Banc of California, Inc. (NYSE:BANC):

$0.28

Earnings Per Share

$17.78

Book Value Per Share

$15.72

Tangible Book Value

Per Share⁽¹⁾

10.55%

CET1 Ratio

29.1%

Average Noninterest-

Bearing Deposits to

Average Total Deposits

Banc of California, Inc. (NYSE:BANC) ("Banc of California" or the "Company"), the parent company of wholly-owned subsidiary Banc of California (the "Bank"), today reported financial results for the fourth quarter and year ended December 31, 2024. The Company reported net earnings available to common and equivalent stockholders of $47.0 million, or $0.28 per diluted common share, for the fourth quarter of 2024. This compares to a net loss available to common and equivalent stockholders of $1.2 million, or a loss of $0.01 per diluted common share, for the third quarter of 2024. On an adjusted basis, net earnings available to common and equivalent stockholders were $41.4 million, or $0.25 per diluted common share for the third quarter.⁽¹⁾ The third quarter of 2024 included $60 million of pre-tax losses from repositioning a portion of the securities portfolio. For the full year 2024, we reported net income available to common and equivalent shareholders of $87.1 million, or $0.52 per diluted common share. On an adjusted basis, net income available to common and equivalent shareholders was $135.4 million, or $0.80 per diluted common shares.⁽¹⁾

Update on Southern California Wildfires

The recent wildfires in Southern California have been devastating, severely impacting Los Angeles and the surrounding areas – home to our headquarters and where many of our clients and team members live and work. To support the recovery efforts, our charitable foundation has launched the Banc of California Wildfire Relief and Recovery Fund, which is dedicated to aiding relief efforts and rebuilding our community. To further our commitment, we have donated $1 million to the relief fund, standing in solidarity with Angelenos as we work together to rebuild and restore what has been lost. To date, we are not aware of any material impact on our loan portfolio, collateral or any of our facilities due to the Southern California wildfires. We are currently aware of four commercial properties and three residential properties that have been damaged or destroyed but all such collateral has insurance coverage in place and will continue to monitor and assess for potential exposure.

Financial Highlights for the Fourth Quarter and 2024 Fiscal Year

Net interest margin expansion of 11 basis points vs 3Q24 to 3.04% and 135 basis points year-over-year, driven by lower funding costs
Lowered funding costs by 27 basis points vs 3Q24 and 113 basis points year-over-year, reflecting benefits of prior balance sheet repositioning actions and improved funding mix
Average noninterest-bearing deposits grew to 29.1% of average total deposits, up from 27.7% in 3Q24 and 22.6% in 4Q23, driven by relationship-focused deposit growth strategy
Total loans of $23.8 billion grew 4.3% annualized or $254 million from 3Q24, driven by growth in warehouse lending, equity funds, and residential mortgage loan portfolios
Total noninterest expense declined 7.6% vs 3Q24 to $181.4 million and 50.1% year-over-year, driven by strong efficiency gains and achievement of our merger cost savings target. This reflects a 35.7% decrease in adjusted noninterest expense⁽¹⁾ year-over-year excluding acquisition, integration and reorganization costs and normalizing 4Q23 to include combined company expenses for a full quarter and incentive compensation adjusted to target.
Strengthened capital ratios with CET1 capital ratio⁽²⁾ up 9 basis points vs 3Q24 to 10.55% and 41 basis points year-over year
Growth in book value per share to $17.78 and tangible book value per share⁽¹⁾ to $15.72

⁽¹⁾	Non-GAAP measure; refer to section 'Non-GAAP Measures'
⁽²⁾	Capital ratio for 12/31/2024 is preliminary

Jared Wolff, President & CEO of Banc of California, commented, "Our strong fourth quarter results reflect continued momentum and consistent execution by our team. During the quarter, we achieved additional cost savings as well as a significant decline in our funding costs driven by our targeted reduction in deposit costs and the balance sheet repositioning actions that we completed earlier in the year. These actions helped drive an expansion in our net interest margin and increases in our net income, earnings per share, and level of returns."

Mr. Wolff continued, "During the course of 2024, we made significant strides in strengthening our balance sheet and core earnings power. We believe we are well positioned to continue adding to our client base and expanding relationships with existing clients. Given the positive economic outlook, and the solid gains in loans and deposits generated by our teams in the fourth quarter, we believe we are well positioned to generate further growth in the balance sheet in 2025, expanding operating leverage and profitability to create additional value for our shareholders."

