EX-99.1 2 ppbi_exx991xearnings-2023x.htm EX-99.1 Document

Exhibit 99.1

Pacific Premier Bancorp, Inc. Announces Third Quarter 2023 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share

Third Quarter 2023 Summary
 
•Net income of $46.0 million, or $0.48 per diluted share
•Return on average assets of 0.88%, return on average equity of 6.43%, and return on average tangible common equity(1) of 10.08%
•Pre-provision net revenue (“PPNR”)(1) to average assets of 1.27%, annualized
•Net interest margin of 3.12%
•Cost of deposits of 1.50%, and cost of non-maturity deposits(1) of 0.89%
•Total delinquency of 0.08% of loans held for investment, and nonperforming assets to total assets of 0.13%
•Common equity tier 1 capital ratio of 14.87%, and total risk-based capital ratio of 17.74%
•Tangible book value per share(1) of $19.89; tangible common equity ratio(1) of 9.87%
•Available liquidity of $9.60 billion; cash and cash equivalents was $1.40 billion, and unused borrowing capacity of $8.20 billion at quarter end

Irvine, Calif., October 24, 2023 -- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $46.0 million, or $0.48 per diluted share, for the third quarter of 2023, compared with net income of $57.6 million, or $0.60 per diluted share, for the second quarter of 2023, and net income of $73.4 million, or $0.77 per diluted share, for the third quarter of 2022.
    
For the quarter ended September 30, 2023, the Company’s return on average assets (“ROAA”) was 0.88%, return on average equity (“ROAE”) was 6.43%, and return on average tangible common equity (“ROATCE”)(1) was 10.08%, compared to 1.09%, 8.11%, and 12.66%, respectively, for the second quarter of 2023, and 1.35%, 10.57%, and 16.74%, respectively, for the third quarter of 2022. Total assets were $20.28 billion at September 30, 2023, compared to $20.75 billion at June 30, 2023, and $21.62 billion at September 30, 2022.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, “Our teams continue to deliver solid results in a challenging economic and interest rate environment. We maintained our disciplined focus on prudent and proactive risk, liquidity, and capital management during the quarter. Our relationship managers' extraordinary efforts to deepen existing client relationships and bring new clients into our franchise are producing tangible results. During the quarter, client deposit flows further stabilized in the face of significant pricing competition, and we were able to reduce higher cost brokered deposits by $490 million.

"Our asset quality remained solid during the quarter, as total delinquencies decreased to 0.08% of loans, and non-performing assets were just 0.13% of total assets. Our operating results were impacted by a shared national credit that resulted in two non-relationship loans to one borrower being placed on nonaccrual status during the quarter. This resulted in an interest accrual reversal of $1.7 million and a charge-off of $3.2 million. The borrower on this $13 million credit continues to make payments. Our total shared national credit portfolio, which is a line of business we acquired from Opus Bank in 2020 that we have since discontinued, is comprised of twenty-two loans totaling $201 million in outstanding balances, or 1.5% of total loans, at September 30th.


(1) Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.
1

“During the past several quarters, we intentionally and proactively prioritized capital accumulation over balance sheet growth in light of the uncertain economic outlook, while at the same time continuing to provide best-in-class service to our clients and the communities we serve. As a result, we have created optionality for our organization to pursue organic and strategic growth opportunities that we believe will be accretive and aligned with our commitment to producing long-term value for our shareholders.

“I would like to thank all of the Pacific Premier employees for their outstanding efforts during the quarter, and our Board of Directors, shareholders, and stakeholders for continuing to support our organization through another dynamic period of time.”

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FINANCIAL HIGHLIGHTS
Three Months Ended
 September 30,June 30,September 30,
(Dollars in thousands, except per share data)202320232022
Financial highlights (unaudited)
Net income$46,030 $57,636 $73,363 
Net interest income149,548 160,092 181,112 
Diluted earnings per share0.48 0.60 0.77 
Common equity dividend per share paid0.33 0.33 0.33 
Return on average assets0.88 %1.09 %1.35 %
Return on average equity6.43 8.11 10.57 
Return on average tangible common equity (1)
10.08 12.66 16.74 
Pre-provision net revenue to average assets (1)
1.27 1.52 1.85 
Net interest margin3.12 3.33 3.61 
Cost of deposits1.50 1.27 0.22 
Cost of non-maturity deposits (1)
0.89 0.71 0.11 
Efficiency ratio (1)
59.0 54.1 48.3 
Noninterest expense as a percent of average assets1.96 1.91 1.86 
Total assets$20,275,720 $20,747,883 $21,619,201 
Total deposits16,007,447 16,539,875 17,746,374 
Non-maturity deposits as a percent of total deposits82.8 %81.4 %89.5 %
Noninterest-bearing deposits as a percent of total deposits36.1 35.6 38.2 
Loan-to-deposit ratio82.9 82.3 84.0 
Book value per share$29.78 $29.71 $28.79 
Tangible book value per share (1)
19.89 19.79 18.68 
Tangible common equity ratio9.87 %9.59 %8.59 %
Common equity tier 1 capital ratio14.87 14.34 12.36 
Total capital ratio17.74 17.24 14.83 
______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.

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INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin
 
Net interest income totaled $149.5 million in the third quarter of 2023, a decrease of $10.5 million, or 6.6%, from the second quarter of 2023. The decrease in net interest income was primarily attributable to a higher cost of funds as a result of the current interest rate environment and lower average loans and investment securities balances, partially offset by higher interest-bearing cash balances.

The net interest margin for the third quarter of 2023 decreased 21 basis points to 3.12%, from 3.33% in the prior quarter. The lower net interest margin was due to a higher cost of funds and lower loan prepayment fees, partially offset by higher yields on interest-bearing cash balances and investment securities. The net interest margin was negatively impacted 4 basis points as a result of reversing $1.7 million of accrued interest for the shared national credit through September 30, 2023.

