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 six months ended June 30, 2026. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 and with the unaudited 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 nine months ended September 30, 2026. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q.

Previous wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to our anticipated benefits of our securities repositioning, targeted loan sale process, and other strategic balance sheet actions including, among others, an improved credit risk profile, increased capital efficiency, and an enhanced earnings profile; and other non-historical statements. Words or phrases such as “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “strategy,” or similar expressions are intended to identify these forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by the Company with the SEC. The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Current wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, profitability, liquidity and capital; anticipated benefits of our securities repositioning and other strategic balance sheet actions including, among others, a strengthened credit risk profile, increased capital efficiency, and an enhanced earnings profile; and other non-historical statements. Words or phrases such as “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “strategy,” or similar expressions are intended to identify these forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by the Company with the SEC. The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Previous wording

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to: (i) changes in general economic conditions, either nationally or in our market areas, including the impact of tariffs and retaliatory tariffs, supply chain disruptions, and the risk of recession or an economic downturn; (ii) changes in the interest rate environment, including the recent and potential future changes in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, the realization of deferred tax assets, the availability and cost of capital and liquidity, and the impacts of continuing or renewed inflation; (iii) the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and non-performing assets, and may result in our allowance for credit losses not being adequate; (iv) fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area; (v) the quality and composition of our securities portfolio; (vi) our ability to develop and maintain a strong core deposit base, including among our venture banking clients, or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment; (vii) the rapid withdrawal of a significant amount of demand deposits over a short period of time; (viii) our ability to achieve or maintain the anticipated benefits of our securities repositioning and other strategic balance sheet actions due to one or more of the other factors described herein or otherwise, or the failure to complete our anticipated loan sales due to a condition to closing not being satisfied or otherwise; (ix) our ability to raise capital or incur debt on reasonable terms; (x) the costs and effects of litigation; (xi) risks related to the Company’s acquisitions, including disruption to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; and our inability to achieve expected revenues, cost savings, synergies, and other benefits; (xii) the competitive and other impacts on our business of emerging technologies, including stablecoins and other digital currencies, tokenized deposits, blockchain, artificial intelligence, quantum computing, and related innovations affecting both the Company and the banking industry; (xiii) results of examinations by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, restrict our ability to invest in certain assets, refrain…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to: (i) changes in general economic conditions, either nationally or in our market areas, including the impact of tariffs and retaliatory tariffs, supply chain disruptions, and the risk of recession or an economic downturn; (ii) changes in the interest rate environment, including the recent and potential future changes in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, the realization of deferred tax assets, the availability and cost of capital and liquidity, and the impacts of continuing or renewed inflation; (iii) the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and non-performing assets, and may result in our allowance for credit losses not being adequate; (iv) fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area; (v) the quality and composition of our securities portfolio; (vi) our ability to develop and maintain a strong core deposit base, including among our venture banking and private banking clients, or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment; (vii) the rapid withdrawal of a significant amount of demand deposits over a short period of time; (viii) our ability to achieve or maintain the anticipated benefits of our securities repositioning and other strategic balance sheet actions due to one or more of the other factors described herein or otherwise; (ix) our ability to successfully implement new business initiatives, such as our private banking service, and to realize their anticipated benefits; (x) our ability to raise capital or incur debt on reasonable terms; (xi) the costs and effects of litigation; (xii) risks related to the Company’s acquisitions, including disruption to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; and our inability to achieve expected revenues, cost savings, synergies, and other benefits; (xiii) the competitive and other impacts on our business of emerging technologies, including stablecoins and other digital currencies, tokenized deposits, blockchain, artificial intelligence, quantum computing, and related innovations affecting both the Company and the banking industry; (xiv) results of examinations by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, restr…

Excerpt shortened here; the source contains the full paragraph.

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 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 77 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.

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 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. Through its Private Banking division, the Bank also serves individuals and families with personalized banking solutions, dedicated relationship management, and exceptional service. The Bank offers a broad range of loan and deposit products and services through 76 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.

Previous wording

As part of the securities repositioning, the Company transferred $2.3 billion of HTM securities to AFS, subsequently sold substantially all of the transferred securities, and redeployed a portion of the proceeds into higher-yielding, shorter-duration AFS securities. In connection with the targeted loan sale process, the Company transferred $827.0 million of loans to HFS during the quarter and subsequently entered into agreements to sell these loans in July 2026. In addition, the Company redeemed $385.0 million of subordinated debt prior to a higher interest rate reset.