INCOME STATEMENT HIGHLIGHTS

	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,
Summary Income Statement		2024			2024			2023			2024			2023
	(In thousands)
Total interest income	$	424,519		$	446,893		$	467,240		$	1,812,705		$	1,971,000
Total interest expense		189,234			214,718			316,189			886,655			1,223,872
Net interest income		235,285			232,175			151,051			926,050			747,128
Provision for credit losses		12,801			9,000			47,000			42,801			52,000
Gain (loss) on sale of loans		20			(62	)		(3,526	)		645			(161,346	)
(Loss) gain on sale of securities		(454	)		(59,946	)		(442,413	)		(60,400	)		(442,413	)
Other noninterest income		29,423			44,556			45,537			136,900			155,474
Total noninterest income (loss)		28,989			(15,452	)		(400,402	)		77,145			(448,285	)
Total revenue		264,274			216,723			(249,351	)		1,003,195			298,843
Goodwill impairment		-			-			-			-			1,376,736
Acquisition, integration and reorganization costs		(1,023	)		(510	)		111,800			(14,183	)		142,633
Other noninterest expense		182,393			196,719			251,838			805,923			938,812
Total noninterest expense		181,370			196,209			363,638			791,740			2,458,181
Earnings (loss) before income taxes		70,103			11,514			(659,989	)		168,654			(2,211,338	)
Income tax expense (benefit)		13,184			2,730			(177,034	)		41,766			(312,201	)
Net earnings (loss)		56,919			8,784			(482,955	)		126,888			(1,899,137	)
Preferred stock dividends		9,947			9,947			9,947			39,788			39,788
Net earnings (loss) available to common and equivalent stockholders	$	46,972		$	(1,163	)	$	(492,902	)	$	87,100		$	(1,938,925	)

Net Interest Income

Q4-2024 vs Q3-2024

Net interest income increased by $3.1 million to $235.3 million for the fourth quarter from $232.2 million for the third quarter due to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets.

The net interest margin increased 11 basis points to 3.04% for the fourth quarter as the cost of average total funding decreased 27 basis points and the average interest-earning assets yield decreased 15 basis points.

The average yield on interest-earning assets decreased by 15 basis points to 5.48% for the fourth quarter from 5.63% for the third quarter due mainly to the average yield on deposits in financial institutions decreasing by 65 basis points and the average yield on loans and leases decreasing by 17 basis points, offset partially by the average yield on investment securities increasing by 21 basis points. The decrease in the average yield on deposits in financial institutions was due to lower market rates attributable mainly to the Federal Reserve reducing the federal funds rate by a total of 100 basis points since September 2024. The average yield on loans and leases decreased by 17 basis points to 6.01% for the fourth quarter from 6.18% for the third quarter as a result of lower market interest rates and lower loan discount accretion. The average yield on investment securities increased by 21 basis points benefiting from the balance sheet repositioning actions taken in the third quarter.

Average interest-earning assets decreased by $750.7 million to $30.8 billion for the fourth quarter due mainly to the decreases of $631.5 million in average deposits in financial institutions and $154.4 million in average loans and leases.

The average total cost of funds decreased by 27 basis points to 2.55% for the fourth quarter from 2.82% for the third quarter due mainly to lower market interest rates, lower rate on average borrowings, and lower average balance of total deposits due to the paydown of higher-cost brokered deposits in the third quarter. The average cost of interest-bearing liabilities decreased by 32 basis points to 3.48% for the fourth quarter from 3.80% for the third quarter. The average cost of interest-bearing deposits decreased by 34 basis points to 3.18% for the fourth quarter from 3.52% for the third quarter mainly due to deposit rate repricing driven by federal funds rate cuts, while the average cost of borrowings decreased by 95 basis points to 5.40% for the fourth quarter from 6.35% for the third quarter as the BTFP was paid off and partially replaced with lower fixed rate FHLB advances in the third quarter. Average noninterest-bearing deposits increased by $59.9 million for the fourth quarter compared to the third quarter, average total deposits decreased by $1.2 billion due to the aforementioned paydown of brokered deposits, and average borrowings increased by $335.5 million.

