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Pacific Premier Bancorp
PPBI
#4399
Rank
$2.37 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$24.49
Share price
0.00%
Change (1 day)
5.42%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Pacific Premier Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2025 Q2

Pacific Premier Bancorp - 10-Q quarterly report FY2025 Q2


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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 
FORM 10-Q
(Mark One)
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
OR 
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from _______ to _______ 
Commission File Number 0-22193
 image0a03.jpg
(Exact name of registrant as specified in its charter) 
Delaware33-0743196
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
17901 Von Karman Avenue, Suite 1200, Irvine, California 92614
(Address of principal executive offices and zip code)
(949) 864-8000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. (See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per sharePPBI
The Nasdaq Stock Market LLC
The number of shares outstanding of the registrant’s common stock as of July 25, 2025 was 96,991,440.


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
FOR THE QUARTER ENDED JUNE 30, 2025

Item 1 - Financial Statements
Consolidated Statements of Financial Condition (Unaudited)
3
Consolidated Statements of Income (Unaudited)
4
Consolidated Statements of Comprehensive Income (Unaudited)
5
Consolidated Statements of Stockholders’ Equity (Unaudited)
6
Consolidated Statements of Cash Flows (Unaudited)
8
Notes to Consolidated Financial Statements (Unaudited)
9
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
51
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
98
Item 4 - Controls and Procedures
100
101
Item 1 - Legal Proceedings
101
Item 1A - Risk Factors
101
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
101
Item 3 - Defaults Upon Senior Securities
101
Item 4 - Mine Safety Disclosures
101
Item 5 - Other Information
102
Item 6 - Exhibits
102
103
2

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(Dollars in thousands, except par value and share data)
June 30,
2025		December 31,
2024
ASSETS
Cash and due from banks$166,647 $117,955 
Interest-bearing deposits with financial institutions624,490 491,375 
Cash and cash equivalents791,137 609,330 
Interest-bearing time deposits with financial institutions1,253 1,246 
Investments securities held-to-maturity, at amortized cost, net of allowance for credit losses of $103 and $110 (fair value of $1,377,903 and $1,428,077) at June 30, 2025 and December 31, 2024, respectively
1,687,871 1,711,804 
Investment securities available-for-sale, at fair value1,581,731 1,683,215 
FHLB, FRB, and other stock97,717 97,539 
Loans held for sale, at lower of cost or fair value751 2,315 
Loans held for investment11,902,079 12,039,741 
Allowance for credit losses(170,663)(178,186)
Loans held for investment, net11,731,416 11,861,555 
Accrued interest receivable69,455 67,953 
Premises and equipment, net45,666 48,580 
Deferred income taxes, net93,450 100,295 
Bank owned life insurance490,770 484,952 
Intangible assets27,127 32,194 
Goodwill901,312 901,312 
Other assets263,516 301,295 
Total assets$17,783,172 $17,903,585 
LIABILITIES 
Deposit accounts: 
Noninterest-bearing checking$4,687,795 $4,617,013 
Interest-bearing: 
Checking2,814,687 2,898,810 
Money market/savings5,035,658 4,837,929 
Retail certificates of deposit1,758,846 1,809,818 
Wholesale/brokered certificates of deposit200,387 300,132 
Total interest-bearing9,809,578 9,846,689 
Total deposits14,497,373 14,463,702 
Subordinated debentures124,023 272,449 
Accrued expenses and other liabilities186,358 211,691 
Total liabilities14,807,754 14,947,842 
STOCKHOLDERS’ EQUITY 
Preferred stock, $0.01 par value; 1,000,000 authorized; no shares issued and outstanding
— — 
Common stock, $0.01 par value; 150,000,000 shares authorized at June 30, 2025 and December 31, 2024; 97,019,910 shares and 96,441,667 shares issued and outstanding, respectively
946 942 
Additional paid-in capital2,400,552 2,395,339 
Retained earnings639,189 635,268 
Accumulated other comprehensive loss(65,269)(75,806)
Total stockholders’ equity2,975,418 2,955,743 
Total liabilities and stockholders’ equity$17,783,172 $17,903,585 
Accompanying notes are an integral part of these consolidated financial statements.
3

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months EndedSix Months Ended
 June 30,June 30,June 30,June 30,
(Dollars in thousands, except share data)
2025202420252024
INTEREST INCOME
Loans$150,419 $167,547 $298,949 $340,522 
Investment securities and other interest-earning assets38,762 40,507 77,567 80,963 
Total interest income189,181 208,054 376,516 421,485 
INTEREST EXPENSE  
Deposits58,376 64,229 117,949 123,735 
FHLB advances and other borrowings2 2,330 4 6,567 
Subordinated debentures4,048 5,101 8,441 9,662 
Total interest expense62,426 71,660 126,394 139,964 
Net interest income before provision for credit losses126,755 136,394 250,122 281,521 
Provision for credit losses(2,078)1,265 (5,796)5,117 
Net interest income after provision for credit losses128,833 135,129 255,918 276,404 
NONINTEREST INCOME  
Loan servicing income472 510 919 1,039 
Service charges on deposit accounts2,578 2,710 5,207 5,398 
Other service fee income283 309 572 645 
Debit card interchange fee income935 925 1,769 1,690 
Earnings on bank owned life insurance4,341 4,218 10,113 8,377 
Net gain from sales of loans23 65 113 65 
Trust custodial account fees8,815 8,950 19,122 19,592 
Escrow and exchange fees774 702 1,446 1,398 
Other (loss) income
(656)(167)(231)5,792 
Total noninterest income17,565 18,222 39,030 43,996 
NONINTEREST EXPENSE  
Compensation and benefits53,268 53,140 106,080 107,270 
Premises and occupancy8,471 10,480 18,187 21,287 
Data processing7,806 7,754 15,782 15,265 
Other real estate owned operations, net— — — 46 
FDIC insurance premiums1,947 1,873 3,943 4,502 
Legal and professional services2,223 1,078 7,084 5,221 
Marketing expense905 1,724 1,841 3,282 
Office expense1,006 1,077 2,105 2,170 
Loan expense829 840 1,610 1,610 
Deposit expense13,644 12,289 26,540 24,954 
Merger-related expense6,712 — 6,712 — 
Amortization of intangible assets2,501 2,763 5,067 5,599 
Other expense5,064 4,549 9,717 8,994 
Total noninterest expense104,376 97,567 204,668 200,200 
Net income before income taxes42,022 55,784 90,280 120,200 
Income tax expense9,961 13,879 22,198 31,270 
Net income$32,061 $41,905 $68,082 $88,930 
EARNINGS PER SHARE  
Basic$0.33 $0.43 $0.70 $0.92 
Diluted0.33 0.43 0.70 0.92 
WEIGHTED AVERAGE SHARES OUTSTANDING  
Basic95,096,632 94,628,201 94,931,672 94,489,230 
Diluted95,132,789 94,716,205 94,968,160 94,597,559 

Accompanying notes are an integral part of these consolidated financial statements.
4

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months EndedSix Months Ended
 June 30,June 30,June 30,June 30,
(Dollars in thousands)2025202420252024
Net income$32,061 $41,905 $68,082 $88,930 
Other comprehensive income, net of tax:
Unrealized gain on securities available-for-sale, net of income taxes (1)
97 2,983 5,414 4,373 
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity, net of income taxes (2)
2,646 2,600 5,123 5,119 
Other comprehensive income, net of tax
2,743 5,583 10,537 9,492 
Comprehensive income, net of tax
$34,804 $47,488 $78,619 $98,422 
______________________________
(1) Income tax expense of the unrealized gain on securities was $38,000 and $1.2 million for the three months ended June 30, 2025 and 2024, respectively, and $2.1 million and $1.7 million for the six months ended June 30, 2025 and 2024, respectively.
(2) Income tax expense on the amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity included in net income was $1.0 million and $1.0 million for the three months ended June 30, 2025 and 2024, respectively, and $2.0 million and $2.0 million for the six months ended June 30, 2025 and 2024, respectively.

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

5

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2025
(Unaudited)

(Dollars in thousands, except share data)Common Stock
Shares		Common StockAdditional Paid-in CapitalAccumulated Retained
Earnings		Accumulated Other Comprehensive LossTotal Stockholders’ Equity
Balance at December 31, 202496,441,667 $942 $2,395,339 $635,268 $(75,806)$2,955,743 
Net income— — — 68,082 — 68,082 
Other comprehensive income— — — — 10,537 10,537 
Cash dividends declared ($0.66 per common share)
— — — (63,850)— (63,850)
Dividend equivalents declared ($0.66 per restricted stock unit)
— — 311 (311)— — 
Share-based compensation expense— — 9,906 — — 9,906 
Issuance of restricted stock, net855,050 4 (4)— — — 
Restricted stock surrendered and canceled(279,807)— (5,046)— — (5,046)
Exercise of stock options3,000 — 46 — — 46 
Balance at June 30, 202597,019,910 $946 $2,400,552 $639,189 $(65,269)$2,975,418 
Balance at March 31, 202597,069,001 $946 $2,394,834 $639,321 $(68,012)$2,967,089 
Net income— — — 32,061 — 32,061 
Other comprehensive income— — — — 2,743 2,743 
Cash dividends declared ($0.33 per common share)
— — — (32,029)— (32,029)
Dividend equivalents declared ($0.33 per restricted stock unit)
— — 164 (164)— — 
Share-based compensation expense— — 5,690 — — 5,690 
Issuance of restricted stock, net1,000 — — — — — 
Restricted stock surrendered and canceled(50,091)— (136)— — (136)
Exercise of stock options— — — — — — 
Balance at June 30, 202597,019,910 $946 $2,400,552 $639,189 $(65,269)$2,975,418 
6


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2024
(Unaudited)

(Dollars in thousands, except share data)Common Stock
Shares		Common StockAdditional Paid-in CapitalAccumulated Retained
Earnings		Accumulated Other Comprehensive LossTotal Stockholders’ Equity
Balance at December 31, 202395,860,092 $938 $2,377,131 $604,137 $(99,625)$2,882,581 
Net income— — — 88,930 — 88,930 
Other comprehensive income— — — — 9,492 9,492 
Cash dividends declared ($0.66 per common share)
— — — (63,458)— (63,458)
Dividend equivalents declared ($0.66 per restricted stock unit)
— — 268 (268)— — 
Share-based compensation expense— — 10,884 — — 10,884 
Issuance of restricted stock, net806,001 3 (3)— — — 
Restricted stock surrendered and canceled(243,472)— (4,852)— — (4,852)
Exercise of stock options11,426 — 187 — — 187 
Balance at June 30, 202496,434,047 $941 $2,383,615 $629,341 $(90,133)$2,923,764 
Balance at March 31, 202496,459,966 $941 $2,378,171 $619,405 $(95,716)$2,902,801 
Net income— — 41,905 — 41,905 
Other comprehensive income— — — 5,583 5,583 
Cash dividends declared ($0.33 per common share)
— — (31,823)— (31,823)
Dividend equivalents declared ($0.33 per restricted stock unit)
— — 146 (146)— — 
Share-based compensation expense— — 5,434 — — 5,434 
Issuance of restricted stock, net19,500 — — — — — 
Restricted stock surrendered and canceled(46,585)— (161)— — (161)
Exercise of stock options1,166 — 25 — — 25 
Balance at June 30, 202496,434,047 $941 $2,383,615 $629,341 $(90,133)$2,923,764 


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


7

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended
 June 30,June 30,
(Dollars in thousands)20252024
Cash flows from operating activities:  
Net income$68,082 $88,930 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization expense5,345 6,097 
Provision for credit losses(5,796)5,117 
Share-based compensation expense9,906 10,884 
Loss on sales and disposals of premises and equipment51 6 
Loss on sale or write down of other real estate owned— 28 
Net (accretion) of discounts/premium on securities(2,119)(6,403)
Net (accretion) of discounts/premiums for acquired loans and deferred loan fees/costs(3,706)(6,411)
Loss (Gain) on debt extinguishment1,315 (5,067)
(Gain) on sales of loans(113)(65)
Deferred income tax expense2,712 1,234 
Income from bank owned life insurance, net(8,614)(6,977)
Amortization of intangible assets5,067 5,599 
Origination of loans held for sale, net of principal payments received(1,390)(1,006)
Proceeds from the sales of loans held for sale3,227 1,280 
Net change in accrued expenses and other liabilities(24,730)(16,502)
Net change in accrued interest receivable and other assets28,626 46,745 
Net cash provided by operating activities77,863 123,489 
Cash flows from investing activities:  
Net (increase) in interest-bearing time deposits with financial institutions(7)(1)
Proceeds from sales of other real estate owned— 209 
Loan payments and (originations), net434,413 734,144 
Proceeds from sales of loans classified as loans held for investment773 55,625 
Purchase of loans held for investment(286,919)— 
Proceeds from prepayments and maturities of securities held-to-maturity26,498 22,032 
Purchase of securities available-for-sale(320,289)(564,079)
Proceeds from prepayments and maturities of securities available-for-sale436,004 425,294 
Proceeds from the sales of premises and equipment— 2 
Proceeds from surrender of bank owned life insurance2,799 352 
Purchase of premises and equipment(2,482)(1,566)
Net change in FHLB, FRB, and other stock(126)2,017 
Funding of Community Reinvestment Act (“CRA”) investments, net(1,541)(3,146)
Net cash provided by investing activities289,123 670,883 
Cash flows from financing activities:  
Net change in deposit accounts$33,671 $(367,972)
Repayments of long-term borrowings— (394,933)
Repayments of subordinated debentures(150,000)— 
Cash dividends paid(63,850)(63,458)
Proceeds from exercise of stock options46 187 
Restricted stock surrendered and canceled(5,046)(4,852)
Net cash (used in) financing activities(185,179)(831,028)
Net change in cash and cash equivalents181,807 (36,656)
Cash and cash equivalents, beginning of period609,330 936,473 
Cash and cash equivalents, end of period$791,137 $899,817 
Supplemental cash flow disclosures:  
Interest paid$129,655 $141,280 
Income taxes (refunded) paid, net(4,183)(3,470)
Noncash investing activities during the period:
Transfers from loans held for investment to loans held for sale735 55,974 
Recognition of operating lease right-of-use assets(187)(4,357)
Recognition of operating lease liabilities175 4,131 
Receivable on unsettled security maturity— 25,000 
Due on unsettled security purchases— (49,513)


Accompanying notes are an integral part of these consolidated financial statements.
8

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2025
(Unaudited)

Note 1 – Basis of Presentation
 
The consolidated financial statements include the accounts of Pacific Premier Bancorp, Inc. (the “Corporation”) and its wholly owned subsidiaries, including Pacific Premier Bank, National Association, (the “Bank”) (collectively, the “Company,” “we,” “our,” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation.
 
In the opinion of management, the unaudited consolidated financial statements reflect all normal recurring adjustments and accruals that are necessary for a fair presentation of the statement of financial position and the results of operations for the interim periods presented. The results of operations for the six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for any other interim period or the full year ending December 31, 2025.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”).
 
The Company consolidates voting entities in which the Company has control through voting interests or entities through which the Company has a controlling financial interest in a variable interest entity (“VIE”). The Company evaluates its interests in these entities to determine whether they meet the definition of a VIE and whether the Company is required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holds could potentially be significant to the VIE, the Company considers both qualitative and quantitative factors regarding the nature, size, and form of the Company's involvement with the VIE. See Note 13 – Variable Interest Entities for additional information.


9

Note 2 – Recently Issued Accounting Pronouncements
 
Recent Accounting Guidance Not Yet Effective

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This Update addresses requests from financial statement users for more detailed information concerning a public business entity’s expenses, such as those related to purchases of inventory, employee compensation costs, depreciation, amortization, and depletion costs. The incremental disclosures are intended to assist financial statement users by providing a better understanding of an entity’s expenses and to enable investors to better assess an entity’s current and future performance. This Update also requires entities to disclose the total amount of selling expenses and to provide the entity’s definition of what constitutes “selling expenses” in annual financial statement disclosures. Further, this Update requires a qualitative description of the amounts remaining in relevant expense captions that have not been separately disaggregated. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The amendments in this Update may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of this Update.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The amendments in this Update address investor requests for more transparency and decision usefulness about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid. The amendments in this Update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company has evaluated the provisions of this Update and does not believe they will have a material impact on the Company’s consolidated financial statements.


Note 3 – Significant Accounting Policies

Our accounting policies are described in Note 1 - Description of Business and Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2024 Form 10-K. As of June 30, 2025, there were no significant changes to accounting policies from those disclosed in our audited consolidated financial statements included in our 2024 Form 10-K.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Actual results could differ from those estimates.

10

Note 4 – Investment Securities
 
The amortized cost and estimated fair value of available-for-sale (“AFS”) investment securities were as follows:
(Dollars in thousands)Amortized
 Cost		Gross Unrealized
Gain		Gross Unrealized
Loss		Estimated
Fair Value
AFS investment securities:
June 30, 2025    
U.S. Treasury$1,093,655 $1,763 $(417)$1,095,001 
Agency928 — (23)905 
Corporate383,165 228 (10,578)372,815 
Collateralized mortgage obligations113,611 — (601)113,010 
Total AFS investment securities$1,591,359 $1,991 $(11,619)$1,581,731 
December 31, 2024
U.S. Treasury$1,166,474 $2,192 $(2,581)$1,166,085 
Agency1,148 — (40)1,108 
Corporate408,256 421 (16,419)392,258 
Collateralized mortgage obligations124,502 4 (742)123,764 
Total AFS investment securities$1,700,380 $2,617 $(19,782)$1,683,215 

The carrying amount and estimated fair value of held-to-maturity (“HTM”) investment securities were as follows:
(Dollars in thousands)Amortized
 Cost		Allowance for Credit LossesNet Carrying AmountGross Unrecognized
Gain		Gross Unrecognized
Loss		Estimated
Fair Value
HTM investment securities:
June 30, 2025
Municipal bonds$1,143,058 $(103)$1,142,955 $— $(273,668)$869,287 
Collateralized mortgage obligations295,445 — 295,445 4,060 (8,063)291,442 
Mortgage-backed securities233,355 — 233,355 178 (32,475)201,058 
Other16,116 — 16,116 — — 16,116 
Total HTM investment securities$1,687,974 $(103)$1,687,871 $4,238 $(314,206)$1,377,903 
December 31, 2024
Municipal bonds$1,144,862 $(110)$1,144,752 $— $(242,298)$902,454 
Collateralized mortgage obligations309,653 — 309,653 3,886 (8,718)304,821 
Mortgage-backed securities241,223 — 241,223 67 (36,664)204,626 
Other16,176 — 16,176 — — 16,176 
Total HTM investment securities$1,711,914 $(110)$1,711,804 $3,953 $(287,680)$1,428,077 

Investment securities with carrying values of $3.04 billion and $3.16 billion as of June 30, 2025 and December 31, 2024, respectively, were pledged to other borrowings, to secure public deposits, and for other purposes as required or permitted by law, of which $2.85 billion and $2.97 billion as of June 30, 2025 and December 31, 2024, respectively, were pledged to the Federal Reserve's discount window to increase the Company’s access to funding and provide liquidity.
11

Unrealized Gains and Losses

Unrealized gains and losses on AFS investment securities, net of tax, are recognized in stockholders’ equity as accumulated other comprehensive income or loss, net of tax. At June 30, 2025, the Company had a net unrealized loss on AFS investment securities of $9.6 million, or $6.9 million net of tax in accumulated other comprehensive loss, compared to a net unrealized loss of $17.2 million, or $12.3 million net of tax in accumulated other comprehensive loss, at December 31, 2024.

For investment securities transferred from AFS to HTM, the net after-tax unrealized gains and losses at the date of transfer continue to be reported in stockholders’ equity as accumulated other comprehensive loss and are amortized over the remaining lives of the securities with an offsetting entry to interest income as an adjustment of yield in a manner consistent with the amortization of a premium or discount. At June 30, 2025, the unrealized loss on investment securities transferred from AFS to HTM was $81.3 million, or $58.4 million net of tax. At December 31, 2024, the unrealized loss on investment securities transferred from AFS to HTM was $88.4 million, or $63.5 million net of tax.
    
The table below summarizes the number, fair value, and gross unrealized holding losses of the Company’s AFS investment securities in an unrealized loss position for which an allowance for credit losses (the “ACL”) has not been recorded as of the dates indicated, aggregated by investment category and length of time in a continuous loss position.
 Less than 12 Months12 Months or LongerTotal
(Dollars in thousands)NumberFair
Value		Gross
Unrealized
Losses		NumberFair
Value		Gross
Unrealized
Losses		NumberFair
Value		Gross
Unrealized
Losses
AFS investment securities:
June 30, 2025
U.S. Treasury22 $547,178 $(417)— $— $— 22 $547,178 $(417)
Agency— — — 4 905 (23)4 905 (23)
Corporate7 61,542 (42)23 203,113 (10,536)30 264,655 (10,578)
Collateralized mortgage obligations2 7,536 (12)24 105,474 (589)26 113,010 (601)
Total AFS investment securities31 $616,256 $(471)51 $309,492 $(11,148)82 $925,748 $(11,619)
December 31, 2024
U.S. Treasury21 $519,211 $(2,581)— $— $— 21 $519,211 $(2,581)
Agency— — — 4 1,108 (40)4 1,108 (40)
Corporate1 9,007 (4)25 227,250 (16,415)26 236,257 (16,419)
Collateralized mortgage obligations2 11,161 (37)23 108,783 (705)25 119,944 (742)
Total AFS investment securities24 $539,379 $(2,622)52 $337,141 $(17,160)76 $876,520 $(19,782)

Allowance for Credit Losses on Investment Securities

The Company reviews individual securities classified as AFS to determine whether unrealized losses are deemed credit related or due to other factors such as changes in interest rates and general market conditions. An ACL on AFS investment securities is recorded when unrealized losses have been deemed, through the Company’s qualitative assessment, to be credit related. Non-credit related unrealized losses on AFS investment securities, which may be attributed to changes in interest rates and other market-related factors, are not recorded through an ACL. Such declines are recorded as an adjustment to accumulated other comprehensive loss, net of tax. In the event the Company is required to sell or has the intent to sell an AFS 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.

12

The ACL for HTM investment securities is estimated on a collective basis, based on shared risk characteristics, and is determined at the individual security level when the Company deems a security to no longer possess shared risk characteristics. Credit losses on HTM investment securities are representative of the amount needed to reduce the amortized cost basis to reflect the net amount expected to be collected.

The Company determines credit losses on both AFS and HTM 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 AFS 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.

For additional information concerning the ACL on investment securities, refer to Note 1 - Description of Business and Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2024 Form 10-K

The Company had no ACL for AFS investment securities at June 30, 2025 and December 31, 2024. The Company performed a qualitative assessment of these investments as of June 30, 2025 and determined that unrealized losses during the second quarter of 2025 were the result of general market conditions, including changes in interest rates, and does not believe the declines in fair value were credit related. As of June 30, 2025, the Company had not recorded credit losses on AFS securities that were in an unrealized loss position due to the high credit quality of the investments, with investment grade ratings, and many of them issued by U.S. government agencies. As of June 30, 2025, 76% of our AFS securities were U.S. Treasury, U.S. government agency, and U.S. government-sponsored enterprise securities. The fair value of corporate bank debt securities continued to improve during the six months ended June 30, 2025 as the spreads on the bank debt continued to tighten with overall signs of stability in the banking industry and interest rate movement during the period. Additionally, the Company continues to receive contractual principal and interest payments in a timely manner. It is more likely than not that the Company will not be required to sell AFS securities prior to their anticipated recoveries, and at this time the Company does not intend to sell these securities. There was no provision for credit losses recognized for AFS investment securities during the six months ended June 30, 2025 and 2024.

At June 30, 2025 and December 31, 2024, the Company had an ACL of $103,000 and $110,000, respectively, for HTM investment securities classified as municipal bonds. The following table presents a rollforward by major security type of the ACL on the Company's HTM debt securities as of and for the periods indicated:
(Dollars in thousands)Beginning ACL Balance
Provision for Credit Losses
Ending ACL Balance
Three Months Ended June 30, 2025
HTM investment securities:
Municipal bonds$97 $6 $103 

Three Months Ended June 30, 2024
HTM investment securities:
Municipal bonds$115 $14 $129 
(Dollars in thousands)Beginning ACL Balance
Provision for Credit Losses
Ending ACL Balance
Six Months Ended June 30, 2025
HTM investment securities:
Municipal bonds$110 $(7)$103 
Six Months Ended June 30, 2024
HTM investment securities:
Municipal bonds$126 $3 $129 
13

At June 30, 2025 and December 31, 2024, there were no AFS or HTM securities on nonaccrual status. At June 30, 2025 and December 31, 2024, there were no securities purchased with deterioration in credit quality since their origination.

Contractual Maturities

The amortized cost and estimated fair value of investment securities at June 30, 2025, by contractual maturity, are shown in the table below.
Due in One Year
or Less		Due after One Year
through Five Years		Due after Five Years
through Ten Years		Due after
Ten Years		Total
(Dollars in thousands)Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
AFS investment securities:          
U.S. Treasury$772,231 $772,600 $321,424 $322,401 $— $— $— $— $1,093,655 $1,095,001 
Agency— — 585 572 — — 343 333 928 905 
Corporate— — 215,224 214,328 167,941 158,487 — — 383,165 372,815 
Collateralized mortgage obligations3,844 3,835 62,795 62,559 13,846 13,750 33,126 32,866 113,611 113,010 
Total AFS investment securities776,075 776,435 600,028 599,860 181,787 172,237 33,469 33,199 1,591,359 1,581,731 
HTM investment securities:
Municipal bonds— — 38,940 37,369 43,068 38,673 1,061,050 793,245 1,143,058 869,287 
Collateralized mortgage obligations— — 22 22 — — 295,423 291,420 295,445 291,442 
Mortgage-backed securities— — 3,917 4,009 5,064 5,111 224,374 191,938 233,355 201,058 
Other— — — — — — 16,116 16,116 16,116 16,116 
Total HTM investment securities— — 42,879 41,400 48,132 43,784 1,596,963 1,292,719 1,687,974 1,377,903 
Total investment securities$776,075 $776,435 $642,907 $641,260 $229,919 $216,021 $1,630,432 $1,325,918 $3,279,333 $2,959,634 

Note 5 – Loans Held for Investment
 
The Company’s loan portfolio is segmented according to loans that share similar attributes and risk characteristics.

Investor loans secured by real estate includes commercial real estate (“CRE”) non-owner-occupied, multifamily, construction, and land, as well as Small Business Administration (“SBA”) loans secured by investor 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 (“C&I”), franchise loans non-real estate secured, and SBA loans non-real estate secured.

