Pacific Premier Bancorp(PPBI) - 2022 Q4 - Annual Report

Financial Performance - Tangible book value per share has more than doubled since 2013, reflecting successful execution of the overall growth strategy[35] - The quarterly cash dividend was increased to $0.33 per share in January 2023, up from an annual cash dividend of $1.32 per share in 2022[42] - The annualized common equity cash dividend was $1.32 per share in 2022, an increase of 2% from $1.29 per share in 2021[113] - The Corporation anticipates continuing to pay quarterly cash dividends, subject to the discretion of the Board of Directors and dependent on operating results and financial condition[113] - The amount available for distribution from the Bank to the Corporation was approximately $459.5 million at December 31, 2022[115] Regulatory Compliance - The company is subject to extensive regulation and supervision by federal and state regulators, impacting operations and capital requirements[79][80] - The Dodd-Frank Act has increased the regulatory burden and compliance costs for the company[84] - The Company implemented the CECL model starting January 1, 2020, and opted to phase in the full effect of CECL on regulatory capital over a five-year transition period[104] - The Basel III framework requires a minimum CET1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total capital ratio of 8.0%, plus the capital conservation buffer[96] - The federal banking regulators have the authority to set individual minimum capital requirements for specific institutions above the standard guidelines[99] Capital and Liquidity - The Company had outstanding subordinated debentures totaling $331.2 million as of December 31, 2022, with $283.2 million qualifying as Tier 2 capital[97] - As of December 31, 2022, the Bank and Corporation exceeded all regulatory capital requirements, maintaining a Common Equity Tier 1 (CET1) capital ratio above the minimum requirement of 7.0%[107] - The minimum capital conservation buffer has been phased in over four years, reaching 2.50% by 2019, which is part of the overall capital requirements under Basel III[94] - The Company and the Bank have elected to exclude Accumulated Other Comprehensive Income (AOCI) from CET1 capital as permitted by Basel III[95] - The company is subject to capital adequacy standards, and failure to meet these could restrict activities and capital actions such as paying dividends or repurchasing securities[164] Loan and Credit Quality - The largest aggregate outstanding balance of loans to one borrower was $224.5 million as of December 31, 2022, primarily comprised of an asset-based line of credit[50] - Total nonperforming assets amounted to $30.9 million, or 0.14% of total assets, with net loan charge-offs increasing to $10.6 million in 2022 from $3.2 million in 2021[165] - The company reported a provision expense for loan losses of $8.5 million in 2022, a significant decrease from a provision recapture of $67.1 million in 2021[165] - Approximately 59% of the aggregate outstanding principal of the Company's loans as of December 31, 2022, is secured by real estate located within California[143] - The processes used to estimate the allowance for credit losses require complex judgments, which may be adversely affected by economic conditions[140] Economic Environment and Risks - The economic environment poses significant challenges, with potential adverse effects on the Company's customers' ability to repay loans due to financial stress[139] - Elevated inflation could lead to increased costs for business customers, impacting their profitability and potentially increasing default rates on loans[141] - The ongoing COVID-19 pandemic continues to create uncertainty, affecting economic conditions and the Company's operations[145] - The Company is closely monitoring the impact of military conflicts and geopolitical events on financial markets[142] - Liquidity risk remains a concern, with potential adverse effects on financial condition due to market disruptions or regulatory actions impacting access to funding sources[160] Employee and Diversity - As of December 31, 2022, the company had 1,430 full-time equivalent employees[66] - 49% of employees in vice president and above roles were female, and 42% were from a minority group[68] - The aggregate percentage of women in the entire workforce was 60%, and the aggregate percentage of minorities was 53%[68] - The company offers a comprehensive total compensation package, including medical, dental, and vision benefits, as well as a 401(k) plan with a competitive company match[71] Cybersecurity and Operational Risks - The Bank maintains a comprehensive cybersecurity strategy, including regular employee training and incident response plans to mitigate risks[53] - Cybersecurity remains a priority, with ongoing enhancements to protect sensitive data against evolving threats, although no successful cyber-attacks have been reported to date[176] - The company incurs costs to replace compromised cards and address fraudulent transaction activities when clients fall victim to cyber-attacks[178] - The company is exposed to risks from operational errors and reliance on automated systems, which could lead to financial loss or liability[202] Competition and Market Position - The company is focused on the commercial banking business in the Western Region of the U.S., competing with larger regional and national banks[72][73] - The company differentiates itself through personalized relationship banking services and efficient decision-making in lending[76] - The company faces strong competition from various financial institutions, including national banks, regional banks, community banks, and fintech companies, which may adversely affect its ability to grow loans and deposits[200] - Competition for qualified personnel is intense, and the inability to attract and retain talent could materially affect the company's financial condition and results of operations[199] Acquisitions and Goodwill - The company has completed eleven acquisitions since 2010, including Opus Bank, which had approximately $8 billion in total assets at the time of acquisition[203] - The company issued approximately 34.4 million shares of common stock as transaction consideration in the acquisition of Opus Bank, which may lead to dilution of stockholder value[206] - As of December 31, 2022, the company had approximately $956.9 million in goodwill and intangible assets, with $901.3 million attributed to acquisitions since 2011[208] Investment and Securities - As of December 31, 2022, available-for-sale securities totaled $2.60 billion, representing 12% of total assets, with an effective duration of 3.1 years[39] - The effective duration of the securities portfolio is 3.1 years, with approximately 95% of investments rated "A1 - A3" or higher[39] - As of December 31, 2022, the fair value of available-for-sale securities was $2.60 billion, with an aggregate net unrealized loss of $303.7 million, contributing to a decline in stockholders' equity by $87.9 million compared to the previous year[154] - The total stockholders' equity decreased by $87.9 million from December 31, 2021, primarily due to declines in the estimated fair value of available-for-sale securities during 2022[154]