Full Year 2024 vs Full Year 2023

Net interest income increased by $178.9 million to $926.1 million for the year ended December 31, 2024 from $747.1 million for the year ended December 31, 2023 due to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets.

The net interest margin increased by 87 basis points to 2.85% for the year ended December 31, 2024 compared to 1.98% in 2023 due to the average yield on interest-earning assets increasing by 37 basis points, while the average total cost of funds decreased by 50 basis points.

The average yield on interest-earning assets increased by 37 basis points to 5.58% for the year ended December 31, 2024 from 5.21% in 2023 due mainly to the change in the interest-earning asset mix. This was driven by the increase in the balance of average loans and leases as a percentage of average interest-earning assets to 76% for the year ended December 31,2024 from 67% for the year ended December 31, 2023, the decrease in the balance of average investment securities as a percentage of average interest-earning assets to 14% for the year ended December 31, 2024 from 18% in 2023, and the decrease in the balance of average deposits in financial institutions as a percentage of average interest-earning assets to 10% for the year ended December 31, 2024 from 15% in 2023.

The average yield on loans and leases increased by 19 basis points to 6.11% for the year ended December 31, 2024 from 5.92% in 2023 as a result of changes in portfolio mix and higher net accretion of loan discounts. The average yield on investment securities increased by 44 basis points benefiting from the balance sheet repositioning actions taken in the third quarter of 2024.

Average interest-earning assets decreased by $5.4 billion to $32.5 billion for the year ended December 31, 2024 due to lower average balances in loans and leases, investments securities, and deposits in financial institutions. Average loans and leases decreased by $760.7 million primarily due to the sale in July 2024 of $1.95 billion of Civic loans, offset partially by the acquisition of legacy Banc of California loans completed in the fourth quarter of 2023. Average investment securities decreased by $2.1 billion mostly due to securities sales completed in the fourth quarter of 2023. Average deposits in financial institutions decreased by $2.5 billion due to lower cash balances which were used to pay down higher-cost funding including the full payoff of $2.6 billion of the BTFP and $1.85 billion in brokered deposits as part of the balance sheet repositioning actions taken during 2024.

The average total cost of funds decreased by 50 basis points to 2.84% for the year ended December 31, 2024 from 3.34% for the year ended December 31, 2023 due mainly to changes in the total funding mix. This was driven by the increase in the balance of lower-cost average total deposits as a percentage of average total funds to 91% for the year ended December 31, 2024 from 78% in 2023, and the decrease in the balance of higher-cost average borrowings as a percentage of average total funds to 6% for the year ended December 31, 2024 from 19% in 2023. The average cost of interest-bearing liabilities decreased by 35 basis points to 3.79% for the year ended December 31, 2024 from 4.14% in 2023. The average total cost of deposits decreased by 9 basis points to 2.52% for the year ended December 31, 2024 compared to 2.61% for the year ended December 31, 2023. Average noninterest-bearing deposits increased by $757.6 million for the year ended December 31, 2024 compared to 2023 and average total deposits decreased by $251.8 million. Average borrowings decreased by $5.2 billion for the year ended December 31, 2024 compared to 2023 due to paydown of borrowings in connection with the balance sheet repositioning completed due to the merger.

Provision For Credit Losses

Q4-2024 vs Q3-2024

The provision for credit losses increased by $3.8 million to $12.8 million for the fourth quarter compared to $9.0 million for the third quarter. The fourth quarter provision included an $11.5 million provision for loan losses and a $1.5 million provision for unfunded loan commitments, offset partially by a $0.2 million reversal of the provision for credit losses related to available-for-sale securities. The fourth quarter provision for loans and unfunded loan commitments was driven primarily by net charge-off activity during the quarter. The third quarter provision was driven primarily by increases in qualitative reserves, for loans secured by office properties and concentrations of credit, and specific reserves for nonperforming loan downgrades.

