Pacific Premier Bancorp, Inc. Announces Third Quarter 2015 Results (Unaudited)

Third Quarter 2015 Summary

  • Net income of $7.8 million, or $0.36 per diluted share, an increase of 16% from prior year
  • Net income of $8.2 million, or $0.38 per diluted share, adjusted for merger related expenses
  • ROAA of 1.25% and ROATCE of 14.96%, adjusted for merger related expenses
  • Efficiency ratio of 53.55%
  • Net interest margin of 4.14%
  • Growth in loans of $49.3 million and in non-interest bearing deposits of $45.2 million
  • Tangible book value increased to $10.80 per share
  • Announced acquisition of Security California Bancorp on October 1, 2015

IRVINE, Calif.--()--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the third quarter of 2015 of $7.8 million, or $0.36 per diluted share. This compares with net income of $7.8 million, or $0.36 per diluted share, for the second quarter of 2015 and net income of $5.5 million, or $0.31 per diluted share, for the third quarter of 2014. Net income for the third quarter of 2015 includes $400,000 of merger related expenses associated with the acquisition of Security California Bancorp ("Security"). Excluding the non-tax deductible merger-related expenses, adjusted net income for the third quarter of 2015 was $8.2 million, or $0.38 per diluted share.

For the three months ended September 30, 2015, the Company’s return on average assets was 1.19% and return on average tangible common equity was 14.25%, or 1.25% and 14.96% after adjusting for the merger related expenses, respectively. For the three months ended June 30, 2015 the return on average assets was 1.18% and the return on average tangible common equity was 14.84%. For the three months ended September 30, 2014 the return on average assets was 1.14% and the return on average tangible common equity was 13.60%.

Steven R. Gardner, President and Chief Executive Officer of the Company, commented on the results, “We are seeing positive trends in loan production, core deposit growth, expense management and credit quality, which resulted in earnings per share increasing by 16% over the prior year.

“We originated $236 million of new loans in the third quarter, including $48 million in SBA loan production, which was the largest quarter ever for our SBA lending group. Much of our new loan production came on late in the quarter, which should drive a higher level of interest income going forward. We also continued to see strong core deposit growth with noninterest bearing deposits increasing by $45.2 million in the quarter, or a 28.5% annualized growth rate. We have a healthy loan and deposit pipeline and we expect to end 2015 with another strong quarter of balance sheet growth.

“We are well underway in the approval process for our pending acquisition of Security California Bancorp, and we are excited about the opportunities created through this transaction. We will be adding a proven team of commercial bankers that will improve our overall C&I banking capabilities. We have received a great response from Security customers, who will benefit from the expanded suite of treasury management products that will be available to them and the higher lending limits that we are able to provide. We see exceptional opportunities to expand banking relationships with Security’s existing customers, as well as to further grow our customer base throughout Southern California. As we capture the synergies we project for this merger, we believe the addition of Security’s talent, customer base and branch network will significantly enhance the value of our franchise in the years to come,” said Mr. Gardner.

FINANCIAL HIGHLIGHTS

   
Three Months Ended
September 30,     June 30,     September 30,
2015 2015 2014
Financial Highlights (dollars in thousands, except per share data)
Net income $ 7,837 $ 7,825 $ 5,450
Diluted EPS $ 0.36 $ 0.36 $ 0.31
Return on average assets 1.19 % 1.18 % 1.14 %
Adjusted return on average assets 1.25 % 1.18 % 1.14 %
Adjusted net income (1) $ 8,237 $ 7,825 $ 5,450
Return on average tangible common equity (2) 14.25 % 14.84 % 13.60 %
Adjusted return on average tangible common equity (1)(2) 14.96 % 14.84 % 13.60 %
Net interest margin 4.14 % 4.26 % 4.14 %
Cost of deposits 0.32 % 0.31 % 0.35 %
Efficiency ratio (3) 53.55 % 53.66 % 56.57 %
                   
(1) Adjusted to exclude merger related expenses, net of tax.
(2) A reconciliation of the non-GAAP measures of average tangible common equity to the GAAP measures of common stockholders' equity is set forth at the end of this press release.
(3) Represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization and non-recurring merger related expense to the sum of net interest income before provision for loan losses and total noninterest income less gains/(loss) on sale of securities and other-than-temporary impairment recovery (loss) on investment securities.
 

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $26.0 million in the third quarter of 2015, a decline of $712,000 or 2.7% from the second quarter of 2015. The decrease in net interest income reflected a decrease in average interest-earning assets of $26.3 million, and a decrease in the net interest margin of 12 basis points to 4.14%. The decrease in average interest-earning assets during the third quarter of 2015 was primarily related to lower utilization rates of warehouse mortgage lines of credit that resulted in a $65.6 million decrease in average outstanding balances on these lines in comparison to the second quarter of 2015. The reduction in the net interest margin to 4.14% was mostly the result of a decrease in the yield on earning assets of 10 basis points. The Company received a special dividend from the San Francisco Federal Home Loan Bank during the second quarter of 2015 of approximately $500,000. This dividend had the impact of increasing the net interest margin by 8 basis points in the second quarter. Additionally, the yield on earning assets was negatively impacted as a result of an unfavorable asset mix arising from the $46.5 million decrease in average loans and a $20.3 million increase in average cash balances from the prior quarter.

