EX-99.1 2 ppbi_exx991xearnings-2021x.htm EX-99.1 Document

Exhibit 99.1


Pacific Premier Bancorp, Inc. Announces Second Quarter 2021 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share

Second Quarter 2021 Summary
 
•Net income of $96.3 million, or $1.01 per diluted share
•Return on average assets of 1.90%, return on average equity of 14.02%, and return on average tangible common equity of 22.45%(1)
•Tangible book value increases to $19.38, compared with $18.19 at March 31, 2021(1)
•Net interest margin of 3.44% and core net interest margin of 3.22%(1)
•Cost of deposits of 0.08% in the second quarter compared with 0.11% in the prior quarter
•Non-maturity deposits of $15.8 billion, or 92.6% of total deposits
•Noninterest-bearing deposits represent 39.8% of total deposits
•Nonperforming assets represent 0.17% of total assets

    Irvine, Calif., July 27, 2021 -- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $96.3 million, or $1.01 per diluted share, for the second quarter of 2021, compared with net income of $68.7 million, or $0.72 per diluted share, for the first quarter of 2021, and net loss of $99.1 million, or $(1.41) per diluted share, for the second quarter of 2020.
    For the quarter ended June 30, 2021, the Company’s return on average assets (“ROAA”) was 1.90%, return on average equity (“ROAE”) was 14.02%, and return on average tangible common equity (“ROATCE”) was 22.45%, compared to 1.37%, 9.99%, and 16.21%, respectively, for the first quarter of 2021 and (2.61)%, (17.76)%, and (29.40)%, respectively, for the second quarter of 2020. Total assets were $20.53 billion at June 30, 2021, compared to $20.17 billion at March 31, 2021, and $20.52 billion at June 30, 2020. A reconciliation of the non-U.S. generally accepted accounting principles (“GAAP”) measure of ROATCE to the GAAP measure of ROAE is set forth at the end of this press release.

Steven R. Gardner, Chairman, President, and Chief Executive Officer of the Company, commented, “We continue to realize the benefits of increased size and scale, which has enabled us to generate a high level of profitability despite the challenging interest rate environment. Our performance has resulted in strong growth in our tangible book value per share from the prior quarter and allowed us to continue to return significant capital to shareholders through our common stock dividend.

“We are leveraging the collective strengths of our larger organization, and our teams are working well together to add new clients and expand existing business relationships. This is resulting in strong inflows of low-cost deposits from all of our banking groups, as well as higher levels of loan production. During the second quarter, we generated $1.58 billion in new loan commitments, an increase of 36.7% compared to the prior quarter, while loan fundings increased 54.5% resulting in annualized total loan growth of 14.5%. The increased loan production allowed us to further remix the balance sheet towards higher yielding assets.

“While we are seeing signs of improving demand, there continue to be uncertainties surrounding the COVID-19 pandemic. However, we believe that we are well positioned to deliver consistent financial performance and to capitalize on stronger credit demand as the economy progresses,” said Mr. Gardner.

(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
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FINANCIAL HIGHLIGHTS
Three Months Ended
 June 30,March 31,June 30,
(Dollars in thousands, except per share data)202120212020
Financial highlights (unaudited)
Net income (loss)$96,302 $68,668 $(99,091)
Diluted earnings (loss) per share1.01 0.72 (1.41)
Common equity dividend per share paid0.33 0.30 0.25 
Return on average assets1.90 %1.37 %(2.61)%
Return on average equity14.02 9.99 (17.76)
Return on average tangible common equity (1)
22.45 16.21 (29.40)
Pre-provision net revenue on average assets (1)
1.84 1.86 1.60 
Net interest margin3.44 3.55 3.79 
Core net interest margin (1)
3.22 3.30 3.59 
Cost of deposits0.08 0.11 0.32 
Efficiency ratio (1)
49.4 48.6 52.9 
Noninterest expense (excluding merger-related expense) as a percent of average assets (1)
1.86 %1.85 %2.02 %
Total assets$20,529,486 $20,173,298 $20,517,074 
Total deposits17,015,097 16,740,007 16,976,693 
Loans to deposit ratio79.9 %78.4 %88.8 %
Non-maturity deposits as a percent of total deposits92.6 91.8 88.7 
Book value per share$29.72 $28.56 $28.14 
Tangible book value per share (1)
19.38 18.19 17.58 
Total risk-based capital ratio15.61 %16.26 %15.69 %
______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.


INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin
 
Net interest income totaled $160.9 million in the second quarter of 2021, a decrease of $718,000, or 0.4%, from the first quarter of 2021. The decrease in net interest income reflected lower average loan yields and fees, partially offset by one more day of interest and a lower cost of funds.

The net interest margin for the second quarter of 2021 was 3.44%, compared with 3.55% in the prior quarter. Our core net interest margin, which excludes the impact of loan accretion income of $9.5 million, compared to $9.9 million in the prior quarter, certificates of deposit mark-to-market amortization, and other adjustments, decreased 8 basis points to 3.22%, compared to 3.30% in the prior quarter. The decrease was driven by lower average loan yields and fees, partially offset by a lower cost of funds.

Net interest income for the second quarter of 2021 increased $30.6 million, or 23.5%, compared to the second quarter of 2020. The increase was attributable to an increase in average interest-earning assets of $4.95 billion, which primarily resulted from the acquisition of Opus Bank (“Opus”) in the second quarter of 2020.

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PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 Three Months Ended
 June 30, 2021March 31, 2021June 30, 2020
(Dollars in thousands)Average BalanceInterest Income/ExpenseAverage
 Yield/
 Cost		Average BalanceInterest Income/ExpenseAverage
 Yield/
 Cost		Average BalanceInterest Income/ExpenseAverage Yield/ Cost
Assets
Cash and cash equivalents$1,323,186 $315 0.10 %$1,309,366 $301 0.09 %$796,761 $215 0.11 %
Investment securities4,243,644 18,012 1.70 4,087,451 17,468 1.71 1,792,432 10,568 2.36 
Loans receivable, net (1) (2)
13,216,973 152,365 4.62 13,093,609 155,225 4.81 11,242,721 133,339 4.77 
Total interest-earning assets$18,783,803 $170,692 3.64 $18,490,426 $172,994 3.79 $13,831,914 $144,122 4.19 
Liabilities
Interest-bearing deposits$10,395,002 $3,265 0.13 $10,420,199 $4,426 0.17 $7,317,675 $9,655 0.53 
Borrowings486,718 6,493 5.35 523,565 6,916 5.36 431,181 4,175 3.89 
Total interest-bearing liabilities$10,881,720 $9,758 0.36 $10,943,764 $11,342 0.42 $7,748,856 $13,830 0.72 
Noninterest-bearing deposits$6,341,063 $6,034,319 $4,970,812 
Net interest income$160,934 $161,652 $130,292 
Net interest margin (3)
  3.44 3.55 3.79 
Cost of deposits0.08 0.11 0.32 
Cost of funds (4)
0.23 0.27 0.44 
Ratio of interest-earning assets to interest-bearing liabilities172.62 168.96 178.50 
______________________________
(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 $9.5 million, $9.9 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

