Pacific Premier Bancorp, Inc. Announces Third Quarter 2016 Results (Unaudited)

Third Quarter 2016 Summary

  • Diluted earnings per share of $0.33 and net income of $9.2 million
  • Total loan growth of $169 million, or 23% annualized
  • Non-performing assets to total assets of 0.17%
  • Non-maturity deposit growth of $176 million, or 30% annualized
  • Non-interest bearing deposits account for 37.9% of total deposits, highest in company history
  • Total revenues increase to $45 million, or 28% annualized
  • Core net interest margin of 4.18%
  • ROAA and ROATCE of 1.00% and 11.52%, respectively
  • Tangible book value per share increased $0.35 to $12.22
  • Efficiency ratio of 57%

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 2016 of $9.2 million, or $0.33 per diluted share, compared with net income of $10.4 million, or $0.37 per diluted share, for the second quarter of 2016 and net income of $7.8 million, or $0.36 per diluted share, for the third quarter of 2015.

For the three months ended September 30, 2016, the Company’s return on average assets was 1.00% and return on average tangible common equity was 11.52%. For the three months ended June 30, 2016, the Company's return on average assets was 1.17% and the return on average tangible common equity was 13.48%. For the three months ended September 30, 2015, the Company's return on average assets was 1.19% and its return on average tangible common equity was 14.25%.

Steve R. Gardner, Chairman and Chief Executive Officer of the Company, commented on the results, “We are disappointed with our level of earnings this quarter, as higher credit costs and non-recurring, non-interest expenses undermined the strong growth we had in both loans and deposits.

“Following the Security Bank acquisition, we continue to see improvement in our ability to attract new commercial customers. We generated $322 million in new loan commitments in the third quarter, a record level for the Bank. Our loan production is well diversified with strong growth generated in all of our major portfolios. The new client acquisition activity is also driving strong inflows of core deposits, with the largest increases coming in non-interest bearing deposits. We continue to execute very well on our efforts to build a highly diversified loan portfolio and a low cost deposit base.

“Our credit costs were elevated this quarter, which was primarily driven by a specific reserve of $2.0 million established for one commercial credit that deteriorated rapidly after several years of good performance. Aside from this one issue, we continue to see positive credit trends in the loan portfolio, as nonperforming assets to total assets was 17 basis points and delinquency as a percent of total loans was just 18 basis points.

“We recorded an aggregate of approximately $1.4 million of one-time costs to certain non-interest expense items in the third quarter related primarily to compensation, data processing and marketing expenses, which resulted in higher than expected non-interest expense. Excluding these items, our non-interest expense would have been in the $24 million to $25 million range, which is in line with our expected quarterly non-interest expense going forward for the foreseeable future. Our third quarter non-interest expense, excluding these one-time costs, reflects the full quarter impact of the additions we have made throughout the organization in 2016 to strengthen our infrastructure and upgrade personnel in key areas such as business development, finance and compliance.

“Following the investments we have made in 2016, we believe that we are well positioned to manage the continued growth of the Bank and that our business development capabilities are strong. As we continue to drive quality balance sheet growth, we believe we will see improved efficiencies and stronger profitability,” said Mr. Gardner.

FINANCIAL HIGHLIGHTS

      Three Months Ended
September 30,       June 30,       September 30,
2016 2016 2015
Financial Highlights (dollars in thousands, except per share data)
Net income $ 9,227 $ 10,369 $ 7,837
Diluted EPS $ 0.33 $ 0.37 $ 0.36
Return on average assets 1.00 % 1.17 % 1.19 %
Adjusted return on average assets (1)(2) 1.00 % 1.20 % 1.25 %
Adjusted net income (1)(2) $ 9,227 $ 10,676 $ 8,237
Return on average tangible common equity (2) 11.52 % 13.48 % 14.25 %
Adjusted return on average tangible common equity (1)(2) 11.52 % 13.86 % 14.96 %
Net interest margin 4.41 % 4.48 % 4.22 %
Cost of deposits 0.28 % 0.28 % 0.32 %
Efficiency ratio (3) 57.0 % 54.4 % 53.6 %
                         
(1) Adjusted to exclude merger related, 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 non-interest expense less other real estate owned operations, core deposit intangible amortization and non-recurring merger related to the sum of net interest income before provision for loan losses and total non-interest 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 $39.0 million in the third quarter of 2016, an increase of $1.4 million or 3.9% from the second quarter of 2016. The increase in net interest income reflected an increase in average interest-earning assets of $147 million, partially offset by a decrease in accretion income. The increase in average interest-earning assets during the third quarter of 2016 was primarily related to record organic loan originations and the purchase of $83 million of multi-family loans.

