News Details

Pacific Premier Bancorp, Inc. Announces Fourth Quarter 2020 Financial Results and Increases Quarterly Cash Dividend to $0.30 per Share

Company Release - 1/26/2021

 

Fourth Quarter 2020 Summary

  • Net income of $67.1 million, or $0.71 per diluted share
  • Return on average assets of 1.34%, return on average equity of 9.91%, and return on average tangible common equity of 16.32%
  • Net interest margin of 3.61% and core net interest margin of 3.32%
  • Cost of deposits of 0.14% in the fourth quarter compared with 0.20% in the prior quarter
  • Noninterest bearing deposits represent 37% of total deposits
  • Nonperforming assets represent 0.15% of total assets
  • Total loan delinquency of 0.10% compared with 0.22% in the prior quarter
  • Increased common equity quarterly dividend by $0.02 to $0.30 per share
  • Approved a new $150 million share repurchase program in January 2021

IRVINE, Calif.--(BUSINESS WIRE)-- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the fourth quarter of 2020 of $67.1 million, or $0.71 per diluted share, compared with net income of $66.6 million, or $0.70 per diluted share, for the third quarter of 2020 and net income of $41.1 million, or $0.69 per diluted share, for the fourth quarter of 2019.

For the three months ended December 31, 2020, the Company’s return on average assets (“ROAA”) was 1.34%, return on average equity (“ROAE”) was 9.91%, and return on average tangible common equity (“ROATCE”) was 16.32%, compared to 1.31%, 9.90%, and 16.44%, respectively, for the third quarter of 2020 and 1.42%, 8.20%, and 15.89%, respectively, for the fourth quarter of 2019. Total assets as of December 31, 2020 were $19.7 billion compared to $19.8 billion at September 30, 2020 and $11.8 billion at December 31, 2019. A reconciliation of the non–U.S. generally accepted accounting principles (“GAAP”) measure of ROATCE to the GAAP measure of common stockholders' equity is set forth at the end of this press release.

Steven R. Gardner, Chairman, President, and Chief Executive Officer of the Company, commented, “We delivered a strong quarter to end 2020 that reflects our improved earnings power and overall operational strength. Despite the low interest rate environment and the uncertainty around the pandemic, we generated a return on average assets and average tangible common equity, exclusive of merger-related expenses, of 1.41% and 17.2%, respectively.

“Having completed the Opus integration in early October, we were able to increase our focus on business development throughout the remainder of the fourth quarter. As a result, we ended the year with a strong loan pipeline as our teams are attracting larger, more sophisticated clients. During the fourth quarter, our new loan commitments were up substantially from the prior quarter, although elevated payoffs and strategic loan sales reduced our loan balances at quarter end.

“Our strong earnings continue to enhance our capital levels, and we remain committed to a disciplined, prudent capital management strategy. We recently adopted a new stock repurchase program, increasing the size over the program previously adopted in late 2019. We also announced today that we increased our common stock dividend to $0.30 per share, from $0.28 per share in the prior quarter. Since initiating our dividend program two years ago, we have steadily increased the amount of capital we are returning to shareholders, which has positively influenced total shareholder returns.

“As we begin 2021, we are well-positioned to manage through the impact of the ongoing pandemic and capitalize on the economic recovery. We expect increasing levels of organic growth in our various markets, and we will continue to pursue strategic growth opportunities that can expand and enhance our franchise. Over the past several years we have made investments in talent and technology to create a robust, highly scalable platform to generate profitable growth, and we are confident in our ability to execute and deliver for our shareholders in the years ahead.”

Mr. Gardner concluded, “I want to thank all of the Pacific Premier team members for their strong commitment to our clients, our communities, and each other. Their incredible resiliency and talents are what drive our results.”

FINANCIAL HIGHLIGHTS

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Financial Highlights

 

(Dollars in thousands, except per share data)

Net income

 

$

67,136

 

 

$

66,566

 

 

$

41,098

 

Diluted earnings per share

 

0.71

 

 

0.70

 

 

0.69

 

Common equity dividend per share

 

0.28

 

 

0.25

 

 

0.22

 

Return on average assets

 

1.34

%

 

1.31

%

 

1.42

%

Return on average equity

 

9.91

 

 

9.90

 

 

8.20

 

Return on average tangible common equity (1)

 

16.32

 

 

16.44

 

 

15.89

 

Pre-provision net revenue on average assets (1)

 

1.92

 

 

1.92

 

 

1.95

 

Net interest margin

 

3.61

 

 

3.54

 

 

4.33

 

Core net interest margin (1)

 

3.32

 

 

3.23

 

 

4.10

 

Cost of deposits

 

0.14

 

 

0.20

 

 

0.58

 

Efficiency ratio (2)

 

48.5

 

 

47.4

 

 

51.9

 

Noninterest expense (excluding merger-related expense) as a percent of average assets (1)

 

1.89

 

 

1.88

 

 

2.29

 

Total assets

 

$

19,736,544

 

 

$

19,844,240

 

 

$

11,776,012

 

Total deposits

 

16,214,177

 

 

16,330,807

 

 

8,898,509

 

Loans to deposit ratio

 

82

%

 

82

%

 

98

%

Non-maturity deposits as a percent of total deposits

 

90

 

 

89

 

 

88

 

Book value per share

 

$

29.07

 

 

$

28.48

 

 

$

33.82

 

Tangible book value per share (1)

 

18.65

 

 

18.01

 

 

18.84

 

Total risk-based capital ratio (3)

 

16.31

%

 

16.11

%

 

13.81

%

(1)

A reconciliation of the non-GAAP measures of return on average tangible common equity, pre-provision net revenue on average assets, core net interest margin, noninterest expense (excluding merger-related expense) as a percent of average assets, and tangible book value per share to the 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 gain/(loss) on sale of securities, gain/(loss) from other real estate owned, and gain/(loss) from debt extinguishment.

(3)

The Company's total risk-based capital ratio as of September 30, 2020 reflects the reclassification of $502.6 million of cash and due from banks as of September 30, 2020 to interest-bearing deposits with financial institutions as of that same date. This reclassification resulted in an increase in the ratio as of September 30, 2020 from what was previously reported.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $168.2 million in the fourth quarter of 2020, an increase of $1.7 million from the third quarter of 2020. The increase in net interest income was driven by higher average investment securities, higher loan related fees, and lower rates paid on deposits, partially offset by the impact of lower average loans and yields.

Net interest margin for the fourth quarter of 2020 was 3.61%, compared with 3.54% for the third quarter of 2020. Our core net interest margin, which excludes the impact of loan accretion, certificates of deposit mark-to-market amortization, and other one-time adjustments, increased 9 basis points to 3.32%, compared to 3.23% in the prior quarter. The increase was a result of higher loan related fees driven by elevated prepayments and lower cost of funds driven by lower rates paid on deposits, partially offset by the decrease attributable to the shift in interest-earning asset mix and lower loan yields.

Net interest income for the fourth quarter of 2020 increased $55.3 million, compared to the fourth quarter of 2019. The increase was primarily attributable to an increase in average interest-earning assets of $8.17 billion, which primarily resulted from the acquisition of Opus Bank (“Opus”) in the second quarter of 2020 and organic loan growth, as well as a higher average investment securities and a lower cost of funds, partially offset by lower average loan and investment yields, and higher average deposits.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

December 31, 2020

 

September 30, 2020

 

December 31, 2019

 

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

Assets

 

(Dollars in thousands)

Cash and cash equivalents

 

$

1,239,035

 

 

$

286

 

 

0.09

%

 

$

1,388,897

 

 

$

305

 

 

0.09

%

 

$

201,161

 

 

$

283

 

 

0.56

%

Investment securities

 

3,964,592

 

 

17,039

 

 

1.72

 

 

3,283,840

 

 

14,231

 

 

1.73

 

 

1,445,158

 

 

10,210

 

 

2.83

 

Loans receivable, net (1) (2)

 

13,315,810

 

 

163,499

 

 

4.88

 

 

14,034,868

 

 

167,455

 

 

4.75

 

 

8,700,690

 

 

119,353

 

 

5.44

 

Total interest-earning assets

 

$

18,519,437

 

 

$

180,824

 

 

3.88

 

 

$

18,707,605

 

 

$

181,991

 

 

3.87

 

 

$

10,347,009

 

 

$

129,846

 

 

4.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

10,384,229

 

 

$

5,685

 

 

0.22

 

 

$

10,703,431

 

 

$

8,509

 

 

0.32

 

 

$

5,216,658

 

 

$

13,144

 

 

1.00

 

Borrowings

 

539,021

 

 

6,941

 

 

5.12

 

 

542,437

 

 

6,936

 

 

5.09

 

 

368,583

 

 

3,783

 

 

4.07

 

Total interest-bearing liabilities

 

$

10,923,250

 

 

$

12,626

 

 

0.46

 

 

$

11,245,868

 

 

$

15,445

 

 

0.55

 

 

$

5,585,241

 

 

$

16,927

 

 

1.20

 

Noninterest-bearing deposits

 

$

6,125,171

 

 

 

 

 

 

$

5,877,619

 

 

 

 

 

 

$

3,814,809

 

 

 

 

 

Net interest income

 

 

 

$

168,198

 

 

 

 

 

 

$

166,546

 

 

 

 

 

 

$

112,919

 

 

 

Net interest margin (3)

 

 

 

 

 

3.61

 

 

 

 

 

 

3.54

 

 

 

 

 

 

4.33

 

Cost of deposits

 

 

 

 

 

0.14

 

 

 

 

 

 

0.20

 

 

 

 

 

 

0.58

 

Cost of funds (4)

 

 

 

 

 

0.29

 

 

 

 

 

 

0.36

 

 

 

 

 

 

0.71

 

Ratio of interest-earning assets to interest-bearing liabilities

 

169.54

 

 

 

 

 

 

166.35

 

 

 

 

 

 

185.26

 

(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 $11.0 million, $12.2 million, and $5.8 million, respectively.

