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What changed in BANC OF CALIFORNIA, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of BANC OF CALIFORNIA, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+473 added−669 removedSource: 10-K (2026-02-27) vs 10-K (2025-03-03)

Top changes in BANC OF CALIFORNIA, INC.'s 2025 10-K

473 paragraphs added · 669 removed · 344 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

82 edited+36 added−107 removed82 unchanged
Biggest changeThe regulators have the power to, among other things: • require affirmative actions to correct any violation or practice; • issue administrative orders that can be judicially enforced; • direct increases in capital; • direct the sale of subsidiaries or other assets; • limit dividends and distributions; • restrict growth and activities; • assess civil monetary penalties; • remove officers and directors; and • terminate deposit insurance.
Biggest changeAdditionally, regulators may direct the sale of subsidiaries or other assets, limit our ability to pay dividends and make distributions, and restrict our growth or business activities. They also have the power to assess civil monetary penalties, remove officers and directors, and, in severe cases, terminate our deposit insurance.
On November 30, 2023, Banc of California, Inc. completed its transformational merger with PacWest Bancorp (“PacWest”), pursuant to which PacWest merged into Banc of California, Inc., with Banc of California, Inc. continuing as the surviving legal corporation, and, as of December 1, 2023, Banc of California, N.A. merged into Pacific Western Bank, with Pacific Western Bank continuing under the Banc of California name and brand as the Bank.
On November 30, 2023, Banc of California, Inc. completed its transformational merger with PacWest Bancorp (“PacWest”), pursuant to which PacWest merged into Banc of California, Inc., (the "Merger") with Banc of California, Inc. continuing as the surviving legal corporation, and, as of December 1, 2023, Banc of California, N.A. merged into Pacific Western Bank, with Pacific Western Bank continuing under the Banc of California name and brand as the Bank.
If restrictions are imposed on the activities of a financial holding company, such information may not necessarily be available to the public. 20 The bank regulatory framework requires that we obtain prior approval of one or more regulators for various initiatives or corporate actions, including certain acquisitions or investments and the establishment of branches.
If restrictions are imposed on the activities of a financial holding company, such information may not necessarily be available to the public. The bank regulatory framework requires that we obtain prior approval of one or more regulators for various initiatives or corporate actions, including certain acquisitions or investments and the establishment of branches.
Our common stock trades on the New York Stock Exchange under the trading symbol “BANC” and our Series F preferred depositary shares trade on the New York Stock Exchange under the trading symbol “BANC/PF.” The Bank is one of the nation’s premier relationship-based business banks focused on providing banking and treasury management services to small-, middle-market, and venture-backed businesses.
Our common stock trades on the New York Stock Exchange under the trading symbol “BANC” and our Series F preferred depositary shares trade on the New York Stock Exchange under the trading symbol “BANC/PF.” The Bank is one of the nation’s premier relationship-based business banks, providing banking and treasury management services to small, middle-market, and venture-backed businesses.
To facilitate talent attraction and retention, we strive to make the Bank an inclusive and safe workplace, with opportunities for our team members to grow and advance in their careers, supported by strong compensation, benefits, and health and wellness programs. 17 Oversight and Management We strive to attract, develop, and retain highly qualified team members for each role in the organization.
To facilitate talent attraction and retention, we strive to make the Bank an inclusive and safe workplace, with opportunities for our team members to grow and advance in their careers, supported by strong compensation, benefits, and health and wellness programs. Oversight and Management We strive to attract, develop, and retain highly qualified team members for each role in the organization.
We strive to distinguish ourselves from other banks and financial services providers in our marketplace by providing an extremely high level of service to enhance customer loyalty and to attract and retain business. We differentiate ourselves in the marketplace through the quality of service we provide to borrowers while maintaining competitive interest rates, loan fees and other loan terms.
We strive to distinguish ourselves from other banks and financial services providers in our marketplace by providing an extremely high level of service to enhance customer loyalty and to attract and retain business. 9 We differentiate ourselves in the marketplace through the quality of service we provide to borrowers while maintaining competitive interest rates, loan fees and other loan terms.
Most customer records are maintained digitally. We also provide online, mobile, and telephone banking services to further improve the overall client experience. We use an enterprise data warehouse system in order to aggregate, analyze, and report key metrics associated with our customers and products.
Most customer records are maintained digitally. We also provide online, mobile, and telephone banking services to further improve the overall client experience. 8 We use an enterprise data warehouse system in order to aggregate, analyze, and report key metrics associated with our customers and products.
Thus, if the Bank were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, then the regulators could require the Company to provide additional capital or liquidity support, or take other action, in support of the Bank—even if doing so is not otherwise in the best interest of the Company. 21 The Bank Liquidity.
Thus, if the Bank were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, then the regulators could require the Company to provide additional capital or liquidity support, or take other action, in support of the Bank—even if doing so is not otherwise in the best interest of the Company.
We are focused on fostering relationships with businesses in our markets and verticals and providing an exceptional level of service. 6 We offer a wide variety of deposit, loan, and other financial services to small and middle-market businesses, venture capital and private equity firms, non-profit organizations, business owners, entrepreneurs, professionals and high-net worth individuals.
We are focused on fostering relationships with businesses in our markets and verticals and providing an exceptional level of service. 5 We offer a wide variety of deposit, loan, and other financial services to small and middle-market businesses, venture capital and private equity firms, non-profit organizations, business owners, entrepreneurs, professionals and high-net worth individuals.
We also offer team members career development resources, including individual development plans, an internship program, a mentorship program, leadership and management programs, and tuition reimbursement. Through our talent management processes of goal setting, performance reviews, succession planning, career development, and encouraging internal mobility, we strive to continually develop our people and meet the dynamic needs of our customers.
We also offer team members career development resources, including individual development plans, an internship program, a mentorship program, leadership and management programs, and tuition reimbursement. Through our talent management processes of goal setting, performance reviews, succession planning, career development, and encouraging internal mobility, we strive to continually develop our people and meet the dynamic needs of our clients.
As of December 31, 2024, the Bank has no loans in excess of its loans-to-one borrower limit. Dividends. The Company’s primary source of liquidity is dividend payments from the Bank. The regulatory regime imposes various restrictions on the ability of the Bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items.
As of December 31, 2025, the Bank has no loans in excess of its loans-to-one borrower limit. Dividends. The Company’s primary source of liquidity is dividend payments from the Bank. The regulatory regime imposes various restrictions on the ability of the Bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items.
As of December 31, 2024, we were in compliance with the minimum CET1, Tier 1, total capital, and leverage ratios and the minimum capital conservation buffer set forth in these generally applicable regulations. These capital requirements are the minimum ratios generally applicable to banking organizations. The regulators assess any particular institution’s capital adequacy based on numerous factors.
As of December 31, 2025, we were in compliance with the minimum CET1, Tier 1, total capital, and leverage ratios and the minimum capital conservation buffer set forth in these generally applicable regulations. These capital requirements are the minimum ratios generally applicable to banking organizations. The regulators assess any particular institution’s capital adequacy based on numerous factors.
It is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future capital needs, asset quality, and overall financial condition.
For example, it is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future capital needs, asset quality, and overall financial condition.
Regarding dividends, see “ Capital Requirements ” below. 22 FDIC Insurance The Bank’s deposits are insured by the DIF of the FDIC up to applicable legal limits. As an FDIC-insured depository institution, the Bank is subject under certain circumstances to regulation by the FDIC.
Regarding dividends, see “ Capital Requirements ” below. 13 FDIC Insurance The Bank’s deposits are insured by the DIF of the FDIC up to applicable legal limits. As an FDIC-insured depository institution, the Bank is subject under certain circumstances to regulation by the FDIC.
As of December 31, 2024, the Company had capital ratios in excess of the minimums required to be considered “well capitalized.” Repurchases/Redemptions; Dividends. The ability of the Company to buy back stock and make capital distributions is limited by regulatory capital rules and other aspects of the regulatory framework.
As of December 31, 2025, the Company had capital ratios in excess of the minimums required to be considered “well capitalized.” 12 Repurchases/Redemptions; Dividends. The ability of the Company to buy back stock and make capital distributions is limited by regulatory capital rules and other aspects of the regulatory framework.
We believe that creating an environment which encourages continual learning and development is essential for us to maintain a high level of service and to achieve our goal to have every team member feel that they are a valued member of a successful company.
We believe that creating an environment which encourages continual learning and development is essential for us to maintain a high level of service and to achieve our goal to have every team member feel that they are a valued and contributing member.
The Bank is a participant in the IntraFi Network, a product that offers deposit placement services such as ICS and CDARS, and other reciprocal deposit networks which offer products that qualify large deposits for FDIC insurance.
The Bank is a participant in the IntraFi Network, a product that offers deposit placement services such as IntraFi Cash Service and CDARS, and other reciprocal deposit networks which offer products that qualify large deposits for FDIC insurance.
At December 31, 2024, we had ATMs at 69 of our branches located in California and one ATM at our branch in Denver, Colorado. We provide access to customer accounts via a 24-hour seven-day-a-week, toll-free, automated telephone customer service and secure online banking services.
At December 31, 2025, we had ATMs at 67 of our branches located in California and one ATM at our branch in Denver, Colorado. We provide access to customer accounts via a 24-hour seven-day-a-week, toll-free, automated telephone customer service and secure online banking services.
Our Compensation, Nominating and Corporate Governance Committee also works closely with the Enterprise Risk Committee to monitor current and emerging human capital management risks and to mitigate exposure to those risks. Demographics At December 31, 2024, we had 1,903 full-time, part-time, and temporary employees, the overwhelming majority of which were full-time employees.
Our Compensation, Nominating and Corporate Governance Committee also works closely with the Enterprise Risk Committee to monitor current and emerging human capital management risks and to mitigate exposure to those risks. Demographics At December 31, 2025, we had 1,904 full-time and part-time employees, the overwhelming majority of which were full-time employees.
We expect this trend of state-level activity and consumer expectations in those areas to continue to heighten, and we are continually monitoring for developments in the states in which our clients are located. Our regulators regularly examine us for compliance with applicable laws, and adherence to industry best practices, with respect to these topics.
We expect this trend of state-level activity and consumer expectations in those areas to continue to heighten, and we are continually monitoring for developments in the states in which our clients are located. Our regulators regularly examine us for compliance with applicable laws and standards with respect to these topics.
The Bank also had secured financing capacity with the FRBSF of $6.3 billion as of December 31, 2024 collateralized by liens on $5.9 billion of qualifying loans and $1.5 billion of securities. Information Technology Systems We devote significant financial and management resources to maintain stable, reliable, efficient, secure, and scalable information technology systems.
The Bank also had secured financing capacity with the FRBSF of $5.0 billion as of December 31, 2025 collateralized by liens on $4.6 billion of qualifying loans and $1.5 billion of securities. Information Technology Systems We devote significant financial and management resources to maintain stable, reliable, efficient, secure, and scalable information technology systems.
Also, in the case of a bank holding company applying for approval to acquire a bank, the FRB will assess the records of each subsidiary depository institution of the applicant bank holding company, and that record may be the basis for denying the application.
Also, in the case of a bank holding company applying for approval to acquire a bank, the FRB will assess the CRA records of each subsidiary depository institution of the applicant bank holding company. An unsatisfactory CRA record may be the basis for denying the application.
At December 31, 2024, our total deposits were $27.2 billion and consisted of $7.7 billion in noninterest-bearing deposits, $7.6 billion in interest-bearing checking accounts, $5.4 billion in money market accounts, $1.9 billion in savings accounts, and $4.6 billion in time deposits.
At December 31, 2025, our total deposits were $27.8 billion and consisted of $7.8 billion in noninterest-bearing deposits, $8.5 billion in interest-bearing checking accounts, $4.9 billion in money market accounts, $1.9 billion in savings accounts, and $4.7 billion in time deposits.
The BHCA and regulations thereunder require every bank holding company to obtain the prior approval of the FRB before it: (i) may acquire direct or indirect ownership or control of any voting shares of any bank or savings and loan association, if after such acquisition, the bank holding company will directly or indirectly own or control 5% or more of the voting shares of the institution; (ii) or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank or savings and loan association; or (iii) may merge or consolidate with any other bank holding company.
The BHCA and regulations thereunder require a bank holding company to obtain the prior approval of the FRB before it: (i) may acquire direct or indirect ownership or control of more than 5% of any class of voting shares of any bank or savings and loan association; (ii) or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank or savings and loan association; or (iii) may merge or consolidate with any other bank holding company.
Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours. Compliance with the new rule was required by May 1, 2022.
Service providers are required to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.
Data is collected across multiple systems so that standard and ad hoc reports are available to assist with managing our business. We maintain an information technology strategic plan. This plan defines the overall innovation and technology agenda and vision, tracks information technology and information security trends and priorities, and provides details on information technology initiatives over the next several years.
Data is collected across multiple systems so that standard and ad hoc reports are available to assist with managing our business. We maintain an information technology strategic plan. This plan defines the overall innovation and technology agenda and vision.
Our risk framework is based upon our business strategy, risk appetite, and financial plans approved by our Board. Our risk framework is supported by an enterprise risk management program. Our enterprise risk management program integrates all risk efforts under one common framework. This framework includes risk policies, procedures, measured and reported limits and targets, and reporting.
Our risk framework is supported by an enterprise risk management program. Our enterprise risk management program integrates all risk efforts under one common framework. This framework includes risk policies, procedures, measured and reported limits and targets, and reporting.
As a California state-chartered bank that is a member of the FRB, the Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the DFPI and the FRB. In addition, as an FDIC-insured depository institution, the Bank is also subject to regulation by the FDIC.
As a California state-chartered bank that is a member of the FRB, the Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the DFPI and the FRB.
The legal and regulatory framework is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement.
The legal and regulatory framework is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement. Changes are difficult to predict and could have significant effects on our business.
These regulations establish required minimum ratios for common equity Tier 1 (the “CET1”) capital, Tier 1 capital and total capital and a leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; require an additional capital conservation buffer over the minimum required capital ratios in order to avoid certain limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses; and define what qualifies as capital for purposes of meeting the capital requirements. 23 In 2020, the federal bank regulatory authorities approved a rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL.
These regulations establish required minimum ratios for CET1 capital, Tier 1 capital and total capital and a leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; require an additional capital conservation buffer over the minimum required capital ratios in order to avoid certain limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses; and define what qualifies as capital for purposes of meeting the capital requirements.
The Bank is subject to a variety of requirements under federal law. The Bank is required to maintain sufficient liquidity to ensure safe and sound operations. For additional information, see Liquidity included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K. Safety and Soundness.
The Bank Liquidity. The Bank is subject to a variety of requirements under federal law. The Bank is required to maintain sufficient liquidity to ensure safe and sound operations. For additional information, see "Liquidity" in Item 7 of this Form 10-K. Safety and Soundness.
The FRB’s jurisdiction also extends to any company that is directly or indirectly controlled by a bank holding company. The Company has also elected to be a financial holding company under the BHCA.
(the “Company”) is subject to the BHCA and is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the FRB. The FRB’s jurisdiction also extends to any company that is directly or indirectly controlled by a bank holding company. The Company has also elected to be a financial holding company under the BHCA.
Future Legislation or Regulation Federal, state and local governments, legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, their holding companies and other financial institutions.
We cannot predict the nature of future monetary policies and the effect of such policies on our business and earnings. Future Legislation or Regulation Federal, state and local governments, legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, their holding companies and other financial institutions.
Federal and state laws and regulations generally applicable to financial institutions regulate the Company’s and the Bank’s scope of business, investments, reserves against deposits, capital levels, the nature and amount of collateral for loans, the establishment of branches, mergers, acquisitions, dividends, and other matters.
In addition, as an FDIC-insured depository institution, the Bank is also subject to regulation by the FDIC. 11 Federal and state laws and regulations generally applicable to financial institutions regulate the Company’s and the Bank’s scope of business, investments, reserves against deposits, capital levels, the nature and amount of collateral for loans, the establishment of branches, mergers, acquisitions, dividends, and other matters.
See Note 2. Business Combinations of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” for additional information. Our principal executive office is currently located at 11611 San Vicente Boulevard, Suite 500, Los Angeles, California, and our telephone number is (855) 361-2262.
See "Note 2. Business Combinations" in Item 8 of this Form 10-K for additional information. Our principal executive office is currently located at 11611 San Vicente Boulevard, Suite 500, Los Angeles, California, and our telephone number is (855) 361-2262.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including implementing or modifying data encryption requirements, data breach notifications, and information security.
The health, safety, and wellness of our team members is fundamentally connected to the success of our business. We provide our team members and their families with access to a variety of flexible, convenient, and innovative health and wellness programs to help them improve or maintain their physical and mental well-being.
We provide our team members and their families with access to a variety of flexible, convenient, and innovative health and wellness programs to help them improve or maintain their physical and mental well-being. The safety of our team members and customers is paramount. We strive to ensure that all team members feel safe in their respective work environment.
We employ a variety of financing arrangements, including term debt, subordinated debt, and equity. As a member of the FHLB, the Bank had secured financing capacity with the FHLB as of December 31, 2024 of $6.9 billion, collateralized by a blanket lien on $10.5 billion of qualifying loans and $19.8 million of securities.
As a member of the FHLB, the Bank had secured financing capacity with the FHLB as of December 31, 2025 of $6.9 billion, collateralized by a blanket lien on $10.3 billion of qualifying loans and $20.5 million of securities.
Capital Requirements and Prompt Corrective Action The bank regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain a specified level of capital relative to the amount and types of assets they hold.
As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain a specified level of capital relative to the amount and types of assets they hold.
Financial Privacy Under the Requirements of the Gramm-Leach-Bliley Act We are subject to various laws related to the privacy of consumer information.
Based on the most recent CRA examination, the Bank was rated "outstanding." Financial Privacy Under the Requirements of the Gramm-Leach-Bliley Act We are subject to various laws related to the privacy of consumer information.
In a receivership, the claims of the Bank’s depositors (and those of the FDIC as subrogee of the Bank) would have priority over other general unsecured claims against the Bank.
In a receivership, the claims of the Bank’s depositors (and those of the FDIC as subrogee of the Bank) would have priority over other general unsecured claims against the Bank. Brokered Deposits The Federal Deposit Insurance Act restricts the use of brokered deposits by certain depository institutions.
Anti-Money Laundering and Suspicious Activity We are subject to several federal laws related to anti-money laundering (“AML”), economic sanctions, and prevention of financial crime, including the Bank Secrecy Act, the Money Laundering Control Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“Patriot Act”), and economic sanctions programs.
In addition to capital requirements, depository institutions are required to maintain noninterest bearing reserves at specified levels against their transaction accounts and certain non-personal time deposits. 14 Anti-Money Laundering and Suspicious Activity We are subject to several federal laws related to anti-money laundering (“AML”), economic sanctions, and prevention of financial crime, including the Bank Secrecy Act, the Money Laundering Control Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“Patriot Act”), and economic sanctions programs.
Our oversight of this risk management process is conducted by the Company’s Board of Directors (the “Board”) and its standing committees. The committees each report to the Board and the Board has overall oversight responsibility for risk management. Our risk framework is structured to guide decisions regarding the appropriate balance between risk and return considerations in our business.
The committees each report to the Board and the Board has overall oversight responsibility for risk management. Our risk framework is structured to guide decisions regarding the appropriate balance between risk and return considerations in our business. Our risk framework is based upon our business strategy, risk appetite, and financial plans approved by our Board.
The Bank offers a broad range of loan and deposit products and services through 80 full-service branches located throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide. The Bank also provides full-stack payment processing solutions through its subsidiary, Deepstack Technologies, LLC (“Deepstack”).
The Bank offers a broad range of loan and deposit products and services through 79 full-service branches located throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide. The Bank also provides full-service payment processing solutions to its clients and serves the Community Association Management industry nationwide with its technology-forward platform, SmartStreet™.
However, there is a specific exception for loans by financial institutions, such as the Bank, to its executive officers and directors that are made in compliance with federal banking laws.
However, there is a specific exception for loans by financial institutions, such as the Bank, to its executive officers and directors that are made in compliance with federal banking laws. 15 The Company and its affiliates, including the Bank, maintain programs to comply with the limitations on transactions with affiliates and restrictions on loans to insiders and the Company believes it and the Bank are currently in compliance with these requirements.
Our Board approves our risk appetite statement, which sets forth the amount and type of risks we are willing to accept in pursuit of achieving our strategic, business, and financial objectives.
Our Board approves our risk appetite statement, which sets forth the amount and type of risks we are willing to accept in pursuit of achieving our strategic, business, and financial objectives. Our risk appetite statement provides the context for our risk management tools, including, among others, risk policies, limits, portfolio composition, underwriting standards, and operational processes.
An adequately capitalized insured depository institution may not accept, renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC. The FDIC may grant a waiver upon a finding that the acceptance of brokered deposits does not constitute an unsafe or unsound practice with respect to such institution.
A well-capitalized insured depository institution may solicit and accept, renew or roll over any brokered deposit without restriction. An adequately capitalized insured depository institution may not accept, renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC.
As of December 31, 2024, the Company had total assets of $33.5 billion, total loans and leases held for investment of $23.8 billion, total deposits of $27.2 billion, and total stockholders’ equity of $3.5 billion.
As of December 31, 2025, the Company had total assets of $34.8 billion, total loans and leases HFI of $25.0 billion, total deposits of $27.8 billion, and total stockholders’ equity of $3.5 billion.
In allocating total compensation, we seek to provide competitive levels of fixed compensation (base salary) and, through annual and long-term incentives, provide for increased total compensation when performance objectives are met or exceeded and appropriately lower total compensation if performance objectives are not met.
In allocating total compensation, we seek to provide competitive levels of fixed compensation (base salary) and, through annual and long-term incentives, provide for increased total compensation when performance objectives are met or exceeded and appropriately lower total compensation if performance objectives are not met. 10 Our compensation and benefits programs are designed to be competitive and aligned with industry standards, ensuring fairness based on employee position, skill level, experience, and knowledge.
Specifically, the new rule requires a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred.
If we fail to observe such regulatory guidance and standards, we could be subject to various regulatory sanctions. A banking organization is required to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred.
The determination whether a party “controls” a depository institution or its holding company for purposes of these laws is based on applicable regulations and all of the facts and circumstances surrounding the investment. 25 Identity Theft Under the Fair and Accurate Credit Transactions Act (the “FACT Act”), the Bank is required to develop and implement a written Identity Theft Prevention Program (the “Program”) to detect, prevent and mitigate identity theft “red flags” in connection with the opening of certain accounts or certain existing accounts.
