BANC OF CALIFORNIA, INC.

Previous wording

The following is management's discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and three months ended March 31, 2025. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (the "Form 10-K") and with the unaudited condensed consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q.

Current wording

The following is management's discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and six months ended June 30, 2025. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (the "Form 10-K") and with the unaudited condensed consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q.

Previous wording

•errors in estimates of fair values of certain of our assets and liabilities, which may result in significant changes in valuation;

Current wording

•errors in estimates of fair values of certain of our assets and liabilities, as well as the value of collateral supporting our loans, which may result in significant changes in valuation or recoveries;

Previous wording

•the risk that we may incur significant losses on future asset sales; and

Current wording

•the risk that we may incur significant losses on future asset sales or may not be able to execute anticipated asset sales; and

Previous wording

Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and member of the FRB. When we refer to the “holding company," we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company,” we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively. The Bank is a premier relationship-based business bank, providing banking and treasury management services to small-, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and deposit products and services through full-service branches throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide. The Bank also provides full-stack payment processing solutions through its subsidiary, Deepstack Technologies, and serves the community association management industry nationwide with its technology-forward platform, SmartStreet TM.

Current wording

Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and member of the FRB. When we refer to the “holding company," we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company,” we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively. The Bank is a premier relationship-based business bank, providing banking and treasury management services to small-, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and deposit products and services through full-service branches throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide. The Bank also provides full-stack payment processing solutions through its subsidiary, Deepstack Technologies, and serves the community association management industry nationwide with its technology-forward platform, SmartStreetTM.

Previous wording

On March 17, 2025, the Company announced that our Board of Directors authorized a stock repurchase program of up to $150.0 million of our common stock. During the first quarter of 2025, common stock repurchased under the stock repurchase program totaled 2,684,823 shares at a weighted average price per share of $14.36, or $38.5 million in the aggregate. Through April 21, 2025, repurchases of Company common stock totaled 11,494,637 shares at a weighted average price per share of $13.05, or $150.0 million in the aggregate. 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.

Current wording

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.

Previous wording

The repurchase authorization expires in March 2026. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions. The program may be changed, suspended, or discontinued at any time.

Current wording

Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions. The program may be changed, suspended, or discontinued at any time.

Previous wording

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

Current wording

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

Previous wording

Our loan origination process emphasizes credit quality. On occasion, to augment our internal loan production, we have purchased loans such as single-family residential 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.

Current wording

Our loan origination process emphasizes credit quality. To augment our internal loan production, we have purchased loans such as single-family residential 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.

Previous wording

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 earnings credit rate ("ECRs") payments to customers and are mostly driven by the Homeowners Association ("HOA") business. ECRs are rate-sensitive and fluctuate in response to changes in the federal funds rate. Additionally, noninterest expense included 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.

Current wording

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 earnings credit rate ("ECRs") payments to customers and are mostly driven by the Homeowners Association ("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.

Previous wording

•Return on average tangible common equity, tangible common equity, tangible book value per common share, and efficiency ratio: 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, book value per common share, and noninterest expense to total revenue, 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.

Current wording

•Return on average tangible common equity, tangible common equity, tangible book value per common share, efficiency ratio, adjusted net earnings, and adjusted diluted earnings per share: 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, book value per common share, and noninterest expense to total revenue, 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.

Previous wording

(1) Effective tax rates of 25.30%, 24.76% and 26.40% used for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024, respectively.

Current wording

(1) Effective tax rates of 23.12% and 25.30% used for the three months ended June 30, 2025 and March 31, 2025. Effective tax rates of 23.12% and 28.62% used for the six months ended June 30, 2025 and 2024.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The Company reported net earnings available to common and equivalent stockholders of $43.6 million, or $0.26 per diluted common share, for the first quarter of 2025. This compares to net earnings available to common and equivalent stockholders of $47.0 million, or $0.28 per diluted common share, for the fourth quarter of 2024, and net earnings available to common and equivalent stockholders of $20.9 million, or $0.12 per diluted common share, for the first quarter of 2024.

Current wording

The Company reported net earnings available to common and equivalent stockholders of$18.4 million, or$0.12 per diluted common share, for the second quarter of 2025. On an adjusted basis, net earnings available to common and equivalent stockholders were $48.4 million for the quarter, or $0.31 per diluted common share.(1) This compares to net earnings available to common and equivalent stockholders of$43.6 million, or $0.26 per diluted common share, for the first quarter of 2025. The second quarter included provision expense, net of tax, of an additional $20.2 million taken during the quarter as a result of transferring $506.7 million of loans to held for sale at their lower of cost or market value. The second quarter also included a one-time non-cash income tax expense of $9.8 million primarily due to the revaluation of deferred tax assets related to recent California state tax changes passed as part of the 2025 California budget.

