PUBLIC DISCLOSURE COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Pacific Premiere Bank RSSD # 431172 1600 Sunflower Avenue, 2 nd Floor 92626 Federal Reserve Bank of San Francisco 101 Market Street San Francisco, California 94105 NOTE: This document is an evaluation of this institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution. This evaluation is not, nor should it be construed as, an assessment of the financial condition of this institution. The rating assigned to this institution does not represent an analysis, conclusion or opinion of the federal financial supervisory agency concerning the safety and soundness of this financial institution.
Costa Mesa, CalIfornia CRA Public Evaluation TABLE OF CONTENTS INSTITUTION RATING........................ 1 INSTITUTION................ 2 Description of Institution... 2 Description of Assessment Area... 3 Scope of Examination... 7 LENDING TEST........................................................ 7 CDMMUNITY DEVELDPMENT TEST....................................... 7 Lending Test... 8 LDAN-TD-DEPDSIT RATIO.................................................... 8 LENDING IN ASSESSMENT AREA..................................................... 8 LENDING DISTRIBUTION BY GEOGRAPHY.......................................... 9 LENDING DISTRIBUTION BY BUSINESS REVENUE................................. 11 RESPONSE TD COMPLA!NTS.............................................. 11 Community Development Test... 12 Fair Lending or Other Illegal Practices Review... 13 GLOSSARY OF TERMS... 14
----------------- PACIFIC PREMIER BANK era Public Evaluation INSTITUTION RATING Institution's era Rating Pacific Premier Bank is rated "SATISFACTORY" The following table shows the performance ratings for the lending and community development tests. PERFORMANCE LEVELS LENDING TEST PERFORMANCE TESTS COMMUNITY DEVELOPMENT TEST OUTSTANDING SATISFACTORY X X NEEDS TO IMPROVE SUBSTANTIAL NONCOMPLIANCE The major factors supporting the institution's rating include: A reasonable loan to deposit ratio; A substantial majority of loans originated in the assessment area; A reasonable geographic distribution of small business loans, with no conspicuous gaps in lending patterns; A reasonable dispersion of small business loans among businesses of different sizes; and An adequate level of community development activities comprised primarily of community development loans supporting low- and moderate-income geographies supported by qualified investment and service activity that targeted the needs of low- and moderate-income individuals and focused on financial literacy. 1
Costa M(!sa, California CRA Public Evaluation INSTITUTION Description of Institution Pacific Premier Bank (PPB) is headquartered in, and reported total assets of $943.4 million as of June 30, 2011. The bank has been in operation since 1983 and was first a federallychartered savings bank, before becoming a state-chartered commercial bank on March 30, 2007. The bank is a wholly-owned subsidiary of Premier Bancorp. On February 11, 2011, through a Federal Deposit Insurance Corporation (FDIC) purchase and assumption transaction, PPB acquired three branches and $211 million in assets from a failed institution. PPB now operates nine full-service branches with five branches located in Orange County in the cities of Costa Mesa (corporate office), Huntington Beach, Los Alamitos, Newport Beach, and Seal Beach. A sixth branch is located in the city of San Bernardino in San Bernardino County. The three branches acquired in 2011 are located in Riverside County (one in Palm Desert and two in Palm Springs). PPB is a commercial bank offering commercial banking products and services to small- and middlemarket businesses. Commercial loans include commercial real estate, multi-family real estate, conventional commercial, and Small Business Administration 7(a), S04 and Express loans. PPB also offers consumer loans primarily to existing business customers on an accommodation basis. Loan types include home purchase and home refinance loans, home equity lines of credit, automobile and savings secured loans. Lastly, the bank offers business and consumer credit cards through a third party credit card vendor. Below is the June 30, 2011, loan portfolio, as stated in the Consolidated Reports of Condition and Income, which shows PPB's commercial and multi-family lending focus. EXHIBIT 1 LOANS AND LEASES AS OF JUNE 30, 2011 Loan Type $ ('OOOs) % Commercial/Industrial & Non-Farm Non-Residential Real Estate 390,634 55.2 Multi-Family Residential Real Estate 237,681 33.6 Secured by 1-4 Family Residential Real Estate 64,892 9.1 Construction & Land Development 8,785 1.2 Consumer Loans & Credit Cards 4,703 0.7 State, Political Subdivisions and All Other 1,401 0.2 Total (Gross) 708,096 100.00 PPB faces no legal or financial impediments that would prevent it from helping to meet the credit needs of its assessment area consistent with its business strategy, size, financial capacity, and local economic conditions. The bank received an overall satisfactory rating at its previous Community Reinvestment Act ((RA) examination conducted as of February 8, 2010. 2
