Image of Don M. Griffith

Don M. Griffith
Chairman & Chief Executive Officer

Chairman’s Letter

As a lifelong banker and entrepreneur, I have always been inspired by the challenge of building and growing businesses.

It is what has motivated me, together with COO Deborah Marsten, to found several banks — including Grandpoint — over the course of my career.

We started Grandpoint in June, 2010, with a vision to build a regional business bank that provides high-touch client service and maintains a strong connection to the communities we serve. Grandpoint opened its doors during a challenging time for traditional banking; however, we did not embark upon this journey alone. We assembled a seasoned team of industry veterans who were united by an entrepreneurial vision and a love of banking, and together, we used our passion and expertise to navigate this bank — and our clients’ businesses — through strong economic headwinds.

We have always embraced an ethos of taking an advisory role with clients, providing banking insights and services that can help their businesses grow and prosper. In turn, our client relationships have created opportunities for Grandpoint’s growth by inspiring us to continually evolve and diversify our product offerings, to meet their expanding and specialized needs.

Since Grandpoint’s inception, we have achieved steady progress with revenue generation and expense management by adhering to our strategy. In the past eight years, it has been a pleasure for me to watch the strategic vision upon which we founded the bank come to life.

Our acquisition phase

Grandpoint’s first phase of evolution involved the acquisition of small community banks that aligned with a well-defined set of criteria. These were historically high-quality community banks with strong deposit relationships that had gotten caught up in the economic tsunami of 2008. Between 2010 and 2014, we executed this strategy by acquiring 11 banks in growth markets. These acquisitions brought an influx of highly experienced bankers to our organization, who had strong client relationships and deep ties to their respective communities.

Aquisitions (assets in millions)

History of Aquisitions (Chart)

Branch Locations

Branch locations graph shows where Grandpoint Bank offices are located in southern California, Arizona and Washington.

In the last eight years, Grandpoint has grown from $75 million to more than $3 billion in assets.

Balance Sheet Growth – Total Assets (in millions)

Balance Sheet Growth (Chart)

Our consolidation phase

It took several years to fully integrate the acquired banks, consolidate their operations, eliminate redundancies, and establish our corporate culture across the Grandpoint system. During this phase, our focus was not on growing assets but rather on improving the bank’s mix of underlying assets and liabilities. A major goal was to reduce our dependence on brokered and non-core deposits and to replace them with the stable core business demand deposits indicative of long-term client relationships. As a result, we experienced low asset growth during this period but a dramatic improvement in return on assets and return on equity.

From 2012 onward, as we built a single, unified bank, Grandpoint continued to increase profitability, and we began to improve our overall efficiency ratio to levels below the industry norm.

Annual Net Income (in thousands)

Annual Net Income in thousands (Chart)

*Includes a $6.3 million tax benefit.
†Impacted by after-tax M&A expense of approximately $6.0 million.
‡Impacted by one-time charge-off of $6.6 million in deferred tax assets.

Driving organic growth

In 2014, we completed our acquisition and consolidation phases and embarked on the third stage of Grandpoint’s evolution: creating value through sustained, organic growth. After four decades in the industry, it is my belief that in banking, the tortoise wins the race with steady, measured growth. That is the strategy we have followed, gradually and consistently expanding existing client relationships and developing new business. We also focused on improving the deposit mix in order to grow relationship-based demand deposits — which increased from 33% of total deposits in 2014 to 46% in the first quarter of 2018. As we continued to grow, we improved our efficiency and strengthened our financial performance. Our Return on Average Assets (ROAA) increased from -2.36% in 2010 to 1.10% at the end of the first quarter of 2018, and our Return on Average Tangible Equity (ROATE) grew from -11.29% to 12.18% at March 31, 2018.

Return on Average Assets

Return on Average Assets (Chart)

*Adjusted for non-recurring expenses of $2.1 million, net of tax, and the one-time charge-off of $6.6 million in deferred tax assets.

Return on Average Tangible Equity

Return on Average Tangible Equity (Chart)

*Adjusted for non-recurring expenses of $2.1 million, net of tax, and the one-time charge-off of $6.6 million in deferred tax assets.

In addition, by carefully managing our expenses, we have maintained an Efficiency Ratio in the 50% range.

Efficiency Ratio

Efficiency Ratio (Chart)

*Adjusted for $3.6 million of non-recurring expenses.

