Pacific Premier Bancorp, Inc. Announces Fourth Quarter 2024 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share

Fourth Quarter 2024 Summary

• Net income of $33.9 million, or $0.35 per diluted share
• Return on average assets of 0.75%
• Average cost of deposits decreased 5 bps to 1.79%, end-of-period cost of deposits of 1.72%
• Non-maturity deposits increased $145.8 million to $12.35 billion, or 85.4% of total deposits
• Loans held for investment increased $4.6 million to $12.04 billion
• Total delinquency of 0.02% of loans held for investment, nonperforming assets to total assets of 0.16%, and net charge-offs to average loans of 0.01%
• Tangible book value per share⁽¹⁾ increased $0.16 from the prior quarter to $20.97
• Tangible common equity ratio⁽¹⁾ increased to 11.92%
• Common equity tier 1 capital ratio of 17.05%, and total risk-based capital ratio of 20.28%

Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) (the "Company" or "Pacific Premier"), the holding company of Pacific Premier Bank, National Association (the "Bank" or "Pacific Premier Bank"), reported net income of $33.9 million, or $0.35 per diluted share, for the fourth quarter of 2024, compared with net income of $36.0 million, or $0.37 per diluted share, for the third quarter of 2024, and a net loss of $135.4 million, or $1.44 per diluted share, for the fourth quarter of 2023.

For the fourth quarter of 2024, the Company's return on average assets ("ROAA") was 0.75%, return on average equity ("ROAE") was 4.61%, and return on average tangible common equity ("ROATCE")⁽¹⁾ was 7.15%, compared to 0.79%, 4.91%, and 7.63%, respectively, for the third quarter of 2024, and (2.76)%, (19.01)%, and (28.01)%, respectively, for the fourth quarter of 2023.

Total assets as of December 31, 2024 were $17.90 billion, compared to $17.91 billion at September 30, 2024, and $19.03 billion at December 31, 2023.

Steven R. Gardner, Chairman, Chief Executive Officer, and President of the Company, commented, "Our team delivered solid results in the fourth quarter, closing out the year in a strong financial position. Our performance throughout 2024 reflects the excellence of our organization and the effectiveness of our relationship-based business model that has us well-positioned to accelerate growth over the coming quarters."

"The outstanding business development efforts of our relationship managers and their teams, along with a more favorable operating environment and improved client sentiment, led to increased loan originations of $316.0 million in the fourth quarter. Improved loan originations also led to expanded depository relationships as non-maturity deposits increased $145.8 million from the prior quarter, resulting in a positive remix of our deposit base and an 8-basis point reduction in end-of-period deposit costs to 1.72%. The loan portfolio increased from the prior quarter led by growth in C&I and consumer loans as we supplemented our new loan production with select loan purchases and participations of commercial and single-family residential loans. Much of the loan closings occurred later in the quarter and thus the lower average loan balances led, in part, to the net interest margin contracting to 3.02%."

"We enter 2025 from a position of strength, which is reflected, in part, in our strong asset quality levels. Our total delinquency was 0.02% of loans and nonperforming assets decreased to 0.16% of total assets. These positive asset quality results, along with industry-leading capital ratios, provide us with significant flexibility to capitalize on emerging opportunities and thrive in a strengthening economic landscape, reinforcing our role as a trusted partner for our clients and our ability to maximize long term value for our shareholders."

"Our hearts go out to everyone affected by the devastating California wildfires, including our colleagues, clients, and neighbors in the Los Angeles area. We stand ready to support our communities during this challenging time and we have the resources, capabilities, and commitment to rebuild LA. We will be there as a primary capital provider for the residents, builders, contractors, and related businesses as restoration efforts begin. As always, we remain committed to serving as both a trusted financial partner and a source of strength for the communities we proudly call home."

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INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $124.5 million in the fourth quarter of 2024, a decrease of $6.4 million, or 4.9%, from the third quarter of 2024. The decrease in net interest income was primarily attributable to lower average loan balances and lower yields on interest-earning assets, partially offset by a reduction in the cost of funds, driven by lower average wholesale/brokered CD balances and borrowings.