Identity Theft Under the Fair and Accurate Credit Transactions Act (the “FACT Act”), the Bank is required to develop and implement a written Identity Theft Prevention Program (the “Program”) to detect, prevent and mitigate identity theft “red flags” in connection with the opening of certain accounts or certain existing accounts.
The Bank is subject to periodic examination under the CRA by the FRB, which will assign ratings based on the methodologies set forth in its regulations and guidance.
The FRB regularly assesses the Bank on its record in helping meet the credit needs of the communities it serves, including low-income and moderate-income neighborhoods. The Bank is subject to periodic examination under the CRA by the FRB, which will assign ratings based on the methodologies set forth in its regulations and guidance.
For more information on how the regulatory environment, enforcement actions, findings and ratings could also have an impact on our strategies, the value of our assets, or otherwise adversely affect our business see Item 1A. – Risk Factors of this Annual Report on Form 10-K. 28
The full effect that these changes will have on us and our subsidiaries remains uncertain at this time and may have a material adverse effect on our business, our operations or financial condition.For more information on how the regulatory environment, enforcement actions, findings and ratings could also have an impact on our strategies, the value of our assets, or otherwise adversely affect our business see "Risk Factors" in Item 1A of this Form 10-K. 17
We use multiple layers of protection to control access, detect unusual activity, and reduce risk. We regularly conduct a variety of audits and vulnerability and penetration tests on our platforms, systems, and applications and maintain comprehensive incident response plans to minimize potential risks, including cyber-attacks.
We regularly conduct a variety of audits and vulnerability and penetration tests on our platforms, systems, and applications and maintain comprehensive incident response plans to minimize potential risks, including cyber-attacks. To protect our business operations against disasters, we employ multiple layers of redundancy, including geographically distributed systems, replication, and comprehensive recovery plans.
To protect our business operations against disasters, we have a backup off-site core processing system and comprehensive recovery plans. Risk Oversight and Management We believe risk management is another core competency of our business. We have a comprehensive risk management process that measures, monitors, evaluates, and manages the risks we assume in conducting our activities.
Risk Oversight and Management We believe risk management is another core competency of our business. We have a comprehensive risk management process that measures, monitors, evaluates, and manages the risks we assume in conducting our activities. Our oversight of this risk management process is conducted by the Company’s Board of Directors (the “Board”) and its standing committees.
The Company believes it and the Bank are currently in compliance with these requirements. Other Regulations The Bank is a member of the FHLB, which makes loans or advances to members. All advances are required to be fully secured by sufficient collateral as determined by the FHLB.
Other Regulations The Bank is a member of the FHLB, which makes loans or advances to members. All advances are required to be fully secured by sufficient collateral as determined by the FHLB. To be a FHLB member, financial institutions must demonstrate that they originate and/or purchase long-term home mortgage loans or MBS.
Under FRB regulations, which were codified by the Dodd-Frank Wall Street Reform and Consumer Protection Act, a bank holding company, such as the Company, must serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls, such as the Bank.
Regarding dividends, see “ Capital Requirements and Prompt Corrective Action ” below. Source of Strength. Under FRB regulations and federal law, a bank holding company, such as the Company, must serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls, such as the Bank.
We also offer a variety of voluntary benefits that allow employees to select the options that meet their personal and family needs, including health savings and flexible spending accounts, paid parental leave, public transportation reimbursement, personalized wellness programs, and a tuition reimbursement program. 18 Health, Safety and Wellness.
We also offer voluntary benefits such as health savings and flexible spending accounts, paid parental leave, public transportation reimbursement, personalized wellness programs, and tuition reimbursement to meet diverse employee needs. Health, Safety and Wellness. The health, safety, and wellness of our team members is fundamentally connected to the success of our business.
Also, among other types of transactions, the Volcker Rule generally does not prohibit transactions under repurchase and reverse repurchase agreements, securities lending transactions, purchases and sales for the purpose of liquidity management if the liquidity management plan meets specified criteria, and transactions undertaken in a fiduciary capacity. 27 Effect on Economic Environment The policies of regulatory authorities, including the monetary policy of the FRB, have a significant effect on the operating results of bank holding companies and their subsidiaries.
The Volcker Rule permits various exempt activities, including transactions involving government obligations, repurchase and reverse‑repurchase agreements, securities lending, and liquidity‑management transactions conducted in accordance with regulatory requirements. Effect on Economic Environment The policies of regulatory authorities, including the monetary policy of the FRB, have a significant effect on the operating results of bank holding companies and their subsidiaries.
In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. Those competitors include non-bank specialty lenders, insurance companies, private investment funds, investment banks, financial technology companies, and other financial and non-financial institutions.
Those competitors include non-bank specialty lenders, insurance companies, private investment funds, investment banks, financial technology companies, and other financial and non-financial institutions.
The safety of our team members and customers is paramount. We strive to ensure that all team members feel safe in their respective work environment. We closely monitor external developments and governmental regulations regarding workplace safety and employee health and adjust our policies and procedures accordingly. Talent Development.
We closely monitor external developments and governmental regulations regarding workplace safety and employee health and adjust our policies and procedures accordingly. Talent Development.
In addition, most types of transactions by an insured depository institution with, or for the benefit of, an affiliate be on terms substantially the same or at least as favorable to the insured depository institution as if the transaction were conducted with an unaffiliated third party.
In addition, these restrictions require most types of transactions by an insured depository institution with, or for the benefit of, an affiliate be on market terms or better for the insured depository institution.
The Bank has assets in excess of $10 billion; therefore, we are subject to the supervision, examination and primary enforcement jurisdiction of the CFPB with respect to federal consumer financial protection laws. With the recent change in presidential administration and control of Congress, the scope of regulation by the CFPB and other federal agencies remains uncertain.
The Bank has assets in excess of $10 billion; therefore, we are subject to the supervision, examination and primary enforcement jurisdiction of the CFPB with respect to federal consumer financial protection laws. Additionally, under the current U.S. administration, a level of heightened uncertainty exists with respect to the future of the CFPB, including its structure, staffing, and responsibilities.
Some of these competitors are larger in total assets and capitalization, with more offices over a wider geographic area and offer a broader range of financial services than our operations. Our most direct competition for loans comes from larger regional and national banks, diversified finance companies, venture debt funds, and community banks that target the same customers as we do.
Competition The banking business is highly competitive. We compete nationwide with other commercial banks and financial services institutions for loans and leases, deposits, and employees. Some of these competitors are larger in total assets and capitalization, with more offices over a wider geographic area and offer a broader range of financial services than our operations.
The rule provides banking organizations that implemented CECL before the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.
We elected to delay the estimated impact on regulatory capital from the adoption of the CECL methodology for two years followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. As of January 1, 2025, the impact of the CECL standard was fully reflected in our regulatory capital.
The Bank maintains a Program to meet the requirements of the FACT Act and the Bank believes it is currently in compliance with these requirements.
The Bank maintains a Program to meet the requirements of the FACT Act and the Bank believes it is currently in compliance with these requirements. Consumer Protection Laws and Regulations We are subject to a broad array of federal, state and local consumer protection laws and regulations that govern almost every aspect of our business relationships with consumers.
The rates that an adequately capitalized institution with a waiver may pay on brokered deposits may not exceed certain ceilings. An “undercapitalized insured depository institution” may not accept, renew or roll over any brokered deposit. As of December 31, 2024, the Bank was considered “well capitalized” for this purpose.
An “undercapitalized insured depository institution” may not accept, renew or roll over any brokered deposit. As of December 31, 2025, the Bank was considered “well capitalized” for this purpose. Capital Requirements and Prompt Corrective Action The bank regulators view capital levels as important indicators of an institution’s financial soundness.
Banc of California also serves the community association management industry nationwide with its technology-forward platform SmartStreet™. The Bank is committed to its local communities by supporting organizations that provide financial literacy and job training, small business support, affordable housing, and more.
The Bank is committed to its local communities by supporting organizations that provide financial literacy and job training, small business support, affordable housing, and more. The Bank is organized into four business groups – Commercial & Community Banking ("CCB"), Specialty Banking, Deposit and Transaction Services, and Payment Solutions.
To be a FHLB member, financial institutions must demonstrate that they originate and/or purchase long-term home mortgage loans or mortgage-backed securities. The Bank is required to purchase and maintain stock in the FHLB. At December 31, 2024, the Bank had $30.2 million in FHLB stock, which was in compliance with this requirement.
The Bank is required to purchase and maintain stock in the FHLB. At December 31, 2025, the Bank had $46.7 million in FHLB stock, which was in compliance with this requirement.
Financial and Statistical Disclosure Certain of our statistical information is presented within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk.” This information should be read in conjunction with the consolidated financial statements contained in “Item 8.
Financial and Statistical Disclosure Certain of our statistical information is presented within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and "Quantitive and Qualitative Disclosures" in Item 7A of this Form 10-K.
The primary sources of repayment are the sale in the secondary market, either directly or through securitization, of the mortgage loans funded on the warehouse line. • Other lending .
Repayment is from proceeds of loan sales in the secondary market, either directly or through securitization, of the mortgage loans funded on the warehouse line. Other lending . Other lending loans comprise 4% of our total HFI loans as of both December 31, 2025 and 2024, respectively.
Financial Statements and Supplementary Data.” 19 Supervision and Regulation General We are extensively regulated under federal and state laws. As a bank holding company, Banc of California, Inc. (the “Company”) is subject to the BHCA and is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the FRB.
This information should be read in conjunction with the "Financial Statements and Notes to the Consolidated Financial Statements" in Item 8 of this Form 10-K. Supervision and Regulation General We are extensively regulated under federal and state laws. As a bank holding company, Banc of California, Inc.
Specialty Banking is focused on serving clients in niche verticals by industry, including HOA (or homeowner associations), venture banking, lender finance, SBA lending, mortgage warehouse lending, media and entertainment, asset-based lending, and equipment finance. Our Deposit Services provide valuable services through tailored cash management and treasury management solutions along with corporate asset management services through our subsidiary, BAM.
CCB provides in-market relationship lending and deposit gathering through regional offices and 79 branch locations throughout California, in Denver, Colorado and in Durham, North Carolina. Specialty Banking is focused on serving clients in niche verticals by industry, including HOA, venture banking, lender finance, SBA lending, mortgage warehouse lending, media and entertainment, asset-based lending, and equipment finance.
Performance under the CRA also is considered when the FRB reviews applications to acquire, merge or consolidate with another banking institution or its holding company.
Less favorable CRA ratings, or concerns raised under the CRA, may adversely affect the Bank’s ability to obtain approval for certain types of applications. Performance under the CRA also is considered when the relevant federal bank regulator reviews applications to acquire, merge or consolidate with another banking institution or its holding company or to open or relocate a branch office.
“Financial in nature” activities include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; and merchant banking.
As a bank holding company that has elected to be a financial holding company pursuant to the BHCA, the Company is permitted to engage in a broader range of activities. Permitted activities for a financial holding company include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; and merchant banking.
The primary sources of repayments for the CCB group business loans, non-profit borrowers, and SBA 7(a) business expansion loans are the operations of the borrowers. The primary sources of repayment for loans to municipalities are tax collections from their tax jurisdictions.
These loans include CCB business loans, loans to homeowner associations, loans to municipalities and non-profit borrowers, and SBA 7(a) loans for small business expansion. The primary sources of repayments is from borrower cash flow or municipalities tax collections. Consumer Loans Consumer loans comprise 1% and 2% of our total HFI loans as of December 31, 2025 and 2024, respectively.
The loan terms are generally one to four years, and the loans are typically secured by a first priority, secured blanket lien on all corporate assets and/or a lien on intellectual property. • Secured business . These are secured business loans originated through the CCB group. The primary source of repayment is the cash flow of the borrowers.
Secured business loans comprise 3% of our total HFI loans as of both December 31, 2025 and 2024. These are secured business loans originated through the CCB group. The primary source of repayment is the cash flow of the borrowers. The loans can be up to five years and are secured by a specific asset or assets of the borrower.
Under the regulations, FDIC-insured depository institutions, their holding companies, subsidiaries and affiliates (collectively, banking entities), are generally prohibited, subject to certain exemptions, from short-term proprietary trading of securities and other financial instruments and from acquiring or retaining an ownership interest in, or conducting certain other activities with, a “covered fund.” These requirements do not currently have a material impact and are not expected to have a future material impact on the Company’s investing and trading activities.
Volcker Rule The so-called “Volcker Rule” restricts banking entities from engaging in short‑term proprietary trading and from certain activities with “covered funds.” These restrictions do not currently have, and are not expected to have, a material impact on the Company’s investing or trading activities.
Our deposits are diversified and are a mix of deposits from small-, middle-market, and venture-backed businesses, HOA management companies and many are related to lending relationships to a diversified client base. The Company is not dependent upon any single or limited number of customers, the loss of which would have a material adverse effect on the Company.
Our deposits are diversified and are a mix of deposits from small, middle-market, and venture-backed businesses, HOA management companies and many are related to lending relationships to a diversified client base. Client Investment Funds In addition to deposit products, we also offer alternative, non-depository corporate treasury solutions for clients to invest excess liquidity.
At December 31, 2024 and 2023, SNC loans held for investment comprised 0.9% and 0.7% of total loans and leases held for investment. 8 Real Estate Mortgage Loans and Real Estate Construction and Land Loans Our real estate lending activities focus primarily on loans to professional developers and real estate investors for the acquisition, construction, refinancing, renovation, and on-going operation of commercial real estate.
Real Estate Loans Real estate loans consist of CRE mortgage, residential real estate mortgage, and real estate construction and land loans, generally secured by first-priority liens. These loans are originated to professional developers and real estate investors for the acquisition, construction, refinancing, renovation, and on-going operation of CRE.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, it could: • limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • restrict us from paying dividends to our stockholders; • increase our vulnerability to general economic and industry conditions; and • require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use cash flows to fund our operations, capital expenditures and future business opportunities.
Biggest changeFor example, our indebtedness could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions, and other general corporate purposes. It may also restrict us from making strategic acquisitions or could force us to make non-strategic divestitures.
Our real estate loan portfolio encompasses commercial real estate mortgage, residential real estate mortgage, and real estate construction and land loans, which implicate a variety of risks, including: (i) market risks including increased competition in pricing and loan structure, macroeconomic conditions in the United States and in the markets where we lend, and decreased commercial and residential real estate values in the markets where we lend; (ii) environmental risks including natural disasters and impact on underlying real estate collateral and environmental liabilities with respect to real properties acquired; and (iii) project-specific risks including higher construction costs, failure by developers and contractors to meet project specifications or timelines, and buyers of completed construction projects not being able to secure permanent financing.
Our real estate loan portfolio encompasses CRE mortgage, residential real estate mortgage, and real estate construction and land loans, which implicate a variety of risks, including: (i) market risks including increased competition in pricing and loan structure, macroeconomic conditions in the United States and in the markets where we lend, and decreased commercial and residential real estate values in the markets where we lend; (ii) environmental risks including natural disasters and impact on underlying real estate collateral and environmental liabilities with respect to real properties acquired; and (iii) project-specific risks including higher construction costs, failure by developers and contractors to meet project specifications or timelines, and buyers of completed construction projects not being able to secure permanent financing.
A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. 38 Our business and financial results are also significantly affected by the fiscal and monetary policies of the U.S. government and its agencies.
A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. Our business and financial results are also significantly affected by the fiscal and monetary policies of the U.S. government and its agencies.
Bank regulators have, and may in the future, hold banks responsible for the activities of these fintech companies, including in respect of bank secrecy act or anti-money laundering matters, or may take the view that these relationships present safety and soundness issues. 31 We are subject to certain risks in connection with our use of technology.
Bank regulators have, and may in the future, hold banks responsible for the activities of these fintech companies, including in respect of bank secrecy act or anti-money laundering matters, or may take the view that these relationships present safety and soundness issues. We are subject to certain risks in connection with our use of technology.
Both the timing and the nature of any changes in monetary or fiscal policies, as well as their consequences for the economy and the markets in which we operate, are beyond our control and difficult to predict but could adversely affect our business and operating results. Also, the FRB regulates the supply of money and credit in the United States.
Both the timing and the nature of any changes in monetary or fiscal policies, as well as their consequences for the economy and the markets in which we operate, are beyond our control and difficult to predict but could adversely affect our business and operating results. 22 Also, the FRB regulates the supply of money and credit in the United States.
If a cyber-attack succeeds in disrupting our operations or disclosing confidential data, we could also suffer significant reputational damage in addition to possible regulatory fines or client lawsuits. We provide internet banking services to our clients which have additional cyber risks related to our client’s personal electronic devices and electronic communication.
If a cyber-attack succeeds in disrupting our operations or disclosing confidential data, we could also suffer significant reputational damage in addition to possible regulatory fines or client lawsuits. 18 We provide internet banking services to our clients which have additional cyber risks related to our client’s personal electronic devices and electronic communication.
Our income property loans, consisting of commercial real estate and multi-family loans, involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers. We originate commercial real estate and multi-family loans for individuals and businesses for various purposes, which are secured by commercial properties.
Our income property loans, consisting of commercial real estate and multi-family loans, involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers. We originate CRE and multi-family loans for individuals and businesses for various purposes, which are secured by commercial properties.
Applicable laws and regulations, including capital and liquidity requirements, could restrict the Bank’s ability to pay dividends or distribute capital to the Company, which could adversely affect our cash flow and financial condition. 45 There can be no assurance as to the level of dividends we may pay on our common stock and NVCE stock.
Applicable laws and regulations, including capital and liquidity requirements, could restrict the Bank’s ability to pay dividends or distribute capital to the Company, which could adversely affect our cash flow and financial condition. There can be no assurance as to the level of dividends we may pay on our common stock and NVCE stock.
As a result, these loans may experience higher rates of delinquencies, defaults and losses, which will in turn adversely affect our financial condition and results of operations. 39 Our real estate loan portfolio is subject to certain risks including market, environmental and project-specific risks.
As a result, these loans may experience higher rates of delinquencies, defaults and losses, which will in turn adversely affect our financial condition and results of operations. Our real estate loan portfolio is subject to certain risks including market, environmental and project-specific risks.
Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio. 42 Our business is subject to interest rate risk and variations in interest rates may hurt our profits.
Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio. Our business is subject to interest rate risk and variations in interest rates may hurt our profits.
Additionally, from time to time we undertake strategic project initiatives, including but not limited to, payment processing, investment in technology, process improvement, client experience and fintech partnerships or acquisitions, such as our acquisition of Deepstack. Significant effort and resources are necessary to manage and oversee the successful completion of these initiatives.
Additionally, from time to time we undertake strategic project initiatives, including but not limited to, payment processing, investment in technology, process improvement, client experience and fintech partnerships or acquisitions, such as our acquisition of BancEdge. Significant effort and resources are necessary to manage and oversee the successful completion of these initiatives.
A decline in residential real estate values as a result of a downturn in the California housing markets has reduced in some areas, and may continue to reduce, the value of the real estate collateral securing these types of loans and increase the risk that we would incur losses if borrowers default on their loans.
A decline in residential real estate values as a result of a downturn in the national housing markets has reduced in some areas, and may continue to reduce, the value of the real estate collateral securing these types of loans and increase the risk that we would incur losses if borrowers default on their loans.
This is most likely to occur if short-term interest rates increase at a faster rate than long-term interest rates, which would cause our net interest income to go down. In addition, rising interest rates may hurt our income, because that may reduce the demand for loans and the value of our securities.
This is most likely to occur if short-term interest rates increase at a faster rate than long-term interest rates, which would cause our NII to go down. In addition, rising interest rates may hurt our income, because that may reduce the demand for loans and the value of our securities.
In a rapidly changing interest rate environment, we may not be able to manage our interest rate risk effectively, which would adversely impact our financial condition and results of operations. A reduction in our credit ratings could adversely affect our access to capital and could increase our cost of funds.
In a rapidly changing interest rate environment, we may not be able to manage our IRR effectively, which would adversely impact our financial condition and results of operations. A reduction in our credit ratings could adversely affect our access to capital and could increase our cost of funds.
Communications and information systems are essential to the conduct of our business, as we use such systems to manage our client relationships, our general ledger and virtually all other aspects of our business as well as process customer and merchant payments via the Deepstack platform.
Communications and information systems are essential to the conduct of our business, as we use such systems to manage our client relationships, our general ledger and virtually all other aspects of our business as well as process customer and merchant payments via the BancEdge platform.
Risks Related to Credit and Interest Rate If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer.
Risks Related to Credit and Interest Rates If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer.
These precautions may not protect our systems from future vulnerabilities, data breaches or other cyber threats. Losses due to unauthorized account activity could harm our reputation and may have a material adverse effect on our business, financial condition, results of operations, and prospects. Our security measures may not protect us from systems failures or interruptions.
The precautions we take may not protect our systems from future vulnerabilities, data breaches or other cyber threats. Losses due to unauthorized account activity could harm our reputation and may have a material adverse effect on our business, financial condition, results of operations, and prospects. Our security measures may not protect us from systems failures or interruptions.
If we foreclose on a commercial real estate or multi-family loan, our holding period for the collateral typically is longer than for residential mortgage loans because there are fewer potential purchasers of the collateral. Additionally, commercial real estate and multi-family loans generally have relatively large balances to single borrowers or groups of related borrowers.
If we foreclose on a CRE or multi-family loan, our holding period for the collateral typically is longer than for residential mortgage loans because there are fewer potential purchasers of the collateral. Additionally, CRE and multi-family loans generally have relatively large balances to single borrowers or groups of related borrowers.
If interest rates rise, our net interest income and the value of our assets could be reduced if interest paid on interest-bearing liabilities, such as deposits and borrowings, increases more quickly than interest received on interest-earning assets, such as loans, and investment securities.
If interest rates rise, our NII and the value of our assets could be reduced if interest paid on interest-bearing liabilities, such as deposits and borrowings, increases more quickly than interest received on interest-earning assets, such as loans, and investment securities.
To recognize the potential loan repurchase or indemnification losses on all SFR mortgage and multi-family loans sold, we maintained a total reserve of $1.5 million as of December 31, 2024. Increases to this reserve as a result of the sale of loans are a reduction in our gain on the sale of loans.
To recognize the potential loan repurchase or indemnification losses on all SFR mortgage and multi-family loans sold, we maintained a total reserve of $1.8 million as of December 31, 2025. Increases to this reserve as a result of the sale of loans are a reduction in our gain on the sale of loans.
