Pacific Premier Bancorp, Inc. Announces First Quarter 2023 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share

First Quarter 2023 Summary

• Net income of $62.6 million, or $0.66 per diluted share
• Return on average assets of 1.15%, return on average equity of 8.87%, and return on average tangible common equity⁽¹⁾ of 13.89%
• Pre-provision net revenue (“PPNR”)⁽¹⁾ to average assets of 1.63%, annualized
• Net interest margin of 3.44%
• Cost of deposits of 0.94%, and cost of core deposits⁽¹⁾ of 0.54%; total deposits decreased $144.6 million, or 0.8%, from the prior quarter
• Nonperforming assets to total assets of 0.14%, and net charge-offs to average loans of 0.02%
• Total risk-based capital ratio of 16.33% and common equity tier 1 capital ratio of 13.54%
• Tangible book value per share⁽¹⁾ increased $0.23 to $19.61 compared to the prior quarter; tangible common equity ratio⁽¹⁾ of 9.20%
• Available liquidity of $10 billion; cash and cash equivalents increased to $1.42 billion and unused borrowing capacity of $8.55 billion at quarter end

Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income of $62.6 million, or $0.66 per diluted share, for the first quarter of 2023, compared with net income of $73.7 million, or $0.77 per diluted share, for the fourth quarter of 2022, and net income of $66.9 million, or $0.70 per diluted share, for the first quarter of 2022.

For the quarter ended March 31, 2023, the Company’s return on average assets (“ROAA”) was 1.15%, return on average equity (“ROAE”) was 8.87%, and return on average tangible common equity (“ROATCE”)⁽¹⁾ was 13.89%, compared to 1.36%, 10.71%, and 16.99%, respectively, for the fourth quarter of 2022, and 1.28%, 9.34%, and 14.66%, respectively, for the first quarter of 2022. Total assets were $21.36 billion at March 31, 2023, compared to $21.69 billion at December 31, 2022, and $21.62 billion at March 31, 2022.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, “Over the years, we have maintained our commitment to growing a diversified commercial client base predicated on a long-term approach to relationship management. We have consistently operated the institution with a prudent approach to credit risk management along with maintaining ample levels of liquidity and an overall conservative view towards capital management. This longstanding discipline permeates our organization and has enabled us to deliver another quarter of solid profitability and returns in a challenging operating environment.

“The strategic actions we have taken over the past year to proactively address rising interest rates have placed us in a position of strength as we continue to guide our organization through the uncertain economic outlook. Successful execution of our strategy has allowed us to build our capital levels to some of the strongest among our peers, which in turn provides us with significant optionality and flexibility. By employing a disciplined approach to the business, we are well-positioned to meet the needs of our clients while maintaining our focus on generating new profitable customer relationships.

“I am grateful for the extraordinary effort our team put forth during a difficult quarter for the benefit of all of our stakeholders, including our clients, communities, employees, and our stockholders. As we look to the near- and medium-term, we are preparing for the possibility of further dislocations in the credit, funding, and capital markets. We will continue to leverage the strength of our balance sheet, liquidity, and capital positions to navigate these headwinds and will prudently take advantage of future opportunities to expand our business, while continuing to create long-term franchise value.”

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⁽¹⁾ Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

FINANCIAL HIGHLIGHTS

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $168.6 million in the first quarter of 2023, a decrease of $12.8 million, or 7.0%, from the fourth quarter of 2022. The decrease in net interest income was primarily attributable to a higher cost of funds reflecting an increase in deposit pricing as a result of the higher interest rate environment, an increase in brokered certificates of deposit as part of our liquidity management strategy, and two fewer days of interest, partially offset by higher yields on average interest-earning assets.

The net interest margin for the first quarter of 2023 decreased 17 basis points to 3.44%, from 3.61% in the prior quarter. The lower net interest margin was due to higher cost of funds and lower loan prepayment fees, partially offset by higher yields on interest-earning assets.

Net interest income for the first quarter of 2023 increased $6.8 million, or 4.2%, compared to the first quarter of 2022. The increase was attributable to higher yields on average interest-earning assets, partially offset by a higher cost of funds, higher average interest-bearing liabilities, and lower loan-related fees and accretion income as a result of decreased prepayment activity.

