Banc of California, Inc.: Form 10-K for the period ended Dec 31, 2025

General

Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and a member of the FRB. 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. As a bank holding company, the holding company is subject to ongoing and comprehensive supervision, regulation, examination, and enforcement by the FRB. As a California state-chartered bank that is a member of the FRB, the Bank is subject to ongoing and comprehensive supervision, regulation, examination, and enforcement by the DFPI and the FRB.

On November 30, 2023, Banc of California, Inc. completed its transformational merger with PacWest Bancorp (“PacWest”), pursuant to which PacWest merged into Banc of California, Inc., (the "Merger") with Banc of California, Inc. continuing as the surviving legal corporation, and, as of December 1, 2023, Banc of California, N.A. merged into Pacific Western Bank, with Pacific Western Bank continuing under the Banc of California name and brand as the Bank. See "Note 2. Business Combinations" in Item 8 of this Form 10-K for additional information.

Our principal executive office is currently located at 11611 San Vicente Boulevard, Suite 500, Los Angeles, California, and our telephone number is (855) 361-2262. Our common stock trades on the New York Stock Exchange under the trading symbol “BANC” and our Series F preferred depositary shares trade on the New York Stock Exchange under the trading symbol “BANC/PF.”

The Bank is one of the nation’s premier relationship-based business banks, providing banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and deposit products and services through 79 full-service branches located throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide. The Bank also provides full-service payment processing solutions to its clients and serves the Community Association Management industry nationwide with its technology-forward platform, SmartStreet™. The Bank is committed to its local communities by supporting organizations that provide financial literacy and job training, small business support, affordable housing, and more.

The Bank is organized into four business groups – Commercial & Community Banking ("CCB"), Specialty Banking, Deposit and Transaction Services, and Payment Solutions. CCB provides in-market relationship lending and deposit gathering through regional offices and 79 branch locations throughout California, in Denver, Colorado and in Durham, North Carolina. Specialty Banking is focused on serving clients in niche verticals by industry, including HOA, venture banking, lender finance, SBA lending, mortgage warehouse lending, media and entertainment, asset-based lending, and equipment finance. Our Deposit and Transaction Services provide valuable services through tailored cash management and treasury management solutions, including foreign exchange and other liquidity management products. Our Payment Solutions delivers integrated electronic payment solutions for commercial clients, including merchant acquiring and card issuing services. These offerings are supported by a secure, bank-led payments infrastructure that ensures reliable transaction processing, settlement, and regulatory compliance. Merchant acquiring services are provided through BancEdge, the Company’s proprietary platform, enabling clients to accept card payments across both physical and digital channels. Additionally, the Payments business offers card issuing solutions to support purchasing and expense management for business clients.

As of December 31, 2025, the Company had total assets of $34.8 billion, total loans and leases HFI of $25.0 billion, total deposits of $27.8 billion, and total stockholders’ equity of $3.5 billion.

Our Business Strategy

Our strategic objective is to continue to be one of the nation's premier relationship-based commercial banks by delivering outstanding service to our banking clients through our team's ability to collaborate, execute and perform at a level superior to our competition. This involves listening to our clients to understand their needs so that we can actively develop and deliver customized solutions to meet their business objectives. It also involves executing promptly and holding ourselves accountable to the promises we make our clients. We are focused on fostering relationships with businesses in our markets and verticals and providing an exceptional level of service.

We offer a wide variety of deposit, loan, and other financial services to small and middle-market businesses, venture capital and private equity firms, non-profit organizations, business owners, entrepreneurs, professionals and high-net worth individuals. Our deposit products include checking, savings, money market, certificates of deposit, retirement accounts, and safe deposit boxes. Additional products and services leverage other technology and include automated bill payments, cash and treasury management, master demand accounts, foreign exchange, interest rate swaps, card payment services, remote and mobile deposit capture, automated clearing house origination, wire transfer, and direct deposit. Our lending activities are focused on providing thoughtful financing solutions to our clients. We are consistently investing in our technology infrastructure to gain operating efficiencies and to improve the client experience as we deliver our high standard of service.

Depository Products and Services

Deposits are our primary source of funds to support our interest-earning assets and provide a source of stable low-cost funds and deposit-related fee income. We offer traditional deposit products to businesses and other customers with a variety of rates and terms, including demand, money market, and time deposits. We primarily rely on our relationships from our lending activities, competitive pricing policies, marketing, and superior client service to attract and retain deposits. We also provide international banking services, multi-state deposit services, and asset management services. The Bank’s deposits are insured by the DIF of the FDIC up to applicable legal limits. The Bank is a participant in the IntraFi Network, a product that offers deposit placement services such as IntraFi Cash Service and CDARS, and other reciprocal deposit networks which offer products that qualify large deposits for FDIC insurance. These products spread a customer's large deposit account among other banks in the network to increase the amount of FDIC insurance for that customer and to help us retain the customer's entire banking relationship.

Our branch network allows us to gather deposits, expand our brand presence, and service our customers’ banking and cash management needs. We also serve our customers through a wide range of non-branch channels, including online, mobile, remote deposit, and telephone banking platforms, all of which allows us to expand our service area to attract new depositors without a commensurate increase in branch locations or branch traffic.

At December 31, 2025, we had ATMs at 67 of our branches located in California and one ATM at our branch in Denver, Colorado. We provide access to customer accounts via a 24-hour seven-day-a-week, toll-free, automated telephone customer service and secure online banking services.

At December 31, 2025, our total deposits were $27.8 billion and consisted of $7.8 billion in noninterest-bearing deposits, $8.5 billion in interest-bearing checking accounts, $4.9 billion in money market accounts, $1.9 billion in savings accounts, and $4.7 billion in time deposits. Our deposits are diversified and are a mix of deposits from small, middle-market, and venture-backed businesses, HOA management companies and many are related to lending relationships to a diversified client base.

Client Investment Funds

In addition to deposit products, we also offer alternative, non-depository corporate treasury solutions for clients to invest excess liquidity. These off-balance sheet client funds totaled $1.2 billion at December 31, 2025 and $1.5 billion at December 31, 2024.

Payment Processing

The Company’s Payments business provides integrated electronic payment capabilities for commercial clients, including merchant acquiring and card issuing services. These offerings are delivered through a bank‑led payments infrastructure designed to support secure transaction processing, settlement, and regulatory compliance.

Merchant acquiring services are provided through BancEdge, the Company’s branded payments processing platform, which enables clients to accept debit and credit card payments across card‑present and digital channels. BancEdge supports merchant onboarding, underwriting, transaction processing, settlement, reporting, and ongoing account servicing, and incorporates risk monitoring and compliance controls.

The Payments business also offers card issuing solutions for business and commercial clients, supporting purchasing and expense management needs through centralized onboarding, transaction processing, and portfolio management. The Company operates as an acquiring bank and program sponsor and continues to invest in scalable, API‑enabled infrastructure to support additional payment capabilities while maintaining strong risk management and data security controls.

Lending Activities

We provide a variety of lending products to customers, including the loan types below. Lending activities from discontinued or divested non-core loan portfolios, which are currently in the process of running off, are not included in the lending activities described below. For additional information regarding loans, see "Note 5. Loans and Leases" in Item 8 or "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K.

Real Estate Loans

Real estate loans consist of CRE mortgage, residential real estate mortgage, and real estate construction and land loans, generally secured by first-priority liens. These loans are originated to professional developers and real estate investors for the acquisition, construction, refinancing, renovation, and on-going operation of CRE. Our real estate loans include the following specific lending products:

Commercial real estate mortgage. CRE loans comprise 17% and 19% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans are secured by a range of property types, including office, hotels, retail, and industrial properties, and are primarily located in major United States metropolitan markets, with 67% concentrated in California as of December 31, 2025. We also originate owner occupied CRE loans, including tax exempt financing to municipalities, schools, school districts, and non-profit borrowers, and loans under the SBA 7(a) Program and 504 Program.

Multi- Family. Multi-family loans comprise 24% and 26% of our total HFI loans as of December 31, 2025 and 2024, respectively. The loans are primarily secured by income-producing residential properties with five or more dwelling units and are originated to experienced sponsors and professional real estate investors. Multi-family loans are generally used to finance the acquisition, refinancing, and ongoing operation of stabilized apartment properties. The portfolio is located in major United States metropolitan markets, with 73% concentrated in California as of December 31, 2025.

Other residential real estate mortgage. Residential real estate mortgage loans comprise 14% and 12% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans are secured by other residential income producing assets, non-owner occupied for-rent residential properties, and owner-occupied single-family properties. The Company has purchased SFR mortgage loans that met our established lending criteria from multiple third-party lenders.

Real estate construction and land. Real estate construction and land comprise 8% and 13% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans finance the construction or substantial renovation of residential and select commercial properties, and generally have shorter contractual terms than permanent real estate loans. These loans are primarily secured by multi-family, residential properties undergoing a substantial renovation, and office properties.

Commercial Loans and Leases

Commercial loans and leases consist of a diversified portfolio of assets secured lending products and venture related borrowers. These loans support working capital needs, equipment financing, receivable financing, and growth initiatives. Our commercial loans include the following specific lending products:

Lender finance. Lender finance loans comprise 6% and 3% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans are primarily revolving facilities to small business, CRE, and consumer lenders and alternative asset managers, secured primarily by finance receivables, with borrowing bases tied to eligible collateral. Repayment is from borrower operating cash flow and collections on the financed receivables.

Equipment finance. Equipment finance loans comprise 3% and 3% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans are financing of equipment essential to the operations of our borrowers or lessees. Loans are secured by the equipment, leased or owned equipment, under contract with the lessees. Repayment is primarily from operating cash flow and/or residual realization through a sale of the equipment.

Other asset-based. Other asset-based loans comprise 1% and 1% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans are working capital facilities secured by receivables and/or inventories. Repayment is from borrower cash flow, collection of the receivables, and/or the sale of the inventories securing the loans.

Venture capital. Venture capital loans comprise 9% and 6% of our total HFI loans as of December 31, 2025 and 2024, respectively. These are loans directly to venture capital firms themselves or to venture-backed companies, and are composed of two categories: Equity fund loans and Venture lending. Equity fund loans are facilities to venture and private equity funds and managers, typically secured by capital call rights, management fees, and other assets. Equity fund repayments are from capital calls, realizations from sale of portfolio company investments, and management fees. Venture lending loans are to venture-backed companies (primarily technology and life sciences) bridging between funding rounds or strategic outcomes, typically secured by first priority liens on corporate assets and, where relevant, intellectual property.

Secured business. Secured business loans comprise 3% of our total HFI loans as of both December 31, 2025 and 2024. These are secured business loans originated through the CCB group. The primary source of repayment is the cash flow of the borrowers. The loans can be up to five years and are secured by a specific asset or assets of the borrower.

Warehouse loans. Warehouse loans comprise 8% and 6% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans are short-term revolving lines to mortgage originators to fund closed loans prior to sale or securitization. Repayment is from proceeds of loan sales in the secondary market, either directly or through securitization, of the mortgage loans funded on the warehouse line.

Other lending. Other lending loans comprise 4% of our total HFI loans as of both December 31, 2025 and 2024, respectively. These loans include CCB business loans, loans to homeowner associations, loans to municipalities and non-profit borrowers, and SBA 7(a) loans for small business expansion. The primary sources of repayments is from borrower cash flow or municipalities tax collections.

Consumer Loans

Consumer loans comprise 1% and 2% of our total HFI loans as of December 31, 2025 and 2024, respectively. These loans primarily consist of purchased private student loans (not government guaranteed) and, to a lesser extent, purchased auto loans and internally originated personal, home equity lines, and other consumer loans. Purchased pools must meet our thresholds for weighted average credit scores, income, and free cash flow. We monitor originators' and servicers' performance and enforce our contractual rights.

Lending Activity Risk Factors and Mitigation Measures

Our lending activities are subject to a variety of risks that may adversely affect credit quality, portfolio performance, and financial results. These risks include, but are not limited to, changes in macroeconomic conditions, interest rate fluctuations, borrower financial stress, collateral value declines, operational and environmental risks, regulatory changes, and concentration exposures. Our loan portfolios may also be impacted by industry-specific trends, legislative developments, and external events such as natural disasters or market disruptions. For a detailed discussion of these and other risks, refer to “Risk Factors” in Item 1A of this Form 10-K.

To address these risks, we employs a comprehensive risk management framework that includes disciplined credit policies, rigorous underwriting standards, and ongoing portfolio monitoring. Key mitigation strategies include borrower due diligence, collateral valuation and controls, covenant enforcement, portfolio concentration limits, and regular performance reviews. We also maintains oversight of third-party originators and servicers, and ensures compliance with applicable regulatory requirements. These measures are designed to identify, assess, and manage credit risk across all lending activities, supporting the our commitment to maintaining sound asset quality and prudent risk management practices.

Financing

We depend on deposits, including brokered deposits, and external financing sources to fund our operations. We employ a variety of financing arrangements, including term debt, subordinated debt, and equity. As a member of the FHLB, the Bank had secured financing capacity with the FHLB as of December 31, 2025 of $6.9 billion, collateralized by a blanket lien on $10.3 billion of qualifying loans and $20.5 million of securities. The Bank also had secured financing capacity with the FRBSF of $5.0 billion as of December 31, 2025 collateralized by liens on $4.6 billion of qualifying loans and $1.5 billion of securities.

Information Technology Systems

We devote significant financial and management resources to maintain stable, reliable, efficient, secure, and scalable information technology systems. Where possible, we utilize third-party software systems that are hosted and supported by nationally recognized vendors. We work with our third-party vendors to monitor and maximize the efficiency of our use of their applications. We use integrated systems to originate and process loans and deposit accounts, which reduces processing time, automates numerous internal controls, improves customer experiences and reduces costs. Most customer records are maintained digitally. We also provide online, mobile, and telephone banking services to further improve the overall client experience.

We use an enterprise data warehouse system in order to aggregate, analyze, and report key metrics associated with our customers and products. Data is collected across multiple systems so that standard and ad hoc reports are available to assist with managing our business.

We maintain an information technology strategic plan. This plan defines the overall innovation and technology agenda and vision. Through our annual information technology budgeting process, we analyze our infrastructure for capacity planning, detail migration plans to replace aging hardware and software, and resource plan for internal and external information technology staffing needs against planned initiatives.

Protecting our systems to ensure the safety of customer information is critical to our business. We have an information security program subject to oversight by our Board of Directors and Senior Management. We use multiple layers of protection to control access, detect unusual activity, and reduce risk. We regularly conduct a variety of audits and vulnerability and penetration tests on our platforms, systems, and applications and maintain comprehensive incident response plans to minimize potential risks, including cyber-attacks. To protect our business operations against disasters, we employ multiple layers of redundancy, including geographically distributed systems, replication, and comprehensive recovery plans.

Risk Oversight and Management

We believe risk management is another core competency of our business. We have a comprehensive risk management process that measures, monitors, evaluates, and manages the risks we assume in conducting our activities. Our oversight of this risk management process is conducted by the Company’s Board of Directors (the “Board”) and its standing committees. The committees each report to the Board and the Board has overall oversight responsibility for risk management.

Our risk framework is structured to guide decisions regarding the appropriate balance between risk and return considerations in our business. Our risk framework is based upon our business strategy, risk appetite, and financial plans approved by our Board. Our risk framework is supported by an enterprise risk management program. Our enterprise risk management program integrates all risk efforts under one common framework. This framework includes risk policies, procedures, measured and reported limits and targets, and reporting. Our Board approves our risk appetite statement, which sets forth the amount and type of risks we are willing to accept in pursuit of achieving our strategic, business, and financial objectives. Our risk appetite statement provides the context for our risk management tools, including, among others, risk policies, limits, portfolio composition, underwriting standards, and operational processes.

Competition

The banking business is highly competitive. We compete nationwide with other commercial banks and financial services institutions for loans and leases, deposits, and employees. Some of these competitors are larger in total assets and capitalization, with more offices over a wider geographic area and offer a broader range of financial services than our operations. Our most direct competition for loans comes from larger regional and national banks, diversified finance companies, venture debt funds, and community banks that target the same customers as we do. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. Those competitors include non-bank specialty lenders, insurance companies, private investment funds, investment banks, financial technology companies, and other financial and non-financial institutions.

Competition is based on a number of factors, including interest rates charged on loans and leases and paid on deposits, underwriting standards, loan covenants, required guarantees, the scope and type of banking and financial services offered, convenience of our branch locations, customer service, technological changes, and regulatory constraints. Many of our competitors are large companies that have substantial capital, technological, and marketing resources. Some of our competitors have substantial market positions and have access to a lower cost of capital or a less expensive source of funds. Because of economies of scale, our larger, nationwide competitors may offer loan pricing that is more attractive than what we are willing to offer.

Economic factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. We work to anticipate and adapt to dynamic competitive conditions whether it is by developing and marketing innovative products and services, adopting or developing new technologies that differentiate our products and services, cross marketing, or providing highly personalized banking services. We strive to distinguish ourselves from other banks and financial services providers in our marketplace by providing an extremely high level of service to enhance customer loyalty and to attract and retain business.

