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

Exhibit 99.1

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

Third Quarter 2021 Summary
 
•Net income of $90.1 million, or $0.95 per diluted share
•Total revenue increased to $199.2 million, compared with $187.7 million in the prior quarter
•Return on average assets of 1.73%, return on average equity of 12.67%, and return on average tangible common equity of 19.89%(1)
•Pre-provision net revenue (“PPNR”) on average assets of 1.98%, annualized, and efficiency ratio of 47.5%(1)
•Loan and deposit growth of 11.5% and 10.7%, annualized, respectively
•Net interest margin of 3.51%, compared with 3.44% in the prior quarter
•Cost of deposits of 0.06% in the third quarter compared with 0.08% in the prior quarter
•Tangible book value per diluted share increased to $19.75, compared with $19.38 at prior quarter(1)

Irvine, Calif., October 21, 2021 -- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $90.1 million, or $0.95 per diluted share, for the third quarter of 2021, compared with net income of $96.3 million, or $1.01 per diluted share, for the second quarter of 2021, and net income of $66.6 million, or $0.70 per diluted share, for the third quarter of 2020.
    
For the quarter ended September 30, 2021, the Company’s return on average assets (“ROAA”) was 1.73%, return on average equity (“ROAE”) was 12.67%, and return on average tangible common equity (“ROATCE”) was 19.89%, compared to 1.90%, 14.02%, and 22.45%, respectively, for the second quarter of 2021 and 1.31%, 9.90%, and 16.44%, respectively, for the third quarter of 2020. Total assets were $21.01 billion at September 30, 2021, compared to $20.53 billion at June 30, 2021, and $19.84 billion at September 30, 2020. A reconciliation of the non-U.S. generally accepted accounting principles (“GAAP”) measure of ROATCE to the GAAP measure of ROAE is set forth at the end of this press release.

Steven R. Gardner, Chairman, President, and Chief Executive Officer of the Company, commented, “Our teams continue to drive positive results and deliver a high level of profitability, which we have done consistently over time and throughout varying economic cycles. While the resurgence of COVID-19 cases slowed the pace of the economic recovery during the third quarter, our dynamic business development capabilities coupled with our proprietary technology enabled us to generate high quality loan and deposit growth, increase revenue, and achieve higher positive operating leverage. These efforts further improved our core earnings power.

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

“Our new business pipelines remain healthy, which we anticipate contributing to solid organic growth and strong financial performance, while also remaining well positioned to take advantage of strategic growth opportunities that create long-term value for our shareholders and further enhance our franchise,” said Mr. Gardner.
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.
1

FINANCIAL HIGHLIGHTS
Three Months Ended
 September 30,June 30,September 30,
(Dollars in thousands, except per share data)202120212020
Financial highlights (unaudited)
Net income$90,088 $96,302 $66,566 
Diluted earnings per share0.95 1.01 0.70 
Common equity dividend per share paid0.33 0.33 0.25 
Return on average assets1.73 %1.90 %1.31 %
Return on average equity12.67 14.02 9.90 
Return on average tangible common equity (1)
19.89 22.45 16.44 
Pre-provision net revenue on average assets (1)
1.98 1.84 1.92 
Net interest margin3.51 3.44 3.54 
Core net interest margin (1)
3.30 3.22 3.23 
Cost of deposits0.06 0.08 0.20 
Efficiency ratio (1)
47.5 49.4 47.4 
Noninterest expense (excluding merger-related expense) as a percent of average assets (1)
1.85 %1.86 %1.88 %
Total assets$21,005,211 $20,529,486 $19,844,240 
Total deposits17,469,999 17,015,097 16,330,807 
Loans to deposit ratio80.0 %79.9 %82.4 %
Non-maturity deposits as a percent of total deposits93.6 92.6 89.5 
Book value per share$30.08 $29.72 $28.48 
Tangible book value per share (1)
19.75 19.38 18.01 
Total risk-based capital ratio14.56 %15.61 %16.11 %
______________________________
(1) Reconciliations of the non-GAAP measures are set forth at the end of this press release.


INCOME STATEMENT HIGHLIGHTS

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

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

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

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PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 Three Months Ended
 September 30, 2021June 30, 2021September 30, 2020
(Dollars in thousands)Average BalanceInterest Income/ExpenseAverage
 Yield/
 Cost		Average BalanceInterest Income/ExpenseAverage
 Yield/
 Cost		Average BalanceInterest Income/ExpenseAverage Yield/ Cost
Assets
Cash and cash equivalents$663,076 $195 0.12 %$1,323,186 $315 0.10 %$1,388,897 $305 0.09 %
Investment securities4,807,854 18,827 1.57 4,243,644 18,012 1.70 3,283,840 14,231 1.73 
Loans receivable, net (1) (2)
13,660,242 157,025 4.56 13,216,973 152,365 4.62 14,034,868 167,455 4.75 
Total interest-earning assets$19,131,172 $176,047 3.65 $18,783,803 $170,692 3.64 $18,707,605 $181,991 3.87 
Liabilities
Interest-bearing deposits$10,536,091 $2,432 0.09 $10,395,002 $3,265 0.13 $10,703,431 $8,509 0.32 
Borrowings332,245 4,546 5.43 486,718 6,493 5.35 542,437 6,936 5.09 
Total interest-bearing liabilities$10,868,336 $6,978 0.25 $10,881,720 $9,758 0.36 $11,245,868 $15,445 0.55 
Noninterest-bearing deposits$6,809,211 $6,341,063 $5,877,619 
Net interest income$169,069 $160,934 $166,546 
Net interest margin (3)
  3.51 3.44 3.54 
Cost of deposits (4)
0.06 0.08 0.20 
Cost of funds (5)
0.16 0.23 0.36 
Ratio of interest-earning assets to interest-bearing liabilities176.03 172.62 166.35 
____________________________________
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums.
(2) Interest income includes net discount accretion of $9.4 million, $9.5 million, and $12.2 million, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.
(5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

Provision for Credit Losses

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

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Provision for credit losses
Provision for loan losses$(19,543)$(33,131)$4,702 
Provision for unfunded commitments(194)(5,345)(492)
Provision for held-to-maturity securities11 — — 
Total provision for credit losses$(19,726)$(38,476)$4,210 
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Noninterest Income
 
Noninterest income for the third quarter of 2021 was $30.1 million, an increase of $3.4 million from the second quarter of 2021. The increase was primarily due to a $3.5 million increase in trust custodial account fees and a $987,000 increase in earnings on bank-owned life insurance ("BOLI"), partially offset by a $895,000 decrease in net gain from sales of investment securities. Also, other income included a $970,000 net gain on debt extinguishment compared to a $647,000 loss in the prior quarter, partially offset by $1.1 million lower CRA investment income and $483,000 lower Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loan referral fees.

