Pacific Premier Bancorp(PPBI)

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Pacific Premier Bancorp(PPBI) - 2024 Q2 - Quarterly Results
2024-07-24 00:43
[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Pacific Premier Bancorp achieved **$41.9 million** net income in Q2 2024, bolstering capital ratios and increasing loan production Q2 2024 Key Performance Indicators | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Income ($ millions) | 41.9 | 47.0 | 57.6 | | Diluted EPS ($) | 0.43 | 0.49 | 0.60 | | ROAA (%) | 0.90 | 0.99 | 1.09 | | ROAE (%) | 5.76 | 6.50 | 8.11 | | ROATCE (Non-GAAP) (%) | 8.92 | 10.05 | 12.66 | | Net Interest Margin (%) | 3.26 | 3.39 | 3.33 | | Tangible Common Equity Ratio (Non-GAAP) (%) | 11.41 | 10.97 | 9.59 | | Common Equity Tier 1 Capital Ratio (%) | 15.89 | 15.02 | 14.34 | - CEO Steven R. Gardner highlighted the company's disciplined approach to balance sheet and risk management, resulting in capital ratios (**TCE of 11.41%**, **CET1 of 15.89%**) that are near the top of peer averages[51](index=51&type=chunk) - Business development saw increased loan production of **$150.7 million**. Total deposits declined due to clients paying down loans and seasonal factors like tax payments, while the deposit mix remained favorable with noninterest-bearing deposits at **31.6%** of the total[51](index=51&type=chunk) - The company expects stabilization in loan and deposit balances in the second half of the year and is positioned to capitalize on future opportunities due to strong capital and liquidity levels[33](index=33&type=chunk)[34](index=34&type=chunk) [Income Statement Analysis](index=4&type=section&id=INCOME%20STATEMENT%20HIGHLIGHTS) Net interest income declined in Q2 2024, noninterest income decreased due to non-recurring gains, and noninterest expenses fell [Net Interest Income and Net Interest Margin](index=4&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income for Q2 2024 was **$136.4 million**, a decrease of **6.0%** from Q1 2024 and **14.8%** from Q2 2023, driven by lower loan balances and higher funding costs - Net interest income decreased by **$8.7 million** (**6.0%**) from the first quarter of 2024, mainly due to lower average loan balances and higher cost of deposits[37](index=37&type=chunk) - The net interest margin (NIM) for Q2 2024 decreased **13 basis points** to **3.26%** from **3.39%** in the prior quarter, primarily due to a higher cost of deposits[56](index=56&type=chunk) Net Interest Margin and Funding Costs | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net Interest Margin (%) | 3.26 | 3.39 | 3.33 | | Cost of Deposits (%) | 1.73 | 1.59 | 1.27 | | Cost of Funds (%) | 1.86 | 1.73 | 1.45 | [Provision for Credit Losses](index=5&type=section&id=Provision%20for%20Credit%20Losses) The total provision for credit losses in Q2 2024 was **$1.3 million**, a significant reduction from **$3.9 million** in Q1 2024, including **$1.8 million** for loan losses Provision for Credit Losses Breakdown (in thousands) | Component | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Provision for loan losses | $1,756 | $6,288 | $610 | | Provision for unfunded commitments | $(505) | $(2,425) | $1,003 | | Provision for held-to-maturity securities | $14 | $(11) | $(114) | | **Total provision for credit losses** | **$1,265** | **$3,852** | **$1,499** | [Noninterest Income](index=5&type=section&id=Noninterest%20Income) Noninterest income for Q2 2024 was **$18.2 million**, a **$7.6 million** decrease from the previous quarter, primarily due to a non-recurring gain on debt extinguishment - The decrease from Q1 2024 was mainly due to the prior quarter's **$5.1 million** gain on debt extinguishment, a **$1.7 million** decrease in trust custodial account fees, and a **$1.3 million** decrease in Community Reinvestment Act (CRA) investment income[41](index=41&type=chunk) Noninterest Income Components (in thousands) | Component | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Trust custodial account fees | $8,950 | $10,642 | $9,360 | | Earnings on bank owned life insurance | $4,218 | $4,159 | $3,487 | | Service charges on deposit accounts | $2,710 | $2,688 | $2,670 | | Other (loss) income | $(167) | $5,959 | $2,031 | | **Total noninterest income** | **$18,222** | **$25,774** | **$20,539** | [Noninterest Expense](index=6&type=section&id=Noninterest%20Expense) Total noninterest expense decreased by **$5.1 million** quarter-over-quarter to **$97.6 million**, primarily driven by a **$3.1 million** decrease in legal and professional services - The decrease from Q1 2024 was primarily due to a **$3.1 million** decrease in legal and professional services, driven by a **$4.0 million** insurance claim receivable[43](index=43&type=chunk) Noninterest Expense Components (in thousands) | Component | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Compensation and benefits | $53,140 | $54,130 | $53,424 | | Deposit expense | $12,289 | $12,665 | $9,194 | | Premises and occupancy | $10,480 | $10,807 | $11,615 | | Legal and professional services | $1,078 | $4,143 | $4,716 | | **Total noninterest expense** | **$97,567** | **$102,633** | **$100,644** | [Income Tax](index=6&type=section&id=Income%20Tax) Income tax expense for Q2 2024 totaled **$13.9 million**, resulting in an effective tax rate of **24.9%**, lower than prior quarters Income Tax Expense and Effective Tax Rate | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Income Tax Expense ($ millions) | 13.9 | 17.4 | 20.9 | | Effective Tax Rate (%) | 24.9 | 27.0 | 26.6 | [Balance Sheet Analysis](index=7&type=section&id=BALANCE%20SHEET%20HIGHLIGHTS) Total assets decreased to **$18.33 billion**, with loans and deposits declining, while asset quality improved [Loans](index=8&type=section&id=Loans) Loans held for investment totaled **$12.49 billion** at quarter-end, a **4.0%** decrease from Q1 2024, primarily due to increased prepayments, despite increased new loan origination activity - Loans held for investment decreased by **$522.1 million** (**4.0%**) from March 31, 2024, due to increased prepayments, maturities, and a decrease in credit line draws[90](index=90&type=chunk) - New loan commitments increased to **$150.7 million** in Q2 2024, up from **$45.6 million** in Q1 2024 and **$148.5 million** in Q2 2023[64](index=64&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Investor loans secured by real estate | $8,206,124 | $8,390,158 | $8,826,439 | | Business loans secured by real estate | $2,417,673 | $2,492,726 | $2,657,344 | | Commercial loans | $1,822,597 | $2,087,328 | $2,106,395 | | Retail loans | $71,758 | $74,183 | $73,234 | | **Total Loans Held for Investment** | **$12,489,951** | **$13,012,071** | **$13,610,282** | [Allowance for Credit Losses (ACL)](index=10&type=section&id=Allowance%20for%20Credit%20Losses) The Allowance for Credit Losses (ACL) on loans was **$183.8 million**, a decrease of **$8.5 million** from the prior quarter, reflecting portfolio changes and net charge-offs of **$10.3 million** - The ACL decreased by **$8.5 million** from March 31, 2024, reflecting changes in loan portfolio size, composition, and economic forecasts[68](index=68&type=chunk) - Net charge-offs of **$10.3 million** were incurred, primarily related to the sale of substandard non-owner-occupied CRE and multifamily loans[94](index=94&type=chunk) ACL Ratios | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | ACL to Loans Held for Investment (%) | 1.47 | 1.48 | 1.41 | [Asset Quality](index=11&type=section&id=Asset%20Quality) Asset quality metrics improved in Q2 2024, with nonperforming assets decreasing to **$52.1 million** (**0.28%** of total assets) and classified loans declining Key Asset Quality Metrics (in thousands) | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Nonperforming assets | $52,119 | $64,054 | $17,421 | | Nonperforming assets to total assets (%) | 0.28 | 0.34 | 0.08 | | Total classified assets | $183,833 | $204,937 | $120,216 | | Total delinquency | $17,923 | $12,178 | $30,951 | | Delinquency as a % of loans | 0.14 | 0.09 | 0.23 | [Investment Securities](index=11&type=section&id=Investment%20Securities) Total investment securities increased by **$155.7 million** to **$3.03 billion**, primarily due to purchases of AFS U.S. Treasury securities, comprising **$1.32 billion** AFS and **$1.71 billion** HTM securities - The increase in Q2 2024 was mainly from **$443.1 million** in purchases of AFS U.S. Treasury securities, partially offset by **$291.5 million** in principal payments, amortization, and redemptions[100](index=100&type=chunk) - The portfolio consists of **$1.32 billion** in available-for-sale (AFS) and **$1.71 billion** in held-to-maturity (HTM) securities as of June 30, 2024[73](index=73&type=chunk) [Deposits](index=13&type=section&id=Deposits) Total deposits decreased by **3.7%** quarter-over-quarter to **$14.63 billion**, driven by reductions in noninterest-bearing and money market accounts, though non-maturity deposits remain strong at **83.7%** - Total deposits decreased by **$560.2 million** (**3.7%**) from Q1 2024, largely due to reductions in noninterest-bearing checking and money market/savings accounts[102](index=102&type=chunk) - Non-maturity deposits totaled **$12.24 billion**, representing **83.7%** of total deposits[76](index=76&type=chunk) Deposit Costs | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Weighted Average Cost of Total Deposits (%) | 1.73 | 1.59 | 1.27 | | Weighted Average Cost of Non-Maturity Deposits (%) | 1.17 | 1.06 | 0.71 | [Borrowings](index=13&type=section&id=Borrowings) Total borrowings remained stable at **$532.2 million**, composed of **$200.0 million** in FHLB term advances and **$332.2 million** in subordinated debt, with **$8.65 billion** in unused borrowing capacity - Total borrowings at June 30, 2024 were **$532.2 million**, comprised of **$200.0 million** of FHLB term advances and **$332.2 million** of subordinated