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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-35522
BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
04-3639825
(IRS Employer Identification No.)
3 MacArthur Place, Santa Ana, California
(Address of principal executive offices)
92707
(Zip Code)
(855) 361-2262
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes ☐ No ☒

Table of Contents
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBANCNew York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
As of May 4, 2023, the registrant had outstanding 57,594,900 shares of voting common stock and 477,321 shares of Class B non-voting common stock.

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BANC OF CALIFORNIA, INC.
FORM 10-Q QUARTERLY REPORT
March 31, 2023
Table of Contents
Page
Item 1 –
Item 2 –
Item 3 –
Item 4 –
Item 1 –
Item 1A –
Item 2 –
Item 3 –
Item 4 –
Item 5 –
Item 6 –

2
Table of Contents
Forward-Looking Statements
When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California, Inc. and its affiliates (“BANC,” the “Company”, “we”, “us” or “our”). By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:
i.changes in general economic conditions, either nationally or in our market areas, including the impact of supply chain disruptions, and the risk of recession or an economic downturn;
ii.changes in the interest rate environment, including the recent and anticipated increases in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity;
iii.the impacts of continuing inflation;
iv.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 nonperforming assets, and may result in our allowance for credit losses not being adequate;
v.fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area;
vi.the quality and composition of our securities portfolio;
vii.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment;
viii.the rapid withdrawal of a significant amount of demand deposits over a short period of time;
ix.the costs and effects of litigation;
x.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; and in the case of our recent acquisition of Deepstack Technologies, LLC (Deepstack), reputational risk, regulatory risk and potential adverse reactions of the Company's or Deepstack's customers, suppliers, vendors, employees or other business partners;
xi.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 allowance for credit losses, 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;
xii.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;
xiii.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;
xiv.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;
xv.failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including due to cybersecurity threats
xvi.our ability to attract and retain key members of our senior management team;
xvii.the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business;
xviii.the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
xix.the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; and
xx.other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC, including, without limitation, the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.
3
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PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Amounts in thousands, except share and per share data)
(Unaudited)
March 31,
2023		December 31,
2022
ASSETS
Cash and due from banks$36,982 $47,434 
Interest-earning deposits in financial institutions973,969 181,462 
Total cash and cash equivalents1,010,951 228,896 
Securities held-to-maturity, at amortized cost (fair value of $272,915 and $262,460 at March 31, 2023 and December 31, 2022)
328,520 328,641 
Securities available-for-sale, at fair value958,427 868,297 
Loans receivable7,054,380 7,115,038 
Allowance for loan losses(84,560)(85,960)
Loans receivable, net6,969,820 7,029,078 
Federal Home Loan Bank and other bank stock, at cost70,334 57,092 
Premises and equipment, net108,087 107,345 
Bank owned life insurance128,022 127,122 
Deferred income taxes, net54,450 50,518 
Goodwill114,312 114,312 
Other intangibles7,065 7,526 
Other assets288,913 278,189 
Total assets$10,038,901 $9,197,016 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits$2,506,616 $2,809,328 
Interest-bearing deposits4,445,358 4,311,593 
Total deposits6,951,974 7,120,921 
Federal Home Loan Bank (FHLB) advances, net and Federal Reserve Bank (FRB) borrowings1,732,670 727,348 
Long-term debt, net274,995 274,906 
Accrued expenses and other liabilities120,355 114,223 
Total liabilities9,079,994 8,237,398 
Commitments and contingent liabilities
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 65,272,095 shares issued and 58,237,303 shares outstanding at March 31, 2023; 65,168,380 shares issued and 58,544,534 shares outstanding at December 31, 2022
653 651 
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at March 31, 2023 and December 31, 2022
5 5 
Additional paid-in capital866,306 866,478 
Retained earnings263,524 248,988 
Treasury stock, at cost (7,034,792 and 6,623,846 shares at March 31, 2023 and December 31, 2022)
(121,092)(115,907)
Accumulated other comprehensive loss, net(50,489)(40,597)
Total stockholders’ equity958,907 959,618 
Total liabilities and stockholders’ equity$10,038,901 $9,197,016 
See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2023		December 31,
2022		March 31,
2022
Interest and dividend income
Loans, including fees$87,418 $88,717 $76,234 
Securities14,909 12,905 7,309 
Other interest-earning assets4,592 2,490 726 
Total interest and dividend income106,919 104,112 84,269 
Interest expense
Deposits20,527 14,278 1,388 
FHLB advances and FRB borrowings9,648 5,528 2,953 
Other interest-bearing liabilities3,691 4,089 3,487 
Total interest expense33,866 23,895 7,828 
Net interest income73,053 80,217 76,441 
Provision for (reversal of) credit losses2,000 — (31,542)
Net interest income after provision for (reversal of) credit losses71,053 80,217 107,983 
Noninterest income
Customer service fees1,979 2,066 2,434 
Loan servicing income547 561 212 
Income from bank owned life insurance900 923 796 
Net (loss) gain on sale of securities available-for-sale— (7,708)16 
All other income4,433 2,731 2,452 
Total noninterest income7,859 (1,427)5,910 
Noninterest expense
Salaries and employee benefits29,656 27,812 28,987 
Occupancy and equipment5,526 5,740 5,637 
Professional fees4,072 3,193 2,839 
Data processing1,563 1,744 1,828 
Regulatory assessments1,202 905 775 
Software and technology3,274 3,197 2,700 
Loss on investments in alternative energy partnerships1,618 608 158 
Reversal of loan repurchase reserves(11)(17)(471)
Amortization of other intangibles461 555 441 
Other expense3,878 4,466 3,702 
Total noninterest expense51,239 48,203 46,596 
Income before income taxes 27,673 30,587 67,297 
Income tax expense7,395 9,068 18,785 
Net income20,278 21,519 48,512 
Preferred stock dividends— — 1,420 
Impact of preferred stock redemption— — 3,747 
Net income available to common stockholders$20,278 $21,519 $43,345 
Earnings per common share:
Basic$0.34 $0.36 $0.69 
Diluted$0.34 $0.36 $0.69 
Earnings per class B common share:
Basic$0.34 $0.36 $0.69 
Diluted$0.34 $0.36 $0.69 
See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
Three Months Ended
March 31,
2023		December 31,
2022		March 31,
2022
Net income$20,278 $21,519 $48,512 
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on available-for-sale securities:
Unrealized (loss) gain arising during the period(3,926)1,484 (26,913)
Reclassification adjustment for loss (gain) included in net income— 5,315 (11)
Total change in unrealized (loss) gain on available-for-sale securities(3,926)6,799 (26,924)
Unrealized loss on cash flow hedge:
Unrealized loss arising during the period
(6,146)— — 
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity180 183 9 
Total other comprehensive (loss) income(9,892)6,982 (26,915)
Comprehensive income$10,386 $28,501 $21,597 

