IRVINE, Calif.--(BUSINESS WIRE)--Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (the “Company” or “Pacific Premier”), the holding company of Pacific Premier Bank (the “Bank”), reported net income for the fourth quarter of 2020 of $67.1 million, or $0.71 per diluted share, compared with net income of $66.6 million, or $0.70 per diluted share, for the third quarter of 2020 and net income of $41.1 million, or $0.69 per diluted share, for the fourth quarter of 2019.

For the three months ended December 31, 2020, the Company’s return on average assets (“ROAA”) was 1.34%, return on average equity (“ROAE”) was 9.91%, and return on average tangible common equity (“ROATCE”) was 16.32%, compared to 1.31%, 9.90%, and 16.44%, respectively, for the third quarter of 2020 and 1.42%, 8.20%, and 15.89%, respectively, for the fourth quarter of 2019. Total assets as of December 31, 2020 were $19.7 billion compared to $19.8 billion at September 30, 2020 and $11.8 billion at December 31, 2019. A reconciliation of the non–U.S. generally accepted accounting principles (“GAAP”) measure of ROATCE to the GAAP measure of common stockholders' equity is set forth at the end of this press release.

Steven R. Gardner, Chairman, President, and Chief Executive Officer of the Company, commented, “We delivered a strong quarter to end 2020 that reflects our improved earnings power and overall operational strength. Despite the low interest rate environment and the uncertainty around the pandemic, we generated a return on average assets and average tangible common equity, exclusive of merger-related expenses, of 1.41% and 17.2%, respectively.

“Having completed the Opus integration in early October, we were able to increase our focus on business development throughout the remainder of the fourth quarter. As a result, we ended the year with a strong loan pipeline as our teams are attracting larger, more sophisticated clients. During the fourth quarter, our new loan commitments were up substantially from the prior quarter, although elevated payoffs and strategic loan sales reduced our loan balances at quarter end.

“Our strong earnings continue to enhance our capital levels, and we remain committed to a disciplined, prudent capital management strategy. We recently adopted a new stock repurchase program, increasing the size over the program previously adopted in late 2019. We also announced today that we increased our common stock dividend to $0.30 per share, from $0.28 per share in the prior quarter. Since initiating our dividend program two years ago, we have steadily increased the amount of capital we are returning to shareholders, which has positively influenced total shareholder returns.

“As we begin 2021, we are well-positioned to manage through the impact of the ongoing pandemic and capitalize on the economic recovery. We expect increasing levels of organic growth in our various markets, and we will continue to pursue strategic growth opportunities that can expand and enhance our franchise. Over the past several years we have made investments in talent and technology to create a robust, highly scalable platform to generate profitable growth, and we are confident in our ability to execute and deliver for our shareholders in the years ahead.”

Mr. Gardner concluded, “I want to thank all of the Pacific Premier team members for their strong commitment to our clients, our communities, and each other. Their incredible resiliency and talents are what drive our results.”

FINANCIAL HIGHLIGHTS
	Three Months Ended
	December 31,			September 30,			December 31,
	2020			2020			2019
Financial Highlights	(Dollars in thousands, except per share data)
Net income	$	67,136		$	66,566		$	41,098
Diluted earnings per share	0.71			0.70			0.69
Common equity dividend per share	0.28			0.25			0.22
Return on average assets	1.34		%	1.31		%	1.42		%
Return on average equity	9.91			9.90			8.20
Return on average tangible common equity ⁽¹⁾	16.32			16.44			15.89
Pre-provision net revenue on average assets ⁽¹⁾	1.92			1.92			1.95
Net interest margin	3.61			3.54			4.33
Core net interest margin ⁽¹⁾	3.32			3.23			4.10
Cost of deposits	0.14			0.20			0.58
Efficiency ratio ⁽²⁾	48.5			47.4			51.9
Noninterest expense (excluding merger-related expense) as a percent of average assets ⁽¹⁾	1.89			1.88			2.29
Total assets	$	19,736,544		$	19,844,240		$	11,776,012
Total deposits	16,214,177			16,330,807			8,898,509
Loans to deposit ratio	82		%	82		%	98		%
Non-maturity deposits as a percent of total deposits	90			89			88
Book value per share	$	29.07		$	28.48		$	33.82
Tangible book value per share ⁽¹⁾	18.65			18.01			18.84
Total risk-based capital ratio ⁽³⁾	16.31		%	16.11		%	13.81		%

