BANC OF CALIFORNIA INC

Previous wording

The Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through full-service branches throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

At December 31, 2023, the Company had total assets of $38.5 billion, including$25.6 billion of total loans and leases, net of deferred fees, and$2.3 billion of securities available-for-sale,$2.3 billion of securities held-to-maturity, and$5.2 billion of interest-earning deposits in financial institutions, compared to $41.2 billion of total assets, including $28.7 billion of total loans and leases, net of deferred fees, $4.8 billion of securities available-for-sale, $2.3 billion securities held-to-maturity, and $2.0 billion of interest-earning deposits in financial institutions at December 31, 2022. The$2.7 billion decrease in total assets since year-end 2022 was due primarily to a$3.1 billion decrease in loans and leases, net of deferred fees, and a$2.5 billion decrease in securities available-for-sale, offset partially by a$3.1 billion increase in interest-earning deposits in financial institutions. The decrease in loans and leases is mainly due to $5.2 billion of loan sales in the second quarter of 2023, partially offset by the loans acquired in the Company's merger with PacWest Bancorp (the "Merger"). The decrease in securities available-for-sale was due mainly to a $2.7 billion sale of securities in the fourth quarter of 2023 as part of our balance sheet repositioning strategy. Contributing to the increase in interest-earning deposits at financial institutions was the Company's desire to have more on-balance sheet liquidity in response to the deposit volatility caused by the failures of three regional banks in the first and second quarters of 2023.

Current wording

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

Previous wording

At December 31, 2023, the Company had total liabilities of$35.1 billion, including total deposits of$30.4 billion and borrowings of$2.9 billion, compared to $37.3 billion of total liabilities, including $33.9 billion of total deposits and $1.8 billion borrowings at December 31, 2022. The$2.1 billion decrease in total liabilities since year-end 2022 was due mainly to decreases of $3.5 billion in total deposits, offset partially by an increase of $1.1 billion in borrowings. The decrease in total deposits was due to the loss of deposits during the period of volatility after the failures of three regional banks in 2023. The increase in borrowings was due to the Company's desire to have more on-balance sheet liquidity in response to the deposit volatility caused by the failures of three regional banks in the first and second quarters of 2023.

Current wording

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

Previous wording

At December 31, 2023, the Company had total stockholders' equity of $3.39 billion compared to $3.95 billion at December 31, 2022. The $559.8 million decrease in stockholders' equity since year-end 2022 was due mainly to the net loss of $1.9 billion in 2023 attributable primarily to a $1.38 billion goodwill impairment charge in the first quarter of 2023, partially offset by an increase in accumulated other comprehensive income (loss) of $358.8 million attributable to an increase in the fair value of the investment securities portfolio and the shares issued as consideration for the Merger and the related $400 million capital raise.

Current wording

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

Previous wording

The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, PacWest Bancorp was deemed the accounting acquirer, even though Banc of California, Inc. was the legal acquirer. We recorded the legacy Banc of California, Inc. acquired assets and assumed liabilities, both tangible and intangible, at their estimated fair values as of the acquisition date. The application of the acquisition method of accounting resulted in goodwill of $198.6 million. The Bank is headquartered in Los Angeles, California, and operates more than 90 branches in California, as well as branches in North Carolina and Colorado. We completed the Merger to, among other things, enhance our scale and presence in California and augment and diversify our sources of revenue. For further information, see Note 2. Business Combinations.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Net interest income is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings. Contributing to our positive net interest margin is our healthy yield on loans and leases in excess of our core deposit costs. While our deposit balances will fluctuate depending on our customers’ liquidity and cash flow, market conditions, and competitive pressures, we seek to minimize the impact of these variances by attracting a high percentage of noninterest-bearing deposits. During 2023, our net interest margin was negatively impacted because we accessed the wholesale funding market to replace outflows of core deposits.

Current wording

Net interest income is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings. Contributing to our positive net interest margin is our healthy yield on loans and leases in excess of our core deposit costs. While our deposit balances will fluctuate depending on our customers’ liquidity and cash flow, market conditions, and competitive pressures, we seek to minimize the impact of these variances by attracting a high percentage of noninterest-bearing deposits.

Previous wording

We actively seek new lending opportunities under an array of lending products. Our lending activities include real estate mortgage loans, real estate construction and land loans, commercial loans and leases, and a small amount of consumer lending. Our commercial real estate loans and real estate construction loans are secured by a range of property types. Our commercial loans and leases portfolio is diverse and generally includes various asset-secured loans, equipment-secured loans and leases, venture capital loans to support venture capital firms’ operations and the operations of entrepreneurial and venture-backed companies during the various phases of their early life cycles, warehouse loans and secured business loans. During 2023, loan production slowed significantly compared to the prior year mainly due to the negative impact from the three regional bank failures and the need to accelerate the Company’s execution of its strategy to increase on-balance sheet liquidity and preserve capital.

