Pacific Premier Bancorp, Inc. Announces First Quarter 2020 Results (Unaudited) and a Quarterly Cash Dividend of $0.25 Per Share

First Quarter 2020 Summary

  • Net income of $25.7 million, or $0.43 per diluted share
  • Return on average assets of 0.89%, return on average equity of 5.05% and return on average tangible common equity of 9.96%
  • Net interest margin of 4.24% and core net interest margin of 4.08%
  • Non-maturity deposit growth of $169.9 million, or 9% annualized
  • Noninterest bearing deposits represent 43% of total deposits and non-maturity deposits represent 88% of total deposits
  • Nonperforming assets represent 0.18% of total assets
  • Adopted new Current Expected Credit Losses (“CECL”) accounting standard effective January 1, 2020, resulting in a cumulative effect adjustment to the allowance for credit losses (“ACL”) of $64.0 million
  • ACL to total loans held for investment at 1.32% at March 31, 2020 compared to 0.41% at December 31, 2019
  • Loans held for investment include fair value discount of $35.9 million, or 0.41%, as of March 31, 2020
  • Announced acquisition of Opus Bank on February 3, 2020, targeting June 1st effective date

IRVINE, Calif.--()--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $25.7 million, or $0.43 per diluted share for the first quarter of 2020, compared with net income of $41.1 million, or $0.69 per diluted share, for the fourth quarter of 2019 and net income of $38.7 million, or $0.62 per diluted share, for the first quarter of 2019. Financial results for the first quarter of 2020 include a current period provision for credit losses of $25.5 million under the CECL model from forecasting expected future losses related to the coronavirus pandemic (“COVID-19”) economic disruption.

For the three months ended March 31, 2020, the Company’s return on average assets (“ROAA”) was 0.89%, return on average equity (“ROAE”) was 5.05% and return on average tangible common equity (“ROATCE”) was 9.96%, compared to 1.42%, 8.20% and 15.89%, respectively, for the fourth quarter of 2019 and 1.34%, 7.78% and 15.45%, respectively, for the first quarter of 2019. Total assets were $12.0 billion at March 31, 2020 compared with $11.8 billion at December 31, 2019 and $11.6 billion at March 31, 2019. A reconciliation of the non–U.S. GAAP measure of ROATCE to the U.S. GAAP measure of common stockholders' equity is set forth at the end of this press release.

Steven R. Gardner, Chairman, President and Chief Executive Officer of the Company, commented, “I am incredibly proud of the way our organization has responded to the challenges presented by the COVID-19 pandemic. Understanding the urgent nature of this crisis, our team was able to quickly execute on multiple initiatives designed to adjust our operations to protect the health and safety of our employees and clients. Currently, we have 737 employees, 74% of our workforce, who are able to work remotely without impacting our productivity while continuing to provide a superior level of customer service.

“Since the beginning of the crisis, we have been in close contact with our clients, assessing the level of impact on their businesses, and putting a process in place to evaluate each client’s specific situation and provide relief programs where appropriate. We were able to quickly establish our process for participating in the Small Business Administration’s Paycheck Protection Program (“PPP”) that enabled our clients to utilize this valuable resource. Our team was able to process initially 2,090 PPP loans for approximately $809 million in the first round of the program, which has allowed us to further strengthen and deepen our client relationships, while positively impacting thousands of individuals.

“We have continued to steadily move forward on the completion of our acquisition of Opus Bank, which we believe will further strengthen the Pacific Premier franchise and create long-term value for the shareholders of the combined institution. We received regulatory approvals earlier this month and are targeting a June 1, 2020 effective closing date, subject to the receipt of Opus Bank and Pacific Premier shareholder approval and the satisfaction of other customary closing conditions.

“Our disciplined risk management framework and long standing credit culture has prepared us well to navigate the current crisis. We are well positioned from capital, liquidity and earnings standpoints to support our clients and communities throughout the duration of this crisis. This overall strength supports our Board's decision to declare a $0.25 per share dividend and to continue to deliver value for our shareholders,” said Mr. Gardner.

Mr. Gardner concluded, “Although we are pleased with our first quarter results and our institution’s response to the COVID-19 pandemic, as we look forward the level of uncertainty is significant. The path to reopening our economy, and the speed with which reopening will lead to increased hiring and economic activity and the resultant risks are uncertain. In this environment, we believe that it is prudent to prepare for and operate the institution with the expectation that we are entering a potentially deep recession, the duration of which is unknowable and the level and magnitude of the economic recovery is equally uncertain. We all hope for a quick and strong recovery, but as effective risk managers, the level of uncertainty will inform our decision making in the short-term. We believe this approach will position us to further enhance franchise value over the medium and long-term and will position us well to capitalize on opportunities as they arise.”

FINANCIAL HIGHLIGHTS

 

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Financial Highlights

 

(Dollars in thousands, except per share data)

Net income

 

$

 

25,740

 

 

$

 

41,098

 

 

$

 

38,718

 

Diluted earnings per share

 

 

0.43

 

 

 

0.69

 

 

 

0.62

 

Return on average assets

 

 

0.89

%

 

 

1.42

%

 

 

1.34

%

Return on average equity

 

 

5.05

 

 

 

8.20

 

 

 

7.78

 

Return on average tangible common equity (1)

 

 

9.96

 

 

 

15.89

 

 

 

15.45

 

Net interest margin

 

 

4.24

 

 

 

4.33

 

 

 

4.37

 

Core net interest margin (1)

 

 

4.08

 

 

 

4.10

 

 

 

4.21

 

Cost of deposits

 

 

0.48

 

 

 

0.58

 

 

 

0.63

 

Efficiency ratio (2)

 

 

52.6

 

 

 

51.9

 

 

 

49.3

 

Total assets

 

$

 

11,976,209

 

 

$

 

11,776,012

 

 

$

 

11,580,495

 

Total deposits

 

 

9,093,072

 

 

 

8,898,509

 

 

 

8,715,175

 

Non-maturity deposits as a percent of total deposits

 

 

88

%

 

 

88

%

 

 

82

%

Book value per share

 

$

 

33.40

 

 

$

 

33.82

 

 

$

 

31.97

 

Tangible book value per share (1)

 

 

18.60

 

 

 

18.84

 

 

 

17.56

 

Total risk-based capital ratio

 

 

14.23

%

 

 

13.81

%

 

 

12.58

%

_____________________

(1) A reconciliation of the non-U.S. GAAP measures of average tangible common equity, core net interest margin and tangible book value per share to the U.S. GAAP measures of common stockholders' equity and book value are set forth at the end of this press release.
(2) Represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization and merger-related expense to the sum of net interest income before provision for credit losses and total noninterest income, less gains/(loss) on sale of securities, gain/(loss) from other real estate owned and gain/(loss) from debt extinguishment.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $109.2 million in the first quarter of 2020, a decrease of $3.7 million, or 3.3%, from the fourth quarter of 2019. The decrease in net interest income reflected lower average loan balances and yields, lower accretion income and one less day of interest, partially offset by lower cost of funds driven by higher average balances of noninterest bearing deposits, lower rates paid on deposits and lower average balances of retail and brokered certificates of deposit.

The net interest margin for the first quarter of 2020 was 4.24%, compared with 4.33% in the prior quarter. The decrease was primarily driven by lower accretion income of $4.1 million compared to $5.8 million in the prior quarter. Our core net interest margin, which excludes the impact of accretion, decreased two basis points to 4.08%, compared to 4.10% in the prior quarter, primarily attributable to lower loan yields, partially offset by lower cost of funds.

Net interest income for the first quarter of 2020 decreased $2.2 million, or 2.0%, compared to the first quarter of 2019. The decrease was primarily attributable to lower loan yields and a $221.9 million decrease in average loan balances, partially offset by lower cost of funds.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

 

 

 

 

 

Three Months Ended

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

 

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Assets

 

(Dollars in thousands)

Cash and cash equivalents

 

$

 

215,746

 

 

$

 

216

 

 

0.40

%

 

$

 

201,161

 

 

$

 

283

 

 

0.56

%

 

$

 

173,613

 

 

$

 

378

 

 

0.88

%

Investment securities

 

 

1,502,572

 

 

 

10,308

 

 

2.74

 

 

 

1,445,158

 

 

 

10,210

 

 

2.83

 

 

 

1,298,476

 

 

 

9,389

 

 

2.89

 

Loans receivable, net (1) (2)

 

 

8,645,252

 

 

 

113,265

 

 

5.27

 

 

 

8,700,690

 

 

 

119,353

 

 

5.44

 

 

 

8,867,159

 

 

 

121,476

 

 

5.56

 

Total interest-earning assets

 

$

 

10,363,570

 

 

$

 

123,789

 

 

4.80

 

 

$

 

10,347,009

 

 

$

 

129,846

 

 

4.98

 

 

$

 

10,339,248

 

 

$

 

131,243

 

 

5.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

 

4,956,839

 

 

$

 

10,487

 

 

0.85

 

 

$

 

5,216,658

 

 

$

 

13,144

 

 

1.00

 

 

$

 

5,073,723

 

 

$

 

13,284

 

 

1.06

 

Borrowings

 

 

552,741

 

 

 

4,127

 

 

3.00

 

 

 

368,583

 

 

 

3,783

 

 

4.07

 

 

 

880,671

 

 

 

6,553

 

 

3.02

 

Total interest-bearing liabilities

 

$

 

5,509,580

 

 

$

 

14,614

 

 

1.07

 

 

$

 

5,585,241

 

 

$

 

16,927

 

 

1.20

 

 

$

 

5,954,394

 

 

$

 

19,837

 

 

1.35

 

Noninterest-bearing deposits

 

$

 

3,898,399

 

 

 

 

 

 

$

 

3,814,809

 

 

 

 

 

 

$

 

3,480,791

 

 

 

 

 

Net interest income

 

 

 

$

 

109,175

 

 

 

 

 

 

$

 

112,919

 

 

 

 

 

 

$

 

111,406

 

 

 

Net interest margin (3)

 

 

 

 

 

4.24

 

 

 

 

 

 

4.33

 

 

 

 

 

 

4.37

 

Cost of deposits

 

 

 

 

 

0.48

 

 

 

 

 

 

0.58

 

 

 

 

 

 

0.63

 

Cost of funds (4)

 

 

 

 

 

0.62

 

 

 

 

 

 

0.71

 

 

 

 

 

 

0.85

 

Ratio of interest-earning assets to interest-bearing liabilities

 

188.10

 

 

 

 

 

 

185.26

 

 

 

 

 

 

173.64

 

_____________________

(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums.
(2) Interest income includes net discount accretion of $4.1 million, $5.8 million and $3.8 million, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

Provision for Credit Losses

Provision for credit losses for the first quarter of 2020 was $25.5 million, an increase of $23.2 million from the fourth quarter of 2019 and an increase of $23.9 million from the first quarter of 2019. The increase included $25.4 million provision for loan losses and $72,000 provision for unfunded commitments, both of which were based on expected credit losses rather than incurred losses and reflect unfavorable changes in economic forecasts employed in the model related to the COVID-19 pandemic. The provision for unfunded commitments in the first quarter of 2020 was $72,000, compared with a reduction of $666,000 in the fourth quarter of 2019 and $486,000 in the first quarter of 2019.

