EX-99.1 2 ppbi_exx991xearnings-2022x.htm EX-99.1 Document

Exhibit 99.1

Pacific Premier Bancorp, Inc. Announces Second Quarter 2022 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share

Second Quarter 2022 Summary
 
•Net income of $69.8 million, or $0.73 per diluted share
•Return on average assets of 1.29%, return on average equity of 10.10%, and return on average tangible common equity of 16.07%(1)
•Pre-provision net revenue (“PPNR”) to average assets of 1.77%, annualized, and efficiency ratio of 49.0%(1)
•Diversified loan growth of $356.3 million, or 9.7% annualized(2)
•Net interest margin of 3.49%, and core net interest margin of 3.33%(1)
•Cost of deposits of 0.06%, and cost of core deposits of 0.04%(1)
•Noninterest-bearing deposits represent 38.3% of total deposits
•Nonperforming assets to total assets of 0.20%, and classified assets to total assets of 0.48%

Irvine, Calif., July 21, 2022 -- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $69.8 million, or $0.73 per diluted share, for the second quarter of 2022, compared with net income of $66.9 million, or $0.70 per diluted share, for the first quarter of 2022, and net income of $96.3 million, or $1.01 per diluted share, for the second quarter of 2021.
    
For the quarter ended June 30, 2022, the Company’s return on average assets (“ROAA”) was 1.29%, return on average equity (“ROAE”) was 10.10%, and return on average tangible common equity (“ROATCE”)(1) was 16.07%, compared to 1.28%, 9.34%, and 14.66%, respectively, for the first quarter of 2022, and 1.90%, 14.02%, and 22.45%, respectively, for the second quarter of 2021. Total assets increased to $21.99 billion at June 30, 2022, compared to $21.62 billion at March 31, 2022, and $20.53 billion at June 30, 2021.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, “We continued to deliver a high level of performance in the second quarter, while maintaining our conservative approach to managing credit, capital, and liquidity. Our disciplined approach has enabled us to generate higher earnings and returns compared to the prior quarter, despite a challenging operating environment.”

“The second quarter results reflect the strength and durability of our diversified business model resulting in a significant increase in revenue along with tightly controlled operating expenses. We were able to leverage our business development capabilities and deep client relationships to generate $1.5 billion in new loan commitments, which resulted in nearly 10% annualized loan growth. These results also reflect our ability to increase pricing and maintain underwriting discipline on new loan production while our cost of core deposits(1) remained low at 4 basis points.”

“We believe the strength of the franchise we have built, on a foundation of a low-cost, stable deposit base consisting of long-term client relationships will serve us well throughout the remainder of the year and into 2023. We are well-positioned to effectively navigate through any economic environment and take advantage of the opportunities they may present to drive franchise value higher in future periods.”
(1) Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.
(2) Excludes the basis adjustment of $51.1 million to the carrying amount of certain loans included in fair value hedging relationships.
1

FINANCIAL HIGHLIGHTS
Three Months Ended
 June 30,March 31,June 30,
(Dollars in thousands, except per share data)202220222021
Financial highlights (unaudited)
Net income$69,803 $66,904 $96,302 
Diluted earnings per share0.73 0.70 1.01 
Common equity dividend per share paid0.33 0.33 0.33 
Return on average assets1.29 %1.28 %1.90 %
Return on average equity10.10 9.34 14.02 
Return on average tangible common equity (1)
16.07 14.66 22.45 
Pre-provision net revenue on average assets (1)
1.77 1.72 1.84 
Net interest margin3.49 3.41 3.44 
Core net interest margin (1)
3.33 3.33 3.22 
Cost of deposits0.06 0.04 0.08 
Cost of core deposits (1)
0.04 0.03 0.06 
Efficiency ratio (1)
49.0 50.7 49.4 
Noninterest expense as a percent of average assets1.83 %1.86 %1.86 %
Total assets$21,993,919 $21,622,296 $20,529,486 
Total deposits18,084,613 17,689,223 17,015,097 
Loan-to-deposit ratio83.2 %83.4 %79.9 %
Non-maturity deposits as a percent of total deposits92.0 94.2 92.6 
Book value per share$29.01 $29.31 $29.72 
Tangible book value per share (1)
18.86 19.12 19.38 
Total capital ratio14.41 %14.37 %15.61 %
______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.

2

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin
 
Net interest income totaled $172.8 million in the second quarter of 2022, an increase of $10.9 million, or 6.8%, from the first quarter of 2022. The increase in net interest income was primarily attributable to higher average interest-earning assets and yields, as well as higher loan-related fees and accretion income as a result of increased prepayment activity.

The net interest margin for the second quarter of 2022 was 3.49%, compared with 3.41% in the prior quarter. The core net interest margin(6), which excludes the impact of loan accretion income and other adjustments, was unchanged at 3.33%, compared to the prior quarter, reflecting a favorable remix towards higher yielding loans, higher loan-related fees, and a favorable impact from fair value hedges, partially offset by higher cost of funds.

Net interest income for the second quarter of 2022 increased $11.8 million, or 7.4%, compared to the second quarter of 2021. The increase was attributable to higher average loan balances and lower cost of funds.


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 Three Months Ended
 June 30, 2022March 31, 2022June 30, 2021
(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$702,663 $1,211 0.69 %$322,236 $90 0.11 %$1,323,186 $315 0.10 %
Investment securities4,254,961 17,560 1.65 4,546,408 17,852 1.57 4,243,644 18,012 1.70 
Loans receivable, net (1) (2)
14,919,182 164,455 4.42 14,371,588 150,604 4.25 13,216,973 152,365 4.62 
Total interest-earning assets$19,876,806 $183,226 3.70 $19,240,232 $168,546 3.55 $18,783,803 $170,692 3.64 
Liabilities
Interest-bearing deposits$10,722,522 $2,682 0.10 $10,351,434 $1,673 0.07 $10,395,002 $3,265 0.13 
Borrowings933,417 7,779 3.34 555,879 5,034 3.63 486,718 6,493 5.35 
Total interest-bearing liabilities$11,655,939 $10,461 0.36 $10,907,313 $6,707 0.25 $10,881,720 $9,758 0.36 
Noninterest-bearing deposits$7,030,205 $6,928,872 $6,341,063 
Net interest income$172,765 $161,839 $160,934 
Net interest margin (3)
  3.49 3.41 3.44 
Cost of deposits (4)
0.06 0.04 0.08 
Cost of funds (5)
0.22 0.15 0.23 
Cost of core deposits (6)
0.04 0.03 0.06 
Ratio of interest-earning assets to interest-bearing liabilities170.53 176.40 172.62 
________________________________________________________________________
(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 $7.5 million, $5.9 million, and $9.5 million, for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, 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.








