Pacific Premier Bancorp, Inc. Announces Third Quarter 2018 Results (Unaudited)

Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the third quarter of 2018 of $28.4 million, or $0.46 per diluted share, compared with net income of $27.3 million, or $0.58 per diluted share, for the second quarter of 2018 and net income of $20.2 million, or $0.50 per diluted share, for the third quarter of 2017. Financial results for the third quarter of 2018 include merger-related expense of $14.0 million.

For the three months ended September 30, 2018, the Company’s return on average assets ("ROAA") was 1.00% and return on average tangible common equity ("ROATCE") was 12.89%, compared to 1.35% and 15.42%, respectively, for the three months ended June 30, 2018. For the three months ended September 30, 2017, the Company's ROAA was 1.26% and its ROATCE was 15.02%. Total assets as of September 30, 2018 were $11.5 billion compared with $8.2 billion at June 30, 2018 and $6.5 billion at September 30, 2017.

Steven R. Gardner, Chairman, President and Chief Executive Officer of the Company, commented, “During the third quarter, we successfully executed on our strategy of expanding our presence in the Los Angeles market and simultaneously passed the $10 billion asset threshold, as we welcomed the clients and employees of Grandpoint Capital on July 1. Grandpoint provides us with a talented team of bankers and a strong client base that we believe will provide meaningful opportunities for us to expand our small and middle market business relationships as we introduce a broader set of products and services. The integration has gone smoothly, with completion of the system conversion occurring this past weekend, and we are on track to fully realize the synergies projected for this transaction by year-end.

"I am proud of all that our team has accomplished given the high level of activity this year. During the third quarter, we generated an operating ROAA of 1.37% and an operating ROATCE of 17.06%, excluding the merger-related expense of $14.0 million. Our strong credit results continued in the third quarter, with low levels of net charge-offs, our nonperforming assets to total assets were 0.07% and total loan delinquency constituted 0.09% of total loans held for investment. Our disciplined credit risk management is a fundamental underpinning of the culture we have created at the Bank. We continuously seek to improve our capabilities and sophistication around all of our risk management practices just as we do with every aspect of our business operations.

“We are excited about entering the next phase in the growth of the Pacific Premier franchise. As a nearly $12 billion financial institution, we believe that further profitable earnings growth will be driven by solid organic balance sheet expansion, improved operating leverage and efficiencies from our larger scale as well as through opportunistic acquisitions. We expect to continue to be a high performing and disciplined institution that creates significant value for our shareholders,” said Mr. Gardner.

FINANCIAL HIGHLIGHTS
			Three Months Ended
			September 30,				June 30,				September 30,
			2018				2018				2017
Financial Highlights			(dollars in thousands, except per share data)
Net income			$	28,392			$	27,303			$	20,232
Diluted earnings per share			$	0.46			$	0.58			$	0.50
Return on average assets			1.00		%		1.35		%		1.26		%
Return on average tangible common equity (1)			12.89				15.42				15.02
Net interest margin			4.38				4.41				4.34
Cost of deposits			0.54				0.50				0.28
Efficiency ratio (2)			53.2				53.0				52.1
Total assets			$	11,503,881			$	8,158,131			$	6,532,334
Total deposits			$	8,502,145			$	6,308,350			$	5,018,153
Core deposits to total deposits (3)			91		%		89		%		91		%
Tangible book value per share (1)			$	16.06			$	16.21			$	14.35
Total capital ratio			12.05		%		12.75		%		12.51		%
(1) A reconciliation of the non-U.S. GAAP measures of average tangible common equity and tangible book value per share to the U.S. GAAP measures of common stockholders' equity and book value are set forth at the end of this press release.
(2) Represents the ratio of noninterest expense less other real estate owned operations, core deposit intangible amortization and merger-related expense to the sum of net interest income before provision for credit losses and total noninterest income, less gains/(loss) on sale of securities, other-than-temporary impairment recovery/(loss) on investment securities and gain/(loss) from other real estate owned.
(3) Core deposits are all transaction accounts and non-brokered certificates of deposit less than $250,000.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $113 million in the third quarter of 2018, an increase of $31.5 million, or 39%, from the second quarter of 2018. The increase in net interest income reflected higher average interest-earning assets of $2.8 billion, primarily related to the acquisition of Grandpoint Capital, Inc. ("Grandpoint"), which at acquisition added $2.4 billion of loans, and organic loan growth from new loan originations and commitments of $605 million.

Net interest margin for the third quarter was 4.38%, compared with 4.41% in the prior quarter. The decrease was primarily the result of the impact of lower loan yields with the acquisition of Grandpoint, which lowered the net interest margin 9 basis points, and lower loan-related fees. These decreases were partially offset by higher accretion income of $4.1 million in the third quarter of 2018 compared to $1.9 million in the second quarter of 2018, and the favorable impact of loan repricing as a result of the Federal Reserve Bank's interest rate increase in June. Our core net interest margin, which we calculate as net interest margin excluding the impact of accretion, certificates of deposit mark-to-market amortization and one-time adjustments, decreased to 4.19%, compared to 4.29% in the prior quarter. The Company expects our fourth quarter core net interest margin to be in the range of 4.15% to 4.25%.

