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

Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $90.1 million, or $0.95 per diluted share, for the third quarter of 2021, compared with net income of $96.3 million, or $1.01 per diluted share, for the second quarter of 2021, and net income of $66.6 million, or $0.70 per diluted share, for the third quarter of 2020.

For the quarter ended September 30, 2021, the Company’s return on average assets (“ROAA”) was 1.73%, return on average equity (“ROAE”) was 12.67%, and return on average tangible common equity (“ROATCE”) was 19.89%, compared to 1.90%, 14.02%, and 22.45%, respectively, for the second quarter of 2021 and 1.31%, 9.90%, and 16.44%, respectively, for the third quarter of 2020. Total assets were $21.01 billion at September 30, 2021, compared to $20.53 billion at June 30, 2021, and $19.84 billion at September 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, “Our teams continue to drive positive results and deliver a high level of profitability, which we have done consistently over time and throughout varying economic cycles. While the resurgence of COVID-19 cases slowed the pace of the economic recovery during the third quarter, our dynamic business development capabilities coupled with our proprietary technology enabled us to generate high quality loan and deposit growth, increase revenue, and achieve higher positive operating leverage. These efforts further improved our core earnings power.

“The experience and expertise we have built across the organization provides consistently strong loan production and inflows of low-cost deposits. During the third quarter, we generated $1.46 billion in new loan commitments, resulting in 11.5% annualized loan growth and a favorable mix shift in earning assets. Combined with the positive impact of eliminating higher cost funding sources, these efforts led to net interest income growth of 20.2%, annualized, and net interest margin expansion during the third quarter.

“Our new business pipelines remain healthy, which we anticipate contributing to solid organic growth and strong financial performance, while also remaining well positioned to take advantage of strategic growth opportunities that create long-term value for our shareholders and further enhance our franchise,” said Mr. Gardner.

______________________________

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

FINANCIAL HIGHLIGHTS

Three Months Ended

September 30,

June 30,

September 30,

(Dollars in thousands, except per share data)

2021

2021

2020

Financial highlights (unaudited)

Net income

$

90,088

$

96,302

$

66,566

Diluted earnings per share

0.95

1.01

0.70

Common equity dividend per share paid

0.33

0.33

0.25

Return on average assets

1.73

%

1.90

%

1.31

%

Return on average equity

12.67

14.02

9.90

Return on average tangible common equity (1)

19.89

22.45

16.44

Pre-provision net revenue on average assets (1)

1.98

1.84

1.92

Net interest margin

3.51

3.44

3.54

Core net interest margin (1)

3.30

3.22

3.23

Cost of deposits

0.06

0.08

0.20

Efficiency ratio (1)

47.5

49.4

47.4

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

1.85

%

1.86

%

1.88

%

Total assets

$

21,005,211

$

20,529,486

$

19,844,240

Total deposits

17,469,999

17,015,097

16,330,807

Loans to deposit ratio

80.0

%

79.9

%

82.4

%

Non-maturity deposits as a percent of total deposits

93.6

92.6

89.5

Book value per share

$

30.08

$

29.72

$

28.48

Tangible book value per share (1)

19.75

19.38

18.01

Total risk-based capital ratio

14.56

%

15.61

%

16.11

%

______________________________

(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 $169.1 million in the third quarter of 2021, an increase of $8.1 million, or 5.1%, from the second quarter of 2021. The increase in net interest income reflected higher average interest-earning assets, higher loan fees, one more day of interest, and a lower cost of funds as compared to the prior quarter, partially offset by lower average investment and loan yields.

The net interest margin for the third quarter of 2021 was 3.51%, compared with 3.44% in the prior quarter. Our core net interest margin, which excludes the impact of $9.4 million loan accretion income, compared to $9.5 million in the prior quarter, certificates of deposit mark-to-market amortization, and other adjustments, increased 8 basis points to 3.30%, reflecting lower cost of funds and higher loan fees, partially offset by lower average investment and loan yields.

Net interest income for the third quarter of 2021 increased $2.5 million, or 1.5%, compared to the third quarter of 2020. The increase was attributable to lower cost of funds, a $1.52 billion increase in average investment securities, and a $377.5 million decrease in average interest-bearing liabilities, which primarily resulted from the redemptions of subordinated debentures, partially offset by lower average interest-earning assets yields and lower average loan balances.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

(Unaudited)

Three Months Ended

September 30, 2021

June 30, 2021

September 30, 2020

(Dollars in thousands)

Average Balance

Interest Income/Expense

Average

Yield/

Cost

Average Balance

Interest Income/Expense

Average

Yield/

Cost

Average Balance

Interest Income/Expense

Average Yield/ Cost

Assets

Cash and cash equivalents

$

663,076

$

195

0.12

%

$

1,323,186

$

315

0.10

%

$

1,388,897

$

305

0.09

%

Investment securities

4,807,854

18,827

1.57

4,243,644

18,012

1.70

3,283,840

14,231

1.73

Loans receivable, net (1) (2)

13,660,242

157,025

4.56

13,216,973

152,365

4.62

14,034,868

167,455

4.75

Total interest-earning assets

$

19,131,172

$

176,047

3.65

$

18,783,803

$

170,692

3.64

$

18,707,605

$

181,991

3.87

Liabilities

Interest-bearing deposits

$

10,536,091

$

2,432

0.09

$

10,395,002

$

3,265

0.13

$

10,703,431

$

8,509

0.32

Borrowings

332,245

4,546

5.43

486,718

6,493

5.35

542,437

6,936

5.09

Total interest-bearing liabilities

$

10,868,336

$

6,978

0.25

$

10,881,720

$

9,758

0.36

$

11,245,868

$

15,445

0.55

Noninterest-bearing deposits

$

6,809,211

$

6,341,063

$

5,877,619

Net interest income

$

169,069

$

160,934

$

166,546

Net interest margin (3)

3.51

3.44

3.54

Cost of deposits (4)

0.06

0.08

0.20

Cost of funds (5)

0.16

0.23

0.36

Ratio of interest-earning assets to interest-bearing liabilities

176.03

172.62

166.35

____________________________________

(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 $9.4 million, $9.5 million, and $12.2 million, 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.

