Pacific Premier Bancorp, Inc. Announces Fourth Quarter 2019 Financial Results (Unaudited) and Increases Quarterly Cash Dividend to $0.25 per Share

Company Release - 1/23/2020 6:00 AM ET

Fourth Quarter 2019 Summary

  • Net income of $41.1 million, or $0.69 per diluted share
  • Return on average assets of 1.42%, return on average equity of 8.20% and return on average tangible common equity of 15.89%
  • Net interest margin of 4.33% and core net interest margin of 4.10%
  • Non-maturity deposits growth of $335.3 million, or 18% annualized
  • Noninterest bearing deposits increased to 43% of total deposits, compared to 41% in the prior quarter
  • Cost of deposits of 0.58% in the current quarter compared with 0.71% in the prior quarter
  • Nonperforming assets as a percent of total assets of 0.08%
  • Tangible book value ended the year at $18.84, an 11.02% increase over December 31, 2018
  • Approved a new $100 million share repurchase program in December 2019

IRVINE, Calif.--(BUSINESS WIRE)-- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the fourth quarter of 2019 of $41.1 million, or $0.69 per diluted share, compared with net income of $41.4 million, or $0.69 per diluted share, for the third quarter of 2019 and net income of $39.6 million, or $0.63 per diluted share, for the fourth quarter of 2018.

For the three months ended December 31, 2019, the Company’s return on average assets (“ROAA”) was 1.42%, return on average equity (“ROAE”) was 8.20%, and return on average tangible common equity (“ROATCE”) was 15.89%, as compared to 1.44%, 8.32% and 16.27%, respectively, for the third quarter of 2019 and 1.37%, 8.15% and 16.65%, respectively, for the fourth quarter of 2018. Total assets as of December 31, 2019 were $11.8 billion compared with $11.8 billion at September 30, 2019 and $11.5 billion at December 31, 2018. A reconciliation of the non–U.S. generally accepted accounting principles (“GAAP”) measure of ROATCE to the 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, “This was a record year for the Company with net income of $159.7 million and non-maturity deposit growth of $603.0 million. Our prudent balance sheet management strategies and continued success in core deposit growth helped to minimize the impact of the declining interest rate environment on our net interest margin, and coupled with our disciplined expense management, enabled us to generate solid profitability with an ROAA of 1.42% and an ROATCE of 15.89% for the fourth quarter of 2019.

“Prudent capital management remains a focus of the board and management. We recently authorized a new $100 million share repurchase program, and we are increasing our quarterly cash dividend by 13.6% to $0.25 per share. Our strong profitability enables us to return significant amounts of capital to shareholders, while maintaining sufficient capital to support our organic and acquisitive growth strategies.

“During 2019, following several years of strong growth, driven by a number of highly successful acquisitions, we were able to complete several key projects throughout the Company that helped us expand our product and service offerings, enhance efficiencies and strengthen our risk management framework. As of result of the investments we have made, we have a strong foundation in place to support a much larger organization. Our team of employees has never been stronger or more capable, and I am proud to be a part of such an incredibly talented group,” said Mr. Gardner.

FINANCIAL HIGHLIGHTS

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

Financial Highlights

 

(dollars in thousands, except per share data)

Net income

 

$

41,098

 

 

$

41,375

 

 

$

39,643

 

Diluted earnings per share

 

0.69

 

 

0.69

 

 

0.63

 

Return on average assets

 

1.42

%

 

1.44

%

 

1.37

%

Return on average equity

 

8.20

 

 

8.32

 

 

8.15

 

Return on average tangible common equity (1)

 

15.89

 

 

16.27

 

 

16.65

 

Net interest margin

 

4.33

 

 

4.36

 

 

4.49

 

Core net interest margin (1)

 

4.10

 

 

4.12

 

 

4.24

 

Cost of deposits

 

0.58

 

 

0.71

 

 

0.55

 

Efficiency ratio (2)

 

51.9

 

 

50.9

 

 

48.3

 

Total assets

 

$

11,776,012

 

 

$

11,811,497

 

 

$

11,487,387

 

Total deposits

 

8,898,509

 

 

8,859,288

 

 

8,658,351

 

Non-maturity deposits as a percent of total deposits

 

88

%

 

85

%

 

84

%

Book value per share

 

$

33.82

 

 

$

33.50

 

 

$

31.52

 

Tangible book value per share (1)

