# BANC OF CALIFORNIA, INC. (BANC) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from BANC OF CALIFORNIA, INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1169770/000162828025009438/banc-20241231.htm
Accession: 0001628280-25-009438
Filing date: 2025-03-03
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/BANC/
All MD&A years: /company/BANC/mda/
Previous year: /company/BANC/mda/fy2023/ (FY 2023)
Next year: /company/BANC/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. In addition to historical data, this discussion and analysis contains forward looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. 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.

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. 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.

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. 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.

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 also provides full-stack payment processing solutions through its subsidiary, Deepstack Technologies, and serves the community association management industry nationwide with its technology-forward platform, SmartStreetTM.

Presentation of Results – PacWest Bancorp Merger

On November 30, 2023, PacWest Bancorp merged with and into Banc of California, Inc. (the “Merger”), with Banc of California, Inc. continuing as the surviving legal corporation and Banc of California, Inc. concurrently closed a $400 million equity capital raise. The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, PacWest Bancorp was deemed the acquirer for financial reporting purposes, even though Banc of California, Inc. was the legal acquirer. The Merger was an all-stock transaction and has been accounted for as a business combination. Banc of California, Inc.'s financial results for all periods ended prior to November 30, 2023 reflect PacWest Bancorp results only on a standalone basis. In addition, Banc of California, Inc.'s reported financial results for the year ended December 31, 2023 reflect PacWest Bancorp financial results only on a standalone basis until the closing of the Merger on November 30, 2023, and results of the combined company for the month of December 2023. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Banc of California, Inc. have been retrospectively restated to reflect the equivalent number of shares issued in the Merger as the Merger was accounted for as a reverse merger. Under the reverse merger method of accounting, the assets and liabilities of legacy Banc of California, Inc. as of November 30, 2023 were recorded at their respective fair values.

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The following table presents balance sheet data as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","(In thousands)"],["Balance Sheet Data:"],["Total assets","$","33,542,864","","","$","38,534,064","","","$","41,228,936"],["Interest-earning deposits in financial institutions","2,310,206","","","5,175,149","","","2,027,949"],["Securities available-for-sale","2,246,839","","","2,346,864","","","4,843,487"],["Securities held-to-maturity","2,306,149","","","2,287,291","","","2,269,135"],["Loans and leases held for investment","23,781,663","","","25,489,687","","","28,609,129"],["Goodwill","214,521","","","198,627","","","1,376,736"],["Core deposit and customer relationship intangibles","132,944","","","165,477","","","31,381"],["Total liabilities","30,042,915","","","35,143,299","","","37,278,405"],["Noninterest-bearing deposits","7,719,913","","","7,774,254","","","11,212,357"],["Interest-bearing deposits","19,471,996","","","22,627,515","","","22,723,977"],["Total deposits","27,191,909","","","30,401,769","","","33,936,334"],["Borrowings","1,391,814","","","2,911,322","","","1,764,030"],["Subordinated debt","941,923","","","936,599","","","867,087"],["Stockholders\u2019 equity","3,499,949","","","3,390,765","","","3,950,531"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, the Company had total assets of $33.5 billion, including $23.8 billion of loans and leases held for investment, $2.2 billion of AFS securities, $2.3 billion of HTM securities, and $2.3 billion of interest-earning deposits in financial institutions, compared to $38.5 billion of total assets, including $25.5 billion of loans and leases held for investment, $2.3 billion of AFS securities, $2.3 billion HTM securities, and $5.2 billion of interest-earning deposits in financial institutions at December 31, 2023. The $5.0 billion decrease in total assets since year-end 2023 was due primarily to a $2.9 billion decrease in interest-earning deposits in financial institutions and a $1.7 billion decrease in loans and leases held for investment. The decrease in interest-earning deposits in financial institutions was due primarily to lower cash balances which were used to pay down higher-cost funding as part of the balance sheet repositioning actions taken during 2024. The decrease in loans and leases held for investment was due mainly to the movement of $1.91 billion of Civic loans to held for sale at LOCOM and subsequent $1.95 billion sale.

At December 31, 2024, the Company had total liabilities of $30.0 billion, including total deposits of $27.2 billion and borrowings of $1.4 billion, compared to $35.1 billion of total liabilities, including $30.4 billion of total deposits and $2.9 billion borrowings at December 31, 2023. The $5.1 billion decrease in total liabilities since year-end 2023 was due mainly to decreases of $3.2 billion in total deposits and $1.5 billion in borrowings. The decreases in total deposits and borrowings were mainly driven by the pay down of higher-cost brokered deposits and the full repayment of the $2.6 billion balance of the Bank Term Funding Program borrowings as part of the balance sheet repositioning actions taken during 2024. Higher-cost borrowings were replaced with an addition of $1.1 billion in lower-rate FHLB secured term advances.

At December 31, 2024, the Company had total stockholders' equity of $3.5 billion compared to $3.4 billion at December 31, 2023. The $109.2 million increase in stockholders' equity since year-end 2023 was due mainly to net earnings of $126.9 million in 2024 and a decrease in accumulated other comprehensive loss of $77.3 million attributable to an increase in the fair value of the investment securities portfolio, offset partially by common and preferred stock dividends of $108.1 million.

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Recent Events

PacWest Bancorp Merger

On November 30, 2023, Banc of California, Inc. completed the Merger, pursuant to which PacWest Bancorp merged with and 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. Concurrent with the completion of the Merger, Banc of California, Inc. also completed its $400 million equity raise from affiliates of funds managed by Warburg Pincus LLC and certain investment vehicles sponsored, managed, or advised by Centerbridge Partners, L.P. and its affiliates. The stock issued by Banc of California, Inc. as consideration in the Merger totaled approximately $663 million.

The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, PacWest Bancorp was deemed the accounting acquirer, even though Banc of California, Inc. was the legal acquirer. We recorded the legacy Banc of California, Inc. acquired assets and assumed liabilities, both tangible and intangible, at their estimated fair values as of the acquisition date. The application of the acquisition method of accounting resulted in an initial recognition of goodwill of $198.6 million. During the year ended December 31, 2024, the Company recorded adjustments related to the Merger resulting in an increase to goodwill of $15.9 million within the one-year measurement period subsequent to the acquisition date of November 30, 2023. Final goodwill recognized relating to the Merger totaled $214.5 million. We completed the Merger to, among other things, enhance our scale and presence in California and augment and diversify our sources of revenue. For further information, see Note 2. Business Combinations.

Balance Sheet Repositioning

In connection with the Merger, we implemented our previously announced balance sheet repositioning strategy. From the announcement of the Merger on July 25, 2023, through the end of 2024, the combined company, legacy PacWest Bancorp and legacy Banc of California, Inc., sold assets totaling $6.1 billion and completed the paydown of $8.6 billion of high-cost liabilities, which improved the mix of earning assets and reduced the amount of higher-cost funding. The sold assets included $3.9 billion of securities from both the legacy Banc of California, Inc. and PacWest Bancorp portfolios, and $1.5 billion of single-family loans and $0.7 billion of multi-family loans from the legacy Banc of California, Inc. portfolios. The liabilities that were paid down included $4.7 billion of borrowings and $3.9 billion of brokered deposits from both legacy entities.

In the third quarter of 2024, we closed on the sale of $1.95 billion of Civic loans which had been moved to held for sale during the second quarter of 2024. The loan sale generated net proceeds of $1.91 billion, which provided capital and liquidity to support the repositioning of a portion of the AFS securities portfolio and pay down higher-cost brokered deposits and borrowings. We sold approximately $742 million of securities with a weighted average yield of 2.94% resulting in a pre-tax loss of $59.9 million and purchased $724 million of similar quality securities with a weighted average yield of 5.65%. The liabilities that were paid off included $1.85 billion of brokered deposits with an average cost of 5.35% at the time of retirement and the remaining $545.0 million in Bank Term Funding Program balance with a rate of 5.40%. 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. As of December 31, 2024, the balance sheet repositioning contemplated as a result of the Merger has been largely completed.

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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. Net interest margin is net interest income (annualized if related to a quarterly period) expressed as a percentage of average interest-earning assets. Tax equivalent net interest income is net interest income increased by an adjustment for tax-exempt interest on certain loans and investment securities based on a 21% federal statutory tax rate. 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. 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.

During 2024, our net interest margin expanded and increased to 2.85% for the year ended December 31, 2024 compared to 1.98% in 2023 primarily driven by lower funding costs reflecting the benefits of balance sheet repositioning actions taken during the year and improved funding mix.

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 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. 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. Achieving net loan growth is subject to many factors, including maintaining strict credit standards, competition from other lenders, and borrowers that opt to prepay loans.

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 allowance for credit losses on loans and leases, which is the sum of the allowance for loan and lease losses and the reserve for unfunded loan commitments. 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 allowance for loan and lease losses. Recoveries on loans and leases previously charged off are added to the allowance for loan and lease losses. The provision for credit losses on the loan and lease portfolio is based on our allowance methodology, which considers the impact of assumptions and is reflective of historical experience, economic forecasts viewed to be reasonable and supportable by management, the current loan and lease composition, and relative credit risks known as of the balance sheet date. 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.

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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. Changes in economic conditions, such as the rate of economic growth, the unemployment rate, rate of inflation, increases in the general level of interest rates, declines in real estate values, changes in commodity prices, and adverse conditions in borrowers’ businesses, could negatively impact our borrowers and cause us to adversely classify loans and leases. 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.

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. It also includes costs that tend to vary based on the volume of activity, such as loan and lease production and the number and complexity of foreclosed assets. Additionally, noninterest expense included acquisition, integration and reorganization costs related to the Merger and a goodwill impairment charge recorded in 2023. We measure success in controlling both fixed and variable costs through monitoring of the ratio of noninterest expense to average total assets.

The following table presents the calculation of our ratio of noninterest expense to average total assets for the years indicated:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["Noninterest Expense to Average Total Assets","2024","","2023","","2022"],["","","(Dollars in thousands)"],["Noninterest expense","$","791,740","","","$","2,458,181","","","$","773,521"],["Average total assets","$","35,333,488","","","$","40,293,380","","","$","40,481,581"],["Noninterest expense to average total assets","2.24","%","","6.10","%","","1.91","%"]]
[[/GREPCENT_TABLE]]

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements and the notes thereto, which have been prepared in accordance with U.S. 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. We believe that our estimates and assumptions are reasonable; however, actual results may ultimately differ significantly from these estimates and assumptions, which could have a material adverse effect on the carrying value of assets and liabilities at the balance sheet dates and on our results of operations for the reporting periods.

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. 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. These policies relate to the allowance for credit losses on loans and leases held for investment, the carrying value of goodwill and other intangible assets, and the realization of deferred tax assets and liabilities.

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Allowance for Credit Losses on Loans and Leases Held for Investment

The ACL is estimated on a quarterly basis and represents management's estimate of current expected credit losses over the remaining expected life of the Company's financial assets measured at amortized cost, including loans and leases and certain lending-related commitments. The ACL involves significant judgment on a number of matters including assessment of key credit risk characteristics, assignment of risk ratings, valuation of collateral, the determination of remaining expected life, incorporation of historical default and loss experience, and development and weighting of macroeconomic forecasts. For information regarding the calculation and policies of the ACL on loans and leases held for investment, see " - Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment" and Note 1(j). 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. Financial Statements and Supplementary Data."

