PACIFIC PREMIER BANCORP: Management report and analysis of the financial position and operating results (form 10-Q)


FORWARD-LOOKING STATEMENTS

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 Exchange Act. 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.

Given the ongoing and dynamic nature of the COVID-19 pandemic, the ultimate
extent of the impacts on our business, financial position, results of
operations, liquidity and prospects remain uncertain. Although general business
and economic conditions have begun to recover, the recovery could be slowed or
reversed by a number of factors, including increases in COVID-19 infections,
increases in unemployment rates, or turbulence in domestic or global financial
markets, which could adversely affect our revenues and the values of our assets
and liabilities, reduce the availability of funding, lead to a tightening of
credit, and further increase stock price volatility, which could result in
impairment to our goodwill or other intangible assets in future periods. Changes
to statutes, regulations, or regulatory policies or practices as a result of, or
in response, to the COVID-19 pandemic could affect us in substantial and
unpredictable ways, including the potential adverse impact of loan modifications
and payment deferrals implemented consistent with recent regulatory guidance. In
addition to the foregoing, the following additional factors, among others, could
cause our financial performance to differ materially from that expressed in such
forward-looking statements:

•The strength of the United States economy in general and the strength of the
local economies in which we conduct operations;
•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");
•Inflation/deflation, interest rate, market, and monetary fluctuations;
•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
SEC, the Public Company Accounting Oversight Board, FASB or other accounting
standards setters, including ASU 2016-13 (Topic 326), "Measurement of Credit
Losses on Financial Instruments," commonly referenced as the CECL model, which
has changed how we estimate credit losses and has increased the required level
of our allowance for credit losses since adoption on January 1, 2020;
•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;
•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;
•The transition away from USD LIBOR and uncertainty regarding potential
alternative reference rates, including SOFR;
•The effectiveness of our risk management framework and quantitative models;
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•Changes in the level of our nonperforming assets and charge-offs;
•Possible credit-related impairments of securities held by us;
•The impact of current and possible future governmental efforts to restructure
the U.S. financial regulatory system;
•Changes in consumer spending, borrowing, and savings habits;
•The effects of our lack of a diversified loan portfolio, including the risks of
geographic and industry concentrations;
•Our ability to attract deposits and other sources of liquidity;
•The possibility that we may reduce or discontinue the payments of dividends on
our common stock;
•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;
•Public health crises and pandemics, including the COVID-19 pandemic, and the
effects on the economic and business environments in which we operate, including
our credit quality and business operations, as well as the impact on general
economic and financial market conditions;
•Geopolitical conditions, including acts or threats of terrorism, actions taken
by the United States or other governments in response to acts or threats of
terrorism and/or military conflicts, which could impact business and economic
conditions in the United States and abroad;
•Cybersecurity threats and the cost of defending against them, including the
costs of compliance with potential legislation to combat cybersecurity at a
state, national, or global level;
•Natural disasters, earthquakes, fires, and severe weather;
•Unanticipated regulatory, legal, or judicial proceedings; and
•Our ability to manage the risks involved in the foregoing.

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 2020 Form 10-K in addition to Part II, Item 1A - Risk
Factors of this Quarterly Report on Form 10-Q 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.

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GENERAL

This discussion should be read in conjunction with our Management Discussion and
Analysis of Financial Condition and Results of Operations included in our 2020
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, 2021 are not necessarily indicative
of the results expected for the year ending December 31, 2021.

The Corporation is a California-based bank holding company incorporated in 1997
in the state of Delaware and 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 California state-chartered commercial bank. The Bank
was founded in 1983 as a state-chartered thrift and subsequently converted to a
federally-chartered thrift in 1991. The Bank converted to a California-chartered
commercial bank and became a member of the Federal Reserve System in March 2007.
The Bank is also a member of the 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. We are required to file with
the Federal Reserve quarterly and annual reports and such additional information
as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may
conduct examinations of bank holding companies, such as the Corporation, and its
subsidiaries. The Corporation is also a bank holding company within the meaning
of the California Financial Code. As such, the Corporation and its subsidiaries
are subject to the supervision and examination by, and may be required to file
reports with, the California Department of Financial Protection and Innovation
("DFPI").

A bank holding company, such as the Corporation, is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such a policy. The Federal Reserve, under the BHCA, has the
authority to require a bank holding company to terminate any activity or to
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.

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

Our corporate headquarters are located in Irvine, California. At June 30, 2021,
we primarily conduct business throughout the Western Region of the United States
from 65 full-service depository branches located in Arizona, California, Nevada,
Oregon, and Washington. Following the two branch consolidations in San Luis
Obispo County of California completed in July 2021, the Bank operates 63
full-service depository branches. The branches consolidated were identified
largely based on the proximity of neighboring branches, deposit base, historic
growth, and market opportunity to improve further the overall efficiency of
operations, as well as the Bank's goals related to Fair Lending and the
Community Reinvestment Act.


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As a result of our organic and strategic growth strategy we have developed a
variety of banking products and services within our targeted markets in the
Western United States tailored to small- and middle-market businesses,
corporations, including the owners and employees of those businesses,
professionals, entrepreneurs, real estate investors, and non-profit
organizations, as well as consumers in the communities we serve. Through our
branches and our website, www.ppbi.com, we provide a wide array of banking
products and services 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, SBA loans,
commercial real estate loans, agribusiness loans, franchise lending, home equity
lines of credit, and construction loans throughout the Western United States in
major metropolitan markets within Arizona, California, Nevada, Oregon, and
Washington. We also have acquired and enhanced nationwide specialty banking
products and services for Homeowners' Associations ("HOA") and HOA management
companies, as well as experienced owner-operator franchisees in the quick
service restaurant ("QSR") industry. Most recently, we have expanded our
specialty products and services offerings to include commercial escrow services
through our Commerce Escrow division, which facilitates commercial escrow
services and tax-deferred commercial real estate exchanges under Section 1031 of
the Internal Revenue Code, as well as custodial and maintenance services through
our Pacific Premier Trust division, which serves as a custodian for
self-directed IRAs as well as certain accounts that do not qualify as IRAs
pursuant to the Internal Revenue Code.

The Bank funds its lending and investment activities with retail and commercial
deposits obtained through its branches, advances from the FHLB, lines of credit,
and wholesale and brokered certificates of deposit.

Our principal source of income is the net spread between interest earned on
loans and investments and the interest costs associated with deposits and
borrowings used to finance the loan and investment portfolios. Additionally, the
Bank generates fee income from loan and investment sales, and various products
and services offered to depository, loan, escrow, and IRA custodial clients.


COVID-19 PANDEMIC

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

In early March 2020, the Company began preparing for potential disruptions and
government limitations of activity in the markets in which we serve. We
activated our Business Continuity Program and Pandemic Preparedness Plan, and
were able to quickly execute on multiple initiatives to adjust our operations to
protect the health and safety of our employees and clients. We expanded
remote-access availability to ensure a greater number of employees have the
capability to work from home or other remote locations without impacting our
operations while continuing to provide a superior level of customer service. We
also reconfigured our corporate headquarter offices and branches to promote
social distancing for employees by erecting physical barriers, and we provided
monthly rapid COVID-19 testing for all employees and their partners. In
addition, the Company issued a Company-wide employee appreciation bonus related
to the COVID-19 pandemic during the fourth quarter of 2020. Beginning April
2021, non-exempt employees will receive up to 4 hours of paid time off for
COVID-19 vaccination appointments and exempt employees will receive flexibility
for vaccination appointments.


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

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

• Participation in the Small business management (“SBA”) Paycheck Protection Program (“P3”)

We were able to quickly establish our process for participating in the SBA PPP
program that enabled our clients to utilize this valuable resource beginning in
April 2020. Our team executed PPP loans in the two rounds of the program, which
allowed us to further strengthen and deepen our client relationships, while
positively impacting tens of thousands of individuals. In July 2020, the Bank
sold its entire SBA PPP loan portfolio with an aggregate amortized cost of $1.13
billion to a seasoned and experienced non-bank lender and servicer of SBA loans,
resulting in improved balance sheet liquidity and a gain on sale of
approximately $18.9 million, net of net deferred origination fees and net
purchase discounts.

•Implemented a temporary loan modification program for borrowers affected by the
COVID-19 pandemic, including payment deferrals, fee waivers, and extensions of
repayment terms.

In keeping with regulatory guidance to work with borrowers during this
unprecedented situation and as outlined in the CARES Act, the Bank established a
COVID-19 temporary modification program, including interest-only payments, or
full payment deferrals for clients that are adversely affected by the COVID-19
pandemic. The CARES Act also addressed COVID-19 related modifications and
specified that such modifications made on loans that were current as of December
31, 2019 are not classified as TDRs. In accordance with interagency guidance
issued in April 2020, these short-term modifications made to a borrower affected
by the COVID-19 pandemic and governmental shutdown orders, including payment
deferrals, fee waivers, and extensions of repayment terms, do not need to be
identified as TDRs if the loans were current at the time a modification plan was
implemented. The CAA, signed into law on December 27, 2020, extended the
applicable period to include modification to loans held by financial
institutions executed between March 1, 2020 and the earlier of (i) January 1,
2022, or (ii) 60 days after the date of termination of the COVID-19 national
emergency. At June 30, 2021, there was one single family residential loan for
$819,000 classified as a COVID-19 modification under Section 4013 of the CARES
Act. Additionally, as of June 30, 2021, there were no loans in-process for
potential modification. At December 31, 2020, 52 loans totaling $79.5 million,
or 0.60% of loans held for investment, remained within their COVID-19
modification period. Please also see Note 6 - Loans Held for Investment for
additional information.

Additionally, the CARES Act provides for relief on existing and new SBA loans
through the Small Business Debt Relief program. As part of the SBA Small
Business Debt Relief, the SBA will automatically pay principal, interest, and
fees of certain SBA loans for a period of six months for both existing loans and
new loans issued prior to September 27, 2020. On December 27, 2020, the CAA
authorized a second round of SBA payments on covered loans approved before March
27, 2020, for a two-month period beginning with the first payment due on the
loan on or after February 1, 2021, and for an additional three-month period for
certain eligible borrowers. For new loans approved beginning on February 2, 2021
and ending on September 30, 2021, the SBA will make the payments for a
three-month period subject to the availability of funds. At June 30, 2021,
approximately 478 loans, representing approximately $134.3 million aggregate
reported balance, are eligible for this relief. The CARES Act also provides for
mortgage payment relief and a foreclosure moratorium.

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

While economic conditions have improved, the ongoing COVID-19 pandemic has
placed strain on certain businesses and service providers, many of which have
not been able to conduct operations in their usual manner. Should the COVID-19
pandemic persist, we anticipate it may have an impact on the following:

•Loan growth and interest income - Economic activity expanded moderately during
the first six months of 2021, but macroeconomic conditions continue to exhibit
weakness relative to conditions prior to the onset of the COVID-19 pandemic in
the first quarter of 2020. Persistent weakness in economic activity may have an
impact on our borrowers, the businesses they operate and their financial
condition. If a recovery in economic conditions fails to continue, our borrowers
may have less demand for credit needed to invest in and expand their businesses
and/or support their ongoing operations. Additionally, our borrowers may have
less demand for real estate and consumer loans. Further, the Federal Reserve's
Federal Open Market Committee continues to maintain the federal funds rate
within a range of 0% to 0.25%. A potential reduction in future loan growth in
conjunction with lower levels of interest rates would place pressure on the
level of and yield on earnings assets, which may negatively impact our interest
income.

•Credit quality - Increases in unemployment, declines in consumer confidence,
and a reluctance on the part of businesses to invest in and expand their
operations, among other things, may result in additional weakness in economic
conditions, place strain on our borrowers, and ultimately impact the credit
quality of our loan portfolio. We expect this would result in increases in the
level of past due, nonaccrual, and classified loans, as well as higher net
charge-offs. While certain economic metrics have improved since the onset of the
COVID-19 pandemic in the first quarter of 2020, there can be no assurance the
improvement in economic conditions will continue. As such, future deterioration
in credit quality in conjunction with weakened economic conditions, may require
us to record additional provisions for credit losses.

•CECL - On January 1, 2020, the Company adopted ASC 326, which requires the
Company to measure credit losses on certain financial assets, such as loans and
debt securities, using the CECL model. The CECL model for measuring credit
losses is highly dependent upon expectations of future economic conditions and
requires management judgment. Should a recovery in economic conditions fail to
continue and the expectations concerning future economic conditions deteriorate,
the Company may be required to record additional provisions for credit losses
under the CECL model.

•Impairment charges - Should a recovery in economic conditions fail to continue,
it may adversely impact the Company's operating results and the value of certain
of our assets. As a result, the Company may be required to write-down the value
of certain assets such as goodwill, intangible assets, or deferred tax assets
when there is evidence to suggest their value has become impaired or will not be
realizable at a future date.

The U.S. government as well as other state and local policy makers have
responded to the ongoing COVID-19 pandemic with actions geared to support not
only the health and well-being of the public, but also consumers, businesses,
and the economy as a whole. In addition, during the first quarter of 2021, the
President signed into law the American Rescue Plan Act of 2021 ("American Rescue
Plan"), which provides approximately $1.9 trillion in various forms of economic
stimulus and aid to individuals and state and local governments that have been
affected by the ongoing COVID-19 pandemic. However, the impact and overall
effectiveness of these actions is difficult to determine at this time.
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ACQUISITION OF OPUS

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

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

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

Following the acquisition of Opus, the Company acquired Opus and recorded net assets of $ 656.6 million. The final fair value of assets acquired and liabilities assumed mainly consists of the following items:

•$5.81 billion of loans
•$937.1 million of cash and cash equivalents
•$829.9 million of investment securities
•$93.0 million of goodwill
•$16.1 million of core deposit intangible
•$3.2 million of customer relationship intangible
•$6.92 billion of deposits

The fair values of the assets acquired and liabilities assumed were determined
based on the requirements of ASC 820 - Fair Value Measurement. Such fair values
are preliminary estimates at the time of acquisition and are subject to
adjustment for up to one year after the merger date or when additional
information relative to the closing date fair values becomes available and such
information is considered final, whichever is earlier. Since the acquisition,
the Company has made a net adjustment of $146,000 related to loans, deferred tax
assets, other assets, and other liabilities. During the second quarter of 2021,
the Company finalized its fair values analysis of the acquired assets and
assumed liabilities associated with this acquisition. For additional information
about the acquisition of Opus, please see Note 4 - Acquisitions.


