Pacific Premier Bankcorp (PPBI)

[Enterprising Investor]

Pacific Premier Bancorp, Inc. Announces Fourth Quarter and Year End 2013 Results (1/24/14)

Fourth Quarter 2013 Summary

•Net income of $0.24 per diluted share

•Net interest margin expands to 4.32%

•Total loans increased 9%

•Strong organic growth driven by unique, high-performing sales culture

•Nonperforming assets to total assets at 0.20%

•Tangible book value per share increased $0.25 to $9.08

IRVINE, Calif.--(BUSINESS WIRE)--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the fourth quarter of 2013 of $4.2 million or $0.24 per share on a diluted basis, compared with $3.1 million, or $0.18 per share on a diluted basis for the third quarter of 2013, and $3.8 million, or $0.32 per share on a diluted basis, for the fourth quarter of 2012.

For 2013, including one-time merger-related expenses of $5.0 million associated with the acquisition of San Diego Trust Bank (“San Diego Trust”) and $1.7 million associated with the acquisition of First Associations Bank (“First Associations”), the Company recorded net income of $9.0 million or $0.54 per share on a diluted basis. For 2012, including a non-recurring bargain purchase gain of $5.3 million and non-recurring merger-related expenses of $500,000 associated with the Palm Desert National Bank (“Palm Desert National”) acquisition from the Federal Deposit Insurance Corporation (“FDIC”) as receiver, the Company recorded net income of $15.8 million or $1.44 per diluted share.

For 2013, the Company reported adjusted net income of $13.3 million or $0.80 per share on a diluted basis, before non-recurring merger-related expenses, compared with an adjusted $12.8 million or $1.17 per share on a diluted basis, for 2012, before non-recurring bargain purchase gain and merger-related expenses. Although the Company’s adjusted net income increased for 2013 as compared to its adjusted net income for 2012, the Company’s adjusted net income per share decreased during the period as a result of the increase in the issued and outstanding shares of Company common stock from 13,661,648 shares at December 31, 2012 to 16,656,279 shares at December 31, 2013, which increase was primarily due to the issuance of shares in connection with the acquisitions of San Diego Trust and First Associations.

For the three months ended December 31, 2013, the Company’s return on average assets was 1.05% and return on average equity was 9.69%, compared with a return on average assets of 0.78% and a return on average equity of 7.29% for the three months ended September 30, 2013 and a return on average assets of 1.42% and a return on average equity of 14.07% for the three months ended December 31, 2012.

For 2013, our adjusted return on average assets was 0.92% and adjusted return on average equity was 8.27%, before non-recurring merger-related expenses, compared with an adjusted return on average assets of 1.24% and an adjusted return on average equity of 13.27% for 2012, before a non-recurring bargain purchase gain and merger-related expenses.

Steven R. Gardner, President and Chief Executive Officer of the Company, commented on the results, “We delivered a solid quarter of financial performance and continued to make progress on leveraging our capital, deploying excess liquidity and improving our mix of earning assets. As a result, we were able to improve our earnings compared to the prior quarter.

“We are pleased with the strong, well-diversified loan growth we are producing, which can be attributed to the high performing sales culture we continue to refine and develop throughout the Bank’s various business lines. We generated total loan growth of 35% on an annualized basis during the quarter, driven by increases in construction, C&I, SBA, HOA, warehouse and CRE lending. During the quarter, we originated a total of $188.5 million in new loan commitments with a weighted average rate of 4.92%, compared to the prior quarter of $82.9 million with a weighted average rate of 4.67%. Given our strong loan growth we decided to raise pricing on all investor owned CRE loans which helped to increase the yield on newly originated loans and will benefit the net interest margin in future periods.

“In addition to our strong organic growth, we were able to identify another attractive acquisition in Infinity Franchise Holdings, a national lender to franchisees in the quick service restaurant industry, which we expect to close on or about January 30, 2014. Infinity Franchise Holdings provides us with another vehicle for growing our commercial lending platform with assets that generate attractive risk-adjusted yields, while also further diversifying our loan portfolio from both an industry and a geographic perspective. We anticipate adding approximately $80 million of loans in connection with the acquisition of Infinity Franchise Holdings.

