

25,936

2.64

4,165,681

26,791

2.57

4,254,961

17,560

1.65

Loans receivable, net (1)(2)

13,927,145

182,852

5.27

14,394,775

180,958

5.10

14,919,182

164,455

4.42

Total interest-earning assets

19,286,850

225,388

4.69

19,896,067

221,343

4.51

19,876,806

183,226

3.70

Noninterest-earning assets

1,771,156

1,788,806

1,793,347

Total assets

$

21,058,006

$

21,684,873

$

21,670,153

Liabilities and equity

Interest-bearing deposits:

Interest checking

$

2,746,578

$

8,659

1.26

%

$

3,008,712

$

5,842

0.79

%

$

4,055,506

$

712

0.07

%

Money market

4,644,623

15,644

1.35

4,992,084

13,053

1.06

5,231,464

1,010

0.08

Savings

352,377

102

0.12

453,079

508

0.45

432,586

27

0.03

Retail certificates of deposit

1,286,160

10,306

3.21

1,206,966

7,775

2.61

922,784

607

0.26

Wholesale/brokered certificates of deposit

1,767,970

18,869

4.28

1,443,783

13,056

3.67

80,182

326

1.63

Total interest-bearing deposits

10,797,708

53,580

1.99

11,104,624

40,234

1.47

10,722,522

2,682

0.10

FHLB advances and other borrowings

800,016

7,155

3.59

987,817

7,938

3.26

602,621

3,217

2.14

Subordinated debentures

331,449

4,561

5.50

331,297

4,561

5.51

330,796

4,562

5.52

Total borrowings

1,131,465

11,716

4.15

1,319,114

12,499

3.83

933,417

7,779

3.34

Total interest-bearing liabilities

11,929,173

65,296

2.20

12,423,738

52,733

1.72

11,655,939

10,461

0.36

Noninterest-bearing deposits

6,078,543

6,219,818

7,030,205

Other liabilities

206,929

218,925

219,116

Total liabilities

18,214,645

18,862,481

18,905,260

Stockholders' equity

2,843,361

2,822,392

2,764,893

Total liabilities and equity

$

21,058,006

$

21,684,873

$

21,670,153

Net interest income

$

160,092

$

168,610

$

172,765

Net interest margin (3)

3.33

%

3.44

%

3.49

%

Cost of deposits (4)

1.27

0.94

0.06

Cost of funds (5)

1.45

1.15

0.22

Cost of non-maturity deposits (6)

0.71

0.54

0.04

Ratio of interest-earning assets to interest-bearing liabilities

161.68

160.15

170.53

____________________

(1)

Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs, discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships.

(2)

Interest income includes net discount accretion of $2.9 million, $2.5 million, and $7.5 million for the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, respectively.

(3)

Represents annualized net interest income divided by average interest-earning assets.

(4)

Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.

(5)

Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

(6)

Reconciliations of the non-GAAP measures are set forth at the end of this press release.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

LOAN PORTFOLIO COMPOSITION

(Unaudited)

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2023

2023

2022

2022

2022

Investor loans secured by real estate

CRE non-owner-occupied

$

2,571,246

$

2,590,824

$

2,660,321

$

2,771,272

$

2,788,715

Multifamily

5,788,030

5,955,239

6,112,026

6,199,581

6,188,086

Construction and land

428,287

420,079

399,034

373,194

331,734

SBA secured by real estate (1)

38,876

40,669

42,135

42,998

44,199

Total investor loans secured by real estate

8,826,439

9,006,811

9,213,516

9,387,045

9,352,734

Business loans secured by real estate (2)

CRE owner-occupied

2,281,721

2,342,175

2,432,163

2,477,530

2,486,747

Franchise real estate secured

318,539

371,902

378,057

383,468

387,683

SBA secured by real estate (3)

57,084

60,527

61,368

64,002

67,191

Total business loans secured by real estate

2,657,344

2,774,604

2,871,588

2,925,000

2,941,621

Commercial loans (4)

Commercial and industrial

1,744,763

1,967,128

2,160,948

2,164,623

2,295,421

Franchise non-real estate secured

351,944

388,722

404,791

409,773

415,830

SBA non-real estate secured

9,688

10,437

11,100

11,557

11,008

Total commercial loans

2,106,395

2,366,287

2,576,839

2,585,953

2,722,259

Retail loans

Single family residential (5)

70,993

70,913

72,997

75,176

77,951

Consumer

2,241

3,174

3,284

3,761

4,130

Total retail loans

73,234

74,087

76,281

78,937

82,081

Loans held for investment before basis adjustment (6)

13,663,412

14,221,789

14,738,224

14,976,935

15,098,695

Basis adjustment associated with fair value hedge (7)