Net interest income for the third quarter of 2015 increased $7.0 million or 37.0% compared to the third quarter of 2014. The increase was related to an increase in average interest-earning assets of $675 million, primarily related to our organic loan growth since the end of the third quarter of 2014 and our acquisition of Independence Bank during the first quarter of 2015. Our net interest margin remained unchanged from the prior year at 4.14%.

Provision for Loan Losses

A provision for loan losses was recorded for the current quarter in the amount of $1.1 million, as a result of growth in the loan portfolio from June 30, 2015 to September 30, 2015. Net loan charge-offs were $17,000 for the quarter.

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
     
Three Months Ended     Three Months Ended     Three Months Ended
September 30, 2015 June 30, 2015 September 30, 2014

Average
Balance

    Interest    

Average
Yield/
Cost

Average
Balance

    Interest    

Average
Yield/
Cost

Average
Balance

    Interest    

Average
Yield/
Cost

Assets (dollars in thousands)
 
Cash and investments $ 430,805 $ 1,812 1.68 % $ 410,605 $ 2,158 2.10 % $ 342,976 $ 1,484 1.73 %
Loans receivable, net (1) 2,064,768   27,288   5.24 % 2,111,253   27,581   5.24 % 1,477,896   19,550   5.25 %
Total interest-earning assets 2,495,573   29,100   4.63 % 2,521,858   29,739   4.73 % 1,820,872   21,034   4.59 %
 
Liabilities
Interest-bearing deposits 1,464,577 1,719 0.47 % 1,403,396 1,589 0.45 % 1,067,624 1,317 0.49 %
Borrowings 190,408   1,332   2.77 % 333,943   1,389   1.67 % 209,521   697   1.32 %
Total interest-bearing liabilities 1,654,985 3,051 0.73 % 1,737,339 2,978 0.69 % 1,277,145 2,014 0.63 %
Noninterest-bearing deposits 674,795 627,674 418,129
Net interest income $ 26,049   $ 26,761   $ 19,020  
Net interest margin (2) 4.14 % 4.26 % 4.14 %
 
(1) Average balance includes nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums, and allowance for loan losses.
(2) Represents net interest income divided by average interest-earning assets.
 

Noninterest income

Noninterest income for the third quarter of 2015 was $5.0 million, an increase of $313,000 or 6.6% from the second quarter of 2015. The increase from the second quarter of 2015 was primarily related to a $298,000 increase in loan servicing fees and a $298,000 increase in other income, partially offset by a $177,000 decrease in net gain from the sale of loans and a $101,000 decrease in net gain from the sales of investment securities.

Compared to the third quarter of 2014, noninterest income for the third quarter of 2015 increased $558,000 or 12.5%. The increase was primarily related to an increase in gain on the sale of loans of $769,000 and an increase in loan servicing fees of $475,000, partially offset by a $578,000 decrease in other income.

   
Three Months Ended
September 30,     June 30,     September 30,
2015 2015 2014
NONINTEREST INCOME (dollars in thousands)
Loan servicing fees $ 1,022 $ 724 $ 547
Deposit fees 629 634 412
Net gain from sales of loans 2,544 2,721 1,775
Net gain from sales of investment securities 38 139 363
Other income 792 494 1,370
Total noninterest income $ 5,025 $ 4,712 $ 4,467
 

Noninterest Expense

Noninterest expense totaled $17.4 million for the third quarter of 2015, an increase of $160,000 or 0.9%, compared with the second quarter of 2015. The increase was primarily related to the increase in non-recurring merger-related expenses of $400,000. Excluding the impact of non-recurring merger related expenses, non-interest expense decreased by approximately $240,000, as legal and professional expense decreased by $156,000.

In comparison to the third quarter of 2014, noninterest expense grew by $4.0 million or 30%. The increase in expense was primarily related to the additional costs from the personnel and branches retained from the acquisition of Independence Bank, combined with our continued investment in personnel to support our organic growth in loans and deposits.

   
Three Months Ended
September 30,     June 30,     September 30,
2015 2015 2014
NONINTEREST EXPENSE (dollars in thousands)
Compensation and benefits $ 9,418 $ 9,486 $ 7,490
Premises and occupancy 2,151 2,082 1,723
Data processing and communications 681 716 420
Other real estate owned operations, net 9 56 11
FDIC insurance premiums 355 363 257
Legal, audit and professional expense 505 661 625
Marketing expense 567 615 318
Office and postage expense 525 505 441
Loan expense 370 263 258
Deposit expense 917 982 747
Merger related expense 400
CDI amortization 344 344 254
Other expense 1,132 1,141 799
Total noninterest expense $ 17,374 $ 17,214 $ 13,343
 
   
Three Months Ended
September 30,     June 30,     September 30,
2015 2015 2014
Operating Metrics
Efficiency ratio (1) 53.55 % 53.66 % 56.57 %
Noninterest expense to average total assets 2.64 2.59 2.80
Full-time equivalent employees, at period end 331.5 328.5 259.5
                   
(1) Represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization and non-recurring merger related expense to the sum of net interest income before provision for loan losses and total noninterest income less gains/(loss) on sale of securities and other-than-temporary impairment recovery (loss) on investment securities.
 