The decrease in the net interest margin from 4.48% to 4.41% was primarily due to the decrease in accretion income. Excluding the impact of accretion, the portfolio core net interest margin was 4.18% in the third quarter of 2016 compared to 4.19% in the second quarter of 2016, with accretion contributing 23 basis points in the third quarter of 2016 as compared to 29 basis points in the second quarter of 2016.

Net interest income for the third quarter of 2016 increased $12.3 million or 46.1% compared to the third quarter of 2015. The increase was related to an increase in average interest-earning assets of $1.0 billion, which resulted primarily from our organic loan growth since the end of the third quarter of 2015 and our acquisition of Security during the first quarter of 2016. Our net interest margin for the third quarter of 2016 increased 19 basis points to 4.41% from the prior year. The expansion of the net interest margin was driven by a 10 basis point increase in the yield on earning assets, and a 10 basis point decrease in cost of funds.

Net interest margin information is presented in the following table for the periods indicated.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
       
Three Months Ended     Three Months Ended     Three Months Ended
September 30, 2016 June 30, 2016 September 30, 2015

Average

Balance

    Interest    

Average

Yield/

Cost

Average

Balance

    Interest    

Average

Yield/

Cost

Average

Balance

    Interest    

Average

Yield/

Cost

Assets (dollars in thousands)
 
Cash and cash equivalents $ 201,140 $ 232 0.46 % $ 177,603 $ 189 0.43 % $ 124,182 $ 63 0.20 %
Investment securities 316,253 1,710 2.16 299,049 1,650 2.21 306,623 1,749 2.28
Loans receivable, net (1) 2,998,153   40,487   5.37   2,892,236   39,035   5.43   2,080,281   27,935   5.33  
Total interest-earning assets $ 3,515,546   $ 42,429   4.80 % $ 3,368,888   $ 40,874   4.88 % $ 2,511,086   $ 29,747   4.70 %
 
Liabilities
 
Interest-bearing deposits $ 1,921,741 $ 2,136 0.44 % $ 1,864,253 $ 2,010 0.43 % $ 1,464,577 $ 1,719 0.47 %
Borrowings 167,531   1,284   3.05   170,065   1,303   3.08   190,408   1,332   2.77  
Total interest-bearing liabilities $ 2,089,272   $ 3,420   0.65 % $ 2,034,318   $ 3,313   0.66 % $ 1,654,985   $ 3,051   0.73 %
Non-interest bearing deposits $ 1,134,318   $ 1,060,097   $ 674,795  
Net interest income $ 39,009   $ 37,561   $ 26,696  
Net interest margin (2) 4.41 % 4.48 % 4.22 %
 
(1) Average balance includes nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums.
(2) Represents net interest income divided by average interest-earning assets.
 

Provision for Loan Losses

A provision for loan losses was recorded for the current quarter in the amount of $4.0 million, compared with a provision for loan losses of $1.6 million in the quarter ending June 30, 2016. Specific reserves on two loans totaling $2.4 million were recorded in the current quarter with the remaining $1.6 million in provision primarily related to growth in the loan portfolio. Net loan charge-offs were $1.1 million for the third quarter.

Non-interest income

Non-interest income for the third quarter of 2016 was $6.0 million, an increase of $1.5 million or 34.1% from the second quarter of 2016. The increase from the second quarter of 2016 was primarily related to a $1.0 million increase in net gain from the sale of loans, as well as a $0.5 million increase in recoveries on previously charged-off, acquired loans. During the current quarter, $38.8 million in SBA loans and other loans were sold compared to $22.7 million in the prior quarter.

Compared to the third quarter of 2015, non-interest income for the third quarter of 2016 increased $1.6 million or 36.3%. The increase includes an increase of $0.6 million in net gain from sales of loans, a higher net gain from the sales of investment securities of $0.5 million, a $0.3 million increase in other income and a $0.2 million increase in deposit fees.

      Three Months Ended
September 30,       June 30,       September 30,
2016 2016 2015
NON-INTEREST INCOME (dollars in thousands)
Loan servicing fees $ 288 $ 257 $ 248
Deposit fees 829 817 629
Net gain from sales of loans 3,122 2,124 2,544
Net gain from sales of investment securities 512 532 38

Other-than-temporary impairment recovery/(loss) on investment securities

2
Other income 1,215   720   919
Total non-interest income $ 5,968   $ 4,450   $ 4,378
 

Non-interest Expense

Non-interest expense totaled $25.9 million for the third quarter of 2016, an increase of $2.2 million or 9.1%, compared with the second quarter of 2016. The increase was primarily driven by higher compensation costs, specifically incentive compensation including stock-based incentives, increased data processing costs, and higher marketing costs.

