BANC OF CALIFORNIA, INC. (BANC)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 months ended March 31, 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.

Forward-Looking Information

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” about the Company and its subsidiaries within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, strategies, goals, and projections and including statements about our expectations regarding our operating expenses, profitability, ACL, net interest margin, NII, deposit growth, loan and lease portfolio growth and production, acquisitions and related integrations, maintaining capital adequacy, liquidity, goodwill, and IRR management. All statements contained in this Quarterly Report on Form 10-Q that are not clearly historical in nature are forward-looking, and the words “anticipate,” “assume,” “intend,” “believe,” “forecast,” “expect,” “estimate,” “plan,” “continue,” “will,” “should,” “look forward” and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and their results) involve risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements.

Actual results could differ materially from those contained or implied by such forward-looking statements for a variety of factors, including without limitation: (i) changes in general economic conditions, either nationally or in our market areas, including the impact of 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 DTAs, 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 ACL 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) the costs and effects of litigation; (ix) 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; (x) 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 from issuing an approval or non-objection to certain capital or other actions, increase our ACL, result in write-downs of asset values, restrict our ability or that of our bank subsidiary to pay dividends, or impose fines, penalties or sanctions; (xi) legislative or regulatory changes that adversely affect our business, including changes in tax laws and policies, accounting policies and practices, privacy laws, and regulatory capital or other rules; (xii) the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses; (xiii) errors in estimates of the 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; (xiv) failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including due to cybersecurity threats; (xv) our ability to attract and retain key members of our senior management team; (xvi) the effects of climate change, severe weather events, natural disasters such as earthquakes and wildfires, pandemics, epidemics and other public health crises, military activity (including the ongoing Iran war) or acts of terrorism, and other external events on our business; (xvii) the impact of bank failures or other adverse developments at other banks on general depositor and investor sentiment regarding the stability and liquidity of banks; (xviii) the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; (xix) our existing indebtedness, together with any future incurrence of additional indebtedness, could adversely affect our ability to raise additional capital and to meet our debt obligations; (xx) changes in market conditions or strategic balance sheet actions, which may result in realized losses on investment securities or other assets; and (xxi) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in our Form 10-K for the fiscal year ended December 31, 2025 and from time to time in other documents that we file with or furnish to the SEC.

54

All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available at the time the statement is made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.

Overview

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

Recent Events

Stock Repurchase Program

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 First Quarter of 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 March 31, 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.

Subordinated Debt

On May 1, 2026, the Company redeemed the entire outstanding $385 million aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031, originally issued by Pacific Western Bank, for a redemption price equal to 100% of the principal amount redeemed, plus accrued and unpaid interest. These subordinated notes were scheduled to reset to a floating rate equal to three-month SOFR plus 252 bps beginning May 1, 2026, and were redeemable, in whole or in part, beginning May 1, 2026 at a redemption price equal to 100% of principal amount redeemed, plus any accrued and unpaid interest.

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements and related notes, which have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts and disclosure. We evaluate these estimates and assumptions on a ongoing basis based on historical experience and other relevant factors and circumstances; however, actual results may differ significantly from these estimates and assumptions, which could have a material adverse effect on our financial condition and results of operations.

Our accounting policies and estimates are fundamental to understanding the following discussion and analysis of financial condition and results of operations. We identify critical accounting estimates as those that involve the most significant judgments, uncertainties, and subjective decisions, and that could result in materially different outcomes under different assumptions or conditions. Our critical accounting policies and estimates include those related to the ACL on loans and leases HFI and the realization of deferred tax assets and liabilities. Our critical accounting policies and estimates are described in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in the Form 10-K.

55

Non-GAAP Financial Measures

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

Return on average tangible common equity, tangible common equity, tangible book value per common share, efficiency ratio, and pre-tax pre-provision income are presented because the use of these measures is prevalent among banking regulators, investors, and analysts. These measures are disclosed in addition to the related GAAP measures of return on average equity, book value per common share, and noninterest expense to total revenue, respectively. Reconciliations of these non‑GAAP measures to the

[Excerpt truncated for page length; source filing is linked above.]