See accompanying notes to consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share and per share data)
(Unaudited)
Preferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
VotingClass B
Non-Voting
Three Months Ended March 31, 2023
Balance at December 31, 2022$— $651 $5 $866,478 $248,988 $(115,907)$(40,597)$959,618 
Comprehensive income:
Net income— — — — 20,278 — — 20,278 
Other comprehensive loss, net— — — — — — (9,892)(9,892)
Issuance of common stock
— 3 — (3)— — — — 
Purchase of 410,946 shares of treasury stock
— — — — — (5,185)— (5,185)
Share-based compensation expense
— — — 1,455 — — — 1,455 
Restricted stock surrendered due to employee tax liability
— (1)— (1,624)— — — (1,625)
Shares purchased under the Dividend Reinvestment Plan
— — — — (96)— — (96)
Dividends declared ($0.10 per common share)
— — — — (5,646)— — (5,646)
Balance at March 31, 2023$— $653 $5 $866,306 $263,524 $(121,092)$(50,489)$958,907 
Three Months Ended March 31, 2022
Balance at December 31, 2021$94,956 $646 $5 $854,873 $147,894 $(40,827)$7,743 $1,065,290 
Comprehensive income:
Net income— — — — 48,512 — — 48,512 
Other comprehensive loss, net— — — — — — (26,915)(26,915)
Redemption of preferred stock
(94,956)— — — (3,747)— — (98,703)
Repurchase of 215,550 shares of common stock
— — — — (4,298)— (4,298)
Share-based compensation expense
— — — 1,285 — — — 1,285 
Restricted stock surrendered due to employee tax liability
— — — (960)— — — (960)
Shares purchased under the Dividend Reinvestment Plan
— — — — (30)— — (30)
Dividends declared ($0.06 per common share)
— — — — (3,752)— — (3,752)
Preferred stock dividends
— — — — (1,420)— — (1,420)
Balance at March 31, 2022$— $646 $5 $855,198 $187,457 $(45,125)$(19,172)$979,009 