⁽¹⁾		A reconciliation of the non-GAAP measures of return on average tangible common equity, pre-provision net revenue on average assets, core net interest margin, noninterest expense (excluding merger-related expense) as a percent of average assets, and tangible book value per share to the GAAP measures of net income, common stockholders' equity, and book value are set forth at the end of this press release.
⁽²⁾		Represents the ratio of noninterest expense less other real estate owned operations, amortization of intangible assets, and merger-related expense to the sum of net interest income before provision for credit losses and total noninterest income, less gain/(loss) on sale of securities, gain/(loss) from other real estate owned, and gain/(loss) from debt extinguishment.
⁽³⁾		The Company's total risk-based capital ratio as of September 30, 2020 reflects the reclassification of $502.6 million of cash and due from banks as of September 30, 2020 to interest-bearing deposits with financial institutions as of that same date. This reclassification resulted in an increase in the ratio as of September 30, 2020 from what was previously reported.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $168.2 million in the fourth quarter of 2020, an increase of $1.7 million from the third quarter of 2020. The increase in net interest income was driven by higher average investment securities, higher loan related fees, and lower rates paid on deposits, partially offset by the impact of lower average loans and yields.

Net interest margin for the fourth quarter of 2020 was 3.61%, compared with 3.54% for the third quarter of 2020. Our core net interest margin, which excludes the impact of loan accretion, certificates of deposit mark-to-market amortization, and other one-time adjustments, increased 9 basis points to 3.32%, compared to 3.23% in the prior quarter. The increase was a result of higher loan related fees driven by elevated prepayments and lower cost of funds driven by lower rates paid on deposits, partially offset by the decrease attributable to the shift in interest-earning asset mix and lower loan yields.

Net interest income for the fourth quarter of 2020 increased $55.3 million, compared to the fourth quarter of 2019. The increase was primarily attributable to an increase in average interest-earning assets of $8.17 billion, which primarily resulted from the acquisition of Opus Bank (“Opus”) in the second quarter of 2020 and organic loan growth, as well as a higher average investment securities and a lower cost of funds, partially offset by lower average loan and investment yields, and higher average deposits.

PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND YIELD DATA

	Three Months Ended
	December 31, 2020						September 30, 2020						December 31, 2019
	Average Balance		Interest		Average Yield/ Cost		Average Balance		Interest		Average Yield/ Cost		Average Balance		Interest		Average Yield/ Cost
Assets	(Dollars in thousands)
Cash and cash equivalents	$	1,239,035	$	286	0.09	%	$	1,388,897	$	305	0.09	%	$	201,161	$	283	0.56	%
Investment securities	3,964,592		17,039		1.72		3,283,840		14,231		1.73		1,445,158		10,210		2.83
Loans receivable, net ^{(1) (2)}	13,315,810		163,499		4.88		14,034,868		167,455		4.75		8,700,690		119,353		5.44
Total interest-earning assets	$	18,519,437	$	180,824	3.88		$	18,707,605	$	181,991	3.87		$	10,347,009	$	129,846	4.98

Liabilities
Interest-bearing deposits	$	10,384,229	$	5,685	0.22		$	10,703,431	$	8,509	0.32		$	5,216,658	$	13,144	1.00
Borrowings	539,021		6,941		5.12		542,437		6,936		5.09		368,583		3,783		4.07
Total interest-bearing liabilities	$	10,923,250	$	12,626	0.46		$	11,245,868	$	15,445	0.55		$	5,585,241	$	16,927	1.20
Noninterest-bearing deposits	$	6,125,171					$	5,877,619					$	3,814,809
Net interest income			$	168,198					$	166,546					$	112,919
Net interest margin ⁽³⁾					3.61						3.54						4.33
Cost of deposits					0.14						0.20						0.58
Cost of funds ⁽⁴⁾					0.29						0.36						0.71
Ratio of interest-earning assets to interest-bearing liabilities					169.54						166.35						185.26

⁽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 $11.0 million, $12.2 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.