Provision for Credit Losses

For the third quarter of 2021, the Company recorded a $19.7 million provision recapture, compared to a $38.5 million provision recapture for the second quarter of 2021, and a $4.2 million provision expense for the third quarter of 2020. The provision recapture for the third quarter of 2021 was comprised of a $19.5 million provision recapture for loan losses, a $194,000 provision recapture for unfunded commitments, and $11,000 provision expense for held-to-maturity securities that were transferred from available-for-sale during the third quarter. The provision recaptures for loans and unfunded commitments during the third quarter of 2021 were reflective of improving economic forecasts employed in the Company’s current expected credit losses (“CECL”) model relative to prior periods and the favorable asset quality profile of the loan portfolio, partially offset by an increase in loans held for investment. The provision expense in the third quarter of 2020 reflected the impact of changes in economic forecasts related to the COVID-19 pandemic.

Three Months Ended

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Provision for credit losses

Provision for loan losses

$

(19,543)

$

(33,131)

$

4,702

Provision for unfunded commitments

(194)

(5,345)

(492)

Provision for held-to-maturity securities

11

Total provision for credit losses

$

(19,726)

$

(38,476)

$

4,210

Noninterest Income

Noninterest income for the third quarter of 2021 was $30.1 million, an increase of $3.4 million from the second quarter of 2021. The increase was primarily due to a $3.5 million increase in trust custodial account fees and a $987,000 increase in earnings on bank-owned life insurance ("BOLI"), partially offset by a $895,000 decrease in net gain from sales of investment securities. Also, other income included a $970,000 net gain on debt extinguishment compared to a $647,000 loss in the prior quarter, partially offset by $1.1 million lower CRA investment income and $483,000 lower Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loan referral fees.

During the third quarter of 2021, the Bank sold $12.0 million of SBA loans for a net gain of $1.2 million, compared to the sales of $14.7 million of SBA loans for a net gain of $1.5 million in the second quarter of 2021.

Additionally, during the third quarter of 2021, the Bank sold $161.6 million of investment securities for a net gain of $4.2 million, compared to the sales of $280.2 million of investment securities for a net gain of $5.1 million in the second quarter of 2021.

Noninterest income for the third quarter of 2021 increased $3.3 million, or 12.5%, compared to the third quarter of 2020. The increase was primarily due to a $4.5 million increase in trust custodial account fees, a $3.0 million increase in net gain from sales of investment securities, a $1.9 million increase in other income, and a $996,000 increase in earnings on BOLI, partially offset by a $8.4 million decrease in net gain from sales of loans.

The net gain from sales of loans for the third quarter of 2021 decreased from the same period last year reflecting lower net gain from the sales of $12.0 million of SBA loans for a net gain of $1.2 million, compared with the sales of $1.16 billion SBA PPP loans for a net gain of $19.0 million in the third quarter of 2020, offset by sales of $96.2 million of other loans for a net loss of $9.4 million during the third quarter of 2020.

Three Months Ended

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Noninterest income

Loan servicing income

$

536

$

622

$

481

Service charges on deposit accounts

2,375

2,222

1,593

Other service fee income

350

352

487

Debit card interchange fee income

834

1,099

944

Earnings on BOLI

3,266

2,279

2,270

Net gain from sales of loans

1,187

1,546

9,542

Net gain from sales of investment securities

4,190

5,085

1,141

Trust custodial account fees

11,446

7,897

6,960

Escrow and exchange fees

1,867

1,672

1,142

Other income

4,049

3,955

2,198

Total noninterest income

$

30,100

$

26,729

$

26,758

Noninterest Expense

Noninterest expense totaled $96.0 million for the third quarter of 2021, an increase of $1.5 million compared to the second quarter of 2021, primarily driven by a $531,000 increase in data processing expense and a $518,000 increase in marketing expense.

Noninterest expense decreased by $2.5 million compared to the third quarter of 2020. The decrease was primarily due to $3.0 million of merger-related expense for the third quarter of 2020 relating to the Opus Bank acquisition. Excluding merger-related expense, noninterest expense increased $449,000 compared to the third quarter of 2020, primarily due to a $2.6 million increase in compensation and benefits, offset by a $1.3 million decrease in office expense.

Three Months Ended

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Noninterest expense

Compensation and benefits

$

53,592

$

53,474

$

51,021

Premises and occupancy

12,611

12,240

12,373

Data processing

6,296

5,765

6,783

Other real estate owned operations, net

(17)

FDIC insurance premiums

1,392

1,312

1,145

Legal and professional services

4,563

4,186

5,108

Marketing expense

2,008

1,490

1,718

Office expense

1,076

1,589

2,389

Loan expense

1,332

1,165

802

Deposit expense

3,974

3,985

4,728

Merger-related expense

2,988

Amortization of intangible assets

3,912

4,001

4,538

Other expense

5,284

5,289

5,003

Total noninterest expense

$

96,040

$

94,496

$

98,579

Income Tax

For the third quarter of 2021, our income tax expense totaled $32.8 million, resulting in an effective tax rate of 26.7%, compared with income tax expense of $35.3 million and an effective tax rate of 26.8% for the second quarter of 2021, and income tax expense of $23.9 million and an effective tax rate of 26.5% for the third 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 26 to 27%.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.98 billion at September 30, 2021, an increase of $388.3 million, or 2.9%, from June 30, 2021, and an increase of $532.0 million, or 4.0%, from September 30, 2020. The increase from June 30, 2021 was primarily driven by loan fundings, slightly higher line utilization rates, and lower prepayments and maturities. The increase in loans held for investment from September 30, 2020 was primarily driven by higher loan production, partially offset by loan amortizations, prepayments, and maturities, as well as loan sales.

During the third quarter of 2021, the Bank generated $1.46 billion of loan commitments and funded $1.10 billion of new loans, compared with $1.58 billion in loan commitments and $1.15 billion in funded loans for the second quarter of 2021, and $360.0 million in loan commitments and $280.8 million in funded loans for the third quarter of 2020. Business line commitments totaled $2.75 billion with an average utilization rate of 33.12% for the third quarter of 2021, compared with business line commitments of $2.59 billion with an average utilization rate of 31.96% for the second quarter of 2021, and business line commitments of $2.11 billion with an average utilization rate of 36.37% for the third quarter of 2020.

