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

Exhibit 99.1

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

Third Quarter 2022 Summary
 
•Net income of $73.4 million, or $0.77 per diluted share
•Return on average assets of 1.35%, return on average equity of 10.57%, and return on average tangible common equity of 16.74%(1)
•Pre-provision net revenue (“PPNR”) to average assets of 1.85%, annualized, and efficiency ratio of 48.3%(1)
•Net interest margin of 3.61%, and core net interest margin of 3.44%(1)
•Cost of deposits of 0.22%, and cost of core deposits of 0.11%(1)
•Loan-to-deposit ratio of 84.0%, compared with 83.2% in the prior quarter
•Noninterest-bearing deposits represent 38.2% of total deposits
•Nonperforming assets to total assets of 0.28%, and net charge-offs to average loans of 0.01%

Irvine, Calif., October 20, 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 $73.4 million, or $0.77 per diluted share, for the third quarter of 2022, compared with net income of $69.8 million, or $0.73 per diluted share, for the second quarter of 2022, and net income of $90.1 million, or $0.95 per diluted share, for the third quarter of 2021.
    
For the quarter ended September 30, 2022, the Company’s return on average assets (“ROAA”) was 1.35%, return on average equity (“ROAE”) was 10.57%, and return on average tangible common equity (“ROATCE”)(1) was 16.74%, compared to 1.29%, 10.10%, and 16.07%, respectively, for the second quarter of 2022, and 1.73%, 12.67%, and 19.89%, respectively, for the third quarter of 2021. Total assets were $21.62 billion at September 30, 2022, compared to $21.99 billion at June 30, 2022, and $21.01 billion at September 30, 2021.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, “We produced solid results in the third quarter, increasing earnings per share and pre-provision net revenue(1), while producing higher returns and further enhancing our already strong capital position. These results reflect the Pacific Premier team's commitment to creating and maintaining long-term shareholder value, while proactively managing risk.

“During the quarter, we continued to benefit from the actions we took earlier this year to position our balance sheet for a higher interest rate environment, and when combined with our strategic actions throughout the year, contributed to a 12 basis point increase in our net interest margin and an $8.3 million increase in net interest income as compared to the prior quarter. Our disciplined approach to expense management further enhanced our efficiency ratio, which decreased to 48.3% for the quarter.

“Notwithstanding these positive results, the rising interest rate environment negatively impacted commercial real estate acquisition and refinancing activity, which resulted in overall lower loan production. In addition, the higher interest rate environment has led to deposit outflows in our commercial escrow and exchange business due to a decline in commercial real estate refinance and sales activity. We replaced these deposits with brokered time deposits of varying maturities and held our loan to deposit ratio at 84.0%. While incorporating brokered time deposits into our funding mix will increase our deposit costs in the near term, we believe that locking in this longer-term funding ahead of additional rate increases will reinforce our liquidity and help us control our overall funding costs going forward.

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

“We believe we are entering this current period of economic uncertainty from a position of strength. We will continue to focus on proactively managing risk across the enterprise, while at the same time growing existing and new client banking relationships.”
2

FINANCIAL HIGHLIGHTS
Three Months Ended
 September 30,June 30,September 30,
(Dollars in thousands, except per share data)202220222021
Financial highlights (unaudited)
Net income$73,363 $69,803 $90,088 
Net interest income181,112 172,765 169,069 
Diluted earnings per share0.77 0.73 0.95 
Common equity dividend per share paid0.33 0.33 0.33 
Return on average assets1.35 %1.29 %1.73 %
Return on average equity10.57 10.10 12.67 
Return on average tangible common equity (1)
16.74 16.07 19.89 
Pre-provision net revenue on average assets (1)
1.85 1.77 1.98 
Net interest margin3.61 3.49 3.51 
Core net interest margin (1)
3.44 3.33 3.31 
Cost of deposits0.22 0.06 0.06 
Cost of core deposits (1)
0.11 0.04 0.04 
Efficiency ratio (1)
48.3 49.0 47.5 
Noninterest expense as a percent of average assets1.86 1.83 1.85 
Total assets$21,619,201 $21,993,919 $21,005,211 
Total deposits17,746,374 18,084,613 17,469,999 
Loan-to-deposit ratio84.0 %83.2 %80.1 %
Non-maturity deposits as a percent of total deposits89.5 92.0 93.6 
Book value per share$28.79 $29.01 $30.08 
Tangible book value per share (1)
18.68 18.86 19.75 
Total capital ratio14.83 %14.41 %14.56 %
______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.

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INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin
 
Net interest income totaled $181.1 million in the third quarter of 2022, an increase of $8.3 million, or 4.8%, from the second quarter of 2022. The increase in net interest income was primarily attributable to higher yields on average interest-earning assets, as well as a favorable interest impact from fair value hedges on fixed-rate loans of $4.2 million, partially offset by higher cost of funds and lower loan-related fees and accretion income as a result of decreased prepayment activity.

The net interest margin for the third quarter of 2022 increased 12 basis points to 3.61%, from 3.49% in the prior quarter. The core net interest margin(6) increased 11 basis points to 3.44%, compared to 3.33% in the prior quarter, reflecting higher yields on interest-earning assets and a favorable remix of earning-assets towards higher yielding loans, partially offset by higher cost of funds and lower loan prepayment fees.

Net interest income for the third quarter of 2022 increased $12.0 million, or 7.1%, compared to the third quarter of 2021. The increase was attributable to higher yields on average interest-earning assets and higher average loan balances, as well as a favorable impact from fair value hedges on fixed-rate loans, partially offset by higher cost of funds and lower loan-related fees and accretion income as a result of decreased prepayment activity.