 

18.84

 

 

18.41

 

 

16.97

 

Total risk-based capital ratio

 

13.81

%

 

13.40

%

 

12.39

%

 

 

 

 

 

 

 

(1) A reconciliation of the non-GAAP measures of average tangible common equity, core net interest margin and tangible book value per share to the GAAP measures of common stockholders' equity, net interest margin 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, other-than-temporary impairment recovery/(loss) on investment 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 $112.9 million in the fourth quarter of 2019, an increase of $584,000, or 1%, from the third quarter of 2019. The increase in net interest income reflected a lower cost of funds driven primarily by higher average balances of noninterest bearing deposits and, to a lesser extent, lower average balances of retail and brokered certificates of deposit, and lower rates paid on deposits, partially offset by the impact of lower average loan balances and yields.

Net interest margin for the fourth quarter of 2019 was 4.33% compared with 4.36% for the third quarter of 2019. The decrease was driven primarily by lower accretion income and lower loan-related fees of $5.8 million and $3.3 million, respectively, compared to $6.0 million and $3.6 million, respectively. Our core net interest margin, which excludes the impact of accretion and other one-time adjustments, decreased 2 basis points to 4.10%, compared to 4.12% from the prior quarter. The decrease in the core net interest margin reflected lower loan yields, partially offset by a lower cost of funds.

We anticipate our core net interest margin will be in the range of 3.95% to 4.05% in the first quarter of 2020.

Net interest income for the fourth quarter of 2019 decreased $4.6 million, or 4%, compared to the fourth quarter of 2018. The decrease was primarily attributable to lower loan yields and a $208.7 million decrease in average loan balances, partially offset by a lower cost of funds.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

December 31, 2019

 

September 30, 2019

 

December 31, 2018

 

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

Assets

 

(dollars in thousands)

Cash and cash equivalents

 

$

201,161

 

 

$

283

 

 

0.56

%

 

$

188,693

 

 

$

403

 

 

0.85

%

 

$

230,377

 

 

$

634

 

 

1.09

%

Investment securities

 

1,445,158

 

 

10,210

 

 

2.83

 

 

1,311,649

 

 

9,227

 

 

2.81

 

 

1,243,240

 

 

9,046

 

 

2.91

 

Loans receivable, net (1) (2)

 

8,700,690

 

 

119,353

 

 

5.44

 

 

8,728,536

 

 

122,974

 

 

5.59

 

 

8,909,407

 

 

126,341

 

 

5.63

 

Total interest-earning assets

 

$

10,347,009

 

 

$

129,846

 

 

4.98

 

 

$

10,228,878

 

 

$

132,604

 

 

5.14

 

 

$

10,383,024

 

 

$

136,021

 

 

5.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

5,216,658

 

 

$

13,144

 

 

1.00

 

 

$

5,343,043

 

 

$

15,878

 

 

1.18

 

 

$

5,065,505

 

 

$

12,041

 

 

0.94

 

Borrowings

 

368,583

 

 

3,783

 

 

4.07

 

 

436,979

 

 

4,391

 

 

3.99

 

 

905,300

 

 

6,434

 

 

2.82

 

Total interest-bearing liabilities

 

$

5,585,241

 

 

$

16,927

 

 

1.20

 

 

$

5,780,022

 

 

$

20,269

 

 

1.39

 

 

$

5,970,805

 

 

$

18,475

 

 

1.23

 

Noninterest-bearing deposits

 

$

3,814,809

 

 

 

 

 

 

$

3,533,797

 

 

 

 

 

 

$

3,571,119

 

 

 

 

 

Net interest income

 

 

 

$

112,919

 

 

 

 

 

 

$

112,335

 

 

 

 

 

 

$

117,546

 

 

 

Net interest margin (3)

 

 

 

 

 

4.33

 

 

 

 

 

 

4.36

 

 

 

 

 

 

4.49

 

Cost of deposits

 

 

 

 

 

0.58

 

 

 

 

 

 

0.71

 

 

 

 

 

 

0.55

 

Cost of funds (4)

 

 

 

 

 

0.71

 

 

 

 

 

 

0.86

 

 

 

 

 

 

0.77

 

 

(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums.

(2) Includes net discount accretion of $5.8 million, $6.0 million and $6.3 million, respectively.