    For the second quarter of 2021, the Bank recorded a $38.5 million provision recapture, a decrease of $40.5 million from the $2.0 million provision expense recognized during the first quarter of 2021, and a decrease of $199.1 million from the $160.6 million provision expense recognized during the second quarter of 2020. The decrease from the first quarter of 2021 was comprised of a $33.1 million provision recapture for loan loss and a $5.3 million provision recapture for unfunded commitments. The decrease during the second quarter of 2021 was primarily due to improved economic forecasts used in the Company’s CECL model relative to prior periods and the continued strong asset quality profile of the loan portfolio. The provision expense in the second quarter of 2020 reflected unfavorable changes in economic forecasts related to the onset of the COVID-19 pandemic and the Day 1 provision for credit losses of $84.4 million resulting from the acquisition of Opus.
Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Provision for credit losses
Provision for loan losses$(33,131)$315 $150,257 
Provision for unfunded commitments(5,345)1,659 10,378 
Total provision for credit losses$(38,476)$1,974 $160,635 
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Noninterest Income
 
Noninterest income for the second quarter of 2021 was $26.7 million, an increase of $3.0 million from the first quarter of 2021. The increase was primarily due to a $1.2 million increase in net gain from loan sales, a $1.0 million increase in net gain from sales of investment securities, and a $675,000 increase in trust custodial account fees, partially offset by a $647,000 decrease in other income.

During the second quarter of 2021, the Bank sold $14.7 million of SBA loans for a net gain of $1.5 million, compared to the sales of $1.3 million of SBA loans for a net gain of $69,000 and fully charged-off loans for a net gain of $292,000 during the first quarter of 2021.

Additionally, during the second quarter of 2021, the Bank sold $280.2 million of investment securities for a net gain of $5.1 million, compared to the sales of $175.3 million of investment securities for a net gain of $4.0 million in the first quarter of 2021.

Noninterest income for the second quarter of 2021 increased $19.8 million, or 287.5%, compared to the second quarter of 2020. The increase was primarily due to a $5.5 million increase in trust custodial account fees and a $1.4 million increase in escrow and exchange fees following the Opus acquisition.

The net gain from sales of loans for the second quarter of 2021 increased from the same period last year primarily due to the sales of $14.7 million of SBA loans for a net gain of $1.5 million, compared with the sales of $15.4 million of other loans for a net loss of $2.0 million during the second quarter of 2020.

Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Noninterest income
Loan servicing income$622 $458 $434 
Service charges on deposit accounts2,222 2,032 1,399 
Other service fee income352 473 297 
Debit card interchange fee income1,099 787 457 
Earnings on BOLI2,279 2,233 1,314 
Net gain (loss) from sales of loans1,546 361 (2,032)
Net gain (loss) from sales of investment securities5,085 4,046 (21)
Trust custodial account fees
7,897 7,222 2,397 
Escrow and exchange fees1,672 1,526 264 
Other income3,955 4,602 2,389 
Total noninterest income$26,729 $23,740 $6,898 
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 Noninterest Expense
 
Noninterest expense totaled $94.5 million for the second quarter of 2021, an increase of $2.0 million compared to the first quarter of 2021, primarily driven by a $926,000 increase in compensation and benefits primarily attributable to higher business incentives associated with higher loan and deposit production, and an $821,000 increase in other expense largely due to a $518,000 increase in community development support.

Noninterest expense decreased by $21.5 million compared to the second quarter of 2020. The decrease was primarily due to $39.3 million of merger-related expense for the second quarter of 2020 relating to the Opus acquisition. Excluding merger-related expense, noninterest expense increased $17.9 million compared to the second quarter of 2020, primarily due to a $10.5 million increase in compensation and benefits, a $2.8 million increase in premises and occupancy expense, all predominately as a result of the additional operations, personnel, branches, and divisions retained with the acquisition of Opus.

Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Noninterest expense
Compensation and benefits$53,474 $52,548 $43,011 
Premises and occupancy12,240 11,980 9,487 
Data processing5,765 5,828 4,465 
Other real estate owned operations, net— — 9 
FDIC insurance premiums1,312 1,181 846 
Legal and professional services4,186 3,935 3,094 
Marketing expense1,490 1,598 1,319 
Office expense1,589 1,829 1,533 
Loan expense1,165 1,115 823 
Deposit expense3,985 3,859 4,958 
Merger-related expense— 5 39,346 
Amortization of intangible assets4,001 4,143 4,066 
Other expense5,289 4,468 3,013 
Total noninterest expense$94,496 $92,489 $115,970 

Income Tax

For the second quarter of 2021, our income tax expense totaled $35.3 million, resulting in an effective tax rate of 26.8%, compared with income tax expense of $22.3 million and an effective tax rate of 24.5% for the first quarter of 2021, and income tax benefit of $40.3 million and an effective tax rate of 28.9% for the second quarter of 2020. Based on our actual and projected level of earnings for 2021, our estimated effective tax rate for the full year is expected to be in the range of 25 to 27%.


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BALANCE SHEET HIGHLIGHTS
    
Loans

Loans held for investment totaled $13.59 billion at June 30, 2021, an increase of $477.2 million, or 3.6%, from March 31, 2021, and a decrease of $1.49 billion, or 9.9%, from June 30, 2020. The increase from March 31, 2021 was driven by higher loan production, partially offset by loan prepayments, maturities, and sales in the second quarter of 2021. The decrease in loans held for investment from June 30, 2020 was primarily driven by the sale of $1.13 billion of SBA PPP loans in the third quarter of 2020.

During the second quarter of 2021, the Bank generated $1.58 billion of loan commitments and funded $1.15 billion of new loans, compared with $1.15 billion in loan commitments and $746.3 million in funded loans for the first quarter of 2021, and $1.21 billion in loan commitments and $1.19 billion in funded loans for the second quarter of 2020, of which $1.13 billion was SBA PPP loans. Business line commitments totaled $2.59 billion with an average utilization rate of 31.96% for the second quarter of 2021, compared with business line commitments of $2.44 billion with an average utilization rate of 34.06% for the first quarter of 2021, and business line commitments of $2.21 billion with an average utilization rate of 43.98% for the second quarter of 2020.
 
At June 30, 2021, the ratio of loans held for investment to total deposits was 79.9%, compared with 78.4% and 88.8% at March 31, 2021 and June 30, 2020, respectively.