Net interest income for the third quarter of 2018 increased $48.4 million, or 75%, compared to the third quarter of 2017. The increase was primarily related to an increase in average interest-earning assets of $4.3 billion, which resulted primarily from our acquisitions of Grandpoint in the third quarter of 2018 and Plaza Bancorp ("Plaza") in the fourth quarter of 2017, as well as organic loan growth since the end of the third quarter of 2017.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
			Three Months Ended
			September 30, 2018											June 30, 2018											September 30, 2017
			Average Balance				Interest Income/ Expense				Average Yield/ Cost			Average Balance				Interest Income/ Expense				Average Yield/ Cost			Average Balance				Interest Income/ Expense				Average Yield/ Cost
Assets			(dollars in thousands)
Cash and cash equivalents			$	339,064			$	694			0.81	%		$	146,279			$	277			0.76	%		$	167,745			$	265			0.63	%
Investment securities			1,198,362				8,911				2.97			980,334				6,797				2.77			765,537				4,981				2.60
Loans receivable, net (1) (2)			8,664,796				119,271				5.46			6,253,987				85,625				5.49			4,937,733				64,915				5.22
Total interest-earning assets			$	10,202,222			$	128,876			5.01			$	7,380,600			$	92,699			5.04			$	5,871,015			$	70,161			4.74
Liabilities
Interest-bearing deposits			$	5,316,195			$	11,942			0.89			$	3,888,553			$	7,756			0.80			$	3,147,320			$	3,557			0.45
Borrowings			583,400				4,221				2.87			560,706				3,772				2.70			399,206				2,313				2.30
Total interest-bearing liabilities			$	5,899,595			$	16,163			1.09			$	4,449,259			$	11,528			1.04			$	3,546,526			$	5,870			0.66
Noninterest-bearing deposits			$	3,473,056										$	2,310,714										$	1,860,177
Net interest income							$	112,713										$	81,171										$	64,291
Net interest margin (3)											4.38	%										4.41	%										4.34	%
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and unaccreted/unamortized discounts/premiums.
(2) Includes net discount accretion of $4.1 million, $1.9 million and $2.9 million, respectively.
(3) Represents net interest income divided by average interest-earning assets.

Provision for Credit Losses

A provision for credit losses of $2.0 million was recorded for the third quarter of 2018, compared with a provision for credit losses of $1.8 million for the quarter ended June 30, 2018. The third quarter of 2018 provision for credit losses includes a $335,000 provision for unfunded commitments compared to $400,000 in the second quarter of 2018. Higher loan growth, partially offset by a lower loss rate, contributed to the small increase in the provision for credit losses for the third quarter of 2018. Net charge-offs were $87,000 in the third quarter of 2018 compared to $108,000 in the second quarter of 2018.

Noninterest Income

Noninterest income for the third quarter of 2018 was $7.5 million, a decrease of $607,000, or 7.4%, from the second quarter of 2018. The decrease from the second quarter of 2018 was related to a $1.8 million decrease in net gain from the sales of loans, as well as a net loss on Community Reinvestment Act related equity investments of $600,000, partially offset by higher bank-owned life insurance ("BOLI") earnings of $653,000 and an increase in the gain on sale of securities of $733,000. The increase in BOLI income was primarily the result of a death benefit received in the third quarter of 2018 of approximately $400,000.

During the third quarter of 2018, the Bank sold $29.9 million of Small Business Administration ("SBA") loans for a net gain of $2.0 million, compared with the sale of $31.9 million of SBA loans for a net gain of $2.9 million in the second quarter of 2018. Additionally, the Bank sold $20.4 million of commercial real estate loans during the second quarter of 2018 for a gain of $927,000 and did not sell any commercial real estate loans during the third quarter of 2018. The Company expects our fourth quarter noninterest income to be in the range of $6.5 million to $7.5 million based upon current SBA loan sale gain rates and origination levels.

Noninterest income for the third quarter of 2018 decreased $677,000, or 8.2%, compared to the third quarter of 2017. The decrease from the third quarter of 2017 was primarily related to a $1.4 million decrease in net gain from sales of loans.

			Three Months Ended
			September 30,				June 30,				September 30,
			2018				2018				2017
NONINTEREST INCOME			(dollars in thousands)
Loan servicing fees			$	400			$	292			$	276
Service charges on deposit accounts			874				1,057				946
Other service fee income			317				169				851
Debit card interchange fee income			1,061				1,090				248
Earnings on bank-owned life insurance			1,270				617				629
Net gain from sales of loans			2,029				3,843				3,439
Net gain from sales of investment securities			1,063				330				896
Other income			530				753				936
Total noninterest income			$	7,544			$	8,151			$	8,221

Noninterest Expense

Noninterest expense totaled $82.1 million for the third quarter of 2018, an increase of $32.0 million, or 64%, compared with the second quarter of 2018. The increase was driven primarily by merger-related expense of $14.0 million compared with $943,000 in the second quarter of 2018. Excluding merger-related expense, noninterest expense increased $19.0 million to $68.1 million, primarily attributable to increases in compensation and benefits of $8.6 million, core deposit intangible ("CDI") amortization expense of $2.7 million, premises and occupancy of $2.2 million, data processing of $1.3 million, loan expense of $545,000, FDIC insurance premiums of $479,000 and office, telecommunications and postage expense of $423,000, as a result of the addition of operations, personnel and branches retained from the acquisition of Grandpoint. The Company expects our fourth quarter 2018 noninterest expense to be in the range of $63.0 million to $65.0 million excluding any remaining merger-related costs and CDI amortization expense.