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Provision for Credit Losses

 

(Dollars in thousands)

Provision for loan losses

 

$

 

25,382

 

 

$

 

3,016

 

 

$

 

2,012

 

Provision for unfunded commitments

 

 

72

 

 

 

(666

)

 

 

(486

)

Provision for sold loans

 

 

 

 

(53

)

 

 

Total provision for credit losses

 

$

 

25,454

 

 

$

 

2,297

 

 

$

 

1,526

 

Noninterest Income

Noninterest income for the first quarter of 2020 was $14.5 million, an increase of $4.7 million, or 47.7%, from the fourth quarter of 2019. The increase was primarily due to a $4.1 million increase in net gain from sales of investment securities, $472,000 increase in earnings on bank owned life insurance (“BOLI”) primarily due to a death benefit, and a $1.0 million increase in other income primarily due to a $355,000 increase in Community Reinvestment Act (“CRA”) related equity investments income and a $398,000 decrease in cost on debt extinguishment, partially offset by a $927,000 decrease in net gain from the sales of loans.

During the first quarter of 2020, the Bank sold $15.9 million of Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans for a net gain of $1.2 million, compared with the sales of $23.7 million of SBA loans for a net gain of $2.1 million during the prior quarter. The current quarter also included the sales of $23.0 million of other loans for a net loss of $404,000 compared with sales of $8.4 million of other loans for a net loss of $418,000 during the prior quarter.

Noninterest income for the first quarter of 2020 increased $6.8 million, or 88.5%, compared to the first quarter of 2019. The increase was primarily related to a $7.3 million increase in net gain from sales of investment securities, a $426,000 increase in earnings on BOLI primarily due to a death benefit, a $385,000 increase in service charges on deposit accounts, as well as a $294,000 increase in other income, partially offset by a $958,000 decrease in net gain from the sales of loans and a $723,000 decrease in debit card interchange fee income, primarily the result of the Bank becoming a non-exempt institution, effective July 1, 2019, under the Durbin Amendment that regulates debit card interchange fee income, due to the Bank exceeding $10 billion in total assets.

The decrease in net gain from sales of loans for the first quarter of 2020 compared to the same period last year was primarily due to the realization of a $404,000 loss on the sales of other loans in the first quarter of 2020 compared with a loss of $11,000 in the first quarter of 2019, and lower net gain from sales of SBA/USDA loans in the first quarter of 2020 compared to the first quarter of 2019. The Bank sold $25.5 million of SBA loans for a net gain of $1.7 million during the first quarter of 2019.

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Noninterest Income

 

(Dollars in thousands)

Loan servicing fees

 

$

 

480

 

 

$

 

487

 

 

$

 

398

 

Service charges on deposit accounts

 

 

1,715

 

 

 

1,558

 

 

 

1,330

 

Other service fee income

 

 

311

 

 

 

359

 

 

 

356

 

Debit card interchange fee income

 

 

348

 

 

 

367

 

 

 

1,071

 

Earnings on BOLI

 

 

1,336

 

 

 

864

 

 

 

910

 

Net gain from sales of loans

 

 

771

 

 

 

1,698

 

 

 

1,729

 

Net gain from sales of investment securities

 

 

7,760

 

 

 

3,671

 

 

 

427

 

Other income

 

 

1,754

 

 

 

797

 

 

 

1,460

 

Total noninterest income

 

$

 

14,475

 

 

$

 

9,801

 

 

$

 

7,681

 

Noninterest Expense

Noninterest expense totaled $66.6 million for the first quarter of 2020, an increase of $415,000, or 0.6%, compared to the fourth quarter of 2019. The increase was driven by merger-related expense of $1.7 million for the first quarter of 2020 relating to the pending Opus Bank acquisition. Excluding merger-related expense, noninterest expense totaled $64.9 million, a decrease of $1.3 million, or 2.0%, compared to the fourth quarter of 2019. The decrease was driven primarily by a $2.0 million decrease in compensation as a result of lower incentive expense, partially offset by higher payroll taxes. Other contributing decreases included a $301,000 decrease in marketing expense, a $282,000 decrease in CDI amortization and a $242,000 decrease in loan expense. The decreases were partially offset by a $1.1 million increase in FDIC insurance premiums due to small institution assessment credits in the prior quarter and a $451,000 increase in deposit expense attributable largely to higher deposit balances.

Noninterest expense increased by $3.1 million, or 4.8%, compared to the first quarter of 2019. The increase was primarily due to increased merger-related expense related to the pending Opus Bank acquisition, a $1.4 million increase in deposit expense from higher deposit balances, and our continued investment to support our organic growth.

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Noninterest Expense

 

(Dollars in thousands)

Compensation and benefits

 

$

34,376

 

 

$

36,409

 

 

$

33,388

 

Premises and occupancy

 

8,168

 

 

8,113

 

 

7,535

 

Data processing

 

3,253

 

 

3,241

 

 

2,930

 

Other real estate owned operations, net

 

14

 

 

31

 

 

3

 

FDIC insurance premiums

 

367

 

 

(766

)

 

800

 

Legal, audit and professional expense

 

3,126

 

 

3,268

 

 

2,998

 

Marketing expense

 

1,412

 

 

1,713

 

 

1,497

 

Office, telecommunications and postage expense

 

1,103

 

 

1,105

 

 

1,210

 

Loan expense

 

822

 

 

1,064

 

 

873

 

Deposit expense

 

4,988

 

 

4,537

 

 

3,583

 

Merger-related expense

 

1,724

 

 

 

 

655

 

CDI amortization

 

3,965

 

 

4,247

 

 

4,436

 

Other expense

 

3,313

 

 

3,254

 

 

3,669

 

Total noninterest expense

 

$

66,631

 

 

$

66,216

 

 

$

63,577

 

Income Tax

For the first quarter of 2020, our effective tax rate was 18.5%, compared with 24.2% for the fourth quarter of 2019 and 28.3% for the first quarter of 2019. The decrease in the effective tax rate from the prior quarters was due to tax benefits of $2.6 million associated with net operating loss carryback related to our acquisition of Grandpoint Capital, Inc. in 2018 as a result of Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that was signed into law on March 27, 2020 in response to the outbreak of COVID-19.

BALANCE SHEET HIGHLIGHTS

Effective January 1, 2020, the Company adopted the new CECL accounting standard, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, as well as off-balance sheet credit exposures. The Company adopted CECL using the modified retrospective transition approach and recorded a net decrease of $45.6 million to the beginning balance of retained earnings as of January 1, 2020 for the cumulative effect adjustment, reflecting an initial adjustment to the allowance for credit losses of $64.0 million, including the reserve for unfunded commitments, net of related deferred tax assets arising from temporary differences of $18.3 million, commonly referred to as the “Day 1” adjustment. The Day 1 adjustment to the allowance for credit losses is reflective of expected lifetime credit losses associated with the composition of financial assets within in the scope of the CECL accounting standard as of January 1, 2020, which is substantially comprised of loans held for investment and off-balance sheet credit exposures at January 1, 2020, as well as management’s current expectation of future economic conditions. Management did not have any qualitative adjustments as of January 1, 2020.

The Company has developed an expected credit loss estimation model. Depending on the nature of each identified pool of financial assets with similar risk characteristics, the Company employs the use of a probability of default (“PD”) and loss given default (“LGD”) discounted cash flow methodology for commercial real estate and commercial loans, and a historical loss-rate methodology for retail loans, in order to estimate expected future credit losses. Additionally, the Company’s model incorporates reasonable and supportable economic forecasts into the estimate of expected credit losses. The Day 1 adjustment was comprised of $55.7 million for loans held for investment and $8.3 million for off-balance sheet commitments for a total of $64.0 million.

The Company’s assessment of held-to-maturity and available-for-sale investment securities as of January 1, 2020 indicated an ACL was not required. The Company determined the likelihood of default on held-to-maturity investment securities was remote, and the amount of expected non-repayment on those investments was zero. The Company also analyzed available-for-sale investment securities that were in an unrealized loss position as of January 1, 2020 and determined the decline in fair value for those securities was not related to credit, but rather related to changes in interest rates and general market conditions.