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 Three Months Ended
 September 30, 2022June 30, 2022September 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$665,510 $2,754 1.64 %$702,663 $1,211 0.69 %$663,076 $195 0.12 %
Investment securities4,277,444 22,067 2.06 4,254,961 17,560 1.65 4,807,854 18,827 1.57 
Loans receivable, net (1) (2)
14,986,682 174,204 4.61 14,919,182 164,455 4.42 13,660,242 157,025 4.56 
Total interest-earning assets$19,929,636 $199,025 3.96 $19,876,806 $183,226 3.70 $19,131,172 $176,047 3.65 
Liabilities
Interest-bearing deposits$10,839,359 $9,873 0.36 $10,722,522 $2,682 0.10 $10,536,091 $2,432 0.09 
Borrowings966,981 8,040 3.31 933,417 7,779 3.34 332,245 4,546 5.43 
Total interest-bearing liabilities$11,806,340 $17,913 0.60 $11,655,939 $10,461 0.36 $10,868,336 $6,978 0.25 
Noninterest-bearing deposits$6,893,463 $7,030,205 $6,809,211 
Net interest income$181,112 $172,765 $169,069 
Net interest margin (3)
  3.61 3.49 3.51 
Cost of deposits (4)
0.22 0.06 0.06 
Cost of funds (5)
0.38 0.22 0.16 
Cost of core deposits (6)
0.11 0.04 0.04 
Ratio of interest-earning assets to interest-bearing liabilities168.80 170.53 176.03 
________________________________________________________________________
(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 $4.6 million, $7.5 million, and $9.4 million for the three months ended September 30, 2022, June 30, 2022, and September 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.
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Provision for Credit Losses

For the third quarter of 2022, the Company recorded $1.1 million of provision expense, compared to $469,000 of provision expense for the second quarter of 2022, and $19.7 million of provision recapture for the third quarter of 2021. The higher provision for credit losses for the third quarter of 2022 was driven principally by specific reserves on two individually evaluated loans and higher unfunded commitments in the commercial and industrial loan segment.

The provision recaptures for loans and unfunded commitments during the third quarter of 2021 were reflective of favorable changes in the macroeconomic forecasts related to the COVID-19 pandemic relative to prior periods.

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Provision for credit losses
Provision for loan losses$546 $3,803 $(19,543)
Provision for unfunded commitments549 (3,402)(194)
Provision for held-to-maturity securities(18)68 11 
Total provision for credit losses$1,077 $469 $(19,726)


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Noninterest Income
 
Noninterest income for the third quarter of 2022 was $20.2 million, a decrease of $2.0 million from the second quarter of 2022. The decrease was primarily due to a $679,000 decrease in net gain from sales of loans, a $403,000 decrease in trust custodial account fees resulting primarily from a decrease in the market value of custodial assets, and a $362,000 greater net loss from sales of investment securities.

During the third quarter of 2022, the Bank sold $9.6 million of Small Business Administration (“SBA”) loans for a net gain of $434,000 and $15.0 million of other loans for a net gain of $23,000, compared to the sales of $23.4 million of SBA loans and U.S. Department of Agriculture (“USDA”) loans for a net gain of $1.1 million in the second quarter of 2022.

Additionally, during the third quarter of 2022, the Bank sold $231.1 million of investment securities for a net loss of $393,000, compared to the sales of $45.1 million of investment securities for a net loss of $31,000 in the second quarter of 2022.

Noninterest income for the third quarter of 2022 decreased $9.9 million, or 33.0%, compared to the third quarter of 2021. The decrease was primarily due to a $4.6 million decrease in net gain from sales of investment securities and a $3.0 million decrease in other income.

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Noninterest income
Loan servicing income$397 $502 $536 
Service charges on deposit accounts2,704 2,690 2,375 
Other service fee income323 366 350 
Debit card interchange fee income808 936 834 
Earnings on bank owned life insurance3,339 3,240 3,266 
Net gain from sales of loans457 1,136 1,187 
Net (loss) gain from sales of investment securities(393)(31)4,190 
Trust custodial account fees
9,951 10,354 11,446 
Escrow and exchange fees1,555 1,827 1,867 
Other income1,023 1,173 4,049 
Total noninterest income$20,164 $22,193 $30,100 


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Noninterest Expense
 
Noninterest expense totaled $100.9 million for the third quarter of 2022, an increase of $1.9 million compared to the second quarter of 2022, primarily due to a $2.5 million increase in other expense, largely attributable to a client's unauthorized transaction incident for which the Bank provided a $1.9 million provisional credit pending its pursuit of insurance coverage, and a $765,000 increase in deposit expense, partially offset by a $1.2 million decrease in compensation and benefits.

Noninterest expense increased by $4.8 million compared to the third quarter of 2021. The increase was primarily due to a $2.8 million increase in compensation and benefits as well as a $2.3 million increase in other expense.

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Noninterest expense
Compensation and benefits$56,355 $57,562 $53,592 
Premises and occupancy12,011 11,829 12,611 
Data processing7,058 6,604 6,296 
FDIC insurance premiums1,461 1,452 1,392 
Legal and professional services4,075 4,629 4,563 
Marketing expense1,912 1,926 2,008 
Office expense1,338 1,252 1,076 
Loan expense789 1,144 1,332 
Deposit expense4,846 4,081 3,974 
Amortization of intangible assets3,472 3,479 3,912 
Other expense7,549 5,016 5,284 
Total noninterest expense$100,866 $98,974 $96,040 


Income Tax

For the third quarter of 2022, income tax expense totaled $26.0 million, resulting in an effective tax rate of 26.1%, compared with income tax expense of $25.7 million and an effective tax rate of 26.9% for the second quarter of 2022, and income tax expense of $32.8 million and an effective tax rate of 26.7% for the third quarter of 2021. Our estimated effective tax rate for the full year is expected to be in the range of 26% to 27%.

7

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $14.91 billion at September 30, 2022, a decrease of $138.8 million, or 0.9%, from June 30, 2022, and an increase of $926.0 million, or 6.6%, from September 30, 2021. The decrease from June 30, 2022 was primarily driven by lower loan fundings and lower commercial line utilization rates. The commercial line average utilization rate was 40.4% for the third quarter of 2022, a decrease from an average of 41.6% for the second quarter of 2022 and an increase from 33.1% for the third quarter of 2021.

During the third quarter of 2022, loan commitments totaled $789.2 million, and new loan fundings totaled $450.7 million, compared with $1.50 billion in loan commitments and $1.12 billion in new loan fundings for the second quarter of 2022, and $1.46 billion in loan commitments and $1.10 billion in new loan fundings for the third quarter of 2021.
 
At September 30, 2022, the total loan-to-deposit ratio was 84.0%, compared with 83.2% and 80.1% at June 30, 2022 and September 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
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Beginning gross loan balance before basis adjustment$15,101,652 $14,745,401 $13,599,312 
New commitments789,198 1,504,186 1,459,201 
Unfunded new commitments(338,534)(382,478)(359,000)
Net new fundings450,664 1,121,708 1,100,201 
Purchased loans— 710 — 
Amortization/maturities/payoffs(568,615)(936,893)(762,795)
Net draws on existing lines of credit21,416 200,255 69,141 
Loan sales(24,701)(23,698)(12,258)
Charge-offs(1,318)(5,831)(2,640)
Net (decrease) increase (122,554)356,251 391,649 
Ending gross loan balance before basis adjustment$14,979,098 $15,101,652 $13,990,961 
Basis adjustment associated with fair value hedge (1)
(68,124)(51,087)— 
Ending gross loan balance $14,910,974 $15,050,565 $13,990,961 
______________________________
(1) Represents the basis adjustment associated with the application of hedge accounting on certain loans.

