All references to “we,” “us,” “our,” “Pacific Premier,” or the “Company” mean Pacific Premier Bancorp, Inc. and our consolidated subsidiaries, including Pacific Premier Bank, our primary operating subsidiary. All references to the “Bank” refer to Pacific Premier Bank. All references to the “Corporation” refer to Pacific Premier Bancorp, Inc.

This Annual Report on Form 10-K contains information and statements that are considered “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of our beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” or words or phrases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors, which are in many instances, beyond our control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

~~The~~Given the ongoing and dynamic nature of the Coronavirus Disease 2019 (“COVID-19”) pandemic, ~~is adversely affecting us, our customers, counterparties, employees, and third party service providers, and given its ongoing and dynamic nature,~~ the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects isremain uncertain. ~~Continued deterioration in~~Although general business and economic conditions have begun to recover, the recovery could be slowed or reversed by a number of factors, including ~~further~~ increases in ~~unemployment rates,~~COVID-19 infections, the tight labor market, supply chain disruptions, inflationary pressures, or turbulence in domestic or global financial markets, which could adversely affect our revenues, ~~and~~ the values of our assets and liabilities, and our profitability, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility, which could result in impairment to our goodwill or other intangible assets in future periods. Changes to statutes, regulations, or regulatory policies or practices as a result of, or in response, to the COVID-19 pandemic could affect us in substantial and unpredictable ways, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance. In addition to the foregoing, the following additional factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Annual Report on Form 10-K and other reports and registration statements filed by us with the SEC. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We will not update the forward-looking information and statements to reflect actual results or changes in the factors affecting the forward-looking information and statements. For information on the factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K.

Forward-looking information and statements should not be viewed as predictions, and should not be the primary basis upon which investors evaluate us. Any investor in our common stock should consider all risks and uncertainties disclosed in our filings with the SEC, all of which are accessible on the SEC’s website at http://www.sec.gov.

We are a California-based bank holding company incorporated in 1997 in the State of Delaware and a registered bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”). Our wholly-owned subsidiary, Pacific Premier Bank, is a California state-chartered commercial bank. The Bank was founded in 1983 as a state-chartered thrift and subsequently converted to a federally-chartered thrift in 1991. The Bank converted to a California-chartered commercial bank and became a member of the Federal Reserve System in March 2007. The Bank is a member of the Federal Home Loan Bank of San Francisco (“FHLB”), which is a member bank of the Federal Home Loan Bank System. The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the maximum amount currently allowable under federal law. The Bank is currently subject to examination and regulation by the Federal Reserve and the Federal Reserve Bank of San Francisco (“FRB”), the California Department of Financial Protection and Innovation (“DFPI”), the Consumer Financial Protection Bureau (“CFPB”), and the FDIC. We primarily conduct business throughout the Western Region of the United States from our 6561 full-service depository branches located in Arizona, California, Nevada, Oregon, and Washington.

We ~~endeavor~~strive to be an innovative, growth-oriented organization, keenly focused on building shareholder value through ~~generating~~delivering consistent ~~earnings,~~financial performance, creating franchise value, practicing sound enterprise risk management, ~~principals,~~ and effectively and prudently managing capital. ~~Our growth is derived both organically~~We have a significant market presence and through strategic acquisitions of other financial institutions and lines of business that complement our commercial business banking strategy. Our primary target market is small and middle market businesses.a strong core deposit base in several major metropolitan markets along the Western United States.

~~Leveraging Technology to Enhance~~ Our ~~Banking Products and Services and Facilitate Organic Growth~~

~~We believe that these~~While executing on our two-pronged approach to growth, we have maintained our focus on prudent liquidity and ~~other innovative technologies~~capital management, as well as comprehensive and ~~processes have contributed significantly~~effective enterprise risk management. In addition, as our organization has grown in size, complexity and geographic reach, our commitment to promoting a diverse, inclusive and equitable environment for our professionals and the communities we serve has become increasingly important to our ~~organic growth and our ability to develop and expand our specialty banking products and services, some of which are briefly described below.~~long-term success.

Our core lending business continues to focus on meeting the financial needs of small- and medium-sized businesses and corporations. To that end, we offer a full complement of flexible and structured loan products tailored to meet the diverse needs of these customers. A key aspect of our growth initiatives has beenThe graphics below show the diversification ~~– by product type and geography –~~ of our ~~loan portfolio. Set forth below is a brief summary of our primary lending activities.~~

We have a long history of creating value for stockholders through successfully executing transactions in ~~amounts~~a timely and effective manner. We have been able to complete system conversions, branch consolidations, and staffing adjustments efficiently through the vast majority of upour transactions. Successful execution of this strategy has allowed us to ~~80%~~often realize the combined operational synergies and benefits to our organization quickly.

Set forth below is a summary of the ~~lesser~~strategic acquisitions we have consummated since January 1, 2016:

~~The graphics below show the diversification~~Below is a summary of our ~~loan portfolio as of December 31, 2020 by loan type and geography.~~acquisition history:

In addition to the strategic transactions described above, other noteworthy acquisitions include the acquisition of our Franchise Lending business from Infinity Franchise Holdings in 2014, the acquisition of our HOA business from First Associations Bank in 2013, and the expansion of our geographic footprint in San Diego County, California in connection with our 2013 acquisition of San Diego Trust Bank.

The following chart depicts the increase in our tangible book value (“TBV”) per share, which has more than doubled since 2013, reflecting successful execution of our overall growth strategy:

The charts below show our deposit mix as of December 31, ~~2020~~2021 and our average cost of deposits for the fourth quarter in ~~2019~~2020 and each quarter in ~~2020.~~2021.

In January 2021, we also announced that our Board of Directors approved a new stock repurchase program, which authorizes us to repurchase up to 4,725,000 shares of our common ~~stock. The~~ stock ~~repurchase program represents~~representing approximately 5% of our issued and outstanding shares of common stock and approximately $150 million of common stock as of December 31, 2020, based on the closing price of the Company’s common stock on December 31, 2020. During 2021, the Company repurchased $18.1 million of common stock under the program at a weighted average price of $37.61, totaling 479,944 in shares of common stock.

We place significant emphasis on risk management as an integral component of our corporate governance and organizational culture. We believe that our emphasis on risk management is critical to achieving our strategic goals and objectives.

We believe that our commitment to prudent credit risk management and underwriting standards allowed us to navigate periods of the economic volatility experienced ~~in 2020~~ as a result of the COVID-19 pandemic. The graphics below show our non-performing assets, past due loans, classified loans, and net charge-offs, each as a percentage of total loans, for the fourth quarter in ~~2019~~2020 and each quarter in ~~2020.~~2021.

As a California state-chartered commercial bank, we are subject to Section 1481 of the California Financial Code (the “Financial Code”), which establishes the rules that limit the aggregate amount of secured and unsecured loans to a single borrower and its related interests to 25% and 15%, respectively, of unimpaired capital and surplus. The eligibility of the personal property or collateral held as security is based on California regulations. Our credit policies establish internal lending limits below our ~~$821.3~~$848.1 million legal lending limit for secured loans and ~~$492.8~~$508.8 million legal lending limit for unsecured loans as of December 31, ~~2020.~~2021. At December 31, ~~2020,~~2021, our largest aggregate outstanding balance of loans to one borrower was ~~$165.4~~$188.5 million, ~~secured by multifamily properties.~~primarily comprised of an asset-based line of credit.

We recognize the significant potential impact climate change may have on us, our clients, employees, shareholders, and the communities we serve. We are cognizant of our responsibility to better understand the impact of our operations on global climate change and are taking steps to help ensure our organization operates in ~~place insurance coverage for risks related~~a manner consistent with responsible environmental stewardship. We are susceptible to ~~information security.~~losses and disruptions caused by fire (particularly in California, where we have a significant portion of our offices/branches), power shortages, telecommunications failures, water shortages, floods, and other extreme weather conditions. Climate change may contribute to or exacerbate these conditions. We are also susceptible to losses arising from the transition to a low carbon economy, including policy changes, energy costs, and shifts in market and customer sentiment that can impact us and our clients. At this time, we have not experienced material losses from climate change. However, we are aware that its impact may increase in the future. As the potential impact of climate change broadens, we will continue to assess and manage our exposure.

Our culture is embodied in our Success Attributes: Achieve, Communicate, Improve, Integrity, and Urgency. These principles have been the drivers of our performance and continued to serve us well in ~~2020~~2021 as we executed our strategic growth strategy and ~~navigated~~continued to navigate the COVID-19 pandemic. We believe in the value of teamwork and the power of diversity. We expect and encourage participation and collaboration, and understand that we need each other to be successful. We value accountability because it is essential to our success, and we accept our responsibility to hold ourselves and others accountable for meeting shareholder commitments and achieving exceptional standards of performance.

We are a regional bank focused on the commercial banking business, with our primary market encompassing the Western Region of the United States centering on major metropolitan areas within Southern California, the California Central Coast, the Pacific Northwest, Arizona, and Nevada. We also compete in several broader regional and national markets through our HOA Banking, SBA, Franchise Lending, CRE and ~~multi-family~~multifamily lines of business, Commerce Escrow division, and our Pacific Premier Trust division.

The banking business is highly competitive. We compete for loans, deposits, 1031 exchange escrow services, self-directed IRA custodial services, and ~~employees. Some of our competitors are larger in total assets and capitalization, with more offices over a wider geographic area and offer a broader range of financial services than our operations.~~employees, among other things. Our most direct competition for loans comes from larger regional and national banks, diversified finance companies, and community banks that target the same customers as we do. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. Those competitors include ~~non-bank~~nonbank specialty lenders, insurance companies, private investment funds, investment banks, financial technology companies, and other financial and non-financial institutions.

Competition is based on a number of factors, including interest rates charged on loans and paid on deposits, underwriting standards, loan covenants, required guarantees, the scope and type of banking and financial services offered, including online and digital banking, customer service, timely adoption of technological changes, and regulatory compliance. Many of our competitors are larger companies that offer a broader range of financial services and have substantial capital, technological, and marketing resources. Some of our competitors have substantial market positions and have access to a lower cost of capital or a less expensive source of funds. Because of economies of scale, our larger, nationwide competitors may offer loan pricing that is more attractive than what we are willing to offer.

Economic factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. We work to anticipate and adapt to dynamic competitive conditions whether it is by developing and marketing innovative products and services, adopting or developing new technologies that differentiate our products and services, cross marketing, or providing highly personalized banking services. We strive to distinguish ourselves from other banks and financial services providers in our marketplace by providing an extremely high level of service to enhance customer loyalty and to attract and retain business.

We differentiate ourselves in the marketplace through the quality of service we provide to borrowers while ~~maintaining~~striving to maintain competitive interest rates, loan fees, and other loan terms. We emphasize personalized relationship banking services and the efficient decision-making of our lending business units. We compete effectively based on our in-depth knowledge of our borrowers' industries and their business needs based upon information received from our borrowers' key decision-makers, analysis by our experienced professionals, and interaction between these two groups; our breadth of loan product offerings and flexible and creative approach to structuring products that meet our borrowers' business and timing needs; and our dedication to superior client service. However, we can provide no assurance as to the effectiveness of these efforts on our future business or results of operations. Overall, our continued ability to anticipate and adapt to changing conditions and sufficiently enhance our services and banking products ~~put~~positions us ~~in a position~~ to successfully compete in the marketplace.

The Corporation’s common stock is traded on the NASDAQ Global Select Market under the ticker symbol “PPBI.” There are 150 million authorized shares of the Corporation’s common stock, with approximately ~~94.5~~94.4 million shares outstanding as of December 31, ~~2020.~~2021. The Corporation has an additional 1.0 million authorized shares of preferred stock, none of which has been issued to date.

As a bank holding company, the Corporation is subject to regulation and supervision by the Federal Reserve. We are required to file with the Federal Reserve quarterly and annual reports and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may conduct examinations of bank holding companies and their subsidiaries. The Corporation is also a bank holding company within the meaning of the Financial Code. As such, the Corporation and its subsidiaries are subject to examination by, and may be required to file reports with, the DFPI.

Under changes made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), a bank holding company must act as a source of financial and managerial strength to each of its subsidiary banks and to commit resources to support each such subsidiary bank. In order to fulfill its obligations as a source of strength, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank. In addition, the Federal Reserve may charge the bank holding company with engaging in unsafe and unsound practices if the bank holding company fails to commit resources to a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize the bank holding company’s ability to commit resources to such subsidiary bank. The Federal Reserve also has the authority to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.

As a California state-chartered commercial bank and member of the Federal Reserve System, the Bank is subject to supervision, periodic examination, and regulation by the DFPI and the Federal Reserve. The Bank’s deposits are insured by the FDIC through the Deposit Insurance Fund (“DIF”). Pursuant to the Dodd-Frank Act, federal deposit insurance coverage was permanently increased to $250,000 per depositor for all insured depository institutions. As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over the Bank as well as all other FDIC insured institutions. If, as a result of an examination of the Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings, management, liquidity, or other aspects of the Bank’s operations are unsatisfactory or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators. Such remedies include the power to enjoin unsafe or unsound practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict growth, to assess civil monetary penalties, to remove officers and directors, and ultimately, request the FDIC terminate the Bank’s deposit insurance. As a California-chartered commercial bank, the Bank is also subject to certain provisions of California law.

Legislative and regulatory initiatives, which necessarily impact the regulation of the financial services industry, are introduced from ~~time-to-time.~~time to time. We cannot predict whether or when potential legislation or new regulations will be enacted, and if enacted, the effect that new legislation or any implemented regulations and supervisory policies would have on our financial condition and results of operations. The Dodd-Frank Act, by way of example, contains a comprehensive set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets. The Dodd-Frank Act made extensive changes in the regulation of financial institutions and their holding companies. Some of the changes brought about by the Dodd-Frank Act have been modified by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (the “Regulatory Relief Act”), signed into law on May 24, 2018. The Dodd-Frank Act has increased the regulatory burden and compliance costs of the Company.Moreover, bank regulatory agencies can be more aggressive in responding to concerns and trends identified in examinations, which could result in an increased issuance of enforcement actions to financial institutions requiring action to address credit quality, liquidity and risk management, and capital adequacy, as well as other safety and soundness concerns.

The BHCA requires a bank holding company to obtain prior approval of the Federal Reserve before: (i) taking any action that causes a bank to become a controlled subsidiary of the bank holding company; (ii) acquiring direct or indirect ownership or control of voting shares of any bank or bank holding company, if the acquisition results in the acquiring bank holding company having control of more than 5% of the outstanding shares of any class of voting securities of such bank or bank holding company, unless such bank or bank holding company is majority-owned by the acquiring bank holding company before the acquisition; (iii) acquiring all or substantially all of the assets of a bank; or (iv) merging or consolidating with another bank holding company.

The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies.

The scope and content of the U.S. banking regulators’ policies on executive compensation may continue to evolve in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain, and motivate its key employees.

As fully phased-in on January 1, 2019, Basel III subjects banks to the following risk-based capital requirements:

The Basel III final framework provides for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. Basel III also includes, as part of the definition of CET1 capital, a requirement that banking institutions include the amount of ~~Additional~~Accumulated Other Comprehensive Income (“AOCI”), which primarily consists of unrealized gains and losses on available-for-sale securities, which are not required to be treated as other-than-temporary impairment, net of ~~tax)~~tax, in calculating regulatory capital. Banking institutions had the option to opt out of including AOCI in CET1 capital if they elected to do so in their first regulatory report following January 1, 2015. As permitted by Basel III, the Company and the Bank have elected to exclude AOCI from CET1.

The Dodd-Frank Act excludes trust preferred securities issued after May 19, 2010, from being included in Tier 1 capital, unless the issuing company is a bank holding company with less than $500 million in total assets. Trust preferred securities issued prior to that date will continue to count as Tier 1 capital for bank holding companies with less than $15 billion in total assets. During the second quarter of 2020, the Corporation’s acquisition of Opus resulted in total consolidated assets exceeding $15 billion. Accordingly, the trust preferred securities issued by our unconsolidated subsidiary capital trusts ~~are now~~were included in Tier 2 ~~capital.~~capital at December 31, 2020. The Company’s trust preferred securities were all redeemed during the third quarter of 2021, and the related unconsolidated subsidiary capital trusts were dissolved.

In addition, goodwill and most intangible assets are deducted from Tier 1 capital. For purposes of applicable total risk-based capital regulatory guidelines, Tier 2 capital (sometimes referred to as “supplementary capital”) is defined to include, subject to limitations: perpetual preferred stock not included in Tier 1 capital, intermediate-term preferred stock and any related surplus, certain hybrid capital instruments, perpetual debt and mandatory convertible debt securities, ~~allowances~~allowance for ~~loan and lease~~credit losses, and intermediate-term subordinated debt instruments. The maximum amount of qualifying Tier 2 capital is 100% of qualifying Tier 1 capital. For purposes of determining total capital under federal guidelines, total capital equals Tier 1 capital, plus qualifying Tier 2 capital, minus investments in unconsolidated subsidiaries, reciprocal holdings of bank holding company capital securities, and deferred tax assets and other deductions.

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Basel III changed the manner of calculating risk-weighted assets. New methodologies for determining risk-weighted assets in the general capital rules are included, including revisions to recognition of credit risk mitigation, including a greater recognition of financial collateral and a wider range of eligible guarantors. They also include risk weighting of equity exposures and past due loans; and higher (greater than 100%) risk weighting for certain commercial real estate exposures that have higher credit risk profiles, including higher ~~loan to value~~loan-to-value and equity components. In particular, loans categorized as “high-volatility commercial real estate” loans (“HVCRE loans”), as defined pursuant to applicable federal regulations, are required to be assigned a 150% risk weighting, and require additional capital support.

In addition to the uniform risk-based capital guidelines and regulatory capital ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios. Future changes in regulations or practices could further reduce the amount of capital recognized for purposes of capital adequacy. Such a change could affect our ability to grow and could restrict the amount of profits, if any, available for the payment of dividends.

In addition, the Dodd-Frank Act requires the federal banking agencies to adopt capital requirements that address the risks that the activities of an institution ~~poses~~pose to the institution and the public and private stakeholders, including risks arising from certain enumerated activities.

Basel III became applicable to the Corporation and the Bank on January 1, 2015. Overall, the Corporation believes that implementation of the Basel III Rule has not had and will not have a material adverse effect on the Corporation’s or the Bank’s capital ratios, earnings, shareholder’s equity, or its ability to pay dividends, effect stock repurchases or pay discretionary bonuses to executive officers.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms (the standards are commonly referred to as “Basel IV”). Among other things, these standards revise the Basel Committee’s standardized approach for credit risk (including recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital. Under the Basel framework, these standards ~~will~~ generally bebecame effective on January 1, 2022, with an aggregate output floor phasing in through January 1, 2027. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Corporation or the Bank. The impact of Basel IV on us will depend on the manner in which it is implemented by the federal bank regulators.

In 2018, the federal bank regulatory agencies issued a variety of proposals and made statements concerning regulatory capital standards. These proposals touched on such areas as commercial real estate exposure, credit loss allowances under generally accepted accounting principles, and capital requirements for covered swap entities, among others. Public statements by key agency officials have also suggested a revisiting of capital policy and supervisory approaches on a going-forward basis. In July 2019, the federal bank regulators adopted a final rule that simplifies the capital treatment for certain deferred tax assets, mortgage servicing assets, investments in non-consolidated financial entities and minority interests for banking organizations, such as the Corporation and the Bank, that are not subject to the advanced approaches requirements. We will be assessing the impact on us of these new regulations and supervisory approaches as they are proposed and implemented.

As noted above, Basel III integrates the capital requirements into the prompt corrective action category definitions. The following capital requirements have applied to the Bank since January 1, 2015.

An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. An institution’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the institution’s overall financial condition or prospects for other purposes.

In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be “adequately capitalized.” The bank regulators have greater power in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan. In addition to requiring undercapitalized institutions to submit a capital restoration plan, bank regulations contain broad restrictions on certain activities of undercapitalized institutions including asset growth, acquisitions, branch establishment, and expansion into new lines of business. With certain exceptions, an insured depository institution is prohibited from making capital distributions, including dividends, and is prohibited from paying management fees to control persons if the institution would be undercapitalized after any such distribution or payment.

As an institution’s capital decreases, the regulators’ enforcement powers become more severe. A significantly undercapitalized institution is subject to mandated capital raising activities, restrictions on interest rates paid and transactions with affiliates, removal of management, and other restrictions. A regulator has limited discretion in dealing with a critically undercapitalized institution and is virtually required to appoint a receiver or conservator.

Banks with risk-based capital and leverage ratios below the required minimums may also be subject to certain administrative actions, including the termination of deposit insurance upon notice and hearing, or a temporary suspension of insurance without a hearing in the event the institution has no tangible capital.

In addition to the federal regulatory capital requirements described above, the DFPI has authority to take possession of the business and properties of a bank in the event that the tangible stockholders’ equity of a bank is less than the greater of (i) 4% of the bank’s total assets or (ii) $1.0 million.

The Bank’s ability to pay dividends to the Corporation is subject to restrictions set forth in the Financial Code. The Financial Code provides that a bank may not make a cash distribution to its stockholders in excess of the lesser of a bank’s (1) retained earnings; or (2) net income for its last three fiscal years, less the amount of any distributions made by the bank or by any majority-owned subsidiary of the bank to the stockholders of the bank during such period. However, a bank may, with the approval of the DFPI, make a distribution to its stockholders in an amount not exceeding the greatest of (a) its retained earnings; (b) its net income for its last fiscal year; or (c) its net income for its current fiscal year. In the event that bank regulators determine that the stockholders’ equity of a bank is inadequate or that the making of a distribution by the bank would be unsafe or unsound, the regulators may order the bank to refrain from making a proposed distribution. The payment of dividends could, depending on the financial condition of a bank, be deemed to constitute an unsafe or unsound practice. Under the foregoing provision of the Financial Code, the amount available for distribution from the Bank to the Corporation was approximately ~~$298.4~~$404.9 million at December 31, ~~2020.~~2021.

Approval of the Federal Reserve is required for payment of any dividend by a state chartered bank that is a member of the Federal Reserve, such as the Bank, if the total of all dividends declared by the bank in any calendar year would exceed the total of its retained net income for that year combined with its retained net income for the preceding two years. In addition, a state member bank may not pay a dividend in an amount greater than its undivided profits without regulatory and stockholder approval. The Bank is also prohibited under federal law from paying any dividend that would cause it to become undercapitalized.

Under the FDIC’s risk-based deposit premium assessment system, the assessment rates for an insured depository institution are determined by an assessment rate calculator, which is based on a number of elements that measure the risk each institution poses to the ~~Deposit Insurance Fund.~~DIF. As a result of the Dodd-Frank Act, the calculated assessment rate is applied to average consolidated assets less the average tangible equity of the insured depository institution during the assessment period to determine the dollar amount of the quarterly assessment. Under the current system, premiums are assessed quarterly and could increase if, for example, criticized loans and leases and/or other higher risk assets increase or balance sheet liquidity decreases. In addition, the FDIC can impose special assessments in certain instances. Deposit insurance assessments fund the DIF. Under FDIC regulations issued pursuant to the Dodd-Frank Act, all insured depository institutions that were assessed as small institutions at any time during the period from July 1, 2016, through September 30, 2018, were awarded assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from the former minimum of 1.15% to 1.35%. Prior to July 1, 2019, the Bank was classified as a small institution, eligible for assessment credits. Starting the third quarter of 2018, the Bank reported assets of $10 billion or more in its quarterly reports of condition for four consecutive quarters, and was classified as a large institution beginning the third quarter of 2019.

Based on the current FDIC insurance assessment methodology, our FDIC insurance premium expense was $5.3 million for 2021, $3.6 million for 2020, and $764,000 ~~for 2019, and $3.0 million~~ in ~~2018. The decrease in FDIC insurance premium expense in 2019 was due to small institution assessment credits during the year.~~2019.

Transactions between a bank and its “affiliates” are quantitatively and qualitatively restricted under Sections 23A and 23B of the FRA. Section 23A restricts the aggregate amount of covered transactions with any individual affiliate to 10% of the capital and surplus of the financial institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the institution’s capital and surplus. Certain transactions with affiliates are required to be secured by collateral in an amount and of a type described in Section 23A, and the purchase of low quality assets from affiliates are generally prohibited. Section 23B generally provides that certain transactions with affiliates, including loans and asset purchases, must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. The Federal Reserve has promulgated Regulation W, which codifies prior interpretations under Sections 23A and 23B of the FRA and provides interpretive guidance with respect to affiliate transactions. Affiliates of a bank include, among other entities, a bank’s holding company and companies that are under common control with the bank. The Corporation is considered to be an affiliate of the Bank.

The Dodd-Frank Act generally enhanced the restrictions on transactions with affiliates under Section 23A and 23B of the FRA, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivatives transactions, repurchase agreements, reverse repurchase agreements, and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

In addition, the federal banking agencies have also adopted safety and soundness guidelines with respect to asset quality and for evaluating and monitoring earnings to ensure that earnings are sufficient for the maintenance of adequate capital and reserves. These guidelines provide six standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating. Under these standards, an insured depository institution should: (i) conduct periodic asset quality reviews to identify problem assets; (ii) estimate the inherent losses in problem assets and establish reserves that are sufficient to absorb estimated losses; (iii) compare problem asset totals to capital; (iv) take appropriate corrective action to resolve problem assets; (v) consider the size and potential risks of material asset concentrations; and (vi) provide periodic asset quality reports with adequate information for management and the board of directors to assess the level of asset risk.

In April 2018, the U.S. Department of Treasury issued a memorandum to the federal banking regulators recommending changes to the CRA’s regulations to reduce their complexity and associated burden on banks, and in December 2019, the FDIC and the Office of the Comptroller of the Currency ~~(the “OCC”~~(“OCC”) proposed for public comment rules to modernize the agencies' regulations under the CRA. The OCC adopted its final rules in May 2020, ~~and,~~ to ~~date,~~which the FDIC ~~has~~ultimately did not ~~adopted revised rules.~~sign. In September 2020, the ~~Board of Governors of the~~ Federal Reserve ~~System~~ released for public comment its proposed rules to modernize CRA regulations. In July 2021, in an interagency statement, the Federal Reserve, OCC and FDIC committed to working together to jointly strengthen and modernize regulations implementing the CRA. In December 2021, the OCC rescinded its proposed rulemaking previously adopted in May 2020. We will continue to evaluate the impact of any changes to the CRA regulations.

Pursuant to the Dodd-Frank Act, the CFPB has broad authority to regulate and supervise the retail consumer financial products and services activities of banks and various ~~non-bank~~nonbank providers. The CFPB has authority to promulgate regulations, issue orders, guidance and policy statements, conduct examinations and bring enforcement actions with regard to consumer financial products and services. With assets exceeding $10 billion since 2019, the Bank is subject to examination for consumer compliance by the CFPB. The creation of the CFPB by the Dodd-Frank Act has led to, and is likely to continue to lead to, enhanced and strengthened enforcement of consumer financial protection laws.

Federal law currently contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. These provisions also provide that, except for certain limited exceptions, a financial institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. In June 2018, the California legislature passed the California Consumer Privacy Act of 2018 (the “CCPA”), which took effect on January 1, 2020. The CCPA, which covers businesses that obtain or access personal information on California resident consumers, grants consumers enhanced privacy rights and control over their personal information, and imposes significant requirements on covered companies with respect to consumer data privacy rights. We expect this trend of state-level activity to continue, and are continually monitoring developments in other states in which we operate.

The Corporation and the Bank report their income on a consolidated basis using the accrual method of accounting and are subject to federal and state income taxation in the same manner as other corporations with some exceptions. For 2021, 2020, ~~2019~~ and ~~2018,~~2019, the Company was subject to a ~~maximum~~ federal income tax rate of 21.00%. State income tax rates the Company is subject to varies, based on jurisdiction. ~~The highest~~Most of the Company’s apportionment is attributable to California, which has a state income tax rate ~~the~~of 10.84%. The Company is ~~subject to is 10.84%, which is attributable to California. The Company has~~currently not ~~been audited by the Internal Revenue Service (“IRS”).~~under examination in any taxing jurisdiction.

Ownership of our common stock involves certain risks. The risks and uncertainties described below are not the only ones we face. You should carefully consider the risks described below, as well as all other information contained in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occurs, our business, financial condition, and/or results of operations could be materially, adversely affected.

Governments have taken unprecedented financial and monetary steps in response to the pandemic. For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S. economy, followed by additional COVID relief legislation of approximately $900 million in December 2020. In March 2021, the American Rescue Plan Act, also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L. No. 117-2, was enacted to inject an additional $1.9 trillion in financial relief and economic stimulus. The Federal Reserve also took decisive and sweeping actions. From March 15, 2020 through 2021, their actions included a reduction in the target range for the federal funds rate to 0 to 25 basis points, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, corporate bonds, and other investments, and numerous facilities to support the flow of credit to households and businesses.

The full extent of the impact of the COVID-19 pandemic on ~~the global economy~~our capital, liquidity, and other financial positions and on our business, results of operations, ~~liquidity,~~ and ~~financial condition remain uncertain.~~prospects is still uncertain, and will depend on a number of evolving factors, including:

Our financial condition and results of operations are dependent on the U.S. economy, generally, and markets we serve, specifically. We primarily serve markets in California, and major metropolitan areas in Washington, Oregon, Arizona, and Nevada, though certain of our products and services are offered nationwide. Financial stress on our customers as a result of an uncertain future economic environment could have an adverse effect on the Company’s customers and their ability to repay their loans, which could adversely affect the Company’s business, financial condition, and results of operations. A weakening of these conditions in the markets in which we operate would likely have an adverse effect on us and others in the financial institutions industry. For example, a deterioration in economic conditions in our markets could drive losses beyond that which is provided for in our allowance for credit losses. We may also face the following risks in connection with these events:

AsThe threat of near-term inflation poses risk to the economy overall, and could indirectly pose challenges to our clients and to our business. Elevated inflation can impact our business customers through loss of purchasing power for their customers, leading to lower sales. Rising inflation can also increase input and inventory costs for our customers, forcing them to raise their prices or lower their profitability. Supply chain disruption, also leading to inflation, can delay our customers’ shipping ability, or timing on receiving inputs for their production or inventory. Inflation can lead to higher wages for our business customers, increasing costs. All of these inflationary risks for our business customer base can be financially detrimental, leading to increased likelihood that the customer may default

Our business activities and credit exposure are concentrated in California, and to a lesser extent Washington, Oregon, Arizona, and Nevada. Difficult economic conditions in these markets may cause us to incur losses associated with higher default rates and decreased collateral values in our loan portfolio. In addition, demand for our products and services may decline. Declines in the ~~California~~ real estate market could hurt our business because the majority of our loans are secured by real estate located within California. As of December 31, 2020, approximately 61% of the aggregate outstanding principal of our loans was secured by real estate were located in California. Ifif real estate values were to decline, ~~in California,~~ the collateral for our loans would provide less security. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans. The majority of our loans, approximately 61% of the aggregate outstanding principal as of December 31, 2021, are secured by real estate located within California.

Our profitability depends to a large extent upon net interest income, which is the difference between interest income and dividends we earn on interest-earning assets, such as loans and investments, and interest expense we pay on interest-bearing liabilities, such as deposits and borrowings. Any change in general market interest rates, whether as a result of changes in the monetary policy of the Federal Reserve or otherwise, may have a significant effect on net interest income and prepayments on our loans. ~~Since March 2020, the Federal Reserve Board’s Open Market Committee has maintained~~After maintaining its federal funds rate target in a range of 0% to 0.25%. since March 2020, the FOMC signaled in early 2022 that the target rate is likely to increase a number of times during 2022.

Our assets and liabilities may react differently to changes in overall interest rates or conditions. In general, higher interest rates are associated with a lower volume of loan originations while lower interest rates are usually associated with higher loan originations. Further, if interest rates decline, our loans may be refinanced at lower rates or paid off and our investments may be prepaid earlier than expected. If that occurs, we may have to redeploy the loan or investment proceeds into lower yielding assets, which might also decrease our income. Also, as many of our loans currently have interest rate floors, a rise in rates may increase the cost of our deposits while the rates on the loans remain at their floors, which could decrease our net interest income. Accordingly, changes in levels of market interest rates could materially and adversely affect our financial condition, loan origination volumes, net interest margin, results of operations, and profitability. Changes in interest rates also have a significant impact on the carrying value of certain of our assets, including loans, real estate, and investment securities, on our balance sheet.

We may incur debt in the future and that debt may also be sensitive to interest rates. Further, federal monetary policy significantly affects credit conditions for us, as well as for our borrowers, particularly as implemented by the Federal Reserve, primarily through open market operations in U.S. government securities, the federal funds rate target, the discount rate for bank borrowings, and reserve requirements. A material change in any of these conditions could have a material impact on us or our customers (including borrowers), and therefore on our results of operations.

As interest rates rise, our existing customers who have adjustable rate loans may see their loan payments increase and, as a result, may experience difficulty repaying those loans, which in turn could lead to higher losses for us. Increasing delinquencies, non-accrual loans, and defaults lead to higher loan loss provisions, and potentially greater eventual losses that would lower our current profitability and capital ratios.

We use derivative financial instruments, primarily consisting of interest rate swaps, to limit our exposure to interest rate risk. No hedging strategy can completely protect us, and the derivative financial instruments we elect may not have the effect of reducing our interest rate risk. Poorly designed strategies, inaccurate assumptions, improperly executed transactions, or the failure of a counterparty to fulfill its obligations could serve to increase our risks and losses. In addition, hedging strategies involve transaction and other costs. Our hedging strategies and the derivatives that we use may not adequately offset the risks of interest rate volatility and could result in or magnify losses, which could have an adverse effect on our financial condition and results of operations.

At December 31, ~~2020, $3.93~~2021, $4.27 billion of our securities were classified as available-for-sale with an aggregate net unrealized ~~gain~~loss of ~~$84.4~~$4.7 million. We increase or decrease stockholders’ equity by the amount of change from the unrealized gain or loss (the difference between the estimated fair value and the amortized cost) of our available-for-sale securities portfolio, net of the related tax, under the category of accumulated other comprehensive income/loss. Therefore, a decline in the estimated fair value of this portfolio will result in a decline in reported stockholders’ equity, as well as book value per common share and tangible book value per common share. This decrease will occur even though the securities are not sold. In the case of debt securities, if these securities are never sold and there are no credit impairments, the decrease will be recovered over the life of the securities. In the case of equity securities, which have no stated maturity, the declines in fair value may or may not be recovered over time.