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

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

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

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

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Noninterest income
Loan servicing income$536 $622 $481 
Service charges on deposit accounts2,375 2,222 1,593 
Other service fee income350 352 487 
Debit card interchange fee income834 1,099 944 
Earnings on BOLI3,266 2,279 2,270 
Net gain from sales of loans1,187 1,546 9,542 
Net gain from sales of investment securities4,190 5,085 1,141 
Trust custodial account fees
11,446 7,897 6,960 
Escrow and exchange fees1,867 1,672 1,142 
Other income4,049 3,955 2,198 
Total noninterest income$30,100 $26,729 $26,758 
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 Noninterest Expense
 
Noninterest expense totaled $96.0 million for the third quarter of 2021, an increase of $1.5 million compared to the second quarter of 2021, primarily driven by a $531,000 increase in data processing expense and a $518,000 increase in marketing expense.

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

Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Noninterest expense
Compensation and benefits$53,592 $53,474 $51,021 
Premises and occupancy12,611 12,240 12,373 
Data processing6,296 5,765 6,783 
Other real estate owned operations, net— — (17)
FDIC insurance premiums1,392 1,312 1,145 
Legal and professional services4,563 4,186 5,108 
Marketing expense2,008 1,490 1,718 
Office expense1,076 1,589 2,389 
Loan expense1,332 1,165 802 
Deposit expense3,974 3,985 4,728 
Merger-related expense— — 2,988 
Amortization of intangible assets3,912 4,001 4,538 
Other expense5,284 5,289 5,003 
Total noninterest expense$96,040 $94,496 $98,579 

Income Tax

For the third quarter of 2021, our income tax expense totaled $32.8 million, resulting in an effective tax rate of 26.7%, compared with income tax expense of $35.3 million and an effective tax rate of 26.8% for the second quarter of 2021, and income tax expense of $23.9 million and an effective tax rate of 26.5% for the third quarter of 2020. Based on our actual and projected level of earnings for 2021, our estimated effective tax rate for the full year is expected to be in the range of 26 to 27%.


5

BALANCE SHEET HIGHLIGHTS
    
Loans

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

During the third quarter of 2021, the Bank generated $1.46 billion of loan commitments and funded $1.10 billion of new loans, compared with $1.58 billion in loan commitments and $1.15 billion in funded loans for the second quarter of 2021, and $360.0 million in loan commitments and $280.8 million in funded loans for the third quarter of 2020. Business line commitments totaled $2.75 billion with an average utilization rate of 33.12% for the third quarter of 2021, compared with business line commitments of $2.59 billion with an average utilization rate of 31.96% for the second quarter of 2021, and business line commitments of $2.11 billion with an average utilization rate of 36.37% for the third quarter of 2020.
 
At September 30, 2021, the ratio of loans held for investment to total deposits was 80.0%, compared with 79.9% and 82.4% at June 30, 2021 and September 30, 2020, respectively.

The following table presents the primary loan roll-forward activities for total loans, including both loans held for investment and loans held for sale, during the quarters indicated:
Three Months Ended
September 30,June 30,
(Dollars in thousands)20212021
Beginning loan balance$13,599,312 $13,124,703 
New commitments1,459,201 1,576,884 
Unfunded new commitments(359,000)(423,797)
Net new fundings1,100,201 1,153,087 
Amortization/maturities/payoffs(762,795)(821,502)
Net draws on existing lines of credit69,141 161,273 
Loan sales(12,258)(14,959)
Charge-offs(2,640)(3,290)
Net increase391,649 474,609 
Ending loan balance$13,990,961 $13,599,312 

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The following table presents the composition of the loan portfolio as of the dates indicated:
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Investor loans secured by real estate
Commercial real estate (“CRE”) non-owner-occupied$2,823,065 $2,810,233 $2,707,930 
Multifamily5,705,666 5,539,464 5,142,069 
Construction and land292,815 297,728 337,872 
SBA secured by real estate (1)
49,446 53,003 57,610 
Total investor loans secured by real estate8,870,992 8,700,428 8,245,481 
Business loans secured by real estate (2)
CRE owner-occupied2,242,164 2,089,300 2,119,788 
Franchise real estate secured354,481 358,120 359,329 
SBA secured by real estate (3)
69,937 72,923 84,126 
Total business loans secured by real estate2,666,582 2,520,343 2,563,243 
Commercial loans (4)
Commercial and industrial1,888,870 1,795,144 1,820,995 
Franchise non-real estate secured392,950 401,315 515,980 
SBA non-real estate secured12,732 13,900 16,748 
Total commercial loans2,294,552 2,210,359 2,353,723 
Retail loans
Single family residential (5)
144,309 157,228 243,359 
Consumer6,426 6,240 45,034 
Total retail loans150,735 163,468 288,393 
Gross loans held for investment (6)
13,982,861 13,594,598 13,450,840 
Allowance for credit losses for loans held for investment(211,481)(232,774)(282,503)
Loans held for investment, net$13,771,380 $13,361,824 $13,168,337 
Total unfunded loan commitments$2,504,188 $2,345,364 $1,868,264 
Loans held for sale, at lower of cost or fair value$8,100 $4,714 $1,032 
______________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.
(6) Includes unaccreted fair value net purchase discounts of $85.0 million, $94.4 million, and $126.3 million as of September 30, 2021, June 30, 2021, and September 30, 2020, respectively.