Income Tax

For the third quarter of 2015, our effective tax rate was 38%, compared with 37% and 38.5% for the second quarter of 2015 and third quarter of 2014, respectively. The increase in the effective tax rate from the second quarter of 2015 was the result of the non-deductible merger related expenses incurred in the third quarter of 2015.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $2.17 billion at September 30, 2015, an increase of $49.3 million or 2.3% from June 30, 2015, and an increase of $620 million or 40.0% from September 30, 2014. The increase from June 30, 2015, was due to growth in franchise loans, construction lending, Small Business Administration ("SBA") loans, and commercial and industrial loans, which were partially offset by a decrease in utilization of warehouse facilities loans. The $620 million increase in loans from September 30, 2014, included $333 million in loans acquired from Independence Bank. The total end of period weighted average interest rate on loans, excluding fees and discounts, at September 30, 2015 was 4.90%, compared to 4.89% at June 30, 2015 and 4.93% at September 30, 2014.

Loan activity during the third quarter of 2015 included organic loan originations and purchases of $249 million. Originations of loan commitments of $236 million included franchise loan originations of $52.6 million, construction loan originations of $50.8 million, SBA loan originations of $48.5 million and commercial and industrial loan originations of $24.7 million. At September 30, 2015 our loan to deposit ratio was 101.3%, compared with 101.1% and 100.3% at June 30, 2015 and September 30, 2014, respectively.

   
Three Months Ended
September 30,     June 30,     September 30,
2015 2015 2014
LOAN ROLLFORWARD (dollars in thousands)
Loans originated and purchased $ 248,815 $ 283,676 $ 180,641
Repayments (127,475 ) (112,414 ) (55,670 )
Loans sold (28,039 ) (88,416 ) (25,070 )
Change in undisbursed (45,085 ) (95,519 ) (18,523 )
Change in allowance (1,045 ) (1,454 ) (1,034 )
Other 1,080   (154 ) (142 )
Increase (decrease) in loans, net $ 48,251   $ (14,281 ) $ 80,202  
 
           
September 30, June 30, September 30,
2015 2015 2014
Loan Portfolio (dollars in thousands)
Business loans:
Commercial and industrial $ 288,982 $ 284,873 $ 218,871
Franchise 295,965 257,582 163,887
Commercial owner occupied 302,556 294,545 215,938
SBA 70,191 50,306 20,482
Warehouse facilities 144,274 198,113 108,093
Real estate loans:
Commercial non-owner occupied 406,490 402,786 355,984
Multi-family 421,240 400,237 262,588
One-to-four family 78,781 84,283 125,326
Construction 141,293 124,448 67,118
Land 12,758 16,339 6,103
Other loans 5,017   4,811   3,521  
Total gross loans held for investment 2,167,547 2,118,323 1,547,911
Less:
Deferred loan origination costs/(fees) and premiums/(discounts) 309 237 93
Allowance for loan losses (16,145 ) (15,100 ) (10,767 )
Loans held for investment, net $ 2,151,711   $ 2,103,460   $ 1,537,237  
 

Asset Quality and Allowance for Loan Losses

Nonperforming assets totaled $4.8 million or 0.18% of total assets at September 30, 2015, a decrease from $5.1 million or 0.19% at June 30, 2015. During the third quarter of 2015, nonperforming loans decreased $287,000 to total $4.1 million and other real estate owned remained unchanged at $711,000.

At September 30, 2015, the allowance for loan losses was $16.1 million, an increase of $1.0 million from June 30, 2015. At September 30, 2015, our allowance for loan losses as a percent of nonaccrual loans was 394.26%, an increase from 344.59% at June 30, 2015. The increase in the allowance for loan losses at September 30, 2015 was mainly attributable to the growth in certain segments of the loan portfolio. At September 30, 2015, the ratio of allowance for loan losses to total gross loans was 0.74%, an increase from 0.71% at June 30, 2015 and 0.70% at September 30, 2014. Including the loan fair market value discounts recorded in connection with our acquisitions, the allowance for loan losses to total gross loans ratio was 0.93% at September 30, 2015, compared with 0.94% at June 30, 2015 and 0.85% at September 30, 2014.

           
September 30, June 30, September 30,
2015 2015 2014
Asset Quality (dollars in thousands)
Nonaccrual loans $ 4,095 $ 4,382 $ 1,782
Other real estate owned 711   711   752  
Nonperforming assets $ 4,806   $ 5,093   $ 2,534  
Allowance for loan losses 16,145 15,100 10,767
Allowance for loan losses as a percent of total nonperforming loans 394.26 % 344.59 % 604.21 %
Nonperforming loans as a percent of gross loans 0.19 0.21 0.12
Nonperforming assets as a percent of total assets 0.18 0.19 0.12
Net loan charge-offs for the quarter ended $ 17 $ 379 $ 250
Net loan charge-offs for quarter to average total loans, net % 0.07 % 0.07 %
Allowance for loan losses to gross loans 0.74 0.71 0.70
Delinquent Loans:
30 - 59 days $ 702 $ 943 $ 20
60 - 89 days 25 28 43
90+ days (4) 2,214   1,714   343  
Total delinquency $ 2,941   $ 2,685   $ 406  
Delinquency as a % of total gross loans 0.14 % 0.13 % 0.03 %
 

Investment Securities Available for Sale

Investment securities available for sale totaled $291.1 million at September 30, 2015, an increase of $10.7 million from June 30, 2015, and an increase of $8.9 million from September 30, 2014. The increase in the third quarter was primarily the result of purchases of $29.9 million, partially offset by sales/calls of $10.4 million and principal paydowns of $9.6 million. In general, the purchase of investment securities primarily resulted from our investing excess liquidity from our banking operations and proceeds from principal payments generated by the portfolio.

