PACIFIC PREMIER BANCORP INC - FORM 8-K - EX-99.1 - January 25, 2021

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Exhibit 99.1

Pacific Premier Bancorp, Inc. Announces Fourth Quarter 2020 Financial Results and Increases Quarterly Cash Dividend to $0.30 per Share
 
Fourth Quarter 2020 Summary
 
•Net income of $67.1 million, or $0.71 per diluted share
•Return on average assets of 1.34%, return on average equity of 9.91%, and return on average tangible common equity of 16.32%
•Net interest margin of 3.61% and core net interest margin of 3.32%
•Cost of deposits of 0.14% in the fourth quarter compared with 0.20% in the prior quarter
•Noninterest bearing deposits represent 37% of total deposits
•Nonperforming assets represent 0.15% of total assets
•Total loan delinquency of 0.10% compared with 0.22% in the prior quarter
•Increased common equity quarterly dividend by $0.02 to $0.30 per share
•Approved a new $150 million share repurchase program in January 2021


Irvine, Calif., January 26, 2021 -- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the fourth quarter of 2020 of $67.1 million, or $0.71 per diluted share, compared with net income of $66.6 million, or $0.70 per diluted share, for the third quarter of 2020 and net income of $41.1 million, or $0.69 per diluted share, for the fourth quarter of 2019.

For the three months ended December 31, 2020, the Company’s return on average assets (“ROAA”) was 1.34%, return on average equity (“ROAE”) was 9.91%, and return on average tangible common equity (“ROATCE”) was 16.32%, compared to 1.31%, 9.90%, and 16.44%, respectively, for the third quarter of 2020 and 1.42%, 8.20%, and 15.89%, respectively, for the fourth quarter of 2019. Total assets as of December 31, 2020 were $19.7 billion compared to $19.8 billion at September 30, 2020 and $11.8 billion at December 31, 2019. A reconciliation of the non–U.S. generally accepted accounting principles (“GAAP”) measure of ROATCE to the GAAP measure of common stockholders' equity is set forth at the end of this press release.

Steven R. Gardner, Chairman, President, and Chief Executive Officer of the Company, commented, “We delivered a strong quarter to end 2020 that reflects our improved earnings power and overall operational strength. Despite the low interest rate environment and the uncertainty around the pandemic, we generated a return on average assets and average tangible common equity, exclusive of merger-related expenses, of 1.41% and 17.2%, respectively.

“Having completed the Opus integration in early October, we were able to increase our focus on business development throughout the remainder of the fourth quarter. As a result, we ended the year with a strong loan pipeline as our teams are attracting larger, more sophisticated clients. During the fourth quarter, our new loan commitments were up substantially from the prior quarter, although elevated payoffs and strategic loan sales reduced our loan balances at quarter end.

“Our strong earnings continue to enhance our capital levels, and we remain committed to a disciplined, prudent capital management strategy. We recently adopted a new stock repurchase program, increasing the size over the program previously adopted in late 2019. We also announced today that we increased our common stock dividend to $0.30 per share, from $0.28 per share in the prior quarter. Since initiating our dividend program two years ago, we have steadily increased the amount of capital we are returning to shareholders, which has positively influenced total shareholder returns.

“As we begin 2021, we are well-positioned to manage through the impact of the ongoing pandemic and capitalize on the economic recovery. We expect increasing levels of organic growth in our various markets, and we will continue to pursue strategic growth opportunities that can expand and enhance our franchise. Over the past several years we have made investments in talent and technology to create a robust, highly scalable platform to generate profitable growth, and we are confident in our ability to execute and deliver for our shareholders in the years ahead.”

Mr. Gardner concluded, "I want to thank all of the Pacific Premier team members for their strong commitment to our clients, our communities, and each other. Their incredible resiliency and talents are what drive our results.”
1

FINANCIAL HIGHLIGHTS
Three Months Ended
 December 31,September 30,December 31,
 202020202019
Financial Highlights(Dollars in thousands, except per share data)
Net income$67,136 $66,566 $41,098 
Diluted earnings per share0.71 0.70 0.69 
Common equity dividend per share0.28 0.25 0.22 
Return on average assets1.34 %1.31 %1.42 %
Return on average equity9.91 9.90 8.20 
Return on average tangible common equity (1)
16.32 16.44 15.89 
Pre-provision net revenue on average assets (1)
1.92 1.92 1.95 
Net interest margin3.61 3.54 4.33 
Core net interest margin (1)
3.32 3.23 4.10 
Cost of deposits0.14 0.20 0.58 
Efficiency ratio (2)
48.5 47.4 51.9 
Noninterest expense (excluding merger-related expense) as a percent of average assets (1)
1.89 1.88 2.29 
Total assets$19,736,544 $19,844,240 $11,776,012 
Total deposits16,214,177 16,330,807 8,898,509 
Loans to deposit ratio82 %82 %98 %
Non-maturity deposits as a percent of total deposits90 89 88 
Book value per share$29.07 $28.48 $33.82 
Tangible book value per share (1)
18.65 18.01 18.84 
Total risk-based capital ratio (3)
16.31 %16.11 %13.81 %
______________________________
(1) A reconciliation of the non-GAAP measures of return on average tangible common equity, pre-provision net revenue on average assets, core net interest margin, noninterest expense (excluding merger-related expense) as a percent of average assets, and tangible book value per share to the GAAP measures of net income, common stockholders' equity, and book value are set forth at the end of this press release.
(2) Represents the ratio of noninterest expense less other real estate owned operations, amortization of intangible assets, 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, gain/(loss) from other real estate owned, and gain/(loss) from debt extinguishment.
(3) The Company's total risk-based capital ratio as of September 30, 2020 reflects the reclassification of $502.6 million of cash and due from banks as of September 30, 2020 to interest-bearing deposits with financial institutions as of that same date. This reclassification resulted in an increase in the ratio as of September 30, 2020 from what was previously reported.
2

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin
 
Net interest income totaled $168.2 million in the fourth quarter of 2020, an increase of $1.7 million from the third quarter of 2020. The increase in net interest income was driven by higher average investment securities, higher loan related fees, and lower rates paid on deposits, partially offset by the impact of lower average loans and yields.

Net interest margin for the fourth quarter of 2020 was 3.61%, compared with 3.54% for the third quarter of 2020. Our core net interest margin, which excludes the impact of loan accretion, certificates of deposit mark-to-market amortization, and other one-time adjustments, increased 9 basis points to 3.32%, compared to 3.23% in the prior quarter. The increase was a result of higher loan related fees driven by elevated prepayments and lower cost of funds driven by lower rates paid on deposits, partially offset by the decrease attributable to the shift in interest-earning asset mix and lower loan yields.