Current wording

As part of the securities repositioning, the Company transferred $2.3 billion of HTM securities to AFS, subsequently sold substantially all of the transferred securities, and redeployed the proceeds into higher-yielding, shorter-duration AFS securities. In connection with the targeted loan sale process, the Company transferred $827.0 million of loans to HFS during the second quarter of 2026. The majority of the targeted loan sales closed during the third quarter of 2026, and the Company completed the remaining targeted loan sales on October 21, 2026. In addition, the Company redeemed $385.0 million of subordinated debt prior to a higher interest rate reset during the second quarter of 2026.

Previous wording

On March 23, 2026, we announced the extension of the Company’s existing $300 million stock repurchase program, which had been scheduled to expire in March 2026, through March 16, 2027. During six months ended June 30, 2026, the Company repurchased a total of approximately 1.7 million shares of common and common equivalent stock for $31.9 million, at a weighted-average price of $18.68 per share. As of June 30, 2026, the Company had $82.6 million remaining under the stock repurchase authorization. For further information on the stock repurchase program, see "Note 14. Stockholders' Equity", in Item 1 of this Form 10-Q.

Current wording

On March 23, 2026, we announced the extension of the Company’s existing $300 million stock repurchase program, which had been scheduled to expire in March 2026, through March 16, 2027. During the nine months ended September 30, 2026, the Company repurchased a total of approximately 1.7 million shares of common and common equivalent stock for $31.9 million, at a weighted-average price of $18.68 per share. As of September 30, 2026, the Company had $82.6 million remaining under the stock repurchase authorization. For further information on the stock repurchase program, see "Note 14. Stockholders' Equity" in Item 1 of this Form 10-Q.

Previous wording

(1) Effective tax rates of 28.00%, 25.14% and 23.12% used for the three months ended June 30, 2026, March 31, 2026 and June 30, 2025. Effective tax rates of 29.30% and 23.12% used for the six months ended June 30, 2026 and 2025.

Current wording

(1) Annual effective tax rates of 23.12% and 28.00% used for the three months ended September 30, 2026 and June 30, 2026. Annual effective tax rates of 34.32% and 27.34% used for the nine months ended September 30, 2026 and 2025.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(1) Includes customer related expense of $24.1 million, $23.7 million, and $26.6 million for the three months ended June 30, 2026, March 31, 2026, and June 30, 2025, and $47.9 million and $54.3 million for six months ended June 30, 2026 and 2025.

Current wording

(1) Includes customer related expense of $24.8 million and $24.1 million for the three months ended September 30, 2026 and June 30, 2026, and $72.7 million and $80.6 million for nine months ended September 30, 2026 and 2025.

Previous wording

The Company reported net loss available to common and equivalent stockholders of$251.3 million, or$(1.61) per diluted common share, for the second quarter of 2026. This compares to net earnings available to common and equivalent stockholders of $62.0 million, or $0.39 per diluted common share, for the first quarter of 2026, and 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. The net loss for the second quarter of 2026 was primarily attributable to the impact of strategic balance sheet actions undertaken during the quarter, including the securities repositioning, targeted loan sale process, and redemption of subordinated debt.

Current wording

The Company reported net earnings available to common and equivalent stockholders of $73.1 million, or $0.46 per diluted common share, for the third quarter of 2026, compared to $59.7 million, or $0.38 per diluted common share for the third quarter of 2025. For the second quarter of 2026, the Company reported a net loss available to common and equivalent stockholders of $251.3 million, or $(1.61) per diluted common share, reflecting the previously announced strategic balance sheet repositioning.

Previous wording

•Average loans increased $556.1 million, or 2.3%, during the quarter, driven by $2.8 billion of loan production and disbursements with a weighted average interest rate on production of 6.39%.

Current wording

•Loans and leases HFI increased $379.7 million, or 6% on an annualized basis, driven by $2.6 billion of loan production and disbursements with a weighted average interest rate on production of 6.58%.

Previous wording

•Credit quality trends were favorable, as classified loans and leases and special mention loans and leases as a percentage of total loans and leases HFI declined by 99 basis points, and 154 basis points, respectively.

