Pacific Premier Bancorp, Inc. Announces Third Quarter 2017 Results (Unaudited)

Third Quarter 2017 Summary

  • Net income of $20.2 million, an increase of $6.1 million, or 43%, over the prior quarter
  • Diluted earnings per share of $0.50
  • ROAA and ROATCE of 1.26% and 15.02%, respectively
  • Efficiency ratio of 52%
  • Received all regulatory and shareholder approvals to acquire Plaza Bancorp
  • Tangible book value per share of $14.35, an increase of 17.4% over the third quarter of 2016
  • New loan originations of $558 million, 6th consecutive quarterly increase
  • Noninterest-bearing deposits account for 38% of total deposits

IRVINE, Calif.--()--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the third quarter of 2017 of $20.2 million, or $0.50 per diluted share, compared with net income of $14.2 million, or $0.35 per diluted share, for the second quarter of 2017 and net income of $9.2 million, or $0.33 per diluted share, for the third quarter of 2016. Net income for the third and second quarters of 2017 include $503,000 and $10.1 million of merger-related expense, respectively.

For the three months ended September 30, 2017, the Company’s return on average assets was 1.26% and return on average tangible common equity was 15.02%. For the three months ended June 30, 2017, the Company's return on average assets was 0.89% and the return on average tangible common equity was 11.33%. For the three months ended September 30, 2016, the Company's return on average assets was 1.00% and its return on average tangible common equity was 11.35%. Total assets as of September 30, 2017 were $6.5 billion compared with $6.4 billion at June 30, 2017 and $3.8 billion at September 30, 2016.

Steven R. Gardner, Chairman, President and Chief Executive Officer of the Company, commented on the results, “Consistent with the growth of our Company, we generated a solid level of net income and earnings per share in the third quarter. We continually strive to improve in all areas of operations and achieve what we believe are the standards of a high performing financial institution. As a result, we are generating attractive returns on assets and tangible common equity, while continuing to enhance and strengthen our risk management framework.

“We had a strong quarter of quality balance sheet growth. We generated $558 million in loan commitments, with balanced production across all of our major lending areas. We also had good inflows of core deposits, which is helping us to manage our deposit costs in a rising rate environment. The team we added in the Heritage Oaks Bancorp acquisition is performing well, and we are seeing good contributions to both loan and deposit growth coming from our Central Coast markets.

“We are efficiently moving forward with our acquisition of Plaza Bancorp, having received all regulatory and shareholder approvals, and expect to close the transaction on November 1, 2017. We are excited about the clients and bankers that we will be adding through this acquisition, as well as the improved opportunities for business development in the Los Angeles area. As with our previous acquisitions, we believe that Plaza Bancorp will have a positive impact on the value of our franchise and enhance our ability to continue delivering positive results for our shareholders in the future,” said Mr. Gardner.

FINANCIAL HIGHLIGHTS

 
Three Months Ended
September 30,   June 30,   September 30,
2017 2017 2016
Financial Highlights (dollars in thousands, except per share data)
Net income $ 20,232 $ 14,176 $ 9,227
Diluted earnings per share $ 0.50 $ 0.35 $ 0.33
Return on average assets 1.26 % 0.89 % 1.00 %
Return on average tangible common equity (1) 15.02 % 11.33 % 11.35 %
Net interest margin 4.34 % 4.40 % 4.41 %
Cost of deposits 0.28 % 0.25 % 0.28 %
Efficiency ratio (2) 52.1 % 52.3 % 57.0 %
Total assets $ 6,532,334 $ 6,440,631 $ 3,754,831
Tangible book value per share (1) $ 14.35 $ 13.83 $ 12.22
             

(1) A reconciliation of the non-GAAP measures of average tangible common equity and tangible book value per share to the GAAP measures of 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, core deposit intangible amortization and merger-related expense to the sum of net interest income before provision for loan losses and total noninterest income, less gains/(loss) on sale of securities and other-than-temporary impairment recovery/(loss) on investment securities.

 

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $64.3 million in the third quarter of 2017, an increase of $953,000, or 1.5%, from the second quarter of 2017. The increase in net interest income was primarily due to an increase in average loan balances and the impact of higher loan yields, driven principally by the Federal Reserve's June rate hike, partially offset by lower accretion income and prepayment fees, as well as higher deposit costs.

Our net interest margin decreased to 4.34% from 4.40% in the prior quarter, entirely driven by lower accretion income of $2.9 million, compared to $4.2 million of accretion income in the second quarter of 2017. Excluding the impact of accretion, our net interest margin expanded 5 basis points to 4.14%, compared with 4.09% in the second quarter as portfolio loan yields expanded by 7 basis points overall. Partially offsetting these favorable increases were higher deposit interest costs of 3 basis points to 28 basis points from 25 basis points, as well as a decrease in prepayment fees of approximately $400,000.

