Market Overview

Pacific Premier Bancorp, Inc. Announces Second Quarter 2018 Results (Unaudited)

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Second Quarter 2018 Summary

  • Net income of $27.3 million
  • Diluted earnings per share of $0.58
  • ROAA and ROATCE of 1.35% and 15.42%, respectively
  • Efficiency ratio of 53.0%
  • Net interest margin of 4.41%, core net interest margin expands
    to 4.29%
  • New loan commitments of $530 million
  • Business loans increase 9.5% annualized
  • Closed acquisition of Grandpoint Capital, Inc., effective July
    1, 2018

Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) (the "Company"), the
holding company of Pacific Premier Bank (the "Bank"), reported net
income for the second quarter of 2018 of $27.3 million, or $0.58 per
diluted share, compared with net income of $28.0 million, or $0.60 per
diluted share, for the first quarter of 2018 and net income of $14.2
million, or $0.35 per diluted share, for the second quarter of 2017.
Financial results for the second quarter of 2018 include $943,000 of
merger-related expense.

For the three months ended June 30, 2018, the Company's return on
average assets ("ROAA") was 1.35% and return on average tangible common
equity ("ROATCE") was 15.42%. For the three months ended March 31, 2018,
the Company's ROAA was 1.39% and the ROATCE was 16.51%. For the three
months ended June 30, 2017, the Company's ROAA was 0.89% and its ROATCE
was 11.33%. Total assets as of June 30, 2018 were $8.2 billion compared
with $8.1 billion at March 31, 2018 and $6.4 billion at June 30, 2017.

Steven R. Gardner, Chairman, President and Chief Executive Officer of
the Company, commented, "We continue to execute well on our strategic
priorities while delivering solid financial results. On July 1, we
completed the acquisition of Grandpoint Capital in a little more than
four months since the announcement. We have finalized the operational
integration of both the Pacific Premier and Grandpoint teams, which
further strengthens and expands the organization's depth, breadth and
expertise. All of the remaining cost savings are expected to be realized
by year-end as we complete the system conversion in mid-October of this
year. Our franchise has a strong foundation in place to drive growth and
increase market share.

"We have substantively completed the investments in our personnel and
systems necessary to meet the heightened regulatory requirements
associated with surpassing the $10 billion asset threshold. As we
continue to add scale through organic and acquisitive growth, we expect
to more fully absorb the investments we have made in our infrastructure
and realize greater operating leverage going forward.

"While our earnings performance has generated attractive risk adjusted
returns in the first half of the year, it does not live up to the high
standards that we set for ourselves. We are capable of stronger
performance metrics across the organization, and with the completion of
a number of key projects, I expect our team to operate at a higher
level. As always, we are refining our business strategies to drive an
increased level of balance sheet growth in the second half of the year,
and when combined with the projected synergies from the Grandpoint
acquisition, we expect to be well positioned to realize an increase in
our earnings power in 2019," said Mr. Gardner.

FINANCIAL HIGHLIGHTS

      Three Months Ended
June 30,       March 31,       June 30,
2018 2018 2017
Financial Highlights (dollars in thousands, except per share data)
Net income $ 27,303 $ 28,002 $ 14,176
Diluted earnings per share $ 0.58 $ 0.60 $ 0.35
Return on average assets 1.35 % 1.39 % 0.89 %
Return on average tangible common equity (1) 15.42 % 16.51 % 11.33 %
Net interest margin 4.41 % 4.50 % 4.40 %
Cost of deposits 0.50 % 0.39 % 0.25 %
Efficiency ratio (2) 53.0 % 52.4 % 52.3 %
Total assets $ 8,158,131 $ 8,086,816 $ 6,440,631
Total deposits $ 6,308,350 $ 6,192,273 $ 4,946,431
Core deposits to total deposits (3) 89 % 88 % 91 %
Tangible book value per share (1) $ 16.21 $ 15.63 $ 13.83
Total capital ratio 12.75 % 12.64 % 12.69 %
 
(1) A reconciliation of the non-GAAP measures of average tangible
common equity and tangible book value per share to the GAAP measures
of common stockholders' equity and book value are set forth at the
end of this press release.
(2) Represents the ratio of noninterest expense less other real
estate owned operations, core deposit intangible amortization and
merger-related expense to the sum of net interest income before
provision for credit losses and total noninterest income, less
gains/(loss) on sale of securities and other-than-temporary
impairment recovery/(loss) on investment securities.
(3) Core deposits are all transaction accounts and non-brokered
certificates of deposit less than $250,000.
 

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $81.2 million in the second quarter of 2018,
essentially unchanged from the first quarter of 2018. Compared to the
prior quarter, net interest income was positively impacted by higher
yields and average balances on our loans and investments, higher
prepayments and other loan related fees, which were principally offset
by lower accretion income, and higher deposit and borrowing costs.

Net interest margin for the second quarter was 4.41%, compared with
4.50% in the prior quarter. The decrease was principally driven by lower
accretion income of $1.9 million, compared to $3.7 million in the first
quarter of 2018. Excluding the impact of accretion, our core net
interest margin expanded to 4.29%, compared to 4.26% in the prior
quarter. Following the closing of Grandpoint, we expect the core net
interest margin to be in the 4.05% to 4.15% range.

Net interest income for the second quarter of 2018 increased $17.8
million, or 28%, compared to the second quarter of 2017. The increase
was primarily related to an increase in average interest-earning assets
of $1.6 billion, which resulted primarily from our acquisition of Plaza
Bancorp ("Plaza") in the fourth quarter of 2017 and our organic loan
growth since the end of the second quarter of 2017.