Provision for Credit Losses

Provision for credit losses for the fourth quarter of 2020 was $1.5 million, a decrease of $2.7 million from the third quarter of 2020 and a decrease of $780,000 from the fourth quarter of 2019. The current quarter provision for credit losses included an $8.1 million recapture of the provision for loan losses, partially offset by a $9.6 million provision for unfunded commitments. The $8.1 million recapture of the provision for loan losses was primarily attributable to lower loans held for investment and favorable changes in asset quality and loan mix. The $9.6 million provision for unfunded commitments was primarily due to an increase in outstanding unfunded commitments in the commercial and industrial loan segment.

	Three Months Ended
	December 31,			September 30,			December 31,
	2020			2020			2019
Provision for Credit Losses	(Dollars in thousands)
Provision for loan losses	$	(8,079	)	$	4,702		$	3,016
Provision for unfunded commitments	9,596			(492		)	(666		)
Provision for sold loans	—			—			(53		)
Total provision for credit losses	$	1,517		$	4,210		$	2,297

Noninterest income

Noninterest income for the fourth quarter of 2020 was $23.2 million, a decrease of $3.6 million from the third quarter of 2020. The decrease was primarily due to a $9.2 million decrease in net gain from sales of loans in the third quarter of 2020, partially offset by a $3.9 million increase in net gain from sales of investment securities. In addition, other income increased $1.1 million related to equity investment income and a $212,000 increase in recoveries of pre-acquisition charged-off loans. Also, service charges on deposit accounts increased $412,000 and trust custodial account fees increased $336,000 from the prior quarter.

During the fourth quarter of 2020, the Bank sold $2.1 million of SBA loans for a net gain of $154,000, compared with $1.16 billion of SBA PPP loans sold for a net gain of $19.0 million in the third quarter of 2020. The fourth quarter of 2020 also included the sale of $59.2 million of other loans for a net gain of $174,000, compared to sales of $96.2 million of other loans for a net loss of $9.4 million during the third quarter of 2020.

During the fourth quarter of 2020, the Bank sold $202.6 million of investment securities for a net gain of $5.0 million, compared to the sales of $211.4 million of investment securities for a net gain of $1.1 million in the prior quarter.

Noninterest income for the fourth quarter of 2020 increased $13.4 million, compared to the fourth quarter of 2019. The increase was primarily due to the addition of $7.3 million of custodial account fees from Pacific Premier Trust, a $1.4 million increase in earnings on bank-owned life insurance (“BOLI”), primarily due to additional BOLI from Opus, an increase in net gain from sales of investment securities of $1.3 million, and a $3.7 million increase in other income, primarily due to a $1.5 million increase in equity investment income as well as a $1.3 million increase in escrow and exchange fee income.

The decrease in net gain from sales of loans for the fourth quarter of 2020 compared to the same period last year was primarily due to the sale of $2.1 million of SBA loans for a net gain of $154,000 and the sale of $59.2 million of other loans for a net gain of $174,000 during the fourth quarter of 2020, compared to the sale of $23.7 million of SBA loans for a net gain of $2.1 million and the sale of $8.4 million of other loans for a net loss of $418,000 during the fourth quarter of 2019.