Net interest income for the fourth quarter of 2020 increased $55.3 million, compared to the fourth quarter of 2019. The increase was primarily attributable to an increase in average interest-earning assets of $8.17 billion, which primarily resulted from the acquisition of Opus Bank (“Opus”) in the second quarter of 2020 and organic loan growth, as well as a higher average investment securities and a lower cost of funds, partially offset by lower average loan and investment yields, and higher average deposits.
3

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
Three Months Ended
 December 31, 2020September 30, 2020December 31, 2019
 Average BalanceInterestAverage
Yield/
Cost		Average BalanceInterestAverage
Yield/
Cost		Average BalanceInterestAverage Yield/ Cost
Assets(Dollars in thousands)
Cash and cash equivalents$1,239,035 $286 0.09 %$1,388,897 $305 0.09 %$201,161 $283 0.56 %
Investment securities3,964,592 17,039 1.72 3,283,840 14,231 1.73 1,445,158 10,210 2.83 
Loans receivable, net (1) (2)
13,315,810 163,499 4.88 14,034,868 167,455 4.75 8,700,690 119,353 5.44 
Total interest-earning assets$18,519,437 $180,824 3.88 $18,707,605 $181,991 3.87 $10,347,009 $129,846 4.98 
Liabilities
Interest-bearing deposits$10,384,229 $5,685 0.22 $10,703,431 $8,509 0.32 $5,216,658 $13,144 1.00 
Borrowings539,021 6,941 5.12 542,437 6,936 5.09 368,583 3,783 4.07 
Total interest-bearing liabilities$10,923,250 $12,626 0.46 $11,245,868 $15,445 0.55 $5,585,241 $16,927 1.20 
Noninterest-bearing deposits$6,125,171 $5,877,619 $3,814,809 
Net interest income$168,198 $166,546 $112,919 
Net interest margin (3)
 3.61  3.54  4.33 
Cost of deposits0.14 0.20 0.58 
Cost of funds (4)
0.29 0.36 0.71 
Ratio of interest-earning assets to interest-bearing liabilities169.54 166.35 185.26 
______________________________
(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 $11.0 million, $12.2 million, and $5.8 million, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.

Provision for Credit Losses

Provision for credit losses for the fourth quarter of 2020 was $1.5 million, a decrease of $2.7 million from the third quarter of 2020 and a decrease of $780,000 from the fourth quarter of 2019. The current quarter provision for credit losses included an $8.1 million recapture of the provision for loan losses, partially offset by a $9.6 million provision for unfunded commitments. The $8.1 million recapture of the provision for loan losses was primarily attributable to lower loans held for investment and favorable changes in asset quality and loan mix. The $9.6 million provision for unfunded commitments was primarily due to an increase in outstanding unfunded commitments in the commercial and industrial loan segment.
Three Months Ended
December 31,September 30,December 31,
202020202019
Provision for Credit Losses(Dollars in thousands)
Provision for loan losses$(8,079)$4,702 $3,016 
Provision for unfunded commitments9,596 (492)(666)
Provision for sold loans— — (53)
Total provision for credit losses$1,517 $4,210 $2,297 
4

Noninterest income
 
Noninterest income for the fourth quarter of 2020 was $23.2 million, a decrease of $3.6 million from the third quarter of 2020. The decrease was primarily due to a $9.2 million decrease in net gain from sales of loans in the third quarter of 2020, partially offset by a $3.9 million increase in net gain from sales of investment securities. In addition, other income increased $1.1 million related to equity investment income and a $212,000 increase in recoveries of pre-acquisition charged-off loans. Also, service charges on deposit accounts increased $412,000 and trust custodial account fees increased $336,000 from the prior quarter.

During the fourth quarter of 2020, the Bank sold $2.1 million of SBA loans for a net gain of $154,000, compared with $1.16 billion of SBA PPP loans sold for a net gain of $19.0 million in the third quarter of 2020. The fourth quarter of 2020 also included the sale of $59.2 million of other loans for a net gain of $174,000, compared to sales of $96.2 million of other loans for a net loss of $9.4 million during the third quarter of 2020.

During the fourth quarter of 2020, the Bank sold $202.6 million of investment securities for a net gain of $5.0 million, compared to the sales of $211.4 million of investment securities for a net gain of $1.1 million in the prior quarter.

Noninterest income for the fourth quarter of 2020 increased $13.4 million, compared to the fourth quarter of 2019. The increase was primarily due to the addition of $7.3 million of custodial account fees from Pacific Premier Trust, a $1.4 million increase in earnings on bank-owned life insurance (“BOLI”), primarily due to additional BOLI from Opus, an increase in net gain from sales of investment securities of $1.3 million, and a $3.7 million increase in other income, primarily due to a $1.5 million increase in equity investment income as well as a $1.3 million increase in escrow and exchange fee income.

    The decrease in net gain from sales of loans for the fourth quarter of 2020 compared to the same period last year was primarily due to the sale of $2.1 million of SBA loans for a net gain of $154,000 and the sale of $59.2 million of other loans for a net gain of $174,000 during the fourth quarter of 2020, compared to the sale of $23.7 million of SBA loans for a net gain of $2.1 million and the sale of $8.4 million of other loans for a net loss of $418,000 during the fourth quarter of 2019.
Three Months Ended
December 31,September 30,December 31,
202020202019
(Dollars in thousands)
NONINTEREST INCOME
Loan servicing income$633 $481 $487 
Service charges on deposit accounts2,005 1,593 1,558 
Other service fee income459 487 359 
Debit card interchange fee income777 944 367 
Earnings on BOLI2,240 2,270 864 
Net gain from sales of loans328 9,542 1,698 
Net gain from sales of investment securities5,002 1,141 3,671 
Trust custodial account fees7,296 6,960 — 
Other income4,454 3,340 797 
Total noninterest income$23,194 $26,758 $9,801 
 
5

Noninterest Expense
 
Noninterest expense totaled $99.9 million for the fourth quarter of 2020, an increase of $1.4 million compared to the third quarter of 2020, primarily due to the increase of $2.1 million in merger-related expense related to the Opus acquisition. Excluding merger-related expense, noninterest expense totaled $94.9 million, a decrease of $723,000, compared to the third quarter of 2020, driven by a $1.2 million decrease in other expense, an $803,000 decrease in legal and professional services expense, and a $793,000 decrease in data processing. These decreases were partially offset by a net $1.0 million increase in compensation as a result of a Company-wide employee appreciation bonus in the aggregate amount of $2.4 million related to the COVID-19 pandemic and higher accrued incentive compensation of $472,000, partially offset by higher loan origination deferred costs of $1.7 million, and an $895,000 increase in premises and occupancy expense due, in part, to ongoing COVID-19 pandemic-related maintenance expenses.

Noninterest expense increased by $33.7 million, compared to the fourth quarter of 2019. The increase was primarily due to a $5.1 million increase in merger-related expense related to the Opus acquisition, a $15.6 million increase in compensation and benefits, a $5.2 million increase in premises and occupancy expense, a $2.0 million increase in FDIC insurance premiums, a $1.1 million increase in office expense, and a $1.0 million increase in legal and professional services expense, predominately as a result of the additional operations, personnel, branches, and divisions retained with the acquisition of Opus.
Three Months Ended
December 31,September 30,December 31,
202020202019
(Dollars in thousands)
NONINTEREST EXPENSE
Compensation and benefits$52,044 $51,021 $36,409 
Premises and occupancy13,268 12,373 8,113 
Data processing5,990 6,783 3,241 
Other real estate owned operations, net(5)(17)31 
FDIC insurance premiums1,213 1,145 (766)
Legal and professional services4,305 5,108 3,268 
Marketing expense1,442 1,718 1,713 
Office expense2,191 2,389 1,105 
Loan expense1,084 802 1,064 
Deposit expense5,026 4,728 4,537 
Merger-related expense5,071 2,988 — 
Amortization of intangible assets4,505 4,538 4,247 
Other expense3,805 5,003 3,254 
     Total noninterest expense$99,939 $98,579 $66,216 

Income Tax
 
For the fourth quarter of 2020, our effective tax rate was 25.4%, compared to 26.5% for the third quarter of 2020 and 24.2% for the fourth quarter of 2019. The decrease in the effective tax rate from the prior quarter was primarily due to the increase in tax-exempt municipal interest recognized in the fourth quarter.
6

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.24 billion at December 31, 2020, a decrease of $214.4 million from September 30, 2020, and an increase of $4.51 billion from December 31, 2019. The decrease from September 30, 2020 was driven primarily by higher loan prepayments and payoffs, partially offset by higher funded loans.