At September 30, 2021, the ratio of loans held for investment to total deposits was 80.0%, compared with 79.9% and 82.4% at June 30, 2021 and September 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

September 30,

June 30,

(Dollars in thousands)

2021

2021

Beginning loan balance

$

13,599,312

$

13,124,703

New commitments

1,459,201

1,576,884

Unfunded new commitments

(359,000)

(423,797)

Net new fundings

1,100,201

1,153,087

Amortization/maturities/payoffs

(762,795)

(821,502)

Net draws on existing lines of credit

69,141

161,273

Loan sales

(12,258)

(14,959)

Charge-offs

(2,640)

(3,290)

Net increase

391,649

474,609

Ending loan balance

$

13,990,961

$

13,599,312

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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Investor loans secured by real estate

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

$

2,823,065

$

2,810,233

$

2,707,930

Multifamily

5,705,666

5,539,464

5,142,069

Construction and land

292,815

297,728

337,872

SBA secured by real estate (1)

49,446

53,003

57,610

Total investor loans secured by real estate

8,870,992

8,700,428

8,245,481

Business loans secured by real estate (2)

CRE owner-occupied

2,242,164

2,089,300

2,119,788

Franchise real estate secured

354,481

358,120

359,329

SBA secured by real estate (3)

69,937

72,923

84,126

Total business loans secured by real estate

2,666,582

2,520,343

2,563,243

Commercial loans (4)

Commercial and industrial

1,888,870

1,795,144

1,820,995

Franchise non-real estate secured

392,950

401,315

515,980

SBA non-real estate secured

12,732

13,900

16,748

Total commercial loans

2,294,552

2,210,359

2,353,723

Retail loans

Single family residential (5)

144,309

157,228

243,359

Consumer

6,426

6,240

45,034

Total retail loans

150,735

163,468

288,393

Gross loans held for investment (6)

13,982,861

13,594,598

13,450,840

Allowance for credit losses for loans held for investment

(211,481)

(232,774)

(282,503)

Loans held for investment, net

$

13,771,380

$

13,361,824

$

13,168,337

Total unfunded loan commitments

$

2,504,188

$

2,345,364

$

1,868,264

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

$

8,100

$

4,714

$

1,032

______________________________

(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 $85.0 million, $94.4 million, and $126.3 million as of September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at September 30, 2021 was 4.03%, compared to 4.11% at June 30, 2021, and 4.34% at September 30, 2020. The quarter-over-quarter and year-over-year decreases reflect the continued impact from prepayments of higher rate loans and lower rates on new originations.

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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Investor loans secured by real estate

CRE non-owner-occupied

$

105,792

$

181,995

$

40,518

Multifamily

613,640

631,360

182,575

Construction and land

99,943

148,422

37,087

SBA secured by real estate (1)

1,410

Total investor loans secured by real estate

820,785

961,777

260,180

Business loans secured by real estate (2)

CRE owner-occupied

256,269

181,385

30,594

Franchise real estate secured

19,207

39,320

SBA secured by real estate (3)

15,065

13,445

799

Total business loans secured by real estate

290,541

234,150

31,393

Commercial loans (4)

Commercial and industrial

310,985

316,162

56,959

Franchise non-real estate secured

21,654

41,501

9,665

SBA non-real estate secured

1,000

Total commercial loans

332,639

358,663

66,624

Retail loans

Single family residential (5)

14,782

14,744

Consumer

454

7,550

1,825

Total retail loans

15,236

22,294

1,825

Total loan commitments

$

1,459,201

$

1,576,884

$

360,022

______________________________

(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 weighted average interest rate on new loan commitments was 3.66% in the third quarter of 2021, compared with 3.59% in the second quarter of 2021, and 3.61%, in the third quarter of 2020.

Asset Quality and Allowance for Credit Losses

At September 30, 2021, our allowance for credit losses (“ACL”) on loans held for investment was $211.5 million, a decrease of $21.3 million from June 30, 2021, and a decrease of $71.0 million from September 30, 2020. The provision for credit loss recapture during the current quarter was reflective of improving economic forecasts employed in the Company's CECL model relative to the prior quarter and the favorable asset quality profile of the loan portfolio, partially offset by an increase in loans held for investment during the quarter. The decrease from September 30, 2020 was primarily due to changes in economic forecasts employed in the Company's CECL model related to the COVID-19 pandemic.

During the third quarter of 2021, the Company incurred $1.8 million of net charge-offs, compared to $1.1 million and $4.5 million during the second quarter of 2021 and the third quarter of 2020, respectively.

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

Three Months Ended September 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

$

47,112

$

$

$

(4,645)

$

42,467

Multifamily

59,059

(6,895)

52,164

Construction and land

9,548

(1,531)

8,017

SBA secured by real estate (1)

4,681

(158)

(644)

3,879

Business loans secured by real estate (2)

CRE owner-occupied

35,747

14

(2,082)

33,679

Franchise real estate secured

11,436

(1,810)

9,626

SBA secured by real estate (3)

6,317

50

(1,263)

5,104

Commercial loans (4)

Commercial and industrial

39,879

(84)

729

(2,929)

37,595

Franchise non-real estate secured

17,313

(2,398)

80

2,523

17,518

SBA non-real estate secured

730

15

(113)

632

Retail loans

Single family residential (5)

670

2

(143)

529

Consumer loans

282

(11)

271

Totals

$

232,774

$

(2,640)

$

890

$

(19,543)

$

211,481

______________________________

(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, 2021 was 1.51%, compared to 1.71% at June 30, 2021 and 2.10% at September 30, 2020. The fair value net discount on loans acquired through total bank acquisitions was $85.0 million, or 0.60% of total loans held for investment, as of September 30, 2021, compared to $94.4 million, or 0.69% of total loans held for investment, as of June 30, 2021, and $126.3 million, or 0.93% of total loans held for investment, as of September 30, 2020.

Nonperforming assets totaled $35.1 million, or 0.17% of total assets, at September 30, 2021, compared with $34.4 million, or 0.17% of total assets, at June 30, 2021, and $27.5 million, or 0.14% of total assets, at September 30, 2020. Total loan delinquencies were $20.2 million, or 0.14% of loans held for investment, at September 30, 2021, compared to $19.3 million, or 0.14% of loans held for investment, at June 30, 2021, and $29.4 million, or 0.22% of loans held for investment, at September 30, 2020.

Classified loans totaled $124.5 million, or 0.89% of loans held for investment, at September 30, 2021, compared with $131.4 million, or 0.97% of loans held for investment, at June 30, 2021, and $136.7 million, or 1.02% of loans held for investment, at September 30, 2020. The quarter-over-quarter and year-over-year decrease was primarily driven by the net changes in risk ratings.

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 September 30, 2021. There were six troubled debt restructured loans belonging to two borrower relationships totaling $17.6 million at September 30, 2021, compared to $17.8 million troubled debt restructured loans comprised of the same six loans to the two borrower relationships reported at June 30, 2021, and no troubled debt restructured loans at September 30, 2020.