14

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

The following table presents the composition of the loan portfolio for the periods indicated:
June 30,December 31,
(Dollars in thousands)20252024
Investor loans secured by real estate
CRE non-owner-occupied$2,084,781 $2,131,112 
Multifamily5,255,040 5,326,009 
Construction and land302,781 379,143 
SBA secured by real estate27,405 28,777 
Total investor loans secured by real estate7,670,007 7,865,041 
Business loans secured by real estate
CRE owner-occupied1,918,031 1,995,144 
Franchise real estate secured227,080 255,694 
SBA secured by real estate39,263 43,978 
Total business loans secured by real estate2,184,374 2,294,816 
Commercial loans
Commercial and industrial1,643,977 1,486,340 
Franchise non-real estate secured180,708 213,357 
SBA non-real estate secured7,472 8,086 
Total commercial loans1,832,157 1,707,783 
Retail loans
Single family residential224,483 186,739 
Consumer1,658 1,804 
Total retail loans226,141 188,543 
Loans held for investment before basis adjustment (1)
11,912,679 12,056,183 
Basis adjustment associated with fair value hedge (2)
(10,600)(16,442)
Loans held for investment11,902,079 12,039,741 
Allowance for credit losses for loans held for investment(170,663)(178,186)
Loans held for investment, net$11,731,416 $11,861,555 
Total unfunded loan commitments$1,723,901 $1,532,623 
Loans held for sale, at lower of cost or fair value$751 $2,315 
______________________________
(1) Includes unamortized net purchase premiums of $11.2 million and $9.1 million, net deferred origination (fees) costs of $(103,000) and $1.1 million, and unaccreted fair value net purchase discounts of $29.5 million and $33.2 million as of June 30, 2025 and December 31, 2024, respectively.
(2) Represents the basis adjustment associated with the application of hedge accounting on certain loans. The basis adjustment will be allocated to the amortized cost of associated loans within the closed portfolio if the hedge is discontinued. Refer to Note 11 – Derivative Instruments for additional information.

The Company generally originates SBA loans with the intent to sell the guaranteed portion of the 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 or participation interests in order to manage concentrations, maximize interest income, change risk profiles, improve returns, and generate liquidity.
15

Loans Serviced for Others and Loan Securitization

The Company generally retains the servicing rights of the guaranteed portion of SBA loans sold, for which the Company initially records servicing assets at fair value within its other assets category. Servicing assets are subsequently measured using the amortization method and amortized to noninterest income. At June 30, 2025 and December 31, 2024, the servicing assets totaled $824,000 and $1.0 million, respectively, and were included in other assets on the Company’s consolidated statements of financial condition. Servicing 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. At June 30, 2025 and December 31, 2024, the Company determined that no valuation allowance was necessary.
    
In connection with the acquisition of Opus Bank (“Opus”), the Company acquired Federal Home Loan Mortgage Corporation (“Freddie Mac”) guaranteed structured pass-through certificates, which were issued as a result of Opus’s securitization sale of $509 million in originated multifamily loans through a Freddie Mac-sponsored transaction in December 2016. 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.

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 the Company’s exposure to the reimbursement agreement with Freddie Mac was $274,000 as of June 30, 2025 and December 31, 2024.

Loans sold and serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balances of loans and participations serviced for others were $280.2 million at June 30, 2025 and $307.3 million at December 31, 2024, respectively. Included in those totals are multifamily loans transferred through securitization with Freddie Mac of $33.8 million and $37.4 million at June 30, 2025 and December 31, 2024, respectively, and SBA participations serviced for others totaling $191.6 million and $212.5 million at June 30, 2025 and December 31, 2024, respectively.

16

Concentration of Credit Risk
 
As of June 30, 2025, 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 multifamily, CRE non-owner-occupied, CRE owner-occupied, and C&I business loans. The 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 to meet approved concentration levels.

During the fourth quarter of 2024, the Bank converted to a national banking association, and as such all loans and extensions of credit made by the Bank are subject to the legal lending limits for national banks. Under applicable laws and regulations, the Bank may not make loans to one borrower in excess of 15% of the Bank’s capital and surplus, plus an additional 10% of the Bank’s capital and surplus, if the amount that exceeds the Bank’s 15% general limit is fully secured by readily marketable collateral. At June 30, 2025, these loans-to-one borrower limitations result in a dollar limitation of $378.8 million for the 15% general limit and a maximum dollar limitation of $631.4 million for the 25% combined limit. In order to manage concentration risk, the Bank maintains an internal lending limit well below these statutory maximums. At June 30, 2025, the Bank’s largest aggregate outstanding balance of loans to one borrower was $160.4 million comprised of multifamily loans.
 
Credit Quality and Credit Risk Management
 
The Company’s credit quality and credit risk is managed in two 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 at least annually by the Bank Board. The Bank’s underwriters ensure all key risk factors are analyzed, with 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 consideration 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 six-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 estimating credit losses inherent in the portfolio. Risk grades are reviewed regularly with the Company’s Credit and Portfolio Review Committee, and the portfolio management and risk grading process is reviewed on an ongoing basis by both an independent loan review function and periodic internal audits, as well as by regulatory agencies during scheduled examinations.
 
17

The following provides brief definitions for risk grades assigned to loans in the portfolio:
 
•Pass assets carry an acceptable level of credit quality that contains no well-defined deficiencies or weaknesses.
•Special Mention assets do not currently expose the Bank to a sufficient risk to warrant classification in one of the adverse categories, but possess correctable deficiencies or potential weaknesses deserving management’s close attention.
•Substandard assets are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Other real estate owned (“OREO”) acquired through foreclosure are also classified as substandard assets.
•Doubtful credits have all the weaknesses inherent in substandard credits, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
•Loss assets are those that are considered uncollectible and of such little value that their continuance as assets is not warranted. Amounts classified as loss are promptly charged off.

The Bank’s portfolio managers also manage loan performance risks, collections, workouts, bankruptcies, and foreclosures. A special assets 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. Collateral generally consists of accounts receivable, inventory, fixed assets, real estate properties, and cash. 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 accordance with our credit policy, in order to have the most current indication of fair value of the underlying collateral securing the loan. If the loan no longer possesses risk characteristics similar to other loans of a similar type in the loan portfolio, then the loan is individually evaluated to determine an appropriate ACL for the loan. 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. If an individually evaluated loan is not considered collateral dependent, the associated ACL is determined through the use of a discounted cash flow analysis.



18

The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination, as well as the gross charge-offs on a year-to-date basis by year of origination as of June 30, 2025:
Term Loans by Vintage
(Dollars in thousands)20252024202320222021PriorRevolvingRevolving Converted to Term During the PeriodTotal
June 30, 2025
Investor loans secured by real estate
CRE non-owner-occupied
Pass$128,145 $50,398 $29,842 $435,813 $479,954 $926,971 $— $— $2,051,123 
Special mention— — — — — 6,835 — — 6,835 
Substandard— 13,118 — 11,170 — 2,535 — — 26,823 
Multifamily
Pass180,023 111,730 161,954 1,105,238 1,856,604 1,826,948 — — 5,242,497 
Special mention— 207 — — 2,682 9,654 — — 12,543 
Construction and land
Pass30,310 84,454 45,697 86,925 17,134 2,576 — — 267,096 
Special mention9,439 — — 25,850 396 — — — 35,685 
SBA secured by real estate
Pass— — — 5,289 132 13,159 — — 18,580 
Special mention— — — — — 2,379 — — 2,379 
Substandard— — — 1,037 — 5,409 — — 6,446 
Total investor loans secured by real estate347,917 259,907 237,493 1,671,322 2,356,902 2,796,466 — — 7,670,007 
Year-to-date gross charge-offs
— — — — — — — — — 
Business loans secured by real estate
CRE owner-occupied
Pass75,715 44,979 15,692 445,853 540,023 695,594 — — 1,817,856 
Special mention— — — 33,987 25,810 7,756 — — 67,553 
Substandard— — — — 819 31,803 — — 32,622 
Franchise real estate secured
Pass3,604 2,470 8,378 36,272 80,665 81,318 — — 212,707 
Special mention— — — — 4,925 7,924 — — 12,849 
Substandard— — — — — 1,524 — — 1,524 
SBA secured by real estate
Pass19 704 106 9,169 6,467 19,533 — — 35,998 
Substandard— — — — 309 2,956 — — 3,265 
Total loans secured by business real estate79,338 48,153 24,176 525,281 659,018 848,408 — — 2,184,374 
Year-to-date gross charge-offs
— — — — — — — — — 
Commercial loans
Commercial and industrial
Pass305,827 385,189 27,889 111,369 111,471 220,707 450,976 1,176 1,614,604 
Special mention— 740 2,735 — 1,076 125 8,841 182 13,699 
Substandard— — 20 7,896 1,881 475 2,069 448 12,789 
Doubtful
— — — 2,885 — — — — 2,885 
Franchise non-real estate secured
Pass$2,450 $1,155 $5,583 $53,208 $66,169 $50,405 $— $— $178,970 
Special mention— — — — 178 — — — 178 
Substandard— 1,106 — — — 454 — — 1,560 
19

Term Loans by Vintage
(Dollars in thousands)20252024202320222021PriorRevolvingRevolving Converted to Term During the PeriodTotal
June 30, 2025
SBA non-real estate secured
Pass461 923 239 2,952 309 1,509 — — 6,393 
Substandard— — — 943 — 136 — — 1,079 
Total commercial loans308,738 389,113 36,466 179,253 181,084 273,811 461,886 1,806 1,832,157 
Year-to-date gross charge-offs
— 274 70 165 — 22 229 — 760 
Retail loans
Single family residential
Pass40,165 110,013 9 — — 34,381 39,788 — 224,356 
Substandard— — — — — 127 — — 127 
Consumer loans
Pass78 91 — — — 342 1,147 — 1,658 
Total retail loans40,243 110,104 9 — — 34,850 40,935 — 226,141 
Year-to-date gross charge-offs
10 6 1 2 — 13 — — 32 
Loans held for investment before basis adjustment (1)
$776,236 $807,277 $298,144 $2,375,856 $3,197,004 $3,953,535 $502,821 $1,806 $11,912,679 
Total year-to-date gross charge-offs
$10 $280 $71 $167 $— $35 $229 $— $792 
______________________________
(1) Excludes the basis adjustment of $10.6 million to the carrying amount of certain loans included in fair value hedging relationships. Refer to Note 11 – Derivative Instruments for additional information.

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, 2024:
Term Loans by Vintage
(Dollars in thousands)20242023202220212020PriorRevolvingRevolving Converted to Term During the PeriodTotal
December 31, 2024
Investor loans secured by real estate
CRE non-owner-occupied
Pass$61,326 $30,284 $448,638 $491,594 $160,984 $900,867 $— $— $2,093,693 
Special mention— — — 2,918 — 1,531 — — 4,449 
Substandard13,563 — 11,167 — 5,740 2,500 — — 32,970 
Multifamily
Pass120,793 168,040 1,136,648 1,931,238 669,154 1,272,416 — — 5,298,289 
Special mention— — — 2,053 14,052 11,615 — — 27,720 
Construction and land
Pass79,235 47,024 216,604 21,063 2,224 3,185 — — 369,335 
Special mention— — 9,398 410 — — — — 9,808 
SBA secured by real estate
Pass$— $— $6,366 $— $493 $17,189 $— $— $24,048 
Substandard— — — 131 — 4,598 — — 4,729 
Total investor loans secured by real estate274,917 245,348 1,828,821 2,449,407 852,647 2,213,901 — — 7,865,041 
Year-to-date gross charge-offs
$2,304 $— $28 $29 $11,539 $1,651 $— $— $15,551 
20

Term Loans by Vintage
(Dollars in thousands)20242023202220212020PriorRevolvingRevolving Converted to Term During the PeriodTotal
December 31, 2024
Business loans secured by real estate
CRE owner-occupied
Pass54,983 20,800 505,611 578,642 209,526 546,759 — — 1,916,321 
Special mention— — 2,663 24,673 1,884 9,169 — — 38,389 
Substandard— — — 832 — 39,602 — — 40,434 
Franchise real estate secured
Pass2,501 9,622 36,991 98,416 15,397 78,083 — — 241,010 
Special mention— — — 5,027 8,102 1,555 — — 14,684 
SBA secured by real estate
Pass741 108 9,699 7,007 1,205 22,101 — — 40,861 
Substandard— — — — — 3,117 — — 3,117 
Total loans secured by business real estate58,225 30,530 554,964 714,597 236,114 700,386 — — 2,294,816 
Year-to-date gross charge-offs
— 93 3,345 581 1,152 1,024 — — 6,195 
Commercial loans
Commercial and industrial
Pass436,794 34,576 122,900 130,428 32,337 210,544 484,411 3,926 1,455,916 
Special mention533 407 — — 160 — 11,408 330 12,838 
Substandard— 842 9,192 2,439 3 540 1,685 — 14,701 
Doubtful and loss— — 2,885 — — — — — 2,885 
Franchise non-real estate secured
Pass1,325 6,770 56,825 77,541 8,907 54,069 — — 205,437 
Special mention— — — 190 — 512 — — 702 
Substandard1,142 — — — — 6,076 — — 7,218 
SBA non-real estate secured
Pass944 248 4,176 322 — 2,201 — — 7,891 
Substandard— — — — 125 70 — — 195 
Total commercial loans440,738 42,843 195,978 210,920 41,532 274,012 497,504 4,256 1,707,783 
Year-to-date gross charge-offs
— 470 370 290 41 234 2,539 — 3,944 
Retail loans
Single family residential
Pass116,317 10 — — 158 35,923 34,331 — 186,739 
Consumer loans
Pass104 — — — 1 374 1,325 — 1,804 
Total retail loans116,421 10 — — 159 36,297 35,656 — 188,543 
Year-to-date gross charge-offs
$10 $2 $7 $1 $— $876 $— $— $896 
Loans held for investment before basis adjustment (1)
$890,301 $318,731 $2,579,763 $3,374,924 $1,130,452 $3,224,596 $533,160 $4,256 $12,056,183 
Total year-to-date gross charge-offs
$2,314 $565 $3,750 $901 $12,732 $3,785 $2,539 $— $26,586 
______________________________
(1) Excludes the basis adjustment of $16.4 million to the carrying amount of certain loans included in fair value hedging relationships. Refer to Note 11 – Derivative Instruments for additional information.
21

The following tables stratify the loans held for investment portfolio by delinquency as of the periods indicated:
Days Past Due(2)
(Dollars in thousands)Current30-5960-8990+Total
June 30, 2025
Investor loans secured by real estate
CRE non-owner-occupied$2,084,781 $— $— $— $2,084,781 
Multifamily5,255,040 — — — 5,255,040 
Construction and land302,781 — — — 302,781 
SBA secured by real estate27,405 — — — 27,405 
Total investor loans secured by real estate7,670,007 — — — 7,670,007 
Business loans secured by real estate
CRE owner-occupied1,918,031 — — — 1,918,031 
Franchise real estate secured227,080 — — — 227,080 
SBA secured by real estate39,263 — — — 39,263 
Total business loans secured by real estate2,184,374 — — — 2,184,374 
Commercial loans
Commercial and industrial1,642,337 300 99 1,241 1,643,977 
Franchise non-real estate secured180,708 — — — 180,708 
SBA not secured by real estate7,454 — — 18 7,472 
Total commercial loans1,830,499 300 99 1,259 1,832,157 
Retail loans
Single family residential224,094 389 — — 224,483 
Consumer loans1,658 — — — 1,658 
Total retail loans225,752 389 — — 226,141 
Loans held for investment before basis adjustment (1)
$11,910,632 $689 $99 $1,259 $11,912,679 
December 31, 2024
Investor loans secured by real estate
CRE non-owner-occupied$2,131,112 $— $— $— $2,131,112 
Multifamily5,326,009 — — — 5,326,009 
Construction and land379,143 — — — 379,143 
SBA secured by real estate28,777 — — — 28,777 
Total investor loans secured by real estate7,865,041 — — — 7,865,041 
Business loans secured by real estate
CRE owner-occupied1,995,144 — — — 1,995,144 
Franchise real estate secured255,694 — — — 255,694 
SBA secured by real estate43,978 — — — 43,978 
Total business loans secured by real estate2,294,816 — — — 2,294,816 
Commercial loans
Commercial and industrial1,483,926 824 349 1,241 1,486,340 
Franchise non-real estate secured213,357 — — — 213,357 
SBA not secured by real estate8,017 49 — 20 8,086 
Total commercial loans1,705,300 873 349 1,261 1,707,783 
Retail loans
Single family residential186,603 136 — — 186,739 
Consumer loans1,804 — — — 1,804 
Total retail loans188,407 136 — — 188,543 
Loans held for investment before basis adjustment (1)
$12,053,564 $1,009 $349 $1,261 $12,056,183 
______________________________
(1) Excludes the basis adjustment of $10.6 million and $16.4 million to the carrying amount of certain loans included in fair value hedging relationships as of June 30, 2025 and December 31, 2024, respectively. Refer to Note 11 – Derivative Instruments for additional information.
(2) Nonaccrual loans are included in this aging analysis based on the loan’s past due status.

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Individually Evaluated Loans

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 portfolio. These loans are typically identified from a substandard or worse internal risk grade, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, can be modified loans made to borrowers experiencing financial difficulty, 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 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 individually evaluated loans based on changes in the estimated expected 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 June 30, 2025, $26.3 million of loans were individually evaluated with a $484,000 ACL attributed to such loans. At June 30, 2025, $16.6 million of individually evaluated loans were evaluated based on the underlying value of the collateral, and $9.7 million were evaluated using a discounted cash flow approach. All individually evaluated loans were on nonaccrual status at June 30, 2025.

As of December 31, 2024, $28.0 million of loans were individually evaluated with no ACL attributed to such loans. At December 31, 2024, $17.1 million of the individually evaluated loans were evaluated based on the underlying value of the collateral, and $10.9 million were evaluated using a discounted cash flow approach. All individually evaluated loans were on nonaccrual status at December 31, 2024.

Purchased Credit Deteriorated Loans
 
The Company analyzed acquired loans for more-than-insignificant deterioration in credit quality since their origination. Such loans are classified as purchased credit deteriorated (“PCD”) loans. Please see Note 1 - Description of Business and Summary of Significant Accounting Policies of our audited consolidated financial statements included in our 2024 Form 10-K for more information concerning the accounting for PCD loans. The Company had PCD loans of $234.9 million and $275.4 million at June 30, 2025 and December 31, 2024, respectively.

Acquired loans classified as PCD are recorded at an initial amortized cost, which is comprised of the purchase price of the loans (or initial fair value) and the initial ACL determined for the loans, which is added to the purchase price, as well as any resulting discount or premium related to factors other than credit. The Company accounts for interest income on PCD loans using the interest method, whereby any purchase discounts or premiums are accreted or amortized into interest income as an adjustment of the loan’s yield. Subsequent to acquisition, the ACL for PCD loans is measured in accordance with the Company’s ACL methodology. Please also see Note 6 – Allowance for Credit Losses for more information concerning the Company’s ACL methodology.


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Nonaccrual 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 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 Company typically does not accrue interest on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest regardless of the length of past due status. However, when such loans are well-secured and in the process of collection, the Company may continue with the accrual of interest. The Company had loans on nonaccrual status of $26.3 million at June 30, 2025 and $28.0 million at December 31, 2024.

The Company did not record income from the receipt of cash payments related to nonaccruing loans during the three and six months ended June 30, 2025 and 2024. The Company had no loans 90 days or more past due and still accruing at June 30, 2025 and December 31, 2024.

The following tables provide a summary of nonaccrual loans as of the dates indicated:
Nonaccrual Loans (1)
Collateral Dependent LoansNon-Collateral Dependent LoansTotal Nonaccrual LoansNonaccrual Loans with No ACL
(Dollars in thousands)BalanceACLBalanceACL
June 30, 2025
Investor loans secured by real estate
CRE non-owner-occupied$14,805 $— $— $— $14,805 $14,805 
SBA secured by real estate380 — — — 380 380 
Total investor loans secured by real estate15,185 — — — 15,185 15,185 
Commercial loans
Commercial and industrial1,241 484 9,730 — 10,971 10,071 
SBA non-real estate secured18 — — — 18 18 
Total commercial loans1,259 484 9,730 — 10,989 10,089 
Retail loans
Single family residential127 — — — 127 127 
Total retail loans127 — — — 127 127 
Total nonaccrual loans$16,571 $484 $9,730 $— $26,301 $25,401 
December 31, 2024
Investor loans secured by real estate
CRE non-owner-occupied$15,423 $— $— $— $15,423 $15,423 
SBA secured by real estate409 — — — 409 409 
Total investor loans secured by real estate15,832 — — — 15,832 15,832 
Commercial loans
Commercial and industrial1,241 — 10,938 — 12,179 12,179 
SBA non-real estate secured20 — — — 20 20 
Total commercial loans1,261 — 10,938 — 12,199 12,199 
Total nonaccrual loans$17,093 $— $10,938 $— $28,031 $28,031 
______________________________
(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent; otherwise, the ACL for collateral dependent nonaccrual loans is determined based on the estimated fair value of the underlying collateral.

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Residential Real Estate Loans In Process of Foreclosure

The Company had no consumer mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in process as of June 30, 2025 and December 31, 2024.

Modified Loans to Troubled Borrowers
    
On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures, which introduces new reporting requirements for modifications of loans to borrowers experiencing financial difficulty. The Company also refers to these loans as modified loans to troubled borrowers (“MLTB”). An MLTB arises from a modification made to a loan in order to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. GAAP requires that certain types of modifications be reported, which consist of the following: (i) principal forgiveness, (ii) interest rate reduction, (iii) other-than-insignificant payment delay, (iv) term extension, or any combination of the foregoing. The ACL for an MLTB is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In those instances, the ACL for an MLTB is determined through individual evaluation.

MLTBs were $9.7 million at June 30, 2025 and $13.6 million at December 31, 2024.

There were two syndicated C&I participation loans to one borrower totaling $9.7 million modified as an MLTB during the three and six months ended June 30, 2025, compared to one MLTB loan of $16.3 million during the three and six months ended June 30, 2024.

The following table shows the amortized cost of the MLTB by class and type of modification, as well as the percentage of the loans modified to the total class of loans at and during the periods indicated:
Three and Six Months Ended
June 30, 2025
Combination of
Other-than-Insignificant Payment Delay
and
Term Extension
(Dollars in thousands)Balance
Percent of Total Class of Loans
Commercial loans
Commercial and industrial9,730 0.59 %
Total commercial loans$9,730 

Three and Six Months Ended
June 30, 2024
Combination of
Other-than-Insignificant Payment Delay
and
Term Extension
(Dollars in thousands)BalancePercent of Total Class of Loans
Investor loans secured by real estate
CRE non-owner-occupied$16,296 0.73 %
Total investor loans secured by real estate$16,296 
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The following table describes the financial effect of the loan modification made for the borrower experiencing financial difficulty during the periods indicated:
Three and Six Months Ended
June 30, 2025
Combination of
Other-than-Insignificant Payment Delay and
Term Extension
Investor loans secured by real estate
Commercial and industrial
15 month term extension and 9 months of interest only payments

Three and Six Months Ended
June 30, 2024
Combination of
Other-than-Insignificant Payment Delay and
Term Extension
Investor loans secured by real estate
CRE non-owner-occupied
Consolidated 3 loans with varying maturities into a single loan that extended the weighted average maturity by 6 months
and
2 years of interest only payments

During the three and six months ended June 30, 2025 and 2024, there were no MLTBs that had a payment default and had been modified within the 12 months preceding the payment default (90 days or more past due).

The following table depicts the performance of the loans that were modified in the past 12 months as of the dates indicated:
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
June 30, 2025
Commercial loans
Commercial and industrial$9,730 $— $— $— $9,730 
Total commercial loans$9,730 $— $— $— $9,730 
June 30, 2024
Investor loans secured by real estate
CRE non-owner-occupied
$16,296 $— $— $— $16,296 
Total investor loans secured by real estate$16,296 $— $— $— $16,296 
Commercial loans
Commercial and industrial$11,727 $— $— $— $11,727 
Total commercial loans$11,727 $— $— $— $11,727 
Total$28,023 $— $— $— $28,023 


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Collateral Dependent Loans

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. The ACL for each loan 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. Additionally, due to the likelihood of foreclosure and that repayment of the loan is expected to come from the eventual sale of the underlying collateral, management analyzes the underlying collateral at least quarterly, with changes in the estimated fair value of the collateral and/or estimated costs to sell reflected in the lifetime ACL for the loan and balances deemed uncollectible are promptly charged-off. 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 tables summarize collateral dependent loans by collateral type as of the dates indicated:
(Dollars in thousands)Office PropertiesHotel PropertiesResidential PropertiesOther CRE PropertiesBusiness AssetsTotal
June 30, 2025
Investor loan secured by real estate
CRE non-owner-occupied$13,118 $— $— $1,687 $— $14,805 
SBA secured by real estate— 380 — — — 380 
Total investor loans secured by real estate13,118 380 — 1,687 — 15,185 
Commercial loans
Commercial and industrial— — — — 1,241 1,241 
SBA non-real estate secured— — — — 18 18 
Total commercial loans— — — — 1,259 1,259 
Retail loans
Single family residential— — 127 — — 127 
Total retail loans— — 127 — — 127 
Total collateral dependent loans$13,118 $380 $127 $1,687 $1,259 $16,571 

December 31, 2024
Investor loan secured by real estate
CRE non-owner-occupied$13,563 $— $— $1,860 $— $15,423 
SBA secured by real estate— 409 — — — 409 
Total investor loans secured by real estate13,563 409 — 1,860 — 15,832 
Commercial loans
Commercial and industrial— — — — 1,241 1,241 
SBA non-real estate secured— — — — 20 20 
Total commercial loans— — — — 1,261 1,261 
Total collateral dependent loans$13,563 $409 $— $1,860 $1,261 $17,093 
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Note 6 – Allowance for Credit Losses
 
The Company maintains an ACL for loans and unfunded loan commitments in accordance with ASC 326 - Financial Instruments - Credit Losses. ASC 326 requires the Company to initially recognize estimates for lifetime credit losses on loans and unfunded loan commitments at the time of origination or acquisition. The recognition of credit losses represents the Company’s best estimate of lifetime expected credit losses, given the facts and circumstances associated with a particular loan or group of loans with similar risk characteristics. Determining the ACL involves the use of significant management judgement and estimates, which are subject to change based on management’s ongoing assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the Company’s ACL model. The Company uses a discounted cash flow model when determining estimates for the ACL for commercial real estate loans and commercial loans, which comprise the majority of the loan portfolio, and uses a historical loss rate model for retail loans. The Company also utilizes proxy loan data in its ACL model where the Company’s own historical data is not sufficiently available.

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 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”). The PD and LGD are heavily influenced by changes in economic forecasts and key variables employed in the model as well as our portfolio performance and composition over a reasonable and supportable period. The Company’s ACL methodology for 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 CRE 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. The EAD 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; adjusted for any purchase premiums, or discounts, and deferred fees and costs associated with 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 expected to be collected. The ACL for credit facilities is determined by discounting estimates for cash flows not expected to be collected.

Probability of Default

The PD for investor loans secured by real estate 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 economic 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 (“LTV”) ratios, debt service coverage ratio, loan size, loan vintage, and property types.