During the fourth quarter of 2020, the Bank generated $911.3 million of loan commitments and funded $712.5 million of loans, compared with $360.0 million in loan commitments and $280.8 million in funded loans for the third quarter of 2020, and $556.3 million of loan commitments and $419.9 million in funded loans for the fourth quarter of 2019. The year-over-year increase in loans funded was primarily due to expansion in our multifamily loan segment. Business lines of credit utilization rates increased to 36.2% at the end of the fourth quarter of 2020, compared with 33.9% at the end of the third quarter of 2020, but decreased from 44.3% at the end of the fourth quarter of 2019.

The increase in loans held for investment from December 31, 2019 was primarily due to the acquisition of Opus, which added $5.94 billion in gross loans, or $5.81 billion of loans held for investment after purchase accounting adjustments, at the time of acquisition.

At December 31, 2020, the ratio of loans held for investment to total deposits was 81.6%, compared with 82.4% and 98.0% at September 30, 2020 and December 31, 2019, respectively.


7

The following table presents the composition of the loan portfolio as of the dates indicated:
 December 31,September 30,December 31,
 202020202019
(Dollars in thousands)
Investor loans secured by real estate
Commercial real estate (“CRE”) non-owner-occupied$2,675,085 $2,707,930 $2,070,141 
Multifamily5,171,356 5,142,069 1,575,726 
Construction and land321,993 337,872 438,786 
SBA secured by real estate (1)
57,331 57,610 68,431 
Total investor loans secured by real estate8,225,765 8,245,481 4,153,084 
Business loans secured by real estate (2)
CRE owner-occupied2,114,050 2,119,788 1,846,554 
Franchise real estate secured347,932 359,329 353,240 
SBA secured by real estate (3)
79,595 84,126 88,381 
Total business loans secured by real estate2,541,577 2,563,243 2,288,175 
Commercial loans (4)
Commercial and industrial1,768,834 1,820,995 1,393,270 
Franchise non-real estate secured444,797 515,980 564,357 
SBA non-real estate secured15,957 16,748 17,426 
Total commercial loans2,229,588 2,353,723 1,975,053 
Retail loans
Single family residential (5)
232,574 243,359 255,024 
Consumer6,929 45,034 50,975 
Total retail loans239,503 288,393 305,999 
Gross loans held for investment (6)
13,236,433 13,450,840 8,722,311 
Allowance for credit losses for loans held for investment (7)
(268,018)(282,503)(35,698)
Loans held for investment, net$12,968,415 $13,168,337 $8,686,613 
Loans held for sale, at lower of cost or fair value$601 $1,032 $1,672 
_________________________________________
(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 $113.8 million, $126.3 million, and $40.7 million as of December 31, 2020, September 30, 2020, and December 31, 2019, respectively.
(7) The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. Effective January 1, 2020, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.
    
The total end of period weighted average interest rate on loans, excluding fees and discounts, at December 31, 2020 was 4.27%, compared with 4.34% at September 30, 2020 and 4.91% at December 31, 2019. The quarter-over-quarter and year-over-year decreases reflect the impact of lower rates on loan originations as well as repricing of portfolio loan yields as a result of the Federal Reserve Board's federal funds rate decrease in March 2020.


8

The following table presents the composition of new organic loan commitments originated during the quarters indicated:
Three Months Ended
 December 31,September 30,December 31,
 202020202019
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied$80,298 $40,518 $94,791 
Multifamily398,651 182,575 69,653 
Construction and land60,336 37,087 53,166 
SBA secured by real estate (1)
— — 1,635 
Total investor loans secured by real estate539,285 260,180 219,245 
Business loans secured by real estate (2)
CRE owner-occupied96,779 30,594 117,022 
Franchise real estate secured27,162 — 12,257 
SBA secured by real estate (3)
1,999 799 5,935 
Total business loans secured by real estate125,940 31,393 135,214 
Commercial loans (4)
Commercial and industrial228,076 56,959 145,092 
Franchise non-real estate secured8,005 9,665 44,185 
SBA non-real estate secured283 — 2,629 
Total commercial loans236,364 66,624 191,906 
Retail loans
Single family residential (5)
8,888 — 8,457 
Consumer786 1,825 1,439 
Total retail loans9,674 1,825 9,896 
Total loan commitments$911,263 $360,022 $556,261 
______________________________
(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 our new loan production was 3.55% in the fourth quarter of 2020, compared to 3.61% in the third quarter of 2020 and 4.77% in the fourth quarter of 2019.
9

Allowance for Credit Losses
 
Effective January 1, 2020, the Company adopted the new CECL accounting standard, which replaces the incurred loss methodology. At December 31, 2020, our allowance for credit losses (“ACL”) on loans held for investment was $268.0 million, a decrease of $14.5 million from September 30, 2020 and an increase of $232.3 million from December 31, 2019, and continues to reflect the impact of the COVID-19 pandemic and resulting uncertainty in the macroeconomic environment. The decrease from September 30, 2020 was driven principally by lower loans held for investment as well as changes in loan mix at December 31, 2020. The increase from December 31, 2019 was primarily due to the cumulative-effect Day 1 adjustment of $55.7 million from the adoption of the CECL model, the Day 1 provision of $75.9 million for non-purchased credit deteriorated (“PCD”) loans from the Opus acquisition, and an initial ACL of $21.2 million with respect to PCD loans from the acquisition, as well as the provision for loan losses of $96.4 million primarily due to the unfavorable changes in economic forecasts employed in the Company's CECL model related to the COVID-19 pandemic during 2020.

During the fourth quarter of 2020, the Company incurred $6.4 million of net charge-offs, compared to $4.5 million and $2.3 million during the third quarter of 2020 and the fourth quarter of 2019, respectively.

The following table provides the allocation of the ACL for loans held for investment as well as the activity in the ACL attributed to various segments in the loan portfolio as of and for the period indicated:
Three Months Ended December 31, 2020
 Beginning ACL Balance  Charge-offs  Recoveries Provision for Credit Losses  Ending
ACL Balance
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner occupied$54,105 $(8)$44 $(4,965)$49,176 
Multifamily67,336 — — (4,802)62,534 
Construction and land15,557 (162)— (2,960)12,435 
SBA secured by real estate (1)
5,327 (6)— (162)5,159 
Business loans secured by real estate (2)
CRE owner-occupied48,666 — 15 1,836 50,517 
Franchise real estate secured11,988 (932)— 395 11,451 
SBA secured by real estate (3)
6,160 (23)— 430 6,567 
Commercial loans (4)
Commercial and industrial47,914 (1,678)1,781 (1,053)46,964 
Franchise non-real estate secured20,149 (5,297)— 5,673 20,525 
SBA non-real estate secured951 (97)1 140 995 
Retail loans
Single family residential (5)
1,243 (44)— 5 1,204 
Consumer loans3,107 (2)2 (2,616)491 
Totals$282,503 $(8,249)$1,843 $(8,079)$268,018 
______________________________
(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.