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The client account integration and system conversion of Opus was completed in
October 2020. At the same time, as a result of the Opus acquisition, the Bank
consolidated 20 branch offices primarily in California, Washington, and Arizona
into nearby branch offices. The consolidated branches were identified largely
based on the proximity of neighboring branches, historic growth, and market
opportunity to improve further the overall efficiency of operations in line with
the Bank's ongoing cost reduction initiatives.

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; management considers
these 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. Our significant accounting policies are described in the Notes to the
consolidated financial statements in our 2020 Form 10-K.

Provision for credit losses

The Company accounts for credit losses on loans in accordance with ASC 326,
which requires the Company to record an estimate of expected lifetime credit
losses for loans at the time of origination or acquisition. The ACL is
maintained at a level deemed appropriate by management to provide for current
expected future 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. The Company measures the ACL on commercial real estate loans
and commercial loans using a discounted cash flow approach, and a historical
loss rate methodology is used to determine the ACL on retail loans. The
Company's discounted cash flow methodology incorporates a probability of default
and loss given default model, as well as expectations of future economic
conditions, using reasonable and supportable forecasts. The use of reasonable
and supportable forecasts require significant judgment, such as selecting
forecast scenarios and related scenario-weighting, as well as determining the
appropriate length of the forecast horizon. Management leverages economic
projections from a reputable and independent third party to inform and provide
its reasonable and supportable economic forecasts. Other internal and external
indicators of economic forecasts may also be considered by management when
developing the forecast metrics. The Company's ACL model reverts to long-term
average loss rates for purposes of estimating expected cash flows beyond a
period deemed reasonable and supportable. The Company forecasts economic
conditions and expected credit losses over a two-year time horizon before
reverting to long-term average loss rates over a period of three years. The
duration of the forecast horizon, the period over which forecasts revert to
long-term averages, the economic forecasts that management utilizes, as well as
additional internal and external indicators of economic forecasts that
management considers, may change over time depending on the nature and
composition of our loan portfolio. Changes in economic forecasts, in conjunction
with changes in loan specific attributes, impact a loan's probability of default
and loss given default, which can drive changes in the determination of the ACL.

Expectations of future cash flows are discounted at the loan's effective
interest rate. The resulting ACL represents the amount by which the loan's
amortized cost exceeds the net present value of a loan's discounted cash flows.
The ACL is recorded through a charge to provision for credit losses and is
reduced by charge-offs, net of recoveries on loans previously charged-off. It is
the Company's policy to promptly charge-off loan balances at the time they have
been deemed uncollectible. Please also see Note 7 - Allowance for Credit Losses,
of the consolidated financial statements for additional discussion concerning
the Company's ACL methodology, including discussion concerning economic
forecasts used in the determination of the ACL.

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

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

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

Business combinations

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


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Good will

Goodwill assets arise from the acquisition method of accounting for business
combinations and represent the excess value of the consideration paid over the
fair value of the net assets acquired. Goodwill assets are deemed to have
indefinite lives, are not subject to amortization and instead are tested for
impairment at least annually. The Company's policy is to assess goodwill for
impairment in the fourth quarter of each year or more frequently if events or
circumstances lead management to believe the value of goodwill may be impaired.
Impairment testing is performed at the reporting unit level, which is considered
the Corporation level as management has identified the Corporation as its sole
reporting unit as of the date of the consolidated statements of financial
condition. Management's assessment of goodwill is performed in accordance with
ASC 350-20 - Goodwill and Other - Goodwill, which allows the Company to first
perform a qualitative assessment of goodwill to determine if it is more likely
than not the fair value of the Company's equity is below its carrying value.
However, GAAP also allows the Company, at its option, to unconditionally forego
the qualitative assessment and proceed directly to a quantitative assessment.
When performing a qualitative assessment of goodwill, should the results of such
analysis indicate it is more likely than not the fair value of the Company's
equity is below its carrying value, the Company then performs the quantitative
assessment of goodwill to determine the fair value of the reporting unit and
compares it to its carrying value. If the fair value of the reporting unit is
below its carrying value, the Company would then recognize the amount of
impairment as the amount by which the reporting unit's carrying value exceeds
its fair value, limited to the total amount of goodwill allocated to the
reporting unit. Impairment losses are recorded as a charge to noninterest
expense.

The Company is required to employ the use of significant judgment in its
assessment of goodwill, both in a qualitative assessment and a quantitative
assessment, if needed. Assessments of goodwill often require the use of fair
value estimates, which are dependent upon various factors including estimates
concerning the Company's long term growth prospects. Imprecision in estimates
can affect the estimated fair value of the reporting unit in a goodwill
assessment. Additionally, various events or circumstances could have a negative
effect on the estimated fair value of a reporting unit, including declines in
business performance, increases in credit losses, as well as deterioration in
economic or market conditions, which may result in a material impairment charge
to earnings in future periods.

Acquired loans

When the Company acquires loans through purchase or a business combination an
assessment is first performed to determine if such loans have experienced more
than insignificant deterioration in credit quality since their origination and
thus should be classified and accounted for as PCD loans or otherwise classified
as non-PCD loans. All acquired loans are recorded at their fair value as of the
date of acquisition, with any resulting discount or premium accreted or
amortized into interest income over the remaining life of the loan using the
interest method. Additionally, upon the purchase or acquisition of non-PCD
loans, the Company measures and records an ACL based on the Company's
methodology for determining the ACL. The ACL for non-PCD loans is recorded
through a charge to provision for credit losses in the period in which the loans
were purchased or acquired.

Unlike non-PCD loans, the initial ACL for PCD loans is established through an
adjustment to the acquired loan balance and not through a charge to provision
for credit losses in the period in which the loans were acquired. The ACL for
PCD loans is determined with the use of the Company's ACL methodology.
Characteristics of PCD loans include: delinquency, downgrade in credit quality
since origination, loans on nonaccrual status, loans that had been modified,
and/or other factors the Company may become aware of through its initial
analysis of acquired loans that may indicate there has been more than
insignificant deterioration in credit quality since a loan's origination.
Subsequent to acquisition, the ACL for both non-PCD and PCD loans are determined
with the use of the Company's ACL methodology in the same manner as all other
loans.

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

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Fair value of financial instruments

We use fair value measurements to record fair value adjustments to certain
financial instruments and to determine fair value disclosures. Investment
securities available-for-sale, derivative instruments, and equity warrant assets
are financial instruments recorded at fair value on a recurring basis.
Additionally, from time to time, we may be required to record other financial
assets at fair value on a non-recurring basis, such as collateral dependent
loans that are individually evaluated and OREO. These non-recurring fair value
adjustments typically involve the application of lower of cost or fair value
accounting or write-downs of individual assets. Please also see Note 11 - Fair
Value of Financial Instruments of the consolidated financial statements for more
information about the extent to which fair value is used to measure assets and
liabilities, the valuation methodologies used, and its impact to earnings, as
well as the estimated fair value disclosures for financial instruments not
recorded at fair value.

Income taxes

Deferred tax assets and liabilities are recorded for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns using the asset liability method. In estimating future
tax consequences, all expected future events other than enactments of changes in
tax laws or tax rates are considered. The effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the enactment
date. Deferred tax assets are to be recognized for temporary differences that
will result in deductible amounts in future years and for tax carryforwards if,
in the opinion of management, it is more likely than not that the deferred tax
assets will be realized.


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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, return on average tangible common equity 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 period. 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 Ended                                   Six Months Ended
                                           June 30,            March 31,             June 30,             June 30,             June 30,
(Dollars in thousands)                       2021                 2021                 2020                 2021                 2020
Net income (loss)                       $    96,302          $    68,668   

(99,091) $ $ 164,970 $ (73,351)
Plus: amortization of intangible capital expenditures

                                4,001                4,143                4,066                8,144                8,029
Less: amortization of intangible
assets expense tax adjustment (1)             1,145                1,185                1,166                2,330                2,303
Net income (loss) for average
tangible common equity                  $    99,158          $    71,626    

$ (96,191) $ 170,784 $ (67,625)

Average stockholders' equity            $ 2,747,308          $ 2,749,641    

$ 2,231,722 $ 2,748,468 $ 2,134,424
Less: average intangible assets

              79,784               83,946               84,148               81,853               82,946
Less: average goodwill                      900,582              898,587              838,725              899,590              823,524

Average tangible ordinary equity $ 1,766,942 $ 1,767,108

$ 1,308,849 $ 1,767,025 $ 1,227,954

Return on average equity (2)                  14.02  %              9.99  %            (17.76) %             12.00  %             (6.87) %
Return on average tangible common
equity (2)                                    22.45  %             16.21  %            (29.40) %             19.33  %            (11.01) %


______________________________

(1) Amortization of intangible assets adjusted by the statutory tax rate. (2) The ratio is annualized.


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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 stockholder's 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,         

the 31st of December,

        (Dollars in thousands)                       2021              

2020

        Total stockholders' equity              $  2,813,419       $  

2,746,649

        Less: intangible assets                      978,675           

984,076

        Tangible common equity                  $  1,834,744       $  

1,762,573

        Total assets                            $ 20,529,486       $ 

19 736 544

        Less: intangible assets                      978,675           

984,076

        Tangible assets                         $ 19,550,811       $ 

18 752 468

        Tangible common equity ratio                    9.38  %            

9.40%

Ordinary shares issued and outstanding 94,656,575 94,483,136

        Book value per share                    $      29.72       $      29.07
        Less: intangible book value per share          10.34              10.42
        Tangible book value per share           $      19.38       $      18.65



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For periods presented below, efficiency ratio is a non-GAAP financial measure
derived from GAAP-based amounts. This figure represents the ratio of noninterest
expense less other real estate owned operations, core deposit intangible
amortization, and merger-related expense to the sum of net interest income
before provision for loan losses and total noninterest income, less gain/(loss)
on sale of securities, other income - security recoveries on investment
securities, gain/(loss) on sale of other real estate owned, and gain/(loss) from
debt extinguishment. 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 Ended                              Six Months Ended
                                         June 30,          March 31,           June 30,           June 30,           June 30,
(Dollars in thousands)                     2021               2021               2020               2021               2020
Total noninterest expense              $  94,496          $  92,489          $ 115,970          $ 186,985          $ 182,601
Less: amortization of intangible
assets                                     4,001              4,143              4,066              8,144              8,029
Less: merger-related expense                   -                  5             39,346                  5             41,070
Less: other real estate owned
operations, net                                -                  -                  9                  -                 23

Non-interest charges, adjusted $ 90,495 $ 88,341

$ 72,549 $ 178,836 $ 133,479

Net interest income before
provision for loan losses              $ 160,934          $ 161,652          $ 130,292          $ 322,586          $ 239,467
Add: total noninterest income             26,729             23,740              6,898             50,469             21,373
Less: net gain (loss) from
investment securities                      5,085              4,046                (21)             9,131              7,739
Less: other income - security
recoveries                                     6                  2                  -                  8                  -
Less: net loss from other real
estate owned                                   -                  -                (55)                 -                (55)
Less: net loss from debt
extinguishment                              (647)              (503)                 -             (1,150)                 -

Revenue, adjusted                      $ 183,219          $ 181,847          $ 137,266          $ 365,066          $ 253,156

Efficiency ratio                            49.4  %            48.6  %            52.9  %            49.0  %            52.7  %




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Core net interest income and core net interest margin are non-GAAP financial
measures derived from GAAP based amounts. We calculate core net interest income
by excluding scheduled accretion income, accelerated accretion income, premium
amortization on CDs, and nonrecurring nonaccrual interest paid from net interest
income. The core net interest margin is calculated as the ratio of core net
interest income to average interest-earning assets. Management believes that the
exclusion of such items from these financial measures provides useful
information to gain an understanding of the operating results of our core
business.

                                                            Three Months Ended                                      Six Months Ended
                                           June 30,              March 31,             June 30,              June 30,              June 30,
(Dollars in thousands)                       2021                  2021                  2020                  2021                  2020
Net interest income                     $    160,934          $    161,652 

$ 130,292 $ 322,586 $ 239,467
Less: expected incremental income

               3,560                 3,878                 3,501                 7,438                 5,294
Less: accelerated accretion
income                                         5,927                 5,988                 2,347                11,915                 4,659
Less: premium amortization on CDs                942                 1,751                 1,054                 2,693                 1,117
Less: nonrecurring nonaccrual
interest paid                                   (216)                 (603)                 (142)                 (819)                 (142)
Core net interest income                $    150,721          $    150,638          $    123,532          $    301,359          $    228,539
Less: interest income on SBA PPP
loans                                              -                     -                 5,382                     -                 5,382
Core net interest income
excluding SBA PPP loans                 $    150,721          $    150,638          $    118,150          $    301,359          $    223,157

Average interest-bearing assets $ 18,783,803 $ 18,490,426

$ 13,831,914 $ 18,637,924 $ 12,097,742
Less: Average PPP SBA loans

                        -                     -               830,090                     -               206,388
Average interest-earning assets
excluding SBA PPP loans                 $ 18,783,803          $ 18,490,426          $ 13,001,824          $ 18,637,924          $ 11,891,354

Net interest margin (1)                         3.44  %               3.55  %               3.79  %               3.49  %               3.98  %
Core net interest margin (1)                    3.22  %               3.30  %               3.59  %               3.26  %               3.80  %
Core net interest margin
excluding SBA PPP loans (1)                     3.22  %               3.30  %               3.65  %               3.26  %               3.77  %

______________________________

(1) The ratio is annualized.