CRA Pl1blic Evaluation Description of Assessment Area The bank's assessment area has not changed since the previous examination. PPB's assessment area includes the vast majority of the Greater los Angeles Area, which encompasses los Angeles County and the urbanized areas around the county. They are: los Angeles County, which consists of los Angeles County in its entirety and is also known as the los Angeles-long Beach-Glendale Metropolitan Division (MD); Orange County, which consists of Orange County in its entirety and is also known as the Santa Ana-Anaheim-Irvine MD; and Riverside-San Bernardino Counties, which consists of Riverside and San Bernardino Counties in their entirety and is also known as the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (MSA). With a population exceeding 10 million people, los Angeles County is the most populous county in the state, and home to more than 27 percent of the state's 38 million residents. Orange County, located just south of los Angeles County, represents over eight percent of the state's population with an estimated population of three million, making it the third most populous county in California, after los Angeles and San Diego counties. Riverside and San Bernardino counties make up the eastern portion of the assessment area and are significant in terms of population and geography. The counties have approximate populations of just over 2 million, ranking them fourth and fifth, respectively in state population, after Orange County. Additionally, San Bernardino County encompasses over 20,000 square miles, making it the largest geographical county in the state and the United States. 1 PPB has a limited presence in this very large, diverse and competitive assessment area. As of June 30, 2011, there were a total of 176 FDIC-insured financial institutions operating 3,064 offices within PPB's assessment area! The bank's deposit market share was 0.2 percent ranking 33' among active depository institutions. 3 In addition, in 2010 there were 872 home mortgage lenders reporting 576,000 home mortgage loans pursuant to the Home Mortgage Reporting Act (HMDA) and 199 lenders reporting 313,000 small business loans pursuant to the reporting requirements of the CRA, most of which were large regional and national institutions. Accordingly, competition for small business and home mortgage loans is significant. PPB did not have any reportable HMDA loans during 2009 and 2010; however, PPB will be a HMDA reporter for 2011 as a result of purchased loans. The following exhibit, on the next page, presents key demographic and business information, based on the 2000 U.S. Census and 2010 Dun and Bradstreet data, used to help develop a performance context for the assessment area. 1 State of California Employment Development Department, Labor Market Information Division, Population in State o/colifornia, (accessed December 6,2011), available at: www.labormarketinfo.edd.ca.gov. 2. Federal Deposit Insurance Corporation, Deposit Market Share Report, June 30,2011 (Accessed October 3,2011); available at http://www2. fdic.gov/sod/sodmarketrpt. 3 Ibid. 3
PACIFIC PREMIER 8ANK CRA Public Evaluation Income Categories Tract Distribution EXHIBITZ ASSESSMENT AREA DEMOGRAPHICS GREATER Los ANGELES AREA Families by Tract Income Families < Poverty Level as% of Families by Tract Families by Family Income /I % /I % /I % /I % low income 227 7.1 200,882 5.6 76,157 37.9 822,950 22.8 Moderate income 905 28.1 978,063 27.1 207,157 21.2 612,516 17.0 Middle-income 1,007 31.3 1,196,526 33.1 119,961 10.0 672,567 18.6 Upper-income 1,058 32.9 1,235,164 34.2 46,104 3.7 1,502,602 41.6 Tract not reported 21 0.7 0 0.0 0 0.0 0 0.0 TotalAA 3,218 100.0 3,610,635 100.0 449,379 12.4 3,610,635 100.0 Housing Housing Types by Tract Income Categories Units by Owner-Occupied Rental Vacant Tract /I % % /I % /I % low-income 304,941 46,123 1.7 15.1 236,026 77.4 22,792 7.5 Moderate income 1,440,720 494,052 17.9 34.3 849,149 58.9 97,519 6.8 Middle-income 1,807,416 960,798 34.8 53.2 735,673 40.7 110,945 6.1 Upper-income 1,873,329 1,262,406 45.7 67.4 519,624 27.7 91,299 4.9 Tract not reported 30 1 0.0 3.3 21 70.0 8 26.7 TotalAA 5,426,436 2,763,380 100.0 50.9 2,340,493 43.1 322,563 5.9 Businesses by Tract & Revenue Size Total Businesses by Income Categories Tract Less Than or Equal Greater than $1 Revenue Not to $1 Million Million Reported /I % /I % /I % /I % low-income 44,720 5.8 38,475 5.7 3,635 7.2 2,610 7.2 Moderate-income 179,509 23.4 156,162 23.0 13,847 27.4 9,500 26.4 Middle-income 240,235 31.3 212,770 31.3 15,989 31.7 11,476 31.9 Upper-income 297,779 38.8 269,579 39.6 16,265 32.2 11,935 33.1 Tract not reported 4,543 0.6 3,307 0.5 726 1.4 510 1.4 Total AA 766,786 100.0 680,293 100.0 50,462 100.0 36,031 100.0 Percentage of Total Businesses 88.7 6.6 4.7 2004 Median Family Income: June 2011 Median Housing Value:' Los Angeles County $46,509 Los Angeles County $320,000 Riverside-San Bernardino Counties Orange County $64,321 Orange County $439,000 $47,448 2011 HUD Adjusted Median Family Income: June 2011 Unemployment Rate:' Riverside County $200,000 San Bernardino County $148,700 Los Angeles County $64,000 Los Angeles County 12.0% Orange County $84,200 Orange County 8.8% Riverside-San Bernardino Counties $62,500 Riverside County 13.7% San Bernardino County 13.5%, California Association of Realtors~, Trends in Cali/ornia Real Estate, Volume 32, Number 7, July 2011. S Unemployment Rate - California Counties, (accessed on September 21, 2011), available from h ttps:1i e 552.fd i c.g ov Ire co n. 4