The net interest margin for the fourth quarter of 2024 decreased 14 basis points to 3.02% from 3.16% in the third quarter of 2024. This decline was due to lower average loan balances and lower yields on interest-earning assets, partially offset by a lower cost of funds.

Net interest income for the fourth quarter of 2024 decreased $22.3 million, or 15.2%, from the fourth quarter of 2023. The decrease was primarily attributable to lower average loan balances and yields and a higher cost of funds.

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Provision for Credit Losses

For the fourth quarter of 2024, the Company recorded an $814,000 provision reversal, compared to a $486,000 provision expense for the third quarter of 2024, and a $1.7 million provision expense for the fourth quarter of 2023. The decrease in provision for credit losses compared to the third quarter of 2024 was largely attributable to changes to the composition and asset quality trends of the loan portfolio.

Noninterest Income

Noninterest income for the fourth quarter of 2024 was $20.0 million, an increase of $1.1 million from the third quarter of 2024. The increase was primarily due to a $980,000 increase in other income, largely attributable to a $1.1 million increase in Community Reinvestment Act ("CRA") investment gains.

Noninterest income for the fourth quarter of 2024 increased $254.2 million, compared to the fourth quarter of 2023. The increase was primarily due to the repositioning of investment securities portfolio during the fourth quarter of 2023 whereby the Bank sold $1.26 billion of its available-for-sale ("AFS") securities portfolio, which resulted in a $254.1 million net loss.

Noninterest Expense

Noninterest expense totaled $100.7 million for the fourth quarter of 2024, a decrease of $959,000 from the third quarter of 2024. This reduction was primarily due to a $3.0 million decrease in compensation and benefits, a $785,000 decrease in deposit expense, and a $705,000 decrease in premises and occupancy, partially offset by a $4.1 million increase in legal and professional services, driven by a $3.5 million insurance claim receivable reversal.

Noninterest expense decreased by $2.1 million compared to the fourth quarter of 2023. This decline was primarily due to a $2.3 million decrease in FDIC insurance premiums, primarily resulting from a $2.1 million FDIC special assessment in the fourth quarter of 2023, a $1.5 million decrease in compensation and benefits, a $1.2 million decrease in other expense, and a $989,000 decrease in premises and occupancy, partially offset by a $4.4 million increase in legal and professional services, driven by the $3.5 million reversal of the insurance claim receivable.

Income Tax

For the fourth quarter of 2024, our income tax expense totaled $10.7 million, an effective tax rate of 24.1%, compared to income tax expense of $11.7 million, or 24.5%, for the third quarter of 2024, and income tax benefit of $56.5 million, or 29.4%, for the fourth quarter of 2023. The income tax benefit in the fourth quarter of 2023 was primarily attributable to the pretax loss from sales of AFS securities driven by the Company's balance sheet repositioning.

For the full year 2024, our income tax expense totaled $53.7 million, resulting in an effective tax rate of 25.3%, compared to income tax expense of $3.2 million and an effective tax rate of 9.4% for the full year 2023.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $12.04 billion at December 31, 2024, an increase of $4.6 million from September 30, 2024, and a decrease of $1.25 billion from December 31, 2023. The increase from September 30, 2024 was primarily driven by new loan production of $316.0 million and loan purchases of $401.3 million in commercial and industrial loans and $116.3 million in single family residential loans.

New origination activity during the fourth quarter of 2024 increased compared to both the third quarter of 2024 and fourth quarter of 2023. New loan commitments totaled $316.0 million, and new loan fundings totaled $193.8 million, compared to $104.1 million in loan commitments and $39.4 million in new loan fundings for the third quarter of 2024, and $128.1 million in loan commitments and $103.7 million in new loan fundings for the fourth quarter of 2023.

At December 31, 2024, the total loan-to-deposit ratio was 83.3%, compared to 83.1% and 88.6% at September 30, 2024 and December 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:

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

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The total end of period weighted average interest rate on loans, excluding fees and discounts and impact from interest rate swaps designated as fair value hedges, at December 31, 2024 was 4.78%, compared to 4.82% at September 30, 2024 and 4.87% at December 31, 2023. The quarter-over-quarter and year-over-year decreases were primarily due to new loan fundings at lower coupon rates and the repricing of existing loans in response to decreases in benchmark interest rates, as well as customers paying down and paying off higher-rate loans.