28

The PD for business loans secured by real estate and commercial loans is based on an internally developed PD rating scale that assigns PDs based on the Company’s internal credit risk grades for 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 our business profile. As credit risk grades change for these loans, the PD assigned to them also changes. As with investor loans secured by real estate, the PD for business loans secured by real estate and commercial loans is also impacted by current and expected economic conditions, including U.S. GDP growth and U.S. unemployment rate forecasts.

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

Loss Given Default

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: LTV ratio, estimated time to resolution, property size, and current and estimated future market price changes for underlying collateral. LGDs are highly dependent upon LTV ratios, and incorporate estimates for the expenses associated with managing the loans 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 pricing, GDP growth rate, unemployment rates, and the Consumer Price Index. 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, as well as external factors, including GDP growth rate and unemployment rates. LGDs are then applied to each loan in the commercial 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.

Historical Loss Rates for Retail Loans
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.


29

Economic Forecasts

In order to develop reasonable and supportable forecasts of future conditions, the Company estimates 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 a loan. The Company uses macroeconomic scenarios from an independent third party, which are based on past events, current conditions, and the likelihood of future events occurring. These scenarios are typically comprised of: a base-case scenario, an upside scenario, representing slightly better economic conditions than currently experienced and, a downside scenario, representing recessionary conditions. Management evaluates appropriateness of economic 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 likelihood that the economy would perform better than each scenario, 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. The Company’s ACL model at June 30, 2025 includes assumptions concerning the interest rate environment, general uncertainty concerning future economic conditions, and the potential for recessionary conditions.

The Company currently forecasts PDs and LGDs based on economic scenarios over a two-year period, which we believe is a reasonable and supportable period. Beyond this point, PDs and LGDs revert to their 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 the Company does not expect to collect for each loan.

It is important to note that the Company’s ACL model relies on multiple economic and model variables, which are used in several economic scenarios. Although no one 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. These key economic variables include forecasted changes in the U.S. unemployment rate, U.S. real GDP growth, CRE prices, and interest rates.

Qualitative Adjustments

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, considers the need for qualitative adjustments to the ACL on a quarterly basis. 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, 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.


30

Qualitative adjustments primarily relate to certain segments of the loan portfolio deemed by management to be of potentially higher-risk profiles or other factors where management believes the quantitative component of the Company’s ACL model may not be fully reflective of levels deemed adequate in the judgement of management. Certain qualitative adjustments also relate to heightened uncertainty as to future macroeconomic conditions and the related impact on certain loan segments. Management reviews the need for an appropriate level of qualitative adjustments on a quarterly basis, and as such, the amount and allocation of qualitative adjustments may change in future periods.

The following tables provide the allocation of the ACL for loans held for investment as well as the activity in the ACL attributed to various segments in the loan portfolio as of, and for the periods indicated:

Three Months Ended June 30, 2025
(Dollars in thousands) Beginning ACL Balance  Charge-offs  Recoveries Provision for Credit Losses
 Ending ACL Balance
Investor loans secured by real estate
CRE non-owner-occupied
$26,866 $— $— $254 $27,120 
Multifamily51,375 — — 2,603 53,978 
Construction and land3,777 — — (210)3,567 
SBA secured by real estate1,678 — — (551)1,127 
Business loans secured by real estate
CRE owner-occupied30,521 — — (2,600)27,921 
Franchise real estate secured4,663 — — (651)4,012 
SBA secured by real estate3,864 — — (415)3,449 
Commercial loans
Commercial and industrial41,902 (280)298 (1,821)40,099 
Franchise non-real estate secured8,077 (22)— (1,451)6,604 
SBA non-real estate secured461 — 2 (26)437 
Retail loans
Single family residential1,680 — 9 548 2,237 
Consumer loans103 (22)364 (333)112 
Totals$174,967 $(324)$673 $(4,653)$170,663 
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Six Months Ended June 30, 2025
 Beginning ACL Balance Charge-offs  Recoveries Provision for Credit Losses  Ending
ACL Balance
(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner occupied$26,408 $— $— $712 $27,120 
Multifamily53,305 — — 673 53,978 
Construction and land5,230 — — (1,663)3,567 
SBA secured by real estate1,722 — 30 (625)1,127 
Business loans secured by real estate
CRE owner-occupied31,794 — — (3,873)27,921 
Franchise real estate secured5,836 — — (1,824)4,012 
SBA secured by real estate3,831 — — (382)3,449 
Commercial loans
Commercial and industrial37,603 (738)1,073 2,161 40,099 
Franchise non-real estate secured10,794 (22)— (4,168)6,604 
SBA non-real estate secured359 — 8 70 437 
Retail loans
Single family residential1,193 — 9 1,035 2,237 
Consumer loans111 (32)364 (331)112 
Totals$178,186 $(792)$1,484 $(8,215)$170,663 

Three Months Ended June 30, 2024
(Dollars in thousands)Beginning ACL BalanceCharge-offsRecoveriesProvision for Credit LossesEnding
ACL Balance
Investor loans secured by real estate
CRE non-owner-occupied
$30,781 $(4,196)$1,500 $1,653 $29,738 
Multifamily58,411 (7,372)— 6,259 57,298 
Construction and land8,171 — — 2,633 10,804 
SBA secured by real estate2,184 (153)86 25 2,142 
Business loans secured by real estate
CRE owner-occupied28,760 — 121 (350)28,531 
Franchise real estate secured7,258 — — (464)6,794 
SBA secured by real estate4,288 — 1 (155)4,134 
Commercial loans
Commercial and industrial37,107 (968)148 (4,030)32,257 
Franchise non-real estate secured14,320 — 1,375 (4,565)11,130 
SBA non-real estate secured495 (6)3 (10)482 
Retail loans
Single family residential442 — 3 (46)399 
Consumer loans123 (835)— 806 94 
Totals$192,340 $(13,530)$3,237 $1,756 $183,803 
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Six Months Ended June 30, 2024
(Dollars in thousands)Beginning ACL BalanceCharge-offsRecoveriesProvision for Credit LossesEnding
ACL Balance
Investor loans secured by real estate
CRE non-owner-occupied
$31,030 $(5,123)$1,500 $2,331 $29,738 
Multifamily56,312 (7,372)5 8,353 57,298 
Construction and land9,314 — — 1,490 10,804 
SBA secured by real estate2,182 (406)86 280 2,142 
Business loans secured by real estate
CRE owner-occupied28,787 (4,452)184 4,012 28,531 
Franchise real estate secured7,499 (212)— (493)6,794 
SBA secured by real estate4,427 — 2 (295)4,134 
Commercial loans
Commercial and industrial36,692 (1,553)187 (3,069)32,257 
Franchise non-real estate secured15,131 (100)1,375 (5,276)11,130 
SBA non-real estate secured458 (6)5 25 482 
Retail loans
Single family residential505 — 3 (109)399 
Consumer loans134 (835)— 795 94 
Totals$192,471 $(20,059)$3,347 $8,044 $183,803 


The decrease in the ACL for loans held for investment during the three months ended June 30, 2025 of $4.3 million was reflective of a reversal of provision for credit losses of $4.7 million and net recoveries of $349,000.

During the three months ended June 30, 2025, the reversal of provision for credit losses was principally driven by provision reversals in the business loans secured by real estate and commercial loans segments, partially offset by provisions for credit losses in the investor loans secured by real estate and retail loans segments. The reversal of provision for credit losses in the business loans secured by real estate segment was principally driven by the impact of shorter duration as well as a decrease in loan balances. The reversal of provision for credit losses for loans in the commercial loans segment was largely attributed to shorter duration, economic forecast updates, as well as a decline in loan balances for SBA and franchise non-real estate secured loans. The provision for credit losses for the investor loans secured by real estate segment is largely attributed to a provision for multifamily loans, which was driven by economic forecast updates, partially offset by the impact of shorter duration. The provision for multifamily loans was partially offset by provision reversals for construction and land loans as well as SBA loans secured by real estate, which were driven by slightly lower loss rates for construction and land loans, and a change in qualitative adjustments during the period for SBA loans secured by real estate. The provision for credit losses for retail loans can be attributed in large part to the change in qualitative adjustments for single family residential loans during the period.

The decrease in the ACL for loans held for investment during the six months ended June 30, 2025 of $7.5 million was reflective of a reversal of provision for credit losses of $8.2 million and net recoveries of $692,000.

33

During the six months ended June 30, 2025, the reversal of provision for credit losses was principally driven by provision reversals in the business and investor loans secured by real estate and the commercial loans segments. The provision reversals in these segments were partially offset by a provision for credit losses in the retail loans segment. The reversal of provision for credit losses in the business loans secured by real estate segment is largely attributed to the impact of shorter duration as well as a decline in loan balances in that segment. The reversal of provision for credit losses in the commercial loans segment can be attributed to the impact of shorter duration, as well as a decline in loan balances for SBA and franchise non-real estate secured loans, partially offset by the provision for credit losses for commercial and industrial loans, which was primarily attributed to new originations and purchases of commercial and industrial loans. The reversal of provision for credit losses in the investor loans secured by real estate segment is largely attributed to the decline in loan balances for construction and land and SBA real estate secured loans. This was partially offset by provisions for credit losses for CRE non-owner occupied and multifamily loans, which was driven by economic forecast updates, partially offset by the impact of shorter duration. The provision for credit losses for retail loans was principally driven by a change in qualitative adjustments during the second quarter, as well as the purchase of jumbo single family residential loans with high credit quality during the first quarter. GAAP requires the Company to establish an ACL for purchased loans at the time of purchase.

The decrease in the ACL for loans held for investment during the three months ended June 30, 2024 of $8.5 million was reflective of $10.3 million in net charge-offs, partially offset by $1.8 million in provision for credit losses.

During the three months ended June 30, 2024, the provision for credit losses was principally driven by a $10.6 million provision for credit losses for investor loans secured by real estate. The provision for credit losses for loans in this segment was largely due to economic forecast updates on multifamily loans as well as the impact from the loan composition changes on construction and land loans, partially offset by improved asset quality for loans in this segment. The reversal of provision for credit losses for commercial loan totaled $8.6 million, and can be attributed largely to the declines in the balances of franchise non-real estate secured and C&I loans.

Charge-offs during the three months ended June 30, 2024 were largely due to $11.5 million in charge-offs related to the sale of a substandard multifamily loan and a substandard non-owner-occupied CRE loan during the second quarter of 2024.

The decrease in the ACL for loans held for investment during the six months ended June 30, 2024 of $8.7 million was reflective of $16.7 million in net charge-offs, partially offset by $8.0 million in provision for credit losses.

During the six months ended June 30, 2024, the provision for credit losses was largely attributed to the investor and business loans secured by real estate segments, partially offset by a reversal of provision for credit losses in the commercial loans segment. The provision for credit losses in the investor loans secured by real estate segment was attributed to economic forecast updates, with the largest impact on multifamily loans. The provision for credit losses in the business loans secured by real estate segment was attributed to the impact from changes in economic forecasts with the largest impact on CRE owner-occupied loans, partially offset by a decline in the loan balances in this segment, as well as favorable changes in asset quality. The reversal of provision for credit losses in the commercial loans segment was principally driven by a decline in the balance of those loans during the first six months of 2024.

Charge-offs during the six months ended June 30, 2024 were largely due to the charge-offs recorded during the second quarter of 2024, as well as $5.7 million in charge-offs associated with the sale of special mention and substandard CRE and franchise loans during the first quarter of 2024.

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Allowance for Credit Losses for Off-Balance Sheet Commitments

The Company maintains an ACL for off-balance sheet commitments related to unfunded loans and lines of credit, which is included in other liabilities of the consolidated statements of financial condition. The following table summarizes the activities in the ACL for off-balance sheet commitments for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,June 30,June 30,
(Dollars in thousands)2025202420252024
Beginning ACL balance$17,763 $16,839 $17,906 $19,264 
Provision for credit losses on off-balance sheet commitments2,569 (505)2,426 (2,930)
Ending ACL balance$20,332 $16,334 $20,332 $16,334 

The allowance for off-balance sheet commitments was $20.3 million at June 30, 2025 and $17.9 million at December 31, 2024. The provision for off-balance sheet commitments for the three and six months ended June 30, 2025 was largely attributable to an increase in the balance of unfunded loan commitments, partially offset by the impact of economic forecast updates.

The provision reversal for off-balance sheet commitments during the three months ended June 30, 2024 was largely attributable to slightly lower loss rates for C&I loans, partially offset by a slight increase in the balance of unfunded commitments during the quarter. The provision reversal for off-balance sheet commitments during the six months ended June 30, 2024 was attributed largely to overall lower levels of unfunded commitments during the period.

Note 7 – Goodwill and Other Intangible Assets

The Company had goodwill of $901.3 million at June 30, 2025 and December 31, 2024. The Company did not record any adjustments to goodwill during the three months ended June 30, 2025 and June 30, 2024.

The Company’s policy is to assess goodwill for impairment on an annual basis during the fourth quarter of each year, and more frequently if events or circumstances lead management to believe the value of goodwill may be impaired.

Other intangible assets with definite lives were $27.1 million at June 30, 2025, consisting of $25.5 million in core deposit intangibles and $1.6 million in customer relationship intangibles. At December 31, 2024, other intangibles assets were $32.2 million, consisting of $30.5 million in core deposit intangibles and $1.7 million in customer relationship intangibles. The following table summarizes the change in the balances of core deposit and customer relationship intangible assets, and the related accumulated amortization for the periods indicated below:
Three Months EndedSix Months Ended
June 30,June 30,June 30,June 30,
(Dollars in thousands)2025202420252024
Gross amount of intangible assets:
Beginning balance$145,212 $145,212 $145,212 $145,212 
Additions due to acquisitions— — — — 
Ending balance145,212 145,212 145,212 145,212 
Accumulated amortization:
Beginning balance(115,584)(104,763)(113,018)(101,927)
Amortization(2,501)(2,763)(5,067)(5,599)
Ending balance(118,085)(107,526)(118,085)(107,526)
Net intangible assets$27,127 $37,686 $27,127 $37,686 
35


The Company amortizes core deposit intangibles and customer relationship intangibles based on the projected useful lives of the related deposits in the case of core deposit intangibles, and over the projected useful lives of the related client relationships in the case of customer relationship intangibles. The amortization periods typically range from six to eleven years. The estimated aggregate amortization expense related to our core deposit and customer relationship intangible assets for each of the next five years succeeding December 31, 2024, in order from the present, is $10.0 million, $8.9 million, $7.2 million, $4.0 million, and $1.5 million. The Company’s core deposit and customer relationship intangibles are evaluated annually for impairment or more frequently if events and circumstances lead management to believe their value may not be recoverable. The Company is unaware of any events and/or circumstances that would indicate the value of customer relationship intangible assets are impaired as of June 30, 2025.

Note 8 – Subordinated Debentures

As of June 30, 2025, the Company had one series of subordinated notes with a carrying value of $124.0 million and a weighted interest rate of 7.14%, compared to two series of subordinated notes with an aggregate carrying value of $272.4 million and a weighted interest rate of 6.30% at December 31, 2024. The decrease of $148.4 million was due to the early redemption of $150.0 million in subordinated notes due 2030 in the current quarter.

The following table summarizes our outstanding subordinated debentures as of the dates indicated:
 Carrying Value
(Dollars in thousands)Stated MaturityCurrent Interest Rate
Principal Balance
June 30, 2025December 31, 2024
Subordinated notes
Subordinated notes due 2029, 4.875% per annum until May 15, 2024, 3-month term SOFR +2.762% thereafter
May 15, 20297.088 %125,000 124,023 123,896 
Subordinated notes due 2030, 5.375% per annum until June 15, 2025, 3-month term SOFR +5.17% thereafter
June 15, 2030— %150,000 — 148,553 
Total subordinated debentures$275,000 $124,023 $272,449 

In connection with the various issuances of subordinated notes, 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 and senior unsecured debt rating of A- and subordinated debt of BBB+ for the Bank. The Corporation’s and Bank’s ratings were reaffirmed in April 2025 by KBRA.

For additional information on the Company’s subordinated debentures, see “Note 13 — Subordinated Debentures” to the audited consolidated financial statements in the Company’s 2024 Form 10-K. 

For regulatory capital purposes, subordinated notes qualify as Tier 2 capital, subject to limitations. Per applicable Federal Reserve rules and regulations, the amount of the subordinated notes qualifying as Tier 2 regulatory capital is phased out by 20% of the original amount of the subordinated notes in each of the five years beginning on the fifth anniversary preceding the maturity date of the subordinated notes. The regulatory total capital ratios of the Company and the Bank continued to exceed regulatory minimums, inclusive of the fully phased-in capital conservation buffer.

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Note 9 – Earnings Per Share
 
The Company’s restricted stock awards contain non-forfeitable rights to dividends and therefore are considered participating securities. The Company calculates basic and diluted earnings per common share 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.

The following tables set forth the Corporation’s earnings per share calculations for the periods indicated:
 Three Months Ended
(Dollars in thousands, except per share data)June 30, 2025June 30, 2024
Basic
Net income $32,061 $41,905 
Less: dividends and undistributed earnings allocated to participating securities(650)(786)
Net income allocated to common stockholders$31,411 $41,119 
Weighted average common shares outstanding95,096,632 94,628,201 
Basic earnings per common share$0.33 $0.43 
Diluted
Net income allocated to common stockholders$31,411 $41,119 
Weighted average common shares outstanding95,096,632 94,628,201 
Dilutive effect of share-based compensation36,157 88,004 
Weighted average diluted common shares95,132,789 94,716,205 
Diluted earnings per common share$0.33 $0.43 
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 Six Months Ended
(Dollars in thousands, except per share data)June 30, 2025June 30, 2024
Basic
Net income $68,082 $88,930 
Less: dividends and undistributed earnings allocated to participating securities(1,302)(1,570)
Net income allocated to common stockholders$66,780 $87,360 
Weighted average common shares outstanding94,931,672 94,489,230 
Basic earnings per common share$0.70 $0.92 
Diluted
Net income allocated to common stockholders$66,780 $87,360 
Weighted average common shares outstanding94,931,672 94,489,230 
Dilutive effect of share-based compensation36,488 108,329 
Weighted average diluted common shares94,968,160 94,597,559 
Diluted earnings per common share$0.70 $0.92 

Shares or stock options are excluded from the computations of diluted earnings per share when their inclusion have an anti-dilutive effect. 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. For the three and six months ended June 30, 2025 there were 8,604 and 34,133 weighted average common shares that were anti-dilutive, respectively. For the three and six months ended June 30, 2024, there were 44,647 and 25,924 weighted average common shares that were anti-dilutive, respectively.
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Note 10 – Fair Value of Financial Instruments
 
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 - Financial Instruments, 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 ASC Topic 820 - Fair Value Measurement, 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:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, prepayment speeds, volatilities, etc.), or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market.

Level 3 - Valuation is generated from model-based techniques where one or more significant inputs are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of matrix pricing, discounted cash flow models, and similar techniques.
 
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. 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 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 be indicative of net realizable value or reflective of future fair values.

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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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following is a description of both the general and specific valuation methodologies used for certain instruments measured at fair value, as well as the general classification of these instruments pursuant to the fair value hierarchy.

AFS Investment Securities – Investment securities are generally valued based upon quotes obtained from independent third-party pricing services, which use evaluated pricing applications and model processes. Observable market inputs, such as, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data are considered as part of the evaluation. The inputs are related directly to the security being evaluated, or indirectly to a similarly situated security. Market assumptions and market data are utilized in the valuation models. The Company reviews the market prices provided by the third-party pricing service for reasonableness based on the Company’s understanding of the marketplace and credit issues related to the securities. The Company has not made any adjustments to the market quotes provided by them and, accordingly, the Company categorized these securities within Level 2 of the fair value hierarchy.

Equity Securities With Readily Determinable Fair Values – The Company’s equity securities with readily determinable fair values consist of investments in public companies and qualify for CRA purposes. The fair value is based on the closing price on nationally recognized securities exchanges at the end of each period and classified as Level 1 of the fair value hierarchy.
    
Interest Rate Swaps – The Company originates a variable rate loan and enters into a variable-to-fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back swap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against certain fixed-rate loans. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The fair value of these derivatives is based on a market standard discounted cash flow approach. The Company incorporates credit value adjustments on derivatives to properly reflect the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The Company has determined that the observable nature of the majority of inputs used in deriving the fair value of these derivative contracts fall within Level 2 of the fair value hierarchy, and the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the valuation of interest rate swaps is classified as Level 2 of the fair value hierarchy.

Foreign Exchange Contracts – The Company enters into foreign exchange contracts to accommodate the business needs of its customers. The Company also enters into offsetting contracts with institutional counterparties to mitigate the Company’s foreign exchange exposure with its customers, or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. The Company measures the fair value of foreign exchange contracts based on quoted prices for identical instruments in active markets, a Level 1 measurement.
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The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis at the dates indicated:
June 30, 2025
 Fair Value Measurement Using Total Fair Value
(Dollars in thousands)Level 1Level 2Level 3
Financial assets
AFS investment securities:    
U.S. Treasury$— $1,095,001 $— $1,095,001 
Agency— 905 — 905 
Corporate— 372,815 — 372,815 
Collateralized mortgage obligations— 113,010 — 113,010 
Total AFS investment securities$— $1,581,731 $— $1,581,731 
Equity securities$836 $— $— $836 
Derivative assets:
Foreign exchange contracts$3 $— $— $3 
Interest rate swaps (1)
— 3,939 — 3,939 
Total derivative assets$3 $3,939 $— $3,942 
Financial liabilities
Derivative liabilities:
Foreign exchange$1 $— $— $1 
Interest rate swaps— 8,534 — 8,534 
Total derivative liabilities$1 $8,534 $— $8,535 

December 31, 2024
 Fair Value Measurement UsingTotal Fair Value
(Dollars in thousands)Level 1Level 2Level 3
Financial assets
AFS investment securities:    
U.S. Treasury$— $1,166,085 $— $1,166,085 
Agency— 1,108 — 1,108 
Corporate— 392,258 — 392,258 
Collateralized mortgage obligations— 123,764 — 123,764 
Total AFS investment securities$— $1,683,215 $— $1,683,215 
Equity securities
$784 $— $— $784 
Derivative assets:
Foreign exchange contracts$6 $— $— $6 
Interest rate swaps (1)
— 5,638 — 5,638 
Total derivative assets$6 $5,638 $— $5,644 
Financial liabilities
Derivative liabilities:
Interest rate swaps$— $11,152 $— $11,152 
Total derivative liabilities$— $11,152 $— $11,152 
______________________________
(1) Represents amounts after the application of variation margin payments as settlements with central counterparties, where applicable. See Note 11 – Derivative Instruments for additional information.

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Individually Evaluated Loans – A loan is individually evaluated for expected credit losses when it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement and it does not share similar risk characteristics with other loans. Individually evaluated loans are measured at fair value when they are deemed collateral dependent. Fair value on such loans is measured based on the underlying collateral. Collateral generally consists of accounts receivable, inventory, fixed assets, real estate properties, and cash. The Company measures impairment on all individually evaluated loans for which it has reduced the principal balance to the value of the underlying collateral less the anticipated selling costs.

The fair value of individually evaluated collateral dependent loans were determined using Level 3 assumptions, and represents individually evaluated loans for which a specific reserve has been established or on which a write down has been taken. For real estate loans, generally, the Company obtains third party appraisals (or property valuations) and/or collateral audits in conjunction with internal analysis based on historical experience on its individually evaluated loans to determine fair value. In determining the net realizable value of the underlying collateral for individually evaluated loans, the Company then discounts the valuation to cover both market price fluctuations and selling costs, typically ranging from 7% to 10% of the collateral value, that the Company expects would be incurred in the event of foreclosure. In addition to the discounts taken, the Company’s calculation of net realizable value considered any other senior liens in place on the underlying collateral. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions, and management’s expertise and knowledge of the client and client’s business.

At June 30, 2025, 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 recorded the related reserves where applicable during the six months ended June 30, 2025.     

The following table presents our assets measured at fair value on a nonrecurring basis at the dates indicated.
(Dollars in thousands)Fair Value Measurement UsingTotal
Fair Value
June 30, 2025Level 1Level 2Level 3
Financial assets   
Collateral dependent loans$— $— $757 $757 
Total assets$— $— $757 $757 
December 31, 2024
Financial assets    
Collateral dependent loans$— $— $13,563 $13,563 
Total assets$— $— $13,563 $13,563 
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The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a nonrecurring basis at the dates indicated.
  Range
(Dollars in thousands)Fair ValueValuation Technique(s)Unobservable Input(s)MinMaxWeighted Average
June 30, 2025
Commercial loans
Commercial and industrial$757 Fair value of collateralCost to sell1.73%1.73%1.73%
Total individually evaluated loans757 
Total assets$757 
December 31, 2024
Investor loans secured by real estate
CRE non-owner-occupied$13,563 Fair value of collateralCost to sell10.00%10.00%10.00%
Total individually evaluated loans13,563 
Total assets
$13,563 

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Fair Values of Financial Instruments
    
The fair value estimates presented herein are based on pertinent information available to management as of the dates indicated, representing an exit price.
(Dollars in thousands)Carrying
Amount		Level 1Level 2Level 3Estimated
Fair Value
June 30, 2025
Assets     
Cash and cash equivalents$791,137 $791,137 $— $— $791,137 
Interest-bearing time deposits with financial institutions1,253 1,253 — — 1,253 
HTM investment securities1,687,871 — 1,377,903 — 1,377,903 
AFS investment securities1,581,731 — 1,581,731 — 1,581,731 
Equity securities836 836 — — 836 
Loans held for sale751 — 778 — 778 
Loans held for investment, net11,902,079 — — 11,518,745 11,518,745 
Derivative assets (1)
3,942 3 3,939 — 3,942 
Accrued interest receivable69,455 — 69,455 — 69,455 
Liabilities     
Deposit accounts$14,497,373 $— $14,504,834 $— $14,504,834 
Subordinated debentures124,023 — 123,248 — 123,248 
Derivative liabilities (1)
8,535 1 8,534 — 8,535 
Accrued interest payable8,332 — 8,332 — 8,332 

December 31, 2024
Assets     
Cash and cash equivalents$609,330 $609,330 $— $— $609,330 
Interest-bearing time deposits with financial institutions1,246 1,246 — — 1,246 
HTM investment securities1,711,804 — 1,428,077 — 1,428,077 
AFS investment securities1,683,215 — 1,683,215 — 1,683,215 
Equity securities
784 784 — — 784 
Loans held for sale2,315 — 2,425 — 2,425 
Loans held for investment, net12,039,741 — — 11,575,603 11,575,603 
Derivative assets (1)
5,644 6 5,638 — 5,644 
Accrued interest receivable67,953 — 67,953 — 67,953 
Liabilities     
Deposit accounts$14,463,702 $— $14,478,071 $— $14,478,071 
Subordinated debentures272,449 — 267,258 — 267,258 
Derivative liabilities (1)
11,152 — 11,152 — 11,152 
Accrued interest payable11,589 — 11,589 — 11,589 
______________________________
(1) Represents amounts after the application of variation margin payments as settlements with central counterparties, where applicable. See Note 11 – Derivative Instruments for additional information.