Commercial real estate and multi-family loans also expose us to credit risk because the collateral securing these loans often cannot be sold easily at acceptable terms. In addition, many of our commercial real estate and multi-family loans are not fully amortizing and contain large balloon payments upon maturity.
CRE and multi-family loans also expose us to credit risk because the collateral securing these loans often cannot be sold easily at acceptable terms. In addition, many of our CRE and multi-family loans are not fully amortizing and contain large balloon payments upon maturity.
Any change in general market interest rates, whether as a result of changes in the monetary policy of the FRB or otherwise, may have a significant effect on net interest income and prepayments on our loans.
Any change in general market interest rates, whether as a result of changes in the monetary policy of the FRB or otherwise, may have a significant effect on NII and prepayments on our loans.
Accordingly, if we make any errors in judgment in the collectability of our commercial real estate and multi-family loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
Accordingly, if we make any errors in judgment in the collectability of our CRE and multi-family loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
Compliance with such laws, regulations, or policies, including any that may be adopted in the future, could, among other things, increase the costs of operating our businesses, reduce the demand for our products and services, impact our ability to meet or maintain current or future goals, targets or commitments, and increase our legal, operational, and reputational risks, any or all of which could adversely affect our results of operations. 48 Non-compliance with laws and regulations could result in fines or sanctions or operating restrictions.
Compliance with such laws, regulations, or policies, including any that may be adopted in the future, could, among other things, increase the costs of operating our businesses, reduce the demand for our products and services, impact our ability to meet or maintain current or future goals, targets or commitments, and increase our legal, operational, and reputational risks, any or all of which could adversely affect our results of operations.
Such balloon payments may require the borrower to either sell or refinance the underlying property in order to make the payment, which may increase the risk of default or non-payment. The COVID-19 pandemic and its aftermath has had a potentially long-term negative impact on some commercial real estate portfolios.
Such balloon payments may require the borrower to either sell or refinance the underlying property in order to make the payment, which may increase the risk of default or non-payment. 25 The COVID-19 pandemic and its aftermath has had a potentially long-term negative impact on some CRE portfolios.
As of December 31, 2024, approximately 26% of our deposits were uninsured and uncollateralized and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition, and results of operations.
As of December 31, 2025, approximately 28% of our deposits were uninsured and uncollateralized and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition, and results of operations.
Our exposure to repurchases under our representations and warranties could include the current unpaid balance of all loans we have sold. During the years ended December 31, 2024, 2023, and 2022, we sold multi-family and SFR mortgage loans aggregating $2.0 billion, $3.0 billion, and $33.5 million, respectively.
Our exposure to repurchases under our representations and warranties could include the current unpaid balance of all loans we have sold. During the years ended December 31, 2025, 2024, and 2023, we sold multi-family and SFR mortgage loans aggregating $24 million, $2.0 billion, and $3.0 billion, respectively.
As of December 31, 2024, the Company had outstanding indebtedness in the amount of approximately $2.3 billion. Our existing indebtedness, together with any future incurrence of additional indebtedness, could have important consequences for our creditors and stockholders.
As of December 31, 2025, the Company had outstanding indebtedness in the amount of approximately $3.0 billion. Our existing indebtedness, together with any future incurrence of additional indebtedness, could have important consequences for our creditors and stockholders.
In addition, technological advances, including digital currencies and alternative payment methods, may diminish the importance of depository institutions and other financial intermediaries in the transfer of funds between parties. 51 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, technological advances, including digital currencies and alternative payment methods, may diminish the importance of depository institutions and other financial intermediaries in the transfer ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Accordingly, the federal banking agencies have expressed concerns about weaknesses in the current commercial real estate market and have applied increased regulatory scrutiny to institutions with commercial real estate loan portfolios that are fast growing or large relative to the institutions’ total capital.
The federal banking agencies have expressed concerns about weaknesses in the current CRE market and have applied increased regulatory scrutiny to institutions with CRE loan portfolios that are fast growing or large relative to the institutions’ total capital.
An allowance for credit losses is established for losses on debt securities held-to-maturity and available-for-sale due to credit losses and is reported as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. For more information about ASC Topic 326, see Note 1.
An allowance for credit losses is established for losses on debt securities HTM and AFS due to credit losses and is reported as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. For more information about ASC Topic 326, see "Note 1.
Our federal regulators have extensive discretion in connection with their supervisory and enforcement activities over our operations and compliance laws and regulations. Any new laws and regulations could make compliance more difficult or expensive or otherwise adversely affect our business.
Non-compliance with laws and regulations could result in fines or sanctions or operating restrictions. Our federal regulators have extensive discretion in connection with their supervisory and enforcement activities over our operations and compliance laws and regulations. Any new laws and regulations could make compliance more difficult or expensive or otherwise adversely affect our business.
As we and other regional banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely.
The failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely.
From time to time, as part of our balance sheet management process, we may also sell SFR loans and other types of mortgage loans from our portfolio, including multi-family loans. We may use the proceeds of loan sales for generating new loans or for other purposes.
These conditions may fluctuate or even worsen in the future. From time to time, as part of our balance sheet management process, we may also sell SFR loans and other types of mortgage loans from our portfolio, including multi-family loans. We may use the proceeds of loan sales for generating new loans or for other purposes.
As of December 31, 2024, we had $2.2 billion of AFS securities, as compared with $2.3 billion of AFS securities as of December 31, 2023. As of December 31, 2024, AFS securities that were in an unrealized loss position had a total fair value of $1.9 billion with aggregate unrealized losses of $280.5 million.
As of December 31, 2025, we had $2.5 billion of AFS securities, as compared with $2.2 billion of AFS securities as of December 31, 2024. As of December 31, 2025, AFS securities that were in an unrealized loss position had a total fair value of $1.4 billion with aggregate unrealized losses of $196.9 million.
To the extent we acquire other banks, bank branches, other assets, or other businesses, such as the Merger and the Deepstack Acquisition, we may be negatively impacted by certain risks inherent with such acquisitions.
To the extent we acquire other banks, bank branches, other assets, or other businesses, we may be negatively impacted by certain risks inherent with such acquisitions.
There are also regulatory risks in connection with acquisitions, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business.
Our ability to address these matters successfully cannot be assured. There are also regulatory risks in connection with acquisitions, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business.
Managing reputational risk is important to attracting and maintaining clients, investors and employees. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, regulatory investigations, marketplace rumors and questionable or fraudulent activities of our clients.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, regulatory investigations, marketplace rumors and fraudulent activities of our clients.
As of December 31, 2023, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion. 41 The Company follows a robust credit monitoring process to ensure it has appropriate credit support and, as of December 31, 2024, we believed there was no credit losses and did not have the intent to sell any of our securities in an unrealized loss position and it is likely that we will not be required to sell such securities before their anticipated recovery.
The Company follows a robust credit monitoring process to ensure it has appropriate credit support and, as of December 31, 2025, we believed there was no credit losses and did not have the intent to sell any of our securities in an unrealized loss position and it is likely that we will not be required to sell such securities before their anticipated recovery.
In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect the amounts due from its clients. As of December 31, 2024, our commercial and industrial loans totaled $6.8 billion, or 28% of our total loans held for investment.
In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect the amounts due from its clients. As of December 31, 2025, our commercial and industrial loans totaled $9.0 billion, or 36% of our total loans HFI.
Approximately 34% of our loans held for investment are adjustable rate loans as of December 31, 2024. Any rise in prevailing market interest rates may result in increased payments for some borrowers who have adjustable rate loans, increasing the possibility of defaults. Our underwriting practices may not protect us against losses in our loan portfolio.
Any rise in prevailing market interest rates may result in increased payments for some borrowers who have adjustable rate loans, increasing the possibility of defaults. 23 Our underwriting practices may not protect us against losses in our loan portfolio.
As a result, concerns about, or a default or threatened default by, or failure or threatened failure of, one or more institutions could lead to significant market-wide liquidity problems, losses or defaults by us or other institutions, or credit risk in the event of default of our counterparty or customer.
Given the interconnectedness of financial institutions, concerns about, or a default or threatened default by, or failure or threatened failure of, one or more institutions could lead to financial market disruptions and increased expenses, including significant market-wide liquidity problems, losses or defaults by us or other institutions, or credit risk in the event of default of our counterparty or customer.
If one or more of these events occur, this could jeopardize our clients' confidential and other information that we process and store, or otherwise cause interruptions in our operations or the operations of our clients or counterparties.
If one or more of these events occur, this could jeopardize our clients' confidential and other information that we process and store, or otherwise cause interruptions in our operations or the operations of our clients or counterparties. Several states and their governmental agencies also have adopted or proposed cybersecurity laws.
Any compromise of personal electronic device security could jeopardize the confidential information of our clients (including user names and passwords) and expose our clients to account take-overs and the possibility for financial crimes such as fraud or identity theft and deter clients from using our internet banking services. We rely on and employ industry-standard tools and processes to safeguard data.
Any compromise of personal electronic device security could jeopardize the confidential information of our clients and expose our clients to account take-overs and the possibility for financial crimes such as fraud or identity theft and deter clients from using our internet banking services.
Debt securities held-to-maturity and available-for-sale are analyzed for credit losses under ASC 326, Financial Instruments - Credit Losses . For debt securities held-to-maturity and available-for-sale, the Company estimates current expected credit losses.
Debt securities HTM and AFS are analyzed for credit losses under ASC 326, Financial Instruments - Credit Losses . For debt securities HTM and AFS, the Company estimates current expected credit losses.
The occurrence of any systems failure or interruption could damage our reputation and result in a loss of clients and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability.
The occurrence of any systems failure or interruption could damage our reputation and result in a loss of clients and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans, and other sources has had, and could continue to have, a substantial negative effect on our liquidity.
An inability to raise funds through deposits, borrowings, the sale of loans, and other sources has had, and could continue to have, a substantial negative effect on our liquidity.
In addition, our ability to maintain existing or obtain additional deposits may be impacted by factors beyond our control, including perceptions about our reputation, financial strength or the banking industry generally, which could reduce the number of consumers choosing to place deposits with us. 43 Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on capital levels of our bank subsidiary.
In addition, our ability to maintain existing or obtain additional deposits may be impacted by factors beyond our control, including perceptions about our reputation, financial strength or the banking industry generally, which could reduce the number of consumers choosing to place deposits with us.
As of December 31, 2024, $2.8 billion, or 12%, of our total loans held for investment were loans in the other residential real estate mortgage loan portfolio class, as compared with $5.1 billion, or 20%, of our total loans held for investment as of December 31, 2023.
As of December 31, 2025, $3.3 billion, or 14%, of our total loans HFI were loans in the other residential real estate mortgage loan portfolio class, as compared with $2.8 billion, or 12%, of our total loans HFI as of December 31, 2024.
Its monetary policies determine in a large part our cost of funds for lending and investing and the return that can be earned on those loans and investments, both of which affect our net interest margin.
Its monetary policies determine in a large part our cost of funds for lending and investing and the return that can be earned on those loans and investments, both of which affect our net interest margin. FRB policies can also materially affect the value of financial instruments that we hold, such as debt securities and certain mortgage loans HFS.
We believe that, as a result of the increased defaults and foreclosures during the 2007 to 2009 recession resulting in increased demand for repurchases and indemnification in the secondary market, many purchasers of loans are particularly sensitive to obtaining indemnification or the requirement of originators to repurchase loans, and would benefit from enforcing any repurchase remedies they may have.
Any fraud or misrepresentation during the loan origination process, whether by us, the borrower, or other party in the transaction, or, in some cases, upon any early payment default on such loans, may require us to repurchase such loans. 24 We believe that, as a result of the increased defaults and foreclosures during the 2007 to 2009 recession resulting in increased demand for repurchases and indemnification in the secondary market, many purchasers of loans are particularly sensitive to obtaining indemnification or the requirement of originators to repurchase loans, and would benefit from enforcing any repurchase remedies they may have.
We may need to raise additional capital in the future to provide sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. In addition, we, on a consolidated basis, and the Bank, on a standalone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity.
We face significant capital and other regulatory requirements as a financial institution. We may need to raise additional capital in the future to provide sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions.
The examination, supervision, and enforcement of those laws and implementing regulations by the CFPB have created a more intense and complex environment for consumer finance regulation. The Bank has assets of at least $10 billion; therefore, we are subject to the supervision, examination, and primary enforcement jurisdiction of the CFPB with respect to federal consumer financial protection laws.
The Bank has assets of at least $10 billion; therefore, we are subject to the supervision, examination, and primary enforcement jurisdiction of the CFPB with respect to federal consumer financial protection laws.
In a competitive market, depositors have many choices as to where to place their deposit accounts. As the Bank continues to grow its core deposit base and seeks to reduce its exposure to high rate/high volatility accounts, it may experience a net deposit outflow, which could negatively impact our business, financial condition, and results of operations.
As the Bank continues to grow its core deposit base and seeks to reduce its exposure to high rate/high volatility accounts, it may experience a net deposit outflow, which could negatively impact our business, financial condition, and results of operations. Liquidity risk could impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business.
Furthermore, we may experience more fluctuations in our allowance for credit losses, which may be significant. Additionally, loans to venture-backed borrowers support the borrowers’ operations, including operating losses, working capital requirements, and fixed asset acquisitions. Venture-backed borrowers are at various stages in their development and are, generally, reporting operating losses.
The CECL model materially impacts how we determine our allowance for credit losses and required us to increase our allowance for credit losses. Furthermore, we may experience more fluctuations in our allowance for credit losses, which may be significant. 21 Additionally, loans to venture-backed borrowers support the borrowers’ operations, including operating losses, working capital requirements, and fixed asset acquisitions.
The valuation of our investment securities also is influenced by external market and other factors, including implementation of SEC and FASB guidance on fair value accounting. Accordingly, if market conditions deteriorate further and we determine our holdings of other investment securities have experienced credit losses, our future earnings, stockholders’ equity, regulatory capital, and continuing operations could be materially adversely affected.
Accordingly, if market conditions deteriorate further and we determine our holdings of other investment securities have experienced credit losses, our future earnings, stockholders’ equity, regulatory capital, and continuing operations could be materially adversely affected.
In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties seeking damages for environmental contamination emanating from the site.
In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties seeking damages for environmental contamination emanating from the site. If we were to become subject to significant environmental liabilities or costs, our business, financial condition, results of operations, and prospects could be adversely affected.
Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Also, the FRB regulates the supply of money and credit in the United States.
Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. We are a party to a variety of litigation and other actions.
Although the FRB reduced its benchmark rates in September, November, and December 2024, the inflationary outlook in the United States is currently uncertain. Amidst these uncertainties, including potential recessionary economic conditions, financial markets have continued to experience volatility. Changes in interest rates can affect numerous aspects of our business and may impact our future performance.
Amidst these uncertainties, including potential recessionary economic conditions, financial markets have continued to experience volatility. Changes in interest rates can affect numerous aspects of our business and may impact our future performance.
We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients.
We are subject to a wide range of laws related to anti-money laundering, economic sanctions, and prevention of financial crime, which could increase our costs or subject us to significant penalties.
Such actions may adversely affect our business, financial condition, results of operations, and/or competitive position may be adversely affected as a result. 30 We are subject to a wide range of laws related to anti-money laundering, economic sanctions, and prevention of financial crime, which could increase our costs or subject us to significant penalties.
Our allowance for loan and lease losses allocable to loans to venture-backed borrowers may not be appropriate to absorb actual credit losses arising from these loans, and future provisions for credit losses could materially and adversely affect our operating results. 37 There are risks associated with our lending activities and our allowance for credit losses may prove to be insufficient to absorb actual losses in our loan portfolio.
In accordance with GAAP, we maintain an allowance for loan and lease losses to provide for loan defaults and non-performance. Our allowance for loan and lease losses allocable to loans to venture-backed borrowers may not be appropriate to absorb actual credit losses arising from these loans, and future provisions for credit losses could materially and adversely affect our operating results.
For further information on these risks and others related to our real estate loan portfolio, see Item 1. Business—Lending Activities— Real Estate Mortgage Loans and Real Estate Construction and Land Loans . Our loan portfolio possesses increased risk due to our level of adjustable rate loans.
For further information on these risks and others related to our real estate loan portfolio, see "Lending Activities" in Item 1 of this Form 10-K. Our loan portfolio possesses increased risk due to our level of adjustable rate loans. Approximately 39% of our loans HFI are adjustable rate loans as of December 31, 2025.
The primary sources of repayment are future additional venture capital equity investments or the sale of the company or its assets. Our venture-backed borrowers’ business plans may fail, increasing the likelihood for credit losses related to loans to venture-backed borrowers. In accordance with GAAP, we maintain an allowance for loan and lease losses to provide for loan defaults and non-performance.
Venture-backed borrowers are at various stages in their development and are, generally, reporting operating losses. The primary sources of repayment are future additional venture capital equity investments or the sale of the company or its assets. Our venture-backed borrowers’ business plans may fail, increasing the likelihood for credit losses related to loans to venture-backed borrowers.
Our commercial real estate and multi-family loans decreased during the year ended December 31, 2024 to $10.6 billion, or 45% of our total loans held for investment, from $11.1 billion, or 43% of our total loans held for investment, as of December 31, 2023.
Our CRE and multi-family loans decreased during the year ended December 31, 2025 to $10.4 billion, or 41% of our total loans HFI, from $10.6 billion, or 45% of our total loans HFI, as of December 31, 2024.
In addition, we are exposed indirectly through our third party service providers who may experience their own cyber breach and as a result compromise our data and/or lead to service interruptions.
In addition, we are exposed indirectly through our third-party service providers who may experience their own cyber breach and as a result compromise our data and/or lead to service interruptions. Any failure or interruption, or breaches in security, of these systems could result in failures or interruptions in our client relationship management, general ledger, deposit, loan origination, and servicing systems.
Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations.
Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations. 27 We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed or on acceptable terms.
While the Bank met the FDIC’s definition of “well-capitalized” as of December 31, 2024, there can be no assurance that it will continue to meet this definition. Our regulators can adjust the requirements to be “well-capitalized” at any time and have authority to place limitations on our deposit businesses, including the interest rate we pay on deposits.
Our regulators can adjust the requirements to be “well-capitalized” at any time and have authority to place limitations on our deposit businesses, including the interest rate we pay on deposits.
Although we have established disaster recovery and business continuity plans and procedures, and we monitor the effects of any such events on our loans, properties and investments, the occurrence of any such event could have a material adverse effect on us or our results of operations and our financial condition.
The occurrence of any such event could have a material adverse effect on us or our results of operations and our financial condition.
The extent to which such geopolitical instability adversely affects our business, financial condition and results of operations, as well as our liquidity and capital profile, will depend on future developments, which are highly uncertain and unpredictable, including with respect to Russia’s invasion of Ukraine and the Middle East conflict, and the extent and duration of the conflict in Ukraine and in the Middle East, and the humanitarian toll inflicted by such conflicts.
The extent to which such geopolitical instability adversely affects our business, financial condition and results of operations, as well as our liquidity and capital profile, will depend on future developments, which are highly uncertain and unpredictable. Our financial condition and results of operations are dependent on the national and local economy, particularly in the Bank’s market areas.
Our allowance for credit losses was 1.13% of loans and leases held for investment and 141.57% of nonaccrual loans and leases as of December 31, 2024.
Our allowance for credit losses was 1.12% of loans and leases HFI and 176.25% of nonaccrual loans and leases as of December 31, 2025.
A deterioration in economic conditions could result in a number of consequences, including but not limited to the following, any of which could have a material adverse effect on our business, financial condition, and results of operations: • demand for our products and services may decline; • loan delinquencies, problem assets and foreclosures may increase; • collateral for our loans may decline in value; and • the amount of our low cost or noninterest-bearing deposits may decrease.
A deterioration in economic conditions could result in a number of consequences, including but not limited to the following, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Our business, results of operations, and financial condition could also be harmed by risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results.
Our business, results of operations, and financial condition could also be harmed by risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Risks Relating to Our Operations New lines of business, new products and services, or strategic project initiatives, or new partnerships may subject us to additional risks.
We have a net deferred tax asset that may not be fully realized. We have a net DTA and cannot assure that it will be fully realized. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities computed using enacted tax rates.
Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities computed using enacted tax rates.
However, if actual results differ from our expectations, it could have a material adverse effect on the Company’s financial condition, results of operations, or cash flows. For a discussion on current legal proceedings, see "Item 3. Legal Proceedings," and Note 13.
However, if actual results differ from our expectations, it could have a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Changes in federal, state or local tax laws, or audits from tax authorities, could negatively affect our financial condition and results of operations.
Even rumors or adverse news developments concerning other financial institutions or the Bank may result in rapid deterioration in investor and customer confidence.
Even rumors or adverse news developments concerning other financial institutions or the Bank may result in rapid deterioration in investor and customer confidence. We are subject to regulatory capital requirements, which could be made more stringent in the discretion of our regulators.
Although we have developed policies, procedures and processes designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in detecting violations of these laws and regulations. 49 Risks Relating to External Factors and Markets Severe weather events, natural disasters such as earthquakes and wildfires, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events could significantly impact our business.
Risks Relating to External Factors and Markets Severe weather events, natural disasters such as earthquakes and wildfires, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events could significantly impact our business.
Changes in policies of the FRB are beyond our control and the impact of changes in those policies on our activities and results of operations can be difficult to predict. Our business may be adversely affected by difficult economic conditions, including inflationary pressures or volatility in the financial markets, which may impact our business, financial position, and results of operations.
Our business may be adversely affected by difficult economic conditions, including inflationary pressures or volatility in the financial markets, which may impact our business, financial position, and results of operations. Robust demand, labor shortages, and supply chain constraints have led to persistent inflationary pressures throughout the economy.
The success of any such transaction will depend on, among other things, our ability to combine and integrate the acquired assets or business into our business. If we are not able to successfully achieve this objective, the anticipated benefits of the transaction may not be realized fully, or at all, or may take longer to realize than expected.
If we are not able to successfully achieve this objective, the anticipated benefits of the transaction may not be realized fully, or at all, or may take longer to realize than expected. The integration process for an acquisition will likely result in the diversion of management’s time on integration-related issues and could result in the disruption of our business.
Importantly, regulatory capital requirements could increase from current levels, which could require us to raise additional capital or reduce our operations.