CRA P\lblic Evaluation October 11, 1011 The four counties comprising the assessment area are extremely vast and border the Pacific Ocean to the west, and the states of Arizona and Nevada to the east. The area is home to one of the largest and most diverse economies in the country. In 2010, the Greater Los Angeles Area's economy, compared to national economies of the world ranked 16th, Los Angeles County on its own ranked 20th. 6 The five leading employment sectors in the area, ranked by percent of total employment are government, professional and business services, retail trade, education and health services, and leisure and hospitality.7 Individually, each county has their niche industries. For example Los Angeles County is the home to many financial institutions and the motion picture industry; Orange County, with its vast shoreline and amusement parks, is a major tourist attraction; and Riverside-San Bernardino Counties playa vital role in internal trade because of their proximity to the port of Los Angeles and capacity for large warehouses and distribution centers. Although the assessment area is home to many large- and mid-sized corporations, as shown in Exhibit 2 on the previous page, 88.7 percent of the revenues reported are from small businesses with annual revenues less than or equal to one million dollars. Renewed hiring during the first quarter of 2010 in industries such as technology, tourism, trade, entertainment, warehousing and transportation indicated the first stirrings of an economic recovery in the assessment area. However, by mid-201o a stalled labor market, attributed to slowing near-term u.s. growth, the state's weak fiscal outlook, announced defense cuts, and slowing manufacturing orders, had dampened this progress. 9 Although the economy remained stalled through the end of the review period, between December 31, 2010 and June 30, 2011, unemployment rates nevertheless have shown slight declines form 14.6 to 13.7 percent, 14 percent to 13.5 percent, 12.7 to 12 percent, and 9.2 to 8.8 percent in Riverside, San Bernardino, Los Angeles, and Orange counties, respectively. All unemployment figures remained above the respective national and state unemployment rates of 8.9 and 11.7 percent, with the exception of Orange County which reported under both the state and national figures.' According to Moody's Economy.com, during the review period, the economies of the four counties were starting to slowly emerge from recession, but economic pressures continue to threaten the area of slipping back into recession. In response to recessionary pressures during 2008 and 2009, financial institutions tightened their lending standards on all major products. However, according to the Federal Reserve Board's Senior Loan Officer Opinion Survey lending banks began easing lending standards in the second quarter of 2010." Despite this easing, the survey results also indicate the demand for loans from both businesses and households remained weak." Despite the decline in loan demand, interviews with community representatives indicated that the tightened credit standards and economic pressures created challenges for small business owners. 6 2011.2012 Economic Forecast and Industry Outlook, Los Angeles County Economic Development Corporation The Kyser Center For Economic Research, February 2011 (accessed 10/3/2011); available from http://laedc.org/re ports/f 0 reca st -2011-04. pd f. 7 Moody's Economy.com Inc., Precis U.S. Metro: West, April 2011. Moody's Economy.com, Precis METRO: Los Angeles, Santa Ana, and Riverside, April 2010. 9 MOODY's ALVTICS, Precis U.S. Metro, West: Los Angeles and Santa Ana, August 2010. 10 Unemployment Rate - California Counties/US and State Averages, (accessed on September 21, 2011), available from https:/iess2.fdic.gov/recon. 11 Copies of the Senior loan Officer Opinion Survey on Bank Lending Practices, conducted by the Board of Governors of the Federal Reserve System are available at: htlp:/iwww.federalreserve.gov/boarddocs/snloansurvey/. "Ibid. 5
CRA P~lbljc Evaluation October 11, 1011 Community contacts noted that the restricted access to small business credit makes these entities highly vulnerable, particularly during economic downturns. They indicated the importance and need for access to micro loans and smaller working capital lines between $50,000 and $250,000 to help small businesses start up and remain viable. In addition to issues presented by restricted access to credit, many small businesses were also faced with a decline in demand for their products and services given the downturn in the economy and the slow rate of recovery. This may contribute to the overall decline in small business loan demand. The assessment area's housing market is still struggling to recover from the foreclosure crisis, economic recession, and persistently high unemployment. During the review period, median home values fluctuated in response to economic conditions. During 2010, many delinquent loans, delayed by modification efforts, transitioned to foreclosures as tax credits expired." As a result, increasing home inventories generally pushed median-home prices down again or severely slowed upward price movement. Specifically from January 2010 to January 2011, the percent change in the median sales price in Los Angeles, Orange, and Riverside Counties decreased 7.7 percent, 2.4 percent, and 2.6 percent, respectively, while San Bernardino County had an increase of one percent. 