First Quarter 2024 Summary

• Net income of $47.0 million, or $0.49 per diluted share
• Return on average assets of 0.99%, return on average equity of 6.50%, and return on average tangible common equity⁽¹⁾ of 10.05%
• Pre-provision net revenue (“PPNR”)⁽¹⁾ to average assets of 1.43%, annualized
• Net interest margin expanded 11 basis points to 3.39%
• Cost of deposits of 1.59%, and cost of non-maturity deposits⁽¹⁾ of 1.06%
• Non-maturity deposits⁽¹⁾ to total deposits of 84.42%
• Total delinquency of 0.09% of loans held for investment
• Nonperforming assets to total assets of 0.34%
• Tangible book value per share⁽¹⁾ increased $0.11 compared to the prior quarter to $20.33
• Common equity tier 1 capital ratio of 15.02%, and total risk-based capital ratio of 18.23%
• Tangible common equity ratio (“TCE”)⁽¹⁾ increased to 10.97%

Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $47.0 million, or $0.49 per diluted share, for the first quarter of 2024, compared with net loss of $135.4 million, or $1.44 per diluted share, for the fourth quarter of 2023, and net income of $62.6 million, or $0.66 per diluted share, for the first quarter of 2023.

For the first quarter of 2024, the Company’s return on average assets (“ROAA”) was 0.99%, return on average equity (“ROAE”) was 6.50%, and return on average tangible common equity (“ROATCE”)⁽¹⁾ was 10.05%, compared to (2.76)%, (19.01)%, and (28.01)%, respectively, for the fourth quarter of 2023, and 1.15%, 8.87%, and 13.89%, respectively, for the first quarter of 2023. Total assets were $18.81 billion at March 31, 2024, compared to $19.03 billion at December 31, 2023, and $21.36 billion at March 31, 2023.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, “Our team delivered solid first quarter financial performance with net income of $47.0 million, or $0.49 per share, reflecting a full quarter’s benefit from the securities portfolio repositioning as our net interest margin expanded 11 basis points to 3.39%. Our commitment to prudent and proactive risk, liquidity, and capital management in the current dynamic environment continues to drive strong capital levels that rank amongst the top of our peers, with our TCE⁽¹⁾ ratio increasing 25 basis points to 10.97%.

“On the business development front, our dedicated relationship managers, retail branch bankers, and treasury management teams continue to successfully collaborate to expand our client base and deepen existing client relationships. During the first quarter, total deposits increased by $192 million, driven by a $120 million increase in non-maturity deposits, enabling us to further reduce FHLB borrowings by $400 million. Some of the quarterly deposit inflows were seasonal in nature, which we expect to reverse as we move through the year.

“First quarter asset quality trends remained strong, although nonperforming loans increased to $63.8 million, primarily the result of a single, diversified, Pacific Northwest commercial banking relationship, wherein the borrower remains current on all payments. Our team is actively engaged with the client and continues to approach the relationship consistent with our longstanding proactive approach to credit risk management.

“With our strong capital levels combined with our significant loss absorbing capacity, we have strategically positioned the company to perform in a variety of economic and credit scenarios. There are a number of factors contributing to an uncertain outlook, including ongoing inflationary pressures, interest rate volatility, and domestic and international geopolitical risks. Our franchise has been built on a culture of risk management and a proactive approach to building sustainable franchise value. We will continue to manage the business proactively and prudently while leveraging the strength of our relationship banking teams to capitalize on compelling opportunities as they may arise. I would like to thank all Pacific Premier employees for their outstanding efforts during the quarter, as well as all of our stakeholders for continuing to support our organization.”

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $145.1 million in the first quarter of 2024, a decrease of $1.7 million, or 1.1%, from the fourth quarter of 2023. The decrease in net interest income was primarily attributable to lower average interest-earning asset balances, a higher cost of funds, and one less day of interest, partially offset by higher yields on interest-earning assets, as well as lower average borrowings.