In addition, we, on a consolidated basis, and the Bank, on a standalone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Importantly, regulatory capital requirements could increase from current levels, which could require us to raise additional capital or reduce our operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk Factors in the section titled “ We are subject to certain risks in connection with our use of technology. ” 52 Governance Our Board of Directors considers cybersecurity risk as part of its risk management function and has delegated to the Enterprise Risk Committee oversight and governance of the technology program and the information security program, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
Biggest changeFor further discussion of risks from cybersecurity threats, see Item 1A "Risk Factors" in the section titled “ We are subject to certain risks in connection with our use of technology. ” 32 Governance Our Board of Directors considers cybersecurity risk as part of its risk management function and has delegated to the Enterprise Risk Committee oversight and governance of the technology program and the information security program, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
The Information Technology and Information Security sub-committee is a sub-committee of the management level Enterprise Risk Management Committee and is represented by managers within various departments and includes the CISO, the Chief Technology Officer ("CTO"), and the Chief Information Officer ("CIO") and other key departmental managers from throughout the entire company.
The Information Technology and Information Security sub-committee is a sub-committee of the management level Enterprise Risk Management Committee and is represented by managers within various departments and includes the CISO, the Chief Technology Officer ("CTO"), and the CIO and other key departmental managers throughout the entire company.
The Enterprise Risk Committee reviews our cybersecurity risk profile on a quarterly basis. Additionally, our CISO and our Chief Information Officer provide quarterly reports to the Enterprise Risk Committee regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes.
The Enterprise Risk Committee reviews our cybersecurity risk profile on a quarterly basis. Additionally, our CISO and our Chief Information Officer ("CIO") provide quarterly reports to the Enterprise Risk Committee regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes.
Our Chief Information Security Officer (“CISO”) is primarily responsible for our cybersecurity program and is a key member of the risk management function, reporting directly to the Chief Risk Officer (“CRO”) and to the Enterprise Risk Committee of our Board of Directors.
Our Chief Information Security Officer (“CISO”) is primarily responsible for our cybersecurity program and is a key member of the risk management function, reporting directly to our Chief Risk Officer (“CRO”).
Our internal systems, processes, and controls are designed to mitigate and minimize potential losses resulting from cyber-attacks, however, there can be no assurance that our cybersecurity risk management program will be fully effective in protecting the confidentiality, integrity and availability of our information systems and our solutions. For further discussion of risks from cybersecurity threats, see Item 1A.
Our internal systems, processes, and controls are designed to mitigate and minimize potential losses resulting from cyber-attacks, however, there can be no assurance that our cybersecurity risk management program will be fully effective in protecting the confidentiality, integrity and availability of our information systems and our solutions.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease our principal office, which is located at 11611 San Vicente Blvd., Suite 500, Los Angeles, CA 90049. For additional information regarding properties of the Company, see Note 6. Premises and Equipment, Net of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”
Biggest changeOur headquarters, which we lease, is located at 11611 San Vicente Blvd., Suite 500, Los Angeles, CA 90049. For additional information regarding properties of the Company, see "Note 6. Premises and Equipment, Net " in Item 8 of this Form 10-K.
ITEM 2. PROPERTIES As of December 31, 2024, we had a total of 111 properties consisting of 80 full-service branch offices and 31 other offices. We own six locations, and the remaining properties are leased. Our properties are located throughout the United States, however, approximately 88% are located in California.
ITEM 2. PROPERTIES As of December 31, 2025, we had a total of 107 properties consisting of 79 full-service branch offices and 28 other offices. We own six locations, and the remaining properties are leased. Our properties are located throughout the United States, however, the vast majority of which are located in California.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRepurchases of Common Stock The following table presents stock repurchases we made during the fourth quarter of 2024: Total Number of Maximum Dollar Shares Purchased Value of Shares Total as Part of That May Yet Number of Average Publicly Be Purchased Shares Price Paid Announced Under the Purchase Dates Purchased (1) Per Share Program (2) Program (2) (Dollars in thousands, except per share amounts) October 1 - October 31, 2024 884 $ 14.01 — $ — November 1 - November 30, 2024 9,018 $ 15.41 — $ — December 1 - December 31, 2024 383 $ 16.72 — $ — Total 10,285 $ 15.34 — ___________________________________ (1) Includes shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards.
Biggest changeRepurchases of Common Stock The following table presents stock repurchases we made during the fourth quarter of 2025: Purchase Dates Total Number of Share Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publically Announced Program (2) Maximum Dollar Value of Shares That May Yet to be Purchased Under the Program (2) (Dollars in thousands, except per share amounts) October 1 - October 31, 2025 66 $ 17.49 — $ 114,502 November 1 - November 30, 2025 3,743 $ 17.31 — $ 114,502 December 1 - December 31, 2025 1,570 $ 19.83 — $ 114,502 Total 5,379 $ 18.05 — ___________________________________ (1) Includes shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards, and shares repurchased pursuant to the Company's publicly announced Stock Repurchase Program described in (2) below.
The chart compares the yearly percentage change in the cumulative stockholder return on our common stock based on the closing price during the five years ended December 31, 2024, with (1) the Total Return Index for U.S. companies traded on The New York Stock Exchange (the “NYSE Composite Index”) and (2) the Total Return Index for KBW NASDAQ Regional Bank Stocks (the “KBW NASDAQ Regional Banking Index”).
The chart compares the yearly percentage change in the cumulative stockholder return on our common stock based on the closing price during the five years ended December 31, 2025, with (1) the Total Return Index for U.S. companies traded on The New York Stock Exchange (the “NYSE Composite Index”) and (2) the Total Return Index for KBW NASDAQ Regional Bank Stocks (the “KBW NASDAQ Regional Banking Index”).
As of December 31, 2024, we had 477,321 shares of Class B non-voting common stock outstanding and held by three holders of record. Our NVCE stock is not listed or traded on any national securities exchange or automated quotation system, and there currently is no established trading market for such stock.
As of December 31, 2025, we had 477,321 shares of Class B non-voting common stock outstanding and held by three holders of record. Our NVCE stock is not listed or traded on any national securities exchange or automated quotation system, and there currently is no established trading market for such stock.
This comparison assumes $100 was invested on December 31, 2019, in our common stock and the comparison groups and assumes the reinvestment of all cash dividends prior to any tax effect and retention of all stock dividends.
This comparison assumes $100 was invested on December 31, 2020, in our common stock and the comparison groups and assumes the reinvestment of all cash dividends prior to any tax effect and retention of all stock dividends.
The chart is historical only and may not be indicative of possible future performance. 56 ___________________________________ * $100 invested on December 31, 2019 in stock or index, including reinvestment of dividends.
The chart is historical only and may not be indicative of possible future performance. ___________________________________ * $100 invested on December 31, 2020 in stock or index, including reinvestment of dividends.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Marketplace Designation and Holders Our voting common stock is listed on the NYSE and is traded under the symbol “BANC.” As of February 14, 2025, and based on the records of our transfer agent, there were approximately 2,278 record holders of our voting common stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Marketplace Designation and Holders Our voting common stock is listed on the NYSE and is traded under the symbol “BANC.” As of February 13, 2026, and based on the records of our transfer agent, there were approximately 2,155 record holders of our voting common stock.
As of December 31, 2024, we had 9,790,600 shares of NVCE stock outstanding and held by three holders of record. As of December 31, 2024, we had 513,250 shares of preferred stock outstanding, all of which were shares of our 7.75% fixed rate reset non-cumulative perpetual preferred stock, Series F, liquidation amount $1,000 per share (“Series F Preferred Stock”).
As of December 31, 2025, we had 5,017,064 shares of NVCE stock outstanding and held by three holders of record. As of December 31, 2025, we had 513,250 shares of preferred stock outstanding, all of which were shares of our 7.75% fixed rate reset non-cumulative perpetual preferred stock, Series F, liquidation amount $1,000 per share (“Series F Preferred Stock”).
During the year ended December 31, 2024, the holding company paid dividends in the amount of $68.3 million to its common stockholders and $39.8 million to its preferred stockholders. The Bank paid dividends of $80.0 million to the holding company during the year ended December 31, 2024.
Dividends During the year ended December 31, 2025, the holding company paid dividends in the amount of $63.9 million to its common stockholders and $39.8 million to its preferred stockholders. The Bank paid dividends of $430.0 million to the holding company during the year ended December 31, 2025.
Five-Year Stock Performance Graph The following chart and related discussion are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be “soliciting materials” or “filed” with the SEC (other than as provided in Item 201) nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained therein, except to the extent that we specifically incorporate it by reference into a filing.
The program may be changed, suspended, or discontinued at any time. 34 Five-Year Stock Performance Graph The following chart and discussion are provided with this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be “soliciting materials” or “filed” with the SEC (other than as provided in Item 201) nor incorporated in future filings under the Securities Act or the Exchange Act, except if specifically referenced into a filing.
Removed
Dividends The timing and amount of cash dividends paid to our preferred and common stockholders depends on our earnings, capital requirements, financial condition, regulatory approval and other relevant factors, including the discretion of the Board of Directors with respect to common stockholder dividends.
Added
(2) On March 17, 2025, the Company announced that its Board of Directors authorized a Stock Repurchase Program to purchase up to $150.0 million of its common stock.
Removed
Our primary source of revenue at the holding company level is dividends from the Bank, and to a lesser extent our ability to raise capital or debt.
Added
On April 23, 2025, the Company announced an upsize of its stock repurchase program from $150.0 million to $300.0 million and expanded the program to cover both the Company's common stock and depositary shares representing its preferred stock. The repurchase authorization expires in March 2026.
Removed
To the extent we are unable to access dividends from the Bank or are limited in our ability to raise capital in the future, our ability to pay cash dividends to our stockholders would likely be limited.
Added
Year Ended December 31, Index 2020 2021 2022 2023 2024 2025 Banc of California, Inc. $ 100.00 $ 135.08 $ 111.21 $ 96.71 $ 114.42 $ 146.52 NYSE Composite Index 100.00 120.68 109.39 124.46 144.12 169.62 KBW NASDAQ Regional Banking Index 100.00 136.64 127.17 126.67 143.39 152.71 ITEM 6. Reserved. 35
Removed
See “Item 1A. - Risk Factors ” for a discussion regarding the holding company’s reliance on dividends from the Bank for substantially all of its income and as a result the primary source of funds for cash dividends to our preferred and common stockholders.
Removed
For a discussion of dividend restrictions on the Company's common stock, or of dividends from the Company's subsidiaries to the Company, see “Item 1. Business - Supervision and Regulation - Dividends and Share Repurchases ” and Note 22. Dividend Availability and Regulatory Matters of the Notes to Consolidated Financial Statements contained in “Item 8.
Removed
Financial Statements and Supplementary Data.” 54 Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2024 regarding securities issued and to be issued under our equity compensation plan in effect during fiscal year 2024: Number of Securities Weighted Number of Securities to be Issued Upon Average Exercise Remaining Available Exercise of Price of for Future Issuance Outstanding Outstanding Under Equity Options, Options, Compensation Plans Warrants, and Warrants, and (Excluding Securities Rights Rights Reflected in Column (a)) Plan Category Plan Name (a) (b) (c) Amended and Restated Equity compensation Banc of California, plans approved by Inc. 2018 Stock security holders Incentive Plan (1) 11,232 (2) $ 13.75 4,955,607 (3) Equity compensation plans not approved by security holders None — — — Total 11,232 $ 13.75 4,955,607 __________________________________ (1) The Amended and Restated Banc of California, Inc. 2018 Stock Incentive Plan (the “Amended and Restated 2018 Plan”) was approved by our stockholders at our November 22, 2023 Special Meeting of Stockholders, authorizing 10,717,882 shares for issuance.
Removed
In addition to the Amended and Restated 2018 Plan, in connection with the Merger, the Company assumed the Amended and Restated PacWest Bancorp 2017 Stock Incentive Plan (the "PacWest 2017 Plan") with respect to PacWest's outstanding stock-based awards.
Removed
(2) Amount does not include 1,759,335 shares of unvested time-based restricted stock units and 2,283,531 of unvested PSUs granted under the Amended and Restated 2018 Plan and 211,206 unvested time-based restricted shares outstanding under the PacWest 2017 Plan as of December 31, 2024.
Removed
(3) The Amended and Restated 2018 Plan permits these remaining shares to be issued in the form of options, PSUs, RSUs, restricted stock, or stock appreciation rights. 55 Recent Sales of Unregistered Securities None.
Removed
(2) On February 9, 2023, the Company's Board of Directors approved a stock repurchase program to buy back shares of its common stock for an aggregate purchase price not to exceed $35 million, which expired on February 9, 2024.
Removed
Year Ended December 31, Index 2019 2020 2021 2022 2023 2024 Banc of California, Inc. $ 100.00 $ 87.43 $ 118.09 $ 97.23 $ 84.55 $ 100.04 NYSE Composite Index 100.00 106.99 129.11 117.04 133.16 154.19 KBW NASDAQ Regional Banking Index 100.00 91.29 124.74 116.10 115.64 130.90

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

116 edited+55 added−122 removed37 unchanged
Biggest changeRates on tax-exempt securities are contractual rates and are not presented on a tax-equivalent basis. 79 Loans and Leases Held for Investment The following table presents the composition of our total loans and leases held for investment by loan portfolio segment, class, and subclass as of the dates indicated: December 31, 2024 2023 2022 % of % of % of Balance Total Balance Total Balance Total (Dollars in thousands) Real Estate Mortgage: Commercial real estate $ 3,540,612 15 % $ 3,874,804 15 % $ 2,537,629 9 % SBA program 630,412 2 % 632,110 3 % 621,187 2 % Hotel 407,748 2 % 519,583 2 % 688,015 2 % Total commercial real estate mortgage 4,578,772 19 % 5,026,497 20 % 3,846,831 13 % Multi-family 6,041,713 26 % 6,025,179 23 % 5,607,865 20 % Residential mortgage 2,682,667 11 % 2,754,176 11 % 2,902,088 10 % Investor-owned residential 102,778 1 % 2,234,531 9 % 2,886,828 10 % Residential renovation 21,729 — % 71,602 — % 486,712 2 % Total other residential real estate mortgage 2,807,174 12 % 5,060,309 20 % 6,275,628 22 % Total real estate mortgage 13,427,659 57 % 16,111,985 63 % 15,730,324 55 % Real Estate Construction and Land: Commercial 799,131 3 % 759,585 3 % 898,592 3 % Residential 2,373,162 10 % 2,399,684 9 % 3,253,580 11 % Total real estate construction and land (1) 3,172,293 13 % 3,159,269 12 % 4,152,172 14 % Total real estate 16,599,952 70 % 19,271,254 75 % 19,882,496 69 % Commercial: Lender finance 727,913 3 % 486,966 2 % 3,172,814 11 % Equipment finance 621,888 3 % 736,275 3 % 908,141 3 % Premium finance 546,393 2 % 732,162 3 % 861,006 3 % Other asset-based 191,775 1 % 233,682 1 % 198,248 1 % Total asset-based 2,087,969 9 % 2,189,085 9 % 5,140,209 18 % Equity fund loans 746,655 3 % 662,732 3 % 1,356,428 5 % Venture lending 791,121 3 % 783,630 3 % 676,874 2 % Total venture capital 1,537,776 6 % 1,446,362 6 % 2,033,302 7 % Warehouse lending 1,473,074 6 % 554,940 2 % — — % Secured business loans 756,612 3 % 614,120 2 % 347,660 1 % Other lending 923,398 4 % 960,800 4 % 760,791 3 % Total other commercial 3,153,084 13 % 2,129,860 8 % 1,108,451 4 % Total commercial 6,778,829 28 % 5,765,307 23 % 8,281,962 29 % Consumer 402,882 2 % 453,126 2 % 444,671 2 % Total loans and leases held for investment $ 23,781,663 100 % $ 25,489,687 100 % $ 28,609,129 100 % Total unfunded loan commitments $ 4,887,690 $ 5,578,907 $ 11,110,264 ________________________________ (1) Includes $223.9 million, $228.9 million, and $153.5 million, at December 31, 2024, 2023, and 2022 of land acquisition and development loans. 80 Our loan portfolio segments of real estate mortgage loans, real estate construction and land loans, and commercial loans comprised 57%, 13%, and 28% of our total loans and leases held for investment at December 31, 2024, compared to 63%, 12%, and 23% at December 31, 2023, respectively.
Biggest changeThe increase is primarily due to transfers of $495 million to HFS, offset partially by loan sales totaling $262 million during the year. 52 Loans and Leases Held for Investment The following table presents the composition of our total loans and leases HFI by loan portfolio segment, class, and subclass as of the dates indicated: December 31, 2025 2024 % of % of Balance Total Balance Total (Dollars in thousands) Real Estate Mortgage: Commercial real estate $ 3,259,164 13 % $ 3,540,612 15 % SBA program 666,424 3 % 630,412 2 % Hotel 389,049 1 % 407,748 2 % Total commercial real estate mortgage 4,314,637 17 % 4,578,772 19 % Multi-family 6,089,417 24 % 6,041,713 26 % Residential mortgage 3,307,427 14 % 2,682,667 11 % Investor-owned residential 32,567 — % 102,778 1 % Residential renovation 6,739 — % 21,729 — % Total other residential real estate mortgage 3,346,733 14 % 2,807,174 12 % Total real estate mortgage 13,750,787 55 % 13,427,659 57 % Real Estate Construction and Land: Commercial 379,387 2 % 799,131 3 % Residential 1,568,240 6 % 2,373,162 10 % Total real estate construction and land (1) 1,947,627 8 % 3,172,293 13 % Total real estate 15,698,414 63 % 16,599,952 70 % Commercial: Lender finance 1,623,474 6 % 727,913 3 % Equipment finance 674,714 3 % 621,888 3 % Premium finance 447,939 2 % 546,393 2 % Other asset-based 204,883 1 % 191,775 1 % Total asset-based 2,951,010 12 % 2,087,969 9 % Equity fund loans 1,320,297 5 % 746,655 3 % Venture lending 901,800 4 % 791,121 3 % Total venture capital 2,222,097 9 % 1,537,776 6 % Warehouse lending 2,100,075 8 % 1,473,074 6 % Secured business loans 806,597 3 % 756,612 3 % Other lending 897,427 4 % 923,398 4 % Total other commercial 3,804,099 15 % 3,153,084 13 % Total commercial 8,977,206 36 % 6,778,829 28 % Consumer 357,059 1 % 402,882 2 % Total loans and leases held for investment $ 25,032,679 100 % $ 23,781,663 100 % Total unfunded loan commitments $ 5,433,357 $ 4,887,690 ________________________________ (1) Includes $214.5 million and $223.9 million at December 31, 2025 and 2024 of land acquisition and development loans.
Overview Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and member of the FRB.
Overview Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and a member of the FRB.
GAAP. The preparation of the consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances.
The preparation of the consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances.
We manage our liquidity by maintaining pools of liquid assets on-balance sheet, consisting of cash and receivables due from banks, interest-earning deposits in other financial institutions, and unpledged securities, which we refer to as our primary liquidity.
We manage our liquidity by maintaining pools of liquid assets on-balance sheet, consisting of cash and receivables due from banks, interest-earning deposits in other financial institutions, and unpledged AFS securities, which we refer to as our primary liquidity.
When we refer to the “parent” or the “holding company," we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company,” we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively.
When we refer to the "parent" or the “holding company," we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company,” we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively.
For originated and acquired credit-deteriorated loans, a provision for credit losses may be recorded to reflect credit deterioration after the origination date or after the acquisition date, respectively. 61 We regularly review loans and leases to determine whether there has been any deterioration in credit quality resulting from borrower operations or changes in collateral value or other factors which may affect collectability of our loans and leases.
For originated and acquired credit-deteriorated loans, a provision for credit losses may be recorded to reflect credit deterioration after the origination date or after the acquisition date, respectively. 37 We regularly review loans and leases to determine whether there has been any deterioration in credit quality resulting from borrower operations or changes in collateral value or other factors which may affect the collectability of our loans and leases.
(4) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits. (5) Total funds is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits.
The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits. (4) Total funds is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits.
Our commercial loans and leases portfolio is diverse and generally includes various asset-secured loans, equipment-secured loans and leases, venture capital loans to support venture capital firms’ operations and the operations of entrepreneurial and venture-backed companies during the various phases of their early life cycles, warehouse loans and secured business loans. Our loan origination process emphasizes credit quality.
Our commercial loans and leases portfolio is diverse and generally includes various asset-secured loans, lender finance loans, equipment-secured loans and leases, venture capital loans to support venture capital firms’ operations and the operations of entrepreneurial and venture-backed companies during the various phases of their early life cycles, warehouse loans, and secured business loans. Our loan origination process emphasizes credit quality.
(2) Adjusted net earnings (loss) available to common and equivalent stockholders divided by weighted average common shares outstanding. (3) Net earnings (loss) divided by average assets.
(2) Adjusted net earnings available to common and equivalent stockholders divided by weighted average diluted common shares outstanding. (3) Net earnings (loss) divided by average assets.
An increase in classified loans and leases generally results in increased provisions for credit losses and an increased allowance for credit losses. Any deterioration in the real estate market may lead to increased provisions for credit losses because our loans are concentrated in real estate loans.
An increase in classified loans and leases generally results in increased provisions for credit losses and an increased ACL. Any deterioration in the real estate market may lead to increased provisions for credit losses because our loans are concentrated in real estate loans.
Dividends on the Series F preferred stock will not be declared, paid, or set aside for payment to the extent such act would cause us to fail to comply with applicable laws and regulations, including applicable FRB capital adequacy regulations and policies.
Dividends on the Series F preferred stock will not be declared, paid, or set aside for payment to the extent such act would cause us to fail to comply with applicable laws and regulations, including applicable FRB capital adequacy regulations and policies. Dividends on the Series F preferred stock are not cumulative or mandatory.
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. Effective January 1, 2019, the common equity Tier 1, Tier 1, and total capital ratio minimums inclusive of the capital conservation buffer were 7.00%, 8.50%, and 10.50%.
The capital conservation buffer is exclusively comprised of CET1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the CET1, Tier 1, and Total capital ratio minimums inclusive of the capital conservation buffer were 7.00%, 8.50%, and 10.50%.
For the discussion of the financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to "Part II—Item 7.
For the discussion of the financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to "Part II—Item 7.
The loan commitments, a portion of which will eventually result in funded loans, increase our profitability through net interest income when drawn and unused commitment fees prior to being drawn. We manage our overall liquidity taking into consideration funded and unfunded commitments as a percentage of our liquidity sources.