We differentiate ourselves in the marketplace through the quality of service we provide to borrowers while maintaining competitive interest rates, loan fees and other loan terms. We emphasize personalized relationship banking services and the efficient decision-making of our lending business units. We compete effectively based on our in-depth knowledge of our borrowers' industries and their business needs based upon information received from our borrowers' key decision-makers, analysis by our experienced professionals, and interaction between these two groups; our breadth of loan product offerings and flexible and creative approach to structuring products that meet our borrowers' business and timing needs; and our dedication to superior client service. However, we can provide no assurance as to the effectiveness of these efforts on our future business or results of operations, as to our continued ability to anticipate and adapt to changing conditions, and as to sufficiently improving our services and banking products in order to successfully compete in the marketplace.

Human Capital Management

Our human capital strategy empowers people to build a high-performing culture. Among our core business objectives are talent development and creating an environment where everyone has an opportunity to succeed. Our business strategy is to operate a client-focused, well-capitalized, and profitable nationwide bank dedicated to providing personal service to our business and individual customers. Our team members are our most important assets, and they set the foundation for our ability to achieve our strategic objectives. We believe that we have a competitive advantage in the markets we serve because of our long-standing reputation for providing superior, relationship-based customer service. In order to continue to provide the expertise and customer service for which we are known, it is crucial that we continue to attract, retain, and develop top talent. To facilitate talent attraction and retention, we strive to make the Bank an inclusive and safe workplace, with opportunities for our team members to grow and advance in their careers, supported by strong compensation, benefits, and health and wellness programs.

Oversight and Management

We strive to attract, develop, and retain highly qualified team members for each role in the organization. Working under this principle, our Human Resources Department is tasked with managing employment-related matters, including recruiting and hiring, onboarding and training, compensation planning, performance management, and professional development. Our Board of Directors and Compensation, Nominating and Corporate Governance Committee provide oversight on certain human capital matters, including our compensation and benefit programs. As noted in its charter, our Compensation, Nominating and Corporate Governance Committee is responsible for periodically reviewing employee compensation programs and initiatives to ensure they are competitive and aligned with our stockholders’ long-term interests, including incentives and benefits, as well as our succession planning and strategies. Our Compensation, Nominating and Corporate Governance Committee also works closely with the Enterprise Risk Committee to monitor current and emerging human capital management risks and to mitigate exposure to those risks.

Demographics

At December 31, 2025, we had 1,904 full-time and part-time employees, the overwhelming majority of which were full-time employees. None of the Company’s employees are represented by a labor union or by collective bargaining agreements.

Human Capital Management Objectives

Our key human capital management objectives are to attract, retain, and develop the highest quality talent. To support these objectives, our human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future, reward and support team members through competitive pay, benefit, and perquisite programs, enhance the Company’s culture through efforts aimed at making the workplace more engaging and inclusive, acquire talent, and facilitate internal talent mobility to create a high-performing, diverse workforce, and evolve and invest in technology, tools and resources to enable team members to effectively and efficiently perform their responsibilities and achieve their full potential.

Some examples of key programs and initiatives that are focused to attract, develop and retain our workforce include:

Compensation and Benefits. The philosophy and objectives underlying our compensation programs are to employ and retain talented team members to ensure we execute on our business goals, drive short- and long-term profitable growth of the Company, and create long-term stockholder value. In allocating total compensation, we seek to provide competitive levels of fixed compensation (base salary) and, through annual and long-term incentives, provide for increased total compensation when performance objectives are met or exceeded and appropriately lower total compensation if performance objectives are not met.

Our compensation and benefits programs are designed to be competitive and aligned with industry standards, ensuring fairness based on employee position, skill level, experience, and knowledge. As of December 31, 2025, our minimum starting wage is $20 per hour. We regularly engage nationally recognized compensation and benefits consulting firms to independently evaluate and benchmark our offerings, resulting in robust, market-competitive benefits. These include a comprehensive suite of health insurance options, a competitive 401(k) match program, and additional benefits that support employees’ long-term financial wellness. Executive compensation is structured to align with stockholder interests, linking realizable pay to Company performance. Annual increases and incentive compensation are merit-based and communicated clearly to employees through our talent management and review processes. All full-time employees are eligible for a wide range of benefits, including medical, dental, and vision insurance, paid and unpaid leaves, 401(k) participation, life and disability coverage, enhanced mental health resources, and employee assistance programs. We also offer voluntary benefits such as health savings and flexible spending accounts, paid parental leave, public transportation reimbursement, personalized wellness programs, and tuition reimbursement to meet diverse employee needs.

Health, Safety and Wellness. The health, safety, and wellness of our team members is fundamentally connected to the success of our business. We provide our team members and their families with access to a variety of flexible, convenient, and innovative health and wellness programs to help them improve or maintain their physical and mental well-being. The safety of our team members and customers is paramount. We strive to ensure that all team members feel safe in their respective work environment. We closely monitor external developments and governmental regulations regarding workplace safety and employee health and adjust our policies and procedures accordingly.

Talent Development. We believe that creating an environment which encourages continual learning and development is essential for us to maintain a high level of service and to achieve our goal to have every team member feel that they are a valued and contributing member. This is why we have implemented a variety of learning and development resources for all levels of employees across the Bank. Team members have access to more than 20,000 training resources online to foster personal and professional development with enhanced training centered on building strong relationships and always striving to be client focused. We also offer team members career development resources, including individual development plans, an internship program, a mentorship program, leadership and management programs, and tuition reimbursement. Through our talent management processes of goal setting, performance reviews, succession planning, career development, and encouraging internal mobility, we strive to continually develop our people and meet the dynamic needs of our clients.

Culture of Inclusion. We aspire to have a highly talented workforce that also reflects the diversity of the communities in which we operate and of the clients we serve. We take pride in providing equal employment opportunities and building a workplace culture where all team members feel supported and respected, and have equal access to career and development opportunities without regard to race, religion/creed, color, national origin, age, marital status, ancestry, sex, gender, gender identity/expression, sexual orientation, veteran status, physical or mental disability, medical condition, military status, or any other characteristic protected by federal, state or local laws.

Financial and Statistical Disclosure

Certain of our statistical information is presented within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and "Quantitive and Qualitative Disclosures" in Item 7A of this Form 10-K. This information should be read in conjunction with the "Financial Statements and Notes to the Consolidated Financial Statements" in Item 8 of this Form 10-K.

Supervision and Regulation

General

We are extensively regulated under federal and state laws. As a bank holding company, Banc of California, Inc. (the “Company”) is subject to the BHCA and is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the FRB. The FRB’s jurisdiction also extends to any company that is directly or indirectly controlled by a bank holding company. The Company has also elected to be a financial holding company under the BHCA. As a California state-chartered bank that is a member of the FRB, the Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the DFPI and the FRB. In addition, as an FDIC-insured depository institution, the Bank is also subject to regulation by the FDIC.

Federal and state laws and regulations generally applicable to financial institutions regulate the Company’s and the Bank’s scope of business, investments, reserves against deposits, capital levels, the nature and amount of collateral for loans, the establishment of branches, mergers, acquisitions, dividends, and other matters. This regulation and supervision by the banking agencies is intended primarily for the protection of clients and depositors, the public, the stability of the U.S. financial system, and the DIF administered by the FDIC and not for the benefit of stockholders or debt holders. Statutes, regulations and policies govern, among other things, the scope of activities that we may conduct and the manner in which we may conduct them; our business plan and growth; our board, management, and risk management infrastructure; the type, terms, and pricing of our products and services; our loan and investment portfolio; our capital and liquidity levels; our reserves against deposits; our ability to pay dividends, buy-back stock or distribute capital; and our ability to engage in mergers, acquisitions and other strategic initiatives. The legal and regulatory framework is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement. Changes are difficult to predict and could have significant effects on our business.

The description of regulatory requirements below, as well as other descriptions of laws and regulations in this Form 10-K, is not complete and is qualified in its entirety by reference to applicable laws and regulations, is not intended to summarize all laws and regulations applicable to us and our subsidiaries, and is based upon the statutes, regulations, policies, interpretive letters and other written guidance that are in effect as of the date of this Annual Report on Form 10-K.

Banc of California, Inc.

Permissible Activities. In general, the BHCA limits the activities permissible for bank holding companies to the business of banking, managing or controlling banks and such other activities as the FRB has determined to be so closely related to banking as to be properly incidental thereto.

As a bank holding company that has elected to be a financial holding company pursuant to the BHCA, the Company is permitted to engage in a broader range of activities. Permitted activities for a financial holding company include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; and merchant banking.

For a bank holding company to be and remain eligible for financial holding company status, the bank holding company and each of its subsidiary U.S. depository institutions must be “well capitalized” and “well managed,” and each of its subsidiary U.S. depository institutions must have received at least a “satisfactory” rating on its most recent assessment under the CRA. If the bank holding company fails to meet applicable standards for financial holding company status, it may be restricted from engaging in new types of financial activities or making certain types of acquisitions or investments in reliance on its status as a financial holding company or other restrictions. If restrictions are imposed on the activities of a financial holding company, such information may not necessarily be available to the public.

The bank regulatory framework requires that we obtain prior approval of one or more regulators for various initiatives or corporate actions, including certain acquisitions or investments and the establishment of branches. Regulators take into account a range of factors in determining whether to grant a requested approval, including the supervisory status of the applicant and its affiliates. Thus, there is no guarantee that a particular proposal by us would receive the required regulatory approvals.

Acquisitions. The BHCA and regulations thereunder require a bank holding company to obtain the prior approval of the FRB before it: (i) may acquire direct or indirect ownership or control of more than 5% of any class of voting shares of any bank or savings and loan association; (ii) or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank or savings and loan association; or (iii) may merge or consolidate with any other bank holding company. In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the risks to the stability of the U.S. banking or financial system, the applicant’s managerial and financial resources, the applicant’s performance record under the CRA, fair housing laws and other consumer compliance laws, and the effectiveness of the banks in combating money laundering activities.

Capital Requirements. As a bank holding company, the Company is subject to the regulations of the FRB imposing capital requirements for a bank holding company, which establish a capital framework as described in “Capital Requirements and Prompt Corrective Action” below. As of December 31, 2025, the Company had capital ratios in excess of the minimums required to be considered “well capitalized.”

Repurchases/Redemptions; Dividends. The ability of the Company to buy back stock and make capital distributions is limited by regulatory capital rules and other aspects of the regulatory framework. For example, it is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future capital needs, asset quality, and overall financial condition. Under the FRB’s policy statement on the payment of cash dividends, a bank holding company generally should not maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of strength to its banking subsidiaries. FRB policy also provides that a bank holding company should inform the FRB reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company’s capital structure. Regarding dividends, see “Capital Requirements and Prompt Corrective Action” below.

Source of Strength. Under FRB regulations and federal law, a bank holding company, such as the Company, must serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls, such as the Bank. Thus, if the Bank were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, then the regulators could require the Company to provide additional capital or liquidity support, or take other action, in support of the Bank—even if doing so is not otherwise in the best interest of the Company.

The Bank

Liquidity. The Bank is subject to a variety of requirements under federal law. The Bank is required to maintain sufficient liquidity to ensure safe and sound operations. For additional information, see "Liquidity" in Item 7 of this Form 10-K.

Safety and Soundness. A principal objective of the U.S. bank regulatory system is to ensure the safety and soundness of banking organizations. Safety and soundness is a broad concept that includes financial, operational, compliance, and reputational considerations, including matters such as capital, asset quality, quality of board and management oversight, earnings, liquidity, and sensitivity to market and interest rate risk.

The banking and financial regulators have broad examination and enforcement authority. The regulators require banking organizations to file detailed periodic reports and regularly examine the operations of banking organizations. Banking organizations that do not meet the regulators’ supervisory expectations can be subjected to increased scrutiny and supervisory criticism. The regulators have various remedies available, which may be public or of a confidential supervisory nature, if they determine that an institution’s condition, management, operations or risk profile are unsatisfactory. The regulators may also take action if they determine that the banking organization or its management is violating or has violated any applicable law or regulation. Regulators have broad authority to take various actions if they identify violations or unsafe practices. They can require us to take corrective measures, issue administrative orders that are enforceable in court, and mandate increases in our capital levels. Additionally, regulators may direct the sale of subsidiaries or other assets, limit our ability to pay dividends and make distributions, and restrict our growth or business activities. They also have the power to assess civil monetary penalties, remove officers and directors, and, in severe cases, terminate our deposit insurance.

Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject us and our subsidiaries or their officers, directors and institution-affiliated parties to the remedies described above and other sanctions.

Acquisitions. The FRB and the DFPI must approve the Bank’s acquisition of other financial institutions and certain other acquisitions. The acquisition of the Bank is also subject to approval by applicable federal and state bank regulators. For a discussion of the factors generally considered by the bank regulators in connection with such acquisitions, see “—Banc of California, Inc.—Acquisitions” above.

Lending Limits. Our lending activities are subject to a variety of lending limits imposed by law and regulation. In general, the Bank is subject to a legal lending limit on loans to a single borrower based on the Bank’s capital level. The dollar amounts of the Bank’s lending limit increases or decreases as the Bank’s capital increases or decreases. As of December 31, 2025, the Bank has no loans in excess of its loans-to-one borrower limit.

Dividends. The Company’s primary source of liquidity is dividend payments from the Bank. The regulatory regime imposes various restrictions on the ability of the Bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. For example, taking into account the financial condition of the Bank and other factors, the DFPI may object and therefore prevent the Bank from paying dividends to the Company. Generally, the Bank may declare a dividend without the approval of the DFPI as long as the total dividends declared in a calendar year do not exceed either the retained earnings of the Bank nor the total of net earnings of the Bank for three previous fiscal years less any dividend paid during such period. Dividends can also be restricted if the capital conservation buffer requirement is not met. In general, the Bank may declare a dividend without the approval of the FRB as long as the total of all dividends declared by the Bank during the calendar year, including the proposed dividend, does not exceed the sum of the Bank’s net income during the current calendar year and the retained net income of the prior two calendar years. Regarding dividends, see “Capital Requirements” below.

FDIC Insurance

The Bank’s deposits are insured by the DIF of the FDIC up to applicable legal limits. As an FDIC-insured depository institution, the Bank is subject under certain circumstances to regulation by the FDIC. The FDIC charges deposit insurance assessments to FDIC-insured institutions, including the Bank, to fund and support the DIF. The rate of these deposit insurance assessments is based on, among other things, the risk characteristics of the Bank. The FDIC has the power to terminate the Bank’s deposit insurance if it determines the Bank is engaging in unsafe or unsound practices. Federal banking laws provide for the appointment of the FDIC as receiver in the event the Bank were to fail, such as in connection with undercapitalization, insolvency, unsafe or unsound condition or other financial distress. In a receivership, the claims of the Bank’s depositors (and those of the FDIC as subrogee of the Bank) would have priority over other general unsecured claims against the Bank.

Brokered Deposits

The Federal Deposit Insurance Act restricts the use of brokered deposits by certain depository institutions. A well-capitalized insured depository institution may solicit and accept, renew or roll over any brokered deposit without restriction. An adequately capitalized insured depository institution may not accept, renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC. The FDIC may grant a waiver upon a finding that the acceptance of brokered deposits does not constitute an unsafe or unsound practice with respect to such institution. The rates that an adequately capitalized institution with a waiver may pay on brokered deposits may not exceed certain ceilings. An “undercapitalized insured depository institution” may not accept, renew or roll over any brokered deposit. As of December 31, 2025, the Bank was considered “well capitalized” for this purpose.

Capital Requirements and Prompt Corrective Action

The bank regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain a specified level of capital relative to the amount and types of assets they hold. While capital can serve as an important cushion against losses, higher capital requirements can also adversely affect an institution’s ability to grow and/or increase leverage through deposit-gathering or other sources of funding.

The Company and the Bank are each subject to generally similar capital regulations adopted by the FRB. These regulations establish required minimum ratios for CET1 capital, Tier 1 capital and total capital and a leverage ratio; set risk-weighting for assets and certain other items for purposes of the risk-based capital ratios; require an additional capital conservation buffer over the minimum required capital ratios in order to avoid certain limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses; and define what qualifies as capital for purposes of meeting the capital requirements.

We elected to delay the estimated impact on regulatory capital from the adoption of the CECL methodology for two years followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. As of January 1, 2025, the impact of the CECL standard was fully reflected in our regulatory capital.

As of December 31, 2025, we were in compliance with the minimum CET1, Tier 1, total capital, and leverage ratios and the minimum capital conservation buffer set forth in these generally applicable regulations. These capital requirements are the minimum ratios generally applicable to banking organizations. The regulators assess any particular institution’s capital adequacy based on numerous factors. The regulators may require a particular banking organization to maintain capital at levels higher than the generally applicable minimums.

The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (the “PCA”). The PCA guidelines provide for capitalization categories ranging from “well capitalized” to “critically undercapitalized.” An institution’s PCA category is determined primarily by its regulatory capital ratios. The PCA requires remedial actions and imposes limitations that become increasingly stringent as an institution’s condition deteriorates and its PCA capitalization category declines. Among other things, institutions that are less than well capitalized become subject to increasingly stringent restrictions on their ability to accept and/or rollover brokered deposits. As of December 31, 2025, the Bank was considered “well capitalized” for purposes of the PCA.