10

The ratio of allowance for loan losses to total loans held for investment at December 31, 2020 was 2.02%, compared to 2.10% and 0.41% at September 30, 2020 and December 31, 2019, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value discount on loans acquired through bank acquisitions was $113.8 million, or 0.85% of total loans held for investment, as of December 31, 2020, compared to $126.3 million, or 0.93% of total loans held for investment, as of September 30, 2020, and $40.7 million, or 0.46% of total loans held for investment, as of December 31, 2019.

Asset Quality

Nonperforming assets totaled $29.2 million, or 0.15% of total assets, at December 31, 2020, an increase of $1.7 million from September 30, 2020 and an increase of $20.2 million from December 31, 2019. During the fourth quarter of 2020, nonperforming loans increased $2.0 million from September 30, 2020 to $29.2 million and other real estate owned decreased $334,000 from September 30, 2020 to zero resulting from the sale of other real estate owned property. Loan delinquencies decreased to $13.3 million, or 0.10% of loans held for investment, compared to $29.4 million, or 0.22% of loans held for investment, at September 30, 2020, and $19.1 million, or 0.22% of loans held for investment, at December 31, 2019.

Classified loans totaled $128.3 million, or 0.97% of loans held for investment, at December 31, 2020, compared to $136.7 million, or 1.02% of loans held for investment, at September 30, 2020, and $45.4 million, or 0.52% of loans held for investment, at December 31, 2019. The decrease in classified loans from September 30, 2020 was driven, in part, by the sale of substandard loans totaling $20.1 million, as well as the net changes in risk ratings during the quarter. The year-over-year increase was driven, in part, by the migration to the substandard risk grade of approximately $57.4 million of loans subject to temporary loan modifications as of December 31, 2020, the addition of classified loans from the Opus acquisition in the second quarter of 2020, as well as the net changes in risk rating during fiscal 2020.

Interest typically is not accrued on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. There were no loans 90 days or more past due and still accruing interest at December 31, 2020. There were no troubled debt restructured loans at December 31, 2020 and September 30, 2020, and $3.0 million troubled debt restructured loans at December 31, 2019.

At December 31, 2020, 52 loans totaling $79.5 million, or 0.60% of loans held for investment, remain within their modification period due to the COVID-19 pandemic hardship under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), of which $20.2 million of loans has migrated to the substandard risk grade. As of December 31, 2020, no loans were in-process for potential modification. At September 30, 2020, the Company’s loan portfolio included 54 loans totaling $118.3 million, or 0.88% of loans held for investment, that were modified due to the COVID-19 pandemic as well as $119.4 million of loans in-process for potential modification.

11


 December 31,September 30,December 31,
 202020202019
Asset Quality(Dollars in thousands)
Nonperforming loans$29,209 $27,214 $8,527 
Other real estate owned— 334 441 
Other assets owned— — — 
Nonperforming assets$29,209 $27,548 $8,968 
Total classified assets (1)
$128,332 $137,042 $45,387 
Allowance for credit losses268,018 282,503 35,698 
Allowance for credit losses as a percent of total nonperforming loans918 %1,038 %419 %
Nonperforming loans as a percent of loans held for investment0.22 0.20 0.10 
Nonperforming assets as a percent of total assets0.15 0.14 0.08 
Classified loans to total loans held for investment0.97 1.02 0.52 
Classified assets to total assets0.65 0.69 0.39 
Net loan charge-offs for the quarter ended$6,406 $4,470 $2,318 
Net loan charge-offs for quarter to average total loans, net0.05 %0.03 %0.03 %
Allowance for credit losses to loans held for investment2.02 2.10 0.41 
Loans modified under CARES Act$79,465 $118,298 $— 
Loans modified under CARES Act as a percent of loans held for investment0.60 %0.88 %— %
Delinquent Loans:   
30 - 59 days$1,269 $7,084 $2,104 
60 - 89 days57 1,086 10,559 
90+ days11,996 21,206 6,439 
Total delinquency$13,322 $29,376 $19,102 
Delinquency as a percent of loans held for investment0.10 %0.22 %0.22 %
______________________________
(1) Includes substandard loans and other real estate owned.

12

Investment Securities

Investment securities available-for-sale totaled $3.93 billion at December 31, 2020, an increase of $330.4 million from September 30, 2020, and an increase of $2.56 billion from December 31, 2019. The increase as compared to the third quarter of 2020 was primarily the result of purchases of $637.8 million as the company deployed its excess liquidity, and a mark-to-market fair value adjustment increase of $24.4 million, partially offset by sales of $202.6 million and total principal payments, amortization, and redemptions of $129.5 million. The increase compared to the same period last year was primarily the result of $2.72 billion in purchases, $829.9 million acquired from Opus, and a $54.3 million in mark-to-market fair value adjustments, partially offset by $752.6 million in sales and $298.4 million in principal payments, amortization, and redemptions. The Company’s assessment of held-to-maturity and available-for-sale investment securities indicated that no ACL was required as of January 1, 2020 or December 31, 2020.

Deposits

At December 31, 2020, deposits totaled $16.21 billion, a decrease of $116.6 million from September 30, 2020, and an increase of $7.32 billion from December 31, 2019. At December 31, 2020, non-maturity deposits totaled $14.59 billion, a decrease of $25.0 million, or 0.2%, from September 30, 2020 and an increase of $6.74 billion, or 85.8%, from December 31, 2019. During the fourth quarter of 2020, deposit decreases included $115.7 million in money market/savings deposits, $70.5 million in retail certificates of deposits, $24.7 million in interest checking, and $21.1 million in brokered certificates of deposits, partially offset by a $115.4 million increase in noninterest-bearing deposits compared to the third quarter of 2020. The increase in deposits from December 31, 2019 was primarily due to the acquisition of Opus.

The weighted average cost of deposits for the fourth quarter of 2020 was 0.14%, including the favorable impact of the acquired certificates of deposit mark-to-market amortization, compared with 0.20% for the third quarter of 2020 and 0.58% for the fourth quarter of 2019. The decrease in the weighted average cost of deposits for the fourth quarter of 2020 compared to the third quarter of 2020 was principally driven by lower pricing across all deposit product categories, and higher average noninterest-bearing deposits.

The end of period weighted average rate of deposits at December 31, 2020 was 0.18%.
 December 31,September 30,December 31,
 202020202019
Deposit Accounts(Dollars in thousands)
Noninterest-bearing checking$6,011,106 $5,895,744 $3,857,660 
Interest-bearing:
Checking2,913,260 2,937,910 586,019 
Money market/savings5,662,969 5,778,688 3,406,988 
Retail certificates of deposit1,471,512 1,542,029 973,465 
Wholesale/brokered certificates of deposit155,330 176,436 74,377 
Total interest-bearing10,203,071 10,435,063 5,040,849 
Total deposits$16,214,177 $16,330,807 $8,898,509 
Cost of deposits0.14 %0.20 %0.58 %
Noninterest-bearing deposits as a percent of total deposits37.1 36.1 43.4 
Non-maturity deposits as a percent of total deposits90.0 89.5 88.2 
Core deposits to total deposits (1)
94.9 96.0 93.7 
______________________________
(1) Core deposits are all transaction accounts and non-brokered certificates of deposit less than $250,000.
13

Borrowings

At December 31, 2020, total borrowings amounted to $532.5 million, a decrease of $9.9 million from September 30, 2020 and a decrease of $199.7 million from December 31, 2019. Total borrowings at December 31, 2020 included $31.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) advances and $501.5 million of subordinated debt. At December 31, 2020, total borrowings represented 2.7% of total assets, compared to 2.7% and 6.2% as of September 30, 2020 and December 31, 2019, respectively. The decrease in borrowings at December 31, 2020 as compared to September 30, 2020 was primarily due to decreases in FHLB advances. The decrease in borrowings at December 31, 2020 as compared to December 31, 2019 was primarily due to lower FHLB advances, partially offset by the issuance in June 2020 of $150 million in aggregate principal amount of the Company's 5.375% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030, as well as the $135 million aggregate principal amount of subordinated notes assumed by the Bank in connection with the acquisition of Opus in the second quarter of 2020.