The loan commitments, a portion of which will eventually result in funded loans, increase our profitability through NII when drawn and unused commitment fees prior to being drawn. We manage our overall liquidity taking into consideration funded and unfunded commitments as a percentage of our liquidity sources.
The Bank is a premier relationship-based business bank, providing banking and treasury management services to small-, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and deposit products and services through full-service branches throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide.
The Bank is one of the nation’s premier relationship-based business banks, providing banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and deposit products and services through 79 full-service branches located throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide.
Our operating lease obligation for leased facilities totaled $138.7 million, of which $31.9 million was due within one year. For further information regarding these items, see Note 10. Deposits , Note 11. Borrowings and Subordinated Debt, Note 8. Other Assets, Note 13 . Commitments and Contingencies, and Note 9.
Our operating lease obligation for leased facilities totaled $135.1 million, of which $30.7 million was due within one year. For further information regarding these items, see "Note 10. Deposits," "Note 11. Borrowings and Subordinated Debt, " " Note 8. Other Assets, " " Note 13 . Commitments and Contingencies, " and "Note 9.
Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates . For further information reg arding the calculation of the ACL on loans and leases held for investment using the CECL methodology, see Note 1(j).
Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates . For further information reg arding the calculation of the ACL on loans and leases HFI using the CECL methodology, see "Note 1.
Historically, to augment our internal loan production, we have purchased loans such as multi-family loans from other banks, private student loans from third-party lenders, and in recent years, single-family residential mortgage loans. These loan purchases help us manage the concentrations in our portfolio as they diversify the geographic risk, interest-rate risk, credit risk, and product composition of our loan portfolio.
To augment our internal loan production, we have purchased loans such as SFR mortgage loans, multi-family loans from other banks, and private student loans from third-party lenders. These loan purchases help us manage the concentrations in our portfolio as they diversify the geographic risk, interest-rate risk, credit risk, and product composition of our loan portfolio.
The FRBSF Discount Window secured credit line was collateralized by liens on $5.9 billion of qualifying loans and $1.5 billion of pledged securities.
The FRBSF Discount Window secured credit line was collateralized by liens on $4.6 billion of qualifying loans and $1.5 billion of pledged securities.
Financial Statements and Supplementary Data." We have identified three policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.
We have identified two policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 29, 2024, which is incorporated herein by reference.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 3, 2025, which is incorporated herein by reference.
Our actual results or outcomes may differ materially from those in this discussion and analysis as a result of various factors, including but not limited to those discussed in Part 1. Item 1A, “ Risk Factors ” in this Annual Report on Form 10-K.
Our actual results or outcomes may differ materially from those in this discussion and analysis as a result of various factors, including but not limited to those discussed in "Risk Factors" in Item 1A of this Form 10-K.
The allowance for loan and lease losses attributable to real estate construction and land loans was $10.9 million and $33.8 million at December 31, 2024 and 2023. As ratios to real estate construction and land loans at those dates, these percentages were 0.34% and 1.07%.
The allowance for loan and lease losses attributable to real estate construction and land loans was $8.8 million and $10.9 million at December 31, 2025 and 2024. As ratios to real estate construction and land loans at those dates, these percentages were 0.45% and 0.34%.
Obtaining new customer deposits, or having existing customers increase their deposit balances with us, are the primary sources of funding for our operations and is one the highest priorities of the Company. See "- Balance Sheet Analysis - Deposits" for additional information and detail of our deposits.
Obtaining new customer deposits, or having existing customers increase their deposit balances with us, are the primary sources of funding for our operations and is one the highest priorities of the Company. See "- Balance Sheet Analysis - Deposits" in Item 7 of this Form 10-K for additional information and detail of our deposits.
We use brokered deposits, the availability of which is uncertain and subject to competitive market forces and regulation, for liquidity management purposes. At December 31, 2024, brokered deposits totaled $2.7 billion, consisting of $0.6 billion of non-maturity brokered accounts and $2.1 billion of brokered time deposits.
We use brokered deposits, the availability of which is uncertain and subject to competitive market forces and regulation, for liquidity management purposes. At December 31, 2025, brokered deposits totaled $2.9 billion, consisting of $0.5 billion of non-maturity brokered accounts and $2.4 billion of brokered time deposits.
We assign a credit risk rating to each loan and verify its accuracy and appropriateness through an independent credit review function. We also conduct regular portfolio reviews to address any loans with unfavorable credit risk ratings and ensure consistency in underwriting for loan modifications and renewals. For more information regarding our real estate loan portfolio and underwriting, see "Item 1.
We assign a credit risk rating to each loan and verify its accuracy and appropriateness through an independent credit review function. We also conduct regular portfolio reviews to address any loans with unfavorable credit risk ratings and ensure consistency in underwriting for loan modifications and renewals.
The FHLB secured credit line was collateralized by a blanket lien on $10.5 billion of certain qualifying loans and $19.8 million of securities. The Bank also had secured borrowing capacity with the FRBSF under the Secured Discount Window Advance totaling $6.3 billion at December 31, 2024, which was $6.3 billion is available.
The FHLB secured credit line was collateralized by a blanket lien on $10.3 billion of certain qualifying loans and $20.5 million of securities. The Bank also had secured borrowing capacity with the FRBSF under the Discount Window program totaling $5.0 billion at December 31, 2025, of which was $5.0 billion was available.
At December 31, 2024, banks considered to be “well capitalized” must maintain a minimum Tier 1 leverage ratio of 5.00%, a minimum common equity Tier 1 risk-based capital ratio of 6.50%, a minimum Tier 1 risk-based capital ratio of 8.00%, and a minimum total risk-based capital ratio of 10.00%.
At December 31, 2025, banks considered to be “well capitalized” must maintain a minimum Tier 1 leverage ratio of 5.00%, a minimum CET1 capital ratio of 6.50%, a minimum Tier 1 capital ratio of 8.00%, and a minimum total capital ratio of 10.00%.
Material Cash Requirements Our material contractual obligations are primarily for time deposits, subordinated debt, commi tments to contribute capital to investments in LIHTC partnerships, SBICs and CRA-related loan pools, and operating lease obligations. At December 31, 2024, time deposits totaled $4.6 billion, of which $4.0 billion was due within one year.
Material Cash Requirements Our material contractual ob ligations are primarily for time deposits, subordinated debt, commitments to contribute capital to investments in LIHTC partnerships, SBICs and CRA-related loan pools, and operating lease obligations. At December 31, 2025, time deposits totaled $4.7 billion, of which $4.2 billion was due within one year.
As a member of the FHLB, the Bank had secured borrowing capacity with the FHLB of $6.9 billion at December 31, 2024, and $527.9 million pledged for letters of credit and a balance outstanding of $1.1 billion as of that date.
As a member of the FHLB, the Bank had secured borrowing capacity with the FHLB of $6.9 billion at December 31, 2025, offset partially by $514.1 million pledged for letters of credit and a balance outstanding of $1.7 billion as of that date.
Regulatory capital requirements limit the amount of DTAs that may be included when determining the amount of regulatory capital. Deferred tax asset amounts in excess of the calculated limit are disallowed from regulatory capital. At December 31, 2024, such disallowed amounts were $307.6 million for the Company and $293.5 million for the Bank.
Regulatory capital requirements limit the amount of DTAs that may be included when determining the amount of regulatory capital. Deferred tax asset amounts in excess of the calculated limit are disallowed from regulatory capital. At December 31, 2025, such disallowed amounts were $316.7 million for the Company and $294.1 million for the Bank.
Net charge-offs in 2023 were $58.2 million compared to net charge-offs of $4.8 million in 2022.
Net charge-offs in 2024 were $85.8 million compared to net charge-offs of $58.2 million in 2023.
The Level of Noninterest Expense Our noninterest expense includes fixed and controllable overhead, the largest components of which are compensation expense, customer related expense, and occupancy expense. Customer related expenses are primarily earnings credit rate payments to customers and are mostly driven by the Homeowners Association ("HOA") business.
The Level of Noninterest Expense Our noninterest expense includes fixed and controllable overhead, the largest components of which are compensation expense, customer related expense, information technology and data processing expense, and occupancy expense. Customer related expenses are primarily ECRs payments to customers and are mostly driven by the HOA business.
Quantitative and Qualitative Disclosures About Market Risk." Allowance for Credit Losses on Loans and Leases Held for Investment The ACL on loans and leases held for investment is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments.
Allowance for Credit Losses on Loans and Leases Held for Investment The ACL on loans and leases HFI is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments.
Contributing to our positive net interest margin is our healthy yield on loans and leases in excess of our core deposit costs. While our deposit balances will fluctuate depending on our customers’ liquidity and cash flow, market conditions, and competitive pressures, we seek to minimize the impact of these variances by attracting a high percentage of noninterest-bearing deposits.
While our deposit balances will fluctuate depending on our customers’ liquidity and cash flow, market conditions, and competitive pressures, we seek to minimize the impact of these variances by attracting a high percentage of noninterest-bearing deposits.
The provisions for credit losses on our loans and leases held for investment, AFS debt securities, and HTM debt securities are based on our allowance methodologies and are expenses that, in our judgment, are required to maintain an appropriate ACL for these assets. 2024 Compared to 2023 The provision for credit losses decreased by $9.2 million to a provision of $42.8 million for the year ended December 31, 2024 compared to a provision of $52.0 million for the year ended December 31, 2023.
The provisions for credit losses on our loans and leases HFI, AFS debt securities, and HTM debt securities are based on our allowance methodologies and are expenses that, in our judgment, are required to maintain an appropriate ACL for these assets. 47 2025 Compared to 2024 The provision for credit losses was $70.6 million for the year ended December 31, 2025 compared to $42.8 million for the year ended December 31, 2024.
(4) Adjusted net earnings divided by average assets 68 Results of Operations Earnings Performance The following table presents performance metrics for the years indicated: Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Earnings Summary: Interest income $ 1,812,705 $ 1,971,000 $ 1,556,489 Interest expense (886,655) (1,223,872) (265,727) Net interest income 926,050 747,128 1,290,762 Provision for credit losses (42,801) (52,000) (24,500) Noninterest income (loss) 77,145 (448,285) 74,827 Operating expense (805,923) (938,812) (738,818) Acquisition, integration and reorganization costs 14,183 (142,633) (5,703) Goodwill impairment — (1,376,736) (29,000) Earnings (loss) before income taxes 168,654 (2,211,338) 567,568 Income tax (expense) benefit (41,766) 312,201 (143,955) Net earnings (loss) 126,888 (1,899,137) 423,613 Preferred stock dividends (39,788) (39,788) (19,339) Net earnings (loss) available to common and equivalent stockholders $ 87,100 $ (1,938,925) $ 404,274 Per Common Share Data: Diluted earnings (loss) per share (1) $ 0.52 $ (22.71) $ 5.14 Adjusted diluted earnings (loss) per share (2) $ 0.80 $ 0.15 $ 6.05 Book value per share (1) $ 17.78 $ 17.12 $ 43.71 Tangible book value per share (1)(2) $ 15.72 $ 14.96 $ 25.88 Performance Ratios: Return on average assets 0.36 % (4.71) % 1.05 % Adjusted return on average assets (2) 0.50 % 0.13 % 1.20 % Return on average tangible common equity (2) 4.35 % (35.27) % 20.53 % Adjusted return on average tangible common equity (2) 6.23 % 1.06 % 22.50 % Net interest margin 2.85 % 1.98 % 3.49 % Yield on average loans and leases 6.11 % 5.92 % 5.07 % Cost of average total deposits 2.52 % 2.61 % 0.59 % Noninterest expense to average total assets 2.24 % 6.10 % 1.91 % Capital Ratios (consolidated): Common equity tier 1 capital ratio 10.55 % 10.14 % 8.70 % Tier 1 capital ratio 12.97 % 12.44 % 10.61 % Total capital ratio 17.05 % 16.43 % 13.61 % Tier 1 leverage capital ratio 10.15 % 9.00 % 8.61 % Risk-weighted assets $ 25,976,675 $ 27,338,852 $ 33,030,960 _____________________________ (1) Shares include non-voting common stock equivalents that are participating securities.
(4) Adjusted net earnings divided by average assets. 43 Results of Operations Earnings Performance The following table presents performance metrics for the years indicated: Year Ended December 31, 2025 2024 2023 (Dollars in thousands) Earnings Summary: Interest income $ 1,676,653 $ 1,812,705 $ 1,971,000 Interest expense (699,267) (886,655) (1,223,872) Net interest income 977,386 926,050 747,128 Provision for credit losses (70,600) (42,801) (52,000) Noninterest income (loss) 142,139 77,145 (448,285) Operating expense (735,850) (805,923) (938,812) Acquisition, integration and reorganization costs — 14,183 (142,633) Goodwill impairment — — (1,376,736) Earnings (loss) before income taxes 313,075 168,654 (2,211,338) Income tax (expense) benefit (84,102) (41,766) 312,201 Net earnings (loss) 228,973 126,888 (1,899,137) Preferred stock dividends (39,788) (39,788) (39,788) Net earnings (loss) available to common and equivalent stockholders $ 189,185 $ 87,100 $ (1,938,925) Per Common Share Data: Diluted earnings (loss) per share (1) $ 1.17 $ 0.52 $ (22.71) Adjusted diluted earnings per share (2) $ 1.35 $ 0.80 $ 0.15 Performance Ratios: Return on average assets 0.68 % 0.36 % (4.71) % Adjusted return on average assets (2) 0.77 % 0.50 % 0.13 % Return on average equity 6.60 % 3.70 % (63.42) % Return on average tangible common equity (2) 7.95 % 4.35 % (35.27) % Adjusted return on average tangible common equity (2) 9.05 % 6.23 % 1.06 % Net interest margin 3.15 % 2.85 % 1.98 % Yield on average loans and leases 5.93 % 6.11 % 5.92 % Cost of average total deposits 2.05 % 2.52 % 2.61 % Noninterest expense to total revenue (3) 65.73 % 78.92 % 822.57 % Efficiency ratio (2) 63.20 % 72.66 % 125.11 % Capital Ratios (consolidated): Common equity tier 1 capital ratio 10.01 % 10.55 % 10.14 % Tier 1 capital ratio 12.34 % 12.97 % 12.44 % Total capital ratio 16.31 % 17.05 % 16.43 % Tier 1 leverage capital ratio 9.99 % 10.15 % 9.00 % Risk-weighted assets $ 26,997,617 $ 25,976,675 $ 27,338,852 _____________________________ (1) Shares include non-voting common stock equivalents that are participating securities.
(2) Adjusted net earnings available to common and equivalent stockholders for adjusted ROATCE divided by average tangible common equity. 67 Adjusted Net Earnings, Adjusted Net Earnings Available to Common and Equivalent Year Ended December 31, Stockholders, Adjusted Diluted EPS, and Adjusted ROAA 2024 2023 2022 (Dollars in thousands, except per share data) Net earnings (loss) $ 126,888 $ (1,899,137) $ 423,613 Earnings (loss) before income taxes $ 168,654 $ (2,211,338) $ 567,568 Add: FDIC special assessment 4,814 32,746 — Add: Loss on sale of securities 59,946 442,413 50,321 Less: Acquisition, integration, and reorganization costs (510) 142,633 5,703 Add: Loan fair value loss adjustments — 170,971 — Add: Unfunded commitments fair value loss adjustments — 106,767 — Add: Goodwill impairment — 1,376,736 29,000 Adjusted earnings before income taxes 232,904 60,928 652,592 Adjusted income tax expense (benefit) (1) 57,667 8,603 165,497 Adjusted net earnings 175,237 52,325 487,095 Less: Preferred stock dividends 39,788 39,788 19,339 Adjusted net earnings available to common and equivalent stockholders $ 135,449 $ 12,537 $ 467,756 Weighted average common shares outstanding 168,684 85,394 77,271 Diluted earnings (loss) per common share $ 0.52 $ (22.71) $ 5.14 Adjusted diluted earnings per common share (2) $ 0.80 $ 0.15 $ 6.05 Average total assets $ 35,333,488 $ 40,293,380 $ 40,481,581 Return on average assets ("ROAA") (3) 0.36 % (4.71) % 1.05 % Adjusted ROAA (4) 0.50 % 0.13 % 1.20 % _________________________________________________________________ (1) Effective tax rates of 24.76%, 14.12%, and 25.36% used for the years ended December 31, 2024, 2023, and 2022.
(2) Adjusted net earnings available to common and equivalent stockholders for adjusted ROATCE divided by average tangible common equity. 42 Adjusted Net Earnings, Net Earnings Available to Common and Equivalent Year Ended December 31, Stockholders, Diluted EPS, and ROAA 2025 2024 2023 (Dollars in thousands) Net earnings (loss) $ 228,973 $ 126,888 $ (1,899,137) Earnings (loss) before income taxes $ 168,654 $ (2,211,338) Add: FDIC special assessment 4,814 32,746 Add: Loss on sale of securities 59,946 442,413 Less: Acquisition, integration, and reorganization costs (510) 142,633 Add: Loan fair value loss adjustments — 170,971 Add: Unfunded commitments fair value loss adjustments — 106,767 Add: Goodwill impairment — 1,376,736 Adjusted earnings before income taxes 232,904 60,928 Adjusted income tax expense (1) 57,667 8,603 Adjustments: Provision for credit losses related to transfer of loans to held for sale 26,289 Tax impact of adjustments above (1) (7,061) Income tax related adjustments 9,792 Adjustments to net earnings 29,020 Adjusted net earnings 257,993 175,237 52,325 Less: Preferred stock dividends 39,788 39,788 39,788 Adjusted net earnings available to common and equivalent stockholders $ 218,205 $ 135,449 $ 12,537 Weighted average diluted common shares outstanding 161,724 168,684 85,394 Diluted earnings (loss) per common share $ 1.17 $ 0.52 $ (22.71) Adjusted diluted earnings per common share (2) $ 1.35 $ 0.80 $ 0.15 Average total assets $ 33,665,738 $ 35,333,488 $ 40,293,380 Return on average assets (ROAA") (3) 0.68 % 0.36 % (4.71) % Adjusted ROAA (4) 0.77 % 0.50 % 0.13 % _________________________________________________________________ (1) Effective tax rates of 26.86%, 24.76%, and 14.12% used for the years ended December 31, 2025, 2024, and 2023.
(2) Total loans are net of deferred fees, related direct costs, and premiums and discounts, but exclude the allowance for loan losses. Includes net loan discount accretion o f $88.0 million and $9.7 million for 2024 and 2023 and net loan premium amortization of $17.9 million for 2022, respectively.
(2) Total loans are net of deferred fees, related direct costs, and premiums and discounts, but exclude the allowance for loan losses. Includes net loan discount accretion o f $64.2 million, $88.0 million and $9.7 million for the years ended 2025 and 2024 and 2023, respectively. (3) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits.
If we were to experience either reduced profitability or operating losses in a future period, the realization of our DTAs may no longer be considered more likely than not and, accordingly, we could be required to record a valuation allowance on our DTAs by charging earnings. 64 Non-GAAP Financial Measures We use 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.
If we were to experience either reduced profitability or operating losses in a future period, the realization of our DTAs may no longer be considered more likely than not and, accordingly, we could be required to record a valuation allowance on our DTAs by charging earnings.
Financial Statements and Supplementary Data" for discussions of factors affecting the availability of dividends and limitations on the ability to declare dividends. Interest payments made on subordinated debt are considered dividend payments under FRB regulations.
Dividend Availability and Regulatory Matters" in Item 8 of this Form 10-K, for discussions of factors affecting the availability of dividends and limitations on the ability to declare dividends. Interest payments made on subordinated debt are considered dividend payments under FRB regulations.
See “Item 1. Business - Supervision and Regulation - Banc of California, Inc. - Repurchases/Redemptions; Dividends ” and Note 22. Dividend Availability and Regulatory Matters of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” for discussions of factors affecting the availability of dividends and limitations on the ability to declare dividends.
See "Supervision and Regulation - Banc of California, Inc. - Repurchases/Redemptions; Dividends” in Item 1 and "Note 22. Dividend Availability and Regulatory Matters" in Item 8 of this Form 10-K for discussions of factors affecting the availability of dividends and limitations on the ability to declare dividends.
Financial Statements and Supplementary Data.” Noninterest Income (Loss) The following table summarizes noninterest income (loss) by category for the years indicated: Year Ended December 31, Increase Increase Noninterest Income (Loss) 2024 (Decrease) 2023 (Decrease) 2022 (In thousands) Leased equipment income $ 51,109 $ (12,058) $ 63,167 $ 12,581 $ 50,586 Other commissions and fees 33,258 (4,828) 38,086 (5,549) 43,635 Service charges on deposit accounts 18,583 2,115 16,468 2,477 13,991 Gain (loss) on sale of loans and leases 645 161,991 (161,346) (161,864) 518 Loss on sale of securities (60,400) 382,013 (442,413) (392,092) (50,321) Dividends and gains (losses) on equity investments 7,982 (7,749) 15,731 19,120 (3,389) Warrant income (loss) 408 1,126 (718) (3,208) 2,490 LOCOM HFS adjustment 215 8,676 (8,461) (8,461) — Other income 25,345 (5,856) 31,201 13,884 17,317 Total noninterest income (loss) $ 77,145 $ 525,430 $ (448,285) $ (523,112) $ 74,827 2024 Compared to 2023 Noninterest income increased by $525.4 million to $77.1 million for the year ended December 31, 2024 compared to a loss of $448.3 million for the year ended December 31, 2023 due mainly to lower losses from the sale of securities of $382.0 million and from the sale of loans and leases of $162.0 million, offset partially by lower leased equipment income of $12.1 million.
Noninterest Income (Loss) The following table summarizes noninterest income (loss) by category for the years indicated: Year Ended December 31, Increase Increase Noninterest Income (Loss) 2025 (Decrease) 2024 (Decrease) 2023 (In thousands) Leased equipment income $ 47,717 $ (3,392) $ 51,109 $ (12,058) $ 63,167 Other commissions and fees 38,637 5,379 33,258 (4,828) 38,086 Service charges on deposit accounts 19,146 563 18,583 2,115 16,468 (Loss) gain on sale of loans and leases (115) (760) 645 161,991 (161,346) Loss on sale of securities — 60,400 (60,400) 382,013 (442,413) Dividends and gains on equity investments 7,992 10 7,982 (7,749) 15,731 Warrant income (loss) 1,726 1,318 408 1,126 (718) LOCOM HFS adjustment (9) (224) 215 8,676 (8,461) Other income 27,045 1,700 25,345 (5,856) 31,201 Total noninterest income (loss) $ 142,139 $ 64,994 $ 77,145 $ 525,430 $ (448,285) 2025 Compared to 2024 Noninterest income increased by $65.0 million to $142.1 million for the year ended December 31, 2025 from $77.1 million for the year ended December 31, 2024.