“Looking ahead to 2014, we feel confident that we can continue to gain market share in Southern California, while also growing nationally with our HOA and SBA lending platforms and, following our acquisition of Infinity Franchise Holdings, our franchise lending business,” said Mr. Gardner.

Net Interest Income and Net Interest Margin

Net interest income totaled $16.7 million in the fourth quarter of 2013, up $1.7 million or 11.0% from the third quarter of 2013. The increase in net interest income reflected an increase in net interest margin of 39 basis points to 4.32% and an increase in average interest-earning assets of $14.1 million. The increase in the net interest margin was primarily due to leveraging our liquidity through funding higher yielding loans in the fourth quarter of 2013 and a $715,000 discount recognized from a loan payoff during the fourth quarter of 2013 that equated to 18 basis points of net interest margin benefit. The increase in average interest-earning assets during the fourth quarter of 2013 was primarily related to an increase in our average loan portfolio of $141.3 million, partially offset by a decrease in average cash and cash equivalents of $63.9 million and investment securities of $63.4 million.

Net interest income for the fourth quarter of 2013 increased $4.0 million or 32.0% compared to the fourth quarter of 2012. The increase was primarily related to an increase in interest-earning assets of $495.8 million, primarily related to the acquisition of San Diego Trust and First Associations banks in the first and second quarters, respectively, of 2013 and organic loan growth. The increase was partially offset by a lower net interest margin which decreased 56 basis points from the fourth quarter of 2012 to the fourth quarter of 2013. The decrease in the net interest margin was related to the rate on interest-earning assets decreasing more rapidly than the cost of interest-bearing liabilities.

For 2013, net interest income totaled $58.2 million, up $12.4 million or 27.0% over net interest income in 2012. The increase reflected an increase in interest-earning assets of $400.0 million, partially offset by a decrease in the net interest margin of 44 basis points to 4.18%. The increase in interest-earning assets was primarily related to the acquisitions of San Diego Trust and First Associations and our organic loan growth. The decrease in net interest margin is mainly attributable to a decrease in yield on average interest-earning assets of 78 basis points, primarily from a higher mix of lower yielding investment securities and cash, which were acquired in our acquisitions of San Diego Trust and First Associations banks, and a decrease in our loan portfolio yield. The weighted average loan portfolio rate at the end of 2013 was 4.95%, 49 basis points lower than the weighted average loan portfolio rate at the end of 2012 and primarily reflected lower rates on loan originations during the period. Partially offsetting the lower yield on average interest-earning assets was a decrease in deposit costs of 34 basis points primarily resulting from an improved mix of lower cost deposits acquired from San Diego Trust and First Associations and lower pricing on certificates of deposit.

Provision for Loan Losses

We recorded a $596,000 provision for loan losses during the fourth quarter of 2013, up from $646,000 for the third quarter of 2013 and up from $606,000 for the fourth quarter of 2012. The increase in the provision for loan losses in the fourth quarter of 2013 was mainly attributable to the growth in our loan portfolio. Net loan charge-offs amounted to $390,000 in the fourth quarter of 2013, down $256,000 from the third quarter of 2013, but up $120,000 from the fourth quarter of 2012. All of the charge-offs in the fourth quarter of 2013 were attributable to loans that we acquired from our FDIC-assisted transactions.

For 2013, we recorded a $1.9 million provision for loan losses, up from $751,000 recorded in 2012. The $1.1 million increase in the provision for loan losses was primarily attributable to the growth in our loan portfolio during the period, including the loans acquired from San Diego Trust and First Associations. Net loan charge-offs for 2013 amounted to $1.7 million, up from $1.3 million in 2012. Charge-offs in 2013 were primarily attributable to loans that we acquired from our FDIC-assisted transactions.