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

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The following table presents the composition of loan commitments originated during the quarters indicated:
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Investor loans secured by real estate
CRE non-owner-occupied$105,792 $181,995 $40,518 
Multifamily613,640 631,360 182,575 
Construction and land99,943 148,422 37,087 
SBA secured by real estate (1)
1,410 — — 
Total investor loans secured by real estate820,785 961,777 260,180 
Business loans secured by real estate (2)
CRE owner-occupied256,269 181,385 30,594 
Franchise real estate secured19,207 39,320 — 
SBA secured by real estate (3)
15,065 13,445 799 
Total business loans secured by real estate290,541 234,150 31,393 
Commercial loans (4)
Commercial and industrial310,985 316,162 56,959 
Franchise non-real estate secured21,654 41,501 9,665 
SBA non-real estate secured— 1,000 — 
Total commercial loans332,639 358,663 66,624 
Retail loans
Single family residential (5)
14,782 14,744 — 
Consumer454 7,550 1,825 
Total retail loans15,236 22,294 1,825 
Total loan commitments$1,459,201 $1,576,884 $360,022 
______________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.

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

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

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


8

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

Three Months Ended September 30, 2021
(Dollars in thousands) Beginning ACL Balance  Charge-offs  Recoveries Provision for Credit Losses  Ending
ACL Balance
Investor loans secured by real estate
CRE non-owner occupied$47,112 $— $— $(4,645)$42,467 
Multifamily59,059 — — (6,895)52,164 
Construction and land9,548 — — (1,531)8,017 
SBA secured by real estate (1)
4,681 (158)— (644)3,879 
Business loans secured by real estate (2)
CRE owner-occupied35,747 — 14 (2,082)33,679 
Franchise real estate secured11,436 — — (1,810)9,626 
SBA secured by real estate (3)
6,317 — 50 (1,263)5,104 
Commercial loans (4)
Commercial and industrial39,879 (84)729 (2,929)37,595 
Franchise non-real estate secured17,313 (2,398)80 2,523 17,518 
SBA non-real estate secured730 — 15 (113)632 
Retail loans
Single family residential (5)
670 — 2 (143)529 
Consumer loans282 — — (11)271 
Totals$232,774 $(2,640)$890 $(19,543)$211,481 
______________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.


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

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

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


9

Interest is not typically accrued on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. There were no loans 90 days or more past due and still accruing interest at September 30, 2021. There were six troubled debt restructured loans belonging to two borrower relationships totaling $17.6 million at September 30, 2021, compared to $17.8 million troubled debt restructured loans comprised of the same six loans to the two borrower relationships reported at June 30, 2021, and no troubled debt restructured loans at September 30, 2020.

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

 September 30,June 30,September 30,
(Dollars in thousands)202120212020
Asset quality
Nonperforming loans$35,090 $34,387 $27,214 
Other real estate owned— — 334 
Nonperforming assets$35,090 $34,387 $27,548 
Total classified assets (1)
$124,506 $131,350 $137,042 
Allowance for credit losses211,481 232,774 282,503 
Allowance for credit losses as a percent of total nonperforming loans603 %677 %1,038 %
Nonperforming loans as a percent of loans held for investment0.25 0.25 0.20 
Nonperforming assets as a percent of total assets0.17 0.17 0.14 
Classified loans to total loans held for investment0.89 0.97 1.02 
Classified assets to total assets0.59 0.64 0.69 
Net loan charge-offs for the quarter ended$1,750 $1,094 $4,470 
Net loan charge-offs for the quarter to average total loans0.01 %0.01 %0.03 %
Allowance for credit losses to loans held for investment (2)
1.51 1.71 2.10 
Loans modified under the CARES Act$— $819 $118,298 
Loans modified under the CARES Act as a percent of loans held for investment— %0.01 %0.88 %
Delinquent loans  
30 - 59 days$728 $207 $7,084 
60 - 89 days936 83 1,086 
90+ days18,514 19,045 21,206 
Total delinquency$20,178 $19,335 $29,376 
Delinquency as a percentage of loans held for investment0.14 %0.14 %0.22 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At September 30, 2021, 40% of loans held for investment include a fair value net discount of $85.0 million, or 0.60% of loans held for investment. At June 30, 2021, 45% of loans held for investment include a fair value net discount of $94.4 million, or 0.69% of loans held for investment. At September 30, 2020, 58% of loans held for investment include a fair value net discount of $126.3 million, or 0.93% of loans held for investment.

10

Investment Securities

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

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

Deposits

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

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

The end of period weighted average rate of deposits at September 30, 2021 was 0.04%.
11

 September 30,June 30,September 30,
(Dollars in thousands)202120212020
Deposit accounts
Noninterest-bearing checking$6,841,495 $6,768,384 $5,895,744 
Interest-bearing:
Checking3,477,902 3,103,343 2,937,910 
Money market/savings6,037,532 5,883,672 5,778,688 
Retail certificates of deposit1,113,070 1,259,698 1,542,029 
Wholesale/brokered certificates of deposit— — 176,436 
Total interest-bearing10,628,504 10,246,713 10,435,063 
Total deposits$17,469,999 $17,015,097 $16,330,807 
Cost of deposits0.06 %0.08 %0.20 %
Noninterest-bearing deposits as a percentage of total deposits39.2 39.8 36.1 
Non-maturity deposits as a percent of total deposits93.6 92.6 89.5 
Core deposits as a percent of total deposits (1)
97.0 96.5 96.0 
______________________________
(1) Core deposits are all transaction accounts and non-brokered certificates of deposit less than $250,000.

Borrowings

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

Capital Ratios

At September 30, 2021, our common stockholder's equity was $2.84 billion, or 13.51% of total assets, compared with $2.81 billion, or 13.70%, at June 30, 2021, and $2.69 billion, or 13.55%, at September 30, 2020, with a book value per share of $30.08, compared with $29.72 at June 30, 2021, and $28.48 at September 30, 2020. At September 30, 2021, our ratio of tangible common equity to total assets was 9.30%, compared with 9.38% at June 30, 2021, and 9.01% at September 30, 2020, with a tangible book value per share of $19.75, compared with $19.38 at June 30, 2021, and $18.01 at September 30, 2020. Reconciliations of the non-GAAP measures of tangible common equity ratio and tangible book value per share to the GAAP measures of common stockholders' equity and book value per share, respectively, are set forth at the end of this press release.

The Company implemented the CECL model on January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. At September 30, 2021, the Company had a tier 1 leverage ratio of 9.85%, common equity tier 1 capital ratio of 11.96%, tier 1 capital ratio of 11.96%, and total capital ratio of 14.56%. At September 30, 2021, the Bank had a tier 1 leverage ratio of 11.38%, common equity tier 1 capital ratio of 13.81%, tier 1 capital ratio of 13.81%, and total capital ratio of 14.61%. The decrease in total capital ratio from prior quarters was primarily driven by the redemptions of subordinated debentures during the current quarter.