	Three Months Ended
	December 31,		September 30,		December 31,
	2020		2020		2019
	(Dollars in thousands)
NONINTEREST INCOME
Loan servicing income	$	633	$	481	$	487
Service charges on deposit accounts	2,005		1,593		1,558
Other service fee income	459		487		359
Debit card interchange fee income	777		944		367
Earnings on BOLI	2,240		2,270		864
Net gain from sales of loans	328		9,542		1,698
Net gain from sales of investment securities	5,002		1,141		3,671
Trust custodial account fees	7,296		6,960		—
Other income	4,454		3,340		797
Total noninterest income	$	23,194	$	26,758	$	9,801

Noninterest Expense

Noninterest expense totaled $99.9 million for the fourth quarter of 2020, an increase of $1.4 million compared to the third quarter of 2020, primarily due to the increase of $2.1 million in merger-related expense related to the Opus acquisition. Excluding merger-related expense, noninterest expense totaled $94.9 million, a decrease of $723,000, compared to the third quarter of 2020, driven by a $1.2 million decrease in other expense, an $803,000 decrease in legal and professional services expense, and a $793,000 decrease in data processing. These decreases were partially offset by a net $1.0 million increase in compensation as a result of a Company-wide employee appreciation bonus in the aggregate amount of $2.4 million related to the COVID-19 pandemic and higher accrued incentive compensation of $472,000, partially offset by higher loan origination deferred costs of $1.7 million, and an $895,000 increase in premises and occupancy expense due, in part, to ongoing COVID-19 pandemic-related maintenance expenses.

Noninterest expense increased by $33.7 million, compared to the fourth quarter of 2019. The increase was primarily due to a $5.1 million increase in merger-related expense related to the Opus acquisition, a $15.6 million increase in compensation and benefits, a $5.2 million increase in premises and occupancy expense, a $2.0 million increase in FDIC insurance premiums, a $1.1 million increase in office expense, and a $1.0 million increase in legal and professional services expense, predominately as a result of the additional operations, personnel, branches, and divisions retained with the acquisition of Opus.

	Three Months Ended
	December 31,			September 30,			December 31,
	2020			2020			2019
	(Dollars in thousands)
NONINTEREST EXPENSE
Compensation and benefits	$	52,044		$	51,021		$	36,409
Premises and occupancy	13,268			12,373			8,113
Data processing	5,990			6,783			3,241
Other real estate owned operations, net	(5		)	(17		)	31
FDIC insurance premiums	1,213			1,145			(766		)
Legal and professional services	4,305			5,108			3,268
Marketing expense	1,442			1,718			1,713
Office expense	2,191			2,389			1,105
Loan expense	1,084			802			1,064
Deposit expense	5,026			4,728			4,537
Merger-related expense	5,071			2,988			—
Amortization of intangible assets	4,505			4,538			4,247
Other expense	3,805			5,003			3,254
Total noninterest expense	$	99,939		$	98,579		$	66,216

Income Tax

For the fourth quarter of 2020, our effective tax rate was 25.4%, compared to 26.5% for the third quarter of 2020 and 24.2% for the fourth quarter of 2019. The decrease in the effective tax rate from the prior quarter was primarily due to the increase in tax-exempt municipal interest recognized in the fourth quarter.

BALANCE SHEET HIGHLIGHTS

Loans

Loans held for investment totaled $13.24 billion at December 31, 2020, a decrease of $214.4 million from September 30, 2020, and an increase of $4.51 billion from December 31, 2019. The decrease from September 30, 2020 was driven primarily by higher loan prepayments and payoffs, partially offset by higher funded loans.

During the fourth quarter of 2020, the Bank generated $911.3 million of loan commitments and funded $712.5 million of loans, compared with $360.0 million in loan commitments and $280.8 million in funded loans for the third quarter of 2020, and $556.3 million of loan commitments and $419.9 million in funded loans for the fourth quarter of 2019. The year-over-year increase in loans funded was primarily due to expansion in our multifamily loan segment. Business lines of credit utilization rates increased to 36.2% at the end of the fourth quarter of 2020, compared with 33.9% at the end of the third quarter of 2020, but decreased from 44.3% at the end of the fourth quarter of 2019.