(3)

Represents annualized net interest income divided by average interest-earning assets.

(4)

Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

Provision for Credit Losses

Provision for credit losses for the fourth quarter of 2020 was $1.5 million, a decrease of $2.7 million from the third quarter of 2020 and a decrease of $780,000 from the fourth quarter of 2019. The current quarter provision for credit losses included an $8.1 million recapture of the provision for loan losses, partially offset by a $9.6 million provision for unfunded commitments. The $8.1 million recapture of the provision for loan losses was primarily attributable to lower loans held for investment and favorable changes in asset quality and loan mix. The $9.6 million provision for unfunded commitments was primarily due to an increase in outstanding unfunded commitments in the commercial and industrial loan segment.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Provision for Credit Losses

 

(Dollars in thousands)

Provision for loan losses

 

$

(8,079

)

 

 

$

4,702

 

 

 

$

3,016

 

 

Provision for unfunded commitments

 

9,596

 

 

 

(492

)

 

 

(666

)

 

Provision for sold loans

 

 

 

 

 

 

 

(53

)

 

Total provision for credit losses

 

$

1,517

 

 

 

$

4,210

 

 

 

$

2,297

 

 

Noninterest income

Noninterest income for the fourth quarter of 2020 was $23.2 million, a decrease of $3.6 million from the third quarter of 2020. The decrease was primarily due to a $9.2 million decrease in net gain from sales of loans in the third quarter of 2020, partially offset by a $3.9 million increase in net gain from sales of investment securities. In addition, other income increased $1.1 million related to equity investment income and a $212,000 increase in recoveries of pre-acquisition charged-off loans. Also, service charges on deposit accounts increased $412,000 and trust custodial account fees increased $336,000 from the prior quarter.

During the fourth quarter of 2020, the Bank sold $2.1 million of SBA loans for a net gain of $154,000, compared with $1.16 billion of SBA PPP loans sold for a net gain of $19.0 million in the third quarter of 2020. The fourth quarter of 2020 also included the sale of $59.2 million of other loans for a net gain of $174,000, compared to sales of $96.2 million of other loans for a net loss of $9.4 million during the third quarter of 2020.

During the fourth quarter of 2020, the Bank sold $202.6 million of investment securities for a net gain of $5.0 million, compared to the sales of $211.4 million of investment securities for a net gain of $1.1 million in the prior quarter.

Noninterest income for the fourth quarter of 2020 increased $13.4 million, compared to the fourth quarter of 2019. The increase was primarily due to the addition of $7.3 million of custodial account fees from Pacific Premier Trust, a $1.4 million increase in earnings on bank-owned life insurance (“BOLI”), primarily due to additional BOLI from Opus, an increase in net gain from sales of investment securities of $1.3 million, and a $3.7 million increase in other income, primarily due to a $1.5 million increase in equity investment income as well as a $1.3 million increase in escrow and exchange fee income.

The decrease in net gain from sales of loans for the fourth quarter of 2020 compared to the same period last year was primarily due to the sale of $2.1 million of SBA loans for a net gain of $154,000 and the sale of $59.2 million of other loans for a net gain of $174,000 during the fourth quarter of 2020, compared to the sale of $23.7 million of SBA loans for a net gain of $2.1 million and the sale of $8.4 million of other loans for a net loss of $418,000 during the fourth quarter of 2019.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

 

 

(Dollars in thousands)

NONINTEREST INCOME

 

 

 

 

 

 

Loan servicing income

 

$

633

 

 

$

481

 

 

$

487

 

Service charges on deposit accounts

 

2,005

 

 

1,593

 

 

1,558

 

Other service fee income

 

459

 

 

487

 

 

359

 

Debit card interchange fee income

 

777

 

 

944

 

 

367

 

Earnings on BOLI

 

2,240

 

 

2,270

 

 

864

 

Net gain from sales of loans

 

328

 

 

9,542

 

 

1,698

 

Net gain from sales of investment securities

 

5,002

 

 

1,141

 

 

3,671

 

Trust custodial account fees

 

7,296

 

 

6,960

 

 

 

Other income

 

4,454

 

 

3,340

 

 

797

 

Total noninterest income

 

$

23,194

 

 

$

26,758

 

 

$

9,801

 

Noninterest Expense

Noninterest expense totaled $99.9 million for the fourth quarter of 2020, an increase of $1.4 million compared to the third quarter of 2020, primarily due to the increase of $2.1 million in merger-related expense related to the Opus acquisition. Excluding merger-related expense, noninterest expense totaled $94.9 million, a decrease of $723,000, compared to the third quarter of 2020, driven by a $1.2 million decrease in other expense, an $803,000 decrease in legal and professional services expense, and a $793,000 decrease in data processing. These decreases were partially offset by a net $1.0 million increase in compensation as a result of a Company-wide employee appreciation bonus in the aggregate amount of $2.4 million related to the COVID-19 pandemic and higher accrued incentive compensation of $472,000, partially offset by higher loan origination deferred costs of $1.7 million, and an $895,000 increase in premises and occupancy expense due, in part, to ongoing COVID-19 pandemic-related maintenance expenses.

Noninterest expense increased by $33.7 million, compared to the fourth quarter of 2019. The increase was primarily due to a $5.1 million increase in merger-related expense related to the Opus acquisition, a $15.6 million increase in compensation and benefits, a $5.2 million increase in premises and occupancy expense, a $2.0 million increase in FDIC insurance premiums, a $1.1 million increase in office expense, and a $1.0 million increase in legal and professional services expense, predominately as a result of the additional operations, personnel, branches, and divisions retained with the acquisition of Opus.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

 

 

(Dollars in thousands)

NONINTEREST EXPENSE

 

 

 

 

 

 

Compensation and benefits

 

$

52,044

 

 

 

$

51,021

 

 

 

$

36,409

 

 

Premises and occupancy

 

13,268

 

 

 

12,373

 

 

 

8,113

 

 

Data processing

 

5,990

 

 

 

6,783

 

 

 

3,241

 

 

Other real estate owned operations, net

 

(5

)

 

 

(17

)

 

 

31

 

 

FDIC insurance premiums

 

1,213

 

 

 

1,145

 

 

 

(766

)

 

Legal and professional services

 

4,305

 

 

 

5,108

 

 

 

3,268

 

 

Marketing expense

 

1,442

 

 

 

1,718

 

 

 

1,713

 

 

Office expense

 

2,191

 

 

 

2,389

 

 

 

1,105

 

 

Loan expense

 

1,084

 

 

 

802

 

 

 

1,064

 

 

Deposit expense

 

5,026

 

 

 

4,728

 

 

 

4,537

 

 

Merger-related expense

 

5,071

 

 

 

2,988

 

 

 

 

 

Amortization of intangible assets

 

4,505

 

 

 

4,538

 

 

 

4,247

 

 

Other expense

 

3,805

 

 

 

5,003

 

 

 

3,254

 

 

Total noninterest expense

 

$

99,939

 

 

 

$

98,579

 

 

 

$

66,216

 

 

Income Tax

For the fourth quarter of 2020, our effective tax rate was 25.4%, compared to 26.5% for the third quarter of 2020 and 24.2% for the fourth quarter of 2019. The decrease in the effective tax rate from the prior quarter was primarily due to the increase in tax-exempt municipal interest recognized in the fourth quarter.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.24 billion at December 31, 2020, a decrease of $214.4 million from September 30, 2020, and an increase of $4.51 billion from December 31, 2019. The decrease from September 30, 2020 was driven primarily by higher loan prepayments and payoffs, partially offset by higher funded loans.

During the fourth quarter of 2020, the Bank generated $911.3 million of loan commitments and funded $712.5 million of loans, compared with $360.0 million in loan commitments and $280.8 million in funded loans for the third quarter of 2020, and $556.3 million of loan commitments and $419.9 million in funded loans for the fourth quarter of 2019. The year-over-year increase in loans funded was primarily due to expansion in our multifamily loan segment. Business lines of credit utilization rates increased to 36.2% at the end of the fourth quarter of 2020, compared with 33.9% at the end of the third quarter of 2020, but decreased from 44.3% at the end of the fourth quarter of 2019.

The increase in loans held for investment from December 31, 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.

At December 31, 2020, the ratio of loans held for investment to total deposits was 81.6%, compared with 82.4% and 98.0% at September 30, 2020 and December 31, 2019, respectively.