Net interest income for the third quarter of 2023 decreased $31.6 million, or 17.4%, compared to the third quarter of 2022. The decrease was attributable to a higher cost of funds and lower average loans and investment securities balances, partially offset by higher yields on average interest-earning assets.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 Three Months Ended
 September 30, 2023June 30, 2023September 30, 2022
(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$1,695,508 $21,196 4.96 %$1,433,137 $16,600 4.65 %$665,510 $2,754 1.64 %
Investment securities3,828,766 25,834 2.70 3,926,568 25,936 2.64 4,277,444 22,067 2.06 
Loans receivable, net (1) (2)
13,475,194 177,032 5.21 13,927,145 182,852 5.27 14,986,682 174,204 4.61 
Total interest-earning assets$18,999,468 $224,062 4.68 $19,286,850 $225,388 4.69 $19,929,636 $199,025 3.96 
Liabilities
Interest-bearing deposits$10,542,884 $62,718 2.36 %$10,797,708 $53,580 1.99 %$10,839,359 $9,873 0.36 %
Borrowings1,131,656 11,796 4.15 1,131,465 11,716 4.15 966,981 8,040 3.31 
Total interest-bearing liabilities$11,674,540 $74,514 2.53 $11,929,173 $65,296 2.20 $11,806,340 $17,913 0.60 
Noninterest-bearing deposits$6,001,033 $6,078,543 $6,893,463 
Net interest income$149,548 $160,092 $181,112 
Net interest margin (3)
  3.12 %3.33 %3.61 %
Cost of deposits (4)
1.50 1.27 0.22 
Cost of funds (5)
1.67 1.45 0.38 
Cost of non-maturity deposits (6)
0.89 0.71 0.11 
Ratio of interest-earning assets to interest-bearing liabilities162.74 161.68 168.80 
_______________________________________
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs, discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships.
(2) Interest income includes net discount accretion of $2.2 million, $2.9 million, and $4.6 million for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.
(5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
(6) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
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Provision for Credit Losses

For the third quarter of 2023, the Company recorded $3.9 million provision expense, compared to $1.5 million for the second quarter of 2023, and $1.1 million for the third quarter of 2022. The provision for credit losses was impacted by changes to the overall size, composition and asset quality trends of the loan portfolio, as well as changes in the Company's macroeconomic forecasts.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Provision for credit losses
Provision for loan losses$2,517 $610 $546 
Provision for unfunded commitments1,386 1,003 549 
Provision for held-to-maturity securities15 (114)(18)
Total provision for credit losses$3,918 $1,499 $1,077 

Noninterest Income
 
Noninterest income for the third quarter of 2023 was $18.6 million, a decrease of $2.0 million from the second quarter of 2023. The decrease was primarily due to a $1.8 million decrease in other income largely attributable to decreases in income on Community Reinvestment Act (“CRA”) and other equity investments.

Noninterest income for the third quarter of 2023 decreased $1.6 million compared to the third quarter of 2022. The decrease was primarily due to an $800,000 decrease in other income primarily due to lower income on CRA and other equity investments and a $617,000 decrease in escrow and exchange fees attributable to lower commercial real estate transaction activity.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Noninterest income
Loan servicing income$533 $493 $397 
Service charges on deposit accounts2,673 2,670 2,704 
Other service fee income280 315 323 
Debit card interchange fee income924 914 808 
Earnings on bank owned life insurance3,579 3,487 3,339 
Net gain from sales of loans45 345 457 
Net loss from sales of investment securities
— — (393)
Trust custodial account fees
9,356 9,360 9,951 
Escrow and exchange fees938 924 1,555 
Other income223 2,031 1,023 
Total noninterest income$18,551 $20,539 $20,164 

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Noninterest Expense
 
Noninterest expense totaled $102.2 million for the third quarter of 2023, an increase of $1.5 million compared to the second quarter of 2023, primarily due to a $1.6 million increase in deposit expense driven by higher deposit earnings credit rates, and a $644,000 increase in compensation and benefits.

Noninterest expense increased by $1.3 million compared to the third quarter of 2022. The increase was primarily due to a $6.0 million increase in deposit expense driven by higher deposit earnings credit rates, partially offset by a $2.3 million decrease in compensation and benefits from reduced staffing levels.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Noninterest expense
Compensation and benefits$54,068 $53,424 $56,355 
Premises and occupancy11,382 11,615 12,011 
Data processing7,517 7,488 7,058 
Other real estate owned operations, net(4)8 — 
FDIC insurance premiums2,324 2,357 1,461 
Legal and professional services4,243 4,716 4,075 
Marketing expense1,635 1,879 1,912 
Office expense1,079 1,280 1,338 
Loan expense476 567 789 
Deposit expense10,811 9,194 4,846 
Amortization of intangible assets3,055 3,055 3,472 
Other expense5,599 5,061 7,549 
Total noninterest expense$102,185 $100,644 $100,866 


Income Tax

For the third quarter of 2023, income tax expense totaled $16.0 million, resulting in an effective tax rate of 25.8%, compared with income tax expense of $20.9 million and an effective tax rate of 26.6% for the second quarter of 2023, and income tax expense of $26.0 million and an effective tax rate of 26.1% for the third quarter of 2022.

6

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.27 billion at September 30, 2023, a decrease of $340.2 million, or 2.5%, from June 30, 2023, and a decrease of $1.64 billion, or 11.0%, from September 30, 2022. The decrease from June 30, 2023 was primarily due to lower loan production and fundings, partially offset by slower loan prepayments. The decrease from September 30, 2022 was primarily driven by lower loan fundings.

During the third quarter of 2023, new loan commitments totaled $67.8 million, and loan fundings totaled $25.6 million, compared with $148.5 million in loan commitments and $71.6 million in new loan fundings for the second quarter of 2023, and $789.2 million in loan commitments and $450.7 million in new loan fundings for the third quarter of 2022. During the third quarter of 2023, new origination activity remained muted given the uncertain economic and interest rate compared to the production levels seen in the third quarter of 2022.
 
At September 30, 2023, the total loan-to-deposit ratio was 82.9%, compared to 82.3% and 84.0% at June 30, 2023 and September 30, 2022, respectively.

The following table presents the primary loan roll-forward activities for total gross loans, including both loans held for investment and loans held for sale, during the quarters indicated:
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Beginning gross loan balance before basis adjustment$13,665,596 $14,223,036 $15,101,652 
New commitments67,811 148,482 789,198 
Unfunded new commitments(42,185)(76,928)(338,534)
Net new fundings25,626 71,554 450,664 
Amortization/maturities/payoffs(370,044)(582,948)(568,615)
Net draws on existing lines of credit7,180 36,393 21,416 
Loan sales(1,206)(78,349)(24,701)
Charge-offs(7,561)(3,986)(1,318)
Transferred to other real estate owned— (104)— 
Net decrease
(346,005)(557,440)(122,554)
Ending gross loan balance before basis adjustment$13,319,591 $13,665,596 $14,979,098 
Basis adjustment associated with fair value hedge (1)
(48,830)(53,130)(68,124)
Ending gross loan balance $13,270,761 $13,612,466 $14,910,974 
______________________________
(1) Represents the basis adjustment associated with the application of hedge accounting on certain loans.