The increase in loans held for investment from December 31, 2019 was primarily due to the acquisition of Opus, which added $5.94 billion in gross loans, or $5.81 billion of loans held for investment after purchase accounting adjustments, at the time of acquisition.

At December 31, 2020, the ratio of loans held for investment to total deposits was 81.6%, compared with 82.4% and 98.0% at September 30, 2020 and December 31, 2019, respectively.

The following table presents the composition of the loan portfolio as of the dates indicated:

	December 31,			September 30,			December 31,
	2020			2020			2019
	(Dollars in thousands)
Investor loans secured by real estate
Commercial real estate (“CRE”) non-owner-occupied	$	2,675,085		$	2,707,930		$	2,070,141
Multifamily	5,171,356			5,142,069			1,575,726
Construction and land	321,993			337,872			438,786
SBA secured by real estate ⁽¹⁾	57,331			57,610			68,431
Total investor loans secured by real estate	8,225,765			8,245,481			4,153,084
Business loans secured by real estate ⁽²⁾
CRE owner-occupied	2,114,050			2,119,788			1,846,554
Franchise real estate secured	347,932			359,329			353,240
SBA secured by real estate ⁽³⁾	79,595			84,126			88,381
Total business loans secured by real estate	2,541,577			2,563,243			2,288,175
Commercial loans ⁽⁴⁾
Commercial and industrial	1,768,834			1,820,995			1,393,270
Franchise non-real estate secured	444,797			515,980			564,357
SBA non-real estate secured	15,957			16,748			17,426
Total commercial loans	2,229,588			2,353,723			1,975,053
Retail loans
Single family residential ⁽⁵⁾	232,574			243,359			255,024
Consumer	6,929			45,034			50,975
Total retail loans	239,503			288,393			305,999
Gross loans held for investment ⁽⁶⁾	13,236,433			13,450,840			8,722,311
Allowance for credit losses for loans held for investment ⁽⁷⁾	(268,018		)	(282,503		)	(35,698		)
Loans held for investment, net	$	12,968,415		$	13,168,337		$	8,686,613

Loans held for sale, at lower of cost or fair value	$	601		$	1,032		$	1,672

⁽¹⁾		SBA loans that are collateralized by hotel/motel real property.
⁽²⁾		Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
⁽³⁾		SBA loans that are collateralized by real property other than hotel/motel real property.
⁽⁴⁾		Loans to businesses where the operating cash flow of the business is the primary source of repayment.
⁽⁵⁾		Single family residential includes home equity lines of credit, as well as second trust deeds.
⁽⁶⁾		Includes unaccreted fair value net purchase discounts of $113.8 million, $126.3 million, and $40.7 million as of December 31, 2020, September 30, 2020, and December 31, 2019, respectively.
⁽⁷⁾		The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. Effective January 1, 2020, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.

The total end of period weighted average interest rate on loans, excluding fees and discounts, at December 31, 2020 was 4.27%, compared with 4.34% at September 30, 2020 and 4.91% at December 31, 2019. The quarter-over-quarter and year-over-year decreases reflect the impact of lower rates on loan originations as well as repricing of portfolio loan yields as a result of the Federal Reserve Board's federal funds rate decrease in March 2020.

The following table presents the composition of new organic loan commitments originated during the quarters indicated:

	Three Months Ended
	December 31,		September 30,		December 31,
	2020		2020		2019
	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	80,298	$	40,518	$	94,791
Multifamily	398,651		182,575		69,653
Construction and land	60,336		37,087		53,166
SBA secured by real estate ⁽¹⁾	—		—		1,635
Total investor loans secured by real estate	539,285		260,180		219,245
Business loans secured by real estate ⁽²⁾
CRE owner-occupied	96,779		30,594		117,022
Franchise real estate secured	27,162		—		12,257
SBA secured by real estate ⁽³⁾	1,999		799		5,935
Total business loans secured by real estate	125,940		31,393		135,214
Commercial loans ⁽⁴⁾
Commercial and industrial	228,076		56,959		145,092
Franchise non-real estate secured	8,005		9,665		44,185
SBA non-real estate secured	283		—		2,629
Total commercial loans	236,364		66,624		191,906
Retail loans
Single family residential ⁽⁵⁾	8,888		—		8,457
Consumer	786		1,825		1,439
Total retail loans	9,674		1,825		9,896
Total loan commitments	$	911,263	$	360,022	$	556,261

⁽¹⁾		SBA loans that are collateralized by hotel/motel real property.
⁽²⁾		Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
⁽³⁾		SBA loans that are collateralized by real property other than hotel/motel real property.
⁽⁴⁾		Loans to businesses where the operating cash flow of the business is the primary source of repayment.
⁽⁵⁾		Single family residential includes home equity lines of credit, as well as second trust deeds.

Allowance for Credit Losses

Effective January 1, 2020, the Company adopted the new CECL accounting standard, which replaces the incurred loss methodology. At December 31, 2020, our allowance for credit losses (“ACL”) on loans held for investment was $268.0 million, a decrease of $14.5 million from September 30, 2020 and an increase of $232.3 million from December 31, 2019, and continues to reflect the impact of the COVID-19 pandemic and resulting uncertainty in the macroeconomic environment. The decrease from September 30, 2020 was driven principally by lower loans held for investment as well as changes in loan mix at December 31, 2020. The increase from December 31, 2019 was primarily due to the cumulative-effect Day 1 adjustment of $55.7 million from the adoption of the CECL model, the Day 1 provision of $75.9 million for non-purchased credit deteriorated (“PCD”) loans from the Opus acquisition, and an initial ACL of $21.2 million with respect to PCD loans from the acquisition, as well as the provision for loan losses of $96.4 million primarily due to the unfavorable changes in economic forecasts employed in the Company's CECL model related to the COVID-19 pandemic during 2020.

During the fourth quarter of 2020, the Company incurred $6.4 million of net charge-offs, compared to $4.5 million and $2.3 million during the third quarter of 2020 and the fourth quarter of 2019, respectively.

The following table provides the allocation of the ACL for loans held for investment as well as the activity in the ACL attributed to various segments in the loan portfolio as of and for the period indicated:

	Three Months Ended December 31, 2020
	Beginning ACL Balance		Charge-offs			Recoveries		Provision for Credit Losses			Ending ACL Balance
	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner occupied	$	54,105	$	(8	)	$	44	$	(4,965	)	$	49,176
Multifamily	67,336		—			—		(4,802		)	62,534
Construction and land	15,557		(162		)	—		(2,960		)	12,435
SBA secured by real estate ⁽¹⁾	5,327		(6		)	—		(162		)	5,159
Business loans secured by real estate ⁽²⁾
CRE owner-occupied	48,666		—			15		1,836			50,517
Franchise real estate secured	11,988		(932		)	—		395			11,451
SBA secured by real estate ⁽³⁾	6,160		(23		)	—		430			6,567
Commercial loans ⁽⁴⁾
Commercial and industrial	47,914		(1,678		)	1,781		(1,053		)	46,964
Franchise non-real estate secured	20,149		(5,297		)	—		5,673			20,525
SBA non-real estate secured	951		(97		)	1		140			995
Retail loans
Single family residential ⁽⁵⁾	1,243		(44		)	—		5			1,204
Consumer loans	3,107		(2		)	2		(2,616		)	491
Totals	$	282,503	$	(8,249	)	$	1,843	$	(8,079	)	$	268,018

⁽¹⁾		SBA loans that are collateralized by hotel/motel real property.
⁽²⁾		Loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment.
⁽³⁾		SBA loans that are collateralized by real property other than hotel/motel real property.
⁽⁴⁾		Loans to businesses where the operating cash flow of the business is the primary source of repayment.
⁽⁵⁾		Single family residential includes home equity lines of credit, as well as second trust deeds.

