Regulatory Matters and Capital Requirements

12 Months Ended

Dec. 31, 2024

Regulatory Capital Requirements under Banking Regulations [Abstract]

Regulatory Matters and Capital Requirements

Note 2 – Regulatory Matters and Capital Requirements

The Corporation and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of the Corporation’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain capital in order to meet certain capital ratios to be considered adequately capitalized or well capitalized under the regulatory framework for prompt corrective action. As of the most recent formal notification from the Federal Reserve, the Bank was categorized as “well capitalized.” There are no conditions or events since that notification that management believes have changed the Bank’s categorization.

The Company and the Bank are required to meet risk-based capital standards under the revised capital framework of the Basel Committee on Banking Supervision, generally referred to as “Basel III”, administered by their respective regulatory authorities. The Basel III final capital framework requires all banking organizations to maintain a capital conservation buffer of 2.50% above the minimum risk-based capital requirements, which fully phased in by January 1, 2019. The capital conservation buffer is exclusively comprised of common equity Tier 1 (“CET1”) capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. At December 31, 2024 and 2023, the Company and Bank were in compliance with the capital conservation buffer requirement and exceeded the minimum CET1, Tier 1, and total capital ratio, inclusive of the fully phased-in capital conservation buffer, of 7.00%, 8.50% and 10.50%, respectively, and the Bank qualified as “well capitalized” for purposes of the federal bank regulatory prompt corrective action regulations. The regulatory capital ratios of the Company and Bank further strengthened at December 31, 2024 compared to the capital ratios at December 31, 2023.

In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase-in over a three-year period the Day 1 adverse regulatory capital effects of the CECL accounting standard. Additionally, in March 2020, the U.S. Federal bank regulatory agencies issued an interim final rule that provides banking organizations an option to delay the estimated CECL impact on regulatory capital for an additional two years for a total transition period of up to five years. The cumulative difference at the end of the second year of the transition period is then phased into regulatory capital at 25% per year over a three-year transition period. The final rule was adopted and became effective in September 2020. The Company implemented the CECL model commencing January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. The cumulative difference at the end of 2021 was phased into regulatory capital over the three-year period from January 1, 2022 through December 31, 2024 until fully phased-in on January 1, 2025.

For regulatory capital purposes, the Corporation’s subordinated debt is included in Tier 2 capital, the eligible amount of which is phased out by 20% of the original amount at the beginning of each of the last five years before maturity. See Note 13 – Subordinated Debentures for additional information.

The following table presents capital ratios as defined in applicable regulations at the dates indicated:

	Actual				Minimum Required for Capital Adequacy Purposes Inclusive of Capital Conservation Buffer				Minimum Required For Well Capitalized Requirement
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2024
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 Leverage Ratio	$	2,127,171	12.31	%	$	690,939	4.00	%	N/A		N/A
Common Equity Tier 1 Capital Ratio	2,127,171		17.05	%	873,305		7.00	%	N/A		N/A
Tier 1 Capital Ratio	2,127,171		17.05	%	1,060,441		8.50	%	N/A		N/A
Total Capital Ratio	2,530,681		20.28	%	1,309,957		10.50	%	N/A		N/A
Pacific Premier Bank
Tier 1 Leverage Ratio	$	2,316,586	13.41	%	$	690,775	4.00	%	$	863,469	5.00	%
Common Equity Tier 1 Capital Ratio	2,316,586		18.57	%	873,079		7.00	%	810,716		6.50	%
Tier 1 Capital Ratio	2,316,586		18.57	%	1,060,167		8.50	%	997,805		8.00	%
Total Capital Ratio	2,472,607		19.82	%	1,309,618		10.50	%	1,247,256		10.00	%
December 31, 2023
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 Leverage Ratio	$	2,084,189	11.03	%	$	755,610	4.00	%	N/A		N/A
Common Equity Tier 1 Capital Ratio	2,084,189		14.32	%	1,018,854		7.00	%	N/A		N/A
Tier 1 Capital Ratio	2,084,189		14.32	%	1,237,180		8.50	%	N/A		N/A
Total Capital Ratio	2,516,538		17.29	%	1,528,281		10.50	%	N/A		N/A
Pacific Premier Bank
Tier 1 Leverage Ratio	$	2,347,494	12.43	%	$	755,724	4.00	%	$	944,654	5.00	%
Common Equity Tier 1 Capital Ratio	2,347,494		16.13	%	1,018,964		7.00	%	946,181		6.50	%
Tier 1 Capital Ratio	2,347,494		16.13	%	1,237,313		8.50	%	1,164,530		8.00	%
Total Capital Ratio	2,507,912		17.23	%	1,528,446		10.50	%	1,455,662		10.00	%