The following table presents the primary loan roll-forward activities for total loans, including both loans held for investment and loans held for sale, during the quarters indicated:
Three Months Ended
(Dollars in thousands)June 30, 2021March 31, 2021
Beginning loan balance$13,124,703 $13,237,034 
New commitments1,576,884 1,153,345 
Unfunded new commitments(423,797)(407,047)
Net new fundings1,153,087 746,298 
Amortization/maturities/payoffs(821,502)(773,170)
Net draws on existing lines of credit161,273 (82,472)
Loan sales(14,959)(1,035)
Charge-offs(3,290)(1,952)
Net increase (decrease)474,609 (112,331)
Ending loan balance$13,599,312 $13,124,703 

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The following table presents the composition of the loan portfolio as of the dates indicated:
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Investor loans secured by real estate
Commercial real estate (“CRE”) non-owner-occupied$2,810,233 $2,729,785 $2,783,692 
Multifamily5,539,464 5,309,592 5,225,557 
Construction and land297,728 316,458 357,426 
SBA secured by real estate (1)
53,003 56,381 59,482 
Total investor loans secured by real estate8,700,428 8,412,216 8,426,157 
Business loans secured by real estate (2)
CRE owner-occupied2,089,300 2,029,984 2,170,154 
Franchise real estate secured358,120 340,805 364,647 
SBA secured by real estate (3)
72,923 73,967 85,542 
Total business loans secured by real estate2,520,343 2,444,756 2,620,343 
Commercial loans (4)
Commercial and industrial1,795,144 1,656,098 2,051,313 
Franchise non-real estate secured401,315 399,041 523,755 
SBA non-real estate secured13,900 14,908 21,057 
SBA PPP— — 1,128,780 
Total commercial loans2,210,359 2,070,047 3,724,905 
Retail loans
Single family residential (5)
157,228 184,049 265,170 
Consumer6,240 6,324 46,309 
Total retail loans163,468 190,373 311,479 
Gross loans held for investment (6)
13,594,598 13,117,392 15,082,884 
Allowance for credit losses for loans held for investment(232,774)(266,999)(282,271)
Loans held for investment, net$13,361,824 $12,850,393 $14,800,613 
Total unfunded loan commitments$2,345,364 $2,243,650 $1,885,163 
Loans held for sale, at lower of cost or fair value$4,714 $7,311 $1,007 
______________________________
(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 $94.4 million, $103.9 million, and $144.5 million as of June 30, 2021, March 31, 2021, and June 30, 2020, respectively.


The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at June 30, 2021 was 4.11%, compared to 4.21% at March 31, 2021 and 4.12%, or 4.46% excluding SBA PPP loans, at June 30, 2020. The quarter-over-quarter and year-over-year decreases reflect the impact of lower rates on new originations and the continued impact from prepayments of higher rate loans.

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The following table presents the composition of loan commitments originated during the quarters indicated:
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Investor loans secured by real estate
CRE non-owner-occupied$181,995 $128,408 $11,811 
Multifamily631,360 407,156 24,425 
Construction and land148,422 94,124 6,210 
Total investor loans secured by real estate961,777 629,688 42,446 
Business loans secured by real estate (1)
CRE owner-occupied181,385 110,353 17,594 
Franchise real estate secured39,320 24,429 — 
SBA secured by real estate (2)
13,445 4,101 1,204 
Total business loans secured by real estate234,150 138,883 18,798 
Commercial loans (3)
Commercial and industrial316,162 352,530 23,782 
Franchise non-real estate secured41,501 17,647 — 
SBA non-real estate secured1,000 686 315 
SBA PPP— — 1,124,485 
Total commercial loans358,663 370,863 1,148,582 
Retail loans
Single family residential (4)
14,744 13,353 2,137 
Consumer7,550 558 195 
Total retail loans22,294 13,911 2,332 
Total loan commitments$1,576,884 $1,153,345 $1,212,158 
______________________________
(1) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(2) SBA loans that are collateralized by real property other than hotel/motel real property.
(3) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(4) Single family residential includes home equity lines of credit, as well as second trust deeds.

The weighted average interest rate on new loan commitments was 3.59% in the second quarter of 2021, compared with 3.63% in the first quarter of 2021 and 1.21%, or 3.97% excluding SBA PPP loans, in the second quarter of 2020.

Asset Quality and Allowance for Credit Losses
 
At June 30, 2021, our allowance for credit losses (“ACL”) on loans held for investment was $232.8 million, a decrease of $34.2 million from March 31, 2021, and a decrease of $49.5 million from June 30, 2020. The decrease in ACL is primarily due to the provision for credit loss recapture during the current quarter, reflective of improving economic forecasts employed in the Company's CECL model relative to the prior quarter and the continued strong asset quality profile of the loan portfolio, partially offset by an increase in loans held for investment during the quarter. The decrease from June 30, 2020 was primarily due to changes in economic forecasts employed in the Company's CECL model related to the COVID-19 pandemic and lower loans held for investment.

During the second quarter of 2021, the Company incurred $1.1 million of net charge-offs, compared to $1.3 million and $4.7 million during the first quarter of 2021 and the second quarter of 2020, respectively.


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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 June 30, 2021
(Dollars in thousands) Beginning ACL Balance  Charge-offs  Recoveries Provision for Credit Losses  Ending
ACL Balance
Investor loans secured by real estate
CRE non-owner occupied$45,545 $— $— $1,567 $47,112 
Multifamily79,815 — — (20,756)59,059 
Construction and land13,263 — — (3,715)9,548 
SBA secured by real estate (1)
5,141 — — (460)4,681 
Business loans secured by real estate (2)
CRE owner-occupied41,594 — 15 (5,862)35,747 
Franchise real estate secured10,876 — — 560 11,436 
SBA secured by real estate (3)
6,451 — 80 (214)6,317 
Commercial loans (4)
Commercial and industrial43,373 (3,290)2,098 (2,302)39,879 
Franchise non-real estate secured18,903 — — (1,590)17,313 
SBA non-real estate secured890 — 2 (162)730 
Retail loans
Single family residential (5)
822 — 1 (153)670 
Consumer loans326 — — (44)282 
Totals$266,999 $(3,290)$2,196 $(33,131)$232,774 
______________________________
(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 credit losses to loans held for investment at June 30, 2021 was 1.71%, compared to 2.04% at March 31, 2021 and 2.02% at June 30, 2020, excluding SBA PPP loans. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value net discount on loans acquired through total bank acquisitions was $94.4 million, or 0.69% of total loans held for investment, as of June 30, 2021, compared to $103.9 million, or 0.79% of total loans held for investment, as of March 31, 2021, and $144.5 million, or 1.03% of total loans held for investment excluding SBA PPP loans, as of June 30, 2020.

Nonperforming assets totaled $34.4 million, or 0.17% of total assets, at June 30, 2021, compared with $38.9 million, or 0.19% of total assets, at March 31, 2021, and $34.2 million, or 0.17% of total assets, at June 30, 2020. During the second quarter of 2021, nonperforming loans decreased $4.5 million to $34.4 million from March 31, 2021. Total loan delinquencies were $19.3 million, or 0.14% of loans held for investment, at June 30, 2021, compared to $22.6 million, or 0.17% of loans held for investment, at March 31, 2021, and $38.2 million, or 0.25% of loans held for investment, at June 30, 2020.

Classified loans totaled $131.4 million, or 0.97% of loans held for investment, at June 30, 2021, compared with $134.7 million, or 1.03% of loans held for investment, at March 31, 2021, and $89.9 million, or 0.60% of loans held for investment, at June 30, 2020. The year-over-year increase was driven, in part, by the migration to the substandard risk grade of approximately $56.4 million of loans subject to temporary loan modifications relating to COVID-19 under the CARES Act during 2020, as well as the net changes in risk ratings.