Noninterest income

Noninterest income for the fourth quarter of 2013 was $2.6 million, up $296,000 or 12.8% from the third quarter of 2013. The increase from the prior quarter was principally related to higher gains on the sale of loans of $319,000 and loan servicing fees of $74,000, partially offset by lower gains on the sales of investment securities of $134,000. During the fourth quarter of 2013, we sold $10.9 million in Small Business Administration (“SBA”) loans, resulting in a 10% overall premium, and $7.1 million in commercial real estate loans.

Compared to the fourth quarter of 2012, noninterest income for the fourth quarter of 2013 decreased by $577,000 or 18.1%. The decrease was primarily related to a decline in realized gains from the sales of investment securities of $751,000 and a decline in other income of $519,000. The lower other income was primarily related to a net gain of $597,000 from the sale of our corporate offices and associated fixed assets that occurred in the fourth quarter of 2012.

For 2013, noninterest income totaled $9.1 million, down from $12.6 million recorded in 2012. The decrease was primarily related to the one-time bargain purchase gain of $5.3 million recorded from the acquisition of Palm Desert National in 2012, the net gain of $597,000 from the above mentioned sale of our corporate offices and lower net gains from the sale of investment securities of $409,000, partially offset by an increase in gain on sale of loans of $2.6 million.

Noninterest Expense

Noninterest expense totaled $12.0 million for the fourth quarter of 2013, up $238,000 or 2.0%, compared with the third quarter of 2013. The increase was primarily related to an increase in compensation and benefits costs of $338,000; non-recurring merger-related expenses of $203,000 associated with the pending acquisition of Infinity Franchise Holdings, LLC (“Infinity Holdings”); and an increase in deposit expenses of $149,000. Partially offsetting these increases were decreases in legal, audit and professional fees of $339,000 and other expense of $145,000.

Compared to the fourth quarter of 2012, noninterest expense for the fourth quarter of 2013 increased by $3.0 million or 33.8%. The increase in expense was primarily related to the acquisitions of San Diego Trust and First Associations in the first half of 2013 together with our organic growth.

For 2013, noninterest income totaled $9.1 million, down from $12.6 million recorded in 2012. The decrease was primarily related to the one-time bargain purchase gain of $5.3 million recorded from the acquisition of Palm Desert National in 2012, the net gain of $597,000 from the above mentioned sale of our corporate offices and lower net gains from the sale of investment securities of $409,000, partially offset by an increase in gain on sale of loans of $2.6 million.

Our Company’s efficiency ratio was 60.45%, 67.72%, and 55.09% for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012, respectively. Our efficiency ratio was 64.68% for the year ended December 31, 2013, compared to 57.41% for 2012.

Income Tax

For the fourth quarter of 2013, our effective tax rate was 37.0%, compared with a 37.6% for the third quarter of 2013 and 38.8% for the fourth quarter of 2012. For 2013, our effective tax rate was 38.3%, compared with 38.8% in 2012.

Assets and Liabilities

At December 31, 2013, assets totaled $1.7 billion, up $145.2 million or 9.3% from September 30, 2013 and $540.4 million or 46.0% from December 31, 2012. The increase in assets during the fourth quarter of 2013 was primarily related to increases in loans held for investment of $101.1 million, cash and cash equivalents of $65.4 million and Federal Home Loan Bank (“FHLB”) stock of $4.6 million, partially offset by a decrease in investment securities available for sale of $26.8 million. The increase in assets since year-end 2012 was primarily related to the acquisition of First Associations, which added assets at the acquisition date of $394.1 million, partially offset by $78.5 million of First Associations deposits held by the Bank prior to the acquisition; the acquisition of San Diego Trust, which added assets at the acquisition date of $201.1 million; and an increase in borrowings of $88.6 million primarily to increase cash in anticipation of consummating the acquisition of Infinity Holdings and to fund organic loan growth. Partially offsetting these increases in assets was the liquidity used to primarily reduce higher-cost deposits by $90.2 million.