Loan and Lease Production We actively seek new lending opportunities under an array of lending products. Our lending activities include real estate mortgage loans, real estate construction and land loans, commercial loans and leases, and a small amount of consumer lending. Our commercial real estate loans and real estate construction loans are secured by a range of property types.
Our lending activities include real estate mortgage loans, real estate construction and land loans, commercial loans and leases, and a small amount of consumer lending. Our CRE loans and real estate construction loans are secured by a range of property types.
The Magnitude of Credit Losses We emphasize credit quality in originating and monitoring our loans and leases, and we measure our success by the levels of our classified loans and leases, nonaccrual loans and leases, and net charge-offs.
The Magnitude of Credit Losses We emphasize credit quality in originating and monitoring our loans and leases, and we measure our success by the levels of our classified loans and leases, nonaccrual loans and leases, and net charge-offs. We maintain an ACL on loans and leases, which is the sum of the ALLL and the reserve for unfunded loan commitments.
Examples of such circumstances are an increased amount of classified and/or nonaccrual loans and leases, net loan and lease and unfunded commitment growth, and changes in economic conditions and forecasts.
Certain circumstances may lead to increased provisions for credit losses on loans and leases in the future. Examples of such circumstances include an increased amount of classified and/or nonaccrual loans and leases, net loan and lease and unfunded commitment growth, and changes in economic conditions and forecasts.
No assurance can be given that the regulatory capital deferred tax asset limitation will not increase in the future or that the Company and the Bank will not have increased DTAs that are disallowed.
No assurance can be given that the regulatory capital deferred tax asset limitation will not increase in the future or that the Company and the Bank will not have increased DTAs that are disallowed. In 2020, the federal bank regulatory authorities approved a rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL.
Tax equivalent net interest margin is calculated as tax equivalent net interest income divided by average interest-earning assets. Net interest income is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings.
Net interest margin is NII (annualized if related to a non-annual period) expressed as a percentage of average interest-earning assets. NII is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings.
The 2024 provision for loan losses was driven mainly by net charge-off activity during the year. The provision for credit losses for 2023 included a $113.5 million provision for loan losses, offset partially by a $61.5 million reversal of the provision for credit losses related to lower unfunded loan commitments.
The provision for loan losses and unfunded commitment for 2024 primarily included a $43.5 million provision for loan losses and a $0.5 million reversal of the provision for unfunded loan commitments. The provision for 2024 was driven mainly by net-charge-off activity during the year.
Additionally, so long as any share of Series F preferred stock remains outstanding, unless dividends on all outstanding shares of Series F preferred stock for the most recently completed dividend period have been paid in full or declared and a sum sufficient for the payment thereof has been set aside for payment, no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on the Company's common stock.
Additionally, so long as any share of Series F preferred stock remains outstanding, unless dividends on all outstanding shares of Series F preferred stock for the most recently completed dividend period have been paid in full or declared and a sum sufficient for the payment thereof has been set aside for payment, no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on the Company's common stock. 68 Liquidity Liquidity Management Liquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates.
Securities Held-to-Maturity The following table presents the composition and durations of our HTM securities as of the dates indicated: December 31, 2024 December 31, 2023 Amortized % of Duration Amortized % of Duration Security Type Cost Total (in years) Cost Total (in years) (Dollars in thousands) Municipal securities $ 1,251,364 55 % 8.0 1,247,310 55 % 8.1 Agency commercial MBS 440,476 19 % 5.9 433,827 19 % 6.8 Private label commercial MBS 355,342 15 % 5.6 350,493 15 % 6.3 U.S.
Rates on tax-exempt securities are contractual rates and are not presented on a tax-equivalent basis. 51 Securities Held-to-Maturity The following table presents the composition and durations of our HTM securities as of the dates indicated: December 31, 2025 2024 Amortized % of Duration Amortized % of Duration Security Type Cost Total (in years) Cost Total (in years) (Dollars in thousands) Municipal securities (1) $ 1,237,792 54 % 7.5 $ 1,251,364 55 % 8.0 Agency commercial MBS 447,283 19 % 5.1 440,476 19 % 5.9 Private label commercial MBS 360,382 16 % 4.8 355,342 15 % 5.6 U.S.
Our obligations also include off-balance sheet arrangements consisting of loan commitments, of which only a portion is expected to be funded, and standby letters of credit. At December 31, 2024, our loan commitments and standby letters of credit were $4.9 billion and $201.8 million, respectively.
We also have in place various borrowing mechanisms for both short-term and long-term liquidity needs. Our obligations also include off-balance sheet arrangements consisting of loan commitments, of which only a portion is expected to be funded, and standby letters of credit. At December 31, 2025, our loan commitments and standby letters of credit were $5.4 billion and $244.9 million, respectively.
Management believes the allowance for credit losses is appropriate for the current expected credit losses in our loan and lease portfolio and associated unfunded loan commitments, and the credit risk ratings and inherent loss rates currently assigned are reasonable and appropriate as of the reporting date.
Management believes the allowance for credit losses appropriately reflects current expected credit losses in our loan and lease portfolio and associated unfunded loan commitments as of the reporting date.
(5) Common and equivalent shares outstanding in 2022 have been restated by multiplying the historical amounts by the Merger exchange ratio of 0.6569. 66 Adjusted Return on Average Year Ended December 31, Tangible Common Equity ("ROATCE") 2024 2023 2022 (Dollars in thousands) Net earnings (loss) $ 126,888 $ (1,899,137) $ 423,613 Earnings (loss) before income taxes $ 168,654 $ (2,211,338) $ 567,568 Add: Intangible asset amortization 33,143 11,419 13,576 Add: Goodwill impairment — 1,376,736 29,000 Add: FDIC special assessment 4,814 32,746 — Add: Loss on sale of securities 59,946 442,413 50,321 Add: Acquisition, integration, and reorganization costs (510) 142,633 5,703 Add: Loan fair value loss adjustments — 170,971 — Add: Unfunded commitments fair value loss adjustments — 106,767 — Adjusted earnings before income taxes for adjusted ROATCE 266,047 72,347 666,168 Adjusted income tax expense (1) 65,873 10,215 168,940 Adjusted net earnings for adjusted ROATCE 200,174 62,132 497,228 Less: Preferred stock dividends 39,788 39,788 19,339 Adjusted net earnings available to common and equivalent stockholders for adjusted ROATCE $ 160,386 $ 22,344 $ 477,889 Average stockholders' equity $ 3,431,364 $ 2,994,428 $ 3,853,033 Less: Average goodwill and intangible assets 356,960 379,005 1,443,528 Less: Average preferred stock 498,516 498,516 285,488 Average tangible common equity $ 2,575,888 $ 2,116,907 $ 2,124,017 Adjusted ROATCE (2) 6.23 % 1.06 % 22.50 % _________________________________________________________________ (1) Effective tax rates of 24.76%, 14.12%, and 25.36% used for the years ended December 31, 2024, 2023, and 2022.
(2) Noninterest expense used for efficiency ratio divided by total revenue used for efficiency ratio. 41 Adjusted Return on Average Year Ended December 31, Tangible Common Equity ("ROATCE") 2025 2024 2023 (Dollars in thousands) Net earnings (loss) $ 228,973 $ 126,888 $ (1,899,137) Earnings (loss) before income taxes $ 168,654 $ (2,211,338) Add: Intangible asset amortization 33,143 11,419 Add: Goodwill impairment — 1,376,736 Add: FDIC special assessment 4,814 32,746 Add: Loss on sale of securities 59,946 442,413 Less: Acquisition, integration, and reorganization costs (510) 142,633 Add: Loan fair value loss adjustments — 170,971 Add: Unfunded commitments fair value loss adjustments — 106,767 Adjusted earnings before income taxes used for adjusted ROATCE 266,047 72,347 Adjusted income tax expense (1) 65,873 10,215 Adjustments: Intangible asset amortization 28,267 Provision for credit losses related to transfer of loans to held for sale 26,289 Total adjustments 54,556 Tax impact of adjustments above (1) (14,654) Income tax related adjustments 9,792 Adjustments to net earnings 49,694 Adjusted net earnings for adjusted ROATCE 278,667 200,174 62,132 Less: Preferred stock dividends 39,788 39,788 39,788 Adjusted net earnings available to common and equivalent stockholders for adjusted ROATCE $ 238,879 $ 160,386 $ 22,344 Average stockholders' equity $ 3,471,278 $ 3,431,364 $ 2,994,428 Less: Average goodwill and intangible assets 333,815 356,960 379,005 Less: Average preferred stock 498,516 498,516 498,516 Average tangible common equity $ 2,638,947 $ 2,575,888 $ 2,116,907 Adjusted ROATCE (2) 9.05 % 6.23 % 1.06 % _________________________________________________________________ (1) Effective tax rates of 26.86%, 24.76%, and 14.12% used for the years ended December 31, 2025, 2024, and 2023.
As of December 31, 2024, the balance sheet repositioning contemplated as a result of the Merger has been largely completed. 60 Key Performance Indicators Among other factors, our operating results generally depend on the following key performance indicators: The Level of Net Interest Income Net interest income is the excess of interest earned on our interest-earning assets over the interest paid on our interest-bearing liabilities.
Key Performance Indicators Among other factors, our operating results generally depend on the following key performance indicators: The Level of Net Interest Income NII is the excess of interest earned on our interest-earning assets over the interest paid on our interest-bearing liabilities.
Foreclosed Assets The following table presents foreclosed assets (primarily OREO) by property type as of the dates indicated: December 31, Property Type 2024 2023 2022 (In thousands) Single-family residential $ 9,714 $ 7,394 $ 5,022 Total OREO, net 9,714 7,394 5,022 Other foreclosed assets 20 — — Total foreclosed assets $ 9,734 $ 7,394 $ 5,022 During 2024, foreclosed assets increased by $2.3 million to $9.7 million at December 31, 2024 due mainly to transfers from loans of $20.0 million, offset partially by sales of $16.1 million. 97 Classified and Special Mention Loans and Leases Held for Investment The following table presents the credit risk ratings of our loans and leases held for investment as of the dates indicated: December 31, Loan and Lease Credit Risk Ratings 2024 2023 2022 (In thousands) Pass $ 22,120,846 $ 24,747,958 $ 27,924,599 Special mention 1,097,315 513,312 566,259 Classified 563,502 228,417 118,271 Total loans and leases held for investment $ 23,781,663 $ 25,489,687 $ 28,609,129 Classified and special mention loans and leases fluctuate from period to period as a result of loan repayments and downgrades or upgrades from our ongoing active portfolio management.
Foreclosed Assets, Net The following table presents foreclosed assets (primarily OREO), net of the valuation allowance, by property type as of the dates indicated: December 31, Property Type 2025 2024 (In thousands) Single-family residential $ 17,095 $ 9,714 Total OREO, net 17,095 9,714 Other foreclosed assets 20 20 Total foreclosed assets, net $ 17,115 $ 9,734 Foreclosed assets increased by $7.4 million to $17.1 million at December 31, 2025 compared to $9.7 million at December 31, 2024, due mainly to transfers from loans of $22.8 million, offset partially by sales of $14.7 million and a provision for losses of $0.8 million. 63 Classified and Special Mention Loans and Leases Held for Investment The following table presents the credit risk ratings of our loans and leases HFI as of the dates indicated: December 31, Loan and Lease Credit Risk Ratings 2025 2024 (In thousands) Pass $ 23,773,666 $ 22,120,846 Special mention 458,683 1,097,315 Classified 800,330 563,502 Total loans and leases held for investment $ 25,032,679 $ 23,781,663 Classified and special mention loans and leases fluctuate from period to period as a result of loan repayments and downgrades or upgrades from our ongoing active portfolio management.
As ratios to commercial loans and leases at those dates, these percentages were 1.00% and 0.78%.
As ratios to real estate mortgage loans at those dates, these percentages were 1.00% and 1.09%.
Average borrowings decreased by $5.2 billion for the year ended December 31, 2024 compared to 2023 due to paydown of borrowings in connection with the balance sheet repositioning completed due to the Merger. 73 Provision for Credit Losses The following table sets forth the details of the provision for credit losses on loans and leases held for investment, AFS debt securities, and held-to-maturity debt securities as well as information regarding credit quality metrics for the years indicated: Year Ended December 31, Increase Increase 2024 (Decrease) 2023 (Decrease) 2022 (Dollars in thousands) Provision For Credit Losses: Addition to allowance for loan and lease losses $ 43,500 $ (70,000) $ 113,500 $ 108,500 $ 5,000 (Reduction in) addition to reserve for unfunded loan commitments (500) 61,000 (61,500) (79,500) 18,000 Total loan-related provision 43,000 (9,000) 52,000 29,000 23,000 Reduction in allowance for available-for-sale securities (199) (199) — — — Addition to allowance for held-to-maturity securities — — — (1,500) 1,500 Total provision for credit losses $ 42,801 $ (9,199) $ 52,000 $ 27,500 $ 24,500 Credit Quality Metrics: Net charge-offs on loans and leases held for investment (1) $ 85,827 $ 27,659 $ 58,168 $ 53,336 $ 4,832 Net charge-offs to average loans and leases 0.35 % 0.23 % 0.02 % At year-end: Allowance for credit losses $ 268,431 $ (42,827) $ 311,258 $ 19,455 $ 291,803 Allowance for credit losses to loans and leases held for investment 1.13 % 1.22 % 1.02 % Allowance for credit losses to nonaccrual loans and leases held for investment 141.57 % 497.80 % 281.18 % Nonaccrual loans and leases held for investment $ 189,605 $ 127,078 $ 62,527 $ (41,251) $ 103,778 Nonaccrual loans and leases held for investment to loans and leases held for investment 0.80 % 0.25 % 0.36 % ______________________ (1) See "- Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment " for detail of charge-offs and recoveries by loan portfolio segment, class, and subclass for the years presented.
Provision for Credit Losses The following table sets forth the details of the provision for credit losses on loans and leases HFI, AFS debt securities, and HTM debt securities as well as information regarding credit quality metrics for the years indicated: Year Ended December 31, Increase Increase 2025 (Decrease) 2024 (Decrease) 2023 (Dollars in thousands) Provision For Credit Losses: Addition to allowance for loan and lease losses $ 64,780 $ 21,280 $ 43,500 $ (70,000) $ 113,500 Addition to (reduction in) reserve for unfunded loan commitments 5,850 6,350 (500) 61,000 (61,500) Total loan-related provision 70,630 27,630 43,000 (9,000) 52,000 Addition to (reduction in) allowance for AFS securities 775 974 (199) (199) — Reduction in allowance for HTM securities (805) (805) — — — Total securities-related provision (30) 169 (199) (199) — Total provision for credit losses $ 70,600 $ 27,799 $ 42,801 $ (9,199) $ 52,000 Credit Quality Metrics: Net charge-offs on loans and leases HFI (1) $ 58,528 $ (27,299) $ 85,827 $ 27,659 $ 58,168 Net charge-offs to average loans and leases 0.24 % 0.35 % 0.23 % At year-end: Allowance for credit losses $ 280,533 $ 12,102 $ 268,431 $ (42,827) $ 311,258 Allowance for credit losses to loans and leases HFI 1.12 % 1.13 % 1.22 % Allowance for credit losses to nonaccrual loans and leases HFI 176.25 % 141.57 % 497.80 % Nonaccrual loans and leases HFI $ 159,168 $ (30,437) $ 189,605 $ 127,078 $ 62,527 Nonaccrual loans and leases HFI to loans and leases HFI 0.64 % 0.80 % 0.25 % ______________________ (1) See " Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment" in Item 7 of this Form 10-K for detail of charge-offs and recoveries by loan portfolio segment, class, and subclass for the years presented.
Our liquidity sources, as described in “- Liquidity - Liquidity Management ,” have been and are expected to be sufficient to meet the cash requirements of our lending activities. For further information on loan commitments, see Note 13. Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in “Item 8.
Our liquidity sources, as described in “Liquidity - Liquidity Management” in Item 7 of this Form 10-K, have been and are expected to be sufficient to meet the cash requirements of our lending activities. For further information on loan commitments, see "Note 13. Commitments and Contingencies " in Item 8 of this Form 10-K. Recent Accounting Pronouncements See "Note 1.
For information regarding the allowance for credit losses on loans and leases held for investment, see - “Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment ,” Note 1(j). Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment , and Note 5.
For information regarding the allowance for credit losses on loans and leases HFI and HTM securities, see “Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases sections” in Item 7, "Note 1. Nature of Operations and Summary of Significant Accounting Policies," and "Note 5. Loans and Leases" in Item 8 of this Form 10-K.
Our significant accounting policies and practices are described in Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in "Item 8.
Our significant accounting policies and practices are described in "Note 1. Nature of Operations and Summary of Significant Accounting Policies " in Item 8 of this form 10-K.
At December 31, 2024, the Bank was in compliance with all of its funding concentration liquidity guidelines. 101 Holding Company Liquidity Banc of California, Inc. acts as a source of financial strength for the Bank which can also include being a source of liquidity.
Holding Company Liquidity Banc of California, Inc. acts as a source of financial strength for the Bank which can also include being a source of liquidity.
The increase in income tax expense was due primarily to higher pre-tax earnings incurred in 2024 compared to pre-tax loss in 2023. 70 Net Interest Income The following table summarizes the distribution of average assets, liabilities, and stockholders’ equity, as well as interest income and yields earned on average interest‑earning assets and interest expense and rates paid on average interest‑bearing liabilities, presented on a tax equivalent basis, for the years indicated: Year Ended December 31, 2024 2023 2022 Interest Yields Interest Yields Interest Yields Average Income/ and Average Income/ and Average Income/ and Balance Expense Rates Balance Expense Rates Balance Expense Rates (Dollars in thousands) ASSETS: Loans and leases (1)(2)(3) $ 24,569,650 $ 1,501,534 6.11 % $ 25,330,351 $ 1,498,701 5.92 % $ 26,044,463 $ 1,320,449 5.07 % Investment securities (3) 4,686,615 140,794 3.00 % 6,827,059 174,996 2.56 % 9,120,717 215,624 2.36 % Deposits in financial institutions 3,226,658 170,377 5.28 % 5,746,858 299,647 5.21 % 2,185,585 34,158 1.56 % Total interest‑earning assets (1) 32,482,923 1,812,705 5.58 % 37,904,268 1,973,344 5.21 % 37,350,765 1,570,231 4.20 % Other assets 2,850,565 2,389,112 3,130,816 Total assets $ 35,333,488 $ 40,293,380 $ 40,481,581 LIABILITIES AND STOCKHOLDERS’ EQUITY: Interest checking $ 7,714,920 240,913 3.12 % $ 6,992,888 220,735 3.16 % $ 6,851,831 66,494 0.97 % Money market 5,164,566 138,176 2.68 % 6,724,296 190,027 2.83 % 10,601,028 95,376 0.90 % Savings 2,005,513 66,421 3.31 % 1,051,117 30,978 2.95 % 639,720 188 0.03 % Time 5,714,821 270,474 4.73 % 6,840,920 306,683 4.48 % 2,540,426 38,391 1.51 % Total interest-bearing deposits 20,599,820 715,984 3.48 % 21,609,221 748,423 3.46 % 20,633,005 200,449 0.97 % Borrowings 1,838,819 104,398 5.68 % 7,068,826 416,744 5.90 % 961,601 25,645 2.67 % Subordinated debt 939,528 66,273 7.05 % 875,621 58,705 6.70 % 863,883 39,633 4.59 % Total interest‑bearing liabilities 23,378,167 886,655 3.79 % 29,553,668 1,223,872 4.14 % 22,458,489 265,727 1.18 % Noninterest‑bearing demand deposits 7,829,976 7,072,334 13,601,766 Other liabilities 693,981 672,950 568,293 Total liabilities 31,902,124 37,298,952 36,628,548 Stockholders’ equity 3,431,364 2,994,428 3,853,033 Total liabilities and stockholders' equity $ 35,333,488 $ 40,293,380 $ 40,481,581 Net interest income (1) $ 926,050 $ 749,472 $ 1,304,504 Net interest rate spread (1) 1.79 % 1.07 % 3.02 % Net interest margin (1) 2.85 % 1.98 % 3.49 % Total deposits (4) $ 28,429,796 $ 715,984 2.52 % $ 28,681,555 $ 748,423 2.61 % $ 34,234,771 $ 200,449 0.59 % Total funds (5) $ 31,208,143 $ 886,655 2.84 % $ 36,626,002 $ 1,223,872 3.34 % $ 36,060,255 $ 265,727 0.74 % _____________________ (1) Tax equivalent.