In comparison to the third quarter of 2015, non-interest expense grew by $8.5 million or 48.8%. The increase in expense was primarily related to the additional costs from the personnel and branches retained from the acquisition of Security, 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,
2016 2016 2015
NON-INTEREST EXPENSE (dollars in thousands)
Compensation and benefits $ 14,179 $ 13,098 $ 9,066
Premises and occupancy 2,633 2,559 2,120
Data processing and communications 1,223 887 681
Other real estate owned operations, net 5 (15 ) 9
FDIC insurance premiums 442 401 355
Legal, audit and professional expense 676 446 505
Marketing expense 1,591 775 567
Office and postage expense 612 573 525
Loan expense 534 540 370
Deposit expense 1,315 1,196 917
Merger related expense 497 400
CDI amortization 525 645 344
Other expense 2,125   2,093   1,515
Total non-interest expense $ 25,860   $ 23,695   $ 17,374
 
      Three Months Ended
September 30,       June 30,       September 30,
2016 2016 2015
Operating Metrics
Efficiency ratio (1) 57.0 % 54.4 % 53.6 %
Non-interest expense to average total assets (2) 2.74 % 2.59 % 2.58 %
Full-time equivalent employees, at period end 448 438 332
                         

(1) Represents the ratio of non-interest expense less other real estate owned operations, core deposit intangible amortization and non-recurring merger related to the sum of net interest income before provision for loan losses and total non-interest income less, gains/(loss) on sale of securities and other-than-temporary-impairment recovery/(loss) on investment securities.

(2) Adjusted to exclude CDI amortization.
 

Income Tax

For the third quarter of 2016, our effective tax rate was 38.9%, compared with 38.0% for the second quarter of 2016 and 38.0% for the third quarter of 2015. The increase from the second quarter reflects a true-up to the Company's anticipated full year tax rate of 39%.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $3.09 billion at September 30, 2016, an increase of $170 million or 5.8% from June 30, 2016, and an increase of $923 million or 42.6% from September 30, 2015. The increase from June 30, 2016, was primarily due to $322 million in organic loan originations and $85.4 million in loan purchases, partially offset by $173 million in principal payments and $38.8 million in loan sales. The total end of period weighted average interest rate on loans, excluding fees and discounts, at September 30, 2016 was 4.80%, compared to 4.84% at June 30, 2016 and 4.90% at September 30, 2015.

Loan activity during the third quarter of 2016 included organic loan originations of $322 million, including commercial real estate loans of $65.1 million, commercial and industrial loan originations of $64.1 million, construction loan originations of $52.9 million, franchise loan originations of $48.4 million and SBA loan originations of $43.2 million. At September 30, 2016, our loan to deposit ratio was 101.0%, compared with 99.6% and 101.3% at June 30, 2016 and September 30, 2015, respectively.

      Three Months Ended
September 30,       June 30,       September 30,
2016 2016 2015
LOAN ACTIVITY (dollars in thousands)
Loans originated $ 322,405 $ 298,742 $ 248,815
Loans purchased 85,395
Repayments (172,815 ) (190,026 ) (127,475 )
Loans sold (38,847 ) (22,746 ) (28,039 )
Change in undisbursed (31,915 ) (17,208 ) (45,085 )
Other 4,890   3,260   1,080  
Increase in total loans, gross 169,113   72,022   49,296  
Change in allowance (2,888 ) (500 ) (1,045 )
Increase in total loans, net $ 166,225   $ 71,522   $ 48,251  
 
                September 30,       June 30,       September 30,
2016 2016 2015
Loan Portfolio (dollars in thousands)
Business loans:
Commercial and industrial $ 537,809 $ 508,141 $ 288,982
Franchise 431,618 403,855 295,965
Commercial owner occupied 460,068 443,060 302,556
SBA 92,195 86,076 70,191
Warehouse facilities 144,274
Real estate loans:
Commercial non-owner occupied 527,412 526,362 406,490
Multi-family 689,813 613,573 421,240
One-to-four family 101,377 106,538 78,781
Construction 231,098 215,786 141,293
Land 18,472 18,341 12,758
Other loans 5,678   5,822   5,017  
Total Gross Loans 3,095,540 2,927,554 2,167,547
Less Loans held for sale, net 9,009     10,116      
Total gross loans held for investment 3,086,531 2,917,438 2,167,547
Less:
Deferred loan origination costs/(fees) and premiums/(discounts) 4,308 3,181 309
Allowance for loan losses (21,843 ) (18,955 ) (16,145 )
Loans held for investment, net $ 3,068,996   $ 2,901,664   $ 2,151,711  
 

Asset Quality and Allowance for Loan Losses

Non-performing assets totaled $6.4 million or 0.17% of total assets at September 30, 2016, an increase from $4.8 million or 0.13% of total assets at June 30, 2016. During the third quarter of 2016, non-performing loans increased $1.7 million to total $5.7 million primarily as a result of two loans, and other real estate owned remained unchanged at $0.7 million.