Current wording

•Credit quality trends were favorable, as nonperforming and classified loans and leases as a percentage of total loans and leases HFI declined by 12 basis points and 35 basis points, respectively.

Previous wording

•Capital ratios exceeded the regulatory thresholds for "well capitalized" banks, including a 11.67% Tier 1 capital ratio and 9.25% CET 1 capital ratio.

Current wording

•Capital ratios increased from the second quarter of 2026 and exceeded the regulatory thresholds for "well capitalized" banks, including a 12.10% Tier 1 capital ratio, up 43 basis points, and 9.70% CET1 capital ratio, up 45 basis points, reflecting capital generation following the balance sheet repositioning.

Previous 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 securities). See "Non-GAAP Financial Measures" in Item 2 of this Form 10-Q. Noninterest expense includes customer related expense of $24.1 million and $23.7 million for the three months ended June 30, 2026 and March 31, 2026, and $47.9 million and $54.3 million for six months ended June 30, 2026 and 2025.

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 securities). See "Non-GAAP Financial Measures" in Item 2 of this Form 10-Q. Noninterest expense includes customer related expense of $24.8 million and $24.1 million for the three months ended September 30, 2026 and June 30, 2026, and $72.7 million and $80.6 million for nine months ended September 30, 2026 and 2025.

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 $11.2 million, $12.2 million and $16.1 million for the three months ended June 30, 2026, March 31, 2026 and June 30, 2025.

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 $8.7 million and $11.2 million for the three months ended September 30, 2026 and June 30, 2026.

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 $23.4 million and $32.1 million for the six months ended June 30, 2026 and 2025.

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 $32.2 million and $51.5 million for the nine months ended September 30, 2026 and 2025.

Previous wording

NII increased $29.5 million to $502.1 million for the six months ended June 30, 2026, from $472.6 million for the six months ended June 30, 2025. This increase was primarily driven by a $41.0 million decrease in interest expense on deposits primarily due to lower interest rates following federal funds rate cuts, and an $8.8 million increase in interest income from investment securities reflecting the benefits of prior strategic balance sheet actions and reinvestment into higher-yielding assets. These benefits were offset partially by a $10.3 million decrease in interest income from deposits in financial institutions due to lower balances and lower market interest rates, a $6.3 million increase in borrowing costs associated with funding loan growth and the subordinated debt redemption in the second quarter of 2026, and a $3.6 million decrease in loan interest income primarily attributable to a reversal of previously accrued interest on loans placed on nonaccrual status, offset partially by the benefit of higher average loan balances.

Current wording

NII increased $48.5 million to $774.6 million for the nine months ended September 30, 2026, from $726.0 million for the nine months ended September 30, 2025. The increase was primarily driven by a $53.8 million decrease in interest expense on deposits due to lower interest rates following federal funds rate cuts in the second half of 2025, and a $30.6 million increase in interest income from investment securities reflecting the benefits of prior strategic balance sheet repositioning and reinvestment activities, including $4.1 million of special dividends received on FHLB stock. These benefits were offset partially by a $15.5 million increase in borrowing costs associated with funding loan growth and the subordinated debt redemption prior to higher repricing in the second quarter of 2026, a $13.8 million decrease in loan interest income primarily attributable to a reversal of previously accrued interest on loans placed on nonaccrual status offset partially by the benefit of higher average loan balances, and an $11.8 million decrease in interest income from deposits in financial institutions due to lower balances and lower market interest rates.

Previous wording

The net interest margin was 3.18% for the six months ended June 30, 2026, up 9 basis points from 3.09% for the six months ended June 30, 2025. The year-over-year improvement was primarily driven by a 30 basis point decrease in the average total cost of funds to 2.12%, offset partially by a 20 basis point decrease in the average yield on interest-earning assets to 5.21%.

Current wording

The net interest margin was 3.24% for the nine months ended September 30, 2026, up 11 basis points from 3.13% for the nine months ended September 30, 2025. The year-over-year improvement was primarily driven by a 26 basis point decrease in the average total cost of funds due mainly to lower market interest rates and a 69 basis point increase in the average yield on investment securities.