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Interest is not typically accrued on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. There were no loans 90 days or more past due and still accruing interest at June 30, 2021. There were six troubled debt restructured loans belonging to two borrower relationships totaling $17.8 million at June 30, 2021, compared to no troubled debt restructured loans at March 31, 2021 and $700,000 at June 30, 2020.

At June 30, 2021, there was one residential loan for $819,000 classified as a COVID-19 modification under Section 4013 of the CARES Act. Additionally, as of June 30, 2021, there were no loans in-process for potential modification. At March 31, 2021, there were no loans remaining within their modification period and no loans were in-process for potential modification.

 June 30,March 31,June 30,
(Dollars in thousands)202120212020
Asset quality
Nonperforming loans$34,387 $38,909 $33,825 
Other real estate owned— — 386 
Nonperforming assets$34,387 $38,909 $34,211 
Total classified assets (1)
$131,350 $134,667 $90,334 
Allowance for credit losses232,774 266,999 282,271 
Allowance for credit losses as a percent of total nonperforming loans677 %686 %835 %
Nonperforming loans as a percent of loans held for investment0.25 0.30 0.22 
Nonperforming assets as a percent of total assets0.17 0.19 0.17 
Classified loans to total loans held for investment0.97 1.03 0.60 
Classified assets to total assets0.64 0.67 0.44 
Net loan charge-offs for the quarter ended$1,094 $1,334 $4,650 
Net loan charge-offs for the quarter to average total loans0.01 %0.01 %0.04 %
Allowance for credit losses to loans held for investment (2)
1.71 2.04 1.87 
Loans modified under the CARES Act$819 $— $2,244,974 
Loans modified under the CARES Act as a percent of loans held for investment0.01 %— %14.88 %
Delinquent loans  
30 - 59 days$207 $13,116 $6,248 
60 - 89 days83 61 4,133 
90+ days19,045 9,410 27,807 
Total delinquency$19,335 $22,587 $38,188 
Delinquency as a percentage of loans held for investment0.14 %0.17 %0.25 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At June 30, 2021, 45% of loans held for investment include a fair value net discount of $94.4 million, or 0.69% of loans held for investment. At March 31, 2021, 51% of loans held for investment include a fair value net discount of $103.9 million, or 0.79% of loans held for investment. At June 30, 2020, 56% of loans held for investment include a fair value net discount of $144.5 million, or 1.03% of loans held for investment excluding SBA PPP loans.

10

Investment Securities

Investment securities totaled $4.51 billion at June 30, 2021, an increase of $627.1 million from March 31, 2021, and an increase of $2.14 billion from June 30, 2020. The increase in the second quarter of 2021 compared to the prior quarter was primarily the result of $968.1 million in purchases and a $58.4 million increase in mark-to-market fair value adjustment, partially offset by $280.2 million in sales and $119.2 million in principal payments, amortization, and redemptions. The increase in investment securities from June 30, 2020 was primarily the result of $3.57 billion in purchases, partially offset by $869.5 million in sales, $515.0 million in principal payments, amortization, and redemptions, and a $44.5 million decrease in mark-to-market fair value adjustment. The Company’s assessment of held-to-maturity and available-for-sale investment securities indicated that no ACL was required with respect to investment securities as of June 30, 2021.

Deposits

At June 30, 2021, deposits totaled $17.02 billion, an increase of $275.1 million, or 1.6%, from March 31, 2021, and an increase of $38.4 million, or 0.2%, from June 30, 2020. At June 30, 2021, non-maturity deposits totaled $15.76 billion, or 92.6% of total deposits, an increase of $386.2 million, or 2.5%, from March 31, 2021, and an increase of $697.5 million, or 4.6%, from June 30, 2020. During the second quarter of 2021, deposit increases included $465.7 million in noninterest-bearing deposits, primarily driven by an increase in business deposit account balances, partially offset by decreases of $93.7 million in retail certificates of deposits, $51.7 million in interest-bearing checking deposits, $27.7 million in money market and savings deposits, and $17.4 million in brokered certificates of deposit as compared to the first quarter of 2021.

The weighted average cost of deposits for the second quarter of 2021 was 0.08%, compared to 0.11% for the first quarter of 2021, and 0.32% for the second quarter of 2020, including the favorable impact of the acquired certificates of deposit mark-to-market amortization of 0.02%, 0.04%, and 0.03%, respectively. The decrease in the weighted average cost of deposits in the second quarter of 2021 compared to the prior quarters was principally driven by lower pricing as well as deposit mix.

The end of period weighted average rate of deposits at June 30, 2021 was 0.08%.
 June 30,March 31,June 30,
(Dollars in thousands)202120212020
Deposit accounts
Noninterest-bearing checking$6,768,384 $6,302,703 $5,899,442 
Interest-bearing:
Checking3,103,343 3,155,071 3,098,454 
Money market/savings5,883,672 5,911,417 6,060,031 
Retail certificates of deposit1,259,698 1,353,431 1,651,976 
Wholesale/brokered certificates of deposit— 17,385 266,790 
Total interest-bearing10,246,713 10,437,304 11,077,251 
Total deposits$17,015,097 $16,740,007 $16,976,693 
Cost of deposits0.08 %0.11 %0.32 %
Noninterest-bearing deposits as a percentage of total deposits39.8 37.7 34.8 
Non-maturity deposits as a percent of total deposits92.6 91.8 88.7 
Core deposits as a percent of total deposits (1)
96.5 96.2 94.9 
______________________________
(1) Core deposits are all transaction accounts and non-brokered certificates of deposit less than $250,000.



11

Borrowings

At June 30, 2021, total borrowings amounted to $476.6 million, a decrease of $35.0 million from March 31, 2021, and a decrease of $65.8 million from June 30, 2020. Total borrowings at June 30, 2021 is comprised of $476.6 million of subordinated debt. The decrease in borrowings at June 30, 2021 as compared to March 31, 2021 was primarily due to the redemption of $25 million in subordinated notes in April 2021 and the maturity of the remaining $10.0 million Federal Home Loan Bank of San Francisco ("FHLB") advances. The decrease in borrowings at June 30, 2021 as compared to June 30, 2020 was primarily due to the redemption of $25 million in subordinated notes and the redemption of $41.0 million in FHLB advances.

Capital Ratios

At June 30, 2021, our common stockholder's equity was $2.81 billion, or 13.70% of total assets, compared with $2.70 billion, or 13.40%, at March 31, 2021, and $2.65 billion, or 12.94%, at June 30, 2020, with a book value per share of $29.72, compared with $28.56 at March 31, 2021, and $28.14 at June 30, 2020. At June 30, 2021, our ratio of tangible common equity to total assets was 9.38%, compared with 8.97% at March 31, 2021, and 8.50% at June 30, 2020, with a tangible book value per share of $19.38, compared with $18.19 at March 31, 2021, and $17.58 at June 30, 2020. Reconciliations of the non-GAAP measures of tangible common equity ratio and tangible book value per share to the GAAP measures of common stockholders' equity and book value per share, respectively, are set forth at the end of this press release.