At September 30, 2016, the allowance for loan losses was $21.8 million, an increase of $2.9 million from June 30, 2016. Loan loss provision for the quarter was $4.0 million while net charge-offs were $1.1 million. The increase in the allowance for loan losses at September 30, 2016 was mainly attributable to $2.4 million of specific reserves for two credits and loan growth in certain segments of the loan portfolio.

At September 30, 2016, our allowance for loan losses as a percent of non-accrual loans was 381%, a decrease from 467% at June 30, 2016. The ratio of allowance for loan losses to total loans at September 30, 2016 was 0.70%, compared to 0.65% and 0.74% at June 30, 2016 and September 30, 2015. Including the loan fair market value discounts recorded in connection with our acquisitions, the allowance for loan losses to total gross loans ratio was 0.89% at September 30, 2016, compared with 0.89% at June 30, 2016 and 0.93% at September 30, 2015.

                September 30,       June 30,       September 30,
2016 2016 2015
Asset Quality (dollars in thousands)
Non-accrual loans $ 5,734 $ 4,062 $ 4,095
Other real estate owned 711   711   711  
Non-performing assets $ 6,445   $ 4,773   $ 4,806  
 
Allowance for loan losses $ 21,843 $ 18,955 $ 16,145
Allowance for loan losses as a percent of total non-performing loans 381 % 467 % 394 %
Non-performing loans as a percent of gross loans 0.18 % 0.14 % 0.19 %
Non-performing assets as a percent of total assets 0.17 % 0.13 % 0.18 %
Net loan charge-offs (recoveries) for the quarter ended $ 1,125 $ 1,089 $ 17
Net loan charge-offs for quarter to average total loans, net 0.04 % 0.04 % %
Allowance for loan losses to gross loans 0.70 % 0.65 % 0.74 %
Delinquent Loans:
30 - 59 days $ 1,042 $ 1,144 $ 702
60 - 89 days 1,990 2,487 25
90+ days 2,646   1,797   2,214  
Total delinquency $ 5,678   $ 5,428   $ 2,941  
Delinquency as a % of total gross loans 0.18 % 0.19 % 0.14 %
 

Investment Securities

Investment securities available for sale totaled $313 million at September 30, 2016, an increase of $67.7 million from June 30, 2016, and $22.1 million from September 30, 2015. The increase in the third quarter was primarily the result of $96.9 million in securities purchased, partially offset by $16.1 million in securities sold.

                Estimated Fair Value
September 30,       June 30,       September 30,
2016 2016 2015
Investment securities available for sale: (dollars in thousands)
Corporate $ 23,330 $ $
Municipal bonds 116,838 118,799 130,004
Collateralized mortgage obligation 33,866 22,844
Mortgage-backed securities 139,166   103,828   161,143
Total securities available for sale $ 313,200   $ 245,471   $ 291,147
 
Investments held to maturity $ 9,004 $ 9,390 $
 

Deposits

At September 30, 2016, deposits totaled $3.06 billion, an increase of $129 million or 4.4% from June 30, 2016 and $921 million or 43.0% from September 30, 2015. At September 30, 2016, non-maturity deposits totaled $2.49 billion, an increase of $176 million or 7.62% from June 30, 2016 and an increase of $853 million or 52.2% from September 30, 2015. During the third quarter of 2016, deposit increases included $117 million in non-interest bearing deposits and $57.6 million in money market/savings deposits, partially offset by decreases of $36.6 million in retail certificate deposits and $10.7 million in wholesale/brokered certificates of deposits. The increase in non-maturity deposits was primarily due to commercial relationship deposit increases and, to a lesser extent, higher homeowner's association ("HOA") deposits. Due to the increase in lower cost non-maturity deposits, certain retail and wholesale/brokered deposits were allowed to mature.

The weighted average cost of deposits for the three month periods ending September 30, 2016 and June 30, 2016 was 0.28%, compared to 0.32% for the three month period ending September 30, 2015.

                September 30,       June 30,       September 30,
2016 2016 2015
Deposit Accounts (dollars in thousands)
Non-interest bearing checking $ 1,160,394 $ 1,043,361 $ 680,937
Interest-bearing:
Checking 170,057 168,669 130,671
Money market/Savings 1,157,086 1,099,445 822,876
Retail certificates of deposit 384,083 420,673 383,481
Wholesale/brokered certificates of deposit 188,132   198,853   121,242  
Total interest-bearing 1,899,358   1,887,640   1,458,270  

Total deposits

$ 3,059,752   $ 2,931,001   $ 2,139,207  
 
Deposit Mix (% of total deposits)
Non-interest bearing deposits 37.9 % 35.6 % 31.8 %
Non-maturity deposits 81.3 % 78.9 % 76.4 %
 

Borrowings

At September 30, 2016, total borrowings amounted to $206 million, an increase of $15.0 million or 7.9% from June 30, 2016 and a decrease of $56.2 million from September 30, 2015. At September 30, 2016, total borrowings represented 5.48% of total assets, compared to 5.30% and 9.60%, as of June 30, 2016 and September 30, 2015, respectively.