A critical judgment in the process is estimating the Company's ACL related to macroeconomic forecasts that are incorporated into quantitative methods. As any one economic outlook is inherently uncertain, the Company utilizes a baseline and upside or downside scenarios which are applied based on a probability weighting, to better reflect management's expectation of expected credit losses given changes in the economic environment and existing market conditions. Changes in the Company's assumptions and economic forecasts could significantly affect its estimate of expected credit losses, which could potentially lead to significant changes in the estimate from one reporting period to the next. The ACL is also sensitive to changes in macroeconomic forecast assumptions. Given the dynamic relationship between macroeconomic variables within the Company's models, it is difficult to estimate the impact of a change in any one factor or input on the ACL. Management performs sensitivity analysis on the ACL quarterly both in terms of individual inputs being changed and the weighting of macroeconomic forecast scenarios being changed. This assists management with better understanding changes in the calculated ACL from period to period and helps us to conclude that the estimated ACL is reasonable and appropriate at each reporting date.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets arise from the acquisition method of accounting for business combinations. For acquisitions, we are required to record the assets acquired, including identified intangible assets such as goodwill, and the liabilities assumed at their estimated fair value. These fair values often involve estimates based on third party valuations, such as appraisals, based on discounted cash flow analyses or other valuation techniques that may include estimates of attrition, discount rates, future growth rates, multiples of earnings or other relevant factors. Goodwill and other intangible assets generated from business combinations and deemed to have indefinite lives are not subject to amortization and instead are tested for impairment annually unless a triggering event occurs thereby requiring an updated assessment. Our regular annual impairment assessment occurs in the fourth quarter. Impairment exists when the carrying value of the goodwill exceeds its fair value. The determination of whether impairment has occurred is based on an assessment of several factors including operating results, business plans, economic projections, anticipated future cash flows, and current market data. Analyzing goodwill for impairment also includes consideration of various factors that continue to evolve and for which significant uncertainty remains, including estimates of the profitability of the Company's reporting units, long-term growth rates and the estimated market cost of equity, such as the discount rate and price multiples of comparable companies. Imprecision in estimating these factors can affect the estimated fair value of the reporting units. Certain events and circumstances could have a negative effect on the estimated fair value of the reporting units, including declines in business performance, increases in credit losses, as well as deterioration in economic or market conditions and adverse regulatory or legislative changes, which could result in a material impairment charge to earnings in a future period.

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Deferred Tax Assets and Liabilities

We are subject to the income tax laws of the U.S., its states, and the municipalities in which we operate. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governing taxing authorities. Our tax returns are subject to audit by taxing authorities, which may result in the taxing authority disputing a tax position taken by the Company. Significant judgment is required in determining the tax accruals and in evaluating the tax positions, including evaluating uncertain tax positions. Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, tax credits, interpretations of tax laws, the status of examinations by the taxing authorities, and newly enacted statutory, judicial, and regulatory guidance that could impact the relative merits and risks of tax positions. These changes, when they occur, impact tax expense and can materially affect our operating results and financial condition. We review income tax expense and the carrying value of deferred tax assets and liabilities quarterly, and as new information becomes available, the balances are adjusted as appropriate. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain tax items will affect taxable income in the various tax jurisdictions.

Our deferred tax assets and liabilities arise from differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We determine whether a deferred tax asset is realizable based on facts and circumstances, including our current and projected future tax position, the historical level of our taxable income, and estimates of our future taxable income. In most cases, the realization of DTAs is based on our future profitability. 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.

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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. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP. The methodology for determining these non-GAAP measures may differ among companies and may not be comparable. 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. The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the years presented. Such disclosures should not be viewed as substitutes for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

[[GREPCENT_TABLE]]
[["","","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","\u2014","","","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","%"]]
[[/GREPCENT_TABLE]]

____________________________________________________

(1)     Effective tax rate of 24.76%, 14.12%, and 25.36% for the years ended December 31, 2024, 2023, and 2022.

(2)     Adjusted net earnings (loss) divided by average stockholders' equity.

(3)     Adjusted net earnings (loss) available to common and equivalent stockholders divided by average tangible common equity.

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[[GREPCENT_TABLE]]
[["Tangible Common Equity Ratio and","December 31,"],["Tangible Book Value Per Common Share","2024","","2023","","2022"],["","(Dollars in thousands, except per share data)"],["Stockholders\u2019 equity","$","3,499,949","","","$","3,390,765","","","$","3,950,531"],["Less: Preferred stock","498,516","","","498,516","","","498,516"],["Total common equity","3,001,433","","","2,892,249","","","3,452,015"],["Less: Goodwill and intangible assets","347,465","","","364,104","","","1,408,117"],["Tangible common equity","$","2,653,968","","","$","2,528,145","","","$","2,043,898"],["Total assets","$","33,542,864","","","$","38,534,064","","","$","41,228,936"],["Less: Goodwill and intangible assets","347,465","","","364,104","","","1,408,117"],["Tangible assets","$","33,195,399","","","$","38,169,960","","","$","39,820,819"],["Total stockholders' equity to total assets ratio","10.43","%","","8.80","%","","9.58","%"],["Tangible common equity ratio (1)","7.99","%","","6.62","%","","5.13","%"],["Book value per common share (2)(5)","$","17.78","","","$","17.12","","","$","43.71"],["Tangible book value per common share (3)(5)","$","15.72","","","$","14.96","","","$","25.88"],["Common and equivalent shares outstanding (4)(5)","168,825,656","","","168,959,063","","","78,973,869"]]
[[/GREPCENT_TABLE]]

_________________________________________________________________ 

(1)    Tangible common equity divided by tangible assets.

(2)    Total common equity divided by common and equivalent shares outstanding.

(3)    Tangible common equity divided by common and equivalent shares outstanding.

(4)    Common and equivalent shares outstanding include non-voting common stock equivalents that are participating securities.

(5)    Common and equivalent shares outstanding in 2022 have been restated by multiplying the historical amounts by the Merger exchange ratio of 0.6569.

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[[GREPCENT_TABLE]]
[["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","\u2014","","","1,376,736","","","29,000"],["Add: FDIC special assessment","4,814","","","32,746","","","\u2014"],["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","\u2014","","","170,971","","","\u2014"],["Add: Unfunded commitments fair value loss adjustments","\u2014","","","106,767","","","\u2014"],["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","%"]]
[[/GREPCENT_TABLE]]

_________________________________________________________________ 

(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.

67

[[GREPCENT_TABLE]]
[["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","","","\u2014"],["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","\u2014","","","170,971","","","\u2014"],["Add: Unfunded commitments fair value loss adjustments","\u2014","","","106,767","","","\u2014"],["Add: Goodwill impairment","\u2014","","","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","%"]]
[[/GREPCENT_TABLE]]

_________________________________________________________________ 

(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 (loss) available to common and equivalent stockholders divided by weighted average common shares outstanding.

(3) Net earnings (loss) divided by average assets.

(4) Adjusted net earnings divided by average assets

68

Results of Operations

Earnings Performance

The following table presents performance metrics for the years indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","(Dollars in thousands)"],["Earnings Summary:"],["Interest income","$","1,812,705","","","$","1,971,000","","","$","1,556,489"],["Interest expense","(886,655)","","","(1,223,872)","","","(265,727)"],["Net interest income","926,050","","","747,128","","","1,290,762"],["Provision for credit losses","(42,801)","","","(52,000)","","","(24,500)"],["Noninterest income (loss)","77,145","","","(448,285)","","","74,827"],["Operating expense","(805,923)","","","(938,812)","","","(738,818)"],["Acquisition, integration and reorganization costs","14,183","","","(142,633)","","","(5,703)"],["Goodwill impairment","\u2014","","","(1,376,736)","","","(29,000)"],["Earnings (loss) before income taxes","168,654","","","(2,211,338)","","","567,568"],["Income tax (expense) benefit","(41,766)","","","312,201","","","(143,955)"],["Net earnings (loss)","126,888","","","(1,899,137)","","","423,613"],["Preferred stock dividends","(39,788)","","","(39,788)","","","(19,339)"],["Net earnings (loss) available to common and equivalent stockholders","$","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"]]
[[/GREPCENT_TABLE]]

_____________________________

(1)    Shares include non-voting common stock equivalents that are participating securities.

(2)    See "- Non-GAAP Financial Measures."

69

2024 Compared to 2023

Net earnings available to common and equivalent stockholders for the year ended December 31, 2024 was $87.1 million, or $0.52 per diluted share, compared to net loss available to common stockholders for the year ended December 31, 2023 of $1.9 billion, or $22.71 per diluted share. The $2.0 billion increase in net earnings available to common and equivalent stockholders was due mainly to a goodwill impairment charge of $1.4 billion in the first quarter of 2023, higher net interest income of $178.9 million attributable to a higher NIM, higher noninterest income of $525.4 million, lower operating expense of $132.9 million, a lower provision for credit losses of $9.2 million, offset partially by higher income tax expense of $354.0 million. Net interest income increased due mainly to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets. Noninterest income increased 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. Operating expense decreased due primarily to a decrease of $156.8 million in acquisition, integration and reorganization costs related to the Merger, a decrease of $107.2 million in other expenses due to a $106.8 million of unfunded commitments fair value loss adjustments related to loan sales recorded in 2023 and a decrease of $64.9 million in insurance and assessments expense for both the regular FDIC assessment and the special assessment. The provision for credit losses decreased to $42.8 million for 2024 compared to $52.0 million for 2023. The provision for credit losses in 2024 included a $43.5 million provision for loan losses, offset partially by a $0.5 million reversal of the provision for credit losses related to unfunded loan commitments and a $0.2 million reversal of the provision for credit losses related to AFS securities. The lower 2024 provision for loan losses compared to the previous year-end was driven mainly by lower loan balances in the held for investment portfolio driven by the sale of approximately $1.95 billion of Civic loans during the year and payoffs/lower balances on existing loans along with net charge-off activity but partially offset by higher reserves due to risk rating migration and new loan originations/balance increases on existing loans. 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 in 2023 also included an initial provision of $22.2 million for acquired legacy Banc of California non-PCD loans. 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:

[[GREPCENT_TABLE]]
[["","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\u2011earning 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","","","","","","","$","40,481,581"],["LIABILITIES AND"],["STOCKHOLDERS\u2019 EQUITY:"],["Interest checking","$","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\u2011bearing liabilities","23,378,167","","","886,655","","","3.79","%","","29,553,668","","","1,223,872","","","4.14","%","","22,458,489","","","265,727","","","1.18","%"],["Noninterest\u2011bearing 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\u2019 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","%"]]
[[/GREPCENT_TABLE]]

_____________________

(1)    Tax equivalent.

(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 of $88.0 million and $9.7 million for 2024 and 2023 and net loan premium amortization of $17.9 million for 2022, respectively.

(3)    Includes tax-equivalent adjustments of $0.0 million, $2.3 million, $7.9 million for the years ended 2024, 2023, and 2022, respectively, related to tax-exempt income on loans. Includes tax-equivalent adjustments of $0.0 million, $0.0 million, and $5.9 million for 2024, 2023, and 2022, respectively, related to tax-exempt income on investment securities. The federal statutory rate utilized was 21%.

(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 funds is calculated as annualized total interest expense divided by average total funds.

71

Net interest income is affected by changes in both interest rates and the amounts of average interest‑earning assets and interest‑bearing liabilities. The changes in the yields earned on average interest‑earning assets and rates paid on average interest‑bearing liabilities are referred to as changes in “rate.” The changes in the amounts of average interest‑earning assets and interest‑bearing liabilities are referred to as changes in “volume.” The change in interest income/expense attributable to rate reflects the change in rate multiplied by the prior year’s volume. The change in interest income/expense attributable to volume reflects the change in volume multiplied by the prior year’s rate. The change in interest income/expense not attributable specifically to either rate or volume is allocated ratably between the two categories.