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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 expenses from net
income. 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 Ended                                      Six Months Ended
                                          June 30,              March 31,             June 30,              June 30,              June 30,
(Dollars in thousands)                      2021                  2021                  2020                  2021                  2020
Interest income                        $    170,692          $    172,994          $    144,122          $    343,686          $    267,911
Interest expense                              9,758                11,342                13,830                21,100                28,444
Net interest income                         160,934               161,652               130,292               322,586               239,467
Noninterest income                           26,729                23,740                 6,898                50,469                21,373
Revenue                                     187,663               185,392               137,190               373,055               260,840
Noninterest expense                          94,496                92,489               115,970               186,985               182,601
Add: merger-related expense                       -                     5                39,346                     5                41,070
Pre-provision net revenue                    93,167                92,908                60,566               186,075               119,309
Pre-provision net revenue
(annualized)                           $    372,668          $    371,632          $    242,264          $    372,150          $    238,618

Average assets                         $ 20,290,415          $ 19,994,260          $ 15,175,310          $ 20,143,156          $ 13,383,324

Pre-provision net revenue on
average assets                                 0.46  %               0.46  %               0.40  %               0.92  %               0.89  %
Pre-provision net revenue on
average assets (annualized)                    1.84  %               1.86  %               1.60  %               1.85  %               1.78  %



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RESULTS OF OPERATIONS

The following table presents the components of operating results, stock data and performance ratios for the periods indicated:

                                                                Three Months Ended                              Six Months Ended
(Dollar in thousands, except per share
data and                                          June 30,          March 31,           June 30,           June 30,           June 30,
percentages)                                        2021               2021               2020               2021               2020
Operating data
Interest income                                 $ 170,692          $ 172,994          $ 144,122          $ 343,686          $ 267,911
Interest expense                                    9,758             11,342             13,830             21,100             28,444
Net interest income                               160,934            161,652            130,292            322,586            239,467
Provision for credit losses                       (38,476)             1,974            160,635            (36,502)           186,089
Net interest income (loss) after
provision for credit losses                       199,410            159,678            (30,343)           359,088             53,378
Net gain (loss) from sales of loans                 1,546                361             (2,032)             1,907             (1,261)
Other noninterest income                           25,183             23,379              8,930             48,562             22,634
Noninterest expense                                94,496             92,489            115,970            186,985            182,601
Net income (loss) before income taxes             131,643             90,929           (139,415)           222,572           (107,850)
Income tax expense (benefit)                       35,341             22,261            (40,324)            57,602            (34,499)
Net income (loss)                               $  96,302          $  68,668          $ (99,091)         $ 164,970          $ (73,351)
Pre-provision net revenue (3)                   $  93,167          $  92,908          $  60,566          $ 186,075          $ 119,309
Share data
Earnings (loss) per share:
Basic                                           $    1.02          $    0.73          $   (1.41)         $    1.74          $   (1.14)
Diluted                                              1.01               0.72              (1.41)              1.73              (1.14)
Common equity dividends declared per
share                                                0.33               0.30               0.25               0.63               0.50
Dividend payout ratio (1)                           32.43  %           41.26  %          (17.73) %           36.10  %          (43.90) %
Performance ratios
Return on average assets (2)                         1.90  %            1.37  %           (2.61) %            1.64  %           (1.10) %
Return on average equity (2)                        14.02               9.99             (17.76)             12.00              (6.87)
Return on average tangible common equity
(2)(3)                                              22.45              16.21             (29.40)             19.33             (11.01)

Pre-provision net revenue on average
assets (2)(3)                                        1.84               1.86               1.60               1.85               1.78
Average equity to average assets                    13.54              13.75              14.71              13.64              15.95
Efficiency ratio (3)                                 49.4               48.6               52.9               49.0               52.7

______________________________

(1) Dividend payout ratio is defined as common equity dividends declared per
share divided by basic earnings per share.
(2) Ratio is annualized.
(3) A reconciliation of the non-GAAP measures are set forth in the Non-GAAP
Measures section of the Management's Discussion and Analysis of Financial
Condition and Results of Operations in this Form 10-Q.


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The Company completed the acquisition of Opus effective June 1, 2020. The
Company's financial statements for the second quarter of 2020 include 30 days of
Opus's operations, post-merger, which impacts the comparability of the current
quarter's results to prior periods.

In the second quarter of 2021, we reported net income of $96.3 million, or $1.01
per diluted share. This compares with net income of $68.7 million, or $0.72 per
diluted share, for the first quarter of 2021. The increase in net income was
primarily due to recapture of provision for credit losses of $38.5 million and a
$3.0 million increase in noninterest income, partially offset by an increase of
$13.1 million in income tax expense, an increase of $2.0 million in noninterest
expense, and a decrease of $718,000 in net interest income. The provision
recapture during the second quarter of 2021 was primarily attributable to
improved economic forecasts used in the Company's CECL model relative to prior
periods and the continued strong asset quality profile of the loan portfolio.

Net income of $96.3 million, or $1.01 per diluted share, for the second quarter
of 2021 compares to a net loss for the second quarter of 2020 of $99.1 million,
or $(1.41) per diluted share. The increase in net income was primarily due to a
$199.1 million decrease in provision for credit losses, a $30.6 million increase
in net interest income, a $39.3 million decrease in merger-related expense, and
a $19.8 million increase in noninterest income, partially offset by an increase
of $75.7 million in income tax expense and $17.9 million increase in noninterest
expense excluding merger-related expenses. The provision decrease during the
second quarter of 2021 was primarily due to improved economic forecasts used in
the Company's CECL model relative to prior periods and the continued strong
asset quality profile of the loan portfolio. The provision expense in the second
quarter of 2020 reflected unfavorable changes in economic forecasts related to
the onset of the COVID-19 pandemic and the Day 1 provision for credit losses of
$84.4 million resulting from the acquisition of Opus. The year-over-year
increases in net income reflect the impact of the acquisition of Opus in the
second quarter of 2020.

For the three months ended June 30, 2021, the Company's return on average assets
was 1.90%, return on average equity was 14.02%, and return on average tangible
common equity was 22.45%. For the three months ended March 31, 2021, the return
on average assets was 1.37%, the return on average equity was 9.99%, and the
return on average tangible common equity was 16.21%. For the three months ended
June 30, 2020, the return on average assets was (2.61)%, the return on average
equity was (17.76)%, and the return on average tangible common equity was
(29.40)%.

For the six months ended June 30, 2021, the Company recorded net income of
$165.0 million, or $1.73 per diluted share. This compares with net loss of $73.4
million, or $(1.14) per diluted share, for the six months ended June 30, 2020.
The increase in net income of $238.3 million was primarily due to a $222.6
million decrease in provision for credit losses, an $83.1 million increase in
net interest income, a $29.1 million increase in noninterest income, and a $41.1
million decrease in merger-related expenses, partially offset by a $92.1 million
increase in income tax expense and $45.4 million increase in noninterest expense
excluding merger-related expenses. The decrease in provision for credit losses
was attributable to higher provision expense from the Company's adoption of ASC
326 effective January 1, 2020, the acquisition of Opus, and unfavorable economic
forecasts used in the Company's ACL model driven by the COVID-19 pandemic, as
well as the $38.5 million recapture of provision for credit losses during the
second quarter of 2021, primarily due to improved economic forecasts used in the
Company's CECL model relative to prior periods and the continued strong asset
quality profile of the loan portfolio. The year-over-year increases in net
income reflect the impact of the acquisition of Opus in the second quarter of
2020.

For the six months ended June 30, 2021, the Company's return on average assets
was 1.64%, return on average equity was 12.00%, and return on average tangible
common equity was 19.33%, compared with a return on average assets of (1.10)%,
return on average equity of (6.87)%, and a return on average tangible common
equity of (11.01)% for the six months ended June 30, 2020.



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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 $160.9 million in the second quarter of 2021, a
decrease of $718,000, or 0.4%, from the first quarter of 2021. The decrease in
net interest income reflected lower average loan yields and fees, partially
offset by one more day of interest and a lower cost of funds driven by lower
rates paid on deposits, lower average balances of retail and brokered
certificates of deposit, and lower average borrowings.

The net interest margin for the second quarter of 2021 was 3.44%, compared with
3.55% in the prior quarter. Our core net interest margin, which excludes the
impact of loan accretion income of $9.5 million, compared to $9.9 million in the
prior quarter, certificates of deposit mark-to-market amortization, and other
adjustments, decreased 8 basis points to 3.22%, compared to 3.30% in the prior
quarter. The decrease was driven by lower average loan yields and fees,
partially offset by a lower cost of funds.

Net interest income for the second quarter of 2021 increased $30.6 million, or
23.5%, compared to the second quarter of 2020. The increase was attributable to
an increase in average interest-earning assets of $4.95 billion, which primarily
resulted from the acquisition of Opus in the second quarter of 2020, as well as
higher investment securities balances compared with the second quarter of 2020,
and a lower cost of funds, partially offset by lower average loan and investment
yields, and a higher average balance of deposits.

For the first six months ended 2021, net interest income increased $83.1
million, or 34.7%, compared to the first six months ended 2020. The increase was
related to an increase in average interest-earning assets of $6.5 billion, which
resulted primarily from our acquisition of Opus on June 1, 2020, and a lower
cost of funds, partially offset by lower average loan and investment yields.

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The following table presents the interest spread, 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, 2021                                                    March 31, 2021                                                   June 30, 2020
                                                   Average                                   Average                Average                                   Average                Average                                   Average
(Dollars in thousands)                             Balance             Interest            Yield/Cost               Balance             Interest            Yield/Cost               Balance             Interest            Yield/Cost
Assets
Interest-earning assets:
Cash and cash equivalents                      $  1,323,186          $     315                    0.10  %       $  1,309,366          $     301                    0.09  %       $    796,761          $     215                    0.11  %
Investment securities                             4,243,644             18,012                    1.70             4,087,451             17,468                    1.71             1,792,432             10,568                

2.36

Loans receivable, net (1)(2)                     13,216,973            152,365                    4.62            13,093,609            155,225                    4.81            11,242,721            133,339               

4.77

Total interest-earning assets                    18,783,803            170,692                    3.64            18,490,426            172,994                    3.79            13,831,914            144,122               

4.19

Noninterest-earning assets                        1,506,612                                                        1,503,834                                                        1,343,396
Total assets                                   $ 20,290,415                                                     $ 19,994,260                                                     $ 15,175,310
Liabilities and equity
Interest-bearing deposits:
Interest checking                              $  3,155,935          $     336                    0.04  %       $  3,060,055          $     419                    0.06  %       $  1,417,846          $     844                    0.24  %
Money market                                      5,558,790              2,002                    0.14             5,447,909              2,588                    0.19             4,242,990              5,680                    0.54
Savings                                             384,376                 84                    0.09               368,288                 82                    0.09               283,632                101                    0.14
Retail certificates of deposit                    1,294,544                839                    0.26             1,425,093              1,201                    0.34             1,148,874              2,251                   

0.79

Wholesale/brokered certificates of
deposit                                               1,357                  4                    1.18               118,854                136                    0.46               224,333                779                    

1.40

Total interest-bearing deposits                  10,395,002              3,265                    0.13            10,420,199              4,426                    0.17             7,317,675              9,655                 

0.53

FHLB advances and other borrowings                    6,303                  -                       -                22,012                 65                    1.20               143,813                217                    

0.61

Subordinated debentures                             480,415              6,493                    5.41               501,553              6,851                    5.46               287,368              3,958                    5.51
Total borrowings                                    486,718              6,493                    5.35               523,565              6,916                    5.36               431,181              4,175                    3.89
Total interest-bearing liabilities               10,881,720              9,758                    0.36            10,943,764             11,342                    0.42             7,748,856             13,830                    0.72
Noninterest-bearing deposits                      6,341,063                                                        6,034,319                                                        4,970,812
Other liabilities                                   320,324                                                          266,536                                                          223,920
Total liabilities                                17,543,107                                                       17,244,619                                                       12,943,588
Stockholders' equity                              2,747,308                                                        2,749,641                                                        2,231,722
Total liabilities and equity                   $ 20,290,415                                                     $ 19,994,260                                                     $ 15,175,310
Net interest income                                                  $ 160,934                                                        $ 161,652                                                        $ 130,292

Net interest margin (3)                                                                           3.44  %                                                          3.55  %                                                          3.79  %
Cost of deposits                                                                                  0.08                                                             0.11                                                             0.32
Cost of funds (4)                                                                                 0.23                                                             0.27                                                             0.44
Ratio of interest-earning assets to interest-bearing liabilities                                172.62                                                           168.96                                                           178.50

______________________________

(1) Average balance includes loans held for sale and nonperforming loans and is
net of deferred loan origination fees/costs and discounts/premiums.
(2) Interest income includes net discount accretion of $9.5 million, $9.9
million, and $5.8 million, respectively.
(3) Represents annualized net interest income divided by average
interest-earning assets.
(4) Represents annualized total interest expense divided by the sum of average
total interest-bearing liabilities and noninterest-bearing deposits.