In addition to capital requirements, depository institutions are required to maintain noninterest bearing reserves at specified levels against their transaction accounts and certain non-personal time deposits.

Anti-Money Laundering and Suspicious Activity

We are subject to several federal laws related to anti-money laundering (“AML”), economic sanctions, and prevention of financial crime, including the Bank Secrecy Act, the Money Laundering Control Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“Patriot Act”), and economic sanctions programs. We are required to, among other things, maintain an effective AML and counter-terrorist compliance program, identify and file suspicious activity and currency transaction reports, and block transactions with sanctioned persons or jurisdictions. Compliance with these laws requires significant investment of management attention and resources. These laws are enforced by a number of regulatory authorities, including the FRB, OFAC, the Financial Crimes Enforcement Network, the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. Failure to comply with these laws, or to meet our regulators’ supervisory expectations in connection with these laws, could subject us to supervisory or enforcement action, significant financial penalties, criminal liability, and/or reputational harm.

The Bank is also subject to regulation under economic or financial sanctions imposed, administered, or enforced from time to time by the U.S. government, including as administered by OFAC (such regulations, “Sanctions Laws”). The Sanctions Laws are intended to restrict transactions with persons, companies or foreign governments sanctioned by U.S. authorities. An institution that fails to meet these standards may be subject to civil or criminal enforcement actions. The Bank has established compliance programs designed to comply with the Bank Secrecy Act, the Patriot Act and applicable Sanctions Laws.

Community Reinvestment Act

The Bank is subject to the provisions of the CRA. The FRB regularly assesses the Bank on its record in helping meet the credit needs of the communities it serves, including low-income and moderate-income neighborhoods. The Bank is subject to periodic examination under the CRA by the FRB, which will assign ratings based on the methodologies set forth in its regulations and guidance. Less favorable CRA ratings, or concerns raised under the CRA, may adversely affect the Bank’s ability to obtain approval for certain types of applications.

Performance under the CRA also is considered when the relevant federal bank regulator reviews applications to acquire, merge or consolidate with another banking institution or its holding company or to open or relocate a branch office. Also, in the case of a bank holding company applying for approval to acquire a bank, the FRB will assess the CRA records of each subsidiary depository institution of the applicant bank holding company. An unsatisfactory CRA record may be the basis for denying the application. Based on the most recent CRA examination, the Bank was rated "outstanding."

Financial Privacy Under the Requirements of the Gramm-Leach-Bliley Act

We are subject to various laws related to the privacy of consumer information. The Company and its subsidiaries are required under federal law to periodically disclose to their retail clients the Company’s policies and practices with respect to the sharing of nonpublic client information with its affiliates and others, and the confidentiality and security of that information. Under the Gramm‑Leach‑Bliley Act of 1999 (the “GLBA”), in some cases, the Bank must obtain a consumer’s consent before sharing information with an unaffiliated third-party, and the Bank must give a consumer the opportunity to “opt out” of the Bank’s sharing of information with its affiliates for marketing and certain other purposes. In some cases, the Bank must obtain a consumer’s consent before sharing information with an unaffiliated third-party, and the Bank must allow a consumer to opt out of the Bank’s sharing of information with its affiliates for marketing and certain other purposes.

Limitations on Transactions with Affiliates and Loans to Insiders

Banks are subject to restrictions on their ability to conduct transactions with affiliates and other related parties under federal banking laws. For example, federal banking laws impose quantitative limits, qualitative requirements, and collateral standards on certain extensions of credit and other transactions by an insured depository institution with, or for the benefit of, its affiliates. In addition, these restrictions require most types of transactions by an insured depository institution with, or for the benefit of, an affiliate be on market terms or better for the insured depository institution.

In addition, subject to certain exceptions, the Federal Reserve Act and related regulations place quantitative and other restrictions on the extension of credit to executive officers, directors and principal stockholders (including the Company) and their related interests of the Bank and its affiliates, including a requirement that loans to directors, executive officers and principal stockholders be made on terms substantially the same as those offered in comparable transactions to other persons, and not involve more than the normal risk of repayment or present other unfavorable features. In addition, purchases and sales of assets between an insured depository institution and its executive officers, directors, and principal stockholders may also be limited under such laws. The Sarbanes-Oxley Act generally prohibits loans by public companies to their executive officers and directors. However, there is a specific exception for loans by financial institutions, such as the Bank, to its executive officers and directors that are made in compliance with federal banking laws.

The Company and its affiliates, including the Bank, maintain programs to comply with the limitations on transactions with affiliates and restrictions on loans to insiders and the Company believes it and the Bank are currently in compliance with these requirements.

Acquisition of a Significant Interest in the Company

Banking laws impose various regulatory requirements on parties that may seek to acquire a significant interest in the Company. For example, the Change in Bank Control Act of 1978 would generally require that any party file a formal notice with, and obtain non-objection of, the FRB prior to acquiring (directly or indirectly, whether alone or acting in concert with any other party) 10% or more of any class of voting securities of the Company. Further approval requirements and significant ongoing regulatory consequences would apply to any company that (directly or indirectly, whether alone or as part of an association with another company) seeks to acquire “control” of the Company or the Bank for purposes of the BHCA. The determination whether a party “controls” a depository institution or its holding company for purposes of these laws is based on applicable regulations and all of the facts and circumstances surrounding the investment.

Identity Theft

Under the Fair and Accurate Credit Transactions Act (the “FACT Act”), the Bank is required to develop and implement a written Identity Theft Prevention Program (the “Program”) to detect, prevent and mitigate identity theft “red flags” in connection with the opening of certain accounts or certain existing accounts. Under the FACT Act, the Bank is required to adopt reasonable policies and procedures to: (i) identify relevant red flags for covered accounts and incorporate those red flags into the Program; (ii) detect red flags that have been incorporated into the Program; (iii) respond appropriately to any red flags that are detected to prevent and mitigate identity theft; and (iv) ensure the Program is updated periodically, to reflect changes in risks to clients or to the safety and soundness of the financial institution or creditor from identity theft.

The Bank maintains a Program to meet the requirements of the FACT Act and the Bank believes it is currently in compliance with these requirements.

Consumer Protection Laws and Regulations

We are subject to a broad array of federal, state and local consumer protection laws and regulations that govern almost every aspect of our business relationships with consumers. Among other things, these laws and regulations relate to the content and adequacy of disclosures, pricing and fees, fair lending, anti-discrimination, privacy, cybersecurity, usury, mortgages and housing finance, lending to service members, escheatment, debt collection, loan servicing, collateral secured lending, and unfair, deceptive or abusive acts or practice, and regulate the manner in which financial institutions must deal with clients when taking deposits, making loans, servicing loans and providing other services. If the Bank fails to comply with these laws and regulations, it may be subject to significant penalties, judgments, other monetary or injunctive remedies, lawsuits (including putative class action lawsuits and actions by state and local attorney generals), customer recession rights, supervisory or enforcement actions, and civil or criminal liability.

The CFPB is generally responsible for rulemaking with respect to certain federal laws related to the provision of financial products and services to consumers. In addition, the CFPB has supervision, examination and primary enforcement authority with respect to federal consumer financial protection laws with respect to banking organizations with assets of $10 billion or more. The Bank has assets in excess of $10 billion; therefore, we are subject to the supervision, examination and primary enforcement jurisdiction of the CFPB with respect to federal consumer financial protection laws. Additionally, under the current U.S. administration, a level of heightened uncertainty exists with respect to the future of the CFPB, including its structure, staffing, and responsibilities. It remains uncertain whether, or to what extent, changes at the CFPB will impact our business and the overall regulatory environment. We cannot predict whether future executive or legislative actions regarding the CFPB, consumer laws, and related regulations may impact the industry generally, including potential actions that state or other federal regulators may take in response to such executive or legislative actions.

Information Technology and Cybersecurity

We are subject to laws and regulatory requirements related to information technology and cybersecurity. For example, the Federal Financial Institutions Examination Council (the “FFIEC”), which is a council comprised of the primary federal banking regulators, has issued guidance and supervisory expectations for banking organizations with respect to information technology and cybersecurity. In addition, state regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including implementing or modifying data encryption requirements, data breach notifications, and information security. We expect this trend of state-level activity and consumer expectations in those areas to continue to heighten, and we are continually monitoring for developments in the states in which our clients are located. Our regulators regularly examine us for compliance with applicable laws and standards with respect to these topics. If we fail to observe such regulatory guidance and standards, we could be subject to various regulatory sanctions.

A banking organization is required to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.

Other Regulations

The Bank is a member of the FHLB, which makes loans or advances to members. All advances are required to be fully secured by sufficient collateral as determined by the FHLB. To be a FHLB member, financial institutions must demonstrate that they originate and/or purchase long-term home mortgage loans or MBS. The Bank is required to purchase and maintain stock in the FHLB. At December 31, 2025, the Bank had $46.7 million in FHLB stock, which was in compliance with this requirement.

Volcker Rule

The so-called “Volcker Rule” restricts banking entities from engaging in short‑term proprietary trading and from certain activities with “covered funds.” These restrictions do not currently have, and are not expected to have, a material impact on the Company’s investing or trading activities. The Volcker Rule permits various exempt activities, including transactions involving government obligations, repurchase and reverse‑repurchase agreements, securities lending, and liquidity‑management transactions conducted in accordance with regulatory requirements.

Effect on Economic Environment

The policies of regulatory authorities, including the monetary policy of the FRB, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the FRB to affect the money supply are open market operations in U.S. government securities, changes in the discount rate on borrowings and changes in reserve requirements with respect to deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid for deposits. The FRB monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. We cannot predict the nature of future monetary policies and the effect of such policies on our business and earnings.

Future Legislation or Regulation

Federal, state and local governments, legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, their holding companies and other financial institutions. Changes in laws, regulations or regulatory policies could adversely affect the operating environment for us in substantial and unpredictable ways, increase our cost of doing business, impose new restrictions on the way in which we conduct our operations or add significant operational constraints that might impair our profitability. We cannot predict whether new policies or legislation will be enacted or adopted and, if enacted or adopted, the effect that it, or any implementing regulations, would have on us and our subsidiaries’ business, financial condition or results of operations. The full effect that these changes will have on us and our subsidiaries remains uncertain at this time and may have a material adverse effect on our business, our operations or financial condition.For more information on how the regulatory environment, enforcement actions, findings and ratings could also have an impact on our strategies, the value of our assets, or otherwise adversely affect our business see "Risk Factors" in Item 1A of this Form 10-K.

An investment in our securities is subject to certain risks. Prospective and current investors in our securities should carefully consider the following risks, together with all the other information contained in this Annual Report on Form 10-K, including the sections titled “Forward-Looking Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes in this Annual Report on Form 10-K. If any of the following risks actually occur, our business, results of operations, and financial condition could suffer. In that event, the value of our securities could decline, and you may lose all or part of your investment. Our business, results of operations, and financial condition could also be harmed by risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Relating to Our Operations

New lines of business, new products and services, or strategic project initiatives, or new partnerships may subject us to additional risks.

From time to time, we may seek to implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible, which could in turn have a material negative effect on our operating results. New lines of business and/or new products or services also could subject us to additional regulatory requirements, increased scrutiny by our regulators and other legal risks.

Additionally, from time to time we undertake strategic project initiatives, including but not limited to, payment processing, investment in technology, process improvement, client experience and fintech partnerships or acquisitions, such as our acquisition of BancEdge. Significant effort and resources are necessary to manage and oversee the successful completion of these initiatives. These initiatives often place significant demands on a limited number of employees with subject matter expertise and management and may involve significant costs to implement as well as increase operational risk as employees learn to process transactions under new systems. The failure to properly execute on these strategic initiatives could adversely impact our business and results of operations.

Increasingly, community banks, including the Bank, are partnering with fintech providers to distribute or market their products and services. Bank regulators have, and may in the future, hold banks responsible for the activities of these fintech companies, including in respect of bank secrecy act or anti-money laundering matters, or may take the view that these relationships present safety and soundness issues.

We are subject to certain risks in connection with our use of technology.

Our cybersecurity measures may not be sufficient to mitigate losses or exposure to cyber-attack or cyber theft.

Communications and information systems are essential to the conduct of our business, as we use such systems to manage our client relationships, our general ledger and virtually all other aspects of our business as well as process customer and merchant payments via the BancEdge platform. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks are vulnerable to breaches, unauthorized access either directly or indirectly through our vendors, misuse, computer viruses, or other malicious code and other types of cyber-attacks. Generative artificial intelligence is further increasing risks in this area, including by making fraud detection more difficult, particularly with detection devices that use voice recognition or authentication. The techniques used by bad actors change frequently, may not be recognized until launched, and may not be recognized until well after a breach has occurred. If one or more of these events occur, this could jeopardize our clients' confidential and other information that we process and store, or otherwise cause interruptions in our operations or the operations of our clients or counterparties.

Several states and their governmental agencies also have adopted or proposed cybersecurity laws. Privacy laws in the State of California and the State of Colorado, for example, require regulated entities to establish measures to identify, manage, secure, track, produce, and delete personal information. The occurrence of cyber-attacks may require us to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through our current insurance policies. If a cyber-attack succeeds in disrupting our operations or disclosing confidential data, we could also suffer significant reputational damage in addition to possible regulatory fines or client lawsuits.

We provide internet banking services to our clients which have additional cyber risks related to our client’s personal electronic devices and electronic communication. Any compromise of personal electronic device security could jeopardize the confidential information of our clients and expose our clients to account take-overs and the possibility for financial crimes such as fraud or identity theft and deter clients from using our internet banking services. The precautions we take may not protect our systems from future vulnerabilities, data breaches or other cyber threats. Losses due to unauthorized account activity could harm our reputation and may have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our security measures may not protect us from systems failures or interruptions.

While we have established policies and technical controls to prevent or limit the impact of systems failures and interruptions, there are no absolute assurances that such events will not occur or that the resulting damages will be adequately mitigated.

We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems.

We outsource certain aspects of our data processing and operational functions to third-party service providers. If our third-party service providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, our and our clients’ information may be compromised, and our business operations could be adversely impacted.

We rely on third-party service providers to help ensure the confidentiality of our and our clients’ information and acknowledge the additional risks these third parties expose us to. Third-party service providers may experience unauthorized access to and disclosure of or destruction or corruption of our or our clients’ information. In addition, we are exposed indirectly through our third-party service providers who may experience their own cyber breach and as a result compromise our data and/or lead to service interruptions. Any failure or interruption, or breaches in security, of these systems could result in failures or interruptions in our client relationship management, general ledger, deposit, loan origination, and servicing systems. The occurrence of any systems failure or interruption could damage our reputation and result in a loss of clients and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

The development and use of new technologies, including artificial intelligence (“AI”), presents risks and challenges that may adversely impact our business.

The banking and financial services industry is experiencing rapid technological change, including increased use of AI. We and our third-party vendors may develop or utilize AI and other emerging technologies in certain business processes, products, or services. Our ability to successfully implement and manage these technologies, or to integrate them into existing systems, may be limited and could result in service disruptions, processing errors, compliance failures, or increased operational risk.

AI systems, particularly those developed or operated by third parties, may produce inaccurate or harmful outputs, improperly disclose confidential or proprietary information, reflect unintended biases, or otherwise fail to perform as intended. Our reliance on third-party technology providers may limit our visibility into or control over these risks. Any failures in the development, implementation, or use of AI or other technologies, or evolving legal and regulatory requirements governing their use, could expose us to regulatory scrutiny, litigation, financial losses, or reputational harm and adversely affect our business, financial condition, and results of operations.

To the extent we acquire other banks, bank branches, other assets, or other businesses, we may be negatively impacted by certain risks inherent with such acquisitions.

Acquiring other banks, bank branches, other assets, or other businesses involves various risks, including the risks of incorrectly assessing the credit quality of acquired assets, encountering greater than expected costs of integrating acquired banks, branches or businesses, or in the development of technology platforms, the risk of loss of clients and/or employees of the acquired bank, branch or business, executing cost savings measures, not achieving revenue enhancements and otherwise not realizing the transaction’s anticipated benefits. Our ability to address these matters successfully cannot be assured. There are also regulatory risks in connection with acquisitions, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business. In addition, pursuing an acquisition may divert resources or management’s attention from ongoing business operations, may require investment in integration and in development and enhancement of additional operational and reporting processes and controls, and may subject us to additional regulatory scrutiny. To finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute our existing stockholders.

Acquiring other banks, bank branches, other assets or other businesses, also involves risks associated with integration, which may cause us to not fully realize the benefits of an acquisition.

The success of any such transaction will depend on, among other things, our ability to combine and integrate the acquired assets or business into our business. If we are not able to successfully achieve this objective, the anticipated benefits of the transaction may not be realized fully, or at all, or may take longer to realize than expected. The integration process for an acquisition will likely result in the diversion of management’s time on integration-related issues and could result in the disruption of our business. These transition matters could have an adverse effect on us for an undetermined amount of time after the completion of any acquisition.