debt[79](index=79&type=chunk) - Unused borrowing capacity was **$8.65 billion** as of June 30, 2024, from FHLB, correspondent banks, and the Federal Reserve's discount window[108](index=108&type=chunk) [Capital and Shareholder Returns](index=13&type=section&id=Capital%20and%20Shareholder%20Returns) Capital ratios significantly strengthened in Q2 2024, with a **$0.33** per share dividend declared [Capital Ratios](index=14&type=section&id=Capital%20Ratios) Capital ratios strengthened across the board in Q2 2024, with the tangible common equity to tangible assets ratio increasing to **11.41%** and the Common Equity Tier 1 (CET1) capital ratio rising to **15.89%** - Tangible book value per share increased by **$0.25** to **$20.58**, and the tangible common equity to tangible assets ratio increased **44 basis points** to **11.41%** compared to Q1 2024[80](index=80&type=chunk) - The Company and Bank exceeded all minimum regulatory capital ratios, including the fully phased-in capital conservation buffer, and the Bank qualified as 'well capitalized'[81](index=81&type=chunk) Consolidated Capital Ratios | Ratio | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Tangible common equity ratio (Non-GAAP) (%) | 11.41 | 10.97 | 9.59 | | Common equity tier 1 capital ratio (%) | 15.89 | 15.02 | 14.34 | | Tier 1 capital ratio (%) | 15.89 | 15.02 | 14.34 | | Total capital ratio (%) | 19.01 | 18.23 | 17.24 | [Dividend and Stock Repurchase Program](index=14&type=section&id=Dividend%20and%20Stock%20Repurchase%20Program) On July 22, 2024, the Board of Directors declared a quarterly cash dividend of **$0.33** per share, with no shares repurchased during Q2 2024 - A dividend of **$0.33** per share was declared, payable on August 12, 2024, to stockholders of record as of August 5, 2024[82](index=82&type=chunk) - No shares of common stock were repurchased during the second quarter of 2024[82](index=82&type=chunk) [Appendix: Financial Tables](index=17&type=section&id=Appendix%3A%20Financial%20Tables) This appendix provides detailed unaudited financial statements, including income statements, balance sheets, and non-GAAP reconciliations [Consolidated Statements of Income](index=18&type=section&id=Consolidated%20Statements%20of%20Income) Presents the company's revenues, expenses, and net income for the three and six months ended June 30, 2024, and June 30, 2023 - This table provides a detailed breakdown of the company's income statement for the current and comparative periods[7](index=7&type=chunk) [Consolidated Balance Sheets](index=17&type=section&id=Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and stockholders' equity as of June 30, 2024, compared to several prior quarter-ends - This table provides a snapshot of the company's financial position at the end of the reporting period and previous periods[132](index=132&type=chunk) [Consolidated Average Balances and Yield Data](index=19&type=section&id=Consolidated%20Average%20Balances%20and%20Yield%20Data) Provides average balances for assets and liabilities, along with corresponding interest income/expense and average yields/costs, used to calculate net interest margin - This table details the average balances, interest, and yields/costs for interest-earning assets and interest-bearing liabilities[8](index=8&type=chunk)[133](index=133&type=chunk) [Loan Portfolio Composition](index=20&type=section&id=Loan%20Portfolio%20Composition) Presents a detailed breakdown of the loan portfolio by category for the current and several preceding quarters - This table shows the composition of the loan portfolio across various real estate and commercial loan types over the last five quarters[117](index=117&type=chunk)[134](index=134&type=chunk) [Asset Quality Information](index=21&type=section&id=Asset%20Quality%20Information) Contains key asset quality metrics, including nonperforming assets, classified assets, allowance for credit losses, and delinquency data over the last five quarters - This table provides a trend analysis of key asset quality indicators over the past five quarters[11](index=11&type=chunk)[118](index=118&type=chunk) [Nonaccrual and Past Due Loans](index=23&type=section&id=Nonaccrual%20and%20Past%20Due%20Loans) Provides detailed information on nonaccrual loans, including collateral dependency, and a breakdown of loans by past due status - These tables detail the composition of nonaccrual loans and the aging of past due loans as of June 30, 2024[12](index=12&type=chunk)[14](index=14&type=chunk)[121](index=121&type=chunk) [Credit Risk Grades](index=24&type=section&id=Credit%20Risk%20Grades) Classifies the loan portfolio by internal credit risk grades (Pass, Special Mention, Substandard, Doubtful) for each loan category - This table shows the internal risk rating distribution of the gross loan portfolio as of June 30, 2024[15](index=15&type=chunk)[140](index=140&type=chunk) [GAAP to Non-GAAP Reconciliations](index=29&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliations) Provides reconciliations for non-GAAP financial measures used in the report, such as ROATCE, tangible book value per share, efficiency ratio, and adjusted pre-provision net revenue - This section reconciles non-GAAP measures like Return on Average Tangible Common Equity (ROATCE), Tangible Common Equity Ratio, Efficiency Ratio, and Pre-Provision Net Revenue to their GAAP counterparts[21](index=21&type=chunk)[25](index=25&type=chunk)[141](index=141&type=chunk) [Other Information](index=15&type=section&id=Other%20Information) This section provides conference call details, a corporate overview, and a standard forward-looking statements disclaimer [Conference Call and Webcast](index=15&type=section&id=Conference%20Call%20and%20Webcast) The company will host a conference call on July 24, 2024, at 9:00 a.m. PT to discuss the financial results, with a live webcast and archived version available online - A conference call to discuss financial results is scheduled for July 24, 2024, at 9:00 a.m. PT / 12:00 p.m. ET[4](index=4&type=chunk) [About Pacific Premier Bancorp, Inc.](index=15&type=section&id=About%20Pacific%20Premier%20Bancorp%2C%20Inc.) Pacific Premier Bancorp, Inc. is the parent company of Pacific Premier Bank, a commercial bank with approximately **$18 billion** in total assets, serving businesses and investors across the western U.S. - Pacific Premier Bancorp, Inc. is the parent of Pacific Premier Bank, one of the largest banks headquartered in the western U.S. with approximately **$18 billion** in total assets[129](index=129&type=chunk) [Forward-Looking Statements](index=16&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section contains a standard disclaimer regarding forward-looking statements, cautioning that actual results may differ materially due to various risks and uncertainties - The report contains forward-looking statements based on management's current expectations, which are subject to inherent risks and uncertainties[5](index=5&type=chunk) - Key risks include U.S. economic strength, interest rate policies, deposit competition, credit risk, regulatory changes, and geopolitical conditions[5](index=5&type=chunk)[130](index=130&type=chunk)
Pacific Premier Bancorp(PPBI) - 2024 Q1 - Quarterly Report
2024-04-26 20:12
[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the Company [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and detailed notes, highlighting Q1 2024's decreased assets and net income, and increased equity [Consolidated Statements of Financial Condition (Unaudited)](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20(Unaudited)) Total assets and liabilities slightly decreased by March 31, 2024, while stockholders' equity increased, driven by reduced FHLB advances and higher deposits | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--------------------------------- | :------------------------------ | :------------------------------- | | Total assets | $18,813,181 | $19,026,645 | | Loans held for investment, net | $12,819,731 | $13,096,549 | | Total deposits | $15,187,828 | $14,995,626 | | FHLB advances and other borrowings | $200,000 | $600,000 | | Total stockholders' equity | $2,902,801 | $2,882,581 | [Consolidated Statements of Income (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) Net income for Q1 2024 decreased year-over-year due to lower net interest income and higher credit loss provisions, despite increased noninterest income | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net interest income before provision for credit losses | $145,127 | $168,610 | | Provision for credit losses | $3,852 | $3,016 | | Total noninterest income | $25,774 | $21,186 | | Net income | $47,025 | $62,562 | | Diluted EPS | $0.49 | $0.66 | [Consolidated Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Comprehensive income for Q1 2024 decreased year-over-year, primarily due to lower net income, partially offset by unrealized gains on AFS securities | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net income | $47,025 | $62,562 | | Other comprehensive income, net of tax | $3,909 | $2,518 | | Comprehensive income, net of tax | $50,934 | $65,080 | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Stockholders' equity increased from Q4 2023 to Q1 2024, driven by net income and comprehensive income, partially offset by dividends | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Total stockholders' equity | $2,902,801 | $2,882,581 | | Net income | $47,025 | - | | Cash dividends declared | $(31,635) | - | [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Net cash from operating and investing activities decreased in Q1 2024 year-over-year, while cash used in financing decreased due to deposit changes and debt repayments | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $56,946 | $75,171 | | Net cash provided by investing activities | $274,294 | $630,104 | | Net cash used in financing activities | $(238,895) | $(381,628) | | Net