Net interest income for the third quarter of 2017 increased $25.3 million, or 65%, compared to the third quarter of 2016. The increase was primarily related to an increase in average interest-earning assets of $2.4 billion, which resulted primarily from our organic loan growth since the end of the third quarter of 2016 and our acquisition of Heritage Oaks Bancorp ("Heritage Oaks") during the second quarter of 2017.

Provision for Loan Losses

A provision for loan losses of $2.0 million was recorded for the third quarter of 2017, compared with a provision for loan losses of $1.9 million for the quarter ending June 30, 2017. The small increase in our provision for loan losses was primarily due to organic loan growth.

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
 
Three Months Ended
September 30, 2017   June 30, 2017   September 30, 2016

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Assets (dollars in thousands)
Cash and cash equivalents $ 167,745 $ 265 0.63 % $ 133,127 $ 160 0.48 % $ 201,140 $ 232 0.46 %
Investment securities 765,537 4,981 2.60 829,380 5,019 2.42 316,253 1,710 2.16
Loans receivable, net (1) 4,937,979   64,915   5.22 4,815,612   63,554   5.29 2,998,153   40,487   5.37
Total interest-earning assets $ 5,871,261   $ 70,161   4.74 % $ 5,778,119   $ 68,733   4.77 % $ 3,515,546   $ 42,429   4.80 %
 
Liabilities
Interest-bearing deposits $ 3,147,320 $ 3,557 0.45 % $ 3,107,842 $ 3,081 0.40 % $ 1,921,740 $ 2,136 0.44 %
Borrowings 399,206   2,313   2.30 464,845   2,314   2.00 166,881   1,284   3.06
Total interest-bearing liabilities $ 3,546,526   $ 5,870   0.66 % $ 3,572,687   $ 5,395   0.61 % $ 2,088,621   $ 3,420   0.65 %
Noninterest-bearing deposits $ 1,860,177   $ 1,802,752   $ 1,134,318  
Net interest income $ 64,291   $ 63,338   $ 39,009  
Net interest margin (2) 4.34 % 4.40 % 4.41 %
 
(1) Average balance includes nonperforming loans and is net of deferred loan origination fees/costs and unamortized discounts/premiums.

(2) Represents net interest income divided by average interest-earning assets.

 

Noninterest Income

Noninterest income for the third quarter of 2017 was $8.2 million, a decrease of $538,000, or 6%, from the second quarter of 2017. The decrease from the second quarter of 2017 was primarily related to a $1.2 million decrease in net gain from the sale of investment securities, partially offset by a $552,000 increase in net gain from the sales of loans as well as increases in loan servicing and deposit fees.

During the quarter, the Bank sold $31.9 million of Small Business Administration ("SBA") loans for a gain of $3.1 million, compared with $29.2 million of SBA loans sold and a gain of $2.9 million in the prior quarter. Additionally, the Bank sold lower yielding one-to-four family loans during the quarter totaling $37.0 million for a gain of $386,000.

Noninterest income for the third quarter of 2017 increased $2.3 million, or 38%, compared to the third quarter of 2016. The increase from the third quarter of 2016 was primarily related to a $869,000 increase in other income, $695,000 increase in deposit fees, a $384,000 increase in net gain from the sale of investment securities, and a $317,000 increase in net gain from sales of loans.

 
Three Months Ended
September 30,   June 30,   September 30,
2017 2017 2016
NONINTEREST INCOME (dollars in thousands)
Loan servicing fees $ 276 $ 143 $ 288
Deposit fees 1,117 986 422
Net gain from sales of loans 3,439 2,887 3,122
Net gain from sales of investment securities 896 2,093 512
Net gain from other real estate owned 94
Other income 2,493   2,556   1,624
Total noninterest income $ 8,221   $ 8,759   $ 5,968
 

Noninterest Expense

Noninterest expense totaled $39.6 million for the third quarter of 2017, a decrease of $8.9 million, or 18%, compared with the second quarter of 2017. The decrease was primarily driven by merger-related expense of $503,000 in the third quarter of 2017 compared with $10.1 million for the second quarter of 2017. Excluding the merger-related expense, our noninterest expense increased to $39.1 million compared with $38.4 million for the second quarter of 2017. The increase was primarily driven by an increase in legal, audit and professional expenses of $697,000, a $409,000 increase in other expense, due primarily to CRA related charitable contributions, and a $283,000 increase in premises and occupancy expense, as we expand our facilities to accommodate our growth. These increases were partially offset by a decrease of $439,000 in FDIC insurance premiums, as we adjusted the accrual following the Heritage Oaks acquisition, and a $357,000 decrease in data processing expense, as the Company realized cost savings upon converting the Heritage Oaks systems early in the third quarter of 2017.

In comparison to the third quarter of 2016, noninterest expense grew by $13.8 million, or 53%. The increase in expense was primarily related to the additional costs from the operations, personnel and branches retained from the acquisition of Heritage Oaks, combined with our continued investment in personnel and systems to support our organic growth.