The following table presents the impact of the adoption of the CECL model on the Company’s consolidated financial statements as of January 1, 2020, the date the Company adopted the standard:

 

January 1, 2020

 

Pre-CECL
Adoption

 

Impact of
CECL
Adoption

 

As Reported
Under CECL

 

(Dollars in thousands)

Assets:

 

 

 

 

 

Allowance for credit losses on debt securities:

 

 

 

 

 

Held-to-maturity

$

 

 

 

$

 

 

 

$

 

 

Available-for-sale

 

 

 

 

 

Allowance for credit losses on loans:

 

 

 

 

 

Investor loans secured by real estate

 

9,027

 

 

 

16,072

 

 

 

25,099

 

Business loans secured by real estate

 

5,492

 

 

 

27,572

 

 

 

33,064

 

Commercial loans

 

20,118

 

 

 

9,519

 

 

 

29,637

 

Retail loans

 

1,061

 

 

 

2,523

 

 

 

3,584

 

Deferred tax (liabilities) assets

 

(1,371

)

 

 

18,345

 

 

 

16,974

 

Liabilities:

 

 

 

 

 

Allowance for credit losses on off-balance sheet credit exposures

$

 

3,279

 

 

$

 

8,285

 

 

$

 

11,564

 

Stockholders' equity:

 

 

 

 

 

Retained earnings

$

 

396,051

 

 

$

 

(45,625

)

 

$

 

350,426

 

Loans

Loans held for investment totaled $8.75 billion at March 31, 2020, an increase of $32.6 million, or 0.4%, from December 31, 2019, and a decrease of $111.0 million, or 1.3%, from March 31, 2019. The increase from the end of the prior quarter was primarily driven by lower loan prepayments and payoffs, and higher line utilization in the first quarter of 2020 when compared to the prior quarter, partially offset by lower new loan commitments and fundings, and higher loan sales. Business line utilization rates increased from 44.3% at the end of the fourth quarter of 2019 to 50.6% at the end of the first quarter of 2020. Loan sales during the first quarter of 2020 included $15.9 million of SBA/USDA loans and $23.0 million of other loans, compared with $23.7 million of SBA/USDA loans and $8.4 million of other loans sold in the fourth quarter of 2019. The decrease compared to the first quarter of 2019 was impacted by lower loan commitments and fundings, higher loan prepayments and payoffs and higher loan sales.

During the first quarter of 2020, the Bank generated $443.7 million of new loan commitments and $353.9 million of new loan fundings, compared with $556.3 million in new loan commitments and $419.9 million in new loan fundings for the fourth quarter of 2019, and $549.7 million in new loan commitments and $391.8 million in new loan fundings for the first quarter of 2019.

At March 31, 2020, the ratio of loans held for investment to total deposits was 96.3%, compared with 98.0% and 101.7% at December 31, 2019 and March 31, 2019, respectively.

The following table presents the composition of the loan portfolio as of the dates indicated:

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

 

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

Commercial real estate (“CRE”) non-owner-occupied

 

$

 

2,040,198

 

 

$

 

2,070,141

 

 

$

 

2,121,999

 

Multifamily

 

 

1,625,682

 

 

 

1,575,726

 

 

 

1,511,329

 

Construction and land

 

 

377,525

 

 

 

438,786

 

 

 

582,428

 

SBA secured by real estate (1)

 

 

61,665

 

 

 

68,431

 

 

 

70,416

 

Total investor loans secured by real estate

 

 

4,105,070

 

 

 

4,153,084

 

 

 

4,286,172

 

Business loans secured by real estate (2)

 

 

 

 

 

 

CRE owner-occupied

 

 

1,887,632

 

 

 

1,846,554

 

 

 

1,813,914

 

Franchise real estate secured

 

 

371,428

 

 

 

353,240

 

 

 

317,477

 

SBA secured by real estate (3)

 

 

83,640

 

 

 

88,381

 

 

 

97,508

 

Total business loans secured by real estate

 

 

2,342,700

 

 

 

2,288,175

 

 

 

2,228,899

 

Commercial loans (4)

 

 

 

 

 

 

Commercial and industrial

 

 

1,458,969

 

 

 

1,393,270

 

 

 

1,470,410

 

Franchise non-real estate secured

 

 

547,793

 

 

 

564,357

 

 

 

496,220

 

SBA non-real estate secured

 

 

16,265

 

 

 

17,426

 

 

 

18,987

 

Total commercial loans

 

 

2,023,027

 

 

 

1,975,053

 

 

 

1,985,617

 

Retail loans

 

 

 

 

 

 

Single family residential (5)

 

 

237,180

 

 

 

255,024

 

 

 

279,761

 

Consumer

 

 

46,892

 

 

 

50,975

 

 

 

85,406

 

Total retail loans

 

 

284,072

 

 

 

305,999

 

 

 

365,167

 

Gross loans held for investment (6)

 

 

8,754,869

 

 

 

8,722,311

 

 

 

8,865,855

 

Allowance for credit losses for loans held for investment (7)

 

 

(115,422

)

 

 

(35,698

)

 

 

(37,856

)

Loans held for investment, net

 

$

 

8,639,447

 

 

$

 

8,686,613

 

 

$

 

8,827,999

 

 

 

 

 

 

 

 

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

 

$

 

111

 

 

$

 

1,672

 

 

$

 

11,671

 

_____________________

(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.
(6) Includes unaccreted fair value net purchase discounts of $35.9 million, $40.7 million and $57.2 million as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.
(7) The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. The allowance for credit losses at March 31, 2020 is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.

The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at March 31, 2020 was 4.76%, compared to 4.91% at December 31, 2019 and 5.13% at March 31, 2019. The quarter-over-quarter and year-over-year decreases reflect the impact of lower rates on new originations as well as the repricing of loans as a result of the Federal Reserve Bank's interest rate decreases.

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

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

 

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

CRE non-owner-occupied

 

$

 

111,980

 

 

$

 

94,791

 

 

$

 

117,417

 

Multifamily

 

 

39,831

 

 

 

69,653

 

 

 

30,009

 

Construction and land

 

 

26,525

 

 

 

53,166

 

 

 

79,234

 

SBA secured by real estate (1)

 

 

2,131

 

 

 

1,635

 

 

 

27,038

 

Total investor loans secured by real estate

 

 

180,467

 

 

 

219,245

 

 

 

253,698

 

Business loans secured by real estate (2)

 

 

 

 

 

 

CRE owner-occupied

 

 

115,774

 

 

 

117,022

 

 

 

55,179

 

Franchise real estate secured

 

 

21,577

 

 

 

12,257

 

 

 

15,394

 

SBA secured by real estate (3)

 

 

7,119

 

 

 

5,935

 

 

 

11,645

 

Total business loans secured by real estate

 

 

144,470

 

 

 

135,214

 

 

 

82,218

 

Commercial loans (4)

 

 

 

 

 

 

Commercial and industrial

 

 

97,381

 

 

 

145,092

 

 

 

124,957

 

Franchise non-real estate secured

 

 

12,414

 

 

 

44,185

 

 

 

70,962

 

SBA non-real estate secured

 

 

1,263

 

 

 

2,629

 

 

 

1,792

 

Total commercial loans

 

 

111,058

 

 

 

191,906

 

 

 

197,711

 

Retail loans

 

 

 

 

 

 

Single family residential (5)

 

 

6,052

 

 

 

8,457

 

 

 

14,690

 

Consumer

 

 

1,635

 

 

 

1,439

 

 

 

1,345

 

Total retail loans

 

 

7,687

 

 

 

9,896

 

 

 

16,035

 

Total loan commitments

 

$

 

443,682

 

 

$

 

556,261

 

 

$

 

549,662

 

_____________________

(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.

The weighted average interest rate on new loan production was 4.59% in the first quarter of 2020 compared with 4.77% in the fourth quarter of 2019 and 5.67% in the first quarter of 2019.

Asset Quality and Allowance for Credit Losses

At March 31, 2020, our allowance for credit losses on loans was $115.4 million, an increase of $79.7 million, or 223.3%, from December 31, 2019 and an increase of $77.6 million, or 204.9%, from March 31, 2019, reflecting the cumulative-effect Day 1 adjustment of $55.7 million for funded loans and $8.3 million for off-balance sheet commitments that were recorded against the opening balance of retained earnings and deferred tax assets to adopt the CECL accounting standard, as well as credit loss expense recorded under the CECL model for the first quarter of 2020. The provision for credit losses on loans for the first quarter of 2020 was $25.4 million, compared to $3.0 million and $2.0 million, for the fourth quarter of 2019 and the first quarter of 2019, respectively. The increase was a result of the expected credit losses model as compared to the former incurred loss model and reflected unfavorable changes in economic forecasts employed in the model related to the COVID-19 pandemic.

During the first quarter of 2020, the Company incurred $1.3 million of net charge-offs, compared to $2.3 million and $228,000 during the fourth quarter of 2019 and the first quarter of 2019, respectively.

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

 

For the Three Months Ended March 31, 2020

 

Beginning
ACL
Balance

 

Adoption
of ASC 326

 

Charge-offs

 

Recoveries

 

Provision
for Loan
Losses

 

Ending
ACL
Balance

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

$

 

1,899

 

 

$

 

8,423

 

 

$

 

(387

)

 

$

 

 

 

$

 

5,961

 

 

$

 

15,896

 

Multifamily

 

729

 

 

 

9,174

 

 

 

 

 

 

 

4,819

 

 

 

14,722

 

Construction and land

 

4,484

 

 

 

(124

)

 

 

 

 

 

 

4,862

 

 

 

9,222

 

SBA secured by real estate (1)

 

1,915

 

 

 

(1,401

)

 

 

 

 

 

 

421

 

 

 

935

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

2,781

 

 

 

20,166

 

 

 

 

 

12

 

 

 

3,834

 

 

 

26,793

 

Franchise real estate secured

 

592

 

 

 

5,199

 

 

 

 

 

 

 

1,712

 

 

 

7,503

 

SBA secured by real estate (3)

 

2,119

 

 

 

2,207

 

 

 

(315

)

 

 

71

 

 

 

(38

)

 

 

4,044

 

Commercial loans (4)

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

13,857

 

 

 

87

 

 

 

(490

)

 

 

5

 

 

 

2,283

 

 

 

15,742

 

Franchise non-real estate secured

 

5,816

 

 

 

9,214

 

 

 

 

 

 

 

1,586

 

 

 

16,616

 

SBA non-real estate secured

 

445

 

 

 

218

 

 

 

(236

)

 

 

4

 

 

 

85

 

 

 

516

 

Retail loans

 

 

 

 

 

 

 

 

 

 

 

Single family residential (5)

 

655

 

 

 

541

 

 

 

 

 

 

 

(59

)

 

 

1,137

 

Consumer loans

 

406

 

 

 

1,982

 

 

 

(8

)

 

 

 

 

(84

)

 

 

2,296

 

Totals

$

 

35,698

 

 

$

 

55,686

 

 

$

 

(1,436

)

 

$

 

92

 

 

$

 

25,382

 

 

$

 

115,422

 

_____________________

(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.