change in deposit accounts | $192,202 | $(144,591) | | Repayments of long-term borrowings | $(394,933) | $0 | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes detail the basis of presentation, accounting policies, and specific financial instruments, covering investment securities, loans, credit losses, and other key financial areas [Note 1 – Basis of Presentation](index=10&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) The consolidated financial statements include the Company and its subsidiaries, reflecting normal adjustments and adhering to consolidation principles for controlled entities - The consolidated financial statements include Pacific Premier Bancorp, Inc. and its wholly-owned subsidiaries, including Pacific Premier Bank[22](index=22&type=chunk) - Unaudited statements reflect normal recurring adjustments and should be read in conjunction with the 2023 Form 10-K[23](index=23&type=chunk)[24](index=24&type=chunk) - The Company consolidates voting entities where it has control or a controlling financial interest in a variable interest entity (VIE)[25](index=25&type=chunk) [Note 2 – Recently Issued Accounting Pronouncements](index=11&type=section&id=Note%202%20%E2%80%93%20Recently%20Issued%20Accounting%20Pronouncements) The Company adopted ASU 2023-02 with no material impact and is evaluating ASU 2023-09 and ASU 2023-07, effective after December 15, 2024 - ASU 2023-02 (Investments - Equity Method and Joint Ventures) adopted in 2024, allowing proportional amortization for tax credit structures; no material impact[27](index=27&type=chunk) - ASU 2023-09 (Income Taxes - Improvements to Income Tax Disclosures) effective for annual periods beginning after December 15, 2024; impact being evaluated[28](index=28&type=chunk) - ASU 2023-07 (Segment Reporting - Improvements to Reportable Segments) effective for annual periods beginning after December 15, 2024; impact being evaluated[30](index=30&type=chunk) [Note 3 – Significant Accounting Policies](index=12&type=section&id=Note%203%20%E2%80%93%20Significant%20Accounting%20Policies) No significant changes to accounting policies from the 2023 Form 10-K were made, with financial statements relying on management's estimates and assumptions - No significant changes to accounting policies from the 2023 Form 10-K as of March 31, 2024[31](index=31&type=chunk) - Financial statements require management estimates and assumptions, which could differ from actual results[32](index=32&type=chunk) [Note 4 – Investment Securities](index=13&type=section&id=Note%204%20%E2%80%93%20Investment%20Securities) The investment securities portfolio comprises AFS and HTM securities, with AFS showing improved net unrealized losses and HTM having a slight ACL decrease | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Total AFS investment securities (fair value) | $1,154,021 | $1,140,071 | | Total HTM investment securities (amortized cost) | $1,720,481 | $1,729,541 | - Net unrealized loss on AFS investment securities (net of tax): **$24.4 million** (Mar 31, 2024) vs **$25.8 million** (Dec 31, 2023)[37](index=37&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | ACL for HTM investment securities (municipal bonds) | $115 | $126 | - No ACL for AFS investment securities at March 31, 2024, as unrealized losses were deemed due to general market conditions, not credit[47](index=47&type=chunk) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Amortized cost of AFS investment securities sold | $0 | $304,182 | [Note 5 – Loans Held for Investment](index=17&type=section&id=Note%205%20%E2%80%93%20Loans%20Held%20for%20Investment) The loan portfolio decreased to **$13.01 billion** at March 31, 2024, with increases in delinquent and nonaccrual loans primarily from large commercial relationships | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Loans held for investment, net | $12,819,731 | $13,096,549 | | Total unfunded loan commitments | $1,459,515 | $1,703,470 | - The Bank's largest aggregate outstanding balance of loans to one borrower was **$319.3 million**, secured by multifamily properties, as of March 31, 2024[63](index=63&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Classified loans (Substandard, Doubtful, Loss) | $204,700 (1.57% of loans) | $142,000 (1.07% of loans) | - Delinquent loans (30 or more days past due) as a percentage of total loans held for investment increased to **0.09%** at March 31, 2024, from **0.08%** at December 31, 2023[266](index=266&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Nonaccrual loans | $63,806 | $24,817 | | Collateral dependent loans | $39,794 | $12,222 | | Modified loans to troubled borrowers (MLTB) | $12,161 | $12,595 | - The increase in nonaccrual loans at March 31, 2024, was primarily due to a single, diversified commercial banking relationship totaling **$37.6 million** and another lending relationship totaling **$1.9 million**[78](index=78&type=chunk)[82](index=82&type=chunk) [Note 6 – Allowance for Credit Losses](index=31&type=section&id=Note%206%20%E2%80%93%20Allowance%20for%20Credit%20Losses) The ACL for loans slightly decreased to **$192.3 million** at March 31, 2024, driven by net charge-offs and provisions, with the Company utilizing a CECL model | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | ACL for loans held for investment | $192,340 | $192,471 | | ACL for off-balance sheet commitments | $16,839 | $19,264 | | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net charge-offs | $6,419 | $3,284 | | Provision for loan losses | $6,288 | $3,021 | | Metric | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | ACL to loans held for investment ratio | 1.48% | 1.45% | | ACL to nonperforming loans ratio | 301% | 776% | - The Company's ACL model uses a discounted cash flow approach for commercial real estate and commercial loans, and a historical loss rate model for retail loans, incorporating probability of default (PD), loss given default (LGD), exposure at default (EAD), and economic forecasts[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [Note 7 – Goodwill and Other Intangible Assets](index=36&type=section&id=Note%207%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill remained stable at **$901.3 million**, while other intangible assets decreased to **$40.4 million** due to amortization, with no impairment identified | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Goodwill | $901,312 | $901,312 | | Net intangible assets | $40,449 | $43,285 | | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Amortization of intangible assets | $2,836 | $3,171 | - Estimated aggregate amortization expense for core deposit and customer relationship intangible assets for the next five years: **$11.1 million** (2024), **$10.0 million** (2025), **$8.9 million** (2026), **$7.2 million** (2027), and **$4.0 million** (2028)[116](index=116&type=chunk) [Note 8 – Subordinated Debentures](index=37&type=section&id=Note%208%20%E2%80%93%20Subordinated%20Debentures) Subordinated debentures increased to **$332.0 million** at March 31, 2024, with a **5.30%** weighted interest rate, qualifying as Tier 2 capital | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Total subordinated debentures | $332,001 | $331,842 | | Weighted interest rate | 5.30% | 5.31% | - Subordinated notes due 2024: **$60.0 million** principal, **5.75%** interest[118](index=118&type=chunk) - Subordinated notes due 2029: **$125.0 million** principal, **4.875%** fixed until May 15, 2024, then 3-month term SOFR +2.762%[118](index=118&type=chunk) - Subordinated notes due 2030: **$150.0 million** principal, **5.375%** fixed until June 15, 2025, then 3-month term SOFR +5.17%[118](index=118&type=chunk) - Subordinated notes qualify as Tier 2 capital, subject to phase-out by **20%** annually in the five years preceding maturity[122](index=122&type=chunk) [Note 9 – Earnings Per Share](index=38&type=section&id=Note%209%20%E2%80%93%20Earnings%20Per%20Share) Basic and diluted EPS for Q1 2024 decreased to **$0.49** from **$0.66** in Q1 2023, calculated using the two-class method | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Basic earnings per common share | $0.49 | $0.66 | | Diluted earnings per common share | $0.49 | $0.66 | | Net income allocated to common stockholders | $46,246k | $61,739k | | Weighted average diluted common shares | 94,477,355 | 94,182,522 | [Note 10 – Fair Value of Financial Instruments](index=39&type=section&id=Note%2010%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) Financial instruments are measured at fair value using a three-level hierarchy, with AFS securities and swaps as Level 2, and certain loans/OREO as Level 3 - Fair value hierarchy: Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs other than Level 1), Level 3 (unobservable inputs)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - AFS investment securities and interest rate swaps are generally classified as Level 2[135](index=135&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk) - Individually evaluated collateral dependent loans and OREO are measured at fair value on a nonrecurring basis using Level 3 inputs[145](index=145&type=chunk)[147](index=147&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Total estimated fair value of financial assets | $15,996,288 | $16,199,097 | | Total estimated fair value of financial liabilities | $15,747,163 | $15,945,592 | [Note 11 – Derivative Instruments](index=46&type=section&id=Note%2011%20%E2%80%93%20Derivative%20Instruments) The Company uses derivative instruments, including fair value hedges (interest rate swaps) with a **$1.35 billion** notional amount, to manage market risks and assist customers - Interest rate swaps designated as fair value hedges had an aggregate notional amount of **$1.35 billion** at March 31, 2024, and December 31, 2023[156](index=156&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Cumulative fair value hedging adjustment in