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                                                                                       Average Balance Sheet
                                                                                         Six Months Ended
                                                         June 30, 2021                                                      June 30, 2020
                                      Average                                    Average                 Average                                    Average
(Dollars in thousands)                Balance             Interest             Yield/Cost                Balance             Interest             Yield/Cost
Assets
Interest-earning assets:
Cash and cash equivalents         $  1,316,314          $     616                      0.09  %       $    506,253          $     431                      0.17  %
Investment securities                4,165,979             35,480                      1.70  %          1,647,502             20,876                      2.53  %
Loans receivable, net (1)(2)        13,155,631            307,590                      4.71  %          9,943,987            246,604                      4.99  %
Total interest-earning assets       18,637,924            343,686                      3.72  %         12,097,742            267,911                      4.45  %
Noninterest-earning assets           1,505,232                                                          1,285,582
Total assets                      $ 20,143,156                                                       $ 13,383,324
Liabilities and equity
Interest-bearing deposits:
Interest checking                 $  3,108,260          $     755                      0.05  %       $    997,025          $   1,453                      0.29  %
Money market                         5,503,656              4,590                      0.17  %          3,702,429             11,751                      0.64  %
Savings                                376,376                166                      0.09  %            261,239                198                      0.15  %
Retail certificates of deposit       1,359,458              2,040                      0.30  %          1,042,681              5,715                      1.10  %
Wholesale/brokered certificates
of deposit                              59,781                140                      0.47  %            133,882              1,025                      1.54  %
Total interest-bearing deposits     10,407,531              7,691                      0.15  %          6,137,256             20,142                      0.66  %
FHLB advances and other
borrowings                              14,115                 65                      0.93  %            240,682              1,298                      1.08  %
Subordinated debentures                490,925             13,344                      5.44  %            251,279              7,004                      5.57  %
Total borrowings                       505,040             13,409                      5.35  %            491,961              8,302                      3.39  %
Total interest-bearing
liabilities                         10,912,571             21,100                      0.39  %          6,629,217             28,444                      0.86  %
Noninterest-bearing deposits         6,188,539                                                          4,434,605
Other liabilities                      293,578                                                            185,078
Total liabilities                   17,394,688                                                         11,248,900
Stockholders' equity                 2,748,468                                                          2,134,424
Total liabilities and equity      $ 20,143,156                                                       $ 13,383,324
Net interest income                                     $ 322,586                                                          $ 239,467

Net interest margin (3)                                                                3.49  %                                                            3.98  %
Cost of deposits                                                                       0.09  %                                                            0.38  %
Cost of funds (4)                                                                      0.25  %                                                            0.52  %
Ratio of interest-earning assets
to interest-bearing liabilities                                                      170.79  %                                                          182.49  %


_____________________________
(1) Average balance includes loans held for sale and nonperforming loans and is
net of deferred loan origination fees/costs and discounts/premiums.
(2) Interest income includes net discount accretion of $19.4 million and $10.0
million, respectively.
(3) Represents net interest income divided by average interest-earning assets.
(4) Represents annualized total interest expense divided by the sum of average
total interest-bearing liabilities and noninterest-bearing deposits.
                                      103
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Changes in our net interest income are a function of changes in volume, days in
a period, and rates of interest-earning assets and interest-bearing liabilities.
The following tables present the impact that the volume, days in a period, 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 days in a period (changes in days in a period multiplied by daily
interest; no changes in days for comparisons of the three months ended June 30,
2021 to the three months ended June 30, 2020);
•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, days in a period, and rate
changes allocated proportionately to changes in volume, days in a period, and
changes in interest rates.
                                                                   Three Months Ended June 30, 2021
                                                                              Compared to
                                                                   Three Months Ended March 31, 2021
                                                                      Increase (Decrease) Due to
(Dollars in thousands)                             Volume                 Days               Rate                Net
Interest-earning assets
Cash and cash equivalents                     $        1              $       3          $      10          $       14
Investment securities                                642                      -                (98)                544
Loans receivable, net                              1,420                  1,674             (5,954)             (2,860)
Total interest-earning assets                      2,063                  1,677             (6,042)             (2,302)
Interest-bearing liabilities
Interest checking                                      9                      4                (96)                (83)
Money market                                          52                     22               (660)               (586)
Savings                                                1                      1                  -                   2
Retail certificates of deposit                      (104)                     9               (267)               (362)
Wholesale/brokered certificates of deposit          (135)                     -                  3                (132)
FHLB advances and other borrowings                   (27)                     -                (38)                (65)
Subordinated debentures                             (294)                     -                (64)               (358)
Total interest-bearing liabilities                  (498)                    36             (1,122)             (1,584)
Change in net interest income                 $    2,561              $   1,641          $  (4,920)         $     (718)


                                      104
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                                                             Three Months Ended June 30, 2021
                                                                       Compared to
                                                             Three Months Ended June 30, 2020
                                                                Increase (Decrease) Due to
(Dollars in thousands)                                       Volume                     Rate                Net
Interest-earning assets
Cash and cash equivalents                                $       116                $      (16)         $     100
Investment securities                                          9,346                    (1,902)             7,444
Loans receivable, net                                         23,175                    (4,149)            19,026
Total interest-earning assets                                 32,637                    (6,067)            26,570
Interest-bearing liabilities
Interest checking                                              1,040                    (1,548)              (508)
Money market                                                   2,648                    (6,326)            (3,678)
Savings                                                        3,131                    (3,148)               (17)
Retail certificates of deposit                                   329                    (1,741)            (1,412)
Wholesale/brokered certificates of deposit                      (670)                     (105)              (775)
FHLB advances and other borrowings                              (106)                     (111)              (217)
Subordinated debentures                                        2,605                       (70)             2,535
Total interest-bearing liabilities                             8,977                   (13,049)            (4,072)
Change in net interest income                            $    23,660                $    6,982          $  30,642


                                                           Six Months Ended June 30, 2021
                                                                     Compared to
                                                           Six Months Ended June 30, 2020
                                                             Increase (Decrease) due to
  (Dollars in thousands)                          Volume         Days          Rate           Net
  Interest-earning assets
  Cash and cash equivalents                     $    266      $     (3)     $     (78)     $    185
  Investment securities                           18,628             -         (4,024)       14,604
  Loans receivable, net                           75,866        (1,699)       (13,181)       60,986
  Total interest-earning assets                 $ 94,760      $ (1,702)     

$ (17,283) $ 75,775

Interest-bearing debts

  Interest checking                             $  3,036      $     (4)     $  (3,730)     $   (698)
  Money market                                    13,996           (25)       (21,132)       (7,161)
  Savings                                             86            (1)          (117)          (32)
  Retail certificates of deposit                   2,632           (11)     

(6,296) (3,675)

  Wholesale/brokered certificates of deposit        (394)           (1)     

(490) (885)

  FHLB advances and other borrowings              (1,075)            -      

(158) (1,233)

  Subordinated debentures                          6,565             -      

(225) 6,340

  Total interest-bearing liabilities            $ 24,846      $    (42)     

$ (32,148) $ (7,344)

  Change in net interest income                 $ 69,914      $ (1,660)     $  14,865      $ 83,119



                                      105
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Provision for credit losses

For the second quarter of 2021, the Bank recorded a $38.5 million provision
recapture, a decrease of $40.5 million from the $2.0 million provision expense
recognized during the first quarter of 2021, and a decrease of $199.1 million
from the $160.6 million provision expense recognized during the second quarter
of 2020. The decrease from the first quarter of 2021 was comprised of a $33.1
million provision recapture for loan losses and a $5.3 million provision
recapture for unfunded commitments. The decrease during the second quarter of
2021 was primarily due to improved economic forecasts used in the Company's CECL
model relative to prior periods and the continued strong asset quality profile
of the loan portfolio. The provision expense in the second quarter of 2020
reflected unfavorable changes in economic forecasts related to the onset of the
COVID-19 pandemic, the Day 1 provision for loan losses of $75.9 million, and the
provision for unfunded commitments of $8.6 million resulting from the
acquisition of Opus.


                                                              Three Months Ended
                                                   June 30,       March 31,       June 30,
        (Dollars in thousands)                       2021            2021           2020
        Provision for credit losses
        Provision for loan losses                 $ (33,131)     $      315      $ 150,257
        Provision for unfunded commitments           (5,345)          1,659         10,378

        Total provision for credit losses         $ (38,476)     $    1,974      $ 160,635



For the first six months of 2021, we recorded a $36.5 million provision
recapture, a decrease from the $186.1 million provision expense recorded for the
first six months of 2020. The decrease, which included a $32.8 million provision
recapture for loan losses and a $3.7 million provision recapture for unfunded
commitments, was primarily due to improved economic conditions and forecasts
used in the Bank's CECL model relative to prior periods and the continued strong
asset quality profile of the loan portfolio. The provision expense for the first
six months of 2020 was driven by unfavorable changes in economic forecasts
employed in the Company's CECL model, the Day 1 provision for loan losses of
$75.9 million, and the provision for unfunded commitments of $8.6 million
resulting from the acquisition of Opus.

                                                         Six Months Ended
                                                     June 30,       June 30,
             (Dollars in thousands)                    2021           2020
             Provision for credit losses
             Provision for loans and lease losses   $ (32,816)     $ 175,639
             Provision for unfunded commitments        (3,686)        10,450

             Total provision for credit losses      $ (36,502)     $ 186,089


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Non-interest income

The following table presents the components of noninterest income for the
periods indicated:
                                                            Three Months Ended                             Six Months Ended
                                              June 30,          March 31,           June 30,          June 30,          June 30,
(Dollars in thousands)                          2021               2021               2020              2021              2020
Noninterest income
Loan servicing income                        $    622          $     458   

$ 434 $ 1,080 $ 914
Service charges on deposit accounts

             2,222              2,032              1,399             4,254             3,114
Other service fee income                          352                473                297               825               608
Debit card interchange fee income               1,099                787                457             1,886               805
Earnings on bank-owned life insurance           2,279              2,233              1,314             4,512             2,650
Net gain (loss) from sales of loans             1,546                361             (2,032)            1,907            (1,261)
Net gain (loss) from sales of
investment securities                           5,085              4,046                (21)            9,131             7,739

Trust custodial account fees                    7,897              7,222              2,397            15,119             2,397
Escrow and exchange fees                        1,672              1,526                264             3,198               264
Other income                                    3,955              4,602              2,389             8,557             4,143
Total noninterest income                     $ 26,729          $  23,740    

$ 6,898 $ 50,469 $ 21,373


Noninterest income for the second quarter of 2021 was $26.7 million, an increase
of $3.0 million from the first quarter of 2021. The increase was primarily due
to a $1.2 million increase in net gain from loan sales, a $1.0 million increase
in net gain from sales of investment securities, and a $675,000 increase in
trust custodial account fees, partially offset by a $647,000 decrease in other
income. The decrease in other income was primarily due to $1.8 million lower SBA
PPP loan referral fees, a $239,000 decrease in unused commitment fees, and a
$144,000 increase in loss on debt extinguishment, partially offset by a $1.7
million increase in equity investment income.

During the second quarter of 2021, the Bank sold $14.7 million of SBA loans for
a net gain of $1.5 million, compared to the sales of $1.3 million of SBA loans
for a net gain of $69,000 and fully charged-off loans for a net gain of $292,000
during the first quarter of 2021.

Additionally, during the second quarter of 2021, the Bank sold $280.2 million of
investment securities for a net gain of $5.1 million, compared to the sales of
$175.3 million of investment securities for a net gain of $4.0 million in the
first quarter of 2021.

Noninterest income for the second quarter of 2021 increased $19.8 million, or
287.5%, compared to the second quarter of 2020. The increase was primarily due
to a $5.5 million increase in trust custodial account fees and a $1.4 million
increase in escrow and exchange fees following the Opus acquisition, a $5.1
million increase in net gain from sales of investment securities, a $3.6 million
increase in net gain from the sales of loans, and a $1.6 million increase in
other income, primarily due to a $1.9 million increase in equity investment
income and a $527,000 increase in SBA PPP loan referral fees, partially offset
by a $647,000 loss on debt extinguishment.

The net gain from sales of loans for the second quarter of 2021 increased from
the same period last year primarily due to the sales of $14.7 million of SBA
loans for a net gain of $1.5 million, compared with the sales of $15.4 million
of other loans for a net loss of $2.0 million during the second quarter of 2020.


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For the first six months of 2021, noninterest income totaled $50.5 million, an
increase from $21.4 million for the first six months of 2020. The increase was
primarily related to a $12.7 million increase in trust custodial account fees
and a $2.9 million increase in escrow and exchange fee income following the Opus
acquisition, a $3.2 million increase in net gain from the sales of loans, a $1.9
million increase in earnings from bank-owned life insurance ("BOLI"), a $1.4
million increase in net gain from sales of investment securities, a $1.1 million
increase in service charges on deposit accounts, and a $1.1 million increase in
debit card interchange fee income. In addition, other income increased $4.4
million primarily due to $2.8 million of SBA PPP loan referral fees and a $2.7
million increase in equity investment income, partially offset by $1.2 million
loss on debt extinguishment.
                                      108
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Non-interest charges

The following table presents the components of noninterest expense for the
periods indicated:
                                                               Three Months Ended                              Six Months Ended
                                                 June 30,          March 31,           June 30,           June 30,           June 30,
(Dollars in thousands)                             2021               2021               2020               2021               2020
Noninterest expense
Compensation and benefits                       $ 53,474          $  52,548          $  43,011          $ 106,022          $  77,387
Premises and occupancy                            12,240             11,980              9,487             24,220             17,655
Data processing                                    5,765              5,828              4,465             11,593              7,718
Other real estate owned operations, net                -                  -                  9                  -                 23
FDIC insurance premiums                            1,312              1,181                846              2,493              1,213
Legal and professional services                    4,186              3,935              3,094              8,121              6,220
Marketing expense                                  1,490              1,598              1,319              3,088              2,731
Office expense                                     1,589              1,829              1,533              3,418              2,636
Loan expense                                       1,165              1,115                823              2,280              1,645
Deposit expense                                    3,985              3,859              4,958              7,844              9,946
Merger-related expense                                 -                  5             39,346                  5             41,070
Amortization of intangible assets                  4,001              4,143              4,066              8,144              8,029
Other expense                                      5,289              4,468              3,013              9,757              6,328
Total noninterest expense                       $ 94,496          $  92,489 

$ 115,970 $ 186,985 $ 182,601


Noninterest expense totaled $94.5 million for the second quarter of 2021, an
increase of $2.0 million compared to the first quarter of 2021, primarily driven
primarily by a $926,000 increase in compensation and benefits primarily
attributable to higher business incentives associated with higher loan
production, a $821,000 increase in other expense primarily related to a $518,000
increase in community development support, a $260,000 increase in premises and
occupancy expense, and a $251,000 increase in legal and professional services.