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The following table presents the composition of the loans held for investment as of the dates indicated:
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Investor loans secured by real estate
CRE non-owner-occupied$2,771,272 $2,788,715 $2,823,065 
Multifamily6,199,581 6,188,086 5,705,666 
Construction and land373,194 331,734 292,815 
SBA secured by real estate (1)
42,998 44,199 49,446 
Total investor loans secured by real estate9,387,045 9,352,734 8,870,992 
Business loans secured by real estate (2)
CRE owner-occupied2,477,530 2,486,747 2,242,164 
Franchise real estate secured383,468 387,683 354,481 
SBA secured by real estate (3)
64,002 67,191 69,937 
Total business loans secured by real estate2,925,000 2,941,621 2,666,582 
Commercial loans (4)
Commercial and industrial2,164,623 2,295,421 1,888,870 
Franchise non-real estate secured409,773 415,830 392,950 
SBA non-real estate secured11,557 11,008 12,732 
Total commercial loans2,585,953 2,722,259 2,294,552 
Retail loans
Single family residential (5)
75,176 77,951 144,309 
Consumer3,761 4,130 6,426 
Total retail loans78,937 82,081 150,735 
Loans held for investment before basis adjustment (6)
14,976,935 15,098,695 13,982,861 
Basis adjustment associated with fair value hedge (7)
(68,124)(51,087)— 
Loans held for investment14,908,811 15,047,608 13,982,861 
Allowance for credit losses for loans held for investment(195,549)(196,075)(211,481)
Loans held for investment, net$14,713,262 $14,851,533 $13,771,380 
Total unfunded loan commitments$2,823,555 $2,872,934 $2,504,188 
Loans held for sale, at lower of cost or fair value$2,163 $2,957 $8,100 
__________________________________________________
(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 $59.0 million, $63.6 million, and $85.0 million as of September 30, 2022, June 30, 2022, and September 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 September 30, 2022 was 4.34%, compared to 4.06% at June 30, 2022, and 4.03% at September 30, 2021. The quarter-over-quarter and year-over-year increases reflect higher rates on new originations and the repricing of loans as a result of the Federal Reserve Bank's interest rate increases since March 2022.

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

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Investor loans secured by real estate
CRE non-owner-occupied$88,708 $195,896 $105,792 
Multifamily151,269 540,263 613,640 
Construction and land123,557 192,852 99,943 
SBA secured by real estate (1)
— 4,698 1,410 
Total investor loans secured by real estate363,534 933,709 820,785 
Business loans secured by real estate (2)
CRE owner-occupied80,676 220,936 256,269 
Franchise real estate secured14,011 17,500 19,207 
SBA secured by real estate (3)
6,468 7,033 15,065 
Total business loans secured by real estate101,155 245,469 290,541 
Commercial loans (4)
Commercial and industrial288,857 255,922 310,985 
Franchise non-real estate secured22,413 49,604 21,654 
SBA non-real estate secured4,673 6,419 — 
Total commercial loans315,943 311,945 332,639 
Retail loans
Single family residential (5)
8,566 13,063 14,782 
Consumer— — 454 
Total retail loans8,566 13,063 15,236 
Total loan commitments$789,198 $1,504,186 $1,459,201 
_____________________________________________________
(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 increased to 5.55% in the third quarter of 2022, compared to 4.11% in the second quarter of 2022, and 3.66% in the third quarter of 2021.


Asset Quality and Allowance for Credit Losses
 
At September 30, 2022, our allowance for credit losses (“ACL”) on loans held for investment was $195.5 million, a decrease of $526,000 from June 30, 2022, and a decrease of $15.9 million from September 30, 2021. The slight decline in ACL from June 30, 2022 was reflective primarily of lower loans held for investment. The decrease in ACL from September 30, 2021 was primarily due to favorable changes in the macroeconomic forecasts related to the COVID-19 pandemic.

During the third quarter of 2022, the Company incurred $1.1 million of net charge-offs, compared to $5.2 million and $1.8 million of net charge-offs during the second quarter of 2022 and the third quarter of 2021, respectively.

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

Three Months Ended September 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$37,221 $(1,128)$— $1,011 $37,104 
Multifamily56,293 — — (207)56,086 
Construction and land5,436 — — 1,004 6,440 
SBA secured by real estate (1)
2,865 — — 90 2,955 
Business loans secured by real estate (2)
CRE owner-occupied31,461 — 19 346 31,826 
Franchise real estate secured6,530 — — 180 6,710 
SBA secured by real estate (3)
5,149 — — (364)4,785 
Commercial loans (4)
Commercial and industrial37,048 (190)143 (1,503)35,498 
Franchise non-real estate secured13,124 — — 70 13,194 
SBA non-real estate secured452 — 26 (38)440 
Retail loans
Single family residential (5)
278 — 58 (40)296 
Consumer loans218 — — (3)215 
Totals$196,075 $(1,318)$246 $546 $195,549 
____________________________________________________
(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, 2022 was 1.31%, compared to 1.30% at June 30, 2022 and 1.51% at September 30, 2021. The fair value net discount on loans acquired through total bank acquisitions was $59.0 million, or 0.39% of total loans held for investment, as of September 30, 2022, compared to $63.6 million, or 0.42% of total loans held for investment, as of June 30, 2022, and $85.0 million, or 0.60% of total loans held for investment, as of September 30, 2021.

Nonperforming assets totaled $60.5 million, or 0.28% of total assets, at September 30, 2022, compared with $44.4 million, or 0.20% of total assets, at June 30, 2022, and $35.1 million, or 0.17% of total assets, at September 30, 2021. Loan delinquencies were $41.3 million, or 0.28% of loans held for investment, at September 30, 2022, compared to $36.3 million, or 0.24% of loans held for investment, at June 30, 2022, and $20.2 million, or 0.14% of loans held for investment, at September 30, 2021. All nonaccrual loans were individually evaluated with a total of $4.4 million ACL attributed to such loans as of September 30, 2022, compared with $1.8 million as of June 30, 2022.