      September 30, 2016     June 30, 2016     September 30, 2015
Balance     Weighted

Average Rate

Balance     Weighted

Average Rate

Balance     Weighted

Average Rate

(dollars in thousands)
FHLB advances $ 90,000 0.38 % $ 75,000 0.59 % $ 144,000 0.38 %
Reverse repurchase agreements 46,247 2.01 % 45,252 2.07 % 47,483 1.97 %
Subordinated debentures 69,353   5.35 % 70,310   5.35 % 70,310   5.35 %
Total borrowings $ 205,600   2.44 % $ 190,562   2.65 % $ 261,793   2.00 %
 
Weighted average cost of

borrowings during the quarter

3.05 % 3.08 % 2.77 %
Borrowings as a percent of total assets 5.48 % 5.30 % 9.60 %
 

Capital Ratios

At September 30, 2016, our ratio of tangible common equity to total assets was 9.28%, with book value per share of $16.27 and tangible book value of $12.22 per share.

At September 30, 2016, the Bank exceeded all regulatory capital requirements with a ratio for tier 1 leverage capital of 11.03%, common equity tier 1 risk-based capital of 12.07%, tier 1 risk-based capital of 12.07% and total risk-based capital of 12.77%. 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, 2016, the Company had a ratio for tier 1 leverage capital of 9.80%, common equity tier 1 risk-based capital of 10.42%, tier 1 risk-based capital of 10.72% and total risk-based capital of 13.21%.

                September 30,       June 30,       September 30,
2016 2016 2015
Capital Ratios
Pacific Premier Bank
Tier 1 leverage ratio 11.03 % 11.17 % 11.44 %
Common equity tier 1 risk-based capital ratio 12.07 % 12.32 % 12.54 %
Tier 1 risk-based capital ratio 12.07 % 12.32 % 12.54 %
Total risk-based capital ratio 12.77 % 12.94 % 13.25 %
Pacific Premier Bancorp, Inc.
Tier 1 leverage ratio 9.80 % 9.88 % 9.50 %
Common equity tier 1 risk-based capital ratio 10.42 % 10.58 % 10.02 %
Tier 1 risk-based capital ratio 10.72 % 10.90 % 10.40 %
Total risk-based capital ratio 13.21 % 13.45 % 13.65 %
Tangible common equity ratio 9.28 % 9.41 % 8.75 %
 
Share Data
Book value per share $ 16.27 $ 15.94 $ 13.52
Tangible book value per share $ 12.22 $ 11.87 $ 10.80
Closing stock price $ 26.46 $ 24.00 $ 20.32
Outstanding shares at period end 27,656,533 27,650,533 21,510,678
 

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 19, 2016 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 26, 2016 at 877-344-7529, conference ID 10094248.

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 businesses 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, 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, Murrieta, Newport Beach, Orange, Palm Desert, Palm Springs, Redlands, Riverside, San Bernardino, and San Diego.

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 2015 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.

 
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 2016 2016 2016 2015 2015
Cash and due from banks $ 18,557 $ 15,444 $ 18,624 $ 14,935 $ 102,235
Interest-bearing deposits with financial institutions 85,347   169,855   174,890     63,482   526  
Cash and cash equivalents 103,904 185,299 193,514 78,417 102,761
Interest-bearing time deposits with financial institutions 3,944 3,944 3,944 1,972
Investments held to maturity, at amortized cost 8,900 9,292 9,590 9,642
Investment securities available for sale, at fair value 313,200 245,471 269,711 280,273 291,147
FHLB, FRB and other stock, at cost 29,966 26,984 27,103 22,292 22,490
Loans held for sale, at lower of cost or fair value 9,009 10,116 7,281 8,565
Loans held for investment 3,090,839 2,920,619 2,851,432 2,254,315 2,167,856
Allowance for loan losses (21,843 ) (18,955 ) (18,455 )   (17,317 ) (16,145 )
Loans held for investment, net 3,068,996 2,901,664 2,832,977 2,236,998 2,151,711
Accrued interest receivable 11,642 12,143 11,862 9,315 9,083
Other real estate owned 711 711 1,161 1,161 711
Premises and equipment 11,314 11,014 11,963 9,248 9,044
Deferred income taxes, net 20,001 16,552 17,000 11,511 13,059
Bank owned life insurance 40,116 39,824 39,535 39,245 38,953
Intangible assets 9,976 10,500 11,145 7,170 7,514
Goodwill 101,939 101,939 101,939 50,832 50,832
Other assets 21,213   23,200   24,360     24,005   17,993  
TOTAL ASSETS $ 3,754,831   $ 3,598,653   $ 3,563,085   $ 2,790,646   $ 2,715,298  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposit accounts:
Non-interest-bearing checking $ 1,160,394 $ 1,043,361 $ 1,064,457 $ 711,771 $ 680,937
Interest-bearing:
Checking 170,057 168,669 160,707 134,999 130,671
Money market/savings 1,157,086 1,099,445 1,096,334 827,378 822,876
Retail certificates of deposit 384,083 420,673 455,637 365,911 383,481
Wholesale/brokered certificates of deposit 188,132   198,853   129,129   155,064   121,242  
Total interest-bearing 1,899,358   1,887,640   1,841,807   1,483,352   1,458,270  
Total deposits 3,059,752 2,931,001 2,906,264 2,195,123 2,139,207
FHLB advances and other borrowings 136,213 120,252 124,956 196,125 191,483
Subordinated debentures 69,353 70,310 70,310 70,310 70,310
Accrued expenses and other liabilities 39,548   36,460   32,661   30,108   23,531  
TOTAL LIABILITIES 3,304,866   3,158,023   3,134,191   2,491,666   2,424,531  
STOCKHOLDERS’ EQUITY:
Preferred stock
Common stock 273 273 273 215 215
Additional paid-in capital 343,233 342,388 341,660 221,487 220,992
Retained earnings 105,096 95,869 85,500 76,946 68,881
Accumulated other comprehensive income, net of tax 1,363   2,100   1,461     332   679  
TOTAL STOCKHOLDERS’ EQUITY 449,965   440,630   428,894     298,980   290,767  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,754,831   $ 3,598,653   $ 3,563,085   $ 2,790,646   $ 2,715,298  
 