14 Between December 31, 2010 and June 30, 2011, median home prices in Los Angeles and San Bernardino Counties continued to depreciate 2.6 and 2.1 percent, respectively, while Riverside County showed no movement at all; prices in Orange County appreciated approximately 7.1 percent ls Continued high unemployment levels in Los Angeles, San Bernardino, and Riverside counties may have contributed to the continued decline in median home prices. In Orange County, lower unemployment and the strong demand for new in-fill housing developments in metropolitan areas" helped account for the price appreciation. Although median home prices have generally fallen in three of the four assessment area counties; housing affordability remains a significant issue. Community contacts cited affordable housing as a major community need in the assessment area. Examples were given where multiple families occupy a single family residence or apartment unit because they are unable to afford housing by themselves. A community contact from San Bernardino county noted that families had migrated to the area because of lower housing costs have now lost their jobs and are losing their homes to foreclosures. The California Association of Realtors' Traditional Housing Affordability Index" provides a measure of the percentage of families that can afford a median priced home. A review of the index notes that in the counties of Los Angeles, Orange and San Bernardino, the percentage of families that can afford a median priced home has increased slightly during the review period. The index shows a change from 43, 28, and 75 percent to 46, 33, and 76 percent; while Riverside County remained steady at 63 percent between January 2010 and January 2011. Although the general direction is improving, the figures indicate that in Los Angeles and Orange counties less than half of the households can afford median priced homes. 13 Moody's Analytics, Precis U.S. Metro, West: Los Angeles, Santa Ana, and Riverside August 2010. 14 Southern California Home Sales, Median Sale Price February 15, 2011 (accessed December 13, 2011); available from www.dqnews/articles/2011/news/california/southern-ca/rrscall0215.aspx. 1S California Association of Realtors~, Trends in California Real Estate, Volume 32, Number 1, January 2011, and Volume 32, Number7, July 2011; available at: http://www.car.org. 16 Moody's Analytics, Precis U.S. Metro, West: Santa Ana, April 2011. 17 California Association of Realtors e, Traditional Housing Affordability Index, available at www.car.org?marketdata/data/ftbhai. (accessed December 7, 2011). 6
era Pllblic Evaluation Scope of Examination PPB's performance was conducted using the Interagency Intermediate Small Institution CRA Examination Procedures. Performance was evaluated under the lending and community development tests. LENDING TEST The lending test evaluation was based on the following performance criteria: Loan volume compared to deposits (Loan-to-Deposit Ratio); Lending inside versus outside the assessment area (Lending in Assessment Area); Dispersion of lending throughout the assessment area (Lending Distribution by Geography); and Lending to businesses of different sizes (Lending Distribution by Business Revenues). Responsiveness to consumer complaints was not evaluated as the bank did not receive any CRA-related complaints during the review period. The lending test evaluation was based on PPB's origination of small business loans originated between January 1, 2010 and June 30, 2011 and residential mortgage loans that were purchased during 2011. A total of 370 small business loans and 145 HMDA-related residential mortgage loans were used in the evaluation of Lending in the Assessment Area. A sample of 91 small business loans and all 74 home purchase loans extended within the bank assessment area were used in the evaluation of Lending Distribution by Geography. These same 91 small business loans were also used for the Lending Distribution by Business Revenue analysis. Since borrower income was not collected or reported for HMDA loans that were purchased, these loans were assessed for their borrower distribution. There were insufficient volumes of home refinance, home improvement, and multi-family loans for a meaningful analysis; accordingly, these products were excluded from the geographic distribution and borrower profile analyses. PPB extended no small farm loans during the review period. Loan products were weighted according to volume, credit needs and available opportunities. Therefore, the evaluation placed the greatest weight on small business lending followed by home purchase loans. Although the bank does not operate any branches in Los Angeles County, it does have a small business and residential mortgage lending presence there. The counties of the assessment area were analyzed individually, then collectively, with the most weight given to the three counties in which the bank has a physical presence. COMMUNITY DEVELOPMENT TEST The community development test included an evaluation of PPB's qualified community development loans, investments, and services from January 1, 2010 through June 30, 2011. 7