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Note 11 – Derivative Instruments

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.

Derivatives Designated as Hedging Instruments

Fair Value Hedges – The Company is exposed to changes in the fair value of fixed-rate assets due to changes in benchmark interest rates. The Company entered into pay-fixed and receive-floating interest rate swaps associated with certain fixed rate loans, primarily multifamily and commercial real estate loans, to manage its exposure to changes in fair value on these instruments attributable to changes in the designated SOFR benchmark interest rate. These interest rate swaps are designated as fair value hedges using the portfolio layer method. The Company receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts. The fair value hedges are recorded as components of other assets and other liabilities in the Company’s consolidated statements of financial condition. The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk, are recognized consistent with the classification of the hedged item in interest income in the Company’s consolidated statements of income.

During 2024, as part of its interest rate risk management, the Company voluntarily discontinued portfolio layer method fair value hedges with an aggregate notional amount of $450.0 million associated with closed pools of fixed rate loans. When a portfolio layer method fair value hedge is discontinued, the hedged item is no longer adjusted for changes in the fair value of the hedged risk, also referred to as the basis adjustment. The basis adjustment, as of the date the fair value hedge is discontinued, is allocated on a proportionate basis to the remaining loans that previously comprised the closed pool. The basis adjustment is subsequently amortized or accreted into interest income using the interest method over the remaining lives of the individual loans. Cash flows on derivatives designated as hedging instruments are classified in the statement of cash flows the same as the cash flows of the assets being hedged. At June 30, 2025 and December 31, 2024, interest rate swaps with an aggregate notional amount of $300.0 million and $300.0 million, respectively, were designated as fair value hedges.

The following amounts were recorded on the consolidated statement of financial condition related to cumulative basis adjustment for fair value hedges as of the dates indicated:

Line Item in the Statement of Financial Position in Which the Hedged Item is IncludedCarrying Amount of the Hedged Assets
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets(2)
(Dollars in thousands)June 30, 2025December 31, 2024June 30, 2025December 31, 2024
Loans held for investment (1)
$289,400 $283,558 $(10,026)$(15,815)
Total$289,400 $283,558 $(10,026)$(15,815)
______________________________
(1) These amounts were included in the amortized cost basis of closed portfolios of loans held for investment used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At June 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolios used in these hedging relationships was $930.4 million and $990.6 million, respectively, the cumulative basis adjustments associated with these hedging relationships was $(10.6) million and $(16.4) million, respectively, and the amounts of the designated hedged items were $300.0 million and $300.0 million, respectively.
(2) At June 30, 2025 and December 31, 2024, the balance included $574,000 and $628,000, respectively, hedging adjustment on discontinued hedging relationships.

Derivatives Not Designated as Hedging Instruments

Interest Rate Swap Contracts – From time to time, the Company enters into interest rate swap agreements with certain borrowers to assist them in mitigating their interest rate risk exposure associated with the loans they have with the Company. At the same time, the Company enters into identical offsetting interest rate swap agreements with another financial institution to mitigate the Company’s interest rate risk exposure associated with the swap agreements it enters into with its borrowers. The Company has over-the-counter derivative instruments and centrally-cleared derivative instruments with matched terms. The fair values of these agreements are determined through a third-party valuation model used by the Company’s swap advisory firm, which uses observable market data such as interest rates, prices of Eurodollar futures contracts, and market swap rates. The fair values of these swaps are recorded as components of other assets and other liabilities in the Company’s consolidated statement of financial condition. Changes in the fair value of these swaps, which occur due to changes in interest rates, are recorded in the Company’s statement of income as a component of noninterest income.
    
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.

Foreign Exchange Contracts – The Company offers foreign exchange spot and forward contracts as accommodations to its customers to purchase and/or sell foreign currencies at a contractual price. In conjunction with these products the Company also enters into offsetting contracts with institutional counterparties to mitigate the Company’s foreign exchange exposure with its customers, or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. These contracts allow the Company to offer its customers foreign exchange products while minimizing its exposure to foreign exchange rate fluctuations. These foreign exchange contracts are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities in the Company’s consolidated statements of financial condition. Changes in the fair value of these contracts are recorded in the Company’s consolidated statements of income as a component of noninterest income.

The net increases or decreases in derivatives not designated as hedging instruments are included in “Net change in accrued interest receivable and other assets” and “Net change in accrued expenses and other liabilities” within the statement of cash flows.

The following tables summarize the Company's derivative instruments included in “other assets” and “other liabilities” in the consolidated statements of financial condition as of the dates indicated:
June 30, 2025
Derivative AssetsDerivative Liabilities
(Dollars in thousands)NotionalFair ValueNotionalFair Value
Derivative instruments designated as hedging instruments:
Fair value hedge - interest rate swap contracts$300,000 $11,212 $— $— 
Total derivative designated as hedging instruments300,000 11,212 — — 
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts85 3 210 1 
Interest rate swaps contracts90,607 8,448 90,607 8,454 
Total derivative not designated as hedging instruments90,692 8,451 90,817 8,455 
Total derivatives$390,692 19,663 $90,817 8,455 
Netting adjustments - cleared positions (1)
15,721 (80)
Total derivatives in the Statement of Financial Condition$3,942 $8,535 
December 31, 2024
Derivative AssetsDerivative Liabilities
(Dollars in thousands)NotionalFair ValueNotionalFair Value
Derivative instruments designated as hedging instruments:
Fair value hedge - interest rate swap contracts$300,000 $17,108 $— $— 
Total derivative designated as hedging instruments300,000 17,108 — — 
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts361 6 — — 
Interest rate swaps contracts93,732 11,047 93,732 11,052 
Total derivative not designated as hedging instruments94,093 11,053 93,732 11,052 
Total derivatives$394,093 $28,161 $93,732 $11,052 
Netting adjustments - cleared positions (1)
22,517 (100)
Total derivatives in the Statement of Financial Condition$5,644 $11,152 
______________________________
(1) Netting adjustments represents the variation margin payments that are considered legal settlements of derivative exposure and applied to net the fair value of the respective derivative contracts in accordance with the applicable accounting guidance on the settle-to-market rule for cleared derivatives.

The following table presents the effect of fair value hedge accounting on the consolidated statements of income:
Three Months EndedSix Months Ended
(Dollars in thousands)Location of Gain (Loss) Recognized in Income on Derivative InstrumentsJune 30, 2025June 30, 2024June 30, 2025June 30, 2024
Gain (loss) on fair value hedging relationships:
Hedged itemsInterest Income$2,401 $4,123 $5,841 $1,350 
Derivatives designated as hedging instrumentsInterest Income180 3,175 (697)13,191 
The following table summarizes the effect of the derivatives not designated as hedging instruments in the consolidated statements of income.
(Dollars in thousands)Three Months EndedSix Months Ended
Derivatives Not Designated as Hedging Instruments:
Location of Gain Recognized in Income on Derivative Instruments
June 30, 2025June 30, 2024June 30, 2025June 30, 2024
Foreign exchange contractsOther income$226 $207 $451 $352 
Interest rate productsOther income— 1 — 3 
Total$226 $208 $451 $355 
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Note 12 – Balance Sheet Offsetting

Derivative financial instruments may be eligible for offset in the consolidated statements of financial condition, such as those subject to enforceable master netting arrangements or a similar agreement. Under these agreements, the Company has the right to net settle multiple contracts with the same counterparty. The Company offers an interest rate swap product to qualified customers, which are then paired with derivative contracts the Company enters into with a counterparty bank. While derivative contracts entered into with counterparty banks may be subject to enforceable master netting agreements, derivative contracts with customers may not be subject to enforceable master netting arrangements. With regard to derivative contracts not centrally cleared through a clearinghouse, regulations require collateral to be posted by the party with a net liability position. Parties to a centrally cleared over-the-counter derivative exchange daily payments that reflect the daily change in the value of the derivative. These payments are commonly referred to as variation margin and are treated as settlements of derivative exposure rather than as collateral. The gross amounts of derivative assets and liabilities for derivative contracts cleared through certain central clearing parties are reported at the fair value of the respective derivative contracts net of the variation margin payments, where applicable.

Financial instruments that are eligible for offset in the consolidated statements of financial condition as of the periods indicated are presented below:
Gross Amounts Recognized (1)
Gross Amounts Offset in the Consolidated Statements of Financial ConditionNet Amounts Presented in the Consolidated Statements of Financial ConditionGross Amounts Not Offset in the Consolidated
Statements of Financial Condition		Net Amount
(Dollars in thousands)
Financial Instruments (2)
Cash Collateral (3)
June 30, 2025
Derivative assets:
Interest rate swaps$3,939 $— $3,939 $— $(3,300)$639 
Total$3,939 $— $3,939 $— $(3,300)$639 
Derivative liabilities:
Interest rate swaps$8,534 $— $8,534 $— $— $8,534 
Total$8,534 $— $8,534 $— $— $8,534 
December 31, 2024
Derivative assets:
Interest rate swaps$5,638 $— $5,638 $— $(4,230)$1,408 
Total$5,638 $— $5,638 $— $(4,230)$1,408 
Derivative liabilities:
Interest rate swaps$11,152 $— $11,152 $— $— $11,152 
Total$11,152 $— $11,152 $— $— $11,152 
______________________________
(1) Represents amounts after the application of variation margin payments as settlements with central counterparties, where applicable.
(2) Represents the fair value of securities pledged with counterparty bank.
(3) Represents cash collateral received from or pledged with counterparty bank. Amounts are limited to the derivative asset or liability balance and, accordingly, do not include excess collateral, if any, received or pledged.

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Note 13 – Variable Interest Entities

The Company is involved with VIEs through its loan securitization activities and affordable housing investments that qualify for the low-income housing tax credit (“LIHTC”). The Company has determined that its interests in these entities meet the definition of variable interests.

As of June 30, 2025 and December 31, 2024, 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 statements of financial condition and maximum exposure to loss as of June 30, 2025 and December 31, 2024 that relate to variable interests in non-consolidated VIEs.

June 30, 2025December 31, 2024
(Dollars in thousands)Maximum LossAssetsLiabilitiesMaximum LossAssetsLiabilities
Multifamily loan securitization:
Investment securities (1)
$32,866 $32,866 $— $37,300 $37,300 $— 
Reimbursement obligation (2)
33,814 — 274 37,354 — 274 
Affordable housing partnership:
Other investments (3)
46,291 77,622 — 50,511 85,335 — 
Unfunded equity commitments (2)
— — 31,330 — — 34,824 
Total$112,971 $110,488 $31,604 $125,165 $122,635 $35,098 
______________________________
(1) Included in investment securities AFS on the consolidated statement of financial condition.
(2) Included in accrued expenses and other liabilities on the consolidated statement of financial condition.
(3) Included in other assets on the consolidated statement of financial condition.

Multifamily Loan Securitization

With respect to the securitization transaction with Freddie Mac discussed in Note 5 – Loans Held for Investment, the Company’s variable interests reside with the underlying Freddie Mac-issued guaranteed, structured pass-through certificates that were held as AFS investment securities at fair value as of June 30, 2025. Additionally, the Company has variable interests through a reimbursement agreement executed by Freddie Mac that obligates the Company to reimburse Freddie Mac for any defaulted contractual principal and interest payments identified after the ultimate resolution of the defaulted loans. Such reimbursement obligations are not to exceed 10% of the original principal amount of the loans comprising the securitization pool.

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 of the Company.


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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. As the total outstanding principal amount of the underlying loans decreased below the aforementioned reimbursement threshold, the maximum exposure declined to the total outstanding principal amount of the underlying loans of $33.8 million at June 30, 2025 and $37.4 million at December 31, 2024. Based upon our analysis of quantitative and qualitative data over the underlying loans included in the securitization pool, as of June 30, 2025 and December 31, 2024, our reserve for estimated losses with respect to the reimbursement obligation was $274,000.

Investments in Qualified Affordable Housing Partnerships

The Company has variable interests through its affordable housing partnership investments. These investments are fundamentally designed to provide a return through the generation of income tax credits and other income tax benefits. The Company has evaluated its involvement with the low-income housing projects and determined it does not have the ability to exercise significant influence over or participate in the decision-making activities related to the management of 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 preceding table summarizes the amount of tax credit investments held as assets, the amount of unfunded commitments recognized as liabilities, and the maximum exposure to loss as of June 30, 2025 and December 31, 2024, respectively. See Note 14 – Tax Equity Investments for additional information on equity investments that generate LIHTC and other income tax benefits for the Company.


Note 14 – Tax Equity Investments

The Company makes investments in the equity of certain limited partnerships or limited liability companies that typically qualify for credit under the Community Reinvestment Act. Certain of these equity investments are associated with affordable housing projects that generate LIHTC and other income tax benefits for the Company.

The Company typically accounts for tax equity investments using the proportional amortization method, if certain criteria are met. The election to account for tax equity investments using the proportional amortization method is done so on a tax credit program-by-tax credit program basis. Under the proportional amortization method, the Company amortizes the initial cost of the investment, which is inclusive of any commitments to make future equity contributions, in proportion to the income tax credits and other income tax benefits that are allocated to the Company over the period of the investment. The net benefits of these investments, which are comprised of income tax credits and operating loss income tax benefits, net of investment amortization, are recognized in the income statement as a component of income tax expense. At June 30, 2025 and December 31, 2024, the carrying value of these investments was $77.6 million and $85.3 million, respectively, and are included in other assets in the consolidated statements of financial position.

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As of June 30, 2025, the Company’s unfunded commitments associated with tax equity investments, which are comprised of investments in affordable housing partnerships, were estimated to be paid as follows:
(Dollars in thousands)Amount
Year Ending December 31,
2025$14,481 
202612,192 
20271,045 
2028653 
2029301 
Thereafter2,658 
Total unfunded commitments$31,330 

The following table presents income tax credits and other income tax benefits, as well as amortization expense, associated with investments in qualified affordable housing partnerships where the proportional amortization method of accounting has been applied for the periods indicated.
Three Months EndedSix Months Ended
June 30,June 30,June 30,June 30,
(Dollars in thousands)2025202420252024
Tax credit and other tax benefits recognized (1)
$4,727 $4,217 $9,453 $8,434 
Amortization of investments (1)
3,856 3,475 $7,713 $6,950 
______________________________
(1) Amounts for income tax credits and other income tax benefits, as well as amortization of investments, are included in income tax expense in the consolidated statements of income, and net change in accrued interest receivable and other assets on the consolidated statements of cash flows, for the periods presented above.

There was no non-income-tax-related activity associated with tax equity investments recorded outside of income tax expense for the three and six months ended June 30, 2025. During the three and six months ended June 30, 2024, non-income-tax-related income of $371,000 associated with a tax equity investment was included in other income in the consolidated statements of income as well as net change in accrued interest receivable and other assets on the consolidated statements of cash flows. There were no impairment losses recorded on tax equity investments during the three and six months ended June 30, 2025 and 2024.

Note 15 – Segment Reporting

The Company has identified two operating segments: Commercial and Specialty Banking and Pacific Premier Trust. Only Commercial and Specialty Banking meets the quantitative thresholds under GAAP for disclosure and Pacific Premier Trust’s activities are largely complementary to the broader suite of financial products and services the Company offers its banking clients. The Company has concluded that it is managed on a consolidated basis as one reportable segment, and the measure of profit and loss is net income.

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The Company primarily conducts commercial and specialty banking activities with operations in the Western Region of the United States, with branches in Arizona, California, Nevada, Oregon, and Washington. Our commercial and specialty banking operations comprise the majority of our business activities and largely consist of making commercial and commercial real estate loans tailored to small and middle market businesses, including the owners and employees of those businesses, as well as accepting deposits in the markets we serve. Revenues generated from these activities largely consist of interest income on loans and investment securities, net of interest paid on deposits and borrowed funds, as well as fee income generated from the various banking services we offer our clients. As part of the Company’s broader suite of financial products and services, the Company offers commercial escrow and exchange services through our Commerce Escrow division, as well as custodial and maintenance services for clients with self-directed IRA accounts under our Pacific Premier Trust division. Revenues generated from these activities consist of fee income. The Company’s business activities are collectively managed and monitored by the chief operating decision maker (“CODM”) in assessing performance and making decisions about the allocation of resources.

The Company’s CODM is a role shared by two executive officers, the Chairman, Chief Executive Officer, and President of the Company, as well as the President and Chief Operating Officer of the Bank. The CODM regularly monitors the performance of the Company through the use of internally derived reporting packages, which contain financial metrics of profit/loss, including net income, which is the measure of segment profit and loss, as well as other key performance indicators. The CODM uses such information to assess performance of the Company and make decisions that impact revenues, such as the levels and types of lending and the yields earned, as well as the acceptance of various types of deposits and the rates paid. The CODM also uses such information to monitor levels of noninterest income earned from the various services provided to the Company’s clients, and to monitor the level of expenses incurred associated with the various aspects of the Company’s business that support our clients, generate revenues, and are associated with the overall administration of the Company’s operations. Further, internal financial information is also used by the CODM to monitor credit quality and credit loss expense, and to make decisions concerning risk exposures in the Company’s loan portfolio.

Please refer to the consolidated statements of income for information concerning revenues, expenses, and the measure of segment profit and loss, which is net income. The consolidated statements of income also provide the categories of significant expenses regularly provided to the CODM. In addition, segment assets are reported in the consolidated statements of financial condition.

Note 16 – Subsequent Events

Quarterly Cash Dividend

On July 23, 2025, the Corporation’s Board of Directors declared a cash dividend of $0.33 per share, payable on August 15, 2025 to stockholders of record as of August 5, 2025.

Redemption of Subordinated Notes

On July 14, 2025, the Company’s Board of Directors approved the early redemption of $125.0 million in subordinated notes due 2029 on August 15, 2025.
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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
FORWARD-LOOKING STATEMENTS

All references to “we,” “us,” “our,” “Pacific Premier,” or the “Company” mean Pacific Premier Bancorp, Inc. and our consolidated subsidiaries, including Pacific Premier Bank, National Association, our primary operating subsidiary. All references to the “Bank” refer to Pacific Premier Bank, National Association. All references to the “Corporation” refer to Pacific Premier Bancorp, Inc.
 
This Quarterly Report on Form 10-Q 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, as amended. 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 following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

•The strength of the United States (“U.S.”) economy in general and the strength of the local economies in which we conduct operations;
•Adverse developments in the banking industry, for example the high-profile bank failures in 2023, and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments;
•The effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);
•Interest rate, liquidity, economic, market, credit, operational, and inflation risks associated with our business, including the speed and predictability of changes in these risks;
•Our ability to attract and retain deposits and to access other sources of liquidity, particularly in a higher interest rate environment, and the quality and composition of our deposits;
•Business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the labor market, ineffective management of the U.S. Federal budget or debt, fluctuations in the real estate market, or turbulence or uncertainty in domestic or foreign financial markets;
•The effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations;
•The timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;
•Possible impairment charges to goodwill, including any impairment that may result from increased volatility in our stock price;
•The impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies;
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•Compliance risks, including any increased costs of monitoring, testing, and maintaining compliance with complex laws and regulations;
•The effectiveness of our risk management framework and quantitative models;
•The effect of changes in accounting policies and practices or accounting standards, as may be adopted from time to time by bank regulatory agencies, the Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board (“PCAOB”), the Financial Accounting Standards Board (“FASB”), or other accounting standards setters;
•Possible credit-related impairments of securities held by us;
•Changes in the level of our nonperforming assets and charge-offs;
•The impact of governmental efforts to restructure or modify the U.S. financial regulatory system;
•The impact of changes in Federal Deposit Insurance Corporation (the “FDIC”) insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments;
•Changes in consumer spending, borrowing, and savings habits;
•The effects of concentrations in our loan portfolio, including commercial real estate, and the risks of geographic and industry concentrations;
•The possibility that we may reduce or discontinue the payments of dividends on our common stock;
•The possibility that we may discontinue, reduce, or otherwise limit the level of repurchases of our common stock we may make from time to time pursuant to our stock repurchase program;
•Changes in the financial performance and/or condition of our borrowers;
•Changes in the competitive environment among financial and bank holding companies and other financial service providers;
•Geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine and conflicts in the Middle East, all of which could impact business and economic conditions in the U.S. and abroad;
•Tariffs, trade policies, and related tensions, which could impact our clients, specific industry sectors and/or broader economic conditions and financial market;
•Public health crises and pandemics and their effects on the economic and business environments in which we operate, including on our credit quality and business operations, as well as the impact on general economic and financial market conditions;
•Cybersecurity threats and the cost of defending against them;
•Uncertainty around, and disruption from, new and emerging technologies, including the adoption and utilization of artificial intelligence (“AI”) and generative AI;
•Climate change, including the enhanced regulatory, compliance, credit, and reputational risks and costs;
•Natural disasters, earthquakes, fires, and severe weather;
•Unanticipated regulatory, legal, or judicial proceedings;
•The possibility that the Company’s pending merger with Columbia Banking System, Inc., a Washington corporation (“Columbia”) does not close when expected or at all because required regulatory or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all;
•The possibility that the anticipated benefits and cost savings from the merger with Columbia may not be fully realized or may take longer to realize than expected;
•Disruptions to the Company’s business as a result of the announcement and pendency of the merger with Columbia;
•The possibility that the merger with Columbia may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and
•Our ability to manage the risks involved in the foregoing.

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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 Quarterly Report on Form 10-Q 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 our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”) and quarterly report on Form 10-Q for the quarter ended March 31, 2025, and other reports as filed with the SEC.
 
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.
 
GENERAL
 
Management’s discussion and analysis of financial condition and results of operations is intended to provide a better understanding of the significant changes in trends relating to the Company’s financial condition, results of operations, liquidity, and capital resources. This discussion should be read in conjunction with our 2024 Form 10-K, plus the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The results for the three and six months ended June 30, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025.
 
The Corporation, a California-based bank holding company, was incorporated in 1997 in the state of Delaware and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”). Our wholly owned subsidiary, Pacific Premier Bank, is a national banking association chartered under the laws of the United States, and is thereby subject to the supervision, periodic examination, and regulation by the Office of the Comptroller of the Currency (the “OCC”). The OCC holds primary supervisory and regulatory authority over the operations of the Bank. The Bank’s deposits are insured by the FDIC through the Deposit Insurance Fund. The FDIC also has certain supervisory authority and powers over the Bank as well as all other FDIC insured institutions. Additionally, the Bank is a member of the Federal Home Loan Bank of San Francisco (“FHLB”), which is a member of the Federal Home Loan Bank System. As a bank holding company, the Corporation is subject to regulation and supervision by the Federal Reserve and the Federal Reserve Bank of San Francisco (“FRB”). The Federal Reserve may conduct examinations of bank holding companies, including the Corporation, and its subsidiaries.
 
Our corporate headquarters is located in Irvine, California. At June 30, 2025, we primarily conducted business throughout the Western Region of the United States from our 58 full-service depository branches located in Arizona, California, Nevada, Oregon, and Washington.

Our business strategy is centered on leveraging our high-touch relationship banking model, our broad range of banking products and service offerings, and our investment in technology to drive profitable, risk-adjusted growth, and generate operational efficiencies. Throughout our history, we have accomplished our growth objectives through a two-pronged approach of organic growth and strategic acquisitions.

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In support of our organic and strategic growth strategy, we focus on attracting deposits from small- and middle-market businesses, corporations, including the owners and employees of those businesses, professionals, real estate investors/operators, non-profit organizations, and consumers. We invest those deposits, together with funds generated from operations and borrowings, primarily in commercial loans and various types of commercial real estate loans. The Company expects to fund substantially all of the loans that it originates or purchases through deposits, FHLB advances and other borrowings, and internally generated funds. Through our branches and our website, www.ppbi.com, we offer a variety of banking products and services within our targeted markets in the Western United States such as: various types of deposit accounts, digital banking, treasury management services, online bill payment, and a wide array of loan products, including commercial business loans, lines of credit, Small Business Administration (“SBA”) loans, commercial real estate (“CRE”) loans, agribusiness loans, quick-service restaurant franchise lending, home equity lines of credit, and construction loans throughout the Western U.S. in major metropolitan markets within Arizona, California, Nevada, Oregon, and Washington. We also have developed nationwide specialty banking products and service offerings for homeowners’ associations (“HOA”) and HOA management companies, as well as experienced owner-operator franchisees in the QSR industry. Our specialty products and services offerings include commercial escrow and exchange services through our Commerce Escrow division, which provides a variety of real-property and non-real property escrow services, including the facilitation of Section 1031 of the Internal Revenue Code. In addition, our Pacific Premier Trust division provides individual retirement account (“IRA”) custodial and maintenance services and serves as a custodian for self-directed IRAs holding various asset classes.

The Company generates the majority of its revenues from interest income on loans that it originates and purchases, and income from investments in securities. The Company also provides its clients with financial products and services, which generate noninterest income such as service charges on customer accounts, trust custodial account fees, and escrow and exchange fees. The Company’s revenues are partially offset by interest expense paid on deposits and borrowings, the provision for credit losses, and noninterest expenses, such as operating expenses. The Company’s operating expenses primarily consist of employee compensation and benefit expenses, premises and occupancy expenses, data processing expenses, deposit expenses, and other general expenses. The Company’s results of operations are also affected by prevailing economic conditions, competition, acquisitions, government policies, and other actions of regulatory agencies.

PENDING MERGER WITH COLUMBIA
    
On April 23, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Columbia, and Balboa Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Columbia (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger (the “Surviving Corporation”), and immediately following the Merger, the Surviving Corporation will merge with and into Columbia (the “Second Step Merger”, and together with the Merger, the “Mergers”), with Columbia continuing as the surviving entity in the Second Step Merger. Promptly following the Second Step Merger, the Bank will merge with and into Columbia’s wholly owned bank subsidiary, Umpqua Bank (the “Bank Merger”), with Umpqua Bank as the surviving bank in the Bank Merger. The Merger Agreement was unanimously approved and adopted by the board of directors of each of Columbia, Pacific Premier, and Merger Sub.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock outstanding immediately prior to the Effective Time, other than certain shares held by Columbia, the Company or Merger Sub, will be converted into the right to receive 0.9150 of a share of common stock, no par value per share, of Columbia. Holders of the Company’s common stock will receive cash in lieu of fractional shares.

The Company and Columbia received all required stockholder and shareholder approvals, as applicable, related to the Merger, which is anticipated to close during the second half of 2025, subject to customary closing conditions, including the receipt of regulatory approval.

54

CRITICAL ACCOUNTING POLICIES
 
Management has established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Certain accounting policies require management to make estimates and assumptions that involve a significant level of estimation uncertainty and are reasonably likely to have a material impact on the carrying value of certain assets and liabilities as well as the Company’s results of operations, which management considers to be critical accounting policies. The estimates and assumptions management uses are based on historical experience and other factors, which management believes to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of the Company’s assets and liabilities as well as the Company’s results of operations in future reporting periods. The Company’s critical accounting policies consist of the allowance for credit losses on loans and off-balance sheet commitments, as well as goodwill. Please see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2024 Form 10-K for additional discussion concerning these critical accounting policies. Also, our significant accounting policies are described in Note 1. Description of Business and Summary of Significant Accounting Policies to the audited consolidated financial statements in our 2024 Form 10-K.