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

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. In addition to historical data, this discussion and analysis contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results or outcomes may differ materially from those in this discussion and analysis as a result of various factors, including but not limited to those discussed in "Risk Factors" in Item 1A of this Form 10-K.

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

Overview

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

Presentation of Results – PacWest Bancorp Merger

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

Recent Events

Stock Repurchase Program

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

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

36

Strategic Loan Sales

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

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

Key Performance Indicators

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

The Level of Net Interest Income

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

NII is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings. While our deposit balances will fluctuate depending on our customers’ liquidity and cash flow, market conditions, and competitive pressures, we seek to minimize the impact of these variances by attracting a high percentage of noninterest-bearing deposits. We continue to focus on growing granular relationship-based deposits as a key component of our core deposit strategy, which supports a stable funding base and strengthens our client franchise.

Loan and Lease Production

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

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

The Magnitude of Credit Losses

We emphasize credit quality in originating and monitoring our loans and leases, and we measure our success by the levels of our classified loans and leases, nonaccrual loans and leases, and net charge-offs. We maintain an ACL on loans and leases, which is the sum of the ALLL and the reserve for unfunded loan commitments. Provisions for credit losses are charged to operations as and when needed for both on and off-balance sheet credit exposures. Loans and leases that are deemed uncollectable are charged off and deducted from the ALLL. Recoveries on loans and leases previously charged off are added to the ALLL. The provision for credit losses on the loan and lease portfolio is based on our allowance methodology, which considers the impact of assumptions and is reflective of historical experience, economic forecasts viewed to be reasonable and supportable by management, the current loan and lease composition, and relative credit risks known as of the balance sheet date. For originated and acquired credit-deteriorated loans, a provision for credit losses may be recorded to reflect credit deterioration after the origination date or after the acquisition date, respectively.

37

We regularly review loans and leases to determine whether there has been any deterioration in credit quality resulting from borrower operations or changes in collateral value or other factors which may affect the collectability of our loans and leases. Changes in economic conditions, such as the rate of economic growth, the unemployment rate, rate of inflation, increases in the general level of interest rates, declines in real estate values, changes in commodity prices, and adverse conditions in borrowers’ businesses, could negatively impact our borrowers and cause us to adversely classify loans and leases. An increase in classified loans and leases generally results in increased provisions for credit losses and an increased ACL. Any deterioration in the real estate market may lead to increased provisions for credit losses because our loans are concentrated in real estate loans.

The Level of Noninterest Expense

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

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements and the notes thereto, which have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. We believe that our estimates and assumptions are reasonable; however, actual results may ultimately differ significantly from these estimates and assumptions, which could have a material adverse effect on the carrying value of assets and liabilities at the balance sheet dates and on our results of operations for the reporting periods.

Our significant accounting policies and practices are described in "Note 1. Nature of Operations and Summary of Significant Accounting Policies" in Item 8 of this form 10-K. We have identified two policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the ACL on loans and leases HFI and the realization of deferred tax assets and liabilities.

Allowance for Credit Losses on Loans and Leases Held for Investment

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

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

38

Deferred Tax Assets and Liabilities

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

Our deferred tax assets and liabilities arise from differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We determine whether a deferred tax asset is realizable based on facts and circumstances, including our current and projected future tax position, the historical level of our taxable income, and estimates of our future taxable income. In most cases, the realization of DTAs is based on our future profitability. If we were to experience either reduced profitability or operating losses in a future period, the realization of our DTAs may no longer be considered more likely than not and, accordingly, we could be required to record a valuation allowance on our DTAs by charging earnings.

Non-GAAP Financial Measures

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

We use the following non-GAAP measures:return on average tangible common equity, tangible common equity ratio, efficiency ratio, adjusted return on average tangible common equity, adjusted net earnings, adjusted diluted earnings per share, and adjusted return on average assets. Given that the use of these measures is prevalent among banking regulators, investors, and analysts, we disclose them in addition to the related GAAP measures of return on average equity, stockholders' equity to assets ratio, noninterest expense to total revenue, and return on average assets, respectively. The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the periods presented.

