IRVINE, Calif.--(BUSINESS WIRE)--Jul 24, 2018--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the second quarter of 2018 of $27.3 million, or $0.58 per diluted share, compared with net income of $28.0 million, or $0.60 per diluted share, for the first quarter of 2018 and net income of $14.2 million, or $0.35 per diluted share, for the second quarter of 2017. Financial results for the second quarter of 2018 include $943,000 of merger-related expense.

For the three months ended June 30, 2018, the Company’s return on average assets (“ROAA”) was 1.35% and return on average tangible common equity (“ROATCE”) was 15.42%. For the three months ended March 31, 2018, the Company's ROAA was 1.39% and the ROATCE was 16.51%. For the three months ended June 30, 2017, the Company's ROAA was 0.89% and its ROATCE was 11.33%. Total assets as of June 30, 2018 were $8.2 billion compared with $8.1 billion at March 31, 2018 and $6.4 billion at June 30, 2017.

Steven R. Gardner, Chairman, President and Chief Executive Officer of the Company, commented, “We continue to execute well on our strategic priorities while delivering solid financial results. On July 1, we completed the acquisition of Grandpoint Capital in a little more than four months since the announcement. We have finalized the operational integration of both the Pacific Premier and Grandpoint teams, which further strengthens and expands the organization's depth, breadth and expertise. All of the remaining cost savings are expected to be realized by year-end as we complete the system conversion in mid-October of this year. Our franchise has a strong foundation in place to drive growth and increase market share.

“We have substantively completed the investments in our personnel and systems necessary to meet the heightened regulatory requirements associated with surpassing the $10 billion asset threshold. As we continue to add scale through organic and acquisitive growth, we expect to more fully absorb the investments we have made in our infrastructure and realize greater operating leverage going forward.

“While our earnings performance has generated attractive risk adjusted returns in the first half of the year, it does not live up to the high standards that we set for ourselves. We are capable of stronger performance metrics across the organization, and with the completion of a number of key projects, I expect our team to operate at a higher level. As always, we are refining our business strategies to drive an increased level of balance sheet growth in the second half of the year, and when combined with the projected synergies from the Grandpoint acquisition, we expect to be well positioned to realize an increase in our earnings power in 2019,” said Mr. Gardner.

FINANCIAL HIGHLIGHTS

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $81.2 million in the second quarter of 2018, essentially unchanged from the first quarter of 2018. Compared to the prior quarter, net interest income was positively impacted by higher yields and average balances on our loans and investments, higher prepayments and other loan related fees, which were principally offset by lower accretion income, and higher deposit and borrowing costs.

Net interest margin for the second quarter was 4.41%, compared with 4.50% in the prior quarter. The decrease was principally driven by lower accretion income of $1.9 million, compared to $3.7 million in the first quarter of 2018. Excluding the impact of accretion, our core net interest margin expanded to 4.29%, compared to 4.26% in the prior quarter. Following the closing of Grandpoint, we expect the core net interest margin to be in the 4.05% to 4.15% range.

Net interest income for the second quarter of 2018 increased $17.8 million, or 28%, compared to the second quarter of 2017. The increase was primarily related to an increase in average interest-earning assets of $1.6 billion, which resulted primarily from our acquisition of Plaza Bancorp (“Plaza”) in the fourth quarter of 2017 and our organic loan growth since the end of the second quarter of 2017.

Provision for Credit Losses

A provision for credit losses of $1.8 million was recorded for the second quarter of 2018, compared with a provision for credit losses of $2.3 million for the quarter ended March 31, 2018. The second quarter of 2018 provision for credit losses includes a $400,000 provision for unfunded commitments. The first quarter of 2018 included no additional allowance for unfunded commitments. The decrease in our provision for credit losses was primarily due to lower loan growth and lower net charge-offs compared to the prior quarter. We anticipate that our provision will approximate $2.5 million to $3.5 million per quarter in the second half of 2018.

Noninterest Income

Noninterest income for the second quarter of 2018 was $8.2 million, an increase of $485,000, or 6.3%, from the first quarter of 2018. The increase from the first quarter of 2018 was related to an $885,000 increase in net gain from the sales of loans and a $324,000 increase in net gain from sales of investment securities, partially offset by a $661,000 decrease in other income, driven primarily by a $290,000 net loss attributable to a CRA investment, and a $180,000 decrease in recoveries from pre-acquisition charged-off loans.

During the second quarter of 2018, the Bank sold $31.9 million of Small Business Administration (“SBA”) loans for a gain of $2.9 million, compared with $35.7 million of SBA loans sold for a gain of $2.7 million in the first quarter of 2018. Additionally, the Bank sold $20.4 million of commercial real estate loans during the second quarter of 2018 for a gain of $927,000, compared with the sale of one commercial real estate loan for a gain of $230,000 in the first quarter of 2018.

Noninterest income for the second quarter of 2018 decreased $608,000, or 6.9%, compared to the second quarter of 2017. The decrease from the second quarter of 2017 was primarily related to a $1.8 million decrease in net gain from sales of investment securities, partially offset by a $956,000 increase in net gain from sales of loans, and a $411,000 increase in debit card interchange fees, as well as other service fee increases. With the closing of Grandpoint, our quarterly estimate of noninterest income for the second half of 2018 is $9.0 million to $10.0 million.

Noninterest Expense

Noninterest expense totaled $50.1 million for the second quarter of 2018, an increase of $268,000, or 0.5%, compared with the first quarter of 2018. The increase was primarily due to a $626,000 increase in deposit expense and a $401,000 increase in compensation and benefits. These increases were partially offset by decreases of $278,000 in CDI amortization, $605,000 in other expense and $178,000 in marketing expense. The second quarter of 2018 included $943,000 of merger-related expense compared with $936,000 in the first quarter of 2018.

In comparison to the second quarter of 2017, noninterest expense grew by $1.6 million, or 3.3%. The increase was primarily related to the additional costs from operations, personnel and branches retained from the acquisition of Plaza, combined with our continued investment in personnel to support our organic growth in loans and deposits. The second quarter of 2017 included merger-related expense of $10.1 million. With the closing of Grandpoint, we expect quarterly noninterest expense, excluding merger-related expense, should range between $63 million and $65 million for the second half of 2018.

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