The following table presents changes in interest income (tax equivalent) and interest expense and related changes in rate and volume for the years indicated:

[[GREPCENT_TABLE]]
[["","2024 Compared to 2023","","2023 Compared to 2022"],["","Total","","Increase (Decrease)","","Total","","Increase (Decrease)"],["","Increase","","Due to","","Increase","","Due to"],["","(Decrease)","","Rate","","Volume","","(Decrease)","","Rate","","Volume"],["","(In thousands)"],["Interest Income:"],["Loans and leases (1)","$","2,833","","","$","47,993","","","$","(45,160)","","","$","178,252","","","$","215,431","","","$","(37,179)"],["Investment securities (1)","(34,202)","","","26,694","","","(60,896)","","","(40,628)","","","17,047","","","(57,675)"],["Deposits in financial institutions","(129,270)","","","3,964","","","(133,234)","","","265,489","","","156,500","","","108,989"],["Total interest income (1)","(160,639)","","","78,651","","","(239,290)","","","403,113","","","388,978","","","14,135"],["Interest Expense:"],["Interest checking deposits","20,178","","","(2,780)","","","22,958","","","154,241","","","152,848","","","1,393"],["Money market deposits","(51,851)","","","(9,644)","","","(42,207)","","","94,651","","","140,477","","","(45,826)"],["Savings deposits","35,443","","","4,199","","","31,244","","","30,790","","","30,588","","","202"],["Time deposits","(36,209)","","","16,378","","","(52,587)","","","268,292","","","144,192","","","124,100"],["Total interest-bearing deposits","(32,439)","","","8,153","","","(40,592)","","","547,974","","","468,105","","","79,869"],["Borrowings","(312,346)","","","(14,986)","","","(297,360)","","","391,099","","","62,576","","","328,523"],["Subordinated debt","7,568","","","3,157","","","4,411","","","19,072","","","18,524","","","548"],["Total interest expense","(337,217)","","","(3,676)","","","(333,541)","","","958,145","","","549,205","","","408,940"],["Net interest income (1)","$","176,578","","","$","82,327","","","$","94,251","","","$","(555,032)","","","$","(160,227)","","","$","(394,805)"]]
[[/GREPCENT_TABLE]]

_____________________

(1)    Tax equivalent.

2024 Compared to 2023

Net interest income increased by $178.9 million to $926.1 million for the year ended December 31, 2024 from $747.1 million for the year ended December 31, 2023 due to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets. The net interest margin increased by 87 basis points to 2.85% for the year ended December 31, 2024 compared to 1.98% in 2023 due to the average yield on interest-earning assets increasing by 37 basis points, while the average total cost of funds decreased by 50 basis points.

The average yield on interest-earning assets increased by 37 basis points to 5.58% for the year ended December 31, 2024 from 5.21% in 2023 due mainly to the change in the interest-earning asset mix. This was driven by the increase in the balance of average loans and leases as a percentage of average interest-earning assets to 76% for the year ended December 31, 2024 from 67% for the year ended December 31, 2023, the decrease in the balance of average investment securities as a percentage of average interest-earning assets to 14% for the year ended December 31, 2024 from 18% in 2023, and the decrease in the balance of average deposits in financial institutions as a percentage of average interest-earning assets to 10% for the year ended December 31, 2024 from 15% in 2023. The average yield on loans and leases increased by 19 basis points to 6.11% for the year ended December 31, 2024 from 5.92% in 2023 as a result of changes in portfolio mix and higher net accretion of loan discounts. The average yield on investment securities increased by 44 basis points benefiting from the balance sheet repositioning actions taken in the third quarter of 2024.

72

Average interest-earning assets decreased by $5.4 billion to $32.5 billion for the year ended December 31, 2024 due to lower average balances in loans and leases, investments securities, and deposits in financial institutions. Average loans and leases decreased by $760.7 million primarily due to the sale in July 2024 of $1.95 billion of Civic loans, offset partially by the acquisition of legacy Banc of California loans completed in the fourth quarter of 2023. Average investment securities decreased by $2.1 billion mostly due to securities sales completed in the fourth quarter of 2023. Average deposits in financial institutions decreased by $2.5 billion due to lower cash balances which were used to pay down higher-cost funding including the full payoff of $2.6 billion of the BTFP and $1.85 billion in brokered deposits as part of the balance sheet repositioning actions taken during 2024.

The average total cost of funds decreased by 50 basis points to 2.84% for the year ended December 31, 2024 from 3.34% for the year ended December 31, 2023 due mainly to changes in the total funding mix. This was driven by the increase in the balance of lower-cost average total deposits as a percentage of average total funds to 91% for the year ended December 31, 2024 from 78% in 2023, and the decrease in the balance of higher-cost average borrowings as a percentage of average total funds to 6% for the year ended December 31, 2024 from 19% in 2023. The average cost of interest-bearing liabilities decreased by 35 basis points to 3.79% for the year ended December 31, 2024 from 4.14% in 2023. The average total cost of deposits decreased by 9 basis points to 2.52% for the year ended December 31, 2024 compared to 2.61% for the year ended December 31, 2023. Average noninterest-bearing deposits increased by $757.6 million for the year ended December 31, 2024 compared to 2023 and average total deposits decreased by $251.8 million. 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:

[[GREPCENT_TABLE]]
[["","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","","","$","5,000"],["(Reduction in) addition to reserve for"],["unfunded loan commitments","(500)","","","61,000","","","(61,500)","","","(79,500)","","","18,000"],["Total loan-related provision","43,000","","","(9,000)","","","52,000","","","29,000","","","23,000"],["Reduction in allowance for available-for-sale securities","(199)","","","(199)","","","\u2014","","","\u2014","","","\u2014"],["Addition to allowance for held-to-maturity securities","\u2014","","","\u2014","","","\u2014","","","(1,500)","","","1,500"],["Total provision for credit losses","$","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","%"]]
[[/GREPCENT_TABLE]]

______________________

(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.

Provisions for credit losses are charged to earnings for both on and off‑balance sheet credit exposures. 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 provision for credit losses in 2024 included a $43.5 million provision for loan losses, offset partially by a $0.5 million reversal of the provision for credit losses related to unfunded loan commitments and a $0.2 million reversal of the provision for credit losses related to AFS securities. 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 in 2023 also included an initial provision of $22.2 million for acquired legacy Banc of California non-PCD loans.

74

Certain circumstances may lead to increased provisions for credit losses on loans and leases in the future. 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. Changes in economic conditions and forecasts include the rate of economic growth, the unemployment rate, the rate of inflation, changes in the general level of interest rates, changes in real estate values, and adverse conditions in borrowers’ businesses.

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. Loans and Leases of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”

For information regarding the allowance for credit losses on HTM debt securities, see Note 1(g). Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Held-to-Maturity Debt Securities, and Note 4. Investment Securities of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”

Noninterest Income (Loss)

The following table summarizes noninterest income (loss) by category for the years indicated:

[[GREPCENT_TABLE]]
[["","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","","","$","50,586"],["Other commissions and fees","33,258","","","(4,828)","","","38,086","","","(5,549)","","","43,635"],["Service charges on deposit accounts","18,583","","","2,115","","","16,468","","","2,477","","","13,991"],["Gain (loss) on sale of loans and leases","645","","","161,991","","","(161,346)","","","(161,864)","","","518"],["Loss on sale of securities","(60,400)","","","382,013","","","(442,413)","","","(392,092)","","","(50,321)"],["Dividends and gains (losses) on equity investments","7,982","","","(7,749)","","","15,731","","","19,120","","","(3,389)"],["Warrant income (loss)","408","","","1,126","","","(718)","","","(3,208)","","","2,490"],["LOCOM HFS adjustment","215","","","8,676","","","(8,461)","","","(8,461)","","","\u2014"],["Other income","25,345","","","(5,856)","","","31,201","","","13,884","","","17,317"],["Total noninterest income (loss)","$","77,145","","","$","525,430","","","$","(448,285)","","","$","(523,112)","","","$","74,827"]]
[[/GREPCENT_TABLE]]

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. The Company sold $753.7 million in securities for a net loss of $60.4 million in the year ended December 31, 2024, compared to $2.7 billion in securities for a net loss of $442.4 million in the year ended December 31, 2023. 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:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","","","Increase","","","","Increase"],["Noninterest Expense","2024","","(Decrease)","","2023","","(Decrease)","","2022"],["","(In thousands)"],["Compensation","$","341,396","","","$","9,043","","","$","332,353","","","$","(74,486)","","","$","406,839"],["Customer related expense","129,471","","","5,367","","","124,104","","","68,831","","","55,273"],["Insurance and assessments","70,779","","","(64,887)","","","135,666","","","110,180","","","25,486"],["Occupancy","67,993","","","6,325","","","61,668","","","704","","","60,964"],["Information technology and data processing","60,418","","","8,613","","","51,805","","","6,009","","","45,796"],["Intangible asset amortization","33,143","","","21,724","","","11,419","","","(2,157)","","","13,576"],["Leased equipment depreciation","29,271","","","(4,972)","","","34,243","","","(1,415)","","","35,658"],["Other professional services","20,857","","","(3,766)","","","24,623","","","(5,655)","","","30,278"],["Loan expense","17,306","","","(3,152)","","","20,458","","","(4,114)","","","24,572"],["Other","35,289","","","(107,184)","","","142,473","","","102,097","","","40,376"],["Total operating expense","805,923","","","(132,889)","","","938,812","","","199,994","","","738,818"],["Acquisition, integration and reorganization costs","(14,183)","","","(156,816)","","","142,633","","","136,930","","","5,703"],["Goodwill impairment","\u2014","","","(1,376,736)","","","1,376,736","","","1,347,736","","","29,000"],["Total noninterest expense","$","791,740","","","$","(1,666,441)","","","$","2,458,181","","","$","1,684,660","","","$","773,521"]]
[[/GREPCENT_TABLE]]

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 decrease was due mainly to (i) goodwill impairment of $1.4 billion recorded in 2023, (ii) lower acquisition, integration and reorganization costs of $156.8 million related to the Merger, (iii) lower other expenses of $107.2 million due to a $106.8 million of unfunded commitments fair value loss adjustments related to loan sales recorded in 2023, and (iv) lower regulatory assessments of $64.9 million for both the regular FDIC assessment and the special assessment offset partially by higher intangible asset amortization of $21.7 million.

