Pacific Premier Bancorp, Inc. Announces Second Quarter 2020 Results (Unaudited) and a Quarterly Cash Dividend of $0.25 Per Share

Company Release - 7/27/2020 6:00 AM ET

Second Quarter 2020 Summary

  • Net loss of $99.1 million, or $1.41 per diluted share
  • Pre-provision net revenue ("PPNR") of $60.6 million, excluding $39.3 million of merger-related expense
  • Net interest margin of 3.79% and core net interest margin of 3.59%
  • Nonperforming assets represent 0.17% of total assets
  • Allowance for credit losses (“ACL”) to total loans held for investment of 2.02% at June 30, 2020 excluding Small Business Administration’s Paycheck Protection Program (“PPP”) loans totaling $1.12 billion
  • Loans held for investment include fair value discount of $144.5 million, or 1.03%, as of June 30, 2020
  • Non-maturity deposits of $15.1 billion, or 89% of total deposits
  • Noninterest bearing deposits represent 35% of total deposits
  • Cost of deposits of 0.32% in the second quarter, compared with 0.48% in the prior quarter
  • Closed the acquisition of Opus Bank (“Opus”) effective June 1, 2020; systems integration scheduled for first week in October 2020
  • Completed an offering of subordinated notes for gross proceeds of $150 million

IRVINE, Calif.--(BUSINESS WIRE)-- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported a net loss of $99.1 million, or $1.41 per diluted share, for the second quarter of 2020, compared with net income of $25.7 million, or $0.43 per diluted share, for the first quarter of 2020 and net income of $38.5 million, or $0.62 per diluted share, for the second quarter of 2019. Financial results for the second quarter of 2020 reflected a current period provision for credit losses of $160.6 million, of which $84.4 million was a result of the initial establishment of the Day 1 reserves required by the current expected credit losses (“CECL”) methodology in conjunction with the closing of the Opus acquisition, and $76.2 million primarily related to the deteriorating economic forecast utilized by the Company in its CECL model. Additionally, the Company incurred merger related costs of $39.3 million with the closing of the Opus acquisition during the quarter.

The Company completed the acquisition of Opus effective June 1, 2020. The Company's financial statements for the second quarter include 30 days of Opus's operations, post-merger, which impacts the comparability of the current quarter's results to prior periods. At closing, Opus had $8.32 billion in total assets, $5.94 billion in gross loans and $6.91 billion in total deposits.

For the three months ended June 30, 2020, the Company’s return on average assets (“ROAA”) was (2.61)%, return on average equity (“ROAE”) was (17.76)% and return on average tangible common equity (“ROATCE”) was (29.40)%, compared to 0.89%, 5.05% and 9.96%, respectively, for the first quarter of 2020 and 1.33%, 7.71% and 15.16%, respectively, for the second quarter of 2019. Total assets were $20.5 billion at June 30, 2020, compared with $12.0 billion at March 31, 2020 and $11.8 billion at June 30, 2019. A reconciliation of the non–U.S. GAAP measure of ROATCE to the U.S. GAAP measure of common stockholders' equity is set forth at the end of this press release.

Steven R. Gardner, Chairman, President and Chief Executive Officer of the Company, commented, “Our team is functioning at a high level and driving solid results. Notwithstanding the impact of the merger and COVID-19 related items, we accomplished a great deal during the second quarter.

“On June 1st, we successfully closed the acquisition of Opus, our 11th acquisition and the largest in our history. As a result, we incurred costs in connection with the new accounting standard under CECL, along with the impacts of fair value accounting. As a result, the Company's loss absorbing capacity, loan loss reserves and loan fair value discounts combined, is in excess of 3% of loans held for investment. Given our strong capital position and our expectations around the future performance of the Company, we are pleased to announce the Board's approval of a $0.25 dividend.

“During the second quarter, we initiated a well structured COVID-19 loan modification program to assist those clients that had been temporarily impacted by the pandemic. At quarter-end, we had approximately $2.25 billion, or 14.9%, of the loan portfolio under some form of temporary modification. As of July 24th, we have contacted 63% of the approximately 1,400 customers with loan modifications, and 87% have stated they intend to resume regularly scheduled payments when the modification period expires. Notably, our asset quality metrics remain strong across the spectrum of our loan portfolio.

“Despite the challenges created by the pandemic, the integration of the Pacific Premier and Opus teams is progressing well. The systems conversion will occur in early October at which time we will consolidate 20 branch offices to further drive our overall efficiencies. We are currently on pace to recognize greater cost savings from the acquisition than previously anticipated and, with the addition of key Opus personnel, our team has never been more capable."

Mr. Gardner concluded, “As we enter the second half of 2020, there remains a high level of economic uncertainty, but we are well positioned from a capital, earnings and risk perspective to take advantage of opportunities as they arise.”

FINANCIAL HIGHLIGHTS

 

 

Three Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

 

2020

 

2020

 

2019

Financial Highlights

 

(Dollars in thousands, except per share data)

Net (loss) income

 

$

(99,091

)

 

$

25,740

 

 

$

38,527

 

Diluted (loss) earnings per share

 

(1.41

)

 

0.43

 

 

0.62

 

Pre-provision net revenue (1)

 

$

60,566

 

 

$

58,743

 

 

$

53,034

 

Return on average assets

 

(2.61

)%

 

0.89

%

 

1.33

%

Return on average equity

 

(17.76

)

 

5.05

 

 

7.71

 

Return on average tangible common equity (1)

 

(29.40

)

 

9.96

 

 

15.16

 

Pre-provision net revenue on average assets (1)

 

1.60

 

 

2.03

 

 

1.83

 

Net interest margin

 

3.79

 

 

4.24

 

 