12

The capital ratios of the Company and the Bank exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage ratio, 6.50% for common equity tier 1 capital ratio, 8.00% for tier 1 capital ratio, and 10.00% for total capital ratio and exceeded the minimum capital ratio levels inclusive of the fully phased-in capital conservation buffer of 4.00%, 7.00%, 8.50%, and 10.50%, respectively.

September 30,June 30,September 30,
Capital ratios202120212020
Pacific Premier Bancorp, Inc. Consolidated   
Tier 1 leverage ratio9.85 %9.83 %9.09 %
Common equity tier 1 risk-based capital ratio11.96 11.89 11.79 
Tier 1 capital ratio11.96 11.89 11.79 
Total capital ratio14.56 15.61 16.11 
Tangible common equity ratio (1)
9.30 9.38 9.01 
Pacific Premier Bank
Tier 1 leverage ratio11.38 %11.31 %10.33 %
Common equity tier 1 risk-based capital ratio13.81 13.67 13.40 
Tier 1 capital ratio13.81 13.67 13.40 
Total capital ratio14.61 15.44 15.48 
Share data   
Book value per share$30.08 $29.72 $28.48 
Tangible book value per share (1)
19.75 19.38 18.01 
Common equity dividends declared per share0.33 0.33 0.25 
Closing stock price (2)
41.44 42.29 20.14 
Shares issued and outstanding94,354,211 94,656,575 94,375,521 
Market capitalization (2)(3)
$3,910,039 $4,003,027 $1,900,723 
______________________________
(1) A reconciliation of the non-GAAP measures of tangible common equity and tangible book value per share to the GAAP measures of common stockholders' equity and book value per share, respectively, is set forth at the end of this press release.
(2) As of the last trading day prior to period end.
(3) Dollars in thousands.

Dividend and Stock Repurchase Program

On October 19, 2021, the Company's Board of Directors declared a $0.33 per share dividend, payable on November 12, 2021 to stockholders of record as of November 1, 2021. In January 2021, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock. During the third quarter of 2021, the Company repurchased 280,270 shares of common stock at an average price of $39.82 per share with a total market value of $11.2 million under this program.






13

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 21, 2021 to discuss its financial results. Analysts and investors may participate in the question-and-answer session. A live webcast will be available on the Webcasts page of the Company's investor relations website. An archived version of the webcast will be available in the same location shortly after the live call has ended. The conference call can be accessed by telephone at (866) 290-5977 and asking to be joined to the Pacific Premier Bancorp conference call. Additionally, a telephone replay will be made available through October 28, 2021 at (877) 344-7529, conference ID 10160294.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. (Nasdaq: PPBI) is the parent company of Pacific Premier Bank, a California-based commercial bank focused on serving small, middle-market, and corporate businesses throughout the western United States in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada. Founded in 1983, Pacific Premier Bank has grown to become one of the largest banks headquartered in the western region of the United States, with $21 billion in total assets. Pacific Premier Bank provides banking products and services, including deposit accounts, digital banking, and treasury management services, to businesses, professionals, entrepreneurs, real estate investors, and nonprofit organizations. Pacific Premier Bank also offers a wide array of loan products, such as commercial business loans, lines of credit, SBA loans, commercial real estate loans, agribusiness loans, franchise lending, home equity lines of credit, and construction loans. Pacific Premier Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Commerce Escrow division. Pacific Premier Bank offers clients IRA custodial services through its Pacific Premier Trust division, which has over $17 billion of assets under custody and approximately 44,000 client accounts comprised of self-directed investors, financial institutions, capital syndicators, and financial advisors. Additionally, Pacific Premier Bank provides nationwide customized banking solutions to Homeowners’ Associations and Property Management companies. Pacific Premier Bank is an Equal Housing Lender and Member FDIC. For additional information about Pacific Premier Bancorp, Inc. and Pacific Premier Bank, visit our website: www.ppbi.com.

FORWARD-LOOKING STATEMENTS
 
The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, stockholder value creation, tax rates, and the impact of acquisitions we have made or may make.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. Given the ongoing and dynamic nature of the COVID-19 pandemic, the ultimate extent of the impacts on our business, financial position, results of operations, liquidity and prospects remain uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility, which could result in impairment to our goodwill in future periods. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic, could affect us in substantial and unpredictable ways, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance. Other risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve
14

System; inflation/deflation, interest rate, market, and monetary fluctuations; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” commonly referenced as the CECL model, which has changed how we estimate credit losses and may further increase the required level of our allowance for credit losses in future periods; possible credit related impairments of securities held by us; possible impairment charges to goodwill; the impact of governmental efforts to restructure the U.S. financial regulatory system; changes in consumer spending, borrowing, and savings habits; the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; our ability to attract deposits and other sources of liquidity; the possibility that we may reduce or discontinue the payments of dividends on our common stock; the possibility that we may discontinue our stock repurchase program or reduce or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to such program; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism, and/or military conflicts, which could impact business and economic conditions in the United States and abroad; public health crisis and pandemics, including the COVID-19 pandemic, and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; unanticipated regulatory or legal proceedings; and our ability to manage the risks involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2020 Annual Report on Form 10-K filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Contacts:
 
Pacific Premier Bancorp, Inc.
 