In comparison to the third quarter of 2017, noninterest expense grew by $42.5 million, or 107%. The increase was primarily related to the additional costs from operations, personnel and branches retained from the acquisitions of Grandpoint and Plaza, combined with our continued investment in personnel to support our organic growth in loans and deposits. The third quarter of 2017 included merger-related expense of $503,000.

			Three Months Ended
			September 30,				June 30,				September 30,
			2018				2018				2017
NONINTEREST EXPENSE			(dollars in thousands)
Compensation and benefits			$	37,901			$	29,274			$	21,707
Premises and occupancy			7,214				5,045				4,016
Data processing			4,095				2,747				2,082
Other real estate owned operations, net			—				2				3
FDIC insurance premiums			1,060				581				379
Legal, audit and professional expense			3,280				1,816				1,978
Marketing expense			1,569				1,352				1,248
Office, telecommunications and postage expense			1,538				1,115				835
Loan expense			1,139				594				1,017
Deposit expense			2,137				2,302				1,655
Merger-related expense			13,978				943				503
CDI amortization			4,693				1,996				1,761
Other expense			3,482				2,309				2,428
Total noninterest expense			$	82,086			$	50,076			$	39,612

Income Tax

For the third quarter of 2018, our effective tax rate was 21.5%, compared with 27.2% for the second quarter of 2018 and 34.4% for the third quarter of 2017. The decrease in the effective tax rate for the third quarter of 2018 was primarily the result of a $2.3 million one-time benefit this quarter associated with finalizing the 2017 federal and state tax returns. The Company expects our fourth quarter 2018 effective tax rate to be in the range of 27% to 28%.

The decrease in the effective tax rate for the third quarter of 2018, compared to the third quarter of 2017, was primarily the result of the enactment of the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, which among other items, reduced the federal corporate tax rate to 21%, effective January 2018, from the prior maximum rate of 35%.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $8.8 billion at September 30, 2018, an increase of $2.5 billion, or 40%, from June 30, 2018, and an increase of $3.8 billion, or 75%, from September 30, 2017. The increases were impacted by the acquisitions of Grandpoint and Plaza, as well as organic loan growth. The acquisition of Grandpoint added $2.4 billion of loans in the third quarter of 2018, and the acquisition of Plaza added $1.1 billion of loans in the fourth quarter of 2017, both before fair value adjustments.

During the third quarter of 2018, the Bank had generated $605 million of new loan commitments compared with $530 million in the second quarter of 2018, partially offset by higher loan prepayments of $318 million in the third quarter compared with $266 million in the prior quarter, as a result of a larger loan portfolio. In addition to organic loan growth, the Bank purchased $61.6 million of multi-family loans early in the third quarter of 2018, and sold $29.9 million in loans compared with $52.3 million in loans sold in the prior quarter.

Business loans increased $662 million, or 19%, and real estate loans and consumer loans increased $1.8 billion and $32.8 million, respectively. The total end-of-period weighted average interest rate on loans at September 30, 2018 was 5.08%, compared to 5.12% at June 30, 2018 and 4.81% at September 30, 2017. The year-over-year increase reflects the impact of higher rates on new originations as well as the favorable repricing of loans as a result of recent Federal Reserve Bank fed funds rate increases, while the decrease in the current quarter reflects the impact of the lower Grandpoint loan yields.

The $605 million of new organic loan commitments during the third quarter of 2018 included $133 million of commercial and industrial loans, $124 million of commercial real estate owner occupied loans, $98 million of commercial real estate non-owner occupied loans, $71 million of multi-family loans, $60 million of franchise loans, $50 million of construction loans, $38 million of SBA loans and $9 million of agribusiness loans. The weighted average rate on our new loan production was 5.21% during the third quarter of 2018, a decrease from 5.35% in the second quarter of 2018. The 14 basis point decrease in yield was a result of a higher mix of commercial real estate and multi-family loans in the third quarter of 2018 compared with the second quarter of 2018.

At September 30, 2018, our ratio of loans held for investment to total deposits was 103%, compared with 99.5% and 99.8% at June 30, 2018 and September 30, 2017, respectively.

			September 30,				June 30,				September 30,
			2018				2018				2017
			(dollars in thousands)
Business loans
Commercial and industrial			$	1,359,841			$	1,102,586			$	763,091
Franchise			735,366				708,957				626,508
Commercial owner occupied			1,675,528				1,310,722				805,137
SBA			193,487				176,696				107,211
Agribusiness			133,241				136,962				86,466
Total business loans			4,097,463				3,435,923				2,388,413
Real estate loans
Commercial non-owner occupied			1,931,165				1,219,747				1,098,995
Multi-family			1,554,692				805,494				797,370
One-to-four family			376,617				249,495				246,248
Construction			504,708				321,423				301,334
Farmland			138,479				136,548				140,581
Land			49,992				30,246				30,719
Total real estate loans			4,555,653				2,762,953				2,615,247
Consumer loans
Consumer loans			114,736				81,973				6,228
Gross loans held for investment			8,767,852				6,280,849				5,009,888
Deferred loan origination costs/(fees) and premiums/(discounts), net			(8,648		)		(3,263		)		(774		)
Loans held for investment			8,759,204				6,277,586				5,009,114
Allowance for loan losses			(33,306		)		(31,747		)		(27,143		)
Loans held for investment, net			$	8,725,898			$	6,245,839			$	4,981,971
Loans held for sale, at lower of cost or fair value			$	52,880			$	13,879			$	44,343

Asset Quality and Allowance for Loan Losses

At September 30, 2018, our allowance for loan losses was $33.3 million, an increase of $1.6 million from June 30, 2018. The provision for loan losses for the third quarter of 2018 was $1.6 million, while net charge-offs were $87,000.