CRA Public Evaluation Conclusions with Respect to Performance Tests Lending Test Overall performance under the lending test is satisfactory. The bank's loan-to deposit ratio and lending within the assessment area indicate the bank is effectively engaging in lending activities within its assessment area. Overall lending activity was reasonable given the economic conditions during the review period. The distribution of loans reflects a reasonable penetration in geographies of all income levels, including low- and moderate-income areas. In addition, the distribution of loans among businesses of different sizes is adequate. LOAN-TO-DEPOSIT RATIO The loan-to deposit ratio is reasonable given the institution's size, financial condition, and indicators of credit demand within the various assessment areas. The bank's six-quarter average loan-to-deposit ratio was 85 percent. This is comparable to the state average of 81 percent and exceeds the national peer average of 79 percent. LENDING IN ASSESSMENT AREA A substantial majority of loans were originated inside the bank's assessment area. As shown in Exhibit 3, the bank extended approximately 87 percent by number 86 percent by dollar volume within the assessment area. Given the large geographic size of the assessment area in relation to the bank's size, this level of lending within the assessment area is reasonable. EXHIBIT 3 LENDING INSIDE AND OUTSIDE THE ASSESSMENT AREA JANUARY 1, 2010 TOJUNE 30, 2011 Inside Outside Loan Type $ $ % % % % " ('OOOs) " ('OOOs) HMDA Home Purchase 74 77.1 26,329 86.7 22 22.9 4,057 13.4 HMDA Refinance 28 90.3 9,506 80.1 3 9.7 2,359 19.9 HMDA Home Improvement 5 83.3 277 61.2 1 16.7 176 38.9 HMDA Multifamily 12 100.0 5,011 100.0 0.0 0.0 Total HMDA-Related 119 82.1 41,123 86.2 26 17.9 6,592 13.8 Small Business 327 88.4 79,335 85.9 43 11.6 13,058 14.1 Total Business Related 327 88.4 79,335 85.9 43 11.6 13,058 14.1 Total Loans 446 86.6 120,458 86.0 69 13.4 19,650 14.0 8
PACIFIC PREMIER DANK era Public Evaluation LENDING DISTRIBUTION BY GEOGRAPHY Overall, the geographic distribution of the bank's lending activities for small business and home purchase loans is reasonable. The bank's lending patterns reflect an adequate distribution of loans throughout the assessment area, with an adequate penetration in low- and moderate-income census tracts. Loans were distributed throughout the assessment area and generally concentrated in areas where the bank's offices are located. Any gaps in lending penetration can be partially explained by the performance context. Small Business Lending The geographic distribution of small business loans during the review period is reasonable. As shown in Exhibit 4, in 2010, lending levels in low- and moderate-income tracts generally exceeded both the business concentration and the percent of aggregate lending, except for moderate-income areas in Riverside and San Bernardino Counties. Through the six months ending June 30, 2011, the bank did not originate any small business loans in low-income tracts. However, small business loans were originated in moderate-income tracts and generally exceeded business concentration and aggregate lending levels. The exception here is Los Angeles County. The lack of lending in these tracts is more a function of anomalies created by low loan volumes and the distance of some tracks from the bank's branch locations than the bank's avoidance of any of these areas. Census Tract Income Category EXHIBtT4 GEOGRAPHIC DISTRIBUTION OF SMALL BUSINESS LOANS Bank Lending (%) Business Concentration (%) Aggregate Lending (%) 2010 Orange County Low-Income 14.3 3.1 2.2 Moderate-Income 14.3 28.0 23.0 Middle-Income 57.1 34.8 31.8 Upper-Income 14.3 34.0 43.0 Riverside & San Bernardino Counties Low-Income 50.0 3.2 1.9 Moderate-Income 0.0 27.6 21.8 Middle-Income 50.0 40.7 39.1 Upper-Income 0.0 28.5 37.2 Los Angeles County low-income 8.3 7.7 5.3 Moderate-Income 41.7 20.7 16.2 Middle lncome 16.7 27.6 25.0 Upper-Income 33.3 44.1 53.5 9