Provision for Credit Losses

For the first quarter of 2023, the Company recorded $3.0 million of provision expense, compared to $2.8 million for the fourth quarter of 2022, and $448,000 for the first quarter of 2022. The provision for credit losses was impacted by changes to the overall size, composition, asset quality trends, and unfunded commitments of the loan portfolio, as well as the impact of the weighted macroeconomic forecasts.

Noninterest Income

Noninterest income for the first quarter of 2023 was $21.2 million, an increase of $689,000 from the fourth quarter of 2022. The increase was primarily due to a $1.3 million increase in trust custodial account fees driven by seasonal, annual tax fees earned during the first quarter, partially offset by a $344,000 decrease in other income, and a $224,000 decrease in escrow and exchange fees. Additionally, the Bank sold $304.2 million of investment securities for a net gain of $138,000 during the first quarter of 2023.

Noninterest income for the first quarter of 2023 decreased $4.7 million, compared to the first quarter of 2022. The decrease was primarily due to a $2.0 million decrease in net gain from sales of investment securities, a $1.5 million decrease in net gain from loan sales, a $603,000 decrease in escrow and exchange fees attributable to the lower transaction activity in the commercial real estate market, and a $554,000 decrease in trust custodial account fees.

Noninterest Expense

Noninterest expense totaled $101.4 million for the first quarter of 2023, an increase of $2.2 million compared to the fourth quarter of 2022, primarily due to a $1.7 million increase in deposit expense driven by higher deposit earnings credit rates, as well as a $962,000 increase in FDIC insurance premiums, partially offset by a $622,000 decrease in other expense.

Noninterest expense increased by $3.7 million compared to the first quarter of 2022. The increase was primarily due to a $4.7 million increase in deposit expense driven by higher deposit earnings credit rates, a $1.4 million increase in legal and professional services, a $1.3 million increase in data processing, and a $1.0 million increase in FDIC insurance premiums, partially offset by a $2.7 million decrease in compensation and benefits from decreased staffing levels as well as a $1.1 million decrease in other expense.

Income Tax

For the first quarter of 2023, income tax expense totaled $22.9 million, resulting in an effective tax rate of 26.8%, compared with income tax expense of $26.2 million and an effective tax rate of 26.2% for the fourth quarter of 2022, and income tax expense of $22.7 million and an effective tax rate of 25.4% for the first quarter of 2022.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $14.17 billion at March 31, 2023, a decrease of $504.5 million, or 3.4%, from December 31, 2022, and a decrease of $562.0 million, or 3.8%, from March 31, 2022. The decrease from December 31, 2022 was a result of lower loan originations due to our disciplined approach around credit risk management and loan pricing along with lower loan demand. The decrease from March 31, 2022 was primarily driven by lower loan fundings as well as loan prepayments and maturities.

During the first quarter of 2023, new loan commitments totaled $116.8 million, and loan fundings totaled $66.9 million, compared with $239.8 million in loan commitments and $149.1 million in new loan fundings for the fourth quarter of 2022, and $1.46 billion in loan commitments and $1.06 billion in new loan fundings for the first quarter of 2022. Loan commitments decreased compared to prior quarters as we strategically maintained a disciplined approach to credit risk management and loan pricing.

At March 31, 2023, the total loan-to-deposit ratio was 82.4%, compared with 84.6% and 83.4% at December 31, 2022 and March 31, 2022, 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, 2023 was 4.68%, compared to 4.61% at December 31, 2022, and 3.92% at March 31, 2022. 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 7.43% in the first quarter of 2023, compared to 6.34% in the fourth quarter of 2022, and 3.55% in the first quarter of 2022.

Asset Quality and Allowance for Credit Losses

At March 31, 2023, our allowance for credit losses (“ACL”) on loans held for investment was $195.4 million, a decrease of $263,000 from December 31, 2022, and a decrease of $2.1 million from March 31, 2022. The decline in ACL from December 31, 2022 and March 31, 2022 was reflective primarily of lower loans held for investment.