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

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

 

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

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

 

$

2,675,085

 

 

 

$

2,707,930

 

 

 

$

2,070,141

 

 

Multifamily

 

5,171,356

 

 

 

5,142,069

 

 

 

1,575,726

 

 

Construction and land

 

321,993

 

 

 

337,872

 

 

 

438,786

 

 

SBA secured by real estate (1)

 

57,331

 

 

 

57,610

 

 

 

68,431

 

 

Total investor loans secured by real estate

 

8,225,765

 

 

 

8,245,481

 

 

 

4,153,084

 

 

Business loans secured by real estate (2)

 

 

 

 

 

 

CRE owner-occupied

 

2,114,050

 

 

 

2,119,788

 

 

 

1,846,554

 

 

Franchise real estate secured

 

347,932

 

 

 

359,329

 

 

 

353,240

 

 

SBA secured by real estate (3)

 

79,595

 

 

 

84,126

 

 

 

88,381

 

 

Total business loans secured by real estate

 

2,541,577

 

 

 

2,563,243

 

 

 

2,288,175

 

 

Commercial loans (4)

 

 

 

 

 

 

Commercial and industrial

 

1,768,834

 

 

 

1,820,995

 

 

 

1,393,270

 

 

Franchise non-real estate secured

 

444,797

 

 

 

515,980

 

 

 

564,357

 

 

SBA non-real estate secured

 

15,957

 

 

 

16,748

 

 

 

17,426

 

 

Total commercial loans

 

2,229,588

 

 

 

2,353,723

 

 

 

1,975,053

 

 

Retail loans

 

 

 

 

 

 

Single family residential (5)

 

232,574

 

 

 

243,359

 

 

 

255,024

 

 

Consumer

 

6,929

 

 

 

45,034

 

 

 

50,975

 

 

Total retail loans

 

239,503

 

 

 

288,393

 

 

 

305,999

 

 

Gross loans held for investment (6)

 

13,236,433

 

 

 

13,450,840

 

 

 

8,722,311

 

 

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

 

(268,018

)

 

 

(282,503

)

 

 

(35,698

)

 

Loans held for investment, net

 

$

12,968,415

 

 

 

$

13,168,337

 

 

 

$

8,686,613

 

 

 

 

 

 

 

 

 

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

 

$

601

 

 

 

$

1,032

 

 

 

$

1,672

 

 

(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 $113.8 million, $126.3 million, and $40.7 million as of December 31, 2020, September 30, 2020, and December 31, 2019, respectively.

(7)

The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. 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 December 31, 2020 was 4.27%, compared with 4.34% at September 30, 2020 and 4.91% at December 31, 2019. The quarter-over-quarter and year-over-year decreases reflect the impact of lower rates on loan originations as well as repricing of portfolio loan yields as a result of the Federal Reserve Board's federal funds rate decrease in March 2020.

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

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

 

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

CRE non-owner-occupied

 

$

80,298

 

 

$

40,518

 

 

$

94,791

 

Multifamily

 

398,651

 

 

182,575

 

 

69,653

 

Construction and land

 

60,336

 

 

37,087

 

 

53,166

 

SBA secured by real estate (1)

 

 

 

 

 

1,635

 

Total investor loans secured by real estate

 

539,285

 

 

260,180

 

 

219,245

 

Business loans secured by real estate (2)

 

 

 

 

 

 

CRE owner-occupied

 

96,779

 

 

30,594

 

 

117,022

 

Franchise real estate secured

 

27,162

 

 

 

 

12,257

 

SBA secured by real estate (3)

 

1,999

 

 

799

 

 

5,935

 

Total business loans secured by real estate

 

125,940

 

 

31,393

 

 

135,214

 

Commercial loans (4)

 

 

 

 

 

 

Commercial and industrial

 

228,076

 

 

56,959

 

 

145,092

 

Franchise non-real estate secured

 

8,005

 

 

9,665

 

 

44,185

 

SBA non-real estate secured

 

283

 

 

 

 

2,629

 

Total commercial loans

 

236,364

 

 

66,624

 

 

191,906

 

Retail loans

 

 

 

 

 

 

Single family residential (5)

 

8,888

 

 

 

 

8,457

 

Consumer

 

786

 

 

1,825

 

 

1,439

 

Total retail loans

 

9,674

 

 

1,825

 

 

9,896

 

Total loan commitments

 

$

911,263

 

 

$

360,022

 

 

$

556,261

 

(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.

Allowance for Credit Losses

Effective January 1, 2020, the Company adopted the new CECL accounting standard, which replaces the incurred loss methodology. At December 31, 2020, our allowance for credit losses (“ACL”) on loans held for investment was $268.0 million, a decrease of $14.5 million from September 30, 2020 and an increase of $232.3 million from December 31, 2019, and continues to reflect the impact of the COVID-19 pandemic and resulting uncertainty in the macroeconomic environment. The decrease from September 30, 2020 was driven principally by lower loans held for investment as well as changes in loan mix at December 31, 2020. The increase from December 31, 2019 was primarily due to the cumulative-effect Day 1 adjustment of $55.7 million from the adoption of the CECL model, the Day 1 provision of $75.9 million for non-purchased credit deteriorated (“PCD”) loans from the Opus acquisition, and an initial ACL of $21.2 million with respect to PCD loans from the acquisition, as well as the provision for loan losses of $96.4 million primarily due to the unfavorable changes in economic forecasts employed in the Company's CECL model related to the COVID-19 pandemic during 2020.

During the fourth quarter of 2020, the Company incurred $6.4 million of net charge-offs, compared to $4.5 million and $2.3 million during the third quarter of 2020 and the fourth 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 December 31, 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

$

54,105

 

 

$

(8

)

 

 

$

44

 

 

$

(4,965

)

 

 

$

49,176

 

Multifamily

67,336

 

 

 

 

 

 

 

(4,802

)

 

 

62,534

 

Construction and land

15,557

 

 

(162

)

 

 

 

 

(2,960

)

 

 

12,435

 

SBA secured by real estate (1)

5,327

 

 

(6

)

 

 

 

 

(162

)

 

 

5,159

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

 

CRE owner-occupied

48,666

 

 

 

 

 

15

 

 

1,836

 

 

 

50,517

 

Franchise real estate secured

11,988

 

 

(932

)

 

 

 

 

395

 

 

 

11,451

 

SBA secured by real estate (3)

6,160

 

 

(23

)

 

 

 

 

430

 

 

 

6,567

 

Commercial loans (4)

 

 

 

 

 

 

 

 

 

Commercial and industrial

47,914

 

 

(1,678

)

 

 

1,781

 

 

(1,053

)

 

 

46,964

 

Franchise non-real estate secured

20,149

 

 

(5,297

)

 

 

 

 

5,673

 

 

 

20,525

 

SBA non-real estate secured

951

 

 

(97

)

 

 

1

 

 

140

 

 

 

995

 

Retail loans

 

 

 

 

 

 

 

 

 

Single family residential (5)

1,243

 

 

(44

)

 

 

 

 

5

 

 

 

1,204

 

Consumer loans

3,107

 

 

(2

)

 

 

2

 

 

(2,616

)

 

 

491

 

Totals

$

282,503

 

 

$

(8,249

)

 

 

$

1,843

 

 

$

(8,079

)

 

 

$

268,018

 

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

The ratio of allowance for loan losses to total loans held for investment at December 31, 2020 was 2.02%, compared to 2.10% and 0.41% at September 30, 2020 and December 31, 2019, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value discount on loans acquired through bank acquisitions was $113.8 million, or 0.85% of total loans held for investment, as of December 31, 2020, compared to $126.3 million, or 0.93% of total loans held for investment, as of September 30, 2020, and $40.7 million, or 0.46% of total loans held for investment, as of December 31, 2019.

Asset Quality

Nonperforming assets totaled $29.2 million, or 0.15% of total assets, at December 31, 2020, an increase of $1.7 million from September 30, 2020 and an increase of $20.2 million from December 31, 2019. During the fourth quarter of 2020, nonperforming loans increased $2.0 million from September 30, 2020 to $29.2 million and other real estate owned decreased $334,000 from September 30, 2020 to zero resulting from the sale of other real estate owned property. Loan delinquencies decreased to $13.3 million, or 0.10% of loans held for investment, compared to $29.4 million, or 0.22% of loans held for investment, at September 30, 2020, and $19.1 million, or 0.22% of loans held for investment, at December 31, 2019.

Classified loans totaled $128.3 million, or 0.97% of loans held for investment, at December 31, 2020, compared to $136.7 million, or 1.02% of loans held for investment, at September 30, 2020, and $45.4 million, or 0.52% of loans held for investment, at December 31, 2019. The decrease in classified loans from September 30, 2020 was driven, in part, by the sale of substandard loans totaling $20.1 million, as well as the net changes in risk ratings during the quarter. The year-over-year increase was driven, in part, by the migration to the substandard risk grade of approximately $57.4 million of loans subject to temporary loan modifications as of December 31, 2020, the addition of classified loans from the Opus acquisition in the second quarter of 2020, as well as the net changes in risk rating during fiscal 2020.

Interest typically is not 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 December 31, 2020. There were no troubled debt restructured loans at December 31, 2020 and September 30, 2020, and $3.0 million troubled debt restructured loans at December 31, 2019.

At December 31, 2020, 52 loans totaling $79.5 million, or 0.60% of loans held for investment, remain within their modification period due to the COVID-19 pandemic hardship under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), of which $20.2 million of loans has migrated to the substandard risk grade. As of December 31, 2020, no loans were in-process for potential modification. At September 30, 2020, the Company’s loan portfolio included 54 loans totaling $118.3 million, or 0.88% of loans held for investment, that were modified due to the COVID-19 pandemic as well as $119.4 million of loans in-process for potential modification.

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Asset Quality

 

(Dollars in thousands)

Nonperforming loans

 

$

29,209

 

 

$

27,214

 

 

$

8,527

 

Other real estate owned

 

 

 

334

 

 

441

 

Other assets owned

 

 

 

 

 

 

Nonperforming assets

 

$

29,209

 

 

$

27,548

 

 

$

8,968

 

 

 

 

 

 

 

 

Total classified assets (1)

 

$

128,332

 

 

$

137,042

 

 

$

45,387

 

Allowance for credit losses

 

268,018

 

 

282,503

 

 

35,698

 

Allowance for credit losses as a percent of total nonperforming loans

 

918

%

 

1,038

%

 

419

%

Nonperforming loans as a percent of loans held for investment

 

0.22

 

 

0.20

 

 

0.10

 

Nonperforming assets as a percent of total assets

 

0.15

 

 

0.14

 

 

0.08

 

Classified loans to total loans held for investment

 

0.97

 

 

1.02

 

 

0.52

 

Classified assets to total assets

 

0.65

 

 

0.69

 

 

0.39

 

Net loan charge-offs for the quarter ended

 

$

6,406

 

 

$

4,470

 

 

$

2,318

 

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

 

0.05

%

 

0.03

%

 

0.03

%

Allowance for credit losses to loans held for investment

 

2.02

 

 

2.10

 

 

0.41

 

Loans modified under CARES Act

 

$

79,465

 

 

$

118,298

 

 

$

 

Loans modified under CARES Act as a percent of loans held for investment

 

0.60

%

 

0.88

%

 

%

Delinquent Loans:

 

 

 

 

 

 

30 - 59 days

 

$

1,269

 

 

$

7,084

 

 

$

2,104

 

60 - 89 days

 

57

 

 

1,086

 

 

10,559

 

90+ days

 

11,996

 

 

21,206

 

 

6,439

 

Total delinquency

 

$

13,322

 

 

$

29,376

 

 

$

19,102

 

Delinquency as a percent of loans held for investment

 

0.10

%

 

0.22

%

 

0.22

%

(1)

Includes substandard loans and other real estate owned.