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 June 30, 2021, the Company had a tier 1 leverage ratio of 9.83%, common equity tier 1 capital ratio of 11.89%, tier 1 capital ratio of 11.89%, and total capital ratio of 15.61%. At June 30, 2021, the Bank had a tier 1 leverage ratio of 11.31%, common equity tier 1 capital ratio of 13.67%, tier 1 capital ratio of 13.67%, and total capital ratio of 15.44%. The capital ratios of the Company and the Bank exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage ratio, 6.50% 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 4.00%, 7.00%, 8.50%, and 10.50%, respectively.

12

June 30,March 31,June 30,
Capital ratios202120212020
Pacific Premier Bancorp, Inc. Consolidated   
Tier 1 leverage ratio9.83 %9.66 %12.00 %
Common equity tier 1 risk-based capital ratio11.89 12.05 11.32 
Tier 1 capital ratio11.89 12.05 11.32 
Total capital ratio15.61 16.26 15.69 
Tangible common equity ratio (1)
9.38 8.97 8.50 
Pacific Premier Bank
Tier 1 leverage ratio11.31 %11.13 %13.49 %
Common equity tier 1 risk-based capital ratio13.67 13.90 12.73 
Tier 1 capital ratio13.67 13.90 12.73 
Total capital ratio15.44 15.92 14.81 
Share data   
Book value per share$29.72 $28.56 $28.14 
Tangible book value per share (1)
19.38 18.19 17.58 
Common equity dividends declared per share0.33 0.30 0.25 
Closing stock price (2)
42.29 43.44 21.68 
Shares issued and outstanding94,656,575 94,644,415 94,350,902 
Market capitalization (2)(3)
$4,003,027 $4,111,353 $2,045,528 
______________________________
(1) A reconciliation of the 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, respectively, is set forth at the end of this press release.
(2) As of the last trading day prior to period end.
(3) Dollars in thousands.

Dividend and Stock Repurchase Program

On July 23, 2021, the Company's Board of Directors declared a $0.33 per share dividend, payable on August 13, 2021 to stockholders of record as of August 6, 2021. In January 2021, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock. During the first quarter of 2021, the Company repurchased 199,674 shares of common stock at an average price of $34.51 per share with a total market value of $6.9 million under its stock repurchase program. The Company did not repurchase additional shares during the second quarter ended June 30, 2021.

Subsequent Events

On July 1, 2021, the Company redeemed $135.0 million subordinated notes acquired from Opus and $5.2 million junior subordinated debt associated with Heritage Oaks Capital Trust II. On July 7, 2021, the Company redeemed $5.2 million junior subordinated debt associated with Santa Lucia Bancorp (CA) Capital Trust. The subordinated notes and junior subordinated debt were redeemed at par, plus accrued and unpaid interest, for an aggregate amount of $149.2 million. The Company recorded a net gain on early debt extinguishment of $970,000 related to purchase accounting adjustments.


13

On July 16, 2021, the Bank consolidated two branch offices in San Luis Obispo County of California into nearby branch offices with minimal disruption to clients and daily operations. The consolidated branches were identified largely based on the proximity of neighboring branches, deposit base, historic growth, and market opportunity to improve further the overall efficiency of operations, as well as the Bank's goals related to Fair Lending and the Community Reinvestment Act. After the branch consolidations, the Bank operates 63 branches in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada.


14

Conference Call and Webcast

    The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on July 27, 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 August 3, 2021 at (877) 344-7529, conference ID 10157972.

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 over $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 over $17 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 STATEMENTS
 
    The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, stockholder value creation, tax rates, and the impact of 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. Given the ongoing and dynamic nature of the COVID-19 pandemic, the ultimate extent of the impacts on our business, financial position, results of operations, liquidity and prospects remain 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 the COVID-19 pandemic, 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
15

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 transition away from USD 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 governmental efforts to restructure the U.S. financial regulatory system; 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 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 2020 Annual Report on Form 10-K 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.

Contacts:
 
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


16

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands)20212021202020202020
ASSETS
Cash and cash equivalents$631,888 $1,554,668 $880,766 $1,103,077 $1,341,730 
Interest-bearing time deposits with financial institutions2,708 2,708 2,845 2,845 2,845 
Investments held-to-maturity, at amortized cost18,933 21,931 23,732 27,980 32,557 
Investment securities available-for-sale, at fair value4,487,447 3,857,337 3,931,115 3,600,731 2,336,066 
FHLB, FRB, and other stock, at cost117,738 117,843 117,055 116,819 94,658 
Loans held for sale, at lower of amortized cost or fair value4,714 7,311 601 1,032 1,007 
Loans held for investment13,594,598 13,117,392 13,236,433 13,450,840 15,082,884 
Allowance for credit losses(232,774)(266,999)(268,018)(282,503)(282,271)
Loans held for investment, net13,361,824 12,850,393 12,968,415 13,168,337 14,800,613 
Accrued interest receivable67,529 65,098 74,574 73,112 78,408 
Other real estate owned— — — 334 386 
Premises and equipment73,821 76,329 78,884 80,326 76,542 
Deferred income taxes, net81,741 104,450 89,056 108,050 105,859 
Bank owned life insurance444,645 292,932 292,564 290,875 305,901 
Intangible assets77,363 81,364 85,507 90,012 94,550 
Goodwill901,312 900,204 898,569 898,434 901,166 
Other assets257,823 240,730 292,861 282,276 344,786 
Total assets$20,529,486 $20,173,298 $19,736,544 $19,844,240 $20,517,074 
LIABILITIES  
Deposit accounts:  
Noninterest-bearing checking$6,768,384 $6,302,703 $6,011,106 $5,895,744 $5,899,442 
Interest-bearing:
Checking3,103,343 3,155,071 2,913,260 2,937,910 3,098,454 
Money market/savings5,883,672 5,911,417 5,662,969 5,778,688 6,060,031 
Retail certificates of deposit1,259,698 1,353,431 1,471,512 1,542,029 1,651,976 
Wholesale/brokered certificates of deposit— 17,385 155,330 176,436 266,790 
Total interest-bearing10,246,713 10,437,304 10,203,071 10,435,063 11,077,251 
Total deposits17,015,097 16,740,007 16,214,177 16,330,807 16,976,693 
FHLB advances and other borrowings— 10,000 31,000 41,000 41,006 
Subordinated debentures476,622 501,611 501,511 501,443 501,375 
Accrued expenses and other liabilities224,348 218,582 243,207 282,905 343,353 
Total liabilities17,716,067 17,470,200 16,989,895 17,156,155 17,862,427 
STOCKHOLDERS’ EQUITY     
Common stock931 931 931 930 930 
Additional paid-in capital2,352,112 2,348,445 2,354,871 2,351,532 2,348,415 
Retained earnings433,852 368,911 330,555 289,960 247,078 
Accumulated other comprehensive income (loss)26,524 (15,189)60,292 45,663 58,224 
Total stockholders' equity2,813,419 2,703,098 2,746,649 2,688,085 2,654,647 
Total liabilities and stockholders' equity$20,529,486 $20,173,298 $19,736,544 $19,844,240 $20,517,074 
17