   
Estimated Fair Value
September 30,     June 30,     September 30,
2015 2015 2014
Investment securities available for sale: (dollars in thousands)
Municipal bonds $ 130,004 $ 120,431 $ 98,585
Mortgage-backed securities 161,143 160,003 183,617
Total securities available for sale $ 291,147 $ 280,434 $ 282,202
 

Deposits

At September 30, 2015, non-maturity deposits totaled $1.63 billion, an increase of $67.8 million, or 17.3% from June 30, 2015 on an annualized basis and $515.0 million or 46.0% from September 30, 2014. At September 30, 2015, deposits totaled $2.14 billion, up $43.2 million or 8.2% from June 30, 2015 on an annualized basis and $596 million or 38.6% from September 30, 2014. During the third quarter of 2015, deposit increases included $45.2 million of noninterest bearing deposits and $27.2 million in money market/savings deposits, offset by decreases of $18.8 million in retail certificate of deposits and $5.8 million in wholesale/brokered certificates of deposit. The increase in deposits since the end of the third quarter of 2014 was due to organic growth and the acquisition of Independence Bank, which added $336 million in deposits.

The weighted average cost of deposits for the three month period ending September 30, 2015 was 0.32% an increase from 0.31% for the second quarter of 2015 and a decrease from 0.35% for the third quarter of 2014.

           
September 30, June 30, September 30,
2015 2015 2014
Deposit Accounts (dollars in thousands)
Noninterest-bearing checking $ 680,937 $ 635,695 $ 425,166
Interest-bearing:
Checking 130,671 135,228 130,221
Money market 734,553 708,214 488,677
Savings 88,323 87,511 75,373
Retail certificates of deposit 383,481 402,262 369,534
Wholesale/brokered certificates of deposit 121,242   127,073   54,495  
Total interest-bearing 1,458,270   1,460,288   1,118,300  
Total deposits $ 2,139,207   $ 2,095,983   $ 1,543,466  
 
Deposit Mix (% of total deposits)
Noninterest-bearing deposits 31.83 % 30.33 % 27.55 %
Non-maturity deposits 76.41 % 74.75 % 72.53 %
 

Borrowings

At September 30, 2015, total borrowings amounted to $261.8 million, an increase of $24.1 million or 10.1% from June 30, 2015 and a decrease of $4.1 million from September 30, 2014. At September 30, 2015, total borrowings represented 9.6% of total assets, compared to 9.0% and 13.1%, as of June 30, 2015 and September 30, 2014, respectively.

           
September 30, 2015 June 30, 2015 September 30, 2014
Balance    

Weighted
Average
Rate

Balance    

Weighted
Average
Rate

Balance    

Weighted
Average
Rate

(dollars in thousands)
FHLB advances $ 144,000 0.38 % $ 118,000 0.44 % $ 150,000 0.29 %
Reverse repurchase agreements 47,483 1.97 % 49,389 1.91 % 45,561 2.09 %
Subordinated debentures 70,310   5.35 % 70,310   5.34 % 70,310   5.34 %
Total borrowings $ 261,793   2.00 % $ 237,699   2.20 % $ 265,871   1.93 %
 
Weighted average cost of

borrowings during the quarter

2.77 % 1.67 % 1.32 %
Borrowings as a percent of total assets 9.6 % 9.0 % 13.1 %
 

Capital Ratios

At September 30, 2015, our ratio of tangible common equity to total assets was 8.75%, with a tangible book value of $10.80 per share and a book value per share of $13.52.

At September 30, 2015, the Bank exceeded all regulatory capital requirements with a ratio for tier 1 leverage capital of 11.44%, common equity tier 1 risk-based capital of 12.54%, tier 1 risk-based capital of 12.54% and total risk-based capital of 13.25%. These capital ratios exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage capital, 6.5% for common equity tier 1 risk-based capital, 8.00% for tier 1 risk-based capital and 10.00% for total risk-based capital. At September 30, 2015, the Company had a ratio for tier 1 leverage capital of 9.50%, common equity tier 1 risk-based capital of 10.02%, tier 1 risk-based capital of 10.40% and total risk-based capital of 13.65%.

           
September 30, June 30, September 30,
  2015 2015 2014
Pacific Premier Bank Capital Ratios
Tier 1 leverage ratio (1) 11.44 % 10.95 % 11.48 %
Common equity tier 1 risk-based capital ratio (1) 12.54 % 12.39 % N/A
Tier 1 risk-based capital ratio (1) 12.54 % 12.39 % 12.77 %
Total risk-based capital ratio (1) 13.25 % 13.07 % 13.42 %
Pacific Premier Bancorp, Inc. Capital Ratios
Tier 1 leverage ratio (1) 9.50 % 8.97 % 9.50 %
Common equity tier 1 risk-based capital ratio (1) 10.02 % 9.81 % N/A
Tier 1 risk-based capital ratio (1) 10.40 % 10.12 % 10.53 %
Total risk-based capital ratio (1) 13.65 % 13.40 % 14.71 %
Tangible common equity ratio (2) 8.75 % 8.65 % 8.43 %
Share Data
Book value per share $ 13.52 $ 13.09 $ 11.59
Tangible book value per share (2) 10.80 10.36 9.90
Closing stock price 20.32 16.96 14.05
 

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 21, 2015 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 conference call. Additionally a telephone replay will be made available through October 29, 2015 at (877) 344-7529, conference ID 10074311.