4.28

 

Core net interest margin (1)

 

3.59

 

 

4.08

 

 

4.08

 

Cost of deposits

 

0.32

 

 

0.48

 

 

0.73

 

Efficiency ratio (2)

 

52.9

 

 

52.6

 

 

51.1

 

Total assets

 

$

20,517,074

 

 

$

11,976,209

 

 

$

11,783,781

 

Total deposits

 

16,976,693

 

 

9,093,072

 

 

8,861,922

 

Non-maturity deposits as a percent of total deposits

 

89

%

 

88

%

 

82

%

Book value per share

 

$

28.14

 

 

$

33.40

 

 

$

32.80

 

Tangible book value per share (1)

 

17.58

 

 

18.60

 

 

17.92

 

Total risk-based capital ratio

 

15.69

%

 

14.23

%

 

13.54

%

______________________________

(1)

A reconciliation of the non-U.S. GAAP measures of pre-provision net revenue, return on average tangible common equity, pre-provision net revenue on average assets, core net interest margin and tangible book value per share to the U.S. GAAP measures of net income, common stockholders' equity and book value are set forth at the end of this press release.

(2)

Represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization and merger-related expense to the sum of net interest income before provision for credit losses and total noninterest income, less gains/(loss) on sale of securities, gain/(loss) from other real estate owned and gain/(loss) from debt extinguishment.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $130.3 million in the second quarter of 2020, an increase of $21.1 million, or 19.3%, from the first quarter of 2020. The increase in net interest income reflected higher average interest-earning assets of $3.47 billion, primarily related to the acquisition of Opus, which added $5.94 billion in gross loans, or $5.81 billion of loans after purchase accounting adjustments, higher accretion income, and a lower cost of funds driven by a lower cost of deposits and an increase in noninterest-bearing deposits, all of which was offset by lower average loan and investment yields.

The net interest margin for the second quarter of 2020 was 3.79%, compared with 4.24% in the prior quarter. Our core net interest margin, which excludes the impact of loan accretion income of $5.8 million, compared to $4.1 million in the prior quarter, certificates of deposit mark-to-market amortization and one-time adjustments, decreased 48 basis points to 3.59%, compared to 4.08% in the prior quarter, primarily attributable to lower loan and investment yields, partially offset by a lower cost of deposits. The lower loan yields were driven primarily by the addition of the Opus loan portfolio, the origination and retention of the Small Business Administration (“SBA”) PPP loans, which have a coupon rate of 1%, as well as the impact of loan repricing as a result of the Federal Reserve Board's federal funds rate decreases in March 2020. The lower cost of funds was driven principally by lower rates paid on deposits and increased noninterest-bearing deposits, partially offset by the higher rates paid on Opus's deposits.

Net interest income for the second quarter of 2020 increased $19.7 million, or 17.8%, compared to the second quarter of 2019. The increase was attributable to an increase in average interest-earning assets of $3.47 billion, which primarily resulted from the acquisition of Opus in the second quarter of 2020, as well as organic loan growth (including SBA PPP loans) and a lower cost of funds, partially offset by lower loan and investment yields.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

 

 

 

 

 

Three Months Ended

 

 

June 30, 2020

 

March 31, 2020

 

June 30, 2019

 

 

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

 

$

796,761

 

 

$

215

 

 

0.11

%

 

$

215,746

 

 

$

216

 

 

0.40

%

 

$

187,963

 

 

$

435

 

 

0.93

%

Investment securities

 

1,792,432

 

 

10,568

 

 

2.36

 

 

1,502,572

 

 

10,308

 

 

2.74

 

 

1,396,585

 

 

10,119

 

 

2.90

 

Loans receivable, net (1) (2)

 

11,242,721

 

 

133,339

 

 

4.77

 

 

8,645,252

 

 

113,265

 

 

5.27

 

 

8,779,440

 

 

121,860

 

 

5.57

 

Total interest-earning assets

 

$

13,831,914

 

 

$

144,122

 

 

4.19

 

 

$

10,363,570

 

 

$

123,789

 

 

4.80

 

 

$

10,363,988

 

 

$

132,414

 

 

5.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

7,317,675

 

 

$

9,655

 

 

0.53

 

 

$

4,956,839

 

 

$

10,487

 

 

0.85

 

 

$

5,345,388

 

 

$

15,991

 

 

1.20

 

Borrowings

 

431,181

 

 

4,175

 

 

3.89

 

 

552,741

 

 

4,127

 

 

3.00

 

 

675,345

 

 

5,782

 

 

3.43

 

Total interest-bearing liabilities

 

$

7,748,856

 

 

$

13,830

 

 

0.72

 

 

$

5,509,580

 

 

$

14,614

 

 

1.07

 

 

$

6,020,733

 

 

$

21,773

 

 

1.45

 

Noninterest-bearing deposits

 

$

4,970,812

 

 

 

 

 

 

$

3,898,399

 

 

 

 

 

 

$

3,426,508

 

 

 

 

 

Net interest income

 

 

 

$

130,292

 

 

 

 

 

 

$

109,175

 

 

 

 

 

 

$

110,641

 

 

 

Net interest margin (3)

 

 

 

 

 

3.79

 

 

 

 

 

 

4.24

 

 

 

 

 

 

4.28

 

Cost of deposits

 

 

 

 

 

0.32

 

 

 

 

 

 

0.48

 

 

 

 

 

 

0.73

 

Cost of funds (4)

 

 

 

 

 

0.44

 

 

 

 

 

 

0.62

 

 

 

 

 

 

0.92

 

Ratio of interest-earning assets to interest-bearing liabilities

 

178.50

 

 

 

 

 

 

188.10

 

 

 

 

 

 

172.14