Benefit Plans

401(k) Plan—The Bank maintains an Employee Savings Plan (the “401(k) Plan”) which qualifies under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, employees may contribute between 1% to 50% of their compensation. In 2015, 2014 and 2013, the Bank matched 100% of contributions for the first three percent contributed and 50% on the next two percent contributed. Contributions made to the 401(k) Plan by the Bank amounted to $769,000 for 2015, $540,000 for 2014 and $401,000 for 2013.

Pacific Premier Bancorp, Inc. 2004 Long-Term Incentive Plan (the “2004 Plan”)—The 2004 Plan was approved by the Corporation’s stockholders in May 2004. The 2004 Plan authorizes the granting of options equal to 525,500 shares of the common stock of the Corporation for issuances to executives, key employees, officers, and directors. The 2004 Plan will be in effect for a period of ten years years from February 25, 2004, the date the 2004 Plan was adopted. Options granted under the 2004 Plan will be made at an exercise price equal to the fair market value of the stock on the date of grant. Awards granted to officers and employees may include incentive stock options, nonstatutory stock options and limited rights, which are exercisable only upon a change in control of the Corporation. The options granted pursuant to the 2004 Plan vest at a rate of 33.3% per year. As of December 31, 2015, there are 318,355 options outstanding on the 2004 Plan with zero available for grant. The 2004 Plan terminated in February 2014.

Pacific Premier Bancorp, Inc. 2012 Long-Term Incentive Plan (the “2012 Plan”)—The 2012 Plan was approved by the Corporation’s stockholders in May 2012. The 2012 Plan authorizes the granting of options equal to 620,000 shares of the common stock of the Corporation for issuances to executives, key employees, officers, and directors. The 2012 Plan will be in effect for a period of ten years years from May 30, 2012, the date the 2012 Plan was adopted. Options granted under the 2012 Plan will be made at an exercise price equal to the fair market value of the stock on the date of grant. Awards granted to officers and employees may include incentive stock options, non-qualified stock options, restricted stock, restricted stock units, and stock appreciation rights. The options granted pursuant to the 2012 Plan vest at a rate of 33.3% per year. In May 2014, the Corporation’s stockholders approved an amendment to the 2012 Plan to increase the shares available under the plan by 800,000 shares to total 1,420,000 shares. As of December 31, 2015, there are 740,731 options outstanding on the 2012 Plan with 816,105 available for grant. In May 2015, the Corporation's stockholders approved an amendment to the 2012 Plan to permit the grant of performance-based awards, including equity compensation awards that may not be subject to the deduction limitation of Section 162(m) of the Internal Revenue Code. The performance-based awards include (i) both performance-based equity compensation awards and performance-based cash bonus payments and (ii) restricted stock units.

The Pacific Premier Bancorp, Inc. 2004 Long-Term Incentive Plan, and the Pacific Premier Bancorp, Inc. 2012 Long-Term Incentive Plan are collectively the “Option Plans.”

Stock Options

Below is a summary of the stock option activity in the Plans for the year ended December 31, 2015:



	2015
	Number of Stock Options Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic value
					(in years)	(in thousands)
Outstanding at January 1, 2015	925,084		$	10.41
Granted	249,000		15.16
Exercised	(8,066	)	8.70
Forfeited and Expired	(106,932	)	12.31
Outstanding at December 31, 2015	1,059,086		$	11.35	6.3	$	10,489
Vested and exercisable at December 31, 2015	635,069		$	9.09	4.9	$	7,719

The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $60,000, $536,000 and $277,000, respectively.

The amount charged against compensation expense in relation to the stock options was $905,000 for 2015, $514,000 for 2014 and $943,000 for 2013. At December 31, 2015, unrecognized compensation expense related to the options is approximately $1.0 million.

Options granted under the Option Plans during 2015, 2014 and 2013 were valued using the Black-Scholes model with the following average assumptions:



	Year Ended December 31,
	2015	2014	2013
Expected volatility	29.47%	16.2% - 18.5%	22.2% - 25.82%
Expected term	6.00 Years	6.00 Years	10.00 Years
Expected dividends	None	None	None
Risk free rate	1.39%	1.81% - 2.10%	1.78% - 2.67%
Weighted-average grant date fair value	$4.73	$3.28 - $3.67	$3.93 - $5.87

The following is the listing of the input variables and the assumptions utilized by the Company for each parameter used in the Black-Scholes option pricing model in prior years:

Risk-free Rate – The risk-free rate for periods within the contractual life of the option have been based on the U.S. Treasury rate that matures on the expected assigned life of the option at the date of the grant.

Expected Life of Options – The expected life of options is based on the period of time that options granted are expected to outstanding.

Expected Volatility –The expected volatility has been based on the historical volatility for the Company’s shares.

Dividend Yield – The dividend yield has been based on historical experience and expected future changes on dividend payouts. The Company does not expect to declare or pay dividends on its common stock within the foreseeable future.

Restricted Stock

Below is a summary of the restricted stock activity in the Plans for the years ended December 31, 2015:



	2015
	Shares	Weighted Average Grant-Date Fair Value per share
Unvested at the beginning of the year	—	$	—
Granted	60,000	15.46
Vested	—	—
Unvested at the end of the year	60,000	$	15.46

Compensation expense of $260,000 was recorded related to the above restricted stock grants for the year ended December 31, 2015. Restricted stock awards are valued at the closing stock price on the date of grant and are expensed to stock based compensation expense over the period for which the related service is performed. The total grant date fair value of awards was $927,500 for 2015 awards. At December 31, 2015, unrecognized compensation expense related to restricted stock is approximately $689,000.

Other Plans

Salary Continuation Plan—The Bank implemented a non-qualified supplemental retirement plan in 2006 (the “Salary Continuation Plan”) for certain executive officers of the Bank. The Salary Continuation Plan is unfunded.

Directors’ Deferred Compensation Plan—The Bank created a Directors’ Deferred Compensation Plan in September 2006 which allows directors to defer board of directors’ fees. In addition, the Company contributes to the plan $4,000 per year for non-executive directors that do not receive Company provided long-term care insurance. The deferred compensation is credited with interest by the Bank at prime minus one percent and the accrued liability is payable upon retirement or resignation. The Directors’ Deferred Compensation Plan is unfunded.

The amounts expensed in 2015, 2014, and 2013 for all of these plans amounted to $555,000 and $461,000, and 255,724 respectively. As of December 31, 2015, 2014, and 2013, $5.4 million, $4.0 million, and $4.4 million, respectively, were recorded in other liabilities on the consolidated statements of condition for each of these plans.