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Section 1: 8-K (8-K)

ppbi-20201027
0001028918false00010289182020-10-272020-10-27

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 27, 2020
PACIFIC PREMIER BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware0-2219333-0743196
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
17901 Von Karman Avenue, Suite 1200, Irvine, CA 92614
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (949) 864-8000

Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per sharePPBINASDAQ Global Select Market




ITEM 2.02          RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
On October 27, 2020, Pacific Premier Bancorp, Inc. ("PPBI") issued a press release setting forth its (unaudited) financial results for the third quarter of 2020.  A copy of PPBI’s press release is furnished as Exhibit 99.1 and hereby incorporated by reference. A presentation regarding PPBI’s financial results for the three months ended September 30, 2020 is furnished as Exhibit 99.2 and incorporated herein by reference.

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of PPBI under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.


ITEM 8.01         OTHER EVENTS

Quarterly Dividend

On October 23, 2020, PPBI’s Board of Directors declared a $0.28 per share dividend, payable on November 13, 2020 to stockholders of record on November 6, 2020.


ITEM 9.01           FINANCIAL STATEMENTS AND EXHIBITS
104Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PACIFIC PREMIER BANCORP, INC.
    
Dated:October 27, 2020By:
/s/ STEVEN R. GARDNER
   Steven R. Gardner
   Chairman, President and Chief Executive Officer

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Section 2: EX-99.1 (EX-99.1)

Document

Exhibit 99.1



Pacific Premier Bancorp, Inc. Announces Third Quarter 2020 Results

Increases Quarterly Cash Dividend by 12% to $0.28 Per Share
 
Third Quarter 2020 Summary
 
Net income of $66.6 million, or $0.70 per diluted share
Return on average assets of 1.31%, return on average equity of 9.90%, and return on average tangible common equity of 16.44%
Net interest margin of 3.54% and core net interest margin of 3.23%
Cost of deposits of 0.20% in the third quarter, compared with 0.32% in the prior quarter
Non-maturity deposits of $14.6 billion, or 89.5% of total deposits
Noninterest bearing deposits represent 36.1% of total deposits
Nonperforming assets represent 0.14% of total assets
Converted Opus Bank's operating system and consolidated 20 branches in early October

    Irvine, Calif., October 27, 2020 -- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $66.6 million, or $0.70 per diluted share, for the third quarter of 2020, compared with a net loss of $99.1 million, or $1.41 per diluted share, for the second quarter of 2020 and net income of $41.4 million, or $0.69 per diluted share, for the third quarter of 2019. Financial results for the third quarter of 2020 reflected the Company's return to profitability after increasing its credit loss reserves in the first half of the year. These reserve increases were primarily due to the adverse impact of the COVID-19 pandemic on economic forecasts utilized by the Company in its current expected credit losses (“CECL”) model and the initial establishment of the Day 1 reserves required by CECL methodology in conjunction with the closing of the Opus Bank (“Opus”) acquisition during the second quarter of 2020.
    Total assets were $19.84 billion at September 30, 2020, compared with $20.52 billion at June 30, 2020, and $11.81 billion at September 30, 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, “We delivered solid financial results during the third quarter as we continued to execute well on our strategic priorities, including managing through the COVID-19 crisis, integrating the Opus Bank team, and enhancing our ability to drive franchise value. Pre-provision net revenue increased to $98 million, up 61% from the prior quarter, excluding merger-related expenses, and our efficiency ratio improved to 47%, which reflects our increased operating leverage, earnings power, and the sale of $1.13 billion of SBA PPP loans.

“Since the closing of the Opus Bank acquisition on June 1, 2020 we have successfully executed on our approach to integrating the two teams. In early October, we converted Opus’ core operating system and consolidated 20 branches. We have realized the estimated cost savings of 25% of Opus' pre-merger noninterest expenses and expect to achieve fully phased in cost savings by the end of this year. Our loan pipeline has grown during the quarter and we expect stronger production going forward. Our team is focused on driving new business opportunities and expanding existing relationships to grow deposits, loans, and fee income.

“While the COVID-19 pandemic is far from over, we are seeing encouraging trends in asset quality. Of the nearly $2.3 billion in temporary loan modifications we granted to clients earlier this year, the majority have resumed payments and 1.8% of total loans are currently subject to modifications. We believe the strength of our asset quality during an unprecedented economic downturn reflects the resilience of our clients’ businesses, our conservative underwriting standards, and our proactive approach to credit risk management."

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Mr. Gardner concluded, “Given our strong capital position, our results of operations during the third quarter, and our current expectations regarding our future financial performance, I am pleased to announce that the Board of Directors has approved an increase in our common stock dividend to $0.28 per share. We believe we are well positioned to manage through the ongoing economic uncertainty, and that we have the ability to pursue additional strategic transactions to further enhance the value of our franchise should a compelling opportunity present itself.”