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

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The weighted average interest rate on new loan commitments was 6.92% in the fourth quarter of 2024, compared to 8.43% in the third quarter of 2024, and 6.34% in the fourth quarter of 2023.

Allowance for Credit Losses

At December 31, 2024, our allowance for credit losses ("ACL") on loans held for investment was $178.2 million, a decrease of $3.1 million from September 30, 2024, and a decrease of $14.3 million from December 31, 2023. The change in ACL from September 30, 2024 and December 31, 2023 primarily reflects changes in the size and composition of our loan portfolio and updates to the economic forecasts as well as net loan charge-offs during the respective periods.

During the fourth quarter of 2024, the Company incurred $1.4 million of net charge-offs, compared to $2.3 million of net charge-offs during the third quarter of 2024, and $3.9 million of net charge-offs during the fourth quarter of 2023, 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:

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The ratio of ACL to loans held for investment at December 31, 2024 was 1.48%, a decrease from 1.51% at September 30, 2024, and an increase from 1.45% at December 31, 2023. The fair value net discount on loans acquired through bank acquisitions was $33.2 million, or 0.28% of total loans held for investment, as of December 31, 2024, compared to $35.9 million, or 0.30% of total loans held for investment, as of September 30, 2024, and $43.3 million, or 0.33% of total loans held for investment, as of December 31, 2023.

Asset Quality

Nonperforming assets totaled $28.9 million, or 0.16% of total assets, at December 31, 2024, compared to $39.1 million, or 0.22% of total assets, at September 30, 2024, and $25.1 million, or 0.13% of total assets, at December 31, 2023. Loan delinquencies were $2.6 million, or 0.02% of loans held for investment, at December 31, 2024, compared to $9.9 million, or 0.08% of loans held for investment, at September 30, 2024, and $10.1 million, or 0.08% of loans held for investment, at December 31, 2023.

Classified loans totaled $106.2 million, or 0.88% of loans held for investment, at December 31, 2024, compared to $120.5 million, or 1.00% of loans held for investment, at September 30, 2024, and $142.2 million, or 1.07% of loans held for investment, at December 31, 2023.

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

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Investment Securities

At December 31, 2024, AFS and held-to-maturity ("HTM") investment securities were $1.68 billion and $1.71 billion, respectively, compared to $1.32 billion and $1.71 billion, respectively, at September 30, 2024, and $1.14 billion and $1.73 billion, respectively, at December 31, 2023.

In total, investment securities were $3.40 billion at December 31, 2024, an increase of $364.9 million from $3.03 billion at September 30, 2024 and an increase of $525.4 million from $2.87 billion at December 31, 2023. The increase in the fourth quarter of 2024 compared to the prior quarter was primarily driven by purchases of $704.6 million, predominantly short-term U.S. Treasury securities, as well as an improvement of $2.5 million in AFS investment securities mark-to-market unrealized loss, partially offset by principal payments, amortization, accretion, and redemptions aggregating to $342.2 million.

The increase in investment securities from December 31, 2023 was primarily attributable to purchases of $1.43 billion of AFS and HTM investment securities and an improvement of $18.8 million in AFS investment securities mark-to-market unrealized loss, partially offset by principal payments, amortization, accretion, and redemptions aggregating to $924.6 million.

Deposits

At December 31, 2024, total deposits were $14.46 billion, a decrease of $17.2 million, or 0.1%, from September 30, 2024, and a decrease of $531.9 million, or 3.5%, from December 31, 2023. The decrease from the prior quarter was primarily driven by decreases of $163.1 million in retail certificates of deposit and $22.1 million in noninterest-bearing deposits, partially offset by increases of $135.5 million in interest-bearing checking and $32.4 million in money market and savings. The decrease from December 31, 2023 was attributable to decreases of $315.8 million noninterest-bearing checking and $310.1 million in brokered certificates of deposit, partially offset by an increase of $125.3 million in retail certificates of deposit.

At December 31, 2024, non-maturity deposits⁽¹⁾ totaled $12.35 billion, or 85.4% of total deposits, an increase of $145.8 million, or 1.2%, from September 30, 2024, and a decrease of $347.1 million, or 2.7%, from December 31, 2023.