Investment securities available for sale totaled $256.1 million at December 31, 2013, down $26.8 million or 9.5% from September 30, 2013, but up $172.0 million or 204.6% from December 31, 2012. The decrease in securities during the fourth quarter of 2013 was primarily due to the sale of investment securities totaling $21.6 million, partially offset by the purchase of $2.5 million of investment securities. The increase in securities since year-end 2012 was primarily due to the First Associations acquisition in March 2013, which added $222.4 million of investment securities at the acquisition date, the San Diego Trust acquisition in June 2013, which added $124.8 million at the acquisition date, and purchases of $101.3 million of investment securities, partially offset by the sale of $232.5 million of securities and principal pay downs of $33.7 million. The purchase of investment securities primarily related to investing excess liquidity from our bank acquisitions, while the sales were made to help fund loan production and improve our interest-earning asset mix by redeploying investment securities dollars into loans.

Net loans held for investment totaled $1.2 billion at December 31, 2013, an increase of $100.9 million or 8.9% from September 30, 2013, and an increase of $257.7 million or 26.5% from December 31, 2012. The increase in loan balances from the end of the third quarter of 2013 was primarily related to increases in warehouse facilities of $38.4 million, commercial non-owner occupied loans of $28.6 million, commercial and industrial loans of $13.3 million, multi-family loans of $14.8 million and construction of $10.2 million, partially offset by a decrease in one-to-four family loans of $7.4 million. During the fourth quarter of 2013, we added three new commitments on our warehouse repurchase facility credits, although the overall commitment level decreased by $8.5 million to a total of $295.0 million. The end of period utilization rates for the warehouse repurchase facility credits increased from 16.2% at September 30, 2013 to 29.7% at December 31, 2013. The increase in loans from December 31, 2012 included $26.4 million in loans from the First Associations acquisition and $42.4 million in loans from the San Diego Trust acquisition, and was primarily associated with increases in real estate loan of $217.0 million, commercial owner occupied loans of $70.2 million and commercial and industrial loans of $71.7 million compared to year-end 2012. Partially offsetting these increases was a decrease in warehouse facility loans of $108.2 million.

Loan activity during the fourth quarter of 2013 included loan originations of $188.5 million and loan purchases of $13.2 million, partially offset by loan repayments of $69.4 million, an increase in undisbursed loan funds of $13.9 million and loan sales of $18.0 million. During the fourth quarter of 2013, our loan originations were well diversified across loan type and included $59.2 million in commercial non-owner occupied loans, $30.6 million in construction loans, $26.2 million in commercial and industrial loans, $24.9 million in multifamily loans, $15.0 million in SBA loans, $15.0 million in warehouse facility loans, $9.5 million in homeowners’ association loans and $6.8 million in commercial owner occupied loans. Loan originations for the fourth quarter of 2013 had a weighted average rate of 4.92%, compared to a weighted average rate of 4.67% in the previous quarter. At December 31, 2013, our loan to deposit ratio was 95.2%, up from 88.9% at September 30, 2013, but down from 109.0% at December 31, 2012.

December 31, 2013 deposits totaled $1.3 billion, up $22.2 million or 1.73% from September 30, 2013 and up $401.5 million or 44.4% from December 31, 2012. During the fourth quarter of 2013, we had an increase in retail certificates of deposit of $28.6 million, checking of $14.1 million and noninterest bearing checking of $3.1 million, partially offset by decreases in money market accounts of $19.3 million and savings of $4.5 million. The increase in deposits since year-end 2012 was primarily related to the San Diego Trust and First Associations acquisitions. In the first quarter of 2013, the First Associations acquisition added deposits of $356.8 million at a cost of 21 basis points at the acquisition date. In the second quarter of 2013, the San Diego Trust acquisition added deposits of $183.9 million at a cost of 23 basis points at the acquisition date. Excluding the acquired deposits and $49.0 million of First Associations’ deposits held at December 31, 2012, we had an adjusted net decrease in deposits of $90.2 million in 2013, which primarily resulted from lowering our pricing on certificates of deposits, resulting in a desired runoff upon maturity.