7

The following table presents the composition of the loans held for investment as of the dates indicated:

September 30,June 30,September 30,
(Dollars in thousands)202320232022
Investor loans secured by real estate
Commercial real estate (“CRE”) non-owner-occupied$2,514,056 $2,571,246 $2,771,272 
Multifamily5,719,210 5,788,030 6,199,581 
Construction and land444,576 428,287 373,194 
SBA secured by real estate (1)
37,754 38,876 42,998 
Total investor loans secured by real estate8,715,596 8,826,439 9,387,045 
Business loans secured by real estate (2)
CRE owner-occupied2,228,802 2,281,721 2,477,530 
Franchise real estate secured313,451 318,539 383,468 
SBA secured by real estate (3)
53,668 57,084 64,002 
Total business loans secured by real estate2,595,921 2,657,344 2,925,000 
Commercial loans (4)
Commercial and industrial1,588,771 1,744,763 2,164,623 
Franchise non-real estate secured335,053 351,944 409,773 
SBA non-real estate secured10,667 9,688 11,557 
Total commercial loans1,934,491 2,106,395 2,585,953 
Retail loans
Single family residential (5)
70,984 70,993 75,176 
Consumer1,958 2,241 3,761 
Total retail loans72,942 73,234 78,937 
Loans held for investment before basis adjustment (6)
13,318,950 13,663,412 14,976,935 
Basis adjustment associated with fair value hedge (7)
(48,830)(53,130)(68,124)
Loans held for investment13,270,120 13,610,282 14,908,811 
Allowance for credit losses for loans held for investment(188,098)(192,333)(195,549)
Loans held for investment, net$13,082,022 $13,417,949 $14,713,262 
Total unfunded loan commitments$2,110,565 $2,202,647 $2,823,555 
Loans held for sale, at lower of cost or fair value$641 $2,184 $2,163 
______________________________
(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 $46.2 million, $48.4 million, and $59.0 million as of September 30, 2023, June 30, 2023, and September 30, 2022, respectively.
(7) Represents the basis adjustment associated with the application of hedge accounting on certain loans.

The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at September 30, 2023 was 4.76%, compared to 4.73% at June 30, 2023, and 4.34% at September 30, 2022. The quarter-over-quarter and year-over-year increases reflect higher rates on new originations and the repricing of loans as a result of the increases in benchmark interest rates.

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

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Investor loans secured by real estate
CRE non-owner-occupied$2,900 $1,470 $88,708 
Multifamily3,687 53,522 151,269 
Construction and land17,400 24,525 123,557 
Total investor loans secured by real estate23,987 79,517 363,534 
Business loans secured by real estate (1)
CRE owner-occupied— 3,062 80,676 
Franchise real estate secured— — 14,011 
SBA secured by real estate (2)
— — 6,468 
Total business loans secured by real estate— 3,062 101,155 
Commercial loans (3)
Commercial and industrial40,399 58,730 288,857 
Franchise non-real estate secured— 1,853 22,413 
SBA non-real estate secured406 1,612 4,673 
Total commercial loans40,805 62,195 315,943 
Retail loans
Single family residential (4)
3,019 3,708 8,566 
Total retail loans3,019 3,708 8,566 
Total loan commitments$67,811 $148,482 $789,198 
______________________________
(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 increased to 8.01% in the third quarter of 2023, compared to 6.72% in the second quarter of 2023, and 5.55% in the third quarter of 2022.

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Asset Quality and Allowance for Credit Losses
 
At September 30, 2023, our allowance for credit losses (“ACL”) on loans held for investment was $188.1 million, a decrease of $4.2 million from June 30, 2023, and a decrease of $7.5 million from September 30, 2022. The decrease in the ACL from June 30, 2023 and September 30, 2022 was commensurate with the relative decreases in loans held for investment balances.

During the third quarter of 2023, the Company incurred $6.8 million of net charge-offs, compared to $3.7 million during the second quarter of 2023, and $1.1 million during the third quarter of 2022.

The following table provides the allocation of the ACL for loans held for investment as well as the activity in the ACL attributed to various segments in the loan portfolio as of and for the period indicated:

Three Months Ended September 30, 2023
(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$31,545 $— $51 $(13)$31,583 
Multifamily55,648 — — (427)55,221 
Construction and land7,707 — — 799 8,506 
SBA secured by real estate (1)
2,331 (108)— (24)2,199 
Business loans secured by real estate (2)
CRE owner-occupied28,515 — 12 559 29,086 
Franchise real estate secured6,855 — — 711 7,566 
SBA secured by real estate (3)
4,511 — 128 (77)4,562 
Commercial loans (4)
Commercial and industrial39,586 (7,386)565 (268)32,497 
Franchise non-real estate secured14,642 — 50 1,087 15,779 
SBA non-real estate secured399 (67)3 137 472 
Retail loans
Single family residential (5)
455 — — 36 491 
Consumer loans139 — — (3)136 
Totals$192,333 $(7,561)$809 $2,517 $188,098 
______________________________
(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 September 30, 2023 increased slightly to 1.42%, compared to 1.41% at June 30, 2023, and 1.31% at September 30, 2022. The fair value net discount on loans acquired through acquisitions was $46.2 million, or 0.35% of total loans held for investment, as of September 30, 2023, compared to $48.4 million, or 0.35% of total loans held for investment, as of June 30, 2023, and $59.0 million, or 0.39% of total loans held for investment, as of September 30, 2022.

10

Nonperforming assets totaled $25.9 million, or 0.13% of total assets, at September 30, 2023, compared with $17.4 million, or 0.08% of total assets, at June 30, 2023, and $60.5 million, or 0.28% of total assets, at September 30, 2022. Loan delinquencies were $10.9 million, or 0.08% of loans held for investment, at September 30, 2023, compared to $31.0 million, or 0.23% of loans held for investment, at June 30, 2023, and $41.3 million, or 0.28% of loans held for investment, at September 30, 2022.

Classified loans totaled $149.3 million, or 1.12% of loans held for investment, at September 30, 2023, compared with $119.9 million, or 0.88% of loans held for investment, at June 30, 2023, and $110.1 million, or 0.74% of loans held for investment, at September 30, 2022.

The following table presents the asset quality metrics of the loan portfolio as of the dates indicated.