Current wording

We actively seek new lending opportunities under an array of lending products. Our lending activities include real estate mortgage loans, real estate construction and land loans, commercial loans and leases, and a small amount of consumer lending. Our commercial real estate loans and real estate construction loans are secured by a range of property types. Our commercial loans and leases portfolio is diverse and generally includes various asset-secured loans, equipment-secured loans and leases, venture capital loans to support venture capital firms’ operations and the operations of entrepreneurial and venture-backed companies during the various phases of their early life cycles, warehouse loans and secured business loans.

Previous wording

Our loan origination process emphasizes credit quality. Historically, to augment our internal loan production, we have purchased loans such as multi-family loans from other banks, private student loans from third-party lenders, and in recent years , single-family residential mortgage loans. Prior to our acquisition of Civic in February 2021, we also purchased loans from Civic. 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. Historically, to augment our internal loan production, we have purchased loans such as multi-family loans from other banks, private student loans from third-party lenders, and in recent years, single-family residential mortgage loans. These loan purchases help us manage the concentrations in our portfolio as they diversify the geographic risk, interest-rate risk, credit risk, and product composition of our loan portfolio. Achieving net loan growth is subject to many factors, including maintaining strict credit standards, competition from other lenders, and borrowers that opt to prepay loans.

Previous wording

Our noninterest expense includes fixed and controllable overhead, and typically the largest components of which are compensation and occupancy expense. It also includes costs that tend to vary based on the volume of activity, such as loan and lease production and the number and complexity of foreclosed assets. We measure success in controlling both fixed and variable costs through monitoring of the efficiency ratio, which is calculated by dividing noninterest expense (less intangible asset amortization, net foreclosed assets expense (income), goodwill impairment, and acquisition, integration and reorganization costs) by net revenues (the sum of net interest income plus noninterest income, less gain (loss) on sale of securities and gain (loss) on sales of assets other than loans and leases).

Current wording

Our noninterest expense includes fixed and controllable overhead, the largest components of which are compensation expense, customer related expense, and occupancy expense. Customer related expenses are primarily earnings credit rate payments to customers and are mostly driven by the Homeowners Association ("HOA") business. It also includes costs that tend to vary based on the volume of activity, such as loan and lease production and the number and complexity of foreclosed assets. Additionally, noninterest expense included acquisition, integration and reorganization costs related to the Merger and a goodwill impairment charge recorded in 2023. We measure success in controlling both fixed and variable costs through monitoring of the ratio of noninterest expense to average total assets.

Previous wording

The following table presents the calculation of our efficiency ratio for the years indicated:

Current wording

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

Previous wording

Our significant accounting policies and practices are described in Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data." We have identified four policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for credit losses on loans and leases held for investment, business combinations, the carrying value of goodwill and other intangible assets, and the realization of deferred tax assets and liabilities.

Current wording

Our significant accounting policies and practices are described in Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data." We have identified three policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for credit losses on loans and leases held for investment, the carrying value of goodwill and other intangible assets, and the realization of deferred tax assets and liabilities.

Previous wording

The ACL is estimated on a quarterly basis and represents management's estimate of current expected credit losses over the remaining expected life of the Company's financial assets measured at amortized cost, including loans and leases and certain lending-related commitments. The allowance for credit losses involves significant judgment on a number of matters including assessment of key credit risk characteristics, assignment of risk ratings, valuation of collateral, the determination of remaining expected life, incorporation of historical loss experience, and development and weighting of macroeconomic forecasts. For information regarding the calculation and policies of the ACL on loans and leases held for investment, see " - Balance Sheet Analysis -Allowance for Credit Losses on Loans and Leases Held for Investment" and Note 1(j). Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment, of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."

Current wording

The ACL is estimated on a quarterly basis and represents management's estimate of current expected credit losses over the remaining expected life of the Company's financial assets measured at amortized cost, including loans and leases and certain lending-related commitments. The ACL involves significant judgment on a number of matters including assessment of key credit risk characteristics, assignment of risk ratings, valuation of collateral, the determination of remaining expected life, incorporation of historical default and loss experience, and development and weighting of macroeconomic forecasts. For information regarding the calculation and policies of the ACL on loans and leases held for investment, see " - Balance Sheet Analysis -Allowance for Credit Losses on Loans and Leases Held for Investment" and Note 1(j). Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment, of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."

Previous wording

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 deferred tax assets 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 deferred tax assets may no longer be considered more likely than not and, accordingly, we could be required to record a valuation allowance on our deferred tax assets by charging earnings.

Current wording

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.