Full Year 2024 vs Full Year 2023

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

Noninterest Income

Q4-2024 vs Q3-2024

Noninterest income increased by $44.4 million to $29.0 million for the fourth quarter from a loss of $15.5 million for the third quarter due mainly to a $59.5 million decrease in loss on sale of securities, offset partially by decreases of $6.4 million in leased equipment income, $5.4 million in other income and $3.7 million in dividends and gains on equity investments. The decrease in loss on sale of securities was mainly due to the sale of $741.8 million in securities for a net loss of $59.9 million in the third quarter of 2024. The decrease in leased equipment was due mostly to lower gains from early lease terminations and sale of leased assets. The decrease in other income was due primarily to a $4.6 million increase in the negative fair value mark on the credit-linked notes. The decrease in dividends and gains on equity investments was due to lower income distributions from the CRA equity investments.

Full Year 2024 vs Full Year 2023

Noninterest income increased by $525.4 million to $77.1 million for the year ended December 31, 2024 due mostly to a decrease in the loss on sale of securities of $382.0 million and an increase in the gain on sale of loans of $162.0 million. The Company sold $753.7 million in securities for a net loss of $60.4 million in the year ended December 31, 2024 and $2.7 billion in securities for a net loss of $442.4 in the year ended December 31, 2023. The Company sold $2.5 billion of loans for a net gain of $0.6 million in the year ended December 31, 2024 and $8.7 billion of loans for a net loss of $161.3 million in the year ended December 31, 2023.

Noninterest Expense

Q4-2024 vs Q3-2024

Noninterest expense decreased by $14.8 million to $181.4 million for the fourth quarter due mainly to decreases of $7.9 million in compensation expenses, $2.8 million in customer related expenses, $1.5 million in insurance and assessments expense, and $1.2 million in occupancy expense. The decrease in compensation expenses was primarily due to lower headcount. The decrease in customer related expenses was driven by lower earnings credit rate expenses which were impacted by lower federal funds rate. The decrease in insurance and assessments expense was due to lower FDIC assessment rates. The decrease in occupancy expense was mostly attributable to facility consolidations leading to cost savings.

Full Year 2024 vs Full Year 2023

Noninterest expense decreased by $1.7 billion to $791.7 million for the year ended December 31, 2024 due mainly to a $1.4 billion goodwill impairment recorded in 2023, a $156.8 million decrease in acquisition, integration and reorganization costs related to our merger with PacWest, and a $65.0 million decrease in insurance and assessments expense for both the regular FDIC assessment and the special assessment.

Income Taxes

Q4-2024 vs Q3-2024

Income tax expense of $13.2 million was recorded for the fourth quarter resulting in an effective tax rate of 18.8% compared to income tax expense of $2.7 million for the third quarter and an effective tax rate of 23.7%. The lower fourth quarter effective tax rate was due primarily to tax benefits resulted from recording deferred tax assets at higher state tax rates.

Full Year 2024 vs Full Year 2023

Income tax expense of $41.8 million was recorded for the year ended December 31, 2024 resulting in an effective tax rate of 24.8% compared to an income tax benefit of $312.2 million for the year ended December 31, 2023 and an effective tax rate of 14.1%. The lower effective tax rate in 2023 was due primarily to non-deductible goodwill impairment recorded in 2023. Excluding non-deductible goodwill impairment of $1.0 billion, the effective tax rate was 26.2% for the year ended December 31, 2023.

BALANCE SHEET HIGHLIGHTS

	December 31,		September 30,		December 31,		Increase (Decrease)
Selected Balance Sheet Items		2024		2024		2023	QoQ			YoY
	(In thousands)
Cash and cash equivalents	$	2,502,212	$	2,554,227	$	5,377,576	$	(52,015	)	$	(2,875,364	)
Securities available-for-sale		2,246,839		2,300,284		2,346,864		(53,445	)		(100,025	)
Securities held-to-maturity		2,306,149		2,301,263		2,287,291		4,886			18,858
Loans held for sale		26,331		28,639		122,757		(2,308	)		(96,426	)
Loans and leases held for investment, net of deferred fees		23,781,663		23,527,777		25,489,687		253,886			(1,708,024	)
Total assets		33,542,864		33,432,613		38,534,064		110,251			(4,991,200	)

Noninterest-bearing deposits	$	7,719,913	$	7,811,796	$	7,774,254	$	(91,883	)	$	(54,341	)
Total deposits		27,191,909		26,828,269		30,401,769		363,640			(3,209,860	)
Borrowings		1,391,814		1,591,833		2,911,322		(200,019	)		(1,519,508	)
Total liabilities		30,042,915		29,936,415		35,143,299		106,500			(5,100,384	)
Total stockholders' equity		3,499,949		3,496,198		3,390,765		3,751			109,184

Securities

The balance of securities held-to-maturity ("HTM") remained consistent through the fourth quarter and totaled $2.3 billion at December 31, 2024. As of December 31, 2024, HTM securities had aggregate unrealized net after-tax losses in accumulated other comprehensive income (loss) ("AOCI") of $157.9 million remaining from the balance established at the time of transfer from available-for-sale on June 1, 2022.