Noninterest expense decreased by $21.5 million compared to the second quarter of
2020. The decrease was primarily due to $39.3 million of merger-related expense
for the second quarter of 2020 relating to the Opus acquisition. Excluding
merger-related expense, noninterest expense increased $17.9 million compared to
the second quarter of 2020, primarily due to an $10.5 million increase in
compensation and benefits, a $2.8 million increase in premises and occupancy
expense, a $2.3 million increase in other expense, a $1.3 million increase in
data processing expense, a $1.1 million increase in legal and professional
services, a $466,000 increase in FDIC insurance premiums, and a $342,000
increase in loan expense, all predominately as a result of the additional
operations, personnel, branches, and divisions retained with the acquisition of
Opus.

Noninterest expense totaled $187.0 million for the first six months of 2021, an
increase of $4.4 million, or 2%, compared with the first six months of 2020. The
increase was driven primarily by increases of $28.6 million in compensation and
benefits, $6.6 million in premises and occupancy expense, $3.9 million in data
processing expense, $3.4 million in other expense, $1.9 million in legal and
professional services expense, and $1.3 million in FDIC insurance premiums, all
predominately as a result of the additional operations, personnel, branches, and
divisions retained with the acquisition of Opus, partially offset by a $41.1
million decrease in merger-related expense relating to the Opus acquisition.

The Company's efficiency ratio was 49.4% for the second quarter of 2021,
compared to 48.6% for the first quarter of 2021 and 52.9% for the second quarter
of 2020. The Company's efficiency ratio was 49.0% for the first six months of
2021, compared to 52.7% for the first six months of 2020.
                                      109
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Income taxes

For the three months ended June 30, 2021, March 31, 2021, and June 30, 2020,
income tax expense (benefit) was $35.3 million, $22.3 million, and $(40.3)
million, respectively, and the effective income tax rate was 26.8%, 24.5%, and
28.9%, respectively. Our effective tax rate for the three months ended June 30,
2021 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, BOLI income, tax credits from low-income housing tax
credit ("LIHTC") investments, and the exercise of stock options and vesting of
other stock-based compensation.

The increase in the effective tax rate in the second quarter of 2021 compared to
the first quarter of 2021 was primarily due to the effect of favorable permanent
differences on higher annual projected pre-tax book income. The income tax
benefit recorded for the second quarter of 2020 was driven by the significant
pre-tax loss attributable to the provision for credit losses and our
merger-related costs associated with the acquisition of Opus.

The total amount of unrecognized tax benefits was $1.7 million and $255,000 as
of June 30, 2021 and December 31, 2020, respectively, and was primarily
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 $749,000 and $184,000 at June 30, 2021 and December 31,
2020, respectively. The Company does not believe that the unrecognized tax
benefits will change significantly within the next twelve months.

The Company recognizes interest and penalties related to tax benefits not recognized in income tax expense. The Company had accumulated for $ 26,000 and $ 22,000
of such interest in June 30, 2021 and December 31, 2020, respectively. No penalty amount has been accrued.

The Company and its subsidiaries are subject to U.S. federal income tax, as well
as state income and franchise taxes in multiple state jurisdictions. The statute
of limitations for the assessment of taxes related to the consolidated federal
income tax returns is closed for all tax years up to and including 2016. The
expiration of the statute of limitations for the assessment of taxes related to
the various state income and franchise tax returns varies by state.

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 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 asset
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 amount of taxes paid in available carryback years, the forecasts of future
income, applicable tax planning strategies, and assessments of current and
future economic and business conditions. Based on the analysis, the Company has
determined that a valuation allowance against capital loss carryforward of
$170,000 was required as of June 30, 2021 as it is more likely that not that the
Company would not generate future capital gains to offset the capital loss
carryforward. Except for the valuation allowance against the capital loss
carryforward of $170,000, a valuation allowance for deferred tax assets was not
required as of June 30, 2021 and December 31, 2020.

                                      110
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FINANCIAL CONDITION

At June 30, 2021, assets totaled $20.53 billion, an increase of $792.9 million,
or 4.0%, from $19.74 billion at December 31, 2020. The increase was primarily
due to increases in investment securities, total loans, and BOLI of $551.5
million, $362.3 million, and $152.1 million, respectively, partially offset by a
$248.9 million decrease in cash and cash equivalents. The increase in BOLI was
due to a $150 million purchase of additional BOLI in June 2021.

Loans

Loans held for investment totaled $13.59 billion at June 30, 2021, an increase
of $358.2 million, or 2.7%, from $13.24 billion at December 31, 2020. The
increase was driven by an increase in loans funded during the first half of
2021, partially offset by loan maturities and prepayments. Business line average
utilization rates decreased from 35.28% for the fourth quarter of 2020 to 31.96%
for the second quarter of 2021. Since December 31, 2020, investor loans secured
by real estate increased $474.7 million, commercial loans decreased $19.2
million, business loans secured by real estate decreased $21.2 million, and
retail loans decreased $76.0 million.

Loans held for sale were $ 4.7 million To June 30, 2021, which mainly represent the guaranteed part of the SBA loans that the Bank issues for sale, and increased by $ 4.1 million of $ 601,000 To December 31, 2020.

The total end-of-period weighted average interest rate on loans, net of fees and
discounts, at June 30, 2021 was 4.11%, compared to 4.27% at December 31, 2020.
The decrease reflects the impact of lower rates on new originations and the
continued impact from prepayments of higher rate loans.


                                      111
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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, 2021                                                         December 31, 2020
                                                                                                 Weighted                                                                  Weighted
                                                                         Percent                 Average                                           Percent                 Average
(Dollars in thousands)                              Amount               of Total             Interest Rate                 Amount                 of Total             Interest Rate
Investor loans secured by real estate
CRE non-owner-occupied                          $  2,810,233                 20.7  %                    4.27  %       $      2,675,085                 20.2  %                    4.35  %
Multifamily                                        5,539,464                 40.7                       3.89                 5,171,356                 39.1                       4.04
Construction and land                                297,728                  2.2                       5.02                   321,993                  2.4                       5.60
SBA secured by real estate                            53,003                  0.4                       4.98                    57,331                  0.4                       5.01
Total investor loans secured by real estate        8,700,428                 64.0                       4.06                 8,225,765                 62.1                       4.21
Business loans secured by real estate
CRE owner-occupied                                 2,089,300                 15.4                       4.29                 2,114,050                 16.0                       4.45
Franchise real estate secured                        358,120                  2.6                       4.87                   347,932                  2.6                       5.07
SBA secured by real estate                            72,923                  0.5                       5.22                    79,595                  0.6                       5.21
Total business loans secured by real estate        2,520,343                 18.5                       4.40                 2,541,577                 19.2                       4.56
Commercial loans
Commercial and industrial                          1,795,144                 13.2                       3.73                 1,768,834                 13.4                       3.85
Franchise non-real estate secured                    401,315                  3.0                       5.13                   444,797                  3.4                       5.40
SBA non-real estate secured                           13,900                  0.1                       5.61                    15,957                  0.1                       5.62

Total commercial loans                             2,210,359                 16.3                       4.00                 2,229,588                 16.9                       4.16
Retail loans
Single family residential                            157,228                  1.2                       4.16                   232,574                  1.8                       4.28
Consumer                                               6,240                    -                       5.09                     6,929                    -                       5.56
Total retail loans                                   163,468                  1.2                       4.19                   239,503                  1.8                       4.31
Gross loans held for investment (1)               13,594,598                100.0  %                    4.11                13,236,433                100.0  %                    4.27
Allowance for credit losses for loans held for
investment                                          (232,774)                                                                 (268,018)
Loans held for investment, net                  $ 13,361,824                                                          $     12,968,415

Total unfunded loan commitments                 $  2,345,364                                                          $      1,947,250
Loans held for sale, at lower of cost or fair
value                                           $      4,714                                                          $            601


______________________________

(1) Includes net fair value purchase discounts not $ 94.4 million and
$ 113.8 million from June 30, 2021 and December 31, 2020, respectively.

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Delinquent Loans. When a borrower fails to make required payments on a loan and
does not cure the delinquency within 30 days, we normally initiate proceedings
to pursue our remedies under the loan documents. For loans secured by real
estate, we record a notice of default and, after providing the required notices
to the borrower, commence foreclosure proceedings. If the loan is not reinstated
within the time permitted by law, we may sell the property at a foreclosure sale
where we generally acquire title to the property. Loans delinquent 30 or more
days as a percentage of loans held for investment were 0.14% at June 30,
2021, compared to 0.10% at December 31, 2020.

The following table sets forth delinquencies in the Company's loan portfolio as
of the dates indicated:
                                             30 - 59 Days                             60 - 89 Days                           90 Days or More                            Total
                                                          Principal                                Principal                               Principal                           Principal
                                        # of               Balance               # of               Balance              # of               Balance            # of             Balance
(Dollars in thousands)                  Loans             of Loans              Loans              of Loans              Loans             of Loans            Loans           of Loans
At June 30, 2021
Investor loans secured by real
estate
CRE non-owner-occupied                       -           $      -                     -           $      -                    3           $ 10,343                3           $ 10,343

SBA secured by real estate                   -                  -                     -                  -                    2                440                2                440
Total investor loans secured by
real estate                                  -                  -                     -                  -                    5             10,783                5             10,783
Business loans secured by real
estate
CRE owner-occupied                           -                  -                     -                  -                    3              5,016                3              5,016

SBA secured by real estate                   -                  -                     -                  -                    1                450                1                450
Total business loans secured by
real estate                                  -                  -                     -                  -                    4              5,466                4              5,466
Commercial loans
Commercial and industrial                    2                 29                     2                 83                    4              2,119                8              2,231

SBA non-real estate secured                  -                  -                     -                  -                    1                677                1                677
Total commercial loans                       2                 29                     2                 83                    5              2,796                9              2,908
Retail loans

Total retail loans                           1                178                     -                  -                    -                  -                1                178
Total                                        3           $    207                     2           $     83                   14           $ 19,045               19           $ 19,335
Delinquent loans to loans held for
investment                                                      -  %                                     -  %                                 0.14  %                             0.14  %


.
.
                                      113
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                                             30 - 59 Days                            60 - 89 Days                           90 Days or More                            Total
                                                         Principal                                Principal                               Principal                           Principal
                                        # of              Balance               # of               Balance              # of               Balance            # of             Balance
(Dollars in thousands)                 Loans             of Loans              Loans              of Loans              Loans             of Loans            Loans           of Loans
At December 31, 2020
Investor loans secured by real
estate
CRE non-owner-occupied                      -           $      -                     -           $      -                    2           $    757                2           $    757
Multifamily                                 1                  1                     -                  -                    -                  -                1                  1

SBA secured by real estate                  -                  -                     -                  -                    3              1,257                3              1,257
Total investor loans secured by
real estate                                 1                  1                     -                  -                    5              2,014                6              2,015
Business loans secured by real
estate
CRE owner-occupied                          -                  -                     -                  -                    4              5,304                4              5,304

SBA secured by real estate                  1                486                     -                  -                    5              1,073                6              1,559
Total business loans secured by
real estate                                 1                486                     -                  -                    9              6,377               10              6,863
Commercial loans
Commercial and industrial                  10                428                     2                 57                    6              2,898               18              3,383

SBA non-real estate secured                 2                338                     -                  -                    1                707                3              1,045
Total commercial loans                     12                766                     2                 57                    7              3,605               21              4,428
Retail loans
Single family residential (5)               1                 15                     -                  -                    -                  -                1                 15
Consumer                                    1                  1                     -                  -                    -                  -                1                  1
Total retail loans                          2                 16                     -                  -                    -                  -                2                 16
Total                                      16           $  1,269                     2           $     57                   21           $ 11,996               39           $ 13,322
Delinquent loans to loans held for
investment                                                  0.01  %                                     -  %                                 0.09  %                             0.10  %





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Debt restructuring in difficulty

We sometimes modify or restructure loans when the borrower is experiencing
financial difficulties by making a concession to the borrower in the form of
changes in the amortization terms, reductions in the interest rates, the
acceptance of interest only payments, and, in limited cases, concessions to the
outstanding loan balances. These loans are classified as TDRs. As of June 30,
2021, there were $17.8 million loans reported as TDRs, compared with no TDR
loans as of December 31, 2020. During the three and six months ended June 30,
2021, there were six loans totaling $17.8 million modified as TDRs, which are
comprised of three CRE owner-occupied loans and one C&I loan totaling
$5.3 million belonging to one borrower relationship with the terms modified due
to bankruptcy and two franchise non-real estate secured loans totaling
$12.6 million belonging to another borrower relationship with the terms modified
for payment deferral. During the three and six months ended June 30, 2021, the
three CRE owner-occupied loans and one C&I loan classified as TDRs were in
payment default and all TDRs were on nonaccrual status as of June 30, 2021.
During the three and six months ended June 30, 2020, there were no TDRs that
experienced payment defaults after modifications within the previous 12 months.

In accordance with the CARES Act, the Company implemented various loan
modification programs beginning in April 2020 to provide its borrowers relief
from the economic impacts of COVID-19 and determined none of the COVID-19
related loan modifications need to be characterized as TDRs. As of June 30,
2021, there was one single family residential loan for $819,000 classified as a
COVID-19 modification under Section 4013 of the CARES Act. Additionally, as of
June 30, 2021, no loans were in-process for potential modification. At December
31, 2020, 52 loans totaling $79.5 million, or 0.60% of loans held for
investment, remained within their modification period, of which $20.2 million of
loans had migrated to the substandard risk grade. No loans were in-process for
potential modification as of December 31, 2020. See Note 6 - Loans Held for
Investment for additional information.