Investment Securities

Investment securities available-for-sale totaled $3.93 billion at December 31, 2020, an increase of $330.4 million from September 30, 2020, and an increase of $2.56 billion from December 31, 2019. The increase as compared to the third quarter of 2020 was primarily the result of purchases of $637.8 million as the company deployed its excess liquidity, and a mark-to-market fair value adjustment increase of $24.4 million, partially offset by sales of $202.6 million and total principal payments, amortization, and redemptions of $129.5 million. The increase compared to the same period last year was primarily the result of $2.72 billion in purchases, $829.9 million acquired from Opus, and a $54.3 million in mark-to-market fair value adjustments, partially offset by $752.6 million in sales and $298.4 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 December 31, 2020.

Deposits

At December 31, 2020, deposits totaled $16.21 billion, a decrease of $116.6 million from September 30, 2020, and an increase of $7.32 billion from December 31, 2019. At December 31, 2020, non-maturity deposits totaled $14.59 billion, a decrease of $25.0 million, or 0.2%, from September 30, 2020 and an increase of $6.74 billion, or 85.8%, from December 31, 2019. During the fourth quarter of 2020, deposit decreases included $115.7 million in money market/savings deposits, $70.5 million in retail certificates of deposits, $24.7 million in interest checking, and $21.1 million in brokered certificates of deposits, partially offset by a $115.4 million increase in noninterest-bearing deposits compared to the third quarter of 2020. The increase in deposits from December 31, 2019 was primarily due to the acquisition of Opus.

The weighted average cost of deposits for the fourth quarter of 2020 was 0.14%, including the favorable impact of the acquired certificates of deposit mark-to-market amortization, compared with 0.20% for the third quarter of 2020 and 0.58% for the fourth quarter of 2019. The decrease in the weighted average cost of deposits for the fourth quarter of 2020 compared to the third quarter of 2020 was principally driven by lower pricing across all deposit product categories, and higher average noninterest-bearing deposits.

The end of period weighted average rate of deposits at December 31, 2020 was 0.18%.

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Deposit Accounts

 

(Dollars in thousands)

Noninterest-bearing checking

 

$

6,011,106

 

 

$

5,895,744

 

 

$

3,857,660

 

Interest-bearing:

 

 

 

 

 

 

Checking

 

2,913,260

 

 

2,937,910

 

 

586,019

 

Money market/savings

 

5,662,969

 

 

5,778,688

 

 

3,406,988

 

Retail certificates of deposit

 

1,471,512

 

 

1,542,029

 

 

973,465

 

Wholesale/brokered certificates of deposit

 

155,330

 

 

176,436

 

 

74,377

 

Total interest-bearing

 

10,203,071

 

 

10,435,063

 

 

5,040,849

 

Total deposits

 

$

16,214,177

 

 

$

16,330,807

 

 

$

8,898,509

 

 

 

 

 

 

 

 

Cost of deposits

 

0.14

%

 

0.20

%

 

0.58

%

Noninterest-bearing deposits as a percent of total deposits

 

37.1

 

 

36.1

 

 

43.4

 

Non-maturity deposits as a percent of total deposits

 

90.0

 

 

89.5

 

 

88.2

 

Core deposits to total deposits (1)

 

94.9

 

 

96.0

 

 

93.7

 

(1)

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

Borrowings

At December 31, 2020, total borrowings amounted to $532.5 million, a decrease of $9.9 million from September 30, 2020 and a decrease of $199.7 million from December 31, 2019. Total borrowings at December 31, 2020 included $31.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) advances and $501.5 million of subordinated debt. At December 31, 2020, total borrowings represented 2.7% of total assets, compared to 2.7% and 6.2% as of September 30, 2020 and December 31, 2019, respectively. The decrease in borrowings at December 31, 2020 as compared to September 30, 2020 was primarily due to decreases in FHLB advances. The decrease in borrowings at December 31, 2020 as compared to December 31, 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 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 December 31, 2020, our ratio of tangible common equity to total assets was 9.40%, compared with 9.01% in the prior quarter and 10.30% at December 31, 2019, and our tangible book value per share was $18.65, compared to $18.01 at September 30, 2020 and $18.84 at December 31, 2019.

The Company implemented the CECL model on January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. At December 31, 2020, the Company exceeded all regulatory minimum capital adequacy requirements, inclusive of the fully phased-in capital conservation buffer, with a tier 1 leverage capital ratio of 9.47%, common equity tier 1 risk-based capital ratio of 12.04%, tier 1 risk-based capital ratio of 12.04%, and total risk-based capital ratio of 16.31%.

At December 31, 2020, the Bank exceeded all regulatory capital requirements with a tier 1 leverage capital ratio of 10.89%, common equity tier 1 risk-based capital ratio of 13.84%, tier 1 risk-based capital ratio of 13.84%, and total risk-based capital of 15.89%. These capital ratios exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage ratio, 6.5% for common equity tier 1 capital ratio, 8.00% for tier 1 capital ratio, and 10.00% for total capital ratio and exceeded the minimum capital ratio levels inclusive of the fully phased-in capital conservation buffer of 7.0%, 8.5%, and 10.5%, respectively.

 

 

December 31,

 

September 30,

 

December 31,

Capital Ratios

 

2020

 

2020

 

2019

Pacific Premier Bancorp, Inc. Consolidated

 

 

Tier 1 leverage ratio

 

9.47

%

 

9.09

%

 

10.54

%

Common equity tier 1 risk-based capital ratio (1)

 

12.04

 

 

11.79

 

 

11.35

 

Tier 1 risk-based capital ratio (1)

 

12.04

 

 

11.79

 

 

11.42

 

Total risk-based capital ratio (1)

 

16.31

 

 

16.11

 

 

13.81

 

Tangible common equity ratio (2)

 

9.40

 

 

9.01

 

 

10.30

 

 

 

 

 

 

 

 

Pacific Premier Bank

 

 

 

 

 

 

Tier 1 leverage ratio

 

10.89

%

 

10.33

%

 

12.39

%

Common equity tier 1 risk-based capital ratio (1)

 

13.84

 

 

13.40

 

 

13.43

 

Tier 1 risk-based capital ratio (1)

 

13.84

 

 

13.40

 

 

13.43

 

Total risk-based capital ratio (1)

 

15.89

 

 

15.48

 

 

13.83

 

 

 

 

 

 

 

 

Share Data

 

 

 

 

 

 

Book value per share

 

$

29.07

 

 

$

28.48

 

 

$

33.82

 

Tangible book value per share (2)

 

18.65

 

 

18.01

 

 

18.84

 

Common equity dividend per share

 

0.28

 

 

0.25

 

 

0.22

 

Closing stock price (3)

 

31.33

 

 

20.14

 

 

32.60

 

Shares issued and outstanding (3)

 

94,483,136

 

 

94,375,521

 

 

59,506,057

 

Market Capitalization (3)(4)

 

$

2,960,157

 

 

$

1,900,723

 

 

$

1,939,897

 

(1)

The Company's and the Bank's common equity tier 1 risk-based capital ratios, tier 1 risk-based capital ratios, and total risk-based capital ratios as of September 30, 2020 reflect the reclassification of $502.6 million of cash and due from banks as of September 30, 2020 to interest-bearing deposits with financial institutions as of that same date. This reclassification resulted in increases in each of these ratios as of September 30, 2020 from what was previously reported.

(2)

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.

(3)

As of the last trading day prior to period end.

(4)

Dollars in thousands.

Dividend and Stock Repurchase Program

On January 21, 2021, the Company's Board of Directors declared a $0.30 per share dividend, payable on February 12, 2021 to shareholders of record on February 5, 2021. This represents a $0.02 per share, or 7% increase, compared to the prior quarter’s quarterly dividend rate.

On January 11, 2020, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase up to 4,725,000 shares of its common stock, representing approximately 5% of the Company’s issued and outstanding shares of common stock and approximately $150 million of common stock as of December 31, 2020 based on the closing price of the Company’s common stock on December 31, 2020. The stock repurchase program may be limited or terminated at any time without notice. The new stock repurchase program replaces and supersedes the previous $100 million stock repurchase program approved by the Board in December 2019, which the Company announced was suspended indefinitely in March 2020. The Company had not repurchased any shares of common stock under the previous stock repurchase program.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on January 26, 2021 to discuss its financial results. Analysts and investors may participate in the question-and-answer session. A live webcast will be available on the Webcasts page of the Company's investor relations website. An archived version of the webcast will be available in the same location shortly after the live call has ended. The conference call can be accessed by telephone at (866) 290-5977 and asking to be joined to the Pacific Premier Bancorp conference call. Additionally, a telephone replay will be made available through February 2, 2021 at (877) 344-7529, access code 10150509.