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FINANCIAL HIGHLIGHTS
Three Months Ended
 September 30,June 30,September 30,
 202020202019
Financial Highlights(Dollars in thousands, except per share data)
Net income (loss) $66,566 $(99,091)$41,375 
Diluted earnings (loss) per share0.70 (1.41)0.69 
Pre-provision net revenue (1)
$97,713 $60,566 $58,425 
Return on average assets1.31 %(2.61)%1.44 %
Return on average equity9.90 (17.76)8.32 
Return on average tangible common equity (1)
16.44 (29.40)16.27 
Pre-provision net revenue on average assets (1)
1.92 1.60 2.04 
Net interest margin3.54 3.79 4.36 
Core net interest margin (1)
3.23 3.59 4.12 
Cost of deposits0.20 0.32 0.71 
Efficiency ratio (2)
47.4 52.9 50.9 
Total assets$19,844,240 $20,517,074 $11,811,497 
Total deposits16,330,807 16,976,693 8,859,288 
Non-maturity deposits as a percent of total deposits89.5 %88.7 %84.8 %
Book value per share$28.48 $28.14 $33.50 
Tangible book value per share (1)
18.01 17.58 18.41 
Total risk-based capital ratio16.00 %15.69 %13.40 %
______________________________
(1) A reconciliation of the non-U.S. GAAP measures of pre-provision net revenue, return on average tangible common equity, pre-provision net revenue on average assets, core net interest margin, and tangible book value per share to the U.S. GAAP measures of net income, 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, amortization of intangible assets, 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.
(3) Noninterest expense excludes merger-related expense

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INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin
 
Net interest income totaled $166.5 million in the third quarter of 2020, an increase of $36.3 million, or 27.8%, from the second quarter of 2020. The increase in net interest income reflected higher average interest-earning assets of $4.88 billion, related to the full quarter's impact of the Opus acquisition, compared with the second quarter of 2020, as well as increased investment securities purchases, higher accretion income, and a lower cost of funds driven by a lower cost of deposits.

The net interest margin for the third quarter of 2020 was 3.54%, compared with 3.79% in the prior quarter. Our core net interest margin, which excludes the impact of loan accretion income of $12.2 million, compared to $5.8 million in the prior quarter, certificates of deposit mark-to-market amortization, and other one-time adjustments, decreased 36 basis points to 3.23%, compared to 3.59% in the prior quarter. Excluding the Small Business Administration's Paycheck Protection Program (“PPP”) loan portfolio, our core net interest margin decreased 39 basis points to 3.26%, compared to 3.65% in the prior quarter. The decrease was primarily attributable to the shift in interest-earning asset mix and lower loan and investment yields, partially offset by a lower cost of deposits. The lower interest-earning asset yield was driven primarily by the full quarter's impact of the Opus loan portfolio added in June that had lower yields, and the deployment of excess liquidity into lower yielding investment securities. The lower cost of funds was driven principally by lower rates paid on deposits.

Net interest income for the third quarter of 2020 increased $54.2 million, or 48.3%, compared to the third quarter of 2019. The increase was attributable to an increase in average interest-earning assets of $8.48 billion, which primarily resulted from the acquisition of Opus in the second quarter of 2020 and organic loan growth, as well as a higher average investment securities balance and a lower cost of funds, partially offset by lower average loan and investment yields and a higher average balance of deposits.

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PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
 
 Three Months Ended
 September 30, 2020June 30, 2020September 30, 2019
 Average BalanceInterest Income/ExpenseAverage
Yield/
Cost
Average BalanceInterest Income/ExpenseAverage
Yield/
Cost
Average BalanceInterest Income/ExpenseAverage Yield/ Cost
Assets(Dollars in thousands)
Cash and cash equivalents$1,388,897 $305 0.09 %$796,761 $215 0.11 %$188,693 $403 0.85 %
Investment securities3,283,840 14,231 1.73 1,792,432 10,568 2.36 1,311,649 9,227 2.81 
Loans receivable, net (1) (2)
14,034,868 167,455 4.75 11,242,721 133,339 4.77 8,728,536 122,974 5.59 
Total interest-earning assets$18,707,605 $181,991 3.87 $13,831,914 $144,122 4.19 $10,228,878 $132,604 5.14 
Liabilities
Interest-bearing deposits$10,703,431 $8,509 0.32 $7,317,675 $9,655 0.53 $5,343,043 $15,878 1.18 
Borrowings542,437 6,936 5.09 431,181 4,175 3.89 436,979 4,391 3.99 
Total interest-bearing liabilities$11,245,868 $15,445 0.55 $7,748,856 $13,830 0.72 $5,780,022 $20,269 1.39 
Noninterest-bearing deposits$5,877,619 $4,970,812 $3,533,797 
Net interest income$166,546 $130,292 $112,335 
Net interest margin (3)
  3.54 3.79 4.36 
Cost of deposits0.20 0.32 0.71 
Cost of funds (4)
0.36 0.44 0.86 
Ratio of interest-earning assets to interest-bearing liabilities166.35 178.50 176.97 
______________________________
(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 $12.2 million, $5.8 million, and $6.0 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 third quarter of 2020 was $4.2 million, a decrease of $156.4 million from the second quarter of 2020 and an increase of $2.6 million from the third quarter of 2019. The decrease from the second quarter of 2020 reflected improved economic conditions, lower loans held for investment, and the impact of Day 1 provision for credit losses associated with the acquisition of Opus during the second quarter of 2020. The credit loss reserve during the second quarter of 2020 resulted from unfavorable changes in economic forecasts employed in the Bank's CECL model and an $84.4 million Day 1 provision for credit losses resulting from the acquisition of Opus in June of 2020. The Company recognized a recapture of $492,000 of the provision for unfunded commitments in the third quarter of 2020, primarily due to lower outstanding unfunded commitments, compared with a provision of $10.4 million in the second quarter of 2020, $8.6 million of which represented the Day 1 provision related to the unfunded commitments from the Opus acquisition, and a $197,000 provision for unfunded commitments in the third quarter of 2019.
Three Months Ended
September 30,June 30,September 30,
202020202019
Provision for Credit Losses(Dollars in thousands)
Provision for loan losses$4,702 $150,257 $1,365 
Provision for unfunded commitments(492)10,378 197 
Total provision for credit losses$4,210 $160,635 $1,562 
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Noninterest Income
 
Noninterest income for the third quarter of 2020 was $26.8 million, an increase of $19.9 million from the second quarter of 2020. The increase was primarily due to a $11.6 million increase in net gain from the sales of loans, a $4.6 million increase in custodial account fees from a full quarter's impact of Pacific Premier Trust acquired in the Opus acquisition, a $1.2 million increase in net gain from sales of investment securities, as well as a $956,000 increase in earnings on bank-owned life insurance (“BOLI”), primarily due to additional BOLI from Opus. In addition, other income increased $687,000, primarily due to an $877,000 increase in escrow and exchange fee income attributable to the Commerce Escrow division acquired in the Opus acquisition.