At September 30, 2021, there were no COVID-19 loan modifications remaining within their modification period and no loans were in-process for potential modification. At June 30, 2021, there was one residential loan for $819,000 classified as a COVID-19 modification under Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and no loans were in-process for potential modification.

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Asset quality

Nonperforming loans

$

35,090

$

34,387

$

27,214

Other real estate owned

334

Nonperforming assets

$

35,090

$

34,387

$

27,548

Total classified assets (1)

$

124,506

$

131,350

$

137,042

Allowance for credit losses

211,481

232,774

282,503

Allowance for credit losses as a percent of total nonperforming loans

603

%

677

%

1,038

%

Nonperforming loans as a percent of loans held for investment

0.25

0.25

0.20

Nonperforming assets as a percent of total assets

0.17

0.17

0.14

Classified loans to total loans held for investment

0.89

0.97

1.02

Classified assets to total assets

0.59

0.64

0.69

Net loan charge-offs for the quarter ended

$

1,750

$

1,094

$

4,470

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

0.01

%

0.01

%

0.03

%

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

1.51

1.71

2.10

Loans modified under the CARES Act

$

$

819

$

118,298

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

%

0.01

%

0.88

%

Delinquent loans

30 - 59 days

$

728

$

207

$

7,084

60 - 89 days

936

83

1,086

90+ days

18,514

19,045

21,206

Total delinquency

$

20,178

$

19,335

$

29,376

Delinquency as a percentage of loans held for investment

0.14

%

0.14

%

0.22

%

______________________________

(1) Includes substandard loans and other real estate owned.

(2) At September 30, 2021, 40% of loans held for investment include a fair value net discount of $85.0 million, or 0.60% of loans held for investment. 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 September 30, 2020, 58% of loans held for investment include a fair value net discount of $126.3 million, or 0.93% of loans held for investment.

Investment Securities

During the third quarter of 2021, the Company transferred $157.6 million of municipal bonds from available-for-sale to held-to-maturity at fair value. At September 30, 2021, investment securities available-for-sale were $4.71 billion and investment securities held-to-maturity were $170.6 million. In total, investment securities were $4.88 billion at September 30, 2021, an increase of $374.0 million from June 30, 2021, and an increase of $1.25 billion from September 30, 2020. The increase in the third quarter of 2021 compared to the prior quarter was primarily the result of $735.3 million in purchases, partially offset by $161.6 million in sales and $167.3 million in principal payments, amortization, and redemptions, a $32.4 million decrease in mark-to-market fair value adjustment, and an $11,000 ACL on held-to-maturity securities. The Company’s assessment of available-for-sale investment securities indicated that no ACL was required as of September 30, 2021.

The increase in investment securities from September 30, 2020 was primarily the result of $2.72 billion in purchases, partially offset by $819.7 million in sales, $586.3 million in principal payments, amortization, and redemptions, a $59.3 million decrease in mark-to-market fair value adjustment, and an $11,000 ACL on held-to-maturity securities.

Deposits

At September 30, 2021, deposits totaled $17.47 billion, an increase of $454.9 million, or 2.7%, from June 30, 2021, and an increase of $1.14 billion, or 7.0%, from September 30, 2020. At September 30, 2021, non-maturity deposits totaled $16.36 billion, or 93.6% of total deposits, an increase of $601.5 million, or 3.8%, from June 30, 2021, and an increase of $1.74 billion, or 11.9%, from September 30, 2020. During the third quarter of 2021, deposit increases included $374.6 million in interest-bearing checking deposits, $153.9 million in money market and savings deposits, and $73.1 million in noninterest-bearing deposits, primarily driven by an increase in business deposit account balances, partially offset by a decrease of $146.6 million in retail certificates of deposits, as compared to the second quarter of 2021.

The weighted average cost of deposits for the third quarter of 2021 was 0.06%, compared to 0.08% for the second quarter of 2021, and 0.20% for the third quarter of 2020, including the favorable impact of the acquired certificates of deposit mark-to-market amortization of 0.01%, 0.02%, and 0.07%, respectively. The decrease in the weighted average cost of deposits in the third quarter of 2021 compared to the prior quarters was driven by lower pricing as well as deposit mix.

The end of period weighted average rate of deposits at September 30, 2021 was 0.04%.

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Deposit accounts

Noninterest-bearing checking

$

6,841,495

$

6,768,384

$

5,895,744

Interest-bearing:

Checking

3,477,902

3,103,343

2,937,910

Money market/savings

6,037,532

5,883,672

5,778,688

Retail certificates of deposit

1,113,070

1,259,698

1,542,029

Wholesale/brokered certificates of deposit

176,436

Total interest-bearing

10,628,504

10,246,713

10,435,063

Total deposits

$

17,469,999

$

17,015,097

$

16,330,807

Cost of deposits

0.06

%

0.08

%

0.20

%

Noninterest-bearing deposits as a percentage of total deposits

39.2

39.8

36.1

Non-maturity deposits as a percent of total deposits

93.6

92.6

89.5

Core deposits as a percent of total deposits (1)

97.0

96.5

96.0

______________________________

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

Borrowings

At September 30, 2021, total borrowings amounted to $480.4 million, an increase of $3.8 million from June 30, 2021, and a decrease of $62.0 million from September 30, 2020. Total borrowings at September 30, 2021 were comprised of $150.0 of Federal Home Loan Bank of San Francisco (“FHLB”) advances and $330.4 million of subordinated debt. The increase in borrowings at September 30, 2021 as compared to June 30, 2021 was primarily due to an increase of $150.0 million in FHLB advances, offset by redemptions of $135.0 million in subordinated notes and $10.4 million in junior subordinated debt securities with an aggregate net book value totaling $146.4 million. The decrease in borrowings at September 30, 2021 as compared to September 30, 2020 was primarily due to the redemption of $160.0 million in subordinated notes and $10.4 million junior subordinated debt securities, offset by an increase of $109.0 million in FHLB advances.