Classified loans totaled $110.1 million, or 0.74% of loans held for investment, at September 30, 2022, compared with $106.2 million, or 0.71% of loans held for investment, at June 30, 2022, and $124.5 million, or 0.89% of loans held for investment, at September 30, 2021.
11

 September 30,June 30,September 30,
(Dollars in thousands)202220222021
Asset quality
Nonperforming loans$60,464 $44,445 $35,090 
Other real estate owned— — — 
Nonperforming assets$60,464 $44,445 $35,090 
Total classified assets (1)
$110,143 $106,153 $124,506 
Allowance for credit losses195,549 196,075 211,481 
Allowance for credit losses as a percent of total nonperforming loans323 %441 %603 %
Nonperforming loans as a percent of loans held for investment0.41 0.30 0.25 
Nonperforming assets as a percent of total assets0.28 0.20 0.17 
Classified loans to total loans held for investment0.74 0.71 0.89 
Classified assets to total assets0.51 0.48 0.59 
Net loan charge-offs for the quarter ended$1,072 $5,245 $1,750 
Net loan charge-offs for the quarter to average total loans0.01 %0.04 %0.01 %
Allowance for credit losses to loans held for investment (2)
1.31 1.30 1.51 
Delinquent loans  
30 - 59 days$1,484 $6,915 $728 
60 - 89 days6,535 — 936 
90+ days33,238 29,360 18,514 
Total delinquency$41,257 $36,275 $20,178 
Delinquency as a percentage of loans held for investment0.28 %0.24 %0.14 %
____________________________________________________
(1) Includes substandard loans and other real estate owned.
(2) At September 30, 2022, 27% of loans held for investment include a fair value net discount of $59.0 million, or 0.39% of loans held for investment. 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 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.


Investment Securities

At September 30, 2022, available-for-sale (“AFS”) and held-to-maturity (“HTM”) investment securities were $2.66 billion and $1.39 billion, respectively, compared to $2.68 billion and $1.39 billion, respectively, at June 30, 2022, and $4.71 billion and $170.6 million, respectively, at September 30, 2021. In total, investment securities were $4.05 billion at September 30, 2022, a decrease of $23.2 million from June 30, 2022, and a decrease of $833.8 million from September 30, 2021. The decrease in the third quarter of 2022 compared to the prior quarter was primarily the result of $231.1 million in investment securities sales, a $94.9 million decrease resulting from mark-to-market fair value adjustments, and $70.9 million in principal payments, amortization, and redemptions, partially offset by $373.6 million in purchases.

The decrease in investment securities from September 30, 2021 was primarily the result of $1.20 billion in sales, $488.3 million in principal payments, discounts from the AFS securities transferred from HTM, amortization, and redemptions, and a $329.0 million decrease resulting from mark-to-market fair value adjustments, partially offset by $1.19 billion in purchases.


12

Deposits

At September 30, 2022, total deposits were $17.75 billion, a decrease of $338.2 million, or 1.9%, from June 30, 2022, and an increase of $276.4 million, or 1.6%, from September 30, 2021.

At September 30, 2022, core deposits(1) totaled $15.87 billion, or 89.5% of total deposits, a decrease of $751.1 million, or 4.5%, from June 30, 2022, and a decrease of $476.5 million, or 2.9%, from September 30, 2021. The decrease was primarily driven by a $531.8 million decrease in deposits from the Bank's escrow and exchange business and a $127.4 million decrease in municipal deposits. The decrease from September 30, 2021 was primarily driven by decreases in money market/savings deposits and noninterest-bearing checking deposits, partially offset by an increase in business interest-bearing checking deposits.

At September 30, 2022, non-core deposits totaled $1.87 billion, an increase of $412.8 million, or 28.3%, from June 30, 2022, and an increase of $752.8 million, or 67.3%, from September 30, 2021. The increase in the third quarter of 2022 compared to the prior quarter was primarily due to the addition of $400.0 million in brokered certificates of deposit and an increase of $16.5 million in retail certificates of deposit. The increase from September 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 third quarter of 2022 was 0.22%, compared to 0.06% for the second quarter of 2022, and 0.06% for the third quarter of 2021. The weighted average cost of core deposits(2) for the third quarter was 0.11%, compared to 0.04% for the second quarter of 2022, and 0.04% for the third quarter of 2021.

At September 30, 2022, the end-of-period weighted average rate of total deposits was 0.37%, compared to 0.13% at June 30, 2022 and 0.04% at September 30, 2021. At September 30, 2022, the end-of-period weighted average rate of core deposits was 0.20%, compared to 0.06% at June 30, 2022 and 0.04% at September 30, 2021, respectively.

 September 30,June 30,September 30,
(Dollars in thousands)202220222021
Deposit accounts
Noninterest-bearing checking$6,775,465 $6,934,318 $6,841,495 
Interest-bearing:
Checking3,605,498 4,149,432 3,477,902 
Money market/savings5,493,958 5,542,230 6,031,980 
Total core deposits (1)
15,874,921 16,625,980 16,351,377 
Brokered money market30 3,000 5,552 
Retail certificates of deposit872,421 855,966 1,113,070 
Wholesale/brokered certificates of deposit999,002 599,667 — 
Total non-core deposits1,871,453 1,458,633 1,118,622 
Total deposits$17,746,374 $18,084,613 $17,469,999 
Cost of deposits0.22 %0.06 %0.06 %
Cost of core deposits (2)
0.11 0.04 0.04 
Noninterest-bearing deposits as a percent of total deposits38.2 38.3 39.2 
Non-maturity deposits as a percent of total deposits89.5 92.0 93.6 
Core deposits as a percent of total deposits 89.5 91.9 93.6 
______________________________________________________
(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.
13


Borrowings

At September 30, 2022, total borrowings amounted to $931.0 million, an increase of $159,000 from June 30, 2022, and an increase of $450.6 million from September 30, 2021. Total borrowings at September 30, 2022 were comprised of $600.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) term advances and $331.0 million of subordinated debt. The increase in borrowings at September 30, 2022 as compared to June 30, 2022 was primarily due to the amortization of the subordinated debt issuance costs. The increase in borrowings at September 30, 2022 as compared to September 30, 2021 was primarily due to an increase of $450.0 million in FHLB term advances to bolster liquidity and reduce our interest rate risk.