During the third quarter of 2020, the Bank sold $1.16 billion of Small Business Administration (“SBA”) loans, primarily PPP loans, for a net gain of $19.0 million and sold $96.2 million of other loans for a net loss of $9.4 million, compared with sales of $15.4 million of other loans for a net loss of $2.0 million during the prior quarter.

Noninterest income for the third quarter of 2020 increased $15.3 million, or 134.1%, compared to the third quarter of 2019. The increase was primarily related to a $7.2 million increase in net gain from the sales of loans, the addition of $7.0 million of custodial account fees following the Opus acquisition, a $2.1 million increase in other income primarily due to a $1.1 million increase of escrow and exchange fee income following the Opus acquisition, and a $1.4 million increase in earnings on BOLI, partially offset by a $3.1 million decrease in net gain from sales of investment securities.

The increase in net gain from sales of loans for the third quarter of 2020 compared to the same period last year was primarily due to the sales of $1.16 billion of SBA, primarily PPP loans, for a net gain of $19.0 million and the sale of $96.2 million of other loans for a net loss of $9.4 million loss, compared with sales of $26.3 million of SBA loans for a net gain of $2.3 million and $684,000 of other loans for a net gain of $8,000 during the third quarter of 2019.
Three Months Ended
September 30,June 30,September 30,
202020202019
Noninterest Income(Dollars in thousands)
Loan servicing fees$481 $434 $546 
Service charges on deposit accounts1,593 1,399 1,440 
Other service fee income487 297 360 
Debit card interchange fee income944 457 421 
Earnings on BOLI2,270 1,314 861 
Net gain (loss) from sales of loans9,542 (2,032)2,313 
Net gain (loss) from sales of investment securities1,141 (21)4,261 
Custodial account fees
6,960 2,397 — 
Other income3,340 2,653 1,228 
Total noninterest income$26,758 $6,898 $11,430 
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 Noninterest Expense
 
Noninterest expense totaled $98.6 million for the third quarter of 2020, a decrease of $17.4 million, or 15.0%, compared to the second quarter of 2020, primarily due to the decrease of $36.4 million in merger expense related to the Opus acquisition. Excluding merger-related expense, noninterest expense totaled $95.6 million, an increase of $19.0 million, or 24.8%, compared to the second quarter of 2020 driven primarily by a $8.0 million increase in compensation and benefits, a $2.9 million increase in premises and occupancy, a $2.3 million increase in data processing, and a $2.0 million increase in legal, audit and professional expense, all of which was primarily the result of the full quarter's impact of operations, personnel, and branches retained with the acquisition of Opus.

Noninterest expense increased by $33.2 million, or 50.9%, compared to the third quarter of 2019. The increase was primarily due to a $3.0 million merger-related expense related to the Opus acquisition, a $15.5 million increase in compensation and benefits, a $4.8 million increase in premises and occupancy, a $3.7 million increase in data processing, a $2.1 million increase in legal, audit and professional expense, and a $1.3 million increase in deposit expense as a result of the addition of operations, personnel, and branches retained with the acquisition of Opus.
Three Months Ended
September 30,June 30,September 30,
202020202019
Noninterest Expense(Dollars in thousands)
Compensation and benefits$51,021 $43,011 $35,543 
Premises and occupancy12,373 9,487 7,593 
Data processing6,783 4,465 3,094 
Other real estate owned operations, net(17)64 
FDIC insurance premiums1,145 846 (10)
Legal, audit and professional expense5,108 3,094 3,058 
Marketing expense1,718 1,319 1,767 
Office, telecommunications and postage expense2,389 1,533 1,200 
Loan expense802 823 1,137 
Deposit expense4,728 4,958 3,478 
Merger-related expense2,988 39,346 (4)
Amortization of intangible assets4,538 4,066 4,281 
Other expense5,003 3,013 4,135 
Total noninterest expense$98,579 $115,970 $65,336 
Income Tax

For the third quarter of 2020, our income tax expense totaled $23.9 million, resulting in an effective tax rate of 26.5%, compared with an income tax benefit of $40.3 million and an effective tax rate of 28.9% for the second quarter of 2020, and an income tax expense of $15.5 million and an effective tax rate of 27.2% for the third quarter of 2019. The decrease in effective tax rate for the third quarter of 2020 was primarily due to permanent tax benefits which reduced the tax rate for the third quarter, while the same benefits increased the pre-tax loss rate in the second quarter. The income tax benefit from the second quarter of 2020 was the result of the significant pre-tax loss driven by the provision for credit losses and our merger-related costs associated with the Opus acquisition.


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BALANCE SHEET HIGHLIGHTS
    
Loans

Loans held for investment totaled $13.45 billion at September 30, 2020, a decrease of $1.63 billion, or 10.8%, from June 30, 2020, and an increase of $4.69 billion, or 53.6%, from September 30, 2019. The decrease from June 30, 2020 was driven by the $1.26 billion sale of loans, primarily SBA PPP loans, as well as higher loan prepayments and payoffs, and lower line utilization rates in the third quarter of 2020. The increase from September 30, 2019 was primarily due to the acquisition of Opus, which added $5.94 billion in gross loans, or $5.81 billion of loans held for investment after purchase accounting adjustments at the time of acquisition.