Security California Bancorp Merger Announcement

On October 1, 2015 Pacific Premier Bancorp, Inc. announced that it had entered into a definitive agreement to acquire Security California Bancorp (OTCQB: SCAF) (“Security”), the holding company of Security Bank of California, a Riverside, California based state-chartered bank (“Security Bank”) with $733.6 million in total assets, $470.4 million in gross loans and $653.7 million in total deposits at August 31, 2015 (unaudited). Security Bank has six branches located in Riverside County, San Bernardino County and Orange County and a loan production office located in Los Angeles County. This transaction will strengthen Pacific Premier Bank’s competitive position as one of the premier commercial banks headquartered in Southern California.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. is the holding company for Pacific Premier Bank, one of the largest community banks headquartered in Southern California. Pacific Premier Bank is a business bank primarily focused on serving small and middle market business in the counties of Los Angeles, Orange, Riverside, San Bernardino and San Diego, California. Pacific Premier Bank offers a diverse range of lending products including commercial, commercial real estate, construction, residential warehouse and SBA loans, as well as specialty banking products for homeowners associations and franchise lending nationwide. Pacific Premier Bank serves its customers through its 16 full-service depository branches in Southern California located in the cities of Corona, Encinitas, Huntington Beach, Irvine, Los Alamitos, Newport Beach, Palm Desert, Palm Springs, Riverside, San Bernardino, San Diego, Seal Beach and Tustin.

FORWARD-LOOKING COMMENTS

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. 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; inflation, interest rate, market and monetary fluctuations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the impact of changes in financial services policies, laws and regulations (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) and of governmental efforts to restructure the U.S. financial regulatory system; technological changes; the effect of acquisitions that the Company may make, if any, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from its acquisitions; changes in the level of the Company’s nonperforming assets and charge-offs; any oversupply of inventory and deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; the effects of the Company’s lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; 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; unanticipated regulatory or judicial proceedings; and the Company’s 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 2014 Annual Report on Form 10-K of Pacific Premier Bancorp, Inc. filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Notice to Security California Bancorp and Pacific Premier Shareholders

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed acquisition of Security by the Company, a registration statement on Form S-4 will be filed with the SEC by the Company. The registration statement will contain a joint proxy statement/prospectus to be distributed to the shareholders of Security and the Company in connection with their vote on the acquisition. SHAREHOLDERS OF SECURITY AND THE COMPANY ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The final joint proxy statement/prospectus will be mailed to shareholders of Security and the Company. Investors and security holders will be able to obtain the documents free of charge at the SEC’s website, www.sec.gov. In addition, documents filed with the SEC by the Company will be available free of charge by (1) accessing the Company’s website at www.ppbi.com under the “Investor Relations” link and then under the heading “SEC Filings,” (2) writing the Company at 17901 Von Karman Avenue, Suite 1200, Irvine, CA 92614, Attention: Investor Relations or (3) writing Security at 3403 Tenth Street, Suite 830, Riverside, CA 92501, Attention: Corporate Secretary.

The directors, executive officers and certain other members of management and employees of the Company may be deemed to be participants in the solicitation of proxies in respect of the proposed acquisition. Information about the directors and executive officers of the Company is included in the proxy statement for its 2015 annual meeting of the Company shareholders, which was filed with the SEC on April 27, 2015. The directors, executive officers and certain other members of management and employees of Security may also be deemed to be participants in the solicitation of proxies in favor of the acquisition from the shareholders of Security. Information about the directors and executive officers of Security will be included in the joint proxy statement/prospectus for the acquisition. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed acquisition when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
 