The ratio of allowance for credit losses to loans held for investment at March 31, 2020 amounted to 1.32%, compared to 0.41% and 0.43%, at December 31, 2019 and March 31, 2019, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value net discount on loans acquired through total bank acquisitions was $35.9 million, or 0.41% of total loans held for investment as of March 31, 2020, compared to $40.7 million, or 0.47% of total loans held for investment as of December 31, 2019, and $57.2 million, or 0.65% of total loans held for investment as of March 31, 2019.

Nonperforming assets totaled $21.1 million, or 0.18% of total assets, at March 31, 2020, an increase of $12.1 million from December 31, 2019 and an increase of $8.0 million from March 31, 2019. During the first quarter of 2020, nonperforming loans increased $12.1 million to $20.6 million and other real estate owned remained unchanged at $441,000. Total loan delinquencies were $28.9 million, or 0.33% of loans held for investment, at March 31, 2020, compared to $19.1 million, or 0.22% of loans held for investment, at December 31, 2019, and $15.7 million, or 0.18% of loans held for investment, at March 31, 2019. Nonperforming assets, nonperforming loans and delinquencies of 90 days or more were all negatively impacted in the first quarter by one, $9.1 million franchise credit relationship.

Interest is not typically accrued on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. There were no loans 90 days or more past due and still accruing interest at March 31, 2020. Troubled debt restructured loans totaled $2.3 million at March 31, 2020, $3.0 million at December 31, 2019 and none at March 31, 2019.

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Asset Quality

 

(Dollars in thousands)

Nonperforming loans

 

$

20,610

 

 

$

8,527

 

 

$

12,843

 

Other real estate owned

 

441

 

 

441

 

 

180

 

Other assets owned

 

 

 

 

 

13

 

Nonperforming assets

 

$

21,051

 

 

$

8,968

 

 

$

13,036

 

 

 

 

 

 

 

 

Allowance for credit losses

 

$

115,422

 

 

$

35,698

 

 

$

37,856

 

Allowance for credit losses as a percent of total nonperforming loans

 

560

%

 

419

%

 

295

%

Nonperforming loans as a percent of loans held for investment

 

0.24

 

 

0.10

 

 

0.14

 

Nonperforming assets as a percent of total assets

 

0.18

 

 

0.08

 

 

0.11

 

Net loan charge-offs/(recoveries) for the quarter ended

 

$

1,344

 

 

$

2,318

 

 

$

228

 

Net loan charge-offs for quarter to average total loans (1)

 

0.02

%

 

0.03

%

 

%

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

 

1.32

 

 

0.41

 

 

0.43

 

Delinquent Loans

 

 

 

 

 

 

30 - 59 days

 

$

8,285

 

 

$

2,104

 

 

$

2,275

 

60 - 89 days

 

1,502

 

 

10,559

 

 

1,981

 

90+ days

 

19,084

 

 

6,439

 

 

11,471

 

Total delinquency

 

$

28,871

 

 

$

19,102

 

 

$

15,727

 

Delinquency as a percentage of loans held for investment

 

0.33

%

 

0.22

%

 

0.18

%

_____________________

(1) The ratio is less than 0.01% as of March 31, 2019.
(2) At March 31, 2020, 34% of loans held for investment include an aggregate fair value net discount of $35.9 million, or 0.41% of loans held for investment. At December 31, 2019, 37% of loans held for investment include an aggregate fair value net discount of $40.7 million, or 0.47% of loans held for investment. At March 31, 2019, 47% of loans held for investment include an aggregate fair value net discount of $57.2 million, or 0.65% of loans held for investment.

Investment Securities

Investments securities totaled $1.37 billion at March 31, 2020, a decrease of $33.9 million, or 2.4%, from December 31, 2019, and an increase of $157.0 million, or 12.9%, from March 31, 2019. The decrease in the first quarter of 2020 compared to the prior quarter was primarily the result of $147.5 million in sales and $23.2 million in principal payments, amortization and redemptions, offset by a $104.7 million in purchases and a $33.7 million increase in mark-to-market fair value adjustment. The Company’s assessment of held-to-maturity and available-for-sale investment securities indicated that no ACL was required as of January 1, 2020 and March 31, 2020. The increase compared to the same period last year was primarily the result of $741.7 million in purchases and a $56.7 million increase in mark-to-market fair value adjustment, partially offset by $521.3 million in sales and $118.6 million in principal payments, amortization and redemptions.

Deposits

At March 31, 2020, deposits totaled $9.09 billion, an increase of $194.6 million, or 2.19%, from December 31, 2019 and an increase of $377.9 million, or 4.3%, from March 31, 2019. At March 31, 2020, non-maturity deposits totaled $8.02 billion, or 88% of total deposits, an increase of $169.9 million, or 2.2%, from December 31, 2019 and an increase of $897.5 million, or 12.6%, from March 31, 2019. During the first quarter of 2020, deposit increases included $100.5 million in brokered certificates of deposit, $92.3 million in money market/savings deposits and $85.6 million in noninterest-bearing deposits, partially offset by decreases of $75.8 million in retail certificates of deposits and $8.1 million in interest checking as compared to the fourth quarter of 2019.

The weighted average cost of deposits for the three-month period ending March 31, 2020 was 0.48%, compared to 0.58% for the three-month period ending December 31, 2019, and 0.63% for the three-month period ending March 31, 2019. The decrease in the weighted average cost of deposits in the first quarter of 2020 compared to the prior quarter was primarily driven by lower volume in brokered certificates of deposits and retail certificates of deposits as well as higher average noninterest-bearing deposit balances and lower pricing across all deposit product categories.

The end of period weighted average rate of deposits at March 31, 2020 was 0.40%.

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Deposit Accounts

 

(Dollars in thousands)

Noninterest-bearing checking

 

$

 

3,943,260

 

 

$

 

3,857,660

 

 

$

 

3,423,893

 

Interest-bearing:

 

 

 

 

 

 

Checking

 

 

577,966

 

 

 

586,019

 

 

 

560,274

 

Money market/savings

 

 

3,499,305

 

 

 

3,406,988

 

 

 

3,138,875

 

Retail certificates of deposit

 

 

897,680

 

 

 

973,465

 

 

 

1,007,559

 

Wholesale/brokered certificates of deposit

 

 

174,861

 

 

 

74,377

 

 

 

584,574

 

Total interest-bearing

 

 

5,149,812

 

 

 

5,040,849

 

 

 

5,291,282

 

Total deposits

 

$

 

9,093,072

 

 

$

 

8,898,509

 

 

$

 

8,715,175

 

 

 

 

 

 

 

 

Cost of deposits

 

 

0.48

%

 

 

0.58

%

 

 

0.63

%

Noninterest-bearing deposits as a percentage of total deposits

 

 

43.4

 

 

 

43.4

 

 

 

39.3

 

Non-maturity deposits as a percent of total deposits

 

 

88.2

 

 

 

88.2

 

 

 

81.7

 

Core deposits as a percent of total deposits (1)

 

 

93.0

 

 

 

93.7

 

 

 

87.9

 

_____________________

(1) Core deposits are all transaction accounts and non-brokered certificates of deposit less than $250,000.

Borrowings

At March 31, 2020, total borrowings amounted to $736.3 million, an increase of $4.1 million, or 0.6%, from December 31, 2019 and a decrease of $16.3 million, or 2.3%, from March 31, 2019. Total borrowings at March 31, 2020 included $521.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) advances and $215.3 million of subordinated debt. At March 31, 2020, total borrowings represented 6.1% of total assets, compared to 6.2% and 6.2%, as of December 31, 2019 and March 31, 2019, respectively. The increase in borrowings at March 31, 2020 as compared to December 31, 2019 was due to higher FHLB advances and the decrease as compared to March 31, 2019 was primarily due to lower FHLB advances and the redemption of junior subordinated debt securities, partially offset by the issuance of subordinated notes in May 2019.

Capital Ratios

At March 31, 2020, our ratio of tangible common equity to total assets was 10.06%, compared with 10.30% at December 31, 2019 and 10.32% at March 31, 2019, with a tangible book value per share of $18.60, compared with $18.84 at December 31, 2019 and $17.56 at March 31, 2019.

In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase-in over a three-year period the Day 1 adverse regulatory capital effects of the CECL accounting standard. Additionally, in March 2020, the U.S. federal bank regulatory agencies issued an interim final rule that provides banking organizations an option to delay the estimated CECL impact on regulatory capital for an additional two years for a total transition period of up to five years to provide regulatory relief to banking organizations to better focus on supporting lending to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of the COVID-19 pandemic. The capital relief in the interim is calibrated to approximate the difference in allowances under CECL relative to the incurred loss methodology for the first two years of the transition period using a 25% scaling factor. The cumulative difference at the end of the second year of the transition period is then phased in to regulatory capital at 25% per year over a three-year transition period. As a result, entities will gradually phase in the full effect of CECL on regulatory capital over a five-year transition period. The Company implemented the CECL model starting January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period.

At March 31, 2020, the Company exceeded all regulatory capital requirements with a tier 1 leverage ratio of 10.68%, common equity tier 1 capital ratio of 11.59%, tier 1 capital ratio of 11.66% and total capital ratio of 14.23%.

At March 31, 2020, the Bank exceeded all regulatory capital requirements with a tier 1 leverage ratio of 12.54%, common equity tier 1 capital ratio of 13.70%, tier 1 capital ratio of 13.70% and total capital ratio of 14.28%. These capital ratios each exceeded the “well capitalized” standards defined by the federal banking regulators of 7.00% for tier 1 leverage ratio, 6.5% for common equity tier 1 capital ratio, 8.50% for tier 1 capital ratio and 10.50% for total capital ratio inclusive of the fully phased-in capital conservation buffer.