3

Provision for Credit Losses

For the second quarter of 2022, the Company recorded a $469,000 provision expense, compared to a $448,000 provision expense for the first quarter of 2022, and a $38.5 million provision recapture for the second quarter of 2021. The provision expense for loan losses for the second quarter of 2022 was driven principally by loan growth and the impact of growing macroeconomic uncertainties. The current quarter's provision included a recapture for unfunded commitments largely due to changes in unfunded lending segment mix.

Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Provision for credit losses
Provision for loan losses$3,803 $211 $(33,131)
Provision for unfunded commitments(3,402)218 (5,345)
Provision for held-to-maturity securities68 19 — 
Total provision for credit losses$469 $448 $(38,476)


4

Noninterest Income
 
Noninterest income for the second quarter of 2022 was $22.2 million, a decrease of $3.7 million from the first quarter of 2022. The decrease was primarily due to a $2.2 million decrease in net gain from sales of investment securities and a $1.2 million decrease in trust custodial account fees due primarily to the timing of annual tax fees billed in the first quarter of 2022.

During the second quarter of 2022, the Bank sold $45.1 million of investment securities for a net loss of $31,000, compared to the sales of $658.5 million of investment securities for a net gain of $2.1 million in the first quarter of 2022.

Additionally, during the second quarter of 2022, the Bank sold $23.4 million of Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans for a net gain of $1.1 million, compared to the sales of $17.8 million of SBA loans for a net gain of $1.5 million in the first quarter of 2022.

Noninterest income for the second quarter of 2022 decreased $4.5 million, or 17.0%, compared to the second quarter of 2021. The decrease was primarily due to a $5.1 million decrease in net gain from sales of investment securities and a $2.8 million decrease in other income, primarily from higher CRA investment income, partially offset by a $2.5 million increase in trust custodial account fees.

Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Noninterest income
Loan servicing income$502 $419 $622 
Service charges on deposit accounts2,690 2,615 2,222 
Other service fee income366 367 352 
Debit card interchange fee income936 836 1,099 
Earnings on bank owned life insurance3,240 3,221 2,279 
Net gain from sales of loans1,136 1,494 1,546 
Net (loss) gain from sales of investment securities(31)2,134 5,085 
Trust custodial account fees
10,354 11,579 7,897 
Escrow and exchange fees1,827 1,661 1,672 
Other income1,173 1,568 3,955 
Total noninterest income$22,193 $25,894 $26,729 

5

 Noninterest Expense
 
Noninterest expense totaled $99.0 million for the second quarter of 2022, an increase of $1.3 million compared to the first quarter of 2022, primarily driven by a $608,000 increase in data processing, a $581,000 increase in compensation and benefits, and a $561,000 increase in legal and professional services, partially offset by a $750,000 decrease in other expense.

Noninterest expense increased by $4.5 million compared to the second quarter of 2021. The increase was primarily due to a $4.1 million increase in compensation and benefits.

Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Noninterest expense
Compensation and benefits$57,562 $56,981 $53,474 
Premises and occupancy11,829 11,952 12,240 
Data processing6,604 5,996 5,765 
FDIC insurance premiums1,452 1,396 1,312 
Legal and professional services4,629 4,068 4,186 
Marketing expense1,926 1,809 1,490 
Office expense1,252 1,203 1,589 
Loan expense1,144 1,134 1,165 
Deposit expense4,081 3,751 3,985 
Amortization of intangible assets3,479 3,592 4,001 
Other expense5,016 5,766 5,289 
Total noninterest expense$98,974 $97,648 $94,496 

Income Tax

For the second quarter of 2022, income tax expense totaled $25.7 million, resulting in an effective tax rate of 26.9%, compared with income tax expense of $22.7 million and an effective tax rate of 25.4% for the first quarter of 2022, and income tax expense of $35.3 million and an effective tax rate of 26.8% for the second quarter of 2021. Our estimated effective tax rate for the full year is expected to be in the range of 26% to 27%.
6

BALANCE SHEET HIGHLIGHTS
    
Loans

Loans held for investment totaled $15.05 billion at June 30, 2022, an increase of $313.9 million, or 2.1%, from March 31, 2022, and an increase of $1.45 billion, or 10.7%, from June 30, 2021. The increase from March 31, 2022 was primarily driven by loan fundings and higher commercial line utilization rates, partially offset by higher prepayments and maturities. Commercial line utilization rates increased to an average of 41.6% for the second quarter of 2022, compared to an average of 39.5% for the first quarter of 2022 and 32.0% for the second quarter of 2021.

During the second quarter of 2022, loan commitments totaled $1.50 billion and new loan fundings totaled $1.12 billion, compared with $1.46 billion in loan commitments and $1.06 billion in new loan fundings for the first quarter of 2022, and $1.58 billion in loan commitments and $1.15 billion in new loan fundings for the second quarter of 2021. The increase in new loan fundings from the prior quarter was primarily due to growth in our multifamily, commercial real estate (“CRE”) non-owner-occupied, CRE owner-occupied, and commercial and industrial (“C&I”) loan segments.
 
At June 30, 2022, the total loan-to-deposit ratio was 83.2%, compared with 83.4% and 79.9% at March 31, 2022 and June 30, 2021, 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
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Beginning gross loan balance$14,745,401 $14,306,766 $13,124,703 
New commitments1,504,186 1,461,992 1,576,884 
Unfunded new commitments(382,478)(399,235)(423,797)
Net new fundings1,121,708 1,062,757 1,153,087 
Purchased loans710 — — 
Amortization/maturities/payoffs(936,893)(786,700)(821,502)
Net draws on existing lines of credit200,255 182,868 161,273 
Loan sales(23,698)(17,991)(14,959)
Charge-offs(5,831)(2,299)(3,290)
Net increase 356,251 438,635 474,609 
Ending gross loan balance before basis adjustment$15,101,652 $14,745,401 $13,599,312 
Basis adjustment associated with fair value hedge (1)
(51,087)— — 
Ending gross loan balance $15,050,565 $14,745,401 $13,599,312 
______________________________
(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:
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Investor loans secured by real estate
CRE non-owner-occupied$2,788,715 $2,774,650 $2,810,233 
Multifamily6,188,086 6,041,085 5,539,464 
Construction and land331,734 303,811 297,728 
SBA secured by real estate (1)
44,199 42,642 53,003 
Total investor loans secured by real estate9,352,734 9,162,188 8,700,428 
Business loans secured by real estate (2)
CRE owner-occupied2,486,747 2,391,984 2,089,300 
Franchise real estate secured387,683 384,267 358,120 
SBA secured by real estate (3)
67,191 68,466 72,923 
Total business loans secured by real estate2,941,621 2,844,717 2,520,343 
Commercial loans (4)
Commercial and industrial2,295,421 2,242,632 1,795,144 
Franchise non-real estate secured415,830 388,322 401,315 
SBA non-real estate secured11,008 10,761 13,900 
Total commercial loans2,722,259 2,641,715 2,210,359 
Retail loans
Single family residential (5)
77,951 79,978 157,228 
Consumer4,130 5,157 6,240 
Total retail loans82,081 85,135 163,468 
Loans held for investment before basis adjustment (6)
15,098,695 14,733,755 13,594,598 
Basis adjustment associated with fair value hedge (7)
(51,087)— — 
Loans held for investment15,047,608 14,733,755 13,594,598 
Allowance for credit losses for loans held for investment(196,075)(197,517)(232,774)
Loans held for investment, net$14,851,533 $14,536,238 $13,361,824 
Total unfunded loan commitments$2,872,934 $2,940,370 $2,345,364 
Loans held for sale, at lower of cost or fair value$2,957 $11,646 $4,714 
__________________________________________________
(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 $63.6 million, $71.2 million, and $94.4 million as of June 30, 2022, March 31, 2022, and June 30, 2021, 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 June 30, 2022 was 4.06%, compared to 3.92% at March 31, 2022, and 4.11% at June 30, 2021. The quarter-over-quarter increase reflects higher rates on new originations and the repricing of loans as a result of the Federal Reserve Bank's interest rate increases since March 2022. The year-over-year decrease reflects the continued impact from the prepayments of higher rate loans.