    September 30,     June 30,     March 31,     December 31,     September 30,
ASSETS 2015 2015 2015 2014 2014
Cash and due from banks $ 102,235 $ 82,552 $ 178,096 $ 110,650 $ 103,356
Federal funds sold 526   525   275   275   275  
Cash and cash equivalents 102,761 83,077 178,371 110,925 103,631
Investment securities available for sale 291,147 280,434 280,461 201,638 282,202
FHLB and other stock, at cost 22,490 22,843 30,586 17,067 18,643
Loans held for investment 2,167,856 2,118,560 2,131,387 1,628,622 1,548,004
Allowance for loan losses (16,145 ) (15,100 ) (13,646 ) (12,200 ) (10,767 )
Loans held for investment, net 2,151,711 2,103,460 2,117,741 1,616,422 1,537,237
Accrued interest receivable 9,083 9,072 8,769 7,131 6,762
Other real estate owned 711 711 997 1,037 752
Premises and equipment 9,044 9,394 9,591 9,165 9,402
Deferred income taxes 13,059 12,305 12,815 9,383 10,721
Bank owned life insurance 38,953 38,665 38,377 26,822 26,642
Intangible assets 7,514 7,858 8,203 5,614 5,867
Goodwill 50,832 50,832 51,010 22,950 22,950
Other assets 17,993   18,105   16,079   10,743   9,439  
TOTAL ASSETS $ 2,715,298   $ 2,636,756   $ 2,753,000   $ 2,038,897   $ 2,034,248  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposit accounts:
Noninterest bearing checking $ 680,937 $ 635,695 $ 619,763 $ 456,754 $ 425,166
Interest-bearing:
Checking 130,671 135,228 130,869 131,635 130,221
Money market/savings 822,876 795,725 809,408 600,764 564,050
Retail certificates of deposit 383,481 402,262 406,649 365,168 369,534
Wholesale/brokered certificates of deposit 121,242   127,073   76,477   76,505   54,495  
Total interest-bearing 1,458,270   1,460,288   1,423,403   1,174,072   1,118,300  
Total deposits 2,139,207 2,095,983 2,043,166 1,630,826 1,543,466
FHLB advances and other borrowings 191,483 167,389 343,434 116,643 195,561
Subordinated debentures 70,310 70,310 70,310 70,310 70,310
Accrued expenses and other liabilities 23,531   21,481   22,843   21,526   27,054  
TOTAL LIABILITIES 2,424,531   2,355,163   2,479,753   1,839,305   1,836,391  
STOCKHOLDERS’ EQUITY:
Common stock 215 215 214 169 171
Additional paid-in capital 220,992 220,759 218,528 147,474 150,062
Retained earnings 68,881 61,044 53,220 51,431 47,540
Accumulated other comprehensive income (loss), net of tax (benefit) 679   (425 ) 1,285   518   84  
TOTAL STOCKHOLDERS’ EQUITY 290,767   281,593   273,247   199,592   197,857  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,715,298   $ 2,636,756   $ 2,753,000   $ 2,038,897   $ 2,034,248  
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
           
Three Months Ended Nine months ended
September 30,     June 30,     September 30, September 30,     September 30,
2015 2015 2014 2015   2014
INTEREST INCOME
Loans $ 27,288 $ 27,581 $ 19,550 $ 79,382 $ 54,057
Investment securities and other interest-earning assets 1,812 2,158 1,484 5,527 4,230
Total interest income 29,100 29,739 21,034 84,909 58,287
INTEREST EXPENSE
Deposits 1,719 1,589 1,317 4,914 3,589
FHLB advances and other borrowings 339 407 294 1,121 792
Subordinated debentures 993 982 403 2,946 553
Total interest expense 3,051 2,978 2,014 8,981 4,934
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 26,049 26,761 19,020 75,928 53,353
PROVISION FOR LOAN LOSSES 1,062 1,833 1,284 4,725 3,263
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,987 24,928 17,736 71,203 50,090
NONINTEREST INCOME
Loan servicing fees 1,022 724 547 2,647 1,685
Deposit fees 629 634 412 1,845 1,329
Net gain from sales of loans 2,544 2,721 1,775 5,265 3,621
Net gain from sales of investment securities 38 139 363 293 523
Other income 792 494 1,370 1,713 1,832
Total noninterest income 5,025 4,712 4,467 11,763 8,990
NONINTEREST EXPENSE
Compensation and benefits 9,418 9,486 7,490 28,426 20,866
Premises and occupancy 2,151 2,082 1,723 6,062 4,877
Data processing and communications 681 716 420 2,099 2,036
Other real estate owned operations, net 9 56 11 113 65
FDIC insurance premiums 355 363 257 1,032 760
Legal, audit and professional expense 505 661 625 1,687 1,603
Marketing expense 567 615 318 1,785 736
Office and postage expense 525 505 441 1,529 1,155
Loan expense 370 263 258 826 633
Deposit expense 917 982 747 2,704 2,255
Merger related expense 400 4,392 626
CDI amortization 344 344 254 1,002 761
Other expense 1,132 1,141 799 3,400 2,152
Total noninterest expense 17,374 17,214 13,343 55,057 38,525
NET INCOME BEFORE INCOME TAX 12,638 12,426 8,860 27,909 20,555
INCOME TAX 4,801 4,601 3,410 10,459 7,830
NET INCOME $ 7,837 $ 7,825 $ 5,450 $ 17,450 $ 12,725
EARNINGS PER SHARE
Basic $ 0.36 $ 0.36 $ 0.32 $ 0.83 $ 0.75
Diluted $ 0.36 $ 0.36 $ 0.31 $ 0.82 $ 0.73
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 21,510,678 21,493,641 17,069,216 21,037,345 17,078,945
Diluted 21,866,840 21,828,876 17,342,882 21,342,204 17,385,835
       

SELECTED FINANCIAL DATA

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
     
Three Months Ended     Three Months Ended     Three Months Ended
September 30, 2015 June 30, 2015 September 30, 2014