 September 30,June 30,September 30,
(Dollars in thousands)202320232022
Asset quality
Nonperforming loans$25,458 $17,151 $60,464 
Other real estate owned450 270 — 
Nonperforming assets$25,908 $17,421 $60,464 
Total classified assets (1)
$149,708 $120,216 $110,143 
Allowance for credit losses188,098 192,333 195,549 
Allowance for credit losses as a percent of total nonperforming loans739 %1,121 %323 %
Nonperforming loans as a percent of loans held for investment0.19 0.13 0.41 
Nonperforming assets as a percent of total assets0.13 0.08 0.28 
Classified loans to total loans held for investment1.12 0.88 0.74 
Classified assets to total assets0.74 0.58 0.51 
Net loan charge-offs for the quarter ended$6,752 $3,665 $1,072 
Net loan charge-offs for the quarter to average total loans0.05 %0.03 %0.01 %
Allowance for credit losses to loans held for investment (2)
1.42 1.41 1.31 
Delinquent loans  
30 - 59 days$2,967 $649 $1,484 
60 - 89 days475 31 6,535 
90+ days7,484 30,271 33,238 
Total delinquency$10,926 $30,951 $41,257 
Delinquency as a percentage of loans held for investment0.08 %0.23 %0.28 %
______________________________
(1) Includes substandard and doubtful loans, and other real estate owned.
(2) At September 30, 2023, 24% of loans held for investment include a fair value net discount of $46.2 million, or 0.35% of loans held for investment. At June 30, 2023, 25% of loans held for investment include a fair value net discount of $48.4 million, or 0.35% of loans held for investment. At September 30, 2022, 27% of loans held for investment include a fair value net discount of $59.0 million, or 0.39% of loans held for investment.

11

Investment Securities

At September 30, 2023, available-for-sale (“AFS”) and held-to-maturity (“HTM”) investment securities were $1.91 billion and $1.74 billion, respectively, compared to $2.01 billion and $1.74 billion, respectively, at June 30, 2023, and $2.66 billion and $1.39 billion, respectively, at September 30, 2022.

In total, investment securities were $3.65 billion at September 30, 2023, a decrease of $96.9 million from June 30, 2023, and a decrease of $394.1 million from September 30, 2022. The decrease in the third quarter of 2023 compared to the prior quarter was primarily the result of $88.4 million in principal payments, amortization, and redemptions, and an increase of $21.9 million in AFS securities mark-to-market unrealized loss, partially offset by purchases of CRA related investment securities of $13.4 million.

The decrease in investment securities from September 30, 2022 was primarily the result of $370.3 million in principal payments, discounts from the AFS securities transferred to HTM, amortization, and redemptions, as well as $304.2 million in sales, partially offset by $245.7 million in purchases and a decrease of $27.7 million in AFS securities mark-to-market unrealized loss.

Deposits

At September 30, 2023, total deposits were $16.01 billion, a decrease of $532.4 million, or 3.2%, from June 30, 2023, and a decrease of $1.74 billion, or 9.8%, from September 30, 2022. The decrease from the prior quarter was largely driven by the reduction of $489.5 million in of brokered certificates of deposit.

At September 30, 2023, non-maturity deposits(1) totaled $13.25 billion, or 82.8% of total deposits, a decrease of $202.8 million, or 1.5%, from June 30, 2023, and a decrease of $2.62 billion, or 16.5%, from September 30, 2022. The decreases from prior quarters were largely driven by clients redeploying funds into higher yielding alternatives, prepaying or paying down loans, and, to a lesser extent, shifting depositor behavior following the industry-wide turmoil experienced in the first half of 2023.

At September 30, 2023, maturity deposits totaled $2.75 billion, a decrease of $329.6 million, or 10.7%, from June 30, 2023, and an increase of $881.7 million, or 47.1%, from September 30, 2022. The decrease in the third quarter of 2023 compared to the prior quarter was primarily due to the reduction of $489.5 million in brokered certificates of deposit, partially offset by an increase of $159.8 million in retail certificates of deposit.

The weighted average cost of total deposits for the third quarter of 2023 was 1.50%, compared to 1.27% for the second quarter of 2023, and 0.22% for the third quarter of 2022. The increases in the weighted average cost of deposits for the third quarter of 2023, compared to the second quarter of 2023 and the third quarter of 2022, were principally driven by higher pricing across deposit categories. The weighted average cost of non-maturity deposits(1) for the third quarter of 2023 was 0.89%, compared to 0.71% for the second quarter of 2023, and 0.11% for the third quarter of 2022.

At September 30, 2023, the end-of-period weighted average rate of total deposits was 1.52%, compared to 1.40% at June 30, 2023, and 0.37% at September 30, 2022. At September 30, 2023, the end-of-period weighted average rate of non-maturity deposits was 0.96%, compared to 0.78% at June 30, 2023, and 0.20% at September 30, 2022.






______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
12

The following table presents the composition of deposits as of the dates indicated.

 September 30,June 30,September 30,
(Dollars in thousands)202320232022
Deposit accounts
Noninterest-bearing checking$5,782,305 $5,895,975 $6,775,465 
Interest-bearing:
Checking2,598,449 2,759,855 3,605,498 
Money market/savings4,873,582 4,801,288 5,493,988 
Total non-maturity deposits (1)
13,254,336 13,457,118 15,874,951 
Retail certificates of deposit1,525,919 1,366,071 872,421 
Wholesale/brokered certificates of deposit1,227,192 1,716,686 999,002 
Total maturity deposits2,753,111 3,082,757 1,871,423 
Total deposits$16,007,447 $16,539,875 $17,746,374 
Cost of deposits1.50 %1.27 %0.22 %
Cost of non-maturity deposits (1)
0.89 0.71 0.11 
Noninterest-bearing deposits as a percent of total deposits36.1 35.6 38.2 
Non-maturity deposits (1) as a percent of total deposits
82.8 81.4 89.5 


Borrowings

At September 30, 2023, total borrowings amounted to $1.13 billion, remaining flat from June 30, 2023, and reflecting an increase of $200.6 million from September 30, 2022. Total borrowings at September 30, 2023 were comprised of $800.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) term advances and $331.7 million of subordinated debt. The increase in borrowings at September 30, 2023 as compared to September 30, 2022 was due to a net $200.0 million increase in FHLB term advances.

As of September 30, 2023, our unused borrowing capacity was $8.20 billion, which consists of available lines of credit with FHLB and other correspondent banks as well as access through the Federal Reserve Bank's discount window and the Bank Term Funding Program, neither of which were utilized during the third quarter of 2023.

Capital Ratios

At September 30, 2023, our common stockholders' equity was $2.86 billion, or 14.08% of total assets, compared with $2.85 billion, or 13.73%, at June 30, 2023, and $2.74 billion, or 12.65%, at September 30, 2022, with a book value per share of $29.78, compared with $29.71 at June 30, 2023, and $28.79 at September 30, 2022. At September 30, 2023, the ratio of tangible common equity to tangible assets(1) was 9.87%, compared with 9.59% at June 30, 2023, and 8.59% at September 30, 2022, and tangible book value per share(1) was $19.89, compared with $19.79 at June 30, 2023, and $18.68 at September 30, 2022.






______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
13

The Company implemented the current expected credit losses (“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. In the first quarter of 2022, the Company began phasing into regulatory capital the cumulative adjustments at the end of the second year of the transition period at 25% per year. At September 30, 2023, the Company and Bank were in compliance with the capital conservation buffer requirement and exceeded the minimum Common Equity Tier 1, Tier 1, and total capital ratios, inclusive of the fully phased-in capital conservation buffer of 7.0%, 8.5%, and 10.5%, respectively, and the Bank qualified as “well capitalized” for purposes of the federal bank regulatory prompt corrective action regulations.