(53,130

)

(50,005

)

(61,926

)

(68,124

)

(51,087

)

Loans held for investment

13,610,282

14,171,784

14,676,298

14,908,811

15,047,608

Allowance for credit losses for loans held for investment

(192,333

)

(195,388

)

(195,651

)

(195,549

)

(196,075

)

Loans held for investment, net

$

13,417,949

$

13,976,396

$

14,480,647

$

14,713,262

$

14,851,533

Loans held for sale, at lower of cost or fair value

$

2,184

$

1,247

$

2,643

$

2,163

$

2,957

____________________

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

(6)

Includes unaccreted fair value net purchase discounts of $48.4 million, $52.2 million, $54.8 million, $59.0 million, and $63.6 million as of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, and June 30, 2022, respectively.

(7)

Represents the basis adjustment associated with the application of hedge accounting on certain loans.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY INFORMATION

(Unaudited)

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands)

2023

2023

2022

2022

2022

Asset quality

Nonperforming loans

$

17,151

$

24,872

$

30,905

$

60,464

$

44,445

Other real estate owned

270

5,499

—

—

—

Nonperforming assets

$

17,421

$

30,371

$

30,905

$

60,464

$

44,445

Total classified assets (1)

$

120,216

$

166,576

$

149,304

$

110,143

$

106,153

Allowance for credit losses

192,333

195,388

195,651

195,549

196,075

Allowance for credit losses as a percent of total nonperforming loans

1,121

%

786

%

633

%

323

%

441

%

Nonperforming loans as a percent of loans held for investment

0.13

0.18

0.21

0.41

0.30

Nonperforming assets as a percent of total assets

0.08

0.14

0.14

0.28

0.20

Classified loans to total loans held for investment

0.88

1.14

1.02

0.74

0.71

Classified assets to total assets

0.58

0.78

0.69

0.51

0.48

Net loan charge-offs for the quarter ended

$

3,665

$

3,284

$

3,797

$

1,072

$

5,245

Net loan charge-offs for the quarter to average total loans

0.03

%

0.02

%

0.03

%

0.01

%

0.04

%

Allowance for credit losses to loans held for investment (2)

1.41

1.38

1.33

1.31

1.30

Delinquent loans

30 - 59 days

$

649

$

761

$

20,538

$

1,484

$

6,915

60 - 89 days

31

1,198

185

6,535

—

90+ days

30,271

18,884

22,625

33,238

29,360

Total delinquency

$

30,951

$

20,843

$

43,348

$

41,257

$

36,275

Delinquency as a percent of loans held for investment

0.23

%

0.15

%

0.30

%

0.28

%

0.24

%

____________________

(1)

Includes substandard loans and other real estate owned.

(2)

At June 30, 2023, 25% of loans held for investment include a fair value net discount of $48.4 million, or 0.35% of loans held for investment. At March 31, 2023, 26% of loans held for investment include a fair value net discount of $52.2 million, or 0.37% of loans held for investment. At December 31, 2022, 26% of loans held for investment include a fair value net discount of $54.8 million, or 0.37% of loans held for investment. At September 30, 2022, 27% of loans held for investment include a fair value net discount of $59.0 million, or 0.39% of loans held for investment. At June 30, 2022, 29% of loans held for investment include a fair value net discount of $63.6 million, or 0.42% of loans held for investment.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

NONACCRUAL LOANS (1)

(Unaudited)

(Dollars in thousands)

Collateral
Dependent
Loans

ACL

Non-
Collateral
Dependent
Loans

ACL

Total
Nonaccrual
Loans

Nonaccrual
Loans With
No ACL

June 30, 2023

Investor loans secured by real estate

CRE non-owner-occupied

$

1,566

$

—

$

—

$

—

$

1,566

$

1,566

SBA secured by real estate (2)

505

—

—

—

505

505

Total investor loans secured by real estate

2,071

—

—

—

2,071

2,071

Business loans secured by real estate (3)

CRE owner-occupied

8,984

—

—

—

8,984

8,984

SBA secured by real estate (4)

1,306

—

—

—

1,306

1,306

Total business loans secured by real estate

10,290

—

—

—

10,290

10,290

Commercial loans (5)

Commercial and industrial

4,235

4,000

—

—

4,235

235

SBA not secured by real estate

555

—

—

—

555

555

Total commercial loans

4,790

4,000

—

—

4,790

790

Totals nonaccrual loans

$

17,151

$

4,000

$

—

$

—

$

17,151

$

13,151

____________________

(1)

The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.

(2)

SBA loans that are collateralized by hotel/motel real property.

(3)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(4)

SBA loans that are collateralized by real property other than hotel/motel real property.