8

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

Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Investor loans secured by real estate
CRE non-owner-occupied$195,896 $153,845 $181,995 
Multifamily540,263 454,652 631,360 
Construction and land192,852 213,206 148,422 
SBA secured by real estate (1)
4,698 7,775 — 
Total investor loans secured by real estate933,709 829,478 961,777 
Business loans secured by real estate (2)
CRE owner-occupied220,936 246,405 181,385 
Franchise real estate secured17,500 21,060 39,320 
SBA secured by real estate (3)
7,033 9,378 13,445 
Total business loans secured by real estate245,469 276,843 234,150 
Commercial loans (4)
Commercial and industrial255,922 317,728 316,162 
Franchise non-real estate secured49,604 28,090 41,501 
SBA non-real estate secured6,419 3,543 1,000 
Total commercial loans311,945 349,361 358,663 
Retail loans
Single family residential (5)
13,063 6,310 14,744 
Consumer— — 7,550 
Total retail loans13,063 6,310 22,294 
Total loan commitments$1,504,186 $1,461,992 $1,576,884 
_____________________________________________________
(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 4.11% in the second quarter of 2022, compared to 3.55% in the first quarter of 2022, and 3.59% in the second quarter of 2021.

Asset Quality and Allowance for Credit Losses
 
At June 30, 2022, our allowance for credit losses (“ACL”) on loans held for investment was $196.1 million, a decrease of $1.4 million from March 31, 2022, and a decrease of $36.7 million from June 30, 2021. The ACL as of June 30, 2022 was reflective of the improvement in asset quality, offset by higher loans held for investment as well as the impact of growing macroeconomic uncertainties. The decrease in ACL from June 30, 2021 was primarily due to favorable changes in the macroeconomic forecasts related to the COVID-19 pandemic.

During the second quarter of 2022, the Company incurred $5.2 million of net charge-offs, largely attributable to one C&I lending relationship, compared to $446,000 of net charge-offs during the first quarter of 2022 and $1.1 million of net charge-offs during the second quarter of 2021.

9

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

Three Months Ended June 30, 2022
(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$35,974 $— $— $1,247 $37,221 
Multifamily54,325 — — 1,968 56,293 
Construction and land5,219 — — 217 5,436 
SBA secured by real estate (1)
3,050 — — (185)2,865 
Business loans secured by real estate (2)
CRE owner-occupied31,891 — 4 (434)31,461 
Franchise real estate secured7,977 — — (1,447)6,530 
SBA secured by real estate (3)
5,195 — — (46)5,149 
Commercial loans (4)
Commercial and industrial38,598 (5,381)533 3,298 37,048 
Franchise non-real estate secured14,304 (448)— (732)13,124 
SBA non-real estate secured490 — 16 (54)452 
Retail loans
Single family residential (5)
233 — 33 12 278 
Consumer loans261 (2)— (41)218 
Totals$197,517 $(5,831)$586 $3,803 $196,075 
____________________________________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.


The ratio of allowance for credit losses to loans held for investment at June 30, 2022 was 1.30%, compared to 1.34% at March 31, 2022 and 1.71% at June 30, 2021. The fair value net discount on loans acquired through total bank acquisitions was $63.6 million, or 0.42% of total loans held for investment, as of June 30, 2022, compared to $71.2 million, or 0.48% of total loans held for investment, as of March 31, 2022, and $94.4 million, or 0.69% of total loans held for investment, as of June 30, 2021.

Nonperforming assets totaled $44.4 million, or 0.20% of total assets, at June 30, 2022, compared with $55.3 million, or 0.26% of total assets, at March 31, 2022, and $34.4 million, or 0.17% of total assets, at June 30, 2021. Total loan delinquencies were $36.3 million, or 0.24% of loans held for investment, at June 30, 2022, compared to $43.7 million, or 0.30% of loans held for investment, at March 31, 2022, and $19.3 million, or 0.14% of loans held for investment, at June 30, 2021.

Classified loans totaled $106.2 million, or 0.71% of loans held for investment, at June 30, 2022, compared with $122.5 million, or 0.83% of loans held for investment, at March 31, 2022, and $131.4 million, or 0.97% of loans held for investment, at June 30, 2021.

10

Interest typically is not accrued on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. At June 30, 2022, there were no loans 90 days or more past due and still accruing interest, compared with one CRE owner-occupied loan of $1.8 million in default for more than 90 days and still accruing interest as of March 31, 2022. There were $16.6 million of troubled debt restructured loans at June 30, 2022, compared with $16.9 million at March 31, 2022, and $17.8 million at June 30, 2021.