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
     
Three Months Ended
June 30, 2018       March 31, 2018       June 30, 2017

Average

Balance

     

Interest

Income/

Expense

     

Average

Yield/

Cost

Average

Balance

     

Interest

Income/

Expense

     

Average

Yield/

Cost

Average

Balance

     

Interest

Income/

Expense

     

Average

Yield/

Cost

Assets (dollars in thousands)
Cash and cash equivalents $ 146,279 $ 277 0.76 % $ 167,236 $ 313 0.76 % $ 133,127 $ 160 0.48 %
Investment securities 980,334 6,797 2.77 924,687 6,341 2.74 829,380 5,019 2.42
Loans receivable, net (1) (2) 6,253,987   85,625   5.49 6,237,968   84,173   5.47 4,815,455   63,554   5.29
Total interest-earning assets $ 7,380,600   $ 92,699   5.04 % $ 7,329,891   $ 90,827   5.03 % $ 5,777,962   $ 68,733   4.77 %
 
Liabilities
Interest-bearing deposits $ 3,888,553 $ 7,756 0.80 % $ 3,852,853 $ 5,914 0.62 % $ 3,107,842 $ 3,081 0.40 %
Borrowings 560,706   3,772   2.70 613,295   3,632   2.40 464,845   2,314   2.00
Total interest-bearing liabilities $ 4,449,259   $ 11,528   1.04 % $ 4,466,148   $ 9,546   0.87 % $ 3,572,687   $ 5,395   0.61 %
Noninterest-bearing deposits $ 2,310,714   $ 2,262,895   $ 1,802,752  
Net interest income $ 81,171   $ 81,281   $ 63,338  
Net interest margin (3) 4.41 % 4.50 % 4.40 %
 
(1) Average balance includes loans held for sale and nonperforming
loans and is net of deferred loan origination fees/costs and
unamortized discounts/premiums.
(2) Includes net discount accretion interest of $1.9 million, $3.7
million and $4.2 million, respectively.
(3) Represents net interest income divided by average
interest-earning assets.
 

Provision for Credit Losses

A provision for credit losses of $1.8 million was recorded for the
second quarter of 2018, compared with a provision for credit losses of
$2.3 million for the quarter ended March 31, 2018. The second quarter of
2018 provision for credit losses includes a $400,000 provision for
unfunded commitments. The first quarter of 2018 included no additional
allowance for unfunded commitments. The decrease in our provision for
credit losses was primarily due to lower loan growth and lower net
charge-offs compared to the prior quarter. We anticipate that our
provision will approximate $2.5 million to $3.5 million per quarter in
the second half of 2018.

Noninterest Income

Noninterest income for the second quarter of 2018 was $8.2 million, an
increase of $485,000, or 6.3%, from the first quarter of 2018. The
increase from the first quarter of 2018 was related to an $885,000
increase in net gain from the sales of loans and a $324,000 increase in
net gain from sales of investment securities, partially offset by a
$661,000 decrease in other income, driven primarily by a $290,000 net
loss attributable to a CRA investment, and a $180,000 decrease in
recoveries from pre-acquisition charged-off loans.

During the second quarter of 2018, the Bank sold $31.9 million of Small
Business Administration ("SBA") loans for a gain of $2.9 million,
compared with $35.7 million of SBA loans sold for a gain of $2.7 million
in the first quarter of 2018. Additionally, the Bank sold $20.4 million
of commercial real estate loans during the second quarter of 2018 for a
gain of $927,000, compared with the sale of one commercial real estate
loan for a gain of $230,000 in the first quarter of 2018.

Noninterest income for the second quarter of 2018 decreased $608,000, or
6.9%, compared to the second quarter of 2017. The decrease from the
second quarter of 2017 was primarily related to a $1.8 million decrease
in net gain from sales of investment securities, partially offset by a
$956,000 increase in net gain from sales of loans, and a $411,000
increase in debit card interchange fees, as well as other service fee
increases. With the closing of Grandpoint, our quarterly estimate of
noninterest income for the second half of 2018 is $9.0 million to $10.0
million.

     
Three Months Ended
June 30,       March 31,       June 30,
2018 2018 2017
NONINTEREST INCOME (dollars in thousands)
Loan servicing fees $ 292 $ 345 $ 143
Service charges on deposit accounts 1,057 1,150 866
Other service fee income 169 146 495
Debit card interchange fee income 1,090 1,036 679
Earnings on bank-owned life insurance 617 611 689
Net gain from sales of loans 3,843 2,958 2,887
Net gain from sales of investment securities 330 6 2,093
Other income 753   1,414   907
Total noninterest income $ 8,151   $ 7,666   $ 8,759
 

Noninterest Expense

Noninterest expense totaled $50.1 million for the second quarter of
2018, an increase of $268,000, or 0.5%, compared with the first quarter
of 2018. The increase was primarily due to a $626,000 increase in
deposit expense and a $401,000 increase in compensation and benefits.
These increases were partially offset by decreases of $278,000 in CDI
amortization, $605,000 in other expense and $178,000 in marketing
expense. The second quarter of 2018 included $943,000 of merger-related
expense compared with $936,000 in the first quarter of 2018.