Average
Balance

    Interest    

Average
Yield/
Cost

Average
Balance

    Interest    

Average
Yield/
Cost

Average
Balance

    Interest    

Average
Yield/
Cost

Assets (dollars in thousands)
Interest-earning assets:
Cash and cash equivalents $ 123,656 $ 63 0.20 % $ 103,385 $ 62 0.24 % $ 70,009 $ 26 0.15 %
Federal funds sold 526 446 275
Investment securities 306,623 1,749 2.28 % 306,774 2,096 2.73 % 272,692 1,458 2.14 %
Loans receivable, net (1) 2,064,768   27,288   5.24 % 2,111,253   27,581   5.24 % 1,477,896   19,550   5.25 %
Total interest-earning assets 2,495,573 29,100 4.63 % 2,521,858 29,739 4.73 % 1,820,872 21,034 4.59 %
Noninterest-earning assets 141,128   140,446   88,656  
Total assets $ 2,636,701   $ 2,662,304   $ 1,909,528  
Liabilities and Equity
Interest-bearing deposits:
Interest checking $ 141,747 $ 40 0.11 % $ 147,620 $ 43 0.12 % $ 134,819 $ 40 0.12 %
Money market 708,365 616 0.35 % 695,935 604 0.35 % 477,111 381 0.32 %
Savings 91,455 37 0.16 % 87,706 35 0.16 % 74,790 27 0.14 %
Time 523,010   1,026   0.78 % 472,135   907   0.77 % 380,904   869   0.91 %
Total interest-bearing deposits 1,464,577 1,719 0.47 % 1,403,396 1,589 0.45 % 1,067,624 1,317 0.49 %
FHLB advances and other borrowings 120,098 339 1.12 % 263,633 407 0.62 % 177,689 294 0.66 %
Subordinated debentures 70,310   993   5.60 % 70,310   982   5.60 % 31,832   403   5.02 %
Total borrowings 190,408   1,332   2.77 % 333,943   1,389   1.67 % 209,521   697   1.32 %
Total interest-bearing liabilities 1,654,985 3,051 0.73 % 1,737,339 2,978 0.69 % 1,277,145 2,014 0.63 %
Noninterest-bearing deposits 674,795 627,674 418,129
Other liabilities 22,435   21,431   20,410  
Total liabilities 2,352,215 2,386,444 1,715,684
Stockholders' equity 284,486   275,860   193,844  
Total liabilities and equity $ 2,636,701   $ 2,662,304   $ 1,909,528  
Net interest income $ 26,049   $ 26,761   $ 19,020  
Net interest rate spread (2) 3.90 % 4.04 % 3.96 %
Net interest margin (3) 4.14 % 4.26 % 4.14 %
Ratio of interest-earning assets to interest-bearing liabilities 150.80 % 145.16 % 142.57 %
 
(1) Average balance includes nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums, and allowance for loan losses.
(2) Represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(3) Represents net interest income divided by average interest-earning assets.
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(dollars in thousands)
                   
September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
Loan Portfolio
Business loans:
Commercial and industrial $ 288,982 $ 284,873 $ 276,322 $ 228,979 $ 218,871
Franchise 295,965 257,582 216,544 199,228 163,887
Commercial owner occupied 302,556 294,545 279,703 210,995 215,938
SBA 70,191 50,306 49,855 28,404 20,482
Warehouse facilities 144,274 198,113 216,554 113,798 108,093
Real estate loans:
Commercial non-owner occupied 406,490 402,786 452,422 359,213 355,984
Multi-family 421,240 400,237 397,130 262,965 262,588
One-to-four family 78,781 84,283 116,735 122,795 125,326
Construction 141,293 124,448 111,704 89,682 67,118
Land 12,758 16,339 7,243 9,088 6,103
Other loans 5,017   4,811   6,641   3,298   3,521  
Total gross loans held for investment 2,167,547 2,118,323 2,130,853 1,628,445 1,547,911
Less:
Deferred loan origination costs/(fees) and premiums/(discounts) 309 237 534 177 93
Allowance for loan losses (16,145 ) (15,100 ) (13,646 ) (12,200 ) (10,767 )
Loans held for investment, net $ 2,151,711   $ 2,103,460   $ 2,117,741   $ 1,616,422   $ 1,537,237  
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(dollars in thousands)
                   
September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
Asset Quality
Nonaccrual loans $ 4,095 $ 4,382 $ 4,663 $ 1,444 $ 1,782
Other real estate owned 711   711   997   1,037   752  
Nonperforming assets $ 4,806   $ 5,093   $ 5,660   $ 2,481   $ 2,534  
Allowance for loan losses 16,145 15,100 13,646 12,200 10,767
Allowance for loan losses as a percent of total nonperforming loans 394.26 % 344.59 % 292.64 % 844.88 % 604.21 %
Nonperforming loans as a percent of gross loans 0.19 0.21 0.22 0.09 0.12
Nonperforming assets as a percent of total assets 0.18 0.19 0.21 0.12 0.12
Net loan charge-offs for the quarter ended $ 17 $ 379 $ 384 $ (12 ) $ 250
Net loan charge-offs for quarter to average total loans, net % 0.07 % 0.08 % % 0.07 %
Allowance for loan losses to gross loans 0.74 0.71 0.64 0.75 0.70
Delinquent Loans:
30 - 59 days $ 702 $ 943 $ 645 $ 20 $ 20
60 - 89 days 25 28 375 24 43
90+ days (4) 2,214   1,714   2,258   54   343  
Total delinquency $ 2,941   $ 2,685   $ 3,278   $ 98   $ 406  
Delinquency as a % of total gross loans 0.14 % 0.13 % 0.15 % 0.01 % 0.03 %
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
DEPOSIT COMPOSITION
(dollars in thousands)
                   