 June 30,March 31,June 30,
(Dollars in thousands)202220222021
Asset quality
Nonperforming loans$44,445 $55,309 $34,387 
Other real estate owned— — — 
Nonperforming assets$44,445 $55,309 $34,387 
Total classified assets (1)
$106,153 $122,528 $131,350 
Allowance for credit losses196,075 197,517 232,774 
Allowance for credit losses as a percent of total nonperforming loans441 %357 %677 %
Nonperforming loans as a percent of loans held for investment0.30 0.38 0.25 
Nonperforming assets as a percent of total assets0.20 0.26 0.17 
Classified loans to total loans held for investment0.71 0.83 0.97 
Classified assets to total assets0.48 0.57 0.64 
Net loan charge-offs for the quarter ended$5,245 $446 $1,094 
Net loan charge-offs for the quarter to average total loans0.04 %— %0.01 %
Allowance for credit losses to loans held for investment (2)
1.30 1.34 1.71 
Delinquent loans  
30 - 59 days$6,915 $25,332 $207 
60 - 89 days— 74 83 
90+ days29,360 18,245 19,045 
Total delinquency$36,275 $43,651 $19,335 
Delinquency as a percentage of loans held for investment0.24 %0.30 %0.14 %
____________________________________________________
(1) Includes substandard loans and other real estate owned.
(2) At June 30, 2022, 29% of loans held for investment include a fair value net discount of $63.6 million, or 0.42% of loans held for investment. At March 31, 2022, 32% of loans held for investment include a fair value net discount of $71.2 million, or 0.48% 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.

11

Investment Securities

At June 30, 2022, available-for-sale (“AFS”) and held-to-maturity (“HTM”) investment securities were $2.68 billion and $1.39 billion, respectively, compared to $3.22 billion and $996.4 million, respectively, at March 31, 2022. During the second quarter of 2022, the Company reassessed classification of certain investments and transferred to HTM, at fair value, the remaining AFS municipal bond portfolio totaling $444.6 million, which the Company intends to hold to maturity.

In total, investment securities were $4.07 billion at June 30, 2022, a decrease of $148.7 million from March 31, 2022, and a decrease of $436.6 million from June 30, 2021. The decrease in the second quarter of 2022 compared to the prior quarter was primarily the result of $161.0 million in principal payments, discounts from the AFS securities transferred from HTM, amortization, and redemptions, a $56.6 million decrease resulting from mark-to-market fair value adjustments, and $45.1 million in investment securities sales, partially offset by $114.0 million in investment securities purchases.

The decrease in investment securities from June 30, 2021 was primarily the result of $1.13 billion in sales, $584.7 million in principal payments, discounts from the AFS securities transferred from HTM, amortization, and redemptions, and a $266.5 million decrease resulting from mark-to-market fair value adjustments, partially offset by $1.55 billion in purchases.

Deposits

At June 30, 2022, total deposits were $18.08 billion, an increase of $395.4 million, or 2.2%, from March 31, 2022, and an increase of $1.07 billion, or 6.3%, from June 30, 2021.

At June 30, 2022, core deposits(1) totaled $16.63 billion, or 91.9% of total deposits, a decrease of $26.7 million, or 0.2%, from March 31, 2022, and an increase of $876.1 million, or 5.56%, from June 30, 2021. The decrease in the second quarter of 2022 compared to the prior quarter was primarily due to the decreases of $324.8 million in money market and savings deposits, and $172.2 million in noninterest-bearing checking deposits, offset by an increase of $470.4 million in interest-bearing checking deposits. The increase from June 30, 2021 was primarily driven by an increase in business checking deposits, partially offset by the decreases in money market/savings deposits.

At June 30, 2022, non-core deposits totaled $1.46 billion, an increase of $422.1 million, or 40.7%, from March 31, 2022, and an increase of $193.4 million, or 15.3%, from June 30, 2021. The increase in the second quarter of 2022 compared to the prior quarter was primarily due to the addition of $599.7 million in brokered certificates of deposit, partially offset by the decreases of $175.0 million in retail certificates of deposit and $2.6 million in brokered money market deposits. The increase from June 30, 2021 was primarily driven by an increase in brokered certificates of deposit, partially offset by decreases in retail certificates of deposit and brokered money market deposits.

The weighted average cost of total deposits for the second quarter of 2022 was 0.06%, compared to 0.04% for the first quarter of 2022, and 0.08% for the second quarter of 2021. The weighted average cost of core deposits(2) for the second quarter was 0.04%, compared to 0.03% for the first quarter of 2022, and 0.06% for the second quarter of 2021.

At June 30, 2022, the end of period weighted average rate of total deposits was 0.13% and the end of period weighted average rate of core deposits was 0.06%, compared to 0.04% and 0.03%, respectively at March 31, 2022.



______________________________
(1) Core deposits are total deposits excluding all certificates of deposits and all brokered deposits.
(2) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
12

 June 30,March 31,June 30,
(Dollars in thousands)202220222021
Deposit accounts
Noninterest-bearing checking$6,934,318 $7,106,548 $6,768,384 
Interest-bearing:
Checking4,149,432 3,679,067 3,103,343 
Money market/savings5,542,230 5,867,044 5,878,122 
Total core deposits16,625,980 16,652,659 15,749,849 
Brokered money market3,000 5,553 5,550 
Retail certificates of deposit855,966 1,031,011 1,259,698 
Wholesale/brokered certificates of deposit599,667 — — 
Total non-core deposits1,458,633 1,036,564 1,265,248 
Total deposits$18,084,613 $17,689,223 $17,015,097 
Cost of deposits0.06 %0.04 %0.08 %
Cost of core deposits (1)
0.04 0.03 0.06 
Noninterest-bearing deposits as a percent of total deposits38.3 40.2 39.8 
Non-maturity deposits as a percent of total deposits92.0 94.2 92.6 
Core deposits as a percent of total deposits 91.9 94.1 92.6 
______________________________________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.


Borrowings

At June 30, 2022, total borrowings amounted to $930.9 million, an increase of $160,000 from March 31, 2022, and an increase of $454.3 million from June 30, 2021. Total borrowings at June 30, 2022 were comprised of $600.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) term advances and $330.9 million of subordinated debt. The increase in borrowings at June 30, 2022 as compared to March 31, 2022 was primarily due to the amortization of the subordinated debt issuance costs. The increase in borrowings at June 30, 2022 as compared to June 30, 2021 was primarily due to an increase of $600.0 million in FHLB term advances, partially offset by redemptions of $135.0 million in subordinated notes and $10.4 million junior subordinated debt securities. At June 30, 2022, total borrowings represented 4.2% of total assets, compared to 4.3% and 2.3% as of March 31, 2022 and June 30, 2021, respectively.

Capital Ratios

At June 30, 2022, our common stockholder's equity was $2.76 billion, or 12.53% of total assets, compared with $2.78 billion, or 12.87%, at March 31, 2022, and $2.81 billion, or 13.70%, at June 30, 2021, with a book value per share of $29.01, compared with $29.31 at March 31, 2022, and $29.72 at June 30, 2021. At June 30, 2022, our ratio of tangible common equity to tangible assets(1) was 8.52%, compared with 8.79% at March 31, 2022, and 9.38% at June 30, 2021, and our tangible book value per share(1) was $18.86, compared with $19.12 at March 31, 2022, and $19.38 at June 30, 2021. The decreases in the ratio of tangible common equity to tangible assets and tangible book value per share at June 30, 2021 from the prior quarter were primarily driven by the other comprehensive loss from the impact of higher interest rates on our AFS securities portfolio.