(3) Represents 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 fourth quarter of 2019 was $2.3 million, an increase of $735,000 from the third quarter of 2019 and an increase of $39,000 from the fourth quarter of 2018. Net charge-offs were $2.3 million in the fourth quarter of 2019, compared to $1.4 million in the third quarter of 2019 and $138,000 in the fourth quarter of 2018.

Provision for unfunded commitments for the fourth quarter of 2019 reflected a $666,000 reduction due primarily to lower loan commitments and loss rates as compared to a $197,000 provision for the third quarter of 2019, and similar to the provision for the fourth quarter of 2018 which reflected a $580,000 reduction for unfunded commitments.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

Provision for Credit Losses

 

(dollars in thousands)

Provision for loans and lease losses

 

$

3,016

 

 

$

1,365

 

 

$

2,904

 

Provision for unfunded commitments

 

(666

)

 

197

 

 

(580

)

Provision for sold loans

 

(53

)

 

 

 

(66

)

Total provision for credit losses

 

$

2,297

 

 

$

1,562

 

 

$

2,258

 

Noninterest income

Noninterest income for the fourth quarter of 2019 was $9.8 million, a decrease of $1.6 million, or 14%, from the third quarter of 2019. The fourth quarter of 2019 included decreases of $615,000 in net gain from sales of loans and $590,000 in net gain from the sales of investment securities. In addition, other income decreased $431,000 from the third quarter of 2019 primarily due to a $652,000 decrease in income on Community Reinvestment Act (“CRA”) related equity investments and an $183,000 increase in cost on debt extinguishment, partially offset by a $462,000 increase in swap fee income.

During the fourth quarter of 2019, the Bank sold $23.7 million of Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans for a gain of $2.1 million, compared with $26.3 million of SBA loans sold at a gain of $2.3 million in the third quarter of 2019. The fourth quarter also included the sale of $8.4 million of other loans for a net loss of $418,000 compared with sales of $684,000 of other loans for a net gain of $8,000 during the third quarter of 2019.

We anticipate our noninterest income will range from $6.5 million to $7.0 million for the first quarter of 2020, based upon the current SBA loan sales volume and gain rates as well as normal, recurring business activities, which exclude gain on sales of investment securities.

Noninterest income for the fourth quarter of 2019 increased $2.8 million, or 41%, compared to the fourth quarter of 2018. The increase was primarily due to a net gain from sales of investment securities of $3.7 million, partially offset by a $772,000 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, and a $231,000 decrease in net gain from sales of loans.

The decrease in net gain from sales of loans for the fourth quarter of 2019 compared to the same period last year was primarily due to the realization of a $418,000 loss on the sales of other loans in the fourth quarter of 2019 compared with a net gain of $320,000 in the fourth quarter of 2018, partially offset by a higher average premium realized on total SBA loan sales in the fourth quarter of 2019.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

NONINTEREST INCOME

 

(dollars in thousands)

Loan servicing fees

 

$

487

 

 

$

546

 

 

$

408

 

Service charges on deposit accounts

 

1,558

 

 

1,440

 

 

1,351

 

Other service fee income

 

359

 

 

360

 

 

270

 

Debit card interchange fee income

 

367

 

 

421

 

 

1,139

 

Earnings on BOLI

 

864

 

 

861

 

 

929

 

Net gain from sales of loans

 

1,698

 

 

2,313

 

 

1,929

 

Net gain from sales of investment securities

 

3,671

 

 

4,261

 

 

 

Other income

 

797

 

 

1,228

 

 

944

 

Total noninterest income

 

$

9,801

 

 

$

11,430

 

 

$

6,970

 

Noninterest Expense

Noninterest expense totaled $66.2 million for the fourth quarter of 2019, an increase of $880,000, or 1%, compared with the third quarter of 2019. The increase was driven primarily by a $1.1 million increase in deposit expense attributable largely to higher deposit balances, an $866,000 increase in compensation as a result of higher incentive expense and a $520,000 increase in premise and occupancy expense. These increases were partially offset by an $881,000 decrease in other expense, primarily related to charitable contributions, and a $756,000 decline in FDIC insurance premiums due to small institution assessment credits.

The Company anticipates that total operating expense will range between $65.0 million and $66.0 million for the first quarter of 2020.