NON-GAAP MEASURES

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.

For periods presented below, adjusted return on average assets (“ROAA”) is a non-GAAP financial measure derived from GAAP based amounts. We calculate this figure by excluding merger-related expense, the FDIC special assessment, and the related tax impact from net income. Management believes that the exclusion of such nonrecurring items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison of financial performance.
 Three Months EndedSix Months Ended
 June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands)20252025202420252024
Net income
$32,061 $36,021 $41,905 $68,082 $88,930 
Add: FDIC special assessment(25)25 (161)— 362 
Add: merger-related expense6,712 — — 6,712 — 
Less: tax adjustment (1)
1,884 7 (45)1,891 103 
Adjusted net income for average assets$36,864 $36,039 $41,789 $72,903 $89,189 
Average assets$18,018,457 $18,086,988 $18,595,683 $18,052,533 $18,815,040 
ROAA (annualized)0.71 %0.80 %0.90 %0.75 %0.95 %
Adjusted ROAA (annualized)0.82 %0.80 %0.90 %0.81 %0.95 %
______________________________
(1) Adjusted by statutory tax rate.

55

For periods presented below, return on average tangible common equity (“ROATCE”) is a non-GAAP financial measure derived from GAAP-based amounts. We calculate this figure by excluding amortization of intangible assets expense from net income and excluding the average intangible assets and average goodwill from the average stockholders' equity during the periods indicated. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business. The adjusted net income, adjusted return on average equity (“ROAE”), and adjusted ROATCE further exclude the nonrecurring items to provide a better comparison to the financial results of prior periods.
Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands)20252025202420252024
Net income$32,061 $36,021 $41,905 $68,082 $88,930 
Add: amortization of intangible assets expense
2,501 2,566 2,763 5,067 5,599 
Less: tax adjustment (1)
705 723 781 1,428 1,582 
Net income for average tangible common equity33,857 37,864 43,887 71,721 92,947 
Add: FDIC special assessment(25)25 (161)— 362 
Add: merger-related expense
6,712 — — 6,712 — 
Less: tax adjustment (1)
1,884 7 (45)1,891 103 
Adjusted net income for average tangible common equity$38,660 $37,882 $43,771 $76,542 $93,206 
Average stockholders’ equity$2,964,049 $2,956,846 $2,908,015 $2,960,468 $2,901,982 
Less: average intangible assets28,613 31,168 39,338 29,884 40,736 
Less: average goodwill901,312 901,312 901,312 901,312 901,312 
Average tangible common equity$2,034,124 $2,024,366 $1,967,365 $2,029,272 $1,959,934 
ROAE (annualized)4.33 %4.87 %5.76 %4.60 %6.13 %
Adjusted ROAE (annualized)4.97 %4.88 %5.75 %4.93 %6.15 %
ROATCE (annualized)6.66 %7.48 %8.92 %7.07 %9.48 %
Adjusted ROATCE (annualized)7.60 %7.49 %8.90 %7.54 %9.51 %
______________________________
(1) Amortization of intangible assets expense adjusted by statutory tax rate.

56

Tangible book value per share and tangible common equity to tangible assets (the “tangible common equity ratio”) are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible book value per share by dividing tangible common stockholders’ equity by shares outstanding. We calculate the tangible common equity ratio by excluding the balance of intangible assets from common stockholders’ equity and dividing by period end tangible assets, which also excludes intangible assets. We believe that this information is important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk-based ratios.

 June 30,December 31,
(Dollars in thousands)20252024
Total stockholders’ equity$2,975,418 $2,955,743 
Less: intangible assets928,439 933,506 
Tangible common equity$2,046,979 $2,022,237 
Total assets$17,783,172 $17,903,585 
Less: intangible assets928,439 933,506 
Tangible assets$16,854,733 $16,970,079 
Tangible common equity ratio12.14 %11.92 %
Common shares issued and outstanding97,019,91096,441,667
Book value per share$30.67 $30.65 
Less: intangible book value per share9.57 9.68 
Tangible book value per share$21.10 $20.97 
    
57

Efficiency ratio is a non-GAAP financial measure derived from GAAP-based amounts. This figure represents the ratio of noninterest expense, less amortization of intangible assets, merger-related expense, and other real estate owned operations, where applicable, to the sum of net interest income before provision for credit losses and total noninterest income less net loss from other real estate owned and net (loss) gain from debt extinguishment. The adjusted efficiency ratio further excludes the FDIC special assessment to provide a better comparison to the financial results of prior periods. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business.
Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands)20252025202420252024
Total noninterest expense$104,376 $100,292 $97,567 $204,668 $200,200 
Less: amortization of intangible assets2,501 2,566 2,763 5,067 5,599 
Less: merger-related expense6,712 — — 6,712 — 
Less: other real estate owned operations, net— — — — 46 
Adjusted noninterest expense95,163 97,726 94,804 192,889 194,555 
Less: FDIC special assessment(25)25 (161)— 362 
Adjusted noninterest expense excluding FDIC special assessment$95,188 $97,701 $94,965 $192,889 $194,193 
Net interest income before provision for credit losses$126,755 $123,367 $136,394 $250,122 $281,521 
Add: total noninterest income
17,565 21,465 18,222 39,030 43,996 
Less: net loss from other real estate owned
— — (28)— (28)
Less: net (loss) gain from debt extinguishment
(1,315)— — (1,315)5,067 
Adjusted revenue$145,635 $144,832 $154,644 $290,467 $320,478 
Efficiency ratio65.3 %67.5 %61.3 %66.4 %60.7 %
Adjusted efficiency ratio excluding FDIC special assessment65.4 %67.5 %61.4 %66.4 %60.6 %

58

Pre-provision net revenue is a non-GAAP financial measure derived from GAAP-based amounts. We calculate the pre-provision net revenue by excluding income tax, provision for credit losses, and merger-related expense from net income. The adjusted pre-provision net income further excludes the FDIC special assessment to provide a better comparison of financial performance. Management believes that the exclusion of such items from this financial measure provides useful information to gain an understanding of the operating results of our core business and a better comparison to the financial results of prior periods.
Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands)20252025202420252024
Interest income$189,181 $187,335 $208,054 $376,516 $421,485 
Interest expense62,426 63,968 71,660 126,394 139,964 
Net interest income126,755 123,367 136,394 250,122 281,521 
Noninterest income
17,565 21,465 18,222 39,030 43,996 
Revenue
144,320 144,832 154,616 289,152 325,517 
Noninterest expense104,376 100,292 97,567 204,668 200,200 
Add: merger-related expense6,712 — — 6,712 — 
Pre-provision net revenue
46,656 44,540 57,049 91,196 125,317 
Add: FDIC special assessment(25)25 (161)— 362 
Adjusted pre-provision net revenue$46,631 $44,565 $56,888 $91,196 $125,679 
Pre-provision net revenue (annualized)
$186,624 $178,160 $228,196 $182,392 $250,634 
Adjusted pre-provision net revenue (annualized)$186,524 $178,260 $227,552 $182,392 $251,358 

Cost of non-maturity deposits is a non-GAAP financial measure derived from GAAP-based amounts. Cost of non-maturity deposits is calculated as the ratio of non-maturity deposit interest expense to average non-maturity deposits. We calculate non-maturity deposit interest expense by excluding interest expense for all certificates of deposit from total deposit expense, and we calculate average non-maturity deposits by excluding all certificates of deposit from total deposits. Management believes the cost of non-maturity deposits is a useful measure to assess the Company's deposit base, including its potential volatility.
Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
(Dollars in thousands)20252025202420252024
Total deposits interest expense$58,376 $59,573 $64,229 $117,949 $123,735 
Less: certificates of deposit interest expense16,950 18,512 21,115 35,462 40,190 
Less: brokered certificates of deposit interest expense3,620 3,789 6,506 7,409 13,175 
Non-maturity deposit expense$37,806 $37,272 $36,608 $75,078 $70,370 
Total average deposits$14,610,202 $14,635,422 $14,941,573 $14,622,742 $14,998,661 
Less: average certificates of deposit1,747,641 1,780,043 1,830,516 1,763,752 1,779,122 
Less: average brokered certificates of deposit283,812 300,424 542,699 292,072 555,786 
Average non-maturity deposits$12,578,749 $12,554,955 $12,568,358 $12,566,918 $12,663,753 
Cost of non-maturity deposits1.21 %1.20 %1.17 %1.20 %1.12 %
59

RESULTS OF OPERATIONS

The following table presents the components of results of operations, share data, and performance ratios for the periods indicated:
 Three Months EndedSix Months Ended
June 30,March 31,June 30,June 30,June 30,
(Dollar in thousands, except per share data)20252025202420252024
Operating data
Interest income$189,181 $187,335 $208,054 $376,516 $421,485 
Interest expense62,426 63,968 71,660 126,394 139,964 
Net interest income126,755 123,367 136,394 250,122 281,521 
Provision for credit losses(2,078)(3,718)1,265 (5,796)5,117 
Net interest income after provision for credit losses128,833 127,085 135,129 255,918 276,404 
Net gain from sales of loans
23 90 65 113 65 
Other noninterest income
17,542 21,375 18,157 38,917 43,931 
Noninterest expense104,376 100,292 97,567 204,668 200,200 
Net income before income taxes
42,022 48,258 55,784 90,280 120,200 
Income tax expense9,961 12,237 13,879 22,198 31,270 
Net income
$32,061 $36,021 $41,905 $68,082 $88,930 
Pre-provision net revenue (1)
$46,656 $44,540 $57,049 $91,196 $125,317 
Share data
Earnings per share:
Basic$0.33 $0.37 $0.43 $0.70 $0.92 
Diluted0.33 0.37 0.43 0.70 0.92 
Common equity dividends declared per share0.33 0.33 0.33 0.66 0.66 
Dividend payout ratio (2)
99.91 %88.41 %75.94 %93.82 %71.39 %
Book value per share (basic)
$30.67 $30.57 $30.32 $30.67 $30.32 
Tangible book value per share (1)
21.10 20.98 20.58 21.10 20.58 
Performance ratios
ROAA (3)
0.71 %0.80 %0.90 %0.75 %0.95 %
Adjusted ROAA (1)(3)
0.82 0.80 0.90 0.81 0.95 
ROAE (3)
4.33 4.87 5.76 4.60 6.13 
Adjusted ROAE (1)(3)
4.97 4.88 5.75 4.93 6.15 
ROATCE (1)(3)
6.66 7.48 8.92 7.07 9.48 
Adjusted ROATCE (1)(3)
7.60 7.49 8.90 7.54 9.51 
Net interest margin3.12 3.06 3.26 3.09 3.32 
Cost of deposits1.60 1.65 1.73 1.63 1.66 
Average equity to average assets16.45 16.35 15.64 16.40 15.42 
Efficiency ratio (1)
65.3 67.5 61.3 66.4 60.7 
Adjusted efficiency ratio (1)
65.4 67.5 61.4 66.4 60.6 
______________________________
(1) Reconciliations of the non-GAAP measures are set forth in the Non-GAAP measures section of Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q.
(2) Dividend payout ratio is defined as common equity dividends declared per share divided by basic earnings per share.
(3) Ratio is annualized.

60

Net income for the second quarter of 2025 was $32.1 million, or $0.33 per diluted share, compared to $36.0 million, or $0.37 per diluted share, for the first quarter of 2025. The decrease was primarily due to a $4.1 million increase in noninterest expense, driven by merger-related expense of $6.7 million for the second quarter of 2025 relating to the pending merger with Columbia, a $3.9 million decrease in noninterest income, and a $1.6 million decrease in reversal of provision for credit losses, partially offset by a $3.4 million increase in net interest income and a $2.3 million decrease in income tax expense.

Net income for the second quarter of 2025 was $32.1 million, or $0.33 per diluted share, compared to $41.9 million, or $0.43 per diluted share, for the second quarter of 2024. The decrease was primarily due to a $9.6 million decrease in net interest income, a $6.8 million increase in noninterest expense, driven by merger-related expense of $6.7 million, and a $657,000 decrease in noninterest income, partially offset by a $3.9 million decrease in income tax expense and a $3.3 million decrease in the provision for credit losses.

For the second quarter of 2025, the Company’s ROAA was 0.71%, ROAE was 4.33%, and ROATCE was 6.66%, compared to 0.80%, 4.87%, and 7.48%, respectively, for the first quarter of 2025, and 0.90%, 5.76%, and 8.92%, respectively, for the second quarter of 2024. For additional details, see “Non-GAAP measures” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

For the six months ended June 30, 2025, the Company recorded net income of $68.1 million, or $0.70 per diluted share. This compares with net income of $88.9 million, or $0.92 per diluted share, for the six months ended June 30, 2024. The decrease in net income of $20.8 million was mostly due to the $31.4 million decrease in net interest income, a $5.0 million decrease in noninterest income, and a $4.5 million increase in noninterest expense, driven by merger-related expense of $6.7 million, partially offset by a $10.9 million decrease in provision for credit losses, and a $9.1 million decrease in income tax expense.
    
For the six months ended June 30, 2025, the Company’s ROAA was 0.75%, ROAE was 4.60%, and ROATCE was 7.07%, compared to 0.95%, 6.13%, and 9.48%, respectively, for the six months ended June 30, 2024. For additional details, see “Non-GAAP measures” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Net Interest Income
 
Our primary source of revenue is net interest income, which is the difference between the interest earned on loans, investment securities, and interest-earning balances with financial institutions (“interest-earning assets”) and the interest paid on deposits and borrowings (“interest-bearing liabilities”). Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income is affected by changes in both interest rates and the volume of interest-earning assets and interest-bearing liabilities.

Net interest income totaled $126.8 million in the second quarter of 2025, an increase of $3.4 million, or 2.7%, from the first quarter of 2025. The increase in net interest income was primarily attributable to a lower cost of funds, lower average interest-bearing liabilities balances, and higher average loan yields, partially offset by lower average interest-earning assets balances.

The net interest margin for the second quarter of 2025 increased 6 basis points to 3.12%, from 3.06% in the prior quarter. The increase was primarily due to a lower cost of funds as well as increased average loan yields.

Net interest income for the second quarter of 2025 decreased $9.6 million, or 7.1%, compared to the second quarter of 2024. The decrease was attributable to lower average interest-earning asset balances and yields, partially offset by lower average interest-bearing liabilities balances and a lower cost of funds.

For the first six months ended 2025, net interest income decreased $31.4 million, or 11.2%, compared to the first six months ended 2024. The decrease was driven by lower average interest-earning asset balances and yields, partially offset by lower average interest-bearing liabilities.
61

The following table presents the net interest margin, average balances calculated based on daily average, interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities, and the average yield/rate by asset and liability component for the periods indicated:
 Average Balance Sheet
Three Months Ended
June 30, 2025March 31, 2025June 30, 2024
(Dollars in thousands)Average
Balance		InterestAverage
Yield/Cost		Average
Balance		InterestAverage
Yield/Cost		Average
Balance		InterestAverage
Yield/Cost
Assets
Interest-earning assets:         
Cash and cash equivalents$815,636 $7,649 3.76 %$882,266 $8,279 3.81 %$1,134,736 $13,666 4.84 %
Investment securities3,552,016 31,113 3.50 %3,483,680 30,526 3.51 %2,964,909 26,841 3.62 %
Loans receivable, net (1)(2)
11,923,558 150,419 5.06 %11,981,726 148,530 5.03 %12,724,545 167,547 5.30 %
Total interest-earning assets16,291,210 189,181 4.66 %16,347,672 187,335 4.65 %16,824,190 208,054 4.97 %
Noninterest-earning assets1,727,247 1,739,316 1,771,493 
Total assets$18,018,457 $18,086,988 $18,595,683 
Liabilities and equity
Interest-bearing deposits:
Interest checking$2,864,330 $10,611 1.49 %$2,880,017 $10,669 1.50 %$2,747,972 $10,177 1.49 %
Money market4,728,738 26,983 2.29 %4,705,209 26,358 2.27 %4,724,572 26,207 2.23 %
Savings251,700 212 0.34 %258,789 245 0.38 %271,812 224 0.33 %
Retail certificates of deposit1,747,641 16,950 3.89 %1,780,043 18,512 4.22 %1,830,516 21,115 4.64 %
Wholesale/brokered certificates of deposit283,812 3,620 5.12 %300,424 3,789 5.11 %542,699 6,506 4.82 %
Total interest-bearing deposits9,876,221 58,376 2.37 %9,924,482 59,573 2.43 %10,117,571 64,229 2.55 %
FHLB advances and other borrowings154 2 5.21 %211 2 3.84 %200,154 2,330 4.68 %
Subordinated debentures248,151 4,048 6.48 %272,528 4,393 6.45 %332,097 5,101 6.14 %
Total borrowings248,305 4,050 6.48 %272,739 4,395 6.44 %532,251 7,431 5.59 %
Total interest-bearing liabilities10,124,526 62,426 2.47 %10,197,221 63,968 2.54 %10,649,822 71,660 2.71 %
Noninterest-bearing deposits4,733,981 4,710,940 4,824,002 
Other liabilities195,901 221,981 213,844 
Total liabilities15,054,408 15,130,142 15,687,668 
Stockholders’ equity2,964,049 2,956,846 2,908,015 
Total liabilities and equity$18,018,457 $18,086,988 $18,595,683 
Net interest income$126,755 $123,367 $136,394 
Net interest margin (3)
3.12 %3.06 %3.26 %
Cost of deposits (4)
1.60 %1.65 %1.73 %
Cost of funds (5)
1.69 %1.74 %1.86 %
Cost of non-maturity deposits (6)
1.21 %1.20 %1.17 %
Ratio of interest-earning assets to interest-bearing liabilities160.91 %160.31 %157.98 %
______________________________
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships, where applicable.
(2) Interest income includes fair value net discount accretion of $1.8 million, $1.9 million, and $2.3 million for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
(3) Represents annualized net interest income divided by average interest-earning assets.
(4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.
(5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
(6) Reconciliation of the “Non-GAAP measures” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.
62


Average Balance Sheet
Six Months Ended
June 30, 2025June 30, 2024
(Dollars in thousands)Average
Balance		InterestAverage
Yield/Cost		Average
Balance		InterestAverage
Yield/Cost
Assets
Interest-earning assets:
Cash and cash equivalents$848,767 $15,928 3.78 %$1,137,822 $27,304 4.83 %
Investment securities3,518,037 61,639 3.50 %2,956,540 53,659 3.63 %
Loans receivable, net (1)(2)
11,952,481 298,949 5.04 %12,936,791 340,522 5.29 %
Total interest-earning assets16,319,285 376,516 4.65 %17,031,153 421,485 4.98 %
Noninterest-earning assets1,733,248 1,783,887 
Total assets$18,052,533 $18,815,040 
Liabilities and equity
Interest-bearing deposits:
Interest checking$2,872,130 $21,280 1.49 %$2,793,152 $20,080 1.45 %
Money market4,717,039 53,341 2.28 %4,680,357 49,839 2.14 %
Savings255,225 457 0.36 %279,774 451 0.32 %
Retail certificates of deposit1,763,752 35,462 4.05 %1,779,122 40,190 4.54 %
Wholesale/brokered certificates of deposit292,072 7,409 5.12 %555,786 13,175 4.77 %
Total interest-bearing deposits9,900,218 117,949 2.40 %10,088,191 123,735 2.47 %
FHLB advances and other borrowings182 4 4.43 %359,516 6,567 3.67 %
Subordinated debentures260,272 8,441 6.47 %332,015 9,662 5.82 %
Total borrowings260,454 8,445 6.47 %691,531 16,229 4.70 %
Total interest-bearing liabilities10,160,672 126,394 2.51 %10,779,722 139,964 2.61 %
Noninterest-bearing deposits4,722,524 4,910,470 
Other liabilities208,869 222,866 
Total liabilities15,092,065 15,913,058 
Stockholders’ equity2,960,468 2,901,982 
Total liabilities and equity$18,052,533 $18,815,040 
Net interest income$250,122 $281,521 
Net interest margin (3)
3.09 %3.32 %
Cost of deposits (4)
1.63 %1.66 %
Cost of funds (5)
1.71 %1.79 %
Cost of non-maturity deposits (6)
1.20 %1.12 %
Ratio of interest-earning assets to interest-bearing liabilities160.61 %157.99 %
_____________________________
(1) Average balance includes loans held for sale and nonperforming loans and is net of deferred loan origination fees/costs and discounts/premiums, and the basis adjustment of certain loans included in fair value hedging relationships, where applicable.
(2) Interest income includes fair value net discount accretion of $3.7 million and $4.4 million for the six months ended June 30, 2025 and June 30, 2024, respectively.
(3) Represents net interest income divided by average interest-earning assets.
(4) Represents annualized interest expense on deposits divided by the sum of average interest-bearing deposits and noninterest-bearing deposits.
(5) Represents annualized total interest expense divided by the sum of average total interest-bearing liabilities and noninterest-bearing deposits.
(6) Reconciliation of the “Non-GAAP measures” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.
63

Changes in our net interest income are a function of changes in volume and rates of interest-earning assets and interest-bearing liabilities. Changes in net interest income that are not a function of changes in volume and rates of interest-earning assets and interest-bearing liabilities are allocated proportionately to the change due to volume and the change due to rate. The following tables present the impact that the volume and rate changes have had on our net interest income for the periods 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:
 
•Changes in volume (changes in volume multiplied by prior rate);
•Changes in interest rates (changes in interest rates multiplied by prior volume and includes the recognition of discounts/premiums and deferred fees/costs); and
•The net change or the combined impact of volume and rate changes allocated proportionately to changes in volume and changes in interest rates.
Three Months Ended June 30, 2025
Compared to
Three Months Ended March 31, 2025
Increase (Decrease) Due to
(Dollars in thousands)VolumeRateNet
Interest-earning assets   
Cash and cash equivalents$(544)$(86)$(630)
Investment securities598 (11)587 
Loans receivable, net(5,628)7,517 1,889 
Total interest-earning assets(5,574)7,420 1,846 
Interest-bearing liabilities   
Interest checking(20)(38)(58)
Money market251 374 625 
Savings(6)(27)(33)
Retail certificates of deposit(297)(1,265)(1,562)
Wholesale/brokered certificates of deposit(170)1 (169)
FHLB advances and other borrowings(2)2 — 
Subordinated debentures(369)24 (345)
Total interest-bearing liabilities(613)(929)(1,542)
(Decrease) increase in net interest income
$(4,961)$8,349 $3,388 
64

Three Months Ended June 30, 2025
Compared to
Three Months Ended June 30, 2024
Increase (Decrease) Due to
(Dollars in thousands)VolumeRateNet
Interest-earning assets   
Cash and cash equivalents$(3,348)$(2,669)$(6,017)
Investment securities5,109 (837)4,272 
Loans receivable, net(10,028)(7,100)(17,128)
Total interest-earning assets(8,267)(10,606)(18,873)
Interest-bearing liabilities   
Interest checking461 (27)434 
Money market25 751 776 
Savings(16)4 (12)
Retail certificates of deposit(912)(3,253)(4,165)
Wholesale/brokered certificates of deposit(3,310)424 (2,886)
FHLB advances and other borrowings(2,624)296 (2,328)
Subordinated debentures(1,349)296 (1,053)
Total interest-bearing liabilities(7,725)(1,509)(9,234)
Decrease in net interest income
$(542)$(9,097)$(9,639)
Six Months Ended June 30, 2025
Compared to
Six Months Ended June 30, 2024
Increase (Decrease) Due to
(Dollars in thousands)VolumeRateNet
Interest-earning assets   
Cash and cash equivalents$(6,152)$(5,224)$(11,376)
Investment securities9,760 (1,780)7,980 
Loans receivable, net(25,666)(15,907)(41,573)
Total interest-earning assets(22,058)(22,911)(44,969)
Interest-bearing liabilities
Interest checking549 651 1,200 
Money market377 3,125 3,502 
Savings(19)25 6 
Retail certificates of deposit(351)(4,377)(4,728)
Wholesale/brokered certificates of deposit(6,815)1,049 (5,766)
FHLB advances and other borrowings(8,272)1,709 (6,563)
Subordinated debentures(2,191)970 (1,221)
Total interest-bearing liabilities(16,722)3,152 (13,570)
Increase (decrease) in net interest income$(5,336)$(26,063)$(31,399)

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Provision for Credit Losses

For the second quarter of 2025, the Company recorded a total reversal of provision for credit losses of $2.1 million, consisting of a $4.7 million reversal of provision expense for loans held for investment, a $2.6 million provision expense for unfunded commitments, and a $6,000 provision expense for HTM securities. During the first quarter of 2025, the Company recorded a $3.7 million reversal of provision expense for credit losses, consisting of a $3.6 million reversal of provision expense for loans held for investment, a $143,000 reversal of provision expense for unfunded commitments, and a $13,000 reversal of provision expense for HTM securities. For the second quarter of 2024, the Company recorded a total provision for credit losses of $1.3 million, consisting of a $1.8 million provision for credit losses for loans held for investment, a $505,000 reversal of provision expense for unfunded commitments, and a $14,000 provision expense for credit losses for HTM securities.

The reversal of provision for credit losses for loans held for investment in the second quarter of 2025 was principally driven by provision reversals in the business loans secured by real estate and commercial loans segments, partially offset by provisions for credit losses in the investor loans secured by real estate and retail loans segments. The reversal of provision for credit losses in the business loans secured by real estate segment was principally driven by the impact of shorter duration as well as a decrease in loan balances. The reversal of provision for credit losses for loans in the commercial loans segment was largely attributed to shorter duration, economic forecast updates, as well as a decline in loan balances for SBA and franchise non-real estate secured loans. The provision for credit losses for the investor loans secured by real estate segment is largely attributed to a provision for multifamily loans, which was driven by economic forecast updates, partially offset by the impact of shorter duration. The provision for multifamily loans was partially offset by provision reversals for construction and land loans as well as SBA loans secured by real estate, which were driven by slightly lower loss rates for construction and land loans, and a change in qualitative adjustments during the period for SBA loans secured by real estate. The provision for credit losses for retail loans can be attributed in large part to the change in qualitative adjustments for single family residential loans during the period.

The provision for off-balance sheet commitments during the second quarter of 2025 was largely attributable to an increase in the balance of unfunded loan commitments, partially offset by the impact of economic forecast updates. The provision for HTM investment securities during the period was due to changes in economic forecasts and their impact on HTM securities classified as municipal bonds.