Steven R. Gardner
Chairman, President, and Chief Executive Officer
(949) 864-8000

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

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

15

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)20212021202020202020
ASSETS
Cash and cash equivalents$322,320 $631,888 $1,554,668 $880,766 $1,103,077 
Interest-bearing time deposits with financial institutions2,708 2,708 2,708 2,845 2,845 
Investments held-to-maturity, at amortized cost, net of allowance for credit losses 170,576 18,933 21,931 23,732 27,980 
Investment securities available-for-sale, at fair value4,709,815 4,487,447 3,857,337 3,931,115 3,600,731 
FHLB, FRB, and other stock, at cost118,399 117,738 117,843 117,055 116,819 
Loans held for sale, at lower of amortized cost or fair value8,100 4,714 7,311 601 1,032 
Loans held for investment13,982,861 13,594,598 13,117,392 13,236,433 13,450,840 
Allowance for credit losses(211,481)(232,774)(266,999)(268,018)(282,503)
Loans held for investment, net13,771,380 13,361,824 12,850,393 12,968,415 13,168,337 
Accrued interest receivable63,228 67,529 65,098 74,574 73,112 
Other real estate owned— — — — 334 
Premises and equipment72,850 73,821 76,329 78,884 80,326 
Deferred income taxes, net83,432 81,741 104,450 89,056 108,050 
Bank owned life insurance447,135 444,645 292,932 292,564 290,875 
Intangible assets73,451 77,363 81,364 85,507 90,012 
Goodwill901,312 901,312 900,204 898,569 898,434 
Other assets260,505 257,823 240,730 292,861 282,276 
Total assets$21,005,211 $20,529,486 $20,173,298 $19,736,544 $19,844,240 
LIABILITIES  
Deposit accounts:  
Noninterest-bearing checking$6,841,495 $6,768,384 $6,302,703 $6,011,106 $5,895,744 
Interest-bearing:
Checking3,477,902 3,103,343 3,155,071 2,913,260 2,937,910 
Money market/savings6,037,532 5,883,672 5,911,417 5,662,969 5,778,688 
Retail certificates of deposit1,113,070 1,259,698 1,353,431 1,471,512 1,542,029 
Wholesale/brokered certificates of deposit— — 17,385 155,330 176,436 
Total interest-bearing10,628,504 10,246,713 10,437,304 10,203,071 10,435,063 
Total deposits17,469,999 17,015,097 16,740,007 16,214,177 16,330,807 
FHLB advances and other borrowings150,000 — 10,000 31,000 41,000 
Subordinated debentures330,408 476,622 501,611 501,511 501,443 
Accrued expenses and other liabilities216,688 224,348 218,582 243,207 282,905 
Total liabilities18,167,095 17,716,067 17,470,200 16,989,895 17,156,155 
STOCKHOLDERS’ EQUITY     
Common stock929 931 931 931 930 
Additional paid-in capital2,347,626 2,352,112 2,348,445 2,354,871 2,351,532 
Retained earnings488,385 433,852 368,911 330,555 289,960 
Accumulated other comprehensive income (loss)1,176 26,524 (15,189)60,292 45,663 
Total stockholders' equity2,838,116 2,813,419 2,703,098 2,746,649 2,688,085 
Total liabilities and stockholders' equity$21,005,211 $20,529,486 $20,173,298 $19,736,544 $19,844,240 
16

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)20212021202020212020
INTEREST INCOME   
Loans$157,025 $152,365 $167,455 $464,615 $414,059 
Investment securities and other interest-earning assets19,022 18,327 14,536 55,118 35,843 
Total interest income176,047 170,692 181,991 519,733 449,902 
INTEREST EXPENSE  
Deposits2,432 3,265 8,509 10,123 28,651 
FHLB advances and other borrowings1 — 113 66 1,411 
Subordinated debentures4,545 6,493 6,823 17,889 13,827 
Total interest expense6,978 9,758 15,445 28,078 43,889 
Net interest income before provision for credit losses169,069 160,934 166,546 491,655 406,013 
Provision for credit losses(19,726)(38,476)4,210 (56,228)190,299 
Net interest income after provision for credit losses188,795 199,410 162,336 547,883 215,714 
NONINTEREST INCOME  
Loan servicing income536 622 481 1,616 1,395 
Service charges on deposit accounts2,375 2,222 1,593 6,629 4,707 
Other service fee income350 352 487 1,175 1,095 
Debit card interchange fee income834 1,099 944 2,720 1,749 
Earnings on BOLI3,266 2,279 2,270 7,778 4,920 
Net gain from sales of loans1,187 1,546 9,542 3,094 8,281 
Net gain from sales of investment securities4,190 5,085 1,141 13,321 8,880 
Trust custodial account fees
11,446 7,897 6,960 26,565 9,357 
Escrow and exchange fees1,867 1,672 1,142 5,065 1,407 
Other income4,049 3,955 2,198 12,606 6,340 
Total noninterest income30,100 26,729 26,758 80,569 48,131 
NONINTEREST EXPENSE  
Compensation and benefits53,592 53,474 51,021 159,614 128,408 
Premises and occupancy12,611 12,240 12,373 36,831 30,028 
Data processing6,296 5,765 6,783 17,889 14,501 
Other real estate owned operations, net— — (17)— 6 
FDIC insurance premiums1,392 1,312 1,145 3,885 2,358 
Legal and professional services4,563 4,186 5,108 12,684 11,328 
Marketing expense2,008 1,490 1,718 5,096 4,449 
Office expense1,076 1,589 2,389 4,494 5,025 
Loan expense1,332 1,165 802 3,612 2,447 
Deposit expense3,974 3,985 4,728 11,818 14,674 
Merger-related expense— — 2,988 5 44,058 
Amortization of intangible assets3,912 4,001 4,538 12,056 12,567 
Other expense5,284 5,289 5,003 15,041 11,331 
Total noninterest expense96,040 94,496 98,579 283,025 281,180 
Net income (loss) before income taxes122,855 131,643 90,515 345,427 (17,335)
Income tax expense (benefit)32,767 35,341 23,949 90,369 (10,550)
Net income (loss)$90,088 $96,302 $66,566 $255,058 $(6,785)
EARNINGS (LOSS) PER SHARE  
Basic$0.95 $1.02 $0.71 $2.70 $(0.10)
Diluted$0.95 $1.01 $0.70 $2.68 $(0.10)
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic93,549,639 93,635,392 93,529,967 93,571,468 74,391,688 
Diluted94,060,724 94,218,028 93,719,167 94,090,407 74,391,688 
17

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
(Unaudited)
 