Capital Ratios

At September 30, 2021, our common stockholder's equity was $2.84 billion, or 13.51% of total assets, compared with $2.81 billion, or 13.70%, at June 30, 2021, and $2.69 billion, or 13.55%, at September 30, 2020, with a book value per share of $30.08, compared with $29.72 at June 30, 2021, and $28.48 at September 30, 2020. At September 30, 2021, our ratio of tangible common equity to total assets was 9.30%, compared with 9.38% at June 30, 2021, and 9.01% at September 30, 2020, with a tangible book value per share of $19.75, compared with $19.38 at June 30, 2021, and $18.01 at September 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 September 30, 2021, the Company had a tier 1 leverage ratio of 9.85%, common equity tier 1 capital ratio of 11.96%, tier 1 capital ratio of 11.96%, and total capital ratio of 14.56%. At September 30, 2021, the Bank had a tier 1 leverage ratio of 11.38%, common equity tier 1 capital ratio of 13.81%, tier 1 capital ratio of 13.81%, and total capital ratio of 14.61%. The decrease in total capital ratio from prior quarters was primarily driven by the redemptions of subordinated debentures during the current quarter.

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.

September 30,

June 30,

September 30,

Capital ratios

2021

2021

2020

Pacific Premier Bancorp, Inc. Consolidated

Tier 1 leverage ratio

9.85

%

9.83

%

9.09

%

Common equity tier 1 risk-based capital ratio

11.96

11.89

11.79

Tier 1 capital ratio

11.96

11.89

11.79

Total capital ratio

14.56

15.61

16.11

Tangible common equity ratio (1)

9.30

9.38

9.01

Pacific Premier Bank

Tier 1 leverage ratio

11.38

%

11.31

%

10.33

%

Common equity tier 1 risk-based capital ratio

13.81

13.67

13.40

Tier 1 capital ratio

13.81

13.67

13.40

Total capital ratio

14.61

15.44

15.48

Share data

Book value per share

$

30.08

$

29.72

$

28.48

Tangible book value per share (1)

19.75

19.38

18.01

Common equity dividends declared per share

0.33

0.33

0.25

Closing stock price (2)

41.44

42.29

20.14

Shares issued and outstanding

94,354,211

94,656,575

94,375,521

Market capitalization (2)(3)

$

3,910,039

$

4,003,027

$

1,900,723

______________________________

(1) A reconciliation of the non-GAAP measures of tangible common equity and tangible book value per share to the GAAP measures of common stockholders' equity and book value per share, 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 October 19, 2021, the Company's Board of Directors declared a $0.33 per share dividend, payable on November 12, 2021 to stockholders of record as of November 1, 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 third quarter of 2021, the Company repurchased 280,270 shares of common stock at an average price of $39.82 per share with a total market value of $11.2 million under this program.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 21, 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 October 28, 2021 at (877) 344-7529, conference ID 10160294.

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 $21 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 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.

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)

2021

2021

2020

2020

2020

ASSETS

Cash and cash equivalents

$

322,320

$

631,888

$

1,554,668

$

880,766

$

1,103,077

Interest-bearing time deposits with financial institutions

2,708

2,708

2,708

2,845

2,845

Investments held-to-maturity, at amortized cost, net of allowance for credit losses

170,576

18,933

21,931

23,732

27,980

Investment securities available-for-sale, at fair value

4,709,815

4,487,447

3,857,337

3,931,115

3,600,731

FHLB, FRB, and other stock, at cost

118,399

117,738

117,843

117,055

116,819

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

8,100

4,714

7,311

601

1,032

Loans held for investment

13,982,861

13,594,598

13,117,392

13,236,433

13,450,840

Allowance for credit losses

(211,481)

(232,774)

(266,999)

(268,018)

(282,503)

Loans held for investment, net

13,771,380

13,361,824

12,850,393

12,968,415

13,168,337

Accrued interest receivable

63,228

67,529

65,098

74,574

73,112

Other real estate owned

334

Premises and equipment

72,850

73,821

76,329

78,884

80,326

Deferred income taxes, net

83,432

81,741

104,450

89,056

108,050

Bank owned life insurance

447,135

444,645

292,932

292,564

290,875

Intangible assets

73,451

77,363

81,364

85,507

90,012

Goodwill

901,312

901,312

900,204

898,569

898,434

Other assets

260,505

257,823

240,730

292,861

282,276

Total assets

$

21,005,211

$

20,529,486

$

20,173,298

$

19,736,544

$

19,844,240

LIABILITIES

Deposit accounts:

Noninterest-bearing checking

$

6,841,495

$

6,768,384

$

6,302,703

$

6,011,106

$

5,895,744

Interest-bearing:

Checking

3,477,902

3,103,343

3,155,071

2,913,260

2,937,910

Money market/savings

6,037,532

5,883,672

5,911,417

5,662,969

5,778,688

Retail certificates of deposit

1,113,070

1,259,698

1,353,431

1,471,512

1,542,029

Wholesale/brokered certificates of deposit

17,385

155,330

176,436

Total interest-bearing

10,628,504

10,246,713

10,437,304

10,203,071

10,435,063

Total deposits

17,469,999

17,015,097

16,740,007

16,214,177

16,330,807

FHLB advances and other borrowings

150,000

10,000

31,000

41,000

Subordinated debentures

330,408

476,622

501,611

501,511

501,443

Accrued expenses and other liabilities

216,688

224,348

218,582

243,207

282,905

Total liabilities

18,167,095

17,716,067

17,470,200

16,989,895

17,156,155

STOCKHOLDERS’ EQUITY

Common stock

929

931

931

931

930

Additional paid-in capital

2,347,626

2,352,112

2,348,445

2,354,871

2,351,532

Retained earnings

488,385

433,852

368,911

330,555

289,960

Accumulated other comprehensive income (loss)

1,176

26,524

(15,189)

60,292

45,663

Total stockholders' equity

2,838,116

2,813,419

2,703,098

2,746,649

2,688,085

Total liabilities and stockholders' equity

$

21,005,211

$

20,529,486

$

20,173,298

$

19,736,544

$

19,844,240

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

(Dollars in thousands, except per share data)

2021

2021

2020

2021

2020

INTEREST INCOME

Loans

$

157,025

$

152,365

$

167,455

$

464,615

$

414,059

Investment securities and other interest-earning assets

19,022

18,327

14,536

55,118

35,843

Total interest income

176,047

170,692

181,991

519,733

449,902

INTEREST EXPENSE

Deposits

2,432

3,265

8,509

10,123

28,651

FHLB advances and other borrowings

1

113

66

1,411

Subordinated debentures

4,545

6,493

6,823

17,889

13,827

Total interest expense

6,978

9,758

15,445

28,078

43,889

Net interest income before provision for credit losses

169,069

160,934

166,546

491,655

406,013

Provision for credit losses

(19,726)

(38,476)

4,210

(56,228)