 
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,
2016 2016 2015 2016 2015
INTEREST INCOME
Loans $ 40,487 $ 39,035 $ 27,935 $ 114,929 $ 80,917
Investment securities and other interest-earning assets 1,942   1,839   1,812   5,879   5,527

Total interest income

42,429   40,874   29,747   120,808   86,444
INTEREST EXPENSE
Deposits 2,136 2,010 1,719 6,215 4,914
FHLB advances and other borrowings 314 324 339 963 1,121
Subordinated debentures 970   979   993   2,859   2,946
Total interest expense 3,420   3,313   3,051   10,037   8,981
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 39,009 37,561 26,696 110,771 77,463
PROVISION FOR LOAN LOSSES 4,013   1,589   1,062   6,722   4,725
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 34,996   35,972   25,634   104,049   72,738
NON-INTEREST INCOME
Loan servicing fees 288 257 248 769 156
Deposit fees 829 817 629 2,488 1,845
Net gain from sales of loans 3,122 2,124 2,544 7,152 5,265
Net gain from sales of investment securities 512 532 38 1,797 293
Other-than-temporary-impairment recovery/(loss) on investment securities 2 (205 )
Other income 1,215   720   919   3,279   2,669
Total non-interest income 5,968   4,450   4,378   15,280   10,228
NON-INTEREST EXPENSE
Compensation and benefits 14,179 13,098 9,066 39,017 27,439
Premises and occupancy 2,633 2,559 2,120 7,550 5,980
Data processing and communications 1,223 887 681 3,021 2,099
Other real estate owned operations, net 5 (15 ) 9 (2 ) 113
FDIC insurance premiums 442 401 355 1,225 1,032
Legal, audit and professional expense 676 446 505 1,987 1,687
Marketing expense 1,591 775 567 2,996 1,785
Office and postage expense 612 573 525 1,666 1,529
Loan expense 534 540 370 1,477 826
Deposit expense 1,315 1,196 917 3,530 2,704
Merger related expense 497 400 3,616 4,392
CDI amortization 525 645 344 1,514 1,002
Other expense 2,125   2,093   1,515   5,603   4,469
Total non-interest expense 25,860   23,695   17,374   73,200   55,057
NET INCOME BEFORE INCOME TAX 15,104 16,727 12,638 46,129 27,909
INCOME TAX 5,877   6,358   4,801   17,977   10,459
NET INCOME $ 9,227   $ 10,369   $ 7,837   $ 28,152   $ 17,450
EARNINGS PER SHARE
Basic $ 0.34 $ 0.38 $ 0.36 $ 1.05 $ 0.83
Diluted $ 0.33 $ 0.37 $ 0.36 $ 1.03 $ 0.82
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 27,387,123 27,378,930 21,510,678 26,776,140 21,037,345
Diluted 27,925,351 27,845,490 21,866,840 27,245,108 21,342,204
 
 

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, 2016 June 30, 2016 September 30, 2015