(3) Total revenue equals the sum of NII and noninterest income. 44 Net Interest Income and Net Interest Margin The following table summarizes the distribution of average assets, liabilities, and stockholders’ equity, as well as interest income and yields earned on average interest‑earning assets and interest expense and rates paid on average interest‑bearing liabilities for the years indicated: Year Ended December 31, 2025 2024 2023 Interest Yields Interest Yields Interest Yields Average Income/ and Average Income/ and Average Income/ and Balance Expense Rates Balance Expense Rates Balance Expense Rates (Dollars in thousands) ASSETS: Loans and leases (1)(2) $ 24,300,808 $ 1,440,397 5.93 % $ 24,569,650 $ 1,501,534 6.11 % $ 25,330,351 $ 1,498,701 5.92 % Investment securities 4,782,267 153,326 3.21 % 4,686,615 140,794 3.00 % 6,827,059 174,996 2.56 % Deposits in financial institutions 1,937,775 82,930 4.28 % 3,226,658 170,377 5.28 % 5,746,858 299,647 5.21 % Total interest‑earning assets (1) 31,020,850 1,676,653 5.40 % 32,482,923 1,812,705 5.58 % 37,904,268 1,973,344 5.21 % Other assets 2,644,888 2,850,565 2,389,112 Total assets $ 33,665,738 $ 35,333,488 $ 40,293,380 LIABILITIES AND STOCKHOLDERS’ EQUITY: Interest checking $ 7,732,697 204,070 2.64 % $ 7,714,920 240,913 3.12 % $ 6,992,888 220,735 3.16 % Money market 5,231,379 122,889 2.35 % 5,164,566 138,176 2.68 % 6,724,296 190,027 2.83 % Savings 1,954,354 49,186 2.52 % 2,005,513 66,421 3.31 % 1,051,117 30,978 2.95 % Time 4,568,180 182,295 3.99 % 5,714,821 270,474 4.73 % 6,840,920 306,683 4.48 % Total interest-bearing deposits 19,486,610 558,440 2.87 % 20,599,820 715,984 3.48 % 21,609,221 748,423 3.46 % Borrowings 1,599,469 78,761 4.92 % 1,838,819 104,398 5.68 % 7,068,826 416,744 5.90 % Subordinated debt 947,709 62,066 6.55 % 939,528 66,273 7.05 % 875,621 58,705 6.70 % Total interest‑bearing liabilities 22,033,788 699,267 3.17 % 23,378,167 886,655 3.79 % 29,553,668 1,223,872 4.14 % Noninterest‑bearing demand deposits 7,698,015 7,829,976 7,072,334 Other liabilities 462,657 693,981 672,950 Total liabilities 30,194,460 31,902,124 37,298,952 Stockholders’ equity 3,471,278 3,431,364 2,994,428 Total liabilities and stockholders' equity $ 33,665,738 $ 35,333,488 $ 40,293,380 Net interest income (1) $ 977,386 $ 926,050 $ 749,472 Net interest rate spread (1) 2.23 % 1.79 % 1.07 % Net interest margin (1) 3.15 % 2.85 % 1.98 % Total deposits (3) $ 27,184,625 $ 558,440 2.05 % $ 28,429,796 $ 715,984 2.52 % $ 28,681,555 $ 748,423 2.61 % Total funds (4) $ 29,731,803 $ 699,267 2.35 % $ 31,208,143 $ 886,655 2.84 % $ 36,626,002 $ 1,223,872 3.34 % _____________________ (1) In 2023, a $2.3 million adjustment was made to account for tax-exempt income generated from loans, using a federal statutory rate of 21% for the adjustment.
Year Ended December 31, Return on Average Tangible Common Equity 2024 2023 2022 (Dollars in thousands) Net earnings (loss) $ 126,888 $ (1,899,137) $ 423,613 Earnings (loss) before income taxes $ 168,654 $ (2,211,338) $ 567,568 Add: Goodwill impairment — 1,376,736 29,000 Add: Intangible asset amortization 33,143 11,419 13,576 Adjusted earnings (loss) before income taxes 201,797 (823,183) 610,144 Adjusted income tax expense (benefit) (1) 49,965 (116,233) 154,733 Adjusted net earnings (loss) 151,832 (706,950) 455,411 Less: Preferred stock dividends 39,788 39,788 19,339 Adjusted net earnings (loss) available to common and equivalent stockholders $ 112,044 $ (746,738) $ 436,072 Average stockholders' equity $ 3,431,364 $ 2,994,428 $ 3,853,033 Less: Average intangible assets 356,960 379,005 1,443,528 Less: Average preferred stock 498,516 498,516 285,488 Average tangible common equity $ 2,575,888 $ 2,116,907 $ 2,124,017 Return on average equity (2) 3.70 % (63.42) % 10.99 % Return on average tangible common equity (3) 4.35 % (35.27) % 20.53 % ____________________________________________________ (1) Effective tax rate of 24.76%, 14.12%, and 25.36% for the years ended December 31, 2024, 2023, and 2022.
The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the periods presented. 39 Year Ended December 31, Return on Average Tangible Common Equity ("ROATCE") 2025 2024 2023 (Dollars in thousands) Net earnings (loss) $ 228,973 $ 126,888 $ (1,899,137) Earnings (loss) before income taxes $ 168,654 $ (2,211,338) Add: Goodwill impairment — 1,376,736 Add: Intangible asset amortization 33,143 11,419 Adjusted earnings (loss) before income taxes for ROATCE 201,797 (823,183) Adjusted income tax expense (benefit) (1) 49,965 (116,233) Adjustments: Intangible asset amortization 28,267 Tax impact of adjustment above (1) (7,593) Adjustment to net earnings 20,674 Adjusted net earnings (loss) for ROATCE 249,647 151,832 (706,950) Less: Preferred stock dividends 39,788 39,788 39,788 Adjusted net earnings (loss) available to common and equivalent stockholders for ROATCE $ 209,859 $ 112,044 $ (746,738) Average stockholders' equity $ 3,471,278 $ 3,431,364 $ 2,994,428 Less: Average goodwill and intangible assets 333,815 356,960 379,005 Less: Average preferred stock 498,516 498,516 498,516 Average tangible common equity $ 2,638,947 $ 2,575,888 $ 2,116,907 Return on average equity (2) 6.60 % 3.70 % (63.42) % Return on average tangible common equity (3) 7.95 % 4.35 % (35.27) % ____________________________________________________ (1) Effective tax rate of 26.86 % , 24.76%, and 14.12% for the years ended December 31, 2025, 2024, and 2023.
At December 31, 2024, noninterest-bearing deposits totaled $7.7 billion, or 28% of total deposits and interest-bearing deposits totaled $19.5 billion, or 72% of total deposits. Our deposit base is also diversified by client type. As of December 31, 2024, no individual deposit relationship represented more than 10% of our total deposits.
Our deposit base is also diversified by client type. As of December 31, 2025, no individual deposit relationship represented more than 10% of our total deposits.
The following tables present a comparison of our actual capital ratios to the minimum required ratios and well capitalized ratios as of the dates indicated: Minimum Required For Capital For Capital For Well December 31, Adequacy Conservation Capitalized 2024 2023 Purposes Buffer Classification Banc of California, Inc.: Tier 1 leverage capital ratio 10.15% 9.00% 4.00% N/A N/A CET1 capital ratio 10.55% 10.14% 4.50% 7.00% N/A Tier 1 capital ratio 12.97% 12.44% 6.00% 8.50% N/A Total capital ratio 17.05% 16.43% 8.00% 10.50% N/A Banc of California: Tier 1 leverage capital ratio 11.08% 9.62% 4.00% N/A 5.00% CET1 capital ratio 14.17% 13.27% 4.50% 7.00% 6.50% Tier 1 capital ratio 14.17% 13.27% 6.00% 8.50% 8.00% Total capital ratio 16.65% 15.75% 8.00% 10.50% 10.00% The Company's consolidated Tier 1 leverage and Tier 1 capital ratios increased during the year ended December 31, 2024 due mainly to net earnings and lower risk-weighted assets attributable primarily to securities and loan sales, offset partially by dividends declared and paid and higher disallowed DTAs. 99 Subordinated Debt We issued or assumed through mergers subordinated debt to trusts that were established by us or entities we acquired, which, in turn, issued trust preferred securities.
The following tables present a comparison of our actual capital ratios to the minimum required ratios and well capitalized ratios as of the dates indicated: Minimum Required December 31, For Capital Adequacy For Capital Conservation For Well Capitalized 2025 2024 Purposes Buffer Classification Banc of California, Inc.: Tier 1 leverage capital ratio 9.99% 10.15% 4.00% N/A N/A CET1 capital ratio 10.01% 10.55% 4.50% 7.00% N/A Tier 1 capital ratio 12.34% 12.97% 6.00% 8.50% 6.00% Total capital ratio 16.31% 17.05% 8.00% 10.50% 10.00% Banc of California: Tier 1 leverage capital ratio 10.65% 11.08% 4.00% N/A 5.00% CET1 capital ratio 13.15% 14.17% 4.50% 7.00% 6.50% Tier 1 capital ratio 13.15% 14.17% 6.00% 8.50% 8.00% Total capital ratio 15.61% 16.65% 8.00% 10.50% 10.00% The Company's consolidated risk-based capital ratios decreased during the year ended December 31, 2025 due mainly to the impact of stock repurchases and increase in risk-weighted assets driven mostly by the growth in loan balances, offset by earnings for the year.
We use the following non-GAAP measures in this Annual Report on Form 10-K: • Return on average tangible common equity, tangible common equity ratio, tangible book value per common share, adjusted return on average tangible common equity, adjusted net earnings, and adjusted return on average assets: Given that the use of these measures is prevalent among banking regulators, investors and analysts, we disclose them in addition to the related GAAP measures of return on average equity, equity to assets ratio, and book value per share, respectively.
Given that the use of these measures is prevalent among banking regulators, investors, and analysts, we disclose them in addition to the related GAAP measures of return on average equity, stockholders' equity to assets ratio, noninterest expense to total revenue, and return on average assets, respectively.
The Company also sold $2.5 billion of loans for a net gain of $0.6 million in the year ended December 31, 2024, compared to $8.7 billion of loans for a net loss of $161.3 million in the year ended December 31, 2023. 75 Noninterest Expense The following table summarizes noninterest expense by category for the years indicated: Year Ended December 31, Increase Increase Noninterest Expense 2024 (Decrease) 2023 (Decrease) 2022 (In thousands) Compensation $ 341,396 $ 9,043 $ 332,353 $ (74,486) $ 406,839 Customer related expense 129,471 5,367 124,104 68,831 55,273 Insurance and assessments 70,779 (64,887) 135,666 110,180 25,486 Occupancy 67,993 6,325 61,668 704 60,964 Information technology and data processing 60,418 8,613 51,805 6,009 45,796 Intangible asset amortization 33,143 21,724 11,419 (2,157) 13,576 Leased equipment depreciation 29,271 (4,972) 34,243 (1,415) 35,658 Other professional services 20,857 (3,766) 24,623 (5,655) 30,278 Loan expense 17,306 (3,152) 20,458 (4,114) 24,572 Other 35,289 (107,184) 142,473 102,097 40,376 Total operating expense 805,923 (132,889) 938,812 199,994 738,818 Acquisition, integration and reorganization costs (14,183) (156,816) 142,633 136,930 5,703 Goodwill impairment — (1,376,736) 1,376,736 1,347,736 29,000 Total noninterest expense $ 791,740 $ (1,666,441) $ 2,458,181 $ 1,684,660 $ 773,521 2024 Compared to 2023 Noninterest expense decreased by $1.7 billion to $791.7 million for the year ended December 31, 2024 compared to $2.5 billion for the year ended December 31, 2023.
The prior year period included a $59.9 million loss on the sale of $742 million of securities executed as part of a balance sheet repositioning initiative. 48 Noninterest Expense The following table summarizes noninterest expense by category for the years indicated: Year Ended December 31, Increase Increase Noninterest Expense 2025 (Decrease) 2024 (Decrease) 2023 (In thousands) Compensation $ 349,506 $ 8,110 $ 341,396 $ 9,043 $ 332,353 Customer related expense 105,425 (24,046) 129,471 5,367 124,104 Occupancy 60,624 (7,369) 67,993 6,325 61,668 Information technology and data processing 55,458 (4,960) 60,418 8,613 51,805 Insurance and assessments 32,750 (38,029) 70,779 (64,887) 135,666 Intangible asset amortization 28,267 (4,876) 33,143 21,724 11,419 Leased equipment depreciation 26,393 (2,878) 29,271 (4,972) 34,243 Other professional services 23,087 2,230 20,857 (3,766) 24,623 Loan expense 16,372 (934) 17,306 (3,152) 20,458 Other 37,968 2,679 35,289 (107,184) 142,473 Total operating expense 735,850 (70,073) 805,923 (132,889) 938,812 Acquisition, integration and reorganization costs — 14,183 (14,183) (156,816) 142,633 Goodwill impairment — — — (1,376,736) 1,376,736 Total noninterest expense $ 735,850 $ (55,890) $ 791,740 $ (1,666,441) $ 2,458,181 2025 Compared to 2024 Noninterest expense decreased by $55.9 million to $735.9 million for the year ended December 31, 2025 from $791.7 million for the year ended December 31, 2024.
Basel III currently requires all banking organizations to maintain a 2.50% capital conservation buffer above the minimum risk-based capital requirements to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.
The full impact of the CECL standard was phased-in to regulatory capital through December 31, 2024 under this phase-in option, and beginning in the first quarter of 2025, CECL was fully reflected in our regulatory capital. 67 Basel III currently requires all banking organizations to maintain a 2.50% capital conservation buffer above the minimum risk-based capital requirements to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.
Loans and leases that are deemed uncollectable are charged off and deducted from the allowance for loan and lease losses. Recoveries on loans and leases previously charged off are added to the allowance for loan and lease losses.
Provisions for credit losses are charged to operations as and when needed for both on and off-balance sheet credit exposures. Loans and leases that are deemed uncollectable are charged off and deducted from the ALLL. Recoveries on loans and leases previously charged off are added to the ALLL.
At December 31, 2024, Banc of California, Inc. had $192.3 million in cash and cash equivalents, of which a portion is on deposit at the Bank. We believe this amount of cash, along with anticipated future dividends from the Bank, will be sufficient to fund the holding company’s cash flow needs over the next 12 months.
We believe this amount of cash, along with anticipated future dividends from the Bank, will be sufficient to fund the holding company’s cash flow needs over the next 12 months.
As of December 31, 2024, there was no balance outstanding. 100 The following tables provide a summary of the Company’s primary and secondary liquidity levels at the dates indicated: December 31, December 31, Primary Liquidity - On-Balance Sheet 2024 2023 (Dollars in thousands) Cash and due from banks $ 192,006 $ 202,427 Interest-earning deposits in financial institutions 2,310,206 5,175,149 Less: Restricted cash (184,159) (185,147) Securities available-for-sale, at fair value 2,246,839 2,346,864 Less: Pledged securities available-for-sale, at fair value (4,200) (2,063,754) Less: Haircut on securities available-for-sale (193,191) — Total primary liquidity $ 4,367,501 $ 5,475,539 Ratio of primary liquidity to total assets 13.0 % 14.2 % Secondary Liquidity - Off-Balance Sheet December 31, December 31, Available Secured Borrowing Capacity 2024 2023 (In thousands) Total secured borrowing capacity with the FHLB $ 6,853,652 $ 5,302,210 Less: Secured advances outstanding (1,100,000) — Less: Letters of credit (527,893) (243,801) Available secured borrowing capacity with the FHLB 5,225,759 4,502,682 Available secured borrowing capacity with the FRBSF 6,295,540 6,916,235 Total secondary liquidity $ 11,521,299 $ 11,974,644 During the year ended December 31, 2024, the Company's primary liquidity decreased by $1.1 billion to $4.4 billion at December 31, 2024 due mainly to a decrease of $2.9 billion in interest-earning deposits in financial institutions, offset partially by a decrease of $2.1 billion in pledged AFS securities.
The following tables provide a summary of the Company’s primary and secondary liquidity levels at the dates indicated: December 31, December 31, Primary Liquidity - On-Balance Sheet 2025 2024 (Dollars in thousands) Cash and due from banks $ 181,103 $ 192,006 Interest-earning deposits in financial institutions 2,126,862 2,310,206 Total cash, cash equivalents, and restricted cash 2,307,965 2,502,212 Less: Restricted cash (170,229) (184,159) Add: Securities available-for-sale, at fair value 2,454,058 2,246,839 Add: Allowance on securities available-for-sale 775 — Less: Pledged securities available-for-sale, at fair value (3,463) (4,200) Less: Haircut on securities available-for-sale (183,265) (193,191) Total primary liquidity $ 4,405,841 $ 4,367,501 Ratio of primary liquidity to total assets 12.7 % 13.0 % 69 Secondary Liquidity - Off-Balance Sheet December 31, December 31, Available Secured Borrowing Capacity 2025 2024 (In thousands) Total secured borrowing capacity with the FHLB $ 6,949,898 $ 6,853,652 Less: Secured advances outstanding (1,710,185) (1,100,000) Less: Letters of credit (514,091) (527,893) Available secured borrowing capacity with the FHLB 4,725,622 5,225,759 Available secured borrowing capacity with the FRBSF 5,044,040 6,295,540 Total secondary liquidity $ 9,769,662 $ 11,521,299 The Company's primary liquidity increased by $38.3 million to $4.4 billion at December 31, 2025 compared to $4.4 billion at December 31, 2024, due mainly to a $218.7 million increase in unpledged AFS securities, net of a haircut, offset partially by a $180.3 million decrease in total cash and cash equivalents excluding restricted cash.
Our methodology and framework along with the 4-quarter reasonable and supportable forecast period and 2-quarter reversion period have remained consistent since the implementation of CECL on January 1, 2020. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.
Our methodology and framework include reasonable and supportable forecast period after which we revert to the through-the-cycle environment. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.
Financial Statements and Supplementary Data.” 102 Recent Accounting Pronouncements See Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data” for information on recent accounting pronouncements and their expected impact, if any, on our consolidated financial statements.
Nature of Operations and Summary of Significant Accounting Policies " in Item 8 of this Form 10-K for information on recent accounting pronouncements and their expected impact, if any, on our consolidated financial statements.
Gross subordinated debt totaled $1.0 billion, all of which was due after five years. Our liability to contribute capital to LIHTC partnerships was $117.5 million and our commitment to contribute capital to SBICs and CRA-related loan pools was $79.7 million for a combined total of $197.1 million, of which $124.6 million was due within one year.
Our liability to contribute capital to LIHTC partnerships was $40.9 million and our commitment to contribute capital to SBICs and CRA-related loan pools was $122.1 million for a combined total of $163.0 million, of which $87.8 million was due within one year.
This change was due primarily to net charge-offs in the real estate mortgage portfolio segment increasing to $46.5 million in 2023 from $3.3 million in 2022. 88 The following table presents charge-offs by loan portfolio segment, class, and subclass for the years indicated: Year Ended December 31, Allowance for Credit Losses Charge-offs 2024 2023 2022 (In thousands) Real Estate Mortgage: Commercial real estate $ 22,433 $ 13,956 $ 2,258 SBA program 1,154 339 417 Hotel — — 55 Total commercial real estate mortgage 23,587 14,295 2,730 Multi-family — — — Residential mortgage 242 — 81 Investor-owned residential 38,064 21,844 814 Residential renovation 1,224 11,231 1,431 Total other residential real estate mortgage 39,530 33,075 2,326 Total real estate mortgage 63,117 47,370 5,056 Real Estate Construction and Land: Commercial — — — Residential — — — Total real estate construction and land — — — Total real estate 63,117 47,370 5,056 Commercial: Lender finance — 150 — Equipment finance — — — Premium finance — 60 — Other asset-based 92 — 750 Total asset-based 92 210 750 Equity fund loans — — — Venture lending 16,414 5,013 940 Total venture capital 16,414 5,013 940 Secured business loans 4,490 658 479 Warehouse lending — — — Other lending 5,326 7,780 4,648 Total other commercial 9,816 8,438 5,127 Total commercial 26,322 13,661 6,817 Consumer 5,504 2,397 2,164 Total charge-offs $ 94,943 $ 63,428 $ 14,037 Charge-offs increased by $31.5 million to $94.9 million in 2024 from $63.4 million in 2023 due mainly to increases of $16.2 million in the investor-owned residential real estate mortgage subclass, $11.4 million in the venture lending subclass, and $8.5 million in the commercial real estate mortgage subclass, offset partially by a decrease of $10.0 million in the residential renovation real estate mortgage subclass. 89 The following table presents recoveries by loan portfolio segment, class, and subclass for the years indicated: Year Ended December 31, Allowance for Credit Losses Recoveries 2024 2023 2022 (In thousands) Real Estate Mortgage: Commercial real estate $ 389 $ — $ 1,204 SBA program 480 281 281 Hotel — — — Total commercial real estate mortgage 869 281 1,485 Multi-family 500 — 4 Residential mortgage 8 20 234 Investor-owned residential 724 175 25 Residential renovation 665 409 — Total other residential real estate mortgage 1,397 604 259 Total real estate mortgage 2,766 885 1,748 Real Estate Construction and Land: Commercial — — 178 Residential — — — Total real estate construction and land — — 178 Total real estate 2,766 885 1,926 Commercial: Lender finance — 324 — Equipment finance — — 163 Premium finance — 1 — Other asset-based 113 279 539 Total asset-based 113 604 702 Equity fund loans — — — Venture lending 1,500 2,073 923 Total venture capital 1,500 2,073 923 Secured business loans 504 30 178 Warehouse lending — — — Other lending 3,594 1,418 5,360 Total other commercial 4,098 1,448 5,538 Total commercial 5,711 4,125 7,163 Consumer 639 250 116 Total recoveries $ 9,116 $ 5,260 $ 9,205 90 The following table presents the allowance for loan and lease losses on loans and leases held for investment by loan portfolio segment as of the dates indicated: Allocation of the Allowance for Loan and Lease Losses by Portfolio Segment Real Estate Real Estate Construction Mortgage and Land Commercial Consumer Total (Dollars in thousands) December 31, 2024 Allowance for loan and lease losses $ 145,754 $ 10,940 $ 67,833 $ 14,833 $ 239,360 % of loans to total loans 57 % 13 % 28 % 2 % 100 % December 31, 2023 Allowance for loan and lease losses $ 186,827 $ 33,830 $ 45,156 $ 15,874 $ 281,687 % of loans to total loans 63 % 12 % 23 % 2 % 100 % December 31, 2022 Allowance for loan and lease losses $ 87,309 $ 52,320 $ 52,849 $ 8,254 $ 200,732 % of loans to total loans 55 % 14 % 29 % 2 % 100 % The allowance for loan and lease losses attributable to real estate mortgage loans was $145.8 million and $186.8 million at December 31, 2024 and 2023.