See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended
March 31,
20232022
Cash flows from operating activities:
Net income$20,278 $48,512 
Adjustments to reconcile net income to net cash provided by operating activities
Provision for (reversal of) credit losses2,000 (31,542)
Reversal of loan repurchase reserves(11)(471)
Depreciation on premises and equipment3,611 3,982 
Amortization of other intangibles461 441 
Amortization of debt issuance costs411 397 
Net amortization of premium on securities46 328 
Net (accretion) amortization of deferred loan costs (fees) and purchased premiums (discounts)(324)416 
Deferred income tax (benefit) expense(727)3,198 
Bank owned life insurance income(900)(796)
Share-based compensation expense1,455 1,285 
Income from interest rate swaps23 (102)
Loss on investments in alternative energy partnerships and affordable housing investments3,129 1,704 
Net gain on sale of securities available-for-sale— (16)
Gain on sale-leaseback of branch— (771)
Repurchase of mortgage loans(416)— 
Proceeds from sales of and principal collected on loans held-for-sale323 — 
Change in accrued interest receivable and other assets(14,988)(13,566)
Change in accrued interest payable and other liabilities(3,298)(7,734)
Net cash provided by operating activities11,073 5,265 
Cash flows from investing activities:
Proceeds from sales of securities available-for-sale— 17,646 
Purchases of securities available-for-sale(101,740)(5,000)
Proceeds from principal repayments of securities held-to-maturity and available-for-sale6,415 8,074 
Loan originations and principal collections, net118,502 195,846 
Purchases of loans(61,420)(364,371)
Redemption of FHLB stock6,137 — 
Purchases of FHLB and other bank stock(19,379)(6,824)
Purchases of premises and equipment(2,630)(529)
Proceeds from sale-leaseback of branch— 2,400 
Funding of equity investments(689)(2,789)
Decrease in investments in alternative energy partnerships365 574 
Net cash used in investing activities(54,439)(154,973)
Cash flows from financing activities:
Net (decrease) increase in deposits(168,911)40,266 
Net increase in short-term FHLB advances and FRB borrowings905,000 80,000 
Proceeds from FHLB long-term advances and FRB borrowings100,000 — 
Net increase in other borrowings— 165,000 
Redemption of preferred stock— (98,703)
Purchase of treasury stock(3,398)(4,298)
Purchase of stock surrendered to pay tax liability(1,624)(960)
Dividends paid on preferred stock— (1,727)
Dividends paid on common stock(5,646)(3,752)
Net cash provided by financing activities825,421 175,826 
Net change in cash and cash equivalents782,055 26,118 
Cash and cash equivalents at beginning of period228,896 228,123 
Cash and cash equivalents at end of period$1,010,951 $254,241 
Supplemental cash flow information
Interest paid on deposits and borrowed funds26,013 4,291 
Supplemental disclosure of non-cash activities
Reclassification of securities available-for-sale to held-to-maturity — 329,416 
Operating lease right-of-use assets received in exchange for lease liabilities647 786 
Commitments to fund low income housing tax credit investments— 2,000 
Goodwill adjustments for purchase accounting— 826 
Receivable on unsettled securities sales— 28,500 

See accompanying notes to consolidated financial statements (unaudited)
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BANC OF CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2023