 Three Months Ended
 September 30, 2021June 30, 2021September 30, 2020
(Dollars in thousands)Average BalanceInterest Income/ExpenseAverage Yield/CostAverage BalanceInterest Income/ExpenseAverage Yield/CostAverage BalanceInterest Income/ExpenseAverage Yield/Cost
Assets
Interest-earning assets:         
Cash and cash equivalents$663,076 $195 0.12 %$1,323,186 $315 0.10 %$1,388,897 $305 0.09 %
Investment securities4,807,854 18,827 1.57 4,243,644 18,012 1.70 3,283,840 14,231 1.73 
Loans receivable, net (1)(2)
13,660,242 157,025 4.56 13,216,973 152,365 4.62 14,034,868 167,455 4.75 
Total interest-earning assets19,131,172 176,047 3.65 18,783,803 170,692 3.64 18,707,605 181,991 3.87 
Noninterest-earning assets1,673,731 1,506,612 1,659,156 
Total assets$20,804,903 $20,290,415 $20,366,761 
Liabilities and equity
Interest-bearing deposits:
Interest checking$3,383,219 $290 0.03 %$3,155,935 $336 0.04 %$3,001,738 $1,191 0.16 %
Money market5,554,881 1,309 0.09 5,558,790 2,002 0.14 5,490,541 4,855 0.35 
Savings401,804 58 0.06 384,376 84 0.09 357,768 109 0.12 
Retail certificates of deposit1,196,187 775 0.26 1,294,544 839 0.26 1,587,712 1,857 0.47 
Wholesale/brokered certificates of deposit— — — 1,357 4 1.18 265,672 497 0.74 
Total interest-bearing deposits10,536,091 2,432 0.09 10,395,002 3,265 0.13 10,703,431 8,509 0.32 
FHLB advances and other borrowings1,670 1 0.24 6,303 — — 41,041 113 1.10 
Subordinated debentures330,575 4,545 5.50 480,415 6,493 5.41 501,396 6,823 5.44 
Total borrowings332,245 4,546 5.43 486,718 6,493 5.35 542,437 6,936 5.09 
Total interest-bearing liabilities10,868,336 6,978 0.25 10,881,720 9,758 0.36 11,245,868 15,445 0.55 
Noninterest-bearing deposits6,809,211 6,341,063 5,877,619 
Other liabilities282,556 320,324 553,407 
Total liabilities17,960,103 17,543,107 17,676,894 
Stockholders' equity2,844,800 2,747,308 2,689,867 
Total liabilities and equity$20,804,903 $20,290,415 $20,366,761 
Net interest income$169,069 $160,934 $166,546 
Net interest margin (3)
3.51 %3.44 %3.54 %
Cost of deposits (4)
0.06 0.08 0.20 
Cost of funds (5)
0.16 0.23 0.36 
Ratio of interest-earning assets to interest-bearing liabilities176.03 172.62 166.35 
______________________________
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums.
(2) Interest income includes net discount accretion of $9.4 million, $9.5 million, and $12.2 million, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.
(5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
18

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(Unaudited)
SeptemberJune 30,March 31,December 31,September 30,
(Dollars in thousands)20212021202120202020
Investor loans secured by real estate
CRE non-owner-occupied$2,823,065 $2,810,233 $2,729,785 $2,675,085 $2,707,930 
Multifamily5,705,666 5,539,464 5,309,592 5,171,356 5,142,069 
Construction and land292,815 297,728 316,458 321,993 337,872 
SBA secured by real estate (1)
49,446 53,003 56,381 57,331 57,610 
Total investor loans secured by real estate8,870,992 8,700,428 8,412,216 8,225,765 8,245,481 
Business loans secured by real estate (2)
CRE owner-occupied2,242,164 2,089,300 2,029,984 2,114,050 2,119,788 
Franchise real estate secured354,481 358,120 340,805 347,932 359,329 
SBA secured by real estate (3)
69,937 72,923 73,967 79,595 84,126 
Total business loans secured by real estate2,666,582 2,520,343 2,444,756 2,541,577 2,563,243 
Commercial loans (4)
Commercial and industrial1,888,870 1,795,144 1,656,098 1,768,834 1,820,995 
Franchise non-real estate secured392,950 401,315 399,041 444,797 515,980 
SBA non-real estate secured12,732 13,900 14,908 15,957 16,748 
Total commercial loans2,294,552 2,210,359 2,070,047 2,229,588 2,353,723 
Retail loans
Single family residential (5)
144,309 157,228 184,049 232,574 243,359 
Consumer6,426 6,240 6,324 6,929 45,034 
Total retail loans150,735 163,468 190,373 239,503 288,393 
Gross loans held for investment (6)
13,982,861 13,594,598 13,117,392 13,236,433 13,450,840 
Allowance for credit losses for loans held for investment(211,481)(232,774)(266,999)(268,018)(282,503)
Loans held for investment, net$13,771,380 $13,361,824 $12,850,393 $12,968,415 $13,168,337 
Loans held for sale, at lower of cost or fair value$8,100 $4,714 $7,311 $601 $1,032 
______________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.
(6) Includes unaccreted fair value net purchase discounts of $85.0 million, $94.4 million, $103.9 million, $113.8 million, and $126.3 million as of September 30, 2021, June 30, 2021, March 31, 2021, December 31,2020, and September 30, 2020, respectively.



19

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(Unaudited)
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands)20212021202120202020
Asset quality
Nonperforming loans$35,090 $34,387 $38,909 $29,209 $27,214 
Other real estate owned— — — — 334 
Nonperforming assets$35,090 $34,387 $38,909 $29,209 $27,548 
Total classified assets (1)
$124,506 $131,350 $134,667 $128,332 $137,042 
Allowance for credit losses211,481 232,774 266,999 268,018 282,503 
Allowance for credit losses as a percent of total nonperforming loans603 %677 %686 %918 %1,038 %
Nonperforming loans as a percent of loans held for investment0.25 0.25 0.30 0.22 0.20 
Nonperforming assets as a percent of total assets0.17 0.17 0.19 0.15 0.14 
Classified loans to total loans held for investment0.89 0.97 1.03 0.97 1.02 
Classified assets to total assets0.59 0.64 0.67 0.65 0.69 
Net loan charge-offs for the quarter ended$1,750 $1,094 $1,334 $6,406 $4,470 
Net loan charge-offs for the quarter to average total loans 0.01 %0.01 %0.01 %0.05 %0.03 %
Allowance for credit losses to loans held for investment (2)
1.51 1.71 2.04 2.02 2.10 
Loans modified under the CARES Act$— $819 $— $79,465 $118,298 
Loans modified under the CARES Act as a percent of loans held for investment— %0.01 %— %0.60 %0.88 %
Delinquent loans   
30 - 59 days$728 $207 $13,116 $1,269 $7,084 
60 - 89 days936 83 61 57 1,086 
90+ days18,514 19,045 9,410 11,996 21,206 
Total delinquency$20,178 $19,335 $22,587 $13,322 $29,376 
Delinquency as a percent of loans held for investment0.14 %0.14 %0.17 %0.10 %0.22 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At September 30, 2021, 40% of loans held for investment include a fair value net discount of $85.0 million, or 0.60% of loans held for investment. At June 30, 2021, 45% of loans held for investment include a fair value net discount of $94.4 million, or 0.69% of loans held for investment. At September 30, 2020, 58% of loans held for investment include a fair value net discount of $126.3 million, or 0.93% of loans held for investment.
20