During the third quarter of 2020, the Bank generated $360.0 million of new loan commitments and funded $280.8 million of new loans, compared with $1.21 billion in new loan commitments and $1.19 billion in new funded loans for the second quarter of 2020, which primarily consisted of SBA PPP loans of $1.13 billion, and $536.9 million in new loan commitments and $356.6 million in new funded loans for the third quarter of 2019. The year-over-year decrease in new loans funded was primarily the result of a slowdown in loan demand. Business line utilization rates decreased to 33.9% at the end of the third quarter of 2020, compared with 37.9% at the end of the second quarter of 2020 and 40.3% at the end of third quarter of 2019.
 
At September 30, 2020, the ratio of loans held for investment to total deposits was 82.4%, compared with 88.8% and 98.9% at June 30, 2020 and September 30, 2019, respectively.

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The following table presents the composition of the loan portfolio as of the dates indicated:
September 30,June 30,September 30,
202020202019
(Dollars in thousands)
Investor loans secured by real estate
Commercial real estate (“CRE”) non-owner-occupied$2,707,930 $2,783,692 $2,052,118 
Multifamily5,142,069 5,225,557 1,610,643 
Construction and land337,872 357,426 507,114 
SBA secured by real estate (1)
57,610 59,482 68,689 
Total investor loans secured by real estate8,245,481 8,426,157 4,238,564 
Business loans secured by real estate (2)
CRE owner-occupied2,119,788 2,170,154 1,847,443 
Franchise real estate secured359,329 364,647 344,954 
SBA secured by real estate (3)
84,126 85,542 91,101 
Total business loans secured by real estate2,563,243 2,620,343 2,283,498 
Commercial loans (4)
Commercial and industrial1,820,995 2,051,313 1,353,793 
Franchise non-real estate secured515,980 523,755 549,711 
SBA non-real estate secured16,748 21,057 17,891 
SBA PPP— 1,128,780 — 
Total commercial loans2,353,723 3,724,905 1,921,395 
Retail loans
Single family residential (5)
243,359 265,170 273,416 
Consumer45,034 46,309 40,603 
Total retail loans288,393 311,479 314,019 
Gross loans held for investment (6)
13,450,840 15,082,884 8,757,476 
Allowance for credit losses for loans held for investment (7)
(282,503)(282,271)(35,000)
Loans held for investment, net$13,168,337 $14,800,613 $8,722,476 
Loans held for sale, at lower of cost or fair value$1,032 $1,007 $7,092 
______________________________
(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 $126.3 million, $144.5 million, and $46.8 million as of September 30, 2020, June 30, 2020, and September 30, 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. Effective January 1, 2020, the allowance for credit losses 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 September 30, 2020 was 4.34%, compared to 4.12% at June 30, 2020 and 5.00% at September 30, 2019. Excluding the SBA PPP loans, which had a coupon rate of 1%, the end-of-period weighted average interest rate on loans, excluding fees and discounts, at June 30, 2020 was 4.46%. 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 Board of Governors of the Federal Reserve System's (the "Federal Reserve Board") federal funds rate decreases in March 2020.

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The following table presents the composition of new organic loan commitments originated during the quarters indicated:
September 30,June 30,September 30,
202020202019
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied$40,518 $11,811 $90,464 
Multifamily182,575 24,425 41,289 
Construction and land37,087 6,210 60,924 
SBA secured by real estate (1)
— — 14,302 
Total investor loans secured by real estate260,180 42,446 206,979 
Business loans secured by real estate (2)
CRE owner-occupied30,594 17,594 84,450 
Franchise real estate secured— — 39,205 
SBA secured by real estate (3)
799 1,204 9,655 
Total business loans secured by real estate31,393 18,798 133,310 
Commercial loans (4)
Commercial and industrial56,959 23,782 136,735 
Franchise non-real estate secured9,665 — 51,813 
SBA non-real estate secured— 315 539 
SBA PPP— 1,124,485 — 
Total commercial loans66,624 1,148,582 189,087 
Retail loans
Single family residential (5)
— 2,137 6,110 
Consumer1,825 195 1,463 
Total retail loans1,825 2,332 7,573 
Total loan commitments$360,022 $1,212,158 $536,949 
______________________________
(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 3.61% in the third quarter of 2020 compared with 1.21% in the second quarter of 2020 and 5.28% in the third quarter of 2019. Excluding the SBA PPP loans, the weighted average interest rate on new loan production during the second quarter of 2020 was 3.97%.
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Asset Quality and Allowance for Credit Losses
 
Effective January 1, 2020, the Company adopted the new CECL accounting standard, which replaces the incurred loss methodology. At September 30, 2020, our allowance for credit losses (“ACL”) on loans held for investment was $282.5 million, a slight increase of $232,000 from June 30, 2020 and an increase of $247.5 million from September 30, 2019, and continues to reflect the impact of the COVID-19 pandemic and resulting uncertainty in the macroeconomic environment. The increase from the second quarter of 2020 was associated with the ongoing uncertainties of the economic forecast and changes in asset quality, offset by lower loans held for investment during the third quarter of 2020. The increase from the third quarter of 2019 was primarily due to the cumulative-effect Day 1 adjustment of $55.7 million from the adoption of the CECL model, the provision for loan losses of $180.3 million from the acquisition of Opus as well as the unfavorable changes in economic forecasts employed in the Bank's CECL model related to the COVID-19 pandemic during the first three quarters of 2020.