The reversal of provision expense for loans held for investment during the first quarter of 2025 was principally driven by provision reversals in the investor and business loans secured by real estate segments, partially offset by provisions for credit losses in the commercial and retail loans segments. The reversal of provision for credit losses in the investor loans secured by real estate segment was primarily attributed to a decline in loan balances for multifamily and construction and land loans. The reversal of provision for credit losses in the business loan secured by real estate segment can largely be attributed to a decrease in loan balances for CRE owner-occupied loans and franchise real estate secured loans. The provision for credit losses in the commercial loans segment is largely attributed to new originations and purchases of commercial and industrial loans. The provision for commercial and industrial loans was partially offset by a provision reversal associated with franchise non-real estate secured loans, which was attributed to a decrease in loan balances coupled with slightly favorable changes in economic forecasts for those loans. The Company also recorded a provision for credit losses for retail loans during the first quarter, which was attributed to the purchase of jumbo single family residential loans with high credit quality. GAAP requires the Company to establish an ACL for purchased loans at the time of purchase.

The reversal of provision for credit losses for off-balance sheet commitments during the first quarter of 2025 was largely attributable to the impact of changes in economic forecasts, partially offset by changes in the mix of unfunded commitments between various loan segments. The reversal of provision for credit losses for HTM securities classified as municipal bonds during the first quarter of 2025 was due to economic forecast updates.

66

During the second quarter of 2024 the provision for credit losses for loans held for investment was principally driven by a $10.6 million provision for credit losses for investor loans secured by real estate. The provision for credit losses for loans in this segment was largely due to economic forecast updates and the impact on multifamily loans as well as the impact from the loan composition changes on construction and land loans, partially offset by improved asset quality for loans in this segment. The reversal of provision for credit losses for commercial loan totaled $8.6 million, and can be attributed largely to the declines in the balances of franchise non-real estate secured and C&I loans.

The reversal of provision for credit losses for off-balance sheet commitments during the second quarter of 2024 was attributable, in large part, to slightly lower loss rates for C&I loans, partially offset by a slight increase in unfunded commitments. The provision expense for HTM investment securities classified as municipal bonds was due to economic forecast updates.

Three Months EndedVariance From
June 30,March 31,June 30,March 31, 2025June 30, 2024
(Dollars in thousands)202520252024$%$%
Provision for credit losses
Provision for loan losses$(4,653)$(3,562)$1,756 $(1,091)30.6 %$(6,409)(365.0)%
Provision for unfunded commitments2,569 (143)(505)2,712 (1,896.5)%3,074 (608.7)%
Provision for HTM securities6 (13)14 19 (146.2)%(8)(57.1)%
Total provision for credit losses$(2,078)$(3,718)$1,265 $1,640 (44.1)%$(3,343)(264.3)%

For the first six months of 2025, the Company recorded a $5.8 million provision reversal for credit losses, compared to a $5.1 million provision expense recorded for the first six months of 2024. The provision reversal for the first six months of 2025 was attributed to a provision reversal for loans held for investment, partially offset by a provision for credit losses for off-balance sheet commitments and HTM investment securities. The provision for credit losses for the first six months of 2024 was driven principally by provisions for loans held for investment and HTM investment securities, partially offset by a provision reversal for off-balance sheet commitments during the period.

During the first six months of 2025, the reversal of provision for credit losses for loans held for investment was principally driven by provision reversals in the business and investor loans secured by real estate and the commercial loans segments. The provision reversals in these segments were partially offset by a provision for credit losses in the retail loans segment. The reversal of provision for credit losses in the business loans secured by real estate segment is largely attributed to the impact of shorter duration as well as a decline in loan balances in that segment. The reversal of provision for credit losses in the commercial loans segment can be attributed to the impact of shorter duration, as well as a decline in loan balances for SBA and franchise non-real estate secured loans, partially offset by the provision for credit losses for commercial and industrial loans, which was primarily attributed to new originations and purchases of commercial and industrial loans. The reversal of provision for credit losses in the investor loans secured by real estate segment is largely attributed to the decline in loan balances for construction and land and SBA real estate secured loans. This was partially offset by provisions for credit losses for CRE non-owner occupied and multifamily loans, which was driven by changes in economic forecasts and the impact on those loans, partially offset by the impact of shorter duration. The provision for credit losses for retail loans was principally driven by a change in qualitative adjustments during the second quarter, as well as the purchase of jumbo single family residential loans with high credit quality during the first quarter. GAAP requires the Company to establish an ACL for purchased loans at the time of purchase.

The provision for off-balance sheet commitments during the first six months of 2025 was largely attributable to an increase in the balance of unfunded loan commitments, partially offset by the impact of economic forecast updates. The reversal of provision for credit losses on HTM investment securities classified as municipal bonds was due to economic forecast updates.

67

During the first six months of 2024, the provision for credit losses for loans held for investment was largely attributable to the investor and business loans secured by real estate segments, partially offset by a reversal of provision for credit losses in the commercial loans segment. The provision for credit losses in the investor loans secured by real estate segment was attributed to changes in economic forecasts and the associated impact on loans in this segment, with the largest impact on multifamily loans. The provision for credit losses for loans in this segment was partially offset by improved asset quality and the impact of duration for construction loans. The provision for credit losses in the business loans secured by real estate segment was attributed to the impact from changes in economic forecasts, partially offset by a decline in the balances for those loans, as well as favorable changes in asset quality. The reversal of provision for credit losses in the commercial loans segment was principally driven by a decline in the balance of those loans during the first six months of 2024.

The provision reversal for off-balance sheet commitments during the first six months of 2024 was attributable largely to overall lower levels of unfunded commitments during the period. The provision for HTM investment securities classified as municipal bonds was attributed to economic forecast updates.

Six Months EndedVariance From
June 30,June 30,June 30, 2024
(Dollars in thousands)20252024$%
Provision for credit losses
Provision for loans losses
$(8,215)$8,044 $(16,259)(202.1)%
Provision for unfunded commitments2,426 (2,930)5,356 (182.8)%
Provision for held-to-maturity securities(7)$3 $(10)(333.3)%
Total provision for credit losses$(5,796)$5,117 $(10,913)(213.3)%
68

Noninterest Income

The following table presents the components of noninterest income for the periods indicated:
 Three Months EndedVariance From
 June 30,March 31,June 30,March 31, 2025June 30, 2024
(Dollars in thousands)202520252024$%$%
Noninterest income
Loan servicing income$472 $447 $510 $25 5.6 %$(38)(7.5)%
Service charges on deposit accounts2,578 2,629 2,710 (51)(1.9)%(132)(4.9)%
Other service fee income283 289 309 (6)(2.1)%(26)(8.4)%
Debit card interchange fee income935 834 925 101 12.1 %10 1.1 %
Earnings on bank owned life insurance4,341 5,772 4,218 (1,431)(24.8)%123 2.9 %
Net gain from sales of loans
23 90 65 (67)(74.4)%(42)(64.6)%
Trust custodial account fees8,815 10,307 8,950 (1,492)(14.5)%(135)(1.5)%
Escrow and exchange fees774 672 702 102 15.2 %72 10.3 %
Other (loss) income
(656)425 (167)(1,081)(254.4)%(489)292.8 %
Total noninterest income
$17,565 $21,465 $18,222 $(3,900)(18.2)%$(657)(3.6)%
 Six Months EndedVariance From
 June 30,June 30,June 30, 2024
(Dollars in thousands)20252024$%
Noninterest income
Loan servicing income$919 $1,039 $(120)(11.5)%
Service charges on deposit accounts5,207 5,398 (191)(3.5)%
Other service fee income572 645 (73)(11.3)%
Debit card interchange fee income1,769 1,690 79 4.7 %
Earnings on bank owned life insurance10,113 8,377 1,736 20.7 %
Net gain from sales of loans113 65 48 73.8 %
Trust custodial account fees19,122 19,592 (470)(2.4)%
Escrow and exchange fees1,446 1,398 48 3.4 %
Other (loss) income
(231)5,792 (6,023)(104.0)%
Total noninterest income$39,030 $43,996 $(4,966)(11.3)%

Noninterest income for the second quarter of 2025 was $17.6 million, a decrease of $3.9 million from the first quarter of 2025. The decrease was primarily due to a $1.5 million decrease in trust custodial account fees related to annual tax fees recognized in the prior quarter, a $1.4 million decrease in earnings on bank owned life insurance (“BOLI”) due to non-recurring benefits recorded in the prior quarter, and a $1.3 million loss on debt extinguishment, resulting from the early redemption of $150.0 million in subordinated notes due 2030.

Noninterest income for the second quarter of 2025 decreased $657,000 compared to the second quarter of 2024. The decrease was primarily due to a $1.3 million loss on debt extinguishment recorded in the second quarter of 2025, partially offset by an $826,000 increase in other income, primarily in Community Reinvestment Act investment income.

For the first six months of 2025, noninterest income totaled $39.0 million, a decrease from $44.0 million for the first six months of 2024. The decrease was primarily due to a $6.0 million decrease in other income, driven by the $1.3 million loss on debt extinguishment recorded in the first six months of 2025, compared to the $5.3 million gain on debt extinguishment resulting from the early redemption of two $200.0 million FHLB term advances during the first six months of 2024, and a $470,000 decrease in trust custodial account fees. This was offset by a $1.7 million increase in earnings on BOLI due to non-recurring benefits.

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Noninterest Expense

The following table presents the components of noninterest expense for the periods indicated:
 Three Months EndedVariance From
 June 30,March 31,June 30,March 31, 2025June 30, 2024
(Dollars in thousands)202520252024$%$%
Noninterest expense
Compensation and benefits$53,268 $52,812 $53,140 $456 0.9 %$128 0.2 %
Premises and occupancy8,471 9,716 10,480 (1,245)(12.8)%(2,009)(19.2)%
Data processing7,806 7,976 7,754 (170)(2.1)%52 0.7 %
FDIC insurance premiums1,947 1,996 1,873 (49)(2.5)%74 4.0 %
Legal and professional services2,223 4,861 1,078 (2,638)(54.3)%1,145 106.2 %
Marketing expense905 936 1,724 (31)(3.3)%(819)(47.5)%
Office expense1,006 1,099 1,077 (93)(8.5)%(71)(6.6)%
Loan expense829 781 840 48 6.1 %(11)(1.3)%
Deposit expense13,644 12,896 12,289 748 5.8 %1,355 11.0 %
Merger-related expense6,712 — — 6,712 — %6,712 — %
Amortization of intangible assets2,501 2,566 2,763 (65)(2.5)%(262)(9.5)%
Other expense5,064 4,653 4,549 411 8.8 %515 11.3 %
Total noninterest expense$104,376 $100,292 $97,567 $4,084 4.1 %$6,809 7.0 %
 Six Months EndedVariance From
 June 30,June 30,June 30, 2024
(Dollars in thousands)20252024$%
Noninterest expense
Compensation and benefits$106,080 $107,270 $(1,190)(1.1)%
Premises and occupancy18,187 21,287 (3,100)(14.6)%
Data processing15,782 15,265 517 3.4 %
Other real estate owned operations, net— 46 (46)(100.0)%
FDIC insurance premiums3,943 4,502 (559)(12.4)%
Legal and professional services7,084 5,221 1,863 35.7 %
Marketing expense1,841 3,282 (1,441)(43.9)%
Office expense2,105 2,170 (65)(3.0)%
Loan expense1,610 1,610 — — %
Deposit expense26,540 24,954 1,586 6.4 %
Merger-related expense6,712 — 6,712 — %
Amortization of intangible assets5,067 5,599 (532)(9.5)%
Other expense9,717 8,994 723 8.0 %
Total noninterest expense$204,668 $200,200 $4,468 2.2 %

Noninterest expense totaled $104.4 million for the second quarter of 2025, an increase of $4.1 million from the first quarter of 2025. The increase was primarily due to merger-related expense of $6.7 million for the second quarter of 2025 relating to the pending merger with Columbia. Excluding merger-related expense, noninterest expense totaled $97.7 million, a decrease of $2.6 million compared to the first quarter of 2025 primarily attributable to a $2.6 million decrease in legal and professional services, driven by a $1.1 million reclassification of merger-related legal and professional fees recorded in the prior quarter to merger-related expense, and a $1.2 million decrease in premises and occupancy.

Noninterest expense for the second quarter of 2025 increased by $6.8 million from the second quarter of 2024. The increase was primarily due to merger-related expense of $6.7 million for the second quarter of 2025, a $1.4 million increase in deposit expense, a $1.1 million increase in legal and professional services, partially offset by a $2.0 million decrease in premises and occupancy.
70

Noninterest expense totaled $204.7 million for the first six months of 2025, an increase of $4.5 million from the first six months of 2024. The increase was driven primarily by the merger-related expense of $6.7 million relating to the pending merger with Columbia. Excluding merger-related expense, noninterest expense totaled $198.0 million, a decrease of $2.2 million from the first six months of 2024, driven primarily by a $3.1 million decrease in premises and occupancy, a $1.4 million decrease in marketing expense, a $1.2 million decrease in compensation and benefits, and a $532,000 decrease in amortization of intangible assets, partially offset by a $1.9 million increase in legal and professional services, and a $1.6 million increase in deposit expense, driven by higher deposit administration service fees due to higher cap rates and the seasonal growth in HOA deposits.

The Bank pays third-party management companies, which function as vendors for the Bank, to provide certain property administrative services related to the servicing of the HOA deposit accounts. These administrative service fees are reported as deposit costs within noninterest expense and are based primarily upon the number of HOA accounts managed by these companies, with cap rates based on the size and composition of the deposit relationships.

The Company’s efficiency ratio was 65.3% for the second quarter of 2025, compared to 67.5% for the first quarter of 2025, and 61.3% for the second quarter of 2024. The Company’s efficiency ratio was 66.4% for the first six months of 2025, compared to 60.7% for the first six months of 2024. For additional details, see “Non-GAAP measures” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Income Taxes

For the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, income tax expense was $10.0 million, $12.2 million, and $13.9 million, respectively, and the effective income tax rate was 23.7%, 25.4%, and 24.9%, respectively. For the six months ended June 30, 2025 and 2024, income tax expense was $22.2 million and $31.3 million, respectively, and the effective income tax rate was 24.6% and 26.0%, respectively. Our effective tax rate for the three and six months ended June 30, 2025 differs from the 21% federal statutory rate due to the impact of state taxes as well as various permanent tax differences, including tax-exempt income from municipal securities and loans, BOLI income, tax benefits associated with low-income housing tax credit investments, Section 162(m) limitation on the deduction of executive compensation, non-deductible transaction costs, and the exercise of stock options and vesting of other stock-based compensation.

The total amount of unrecognized tax benefits was $380,000 at June 30, 2025 and December 31, 2024, and was comprised of unrecognized tax benefits related to the Opus acquisition in 2020. The total amount of tax benefits that, if recognized, would favorably impact the effective tax rate was $149,000 at June 30, 2025 and December 31, 2024. It is reasonably possible that $380,000 of the Company's unrecognized tax benefits may be recognized within the next 12 months due to a lapse of the statute of limitations.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $123,000 and $99,000 for such interest at June 30, 2025 and December 31, 2024, respectively. No amounts for penalties were accrued.

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 2020. The expirations of the statutes of limitations related to the various state income and franchise tax returns vary by state.

71

The Company accounts for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of its assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required as of June 30, 2025 and December 31, 2024.

FINANCIAL CONDITION
 
At June 30, 2025, assets totaled $17.78 billion, a decrease of $120.4 million, or 0.7%, from $17.90 billion at December 31, 2024. The decrease was primarily due to a $139.2 million decrease in total loans and a $125.4 million decrease in investment securities, partially offset by a $181.8 million increase in cash and cash equivalents.

Total liabilities were $14.81 billion at June 30, 2025, compared to $14.95 billion at December 31, 2024. The decrease of $140.1 million, or 0.9%, from December 31, 2024 was primarily due to a $148.4 million decrease in subordinated debentures, partially offset by a $33.7 million increase in deposits.

Total stockholders’ equity was $2.98 billion as of June 30, 2025, an increase of $19.7 million from $2.96 billion at December 31, 2024. The increase was primarily due to $68.1 million of net income and $10.5 million of other comprehensive income, partially offset by $63.9 million in cash dividends.

Since the fourth quarter of 2024, we took steps to increase loan originations and supplemented our new loan production with select loan purchases and participations as well as reinvested excess liquidity into shorter-term U.S. Treasury securities. Improved loan originations also led to expanded depository relationships and a favorable deposit mix, with brokered certificates of deposit decreasing by $99.7 million during the second half of 2025. Prudent credit risk management continues to remain our priority. The continuation of positive asset quality trends from the second half of 2024 into the second quarter of 2025, coupled with the strength of our capital position, provides us with optionality and flexibility in terms of balance sheet management and position us well to navigate and address potential challenges that may arise from economic uncertainties.

Our book value per share increased to $30.67 at June 30, 2025 from $30.65 at December 31, 2024. At June 30, 2025, the Company’s tangible common equity to tangible assets ratio increased to 12.14% from 11.92% at December 31, 2024. Our tangible book value per share increased to $21.10 from $20.97 at December 31, 2024. The increase in tangible common equity ratio and tangible book value per share from prior year-end were primarily driven by net income and other comprehensive income, partially offset by dividends paid. The decrease in tangible assets also contributed to the increase in tangible common equity ratio. For additional details, see “Non-GAAP measures” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Investment Securities
 
Our investment policy, as established by our Asset Liability Committee, serves to provide and maintain liquidity, capital preservation, complement our lending activities, support our interest rate risk management and tax planning strategies, and generate a favorable return on investments without incurring undue interest rate and credit risks. Specifically, our investment policy generally limits our investments to U.S. government securities, federal agency-backed securities, U.S. government-sponsored enterprise (“GSE”) guaranteed mortgage-backed securities (“MBS”), which are guaranteed by Fannie Mae (“FNMA”), Freddie Mac (“FHLMC”), Federal Farm Credit Banks (“FFCB”), or Ginnie Mae (“GNMA”), U.S. Treasury securities, municipal bonds, and corporate bonds, specifically bank debt notes. The Bank has designated all investment securities as AFS or HTM. AFS securities are carried at estimated fair value, and debt securities classified as HTM are carried at amortized cost, net of ACL.

We primarily use our investment portfolio for liquidity purposes, capital preservation, and to support our interest rate risk management strategies. Our investment securities portfolio amounted to $3.27 billion at June 30, 2025, a decrease of $125.4 million, or 3.7%, from $3.40 billion at December 31, 2024. The decrease was the result of $453.2 million in principal payments, amortization and accretion, and redemptions, partially offset by $320.3 million in purchases of AFS U.S. Treasury securities, and an improvement of $7.5 million in AFS investment securities mark-to-market unrealized loss. The Company did not sell any investment securities during the six months ended June 30, 2025.

In general, the purchase of investment securities is primarily related to investing excess liquidity from our banking operations. During the six months ended June 30, 2025, we have maintained a meaningful portion of the AFS securities portfolio in highly-liquid, shorter term securities. 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. The effective duration of the AFS securities portfolio was 0.7 years and 0.9 years at June 30, 2025 and December 31, 2024, respectively. The effective duration of the total AFS and HTM securities portfolio was 4.7 years and 4.7 years at June 30, 2025 and December 31, 2024, respectively.

At June 30, 2025, AFS and HTM investment securities were $1.58 billion and $1.69 billion, respectively, compared to $1.68 billion and $1.71 billion, respectively, at December 31, 2024.

The ACL on investment securities is determined for both the AFS and HTM classifications of the investment portfolio in accordance with ASC 326 and evaluated on a quarterly basis. As of June 30, 2025 and December 31, 2024, the Company had an ACL of $103,000 and $110,000, respectively, for municipal bonds classified as HTM investment securities. The Company had no ACL for AFS investment securities at June 30, 2025 and December 31, 2024. For additional information, refer to Note 4 – Investment Securities to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q.

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The following table sets forth the fair value of AFS and the amortized cost of HTM investment securities as well as the weighted average yields on our investment securities portfolio by contractual maturity as of the date indicated. Weighted average yields are an arithmetic computation of income within each maturity range based on the amortized costs of securities, not on a tax-equivalent basis.
 June 30, 2025
One Year
or Less		More than One
to Five Years		More than Five Years
to Ten Years		More than
Ten Years		Total
(Dollars in thousands)AmountWeighted
Average
Yield		AmountWeighted
Average
Yield		AmountWeighted
Average
Yield		AmountWeighted
Average
Yield		AmountWeighted
Average
Yield
AFS investment securities:          
U.S. Treasury$772,600 4.43 %$322,401 3.95 %$— — %$— — %$1,095,001 4.29 %
Agency— — %572 6.46 %— — %333 2.27 %905 4.92 %
Corporate— — %214,328 5.23 %158,487 3.54 %— — %372,815 4.49 %
Collateralized mortgage obligations3,835 4.85 %62,559 4.78 %13,750 4.69 %32,866 6.16 %113,010 5.18 %
Total AFS investment securities776,435 4.43 %599,860 4.50 %172,237 3.64 %33,199 6.12 %1,581,731 4.40 %
HTM investment securities:          
Municipal bonds$— — %$38,940 1.44 %$43,068 1.81 %$1,061,050 2.05 %$1,143,058 2.02 %
Collateralized mortgage obligations— — %22 4.66 %— — %295,423 4.00 %295,445 4.00 %
Mortgage-backed securities— — %3,917 5.10 %5,064 4.81 %224,374 2.21 %233,355 2.32 %
Other— — %— — %— — %16,116 2.86 %16,116 2.86 %
Total HTM investment securities$— — %$42,879 1.78 %$48,132 2.13 %$1,596,963 2.44 %$1,687,974 2.42 %
Total securities$776,435 4.43 %$642,739 4.32 %$220,369 3.31 %$1,630,162 2.52 %$3,269,705 3.38 %
    
The following table presents the fair value of AFS and the amortized cost of HTM investment securities portfolios by Moody’s credit ratings at June 30, 2025.

(Dollars in thousands)U.S. TreasuryAgencyCorporate DebtMunicipal BondsCollateralized Mortgage ObligationsMortgage-backed SecuritiesOtherTotal%
Aaa - Aa3$1,095,001 $905 $— $1,143,058 $408,455 $233,355 $— $2,880,774 88.1 %
A1 - A3— — 169,357 — — — — 169,357 5.2 %
Baa1 - Baa3— — 203,458 — — — 16,116 219,574 6.7 %
Total$1,095,001 $905 $372,815 $1,143,058 $408,455 $233,355 $16,116 $3,269,705 100.0 %

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 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 continue to monitor the quality of our municipal bond portfolio in accordance with current financial conditions.

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Loans

Loans held for investment totaled $11.90 billion at June 30, 2025, a decrease of $137.7 million, or 1.1%, from $12.04 billion at December 31, 2024. The decrease was primarily a result of loan maturities and prepayments, partially offset by loan originations and purchases during the first six months of 2025. Since December 31, 2024, investor loans secured by real estate decreased $195.0 million, business loans secured by real estate decreased $110.4 million, commercial loans increased $124.4 million, and retail loans increased $37.6 million. The commercial line average utilization rate decreased moderately from an average rate of 32.3% for the fourth quarter of 2024 to 31.5% for the second quarter of 2025. Since the fourth quarter of 2024 and continuing into the second quarter of 2025, we have taken strategic steps, including pricing adjustments as well as building and deepening relationships with new and existing customers, to positively impact new loan originations and loan retention, particularly in multifamily, C&I, CRE, and construction loans. In addition to organic loan growth, we have purchased $244.5 million in commercial and industrial loans and $43.0 million in single family residential loans during the first six months of 2025.

The total end-of-period weighted average interest rate on loans, excluding fees and discounts, at June 30, 2025 was 4.83%, compared to 4.78% at December 31, 2024. The increase was primarily attributable to higher-yielding new loan fundings and loan purchases, which exceeded the rates of loan prepayments and payoffs.

Loans held for sale primarily represents the guaranteed portion of SBA loans, which the Bank originates for sale. At June 30, 2025, the Bank had $751,000 of loans held for sale, compared to none at December 31, 2024.

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The following table sets forth the composition of our loan portfolio in dollar amounts and as a percentage of the portfolio, and gives the weighted average interest rate by loan category at the dates indicated: 
 June 30, 2025December 31, 2024
(Dollars in thousands)AmountPercent
of Total		Weighted
Average
Interest Rate		AmountPercent
of Total		Weighted
Average
Interest Rate
Investor loans secured by real estate      
CRE non-owner-occupied$2,084,781 17.5 %4.84 %$2,131,112 17.7 %4.80 %
Multifamily5,255,040 44.2 %4.14 %5,326,009 44.2 %4.05 %
Construction and land302,781 2.5 %8.05 %379,143 3.1 %8.17 %
SBA secured by real estate27,405 0.2 %8.34 %28,777 0.2 %8.73 %
Total investor loans secured by real estate7,670,007 64.4 %4.50 %7,865,041 65.2 %4.47 %
Business loans secured by real estate
CRE owner-occupied1,918,031 16.1 %4.47 %1,995,144 16.6 %4.42 %
Franchise real estate secured227,080 1.9 %5.15 %255,694 2.1 %4.85 %
SBA secured by real estate39,263 0.4 %8.06 %43,978 0.4 %8.51 %
Total business loans secured by real estate2,184,374 18.4 %4.61 %2,294,816 19.1 %4.54 %
Commercial loans
Commercial and industrial1,643,977 13.8 %6.34 %1,486,340 12.3 %6.44 %
Franchise non-real estate secured180,708 1.5 %5.23 %213,357 1.8 %5.17 %
SBA non-real estate secured7,472 0.1 %9.08 %8,086 0.1 %9.50 %
Total commercial loans1,832,157 15.4 %6.25 %1,707,783 14.2 %6.30 %
Retail loans
Single family residential224,483 1.9 %6.86 %186,739 1.6 %6.87 %
Consumer1,658 — %10.75 %1,804 — %9.44 %
Total retail loans226,141 1.9 %6.89 %188,543 1.6 %6.90 %
Loans held for investment before basis adjustment (1)
11,912,679 100.1 %4.83 %12,056,183 100.1 %4.78 %
Basis adjustment associated with fair value hedge (2)
(10,600)(0.1)%(16,442)(0.1)%
Loans held for investment11,902,079 100.0 %12,039,741 100.0 %
Allowance for credit losses for loans held for investment(170,663)(178,186)
Loans held for investment, net$11,731,416 $11,861,555 
Total unfunded loan commitments$1,723,901 $1,532,623 
Loans held for sale, at lower of cost or fair value$751 $2,315 
______________________________
(1) Includes unamortized net purchase premiums of $11.2 million and $9.1 million, net deferred origination (fees) costs of $(103,000) and $1.1 million, and unaccreted fair value net purchase discounts of $29.5 million and $33.2 million as of June 30, 2025 and December 31, 2024, respectively.
(2) Represents the basis adjustment associated with the application of hedge accounting on certain loans. The basis adjustment will be allocated to the amortized cost of associated loans within the closed portfolio if the hedge is discontinued. Refer to Note 11 – Derivative Instruments to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.


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We also have a granular and geographically diverse set of lending relationships. In the tables below, we show the segmentation and geographic dispersion of certain loan portfolios as of June 30, 2025 and December 31, 2024.