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: 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, National Association (the “Bank”), a California-based bank. 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. We are regulated as a bank holding company by the FRB and the Bank operates under a national bank charter issued by the Office of the Comptroller of the Currency (“OCC”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (“FDIC”).
The Bank offers a variety of financial services to meet the banking and financial needs of the communities it serves, with operations conducted through 28 full-service branches located throughout Southern California as of March 31, 2023.
Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed by us with the SEC. Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications are immaterial and have no effect on net income, comprehensive income (loss), total assets or total shareholders’ equity previously reported.
In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022. Significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its then wholly-owned subsidiaries.
Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. We have not made any changes in our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC, except for those described below.
Derivative Instruments - Cash Flow Hedge: The Company applies hedge accounting for certain derivative instruments used to manage interest rate risk. A cash flow hedge is a derivative instrument used to manage the variability in future expected cash flows that would otherwise be impacted by movements in interest rates. To quality for hedge accounting, the cash flow hedge must be highly effective at reducing the risk associated with the hedged exposure. The effectiveness of the hedging relationship is documented at inception and is monitored at least quarterly through the life of the transaction.
A cash flow hedge that is designated as highly effective is carried at fair value with the change in fair value included in the assessment of hedge effectiveness recorded in other comprehensive income (loss) (“AOCI”) and subsequently recognized in earnings in the same period that the hedged forecasted transaction affects earnings. At that time, the amount reclassified from AOCI is presented in the same income statement line item in which the hedged transaction is reported (interest income or expense). If the cash flow hedge becomes ineffective, the change in fair value is reclassified from AOCI to earnings.
Loan Modifications to Borrowers Experiencing Financial Difficulty: Prior to the adoption of ASU 2022-02, we accounted for the modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a troubled debt restructuring (“TDR”). Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. Loans that were considered a TDR prior to the adoption of ASU 2022-02 will continue to be accounted for under the superseded TDR accounting guidance until the loan is paid off, liquidated, or subsequently modified. Since adoption of ASU 2022-02 on January 1, 2023, we have evaluated all loan modifications under ASC 310-20 to determine whether a modification made to a borrower results in a new loan or is a continuation of the existing loan.
9
Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and disclosures provided, and actual results could differ. The allowance for credit losses (“ACL”) (which includes the allowance for loan losses (“ALL”) and the reserve for unfunded noncancellable loan commitments), loan repurchase reserve, realization of deferred tax assets, the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of goodwill and other intangible assets, other derivatives, hypothetical liquidation at book value (“HLBV”) of investments in alternative energy partnerships, and the fair value measurement of financial instruments are particularly subject to change and such change could have a material effect on the consolidated financial statements.
Recently Adopted Accounting Guidance: In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures, which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (“ASU 2016-13”) that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for TDRs by creditors that have adopted the CECL model and enhances the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We adopted ASU 2022-02 on January 1, 2023 and the impact of adoption did not have a material effect on our consolidated financial statements.
Recently Issued Accounting Guidance Not Yet Adopted: In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)(“ASU 2023-02”), which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method, which was previously allowed only for low-income housing tax credit (“LIHTC”) investments, if certain conditions are met. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, and including interim periods within those fiscal years. The amendment must be applied on either a modified retrospective or a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures, including assessing eligibility to apply the updated guidance to our investments in alternative energy partnerships currently accounted for using the HLBV method of the equity method of accounting.
NOTE 2 – FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy
ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value:
•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
•Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
10
Assets and Liabilities Measured on a Recurring Basis
Securities Available-for-Sale: The fair values of securities available-for-sale are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, we primarily employ independent pricing services that utilize pricing models to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments (Level 2). We adhere to established processes to monitor the pricing services' assumptions and challenge the valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. Level 2 securities include SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation.
Derivative Assets and Liabilities:
Cash Flow Hedge. We have entered into pay-fixed, receive-variable interest rate swap contracts with institutional counterparties to hedge against variability in cash flows attributable to interest rate risk caused by changes in interest rates on our deposits and borrowings. We estimate the fair value of these contracts based on inputs from a third-party pricing model, which incorporates such factors as the Treasury curve, SOFR rates, and the pay rate on the interest rate swaps. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.
Interest Rate Swaps. We offer interest rate swap products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee.
The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.
Foreign Exchange Contracts. We offer short-term foreign exchange contracts to customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products, we also enter into offsetting back-to-back contracts with institutional counterparties to hedge our foreign exchange rate risk. These back-to-back contracts are intended to offset each other and allow us to offer our customers foreign exchange products. The fair value of both of these offsetting asset and liability instruments is based on the change in the underlying foreign exchange rate. We are subject to counterparty risk in the event our customers or institutional counterparties default under these contracts. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and typically result in no adjustments to the valuation of the short-term foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of these contracts is classified as Level 2.