At December 31, ~~2020,~~2021, we had stock holdings in the FHLB ~~of San Francisco~~ totaling $17.3 million, ~~$74.4~~$74.5 million in FRB stock, and ~~$25.4~~$25.7 million in other stock, all carried at cost. The stock held by us is ~~subject to recoverability testing~~evaluated for impairment under applicable accounting standards. For the year ended December 31, ~~2020,~~2021, we did not recognize an impairment charge related to our stock holdings. There can be no assurance that future negative changes to the financial condition of the issuers may require us to recognize an impairment charge with respect to such stock holdings.

Certain loans made by ~~the transition from~~us were made at variable rates that use LIBOR as a benchmark for establishing the interest rate. In addition, we also have investments and interest rate derivatives that reference ~~rate.~~

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Our total nonperforming assets amounted to $31.3 million, or 0.15% of our total assets, at December 31, 2021, an increase from $29.2 million, or 0.15% of our total assets, at December 31, ~~2020, an increase from $9.0 million or 0.08% at December 31, 2019.~~2020. We had ~~$16.9~~$3.2 million of net loan charge-offs for ~~2020, an increase~~2021, a decrease from ~~$7.5~~$16.9 million in ~~2019. Our~~2020. We reported a provision ~~for credit losses on loans was~~recapture of $67.1 million in 2021, compared to a provision expense of $172.3 million in ~~2020, an increase from $7.1 million in 2019.~~2020. If increases in our nonperforming assets occur in the future, our net loan charge-offs and/or provision for credit losses may also increase, which may have an adverse effect upon our future results of operations and capital.

We seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices. These practices generally include analysis of a borrower’s available cash flow (determined using financial statements and tax returns) and cash flow projections, valuation of collateral based on reports of independent appraisers, prior credit history, and liquid asset verifications. Although we believe that our underwriting criteria are appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria but subsequently deteriorate, and these losses may exceed the amounts set aside as reserves in our ACL under the CECL methodology, ~~(and ALLL~~and allowance for loan and leases losses (“ALLL”) prior to January 1, ~~2020).~~2020.

On January 1, 2020, we changed the way we estimate credit losses by replacing the incurred loss model used to determine the ~~allowance for loan losses, or~~ ALLL with the ~~current expected credit losses, or~~ CECL model. The CECL model incorporates the use of and is more reliant on reasonable and supportable forecasts of economic conditions, including, but not limited to: forecasts of GDP growth rates, levels of unemployment, vacancy rates, and changes in the value of commercial real estate properties.

Although we maintain an ACL at a level that we believe is adequate to absorb future expected credit losses under the CECL model, ~~changes~~our ACL may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results. Changes in economic, operating, and other conditions, including a sharp decline in real estate values and changes in interest rates, which are beyond our control, may cause our actual loan losses to exceed our current allowance estimates, which will adversely affect our financial condition and results of operations.

In addition, the Federal Reserve and the DFPI, as part of their supervisory function, periodically review our credit loss reserves. Either agency may require us to increase our provision for loan losses or to recognize further loan losses, based on their judgments, which may be different from those of our management and could adversely affect our financial condition and results of operations.

As of December 31, ~~2020,~~2021, our commercial real estate loans amounted to ~~$10.77~~$11.69 billion, or ~~81.3%~~81.8% of our total loan portfolio, and our commercial business loans amounted to ~~$2.23~~$2.51 billion, or ~~16.8%~~17.5% of our total loan portfolio. At such date, our largest outstanding C&I loan was ~~$86.7~~$179.8 million, our largest multiple borrower relationship was ~~$165.4~~$188.5 million, and our largest outstanding CRE loan was ~~$94.1~~$92.4 million. CRE and commercial business loans are generally considered riskier than single-family or ~~multi-family~~multifamily residential loans because they have larger balances to a single borrower or group of related borrowers. CRE and commercial business loans involve risks because the borrowers’ ~~ability~~abilities to repay the loans typically ~~depends~~depend primarily on the successful operation of the businesses or the properties securing the loans. Most of the Company’s commercial business loans are made to ~~small~~small- or ~~middle market~~middle-market business customers who may have a heightened vulnerability to economic conditions. Moreover, a portion of these borrowers may not have experienced a complete business or economic cycle. Furthermore, the deterioration of our borrowers’ businesses may hinder their ability to repay their loans with us, which could adversely affect our financial condition and results of operations.

Our operations are subject to extensive regulation by federal, state, and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on all or part of our operations. Federal and state banking regulators have significant discretion and authority to prevent or remedy what they perceive to be unsafe or unsound practices or violations of laws or regulations by financial institutions and bank holding companies in the performance of their supervisory and enforcement duties. The exercise of regulatory authority may have a negative impact on our financial condition and results of operations. Additionally, in order to conduct certain activities, including acquisitions, we are required to obtain regulatory approval. There can be no assurance that any required approvals can be obtained, or obtained without conditions or on a timeframe acceptable to the Company. The laws, rules, and regulations applicable to us are subject to regular modification and change. Regulations affecting banks and other financial institutions, such as the Dodd-Frank Act, are continuously reviewed and change frequently. The ultimate effect of such changes cannot be predicted. Compliance with such regulations and laws may increase our costs and limit our ability to pursue business opportunities. Further, a change in the Chair for Supervision of the Federal Reserve is likely to involve a different

Federal and state regulatory agencies, including the Federal Reserve, the DFPI, and the CFPB, periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a regulatory agency ~~were~~was to determine in its discretion that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that the Company or its management was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against the Bank or our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance. If we become subject to such regulatory actions, our business, financial condition, results of operations, and reputation may be negatively impacted.

We are subject to various privacy, information security, and data protection laws, such as the Gramm-Leach-Bliley Act, ~~which~~that among other things ~~requires~~require privacy disclosures and maintenance of a robust security program that are increasingly subject to change which could have a significant impact on our current and planned privacy, data protection, and information security-related ~~practices,~~practices; our collection, use, sharing, retention, and safeguarding of consumer or employee information; disclosures and notifications during a cyber or information security incident; and some of our current or planned business activities. We are also subject to the California Consumer Privacy Act of 2018, which came into effect on January 1, 2020, and provides a ~~new~~ private right of action for data breaches and requires companies that process information on California residents to make ~~new~~ disclosures to consumers about their data collection, use, and sharing practices and allow consumers to opt out of certain data sharing with third parties. Our regulators also hold us responsible for privacy and data protection obligations performed by our ~~third party~~third-party service providers while providing services to ~~us.~~us, as well as disclosures and notifications during a cyber or information security incident.

New or changes to existing laws increase our costs of compliance and business operations and could reduce income from certain business initiatives, including increased privacy-related enforcement activity and higher compliance and technology costs, and could restrict our ability to provide certain products and services. Our failure to comply with privacy, data protection, and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions, and damage to our reputation, which could have a material adverse effect on our business, financial condition, or results of operations.

Our total assets were approximately ~~$20~~$21.09 billion as of December 31, ~~2020,~~2021, and our total assets have exceeded $10 billion since July 2018. The Dodd-Frank Act and its implementing regulations impose various additional requirements on banks and bank holding companies with $10 billion or more in total assets, including a more frequent and enhanced regulatory examination regime. In addition, banks with $10 billion or more in total assets (including our bank) are primarily examined by the CFPB with respect to various federal consumer financial protection laws and regulations, with the Federal Reserve maintaining supervision over some consumer related

Since July 1, 2019, we became subject to reduced interchange income, which has resulted in reduced revenues. Debit card interchange fee restrictions set forth in the Dodd-Frank Act, which is known as the Durbin Amendment, as implemented by regulations of the Federal Reserve, cap the maximum debit interchange fee that a bank debit card issuer with $10 billion or more in total assets may receive per transaction at the sum of $0.21 plus five basis ~~points.~~points of the transaction. A debit card issuer that adopts certain fraud prevention procedures may charge an additional $0.01 per transaction. Becoming subject to the Durbin Amendment has negatively affected, and may in the future negatively affect our debit card related fee income and pre-tax earnings.

~~Although~~The Company is continuously enhancing and expanding our digital products and services to meet client and business needs with desired outcomes. These digital products and services often include storing, transmitting, and processing confidential client, employee, monetary, and business information. Due to the nature of this information, and the value it has for internal and external threat actors, we, devote significant resources to maintain and regularly update our systems and processes that are designed to protect the security of our computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to us and our ~~customers, there is no assurance that all of our security measures will provide absolute security.~~

~~Despite efforts~~We believe we have robust preventive, detective, and administrative safeguards and security controls to ~~ensure~~minimize the ~~integrity~~probability and magnitude of our systems, it is possible that we may not be able to anticipate, detect or recognize threats to our systems or to implement effective preventive measures against all security breaches of these types inside or outside our business, especiallya material event. However, because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, orand often are not recognized until ~~launched, and because cyber-attacks can originate from a wide variety of sources, including individuals or groups who are associated with external service providers or who are or~~after an event has occurred, we may be ~~involved in organized crime~~unable to anticipate future tactics and techniques, or ~~linked~~ to ~~terrorist organizations~~implement adequate and timely protective measures.

Cybersecurity, and the continued development and enhancement of controls, processes, and practices designed to protect client information, systems, computers, software, data, and networks from attack, damage, or ~~hostile foreign governments. Those parties~~unauthorized access remain a priority for the Company. As cybersecurity threats continue to evolve, we may ~~also attempt~~be required to ~~fraudulently induce employees, customers, third-party service providers~~expend additional resources to continue to enhance, modify, and refine our protective measures against these evolving threats.

To date, we have no knowledge of a successful cyber-attack or other ~~users~~material information security breach affecting our systems. However, our risk and exposure to these matters remains heightened because of, ~~our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients. Similar to~~among other ~~companies, risks and exposures related to cybersecurity attacks have increased as a result of~~things, the COVID-19 pandemic, the related increased reliance on remote working and increase in digital operations in efforts to comply with state and local mandates. Such risks and exposures are expected to remain high for the foreseeable future due to the rapidly evolving nature ~~and sophistication~~ of these threats, the continuation of a remote work environment for our employees and service providers and our plans to continue to implement and expand digital banking services, expand operations, and use third-party information systems that includes cloud-based infrastructure, platforms, and software. Recent instances of attacks specifically targeting financial services businesses indicate that the ~~expanding use~~risk to our systems remains significant. If we or a critical third-party vendor were to experience a cyber-attack or information security breach, we could suffer damage to our reputation, productivity losses, response costs associated with investigation and resumption of ~~technology, as~~services, and incur substantial additional expenses, including remediation expenses costs associated with client notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated civil litigation, any of which could have a materially adverse effect on our ~~web-based product offerings grow or we expand internal usage~~business, financial condition, and results of ~~web-based applications.~~operations.

In addition, the Company’s clients and vendors rely on technology and systems unmanaged by the Company, such as networking devices, server infrastructure, personal computers, smartphones, tablets, and other mobile devices, to contact and conduct business with the Company. If the devices of the Company’s clients or vendors become the target of a cyber-attack, or information security breach, it could result in unauthorized access to, misuse of, or loss of confidential client, employee, monetary, or business information. Threat actors using

We also face additional costs when our customers become the victims of cyber-attacks. For example, various retailers have reported that they have been the victims of a cyber-attack in which large amounts of their clients’ data, including debit and credit card information, is obtained. Our clients may be the victims of phishing scams, providing cyber criminals access to their accounts, or credit or debit card information. In these situations, we incur costs to replace compromised cards and address fraudulent transaction activity affecting our clients.

Both internal and external fraud and theft are risks. If confidential client, employee, monetary, or business information were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage, and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, ~~including those~~employees, or counterparties, or if such information were to be intercepted or otherwise inappropriately taken by third parties, or if our own employees abused their access to financial systems to commit fraud against our clients and the Company. These activities can occur in connection with the origination of ~~our third-party vendors, could cause serious negative consequences, including significant disruption~~loans and lines of ~~our operations, misappropriation of confidential information, or damage to computers or systems,~~credit, ACH transactions, wire transactions, ATM transactions, and ~~may~~checking transactions, and result in ~~violations~~financial losses, as well as reputational damage.

The occurrence of ~~applicable privacy and other laws, financial loss, loss~~any of ~~confidence~~these risks could result in a diminished ability for us to operate our ~~security measures, customer dissatisfaction, increased insurance premiums, significant litigation exposure and harm~~business, additional costs to ~~our reputation, all~~correct defects, potential liability to clients, reputational intervention, any of which could ~~have a material adverse effect on~~adversely affect our business, financial condition, and results of ~~operations, and future prospects.~~operations.

We rely on certain third parties to provide products and services necessary to maintain day-to-day operations, such as data processing and storage, recording and monitoring transactions, ~~on-line~~online banking interfaces and services, Internet connections, telecommunications, and network access. Even though we have a vendor risk management program to help us carefully select and monitor the performance of third parties, we do not control their actions. The failure of a third-party to perform in accordance with the contracted arrangements under service level agreements as a result of changes in the ~~third party’s~~third-party’s organizational structure, financial condition, support for existing products and services, strategic focus, system interruption or breaches, or for any other reason, could be disruptive to our operations, which could have a material adverse effect on our business, financial condition, and results of operations. Replacing these third parties could also create significant delays and expense. Accordingly, use of such third parties introduces additional risks to our business operations.

We are based in Irvine, California and, at December 31, ~~2020,~~2021, approximately 61% of the aggregate outstanding principal of our loans was tied to businesses or secured by real estate located in California. In addition, the computer systems that operate our ~~Internet~~internal computer network, our internet websites, and some of their back-up systems are located in Irvine, California and Las Vegas, Nevada. Historically, California has been vulnerable to natural disasters, such as earthquakes, wildfires, floods, mudslides, and droughts. Certain of these natural disasters may be exacerbated by changing climate conditions.

Natural or man-made disasters and severe weather events may cause operational disruptions and damage to both our properties and properties securing our loans. Natural disasters could harm our operations directly through interference with communications, including the interruption or loss of our information technology structure and websites, which could prevent us from gathering deposits, originating loans, and processing and controlling our flow of business, as well as through the destruction of facilities and our operational, financial, and management information systems. The measures we implemented to mitigate the risk of business interruption from natural

The Company’s business, as well as the operations and activities of our clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to the ~~issue~~Company and its clients, and these risks are expected to increase over time. Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on the Company and its clients’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, the Company’s carbon footprint, and the Company’s business relationships with clients who operate in carbon-intensive industries.

Federal and state banking regulators and supervisory authorities, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their clients, which may result in financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and investment activities. Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change ~~has increased. Federal~~or changes in policies as the economy transitions to a less carbon-intensive environment, the Company may face regulatory risk of increasing focus on the Company’s resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios. Ongoing legislative or regulatory uncertainties and ~~state legislatures~~changes regarding climate risk management and practices may result in higher regulatory, ~~agencies continue~~compliance, credit, and reputational risks and costs.

With the increased importance and focus on climate change, we are making efforts to ~~propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects~~enhance our governance of climate ~~change. As a financial institution, it is unclear how future government regulations~~change-related risks and ~~shifts~~integrate climate considerations into our risk governance framework. Nonetheless, the risks associated with climate change are rapidly changing and evolving in ~~business trends~~an escalating fashion, making them difficult to assess due to limited data and other uncertainties. We could experience increased expenses resulting from ~~increased concern about~~strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change ~~will affect~~and our ~~operations.~~

We have consummated eleven acquisitions since 2010. Most recently on June 1, 2020, we completed the acquisition of Opus, a California ~~state chartered~~state-chartered bank with approximately $8 billion in total ~~assets on June 1, 2020.~~assets. The success of the Opus acquisition or any future acquisition we may consummate will depend on, among other things, our ability to realize the anticipated revenue enhancements and efficiencies and to combine our business with the business of the target institution in a manner that does not materially disrupt the existing customer relationships of either institution, or result in decreased revenues resulting from any loss of customers, and that permits growth

It is possible that the integration process associated with any pending or future acquisition could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect our ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits of the acquisitions. Integration efforts could also divert management attention and resources. These integration matters could have an adverse effect on the combined Company.

Acquisitions involve numerous other risks and uncertainties, including inaccurate financial and operational assumptions, incomplete or failed due diligence, lower-than-expected performance, higher-than-expected costs, adverse market or other stakeholder reactions, changes in relationships with customers or counterparties, the potential loss of key personnel, and the possibility of litigation and other disputes.

The acquisition of Opus on June 1, 2020 was an all-stock transaction valued at approximately $749.6 million as of the date of close. The consideration payable to Opus stockholders upon consummation of the acquisition consisted of whole shares of the Corporation’s common stock and cash in lieu of fractional shares of the Corporation’s common stock. We issued approximately 34.4 million shares of common stock to Opus stockholders in connection with the acquisition, and the transaction resulted in initial tangible book value dilution of 2.8%, or $0.53 per share at the time of closing with an earnback period of 1.8 years. Future mergers or acquisitions, if any, may involve cash, debt or equity securities as transaction consideration. Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of our stock’s tangible book value and net income per common share may occur in connection with any future transaction. We cannot say with any certainty that we will be able to consummate, or if consummated, successfully integrate any future acquisitions, or that we will not incur disruptions or unexpected expenses in integrating such acquisitions. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from pending or future acquisitions could have a material adverse effect on our financial condition and results of operations.

When the Company acquires a business, a substantial portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price that is allocated to goodwill is determined by the excess of the purchase price over the fair value of the net identifiable assets acquired. As of December 31, ~~2020,~~2021, the Company had approximately ~~$984.1~~$970.9 million of goodwill and intangible assets, which includes goodwill of approximately ~~$898.6~~$901.3 million resulting from the acquisitions the Company has consummated since 2011. The Company accounts for goodwill and intangible assets in accordance with ~~GAAP,~~accounting principles generally accepted in the United States (“GAAP”), which requires goodwill be tested for impairment at least annually, at the reporting unit level, or more frequently if events and circumstances lead management to believe the value of goodwill may be impaired. GAAP also requires that intangible assets other than goodwill be tested for impairment when events and circumstances change, indicating that their carrying value may not be recoverable. For intangible assets other than goodwill, the Company first performs a qualitative assessment to determine if the carrying value of such assets may not be recoverable. A quantitative assessment is followed to determine the amount of impairment in the event the carrying value of such assets are deemed not recoverable. Impairment is measured as the amount by which their carrying value exceeds their estimated fair value.

37

We are required by federal and state regulators to maintain adequate levels of capital. We may need to raise additional capital in the future to meet regulatory or other internal requirements. As a publicly traded company, a likely source of additional funds is the capital markets, accomplished generally through the issuance of equity, both common and preferred stock, and the issuance of debt. Our ability to raise additional capital, if needed, will depend

We cannot provide any assurance that access to such capital will be available to us on acceptable terms or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of debt purchasers or counter-parties participating in the capital markets, may materially and adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. Further, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. The inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our business, financial condition, or results of operations.

The Corporation and the Bank are each subject to capital adequacy and liquidity rules and other regulatory requirements specifying minimum amounts and types of capital that must be maintained. From time to time, the regulators implement changes to these regulatory capital adequacy and liquidity guidelines. If we fail to meet these minimum capital and liquidity guidelines and other regulatory requirements, we may be restricted in the types of activities we may conduct and may be prohibited from taking certain capital actions, such as making payments on certain capital instruments, paying executive bonuses or dividends, and repurchasing or redeeming capital securities.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, ~~and~~ the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. Actual results could differ from these estimates. Material estimates subject to change in the near term include, among other items, the allowance for credit losses, particularly in light of the adoption of the new CECL standard on January 1, 2020; the carrying value of goodwill or other intangible assets; the fair value estimates of certain assets and liabilities; and the realization of deferred tax assets and liabilities. These estimates may be adjusted as more current information becomes available, and any adjustment may be significant.

We rely on quantitative models to measure risks and to estimate certain financial values. ~~Models may be used~~We use models in such processes as determining the pricing of various products, ~~grading loans and extending credit,~~ measuring interest rate and other market risks, predicting or estimating losses, assessing capital adequacy and calculating regulatory capital levels, as well as to estimate the value of financial instruments and balance sheet items. Poorly designed or implemented models present the risk that our business decisions based on information incorporating model output could be adversely affected due to the inaccuracy of that information. Models are often based on historical experience to predict future outcomes, as a result new experiences or events which are not part of historical experience can significantly increase model imprecision and impact model reliability. Model inputs can also include information provided by third parties, such as economic forecasts or macroeconomic variables (unemployment rates, real GDP etc.) upon which we rely. Some of the decisions that our regulators make, including those related to capital distributions, could be affected due to the perception that the quality of the models used to generate the relevant information is insufficient, which could have a negative impact on our ability to make capital distributions in the form of dividends or share repurchases. Our reliance on models continues to increase as rules, guidance, and expectations change. The most recent example of this is the additional models used in the determination of our ~~allowance for credit losses~~ACL under CECL, which we adopted on January 1, 2020.

Our ability to pay cash dividends to our stockholders is partially dependent upon receiving dividends from the Bank. The Bank’s ability to pay dividends to us is subject to restrictions set forth in the Financial Code. The Financial Code provides that a bank may not make a cash distribution to its stockholders in excess of the lesser of (1) a bank’s retained earnings and (2) a bank’s net income for its last three fiscal years, less the amount of any distributions made by the bank or by any majority-owned subsidiary of the bank to the stockholders of the bank during such period. However, a bank may, with the approval of the DFPI, make a distribution to its stockholders in an amount not exceeding the greatest of (a) its retained earnings; (b) its net income for its last fiscal year; or (c) its net income for its current fiscal year. In the event that banking regulators determine that the stockholders’ equity of a bank is inadequate or that the making of a distribution by the bank would be unsafe or unsound, the regulators may order the bank to refrain from making a proposed distribution.

Approval of the Federal Reserve is required for payment of any dividend by a ~~state chartered~~state-chartered bank that is a member of the Federal Reserve System, such as the Bank, if the total of all dividends declared by the Bank in any calendar year would exceed the total of its retained net income for that year combined with its retained net income for the preceding two years. In addition, a state member bank may not pay a dividend in an amount greater than its undivided profits without regulatory and stockholder approval. The Bank is also prohibited under federal law from paying any dividend that would cause it to become undercapitalized. A reduction or discontinuance of dividends from the Bank to the Corporation could have an adverse effect on our ability to pay dividends on our common stock, which in turn could have a material adverse effect on our business, including the market price of our common stock.

Our stockholders are only entitled to receive such dividends as our Board may declare out of funds legally available for such payments. In addition, in January 2021, our Board authorized us to repurchase up to 4,725,000 shares of our common stock. We are not required to pay dividends on, or effect repurchases of, our common stock and may reduce or eliminate our common stock dividend and/or share repurchase program in the future. Our ability to pay dividends to our stockholders is subject to the restrictions set forth in Delaware law, by the Federal Reserve, and by certain covenants contained in our subordinated debentures. Notification to the Federal Reserve is also required prior to our declaring and paying a cash dividend to our stockholders during any period in which our quarterly and/or cumulative twelve-month net earnings are insufficient to fund the dividend amount, among other requirements. We may not pay a dividend if the Federal Reserve objects or until such time as we receive approval from the Federal Reserve or we no longer need to provide notice under applicable regulations. In addition, we may be restricted by applicable law or regulation or actions taken by our regulators, now or in the future, from paying dividends to, or repurchasing shares of our common stock from, our stockholders. We cannot provide assurance that we will continue paying dividends on, or repurchase shares of, our common stock at current levels or at all. A reduction or discontinuance of dividends on our common stock or our share repurchase program could have a material adverse effect on the market price of our common stock.

None.

Not applicable.

The common stock of the Corporation has been publicly traded since 1997 and is currently traded on the NASDAQ Global Select Market under the symbol PPBI. As of February ~~19, 2021,~~18, 2022, there were approximately ~~968~~919 holders of record of our common stock.

The following table provides information as of December 31, ~~2020,~~2021, with respect to options outstanding and shares available for future option, restricted stock, and restricted stock unit awards under the Company’s active equity incentive plans.

The graph below compares the cumulative total shareholder return on our common stock with that of the NASDAQ Composite Index (U.S. companies), the Keefe, Bruyette and Woods (“KBW”) Nasdaq Regional Banking Index (“KRX”), and the NASDAQ Bank Stocks Index from December 31, ~~2015~~2016 through December 31, 2020. In this 2020 Form 10-K, the Company added the KBW Nasdaq Regional Bank Index to the PPBI’s total return to stockholders comparison over the five-year period. This index reflects the performance of U.S. companies that do business as regional banks or thrifts, which the Company believes represents an appropriate index for purposes of comparing the Company’s stock performance to the stock performance of industry participants whose businesses are most similar to the Company’s business.2021. The graph is based on an investment of $100 in our common stock at its closing price on December 31, ~~2015.~~2016.

In January 2019, we announced the initiation of a quarterly cash dividend. Our annual common equity cash dividend was $1.29 per share in 2021, compared to $1.03 per share in 2020, ~~compared to $0.88 per share in 2019,~~ an increase of ~~$0.15~~$0.26 or ~~17%~~25.2%.

The following table summarizes the Company’s quarterly common equity dividend declared during the periods indicated:

On January ~~21, 2021,~~18, 2022, the ~~Corporation’s~~Corporation's Board of Directors ~~increased our quarterly cash dividend by $0.02~~declared a $0.33 per share ~~or 7% to $0.30 per share,~~dividend, payable on February ~~12, 2021~~11, 2022 to ~~shareholders~~stockholders of record on February ~~5, 2021.~~4, 2022. The Corporation anticipates continuing a regular quarterly cash dividend. However, we have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders. Any future determination to pay dividends to holders of our common stock will depend on our financial condition, results of operations, ~~financial condition,~~ capital requirements, banking regulations, contractual restrictions, and any other factors that our Board of Directors may deem relevant.

On January 11, 2021, the Company’s Board of Directors approved a new stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock, representing approximately 5% of the Company’s issued and outstanding shares of common stock and approximately $150 million of common stock as of December 31, 2020 based on the closing price of the Company’s common stock on December 31, 2020.stock. The stock repurchase program may be limited or terminated at any time without notice. ~~The new stock repurchase program replaces and supersedes the previous $100 million stock repurchase program approved by the Board in December 2019, which~~During 2021, the Company ~~announced was suspended indefinitely in March 2020. The Company had not~~ repurchased ~~any shares~~479,944 of its common stock ~~under the previous stock repurchase program.~~for $18.1 million at a weighted average price of $37.61 (excluding commission expense).

The COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization on January 30, 2020 and a pandemic by the World Health Organization on March 11, 2020. The ongoing COVID-19 ~~global~~ pandemic and national health emergency has caused significant disruption in the ~~United States~~U.S. and international economies and financial markets. The operations and business results of the Company have been and could ~~continue to~~ be materially adversely ~~affected.~~affected in future periods.

~~Correspondingly, in~~In early March 2020, the Company began preparing for potential disruptions and government limitations of activity in the markets in which we serve. We activated our Business Continuity Program and Pandemic Preparedness Plan, and were able to quickly execute on multiple initiatives to adjust our operations to protect the health and safety of our employees and clients. We expanded remote-access availability to ensure a greater number of employees have the capability to work from home or other remote locations without impacting our operations while continuing to provide a superior level of customer service. We also reconfigured our corporate ~~headquarter~~ offices and branches to promote social distancing for employees by erecting physical ~~barriers, and provided monthly rapid COVID-19 testing for all employees and their partners. The~~barriers. In addition, the Company ~~also~~ issued a Company-wide employee appreciation bonus related to the COVID-19 pandemic during the fourth quarter of ~~2020.~~2020 and created a vaccine award program. Beginning in April 2021, non-exempt employees receive up to four hours of paid time off for COVID-19 vaccination appointments and exempt employees will receive flexibility for vaccination appointments. The Company also offered rapid and PCR COVID-19 testing to all employees.

Since the beginning of the crisis, we have been in close contact with our clients, assessing the level of impact on their businesses, and implementing a process to evaluate each client’s specific situation, and where appropriate, providing relief programs. We also enhanced client awareness of our digital banking offerings to ensure that we continue to provide a superior level of customer service. We have taken steps to comply with various government directives regarding social distancing and use of personal protective equipment in the work place, and we are following the guidance from the Centers offor Disease Control (“CDC”) to protect our employees.

The Company continued its efforts to monitor the loan portfolio to identify potential at-risk segments and line of credit draws for deviations from normal activity, ~~increase the allowance allocated to these portfolios,~~ and support our customers affected by the COVID-19 pandemic, including but not limited to the following:

Additionally, the CARES Act provides for relief on existing and new SBA loans through the Small Business Debt Relief program. As part of ~~the SBA Small Business Debt Relief,~~this program, the SBA will automatically pay principal, interest, and fees of certain SBA loans for a period of six months for both existing loans and new loans issued prior to September 27, 2020. On December 27, 2020, the CAA authorized a second round of SBA payments on covered loans approved before March 27, 2020, for a two-month period beginning with the first payment due on the loan on or after February 1, 2021 and for an additional three-month period for certain eligible borrowers. For new loans approved beginning on February 2, 2021 and ending on September 30, 2021, the SBA will make the payments for a three-month period subject to the availability of funds. At December 31, ~~2020,~~2021, approximately ~~507~~$5.3 million of loans ~~representing approximately $142.8 million aggregate reported balance,~~ are eligible for this relief. The CARES Act also provides for mortgage payment relief and a foreclosure moratorium.

The extent to which the ongoing COVID-19 pandemic, including the potential existence of additional COVID-19 variants, impacts the Company’s business, asset valuations, financial condition, and results of operations, ~~and financial condition,~~ as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be accurately predicted, including the scope and duration of the COVID-19 pandemic and the effectiveness and the level of acceptance of COVID-19 vaccines, and the actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, investments, loans, ~~loan servicing rights,~~ and deferred tax assets.

49

The U.S. government as well as other state and local policy makers have responded to the ~~on-going~~ongoing COVID-19 pandemic with actions geared to support not only the health and well-being of the public, but also consumers, businesses, and the economy as a whole. In addition, during the first quarter of 2021, the President signed into law the American Rescue Plan, which provides approximately $1.9 trillion in various forms of economic stimulus and aid to individuals and state and local governments that have been affected by the ongoing COVID-19 pandemic. However, the ultimate impact and overall effectiveness of these actions is difficult to determine at this time. In addition, many economists have expressed concern over the need for additional government stimulus to support an economic recovery. However, the likelihood of additional government stimulus is unknown at this time, and the lack thereof may hinder the prospects of further economic recovery.

Effective as of June 1, 2020, the Corporation completed the acquisition of Opus, a California-chartered state bank headquartered in Irvine, California, pursuant to a definitive agreement dated as of January 31, 2020. At closing, Opus had $8.32 billion in total assets, $5.94 billion in gross loans, and $6.91 billion in total deposits and operated 46 banking offices located throughout California, Washington, Oregon, and Arizona. As a result of the Opus acquisition, the Corporation acquired specialty lines of business, including trust and escrow services.

Pursuant to the terms of the merger agreement, the consideration paid to Opus shareholders consisted of whole shares of the Corporation’s common stock and cash in lieu of fractional shares of the Corporation’s common stock. Upon consummation of the transaction, (i) each share of Opus common stock issued and outstanding immediately prior to the effective time of the acquisition was canceled and exchanged for the right to receive 0.900 shares of the Corporation’s common stock, with cash to be paid in lieu of fractional shares at a rate of $19.31 per share, and (ii) each share of Opus Series A non-cumulative, non-voting preferred stock issued and outstanding immediately prior to the effective time of the acquisition was converted into and canceled in exchange for the right to receive that number of shares of the Corporation’s common stock equal to the product of (X) the number of shares of Opus common stock into which such share of Opus preferred stock was convertible in connection with, and as a result of, the acquisition, and (Y) 0.900, in each case, plus cash in lieu of fractional shares of the Corporation’s common stock.

The Corporation issued 34,407,403 shares, net of 165,136 shares for tax withholding from Opus equity award holders, of the Corporation’s common stock valued at $21.62 per share, which was the closing price of the Corporation’s common stock on May 29, 2020, the last trading day prior to the consummation of the acquisition, and paid cash in lieu of fractional shares. The Corporation assumed Opus’s warrants and options, which represented the issuance of up to approximately 406,778 and 9,538 additional shares of the Corporation’s common stock, valued at approximately $1.8 million and $46,000, respectively, and issued substitute restricted stock units in an aggregate amount of $328,000. The value of the total transaction consideration paid amounted to approximately $749.6 million. The Opus warrants assumed by the Corporation expired unexercised on September 30, 2020 and no longer remain outstanding. The Opus options assumed by the Corporation have been fully exercised during the third quarter of 2020.

As a result of the Opus acquisition, the Company acquired Opus and recorded net assets of ~~$659.4~~$656.6 million. The estimated fair value of assets acquired and liabilities assumed primarily consist of the ~~followings:~~following:

The measurement of the ACL is performed by collectively evaluating loans with similar risk ~~characteristics.~~characteristics, as well as the individual evaluation of loans that are deemed to no longer possess characteristics similar to others in the loan portfolio. The Company measures the ACL on commercial real estate loans and commercial loans ~~using~~through a discounted cash flow approach ~~and~~using a loan’s effective interest rate, while a historical loss rate methodology is used to determine the ACL on retail loans. The Company’s discounted cash flow methodology incorporates a probability of default and loss given default model, ~~as well as~~which is impacted by expectations of future economic ~~conditions, using reasonable~~conditions. The Company’s ACL methodology also incorporates estimates and ~~supportable forecasts.~~ assumptions concerning loan prepayments, future draws on revolving credit facilities, and the probability an unfunded commitment will be drawn upon.