CRE Non-Owner-Occupied. CRE non-owner-occupied loans totaled $2.08 billion at June 30, 2025 and $2.13 billion at December 31, 2024. We originate loans that are secured by investor owned CRE, such as retail centers, small office locations, light industrial buildings, and mixed-use commercial properties located in our primary market areas. We believe this loan portfolio is a well-balanced portfolio by geography and by property type as presented below:
June 30, 2025December 31, 2024
(Dollars in thousands)Amount%Amount%
By Property Type
Hotel and Motel$281,127 14 %$273,897 13 %
Industrial256,295 12 %265,437 12 %
Office543,831 26 %556,351 26 %
Retail639,569 31 %658,238 31 %
Other363,959 17 %377,189 18 %
Total CRE non-owner-occupied$2,084,781 100 %$2,131,112 100 %

By Geography(1)
California:
Los Angeles$546,519 26 %$550,187 26 %
Orange299,000 14 %306,388 14 %
Riverside119,020 6 %117,482 6 %
San Bernardino45,012 2 %48,301 2 %
San Diego141,484 7 %146,102 7 %
San Luis Obispo162,567 8 %166,996 8 %
Santa Barbara59,159 3 %62,915 3 %
Ventura16,244 1 %21,224 1 %
Other CA187,035 9 %186,529 9 %
Arizona154,158 7 %156,464 7 %
Nevada114,272 6 %120,493 6 %
Washington68,587 3 %70,571 3 %
Other States171,724 8 %177,460 8 %
Total CRE non-owner-occupied$2,084,781 100 %$2,131,112 100 %
______________________________
(1) Based on location of primary real property collateral. All California information is by respective county.


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Multifamily. Multifamily loans totaled $5.26 billion at June 30, 2025 and $5.33 billion at December 31, 2024. We originate loans secured by multifamily residential properties (five units and greater) located in our primary market areas. These lending relationships consist of seasoned owners of multifamily properties with extensive operating experience. The loans are stratified by number of units and physical location below:

June 30, 2025December 31, 2024
(Dollars in thousands)Amount%Amount%
By Number of Units
10 or fewer units$981,174 19 %$1,018,112 19 %
11-25 units1,530,107 29 %1,562,806 29 %
26-50 units1,037,534 20 %1,033,483 20 %
51-100 units1,000,344 19 %1,031,461 19 %
101+ units705,881 13 %680,147 13 %
Total Multifamily$5,255,040 100 %$5,326,009 100 %

By Geography(1)
California:
Los Angeles$2,030,633 39 %$2,070,683 39 %
Orange190,314 4 %191,818 3 %
Riverside108,561 2 %104,877 2 %
San Bernardino140,079 3 %135,016 2 %
San Diego338,330 6 %343,632 6 %
San Luis Obispo22,727 — %23,112 1 %
Santa Barbara37,717 1 %38,055 1 %
Ventura39,501 1 %39,967 1 %
Other CA642,406 12 %657,237 12 %
Arizona411,806 8 %419,761 8 %
Nevada170,958 3 %149,943 3 %
Washington619,711 12 %635,171 12 %
Other States502,297 9 %516,737 10 %
Total Multifamily$5,255,040 100 %$5,326,009 100 %
______________________________
(1) Based on location of primary real property collateral. All California information is by respective county.


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CRE Owner-Occupied. CRE owner-occupied loans totaled $1.92 billion at June 30, 2025 and $2.00 billion at December 31, 2024. We originate business loans secured by owner-occupied CRE, such as light industrial buildings, mixed-use commercial properties, and small office locations for professional services located in our primary market areas. These loans are underwritten and analyzed based on each business’s cash flows. We believe this portfolio is well-diversified by industry, with a geography covering California and the Western U.S.:

June 30, 2025December 31, 2024
(Dollars in thousands)Amount%Amount%
By Industry(1)
Accommodation and Food Services$96,946 5 %$108,194 5 %
Administrative and Support64,823 3 %61,419 3 %
Agriculture88,726 5 %91,119 4 %
Construction128,852 7 %134,580 7 %
Educational Services152,129 8 %156,161 8 %
Entertainment63,676 3 %68,939 3 %
Financial Services35,812 2 %36,936 2 %
Health Care285,211 15 %293,535 15 %
Manufacturing218,345 11 %216,204 11 %
Other Services202,897 11 %222,140 11 %
Professional Services81,167 4 %93,082 5 %
Real Estate91,230 5 %92,678 5 %
Retail Trade166,163 9 %180,564 9 %
Transport and Warehouse38,210 2 %39,118 2 %
Wholesale Trade175,390 9 %171,372 9 %
Other28,454 1 %29,103 1 %
Total CRE owner-occupied$1,918,031 100 %$1,995,144 100 %

By Geography(2)
California:
Los Angeles$605,154 32 %$628,759 32 %
Orange197,436 10 %190,254 10 %
Riverside313,197 16 %325,295 16 %
San Bernardino170,185 9 %180,647 9 %
San Diego117,342 6 %122,555 6 %
San Luis Obispo79,862 4 %82,597 4 %
Santa Barbara103,394 6 %107,251 5 %
Ventura40,418 2 %42,617 2 %
Other CA119,055 6 %127,515 7 %
Arizona62,220 3 %57,865 3 %
Nevada36,949 2 %46,000 2 %
Washington17,442 1 %18,527 1 %
Other States55,377 3 %65,262 3 %
Total CRE owner-occupied$1,918,031 100 %$1,995,144 100 %
______________________________
(1) Distribution by North American Industry Classification System (NAICS).
(2) Based on location of primary real property collateral. All California information is by respective county.

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Commercial & Industrial. C&I loans totaled $1.64 billion at June 30, 2025 and $1.49 billion at December 31, 2024. We originate C&I loans secured by various business assets, including inventory, receivables, machinery, and equipment. Loan types include revolving lines of credit, term loans, seasonal loans, and loans secured by liquid collateral such as cash deposits or marketable securities. These loans are underwritten and analyzed based on each business’s cash flows. During the first half of 2025, we also complemented our organic loan origination with strategic loan purchases and participations of $244.5 million in C&I loans. This portfolio includes loans to small and middle market businesses by industry and by geography as shown below:
June 30, 2025December 31, 2024
(Dollars in thousands)Amount%Amount%
By Industry(1)
Accommodation and Food Services$106,874 6 %$56,791 4 %
Administrative63,739 4 %58,184 4 %
Agriculture26,779 2 %26,893 2 %
Construction140,837 9 %141,109 9 %
Educational Services26,079 2 %29,145 2 %
Entertainment69,486 4 %62,637 4 %
Financial Services56,489 3 %82,553 6 %
Health Care55,119 3 %55,665 4 %
Information11,608 1 %21,312 1 %
Manufacturing415,441 25 %315,118 21 %
Other Services102,581 6 %115,523 8 %
Professional Services81,993 5 %80,248 5 %
Public Administration148,606 9 %156,010 11 %
Real Estate108,136 7 %109,742 7 %
Retail Trade51,541 3 %37,529 3 %
Transport and Warehouse74,817 5 %70,244 5 %
Wholesale Trade102,493 6 %62,019 4 %
Other1,359 — %5,618 — %
Total Commercial and industrial$1,643,977 100 %$1,486,340 100 %
By Geography(2)
California:
Los Angeles$273,589 17 %$252,632 17 %
Orange179,651 11 %226,331 15 %
Riverside68,372 4 %72,770 5 %
San Bernardino50,672 3 %51,960 4 %
San Diego90,203 6 %95,473 6 %
San Luis Obispo36,202 2 %37,517 3 %
Santa Barbara18,484 1 %19,671 1 %
Ventura19,856 1 %21,005 1 %
Other CA128,733 8 %135,608 9 %
Arizona12,967 1 %10,630 1 %
Nevada21,937 1 %21,989 2 %
Washington50,161 3 %48,771 3 %
Other States693,150 42 %491,983 33 %
Total Commercial and industrial$1,643,977 100 %$1,486,340 100 %
______________________________
(1) Distribution by North American Industry Classification System (NAICS)
(2) Based on location of primary real property collateral if available, otherwise borrower address is used. All California information is by respective county.
(3) Other states is primarily comprised of loans purchased and participated outside our primary geographic footprint. As of June 30, 2025, Illinois and Pennsylvania represented $111.2 million, or 7% and $90.3 million, or 5%, of total C&I loans, respectively, and no other state exceeded 4% of total C&I loans. As of December 31, 2024, Pennsylvania represented $79.5 million of total C&I loans and no other state exceeded 4% of total C&I loans.
80

Delinquent Loans 

When a borrower fails to make required payments on a loan and does not cure the delinquency within 30 days, we normally will develop a plan with the borrower to remediate the problem or initiate proceedings to pursue our remedies under the loan documents. For loans secured by real estate, we provide the required notices to the borrower and make any required filings, and commence foreclosure proceedings if necessary. If the loan is not reinstated within the time permitted by law, we may sell the property at a foreclosure sale. At these foreclosure sales, we generally acquire title to the property. At June 30, 2025, loans delinquent 30 or more days as a percentage of total loans held for investment was 0.02%, unchanged from 0.02% at December 31, 2024.

The following table sets forth delinquencies in the Company’s loan portfolio as of the dates indicated:
 30 - 59 Days60 - 89 Days90 Days or MoreTotal
(Dollars in thousands)# of
Loans
Loan Balance
# of
Loans
Loan Balance
# of
Loans
Loan Balance
# of
Loans
Loan Balance
At June 30, 2025        
Commercial loans
Commercial and industrial7 $300 4 $99 2 $1,241 13 $1,640 
SBA non-real estate secured— — — — 1 18 1 18 
Total commercial loans7 300 4 99 3 1,259 14 1,658 
Retail loans
Single family residential2 389 — — — — 2 389 
Total retail loans2 389 — — — — 2 389 
Total9 $689 4 $99 3 $1,259 16 $2,047 
Delinquent loans to loans held for investment 0.01 % — % 0.01 %0.02 %

At December 31, 2024
Commercial loans
Commercial and industrial5 $824 3 $349 2 $1,241 10 $2,414 
SBA non-real estate secured2 49 — — 1 20 3 69 
Total commercial loans7 873 3 349 3 1,261 13 2,483 
Retail loans
Single family residential1 136 — — — — 1 136 
Total retail loans1 136 — — — — 1 136 
Total8 $1,009 3 $349 3 $1,261 14 $2,619 
Delinquent loans to loans held for investment0.01 %— %0.01 %0.02 %

Modified Loans to Troubled Borrowers

A modified loan to troubled borrowers (“MLTB”) arises from a modification made to a loan in response to a borrower’s financial difficulty in order to alleviate temporary impairments in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. GAAP requires that certain types of modifications be reported, which consist of the following:

•Principal forgiveness
•Interest rate reduction
•Other-than-insignificant payment delay
•Term extension
•Any combination of the above

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See Note 1 - Description of Business and Summary of Significant Accounting Policies of our audited consolidated financial statements included in our 2024 Form 10-K for additional discussion on MLTBs.

As of June 30, 2025, the Company had two MLTB of $9.7 million, the modification of which involved a combination of other-than-insignificant payment delay and a term extension. During the three and six months ended June 30, 2025, there were no MLTBs that had a payment default and had been modified within the 12 months preceding the payment default.

As of June 30, 2024, the Company had three MLTBs totaling $28.0 million. This consisted of two syndicated C&I participation loan modifications to one borrower totaling $11.7 million, the modification of which involved other-than-insignificant payment delays, and a loan to another borrower for $16.3 million, the modification of which involved a combination of other-than-insignificant payment delays and a term extension. During the three and six months ended June 30, 2024, there were no MLTBs that had a payment default and had been modified within the 12 months preceding the payment default.

Credit Quality

We separate our loans by type, and we segregate the loans into various risk grade categories of “Pass,” “Special Mention,” “Substandard,” “Doubtful,” or “Loss.” Classified loans consists of those with a credit risk rating of substandard, doubtful, or loss. For additional information on the Company’s credit quality and credit risk grades, see Note 5 – Loans Held for Investment of the notes to the consolidated financial statements in this Quarterly Report on Form 10-Q.

Classified loans totaled $89.1 million, or 0.75% of loans held for investment, at June 30, 2025, compared to $106.2 million, or 0.88% of loans held for investment, at December 31, 2024. The decrease was primarily driven by the decline in classified CRE and franchise non-real estate loans during the first six months of 2025.

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The following tables stratify the loan portfolio by the Company’s internal risk grading as of the dates indicated:
Credit Risk Grades
(Dollars in thousands)PassSpecial
Mention		SubstandardDoubtfulTotal Gross
Loans
June 30, 2025
Investor loans secured by real estate    
CRE non-owner-occupied$2,051,123 $6,835 $26,823 $— $2,084,781 
Multifamily5,242,497 12,543 — — 5,255,040 
Construction and land267,096 35,685 — — 302,781 
SBA secured by real estate18,580 2,379 6,446 — 27,405 
Total investor loans secured by real estate7,579,296 57,442 33,269 — 7,670,007 
Business loans secured by real estate
CRE owner-occupied1,817,856 67,553 32,622 — 1,918,031 
Franchise real estate secured212,707 12,849 1,524 — 227,080 
SBA secured by real estate35,998 — 3,265 — 39,263 
Total business loans secured by real estate2,066,561 80,402 37,411 — 2,184,374 
Commercial loans
Commercial and industrial1,614,604 13,699 12,789 2,885 1,643,977 
Franchise non-real estate secured178,970 178 1,560 — 180,708 
SBA non-real estate secured6,393 — 1,079 — 7,472 
Total commercial loans1,799,967 13,877 15,428 2,885 1,832,157 
Retail loans
Single family residential224,356 — 127 — 224,483 
Consumer loans1,658 — — — 1,658 
Total retail loans226,014 — 127 — 226,141 
Loans held for investment before basis adjustment (1)
$11,671,838 $151,721 $86,235 $2,885 $11,912,679 
December 31, 2024
Investor loans secured by real estate    
CRE non-owner-occupied$2,093,693 $4,449 $32,970 $— $2,131,112 
Multifamily5,298,289 27,720 — — 5,326,009 
Construction and land369,335 9,808 — — 379,143 
SBA secured by real estate24,048 — 4,729 — 28,777 
Total investor loans secured by real estate7,785,365 41,977 37,699 — 7,865,041 
Business loans secured by real estate
CRE owner-occupied1,916,321 38,389 40,434 — 1,995,144 
Franchise real estate secured241,010 14,684 — — 255,694 
SBA secured by real estate40,861 — 3,117 — 43,978 
Total business loans secured by real estate2,198,192 53,073 43,551 — 2,294,816 
Commercial loans
Commercial and industrial1,455,916 12,838 14,701 2,885 1,486,340 
Franchise non-real estate secured205,437 702 7,218 — 213,357 
SBA non-real estate secured7,891 — 195 — 8,086 
Total commercial loans1,669,244 13,540 22,114 2,885 1,707,783 
Retail loans
Single family residential186,739 — — — 186,739 
Consumer loans1,804 — — — 1,804 
Total retail loans188,543 — — — 188,543 
Loans held for investment before basis adjustment (1)
$11,841,344 $108,590 $103,364 $2,885 $12,056,183 
______________________________
(1) Excludes the basis adjustment of $10.6 million and $16.4 million to the carrying amount of certain loans included in fair value hedging relationships at June 30, 2025 and December 31, 2024. Refer to Note 11 – Derivative Instruments to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.


83

Nonperforming Assets
 
Nonperforming assets consist of loans whereby we have ceased accruing interest (i.e., nonaccrual loans), other real estate owned (“OREO”), and other repossessed assets owned. Nonaccrual loans generally consist of loans that are 90 days or more past due and loans where, in the opinion of management, there is reasonable doubt as to the full collection of principal and interest regardless of the length of past due status.

Nonperforming assets decreased by $2.6 million to $26.3 million, or 0.15% of total assets, at June 30, 2025, compared to $28.9 million, or 0.16% of total assets, at December 31, 2024. The decrease in nonperforming assets from the prior year-end was primarily attributed to $1.2 million repayments on a C&I lending relationship and $619,000 repayments on a CRE lending relationship, and the sale of a single nonperforming loan held for sale of $825,000 included in nonperforming assets at December 31, 2024.

At June 30, 2025, nonperforming loans totaled $26.3 million, or 0.22% of loans held for investment, a decrease from $28.0 million, or 0.23% of loans held for investment, at December 31, 2024.

The Company reported no OREO at June 30, 2025 and December 31, 2024.

The Company had no loans 90 days or more past due and still accruing at June 30, 2025 and December 31, 2024.

The following table sets forth the composition of nonperforming assets at the dates indicated:
(Dollars in thousands)June 30, 2025December 31, 2024
Nonperforming assets
Investor loans secured by real estate
CRE non-owner-occupied$14,805 $15,423 
SBA secured by real estate380 409 
Total investor loans secured by real estate15,185 15,832 
Commercial loans
Commercial and industrial10,971 12,179 
SBA non-real estate secured18 20 
Total commercial loans10,989 12,199 
Retail loans
Single family residential127 — 
Total retail loans127 — 
Total nonperforming loans held for investment
26,301 28,031 
Nonperforming loans held for sale
— 825 
Other real estate owned— — 
Total nonperforming assets
$26,301 $28,856 
Allowance for credit losses$170,663 $178,186 
Allowance for credit losses as a percent of total nonperforming loans649 %636 %
Nonperforming loans as a percent of loans held for investment0.22 %0.23 %
Nonperforming assets as a percent of total assets0.15 %0.16 %
MLTBs included in nonperforming loans$9,730 $13,563 
84

Allowance for Credit Losses

The Company maintains an ACL for loans and unfunded loan commitments in accordance with ASC 326, which requires the Company to record an initial 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, except those that have been deemed collateral dependent are evaluated individually based on the expected estimated fair value of the underlying collateral.

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 unfunded 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”). In the case of unfunded loan commitments, the Company incorporates estimates for utilization, based on historical loan data. PD and LGD for investor loans secured by real estate loans are derived from a third party, using proxy loan information, and loan and property level attributes. PD for both investor and business real estate loans, as well as commercial loans, is heavily impacted by current and expected economic conditions. Forecasts for PDs and LGDs are made over a two-year period, which we believe is reasonable and supportable, and are based on economic scenarios. Beyond this point, PDs and LGDs revert to their historical long-term averages. The Company has reflected this reversion over a period of three years in the ACL model.

The Company’s ACL includes assumptions concerning current and future economic conditions using reasonable and supportable forecasts from an independent third party. These economic forecast scenarios are based on past events, current conditions, and the likelihood of future events occurring. Management periodically evaluates economic scenarios used in the Company’s ACL model, and thus the scenarios as well as the assumptions within those scenarios, and whether to use a 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. As of June 30, 2025, the Company’s ACL model used three weighted scenarios representing a base-case scenario, an upside scenario, and a downside scenario. The use of three weighted scenarios at June 30, 2025 is consistent with the approach used in the Company’s ACL model at March 31, 2025. The Company’s ACL model at June 30, 2025 includes assumptions concerning the interest rate environment, general uncertainty concerning future economic conditions, and the potential for future recessionary conditions. The Company has identified certain economic variables that have significant influence in the Company’s model for determining the ACL. These key economic variables include forecasted changes in the U.S. unemployment rate, U.S. real GDP growth, CRE prices, and interest rates.

The Company considers the need for qualitative adjustments to the ACL on a quarterly basis. 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, 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. Qualitative adjustments at June 30, 2025 served to increase or decrease the level of allocated ACL to these segments of the loan portfolio: investor loans secured by real estate and retail loans.
85

The following charts quantify the factors attributing to the changes in the ACL on loans held for investment for the three and six months ended June 30, 2025 and June 30, 2024:

ACL change attributions ($ in millions)

52295230
1539316279654015393162796546

For additional information on the provision for credit losses and ACL on loans and ACL for off-balance sheet commitments related to unfunded loans and lines of credit, refer to “Provision for Credit Losses” presented under Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 6 – Allowance for Credit Losses to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q.

At June 30, 2025 and 2024, the Company believes the ACL was adequate to cover current expected credit losses in the loan portfolio. However, 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 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 changes to the ACL based on judgments different from those of management. 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.
86

The following table sets forth the Company’s ACL, its corresponding percentage of the loan category balance, and the percent of loan balance to total loans held for investment in each of the loan categories listed as of the dates indicated:
 June 30, 2025December 31, 2024
(Dollars in thousands)Amount
Allowance as a % of Segment
% of
Total Loans
Amount
Allowance as a % of Segment
% of
Total Loans
Investor loans secured by real estate      
CRE non-owner-occupied$27,120 1.30 %17.5 %$26,408 1.24 %17.7 %
Multifamily53,978 1.03 %44.2 %53,305 1.00 %44.2 %
Construction and land3,567 1.18 %2.5 %5,230 1.38 %3.1 %
SBA secured by real estate1,127 4.11 %0.2 %1,722 5.98 %0.2 %
Total investor loans secured by real estate85,792 1.12 %64.4 %86,665 1.10 %65.2 %
Business loans secured by real estate
CRE owner-occupied27,921 1.46 %16.1 %31,794 1.59 %16.6 %
Franchise real estate secured4,012 1.77 %1.9 %5,836 2.28 %2.1 %
SBA secured by real estate3,449 8.78 %0.4 %3,831 8.71 %0.4 %
Total business loans secured by real estate35,382 1.62 %18.4 %41,461 1.81 %19.1 %
Commercial loans
Commercial and industrial40,099 2.44 %13.8 %37,603 2.53 %12.3 %
Franchise non-real estate secured6,604 3.65 %1.5 %10,794 5.06 %1.8 %
SBA non-real estate secured437 5.85 %0.1 %359 4.44 %0.1 %
Total commercial loans47,140 2.57 %15.4 %48,756 2.85 %14.2 %
Retail loans
Single family residential2,237 1.00 %1.9 %1,193 0.64 %1.6 %
Consumer loans112 6.76 %— %111 6.15 %— %
Total retail loans2,349 1.04 %1.9 %1,304 0.69 %1.6 %
Total (1)
$170,663 1.43 %100.0 %$178,186 1.48 %100.0 %
______________________________
(1) Total loans utilized in the calculation of the ratio of ACL to total loans held for investment includes $10.6 million and $16.4 million of the basis adjustment of certain loans used in fair value hedging relationships as of June 30, 2025 and December 31, 2024, respectively. Refer to Note 11 – Derivative Instruments to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.

At June 30, 2025, the ratio of ACL to loans held for investment was 1.43%, a decrease from 1.48% at December 31, 2024. Our unamortized fair value discount on the loans acquired totaled $29.5 million, or 0.25% of total loans held for investment, at June 30, 2025, compared to $33.2 million, or 0.28% of total loans held for investment, at December 31, 2024.


87

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

At and for Three Months Ended
June 30, 2025March 31, 2025June 30, 2024
(Dollars in thousands)Net Charge-offs (Recoveries)Average Loan BalancePercentageNet Charge-offs (Recoveries)Average Loan BalancePercentageNet Charge-offs (Recoveries)Average Loan BalancePercentage
Investor loans secured by real estate
CRE non-owner-occupied$— $2,101,391 —%$— $2,108,856 —%$2,696 $2,280,616 0.12%
Multifamily— 5,261,357 —%— 5,296,062 —%7,372 5,515,912 0.13%
Construction and land— 298,628 —%— 379,080 —%— 461,060 —%
SBA secured by real estate— 27,462 —%(30)29,061 (0.10)%67 34,110 0.20%
Total investor loans secured by real estate— 7,688,838 —%(30)7,813,059 —%10,135 8,291,698 0.12%
Business loans secured by real estate
CRE owner-occupied— 1,922,225 —%— 1,975,525 —%(121)2,117,338 (0.01)%
Franchise real estate secured— 233,954 —%— 247,323 —%— 282,684 —%
SBA secured by real estate— 40,565 —%— 44,420 —%(1)47,365 —%
Total business loans secured by real estate— 2,196,744 —%— 2,267,268 —%(122)2,447,387 —%
Commercial loans
Commercial and industrial(18)1,626,755 —%(317)1,513,333 (0.02)%820 1,655,962 0.05%
Franchise non-real estate secured22 184,509 0.01%— 205,390 —%(1,375)278,143 (0.49)%
SBA non-real estate secured(2)7,674 (0.03)%(6)7,770 (0.08)%3 11,218 0.03%
Total commercial loans2 1,818,938 —%(323)1,726,493 (0.02)%(552)1,945,323 (0.03)%
Retail loans
Single family residential(9)229,309 —%— 188,344 —%(3)70,633 —%
Consumer(342)1,632 (20.96)%10 1,848 0.54%835 2,270 36.78%
Total retail loans(351)230,941 (0.15)%10 190,192 0.01%832 72,903 1.14%
Total (1)
$(349)$11,923,520 —%$(343)$11,981,674 —%$10,293 $12,724,401 0.08%
Allowance for credit losses to loans held for investment1.43%1.46%1.47%
Nonperforming loans to loans held for investment0.22%0.23%0.42%
Allowance for credit losses to nonperforming loans649%632%353%
______________________________
(1) Average loan balance includes $11.9 million, $15.3 million, and $32.9 million of average basis adjustment of certain loans included in fair value hedging relationships for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. Refer to Note 11 – Derivative Instruments to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.




88

For the Six Months Ended
June 30, 2025June 30, 2024
(Dollars in thousands)Net Charge-offs (Recoveries)Average Loan BalancePercentageNet Charge-offs (Recoveries)Average Loan BalancePercentage
Investor loans secured by real estate
CRE non-owner-occupied$— $2,105,103 —%$3,623 $2,319,085 0.16%
Multifamily— 5,278,614 —%7,367 5,562,856 0.13%
Construction and land— 338,632 —%— 470,436 —%
SBA secured by real estate(30)28,257 (0.11)%320 35,011 0.91%
Total investor loans secured by real estate(30)7,750,606 —%11,310 8,387,388 0.13%
Business loans secured by real estate
CRE owner-occupied— 1,948,728 —%4,268 2,149,899 0.20%
Franchise real estate secured— 240,602 —%212 291,756 0.07%
SBA secured by real estate— 42,481 —%(2)48,586 —%
Total business loans secured by real estate— 2,231,811 —%4,478 2,490,241 0.18%
Commercial loans
Commercial and industrial(335)1,570,357 (0.02)%1,366 1,712,921 0.08%
Franchise non-real estate secured22 194,892 0.01%(1,275)293,488 (0.43)%
SBA non-real estate secured(8)7,722 (0.10)%1 11,042 0.01%
Total commercial loans(321)1,772,971 (0.02)%92 2,017,451 —%
Retail loans
Single family residential(9)208,940 —%(3)71,359 —%
Consumer(332)1,739 (19.09)%835 2,189 38.15%
Total retail loans(341)210,679 (0.16)%832 73,548 1.13%
Total (1)
$(692)$11,952,437 (0.01)%$16,712 $12,936,723 0.13%
Allowance for credit losses to loans held for investment1.43%1.47%
Nonperforming loans to loans held for investment0.22%0.42%
Allowance for credit losses to nonperforming loans649%353%
______________________________
(1) Average loan balance includes $13.6 million and $31.9 million of average basis adjustment of certain loans included in fair value hedging relationships for the six months ended June 30, 2025 and June 30, 2024, respectively. Refer to Note 11 – Derivative Instruments to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.
89

Deposits 

At June 30, 2025, total deposits were $14.50 billion, an increase of $33.7 million, or 0.2%, from $14.46 billion at December 31, 2024. The increase was primarily driven by increases of 197.7 million in money market and savings and $70.8 million in noninterest-bearing checking, partially offset by decreases of $99.7 million in brokered certificates of deposit, $84.1 million in interest-bearing checking, and $51.0 million in retail certificates of deposit.