 
Three Months Ended
September 30,   June 30,   September 30,
2017 2017 2016
NONINTEREST EXPENSE (dollars in thousands)
Compensation and benefits $ 21,707 $ 21,625 $ 14,181
Premises and occupancy 4,016 3,733 2,576
Data processing 2,082 2,439 1,223
Other real estate owned operations, net 3 44 5
FDIC insurance premiums 379 818 442
Legal, audit and professional expense 1,978 1,281 737
Marketing expense 1,248 1,006 1,683
Office, telecommunications and postage expense 835 922 612
Loan expense 1,017 1,068 534
Deposit expense 1,655 1,663 1,315
Merger-related expense 503 10,117
CDI amortization 1,761 1,761 525
Other expense 2,428   2,019   2,027
Total noninterest expense $ 39,612   $ 48,496   $ 25,860
 

Income Tax

For the third quarter of 2017, our effective tax rate was 34.4%, compared with 34.7% for the second quarter of 2017 and 38.9% for the third quarter of 2016. The quarter's rate was favorably impacted by a $1.1 million true-up with the filing of the 2016 tax return and, to a lesser extent, the tax rate deductibility of equity stock expense related to the adoption of ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $5.0 billion at September 30, 2017, an increase of $151 million, or 3%, from June 30, 2017, and an increase of $1.9 billion, or 62%, from September 30, 2016. The $151 million increase from the current quarter compared to the prior quarter was the result of business loans growing $159 million and real estate loans falling $8 million. The total end of period weighted average interest rate on loans, excluding fees and discounts, at September 30, 2017 was 4.81%, compared to 4.79% at June 30, 2017 and 4.80% at September 30, 2016.

Loans held for sale increased $37 million from the prior quarter as a result of the inclusion of $32 million of low yielding one-to-four family loans earmarked for potential sale in fourth quarter.

Loan activity during the third quarter of 2017 included new organic loan commitments of $558 million, compared with $492 million in the second quarter of 2017 and $322 million in the third quarter of 2016. The $558 million of new organic loan commitments during the third quarter of 2017 included $107 million of commercial and industrial loans, $86.9 million of construction loans, $85.4 million of franchise loans, $83.9 million of commercial real estate owner occupied loans, $73.0 million of multifamily loans, $49.2 million of SBA loans and $47.4 million of commercial real estate non-owner occupied loans.

At September 30, 2017, our ratio of loans held for investment to total deposits was 99.8%, compared with 98.2% and 101.0% at June 30, 2017 and September 30, 2016, respectively.

     
September 30, June 30, September 30,
2017 2017 2016
(dollars in thousands)
Business loans:
Commercial and industrial $ 763,091 $ 733,852 $ 537,809
Franchise 626,508 565,415 431,618
Commercial owner occupied 805,137 729,476 460,068
SBA 107,211 101,384 83,186
Agriculture 86,466   98,842    
Total business loans 2,388,413 2,228,969 1,512,681
Real estate loans:
Commercial non-owner occupied 1,098,995 1,095,184 527,412
Multi-family 797,370 746,547 689,813
One-to-four family 246,248 322,048 101,377
Construction 301,334 289,600 231,098
Farmland 140,581 136,587
Land 30,719 31,799 18,472
Other loans 6,228   7,309   5,678  
Total real estate loans 2,621,475   2,629,074   1,573,850  
Gross loans held for investment 5,009,888 4,858,043 3,086,531
Plus: Deferred loan origination costs/(fees) and premiums/(discounts), net (571 ) 568   4,308  
Loans held for investment 5,009,317 4,858,611 3,090,839
Allowance for loan losses (27,143 ) (25,055 ) (21,843 )
Loans held for investment, net $ 4,982,174   $ 4,833,556   $ 3,068,996  
 
Loans held for sale, at lower of cost or fair value $ 44,343 $ 6,840 $ 9,009
 

Asset Quality and Allowance for Loan Losses

At September 30, 2017, our allowance for loan losses was $27.1 million, an increase of $2.1 million from June 30, 2017, driven principally by our organic loan growth. Loan loss provision for the quarter was $2.0 million, while net recoveries were $38,000.

The ratio of allowance for loan losses to loans held for investment at September 30, 2017 was 0.54%, compared to 0.52% and 0.71% at June 30, 2017 and September 30, 2016, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value discount on loans acquired through total bank acquisitions was $21.6 million, or 0.43% of total loans held for investment, as of September 30, 2017, compared to $25.2 million, or 0.52% of total loans held for investment, as of June 30, 2017.

Nonperforming assets totaled $887,000, or 0.01% of total assets, at September 30, 2017, an increase from $767,000, or 0.01% of total assets, at June 30, 2017. During the third quarter of 2017, nonperforming loans increased $120,000 to $515,000, and other real estate owned remained unchanged at $372,000. Loan delinquencies increased to $3.6 million, or 0.07% of loans held for investment, compared to $3.0 million, or 0.06% of loans held for investment, at June 30, 2017.