The use of reasonable and supportable forecasts ~~require~~in the ACL methodology requires significant judgment, such as selecting forecast scenarios and related scenario-weighting, as well as determining the appropriate length of the forecast horizon. Management leverages economic projections from a reputable and independent third party to inform and provide its reasonable and supportable economic forecasts. Other internal and external indicators of economic forecasts may also be considered by management when developing ~~the~~ forecast metrics. ~~The Company’s ACL model reverts to long-term average loss rates for purposes~~Forecasts of ~~estimating expected cash flows beyond a period deemed reasonable and supportable. The Company forecasts~~ economic conditions and expected credit losses are made over a two-year time horizon, before reverting to long-term average loss rates over a period of three years. The duration of the forecast horizon, the period over which forecasts revert to long-term averages, the economic forecasts that management utilizes, as well as additional internal and external indicators of economic forecasts that management considers, may change over time depending on the nature and composition of our loan portfolio. Changes in economic forecasts, in conjunction with changes in loan specific attributes, have an impact on a loan’s probability of default and loss given default, which can drive changes in the determination of the ~~ACL.~~

The Company’s ACL ~~model~~methodology also includes adjustments for qualitative factors, where appropriate. Since historical information (such as historical net losses and economic cycles) may not always, by themselves, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to, factors such as: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions, (ii) organization specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through ~~back-testing,~~backtesting, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios, changes in portfolio segmentation, and (iv) management’s overall assessment of the adequacy of the ACL, including an assessment of model data inputs used to determine the ACL.

The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on nonaccrual status, troubled debt restructurings, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated. Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, and as such may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent. Collateral dependent loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral. The ACL for collateral dependent loans is determined using estimates for the fair value of the underlying collateral, less costs to sell.

Although management uses the best information available to derive estimates necessary to measure an appropriate level of the ACL, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that ~~may~~ extend beyond the Company’s control.

The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries on loans previously charged-off. It is the Company’s policy to promptly charge-off loan balances at the time they have been deemed uncollectible.

The ALLL was increased by provisions for loan losses, and reduced by charge-offs, net of recoveries of amounts previously charged-off.

The Company accounts for business combinations under the acquisition method of accounting. Upon obtaining control of ~~the~~an acquired entity, the Company records all identifiable assets and liabilities at their estimated fair values. Goodwill is recorded when the consideration paid for an acquired entity exceeds the estimated fair value of the net assets acquired. Changes to the acquisition date fair values of assets acquired and liabilities assumed may be made as adjustments to goodwill ~~over~~during a ~~12-month~~one year measurement period following the date of acquisition. Such adjustments are attributable to additional information obtained related to fair value estimates of the assets acquired and liabilities assumed. ~~Certain costs~~Costs associated with business combinations are expensed as incurred.

The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures and may not be comparable to non-GAAP financial measures that may be presented by other companies. Management believes that these non-GAAP financial measures provides useful information to gain an understanding of the operating results of our core business. The non-GAAP measures the Company uses include the following:

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP:

The following table sets forth certain of our financial highlights at or for each of the years presented. This data should be read in conjunction with the Consolidated Financial Statements and Notes thereto included herein at Item 8.

For 2021, the Company’s return on average assets was 1.66%, return on average equity was 12.14%, and return on average tangible common equity was 19.30%. For 2020, the Company’s return on average assets was 0.36%, return on average equity was 2.49%, and return on average tangible common equity was 4.93%. For 2019, the Company’s return on average assets was 1.38%, return on average equity was 8.00%, and return on average tangible common equity was 15.69%.

For ~~2020,~~2021, net interest income totaled ~~$574.2~~$662.4 million, an increase of ~~$126.9~~$88.2 million, or ~~28%~~15.35%, from ~~2019.~~2020. This reflected an increase in average interest-earning assets of ~~$5.05~~$3.52 billion, primarily due to a full year’s impact of the acquisition of Opus on June 1, 2020, which ~~at acquisition~~ added $5.81 billion of loans, $937.1 million of cash and cash equivalents, and $829.9 million of investment securities, as well as organic loan growth of ~~$2.54~~$4.07 billion, investment securities purchases of ~~$2.72~~$2.28 billion, ~~in 2020,~~ and a lower cost of funds, partially offset by an increase in average interest-bearing liabilities of ~~$3.03~~$2.02 billion, loan ~~paydowns of $1.83 billion,~~maturities and prepayments, investment securities principal payments, amortization, and redemption, as well as lower average loan and investment yields. Net interest margin decreased 5923 basis points to 3.51% in 2021 from 3.74% in ~~2020 from 4.33% in 2019.~~2020. The decrease was primarily due to yields on interest-earning assets decreasing ~~100~~41 basis points, driven primarily by ~~the impact of the lower yielding Opus loan portfolio added in June 2020,~~ the shift in interest-earning asset mix, and the deployment of excess liquidity into highly rated, ~~lower yielding~~lower-yielding investment securities, as well as the impact of the lower-yielding Opus loan portfolio added in June 2020, partially offset by our cost of funds decreasing 4420 basis points, driven principally by lower rates paid on deposits ~~resulting from the decline~~as well as a favorable shift in ~~market interest rates.~~average deposit mix.

Changes in our net interest income are a function of changes in ~~volumes,~~volume, mix, and rates of interest-earning assets and interest-bearing liabilities, as well as days in a period. The following table presents the impact the volume, days in period, and rate changes have had on our net interest income for the years indicated. For each category of interest-earning assets and interest-bearing liabilities, we have provided information on changes to our net interest income with respect to:

The provision for credit losses in 2020 included a $172.3 million provision expense for loan losses and $19.6 million provision expense for unfunded commitments, primarily reflective of unfavorable economic forecasts in the Company’s CECL model driven by the onset of the COVID-19 pandemic, and the Day 1 provision for credit losses of $84.4 million resulting from the acquisition of Opus, which included $75.9 million for loans held for investment and the provision for unfunded commitments of $8.6 ~~million resulting from the acquisition of Opus.~~

Net loan charge-offs for ~~2020 amounted~~2021 totaled $3.2 million, compared to $16.9 million ~~compared to $7.5 million~~ in ~~2019, and $1.0 million in 2018.~~2020. The ~~increase~~decrease from 2020 was ~~primarily~~ due to ~~the higher~~lower charge-offs ~~in commercial and industrial loans and franchise non-real estate secured loans as compared to the same periods last year.~~

During 2021, we sold $41.1 million of loans with an average price of 110.0%, compared to 2020 in which we sold $1.38 billion of loans with an average price of 100.4%~~, compared to 2019 in which we sold $191.5 million of loans with an average price of 103.3%~~. In ~~2020,~~2021, total loans sold included ~~$1.18 billion~~$41.1 million in SBA and U.S. Department of Agriculture (“USDA”) loans, for a net gain of $4.1 million, and fully charged-off loans for a net gain of $292,000, compared with sales of $1.18 billion in SBA loans, primarily PPP loans, and USDA loans for a net gain of $20.3 million, and $193.8 million in other loans for a net loss of $11.7 million ~~compared with sales of $99.9 million~~ in ~~SBA and USDA loans with a net gain of $8.4 million and $91.7 million in other loans for a net loss of $1.8 million in 2019.~~2020.

In addition, the Bank had increases of ~~$943,000, $188,000,~~$2.5 million and ~~$116,000~~$963,000 in service charges on deposit accounts ~~loan servicing income,~~ and ~~other service~~debit card interchange fee income, respectively, from 2020, reflecting growth in core transaction deposit ~~and loan~~ accounts from both organic growth and the Opus acquisition. These increases were partially offset by a decrease in debit card interchange fee income of $478,000, primarily the result of the Bank becoming a non-exempt institution under the Durbin Amendment that regulates debit card interchange fee income.

Our efficiency ratio was 48.4% for 2021, compared to 49.8% for 2020 ~~compared to~~and 50.8% for ~~2019 and 51.6% for 2018.~~2019.

At December 31, ~~2020,~~2021, total assets of the Company were ~~$19.74~~$21.09 billion, an increase of ~~$7.96~~$1.36 billion, or ~~68%~~7%, from total assets of ~~$11.78~~$19.74 billion at December 31, ~~2019.~~2020. The increase was primarily due to a ~~result of the acquisition of Opus, which added $5.81~~$1.07 billion increase in loans, ~~$937.1~~a $700.7 million ~~in cash, $829.9 million~~increase in investment securities, ~~$191.4~~a $156.8 million increase in BOLI, the result of a $150.0 million purchase of additional BOLI in June 2021, and ~~$90.2~~a $70.3 million ~~of goodwill, after purchase accounting adjustments. These increases were partially offset by increases of $232.3 million~~decrease in allowance for credit losses on loans, ~~reflecting~~reflective of a $67.1 million provision ~~for loan losses of $172.3 million, a $55.7 million addition associated with the Company’s adoption of ASC 326 on January 1, 2020, and an initial ACL of $21.2 million with respect~~recapture, due to ~~PCD loans from the acquisition of Opus. The provision increase was primarily a result of the Opus acquisition and the unfavorable changes in~~improved economic forecasts ~~employed~~used in the Company’s ~~CECL modeling driven~~ACL model and improved asset quality results. These increases were partially offset by ~~the COVID-19 pandemic.~~a $576.1 million decrease in cash and cash equivalents.

Our investment securities portfolio amounted to $4.66 billion at December 31, 2021, an increase of $700.8 million, or 18%, from $3.95 billion at December 31, 2020. The increase was a result of $2.28 billion in purchases, partially offset by $884.2 million in sales, $603.9 million in principal payments, amortization, and redemptions, and an $89.1 million decrease in mark-to-market fair value adjustment. In general, the purchase of investment securities is primarily related to investing excess liquidity from our banking operations. During 2021, we have maintained a meaningful portion of the available-for-sale securities portfolio in highly liquid, short-term securities while also lowering the effective duration of this portfolio to 4.1 years at December 31, 2021 from 5.0 years at December 31, 2020. This strategy enhances our interest rate sensitivity profile to the current rate environment and provides us with the flexibility to quickly redeploy these funds into higher-yielding assets as opportunities arise.

As of December 31, ~~2020,~~2021, our investment securities portfolio consisted of ~~$1.45~~$1.46 billion in municipal bonds, ~~$855.6 million~~$1.58 billion in GSE MBS, ~~$690.4~~$432.1 million of agency bonds, ~~$513.4~~$676.6 million in GSE CMOs, ~~$415.3~~$453.9 million in corporate bonds, ~~$32.5~~$57.9 million in U.S. Treasury securities, and ~~$1.6~~$1.5 million in other securities. The total end of period weighted average interest rate based on the amortized costs of the investments at December 31, ~~2020~~2021 was ~~1.79%~~1.58%, compared to ~~2.85%~~1.79% at December 31, ~~2019,~~2020, reflecting investment securities purchases at lower market yields during ~~2020.~~2021.

The following table ~~lists~~presents the ~~percentage~~fair value of ~~our portfolio exposure, including~~ available-for-sale and the amortized cost of held-to-maturity investment securities ~~to any one issuer as a percentage of capital. The only issuers with greater than 10% exposure are the, FNMA, FHLMC, and FFCB~~portfolios by Moody’s credit ratings at December 31, 2020 and FNMA at December 31, 2019. At December 31, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.2021.

All of the municipal bond securities in our portfolio have an underlying rating of investment grade, with the majority insured by the largest bond insurance companies to bring each of these securities to a Moody’s A+A rating or better. The Company has predominantly purchased general obligation bonds that are risk-weighted at 20% for regulatory capital purposes. The Company reduces its exposure to any single adverse event by holding securities from geographically diversified municipalities. We are continually monitoring the quality of our municipal bond portfolio in accordance with current financial conditions. To our knowledge, none of the municipalities in which we hold bonds are exhibiting financial problems that would require us to record an allowance for credit losses.

The total end of period weighted average interest rate on loans, excluding fees and discounts, as of December 31, ~~2020~~2021 was ~~4.27%~~3.95%, compared to ~~4.91%~~4.27% at December 31, ~~2019.~~2020. The decrease reflects the impact from prepayments of higher rate loans, lower rates on new loan originations, and the change in the mix of ~~loans, as well as repricing of portfolio loan yields as a result of the Federal Reserve Board's federal funds rate decrease in March 2020.~~loans.

The Company participated in the SBA PPP ~~program~~ under the CARES Act during the second quarter of 2020 and originated SBA PPP loans. At June 30, 2020, the Company’s SBA PPP loan balance was $1.13 billion. In July 2020, the Company ~~concluded the sale of~~sold its entire SBA PPP loan portfolio with an aggregate amortized cost of $1.13 billion to a seasoned and experienced ~~non-bank~~nonbank lender and servicer of SBA loans, resulting in improved balance sheet liquidity and a gain on sale of approximately of $18.9 million, net of net deferred origination fees and net purchase discounts.

The following table sets forth the composition of our loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated:

The following table shows the contractual maturity of the Company’s loans without consideration of prepayment assumptions, at the date indicated:

The following table sets forth ~~at December 31, 2020~~ the dollar amount of gross loans receivable at December 31, 2021 that are contractually due after December 31, ~~2021~~2022 and whether such loans have fixed interest rates or adjustable interest rates.

The following table sets forth delinquencies in the Company’s loan portfolio at the dates indicated:

We separate our loans by type, and we use various loan classifications to segregate the loans into various risk grade categories. We use the various loan classifications as a means of measuring risk for determining the valuation allowance for groups and individual assets at a point in time. Currently, we designate our assets into a category of “Pass,” “Special Mention,” “Substandard,” “Doubtful,” or “Loss.” Risk grades are reviewed regularly by the Company’s Credit and Portfolio Review committee, and the portfolio management and risk grading process is reviewed on an ongoing basis by an independent loan review function, as well as by regulatory agencies during scheduled examinations.

At December 31, 2021, we had $121.8 million of loans classified as substandard, compared to $128.3 million at December 31, 2020. The year-over-year decrease was driven by the net changes in risk rating during fiscal year 2021. There were no loans classified as doubtful as of December 31, 2021 or 2020.

The following tables stratify the loan portfolio by the Company’s internal risk grading as of the dates indicated:

We sometimes modify or restructure loans when the borrower is experiencing financial difficulties by making a concession to the borrower in the form of changes in the amortization terms, reductions in the interest rates, the acceptance of ~~interest only~~interest-only payments, and, in limited cases, concessions to the outstanding loan balances. These loans are classified as TDRs. At December 31, ~~2020,~~2021, there were no$17.3 million of loans modified as ~~TDRs. At December 31, 2019,~~ TDRs, ~~consisted~~comprised of three CRE owner-occupied loans and one C&I loan totaling $5.2 million belonging to one borrower relationship with the terms modified due to bankruptcy, and two franchise non-real estate secured loans totaling ~~$3.0~~$12.1 million ~~that were both current and on accrual status.~~belonging to another borrower relationship with the terms modified for payment deferral. During the year ended December 31, 2021, the three CRE owner-occupied loans and one C&I loan classified as TDRs were in payment default, and all TDRs were on nonaccrual status as of December 31, 2021. At December 31, 2020, ~~both~~there were no loans experienced payment defaults and the remaining balance, which were $1.3 million for the commercial and industrial loan and $344,000 for franchise non-real estate secured loan, were charged off in 2020.classified as TDRs. During the year ended December 31, 2020, there were ~~no new~~two loans modified as ~~TDRs.~~TDRs that experienced payment defaults after modifications within the previous 12 months, consisting of a C&I loan of $1.3 million and a franchise non-real estate secured loan of $344,000 that were charged off in 2020.

Nonperforming assets consist of loans on which we have ceased accruing interest (nonaccrual loans), OREO, and other repossessed assets owned. Nonaccrual loans consisted of all loans 90 days or more past due and on loans where, in the opinion of management, there is reasonable doubt as to the collection of principal and interest.

At December 31, ~~2020,~~2021, we had $31.3 million of nonperforming assets, compared with $29.2 million of nonperforming assets at December 31, 2020, all of which consisted of ~~$29.2 million of~~ nonperforming loans. At December 31, 2019, we had $9.0 million of nonperforming assets, which consisted of $8.5 million of nonperforming loans and $441,000 of OREO. The increase in nonperforming loans in 2020 compared to 2019 was primarily attributable to the addition of a franchise credit relationship of $13.2 million, a CRE owner-occupied credit relationship of $5.3 million, and a CRE non-owner-occupied loan of $2.0 million. It is our policy to take appropriate, timely, and aggressive action when necessary to resolve nonperforming assets. When resolving problem loans, it is our policy to determine collectability under various circumstances, which are intended to result in our maximum financial benefit. We accomplish this by working with the borrower to bring the loan current, selling the loan to a third party, or by foreclosing upon and selling the asset.

The Company had no loans 90 days or more past due and still accruing at December 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

~~At December 31, 2020, we~~The Company also had no OREO ~~compared to $441,000~~reported at December 31, ~~2019, which consisted of a two-office condo property with a carrying value of $126,000~~2021 and ~~a retail warehouse property with a carrying value of $315,000.~~December 31, 2020. Properties acquired through or in lieu of foreclosure are recorded at fair value less costs to sell. The Company generally obtains an appraisal and/or a market evaluation on all OREO prior to obtaining possession. After foreclosure, valuations are periodically performed by management as needed due to changing market conditions or factors specifically attributable to the property’s condition. If the carrying value of the property exceeds its fair value, less estimated cost to sell, the asset is written down and a charge to other expense is recorded.

The following table sets forth the composition of nonperforming assets at the date indicated:

~~Effective January 1, 2020,~~The Company determines the ACL for loans and unfunded loan commitments in accordance with ASC 326, which the Company adopted ~~the provisions~~on January 1, 2020. The Company’s adoption of ASC 326 ~~which requires the Company to record an estimate of expected lifetime credit losses for loans and off-balance sheet loan commitments at the time of origination or acquisition. As~~resulted in a ~~result, the Company recorded an increase of~~ $55.7 million increase to the ACL for loans ~~held-for-investment~~held for investment and an $8.3 million increase to the ACL for off-balance sheet loan ~~commitments.~~commitments on January 1, 2020. The Company applied the modified retrospective transition approach, and recorded aan after-tax decrease of $45.6 million ~~net of tax,~~ to the beginning balance of retained earnings as of January 1, 2020 for the cumulative effect adjustment, commonly referred to as the “Day 1” adjustment.

ASC 326 requires the Company to record an estimate of expected lifetime credit losses for loans and unfunded loan commitments at the time of origination or acquisition. The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. Loans that have been deemed by management to no longer possess similar risk characteristics are evaluated individually under a discounted cash flow approach, and loans that have been deemed collateral dependent are evaluated individually based on the expected estimated fair value of the underlying collateral. The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries, on loans previously charged-off.

The Company measures the ACL on commercial real estate and commercial loans using a discounted cash flow approach, using the loan’s effective interest rate, while the ACL for retail loans is based on a historical loss rate model. The discounted cash flow methodology relies on several significant components essential to the development of estimates for future cash flows on loans and ~~off-balance sheet~~unfunded loan commitments. These components consist of: (i) the estimated probability of default (“PD”), (ii) the estimated loss given default (“LGD”), which represents the estimated severity of the loss when a loan is in default, (iii) estimates for prepayment activity on loans, and (iv) the estimated exposure to the Company at ~~default.~~default (“EAD”). In the case of ~~off-balance sheet~~unfunded loan commitments, the Company’s incorporates estimates for utilization, based on its own historical data. Probability of default and loss given default for ~~commercial~~investor loans secured by real estate loans are derived from a third party, using proxy loan information, and loan and property level attributes. Additionally, loss given default for ~~commercial loans and commercial real estate~~these loans incorporates an estimate for the loss severity associated with loans where the borrower fails to meet their debt obligation at maturity. External factors that impact loss given default for commercial real estate loans include: changes in the index for CRE ~~Price Index,~~pricing, GDP growth rate, unemployment rates, and the Moody’s Baa rating corporate debt interest rate spread.

For business loans secured by real estate and commercial loans, probability of default is based on an internally developed rating scale that assigns probability of default based on the Company’s internal risk grades for each loan. Changes in risk grades for ~~commercial~~these loans result in changes in probability of default. The Company obtains loss given default for ~~commercial~~these loans from a third party that has a considerable database of credit-related information specific to the financial services industry and the type of loans within this segment.

Probability of default for both ~~commercial~~investor and business real estate ~~and commercial~~ loans are also heavily impacted by changes in current and expected economic conditions.

The ACL for retail loans is based on a historical loss rate model, which incorporates loss rates derived from a third party that has a considerable database of credit related information for retail loans. Loss rates for retail loans are dependent upon loan level and external factors such as: FICO, vintage, geography, unemployment rates, and changes in consumer real estate prices.

The Company’s ACL includes assumptions concerning current and future economic conditions using reasonable and supportable forecasts and how those forecasts are expected to impact a borrower’s ability to satisfy their obligation to the Bank and the ultimate collectability of future cash flows over the life of the loan. The Company uses economic forecast scenarios from Moody’s Analytics. These economic forecast scenarios are based on past events, current conditions, and the likelihood of future events occurring. Management periodically evaluates economic forecast scenarios, determines whether to utilize multiple probability-weighted scenarios in the Company’s ACL model, and, if multiple scenarios are utilized, evaluates and determines the weighting for each scenario used in the Company’s ACL model, and thus the scenarios and their weightings may change in future periods. Economic forecast scenarios as well as assumptions within those scenarios can vary based on changes in current and expected economic conditions and due to the occurrence of specific events such as the ~~on-going~~ongoing COVID-19 pandemic.

As of December 31, ~~2020,~~2021, the Company’s ACL model used three ~~probability weighted~~probability-weighted scenarios, representing a forecasted base-case scenario, an upside scenario, and a downside scenario. The weightings assigned to each scenario were as follows: the base-case scenario, or most likely scenario, was assigned a weighting of 40%, while the upside and downside scenarios were each assigned weightings of 30%. The Company evaluated the weightings of each economic forecasted scenario in the current period with the assistance of an independent third party, Moody’s Analytics, and determined the current weightings appropriately reflect the likelihood of outcomes for each scenario given the current economic environment. The use of three probability-weighted scenarios at December 31, 2021 is consistent with the approach used in the Company’s ACL model at December 31, 2020.

The Company, with the assistance of Moody’s Analytics, currently forecasts PDs and LGDs based on economic ~~conditions~~scenarios over a two-year period, which we believe is a reasonable and supportable period. Beyond ~~the~~this point, ~~which the Company can provide for a reasonable~~PDs and ~~supportable forecast, economic variables~~LGDs revert to ~~their~~historical long-term averages. The Company has reflected this reversion over a period of three years in each of its economic ~~forecast scenarios.~~scenarios used to generate the overall probability-weighted forecast. Changes in economic forecasts impact the PD, LGD, and EAD for each loan, and therefore influence the amount of future cash flows from each loan the Company does not expect to collect.

85

The Company recognizes that historical information used as the basis for determining future expected credit losses may not always, by themselves, provide a sufficient basis for determining future expected credit losses. The Company, therefore, periodically considers the need for qualitative adjustments to the ACL. AsQualitative adjustments may be related to and include, but not be limited to, factors such as: (i) management’s assessment of ~~December 31, 2020, qualitative adjustments included~~economic forecasts used in the ~~ACL totaled $10.0 million. These adjustments relate to~~model and how those forecasts align with management’s overall evaluation of current and expected economic conditions, (ii) organization specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through backtesting, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios and changes in portfolio segmentation, and (iv) management’s overall assessment of the adequacy of the ACL, ~~and~~including an assessment of model data inputs used to determine the ~~potential for the model, as~~ACL. As of December 31, ~~2020, to underestimate the effects of current changes in asset quality. Management reviews the need for and appropriate level of~~2021, qualitative adjustments ~~on a quarterly basis,~~included in the ACL totaled $4.0 million. These adjustments primarily relate to continued uncertainty concerning the strength of the economic recovery and how it may impact certain classes of loans in the loan portfolio. Management determined through additional review that the uneven recovery as well as labor shortages, continued supply chain disruptions, and inflationary pressures may not be fully reflected in the quantitative component of the ACL for the SBA real estate secured, construction and franchise classes of the loan portfolio, and as such a qualitative adjustment has been assigned.

At December 31, 2021, our ACL on loans was $197.8 million, a decrease of $70.3 million from $268.0 million at December 31, 2020. The decrease in the ~~amount~~ACL for loans held for investment during the year ended December 31, 2021 of $70.3 million is reflective of a $67.1 million provision recapture and ~~allocation~~net charge-offs of ~~qualitative adjustments may change~~$3.2 million. The provision recapture for the year ended December 31, 2021 is reflective of improved economic forecasts used in ~~future periods.~~the Company’s ACL model, including a more favorable outlook for real estate prices and commercial vacancy rates. A favorable asset quality profile of the loan portfolio also contributed to the provision recapture and was partially offset by increases in loans held for investment during 2021.

The increase in ACL during 2020 is reflective of a $55.7 million adjustment to the ACL onfor loans held for investment associated with the Company’s adoption of ASC 326 on January 1, 2020, which was recorded through a cumulative effect adjustment to retained earnings, as well as $172.3 million in provision for credit losses on loans, net charge-offs of $16.9 million, and the establishment of $21.2 million in net ACL for PCD loans acquired in the Opus acquisition. In accordance with ASC 326, the ACL for PCD loans was established through an adjustment to the initial amortized cost of the loan. The provision for credit losses during the year ended December 31, 2020 is inclusive of approximately $75.9 million related to the initial ACL required for the acquisition of non-PCD loans in the Opus acquisition. Under ASC 326, the Company is required to record an ACL for estimates of lifetime credit losses on loans at the time of acquisition. For non-PCD loans, the initial ACL is established through a charge to provision for credit losses at the time of acquisition. Excluding the impact of the Opus acquisition, the provision for credit losses of $96.4 million for the year ended December 31, 2020 is ~~also~~largely reflective of unfavorable economic forecasts employed in the Company’s ACL model driven by the ~~on-going~~onset of the COVID-19 pandemic.

No assurance can be given that we will not, in any particular period, sustain credit losses that exceed the amount reserved, or that subsequent evaluation of our loan portfolio, in light of prevailing factors, including ~~current and future~~ economic conditions that may adversely affect our market area or other circumstances, will not require significant increases in the ACL. In addition, regulatory agencies, as an integral part of their examination process, periodically review our ACL and may require us to recognize additional provisions to increase the ~~ACL~~allowance and record charge-offs in anticipation of future losses. ~~At December 31, 2020, the Company believes the ACL was adequate to cover current expected credit losses in the loan portfolio.~~ Should any of the factors considered by management in evaluating the appropriate level of the ACL change, including the size and composition of the loan portfolio, the credit quality of the loan portfolio, as well as forecasts of future economic conditions, the Company’s estimate of current expected credit losses could also significantly change and affect the level of future provisions for credit losses.

At December 31, 2021 and 2020, the Company believes the ACL was adequate to cover current expected credit losses in the loan portfolio.

At December 31, 2021, the ratio of allowance for credit losses to loans held for investment was ~~2.02%~~1.38%, a ~~significant increase~~decrease from ~~0.41%~~2.02% at December 31, ~~2019 due to the adoption of the CECL accounting standard.~~2020. Our unamortized fair value discount on the loans acquired totaled $77.1 million, or 0.54% of total loans held for investment, at December 31, 2021, compared to $113.8 million, or 0.85% of total loans held for investment, at December 31, ~~2020, compared to $40.7 million, or 0.46% of total loans held for investment, at December 31, 2019. At December 31, 2020, the ACL as a percent of nonperforming loans was 918%, compared with 419%~~ at ~~December 31, 2019.~~

The following table sets forth the Company’s ACL and its corresponding percentage of the loan category balance and the percent of loan balance to total gross loans in each of the loan categories listed at the dates indicated:

The following table sets forth the ~~activity within~~Company’s net charge-offs as a percentage to the ~~Company’s allowance~~average loan held for ~~credit losses~~investment balances in each of the loan categories, ~~listed~~as well as other credit related percentages at and for the periods indicated:

The following table sets forth the average balance of deposit accounts and the weighted average rates paid for the periods indicated:

The decrease in the weighted average cost of deposits was principally driven by lower pricing across all deposit product categories ~~favorably impacted by the Federal Reserve Board’s federal funds rate decrease in March 2020, as well as~~and higher average noninterest-bearing deposits.

AtThe following table sets forth the estimated deposits exceeding the FDIC insurance limit:

The estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $357.1 million at December 31, ~~2020, we had $1.34 billion in certificates of deposit accounts with balances of $100,000 or more, and we had $825.9 million in certificates of deposit accounts with balances of $250,000 or more with~~2021. The following table sets forth the maturity distribution ~~as follows:~~of the estimated uninsured time deposits:

Borrowings represent a secondary source of funds for our lending and investing activities. The Company has a variety of borrowing relationships that it can draw upon to fund its activities. At December 31, ~~2020,~~2021, total borrowings amounted to ~~$532.5~~$888.6 million, ~~a decrease~~an increase of ~~$199.7~~$356.1 million, or ~~27.3%~~66.9%, from December 31, ~~2019.~~2020. The ~~decrease~~increase in borrowings at December 31, ~~2020~~2021 from December 31, ~~2019~~2020 was primarily due to ~~a decrease~~an increase of ~~$486.0~~$519.0 million in FHLB overnight advances and $8.0 million in other short-term borrowing, partially offset by the ~~issuance in June 2020~~redemptions of ~~$150.0~~$160.0 million in ~~aggregate principal amount of the Company's 5.375% Fixed-to-Floating Rate Subordinated Notes (the “Notes III”) due June 15, 2030, as well as the $135.0 million aggregate principal amount of~~ subordinated notes ~~assumed by the Bank~~and $10.4 million in ~~connection with the acquisition of Opus in the second quarter of 2020.~~junior subordinated debt securities.

At December 31, ~~2020,~~2021, total borrowings represented ~~2.7%~~4.2% of total assets and had an end-of-period weighted average rate of ~~5.16%~~2.12%, compared with ~~6.2%~~2.7% of total assets at a weighted average rate of ~~2.77%~~5.16% at December 31, ~~2019.~~2020.

The FHLB system functions as a source of credit to financial institutions that are members. Advances are secured by certain real estate loans, investment securities, and the capital stock of the FHLB owned by the Company. Subject to the FHLB’s advance policies and requirements, these advances can be requested for any business purpose in which the Company is authorized to engage. In granting advances, the FHLB considers a member’s creditworthiness and other relevant factors. The Company has a line of credit with the FHLB, which provides for advances totaling up to 40% of its assets. At December 31, ~~2020,~~2021, the maximum amount we could borrow through the FHLB was ~~$7.94~~$8.40 billion, of which ~~$4.74~~$5.50 billion was remaining available for borrowing based on collateral ~~pledge~~pledged of ~~$7.25~~$8.74 billion in real estate loans. At December 31, ~~2020,~~2021, the Company had $550.0 million in overnight FHLB advances, compared to $31.0 million in term FHLB advances ~~compared to $26.0 million in term FHLB advances and $491.0 million in overnight FHLB advances~~ at December 31, ~~2019.~~2020.

The Company maintains additional sources of liquidity at the Corporation level. The Corporation renewed the line of credit of $15.0 million with U.S. Bank that matured in September 2021, extended the maturity date to September 27, 2022, and increased the aggregate principal amount to $25.0 million. At December 31, 2021, the Corporation had $8.0 million outstanding under the current line of credit, compared to no outstanding balances against this line at December 31, 2020.

The Company maintains unsecured lines of credit to purchase federal funds totaling ~~$340.0~~$330.0 million and access through the Federal Reserve discount window to borrow ~~$21.3~~$20.4 million based upon current pledged investment security collateral, to be utilized as business needs dictate. Federal funds purchased are short-term in nature and utilized to meet short-term funding needs.

At December 31, ~~2020,~~2021, total subordinated debentures ~~consisting~~amounted to $330.6 million with a weighted interest rate of ~~subordinated notes and junior subordinated debentures, amounted~~5.33%, compared to $501.5 million with a weighted interest rate of 5.38%~~, compared to $215.1 million with a weighted interest rate of 5.37%~~ at December 31, ~~2019.~~2020. The ~~increase~~decrease of ~~$286.4~~$170.9 million, or ~~133.10%~~34.09%, iswas primarily driven by the ~~issuance in June 2020~~redemptions of ~~$150.0~~$160.0 million in ~~aggregate principal amount of the Notes III, as well as the $135.0 million aggregate principal amount of~~ subordinated notes ~~assumed by the Bank~~and $10.4 million in ~~connection with the acquisition of Opus in the second quarter of 2020.~~junior subordinated debt securities. At December 31, ~~2020~~2021 and ~~2019,~~2020, outstanding subordinated notes were ~~$493.4~~$330.6 million and ~~$207.2~~$493.4 million, respectively. At December 31, 2020, ~~and 2019,~~ junior subordinated debentures to affiliated trusts in connection with the issuance of trust preferred securities by such trusts were $7.7 million, ~~and $7.6 million, respectively.~~net of purchase accounting fair value adjustments. No junior subordinated debentures remained at December 31, 2021.

The following table sets forth certain information regarding the Company’s borrowed funds at or for the years ended on the dates indicated:

At December 31, ~~2020,~~2021, our stockholders’ equity amounted to ~~$2.75~~$2.89 billion, compared with ~~$2.01~~$2.75 billion at December 31, ~~2019.~~2020. The increase of ~~$734.1~~$139.7 million, or ~~36%~~5%, is primarily ~~the result of the $749.6 stock consideration issued in connection with the acquisition of Opus in the second quarter of 2020,~~due to net income in ~~2020~~2021 of ~~$60.4 million, and comprehensive income of $38.8~~$339.9 million, partially offset by ~~the $79.9~~$121.9 million in cash dividends, ~~paid~~$68.2 million in other comprehensive loss, and $18.1 million in stock repurchases effected during ~~2020, and the $45.6 million cumulative-effect adjustment to the opening balance of retained earnings upon the adoption of the new CECL accounting standard.~~2021.

Our primary sources of funds are deposits, principal and interest payments on loans, FHLB advances and other borrowings, and income from ~~investments.~~investments, to meet our financial obligations, which arise primarily from the withdrawal of deposits, extension of credit, and payment of operating expenses. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.

The Company’s Board of Directors (the “Board”) is ultimately responsible for ensuring policies and procedures are in place that provide for the safety and soundness management of assets and liabilities of the Bank, including liquidity management and interest rate risk policies to ensure these policies are effectively implemented. At the management level, the Bank’s Asset Liability Committee (“ALCO”) establishes the liquidity guidelines and review its ongoing compliance with the policies approved by the Board.

The objective of liquidity management is to ensure liquidity risk is monitored and controlled. Liquidity risk is the possibility that the Company will not be able to fund present and future obligations as they come due because of an inability to liquidate assets or obtain adequate funding at a reasonable cost. The Bank and the Company have developed tools to appropriately identify, measure, monitor, and control funding and liquidity risk. These tools include cash flow projections, stress testing, and a formalized Contingency Funding Plan (“CFP”) as primary tools for measuring and managing liquidity risk. The CFP provides a framework for the Company to evaluate increasingly severe illiquid situations and monitor the availability of funding over these scenarios and addresses the actions that the Company would take in response to both a short-term and long-term funding crisis.