Securities available-for-sale ("AFS") decreased by $53.4 million during the fourth quarter to $2.2 billion at December 31, 2024. AFS securities had aggregate unrealized net after-tax losses in AOCI of $200.1 million. These AFS unrealized net losses related primarily to changes in overall interest rates and spreads and the resulting impact on valuations.

Loans and Leases

The following table sets forth the composition, by loan category, of our loan and lease portfolio held for investment, net of deferred fees, as of the dates indicated:

	December 31,			September 30,			June 30,			March 31,			December 31,
Composition of Loans and Leases		2024			2024			2024			2024			2023
	(Dollars in thousands)
Real estate mortgage:
Commercial	$	4,578,772		$	4,557,939		$	4,722,585		$	4,896,544		$	5,026,497
Multi-family		6,041,713			6,009,280			5,984,930			6,121,472			6,025,179
Other residential		2,807,174			2,767,187			2,866,085			4,949,383			5,060,309
Total real estate mortgage		13,427,659			13,334,406			13,573,600			15,967,399			16,111,985
Real estate construction and land:
Commercial		799,131			836,902			784,166			775,021			759,585
Residential		2,373,162			2,622,507			2,573,431			2,470,333			2,399,684
Total real estate construction and land		3,172,293			3,459,409			3,357,597			3,245,354			3,159,269
Total real estate		16,599,952			16,793,815			16,931,197			19,212,753			19,271,254
Commercial:
Asset-based		2,087,969			2,115,311			1,968,713			2,061,016			2,189,085
Venture capital		1,537,776			1,353,626			1,456,122			1,513,641			1,446,362
Other commercial		3,153,084			2,850,535			2,446,974			2,245,910			2,129,860
Total commercial		6,778,829			6,319,472			5,871,809			5,820,567			5,765,307
Consumer		402,882			414,490			425,903			439,702			453,126
Total loans and leases held for investment, net of deferred fees	$	23,781,663		$	23,527,777		$	23,228,909		$	25,473,022		$	25,489,687

Total unfunded loan commitments	$	4,887,690		$	5,008,449		$	5,256,473		$	5,482,672		$	5,578,907


Composition as % of Total	December 31,			September 30,			June 30,			March 31,			December 31,
Loans and Leases		2024			2024			2024			2024			2023
Real estate mortgage:
Commercial		19	%		19	%		20	%		19	%		20	%
Multi-family		26	%		25	%		26	%		24	%		23	%
Other residential		12	%		12	%		12	%		19	%		20	%
Total real estate mortgage		57	%		56	%		58	%		62	%		63	%
Real estate construction and land:
Commercial		3	%		4	%		4	%		3	%		3	%
Residential		10	%		11	%		11	%		10	%		9	%
Total real estate construction and land		13	%		15	%		15	%		13	%		12	%
Total real estate		70	%		71	%		73	%		75	%		75	%
Commercial:
Asset-based		9	%		9	%		8	%		8	%		9	%
Venture capital		6	%		6	%		6	%		6	%		6	%
Other commercial		13	%		12	%		11	%		9	%		8	%
Total commercial		28	%		27	%		25	%		23	%		23	%
Consumer		2	%		2	%		2	%		2	%		2	%
Total loans and leases held for investment, net of deferred fees		100	%		100	%		100	%		100	%		100	%

Total loans and leases held for investment, net of deferred fees, increased by $253.9 million in the fourth quarter and totaled $23.8 billion at December 31, 2024. The increase in loans and leases held for investment was due primarily to increased balances in the warehouse lending, equity funds, and residential mortgage loan portfolios, offset partially by a decrease in the residential real estate construction loan portfolio. Loan originations including production, purchased loans, and unfunded new commitments were $1.8 billion in the fourth quarter with rate on new production at a weighted average interest rate of 7.02%.