Our payment processing and merchant acquiring activities expose us to regulatory, fraud, third-party, and operational risks that could materially adversely affect our business and financial results.

We provide payment processing and merchant acquiring services and are subject to extensive requirements imposed by payment card networks, NACHA, and other payment networks. Failure by us, our merchants, or third-party intermediaries to comply with these requirements, or changes in network rules or their interpretation, could result in fines, penalties, increased costs, suspension, or termination of our registrations or certifications, which could limit our ability to provide these services and adversely affect our business. In some cases, we may be required to bear fines, penalties, or other losses if we are unable to recover such amounts from merchants or other third parties.

Our payment processing activities also expose us to fraud, chargebacks, and other losses arising from merchant activity, including situations in which merchants are unwilling or unable to satisfy their obligations due to financial distress, closure, or bankruptcy. In addition, our reliance on independent sales organizations, employees, third-party vendors, and technology systems increases our exposure to operational risks, including failures in oversight, execution errors, data processing or technology disruptions, cybersecurity incidents, and breakdowns in internal controls. Any of these risks, individually or in the aggregate, could have a material adverse effect on our business, financial condition, and results of operations.

Managing reputational risk is important to attracting and maintaining clients, investors and employees.

Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, regulatory investigations, marketplace rumors and fraudulent activities of our clients. Negative publicity regarding our business, employees, or clients, with or without merit, may result in the loss of clients, investors and employees, costly litigation, a decline in revenues, and/or increased governmental oversight.

If the public perception of financial institutions remains negative, then our reputation and business may be adversely affected by negative publicity or information regarding our business and personnel, whether or not accurate or true. Such information has in the past and may in the future be posted on social media or other Internet forums or published by news organizations and the speed and pervasiveness with which information can be disseminated through these channels, in particular social media, may magnify risks relating to negative publicity.

Moreover, our customers, shareholders, employees, regulators, and other stakeholders have diverse expectations, demands, and perspective on a range of topics, including environmental and social topics, which are continuing to evolve and, in some cases, diverge. We may not be able to meet the diverse expectations and demands of all of our stakeholders, which could harm our reputation, reduce customer demand for our products and services, and subject us to legal and operational risks.

We depend on key management personnel.

Our success, to a large extent, depends on the continued employment of our key management personnel. The unexpected loss of the services of any of these individuals could have a detrimental effect on our business. Although we have entered into employment agreements with our Chief Executive Officer and our Chief Financial Officer, no assurance can be given that these individuals, or any of our key management personnel, will continue to be employed by us. The loss of any of these individuals could negatively affect our ability to achieve our business plan and could have a material adverse effect on our results of operations and financial condition.

We have a net deferred tax asset that may not be fully realized.

We have a net DTA and cannot assure that it will be fully realized. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities computed using enacted tax rates. If we determine that we will not achieve sufficient future taxable income to realize our net deferred tax asset, we are required under GAAP to establish a full or partial valuation allowance. If we determine that a valuation allowance is necessary, we are required to incur a charge to operations. We regularly assess available positive and negative evidence to determine whether it is more likely than not that our net deferred tax asset will be realized. Realization of a deferred tax asset requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty. As of December 31, 2025, we had a net DTA of $656.8 million. For additional information, see "Note 16. Income Taxes" in Item 8 of this Form 10-K.

Changes in market conditions or strategic balance sheet actions may result in realized losses on investment securities or other assets.

Following the Merger, the Company executed a balance sheet repositioning strategy designed improve funding mix, reduce interest rate sensitivity, and support long-term earnings performance. As part of this strategy, we sold certain securities portfolios and mortgage loans. These transactions resulted in the recognition of losses, primarily reflecting market conditions and interest rate movements at the time of sale; however, these actions were undertaken as part of our broader efforts to strengthen our balance sheet and reposition the Company for future growth. The fair value of our investment securities, loan portfolios and certain other financial assets is influenced by a variety of factors, including changes in interest rates, credit spreads, market liquidity, prepayment assumptions and overall economic conditions. As a result, these assets may from time to time have a fair value that is below their amortized cost basis. Unrealized losses on AFS securities are reflected in accumulated other comprehensive income (loss), while HTM securities are carried at amortized cost and not adjusted for changes in fair value unless a credit-related impairment is recognized. If we were to sell securities or other assets that are in an unrealized loss position, we may be required to recognize realized losses in earnings.

We regularly evaluate opportunities to improve our asset mix, funding profile, and risk positioning in light of market conditions and strategic objectives. Future asset sales, if any, could result in additional gains or losses depending on market factors, including interest rates, credit spreads, and buyer demand at the time of sale. While such transactions may result in the recognition of losses in the period incurred, they may also improve our long-term liquidity profile, capital position, and earnings stability. Any material losses recognized in future periods, whether from strategic repositioning activities or the realization of previously unrealized losses, could adversely affect our financial condition and results of operations.

Our level of indebtedness could adversely affect our ability to raise capital and meet our debt obligations.

As of December 31, 2025, the Company had outstanding indebtedness in the amount of approximately $3.0 billion. Our existing indebtedness, together with any future incurrence of additional indebtedness, could have important consequences for our creditors and stockholders. For example, our indebtedness could limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions, and other general corporate purposes. It may also restrict us from making strategic acquisitions or could force us to make non-strategic divestitures. Additionally, our debt obligations could limit our ability to pay dividends to stockholders and increase our vulnerability to general economic and industry conditions. Furthermore, a substantial portion of our cash flow from operations may need to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the cash available to fund our operations, capital expenditures, and future business opportunities.

Risks Related to Credit and Interest Rates

If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer.

The determination of the appropriate level of the allowance for credit losses inherently involves a high degree of subjectivity and requires us to make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. If our estimates are incorrect, the allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for additions to our allowance through an increase in the provision for loan losses. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans, fraud and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. Our allowance for credit losses was 1.12% of loans and leases HFI and 176.25% of nonaccrual loans and leases as of December 31, 2025. In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the recognition of further charge-offs (which may in turn also require an increase in the provision for credit losses), based on judgments different than that of management. Any increases in the provision for credit losses will result in a decrease in net earnings and may have a material adverse effect on our financial condition and results of operations.

ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which we adopted on January 1, 2020, substantially changed the accounting for credit losses on loans and other financial assets held by banks, financial institutions, and other organizations. The CECL model materially impacts how we determine our allowance for credit losses and required us to increase our allowance for credit losses. Furthermore, we may experience more fluctuations in our allowance for credit losses, which may be significant.

Additionally, loans to venture-backed borrowers support the borrowers’ operations, including operating losses, working capital requirements, and fixed asset acquisitions. Venture-backed borrowers are at various stages in their development and are, generally, reporting operating losses. The primary sources of repayment are future additional venture capital equity investments or the sale of the company or its assets. Our venture-backed borrowers’ business plans may fail, increasing the likelihood for credit losses related to loans to venture-backed borrowers.

In accordance with GAAP, we maintain an allowance for loan and lease losses to provide for loan defaults and non-performance. Our allowance for loan and lease losses allocable to loans to venture-backed borrowers may not be appropriate to absorb actual credit losses arising from these loans, and future provisions for credit losses could materially and adversely affect our operating results.

There are risks associated with our lending activities and our allowance for credit losses may prove to be insufficient to absorb actual losses in our loan portfolio.

Lending money is a substantial part of our business. Every loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment. This risk is influenced by several factors, including the cash flow for the borrower, and, if applicable, the project being financed, as well as the borrower’s credit history. In the case of collateralized loans, changes and uncertainties regarding the future value of the collateral also play a significant role. Additionally, fluctuations in interest rates, shifts in economic and industry conditions, and the duration of the loan all contribute to the overall level of risk.

We maintain an allowance for credit losses which we believe is appropriate to provide for probable losses inherent in our loan portfolio. Management determines the amount of this allowance through regular reviews and consideration of various factors. These include an ongoing assessment of the quality, size, and diversity of the loan portfolio, as well as evaluations of nonaccrual loans. Historical default, loss, and recovery experiences are also taken into account, along with current and anticipated economic conditions. Additionally, management considers the risk characteristics associated with different loan classifications and the amount and quality of collateral, including guarantees, that secure the loans.

Our business and operating results could be adversely affected by uncertainty in the political environment and governmental fiscal and monetary policies.

Our success depends, to a certain extent, upon local and national economic and political conditions, as well as governmental, fiscal, and monetary policies. An unpredictable or volatile political environment in the United States, reductions in government spending, concerns related to the U.S. debt ceiling, the imposition of tariffs and retaliatory responses, other changes in government policy, and other factors beyond our control, could negatively impact business and market conditions, economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of which in turn could cause our business and financial results to suffer. Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations, or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2023, Fitch lowered its long-term sovereign credit rating on the U.S. from AAA to AA+. A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.

Our business and financial results are also significantly affected by the fiscal and monetary policies of the U.S. government and its agencies. We are particularly affected by the policies of the FRB, which regulates the supply of money and credit in the United States in pursuit of maximum employment, stable prices, and moderate long-term interest rates. The FRB and its policies influence the availability and demand for loans and deposits, the rates and other terms for loans and deposits, the conditions in equity, fixed-income, currency, and other markets, and the value of securities and other financial instruments. Additionally, tax, tariff, and other fiscal policies, moreover, impact not only general economic and market conditions but also give rise to incentives or disincentives that affect how we and our customers prioritize objectives, deploy resources, and run households or operate businesses. Both the timing and the nature of any changes in monetary or fiscal policies, as well as their consequences for the economy and the markets in which we operate, are beyond our control and difficult to predict but could adversely affect our business and operating results.

Also, the FRB regulates the supply of money and credit in the United States. Its monetary policies determine in a large part our cost of funds for lending and investing and the return that can be earned on those loans and investments, both of which affect our net interest margin. FRB policies can also materially affect the value of financial instruments that we hold, such as debt securities and certain mortgage loans HFS. Its policies also can affect our borrowers, potentially increasing the risk that they may fail to repay their loans or satisfy their obligations to us. Changes in policies of the FRB are beyond our control and the impact of changes in those policies on our activities and results of operations can be difficult to predict.

Our business may be adversely affected by difficult economic conditions, including inflationary pressures or volatility in the financial markets, which may impact our business, financial position, and results of operations.

Robust demand, labor shortages, and supply chain constraints have led to persistent inflationary pressures throughout the economy. In response to these inflationary pressures, beginning early in 2022, the FRB raised benchmark interest rates rapidly, causing the federal funds rate to reach a 23-year high. Although the FRB reduced its benchmark rates several times in 2024 and 2025, the inflationary outlook in the United States is currently uncertain. Amidst these uncertainties, including potential recessionary economic conditions, financial markets have continued to experience volatility. Changes in interest rates can affect numerous aspects of our business and may impact our future performance.

Prolonged periods of inflation have impacted, and may continue to impact, our profitability by negatively impacting our costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation has led to, and may continue to lead to, a decrease in consumer and clients purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses which could decrease our appetite for new credit extensions.

If financial markets remain volatile, this may impact the future performance of various segments of our business, including the value of our investment securities portfolio. We continue to closely monitor economic conditions and the pace of inflation and the impacts of inflation on the larger market, including labor and supply chain impacts.

Any of the effects of these adverse economic conditions would likely have an adverse impact on our earnings, with the significance of the impact generally depending on the nature and severity of such adverse economic conditions.

Our business may be adversely affected by credit risk associated with residential property and declining property values.

As of December 31, 2025, $3.3 billion, or 14%, of our total loans HFI were loans in the other residential real estate mortgage loan portfolio class, as compared with $2.8 billion, or 12%, of our total loans HFI as of December 31, 2024. This type of lending is particularly sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. A decline in residential real estate values as a result of a downturn in the national housing markets has reduced in some areas, and may continue to reduce, the value of the real estate collateral securing these types of loans and increase the risk that we would incur losses if borrowers default on their loans. As a result, these loans may experience higher rates of delinquencies, defaults and losses, which will in turn adversely affect our financial condition and results of operations.

Our real estate loan portfolio is subject to certain risks including market, environmental and project-specific risks.

Our real estate loan portfolio encompasses CRE mortgage, residential real estate mortgage, and real estate construction and land loans, which implicate a variety of risks, including: (i) market risks including increased competition in pricing and loan structure, macroeconomic conditions in the United States and in the markets where we lend, and decreased commercial and residential real estate values in the markets where we lend; (ii) environmental risks including natural disasters and impact on underlying real estate collateral and environmental liabilities with respect to real properties acquired; and (iii) project-specific risks including higher construction costs, failure by developers and contractors to meet project specifications or timelines, and buyers of completed construction projects not being able to secure permanent financing. For further information on these risks and others related to our real estate loan portfolio, see "Lending Activities" in Item 1 of this Form 10-K.

Our loan portfolio possesses increased risk due to our level of adjustable rate loans.

Approximately 39% of our loans HFI are adjustable rate loans as of December 31, 2025. Any rise in prevailing market interest rates may result in increased payments for some borrowers who have adjustable rate loans, increasing the possibility of defaults.

Our underwriting practices may not protect us against losses in our loan portfolio.

We seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices, including: analyzing a borrower’s credit history, financial statements, tax returns, and cash flow projections; valuing collateral based on reports of independent appraisers; and verifying liquid assets. Notwithstanding these practices, we have incurred losses on loans that have met these criteria, and may continue to experience higher than expected losses depending on economic factors and borrower behavior. In addition, our ability to assess the creditworthiness of our clients may be impaired if the models and approaches we use to select, manage, and underwrite our clients become less predictive of future behaviors, or in the case of borrower fraud. Finally, we may have higher credit risk, or experience higher credit losses, to the extent our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral. Deterioration in real estate values and underlying economic conditions in Southern California in particular could result in significantly higher credit losses to our portfolio.

Repayment of our commercial and industrial loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may not be sufficient to repay the loan in the event of default.

We make our commercial and industrial loans primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Collateral securing commercial and industrial loans may depreciate over time, be difficult to appraise and fluctuate in value and in the event we are required to assume direct responsibility for the collateral, including but not limited to residential mortgage loans in the case of warehouse credit facilities that we provide to non-bank financial institutions, our allowance for credit losses may increase, which may, in turn, adversely affect our financial condition and results of operations. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect the amounts due from its clients. As of December 31, 2025, our commercial and industrial loans totaled $9.0 billion, or 36% of our total loans HFI.

We are exposed to risk of environmental liabilities with respect to real properties acquired.

In prior years, due to weakness of the U.S. economy and, more specifically, the California economy, including higher levels of unemployment than the nationwide average and declines in real estate values, certain borrowers have been unable to meet their loan repayment obligations and, as a result, we have had to initiate foreclosure proceedings with respect to and take title to a number of real properties that had collateralized their loans. As an owner of such properties, we could become subject to environmental liabilities and incur substantial costs for any property damage, personal injury, investigation and clean-up that may be required due to any environmental contamination that may be found to exist at any of those properties, even though we did not engage in the activities that led to such contamination. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties seeking damages for environmental contamination emanating from the site. If we were to become subject to significant environmental liabilities or costs, our business, financial condition, results of operations, and prospects could be adversely affected.

Secondary mortgage market conditions could have a material adverse impact on our business, results of operations, financial condition, or liquidity.

In addition to being affected by interest rates, the secondary mortgage markets are subject to investor demand for mortgage loans and MBS and investor yield requirements for those loans and securities. These conditions may fluctuate or even worsen in the future.

From time to time, as part of our balance sheet management process, we may also sell SFR loans and other types of mortgage loans from our portfolio, including multi-family loans. We may use the proceeds of loan sales for generating new loans or for other purposes. If secondary mortgage market conditions were to deteriorate in the future and we cannot sell loans at our desired levels, our balance sheet management objectives might not be met. As a result, our business, results of operations, financial condition, or liquidity may be adversely affected.

Any breach of representations and warranties made by us to our loan purchasers or credit default on our loan sales may require us to repurchase loans we have sold.

We have sold or securitized loans we originated into the secondary market pursuant to agreements that generally require us to repurchase loans in the event of a breach of a representation or warranty made by us to the loan purchaser. Any fraud or misrepresentation during the loan origination process, whether by us, the borrower, or other party in the transaction, or, in some cases, upon any early payment default on such loans, may require us to repurchase such loans.

We believe that, as a result of the increased defaults and foreclosures during the 2007 to 2009 recession resulting in increased demand for repurchases and indemnification in the secondary market, many purchasers of loans are particularly sensitive to obtaining indemnification or the requirement of originators to repurchase loans, and would benefit from enforcing any repurchase remedies they may have. Our exposure to repurchases under our representations and warranties could include the current unpaid balance of all loans we have sold. During the years ended December 31, 2025, 2024, and 2023, we sold multi-family and SFR mortgage loans aggregating $24 million, $2.0 billion, and $3.0 billion, respectively. To recognize the potential loan repurchase or indemnification losses on all SFR mortgage and multi-family loans sold, we maintained a total reserve of $1.8 million as of December 31, 2025. Increases to this reserve as a result of the sale of loans are a reduction in our gain on the sale of loans. Increases and decreases to this reserve subsequent to the sale are included as a component of noninterest expense. The determination of the appropriate level of the reserve inherently involves a high degree of subjectivity and requires us to make estimates of repurchase and indemnification risks and expected losses. The estimates used could be inaccurate, resulting in a level of reserve that is less than actual losses.