September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
Deposit Accounts
Noninterest-bearing checking $ 680,937 $ 635,695 $ 619,763 $ 456,754 $ 425,166
Interest-bearing:
Checking 130,671 135,228 130,869 131,635 130,221
Money market 734,553 708,214 720,510 526,256 488,677
Savings 88,323 87,511 88,898 74,508 75,373
Retail certificates of deposit 383,481 402,262 406,649 365,168 369,534
Wholesale/brokered certificates of deposit 121,242 127,073 76,477 76,505 54,495
Total interest-bearing 1,458,270 1,460,288 1,423,403 1,174,072 1,118,300
Total deposits $ 2,139,207 $ 2,095,983 $ 2,043,166 $ 1,630,826 $ 1,543,466
 

GAAP RECONCILIATIONS

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS
(dollars in thousands, except per share data)
 
GAAP Reconciliations            
 
For periods presented below, adjusted net income, adjusted diluted earnings per share and adjusted return on average assets are non-GAAP financial measures derived from GAAP-based amounts. We calculate these figures by excluding merger related expenses in the period results. Management believes that the exclusion of such items from these financial measures provides useful information to an understanding of the operating results of our core business. 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.
 
Three Months Ended
September 30, June 30, 2015 September 30,
2015 2015 2014
Net income $ 7,837 $ 7,825 $ 5,450
Plus merger related expenses, net of tax 400      
Adjusted net income $ 8,237   $ 7,825   $ 5,450  
Diluted earnings per share $ 0.36 $ 0.36 $ 0.31
Plus merger related expenses, net of tax 0.02      
Adjusted diluted earnings per share $ 0.38   $ 0.36   $ 0.31  
Return on average assets 1.19 % 1.18 % 1.14 %
Plus merger related expenses, net of tax 0.06      
Adjusted return on average assets 1.25 % 1.18 % 1.14 %
 
For periods presented below, return on average tangible common equity and adjusted return on average tangible common equity are non-GAAP financial measures derived from GAAP-based amounts. We calculate these figures by excluding merger related expenses and/or CDI amortization expense and exclude the average CDI and average goodwill from the average stockholders' equity during the period. Management believes that the exclusion of such items from these financial measures provides useful information to an understanding of the operating results of our core business. 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.
 
Three Months Ended
September 30, June 30, September 30,
2015 2015 2014
Net income $ 7,837 $ 7,825 $ 5,450
Plus tax effected CDI amortization 213   216   156  
Net income for average tangible common equity 8,050 8,041 5,606
Plus merger related expenses, net of tax 400      
Adjusted net income for average tangible common equity $ 8,450   $ 8,041   $ 5,606  
Average stockholders' equity $ 284,486 $ 275,860 $ 193,844
Less average CDI 7,686 8,080 5,994
Less average goodwill 50,832   50,965   22,950  
Average tangible common equity $ 225,968   $ 216,815   $ 164,900  
Return on average tangible common equity 14.25 % 14.84 % 13.60 %
Adjusted return on average tangible common equity 14.96 % 14.84 % 13.60 %
 
Tangible common equity to tangible assets (the "tangible common equity ratio") and tangible book value per share are non-GAAP financial measures derived from GAAP-based amounts. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. 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 believe that this information is consistent with the treatment by bank regulatory agencies, which exclude 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. 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 measures, this presentation may not be comparable to other similarly titled measures reported by other companies.
 
    September 30,     June 30,     March 31,     December 31,     September 30,
2015 2015 2015 2014 2014
Total stockholders' equity $ 290,767 $ 281,593 $ 273,247 $ 199,592 $ 197,857
Less intangible assets (58,346 ) (58,690 ) (59,213 ) (28,564 ) (28,817 )
Tangible common equity $ 232,421   $ 222,903   $ 214,034   $ 171,028   $ 169,040  
Book value per share $ 13.52 $ 13.09 $ 12.78 $ 11.81 $ 11.59
Less intangible book value per share (2.72 ) (2.73 ) (2.77 ) (1.69 ) (1.69 )
Tangible book value per share $ 10.80   $ 10.36   $ 10.01   $ 10.12   $ 9.90  
Total assets $ 2,715,298 $ 2,636,756 $ 2,753,000 $ 2,038,897 $ 2,034,248
Less intangible assets (58,346 ) (58,690 ) (59,213 ) (28,564 ) (28,817 )
Tangible assets $ 2,656,952   $ 2,578,066   $ 2,693,787   $ 2,010,333   $ 2,005,431  
Tangible common equity ratio 8.75 % 8.65 % 7.95 % 8.51 % 8.43 %
 

Contacts

Pacific Premier Bancorp, Inc.
Steve Gardner, 949-864-8000
President/CEO
or
E. Allen Nicholson, 949-864-8000
Executive Vice President/CFO

Release Summary

Pacific Premier Bancorp, Inc. Announces Third Quarter 2015 Results (Unaudited)

Contacts

Pacific Premier Bancorp, Inc.
Steve Gardner, 949-864-8000
President/CEO
or
E. Allen Nicholson, 949-864-8000
Executive Vice President/CFO