Capital Ratios

At September 30, 2022, our common stockholder's equity was $2.74 billion, or 12.65% of total assets, compared with $2.76 billion, or 12.53%, at June 30, 2022, and $2.84 billion, or 13.51%, at September 30, 2021, with a book value per share of $28.79, compared with $29.01 at June 30, 2022, and $30.08 at September 30, 2021. At September 30, 2022, the ratio of tangible common equity to tangible assets(1) was 8.59%, compared with 8.52% at June 30, 2022, and 9.30% at September 30, 2021, and tangible book value per share(1) was $18.68, compared with $18.86 at June 30, 2022, and $19.75 at September 30, 2021. The decrease in tangible book value per share at September 30, 2022 from the prior quarter was primarily driven by the other comprehensive loss from the impact of higher interest rates on our AFS securities portfolio.

The Company implemented the current expected credit losses (“CECL”) model on January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. In the first quarter of 2022, the Company began phasing into regulatory capital the cumulative adjustments at the end of the second year of the transition period at 25% per year. At September 30, 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.




















_________________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
14

September 30,June 30,September 30,
Capital ratios202220222021
Pacific Premier Bancorp, Inc. Consolidated   
Tier 1 leverage ratio10.12 %9.90 %9.85 %
Common equity tier 1 capital ratio12.36 11.91 11.96 
Tier 1 capital ratio12.36 11.91 11.96 
Total capital ratio14.83 14.41 14.56 
Tangible common equity ratio (1)
8.59 8.52 9.30 
Pacific Premier Bank
Tier 1 leverage ratio11.64 %11.41 %11.38 %
Common equity tier 1 capital ratio14.23 13.72 13.81 
Tier 1 capital ratio14.23 13.72 13.81 
Total capital ratio15.05 14.54 14.61 
Share data   
Book value per share$28.79 $29.01 $30.08 
Tangible book value per share (1)
18.68 18.86 19.75 
Common equity dividends declared per share0.33 0.33 0.33 
Closing stock price (2)
30.96 29.24 41.44 
Shares issued and outstanding95,016,767 94,976,605 94,354,211 
Market capitalization (2)(3)
$2,941,719 $2,777,116 $3,910,039 
______________________________
(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 October 19, 2022, the Company's Board of Directors declared a $0.33 per share dividend, payable on November 10, 2022 to stockholders of record as of October 31, 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 third quarter of 2022, the Company did not repurchase any shares of common stock.


15

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 20, 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 October 27, 2022, at (877) 344-7529, conference ID 1207116.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. (Nasdaq: PPBI) is the parent company of Pacific Premier Bank, a California-based commercial bank focused on serving small, middle-market, and corporate businesses throughout the western United States in major metropolitan markets in California, Washington, Arizona, and Nevada. Founded in 1983, Pacific Premier Bank has grown to become one of the largest banks headquartered in the western region of the United States, with approximately $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 over $17 billion of assets under custody and approximately 40,000 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. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; our ability to attract and retain deposits and access to other sources of liquidity; 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; possible impairment charges to goodwill, including any impairment that may result from increased volatility in our stock price; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative
16

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 governmental efforts to restructure the U.S. financial regulatory system; the impact of any change in the FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount; changes in consumer spending, borrowing, and savings habits; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; the possibility that we may reduce or discontinue the payments of dividends on our common stock; the possibility that we may discontinue, reduce or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to our stock repurchase program; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism, and/or military conflicts, including the war between Russia and Ukraine, which could impact business and economic conditions in the United States and abroad; public health crises 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; 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

17

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20222022202220212021
ASSETS
Cash and cash equivalents$739,211 $972,798 $809,259 $304,703 $322,320 
Interest-bearing time deposits with financial institutions1,733 2,216 2,216 2,216 2,708 
Investments held-to-maturity, at amortized cost, net of allowance for credit losses 1,385,502 1,390,682 996,382 381,674 170,576 
Investment securities available-for-sale, at fair value2,661,079 2,679,070 3,222,095 4,273,864 4,709,815 
FHLB, FRB, and other stock, at cost118,778 118,636 116,973 117,538 118,399 
Loans held for sale, at lower of amortized cost or fair value2,163 2,957 11,646 10,869 8,100 
Loans held for investment14,908,811 15,047,608 14,733,755 14,295,897 13,982,861 
Allowance for credit losses(195,549)(196,075)(197,517)(197,752)(211,481)
Loans held for investment, net14,713,262 14,851,533 14,536,238 14,098,145 13,771,380 
Accrued interest receivable66,192 66,898 60,922 65,728 63,228 
Premises and equipment65,651 68,435 70,453 71,908 72,850 
Deferred income taxes, net190,948 163,767 133,938 87,344 83,432 
Bank owned life insurance457,301 454,593 451,968 449,353 447,135 
Intangible assets59,028 62,500 65,978 69,571 73,451 
Goodwill901,312 901,312 901,312 901,312 901,312 
Other assets257,041 258,522 242,916 260,204 260,505 
Total assets$21,619,201 $21,993,919 $21,622,296 $21,094,429 $21,005,211 
LIABILITIES  
Deposit accounts:  
Noninterest-bearing checking$6,775,465 $6,934,318 $7,106,548 $6,757,259 $6,841,495 
Interest-bearing:
Checking3,605,498 4,149,432 3,679,067 3,493,331 3,477,902 
Money market/savings5,493,988 5,545,230 5,872,597 5,806,726 6,037,532 
Retail certificates of deposit872,421 855,966 1,031,011 1,058,273 1,113,070 
Wholesale/brokered certificates of deposit999,002 599,667 — — — 
Total interest-bearing10,970,909 11,150,295 10,582,675 10,358,330 10,628,504 
Total deposits17,746,374 18,084,613 17,689,223 17,115,589 17,469,999 
FHLB advances and other borrowings600,000 600,000 600,000 558,000 150,000 
Subordinated debentures331,045 330,886 330,726 330,567 330,408 
Accrued expenses and other liabilities206,386 223,201 219,329 203,962 216,688 
Total liabilities18,883,805 19,238,700 18,839,278 18,208,118 18,167,095 
STOCKHOLDERS’ EQUITY     
Common stock933 933 933 929 929 
Additional paid-in capital2,357,731 2,353,361 2,348,727 2,351,294 2,347,626 
Retained earnings657,845 615,943 577,591 541,950 488,385 
Accumulated other comprehensive (loss) income(281,113)(215,018)(144,233)(7,862)1,176 
Total stockholders' equity2,735,396 2,755,219 2,783,018 2,886,311 2,838,116 
Total liabilities and stockholders' equity$21,619,201 $21,993,919 $21,622,296 $21,094,429 $21,005,211 