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 headquartered 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. Pacific Premier Bank also offers 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 $16 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 Homeowners' 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 COMMENTS

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, stockholder value creation, tax rates and the impact of acquisitions we have made or may make.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. 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, interest rate, market and monetary fluctuations; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; 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; the possibility that we may discontinue our newly approved stock repurchase program or reduce or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to such program; 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, June 30, 2020, and September 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.

(PPBI-ER)

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands)

(Unaudited)

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2020

 

2020

 

2020

 

2020

 

2019

ASSETS

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

880,766

 

 

 

$

1,103,077

 

 

 

$

1,341,730

 

 

 

$

534,032

 

 

 

$

326,850

 

 

Interest-bearing time deposits with financial institutions

 

2,845

 

 

 

2,845

 

 

 

2,845

 

 

 

2,708

 

 

 

2,708

 

 

Investments held to maturity, at amortized cost

 

23,732

 

 

 

27,980

 

 

 

32,557

 

 

 

34,553

 

 

 

37,838

 

 

Investment securities available for sale, at fair value

 

3,931,115

 

 

 

3,600,731

 

 

 

2,336,066

 

 

 

1,337,761

 

 

 

1,368,384

 

 

FHLB, FRB and other stock, at cost

 

117,055

 

 

 

116,819

 

 

 

94,658

 

 

 

92,858

 

 

 

93,061

 

 

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

 

601

 

 

 

1,032

 

 

 

1,007

 

 

 

111

 

 

 

1,672

 

 

Loans held for investment

 

13,236,433

 

 

 

13,450,840

 

 

 

15,082,884

 

 

 

8,754,869

 

 

 

8,722,311

 

 

Allowance for credit losses

 

(268,018

)

 

 

(282,503

)

 

 

(282,271

)

 

 

(115,422

)

 

 

(35,698

)

 

Loans held for investment, net

 

12,968,415

 

 

 

13,168,337

 

 

 

14,800,613

 

 

 

8,639,447

 

 

 

8,686,613

 

 

Accrued interest receivable

 

74,574

 

 

 

73,112

 

 

 

78,408

 

 

 

38,294

 

 

 

39,442

 

 

Other real estate owned

 

 

 

 

334

 

 

 

386

 

 

 

441

 

 

 

441

 

 

Premises and equipment

 

78,884

 

 

 

80,326

 

 

 

76,542

 

 

 

61,615

 

 

 

59,001

 

 

Deferred income taxes, net

 

89,056

 

 

 

108,050

 

 

 

105,859

 

 

 

15,249

 

 

 

 

 

Bank owned life insurance

 

292,564

 

 

 

290,875

 

 

 

305,901

 

 

 

113,461

 

 

 

113,376

 

 

Intangible assets

 

85,507

 

 

 

90,012

 

 

 

94,550

 

 

 

79,349

 

 

 

83,312

 

 

Goodwill

 

898,569

 

 

 

898,434

 

 

 

901,166

 

 

 

808,322

 

 

 

808,322

 

 

Other assets

 

292,861

 

 

 

282,276

 

 

 

344,786

 

 

 

218,008

 

 

 

154,992

 

 

Total assets

 

$

19,736,544

 

 

 

$

19,844,240

 

 

 

$

20,517,074

 

 

 

$

11,976,209

 

 

 

$

11,776,012

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

Deposit accounts:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

 

$

6,011,106

 

 

 

$

5,895,744

 

 

 

$

5,899,442

 

 

 

$

3,943,260

 

 

 

$

3,857,660

 

 

Interest-bearing:

 

 

 

 

 

 

 

 

 

 

Checking

 

2,913,260

 

 

 

2,937,910

 

 

 

3,098,454

 

 

 

577,966

 

 

 

586,019

 

 

Money market/savings

 

5,662,969

 

 

 

5,778,688

 

 

 

6,060,031

 

 

 

3,499,305

 

 

 

3,406,988

 

 

Retail certificates of deposit

 

1,471,512

 

 

 

1,542,029

 

 

 

1,651,976

 

 

 

897,680

 

 

 

973,465

 

 

Wholesale/brokered certificates of deposit

 

155,330

 

 

 

176,436

 

 

 

266,790

 

 

 

174,861

 

 

 

74,377

 

 

Total interest-bearing

 

10,203,071

 

 

 

10,435,063

 

 

 

11,077,251

 

 

 

5,149,812

 

 

 

5,040,849

 

 

Total deposits

 

16,214,177

 

 

 

16,330,807

 

 

 

16,976,693

 

 

 

9,093,072

 

 

 

8,898,509

 

 

FHLB advances and other borrowings

 

31,000

 

 

 

41,000

 

 

 

41,006

 

 

 

521,017

 

 

 

517,026

 

 

Subordinated debentures

 

501,511

 

 

 

501,443

 

 

 

501,375

 

 

 

215,269

 

 

 

215,145

 

 

Deferred income taxes, net

 

 

 

 

 

 

 

 

 

 

 

 

 

1,371

 

 

Accrued expenses and other liabilities

 

243,207

 

 

 

282,905

 

 

 

343,353

 

 

 

143,934

 

 

 

131,367

 

 

Total liabilities

 

16,989,895

 

 

 

17,156,155

 

 

 

17,862,427

 

 

 

9,973,292

 

 

 

9,763,418

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Common stock

 

931

 

 

 

930

 

 

 

930

 

 

 

586

 

 

 

586

 

 

Additional paid-in capital

 

2,354,871

 

 

 

2,351,532

 

 

 

2,348,415

 

 

 

1,596,680

 

 

 

1,594,434

 

 

Retained earnings

 

330,555

 

 

 

289,960

 

 

 

247,078

 

 

 

361,242

 

 

 

396,051

 

 

Accumulated other comprehensive income (loss)

 

60,292

 

 

 

45,663

 

 

 

58,224

 

 

 

44,409

 

 

 

21,523

 

 

Total stockholders' equity

 

2,746,649

 

 

 

2,688,085

 

 

 

2,654,647

 

 

 

2,002,917

 

 

 

2,012,594

 

 

Total liabilities and stockholders' equity

 

$

19,736,544

 

 

 

$

19,844,240

 

 

 

$

20,517,074

 

 

 

$

11,976,209

 

 

 

$

11,776,012

 

 

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

 

2020

 

2020

 

2019

 

2020

 

2019

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

Loans

 

$

163,499

 

 

 

$

167,455

 

 

 

$

119,353

 

 

 

$

577,558

 

 

$

485,663

 

Investment securities and other interest-earning assets

 

17,325

 

 

 

14,536

 

 

 

10,493

 

 

 

53,168

 

 

40,444

 

Total interest income

 

180,824

 

 

 

181,991

 

 

 

129,846

 

 

 

630,726

 

 

526,107

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

Deposits

 

5,685

 

 

 

8,509

 

 

 

13,144

 

 

 

34,336

 

 

58,297

 

FHLB advances and other borrowings

 

121

 

 

 

113

 

 

 

730

 

 

 

1,532

 

 

9,829

 

Subordinated debentures

 

6,820

 

 

 

6,823

 

 

 

3,053

 

 

 

20,647

 

 

10,680

 

Total interest expense

 

12,626

 

 

 

15,445

 

 

 

16,927

 

 

 

56,515

 

 

78,806

 

Net interest income before provision for credit losses

 

168,198

 

 

 

166,546

 

 

 

112,919

 

 

 

574,211

 

 

447,301

 

Provision for credit losses

 

1,517

 

 

 

4,210

 

 

 

2,297

 

 

 

191,816

 

 

5,719

 

Net interest income after provision for credit losses

 

166,681

 

 

 

162,336

 

 

 

110,622

 

 

 

382,395

 

 

441,582

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

Loan servicing income

 

633

 

 

 

481

 

 

 

487

 

 

 

2,028

 

 

1,840

 

Service charges on deposit accounts

 

2,005

 

 

 

1,593

 

 

 

1,558

 

 

 

6,712

 

 

5,769

 

Other service fee income

 

459

 

 

 

487

 

 

 

359

 

 

 

1,554

 

 

1,438

 

Debit card interchange fee income

 

777

 

 

 

944

 

 

 

367

 

 

 

2,526

 

 

3,004

 

Earnings on BOLI

 

2,240

 

 

 

2,270

 

 

 

864

 

 

 

7,160

 

 

3,486

 

Net gain from sales of loans

 

328

 

 

 

9,542

 

 

 

1,698

 

 

 

8,609

 

 

6,642

 

Net gain from sales of investment securities

 

5,002

 

 

 

1,141

 

 

 

3,671

 

 

 

13,882

 

 

8,571

 

Trust custodial account fees

 

7,296

 

 

 

6,960

 

 

 

 

 

 

16,653

 

 

 

Other income

 

4,454

 

 

 

3,340

 

 

 

797

 

 

 

12,201

 

 

4,486

 

Total noninterest income

 

23,194

 

 

 

26,758

 

 

 

9,801

 

 

 

71,325

 

 

35,236

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

52,044

 

 

 

51,021

 

 

 

36,409

 

 

 

180,452

 

 

139,187

 

Premises and occupancy

 

13,268

 

 

 

12,373

 

 

 

8,113

 

 

 

43,296

 

 

30,758

 

Data processing

 

5,990

 

 

 

6,783

 

 

 

3,241

 

 

 

20,491

 

 

12,301

 

Other real estate owned operations, net

 

(5

)

 

 

(17

)

 

 

31

 

 

 

1

 

 

160

 

FDIC insurance premiums

 

1,213

 

 

 

1,145

 

 

 

(766

)

 

 

3,571

 

 

764

 

Legal and professional services

 

4,305

 

 

 

5,108

 

 

 

3,268

 

 

 

15,633

 

 