Credit Quality

	December 31,			September 30,			June 30,			March 31,			December 31,
Asset Quality Information and Ratios		2024			2024			2024			2024			2023
	(Dollars in thousands)
Delinquent loans and leases held for investment:
30 to 89 days delinquent	$	91,347		$	52,927		$	27,962		$	178,421		$	113,307
90+ days delinquent		88,846			72,037			55,792			57,573			30,881
Total delinquent loans and leases	$	180,193		$	124,964		$	83,754		$	235,994		$	144,188

Total delinquent loans and leases to loans and leases held for investment		0.76	%		0.53	%		0.36	%		0.93	%		0.57	%

Nonperforming assets, excluding loans held for sale:
Nonaccrual loans and leases	$	189,605		$	168,341		$	117,070		$	145,785		$	62,527
90+ days delinquent loans and still accruing		-			-			-			-			11,750
Total nonperforming loans and leases ("NPLs")		189,605			168,341			117,070			145,785			74,277
Foreclosed assets, net		9,734			8,661			13,302			12,488			7,394
Total nonperforming assets ("NPAs")	$	199,339		$	177,002		$	130,372		$	158,273		$	81,671

Classified loans and leases held for investment	$	563,502		$	533,591		$	415,498		$	366,729		$	228,417
Allowance for loan and lease losses	$	239,360		$	254,345		$	247,762		$	291,503		$	281,687
Allowance for loan and lease losses to NPLs		126.24	%		151.09	%		211.64	%		199.95	%		379.24	%
NPLs to loans and leases held for investment		0.80	%		0.72	%		0.50	%		0.57	%		0.29	%
NPAs to total assets		0.59	%		0.53	%		0.37	%		0.44	%		0.21	%
Classified loans and leases to loans and leases held for investment		2.37	%		2.27	%		1.79	%		1.44	%		0.90	%

We continued to remain conservative on risk rating of loans and leases. Increases to classified loans and leases that remained on accrual status resulted from downward migration for loans and leases where performance metrics deteriorated but with no current expectation of loss. Nonperforming, classified and delinquent loan inflows were primarily driven by one customer relationship with two loans with no expected loss due to collateral coverage. Our overall loan portfolio continues to benefit from strong underwriting, borrower strength and good credit metrics.

At December 31, 2024, total delinquent loans and leases were $180.2 million, compared to $125.0 million at September 30, 2024. The $55.2 million increase in total delinquent loans was due mainly to increases in the 30 to 89 days delinquent category of $20.2 million in other residential real estate mortgage loans, $10.4 million in commercial real estate mortgage loans, and $10.3 million in multi-family mortgage loans. In the 90 or more days delinquent category, there was a $21.9 million increase in multi-family mortgage loans, offset partially by a $6.9 million decrease in commercial real estate mortgage loans. Total delinquent loans and leases as a percentage of total loans and leases increased to 0.76% at December 31, 2024, as compared to 0.53% at September 30, 2024.

At December 31, 2024, nonperforming assets were $199.3 million, or 0.59% of total assets, compared to $177.0 million, or 0.53% of total assets, as of September 30, 2024. At December 31, 2024, nonperforming assets included $9.7 million of foreclosed assets, consisting entirely of single-family residences.

At December 31, 2024, nonperforming loans were $189.6 million, compared to $168.3 million at September 30, 2024. During the fourth quarter, nonperforming loans increased by $21.3 million due to additions of $56.9 million, offset partially by charge-offs of $22.0 million and payoffs and paydowns of $13.6 million. The addition to nonperforming loans was mainly related to aforementioned two commercial loans from one customer relationship.

Nonperforming loans and leases as a percentage of loans and leases held for investment increased to 0.80% at December 31, 2024 compared to 0.72% at September 30, 2024.