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 $ 201,140 $ 232 0.46 % $ 177,603 $ 189 0.43 % $ 124,182 $ 63 0.20 %
Investment securities 316,253 1,710 2.16 299,049 1,650 2.21 306,623 1,749 2.28
Loans receivable, net (1) 2,998,153   40,487   5.37   2,892,236   39,035   5.43   2,080,281   27,935   5.33  
Total interest-earning assets 3,515,546 42,429 4.80 % 3,368,888 40,874 4.88 % 2,511,086 29,747 4.70 %
Non-interest-earning assets 186,778   190,838   125,615  
Total assets $ 3,702,324   $ 3,559,726   $ 2,636,701  
Liabilities and Equity
Interest-bearing deposits:
Interest checking $ 185,344 $ 53 0.11 % $ 178,258 $ 50 0.11 % $ 141,747 $ 40 0.11 %
Money market 1,036,350 923 0.35 980,806 896 0.37 708,365 616 0.35
Savings 98,496 38 0.15 98,419 38 0.16 91,455 37 0.16
Time 601,551   1,122   0.74   606,770   1,026   0.68   523,010   1,026   0.78  
Total interest-bearing deposits 1,921,741 2,136 0.44 % 1,864,253 2,010 0.43 % 1,464,577 1,719 0.47 %
FHLB advances and other borrowings 97,547 314 1.28 99,755 324 1.31 120,098 339 1.12
Subordinated debentures 69,984   970   5.54   70,310   979   5.57   70,310   993   5.65  
Total borrowings 167,531   1,284   3.05 % 170,065   1,303   3.08 % 190,408   1,332   2.77 %
Total interest-bearing liabilities 2,089,272 3,420 0.65 % 2,034,318 3,313 0.66 % 1,654,985 3,051 0.73 %
Non-interest-bearing deposits 1,134,318 1,060,097 674,795
Other liabilities 35,019   32,969   22,435  
Total liabilities 3,258,609 3,127,384 2,352,215
Stockholders' equity 443,715   432,342   284,486  
Total liabilities and equity $ 3,702,324     $ 3,559,726     $ 2,636,701    
Net interest income $ 39,009   $ 37,561   $ 26,696  
Net interest margin (2) 4.41 % 4.48 % 4.22 %
Ratio of interest-earning assets to interest-bearing liabilities 168.27 % 165.60 % 151.73 %
 
(1) Average balance includes nonperforming loans and is net of deferred loan origination fees, unamortized discounts and premiums.
(2) 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,
2016 2016 2016 2015 2015
Loan Portfolio
Business loans:
Commercial and industrial $ 537,809 $ 508,141 $ 491,112 $ 309,741 $ 288,982
Franchise 431,618 403,855 371,875 328,925 295,965
Commercial owner occupied 460,068 443,060 424,289 294,726 302,556
SBA 92,195 86,076 78,350 62,256 70,191
Warehouse facilities 1,394 143,200 144,274
Real estate loans:
Commercial non-owner occupied 527,412 526,362 522,080 421,583 406,490
Multi-family 689,813 613,573 619,485 429,003 421,240
One-to-four family 101,377 106,538 106,854 80,050 78,781
Construction 231,098 215,786 218,069 169,748 141,293
Land 18,472 18,341 18,222 18,340 12,758
Other loans 5,678   5,822   6,045   5,111   5,017  
Total gross loans 3,095,540 2,927,554 2,857,775 2,262,683 2,167,547
Less loans held for sale, net 9,009   10,116   7,281   8,565    
Total gross loans held for investment 3,086,531 2,917,438 2,850,494 2,254,118 2,167,547
Plus (less):
Deferred loan origination costs and premiums, net 4,308 3,181 938 197 309
Allowance for loan losses (21,843 ) (18,955 ) (18,455 ) (17,317 ) (16,145 )
Loans held for investment, net $ 3,068,996   $ 2,901,664   $ 2,832,977   $ 2,236,998   $ 2,151,711  
 
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(dollars in thousands)
                     
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Asset Quality
Nonaccrual loans $ 5,734 $ 4,062 $ 4,823 $ 3,970 $ 4,095
Other real estate owned 711   711   1,161   1,161   711  
Nonperforming assets $ 6,445   $ 4,773   $ 5,984   $ 5,131   $ 4,806  
 
Allowance for loan losses $ 21,843 $ 18,955 $ 18,455 $ 17,317 $ 16,145
Allowance for loan losses as a percent of total nonperforming loans 381 % 467 % 383 % 436 % 394 %
Nonperforming loans as a percent of gross loans 0.18 % 0.14 % 0.17 % 0.18 % 0.19 %
Nonperforming assets as a percent of total assets 0.17 % 0.13 % 0.17 % 0.18 % 0.18 %
Net loan charge-offs for the quarter ended $ 1,125 $ 1,089 $ (18 ) $ 528 $ 17
Net loan charge-offs for quarter to average total loans, net 0.04 % 0.04 % % 0.02 % %
Allowance for loan losses to gross loans 0.70 % 0.65 % 0.65 % 0.77 % 0.74 %
Delinquent Loans:
30 - 59 days $ 1,042 $ 1,144 $ 247 $ 323 $ 702
60 - 89 days 1,990 2,487 355 25
90+ days 2,646   1,797   3,199   1,954   2,214  
Total delinquency $ 5,678   $ 5,428   $ 3,446   $ 2,632   $ 2,941  
Delinquency as a % of total gross loans 0.18 % 0.19 % 0.12 % 0.12 % 0.14 %
 