Previous wording

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. The methodology for determining these non-GAAP measures may differ among companies. We use the following non-GAAP measures in this Form 10-K:

Current wording

We use certain non‑GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP. The methodology for determining these non-GAAP measures may differ among companies and may not be comparable. We use the following non-GAAP measures in this Annual Report on Form 10-K:

Previous wording

•Return on average tangible common equity, tangible common equity to tangible assets ratio, and tangible book value per common 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, equity to assets ratio, and book value per share, respectively. The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the years presented. Such disclosures should not be viewed as substitutes for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Current wording

•Return on average tangible common equity, tangible common equity ratio, tangible book value per common share, adjusted return on average tangible common equity, adjusted net earnings, and adjusted return on average assets: Given that the use of these measures is prevalent among banking regulators, investors and analysts, we disclose them in addition to the related GAAP measures of return on average equity, equity to assets ratio, and book value per share, respectively. The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the years presented. Such disclosures should not be viewed as substitutes for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(2) Includes net loan discount accretion of $9.7 million for 2023 and net loan premium amortization of $17.9 million and $11.4 million for 2022 and 2021, respectively.

Current wording

(2) Total loans are net of deferred fees, related direct costs, and premiums and discounts, but exclude the allowance for loan losses. Includes net loan discount accretion of$88.0 million and $9.7 million for 2024 and 2023 and net loan premium amortization of $17.9 million for 2022, respectively.

Previous wording

(3) Includes tax-equivalent adjustments of $2.3 million, $7.9 million, $6.6 million for the years ended 2023, 2022, and 2021, respectively, related to tax-exempt income on loans. Includes tax-equivalent adjustments of$0.0 million, $5.9 million, and $8.6 million for 2023, 2022, and 2021, respectively, related to tax-exempt income on investment securities. The federal statutory rate utilized was 21%.

Current wording

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

Previous wording

The tax equivalent NIM for the year ended December 31, 2022 was 3.49% compared to 3.40% for the year ended December 31, 2021. The increase in the tax equivalent NIM was due mostly to the change in the mix of average interest-earning assets. The change in the mix of average interest-earning assets was due to the increase in the balance of average loans and leases as a percentage of average interest-earning assets from 60% to 70%, the increase in the balance of average investment securities as a percentage of average interest-earning assets from 23% to 24%, and the decrease in the balance of average deposits in financial institutions as a percentage of average interest-earning assets from 17% to 6%. The balance of average loans and leases increased by $6.3 billion, the balance of average investment securities increased by $1.6 billion, and the balance of average deposits in financial institutions declined by $3.5 billion.

Current wording

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

Previous wording

The following table sets forth the details of the provision for credit losses on loans and leases held for investment and held-to-maturity debt securities as well as information regarding credit quality metrics for the years indicated:

Current wording

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

Previous wording

Provisions for credit losses are charged to earnings for both on and off‑balance sheet credit exposures. The provisions for credit losses on our loans and leases held for investment and held-to-maturity debt securities are based on our allowance methodologies and are expenses that, in our judgment, are required to maintain an adequate allowance for credit losses for both assets held at amortized cost.

Current wording

Provisions for credit losses are charged to earnings for both on and off‑balance sheet credit exposures. The provisions for credit losses on our loans and leases held for investment, AFS debt securities, and HTM debt securities are based on our allowance methodologies and are expenses that, in our judgment, are required to maintain an appropriate ACL for these assets.

Previous wording

The provision for credit losses increasedby $27.5 million to a provision of $52.0 million for the year ended December 31, 2023 compared to a provision of $24.5 million for the year ended December 31, 2022. During 2023, the $52.0 million loan-related provision included a $113.5 million provision for loan losses due primarily to the growth in loans and leases resulting from the Merger, an increase in net charge-offs, and management's expectation of a less favorable economic forecast, offset partially by a $61.5 million reversal of the provision for credit losses related to lower unfunded loan commitments. The provision for loan losses in 2023 included an initial provision of $22.2 million for acquired legacy Banc of California non-PCD loans. The provision for credit losses on loans was $23.0 million during the year ended December 31, 2022, and included a $5.0 million provision for loan losses due primarily to the growth in loans and leases and a less favorable economic forecast, offset partially by a decrease in qualitative reserves, and an $18.0 million provision related to higher unfunded loan commitments.