Non-performing assets

Nonperforming assets consist of loans on which we have ceased accruing interest
(nonaccrual loans), OREO, and other repossessed assets owned. It is our general
policy to place a loan on nonaccrual status when the loan becomes 90 days or
more past due or when collection of principal or interest appears doubtful.

Nonperforming assets totaled $34.4 million, or 0.17% of total assets, at
June 30, 2021, an increase from $29.2 million, or 0.15% of total assets, at
December 31, 2020. There was no other real estate owned at June 30, 2021 and
December 31, 2020. The increase in nonperforming assets during the six month
period ending June 30, 2021 was primarily attributable to $10.0 million of
nonperforming loans added during the quarter, primarily CRE non-owner occupied
loans, and to a lesser extent commercial and industrial loans, partially offset
by loan charge-offs and repayments during the quarter. The Company had no loans
90 days or more past due and accruing at June 30, 2021 and December 31, 2020.
                                      115
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The following table sets forth our composition of nonperforming assets at the
dates indicated:
(Dollars in thousands)                                                June 30, 2021          December 31, 2020
Nonperforming assets
Investor loans secured by real estate
CRE non-owner-occupied                                               $      

$ 12,296 2,792

SBA secured by real estate                                                     440                     1,257
Total investor loans secured by real estate                                 12,736                     4,049
Business loans secured by real estate
CRE owner-occupied                                                           5,016                     6,083

SBA secured by real estate                                                     692                     1,143
Total business loans secured by real estate                                  5,708                     7,226
Commercial loans
Commercial and industrial                                                    2,670                     3,974
Franchise non-real estate secured                                           12,584                    13,238
SBA non-real estate secured                                                    677                       707
Total commercial loans                                                      15,931                    17,919
Retail loans
Single family residential                                                       12                        15

Total retail loans                                                              12                        15
Total nonperforming loans                                                  
34,387                    29,209
Other real estate owned                                                          -                         -
Other assets owned                                                               -                         -
Total                                                                $      34,387          $         29,209

Allowance for credit losses                                          $     232,774          $        268,018
Allowance for credit losses as a percent of total
nonperforming loans                                                            677  %                    918  %
Nonperforming loans as a percent of loans held for investment                 0.25                      0.22
Nonperforming assets as a percent of total assets                             0.17                      0.15
TDR included in nonperforming loans                                  $      17,848                         -




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Provision for credit losses

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

The 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, (ii) the estimated loss given default, 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. With respect to unfunded loan commitments, the Company's incorporates
estimates for utilization, based on historical loan data. Probability of default
and loss given default for investor loans secured by real estate are derived
from a third party, using proxy loan information, and loan and property level
attributes. Additionally, loss given default for these loans incorporates an
estimate for the loss severity associated with loans where the borrower fails to
meet their debt obligation at maturity. External factors that impact loss given
default for commercial real estate loans include: changes in the index for CRE
pricing, GDP growth rate, unemployment rates, and the Moody's Baa rating
corporate debt interest rate spread.

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

The probability of default for mortgage loans to investors and businesses, as well as for commercial loans, is strongly impacted by current and expected economic conditions.

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

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

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As of June 30, 2021, the Company's ACL model used three probability-weighted
scenarios representing a base-case scenario, an upside scenario, and a downside
scenario. The weightings assigned to each scenario were as follows: the
base-case scenario, or most likely scenario, was assigned a weighting of 40%,
while the upside and downside scenarios were each assigned weightings of 30%.
These economic scenarios include the current and estimated future impact
associated with the ongoing COVID-19 pandemic. The Company evaluated the
weightings of each economic scenario in the current period with the assistance
of Moody's Analytics, and determined the current weightings of 40% for the
base-case scenario, and 30% for each of the upside and downside scenarios
appropriately reflect the likelihood of outcomes for each scenario given the
current economic environment. The use of three probability-weighted scenarios in
the second quarter of 2021 and the weighting assigned to each scenario is
consistent with the approach used in the Company's ACL model for the three
months ended March 31, 2021 and June 30, 2020.

The Company, with the assistance of Moody's Analytics, currently forecasts
probability of default and loss given default based on economic scenarios over a
two-year period, which we believe is a reasonable and supportable period. Beyond
this point, probability of default and loss given default 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.

The economic forecasts used in the Company’s ACL model cover all states and metropolitan areas of the United States and reflect changes in economic variables such as: GDP growth, interest rates, employment rates, wage changes, retail sales, industrial production, measures associated with single and multi-family housing markets, vacancy rates, stock price changes and energy markets.

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

From June 30, 2021, the Company’s ACL model incorporated the following assumptions for key economic variables in the base, upside and downside scenarios:

Base-case Scenario:

•CRE price index experiences a slowing annualized rate of decline throughout
2021 from approximately -13% in early 2021 to approximately -4% by the end of
2021. This scenario assumes the index returns to growth in 2022 and 2023. This
scenario also assumes the CRE price index returns to moderate levels of growth
beginning in the first quarter of 2022, with the annualized rate of growth
increasing from 2% in early 2022 to 10% by the end of 2022. Under this scenario,
the CRE price index is anticipated to increase approximately 8-9% on an
annualized basis in 2023.
•U.S. real GDP experiences growth within a range of 6-7% on an annualized basis
throughout 2021. This scenario also assumes decelerating growth in real GDP
throughout 2022, from the levels estimated for 2021. Growth in real GDP for 2022
under this scenario decelerates from approximately 5% annualized in early 2022
to approximately 2% annualized by the end of 2022. This scenario assumes real
GDP growth increases to approximately 2-3% in 2023.
•U.S. unemployment declining from approximately 6% in early 2021 to
approximately 4.5% by the end of 2021. This scenario also assumes unemployment
continues to decline in 2022 from approximately 4% in early 2022 to
approximately 3.5% by the end of 2022. This scenario assumes the rate of
unemployment holds constant at approximately 3.5% throughout 2023.


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Reverse scenario:

•CRE price index experiences declines throughout 2021, with the estimated
annualized rate of decline slowing from approximately -13% in early 2021 to
approximately -1% by the end of 2021. This scenario also assumes the CRE price
index returns growth in 2022, with the annualized rate of growth increasing from
7% in early 2022 to 12% by the end of 2022. Under this scenario, the CRE price
index is anticipated to experience a decelerating annualized rate of increase
from approximately 9% in early 2023 to approximately 7% by the end of 2023.
•U.S. real GDP experiences accelerating growth within a range of 6-10% on an
annualized basis throughout 2021. This scenario also assumes decelerating growth
in real GDP throughout 2022, from the levels estimated for 2021. Growth in real
GDP for 2022 under this scenario decelerates from approximately 8% annualized in
early 2022 to approximately 0% annualized by the end of 2022. This scenario
assumes real GDP growth increases to approximately 1-2% in 2023.
•U.S. unemployment declining from approximately 6.2% in early 2021 to
approximately 4.0% by the end of 2021. This scenario also assumes unemployment
of approximately 3% throughout all of 2022. This scenario assumes the rate of
unemployment holds constant at approximately 3% throughout 2023.

Downward scenario:

•CRE price index experiences accelerating annualized rates of decline throughout
2021. Annualized declines of approximately -13% in early 2021 and accelerating
to approximately -20% by the end of 2021. The CRE price index is estimated to
experience decelerating declines throughout 2022, with the annualized rate of
decline slowing from approximately -24% in early 2022 to approximately -2% by
the end of 2022. Under this scenario, the CRE price index is anticipated to
experience accelerating annualized growth of approximately 7% in early 2023 to
approximately 20% by the end of 2023.
•U.S. real GDP experiences growth of approximately 6% to 10% in the first half
of 2021, followed by a decrease of -3% for the remainder of 2021. This scenario
also assumes a return to modest annualized growth in real GDP by the second
quarter of 2022, with growth of approximately 2-3% for the remainder of 2022.
This scenario assumes real GDP fluctuates within a range of approximately 2-4%
throughout 2023.
•U.S. unemployment increases throughout 2021 from approximately 6% in early 2021
to approximately 8% by the end of 2021. This scenario also assumes unemployment
remains elevated in 2022 at approximately 9%. This scenario assumes a decline in
unemployment throughout 2023, from approximately 8% in early 2023 to
approximately 7% at the end of 2023.




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The Company periodically considers the need for qualitative adjustments to the
ACL. Qualitative adjustments may be related to and include, but not be limited
to, factors such as: (i) management's assessment of economic forecasts used in
the model and how those forecasts align with management's overall evaluation of
current and expected economic conditions, (ii) organization specific risks such
as credit concentrations, collateral specific risks, regulatory risks, and
external factors that may ultimately impact credit quality, (iii) potential
model limitations such as limitations identified through back-testing, and other
limitations associated with factors such as underwriting changes, acquisition of
new portfolios and changes in portfolio segmentation, and (iv) management's
overall assessment of the adequacy of the ACL, including an assessment of model
data inputs used to determine the ACL. As of June 30, 2021, qualitative
adjustments included in the ACL totaled $8.0 million. These adjustments
primarily relate to continued uncertainty concerning the strength of the
economic recovery and how it may impact certain classes of loans in the loan
portfolio. Management determined through additional review that the uneven
recovery and continued government interventions, are potentially underestimating
the impact the ongoing COVID-19 pandemic may have on certain segments and
classes of the loan portfolio, such as loans within the SBA, franchise, C&I, and
construction classifications. 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 ACL was $232.8 million at June 30, 2021, $267.0 million at March 31, 2021
and $268.0 million at December 31, 2020. The decrease in the ACL for loans held
for investment during the three months ended June 30, 2021 of $34.2 million was
comprised of a $33.1 million provision for credit losses recapture and $1.1
million in net charge-offs. The provision recapture for the three months ended
June 30, 2021 was reflective of improving economic forecasts used in the
Company's ACL model relative to prior periods and the continued strong asset
quality profile of the loan portfolio, partially offset by an increase in loans
held for investment during the quarter. The decrease in the ACL for the six
months ended June 30, 2021 of $35.2 million was comprised of a $32.8 million
provision for credit losses recapture and $2.4 million in net charge-offs. The
provision recapture for the six months ended June 30, 2021 was also reflective
of improving economic forecasts used in the Company's ACL model and the
continued strong asset quality profile of the loan portfolio.

The ACL was $282.3 million at June 30, 2020, $115.4 million at March 31, 2020,
and $35.7 million at December 31, 2019. The change in the ACL for the three
months ended June 30, 2020 of $166.8 million was comprised of a $150.3 million
provision for credit losses, $4.7 million in net charge-offs, and the
establishment of $21.2 million in net ACL for PCD loans acquired in the Opus
acquisition. The ACL established for PCD loans was reflected as an adjustment to
the acquired balance of the loans in accordance with ASC 326. The change in the
ACL for the six months ended June 30, 2020 of $246.6 million was reflective of a
$55.7 million addition associated with the Company's adoption of ASC 326 on
January 1, 2020, which was recorded through a cumulative effect adjustment to
retained earnings, as well as a $175.6 million provision for credit losses, net
charge-offs of $6.0 million, and the establishment of $21.2 million in net ACL
for PCD loans previously mentioned. The provision for credit losses for the
three and six months ended June 30, 2020 includes $75.9 million related to the
initial ACL for non-PCD loans acquired in the Opus acquisition, as required by
ASC 326. The provision for credit losses for the three and six months ended June
30, 2020 was also reflective of unfavorable changes in economic forecasts used
in the Company's ACL model, which was driven by the COVID-19 pandemic.

No assurance can be given that we will not, in any particular period, sustain
credit losses that exceed the amount reserved, or that subsequent evaluation of
our loan portfolio, in light of prevailing factors, including economic
conditions that may adversely affect our market area or other circumstances,
will not require significant increases in the ACL. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
our ACL and may require us to recognize additional provisions to increase the
allowance and record charge-offs in anticipation of future losses.


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At June 30, 2021, the Company believes the ACL was adequate to cover current
expected credit losses in the loan portfolio. Should any of the factors
considered by management in evaluating the appropriate level of the ACL change,
including the size and composition of the loan portfolio, the credit quality of
the loan portfolio, as well as forecasts of future economic conditions, the
Company's estimate of current expected credit losses could also significantly
change and affect the level of future provisions for credit losses.

The following table sets forth the Company's ACL, its corresponding percentage
of the loan category balance, and the percentage of loan balance to total gross
loans in each of the loan categories listed for the periods indicated:
                                                                          June 30, 2021                                                      December 31, 2020
                                                                         Allowance as a %        % of Loans in                                 Allowance as a %        % of Loans in
                                                                           of Category            Category to                                    of Category            Category to
(Dollars in thousands)                                 Amount                 Total               Total Loans               Amount                  Total               Total Loans
Investor loans secured by real estate
CRE non-owner-occupied                             $     47,112                   1.68  %               20.7  %       $        49,176                   1.84  %               20.2  %
Multifamily                                              59,059                   1.07                  40.7                   62,534                   1.21                  39.1
Construction and land                                     9,548                   3.21                   2.2                   12,435                   3.86                   2.4
SBA secured by real estate                                4,681                   8.83                   0.4                    5,159                   9.00                   0.4
Total investor loans secured by real estate             120,400                   1.38                  64.0                  129,304                   1.57                  62.1
Business loans secured by real estate
CRE owner-occupied                                       35,747                   1.71                  15.4                   50,517                   2.39                  16.0
Franchise real estate secured                            11,436                   3.19                   2.6                   11,451                   3.29                   2.6
SBA secured by real estate                                6,317                   8.66                   0.5                    6,567                   8.25                   0.6
Total business loans secured by real estate              53,500                   2.12                  18.5                   68,535                   2.70                  19.2
Commercial loans
Commercial and industrial                                39,879                   2.22                  13.2                   46,964                   2.66                  13.4
Franchise non-real estate secured                        17,313                   4.31                   3.0                   20,525                   4.61                   3.4
SBA non-real estate secured                                 730                   5.25                   0.1                      995                   6.24                   0.1

Total commercial loans                                   57,922                   2.62                  16.3                   68,484                   3.07                  16.9
Retail loans
Single family residential                                   670                   0.43                   1.2                    1,204                   0.52                   1.8
Consumer loans                                              282                   4.52                     -                      491                   7.09                     -
Total retail loans                                          952                   0.58                   1.2                    1,695                   0.71                   1.8
Total                                              $    232,774                   1.71  %              100.0  %       $       268,018                   2.02  %              100.0  %



At June 30, 2021, the ratio of allowance for credit losses to loans held for
investment was 1.71%, a decrease from 2.02% at December 31, 2020. Our
unamortized fair value discount on the loans acquired totaled $94.4 million, or
0.69% of total loans held for investment at June 30, 2021, compared to $113.8
million, or 0.85% of total loans held for investment at December 31, 2020.