In comparison to the second quarter of 2017, noninterest expense grew by
$1.6 million, or 3.3%. The increase was primarily related to the
additional costs from operations, personnel and branches retained from
the acquisition of Plaza, combined with our continued investment in
personnel to support our organic growth in loans and deposits. The
second quarter of 2017 included merger-related expense of $10.1 million.
With the closing of Grandpoint, we expect quarterly noninterest expense,
excluding merger-related expense, should range between $63 million and
$65 million for the second half of 2018.

      Three Months Ended
June 30,       March 31,       June 30,
2018 2018 2017
NONINTEREST EXPENSE (dollars in thousands)
Compensation and benefits $ 29,274 $ 28,873 $ 21,623
Premises and occupancy 5,045 4,781 3,733
Data processing 2,747 2,702 2,439
Other real estate owned operations, net 2 1 44
FDIC insurance premiums 581 611 818
Legal, audit and professional expense 1,816 1,839 1,178
Marketing expense 1,352 1,530 1,006
Office, telecommunications and postage expense 1,115 1,080 922
Loan expense 594 591 1,068
Deposit expense 2,302 1,676 1,669
Merger-related expense 943 936 10,117
CDI amortization 1,996 2,274 1,761
Other expense 2,309   2,914   2,077
Total noninterest expense $ 50,076   $ 49,808   $ 48,455

Income Tax

For the second quarter of 2018, our effective tax rate was 27.2%,
compared with 24.1% for the first quarter of 2018 and 34.7% for the
second quarter of 2017. The increase in the effective tax rate for the
second quarter of 2018, compared to the first quarter of 2018, was
primarily the result of the tax effect of exercised and vested
share-based compensation awards, which are reported as discrete items in
the period they occur, resulting in a $372,000 tax benefit to the
Company for the second quarter of 2018, compared to a $1.4 million tax
benefit in the first quarter of 2018. The Company expects the annual
effective tax rate to be in the range of 26% to 27%.

The decrease in the effective tax rate for the second quarter of 2018,
compared to the second quarter of 2017, was primarily the result of
"H.R.1," formerly known as the "Tax Cuts and Jobs Act," which was signed
into law on December 22, 2017, which among other items, reduced the
federal corporate tax rate to 21%, effective January 2018, from the
prior maximum rate of 35%.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $6.3 billion at June 30, 2018, an
increase of $35.7 million, or 0.6%, from March 31, 2018, and an increase
of $1.4 billion, or 29%, from June 30, 2017. The $35.7 million increase
for the current quarter compared to the prior quarter was driven
primarily by new organic loan commitments of $530 million compared with
$488 million in the first quarter of 2018, partially offset by higher
loan prepayments increasing to $266 million in the second quarter from
$213 million in the prior quarter, and loans sales increasing to $52
million compared with $37 million in the prior quarter.

Business loans increased $79.9 million, or 9.5%, and real estate loans
and consumer loans decreased $39.6 million and $4.2 million,
respectively. Business loans represented 55% of the total gross loans
held for investment for the quarter compared with 54% in the prior
quarter and 46% in the second quarter of 2017. The total end-of-period
weighted average interest rate on loans at June 30, 2018 was 5.12%,
compared to 5.04% at March 31, 2018 and 4.79% at June 30, 2017,
reflecting the impact of higher rates on new originations as well as the
favorable repricing of variable rate portfolio loans as a result of
recent Federal Reserve Bank fed funds rate increases.

The $530 million of new organic loan commitments during the second
quarter of 2018 included $126 million of commercial and industrial
loans, $89 million of franchise loans, $80 million of commercial real
estate owner occupied loans, $79 million of construction loans, $60
million of commercial real estate non-owner occupied loans, $36 million
of SBA loans, $31 million of multi-family loans and $17 million of
agribusiness and farmland loans. The weighted average rate on our new
loan production was 5.35% during the second quarter of 2018, an increase
from 5.27% in the first quarter of 2018.

At June 30, 2018, our ratio of loans held for investment to total
deposits was 99.5%, compared with 100.8% and 98.2% at March 31, 2018 and
June 30, 2017, respectively.

      June 30,       March 31,       June 30,
2018 2018 2017
(dollars in thousands)
Business loans
Commercial and industrial $ 1,102,586 $ 1,062,385 $ 733,852
Franchise 708,957 692,846 565,415
Commercial owner occupied 1,310,722 1,268,869 729,476
SBA 176,696 182,626 101,384
Agribusiness 136,962   149,256   98,842  
Total business loans 3,435,923 3,355,982 2,228,969
Real estate loans
Commercial non-owner occupied 1,219,747 1,227,693 1,095,184
Multi-family 805,494 817,963 746,547
One-to-four family 249,495 266,324 322,048
Construction 321,423 319,610 289,600
Farmland 136,548 136,522 136,587
Land 30,246   34,452   31,799  
Total real estate loans 2,762,953 2,802,564 2,621,765
Consumer loans
Consumer loans 81,973   86,206   7,309  
Gross loans held for investment 6,280,849 6,244,752 4,858,043
Deferred loan origination costs/(fees) and premiums/(discounts), net (3,263 ) (2,911 ) 335  
Loans held for investment 6,277,586 6,241,841 4,858,378
Allowance for loan losses (31,747 ) (30,502 ) (25,055 )
Loans held for investment, net $ 6,245,839   $ 6,211,339   $ 4,833,323  
 
Loans held for sale, at lower of cost or fair value $ 13,879 $ 29,034 $ 6,840
 

Asset Quality and Allowance for Loan Losses

At June 30, 2018, our allowance for loan losses was $31.7 million, an
increase of $1.2 million from March 31, 2018. The provision for loan
losses for the second quarter of 2018 was $1.4 million, while net
charge-offs were $108,000.