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, 2021
Investor loans secured by real estate
CRE non-owner-occupied$12,179 $571 $— $— $12,179 $4,563 
SBA secured by real estate (2)
976 — — — 976 976 
Total investor loans secured by real estate13,155 571 — — 13,155 5,539 
Business loans secured by real estate (3)
CRE owner-occupied4,978 — — — 4,978 4,978 
SBA secured by real estate (4)
604 — — — 604 604 
Total business loans secured by real estate5,582 — — — 5,582 5,582 
Commercial loans (5)
Commercial and industrial1,816 — 443 — 2,259 2,259 
Franchise non-real estate secured1,086 — 12,333 — 13,419 13,419 
SBA not secured by real estate664 — — — 664 664 
Total commercial loans3,566 — 12,776 — 16,342 16,342 
Retail loans
Single family residential (6)
11 — — — 11 11 
Total retail loans11 — — — 11 11 
Totals nonaccrual loans$22,314 $571 $12,776 $— $35,090 $27,474 
______________________________
(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.
(2) SBA loans that are collateralized by hotel/motel real property.
(3) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(4) SBA loans that are collateralized by real property other than hotel/motel real property.
(5) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(6) Single family residential includes home equity lines of credit, as well as second trust deeds.



21

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
PAST DUE STATUS
(Unaudited)
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
September 30, 2021
Investor loans secured by real estate
CRE non-owner-occupied$2,812,797 $— $— $10,268 $2,823,065 
Multifamily5,705,666 — — — 5,705,666 
Construction and land292,815 — — — 292,815 
SBA secured by real estate (1)
48,470 — 629 347 49,446 
Total investor loans secured by real estate8,859,748 — 629 10,615 8,870,992 
Business loans secured by real estate (2)
CRE owner-occupied2,237,186 — — 4,978 2,242,164 
Franchise real estate secured354,481 — — — 354,481 
SBA secured by real estate (3)
69,496 — — 441 69,937 
Total business loans secured by real estate2,661,163 — — 5,419 2,666,582 
Commercial loans (4)
Commercial and industrial1,886,386 654 14 1,816 1,888,870 
Franchise non-real estate secured392,950 — — — 392,950 
SBA not secured by real estate11,701 74 293 664 12,732 
Total commercial loans2,291,037 728 307 2,480 2,294,552 
Retail loans
Single family residential (5)
144,309 — — — 144,309 
Consumer loans6,426 — — — 6,426 
Total retail loans150,735 — — — 150,735 
Total loans$13,962,683 $728 $936 $18,514 $13,982,861 
______________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.


22

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CREDIT RISK GRADES
(Unaudited)
 
(Dollars in thousands)PassSpecial
Mention		SubstandardTotal Gross
Loans
September 30, 2021
Investor loans secured by real estate    
CRE non-owner-occupied$2,773,609 $18,206 $31,250 $2,823,065 
Multifamily5,703,795 — 1,871 5,705,666 
Construction and land292,815 — — 292,815 
SBA secured by real estate (1)
39,502 1,510 8,434 49,446 
Total investor loans secured by real estate8,809,721 19,716 41,555 8,870,992 
Business loans secured by real estate (2)
CRE owner-occupied2,219,546 7,819 14,799 2,242,164 
Franchise real estate secured354,481 — — 354,481 
SBA secured by real estate (3)
61,960 212 7,765 69,937 
Total business loans secured by real estate2,635,987 8,031 22,564 2,666,582 
Commercial loans (4)
   
Commercial and industrial1,838,441 14,818 35,611 1,888,870 
Franchise non-real estate secured370,211 — 22,739 392,950 
SBA not secured by real estate9,973 815 1,944 12,732 
Total commercial loans2,218,625 15,633 60,294 2,294,552 
Retail loans
Single family residential (5)
144,258 — 51 144,309 
Consumer loans6,384 — 42 6,426 
Total retail loans150,642 — 93 150,735 
Total loans$13,814,975 $43,380 $124,506 $13,982,861 
______________________________
(1) SBA loans that are collateralized by hotel/motel real property.
(2) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(3) SBA loans that are collateralized by real property other than hotel/motel real property.
(4) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(5) Single family residential includes home equity lines of credit, as well as second trust deeds.


23

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP to Non-GAAP RECONCILIATIONS
(Unaudited)
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
For periods presented below, return on average tangible common equity is a non-GAAP financial measure derived from GAAP based amounts. We calculate this figure by excluding amortization of intangible assets expense from net income and excluding the average intangible assets and average goodwill from the average stockholders' equity during the periods indicated. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
 Three Months Ended
 September 30,June 30,September 30,
(Dollars in thousands)202120212020
Net income$90,088 $96,302 $66,566 
Plus: amortization of intangible assets expense3,912 4,001 4,538 
Less: amortization of intangible assets expense tax adjustment (1)
1,119 1,145 1,301 
Net income for average tangible common equity92,881 99,158 69,803 
Plus: merger-related expense— — 2,988 
Less: merger-related expense tax adjustment (1)
— — 857 
Net income for average tangible common equity excluding merger-related expense$92,881 $99,158 $71,934 
Average stockholders' equity$2,844,800 $2,747,308 $2,689,867 
Less: average intangible assets75,795 79,784 92,768 
Less: average goodwill901,312 900,582 898,430 
Average tangible common equity$1,867,693 $1,766,942 $1,698,669 
Return on average equity (annualized)12.67 %14.02 %9.90 %
Return on average tangible common equity (annualized)19.89 %22.45 %16.44 %
Return on average tangible common equity excluding merger-related expense (annualized)19.89 %22.45 %16.94 %
___________________________________________________
(1) Adjusted by statutory tax rate