18

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedNine Months Ended
 September 30,June 30,September 30,September 30,September 30,
(Dollars in thousands, except per share data)20222022202120222021
INTEREST INCOME   
Loans$174,204 $164,455 $157,025 $489,263 $464,615 
Investment securities and other interest-earning assets24,821 18,771 19,022 61,534 55,118 
Total interest income199,025 183,226 176,047 550,797 519,733 
INTEREST EXPENSE  
Deposits9,873 2,682 2,432 14,228 10,123 
FHLB advances and other borrowings3,480 3,217 1 7,171 66 
Subordinated debentures4,560 4,562 4,545 13,682 17,889 
Total interest expense17,913 10,461 6,978 35,081 28,078 
Net interest income before provision for credit losses181,112 172,765 169,069 515,716 491,655 
Provision for credit losses1,077 469 (19,726)1,994 (56,228)
Net interest income after provision for credit losses180,035 172,296 188,795 513,722 547,883 
NONINTEREST INCOME  
Loan servicing income397 502 536 1,318 1,616 
Service charges on deposit accounts2,704 2,690 2,375 8,009 6,629 
Other service fee income323 366 350 1,056 1,175 
Debit card interchange fee income808 936 834 2,580 2,720 
Earnings on bank owned life insurance3,339 3,240 3,266 9,800 7,778 
Net gain from sales of loans457 1,136 1,187 3,087 3,094 
Net (loss) gain from sales of investment securities(393)(31)4,190 1,710 13,321 
Trust custodial account fees
9,951 10,354 11,446 31,884 26,565 
Escrow and exchange fees1,555 1,827 1,867 5,043 5,065 
Other income1,023 1,173 4,049 3,764 12,606 
Total noninterest income20,164 22,193 30,100 68,251 80,569 
NONINTEREST EXPENSE  
Compensation and benefits56,355 57,562 53,592 170,898 159,614 
Premises and occupancy12,011 11,829 12,611 35,792 36,831 
Data processing7,058 6,604 6,296 19,658 17,889 
FDIC insurance premiums1,461 1,452 1,392 4,309 3,885 
Legal and professional services4,075 4,629 4,563 12,772 12,684 
Marketing expense1,912 1,926 2,008 5,647 5,096 
Office expense1,338 1,252 1,076 3,793 4,494 
Loan expense789 1,144 1,332 3,067 3,612 
Deposit expense4,846 4,081 3,974 12,678 11,818 
Merger-related expense— — — — 5 
Amortization of intangible assets3,472 3,479 3,912 10,543 12,056 
Other expense7,549 5,016 5,284 18,331 15,041 
Total noninterest expense100,866 98,974 96,040 297,488 283,025 
Net income before income taxes99,333 95,515 122,855 284,485 345,427 
Income tax25,970 25,712 32,767 74,415 90,369 
Net income$73,363 $69,803 $90,088 $210,070 $255,058 
EARNINGS PER SHARE  
Basic$0.77 $0.74 $0.95 $2.22 $2.70 
Diluted$0.77 $0.73 $0.95 $2.21 $2.68 
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic93,793,502 93,765,264 93,549,639 93,687,230 93,571,468 
Diluted94,120,637 94,040,691 94,060,724 94,055,116 94,090,407 
19

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 
 Three Months Ended
 September 30, 2022June 30, 2022September 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$665,510 $2,754 1.64 %$702,663 $1,211 0.69 %$663,076 $195 0.12 %
Investment securities4,277,444 22,067 2.06 4,254,961 17,560 1.65 4,807,854 18,827 1.57 
Loans receivable, net (1)(2)
14,986,682 174,204 4.61 14,919,182 164,455 4.42 13,660,242 157,025 4.56 
Total interest-earning assets19,929,636 199,025 3.96 19,876,806 183,226 3.70 19,131,172 176,047 3.65 
Noninterest-earning assets1,757,800 1,793,347 1,673,731 
Total assets$21,687,436 $21,670,153 $20,804,903 
Liabilities and equity
Interest-bearing deposits:
Interest checking$3,812,448 $1,658 0.17 %$4,055,506 $712 0.07 %$3,383,219 $290 0.03 %
Money market5,053,890 2,940 0.23 5,231,464 1,010 0.08 5,554,881 1,309 0.09 
Savings434,591 28 0.03 432,586 27 0.03 401,804 58 0.06 
Retail certificates of deposit835,645 1,420 0.67 922,784 607 0.26 1,196,187 775 0.26 
Wholesale/brokered certificates of deposit702,785 3,827 2.16 80,182 326 1.63 — — — 
Total interest-bearing deposits10,839,359 9,873 0.36 10,722,522 2,682 0.10 10,536,091 2,432 0.09 
FHLB advances and other borrowings636,006 3,480 2.17 602,621 3,217 2.14 1,670 1 0.24 
Subordinated debentures330,975 4,560 5.51 330,796 4,562 5.52 330,575 4,545 5.50 
Total borrowings966,981 8,040 3.31 933,417 7,779 3.34 332,245 4,546 5.43 
Total interest-bearing liabilities11,806,340 17,913 0.60 11,655,939 10,461 0.36 10,868,336 6,978 0.25 
Noninterest-bearing deposits6,893,463 7,030,205 6,809,211 
Other liabilities212,509 219,116 282,556 
Total liabilities18,912,312 18,905,260 17,960,103 
Stockholders' equity2,775,124 2,764,893 2,844,800 
Total liabilities and equity$21,687,436 $21,670,153 $20,804,903 
Net interest income$181,112 $172,765 $169,069 
Net interest margin (3)
3.61 %3.49 %3.51 %
Cost of deposits (4)
0.22 0.06 0.06 
Cost of funds (5)
0.38 0.22 0.16 
Cost of core deposits (6)
0.11 0.04 0.04 
Ratio of interest-earning assets to interest-bearing liabilities168.80 170.53 176.03 
______________________________________________
(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 $4.6 million, $7.5 million, and $9.4 million for the three months ended September 30, 2022, June 30, 2022, and September 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.