Noninterest expense decreased by $1.0 million, or 2%, compared to the fourth quarter of 2018. The decrease was primarily related to a reduction in merger-related expense and a $1.5 million decline in FDIC insurance premiums, partially offset by a $2.6 million increase in compensation.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

NONINTEREST EXPENSE

 

(dollars in thousands)

Compensation and benefits

 

$

36,409

 

 

$

35,543

 

 

$

33,838

 

Premises and occupancy

 

8,113

 

 

7,593

 

 

7,504

 

Data processing

 

3,241

 

 

3,094

 

 

3,868

 

Other real estate owned operations, net

 

31

 

 

64

 

 

1

 

FDIC insurance premiums

 

(766

)

 

(10

)

 

750

 

Legal, audit and professional expense

 

3,268

 

 

3,058

 

 

3,105

 

Marketing expense

 

1,713

 

 

1,767

 

 

1,700

 

Office, telecommunications and postage expense

 

1,105

 

 

1,200

 

 

1,579

 

Loan expense

 

1,064

 

 

1,137

 

 

1,046

 

Deposit expense

 

4,537

 

 

3,478

 

 

3,105

 

Merger-related expense

 

 

 

(4

)

 

2,597

 

CDI amortization

 

4,247

 

 

4,281

 

 

4,631

 

Other expense

 

3,254

 

 

4,135

 

 

3,515

 

Total noninterest expense

 

$

66,216

 

 

$

65,336

 

 

$

67,239

 

Income Tax

For the fourth quarter of 2019, our effective tax rate was 24.2% compared with 27.2% for the third quarter of 2019 and 27.9% for the fourth quarter of 2018. The decrease in the effective tax rate from the prior quarter was due to tax benefits associated with the settlement of stock-based compensation in the fourth quarter of 2019, favorable return to provision adjustments associated with the filing of the 2018 federal and state tax returns in October 2019, and a true-up of the state tax rate.

The Company anticipates the full year 2020 effective tax rate to be in the range of 26.0% to 28.0%.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $8.7 billion at December 31, 2019, a decrease of $35.2 million, or 0.4%, from September 30, 2019, and a decrease of $114.5 million, or 1.3%, from December 31, 2018. The decreases were driven primarily by higher loan prepayments and payoffs, as well as higher loan sales and lower loan purchases, partially offset by higher line utilization and fundings. Loan sales during the fourth quarter of 2019 included $23.7 million of SBA/USDA loans and $8.4 million of other loans, compared with $26.3 million of SBA loans and $684,000 of other loans sold in the third quarter of 2019.

During the fourth quarter of 2019, the Bank generated $556.3 million of new loan commitments and $419.9 million of new loan fundings, compared with $536.9 million in new loan commitments and $356.6 million in new loan fundings in the third quarter of 2019, and $730.0 million of new loan commitments and $531.5 million in new loan fundings in the fourth quarter of 2018.

At December 31, 2019, our loans held for investment to deposit ratio was 98.0%, compared with 98.9% and 102.1% at September 30, 2019 and December 31, 2018, respectively.

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

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

 

 

(dollars in thousands)

Business Loans:

 

 

 

 

 

 

Commercial and industrial

 

$

1,265,185

 

 

$

1,233,938

 

 

$

1,364,423

 

Franchise

 

916,875

 

 

894,023

 

 

765,416

 

Commercial owner occupied

 

1,674,092

 

 

1,678,888

 

 

1,679,122

 

SBA

 

175,815

 

 

179,965

 

 

193,882

 

Agribusiness

 

127,834

 

 

119,633

 

 

138,519

 

Total business loans

 

4,159,801

 

 

4,106,447

 

 

4,141,362

 

Real Estate Loans:

 

 

 

 

 

 

Commercial non-owner occupied

 

2,072,374

 

 

2,053,590

 

 

2,003,174

 

Multi-family

 

1,576,870

 

 

1,611,904

 

 

1,535,289

 

One-to-four family

 

254,779

 

 

273,182

 

 

356,264

 

Construction

 

410,065

 

 

478,961

 

 

523,643

 

Farmland

 

175,997

 

 

171,667

 

 

150,502

 

Land

 

31,090

 

 

30,717

 

 

46,628

 

Total real estate loans

 

4,521,175

 

 

4,620,021

 

 

4,615,500

 

Consumer Loans:

 

 

 

 

 

 

Consumer loans

 

50,922

 

 

40,548

 

 

89,424

 

Gross loans held for investment

 

8,731,898

 

 