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands, except per share data)20212021202020212020
INTEREST INCOME   
Loans$152,365 $155,225 $133,339 $307,590 $246,604 
Investment securities and other interest-earning assets18,327 17,769 10,783 36,096 21,307 
Total interest income170,692 172,994 144,122 343,686 267,911 
INTEREST EXPENSE  
Deposits3,265 4,426 9,655 7,691 20,142 
FHLB advances and other borrowings— 65 217 65 1,298 
Subordinated debentures6,493 6,851 3,958 13,344 7,004 
Total interest expense9,758 11,342 13,830 21,100 28,444 
Net interest income before provision for credit losses160,934 161,652 130,292 322,586 239,467 
Provision for credit losses(38,476)1,974 160,635 (36,502)186,089 
Net interest income (loss) after provision for credit losses199,410 159,678 (30,343)359,088 53,378 
NONINTEREST INCOME  
Loan servicing income622 458 434 1,080 914 
Service charges on deposit accounts2,222 2,032 1,399 4,254 3,114 
Other service fee income352 473 297 825 608 
Debit card interchange fee income1,099 787 457 1,886 805 
Earnings on BOLI2,279 2,233 1,314 4,512 2,650 
Net gain (loss) from sales of loans1,546 361 (2,032)1,907 (1,261)
Net gain (loss) from sales of investment securities5,085 4,046 (21)9,131 7,739 
Trust custodial account fees
7,897 7,222 2,397 15,119 2,397 
Escrow and exchange fees1,672 1,526 264 3,198 264 
Other income3,955 4,602 2,389 8,557 4,143 
Total noninterest income26,729 23,740 6,898 50,469 21,373 
NONINTEREST EXPENSE  
Compensation and benefits53,474 52,548 43,011 106,022 77,387 
Premises and occupancy12,240 11,980 9,487 24,220 17,655 
Data processing5,765 5,828 4,465 11,593 7,718 
Other real estate owned operations, net— — 9 — 23 
FDIC insurance premiums1,312 1,181 846 2,493 1,213 
Legal and professional services4,186 3,935 3,094 8,121 6,220 
Marketing expense1,490 1,598 1,319 3,088 2,731 
Office expense1,589 1,829 1,533 3,418 2,636 
Loan expense1,165 1,115 823 2,280 1,645 
Deposit expense3,985 3,859 4,958 7,844 9,946 
Merger-related expense— 5 39,346 5 41,070 
Amortization of intangible assets4,001 4,143 4,066 8,144 8,029 
Other expense5,289 4,468 3,013 9,757 6,328 
Total noninterest expense94,496 92,489 115,970 186,985 182,601 
Net income (loss) before income taxes131,643 90,929 (139,415)222,572 (107,850)
Income tax expense (benefit)35,341 22,261 (40,324)57,602 (34,499)
Net income (loss)$96,302 $68,668 $(99,091)$164,970 $(73,351)
EARNINGS (LOSS) PER SHARE  
Basic$1.02 $0.73 $(1.41)$1.74 $(1.14)
Diluted$1.01 $0.72 $(1.41)$1.73 $(1.14)
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic93,635,392 93,529,147 70,425,027 93,582,563 64,716,109 
Diluted94,218,028 94,093,644 70,425,027 94,155,740 64,716,109 
18

SELECTED FINANCIAL DATA
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 
 Three Months Ended
 June 30, 2021March 31, 2021June 30, 2020
(Dollars in thousands)Average BalanceInterest Income/ExpenseAverage Yield/CostAverage BalanceInterest Income/ExpenseAverage Yield/CostAverage BalanceInterest Income/ExpenseAverage Yield/Cost
Assets
Interest-earning assets:         
Cash and cash equivalents$1,323,186 $315 0.10 %$1,309,366 $301 0.09 %$796,761 $215 0.11 %
Investment securities4,243,644 18,012 1.70 4,087,451 17,468 1.71 1,792,432 10,568 2.36 
Loans receivable, net (1)(2)
13,216,973 152,365 4.62 13,093,609 155,225 4.81 11,242,721 133,339 4.77 
Total interest-earning assets18,783,803 170,692 3.64 18,490,426 172,994 3.79 13,831,914 144,122 4.19 
Noninterest-earning assets1,506,612 1,503,834 1,343,396 
Total assets$20,290,415 $19,994,260 $15,175,310 
Liabilities and equity
Interest-bearing deposits:
Interest checking$3,155,935 $336 0.04 %$3,060,055 $419 0.06 %$1,417,846 $844 0.24 %
Money market5,558,790 2,002 0.14 5,447,909 2,588 0.19 4,242,990 5,680 0.54 
Savings384,376 84 0.09 368,288 82 0.09 283,632 101 0.14 
Retail certificates of deposit1,294,544 839 0.26 1,425,093 1,201 0.34 1,148,874 2,251 0.79 
Wholesale/brokered certificates of deposit1,357 4 1.18 118,854 136 0.46 224,333 779 1.40 
Total interest-bearing deposits10,395,002 3,265 0.13 10,420,199 4,426 0.17 7,317,675 9,655 0.53 
FHLB advances and other borrowings6,303 — — 22,012 65 1.20 143,813 217 0.61 
Subordinated debentures480,415 6,493 5.41 501,553 6,851 5.46 287,368 3,958 5.51 
Total borrowings486,718 6,493 5.35 523,565 6,916 5.36 431,181 4,175 3.89 
Total interest-bearing liabilities10,881,720 9,758 0.36 10,943,764 11,342 0.42 7,748,856 13,830 0.72 
Noninterest-bearing deposits6,341,063 6,034,319 4,970,812 
Other liabilities320,324 266,536 223,920 
Total liabilities17,543,107 17,244,619 12,943,588 
Stockholders' equity2,747,308 2,749,641 2,231,722 
Total liabilities and equity$20,290,415 $19,994,260 $15,175,310 
Net interest income$160,934 $161,652 $130,292 
Net interest margin (3)
3.44 %3.55 %3.79 %
Cost of deposits0.08 0.11 0.32 
Cost of funds (4)
0.23 0.27 0.44 
Ratio of interest-earning assets to interest-bearing liabilities172.62 168.96 178.50 
______________________________
(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 $9.5 million, $9.9 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.
19