Income Taxes

The effective tax rates were 24.8% and 14.1% for the years ended December 31, 2024 and 2023. The lower effective tax rate in 2023 was due mainly to the effect of the non-deductible goodwill impairment. Excluding non-deductible goodwill impairment, the effective income tax rate was 26.2% for the year ended December 31, 2023. The Company's 2024 blended statutory tax rate for federal and state was 28.5%. For further information on income taxes, see Note 16. Income Taxes of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”

76

Balance Sheet Analysis

Securities Available-for-Sale

The following table presents the composition and durations of our AFS securities as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","Fair","","% of","","Duration","","Fair","","% of","","Duration","","Fair","","% of","","Duration"],["Security Type","Value","","Total","","(in years)","","Value","","Total","","(in years)","","Value","","Total","","(in years)"],["","(Dollars in thousands)"],["Agency residential MBS","$","861,840","","","38","%","","7.6","","","$","1,187,609","","","51","%","","8.2","","","$","2,242,042","","","46","%","","7.6"],["Agency residential CMOs","446,631","","","20","%","","3.2","","","284,334","","","12","%","","4.4","","","457,063","","","9","%","","4.4"],["Private label residential CMOs","316,910","","","14","%","","3.9","","","158,412","","","7","%","","7.7","","","166,724","","","4","%","","5.6"],["Collateralized loan obligations","279,416","","","12","%","","0.3","","","108,416","","","5","%","","0.1","","","102,261","","","2","%","","\u2014"],["Corporate debt securities","257,712","","","12","%","","1.4","","","267,232","","","11","%","","1.9","","","311,905","","","7","%","","2.7"],["Agency commercial MBS","51,564","","","2","%","","1.9","","","253,306","","","11","%","","3.4","","","487,606","","","10","%","","4.7"],["Asset-backed securities","15,600","","","1","%","","0.1","","","19,952","","","1","%","","\u2014","","","22,413","","","\u2014","%","","\u2014"],["Private label commercial MBS","12,372","","","1","%","","3.6","","","20,813","","","1","%","","2.1","","","26,827","","","1","%","","2.3"],["SBA securities","4,200","","","\u2014","%","","3.2","","","13,739","","","\u2014","%","","3.2","","","17,250","","","\u2014","%","","2.5"],["Municipal securities","594","","","\u2014","%","","3.7","","","28,083","","","1","%","","4.5","","","339,326","","","7","%","","5.6"],["U.S. Treasury securities","\u2014","","","\u2014","%","","\u2014","","","4,968","","","\u2014","%","","0.1","","","670,070","","","14","%","","4.9"],["Total securities"],["available-for-sale","$","2,246,839","","","100","%","","4.4","","","$","2,346,864","","","100","%","","5.9","","","$","4,843,487","","","100","%","","5.9"]]
[[/GREPCENT_TABLE]]

Effective June 1, 2022, the Company transferred $2.3 billion in fair value of municipal securities, agency commercial MBS, private label commercial MBS, U.S. Treasury securities, and corporate debt securities from AFS to HTM. The unrealized losses which became part of the securities' amortized cost basis, along with the related unrealized losses included in accumulated other comprehensive income, are being amortized over the remaining life of the transferred securities as effective yield adjustments using the interest method. As a result, there is no impact on the consolidated statements of earnings (loss).

77

The following table presents a summary of contractual rates and contractual maturities of our AFS securities as of the date indicated:

[[GREPCENT_TABLE]]
[["","","","","","Due After","","Due After"],["","Due","","One Year","","Five Years"],["","Within","","Through","","Through","","Due After"],["","One Year","","Five Years","","Ten Years","","Ten Years","","Total"],["","Fair","","","","Fair","","","","Fair","","","","Fair","","","","Fair"],["December 31, 2024","Value","","Rate(1)","","Value","","Rate(1)","","Value","","Rate(1)","","Value","","Rate(1)","","Value","","Rate(1)"],["","(Dollars in thousands)"],["Agency residential MBS","$","\u2014","","","\u2014","%","","$","\u2014","","","\u2014","%","","$","\u2014","","","\u2014","%","","$","861,840","","","3.47","%","","$","861,840","","","3.47","%"],["Agency residential CMOs","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","14,899","","","5.67","%","","431,732","","","4.76","%","","446,631","","","4.79","%"],["Private label residential CMOs","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","316,910","","","4.54","%","","316,910","","","4.54","%"],["Collateralized loan obligations","\u2014","","","\u2014","%","","4,539","","","7.11","%","","167,973","","","6.40","%","","106,904","","","6.45","%","","279,416","","","6.43","%"],["Corporate debt securities","\u2014","","","\u2014","%","","4,842","","","7.23","%","","252,870","","","5.46","%","","\u2014","","","\u2014","%","","257,712","","","5.49","%"],["Agency commercial MBS","\u2014","","","\u2014","%","","30,312","","","4.18","%","","9,979","","","5.25","%","","11,273","","","4.07","%","","51,564","","","4.36","%"],["Asset-backed securities","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","15,600","","","5.80","%","","15,600","","","5.80","%"],["Private label commercial MBS","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","976","","","4.19","%","","11,396","","","2.98","%","","12,372","","","3.07","%"],["SBA securities","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","4,200","","","3.16","%","","\u2014","","","\u2014","%","","4,200","","","3.16","%"],["Municipal securities","\u2014","","","\u2014","%","","594","","","5.09","%","","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","594","","","5.09","%"],["Total securities"],["available-for-sale","$","\u2014","","","\u2014","%","","$","40,287","","","4.89","%","","$","450,897","","","5.79","%","","$","1,755,655","","","4.19","%","","$","2,246,839","","","4.52","%"]]
[[/GREPCENT_TABLE]]

_______________________________________

(1)    Rates presented are weighted average rates. Rates on tax-exempt securities are contractual rates and are not presented on a tax-equivalent basis.

Securities Held-to-Maturity

The following table presents the composition and durations of our HTM securities as of the dates indicated:

[[GREPCENT_TABLE]]
[["","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","$","1,251,364","","","55","%","","8.0","","","1,247,310","","","55","%","","8.1"],["Agency commercial MBS","440,476","","","19","%","","5.9","","","433,827","","","19","%","","6.8"],["Private label commercial MBS","355,342","","","15","%","","5.6","","","350,493","","","15","%","","6.3"],["U.S. Treasury securities","189,985","","","8","%","","5.9","","","187,033","","","8","%","","6.7"],["Corporate debt securities","70,482","","","3","%","","4.0","","","70,128","","","3","%","","4.4"],["Total securities held-to-maturity","$","2,307,649","","","100","%","","7.0","","","$","2,288,791","","","100","%","","7.4"]]
[[/GREPCENT_TABLE]]

78

The following table shows the geographic composition of the majority of our HTM municipal securities portfolio as of the date indicated:

[[GREPCENT_TABLE]]
[["","December 31, 2024"],["","Amortized","","% of"],["Municipal Securities by State","Cost","","Total"],["","(Dollars in thousands)"],["California","$","313,480","","","25","%"],["Texas","277,396","","","22","%"],["Washington","188,615","","","15","%"],["Oregon","79,992","","","6","%"],["Maryland","64,354","","","5","%"],["Georgia","55,324","","","4","%"],["Colorado","48,654","","","4","%"],["Minnesota","34,780","","","3","%"],["Tennessee","31,048","","","3","%"],["Florida","21,956","","","2","%"],["Total of ten largest states","1,115,599","","","89","%"],["All other states","135,765","","","11","%"],["Total municipal securities held-to-maturity","$","1,251,364","","","100","%"]]
[[/GREPCENT_TABLE]]

The following table presents a summary of contractual rates and contractual maturities of our HTM securities as of the date indicated:

[[GREPCENT_TABLE]]
[["","","","","","Due After","","Due After"],["","Due","","One Year","","Five Years"],["","Within","","Through","","Through","","Due After"],["","One Year","","Five Years","","Ten Years","","Ten Years","","Total"],["","Amortized","","","","Amortized","","","","Amortized","","","","Amortized","","","","Amortized"],["December 31, 2024","Cost","","Rate(1)","","Cost","","Rate(1)","","Cost","","Rate(1)","","Cost","","Rate(1)","","Cost","","Rate(1)"],["","(Dollars in thousands)"],["Municipal securities","$","\u2014","","","\u2014","%","","$","20,281","","","4.11","%","","$","449,652","","","2.03","%","","$","781,431","","","3.65","%","","$","1,251,364","","","3.08","%"],["Agency commercial MBS","\u2014","","","\u2014","%","","31,997","","","1.36","%","","408,479","","","2.06","%","","\u2014","","","\u2014","%","","440,476","","","2.01","%"],["Private label commercial MBS","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","36,846","","","2.96","%","","318,496","","","2.74","%","","355,342","","","2.76","%"],["U.S. Treasury securities","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","189,985","","","1.24","%","","\u2014","","","\u2014","%","","189,985","","","1.24","%"],["Corporate debt securities","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","10,151","","","6.30","%","","60,331","","","4.86","%","","70,482","","","5.07","%"],["Total securities"],["held-to-maturity","$","\u2014","","","\u2014","%","","$","52,278","","","4.11","%","","$","1,095,113","","","1.93","%","","$","1,160,258","","","3.46","%","","$","2,307,649","","","2.91","%"]]
[[/GREPCENT_TABLE]]

_______________________________________

(1)    Rates presented are weighted average rates. Rates 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:

[[GREPCENT_TABLE]]
[["","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","","","\u2014","%","","71,602","","","\u2014","%","","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","%","","\u2014","","","\u2014","%"],["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"]]
[[/GREPCENT_TABLE]]

________________________________

(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.

The changes during 2024 in the portfolio classes comprising these portfolio segments reflected the following:

•Commercial real estate mortgage loans decreased by 9% to $4.6 billion or 19% of total loans and leases held for investment at December 31, 2024 from $5.0 billion or 20% at December 31, 2023. The lower balance was attributable primarily to payoffs and paydowns outpacing production.

•Multi-family real estate mortgage loans remained mostly flat and increased by 0.3% to $6.0 billion or 26% of total loans and leases held for investment at December 31, 2024 from $6.0 billion or 23% at December 31, 2023.

•Other residential real estate mortgage loans decreased by 45% to $2.8 billion or 12% of total loans and leases held for investment at December 31, 2024 from $5.1 billion or 20% at December 31, 2023. The decrease was attributable primarily to investor-owned residential loans (Civic) decreasing by $2.1 billion or 95% and residential renovation loans (Civic) decreasing by $49.9 million or 70% due to loan sales and continued runoff during 2024.

•Commercial real estate construction and land loans increased by 5% to $799.1 million or 3% of total loans and leases held for investment at December 31, 2024 from $759.6 million or 3% at December 31, 2023 due primarily to production outpacing payoffs and paydowns.

•Residential real estate construction and land loans remained mostly flat and decreased by 1% to $2.4 billion or 10% of total loans and leases held for investment at December 31, 2024 from $2.4 billion or 9% at December 31, 2023.

•Asset-based loans and leases decreased by 5% to $2.1 billion or 9% of total loans and leases held for investment at December 31, 2024 from $2.2 billion or 9% at December 31, 2023. The lower balance was attributable primarily to the balance of premium finance loans decreasing by 25% to $546.4 million and equipment finance loans decreasing by 16% to $621.9 million, partially offset by lender finance loans increasing 49% to $727.9 million. This decrease in premium finance loans was due mainly to sales in connection with the Company's strategic plan to divest this non-core loan portfolio. In the third quarter of 2024, we moved Lender Finance back in our core portfolio and repurchased at par $319 million of the loans PacWest sold prior to the Merger and for which the bank had retained servicing.

•Venture capital loans increased by 6% to $1.5 billion or 6% of total loans and leases held for investment at December 31, 2024 from $1.4 billion or 6% at December 31, 2023. The increased balance was attributable primarily to higher equity fund loans, which increased by $83.9 million to $746.7 million at December 31, 2024 from $662.7 million at December 31, 2023 attributable to more venture capital activity during 2024 than 2023.

•Other commercial loans increased by 48% to $3.2 billion or 13% of total loans and leases held for investment at December 31, 2024 from $2.1 billion or 8% at December 31, 2023. The increased balance was attributable primarily to higher warehouse lending loans, which increased by $918.1 million to $1.5 billion at December 31, 2024 from $554.9 million at December 31, 2023, and higher secured business loans, which increased by 23% to $756.6 million at December 31, 2024 from $614.1 million at December 31, 2023.