Deterioration in the economy, an increase in interest rates or a decrease in home and collateral values could increase client defaults on loans that were sold and increase demand for repurchases and indemnification and increase our losses from loan repurchases and indemnification. If we are required to indemnify loan purchasers or repurchase loans and incur losses that exceed our reserve, this could adversely affect our business, financial condition, and results of operations. In addition, any claims asserted against us in the future by loan purchasers may result in liabilities or legal expenses that could have a material adverse effect on our results of operations and financial condition.

Credit impairment in our investment securities portfolio could result in losses and adversely affect our continuing operations.

As of December 31, 2025, we had $2.5 billion of AFS securities, as compared with $2.2 billion of AFS securities as of December 31, 2024.

As of December 31, 2025, AFS securities that were in an unrealized loss position had a total fair value of $1.4 billion with aggregate unrealized losses of $196.9 million. These unrealized losses related primarily to changes in overall interest rates and the resulting impact on valuations of MBS, CMOs, SBA securities and corporate debt securities.

As of December 31, 2025, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion. As of December 31, 2024, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion.

The Company follows a robust credit monitoring process to ensure it has appropriate credit support and, as of December 31, 2025, we believed there was no credit losses and did not have the intent to sell any of our securities in an unrealized loss position and it is likely that we will not be required to sell such securities before their anticipated recovery. Debt securities HTM and AFS are analyzed for credit losses under ASC 326, Financial Instruments - Credit Losses. For debt securities HTM and AFS, the Company estimates current expected credit losses. An allowance for credit losses is established for losses on debt securities HTM and AFS due to credit losses and is reported as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. For more information about ASC Topic 326, see "Note 1. Nature of Operations and Significant Accounting Policies" in Item 8 of this Form 10-K.

We closely monitor our investment securities for changes in credit risk. The valuation of our investment securities also is influenced by external market and other factors, including implementation of SEC and FASB guidance on fair value accounting. Accordingly, if market conditions deteriorate further and we determine our holdings of other investment securities have experienced credit losses, our future earnings, stockholders’ equity, regulatory capital, and continuing operations could be materially adversely affected.

Our income property loans, consisting of commercial real estate and multi-family loans, involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers.

We originate CRE and multi-family loans for individuals and businesses for various purposes, which are secured by commercial properties. These loans typically involve higher principal amounts than other types of loans, and repayment is dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions. For example, if the cash flow from the borrower’s project is reduced as a result of leases not being obtained or renewed in a timely manner or at all, the borrower’s ability to repay the loan may be impaired.

CRE and multi-family loans also expose us to credit risk because the collateral securing these loans often cannot be sold easily at acceptable terms. In addition, many of our CRE and multi-family loans are not fully amortizing and contain large balloon payments upon maturity. Such balloon payments may require the borrower to either sell or refinance the underlying property in order to make the payment, which may increase the risk of default or non-payment.

The COVID-19 pandemic and its aftermath has had a potentially long-term negative impact on some CRE portfolios. We continue to monitor our real estate loans secured by office properties because of the risk that tenants may continue to reduce the office space they lease as some portion of the workforce continues to work remotely on a hybrid or permanent basis and that we may not collect all amounts contractually owed to us.

If we foreclose on a CRE or multi-family loan, our holding period for the collateral typically is longer than for residential mortgage loans because there are fewer potential purchasers of the collateral. Additionally, CRE and multi-family loans generally have relatively large balances to single borrowers or groups of related borrowers. Accordingly, if we make any errors in judgment in the collectability of our CRE and multi-family loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. Our CRE and multi-family loans decreased during the year ended December 31, 2025 to $10.4 billion, or 41% of our total loans HFI, from $10.6 billion, or 45% of our total loans HFI, as of December 31, 2024.

The federal banking agencies have expressed concerns about weaknesses in the current CRE market and have applied increased regulatory scrutiny to institutions with CRE loan portfolios that are fast growing or large relative to the institutions’ total capital. Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio.

Our business is subject to interest rate risk and variations in interest rates may hurt our profits.

Our profitability depends to a large extent upon our ability to earn more money in interest that we receive on loans and investments than we pay to our depositors and lenders in interest. Any change in general market interest rates, whether as a result of changes in the monetary policy of the FRB or otherwise, may have a significant effect on NII and prepayments on our loans. If interest rates rise, our NII and the value of our assets could be reduced if interest paid on interest-bearing liabilities, such as deposits and borrowings, increases more quickly than interest received on interest-earning assets, such as loans, and investment securities. This is most likely to occur if short-term interest rates increase at a faster rate than long-term interest rates, which would cause our NII to go down. In addition, rising interest rates may hurt our income, because that may reduce the demand for loans and the value of our securities. If interest rates decline, our fixed, higher-rate loans may be refinanced at lower rates or paid off and our investments may be prepaid earlier than expected. If that occurs, we may have to redeploy the loan or investment proceeds into lower yielding assets, which might also decrease our income. Accordingly, changes in levels of market interest rates could materially and adversely affect our financial condition, net interest margin, results of operations, and profitability. Changes in interest rates also have a significant impact on the carrying value of certain of our assets, such as investment securities, on our balance sheet. In a rapidly changing interest rate environment, we may not be able to manage our IRR effectively, which would adversely impact our financial condition and results of operations.

A reduction in our credit ratings could adversely affect our access to capital and could increase our cost of funds.

The credit rating agencies regularly evaluate the Company and the Bank, and credit ratings are based on a number of factors, including our financial strength and ability to generate earnings, as well as factors not entirely within our control, including conditions affecting the financial services industry, the economy, and changes in rating methodologies. There can be no assurance that we will maintain our current credit ratings. A downgrade of the credit ratings of the Company or the Bank could adversely affect our access to liquidity and capital and could significantly increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us or purchase our securities, reducing our ability to generate earnings.

Funding and Liquidity Risks

We may not be able to develop and maintain a strong core deposit base or other low cost funding sources.

We depend on checking, savings and money market deposit account balances and other forms of deposits as the primary source of funding for our lending activities. Our future growth will largely depend on our ability to expand core deposits, to provide a less costly and stable source of funding. The deposit markets are competitive, and therefore it may prove difficult to grow our core deposit base. Changes we make to the rates offered on our deposit products may affect our finances and liquidity. In addition, our ability to maintain existing or obtain additional deposits may be impacted by factors beyond our control, including perceptions about our reputation, financial strength or the banking industry generally, which could reduce the number of consumers choosing to place deposits with us.

Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on capital levels of our bank subsidiary. While the Bank met the FDIC’s definition of “well-capitalized” as of December 31, 2025, there can be no assurance that it will continue to meet this definition. Our regulators can adjust the requirements to be “well-capitalized” at any time and have authority to place limitations on our deposit businesses, including the interest rate we pay on deposits. An inability to develop and maintain a strong deposit base could have a material adverse impact on our business, financial condition, and results of operations.

In a competitive market, depositors have many choices as to where to place their deposit accounts. As the Bank continues to grow its core deposit base and seeks to reduce its exposure to high rate/high volatility accounts, it may experience a net deposit outflow, which could negatively impact our business, financial condition, and results of operations.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans, and other sources has had, and could continue to have, a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us has been, and could continue to be, impaired by factors that affect us specifically or the financial services industry or economy in general.

Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or adverse regulatory action against us. Our ability to borrow has also been, and could continue to be, impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry.

The failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely. As of December 31, 2025, approximately 28% of our deposits were uninsured and uncollateralized and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition, and results of operations.

Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank.

The soundness and stability of financial institutions are closely interrelated as a result of credit, trading, clearing, and other relationships between institutions. Given the interconnectedness of financial institutions, concerns about, or a default or threatened default by, or failure or threatened failure of, one or more institutions could lead to financial market disruptions and increased expenses, including significant market-wide liquidity problems, losses or defaults by us or other institutions, or credit risk in the event of default of our counterparty or customer. Even rumors or adverse news developments concerning other financial institutions or the Bank may result in rapid deterioration in investor and customer confidence.

We are subject to regulatory capital requirements, which could be made more stringent in the discretion of our regulators.

We are subject to capital and other regulatory requirements specifying minimum amounts and types of capital that we must maintain. From time to time, the regulators may change these regulatory capital and related requirements. If we fail to meet these minimum capital and related requirements, we or our subsidiaries may be restricted in the types of activities we may conduct and we may be prohibited from taking certain capital actions, such as paying dividends and repurchasing or redeeming capital securities. In addition, the failure to meet such requirements could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect customer and investor confidence, our costs of funds and level of required deposit insurance assessments to the FDIC, our ability to pay dividends on our capital stock, our ability to make acquisitions, and our business, results of operations, and financial condition, generally.

The FRB may require us to commit capital resources or take other action to support the Bank.

A bank holding company is required to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. The FRB may require a bank holding company to make capital injections into, or take other action in support of, a troubled subsidiary bank at times when the bank holding company may not be inclined to do so and may charge the bank holding company with engaging in unsafe and unsound practices for failing to commit resources to such a subsidiary bank. Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial distress—even if doing so is not otherwise in the best interest of the Company.

Such a capital injection or other support may be required at a time when our resources are limited, and we may be required to borrow the funds to make the required capital injection. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations.

We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed or on acceptable terms.

We face significant capital and other regulatory requirements as a financial institution. We may need to raise additional capital in the future to provide sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. In addition, we, on a consolidated basis, and the Bank, on a standalone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Importantly, regulatory capital requirements could increase from current levels, which could require us to raise additional capital or reduce our operations.

Our ability to raise additional capital depends on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the financial services and banking industry, market conditions, and governmental activities, and on our financial condition and performance. Accordingly, we may be unable to raise additional capital if needed or on acceptable terms. If we fail to maintain capital to meet regulatory requirements, our liquidity, business, financial condition, and results of operations could be adversely affected.

Our holding company relies on dividends from the Bank for substantially all of its income and as the primary source of funds for cash dividends to our preferred, common, and NVCE stockholders.

The Company is the parent company of, and a separate and distinct legal entity from, the Bank. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, which could result in adverse liquidity events at either the Company and/or the Bank. In particular, the Bank is subject to laws that restrict dividend payments or authorize federal bank regulators to block or reduce the flow of funds from those subsidiaries to the parent company or other subsidiaries. Applicable laws and regulations, including capital and liquidity requirements, could restrict the Bank’s ability to pay dividends or distribute capital to the Company, which could adversely affect our cash flow and financial condition.

There can be no assurance as to the level of dividends we may pay on our common stock and NVCE stock.

Holders of our common stock and NVCE stock are only entitled to receive such dividends as our Board of Directors declares out of funds legally available for such payments. Although we have historically declared cash dividends on our common stock, we are not required to do so and there may be circumstances under which we would reduce, suspend, or eliminate our common stock dividend in the future. This could adversely affect the market price of our common stock.

As a bank holding company, our ability to pay dividends is affected by the policies and enforcement powers of the FRB and any future payment of dividends will depend on the Bank’s ability to make distributions and payments to the Company as our principal source of funds to pay such dividends. The Bank is also subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company. There are numerous laws and banking regulations that restrict the Bank’s ability to pay dividends or make capital distributions to the Company. These statutes and regulations require, among other things, that the Bank maintain certain levels of capital in order to pay a dividend. Further, our banking authorities have the ability to restrict the Bank’s payment of dividends through supervisory action. In addition, in the future, we may enter into borrowing or other contractual arrangements that restrict its ability to pay dividends. As a consequence of these various limitations and restrictions, we may not be able to make the payment of dividends on our common stock and NVCE stock.

Legal and Compliance Risks

We operate in a highly regulated environment and our business, operations, and income may be adversely affected by changes in laws, rules, and regulations governing our operations.

We are subject to extensive regulation, supervision and legal requirements that affect virtually all aspects of our business and operations. The regulatory agencies governing banking organizations are focused on protecting customers, depositors, the DIF, and the overall financial stability of the United States—not our stockholders or creditors. See "Supervision and Regulation" in Item 1 of this Form 10-K for information on the regulation and supervision framework which governs our Company and its activities.

We are regularly examined and inspected by our regulators, including the FRB and DFPI, who possess extensive authority and discretion in their interpretation, implementation, supervision and enforcement of their regulatory agenda.This oversight covers a wide range of matters, such as dividends or capital distributions by the Bank or the Company, and capital and liquidity requirements, which may be more stringent than generally applicable laws. Regulators also influence the types and terms of products we offer, the activities we conduct, our operations, and the investments we make. They may assess the composition, risk characteristics, potential adverse classification, allowance and risk reserves in connection with loans and other assets, including reclassifying assets. Additionally, they evaluate the level of deposit insurance premiums as well as our deposit-gathering and other funding sources. The quality of our board and management oversight, as well as the effectiveness of our risk management and compliance programs, including consumer protection, information technology, cybersecurity, third-party risk management, anti-money laundering, and sanctions compliance are also subject to regulatory review. Furthermore, regulators evaluate our commitment to meeting the credit needs of low and moderate income neighborhoods under the CRA, and their approval is required for applications related to new branches, new activities, mergers, and acquisitions. Finally, they influence our rate of growth and other strategic or expansionary initiatives.

Also, failure by the Company to meet the applicable eligibility requirements for financial holding company status (including capital and management requirements and that the Bank maintain at least a “Satisfactory” CRA rating) may result in restrictions on certain activities of the Company, including the commencement of new activities and mergers with or acquisitions of other financial institutions and could ultimately result in the loss of financial holding company status. We must devote substantial time and resources to compliance and meeting our regulators’ supervisory expectations, which may adversely affect our ability to operate profitably or to pursue advantageous business opportunities.

Congress, state legislatures, and federal and state agencies continually review banking, lending, and other laws, regulations and policies for possible changes, and there have been significant revisions to the laws, regulations, and policies applicable to banks and bank holding companies that have been enacted or proposed in recent years. We face the risk of becoming subject to new or more stringent requirements in connection with the introduction of new regulations or modifications of existing regulations, including based on changes in the U.S. presidential administrations or one or both houses of Congress and other factors, and this could require us to hold more capital or liquidity or have other adverse effects on our businesses or profitability. Moreover, changes in the leadership of federal banking agencies may impact rulemaking, supervision, examination, and enforcement priorities and policies of the agencies, and which may result in changing interpretations of existing rules and guidance. The impact of such changes may impact our business and our customers' business in unpredictable ways.

Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation, that applies to us could have a material adverse impact on our operations. Because our business is highly regulated, the laws and applicable regulations are subject to frequent change. Any new laws, rules and regulations such as the California Consumer Privacy Act (the “CCPA”) and the Colorado Privacy Act could make compliance more difficult, expensive, costly to implement or may otherwise adversely affect our business, financial condition or growth prospects. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things.

We are a party to a variety of litigation and other actions.

We are subject to a variety of litigation pertaining to fiduciary and other claims and legal proceedings in the ordinary course of business and in connection with the Merger. Currently, there are certain legal proceedings pending against us in the ordinary course of business and in connection with the Merger. Such legal proceedings have caused us to incur costs and diverted the time and attention of our board and management, and may continue to do so in the future. While the outcome of any legal proceeding is inherently uncertain, we believe that any liabilities arising from pending legal matters would be immaterial based on information currently available. However, if actual results differ from our expectations, it could have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Changes in federal, state or local tax laws, or audits from tax authorities, could negatively affect our financial condition and results of operations.

We are subject to changes in tax law that could increase our effective tax rates. These law changes may be retroactive to previous periods and as a result could negatively affect our current and future financial performance. The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics of home ownership, which could require an increase in our provision for loan losses, which would reduce our profitability and could materially adversely affect our business, financial condition, and results of operations. Further, tax law changes could make some businesses and industries less inclined to borrow, potentially reducing demand for our commercial loan products. Finally, we may be negatively impacted more than our competitors because our business strategy focuses on California, which has a higher cost real estate market compared to other states.

We are also subject to potential tax audits in various jurisdictions and in such event, tax authorities may disagree with certain positions we have taken and assess penalties or additional taxes. While we assess regularly the likely outcomes of these potential audits, there can be no assurance that we will accurately predict the outcome of a potential audit, and an audit could have a material adverse impact on our business, results of operations, and financial condition.

Failure to comply with applicable laws or regulations, or to satisfy our regulators' supervisory expectations, could subject us to supervisory or enforcement action, which could adversely affect our business, financial condition, and results of operations.

If we do not comply with applicable laws or regulations, if we are deemed to have engaged in unsafe or unsound conduct, or if we do not satisfy our regulators’ supervisory expectations, then we may be subject to increased scrutiny, supervisory criticism, governmental or private litigation and/or a wide range of potential monetary penalties or enforcement actions. Such actions could arise even if we are acting in good faith or operating under a reasonable interpretation of the law. Such actions may be public or of a confidential supervisory nature. Such actions could include, for example, monetary penalties, payment of damages, restitution or disgorgement of profits, directives to take remedial action or to cease or modify practices, restrictions on growth or expansionary proposals, denial or refusal to accept applications, removal of officers or directors, prohibition on dividends or capital distributions, increases in capital or liquidity requirements and/or termination of the Bank’s deposit insurance. Such actions could have an adverse effect on our business, financial condition, and results of operations, including as a result of reputational harm.