190,299

Net interest income after provision for credit losses

188,795

199,410

162,336

547,883

215,714

NONINTEREST INCOME

Loan servicing income

536

622

481

1,616

1,395

Service charges on deposit accounts

2,375

2,222

1,593

6,629

4,707

Other service fee income

350

352

487

1,175

1,095

Debit card interchange fee income

834

1,099

944

2,720

1,749

Earnings on BOLI

3,266

2,279

2,270

7,778

4,920

Net gain from sales of loans

1,187

1,546

9,542

3,094

8,281

Net gain from sales of investment securities

4,190

5,085

1,141

13,321

8,880

Trust custodial account fees

11,446

7,897

6,960

26,565

9,357

Escrow and exchange fees

1,867

1,672

1,142

5,065

1,407

Other income

4,049

3,955

2,198

12,606

6,340

Total noninterest income

30,100

26,729

26,758

80,569

48,131

NONINTEREST EXPENSE

Compensation and benefits

53,592

53,474

51,021

159,614

128,408

Premises and occupancy

12,611

12,240

12,373

36,831

30,028

Data processing

6,296

5,765

6,783

17,889

14,501

Other real estate owned operations, net

(17)

6

FDIC insurance premiums

1,392

1,312

1,145

3,885

2,358

Legal and professional services

4,563

4,186

5,108

12,684

11,328

Marketing expense

2,008

1,490

1,718

5,096

4,449

Office expense

1,076

1,589

2,389

4,494

5,025

Loan expense

1,332

1,165

802

3,612

2,447

Deposit expense

3,974

3,985

4,728

11,818

14,674

Merger-related expense

2,988

5

44,058

Amortization of intangible assets

3,912

4,001

4,538

12,056

12,567

Other expense

5,284

5,289

5,003

15,041

11,331

Total noninterest expense

96,040

94,496

98,579

283,025

281,180

Net income (loss) before income taxes

122,855

131,643

90,515

345,427

(17,335)

Income tax expense (benefit)

32,767

35,341

23,949

90,369

(10,550)

Net income (loss)

$

90,088

$

96,302

$

66,566

$

255,058

$

(6,785)

EARNINGS (LOSS) PER SHARE

Basic

$

0.95

$

1.02

$

0.71

$

2.70

$

(0.10)

Diluted

$

0.95

$

1.01

$

0.70

$

2.68

$

(0.10)

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic

93,549,639

93,635,392

93,529,967

93,571,468

74,391,688

Diluted

94,060,724

94,218,028

93,719,167

94,090,407

74,391,688

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

(Unaudited)

Three Months Ended

September 30, 2021

June 30, 2021

September 30, 2020

(Dollars in thousands)

Average Balance

Interest Income/Expense

Average Yield/Cost

Average Balance

Interest Income/Expense

Average Yield/Cost

Average Balance

Interest Income/Expense

Average Yield/Cost

Assets

Interest-earning assets:

Cash and cash equivalents

$

663,076

$

195

0.12

%

$

1,323,186

$

315

0.10

%

$

1,388,897

$

305

0.09

%

Investment securities

4,807,854

18,827

1.57

4,243,644

18,012

1.70

3,283,840

14,231

1.73

Loans receivable, net (1)(2)

13,660,242

157,025

4.56

13,216,973

152,365

4.62

14,034,868

167,455

4.75

Total interest-earning assets

19,131,172

176,047

3.65

18,783,803

170,692

3.64

18,707,605

181,991

3.87

Noninterest-earning assets

1,673,731

1,506,612

1,659,156

Total assets

$

20,804,903

$

20,290,415

$

20,366,761

Liabilities and equity

Interest-bearing deposits:

Interest checking

$

3,383,219

$

290

0.03

%

$

3,155,935

$

336

0.04

%

$

3,001,738

$

1,191

0.16

%

Money market

5,554,881

1,309

0.09

5,558,790

2,002

0.14

5,490,541

4,855

0.35

Savings

401,804

58

0.06

384,376

84

0.09

357,768

109

0.12

Retail certificates of deposit

1,196,187

775

0.26

1,294,544

839

0.26

1,587,712

1,857

0.47

Wholesale/brokered certificates of deposit

1,357

4

1.18

265,672

497

0.74

Total interest-bearing deposits

10,536,091

2,432

0.09

10,395,002

3,265

0.13

10,703,431

8,509

0.32

FHLB advances and other borrowings

1,670

1

0.24

6,303

41,041

113

1.10

Subordinated debentures

330,575

4,545

5.50

480,415

6,493

5.41

501,396

6,823

5.44

Total borrowings

332,245

4,546

5.43

486,718

6,493

5.35

542,437

6,936

5.09

Total interest-bearing liabilities

10,868,336

6,978

0.25

10,881,720

9,758

0.36

11,245,868

15,445

0.55

Noninterest-bearing deposits

6,809,211

6,341,063

5,877,619

Other liabilities

282,556

320,324

553,407

Total liabilities

17,960,103

17,543,107

17,676,894

Stockholders' equity

2,844,800

2,747,308

2,689,867

Total liabilities and equity

$

20,804,903

$

20,290,415

$

20,366,761

Net interest income

$

169,069

$

160,934

$

166,546

Net interest margin (3)

3.51

%

3.44

%

3.54

%

Cost of deposits (4)

0.06

0.08

0.20

Cost of funds (5)

0.16

0.23

0.36

Ratio of interest-earning assets to interest-bearing liabilities

176.03

172.62

166.35

______________________________

(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 $9.4 million, $9.5 million, and $12.2 million, 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.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

LOAN PORTFOLIO COMPOSITION

(Unaudited)

September

June 30,

March 31,

December 31,

September 30,

(Dollars in thousands)

2021

2021

2021

2020

2020

Investor loans secured by real estate

CRE non-owner-occupied

$

2,823,065

$

2,810,233

$

2,729,785

$

2,675,085

$

2,707,930

Multifamily

5,705,666

5,539,464

5,309,592

5,171,356

5,142,069

Construction and land

292,815

297,728

316,458

321,993

337,872

SBA secured by real estate (1)

49,446

53,003

56,381

57,331

57,610

Total investor loans secured by real estate

8,870,992

8,700,428

8,412,216

8,225,765

8,245,481

Business loans secured by real estate (2)

CRE owner-occupied

2,242,164

2,089,300

2,029,984

2,114,050

2,119,788

Franchise real estate secured

354,481

358,120

340,805

347,932

359,329

SBA secured by real estate (3)

69,937

72,923

73,967

79,595

84,126

Total business loans secured by real estate

2,666,582

2,520,343

2,444,756

2,541,577

2,563,243

Commercial loans (4)