81

The following table presents a roll forward of loans and leases held for investment for the years indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Roll Forward of Loans and Leases Held for Investment","2024","","2023","","2022"],["","(In thousands)"],["Balance, beginning of year","$","25,489,687","","","$","28,609,129","","","$","22,941,548"],["Additions:"],["Production","2,160,644","","","951,465","","","8,435,396"],["Disbursements","5,110,783","","","5,485,138","","","7,058,553"],["Total production and disbursements","7,271,427","","","6,436,603","","","15,493,949"],["Reductions:"],["Payoffs","(3,864,489)","","","(4,490,009)","","","(4,909,797)"],["Paydowns","(3,043,419)","","","(2,998,257)","","","(4,755,033)"],["Total payoffs and paydowns","(6,907,908)","","","(7,488,266)","","","(9,664,830)"],["Sales","(27,516)","","","(3,299,857)","","","(63,263)"],["Transfers to foreclosed assets","(19,978)","","","(20,915)","","","(7,985)"],["Charge-offs","(94,943)","","","(63,428)","","","(14,037)"],["Transfers to loans held for sale","(1,930,285)","","","(3,162,615)","","","(76,253)"],["Total reductions","(8,980,630)","","","(14,035,081)","","","(9,826,368)"],["Transfers from loans held for sale","1,179","","","513,914","","","\u2014"],["Loans acquired through merger and acquisition","\u2014","","","3,965,122","","","\u2014"],["Net (decrease) increase","(1,708,024)","","","(3,119,442)","","","5,667,581"],["Balance, end of year","$","23,781,663","","","$","25,489,687","","","$","28,609,129"]]
[[/GREPCENT_TABLE]]

Loan Concentrations

Total real estate loans held for investment totaled $16.6 billion, or 70%, of our loan portfolio at December 31, 2024 and consisted of $13.4 billion of real estate mortgage loans and $3.2 billion of real estate construction and land loans, compared to $19.3 billion, or 75%, of our total loan portfolio at December 31, 2023 and consisted of $16.1 billion of real estate mortgage loans and $3.2 billion of real estate construction and loan loans.

The Company mitigates our loan concentration risks by considering the prospects for the borrower's industry and competition, evaluating our past experiences with the borrower and with the collateral type, and adhering to written loan underwriting policies and procedures, including, among other factors, loan structures and covenants. Each loan request and renewal is individually reviewed, with larger loans subject to approval by our credit committee. We also actively manage our real estate loan portfolio and seek to mitigate credit risks via regular monitoring of economic conditions in the regions or areas in which our borrowers are operating, evaluating borrower performance, and ensuring covenant compliance. 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. Business - Lending Activities - Real Estate Mortgage Loans and Real Estate Construction and Land Loans."

82

The following table presents the geographic composition of our real estate loans held for investment by the top ten states and all other states combined (in the order presented for the current year-end) as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023"],["","","","% of","","","","% of"],["Real Estate Loans by State","Balance","","Total","","Balance","","Total"],["","(Dollars in thousands)"],["California","$","11,722,323","","","71","%","","$","12,262,311","","","64","%"],["Colorado","1,224,295","","","7","%","","1,167,659","","","6","%"],["Texas","542,312","","","3","%","","878,538","","","4","%"],["Arizona","540,726","","","3","%","","719,299","","","4","%"],["Florida","437,987","","","3","%","","837,467","","","4","%"],["Washington","393,584","","","2","%","","533,931","","","3","%"],["Nevada","388,627","","","2","%","","411,020","","","2","%"],["Oregon","307,088","","","2","%","","348,166","","","2","%"],["Utah","147,205","","","1","%","","168,080","","","1","%"],["Illinois","106,463","","","1","%","","92,758","","","\u2014","%"],["Total of 10 largest states","15,810,610","","","95","%","","17,419,229","","","90","%"],["All other states","789,342","","","5","%","","1,852,025","","","10","%"],["Total real estate loans held for investment","$","16,599,952","","","100","%","","$","19,271,254","","","100","%"]]
[[/GREPCENT_TABLE]]

At December 31, 2024 and 2023, 71% and 64% of our real estate loans were collateralized by property located in California because our full-service branches and our community banking activities are primarily located in California.

The following table presents the composition of our real estate mortgage loans held for investment by collateral types as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023"],["","","","% of","","","","% of"],["Real Estate Mortgage Loans by Collateral Type","Balance","","Total","","Balance","","Total"],["","(Dollars in thousands)"],["Commercial:"],["Industrial","$","1,008,877","","","8","%","","$","1,129,112","","","7","%"],["Office","992,392","","","7","%","","1,203,494","","","7","%"],["Retail","812,552","","","6","%","","868,097","","","5","%"],["Hotel","424,345","","","3","%","","539,447","","","3","%"],["Healthcare","338,836","","","3","%","","345,560","","","2","%"],["Mixed use","289,054","","","2","%","","245,428","","","2","%"],["All other","834,303","","","6","%","","660,329","","","5","%"],["Total commercial","$","4,700,359","","","35","%","","$","4,991,467","","","31","%"],["Residential:"],["Multi-family","$","6,066,374","","","45","%","","$","6,113,144","","","38","%"],["Single-family residential","2,481,904","","","18","%","","4,689,631","","","29","%"],["All other","179,022","","","2","%","","317,743","","","2","%"],["Total residential","$","8,727,300","","","65","%","","$","11,120,518","","","69","%"],["Total real estate mortgage loans","$","13,427,659","","","100","%","","$","16,111,985","","","100","%"]]
[[/GREPCENT_TABLE]]

83

The real estate mortgage loan portfolio is diversified among various property types. At December 31, 2024, the three largest property types securing real estate mortgage loans were multi-family properties, single-family residential properties, and industrial properties, which comprised 45%, 18%, and 8% of our real estate mortgage loans, respectively. At December 31, 2023, the three largest property types securing real estate mortgage loans were multi-family properties, single-family residential properties, and office properties, which comprised 38%, 29% and 7% of our real estate mortgage loans, respectively.

Real Estate Mortgage Loans Secured by Multi-family Properties

The largest concentration of our real estate mortgage loans is in multi-family properties. The following table presents the geographic composition of our multi-family by the top five states and all other states combined (in the order presented for the current year-end) as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023"],["Real Estate Mortgage Loans Secured","","","% of","","","","% of"],["by Multi-family Properties by State","Balance","","Total","","Balance","","Total"],["","(Dollars in thousands)"],["California","$","4,482,142","","","74","%","","$","4,538,762","","","74","%"],["Florida","198,710","","","3","%","","195,568","","","3","%"],["Nevada","159,207","","","3","%","","153,873","","","3","%"],["Colorado","153,802","","","3","%","","119,758","","","2","%"],["Arizona","143,270","","","2","%","","144,444","","","2","%"],["Total of 5 largest states","5,137,131","","","85","%","","5,152,405","","","84","%"],["All other states","929,243","","","15","%","","960,739","","","16","%"],["Total real estate mortgage loans secured by multi-family properties","$","6,066,374","","","100","%","","$","6,113,144","","","100","%"]]
[[/GREPCENT_TABLE]]

At both December 31, 2024 and 2023, 74% of our real estate mortgage loans secured by multi-family properties were located in California where we principally operated.

Loan and Lease Maturities and Interest Rate Characteristics

The following table presents contractual maturity information for loans and leases held for investment as of the date indicated:

[[GREPCENT_TABLE]]
[["","","","Due After"],["","Due","","One Year","","Due After"],["","Within","","Through","","Five to","","Due After"],["December 31, 2024","One Year","","Five Years","","15 Years","","15 Years","","Total"],["","(In thousands)"],["Real estate mortgage","$","1,219,442","","","$","3,240,909","","","$","2,928,788","","","$","6,038,520","","","$","13,427,659"],["Real estate construction and land","2,428,171","","","729,337","","","14,785","","","\u2014","","","3,172,293"],["Commercial","3,389,233","","","2,562,890","","","605,368","","","221,338","","","6,778,829"],["Consumer","4,907","","","45,552","","","216,536","","","135,887","","","402,882"],["Total loans and leases held for"],["investment","$","7,041,753","","","$","6,578,688","","","$","3,765,477","","","$","6,395,745","","","$","23,781,663"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, we had $7.0 billion of loans and leases held for investment due to mature over the next twelve months. For any loan modifications made to these borrowers, an assessment of whether the borrower is experiencing financial difficulty is made on the date of the modification. Loans are assessed to determine whether the modification constitutes a new loan or a continuation of the existing loan. Depending on the terms of the modification and nature of the borrower, this may result in a downgrade or placing the loan on nonaccrual status, which in turn would impact the loan’s classification within the ALLL. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ALLL because of the measurement methodologies used to estimate the allowance, a change to the ALLL is generally not recorded upon modification.

84

The following table presents the interest rate profile of loans and leases held for investment due after one year as of the date indicated:

[[GREPCENT_TABLE]]
[["","Due After One Year"],["","Fixed","","Variable"],["December 31, 2024","Rate","","Rate","","Total"],["","(In thousands)"],["Real estate mortgage","$","5,921,268","","","$","6,286,949","","","$","12,208,217"],["Real estate construction and land","241,958","","","502,164","","","744,122"],["Commercial","1,466,388","","","1,923,208","","","3,389,596"],["Consumer","390,958","","","7,017","","","397,975"],["Total","$","8,020,572","","","$","8,719,338","","","$","16,739,910"]]
[[/GREPCENT_TABLE]]

For information regarding our variable-rate loans subject to interest rate floors, see "Item 7A. 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. The allowance for loan and lease losses is reported as a reduction of the amortized cost basis of loans and leases, while the reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the consolidated balance sheets. The amortized cost basis of loans and leases does not include accrued interest receivable, which is included in "Other assets" on the consolidated balance sheets. The "Provision for credit losses" on the consolidated statements of earnings (loss) is a combination of the provision for loan and lease losses, the provision for unfunded loan commitments, the provision for AFS debt securities, and the provision for HTM debt securities.

Under the CECL methodology, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates.

For further information regarding the calculation of the ACL on loans and leases held for investment using the CECL methodology, see Note 1(j). 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. Financial Statements and Supplementary Data."

In calculating our ACL, we continued to consider higher inflation rates, the Federal Reserve's monetary policy, the risk of a recession, technical or otherwise, extreme weather events, and the impact of various geopolitical risks on the economy in our process for estimating expected credit losses given the changes in economic forecasts and assumptions along with the uncertainty related to the severity and duration of the economic consequences resulting from such events. 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.

We use a multiple scenario approach primarily to better address the inherent forecast uncertainty in calculating quantitative reserves. In the fourth quarter of 2024, we used the Moody’s December 2024 Baseline, and S2 Downside 75th Percentile scenarios for the calculation of our quantitative component. The weightings of the scenarios were based on management’s current expectations, acknowledging the risk of a mild recession over our reasonable and supportable forecast period, and inherent uncertainty in the economy. To consider the higher interest rate environment, the prepayment rates applied in the quantitative calculation are continuing to use a lower prepayment rate based on the slowing trends of loan payoffs and paydowns.

85

As part of our allowance for credit losses methodology, we consistently incorporate the use of qualitative factors in determining the overall ACL to capture risks that may not be appropriately reflected in our quantitative models. Such qualitative factors may include, but are not limited to: economic conditions not captured in the quantitative reserve; collateral dependency related to certain loan portfolios including loans secured by office properties that are directly impacted by flexible/hybrid work environment; concentrations of credit within the loan portfolio including the commercial real estate portfolio; the quality of the company’s credit review system; the volume and severity of adversely classified financial assets; the Company’s lending policies and procedures; and the effect of other external factors such as the regulatory and legal environments. The primary qualitative adjustments are related to loans secured by office properties, concentration of credit associated with geographic concentration, and volume of adversely classified financial assets.