We seek to maintain a level of liquid assets to ensure a safe and sound operation. Our liquid assets are comprised of unrestricted cash and unpledged ~~investments.~~available-for-sale investments securities. As part of our daily monitoring, we calculate a liquidity ratio by dividing the sum of cash balances plus unpledged available-for-sale securities by ~~the sum of~~total deposits, ~~that mature in~~excluding time deposits maturing one year or ~~less,~~more, plus ~~transaction accounts and~~ FHLB ~~advances.~~advances maturing within one year. At December 31, ~~2020,~~2021, our liquidity ratio was ~~28.32%~~25.01%, compared with ~~17.08%~~28.32% at December 31, ~~2019.~~2020.

At December 31, ~~2020,~~2021, the Company’s loan to deposit and borrowing ratio was ~~79.0%~~79.5%, compared with ~~90.6%~~79.0% at December 31, ~~2019.~~2020. The ~~decrease~~increase was primarily associated with our ~~deposits and borrowings~~loans increasing at a faster rate relative to our ~~loans~~deposits and borrowings during the ~~period as a result of the Opus acquisition and the issuance of $150.0 million in aggregate principal amount of the Notes III in June 2020.~~period. Certificates of deposit, which are scheduled to mature in one year or less from December 31, ~~2020,~~2021, totaled ~~$1.43 billion.~~$983.7 million.

The Bank ~~has a policy~~maintains liquidity guidelines in ~~place~~the Company’s Liquidity Policy that permits the purchase of brokered deposit funds, in an amount not to exceed ~~15%~~10% of total deposits, or ~~12%~~8% of total assets, as a secondary source for funding. At December 31, 2021, the Company had no brokered time deposits. At December 31, 2020, the Company had $155.3 million, or 0.8% of total assets, in brokered time deposits. ~~At December 31, 2019, the Company had $74.4 million, or 0.6%~~

Based on the modeling of the impact on earnings and EVE from changes in interest rates, the Company’s sensitivity to changes in interest rates is ~~low~~moderate for rising ~~rates.~~rates, aided by the addition of interest rate swaps for hedging purposes. Both the Earnings at Risk and the EVE project to increase as rates rise. It is important to note the above tables are forecasts based on several assumptions and that actual results may vary. The forecasts are based on estimates of historical behavior and assumptions by management that may change over time and may turn out to be different. Factors affecting these estimates and assumptions include, but are not limited to ~~(1)~~ competitor behavior, ~~(2)~~ economic conditions both locally and nationally, ~~(3)~~ actions taken by the Federal Reserve Board, ~~(4)~~ customer behavior, and ~~(5)~~ management’s responses. Changes that vary significantly from the assumptions and estimates may have significant effects on the Company’s earnings and EVE.

The Company ~~does not have any~~has minimal direct market risk from foreign exchange ~~or commodity exposures.~~and no exposure from commodities.

The principal business of the Company is attracting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, primarily in business loans and commercial real estate loans. At December 31, ~~2020,~~2021, the Company had 6561 full-service depository branches located in the western United States in major metropolitan markets in California, Washington, Oregon, Arizona, and Nevada. The Company also offers IRA custodial and maintenance services through its Pacific Premier Trust division, which serves as a custodian for self-directed IRAs, the funds of which account owners use for self-directed investments in various alternative asset classes. Additionally, the Company provides commercial escrow services through its Commerce Escrow division, which facilitates tax-deferred commercial exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Company is subject to the regulations of certain governmental agencies, and undergoes periodic examinations by those regulatory authorities.

The following discussion provides a summary of the Company’s significant accounting policies:

The Company accounts for transfers of debt securities from the available-for-sale classification to the held-to-maturity classification at fair value on the date of transfer. Any associated unrealized gains or losses on such securities as of the date of transfer become part of the security’s amortized cost and are subsequently amortized or accreted into interest income over the remaining life of the security using the interest method. In addition, the related unrealized gains and losses included in accumulated other comprehensive income on the date of transfer are also subsequently amortized or accreted into interest income over the remaining life of the security using the interest method.

For available-for-sale investment securities, the Company performs a ~~quarterly~~ qualitative evaluation for securities in an unrealized loss position to determine if, for those investments in an unrealized loss position, the decline in fair value is credit related or non-credit related. In determining whether a security’s decline in fair value is credit related, the Company considers a number of factors including, but not limited to: (i) the extent to which the fair value of the investment is less than its amortized cost; (ii) the financial condition and near-term prospects of the issuer; (iii) downgrades in credit ratings; (iv) payment structure of the security, (v) the ability of the issuer of the security to make scheduled principal and interest payments, and (vi) general market conditions which reflect prospects for the economy as a whole, including interest rates and sector credit spreads. If it is determined that the unrealized loss, or a portion thereof, is credit related, the Company records the amount of credit loss through a charge to provision for credit losses in current period earnings. However, the amount of credit loss recorded in current period earnings is limited to the amount of the total unrealized loss on the security, which is measured as the amount by which the security’s fair value is below its amortized cost. If it is likely the Company will be required to sell the security in an unrealized loss position, the total amount of the loss is recognized in current period earnings. Unrealized losses deemed non-credit related are recorded, net of tax, through accumulated other comprehensive income.

The Company determines expected credit losses on available-for-sale and held-to-maturity securities through a discounted cash flow approach, using the security’s effective interest rate. However, as previously mentioned, the measurement of credit losses on available-for-sale securities only occurs when, through the Company’s qualitative assessment, it is determined all or a portion of the unrealized loss is deemed to be credit related. The Company’s discounted cash flow approach incorporates assumptions about the collectability of future cash flows. The amount of credit loss is measured as the amount by which the security’s amortized cost exceeds the present value of expected future cash flows. Credit losses on available-for-sale securities are measured on an individual basis, while credit losses on held-to-maturity securities are measured on a collective basis according to shared risk characteristics. Credit losses on held-to-maturity securities are only recognized at the individual security level when the Company determines a security no longer possesses risk characteristics similar to others in the portfolio.basis. The Company does not measure credit losses on an investment’s accrued interest receivable, but rather promptly reverses from current period earnings the amount of accrued interest that is no longer deemed collectable. Accrued interest receivable for investment securities is included in accrued interest receivable balances in the consolidated statements of financial condition.

The Company applies the equity method of accounting to investments in the equity of certain entities where it is deemed to have the ability to exercise significant influence over the entity, but does not control the entity, such as when its ownership interest is between 20% and 50%. Further, the Company also applies the equity method of accounting to equity investments it makes in limited partnerships and limited liability companies when its ownership interest in such entities exceeds 5% or when the Company has the ability to exercise significant influence over the partnership. Such investments typically reflect equity interests in various partnerships that make investments qualifying for credit under the Community Reinvestment Act (“CRA”). The Company records its share of the operating results associated with equity method investments, based on the most recent information available from the investee, in other noninterest income in the consolidated statements of income.

The Company typically sells the guaranteed portion of SBA loans and retains the unguaranteed portion (“retained interest”). A portion of the premium on sale of SBA loans is recognized as gain on sale of loans at the time of the sale by allocating the carrying amount between the asset sold and the retained interest, based on their relative fair values. The remaining portion of the premium is recorded as a discount on the retained interest and is amortized over the remaining life of the loan as an adjustment to yield. The retained interest, net of any discount, are included in loans held for investment—net of allowance for credit losses in the accompanying consolidated statements of financial condition.

The Company accrues interest on loans using the interest method and only if deemed collectible. Loans for which the accrual of interest has been discontinued are designated as nonaccrual loans. The accrual of interest on loans is discontinued when principal or interest is past due 90 days based on contractual terms of the loan or when, in the opinion of management, there is reasonable doubt as to the ~~timely~~ collection of principal and or interest. When loans are placed on nonaccrual status, all previously accrued and uncollected interest is promptly reversed against current period interest income, and as such an ACL for accrued interest receivable is not established. Interest income generally is not recognized on nonaccrual loans unless the likelihood of further loss is remote. Interest payments received on nonaccrual loans are applied as a reduction to the loan principal balance. Interest accruals are resumed on such loans only when they are brought current with respect to interest and principal and when, in the judgment of management, the loans are deemed to be fully collectible as to all principal and interest.

The Company’s ACL model also includes adjustments for qualitative factors, where appropriate. Since historical information (such as historical net losses and economic cycles) may not always, by itself, provide a sufficient basis for determining future expected credit losses, the Company periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to factors such as: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions, (ii) organization specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through ~~back-testing,~~backtesting, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios and changes in portfolio segmentation, and (iv) management’s overall assessment of the adequacy of the ACL, including an assessment of model data inputs used to determine the ACL.

The Company has a credit portfolio review process designed to detect problem loans. Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on nonaccrual status, troubled debt restructurings (“TDRs”), loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated. Such loans, which have exhibited a deterioration in credit quality may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the loan portfolio, ~~because the specific attributes~~ and ~~risks associated with the loan have likely become unique~~ as ~~the credit quality of the loan deteriorates. As~~ such ~~these loans~~ may require individual evaluation to determine an appropriate ACL for the loan. When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent. Collateral dependent loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral. The ACL for collateral dependent loans is determined using estimates for the fair value of the underlying collateral, less costs to sell.

Although management uses the best information available to derive estimates necessary to measure an appropriate level of the ACL, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process. Such agencies may require the Company to recognize additions to the ACL based on judgments different from those of management.

The Company has segmented the loan portfolio according to loans that share similar attributes and risk characteristics. Each segment possesses varying degrees of risk based on, among other things, the type of loan, the type of collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. These segment groupings are: investor loans secured by real estate, business loans secured by real estate, commercial loans, and retail loans. Within each segment grouping there are various classes of loans as disclosed below. The Company determines the ACL for loans based on this more detailed loan segmentation and classification.

In connection with the Opus acquisition on June 1, 2020, the Company acquired PCD loans with an aggregate fair value of approximately $841.2 million, and recorded an initial ACL of approximately $21.2 million, which was added to the amortized cost of the ~~loans.~~loans on the date of acquisition.

The amortized cost and estimated fair value of investment securities available-for-sale were as follows:

The Company reassesses classification of certain investments as part of the ongoing review of the investment securities portfolio. During the year, the Company transferred approximately $326.5 million of municipal bonds, which the Company intends and has the ability to hold to maturity, from available-for sale to held-to-maturity securities. The transfer of these securities was accounted for at fair value. These securities had a net carrying amount of $319.9 million with a pre-tax unrealized loss of $6.6 million, which was reflected as a discount on the date of transfer. This discount, as well as the related unrealized loss in accumulated other comprehensive income, is amortized into interest income as a yield adjustment over the remaining term of the securities. The amortization of the unrealized loss reported in accumulated other comprehensive income offsets the effect on interest income of the amortization of the discount. No gains or losses were recorded at the time of transfer.

Investment securities with carrying values of $130.7 million and $147.3 million as of December 31, 2021 and 2020, respectively, were pledged to secure public deposits, other borrowings, and for other purposes as required or permitted by law.

Unrealized gains and losses on investment securities available-for-sale are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At December 31, ~~2020,~~2021, the Company had accumulated other comprehensive loss of $4.7 million, or $3.3 million net of tax, compared to accumulated other comprehensive income of $84.4 million, or $60.3 million net of tax, ~~compared~~at December 31, 2020.

For investment securities transferred from available-for-sale to held-to-maturity, the unrealized gains and losses at the date of transfer continue to be reported in stockholders’ equity as accumulated other comprehensive income and are amortized over the remaining lives of ~~$30.1 million, or $21.5 million net~~the securities with an offsetting entry to interest income as an adjustment of ~~tax, at December 31, 2019.~~

The table below shows the number, fair value, and gross unrealized holding losses of the Company’s investment securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded as of the dates indicated, aggregated by investment category and length of time ~~that the securities have been~~ in a continuous ~~unrealized~~ loss position.

The Company ~~accounts for~~reviews individual securities classified as available-for-sale to determine whether a decline in fair value below the amortized cost basis is deemed credit ~~losses on debt securities~~related or due to other factors such as changes in accordance with ASC 326, which requires the Company to record an ACL on held-to-maturity investment securities at the time of purchase or acquisition. The ACL for held-to-maturity investment securities represents the Company’s current estimate of expected credit losses that may be incurred over the life of the investment.interest rates and general market conditions. An ACL on available-for-sale investment securities is recorded when the fair value of the investment is below its amortized cost and the decline in fair value has been deemed, ~~to be credit related~~ through the Company’s qualitative ~~assessment.~~assessment, to be credit related. Non-credit related declines in fair value of available-for-sale investment securities, which may be attributed to changes in interest rates and other market related factors, are not recorded through an ~~ACL, but rather~~ACL. Such declines are recorded as an adjustment to accumulated other comprehensive income, net of tax. In the event the Company is required to sell or has the intent to sell an available-for-sale security that has experienced a decline in fair value below its amortized cost, the Company writes the amortized cost of the security down to fair value in the current period.

Credit losses on held-to-maturity investment securities are recorded at the time of purchase or acquisition and when the Company has designated securities as held-to-maturity. Credit losses on held-to-maturity investment securities are representative of current expected credit losses that may be incurred over the life of the investment.

The Company determines credit losses on both available-for-sale and held-to-maturity investment securities through the use of a discounted cash flow approach using the security’s effective interest rate. The ACL is measured as the amount by which an investment security’s amortized cost exceeds the net present value of expected future cash flows. However, the amount of credit losses for available-for-sale investment securities is limited to the amount of a security’s unrealized loss. The ACL is established through a charge to provision for credit losses in current period earnings.

During the second quarter of 2020, the Company acquired $829.9 million of available-for-sale securities in connection with the acquisition of Opus. Such securities were evaluated and it was determined that there were no investment securities classified as purchase credit deteriorated upon acquisition and, as a result, no allowance for credit losses was recorded.

At December 31, 2021, the Company had an ACL of $22,000 for held-to-maturity investment securities classified as municipal bonds, which primarily consisted of the securities transferred from available-for-sale during the third and fourth quarters of 2021. There was no ACL for held-to-maturity investment securities at December 31, 2020. The Company ~~did 0t record an ACL~~recognized $22,000 of provision for ~~available-for-sale or~~credit losses for held-to-maturity investment securities during the year ended December 31, ~~2020. For available-for-sale securities where estimated fair value~~2021. There was below amortized cost, such declines were deemed non-credit related and recorded as an adjustment to accumulated other comprehensive income, net of tax. Non-credit related decline in fair value of available-for-saleno provision for credit losses recognized for held-to-maturity investment ~~securities can be attributed to changes in interest rates and other market related factors. The Company did 0t record an ACL for held-to maturity~~ securities during the year ended December 31, ~~2020, because the likelihood of non-repayment is remote.~~2020.

The following table presents a rollforward by major security type of the allowance for credit losses on the Company's held-to-maturity debt securities as of, and for the periods indicated:

The Company had no ACL for available-for-sale or investment securities at December 31, 2021 and 2020. As of December 31, 2021 the Company has not recorded credit losses on certain available-for-sale securities that were in an unrealized loss position due to the high quality of the investments, with investment grade ratings, and many of them are issued by U.S. government agencies. Additionally, the Company continues to receive contractual principal and interest payments in a timely manner. The Company performed a qualitative assessment of these investments as of December 31, 2021, and does not believe the declines in fair value were credit related. There were no provision for credit losses recognized for investment securities during the year ended December 31, 2021 and 2020. There were no other than temporary impairment losses recognized for investment securities for the year ended December 31, 2019.

At December 31, 2021 and 2020, there were no available-for-sale or held-to-maturity securities in nonaccrual status. All securities in the portfolio were current with their contractual principal and interest payments. At December 31, 2021 and 2020, there were no securities purchased with deterioration in credit quality since their origination. At December 31, 2021 and 2020, there were no collateral dependent available-for-sale or held-to-maturity securities.

The following table summarizes the Company’s investment securities portfolio by Moody’s external rating equivalent and by vintage as of December 31, ~~2020:~~2021:

During the years ended December 31, 2021, 2020, and 2019, the Company recognized gross realized gains on sales of available-for-sale securities in the amounts of $23.2 million, $15.7 million, and $10.3 million, respectively. During the years ended December 31, 2021, 2020, and 2019, the Company recognized gross realized losses on sales of available-for-sale securities in the amounts of $6.3 million, $1.8 million, and $1.8 million, respectively. The Company had net proceeds from the sale of available-for-sale securities of $901.1 million, $766.5 million, and $551.8 million during the years ended December 31, 2021, 2020, and 2019, respectively.

The amortized cost and estimated fair value of investment securities available-for-sale at December 31, 2021, by contractual maturity, are shown in the table below.

The Company’s equity securities primarily consist of FHLB and FRB stock, which are considered restricted securities and held as a condition of membership of the FHLB and the Board of Governors of the Federal Reserve System. These equity securities without readily determinable fair values are carried at cost less impairment. At December 31, 2021, the Company had $17.3 million in FHLB stock, $74.5 million in FRB stock, and $25.7 million in other stock, all carried at cost. During the year ended December 31, 2021, FHLB did not repurchase any of the Company’s excess FHLB stock through its stock repurchase program. During the year ended December 31, 2020 and 2019, FHLB had repurchased $17.3 million and $18.3 million, respectively, of the Company’s excess FHLB stock through their stock repurchase program.

The Company evaluates its investments in FHLB, FRB, and other stock for impairment periodically, including their capital adequacy and overall financial condition. No impairment losses have been recorded through December 31, 2021.

Investor loans secured by real estate ~~includes~~include CRE non-owner-occupied, multifamily, construction, and land, as well as SBA loans secured by real estate, which are loans collateralized by hotel/motel real property.

Business loans secured by real estate are loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes CRE owner-occupied, franchise loans secured by real estate, and SBA loans secured by real estate, which are collateralized by real property other than hotel/motel real property.

Commercial loans are loans to businesses where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes commercial and industrial loans, franchise loans non-real estate secured, and SBA loans non-real estate secured.

Retail loans ~~portfolio includes~~include single family residential and consumer loans. Single family residential loans include home equity lines of credit, as well as second trust deeds.

The Company originates SBA loans with the intent to sell the guaranteed portion of the ~~loan~~loans prior to maturity and, therefore, designates them as held for sale. From time to time, the Company may purchase or sell other types of loans in order to manage concentrations, maximize interest income, change risk profiles, improve returns, and generate liquidity.

The Company participated in the SBA ~~PPP program~~Paycheck Protection Program (“PPP”) under the CARES Act during the second quarter of 2020 and originated SBA PPP loans. At June 30, 2020, the Company’s SBA PPP loan balance was $1.13 billion. In July 2020, the Company concluded the sale of its entire SBA PPP loan portfolio with an aggregate amortized cost of $1.13 billion to a seasoned and experienced ~~non-bank~~nonbank lender and servicer of SBA loans, resulting in improved balance sheet liquidity and a gain on sale of approximately of $18.9 million, net of net deferred origination fees and net purchase discounts.

The Company generally retains the servicing rights of the guaranteed portion of SBA loans sold, for which the Company records a servicing ~~asset~~assets at fair value within its other assets category. Servicing assets are subsequently measured using the amortization method and amortized to noninterest ~~income. Servicing assets are evaluated for impairment based on~~income in proportion to and over the ~~fair value~~period of ~~the assets as compared to carrying amount.~~estimated net servicing income. At December 31, ~~2020~~2021 and ~~2019,~~2020, the servicing ~~asset~~assets totaled ~~$5.3~~$3.8 million and ~~$7.7~~$5.3 million, respectively, and ~~was~~were included in other assets on the Company’s consolidated ~~statement~~statements of financial condition. Servicing ~~rights~~assets are evaluated for impairment based upon the fair value of the servicing rights as compared to the carrying amount. Impairment is recognized through a valuation allowance, to the extent the fair value is less than the carrying amount. The fair value of retained servicing rights is generally evaluated at the loan level using a discounted cash flow analysis utilizing current market assumptions derived from the secondary market. Key modeling assumptions include interest rates, prepayment assumptions, discount rate, and ~~estimated cash flows.~~servicing cost. At December 31, ~~2020,~~2021, and ~~2019,~~2020, the Company determined that 0no valuation allowance was necessary.

Opus entered into securitization sales on December 23, 2016 with the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The transaction involved the sale of ~~$509~~$509.0 million in originated multifamily loans through a Freddie Mac-sponsored transaction. One class of Freddie Mac guaranteed structured pass-through certificates was issued and purchased entirely by Opus. In connection with the Opus acquisition, the Company's continuing involvement includes sub-servicing responsibilities, general representations and warranties, and reimbursement obligations. Servicing responsibilities on loan sales generally include obligations to collect and remit payments of principal and interest, provide foreclosure services, manage payments of taxes and insurance premiums, and otherwise administer the underlying loans. In connection with the securitization transaction, Freddie Mac was designated as the master servicer and appointed the Company to perform sub-servicing responsibilities, which generally include the servicing responsibilities described above with the exception of the servicing of foreclosed or defaulted loans. The overall management, servicing, and resolution of defaulted loans and foreclosed loans are separately designated to the special servicer, a third-party institution that is independent of the master servicer and the Company. The master servicer has the right to terminate the Company in its role as sub-servicer and direct such responsibilities accordingly.

General representations and warranties associated with loan sales and securitization sales require the Company to uphold various assertions that pertain to the underlying loans at the time of the transaction, including, but not limited to, compliance with relevant laws and regulations, absence of fraud, enforcement of liens, no environmental damages, and maintenance of relevant environmental insurance. Such representations and warranties are limited to those that do not meet the quality represented at the transaction date and do not pertain to a decline in value or future payment defaults. In circumstances where the Company breaches its representations and warranties, the Company would generally be required to cure such instances through a repurchase or substitution of the subject

To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse Freddie Mac for such amounts, not to exceed 10% of the original principal amount of the loans comprising the securitization pool at the closing date of December 23, 2016. The liability recorded for Company’s exposure to the reimbursement agreement with Freddie Mac was $338,000 and $448,000 as of December 31, ~~2020.~~2021 and 2020, respectively.

Loans sold and serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal ~~balance~~balances of loans and participations serviced for others were $565.8 million and $686.0 million at December 31, 2021 and 2020, ~~and $633.8 million at December 31, 2019, including~~respectively. Included in those totals are multifamily loans transferred through securitization with Freddie Mac of $78.1 million and $99.4 million at December 31, 2021 and 2020, respectively, and SBA participations serviced for others totaling $365.6 million and $421.7 million at December 31, 2021 and 2020, ~~and $475.3 million at December 31, 2019.~~respectively.

As of December 31, ~~2020,~~2021, the Company’s loan portfolio was primarily collateralized by various forms of real estate and business assets located principally in California. The Company’s loan portfolio contains concentrations of credit in ~~commercial non-owner occupied real estate,~~ multifamily, ~~real estate, commercial owner occupied business loans~~CRE non-owner-occupied, CRE owner-occupied, and ~~commercial and industrial~~C&I business loans. The ~~Company~~Bank maintains policies approved by the Bank’s Board of Directors (the “Bank Board”) that address these concentrations and diversifies its loan portfolio through loan originations, purchases, and sales ~~of loans~~ to meet approved concentration levels. While management believes that the collateral presently securing these loans is adequate, there can be no assurances that significant deterioration in the California real estate market or economy would not expose the Company to significantly greater credit risk.

Under applicable laws and regulations, the Bank may not make secured loans to one borrower in excess of 25% of the Bank’s unimpaired capital plus surplus and likewise in excess of 15% of the Bank’s unimpaired capital plus surplus for unsecured loans. These loans-to-one borrower limitations result in a dollar limitation of ~~$821.3~~$848.1 million for secured loans and ~~$492.8~~$508.8 million for unsecured loans at December 31, ~~2020.~~2021. In order to manage concentration risk, the Bank maintains a house lending limit well below these statutory maximums. At December 31, ~~2020,~~2021, the Bank’s largest aggregate outstanding balance of loans to one borrower was ~~$165.4~~$188.5 million, ~~secured by multifamily properties.~~primarily comprised of an asset-based line of credit.

The Company’s credit quality and credit risk is managed in 2 distinct areas. The first is the loan origination process, wherein the Bank underwrites credit and chooses which types and levels of risk it is willing to accept. The Company maintains a credit policy which addresses many related topics, sets forth maximum tolerances for key elements of loan risk, and indicates appropriate protocols for identifying and analyzing these risk elements. The policy sets forth specific guidelines for analyzing each of the loan products the Company offers from both an individual and portfolio-wide basis. The credit policy is reviewed annually by the Bank Board. The Bank’s underwriters ensure all key risk factors are analyzed, with ~~nearly all~~most underwriting including a global cash flow analysis of the prospective borrowers.

The second area is in the ongoing oversight of the loan portfolio, where existing credit risk is measured and monitored, and where performance issues are dealt with in a timely and appropriate fashion. Credit risk is monitored and managed within the loan portfolio by the Company’s portfolio managers based on both the credit policy and a credit and portfolio review policy. This latter policy requires a program of financial data collection and analysis, thorough loan reviews, property and/or business inspections, monitoring of portfolio concentrations and trends, and incorporation of current business and economic conditions. The portfolio managers also monitor asset-based lines of credit, loan covenants, and other conditions associated with the Company’s business loans as a means to help identify potential credit risk. Most individual loans, excluding the homogeneous loan portfolio, are reviewed at least annually, including the assignment or confirmation of a risk grade.

Risk grades are based on a 6-grade Pass scale, along with Special Mention, Substandard, Doubtful, and Loss classifications, as such classifications are defined by the federal banking regulatory agencies. The assignment of risk grades allows the Company to, among other things, identify the risk associated with each credit in the portfolio and to provide a basis for ~~measuring risk to determine~~estimating credit losses inherent in the ~~estimated valuation allowance for groups and individual assets at a point in time.~~portfolio. Risk grades are reviewed regularly bywith the Company’s Credit and Portfolio Review ~~committee,~~Committee, and the portfolio management and risk grading process is reviewed on an ~~on-going~~ongoing basis by an independent loan review function, as well as by regulatory agencies during scheduled examinations.

The following provides brief definitions for risk grades assigned to loans in the portfolio:

The Bank’s portfolio managers also manage loan performance risks, collections, workouts, bankruptcies, and foreclosures. A special department, whose portfolio managers have professional expertise in these areas, typically handles or advises on these types of matters. Loan performance risks are mitigated by our portfolio managers acting promptly and assertively to address problem credits when they are identified. Collection efforts commence immediately upon non-payment, and the portfolio managers seek to promptly determine the appropriate steps to minimize the Company’s risk of loss. When foreclosure will maximize the Company’s recovery for a non-performing loan, the portfolio managers will take appropriate action to initiate the foreclosure process.

When a loan is graded as special mention, substandard, or doubtful, the Company obtains an updated valuation of the underlying collateral. If, through the Company’s credit risk management process, it is determined the ultimate repayment of a loan will come from the foreclosure upon and ultimate sale of the underlying collateral, the loan is deemed collateral dependent and evaluated individually to determine an appropriate ACL for the loan. The ACL for such loans is measured as the amount by which the fair value of the underlying collateral, less estimated costs to sell, is less than the amortized cost of the loan. The Company typically continues to obtain or confirm updated valuations of underlying collateral for special mention and classified loans on an annual or biennial basis in order to have the most current indication of fair value of the underlying collateral securing the loan. Additionally, once a loan is identified as collateral dependent, due to the likelihood of foreclosure, and repayment of the loan is expected to come from the eventual sale of the underlying collateral, an analysis of the underlying collateral is performed at least quarterly. Changes in the estimated fair value of the collateral are reflected in the lifetime ACL for the loan. Balances deemed to be uncollectable are promptly charged-off.

The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination, as of December 31, ~~2020:~~2021:

The following table stratifies the ~~loan~~loans held for investment portfolio by the Company’s internal risk ~~rating~~grading, and by year of origination, as of December 31, ~~2019:~~2020:

The following tables stratify loans held for investment by delinquencies in the Company’s loan portfolio as of the periods indicated:

Beginning on January 1, 2020, the Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, modified through a TDR, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated costs to sell. The Company may increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral. Changes in the ACL for all other individually evaluated loans is based substantially on the Company’s evaluation of cash flows expected to be received from such loans.

As of December 31, 2021, $31.3 million of loans were individually evaluated, and the ACL attributed to such loans was $1.5 million. At December 31, 2021, $12.4 million of individually evaluated loans were evaluated using a discounted cash flow approach, and $18.9 million of individually evaluated loans were evaluated based on the underlying value of the collateral. All individually evaluated loans were on nonaccrual status at December 31, 2021.

As of December 31, 2020, $29.2 million of loans were individually evaluated, and the ACL attributed to such loans was $126,000. At December 31, 2020, $15.2 million of the individually evaluated loans were evaluated using a discounted cash flow approach and $14.0 million ~~of individually evaluated loans~~ were evaluated based on the underlying value of ~~the~~ collateral.

We sometimes modify or restructure loans when the borrower is experiencing financial difficulties by making a concession to the borrower in the form of changes in the amortization terms, reductions in the interest rates, the acceptance of ~~interest only~~interest-only payments, and, in limited cases, concessions to the outstanding loan balances. These loans are classified as TDRs. TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term. In most cases, the Company initially places TDRs on nonaccrual status, and they may be returned to accrual status when the ~~loan is~~loans are brought current, ~~has~~have performed in accordance with the restructured contractual terms for a period of at least six months, and the ultimate collectability of the total contractual restructured principal and interest isare no longer in doubt. At December 31, ~~2020,~~2021, the Company had 0$17.3 million TDR loans. During the year ended December 31, 2021, there were 6 loans totaling $17.3 million modified as TDRs, which were comprised of 3 CRE owner-occupied loans and 1 C&I loan totaling $5.2 million belonging to one borrower relationship with the terms modified due to bankruptcy, and 2 franchise non-real estate secured loans totaling $12.1 million belonging to another borrower relationship with the terms modified for payment deferral. During the year ended December 31, 2021, the 3 CRE owner-occupied loans and 1 C&I loan classified as TDRs were in payment default and all TDRs were on nonaccrual status as of December 31, 2021. At December 31, 2020, there were 0 loans classified as TDRs. During the year ended December 31, 2020, there were 02 loans modified as TDRs. At December 31, 2019, the Company had 2 TDRs aggregating to $3.0 million, consisting of a franchise non-real estate secured loan of $1.7 million and a commercial and industrial loan of $1.3 million with each’s terms being modified to extend the maturity date for 24 months or less. The modifications did not have a financial impact on the recorded investments. These 2 TDRs were both current and on accrual status as of December 31, 2019. During the year ended December 31, 2020, both TDRs experienced payment defaults after modifications within the previous 12 months and the remaining balance, which were $1.3 million for commercial and industrial loan and $344,000 for franchise non-real estate secured loan, were charged off in 2020. During the year ended December 31, 2019, there were 0 TDRs that experienced payment defaults after modifications within the previous 12 ~~months.~~months, consisting of a C&I loan of $1.3 million and a franchise non-real estate secured loan of $344,000 that were charged off in 2020.

The CARES Act, signed into law on March 27, 2020, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. On April 7, 2020, federal bank regulators issued a joint interagency statement that allows lenders to conclude that a borrower is not experiencing financial difficulty if short-term (e.g., six months or less) modifications are made in response to the COVID-19 pandemic, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The CAA, signed into law on December 27, 2020, extends the applicable period to include modification to loans held by financial institutions executed between March 1, 2020 and the earlier of (i) January 1, 2022, or (ii) 60 days after the date of termination of the COVID-19 national emergency.

For COVID-19 related loan modifications in the form of payment deferrals, the delinquency status will not advance and loans that were accruing at the time that the relief is provided will generally not be placed on nonaccrual status during the deferral period. Interest income will continue to be recognized over the contractual life of the loan. However, the Company, through its credit portfolio management activities, ~~has~~ continued to monitor facts and circumstances associated with the underlying credit quality of loans modified under the provisions of the CARES Act in an effort to identify any loans where the accrual of interest during the modification period is no longer appropriate. In such cases, the Company ceases the accrual of interest and all previously accrued and uncollected interest is promptly reversed against current period interest income. ~~The Company has determined 0ne~~At December 31, 2021, there were no COVID-19 loan modifications within their modification period under Section 4013 of the ~~COVID-19 related loan modifications need to be characterized as TDRs.~~CARES Act and no loans were in-process for potential modification. As of December 31, 2020, 52 loans with an aggregate amortized cost of $79.5 million, ~~of which 5 loans totaling $3.1 million were acquired in connection with the acquisition of Opus, remained under modification due to COVID-19 hardship under the CARES Act, which represent 0.60%~~or 0.56% of total loans held for investment, ~~as of that date. As of December 31, 2020, 0 loans were in-process for potential modification.~~remained under modification due to the COVID-19 pandemic hardship under the CARES Act.

The following table reconciles the par value, or initial amortized cost, of PCD loans acquired in the Opus acquisition as of the date of the acquisition with the purchase price (or initial fair value of the loans):

When loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from current period earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is remote, the Company may recognize interest income on a cash basis. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least three months of sustained repayment performance since the loan was placed on nonaccrual.

The following ~~table provides~~tables provide a summary of nonaccrual loans as of the ~~date~~dates indicated:

The Company had 0no consumer mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in process as of December 31, ~~2020~~2021 and ~~2019.~~2020.

Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL, which is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded.

The following ~~table summarizes~~tables summarize collateral dependent loans by collateral type as of ~~December 31, 2020:~~the dates indicated:

Prior to the Company’s adoption of ASC 326 on January 1, 2020, the Company maintained an ALLL in accordance with ASC 310 and ASC 450 that ~~covered estimated credit~~represented an allowance for loan and lease losses onfor individually evaluated loans that were ~~determined to be~~identified as impaired, as well as estimated probable incurred losses inherent in the remainder of the loan portfolio. The ALLL was prepared using the information provided by the Company’s credit review process, including internal risk grades for each loan, together with data from peer institutions and economic information gathered from published sources.

The loan portfolio was segmented into groups of loans with similar risk characteristics. Each segment possessing varying degrees of risk based on, among other things, the type of loan, the type of collateral and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. An estimated loss rate calculated using the Company’s historical loss rates, adjusted for current portfolio trends, economic conditions, and other relevant internal and external factors, was applied to each ~~segment’s aggregate~~ loan ~~balances.~~in each segment of the loan portfolio.