During the third quarter of 2020, the Company incurred $4.5 million of net charge-offs, compared to $4.7 million and $1.4 million during the second quarter of 2020 and the third 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:

Three Months Ended September 30, 2020
 Beginning ACL Balance  Charge-offs  Recoveries Provision for Credit Losses  Ending
ACL Balance
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner occupied$63,007 $(443)$— $(8,459)$54,105 
Multifamily63,511 — — 3,825 67,336 
Construction and land18,804 (377)— (2,870)15,557 
SBA secured by real estate (1)
2,010 (145)34 3,428 5,327 
Business loans secured by real estate (2)
CRE owner-occupied48,213 (1,739)21 2,171 48,666 
Franchise real estate secured13,060 — — (1,072)11,988 
SBA secured by real estate (3)
4,368 — 76 1,716 6,160 
Commercial loans (4)
Commercial and industrial41,967 (2,437)10 8,374 47,914 
Franchise non-real estate secured21,676 (207)865 (2,185)20,149 
SBA non-real estate secured600 (10)353 951 
Retail loans
Single family residential (5)
1,479 — (238)1,243 
Consumer loans3,576 (129)(341)3,107 
Totals$282,271 $(5,487)$1,017 $4,702 $282,503 
______________________________
(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.


11


The ratio of allowance for credit losses to loans held for investment at September 30, 2020 was 2.10%, compared to 1.87% at June 30, 2020 and 0.40% at September 30, 2019. The ratio of allowance for credit losses to loans held for investment excluding SBA PPP loans at June 30, 2020 was 2.02%. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value net discount on loans acquired through total bank acquisitions was $126.3 million, or 0.93% of total loans held for investment, as of September 30, 2020, compared to $144.5 million, or 0.95% of total loans held for investment, as of June 30, 2020, and $46.8 million, or 0.53% of total loans held for investment, as of September 30, 2019. The fair value net discount on loans acquired through total bank acquisitions was 1.03% of total loans held for investment excluding SBA PPP loans as of June 30, 2020.

Nonperforming assets totaled $27.5 million, or 0.14% of total assets, at September 30, 2020, compared with $34.2 million, or 0.17% of total assets, at June 30, 2020 and $8.2 million, or 0.07% of total assets, at September 30, 2019. During the third quarter of 2020, nonperforming loans decreased $6.6 million to $27.2 million and other real estate owned decreased to $334,000. The decrease in nonperforming loans from June 30, 2020 was primarily due to loan charge-offs, repayments, loan sales, and loans that were returned to accrual status, partially offset by new additions to nonaccrual status, primarily commercial and industrial loans. Total loan delinquencies were $29.4 million, or 0.22% of loans held for investment, at September 30, 2020, compared to $38.2 million, or 0.25% of loans held for investment, at June 30, 2020, and $11.2 million, or 0.13% of loans held for investment, at September 30, 2019.

Classified loans totaled $136.7 million, or 1.02% of loans held for investment, at September 30, 2020, compared with $89.9 million, or 0.60% of loans held for investment, at June 30, 2020. The increase in classified loans from the prior quarter was driven in part by the migration to substandard of approximately $26.9 million of loans previously subject to temporary loan modifications, as well as the net result of normal risk rating changes during the quarter.

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 September 30, 2020. There were no troubled debt restructured loans at September 30, 2020, compared to $700,000 at June 30, 2020 and none at September 30, 2019. At September 30, 2020, 54 loans totaling $118.3 million remain within their modification period due to COVID-19 hardship under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Additionally, as of September 30, 2020, 56 loans totaling $119.4 million were in-process for potential modification, of which 37 loans totaling $101.7 million were extensions of previously modified loans. At June 30, 2020, the Company’s loan portfolio included 1,461 loans totaling $2.24 billion that were modified due to COVID-19.

12



 September 30,June 30,September 30,
 202020202019
Asset Quality(Dollars in thousands)
Nonperforming loans$27,214 $33,825 $8,109 
Other real estate owned334 386 126 
Nonperforming assets$27,548 $34,211 $8,235 
Total classified assets (1)
$137,042 $90,334 $39,879 
Allowance for credit losses282,503 282,271 35,000 
Allowance for credit losses as a percent of total nonperforming loans1,038 %835 %432 %
Nonperforming loans as a percent of loans held for investment0.20 0.22 0.09 
Nonperforming assets as a percent of total assets0.14 0.17 0.07 
Classified loans to total loans held for investment1.02 0.60 0.45 
Classified assets to total assets0.69 0.44 0.34 
Net loan charge-offs for the quarter ended$4,470 $4,650 $1,391 
Net loan charge-offs for quarter to average total loans0.03 %0.04 %0.02 %
Allowance for credit losses to loans held for investment (2)
2.10 1.87 0.40 
Allowance for credit losses to loans held for investment, excluding SBA PPP loans (2)
2.10 2.02 0.40 
Delinquent Loans  
30 - 59 days$7,084 $6,248 $1,715 
60 - 89 days1,086 4,133 3,212 
90+ days21,206 27,807 6,297 
Total delinquency$29,376 $38,188 $11,224 
Delinquency as a percentage of loans held for investment0.22 %0.25 %0.13 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At September 30, 2020, 58% of loans held for investment include an aggregate fair value net discount of $126.3 million, or 0.93% of loans held for investment. At June 30, 2020, 56% of loans held for investment include an aggregate fair value net discount of $144.5 million, or 0.95% of loans held for investment (1.03% of loans held for investment excluding SBA PPP loans). At September 30, 2019, 41% of loans held for investment include an aggregate fair value net discount of $46.8 million, or 0.53% of loans held for investment.