The ratio of allowance for loan losses to loans held for investment at
June 30, 2018 amounted to 0.51%, compared to 0.49% and 0.52% at
March 31, 2018 and June 30, 2017, respectively. Under the guidance of
ASC 820: Fair Value Measurements and Disclosures, the fair value
net discount on loans acquired through total bank acquisitions was $22.2
million, or 0.35% of total loans held for investment, as of June 30,
2018, compared to $24.5 million, or 0.39% of total loans held for
investment, as of March 31, 2018.

Nonperforming assets totaled $6.4 million, or 0.08% of total assets, at
June 30, 2018, a decrease from $8.6 million, or 0.11% of total assets,
at March 31, 2018. During the second quarter of 2018, nonperforming
loans decreased $2.1 million to $6.0 million and other real estate owned
increased $14,000 to $220,000, while other assets owned decreased
$50,000 to $183,000. Loan delinquencies were $7.4 million, or 0.12% of
loans held for investment, at June 30, 2018, compared to $12.8 million,
or 0.20% of loans held for investment, at March 31, 2018.

      June 30,       March 31,       June 30,
2018 2018 2017
Asset Quality (dollars in thousands)
Nonperforming loans $ 6,039 $ 8,149 $ 395
Other real estate owned 220 206 372
Other assets owned 183   233    
Nonperforming assets $ 6,442   $ 8,588   $ 767  
 
Allowance for loan losses $ 31,747 $ 30,502 $ 25,055
Allowance for loan losses as a percent of total nonperforming loans 526 % 374 % 6,343 %
Nonperforming loans as a percent of loans held for investment 0.10 % 0.13 % 0.01 %
Nonperforming assets as a percent of total assets 0.08 % 0.11 % 0.01 %
Net loan charge-offs/(recoveries) for the quarter ended $ 108 $ 687 $ (76 )
Net loan charge-offs for quarter to average total loans % 0.01 % %
Allowance for loan losses to loans held for investment (1) 0.51 % 0.49 % 0.52 %
Delinquent Loans
30 - 59 days $ 3,583 $ 6,605 $ 600
60 - 89 days 1,290 1,084 1,965
90+ days 2,574   5,065   454  
Total delinquency $ 7,447   $ 12,754   $ 3,019  
Delinquency as a percentage of loans held for investment 0.12 % 0.20 % 0.06 %
 
(1) 40% of loans held for investment include a fair value net
discount of $22.2 million.
 

Investment Securities

Investments totaled $907 million at June 30, 2018, an increase of $18.9
million from March 31, 2018, and $196 million from June 30, 2017. The
increase in the second quarter of 2018 was primarily the result of $71.8
million in purchases, partially offset by $15.9 million in sales and
$32.3 million in principal payments/amortization/redemptions.

Deposits

At June 30, 2018, deposits totaled $6.3 billion, an increase of $116
million, or 1.9%, from March 31, 2018 and $1.4 billion, or 28%, from
June 30, 2017. At June 30, 2018, non-maturity deposits totaled $5.1
billion, or 81% of total deposits, an increase of $64.9 million, or
1.3%, from March 31, 2018 and an increase of $1.0 billion, or 24%, from
June 30, 2017. During the second quarter of 2018, deposit increases
included $79.2 million in retail certificates deposit, $41.0 million in
money market/savings deposits and $36.9 million in noninterest-bearing
deposits, partially offset by a $28.1 million decrease in
wholesale/brokered certificates of deposit and a $12.9 million decrease
in interest checking.

The weighted average cost of deposits for the three-month period ending
June 30, 2018 was 0.50%, compared to 0.39% for the three-month period
ending March 31, 2018 and 0.25% for the three-month period ending
June 30, 2017. The increase in the weighted average cost of deposits was
primarily driven by higher rates in money market and retail certificates
of deposit accounts.

      June 30,       March 31,       June 30,
2018 2018 2017
Deposit Accounts (dollars in thousands)
Noninterest-bearing checking $ 2,349,464 $ 2,312,586 $ 1,810,047
Interest-bearing:
Checking 342,986 355,895 323,818
Money market/savings 2,446,849 2,405,869 2,006,131
Retail certificates of deposit 823,425 744,214 572,523
Wholesale/brokered certificates of deposit 345,626   373,709   233,912  
Total interest-bearing 3,958,886   3,879,687   3,136,384  
Total deposits $ 6,308,350   $ 6,192,273   $ 4,946,431  
 
Cost of deposits 0.50 % 0.39 % 0.25 %
Noninterest-bearing deposits as a percent of total deposits 37 % 37 % 37 %
Non-maturity deposits as a percent of total deposits 81 % 82 % 84 %
 

Borrowings

At June 30, 2018, total borrowings amounted to $484 million, a decrease
of $104 million, or 18%, from March 31, 2018 and an increase of $7.3
million, or 1.5%, from June 30, 2017. Total borrowings for the quarter
included $338 million of advances from the Federal Home Loan Bank of San
Francisco and $105 million of subordinated debt. At June 30, 2018, total
borrowings represented 5.9% of total assets, compared to 7.3% and 7.4%,
as of March 31, 2018 and June 30, 2017, respectively.