Allowance for Credit Losses – Loans

	Three Months Ended									Year Ended
	December 31,			September 30,			December 31,			December 31,
Allowance for Credit Losses – Loans		2024			2024			2023			2024			2023
	(Dollars in thousands)
Allowance for loan and lease losses
("ALLL"):
Balance at beginning of period	$	254,345		$	247,762		$	222,297		$	281,687		$	200,732
Initial ALLL on acquired PCD loans		-			-			25,623			-			25,623
Charge-offs		(27,696	)		(4,163	)		(14,628	)		(94,943	)		(63,428	)
Recoveries		1,211			1,746			1,395			9,116			5,260
Net charge-offs		(26,485	)		(2,417	)		(13,233	)		(85,827	)		(58,168	)
Provision for loan losses		11,500			9,000			47,000			43,500			113,500
Balance at end of period	$	239,360		$	254,345		$	281,687		$	239,360		$	281,687

Reserve for unfunded loan commitments
("RUC"):
Balance at beginning of period	$	27,571		$	27,571		$	29,571		$	29,571		$	91,071
(Negative provision) provision for credit losses		1,500			-			-			(500	)		(61,500	)
Balance at end of period	$	29,071		$	27,571		$	29,571		$	29,071		$	29,571

Allowance for credit losses ("ACL") –
Loans:
Balance at beginning of period	$	281,916		$	275,333		$	251,868		$	311,258		$	291,803
Initial ALLL on acquired PCD loans		-			-			25,623			-			25,623
Charge-offs		(27,696	)		(4,163	)		(14,628	)		(94,943	)		(63,428	)
Recoveries		1,211			1,746			1,395			9,116			5,260
Net charge-offs		(26,485	)		(2,417	)		(13,233	)		(85,827	)		(58,168	)
Provision for credit losses		13,000			9,000			47,000			43,000			52,000
Balance at end of period	$	268,431		$	281,916		$	311,258		$	268,431		$	311,258

ALLL to loans and leases held for investment		1.01	%		1.08	%		1.11	%		1.01	%		1.11	%
ACL to loans and leases held for investment		1.13	%		1.20	%		1.22	%		1.13	%		1.22	%
ACL to NPLs		141.57	%		167.47	%		419.05	%		141.57	%		419.05	%
ACL to NPAs		134.66	%		159.27	%		381.11	%		134.66	%		381.11	%
Annualized net charge-offs to average loans and leases		0.45	%		0.04	%		0.22	%		0.35	%		0.23	%

The allowance for credit losses – loans, which includes the reserve for unfunded loan commitments, totaled $268.4 million, or 1.13% of total loans and leases, at December 31, 2024, compared to $281.9 million, or 1.20% of total loans and leases, at September 30, 2024. The $13.5 million decrease in the allowance was due to net charge-offs of $26.5 million, offset partially by the $13.0 million provision. The ACL coverage ratio decreased from last quarter driven by improvement in the economic forecast, a mix shift towards loan categories with lower expected losses, and the impact of charge-offs, offset partially by the impact of changes in risk ratings.

Our ability to absorb credit losses is also bolstered by (i) $117.0 million of loss coverage from the credit-linked notes, pursuant to which the bank sold the first 5% of any losses on our $2.3 billion single-family residential mortgage loan portfolio; and (ii) unearned credit marks of $22.5 million on approximately $1.7 billion of purchased loans without credit deterioration that were originated by Banc of California prior to the merger. When the loss coverage from the credit-linked notes and unearned credit marks is added to our allowance for credit losses, this provides additional economic coverage on top of our ACL ratio. We refer to this adjusted ACL ratio as our economic coverage ratio⁽¹⁾, which equaled 1.72% of total loans and leases at December 31, 2024.

The ACL coverage of nonperforming loans was 142% at December 31, 2024 compared to 167% at September 30, 2024.

Net charge-offs were 0.45% of average loans and leases (annualized) for the fourth quarter, compared to 0.04% for the third quarter. The increase in net charge-offs in the fourth quarter was attributable primarily to a commercial loan exposure with isolated risk and one Civic loan, both of which migrated to nonperforming loan status in the third quarter.

⁽¹⁾

Non-GAAP measures; refer to section 'Non-GAAP Measures'

Deposits and Client Investment Funds

The following table sets forth the composition of our deposits at the dates indicated:

December 31,

September 30,

June 30,

March 31,

December 31,

Composition of Deposits

2024

2023

(Dollars in thousands)

Noninterest-bearing checking

7,719,913

7,811,796

7,825,007

Banc of California, Inc. Reports Fourth Quarter Diluted Earnings per Share of $0.28, Reflecting Strong Year-Over-Year Net Interest Margin Expansion and Lower Noninterest Expenses