We have never been interested in pursuing rapid growth at the expense of caution. As a relationship-driven organization, Grandpoint has always maintained a very clean balance sheet with strong asset quality. I take personal pride in our team’s ability to consistently operate a healthy bank that remains in good standing with regulators. Most of the banks we acquired had asset quality ratios that were negatively impacted by the economic climate at the time of acquisition. In addition to improving our profitability and efficiency as we evolved into a single, consolidated bank, we were also able to improve our asset quality ratio to industry lows.

Classified Assets to Total Capital

Classified Assets to Total Capital (Chart)

*Impacted by 2017 $1.25 special dividend to shareholders

While all of our regions share a fundamental business philosophy, credit culture and client-centered attitude, we embrace the unique character that each brings to Grandpoint. In all of our markets, we made it a priority to retain local leadership and build on the well-established presence in those regions. Our regional presidents have the autonomy to make the decisions and pursue the opportunities they deem best for their regions. This has enabled them to continue to foster relationships within their respective communities and grow their businesses.

New product initiatives

We continually seek out opportunities to expand our product platform to better help our clients advance their businesses. Among our most recent initiatives was the creation of a business unit devoted to the needs of the specialty deposit industries and new financial solutions tailored to the unique banking requirements of our non-profit clients.

Our new Specialty Deposits group

During 2017, we launched our Specialty Deposits practice — and we are off to a fantastic start. Our Specialty Deposits group is headed by veteran banker and SVP Scott Armstrong, who brings to Grandpoint decades of experience in the cash management needs of all specialty deposit industries. Scott’s level of expertise in Specialty Deposits is unique in our industry, and his insights have enabled us to craft creative, customized solutions that can streamline our clients’ businesses and truly add value for them. Scott is already building a robust portfolio of business by providing 1031 Exchange services, title and escrow services, and third party escrow services.

A strategic focus on banking nonprofit organizations

At our core, Grandpoint retains the spirit of a community bank. Community outreach is important to us, and the depth of our commitment is recognized in the Community Reinvestment Act (CRA) rating we have earned from industry regulators. We support the good works of nonprofit organizations in our regions — with volunteerism, contributions and by providing the banking services they need.

Through our CRA experience, we have gained an understanding of the unique challenges inherent in running a donation-driven organization. We have brought our wealth of expertise and long-standing community relationships to bear for the benefit of our nonprofit clients in a variety of ways. We harness the expertise of multi-disciplinary teams within Grandpoint to create banking solutions that address the unique requirements of individual nonprofits.

Our people

It has long been my belief that our clients don’t bank with Grandpoint — they bank with our people. We strive to create continuity year-over-year for clients by recruiting and retaining the best talent in the banking industry, individuals who combine extensive banking experience with a personalized, advisory approach and a devotion to helping our clients succeed.

In 2017, our team helped to create successful banking solutions for clients in a variety of different categories:

Grandpoint’s acquisition by Pacific Premier Bank

This is a significant moment for the Grandpoint team. In February, 2018, we announced that Grandpoint will be acquired by Pacific Premier Bancorp, Inc. Like Grandpoint, Pacific Premier Bank specializes in serving business clients and is one of the strongest community banks in the nation. It has a well-established presence in the Southern and Central Coast areas of California as well as Las Vegas, Nev. This merger will create one of the largest commercial banks headquartered in Southern California, with combined assets over $11 billion, and 46 branches in California, Arizona, Nevada and Washington.

We chose to merge with Pacific Premier Bank in part because we share certain synergies, including a similar business philosophy and history. Like Grandpoint, the Pacific Premier team places a high value on forging long-term client relationships, and they are proud to invest in and collaborate with hundreds of nonprofit organizations across their operating regions. This combined company will offer our clients the benefits of banking with a larger organization that has an entrepreneurial, community- and client-focused approach, greater capital resources and an expanded array of products and services. Moving forward, as we transition to Pacific Premier, Grandpoint clients will continue to work with many of the same staff members who support their banking needs with care and attention today.

I have greatly enjoyed the opportunity to build Grandpoint Bank into the organization it is today. At the same time, I am excited about the opportunities that will be created from this merger. I will be joining the board of directors of the combined bank, and I look forward to contributing to the collective success of Grandpoint and Pacific Premier in the future.

We are grateful for the confidence and support of our shareholders, for the continued loyalty of our clients, and for the passion and dedication of our employees, in helping to build an exceptional organization.

Don M. Griffith
Chairman & Chief Executive Officer