The Company’s base ALLL factors were determined by management using the Bank’s annualized actual ~~trailing~~historical net charge-off data over a full credit cycle with an approximate average loss emergence period of 1 year to 1.6 years. Potential adjustments to those base factors were made for relevant internal and external factors. Those factors included:

For loans with risk ~~graded as~~grades of watch or worse, progressively higher ~~potential~~estimated loss ~~factors~~rates were applied based on migration analysis of risk grading and net charge-offs.

The discounted cash flow model is applied on an instrument-by-instrument basis, and for loans with similar risk characteristics, to derive estimates for the lifetime ACL for each loan. The discounted cash flow methodology relies on several significant components essential to the development of estimates for future cash flows on loans and ~~off-balance sheet~~unfunded loan commitments. These components consist of: (i) the estimated probability of default (“PD”), (ii) the estimated loss given default (“LGD”), which represents the estimated severity of the loss when a loan is in default, (iii) estimates for prepayment activity on loans, and (iv) the estimated exposure to the Company at default (“EAD”). These components are also heavily influenced by changes in economic forecasts employed in the model over a reasonable and supportable period. The Company’s ACL methodology for ~~off-balance sheet~~unfunded loan commitments also includes assumptions concerning the probability an unfunded commitment will be drawn upon by the borrower. These assumptions are based on the Company’s historical experience.

The Company’s discounted cash flow ACL model for commercial real estate and commercial loans uses internally derived estimates for prepayments in determining the amount and timing of future contractual cash flows expected to be collected. The estimate of future cash flows also incorporates estimates for contractual amounts the Company believes may not be collected, which are based on assumptions for PD, LGD, and EAD. EAD is the estimated outstanding balance of the loan at the time of default. It is determined by the contractual payment schedule and expected payment profile of the loan, incorporating estimates for expected prepayments and future draws on revolving credit facilities. The Company discounts cash flows using the effective interest rate on the loan. The effective interest rate represents the contractual rate on the ~~loan;~~loan adjusted for any purchase premiums or discounts, and deferred fees and costs associated with ~~the origination of the~~an originated loan. The Company has made an accounting policy election to adjust the effective interest rate to take into consideration the effects of estimated prepayments. The ACL for loans is determined by measuring the amount by which a loan’s amortized cost exceeds its discounted cash ~~flows.~~flows expected to be collected. The ACL for credit facilities is determined by discounting estimates for cash flows not expected to be collected.

The PD for ~~commercial~~investor loans secured by real estate ~~loans~~ is based largely on a model provided by a third party, using proxy loan information. The PDs generated by this model are reflective of current and expected ~~changes in~~ economic conditions and conditions in the commercial real estate market, and how they are expected to impact loan level and property level attributes, and ultimately the likelihood of a default event occurring. This model incorporates assumptions for PD at a loan’s maturity. Significant loan and property level attributes include: loan-to-value ratios, debt service coverage, loan size, loan vintage, and property types.

The PD for ~~commercial~~business loans is based on an internally developed PD rating scale that assigns PDs ~~to individual loans~~ based on the Company’s internal risk grade for ~~each loan.~~loans. This internally developed PD rating scale is based on a combination of the Company’s own historical data and observed historical data from the Company’s peers, which consist of banks that management believes align with the Company’s business profile. As credit risk grades change for these loans, ~~in the commercial segment,~~ the PD assigned to them also changes. As with ~~commercial~~investor loans secured by real estate, ~~loans,~~ the PD for business loans secured by real estate and commercial loans is also impacted by current and expected economic conditions.

The Company considers loans to be in default when they are 90 days or more past due and still accruing or placed on nonaccrual status.

LGDs for commercial real estate loans are derived from a third party, using proxy loan information, and are based on loan and property level characteristics for loans in the Company’s loan portfolio, such as: ~~loan-to-values,~~loan-to-value ratios, estimated time to resolution, property size, and current and estimated future market price changes for underlying collateral. The LGD is highly dependent upon estimated loan-to-value ratios, and incorporates estimates for the expense associated with managing the loan through to resolution. LGDs also incorporate an estimate for the loss severity associated with loans where the borrower fails to meet their debt obligation at maturity, such as through a balloon payment or the refinancing of the loan through another lender. External factors that have an impact on LGDs include: changes in the index for CRE ~~Price Index,~~pricing, GDP growth rate, unemployment rates, and the Moody’s Baa rating corporate debt interest rate spread. LGDs are applied to each loan in the commercial real estate portfolio, and in conjunction with the PD, produce estimates for net cash flows not expected to be collected over the estimated term of the loan.

LGDs for commercial loans are also derived from a third party that has a considerable database of credit related information specific to the financial services industry and the type of loans within this segment, and is used to generate annual default information for commercial loans. These proxy LGDs are dependent upon data inputs such as: credit quality, borrower industry, region, borrower size, and debt seniority. LGDs are then applied to each loan in the commercial ~~portfolio,~~segment, and in conjunction with the PD, produce estimates for net cash flows not expected to be collected over the estimated term of the loan.

The historical loss rate model for retail loans is derived from a third party that has a considerable database of credit related information for retail loans. Key loan level attributes and economic drivers in determining the loss rate for retail loans include FICO scores, vintage, as well as geography, unemployment rates, and changes in consumer real estate prices.

GAAP requires the Company to develop reasonable and supportable forecasts of future conditions, and estimate how those forecasts are expected to impact a borrower’s ability to satisfy their obligation to the Bank and the ultimate collectability of future cash flows over the life of ~~the~~a loan. The Company uses economic ~~forecast~~ scenarios from an independent ~~third party,~~third-party, Moody’s ~~Analytics, in its estimation of a borrower’s ability to repay a loan in future periods.~~Analytics. These scenarios are based on past events, current conditions, and the likelihood of future events occurring. These scenarios typically are comprised of: (1) a base-case scenario, (2) an upside scenario, representing slightly better economic conditions than currently experienced and, (3) a downside scenario, representing recessionary conditions. Management periodically evaluates economic forecast scenarios and may decide that a particular economic scenario or a combination of probability-weighted economic scenarios should be used in the Company’s ACL model. The economic scenarios chosen for the model, the extent to which more than one scenario is used, and the weights that are assigned to them, are based on the Company’s estimate of the probability of each scenario occurring, which is based in part on analysis performed by an independent third-party. Economic scenarios chosen, as well as the assumptions within those scenarios, and whether to use a probability-weighted multiple scenario approach, can vary from one period to the next based on changes in current and expected economic conditions, and due to the occurrence of specific events such as the ~~on-going~~ongoing COVID-19 pandemic. The Company recognizes the non-linearity of credit losses relative to economic performance and thus the Company believes consideration of and, if appropriate under the circumstances, use of multiple probability-weighted economic scenarios is appropriate in estimating credit losses over the forecast period. This approach is based on certain assumptions. The first assumption is that no single forecast of the economy, however detailed or complex, is completely accurate over a reasonable forecast time-frame, and is subject to revisions over time. By considering multiple scenario outcomes and assigning reasonable probability weightings to them, some of the uncertainty associated with a single scenario approach, the Company believes, is mitigated.

~~156~~

The Company, with the assistance of Moody’s Analytics, currently forecasts PDs and LGDs based on economic ~~conditions~~scenarios over a two-year period, which we believe is a reasonable and supportable period. Beyond ~~the~~this point, ~~which the Company can provide for a reasonable~~PDs and ~~supportable forecast, economic variables~~LGDs revert to historical long-term averages. The Company has reflected this reversion over a period of three years in each of its economic scenarios used to generate the overall probability-weighted forecast. Changes in economic forecasts impact the PD, LGD, and EAD for each loan, and therefore influence the amount of future cash flows from each loan the Company does not expect to collect.

The Company derives the economic forecasts it uses in its ACL model from Moody's Analytics that has a large team of economists, ~~data-base~~database managers, and operational engineers with a history of producing monthly economic ~~forecasts for over 25 years.~~forecasts. The forecasts produced by this ~~third party~~third-party have been widely used by banks, credit unions, government agencies, and real estate developers. These economic forecasts cover all states and metropolitan areas in the Unites States, and reflect changes in economic variables such as: GDP growth, interest rates, employment rates, changes in wages, retail sales, industrial production, metrics associated with the single-family and multifamily housing markets, vacancy rates, changes in equity market prices, and energy markets.

It is important to note that the Company’s ACL model relies on multiple economic variables, which are used under several economic scenarios. Although no one economic variable can fully demonstrate the sensitivity of the ACL calculation to changes in the economic variables used in the model, the Company has identified certain economic variables that have significant influence in the Company’s model for determining the ACL.

As of December 31, ~~2020,~~2021, the Company’s ACL model incorporated the following assumptions for key economic variables in the base-case, upside, and downside scenarios:

The Company recognizes that historical information used as the basis for determining future expected credit losses may not always, by itself, provide a sufficient basis for determining future expected credit losses. The Company, therefore, periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not be limited to, factors such as: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions, (ii) organization specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through ~~back-testing,~~backtesting, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios, and changes in portfolio segmentation, and (iv) management’s overall assessment of the adequacy of the ACL, including an assessment of model data inputs used to determine the ACL.

As of December 31, ~~2020,~~2021, qualitative adjustments included in the ACL totaled ~~$10.0~~$4.0 million. These adjustments primarily relate to ~~management’s overall assessment~~continued uncertainty concerning the strength of the ~~adequacy~~economic recovery and how it may impact certain classes of loans in the loan portfolio. Management determined through additional review that the uneven recovery as well as labor shortages, continued supply chain disruptions and inflationary pressures may not be fully reflected in the quantitative component of the ACL ~~and the potential~~ for the ~~model,~~SBA real estate secured, construction, and franchise classes of the loan portfolio and as ~~of December 31, 2020, to underestimate the effects of current changes in asset quality.~~such a qualitative adjustment has been assigned. Management reviews the need for and appropriate level of qualitative adjustments on a quarterly basis, and as such, the amount and allocation of qualitative adjustments may change in future periods.

~~159~~

The following table provides the allocation of the ALLL for loans held for investment as well as the activity attributed to various segments in the loan portfolio as of, and for the period indicated, as determined in accordance with ASC 450 and ASC 310, prior to the adoption of ASC 326:

For the Year Ended December 31, 2018
Beginning ALLL Balance Charge-offs Recoveries Provision for Credit Losses Ending
ALLL Balance
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied $ 1,273 $ 0 $ 0 $ 351 $ 1,624
Multifamily 614 0 0 126 740
Construction and land 5,565 0 0 399 5,964
SBA secured by real estate 1,396 0 0 431 1,827
Business loans secured by real estate
CRE owner-occupied 923 (33) 47 971 1,908
Franchise real estate secured 602 0 0 141 743
SBA secured by real estate 901 0 0 923 1,824
Commercial loans
Commercial and industrial 11,018 (1,411) 698 3,390 13,695
Franchise non-real estate secured 5,191 0 0 875 6,066
SBA non-real estate secured 594 (102) 169 (7) 654
Retail loans
Single family residential 804 0 13 (9) 808
Consumer loans 55 (409) 8 565 219
Totals $ 28,936 $ (1,955) $ 935 $ 8,156 $ 36,072

For the year ended December 31, 2020, the ACL for loans held for investment increased $232.3 million. The increase in the ACL was attributable to $172.3 million in provisions for credit losses, ~~net charge-offs of $16.9 million,~~ the establishment of $21.2 million in net ACL for PCD loans acquired in the Opus acquisition, and a $55.7 million adjustment to the ACL associated with the Company’s January 1, 2020 adoption of ASC 326, which was recorded through a cumulative effect adjustment to retained earnings. These increases were partially offset by net charge-offs of $16.9 million recorded during 2020. The provision for credit losses in 2020 is inclusive of $75.9 million related to the initial ACL required for the acquisition of non-PCD loans in the Opus acquisition. Under ASC 326, the Company is required to record an ACL for estimates of ~~life-time~~lifetime credit losses on ~~loans at the time of acquisition. For~~ non-PCD loans ~~the initial ACL is established~~ through a charge to provision for credit losses at the time of acquisition. However, the initial ACL for PCD loans is established through an adjustment to the loan’s purchase price (or initial fair value). Excluding the impact of the Opus acquisition, the provision for credit losses ofwas $96.4 million for the year ended December 31, 2020 ~~is also~~which was reflective of unfavorable economic forecasts ~~employed~~ in the Company’s ACL model, driven by the ~~on-going~~onset of the COVID-19 ~~pandemic.~~pandemic during 2020.

~~As previously mentioned, prior to the Company’s adoption~~The following tables present PD bands for commercial real estate and commercial loan segments of ASC 326 on January 1, 2020, the Company maintained an allowance for loan and lease losses in accordance with ASC 450 and ASC 310, which required the Company to measure credit losses on loans using a probable incurred loss model. The probable incurred loss model was reflective of estimates for loan losses incurred and inherent in the loan portfolio as of the ~~balance sheet date, and did not reflect current estimates of future expected credit losses over the lives of the Company’s loans, as now required by ASC 326.~~dates indicated.

A significant driver in the ACL for loans in the investor real estate secured and business real estate secured segments is the loan-to-value ratio (“LTV”). The following tables summarize the amortized cost of loans in these segments by current estimated LTV and by year of origination as of the dates indicated:

The following tables present FICO bands for the retail segment of the loan portfolio as of the dates indicated:

The Company maintains an allowance for credit losses onfor off-balance sheet commitments related to unfunded loans and lines of credit, which is included in other liabilities of the consolidated ~~balance sheets.~~statements of financial position. Upon the Company’s adoption of ASC 326 on January 1, 2020, the Company applies an expected credit loss estimation methodology for off-balance sheet commitments. This methodology is largely commensurate with the methodology applied to each respective segment of the loan portfolio in determining the ACL for loans ~~held-for-investment.~~held for investment. The loss estimation process includes assumptions for the probability that a loan will fund, as well as the expected amount of funding. These assumptions are based on the Company’s own historical internal loan data.

The allowance for off-balance sheet commitments was $27.3 million at December 31, 2021 and $31.1 million at December 31, ~~2020 and $3.3 million at December 31, 2019.~~2020. The change in the allowance for off-balance sheet commitments ~~can be~~in 2021 is attributed to a provision recapture for off-balance sheet commitments of $3.8 million, which was related primarily to improving economic conditions and forecasts reflected in the Company’s ACL model, partially offset by increases in unfunded loan commitments during 2021.

The allowance for off-balance sheet commitments increased $27.8 million during the year ended December 31, 2020. The increase is attributed to several factors, including: (i) an $8.3 million increase in the first quarter of 2020 attributed to the Company’s adoption of ASC 326, (ii) an $8.6 million provision for credit losses in the second quarter of 2020 related to the required initial ACL on off-balance sheet loan commitments that the Company was required to establish at the time of the acquisition of Opus, and (iii) an $11.0 million in provision for credit losses during 2020 related primarily to the deterioration in economic forecasts ~~employed~~used in the Company’s ~~CECL~~ACL model.

The Company’s premises and equipment consisted of the following at December 31:

Depreciation expense for premises and equipment was $16.0 million for 2021, $13.3 million for 2020, and $9.8 million for 2019.

At December 31, ~~2020,~~2021, the Company had goodwill of ~~$898.6~~$901.3 million. In June 2020, the Company acquired Opus, which resulted in the recognition of approximately ~~$90.2~~$93.0 million in goodwill assets including post-acquisition measurement period purchase accounting adjustments totaling $146,000. These adjustments largely relate to the finalization of the short-year Opus tax returns within one year after the closing date of the acquisition, and resulted from additional information becoming available or finalized during that period about facts or circumstances that existed as of the acquisition date. During the year ended December 31, 2021 the Company recorded adjustments associated with the acquisition of Opus resulting in an increase to goodwill in the amount of $2.7 million. Adjustments to goodwill associated with the acquisition of Opus resulted in a decrease of $2.6 million to goodwill during the year ended December 31, 2020. The Company’s analysis of the fair value of assets acquired and liabilities ~~assumed. In 2019, adjustments to goodwill~~assumed in the ~~amount of $404,000 were related to fair value adjustments associated with the~~Opus acquisition ~~of Grandpoint Capital, Inc. (“Grandpoint”) and were recorded~~was finalized during the ~~12-month measurement period subsequent to the acquisition date. In 2018, additions to goodwill included $313.0 million due to the acquisition~~second quarter of Grandpoint and adjustments to goodwill in the amount of $1.8 million for Plaza Bancorp (“PLZZ”) and $600,000 for Heritage Oaks Bank (“HEOP”), both of which were recorded during the 12-month measurement period subsequent to the acquisition date. 2021.

During the fourth quarter of 2020, and in accordance with ASC 350-20, the Company made an unconditional election to forego a qualitative assessment of goodwill and proceed directly to the quantitative assessment of ~~goodwill during the fourth quarter of 2020.~~goodwill. The Company’s quantitative assessment of goodwill in the fourth quarter of 2020 consisted of a market approach as well as a discounted cash flow approach, both of which were given equal weighting in the analysis. The results of ~~this~~that analysis indicated the estimated fair value of the Company exceeded its carrying value and that the value of goodwill assets could be supported and there was 0no goodwill impairment as of December 31, 2020. The Company made the unconditional election to proceed directly to a quantitative assessment of goodwill in 2020 largely due to the volatility experienced in the Company’s stock price and weakened economic conditions stemming from the onset of the COVID-19 pandemic.

The market approach utilized in the Company’s goodwill assessment utilized observed valuation multiples, such as price-to-tangible book values, of the Company’s peers, as well as premiums paid in bank mergers completed over the last four years. In addition, the market approach component of the Company’s quantitative assessment incorporated estimates for a control premium, which was based on market observations. The discounted cash flow approach utilized in the Company’s goodwill assessment relied upon internal projections of future operating results, as well as estimates for an appropriate discount rate, representative of the estimated cost of equity.

At December 31, 2021, the Company had other intangible assets of $69.6 million, consisting of $66.9 million in core deposit intangibles and $2.7 million in customer relationship intangibles. The Company had no additions to other intangible assets during 2021. At December 31, 2020, the Company had other intangible assets of $85.5 million, consisting of $82.5 million in core deposit intangibles and $3.0 million in customer relationship intangibles. The Company had $19.3 million of additions to other intangible assets during 2020, consisting of $16.1 million of core deposit intangible assets and $3.2 million of customer relationship intangibles, both the result of the Opus acquisition. The following table summarizes the ~~change~~changes in the ~~balance~~balances of core deposit ~~intangibles~~ and customer relationship intangible assets, and the related accumulated amortization for the ~~periods indicated below:~~years ended December 31:

At December 31, ~~2020~~2021 and ~~2019,~~2020, the Company had investments in BOLI of ~~$292.6~~$449.4 million and ~~$113.4~~$292.6 million, respectively. The increase from the prior year was a result of ~~the acquisition~~$150.0 million purchase of ~~Opus, which added $191.4 million in BOLI.~~additional BOLI policies. The Company recorded noninterest income associated with the BOLI policies of $11.3 million, $7.2 million, ~~$3.5 million,~~ and ~~$3.4~~$3.5 million for the years ending December 31, 2021, 2020, ~~2019,~~ and ~~2018,~~2019, respectively.

BOLI involves the purchasing of life insurance by the Company on a select group of employees where the Company is the owner and beneficiary of the policies. BOLI is recorded as an asset at its cash surrender value. Increases in the cash surrender value of these policies, as well as a portion of the insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties.

The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA credit and generate ~~low income~~low-income housing tax credits (“LIHTC”) and other tax benefits for the ~~Company over an approximate 10 year period.~~Company.

The Company records its investments in qualified affordable housing partnerships using either the proportional amortization method, if certain criteria are met, or the cost method. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits that are allocated to the Company over the period of the investment. The net benefits of these investments, which isare comprised of tax credits and operating loss tax benefits, net of investment amortization, are recognized in the income statement as a component of income tax ~~expense (benefit).~~expense. At December 31, ~~2020~~2021 and ~~2019~~2020 the carrying value of these investments was ~~$86.8~~$84.0 million and ~~$49.9~~$86.8 million, respectively. For certain of the Company’s investments in qualified affordable housing partnerships that do not qualify for the application of the proportional amortization method, the Company applies the cost method. Under the cost method, the Company amortizes the initial cost of the investment as noninterest expense equally over the expected time period in which tax credits and other tax benefits will be received. Tax credits and other tax benefits on these investments are recognized as a component of income tax ~~expense (benefit).~~expense. At December 31, ~~2020~~2021 and ~~2019~~2020 the carrying value of these investments was ~~$3.0~~$2.0 million and ~~$4.0~~$3.0 million, respectively.

The Company’s net investment in qualified affordable housing projects that generate LIHTC and other tax benefits at December 31, 2021 and 2020 ~~and 2019~~ was ~~$89.8~~$86.0 million and ~~$53.9~~$89.8 million, respectively, and ~~are~~is recorded in other assets in the consolidated statement of financial condition. The change in the aggregate carrying value of these investments in 2020 is largely attributable to the acquisition of Opus in June 2020, through which the Company acquired approximately $45.4 million of investments in qualified affordable housing partnerships. The total unfunded commitments related to the investments in qualified affordable housing partnerships totaled ~~$18.1~~$17.2 million and ~~$21.4~~$18.1 million at December 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~are~~were recorded ~~under~~in accrued expenses and other liabilities.

As of December 31, ~~2020,~~2021, the Company’s unfunded affordable housing partnerships commitments were estimated to be paid as follows:

The following table presents tax credits and other tax benefits generated by operating losses from qualified affordable housing projects as well as amortization expense associated with these investments for the years ended December 31, 2021, 2020, ~~2019,~~ and ~~2018.~~2019.

There were 0no impairment losses related to LIHTC investments for the years ended December 31, 2021, 2020, ~~2019,~~ and ~~2018.~~2019.

The Company is involved with VIEs through its loan securitization activities, affordable housing investments that qualify for ~~LIHTC,~~the low-income housing tax credit, and trust subsidiaries, which have issued trust preferred securities. The Company has determined that its interests in these entities meet the definition of variable interests.

As of December 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company determined it was not the primary beneficiary of the VIEs and did not consolidate its interests in VIEs. The following table provides a summary of the carrying amount of assets and liabilities in the Company’s consolidated ~~balance sheet~~statements of financial condition and maximum loss exposures as of December 31, ~~2020~~2021 and December 31, ~~2019~~2020 that relate to variable interests in non-consolidated VIEs.

As part of the securitization transaction, the Company released all servicing obligations and rights to Freddie Mac who was designated as the Master Servicer. In its capacity as Master Servicer, Freddie Mac can terminate the Company’s role as sub-servicer and direct such responsibilities accordingly. In evaluating our variable interests and continuing involvement in the VIE, we determined that we do not have the power to make significant decisions or direct the activities that most significantly impact the economic performance of the VIE’s assets and liabilities. As sub-servicer of the loans, the Company does not have the authority to make significant decisions that influence the value of the VIE’s net assets and, therefore, the Company is not the primary beneficiary of the VIE. As a result, we determined that the VIE associated with the multifamily securitization should not be included in the ~~Consolidated Financial Statements~~consolidated financial statements of the Company.

We believe that our maximum exposure to loss as a result of our involvement with the VIE associated with the securitization is the carrying value of the investment securities issued by Freddie Mac and purchased by the Company. Additionally, our maximum exposure to loss under the reimbursement agreement executed with Freddie Mac is 10% of the original principal amount of the loans comprising the securitization pool, or $50.9 million. Based upon our analysis of quantitative and qualitative data over the underlying loans included in the securitization pool, as of December 31, 2021 and December 31, 2020, our reserve for estimated losses with respect to the reimbursement obligation was ~~$448,000.~~$338,000 and $448,000, respectively.

The Company has variable interests through its affordable housing ~~partnerships.~~partnership investments. These investments are fundamentally designed to provide a return through the generation of income tax credits. The Company has evaluated its involvement with the low-income housing projects and determined it does not have significant influence or decision making capabilities to manage the projects, and therefore, is not the primary beneficiary, and does not consolidate these interests.

The Company’s maximum exposure to loss, exclusive of any potential realization of tax credits, is equal to the commitments invested, adjusted for amortization. The amount of unfunded commitments was included in the investments recognized as assets with a corresponding liability. The table above summarizes the amount of tax credit investments held as assets, the amount of unfunded commitments held as liabilities, and the maximum exposure to loss as of December 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Deposit accounts and weighted average interest rates paid consisted of the following at December 31:

The aggregate annual maturities of certificates of deposit accounts at December 31, ~~2020~~2021 are as follows:

Interest expense on deposit accounts for the years ended December 31 is summarized as follows:

Accrued interest on deposits, which is included in accrued expenses and other liabilities, was $86,000 at December 31, 2021 and $507,000 at December 31, ~~2020 and $590,000 at December 31, 2019.~~2020.

As of December 31, ~~2020,~~2021, the Company has a line of credit with the FHLB that provides for advances totaling up to 40% of the Company’s assets, equating to a credit line of ~~$7.94~~$8.40 billion, of which ~~$4.74~~$5.50 billion was available for borrowing. The amount available for borrowing was based on collateral pledged by real estate loans with an aggregate balance of ~~$7.25~~$8.74 billion.

At December 31, ~~2020,~~2021, the Company had ~~$31.0 million term advances, compared to $491.0~~$550.0 million in overnight FHLB advances, ~~and $26.0~~compared to $31.0 million in term advances at December 31, ~~2019.~~2020. The ~~term~~overnight advances have ~~maturity dates ranging from May 2021 to June 2022 and~~an interest rates ~~ranging from 0.00% to 2.47%~~rate of 0.20%.

The Company maintains additional sources of liquidity at the Corporation level. The ~~$15.0 million~~Corporation renewed the line of credit of $15.0 million with USU.S. Bank ~~was established on June 2019~~matured in September 2021, extended the maturity date to September 27, 2022, and ~~expires on September 28, 2021.~~increased the aggregate principal amount to $25.0 million. At December 31, ~~2020 and December 31, 2019~~2021, the Corporation had 0$8.0 million short-term borrowing outstanding compared to no outstanding balances against this ~~line.~~line at December 31, 2020.

As of December 31, ~~2020,~~2021, the Company had 53 subordinated notes ~~and 2 junior subordinated debt securities,~~ with an aggregate carrying value of ~~$501.5~~$330.6 million and a weighted interest rate of ~~5.38%~~5.33%, compared to ~~$215.1~~$501.5 million with a weighted interest rate of ~~5.37%~~5.38% at December 31, ~~2019.~~2020. The ~~increase~~decrease of ~~$286.4~~$170.9 million is primarily ~~driven by~~due to the ~~issuance in June 2020~~redemption of ~~$150.0~~$170.4 million in ~~aggregate principal amount of the Company's 5.375% Fixed-to-Floating Rate Subordinated Notes (the “Notes III”) due June 15, 2030, as well as the $135.0 million aggregate principal amount of~~ subordinated ~~notes assumed by the Bank in connection with the acquisition of Opus in the second quarter of 2020.~~debentures.

In August 2014, the Corporation issued $60.0 million in aggregate principal amount of 5.75% Subordinated Notes Due 2024 (the “Notes I”) in a private placement transaction to institutional accredited investors (the “Private Placement”). The Notes I bear interest at an annual fixed rate of 5.75%, with the first interest payment on the Notes made on March 3, 2015, and interest payable semiannually each March 3 and September 3 through September 3, 2024. At December 31, ~~2020,~~2021, the carrying value of the Notes was ~~$59.6~~$59.7 million, net of unamortized debt issuance costs of ~~$448,000.~~$329,000. The Notes can only be redeemed, in whole or in part, prior to the maturity date if the notes do not constitute Tier 2 Capital (for purposes of capital adequacy guidelines of the Board of Governors of the Federal Reserve). Principal and interest are due upon early redemption. As of December 31, ~~2020, 60%~~2021, 40% of the Notes I qualify as Tier 2 Capital as the remaining maturity is less than four years pursuant to regulatory capital rule.

In May 2019, the Corporation issued $125.0 million in aggregate principal amount of 4.875% Fixed-to-Floating Rate Subordinated Notes due May 15, 2029 (the “Notes II”), at a public offering price equal to 100% of the aggregate principal amount of the Notes II. The Corporation may redeem the Notes II on or after May 15, 2024. From and including the issue date, but excluding May 15, 2024, the Notes II will bear interest at an initial fixed rate of 4.875% per annum, payable semi-annually. From and including May 15, 2024, but excluding the maturity date or the date of earlier redemption, the Notes II will bear interest at a floating rate equal to the then-current three-month LIBOR plus a spread of 2.50% per annum, payable quarterly in arrears. ~~At December 31, 2020, the carrying value of the Notes II was $122.9 million, net of unamortized debt issuance cost of $2.1 million. At December 31, 2020, the Notes II qualify as Tier 2 Capital.~~ Principal and interest are due upon early redemption at any time, including prior to May 15, 2024 at our option, in whole but not in part, under the occurrence of special events defined within the trust indenture.

In June 2020, the Corporation issued $150.0 million aggregate principal amount of its 5.375% fixed-to-floating rate subordinated notes due 2030 (the “Notes III”) at a public offering price equal to 100% of the aggregate principal amount of the Notes III. The Corporation may redeem the Notes III on or after June 14, 2025. Interest on the Notes III accrue at a rate equal to 5.375% per annum from and including June 15, 2020 to, but excluding, June 15, 2025, payable semiannually in arrears. From and including June 15, 2025 to, but excluding, June 15, 2030 or the earlier redemption date, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be Three-Month Term ~~Secured Overnight Financing Rate (“SOFR”),~~SOFR, plus a spread of 517 basis points, payable quarterly in arrears. Principal and interest are due upon early redemption at any time, including prior to June 15, 2025 at our option, in whole but not in part, under the occurrence of special events defined within the trust indenture. At ~~September 30, 2020,~~December 31, 2021, the Notes III qualified as Tier 2 capital. At December 31, ~~2020,~~2021, the carrying value of the Notes III was ~~$147.5~~$147.8 million, net of unamortized debt issuance cost of ~~$2.5~~$2.2 million.

On April 15, 2021, the Company redeemed the subordinated notes totaling $25.0 million that the Company assumed as part of the acquisition of Plaza Bancorp, Inc. in 2017. Prior to redemption, such subordinated notes carried a fixed interest rate of 7.125% and were scheduled to mature on June 26, 2025. These subordinated notes were called at 103% of the principal amount of the notes, plus accrued and unpaid interest, for an aggregate amount of $25.8 million. The Company recorded a loss on early debt extinguishment of $647,000 after considering a $103,000 fair value mark related to purchase accounting adjustments.

On July 1, 2021, the Company redeemed $135.0 million subordinated notes acquired from Opus and $5.2 million junior subordinated debt associated with Heritage Oaks Capital Trust II. Prior to redemption, the subordinated notes and junior subordinated debt securities carried an interest rate of 5.50% and 1.92%, respectively. On July 7, 2021, the Company redeemed $5.2 million junior subordinated debt associated with Santa Lucia Bancorp (CA) Capital Trust. Prior to redemption, the junior subordinated debt securities carried an interest rate of 1.66%. The subordinated notes and junior subordinated debt were redeemed at par, plus accrued and unpaid interest, for an aggregate amount of $149.2 million. The Company recorded a net gain on early debt extinguishment of $970,000 related to purchase accounting adjustments. Subsequent to the redemptions of these junior subordinated debt securities, the Company’s unconsolidated Delaware statutory trust subsidiaries, Heritage Oaks Capital Trust II and Santa Lucia Bancorp (CA) Capital Trust, that were used as business trusts for the purpose of issuing trust preferred securities to third party investors were dissolved.

In connection with the Private Placement, the Corporation obtained ratings from Kroll Bond Rating Agency (“KBRA”). KBRA assigned investment grade ratings of BBB+ and BBB for the Corporation’s senior unsecured debt and subordinated debt, respectively, and a deposit rating of A- for the Bank. The Company’s and Bank’s ratings were reaffirmed in June ~~2020~~2021 by ~~KBRA following the announcement of the proposed acquisition of Opus.~~

For regulatory capital purposes, the trust preferred securities are included in Tier 2 ~~capital at December 31, 2020. Provisions~~capital. The redemption of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 require that if a depository institution holding company exceeds $15 billion in total consolidated assets due to an acquisition, then trust preferred securities are to be excluded from Tier 1 capital beginning in the period in which the transaction occurred. Duringsubordinated notes totaling $25.0 million during the second quarter of ~~2020,~~2021 reduced the Company’s ~~acquisition~~Tier 2 capital by approximately $20.0 million. The redemption of ~~Opus resulted in total consolidated assets exceeding $15 billion; accordingly,~~subordinated notes and trust preferred securities ~~are now excluded from~~totaling $145.4 million during the third quarter of 2021 reduced the Company’s Tier ~~1 capital. The~~2 capital by approximately $146.0 million. Following these redemptions, the regulatory total capital ratios of the Company and the Bank ~~also has subordinated debt notes that qualify as Tier 2 capital.~~continued to exceed regulatory minimums, inclusive of the fully phased-in capital conservation buffer.

The following table summarizes our outstanding subordinated debentures as of December 31:

On March 27, 2020, the U.S. government enacted the ~~Coronavirus Aid, Relief and Economic Security~~CARES Act, ~~(“CARES Act”),~~ which among other things, provided ~~taxpayer~~taxpayers the ability to carry back net operating loss (“NOL”) incurred in 2018, 2019, or 2020 to each of the five tax years preceding the tax year of such loss. The Company is permitted to carryback 2018 NOL of an acquired entity, Grandpoint, to its prior tax years, which have income tax rates ranging from 34% to 35%. As a result, the Company recorded an income tax benefit of $2.6 million attributable to the Grandpoint NOL carryback during the year ended December 31, 2020.

Section 382 of the Internal Revenue Code imposes limitations on a corporation’s ability to use any net unrealized built in losses and other tax attributes, such as net operating loss and tax credit carryforwards, when it undergoes a 50% ownership change over a designated testing period. The Company has a Section 382 limited net operating loss ~~carry forward~~carry-forward of approximately ~~$29.0~~$24.7 million for federal income tax purposes, which is scheduled to expire at various dates from 2026 to 2032. The Company also has a Section 382 limited net operating loss carry forward of approximately ~~$7.0~~$6.6 million for California franchise tax purposes, which is scheduled to expire at various dates from 2029 to ~~2034~~2033 with the carryover period extension from California Assembly Bill 85 (“A.B. 85”) and Senate Bill 113 (“S.B. 113”). On June 29, 2020, A.B. 85 was signed into law, and among other changes, A.B. 85 suspends the use of the California NOL for the 2020, 2021, and 2022 tax years. On February 9, 2022, S.B. 113 was signed into law, and among other changes, S.B. 113 reinstates the California NOL deductions for tax years beginning in 2022, in effect shortening the suspension period from A.B. 85 by one year for NOL deductions. For NOL incurred in tax years before 2020 for which a deduction is denied, the carryover period is extended by ~~three~~two years. In addition, the Company has a Section 382 limited tax credit carryforward of ~~$3.3~~$1.8 million, which is scheduled to expire ~~from 2039.~~by 2040. The Company is expected to fully utilize the federal and California net operating loss carryforward before it expires with the application of the Section 382 annual limitation.