For periods presented below, return on average assets excluding merger-related expense is a non-GAAP financial measure derived from GAAP based amounts. We calculate this figure by excluding merger-related expense and the related tax impact from net income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
 Three Months Ended
 September 30,June 30,September 30,
(Dollars in thousands)202120212020
Net income$90,088 $96,302 $66,566 
Plus: merger-related expense— — 2,988 
Less: merger-related expense tax adjustment (1)
— — 857 
Net income for average assets excluding merger-related expense$90,088 $96,302 $68,697 
Average assets$20,804,903 $20,290,415 $20,366,761 
Return on average assets (annualized)1.73 %1.90 %1.31 %
Return on average assets excluding merger-related expense (annualized)1.73 %1.90 %1.35 %
____________________________________________
(1) Adjusted by statutory tax rate


Pre-provision net revenue is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the pre-provision net revenue by excluding income tax, provision for credit losses, and merger-related expenses from net income. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Interest income$176,047 $170,692 $181,991 
Interest expense6,978 9,758 15,445 
Net interest income169,069 160,934 166,546 
Noninterest income30,100 26,729 26,758 
Revenue199,169 187,663 193,304 
Noninterest expense96,040 94,496 98,579 
Add: merger-related expense— — 2,988 
Pre-provision net revenue103,129 93,167 97,713 
Pre-provision net revenue (annualized)$412,516 $372,668 $390,852 
Average assets$20,804,903 $20,290,415 $20,366,761 
Pre-provision net revenue on average assets0.50 %0.46 %0.48 %
Pre-provision net revenue on average assets (annualized)1.98 %1.84 %1.92 %


Noninterest expense (excluding merger-related expense) as a percent of average assets is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the noninterest expense (excluding merger-related expense) as a percent of average assets by excluding merger-related expenses from the noninterest expense and dividing by average assets. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Noninterest expense$96,040 $94,496 $98,579 
Less: merger-related expense— — 2,988 
Noninterest expense excluding merger-related expense$96,040 $94,496 $95,591 
Average assets$20,804,903 $20,290,415 $20,366,761 
Noninterest expense as a percent of average assets (annualized)1.85 %1.86 %1.94 %
Noninterest expense excluding merger-related expense as a percent of average assets (annualized)1.85 %1.86 %1.88 %

Tangible book value per share and tangible common equity to tangible assets (the “tangible common equity ratio”) are non-GAAP financial measures derived from GAAP based amounts. We calculate tangible book value per share by dividing tangible common equity by common shares outstanding, as compared to book value per share, which we calculate by dividing common stockholders' equity by shares outstanding. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. We believe that this information is consistent with the treatment by bank regulatory agencies, which excludes intangible assets from the calculation of risk-based capital ratios. Accordingly, we believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our capital position and ratios.
 September 30,June 30,March 31,December 31,September 30,
(Dollars in thousands, except per share data)20212021202120202020
Total stockholders' equity$2,838,116 $2,813,419 $2,703,098 $2,746,649 $2,688,085 
Less: intangible assets974,763 978,675 981,568 984,076 988,446 
Tangible common equity$1,863,353 $1,834,744 $1,721,530 $1,762,573 $1,699,639 
Total assets$21,005,211 $20,529,486 $20,173,298 $19,736,544 $19,844,240 
Less: intangible assets974,763 978,675 981,568 984,076 988,446 
Tangible assets$20,030,448 $19,550,811 $19,191,730 $18,752,468 $18,855,794 
Tangible common equity ratio9.30 %9.38 %8.97 %9.40 %9.01 %
Common shares issued and outstanding94,354,21194,656,57594,644,41594,483,13694,375,521
Book value per share$30.08 $29.72 $28.56 $29.07 $28.48 
Less: intangible book value per share10.33 10.34 10.37 10.42 10.47 
Tangible book value per share$19.75 $19.38 $18.19 $18.65 $18.01 
Core net interest income and core net interest margin are non-GAAP financial measures derived from GAAP based amounts. We calculate core net interest income by excluding scheduled accretion income, accelerated accretion income, premium amortization on CDs, and nonrecurring nonaccrual interest paid from net interest income. The core net interest margin is calculated as the ratio of core net interest income to average interest-earning assets. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Net interest income$169,069 $160,934 $166,546 
Less: scheduled accretion income3,339 3,560 6,858 
Less: accelerated accretion income6,107 5,927 5,338 
Less: premium amortization on CD390 942 2,968 
Less: nonrecurring nonaccrual interest paid(74)(216)(275)
Core net interest income159,307 150,721 151,657 
Less: interest income on SBA PPP loans— — 838 
Core net interest income excluding SBA PPP loans$159,307 $150,721 $150,819 
Average interest-earning assets$19,131,172 $18,783,803 $18,707,605 
Less: average SBA PPP loans— — 329,396 
Average interest-earning assets excluding SBA PPP loans$19,131,172 $18,783,803 $18,378,209 
Net interest margin3.51 %3.44 %3.54 %
Core net interest margin3.30 %3.22 %3.23 %
Core net interest margin excluding SBA PPP loans3.30 %3.22 %3.26 %

Efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization, and merger-related expense to the sum of net interest income before provision for credit losses and total noninterest income, less gain (loss) on sale of securities, other income - security recoveries, gain/(loss) on sale of other real estate owned, and gain (loss) from debt extinguishment. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
Three Months Ended
September 30,June 30,September 30,
(Dollars in thousands)202120212020
Total noninterest expense$96,040 $94,496 $98,579 
Less: amortization of intangible assets3,912 4,001 4,538 
Less: merger-related expense— — 2,988 
Less: other real estate owned operations, net— — (17)
Noninterest expense, adjusted$92,128 $90,495 $91,070 
Net interest income before provision for credit losses$169,069 $160,934 $166,546 
Add: total noninterest income30,100 26,729 26,758 
Less: net gain from investment securities4,190 5,085 1,141 
Less: other income - security recoveries1 6 1 
Less: net gain from other real estate owned— — 13 
Less: net gain (loss) from debt extinguishment970 (647)— 
Revenue, adjusted$194,008 $183,219 $192,149 
Efficiency ratio47.5 %49.4 %47.4 %
24