Capital Ratios

At June 30, 2018, our ratio of tangible common equity to total assets
was 9.91%, compared with 9.63% in the prior quarter, with a book value
per share of $27.63 and a tangible book value per share of $16.21 per
share, compared with a tangible book value per share of $15.63 at
March 31, 2018 and a tangible book value per share of $13.83 at June 30,
2017.

At June 30, 2018, the Company had a tier 1 leverage ratio of 10.41%,
common equity tier 1 capital ratio of 10.80%, tier 1 capital ratio of
11.09% and total capital ratio of 12.75%.

At June 30, 2018, the Bank exceeded all regulatory capital requirements
with a tier 1 leverage ratio of 11.31%, common equity tier 1 capital
ratio of 12.05%, tier 1 capital ratio of 12.05% and total capital ratio
of 12.53%. These capital ratios each 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.

      June 30,       March 31,       June 30,
Capital Ratios 2018 2018 2017
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio 10.41 % 10.10 % 9.85 %
Common equity tier 1 capital ratio 10.80 % 10.67 % 10.71 %
Tier 1 capital ratio 11.09 % 10.96 % 11.08 %
Total capital ratio 12.75 % 12.64 % 12.69 %
Tangible common equity ratio (1) 9.91 % 9.63 % 9.18 %
 
Pacific Premier Bank
Tier 1 leverage ratio 11.31 % 11.00 % 10.54 %
Common equity tier 1 capital ratio 12.05 % 11.93 % 11.85 %
Tier 1 capital ratio 12.05 % 11.93 % 11.85 %
Total capital ratio 12.53 % 12.39 % 12.35 %
 
Share Data
Book value per share $ 27.63 $ 27.12 $ 23.96
Shares issued and outstanding 46,629,118 46,527,566 40,048,758
Tangible book value per share (1) $ 16.21 $ 15.63 $ 13.83
Closing stock price (2) $ 38.15 $ 40.20 $ 36.90
Market Capitalization (3) $ 1,778,901 $ 1,870,408 $ 1,477,799
 
(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
below.
(2) As of the last trading day prior to period end.
(3) Dollars in thousands.
 

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET
on July 24, 2018 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 July 31, 2018 at 877-344-7529, conference ID 10121631.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp is the holding company for Pacific Premier Bank,
one of the largest banks headquartered in Southern California with
approximately $11.6 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, shareholder value creation and the impact of the acquisition
of Grandpoint Capital, Inc. ("Grandpoint") and its wholly owned
subsidiary, Grandpoint Bank, and other acquisitions.

Such statements involve inherent risks and uncertainties, many of which
are difficult to predict and are generally beyond the control of the
Company. There can be no assurance that future developments affecting
the Company will be the same as those anticipated by management. The
Company cautions readers that a number of important factors could cause
actual results to differ materially from those expressed in, or implied
or projected by, such forward-looking statements. These risks and
uncertainties include, but are not limited to, the following: the
expected cost savings, synergies and other financial benefits from the
Grandpoint acquisition or any other acquisition the Company has made or
may make might not be realized within the expected time frames or at
all; the strength of the United States economy in general and the
strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; inflation, interest rate,
market and monetary fluctuations; the timely development of competitive
new products and services and the acceptance of these products and
services by new and existing customers; the willingness of users to
substitute competitors' products and services for the Company's products
and services; the impact of changes in financial services policies, laws
and regulations (including the Dodd-Frank Wall Street Reform and
Consumer Protection Act) and of governmental efforts to restructure the
U.S. financial regulatory system; technological changes; changes in the
level of the Company's nonperforming assets and charge offs; any
oversupply of inventory and deterioration in values of California real
estate, both residential and commercial; the effect of changes in
accounting policies and practices, as may be adopted from time-to-time
by bank regulatory agencies, the Securities and Exchange Commission
("SEC"), the Public Company Accounting Oversight Board, the Financial
Accounting Standards Board or other accounting standards setters;
possible other-than-temporary impairment of securities held by us;
changes in consumer spending, borrowing and savings habits; the effects
of the Company's lack of a diversified loan portfolio, including the
risks of geographic and industry concentrations; ability to attract
deposits and other sources of liquidity; changes in the financial
performance and/or condition of our borrowers; changes in the
competitive environment among financial and bank holding companies and
other financial service providers; unanticipated regulatory or judicial
proceedings; and the Company's ability to manage the risks involved in
the foregoing. Additional factors that could cause actual results to
differ materially from those expressed in the forward-looking statements
are discussed in the 2017 Annual Report on Form 10-K of Pacific Premier
Bancorp, Inc. filed with the SEC and available at the SEC's Internet
site (http://www.sec.gov).

Pacific Premier 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)
 