Commercial and industrial

1,888,870

1,795,144

1,656,098

1,768,834

1,820,995

Franchise non-real estate secured

392,950

401,315

399,041

444,797

515,980

SBA non-real estate secured

12,732

13,900

14,908

15,957

16,748

Total commercial loans

2,294,552

2,210,359

2,070,047

2,229,588

2,353,723

Retail loans

Single family residential (5)

144,309

157,228

184,049

232,574

243,359

Consumer

6,426

6,240

6,324

6,929

45,034

Total retail loans

150,735

163,468

190,373

239,503

288,393

Gross loans held for investment (6)

13,982,861

13,594,598

13,117,392

13,236,433

13,450,840

Allowance for credit losses for loans held for investment

(211,481)

(232,774)

(266,999)

(268,018)

(282,503)

Loans held for investment, net

$

13,771,380

$

13,361,824

$

12,850,393

$

12,968,415

$

13,168,337

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

$

8,100

$

4,714

$

7,311

$

601

$

1,032

______________________________

(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 $85.0 million, $94.4 million, $103.9 million, $113.8 million, and $126.3 million as of September 30, 2021, June 30, 2021, March 31, 2021, December 31,2020, and September 30, 2020, respectively.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

ASSET QUALITY INFORMATION

(Unaudited)

September 30,

June 30,

March 31,

December 31,

September 30,

(Dollars in thousands)

2021

2021

2021

2020

2020

Asset quality

Nonperforming loans

$

35,090

$

34,387

$

38,909

$

29,209

$

27,214

Other real estate owned

334

Nonperforming assets

$

35,090

$

34,387

$

38,909

$

29,209

$

27,548

Total classified assets (1)

$

124,506

$

131,350

$

134,667

$

128,332

$

137,042

Allowance for credit losses

211,481

232,774

266,999

268,018

282,503

Allowance for credit losses as a percent of total nonperforming loans

603

%

677

%

686

%

918

%

1,038

%

Nonperforming loans as a percent of loans held for investment

0.25

0.25

0.30

0.22

0.20

Nonperforming assets as a percent of total assets

0.17

0.17

0.19

0.15

0.14

Classified loans to total loans held for investment

0.89

0.97

1.03

0.97

1.02

Classified assets to total assets

0.59

0.64

0.67

0.65

0.69

Net loan charge-offs for the quarter ended

$

1,750

$

1,094

$

1,334

$

6,406

$

4,470

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

0.01

%

0.01

%

0.01

%

0.05

%

0.03

%

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

1.51

1.71

2.04

2.02

2.10

Loans modified under the CARES Act

$

$

819

$

$

79,465

$

118,298

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

%

0.01

%

%

0.60

%

0.88

%

Delinquent loans

30 - 59 days

$

728

$

207

$

13,116

$

1,269

$

7,084

60 - 89 days

936

83

61

57

1,086

90+ days

18,514

19,045

9,410

11,996

21,206

Total delinquency

$

20,178

$

19,335

$

22,587

$

13,322

$

29,376

Delinquency as a percent of loans held for investment

0.14

%

0.14

%

0.17

%

0.10

%

0.22

%

______________________________

(1) Includes substandard loans and other real estate owned.

(2) At September 30, 2021, 40% of loans held for investment include a fair value net discount of $85.0 million, or 0.60% of loans held for investment. 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 September 30, 2020, 58% of loans held for investment include a fair value net discount of $126.3 million, or 0.93% of loans held for investment.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

NONACCRUAL LOANS (1)

(Unaudited)

(Dollars in thousands)

Collateral Dependent Loans

ACL

Non-Collateral Dependent Loans

ACL

Total Nonaccrual Loans

Nonaccrual Loans With No ACL

September 30, 2021

Investor loans secured by real estate

CRE non-owner-occupied

$

12,179

$

571

$

$

$

12,179

$

4,563

SBA secured by real estate (2)

976

976

976

Total investor loans secured by real estate

13,155

571

13,155

5,539

Business loans secured by real estate (3)

CRE owner-occupied

4,978

4,978

4,978

SBA secured by real estate (4)

604

604

604

Total business loans secured by real estate

5,582

5,582

5,582

Commercial loans (5)

Commercial and industrial

1,816

443

2,259

2,259

Franchise non-real estate secured

1,086

12,333

13,419

13,419

SBA not secured by real estate

664

664

664

Total commercial loans

3,566

12,776

16,342

16,342

Retail loans

Single family residential (6)

11

11

11

Total retail loans

11

11

11

Totals nonaccrual loans

$

22,314

$

571

$

12,776

$

$

35,090

$

27,474

______________________________

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

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

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

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

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

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

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

PAST DUE STATUS

(Unaudited)

Days Past Due

(Dollars in thousands)

Current

30-59

60-89

90+

Total

September 30, 2021

Investor loans secured by real estate

CRE non-owner-occupied

$

2,812,797

$

$

$

10,268

$

2,823,065

Multifamily

5,705,666

5,705,666

Construction and land

292,815

292,815

SBA secured by real estate (1)

48,470

629

347

49,446

Total investor loans secured by real estate

8,859,748

629

10,615

8,870,992

Business loans secured by real estate (2)

CRE owner-occupied

2,237,186

4,978

2,242,164

Franchise real estate secured

354,481

354,481

SBA secured by real estate (3)

69,496

441

69,937

Total business loans secured by real estate

2,661,163

5,419

2,666,582

Commercial loans (4)

Commercial and industrial

1,886,386

654

14

1,816

1,888,870

Franchise non-real estate secured

392,950

392,950

SBA not secured by real estate

11,701

74

293

664

12,732

Total commercial loans

2,291,037

728

307

2,480

2,294,552

Retail loans

Single family residential (5)

144,309

144,309

Consumer loans

6,426

6,426

Total retail loans

150,735

150,735

Total loans

$

13,962,683

$

728

$

936

$

18,514

$

13,982,861

______________________________

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

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

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

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

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

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CREDIT RISK GRADES

(Unaudited)

(Dollars in thousands)

Pass

Special

Mention

Substandard

Total Gross

Loans

September 30, 2021

Investor loans secured by real estate

CRE non-owner-occupied

$

2,773,609

$

18,206

$

31,250

$

2,823,065

Multifamily

5,703,795

1,871

5,705,666

Construction and land

292,815

292,815

SBA secured by real estate (1)

39,502

1,510

8,434

49,446

Total investor loans secured by real estate

8,809,721

19,716

41,555

8,870,992

Business loans secured by real estate (2)