______________________________
(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 June 30, 2022, 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.

June 30,March 31,June 30,
Capital ratios202220222021
Pacific Premier Bancorp, Inc. Consolidated   
Tier 1 leverage ratio9.90 %10.10 %9.83 %
Common equity tier 1 capital ratio11.91 11.80 11.89 
Tier 1 capital ratio11.91 11.80 11.89 
Total capital ratio14.41 14.37 15.61 
Tangible common equity ratio (1)
8.52 8.79 9.38 
Pacific Premier Bank
Tier 1 leverage ratio11.41 %11.66 %11.31 %
Common equity tier 1 capital ratio13.72 13.61 13.67 
Tier 1 capital ratio13.72 13.61 13.67 
Total capital ratio14.54 14.47 15.44 
Share data   
Book value per share$29.01 $29.31 $29.72 
Tangible book value per share (1)
18.86 19.12 19.38 
Common equity dividends declared per share0.33 0.33 0.33 
Closing stock price (2)
29.24 35.35 42.29 
Shares issued and outstanding94,976,605 94,945,849 94,656,575 
Market capitalization (2)(3)
$2,777,116 $3,356,336 $4,003,027 
______________________________
(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.

Dividend and Stock Repurchase Program

On July 19, 2022, the Company's Board of Directors declared a $0.33 per share dividend, payable on August 12, 2022 to stockholders of record as of August 1, 2022. 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 second quarter of 2022, the Company did not repurchase any shares of common stock.

Restructuring

During July 2022, the Company completed a staff restructuring by eliminating 53 positions, or approximately 3% of the workforce. As a result, the Company will incur one-time severance and other employee-related costs totaling $1.1 million in the third quarter of 2022. The workforce reduction will not have a material impact to the Company's financial position or results of operations.
14

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on July 21, 2022 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 July 28, 2022, at (877) 344-7529, conference ID 3670384.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. (Nasdaq: PPBI) is the parent company of Pacific Premier Bank, a California-based commercial bank focused on serving small, middle-market, and corporate businesses throughout the western United States in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada. Founded in 1983, Pacific Premier Bank has grown to become one of the largest banks headquartered in the western region of the United States, with approximately $22 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 41,000 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 the tight labor market, supply chain disruptions, inflationary pressures, or turbulence in domestic or global financial markets could adversely affect our revenues, 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 or other intangible assets in future periods. 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
15

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 related uncertainty as well as the risk and costs related to our adoption of 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; the impact of current and possible future 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, 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, which could impact business and economic conditions in the United States and abroad; cybersecurity threats and the cost of defending against them; 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 2021 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

16

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands)20222022202120212021
ASSETS
Cash and cash equivalents$972,798 $809,259 $304,703 $322,320 $631,888 
Interest-bearing time deposits with financial institutions2,216 2,216 2,216 2,708 2,708 
Investments held-to-maturity, at amortized cost, net of allowance for credit losses 1,390,682 996,382 381,674 170,576 18,933 
Investment securities available-for-sale, at fair value2,679,070 3,222,095 4,273,864 4,709,815 4,487,447 
FHLB, FRB, and other stock, at cost118,636 116,973 117,538 118,399 117,738 
Loans held for sale, at lower of amortized cost or fair value2,957 11,646 10,869 8,100 4,714 
Loans held for investment15,047,608 14,733,755 14,295,897 13,982,861 13,594,598 
Allowance for credit losses(196,075)(197,517)(197,752)(211,481)(232,774)
Loans held for investment, net14,851,533 14,536,238 14,098,145 13,771,380 13,361,824 
Accrued interest receivable66,898 60,922 65,728 63,228 67,529 
Premises and equipment68,435 70,453 71,908 72,850 73,821 
Deferred income taxes, net163,767 133,938 87,344 83,432 81,741 
Bank owned life insurance454,593 451,968 449,353 447,135 444,645 
Intangible assets62,500 65,978 69,571 73,451 77,363 
Goodwill901,312 901,312 901,312 901,312 901,312 
Other assets258,522 242,916 260,204 260,505 257,823 
Total assets$21,993,919 $21,622,296 $21,094,429 $21,005,211 $20,529,486 
LIABILITIES  
Deposit accounts:  
Noninterest-bearing checking$6,934,318 $7,106,548 $6,757,259 $6,841,495 $6,768,384 
Interest-bearing:
Checking4,149,432 3,679,067 3,493,331 3,477,902 3,103,343 
Money market/savings5,545,230 5,872,597 5,806,726 6,037,532 5,883,672 
Retail certificates of deposit855,966 1,031,011 1,058,273 1,113,070 1,259,698 
Wholesale/brokered certificates of deposit599,667 — — — — 
Total interest-bearing11,150,295 10,582,675 10,358,330 10,628,504 10,246,713 
Total deposits18,084,613 17,689,223 17,115,589 17,469,999 17,015,097 
FHLB advances and other borrowings600,000 600,000 558,000 150,000 — 
Subordinated debentures330,886 330,726 330,567 330,408 476,622 
Accrued expenses and other liabilities223,201 219,329 203,962 216,688 224,348 
Total liabilities19,238,700 18,839,278 18,208,118 18,167,095 17,716,067 
STOCKHOLDERS’ EQUITY     
Common stock933 933 929 929 931 
Additional paid-in capital2,353,361 2,348,727 2,351,294 2,347,626 2,352,112 
Retained earnings615,943 577,591 541,950 488,385 433,852 
Accumulated other comprehensive (loss) income(215,018)(144,233)(7,862)1,176 26,524 
Total stockholders' equity2,755,219 2,783,018 2,886,311 2,838,116 2,813,419 
Total liabilities and stockholders' equity$21,993,919 $21,622,296 $21,094,429 $21,005,211 $20,529,486 