      June 30,       March 31,       December 31,       September 30,       June 30,
ASSETS 2018 2018 2017 2017 2017
Cash and due from banks $ 30,025 $ 42,575 $ 39,606 $ 35,713 $ 35,686
Interest-bearing deposits with financial institutions 101,443   83,481   157,558   85,649   193,595  
Cash and cash equivalents 131,468 126,056 197,164 121,362 229,281
Interest-bearing time deposits with financial institutions 6,633 6,633 6,633 4,437 3,944
Investments held-to-maturity, at amortized cost 31,965 24,559 18,291 18,627 7,750
Investment securities available-for-sale, at fair value 874,700 863,243 787,429 703,944 703,083
FHLB, FRB and other stock, at cost 82,666 82,115 65,881 58,344 56,612
Loans held for sale, at lower of cost or fair value 13,879 29,034 23,426 44,343 6,840
Loans held for investment 6,277,586 6,241,841 6,196,224 5,009,114 4,858,378
Allowance for loan losses (31,747 ) (30,502 ) (28,936 ) (27,143 ) (25,055 )
Loans held for investment, net 6,245,839 6,211,339 6,167,288 4,981,971 4,833,323
Accrued interest receivable 27,420 27,073 27,060 20,527 20,607
Other real estate owned 220 206 326 372 372
Premises and equipment 54,049 53,146 53,155 45,725 45,342
Deferred income taxes, net 17,183 13,941 13,265 22,023 22,201
Bank owned life insurance 76,937 76,454 75,976 75,482 74,982
Intangible assets 37,938 40,740 43,014 33,545 35,305
Goodwill 494,672 493,785 493,329 371,677 370,564
Other assets 62,562   38,492   52,264   29,955   30,425  
Total assets $ 8,158,131   $ 8,086,816   $ 8,024,501   $ 6,532,334   $ 6,440,631  
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts:
Noninterest-bearing checking $ 2,349,464 $ 2,312,586 $ 2,226,876 $ 1,890,241 $ 1,810,047
Interest-bearing:
Checking 342,986 355,895 365,193 304,295 323,818
Money market/savings 2,446,849 2,405,869 2,409,007 2,009,781 2,006,131
Retail certificates of deposit 823,425 744,214 714,751 573,656 572,531
Wholesale/brokered certificates of deposit 345,626   373,709   370,059   240,180   233,904  
Total interest-bearing 3,958,886   3,879,687   3,859,010   3,127,912   3,136,384  
Total deposits 6,308,350 6,192,273 6,085,886 5,018,153 4,946,431
FHLB advances and other borrowings 379,100 483,525 536,287 382,173 397,267
Subordinated debentures 105,253 105,188 105,123 79,871 79,800
Accrued expenses and other liabilities 76,903   43,922   55,209   70,477   57,402  
Total liabilities 6,869,606   6,824,908   6,782,505   5,550,674   5,480,900  
STOCKHOLDERS' EQUITY
Common stock 459 472 458 397 396
Additional paid-in capital 1,067,907 1,065,218 1,063,974 817,809 815,329
Retained earnings 232,372 205,069 177,149 160,978 140,746
Accumulated other comprehensive (loss) income (12,213 ) (8,851 ) 415   2,476   3,260  
Total stockholders' equity 1,288,525   1,261,908   1,241,996   981,660   959,731  
Total liabilities and stockholders' equity $ 8,158,131   $ 8,086,816   $ 8,024,501   $ 6,532,334   $ 6,440,631  
 
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
 
      Three Months Ended       Six Months Ended
June 30,       March 31,       June 30, June 30,       June 30,
2018 2018 2017 2018 2017
INTEREST INCOME
Loans $ 85,625 $ 84,173 $ 63,554 $ 169,798 $ 105,990
Investment securities and other interest-earning assets 7,074   6,654   5,179   13,728   8,170
Total interest income 92,699 90,827 68,733 183,526 114,160
INTEREST EXPENSE
Deposits 7,756 5,914 3,081 13,670 5,216
FHLB advances and other borrowings 2,125 2,023 1,175 4,148 1,779
Subordinated debentures 1,647   1,609   1,139   3,256   2,124
Total interest expense 11,528   9,546   5,395   21,074   9,119
Net interest income before provision for credit losses 81,171 81,281 63,338 162,452 105,041
Provision for credit losses 1,761   2,253   1,945   4,014   4,190
Net interest income after provision for credit losses 79,410 79,028 61,393 158,438 100,851
NONINTEREST INCOME
Loan servicing fees 292 345 143 637 365
Service charges on deposit accounts 1,057 1,150 866 2,207 1,207
Other service fee income 169 146 495 315 874
Debit card interchange fee income 1,090 1,036 679 2,126 746
Earnings on bank-owned life insurance 617 611 689 1,228 1,025
Net gain from sales of loans 3,843 2,958 2,887 6,801 5,698
Net gain from sales of investment securities 330 6 2,093 336 2,093
Other income 753   1,414   907   2,167   1,434
Total noninterest income 8,151 7,666 8,759 15,817 13,442
NONINTEREST EXPENSE
Compensation and benefits 29,274 28,873 21,623 58,147 36,510
Premises and occupancy 5,045 4,781 3,733 9,826 6,186
Data processing 2,747 2,702 2,439 5,449 3,626
Other real estate owned operations, net 2 1 44 3 56
FDIC insurance premiums 581 611 818 1,192 1,273
Legal, audit and professional expense 1,816 1,839 1,178 3,655 2,035
Marketing expense 1,352 1,530 1,006 2,882 1,824
Office, telecommunications and postage expense 1,115 1,080 922 2,195 1,355
Loan expense 594 591 1,068 1,185 1,536
Deposit expense 2,302 1,676 1,669 3,978 3,113
Merger-related expense 943 936 10,117 1,879 15,063
CDI amortization 1,996 2,274 1,761 4,270 2,272
Other expense 2,309   2,914   2,077   5,223   3,610
Total noninterest expense 50,076   49,808   48,455   99,884   78,459
Net income before income taxes 37,485 36,886 21,697 74,371 35,834
Income tax 10,182   8,884   7,521   19,066   12,137
Net income $ 27,303   $ 28,002   $ 14,176   $ 55,305   $ 23,697
EARNINGS PER SHARE
Basic $ 0.59 $ 0.61 $ 0.36 $ 1.20 $ 0.71
Diluted 0.58 0.60 0.35 1.18 0.69
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 46,053,077 45,893,496 39,586,524 45,973,727 33,591,040
Diluted 46,702,968 46,652,059 40,267,220 46,678,123 34,267,215
 