The ratio of allowance for loan losses to loans held for investment at September 30, 2018 amounted to 0.38%, compared to 0.51% and 0.54% at June 30, 2018 and September 30, 2017, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value net discount on loans acquired through total bank acquisitions was $71.7 million, or 0.82% of total loans held for investment as of September 30, 2018, compared to $22.2 million, or 0.35% of total loans held for investment as of June 30, 2018.

Nonperforming assets totaled $7.8 million, or 0.07% of total assets, at September 30, 2018, an increase from $6.4 million, at June 30, 2018. During the third quarter of 2018, nonperforming loans increased $1.2 million to $7.3 million and other real estate owned increased $136,000 to $356,000, while other assets owned decreased $54,000 to $129,000. Loan delinquencies were $7.7 million, or 0.09% of loans held for investment, at September 30, 2018, compared to $7.4 million, or 0.12% of loans held for investment, at June 30, 2018.

			September 30,				June 30,				September 30,
			2018				2018				2017
Asset Quality			(dollars in thousands)
Nonperforming loans			$	7,268			$	6,039			$	515
Other real estate owned			356				220				372
Other assets owned			129				183				—
Nonperforming assets			$	7,753			$	6,442			$	887
Allowance for loan losses			$	33,306			$	31,747			$	27,143
Allowance for loan losses as a percent of total nonperforming loans			458		%		526		%		5,270		%
Nonperforming loans as a percent of loans held for investment			0.08				0.10				0.01
Nonperforming assets as a percent of total assets			0.07				0.08				0.01
Net loan charge-offs/(recoveries) for the quarter ended			$	87			$	108			$	(39	)
Net loan charge-offs for quarter to average total loans			—		%		—		%		—		%
Allowance for loan losses to loans held for investment (1)			0.38				0.51				0.54
Delinquent Loans
30 - 59 days			$	1,977			$	3,583			$	556
60 - 89 days			720				1,290				1,423
90+ days			5,048				2,574				1,629
Total delinquency			$	7,745			$	7,447			$	3,608
Delinquency as a percentage of loans held for investment			0.09		%		0.12		%		0.07		%
(1) 53% of loans held for investment include a fair value net discount of $71.7 million.

Investment Securities

Investments totaled $1.1 billion at September 30, 2018, an increase of $195 million from June 30, 2018, and $379 million from September 30, 2017. The increase in the third quarter of 2018 was primarily the result of $396 million of investment securities acquired from Grandpoint and $234 million in purchases, partially offset by $377 million in sales and $48.6 million in principal payments/amortization/redemptions.

Deposits

At September 30, 2018, deposits totaled $8.5 billion, an increase of $2.2 billion, or 35%, from June 30, 2018 and $3.5 billion, or 69%, from September 30, 2017. At September 30, 2018, non-maturity deposits totaled $7.2 billion, or 85% of total deposits, an increase of $2.1 billion, or 40%, from June 30, 2018 and an increase of $3.0 billion, or 71%, from September 30, 2017. During the third quarter of 2018, deposit increases included $1.1 billion in noninterest-bearing deposits, $815 million in money market/savings deposits, $222 million in retail certificates of deposit and $152 million in interest checking, all of which was partially offset by an $80.5 million decrease in brokered certificates of deposit. The increases were primarily due to the acquisition of Grandpoint in the third quarter of 2018, which contributed $2.5 billion of deposits at the time of acquisition, before purchasing accounting adjustments.

The weighted average cost of deposits for the three-month period ending September 30, 2018 was 0.54%, compared to 0.50% for the three-month period ending June 30, 2018, and 0.28% for the three-month period ending September 30, 2017. The increase in the weighted average cost of deposits in the third quarter of 2018 compared to the prior quarter was primarily driven by higher rates in wholesale/brokered certificates of deposits and, to a lesser extent, money market and retail certificates of deposits accounts.

			September 30,				June 30,				September 30,
			2018				2018				2017
Deposit Accounts			(dollars in thousands)
Noninterest-bearing checking			$	3,434,674			$	2,349,464			$	1,890,241
Interest-bearing:
Checking			495,483				342,986				304,295
Money market/savings			3,261,544				2,446,849				2,009,781
Retail certificates of deposit			1,045,334				823,425				573,656
Wholesale/brokered certificates of deposit			265,110				345,626				240,180
Total interest-bearing			5,067,471				3,958,886				3,127,912
Total deposits			$	8,502,145			$	6,308,350			$	5,018,153
Cost of deposits			0.54		%		0.50		%		0.28		%
Noninterest-bearing deposits as a percent of total deposits			40		%		37		%		38		%
Non-maturity deposits as a percent of total deposits			85		%		81		%		84		%

Borrowings

At September 30, 2018, total borrowings amounted to $972 million, an increase of $488 million, or 101%, from June 30, 2018 and an increase of $510 million, or 110%, from September 30, 2017. Total borrowings for the quarter included $860 million of advances from the Federal Home Loan Bank of San Francisco ("FHLB") and $110 million of subordinated debt. The average cost of FHLB borrowings rose 22 basis points to 2.09% for the third quarter of 2018. At September 30, 2018, total borrowings represented 8.5% of total assets, compared to 5.9% and 7.1%, as of June 30, 2018 and September 30, 2017, respectively.