Previous wording

•New loan originations totaled $2.6 billion including production, purchased loans, and unfunded new commitments with a weighted average interest rate on production of 7.20%.

Current wording

•Strong loan originations totaled $2.2 billion including production, purchased loans, and unfunded new commitments, with a weighted average interest rate on production of 7.29%.

Previous wording

•Strong capital ratios well above the regulatory thresholds for "well capitalized" banks, including a 12.86% Tier 1 capital ratio and a 10.45% CET 1 capital ratio.

Current wording

•Maintained strong capital ratios well above the regulatory thresholds for "well capitalized" banks, including a 12.34% Tier 1 capital ratio and 9.95% CET 1 capital ratio and continued growth in book value per share to $18.58, up 2% vs. the first quarter of 2025 and tangible book value per share(1) to $16.46, up 2% vs. the first quarter of 2025.

Previous wording

(4) Ratio calculated by dividing noninterest expense (less intangible asset amortization and acquisition, integration and reorganization costs) by total revenue (less gain(loss) on sale of securities). See "- Non-GAAP Financial Measures." Noninterest expense includes customer related expense of $27,751, $31,672, and $30,919 for the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively.

Current wording

(5) Ratio calculated by dividing noninterest expense (less intangible asset amortization and acquisition, integration and reorganization costs) by total revenue (less gain/loss on sale of securities). See "- Non-GAAP Financial Measures." Noninterest expense includes customer related expense of $26.6 million and $27.8 million for the three months ended June 30, 2025 and March 31, 2025, and $54.3 million and $63.3 million for the six months ended June 30, 2025 and 2024.

Previous wording

(1) 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$16.0 million, $20.7 million, and $22.4 million for the three months ended March 31, 2025, December 31, 2024, and March 31, 2024.

Current wording

(1) 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 $32.1 million and $44.3 million for the six months ended June 30, 2025 and 2024..

Previous wording

Net interest income increased by$3.3 million to $232.4 million for the first quarter of 2025 from $229.1 million for the first quarter of 2024 attributable primarily to the following:

Current wording

Net interest income increased by $7.9 million to $240.2 million for the second quarter from $232.4 million for the first quarter attributable primarily to the following:

Previous wording

•A decrease of $13.6 million in interest expense due primarily to lower interest paid on interest-bearing deposits as a result of deposit rate repricing driven by the federal funds rate cuts in the fourth quarter and lower day count.

Current wording

•A decrease of $95.4 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 100 basis points of federal funds rate cuts in the second half of 2024 and lower average balance due mainly to the paydown of brokered deposits.

Previous wording

•A decrease of $21.0 million in interest expense paid on our borrowings and subordinated debt, primarily due to a lower balance resulting from the payoff of higher-cost Bank Term Funding Program borrowings, which were partially replaced with lower-cost long-term FHLB advances.

Current wording

•A decrease of $30.0 million in interest expense on borrowings driven by lower average balance resulting from the payoff of higher-cost Bank Term Funding Program ("BTFP") borrowings in 2024, which were partially replaced with lower-cost long-term FHLB advances and lower market interest rates.

Previous wording

•An increase of $3.6 million in interest income from investment securities reflecting the benefit from the balance sheet repositioning actions taken in 2024 and the purchase of and reinvestment into higher-yielding securities.

Current wording

•An increase of$7.3 million in interest income from investment securities reflecting the benefits from 2024 balance sheet repositioning actions and reinvestment in higher-yield securities.

Previous wording

•A decrease of$11.2 million in interest income from loans due primarily to lower day count, lower loan prepayments, and lower market interest rates reflective of a full quarter impact of the cumulative 50 basis points federal funds rate cuts in the fourth quarter.

Current wording

•A decrease of $65.9 million in interest income from loans due primarily to a lower average balance attributable mainly to the sale in July 2024 of $1.95 billion of Civic loans, lower net loan discount accretion, and lower market interest rates reflective of the federal funds rate cuts.

Previous wording

•A decrease of $6.8 million in interest income from deposits in financial institutions driven by lower balances, as we maintained a lower cash target level in the first quarter of 2025, and lower market interest rates.