 

SELECTED FINANCIAL DATA

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
     
Three Months Ended
June 30, 2018       March 31, 2018       June 30, 2017

Average

Balance

     

Interest

Income/

Expense

     

Average

Yield/

Cost

Average

Balance

     

Interest

Income/

Expense

     

Average

Yield/

Cost

Average

Balance

     

Interest

Income/

Expense

     

Average

Yield/

Cost

Assets (dollars in thousands)
Interest-earning assets:
Cash and cash equivalents $ 146,279 $ 277 0.76 % $ 167,236 $ 313 0.76 % $ 133,127 $ 160 0.48 %
Investment securities 980,334 6,797 2.77 924,687 6,341 2.74 829,380 5,019 2.42
Loans receivable, net (1) (2) 6,253,987   85,625   5.49 6,237,968   84,173   5.47 4,815,455   63,554   5.29
Total interest-earning assets 7,380,600 92,699 5.04 7,329,891 90,827 5.03 5,777,962 68,733 4.77
Noninterest-earning assets 726,922   715,408   592,343  
Total assets $ 8,107,522   $ 8,045,299   $ 6,370,305  
Liabilities and Equity
Interest-bearing deposits:
Interest checking $ 349,721 $ 117 0.13 % $ 348,110 $ 114 0.13 % $ 329,450 $ 90 0.11 %
Money market 2,185,310 3,943 0.72 2,189,912 3,159 0.59 1,779,013 1,582 0.36
Savings 219,035 83 0.15 223,992 79 0.14 218,888 68 0.12
Retail certificates of deposit 784,911 2,290 1.17 713,225 1,388 0.79 568,380 911 0.64
Wholesale/brokered certificates of deposit 349,576   1,323   1.52 377,614   1,174   1.26 212,111   430   0.81
Total interest-bearing deposits 3,888,553 7,756 0.80 3,852,853 5,914 0.62 3,107,842 3,081 0.40
FHLB advances and other borrowings 455,488 2,125 1.87 508,142 2,023 1.61 385,088 1,175 1.22
Subordinated debentures 105,218   1,647   6.26 105,153   1,609   6.12 79,757   1,139   5.71
Total borrowings 560,706   3,772   2.70 613,295   3,632   2.40 464,845   2,314   2.00
Total interest-bearing liabilities 4,449,259 11,528 1.04 4,466,148 9,546 0.87 3,572,687 5,395 0.61
Noninterest-bearing deposits 2,310,714 2,262,895 1,802,752
Other liabilities 67,617   60,627   46,666  
Total liabilities 6,827,590 6,789,670 5,422,105
Stockholders' equity 1,279,932   1,255,629   948,200  
Total liabilities and equity $ 8,107,522     $ 8,045,299     $ 6,370,305    
Net interest income $ 81,171   $ 81,281   $ 63,338  
Net interest margin (3) 4.41 % 4.50 % 4.40 %
Ratio of interest-earning assets to interest-bearing liabilities 165.88 % 164.12 % 161.73 %
 
(1) Average balance includes loans held for sale and nonperforming
loans and is net of deferred loan origination fees/costs and
unamortized discounts/premiums.
(2) Includes net discount accretion interest of $1.9 million, $3.7
million and $4.2 million, respectively.
(3) Represents net interest income divided by average
interest-earning assets.
 
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
                             
June 30, March 31, December 31, September 30, June 30,
2018 2018 2017 2017 2017
(dollars in thousands)
Business loans
Commercial and industrial $ 1,102,586 $ 1,062,385 $ 1,086,659 $ 763,091 $ 733,852
Franchise 708,957 692,846 660,414 626,508 565,415
Commercial owner occupied 1,310,722 1,268,869 1,289,213 805,137 729,476
SBA 176,696 182,626 185,514 107,211 101,384
Agribusiness 136,962   149,256   116,066   86,466   98,842  
Total business loans 3,435,923 3,355,982 3,337,866 2,388,413 2,228,969
Real estate loans
Commercial non-owner occupied 1,219,747 1,227,693 1,243,115 1,098,995 1,095,184
Multi-family 805,494 817,963 794,384 797,370 746,547
One-to-four family 249,495 266,324 270,894 246,248 322,048
Construction 321,423 319,610 282,811 301,334 289,600
Farmland 136,548 136,522 145,393 140,581 136,587
Land 30,246   34,452   31,233   30,719   31,799  
Total real estate loans 2,762,953 2,802,564 2,767,830 2,615,247 2,621,765
Consumer loans
Consumer loans 81,973   86,206   92,931   6,228   7,309  
Gross loans held for investment 6,280,849 6,244,752 6,198,627 5,009,888 4,858,043
Deferred loan origination costs/(fees) and premiums/(discounts), net (3,263 ) (2,911 ) (2,403 ) (774 ) 335  
Loans held for investment 6,277,586 6,241,841 6,196,224 5,009,114 4,858,378
Allowance for loan losses (31,747 ) (30,502 ) (28,936 ) (27,143 ) (25,055 )
Loans held for investment, net $ 6,245,839   $ 6,211,339   $ 6,167,288   $ 4,981,971   $ 4,833,323  
 