8,767,016

 

 

8,846,286

 

Deferred loan origination costs/(fees) and premiums/(discounts), net

 

(9,587

)

 

(9,540

)

 

(9,468

)

Loans held for investment

 

8,722,311

 

 

8,757,476

 

 

8,836,818

 

Allowance for loan losses

 

(35,698

)

 

(35,000

)

 

(36,072

)

Loans held for investment, net

 

$

8,686,613

 

 

$

8,722,476

 

 

$

8,800,746

 

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

 

$

1,672

 

 

$

7,092

 

 

$

5,719

 

The total end of period weighted average interest rate on loans, excluding fees and discounts, at December 31, 2019 was 4.91%, compared with 5.00% at September 30, 2019 and 5.13% at December 31, 2018. The quarter-over-quarter and year-over-year decreases reflect the impact of lower rates on new originations as well as the unfavorable repricing of loans as a result of the Federal Reserve Bank's interest rate decreases.

The following table presents the composition of the organic loan commitments for the periods indicated:

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

 

 

(dollars in thousands)

Business Loans:

 

 

 

 

 

 

Commercial and industrial

 

$

139,297

 

 

$

130,494

 

 

$

141,837

 

Franchise

 

56,442

 

 

91,018

 

 

82,013

 

Commercial owner occupied

 

114,222

 

 

64,080

 

 

64,349

 

SBA

 

27,576

 

 

35,516

 

 

26,884

 

Agribusiness

 

5,795

 

 

6,241

 

 

6,525

 

Total business loans

 

343,332

 

 

327,349

 

 

321,608

 

Real Estate Loans:

 

 

 

 

 

 

Commercial non-owner occupied

 

77,414

 

 

90,464

 

 

196,779

 

Multi-family

 

69,653

 

 

41,289

 

 

73,454

 

One-to-four family

 

8,457

 

 

6,110

 

 

13,029

 

Construction

 

49,366

 

 

59,639

 

 

85,327

 

Farmland

 

2,800

 

 

9,350

 

 

14,588

 

Land

 

3,800

 

 

1,285

 

 

4,229

 

Total real estate loans

 

211,490

 

 

208,137

 

 

387,406

 

Consumer Loans:

 

 

 

 

 

 

Consumer loans

 

1,439

 

 

1,463

 

 

20,938

 

Total loan commitments

 

$

556,261

 

 

$

536,949

 

 

$

729,952

 

The weighted average interest rate on our new loan production was 4.77% in the fourth quarter of 2019, compared with 5.28% in the third quarter of 2019 and 5.35% in the fourth quarter of 2018. During the fourth quarter of 2019, the Bank also purchased $25.6 million of multi-family loans at a weighted average interest rate of 3.99% and $14.4 million of commercial non-owner occupied loans at a weighted average interest rate of 4.25%.

Asset Quality and Allowance for Loan Losses

At December 31, 2019, the allowance for loan losses was $35.7 million, compared to $35.0 million at September 30, 2019 and $36.1 million at December 31, 2018. The provision for loan and lease losses for the fourth quarter of 2019 was $3.0 million, compared to $1.4 million for the third quarter of 2019 and $2.9 million for the fourth quarter of 2018. During the fourth quarter of 2019, the Company incurred $2.3 million of net charge-offs, compared to $1.4 million in the third quarter of 2019 and $138,000 in the fourth quarter of 2018.

The ratio of allowance for loan losses to total loans held for investment at December 31, 2019 was 0.41%, compared to 0.40% and 0.41% at September 30, 2019 and December 31, 2018, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value discount on loans acquired through bank acquisitions was $40.7 million, or 0.47% of total loans held for investment, as of December 31, 2019, compared to $46.8 million, or 0.53% of total loans held for investment, as of September 30, 2019 and $61.0 million, or 0.69% of total loans held for investment, as of December 31, 2018.

Nonperforming assets totaled $9.1 million, or 0.08% of total assets, at December 31, 2019, an increase of $860,000 from September 30, 2019 and an increase of $4.1 million from December 31, 2018. During the fourth quarter of 2019, nonperforming loans increased $545,000 from September 30, 2019 to $8.7 million and other real estate owned increased $315,000 from September 30, 2019 to $441,000. Loan delinquencies increased to $19.2 million, or 0.22% of loans held for investment, compared to $11.2 million, or 0.13% of loans held for investment, at September 30, 2019, and $12.9 million, or 0.15% of loans held for investment, at December 31, 2018.