hedged assets | $(32,324) | $(29,551) | | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Total derivative assets (fair value) | $6,496 | $5,644 | | Total derivative liabilities (fair value) | $12,019 | $10,715 | | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Gain (loss) on derivatives designated as hedging instruments | $10,016 | $(3,586) | [Note 12 – Balance Sheet Offsetting](index=50&type=section&id=Note%2012%20%E2%80%93%20Balance%20Sheet%20Offsetting) Derivative financial instruments may be offset in the consolidated statements of financial condition under master netting arrangements, with variation margin payments treated as settlements | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Gross interest rate swap assets | $6,488 | $5,643 | | Net interest rate swap assets (after cash collateral) | $1,068 | $1,033 | | Gross interest rate swap liabilities | $12,019 | $10,705 | | Net interest rate swap liabilities (after cash collateral) | $12,019 | $10,705 | [Note 13 – Variable Interest Entities](index=51&type=section&id=Note%2013%20%E2%80%93%20Variable%20Interest%20Entities) The Company is involved with VIEs through securitization and affordable housing but does not consolidate them, with maximum exposure to loss at **$47.6 million** and **$54.3 million** respectively - The Company is not the primary beneficiary of the VIEs and does not consolidate its interests in them[170](index=170&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Maximum exposure to loss from multifamily loan securitization | $47,563 | $47,994 | | Maximum exposure to loss from affordable housing partnerships | $54,338 | $57,016 | - Reserve for estimated losses with respect to the reimbursement obligation for multifamily loan securitization was **$345,000** at both March 31, 2024, and December 31, 2023[174](index=174&type=chunk) [Note 14 – Tax Equity Investments](index=52&type=section&id=Note%2014%20%E2%80%93%20Tax%20Equity%20Investments) Tax equity investments, primarily in affordable housing, had a carrying value of **$85.4 million** at March 31, 2024, with **$31.1 million** in unfunded commitments | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Carrying value of tax equity investments | $85,485 | $88,805 | | Metric | March 31, 2024 (in thousands) | | :----------------------------------- | :---------------------------- | | Total unfunded commitments associated with tax equity investments | $31,147 | | Unfunded commitments due in 2024 | $10,085 | | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Tax credit and other tax benefits recognized | $4,217 | $3,776 | | Amortization of investments | $3,475 | $3,050 | [Note 15 – Subsequent Events](index=53&type=section&id=Note%2015%20%E2%80%93%20Subsequent%20Events) On April 22, 2024, the Board declared a cash dividend of **$0.33** per share, payable May 13, 2024 - Quarterly cash dividend of **$0.33** per share declared on April 22, 2024, payable May 13, 2024[182](index=182&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition, operations, liquidity, and capital, including forward-looking statements, economic developments, and detailed analysis of key financial metrics [Forward-Looking Statements](index=54&type=section&id=Forward-Looking%20Statements) Forward-looking statements are subject to various known and unknown risks and uncertainties, including economic conditions, interest rates, and regulatory changes - Forward-looking statements are based on expectations and subject to known and unknown risks and uncertainties[186](index=186&type=chunk) - Key factors that could cause actual results to differ include the strength of the U.S. economy, banking industry developments, interest rate policies, liquidity, acquisitions, regulatory changes, and cybersecurity threats[187](index=187&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements and should consider all risks disclosed in SEC filings[188](index=188&type=chunk)[189](index=189&type=chunk) [General](index=56&type=section&id=General) Pacific Premier Bancorp, Inc. operates Pacific Premier Bank in the Western U.S. through 58 branches, offering diverse banking products and services to businesses and non-profits - Pacific Premier Bancorp, Inc. is a bank holding company, and Pacific Premier Bank is a California state-chartered commercial bank[191](index=191&type=chunk) - The Company operates primarily in the Western U.S. with **59** (now **58** after April 2024 consolidation) full-service branches in California, Washington, Oregon, Arizona, and Nevada[194](index=194&type=chunk) - Offers a wide array of banking products and services tailored to small- and middle-market businesses, corporations, professionals, entrepreneurs, real estate investors, and non-profit organizations[196](index=196&type=chunk) - Specialty banking products and services include Homeowners' Associations (HOA) and quick-service restaurant (QSR) franchise lending, commercial escrow, and IRA custodial services[196](index=196&type=chunk) - The principal source of income is the net spread between interest earned on loans and investments and interest costs on deposits and borrowings, supplemented by fee income[198](index=198&type=chunk) [Recent Developments](index=57&type=section&id=Recent%20Developments) FOMC's monetary tightening led to higher interest rates, impacting interest income and expenses, with the Company anticipating effects on loan growth, credit quality, and liquidity - The FOMC's monetary policy tightening due to persistent inflation has resulted in higher interest rates, impacting both interest income and expenses[199](index=199&type=chunk) - Anticipated impacts of economic conditions include: pressure on loan growth and interest income, potential decline in credit quality leading to higher past due/nonaccrual loans and increased provision for credit losses, possible increase in ACL, potential impairment charges on goodwill/intangibles/deferred tax assets, negative impact on AFS investment securities valuation and stockholders' equity, continued increase in deposit costs, and challenges in retaining/attracting deposits[199](index=199&type=chunk)[200](index=200&type=chunk) - The Company is focused on serving customers, employee well-being, and executing strategic initiatives while monitoring the economic environment and industry conditions[201](index=201&type=chunk) [Critical Accounting Policies](index=59&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies, including ACL for loans and goodwill, require significant management judgment and estimates, which could materially impact financial statements - Critical accounting policies include the allowance for credit losses on loans and off-balance sheet commitments, as well as goodwill[202](index=202&type=chunk) - These policies require significant management judgment and estimates, which are subject to change and could materially impact financial statements[202](index=202&type=chunk) [Non-GAAP Measures](index=60&type=section&id=Non-GAAP%20Measures) The Company uses several non-GAAP financial measures, such as adjusted ROAA, ROATCE, and efficiency ratio, to provide supplemental information on operational performance and comparability, excluding nonrecurring items | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :----------------------------------------- | :--------- | :--------- | :--------- | | Adjusted ROAA (annualized) | 1.00% | 0.99% | 1.15% | | Adjusted ROATCE (annualized) | 10.13% | 11.19% | 13.89% | | Adjusted diluted EPS | $0.49 | $0.51 | $0.66 | | Tangible book value per share | $20.33 | $20.22 | $19.61 | | Tangible common equity ratio | 10.97% | 10.72% | - | | Adjusted efficiency ratio (excl. FDIC special assessment) | 59.8% | 58.8% | 51.7% | | Adjusted pre-provision net revenue (annualized) | $275,164k | $263,880k | $353,776k | | Cost of non-maturity deposits | 1.06% | 1.02% | 0.54% | [Results of Operations](index=67&type=section&id=RESULTS%20OF%20OPERATIONS) The Company reported net income of **$47.0 million** for Q1 2024, a significant increase from Q4 2023 but a decrease from Q1 2023, with net interest margin increasing to **3.39%** [Overview](index=67&type=section&id=Overview) Net income for Q1 2024 was **$47.0 million** (**$0.49** diluted EPS), increasing from Q4 2023 but decreasing from Q1 2023 due to varied income and expense factors | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--------------- | :--------- | :---------- | :--------- | | Net income (loss) | $47,025k | $(135,376)k | $62,562k | | Diluted EPS | $0.49 | $(1.44) | $0.66 | | ROAA | 0.99% | (2.76)% | 1.15% | | ROAE | 6.50% | (19.01)% | 8.87% | | ROATCE | 10.05% | (28.01)% | 13.89% | [Net Interest Income](index=68&type=section&id=Net%20Interest%20Income) Net interest income slightly decreased to **$145.1 million** in Q1 2024 from Q4 2023, but net interest margin increased to **3.39%**, while year-over-year income decreased significantly | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :----------------------------------- | :--------- | :--------- | :--------- | | Net interest income | $145,127k | $146,789k | $168,610k | | Net interest margin | 3.39% | 3.28% | 3.44% | | Cost of deposits | 1.59% | 1.56% | 0.94% | | Average interest-earning assets | $17,238,117k | $17,743,168k | $19,896,067k | | Average yield on interest-earning assets | 4.98% | 4.86% | 4.51% | | Average cost of interest-bearing liabilities | 2.52% | 2.46% | 1.72% | [Provision for Credit Losses](index=71&type=section&id=Provision%20for%20Credit%20Losses) Provision for credit losses increased to **$3.9 million** in Q1 2024, driven by economic forecasts and specific reserves, partially offset by decreased loans | Metric | Q1 2024 (in thousands) | Q4 2023 (in thousands) | Q1 2023 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | :--------------------- | | Total provision for credit losses | $3,852 | $1,696 | $3,016 | | Provision for loan losses | $6,288 | $8,275 | $3,021 | | Provision