These deposit changes have decreased the mix of our transaction accounts to 75.9% at December 31, 2013, down from 77.7% at September 30, 2013, but up from 60.1% at year-end 2012. The total end of period weighted average cost of deposits at December 31, 2013 was 0.33%, up from 0.30% at September 30, 2013, but down from 0.51% at December 31, 2012.

At December 31, 2013, total borrowings amounted to $214.4 million, up $117.6 million or 121.5% from September 30, 2013 and up $88.6 million or 70.4% from December 31, 2012. The increase in borrowings at December 31, 2013 from both periods was primarily related to an increase in FHLB overnight advances taken out to fund our organic loan growth. Additionally, relative to year-end 2012, repurchase agreement debt increased $18.6 million, which was related to our homeowners’ association business. At December 31, 2013, total borrowings represented 12.5% of total assets and had an end of period weighted average cost of 0.63%, compared with 6.2% of total assets at a weighted average cost of 1.32% at September 30, 2013, and 10.7% of total assets at a weighted average cost of 1.19% at December 31, 2012.

Asset Quality

At December 31, 2013, nonperforming assets totaled $3.4 million or 0.20% of total assets, up from $2.3 million or 0.15% of total assets at September 30, 2013, but down from $4.5 million or 0.38% of total assets at December 31, 2012. During the fourth quarter of 2013, nonperforming loans increased $1.1 million to total $2.3 million and other real estate owned remained unchanged at $1.2 million.

At December 31, 2013, our allowance for loan losses was $8.2 million, up $200,000 from September 30, 2013 and December 31, 2012. At December 31, 2013, our allowance for loan losses as a percent of nonaccrual loans was 364.3%, down from 693.3% at September 30, 2013, but up from 362.4% at December 31, 2012. At December 31, 2013, the ratio of allowance for loan losses to total gross loans was 0.66%, down from 0.70% at September 30, 2013 and 0.81% at December 31, 2012. Including the loan fair market value discounts recorded in connection with our acquisitions, the allowance for loan losses to total gross loans ratio was 0.93% at December 31, 2013, compared with 1.06% at September 30, 2013 and 1.34% at December 31, 2012.

Capital Ratios

At December 31, 2013, our ratio of tangible common equity to total assets was 8.94%, with a tangible book value of $9.08 per share and a book value per share of $10.52.

At December 31, 2013, the Bank exceeded all regulatory capital requirements with a ratio for tier 1 leverage capital of 10.03%, tier 1 risked-based capital of 12.34% and total risk-based capital of 12.97%. These capital ratios exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage capital, 6.00% for tier 1 risked-based capital and 10.00%, for total risk-based capital. At December 31, 2013, the Company had a ratio for tier 1 leverage capital of 10.29%, tier 1 risked-based capital of 12.54% and total risk-based capital of 13.17%.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on January 22, 2014 to discuss its financial results. Analysts and investors may participate in the question-and-answer session. The conference call will be webcast live on the Investor Relations section of the Company’s website www.ppbi.com and an archived version of the webcast will be available in the same location shortly after the live call has ended. The conference call can be accessed by telephone at [phone], conference ID 4661960 or “Pacific Premier Bancorp.” Additionally a telephone replay will be made available through January 29, 2014 at [phone], conference ID 4661960.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp, Inc. is the holding company for Pacific Premier Bank, one of the largest community banks in Southern California. Pacific Premier Bank is a business bank primarily focused on serving small- and medium-sized businesses in the counties of Los Angeles, Orange, Riverside, San Bernardino and San Diego. The Bank offers a diverse range of lending products including commercial, commercial real estate, construction, residential warehouse and SBA loans, as well as specialty banking products for homeowners associations nationwide. Pacific Premier Bank serves its customers through its 13 full-service depository branches in Southern California located in the cities of Encinitas, Huntington Beach, Irvine, Los Alamitos, Newport Beach, Palm Desert, Palm Springs, San Bernardino, San Diego and Seal Beach and one office in Dallas, Texas.

http://www.businesswire.com/news/pecom/20140122005430/en