12,869

 

Marketing expense

 

1,442

 

 

 

1,718

 

 

 

1,713

 

 

 

5,891

 

 

6,402

 

Office expense

 

2,191

 

 

 

2,389

 

 

 

1,105

 

 

 

7,216

 

 

4,826

 

Loan expense

 

1,084

 

 

 

802

 

 

 

1,064

 

 

 

3,531

 

 

4,079

 

Deposit expense

 

5,026

 

 

 

4,728

 

 

 

4,537

 

 

 

19,700

 

 

15,266

 

Merger-related expense

 

5,071

 

 

 

2,988

 

 

 

 

 

 

49,129

 

 

656

 

Amortization of intangible assets

 

4,505

 

 

 

4,538

 

 

 

4,247

 

 

 

17,072

 

 

17,245

 

Other expense

 

3,805

 

 

 

5,003

 

 

 

3,254

 

 

 

15,136

 

 

14,552

 

Total noninterest expense

 

99,939

 

 

 

98,579

 

 

 

66,216

 

 

 

381,119

 

 

259,065

 

Net income before income taxes

 

89,936

 

 

 

90,515

 

 

 

54,207

 

 

 

72,601

 

 

217,753

 

Income tax

 

22,800

 

 

 

23,949

 

 

 

13,109

 

 

 

12,250

 

 

58,035

 

Net income

 

$

67,136

 

 

 

$

66,566

 

 

 

$

41,098

 

 

 

$

60,351

 

 

$

159,718

 

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.71

 

 

 

$

0.71

 

 

 

$

0.69

 

 

 

$

0.75

 

 

$

2.62

 

Diluted

 

0.71

 

 

 

0.70

 

 

 

0.69

 

 

 

0.75

 

 

2.60

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

Basic

 

93,568,994

 

 

93,529,967

 

 

58,816,352

 

 

79,209,560

 

 

60,339,714

 

Diluted

 

93,969,188

 

 

93,719,167

 

 

59,182,054

 

 

79,506,274

 

 

60,692,281

 

 

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

December 31, 2020

 

September 30, 2020

 

December 31, 2019

 

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

 

Average

Balance

 

Interest

 

Average

Yield/

Cost

Assets

 

(Dollars in thousands)

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,239,035

 

 

$

286

 

 

0.09

%

 

$

1,388,897

 

 

$

305

 

 

0.09

%

 

$

201,161

 

 

$

283

 

 

0.56

%

Investment securities

 

3,964,592

 

 

17,039

 

 

1.72

 

 

3,283,840

 

 

14,231

 

 

1.73

 

 

1,445,158

 

 

10,210

 

 

2.83

 

Loans receivable, net (1) (2)

 

13,315,810

 

 

163,499

 

 

4.88

 

 

14,034,868

 

 

167,455

 

 

4.75

 

 

8,700,690

 

 

119,353

 

 

5.44

 

Total interest-earning assets

 

18,519,437

 

 

180,824

 

 

3.88

 

 

18,707,605

 

 

181,991

 

 

3.87

 

 

10,347,009

 

 

129,846

 

 

4.98

 

Noninterest-earning assets

 

1,540,456

 

 

 

 

 

 

1,659,156

 

 

 

 

 

 

1,230,083

 

 

 

 

 

Total assets

 

$

20,059,893

 

 

 

 

 

 

$

20,366,761

 

 

 

 

 

 

$

11,577,092

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking

 

$

2,971,983

 

 

$

652

 

 

0.09

%

 

$

3,001,738

 

 

$

1,191

 

 

0.16

%

 

$

563,357

 

 

$

643

 

 

0.45

%

Money market

 

5,368,054

 

 

3,296

 

 

0.24

 

 

5,490,541

 

 

4,855

 

 

0.35

 

 

3,184,267

 

 

6,704

 

 

0.84

 

Savings

 

360,148

 

 

86

 

 

0.09

 

 

357,768

 

 

109

 

 

0.12

 

 

236,970

 

 

101

 

 

0.17

 

Retail certificates of deposit

 

1,507,959

 

 

1,413

 

 

0.37

 

 

1,587,712

 

 

1,857

 

 

0.47

 

 

998,594

 

 

4,272

 

 

1.70

 

Wholesale/brokered certificates of deposit

 

176,085

 

 

238

 

 

0.54

 

 

265,672

 

 

497

 

 

0.74

 

 

233,470

 

 

1,424

 

 

2.42

 

Total interest-bearing deposits

 

10,384,229

 

 

5,685

 

 

0.22

 

 

10,703,431

 

 

8,509

 

 

0.32

 

 

5,216,658

 

 

13,144

 

 

1.00

 

FHLB advances and other borrowings

 

37,560

 

 

121

 

 

1.28

 

 

41,041

 

 

113

 

 

1.10

 

 

153,333

 

 

730

 

 

1.89

 

Subordinated debentures

 

501,461

 

 

6,820

 

 

5.44

 

 

501,396

 

 

6,823

 

 

5.44

 

 

215,250

 

 

3,053

 

 

5.67

 

Total borrowings

 

539,021

 

 

6,941

 

 

5.12

 

 

542,437

 

 

6,936

 

 

5.09

 

 

368,583

 

 

3,783

 

 

4.07

 

Total interest-bearing liabilities

 

10,923,250

 

 

12,626

 

 

0.46

 

 

11,245,868

 

 

15,445

 

 

0.55

 

 

5,585,241

 

 

16,927

 

 

1.20

 

Noninterest-bearing deposits

 

6,125,171

 

 

 

 

 

 

5,877,619

 

 

 

 

 

 

3,814,809

 

 

 

 

 

Other liabilities

 

300,963

 

 

 

 

 

 

553,407

 

 

 

 

 

 

172,227

 

 

 

 

 

Total liabilities

 

17,349,384

 

 

 

 

 

 

17,676,894

 

 

 

 

 

 

9,572,277

 

 

 

 

 

Stockholders' equity

 

2,710,509

 

 

 

 

 

 

2,689,867

 

 

 

 

 

 

2,004,815

 

 

 

 

 

Total liabilities and equity

 

$

20,059,893

 

 

 

 

 

 

$

20,366,761

 

 

 

 

 

 

$

11,577,092

 

 

 

 

 

Net interest income

 

 

 

$

168,198

 

 

 

 

 

 

$

166,546

 

 

 

 

 

 

$

112,919

 

 

 

Net interest margin (3)

 

 

 

 

 

3.61

%

 

 

 

 

 

3.54

%

 

 

 

 

 

4.33

%

Cost of deposits

 

 

 

 

 

0.14

 

 

 

 

 

 

0.20

 

 

 

 

 

 

0.58

 

Cost of funds (4)

 

 

 

 

 

0.29

 

 

 

 

 

 

0.36

 

 

 

 

 

 

0.71

 

Ratio of interest-earning assets to interest-bearing liabilities

 

169.54

 

 

 

 

 

 

166.35

 

 

 

 

 

 

185.26

 

(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 $11.0 million, $12.2 million, and $5.8 million, respectively.

(3)

Represents annualized net interest income divided by average interest-earning assets.

(4)

Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

LOAN PORTFOLIO COMPOSITION

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2020

 

2020

 

2020

 

2020

 

2019

 

 

(Dollars in thousands)

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

2,675,085

 

 

 

$

2,707,930

 

 

 

$

2,783,692

 

 

 

$

2,040,198

 

 

 

$

2,070,141

 

 

Multifamily

 

5,171,356

 

 

 

5,142,069

 

 

 

5,225,557

 

 

 

1,625,682

 

 

 

1,575,726

 

 

Construction and land

 

321,993

 

 

 

337,872

 

 

 

357,426

 

 

 

377,525

 

 

 

438,786

 

 

SBA secured by real estate (1)

 

57,331

 

 

 

57,610

 

 

 

59,482

 

 

 

61,665

 

 

 

68,431

 

 

Total investor loans secured by real estate

 

8,225,765

 

 

 

8,245,481

 

 

 

8,426,157

 

 

 

4,105,070

 

 

 

4,153,084

 

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

2,114,050

 

 

 

2,119,788

 

 

 

2,170,154

 

 

 

1,887,632

 

 

 

1,846,554

 

 

Franchise real estate secured

 

347,932

 

 

 

359,329

 

 

 

364,647

 

 

 

371,428

 

 

 

353,240

 

 

SBA secured by real estate (3)

 

79,595

 

 

 

84,126

 

 

 

85,542

 

 

 

83,640

 

 

 

88,381

 

 

Total business loans secured by real estate

 

2,541,577

 

 

 

2,563,243

 

 

 

2,620,343

 

 

 

2,342,700

 

 

 

2,288,175

 

 

Commercial loans (4)

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

1,768,834

 

 

 

1,820,995

 

 

 

2,051,313

 

 

 

1,458,969

 

 

 

1,393,270

 

 

Franchise non-real estate secured

 

444,797

 

 

 

515,980

 

 

 

523,755

 

 

 

547,793

 

 

 

564,357

 

 

SBA non-real estate secured

 

15,957

 

 

 

16,748

 

 

 

21,057

 

 

 

16,265

 

 

 

17,426

 

 

SBA PPP

 

 

 

 

 

 

 

1,128,780

 

 

 

 

 

 

 

 

Total commercial loans

 

2,229,588

 

 

 

2,353,723

 

 

 

3,724,905

 

 

 

2,023,027

 

 

 

1,975,053

 

 

Retail loans

 

 

 

 

 

 

 

 

 

 

Single family residential (5)

 

232,574

 

 

 

243,359

 

 

 

265,170

 

 

 

237,180

 

 

 

255,024

 

 

Consumer

 

6,929

 

 

 

45,034

 

 

 

46,309

 

 

 

46,892

 

 

 

50,975

 

 

Total retail loans

 

239,503

 

 

 

288,393

 

 

 

311,479

 

 

 

284,072

 

 

 

305,999

 

 

Gross loans held for investment (6)

 

13,236,433

 

 

 

13,450,840

 

 

 

15,082,884

 

 

 

8,754,869

 

 

 

8,722,311

 

 

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

 

(268,018

)

 

 

(282,503

)

 

 

(282,271

)

 

 

(115,422

)

 

 

(35,698

)

 

Loans held for investment, net

 

$

12,968,415

 

 

 

$

13,168,337

 

 

 

$

14,800,613

 

 

 

$

8,639,447

 

 

 

$

8,686,613

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

601

 

 

 

$

1,032

 

 

 

$

1,007

 

 

 

$

111

 

 

 

$

1,672

 

 

(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 $113.8 million, $126.3 million, and $40.7 million as of December 31, 2020, September 30, 2020, and December 31, 2019 respectively.