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(Unaudited)
June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands)20212021202020202020
Investor loans secured by real estate
CRE non-owner-occupied$2,810,233 $2,729,785 $2,675,085 $2,707,930 $2,783,692 
Multifamily5,539,464 5,309,592 5,171,356 5,142,069 5,225,557 
Construction and land297,728 316,458 321,993 337,872 357,426 
SBA secured by real estate (1)
53,003 56,381 57,331 57,610 59,482 
Total investor loans secured by real estate8,700,428 8,412,216 8,225,765 8,245,481 8,426,157 
Business loans secured by real estate (2)
CRE owner-occupied2,089,300 2,029,984 2,114,050 2,119,788 2,170,154 
Franchise real estate secured358,120 340,805 347,932 359,329 364,647 
SBA secured by real estate (3)
72,923 73,967 79,595 84,126 85,542 
Total business loans secured by real estate2,520,343 2,444,756 2,541,577 2,563,243 2,620,343 
Commercial loans (4)
Commercial and industrial1,795,144 1,656,098 1,768,834 1,820,995 2,051,313 
Franchise non-real estate secured401,315 399,041 444,797 515,980 523,755 
SBA non-real estate secured13,900 14,908 15,957 16,748 21,057 
SBA PPP— — — — 1,128,780 
Total commercial loans2,210,359 2,070,047 2,229,588 2,353,723 3,724,905 
Retail loans
Single family residential (5)
157,228 184,049 232,574 243,359 265,170 
Consumer6,240 6,324 6,929 45,034 46,309 
Total retail loans163,468 190,373 239,503 288,393 311,479 
Gross loans held for investment (6)
13,594,598 13,117,392 13,236,433 13,450,840 15,082,884 
Allowance for credit losses for loans held for investment(232,774)(266,999)(268,018)(282,503)(282,271)
Loans held for investment, net$13,361,824 $12,850,393 $12,968,415 $13,168,337 $14,800,613 
Loans held for sale, at lower of cost or fair value$4,714 $7,311 $601 $1,032 $1,007 
______________________________
(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 $94.4 million, $103.9 million, $113.8 million, $126.3 million, and $144.5 million as of June 30, 2021, March 31, 2021, December 31, 2020, September 30,2020, and June 30, 2020, respectively.



20

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited)
 June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands)20212021202020202020
Asset quality
Nonperforming loans$34,387 $38,909 $29,209 $27,214 $33,825 
Other real estate owned— — — 334 386 
Nonperforming assets$34,387 $38,909 $29,209 $27,548 $34,211 
Total classified assets (1)
$131,350 $134,667 $128,332 $137,042 $90,334 
Allowance for credit losses232,774 266,999 268,018 282,503 282,271 
Allowance for credit losses as a percent of total nonperforming loans677 %686 %918 %1,038 %835 %
Nonperforming loans as a percent of loans held for investment0.25 0.30 0.22 0.20 0.22 
Nonperforming assets as a percent of total assets0.17 0.19 0.15 0.14 0.17 
Classified loans to total loans held for investment0.97 1.03 0.97 1.02 0.60 
Classified assets to total assets0.64 0.67 0.65 0.69 0.44 
Net loan charge-offs for the quarter ended$1,094 $1,334 $6,406 $4,470 $4,650 
Net loan charge-offs for the quarter to average total loans 0.01 %0.01 %0.05 %0.03 %0.04 %
Allowance for credit losses to loans held for investment (2)
1.71 2.04 2.02 2.10 1.87 
Allowance for credit losses to loans held for investment, excluding SBA PPP loans (2)
1.71 2.04 2.02 2.10 2.02 
Loans modified under the CARES Act$819 $— $79,465 $118,298 $2,244,974 
Loans modified under the CARES Act as a percent of loans held for investment0.01 %— %0.60 %0.88 %14.88 %
Delinquent loans   
30 - 59 days$207 $13,116 $1,269 $7,084 $6,248 
60 - 89 days83 61 57 1,086 4,133 
90+ days19,045 9,410 11,996 21,206 27,807 
Total delinquency$19,335 $22,587 $13,322 $29,376 $38,188 
Delinquency as a percent of loans held for investment0.14 %0.17 %0.10 %0.22 %0.25 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At June 30, 2021, 45% of loans held for investment include a fair value net discount of $94.4 million, or 0.69% of loans held for investment. At March 31, 2021, 51% of loans held for investment include a fair value net discount of $103.9 million, or 0.79% of loans held for investment. At June 30, 2020, 56% of loans held for investment include a fair value net discount of $144.5 million, or 1.03% of loans held for investment excluding SBA PPP loans.
21

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
NONACCRUAL LOANS (1)
(Unaudited)
(Dollars in thousands)Collateral Dependent LoansACLNon-Collateral Dependent LoansACLTotal Nonaccrual LoansNonaccrual Loans With No ACL
June 30, 2021
Investor loans secured by real estate
CRE non-owner-occupied$12,296 $— $— $— $12,296 $12,296 
SBA secured by real estate (2)
440 — — — 440 440 
Total investor loans secured by real estate12,736 — — — 12,736 12,736 
Business loans secured by real estate (3)
CRE owner-occupied5,016 — — — 5,016 5,016 
SBA secured by real estate (4)
692 — — — 692 692 
Total business loans secured by real estate5,708 — — — 5,708 5,708 
Commercial loans (5)
Commercial and industrial2,118 — 552 — 2,670 2,670 
Franchise non-real estate secured— — 12,584 — 12,584 12,584 
SBA not secured by real estate677 — — — 677 677 
Total commercial loans2,795 — 13,136 — 15,931 15,931 
Retail loans
Single family residential (6)
12 — — — 12 12 
Total retail loans12 — — — 12 12 
Totals nonaccrual loans$21,251 $— $13,136 $— $34,387 $34,387 
______________________________
(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.



22

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
PAST DUE STATUS
(Unaudited)
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
June 30, 2021
Investor loans secured by real estate
CRE non-owner-occupied$2,799,890 $— $— $10,343 $2,810,233 
Multifamily5,539,464 — — — 5,539,464 
Construction and land297,728 — — — 297,728 
SBA secured by real estate (1)
52,563 — — 440 53,003 
Total investor loans secured by real estate8,689,645 — — 10,783 8,700,428 
Business loans secured by real estate (2)
CRE owner-occupied2,084,284 — — 5,016 2,089,300 
Franchise real estate secured358,120 — — — 358,120 
SBA secured by real estate (3)
72,473 — — 450 72,923 
Total business loans secured by real estate2,514,877 — — 5,466 2,520,343 
Commercial loans (4)
Commercial and industrial1,792,913 29 83 2,119 1,795,144 
Franchise non-real estate secured401,315 — — — 401,315 
SBA not secured by real estate13,223 — — 677 13,900 
Total commercial loans2,207,451 29 83 2,796 2,210,359 
Retail loans
Single family residential (5)
157,050 178 — — 157,228 
Consumer loans6,240 — — — 6,240 
Total retail loans163,290 178 — — 163,468 
Total loans$13,575,263 $207 $83 $19,045 $13,594,598 
______________________________
(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.