In addition, the U.S. federal government, U.S. states, and certain other countries and regions have adopted or are considering legislation, regulation, or policies that reflect diverging and, in some cases, potentially conflicting, policy goals, for example, on social and environmental topics such as climate change, diversity, and companies’ actions, commitments, and initiatives on such issues. Compliance with such laws, regulations, or policies, including any that may be adopted in the future, could, among other things, increase the costs of operating our businesses, reduce the demand for our products and services, impact our ability to meet or maintain current or future goals, targets or commitments, and increase our legal, operational, and reputational risks, any or all of which could adversely affect our results of operations.

Non-compliance with laws and regulations could result in fines or sanctions or operating restrictions.

Our federal regulators have extensive discretion in connection with their supervisory and enforcement activities over our operations and compliance laws and regulations. Any new laws and regulations could make compliance more difficult or expensive or otherwise adversely affect our business. One aspect of our business that we believe presents risks in this particular area is the conflict between federal and state law, including but not limited to cannabis and cannabis related businesses, which are legal in the State of California and the State of Colorado and prohibited by federal law. If our risk management and compliance programs prove to be ineffective, incomplete or inaccurate, we could suffer unexpected losses and/or incur fines, penalties or restrictions to operations, which could materially adversely affect our results of operations or financial condition. As part of our federal regulators’ enforcement authority, significant civil or criminal monetary penalties, consent orders, or other regulatory actions can be assessed against the Bank. Such actions could require us to make changes to our operations, including the clients that we serve, and may have an adverse impact on our operating results.

We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

The provision of financial services to consumers is governed by a wide range of laws and regulations, including the Equal Credit Opportunity Act, the Fair Housing Act, the GLBA, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB, the Justice Department and other federal agencies are generally responsible for enforcing these laws and regulations. Failure to comply with these laws could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity, and restrictions on expansion activity. Private parties may also have the ability to challenge an institution’s performance under certain of these in private or class action litigation.

In addition, the CFPB has broad rulemaking, supervisory, and enforcement powers under various federal consumer financial protection laws with respect to banking organizations with assets of $10 billion or more. The Bank has assets of at least $10 billion; therefore, we are subject to the supervision, examination, and primary enforcement jurisdiction of the CFPB with respect to federal consumer financial protection laws. Such actions may adversely affect our business, financial condition, results of operations, and/or competitive position may be adversely affected as a result.

We are subject to a wide range of laws related to anti-money laundering, economic sanctions, and prevention of financial crime, which could increase our costs or subject us to significant penalties.

We are subject to a wide range of laws related to anti-money laundering, economic sanctions and prevention of financial crime, including but not limited to the BSA, the USA PATRIOT Act and economic sanctions programs. We are required to, among other things, maintain an effective anti-money laundering and counter-terrorist compliance program, identify and file suspicious activity and currency transaction reports, and block transactions with sanctioned persons or jurisdictions. Compliance with these laws requires significant investment of management attention and resources. These laws are enforced by a number of regulatory authorities, including the FRB, OFAC, the Financial Crimes Enforcement Network, the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. Failure to comply with these laws, or to meet our regulators’ supervisory expectations in connection with these laws, could subject us to supervisory or enforcement action, significant financial penalties, criminal liability, and/or reputational harm. Several banking institutions have received large fines, or suffered limitations on their operations, for non-compliance with these laws and regulations. Although we have developed policies, procedures and processes designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in detecting violations of these laws and regulations.

Risks Relating to External Factors and Markets

Severe weather events, natural disasters such as earthquakes and wildfires, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events could significantly impact our business.

Severe weather events, natural disasters such as earthquakes and wildfires, pandemics, epidemics and other public health crises, acts of war or terrorism (and any responses thereto), and other external events have had and could have a significant adverse impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of our borrowers to repay their outstanding loans, cause significant property damage or otherwise impair the value of collateral securing our loans, and result in loss of revenue and/or cause us to incur additional expenses. The occurrence of any such event could have a material adverse effect on us or our results of operations and our financial condition.

Ongoing geopolitical instability, including as a result of Russia’s invasion of Ukraine and the conflict in the Middle East, has negatively impacted, and could in the future negatively impact, the global and U.S. economies, including by causing supply chain disruptions, rising prices for oil and other commodities, volatility in capital markets and foreign currency exchange rates, rising interest rates and heightened cybersecurity risks. The extent to which such geopolitical instability adversely affects our business, financial condition and results of operations, as well as our liquidity and capital profile, will depend on future developments, which are highly uncertain and unpredictable.

Our financial condition and results of operations are dependent on the national and local economy, particularly in the Bank’s market areas. A worsening in economic conditions in the market areas we serve may impact our earnings adversely and could increase the credit risk of our loan portfolio.

We cannot accurately predict the possibility of the national or local economy’s return to recessionary conditions or to a period of economic weakness, which would adversely impact the markets we serve. Our primary market area is concentrated in the greater Los Angeles, Orange, San Diego, San Bernardino, Riverside, and Ventura counties of California, with full-service branches also located in Denver, Colorado and Durham, North Carolina. Adverse economic conditions in any of these areas can reduce our rate of growth, affect our clients’ ability to repay loans and adversely impact our financial condition and earnings. General economic conditions, including inflation, unemployment and money supply fluctuations, also may affect our profitability adversely.

A deterioration in economic conditions could result in a number of consequences, including but not limited to the following, any of which could have a material adverse effect on our business, financial condition, and results of operations. For example, we could experience reduced demand for our products and services, an increase in loan delinquencies, problem assets, and foreclosures, and a decrease in the value of collateral securing our loans. Additionally, the amount of our low-cost or noninterest-bearing deposits could decline, further impacting our financial stability.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client.

Strong competition within our market areas may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, non-bank lenders, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors have substantially greater name recognition, resources and lending limits than we do and may offer certain services or prices for services that we do not or cannot provide. Our profitability depends upon our continued ability to successfully compete in our markets.

Continued technological advances, including cryptocurrencies and blockchain and other distributed ledger technologies, and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products, and for financial institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities trading, lending and payment solutions. In addition, technological advances, including digital currencies and alternative payment methods, may diminish the importance of depository institutions and other financial intermediaries in the transfer

Cybersecurity Risk Management and Strategy

Our enterprise risk management program is designed to identify, measure, monitor and control all significant risks across various aspects of our company. Cybersecurity risk management processes are integrated into this program, given the increasing reliance on technology and potential of cyber threats. Our Chief Information Security Officer (“CISO”) is primarily responsible for our cybersecurity program and is a key member of the risk management function, reporting directly to our Chief Risk Officer (“CRO”).

Our objective for managing cybersecurity risk is to maintain appropriate layers of safeguards to protect information systems from possible threats and to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. Our information security program is designed in accordance with industry frameworks, such as the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, and is periodically reviewed and updated at least annually and upon significant changes to our operating environment. Our program includes the following key elements:

• Systems Safeguards. We adopt the “trust by design” framework when designing new products, services and technology. We employ a variety of administrative, preventative and detective controls and tools designed to monitor, detect, block, and provide alerts regarding suspicious and unauthorized activity and to report on suspected advanced persistent threats.
• Incident Response. We maintain an Incident Response Plan (“IRP”) that provides a documented framework for responding to actual or potential cybersecurity incidents. The IRP is coordinated through the CISO and key members of management and addresses roles, responsibilities, and communication and contract strategies in the event of a compromise, including analysis of reportable events in accordance with applicable legal and compliance requirements.
• Collaboration. We engage cybersecurity experts and third-party specialists to perform regular assessments of our infrastructure, software systems and network architecture. We also leverage internal and external auditors and independent external partners to periodically review our processes, systems and controls, including with respect to our information security program, to assess their design and operating effectiveness.
• Education and Training. We have regular and ongoing security education and training for employees, practical exercises that simulate actual cyber-attacks, and recovery and resilience tests.
• Third-Party Risk Management. We maintain a third-party risk management program designed to identify, assess and manage cybersecurity risks associated with external service providers, contractors and vendors.

To our knowledge, cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, including its business strategy, results of operations, or financial conditions. Our internal systems, processes, and controls are designed to mitigate and minimize potential losses resulting from cyber-attacks, however, there can be no assurance that our cybersecurity risk management program will be fully effective in protecting the confidentiality, integrity and availability of our information systems and our solutions. For further discussion of risks from cybersecurity threats, see Item 1A "Risk Factors" in the section titled “We are subject to certain risks in connection with our use of technology.”

Governance

Our Board of Directors considers cybersecurity risk as part of its risk management function and has delegated to the Enterprise Risk Committee oversight and governance of the technology program and the information security program, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. The Enterprise Risk Committee reviews our cybersecurity risk profile on a quarterly basis. Additionally, our CISO and our Chief Information Officer ("CIO") provide quarterly reports to the Enterprise Risk Committee regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes.

The Information Technology and Information Security sub-committee is a sub-committee of the management level Enterprise Risk Management Committee and is represented by managers within various departments and includes the CISO, the Chief Technology Officer ("CTO"), and the CIO and other key departmental managers throughout the entire company. This sub-committee meets quarterly to provide oversight of the technology management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. Meetings with key team leaders occur as required and in accordance with the IRP in order to facilitate timely informing and monitoring efforts. The Company's Executive Leadership Team meets monthly with the CISO, CIO, and CTO and reports summaries of key issues, including significant cybersecurity and/or privacy incidents, discussed at various meetings and responses to any actions taken to/from the Enterprise Risk Committee on a quarterly basis or more frequently as may be required by the IRP.

Our CISO has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management and is accountable for managing our enterprise information security department and developing and implementing our information security program. The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, client, vendor and employee education and awareness, and business continuity and disaster recovery. The department, as a whole, consists of information security professionals with varying degrees of professional education, certifications and experience.

As of December 31, 2025, we had a total of 107 properties consisting of 79 full-service branch offices and 28 other offices. We own six locations, and the remaining properties are leased. Our properties are located throughout the United States, however, the vast majority of which are located in California. Our headquarters, which we lease, is located at 11611 San Vicente Blvd., Suite 500, Los Angeles, CA 90049.

For additional information regarding properties of the Company, see "Note 6. Premises and Equipment, Net" in Item 8 of this Form 10-K.

See "Note 13. Commitments and Contingencies" in Item 8 of this Form 10-K. That information is incorporated into this item by reference.

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 "Risk Factors" in Item 1A of this Form 10-K.

For the discussion of the financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 3, 2025, which is incorporated herein by reference.

Overview

Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and a member of the FRB. 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 one of the nation’s premier relationship-based business banks, providing banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and deposit products and services through 79 full-service branches located throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide. The Bank also provides full-service payment processing solutions to its clients and serves the Community Association Management industry nationwide with its technology-forward platform, SmartStreet™. The Bank is committed to its local communities by supporting organizations that provide financial literacy and job training, small business support, affordable housing, and more.

Presentation of Results – PacWest Bancorp Merger

On November 30, 2023, PacWest Bancorp merged with and into Banc of California, Inc. (the “Merger”), which remained the legal corporation and completed a $400 million equity capital raise. The Merger, an all-stock transaction, was treated as a reverse merger for accounting, making PacWest Bancorp the acquirer for financial reporting, though Banc of California, Inc. was the legal acquirer. Financial results before November 30, 2023, reflect only PacWest Bancorp and results for December 2023 included the combined company. The shares issued and outstanding, earnings per share, and all references to share quantities or metrics were retrospectively restated to reflect the Merger, and Banc of California, Inc, assets and liabilities were recorded at fair value as of the merger date. Refer to "Note 2. Business Combinations" in Item 8 of this Form 10-K for additional information on this merger.

Recent Events

Stock Repurchase Program

On March 17, 2025, we announced that our Board of Directors authorized the repurchase of up to $150.0 million of our common stock. On April 23, 2025, the Company announced an upsize of its stock repurchase program from $150.0 million to $300.0 million and expanded the program to cover both the Company's common stock and depositary shares representing its preferred stock. The repurchase authorization expires in March 2026.

During the year ended December 31, 2025, the Company repurchased a total of approximately 13.6 million shares of common and common equivalent stock for $185.5 million, at a weighted-average price of $13.59 per share. This included the repurchase of 2.7 million shares in the first quarter, 8.8 million in the second quarter, and 2.2 million in the third quarter of 2025. As of December 31, 2025, the Company had $114.5 million remaining under the stock repurchase authorization. For further information on the stock repurchase program, see "Note 21. Stockholders' Equity" in Item 8 of this Form 10-K.

Strategic Loan Sales

During the second quarter of 2025, the Company commenced a strategic loan sale process, reclassifying approximately $506.7 million of loans as HFS. While many of the loans sold had sufficient collateral values, they had attributes that drive credit migration, and as a result we commenced the sales process for these loans in the second quarter. As a result of the transfer, the Company recognized charge-offs totaling $36.9 million resulting in an incremental impact to provision expense of $26.3 million in the second quarter. The charge-off and provision impact reflects the estimated fair value based on active bids or other market inputs.

As of December 31, 2025, $292.0 million of these loans had been liquidated through the sale of $236.4 million of loans and the repayment of an additional $55.6 million prior to the sale. The Company recognized a loss of $0.4 million on the loans sold. As of December 31, 2025, $174.6 million of loans remained to be sold.

Key Performance Indicators

Among other factors, our operating results generally depend on the following key performance indicators:

The Level of Net Interest Income

NII is the excess of interest earned on our interest-earning assets over the interest paid on our interest-bearing liabilities. Net interest margin is NII (annualized if related to a non-annual period) expressed as a percentage of average interest-earning assets.

NII is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings. 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. We continue to focus on growing granular relationship-based deposits as a key component of our core deposit strategy, which supports a stable funding base and strengthens our client franchise.

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 CRE 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, lender finance loans, equipment-secured loans and leases, venture capital loans to support venture capital firms’ operations and the operations of entrepreneurial and venture-backed companies during the various phases of their early life cycles, warehouse loans, and secured business loans.

Our loan origination process emphasizes credit quality. To augment our internal loan production, we have purchased loans such as SFR mortgage loans, multi-family loans from other banks, and private student loans from third-party lenders. These loan purchases help us manage the concentrations in our portfolio as they diversify the geographic risk, interest-rate risk, credit risk, and product composition of our loan portfolio. 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 ACL on loans and leases, which is the sum of the ALLL 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 ALLL. Recoveries on loans and leases previously charged off are added to the ALLL. 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.

We regularly review loans and leases to determine whether there has been any deterioration in credit quality resulting from borrower operations or changes in collateral value or other factors which may affect the collectability of our loans and leases. 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 ACL. Any deterioration in the real estate market may lead to increased provisions for credit losses because our loans are concentrated in real estate loans.

The Level of Noninterest Expense

Our noninterest expense includes fixed and controllable overhead, the largest components of which are compensation expense, customer related expense, information technology and data processing expense, and occupancy expense. Customer related expenses are primarily ECRs payments to customers and are mostly driven by the HOA business. ECRs are rate-sensitive and fluctuate in response to changes in the federal funds rate. Additionally, noninterest expense includes insurance and assessments, intangible asset amortization, leased equipment depreciation, other professional services, loan expenses, acquisition, integration and organization costs, and other expense. We monitor our efficiency ratio as a key measure of operational performance.

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" in Item 8 of this form 10-K. We have identified two policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the ACL on loans and leases HFI and the realization of deferred tax assets and liabilities.

Allowance for Credit Losses on Loans and Leases Held for Investment

The ACL represents management’s estimate of current expected credit losses on loans and leases HFI and related unfunded loan commitments. The ACL is evaluated quarterly and reflects management’s judgment based on historical loss experience, current conditions, and reasonable and supportable forecasts. A detailed description of the Company’s accounting policies and methodology is included in the " Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment" in Item 7 and "Note 1. Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment" in Item 8 of this Form 10-K.

The ACL is sensitive to change in macroeconomic conditions and management's forward-looking assumptions. Management considers multiple economic scenarios to address forecast uncertainty, and changes in the economic outlook, portfolio composition, risk rating migration, and unfunded commitment levels may result in period-to-period volatility in the ACL.

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.

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:return on average tangible common equity, tangible common equity ratio, efficiency ratio, adjusted return on average tangible common equity, adjusted net earnings, adjusted diluted earnings per share, 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, stockholders' equity to assets ratio, noninterest expense to total revenue, and return on average assets, respectively. The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the periods presented.

(Dollars in thousands)

(1) Effective tax rate of 26.86%, 24.76%, and 14.12% for the years ended December 31, 2025, 2024, and 2023.

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

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

(Dollars in thousands, except per share data)

(1) Tangible common equity divided by tangible assets.

(1) Includes customer related expense of $105.4 million, $129.5 million, and $124.1 million for the years ended December 31, 2025, 2024, and 2023.