The net interest margin for the first quarter of 2024 increased 11 basis points to 3.39%, from 3.28% in the prior quarter. The increase was primarily due to higher yields on investment securities as a result of a full quarter's benefit from the securities repositioning to higher-yielding available-for-sale (“AFS”) Treasury securities, partially offset by a higher cost of funds.

Net interest income for the first quarter of 2024 decreased $23.5 million, or 13.9%, compared to the first quarter of 2023. The decrease was attributable to a higher cost of funds and lower average interest-earning asset balances, partially offset by lower average interest-bearing liabilities and higher yields on average interest-earning assets, all the result of the higher interest rate environment and the Company's balance sheet management strategies to prioritize capital accumulation.

Provision for Credit Losses

For the first quarter of 2024, the Company recorded a $3.9 million provision expense, compared to $1.7 million for the fourth quarter of 2023, and $3.0 million for the first quarter of 2023. The provision for credit losses was largely attributable to increases associated with economic forecasts, partially offset by changes to the overall size and composition of the loan portfolio.

Noninterest Income

Noninterest income for the first quarter of 2024 was $25.8 million, an increase of $260.0 million from the fourth quarter of 2023. The increase was related to the investment securities portfolio repositioning which resulted in a loss of $254.1 million during the fourth quarter of 2023. Excluding the prior quarter's loss, noninterest income increased $5.9 million, primarily due to a $5.1 million gain on debt extinguishment resulting from an early redemption of a $200.0 million Federal Home Loan Bank of San Francisco (“FHLB”) term advance as well as a $1.3 million increase in trust custodial account fees driven by annual tax fees earned during the current quarter.

Noninterest income for the first quarter of 2024 increased $4.6 million compared to the first quarter of 2023. The increase was primarily due to a $5.1 million gain on debt extinguishment resulting from an early redemption of a $200.0 million FHLB term advance during the current quarter.

Noninterest Expense

Noninterest expense totaled $102.6 million for the first quarter of 2024, a decrease of $137,000 compared to the fourth quarter of 2023. The results were impacted by a $523,000 FDIC special assessment in the first quarter of 2024 and a $2.1 million FDIC special assessment during the fourth quarter of 2023. Excluding the special assessments, noninterest expense increased $1.4 million, primarily due to a $2.2 million increase in compensation and benefits related to higher payroll taxes and the annual equity-based compensation awards, as well as a $1.5 million increase in deposit expense due to higher deposit earnings credit rates, partially offset by a $1.1 million decrease in other expense.

Noninterest expense for the first quarter of 2024 increased by $1.3 million compared to the first quarter of 2023. The increase was primarily due to a $4.2 million increase in deposit expense, partially offset by a $1.4 million decrease in legal and professional services and a $935,000 decrease in premises and occupancy.

Income Tax

For the first quarter of 2024, income tax expense totaled $17.4 million, resulting in an effective tax rate of 27.0%, compared with income tax benefit of $56.5 million and an effective tax rate of 29.4% for the fourth quarter of 2023, and income tax expense of $22.9 million and an effective tax rate of 26.8% for the first quarter of 2023. The income tax benefit in the prior quarter was primarily attributable to the pretax loss from sales of AFS securities recorded for the fourth quarter of 2023, driven by the Company's balance sheet repositioning.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.01 billion at March 31, 2024, a decrease of $276.9 million, or 2.1%, from December 31, 2023, and a decrease of $1.16 billion, or 8.2%, from March 31, 2023. The decrease from December 31, 2023 was primarily due to lower loan production and fundings, as well as a decrease in credit line draws, partially offset by slower loan prepayments and maturities.

During the first quarter of 2024, new loan commitments totaled $45.6 million, and new loan fundings totaled $14.0 million, compared with $128.1 million in loan commitments and $103.7 million in new loan fundings for the fourth quarter of 2023, and $116.8 million in loan commitments and $66.9 million in new loan fundings for the first quarter of 2023. During the first quarter of 2024, new origination activity remained muted given the uncertain economic and interest rate outlook as well as softer borrower demand.