 

 

March 31,

 

December 31,

 

March 31,

Capital Ratios

 

2020

 

2019

 

2019

Pacific Premier Bancorp, Inc. Consolidated

 

 

 

 

 

 

Tier 1 leverage ratio

 

 

10.68

%

 

 

10.54

%

 

 

10.69

%

Common equity tier 1 capital ratio

 

 

11.59

 

 

 

11.35

 

 

 

11.08

 

Tier 1 capital ratio

 

 

11.66

 

 

 

11.42

 

 

 

11.32

 

Total capital ratio

 

 

14.23

 

 

 

13.81

 

 

 

12.58

 

Tangible common equity ratio (1)

 

 

10.06

 

 

 

10.30

 

 

 

10.32

 

 

 

 

 

 

 

 

Pacific Premier Bank

 

 

Tier 1 leverage ratio

 

 

12.54

%

 

 

12.39

%

 

 

11.39

%

Common equity tier 1 capital ratio

 

 

13.70

 

 

 

13.43

 

 

 

12.07

 

Tier 1 capital ratio

 

 

13.70

 

 

 

13.43

 

 

 

12.07

 

Total capital ratio

 

 

14.28

 

 

 

13.83

 

 

 

12.49

 

 

 

 

 

 

 

 

Share Data

 

 

 

 

 

 

Book value per share

 

$

 

33.40

 

 

$

 

33.82

 

 

$

 

31.97

 

Tangible book value per share (1)

 

 

18.60

 

 

 

18.84

 

 

 

17.56

 

Dividend per share

 

 

0.25

 

 

 

0.22

 

 

 

0.22

 

Closing stock price (2)

 

 

18.84

 

 

 

32.60

 

 

 

26.53

 

Shares issued and outstanding

 

 

59,975,281

 

 

 

59,506,057

 

 

 

62,773,299

 

Market capitalization (2)(3)

 

$

 

1,129,934

 

 

$

 

1,939,897

 

 

$

 

1,665,376

 

_____________________

(1) A reconciliation of the non-U.S. GAAP measures of tangible common equity and tangible book value per share to the U.S. GAAP measures of common stockholders' equity and book value per share is set forth below.
(2) As of the last trading day prior to period end.
(3) Dollars in thousands.

Dividend and Stock Repurchase Program

On April 24, 2020, the Company's Board of Directors declared a $0.25 per share dividend, payable on May 15, 2020 to stockholders of record as of May 8, 2020. In December 2019, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase up to $100 million of its common stock. As of March 31, 2020, the Company has not repurchased any shares under the newly-approved stock repurchase program and has paused the stock repurchase program indefinitely.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on April 28, 2020 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 May 5, 2020 at (877) 344-7529, conference ID 10141228.

Opus Bank Merger Announcement

On February 3, 2020, Pacific Premier announced that it had entered into a definitive agreement to acquire Opus Bank with $8.0 billion of total assets, $5.9 billion of total loans and $6.5 billion in total deposits as of December 31, 2019. Opus Bank has 46 banking offices, including 28 in California, 16 in the Seattle/Puget Sound region in Washington, one in the Phoenix metropolitan area of Arizona and one in Portland, Oregon.

Pacific Premier has received the required regulatory approvals from the Board of Governors of the Federal Reserve System, the California Department of Business Oversight and the Colorado Department of Regulatory Agencies for the consummation of the acquisition. The consummation of the acquisition remains subject to the approval by Opus Bank’s shareholders of the acquisition, the approval by Pacific Premier’s shareholders of the issuance of the shares of Pacific Premier common stock in connection with the acquisition, and the satisfaction of other closing conditions.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. is the holding company for Pacific Premier Bank, one of the largest banks headquartered in Southern California with approximately $12.0 billion in assets. Pacific Premier Bank is a business bank primarily focused on serving small and middle market businesses in the counties of Orange, Los Angeles, Riverside, San Bernardino, San Diego, San Luis Obispo and Santa Barbara, California, as well as markets in the states of Arizona, Nevada and Washington. Through its 40 depository branches, 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.

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 including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, stockholder value creation, tax rates and the impact of the acquisition of Opus Bank and other acquisitions.

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. The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity and prospects is uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility, which could result in impairment to our goodwill in future periods. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance. Other 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/deflation, interest rate, market and monetary fluctuations; the effect of acquisitions we may make, such as our pending acquisition of Opus Bank, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations, including those concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; uncertainty regarding the future of LIBOR; the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the CECL model, which has changed how we estimate credit losses and may further increase the required level of our allowance for credit losses in future periods; possible credit related impairments of securities held by us; possible impairment charges to goodwill; the impact of current governmental efforts to restructure the U.S. financial regulatory system, including any amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act; changes in consumer spending, borrowing and savings habits; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; our ability to attract deposits and other sources of liquidity; the possibility that we may reduce or discontinue the payments of dividends on common stock; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; public health crisis and pandemics, including the COVID-19 pandemic, and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national or global level; unanticipated regulatory or legal proceedings; and our ability to manage the risks involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2019 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 undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Notice to Opus Bank 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 Opus Bank by Pacific Premier, Pacific Premier filed a registration statement on Form S-4 (File No. 333-237188) (the “Registration Statement”) with the SEC. The Registration Statement includes a preliminary joint proxy statement/prospectus of Pacific Premier and Opus Bank. The Registration Statement was declared effective by the SEC on April 7, 2020 and the definitive joint proxy statement/prospectus was mailed to Pacific Premier's and Opus Bank's shareholders of record as of the close of business on April 2, 2020.

INVESTORS AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS (AND ANY OTHER DOCUMENTS FILED WITH THE SEC OR THE FDIC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED MERGER AND RELATED MATTERS. Investors and security holders are able to obtain the Registration Statement, the joint proxy statement/prospectus, and any other documents Pacific Premier has filed with the SEC, free of charge at the SEC’s website, http://www.sec.gov or by accessing Pacific Premier’s website at www.ppbi.com under the “Investors” link and then under the heading “SEC Filings”. Investors and security holders are able to obtain the documents, and any other documents Opus Bank has filed with the FDIC, free of charge at Opus Bank’s website at www.opusbank.com under the tab “Investor Relations” and then under the heading “Presentations & Filings”. In addition, documents filed with the SEC by Pacific Premier or with the FDIC by Opus Bank will be available free of charge by (1) writing Pacific Premier at 17901 Von Karman Avenue, Suite 1200, Irvine, CA 92614, Attention: Investor Relations, or (2) writing Opus Bank at 19900 MacArthur Boulevard, 12th Floor, Irvine, CA 92612, Attention: Investor Relations.

The directors, executive officers and certain other members of management and employees of Pacific Premier may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction from the shareholders of Pacific Premier. Information about Pacific Premier’s directors and executive officers is included in the proxy statement for its 2020 annual meeting of Pacific Premier shareholders, which was filed with the SEC on April 8, 2020, and Pacific Premier's Form 10-K/A, which was filed on April 3, 2020.

The directors, executive officers and certain other members of management and employees of Opus Bank may also be deemed to be participants in the solicitation of proxies in connection with the proposed transaction from the shareholders of Opus Bank. Information about the directors and executive officers of Opus Bank is included in Opus Bank's Form 10-K/A filed with the FDIC on March 24, 2020. 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. Free copies of this document may be obtained as described above.

Before making any voting or investment decision, shareholders of Pacific Premier and Opus Bank are urged to read carefully the entire Registration Statement and joint proxy statement/prospectus, including all amendments thereto, because they contain important information about the proposed transaction, Pacific Premier and Opus Bank. Free copies of these documents may be obtained as described above.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands)

(Unaudited)

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2020

 

2019

 

2019

 

2019

 

2019

ASSETS

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

 

108,285

 

 

$

 

135,847

 

 

$

 

166,238

 

 

$

 

139,879

 

 

$

 

122,947

 

Interest-bearing deposits with financial institutions

 

 

425,747

 

 

 

191,003

 

 

 

261,477

 

 

 

235,505

 

 

 

55,435

 

Cash and cash equivalents

 

 

534,032

 

 

 

326,850

 

 

 

427,715

 

 

 

375,384

 

 

 

178,382

 

Interest-bearing time deposits with financial institutions

 

 

2,708

 

 

 

2,708

 

 

 

2,711

 

 

 

2,956

 

 

 

5,896

 

Investments held-to-maturity, at amortized cost

 

 

34,553

 

 

 

37,838

 

 

 

40,433

 

 

 

42,997

 

 

 

43,894

 

Investment securities available-for-sale, at fair value

 

 

1,337,761

 

 

 

1,368,384

 

 

 

1,256,655

 

 

 

1,258,379

 

 

 

1,171,410

 

FHLB, FRB and other stock, at cost

 

 

92,858

 

 

 

93,061

 

 

 

92,986

 

 

 

92,841

 

 

 

94,751

 

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

 

 

111

 

 

 

1,672

 

 

 

7,092

 

 

 

8,529

 

 

 

11,671

 

Loans held for investment

 

 

8,754,869

 

 

 

8,722,311

 

 

 

8,757,476

 

 

 

8,771,938

 

 

 

8,865,855

 

Allowance for credit losses

 

 

(115,422

)

 

 

(35,698

)

 

 

(35,000

)

 

 

(35,026

)

 

 

(37,856

)

Loans held for investment, net

 

 

8,639,447

 

 

 

8,686,613

 

 

 

8,722,476

 

 

 

8,736,912

 

 

 

8,827,999

 

Accrued interest receivable

 

 

38,294

 

 

 

39,442

 

 

 

38,603

 

 

 

40,420

 

 

 

40,302

 

Other real estate owned

 

 

441

 

 

 

441

 

 

 

126

 

 

 

35

 

 

 

180

 

Premises and equipment

 

 

61,615

 

 

 

59,001

 

 

 

62,851

 

 

 

54,218

 

 

 