Current wording

•A decrease of $55.6 million in interest income from deposits in financial institutions primarily driven by lower balances, as we maintained a lower cash target level, and lower market interest rates.

Previous wording

•The first quarter of 2025 provision included a $9.7 million provision for loan losses and a $0.5 million provision for unfunded loan commitments, offset partially by a $0.9 million reversal of the provision for credit losses related to HTM securities. The first quarter of 2025 provision for loans and unfunded loan commitments was primarily driven by net charge-off activity experienced during the quarter, partially offset by lower specific reserves and changes in portfolio mix driven by growth in loan segments with low expected credit losses.

Current wording

The first quarter provision included a $9.7 million provision for loan losses and a $0.5 million provision for unfunded loan commitments, offset partially by a $0.9 million reversal of the provision for credit losses related to investment securities. The first quarter provision for loans and unfunded loan commitments was primarily driven by net charge-off activity experienced during the quarter, offset partially by lower specific reserves and changes in portfolio mix driven by growth in loan segments with low expected credit losses.

Previous wording

Noninterest income increased by $4.7 million to $33.7 million for the first quarter of 2025 from $29.0 million for the fourth quarter of 2024 due mainly to a $2.3 million increase in dividends and gains on equity investments, a $1.7 million increase in other commissions and fees, and a $0.8 million increase in other income. The increase in dividends and gains on equity investments was due to higher gains from SBIC investments. The increase in other commissions and fees was due to higher loan-related fee income and higher customer service fees. The increase in other income was mainly driven by a $0.7 million increase in the fair value mark on credit-linked notes.

Current wording

Noninterest income increased by $2.7 million to $66.3 million for the six months ended June 30, 2025 from $63.6 million for the six months ended June 30, 2024 due mainly to increases of $4.0 million in other income and $2.8 million in commissions and fees, offset partially by decreases of $2.2 million in leased equipment income and $2.0 million in dividends and gains on equity investments. The increase in other income was due mainly to a $2.6 million increase in the fair value mark on the credit-linked notes and a $1.1 million increase in gain on termination of leases. The increase in commissions and fees was due principally to higher loan-related fee income and higher customer service fees. The decrease in dividends and gains on equity investments was due mostly to lower fair value net gains in the first half of 2025 on SBIC investments compared to the same period in 2024.

Previous wording

Noninterest expense decreased by$26.9 million to$183.7 million for the three months ended March 31, 2025 compared to$210.5 million for the three months ended March 31, 2024 due mainly to decreases of$13.2 million in insurance and assessments,$5.8 million in compensation,$3.2 million in customer related expense,$3.0 million in occupancy, and$1.6 million in loan expenses. The decrease in insurance and assessments was primarily due to incremental FDIC special assessments recorded in the first quarter of 2024, resulting from higher assessment rates. Compensation expense decreased mainly due to lower headcount. Customer related expense decreased due to lower ECR expenses which were impacted by the lower federal funds rate. Occupancy expenses were also lower reflecting cost savings from branch consolidations following the merger. Loan expenses decreased largely due to lower loan servicing costs primarily as a result of the Civic loan sale completed in the third quarter of 2024.

Current wording

Noninterest expense decreased by$44.6 million to$369.5 million for the six-month period ended June 30, 2025 due mainly to decreases of$30.2 million in insurance and assessments,$9.0 million in customer related expenses,$4.9 million in occupancy,$3.4 million in compensation expense, and$13.1 million in all of the other expense categories, offset partially by an increase of$12.7 million in acquisition, integration and reorganization costs, as the prior-year period included a reversal of previously accrued merger-related costs due to lower actual expenses and there are no merger-related costs in the current year. Insurance and assessment decreased primarily due to incremental FDIC special assessments recorded in the first quarter of 2024, resulting from higher assessment rates. Customer related expense decreased due to lower earnings credit rate expenses, which were impacted by the lower federal funds rate. Occupancy decreased reflecting cost savings from branch consolidations following the merger. Compensation expense decreased primarily driven by reduced headcount following the merger.

Previous wording

Income tax expense of $19.5 million was recorded for the first quarter of 2025 resulting in an effective tax rate of 26.7% compared to income tax expense of $11.5 million for the first quarter of 2024 and an effective tax rate of 27.2%. The lower effective tax rate in the first quarter of 2025 was primarily attributable to lower disallowed FDIC insurance premium deduction.