17

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands, except per share data)20222022202120222021
INTEREST INCOME   
Loans$164,455 $150,604 $152,365 $315,059 $307,590 
Investment securities and other interest-earning assets18,771 17,942 18,327 36,713 36,096 
Total interest income183,226 168,546 170,692 351,772 343,686 
INTEREST EXPENSE  
Deposits2,682 1,673 3,265 4,355 7,691 
FHLB advances and other borrowings3,217 474 — 3,691 65 
Subordinated debentures4,562 4,560 6,493 9,122 13,344 
Total interest expense10,461 6,707 9,758 17,168 21,100 
Net interest income before provision for credit losses172,765 161,839 160,934 334,604 322,586 
Provision for credit losses469 448 (38,476)917 (36,502)
Net interest income after provision for credit losses172,296 161,391 199,410 333,687 359,088 
NONINTEREST INCOME  
Loan servicing income502 419 622 921 1,080 
Service charges on deposit accounts2,690 2,615 2,222 5,305 4,254 
Other service fee income366 367 352 733 825 
Debit card interchange fee income936 836 1,099 1,772 1,886 
Earnings on bank owned life insurance3,240 3,221 2,279 6,461 4,512 
Net gain from sales of loans1,136 1,494 1,546 2,630 1,907 
Net (loss) gain from sales of investment securities(31)2,134 5,085 2,103 9,131 
Trust custodial account fees
10,354 11,579 7,897 21,933 15,119 
Escrow and exchange fees1,827 1,661 1,672 3,488 3,198 
Other income1,173 1,568 3,955 2,741 8,557 
Total noninterest income22,193 25,894 26,729 48,087 50,469 
NONINTEREST EXPENSE  
Compensation and benefits57,562 56,981 53,474 114,543 106,022 
Premises and occupancy11,829 11,952 12,240 23,781 24,220 
Data processing6,604 5,996 5,765 12,600 11,593 
FDIC insurance premiums1,452 1,396 1,312 2,848 2,493 
Legal and professional services4,629 4,068 4,186 8,697 8,121 
Marketing expense1,926 1,809 1,490 3,735 3,088 
Office expense1,252 1,203 1,589 2,455 3,418 
Loan expense1,144 1,134 1,165 2,278 2,280 
Deposit expense4,081 3,751 3,985 7,832 7,844 
Merger-related expense— — — — 5 
Amortization of intangible assets3,479 3,592 4,001 7,071 8,144 
Other expense5,016 5,766 5,289 10,782 9,757 
Total noninterest expense98,974 97,648 94,496 196,622 186,985 
Net income before income taxes95,515 89,637 131,643 185,152 222,572 
Income tax25,712 22,733 35,341 48,445 57,602 
Net income$69,803 $66,904 $96,302 $136,707 $164,970 
EARNINGS PER SHARE  
Basic$0.74 $0.71 $1.02 $1.44 $1.74 
Diluted$0.73 $0.70 $1.01 $1.44 $1.73 
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic93,765,264 93,499,695 93,635,392 93,633,213 93,582,563 
Diluted94,040,691 93,946,074 94,218,028 93,983,057 94,155,740 
18

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 
 Three Months Ended
 June 30, 2022March 31, 2022June 30, 2021
(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$702,663 $1,211 0.69 %$322,236 $90 0.11 %$1,323,186 $315 0.10 %
Investment securities4,254,961 17,560 1.65 4,546,408 17,852 1.57 4,243,644 18,012 1.70 
Loans receivable, net (1)(2)
14,919,182 164,455 4.42 14,371,588 150,604 4.25 13,216,973 152,365 4.62 
Total interest-earning assets19,876,806 183,226 3.70 19,240,232 168,546 3.55 18,783,803 170,692 3.64 
Noninterest-earning assets1,793,347 1,716,559 1,506,612 
Total assets$21,670,153 $20,956,791 $20,290,415 
Liabilities and equity
Interest-bearing deposits:
Interest checking$4,055,506 $712 0.07 %$3,537,824 $229 0.03 %$3,155,935 $336 0.04 %
Money market5,231,464 1,010 0.08 5,343,973 888 0.07 5,558,790 2,002 0.14 
Savings432,586 27 0.03 422,186 26 0.02 384,376 84 0.09 
Retail certificates of deposit922,784 607 0.26 1,047,451 530 0.21 1,294,544 839 0.26 
Wholesale/brokered certificates of deposit80,182 326 1.63 — — — 1,357 4 1.18 
Total interest-bearing deposits10,722,522 2,682 0.10 10,351,434 1,673 0.07 10,395,002 3,265 0.13 
FHLB advances and other borrowings602,621 3,217 2.14 225,250 474 0.85 6,303 — — 
Subordinated debentures330,796 4,562 5.52 330,629 4,560 5.52 480,415 6,493 5.41 
Total borrowings933,417 7,779 3.34 555,879 5,034 3.63 486,718 6,493 5.35 
Total interest-bearing liabilities11,655,939 10,461 0.36 10,907,313 6,707 0.25 10,881,720 9,758 0.36 
Noninterest-bearing deposits7,030,205 6,928,872 6,341,063 
Other liabilities219,116 256,219 320,324 
Total liabilities18,905,260 18,092,404 17,543,107 
Stockholders' equity2,764,893 2,864,387 2,747,308 
Total liabilities and equity$21,670,153 $20,956,791 $20,290,415 
Net interest income$172,765 $161,839 $160,934 
Net interest margin (3)
3.49 %3.41 %3.44 %
Cost of deposits (4)
0.06 0.04 0.08 
Cost of funds (5)
0.22 0.15 0.23 
Cost of core deposits (6)
0.04 0.03 0.06 
Ratio of interest-earning assets to interest-bearing liabilities170.53 176.40 172.62 
______________________________________________
(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 $7.5 million, $5.9 million, and $9.5 million, for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, 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.
19

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(Unaudited)
June 30,March 31,December 31,September 30June 30,
(Dollars in thousands)20222022202120212021
Investor loans secured by real estate
CRE non-owner-occupied$2,788,715 $2,774,650 $2,771,137 $2,823,065 $2,810,233 
Multifamily6,188,086 6,041,085 5,891,934 5,705,666 5,539,464 
Construction and land331,734 303,811 277,640 292,815 297,728 
SBA secured by real estate (1)
44,199 42,642 46,917 49,446 53,003 
Total investor loans secured by real estate9,352,734 9,162,188 8,987,628 8,870,992 8,700,428 
Business loans secured by real estate (2)
CRE owner-occupied2,486,747 2,391,984 2,251,014 2,242,164 2,089,300 
Franchise real estate secured387,683 384,267 380,381 354,481 358,120 
SBA secured by real estate (3)
67,191 68,466 69,184 69,937 72,923 
Total business loans secured by real estate2,941,621 2,844,717 2,700,579 2,666,582 2,520,343 
Commercial loans (4)
Commercial and industrial2,295,421 2,242,632 2,103,112 1,888,870 1,795,144 
Franchise non-real estate secured415,830 388,322 392,576 392,950 401,315 
SBA non-real estate secured11,008 10,761 11,045 12,732 13,900 
Total commercial loans2,722,259 2,641,715 2,506,733 2,294,552 2,210,359 
Retail loans
Single family residential (5)
77,951 79,978 95,292 144,309 157,228 
Consumer4,130 5,157 5,665 6,426 6,240 
Total retail loans82,081 85,135 100,957 150,735 163,468 
Loans held for investment before basis adjustment (6)
15,098,695 14,733,755 14,295,897 13,982,861 13,594,598 
Basis adjustment associated with fair value hedge (7)
(51,087)— — — — 
Loans held for investment15,047,608 14,733,755 14,295,897 13,982,861 13,594,598 
Allowance for credit losses for loans held for investment(196,075)(197,517)(197,752)(211,481)(232,774)
Loans held for investment, net$14,851,533 $14,536,238 $14,098,145 $13,771,380 $13,361,824 
Loans held for sale, at lower of cost or fair value$2,957 $11,646 $10,869 $8,100 $4,714 
______________________________
(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 $63.6 million, $71.2 million, $77.1 million, $85.0 million, and $94.4 million as of June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, respectively.
(7) Represents the basis adjustment associated with the application of hedge accounting on certain loans.