23

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CREDIT RISK GRADES
(Unaudited)
 
(Dollars in thousands)PassSpecial
Mention		SubstandardTotal Gross
Loans
June 30, 2021
Investor loans secured by real estate    
CRE non-owner-occupied$2,741,106 $37,332 $31,795 $2,810,233 
Multifamily5,533,772 3,818 1,874 5,539,464 
Construction and land297,728 — — 297,728 
SBA secured by real estate (1)
41,278 3,788 7,937 53,003 
Total investor loans secured by real estate8,613,884 44,938 41,606 8,700,428 
Business loans secured by real estate (2)
CRE owner-occupied2,060,588 10,870 17,842 2,089,300 
Franchise real estate secured357,242 878 — 358,120 
SBA secured by real estate (3)
64,851 150 7,922 72,923 
Total business loans secured by real estate2,482,681 11,898 25,764 2,520,343 
Commercial loans (4)
   
Commercial and industrial1,745,403 13,789 35,952 1,795,144 
Franchise non-real estate secured375,466 — 25,849 401,315 
SBA not secured by real estate11,819 — 2,081 13,900 
Total commercial loans2,132,688 13,789 63,882 2,210,359 
Retail loans
Single family residential (5)
157,174 — 54 157,228 
Consumer loans6,196 — 44 6,240 
Total retail loans163,370 — 98 163,468 
Total loans$13,392,623 $70,625 $131,350 $13,594,598 
______________________________
(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.


24

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP to Non-GAAP RECONCILIATIONS
(Unaudited)
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. 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
 June 30,March 31,June 30,
(Dollars in thousands)202120212020
Net income$96,302 $68,668 $(99,091)
Plus: amortization of intangible assets expense4,001 4,143 4,066 
Less: amortization of intangible assets expense tax adjustment (1)
1,145 1,185 1,166 
Net income for average tangible common equity99,158 71,626 (96,191)
Plus: merger-related expense— 5 39,346 
Less: merger-related expense tax adjustment (1)
— 1 11,284 
Net income for average tangible common equity excluding merger-related expense$99,158 $71,630 $(68,129)
Average stockholders' equity$2,747,308 $2,749,641 $2,231,722 
Less: average intangible assets79,784 83,946 84,148 
Less: average goodwill900,582 898,587 838,725 
Average tangible common equity$1,766,942 $1,767,108 $1,308,849 
Return on average equity (annualized)14.02 %9.99 %(17.76)%
Return on average tangible common equity (annualized)22.45 %16.21 %(29.40)%
Return on average tangible common equity excluding merger-related expense (annualized)22.45 %16.21 %(20.82)%
___________________________________________________
(1) Adjusted by statutory tax rate

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
 June 30,March 31,June 30,
(Dollars in thousands)202120212020
Net income (loss)$96,302 $68,668 $(99,091)
Plus: merger-related expense— 5 39,346 
Less: merger-related expense tax adjustment (1)
— 1 11,284 
Net income (loss) for average assets excluding merger-related expense$96,302 $68,672 $(71,029)
Average assets$20,290,415 $19,994,260 $15,175,310 
Return on average assets (annualized)1.90 %1.37 %(2.61)%
Return on average assets excluding merger-related expense (annualized)1.90 %1.37 %(1.87)%
____________________________________________
(1) Adjusted by statutory tax rate


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 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
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Interest income$170,692 $172,994 $144,122 
Interest expense9,758 11,342 13,830 
Net interest income160,934 161,652 130,292 
Noninterest income26,729 23,740 6,898 
Revenue187,663 185,392 137,190 
Noninterest expense94,496 92,489 115,970 
Add: merger-related expense— 5 39,346 
Pre-provision net revenue93,167 92,908 60,566 
Pre-provision net revenue (annualized)$372,668 $371,632 $242,264 
Average assets$20,290,415 $19,994,260 $15,175,310 
Pre-provision net revenue on average assets0.46 %0.46 %0.40 %
Pre-provision net revenue on average assets (annualized)1.84 %1.86 %1.60 %


Noninterest expense (excluding merger-related expense) as a percent of average assets is a 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
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Noninterest expense$94,496 $92,489 $115,970 
Less: merger-related expense— 5 39,346 
Noninterest expense excluding merger-related expense$94,496 $92,484 $76,624 
Average assets$20,290,415 $19,994,260 $15,175,310 
Noninterest expense as a percent of average assets (annualized)1.86 %1.85 %3.06 %
Noninterest expense excluding merger-related expense as a percent of average assets (annualized)1.86 %1.85 %2.02 %

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 excludes 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.
 June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands, except per share data)20212021202020202020
Total stockholders' equity$2,813,419 $2,703,098 $2,746,649 $2,688,085 $2,654,647 
Less: intangible assets978,675 981,568 984,076 988,446 995,716 
Tangible common equity$1,834,744 $1,721,530 $1,762,573 $1,699,639 $1,658,931 
Total assets$20,529,486 $20,173,298 $19,736,544 $19,844,240 $20,517,074 
Less: intangible assets978,675 981,568 984,076 988,446 995,716 
Tangible assets$19,550,811 $19,191,730 $18,752,468 $18,855,794 $19,521,358 
Tangible common equity ratio9.38 %8.97 %9.40 %9.01 %8.50 %
Common shares issued and outstanding94,656,57594,644,41594,483,13694,375,52194,350,902
Book value per share$29.72 $28.56 $29.07 $28.48 $28.14 
Less: intangible book value per share10.34 10.37 10.42 10.47 10.55 
Tangible book value per share$19.38 $18.19 $18.65 $18.01 $17.58 
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, and nonrecurring nonaccrual interest paid 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
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Net interest income$160,934 $161,652 $130,292 
Less: scheduled accretion income3,560 3,878 3,501 
Less: accelerated accretion income5,927 5,988 2,347 
Less: premium amortization on CD942 1,751 1,054 
Less: nonrecurring nonaccrual interest paid(216)(603)(142)
Core net interest income150,721 150,638 123,532 
Less: interest income on SBA PPP loans— — 5,382 
Core net interest income excluding SBA PPP loans$150,721 $150,638 $118,150 
Average interest-earning assets$18,783,803 $18,490,426 $13,831,914 
Less: average SBA PPP loans— — 830,090 
Average interest-earning assets excluding SBA PPP loans$18,783,803 $18,490,426 $13,001,824 
Net interest margin3.44 %3.55 %3.79 %
Core net interest margin3.22 %3.30 %3.59 %
Core net interest margin excluding SBA PPP loans3.22 %3.30 %3.65 %

Efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization, and merger-related expense to the sum of net interest income before provision for credit losses and total noninterest income, less gain (loss) on sale of securities, other income - security recoveries, gain/(loss) on sale of other real estate owned, and gain (loss) from debt extinguishment. 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
June 30,March 31,June 30,
(Dollars in thousands)202120212020
Total noninterest expense$94,496 $92,489 $115,970 
Less: amortization of intangible assets4,001 4,143 4,066 
Less: merger-related expense— 5 39,346 
Less: other real estate owned operations, net— — 9 
Noninterest expense, adjusted$90,495 $88,341 $72,549 
Net interest income before provision for credit losses$160,934 $161,652 $130,292 
Add: total noninterest income26,729 23,740 6,898 
Less: net gain (loss) from investment securities5,085 4,046 (21)
Less: other income - security recoveries6 2 — 
Less: net loss from other real estate owned— — (55)
Less: net loss from debt extinguishment(647)(503)— 
Revenue, adjusted$183,219 $181,847 $137,266 
Efficiency ratio49.4 %48.6 %52.9 %
25