Capital Ratios

At September 30, 2018, our ratio of tangible common equity to total assets was 9.47%, compared with 9.91% in the prior quarter, with a book value per share of $30.68 and a tangible book value per share of $16.06, compared with a tangible book value per share of $16.21 at June 30, 2018 and a tangible book value per share of $14.35 at September 30, 2017.

At September 30, 2018, the Company had a tier 1 leverage ratio of 10.15%, common equity tier 1 capital ratio of 10.55%, tier 1 capital ratio of 10.81% and total capital ratio of 12.05%.

At September 30, 2018, the Bank exceeded all regulatory capital requirements with a tier 1 leverage ratio of 10.83%, common equity tier 1 capital ratio of 11.53%, tier 1 capital ratio of 11.53% and total capital ratio of 11.92%. These capital ratios each exceeded the “well capitalized” standards defined by the federal banking regulators of 5.00% for tier 1 leverage ratio, 6.5% for common equity tier 1 capital ratio, 8.00% for tier 1 capital ratio and 10.00% for total capital ratio.

			September 30,				June 30,				September 30,
Capital Ratios			2018				2018				2017
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio			10.15		%		10.41		%		10.12		%
Common equity tier 1 capital ratio			10.55				10.80				10.59
Tier 1 capital ratio			10.81				11.09				10.94
Total capital ratio			12.05				12.75				12.51
Tangible common equity ratio (1)			9.47				9.91				9.41
Pacific Premier Bank
Tier 1 leverage ratio			10.83		%		11.31		%		10.91		%
Common equity tier 1 capital ratio			11.53				12.05				11.80
Tier 1 capital ratio			11.53				12.05				11.80
Total capital ratio			11.92				12.53				12.31
Share Data
Book value per share			$	30.68			$	27.63			$	24.44
Shares issued and outstanding			62,472,721				46,629,118				40,162,026
Tangible book value per share (1)			$	16.06			$	16.21			$	14.35
Closing stock price (2)			37.20				38.15				37.75
Market Capitalization (3)			2,323,985				1,778,901				1,516,116
(1) A reconciliation of the non-U.S. GAAP measures of tangible common equity and tangible book value per share to the U.S. GAAP measures of common stockholders' equity and book value per share is set forth below.
(2) As of the last trading day prior to period end.
(3) Dollars in thousands.

Conference Call and Webcast

The Company will host a conference call at 9:00 a.m. PT / 12:00 p.m. ET on October 23, 2018 to discuss its financial results. Analysts and investors may participate in the question-and-answer session. A live webcast will be available on the Webcasts page of the Company's investor relations website. 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] and asking to be joined to the Pacific Premier Bancorp conference call. Additionally, a telephone replay will be made available through October 30, 2018 at [phone], conference ID 10124528.

About Pacific Premier Bancorp, Inc.

Pacific Premier Bancorp is the holding company for Pacific Premier Bank, one of the largest banks headquartered in Southern California with approximately $11.5 billion in assets. Pacific Premier Bank is a business bank primarily focused on serving small and middle market businesses in the counties of Orange, Los Angeles, Riverside, San Bernardino, San Diego, San Luis Obispo and Santa Barbara, California, as well as markets in the states of Arizona, Nevada and Washington. Through its more than 40 depository branches, Pacific Premier Bank offers a diverse range of lending products including commercial, commercial real estate, construction, and SBA loans, as well as specialty banking products for homeowners associations and franchise lending nationwide.

FORWARD-LOOKING COMMENTS

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, shareholder value creation and the impact of the acquisition of Grandpoint and other acquisitions.

Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the expected cost savings, synergies and other financial benefits from the Grandpoint acquisition or any other acquisition the Company has made or may make might not be realized within the expected time frames or at all; the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the impact of changes in financial services policies, laws and regulations and of governmental efforts to restructure the U.S. financial regulatory system; technological changes; changes in the level of the Company’s nonperforming assets and charge offs; any oversupply of inventory and deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setters; possible other-than-temporary impairment of securities held by us; changes in consumer spending, borrowing and savings habits; the effects of the Company’s lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; ability to attract deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; changes in the competitive environment among financial and bank holding companies and other financial service providers; unanticipated regulatory or judicial proceedings; and the Company’s ability to manage the risks involved in the foregoing. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2017 Annual Report on Form 10-K of Pacific Premier Bancorp, Inc. filed with the SEC and available at the SEC’s Internet site (http://www.sec.gov).