Previous wording

The average total cost of funds decreased by 30 basis points to 2.12%, driven mainly by lower market interest rates. The average cost of deposits declined by 33 basis points to 1.79%, reflecting the impact of federal funds rate cuts in the second half of 2025. Average total deposits increased by $356.0 million year-over-year, as a result of a $229.2 million increase in average noninterest-bearing deposits and a $126.8 million increase in average interest-bearing deposits. Average noninterest-bearing deposits represented 28.7% of average total deposits for the six months ended June 30, 2026, up from 28.2% for the comparable period in 2025. The average cost of borrowings also decreased by 60 basis points to 4.52%, reflecting the paydown of higher-cost borrowings in the prior year and their replacement with lower-cost long-term FHLB advances.

Current wording

The average total cost of funds decreased by 26 basis points to 2.14%, driven primarily by the decline in average cost of deposits of 30 basis points to 1.81%, reflecting the impact of lower market interest rates. Average total deposits increased by $536.6 million year-over-year, as a result of a $316.6 million increase in average interest-bearing deposits and a $220.1 million increase in average noninterest-bearing deposits. Average noninterest-bearing deposits represented 28.4% of average total deposits for the nine months ended September 30, 2026, up from 28.2% for the comparable period in 2025. The average cost of borrowings also decreased by 49 basis points to 4.50%, reflecting the paydown of higher-cost borrowings in the prior year and their replacement with lower-cost short-term FHLB advances.

Previous wording

The first quarter provision for loan losses and unfunded loan commitments was primarily driven by net charge off activity and changes in loan risk ratings including specific reserves, offset partially by lower balances in the HFI portfolio and lower qualitative reserves.

Current wording

The third quarter provision included an $8.4 million provision for loan losses and a $2.0 million provision for unfunded commitments. The provision was primarily driven by net charge-off activity experienced in the quarter and growth in the HFI loan portfolio, offset partially by lower specific reserves and changes in the economic factors used in the provision estimate.

Previous wording

The provision for credit losses was $161.8 million for the second quarter compared to $9.8 million for the first quarter. The increase was primarily driven by $161.6 million of charge-offs, the impact of loan growth and higher loss given default rates on commercial real estate and multi-family construction loans, offset partially by improved risk ratings for our HFI portfolio. The increase in net charge-offs in the quarter related primarily to the transfer of $827.0 million of loans to HFS in connection with the targeted loan sale process. The transfer required the loans to be recorded at LOCOM, resulting in charge-offs and additional provision expense during the quarter.

Current wording

The second quarter provision was elevated by the strategic balance sheet repositioning activities related to the targeted loan sale process, the impact of loan growth and higher loss given default rates on CRE and multi-family construction loans, offset partially by improved risk ratings in our HFI portfolio.

Previous wording

The provision for credit losses was $171.6 million for the six months ended June 30, 2026, compared to $48.4 million for the six months ended June 30, 2025. The provision for the six months ended 2026 consisted of provision for loan losses of $171.8 million, primarily reflecting the impact of the targeted loan sale process, offset partially by a $2.0 million reduction in provision for unfunded loan commitments.

Current wording

The provision for credit losses was $182.0 million for the nine months ended September 30, 2026, compared to $58.1 million for the nine months ended September 30, 2025. The provision for the 2026 period included a provision for loan losses of $180.2 million, reflecting the impact of the targeted loan sale process and the impact of loan growth, offset partially by improved risk ratings for our HFI portfolio.

Previous wording

The provision for the six months ended June 30, 2025 included the impact of $506.7 million of loans transferred to HFS and recorded at the LOCOM. 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.

Current wording

The provision for the nine months ended September 30, 2025 included the impact of $506.7 million of loans transferred to HFS during the second quarter of 2025 and recorded at the LOCOM. The remaining increase in the provision for credit losses 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. These were offset partially by lower specific reserves and a favorable shift in the portfolio mix due to growth in loan segments with lower expected credit losses.

Previous wording

For information regarding the ACL on loans and leases HFI and HTM securities, see “Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases” and “Critical Accounting Policies and Estimates” in Item 2 Management's Discussion and Analysis, and "Note 4. Loans and Leases Held for Investment" in Item 1 of this Form 10-Q.