CRA Public Evaluation Low-Income Moderate-Income Middle-Income Upper-Income Low-Income Moderate-Income Middle-Income Upper-Income Low-Income Moderate-Income Middle-Income Upper-Income January 1, 2011- June 30, 2011 Orange County 0.0 3.1 25.0 28.0 75.0 34.8 00.0 34.0 Riverside-San Bernardino 0.0 3.2 48.2 27.6 26.8 40.7 25.0 28.5 Los Angeles County 0.0 7.7 0.0 20.7 50.0 27.6 50.0 44.1 Home Purchase Lending The geographic distribution of lending activity for home purchase loans is poor. As seen in Exhibit 5, the bank extended no mortgage loans in low-income census tracts, and extended no mortgage loans in moderate-income census tracts in Los Angeles and Orange counties during the first six months of 2011. This can be partially explained by the fact that the bank simply purchased these loans from a failed financial institution and was not involved in the marketing or underwriting of these loans. Further, the relatively low percentage of owner-occupied homes in the low-income census tracts, presents a lending challenge. Additionally, the high levels of unemployment and depressed real estate market also partially explain the bank's poor home mortgage lending performance. EXHIBITS GEOGRAPHIC DISTRIBUTION OF HOME PURCHASE LOANS JANUARY 1, 2011 TO JUNE 30, 2011 Census Tract Income Category Bank Lending (%) Owner Occupied (%) Aggregate Lending (%) Orange County Low-Income 0.0 1.3 Not Available Moderate-Income 0.0 19.6 Not Available Middle-Income 0.0 33.6 Not Available Upper-Income 100.0 45.6 Not Available Riverside & San Bernardino Counties Low-Income 0.0 1.5 Not Available Moderate-Income 60.9 21.7 Not Available Middle-Income 21.9 43.3 Not Available Upper-Income 17.2 33.4 Not Available Los Angeles County low-income 0.0 1.9 Not Available Moderate-Income 0.0 15.5 Not Available Middle-Income 0.0 31.3 Not Available Upper-Income 100.0 51.3 Not Available 10
Costa Mesa, Cillifornia era Public Evaluation LENDING DISTRIBUTION BY BUSINESS REVENUE The distribution of loans among businesses of different sizes is adequate. As shown in Exhibit 6, in 2010, the overall percentage of loans made to businesses with gross annual revenue less than or equal to one million dollars generally exceeded the aggregate lending in the assessment area, except in Orange County where lending fell below aggregate levels but remain adequate overall. Lending levels in 2011 are similar to that in 2010 for all three areas. Additionally, throughout the review period, a majority of the bank's small business loans were made in dollar amounts less than $250,000, thereby addressing an articulated community development need. EXHIBIT 6 BUSINESS REVENUE DISTRIBUTION OF SMALL BUSINESS LOANS Lending to Businesses with Revenue Originations Regardless of Revenue Size by Bank <=$1 Million Loan Amount Year I Area Lending Bank Businesses Aggregate > $100K& <=$100K >250K& # Lending <=$lm In Lending <=$250K (%) <=$lm (%) (%) Revenue (%) (%) (%) 2010 Orange County Riverside & San Bernardino Counties Los Angeles County 14 28.6 88.1 37.1 28.6 35.7 35.7 2 50.0 89.8 37.8 50.0 0.0 50.0 12 66.7 88.6 33.0 0.0 41.7 58.3 January 1, 2011 through June 30, 3011 Orange Not Not 5 20.0 County available available 0.0 40.0 60.0 Riverside & San Not Not 56 73.2 Bernardino available available 41.1 32.1 26.8 Counties Los Angeles Not Not 2 100.0 Counties available available 0.0 0.0 100.0 RESPONSE TO COMPLAINTS PPB has not received any CRA related complaints during the review period. Consequently, the bank's performance in responding to complaints was not considered in evaluating CRA performance. 11
------------------------------------------- PACIFIC PREMIER BANK Co~ta Mesa, California era Public Evaluation OctolJer 11,2011 Community Development Test PPB's overall community development test performance is satisfactory. The bank directed its available resources to funding an overall reasonable level of community development loans, mostly for the development and stabilization of small businesses located in low- and moderate-income census tracts, including, but not limited to the retention or creation of employment opportunities for low- and moderate income wage earners. To a lesser extent, the bank purchased loans that had been originated for borrowers whose properties were located in a designated disaster area. The bank also extended loans for affordable housing, thereby addressing an articulated community development need. PPB provided a generally adequate level of community development services to organizations that target the needs of low- and moderate income individuals. In addition, retail banking services, by means of the bank's nine branch network, were generally accessible to individuals of all income categories given that the branches were located in all income census tract types. Finally, PPB funded an adequate level of investments with the majority of the investments in two mortgage backed securities benefiting low- and moderate-income borrowers or tracts located in Orange, Riverside and San Bernardino Counties. EXHIBIT 7 COMMUNITY DEVELOPMENT ACTIVITIES Investments Assessment Area loans Current Services Prior Period Period # $ ('0005) # $ ('0005) # $ ('0005) # Hours Orange County 7 5,524 1 1,024 9 1,134 10 222 Riverside and San Bernardino Counties 22 15,465 0 0 8 180 3 61 los Angeles County 30 14,379 0 0 0 0 0 0 Broader Statewide or Regional Area 2 $2,168 0 0 0 0 0 0 Total 61 $37,536 1 $1,024 17 $1,314 13 283 As shown in Exhibit 7, PPB's community development lending primarily benefitted Riverside, San Bernardino, and Los Angeles Counties. Some notable examples of community development loans include the following: A $4.2 million loan to a small business located Riverside County and in a moderate-income census tract that will hire low- and moderate-income wage earners. A $3 million loan to a small business located in Orange County to purchase inventory, equipment, and hire low-and moderate income wage earners. The small business is located in a low-income census tract and enterprise zone. An $800,000 loan to provide affordable housing in Los Angeles County. A 3D-unit multi-family dwelling located in a low-income census tract that has rents below that designated by the Housing and Urban Development (HUD) as being affordable. 12