Current wording

The provision for credit losses decreasedby $9.2 million to a provision of $42.8 million for the year ended December 31, 2024 compared to a provision of $52.0 million for the year ended December 31, 2023. The provision for credit losses in 2024 included a $43.5 million provision for loan losses, offset partially by a $0.5 million reversal of the provision for credit losses related to unfunded loan commitments and a $0.2 million reversal of the provision for credit losses related to AFS securities. The 2024 provision for loan losses was driven mainly by net charge-off activity during the year. The provision for credit losses for 2023 included a $113.5 million provision for loan losses, offset partially by a $61.5 million reversal of the provision for credit losses related to lower unfunded loan commitments. The provision for loan losses in 2023 also included an initial provision of $22.2 million for acquired legacy Banc of California non-PCD loans.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Noninterest expense increased by$1.7 billion to$2.5 billion for the year ended December 31, 2023 compared to $773.5 million for the year ended December 31, 2022. The increase was due mainly to higher (i) goodwill impairment of $1.35 billion, (ii) acquisition, integration and reorganization costs of $136.9 million, (iii) regulatory assessments of $110.2 million due to the special FDIC assessment of $32.7 million and the generally-applicable FDIC increased assessment rates in 2023, (iv) customer related expense of $68.8 million, and (v) other expenses of $102.0 million, including $106.8 million of unfunded commitments fair value loss adjustments related to loan sales, offset partially by lower compensation expense of $74.5 million.

Current wording

Noninterest expense decreased by$1.7 billion to$791.7 million for the year ended December 31, 2024 compared to$2.5 billion for the year ended December 31, 2023. The decrease was due mainly to (i) goodwill impairment of$1.4 billion recorded in 2023, (ii) lower acquisition, integration and reorganization costs of $156.8 million related to the Merger, (iii) lower other expenses of $107.2 million due to a $106.8 million of unfunded commitments fair value loss adjustments related to loan sales recorded in 2023, and (iv) lower regulatory assessments of $64.9 million for both the regular FDIC assessment and the special assessment offset partially by higher intangible asset amortization of $21.7 million.

Previous wording

The effective tax rates were 14.1%, 25.4%, and 26.2% for the years ended December 31, 2023, 2022, and 2021. Excluding non-deductible goodwill impairment, the effective income tax rate was 26.2% for the year ended December 31, 2023. The lower effective tax rate in 2023 was due mainly to the effect of the non-deductible goodwill impairment. The decrease in the effective tax rate for 2022 compared to the 26.2% rate for 2021 was due mainly to a change in the apportionment of taxable income for state taxes in 2022. The Company's 2023 blended statutory tax rate for federal and state was 28.1%. For further information on income taxes, see Note 16. Income Taxes of the Notes to Consolidated Financial Statements contained in “Item 8. Financial Statements and Supplementary Data.”

Current wording

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

Previous wording

The following table presents the composition and durations of our securities available-for-sale as of the dates indicated:

Current wording

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

Previous wording

Effective June 1, 2022, the Company transferred $2.3 billion in fair value of municipal securities, agency commercial MBS, private label commercial MBS, U.S. Treasury securities, and corporate debt securities from available-for-sale to held-to-maturity. The unrealized losses on the transferred securities are being amortized over the expected remaining life of the securities in a manner consistent with the amortization of a premium or discount.

Current wording

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

Previous wording

The following table presents a summary of contractual rates and contractual maturities of our securities available‑for‑sale as of the date indicated:

Current wording

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

Previous wording

The following table presents the composition and durations of our securities held-to-maturity as of the dates indicated:

Current wording

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

Previous wording

The following table shows the geographic composition of the majority of our held-to-maturity municipal securities portfolio as of the date indicated:

Current wording

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

Previous wording

The following table presents a summary of contractual rates and contractual maturities of our securities held-to-maturity as of the date indicated:

Current wording

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

Previous wording

The following table presents the composition of our total loans and leases held for investment, net of deferred fees, by loan portfolio segment, class, and subclass as of the dates indicated:

Current wording

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

Previous wording

(1) Includes $228.9 million, $153.5 million, and $151.8 million, at December 31, 2023, 2022, and 2021 of land acquisition and development loans.

Current wording

(1) Includes $223.9 million, $228.9 million, and $153.5 million, at December 31, 2024, 2023, and 2022 of land acquisition and development loans.

Previous wording

Our loan portfolio segments of real estate mortgage loans, real estate construction and land loans, and commercial loans comprised 63%, 12%, and 23% of our total loans and leases held for investment at December 31, 2023, compared to 55%, 14%, and 29% at December 31, 2022, respectively.

Current wording

Our loan portfolio segments of real estate mortgage loans, real estate construction and land loans, and commercial loans comprised 57%, 13%, and 28% of our total loans and leases held for investment at December 31, 2024, compared to 63%, 12%, and 23% at December 31, 2023, respectively.

Previous wording

•Multi-family real estate mortgage loans increased by 7% to $6.0 billion or 23% of total loans and leases held for investment at December 31, 2023 from $5.6 billion or 20% at December 31, 2022. The higher balance was attributable primarily to the balances acquired in the Merger.

Current wording

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