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

Asset Quality

 

(dollars in thousands)

Nonperforming loans

 

$

8,650

 

 

$

8,105

 

 

$

4,857

 

Other real estate owned

 

441

 

 

126

 

 

147

 

Other assets owned

 

 

 

 

 

13

 

Nonperforming assets

 

$

9,091

 

 

$

8,231

 

 

$

5,017

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

35,698

 

 

$

35,000

 

 

$

36,072

 

Allowance for loan losses as a percent of total nonperforming loans

 

413

%

 

432

%

 

743

%

Nonperforming loans as a percent of loans held for investment

 

0.10

 

 

0.09

 

 

0.05

 

Nonperforming assets as a percent of total assets

 

0.08

 

 

0.07

 

 

0.04

 

Net loan charge-offs for the quarter ended

 

$

2,318

 

 

$

1,391

 

 

$

138

 

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

 

0.03

%

 

0.02

%

 

%

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

 

0.41

 

 

0.40

 

 

0.41

 

Delinquent Loans:

 

 

 

 

 

 

30 - 59 days

 

$

2,106

 

 

$

1,725

 

 

$

7,046

 

60 - 89 days

 

10,583

 

 

3,212

 

 

1,242

 

90+ days

 

6,560

 

 

6,293

 

 

4,565

 

Total delinquency

 

$

19,249

 

 

$

11,230

 

 

$

12,853

 

Delinquency as a percent of loans held for investment

 

0.22

%

 

0.13

%

 

0.15

%

 

 

 

 

 

 

 

(1) The ratio is less than 0.01% as of December 31, 2018.

(2) 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 September 30, 2019, 41% of loans held for investment include a fair value net discount of $46.8 million or 0.53% of loans held for investment. At December 31, 2018, 49% of loans held for investment include a fair value net discount of $61.0 million or 0.69% of loans held for investment.

Investment Securities

Investment securities available-for-sale totaled $1.4 billion at December 31, 2019, an increase of $111.7 million, or 8.9%, from September 30, 2019, and an increase of $265.2 million, or 24.0%, from December 31, 2018. The increase in the fourth quarter of 2019 as compared to the third quarter of 2019 was primarily the result of purchases of $284.0 million, partially offset by sales of $129.6 million, total principal payments, amortization and redemptions of $32.9 million and a mark-to-market fair value adjustment decrease of $12.3 million. The increase compared to the same period last year was primarily the result of $889.5 million in purchases and a $38.1 million in mark-to-market fair value adjustment, partially offset by $543.2 million in sales and $126.6 million in principal payments, amortization and redemptions due to higher purchases and expansion of the investment portfolio.

Deposits

At December 31, 2019, deposits totaled $8.9 billion, an increase of $39.2 million, or 0.4%, from September 30, 2019 and an increase of $240.2 million, or 2.8%, from December 31, 2018. Non-maturity deposits totaled $7.9 billion, an increase of $335.3 million, or 4.5%, from September 30, 2019 and an increase of $603.0 million, or 8.3%, from December 31, 2018. During the fourth quarter of 2019, deposit increases included $234.1 million in noninterest-bearing deposits, $56.6 million in interest checking and $44.5 million in money market/savings deposits, partially offset by decreases of $250.1 million in brokered certificates of deposits and $46.0 million in retail certificates of deposits as compared to the third quarter of 2019.

The weighted average cost of deposits for the fourth quarter of 2019 was 0.58%, compared with 0.71% for the third quarter of 2019 and 0.55% for the fourth quarter of 2018. The decrease in the weighted average cost of deposits for the fourth quarter of 2019 compared to the third quarter of 2019 was driven primarily by lower volume and rates paid on retail and brokered certificates of deposit as well as higher average noninterest-bearing and money market deposit balances and pricing actions taken by the Bank across all interest-bearing deposit products. The cost of deposits was 0.53% at December 31, 2019.