During the first quarter of 2023, the Company incurred $3.3 million of net charge-offs, compared to $3.8 million during the fourth quarter of 2022, and $446,000 of net charge-offs during the first quarter of 2022, 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:

The ratio of allowance for credit losses to loans held for investment at March 31, 2023 was 1.38%, compared to 1.33% at December 31, 2022, and 1.34% at March 31, 2022. The fair value net discount on loans acquired through total bank acquisitions was $52.2 million, or 0.37% of total loans held for investment, as of March 31, 2023, compared to $54.8 million, or 0.37% of total loans held for investment, as of December 31, 2022, and $71.2 million, or 0.48% of total loans held for investment, as of March 31, 2022.

Nonperforming assets totaled $30.4 million, or 0.14% of total assets, at March 31, 2023, compared with $30.9 million, or 0.14% of total assets, at December 31, 2022, and $55.3 million, or 0.26% of total assets, at March 31, 2022. Loan delinquencies were $20.8 million, or 0.15% of loans held for investment, at March 31, 2023, compared to $43.3 million, or 0.30% of loans held for investment, at December 31, 2022, and $43.7 million, or 0.30% of loans held for investment, at March 31, 2022.

Classified loans totaled $161.1 million, or 1.14% of loans held for investment, at March 31, 2023, compared with $149.3 million, or 1.02% of loans held for investment, at December 31, 2022, and $122.5 million, or 0.83% of loans held for investment, at March 31, 2022.

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

Investment Securities

At March 31, 2023, available-for-sale (“AFS”) and held-to-maturity (“HTM”) investment securities were $2.11 billion and $1.75 billion, respectively, compared to $2.60 billion and $1.39 billion, respectively, at December 31, 2022, and $3.22 billion and $996.4 million, respectively, at March 31, 2022. During the first quarter of 2023, the Company reassessed classification of certain AFS investments and transferred approximately $410.7 million of collateralized mortgage obligations to HTM securities, which the Company intends and has the ability to hold to maturity. The transfer of these securities was accounted for at fair value on the transfer date. These securities had pre-tax unrealized losses of $50.4 million at the time of transfer.

In total, investment securities were $3.86 billion at March 31, 2023, a decrease of $127.2 million from December 31, 2022, and a decrease of $356.6 million from March 31, 2022. The decrease in the first quarter of 2023 compared to the prior quarter was primarily the result of $304.2 million in investment securities sales and $105.9 million in principal payments, discounts from the AFS securities transferred to HTM, amortization, and redemptions, partially offset by $232.3 million in purchases and a mark-to-market fair value loss reduction of $50.7 million.

The decrease in investment securities from March 31, 2022 was primarily the result of $580.4 million in sales, $422.8 million in principal payments, discounts from the AFS securities transferred to HTM, amortization, and redemptions, and a mark-to-market fair value loss increase of $80.2 million, partially offset by $720.0 million in purchases.

Deposits

At March 31, 2023, total deposits were $17.21 billion, a decrease of $144.6 million, or 0.8%, from December 31, 2022, and a decrease of $481.4 million, or 2.7%, from March 31, 2022.

At March 31, 2023, core deposits⁽¹⁾ totaled $14.21 billion or 82.6% of total deposits, a decrease of $639.5 million, or 4.3%, from December 31, 2022, and a decrease of $2.44 billion, or 14.7%, from March 31, 2022. The decreases from prior quarters were largely driven by the industry-wide turmoil experienced during the quarter and partially by clients redeploying funds into higher yielding alternatives.

At March 31, 2023, non-core deposits totaled $3.00 billion, an increase of $494.9 million, or 19.8%, from December 31, 2022, and an increase of $1.96 billion, or 189.2%, from March 31, 2022. The increase in the first quarter of 2023 compared to the prior quarter was primarily due to the addition of $324.3 million in brokered certificates of deposit, and an increase of $170.7 million in retail certificates of deposit. The increase from March 31, 2022 was primarily driven by increases in brokered and retail certificates of deposit.

The weighted average cost of total deposits for the first quarter of 2023 was 0.94%, compared to 0.58% for the fourth quarter of 2022, and 0.04% for the first quarter of 2022. The increases in the weighted average cost of

deposits for the first quarter of 2023, compared to the fourth quarter of 2022 and the first quarter of 2022, were principally driven by higher pricing across all deposit categories. The weighted average cost of core deposits⁽²⁾ for the first quarter of 2023 was 0.54%, compared to 0.31% for the fourth quarter of 2022, and 0.03% for the first quarter of 2022.