CRA Public Evaluation A $510,000 loan to provide affordable housing in Los Angeles County. An eight unit multi-family dwelling located in a low-income census tract that has rents below that designated by HUD as being affordable. PPB's community development investments, donations and services primarily benefitted Orange, Riverside and San Bernardino Counties. PPB's community development investments were targeted to two mortgage backed securities; one of which was originally purchased in 2009, and the other was purchased in 2011. The mortgage backed securities were comprised of 21 residential mortgages, made to low- and moderate-income families, or secured by properties located in low- and moderate-income geographies; all of the properties are located in the bank's assessment area. Additionally, PPB provided donations totaling $179,775, to organizations providing community services to low- and moderate-income individuals. For example, they forgave all indebtedness owed on a $150,000 loan to the Community Investment Corporation (Cle) located in Riverside and San Bernardino Counties. CIC provides benefits by assisting entrepreneurs in low- and moderate-income communities create and retain jobs, as well as assisting in home ownership. PPB provided 283 hours of community development services. The majority of these hours were for the provision of financial literacy training to low- and moderate-income individuals. Fair Lending or Other Illegal Practices Review Concurrent with this CRA evaluation, a review of the bank's compliance with consumer protection laws and regulations was conducted, and no violations of the substantive provisions of anti-discrimination, fair lending, or other illegal credit practice rules, laws or regulations were identified. 13
CRA Public Evalualion GLOSSARY OF TERMS Aggregate lending: The number of loans originated and purchased by all reporting lenders in specified income categories as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Census tract: A small subdivision of metropolitan and other densely populated counties. Census tract boundaries do not cross county lines; however, they may cross the boundaries of metropolitan statistical areas. Census tracts usually have between 2,500 and 8,000 persons, and their physical size varies widely depending upon population density. Census tracts are designed to be homogeneous with respect to population characteristics, economic status, and living conditions to allow for statistical comparisons. Community development: All Agencies have adopted the following language. Affordable housing (including multifamily rental housing) for low- or moderate-income individuals; community services targeted to low or moderate-income individuals; activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs (13 CFR 121.301) or have gross annual revenues of $1 million or less; or, activities that revitalize or stabilize lowor moderate-income geographies. Effective September 1, 2005, the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have adopted the following additional language as part of the revitalize or stabilize definition of community development. Activities that revitalize or stabilize: (i) Low- or moderate-income geographies; (ii) Designated disaster areas; or (iii) Distressed or underserved nonmetropolitan middle-income geographies designated by the Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, based on: a. Rates of poverty, unemployment, and population loss; or b. Population size, density, and dispersion. Activities that revitalize and stabilize geographies designated based on population size, density, and dispersion if they help to meet essential community needs, including needs of low- and moderate-income individuals. Consumer loan(s): A loan(s) to one or more individuals for household, family, or other personal expenditures. A consumer loan does not include a home mortgage, small business, or small farm loan. This definition includes the following categories: motor vehicle loans, credit card loans, home equity loans, other secured consumer loans, and other unsecured consumer loans. Family: Includes a householder and one or more other persons living in the same household who are related to the householder by birth, marriage, or adoption. The number of family households always equals the number of families; however, a family household may also include non-relatives living with the family. Families are classified by type as either a married-couple family or other family, which is further classified into 'male householder' (a family with a male householder and no wife present) or 'female householder' (a family with a female householder and no husband present). 14