61,523

 

Deferred income taxes, net

 

 

15,249

 

 

 

 

 

 

 

2,266

 

 

 

9,275

 

Bank owned life insurance

 

 

113,461

 

 

 

113,376

 

 

 

112,716

 

 

 

112,054

 

 

 

111,400

 

Intangible assets

 

 

79,349

 

 

 

83,312

 

 

 

87,560

 

 

 

91,840

 

 

 

96,120

 

Goodwill

 

 

808,322

 

 

 

808,322

 

 

 

808,322

 

 

 

808,322

 

 

 

808,726

 

Other assets

 

 

218,008

 

 

 

154,992

 

 

 

151,251

 

 

 

156,628

 

 

 

118,966

 

Total assets

 

$

 

11,976,209

 

 

$

 

11,776,012

 

 

$

 

11,811,497

 

 

$

 

11,783,781

 

 

$

 

11,580,495

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Deposit accounts:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

 

$

 

3,943,260

 

 

$

 

3,857,660

 

 

$

 

3,623,546

 

 

$

 

3,480,312

 

 

$

 

3,423,893

 

Interest-bearing:

 

 

 

 

 

 

 

 

 

 

Checking

 

 

577,966

 

 

 

586,019

 

 

 

529,401

 

 

 

548,314

 

 

 

560,274

 

Money market/savings

 

 

3,499,305

 

 

 

3,406,988

 

 

 

3,362,453

 

 

 

3,272,511

 

 

 

3,138,875

 

Retail certificates of deposit

 

 

897,680

 

 

 

973,465

 

 

 

1,019,433

 

 

 

1,065,207

 

 

 

1,007,559

 

Wholesale/brokered certificates of deposit

 

 

174,861

 

 

 

74,377

 

 

 

324,455

 

 

 

495,578

 

 

 

584,574

 

Total interest-bearing

 

 

5,149,812

 

 

 

5,040,849

 

 

 

5,235,742

 

 

 

5,381,610

 

 

 

5,291,282

 

Total deposits

 

 

9,093,072

 

 

 

8,898,509

 

 

 

8,859,288

 

 

 

8,861,922

 

 

 

8,715,175

 

FHLB advances and other borrowings

 

 

521,017

 

 

 

517,026

 

 

 

604,558

 

 

 

571,575

 

 

 

609,591

 

Subordinated debentures

 

 

215,269

 

 

 

215,145

 

 

 

217,825

 

 

 

232,944

 

 

 

110,381

 

Deferred income taxes, net

 

 

 

 

1,371

 

 

 

301

 

 

 

 

 

Accrued expenses and other liabilities

 

 

143,934

 

 

 

131,367

 

 

 

140,527

 

 

 

132,884

 

 

 

138,284

 

Total liabilities

 

 

9,973,292

 

 

 

9,763,418

 

 

 

9,822,499

 

 

 

9,799,325

 

 

 

9,573,431

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

586

 

 

 

586

 

 

 

584

 

 

 

595

 

 

 

617

 

Additional paid-in capital

 

 

1,596,680

 

 

 

1,594,434

 

 

 

1,590,168

 

 

 

1,618,137

 

 

 

1,676,024

 

Retained earnings

 

 

361,242

 

 

 

396,051

 

 

 

368,051

 

 

 

343,366

 

 

 

325,363

 

Accumulated other comprehensive (loss) income

 

 

44,409

 

 

 

21,523

 

 

 

30,195

 

 

 

22,358

 

 

 

5,060

 

Total stockholders' equity

 

 

2,002,917

 

 

 

2,012,594

 

 

 

1,988,998

 

 

 

1,984,456

 

 

 

2,007,064

 

Total liabilities and stockholders' equity

 

$

 

11,976,209

 

 

$

 

11,776,012

 

 

$

 

11,811,497

 

 

$

 

11,783,781

 

 

$

 

11,580,495

 

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

INTEREST INCOME

 

 

 

 

 

 

Loans

 

$

 

113,265

 

 

$

 

119,353

 

 

$

 

121,476

 

Investment securities and other interest-earning assets

 

 

10,524

 

 

 

10,493

 

 

 

9,767

 

Total interest income

 

 

123,789

 

 

 

129,846

 

 

 

131,243

 

INTEREST EXPENSE

 

 

 

 

 

 

Deposits

 

 

10,487

 

 

 

13,144

 

 

 

13,284

 

FHLB advances and other borrowings

 

 

1,081

 

 

 

730

 

 

 

4,802

 

Subordinated debentures

 

 

3,046

 

 

 

3,053

 

 

 

1,751

 

Total interest expense

 

 

14,614

 

 

 

16,927

 

 

 

19,837

 

Net interest income before provision for credit losses

 

 

109,175

 

 

 

112,919

 

 

 

111,406

 

Provision for credit losses

 

 

25,454

 

 

 

2,297

 

 

 

1,526

 

Net interest income after provision for credit losses

 

 

83,721

 

 

 

110,622

 

 

 

109,880

 

NONINTEREST INCOME

 

 

 

 

 

 

Loan servicing fees

 

 

480

 

 

 

487

 

 

 

398

 

Service charges on deposit accounts

 

 

1,715

 

 

 

1,558

 

 

 

1,330

 

Other service fee income

 

 

311

 

 

 

359

 

 

 

356

 

Debit card interchange fee income

 

 

348

 

 

 

367

 

 

 

1,071

 

Earnings on BOLI

 

 

1,336

 

 

 

864

 

 

 

910

 

Net gain from sales of loans

 

 

771

 

 

 

1,698

 

 

 

1,729

 

Net gain from sales of investment securities

 

 

7,760

 

 

 

3,671

 

 

 

427

 

Other income

 

 

1,754

 

 

 

797

 

 

 

1,460

 

Total noninterest income

 

 

14,475

 

 

 

9,801

 

 

 

7,681

 

NONINTEREST EXPENSE

 

 

 

 

 

 

Compensation and benefits

 

 

34,376

 

 

 

36,409

 

 

 

33,388

 

Premises and occupancy

 

 

8,168

 

 

 

8,113

 

 

 

7,535

 

Data processing

 

 

3,253

 

 

 

3,241

 

 

 

2,930

 

Other real estate owned operations, net

 

 

14

 

 

 

31

 

 

 

3

 

FDIC insurance premiums

 

 

367

 

 

 

(766

)

 

 

800

 

Legal, audit and professional expense

 

 

3,126

 

 

 

3,268

 

 

 

2,998

 

Marketing expense

 

 

1,412

 

 

 

1,713

 

 

 

1,497

 

Office, telecommunications and postage expense

 

 

1,103

 

 

 

1,105

 

 

 

1,210

 

Loan expense

 

 

822

 

 

 

1,064

 

 

 

873

 

Deposit expense

 

 

4,988

 

 

 

4,537

 

 

 

3,583

 

Merger-related expense

 

 

1,724

 

 

 

 

 

655

 

CDI amortization

 

 

3,965

 

 

 

4,247

 

 

 

4,436

 

Other expense

 

 

3,313

 

 

 

3,254

 

 

 

3,669

 

Total noninterest expense

 

 

66,631

 

 

 

66,216

 

 

 

63,577

 

Net income before income taxes

 

 

31,565

 

 

 

54,207

 

 

 

53,984

 

Income tax

 

 

5,825

 

 

 

13,109

 

 

 

15,266

 

Net income

 

$

 

25,740

 

 

$

 

41,098

 

 

$

 

38,718

 

EARNINGS PER SHARE

 

 

 

 

 

 

Basic

 

$

 

0.43

 

 

$

 

0.69

 

 

$

 

0.62

 

Diluted

 

$

 

0.43

 

 

$

 

0.69

 

 

$

 

0.62

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

Basic

 

 

59,007,191

 

 

 

58,816,352

 

 

 

61,987,605

 

Diluted

 

 

59,189,717

 

 

59,182,054

 

 

 

62,285,783

 

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

 

 

 

 

 

Three Months Ended

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

 

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/Cost

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/Cost

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/Cost

Assets

 

(Dollars in thousands)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

215,746

 

 

$

 

216

 

 

0.40

%

 

$

 

201,161

 

 

$

 

283

 

 

0.56

%

 

$

 

173,613

 

 

$

 

378

 

 

0.88

%

Investment securities

 

 

1,502,572

 

 

 

10,308

 

 

2.74

 

 

 

1,445,158

 

 

 

10,210

 

 

2.83

 

 

 

1,298,476

 

 

 

9,389

 

 

2.89

 

Loans receivable, net (1)(2)

 

 

8,645,252

 

 

 

113,265

 

 

5.27

 

 

 

8,700,690

 

 

 

119,353

 

 

5.44

 

 

 

8,867,159

 

 

 

121,476

 

 

5.56

 

Total interest-earning assets

 

 

10,363,570

 

 

 

123,789

 

 

4.80

 

 

 

10,347,009

 

 

 

129,846

 

 

4.98

 

 

 

10,339,248

 

 

 

131,243

 

 

5.15

 

Noninterest-earning assets

 

 

1,227,766

 

 

 

 

 

 

 

1,230,083

 

 

 

 

 

 

 

1,224,281

 

 

 

 

 

Total assets

 

$

 

11,591,336

 

 

 

 

 

 

$

 

11,577,092

 

 

 

 

 

 

$

 

11,563,529

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking

 

$

 

576,203

 

 

$

 

609

 

 

0.43

%

 

$

 

563,357

 

 

$

 

643

 

 

0.45

%

 

$

 

536,117

 

 

$

 

474

 

 

0.36

%

Money market

 

 

3,161,867

 

 

 

6,071

 

 

0.77

 

 

 

3,184,267

 

 

 

6,704

 

 

0.84

 

 

 

2,912,819

 

 

 

6,534

 

 

0.91

 

Savings

 

 

238,848

 

 

 

97

 

 

0.16

 

 

 

236,970

 

 

 

101

 

 

0.17

 

 

 

249,621

 

 

 

86

 

 

0.14

 

Retail certificates of deposit

 

 

936,489

 

 