for unfunded commitments | $(2,425) | $(6,577) | $(189) | [Noninterest Income](index=72&type=section&id=Noninterest%20Income) Noninterest income was **$25.8 million** in Q1 2024, significantly increasing from Q4 2023 due to the absence of prior repositioning losses and a gain on debt extinguishment | Metric | Q1 2024 (in thousands) | Q4 2023 (in thousands) | Q1 2023 (in thousands) | | :----------------------------------- | :--------------------- | :--------------------- | :--------------------- | | Total noninterest income (loss) | $25,774 | $(234,194) | $21,186 | | Net (loss) gain from sales of investment securities | $0 | $(254,065) | $138 | | Other income (includes gain on debt extinguishment) | $5,959 | $1,562 | $1,261 | | Trust custodial account fees | $10,642 | $9,388 | $11,025 | [Noninterest Expense](index=73&type=section&id=Noninterest%20Expense) Noninterest expense totaled **$102.6 million** for Q1 2024, slightly decreasing from Q4 2023 due to lower FDIC special assessment, but increasing year-over-year | Metric | Q1 2024 (in thousands) | Q4 2023 (in thousands) | Q1 2023 (in thousands) | | :------------------------- | :--------------------- | :--------------------- | :--------------------- | | Total noninterest expense | $102,633 | $102,770 | $101,352 | | FDIC insurance premiums | $2,629 | $4,267 | $2,425 | | Deposit expense | $12,665 | $11,152 | $8,436 | | Efficiency ratio | 60.2% | 60.1% | 51.7% | [Income Taxes](index=74&type=section&id=Income%20Taxes) Income tax expense for Q1 2024 was **$17.4 million** with an effective tax rate of **27.0%**, contrasting with a tax benefit in Q4 2023 due to a pre-tax loss | Metric | Q1 2024 (in thousands) | Q4 2023 (in thousands) | Q1 2023 (in thousands) | | :------------------------- | :--------------------- | :--------------------- | :--------------------- | | Income tax expense (benefit) | $17,391 | $(56,495) | $22,866 | | Effective income tax rate | 27.0% | 29.4% | 26.8% | | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Unrecognized tax benefits | $1,400 | $1,400 | | Accrued interest on unrecognized tax benefits | $231 | $200 | [Financial Condition](index=75&type=section&id=FINANCIAL%20CONDITION) The Company's financial condition at March 31, 2024, shows decreased total assets and liabilities, driven by reduced loans and FHLB advances, while stockholders' equity increased [Overview](index=75&type=section&id=Overview) Total assets decreased to **$18.81 billion** at March 31, 2024, with liabilities also down, while stockholders' equity increased due to net income and comprehensive income | Metric | March 31, 2024 (in billions) | December 31, 2023 (in billions) | | :------------------------- | :--------------------------- | :------------------------------ | | Total assets | $18.81 | $19.03 | | Total liabilities | $15.91 | $16.14 | | Total stockholders' equity | $2.90 | $2.88 | | Metric | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | Book value per share | $30.09 | $30.07 | | Tangible book value per share | $20.33 | $20.22 | | Tangible common equity to tangible assets ratio | 10.97% | 10.72% | [Loans](index=75&type=section&id=Loans) Loans held for investment decreased by **$276.9 million** to **$13.01 billion** at March 31, 2024, with increased delinquent and nonperforming assets due to specific commercial relationships | Metric | March 31, 2024 (in billions) | December 31, 2023 (in billions) | | :----------------------------------- | :--------------------------- | :------------------------------ | | Loans held for investment | $13.01 | $13.29 | | Weighted average interest rate on loans | 4.91% | 4.87% | - Delinquent loans (30 or more days past due) as a percentage of total loans held for investment increased to **0.09%** at March 31, 2024, from **0.08%** at December 31, 2023[266](index=266&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Nonperforming assets | $64,054 (0.34% of total assets) | $25,065 (0.13% of total assets) | | Nonperforming loans | $63,806 (0.49% of loans) | $24,817 (0.19% of loans) | | Classified loans (Substandard, Doubtful, Loss) | $200,580 (1.57% of loans) | $137,420 (1.07% of loans) | | Modified loans to troubled borrowers (MLTB) | $12,161 | $12,595 | [Allowance for Credit Losses](index=86&type=section&id=Allowance%20for%20Credit%20Losses) The ACL for loans held for investment was **$192.3 million** at March 31, 2024, with a **1.48%** ratio to loans, determined by a CECL model and qualitative adjustments | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | ACL for loans held for investment | $192,340 | $192,471 | | Metric | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | ACL to loans held for investment ratio | 1.48% | 1.45% | | ACL to nonperforming loans ratio | 301% | 776% | | Net charge-offs to average loans held for investment | 0.05% | 0.03% | - The CECL model incorporates reasonable and supportable economic forecasts from an independent third party, with PDs and LGDs forecasted over a two-year period and reverting to long-term averages over three years[283](index=283&type=chunk)[284](index=284&type=chunk) - Qualitative adjustments are considered quarterly for higher-risk loan segments or where the quantitative model may not fully reflect adequate levels, based on management's judgment[286](index=286&type=chunk) [Investment Securities](index=90&type=section&id=Investment%20Securities) The investment securities portfolio slightly increased to **$2.87 billion** at March 31, 2024, primarily investment grade and diversified, with AFS and HTM components | Metric | March 31, 2024 (in billions) | December 31, 2023 (in billions) | | :----------------------------------- | :--------------------------- | :------------------------------ | | Total investment securities | $2.87 | $2.87 | | AFS investment securities | $1.15 | $1.14 | | HTM investment securities | $1.72 | $1.73 | - The effective duration of the AFS securities portfolio was **0.9 years** at March 31, 2024, compared to **0.7 years** at December 31, 2023[294](index=294&type=chunk) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | ACL for HTM investment securities | $115 | $126 | - No ACL for AFS investment securities at March 31, 2024[296](index=296&type=chunk) - **84.9%** of the investment securities portfolio had a Moody's credit rating of Aaa-Aa3 at March 31, 2024[299](index=299&type=chunk) [Deposits](index=92&type=section&id=Deposits) Total deposits increased by **$192.2 million** to **$15.19 billion** at March 31, 2024, with non-maturity deposits at **84.4%** and uninsured deposits totaling **$6.14 billion** | Metric | March 31, 2024 (in billions) | December 31, 2023 (in billions) | | :----------------------------------- | :--------------------------- | :------------------------------ | | Total deposits | $15.19 | $15.00 | | Non-maturity deposits | $12.82 (84.4% of total deposits) | $12.70 (84.7% of total deposits) | | Noninterest-bearing checking | $4,997,636k (32.9% of total deposits) | $4,932,817k (32.9% of total deposits) | | Weighted average rate of deposits | 1.66% | 1.55% | | Uninsured deposits | $6,138,719k | $5,976,621k | | Insured and collateralized deposits as % of total deposits | 66% | 66% | | Loans held for investment to deposits ratio | 85.7% | 88.6% | [Borrowings](index=93&type=section&id=Borrowings) Total borrowings decreased by **$399.8 million** to **$532.0 million** at March 31, 2024, primarily due to a reduction in FHLB term advances | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Total borrowings | $532,001 | $931,842 | | FHLB advances | $200,000 | $600,000 | | Subordinated debentures | $332,001 | $331,842 | | Borrowings as a percent of total assets | 2.8% | 4.9% | | Weighted average rate of borrowings | 5.07% | 3.93% | [Capital Resources and Liquidity](index=95&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) The Company maintains robust capital and liquidity, exceeding regulatory minimums, with substantial liquid assets and unused borrowing capacity providing strong coverage [Liquidity Management](index=95&type=section&id=Liquidity%20Management) The Company's liquidity sources include deposits and FHLB advances, with **$9.90 billion** in readily available liquidity providing **190.9%** coverage to uninsured deposits - Unused borrowing capacity was **$8.53 billion** at March 31, 2024, including FHLB, FRB discount window, and correspondent bank lines[315](index=315&type=chunk) - Combined readily available liquidity (cash, time deposits, short-term, unpledged AFS U.S. Treasury securities) totaled approximately **$9.90 billion** at March 31, 2024[315](index=315&type=chunk) - The coverage ratio of readily available liquidity to uninsured and uncollateralized deposits was **190.9%** at March 31, 2024[315](index=315&type=chunk) - The liquidity ratio was **14.4%** at March 31, 2024, exceeding the Company's minimum policy requirement of **10.0%**[316](index=316&type=chunk) - Brokered deposits amounted to **$572.1 million**, representing **3.77%** of total deposits and **3.04%** of total assets at March 31, 2024[318](index=318&type=chunk) - The Bank paid **$31.6 million** in dividends to the Corporation during the three months ended March 31, 2024[319](index=319&type=chunk) - The Corporation maintains a **$25.0 million** line of credit with U.S. Bank, with no outstanding balance at March 31, 2024[320](index=320&type=chunk) [Material Cash Requirement](index=96&type=section&id=Material%20Cash%20Requirement) Material cash requirements include funding loan commitments, equity investments, and debt repayment, with total contractual obligations of **$2.98 billion**, **$2.32 billion** due within one year | Metric | Total (in thousands) | Less than 1 year (in thousands) | | :----------------------------------- | :------------------- | :------------------------------ | | Total contractual cash obligations | $2,980,982 | $2,318,813 | | Loan commitments to extend credit | $1,411,838 | $950,471 | | Affordable housing partnerships commitment | $31,147 | $14,924 | [Regulatory Capital Compliance](index=98&type=section&id=Regulatory%20Capital%20Compliance) The Company and Bank exceed all regulatory capital minimums, including the capital conservation buffer, and are categorized as 'well capitalized,' with ratios strengthening in Q1 2024 - The Bank was categorized as 'well capitalized' as of the most recent formal notification from the Federal Reserve[329](index=329&type=chunk) - The Company and Bank are in compliance with the capital conservation buffer requirement and exceeded minimum Common Equity Tier 1, Tier 1, and Total Capital ratios, inclusive of the fully phased-in capital conservation buffer[330](index=330&type=chunk) | Metric | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | Pacific Premier Bancorp, Inc. Consolidated | | | | Tier 1 leverage ratio | 11.48% | 11.03% | | Common equity tier 1 capital ratio | 15.02% | 14.32% | | Tier 1 capital ratio | 15.02% | 14.32% | | Total capital ratio | 18.23% | 17.29% | | Pacific Premier Bank | | | | Tier 1 leverage ratio | 12.97% | 12.43% | | Common equity tier 1 capital ratio | 16.96% | 16.13% | | Tier 1 capital ratio | 16.96% | 16.13% | | Total capital ratio | 18.21% | 17.23% | - The Company elected to phase in the full effect of CECL on regulatory capital over a five-year transition period[331](index=331&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=98&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Company's exposure to market risk, primarily interest rate risk, managed by the Asset Liability Committee to limit adverse effects on NII and EVE [Asset/Liability Management and Market Risk](index=100&type=section&id=Asset%2FLiability%20Management%20and%20Market%20Risk) Market risk, mainly interest rate risk from asset/liability repricing mismatches, is managed by the Asset Liability Committee to mitigate adverse impacts on NII and EVE - Market risk primarily arises from interest rate risk in lending, investments, and deposit taking activities[334](index=334&type=chunk) - The Asset Liability Committee is responsible for implementing the Bank's interest rate risk management policy to limit adverse effects on NII and EVE[334](index=334&type=chunk) [Interest Rate Risk Management](index=100&type=section&id=Interest%20Rate%20Risk%20Management) The Company manages interest rate risk through portfolio structuring and pricing, monitoring NII and EVE sensitivity, with low sensitivity to rising rates and expected NII increases | Metric | March 31, 2024 (in thousands) | | :----------------------------------- | :---------------------------- | | Projected NII change for +300 bps shift | $44,467 (7.3% increase) | | EVE change for +300 bps shift | $(413,729) (13.0% decrease) | - The Company's sensitivity to changes in interest rates is low for rising rates, aided by interest rate swaps for hedging purposes, with Earnings at Risk expected to increase as rates rise[339](index=339&type=chunk) - The Company has minimal direct market risk from foreign exchange and no exposure from commodities[340](index=340&type=chunk) [Item 4. Controls and Procedures](index=102&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=102&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including CEO and CFO, concluded the Company's disclosure controls and procedures were effective as of March 31, 2024 - The Company's disclosure controls and procedures were effective as of March 31, 2024[341](index=341&type=chunk) [Changes in Internal Controls over Financial Reporting](index=102&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024 - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[342](index=342&type=chunk) [PART II - OTHER INFORMATION](index=103&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides other required information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=103&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in ordinary course legal proceedings, which management believes will not materially impact its operations or financial condition - Legal proceedings are in the ordinary course of business[345](index=345&type=chunk) - Management believes these proceedings will not have a material adverse impact on the Company's results of operations or financial condition[345](index=345&type=chunk) [Item 1A. Risk Factors](index=103&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors as previously described in the 2023 Form 10-K[346](index=346&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=103&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A stock repurchase program for up to **4,725,000** shares was authorized, but no shares were repurchased during Q1 2024 - Stock repurchase program authorized for up to **4,725,000** shares of common stock[347](index=347&type=chunk) - No shares of common stock were repurchased during the first quarter of 2024[347](index=347&type=chunk)[349](index=349&type=chunk) - Maximum number of shares that may yet be purchased under the program is **4,245,056**[349](index=349&type=chunk) [Item 3. Defaults Upon Senior Securities](index=103&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities[350](index=350&type=chunk) [Item 4. Mine Safety Disclosures](index=103&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company's operations - Not applicable[351](index=351&type=chunk) [Item 5. Other Information](index=103&type=section&id=Item%205.%20Other%20Information) No officer or director adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 arrangements during Q1 2024 - No officer or director adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2024[352](index=352&type=chunk) [Item 6. Exhibits](index=104&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and XBRL-related documents - Exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), certifications (CEO, CFO), and XBRL Instance, Schema, Calculation, Definitions, Label, and Presentation Linkbase Documents[353](index=353&type=chunk) [SIGNATURES](index=105&type=section&id=SIGNATURES) The report was duly signed by Steven R. Gardner (Chairman, CEO, and President) and Ronald J. Nicolas, Jr. (SVP and CFO) on April 26, 2024 - The report was signed by Steven R. Gardner (Chairman, CEO, and President) and Ronald J. Nicolas, Jr. (Senior Executive Vice President and CFO) on April 26, 2024[358](index=358&type=chunk)
Pacific Premier Bancorp(PPBI) - 2024 Q1 - Earnings Call Transcript
2024-04-24 21:46
Financial Data and Key Metrics Changes - The company reported net income of $47 million or $0.49 per share, with a return on average assets of 0.99% and a return on average tangible common equity of 10.05% [92] - The net interest margin increased by 11 basis points to 3.39%, attributed to the repositioning of the securities portfolio [73][93] - The tangible common equity (TCE) ratio rose by 25 basis points to 10.97%, and the tangible book value per share increased by $0.11 to $20.33 [74][106] Business Line Data and Key Metrics Changes - Loan demand remained muted, with total loans held for investment decreasing by $277 million due to prepayment sales and maturities exceeding new loan commitments [101] - Noninterest income increased by $5.9 million, primarily due to a $5.1 million gain on the prepayment of a $200 million FHLB term borrowing [97] - Nonperforming assets increased by $39 million to $64 million, primarily due to a single diversified commercial banking relationship [86][107] Market Data and Key Metrics Changes - Total deposits increased by $192 million, driven by a $120 million increase in non-maturity deposits [83][103] - The average cost of non-maturity deposits was well controlled at 1.06% [76] - The company anticipates some outflows in deposits due to seasonal factors, particularly during tax season [103] Company Strategy and Development Direction - The company aims to maintain strong capital levels while expanding deposit relationships and attracting new clients [111] - There is a focus on disciplined risk management and proactive credit risk management to navigate the current economic environment [112] - The company is exploring opportunities to deploy excess capital into higher-yielding earning assets [96][112] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing inflationary pressures, interest rate volatility, and geopolitical risks as factors contributing to an uncertain outlook [112] - The company is cautiously optimistic about modest increases in new loan opportunities as the year progresses [85] - Management emphasized the importance of maintaining discipline in loan origination despite competitive pressures [57][118] Other Important Information - The company has a strong capital position, with a CET1 ratio of 15.20% and a total risk-based capital ratio of 18.23% [74] - The average yield on the investment portfolio increased by 56 basis points to 3.64% [105] - The company is committed to a proactive approach to credit risk management, which has historically benefited the organization [112] Q&A Session Summary Question: What is the outlook for earning assets over the next couple of quarters? - Management indicated that they are encouraged by new opportunities but will maintain discipline in their approach to lending [117] Question: Can you provide guidance on the swap portfolio for the upcoming quarters? - The swap portfolio is expected to remain flat in Q2, contributing approximately 20-21 basis points to the net interest margin [119][120] Question: What is the expected tax rate for the year? - The tax rate is anticipated to be in the range of 26% to 27% for the full year [127]
Pacific Premier Bancorp(PPBI) - 2024 Q1 - Quarterly Results
2024-04-24 01:27
Exhibit 99.1 Pacific Premier Bancorp, Inc. Announces First Quarter 2024 Financial Results and a Quarterly Cash Dividend of $0.33 Per Share First Quarter 2024 Summary Irvine, Calif., April 24, 2024 -- 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 ...