At December 31, 2024, maturity deposits totaled $2.11 billion, a decrease of $163.0 million, or 7.2%, from September 30, 2024, and a decrease of $184.8 million, or 8.1%, from December 31, 2023. The decrease in the fourth quarter of 2024 compared to the prior quarter was primarily driven by the decrease of $163.1 million in retail certificates of deposit. The decrease from December 31, 2023 was largely due to the reduction of higher cost brokered certificates of deposit, partially offset by the increase in retail certificates of deposit.

The weighted average cost of total deposits for the fourth quarter of 2024 was 1.79%, compared with 1.84% for the third quarter of 2024 and 1.56% for the fourth quarter of 2023. The decrease in the weighted average cost of deposits for the fourth quarter of 2024 compared to the third quarter of 2024 was principally driven by lower pricing in the retail certificates of deposit category and lower average balances in higher-costing maturity deposits. The increase in the weighted average cost of deposits for the fourth quarter of 2024 compared to the fourth quarter of 2023 was principally driven by higher pricing across all deposit categories. The weighted average cost of non-maturity deposits⁽¹⁾ for the fourth quarter of 2024 was 1.28%, compared to 1.27% for the third quarter of 2024, and 1.02% for the fourth quarter of 2023.

At December 31, 2024, the end-of-period weighted average rate of total deposits was 1.72%, compared to 1.80% at September 30, 2024 and 1.55% at December 31, 2023. At December 31, 2024, the end-of-period weighted average rate of non-maturity deposits was 1.24%, compared to 1.26% at September 30, 2024 and 1.04% at December 31, 2023.

At December 31, 2024, the Company's FDIC-insured deposits as a percentage of total deposits was 60%, and insured and collateralized deposits comprised 66% of total deposits at December 31, 2024, consistent with the ratios at September 30, 2024 and December 31, 2023.

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

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Borrowings

At December 31, 2024, total borrowings amounted to $272.4 million, an increase of $129,000 from September 30, 2024 and a decrease of $659.4 million from December 31, 2023. Total borrowings at December 31, 2024 were comprised entirely of $272.4 million in subordinated debentures. The slight increase in borrowings at December 31, 2024 as compared to September 30, 2024 was due to the amortization of subordinated debt issuance costs. The decrease in average borrowings and borrowings at December 31, 2024, compared to December 31, 2023, was primarily due to the redemptions and maturities of higher cost FHLB term advances and the maturity of $60.0 million in subordinated debentures.

As of December 31, 2024, our unused borrowing capacity was $9.03 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 fourth quarter of 2024.

Capital Ratios

At December 31, 2024, our common stockholder's equity was $2.96 billion, or 16.51% of total assets, compared with $2.94 billion, or 16.44% of total assets, at September 30, 2024, and $2.88 billion, or 15.15% of total assets, at December 31, 2023. At December 31, 2024, the ratio of tangible common equity to total assets⁽¹⁾ increased 9 and 120 basis points to 11.92%, compared with 11.83% at September 30, 2024, and 10.72% at December 31, 2023, respectively. Tangible book value per share⁽¹⁾ increased $0.16 and $0.75 to $20.97, compared with $20.81 at September 30, 2024 and $20.22 at December 31, 2023, respectively.

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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 December 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.

The following table presents capital ratios and share data as of the dates indicated:

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Dividend and Stock Repurchase Program

On January 21, 2025, the Company's Board of Directors declared a $0.33 per share dividend, payable on February 10, 2025 to stockholders of record on February 3, 2025. 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 fourth 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 January 23, 2025 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 into the Pacific Premier Bancorp, Inc. call. Additionally, a telephone replay will be made available through January 30, 2025 at (877) 344-7529, access code 8161362.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the parent company of Pacific Premier Bank, National Association, a nationally chartered 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 $18 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 $18 billion of assets under custody and over 31,000 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 ("U.S.") economy in general and the strength of the local economies in which we conduct operations; adverse developments in the banking industry 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 any increased 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 or adjust 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, conflict 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; direct and indirect costs and impacts on clients, the Company and its employees from the January 2025 Los Angeles County wildfires, including potential adverse changes to the level of our nonperforming assets and charge-offs; 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.