(7)

The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. Effective January 1, 2020, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2020

 

2020

 

2020

 

2020

 

2019

 

 

(Dollars in thousands)

Asset Quality

 

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

$

29,209

 

 

$

27,214

 

 

$

33,825

 

 

$

20,610

 

 

$

8,527

 

Other real estate owned

 

 

 

334

 

 

386

 

 

441

 

 

441

 

Nonperforming assets

 

$

29,209

 

 

$

27,548

 

 

$

34,211

 

 

$

21,051

 

 

$

8,968

 

 

 

 

 

 

 

 

 

 

 

 

Total classified assets (1)

 

$

128,332

 

 

$

137,042

 

 

$

90,334

 

 

$

54,586

 

 

$

45,387

 

Allowance for credit losses

 

268,018

 

 

282,503

 

 

282,271

 

 

115,422

 

 

35,698

 

Allowance for credit losses as a percent of total nonperforming loans

 

918

%

 

1,038

%

 

835

%

 

560

%

 

419

%

Nonperforming loans as a percent of loans held for investment

 

0.22

 

 

0.20

 

 

0.22

 

 

0.24

 

 

0.10

 

Nonperforming assets as a percent of total assets

 

0.15

 

 

0.14

 

 

0.17

 

 

0.18

 

 

0.08

 

Classified loans to total loans held for investment

 

0.97

 

 

1.02

 

 

0.60

 

 

0.62

 

 

0.52

 

Classified assets to total assets

 

0.65

 

 

0.69

 

 

0.44

 

 

0.46

 

 

0.39

 

Net loan charge-offs for the quarter ended

 

$

6,406

 

 

$

4,470

 

 

$

4,650

 

 

$

1,344

 

 

$

2,318

 

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

 

0.05

%

 

0.03

%

 

0.04

%

 

0.02

%

 

0.03

%

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

 

2.02

 

 

2.10

 

 

1.87

 

 

1.32

 

 

0.41

 

Allowance for credit losses to loans held for investment, excluding SBA PPP loans (2)

 

2.02

 

 

2.10

 

 

2.02

 

 

1.32

 

 

0.41

 

Loans modified under CARES Act

 

$

79,465

 

 

$

118,298

 

 

$

2,244,974

 

 

$

 

 

$

 

Loans modified under CARES Act as a percent of loans held for investment

 

0.60

%

 

0.88

%

 

14.88

%

 

%

 

%

Delinquent Loans:

 

 

 

 

 

 

 

 

 

 

30 - 59 days

 

$

1,269

 

 

$

7,084

 

 

$

6,248

 

 

$

8,285

 

 

$

2,104

 

60 - 89 days

 

57

 

 

1,086

 

 

4,133

 

 

1,502

 

 

10,559

 

90+ days

 

11,996

 

 

21,206

 

 

27,807

 

 

19,084

 

 

6,439

 

Total delinquency

 

$

13,322

 

 

$

29,376

 

 

$

38,188

 

 

$

28,871

 

 

$

19,102

 

Delinquency as a percent of loans held for investment

 

0.10

%

 

0.22

%

 

0.25

%

 

0.33

%

 

0.22

%

(1)

Includes substandard loans and other real estate owned.

(2)

At December 31, 2020, 55% of loans held for investment include an aggregate fair value net discount of $113.8 million, or 0.85% of loans held for investment. 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 December 31, 2019, 37% of loans held for investment include an aggregate fair value net discount of $40.7 million, or 0.46% of loans held for investment.

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

NONACCRUAL LOANS (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral

Dependent

Loans

 

ACL

 

Non-

Collateral

Dependent

Loans

 

ACL

 

Total

Nonaccrual

Loans

 

Nonaccrual

Loans With

No ACL

 

 

(Dollars in thousands)

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

2,792

 

 

$

 

 

$

 

 

$

 

 

$

2,792

 

 

$

2,792

 

SBA secured by real estate (2)

 

1,257

 

 

 

 

 

 

 

 

1,257

 

 

1,257

 

Total investor loans secured by real estate

 

4,049

 

 

 

 

 

 

 

 

4,049

 

 

4,049

 

Business loans secured by real estate (3)

 

 

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

6,083

 

 

 

 

 

 

 

 

6,083

 

 

6,083

 

SBA secured by real estate (4)

 

1,143

 

 

 

 

 

 

 

 

1,143

 

 

1,143

 

Total business loans secured by real estate

 

7,226

 

 

 

 

 

 

 

 

7,226

 

 

7,226

 

Commercial loans (5)

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

2,040

 

 

 

 

1,934

 

 

126

 

 

3,974

 

 

2,733

 

Franchise non-real estate secured

 

 

 

 

 

13,238

 

 

 

 

13,238

 

 

13,238

 

SBA not secured by real estate

 

707

 

 

 

 

 

 

 

 

707

 

 

707

 

Total commercial loans

 

2,747

 

 

 

 

15,172

 

 

126

 

 

17,919

 

 

16,678

 

Retail Loans

 

 

 

 

 

 

 

 

 

 

 

 

Single family residential (6)

 

15

 

 

 

 

 

 

 

 

15

 

 

15

 

Total retail loans

 

15

 

 

 

 

 

 

 

 

15

 

 

15

 

Totals nonaccrual loans

 

$

14,037

 

 

$

 

 

$

15,172

 

 

$

126

 

 

$

29,209

 

 

$

27,968

 

(1)

The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.

(2)

SBA loans that are collateralized by hotel/motel real property.

(3)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(4)

SBA loans that are collateralized by real property other than hotel/motel real property.

(5)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(6)

Single family residential includes home equity lines of credit, as well as second trust deeds.

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

PAST DUE STATUS

 

 

 

 

 

Days Past Due

 

 

 

 

Current

 

30-59

 

60-89

 

90+

 

Total

 

 

(Dollars in thousands)

December 31, 2020

 

 

 

 

 

 

 

 

 

 

Investor loans secured by real estate

 

 

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

2,674,328

 

 

$

 

 

$

 

 

$

757

 

 

$

2,675,085

 

Multifamily

 

5,171,355

 

 

1

 

 

 

 

 

 

5,171,356

 

Construction and land

 

321,993

 

 

 

 

 

 

 

 

321,993

 

SBA secured by real estate (1)

 

56,074

 

 

 

 

 

 

1,257

 

 

57,331

 

Total investor loans secured by real estate

 

8,223,750

 

 

1

 

 

 

 

2,014

 

 

8,225,765

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

 

 

CRE owner-occupied

 

2,108,746

 

 

 

 

 

 

5,304

 

 

2,114,050

 

Franchise real estate secured

 

347,932

 

 

 

 

 

 

 

 

347,932

 

SBA secured by real estate (3)

 

78,036

 

 

486

 

 

 

 

1,073

 

 

79,595

 

Total business loans secured by real estate

 

2,534,714

 

 

486

 

 

 

 

6,377

 

 

2,541,577

 

Commercial loans (4)

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

1,765,451

 

 

428

 

 

57

 

 

2,898

 

 

1,768,834

 

Franchise non-real estate secured

 

444,797

 

 

 

 

 

 

 

 

444,797

 

SBA not secured by real estate

 

14,912

 

 

338

 

 

 

 

707

 

 

15,957

 

Total commercial loans

 

2,225,160

 

 

766

 

 

57

 

 

3,605

 

 

2,229,588

 

Retail loans

 

 

 

 

 

 

 

 

 

 

Single family residential (5)

 

232,559

 

 

15

 

 

 

 

 

 

232,574

 

Consumer loans

 

6,928

 

 

1

 

 

 

 

 

 

6,929

 

Total retail loans

 

239,487

 

 

16

 

 

 

 

 

 

239,503

 

Total loans

 

$

13,223,111

 

 

$

1,269

 

 

$

57

 

 

$

11,996

 

 

$

13,236,433

 

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CREDIT RISK GRADES

 

 

 

 

 

 

 

 

 

 

 

Pass

 

Special

Mention

 

Substandard

 

Total Gross

Loans

 

 

(Dollars in thousands)

December 31, 2020

 

 

 

 

 

 

 

 

Investor loans secured by real estate

 

 

 

 

 

 

 

 

CRE non-owner-occupied

 

$

2,617,655

 

 

$

39,360

 

 

$

18,070

 

 

$

2,675,085

 

Multifamily

 

5,156,988

 

 

13,037

 

 

1,331

 

 

5,171,356

 

Construction and land

 

321,993

 

 

 

 

 

 

321,993

 

SBA secured by real estate (1)

 

44,754

 

 

4,366

 

 

8,211

 

 

57,331

 

Total investor loans secured by real estate

 

8,141,390

 

 

56,763

 

 

27,612

 

 

8,225,765

 

Business loans secured by real estate (2)

 

 

 

 

 

 

 

 

CRE owner-occupied

 

2,072,545

 

 

26,263

 

 

15,242

 

 

2,114,050

 

Franchise real estate secured

 

340,784

 

 

5,180

 

 

1,968

 

 

347,932

 

SBA secured by real estate (3)

 

71,668

 

 

1,337

 

 

6,590

 

 

79,595

 

Total business loans secured by real estate

 

2,484,997

 

 

32,780

 

 

23,800

 

 

2,541,577

 

Commercial loans (4)

 

 

 

 

 

 

 

 

Commercial and industrial

 

1,701,772

 

 

22,741

 

 

44,321

 

 

1,768,834

 

Franchise non-real estate secured

 

402,737

 

 

12,335

 

 

29,725

 

 

444,797

 

SBA not secured by real estate

 

12,214

 

 

1,574

 

 

2,169

 

 

15,957

 

Total commercial loans

 

2,116,723

 

 

36,650

 

 

76,215

 

 

2,229,588

 

Retail loans

 

 

 

 

 

 

 

 

Single family residential (5)

 

231,917

 

 

 

 

657

 

 

232,574

 

Consumer loans

 

6,881

 

 

 

 

48

 

 

6,929

 

Total retail loans

 

238,798

 

 

 

 

705

 

 

239,503

 

Total loans

 

$

12,981,908

 

 

$

126,193

 

 

$

128,332

 

 

$

13,236,433

 

(1)

SBA loans that are collateralized by hotel/motel real property.