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The following table sets forth the activity within the Company's allowance for
credit losses in each of the loan categories listed for the periods indicated:
                                                         Three Months Ended                            Six Months Ended (1)
                                           June 30,          March 31,           June 30,           June 30,           June 30,
(Dollars in thousands)                       2021               2021               2020               2021               2020
Balance, beginning of period             $ 266,999          $ 268,018       

$ 115,422 $ 268,018 $ 35,698
ASC 326 adopted

                              -                  -                  -                  -             55,686
Initial ACL recorded for PCD Loans               -                  -             21,242                  -             21,242
Provision (recapture) for credit losses    (33,131)               315            150,257            (32,816)           175,639

Landfills

Investor loans secured by real estate
CRE non-owner-occupied                           -               (154)                 -               (154)              (387)

SBA secured by real estate                       -               (265)              (554)              (265)              (554)

Commercial loans secured by real estate

SBA secured by real estate                       -                (98)                 -                (98)              (315)
Commercial loans
Commercial and industrial                   (3,290)            (1,279)            (2,286)            (4,569)            (2,776)
Franchise non-real estate secured                -               (156)            (1,227)              (156)            (1,227)
SBA non-real estate secured                      -                  -               (556)                 -               (792)
Retail loans
Single family residential                        -                  -                (62)                 -                (62)
Consumer loans                                   -                  -                  -                  -                 (8)
Total charge-offs                           (3,290)            (1,952)            (4,685)            (5,242)            (6,121)
Recoveries

Business loans secured by real estate
CRE owner-occupied                              15                 15                 11                 30                 23

SBA secured by real estate                      80                  -                  3                 80                 74
Commercial loans
Commercial and industrial                    2,098                601                 21              2,699                 26

SBA non-real estate secured                      2                  2                 (2)                 4                  2
Retail loans
Single family residential                        1                  -                  1                  1                  1
Consumer loans                                   -                  -                  1                  -                  1
Total recoveries                             2,196                618                 35              2,814                127
Net loan charge-offs                        (1,094)            (1,334)            (4,650)            (2,428)            (5,994)
Balance, end of period                   $ 232,774          $ 266,999       

$ 282,271 $ 232,774 $ 282,271

Reports

Annualized net charge-offs to average
total loans, net                              0.03  %            0.04  %            0.17  %            0.04  %            0.12  %
Allowance for loan losses to loans held
for investment at end of period               1.71               2.04               1.87               1.71               1.87
Allowance for loan losses to loans held
for investment at end of period,
excluding SBA PPP loans                       1.71               2.04               2.02               1.71               2.02


________________________________________________

(1) Effective January 1, 2020, the allowance for credit losses is accounted for
under ASC 326, which is reflective of estimated expected lifetime credit losses.
Prior to January 1, 2020, the allowance was accounted for under ASC 450 and ASC
310, which is reflective of probable incurred losses as of the balance sheet
date.
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Investment security

We primarily use our investment portfolio for liquidity purposes, capital
preservation, and to support our interest rate risk management strategies.
Investments totaled $4.51 billion at June 30, 2021, an increase of $551.5
million, or 13.9%, from $3.95 billion at December 31, 2020. The increase was
primarily the result of $1.34 billion in purchases, primarily mortgage-backed
securities, partially offset by $455.5 million in sales, $289.5 million in
principal payments, amortization, and redemptions, and a $47.3 million decrease
in mark-to-market fair value adjustments.

Effective January 1, 2020, the Company adopted the new CECL accounting standard.
The Company's assessment of held-to-maturity and available-for-sale investment
securities as of January 1, 2020 indicated that an ACL was not required. The
Company determined the likelihood of default on held-to-maturity investment
securities was remote, and the amount of expected non-repayment on those
investments was zero. The Company also analyzed available-for-sale investment
securities that were in an unrealized loss position as of January 1, 2020 and
determined the decline in fair value for those securities was not related to
credit, but rather related to changes in interest rates and general market
conditions. As of June 30, 2021, there was no ACL for the Company's
held-to-maturity and available-for-sale investment securities. There were no
investment securities classified as PCD upon acquisition of Opus during the
second quarter of 2020. We recorded no allowance for credit losses for
available-for-sale or held-to-maturity investment securities during the three
and six months ended June 30, 2021 and June 30, 2020, respectively.

The following table sets forth the fair values and weighted average yields on
our investment securities portfolio by contractual maturity at the date
indicated:
                                                                                                                                           June 30, 2021
                                                      One Year                                More than One                            More than Five Years                             More than
                                                       or Less                                to Five Years                                to Ten Years                                 Ten Years                                    Total
                                                               Weighted                                     Weighted                                    Weighted                                   Weighted                                   Weighted
                                             Fair               Average                 Fair                 Average                Fair                 Average                Fair                Average                Fair                Average
(Dollars in thousands)                       Value               Yield                 Value                  Yield                 Value                 Yield                Value                 Yield                Value                 Yield
Investment securities
available-for-sale:
U.S. Treasury                             $      -                     -  %       $      31,913                  2.45  %       $     79,895                  1.10  %       $         -                     -  %       $   111,808                  1.47  %
Agency                                           -                     -                314,952                  0.94               184,414                  1.25               55,801                  1.30              555,167                  1.08
Corporate                                   54,074                  0.97                  9,714                  3.55               294,594                  3.36                    -                     -              358,382                  3.00
Municipal bonds                             12,830                     -                  4,918                  2.45                80,607            
     1.99            1,281,118                  2.10            1,379,473                  2.08
Collateralized mortgage obligations              -                     -                 26,357                  0.46               226,997                  0.86              361,384                  1.29              614,738                  1.09
Mortgage-backed securities                       -                     -                  2,252                  3.42               486,001                  1.38              979,626                  1.46            1,467,879                  1.44
Total securities available-for-sale         66,904                  0.78                390,106                  1.13             1,352,508                  1.73            2,677,929                  1.74            4,487,447                  1.66
Investment securities
held-to-maturity:
Mortgage-backed securities                       -                     -                      -                     -                     -                     -               18,265                  2.72               18,265                  2.72
Other                                            -                     -                      -                     -                     -                     -                1,555                  0.97                1,555                  0.97
Total securities held-to-maturity                -                     -                      -                     -                     -                     -               19,820                  2.58               19,820                  2.58
Total securities                          $ 66,904                  0.78  %       $     390,106                  1.13  %       $  1,352,508            
     1.73  %       $ 2,697,749                  1.75  %       $ 4,507,267                  1.67  %



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Liabilities and equity

The total liability was $ 17.72 billion To June 30, 2021, compared to $ 16.99 billion To December 31, 2020. The raise of $ 726.2 million, or 4.3%, of
December 31, 2020 was mainly due to a $ 800.9 million, or 4.9%, increase in deposits.

Deposits. At June 30, 2021, deposits totaled $17.02 billion, an increase of
$800.9 million, or 4.9%, from $16.21 billion at December 31, 2020. Non-maturity
deposits totaled $15.76 billion, or 92.6% of total deposits, an increase of
$1.17 billion, or 8.0%, from December 31, 2020. The increase in deposits
included $757.3 million in noninterest-bearing checking, $220.7 million in money
market/savings, and $190.1 million in interest-bearing checking, partially
offset by decreases of $211.8 million in retail certificates of deposit and
$155.3 million in brokered certificates of deposit.

The total end of period weighted average rate of deposits at June 30, 2021 was
0.08%, a decrease from 0.18% at December 31, 2020, principally driven by lower
pricing across all deposit product categories.

Our ratio of loans held for investment purposes to deposits was 79.9% and 81.6% as of
June 30, 2021 and December 31, 2020, respectively.

The following table shows the breakdown of the Company’s deposit accounts on the dates indicated and the weighted average interest rates on the last day of each period for each category of deposits presented:

                                                                 June 30, 2021                                                         December 31, 2020
                                                                 % of Total           Weighted Average                                     % of Total           Weighted Average
(Dollars in thousands)                      Balance               Deposits                  Rate                    Balance                 Deposits                  Rate
Noninterest-bearing checking            $  6,768,384                    39.8  %                    -  %       $      6,011,106                    37.1  %                    -  %
Interest-bearing deposits:
Checking                                   3,103,343                    18.2                    0.03                 2,913,260                    18.0                    0.06
Money market                               5,493,096                    32.3                    0.12                 5,302,073                    32.7                    0.23
Savings                                      390,576                     2.3                    0.08                   360,896                     2.2                    0.09
Time deposit accounts:
Less than 1.00%                            1,088,347                     6.4                    0.27                   928,830                     5.7                    0.32
1.00 - 1.99                                  125,664                     0.7                    1.61                   579,570                     3.6                    1.49
2.00 - 2.99                                   45,470                     0.3                    2.22                   118,358                     0.7                    2.34
3.00 - 3.99                                      179                       -                    3.45                        46                       -                    4.00
4.00 - 4.99                                       38                       -                    4.30                        38                       -                    4.30
5.00 and greater                                   -                       -                       -                         -                       -                       -
Total time deposit accounts                1,259,698                     7.4                    0.48                 1,626,842                    10.0                    0.88
Total interest-bearing deposits           10,246,713                    60.2                    0.14                10,203,071                    62.9                    0.28
Total deposits                          $ 17,015,097                   100.0  %                 0.08  %       $     16,214,177                   100.0  %                 0.18  %





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At June 30, 2021, we had $1.01 billion in certificates of deposit with balances
of $100,000 or more, and $586.9 million in certificates of deposit with balances
of $250,000 or more with maturities as follows:
                                                                                                                             At June 30, 2021
(Dollars in thousands)                            $100,000 through $250,000                                                Greater than $250,000                                                         Total
                                                         Weighted                % of Total                                    Weighted                % of Total                                     Weighted                % of Total
    Maturity Period                Amount              Average Rate               Deposits               Amount              Average Rate               Deposits                Amount              Average Rate               

Deposits

Certificates of deposit
Three months or less           $   132,033                      0.80  %                 0.77  %       $  409,332                      0.40  %                 2.41  %       $   541,365                      0.50  %                 3.18  %
Over three months
through 6 months                    71,349                      0.39                    0.42              57,881                      0.49                    0.34              129,230                      0.43                  

0.76

Over 6 months through 12
months                             128,206                      0.44                    0.75              98,761                      0.50                    0.58              226,967                      0.47                    1.33
Over 12 months                      89,526                      0.38                    0.53              20,878                      0.52                    0.12              110,404                      0.41                    0.65
Total                          $   421,114                      0.53  %                 2.47  %       $  586,852                      0.43  %                 3.45  %       $ 1,007,966                      0.47  %                 5.92  %



Borrowings. At June 30, 2021, total borrowings amounted to $476.6 million, a
decrease of $55.9 million, or 10.5%, from $532.5 million at December 31, 2020,
primarily due to the maturity and redemption of $31.0 million FHLB advances and
the redemption of $25.0 million in subordinated notes.

At June 30, 2021, total borrowings represented 2.3% of total assets and had an
end of period weighted average rate of 5.29%, compared with 2.7% of total assets
at a weighted average rate of 5.16% at December 31, 2020.

TO June 30, 2021, the total borrowings consisted of the following:

•Subordinated notes of $60.0 million at a fixed rate of 5.75% due September 3,
2024 (the "Notes I") and a carrying value of $59.6 million, net of unamortized
debt issuance cost of $389,000. Interest is payable semiannually at 5.75% per
annum;
•Subordinated notes of $125.0 million at 4.875% fixed-to-floating rate due May
15, 2029 (the "Notes II") and a carrying value of $123.0 million, net of
unamortized debt issuance cost of $2.0 million. Interest is payable semiannually
at an initial fixed rate of 4.875% per annum. From and including May 15, 2024,
but excluding the maturity date or the date of earlier redemption, the Notes II
will bear interest at a floating rate equal to three-month LIBOR plus a spread
of 2.50% per annum, payable quarterly in arrears;
•Subordinated notes of $150.0 million at 5.375% fixed-to-floating rate due
June 15, 2030 (the "Notes III") and a carrying value of $147.6 million, net of
unamortized debt issuance cost of $2.4 million. Interest on the Notes III accrue
at a rate equal to 5.375% per annum from and including June 15, 2020 to, but
excluding, June 15, 2025, payable semiannually in arrears. From and including
June 15, 2025 to, but excluding, June 15, 2030 or the earlier redemption date,
interest will accrue at a floating rate per annum equal to a benchmark rate,
which is expected to be three-month term SOFR, plus a spread of 517 basis
points, payable quarterly in arrears.
•Subordinated notes of $135.0 million at 5.5% fixed-to-variable rate due July 1,
2026, assumed in connection with the acquisition of Opus in the second quarter
of 2020. The notes bear interest at a fixed rate of per year until June 2021.
After this date and for the remaining five years of the notes' term, interest
will accrue at a variable rate of three-month LIBOR plus 4.285%. At June 30,
2021, the carrying value of these subordinated notes was $138.2 million, which
reflects purchase accounting fair value adjustments of $3.2 million. The
subordinate notes were subsequently redeemed by the Company on July 1, 2021. See
Note 17 - Subsequent Events to the consolidated financial statements in this
Form 10-Q.
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•$5.2 million of floating rate junior subordinated debt securities due
January 1, 2037, associated with Heritage Oaks Capital Trust II and assumed in
connection with the acquisition of Heritage Oaks Bancorp in April 2017. At
June 30, 2021, the carrying value of these debentures was $4.2 million, which
reflects purchase accounting fair value adjustments of $1.1 million. Interest is
payable quarterly at three-month LIBOR plus 1.72% per annum, for an effective
rate of 1.92% per annum as of June 30, 2021. The junior subordinated debt
securities were subsequently redeemed by the Company on July 1, 2021. See Note
17 - Subsequent Events to the consolidated financial statements in this Form
10-Q.
•$5.2 million of floating rate junior subordinated debt due July 7, 2036,
associated Santa Lucia Bancorp (CA) Capital Trust and assumed in connection with
the acquisition of Heritage Oaks Bancorp in April 2017. At June 30, 2021, the
carrying value of this debt was $4.0 million, which reflects purchase accounting
fair value adjustments $1.1 million. Interest is payable quarterly at
three-month LIBOR plus 1.48% per annum, for an effective rate of 1.66% per annum
as of June 30, 2021. The junior subordinated debt securities were subsequently
redeemed by the Company on July 7, 2021. See Note 17 - Subsequent Events to the
consolidated financial statements in this Form 10-Q.