At June 30, 2025, non-maturity deposits totaled $12.54 billion, or 86.5% of total deposits, an increase of $184.4 million, or 1.5%, from December 31, 2024. The increase was primarily in seasonal deposit growth within our HOA business as well as municipal deposits. Our non-maturity deposits reflect our well-diversified and relationship-focused business model that has resulted in noninterest-bearing checking deposits representing 32.3% of total deposits as of June 30, 2025.

At June 30, 2025, maturity deposits totaled $1.96 billion, a decrease of $150.7 million, or 7.1%, from December 31, 2024. The decrease was primarily driven by decreases of $99.7 million in brokered certificates of deposit and $51.0 million in retail certificates of deposit.

The total end-of-period weighted average rate of deposits at June 30, 2025 was 1.60%, a decrease from 1.72% at December 31, 2024, principally driven by decreases in higher-cost maturity deposits as well as pricing actions across deposit categories. At June 30, 2025, the end-of-period weighted average rate of non-maturity deposits was 1.24%, compared to 1.24% at December 31, 2024.

As of June 30, 2025, the Bank counted one client, a property management holding company, with deposits of $750.3 million, or 5.2% of total deposits, and 10,842 total deposit accounts. No other individual depositor represented more than 1.4% of our total deposits, and our top 50 depositors represented 13.4% of our total deposits.

Our ratio of loans held for investment to deposits was 82.1% and 83.3% at June 30, 2025 and December 31, 2024, respectively.

The following table sets forth the distribution of the Company’s deposit accounts at the dates indicated and the weighted average interest rates as of the last day of each period for each category of deposits presented:
 June 30, 2025December 31, 2024
(Dollars in thousands)Balance% of Total DepositsWeighted Average RateBalance% of Total DepositsWeighted Average Rate
Noninterest-bearing checking$4,687,795 32.3 %— %$4,617,013 31.9 %— %
Interest-bearing deposits:
Interest-bearing checking2,814,687 19.4 %1.46 %2,898,810 20.0 %1.58 %
Money market4,788,067 33.0 %2.37 %4,577,646 31.7 %2.34 %
Savings247,591 1.7 %0.33 %260,283 1.8 %0.37 %
Total non-maturity deposits12,538,140 86.4 %1.24 %12,353,752 85.4 %1.24 %
Time deposit accounts:
Less than 1.00%36,222 0.2 %0.39 %29,299 0.2 %0.39 %
1.00 - 1.9925,758 0.2 %1.54 %17,609 0.1 %1.86 %
2.00 - 2.9921,815 0.2 %2.63 %14,814 0.1 %2.67 %
3.00 - 3.991,357,418 9.4 %3.82 %311,972 2.2 %3.81 %
4.00 - 4.99417,636 2.9 %4.44 %1,386,196 9.7 %4.65 %
5.00 and greater100,384 0.7 %5.00 %350,060 2.4 %5.07 %
Total time deposit accounts1,959,233 13.6 %3.91 %2,109,950 14.7 %4.50 %
Total deposits$14,497,373 100.0 %1.60 %$14,463,702 100.0 %1.72 %
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The following table sets forth the estimated deposits exceeding the FDIC insurance limit:
(Dollars in thousands)June 30, 2025December 31, 2024
Uninsured deposits$5,991,359 $5,781,072 

The Bank is a member of the IntraFi Network (“IntraFi”), which offers deposit placement services, including both the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Service (“ICS”) programs, that qualify large deposits for FDIC insurance. These reciprocal deposit structures offer protection to depositors by fully insuring deposits with other network banks.

At June 30, 2025, the Company’s FDIC-insured deposits as a percentage of total deposits was 59%. Insured and collateralized deposits comprised 65% of total deposits at June 30, 2025, which includes federally-insured deposits, $863.4 million of collateralized municipal and tribal deposits, and $35.0 million of privately insured deposits. At December 31, 2024, the Company’s FDIC-insured deposits as a percentage of total deposits was 60%. Insured and collateralized deposits comprised 66% of total deposits at December 31, 2024, which includes federally-insured deposits, $765.6 million of collateralized municipal and tribal deposits, and $45.0 million of privately insured deposits.

The estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $431.5 million at June 30, 2025 and $439.8 million at December 31, 2024. The following table sets forth the maturity distribution of the estimated uninsured time deposits:

(Dollars in thousands)June 30, 2025December 31, 2024
3 months or less$256,475 $283,029 
Over 3 months through 6 months113,275 92,215 
Over 6 months through 12 months50,101 60,205 
Over 12 months11,634 4,380 
Total$431,485 $439,829 


Borrowings 

At June 30, 2025, total borrowings amounted to $124.0 million, a decrease of $148.4 million from $272.4 million at December 31, 2024. Total borrowings at June 30, 2025 were solely comprised of $124.0 million of subordinated debentures. The decrease in borrowings at June 30, 2025 as compared to December 31, 2024 was due to the early redemption of $150.0 million in subordinated notes due 2030. At June 30, 2025, total borrowings represented 0.7% of total assets and had an end-of-period weighted average rate of 7.14%, compared with 1.5% of total assets and an end-of-period weighted average rate of 6.30% at December 31, 2024. 

At June 30, 2025, our subordinated notes were comprised of a principal balance of $125.0 million at 7.088% fixed-to-floating rate due May 15, 2029 (the “Notes II”) with a carrying value of $124.0 million, net of unamortized debt issuance cost of $1.0 million. Interest is payable semiannually at a floating rate equal to three-month term SOFR, plus a spread of 2.762% per annum, payable quarterly in arrears.

For additional information about the subordinated debentures, see Note 8 – Subordinated Debentures to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q.
    
91

The following table sets forth certain information regarding the Company’s borrowed funds as of and during the periods indicated: 
 June 30, 2025December 31, 2024
(Dollars in thousands)BalanceWeighted
Average Rate		BalanceWeighted
Average Rate
Subordinated debentures$124,023 7.14 %$272,449 6.30 %
Total borrowings$124,023 7.14 %$272,449 6.30 %
Weighted average cost of borrowings during the quarter6.48 % 6.62 % 
Borrowings as a percent of total assets0.7 % 1.5 % 

As of June 30, 2025, our unused borrowing capacity was $9.15 billion, which consisted of available lines of credit with FHLB and other correspondent banks as well as access through the Federal Reserve Bank's discount window. During the six months ended June 30, 2025, we did not utilize the Federal Reserve Bank's discount window.

The Company maintains additional sources of liquidity at the Corporation level. Our Corporation maintains a $25.0 million line of credit with U.S. Bank and had no outstanding balance against it at June 30, 2025 and December 31, 2024.

92

CAPITAL RESOURCES AND LIQUIDITY

Liquidity Management

Our primary sources of funds are deposits, advances from the FHLB and other borrowings, principal and interest payments on loans, and income from 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 inflows and outflows as well as loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.

In addition to the interest payments on loans and investments as well as fees collected on the services we provide, our primary sources of funds generated during the first six months of 2025 were from:
 
•Principal payments on loans held for investment of $625.8 million;
•Proceeds of $462.5 million from the sales, payments, or maturities of securities; and
•Deposit growth of $33.7 million.

We used these funds to:
 
•Originate loans held for investment of $401.7 million;
•Purchase investment securities of $320.3 million;
•Purchase loans held for investment of $286.9 million;
•Redeem subordinated notes of $150.0 million; and
•Return capital to shareholders through $63.9 million in dividends.

Our most liquid assets are comprised of unrestricted cash, short-term investments, and unpledged AFS investment securities. The levels of these assets are dependent on our operating, lending, and investing activities during any given period. We endeavor to take a prudent, proactive approach to liquidity management, as evidenced by our balance-sheet-oriented initiatives from 2023 to the second quarter of 2025. At June 30, 2025, cash and cash equivalents totaled $791.1 million. If additional liquidity is needed or otherwise desired as part of our liquidity management strategy, we have additional sources of liquidity that can be accessed, including FHLB advances, federal funds lines, the Federal Reserve Board’s lending programs, brokered deposits, as well as loan and investment securities sales. As of June 30, 2025, the Bank had secured borrowing capacity with the FHLB allowing us to borrow up to 35% of the Bank’s total assets equating to a credit line of $6.33 billion, of which $4.81 billion remained available for borrowing based on collateral pledged of $7.09 billion at market value in qualifying loans, and no FHLB borrowings outstanding. We also had a $3.95 billion line with the FRB discount window secured by investment securities and unsecured lines of credit aggregating to $390.0 million with other correspondent banks from which to purchase federal funds. Our unused borrowing capacity was $9.15 billion, and the combined readily available liquidity with cash and cash equivalents of $791.1 million, interest-bearing time deposits with financial institutions of $1.3 million, as well as short-term, unpledged, AFS U.S. Treasury securities of $49.7 million, totaled approximately $9.99 billion, with a coverage ratio of 196.2% to uninsured and uncollateralized deposits.

We believe our level of liquid assets is sufficient to meet current anticipated funding needs. As part of our daily monitoring, we calculate a liquidity ratio by dividing the sum of cash balances plus unpledged AFS securities by total deposits, excluding time deposits maturing one year or more, plus FHLB advances maturing within one year. As of June 30, 2025, our liquidity ratio was 16.3%, which is above the Company’s minimum policy requirement of 10.0%. The Company regularly monitors liquidity, models liquidity stress scenarios to ensure that adequate liquidity is available, and has contingency funding plans in place, which are reviewed and tested on a regular, recurring basis.

93

A substantial portion of our loans are funded by our deposits. At June 30, 2025, the Company’s loan-to-deposit ratio was 82.1% compared to 83.3% at December 31, 2024. The Bank’s participation in IntraFi’s CDARS and ICS programs provides our depositors with full deposit insurance coverage of excess balances, while the Bank receives reciprocal deposits from other FDIC-insured banks, and helps enhance the Bank’s funding stability by retaining the full amount of the deposits on our balance sheet. To the extent that our deposit growth is not sufficient to satisfy our ongoing commitments to fund maturing and withdrawable deposits, repay maturing borrowings, fund existing and future loans, or make investments, we may access funds through our FHLB borrowing arrangement, FRB discount window, unsecured lines of credit, or other sources.

The Bank maintains liquidity guidelines in the Company’s Liquidity Policy that permits the purchase of brokered deposit funds, in an amount not to exceed 15% of total deposits or 12% of total assets, as a secondary source for funding. At June 30, 2025, we had $200.4 million in brokered deposits, which constituted 1.38% of total deposits and 1.13% of total assets at that date.

The Corporation is a corporate entity separate and apart from the Bank that must provide for its own liquidity. The Corporation’s primary sources of liquidity are dividends from the Bank. There are statutory and regulatory provisions that limit the ability of the Bank to pay dividends to the Corporation. Management believes that such restrictions will not have a material impact on the ability of the Corporation to meet its ongoing cash obligations. During the six months ended June 30, 2025, the Bank paid $190.0 million in dividends to the Corporation.

The Corporation maintains a line of credit of $25.0 million with U.S. Bank that will expire on September 24, 2025. The Corporation anticipates renewing the line of credit upon expiration. This line of credit provides an additional source of liquidity at the Corporation level. At June 30, 2025, the Corporation had no outstanding balances against this line.

During the first quarter of 2025, the Corporation declared a quarterly dividend payment of $0.33 per share. On July 23, 2025, the Company's Board of Directors declared a $0.33 per share dividend, payable on August 15, 2025 to stockholders of record as of August 5, 2025. The Corporation’s Board of Directors periodically reviews whether to declare or pay cash dividends, taking into account, among other things, general business conditions, the Company’s financial results, future prospects, capital requirements, legal and regulatory restrictions, and such other factors as the Corporation’s Board of Directors may deem relevant. Due to the pending Merger, the Company is restricted from paying quarterly cash dividends in excess of the current level.

On January 11, 2021, the Company’s Board of Directors approved a 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. During the six months ended June 30, 2025, the Company did not repurchase any shares of common stock. See Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds for additional information. The stock repurchase program is currently suspended due to the announced Merger.

Material Cash Requirement

Our material cash requirements may include funding existing loan commitments, funding equity investments and affordable housing partnerships for low-income housing tax credit, withdrawal/maturity of existing deposits, repayment of borrowings, operating lease payments, and expenditures necessary to maintain current operations.

94

The Company enters into contractual obligations in the normal course of business as a source of funds for its asset growth and to meet required capital needs. The following schedule summarizes maturities and principal payments due on our contractual obligations, excluding accrued interest:

 June 30, 2025
(Dollars in thousands)Less than 1 yearMore than 1 yearTotal
Subordinated debentures$— $124,023 $124,023 
Certificates of deposit1,928,802 30,431 1,959,233 
Operating leases14,685 41,319 56,004 
Affordable housing partnerships commitment22,196 9,134 31,330 
Total contractual cash obligations$1,965,683 $204,907 $2,170,590 

On July 14, 2025, the Company’s Board of Directors approved the early redemption of $125.0 million in subordinated notes due 2029 on August 15, 2025.

We believe that the Company’s liquidity sources will be sufficient to fulfill all the contractual obligations as they become due, including the planned cash deployment of $125.0 million for the aforementioned subordinated notes redemption in August 2025 through the maintenance of adequate liquidity levels.

In the ordinary course of business, we enter into various transactions to meet the financing needs of our customers which, in accordance with GAAP, are not included in our consolidated balance sheets. These transactions include off-balance sheet commitments, including commitments to extend credit and standby letters of credit, and commitments to fund investments that qualify for CRA credit.

The following table presents a summary of the Company’s commitments to extend credit by expiration period:

 June 30, 2025
(Dollars in thousands)Less than 1 yearMore than 1 yearTotal
Loan commitments to extend credit$894,843 $781,104 $1,675,947 
Standby letters of credit47,954 — 47,954 
Total$942,797 $781,104 $1,723,901 

Since many commitments to extend credit are expected to expire, the total commitment amounts do not necessarily represent future cash requirements. For further information, see Note 15 - Off-Balance Sheet Arrangements, Commitments, and Contingencies to the Notes to the audited consolidated financial statements in the Company’s 2024 Form 10-K. 

95

Regulatory Capital Compliance
 
The Corporation and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of the Corporation’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Corporation’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain capital in order to meet certain capital ratios to be considered adequately capitalized or well capitalized under the regulatory framework for prompt corrective action. As of the most recent formal notification from the Federal Reserve, the Bank was categorized as “well capitalized.” There are no conditions or events since that notification that management believes have changed the Bank’s categorization.

Final comprehensive regulatory capital rules for U.S. banking organizations pursuant to the capital framework of the Basel Committee on Banking Supervision, generally referred to as “Basel III,” implemented a requirement for all banking organizations to maintain a capital conservation buffer of 2.5% above the minimum risk-based capital requirements, which fully phased in by January 1, 2019. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. At June 30, 2025, the Company and Bank are in compliance with the capital conservation buffer requirement and exceeded the minimum common equity Tier 1, Tier 1, and total capital ratio, inclusive of the fully phased-in capital conservation buffer, of 7.00%, 8.50%, and 10.50%, respectively, and the Bank qualified as “well capitalized” for purposes of the federal bank regulatory prompt corrective action regulations.

The Company implemented the current expected credit losses (“CECL”) model commencing January 1, 2020 and elected to phase in the full effect of CECL on regulatory capital over the five-year transition period. Effective January 1, 2025, this cumulative difference of CECL at the end of the second year of the transition period was fully phased into regulatory capital.

For regulatory capital purposes, the Corporation’s subordinated debt is included in Tier 2 capital, the eligible amount of which is phased out by 20% of the original amount at the beginning of each of the last five years before maturity. See Note 8 – Subordinated Debentures to the Notes to the consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.


96

As defined in applicable regulations and set forth in the table below, the Corporation and the Bank continue to exceed the regulatory capital minimum requirements, and the Bank continues to exceed the “well capitalized” standards and the required conservation buffer at the dates indicated:
ActualMinimum Required for Capital Adequacy Purposes Inclusive of Capital Conservation BufferMinimum Required
For Well Capitalized Requirement
June 30, 2025
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio12.40%4.00%N/A
Common equity tier 1 capital ratio17.00%7.00%N/A
Tier 1 capital ratio17.00%8.50%N/A
Total capital ratio18.85%10.50%N/A
Pacific Premier Bank
Tier 1 leverage ratio12.84%4.00%5.00%
Common equity tier 1 capital ratio17.60%7.00%6.50%
Tier 1 capital ratio17.60%8.50%8.00%
Total capital ratio18.85%10.50%10.00%
December 31, 2024
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio12.31%4.00%N/A
Common equity tier 1 capital ratio17.05%7.00%N/A
Tier 1 capital ratio17.05%8.50%N/A
Total capital ratio20.28%10.50%N/A
Pacific Premier Bank
Tier 1 leverage ratio13.41%4.00%5.00%
Common equity tier 1 capital ratio18.57%7.00%6.50%
Tier 1 capital ratio18.57%8.50%8.00%
Total capital ratio19.82%10.50%10.00%

97

Item 3.  Quantitative and Qualitative Disclosure about Market Risk
 
Asset/Liability Management and Market Risk

Market risk is the risk of loss in value or reduced earnings from adverse changes in market prices and interest rates. The Bank’s market risk arises primarily from interest rate risk in our lending, investments, and deposit taking activities. Interest rate risk primarily occurs to the degree that the Bank’s interest-bearing liabilities reprice or mature on a different basis and frequency than its interest-earning assets. The Bank actively monitors and manages its portfolios to limit the adverse effects on net interest income and economic value due to changes in interest rates. The Asset Liability Committee is responsible for implementing the Bank’s interest rate risk management policy established by the Board of Directors that sets forth limits of acceptable changes in net interest income (“NII”) and economic value of equity (“EVE”) due to specified changes in interest rates. Management monitors asset and liability maturities and repricing characteristics on a regular basis and evaluates its interest rate risk as it relates to operational strategies.

Interest Rate Risk Management

The principal objective of the Company’s interest rate risk management function is to maintain an interest rate risk profile close to the desired risk profile in light of the interest rate outlook. The Bank measures the interest rate risk included in the major balance sheet portfolios and compares the current risk profile to the desired risk profile and to policy limits set by the Board of Directors. Management then implements strategies consistent with the desired risk profile. Asset duration is compared to liability, with the desired mix of fixed and floating rate determined based upon the Company’s risk profile and outlook. Likewise, the Bank seeks to raise non-maturity deposits. Management often implements these strategies through pricing actions. Finally, management structures its security portfolio and borrowings to offset some of the interest rate sensitivity created by the repricing characteristics of customer loans and deposits.

Management monitors asset and liability maturities and repricing characteristics on a regular basis and evaluates its interest rate risk as it relates to operational strategies. Management analyzes potential strategies for their impact on the interest rate risk profile. Each quarter the Board of Directors reviews the Bank’s asset/liability position, including simulations showing the impact on the Bank’s EVE in various interest rate scenarios. Interest rate moves, up or down, may subject the Bank to interest rate spread compression, which adversely impacts its net interest income. This is primarily due to the lag in repricing of the indices, to which adjustable rate loans and mortgage-backed securities are tied, as well as their repricing frequencies. Furthermore, large rate moves show the impact of interest rate caps and floors on adjustable rate transactions. This is partly offset by lags in repricing for deposit products. The extent of the interest rate spread compression depends on the direction and severity of interest rate moves and features in the Bank’s product portfolios.

The Company’s interest rate sensitivity is monitored by management through the use of both a simulation model that quantifies the estimated impact to earnings (“Earnings at Risk”) for a twelve- and twenty-four-month period, and a model that estimates the change in the Company’s EVE under alternative interest rate scenarios, primarily instantaneous parallel interest rate shifts in 100 basis point increments. The simulation model estimates the impact on NII from changing interest rates on interest-earning assets and interest expense paid on interest- bearing liabilities. The EVE model computes the net present value of equity by discounting all expected cash flows on assets and liabilities under each rate scenario. For each scenario, the EVE is the present value of all assets less the present value of all liabilities. The EVE ratio is defined as the EVE divided by the market value of assets within the same scenario.


98

The following table shows the projected NII and net interest margin of the Company at June 30, 2025 and December 31, 2024, assuming instantaneous parallel interest rate shifts in the first month of the following quarter:
(Dollars in thousands)Earnings at RiskProjected Net Interest Margin
Change in Rates (Basis Points)$ Amount$ Change% ChangeRate %
June 30, 2025
+300550,264 9,341 1.7 3.42 
+200550,203 9,280 1.7 3.42 
+100546,337 5,414 1.0 3.40 
Static540,923 — — 3.37 
-100534,182 (6,741)(1.2)3.32 
-200523,641 (17,282)(3.2)3.26 
-300513,017 (27,905)(5.2)3.19 
December 31, 2024
+300551,991 9,065 1.7 3.42 
+200552,383 9,457 1.7 3.42 
+100548,931 6,005 1.1 3.40 
Static542,926 — — 3.36 
-100535,000 (7,926)(1.5)3.31 
-200524,599 (18,327)(3.4)3.25 
-300514,981 (27,945)(5.1)3.19 

The following table shows the EVE and projected change in the EVE of the Company at June 30, 2025 and December 31, 2024, assuming instantaneous parallel interest rate shifts in the first month of the following quarter: 
(Dollars in thousands)Economic Value of Equity EVE as % of market value of portfolio assets
Change in Rates (Basis Points)$ Amount$ Change% ChangeEVE Ratio
June 30, 2025
+3002,640,593 (347,140)(11.6)17.89 
+2002,827,916 (159,818)(5.3)18.67 
+1002,993,816 6,083 0.2 19.25 
Static2,987,734 — — 18.72 
-1002,910,241 (77,492)(2.6)17.78 
-2002,767,296 (220,438)(7.4)16.48 
-3002,559,658 (428,075)(14.3)14.87 
December 31, 2024
+3002,737,167 (431,287)(13.6)18.52 
+2002,948,727 (219,727)(6.9)19.43 
+1003,141,508 (26,946)(0.9)20.16 
Static3,168,454 — — 19.80 
-1003,116,700 (51,754)(1.6)18.99 
-2002,987,732 (180,722)(5.7)17.76 
-3002,782,136 (386,318)(12.2)16.16 

99

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 for rising rates. With a slightly asset sensitive profile, the Earnings at Risk is expected 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 to the foregoing. Changes that vary significantly from the assumptions and estimates may have significant effects on the Company’s earnings and EVE.

The Company has minimal direct market risk from foreign exchange and no exposure from commodities.

Item 4.  Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
 
Changes in Internal Controls over Financial Reporting
 
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

100

PART II - OTHER INFORMATION
 
Item 1.  Legal Proceedings

The Company is involved in legal proceedings occurring in the ordinary course of business. Management believes that none of the legal proceedings occurring in the ordinary course of business, individually or in the aggregate, will have a material adverse impact on the results of operations or financial condition of the Company.

Item 1A.  Risk Factors
    
The section titled Risk Factors in Part I, Item 1A of our 2024 Form 10-K included a discussion of the many risks and uncertainties we face, any one or more of which could have a material adverse effect on our business, results of operations, financial condition (including capital and liquidity), prospects, or the value of or return on an investment in the Company. There are no material changes to our risk factors as previously described under Item 1A of our 2024 Form 10-K and those added to our quarterly report on Form 10-Q for the quarter ended March 31, 2025.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
 
On January 11, 2021, the Company’s Board of Directors approved a stock repurchase program, which authorized the repurchase of up to 4,725,000 shares of its common stock. The stock repurchase program may be limited or terminated at any time without notice. During the second quarter of 2025, the Company did not repurchase any shares of common stock. The stock repurchase program is currently suspended due to the announced Merger.

The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the second quarter of 2025.
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2025 to April 30, 2025— $— — 4,245,056 
May 1, 2025 to May 31, 2025— — — 4,245,056 
June 1, 2025 to June 30, 2025— — — 4,245,056 
Total— — 
Item 3.  Defaults Upon Senior Securities
 
None.
 
Item 4.  Mine Safety Disclosures
 
Not applicable.
 
101

Item 5.  Other Information
 
Rule 10b5-1 Trading Plans

On May 5, 2025, Edward E. Wilcox, President and Chief Operating Officer of the Bank, terminated a trading plan for the sale of securities of the Company’s common stock intended to satisfy the affirmative defense conditions of the Securities Exchange Act Rule 10b5-1(c). Mr. Wilcox’s plan was originally adopted on December 23, 2025 for the sale of up to 29,000 shares of the Company’s common stock in amounts and prices set forth in the plan until the earlier of the date all shares under the plan are sold and December 31, 2025. As of the date of the plan termination, 14,500 shares of the Company’s common stock had been sold under the plan.

During the quarter ended June 30, 2025, other than disclosed above, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the Company’s common stock that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR § 229.408(c).

Item 6.  Exhibits
Exhibit 2.1
Exhibit 3.1
Exhibit 3.2
Exhibit 4.1
Exhibit 4.2Long-term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company undertakes to furnish copies of such instruments to the SEC upon request.
Exhibit 10.1
Exhibit 10.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
Exhibit 101.SCHInline XBRL Taxonomy Extension Schema Document
Exhibit 101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEFInline XBRL Taxonomy Extension Definitions Linkbase Document
Exhibit 101.LABInline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104
The cover page of Pacific Premier Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, formatted in Inline XBRL (contained in Exhibit 101)
(1) Incorporated by reference from the Registrant’s Form 8-K filed with the SEC on April 25, 2025.
(2) Incorporated by reference from the Registrant’s Form 8-K filed with the SEC on May 15, 2018.
(3) Incorporated by reference from the Registrant’s Form 10-K filed with the SEC on February 28, 2025.
(4) Incorporated by reference from the Registrant’s Form 8-K filed with the SEC on May 20, 2025.
(5) Incorporated by reference from the Registrant’s Form 10-Q filed with the SEC on May 2, 2025.
102

SIGNATURES
 
Pursuant to the requirements 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.

PACIFIC PREMIER BANCORP, INC.,
Date:August 1, 2025By:/s/ Steven R. Gardner
 Steven R. Gardner
  Chairman, Chief Executive Officer, and President
  (Principal Executive Officer)
   
Date:August 1, 2025By:/s/ Ronald J. Nicolas, Jr.
 Ronald J. Nicolas, Jr.
  Senior Executive Vice President and Chief Financial Officer
  (Principal Financial Officer)

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