Capital Ratios
 
At December 31, 2020, our ratio of tangible common equity to total assets was 9.40%, compared with
9.01% in the prior quarter and 10.30% at December 31, 2019, and our tangible book value per share was $18.65, compared to $18.01 at September 30, 2020 and $18.84 at December 31, 2019.

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 December 31, 2020, the Company exceeded all regulatory minimum capital adequacy requirements, inclusive of the fully phased-in capital conservation buffer, with a tier 1 leverage capital ratio of 9.47%, common equity tier 1 risk-based capital ratio of 12.04%, tier 1 risk-based capital ratio of 12.04% and total risk-based capital ratio of 16.31%.
 
At December 31, 2020, the Bank exceeded all regulatory capital requirements with a tier 1 leverage capital ratio of 10.89%, common equity tier 1 risk-based capital ratio of 13.84%, tier 1 risk-based capital ratio of 13.84%, and total risk-based capital of 15.89%. These capital ratios exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage ratio, 6.5% 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 7.0%, 8.5%, and 10.5%, respectively.
14

 December 31,September 30,December 31,
Capital Ratios202020202019
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio9.47 %9.09 %10.54 %
Common equity tier 1 risk-based capital ratio (1)
12.04 11.79 11.35 
Tier 1 risk-based capital ratio (1)
12.04 11.79 11.42 
Total risk-based capital ratio (1)
16.31 16.11 13.81 
Tangible common equity ratio (2)
9.40 9.01 10.30 
Pacific Premier Bank
Tier 1 leverage ratio10.89 %10.33 %12.39 %
Common equity tier 1 risk-based capital ratio (1)
13.84 13.40 13.43 
Tier 1 risk-based capital ratio (1)
13.84 13.40 13.43 
Total risk-based capital ratio (1)
15.89 15.48 13.83 
Share Data   
Book value per share$29.07 $28.48 $33.82 
Tangible book value per share (2)
18.65 18.01 18.84 
Common equity dividend per share0.28 0.25 0.22 
Closing stock price (3)
31.33 20.14 32.60 
Shares issued and outstanding (3)
94,483,136 94,375,521 59,506,057 
Market Capitalization (3)(4)
$2,960,157 $1,900,723 $1,939,897 
______________________________
(1) The Company's and the Bank's common equity tier 1 risk-based capital ratios, tier 1 risk-based capital ratios, and total risk-based capital ratios as of September 30, 2020 reflect the reclassification of $502.6 million of cash and due from banks as of September 30, 2020 to interest-bearing deposits with financial institutions as of that same date. This reclassification resulted in increases in each of these ratios as of September 30, 2020 from what was previously reported.
(2) 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 is set forth below.
(3) As of the last trading day prior to period end.
(4) Dollars in thousands.

Dividend and Stock Repurchase Program
 
    On January 21, 2021, the Company's Board of Directors declared a $0.30 per share dividend, payable on February 12, 2021 to shareholders of record on February 5, 2021. This represents a $0.02 per share, or 7% increase, compared to the prior quarter’s quarterly dividend rate.

On January 11, 2020, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase up to 4,725,000 shares of its common stock, representing approximately 5% of the Company’s issued and outstanding shares of common stock and approximately $150 million of common stock as of December 31, 2020 based on the closing price of the Company’s common stock on December 31, 2020. The stock repurchase program may be limited or terminated at any time without notice. The new stock repurchase program replaces and supersedes the previous $100 million stock repurchase program approved by the Board in December 2019, which the Company announced was suspended indefinitely in March 2020. The Company had not repurchased any shares of common stock under the previous stock repurchase program.

15

Conference Call and Webcast
 
The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on January 26, 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 February 2, 2021 at (877) 344-7529, access code 10150509.

About Pacific Premier Bancorp, Inc.

    Pacific Premier Bancorp, Inc. (Nasdaq: PPBI) is the parent company of Pacific Premier Bank, a California based commercial bank focused on serving small, middle-market, and corporate businesses throughout the western United States in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada. Founded in 1983, Pacific Premier Bank has grown to become one of the largest banks headquartered in the western region of the United States, with approximately $20 billion in total assets. Pacific Premier Bank provides banking products and services, including deposit accounts, digital banking, and treasury management services, to businesses, professionals, entrepreneurs, real estate investors, and nonprofit organizations. Pacific Premier Bank also offers a wide array of loan products, such as commercial business loans, lines of credit, SBA loans, commercial real estate loans, agribusiness loans, franchise lending, home equity lines of credit, and construction loans. Pacific Premier Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Commerce Escrow division. Pacific Premier Bank offers clients IRA custodial services through its Pacific Premier Trust division, which has approximately $16 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 COMMENTS
 
    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. The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and given its ongoing and dynamic nature, the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is 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 COVID-19, could affect us in substantial and unpredictable ways, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance. Other risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and
laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market and monetary fluctuations; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the impact of changes in financial services policies, laws and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; the effectiveness of our risk management framework and quantitative models; changes in the level of our nonperforming assets and charge-offs; the expected discontinuation of 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 current governmental efforts to restructure the U.S. financial regulatory system, including any amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act; 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 newly approved 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 2019 Annual Report on Form 10-K and quarterly report on Form 10-Q for the period ended March 31, 2020, June 30, 2020, and September 30, 2020 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.

Contact:
 
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

Brett Villaume
Senior Vice President and Director of Investor Relations
(949) 553-9042