At March 31, 2024, the total loan-to-deposit ratio was 85.7%, compared to 88.6% and 82.4% at December 31, 2023 and March 31, 2023, respectively.

The following table presents the primary loan roll-forward activities for total gross loans, including both loans held for investment and loans held for sale, during the quarters indicated:

The following table presents the composition of the loans held for investment as of the dates indicated:

The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at March 31, 2024 was 4.91%, compared to 4.87% at December 31, 2023, and 4.68% at March 31, 2023. The quarter-over-quarter and year-over-year increases reflect higher rates on new originations and the repricing of loans as a result of the increases in benchmark interest rates.

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

The weighted average interest rate on new loan commitments increased to 8.62% in the first quarter of 2024, compared to 6.34% in the fourth quarter of 2023, and 7.43% in the first quarter of 2023.

Asset Quality and Allowance for Credit Losses

At March 31, 2024, our allowance for credit losses (“ACL”) on loans held for investment was $192.3 million, a decrease of $131,000 from December 31, 2023, and a decrease of $3.0 million from March 31, 2023. The decrease in the ACL from December 31, 2023 and March 31, 2023 reflects the relative changes in size and composition in our loans held for investment, partially offset by changes in economic forecasts.

During the first quarter of 2024, the Company incurred $6.4 million of net charge-offs, primarily related to the sale of special mention and substandard CRE and franchise loans during the quarter, compared to $3.9 million during the fourth quarter of 2023, and $3.3 million during the first quarter of 2023.

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:

The ratio of ACL to loans held for investment at March 31, 2024 increased to 1.48%, compared to 1.45% at December 31, 2023, and 1.38% at March 31, 2023. The fair value net discount on loans acquired through acquisitions was $41.2 million, or 0.32% of total loans held for investment, as of March 31, 2024, compared to $43.3 million, or 0.33% of total loans held for investment, as of December 31, 2023, and $52.2 million, or 0.37% of total loans held for investment, as of March 31, 2023.

Nonperforming assets totaled $64.1 million, or 0.34% of total assets, at March 31, 2024, compared with $25.1 million, or 0.13% of total assets, at December 31, 2023, and $30.4 million, or 0.14% of total assets, at March 31, 2023. The increase in nonperforming assets at March 31, 2024, was primarily the result of loans to one borrower relationship totaling $37.6 million, all of which were current as of March 31, 2024. Loan delinquencies were $12.2 million, or 0.09% of loans held for investment, at March 31, 2024, compared to $10.1 million, or 0.08% of loans held for investment, at December 31, 2023, and $20.8 million, or 0.15% of loans held for investment, at March 31, 2023.

Classified loans totaled $204.7 million, or 1.57% of loans held for investment, at March 31, 2024, compared with $142.0 million, or 1.07% of loans held for investment, at December 31, 2023, and $161.1 million, or 1.14% of loans held for investment, at March 31, 2023. The increase in classified loans included the $37.6 million in loans related to one borrower relationship that were placed on nonaccrual during the first quarter of 2024 and remained current as of March 31, 2024.

The following table presents the asset quality metrics of the loan portfolio as of the dates indicated.

Investment Securities

At March 31, 2024, AFS and held-to-maturity (“HTM”) investment securities were $1.15 billion and $1.72 billion, respectively, compared to $1.14 billion and $1.73 billion, respectively, at December 31, 2023, and $2.11 billion and $1.75 billion, respectively, at March 31, 2023.

In total, investment securities were $2.87 billion at March 31, 2024, an increase of $4.9 million from December 31, 2023, and a decrease of $987.4 million from March 31, 2023. The increase in the first quarter of 2024 compared to the prior quarter was primarily the result of $170.2 million in purchases and a decrease of $1.9 million in AFS investment securities mark-to-market unrealized loss, partially offset by $167.3 million in principal payments, amortization and accretion, and redemptions.