At March 31, 2023, the end-of-period weighted average rate of total deposits was 1.15%, compared to 0.79% at December 31, 2022 and 0.04% at March 31, 2022. At March 31, 2023, the end-of-period weighted average rate of core deposits was 0.61%, compared to 0.43% at December 31, 2022, and 0.03% at March 31, 2022.

Borrowings

At March 31, 2023, total borrowings amounted to $1.13 billion, a decrease of $199.8 million from December 31, 2022, and an increase of $200.6 million from March 31, 2022. Total borrowings at March 31, 2023 were comprised of $800.0 million of Federal Home Loan Bank of San Francisco (“FHLB”) term advances and $331.4 million of subordinated debt. The decrease in borrowings at March 31, 2023 as compared to December 31, 2022 was due to the maturity of $200.0 million in FHLB term advances during the first quarter of 2023, partially offset by the amortization of the subordinated debt issuance costs. The increase in borrowings at March 31, 2023 as compared to March 31, 2022 was due to $200.0 million higher FHLB term advances to manage interest rate risk and liquidity.

As of March 31, 2023, our unused borrowing capacity was $8.55 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 and the new Bank Term Funding Program, neither of which we accessed during the first quarter of 2023.

Capital Ratios

At March 31, 2023, our common stockholder's equity was $2.83 billion, or 13.25% of total assets, compared with $2.80 billion, or 12.90%, at December 31, 2022, and $2.78 billion, or 12.87%, at March 31, 2022, with a book value per share of $29.58, compared with $29.45 at December 31, 2022, and $29.31 at March 31, 2022. At March 31, 2023, the ratio of tangible common equity to tangible assets⁽¹⁾ was 9.20%, compared with 8.88% at December 31, 2022, and 8.79% at March 31, 2022, and tangible book value per share⁽¹⁾ was $19.61, compared with $19.38 at December 31, 2022, and $19.12 at March 31, 2022. The increase in tangible book value per share at March 31, 2023 from the prior quarter was primarily driven by net income, partially offset by the dividends paid.

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, 2023, 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.

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⁽¹⁾ Reconciliations of the non-GAAP measures are set forth at the end of this press release.

Dividend and Stock Repurchase Program

On April 24, 2023, the Company's Board of Directors declared a $0.33 per share dividend, payable on May 15, 2023 to stockholders of record as of May 8, 2023. 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 2023, 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 27, 2023 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, Inc. conference call. Additionally, a telephone replay will be made available through May 4, 2023, at (877) 344-7529, conference ID 4228581.

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, 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 over $21 billion in total assets. Pacific Premier Bank provides banking products and services, including deposit accounts, digital banking, and treasury management services, to businesses, professionals, entrepreneurs, real estate investors, and nonprofit organizations. Pacific Premier Bank also offers a wide array of loan products, such as commercial business loans, lines of credit, SBA loans, commercial real estate loans, agribusiness loans, franchise lending, home equity lines of credit, and construction loans. Pacific Premier Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Commerce Escrow division. Pacific Premier Bank offers clients IRA custodial services through its Pacific Premier Trust division, which has approximately $17 billion of assets under custody and 38,000 client accounts comprised of self-directed investors, financial institutions, capital syndicators, and financial advisors. Additionally, Pacific Premier Bank provides nationwide customized banking solutions to Homeowners’ Associations and Property Management companies. Pacific Premier Bank is an Equal Housing Lender and Member FDIC. For additional information about Pacific Premier Bancorp, Inc. and Pacific Premier Bank, visit our website: www.ppbi.com.

FORWARD-LOOKING STATEMENTS

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

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. 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; 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; 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 transition away from USD LIBOR and related uncertainty as well as the risk and costs related to our adoption of Secured Overnight Financing Rate (“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; 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; 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; 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, which could impact business and economic conditions in the United States and abroad; public health crises and pandemics, including with respect to COVID-19, 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 2022 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.