The primary driver behind lower quantitative reserves compared to the previous year-end were lower loan balances in the held for investment portfolio driven by the sale of approximately $1.95 billion of Civic loans during the year, and payoffs/lower balances on existing loans along with net charge-off activity. The decrease in quantitative reserves was partially offset by higher reserves due to risk rating migration and new loan originations/balance increases on existing loans. The loan-related provision for credit losses was $43.0 million in 2024.

The use of different economic forecasts, whether based on different scenarios, the use of multiple or single scenarios, or updated economic forecasts and scenarios, can change the outcome of the calculations. In addition to the economic forecasts, there are numerous components and assumptions that are integral to the overall estimation of ACL. As part of our allowance for credit losses process, sensitivity analyses are performed to assess the impact of how changing certain assumptions could impact the estimated ACL. At times, these analyses can provide information to further assist management in making decisions on certain assumptions. We calculated alternative values for our December 31, 2024 ACL using various alternative forecast scenario weightings and the calculated amounts for the quantitative component differed from the management’s probability-weighted multiple scenario forecast ranging from lower reserves by 5.53% to higher reserves by 1.67%. However, changing one assumption and not reassessing other assumptions used in the quantitative or qualitative process could yield results that are not reasonable or appropriate, hence all assumptions and information must be considered. From a sensitivity analysis perspective, changing key assumptions such as the macro-economic variable inputs from the economic forecasts, the reasonable and supportable forecast period, prepayment rates, loan segmentation, historical loss factors and/or periods, among others, would all change the outcome of the quantitative components of the ACL. Those results would then need to be assessed from a qualitative perspective potentially requiring further adjustments to the qualitative component to arrive at a reasonable and appropriate allowance for credit losses.

The determination of the allowance for credit losses is complex and highly dependent on numerous models, assumptions, and judgments made by management. Management's current expectation for credit losses on loans and leases held for investment as quantified in the allowance for credit losses considers the impact of assumptions and is reflective of historical credit experience, economic forecasts viewed to be reasonable and supportable, current loan and lease composition, and relative credit risks known as of the balance sheet date.

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. 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.

The following table presents information regarding the allowance for credit losses on loans and leases held for investment as of the dates indicated:

[[GREPCENT_TABLE]]
[["","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","%"]]
[[/GREPCENT_TABLE]]

86

The following table presents the changes in our allowance for credit losses on loans and leases held for investment for the years indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Allowance for Credit Losses Roll Forward","2024","","2023","","2022"],["","(Dollars in thousands)"],["Balance, beginning of year","$","311,258","","","$","291,803","","","$","273,635"],["Initial allowance on acquired PCD loans","\u2014","","","25,623","","","\u2014"],["Provision for credit losses:"],["Addition to allowance for loan and lease losses","43,500","","","113,500","","","5,000"],["(Reduction in) addition to reserve for unfunded loan commitments","(500)","","","(61,500)","","","18,000"],["Total provision for credit losses","43,000","","","52,000","","","23,000"],["Loans and leases charged off:"],["Real estate mortgage","(63,117)","","","(47,370)","","","(5,056)"],["Real estate construction and land","\u2014","","","\u2014","","","\u2014"],["Commercial","(26,322)","","","(13,661)","","","(6,817)"],["Consumer","(5,504)","","","(2,397)","","","(2,164)"],["Total loans and leases charged off","(94,943)","","","(63,428)","","","(14,037)"],["Recoveries on loans charged off:"],["Real estate mortgage","2,766","","","885","","","1,748"],["Real estate construction and land","\u2014","","","\u2014","","","178"],["Commercial","5,711","","","4,125","","","7,163"],["Consumer","639","","","250","","","116"],["Total recoveries on loans charged off","9,116","","","5,260","","","9,205"],["Net charge-offs","(85,827)","","","(58,168)","","","(4,832)"],["Balance, end of year","$","268,431","","","$","311,258","","","$","291,803"],["Net charge-offs to average loans and leases","0.35","%","","0.23","%","","0.02","%"]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","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","$","\u2014","","","$","\u2014","","","$","(178)"],["Average loan balance","$","3,278,784","","","$","3,677,785","","","$","3,527,334"],["Ratio of net recoveries to average loans","\u2014","%","","\u2014","%","","(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","%","","\u2014","%"],["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","%"]]
[[/GREPCENT_TABLE]]

Net charge-offs in 2024 were $85.8 million compared to net charge-offs of $58.2 million in 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.

Net charge-offs in 2023 were $58.2 million compared to net charge-offs of $4.8 million in 2022. 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:

[[GREPCENT_TABLE]]
[["","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","","","$","2,258"],["SBA program","1,154","","","339","","","417"],["Hotel","\u2014","","","\u2014","","","55"],["Total commercial real estate mortgage","23,587","","","14,295","","","2,730"],["Multi-family","\u2014","","","\u2014","","","\u2014"],["Residential mortgage","242","","","\u2014","","","81"],["Investor-owned residential","38,064","","","21,844","","","814"],["Residential renovation","1,224","","","11,231","","","1,431"],["Total other residential real estate mortgage","39,530","","","33,075","","","2,326"],["Total real estate mortgage","63,117","","","47,370","","","5,056"],["Real Estate Construction and Land:"],["Commercial","\u2014","","","\u2014","","","\u2014"],["Residential","\u2014","","","\u2014","","","\u2014"],["Total real estate construction and land","\u2014","","","\u2014","","","\u2014"],["Total real estate","63,117","","","47,370","","","5,056"],["Commercial:"],["Lender finance","\u2014","","","150","","","\u2014"],["Equipment finance","\u2014","","","\u2014","","","\u2014"],["Premium finance","\u2014","","","60","","","\u2014"],["Other asset-based","92","","","\u2014","","","750"],["Total asset-based","92","","","210","","","750"],["Equity fund loans","\u2014","","","\u2014","","","\u2014"],["Venture lending","16,414","","","5,013","","","940"],["Total venture capital","16,414","","","5,013","","","940"],["Secured business loans","4,490","","","658","","","479"],["Warehouse lending","\u2014","","","\u2014","","","\u2014"],["Other lending","5,326","","","7,780","","","4,648"],["Total other commercial","9,816","","","8,438","","","5,127"],["Total commercial","26,322","","","13,661","","","6,817"],["Consumer","5,504","","","2,397","","","2,164"],["Total charge-offs","$","94,943","","","$","63,428","","","$","14,037"]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["Allowance for Credit Losses Recoveries","2024","","2023","","2022"],["","(In thousands)"],["Real Estate Mortgage:"],["Commercial real estate","$","389","","","$","\u2014","","","$","1,204"],["SBA program","480","","","281","","","281"],["Hotel","\u2014","","","\u2014","","","\u2014"],["Total commercial real estate mortgage","869","","","281","","","1,485"],["Multi-family","500","","","\u2014","","","4"],["Residential mortgage","8","","","20","","","234"],["Investor-owned residential","724","","","175","","","25"],["Residential renovation","665","","","409","","","\u2014"],["Total other residential real estate mortgage","1,397","","","604","","","259"],["Total real estate mortgage","2,766","","","885","","","1,748"],["Real Estate Construction and Land:"],["Commercial","\u2014","","","\u2014","","","178"],["Residential","\u2014","","","\u2014","","","\u2014"],["Total real estate construction and land","\u2014","","","\u2014","","","178"],["Total real estate","2,766","","","885","","","1,926"],["Commercial:"],["Lender finance","\u2014","","","324","","","\u2014"],["Equipment finance","\u2014","","","\u2014","","","163"],["Premium finance","\u2014","","","1","","","\u2014"],["Other asset-based","113","","","279","","","539"],["Total asset-based","113","","","604","","","702"],["Equity fund loans","\u2014","","","\u2014","","","\u2014"],["Venture lending","1,500","","","2,073","","","923"],["Total venture capital","1,500","","","2,073","","","923"],["Secured business loans","504","","","30","","","178"],["Warehouse lending","\u2014","","","\u2014","","","\u2014"],["Other lending","3,594","","","1,418","","","5,360"],["Total other commercial","4,098","","","1,448","","","5,538"],["Total commercial","5,711","","","4,125","","","7,163"],["Consumer","639","","","250","","","116"],["Total recoveries","$","9,116","","","$","5,260","","","$","9,205"]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","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","%"]]
[[/GREPCENT_TABLE]]

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. As ratios to real estate mortgage loans at those dates, these percentages were 1.09% and 1.16%. The ratio decrease was primarily due to a an improvement in the economic forecast, a shorter remaining life of the portfolio, and changes in the portfolio mix to loans with lower expected credit losses driven primarily by the sale of Civic loans.

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 ratio decrease was primarily due to an improvement in the economic forecast and a shorter remaining life of the portfolio.

The allowance for loan and lease losses attributable to commercial loans and leases was $67.8 million and $45.2 million at December 31, 2024 and 2023. As ratios to commercial loans and leases at those dates, these percentages were 1.00% and 0.78%. The ratio increase was due to a higher allowance for loan losses as a result of risk rating migration activity resulting in higher classified loans and net charge-off activity that increased the loss given default rate for certain loan portfolio classes in this loan segment.

91

Deposits

    The following table presents a summary of our average deposit amounts and average rates paid during the years indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","","","Weighted","","","","Weighted","","","","Weighted"],["","Average","","Average","","Average","","Average","","Average","","Average"],["Deposit Composition","Balance","","Rate","","Balance","","Rate","","Balance","","Rate"],["","(Dollars in thousands)"],["Interest checking","$","7,714,920","","","3.12","%","","$","6,992,888","","","3.16","%","","$","6,851,831","","","0.97","%"],["Money market","5,164,566","","","2.68","%","","6,724,296","","","2.83","%","","10,601,028","","","0.90","%"],["Savings","2,005,513","","","3.31","%","","1,051,117","","","2.95","%","","639,720","","","0.03","%"],["Time","5,714,821","","","4.73","%","","6,840,920","","","4.48","%","","2,540,426","","","1.51","%"],["Total interest-bearing deposits","20,599,820","","","3.48","%","","21,609,221","","","3.46","%","","20,633,005","","","0.97","%"],["Noninterest-bearing checking","7,829,976","","","\u2014","","","7,072,334","","","\u2014","","","13,601,766","","","\u2014"],["Total deposits","$","28,429,796","","","2.52","%","","$","28,681,555","","","2.61","%","","$","34,234,771","","","0.59","%"]]
[[/GREPCENT_TABLE]]

The following table presents the composition of our deposit portfolio by account type as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","","","% of","","","","% of","","","","% of"],["Deposit Composition","Balance","","Total","","Balance","","Total","","Balance","","Total"],["","(Dollars in thousands)"],["Noninterest-bearing checking","$","7,719,913","","","28","%","","$","7,774,254","","","26","%","","$","11,212,357","","","33","%"],["Interest-bearing:"],["Checking","7,610,705","","","28","%","","7,808,764","","","26","%","","7,938,911","","","23","%"],["Money market","5,361,635","","","20","%","","6,187,889","","","20","%","","9,469,586","","","28","%"],["Savings","1,933,232","","","7","%","","1,997,989","","","6","%","","577,637","","","2","%"],["Time:"],["Non-brokered","2,488,217","","","9","%","","3,139,270","","","10","%","","2,434,414","","","7","%"],["Brokered","2,078,207","","","8","%","","3,493,603","","","12","%","","2,303,429","","","7","%"],["Total time deposits","4,566,424","","","17","%","","6,632,873","","","22","%","","4,737,843","","","14","%"],["Total interest-bearing","19,471,996","","","72","%","","22,627,515","","","74","%","","22,723,977","","","67","%"],["Total deposits","$","27,191,909","","","100","%","","$","30,401,769","","","100","%","","$","33,936,334","","","100","%"]]
[[/GREPCENT_TABLE]]

The following table presents time deposits based on the $250,000 FDIC insured limit as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","","","% of","","","","% of","","","","% of"],["","","","Total","","","","Total","","","","Total"],["Time Deposits","Balance","","Deposits","","Balance","","Deposits","","Balance","","Deposits"],["","(Dollars in thousands)"],["Time deposits $250,000 and under","$","3,468,376","","","13","%","","$","5,526,396","","","18","%","","$","3,198,434","","","9","%"],["Time deposits over $250,000","1,098,048","","","4","%","","1,106,477","","","4","%","","1,539,409","","","5","%"],["Total time deposits","$","4,566,424","","","17","%","","$","6,632,873","","","22","%","","$","4,737,843","","","14","%"]]
[[/GREPCENT_TABLE]]

92

During 2024, total deposits decreased by $3.2 billion, or 10.6%, to $27.2 billion at December 31, 2024, due primarily to decreases of $1.4 billion in brokered time deposits, $0.8 billion in money market accounts, and $0.7 billion in non-brokered time deposits. 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.