     
September 30, June 30, September 30,
2017 2017 2016
Asset Quality (dollars in thousands)
Nonaccrual loans $ 515 $ 395 $ 5,734
Other real estate owned 372   372   711  
Nonperforming assets $ 887   $ 767   $ 6,445  
 
Allowance for loan losses $ 27,143 $ 25,055 $ 21,843
Allowance for loan losses as a percent of total nonperforming loans 5,270 % 6,343 % 381 %
Nonperforming loans as a percent of loans held for investment 0.01 % 0.01 % 0.19 %
Nonperforming assets as a percent of total assets 0.01 % 0.01 % 0.17 %
Net loan (recoveries) charge-offs for the quarter ended $ (38 ) $ (76 ) $ 1,125
Net loan (recoveries) charge-offs for quarter to average total loans % % 0.04 %
Allowance for loan losses to loans held for investment (1) 0.54 % 0.52 % 0.71 %
Delinquent Loans:
30 - 59 days $ 556 $ 600 $ 1,042
60 - 89 days 1,423 1,965 1,990
90+ days 1,629   454   2,646  
Total delinquency $ 3,608   $ 3,019   $ 5,678  
Delinquency as a % of loans held for investment 0.07 % 0.06 % 0.18 %
             
(1) 31% of loans held for investment include a fair value discount of $21.6 million.
 

Investment Securities

Investment securities available for sale totaled $704 million at September 30, 2017, an increase of $861,000 from June 30, 2017, and $391 million from September 30, 2016. The increase in the third quarter of 2017 was primarily the result of $66.4 million in purchases, partially offset by $27.6 million in sales of securities resulting in a gain of $896,000, and approximately $27.1 million in principal payments/amortization/redemptions.

Deposits

At September 30, 2017, deposits totaled $5.0 billion, an increase of $71.7 million, or 1.4%, from June 30, 2017 and $2.0 billion, or 64%, from September 30, 2016. At September 30, 2017, non-maturity deposits totaled $4.2 billion, or 84% of total deposits, an increase of $64.3 million, or 1.6%, from June 30, 2017 and an increase of $1.7 billion, or 69%, from September 30, 2016. During the third quarter of 2017, deposit increases included $80.2 million in noninterest-bearing deposits, $6.3 million in wholesale/brokered certificates of deposits, $3.7 million in money market/savings deposits and $1.1 million in retail certificate deposits, partially offset by a $19.5 million decrease in interest checking.

The weighted average cost of deposits for the three month period ending September 30, 2017 was 0.28%, compared to 0.25% for the three month period ending June 30, 2017 and 0.28% for the three month period ending September 30, 2016.

     
September 30, June 30, September 30,
2017 2017 2016
Deposit Accounts (dollars in thousands)
Noninterest-bearing checking $ 1,890,241 $ 1,810,047 $ 1,160,394
Interest-bearing:
Checking 304,295 323,818 181,534
Money market/savings 2,009,781 2,006,131 1,145,609
Retail certificates of deposit 573,652 572,523 384,083
Wholesale/brokered certificates of deposit 240,184   233,912   188,132  
Total interest-bearing 3,127,912   3,136,384   1,899,358  
Total deposits $ 5,018,153   $ 4,946,431   $ 3,059,752  
 
Cost of deposits 0.28 % 0.25 % 0.28 %
Noninterest-bearing deposits as a percent of total deposits 38 % 37 % 38 %
Non-maturity deposits as a percent of total deposits 84 % 84 % 81 %
 

Borrowings

At September 30, 2017, total borrowings amounted to $462 million, a decrease of $15.0 million, or 3%, from June 30, 2017 and an increase of $256 million, or 125%, from September 30, 2016. Total borrowings for the quarter included $335 million of advances from the Federal Home Loan Bank of San Francisco and $79.9 million of subordinated debt. At September 30, 2017, total borrowings represented 7.1% of total assets, compared to 7.4% and 5.5%, as of June 30, 2017 and September 30, 2016, respectively.

Capital Ratios

At September 30, 2017, our ratio of tangible common equity to total assets was 9.41%, compared with 9.18% in the prior quarter, with book value per share of $24.44 and tangible book value per share of $14.35 per share, compared with a tangible book value per share of $13.83 at June 30, 2017 and tangible book value per share of $12.22 at September 30, 2016.

At September 30, 2017, the Company had a ratio for tier 1 leverage capital of 9.95%, common equity tier 1 risk-based capital of 10.55%, tier 1 risk-based capital of 10.72% and total risk-based capital of 12.28%.

At September 30, 2017, the Bank exceeded all regulatory capital requirements with a ratio for tier 1 leverage capital of 10.91%, common equity tier 1 risk-based capital of 11.76%, tier 1 risk-based capital of 11.76% and total risk-based capital of 12.26%. These capital ratios each exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage capital, 6.5% for common equity tier 1 risk-based capital, 8.00% for tier 1 risk-based capital and 10.00% for total risk-based capital.