Current wording

For information regarding the ACL on loans and leases HFI and HTM securities, see “Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases” and “Critical Accounting Policies and Estimates” in Item 2 Management's Discussion and Analysis, and "Note 4. Loans and Leases" in Item 1 of this Form 10-Q.

Previous wording

Noninterest income decreased by $269.4 million, resulting in a loss of $234.1 million for the second quarter, compared to noninterest income of $35.3 million for the first quarter. The decrease was primarily driven by a $256.7 million pre-tax loss recognized as part of the securities repositioning, and a $12.5 million loss recorded as part of the LOCOM adjustment on HFS loans. Also included in noninterest income was a $3.1 million loss related to the redemption of $385.0 million aggregate principal amount of subordinated notes during the quarter. The decrease for the quarter was offset by the $3.8 million gain recognized on the sale of the Company's single-family mortgage servicing rights portfolio, which serviced approximately $1.35 billion of underlying loans.

Current wording

Noninterest income increased by $265.5 million to $31.4 million for the third quarter, compared to a loss of $234.1 million for the second quarter. The increase was primarily driven by a $257.5 million decrease in loss on securities and an $8.3 million decrease in loss on loans and leases HFS, both of which were a result of the strategic balance sheet repositioning actions taken in the second quarter. Also included in noninterest income was a $2.0 million increase in operating lease income, primarily due to new lease fundings and higher lease renewal income, offset partially by a $1.4 million decrease in other income. The decrease in other income was primarily due to the second quarter gain recognized on the sale of the Company's single-family mortgage servicing rights portfolio, offset partially by the second quarter loss on the redemption of the $385 million subordinated notes.

Previous wording

Noninterest income decreased by $265.1 million to a loss of $198.8 million for the six months ended June 30, 2026, compared to income of $66.3 million for the same period 2025. The year-to-date decrease was primarily attributable to the $256.7 million pre-tax loss recognized as part of the securities repositioning, and a $12.5 million LOCOM adjustment on the HFS loans, as discussed above.

Current wording

Noninterest income decreased by $268.0 million to a loss of $167.4 million for the nine months ended September 30, 2026, compared to income of $100.6 million for the same period in 2025. The decrease was primarily attributable to the $256.0 million pre-tax loss recognized as part of the securities repositioning and a $16.6 million increase in the loss on loans and leases HFS resulting primarily from LOCOM adjustments recorded during the second quarter in connection with the strategic balance sheet repositioning actions.

Previous wording

Noninterest expense increased by$1.7 million to$371.3 million for the six months ended June 30, 2026 from $369.5 million for the six months ended June 30, 2025. The increase is primarily due to a$6.3 million increase in other expense related mainly to software obsolescence charges, a$4.6 million increase in insurance and assessment due to the higher assessment rate resulting from the strategic balance sheet actions, and a$2.5 million increase in loans expense related to legal fees. These increases were offset partially by a$6.5 million decrease in customer related expenses primarily due to federal fund rate cuts in the fourth quarter of 2025 and a$3.0 million decrease in leased equipment depreciation.

Current wording

Noninterest expense increased by$1.4 million to$556.6 million for the nine months ended September 30, 2026 from $555.2 million for the nine months ended September 30, 2025. The increase is primarily due to an$8.2 million increase in other expense related mainly to software obsolescence charges, a$7.8 million increase in insurance and assessments due to the higher assessment rate resulting from the balance sheet repositioning and its effect on assessment related metrics, and a$2.2 million increase in loan expense related to legal fees. These increases were offset partially by a$7.9 million decrease in customer related expenses primarily due to federal funds rate cuts in the fourth quarter of 2025 and a$3.6 million decrease in leased equipment depreciation.

Previous wording

Income tax benefit of $93.9 million was recorded for the second quarter, resulting in an effective tax rate of 28.0%, compared to income tax expense of $23.8 million and an effective tax rate of 24.9% for the first quarter. The second quarter tax rate reflects the effects of the Company's strategic balance sheet actions. Due to the significant impact of these actions on projected annual earnings, the Company calculated its second quarter income tax provision using a year to date effective tax rate approach rather than the estimated annual effective tax rate method.

