Pacific Premier Bancorp, Inc. Announces Second Quarter 2020 Results
Pacific Premier Bancorp, Inc. Announces Second Quarter 2020 Results (Unaudited) and a Quarterly Cash Dividend of $0.25 Per Share
Second Quarter 2020 Summary
- Net loss of $99.1 million, or $1.41 per diluted share
- Pre-provision net revenue ("PPNR") of $60.6 million, excluding $39.3 million of merger-related expense
- Net interest margin of 3.79% and core net interest margin of 3.59%
- Nonperforming assets represent 0.17% of total assets
- Allowance for credit losses (“ACL”) to total loans held for investment of 2.02% at June 30, 2020 excluding Small Business Administration’s Paycheck Protection Program (“PPP”) loans totaling $1.12 billion
- Loans held for investment include fair value discount of $144.5 million, or 1.03%, as of June 30, 2020
- Non-maturity deposits of $15.1 billion, or 89% of total deposits
- Noninterest bearing deposits represent 35% of total deposits
- Cost of deposits of 0.32% in the second quarter, compared with 0.48% in the prior quarter
- Closed the acquisition of Opus Bank (“Opus”) effective June 1, 2020; systems integration scheduled for first week in October 2020
- Completed an offering of subordinated notes for gross proceeds of $150 million
IRVINE, Calif.--(BUSINESS WIRE)-- Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported a net loss of $99.1 million, or $1.41 per diluted share, for the second quarter of 2020, compared with net income of $25.7 million, or $0.43 per diluted share, for the first quarter of 2020 and net income of $38.5 million, or $0.62 per diluted share, for the second quarter of 2019. Financial results for the second quarter of 2020 reflected a current period provision for credit losses of $160.6 million, of which $84.4 million was a result of the initial establishment of the Day 1 reserves required by the current expected credit losses (“CECL”) methodology in conjunction with the closing of the Opus acquisition, and $76.2 million primarily related to the deteriorating economic forecast utilized by the Company in its CECL model. Additionally, the Company incurred merger related costs of $39.3 million with the closing of the Opus acquisition during the quarter.
The Company completed the acquisition of Opus effective June 1, 2020. The Company's financial statements for the second quarter include 30 days of Opus's operations, post-merger, which impacts the comparability of the current quarter's results to prior periods. At closing, Opus had $8.32 billion in total assets, $5.94 billion in gross loans and $6.91 billion in total deposits.
For the three months ended June 30, 2020, the Company’s return on average assets (“ROAA”) was (2.61)%, return on average equity (“ROAE”) was (17.76)% and return on average tangible common equity (“ROATCE”) was (29.40)%, compared to 0.89%, 5.05% and 9.96%, respectively, for the first quarter of 2020 and 1.33%, 7.71% and 15.16%, respectively, for the second quarter of 2019. Total assets were $20.5 billion at June 30, 2020, compared with $12.0 billion at March 31, 2020 and $11.8 billion at June 30, 2019. A reconciliation of the non–U.S. GAAP measure of ROATCE to the U.S. GAAP measure of common stockholders' equity is set forth at the end of this press release.
Steven R. Gardner, Chairman, President and Chief Executive Officer of the Company, commented, “Our team is functioning at a high level and driving solid results. Notwithstanding the impact of the merger and COVID-19 related items, we accomplished a great deal during the second quarter.
“On June 1st, we successfully closed the acquisition of Opus, our 11th acquisition and the largest in our history. As a result, we incurred costs in connection with the new accounting standard under CECL, along with the impacts of fair value accounting. As a result, the Company's loss absorbing capacity, loan loss reserves and loan fair value discounts combined, is in excess of 3% of loans held for investment. Given our strong capital position and our expectations around the future performance of the Company, we are pleased to announce the Board's approval of a $0.25 dividend.
“During the second quarter, we initiated a well structured COVID-19 loan modification program to assist those clients that had been temporarily impacted by the pandemic. At quarter-end, we had approximately $2.25 billion, or 14.9%, of the loan portfolio under some form of temporary modification. As of July 24th, we have contacted 63% of the approximately 1,400 customers with loan modifications, and 87% have stated they intend to resume regularly scheduled payments when the modification period expires. Notably, our asset quality metrics remain strong across the spectrum of our loan portfolio.
“Despite the challenges created by the pandemic, the integration of the Pacific Premier and Opus teams is progressing well. The systems conversion will occur in early October at which time we will consolidate 20 branch offices to further drive our overall efficiencies. We are currently on pace to recognize greater cost savings from the acquisition than previously anticipated and, with the addition of key Opus personnel, our team has never been more capable."
Mr. Gardner concluded, “As we enter the second half of 2020, there remains a high level of economic uncertainty, but we are well positioned from a capital, earnings and risk perspective to take advantage of opportunities as they arise.”