     
September 30, June 30, September 30,
Capital Ratios 2017 2017 2016
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio 9.95 % 9.85 % 9.80 %
Common equity tier 1 risk-based capital ratio 10.55 % 10.71 % 10.36 %
Tier 1 risk-based capital ratio 10.72 % 11.08 % 10.66 %
Total risk-based capital ratio 12.28 % 12.69 % 13.14 %
Tangible common equity ratio (1) 9.41 % 9.18 % 9.28 %
 
Pacific Premier Bank
Tier 1 leverage ratio 10.91 % 10.54 % 11.03 %
Common equity tier 1 risk-based capital ratio 11.76 % 11.85 % 12.01 %
Tier 1 risk-based capital ratio 11.76 % 11.85 % 12.01 %
Total risk-based capital ratio 12.26 % 12.35 % 12.70 %
 
Share Data
Book value per share $ 24.44 $ 23.96 $ 16.27
Shares issued and outstanding 40,162,026 40,048,758 27,656,533
Tangible book value per share (1) $ 14.35 $ 13.83 $ 12.22
Closing stock price $ 37.75 $ 36.90 $ 26.46
Market Capitalization (2) $ 1,516,116 $ 1,477,759 $ 731,792
 
(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 is set forth below.

(2) Dollars in thousands.

 

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 24, 2017 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 31, 2017 at (877) 344-7529, conference ID 10112795.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. is the holding company for Pacific Premier Bank, one of the largest banks headquartered in Southern California with approximately $6.5 billion in assets. Pacific Premier Bank is a business bank primarily focused on serving small and middle market businesses in the counties of Orange, Los Angeles, Riverside, San Bernardino, San Diego, San Luis Obispo and Santa Barbara, California. Through its 26 depository branches, Pacific Premier Bank offers a diverse range of lending products including commercial, commercial real estate, construction, and SBA loans, as well as specialty banking products for homeowners associations and franchise lending nationwide.

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, statements regarding the Company's growth, management of growth related expense and the impact of acquisitions. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the impact of changes in financial services policies, laws and regulations (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) and of governmental efforts to restructure the U.S. financial regulatory system; technological changes; the effect of acquisitions that the Company may make, if any, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from its acquisitions; changes in the level of the Company’s nonperforming assets and charge-offs; any oversupply of inventory and deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; the effects of the Company’s lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; 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; unanticipated regulatory or judicial proceedings; and the Company’s 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 2016 Annual Report on Form 10-K of Pacific Premier Bancorp, Inc. filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

NOTICE TO PLAZA BANCORP STOCKHOLDERS

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the Company’s proposed acquisition of Plaza Bancorp (“Plaza”), the Company has filed a registration statement on Form S-4 (the “Registration Statement”) with the SEC. The Registration Statement was declared by the SEC to be effective on September 28, 2017, and a prospectus/consent solicitation statement was distributed to the stockholders of Plaza. STOCKHOLDERS OF PLAZA ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND THE PROSPECTUS/CONSENT SOLICITATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. Investors and security holders are be able to obtain the documents, including the prospectus/consent solicitation statement, free of charge at the SEC’s website, www.sec.gov. In addition, documents filed with the SEC by the Company are available free of charge by (1) accessing the Company’s website at www.ppbi.com under the “Investor Relations” link and then under the heading “SEC Filings,” (2) writing to Pacific Premier at 17901 Von Karman Avenue, Suite 1200, Irvine, CA 92614, Attention: Investor Relations or (3) writing to Plaza at 18200 Von Karman Avenue, Suite 500, Irvine, CA 92612, Attention: Corporate Secretary.

The directors, executive officers and certain other members of management and employees of Plaza may be deemed to be participants in the solicitation of consents in favor of the acquisition from the stockholders of Plaza. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the prospectus/consent solicitation statement regarding the proposed acquisition. Free copies of this document may be obtained as described in the preceding paragraph.