(2) Noninterest expense used for efficiency ratio divided by total revenue used for efficiency ratio.

(Dollars in thousands)

(1) Effective tax rates of 26.86%, 24.76%, and 14.12% used for the years ended December 31, 2025, 2024, and 2023.

(2) Adjusted net earnings available to common and equivalent stockholders for adjusted ROATCE divided by average tangible common equity.

(Dollars in thousands)

(1) Effective tax rates of 26.86%, 24.76%, and 14.12% used for the years ended December 31, 2025, 2024, and 2023.

(2) Adjusted net earnings available to common and equivalent stockholders divided by weighted average diluted common shares outstanding.

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

(4) Adjusted net earnings divided by average assets.

Results of Operations

Earnings Performance

The following table presents performance metrics for the years indicated:

(Dollars in thousands)

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

(2) See "Non-GAAP Financial Measures" in Item 7 of this Form 10-K.

(3) Total revenue equals the sum of NII and noninterest income.

Net Interest Income and Net Interest Margin

The following table summarizes the distribution of average assets, liabilities, and stockholders’ equity, as well as interest income and yields earned on average interest‑earning assets and interest expense and rates paid on average interest‑bearing liabilities for the years indicated:

(Dollars in thousands)

(1) In 2023, a $2.3 million adjustment was made to account for tax-exempt income generated from loans, using a federal statutory rate of 21% for the adjustment.

(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 $64.2 million, $88.0 million and $9.7 million for the years ended 2025 and 2024 and 2023, respectively.

(3) Total deposits is the sum of total interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.

(4) Total funds is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of total funds is calculated as annualized total interest expense divided by average total funds.

NII is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume change.” NII is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as “rate change.” Any changes that are not solely due to either volume or rate are allocated in proportion to the percentage changes in average volume and average rate.

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

(In thousands)

(1) In 2023, a $2.3 million adjustment was made to account for tax-exempt income generated from loans, using a federal statutory rate of 21% for the adjustment.

2025 Compared to 2024

NII increased by $51.3 million to $977.4 million for the year ended December 31, 2025 from $926.1 million for the year ended December 31, 2024 attributable primarily to the following:

• A decrease of $157.5 million in interest expense on deposits due primarily to lower interest paid on interest-bearing deposits as a result of deposit rate repricing driven by the federal funds rate cuts of 100 basis points in the second half of 2024 and 75 basis points in the second half of 2025 and lower average balances including the paydown of brokered deposits.
• A decrease of $25.6 million in interest expense on borrowings driven by lower average balances resulting from the payoff of higher-cost borrowings in 2024, which were partially replaced with lower-cost long-term FHLB advances and lower market interest rates.
• An increase of $12.5 million in interest income from investment securities reflecting the benefits from 2024 balance sheet repositioning actions and reinvestment in higher-yield securities.

This was offset partially by:

• A decrease of $87.4 million in interest income from deposits in financial institutions driven by lower balances, as we maintained a lower cash target level and lower market interest rates.
• A decrease of $61.1 million in interest income from loans due primarily to lower market interest rates reflective of federal funds rate cuts, lower average balances attributable mainly to our July 2024 sale of $1.95 billion of Civic loans, and by lower net loan discount accretion income.

The net interest margin was 3.15% for the year ended December 31, 2025, up 30 basis points from 2.85% for the year ended December 31, 2024. The year-over-year improvement was primarily driven by a 49 basis point decrease in the average total cost of funds to 2.35%, offset by an 18 basis point decrease in the average yield on interest-earning assets to 5.40%.

The average total cost of funds decreased by 49 basis points to 2.35%, driven mainly by lower market interest rates. The average cost of deposits declined by 47 basis points to 2.05%, reflecting the impact of federal funds rate cuts in the second half of 2024 and second half of 2025. Average total deposits decreased by $1.2 billion year over year, including a $1.1 billion reduction in average interest-bearing deposits and a $132.0 million decrease in average noninterest-bearing deposits. Despite the decline, average noninterest-bearing deposits represented 28.3% of average total deposits for the year ended December 31, 2025, up from 27.5% for the comparable period in 2024. The average cost of borrowings also decreased by 76 basis points to 4.92%, reflecting the paydown of higher-cost borrowings in the prior year and their replacement with lower-cost long-term FHLB advances.

The average yield on interest-earning assets declined by 18 basis points to 5.40%, due primarily to an 18 basis point decline in the average yield on loans and leases.

Provision for Credit Losses

The following table sets forth the details of the provision for credit losses on loans and leases HFI, AFS debt securities, and HTM debt securities as well as information regarding credit quality metrics for the years indicated:

(Dollars in thousands)

(1) See " Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment" in Item 7 of this Form 10-K for detail of charge-offs and recoveries by loan portfolio segment, class, and subclass for the years presented.

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 HFI, AFS debt securities, and HTM debt securities are based on our allowance methodologies and are expenses that, in our judgment, are required to maintain an appropriate ACL for these assets.

2025 Compared to 2024

The provision for credit losses was $70.6 million for the year ended December 31, 2025 compared to $42.8 million for the year ended December 31, 2024. The provision for 2025 included a provision for loan losses of $64.8 million and a provision for unfunded loan commitments of $5.9 million. The provision for credit losses for 2025 included $26.3 million related to loans transferred to HFS in the second quarter of 2025 in connection with a strategic loan sale. The remaining increase in the provision for loan losses and unfunded loan commitments was primarily driven by net charge-off activity experienced in the first half of the year, with additional impacts from changes in loan risk ratings, and higher unfunded commitments. These were offset partially by lower qualitative reserves, lower specific reserves, and a favorable shift in the portfolio mix due to growth in loan segments with lower expected credit losses.

The provision for loan losses and unfunded commitment for 2024 primarily included a $43.5 million provision for loan losses and a $0.5 million reversal of the provision for unfunded loan commitments. The provision for 2024 was driven mainly by net-charge-off activity during the year.

Certain circumstances may lead to increased provisions for credit losses on loans and leases in the future. Examples of such circumstances include an increased amount of classified and/or nonaccrual loans and leases, net loan and lease and unfunded commitment growth, and changes in economic conditions and forecasts. 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 HFI and HTM securities, see “Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases sections” in Item 7, "Note 1. Nature of Operations and Summary of Significant Accounting Policies," and "Note 5. Loans and Leases" in Item 8 of this Form 10-K.

Noninterest Income (Loss)

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

(In thousands)

2025 Compared to 2024

Noninterest income increased by $65.0 million to $142.1 million for the year ended December 31, 2025 from $77.1 million for the year ended December 31, 2024. The prior year period included a $59.9 million loss on the sale of $742 million of securities executed as part of a balance sheet repositioning initiative.

Noninterest Expense

The following table summarizes noninterest expense by category for the years indicated:

(In thousands)

2025 Compared to 2024

Noninterest expense decreased by $55.9 million to $735.9 million for the year ended December 31, 2025 from $791.7 million for the year ended December 31, 2024. The decrease was due mainly to lower insurance and assessments expense of $38.0 million, lower customer related expense of $24.0 million, and lower occupancy expense of $7.4 million, offset partially by $14.2 million in acquisition, integration and reorganization costs from 2024 that did not recur. Insurance and assessments expense decreased due primarily to incremental FDIC special assessments recorded in 2024, which reflected higher assessment rates. Customer related expense decreased due to lower earnings credit rate expenses, driven by the lower federal funds rate. Occupancy expense decreased as a result of cost savings from branch consolidations following the PacWest Bancorp merger. Acquisition, integration and reorganization costs of $14.2 million in 2024 reflected adjustments to the merger-related accruals, as actual expenses were lower than previously estimated.

Income Taxes

2025 Compared to 2024

The effective tax rates were 26.9% and 24.8% for the years ended December 31, 2025 and 2024, respectively. The Company's 2025 blended statutory tax rate for federal and state was 27.7%. The higher 2025 effective tax rate was due primarily to a one-time non-cash tax expense recorded in the second quarter of 2025 for the DTA revaluation resulting from the California state tax changes passed as part of the 2025 California budget enacted on June 30, 2025 and effective retroactively to January 1, 2025. For further information on income taxes, see "Note 16. Income Taxes" in Item 8 of this Form 10-K.

Balance Sheet Analysis

The following table provides a summary of our balance sheet highlights as of the dates indicated:

(In thousands)

During the second quarter of 2025, as part of our strategic loan sale process, we reclassified approximately $506.7 million of loans as HFS. During the third quarter of 2024, as part of our balance sheet repositioning strategy, we sold $1.95 billion of Civic loans, generating $1.91 billion in net proceeds. This sale provided capital to reposition part of our AFS securities portfolio and reduce 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.

Securities Available-for-Sale

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

(Dollars in thousands)

AFS securities increased by $0.2 billion during the year ended December 31, 2025 to $2.5 billion at December 31, 2025 compared to $2.2 billion at December 31, 2024, due primarily to purchases of $605.4 million and a $88.2 million increase in the fair value of AFS securities due to higher interest rates, offset partially by $478.7 million of principal paydowns and $6.9 million of net amortization.

As of December 31, 2025, AFS securities had aggregate unrealized net after-tax losses in AOCI of $136.6 million compared to $200.1 million at December 31, 2024.

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

(Dollars in thousands)

(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:

(Dollars in thousands)

(1) As of December 31, 2025, our municipal securities are geographically concentrated primarily in California at 26%, Texas at 23%, and Washington at 15% of total municipal securities based on amortized cost.

As of December 31, 2025, HTM securities had aggregate unrealized net after-tax losses in AOCI of $133.4 million remaining from the balance established at the time of the AFS to HTM transfer, compared to $157.9 million at December 31, 2024.

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

(Dollars in thousands)

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

Loans Held for Sale

As part of our management of the loans held in our portfolio, on occasion we will transfer loans from HFI to HFS. At December 31, 2025, the loans HFS balance totaled $183 million compared to $26 million at December 31, 2024. The increase is primarily due to transfers of $495 million to HFS, offset partially by loan sales totaling $262 million during the year.

Loans and Leases Held for Investment

The following table presents the composition of our total loans and leases HFI by loan portfolio segment, class, and subclass as of the dates indicated:

(Dollars in thousands)

(1) Includes $214.5 million and $223.9 million at December 31, 2025 and 2024 of land acquisition and development loans.

Our non-deposit financial institutions ("NDFI") lending totaled $5.1 billion, or 20.5% as of December 31, 2025, and is diversified across multiple asset classes, including warehouse lending, equity fund loans, and lender finance. The NDFI portfolio has a history of strong asset quality performance with no delinquencies, nonperforming loans, or classified loans at December 31, 2025.

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

(In thousands)

Loan Concentrations

We mitigate 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 "Lending Activities" in Item 1 of this Form 10-K.

Total real estate loans HFI were $15.7 billion, or 63%, of our loan portfolio at December 31, 2025 and consisted of $13.8 billion of real estate mortgage loans and $1.9 billion of real estate construction and land loans, compared to $16.6 billion, or 70%, of our total 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 loan loans. For both December 31, 2025 and 2024, 71% of our real estate loans was collateralized by property in California, reflecting the concentration of our community banking operations within the state.

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

(Dollars in thousands)

The largest concentration of our real estate mortgage loans is in multi-family properties. At December 31, 2025 and 2024, 73% and 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 HFI as of the date indicated:

(In thousands)

At December 31, 2025, we had $7.2 billion of loans and leases HFI 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.

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

(In thousands)

For information regarding our variable-rate loans subject to interest rate floors, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of this Form 10-K.

Allowance for Credit Losses on Loans and Leases Held for Investment

The ACL on loans and leases HFI is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. 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 HFI using the CECL methodology, see "Note 1. Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment" in Item 8 of this Form 10-K.

In estimating our ACL, we consider prevailing economic conditions and forward looking assumptions, including the impact of inflation, interest rates, and broader economic uncertainty. Our methodology and framework include reasonable and supportable forecast period after which we revert to the through-the-cycle environment. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.

In estimating the expected credit losses, we consider multiple forward-looking economic scenarios to address forecast uncertainty with the scenario selection and weighting reflecting management’s assessment of current economic conditions and downside risk over our reasonable and supportable forecast period.

Qualitative adjustments are applied to capture risks not fully reflected in the quantitative model outputs. In 2025, qualitative considerations primarily related to CRE exposure, concentrations within the loan portfolio, and the volume of adversely classified loans. As part of our governance process, we conduct sensitively analysis to evaluate the reasonableness of the ACL. However, due to the interrelated nature of the model assumptions, the impact of changes in individual inputs cannot be isolated.

Management believes the allowance for credit losses appropriately reflects current expected credit losses in our loan and lease portfolio and associated unfunded loan commitments as of the reporting date. 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 ACL on loans and leases HFI as of the dates indicated:

(Dollars in thousands)

The following table presents the changes in our ACL on loans and leases HFI for the years indicated:

(Dollars in thousands)

57

The following table presents net charge-offs, average loan balance, and ratio of net charge-offs to average loans by loan portfolio segment for the years indicated:

(Dollars in thousands)

Net charge-offs in 2025 were $58.5 million compared to net charge-offs of $85.8 million in 2024. This change was due primarily to net charge-offs in the real estate mortgage portfolio segment decreasing to $23.7 million in 2025 from $60.4 million in 2024 and net charge-offs in the commercial portfolio segment decreasing to $10.7 million in 2025 from $20.6 million in 2024, offset partially by net charge-offs in the real estate construction and land segment, which increased to $20.2 million in 2025, compared to no charge-offs in 2024.

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.

The following table presents charge-offs by loan portfolio segment, class, and subclass for the years indicated:

(In thousands)

Charge-offs decreased by $19.4 million to $75.5 million in 2025 from $94.9 million in 2024 due mainly to decreases of $35.9 million in the investor-owned residential real estate mortgage subclass and $10.2 million in the venture lending subclass, offset partially by an increase of $21.5 million in the CRE construction and land class.

The following table presents recoveries by loan portfolio segment, class, and subclass for the years indicated:

(In thousands)

60

The following table presents the allowance for loan and lease losses on loans and leases HFI by loan portfolio segment as of the dates indicated:

(Dollars in thousands)

The allowance for loan and lease losses attributable to real estate mortgage loans was $137.4 million and $145.8 million at December 31, 2025 and 2024. As ratios to real estate mortgage loans at those dates, these percentages were 1.00% and 1.09%. The decrease in the coverage ratio was primarily attributable to lower qualitative reserves for loans secured by office properties, as well as changes in the portfolio mix toward loans with stronger credit quality driven in part by the transfer of certain loans to HFS during the year.

The allowance for loan and lease losses attributable to real estate construction and land loans was $8.8 million and $10.9 million at December 31, 2025 and 2024. As ratios to real estate construction and land loans at those dates, these percentages were 0.45% and 0.34%. The increase in the coverage ratio was primarily due to an increase in classified loans during the year.

The allowance for loan and lease losses attributable to commercial loans and leases was $86.1 million and $67.8 million at December 31, 2025 and 2024. As ratios to commercial loans and leases at those dates, these percentages were 0.96% and 1.00%. The decrease in the coverage ratio was primarily due to a change in the loan portfolio composition, including growth in lending segments with lower historical losses such as lender finance, equity funds, and warehouse lending. This decrease was offset partially by higher reserve in the venture lending portfolio, driven by risk rating migration activity.

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:

(Dollars in thousands)

Nonaccrual Loans and Leases Held for Investment

Nonperforming loans and leases HFI decreased by $30.4 million to $159.2 million at December 31, 2025 compared to $189.6 million at December 31, 2024, due mainly to principal and other reductions of $108.8 million, charge-offs of $26.0 million, transfers to accrual status of $24.3 million, and transfers to HFS of $5.7 million, offset partially by additions of $134.3 million. As of December 31, 2025, our three largest loan relationships on nonaccrual status had an aggregate carrying value of $43.5 million and represented 27% of total nonaccrual loans and leases.

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

(In thousands)

Loans and leases accruing and 30-89 days past due increased by $42.2 million to $93.0 million as of December 31, 2025 compared to $50.8 million at December 31, 2024, due mainly to increases of $26.5 million in residential real estate construction and land delinquent loans and $23.4 million in multi-family real estate mortgage delinquent loans.

The amount of interest income that would have been recorded on nonaccrual loans and leases at December 31, 2025 and 2024 had such loans and leases been current in accordance with their original terms was $9.6 million and $7.8 million for 2025 and 2024.

Foreclosed Assets, Net

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

(In thousands)

Foreclosed assets increased by $7.4 million to $17.1 million at December 31, 2025 compared to $9.7 million at December 31, 2024, due mainly to transfers from loans of $22.8 million, offset partially by sales of $14.7 million and a provision for losses of $0.8 million.

Classified and Special Mention Loans and Leases Held for Investment

The following table presents the credit risk ratings of our loans and leases HFI as of the dates indicated:

(In thousands)

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 HFI by loan portfolio segment and class and the related net changes as of the dates indicated:

(In thousands)

Classified loans and leases increased by $236.8 million to $800.3 million at December 31, 2025 compared to $563.5 million at December 31, 2024, due mainly to increases of $96.4 million in venture capital classified loans, $53.2 million in multi-family real estate mortgage classified loans, $52.8 million in CRE construction and land classified loans, and $31.7 million in asset-based classified loans.