(PPBI-ER)
16

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
 December 31,September 30,June 30,March 31,December 31,
20202020202020202019
ASSETS
Cash and cash equivalents$880,766 $1,103,077 $1,341,730 $534,032 $326,850 
Interest-bearing time deposits with financial institutions2,845 2,845 2,845 2,708 2,708 
Investments held to maturity, at amortized cost 23,732 27,980 32,557 34,553 37,838 
Investment securities available for sale, at fair value3,931,115 3,600,731 2,336,066 1,337,761 1,368,384 
FHLB, FRB and other stock, at cost117,055 116,819 94,658 92,858 93,061 
Loans held for sale, at lower of cost or fair value601 1,032 1,007 111 1,672 
Loans held for investment13,236,433 13,450,840 15,082,884 8,754,869 8,722,311 
Allowance for credit losses(268,018)(282,503)(282,271)(115,422)(35,698)
Loans held for investment, net12,968,415 13,168,337 14,800,613 8,639,447 8,686,613 
Accrued interest receivable74,574 73,112 78,408 38,294 39,442 
Other real estate owned— 334 386 441 441 
Premises and equipment78,884 80,326 76,542 61,615 59,001 
Deferred income taxes, net89,056 108,050 105,859 15,249 — 
Bank owned life insurance292,564 290,875 305,901 113,461 113,376 
Intangible assets85,507 90,012 94,550 79,349 83,312 
Goodwill898,569 898,434 901,166 808,322 808,322 
Other assets292,861 282,276 344,786 218,008 154,992 
Total assets$19,736,544 $19,844,240 $20,517,074 $11,976,209 $11,776,012 
LIABILITIES 
Deposit accounts: 
Noninterest-bearing checking$6,011,106 $5,895,744 $5,899,442 $3,943,260 $3,857,660 
Interest-bearing:
Checking2,913,260 2,937,910 3,098,454 577,966 586,019 
Money market/savings5,662,969 5,778,688 6,060,031 3,499,305 3,406,988 
Retail certificates of deposit1,471,512 1,542,029 1,651,976 897,680 973,465 
Wholesale/brokered certificates of deposit155,330 176,436 266,790 174,861 74,377 
Total interest-bearing10,203,071 10,435,063 11,077,251 5,149,812 5,040,849 
Total deposits16,214,177 16,330,807 16,976,693 9,093,072 8,898,509 
FHLB advances and other borrowings31,000 41,000 41,006 521,017 517,026 
Subordinated debentures501,511 501,443 501,375 215,269 215,145 
Deferred income taxes, net— — — — 1,371 
Accrued expenses and other liabilities243,207 282,905 343,353 143,934 131,367 
Total liabilities16,989,895 17,156,155 17,862,427 9,973,292 9,763,418 
STOCKHOLDERS’ EQUITY 
Common stock931 930 930 586 586 
Additional paid-in capital2,354,871 2,351,532 2,348,415 1,596,680 1,594,434 
Retained earnings330,555 289,960 247,078 361,242 396,051 
Accumulated other comprehensive income (loss)60,292 45,663 58,224 44,409 21,523 
Total stockholders' equity2,746,649 2,688,085 2,654,647 2,002,917 2,012,594 
Total liabilities and stockholders' equity$19,736,544 $19,844,240 $20,517,074 $11,976,209 $11,776,012 
17

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months EndedYear Ended
 December 31,September 30,December 31,December 31,December 31,
 20202020201920202019
INTEREST INCOME   
Loans$163,499 $167,455 $119,353 $577,558 $485,663 
Investment securities and other interest-earning assets17,325 14,536 10,493 53,168 40,444 
Total interest income180,824 181,991 129,846 630,726 526,107 
INTEREST EXPENSE  
Deposits5,685 8,509 13,144 34,336 58,297 
FHLB advances and other borrowings121 113 730 1,532 9,829 
Subordinated debentures6,820 6,823 3,053 20,647 10,680 
Total interest expense12,626 15,445 16,927 56,515 78,806 
Net interest income before provision for credit losses168,198 166,546 112,919 574,211 447,301 
Provision for credit losses1,517 4,210 2,297 191,816 5,719 
Net interest income after provision for credit losses166,681 162,336 110,622 382,395 441,582 
NONINTEREST INCOME  
Loan servicing income633 481 487 2,028 1,840 
Service charges on deposit accounts2,005 1,593 1,558 6,712 5,769 
Other service fee income459 487 359 1,554 1,438 
Debit card interchange fee income777 944 367 2,526 3,004 
Earnings on BOLI2,240 2,270 864 7,160 3,486 
Net gain from sales of loans328 9,542 1,698 8,609 6,642 
Net gain from sales of investment securities5,002 1,141 3,671 13,882 8,571 
Trust custodial account fees7,296 6,960 — 16,653 — 
Other income4,454 3,340 797 12,201 4,486 
Total noninterest income23,194 26,758 9,801 71,325 35,236 
NONINTEREST EXPENSE  
Compensation and benefits52,044 51,021 36,409 180,452 139,187 
Premises and occupancy13,268 12,373 8,113 43,296 30,758 
Data processing5,990 6,783 3,241 20,491 12,301 
Other real estate owned operations, net(5)(17)31 1 160 
FDIC insurance premiums1,213 1,145 (766)3,571 764 
Legal and professional services4,305 5,108 3,268 15,633 12,869 
Marketing expense1,442 1,718 1,713 5,891 6,402 
Office expense2,191 2,389 1,105 7,216 4,826 
Loan expense1,084 802 1,064 3,531 4,079 
Deposit expense5,026 4,728 4,537 19,700 15,266 
Merger-related expense5,071 2,988 — 49,129 656 
Amortization of intangible assets4,505 4,538 4,247 17,072 17,245 
Other expense3,805 5,003 3,254 15,136 14,552 
Total noninterest expense99,939 98,579 66,216 381,119 259,065 
Net income before income taxes89,936 90,515 54,207 72,601 217,753 
Income tax22,800 23,949 13,109 12,250 58,035 
Net income$67,136 $66,566 $41,098 $60,351 $159,718 
EARNINGS PER SHARE  
Basic$0.71 $0.71 $0.69 $0.75 $2.62 
Diluted0.71 0.70 0.69 0.75 2.60 
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic93,568,99493,529,96758,816,35279,209,560 60,339,714 
Diluted93,969,18893,719,16759,182,05479,506,274 60,692,281 
18

SELECTED FINANCIAL DATA
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
Three Months Ended
 December 31, 2020September 30, 2020December 31, 2019
 Average BalanceInterestAverage
Yield/
Cost		Average BalanceInterestAverage
Yield/
Cost		Average BalanceInterestAverage Yield/ Cost
Assets(Dollars in thousands)
Interest-earning assets:         
Cash and cash equivalents$1,239,035 $286 0.09 %$1,388,897 $305 0.09 %$201,161 $283 0.56 %
Investment securities3,964,592 17,039 1.72 3,283,840 14,231 1.73 1,445,158 10,210 2.83 
Loans receivable, net (1) (2)
13,315,810 163,499 4.88 14,034,868 167,455 4.75 8,700,690 119,353 5.44 
Total interest-earning assets18,519,437 180,824 3.88 18,707,605 181,991 3.87 10,347,009 129,846 4.98 
Noninterest-earning assets1,540,456 1,659,156 1,230,083 
Total assets$20,059,893 $20,366,761 $11,577,092 
Liabilities and Equity
Interest-bearing deposits:
Interest checking$2,971,983 $652 0.09 %$3,001,738 $1,191 0.16 %$563,357 $643 0.45 %
Money market5,368,054 3,296 0.24 5,490,541 4,855 0.35 3,184,267 6,704 0.84 
Savings360,148 86 0.09 357,768 109 0.12 236,970 101 0.17 
Retail certificates of deposit1,507,959 1,413 0.37 1,587,712 1,857 0.47 998,594 4,272 1.70 
Wholesale/brokered certificates of deposit176,085 238 0.54 265,672 497 0.74 233,470 1,424 2.42 
Total interest-bearing deposits10,384,229 5,685 0.22 10,703,431 8,509 0.32 5,216,658 13,144 1.00 
FHLB advances and other borrowings37,560 121 1.28 41,041 113 1.10 153,333 730 1.89 
Subordinated debentures501,461 6,820 5.44 501,396 6,823 5.44 215,250 3,053 5.67 
Total borrowings539,021 6,941 5.12 542,437 6,936 5.09 368,583 3,783 4.07 
Total interest-bearing liabilities10,923,250 12,626 0.46 11,245,868 15,445 0.55 5,585,241 16,927 1.20 
Noninterest-bearing deposits6,125,171 5,877,619 3,814,809 
Other liabilities300,963 553,407 172,227 
Total liabilities17,349,384 17,676,894 9,572,277 
Stockholders' equity2,710,509 2,689,867 2,004,815 
Total liabilities and equity$20,059,893 $20,366,761 $11,577,092 
Net interest income$168,198 $166,546 $112,919 
Net interest margin (3)
  3.61 %  3.54 %4.33 %
Cost of deposits0.14 0.20 0.58 
Cost of funds (4)
0.29 0.36 0.71 
Ratio of interest-earning assets to interest-bearing liabilities169.54   166.35 185.26 
______________________________
(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 $11.0 million, $12.2 million, and $5.8 million, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
19