The ratio of allowance for loan losses to total loans held for investment at December 31, 2020 was 2.02%, compared to 2.10% and 0.41% at September 30, 2020 and December 31, 2019, respectively. Under the guidance of ASC 820: Fair Value Measurements and Disclosures, the fair value discount on loans acquired through bank acquisitions was $113.8 million, or 0.85% of total loans held for investment, as of December 31, 2020, compared to $126.3 million, or 0.93% of total loans held for investment, as of September 30, 2020, and $40.7 million, or 0.46% of total loans held for investment, as of December 31, 2019.

Asset Quality

Nonperforming assets totaled $29.2 million, or 0.15% of total assets, at December 31, 2020, an increase of $1.7 million from September 30, 2020 and an increase of $20.2 million from December 31, 2019. During the fourth quarter of 2020, nonperforming loans increased $2.0 million from September 30, 2020 to $29.2 million and other real estate owned decreased $334,000 from September 30, 2020 to zero resulting from the sale of other real estate owned property. Loan delinquencies decreased to $13.3 million, or 0.10% of loans held for investment, compared to $29.4 million, or 0.22% of loans held for investment, at September 30, 2020, and $19.1 million, or 0.22% of loans held for investment, at December 31, 2019.

Classified loans totaled $128.3 million, or 0.97% of loans held for investment, at December 31, 2020, compared to $136.7 million, or 1.02% of loans held for investment, at September 30, 2020, and $45.4 million, or 0.52% of loans held for investment, at December 31, 2019. The decrease in classified loans from September 30, 2020 was driven, in part, by the sale of substandard loans totaling $20.1 million, as well as the net changes in risk ratings during the quarter. The year-over-year increase was driven, in part, by the migration to the substandard risk grade of approximately $57.4 million of loans subject to temporary loan modifications as of December 31, 2020, the addition of classified loans from the Opus acquisition in the second quarter of 2020, as well as the net changes in risk rating during fiscal 2020.

Interest typically is not accrued on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. There were no loans 90 days or more past due and still accruing interest at December 31, 2020. There were no troubled debt restructured loans at December 31, 2020 and September 30, 2020, and $3.0 million troubled debt restructured loans at December 31, 2019.

At December 31, 2020, 52 loans totaling $79.5 million, or 0.60% of loans held for investment, remain within their modification period due to the COVID-19 pandemic hardship under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), of which $20.2 million of loans has migrated to the substandard risk grade. As of December 31, 2020, no loans were in-process for potential modification. At September 30, 2020, the Company’s loan portfolio included 54 loans totaling $118.3 million, or 0.88% of loans held for investment, that were modified due to the COVID-19 pandemic as well as $119.4 million of loans in-process for potential modification.

	December 31,			September 30,			December 31,
	2020			2020			2019
Asset Quality	(Dollars in thousands)
Nonperforming loans	$	29,209		$	27,214		$	8,527
Other real estate owned	—			334			441
Other assets owned	—			—			—
Nonperforming assets	$	29,209		$	27,548		$	8,968

Total classified assets ⁽¹⁾	$	128,332		$	137,042		$	45,387
Allowance for credit losses	268,018			282,503			35,698
Allowance for credit losses as a percent of total nonperforming loans	918		%	1,038		%	419		%
Nonperforming loans as a percent of loans held for investment	0.22			0.20			0.10
Nonperforming assets as a percent of total assets	0.15			0.14			0.08
Classified loans to total loans held for investment	0.97			1.02			0.52
Classified assets to total assets	0.65			0.69			0.39
Net loan charge-offs for the quarter ended	$	6,406		$

Pacific Premier Bancorp, Inc. Announces Fourth Quarter 2020 Financial Results and Increases Quarterly Cash Dividend to $0.30 per Share