(2)

Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.

(3)

SBA loans that are collateralized by real property other than hotel/motel real property.

(4)

Loans to businesses where the operating cash flow of the business is the primary source of repayment.

(5)

Single family residential includes home equity lines of credit, as well as second trust deeds.

 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

GAAP RECONCILIATIONS

(Dollars in thousands, except per share data)

 

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

 

 

 

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

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Net income

 

$

67,136

 

 

$

66,566

 

 

$

41,098

 

Plus: amortization of intangible assets expense

 

4,505

 

 

4,538

 

 

4,247

 

Less: amortization of intangible assets expense tax adjustment

 

1,288

 

 

1,301

 

 

1,218

 

Net income for average tangible common equity

 

70,353

 

 

69,803

 

 

44,127

 

Plus: merger-related expense

 

5,071

 

 

2,988

 

 

 

Less: merger-related expense tax adjustment

 

1,450

 

 

857

 

 

 

Net income for average tangible common equity excluding merger-related expense

 

$

73,974

 

 

$

71,934

 

 

$

44,127

 

 

 

 

 

 

 

 

Average stockholders' equity

 

$

2,710,509

 

 

$

2,689,867

 

 

$

2,004,815

 

Less: average intangible assets

 

88,216

 

 

92,768

 

 

85,901

 

Less: average goodwill

 

898,436

 

 

898,430

 

 

808,322

 

Average tangible common equity

 

$

1,723,857

 

 

$

1,698,669

 

 

$

1,110,592

 

 

 

 

 

 

 

 

Return on average equity

 

9.91

%

 

9.90

%

 

8.20

%

Return on average tangible common equity

 

16.32

%

 

16.44

%

 

15.89

%

Return on average tangible common equity excluding merger-related expense

 

17.16

%

 

16.94

%

 

15.89

%

For periods presented below, return on average assets excluding merger-related expense is a non-GAAP financial measure derived from GAAP based amounts. We calculate this figure by excluding merger-related expense and the related tax impact from net income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Net income

 

$

67,136

 

 

$

66,566

 

 

$

41,098

 

Plus: merger-related expense

 

5,071

 

 

2,988

 

 

 

Less: merger-related expense tax adjustment

 

1,450

 

 

857

 

 

 

Net income for average assets excluding merger-related expense

 

$

70,757

 

 

$

68,697

 

 

$

41,098

 

 

 

 

 

 

 

 

Average assets

 

$

20,059,893

 

 

$

20,366,761

 

 

$

11,577,092

 

 

 

 

 

 

 

 

Return on average average

 

1.34

%

 

1.31

%

 

1.42

%

Return on average average excluding merger-related expense

 

1.41

%

 

1.35

%

 

1.42

%

Pre-provision net revenue is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the pre-provision net revenue by excluding income tax, provision for credit losses, and merger-related expenses from the net income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Interest income

 

$

180,824

 

 

$

181,991

 

 

$

129,846

 

Interest expense

 

12,626

 

 

15,445

 

 

16,927

 

Net interest income

 

168,198

 

 

166,546

 

 

112,919

 

Noninterest income

 

23,194

 

 

26,758

 

 

9,801

 

Revenue

 

191,392

 

 

193,304

 

 

122,720

 

Noninterest expense

 

99,939

 

 

98,579

 

 

66,216

 

Plus: merger-related expense

 

5,071

 

 

2,988

 

 

 

Pre-provision net revenue

 

96,524

 

 

97,713

 

 

56,504

 

Pre-provision net revenue (annualized)

 

$

386,096

 

 

$

390,852

 

 

$

226,016

 

 

 

 

 

 

 

 

Average assets

 

$

20,059,893

 

 

$

20,366,761

 

 

$

11,577,092

 

 

 

 

 

 

 

 

Pre-provision net revenue on average assets

 

0.48

%

 

0.48

%

 

0.49

%

Pre-provision net revenue on average assets (annualized)

 

1.92

%

 

1.92

%

 

1.95

%

Noninterest expense (excluding merger-related expense) as a percent of average assets is non-GAAP financial measure derived from GAAP-based amounts. We calculate the noninterest expense (excluding merger-related expense) as a percent of average assets by excluding merger-related expenses from the noninterest expense and dividing by average assets. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Noninterest expense

 

$

99,939

 

 

$

98,579

 

 

$

66,216

 

Less: merger-related expense

 

5,071

 

 

2,988

 

 

 

Noninterest expense excluding merger-related expense

 

94,868

 

 

95,591

 

 

66,216

 

 

 

 

 

 

 

 

Average assets

 

$

20,059,893

 

 

$

20,366,761

 

 

$

11,577,092

 

 

 

 

 

 

 

 

Noninterest expense as a percent of average assets (annualized)

 

1.99

%

 

1.94

%

 

2.29

%

Noninterest expense excluding merger-related expense as a percent of average assets (annualized)

 

1.89

%

 

1.88

%

 

2.29

%

Tangible book value per share and tangible common equity to tangible assets (the “tangible common equity ratio”) are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible book value per share by dividing tangible common equity by common shares outstanding, as compared to book value per share, which we calculate by dividing common stockholders' equity by shares outstanding. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. We believe that this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios. Accordingly, we believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our capital position and ratios.

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2020

 

2020

 

2020

 

2020

 

2019

Total stockholders' equity

 

$

2,746,649

 

 

$

2,688,085

 

 

$

2,654,647

 

 

$

2,002,917

 

 

$

2,012,594

 

Less: intangible assets

 

984,076

 

 

988,446

 

 

995,716

 

 

887,671

 

 

891,634

 

Tangible common equity

 

$

1,762,573

 

 

$

1,699,639

 

 

$

1,658,931

 

 

$

1,115,246

 

 

$

1,120,960

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

29.07

 

 

$

28.48

 

 

$

28.14

 

 

$

33.40

 

 

$

33.82

 

Less: intangible book value per share

 

10.42

 

 

10.47

 

 

10.56

 

 

14.80

 

 

14.98

 

Tangible book value per share

 

$

18.65

 

 

$

18.01

 

 

$

17.58

 

 

$

18.60

 

 

$

18.84

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

19,736,544

 

 

$

19,844,240

 

 

$

20,517,074

 

 

$

11,976,209

 

 

$

11,776,012

 

Less: intangible assets

 

984,076

 

 

988,446

 

 

995,716

 

 

887,671

 

 

891,634

 

Tangible assets

 

$

18,752,468

 

 

$

18,855,794

 

 

$

19,521,358

 

 

$

11,088,538

 

 

$

10,884,378

 

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity ratio

 

9.40

%

 

9.01

%

 

8.50

%

 

10.06

%

 

10.30

%

 

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

 

 

Three Months Ended

 

 

December 31,

 

September 30,

 

December 31,

 

 

2020

 

2020

 

2019

Net interest income

 

$

168,198

 

 

$

166,546

 

 

 

$

112,919

 

Less: scheduled accretion income

 

4,911

 

 

6,858

 

 

 

2,030

 

Less: accelerated accretion income

 

6,120

 

 

5,338

 

 

 

3,798

 

Less: premium amortization on CD

 

2,358

 

 

2,968

 

 

 

72

 

Less: nonrecurring nonaccrual interest paid and other one-time adjustments

 

322

 

 

(275

)

 

 

168

 

Core net interest income

 

154,487

 

 

151,657

 

 

 

106,851

 

Less: interest income on SBA PPP loans

 

 

 

838

 

 

 

 

Core net interest income excluding SBA PPP loans

 

$

154,487

 

 

$

150,819

 

 

 

$

106,851

 

 

 

 

 

 

 

 

Average interest-earning assets

 

$

18,519,437

 

 

$

18,707,605

 

 

 

$

10,347,009

 

Less: average SBA PPP loans

 

 

 

329,396

 

 

 

 

Average interest-earning assets excluding SBA PPP loans

 

$

18,519,437

 

 

$

18,378,209

 

 

 

$

10,347,009

 

 

 

 

 

 

 

 

Net interest margin

 

3.61

%

 

3.54

 

%

 

4.33

%

Core net interest margin

 

3.32

%

 

3.23

 

%

 

4.10

%

Core net interest margin excluding SBA PPP loans

 

3.32

%

 

3.26

 

%

 

4.10

%

 

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

Source: Pacific Premier Bancorp, Inc.