BANC-PF

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How BANC-PF rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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RISK FACTORS An investment in our securities is subject to certain risks.
Prospective and current investors in our securities should carefully consider the following risks, together with all the other information contained in this Annual Report on Form 10-K, including the sections titled “Forward-Looking Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes in this Annual Report on Form 10-K.
If any of the following risks actually occur, our business, results of operations, and financial condition could suffer.
In that event, the value of our securities could decline, and you may lose all or part of your investment.
Our business, results of operations, and financial condition could also be harmed by risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Relating to Our Operations New lines of business, new products and services, or strategic project initiatives, or new partnerships may subject us to additional risks.
From time to time, we may seek to implement new lines of business or offer new products and services within existing lines of business.
There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible, which could in turn have a material negative effect on our operating results.
New lines of business and/or new products or services also could subject us to additional regulatory requirements, increased scrutiny by our regulators and other legal risks.
Additionally, from time to time we undertake strategic project initiatives, including but not limited to, payment processing, investment in technology, process improvement, client experience and fintech partnerships or acquisitions, such as our acquisition of BancEdge.
Significant effort and resources are necessary to manage and oversee the successful completion of these initiatives.
These initiatives often place significant demands on a limited number of employees with subject matter expertise and management and may involve significant costs to implement as well as increase operational risk as employees learn to process transactions under new systems.
The failure to properly execute on these strategic initiatives could adversely impact our business and results of operations.
Increasingly, community banks, including the Bank, are partnering with fintech providers to distribute or market their products and services.
Bank regulators have, and may in the future, hold banks responsible for the activities of these fintech companies, including in respect of bank secrecy act or anti-money laundering matters, or may take the view that these relationships present safety and soundness issues.
We are subject to certain risks in connection with our use of technology.
Our cybersecurity measures may not be sufficient to mitigate losses or exposure to cyber-attack or cyber theft.
Communications and information systems are essential to the conduct of our business, as we use such systems to manage our client relationships, our general ledger and virtually all other aspects of our business as well as process customer and merchant payments via the BancEdge platform.
Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks.
Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks are vulnerable to breaches, unauthorized access either directly or indirectly through our vendors, misuse, computer viruses, or other malicious code and other types of cyber-attacks.
Generative artificial intelligence is further increasing risks in this area, including by making fraud detection more difficult, particularly with detection devices that use voice recognition or authentication.
The techniques used by bad actors change frequently, may not be recognized until launched, and may not be recognized until well after a breach has occurred.
If one or more of these events occur, this could jeopardize our clients' confidential and other information that we process and store, or otherwise cause interruptions in our operations or the operations of our clients or counterparties.
Several states and their governmental agencies also have adopted or proposed cybersecurity laws.
Privacy laws in the State of California and the State of Colorado, for example, require regulated entities to establish measures to identify, manage, secure, track, produce, and delete personal information.
The occurrence of cyber-attacks may require us to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through our current insurance policies.
If a cyber-attack succeeds in disrupting our operations or disclosing confidential data, we could also suffer significant reputational damage in addition to possible regulatory fines or client lawsuits.
We provide internet banking services to our clients which have additional cyber risks related to our client’s personal electronic devices and electronic communication.
Any compromise of personal electronic device security could jeopardize the confidential information of our clients and expose our clients to account take-overs and the possibility for financial crimes such as fraud or identity theft and deter clients from using our internet banking services.
The precautions we take may not protect our systems from future vulnerabilities, data breaches or other cyber threats.
Losses due to unauthorized account activity could harm our reputation and may have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our security measures may not protect us from systems failures or interruptions.
While we have established policies and technical controls to prevent or limit the impact of systems failures and interruptions, there are no absolute assurances that such events will not occur or that the resulting damages will be adequately mitigated.
We rely on communications, information, operating and financial control systems technology from third-party service providers, and we may suffer an interruption in those systems.
We outsource certain aspects of our data processing and operational functions to third-party service providers.
If our third-party service providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, our and our clients’ information may be compromised, and our business operations could be adversely impacted.
We rely on third-party service providers to help ensure the confidentiality of our and our clients’ information and acknowledge the additional risks these third parties expose us to.
Third-party service providers may experience unauthorized access to and disclosure of or destruction or corruption of our or our clients’ information.