September 30,June 30,September 30,
Capital ratios202320232022
Pacific Premier Bancorp, Inc. Consolidated   
Tier 1 leverage ratio11.13 %10.90 %10.12 %
Common equity tier 1 capital ratio14.87 14.34 12.36 
Tier 1 capital ratio14.87 14.34 12.36 
Total capital ratio17.74 17.24 14.83 
Tangible common equity ratio (1)
9.87 9.59 8.59 
Pacific Premier Bank
Tier 1 leverage ratio12.42 %12.15 %11.64 %
Common equity tier 1 capital ratio16.59 15.99 14.23 
Tier 1 capital ratio16.59 15.99 14.23 
Total capital ratio17.66 17.05 15.05 
Share data   
Book value per share$29.78 $29.71 $28.79 
Tangible book value per share (1)
19.89 19.79 18.68 
Common equity dividends declared per share0.33 0.33 0.33 
Closing stock price (2)
21.76 20.68 30.96 
Shares issued and outstanding95,900,847 95,906,217 95,016,767 
Market capitalization (2)(3)
$2,086,802 $1,983,341 $2,941,719 
______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
(2) As of the last trading day prior to period end.
(3) Dollars in thousands.

14

Dividend and Stock Repurchase Program

On October 23, 2023, the Company's Board of Directors declared a $0.33 per share dividend, payable on November 13, 2023 to stockholders of record as of November 3, 2023. In January 2021, the Company’s Board of Directors approved a stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock. During the third quarter of 2023, the Company did not repurchase any shares of common stock.

Subsequent Events

On October 6, 2023, in light of a stabilizing deposit base and as part of its balance sheet and liquidity management strategy, the Company deployed excess cash to pay down a $200.0 million higher cost FHLB term advance. Prior to the redemption, such FHLB term advance carried a fixed interest rate of 4.84% with a maturity date in May 2024. Total payment in aggregate was $199.4 million, including principal and accrued and unpaid interest expense, net of a prepayment credit of $793,000, which was recorded as a net gain on debt extinguishment. Management anticipates the deleverage strategy will positively impact the Company's cost of funds, net interest margin, and FHLB available borrowing capacity.
15

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 24, 2023 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, Inc. conference call. Additionally, a telephone replay will be made available through October 31, 2023, at (877) 344-7529, replay code 9928068.

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, 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 $17 billion of assets under custody and over 35,000 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, liquidity, 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. These 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; interest rate, liquidity, economic, market, credit, operational, and inflation risks associated with our business, including the speed and predictability of changes in these risks; our ability to attract and retain deposits and access to other sources of liquidity, particularly in a rising or high interest rate environment, and the quality and composition of our deposits; business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the U.S. Federal budget or debt, or turbulence or uncertainty in domestic or foreign financial markets; 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
16

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; possible impairment charges to goodwill, including any impairment that may result from increased volatility in our stock price; 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; compliance risks, including the costs of monitoring, testing, and maintaining compliance with complex laws and regulations; the effectiveness of our risk management framework and quantitative models; the transition away from USD LIBOR and related uncertainty as well as the risk and costs related to our adoption of Secured Overnight Financing Rate (“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; possible credit-related impairments of securities held by us; changes in the level of our nonperforming assets and charge-offs; the impact of governmental efforts to restructure the U.S. financial regulatory system; the impact of recent or future changes in the FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; 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; the possibility that we may reduce or discontinue the payments of dividends on our common stock; the possibility that we may discontinue, reduce or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to our stock repurchase 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, including the war between Russia and Ukraine and the war in the Middle East, which could impact business and economic conditions in the United States and abroad; public health crises and pandemics, including with respect to COVID-19, 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 incidents, and related potential costs and risks, including reputation, financial and litigation risks; climate change, including the enhanced regulatory, compliance, credit, and reputational risks and costs; natural disasters, earthquakes, fires, and severe weather; 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 2022 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, Chief Executive Officer, and President
(949) 864-8000

Ronald J. Nicolas, Jr.
Senior Executive Vice President and Chief Financial Officer
(949) 864-8000

Matthew J. Lazzaro
Senior Vice President, Director of Investor Relations
(949) 243-1082

17

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20232023202320222022
ASSETS
Cash and cash equivalents$1,400,276 $1,463,677 $1,424,896 $1,101,249 $739,211 
Interest-bearing time deposits with financial institutions1,242 1,487 1,734 1,734 1,733 
Investment securities held-to-maturity, at amortized cost, net of allowance for credit losses 1,737,866 1,737,604 1,749,030 1,388,103 1,385,502 
Investment securities available-for-sale, at fair value1,914,599 2,011,791 2,112,852 2,601,013 2,661,079 
FHLB, FRB, and other stock105,505 105,369 105,479 119,918 118,778 
Loans held for sale, at lower of amortized cost or fair value641 2,184 1,247 2,643 2,163 
Loans held for investment13,270,120 13,610,282 14,171,784 14,676,298 14,908,811 
Allowance for credit losses(188,098)(192,333)(195,388)(195,651)(195,549)
Loans held for investment, net13,082,022 13,417,949 13,976,396 14,480,647 14,713,262 
Accrued interest receivable68,131 70,093 69,660 73,784 66,192 
Other real estate owned450 270 5,499 — — 
Premises and equipment, net59,396 61,527 63,450 64,543 65,651 
Deferred income taxes, net192,208 184,857 177,778 183,602 190,948 
Bank owned life insurance468,191 465,288 462,732 460,010 457,301 
Intangible assets46,307 49,362 52,417 55,588 59,028 
Goodwill901,312 901,312 901,312 901,312 901,312 
Other assets297,574 275,113 257,082 253,871 257,041 
Total assets$20,275,720 $20,747,883 $21,361,564 $21,688,017 $21,619,201 
LIABILITIES  
Deposit accounts:  
Noninterest-bearing checking$5,782,305 $5,895,975 $6,209,104 $6,306,825 $6,775,465 
Interest-bearing:
Checking2,598,449 2,759,855 2,871,812 3,119,850 3,605,498 
Money market/savings4,873,582 4,801,288 5,128,857 5,422,607 5,493,988 
Retail certificates of deposit1,525,919 1,366,071 1,257,146 1,086,423 872,421 
Wholesale/brokered certificates of deposit1,227,192 1,716,686 1,740,891 1,416,696 999,002 
Total interest-bearing10,225,142 10,643,900 10,998,706 11,045,576 10,970,909 
Total deposits16,007,447 16,539,875 17,207,810 17,352,401 17,746,374 
FHLB advances and other borrowings800,000 800,000 800,000 1,000,000 600,000 
Subordinated debentures331,682 331,523 331,364 331,204 331,045 
Accrued expenses and other liabilities281,057 227,351 191,229 206,023 206,386 
Total liabilities17,420,186 17,898,749 18,530,403 18,889,628 18,883,805 
STOCKHOLDERS’ EQUITY     
Common stock937 937 937 933 933 
Additional paid-in capital2,371,941 2,366,639 2,361,830 2,362,663 2,357,731 
Retained earnings771,285 757,025 731,123 700,040 657,845 
Accumulated other comprehensive loss(288,629)(275,467)(262,729)(265,247)(281,113)
Total stockholders' equity2,855,534 2,849,134 2,831,161 2,798,389 2,735,396 
Total liabilities and stockholders' equity$20,275,720 $20,747,883 $21,361,564 $21,688,017 $21,619,201 