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
 December 31,September 30,June 30,March 31,December 31,
 20202020202020202019
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied$2,675,085 $2,707,930 $2,783,692 $2,040,198 $2,070,141 
Multifamily5,171,356 5,142,069 5,225,557 1,625,682 1,575,726 
Construction and land321,993 337,872 357,426 377,525 438,786 
SBA secured by real estate (1)
57,331 57,610 59,482 61,665 68,431 
Total investor loans secured by real estate8,225,765 8,245,481 8,426,157 4,105,070 4,153,084 
Business loans secured by real estate (2)
CRE owner-occupied2,114,050 2,119,788 2,170,154 1,887,632 1,846,554 
Franchise real estate secured347,932 359,329 364,647 371,428 353,240 
SBA secured by real estate (3)
79,595 84,126 85,542 83,640 88,381 
Total business loans secured by real estate2,541,577 2,563,243 2,620,343 2,342,700 2,288,175 
Commercial loans (4)
Commercial and industrial1,768,834 1,820,995 2,051,313 1,458,969 1,393,270 
Franchise non-real estate secured444,797 515,980 523,755 547,793 564,357 
SBA non-real estate secured15,957 16,748 21,057 16,265 17,426 
SBA PPP— — 1,128,780 — — 
Total commercial loans2,229,588 2,353,723 3,724,905 2,023,027 1,975,053 
Retail loans
Single family residential (5)
232,574 243,359 265,170 237,180 255,024 
Consumer6,929 45,034 46,309 46,892 50,975 
Total retail loans239,503 288,393 311,479 284,072 305,999 
Gross loans held for investment (6)
13,236,433 13,450,840 15,082,884 8,754,869 8,722,311 
Allowance for credit losses for loans held for investment (7)
(268,018)(282,503)(282,271)(115,422)(35,698)
Loans held for investment, net$12,968,415 $13,168,337 $14,800,613 $8,639,447 $8,686,613 
Loans held for sale, at lower of cost or fair value$601 $1,032 $1,007 $111 $1,672 
______________________________
(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 $113.8 million, $126.3 million, and $40.7 million as of December 31, 2020, September 30, 2020, and December 31, 2019 respectively.
(7) The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. Effective January 1, 2020, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.
20

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
 December 31,September 30,June 30,March 31,December 31,
 20202020202020202019
(Dollars in thousands)
Asset Quality
Nonperforming loans$29,209 $27,214 $33,825 $20,610 $8,527 
Other real estate owned— 334 386 441 441 
Nonperforming assets$29,209 $27,548 $34,211 $21,051 $8,968 
Total classified assets (1)
$128,332 $137,042 $90,334 $54,586 $45,387 
Allowance for credit losses268,018 282,503 282,271 115,422 35,698 
Allowance for credit losses as a percent of total nonperforming loans918 %1,038 %835 %560 %419 %
Nonperforming loans as a percent of loans held for investment0.22 0.20 0.22 0.24 0.10 
Nonperforming assets as a percent of total assets0.15 0.14 0.17 0.18 0.08 
Classified loans to total loans held for investment0.97 1.02 0.60 0.62 0.52 
Classified assets to total assets0.65 0.69 0.44 0.46 0.39 
Net loan charge-offs for the quarter ended$6,406 $4,470 $4,650 $1,344 $2,318 
Net loan charge-offs for the quarter to average total loans0.05 %0.03 %0.04 %0.02 %0.03 %
Allowance for credit losses to loans held for investment (2)
2.02 2.10 1.87 1.32 0.41 
Allowance for credit losses to loans held for investment, excluding SBA PPP loans (2)
2.02 2.10 2.02 1.32 0.41 
Loans modified under CARES Act$79,465 $118,298 $2,244,974 $— $— 
Loans modified under CARES Act as a percent of loans held for investment0.60 %0.88 %14.88 %— %— %
Delinquent Loans:     
30 - 59 days$1,269 $7,084 $6,248 $8,285 $2,104 
60 - 89 days57 1,086 4,133 1,502 10,559 
90+ days11,996 21,206 27,807 19,084 6,439 
Total delinquency$13,322 $29,376 $38,188 $28,871 $19,102 
Delinquency as a percent of loans held for investment0.10 %0.22 %0.25 %0.33 %0.22 %
______________________________
(1) Includes substandard loans and other real estate owned.
(2) At December 31, 2020, 55% of loans held for investment include an aggregate fair value net discount of $113.8 million, or 0.85% of loans held for investment. At September 30, 2020, 58% of loans held for investment include an aggregate fair value net discount of $126.3 million, or 0.93% of loans held for investment. At December 31, 2019, 37% of loans held for investment include an aggregate fair value net discount of $40.7 million, or 0.46% of loans held for investment.

21

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
NONACCRUAL LOANS (1)
Collateral Dependent LoansACLNon-Collateral Dependent LoansACLTotal Nonaccrual LoansNonaccrual Loans With No ACL
(Dollars in thousands)
December 31, 2020
Investor loans secured by real estate
CRE non-owner-occupied$2,792 $— $— $— $2,792 $2,792 
SBA secured by real estate (2)
1,257 — — — 1,257 1,257 
Total investor loans secured by real estate4,049 — — — 4,049 4,049 
Business loans secured by real estate (3)
CRE owner-occupied6,083 — — — 6,083 6,083 
SBA secured by real estate (4)
1,143 — — — 1,143 1,143 
Total business loans secured by real estate7,226 — — — 7,226 7,226 
Commercial loans (5)
Commercial and industrial2,040 — 1,934 126 3,974 2,733 
Franchise non-real estate secured— — 13,238 — 13,238 13,238 
SBA not secured by real estate707 — — — 707 707 
Total commercial loans2,747 — 15,172 126 17,919 16,678 
Retail Loans
Single family residential (6)
15 — — — 15 15 
Total retail loans15 — — — 15 15 
Totals nonaccrual loans$14,037 $— $15,172 $126 $29,209 $27,968 
______________________________
(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.
(2) SBA loans that are collateralized by hotel/motel real property.
(3) Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
(4) SBA loans that are collateralized by real property other than hotel/motel real property.
(5) Loans to businesses where the operating cash flow of the business is the primary source of repayment.
(6) Single family residential includes home equity lines of credit, as well as second trust deeds.
22