39

____________________________________________________

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

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

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

_________________________________________________________________

(1)    Tangible common equity divided by tangible assets.

40

_______________________________________

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

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

41

_________________________________________________________________

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

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

42

_________________________________________________________________

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

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

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

(4)    Adjusted net earnings divided by average assets.

43

Results of Operations

Earnings Performance

The following table presents performance metrics for the years indicated:

_____________________________

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

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

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

44

Net Interest Income and Net Interest Margin

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

_____________________

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

(2)    Total loans are net of deferred fees, related direct costs, and premiums and discounts, but exclude the allowance for loan losses. Includes net loan discount accretion of $64.2 million, $88.0 million and $9.7 million for the years ended 2025 and 2024 and 2023, respectively.

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

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

45

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

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

_____________________

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

2025 Compared to 2024

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

•A decrease of $157.5 million in interest expense on deposits due primarily to lower interest paid on interest-bearing deposits as a result of deposit rate repricing driven by the federal funds rate cuts of 100 basis points in the second half of 2024 and 75 basis points in the second half of 2025 and lower average balances including the paydown of brokered deposits.

•A decrease of $25.6 million in interest expense on borrowings driven by lower average balances resulting from the payoff of higher-cost borrowings in 2024, which were partially replaced with lower-cost long-term FHLB advances and lower market interest rates.

•An increase of $12.5 million in interest income from investment securities reflecting the benefits from 2024 balance sheet repositioning actions and reinvestment in higher-yield securities.

This was offset partially by:

•A decrease of $87.4 million in interest income from deposits in financial institutions driven by lower balances, as we maintained a lower cash target level and lower market interest rates.

•A decrease of $61.1 million in interest income from loans due primarily to lower market interest rates reflective of federal funds rate cuts, lower average balances attributable mainly to our July 2024 sale of $1.95 billion of Civic loans, and by lower net loan discount accretion income.

46

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

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

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

Provision for Credit Losses

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

______________________

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

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

47

2025 Compared to 2024

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

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

Certain circumstances may lead to increased provisions for credit losses on loans and leases in the future. Examples of such circumstances include an increased amount of classified and/or nonaccrual loans and leases, net loan and lease and unfunded commitment growth, and changes in economic conditions and forecasts. Changes in economic conditions and forecasts include the rate of economic growth, the unemployment rate, the rate of inflation, changes in the general level of interest rates, changes in real estate values, and adverse conditions in borrowers’ businesses.

For information regarding the allowance for credit losses on loans and leases HFI and HTM securities, see “Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases sections” in Item 7, "Note 1. Nature of Operations and Summary of Significant Accounting Policies," and "Note 5. Loans and Leases" in Item 8 of this Form 10-K.

Noninterest Income (Loss)

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

2025 Compared to 2024

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

48

Noninterest Expense

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

2025 Compared to 2024

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

Income Taxes

2025 Compared to 2024

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

49

Balance Sheet Analysis

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

During the second quarter of 2025, as part of our strategic loan sale process, we reclassified approximately $506.7 million of loans as HFS. During the third quarter of 2024, as part of our balance sheet repositioning strategy, we sold $1.95 billion of Civic loans, generating $1.91 billion in net proceeds. This sale provided capital to reposition part of our AFS securities portfolio and reduce higher-cost brokered deposits and borrowings. We sold approximately $742 million of securities with a weighted average yield of 2.94% resulting in a pre-tax loss of $59.9 million and purchased $724 million of similar quality securities with a weighted average yield of 5.65%. The liabilities that were paid off included $1.85 billion of brokered deposits with an average cost of 5.35% at the time of retirement and the remaining $545.0 million in Bank Term Funding Program balance with a rate of 5.40%. We replaced a portion of these higher-cost fundings with the addition of a $500 million long-term FHLB advance with a rate of 3.18%. These balance sheet repositioning actions that we executed resulted in net interest margin expansion and improved both our capital and liquidity.

50

Securities Available-for-Sale

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

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

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

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

_______________________________________

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

51

Securities Held-to-Maturity

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

_______________________________________

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

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

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

_______________________________________

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

Loans Held for Sale

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

52

Loans and Leases Held for Investment

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