 

3,464

 

 

1.49

 

 

 

998,594

 

 

 

4,272

 

 

1.70

 

 

 

1,001,344

 

 

 

4,058

 

 

1.64

 

Wholesale/brokered certificates of deposit

 

 

43,432

 

 

 

246

 

 

2.28

 

 

 

233,470

 

 

 

1,424

 

 

2.42

 

 

 

373,822

 

 

 

2,132

 

 

2.31

 

Total interest-bearing deposits

 

 

4,956,839

 

 

 

10,487

 

 

0.85

 

 

 

5,216,658

 

 

 

13,144

 

 

1.00

 

 

 

5,073,723

 

 

 

13,284

 

 

1.06

 

FHLB advances and other borrowings

 

 

337,551

 

 

 

1,081

 

 

1.29

 

 

 

153,333

 

 

 

730

 

 

1.89

 

 

 

770,331

 

 

 

4,802

 

 

2.53

 

Subordinated debentures

 

 

215,190

 

 

 

3,046

 

 

5.66

 

 

 

215,250

 

 

 

3,053

 

 

5.67

 

 

 

110,340

 

 

 

1,751

 

 

6.35

 

Total borrowings

 

 

552,741

 

 

 

4,127

 

 

3.00

 

 

 

368,583

 

 

 

3,783

 

 

4.07

 

 

 

880,671

 

 

 

6,553

 

 

3.02

 

Total interest-bearing liabilities

 

 

5,509,580

 

 

 

14,614

 

 

1.07

 

 

 

5,585,241

 

 

 

16,927

 

 

1.20

 

 

 

5,954,394

 

 

 

19,837

 

 

1.35

 

Noninterest-bearing deposits

 

 

3,898,399

 

 

 

 

 

 

 

3,814,809

 

 

 

 

 

 

 

3,480,791

 

 

 

 

 

Other liabilities

 

 

146,231

 

 

 

 

 

 

 

172,227

 

 

 

 

 

 

 

136,483

 

 

 

 

 

Total liabilities

 

 

9,554,210

 

 

 

 

 

 

 

9,572,277

 

 

 

 

 

 

 

9,571,668

 

 

 

 

 

Stockholders' equity

 

 

2,037,126

 

 

 

 

 

 

 

2,004,815

 

 

 

 

 

 

 

1,991,861

 

 

 

 

 

Total liabilities and equity

 

$

 

11,591,336

 

 

 

 

 

 

$

 

11,577,092

 

 

 

 

 

 

$

 

11,563,529

 

 

 

 

 

Net interest income

 

 

 

$

 

109,175

 

 

 

 

 

 

$

 

112,919

 

 

 

 

 

 

$

 

111,406

 

 

 

Net interest margin (3)

 

 

 

 

 

4.24

%

 

 

 

 

 

4.33

%

 

 

 

 

 

4.37

%

Cost of deposits

 

 

 

 

 

0.48

 

 

 

 

 

 

0.58

 

 

 

 

 

 

0.63

 

Cost of funds (4)

 

 

 

 

 

0.62

 

 

 

 

 

 

0.71

 

 

 

 

 

 

0.85

 

Ratio of interest-earning assets to interest-bearing liabilities

 

188.10

 

 

 

 

 

 

185.26

 

 

 

 

 

 

173.64

 

_____________________

(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums.
(2) Interest income includes net discount accretion of $4.1 million, $5.8 million and $3.8 million, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

LOAN PORTFOLIO COMPOSITION

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2020

 

2019

 

2019

 

2019

 

2019

 

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

 

2,040,198

 

 

$

 

2,070,141

 

 

$

 

2,052,118

 

 

$

 

2,118,829

 

 

$

 

2,121,999

 

Multifamily

 

 

1,625,682

 

 

 

1,575,726

 

 

 

1,610,643

 

 

 

1,519,110

 

 

 

1,511,329

 

Construction and land

 

 

377,525

 

 

 

438,786

 

 

 

507,114

 

 

 

543,683

 

 

 

582,428

 

SBA secured by real estate (1)

 

 

61,665

 

 

 

68,431

 

 

 

68,689

 

 

 

65,773

 

 

 

70,416

 

Total investor loans secured by real estate

 

 

4,105,070

 

 

 

4,153,084

 

 

 

4,238,564

 

 

 

4,247,395

 

 

 

4,286,172

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

 

1,887,632

 

 

 

1,846,554

 

 

 

1,847,443

 

 

 

1,835,411

 

 

 

1,813,914

 

Franchise real estate secured

 

 

371,428

 

 

 

353,240

 

 

 

344,954

 

 

 

323,445

 

 

 

317,477

 

SBA secured by real estate (3)

 

 

83,640

 

 

 

88,381

 

 

 

91,101

 

 

 

93,257

 

 

 

97,508

 

Total business loans secured by real estate

 

 

2,342,700

 

 

 

2,288,175

 

 

 

2,283,498

 

 

 

2,252,113

 

 

 

2,228,899

 

Commercial loans (4)

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

1,458,969

 

 

 

1,393,270

 

 

 

1,353,793

 

 

 

1,426,274

 

 

 

1,470,410

 

Franchise non-real estate secured

 

 

547,793

 

 

 

564,357

 

 

 

549,711

 

 

 

537,490

 

 

 

496,220

 

SBA non-real estate secured

 

 

16,265

 

 

 

17,426

 

 

 

17,891

 

 

 

19,282

 

 

 

18,987

 

Total commercial loans

 

 

2,023,027

 

 

 

1,975,053

 

 

 

1,921,395

 

 

 

1,983,046

 

 

 

1,985,617

 

Retail loans

 

 

 

 

 

 

 

 

 

 

Single family residential (5)

 

 

237,180

 

 

 

255,024

 

 

 

273,416

 

 

 

248,611

 

 

 

279,761

 

Consumer

 

 

46,892

 

 

 

50,975

 

 

 

40,603

 

 

 

40,773

 

 

 

85,406

 

Total retail loans

 

 

284,072

 

 

 

305,999

 

 

 

314,019

 

 

 

289,384

 

 

 

365,167

 

Gross loans held for investment (6)

 

 

8,754,869

 

 

 

8,722,311

 

 

 

8,757,476

 

 

 

8,771,938

 

 

 

8,865,855

 

Allowance for credit losses for loans held for investment (7)

 

 

(115,422

)

 

 

(35,698

)

 

 

(35,000

)

 

 

(35,026

)

 

 

(37,856

)

Loans held for investment, net

 

$

 

8,639,447

 

 

$

 

8,686,613

 

 

$

 

8,722,476

 

 

$

 

8,736,912

 

 

$

 

8,827,999

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

 

111

 

 

$

 

1,672

 

 

$

 

7,092

 

 

$

 

8,529

 

 

$

 

11,671

 

_____________________

(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.
(6) Includes unaccreted fair value net purchase discounts of $35.9 million, $40.7 million and $57.2 million as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.
(7) The allowance for credit losses as of December 31, 2019 and prior were accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. The allowance for credit losses at March 31, 2020 is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2020

 

2019

 

2019

 

2019

 

2019

Asset Quality

 

(Dollars in thousands)

Nonperforming loans

 

$

 

20,610

 

 

$

 

8,527

 

 

$

 

8,109

 

 

$

 

7,659

 

 

$

 

12,843

 

Other real estate owned

 

 

441

 

 

 

441

 

 

 

126

 

 

 

35

 

 

 

180

 

Other assets owned

 

 

 

 

 

 

 

 

 

 

13

 

Nonperforming assets

 

$

 

21,051

 

 

$

 

8,968

 

 

$

 

8,235

 

 

$

 

7,694

 

 

$

 

13,036

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

$

 

115,422

 

 

$

 

35,698

 

 

$

 

35,000

 

 

$

 

35,026

 

 

$

 

37,856

 

Allowance for credit losses as a percent of total nonperforming loans

 

 

560

%

 

 

419

%

 

 

432

%

 

 

457

%

 

 

295

%

Nonperforming loans as a percent of loans held for investment

 

 

0.24

 

 

 

0.10

 

 

 

0.09

 

 

 

0.09

 

 

 

0.14

 

Nonperforming assets as a percent of total assets

 

 

0.18

 

 

 

0.08

 

 

 

0.07

 

 

 

0.07

 

 

 

0.11

 

Net loan charge-offs for the quarter ended

 

$

 

1,344

 

 

$

 

2,318

 

 

$

 

1,391

 

 

$

 

3,572

 

 

$

 

228

 

Net loan charge-offs for the quarter to average total loans(1)

 

 

0.02

%

 

 

0.03

%

 

 

0.02

%

 

 

0.04

%

 

%

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

 

 

1.32

 

 

 

0.41

 

 

 

0.40

 

 

 

0.40

 

 

 

0.43

 

Delinquent Loans

 

 

 

 

 

 

 

 

 

 

30 - 59 days

 

$

 

8,285

 

 

$

 

2,104

 

 

$

 

1,715

 

 

$

 

3,407

 

 

$

 

2,275

 

60 - 89 days

 

 

1,502

 

 

 

10,559

 

 

 

3,212

 

 

 

801

 

 

 

1,981

 

90+ days

 

 

19,084

 

 

 

6,439

 

 

 

6,297

 

 

 

9,284

 

 

 

11,471

 

Total delinquency

 

$

 

28,871

 

 

$

 

19,102

 

 

$

 

11,224

 

 

$

 

13,492

 

 

$

 

15,727

 

Delinquency as a percent of loans held for investment

 

 

0.33

%

 

 

0.22

%

 

 

0.13

%

 

 

0.15

%

 

 

0.18

%

_____________________

(1) The ratio is less than 0.01% as of March 31, 2019.
(2) At March 31, 2020, 34% of loans held for investment include a fair value net discount of $35.9 million or 0.41% of loans held for investment. At December 31, 2019, 37% of loans held for investment include a fair value net discount of $40.7 million, or 0.47% of loans held for investment. At March 31, 2019, 47% of loans held for investment include a fair value net discount of $57.2 million or 0.65% of loans held for investment.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