 

 

December 31,

 

September 30,

 

December 31,

 

 

2019

 

2019

 

2018

Deposit Accounts

 

(dollars in thousands)

Noninterest-bearing checking

 

$

3,857,660

 

 

$

3,623,546

 

 

$

3,495,737

 

Interest-bearing:

 

 

 

 

 

 

Checking

 

586,019

 

 

529,401

 

 

526,088

 

Money market/savings

 

3,406,988

 

 

3,362,453

 

 

3,225,849

 

Retail certificates of deposit

 

973,465

 

 

1,019,433

 

 

1,009,066

 

Wholesale/brokered certificates of deposit

 

74,377

 

 

324,455

 

 

401,611

 

Total interest-bearing

 

5,040,849

 

 

5,235,742

 

 

5,162,614

 

Total deposits

 

$

8,898,509

 

 

$

8,859,288

 

 

$

8,658,351

 

 

 

 

 

 

 

 

Cost of deposits

 

0.58

%

 

0.71

%

 

0.55

%

Noninterest-bearing deposits as a percent of total deposits

 

43.4

 

 

40.9

 

 

40.4

 

Non-maturity deposits as a percent of total deposits

 

88.2

 

 

84.8

 

 

83.7

 

Core deposits to total deposits (1)

 

93.7

 

 

90.7

 

 

89.2

 

 

 

 

 

 

 

 

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

Borrowings

At December 31, 2019, total borrowings amounted to $732.2 million, a decrease of $90.2 million, or 11%, from September 30, 2019 and a decrease of $45.8 million, or 6%, from December 31, 2018. Total borrowings for the quarter included $517.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) advances and $215.1 million of subordinated debt. At December 31, 2019, total borrowings represented 6.2% of total assets, compared to 7.0% and 6.8% as of September 30, 2019 and December 31, 2018, respectively. The decrease in borrowings at December 31, 2019 as compared to September 30, 2019 and December 31, 2018 was primarily due to decreases in FHLB advances and the redemption of junior subordinated debt securities.

In May 2019, the Company issued $125.0 million aggregate principal amount of its 4.875% Fixed-to-Floating Rate Subordinated Notes (the “Notes”) due May 15, 2029. On October 7, 2019, the Company used a portion of the proceeds from the issuance of the Notes to redeem all $3.1 million outstanding principal amount of floating rate junior subordinated debt securities associated with Mission Community Capital Trust I, a statutory business trust created under the laws of the State of Delaware, acquired as part of the Heritage Oaks Bancorp acquisition. The junior subordinated debt securities carried an interest rate of three-month LIBOR plus 2.95% per annum, for an effective rate of 5.25% per annum, and were scheduled to mature on October 7, 2033. The junior subordinated debt securities were called at par, plus accrued and unpaid interest, for an aggregate amount of $3.1 million.

Capital Ratios

At December 31, 2019, our ratio of tangible common equity to total assets was 10.30%, compared with 10.01% in the prior quarter and 10.02% at December 31, 2018, with tangible book value per share of $18.84, compared with $18.41 at September 30, 2019 and $16.97 at December 31, 2018.

At December 31, 2019, the Company had a tier 1 leverage capital ratio of 10.54%, common equity tier 1 risk-based capital ratio of 11.35%, tier 1 risk-based capital ratio of 11.42% and total risk-based capital ratio of 13.81%.

At December 31, 2019, the Bank exceeded all regulatory capital requirements with a tier 1 leverage capital ratio of 12.39%, common equity tier 1 risk-based capital ratio of 13.43%, tier 1 risk-based capital ratio of 13.43% and total risk-based capital of 13.83%. These capital ratios exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage ratio, 6.5% for common equity tier 1 capital ratio, 8.00% for tier 1 capital ratio and 10.00% for total capital ratio and exceeded the minimum common equity Tier 1, Tier 1 and total capital ratio inclusive of the fully phased-in capital conservation buffer of 7.0%, 8.5% and 10.5%, respectively.

 

 

December 31,

 

September 30,

 

December 31,

Capital Ratios

 

2019

 

2019

 

2018

Pacific Premier Bancorp, Inc. Consolidated

 

 

Tier 1 leverage ratio

 

10.54

%

 

10.34

%

 

10.38

%

Common equity tier 1 risk-based capital ratio

 

11.35

 

 

10.93

 

 

10.88

 

Tier 1 risk-based capital ratio

 

11.42

 

 

11.04

 

 

11.13

 

Total risk-based capital ratio

 

13.81

 

 

13.40

 

 

12.39

 

Tangible common equity ratio (1)

 

10.30

 

 

10.01

 

 

10.02

 

 

 

 

 

 

 

 

Pacific Premier Bank

 

 

 

 

 

 