(5)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

PAST DUE STATUS

(Unaudited)

Days Past Due

(Dollars in thousands)

Current

30-59

60-89

90+

Total

June 30, 2023

Investor loans secured by real estate

CRE non-owner-occupied

$

2,569,680

$

—

$

—

$

1,566

$

2,571,246

Multifamily

5,788,030

—

—

—

5,788,030

Construction and land

428,287

—

—

—

428,287

SBA secured by real estate (1)

38,349

527

—

—

38,876

Total investor loans secured by real estate

8,824,346

527

—

1,566

8,826,439

Business loans secured by real estate (2)

CRE owner-occupied

2,276,988

—

—

4,733

2,281,721

Franchise real estate secured

318,539

—

—

—

318,539

SBA secured by real estate (3)

55,778

—

—

1,306

57,084

Total business loans secured by real estate

2,651,305

—

—

6,039

2,657,344

Commercial loans (4)

Commercial and industrial

1,722,499

122

31

22,111

1,744,763

Franchise non-real estate secured

351,944

—

—

—

351,944

SBA not secured by real estate

9,133

—

—

555

9,688

Total commercial loans

2,083,576

122

31

22,666

2,106,395

Retail loans

Single family residential (5)

70,993

—

—

—

70,993

Consumer loans

2,241

—

—

—

2,241

Total retail loans

73,234

—

—

—

73,234

Loans held for investment before basis adjustment (6)

$

13,632,461

$

649

$

31

$

30,271

$

13,663,412

____________________

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

(6)

Excludes the basis adjustment of $53.1 million to the carrying amount of certain loans included in fair value hedging relationships.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CREDIT RISK GRADES

(Unaudited)

(Dollars in thousands)

Pass

Special

Mention

Substandard

Total Gross

Loans

June 30, 2023

Investor loans secured by real estate

CRE non-owner-occupied

$

2,555,682

$

6,417

$

9,147

$

2,571,246

Multifamily

5,775,486

12,544

—

5,788,030

Construction and land

428,287

—

—

428,287

SBA secured by real estate (1)

30,318

—

8,558

38,876

Total investor loans secured by real estate

8,789,773

18,961

17,705

8,826,439

Business loans secured by real estate (2)

CRE owner-occupied

2,239,451

18,045

24,225

2,281,721

Franchise real estate secured

300,986

12,403

5,150

318,539

SBA secured by real estate (3)

51,427

—

5,657

57,084

Total business loans secured by real estate

2,591,864

30,448

35,032

2,657,344

Commercial loans (4)

Commercial and industrial

1,656,391

39,756

48,616

1,744,763

Franchise non-real estate secured

330,632

3,787

17,525

351,944

SBA not secured by real estate

8,622

—

1,066

9,688

Total commercial loans

1,995,645

43,543

67,207

2,106,395

Retail loans

Single family residential (5)

70,991

—

2

70,993

Consumer loans

2,241

—

—

2,241

Total retail loans

73,232

—

2

73,234

Loans held for investment before basis adjustment (6)

$

13,450,514

$

92,952

$

119,946

$

13,663,412

____________________

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

(6)

Excludes the basis adjustment of $53.1 million to the carrying amount of certain loans included in fair value hedging relationships.

GAAP to NON-GAAP RECONCILIATIONS

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
(Unaudited)

The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.

For periods presented below, return on average tangible common equity is a non-GAAP financial measure derived from GAAP-based amounts. We calculate this figure by excluding amortization of intangible assets expense from net income and excluding the average intangible assets and average goodwill from the average stockholders' equity during the periods indicated. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Net income

$

57,636

$

62,562

$

69,803

Plus: amortization of intangible assets expense

3,055

3,171

3,479

Less: amortization of intangible assets expense tax adjustment (1)

868

901

993

Net income for average tangible common equity

$

59,823

$

64,832

$

72,289

Average stockholders' equity

$

2,843,361

$

2,822,392

$

2,764,893

Less: average intangible assets

51,180

54,310

64,583

Less: average goodwill

901,312

901,312

901,312

Average tangible common equity

$

1,890,869

$

1,866,770

$

1,798,998

Return on average equity (annualized)

8.11

%

8.87

%

10.10

%

Return on average tangible common equity (annualized)

12.66

%

13.89

%

16.07

%

____________________

(1)

Adjusted by statutory tax rate

Pre-provision net revenue is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the pre-provision net revenue by excluding income tax and provision for credit losses from net income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Interest income

$

225,388

$

221,343

$

183,226

Interest expense

65,296

52,733

10,461

Net interest income

160,092

168,610

172,765

Noninterest income

20,539

21,186

22,193

Revenue

180,631

189,796

194,958

Noninterest expense

100,644

101,352

98,974

Pre-provision net revenue

79,987

88,444

95,984

Pre-provision net revenue (annualized)