The Company and its subsidiaries are subject to U.S. Federal income tax as well as income and franchise tax in multiple state jurisdictions. The statute of limitations related to the consolidated Federal income tax returns is closed for all tax years up to and including ~~2016.~~2017. The ~~expiration~~expirations of the ~~statute~~statutes of limitations related to the various state income and franchise tax returns ~~varies~~vary by state. The Company is currently not under examination in any taxing jurisdiction.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 ~~2020 and 2019~~ is as follows:

The total amount of unrecognized tax benefits was ~~$255,000~~$1.4 million and ~~$2.9 million~~$255,000 at December 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and is primarily comprised of unrecognized tax benefits ~~from an~~related to the Opus acquisition ~~during 2017.~~in 2020. The total amount of tax benefits that, if recognized, would favorably impact the effective tax rate was ~~$184,000~~$563,000 and $0$184,000 at December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company does not believe that the unrecognized tax benefits will change significantly within the next twelve months.

The Company recognizes interest and penalties ~~accrued~~ related to unrecognized tax benefits in income tax expense. The Company had accrued for $31,000 and $22,000 ~~and $424,000~~ of ~~the~~such interest ~~and penalties~~ at December 31, 2021 and 2020, respectively. No amounts for penalties were accrued at December 31, 2021 and ~~2019, respectively.~~

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of originating loans or providing funds under existing lines or letters of credit. These commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates and may require payment of a fee. Since many commitments are expected to expire, the total commitment amounts do not necessarily represent future cash requirements. Commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the accompanying consolidated statements of financial condition.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual or notional amount of those instruments. The Company controls credit risk of its commitments to fund loans through credit approvals, limits and monitoring procedures. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company evaluates each customer for creditworthiness.

The Company receives collateral to support commitments when deemed necessary. The most significant categories of collateral include real estate properties underlying mortgage loans, liens on personal property, and cash on deposit with the Bank.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the financial performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing or purchase arrangements. If a borrower defaults on its commitments subject to any letter of credit issued under these arrangements, the Bank would be required to meet the borrower's financial obligation but would seek repayment of that financial obligation from the borrower. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the customer.

The following table presents a summary of the Company’s commitments to extend credit described below as of the dates indicated:

The balance at December 31, 2021 is primarily composed of $1.94 billion of undisbursed commitments for C&I loans.

The Company’s Pacific Premier Trust division holds certain assets in custodial capacity on behalf of our trust customers, which are not included in our consolidated financial statement of condition. The total trust custodial assets under custody was approximately $18.11 billion and $15.89 billion at December 31, 2021 and 2020, respectively.

The Company is not involved in any material pending legal proceedings, other than ~~the legal proceedings described under Item 3, “Legal Proceedings,” and~~ those occurring in the ordinary course of business. Management believes that none of these legal proceedings, individually or in the aggregate, will have a material adverse impact on the financial condition or results of operations ~~or financial condition~~ of the Company.

The total intrinsic value of options exercised during the years ended December 31, 2021, 2020, and 2019 ~~and 2018~~ was $2.4 million, $1.7 million, ~~$4.2 million,~~ and ~~$8.4~~$4.2 million, respectively.

There was no compensation expense related to stock options for the year ended December 31, 2021. The amount charged against compensation expense in relation to the stock options was $8,000 for 2020, and $132,000 for ~~2019, and $571,000 for 2018.~~2019. At December 31, ~~2020,~~2021, there was 0no unrecognized compensation expense related to the options.

Compensation expense for the ~~year~~years ended December 31, 2021, 2020, ~~2019,~~ and ~~2018~~2019 related to the above restricted stock grants amounted to $13.3 million, $10.8 million, ~~$10.4 million~~ and ~~$8.5~~$10.4 million, respectively. Restricted stock awards and restricted stock units are valued at the closing stock price on the date of grant and are expensed to ~~stock~~stock- based compensation expense over the period for which the related service is performed. The total grant date fair value of awards was ~~$15.7~~$24.4 million for ~~2020~~2021 awards. At December 31, ~~2020,~~2021, unrecognized compensation expense related to restricted stock award and units is approximately ~~$16.9~~$26.4 million, which is expected to be recognized over a weighted-average period of ~~2.32~~3.07 years.

The amounts expensed in 2021, 2020, and 2019 for salary continuation and ~~2018 for all of these~~deferred compensation plans amounted to $503,000, $511,000, ~~$674,000,~~ and ~~$827,000~~$674,000 respectively. As of December 31, 2021 and 2020, ~~2019, and 2018, $10.4 million, $10.8 million and $10.9 million, respectively, were~~the total deferred compensation liabilities recorded in other liabilities on the consolidated statements of condition for ~~each of~~ these ~~plans.~~plans were $11.7 million and $12.2 million, respectively.

The fair value of an asset or liability is the exchange price that would be received to sell that asset or paid to transfer that liability (exit price) in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including both those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis and a non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value are discussed below.

In accordance with accounting guidance, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the fair values presented. Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique. ~~Therefore, for substantially all financial instruments,~~While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value ~~estimates presented herein are~~of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company’s valuation methodologies may produce a fair value calculation that may not ~~necessarily~~be indicative of ~~the amounts the Company could have realized in a sales transaction at December 31, 2020 and 2019.~~net realizable value or reflective of future fair values.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management maximizes the use of observable inputs and attempts to minimize the use of unobservable inputs when determining fair value measurements. Estimated fair values are disclosed for financial instruments for which it is practicable to estimate fair value. These estimates are made at a specific point in time based on relevant market data and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

The following fair value hierarchy tables present information about the Company’s assets measured at fair value on a recurring basis at the dates indicated:

The following table is a reconciliation of the fair value of the equity warrants that are classified as Level 3 and measured on a recurring basis as of:

The following table presents quantitative information about level 3 of fair value measurements for assets measured at fair value on a recurring basis at December 31, ~~2020.~~2021.

~~Other Real Estate Owned~~ – OREO is initially recorded at the fair value less estimated costs to sell at the date of transfer. This amount becomes the property’s new basis. Any fair value adjustments based on the property’s fair value less estimated costs to sell at the date of acquisition are charged to the allowance for credit losses.

At December 31, ~~2020,~~2021, the Company’s individually evaluated collateral dependent loans were evaluated based on the fair value of their underlying collateral based upon the most recent appraisals available to management. The Company completed partial charge-offs on certain individually evaluated loans based on recent real estate or property appraisals and released the related reserves during the year ended December 31, ~~2020.~~2021.

The following table presents our assets measured at fair value on a nonrecurring basis at December 31, ~~2020~~2021 and ~~2019.~~2020.

The following table presents quantitative information about level 3 of fair value measurements for assets measured at fair value on a nonrecurring basis at December 31, ~~2020~~2021 and ~~2019.~~2020.

~~In February 2019, the~~The Company’s ~~Compensation Committee of Board of Directors reviewed the various forms of outstanding equity awards, including~~ restricted stock awards contain non-forfeitable rights to dividends and ~~restricted stock units (“RSUs”), and approved that unvested restricted stock awards will be~~therefore are considered participating securities. ~~As a result of the different treatment of unvested restricted stock~~The Company calculates basic and ~~unvested RSUs, beginning in 2019,~~diluted earnings per common share ~~is computed~~ using the two-class method.

Under the two-class method, distributed and undistributed earnings allocable to participating securities are deducted from net income to determine net income allocable to common shareholders, which is then used in the numerator of both basic and diluted earnings per share calculations. Basic earnings per common share is computed by dividing net income allocable to common shareholders by the weighted average number of common shares outstanding for the reporting period, excluding outstanding participating securities. Diluted earnings per common share is computed by dividing net income allocable to common shareholders by the weighted average number of common shares outstanding over the reporting period, adjusted to include the effect of potentially dilutive common shares, but excludes awards considered participating securities. The computation of diluted earnings per common share excludes the impact of the assumed exercise or issuance of securities that would have an anti-dilutive effect.

~~191~~

The impact of stock options, which are anti-dilutive are excluded from the computations of diluted earnings per share. The dilutive impact of these securities could be included in future computations of diluted earnings per share if the market price of the common stock increases. There were no potential common shares that were anti-dilutive at December 31, 2021 and December 31, 2019. For the year ended December 31, 2020, there were 737 weighted average common shares that were anti-dilutive. ~~There are 0 potential common shares that were anti-dilutive at December 31, 2019 and 2018.~~

The Company uses derivative instruments to manage its exposure to market risks, including interest rate risk, and to assist customers with their risk management objectives. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, while other derivatives serve as economic hedges that do not qualify for hedge accounting.

Over-the-counter contracts are tailored to meet the needs of the counterparties involved and, therefore, generally contain a greater degree of credit risk and liquidity risk than centrally-cleared contracts, which have standardized terms. Although changes in the fair value of swap agreements between the Company and borrowers and the Company and other financial institutions offset each other, changes in the credit risk of these counterparties may result in a difference in the fair value of the swap agreements. Offsetting over-the-counter swap agreements the Company has with other financial institutions are collateralized with cash, and swap agreements with borrowers are secured by the collateral arrangements for the underlying loans these borrowers have with the Company. All interest rate swap agreements entered into by the Company are free-standing derivatives and are not designated as hedging instruments.

The following tables summarize the Company’s derivative instruments included in “other assets” and “other liabilities” in the consolidated statements of financial ~~condition.~~condition as of the dates indicated:

~~193~~

The following table summarizes the effect of the derivative financial instruments in the consolidated statements of income.

The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:

Service charges on deposit accounts and other service fee income consists of periodic service charges on deposit accounts and transaction based fees such as those related to overdrafts, ATM charges, and wire transfer fees. The majority of these revenues are accounted for under ASC 606. Performance obligations for periodic service charges on deposit accounts are typically short-term in nature and are generally satisfied on a monthly basis, while performance obligations for other transaction based fees are typically satisfied at a point in ~~time (which may consist of only a few moments to perform the service or transaction) with no further obligations on behalf of the Company to the customer.~~time. Periodic service charges are generally collected monthly directly from the customer’s deposit account, and at the end of a statement cycle, while transaction based service charges are typically collected at the time of or soon after the service is performed.

Debit card interchange fee income consists of transaction processing fees associated with customer debit card transactions ~~processed through a payment network~~ and are accounted for under ASC 606. These fees are earned each time a request for payment is originated by a customer debit cardholder at a ~~merchant. In these transactions,~~merchant and the Company ~~transfers funds from the debit cardholder’s account to a merchant~~satisfies it performance obligation through daily settlement through a payment network at the request of the debit cardholder by way of the debit card transaction. The related performance obligations are generally satisfied when the transfer of funds is complete, which is generally a point in time when the debit card transaction is processed.network. Debit card interchange fees are typically received and recorded as revenue on a daily basis.

Trust custodial account ~~fees~~fee income is a revenue stream acquired in the Opus acquisition in June 2020 and is ~~governed by~~attributable to contracts executed with Pacific Premier Trust clients, largely to perform maintenance and custodial services for their alternative IRA ~~investments. Fees~~investments as well as certain accounts that do not qualify as individual retirement accounts pursuant to the Internal Revenue Code. Typically, these fees are billed and collected on a quarterly basis and recognized commensurate with completion of the performance obligations required under the contracts. At December 31, 2021 and December 31, 2020, the Company had accrued fees receivable of approximately $13.1 million and $5.8 million, respectively, which are included in other assets in the consolidated statements of financial position. The balance of accrued fees receivable is net an allowance for credit losses for doubtful accounts of approximately $955,000 and $268,000 at December 31, 2021 and December 31, 2020, respectively. The allowance represents the Company’s estimate of credit losses on accrued fees receivable in accordance in ASC 326.

Escrow and exchange fee income is a revenue stream associated with Commerce Escrow, which was acquired in the Opus acquisition in 2020. These fees relate to agreements with customers participating in escrow and exchange transactions associated with Section 1031 of the Internal Revenue Code. Escrow and exchange services include preparation of closing statements and custody of escrow funds. The fees are received from the sale proceeds of a relinquished property and are recognized as revenue upon closing of the escrow transaction, which is the final performance obligation.

Other noninterest income includes other miscellaneous fees, which are accounted for under ASC 606; however, much like service charges on deposit accounts, these fees have performance obligations that are very short-term in nature and are typically satisfied at a point in time. Revenue is typically recorded at the time these fees are collected, which is generally upon the completion of the related transaction or service provided.

The Company assumed operating leases in the acquisition of Opus on June 1, 2020. The liabilities and the related right-of-use assets recorded for the assumption of these leases ~~was~~were approximately $43.3 million and $42.4 million, respectively. Right-of-use assets related to the Opus acquisition reflect unfavorable lease liability adjustments of approximately $900,000. Lease liabilities for the leases assumed from Opus were measured based on the net present value of remaining future lease payments on the date of acquisition, with consideration given for options to extend or renew each lease. Remaining future lease payments were discounted at the Company’s estimated incremental borrowing rate on the date of acquisition.

The following tables present supplemental information related to operating leases as of and for ~~year~~years ended:

The Company from time to time leases portions of space it owns to other parties. Income received from these transactions is recorded on a straight-line basis over the term of the sublease. For the ~~year~~years ended December 31, ~~2020~~2021 and ~~2019,~~2020, rental income totaled ~~$534,000~~$703,000 and ~~$142,000,~~$534,000, respectively.

Loans to the Company’s executive officers and directors are made in the ordinary course of business, in accordance with applicable regulations and the Company’s policies and procedures. At December 31, 2021 and December 31, 2020 there ~~was 0~~were no related party loans outstanding. At December 31, 2019, the Company had related party loans outstanding totaling $5.5 million associated with 2 former Directors, John J. Carona and Michael J. Morris, who resigned pursuant to the terms of the merger agreement to acquire Opus in June 2020.

At the end of ~~2020,~~2021, the Company had related party deposits of approximately ~~$60.0~~$54.0 million, compared to ~~$510.2~~$60.0 million at the end of ~~2019. The decrease was due to the departure of former Director Mr. Carona during 2020; thus, the associated deposits are no longer considered related party deposits at December 31,~~ 2020. Mr. Carona is the President and Chief Executive Officer of Associations, Inc. (“Associa”), a Texas corporation that specializes in providing management and related services for homeowners’ associations located across the United States. At December 31, 2019, $468.9 million of the related party deposits were attributable to Associa.

The Corporation is a California-based bank holding company organized in 1997 as a Delaware corporation and owns 100% of the capital stock of the Bank, its principal operating subsidiary. The Bank was incorporated and commenced operations in 1983. Condensed financial statements of the Corporation are as follows:

Effective as of June 1, 2020, the Corporation completed the acquisition of Opus, a California-chartered state bank headquartered in Irvine, California, pursuant to a definitive agreement dated as of January 31, 2020. At closing, Opus had $8.32 billion in total assets, $5.94 billion in gross loans, and $6.91 billion in total deposits and operated 46 banking offices located throughout California, Washington, Oregon, and Arizona. As a result of the Opus acquisition, the Corporation acquired specialty lines of business, including trust and escrow services.

Prior to the Opus acquisition, PENSCO Trust Company LLC, a Colorado-chartered non-depository trust company (“PENSCO”), operated as an indirect, wholly-owned subsidiary of Opus and served as a custodian for self-directed IRAs, the funds of which account owners used for self-directed investments in various alternative asset classes. Immediately following the Opus acquisition, PENSCO merged with and into the Bank and operates its custodial business under the name of Pacific Premier Trust, as a division of the Bank. As of May 31, 2020, PENSCO had approximately $14.48 billion of custodial assets and approximately 44,000 client accounts.

Prior to the Opus acquisition, Commerce Escrow operated as a division of Opus, offering commercial escrow services and facilitating tax-deferred commercial exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended. Following the acquisition of Opus, Commerce Escrow operates as a division of the Bank, which created synergies with the Company’s existing escrow deposit business.

The acquisition of Opus expands the Company’s presence in major metropolitan markets with greater operational scale, diversifies business lines, banking products and services, as well as deposit base and clients by adding a new channel of stable, low-cost deposits and fee income from Opus’s trust and escrow businesses, improves revenue, and accelerates the Company’s ability to invest in technology solutions and increase efficiencies.

Pursuant to the terms of the merger agreement, the consideration paid to Opus shareholders consisted of whole shares of the Corporation’s common stock and cash in lieu of fractional shares of the Corporation’s common stock. Upon consummation of the transaction, (i) each share of Opus common stock issued and outstanding immediately prior to the effective time of the acquisition was canceled and exchanged for the right to receive 0.900 shares of the Corporation’s common stock, with cash to be paid in lieu of fractional shares at a rate of $19.31 per share, and (ii) each share of Opus Series A non-cumulative, non-voting preferred stock issued and outstanding immediately prior to the effective time of the acquisition was converted into and canceled in exchange for the right to receive that number of shares of the Corporation’s common stock equal to the product of (X) the number of shares of Opus common stock into which such share of Opus preferred stock was convertible in connection with, and as a result of, the acquisition, and (Y) 0.900, in each case, plus cash in lieu of fractional shares of the Corporation’s common stock.

The Corporation issued 34,407,403 shares, net of 165,136 shares for tax withholding from Opus equity award holders, of the Corporation’s common stock valued at $21.62 per share, which was the closing price of the Corporation’s common stock on May 29, 2020, the last trading day prior to the consummation of the acquisition, and paid cash in lieu of fractional shares. The Corporation assumed Opus’s warrants and options, which represented the issuance of up to approximately 406,778 and 9,538 additional shares of the Corporation’s common stock, valued at approximately $1.8 million and $46,000, respectively, and issued substitute restricted stock units in an aggregate amount of $328,000. The value of the total transaction consideration paid amounted to approximately $749.6 million. The Opus warrants assumed by the Corporation expired unexercised on September 30, 2020 and no longer remain outstanding. The Opus options assumed by the Corporation have been fully exercised during the third quarter of 2020.

~~CDI~~Core deposit intangible (“CDI”) of $16.1 million, customer relationship intangible assets of $3.2 million, and goodwill of ~~$90.2~~$93.0 million were recognized as a result of the acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed of Opus as of June 1, 2020 under the acquisition method of accounting, net of purchase accounting adjustments:

The Company determined the fair value of loans, intangible assets, investment securities, real property, leases, deposits, and borrowings with the assistance of third-party valuations.

Opus’s loan portfolio was recorded at fair value at the date of acquisition. A valuation of Opus’s loan portfolio was performed by a third party as of the acquisition date in accordance with ASC 820 to assess the fair value of the loan portfolio, considering adjustments for interest rate risk, required equity return, servicing, credit, and liquidity risk. The loan portfolio was segmented into two groups: non-PCD loans and PCD loans. The non-PCD loans were pooled based on similar characteristics, such as loan type, fixed or adjustable interest rates, payment type, index rate and caps/floors, and non-accrual status. The PCD loans were valued at the loan level with similar characteristics noted above. The fair value was calculated using a discounted cash flow analysis. The discount rate utilized to analyze fair value considered the cost of funds rate, capital charge, servicing costs, and liquidity premium, mostly based on industry standards.

At the acquisition date, non-PCD loans and PCD loans had a fair value of $4.94 billion and $841.2 million, respectively, and a contractual balance of $5.05 billion and $896.5 million, respectively. In accordance with GAAP, there was no carryover of the allowance for credit losses that had been previously recorded by Opus. The Company recorded an ACL of $75.9 million through an increase to the provision for credit losses. The initial ACL for PCD loans of $21.2 million is established through an adjustment to the acquired loan balance and goodwill.

The CDI on non-maturing deposits was determined by evaluating the underlying characteristics of the deposit relationships, including customer attrition, deposit interest rates and maintenance costs, and costs of alternative funding using the discounted cash flow approach. The core deposit intangibles represent the costs saved by the Company between maintaining the existing deposits and obtaining alternative funds over the life of the deposit base.

PENSCO operated as the legal custodian for its clients to provide recurring custodial services over the life of client’s custodial agreement. PENSCO could separately identify each of its customer relationships through the custodial agreement between each customer and PENSCO, as well as account-level specific information, and has a history and pattern of conducting business with them as their legal custodian. In the event that PENSCO (or its successor trust division within the Bank) were to merge, reorganize, get acquired, or change its name, the surviving entity will become the trustee or custodian of the IRAs provided that the surviving entity is authorized to serve in that capacity pursuant to the Internal Revenue Code. Accordingly, such PENSCO client relationships met the contractual or other legal rights criterion for identification as a recognizable intangible asset separate from goodwill. The fair value of the customer relationship intangible asset was determined through the use of an excess earnings model associated with the expected fee income associated with underlying client relationships.

In determining the fair value of certificates of deposit, the cash flows of the contractual interest payments during the specific period of the certificates of deposit and scheduled principal payout were discounted to present value at market-based interest rates.

The fair value of fixed rate ~~Federal Home Loan Bank of San Francisco (“FHLB”)~~FHLB advances was determined using a discounted cash flow approach. The cash flows of the advances were projected based on scheduled payments of the fixed rate advances, factoring in prepayment fee. The cash flows were then discounted to present value using the FHLB rates as of May 29, 2020.

The fair value of subordinated debt was determined by using a discounted cash flow method using a market participant discount rate for similar instruments.

The Company incurred ~~$49.1 million~~$5,000 of expenses in connection with the Opus acquisition during the year ended December 31, ~~2020.~~2021. Merger-related expenses are included in other expense in the Company's consolidated statements of income.

The following table presents certain unaudited pro forma financial information for illustrative purposes only, for the years ended December 31, 2020 and 2019 as if Opus had been acquired on January 1, 2019. This unaudited pro forma information combines the historical results of Opus with the Company’s consolidated historical results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition occurred as of the beginning of the year prior to the acquisition. The unaudited pro forma information does not consider any changes to the provision for credit losses resulting from recording loan assets at fair value, cost savings, or business synergies. As a result, actual amounts would have differed from the unaudited pro forma information presented and the differences could be significant.

On January ~~26, 2021,~~18, 2022, the ~~Corporation’s~~Corporation's Board of Directors declared a ~~quarterly cash dividend of $0.30~~$0.33 per share dividend, payable on February ~~12, 2021~~11, 2022 to ~~shareholders~~stockholders of record on February ~~5, 2021.~~4, 2022.

OnThe Company reassessed classification of certain investments, and effective January ~~11, 2021,~~1, 2022, the ~~Company’s Board~~Company transferred approximately $177.7 million of ~~Directors approved~~municipal bonds from available-for-sale to held-to-maturity securities at fair value. These securities had an unrealized gain of $1.1 million at the transfer date, which was reflected as a ~~new stock repurchase program, which authorized~~premium on the ~~repurchase up to 4,725,000 shares~~date of ~~its common stock, representing approximately 5%~~transfer. This premium, as well as the related unrealized gain in accumulated other comprehensive income, will be amortized into interest income as a yield adjustment over the remaining term of the ~~Company’s issued and outstanding shares of common stock and approximately $150 million of common stock as of December 31, 2020 based on the closing price~~securities. The amortization of the ~~Company’s common stock~~unrealized gain reported in accumulated other comprehensive income will offset the effect on ~~December 31, 2020. The stock repurchase program may be limited~~interest income of the amortization of the premium. No gains or ~~terminated~~losses were recorded at ~~any~~the time without notice. The new stock repurchase program replaces and supersedes the previous $100 million stock repurchase program approved by the Board in December 2019, which the Company announced was suspended indefinitely in March 2020. The Company had not repurchased any shares of ~~common stock under the previous stock repurchase program.~~

None.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Annual Report on Form 10-K in providing reasonable assurance that information we are required to disclose in periodic reports that we file or submit to the SEC pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

~~Beginning January 1, 2020, the Company adopted the CECL model under ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~”. The Company made changes to the credit loss reserve policies, processes, and controls and incorporated new policies, processes, and controls over the estimation of ACL as a result. Controls established include reviews of PD and LGD models to calculate cash flows, economic forecasting projections, and the historical loss rate model provided by an independent third party. There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~None~~None.

Not applicable.

The information required by this item with respect to our directors and certain corporate governance practices is contained in our Proxy Statement for our ~~2021~~2022 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC within 120 days after the end of the Company’s fiscal year ended December 31, ~~2020.~~2021. Such information is incorporated herein by reference.

We maintain a Code of Business Conduct and Ethics applicable to our Board of Directors, principal executive officer, and principal financial officer, as well as all of our other employees. Our Code of Business Conduct and Ethics can be found on our internet website located at www.ppbi.com.

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


PART I			43
ITEM 1. BUSINESS			293
ITEM 1A. RISK FACTORS			4230
ITEM 1B. UNRESOLVED STAFF COMMENTS			4245
ITEM 2. PROPERTIES			4345
ITEM 3. LEGAL PROCEEDINGS			4345
ITEM 4. MINE SAFETY DISCLOSURES			4445
PART II			4546
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES			4546
ITEM 6. ~~SELECTED FINANCIAL DATA~~[RESERVED]			4849
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			49
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			9892
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			~~101~~95
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			~~210~~195
ITEM 9A. CONTROLS AND PROCEDURES			~~210~~195
ITEM 9B. OTHER INFORMATION			~~211~~196
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.			196
PART III			~~212~~197
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE			~~212~~197
ITEM 11. EXECUTIVE COMPENSATION			~~212~~197
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			~~212~~197
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE			~~212~~197
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES			~~212~~197
PART IV			~~213~~198
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES			~~213~~198
ITEM 16. FORM 10-K SUMMARY			~~213~~198
SIGNATURES			~~213~~199


Plan Category	Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights			Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans		Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights			Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans
Equity compensation plans approved by security holders:	Equity compensation plans approved by security holders:								Equity compensation plans approved by security holders:
Pacific Premier Bancorp, Inc. 2004 Long-term Incentive Plan		—		$	—		—
Pacific Premier Bancorp, Inc. Amended and Restated 2012 Stock Long-term Incentive Plan	Pacific Premier Bancorp, Inc. Amended and Restated 2012 Stock Long-term Incentive Plan	665,265		16.40			2,168,227		Pacific Premier Bancorp, Inc. Amended and Restated 2012 Stock Long-term Incentive Plan	605,949		16.40			1,682,130
Heritage Oaks Bancorp, Inc. 2005 Equity Incentive Plan	Heritage Oaks Bancorp, Inc. 2005 Equity Incentive Plan	13,491		20.18			—		Heritage Oaks Bancorp, Inc. 2005 Equity Incentive Plan	6,087		20.47			—
Heritage Oaks Bancorp, Inc. 2015 Equity Incentive Plan	Heritage Oaks Bancorp, Inc. 2015 Equity Incentive Plan	16,358		21.50			656,450	(3)	Heritage Oaks Bancorp, Inc. 2015 Equity Incentive Plan	5,534		21.32			657,167	(3)
Equity compensation plans not approved by security holders	Equity compensation plans not approved by security holders	—		—			—		Equity compensation plans not approved by security holders	—		—			—
Total equity compensation plans	Total equity compensation plans	695,114	(1)	$	16.84	(2)	2,824,677	(4)	Total equity compensation plans	617,570	(1)	$	16.64	(2)	2,339,297	(4)


Total Return Analysis	Total Return Analysis	12/31/2015		12/30/2016		12/29/2017		12/31/2018		12/31/2019		12/31/2020		Total Return Analysis	12/30/2016		12/29/2017		12/31/2018		12/31/2019		12/31/2020		12/31/2021
Pacific Premier Bancorp, Inc.	Pacific Premier Bancorp, Inc.	$	100.00	$	166.35	$	188.24	$	120.09	$	157.92	$	158.47	Pacific Premier Bancorp, Inc.	$	100.00	$	113.15	$	72.19	$	94.93	$	95.26	$	125.63
NASDAQ Composite Index	NASDAQ Composite Index	100.00		108.97		141.36		137.39		187.87		272.51		NASDAQ Composite Index	100.00		129.73		126.08		172.41		250.08		305.63
KBW Nasdaq Regional Banking Index	KBW Nasdaq Regional Banking Index	100.00		139.12		141.63		116.86		144.76		132.18		KBW Nasdaq Regional Banking Index	100.00		101.81		84.00		104.05		95.02		129.84
NASDAQ Bank Stocks Index	NASDAQ Bank Stocks Index	100.00		137.97		145.50		121.96		151.69		140.31		NASDAQ Bank Stocks Index	100.00		105.46		88.40		109.95		101.7		145.34


	For the Year Ended December 31,
	2020			2019			2018			2017			2016
	(Dollars in thousands, except per share data)
Operating Data
Interest income	$	630,726		$	526,107		$	448,423		$	270,005		$	166,605
Interest expense	56,515			78,806			55,712			22,503			13,530
Net interest income	574,211			447,301			392,711			247,502			153,075
Provision for credit losses	191,816			5,719			8,253			8,432			9,296
Net interest income after provision for credit losses	382,395			441,582			384,458			239,070			143,779
Net gains from loan sales	8,609			6,642			10,759			12,468			9,539
Other noninterest income	62,716			28,594			20,268			18,646			10,063
Noninterest expense	381,119			259,065			249,905			167,958			98,063
Income before income tax	72,601			217,753			165,580			102,226			65,318
Income tax	12,250			58,035			42,240			42,126			25,215
Net income	$	60,351		$	159,718		$	123,340		$	60,100		$	40,103
Pre-provision net revenue (1)	$	313,546		$	224,128		$	192,287		$	131,660		$	79,002
Share Data
Earnings per share:
Basic	$	0.75		$	2.62		$	2.29		$	1.59		$	1.49
Diluted	0.75			2.60			2.26			1.56			1.46
Weighted average common shares outstanding:
Basic	79,209,560			60,339,714			53,963,047			37,705,556			26,931,634
Diluted	79,506,274			60,692,281			54,613,057			38,511,261			27,439,159
Book value per share (basic)	$	29.07		$	33.82		$	31.52		$	26.86		$	16.54
Book value per share (diluted)	29.03			33.69			31.38			26.73			16.78
Common equity dividends declared per share	1.03			0.88			—			—			—
Dividend payout ratio (2)	137.33		%	33.59		%	—		%	—		%	—		%
Selected Balance Sheet Data
Total assets	$	19,736,544		$	11,776,012		$	11,487,387		$	8,024,501		$	4,036,311
Securities, FHLB, FRB, and other stock	4,071,902			1,499,283			1,243,350			871,601			426,832
Loans held for sale, net	601			1,672			5,719			23,426			7,711
Loans held for investment, net	12,968,415			8,686,613			8,800,746			6,167,288			3,220,317
Allowance for credit losses	268,018			35,698			36,072			28,936			21,296
Total deposits	16,214,177			8,898,509			8,658,351			6,085,886			3,145,581
Total borrowings	532,511			732,171			777,994			641,410			397,354
Total stockholders’ equity	2,746,649			2,012,594			1,969,697			1,241,996			459,740
Performance Ratios
Return on average assets	0.36		%	1.38		%	1.26		%	0.99		%	1.11		%
Return on average equity	2.49			8.00			7.71			6.75			9.30
Average equity to average assets	14.38			17.29			16.33			14.62			11.97
Return on average tangible common equity (1)	4.93			15.69			15.20			11.96			12.80
Pre-provision net revenue on average assets (1)	1.86			1.94			1.96			2.16			2.19
Equity to total assets at end of period	13.92			17.09			17.15			15.48			11.39
Average interest rate spread	3.46			3.75			4.00			4.18			4.22
Net interest margin	3.74			4.33			4.44			4.43			4.48
Efficiency ratio (3)	49.8			50.8			51.6			51.0			53.6
Ratio of interest-earning assets to interest-bearing liabilities	173.39			176.89			169.84			164.66			166.42
Pacific Premier Bank Capital Ratios
Tier 1 leverage ratio	10.89		%	12.39		%	11.06		%	11.59		%	10.94		%
Common equity tier 1 to risk-weighted assets	13.84			13.43			11.87			11.77			11.65
Tier 1 capital to risk-weighted assets	13.84			13.43			11.87			11.77			11.65
Total capital to risk-weighted assets	15.89			13.83			12.28			12.22			12.29
Pacific Premier Bancorp, Inc. Capital Ratios
Tier 1 leverage ratio	9.47		%	10.54		%	10.38		%	10.61		%	9.78		%
Common equity tier 1 to risk-weighted assets	12.04			11.35			10.88			10.48			10.12
Tier 1 capital to risk-weighted assets	12.04			11.42			11.13			10.78			10.41
Total capital to risk-weighted assets	16.31			13.81			12.39			12.46			12.72
Asset Quality Ratios
Nonperforming loans as a percent of loans held for investment	0.22		%	0.10		%	0.05		%	0.05		%	0.04		%
Nonperforming assets as a percent of total assets	0.15			0.08			0.04			0.04			0.04
Net charge-offs to average total loans, net	0.14			0.09			0.01			0.02			0.17
Allowance for credit losses to loans held for investment	2.02			0.41			0.41			0.47			0.66
Allowance for credit losses as a percent of nonperforming loans	918			419			747			892			1,876

(1) A reconciliation of the non-GAAP measures of pre-provision net revenue, return on average tangible common equity, and pre-provision net revenue on average assets derived from GAAP measures are set forth in the “Non-GAAP Measurements” section included herein at Item 7 of this Form 10-K.
(2) Dividend payout ratio is defined as dividends declared per share divided by basic earnings per share.
(3) Represents the ratio of noninterest expense less other real estate owned operations, amortization of intangible assets, 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, gain on acquisitions, gain/(loss) from other real estate owned, and gain/(loss) from debt extinguishment.