Tier 1 leverage ratio

 

12.39

%

 

12.20

%

 

11.06

%

Common equity tier 1 risk-based capital ratio

 

13.43

 

 

13.01

 

 

11.87

 

Tier 1 risk-based capital ratio

 

13.43

 

 

13.01

 

 

11.87

 

Total risk-based capital ratio

 

13.83

 

 

13.41

 

 

12.28

 

 

 

 

 

 

 

 

Share Data

 

 

 

 

 

 

Book value per share

 

$

33.82

 

 

$

33.50

 

 

$

31.52

 

Tangible book value per share (1)

 

18.84

 

 

18.41

 

 

16.97

 

Dividend per share

 

0.22

 

 

0.22

 

 

 

Closing stock price (2)

 

32.60

 

 

31.19

 

 

25.52

 

Shares issued and outstanding (2)

 

59,506,057

 

 

59,364,340

 

 

62,480,755

 

Market Capitalization (2)(3)

 

$

1,939,897

 

 

$

1,851,574

 

 

$

1,594,509

 

 

 

 

 

 

 

 

(1) A reconciliation of the non-GAAP measures of tangible common equity and tangible book value per share to the GAAP measures of common stockholders' equity and book value per share is set forth at the end of this press release.

(2) As of the last trading day prior to period end.

(3) Dollars in thousands.

Dividend and Stock Repurchase Program

On January 21, 2020, the Company's Board of Directors declared a $0.25 per share dividend, payable on February 14, 2020 to shareholders of record on February 3, 2020, a $0.03 increase over the prior quarter's $0.22 per share dividend paid. On December 2, 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 December 31, 2019, the Company did not repurchase any shares under the newly-approved stock repurchase program. The stock repurchase program may be limited or terminated at any time without prior notice. In connection with the prior stock repurchase program approved in October 2018, which concluded in the third quarter of 2019, the Company purchased an aggregate of 3,364,761 shares of Common Stock for aggregate cash consideration of $100 million.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on January 23, 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 February 4, 2020 at (877) 344-7529, access code 10137673.

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 $11.8 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 more than 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 acquisitions we have made or may make.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market and monetary fluctuations; the effect of acquisitions we may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; 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 Current Expected Credit Loss (“CECL”) model, which will change how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption on January 1, 2020; possible other-than-temporary impairments of securities held by us; 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; the possibility that we may discontinue a currently-approved stock repurchase program or reduce or otherwise limit the level of repurchases of common stock we may make from time to time pursuant to such program; 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; 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 Company's 2018 Annual Report on Form 10-K and other reports filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

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

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)

(Unaudited)

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2019

 

2019

 

2019

 

2019

 

2018

ASSETS

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

135,847

 

 

$

166,238

 

 

$

139,879

 

 

$

122,947

 

 

$

125,036

 

Interest-bearing deposits with financial institutions

 

191,003

 

 

261,477

 

 

235,505

 

 

55,435

 

 

78,370

 

Cash and cash equivalents

 

326,850

 

 

427,715

 

 

375,384

 

 

178,382

 

 

203,406

 

Interest-bearing time deposits with financial institutions

 

2,708

 

 

2,711

 

 

2,956

 

 

5,896

 

 

6,143

 

Investments held to maturity, at amortized cost

 

37,838

 

 

40,433

 

 

42,997

 

 

43,894

 

 

45,210

 

Investment securities available for sale, at fair value

 

1,368,384

 

 

1,256,655

 

 

1,258,379

 

 

1,171,410

 

 

1,103,222

 

FHLB, FRB and other stock, at cost

 

93,061

 

 

92,986

 

 

92,841

 

 

94,751

 

 

94,918

 

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

 

1,672

 

 

7,092

 

 

8,529

 

 

11,671

 

 

5,719

 

Loans held for investment

 

8,722,311

 

 

8,757,476

 

 

8,771,938

 

 

8,865,855

 

 

8,836,818

 

Allowance for loan losses

 

(35,698

)

 

(35,000

)

 

(35,026

)

 

(37,856

)

 

(36,072

)

Loans held for investment, net

 

8,686,613

 

 

8,722,476

 

 

8,736,912

 

 

8,827,999

 

 

8,800,746

 

Accrued interest receivable

 

39,442

 

 

38,603

 

 

40,420

 

 

40,302

 

 

37,837

 

Other real estate owned