18

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
(Dollars in thousands, except per share data)20232023202220232022
INTEREST INCOME   
Loans$177,032 $182,852 $174,204 $540,842 $489,263 
Investment securities and other interest-earning assets47,030 42,536 24,821 129,951 61,534 
Total interest income224,062 225,388 199,025 670,793 550,797 
INTEREST EXPENSE  
Deposits62,718 53,580 9,873 156,532 14,228 
FHLB advances and other borrowings7,235 7,155 3,480 22,328 7,171 
Subordinated debentures4,561 4,561 4,560 13,683 13,682 
Total interest expense74,514 65,296 17,913 192,543 35,081 
Net interest income before provision for credit losses149,548 160,092 181,112 478,250 515,716 
Provision for credit losses3,918 1,499 1,077 8,433 1,994 
Net interest income after provision for credit losses145,630 158,593 180,035 469,817 513,722 
NONINTEREST INCOME  
Loan servicing income533 493 397 1,599 1,318 
Service charges on deposit accounts2,673 2,670 2,704 7,972 8,009 
Other service fee income280 315 323 891 1,056 
Debit card interchange fee income924 914 808 2,641 2,580 
Earnings on bank owned life insurance3,579 3,487 3,339 10,440 9,800 
Net gain from sales of loans45 345 457 419 3,087 
Net (loss) gain from sales of investment securities
— — (393)138 1,710 
Trust custodial account fees
9,356 9,360 9,951 29,741 31,884 
Escrow and exchange fees938 924 1,555 2,920 5,043 
Other income223 2,031 1,023 3,515 3,764 
Total noninterest income18,551 20,539 20,164 60,276 68,251 
NONINTEREST EXPENSE  
Compensation and benefits54,068 53,424 56,355 161,785 170,898 
Premises and occupancy11,382 11,615 12,011 34,739 35,792 
Data processing7,517 7,488 7,058 22,270 19,658 
Other real estate owned operations, net(4)8 — 112 — 
FDIC insurance premiums2,324 2,357 1,461 7,106 4,309 
Legal and professional services4,243 4,716 4,075 14,460 12,772 
Marketing expense1,635 1,879 1,912 5,352 5,647 
Office expense1,079 1,280 1,338 3,591 3,793 
Loan expense476 567 789 1,689 3,067 
Deposit expense10,811 9,194 4,846 28,441 12,678 
Amortization of intangible assets3,055 3,055 3,472 9,281 10,543 
Other expense5,599 5,061 7,549 15,355 18,331 
Total noninterest expense102,185 100,644 100,866 304,181 297,488 
Net income before income taxes61,996 78,488 99,333 225,912 284,485 
Income tax expense15,966 20,852 25,970 59,684 74,415 
Net income$46,030 $57,636 $73,363 $166,228 $210,070 
EARNINGS PER SHARE  
Basic$0.48 $0.60 $0.77 $1.74 $2.22 
Diluted$0.48 $0.60 $0.77 $1.74 $2.21 
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic94,189,844 94,166,083 93,793,502 94,072,463 93,687,230 
Diluted94,283,008 94,215,967 94,120,637 94,214,846 94,055,116 
19

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 
 Three Months Ended
 September 30, 2023June 30, 2023September 30, 2022
(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$1,695,508 $21,196 4.96 %$1,433,137 $16,600 4.65 %$665,510 $2,754 1.64 %
Investment securities3,828,766 25,834 2.70 3,926,568 25,936 2.64 4,277,444 22,067 2.06 
Loans receivable, net (1)(2)
13,475,194 177,032 5.21 13,927,145 182,852 5.27 14,986,682 174,204 4.61 
Total interest-earning assets18,999,468 224,062 4.68 19,286,850 225,388 4.69 19,929,636 199,025 3.96 
Noninterest-earning assets1,806,319 1,771,156 1,757,800 
Total assets$20,805,787 $21,058,006 $21,687,436 
Liabilities and equity
Interest-bearing deposits:
Interest checking$2,649,203 $10,849 1.62 %$2,746,578 $8,659 1.26 %$3,812,448 $1,658 0.17 %
Money market4,512,740 19,182 1.69 4,644,623 15,644 1.35 5,053,890 2,940 0.23 
Savings329,684 115 0.14 352,377 102 0.12 434,591 28 0.03 
Retail certificates of deposit1,439,531 13,398 3.69 1,286,160 10,306 3.21 835,645 1,420 0.67 
Wholesale/brokered certificates of deposit1,611,726 19,174 4.72 1,767,970 18,869 4.28 702,785 3,827 2.16 
Total interest-bearing deposits10,542,884 62,718 2.36 10,797,708 53,580 1.99 10,839,359 9,873 0.36 
FHLB advances and other borrowings800,049 7,235 3.59 800,016 7,155 3.59 636,006 3,480 2.17 
Subordinated debentures331,607 4,561 5.50 331,449 4,561 5.50 330,975 4,560 5.51 
Total borrowings1,131,656 11,796 4.15 1,131,465 11,716 4.15 966,981 8,040 3.31 
Total interest-bearing liabilities11,674,540 74,514 2.53 11,929,173 65,296 2.20 11,806,340 17,913 0.60 
Noninterest-bearing deposits6,001,033 6,078,543 6,893,463 
Other liabilities268,249 206,929 212,509 
Total liabilities17,943,822 18,214,645 18,912,312 
Stockholders' equity2,861,965 2,843,361 2,775,124 
Total liabilities and equity$20,805,787 $21,058,006 $21,687,436 
Net interest income$149,548 $160,092 $181,112 
Net interest margin (3)
3.12 %3.33 %3.61 %
Cost of deposits (4)
1.50 1.27 0.22 
Cost of funds (5)
1.67 1.45 0.38 
Cost of non-maturity deposits (6)
0.89 0.71 0.11 
Ratio of interest-earning assets to interest-bearing liabilities162.74 161.68 168.80 
______________________________
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs, discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships.
(2) Interest income includes net discount accretion of $2.2 million, $2.9 million, and $4.6 million for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.
(5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
(6) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
20