13


Investment Securities

Investment securities totaled $3.63 billion at September 30, 2020, an increase of $1.3 billion, or 53.2%, from June 30, 2020, and an increase of $2.33 billion, or 179.8%, from September 30, 2019. The increase in the third quarter of 2020 compared to the prior quarter was primarily the result of $1.59 billion in purchases, partially offset by $211.4 million in sales, $96.0 million in principal payments, amortization and redemptions, and a $17.6 million decrease in mark-to-market fair value adjustment. The increase in investment securities from September 30, 2019 was primarily the result of $2.36 billion in purchases, $829.9 million acquired from Opus, and a $21.5 million increase in mark-to-market fair value adjustment, partially offset by $679.2 million in sales and $202.3 million in principal payments, amortization and redemptions. 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 or September 30, 2020.

Deposits

At September 30, 2020, deposits totaled $16.33 billion, a decrease of $645.9 million, or 3.8%, from June 30, 2020 and an increase of $7.47 billion, or 84.3%, from September 30, 2019. At September 30, 2020, non-maturity deposits totaled $14.61 billion, or 89.5% of total deposits, a decrease of $445.6 million, or 3.0%, from June 30, 2020 and an increase $7.10 billion, or 94.4%, from September 30, 2019. During the third quarter of 2020, deposit decreases included $281.3 million in money market and savings deposits, $160.5 million in interest-checking, $109.9 million in retail certificates of deposits, $90.4 million in brokered certificates of deposit, and $3.7 million in noninterest-bearing deposits as compared to the second quarter of 2020. The increase in deposits from September 30, 2019 was primarily due to the acquisition of Opus.
The weighted average cost of deposits for the three-month period ending September 30, 2020 was 0.20%, compared to 0.32% for the three-month period ending June 30, 2020, and 0.71% for the three-month period ending September 30, 2019. The decrease in the weighted average cost of deposits in the third quarter of 2020 compared to the prior quarter was principally driven by lower pricing across all deposit product categories as well as a 3 basis point increase in the credit amortization of the CD mark to market adjustment.

The end of period weighted average rate of deposits at September 30, 2020 was 0.23%.
 September 30,June 30,September 30,
 202020202019
Deposit Accounts(Dollars in thousands)
Noninterest-bearing checking$5,895,744 $5,899,442 $3,623,546 
Interest-bearing:
Checking2,937,910 3,098,454 529,401 
Money market/savings5,778,688 6,060,031 3,362,453 
Retail certificates of deposit1,542,029 1,651,976 1,019,433 
Wholesale/brokered certificates of deposit176,436 266,790 324,455 
Total interest-bearing10,435,063 11,077,251 5,235,742 
Total deposits$16,330,807 $16,976,693 $8,859,288 
Cost of deposits0.20 %0.32 %0.71 %
Noninterest-bearing deposits as a percentage of total deposits36.1 34.8 40.9 
Non-maturity deposits as a percent of total deposits89.5 88.7 84.8 
Core deposits as a percent of total deposits (1)
96.0 94.9 90.6 
______________________________
(1) Core deposits are all transaction accounts and non-brokered certificates of deposit less than $250,000.


14


Borrowings

At September 30, 2020, total borrowings amounted to $542.4 million, a slight increase of $62,000 from June 30, 2020 and a decrease of $279.9 million from September 30, 2019. Total borrowings at September 30, 2020 included $41.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) advances and $501.4 million of subordinated debt. At September 30, 2020, total borrowings represented 2.7% of total assets, compared to 2.6% and 7.0%, as of June 30, 2020 and September 30, 2019, respectively. The decrease in borrowings at September 30, 2020 as compared September 30, 2019 was primarily due to lower FHLB advances, partially offset by the issuance in June 2020 of $150 million in aggregate principal amount of the Company's 5.375% Fixed-to-Floating Rate Subordinated Notes (the “Notes”) due June 15, 2030, as well as the $135 million aggregate principal amount of subordinated notes assumed by the Bank in connection with the acquisition of Opus in the second quarter of 2020.

Capital Ratios

At September 30, 2020, our ratio of tangible common equity to total assets was 9.01%, compared with 8.50% at June 30, 2020 and 10.01% at September 30, 2019, with a tangible book value per share of $18.01, compared with $17.58 at June 30, 2020 and $18.41 at September 30, 2019.

The Company implemented the CECL model commencing January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. At September 30, 2020, the Company exceeded all regulatory minimum capital adequacy requirements, inclusive of the fully phased in capital conservation buffer, with a tier 1 leverage ratio of 9.09%, common equity tier 1 capital ratio of 11.71%, tier 1 capital ratio of 11.71%, and total capital ratio of 16.00%.

At September 30, 2020, the Bank had a tier 1 leverage ratio of 10.33%, common equity tier 1 capital ratio of 13.31%, tier 1 capital ratio of 13.31%, and total capital ratio of 15.38%. The decrease in tier 1 leverage ratios from June 30, 2020 and September 30, 2019 reflected the full quarter's impact of the acquisition of Opus on average total consolidated assets. 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.
15