As of December 31, 2024, FDIC-insured deposits represented approximately 72% of total deposits, down from 76% as of December 31, 2023. The Bank’s spot deposit rates were 2.13% at December 31, 2024, down from 2.69% at December 31, 2023.

The following table summarizes the maturities of time deposits as of the date indicated:

[[GREPCENT_TABLE]]
[["","Time Deposits"],["","$250,000","","Over"],["December 31, 2024","and Under","","$250,000","","Total"],["","(In thousands)"],["Maturities:"],["Due in three months or less","$","1,112,045","","","$","413,388","","","$","1,525,433"],["Due in over three months through six months","824,174","","","188,062","","","1,012,236"],["Due in over six months through 12 months","1,083,041","","","428,242","","","1,511,283"],["Total due within 12 months","3,019,260","","","1,029,692","","","4,048,952"],["Due in over 12 months through 24 months","444,699","","","63,888","","","508,587"],["Due in over 24 months","4,417","","","4,468","","","8,885"],["Total due over 12 months","449,116","","","68,356","","","517,472"],["Total","$","3,468,376","","","$","1,098,048","","","$","4,566,424"]]
[[/GREPCENT_TABLE]]

The following table summarizes the maturities of estimated uninsured time deposits as of the date indicated:

[[GREPCENT_TABLE]]
[["","","","","","Uninsured"],["","","","","","Time"],["December 31, 2024","","","","","Deposits"],["","","","","","(In thousands)"],["Maturities:"],["Due in three months or less","","","","","$","116,993"],["Due in over three months through six months","","","","","102,307"],["Due in over six months through 12 months","","","","","279,164"],["Total due within 12 months","","","","","498,464"],["Total due over 12 months","","","","","41,200"],["Total","","","","","$","539,664"]]
[[/GREPCENT_TABLE]]

Client Investment Funds

In addition to deposit products, we also offer select clients non-depository cash investment options through BAM, our SEC registered investment adviser subsidiary, and third-party money market sweep products. BAM provides customized investment advisory and asset management solutions. At December 31, 2024, total off-balance sheet client investment funds were $1.5 billion of which $0.7 billion was managed by BAM. At December 31, 2023, total off-balance sheet client investment funds were $0.6 billion, of which $0.2 billion was managed by BAM.

93

Borrowings and Subordinated Debt

The Bank has various available lines of credit. These include the ability to borrow funds from time to time on a long‑term, short‑term, or overnight basis from the FHLB, the FRBSF, or other financial institutions. The maximum amount that the Bank could borrow under its secured credit line with the FHLB at December 31, 2024 was $6.9 billion, of which $5.2 billion was available on that date. The maximum amount that the Bank could borrow under its secured credit line with the FRBSF at December 31, 2024 was $6.3 billion, all of which was available on that date. 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 FRBSF secured credit line was collateralized by liens on $5.9 billion of qualifying loans and $1.5 billion of securities. In addition to its secured lines of credit, the Bank also maintains unsecured lines of credit for the borrowing of overnight funds, subject to availability of $265.0 million in the aggregate with several correspondent banks. As of December 31, 2024, there was no balance outstanding related to these unsecured lines of credit. The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks. The availability of funds changes daily. As of December 31, 2024, the Bank had no of overnight borrowings through the AFX. Additionally, the holding company has a $50.0 million unsecured revolving line of credit with a correspondent bank. As of December 31, 2024, there was no balance outstanding.

On September 29, 2022, legacy Pacific Western Bank completed a credit-linked notes transaction. The notes were issued and sold at par and had an aggregate principal amount of $132.8 million with net proceeds of approximately $128.7 million and are due June 27, 2052. The notes are linked to the credit risk of a reference pool of previously purchased single-family residential mortgage loans, which had an approximate balance of $2.66 billion at the transaction date. The notes were issued in five classes with a blended rate on the notes of SOFR plus 11%. The transaction resulted in a lower risk-weighting on the reference pool of loans for regulatory capital purposes. The credit-linked notes are reported at fair value. See Note 11. Borrowings and Subordinated Debt and Note 14. Fair Value Option for more information regarding the credit-linked notes.

The following table presents information on our borrowings as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","","","Weighted","","","","Weighted","","","","Weighted"],["","","","Average","","","","Average","","","","Average"],["Borrowings","Balance","","Rate","","Balance","","Rate","","Balance","","Rate"],["","(Dollars in thousands)"],["FHLB secured term advances","$","1,100,000","","","3.93","%","","$","\u2014","","","\u2014","%","","$","1,270,000","","","4.62","%"],["Senior Notes","174,000","","","5.25","%","","174,000","","","5.25","%","","\u2014","","","\u2014","%"],["Credit-linked notes","118,838","","","15.29","%","","123,116","","","16.02","%","","132,030","","","14.56","%"],["Bank Term Funding Program","\u2014","","","\u2014","%","","2,618,300","","","4.37","%","","\u2014","","","\u2014","%"],["AFX short-term borrowings","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","250,000","","","4.68","%"],["FHLB unsecured overnight advance","\u2014","","","\u2014","%","","\u2014","","","\u2014","%","","112,000","","","4.37","%"],["Total borrowings","1,392,838","","","5.06","%","","2,915,416","","","4.92","%","","1,764,030","","","5.36","%"],["Acquisition discount on senior notes","(1,024)","","","","","(4,094)","","","","","\u2014"],["Total borrowings, net","$","1,391,814","","","","","$","2,911,322","","","","","$","1,764,030"],["Averages for the year:"],["Total borrowings, net","$","1,838,819","","","5.68","%","","$","7,068,826","","","5.90","%","","$","961,601","","","2.67","%"]]
[[/GREPCENT_TABLE]]

94

The following table presents summary information on our subordinated debt as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","","","Weighted","","","","Weighted","","","","Weighted"],["","","","Average","","","","Average","","","","Average"],["Subordinated Debt","Balance","","Rate","","Balance","","Rate","","Balance","","Rate"],["","(Dollars in thousands)"],["Subordinated debt:"],["With no unamortized acquisition discount"],["or unamortized issuance costs","$","152,582","","","7.16","%","","$","152,582","","","8.08","%","","$","135,055","","","7.01","%"],["With unamortized acquisition discount"],["or unamortized issuance costs","863,420","","","5.18","%","","865,186","","","5.56","%","","804,325","","","4.76","%"],["Total subordinated debt","1,016,002","","","5.48","%","","1,017,768","","","5.93","%","","939,380","","","5.08","%"],["Unamortized issuance costs","(3,815)","","","","","(4,349)","","","","","(4,866)"],["Unamortized acquisition discount","(70,264)","","","","","(76,820)","","","","","(67,427)"],["Total subordinated debt, net","$","941,923","","","","","$","936,599","","","","","$","867,087"],["Averages for the year:"],["Total subordinated debt, net","$","939,528","","","7.05","%","","$","875,621","","","6.70","%","","$","863,883","","","4.59","%"]]
[[/GREPCENT_TABLE]]

The subordinated debt is variable rate and based on 3-month Term SOFR or Prime plus a margin, except for: (a) one which is based on 3-month EURIBOR plus a margin, (b) $400 million of subordinated notes issued on April 30, 2021 that is fixed rate at 3.25% until May 1, 2026 when it changes to floating rate and resets quarterly equal to 3-month Term SOFR plus a spread of 252 basis points, and (c) $75 million of subordinated notes from legacy Banc of California, Inc. Inc. that is fixed rate at 4.375% until October 30, 2025 when it changes to a floating rate equal to 3-month Term SOFR plus a spread of 419.5 basis points. The margins on the 3-month term SOFR and Prime debentures range from 1.55% to 3.40%, while the margin on the 3-month EURIBOR debenture is 2.05%. On July 1, 2023, interest rates transitioned from LIBOR to Term SOFR or Prime plus the relevant spread amount as the applicable benchmark upon the cessation of LIBOR on June 30, 2023. The subordinated debt is all long-term, with maturities ranging from October 2030 to July 2037.

95

Credit Quality

Nonperforming Assets, Classified Loans and Leases, and Special Mention Loans and Leases

The following table presents information on our nonperforming assets, classified loans and leases, and special mention loans and leases as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2024","","2023","","2022"],["","(Dollars in thousands)"],["Nonaccrual loans and leases held for investment","$","189,605","","","$","62,527","","","$","103,778"],["Accruing loans contractually past due 90 days or more","\u2014","","","11,750","","","\u2014"],["Total nonperforming loans and leases","189,605","","","74,277","","","103,778"],["Foreclosed assets, net","9,734","","","7,394","","","5,022"],["Total nonperforming assets","$","199,339","","","$","81,671","","","$","108,800"],["Classified loans and leases held for investment","$","563,502","","","$","228,417","","","$","118,271"],["Special mention loans and leases held for investment","$","1,097,315","","","$","513,312","","","$","566,259"],["Nonaccrual loans and leases held for investment to"],["loans and leases held for investment","0.80","%","","0.29","%","","0.36","%"],["Nonperforming assets to loans and leases held for investment"],["and foreclosed assets, net","0.84","%","","0.32","%","","0.38","%"],["Allowance for credit losses to nonaccrual loans and leases"],["held for investment","141.57","%","","497.80","%","","281.18","%"],["Classified loans and leases held for investment to"],["loans and leases held for investment","2.37","%","","0.90","%","","0.41","%"],["Special mention loans and leases held for investment to"],["loans and leases held for investment","4.61","%","","2.01","%","","1.98","%"]]
[[/GREPCENT_TABLE]]

Nonaccrual Loans and Leases Held for Investment

During 2024, nonperforming loans and leases held for investment increased by $115.3 million to $189.6 million at December 31, 2024 due mainly to $245.5 million in additions, offset partially by charge-offs of $36.7 million, transfers to loans held for sale of $19.6 million, transfers to accrual status of $15.3 million, and principal payments and other reductions of $58.5 million. As of December 31, 2024, the Company's three largest loan relationships on nonaccrual status had an aggregate carrying value of $62.3 million and represented 33% of total nonaccrual loans and leases.