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(Unaudited)
September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20232023202320222022
Investor loans secured by real estate
CRE non-owner-occupied$2,514,056 $2,571,246 $2,590,824 $2,660,321 $2,771,272 
Multifamily5,719,210 5,788,030 5,955,239 6,112,026 6,199,581 
Construction and land444,576 428,287 420,079 399,034 373,194 
SBA secured by real estate (1)
37,754 38,876 40,669 42,135 42,998 
Total investor loans secured by real estate8,715,596 8,826,439 9,006,811 9,213,516 9,387,045 
Business loans secured by real estate (2)
CRE owner-occupied2,228,802 2,281,721 2,342,175 2,432,163 2,477,530 
Franchise real estate secured313,451 318,539 371,902 378,057 383,468 
SBA secured by real estate (3)
53,668 57,084 60,527 61,368 64,002 
Total business loans secured by real estate2,595,921 2,657,344 2,774,604 2,871,588 2,925,000 
Commercial loans (4)
Commercial and industrial1,588,771 1,744,763 1,967,128 2,160,948 2,164,623 
Franchise non-real estate secured335,053 351,944 388,722 404,791 409,773 
SBA non-real estate secured10,667 9,688 10,437 11,100 11,557 
Total commercial loans1,934,491 2,106,395 2,366,287 2,576,839 2,585,953 
Retail loans
Single family residential (5)
70,984 70,993 70,913 72,997 75,176 
Consumer1,958 2,241 3,174 3,284 3,761 
Total retail loans72,942 73,234 74,087 76,281 78,937 
Loans held for investment before basis adjustment (6)
13,318,950 13,663,412 14,221,789 14,738,224 14,976,935 
Basis adjustment associated with fair value hedge (7)
(48,830)(53,130)(50,005)(61,926)(68,124)
Loans held for investment13,270,120 13,610,282 14,171,784 14,676,298 14,908,811 
Allowance for credit losses for loans held for investment(188,098)(192,333)(195,388)(195,651)(195,549)
Loans held for investment, net$13,082,022 $13,417,949 $13,976,396 $14,480,647 $14,713,262 
Loans held for sale, at lower of cost or fair value$641 $2,184 $1,247 $2,643 $2,163 
______________________________
(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 $46.2 million, $48.4 million, $52.2 million, $54.8 million, and $59.0 million as of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively.
(7) Represents the basis adjustment associated with the application of hedge accounting on certain loans.




21

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited)
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20232023202320222022
Asset quality
Nonperforming loans$25,458 $17,151 $24,872 $30,905 $60,464 
Other real estate owned450 270 5,499 — — 
Nonperforming assets$25,908 $17,421 $30,371 $30,905 $60,464 
Total classified assets (1)
$149,708 $120,216 $166,576 $149,304 $110,143 
Allowance for credit losses188,098 192,333 195,388 195,651 195,549 
Allowance for credit losses as a percent of total nonperforming loans739 %1,121 %786 %633 %323 %
Nonperforming loans as a percent of loans held for investment0.19 0.13 0.18 0.21 0.41 
Nonperforming assets as a percent of total assets0.13 0.08 0.14 0.14 0.28 
Classified loans to total loans held for investment1.12 0.88 1.14 1.02 0.74 
Classified assets to total assets0.74 0.58 0.78 0.69 0.51 
Net loan charge-offs for the quarter ended$6,752 $3,665 $3,284 $3,797 $1,072 
Net loan charge-offs for the quarter to average total loans 0.05 %0.03 %0.02 %0.03 %0.01 %
Allowance for credit losses to loans held for investment (2)
1.42 1.41 1.38 1.33 1.31 
Delinquent loans   
30 - 59 days$2,967 $649 $761 $20,538 $1,484 
60 - 89 days475 31 1,198 185 6,535 
90+ days7,484 30,271 18,884 22,625 33,238 
Total delinquency$10,926 $30,951 $20,843 $43,348 $41,257 
Delinquency as a percent of loans held for investment0.08 %0.23 %0.15 %0.30 %0.28 %
______________________________
(1) Includes substandard and doubtful loans, and other real estate owned.
(2) At September 30, 2023, 24% of loans held for investment include a fair value net discount of $46.2 million, or 0.35% of loans held for investment. At June 30, 2023, 25% of loans held for investment include a fair value net discount of $48.4 million, or 0.35% of loans held for investment. At March 31, 2023, 26% of loans held for investment include a fair value net discount of $52.2 million, or 0.37% of loans held for investment. At December 31, 2022, 26% of loans held for investment include a fair value net discount of $54.8 million, or 0.37% of loans held for investment. At September 30, 2022, 27% of loans held for investment include a fair value net discount of $59.0 million, or 0.39% of loans held for investment.

22

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
September 30, 2023
Investor loans secured by real estate
CRE non-owner-occupied$425 $— $— $— $425 $425 
SBA secured by real estate (2)
1,242 — — — 1,242 1,242 
Total investor loans secured by real estate1,667 — — — 1,667 1,667 
Business loans secured by real estate (3)
CRE owner-occupied8,826 — — — 8,826 8,826 
SBA secured by real estate (4)
1,173 — — — 1,173 1,173 
Total business loans secured by real estate9,999 — — — 9,999 9,999 
Commercial loans (5)
Commercial and industrial233 — 13,021 — 13,254 13,254 
SBA not secured by real estate538 — — — 538 538 
Total commercial loans771 — 13,021 — 13,792 13,792 
Totals nonaccrual loans$12,437 $— $13,021 $— $25,458 $25,458 
______________________________
(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.

23

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
PAST DUE STATUS
(Unaudited)
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
September 30, 2023
Investor loans secured by real estate
CRE non-owner-occupied$2,513,631 $— $— $425 $2,514,056 
Multifamily5,719,210 — — — 5,719,210 
Construction and land444,576 — — — 444,576 
SBA secured by real estate (1)
37,002 — 332 420 37,754 
Total investor loans secured by real estate8,714,419 — 332 845 8,715,596 
Business loans secured by real estate (2)
CRE owner-occupied2,224,107 — — 4,695 2,228,802 
Franchise real estate secured313,451 — — — 313,451 
SBA secured by real estate (3)
52,495 — — 1,173 53,668 
Total business loans secured by real estate2,590,053 — — 5,868 2,595,921 
Commercial loans (4)
Commercial and industrial1,585,718 2,677 143 233 1,588,771 
Franchise non-real estate secured335,053 — — — 335,053 
SBA not secured by real estate9,840 289 — 538 10,667 
Total commercial loans1,930,611 2,966 143 771 1,934,491 
Retail loans
Single family residential (5)
70,984 — — — 70,984 
Consumer loans1,957 1 — — 1,958 
Total retail loans72,941 1 — — 72,942 
Loans held for investment before basis adjustment (6)
$13,308,024 $2,967 $475 $7,484 $13,318,950 
______________________________
(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) Excludes the basis adjustment of $48.8 million to the carrying amount of certain loans included in fair value hedging relationships.