The decrease in investment securities from March 31, 2023 was primarily the result of $1.52 billion in sales of AFS investment securities and $410.9 million in principal payments, discounts from the AFS securities transferred to HTM, partially offset by $722.7 million in purchases of AFS and HTM investment securities and a decrease of $219.0 million in AFS securities mark-to-market unrealized loss.

Deposits

At March 31, 2024, total deposits were $15.19 billion, an increase of $192.2 million, or 1.3%, from December 31, 2023, and a decrease of $2.02 billion, or 11.7%, from March 31, 2023. The increase from the prior quarter was largely driven by increases of $169.2 million in money market and savings, $110.3 million in retail certificates of deposit, and $64.8 million in noninterest-bearing checking, partially offset by reductions of $114.0 million in interest-bearing checking and $38.1 million in brokered certificates of deposit. The decrease from March 31, 2023 was attributable to the decreases of $1.21 billion in noninterest-bearing checking and $1.17 billion in brokered certificates of deposit.

At March 31, 2024, non-maturity deposits⁽¹⁾ totaled $12.82 billion, or 84.4% of total deposits, an increase of $120.0 million, or 0.9%, from December 31, 2023, and a decrease of $1.39 billion, or 9.8%, from March 31, 2023. The increase from prior quarter was largely driven by seasonal deposit growth within our HOA business. The decrease from the first quarter of 2023 was attributable to the continued effect of clients prepaying or paying down loans and redeploying funds into higher yielding alternatives.

At March 31, 2024, maturity deposits totaled $2.37 billion, an increase of $72.2 million, or 3.1%, from December 31, 2023, and a decrease of $631.1 million, or 21.1%, from March 31, 2023. The increase in the first quarter of 2024 compared to the prior quarter was primarily driven by an increase of $110.3 million in retail certificates of deposit, partially offset by the reduction of $38.1 million in brokered certificates of deposit. The decrease from March 31, 2023 was primarily driven by decreases in brokered certificates of deposit.

The weighted average cost of total deposits for the first quarter of 2024 was 1.59%, compared to 1.56% for the fourth quarter of 2023, and 0.94% for the first quarter of 2023. The increases in the weighted average cost of deposits for the first quarter of 2024, compared to the fourth quarter of 2023 and the first quarter of 2023, were principally driven by higher pricing across deposit categories. The weighted average cost of non-maturity deposits⁽¹⁾ for the first quarter of 2024 was 1.06%, compared to 1.02% for the fourth quarter of 2023, and 0.54% for the first quarter of 2023.

At March 31, 2024, the end-of-period weighted average rate of total deposits was 1.66%, compared to 1.55% at December 31, 2023, and 1.15% at March 31, 2023. At March 31, 2024, the end-of-period weighted average rate of non-maturity deposits was 1.12%, compared to 1.04% at December 31, 2023, and 0.61% at March 31, 2023.

At March 31, 2024, the Company’s FDIC-insured deposits as a percentage of total deposits was 60%. Insured and collateralized deposits comprised 66% of total deposits at March 31, 2024, which was the same level at December 31, 2023.

The following table presents the composition of deposits as of the dates indicated.

Borrowings

At March 31, 2024, total borrowings amounted to $532.0 million, a decrease of $399.8 million from December 31, 2023, and a decrease of $599.4 million from March 31, 2023. Total borrowings at March 31, 2024 were comprised of $200.0 million of FHLB term advances and $332.0 million of subordinated debt. The decrease in borrowings at March 31, 2024 as compared to December 31, 2023 was due to a decrease of $400.0 million in FHLB term advances. The decrease in borrowings at March 31, 2024 as compared to March 31, 2023 was due to a decrease of $600.0 million in FHLB term advances.

As of March 31, 2024, our unused borrowing capacity was $8.53 billion, which consists of available lines of credit with FHLB and other correspondent banks as well as access through the Federal Reserve Bank's discount window, which was not utilized during the first quarter of 2024.