96

The following table presents our nonaccrual loans and leases held for investment and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31, 2024","","December 31, 2023","","Increase (Decrease)"],["","","","Accruing","","","","Accruing","","","","Accruing"],["","","","and 30-89","","","","and 30-89","","","","and 30-89"],["","","","Days Past","","","","Days Past","","","","Days Past"],["","Nonaccrual","","Due","","Nonaccrual","","Due","","Nonaccrual","","Due"],["","(In thousands)"],["Real estate mortgage:"],["Commercial","$","97,655","","","$","\u2014","","","$","15,669","","","$","10,577","","","$","81,986","","","$","(10,577)"],["Multi-family","22,763","","","9,442","","","1,020","","","2,302","","","21,743","","","7,140"],["Other residential","46,788","","","34,417","","","31,041","","","83,747","","","15,747","","","(49,330)"],["Total real estate mortgage","167,206","","","43,859","","","47,730","","","96,626","","","119,476","","","(52,767)"],["Real estate construction and land:"],["Commercial","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Residential","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total real estate construction and land","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Commercial:"],["Asset-based","1,940","","","1,795","","","2,689","","","608","","","(749)","","","1,187"],["Venture capital","6,291","","","\u2014","","","325","","","\u2014","","","5,966","","","\u2014"],["Other commercial","13,544","","","2,331","","","10,972","","","1,187","","","2,572","","","1,144"],["Total commercial","21,775","","","4,126","","","13,986","","","1,795","","","7,789","","","2,331"],["Consumer","624","","","2,804","","","811","","","3,461","","","(187)","","","(657)"],["Total held for investment","$","189,605","","","$","50,789","","","$","62,527","","","$","101,882","","","$","127,078","","","$","(51,093)"]]
[[/GREPCENT_TABLE]]

During 2024, loans accruing and 30-89 days past due decreased by $51.1 million to $50.8 million at December 31, 2024 due primarily to decreases in past due loans of $49.3 million in the other residential real estate mortgage loan portfolio class and $10.6 million in the commercial real estate mortgage loan portfolio class, offset partially by an increase of $7.1 million in the multi-family real estate mortgage loan portfolio class.

Foreclosed Assets

The following table presents foreclosed assets (primarily OREO) by property type as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31,"],["Property Type","2024","","2023","","2022"],["","(In thousands)"],["Single-family residential","$","9,714","","","$","7,394","","","$","5,022"],["Total OREO, net","9,714","","","7,394","","","5,022"],["Other foreclosed assets","20","","","\u2014","","","\u2014"],["Total foreclosed assets","$","9,734","","","$","7,394","","","$","5,022"]]
[[/GREPCENT_TABLE]]

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:

[[GREPCENT_TABLE]]
[["","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"]]
[[/GREPCENT_TABLE]]

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.

The following table presents the classified and special mention credit risk rating categories for loans and leases held for investment by loan portfolio segment and class and the related net changes as of the dates indicated:

[[GREPCENT_TABLE]]
[["","December 31, 2024","December 31, 2023","","Increase (Decrease)"],["","","","Special","","","","Special","","","","Special"],["","Classified","","Mention","","Classified","","Mention","","Classified","","Mention"],["","(In thousands)"],["Real estate mortgage:"],["Commercial","$","301,278","","","$","348,014","","","$","75,739","","","$","219,687","","","$","225,539","","","$","128,327"],["Multi-family","113,164","","","202,690","","","74,954","","","108,356","","","38,210","","","94,334"],["Other residential","47,993","","","14,351","","","38,155","","","54,197","","","9,838","","","(39,846)"],["Total real estate mortgage","462,435","","","565,055","","","188,848","","","382,240","","","273,587","","","182,815"],["Real estate construction and land:"],["Commercial","\u2014","","","148,024","","","\u2014","","","\u2014","","","\u2014","","","148,024"],["Residential","\u2014","","","203,220","","","\u2014","","","2,757","","","\u2014","","","200,463"],["Total real estate construction and land","\u2014","","","351,244","","","\u2014","","","2,757","","","\u2014","","","348,487"],["Commercial:"],["Asset-based","5,003","","","9,547","","","4,561","","","12,506","","","442","","","(2,959)"],["Venture capital","75,406","","","125,320","","","7,805","","","98,633","","","67,601","","","26,687"],["Other commercial","19,949","","","38,741","","","26,044","","","9,984","","","(6,095)","","","28,757"],["Total commercial","100,358","","","173,608","","","38,410","","","121,123","","","61,948","","","52,485"],["Consumer","709","","","7,408","","","1,159","","","7,192","","","(450)","","","216"],["Total","$","563,502","","","$","1,097,315","","","$","228,417","","","$","513,312","","","$","335,085","","","$","584,003"]]
[[/GREPCENT_TABLE]]

During 2024, classified loans and leases increased by $335.1 million to $563.5 million at December 31, 2024 due mainly to increases of $225.5 million in commercial real estate mortgage classified loans, $67.6 million in venture capital commercial classified loans, $38.2 million in multi-family real estate mortgage classified loans, and $9.8 million in other residential real estate mortgage classified loans, offset partially by a decrease of $6.1 million in other commercial classified loans.

During 2024, special mention loans and leases increased by $584.0 million to $1.1 billion at December 31, 2024 due primarily to increases of $200.5 million in residential real estate construction and land special mention loans, $148.0 million in commercial real estate construction and land special mention loans, $128.3 million in commercial real estate mortgage special mention loans, and $94.3 million in multi-family real estate mortgage special mention loans, offset partially by a decrease of $39.8 million in other residential real estate mortgage special mention loans.

98

Regulatory Matters

Capital

Bank regulatory agencies measure capital adequacy through standardized risk-based capital guidelines that compare different levels of capital (as defined by such guidelines) to risk-weighted assets and off-balance sheet obligations. 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%.

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. 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.

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 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%. At December 31, 2024, the Company and Bank were in compliance with the capital conservation buffer requirements.

The Company and Bank elected the CECL 5-year regulatory transition guidance for calculating regulatory capital ratios and the December 31, 2024 ratios include this election. This regulatory guidance allows an entity to add back to capital 100% of the capital impact from the day one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through December 31, 2021. This cumulative amount was phased out of regulatory capital evenly over the three years from 2022 to 2024. The add-back as of December 31, 2024 ranged from 0 basis points to 3 basis points for the capital ratios below.

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:

[[GREPCENT_TABLE]]
[["","","","","","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%"]]
[[/GREPCENT_TABLE]]

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. As of December 31, 2024, the carrying value of subordinated debt totaled $941.9 million. At December 31, 2024, $131.0 million of the trust preferred securities were included in the Company's Tier I capital and $796.0 million were included in Tier II capital. For a more detailed discussion of our subordinated debt, see "Item 1. Business - Supervision and Regulation - Capital Requirements."

Dividends on Common Stock and Interest on Subordinated Debt

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. 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.

Dividends on Preferred Stock

The Company's ability to pay dividends on the Series F preferred stock depends on the ability of the Bank to pay dividends to the holding company. The ability of the Company and the Bank to pay dividends in the future is subject to bank regulatory requirements, including capital regulations and policies established by the FRB and the DFPI, as applicable. 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.

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. Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet the needs and accommodate fluctuations in asset and liability levels due to changes in the Company’s business operations or unanticipated events.

We have a Management Finance Committee ("MFC") that is comprised of members of senior management and is responsible for managing commitments to meet the needs of customers while achieving our financial objectives. MFC meets regularly to review funding capacities, current and forecasted loan demand, and investment opportunities.

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 also maintain available borrowing capacity under secured credit lines with the FHLB and the FRBSF, which we refer to as our secondary liquidity.

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. 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 FRBSF Discount Window secured credit line was collateralized by liens on $5.9 billion of qualifying loans and $1.5 billion of pledged securities.

In addition to its secured lines of credit with the FHLB and FRBSF, the Bank also maintains unsecured lines of credit for the purpose of borrowing overnight funds, subject to availability, of $265.0 million in the aggregate with several correspondent banks. As of December 31, 2024, there was no balance outstanding related to these unsecured lines of credit. The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks. The availability of funds changes daily. As of December 31, 2024, there was no outstanding balance through the AFX. Additionally, the holding company has a $50.0 million unsecured revolving line of credit with a correspondent bank. 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:

[[GREPCENT_TABLE]]
[["","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)","","","\u2014"],["Total primary liquidity","$","4,367,501","","","$","5,475,539"],["Ratio of primary liquidity to total assets","13.0","%","","14.2","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["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)","","","\u2014"],["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"]]
[[/GREPCENT_TABLE]]

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. We also include certain unencumbered HTM securities in our internal liquidity stress test buffer which are not included in our primary liquidity. During the year ended December 31, 2024, the Company's secondary liquidity decreased by $453.3 million to $11.5 billion at December 31, 2024 due mainly to a decrease in available secured borrowing capacity with the FRBSF of $620.7 million, offset partially by an increase in available secured borrowing capacity with the FHLB of $167.4 million.

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. Additionally, we fund our operations with cash flows from our loan and securities portfolios.

Our deposit balances may decrease if customers withdraw funds from the Bank. In order to address the Bank’s liquidity risk from fluctuating deposit balances, the Bank maintains adequate levels of available liquidity on and off the balance sheet.

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. At December 31, 2023, brokered deposits totaled $4.6 billion, consisting of $1.1 billion of non-maturity brokered accounts and $3.5 billion of brokered time deposits.

Our liquidity policy includes guidelines, which are governed by the Company's Risk Appetite Statement, which include the following metrics: Primary Liquidity Ratio (unencumbered liquid assets and the market value of unpledged AFS securities, net of a haircut, divided by total assets), Brokered Deposits to Total Funding Ratio (wholesale deposits to total deposits plus borrowings), Total Borrowings to Total Funding Ratio (borrowings to total deposits and borrowings), Short-Term Non-Core Funding Ratio (retail time deposits of $250,000 or more that mature within one year, brokered deposits that mature within one year, listing service deposits that mature within one year, official checks, escrow and title company deposits, 1031 exchange accommodator deposits, Federal Funds purchased, and borrowings that mature within one year as a percentage of total assets) and the Wholesale Funding Ratio (wholesale deposits and borrowings to total assets). 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. The primary sources of liquidity for the holding company include dividends from the Bank, intercompany tax payments from the Bank, and Banc of California, Inc.'s ability to raise capital, issue subordinated and senior debt, and secure outside borrowings. Banc of California, Inc.'s ability to obtain funds for the payment of dividends to our stockholders, the repurchase of shares of common stock and preferred stock, and other cash requirements is largely dependent upon the Bank’s earnings. The Bank is subject to restrictions under certain federal and state laws and regulations that limit its ability to transfer funds to the holding company through intercompany loans, advances, or cash dividends. Banc of California, Inc.'s ability to pay dividends is also subject to the restrictions set forth by the FRB, and by certain covenants contained in our subordinated debt. 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.

Dividends on the Series F preferred stock are not cumulative or mandatory. If the Company's Board of Directors does not declare a dividend on the Series F preferred stock in respect of a dividend period, then no dividend shall be deemed to be payable for such dividend period or be cumulative, and the Company will have no obligation to pay any dividend for that dividend period, whether or not the Board of Directors declares a dividend on the Series F preferred stock or any other class or series of its capital stock for any future dividend period. However, if dividends on the Series F preferred stock have not been declared or paid for the equivalent of six dividend payments, whether or not for consecutive dividend periods, holders of the outstanding shares of Series F preferred stock, together with holders of any other series of the Company's preferred stock ranking equal with the Series F preferred stock with similar voting rights, will generally be entitled to vote for the election of two additional directors. 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.

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.

Material Cash Requirements

Our material contractual obligations 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, 2024, time deposits totaled $4.6 billion, of which $4.0 billion was due within one year. 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 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. Leases of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate liquidity levels. We expect to maintain adequate liquidity levels through profitability, loan and lease payoffs, securities repayments and maturities, and continued deposit gathering activities. 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, 2024, our loan commitments and standby letters of credit were $4.9 billion and $201.8 million, respectively. 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. 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. Financial Statements and Supplementary Data.”

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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.