September 30,June 30,September 30,
Capital Ratios202020202019
Pacific Premier Bancorp, Inc. Consolidated   
Tier 1 leverage ratio9.09 %12.00 %10.34 %
Common equity tier 1 capital ratio11.71 11.32 10.93 
Tier 1 capital ratio11.71 11.32 11.04 
Total capital ratio16.00 15.69 13.40 
Tangible common equity ratio (1)
9.01 8.50 10.01 
Pacific Premier Bank
Tier 1 leverage ratio10.33 %13.49 %12.20 %
Common equity tier 1 capital ratio13.31 12.73 13.01 
Tier 1 capital ratio13.31 12.73 13.01 
Total capital ratio15.38 14.81 13.41 
Share Data   
Book value per share$28.48 $28.14 $33.50 
Tangible book value per share (1)
18.01 17.58 18.41 
Dividend per share0.25 0.25 0.22 
Closing stock price (2)
20.14 21.68 31.19 
Shares issued and outstanding94,375,521 94,350,902 59,364,340 
Market capitalization (2)(3)
$1,900,723 $2,045,528 $1,851,574 
______________________________
(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 October 23, 2020, the Company's Board of Directors declared a $0.28 per share dividend, payable on November 13, 2020 to stockholders of record as of November 6, 2020. In December 2019, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase of up to $100 million of its common stock. To date, the Company has not repurchased any shares under the new stock repurchase program and has suspended the stock repurchase program indefinitely.

Subsequent events

On October 5, 2020, the Bank completed the client account and computer system conversion for the Opus acquisition. At the same time, as a result of the Opus acquisition, the Bank consolidated 20 branch offices primarily in California, Washington, and Arizona into nearby branch offices with minimal disruption to clients and daily operations. The consolidated branches were identified largely based on the proximity of neighboring branches, historic growth, and market opportunity to improve further the overall efficiency of operations in line with the Bank's ongoing cost reduction initiatives. After the branch consolidations, the Bank operates 65 branches in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada.



16


Conference Call and Webcast

    The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 27, 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 November 3, 2020 at (877) 344-7529, conference ID 10148225.

About Pacific Premier Bancorp, Inc.

    Pacific Premier Bancorp, Inc. (Nasdaq: PPBI) is the parent company of Pacific Premier Bank, a California-based commercial bank focused on serving small, middle-market, and corporate businesses throughout the western United States in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada. Founded in 1983, Pacific Premier Bank has grown to become one of the largest banks in the western region of the United States, with approximately $20 billion in total assets. Pacific Premier Bank provides banking products and services, including deposit accounts, digital banking, and treasury management services, to businesses, professionals, entrepreneurs, real estate investors, and nonprofit organizations. We also offer a wide array of loan products, such as commercial business loans, lines of credit, SBA loans, commercial real estate loans, agribusiness loans, franchise lending, home equity lines of credit, and construction loans. Pacific Premier Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Commerce Escrow division. Pacific Premier Bank offers clients IRA custodial services through its Pacific Premier Trust division, which has approximately $15 billion of assets under custody and approximately 44,000 client accounts comprised of self-directed investors, financial institutions, capital syndicators, and financial advisors. Additionally, Pacific Premier Bank provides nationwide customized banking solutions to Home Owners' Associations and Property Management companies. Pacific Premier Bank is an Equal Housing Lender and Member FDIC. For additional information about Pacific Premier Bancorp, Inc. and Pacific Premier Bank, visit our website: www.ppbi.com.

FORWARD-LOOKING STATEMENTS
 
    The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, stockholder value creation, tax rates and the impact of the Opus acquisition 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 given its ongoing and dynamic nature, 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,
17


interest rate, market and monetary fluctuations; the effect of acquisitions we have made or may make, such as our recent Opus acquisition, 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; the expected discontinuation of LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters, 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 our 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 Company's 2019 Annual Report on Form 10-K and quarterly report on Form 10-Q for the period ended March 31, 2020 and June 30, 2020 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.

Contact:
 
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

Brett Villaume
Senior Vice President and Director of Investor Relations
(949) 553-9042

(PPBI-ER)
18


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
 September 30,June 30,March 31,December 31,September 30,
20202020202020192019
ASSETS
Cash and due from banks$641,739 $158,784 $108,285 $135,847 $166,238 
Interest-bearing deposits with financial institutions461,338 1,182,946 425,747 191,003 261,477 
Cash and cash equivalents1,103,077 1,341,730 534,032 326,850 427,715 
Interest-bearing time deposits with financial institutions2,845 2,845 2,708 2,708 2,711 
Investments held-to-maturity, at amortized cost27,980 32,557 34,553 37,838 40,433 
Investment securities available-for-sale, at fair value3,600,731 2,336,066 1,337,761 1,368,384 1,256,655 
FHLB, FRB, and other stock, at cost116,819 94,658 92,858 93,061 92,986 
Loans held for sale, at lower of amortized cost or fair value1,032 1,007 111 1,672 7,092 
Loans held for investment13,450,840 15,082,884 8,754,869 8,722,311 8,757,476 
Allowance for credit losses(282,503)(282,271)(115,422)(35,698)(35,000)
Loans held for investment, net13,168,337 14,800,613 8,639,447 8,686,613 8,722,476 
Accrued interest receivable73,112 78,408 38,294 39,442 38,603 
Other real estate owned334 386 441 441 126 
Premises and equipment80,326 76,542 61,615 59,001 62,851 
Deferred income taxes, net108,050 105,859 15,249 — — 
Bank owned life insurance290,875 305,901 113,461 113,376 112,716 
Intangible assets90,012 94,550 79,349 83,312 87,560 
Goodwill898,434 901,166 808,322 808,322 808,322 
Other assets282,276 344,786 218,008 154,992 151,251 
Total assets$19,844,240 $20,517,074 $11,976,209 $11,776,012 $11,811,497 
LIABILITIES:  
Deposit accounts:  
Noninterest-bearing checking$5,895,744 $5,899,442 $3,943,260 $3,857,660 $3,623,546 
Interest-bearing:
Checking2,937,910 3,098,454 577,966 586,019 529,401 
Money market/savings5,778,688 6,060,031 3,499,305 3,406,988 3,362,453 
Retail certificates of deposit1,542,029 1,651,976 897,680 973,465 1,019,433 
Wholesale/brokered certificates of deposit176,436 266,790 174,861 74,377 324,455 
Total interest-bearing10,435,063 11,077,251 5,149,812 5,040,849 5,235,742 
Total deposits16,330,807 16,976,693 9,093,072 8,898,509 8,859,288 
FHLB advances and other borrowings41,000 41,006 521,017 517,026 604,558 
Subordinated debentures501,443 501,375 215,269 215,145 217,825 
Deferred income taxes, net— — — 1,371 301 
Accrued expenses and other liabilities282,905 343,353 143,934 131,367 140,527 
Total liabilities17,156,155 17,862,427 9,973,292 9,763,418 9,822,499 
STOCKHOLDERS’ EQUITY:     
Common stock930 930 586 586 584 
Additional paid-in capital2,351,532 2,348,415 1,596,680 1,594,434 1,590,168 
Retained earnings289,960 247,078 361,242 396,051 368,051 
Accumulated other comprehensive income45,663 58,224 44,409 21,523 30,195 
Total stockholders' equity2,688,085 2,654,647 2,002,917 2,012,594 1,988,998 
Total liabilities and stockholders' equity$19,844,240 $20,517,074 $11,976,209 $11,776,012 $11,811,497 
19