Special mention loans and leases decreased by $638.6 million to $458.7 million at December 31, 2025 compared to $1.1 billion at December 31, 2024, due primarily to decreases of $221.0 million in CRE mortgage special mention loans, $192.5 million in residential real estate construction and land special mention loans, $148.0 million in CRE construction and land special mention loans, and $60.7 million in venture capital special mention loans.

Deferred Tax Asset

As of December 31, 2025, the net DTA balance totaled $656.8 million, a decrease from $720.6 million as of December 31, 2024, due primarily to the decline in unrealized loss on AFS securities. As of December 31, 2025 and 2024, we have a valuation allowance of $16.1 million and $19.0 million against DTAs.

Deposits

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

(Dollars in thousands)

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

(Dollars in thousands)

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

(Dollars in thousands)

Total deposits increased by $651.4 million to $27.8 billion at December 31, 2025 compared to $27.2 billion at December 31, 2024, due primarily to venture banking growth and increase in broker deposits to support loan growth. Our deposit base is also diversified by client type. As of December 31, 2025, no individual deposit relationship represented more than 10% of our total deposits.

As of December 31, 2025, FDIC-insured deposits represented approximately 71% of total deposits, down from 72% as of December 31, 2024.

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

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

(In thousands)

Client Investment Funds

In addition to deposit products, we also offer alternative, non-depository corporate treasury solutions for clients to invest excess liquidity. These off-balance sheet client funds totaled $1.2 billion at December 31, 2025 and $1.5 billion at December 31, 2024.

Borrowings

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

(Dollars in thousands)

66

Borrowings increased by $672.0 million to $2.1 billion at December 31, 2025 compared to $1.4 billion at December 31, 2024, due to higher FHLB secured advances and other short-term borrowings, offset partially by the payoff of $174.0 million of Senior Notes in the second quarter of 2025. We utilized these borrowings to manage liquidity needs, including, but not limited to, funding asset growth, accommodating liability maturities and deposit withdrawals, and supporting business operations.

Subordinated Debt

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

(Dollars in thousands)

Subordinated debt increased by $10.8 million to $952.7 million at December 31, 2025 compared to $941.9 million at December 31, 2024, due to accretion of the acquisition discount on acquired subordinated debt and higher valuation of the Euribor-based subordinated debt. At December 31, 2025, $131.0 million of subordinated debt was included in the Company's Tier I capital and $791.6 million was included in Tier II capital.

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, 2025, banks considered to be “well capitalized” must maintain a minimum Tier 1 leverage ratio of 5.00%, a minimum CET1 capital ratio of 6.50%, a minimum Tier 1 capital ratio of 8.00%, and a minimum total capital ratio of 10.00%.

Regulatory capital requirements limit the amount of DTAs that may be included when determining the amount of regulatory capital. Deferred tax asset amounts in excess of the calculated limit are disallowed from regulatory capital. At December 31, 2025, such disallowed amounts were $316.7 million for the Company and $294.1 million for the Bank. No assurance can be given that the regulatory capital deferred tax asset limitation will not increase in the future or that the Company and the Bank will not have increased DTAs that are disallowed.

In 2020, the federal bank regulatory authorities approved a rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL. We elected the CECL phase-in option provided by regulatory capital rules which delayed for two years the estimated impact of CECL on regulatory capital and phases it in over a three-year transition period beginning in the first quarter of 2022. The full impact of the CECL standard was phased-in to regulatory capital through December 31, 2024 under this phase-in option, and beginning in the first quarter of 2025, CECL was fully reflected in our regulatory capital.

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 CET1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the CET1, Tier 1, and Total capital ratio minimums inclusive of the capital conservation buffer were 7.00%, 8.50%, and 10.50%. At December 31, 2025, the Company and the Bank were in compliance with the capital conservation buffer requirements.

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:

The Company's consolidated risk-based capital ratios decreased during the year ended December 31, 2025 due mainly to the impact of stock repurchases and increase in risk-weighted assets driven mostly by the growth in loan balances, offset by earnings for the year. The consolidated Tier 1 leverage ratio also decreased during the year ended December 31, 2025 due mainly to the impact of stock repurchases and higher average assets, offset by earnings.

Dividends on Common Stock and Interest on Subordinated Debt

See "Dividends and Share Repurchases" in Item 1 and "Note 22. Dividend Availability and Regulatory Matters" in Item 8 of this Form 10-K, for discussions of factors affecting the availability of dividends and limitations on the ability to declare dividends. 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.

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.

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 AFS 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, 2025, offset partially by $514.1 million pledged for letters of credit and a balance outstanding of $1.7 billion as of that date. The FHLB secured credit line was collateralized by a blanket lien on $10.3 billion of certain qualifying loans and $20.5 million of securities. The Bank also had secured borrowing capacity with the FRBSF under the Discount Window program totaling $5.0 billion at December 31, 2025, of which was $5.0 billion was available. The FRBSF Discount Window secured credit line was collateralized by liens on $4.6 billion of qualifying loans and $1.5 billion of pledged securities.

In addition to its secured lines of credit with the FHLB and FRBSF, the Bank also had credit limits of $215.0 million in the aggregate with several commercial banks, as well as borrowing arrangements with unaffiliated financial institutions that provide for the purchase of overnight funds or other short-term borrowings. The availability of these unsecured borrowings fluctuates regularly and is subject to the discretion of the counterparties. As of December 31, 2025, the Bank had $240.0 million outstanding under these arrangements. Additionally, the holding company has a $100.0 million unsecured revolving line of credit. As of December 31, 2025, there was no balance outstanding.

The following tables provide a summary of the Company’s primary and secondary liquidity levels at the dates indicated:

(Dollars in thousands)

69

(In thousands)

The Company's primary liquidity increased by $38.3 million to $4.4 billion at December 31, 2025 compared to $4.4 billion at December 31, 2024, due mainly to a $218.7 million increase in unpledged AFS securities, net of a haircut, offset partially by a $180.3 million decrease in total cash and cash equivalents excluding restricted cash. We also include certain unencumbered HTM securities in our internal liquidity stress test buffer which are not included in our primary liquidity. The Company's secondary liquidity decreased by $1.8 billion to $9.8 billion at December 31, 2025 compared to $11.5 billion at December 31, 2024, due to decreases in available secured borrowing capacity with the FRB of $1.3 billion and available secured borrowing capacity with the FHLB of $500.1 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" in Item 7 of this Form 10-K 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, 2025, brokered deposits totaled $2.9 billion, consisting of $0.5 billion of non-maturity brokered accounts and $2.4 billion of brokered time deposits. 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.

Our Liquidity Management Policy establishes guidelines aligned with the Company's Risk Appetite Framework and includes a range of liquidity and funding concentration metrics designed to monitor balance sheet strength, funding stability, and available liquidity resources. These measures incorporate assessments of on-balance sheet liquidity, contingent funding capacity, and the composition of funding sources. As of December 31, 2025, the Bank was in compliance with all applicable liquidity and funding concentration guidelines.

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 "Supervision and Regulation - Banc of California, Inc. - Repurchases/Redemptions; Dividends” in Item 1 and "Note 22. Dividend Availability and Regulatory Matters" in Item 8 of this Form 10-K for discussions of factors affecting the availability of dividends and limitations on the ability to declare dividends.

On December 23, 2024, Banc of California, Inc. entered into an unsecured revolving line of credit agreement as a borrower for $50.0 million. On March 17, 2025, the Company executed an amendment to the credit agreement which increased the Company's unsecured revolving line of credit to $100.0 million. As of December 31, 2025 and December 31, 2024, there was no balance outstanding.

On March 17, 2025, we announced that our Board of Directors authorized the repurchase of up to $150.0 million of our common stock. On April 23, 2025, we announced an upsize of our stock repurchase program from $150.0 million to $300.0 million and expanded the program to cover both the Company's common stock and depositary shares representing its preferred stock. The repurchase authorization expires in March 2026. During the year ended December 31, 2025, common and common equivalent stock repurchased under the program totaled 13,648,429 shares at a weighted average price per share of $13.59, or $185.5 million in the aggregate. As of December 31, 2025, the Company had $114.5 million remaining under the stock repurchase authorization. The program may be changed, suspended, or discontinued at any time.

At December 31, 2025, Banc of California, Inc. had $159.7 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, 2025, time deposits totaled $4.7 billion, of which $4.2 billion was due within one year. Gross subordinated debt totaled $1.0 billion, of which $75.0 million was due within 5 years and the remaining $941.3 million was due after five years. Our liability to contribute capital to LIHTC partnerships was $40.9 million and our commitment to contribute capital to SBICs and CRA-related loan pools was $122.1 million for a combined total of $163.0 million, of which $87.8 million was due within one year. Our operating lease obligation for leased facilities totaled $135.1 million, of which $30.7 million was due within one year. For further information regarding these items, see "Note 10. Deposits," "Note 11. Borrowings and Subordinated Debt," "Note 8. Other Assets," "Note 13. Commitments and Contingencies," and "Note 9. Leases" in Item 8 of this Form 10-K.

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, 2025, our loan commitments and standby letters of credit were $5.4 billion and $244.9 million, respectively. The loan commitments, a portion of which will eventually result in funded loans, increase our profitability through NII when drawn and unused commitment fees prior to being drawn. We manage our overall liquidity taking into consideration funded and unfunded commitments as a percentage of our liquidity sources. Our liquidity sources, as described in “Liquidity - Liquidity Management” in Item 7 of this Form 10-K, have been and are expected to be sufficient to meet the cash requirements of our lending activities. For further information on loan commitments, see "Note 13. Commitments and Contingencies" in Item 8 of this Form 10-K.

Recent Accounting Pronouncements

See "Note 1. Nature of Operations and Summary of Significant Accounting Policies" in Item 8 of this Form 10-K for information on recent accounting pronouncements and their expected impact, if any, on our consolidated financial statements.

Market Risk - Foreign Currency Exposure

We enter into foreign exchange contracts with our clients and counterparty banks primarily for the purpose of offsetting or hedging clients' foreign currency exposures arising out of commercial transactions, and we enter into cross currency swaps and foreign exchange forward contracts to hedge exposures to loans and debt instruments denominated in foreign currencies. We have experienced and will continue to experience fluctuations in our net earnings as a result of transaction gains or losses related to revaluing certain asset and liability balances that are denominated in currencies other than the U.S. Dollar and the derivatives that hedge those exposures. As of December 31, 2025, the U.S. Dollar notional amounts of loans receivable and subordinated debt payable denominated in foreign currencies were $76.8 million and $30.3 million, and the U.S. Dollar notional amounts of derivatives outstanding to hedge these foreign currency exposures were $75.8 million and $29.9 million. We recognized foreign currency translation net losses of $0.5 million for the year ended December 31, 2025 and $1.0 million for the year ended December 31, 2024, and $0.3 million for the year ended December 31, 2023.

Asset/Liability Management and Interest Rate Sensitivity

Interest Rate Risk - Company Governance. On at least a quarterly basis, we measure our IRR position using two methods: (i) NII simulation analysis and (ii) EVE modeling. The Management Finance Committee and the Finance Committee of the Company's Board of Directors review the results of these analyses at least quarterly. As discussed in more detail below, if projected changes to interest rates cause changes to our simulated net present value of equity and/or NII to be outside our pre-established IRR limits, we may adjust our asset and liability mix in an effort to bring our IRR exposure within our established limits.

The pre-established IRR limits are recommended by management, determined based on analytical review and available peer data published by regulatory agencies about the IRR limits utilized by other regional banks, and documented in the Company's Asset Liability Management Policy. This policy is approved by MFC and the Finance Committee of the Board of Directors annually. We believe our IRR limits are consistent with prevailing practice in the regional banking industry.

We use a balance sheet simulation model (the "IRR Model") to estimate changes in NII and EVE that would result from immediate and sustained changes in interest rates as of the measurement date. This IRR Model assesses the changes in NII and EVE that would occur in response to an instantaneous and sustained increase and decrease in market interest rates of +-100, +-200, +-300, and +-400 basis points. This model is an IRR management tool, and the results are not necessarily an indication of our future NII. The IRR Model has inherent limitations and the model's results are based on a given set of rate changes and assumptions at a single point in time.

The IRR Model is updated at least quarterly, and the IRR Model results are reported to MFC and the Finance Committee of the Company's Board of Directors at each monthly or quarterly meeting, as applicable.

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time, except for non-maturity deposits. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as IRR and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our IRR. In monitoring IRR, we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.

The MFC is comprised of select members of Senior Management. The Company also has a Finance Committee of the Boards of Directors of the Company and the Bank (together with MFC, the “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and IRR exposure limits versus current projections pursuant to our EVE analysis.

In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, IRR, profitability, and capital targets, we evaluate various strategies. These include complementing our current loan origination platform through strategic acquisitions of whole loans, strategically managing multiple warehouse relationships, and originating shorter-term consumer loans. We also actively manage the level of investments and duration of investment securities, and focus on establish stable deposit relationships. Additionally, we utilize certain derivatives such as interest rate swaps and collars as hedges to align maturities and repricing terms.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our IRR position within the asset/liability tolerance set forth by our Board of Directors. As part of its procedures, the ALCOs regularly review IRR by forecasting the impact of alternative interest rate environments on NII and our EVE.

Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income

IRR results from our banking activities and is the primary market risk for us. IRR is caused by the following factors:

• Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
• Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;
• Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
• Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate, and SOFR.

Since our earnings are primarily dependent on our ability to generate NII, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our NII. Management of our IRR is overseen by the Finance Committee of the Boards of Directors of the Company and Bank, which delegates the day-to-day management of IRR to the MFC. MFC ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our IRR program. The Finance Committee of the Boards of Directors of the Company and the Bank reviews the results of our IRR modeling at least quarterly to ensure that we have appropriately measured our IRR, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of our Asset Liability Management Policy, our Board of Directors periodically reviews the IRR limits.

IRR management is an ongoing process that monitors loan and deposit flows, along with investment and funding activities. Effective IRR management begins with understanding the repricing characteristics of assets and liabilities and estimating an appropriate risk posture based on forecasts, objectives, market expectations, and policy constraints.

IRR exposure is measured using several tools, including a simulation model that performs interest rate sensitivity under multiple scenarios. The model reflects the actual maturities and re-pricing characteristics of interest rate sensitive assets and liabilities and includes instantaneous parallel interest rate shocks. Results are evaluated using two metrics: NII at Risk and EVE. NII at Risk estimates the impact of rate changes on NII using assumptions for assets, liabilities, and derivatives.

The NII simulation estimates changes in NII over the next twelve months from immediate and sustained rate changes as of December 31, 2025. The Analysis assumes a static balance sheet with no growth or product mix changes. This model is a risk management tool and does not necessarily predict future NII.

EVE measures the present value of assets minus liabilities and assesses changes in the economic value under various interest rate scenarios. Unlike the NII approach, EVE captures the impact of all anticipated cash flows and provides a longer-term perspective.

A balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our NII, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, a bank balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our NII, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.

At both December 31, 2025 and December 31, 2024, our IRR profile remained close to "neutral." This position reflects our balanced composition of repricing assets and beta-adjusted repricing deposits and other interest-bearing liabilities over the course of the next twelve months. Given the uncertainty of the magnitude, timing, and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary materially from those predicted by our model.

The following table presents the projected change in the Company’s EVE at December 31, 2025 and NII over the next twelve months, which would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change:

(Dollars in millions)

(1) Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.

Earnings-at-Risk

In addition to IRR associated with NII, certain noninterest expense items are also sensitive to changes in market interest rates. One such item is the cost of ECRs provided on certain deposit accounts, primarily those associated with our HOA business. ECRs comprise most of our customer related expense and fluctuate in response to changes in short term rates and can therefore influence the Company's overall earnings sensitivity profile. We expect that a declining interest rate environment would reduce ECR costs and thereby reduce noninterest expense, conversely, when interest rates rise, ECR costs would also rise, thereby increasing noninterest expense. The Company's Earnings-at-Risk modeling incorporates the impact of these rate-sensitive noninterest expenses, in addition to interest income and expense, to assess the effect of interest rate movements on projected earnings over a twelve-month horizon.

As of December 31, 2025, client deposits eligible for ECRs totaled approximately $3.6 billion. Taking into account the rate sensitivity of ECRs, which are primarily attributable to such deposits, the Company's overall earnings profile would be considered "liability sensitive." During the second quarter of 2025, the Company also entered into interest rate collars with a notional value of $1.0 billion to mitigate the risk of increasing interest expense if short term interest rates increase. For further information on the interest rate collars, see "Note 12. Derivatives" in Item 8 of this Form 10-K.

Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of December 31, 2025 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rules 13a‑15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework in Internal Control-Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2025. See "Management's Report on Internal Control Over Financial Reporting" set forth in Part II, Item 8 for additional information regarding management's evaluation.

Report of the Independent Registered Public Accounting Firm. Ernst & Young LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10‑K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting as stated in their report entitled "Report of Independent Registered Public Accounting Firm" which appears herein under "Item 8. Financial Statements and Supplementary Data."

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.