11
The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
Fair Value Measurement Level
($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
March 31, 2023
Assets
Securities available-for-sale:
SBA loan pools securities$10,279 $— $10,279 $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities84,376 — 84,376 — 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations92,751 — 92,751 — 
Non-agency residential mortgage-backed securities115,371 — 115,371 — 
Collateralized loan obligations479,623 — 479,623 — 
Corporate debt securities176,027 — 176,027 — 
Derivative assets:
Interest rate swaps and foreign exchange contracts(1)
1,650 — 1,650 — 
Liabilities
Derivative liabilities:
Cash flow hedges(2)
8,622 — 8,622 — 
Interest rate swaps and foreign exchange contracts(2)
1,632 — 1,632 — 
December 31, 2022
Assets
Securities available-for-sale:
SBA loan pools securities$11,187 $— $11,187 $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities40,206 — 40,206 — 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations93,191 — 93,191 — 
Municipal securities— — — — 
Non-agency residential mortgage-backed securities80,492 — 80,492 — 
Collateralized loan obligations476,603 — 476,603 — 
Corporate debt securities166,618 — 166,618 — 
Derivative assets:
Interest rate swaps and foreign exchange contracts(1)
2,292 — 2,292 — 
Liabilities
Derivative liabilities:
Interest rate swaps and foreign exchange contracts(2)
2,251 — 2,251 — 

(1)Included in other assets in the consolidated statements of financial condition.
(2)Included in accrued expenses and other liabilities in the consolidated statements of financial condition.
There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2023 and 2022.
12

Assets and Liabilities Measured on a Non-Recurring Basis
Individually Evaluated Loans: The fair value of individually evaluated loans with specific allocations of the ACL based on collateral values is generally derived from recent real estate appraisals and automated valuation models (“AVMs”). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.
The following table presents our financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement Level
($ in thousands)Fair
Value		Quoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
March 31, 2023
Assets
Individually evaluated loans:
Commercial and industrial$5,002 $— $— $5,002 
SBA1,117 — — 1,117 
Other consumer114 — — 114 
December 31, 2022
Assets
Individually evaluated loans:
Single family residential mortgage$3,600 $— $— $3,600 
Commercial and industrial7,115 — — 7,115 
SBA3,704 — — 3,704 

The following table presents the gains (losses) recognized on assets measured at fair value on a non-recurring basis for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Individually evaluated loans:
Single family residential mortgage$(43)$(339)
Commercial and industrial(7,143)(634)
SBA395 26 
Other consumer(18)(27)
Commercial real estate(300)— 
13