Pacific Premier undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(Unaudited)
			September 30,				June 30,				March 31,				December 31,				September 30,
ASSETS			2018				2018				2018				2017				2017
Cash and due from banks			$	39,485			$	30,025			$	42,575			$	39,606			$	35,713
Interest-bearing deposits with financial institutions			223,727				101,443				83,481				157,558				85,649
Cash and cash equivalents			263,212				131,468				126,056				197,164				121,362
Interest-bearing time deposits with financial institutions			6,386				6,633				6,633				6,633				4,437
Investments held-to-maturity, at amortized cost			46,385				31,965				24,559				18,291				18,627
Investment securities available-for-sale, at fair value			1,054,877				874,700				863,243				787,429				703,944
FHLB, FRB and other stock, at cost			112,649				82,666				82,115				65,881				58,344
Loans held for sale, at lower of cost or fair value			52,880				13,879				29,034				23,426				44,343
Loans held for investment			8,759,204				6,277,586				6,241,841				6,196,224				5,009,114
Allowance for loan losses			(33,306		)		(31,747		)		(30,502		)		(28,936		)		(27,143		)
Loans held for investment, net			8,725,898				6,245,839				6,211,339				6,167,288				4,981,971
Accrued interest receivable			37,683				27,420				27,073				27,060				20,527
Other real estate owned			356				220				206				326				372
Premises and equipment			66,103				54,049				53,146				53,155				45,725
Deferred income taxes, net			26,848				17,183				13,941				13,265				22,023
Bank owned life insurance			110,354				76,937				76,454				75,976				75,482
Intangible assets			105,187				37,938				40,740				43,014				33,545
Goodwill			807,892				494,672				493,785				493,329				371,677
Other assets			87,171				62,562				38,492				52,264				29,955
Total assets			$	11,503,881			$	8,158,131			$	8,086,816			$	8,024,501			$	6,532,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposit accounts:
Noninterest-bearing checking			$	3,434,674			$	2,349,464			$	2,312,586			$	2,226,876			$	1,890,241
Interest-bearing:
Checking			495,483				342,986				355,895				365,193				304,295
Money market/savings			3,261,544				2,446,849				2,405,869				2,409,007				2,009,781
Retail certificates of deposit			1,045,334				823,425				744,214				714,751				573,656
Wholesale/brokered certificates of deposit			265,110				345,626				373,709				370,059				240,180
Total interest-bearing			5,067,471				3,958,886				3,879,687				3,859,010				3,127,912
Total deposits			8,502,145				6,308,350				6,192,273				6,085,886				5,018,153
FHLB advances and other borrowings			861,972				379,100				483,525				536,287				382,173
Subordinated debentures			110,244				105,253				105,188				105,123				79,871
Accrued expenses and other liabilities			113,143				76,903				43,922				55,209				70,477
Total liabilities			9,587,504				6,869,606				6,824,908				6,782,505				5,550,674
STOCKHOLDERS’ EQUITY
Common stock			617				459				472				458				397
Additional paid-in capital			1,671,673				1,067,907				1,065,218				1,063,974				817,809
Retained earnings			260,764				232,372				205,069				177,149				160,978
Accumulated other comprehensive (loss) income			(16,677		)		(12,213		)		(8,851		)		415				2,476
Total stockholders' equity			1,916,377				1,288,525				1,261,908				1,241,996				981,660
Total liabilities and stockholders' equity			$	11,503,881			$	8,158,131			$	8,086,816			$	8,024,501			$	6,532,334

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
			Three Months Ended												Nine Months Ended
			September 30,				June 30,				September 30,				September 30,				September 30,
			2018				2018				2017				2018				2017
INTEREST INCOME
Loans			$	119,271			$	85,625			$	64,915			$	289,069			$	170,905
Investment securities and other interest-earning assets			9,605				7,074				5,246				23,333				13,416
Total interest income			128,876				92,699				70,161				312,402				184,321
INTEREST EXPENSE
Deposits			11,942				7,756				3,557				25,612				8,774
FHLB advances and other borrowings			2,494				2,125				1,162				6,642				2,940
Subordinated debentures			1,727				1,647				1,151				4,983				3,275
Total interest expense			16,163				11,528				5,870				37,237				14,989
Net interest income before provision for credit losses			112,713				81,171				64,291				275,165				169,332
Provision for credit losses			1,981				1,761				2,049				5,995				6,238
Net interest income after provision for credit losses			110,732				79,410				62,242				269,170				163,094
NONINTEREST INCOME
Loan servicing fees			400				292				276				1,037				641
Service charges on deposit accounts			874				1,057				946				3,081				2,153
Other service fee income			317				169				851				632				1,725
Debit card interchange fee income			1,061				1,090				248				3,187				994
Earnings on bank-owned life insurance			1,270				617				629				2,498				1,654
Net gain from sales of loans			2,029				3,843				3,439				8,830				9,137
Net gain from sales of investment securities			1,063				330				896				1,399				2,989
Other income			530				753				936				2,697				2,370
Total noninterest income			7,544				8,151				8,221				23,361				21,663
NONINTEREST EXPENSE
Compensation and benefits			37,901				29,274				21,707				96,048				58,218
Premises and occupancy			7,214				5,045				4,016				17,040				10,202
Data processing			4,095				2,747				2,082				9,544				5,708
Other real estate owned operations, net			—				2				3				3				59
FDIC insurance premiums			1,060				581				379				2,252				1,652
Legal, audit and professional expense			3,280				1,816				1,978				6,935				4,177
Marketing expense			1,569				1,352				1,248				4,451				3,072
Office, telecommunications and postage expense			1,538				1,115				835				3,733				2,190
Loan expense			1,139				594				1,017				2,324				2,553
Deposit expense			2,137				2,302				1,655				6,115				4,762
Merger-related expense			13,978				943				503				15,857				15,566
CDI amortization			4,693				1,996				1,761				8,963				4,033
Other expense			3,482				2,309				2,428				8,705				5,880
Total noninterest expense			82,086				50,076				39,612				181,970				118,072
Net income before income taxes			36,190				37,485				30,851				110,561				66,685
Income tax			7,798				10,182				10,619				26,864				22,756
Net income			$	28,392			$	27,303			$	20,232			$	83,697			$	43,929
EARNINGS PER SHARE
Basic			$	0.46			$	0.59			$	0.51			$	1.63			$	1.23
Diluted			0.46				0.58				0.50				1.61				1.20
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic			61,727,030				46,053,077				39,709,565				51,282,533				35,652,626
Diluted			62,361,804				46,702,968				40,486,114				51,965,647				36,455,945