Pacific Premier Bancorp(PPBI) - 2023 Q4 - Annual Report
2024-02-23 21:31
Financial Performance - As of December 31, 2023, the company reported consolidated total assets of $19.03 billion, net loans of $13.10 billion, total deposits of $15.00 billion, and consolidated total stockholders' equity of $2.88 billion[20]. - The total commercial and consumer deposits were $15.00 billion, with non-maturity deposits comprising 84.7% of total deposits as of December 31, 2023[42]. - The available-for-sale securities portfolio was valued at $1.14 billion, representing 6% of total assets, with a repositioning that generated significant liquidity[45]. - The liquidity position totaled approximately $9.91 billion, consisting of $1.23 billion of on-balance sheet liquidity and $8.68 billion of additional borrowing capacity[47]. - The quarterly cash dividend was increased to $0.33 per share in January 2024, up from an annual cash dividend of $1.32 per share in 2023[52]. - The Corporation's annualized common equity cash dividend was $1.32 per share in 2023, consistent with 2022[112]. - The FDIC insurance premium expense was $11.4 million for 2023, which includes $2.1 million for the FDIC special assessment[122]. - The Corporation anticipates continuing to pay quarterly cash dividends, although future payments are subject to the Board of Directors' discretion[112]. Risk Management and Compliance - The company’s strategic focus includes sound risk management and maintaining a diverse client base through a relationship-driven banking model[21]. - The company is committed to Environmental, Social, and Governance (ESG) initiatives, incorporating them into its enterprise risk management framework[25]. - The company is focused on mitigating climate-related risks, integrating them into its enterprise-wide Risk and Control Self-Assessment (RCSA) process[65]. - A cross-functional climate risk working group has been established to manage climate-related risks, led by a senior officer from the portfolio management and underwriting group[67]. - The Dodd-Frank Act has increased the regulatory burden and compliance costs for the Company, impacting its financial condition and operational results[1]. - The federal banking regulators have the discretion to set individual minimum capital requirements for specific institutions, which could affect the Company's growth and dividend payments[99]. - The federal banking agencies prohibit incentive-based compensation arrangements that encourage excessive risk-taking, impacting the Company's compensation policies[90]. - The Company is subject to enhanced enforcement of consumer financial protection laws due to its assets exceeding $10 billion since 2019[138]. - The Company must comply with various consumer protection laws, including the Truth in Lending Act and Fair Credit Reporting Act, to maintain customer relations[137]. - The Company is evaluating the impact of new regulations and developing strategies for compliance with the CRA[132]. Loan Portfolio and Asset Quality - As of December 31, 2023, the total loans held for investment amounted to $13.29 billion, with multifamily real estate secured loans constituting 42.5% at $5.65 billion[36]. - The loan portfolio is concentrated in commercial real estate (CRE) and commercial business loans, with CRE loans totaling $11.12 billion, or 83.7% of the total loan portfolio[164]. - The company reported net loan charge-offs of $17.6 million and a provision expense for loan losses of $14.4 million in 2023[159]. - As of December 31, 2023, total nonperforming assets amounted to $25.1 million, or 0.13% of total assets[159]. - The largest outstanding commercial and industrial (C&I) loan balance was $264.1 million, while the largest outstanding CRE loan balance was $88.9 million[164]. Employee and Diversity Initiatives - The company had 1,345 full-time equivalent employees as of December 31, 2023[69]. - 51% of employees in vice president and above roles were female, and 47% were from a minority group[71]. - The aggregate percentage of women in the entire workforce was 60%, while the percentage of minorities was 57%[71]. - The company offers a competitive total compensation package, including comprehensive medical, dental, and vision benefits, as well as a 401(k) plan with a competitive company match[76]. Technology and Innovation - The company has developed the Pacific Premier API Banking platform to enhance cash management treasury functions, improving automation and customer experience[32]. - The company’s online banking platform includes features such as mobile check deposit and wire approval, enhancing clients' ability to manage accounts efficiently[32]. - The effective use of technology is critical for the company to meet customer demands and improve operational efficiencies[198]. - The company’s modeling of sensitivity to interest rates is low in a rising interest rate environment and low-to-moderate in a falling rate environment[154]. - The reliance on artificial intelligence technologies introduces risks such as algorithmic bias and unauthorized access to data[176]. Market Competition and Economic Environment - The company competes in the commercial banking sector primarily in the Western Region of the U.S., facing competition from larger regional and national banks[74]. - Increased competition in the financial services industry may lead to reduced new loan production and decreased deposit balances[196]. - The company faces strong competition from national banks, regional banks, community banks, and fintech companies, which could adversely affect its business[195]. - Customer confidence in the banking system has improved since the first half of 2023, but risks related to disintermediation and uninsured deposits remain[149]. - The Company faces risks from potential economic deterioration in California and surrounding states, which could lead to higher default rates on loans[148]. Regulatory and Legal Considerations - The Company is not currently classified as a "financial holding company," limiting its ability to engage in certain additional financial activities[88]. - The FDIC's risk-based deposit premium assessment system may lead to increased premiums if criticized loans or higher risk assets rise[117]. - Regulatory changes could restrict the company's ability to conduct certain activities, impacting business opportunities and financial performance[187]. - The company is subject to evolving regulations regarding privacy and data protection, including the California Consumer Privacy Act, which could increase compliance costs[192]. - The company experienced a data compromise in 2023 involving a third-party vendor, but it did not impact its own information systems[173]. Capital and Funding - The Company exceeded all regulatory capital requirements, maintaining a Common Equity Tier 1 (CET1) capital ratio above 7.0%, a Tier 1 capital ratio above 8.5%, and a total capital ratio above 10.5%[106]. - The Company has approximately $944.6 million in goodwill and intangible assets as of December 31, 2023, including $901.3 million in goodwill from acquisitions since 2011[203]. - The Company has opted to exclude Accumulated Other Comprehensive Income (AOCI) from its CET1 capital calculations as permitted by Basel III[95]. - The Company may need to raise additional capital in the future, which may not be available on acceptable terms[168]. - The company successfully reduced higher-cost wholesale funding sources by $817.0 million during the fourth quarter of 2023[45].
Pacific Premier Bancorp(PPBI) - 2023 Q4 - Earnings Call Transcript
2024-01-29 19:53
Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) Q4 2023 Earnings Conference Call January 29, 2024 12:00 PM ET Company Participants Steve Gardner - Chairman and CEO Ron Nicolas - CFO Conference Call Participants David Feaster - Raymond James Chris McGratty - KBW Gary Tenner - D.A. Davidson Andrew Terrell - Stephens Adam Butler - Piper Sandler Operator Good morning. And welcome to the Pacific Premier Bancorp Fourth Quarter 2023 Conference Call. All participants will be in listen only mode [Operator Instructions]. ...
Pacific Premier Bancorp(PPBI) - 2023 Q3 - Quarterly Report
2023-10-26 20:02
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 0-22193 (Exact name of registrant as specified in its charter) Delaware 33-0743196 (State or other jurisdiction of ...
Pacific Premier Bancorp(PPBI) - 2023 Q3 - Earnings Call Presentation
2023-10-24 19:31
Investor Presentation October 24, 2023 Ronald J. Nicolas, Jr. Sr. EVP & Chief Financial Officer rnicolas@ppbi.com 949-864-8000 Forward Looking Statements Third Quarter 2023 Steve Gardner Chairman, Chief Executive Officer, & President sgardner@ppbi.com 949-864-8000 PACIFIC PREMIER BANCORP, INC. FORWARD LOOKING STATEMENTS AND WHERE TO FIND MORE INFORMATION This investor presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the f ...
Pacific Premier Bancorp(PPBI) - 2023 Q3 - Earnings Call Transcript
2023-10-24 19:30
Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) Q3 2023 Earnings Conference Call October 24, 2023 12:00 PM ET Company Participants Steve Gardner - Chairman and CEO Ron Nicolas - CFO Conference Call Participants David Feaster - Raymond James Matthew Clark - Piper Sandler Chris McGratty - KBW Gary Tenner - DA Davidson David Chiaverini - Wedbush Securities Operator Good day, everyone. And welcome to the Pacific Premier Bancorp Third Quarter 2023 Conference Call. All participants will be in a listen-only mode. [Ope ...