		For the Year Ended December 31,									January 1,				For the Year Ended December 31,
(Dollars in thousands, except per share data)														(Dollars in thousands, except per share data)	2021			2020			2019
Total stockholders’ equity														Total stockholders’ equity	$	2,886,311		$	2,746,649		$	2,012,594
		2020			2019			2018			2020
		(Dollars in thousands, except per share data)
Total stockholders’ equity		$	2,746,649		$	2,012,594		$	1,969,697		$	2,012,594
Less: cumulative effect of the change in accounting principle (1)		—			—			—			45,625
Total stockholders' equity, adjusted		2,746,649			2,012,594			1,969,697			1,966,969
Less: intangible assets	Less: intangible assets	984,076			891,634			909,282			891,634			Less: intangible assets	970,883			984,076			891,634
Tangible common equity	Tangible common equity	$	1,762,573		$	1,120,960		$	1,060,415		$	1,075,335		Tangible common equity	$	1,915,428		$	1,762,573		$	1,120,960

Total assets	Total assets	$	19,736,544		$	11,776,012		$	11,487,387		$	11,776,012		Total assets	$	21,094,429		$	19,736,544		$	11,776,012
Less: cumulative effect of the change in accounting principle (1)		—			—			—			45,625
Total assets, adjusted		19,736,544			11,776,012			11,487,387			11,730,387

Less: intangible assets	Less: intangible assets	984,076			891,634			909,282			891,634			Less: intangible assets	970,883			984,076			891,634
Tangible assets	Tangible assets	$	18,752,468		$	10,884,378		$	10,578,105		$	10,884,378		Tangible assets	$	20,123,546		$	18,752,468		$	10,884,378

Common equity ratio	Common equity ratio	13.92		%	17.09		%	17.15		%	16.77		%	Common equity ratio	13.68		%	13.92		%	17.09		%
Less: intangible equity ratio	Less: intangible equity ratio	4.52			6.79			7.13			6.89			Less: intangible equity ratio	4.16			4.52			6.79
Tangible common equity ratio	Tangible common equity ratio	9.40		%	10.30		%	10.02		%	9.88		%	Tangible common equity ratio	9.52		%	9.40		%	10.30		%

Basic shares outstanding		94,483,136			59,506,057			62,480,755			59,506,057
Common shares issued and outstanding														Common shares issued and outstanding	94,389,543			94,483,136			59,506,057

Book value per share	Book value per share	$	29.07		$	33.82		$	31.52		$	33.05		Book value per share	$	30.58		$	29.07		$	33.82
Less: intangible book value per share	Less: intangible book value per share	10.42			14.98			14.55			14.98			Less: intangible book value per share	10.29			10.42			14.98
Tangible book value per share	Tangible book value per share	$	18.65		$	18.84		$	16.97		$	18.07		Tangible book value per share	$	20.29		$	18.65		$	18.84


						~~Through~~Commercial Lending We believe our effective execution of our combination of strategic and organic growth has positioned us to provide a full complement of flexible and structured loan products tailored to meet the diverse borrowing and capital needs of these customers.Our core lending business continues to focus on small- and medium-sized businesses and corporations through commercial business loans, lines of credit, SBA loans, commercial real estate loans, agribusiness loans, franchise lending, home equity lines of credit, and construction loans. •Commercial and Industrial (“C&I”) and Franchise Lending. We originate C&I loans secured by business assets including inventory, receivables, and machinery and equipment to businesses located in our primary market area. Loan types include revolving lines of credit, term loans, seasonal loans, loans to the agricultural community, and loans secured by liquid collateral such as cash deposits or marketable securities. Franchise credit facilities not secured by real estate and HOA credit facilities are included in C&I loans. Franchise loans are made to QSR franchises nationwide and include financing for equipment, real estate, new store development, remodeling, refinancing, acquisition, and recapitalization. We also issue letters of credit on behalf of our customers, backed by deposits or other collateral with the Company. At December 31, 2021, C&I loans, including franchise loans not secured by real estate, totaled $2.50 billion, constituting 17.4% of our gross loans held for investment. At December 31, 2021, we had commitments to extend additional credit on C&I loans up to $1.95 billion. •Commercial Owner-Occupied Business Lending. We originate and purchase loans secured by owner-occupied commercial real estate (“CRE”), such as small office and light industrial buildings, and mixed-use commercial properties located in our primary market areas. We also make loans secured by special purpose properties, such as gas stations and churches. Franchise loans secured by real estate are also included in this category. Pursuant to our underwriting policies, owner-occupied CRE loans may be made in amounts of up to 80% of the lesser of the appraised value or the purchase price of the collateral property. Loans are generally made for terms of up to 25 years with amortization periods up to 25 years. At December 31, 2021, we had $2.63 billion of owner-occupied CRE secured loans, constituting 18.4% of our gross loans held for investment. •Commercial Non-Owner-Occupied Real Estate Lending. We originate and purchase loans that are secured by CRE, such as retail centers, small office and light industrial buildings, and mixed-use commercial properties located in our primary market areas that are not occupied by the borrower. We also make loans secured by special purpose properties, such as hotels and self-storage facilities. Pursuant to our underwriting practices, non-owner-occupied CRE loans may be made in amounts up to 75% of the lesser of the appraised value or the purchase price of the collateral property. We consider the net operating income of the property and typically require a stabilized debt service coverage ratio of at least 1.25:1, based on the qualifying loan interest rate. Loans are generally made for terms of 10 years, with amortization periods up to 25 years. At December 31, 2021, we had $2.77 billion of non-owner- occupied CRE secured loans, constituting 19.4% of our gross loans held for investment. ~~HOA & Property Banking~~group, we provide a variety of specialized treasury management and loan products specifically designed for HOAs, Common Interest Communities, and HOA management companies nationwide. These services include customized accounts receivable and accounts payable tools, real time information and image reporting, which often integrates seamlessly into the customer’s accounting and property management software via our proprietary Pacific Premier Bank API platform. Since acquiring this business in 2013, we have grown HOA deposits four-fold to over $1.71 billion as of December 31, 2020, which represents approximately 11% of our total deposits as of that date, and have diversified the client base to over 14,000 individual HOAs nationwide.

						~~Pacific Premier Franchise Capital~~ provides, through a consultative sales approach, a full array of conventional loan products to experienced, multi-unit franchisees of well-known quick-service franchised restaurant brands across the United States. These products include loans for equipment, real estate, new store development, remodels, acquisitions, refinancing, and recapitalizations. Since we acquired this business line in 2014, we have grown it ten-fold from $78.8 million in total loans outstanding on the date of acquisition to $792.7 million in total loans outstanding as of December 31, 2020, and we had over 200 Pacific Premier Franchise Capital clients as of December 31, 2020.

						~~Our~~ ~~SBA Financing~~group offers Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans nationwide, which provide entrepreneurs and small business owners access to credit needed for equipment, working capital, real estate, and continued growth. We are approved to originate loans under the SBA’s Preferred Lenders Program, enabling us to originate loans within a significantly shorter timeframe from application to funding. We have originated over $1.75 billion of SBA and USDA loans over the past five years, including $1.13 billion aggregate principal amount of loans originated under the Small Business Administration’s Paycheck Protection Program and subsequently sold in 2020.


						~~Our~~ ~~Pacific Premier Trust~~•Multifamily Residential Lending. division serves as a custodian for alternative assets held in qualified self-directed IRA accounts, including investments in private equity, real estate, notes, cash, and other non-exchange traded assets. Through our Pacific Premier Trust division, we work with self-directed investors, financial institutions, capital raisers, and financial advisors to put tax-advantaged retirement dollars to work in alternative assets. Pacific Premier Trust is responsible for facilitating the initial investment and administering the assets in its clients' accounts over the lifetime of the assets. We acquired our Pacific Premier Trust division as part of our acquisition of Opus Bank (“Opus”) in June 2020. Following the Opus acquisition, our Pacific Premier Trust division generated $16.7 million in trust custodial account fees in 2020. As of December 31, 2020, through our Pacific Premier Trust division, we had $15.89~~billion of custodial assets and approximately 44,000 client accounts with $1.44 billion in low cost deposits.~~

						~~Through our~~ ~~Commerce Escrow~~division, we facilitate Section 1031 exchange transactions and provide a variety of real-property and non-real property escrow services. We acquired our Commerce Escrow division as part of our acquisition of Opus in June 2020. Following the Opus acquisition, our Commerce Escrow division generated $2.7 million in escrow and exchange fee income in 2020 on 963 transactions, and represented $516.8 million of low-cost deposits as of December 31, 2020, or approximately 3.2% of our total deposits as of that date.



						Through our HOA & Property Bankinggroup, we provide a variety of specialized treasury management and loan products specifically designed for HOAs and HOA management companies nationwide. These services include customized accounts receivable and accounts payable tools, real time information and image reporting, which often integrates seamlessly into the customer’s accounting and property management software via our proprietary Pacific Premier Bank API platform. Since acquiring this business in 2013, we have grown HOA deposits five-fold to over $2.12 billion as of December 31, 2021, which represents approximately 12% of our total deposits as of that date, and represents a diversified client base serving HOAs and HOA management companies nationwide.

						Pacific Premier Franchise Capital provides, through a consultative sales approach, a full array of conventional loan products to experienced, multi-unit franchisees of well-known quick-service franchised restaurant brands across the United States. These products include loans for equipment, real estate, new store development, remodels, acquisitions, refinancing, and recapitalizations. Since acquiring this business in 2014, Pacific Premier Franchise Capital had a nearly ten-fold increase from $78.8 million in total loans outstanding as of the date of acquisition to $773.0 million in total loans outstanding as of December 31, 2021.


						Our SBA Financinggroup offers Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans nationwide, which provide entrepreneurs and small business owners access to credit needed for equipment, working capital, real estate, and overall growth. We are approved to originate loans under the SBA’s Preferred Lenders Program, enabling us to originate loans within a significantly shorter timeframe from application to funding. During 2020, we originated and subsequently sold $1.13 billion in loans for customers under the SBA’s Paycheck Protection Program (“PPP”) and continue to provide SBA products and services to our clients.

						Our Pacific Premier Trustdivision serves as a custodian for alternative assets held in qualified self-directed IRA accounts, including investments in private equity, real estate, notes, cash, and other non-exchange traded assets. Through our Pacific Premier Trust division, which we acquired in June 2020, we work with self-directed investors, financial institutions, capital raisers, and financial advisors to put tax-advantaged retirement dollars to work in alternative assets. Pacific Premier Trust is responsible for facilitating the initial investment and administering the assets in its clients' accounts over the lifetime of the assets. Pacific Premier Trust generated $38.2 million in trust custodial account fees in 2021. As of December 31, 2021, through our Pacific Premier Trust division, we had $18.11 billion of custodial assets and approximately 45,000 client accounts with $1.82 billion in low-cost deposits, or 10.6% of total deposits.

						Through our Commerce Escrowdivision, which we acquired in June 2020, we facilitate Section 1031 exchange transactions and provide a variety of real-property and non-real property escrow services. During 2021, our Commerce Escrow division generated $7.3 million in escrow and exchange fee income. As of December 31, 2021, Commerce Escrow had $903.8 million of low-cost deposits, or approximately 5.3% of our total deposits as of such date.


		Year Ended December 31,					Year Ended December 31,
		2020		2019			2021		2020
First quarter	First quarter	$	0.25	$	0.22	First quarter	$	0.30	$	0.25
Second quarter	Second quarter	0.25		0.22		Second quarter	0.33		0.25
Third quarter	Third quarter	0.25		0.22		Third quarter	0.33		0.25
Fourth quarter	Fourth quarter	0.28		0.22		Fourth quarter	0.33		0.28
Total	Total	$	1.03	$	0.88	Total	$	1.29	$	1.03


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum ~~Dollar Value~~Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, ~~2020~~2021 to October 31, ~~2020~~2021	—	$	—	—	4,245,056
November 1, 2021 to November 30, 2021	—	—		—	$	~~100,000,000~~4,245,056
~~November~~December 1, ~~2020~~2021 to ~~November 30, 2020~~December 31, 2021	—	—		—	~~100,000,000~~
~~December 1, 2020 to December 31, 2020~~	—	—		—	~~100,000,000~~4,245,056
Total	—			—


	For the Year Ended December 31,
(Dollars in thousands)	2021			2020			2019
Total noninterest expense	$	380,277		$	381,119		$	259,065
Less: amortization of intangible assets	15,936			17,072			17,245
Less: merger-related expense	5			49,129			656
Less: other real estate owned operations, net	—			1			160
Noninterest expense, adjusted	$	364,336		$	314,917		$	241,004

Net interest income before provision for loan losses	$	662,374		$	574,211		$	447,301
Add: total noninterest income	107,850			71,325			35,236
Less: net gain from investment securities	16,906			13,882			8,571
Less: other income - security recoveries	10			2			2
Less: net (loss) gain from other real estate owned	—			(112)			52
Less: net loss from debt extinguishment	(180)			—			(612)
Revenue, adjusted	$	753,488		$	631,764		$	474,524

Efficiency ratio	48.4		%	49.8		%	50.8		%


		Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 Increase (Decrease) Due to								Year Ended December 31, 2019 Compared to Year Ended December 31, 2018 Increase (Decrease) Due to				Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Increase (Decrease) Due to										Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 Increase (Decrease) Due to
		Volume		Days		Rate		Net		Volume		Rate			Net
		(Dollars in thousands)
(Dollars in thousands)																	(Dollars in thousands)	Volume		Days		Rate		Net		Volume		Days		Rate		Net
Interest-Earning Assets	Interest-Earning Assets																Interest-Earning Assets
Cash and cash equivalents	Cash and cash equivalents	$	(233)	$	3	$	35	$	(195)	$	(288)	$	(618)		$	(906)	Cash and cash equivalents	$	(9)	$	(2)	$	(134)	$	(145)	$	(233)	$	3	$	35	$	(195)
Investment securities	Investment securities	19,468		—		(6,549)		12,919		7,898		439			8,337		Investment securities	28,486		—		(6,803)		21,683		19,468		—		(6,549)		12,919
Loans receivable, net	Loans receivable, net	136,223		1,578		(45,906)		91,895		68,744		1,509			70,253		Loans receivable, net	77,026		(1,704)		(30,847)		44,475		136,223		1,578		(45,906)		91,895
Total interest-earning assets	Total interest-earning assets	155,458		1,581		(52,420)		104,619		76,354		1,330			77,684		Total interest-earning assets	105,503		(1,706)		(37,784)		66,013		155,458		1,581		(52,420)		104,619
Interest-Bearing Liabilities	Interest-Bearing Liabilities																Interest-Bearing Liabilities
Interest checking	Interest checking	1,221		9		(275)		955		350		823			1,173		Interest checking	2,118		(3)		(4,140)		(2,025)		1,221		9		(275)		955
Money market	Money market	158,234		54		(166,664)		(8,376)		3,497		5,215			8,712		Money market	5,239		(19)		(18,299)		(13,079)		158,234		54		(166,664)		(8,376)
Savings	Savings	31		1		(21)		11		1		24			25		Savings	105		(1)		(246)		(142)		31		1		(21)		11
Retail certificates of deposit	Retail certificates of deposit	7,332		25		(16,041)		(8,684)		1,624		5,246			6,870		Retail certificates of deposit	(323)		(9)		(5,459)		(5,791)		7,332		25		(16,041)		(8,684)
Wholesale/brokered certificates of deposit	Wholesale/brokered certificates of deposit	(3,648)		4		(4,223)		(7,867)		1,043		2,821			3,864		Wholesale/brokered certificates of deposit	(940)		—		(542)		(1,482)		(3,648)		4		(4,223)		(7,867)
FHLB advances and other borrowings	FHLB advances and other borrowings	(4,507)		4		(3,794)		(8,297)		(5,361)		3,847			(1,514)		FHLB advances and other borrowings	(808)		—		(625)		(1,433)		(4,507)		4		(3,794)		(8,297)
Subordinated debentures	Subordinated debentures	11,000		—		(1,033)		9,967		4,690		(726)			3,964		Subordinated debentures	1,808		—		(6)		1,802		11,000		—		(1,033)		9,967
Total interest-bearing liabilities	Total interest-bearing liabilities	169,663		97		(192,051)		(22,291)		5,844		17,250			23,094		Total interest-bearing liabilities	7,199		(32)		(29,317)		(22,150)		169,663		97		(192,051)		(22,291)
Changes in net interest income	Changes in net interest income	$	(14,205)	$	1,484	$	139,631	$	126,910	$	70,510	$	(15,920)		$	54,590	Changes in net interest income	$	98,304	$	(1,674)	$	(8,467)	$	88,163	$	(14,205)	$	1,484	$	139,631	$	126,910


	For the Year Ended December 31,						Variance 2021 vs. 2020
(Dollars in thousands)	2021		2020		2019		$		%
Provision for Credit Losses
Provision for loan losses	$	(67,069)	$	172,262	$	7,135	$	(239,331)	(138.9)	%
Provision for unfunded commitments	(3,829)		19,554		(1,363)		(23,383)		(119.6)
Provision for sold loans	—		—		(53)		—		—
Provision for held-to-maturity securities	22		—		—		22		—
Total provision for credit losses	$	(70,876)	$	191,816	$	5,719	$	(262,692)	(136.9)	%


	At December 31,
	2020						2019						2018
	Amortized Cost		Fair Value		% Portfolio		Amortized Cost		Fair Value		% Portfolio		Amortized Cost		Fair Value		% Portfolio
	(Dollars in thousands)
Investment Securities Available-for-Sale:
U.S. Treasury	$	30,153	$	32,533	0.8	%	$	60,457	$	63,555	4.5	%	$	59,688	$	60,912	5.3	%
Agency	666,702		690,386		17.5		240,348		246,358		17.5		128,958		130,070		11.3
Corporate	412,223		415,308		10.5		149,150		151,353		10.8		104,158		103,543		9.0
Municipal bonds	1,412,012		1,446,019		36.5		384,032		397,298		28.2		238,914		238,630		20.8
Collateralized mortgage obligation	513,259		513,366		13.0		9,869		9,984		0.7		24,699		24,338		2.1
Mortgage-backed securities	812,384		833,503		21.1		494,404		499,836		35.6		554,751		545,729		47.6
Total investment securities available-for-sale	3,846,733		3,931,115		99.4		1,338,260		1,368,384		97.3		1,111,168		1,103,222		96.1
Investment Securities Held-to-Maturity:
Mortgage-backed securities	22,124		23,405		0.6		36,114		37,036		2.6		43,381		42,843		3.7
Other	1,608		1,608		—		1,724		1,724		0.1		1,829		1,829		0.2
Total investment securities held-to-maturity	23,732		25,013		0.6		37,838		38,760		2.7		45,210		44,672		3.9
Total investment securities	$	3,870,465	$	3,956,128	100	%	$	1,376,098	$	1,407,144	100	%	$	1,156,378	$	1,147,894	100	%


	At December 31,
	2020						2019
	Amortized Cost		Fair Value		% Capital		Amortized Cost		Fair Value		% Capital
	(Dollars in thousands)
Issuer


FNMA	$	751,880	$	769,317	28.0	%	$	369,371	$	373,010	18.5	%
FHLMC	745,469		749,336		27.3		165,231		167,101		8.3

FFCB	263,822		277,405		10.1		110,993		115,934		5.8


(Dollars in thousands)	U.S. Treasury		Agency		Corporate		Municipal Bonds		Collateralized Mortgage Obligations		Mortgage-backed Securities		Other		Total		%
Aaa - Aa3	$	57,866	$	419,105	$	—	$	1,457,399	$	676,643	$	1,575,289	$	—	$	4,186,302	89.9	%
A1 - A3	—		—		221,871		858		—		—		—		222,729		4.8
Baa1 - Baa3	—		13,030		231,990		—		—		—		1,509		246,529		5.3
Total	$	57,866	$	432,135	$	453,861	$	1,458,257	$	676,643	$	1,575,289	$	1,509	$	4,655,560	100.0	%


		At December 31, 2020							At December 31, 2021
		Amortized Cost		Fair Value		% Municipal
		(Dollars in thousands)
(Dollars in thousands)								(Dollars in thousands)	Amortized Cost		Fair Value		% Municipal
Issuer	Issuer							Issuer
Texas	Texas	$	762,043	$	780,719	54.0	%	Texas	$	713,616	$	732,015	50.1	%
California	California	117,065		120,970		8.4		California	114,563		117,355		8.0
Georgia								Georgia	82,263		81,972		5.6
Massachusetts	Massachusetts	89,799		92,760		6.4		Massachusetts	79,170		81,482		5.6
Oregon								Oregon	76,241		76,499		5.2
Other	Other	443,105		451,570		31.2		Other	364,476		371,097		25.5
Total municipal securities	Total municipal securities	$	1,412,012	$	1,446,019	100.0	%	Total municipal securities	$	1,430,329	$	1,460,420	100.0	%


	December 31, 2018						December 31, 2017						December 31, 2016
	Amount		Percent of Total		Weighted Average Interest Rate		Amount		Percent of Total		Weighted Average Interest Rate		Amount		Percent of Total		Weighted Average Interest Rate
	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	2,000,893	22.7	%	4.67	%	$	1,241,734	20.0	%	4.60	%	$	586,484	18.1	%	4.63	%
Multifamily	1,534,673		17.4		4.32		799,450		12.9		4.29		697,170		21.5		4.28
Construction and land	567,687		6.4		6.64		311,627		5.0		6.09		287,119		8.9		5.56
SBA secured by real estate	63,972		0.7		7.10		56,792		0.9		6.25		45,750		1.4		5.62
Total investor loans secured by real estate	4,167,225		47.2		4.85		2,409,603		38.8		4.73		1,616,523		49.9		4.68
Business loans secured by real estate
CRE owner-occupied	1,827,403		20.7		4.93		1,432,990		23.1		4.95		454,204		14.0		4.76
Franchise real estate secured	312,051		3.5		5.30		272,907		4.4		5.16		163,695		5.0		5.32
SBA secured by real estate	104,689		1.2		7.20		110,461		1.8		6.35		31,646		1.0		5.66
Total business loans secured by real estate	2,244,143		25.4		5.08		1,816,358		29.3		5.06		649,545		20.0		4.94
Commercial loans
Commercial and industrial	1,501,827		17.0		5.79		1,201,442		19.4		5.13		563,280		17.4		4.83
Franchise non-real estate secured	453,923		5.1		5.46		387,818		6.3		5.28		296,134		9.1		5.19
SBA non-real estate secured	23,761		0.3		7.23		16,879		0.3		6.24		11,223		0.4		5.67

Total commercial loans	1,979,511		22.4		5.73		1,606,139		26.0		5.17		870,637		26.9		4.96
Retail loans
Single family residential	356,448		4.0		5.00		271,061		4.4		4.62		100,605		3.1		4.62
Consumer	89,491		1.0		5.59		93,063		1.5		5.63		4,302		0.1		5.55
Total retail loans	445,939		5.0		5.13		364,124		5.9		4.87		104,907		3.2		4.66
Gross loans held for investment (1)	8,836,818		100.0	%	5.13	%	6,196,224		100.0	%	4.95	%	3,241,612		100.0	%	4.81	%
Allowance for credit losses for loans held for investment (2)	(36,072)						(28,936)						(21,296)
Loans held for investment, net	$	8,800,746					$	6,167,288					$	3,220,316

Loans held for sale, at lower of cost or fair value	$	5,719					$	23,426					$	7,711


	At December 31, 2020
	One Year or Less				More than One to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Investment Securities Available-for-Sale:
U.S. Treasury	$	—	—	%	$	32,533	2.45	%	$	—	—	%	$	—	—	%	$	32,533	2.45	%
Agency	—		—		365,530		0.99		227,338		1.50		97,518		1.91		690,386		1.28
Corporate	146,471		0.91		9,714		3.59		221,753		3.68		37,370		1.72		415,308		2.52
Municipal bonds	10,525		2.55		3,743		2.51		37,721		2.51		1,394,030		2.11		1,446,019		2.13
Collateralized mortgage obligation	—		—		14,869		0.48		219,509		0.76		278,988		1.35		513,366		1.07
Mortgage-backed securities	—		—		2,313		3.36		216,932		2.36		614,258		1.44		833,503		1.67
Total investment securities available-for-sale	156,996		1.02		428,702		1.16		923,253		2.09		2,422,164		1.84		3,931,115		1.79
Investment Securities Held-to-Maturity:
Mortgage-backed securities	—		—		—		—		—		—		23,405		1.95		23,405		1.95
Other	—		—		—		—		—		—		1,608		0.97		1,608		0.97
Total investment securities held-to-maturity	—		—		—		—		—		—		25,013		1.89		25,013		1.89
Total investment securities	$	156,996	1.02	%	$	428,702	1.16	%	$	923,253	2.09	%	$	2,447,177	1.84	%	$	3,956,128	1.79	%


		December 31, 2020						December 31, 2019							December 31, 2021						December 31, 2020
		Amount		Percent of Total		Weighted Average Interest Rate		Amount		Percent of Total		Weighted Average Interest Rate
		(Dollars in thousands)
(Dollars in thousands)														(Dollars in thousands)	Amount		Percent of Total		Weighted Average Interest Rate		Amount		Percent of Total		Weighted Average Interest Rate
Investor loans secured by real estate	Investor loans secured by real estate													Investor loans secured by real estate
CRE non-owner-occupied	CRE non-owner-occupied	$	2,675,085	20.2	%	4.35	%	$	2,070,141	23.7	%	4.61	%	CRE non-owner-occupied	$	2,771,137	19.4	%	4.19	%	$	2,675,085	20.2	%	4.35	%
Multifamily	Multifamily	5,171,356		39.1		4.04		1,575,726		18.1		4.30		Multifamily	5,891,934		41.2		3.75		5,171,356		39.1		4.04
Construction and land	Construction and land	321,993		2.4		5.60		438,786		5.0		5.95		Construction and land	277,640		1.9		4.88		321,993		2.4		5.60
SBA secured by real estate	SBA secured by real estate	57,331		0.4		5.01		68,431		0.8		6.62		SBA secured by real estate	46,917		0.3		4.98		57,331		0.4		5.01
Total investor loans secured by real estate	Total investor loans secured by real estate	8,225,765		62.1		4.21		4,153,084		47.6		4.67		Total investor loans secured by real estate	8,987,628		62.8		3.93		8,225,765		62.1		4.21
Business loans secured by real estate	Business loans secured by real estate													Business loans secured by real estate
CRE owner-occupied	CRE owner-occupied	2,114,050		16.0		4.45		1,846,554		21.2		4.83		CRE owner-occupied	2,251,014		15.7		4.07		2,114,050		16.0		4.45
Franchise real estate secured	Franchise real estate secured	347,932		2.6		5.07		353,240		4.0		5.39		Franchise real estate secured	380,381		2.7		4.60		347,932		2.6		5.07
SBA secured by real estate	SBA secured by real estate	79,595		0.6		5.21		88,381		1.0		6.92		SBA secured by real estate	69,184		0.5		5.23		79,595		0.6		5.21
Total business loans secured by real estate	Total business loans secured by real estate	2,541,577		19.2		4.56		2,288,175		26.2		5.00		Total business loans secured by real estate	2,700,579		18.9		4.18		2,541,577		19.2		4.56
Commercial loans	Commercial loans													Commercial loans
Commercial and industrial	Commercial and industrial	1,768,834		13.4		3.85		1,393,270		16.0		5.19		Commercial and industrial	2,103,112		14.7		3.61		1,768,834		13.4		3.85
Franchise non-real estate secured	Franchise non-real estate secured	444,797		3.4		5.40		564,357		6.5		5.70		Franchise non-real estate secured	392,576		2.7		4.76		444,797		3.4		5.40
SBA non-real estate secured	SBA non-real estate secured	15,957		0.1		5.62		17,426		0.2		7.06		SBA non-real estate secured	11,045		0.1		5.54		15,957		0.1		5.62

Total commercial loans	Total commercial loans	2,229,588		16.9		4.16		1,975,053		22.7		5.35		Total commercial loans	2,506,733		17.5		3.80		2,229,588		16.9		4.16
Retail loans	Retail loans													Retail loans
Single family residential	Single family residential	232,574		1.8		4.28		255,024		2.9		4.77		Single family residential	95,292		0.7		4.01		232,574		1.8		4.28
Consumer	Consumer	6,929		—		5.65		50,975		0.6		3.96		Consumer	5,665		0.1		4.98		6,929		—		5.65
Total retail loans	Total retail loans	239,503		1.8		4.31		305,999		3.5		4.64		Total retail loans	100,957		0.8		4.05		239,503		1.8		4.31
Gross loans held for investment (1)	Gross loans held for investment (1)	13,236,433		100.0	%	4.27	%	8,722,311		100.0	%	4.91	%	Gross loans held for investment (1)	14,295,897		100.0	%	3.95	%	13,236,433		100.0	%	4.27	%
Allowance for credit losses for loans held for investment (2)		(268,018)						(35,698)
Allowance for credit losses for loans held for investment														Allowance for credit losses for loans held for investment	(197,752)						(268,018)
Loans held for investment, net	Loans held for investment, net	$	12,968,415					$	8,686,613					Loans held for investment, net	$	14,098,145					$	12,968,415

Loans held for sale, at lower of cost or fair value	Loans held for sale, at lower of cost or fair value	$	601					$	1,672					Loans held for sale, at lower of cost or fair value	$	10,869					$	601


		At December 31, 2020									At December 31, 2021
		Due in One Year or Less		Due after One Year through Five Years		Due after Five Years		Total
		(Dollars in thousands)
(Dollars in thousands)										(Dollars in thousands)	Due in One Year or Less		Due after One Year through Five Years		Due after Five Years through Fifteen Years		Due after Fifteen Years		Total
Investor loans secured by real estate	Investor loans secured by real estate									Investor loans secured by real estate
CRE non-owner occupied		$	91,833	$	727,025	$	1,856,227	$	2,675,085
CRE non-owner-occupied										CRE non-owner-occupied	$	148,501	$	821,447	$	1,609,196	$	191,993	$	2,771,137
Multifamily	Multifamily	46,985		370,514		4,753,857		5,171,356		Multifamily	88,985		389,403		4,302,144		1,111,402		5,891,934
Construction and land	Construction and land	223,744		94,044		4,205		321,993		Construction and land	186,084		87,650		3,906		—		277,640
SBA secured by real estate	SBA secured by real estate	—		—		57,331		57,331		SBA secured by real estate	—		—		78		46,839		46,917
Total investor loans secured by real estate	Total investor loans secured by real estate	362,562		1,191,583		6,671,620		8,225,765		Total investor loans secured by real estate	423,570		1,298,500		5,915,324		1,350,234		8,987,628
Business loans secured by real estate	Business loans secured by real estate									Business loans secured by real estate
CRE owner-occupied	CRE owner-occupied	78,469		309,511		1,726,070		2,114,050		CRE owner-occupied	66,283		314,708		1,596,135		273,888		2,251,014
Franchise real estate secured	Franchise real estate secured	—		16,998		330,934		347,932		Franchise real estate secured	2,496		19,592		308,426		49,867		380,381
SBA secured by real estate	SBA secured by real estate	—		1,492		78,103		79,595		SBA secured by real estate	7		873		7,856		60,448		69,184
Total business loans secured by real estate	Total business loans secured by real estate	78,469		328,001		2,135,107		2,541,577		Total business loans secured by real estate	68,786		335,173		1,912,417		384,203		2,700,579
Commercial loans	Commercial loans									Commercial loans
Commercial and industrial	Commercial and industrial	527,881		741,909		499,044		1,768,834		Commercial and industrial	756,902		764,490		531,451		50,269		2,103,112
Franchise non-real estate secured	Franchise non-real estate secured	8,833		81,847		354,117		444,797		Franchise non-real estate secured	925		92,552		299,099		—		392,576
SBA not secured by real estate	SBA not secured by real estate	231		6,433		9,293		15,957		SBA not secured by real estate	755		4,226		5,613		451		11,045
Total commercial loans	Total commercial loans	536,945		830,189		862,454		2,229,588		Total commercial loans	758,582		861,268		836,163		50,720		2,506,733
Retail loans	Retail loans									Retail loans
Single family residential	Single family residential	13,601		21,320		197,653		232,574		Single family residential	196		5,386		10,339		79,371		95,292
Consumer loans	Consumer loans	2,400		2,209		2,320		6,929		Consumer loans	3,243		743		919		760		5,665
Total retail loans	Total retail loans	16,001		23,529		199,973		239,503		Total retail loans	3,439		6,129		11,258		80,131		100,957
Gross loans held for investment	Gross loans held for investment	$	993,977	$	2,373,302	$	9,869,154	$	13,236,433	Gross loans held for investment	$	1,254,377	$	2,501,070	$	8,675,162	$	1,865,288	$	14,295,897


		At December 31, 2020 Loans Due After December 31, 2021							At December 31, 2021 Loans Due After December 31, 2022
		Fixed		Adjustable		Total
		(Dollars in thousands)
(Dollars in thousands)								(Dollars in thousands)	Fixed		Adjustable		Total
Investor loans secured by real estate	Investor loans secured by real estate							Investor loans secured by real estate
CRE non-owner occupied		$	846,653	$	1,736,599	$	2,583,252
CRE non-owner-occupied								CRE non-owner-occupied	$	1,018,942	$	1,603,694	$	2,622,636
Multifamily	Multifamily	381,736		4,742,635		5,124,371		Multifamily	436,833		5,366,116		5,802,949
Construction and land	Construction and land	12,614		85,635		98,249		Construction and land	3,525		88,031		91,556
SBA secured by real estate	SBA secured by real estate	668		56,663		57,331		SBA secured by real estate	936		45,981		46,917
Total investor loans secured by real estate	Total investor loans secured by real estate	1,241,671		6,621,532		7,863,203		Total investor loans secured by real estate	1,460,236		7,103,822		8,564,058
Business loans secured by real estate	Business loans secured by real estate							Business loans secured by real estate
CRE owner-occupied	CRE owner-occupied	948,936		1,086,645		2,035,581		CRE owner-occupied	1,327,298		857,433		2,184,731
Franchise real estate secured	Franchise real estate secured	40,626		307,306		347,932		Franchise real estate secured	56,557		321,328		377,885
SBA secured by real estate	SBA secured by real estate	1,587		78,008		79,595		SBA secured by real estate	726		68,451		69,177
Total business loans secured by real estate	Total business loans secured by real estate	991,149		1,471,959		2,463,108		Total business loans secured by real estate	1,384,581		1,247,212		2,631,793
Commercial loans	Commercial loans							Commercial loans
Commercial and industrial	Commercial and industrial	826,218		414,735		1,240,953		Commercial and industrial	1,018,251		327,959		1,346,210
Franchise non-real estate secured	Franchise non-real estate secured	62,946		373,018		435,964		Franchise non-real estate secured	44,101		347,550		391,651
SBA not secured by real estate	SBA not secured by real estate	3,675		12,051		15,726		SBA not secured by real estate	2,548		7,742		10,290
Total commercial loans	Total commercial loans	892,839		799,804		1,692,643		Total commercial loans	1,064,900		683,251		1,748,151
Retail loans	Retail loans							Retail loans
Single family residential	Single family residential	39,313		179,660		218,973		Single family residential	11,612		83,484		95,096
Consumer loans	Consumer loans	2,325		2,204		4,529		Consumer loans	2,018		404		2,422
Total retail loans	Total retail loans	41,638		181,864		223,502		Total retail loans	13,630		83,888		97,518
Gross loans held for investment	Gross loans held for investment	$	3,167,297	$	9,075,159	$	12,242,456	Gross loans held for investment	$	3,923,347	$	9,118,173	$	13,041,520