SELECTED FINANCIAL DATA

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA
			Three Months Ended
			September 30, 2018											June 30, 2018											September 30, 2017
			Average Balance				Interest Income/ Expense				Average Yield/Cost			Average Balance				Interest Income/ Expense				Average Yield/ Cost			Average Balance				Interest Income/ Expense				Average Yield/ Cost
Assets			(dollars in thousands)
Interest-earning assets:
Cash and cash equivalents			$	339,064			$	694			0.81	%		$	146,279			$	277			0.76	%		$	167,745			$	265			0.63	%
Investment securities			1,198,362				8,911				2.97			980,334				6,797				2.77			765,537				4,981				2.60
Loans receivable, net (1) (2)			8,664,796				119,271				5.46			6,253,987				85,625				5.49			4,937,733				64,915				5.22
Total interest-earning assets			10,202,222				128,876				5.01			7,380,600				92,699				5.04			5,871,015				70,161				4.74
Noninterest-earning assets			1,185,882											726,922											573,373
Total assets			$	11,388,104										$	8,107,522										$	6,444,388
Liabilities and Equity
Interest-bearing deposits:
Interest checking			$	532,246			$	480			0.36			$	349,721			$	117			0.13			$	318,412			$	103			0.13
Money market			3,143,556				6,391				0.81			2,185,310				3,943				0.72			1,802,834				1,767				0.39
Savings			264,453				97				0.15			219,035				83				0.15			211,404				68				0.13
Retail certificates of deposit			1,059,416				3,417				1.28			784,902				2,290				1.17			571,669				1,052				0.73
Wholesale/brokered certificates of deposit			316,524				1,557				1.95			349,585				1,323				1.52			243,001				567				0.93
Total interest-bearing deposits			5,316,195				11,942				0.89			3,888,553				7,756				0.80			3,147,320				3,557				0.45
FHLB advances and other borrowings			473,197				2,494				2.09			455,488				2,125				1.87			319,373				1,162				1.44
Subordinated debentures			110,203				1,727				6.27			105,218				1,647				6.26			79,833				1,151				5.77
Total borrowings			583,400				4,221				2.87			560,706				3,772				2.70			399,206				2,313				2.30
Total interest-bearing liabilities			5,899,595				16,163				1.09			4,449,259				11,528				1.04			3,546,526				5,870				0.66
Noninterest-bearing deposits			3,473,056											2,310,714											1,860,177
Other liabilities			107,055											67,617											61,604
Total liabilities			9,479,706											6,827,590											5,468,307
Stockholders' equity			1,908,398											1,279,932											976,081
Total liabilities and equity			$	11,388,104										$	8,107,522										$	6,444,388
Net interest income							$	112,713										$	81,171										$	64,291
Net interest margin (3)											4.38	%										4.41	%										4.34	%
Ratio of interest-earning assets to interest-bearing liabilities											172.93	%										165.88	%										165.54	%
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and unaccreted/unamortized discounts/premiums.
(2) Includes net discount accretion of $4.1 million, $1.9 million and $2.9 million, respectively.
(3) Represents net interest income divided by average interest-earning assets.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
LOAN PORTFOLIO COMPOSITION
			September 30,				June 30,				March 31,				December 31,				September 30,
			2018				2018				2018				2017				2017
			(dollars in thousands)
Business loans
Commercial and industrial			$	1,359,841			$	1,102,586			$	1,062,385			$	1,086,659			$	763,091
Franchise			735,366				708,957				692,846				660,414				626,508
Commercial owner occupied			1,675,528				1,310,722				1,268,869				1,289,213				805,137
SBA			193,487				176,696				182,626				185,514				107,211
Agribusiness			133,241				136,962				149,256				116,066				86,466
Total business loans			4,097,463				3,435,923				3,355,982				3,337,866				2,388,413
Real estate loans
Commercial non-owner occupied			1,931,165				1,219,747				1,227,693				1,243,115				1,098,995
Multi-family			1,554,692				805,494				817,963				794,384				797,370
One-to-four family			376,617				249,495				266,324				270,894				246,248
Construction			504,708				321,423				319,610				282,811				301,334
Farmland			138,479				136,548				136,522				145,393				140,581
Land			49,992				30,246				34,452				31,233				30,719
Total real estate loans			4,555,653				2,762,953				2,802,564				2,767,830				2,615,247
Consumer loans
Consumer loans			114,736				81,973				86,206				92,931				6,228
Gross loans held for investment			8,767,852				6,280,849				6,244,752				6,198,627				5,009,888
Deferred loan origination costs/(fees) and premiums/(discounts), net			(8,648		)		(3,263		)		(2,911		)		(2,403		)		(774		)
Loans held for investment			8,759,204				6,277,586				6,241,841				6,196,224				5,009,114
Allowance for loan losses			(33,306		)		(31,747		)		(30,502		)		(28,936		)		(27,143		)
Loans held for investment, net			$	8,725,898			$	6,245,839			$	6,211,339			$	6,167,288			$	4,981,971
Loans held for sale, at lower of cost or fair value			$	52,880			$	13,879			$	29,034			$	23,426			$	44,343