Capital Ratios

At March 31, 2024, our common stockholders' equity was $2.90 billion, or 15.43% of total assets, compared with $2.88 billion, or 15.15%, at December 31, 2023, and $2.83 billion, or 13.25%, at March 31, 2023, with a book value per share of $30.09, compared with $30.07 at December 31, 2023, and $29.58 at March 31, 2023. At March 31, 2024, the ratio of tangible common equity to tangible assets⁽¹⁾ was 10.97%, compared with 10.72% at December 31, 2023, and 9.20% at March 31, 2023, and tangible book value per share⁽¹⁾ was $20.33, compared with $20.22 at December 31, 2023, and $19.61 at March 31, 2023.

The Company implemented the current expected credit losses (“CECL”) model on January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. In the first quarter of 2022, the Company began phasing into regulatory capital the cumulative adjustments at the end of the second year of the transition period at 25% per year. At March 31, 2024, the Company and Bank were in compliance with the capital conservation buffer requirement and exceeded the minimum Common Equity Tier 1, Tier 1, and total capital ratios, inclusive of the fully phased-in capital conservation buffer of 7.0%, 8.5%, and 10.5%, respectively, and the Bank qualified as “well capitalized” for purposes of the federal bank regulatory prompt corrective action regulations.

Dividend and Stock Repurchase Program

On April 22, 2024, the Company's Board of Directors declared a $0.33 per share dividend, payable on May 13, 2024 to stockholders of record as of May 6, 2024. In January 2021, the Company’s Board of Directors approved a stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock. During the first quarter of 2024, the Company did not repurchase any shares of common stock.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on April 24, 2024 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. Participants should ask to be joined to the Pacific Premier Bancorp, Inc. call. Additionally, a telephone replay will be made available through May 1, 2024, at (877) 344-7529, replay code 4066481.

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 $19 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 $17 billion of assets under custody and over 33,000 client accounts comprised of self-directed investors, financial institutions, capital syndicators, and financial advisors. Additionally, Pacific Premier Bank provides nationwide customized banking solutions to Homeowners’ Associations and Property Management companies. Pacific Premier Bank is an Equal Housing Lender and Member FDIC. For additional information about Pacific Premier Bancorp, Inc. and Pacific Premier Bank, visit our website: www.ppbi.com.

FORWARD-LOOKING STATEMENTS

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

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which we conduct operations; adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; 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; interest rate, liquidity, economic, market, credit, operational, and inflation risks associated with our business, including the speed and predictability of changes in these risks; our ability to attract and retain deposits and access to other sources of liquidity, particularly in a rising or high interest rate environment, and the quality and composition of our deposits; business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the U.S. Federal budget or debt, or turbulence or uncertainty in domestic or foreign financial markets; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; possible impairment charges to goodwill, including any impairment that may result from increased volatility in our stock price; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; compliance risks, including the costs of monitoring, testing, and maintaining compliance with complex laws and regulations; the effectiveness of our risk management framework and quantitative models; 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; possible credit-related impairments of securities held by us; changes in the level of our nonperforming assets and charge-offs; the impact of governmental efforts to restructure the U.S. financial regulatory system; the impact of recent or future changes in the FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; changes in consumer spending, borrowing, and savings habits; the effects of concentrations in our loan portfolio, including commercial real estate and the risks of geographic and industry concentrations; the possibility that we may reduce or discontinue the payments of dividends on our common stock; the possibility that we may discontinue, reduce or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to our stock repurchase program; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism, and/or military conflicts, including the war between Russia and Ukraine, Israel and Hamas and overall tension in the Middle East, and trade tensions, all of which could impact business and economic conditions in the United States and abroad; public health crises and pandemics and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions; cybersecurity threats and the cost of defending against them; climate change, including the enhanced regulatory, compliance, credit, and reputational risks and costs; natural disasters, earthquakes, fires, and severe weather; unanticipated regulatory or legal proceedings; and our ability to manage the risks involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2023 Annual Report on Form 10-K filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

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