Current wording

Income tax expense of$19.5 million was recorded for the second quarter resulting in an effective tax rate of 40.7% compared to income tax expense of $19.5 million and an effective tax rate of 26.7% for the first quarter.

Previous wording

Income tax expense of $19.5 million was recorded for the first quarter of 2025 resulting in an effective tax rate of 26.7% compared to income tax expense of $13.2 million for the fourth quarter of 2024 and an effective tax rate of 18.8%. The lower fourth quarter effective tax rate was due primarily to tax benefits resulting from recording deferred tax assets at higher state tax rates.

Current wording

Income tax expense of $39.0 million was recorded for the six-month period ended June 30, 2025 resulting in an effective tax rate of 32.2% compared to income tax expense of $25.9 million and an effective tax rate of 29.7% for the comparable period in 2024. The higher 2025 year-to-date effective tax rate was due primarily to the one-time non-cash tax expense related to the DTA revaluation recorded in the second quarter of 2025.

Previous wording

Cash and cash equivalents decreased by $158.3 million during the first quarter of 2025 to $2.3 billion at March 31, 2025 compared to $2.5 billion at December 31, 2024, primarily reflecting a lower cash target level being maintained during the quarter.

Current wording

Cash and cash equivalents decreased by $148.7 million to $2.4 billion at June 30, 2025 compared to $2.5 billion at December 31, 2024, primarily attributable to the use of cash to support loan growth in the first half of the year.

Previous wording

AFS securities increased by $87.2 million during the first quarter of 2025 to$2.3 billion at March 31, 2025 compared to$2.2 billion at December 31, 2024. The increase was primarily driven by purchases of $148.5 million and a $38.5 million increase in the fair value of AFS securities due to higher interest rates, partially offset by $97.9 million of principal paydowns and $1.9 million of net amortization. As principal paydowns occurred, we reinvested in higher-yield securities to enhance our investment yield.

Current wording

AFS securities decreased by$0.7 million to$2.2 billion at June 30, 2025 compared to$2.2 billion at December 31, 2024. The decrease was primarily driven by$209.7 million of principal paydowns,$3.7 million of net amortization, and a $0.8 million provision for credit losses, offset partially by purchases of$166.9 million anda$46.7 million increase in the fair value of AFS securities due to lower interest rates. As principal paydowns occurred, we reinvested in higher-yield securities to enhance our investment yield.

Previous wording

As of March 31, 2025, AFS securities had aggregate unrealized net after-tax losses in AOCI of $172.5 million compared to $200.1 million at December 31, 2024.

Current wording

As of June 30, 2025, AFS securities had aggregate unrealized net after-tax losses in AOCI of$166.6 million compared to$200.1 million at December 31, 2024. The decrease in the AFS unrealized net losses related primarily to lower interest rates and the resulting impact on valuations.

Previous wording

HTM securities increased by$5.8 million in the first quarter to$2.3 billion at March 31, 2025 compared to$2.3 billion at December 31, 2024. The increase was primarily due to the accretion of $8.3 million of the remaining unrealized losses balance deferred in other comprehensive income ("OCI") from a prior transfer of securities from AFS to HTM on June 1, 2022, and the release of $0.9 million in credit loss reserve, partially offset by $3.2 million of net amortization and $0.3 million of principal paydowns.

Current wording

HTM securities increased by$10.6 million to$2.3 billion at June 30, 2025 compared to$2.3 billion at December 31, 2024. The increase was primarily due to the accretion of$16.7 million of the remaining unrealized losses balance deferred in other comprehensive income ("OCI") from a prior transfer of securities from AFS to HTM on June 1, 2022, and the release of$0.8 million in credit loss reserve, offset partially by$6.3 million of net amortization and $0.6 million of principal paydowns.

Previous wording

As of March 31, 2025, HTM securities had aggregate unrealized net after-tax losses in AOCI of $151.9 million remaining from the balance established at the time of the AFS to HTM transfer, compared to $157.9 million at December 31, 2024.

Current wording

As of June 30, 2025, HTM securities had aggregate unrealized net after-tax losses in AOCI of $145.9 million remaining from the balance established at the time of the AFS to HTM transfer, compared to$157.9 million at December 31, 2024.

Previous wording

(1) Includes land and acquisition and development loans of $221.4 million at March 31, 2025 and $223.9 million at December 31, 2024.

Current wording

(1) Includes land and acquisition and development loans of $200.6 million at June 30, 2025 and $223.9 million at December 31, 2024.