era Public Evaluation Full-scope review: Performance under the lending and community development tests is analyzed considering performance context, quantitative factors (for example, geographic distribution, borrower distribution, and total number and dollar amount of investments), and qualitative factors (for example, responsiveness). Geography: A census tract delineated by the United States Bureau of the Census in the most recent decennial census. Home Mortgage Disclosure Act (HMDA): The statute that requires certain mortgage lenders that do business or have banking offices in a metropolitan statistical area to file annual summary reports of their mortgage lending activity. The reports include such data as the race, gender, and the income of applications, the amount of loan requested, and the disposition of the application (for example, approved, denied, and withdrawn). Home mortgage loans: Includes home purchase and home improvement loans as defined in the HMDA regulation. This definition also includes multifamily (five or more families) dwelling loans, loans for the purchase of manufactured homes and refinancings of home improvement and home purchase loans. Household: Includes all persons occupying a housing unit. Persons not living in households are classified as living in group quarters. In 100 percent tabulations, the count of households always equals the count of occupied housing units. Limited-scope review: Performance under the lending and community development tests is analyzed using only quantitative factors (for example, geographic distribution, borrower distribution, total number and dollar amount of investments, and branch distribution). Low-Income: Individual income that is less than 50 percent of the area median income, or a median family income that is less than 50 percent, in the case of a geography. Market share: The number of loans originated and purchased by the institution as a percentage of the aggregate number of loans originated and purchased by all reporting lenders in the metropolitan area/assessment area. Metropolitan area (MA): A metropolitan statistical area (MSA) or a metropolitan division (MD) as defined by the Office of Management and Budget. A MSA is a core area containing at least one urbanized area of 50,000 or more inhabitants, together with adjacent communities having a high degree of economic and social integration with that core. A MD is a division of a MSA based on specific criteria including commuting patterns. Only a MSA that has a population of at least 2.5 million may be divided into MDs. Middle-Income: Individual income that is at least 80 percent and less than 120 percent of the area median income, or a median family income that is at least 80 percent and less than 120 percent, in the case of a geography. Moderate-Income: Individual income that is at least 50 percent and less than 80 percent of the area median income, or a median family income that is at least 50 percent and less than 80 percent, in the case of a geography. 15
CRA Public Evaluation Multi-family: Refers to a residential structure that contains five or more units. Other products: Includes any unreported optional category of loans for which the institution collects and maintains data for consideration during a CRA examination. Examples of such activity include consumer loans and other loan data an institution may provide concerning its lending performance. Owner-occupied units: Includes units occupied by the owner or co-owner, even if the unit has not been fully paid for or is mortgaged. Qualified Investment: A qualified investment is defined as any lawful investment, deposit, membership share, or grant that has as its primary purpose community development. Rated area: A rated area is a state or multistate metropolitan area. For an institution with domestic branches in only one state, the institution's CRA rating would be the state rating. If an institution maintains domestic branches in more than one state, the institution will receive a rating for each state in which those branches are located. If an institution maintains domestic branches in two or more states within a multistate metropolitan area, the institution will receive a rating for the multistate metropolitan area. Smaliloan(s) to business(es): A loan included in 'loans to small businesses' as defined in the Consolidated Report of Condition and Income (Call Report) and the Thrift Financial Reporting (TFR) instructions. These loans have original amounts of $1 million or less and typically are either secured by nonfarm or nonresidential real estate or are classified as commercial and industrial loans. However, thrift institutions may also exercise the option to report loans secured by nonfarm residential real estate as "small business loans" if the loans are reported on the TFR as non mortgage, commercial loans. Smaliloan(s) to farm(s): A loan included in 'loans to small farms' as defined in the instructions for preparation of the Consolidated Report of Condition and Income (Call Report). These loans have original amounts of $500,000 or less and are either secured by farmland, or are classified as loans to finance agricultural production and other loans to farmers. Upper-Income: Individual income that is more than 120 percent of the area median income, or a median family income that is more than 120 percent, in the case of a geography. 16