$

319,948

$

353,776

$

383,936

Average assets

$

21,058,006

$

21,684,873

$

21,670,153

Pre-provision net revenue to average assets

0.38

%

0.41

%

0.44

%

Pre-provision net revenue to average assets (annualized)

1.52

%

1.63

%

1.77

%

Tangible book value per share and tangible common equity to tangible assets (the "tangible common equity ratio") are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible book value per share by dividing tangible common equity by common shares outstanding, as compared to book value per share, which we calculate by dividing common stockholders' equity by shares outstanding. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. We believe that this information is consistent with the treatment by bank regulatory agencies, which excludes intangible assets from the calculation of risk-based capital ratios. Accordingly, we believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our capital position and ratios.

June 30,

March 31,

December 31,

September 30,

June 30,

(Dollars in thousands, except per share data)

2023

2023

2022

2022

2022

Total stockholders' equity

$

2,849,134

$

2,831,161

$

2,798,389

$

2,735,396

$

2,755,219

Less: intangible assets

950,674

953,729

956,900

960,340

963,812

Tangible common equity

$

1,898,460

$

1,877,432

$

1,841,489

$

1,775,056

$

1,791,407

Total assets

$

20,747,883

$

21,361,564

$

21,688,017

$

21,619,201

$

21,993,919

Less: intangible assets

950,674

953,729

956,900

960,340

963,812

Tangible assets

$

19,797,209

$

20,407,835

$

20,731,117

$

20,658,861

$

21,030,107

Tangible common equity ratio

9.59

%

9.20

%

8.88

%

8.59

%

8.52

%

Common shares issued and outstanding

95,906,217

95,714,777

95,021,760

95,016,767

94,976,605

Book value per share

$

29.71

$

29.58

$

29.45

$

28.79

$

29.01

Less: intangible book value per share

9.91

9.96

10.07

10.11

10.15

Tangible book value per share

$

19.79

$

19.61

$

19.38

$

18.68

$

18.86

Efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense, less other real estate owned operations and amortization of intangible assets, where applicable, to the sum of net interest income before provision for credit losses and total noninterest income, less net gain (loss) from sales of investment securities and net gain from other real estate owned. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Total noninterest expense

$

100,644

$

101,352

$

98,974

Less: amortization of intangible assets

3,055

3,171

3,479

Less: other real estate owned operations, net

8

108

—

Noninterest expense, adjusted

$

97,581

$

98,073

$

95,495

Net interest income before provision for credit losses

$

160,092

$

168,610

$

172,765

Add: total noninterest income

20,539

21,186

22,193

Less: net gain (loss) from sales of investment securities

—

138

(31

)

Less: net gain from other real estate owned

106

—

—

Revenue, adjusted

$

180,525

$

189,658

$

194,989

Efficiency ratio

54.1

%

51.7

%

49.0

%

Cost of non-maturity deposits is a non-GAAP financial measure derived from GAAP-based amounts. Cost of non-maturity deposits is calculated as the ratio of non-maturity deposit interest expense to average non-maturity deposits. We calculate non-maturity deposit interest expense by excluding interest expense for all certificates of deposit from total deposit expense, and we calculate average non-maturity deposits by excluding all certificates of deposit from total deposits. Management believes cost of non-maturity deposits is a useful measure to assess the Company's deposit base, including its potential volatility.

Three Months Ended

June 30,

March 31,

June 30,

(Dollars in thousands)

2023

2023

2022

Total deposits interest expense

$

53,580

$

40,234

$

2,682

Less: certificates of deposit interest expense

10,306

7,775

607

Less: brokered certificates of deposit interest expense

18,869

13,056

326

Non-maturity deposit expense

$

24,405

$

19,403

$

1,749

Total average deposits

$

16,876,251

$

17,324,442

$

17,752,727

Less: average certificates of deposit

1,286,160

1,206,966

922,784

Less: average brokered certificates of deposit

1,767,970

1,443,783

80,182

Average non-maturity deposits

$

13,822,121

$

14,673,693

$

16,749,761

Cost of non-maturity deposits

0.71

%

0.54

%

0.04

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727336941/en/

Contacts

Pacific Premier Bancorp, Inc.

Steven R. Gardner
Chairman, Chief Executive Officer, and President
(949) 864-8000

Ronald J. Nicolas, Jr.
Senior Executive Vice President and Chief Financial Officer
(949) 864-8000

Matthew J. Lazzaro
Senior Vice President, Director of Investor Relations
(949) 243-1082

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