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
PAST DUE STATUS
Days Past Due
Current30-5960-8990+Total
(Dollars in thousands)
December 31, 2020
Investor loans secured by real estate
CRE non-owner-occupied$2,674,328 $— $— $757 $2,675,085 
Multifamily5,171,355 1 — — 5,171,356 
Construction and land321,993 — — — 321,993 
SBA secured by real estate (1)
56,074 — — 1,257 57,331 
Total investor loans secured by real estate8,223,750 1 — 2,014 8,225,765 
Business loans secured by real estate (2)
CRE owner-occupied2,108,746 — — 5,304 2,114,050 
Franchise real estate secured347,932 — — — 347,932 
SBA secured by real estate (3)
78,036 486 — 1,073 79,595 
Total business loans secured by real estate2,534,714 486 — 6,377 2,541,577 
Commercial loans (4)
Commercial and industrial1,765,451 428 57 2,898 1,768,834 
Franchise non-real estate secured444,797 — — — 444,797 
SBA not secured by real estate14,912 338 — 707 15,957 
Total commercial loans2,225,160 766 57 3,605 2,229,588 
Retail loans
Single family residential (5)
232,559 15 — — 232,574 
Consumer loans6,928 1 — — 6,929 
Total retail loans239,487 16 — — 239,503 
Total loans$13,223,111 $1,269 $57 $11,996 $13,236,433 
______________________________
(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
CREDIT RISK GRADES
PassSpecial
Mention		SubstandardTotal Gross
Loans
(Dollars in thousands)
December 31, 2020
Investor loans secured by real estate
CRE non-owner-occupied$2,617,655 $39,360 $18,070 $2,675,085 
Multifamily5,156,988 13,037 1,331 5,171,356 
Construction and land321,993 — — 321,993 
SBA secured by real estate (1)
44,754 4,366 8,211 57,331 
Total investor loans secured by real estate8,141,390 56,763 27,612 8,225,765 
Business loans secured by real estate (2)
CRE owner-occupied2,072,545 26,263 15,242 2,114,050 
Franchise real estate secured340,784 5,180 1,968 347,932 
SBA secured by real estate (3)
71,668 1,337 6,590 79,595 
Total business loans secured by real estate2,484,997 32,780 23,800 2,541,577 
Commercial loans (4)
Commercial and industrial1,701,772 22,741 44,321 1,768,834 
Franchise non-real estate secured402,737 12,335 29,725 444,797 
SBA not secured by real estate12,214 1,574 2,169 15,957 
Total commercial loans2,116,723 36,650 76,215 2,229,588 
Retail loans
Single family residential (5)
231,917 — 657 232,574 
Consumer loans6,881 — 48 6,929 
Total retail loans238,798 — 705 239,503 
Total loans$12,981,908 $126,193 $128,332 $13,236,433 
_____________________________
(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.
24

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS
(Dollars in thousands, except per share data)
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. We further exclude merger-related expense and the related tax impact to arrive at return on average tangible common equity excluding merger-related expense. 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
 December 31,September 30,December 31,
 202020202019
Net income$67,136 $66,566 $41,098 
Plus: amortization of intangible assets expense4,505 4,538 4,247 
Less: amortization of intangible assets expense tax adjustment1,288 1,301 1,218 
Net income for average tangible common equity70,353 69,803 44,127 
Plus: merger-related expense5,071 2,988 — 
Less: merger-related expense tax adjustment1,450 857 — 
Net income for average tangible common equity excluding merger-related expense$73,974 $71,934 $44,127 
Average stockholders' equity$2,710,509 $2,689,867 $2,004,815 
Less: average intangible assets88,216 92,768 85,901 
Less: average goodwill898,436 898,430 808,322 
Average tangible common equity$1,723,857 $1,698,669 $1,110,592 
Return on average equity9.91 %9.90 %8.20 %
Return on average tangible common equity16.32 %16.44 %15.89 %
Return on average tangible common equity excluding merger-related expense17.16 %16.94 %15.89 %

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
 December 31,September 30,December 31,
 202020202019
Net income$67,136 $66,566 $41,098 
Plus: merger-related expense5,071 2,988 — 
Less: merger-related expense tax adjustment1,450 857 — 
Net income for average assets excluding merger-related expense$70,757 $68,697 $41,098 
Average assets$20,059,893 $20,366,761 $11,577,092 
Return on average average1.34 %1.31 %1.42 %
Return on average average excluding merger-related expense1.41 %1.35 %1.42 %
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 the 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
December 31,September 30,December 31,
202020202019
Interest income$180,824 $181,991 $129,846 
Interest expense12,626 15,445 16,927 
Net interest income168,198 166,546 112,919 
Noninterest income23,194 26,758 9,801 
Revenue191,392 193,304 122,720 
Noninterest expense99,939 98,579 66,216 
Plus: merger-related expense5,071 2,988 — 
Pre-provision net revenue96,524 97,713 56,504 
Pre-provision net revenue (annualized)$386,096 $390,852 $226,016 
Average assets$20,059,893 $20,366,761 $11,577,092 
Pre-provision net revenue on average assets0.48 %0.48 %0.49 %
Pre-provision net revenue on average assets (annualized)1.92 %1.92 %1.95 %
Noninterest expense (excluding merger-related expense) as a percent of average assets is 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
December 31,September 30,December 31,
202020202019
Noninterest expense$99,939 $98,579 $66,216 
Less: merger-related expense5,071 2,988 — 
Noninterest expense excluding merger-related expense94,868 95,591 66,216 
Average assets$20,059,893 $20,366,761 $11,577,092 
Noninterest expense as a percent of average assets (annualized)1.99 %1.94 %2.29 %
Noninterest expense excluding merger-related expense as a percent of average assets (annualized)1.89 %1.88 %2.29 %

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 exclude 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.
 December 31,September 30,June 30,March 31,December 31,
 20202020202020202019
Total stockholders' equity$2,746,649 $2,688,085 $2,654,647 $2,002,917 $2,012,594 
Less: intangible assets984,076 988,446 995,716 887,671 891,634 
Tangible common equity$1,762,573 $1,699,639 $1,658,931 $1,115,246 $1,120,960 
Book value per share$29.07 $28.48 $28.14 $33.40 $33.82 
Less: intangible book value per share10.42 10.47 10.56 14.80 14.98 
Tangible book value per share$18.65 $18.01 $17.58 $18.60 $18.84 
Total assets$19,736,544 $19,844,240 $20,517,074 $11,976,209 $11,776,012 
Less: intangible assets984,076 988,446 995,716 887,671 891,634 
Tangible assets$18,752,468 $18,855,794 $19,521,358 $11,088,538 $10,884,378 
Tangible common equity ratio9.40 %9.01 %8.50 %10.06 %10.30 %

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 other one-time adjustments 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
December 31,September 30,December 31,
202020202019
Net interest income$168,198 $166,546 $112,919 
Less: scheduled accretion income4,911 6,858 2,030 
Less: accelerated accretion income6,120 5,338 3,798 
Less: premium amortization on CD2,358 2,968 72 
Less: nonrecurring nonaccrual interest paid and other one-time adjustments322 (275)168 
Core net interest income154,487 151,657 106,851 
Less: interest income on SBA PPP loans— 838 — 
Core net interest income excluding SBA PPP loans$154,487 $150,819 $106,851 
Average interest-earning assets$18,519,437 $18,707,605 $10,347,009 
Less: average SBA PPP loans— 329,396 — 
Average interest-earning assets excluding SBA PPP loans$18,519,437 $18,378,209 $10,347,009 
Net interest margin3.61 %3.54 %4.33 %
Core net interest margin3.32 %3.23 %4.10 %
Core net interest margin excluding SBA PPP loans3.32 %3.26 %4.10 %
25

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PACIFIC PREMIER BANCORP INC Reports