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY INFORMATION
			September 30,				June 30,				March 31,				December 31,				September 30,
			2018				2018				2018				2017				2017
Asset Quality			(dollars in thousands)
Nonperforming loans			$	7,268			$	6,039			$	8,149			$	3,284			$	515
Other real estate owned			356				220				206				326				372
Other assets owned			129				183				233				—				—
Nonperforming assets			$	7,753			$	6,442			$	8,588			$	3,610			$	887
Allowance for loan losses			$	33,306			$	31,747			$	30,502			$	28,936			$	27,143
Allowance for loan losses as a percent of total nonperforming loans			458		%		526		%		374		%		881		%		5,270		%
Nonperforming loans as a percent of loans held for investment			0.08				0.10				0.13				0.05				0.01
Nonperforming assets as a percent of total assets			0.07				0.08				0.11				0.04				0.01
Net loan charge-offs/(recoveries) for the quarter ended			$	87			$	108			$	687			$	392			$	(39	)
Net loan charge-offs for quarter to average total loans			—		%		—		%		0.01		%		0.01		%		—		%
Allowance for loan losses to loans held for investment (1)			0.38				0.51				0.49				0.47				0.54
Delinquent Loans
30 - 59 days			$	1,977			$	3,583			$	6,605			$	5,964			$	556
60 - 89 days			720				1,290				1,084				1,056				1,423
90+ days			5,048				2,574				5,065				3,039				1,629
Total delinquency			$	7,745			$	7,447			$	12,754			$	10,059			$	3,608
Delinquency as a percent of loans held for investment			0.09		%		0.12		%		0.20		%		0.16		%		0.07		%
(1) 53% of loans held for investment include a fair value net discount of $71.7 million.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
GAAP RECONCILIATIONS
(dollars in thousands, except per share data)
For the periods presented below, return on average tangible common equity is a non-U.S. GAAP financial measure derived from U.S. GAAP-based amounts. We calculate these figures by excluding CDI amortization expense from net income and excluding the average CDI and average goodwill from the average stockholders' equity during the period. Management believes that the exclusion of such items from these financial measures provides useful information to an understanding of the operating results of our core business. However, these non-U.S. GAAP financial measures are supplemental and are not a substitute for an analysis based on U.S. GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
			Three Months Ended
			September 30,				June 30,				September 30,
			2018				2018				2017
Net income			$	28,392			$	27,303			$	20,232
Plus CDI amortization expense			4,693				1,996				1,761
Less CDI amortization expense tax adjustment			1,011				542				606
Net income for average tangible common equity			$	32,074			$	28,757			$	21,387
Average stockholders' equity			$	1,908,398			$	1,279,932			$	976,081
Less average CDI			108,258				39,766				34,699
Less average goodwill			805,116				494,070				371,651
Average tangible common equity			$	995,024			$	746,096			$	569,731
Return on average equity			5.95		%		8.53		%		8.29		%
Return on average tangible common equity			12.89		%		15.42		%		15.02		%

Tangible common equity to tangible assets (the "tangible common equity ratio") and tangible book value per share are non-U.S. GAAP financial measures derived from U.S. GAAP-based amounts. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders' equity and dividing by tangible assets. We calculate tangible book value per share by dividing tangible common equity by common shares outstanding, as compared to book value per share, which we calculate by dividing common stockholders' equity by shares outstanding. We believe that this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios. Accordingly, we believe that these non-U.S. GAAP financial measures provide information that is important to investors and that is useful in understanding our capital position and ratios. However, these non-U.S. GAAP financial measures are supplemental and are not a substitute for an analysis based on U.S. GAAP measures. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies.
			September 30,				June 30,				March 31,				December 31,				September 30,
			2018				2018				2018				2017				2017
Total stockholders' equity			$	1,916,377			$	1,288,525			$	1,261,908			$	1,241,996			$	981,660
Less intangible assets			913,079				532,610				534,525				536,343				405,222
Tangible common equity			$	1,003,298			$	755,915			$	727,383			$	705,653			$	576,438
Book value per share			$	30.68			$	27.63			$	27.12			$	26.86			$	24.44
Less intangible book value per share			14.62				11.42				11.49				11.60				10.09
Tangible book value per share			$	16.06			$	16.21			$	15.63			$	15.26			$	14.35
Total assets			$	11,503,881			$	8,158,131			$	8,086,816			$	8,024,501			$	6,532,334
Less intangible assets			913,079				532,610				534,525				536,343				405,222
Tangible assets			$	10,590,802			$	7,625,521			$	7,552,291			$	7,488,158			$	6,127,112
Tangible common equity ratio			9.47		%		9.91		%		9.63		%		9.42		%		9.41		%

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