Current wording

Income tax expense of $25.0 million was recorded for the third quarter, resulting in an effective tax rate of 23.1%, compared to an income tax benefit of $93.9 million and an effective tax rate of 28.0% for the second quarter. The second quarter tax rate reflects the effects of the Company's balance sheet repositioning actions. Due to the significant impact of these actions on projected annual earnings, in the second quarter, the Company began calculating its tax provision using a year-to-date effective tax rate approach rather than the estimated annual effective tax rate method. The decrease in the effective tax rate from the second quarter is due primarily to the tax benefits from LIHTC investments resulting from return-to-provision adjustments.

Previous wording

Income tax benefit of $70.1 millionwas recorded for thesix months ended June 30, 2026, resulting in an effective tax rate of 29.3%, compared to income tax expense of $39.0 million and effective tax rate of 32.2% for the same period 2025. The decrease in effective tax rate from 2025 to 2026 is due primarily to the impact of a DTA revaluation recorded following the California state tax changes passed as part of the 2025 California budget enacted on June 30, 2025.

Current wording

Income tax benefit of $45.1 millionwas recorded for thenine months ended September 30, 2026, resulting in an effective tax rate of 34.3%, compared to income tax expense of $61.7 million and effective tax rate of 28.9% for the same period in 2025. The increase in the effective tax rate from 2025 to 2026 is due primarily to the effects of the Company's balance sheet repositioning actions taken in the second quarter of 2026.

Previous wording

The Company's June 30, 2026 balance sheet reflects the effects of the several strategic balance sheet actions, including the repositioning of $2.3 billion of lower-yielding HTM securities, the transfer of $827.0 million of loans from HFI to HFS as part of a targeted loan sale process, and the retirement of $385.0 million of subordinated debt.

Current wording

The Company's September 30, 2026 balance sheet reflects the effects of several strategic balance sheet actions that occurred in the second quarter of 2026, including the repositioning of $2.3 billion of lower-yielding HTM securities, the transfer of $827.0 million of loans from HFI to HFS as part of the targeted loan sale process, and the retirement of $385.0 million of subordinated debt.

Previous wording

AFS securities increased by $1.8 billion to $4.5 billion at June 30, 2026 compared to $2.5 billion at December 31, 2025, due primarily to the transfer of HTM securities to AFS of $2.3 billion and purchases of $2.3 billion, offset partially by the sale of $2.3 billion, as part of the securities repositioning, $236.7 million of principal paydowns, $27.5 million of maturities, $17.4 million decrease in the fair value of AFS securities, and $3.4 million of net amortization. As of June 30, 2026, AFS securities had aggregate unrealized net after-tax losses in AOCI of $145.3 million, up from $136.6 million at December 31, 2025, driven by higher interest rates.

Current wording

AFS securities increased by $2.6 billion to $5.1 billion at September 30, 2026 compared to $2.5 billion at December 31, 2025, due primarily to the transfer of HTM securities to AFS of $2.3 billion in the second quarter of 2026 and purchases of $3.3 billion, offset partially by the sale of $2.3 billion, as part of the securities repositioning, $446.7 million of principal paydowns, $54.3 million of maturities, $177.6 million decrease in the fair value of AFS securities, and $3.5 million of net amortization. As of September 30, 2026, AFS securities had aggregate unrealized net after-tax losses in AOCI of $261.4 million, up from $136.6 million at December 31, 2025, driven by higher interest rates.

Previous wording

As a result of the securities repositioning, the Company did not hold any securities classified as HTM as of June 30, 2026. The following table presents the composition and duration of our HTM securities as of December 31, 2025.

Current wording

The Company did not hold any securities classified as HTM as of September 30, 2026. The following table presents the composition and duration of our HTM securities as of December 31, 2025.

Previous wording

As part of our management of the loans held in our portfolio, on occasion we will transfer loans from HFI to HFS. Total loans and leases HFS increased by $732.2 million to $915.2 million at June 30, 2026 compared to $182.9 million at December 31, 2025. The increase was primarily driven by the transfer of $827.0 million of loans from HFI to HFS, which were recorded at the LOCOM, as part of the Company's targeted loan sale process and broader strategic balance sheet actions completed during the second quarter of 2026, offset partially by loan sales of $146.5 million .