20

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited)
 June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands)20222022202120212021
Asset quality
Nonperforming loans$44,445 $55,309 $31,273 $35,090 $34,387 
Other real estate owned— — — — — 
Nonperforming assets$44,445 $55,309 $31,273 $35,090 $34,387 
Total classified assets (1)
$106,153 $122,528 $121,827 $124,506 $131,350 
Allowance for credit losses196,075 197,517 197,752 211,481 232,774 
Allowance for credit losses as a percent of total nonperforming loans441 %357 %632 %603 %677 %
Nonperforming loans as a percent of loans held for investment0.30 0.38 0.22 0.25 0.25 
Nonperforming assets as a percent of total assets0.20 0.26 0.15 0.17 0.17 
Classified loans to total loans held for investment0.71 0.83 0.85 0.89 0.97 
Classified assets to total assets0.48 0.57 0.58 0.59 0.64 
Net loan charge-offs (recoveries) for the quarter ended$5,245 $446 $(981)$1,750 $1,094 
Net loan charge-offs (recoveries) for the quarter to average total loans 0.04 %— %(0.01)%0.01 %0.01 %
Allowance for credit losses to loans held for investment (2)
1.30 1.34 1.38 1.51 1.71 
Loans modified under the CARES Act$— $— $— $— $819 
Loans modified under the CARES Act as a percent of loans held for investment— %— %— %— %0.01 %
Delinquent loans   
30 - 59 days$6,915 $25,332 $1,395 $728 $207 
60 - 89 days— 74 — 936 83 
90+ days29,360 18,245 18,100 18,514 19,045 
Total delinquency$36,275 $43,651 $19,495 $20,178 $19,335 
Delinquency as a percent of loans held for investment0.24 %0.30 %0.14 %0.14 %0.14 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At June 30, 2022, 29% of loans held for investment include a fair value net discount of $63.6 million, or 0.42% of loans held for investment. At March 31, 2022, 32% of loans held for investment include a fair value net discount of $71.2 million, or 0.48% of loans held for investment. At December 31, 2021, 36% of loans held for investment include a fair value net discount of $77.1 million, or 0.54% of loans held for investment. 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.
21

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
NONACCRUAL LOANS (1)
(Unaudited)
(Dollars in thousands)Collateral Dependent LoansACLNon-Collateral Dependent LoansACLTotal Nonaccrual LoansNonaccrual Loans With No ACL
June 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied$10,230 $1,835 $— $— $10,230 $2,615 
Multifamily8,873 — — — 8,873 8,873 
SBA secured by real estate (2)
562 — — — 562 562 
Total investor loans secured by real estate19,665 1,835 — — 19,665 12,050 
Business loans secured by real estate (3)
CRE owner-occupied4,889 — — — 4,889 4,889 
SBA secured by real estate (4)
206 — — — 206 206 
Total business loans secured by real estate5,095 — — — 5,095 5,095 
Commercial loans (5)
Commercial and industrial4,744 — — — 4,744 4,744 
Franchise non-real estate secured2,794 — 11,517 — 14,311 14,311 
SBA not secured by real estate624 — — — 624 624 
Total commercial loans8,162 — 11,517 — 19,679 19,679 
Retail loans
Single family residential (6)
6 — — — 6 6 
Total retail loans6 — — — 6 6 
Totals nonaccrual loans$32,928 $1,835 $11,517 $— $44,445 $36,830 
______________________________
(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.
(2) SBA loans that are collateralized by hotel/motel real property.
(3) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(4) SBA loans that are collateralized by real property other than hotel/motel real property.
(5) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(6) Single family residential includes home equity lines of credit, as well as second trust deeds.



22

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
PAST DUE STATUS
(Unaudited)
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
June 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied$2,772,126 $6,359 $— $10,230 $2,788,715 
Multifamily6,179,213 — — 8,873 6,188,086 
Construction and land331,734 — — — 331,734 
SBA secured by real estate (1)
44,199 — — — 44,199 
Total investor loans secured by real estate9,327,272 6,359 — 19,103 9,352,734 
Business loans secured by real estate (2)
CRE owner-occupied2,481,858 — — 4,889 2,486,747 
Franchise real estate secured387,683 — — — 387,683 
SBA secured by real estate (3)
67,108 83 — — 67,191 
Total business loans secured by real estate2,936,649 83 — 4,889 2,941,621 
Commercial loans (4)
Commercial and industrial2,290,204 473 — 4,744 2,295,421 
Franchise non-real estate secured415,830 — — — 415,830 
SBA not secured by real estate10,384 — — 624 11,008 
Total commercial loans2,716,418 473 — 5,368 2,722,259 
Retail loans
Single family residential (5)
77,951 — — — 77,951 
Consumer loans4,130 — — — 4,130 
Total retail loans82,081 — — — 82,081 
Loans held for investment before basis adjustment (6)
$15,062,420 $6,915 $— $29,360 $15,098,695 
______________________________
(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 $51.1 million to the carrying amount of certain loans included in fair value hedging relationships.


23

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CREDIT RISK GRADES
(Unaudited)
 
(Dollars in thousands)PassSpecial
Mention		SubstandardTotal Gross
Loans
June 30, 2022
Investor loans secured by real estate    
CRE non-owner-occupied$2,745,596 $13,944 $29,175 $2,788,715 
Multifamily6,178,459 — 9,627 6,188,086 
Construction and land331,734 — — 331,734 
SBA secured by real estate (1)
36,240 — 7,959 44,199 
Total investor loans secured by real estate9,292,029 13,944 46,761 9,352,734 
Business loans secured by real estate (2)
CRE owner-occupied2,464,909 — 21,838 2,486,747 
Franchise real estate secured387,683 — — 387,683 
SBA secured by real estate (3)
60,437 — 6,754 67,191 
Total business loans secured by real estate2,913,029 — 28,592 2,941,621 
Commercial loans (4)
   
Commercial and industrial2,280,108 853 14,460 2,295,421 
Franchise non-real estate secured401,114 — 14,716 415,830 
SBA not secured by real estate9,431 — 1,577 11,008 
Total commercial loans2,690,653 853 30,753 2,722,259 
Retail loans
Single family residential (5)
77,907 — 44 77,951 
Consumer loans4,127 — 3 4,130 
Total retail loans82,034 — 47 82,081 
Loans held for investment before basis adjustment (6)
$14,977,745 $14,797 $106,153 $15,098,695 
______________________________
(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 $51.1 million to the carrying amount of certain loans included in fair value hedging relationships.