NONACCRUAL LOANS (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral
Dependent
Loans

 

ACL

 

Non-
Collateral
Dependent
Loans

 

ACL

 

Total
Nonaccrual
Loans

 

Nonaccrual
Loans With
No ACL

 

 

(Dollars in thousands)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

 

318

 

 

$

 

 

 

$

 

559

 

 

$

 

 

 

$

 

877

 

 

$

 

877

 

Multifamily

 

 

 

 

 

 

 

 

 

 

 

 

Construction and land

 

 

1,802

 

 

 

 

 

 

 

 

 

1,802

 

 

 

1,802

 

SBA secured by real estate (2)

 

 

392

 

 

 

 

 

 

 

 

 

392

 

 

 

392

 

Total investor loans secured by real estate

 

 

2,512

 

 

 

 

 

559

 

 

 

 

 

3,071

 

 

 

3,071

 

Business loans secured by real estate (3)

 

 

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

 

 

 

 

 

322

 

 

 

27

 

 

 

322

 

 

 

Franchise real estate secured

 

 

 

 

 

 

 

 

 

 

 

 

SBA secured by real estate (4)

 

 

1,033

 

 

 

 

 

79

 

 

 

13

 

 

 

1,112

 

 

 

1,033

 

Total business loans secured by real estate

 

 

1,033

 

 

 

 

 

401

 

 

 

40

 

 

 

1,434

 

 

 

1,033

 

Commercial loans (5)

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

1,063

 

 

 

 

 

4,613

 

 

 

215

 

 

 

5,676

 

 

 

1,063

 

Franchise non-real estate secured

 

 

 

 

 

 

9,142

 

 

 

1,475

 

 

 

9,142

 

 

 

SBA not secured by real estate

 

 

878

 

 

 

 

 

51

 

 

 

6

 

 

 

929

 

 

 

877

 

Total commercial loans

 

 

1,941

 

 

 

 

 

13,806

 

 

 

1,696

 

 

 

15,747

 

 

 

1,940

 

Retail Loans

 

 

 

 

 

 

 

 

 

 

 

 

Single family residential (6)

 

 

 

 

 

 

358

 

 

 

3

 

 

 

358

 

 

 

Consumer loans

 

 

 

 

 

 

 

 

 

 

 

 

Total retail loans

 

 

 

 

 

 

358

 

 

 

3

 

 

 

358

 

 

 

Totals nonaccrual loans

 

$

 

5,486

 

 

$

 

 

 

$

 

15,124

 

 

$

 

1,739

 

 

$

 

20,610

 

 

$

 

6,044

 

_____________________

(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.
(2) SBA loans that are collateralized by hotel/motel real property.
(3) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(4) SBA loans that are collateralized by real property other than hotel/motel real property.
(5) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(6) Single family residential includes home equity lines of credit, as well as second trust deeds.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

PAST DUE STATUS

 

 

 

 

 

Days Past Due

 

 

 

 

Current

 

30-59

 

60-89

 

90+

 

Total

 

 

(Dollars in thousands)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

 

2,037,130

 

 

$

 

2,191

 

 

$

 

 

 

$

 

877

 

 

$

 

2,040,198

 

Multifamily

 

 

1,625,682

 

 

 

 

 

 

 

 

 

1,625,682

 

Construction and land

 

 

375,723

 

 

 

 

 

 

 

1,802

 

 

 

377,525

 

SBA secured by real estate (1)

 

 

58,978

 

 

 

1,147

 

 

 

1,148

 

 

 

392

 

 

 

61,665

 

Total investor loans secured by real estate

 

 

4,097,513

 

 

 

3,338

 

 

 

1,148

 

 

 

3,071

 

 

 

4,105,070

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

 

1,883,996

 

 

 

3,636

 

 

 

 

 

 

 

1,887,632

 

Franchise real estate secured

 

 

371,428

 

 

 

 

 

 

 

 

 

371,428

 

SBA secured by real estate (3)

 

 

82,608

 

 

 

 

 

 

 

1,032

 

 

 

83,640

 

Total business loans secured by real estate

 

 

2,338,032

 

 

 

3,636

 

 

 

 

 

1,032

 

 

 

2,342,700

 

Commercial loans (4)

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

1,452,405

 

 

 

1,249

 

 

 

354

 

 

 

4,961

 

 

 

1,458,969

 

Franchise non-real estate secured

 

 

538,651

 

 

 

 

 

 

 

9,142

 

 

 

547,793

 

SBA not secured by real estate

 

 

15,325

 

 

 

62

 

 

 

 

 

878

 

 

 

16,265

 

Total commercial loans

 

 

2,006,381

 

 

 

1,311

 

 

 

354

 

 

 

14,981

 

 

 

2,023,027

 

Retail loans

 

 

 

 

 

 

 

 

 

 

Single family residential (5)

 

 

237,180

 

 

 

 

 

 

 

 

 

237,180

 

Consumer loans

 

 

46,892

 

 

 

 

 

 

 

 

 

46,892

 

Total retail loans

 

 

284,072

 

 

 

 

 

 

 

 

 

284,072

 

Total loans

 

$

 

8,725,998

 

 

$

 

8,285

 

 

$

 

1,502

 

 

$

 

19,084

 

 

$

 

8,754,869

 

_____________________

(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

GAAP RECONCILIATIONS

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

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

 

 

 

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

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Net income

 

$

 

25,740

 

 

$

 

41,098

 

 

$

 

38,718

 

Plus: CDI amortization expense

 

 

3,965

 

 

 

4,247

 

 

 

4,436

 

Less: CDI amortization expense tax adjustment

 

 

1,137

 

 

 

1,218

 

 

 

1,288

 

Net income for average tangible common equity

 

$

 

28,568

 

 

$

 

44,127

 

 

$

 

41,866

 

 

 

 

 

 

 

 

Average stockholders' equity

 

$

 

2,037,126

 

 

$

 

2,004,815

 

 

$

 

1,991,861

 

Less: average CDI

 

 

81,744

 

 

 

85,901

 

 

 

98,984

 

Less: average goodwill

 

 

808,322

 

 

 

808,322

 

 

 

808,726

 

Average tangible common equity

 

$

 

1,147,060

 

 

$

 

1,110,592

 

 

$

 

1,084,151

 

 

 

 

 

 

 

 

Return on average equity

 

 

5.05

%

 

 

8.20

%

 

 

7.78

%

Return on average tangible common equity

 

 

9.96

%

 

 

15.89

%

 

 

15.45

%

Tangible book value per share and tangible common equity to tangible assets (the “tangible common equity ratio”) are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible book value per share by dividing tangible common equity by common shares outstanding, as compared to book value per share, which we calculate by dividing common stockholders' equity by shares outstanding. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. We believe that this information is consistent with the treatment by bank regulatory agencies, which 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

 

2020

 

2019

 

2019

 

2019

 

2019

Total stockholders' equity

 

$

 

2,002,917

 

 

$

 

2,012,594

 

 

$

 

1,988,998

 

 

$

 

1,984,456

 

 

$

 

2,007,064

 

Less: intangible assets

 

 

887,671

 

 

 

891,634

 

 

 

895,882

 

 

 

900,162

 

 

 

904,846

 

Tangible common equity

 

$

 

1,115,246

 

 

$

 

1,120,960

 

 

$

 

1,093,116

 

 

$

 

1,084,294

 

 

$

 

1,102,218

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

 

33.40

 

 

$

 

33.82

 

 

$

 

33.50

 

 

$

 

32.80

 

 

$

 

31.97

 

Less: intangible book value per share

 

 

14.80

 

 

 

14.98

 

 

 

15.09

 

 

 

14.88

 

 

 

14.41

 

Tangible book value per share

 

$

 

18.60

 

 

$

 

18.84

 

 

$

 

18.41

 

 

$

 

17.92

 

 

$

 

17.56

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

11,976,209

 

 

$

 

11,776,012

 

 

$

 

11,811,497

 

 

$

 

11,783,781

 

 

$

 

11,580,495

 

Less: intangible assets

 

 

887,671

 

 

 

891,634

 

 

 

895,882

 

 

 

900,162

 

 

 

904,846

 

Tangible assets

 

$

 

11,088,538

 

 

$

 

10,884,378

 

 

$

 

10,915,615

 

 

$

 

10,883,619

 

 

$

 

10,675,649

 

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity ratio

 

 

10.06

%

 

 

10.30

%

 

 

10.01

%

 

 

9.96

%

 

 

10.32

%

Core net interest income and core net interest margin are non-GAAP financial measures derived from GAAP-based amounts. We calculate core net interest income by excluding scheduled accretion income, accelerated accretion income, premium amortization on CD and nonrecurring nonaccrual interest paid from net interest income. The core net interest margin is calculated as the ratio of core net interest income to average interest-earning assets. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

Net interest income

 

$

 

109,175

 

 

$

 

112,919

 

 

$

 

111,406

 

Less: scheduled accretion income

 

 

1,793

 

 

 

2,030

 

 

 

2,573

 

Less: accelerated accretion income

 

 

2,312

 

 

 

3,798

 

 

 

1,232

 

Less: premium amortization on CD

 

 

63

 

 

 

72

 

 

 

201

 

Less: nonrecurring nonaccrual interest paid

 

 

 

 

168

 

 

 

161

 

Core net interest income

 

$

 

105,007

 

 

$

 

106,851

 

 

$

 

107,239

 

 

 

 

 

 

 

 

Average interest-earning assets

 

$

 

10,363,570

 

 

$

 

10,347,009

 

 

$

 

10,339,248

 

 

 

 

 

 

 

 

Net interest margin

 

 

4.24

%

 

 

4.33

%

 

 

4.37

%

Core net interest margin

 

 

4.08

%

 

 

4.10

%

 

 

4.21

%

 

Contacts

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

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

Release Summary

Pacific Premier Bancorp, Inc. Announces First Quarter 2020 Results (Unaudited) and a Quarterly Cash Dividend of $0.25 Per Share

$Cashtags

Contacts

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

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