Current wording

As part of our management of the loans held in our portfolio, on occasion we will transfer loans from HFI to HFS. Total loans and leases HFS increased by $315.8 million to $498.8 million at September 30, 2026 compared to $182.9 million at December 31, 2025. The increase was primarily driven by the transfer of $827.0 million of CRE and multi-family construction loans from HFI to HFS in the second quarter of 2026 as part of the Company's targeted loan sale process, offset partially by $615.2 million of loan sales during the nine months ended September 30, 2026, including a majority of the targeted loan sales that closed during the period. The remaining targeted loan sales closed on October 21, 2026.

Previous wording

(1) Includes land and acquisition and development loans of $186.0 million at June 30, 2026 and $214.5 million at December 31, 2025.

Current wording

(1) Includes land and acquisition and development loans of $182.4 million at September 30, 2026 and $214.5 million at December 31, 2025.

Previous wording

Our non-deposit financial institutions ("NDFI") lending for HFI loans totaled $5.2 billion or 21.6%, as of June 30, 2026 compared to $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 for these respective periods.

Current wording

Our NDFI lending for loans HFI totaled $5.4 billion or 22.1% of total loans HFI, as of September 30, 2026, compared to $5.1 billion, or 20.5% of total loans HFI 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 for these respective periods.

Previous wording

Total real estate loans HFI were $14.8 billion, or 61%, of our loan portfolio at June 30, 2026 and consisted of $13.3 billion of real estate mortgage loans and $1.5 billion of real estate construction and land loans, compared to $15.7 billion, or 63%, of our total 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. At June 30, 2026 and December 31, 2025, 70% and 71% of our real estate loans were collateralized by property in California, reflecting the concentration of our community banking operations within the state.

Current wording

Total real estate loans HFI were $15.0 billion, or 61%, of our loan portfolio at September 30, 2026 and consisted of $13.5 billion of real estate mortgage loans and $1.5 billion of real estate construction and land loans, compared to $15.7 billion, or 63%, of our total 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. At September 30, 2026 and December 31, 2025, 70% and 71% of our real estate loans were collateralized by property in California, reflecting the concentration of our community banking operations within the state.

Previous wording

Nonperforming loans and leases HFI incr eased by $44.5 million to $203.7 million at June 30, 2026 compared to$159.2 million at December 31, 2025, due mainly to additions of $446.3 million, offset partially by transfers to loans HFS of $248.0 million, charge-offs of$97.1 million, principal and other reductions of $52.4 million, and transfers to accrual status of $4.4 million. As of June 30, 2026, three of our largest loan relationships on nonaccrual status had an aggregate carrying value of$69.8 million and represented 34% of total nonaccrual loans and leases.

Current wording

Nonperforming loans and leases HFI increased by $18.1 million to $177.2 million at September 30, 2026 compared to $159.2 million at December 31, 2025, due mainly to additions of $515.5 million, offset partially by transfers to loans HFS of $303.0 million, charge-offs of$114.9 million, principal and other reductions of $64.2 million, and transfers to accrual status of $15.3 million. As of September 30, 2026, three of our largest loan relationships on nonaccrual status had an aggregate carrying value of$54.8 million and represented 31% of total nonaccrual loans and leases.

Previous wording

Loans and leases accruing and 30-89 days past due decreased by $20.3 million to $72.8 million as of June 30, 2026 compared to $93.0 million at December 31, 2025, due mainly to decreases of$32.9 million in multi-family real estate mortgage delinquent loans and $26.5 million in residential real estate construction and land delinquent loans, offset partially by increases of $24.8 million in other residential real estate mortgage delinquent loans.

Current wording

Loans and leases accruing and 30-89 days past due decreased by $66.6 million to $26.4 million as of September 30, 2026 compared to$93.0 million at December 31, 2025, due mainly to decreases of$32.9 million in multi-family real estate mortgage delinquent loans and $26.5 million in residential real estate construction and land delinquent loans.

Previous wording

Foreclosed assets decreased by $0.8 million to $16.3 million at June 30, 2026 compared to$17.1 million at December 31, 2025, due mainly to sales of$2.9 million, offset partially by transfers from loans of $2.1 million.

Current wording

Foreclosed assets increased by $4.3 million to$21.5 million at September 30, 2026 compared to$17.1 million at December 31, 2025, due mainly to transfers from loans of$7.6 million, offset partially by sales of $3.1 million and a provision for losses on OREO of $0.1 million.