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
  September 30,   June 30,   March 31,   December 31,   September 30,
ASSETS 2017 2017 2017 2016 2016
Cash and due from banks $ 35,713 $ 35,686 $ 13,425 $ 14,706 $ 18,543
Interest-bearing deposits with financial institutions 85,649   193,595   87,088   142,151   85,361  
Cash and cash equivalents 121,362 229,281 100,513 156,857 103,904
Interest-bearing time deposits with financial institutions 4,437 3,944 3,944 3,944 3,944
Investments held-to-maturity, at amortized cost 18,627 7,750 8,272 8,565 8,900
Investment securities available-for-sale, at fair value 703,944 703,083 435,408 380,963 313,200
FHLB, FRB and other stock, at cost 58,344 56,612 37,811 37,304 29,966
Loans held for sale, at lower of cost or fair value 44,343 6,840 11,090 7,711 9,009
Loans held for investment 5,009,317 4,858,611 3,385,697 3,241,613 3,090,839
Allowance for loan losses (27,143 ) (25,055 ) (23,075 ) (21,296 ) (21,843 )
Loans held for investment, net 4,982,174 4,833,556 3,362,622 3,220,317 3,068,996
Accrued interest receivable 20,527 20,607 13,366 13,145 11,642
Other real estate owned 372 372 460 460 711
Premises and equipment 45,725 45,342 11,799 12,014 11,314
Deferred income taxes, net 22,023 22,201 12,744 16,807 20,001
Bank owned life insurance 75,482 74,982 40,696 40,409 40,116
Intangible assets 33,545 35,305 8,942 9,451 9,976
Goodwill 371,677 370,564 102,490 102,490 101,939
Other assets 29,752   30,192   24,271   25,874   21,213  
Total Assets $ 6,532,334   $ 6,440,631   $ 4,174,428   $ 4,036,311   $ 3,754,831  
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposit accounts:
Noninterest-bearing checking $ 1,890,241 $ 1,810,047 $ 1,232,578 $ 1,185,768 $ 1,160,394
Interest-bearing:
Checking 304,295 323,818 191,399 182,893 181,534
Money market/savings 2,009,781 2,006,131 1,273,917 1,202,361 1,145,609
Retail certificates of deposit 573,652 572,523 381,738 375,203 384,083
Wholesale/brokered certificates of deposit 240,184   233,912   217,441   199,356   188,132  
Total interest-bearing 3,127,912   3,136,384   2,064,495   1,959,813   1,899,358  
Total deposits 5,018,153 4,946,431 3,297,073 3,145,581 3,059,752
FHLB advances and other borrowings 382,173 397,267 311,363 327,971 136,213
Subordinated debentures 79,871 79,800 69,413 69,383 69,353
Accrued expenses and other liabilities 70,477   57,402   25,554   33,636   39,548  
Total Liabilities 5,550,674   5,480,900   3,703,403   3,576,571   3,304,866  
STOCKHOLDERS’ EQUITY:
Common stock 397 396 275 274 273
Additional paid-in capital 817,809 815,329 345,888 345,138 343,231
Retained earnings 160,978 140,746 126,570 117,049 105,098
Accumulated other comprehensive income (loss), net of tax (benefit) 2,476   3,260   (1,708 ) (2,721 ) 1,363  
Total Stockholders' Equity 981,660   959,731   471,025   459,740   449,965  
Total Liabilities and Stockholders' Equity $ 6,532,334   $ 6,440,631   $ 4,174,428   $ 4,036,311   $ 3,754,831  
 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
           
Three Months Ended Nine Months Ended
September 30,   June 30,   September 30, September 30,   September 30,
2017 2017 2016 2017 2016
INTEREST INCOME
Loans $ 64,915 $ 63,554 $ 40,487 $ 170,905 $ 114,929
Investment securities and other interest-earning assets 5,246   5,179   1,942   13,416   5,879
Total interest income 70,161   68,733   42,429   184,321   120,808
INTEREST EXPENSE
Deposits 3,557 3,081 2,136 8,774 6,215
FHLB advances and other borrowings 1,162 1,175 314 2,940 963
Subordinated debentures 1,151   1,139   970   3,275   2,859
Total interest expense 5,870   5,395   3,420   14,989   10,037
Net interest income before provision for loan losses 64,291 63,338 39,009 169,332 110,771
Provision for loan losses 2,049   1,904   4,013   6,455   6,722
Net interest income after provision for loan losses 62,242   61,434   34,996   162,877   104,049
NONINTEREST INCOME
Loan servicing fees 276 143 288 641 769
Deposit fees 1,117 986 422 2,521 1,267
Net gain from sales of loans 3,439 2,887 3,122 9,137 7,152
Net gain from sales of investment securities 896 2,093 512 2,989 1,797
Net gain from other real estate owned 94 94 18
Other income 2,493   2,556   1,624   6,281   4,282
Total noninterest income 8,221   8,759   5,968   21,663   15,285
NONINTEREST EXPENSE
Compensation and benefits 21,707 21,625 14,181 58,218 39,018
Premises and occupancy 4,016 3,733 2,576 10,202 7,306
Data processing 2,082 2,439 1,223 5,708 3,021
Other real estate owned operations, net 3 44 5 59 16
FDIC insurance premiums 379 818 442 1,652 1,225
Legal, audit and professional expense 1,978 1,281 737 4,177 2,149
Marketing expense 1,248 1,006 1,683 3,072 3,116
Office, telecommunications and postage expense 835 922 612 2,190 1,666
Loan expense 1,017 1,068 534 2,553 1,477
Deposit expense 1,655 1,663 1,315 4,762 3,516
Merger-related expense 503 10,117 15,566 3,616
CDI amortization 1,761 1,761 525 4,033 1,514
Other expense 2,428   2,019   2,027   5,663   5,565
Total noninterest expense 39,612   48,496   25,860   117,855   73,205
Net income before income taxes 30,851 21,697 15,104 66,685 46,129
Income tax 10,619   7,521   5,877   22,756   17,977
Net income $ 20,232   $ 14,176   $ 9,227   $ 43,929   $ 28,152
EARNINGS PER SHARE
Basic $ 0.51 $ 0.36 $ 0.34 $ 1.23 $ 1.05
Diluted $ 0.50 $ 0.35 $ 0.33 $ 1.20 $ 1.03
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 39,709,565 39,586,524 27,387,123 35,652,626 26,776,140
Diluted 40,486,114 40,394,236 27,925,351 36,455,945 27,245,108
 