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
 20202020201920202019
INTEREST INCOME   
Loans$167,455 $133,339 $122,974 $414,059 $366,310 
Investment securities and other interest-earning assets14,536 10,783 9,630 35,843 29,951 
Total interest income181,991 144,122 132,604 449,902 396,261 
INTEREST EXPENSE  
Deposits8,509 9,655 15,878 28,651 45,153 
FHLB advances and other borrowings113 217 1,214 1,411 9,099 
Subordinated debentures6,823 3,958 3,177 13,827 7,627 
Total interest expense15,445 13,830 20,269 43,889 61,879 
Net interest income before provision for credit losses166,546 130,292 112,335 406,013 334,382 
Provision for credit losses4,210 160,635 1,562 190,299 3,422 
Net interest (loss) income after provision for credit losses162,336 (30,343)110,773 215,714 330,960 
NONINTEREST INCOME  
Loan servicing fees481 434 546 1,395 1,353 
Service charges on deposit accounts1,593 1,399 1,440 4,707 4,211 
Other service fee income487 297 360 1,095 1,079 
Debit card interchange fee income944 457 421 1,749 2,637 
Earnings on BOLI2,270 1,314 861 4,920 2,622 
Net gain (loss) from sales of loans9,542 (2,032)2,313 8,281 4,944 
Net gain (loss) from sales of investment securities1,141 (21)4,261 8,880 4,900 
Custodial account fees
6,960 2,397 — 9,357 — 
Other income3,340 2,653 1,228 7,747 3,689 
Total noninterest income26,758 6,898 11,430 48,131 25,435 
NONINTEREST EXPENSE  
Compensation and benefits51,021 43,011 35,543 128,408 102,778 
Premises and occupancy12,373 9,487 7,593 30,028 22,645 
Data processing6,783 4,465 3,094 14,501 9,060 
Other real estate owned operations, net(17)64 129 
FDIC insurance premiums1,145 846 (10)2,358 1,530 
Legal, audit and professional expense5,108 3,094 3,058 11,328 9,601 
Marketing expense1,718 1,319 1,767 4,449 4,689 
Office, telecommunications and postage expense2,389 1,533 1,200 5,025 3,721 
Loan expense802 823 1,137 2,447 3,015 
Deposit expense4,728 4,958 3,478 14,674 10,729 
Merger-related expense2,988 39,346 (4)44,058 656 
Amortization of intangible assets4,538 4,066 4,281 12,567 12,998 
Other expense5,003 3,013 4,135 11,331 11,298 
Total noninterest expense98,579 115,970 65,336 281,180 192,849 
Net income (loss) before income taxes90,515 (139,415)56,867 (17,335)163,546 
Income tax expense (benefit)23,949 (40,324)15,492 (10,550)44,926 
Net income (loss) $66,566 $(99,091)$41,375 $(6,785)$118,620 
EARNINGS (LOSS) PER SHARE  
Basic$0.71 $(1.41)$0.69 $(0.10)$1.93 
Diluted$0.70 $(1.41)$0.69 $(0.10)$1.92 
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic93,529,967 70,425,027 59,293,218 74,391,688 60,853,081 
Diluted93,719,167 70,425,027 59,670,855 74,391,688 61,201,858 
20


SELECTED FINANCIAL DATA
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
 
 Three Months Ended
 September 30, 2020June 30, 2020September 30, 2019
 Average BalanceInterest Income/ExpenseAverage Yield/CostAverage BalanceInterest Income/ExpenseAverage Yield/CostAverage BalanceInterest Income/ExpenseAverage Yield/Cost
Assets(Dollars in thousands)
Interest-earning assets:         
Cash and cash equivalents$1,388,897 $305 0.09 %$796,761 $215 0.11 %$188,693 $403 0.85 %
Investment securities3,283,840 14,231 1.73 1,792,432 10,568 2.36 1,311,649 9,227 2.81 
Loans receivable, net (1)(2)
14,034,868 167,455 4.75 11,242,721 133,339 4.77 8,728,536 122,974 5.59 
Total interest-earning assets18,707,605 181,991 3.87 13,831,914 144,122 4.19 10,228,878