Loans held for sale, at lower of cost or fair value $ 13,879 $ 29,034 $ 23,426 $ 44,343 $ 6,840
 
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
                             
June 30, March 31, December 31, September 30, June 30,
2018 2018 2017 2017 2017
Asset Quality (dollars in thousands)
Nonperforming loans $ 6,039 $ 8,149 $ 3,284 $ 515 $ 395
Other real estate owned 220 206 326 372 372
Other assets owned 183   233        
Nonperforming assets $ 6,442   $ 8,588   $ 3,610   $ 887   $ 767  
 
Allowance for loan losses $ 31,747 $ 30,502 $ 28,936 $ 27,143 $ 25,055
Allowance for loan losses as a percent of total nonperforming loans 526 % 374 % 881 % 5,270 % 6,343 %
Nonperforming loans as a percent of loans held for investment 0.10 % 0.13 % 0.05 % 0.01 % 0.01 %
Nonperforming assets as a percent of total assets 0.08 % 0.11 % 0.04 % 0.01 % 0.01 %
Net loan charge-offs/(recoveries) for the quarter ended $ 108 $ 687 $ 392 $ (39 ) $ (76 )
Net loan charge-offs for quarter to average total loans % 0.01 % 0.01 % % %
Allowance for loan losses to loans held for investment (1) 0.51 % 0.49 % 0.47 % 0.54 % 0.52 %
Delinquent Loans
30 - 59 days $ 3,583 $ 6,605 $ 5,964 $ 556 $ 600
60 - 89 days 1,290 1,084 1,056 1,423 1,965
90+ days 2,574   5,065   3,039   1,629   454  
Total delinquency $ 7,447   $ 12,754   $ 10,059   $ 3,608   $ 3,019  
Delinquency as a percent of loans held for investment 0.12 % 0.20 % 0.16 % 0.07 % 0.06 %
 
(1) 40% of loans held for investment include a fair value net
discount of $22.2 million.
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS
(dollars in thousands, except per share data)
                 
For periods presented below, return on average tangible common
equity is a non-GAAP financial measure derived from GAAP-based
amounts. We calculate these figures by excluding CDI amortization
expense and exclude the average CDI and average goodwill from the
average stockholders' equity during the period. Management believes
that the exclusion of such items from these financial measures
provides useful information to an understanding of the operating
results of our core business. However, these non-GAAP financial
measures are supplemental and are not a substitute for an analysis
based on GAAP measures. As other companies may use different
calculations for these adjusted measures, this presentation may not
be comparable to other similarly titled adjusted measures reported
by other companies.
Three Months Ended
June 30, March 31, June 30,
2018 2018 2017
Net income $ 27,303 $ 28,002 $ 14,176
Plus CDI amortization expense 1,996 2,274 1,761
Less CDI amortization expense tax adjustment 542   548   610  
Net income for average tangible common equity $ 28,757   $ 29,728   $ 15,327  
 
Average stockholders' equity $ 1,279,932 $ 1,255,629 $ 948,200
Less average CDI 39,766 42,220 36,445
Less average goodwill 494,070   493,357   370,564  
Average tangible common equity $ 746,096   $ 720,052   $ 541,191  
 
Return on average equity 8.53 % 8.92 % 5.98 %
Return on average tangible common equity 15.42 % 16.51 % 11.33 %
 

Tangible common equity to tangible assets (the "tangible common
equity ratio") and tangible book value per share are non-GAAP
financial measures derived from GAAP-based amounts. We calculate
the tangible common equity ratio by excluding the balance of
intangible assets from common stockholders' equity and dividing by
tangible assets. We calculate tangible book value per share by
dividing tangible common equity by common shares outstanding, as
compared to book value per share, which we calculate by dividing
common stockholders' equity by shares outstanding. We believe that
this information is consistent with the treatment by bank
regulatory agencies, which exclude intangible assets from the
calculation of risk-based capital ratios. Accordingly, we believe
that these non-GAAP financial measures provide information that is
important to investors and that is useful in understanding our
capital position and ratios. However, these non-GAAP financial
measures are supplemental and are not a substitute for an analysis
based on GAAP measures. As other companies may use different
calculations for these measures, this presentation may not be
comparable to other similarly titled measures reported by other
companies.

 
      June 30,       March 31,       December 31,       September 30,       June 30,
2018 2018 2017 2017 2017
Total stockholders' equity $ 1,288,525 $ 1,261,908 $ 1,241,996 $ 981,660 $ 959,731
Less intangible assets 532,610   534,525   536,343   405,222   405,869  
Tangible common equity $ 755,915   $ 727,383   $ 705,653   $ 576,438   $ 553,862  
 
Book value per share $ 27.63 $ 27.12 $ 26.86 $ 24.44 $ 23.96
Less intangible book value per share 11.42   11.49   11.60   10.09   10.13  
Tangible book value per share $ 16.21   $ 15.63   $ 15.26   $ 14.35   $ 13.83  
 
Total assets $ 8,158,131 $ 8,086,816 $ 8,024,501 $ 6,532,334 $ 6,440,631
Less intangible assets 532,610   534,525   536,343   405,222   405,869  
Tangible assets $ 7,625,521   $ 7,552,291   $ 7,488,158   $ 6,127,112   $ 6,034,762  
 
Tangible common equity ratio 9.91 % 9.63 % 9.42 % 9.41 % 9.18 %
 

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