SELECTED FINANCIAL DATA

 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
 
Three Months Ended
September 30, 2017   June 30, 2017   September 30, 2016

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Average
Balance

 

Interest
Income/
Expense

 

Average
Yield/
Cost

Assets (dollars in thousands)
Interest-earning assets:
Cash and cash equivalents $ 167,745 $ 265 0.63 % $ 133,127 $ 160 0.48 % $ 201,140 $ 232 0.46 %
Investment securities 765,537 4,981 2.60 829,380 5,019 2.42 316,253 1,710 2.16
Loans receivable, net (1) 4,937,979   64,915   5.22 4,815,612   63,554   5.29 2,998,153   40,487   5.37
Total interest-earning assets 5,871,261 70,161 4.74 5,778,119 68,733 4.77 3,515,546 42,429 4.80
Noninterest-earning assets 573,127   592,186   190,670  
Total assets $ 6,444,388   $ 6,370,305   $ 3,706,216  
Liabilities and Equity
Interest-bearing deposits:
Interest checking $ 318,412 $ 103 0.13 $ 329,450 $ 90 0.11 $ 185,344 $ 53 0.11
Money market 1,802,834 1,767 0.39 1,779,013 1,582 0.36 1,036,349 923 0.35
Savings 211,404 68 0.13 218,888 68 0.12 98,496 38 0.15
Retail certificates of deposit 571,663 1,052 0.73 568,367 911 0.64 402,371 745 0.74
Wholesale/brokered certificates of deposit 243,007   567   0.93 212,124   430   0.81 199,180   377   0.75
Total interest-bearing deposits 3,147,320 3,557 0.45 3,107,842 3,081 0.40 1,921,740 2,136 0.44
FHLB advances and other borrowings 319,373 1,162 1.44 385,088 1,175 1.22 97,547 314 1.28
Subordinated debentures 79,833   1,151   5.77 79,757   1,139   5.71 69,334   970   5.60
Total borrowings 399,206   2,313   2.30 464,845   2,314   2.00 166,881   1,284   3.06
Total interest-bearing liabilities 3,546,526 5,870 0.66 3,572,687 5,395 0.61 2,088,621 3,420 0.65
Noninterest-bearing deposits 1,860,177 1,802,752 1,134,318
Other liabilities 61,604   46,666   34,500  
Total liabilities 5,468,307 5,422,105 3,257,439
Stockholders' equity 976,081   948,200   448,777  
Total liabilities and equity $ 6,444,388     $ 6,370,305     $ 3,706,216    
Net interest income $ 64,291   $ 63,338   $ 39,009  
Net interest margin (2) 4.34 % 4.40 % 4.41 %
Ratio of interest-earning assets to interest-bearing liabilities 165.55 % 161.73 % 168.32 %
 
(1) Average balance includes nonperforming loans and is net of deferred loan origination fees/costs and unamortized discounts/premiums.
(2) Represents net interest income divided by average interest-earning assets.
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
(dollars in thousands)
         
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
 
Business loans:
Commercial and industrial $ 763,091 $ 733,852 $ 593,457 $ 563,169 $ 537,809
Franchise 626,508 565,415 493,158 459,421 431,618
Commercial owner occupied 805,137 729,476 482,295 454,918 460,068
SBA 107,211 101,384 96,486 88,994 83,186
Agriculture 86,466   98,842        
Total business loans 2,388,413 2,228,969 1,665,396 1,566,502 1,512,681
Real estate loans:
Commercial non-owner occupied 1,098,995 1,095,184 612,444 586,975 527,412
Multi-family 797,370 746,547 682,237 690,955 689,813
One-to-four family 246,248 322,048 100,423 100,451 101,377
Construction 301,334 289,600 298,279 269,159 231,098
Farmland 140,581 136,587
Land 30,719 31,799 19,738 19,829 18,472
Other loans 6,228   7,309   3,930   4,112   5,678  
Total real estate loans 2,621,475   2,629,074   1,717,051   1,671,481   1,573,850  
Gross loans held for investment 5,009,888 4,858,043 3,382,447 3,237,983 3,086,531
Plus: Deferred loan origination costs/(fees) and premiums/(discounts), net (571 ) 568   3,250   3,630   4,308  
Loans held for investment 5,009,317 4,858,611 3,385,697 3,241,613 3,090,839
Allowance for loan losses (27,143 ) (25,055 ) (23,075 ) (21,296 ) (21,843 )
Loans held for investment, net $ 4,982,174   $ 4,833,556   $ 3,362,622   $ 3,220,317   $ 3,068,996  
 