Previous wording

Total loans and leases held for investment increased by$344.9 million in the first quarter and totaled $24.1 billion at March 31, 2025 compared to $23.8 billion at December 31, 2024. The increase in loans and leases held for investment was due primarily to increased balances in the asset-based, venture capital, other commercial, and multi-family loan portfolios, offset partially by a decrease in the real estate construction and land loan segment, and the commercial real estate mortgage and other residential real estate mortgage loan portfolios. Loan originations including production, purchased loans, and unfunded new commitments were $2.6 billion in the first quarter, most of which onboarded towards the end of the quarter, with a weighted average interest rate on production of 7.20%.

Current wording

Total loans and leases held for investment increased by $464.2 million and totaled $24.2 billion at June 30, 2025 compared to $23.8 billion at December 31, 2024. The increase in loans and leases held for investment was due primarily to increased balances in the venture capital, asset-based, other residential real estate mortgage mainly from purchased single-family residential loans, multi-family, and other commercial loan portfolios, offset partially by a decrease in the real estate construction and land loan segment and the commercial real estate mortgage loan portfolios.

Previous wording

The following table presents the geographic composition of our real estate loans held for investment by the top 10 states and all other states combined (in the order presented for the current quarter-end) as of the dates indicated:

Current wording

Our real estate loan portfolio encompasses commercial real estate mortgage, residential real estate mortgage, and real estate construction and land loans. As of June 30, 2025 and December 31, 2024, the real estate loan comprised 66% and 70%, respectively of the total loan portfolio. The following table presents the geographic composition of our real estate loans held for investment by the top 10 states and all other states combined (in the order presented for the current quarter-end) as of the dates indicated:

Previous wording

At March 31, 2025 and December 31, 2024, 71% and 71% of our real estate loans were collateralized by property located in California because our full-service branches and our community banking activities are primarily located in California.

Current wording

At June 30, 2025 and December 31, 2024, 72% and 71% of our real estate loans were collateralized by property located in California because our full-service branches and our community banking activities are primarily located in California.

Previous wording

For the first quarter of 2025, we used the Moody’s March 31, 2025 Baseline and S2 Downside 75th Percentile for the calculation of our quantitative component. The weightings of the scenarios were based on management’s current expectations for the economic forecast, acknowledging the risk of recession over our reasonable and supportable forecast period and the current economic uncertainty.

Current wording

For the second quarter of 2025, we used the Moody’s June 30, 2025 Baseline and S2 Downside 75th Percentile for the calculation of our quantitative component. The weightings of the scenarios were based on management’s current expectations for the economic forecast, acknowledging the risk of recession over our reasonable and supportable forecast period and the current economic uncertainty.

Previous wording

As part of our ACL methodology, we consistently incorporate the use of qualitative factors in determining the overall ACL to capture risks that may not be appropriately reflected in our quantitative models. Such qualitative factors may include, but are not limited to: economic conditions not captured in in the quantitative reserve; collateral dependency related to certain loan portfolios including loans secured by office properties that were directly impacted by flexible/hybrid work environment; concentrations of credit within the loan portfolio including the commercial real estate portfolio; the quality of the Company’s credit review system; the volume and severity of adversely classified financial assets; the Company’s lending policies and procedures; and the effect of other external factors such as the regulatory and legal environments. During the first quarter of 2025, reserves associated with the qualitative adjustments decreased when compared to the prior quarter. Primary qualitative adjustments were related to loans secured by office properties and concentration of credit associated with commercial real estate loans, multi-family loans, and construction loans.

Current wording

As part of our ACL methodology, we consistently incorporate the use of qualitative factors in determining the overall ACL to capture risks that may not be appropriately reflected in our quantitative models. Such qualitative factors may include, but are not limited to: economic conditions not captured in in the quantitative reserve; collateral dependency related to certain loan portfolios including loans secured by office properties that were directly impacted by flexible/hybrid work environment; concentrations of credit within the loan portfolio including the commercial real estate portfolio; the quality of the Company’s credit review system; the volume and severity of adversely classified financial assets; the Company’s lending policies and procedures; and the effect of other external factors such as the regulatory and legal environments. During the second quarter of 2025, reserves associated with the qualitative adjustments increased when compared to the prior quarter. Primary qualitative adjustments were related to loans secured by office properties and concentration of credit associated with commercial real estate loans, multi-family loans, and construction loans.