CRE owner-occupied

2,219,546

7,819

14,799

2,242,164

Franchise real estate secured

354,481

354,481

SBA secured by real estate (3)

61,960

212

7,765

69,937

Total business loans secured by real estate

2,635,987

8,031

22,564

2,666,582

Commercial loans (4)

Commercial and industrial

1,838,441

14,818

35,611

1,888,870

Franchise non-real estate secured

370,211

22,739

392,950

SBA not secured by real estate

9,973

815

1,944

12,732

Total commercial loans

2,218,625

15,633

60,294

2,294,552

Retail loans

Single family residential (5)

144,258

51

144,309

Consumer loans

6,384

42

6,426

Total retail loans

150,642

93

150,735

Total loans

$

13,814,975

$

43,380

$

124,506

$

13,982,861

______________________________

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

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

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

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

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

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

GAAP 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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Net income

$

90,088

$

96,302

$

66,566

Plus: amortization of intangible assets expense

3,912

4,001

4,538

Less: amortization of intangible assets expense tax adjustment (1)

1,119

1,145

1,301

Net income for average tangible common equity

92,881

99,158

69,803

Plus: merger-related expense

2,988

Less: merger-related expense tax adjustment (1)

857

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

$

92,881

$

99,158

$

71,934

Average stockholders' equity

$

2,844,800

$

2,747,308

$

2,689,867

Less: average intangible assets

75,795

79,784

92,768

Less: average goodwill

901,312

900,582

898,430

Average tangible common equity

$

1,867,693

$

1,766,942

$

1,698,669

Return on average equity (annualized)

12.67

%

14.02

%

9.90

%

Return on average tangible common equity (annualized)

19.89

%

22.45

%

16.44

%

Return on average tangible common equity excluding merger-related expense (annualized)

19.89

%

22.45

%

16.94

%

___________________________________________________

(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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Net income

$

90,088

$

96,302

$

66,566

Plus: merger-related expense

2,988

Less: merger-related expense tax adjustment (1)

857

Net income for average assets excluding merger-related expense

$

90,088

$

96,302

$

68,697

Average assets

$

20,804,903

$

20,290,415

$

20,366,761

Return on average assets (annualized)

1.73

%

1.90

%

1.31

%

Return on average assets excluding merger-related expense (annualized)

1.73

%

1.90

%

1.35

%

____________________________________________

(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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Interest income

$

176,047

$

170,692

$

181,991

Interest expense

6,978

9,758

15,445

Net interest income

169,069

160,934

166,546

Noninterest income

30,100

26,729

26,758

Revenue

199,169

187,663

193,304

Noninterest expense

96,040

94,496

98,579

Add: merger-related expense

2,988

Pre-provision net revenue

103,129

93,167

97,713

Pre-provision net revenue (annualized)

$

412,516

$

372,668

$

390,852

Average assets

$

20,804,903

$

20,290,415

$

20,366,761

Pre-provision net revenue on average assets

0.50

%

0.46

%

0.48

%

Pre-provision net revenue on average assets (annualized)

1.98

%

1.84

%

1.92

%

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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Noninterest expense

$

96,040

$

94,496

$

98,579

Less: merger-related expense

2,988

Noninterest expense excluding merger-related expense

$

96,040

$

94,496

$

95,591

Average assets

$

20,804,903

$

20,290,415

$

20,366,761

Noninterest expense as a percent of average assets (annualized)

1.85

%

1.86

%

1.94

%

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

1.85

%

1.86

%

1.88

%

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)

2021

2021

2021

2020

2020

Total stockholders' equity

$

2,838,116

$

2,813,419

$

2,703,098

$

2,746,649

$

2,688,085

Less: intangible assets

974,763

978,675

981,568

984,076

988,446

Tangible common equity

$

1,863,353

$

1,834,744

$

1,721,530

$

1,762,573

$

1,699,639

Total assets

$

21,005,211

$

20,529,486

$

20,173,298

$

19,736,544

$

19,844,240

Less: intangible assets

974,763

978,675

981,568

984,076

988,446

Tangible assets

$

20,030,448

$

19,550,811

$

19,191,730

$

18,752,468

$

18,855,794

Tangible common equity ratio

9.30

%

9.38

%

8.97

%

9.40

%

9.01

%

Common shares issued and outstanding

94,354,211

94,656,575

94,644,415

94,483,136

94,375,521

Book value per share

$

30.08

$

29.72

$

28.56

$

29.07

$

28.48

Less: intangible book value per share

10.33

10.34

10.37

10.42

10.47

Tangible book value per share

$

19.75

$

19.38

$

18.19

$

18.65

$

18.01

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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Net interest income

$

169,069

$

160,934

$

166,546

Less: scheduled accretion income

3,339

3,560

6,858

Less: accelerated accretion income

6,107

5,927

5,338

Less: premium amortization on CD

390

942

2,968

Less: nonrecurring nonaccrual interest paid

(74)

(216)

(275)

Core net interest income

159,307

150,721

151,657

Less: interest income on SBA PPP loans

838

Core net interest income excluding SBA PPP loans

$

159,307

$

150,721

$

150,819

Average interest-earning assets

$

19,131,172

$

18,783,803

$

18,707,605

Less: average SBA PPP loans

329,396

Average interest-earning assets excluding SBA PPP loans

$

19,131,172

$

18,783,803

$

18,378,209

Net interest margin

3.51

%

3.44

%

3.54

%

Core net interest margin

3.30

%

3.22

%

3.23

%

Core net interest margin excluding SBA PPP loans

3.30

%

3.22

%

3.26

%

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

September 30,

June 30,

September 30,

(Dollars in thousands)

2021

2021

2020

Total noninterest expense

$

96,040

$

94,496

$

98,579

Less: amortization of intangible assets

3,912

4,001

4,538

Less: merger-related expense

2,988

Less: other real estate owned operations, net

(17)

Noninterest expense, adjusted

$

92,128

$

90,495

$

91,070

Net interest income before provision for credit losses

$

169,069

$

160,934

$

166,546

Add: total noninterest income

30,100

26,729

26,758

Less: net gain from investment securities

4,190

5,085

1,141

Less: other income - security recoveries

1

6

1

Less: net gain from other real estate owned

13

Less: net gain (loss) from debt extinguishment

970

(647)

Revenue, adjusted

$

194,008

$

183,219

$

192,149

Efficiency ratio

47.5

%

49.4

%

47.4

%


Contacts:

Pacific Premier Bancorp, Inc.

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