20

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(Unaudited)
September 30June 30,March 31,December 31,September 30
(Dollars in thousands)20222022202220212021
Investor loans secured by real estate
CRE non-owner-occupied$2,771,272 $2,788,715 $2,774,650 $2,771,137 $2,823,065 
Multifamily6,199,581 6,188,086 6,041,085 5,891,934 5,705,666 
Construction and land373,194 331,734 303,811 277,640 292,815 
SBA secured by real estate (1)
42,998 44,199 42,642 46,917 49,446 
Total investor loans secured by real estate9,387,045 9,352,734 9,162,188 8,987,628 8,870,992 
Business loans secured by real estate (2)
CRE owner-occupied2,477,530 2,486,747 2,391,984 2,251,014 2,242,164 
Franchise real estate secured383,468 387,683 384,267 380,381 354,481 
SBA secured by real estate (3)
64,002 67,191 68,466 69,184 69,937 
Total business loans secured by real estate2,925,000 2,941,621 2,844,717 2,700,579 2,666,582 
Commercial loans (4)
Commercial and industrial2,164,623 2,295,421 2,242,632 2,103,112 1,888,870 
Franchise non-real estate secured409,773 415,830 388,322 392,576 392,950 
SBA non-real estate secured11,557 11,008 10,761 11,045 12,732 
Total commercial loans2,585,953 2,722,259 2,641,715 2,506,733 2,294,552 
Retail loans
Single family residential (5)
75,176 77,951 79,978 95,292 144,309 
Consumer3,761 4,130 5,157 5,665 6,426 
Total retail loans78,937 82,081 85,135 100,957 150,735 
Loans held for investment before basis adjustment (6)
14,976,935 15,098,695 14,733,755 14,295,897 13,982,861 
Basis adjustment associated with fair value hedge (7)
(68,124)(51,087)— — — 
Loans held for investment14,908,811 15,047,608 14,733,755 14,295,897 13,982,861 
Allowance for credit losses for loans held for investment(195,549)(196,075)(197,517)(197,752)(211,481)
Loans held for investment, net$14,713,262 $14,851,533 $14,536,238 $14,098,145 $13,771,380 
Loans held for sale, at lower of cost or fair value$2,163 $2,957 $11,646 $10,869 $8,100 
______________________________
(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 $59.0 million, $63.6 million, $71.2 million, $77.1 million, and $85.0 million as of September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively.
(7) Represents the basis adjustment associated with the application of hedge accounting on certain loans.




21

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited)
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20222022202220212021
Asset quality
Nonperforming loans$60,464 $44,445 $55,309 $31,273 $35,090 
Other real estate owned— — — — — 
Nonperforming assets$60,464 $44,445 $55,309 $31,273 $35,090 
Total classified assets (1)
$110,143 $106,153 $122,528 $121,827 $124,506 
Allowance for credit losses195,549 196,075 197,517 197,752 211,481 
Allowance for credit losses as a percent of total nonperforming loans323 %441 %357 %632 %603 %
Nonperforming loans as a percent of loans held for investment0.41 0.30 0.38 0.22 0.25 
Nonperforming assets as a percent of total assets0.28 0.20 0.26 0.15 0.17 
Classified loans to total loans held for investment0.74 0.71 0.83 0.85 0.89 
Classified assets to total assets0.51 0.48 0.57 0.58 0.59 
Net loan charge-offs (recoveries) for the quarter ended$1,072 $5,245 $446 $(981)$1,750 
Net loan charge-offs (recoveries) for the quarter to average total loans 0.01 %0.04 %— %(0.01)%0.01 %
Allowance for credit losses to loans held for investment (2)
1.31 1.30 1.34 1.38 1.51 
Delinquent loans   
30 - 59 days$1,484 $6,915 $25,332 $1,395 $728 
60 - 89 days6,535 — 74 — 936 
90+ days33,238 29,360 18,245 18,100 18,514 
Total delinquency$41,257 $36,275 $43,651 $19,495 $20,178 
Delinquency as a percent of loans held for investment0.28 %0.24 %0.30 %0.14 %0.14 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At September 30, 2022, 27% of loans held for investment include a fair value net discount of $59.0 million, or 0.39% of loans held for investment. 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.

22

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
NONACCRUAL LOANS (1)
(Unaudited)
(Dollars in thousands)Collateral Dependent LoansACLNon-Collateral Dependent LoansACLTotal Nonaccrual LoansNonaccrual Loans With No ACL
September 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied$23,050 $2,640 $— $— $23,050 $6,656 
Multifamily8,806 — — — 8,806 8,806 
SBA secured by real estate (2)
547 — — — 547 547 
Total investor loans secured by real estate32,403 2,640 — — 32,403 16,009 
Business loans secured by real estate (3)
CRE owner-occupied11,249 1,742 — — 11,249 9,507 
SBA secured by real estate (4)
197 — — — 197 197 
Total business loans secured by real estate11,446 1,742 — — 11,446 9,704 
Commercial loans (5)
Commercial and industrial4,754 — — — 4,754 4,754 
Franchise non-real estate secured— — 11,254 — 11,254 11,254 
SBA not secured by real estate607 — — — 607 607 
Total commercial loans5,361 — 11,254 — 16,615 16,615 
Totals nonaccrual loans$49,210 $4,382 $11,254 $— $60,464 $42,328 
______________________________
(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.
(2) SBA loans that are collateralized by hotel/motel real property.
(3) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(4) SBA loans that are collateralized by real property other than hotel/motel real property.
(5) Loans to businesses where the operating cash flow of the business is the primary source of repayment.



23

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
PAST DUE STATUS
(Unaudited)
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
September 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied$2,754,403 $— $— $16,869 $2,771,272 
Multifamily6,193,507 — — 6,074 6,199,581 
Construction and land373,194 — — — 373,194 
SBA secured by real estate (1)
42,998 — — — 42,998 
Total investor loans secured by real estate9,364,102 — — 22,943 9,387,045 
Business loans secured by real estate (2)
CRE owner-occupied2,466,281 — 6,398 4,851 2,477,530 
Franchise real estate secured383,468 — — — 383,468 
SBA secured by real estate (3)
62,675 1,244 — 83 64,002 
Total business loans secured by real estate2,912,424 1,244 6,398 4,934 2,925,000 
Commercial loans (4)
Commercial and industrial2,159,494 240 135 4,754 2,164,623 
Franchise non-real estate secured409,773 — — — 409,773 
SBA not secured by real estate10,950 — — 607 11,557 
Total commercial loans2,580,217 240 135 5,361 2,585,953 
Retail loans
Single family residential (5)
75,176 — — — 75,176 
Consumer loans3,759 — 2 — 3,761 
Total retail loans78,935 — 2 — 78,937 
Loans held for investment before basis adjustment (6)
$14,935,678 $1,484 $6,535 $33,238 $14,976,935 
______________________________
(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 $68.1 million to the carrying amount of certain loans included in fair value hedging relationships.