Pacific Premier Bancorp(PPBI) - 2023 Q2 - Quarterly Report
2023-07-28 20:01
PART I [Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) Presents Pacific Premier Bancorp's unaudited consolidated financial statements for Q2 2023, covering financial condition, income, comprehensive income, equity, cash flows, and detailed notes [Consolidated Statements of Financial Condition (Unaudited)](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20%28Unaudited%29) Total assets and liabilities decreased as of June 30, 2023, driven by reduced loans and deposits, while stockholders' equity slightly increased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,463,677 | $1,101,249 | | Investment securities (AFS & HTM) | $3,749,395 | $3,989,116 | | Loans held for investment, net | $13,417,949 | $14,480,647 | | Goodwill | $901,312 | $901,312 | | **Total assets** | **$20,747,883** | **$21,688,017** | | **Liabilities** | | | | Total deposits | $16,539,875 | $17,352,401 | | FHLB advances and other borrowings | $800,000 | $1,000,000 | | **Total liabilities** | **$17,898,749** | **$18,889,628** | | **Stockholders' Equity** | | | | Total stockholders' equity | $2,849,134 | $2,798,389 | | **Total liabilities and stockholders' equity** | **$20,747,883** | **$21,688,017** | [Consolidated Statements of Income (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20%28Unaudited%29) Net income for Q2 2023 and the six months ended June 30, 2023, decreased year-over-year, primarily due to lower net interest income from increased funding costs Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $160,092 | $172,765 | $328,702 | $334,604 | | Provision for credit losses | $1,499 | $469 | $4,515 | $917 | | Noninterest income | $20,539 | $22,193 | $41,725 | $48,087 | | Noninterest expense | $100,644 | $98,974 | $201,996 | $196,622 | | **Net income** | **$57,636** | **$69,803** | **$120,198** | **$136,707** | | **Diluted EPS** | **$0.60** | **$0.73** | **$1.26** | **$1.44** | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29) Comprehensive income significantly improved in Q2 2023 compared to a loss in Q2 2022, despite lower net income, due to a smaller other comprehensive loss related to available-for-sale securities Comprehensive Income (Loss) Summary (in thousands) | Component | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $57,636 | $69,803 | $120,198 | $136,707 | | Other Comprehensive (Loss), net of tax | $(12,738) | $(70,785) | $(10,220) | $(207,156) | | **Comprehensive Income (Loss)** | **$44,898** | **$(982)** | **$109,978** | **$(70,449)** | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29) Total stockholders' equity increased from year-end 2022 to June 30, 2023, driven by net income, partially offset by cash dividends and other comprehensive loss - For the six months ended June 30, 2023, stockholders' equity increased by **$50.7 million**, from **$2.798 billion** to **$2.849 billion**[17](index=17&type=chunk) - Key changes in equity for the first half of 2023 included: +**$120.2 million** from net income, -**$63.0 million** from cash dividends, and -**$10.2 million** from other comprehensive loss[17](index=17&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) Net cash increased for the six months ended June 30, 2023, driven by operating and investing activities, partially offset by financing outflows from decreased deposits Net Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $176,409 | $210,378 | | Net cash provided by (used in) investing activities | $1,267,050 | $(482,829) | | Net cash (used in) provided by financing activities | $(1,081,031) | $940,546 | | **Net increase in cash and cash equivalents** | **$362,428** | **$668,095** | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Provides detailed disclosures supporting financial statements, including new accounting standards, portfolio details, credit quality, ACL, goodwill, debt, and fair value measurements - The company adopted ASU 2022-02 on January 1, 2023, which eliminated the accounting guidance for Troubled Debt Restructurings (TDRs) and introduced new disclosure requirements for loan modifications to borrowers experiencing financial difficulty[32](index=32&type=chunk) - The use of the London Interbank Offered Rate (LIBOR) was discontinued after June 30, 2023, with the company transitioning to the Secured Overnight Financing Rate (SOFR) as its primary alternative reference rate[37](index=37&type=chunk) - During the first half of 2023, the company transferred **$410.7 million** of Available-for-Sale (AFS) collateralized mortgage obligations to Held-to-Maturity (HTM) securities to be held to maturity[46](index=46&type=chunk) - The Allowance for Credit Losses (ACL) for loans was **$192.3 million** as of June 30, 2023, compared to **$195.7 million** at year-end 2022, with the ACL for off-balance sheet commitments at **$24.5 million**[118](index=118&type=chunk)[122](index=122&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting decreased Q2 2023 net income due to margin compression, and outlines strategic actions to enhance liquidity and maintain strong capital ratios [General and Recent Developments](index=63&type=section&id=General%20and%20Recent%20Developments) The company operates 59 branches in the Western U.S., focusing on small- to middle-market businesses, and is actively monitoring the impact of inflation, rising rates, and bank failures on its operations - The company identifies key risks from the current economic environment, including pressure on loan growth, potential credit quality deterioration, the need for higher provisions for credit losses (ACL), and increased deposit costs and competition[208](index=208&type=chunk)[209](index=209&type=chunk) - In response to market conditions, the company has taken strategic actions to enhance liquidity, including increasing FHLB borrowings, using brokered deposits, and potentially liquidating AFS securities[209](index=209&type=chunk) [Results of Operations](index=69&type=section&id=Results%20of%20Operations) Q2 2023 net income decreased sequentially and year-over-year, primarily due to net interest margin compression from rising funding costs, alongside minor changes in noninterest items Quarterly Performance Summary (in thousands, except per share data) | Metric | Q2 2023 | Q1 2023 | Q2 2022 | | :--- | :--- | :--- | :--- | | Net Income | $57,636 | $62,562 | $69,803 | | Diluted EPS | $0.60 | $0.66 | $0.73 | | Net Interest Income | $160,092 | $168,610 | $172,765 | | Net Interest Margin | 3.33% | 3.44% | 3.49% | | Provision for Credit Losses | $1,499 | $3,016 | $469 | - Net interest income decreased by **$12.7 million**, or **7.3%**, compared to Q2 2022, primarily due to higher cost of funds, an increase in brokered CDs, and lower average loan balances[228](index=228&type=chunk) - Noninterest expense increased by **$1.7 million** compared to Q2 2022, driven by a **$5.1 million** increase in deposit expense (due to higher earnings credit rates) and higher FDIC insurance premiums, partially offset by a **$4.1 million** decrease in compensation and benefits[248](index=248&type=chunk) [Financial Condition](index=80&type=section&id=Financial%20Condition) Total assets and deposits decreased at June 30, 2023, driven by lower loans and non-maturity deposit outflows, while nonperforming assets declined and tangible common equity improved - Loans held for investment decreased by **$1.07 billion** (**7.3%**) since year-end 2022, reflecting a disciplined approach to credit risk, pricing, and lower loan demand[264](index=264&type=chunk) - Nonperforming assets fell to **$17.4 million** (**0.08% of total assets**) at Q2 2023, down from **$30.9 million** (**0.14% of total assets**) at year-end 2022[277](index=277&type=chunk) - Deposits decreased by **$812.5 million** since year-end 2022, with non-maturity deposits falling by **$1.39 billion** while time deposits grew; uninsured and uncollateralized deposits represented **32%** of total deposits[305](index=305&type=chunk)[310](index=310&type=chunk) - Total borrowings decreased by **$199.7 million** to **$1.13 billion**, due to the maturity of **$200.0 million** in FHLB term advances[311](index=311&type=chunk) [Capital Resources and Liquidity](index=97&type=section&id=Capital%20Resources%20and%20Liquidity) The company maintains strong liquidity and capital, with substantial available liquidity covering uninsured deposits, and all regulatory capital ratios significantly exceeding 'well capitalized' minimums - As of June 30, 2023, the company had unused borrowing capacity of **$8.53 billion**, including **$4.75 billion** from the FHLB and access to the FRB's discount window and Bank Term Funding Program[312](index=312&type=chunk)[315](index=315&type=chunk) - The company declared a quarterly cash dividend of **$0.33 per share** on July 25, 2023, with no shares repurchased under the stock repurchase program during the first half of 2023[322](index=322&type=chunk)[323](index=323&type=chunk) Regulatory Capital Ratios (Consolidated) | Ratio | June 30, 2023 | Minimum Required (with buffer) | | :--- | :--- | :--- | | Common equity tier 1 capital ratio | 14.34% | 7.00% | | Tier 1 capital ratio | 14.34% | 8.50% | | Total capital ratio | 17.24% | 10.50% | | Tier 1 leverage ratio | 10.90% | 4.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=102&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with models indicating an asset-sensitive position where Net Interest Income and Economic Value of Equity are projected to increase in rising rate scenarios Net Interest Income (NII) Sensitivity Analysis (at June 30, 2023) | Change in Rates (bps) | $ Change (12-mo) | % Change (12-mo) | | :--- | :--- | :--- | | +200 | $23,275 | 3.6% | | +100 | $12,887 | 2.0% | | Static | $0 | 0.0% | | -100 | $(24,200) | -3.8% | Economic Value of Equity (EVE) Sensitivity Analysis (at June 30, 2023) | Change in Rates (bps) | $ Change | % Change | | :--- | :--- | :--- | | +200 | $58,396 | 1.7% | | +100 | $57,790 | 1.7% | | Static | $0 | 0.0% | | -100 | $(117,568) | -3.5% | [Controls and Procedures](index=104&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[340](index=340&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[341](index=341&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=105&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, none expected to materially impact its financial condition or results of operations - Management believes that no legal proceedings occurring in the ordinary course of business will have a material adverse impact on the Company's results of operations or financial condition[344](index=344&type=chunk) [Risk Factors](index=105&type=section&id=Item%201A%20-%20Risk%20Factors) No material changes to the company's risk factors have occurred since the 2022 Form 10-K and Q1 2023 Form 10-Q disclosures - No material changes to the risk factors previously described in the 2022 Form 10-K and Q1 2023 Form 10-Q have occurred[345](index=345&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=105&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase common stock during Q2 2023, with 4,245,056 shares remaining available under the authorized repurchase program as of June 30, 2023 - During the second quarter of 2023, the Company did not repurchase any shares of its common stock[346](index=346&type=chunk) - The maximum number of shares that may yet be purchased under the publicly announced plan is **4,245,056** as of June 30, 2023[348](index=348&type=chunk) [Defaults Upon Senior Securities](index=105&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) None reported [Mine Safety Disclosures](index=105&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=105&type=section&id=Item%205%20-%20Other%20Information) No officer or director adopted or terminated Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during Q2 2023 - No officer or director adopted or terminated a Rule 10b5-1 trading plan during the quarter ended June 30, 2023[351](index=351&type=chunk) [Exhibits](index=106&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL data files