		30 - 59 Days				60 - 89 Days				90 Days or More				Total					30 - 59 Days				60 - 89 Days				90 Days or More				Total
		# of Loans	Principal Balance of Loans			# of Loans	Principal Balance of Loans			# of Loans	Principal Balance of Loans			# of Loans	Principal Balance of Loans
		(Dollars in thousands)
December 31, 2020
(Dollars in thousands)																		(Dollars in thousands)	# of Loans	Principal Balance of Loans			# of Loans	Principal Balance of Loans			# of Loans	Principal Balance of Loans			# of Loans	Principal Balance of Loans
December 31, 2021																		December 31, 2021
Investor loans secured by real estate	Investor loans secured by real estate																	Investor loans secured by real estate
CRE non-owner-occupied	CRE non-owner-occupied	—	$	—		—	$	—		2	$	757		2	$	757		CRE non-owner-occupied	—	$	—		—	$	—		3	$	10,255		3	$	10,255
Multifamily	Multifamily	1	1			—	—			—	—			1	1			Multifamily	1	1,230			—	—			—	—			1	1,230

SBA secured by real estate	SBA secured by real estate	—	—			—	—			3	1,257			3	1,257			SBA secured by real estate	—	—			—	—			1	337			1	337
Total investor loans secured by real estate	Total investor loans secured by real estate	1	1			—	—			5	2,014			6	2,015			Total investor loans secured by real estate	1	1,230			—	—			4	10,592			5	11,822
Business loans secured by real estate	Business loans secured by real estate																	Business loans secured by real estate
CRE owner-occupied	CRE owner-occupied	—	—			—	—			4	5,304			4	5,304			CRE owner-occupied	—	—			—	—			3	4,952			3	4,952

SBA secured by real estate	SBA secured by real estate	1	486			—	—			5	1,073			6	1,559			SBA secured by real estate	—	—			—	—			1	441			1	441
Total business loans secured by real estate	Total business loans secured by real estate	1	486			—	—			9	6,377			10	6,863			Total business loans secured by real estate	—	—			—	—			4	5,393			4	5,393
Commercial loans	Commercial loans																	Commercial loans
Commercial and industrial	Commercial and industrial	10	428			2	57			6	2,898			18	3,383			Commercial and industrial	8	92			—	—			2	1,462			10	1,554

SBA non-real estate secured	SBA non-real estate secured	2	338			—	—			1	707			3	1,045			SBA non-real estate secured	1	73			—	—			1	653			2	726
Total commercial loans	Total commercial loans	12	766			2	57			7	3,605			21	4,428			Total commercial loans	9	165			—	—			3	2,115			12	2,280
Retail loans	Retail loans																	Retail loans
Single family residential		1	15			—	—			—	—			1	15
Consumer		1	1			—	—			—	—			1	1

Total retail loans	Total retail loans	2	16			—	—			—	—			2	16			Total retail loans	—	—			—	—			—	—			—	—
Total	Total	16	$	1,269		2	$	57		21	$	11,996		39	$	13,322		Total	10	$	1,395		—	$	—		11	$	18,100		21	$	19,495
Delinquent loans to loans held for investment	Delinquent loans to loans held for investment		0.01		%		—		%		0.09		%		0.10		%	Delinquent loans to loans held for investment		0.01		%		—		%		0.13		%		0.14		%


	Credit Risk Grades
(Dollars in thousands)	Pass		Special Mention		Substandard		Total Gross Loans
December 31, 2021
Investor loans secured by real estate
CRE non-owner-occupied	$	2,718,001	$	23,848	$	29,288	$	2,771,137
Multifamily	5,890,626		—		1,308		5,891,934
Construction and land	277,640		—		—		277,640
SBA secured by real estate	37,228		1,501		8,188		46,917
Total investor loans secured by real estate	8,923,495		25,349		38,784		8,987,628
Business loans secured by real estate
CRE owner-occupied	2,233,829		—		17,185		2,251,014
Franchise real estate secured	380,381		—		—		380,381
SBA secured by real estate	60,560		62		8,562		69,184
Total business loans secured by real estate	2,674,770		62		25,747		2,700,579
Commercial loans
Commercial and industrial	2,052,581		15,290		35,241		2,103,112
Franchise non-real estate secured	372,910		—		19,666		392,576
SBA non-real estate secured	7,950		795		2,300		11,045
Total commercial loans	2,433,441		16,085		57,207		2,506,733
Retail loans
Single family residential	95,243		—		49		95,292
Consumer loans	5,625		—		40		5,665
Total retail loans	100,868		—		89		100,957
Total gross loans	$	14,132,574	$	41,496	$	121,827	$	14,295,897


		At December 31,																December 31,
(Dollars in thousands)																	(Dollars in thousands)	2021			2020
Nonperforming assets																	Nonperforming assets
Investor loans secured by real estate																	Investor loans secured by real estate
CRE non-owner-occupied																	CRE non-owner-occupied	$	10,255		$	2,792
		2020			2019			2018			2017			2016
		(Dollars in thousands)
Nonperforming assets
Investor loans secured by real estate
CRE non-owner occupied		$	2,792		$	1,088		$	—		$	—		$	—

Construction and land		—			—			—			9			15
SBA secured by real estate	SBA secured by real estate	1,257			390			1,600			903			225			SBA secured by real estate	937			1,257
Total investor real estate secured loans	Total investor real estate secured loans	4,049			1,478			1,600			912			240			Total investor real estate secured loans	11,192			4,049
Business loans secured by real estate	Business loans secured by real estate																Business loans secured by real estate
CRE owner-occupied	CRE owner-occupied	6,083			—			599			101			436			CRE owner-occupied	4,952			6,083

SBA secured by real estate	SBA secured by real estate	1,143			928			—			—			18			SBA secured by real estate	589			1,143
Total business loans secured by real estate	Total business loans secured by real estate	7,226			928			599			101			454			Total business loans secured by real estate	5,541			7,226
Commercial loans	Commercial loans																Commercial loans
Commercial and industrial	Commercial and industrial	3,974			4,637			931			1,160			244			Commercial and industrial	1,798			3,974
Franchise non-real estate secured	Franchise non-real estate secured	13,238			—			190			—			—			Franchise non-real estate secured	12,079			13,238
SBA non-real estate secured	SBA non-real estate secured	707			1,118			1,110			252			73			SBA non-real estate secured	653			707
Total commercial loans	Total commercial loans	17,919			5,755			2,231			1,412			317			Total commercial loans	14,530			17,919
Retail loans	Retail loans																Retail loans
Single family residential	Single family residential	15			366			399			818			124			Single family residential	10			15

Total retail loans	Total retail loans	15			366			399			818			124			Total retail loans	10			15
Total nonperforming loans	Total nonperforming loans	29,209			8,527			4,829			3,243			1,135			Total nonperforming loans	31,273			29,209
Other real estate owned	Other real estate owned	—			441			147			326			460			Other real estate owned	—			—
Other assets owned	Other assets owned	—			—			13			—			—			Other assets owned	—			—
Total	Total	$	29,209		$	8,968		$	4,989		$	3,569		$	1,595		Total	$	31,273		$	29,209

Allowance for credit losses (1)		$	268,018		$	35,698		$	36,072		$	28,936		$	21,296
Allowance for credit losses as a percent of total nonperforming loans (1)		918		%	419		%	747		%	892		%	1,876		%
Nonperforming loans as a percent of loans held for investment		0.22			0.10			0.05			0.05			0.04

Nonperforming assets as a percent of total assets	Nonperforming assets as a percent of total assets	0.15			0.08			0.04			0.04			0.04			Nonperforming assets as a percent of total assets	0.15		%	0.15		%
TDR included in nonperforming loans		$	—		$	—		$	—		$	97		$	—
TDRs included in nonperforming loans																	TDRs included in nonperforming loans	$	17,277		$	—


	For the Year Ended December 31, (1)
	2020			2019			2018			2017			2016
	(Dollars in thousands)
Balance, beginning of period	$	35,698		$	36,072		$	28,936		$	21,296		$	17,317
Adoption of ASC 326	55,686			—			—			—			—
Initial ACL recorded for PCD Loans	21,242			—			—			—			—
Provision for credit losses	172,262			7,135			8,156			8,640			8,776
Charge-offs:
Investor loans secured by real estate:
CRE non-owner occupied	(839)			(625)			—			—			—

Construction and land	(539)			—			—			—			—
SBA secured by real estate	(705)			(742)			—			—			—
Business loans secured by real estate:
CRE owner-occupied	(1,739)			(125)			(33)			—			(329)
Franchise real estate secured	(932)			(1,377)			—			—			—
SBA secured by real estate	(338)			(908)			—			(8)			(851)
Commercial loans:
Commercial and industrial	(6,891)			(2,318)			(1,411)			(1,344)			(2,801)
Franchise non-real estate secured	(6,731)			(1,154)			—			—			(980)
SBA non-real estate secured	(899)			(588)			(102)			—			(130)

Retail loans:
Single family residential	(106)			—			—			(10)			(151)
Consumer loans	(139)			(16)			(409)			—			—
Total charge-offs	(19,858)			(7,853)			(1,955)			(1,362)			(5,242)
Recoveries:
Investor loans secured by real estate:
CRE non-owner occupied	44			—			—			—			21


SBA secured by real estate	34			—			—			—			—
Business loans secured by real estate:
CRE owner-occupied	59			46			47			105			24

SBA secured by real estate	147			10			—			78			107
Commercial loans:
Commercial and industrial	1,818			189			698			94			178
Franchise non-real estate secured	866			18			—			—			—
SBA non-real estate secured	14			68			169			49			86
Retail loans:
Single family residential	2			2			13			35			25
Consumer loans	4			11			8			1			4
Total recoveries	2,988			344			935			362			445
Net loan charge-offs	(16,870)			(7,509)			(1,020)			(1,000)			(4,797)
Balance, end of period	$	268,018		$	35,698		$	36,072		$	28,936		$	21,296

Ratios:
Net charge-offs to average total loans, net	0.14		%	0.09		%	0.01		%	0.02		%	0.17		%
Allowance for credit losses to loans held for investment at end of period	2.02		%	0.41		%	0.41		%	0.47		%	0.66		%


	As of and for the Year Ended December 31,
	2021					2020					2019
(Dollars in thousands)	Net Charge-offs (Recoveries)		Average Loan Balance		Percentage	Net Charge-offs (Recoveries)		Average Loan Balance		Percentage	Net Charge-offs (Recoveries)		Average Loan Balance		Percentage
Investor loans secured by real estate
CRE non-owner-occupied	$	76	$	2,759,560	—%	$	795	$	2,454,145	0.03%	$	625	$	2,074,138	0.03%
Multifamily	—		5,464,907		—%	—		3,674,994		—%	—		1,537,075		—%
Construction and land	—		301,353		—%	539		368,378		0.15%	—		539,277		—%
SBA secured by real estate	421		54,395		0.77%	671		64,795		1.04%	742		70,663		1.05%
Total investor loans secured by real estate	497		8,580,215		0.01%	2,005		6,562,312		0.03%	1,367		4,221,153		0.03%
Business loans secured by real estate
CRE owner-occupied	(56)		2,121,071		—%	1,680		2,008,653		0.08%	79		1,827,427		—%
Franchise real estate secured	—		348,916		—%	932		360,272		0.26%	1,377		330,811		0.42%
SBA secured by real estate	(32)		75,297		(0.04)%	191		90,396		0.21%	898		99,626		0.90%
Total business loans secured by real estate	(88)		2,545,284		—%	2,803		2,459,321		0.11%	2,354		2,257,864		0.10%
Commercial loans
Commercial and industrial	664		1,787,475		0.04%	5,073		1,684,048		0.30%	2,129		1,412,793		0.15%
Franchise non-real estate secured	2,149		398,126		0.54%	5,865		524,288		1.12%	1,136		519,503		0.22%
SBA non-real estate secured	(21)		14,095		(0.15)%	885		18,411		4.81%	520		18,060		2.88%
SBA paycheck protection program	—		—		—%	—		283,592		—%	—		—		—%
Total commercial loans	2,792		2,199,696		0.13%	11,823		2,510,339		0.47%	3,785		1,950,356		0.19%
Retail loans
Single family residential	(3)		165,398		—%	104		244,252		0.04%	(2)		278,254		—%
Consumer	(1)		6,239		(0.02)%	135		43,599		0.31%	5		60,344		0.01%
Total retail loans	(4)		171,637		—%	239		287,851		0.08%	3		338,598		—%
Total	$	3,197	$	13,496,832	0.02%	$	16,870	$	11,819,823	0.14%	$	7,509	$	8,767,971	0.09%

Allowance for credit losses to loans held for investment					1.38%					2.02%					0.41%
Nonperforming loans to loans held for investment					0.22%					0.22%					0.10%
Allowance for credit losses to nonperforming loans					632%					918%					419%


	At December 31, 2020
	$100,000 through $250,000						Greater than $250,000						Total
Maturity Period	Amount		Weighted Average Rate		% of Total Deposits		Amount		Weighted Average Rate		% of Total Deposits		Amount		Weighted Average Rate		% of Total Deposits
	(Dollars in thousands)
Certificates of deposit
Three months or less	$	111,916	1.15	%	0.69	%	$	508,490	0.72	%	3.14	%	$	620,406	0.80	%	3.83	%
Over three months through 6 months	135,957		1.11		0.84		143,366		1.26		0.88		279,323		1.19		1.72
Over 6 months through 12 months	146,261		0.84		0.90		146,972		1.06		0.91		293,233		0.95		1.81
Over 12 months	123,968		0.59		0.76		27,057		0.95		0.17		151,025		0.65		0.93
Total	$	518,102	0.92	%	3.20	%	$	825,885	0.88	%	5.09	%	$	1,343,987	0.89	%	8.29	%


(Dollars in thousands)	December 31, 2021


3 months or less	$	297,595
Over 3 months through 6 months	28,187
Over 6 months through 12 months	23,051
Over 12 months	8,287
Total	$	357,120


		At or For Year Ended December 31,										At or For Year Ended December 31,
		2020			2019			2018
		(Dollars in thousands)
(Dollars in thousands)											(Dollars in thousands)	2021			2020
FHLB Advances	FHLB Advances										FHLB Advances
Balance outstanding at end of year	Balance outstanding at end of year	$	31,000		$	517,026		$	667,606		Balance outstanding at end of year	$	550,000		$	31,000
Weighted average interest rate at end of year	Weighted average interest rate at end of year	1.53		%	1.69		%	2.51		%	Weighted average interest rate at end of year	0.20		%	1.53		%
Average balance outstanding	Average balance outstanding	$	139,190		$	404,959		$	529,278		Average balance outstanding	$	24,886		$	139,190
Weighted average interest rate during the year	Weighted average interest rate during the year	1.10		%	2.43		%	2.06		%	Weighted average interest rate during the year	0.39		%	1.10		%
Maximum amount outstanding at any month-end during the year	Maximum amount outstanding at any month-end during the year	$	521,017		$	1,091,596		$	883,612		Maximum amount outstanding at any month-end during the year	$	550,000		$	521,017
Other Borrowings	Other Borrowings										Other Borrowings
Balance outstanding at end of year	Balance outstanding at end of year	$	—		$	—		$	75		Balance outstanding at end of year	$	8,000		$	—
Weighted average interest rate at end of year	Weighted average interest rate at end of year	—		%	—		%	0.01		%	Weighted average interest rate at end of year	2.15		%	—		%
Average balance outstanding	Average balance outstanding	$	251		$	230		$	29,193		Average balance outstanding	$	61		$	251
Weighted average interest rate during the year	Weighted average interest rate during the year	0.16		%	0.63		%	1.69		%	Weighted average interest rate during the year	0.34		%	0.16		%
Maximum amount outstanding at any month-end during the year	Maximum amount outstanding at any month-end during the year	$	5,000		$	10,000		$	52,091		Maximum amount outstanding at any month-end during the year	$	8,000		$	5,000
Subordinated Debentures	Subordinated Debentures										Subordinated Debentures
Balance outstanding at end of year	Balance outstanding at end of year	$	501,511		$	215,145		$	110,313		Balance outstanding at end of year	$	330,567		$	501,511
Weighted average interest rate at end of year	Weighted average interest rate at end of year	5.38		%	5.37		%	6.04		%	Weighted average interest rate at end of year	5.33		%	5.38		%
Average balance outstanding	Average balance outstanding	$	377,037		$	183,382		$	107,732		Average balance outstanding	$	410,067		$	377,037
Weighted average interest rate during the year	Weighted average interest rate during the year	5.48		%	5.82		%	6.23		%	Weighted average interest rate during the year	5.47		%	5.48		%
Maximum amount outstanding at any month-end during the year	Maximum amount outstanding at any month-end during the year	$	501,511		$	233,119		$	110,313		Maximum amount outstanding at any month-end during the year	$	501,647		$	501,511
Total Borrowings	Total Borrowings										Total Borrowings
Balance outstanding at end of year	Balance outstanding at end of year	$	532,511		$	732,171		$	777,994		Balance outstanding at end of year	$	888,567		$	532,511
Weighted average interest rate at end of year	Weighted average interest rate at end of year	5.16		%	2.77		%	3.01		%	Weighted average interest rate at end of year	2.12		%	5.16		%
Average balance outstanding	Average balance outstanding	$	516,478		$	588,571		$	666,250		Average balance outstanding	$	435,014		$	516,478
Weighted average interest rate during the year	Weighted average interest rate during the year	4.29		%	3.48		%	2.71		%	Weighted average interest rate during the year	5.18		%	4.29		%
Maximum amount outstanding at any month-end during the year	Maximum amount outstanding at any month-end during the year	$	736,286		$	1,211,954		$	994,816		Maximum amount outstanding at any month-end during the year	$	888,567		$	736,286


	At December 31, 2021
(Dollars in thousands)	Less than 1 year		More than 1 year		Total

FHLB advances and other borrowings	$	558,000	$	—	$	558,000
Subordinated debentures	—		335,000		335,000
Certificates of deposit	983,669		74,604		1,058,273
Operating leases	19,538		62,565		82,103
Total contractual cash obligations	$	1,561,207	$	472,169	$	2,033,376


	At December 31, 2020
	Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
	(Dollars in thousands)
Contractual Obligations
FHLB advances	$	10,000	$	21,000	$	—	$	—	$	31,000

Subordinated debentures	—		—		84,661		416,850		501,511
Certificates of deposit	1,433,757		100,151		9,576		83,358		1,626,842
Operating leases	21,257		37,930		27,104		13,009		99,300
Total contractual cash obligations	$	1,465,014	$	159,081	$	121,341	$	513,217	$	2,258,653


December 31, 2019
(Dollars in thousands)
	Economic Value of Equity			EVE as % of market value of portfolio assets
Change in Rates (Basis Points)	$ Amount	$ Change	% Change	EVE Ratio
200	2,084,891	106,053	5.4	19.77
100	2,042,116	63,277	3.2	18.91
Static	1,978,839	—	—	17.90
-100	1,884,247	(94,591)	(4.8)	16.63
-200	1,728,146	(250,693)	(12.7)	14.86


			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 173)			~~102~~96
Consolidated Statements of Financial Condition			~~107~~99
Consolidated Statements of Income			~~108~~100
Consolidated Statements of Comprehensive Income			~~109~~101
Consolidated Statements of Stockholder’s Equity			~~110~~102
Consolidated Statements of Cash Flows			~~111~~103
Notes to Consolidated Financial Statements			~~112~~104


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES	PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES					PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION	CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION					CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
							At December 31,
(Dollars in thousands, except share data)	(Dollars in thousands, except share data)					(Dollars in thousands, except share data)	2021		2020
		At December 31,
		2020		2019
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	135,429	$	135,847	Cash and due from banks	$	83,150	$	135,429
Interest-bearing deposits with financial institutions	Interest-bearing deposits with financial institutions	745,337		191,003		Interest-bearing deposits with financial institutions	221,553		745,337
Cash and cash equivalents	Cash and cash equivalents	880,766		326,850		Cash and cash equivalents	304,703		880,766
Interest-bearing time deposits with financial institutions	Interest-bearing time deposits with financial institutions	2,845		2,708		Interest-bearing time deposits with financial institutions	2,216		2,845
Investments held-to-maturity, at amortized cost (fair value of 25,013 and 38,760 as of December 31, 2020 and December 31, 2019, respectively)		23,732		37,838
Investments held-to-maturity, at amortized cost, net of allowance of $22 and $0 (fair value of $384,423 and $25,013 as of December 31, 2021 and December 31, 2020, respectively)						Investments held-to-maturity, at amortized cost, net of allowance of $22 and $0 (fair value of $384,423 and $25,013 as of December 31, 2021 and December 31, 2020, respectively)	381,674		23,732
Investment securities available-for-sale, at fair value	Investment securities available-for-sale, at fair value	3,931,115		1,368,384		Investment securities available-for-sale, at fair value	4,273,864		3,931,115
FHLB, FRB, and other stock, at cost	FHLB, FRB, and other stock, at cost	117,055		93,061		FHLB, FRB, and other stock, at cost	117,538		117,055
Loans held for sale, at lower of cost or fair value	Loans held for sale, at lower of cost or fair value	601		1,672		Loans held for sale, at lower of cost or fair value	10,869		601
Loans held for investment	Loans held for investment	13,236,433		8,722,311		Loans held for investment	14,295,897		13,236,433
Allowance for credit losses	Allowance for credit losses	(268,018)		(35,698)		Allowance for credit losses	(197,752)		(268,018)
Loans held for investment, net	Loans held for investment, net	12,968,415		8,686,613		Loans held for investment, net	14,098,145		12,968,415
Accrued interest receivable	Accrued interest receivable	74,574		39,442		Accrued interest receivable	65,728		74,574
Other real estate owned		0		441
Premises and equipment		78,884		59,001

Premises and equipment, net						Premises and equipment, net	71,908		78,884
Deferred income taxes, net	Deferred income taxes, net	89,056		0		Deferred income taxes, net	87,344		89,056
Bank owned life insurance	Bank owned life insurance	292,564		113,376		Bank owned life insurance	449,353		292,564
Intangible assets	Intangible assets	85,507		83,312		Intangible assets	69,571		85,507
Goodwill	Goodwill	898,569		808,322		Goodwill	901,312		898,569
Other assets	Other assets	292,861		154,992		Other assets	260,204		292,861
Total assets	Total assets	$	19,736,544	$	11,776,012	Total assets	$	21,094,429	$	19,736,544

LIABILITIES	LIABILITIES					LIABILITIES
Deposit accounts:	Deposit accounts:					Deposit accounts:
Noninterest-bearing checking	Noninterest-bearing checking	$	6,011,106	$	3,857,660	Noninterest-bearing checking	$	6,757,259	$	6,011,106
Interest-bearing:	Interest-bearing:					Interest-bearing:
Checking	Checking	2,913,260		586,019		Checking	3,493,331		2,913,260
Money market/savings	Money market/savings	5,662,969		3,406,988		Money market/savings	5,806,726		5,662,969
Retail certificates of deposit	Retail certificates of deposit	1,471,512		973,465		Retail certificates of deposit	1,058,273		1,471,512
Wholesale/brokered certificates of deposit	Wholesale/brokered certificates of deposit	155,330		74,377		Wholesale/brokered certificates of deposit	—		155,330
Total interest-bearing	Total interest-bearing	10,203,071		5,040,849		Total interest-bearing	10,358,330		10,203,071
Total deposits	Total deposits	16,214,177		8,898,509		Total deposits	17,115,589		16,214,177
FHLB advances and other borrowings	FHLB advances and other borrowings	31,000		517,026		FHLB advances and other borrowings	558,000		31,000
Subordinated debentures	Subordinated debentures	501,511		215,145		Subordinated debentures	330,567		501,511
Deferred income taxes, net		0		1,371

Accrued expenses and other liabilities	Accrued expenses and other liabilities	243,207		131,367		Accrued expenses and other liabilities	203,962		243,207
Total liabilities	Total liabilities	16,989,895		9,763,418		Total liabilities	18,208,118		16,989,895
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 1,000,000 shares authorized; 0 shares issued and outstanding		0		0
Common stock, $0.01 par value; 150,000,000 shares authorized at December 31, 2020 and December 31, 2019; 94,483,136 shares and 59,506,057 shares issued and outstanding, respectively		931		586
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding						Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.01 par value; 150,000,000 shares authorized at December 31, 2021 and December 31, 2020; 94,389,543 shares and 94,483,136 shares issued and outstanding, respectively						Common stock, $0.01 par value; 150,000,000 shares authorized at December 31, 2021 and December 31, 2020; 94,389,543 shares and 94,483,136 shares issued and outstanding, respectively	929		931
Additional paid-in capital	Additional paid-in capital	2,354,871		1,594,434		Additional paid-in capital	2,351,294		2,354,871
Retained earnings	Retained earnings	330,555		396,051		Retained earnings	541,950		330,555
Accumulated other comprehensive income		60,292		21,523
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(7,862)		60,292
Total stockholders’ equity	Total stockholders’ equity	2,746,649		2,012,594		Total stockholders’ equity	2,886,311		2,746,649
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	19,736,544	$	11,776,012	Total liabilities and stockholders’ equity	$	21,094,429	$	19,736,544

Accompanying notes are an integral part of these consolidated financial statements.	Accompanying notes are an integral part of these consolidated financial statements.					Accompanying notes are an integral part of these consolidated financial statements.


	January 1, 2020
	Pre-CECL Adoption		Impact of CECL Adoption		As Reported Under CECL
	(Dollars in thousands)
Assets:
Allowance for credit losses on debt securities:
Held-to-maturity	$	0	$	0	$	0
Available-for-sale	0		0		0
Allowance for credit losses on loans:
Investor loans secured by real estate	9,027		16,072		25,099
Business loans secured by real estate	5,492		27,572		33,064
Commercial loans	20,118		9,519		29,637
Retail loans	1,061		2,523		3,584
Deferred tax (liabilities) assets	(1,371)		18,346		16,975
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	3,279	$	8,285	$	11,564
Stockholders' equity:
Retained earnings	$	396,051	$	(45,625)	$	350,426


		Actual				Minimum Required for Capital Adequacy Purposes Inclusive of Capital Conservation Buffer			Minimum Required For Well Capitalized Requirement					Actual				Minimum Required for Capital Adequacy Purposes Inclusive of Capital Conservation Buffer				Minimum Required For Well Capitalized Requirement
(Dollars in thousands)													(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2021													December 31, 2021
Pacific Premier Bancorp, Inc. Consolidated													Pacific Premier Bancorp, Inc. Consolidated
Tier 1 Leverage Ratio													Tier 1 Leverage Ratio	$	2,016,538	10.08	%	$	799,963	4.00	%	N/A		N/A
Common Equity Tier 1 Capital Ratio													Common Equity Tier 1 Capital Ratio	2,016,538		12.11	%	1,165,837		7.00	%	N/A		N/A
Tier 1 Capital Ratio													Tier 1 Capital Ratio	2,016,538		12.11	%	1,415,659		8.50	%	N/A		N/A
Total Capital Ratio													Total Capital Ratio	2,434,680		14.62	%	1,748,755		10.50	%	N/A		N/A
		Amount		Ratio		Amount	Ratio		Amount		Ratio
Pacific Premier Bank													Pacific Premier Bank
Tier 1 Leverage Ratio													Tier 1 Leverage Ratio	$	2,324,626	11.62	%	$	800,009	4.00	%	$	1,000,012	5.00	%
Common Equity Tier 1 Capital Ratio													Common Equity Tier 1 Capital Ratio	2,324,626		13.96	%	1,165,449		7.00	%	1,082,202		6.50	%
Tier 1 Capital Ratio													Tier 1 Capital Ratio	2,324,626		13.96	%	1,415,188		8.50	%	1,331,941		8.00	%
Total Capital Ratio													Total Capital Ratio	2,448,201		14.70	%	1,748,173		10.50	%	1,664,927		10.00	%
		(Dollars in thousands)
December 31, 2020	December 31, 2020												December 31, 2020
Pacific Premier Bancorp, Inc. Consolidated	Pacific Premier Bancorp, Inc. Consolidated												Pacific Premier Bancorp, Inc. Consolidated
Tier 1 Leverage Ratio	Tier 1 Leverage Ratio	$	1,811,280	9.47	%	764,968	4.00	%	N/A		N/A		Tier 1 Leverage Ratio	$	1,811,280	9.47	%	$	764,968	4.00	%	N/A		N/A
Common Equity Tier 1 Capital Ratio	Common Equity Tier 1 Capital Ratio	1,811,280		12.04	%	1,053,063	7.00	%	N/A		N/A		Common Equity Tier 1 Capital Ratio	1,811,280		12.04	%	1,053,063		7.00	%	N/A		N/A
Tier 1 Capital Ratio	Tier 1 Capital Ratio	1,811,280		12.04	%	1,278,719	8.50	%	N/A		N/A		Tier 1 Capital Ratio	1,811,280		12.04	%	1,278,719		8.50	%	N/A		N/A
Total Capital Ratio	Total Capital Ratio	2,454,055		16.31	%	1,579,594	10.50	%	N/A		N/A		Total Capital Ratio	2,454,055		16.31	%	1,579,594		10.50	%	N/A		N/A

Pacific Premier Bank	Pacific Premier Bank												Pacific Premier Bank
Tier 1 Leverage Ratio	Tier 1 Leverage Ratio	$	2,081,916	10.89	%	764,863	4.00	%	$	956,079	5.00	%	Tier 1 Leverage Ratio	$	2,081,916	10.89	%	$	764,863	4.00	%	$	956,079	5.00	%
Common Equity Tier 1 Capital Ratio	Common Equity Tier 1 Capital Ratio	2,081,916		13.84	%	1,053,177	7.00	%	977,950		6.50	%	Common Equity Tier 1 Capital Ratio	2,081,916		13.84	%	1,053,177		7.00	%	977,950		6.50	%
Tier 1 Capital Ratio	Tier 1 Capital Ratio	2,081,916		13.84	%	1,278,858	8.50	%	1,203,631		8.00	%	Tier 1 Capital Ratio	2,081,916		13.84	%	1,278,858		8.50	%	1,203,631		8.00	%
Total Capital Ratio	Total Capital Ratio	2,390,954		15.89	%	1,579,766	10.50	%	1,504,539		10.00	%	Total Capital Ratio	2,390,954		15.89	%	1,579,766		10.50	%	1,504,539		10.00	%

December 31, 2019
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 Leverage Ratio		$	1,123,740	10.54	%	426,597	4.00	%	N/A		N/A
Common Equity Tier 1 Capital Ratio		1,116,185		11.35	%	688,508	7.00	%	N/A		N/A
Tier 1 Capital Ratio		1,123,740		11.42	%	836,045	8.50	%	N/A		N/A
Total Capital Ratio		1,357,904		13.81	%	1,032,762	10.50	%	N/A		N/A

Pacific Premier Bank
Tier 1 Leverage Ratio		$	1,321,494	12.39	%	426,592	4.00	%	$	533,240	5.00	%
Common Equity Tier 1 Capital Ratio		1,321,494		13.43	%	688,650	7.00	%	639,461		6.50	%
Tier 1 Capital Ratio		1,321,494		13.43	%	836,218	8.50	%	787,029		8.00	%
Total Capital Ratio		1,360,471		13.83	%	1,032,975	10.50	%	983,786		10.00	%


		December 31, 2020
		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
		(Dollars in thousands)
(Dollars in thousands)										(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
Investment securities available-for-sale:	Investment securities available-for-sale:									Investment securities available-for-sale:
December 31, 2021										December 31, 2021
U.S. Treasury	U.S. Treasury	$	30,153	$	2,380	$	0	$	32,533	U.S. Treasury	$	57,708	$	614	$	(456)	$	57,866
Agency	Agency	666,702		24,292		(608)		690,386		Agency	440,183		2,081		(10,129)		432,135
Corporate	Corporate	412,223		3,591		(506)		415,308		Corporate	451,621		6,096		(3,856)		453,861
Municipal bonds	Municipal bonds	1,412,012		37,260		(3,253)		1,446,019		Municipal bonds	1,061,985		32,209		(4,281)		1,089,913
Collateralized mortgage obligation		513,259		819		(712)		513,366
Collateralized mortgage obligations										Collateralized mortgage obligations	680,686		2,012		(6,055)		676,643
Mortgage-backed securities	Mortgage-backed securities	812,384		21,662		(543)		833,503		Mortgage-backed securities	1,586,406		3,220		(26,180)		1,563,446
Total investment securities available-for-sale	Total investment securities available-for-sale	3,846,733		90,004		(5,622)		3,931,115		Total investment securities available-for-sale	$	4,278,589	$	46,232	$	(50,957)	$	4,273,864
Investment securities held-to-maturity:

December 31, 2020										December 31, 2020
U.S. Treasury										U.S. Treasury	$	30,153	$	2,380	$	—	$	32,533
Agency										Agency	666,702		24,292		(608)		690,386
Corporate										Corporate	412,223		3,591		(506)		415,308
Municipal bonds										Municipal bonds	1,412,012		37,260		(3,253)		1,446,019
Collateralized mortgage obligations										Collateralized mortgage obligations	513,259		819		(712)		513,366
Mortgage-backed securities	Mortgage-backed securities	22,124		1,281		0		23,405		Mortgage-backed securities	812,384		21,662		(543)		833,503
Other		1,608		0		0		1,608
Total investment securities held-to-maturity		23,732		1,281		0		25,013
Total investment securities		$	3,870,465	$	91,285	$	(5,622)	$	3,956,128
Total investment securities available-for-sale										Total investment securities available-for-sale	$	3,846,733	$	90,004	$	(5,622)	$	3,931,115