24

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CREDIT RISK GRADES
(Unaudited)
 
(Dollars in thousands)PassSpecial
Mention		SubstandardTotal Gross
Loans
September 30, 2022
Investor loans secured by real estate    
CRE non-owner-occupied$2,736,526 $11,502 $23,244 $2,771,272 
Multifamily6,190,027 — 9,554 6,199,581 
Construction and land373,194 — — 373,194 
SBA secured by real estate (1)
35,094 — 7,904 42,998 
Total investor loans secured by real estate9,334,841 11,502 40,702 9,387,045 
Business loans secured by real estate (2)
CRE owner-occupied2,445,551 9,897 22,082 2,477,530 
Franchise real estate secured376,395 — 7,073 383,468 
SBA secured by real estate (3)
57,915 — 6,087 64,002 
Total business loans secured by real estate2,879,861 9,897 35,242 2,925,000 
Commercial loans (4)
   
Commercial and industrial2,131,335 19,139 14,149 2,164,623 
Franchise non-real estate secured391,085 — 18,688 409,773 
SBA not secured by real estate10,237 — 1,320 11,557 
Total commercial loans2,532,657 19,139 34,157 2,585,953 
Retail loans
Single family residential (5)
75,134 — 42 75,176 
Consumer loans3,761 — — 3,761 
Total retail loans78,895 — 42 78,937 
Loans held for investment before basis adjustment (6)
$14,826,254 $40,538 $110,143 $14,976,935 
______________________________
(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 $68.1 million to the carrying amount of certain loans included in fair value hedging relationships.

25

GAAP to Non-GAAP RECONCILIATIONS

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
(Unaudited)
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
For periods presented below, return on average tangible common equity is a non-GAAP financial measure derived from GAAP based amounts. We calculate this figure by excluding amortization of intangible assets expense from net income and excluding the average intangible assets and average goodwill from the average stockholders' equity during the periods indicated. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
 Three Months Ended
 September 30,June 30,September 30,
(Dollars in thousands)202220222021
Net income$73,363 $69,803 $90,088 
Plus: amortization of intangible assets expense3,472 3,479 3,912 
Less: amortization of intangible assets expense tax adjustment (1)
991 993 1,119 
Net income for average tangible common equity75,844 72,289 92,881 
Average stockholders' equity$2,775,124 $2,764,893 $2,844,800 
Less: average intangible assets61,101 64,583 75,795 
Less: average goodwill901,312 901,312 901,312 
Average tangible common equity$1,812,711 $1,798,998 $1,867,693 
Return on average equity (annualized)10.57 %10.10 %12.67 %
Return on average tangible common equity (annualized)16.74 %16.07 %19.89 %
___________________________________________________
(1) Adjusted by statutory tax rate



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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
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Interest income$199,025 $183,226 $176,047 
Interest expense17,913 10,461 6,978 
Net interest income181,112 172,765 169,069 
Noninterest income20,164 22,193 30,100 
Revenue201,276 194,958 199,169 
Noninterest expense100,866 98,974 96,040 
Pre-provision net revenue100,410 95,984 103,129 
Pre-provision net revenue (annualized)$401,640 $383,936 $412,516 
Average assets$21,687,436 $21,670,153 $20,804,903 
Pre-provision net revenue to average assets0.46 %0.44 %0.50 %
Pre-provision net revenue to average assets (annualized)1.85 %1.77 %1.98 %


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)20222022202220212021
Total stockholders' equity$2,735,396 $2,755,219 $2,783,018 $2,886,311 $2,838,116 
Less: intangible assets960,340 963,812 967,290 970,883 974,763 
Tangible common equity$1,775,056 $1,791,407 $1,815,728 $1,915,428 $1,863,353 
Total assets$21,619,201 $21,993,919 $21,622,296 $21,094,429 $21,005,211 
Less: intangible assets960,340 963,812 967,290 970,883 974,763 
Tangible assets$20,658,861 $21,030,107 $20,655,006 $20,123,546 $20,030,448 
Tangible common equity ratio8.59 %8.52 %8.79 %9.52 %9.30 %
Common shares issued and outstanding95,016,76794,976,60594,945,84994,389,54394,354,211
Book value per share$28.79 $29.01 $29.31 $30.58 $30.08 
Less: intangible book value per share10.11 10.15 10.19 10.29 10.33 
Tangible book value per share$18.68 $18.86 $19.12 $20.29 $19.75 

27

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
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Net interest income$181,112 $172,765 $169,069 
Less: scheduled accretion income2,377 2,626 3,339 
Less: accelerated accretion income2,269 4,918 6,107 
Less: premium amortization on CD39 60 390 
Less: nonrecurring nonaccrual interest paid(848)48 (74)
Less: gain (loss) on fair value hedging relationships4,240 128 (95)
Core net interest income$173,035 $164,985 $159,402 
Average interest-earning assets$19,929,636 $19,876,806 $19,131,172 
Net interest margin3.61 %3.49 %3.51 %
Core net interest margin3.44 %3.33 %3.31 %


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
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Total noninterest expense$100,866 $98,974 $96,040 
Less: amortization of intangible assets3,472 3,479 3,912 
Noninterest expense, adjusted$97,394 $95,495 $92,128 
Net interest income before provision for credit losses$181,112 $172,765 $169,069 
Add: total noninterest income20,164 22,193 30,100 
Less: net (loss) gain from investment securities(393)(31)4,190 
Less: other income - security recoveries— — 1 
Less: net loss from debt extinguishment— — 970 
Revenue, adjusted$201,669 $194,989 $194,008 
Efficiency ratio48.3 %49.0 %47.5 %



28

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
September 30,June 30,September 30,
(Dollars in thousands)202220222021
Total deposits interest expense$9,873 $2,682 $2,432 
Less: certificates of deposit interest expense1,420 607 775 
Less: brokered deposits interest expense3,827 327 2 
Core deposits expense$4,626 $1,748 $1,655 
Total average deposits$17,732,822 $17,752,727 $17,345,302 
Less: average certificates of deposit835,645 922,784 1,196,187 
Less: average brokered deposits703,848 85,131 5,551 
Average core deposits$16,193,329 $16,744,812 $16,143,564 
Cost of core deposits0.11 %0.04 %0.04 %
29