24

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP to Non-GAAP RECONCILIATIONS
(Unaudited)
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
For periods presented below, return on average tangible common equity is a non-GAAP financial measure derived from GAAP based amounts. We calculate this figure by excluding amortization of intangible assets expense from net income and excluding the average intangible assets and average goodwill from the average stockholders' equity during the periods indicated. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
 Three Months Ended
 June 30,March 31,June 30,
(Dollars in thousands)202220222021
Net income$69,803 $66,904 $96,302 
Plus: amortization of intangible assets expense3,479 3,592 4,001 
Less: amortization of intangible assets expense tax adjustment (1)
993 1,025 1,145 
Net income for average tangible common equity72,289 69,471 99,158 
Average stockholders' equity$2,764,893 $2,864,387 $2,747,308 
Less: average intangible assets64,583 68,157 79,784 
Less: average goodwill901,312 901,312 900,582 
Average tangible common equity$1,798,998 $1,894,918 $1,766,942 
Return on average equity (annualized)10.10 %9.34 %14.02 %
Return on average tangible common equity (annualized)16.07 %14.66 %22.45 %
___________________________________________________
(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, where applicable, from net income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.
Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Interest income$183,226 $168,546 $170,692 
Interest expense10,461 6,707 9,758 
Net interest income172,765 161,839 160,934 
Noninterest income22,193 25,894 26,729 
Revenue194,958 187,733 187,663 
Noninterest expense98,974 97,648 94,496 
Pre-provision net revenue95,984 90,085 93,167 
Pre-provision net revenue (annualized)$383,936 $360,340 $372,668 
Average assets$21,670,153 $20,956,791 $20,290,415 
Pre-provision net revenue to average assets0.44 %0.43 %0.46 %
Pre-provision net revenue to average assets (annualized)1.77 %1.72 %1.84 %

Tangible book value per share and tangible common equity to tangible assets (the “tangible common equity ratio”) are non-GAAP financial measures derived from GAAP based amounts. We calculate tangible book value per share by dividing tangible common equity by common shares outstanding, as compared to book value per share, which we calculate by dividing common stockholders' equity by shares outstanding. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. We believe that this information is consistent with the treatment by bank regulatory agencies, which excludes intangible assets from the calculation of risk-based capital ratios. Accordingly, we believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our capital position and ratios.
 June 30,March 31,December 31,September 30,June 30,
(Dollars in thousands, except per share data)20222022202120212021
Total stockholders' equity$2,755,219 $2,783,018 $2,886,311 $2,838,116 $2,813,419 
Less: intangible assets963,812 967,290 970,883 974,763 978,675 
Tangible common equity$1,791,407 $1,815,728 $1,915,428 $1,863,353 $1,834,744 
Total assets$21,993,919 $21,622,296 $21,094,429 $21,005,211 $20,529,486 
Less: intangible assets963,812 967,290 970,883 974,763 978,675 
Tangible assets$21,030,107 $20,655,006 $20,123,546 $20,030,448 $19,550,811 
Tangible common equity ratio8.52 %8.79 %9.52 %9.30 %9.38 %
Common shares issued and outstanding94,976,60594,945,84994,389,54394,354,21194,656,575
Book value per share$29.01 $29.31 $30.58 $30.08 $29.72 
Less: intangible book value per share10.15 10.19 10.29 10.33 10.34 
Tangible book value per share$18.86 $19.12 $20.29 $19.75 $19.38 
Core net interest income and core net interest margin are non-GAAP financial measures derived from GAAP-based amounts. We calculate core net interest income by excluding scheduled accretion income, accelerated accretion income, premium amortization on CDs, nonrecurring nonaccrual interest paid, and gain (loss) on interest rate contract in fair value hedging relationships from net interest income. The core net interest margin is calculated as the ratio of core net interest income to average interest-earning assets. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Net interest income$172,765 $161,839 $160,934 
Less: scheduled accretion income2,626 2,857 3,560 
Less: accelerated accretion income4,918 3,083 5,927 
Less: premium amortization on CD60 96 942 
Less: nonrecurring nonaccrual interest paid48 (356)(216)
Less: gain (loss) on fair value hedging relationships$128 $(1,667)$— 
Core net interest income$164,985 $157,826 $150,721 
Average interest-earning assets$19,876,806 $19,240,232 $18,783,803 
Net interest margin3.49 %3.41 %3.44 %
Core net interest margin3.33 %3.33 %3.22 %

Efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense, less amortization of intangible assets and merger-related expense, where applicable, 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, and gain (loss) from debt extinguishment. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Total noninterest expense$98,974 $97,648 $94,496 
Less: amortization of intangible assets3,479 3,592 4,001 
Noninterest expense, adjusted$95,495 $94,056 $90,495 
Net interest income before provision for credit losses$172,765 $161,839 $160,934 
Add: total noninterest income22,193 25,894 26,729 
Less: net (loss) gain from investment securities(31)2,134 5,085 
Less: other income - security recoveries— — 6 
Less: net loss from debt extinguishment— — (647)
Revenue, adjusted$194,989 $185,599 $183,219 
Efficiency ratio49.0 %50.7 %49.4 %


Cost of core deposits is a non-GAAP financial measure derived from GAAP-based amounts. Cost of core deposits is calculated as the ratio of core deposit interest expense to average core deposits. We calculate core deposit interest expense by excluding interest expense for certificates of deposit and brokered deposits from total deposit expense, and we calculate average core deposits by excluding certificates of deposit and brokered deposits from total deposits. Management believes cost of core deposits is a useful measure to assess the Company's deposit base, including its potential volatility.
Three Months Ended
June 30,March 31,June 30,
(Dollars in thousands)202220222021
Total deposits interest expense$2,682 $1,673 $3,265 
Less: certificates of deposit interest expense607 530 839 
Less: brokered deposits interest expense327 1 7 
Core deposits expense$1,748 $1,142 $2,419 
Total average deposits$17,752,727 $17,280,306 $16,736,065 
Less: average certificates of deposit922,784 1,047,451 1,294,544 
Less: average brokered deposits85,131 5,553 6,905 
Average core deposits$16,744,812 $16,227,302 $15,434,616 
Cost of core deposits0.04 %0.03 %0.06 %
25