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
DEPOSIT COMPOSITION
(dollars in thousands)
                     
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Deposit Accounts
Non-interest bearing checking $ 1,160,394 $ 1,043,361 $ 1,064,457 $ 711,771 $ 680,937
Interest-bearing:
Checking 170,057 168,669 160,707 134,999 130,671
Money market/savings 1,157,086 1,099,445 1,096,334 827,378 822,876
Retail certificates of deposit 384,083 420,673 455,637 365,911 383,481
Wholesale/brokered certificates of deposit 188,132   198,853   129,129   155,064   121,242  
Total interest-bearing 1,899,358   1,887,640   1,841,807   1,483,352   1,458,270  
Total deposits $ 3,059,752   $ 2,931,001   $ 2,906,264   $ 2,195,123   $ 2,139,207  
 
Deposit Mix (% of total deposits)
Non-interest bearing deposits 37.9 % 35.6 % 36.6 % 32.4 % 31.8 %
Non-maturity deposits 81.3 % 78.9 % 79.9 % 76.3 % 76.4 %
 
 

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, September 30,
2016 2016 2015
Net income $ 9,227 $ 10,369 $ 7,837
Plus merger related expenses, net of tax 497 400
Less merger related expenses tax adjustment   (190 )  
Adjusted net income $ 9,227   $ 10,676   $ 8,237  
Diluted earnings per share $ 0.33 $ 0.37 $ 0.36
Plus merger related expenses, net of tax   0.01   0.02  
Adjusted diluted earnings per share $ 0.33   $ 0.38   $ 0.38  
Return on average assets 1.00 % 1.17 % 1.19 %
Plus merger related expenses, net of tax % 0.03 % 0.06 %
Adjusted return on average assets 1.00 % 1.20 % 1.25 %
 
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,
2016 2016 2015
Net income $ 9,227 $ 10,369 $ 7,837
Plus tax effected CDI amortization 525 645 344
Less CDI amortization expense tax adjustment (204 ) (245 ) (131 )
Net income for average tangible common equity $ 9,548 $ 10,769 $ 8,050
Plus merger related expenses, net of tax 497 400
Less merger related expenses tax adjustment   (190 )  
Adjusted net income for average tangible common equity $ 9,548   $ 11,076   $ 8,450  
Average stockholders' equity $ 443,715 $ 432,342 $ 284,486
Less average CDI 10,318 10,876 7,686
Less average goodwill 101,939   101,923   50,832  
Average tangible common equity $ 331,458   $ 319,543   $ 225,968  
Return on average tangible common equity 11.52 % 13.48 % 14.25 %
Adjusted return on average tangible common equity 11.52 % 13.86 % 14.96 %
 
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,
2016 2016 2016 2015 2015
Total stockholders' equity $ 449,965 $ 440,630 $ 428,894 $ 298,980 $ 290,767
Less intangible assets (111,915 ) (112,439 ) (113,230 ) (58,002 ) (58,346 )
Tangible common equity $ 338,050   $ 328,191   $ 315,664   $ 240,978   $ 232,421  
Book value per share $ 16.27 $ 15.94 $ 15.58 $ 13.86 $ 13.52
Less intangible book value per share (4.05 ) (4.07 ) (4.12 ) (2.69 ) (2.72 )
Tangible book value per share $ 12.22   $ 11.87   $ 11.46   $ 11.17   $ 10.80  
Total assets $ 3,754,831 $ 3,598,653 $ 3,563,085 $ 2,790,646 $ 2,715,298
Less intangible assets (111,915 ) (112,439 ) (113,230 ) (58,002 ) (58,346 )
Tangible assets $ 3,642,916   $ 3,486,214   $ 3,449,855   $ 2,732,644   $ 2,656,952  
Tangible common equity ratio 9.28 % 9.41 % 9.15 % 8.82 % 8.75 %
 

Contacts

Pacific Premier Bancorp, Inc.
Steve R. Gardner
Chairman & Chief Executive Officer
949-864-8000
or
Ronald J. Nicolas, Jr.
Senior Executive Vice President & CFO
949-864-8000

Release Summary

Pacific Premier Bancorp, Inc. Announces Third Quarter 2016 Results (Unaudited)

Contacts

Pacific Premier Bancorp, Inc.
Steve R. Gardner
Chairman & Chief Executive Officer
949-864-8000
or
Ronald J. Nicolas, Jr.
Senior Executive Vice President & CFO
949-864-8000