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Gone since FY2024

Item 1A. - Risk Factors ” for a discussion regarding the holding company’s reliance on dividends from the Bank for substantially all of its income and as a result the primary source of funds for cash dividends to our preferred and common stockholders.
During the year ended December 31, 2024, the holding company paid dividends in the amount of $68.3 million to its common stockholders and $39.8 million to its preferred stockholders.
The Bank paid dividends of $ 80.0 million to the holding company during the year ended December 31, 2024.
For a discussion of dividend restrictions on the Company's common stock, or of dividends from the Company's subsidiaries to the Company, see “Item 1.
Business - Supervision and Regulation - Dividends and Share Repurchases " and Note 22.
Dividend Availability and Regulatory Matters of the Notes to Consolidated Financial Statements contained in “Item 8.
Financial Statements and Supplementary Data.” Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2024 regarding securities issued and to be issued under our equity compensation plan in effect during fiscal year 2024: Number of Securities Weighted Number of Securities to be Issued Upon Average Exercise Remaining Available Exercise of Price of for Future Issuance Outstanding Outstanding Under Equity Options, Options, Compensation Plans Warrants, and Warrants, and (Excluding Securities Rights Rights Reflected in Column (a)) Plan Category Plan Name (a) (b) (c) Amended and Restated Equity compensation Banc of California, plans approved by Inc. 2018 Stock security holders Incentive Plan (1) 11,232 (2) $ 13.75 4,955,607 (3) Equity compensation plans not approved by security holders None — — — Total 11,232 $ 13.75 4,955,607 __________________________________ (1) The Amended and Restated Banc of California, Inc. 2018 Stock Incentive Plan (the “Amended and Restated 2018 Plan”) was approved by our stockholders at our November 22, 2023 Special Meeting of Stockholders, authorizing 10,717,882 shares for issuance.
In addition to the Amended and Restated 2018 Plan, in connection with the Merger, the Company assumed the Amended and Restated PacWest Bancorp 2017 Stock Incentive Plan (the "PacWest 2017 Plan") with respect to PacWest's outstanding stock-based awards.
(2) Amount does not include 1,759,335 shares of unvested time-based restricted stock units and 2,283,531 of unvested PSUs granted under the Amended and Restated 2018 Plan and 211,206 unvested time-based restricted shares outstanding under the PacWest 2017 Plan as of December 31, 2024.
(3) The Amended and Restated 2018 Plan permits these remaining shares to be issued in the form of options, PSUs, RSUs, restricted stock, or stock appreciation rights.
Recent Sales of Unregistered Securities None.
Repurchases of Common Stock The following table presents stock repurchases we made during the fourth quarter of 2024: Total Number of Maximum Dollar Shares Purchased Value of Shares Total as Part of That May Yet Number of Average Publicly Be Purchased Shares Price Paid Announced Under the Purchase Dates Purchased (1) Per Share Program (2) Program (2) (Dollars in thousands, except per share amounts) October 1 - October 31, 2024 884 $ 14.01 — $ — November 1 - November 30, 2024 9,018 $ 15.41 — $ — December 1 - December 31, 2024 383 $ 16.72 — $ — Total 10,285 $ 15.34 — ___________________________________ (1) Includes shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards.
(2) On February 9, 2023, the Company's Board of Directors approved a stock repurchase program to buy back shares of its common stock for an aggregate purchase price not to exceed $35 million, which expired on February 9, 2024.
Five-Year Stock Performance Graph The following chart and related discussion are being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be “soliciting materials” or “filed” with the SEC (other than as provided in Item 201) nor shall this information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained therein, except to the extent that we specifically incorporate it by reference into a filing.
The chart compares the yearly percentage change in the cumulative stockholder return on our common stock based on the closing price during the five years ended December 31, 2024, with (1) the Total Return Index for U.S. companies traded on The New York Stock Exchange (the “NYSE Composite Index”) and (2) the Total Return Index for KBW NASDAQ Regional Bank Stocks (the “KBW NASDAQ Regional Banking Index”).
This comparison assumes $100 was invested on December 31, 2019, in our common stock and the comparison groups and assumes the reinvestment of all cash dividends prior to any tax effect and retention of all stock dividends.