Loans held for sale, at lower of cost or fair value $ 44,343 $ 6,840 $ 11,090 $ 7,711 $ 9,009
 
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
(dollars in thousands)
         
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Asset Quality
Nonaccrual loans $ 515 $ 395 $ 513 $ 1,141 $ 5,734
Other real estate owned 372   372   460   460   711  
Nonperforming assets $ 887   $ 767   $ 973   $ 1,601   $ 6,445  
 
Allowance for loan losses $ 27,143 $ 25,055 $ 23,075 $ 21,296 $ 21,843
Allowance for loan losses as a percent of total nonperforming loans 5,270 % 6,343 % 4,498 % 1,866 % 381 %
Nonperforming loans as a percent of loans held for investment 0.01 % 0.01 % 0.02 % 0.04 % 0.19 %
Nonperforming assets as a percent of total assets 0.01 % 0.01 % 0.02 % 0.04 % 0.17 %
Net loan (recoveries) charge-offs for the quarter ended $ (38 ) $ (76 ) $ 723 $ 2,601 $ 1,125
Net loan (recoveries) charge-offs for quarter to average total loans % % 0.02 % 0.08 % 0.04 %
Allowance for loan losses to loans held for investment (1) 0.54 % 0.52 % 0.68 % 0.66 % 0.71 %
Delinquent Loans:
30 - 59 days $ 556 $ 600 $ 117 $ 122 $ 1,042
60 - 89 days 1,423 1,965 71 1,990
90+ days 1,629   454   360   639   2,646  
Total delinquency $ 3,608   $ 3,019   $ 477   $ 832   $ 5,678  
Delinquency as a percent of loans held for investment 0.07 % 0.06 % 0.01 % 0.03 % 0.18 %
(1) 31% of loans held for investment include a fair value discount of $21.6 million.
 

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS
(dollars in thousands, except per share data)

For periods presented below, return on average tangible common equity is a non-GAAP financial measure derived from GAAP-based amounts. We calculate these figures by excluding CDI amortization expense and exclude the average CDI and average goodwill from the average stockholders' equity during the period. Management believes that the exclusion of such items from these financial measures provides useful information to an understanding of the operating results of our core business. 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.

 

  Three Months Ended
September 30,   June 30,   September 30,
2017 2017 2016
Net income $ 20,232 $ 14,176 $ 9,227
Plus CDI amortization expense 1,761 1,761 525
Less CDI amortization expense tax adjustment (606 ) (610 ) (204 )
Net income for average tangible common equity $ 21,387   $ 15,327   $ 9,548  
 
Average stockholders' equity $ 976,081 $ 948,200 $ 448,777
Less average CDI 34,699 36,445 10,318
Less average goodwill 371,651   370,564   101,939  
Average tangible common equity $ 569,731   $ 541,191   $ 336,520  
 
Return on average equity 8.29 % 5.98 % 8.22 %
Return on average tangible common equity 15.02 % 11.33 % 11.35 %
 

Tangible common equity to tangible assets (the "tangible common equity ratio") and tangible book value per share are non-GAAP financial measures derived from GAAP-based amounts. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. 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 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. 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 measures, this presentation may not be comparable to other similarly titled measures reported by other companies.

 

  September 30,   June 30,   March 31,   December 31,   September 30,
2017 2017 2017 2016 2016
Total stockholders' equity $ 981,660 $ 959,731 $ 471,025 $ 459,740 $ 449,965
Less intangible assets (405,222 ) (405,869 ) (111,432 ) (111,941 ) (111,915 )
Tangible common equity $ 576,438   $ 553,862   $ 359,593   $ 347,799   $ 338,050  
 
Book value per share $ 24.44 $ 23.96 $ 16.88 $ 16.54 $ 16.27
Less intangible book value per share (10.09 ) (10.13 ) (4.00 ) (4.03 ) (4.05 )
Tangible book value per share $ 14.35   $ 13.83   $ 12.88   $ 12.51   $ 12.22  
 
Total assets $ 6,532,334 $ 6,440,631 $ 4,174,428 $ 4,036,311 $ 3,754,831
Less intangible assets (405,222 ) (405,869 ) (111,432 ) (111,941 ) (111,915 )
Tangible assets $ 6,127,112   $ 6,034,762   $ 4,062,996   $ 3,924,370   $ 3,642,916  
 
Tangible common equity ratio 9.41 % 9.18 % 8.85 % 8.86 % 9.28 %
 

Contacts

Pacific Premier Bancorp, Inc.
Steven R. Gardner
Chairman, President and Chief Executive Officer
949.864.8000
or
Ronald J. Nicolas, Jr.
Senior Executive Vice President & CFO
949.864.8000

Release Summary

Pacific Premier Bancorp, Inc. Announces Third Quarter 2017 Results (Unaudited)

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Contacts

Pacific Premier Bancorp, Inc.
Steven R. Gardner
Chairman, President and Chief Executive Officer
949.864.8000
or
Ronald J. Nicolas, Jr.
Senior Executive Vice President & CFO
949.864.8000