24

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CREDIT RISK GRADES
(Unaudited)
 
(Dollars in thousands)PassSpecial
Mention		Substandard
Doubtful
Total Gross
Loans
September 30, 2023
Investor loans secured by real estate    
CRE non-owner-occupied$2,475,554 $7,005 $31,497 $— $2,514,056 
Multifamily5,706,494 234 12,482 — 5,719,210 
Construction and land444,576 — — — 444,576 
SBA secured by real estate (1)
29,343 — 8,411 — 37,754 
Total investor loans secured by real estate8,655,967 7,239 52,390 — 8,715,596 
Business loans secured by real estate (2)
CRE owner-occupied2,167,522 34,811 26,469 — 2,228,802 
Franchise real estate secured294,520 13,871 5,060 — 313,451 
SBA secured by real estate (3)
47,734 619 5,315 — 53,668 
Total business loans secured by real estate2,509,776 49,301 36,844 — 2,595,921 
Commercial loans (4)
   
Commercial and industrial1,445,826 102,152 35,824 4,969 1,588,771 
Franchise non-real estate secured312,418 4,396 18,239 — 335,053 
SBA not secured by real estate9,676 — 991 — 10,667 
Total commercial loans1,767,920 106,548 55,054 4,969 1,934,491 
Retail loans
Single family residential (5)
70,983 — 1 — 70,984 
Consumer loans1,958 — — — 1,958 
Total retail loans72,941 — 1 — 72,942 
Loans held for investment before basis adjustment (6)
$13,006,604 $163,088 $144,289 $4,969 $13,318,950 
______________________________
(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) Excludes the basis adjustment of $48.8 million to the carrying amount of certain loans included in fair value hedging relationships.

25

GAAP to NON-GAAP RECONCILIATIONS

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
(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
 September 30,June 30,September 30,
(Dollars in thousands)202320232022
Net income$46,030 $57,636 $73,363 
Plus: amortization of intangible assets expense3,055 3,055 3,472 
Less: amortization of intangible assets expense tax adjustment (1)
868 868 991 
Net income for average tangible common equity$48,217 $59,823 $75,844 
Average stockholders' equity$2,861,965 $2,843,361 $2,775,124 
Less: average intangible assets48,150 51,180 61,101 
Less: average goodwill901,312 901,312 901,312 
Average tangible common equity$1,912,503 $1,890,869 $1,812,711 
Return on average equity (annualized)6.43 %8.11 %10.57 %
Return on average tangible common equity (annualized)10.08 %12.66 %16.74 %
_____________________________________
(1) Adjusted by statutory tax rate.



26

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 and provision for credit losses 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
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Interest income$224,062 $225,388 $199,025 
Interest expense74,514 65,296 17,913 
Net interest income149,548 160,092 181,112 
Noninterest income18,551 20,539 20,164 
Revenue168,099 180,631 201,276 
Noninterest expense102,185 100,644 100,866 
Pre-provision net revenue65,914 79,987 100,410 
Pre-provision net revenue (annualized)$263,656 $319,948 $401,640 
Average assets$20,805,787 $21,058,006 $21,687,436 
Pre-provision net revenue to average assets0.32 %0.38 %0.46 %
Pre-provision net revenue to average assets (annualized)1.27 %1.52 %1.85 %


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.
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands, except per share data)20232023202320222022
Total stockholders' equity$2,855,534 $2,849,134 $2,831,161 $2,798,389 $2,735,396 
Less: intangible assets947,619 950,674 953,729 956,900 960,340 
Tangible common equity$1,907,915 $1,898,460 $1,877,432 $1,841,489 $1,775,056 
Total assets$20,275,720 $20,747,883 $21,361,564 $21,688,017 $21,619,201 
Less: intangible assets947,619 950,674 953,729 956,900 960,340 
Tangible assets$19,328,101 $19,797,209 $20,407,835 $20,731,117 $20,658,861 
Tangible common equity ratio9.87 %9.59 %9.20 %8.88 %8.59 %
Common shares issued and outstanding95,900,84795,906,21795,714,77795,021,76095,016,767
Book value per share$29.78 $29.71 $29.58 $29.45 $28.79 
Less: intangible book value per share9.88 9.91 9.96 10.07 10.11 
Tangible book value per share$19.89 $19.79 $19.61 $19.38 $18.68 

27

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 and amortization of intangible assets, where applicable, to the sum of net interest income before provision for credit losses and total noninterest income, less net gain (loss) from sales of investment securities and net gain from other real estate owned. 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
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Total noninterest expense$102,185 $100,644 $100,866 
Less: amortization of intangible assets3,055 3,055 3,472 
Less: other real estate owned operations, net(4)8 — 
Noninterest expense, adjusted$99,134 $97,581 $97,394 
Net interest income before provision for credit losses$149,548 $160,092 $181,112 
Add: total noninterest income18,551 20,539 20,164 
Less: net loss from sales of investment securities
— — (393)
Less: net gain from other real estate owned— 106 — 
Revenue, adjusted$168,099 $180,525 $201,669 
Efficiency ratio59.0 %54.1 %48.3 %


Cost of non-maturity deposits is a non-GAAP financial measure derived from GAAP-based amounts. Cost of non-maturity deposits is calculated as the ratio of non-maturity deposit interest expense to average non-maturity deposits. We calculate non-maturity deposit interest expense by excluding interest expense for all certificates of deposit from total deposit expense, and we calculate average non-maturity deposits by excluding all certificates of deposit from total deposits. Management believes cost of non-maturity deposits is a useful measure to assess the Company's deposit base, including its potential volatility.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202320232022
Total deposits interest expense$62,718 $53,580 $9,873 
Less: certificates of deposit interest expense13,398 10,306 1,420 
Less: brokered certificates of deposit interest expense19,174 18,869 3,827 
Non-maturity deposit expense$30,146 $24,405 $4,626 
Total average deposits$16,543,917 $16,876,251 $17,732,822 
Less: average certificates of deposit1,439,531 1,286,160 835,645 
Less: average brokered certificates of deposit1,611,726 1,767,970 702,785 
Average non-maturity deposits$13,492,660 $13,822,121 $16,194,392 
Cost of non-maturity deposits0.89 %0.71 %0.11 %
28