The chart is historical only and may not be indicative of possible future performance. ___________________________________ * $100 invested on December 31, 2019 in stock or index, including reinvestment of dividends.
Year Ended December 31, Index 2019 2020 2021 2022 2023 2024 Banc of California, Inc. $ 100.00 $ 87.43 $ 118.09 $ 97.23 $ 84.55 $ 100.04 NYSE Composite Index 100.00 106.99 129.11 117.04 133.16 154.19 KBW NASDAQ Regional Banking Index 100.00 91.29 124.74 116.10 115.64 130.90 ITEM 6.
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 Part 1.
Item 1A, “ Risk Factors ” in this Annual Report on Form 10-K.
For the discussion of the financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, 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, 2023 filed with the SEC on February 29, 2024, 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 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 a premier relationship-based business bank, providing banking and treasury management services to small-, middle-market, and venture-backed businesses.
The Bank offers a broad range of loan and deposit products and services through full-service branches throughout California and in Denver, Colorado, and Durham, North Carolina, as well as through regional offices nationwide.
The Bank also provides full-stack payment processing solutions through its subsidiary, Deepstack Technologies, and serves the community association management industry nationwide with its technology-forward platform, SmartStreet TM .
Presentation of Results – PacWest Bancorp Merger On November 30, 2023, PacWest Bancorp merged with and into Banc of California, Inc.
(the “Merger”), with Banc of California, Inc. continuing as the surviving legal corporation and Banc of California, Inc. concurrently closed a $ 400 million equity capital raise.
The Merger was accounted for as a reverse merger using the acquisition method of accounting; therefore, PacWest Bancorp was deemed the acquirer for financial reporting purposes, even though Banc of California, Inc. was the legal acquirer.
The Merger was an all-stock transaction and has been accounted for as a business combination.
Banc of California, Inc.'s financial results for all periods ended prior to November 30, 2023 reflect PacWest Bancorp results only on a standalone basis.
In addition, Banc of California, Inc.'s reported financial results for the year ended December 31, 2023 reflect PacWest Bancorp financial results only on a standalone basis until the closing of the Merger on November 30, 2023, and results of the combined company for the month of December 2023.
The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Banc of California, Inc. have been retrospectively restated to reflect the equivalent number of shares issued in the Merger as the Merger was accounted for as a reverse merger.
Under the reverse merger method of accounting, the assets and liabilities of legacy Banc of California, Inc. as of November 30, 2023 were recorded at their respective fair values.
The following table presents balance sheet data as of the dates indicated: December 31, 2024 2023 2022 (In thousands) Balance Sheet Data: Total assets $ 33,542,864 $ 38,534,064 $ 41,228,936 Interest-earning deposits in financial institutions 2,310,206 5,175,149 2,027,949 Securities available-for-sale 2,246,839 2,346,864 4,843,487 Securities held-to-maturity 2,306,149 2,287,291 2,269,135 Loans and leases held for investment 23,781,663 25,489,687 28,609,129 Goodwill 214,521 198,627 1,376,736 Core deposit and customer relationship intangibles 132,944 165,477 31,381 Total liabilities 30,042,915 35,143,299 37,278,405 Noninterest-bearing deposits 7,719,913 7,774,254 11,212,357 Interest-bearing deposits 19,471,996 22,627,515 22,723,977 Total deposits 27,191,909 30,401,769 33,936,334 Borrowings 1,391,814 2,911,322 1,764,030 Subordinated debt 941,923 936,599 867,087 Stockholders’ equity 3,499,949 3,390,765 3,950,531 At December 31, 2024, the Company had total assets of $33.5 billion, including $23.8 billion of loans and leases held for investment, $2.2 billion of AFS securities, $2.3 billion of HTM securities, and $2.3 billion of interest-earning deposits in financial institutions, compared to $38.5 billion of total assets, including $25.5 billion of loans and leases held for investment, $2.3 billion of AFS securities, $2.3 billion HTM securities, and $5.2 billion of interest-earning deposits in financial institutions at December 31, 2023.
The $5.0 billion decrease in total assets since year-end 2023 was due primarily to a $2.9 billion decrease in interest-earning deposits in financial institutions and a $1.7 billion decrease in loans and leases held for investment.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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