For more information on Subordinated Notes, Subordinated Debentures and Trust Preferred Securities, see Note 9 – Subordinated Debentures to the Consolidated Financial Statements in this Form 10-Q.

The following table presents certain information concerning the funds borrowed by the Company on the dates indicated:

                                                             June 30, 2021                                      December 31, 2020
                                                                          Weighted                                               Weighted
(Dollars in thousands)                           Balance                Average Rate                  Balance                  Average Rate
FHLB advances                                $          -                             -  %       $        31,000                          1.53  %

Subordinated debentures                           476,622                          5.29                  501,511                          5.38
Total borrowings                             $    476,622                          5.29  %       $       532,511                          5.16  %

Weighted average cost of
borrowings during the quarter                        5.35  %                                                5.12  %
Borrowings as a percent of total assets               2.3                                                    2.7



Stockholders' Equity. Total stockholders' equity was $2.81 billion as of
June 30, 2021, a $66.8 million increase from $2.75 billion at December 31, 2020.
The current year increase in stockholders' equity was primarily due to $165.0
million net income, partially offset by $59.5 million in cash dividends, $33.8
million in comprehensive loss, and $6.9 million in repurchase of common stock
during the six months ended June 30, 2021.

Our book value per share increased to $29.72 at June 30, 2021 from $29.07 at
December 31, 2020. At June 30, 2021, the Company's tangible common equity to
tangible assets ratio was 9.38%, a decrease from 9.40% at December 31, 2020.


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CAPITAL AND LIQUIDITY RESOURCES

Our main sources of funding are deposits, FHLB advances and other borrowings, principal and interest repayments on loans and investment income. While loan maturities and scheduled amortization are a predictable source of funds, deposit inflows and outflows as well as loan prepayments are heavily influenced by general 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 2021 were from:

•Principal payments on loans held for investment of $1.37 billion;
•Deposit growth of $800.9 million;
•Proceeds of $464.7 million from the sale or maturity of securities
available-for-sale; and
•Principal payments on securities of $278.3 million.

We used these funds to:

• Original loans held for the investment of $ 1.88 billion; • Buy titles available for sale from $ 1.33 billion; • Buy life insurance held by the bank of $ 150.0 million; • Repay the capital to shareholders by $ 59.5 million in dividends; • Reduce the FHLB loan by $ 31.0 million; • Original loans held for the sale of $ 20.3 million; • Repay the junior subordinated debt securities of $ 25.0 million; and • Repurchase part of the ordinary shares of the Company for a total cost of $ 6.9 million.

Our most liquid assets are unrestricted cash and short-term investments. The
levels of these assets are dependent on our operating, lending, and investing
activities during any given period. Our liquidity position is continuously
monitored and adjustments are made to the balance between sources and uses of
funds as deemed appropriate. At June 30, 2021, cash and cash equivalents totaled
$631.9 million, and the market value of our investment securities
available-for-sale totaled $4.49 billion. If additional funds are needed, we
have additional sources of liquidity that can be accessed, including FHLB
advances, federal fund lines, the Federal Reserve Board's lending programs, as
well as loan and investment securities sales. As of June 30, 2021, the maximum
amount we could borrow through the FHLB was $8.07 billion, of which $5.66
billion was remaining available for borrowing based on collateral pledged of
$8.28 billion in real estate loans. At June 30, 2021, we did not utilize any
FHLB borrowings. At June 30, 2021, we also had a $20.8 million line with the FRB
discount window secured by investments securities as well as unsecured lines of
credit aggregating to $340.0 million with other financial institutions from
which to draw funds. As of June 30, 2021, our liquidity ratio was 29.0%, 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.

To the extent that 2021 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, unsecured lines of credit, or
other sources.

The Bank has a policy in place that permits the purchase of brokered 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, 2021, we had $5.6 million in brokered
money market deposits which constituted 0.03% of total deposits and 0.03% of
total assets at that date.
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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, 2021, the Bank paid $59.3 million in dividends to the
Corporation.

The Corporation maintains a line of credit with US Bank with availability of
$15.0 million that will expire on September 28, 2021. The Corporation
anticipates renewing the line of credit upon expiration. This line of credit
provides an additional source of liquidity at the Corporation level and had no
outstanding balance at June 30, 2021.

During the second quarters of 2021, the Company redeemed the subordinated notes
totaling $25.0 million that the Company assumed as part of the acquisition of
Plaza Bancorp, Inc. in 2017. Prior to redemption, such subordinated notes
carried a fixed interest rate of 7.125% and were scheduled to mature on June 26,
2025. These subordinated notes were called at 103% of the principal amount of
the notes, plus accrued and unpaid interest, for an aggregate amount of $25.8
million. See Note 9 - Subordinated Debentures for additional information.

During the first and second quarters of 2021, the Corporation declared a
quarterly dividend payment of $0.30 and $0.33 per share, respectively. On July
23, 2021, the Company's Board of Directors declared a $0.33 per share dividend,
payable on August 13, 2021 to stockholders of record as of August 6, 2021.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.

On January 11, 2021, the Company's Board of Directors approved a new stock
repurchase program, which authorized the repurchase of up to 4,725,000 shares of
its common stock, representing approximately 5% of the Company's issued and
outstanding shares of common stock and approximately $150 million of common
stock as of December 31, 2020 based on the closing price of the Company's common
stock on December 31, 2020. During the first quarter of 2021, the Company
purchased 199,674 shares for a total of $6.9 million, or $34.51 per share, under
this stock repurchase program. During the second quarter of 2021, 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.

Contractual obligations and off-balance sheet commitments

Contractual Obligations. The Company enters into contractual obligations in the
normal course of business primarily as a source of funds for its asset growth
and to meet required capital needs.

The following schedule summarizes the due dates and payments due on our obligations and commitments, excluding accrued interest, on the date indicated:

                                                                                           June 30, 2021
                                                                                                                     More than 5
(Dollars in thousands)                         Less than 1 year           1 - 3 years           3 - 5 years             years               Total

Contractual obligations

Subordinated debentures                                      -                     -                59,611             417,011              476,622
Certificates of deposit                              1,114,334                71,289                 9,335              64,740            1,259,698
Operating leases                                        20,124                37,523                23,887              12,116               93,650
Total contractual cash obligations           $       1,134,458          $    108,812          $     92,833          $  493,867          $ 1,829,970




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Off-Balance Sheet Commitments. We utilize off-balance sheet commitments in the
normal course of business to meet the financing needs of our customers and to
reduce our own exposure to fluctuations in interest rates. These financial
instruments include commitments to originate real estate, business, and other
loans held for investment, undisbursed loan funds, lines and letters of credit,
and commitments to purchase loans and investment securities for portfolio. The
contract or notional amounts of those instruments reflect the extent of
involvement we have in particular classes of financial instruments.

Commitments to originate loans held for investment are agreements to lend to a
customer as long as there is no violation of any condition established in the
commitment. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some commitments
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Undisbursed loan funds and unused lines of
credit on home equity and commercial loans include committed funds not
disbursed. Letters of credit are conditional commitments we issue to guarantee
the performance of a customer to a third party. As of June 30, 2021, we had
commitments to extend credit on existing lines and letters of credit of $2.35
billion, compared to $1.95 billion at December 31, 2020.

The following table summarizes our contractual commitments with off-balance sheet risk by maturity period on the date indicated:

                                                                                           June 30, 2021
                                                                                                                     More than 5
(Dollars in thousands)                         Less than 1 year           1 - 3 years           3 - 5 years             years               Total
Other unused commitments
Commercial and industrial                    $         958,150          $   

615 811 $ 100,847 $ 75,870 $ 1,750,678
Construction

                                            51,340               241,610                24,706                   -              317,656
Agribusiness and farmland                               25,862                14,254                     3               1,489               41,608
Home equity lines of credit                              7,060                 6,028                 3,003              51,199               67,290
Standby letters of credit                               47,604                     -                     -                   -               47,604
All other                                               66,488                23,480                 2,358              28,202              120,528
Total commitments                            $       1,156,504          $    901,183          $    130,917          $  156,760          $ 2,345,364



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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 Company and 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", became effective for the Company and the
Bank on January 1, 2015, subject to phase-in periods for certain of their
components and other provisions. The most significant of the provisions of the
new capital rules, which apply to the Company and the Bank are as follows: the
phase-out of trust preferred securities from Tier 1 capital, the higher
risk-weighting of high volatility and past due real estate loans and the capital
treatment of deferred tax assets and liabilities above certain thresholds.

Beginning January 1, 2016, Basel III implemented a requirement for all banking
organizations to maintain a capital conservation buffer above the minimum
risk-based capital requirements in order to avoid certain limitations on capital
distributions, stock repurchases and discretionary bonus payments to executive
officers. 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. The capital conservation buffer fully
phased in at 2.50% by January 1, 2019. At June 30, 2021, 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.

In February 2019, the U.S. federal bank regulatory agencies approved a final
rule modifying their regulatory capital rules and providing an option to
phase-in over a three-year period the Day 1 adverse regulatory capital effects
of CECL accounting standard. Additionally, in March 2020, the U.S. Federal bank
regulatory agencies issued an interim final rule that provides banking
organizations an option to delay the estimated CECL impact on regulatory capital
for an additional two years for a total transition period of up to five years to
provide regulatory relief to banking organizations to better focus on supporting
lending to creditworthy households and businesses in light of recent strains on
the U.S. economy as a result of the COVID-19 pandemic. The capital relief in the
interim is calibrated to approximate the difference in allowances under CECL
relative to the incurred loss methodology for the first two years of the
transition period using a 25% scaling factor. The cumulative difference at the
end of the second year of the transition period is then phased in to regulatory
capital at 25% per year over a three-year transition period. The final rule was
adopted and became effective in September 2020. As a result, entities may
gradually phase in the full effect of CECL on regulatory capital over a
five-year transition period. The Company implemented the 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.


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For regulatory capital purposes, the Corporation's trust preferred securities
are included in Tier 2 capital at June 30, 2021. Provisions of the Dodd-Frank
Act require that if a depository institution holding company exceeds $15 billion
due to an acquisition, then trust preferred securities are to be excluded from
Tier 1 capital beginning in the period in which the transaction occurred. The
Corporation's acquisition of Opus resulted in total consolidated assets
exceeding $15 billion; accordingly, trust preferred securities are now excluded
from the Corporation's Tier 1 capital and included as Tier 2 capital. The
Corporation and the Bank also have subordinated debt that qualifies as Tier 2
capital. See Note 9 - Subordinated Debentures for additional information.

As defined in the applicable regulations and set out in the table below, the Company and the Bank continue to exceed the minimum regulatory capital requirements and the Bank continues to exceed the “well capitalized” standards and the conservation buffer. required on the dates indicated:

                                                                                          Minimum Required
                                                                                            for Capital
                                                                                         Adequacy Purposes
                                                                                            Inclusive of
                                                                                              Capital               Minimum Required
                                                                                            Conservation          For Well Capitalized
                                                            Actual                             Buffer                  Requirement
June 30, 2021
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio                                       9.83%                              4.00%                       N/A
Common equity tier 1 capital ratio                          11.89%                             7.00%                       N/A
Tier 1 capital ratio                                        11.89%                             8.50%                       N/A
Total capital ratio                                         15.61%                             10.50%                      N/A

Pacific Premier Bank
Tier 1 leverage ratio                                       11.31%                             4.00%                      5.00%
Common equity tier 1 capital ratio                          13.67%                             7.00%                      6.50%
Tier 1 capital ratio                                        13.67%                             8.50%                      8.00%
Total capital ratio                                         15.44%                             10.50%                    10.00%

                                                                                          Minimum Required
                                                                                            for Capital
                                                                                         Adequacy Purposes
                                                                                            Inclusive of
                                                                                              Capital               Minimum Required
                                                                                            Conservation          For Well Capitalized
                                                            Actual                             Buffer                  Requirement
December 31, 2020
Pacific Premier Bancorp, Inc. Consolidated
Tier 1 leverage ratio                                       9.47%                              4.00%                       N/A
Common equity tier 1 capital ratio                          12.04%                             7.00%                       N/A
Tier 1 capital ratio                                        12.04%                             8.50%                       N/A
Total capital ratio                                         16.31%                             10.50%                      N/A

Pacific Premier Bank
Tier 1 leverage ratio                                       10.89%                             4.00%                      5.00%
Common equity tier 1 capital ratio                          13.84%                             7.00%                      6.50%
Tier 1 capital ratio                                        13.84%                             8.50%                      8.00%
Total capital ratio                                         15.89%                             10.50%                    10.00%


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