This change was due primarily to net charge-offs in the real estate mortgage portfolio segment increasing to $60.4 million in 2024 from $46.5 million in 2023, and to net charge-offs in the commercial portfolio segment increasing to $20.6 million in 2024 from $9.5 million in 2023. 58 The following table presents charge-offs by loan portfolio segment, class, and subclass for the years indicated: Year Ended December 31, Allowance for Credit Losses Charge-offs 2025 2024 (In thousands) Real Estate Mortgage: Commercial real estate $ 17,411 $ 22,433 SBA program 634 1,154 Hotel 1,685 — Total commercial real estate mortgage 19,730 23,587 Multi-family 3,275 — Residential mortgage 849 242 Investor-owned residential 2,148 38,064 Residential renovation 505 1,224 Total other residential real estate mortgage 3,502 39,530 Total real estate mortgage 26,507 63,117 Real Estate Construction and Land: Commercial 21,536 — Residential — — Total real estate construction and land 21,536 — Total real estate 48,043 63,117 Commercial: Lender finance — — Equipment finance — — Premium finance — — Other asset-based — 92 Total asset-based — 92 Equity fund loans — — Venture lending 6,250 16,414 Total venture capital 6,250 16,414 Secured business loans 4,386 4,490 Warehouse lending — — Other lending 12,341 5,326 Total other commercial 16,727 9,816 Total commercial 22,977 26,322 Consumer 4,485 5,504 Total charge-offs $ 75,505 $ 94,943 Charge-offs decreased by $19.4 million to $75.5 million in 2025 from $94.9 million in 2024 due mainly to decreases of $35.9 million in the investor-owned residential real estate mortgage subclass and $10.2 million in the venture lending subclass, offset partially by an increase of $21.5 million in the CRE construction and land class. 59 The following table presents recoveries by loan portfolio segment, class, and subclass for the years indicated: Year Ended December 31, Allowance for Credit Losses Recoveries 2025 2024 (In thousands) Real Estate Mortgage: Commercial real estate $ 2,349 $ 389 SBA program 312 480 Hotel — — Total commercial real estate mortgage 2,661 869 Multi-family — 500 Residential mortgage 28 8 Investor-owned residential 11 724 Residential renovation 86 665 Total other residential real estate mortgage 125 1,397 Total real estate mortgage 2,786 2,766 Real Estate Construction and Land: Commercial 1,370 — Residential — — Total real estate construction and land 1,370 — Total real estate 4,156 2,766 Commercial: Lender finance — — Equipment finance — — Premium finance 20 — Other asset-based 1,878 113 Total asset-based 1,898 113 Equity fund loans — — Venture lending 499 1,500 Total venture capital 499 1,500 Secured business loans 2,826 504 Warehouse lending — — Other lending 7,041 3,594 Total other commercial 9,867 4,098 Total commercial 12,264 5,711 Consumer 557 639 Total recoveries $ 16,977 $ 9,116 60 The following table presents the allowance for loan and lease losses on loans and leases HFI by loan portfolio segment as of the dates indicated: Allocation of the Allowance for Loan and Lease Losses by Portfolio Segment Real Estate Construction Real Estate Mortgage and Land Commercial Consumer Total (Dollars in thousands) December 31, 2025 Allowance for loan and lease losses $ 137,401 $ 8,849 $ 86,087 $ 13,275 $ 245,612 % of loans to total loans 55 % 8 % 36 % 1 % 100 % December 31, 2024 Allowance for loan and lease losses $ 145,754 $ 10,940 $ 67,833 $ 14,833 $ 239,360 % of loans to total loans 57 % 13 % 28 % 2 % 100 % The allowance for loan and lease losses attributable to real estate mortgage loans was $137.4 million and $145.8 million at December 31, 2025 and 2024.
This change was due primarily to net charge-offs in the real estate mortgage portfolio segment increasing to $60.4 million in 2024 from $46.5 million in 2023, and to net charge-offs in the commercial portfolio segment increasing to $20.6 million in 2024 from $9.5 million in 2023.
This change was due primarily to net charge-offs in the real estate mortgage portfolio segment decreasing to $23.7 million in 2025 from $60.4 million in 2024 and net charge-offs in the commercial portfolio segment decreasing to $10.7 million in 2025 from $20.6 million in 2024, offset partially by net charge-offs in the real estate construction and land segment, which increased to $20.2 million in 2025, compared to no charge-offs in 2024.
We replaced a portion of these higher-cost fundings with the addition of a $500 million long-term FHLB advance with a rate of 3.18%. These balance sheet repositioning actions that we executed resulted in net interest margin expansion and improved both our capital and liquidity.
We replaced a portion of these higher-cost fundings with the addition of a $500 million long-term FHLB advance with a rate of 3.18%.
The following table presents information regarding the allowance for credit losses on loans and leases held for investment as of the dates indicated: December 31, Allowance for Credit Losses Data 2024 2023 2022 (Dollars in thousands) Allowance for loan and lease losses $ 239,360 $ 281,687 $ 200,732 Reserve for unfunded loan commitments 29,071 29,571 91,071 Total allowance for credit losses $ 268,431 $ 311,258 $ 291,803 Allowance for credit losses to loans and leases held for investment 1.13 % 1.22 % 1.02 % Allowance for credit losses to nonaccrual loans and leases held for investment 141.6 % 497.8 % 281.2 % 86 The following table presents the changes in our allowance for credit losses on loans and leases held for investment for the years indicated: Year Ended December 31, Allowance for Credit Losses Roll Forward 2024 2023 2022 (Dollars in thousands) Balance, beginning of year $ 311,258 $ 291,803 $ 273,635 Initial allowance on acquired PCD loans — 25,623 — Provision for credit losses: Addition to allowance for loan and lease losses 43,500 113,500 5,000 (Reduction in) addition to reserve for unfunded loan commitments (500) (61,500) 18,000 Total provision for credit losses 43,000 52,000 23,000 Loans and leases charged off: Real estate mortgage (63,117) (47,370) (5,056) Real estate construction and land — — — Commercial (26,322) (13,661) (6,817) Consumer (5,504) (2,397) (2,164) Total loans and leases charged off (94,943) (63,428) (14,037) Recoveries on loans charged off: Real estate mortgage 2,766 885 1,748 Real estate construction and land — — 178 Commercial 5,711 4,125 7,163 Consumer 639 250 116 Total recoveries on loans charged off 9,116 5,260 9,205 Net charge-offs (85,827) (58,168) (4,832) Balance, end of year $ 268,431 $ 311,258 $ 291,803 Net charge-offs to average loans and leases 0.35 % 0.23 % 0.02 % 87 The following table presents net charge-offs, average loan balance, and ratio of net charge-offs to average loans by loan portfolio segment for the years indicated: Year Ended December 31, Ratio of Net Charge-offs to Average Loans 2024 2023 2022 (Dollars in thousands) Real Estate Mortgage: Net charge-offs $ 60,351 $ 46,485 $ 3,308 Average loan balance $ 14,483,010 $ 14,723,618 $ 13,811,880 Ratio of net charge-offs to average loans 0.42 % 0.32 % 0.02 % Real Estate Construction and Land: Net recoveries $ — $ — $ (178) Average loan balance $ 3,278,784 $ 3,677,785 $ 3,527,334 Ratio of net recoveries to average loans — % — % (0.01) % Commercial: Net charge-offs (recoveries) $ 20,611 $ 9,536 $ (346) Average loan balance $ 6,111,197 $ 5,717,669 $ 8,202,539 Ratio of net charge-offs to average loans 0.34 % 0.17 % — % Consumer: Net charge-offs $ 4,865 $ 2,147 $ 2,048 Average loan balance $ 427,221 $ 416,797 $ 471,032 Ratio of net charge-offs to average loans 1.14 % 0.52 % 0.43 % Net charge-offs in 2024 were $85.8 million compared to net charge-offs of $58.2 million in 2023.
It is possible that others, given the same information, may at any point in time reach different conclusions that could result in a significant impact to the Company's financial statements. 56 The following table presents information regarding the ACL on loans and leases HFI as of the dates indicated: December 31, Allowance for Credit Losses Data 2025 2024 (Dollars in thousands) Allowance for loan and lease losses $ 245,612 $ 239,360 Reserve for unfunded loan commitments 34,921 29,071 Total allowance for credit losses $ 280,533 $ 268,431 Allowance for credit losses to loans and leases HFI 1.12 % 1.13 % Allowance for credit losses to nonaccrual loans and leases HFI 176.3 % 141.6 % The following table presents the changes in our ACL on loans and leases HFI for the years indicated: Roll Forward of Allowance for Credit Losses Year Ended December 31, on Loans and Leases HFI 2025 2024 (Dollars in thousands) Balance, beginning of year $ 268,431 $ 311,258 Provision for credit losses: Addition to allowance for loan and lease losses 64,780 43,500 Addition to (reduction in) reserve for unfunded loan commitments 5,850 (500) Total provision for credit losses 70,630 43,000 Loans and leases charged off: Real estate mortgage (26,507) (63,117) Real estate construction and land (21,536) — Commercial (22,977) (26,322) Consumer (4,485) (5,504) Total loans and leases charged off (75,505) (94,943) Recoveries on loans and leases charged off: Real estate mortgage 2,786 2,766 Real estate construction and land 1,370 — Commercial 12,264 5,711 Consumer 557 639 Total recoveries on loans and leases charged off 16,977 9,116 Net charge-offs (58,528) (85,827) Balance, end of year $ 280,533 $ 268,431 Net charge-offs to average loans and leases 0.24 % 0.35 % 57 The following table presents net charge-offs, average loan balance, and ratio of net charge-offs to average loans by loan portfolio segment for the years indicated: Year Ended December 31, Ratio of Net Charge-offs to Average Loans 2025 2024 2023 (Dollars in thousands) Real Estate Mortgage: Net charge-offs $ 23,721 $ 60,351 $ 46,485 Average loan balance $ 13,611,756 $ 14,483,010 $ 14,723,618 Ratio of net charge-offs to average loans 0.17 % 0.42 % 0.32 % Real Estate Construction and Land: Net charge-offs $ 20,166 $ — $ — Average loan balance $ 2,487,575 $ 3,278,784 $ 3,677,785 Ratio of net charge-offs to average loans 0.81 % — % — % Commercial: Net charge-offs $ 10,713 $ 20,611 $ 9,536 Average loan balance $ 7,778,950 $ 6,111,197 $ 5,717,669 Ratio of net charge-offs to average loans 0.14 % 0.34 % 0.17 % Consumer: Net charge-offs $ 3,928 $ 4,865 $ 2,147 Average loan balance $ 381,201 $ 427,221 $ 416,797 Ratio of net charge-offs to average loans 1.03 % 1.14 % 0.52 % Net charge-offs in 2025 were $58.5 million compared to net charge-offs of $85.8 million in 2024.
Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment of the Notes to Consolidated Financial Statements contained in "Item 8.
Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment" in Item 8 of this Form 10-K. The ACL is sensitive to change in macroeconomic conditions and management's forward-looking assumptions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents the projected change in the Company’s economic value of equity at December 31, 2024 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change: Change in Interest Rates in Basis Points (bps) (1) Economic Value of Equity Net Interest Income Amount Percentage Amount Percentage December 31, 2024 Amount Change Change Amount Change Change (Dollars in millions) +100 bps $ 5,550 $ 35 0.6 % $ 1,090 $ 6 0.6 % 0 bps $ 5,515 $ 1,084 -100 bps $ 5,809 $ 294 5.3 % $ 1,075 $ (9) (0.8) % ____________________ (1) Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent. 105
Biggest changeGiven the uncertainty of the magnitude, timing, and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary materially from those predicted by our model. 73 The following table presents the projected change in the Company’s EVE at December 31, 2025 and NII over the next twelve months, which would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change: Change in Interest Rates in Basis Points (bps) (1) Economic Value of Equity Net Interest Income Amount Percentage Amount Percentage December 31, 2025 Amount Change Change Amount Change Change (Dollars in millions) +200 bps $ 4,739 $ (508) (9.7) % $ 1,082 $ 25 2.4 % +100 bps $ 5,060 $ (187) (3.6) % $ 1,069 $ 12 1.1 % 0 bps $ 5,247 $ 1,057 -100 bps $ 5,348 $ 101 1.9 % $ 1,052 $ (5) (0.4) % -200 bps $ 5,378 $ 132 2.5 % $ 1,049 $ (8) (0.7) % ____________________ (1) Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.
Interest rate risk is caused by the following factors: • Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities; • Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity; • Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and • Basis risk - changes in spread relationships between different yield curves, such as U.S.
IRR is caused by the following factors: • Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities; • Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity; • Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and • Basis risk - changes in spread relationships between different yield curves, such as U.S.
We have experienced and will continue to experience fluctuations in our net earnings as a result of transaction gains or losses related to revaluing certain asset and liability balances that are denominated in currencies other than the U.S. Dollar and the derivatives that hedge those exposures. As of December 31, 2024, the U.S.
We have experienced and will continue to experience fluctuations in our net earnings as a result of transaction gains or losses related to revaluing certain asset and liability balances that are denominated in currencies other than the U.S. Dollar and the derivatives that hedge those exposures. As of December 31, 2025, the U.S.
This IRR Model assesses the changes in NII and EVE that would occur in response to an instantaneous and sustained increase and decrease in market interest rates of +-100, +-200, +-300, and +400 basis points. This model is an IRR management tool, and the results are not necessarily an indication of our future net interest income.
This IRR Model assesses the changes in NII and EVE that would occur in response to an instantaneous and sustained increase and decrease in market interest rates of +-100, +-200, +-300, and +-400 basis points. This model is an IRR management tool, and the results are not necessarily an indication of our future NII.
We believe our ALCO Policy IRR Limits are consistent with prevailing practice in the regional banking industry. We use a balance sheet simulation model (the "IRR Model") to estimate changes in NII and EVE that would result from immediate and sustained changes in interest rates as of the measurement date.
We believe our IRR limits are consistent with prevailing practice in the regional banking industry. We use a balance sheet simulation model (the "IRR Model") to estimate changes in NII and EVE that would result from immediate and sustained changes in interest rates as of the measurement date.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our IRR position within the asset/liability tolerance set forth by our Board of Directors.
Treasuries, U.S. Prime Rate, and SOFR. Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income.
Treasuries, U.S. Prime Rate, and SOFR. Since our earnings are primarily dependent on our ability to generate NII, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our NII.
As discussed in more detail below, if projected changes to interest rates cause changes to our simulated net present value of equity and/or net interest income to be outside our pre-established IRR limits, we may adjust our asset and liability mix in an effort to bring our interest rate risk exposure within our established limits.
As discussed in more detail below, if projected changes to interest rates cause changes to our simulated net present value of equity and/or NII to be outside our pre-established IRR limits, we may adjust our asset and liability mix in an effort to bring our IRR exposure within our established limits.
The pre-established IRR Limits are recommended by management, determined based on analytical review and available peer data published by regulatory agencies about the IRR Limits utilized by other regional banks, and documented in the Company's ALCO Policy. The ALCO Policy is approved by MFC and the Finance Committee of the Board of Directors annually.
The pre-established IRR limits are recommended by management, determined based on analytical review and available peer data published by regulatory agencies about the IRR limits utilized by other regional banks, and documented in the Company's Asset Liability Management Policy. This policy is approved by MFC and the Finance Committee of the Board of Directors annually.
In monitoring interest rate risk, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates. 103 The MFC is comprised of select members of senior management.
In monitoring IRR, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates. The MFC is comprised of select members of Senior Management.
As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and our economic value of equity. Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income Interest rate risk results from our banking activities and is the primary market risk for us.
As part of its procedures, the ALCOs regularly review IRR by forecasting the impact of alternative interest rate environments on NII and our EVE. 72 Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income IRR results from our banking activities and is the primary market risk for us.
The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest income, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities.
A balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our NII, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities.
The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our economic value of equity analysis.
The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and IRR exposure limits versus current projections pursuant to our EVE analysis.
Management of our interest rate risk is overseen by the Finance Committee of the Boards of Directors of the Company and Bank, which delegates the day-to-day management of interest rate risk to the MFC. MFC ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program.
Management of our IRR is overseen by the Finance Committee of the Boards of Directors of the Company and Bank, which delegates the day-to-day management of IRR to the MFC. MFC ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our IRR program.
Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our net interest income, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.
Conversely, a bank balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our NII, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.
The Finance Committee of the Boards of Directors of the Company and the Bank reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable.
The Finance Committee of the Boards of Directors of the Company and the Bank reviews the results of our IRR modeling at least quarterly to ensure that we have appropriately measured our IRR, mitigated our exposures appropriately and any residual risk is acceptable.
How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk.
As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our IRR.
We recognized foreign currency translation net losses of $1.0 million for the year ended December 31, 2024 and $0.3 million for the year ended December 31, 2023, and a net gain of $2.0 million for the year ended December 31, 2022. Asset/Liability Management and Interest Rate Sensitivity Interest Rate Risk - Company Governance.
We recognized foreign currency translation net losses of $0.5 million for the year ended December 31, 2025 and $1.0 million for the year ended December 31, 2024, and $0.3 million for the year ended December 31, 2023. 71 Asset/Liability Management and Interest Rate Sensitivity Interest Rate Risk - Company Governance.
On a monthly basis, we measure our IRR position using two methods: (i) Net Interest Income simulation analysis and (ii) Economic Value of Equity modeling. The Management Finance Committee and the Finance Committee of the Company's Board of Directors review the results of these analyses at least quarterly.
On at least a quarterly basis, we measure our IRR position using two methods: (i) NII simulation analysis and (ii) EVE modeling. The Management Finance Committee and the Finance Committee of the Company's Board of Directors review the results of these analyses at least quarterly.
Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints. 104 Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios.
Effective IRR management begins with understanding the repricing characteristics of assets and liabilities and estimating an appropriate risk posture based on forecasts, objectives, market expectations, and policy constraints. IRR exposure is measured using several tools, including a simulation model that performs interest rate sensitivity under multiple scenarios.
In addition to our annual review of our asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits. Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities.
In addition to our annual review of our Asset Liability Management Policy, our Board of Directors periodically reviews the IRR limits. IRR management is an ongoing process that monitors loan and deposit flows, along with investment and funding activities.
Dollar notional amounts of loans receivable and subordinated debt payable denominated in a foreign currency were $7.2 million and $26.7 million, and the U.S. Dollar notional amounts of derivatives outstanding to hedge these foreign currency exposures were $7.7 million and $28.5 million.
Dollar notional amounts of loans receivable and subordinated debt payable denominated in foreign currencies were $76.8 million and $30.3 million, and the U.S. Dollar notional amounts of derivatives outstanding to hedge these foreign currency exposures were $75.8 million and $29.9 million.
The IRR Model has inherent limitations and the model's results are based on a given set of rate changes and assumptions at a single point in time. The IRR Model is updated monthly, and the IRR Model results are reported to MFC and the Finance Committee of the Company's Board of Directors at each monthly or quarterly meeting, as applicable.
The IRR Model has inherent limitations and the model's results are based on a given set of rate changes and assumptions at a single point in time.
In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability, and capital targets, we evaluate various strategies including: • Complementing our current loan origination platform through strategic acquisitions of whole loans; • Strategically managing multiple warehouse relationships; • Originating shorter-term consumer loans; • Managing the level of investments and duration of investment securities; • Managing our deposits to establish stable deposit relationships; and • Using FHLB advances and/or certain derivatives such as swaps as hedges to align maturities and repricing terms.
In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, IRR, profitability, and capital targets, we evaluate various strategies. These include complementing our current loan origination platform through strategic acquisitions of whole loans, strategically managing multiple warehouse relationships, and originating shorter-term consumer loans.
Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
The risk associated with changes in interest rates and our ability to adapt to these changes is known as IRR and is our most significant market risk. How We Measure Our Risk of Interest Rate Changes.
Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time.
The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time, except for non-maturity deposits. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities.
We have assumed no growth or changes in the product mix of either our total interest-sensitive assets or liabilities over the next twelve months, therefore the results reflect an interest rate shock to a static balance sheet. This model is an interest rate risk management tool, and the results are not necessarily an indication of our future net interest income.
The NII simulation estimates changes in NII over the next twelve months from immediate and sustained rate changes as of December 31, 2025. The Analysis assumes a static balance sheet with no growth or product mix changes. This model is a risk management tool and does not necessarily predict future NII.
EVE measures the period end present value of assets minus the present value of liabilities. Asset liability management uses this value to measure the changes in the economic value of the Company under various interest rate scenarios.
EVE measures the present value of assets minus liabilities and assesses changes in the economic value under various interest rate scenarios. Unlike the NII approach, EVE captures the impact of all anticipated cash flows and provides a longer-term perspective.
The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”).
The model reflects the actual maturities and re-pricing characteristics of interest rate sensitive assets and liabilities and includes instantaneous parallel interest rate shocks. Results are evaluated using two metrics: NII at Risk and EVE. NII at Risk estimates the impact of rate changes on NII using assumptions for assets, liabilities, and derivatives.
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Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and derivatives.
Added
The IRR Model is updated at least quarterly, and the IRR Model results are reported to MFC and the Finance Committee of the Company's Board of Directors at each monthly or quarterly meeting, as applicable. Our Risk When Interest Rates Change.
Removed
We used a NII simulation model to measure the estimated changes in NII that would result over the next twelve months from immediate and sustained changes in interest rates as of December 31, 2024.
Added
We also actively manage the level of investments and duration of investment securities, and focus on establish stable deposit relationships. Additionally, we utilize certain derivatives such as interest rate swaps and collars as hedges to align maturities and repricing terms.
Removed
In some ways, the economic value approach provides a broader scope than net interest income volatility approach since it captures all anticipated cash flows.
Added
At both December 31, 2025 and December 31, 2024, our IRR profile remained close to "neutral." This position reflects our balanced composition of repricing assets and beta-adjusted repricing deposits and other interest-bearing liabilities over the course of the next twelve months.
Removed
At December 31, 2024, our interest rate risk profile is “neutral”, as compared to a slightly “liability sensitive” interest rate risk profile position as of December 31, 2023.
Added
Earnings-at-Risk In addition to IRR associated with NII, certain noninterest expense items are also sensitive to changes in market interest rates. One such item is the cost of ECRs provided on certain deposit accounts, primarily those associated with our HOA business.
Removed
This shift to neutral is primarily due to the change in the mix of loans related to fixed rate loan sales, variable rate loan growth, and the AFS securities portfolio repositioning during 2024.
Added
ECRs comprise most of our customer related expense and fluctuate in response to changes in short term rates and can therefore influence the Company's overall earnings sensitivity profile. We expect that a declining interest rate environment would reduce ECR costs and thereby reduce noninterest expense, conversely, when interest rates rise, ECR costs would also rise, thereby increasing noninterest expense.
Removed
Given the uncertainty of the magnitude, timing, and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary materially from those predicted by our model.
Added
The Company's Earnings-at-Risk modeling incorporates the impact of these rate-sensitive noninterest expenses, in addition to interest income and expense, to assess the effect of interest rate movements on projected earnings over a twelve-month horizon. As of December 31, 2025, client deposits eligible for ECRs totaled approximately $3.6 billion.
Added
Taking into account the rate sensitivity of ECRs, which are primarily attributable to such deposits, the Company's overall earnings profile would be considered "liability sensitive." During the second quarter of 2025, the Company also entered into interest rate collars with a notional value of $1.0 billion to mitigate the risk of increasing interest expense if short term interest rates increase.
Added
For further information on the interest rate collars, see "Note 12. Derivatives " in Item 8 of this Form 10-K. 74

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