Estimated Fair Values of Financial Instruments
The following table presents the carrying amounts and estimated fair values of financial assets and liabilities as of the dates indicated:
Carrying AmountFair Value Measurement Level
($ in thousands)Level 1Level 2Level 3Total
March 31, 2023
Financial assets
Cash and cash equivalents$1,010,951 $1,010,951 $— $— $1,010,951 
Securities held-to-maturity328,520 — 272,915 — 272,915 
Securities available-for-sale958,427 — 958,427 — 958,427 
Federal Home Loan Bank and other bank stock70,334 — 70,334 — 70,334 
Loans receivable, net of allowance for credit losses6,969,820 — — 6,585,663 6,585,663 
Accrued interest receivable39,850 39,850 — — 39,850 
Interest rate swaps and foreign exchange contracts1,650 — 1,650 — 1,650 
Financial liabilities
Deposits6,951,974 5,366,984 1,574,301 — 6,941,285 
Advances from Federal Home Loan Bank and Federal Reserve Bank borrowings1,732,670 — 1,708,419 — 1,708,419 
Long-term debt274,995 — 254,406 — 254,406 
Cash flow hedges8,622 8,622 8,622 
Interest rate swaps and foreign exchange contracts1,632 — 1,632 — 1,632 
Accrued interest payable14,446 14,446 — — 14,446 
December 31, 2022
Financial assets
Cash and cash equivalents$228,896 $228,896 $— $— $228,896 
Securities held-to-maturity328,641 — 262,460 — 262,460 
Securities available-for-sale868,297 — 868,297 — 868,297 
Federal Home Loan Bank and other bank stock57,092 — 57,092 — 57,092 
Loans receivable, net of allowance for credit losses7,029,078 — — 6,526,916 6,526,916 
Accrued interest receivable37,942 37,942 — — 37,942 
Interest rate swaps and foreign exchange contracts2,292 — 2,292 — 2,292 
Financial liabilities
Deposits7,120,921 5,931,500 1,175,857 — 7,107,357 
Advances from Federal Home Loan Bank727,348 — 699,730 — 699,730 
Long-term debt274,906 — 269,673 — 269,673 
Interest rate swaps and foreign exchange contracts2,251 — 2,251 — 2,251 
Accrued interest payable7,004 7,004 — — 7,004 

14
NOTE 3 – INVESTMENT SECURITIES
The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated:
($ in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
March 31, 2023
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$152,937 $— $(24,952)$127,985 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations61,380 — (10,742)50,638 
Municipal securities114,203 — (19,911)94,292 
Total securities held-to-maturity$328,520 $— $(55,605)$272,915 
Securities available-for-sale:
SBA loan pool securities$10,332 $— $(53)$10,279 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities84,739 — (363)84,376 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations97,579 140 (4,968)92,751 
Non-agency residential mortgage-backed securities125,917 93 (10,639)115,371 
Collateralized loan obligations490,860 — (11,237)479,623 
Corporate debt securities195,789 19 (19,781)176,027 
Total securities available-for-sale$1,005,216 $252 $(47,041)$958,427 
December 31, 2022
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$153,033 $— $(29,807)$123,226 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations61,404 — (11,946)49,458 
Municipal securities114,204 — (24,428)89,776 
Total securities held-to-maturity$328,641 $— $(66,181)$262,460 
Securities available-for-sale:
SBA loan pool securities$11,241 $— $(54)$11,187 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities40,431 — (225)40,206 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations99,075 — (5,884)93,191 
Non-agency residential mortgage-backed securities90,832 — (10,340)80,492 
Collateralized loan obligations492,203 — (15,600)476,603 
Corporate debt securities175,781 32 (9,195)166,618 
Total securities available-for-sale$909,563 $32 $(41,298)$868,297 
During the first quarter of 2022, certain longer-duration fixed-rate mortgage-backed securities and municipal securities with an amortized cost basis of $346.0 million were transferred from the available-for-sale portfolio to the held-to-maturity portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which became part of the securities’ amortized cost basis. This amount, along with the unrealized loss included in accumulated other comprehensive income, is subsequently amortized over the life of the security as an adjustment to its yield using the interest method. As a result, there is no impact on the consolidated statements of operations.
At March 31, 2023, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities, collateralized loan obligations, and corporate debt securities. The expected maturities of these types of securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
15
There was no allowance for credit losses for debt securities held-to-maturity and available-for sale as of March 31, 2023 and December 31, 2022.
Accrued interest receivable on debt securities held-to-maturity and available-for-sale totaled $10.9 million and $9.2 million at March 31, 2023 and December 31, 2022, and is included within other assets in the accompanying consolidated statements of financial condition.
At March 31, 2023 and December 31, 2022, there were no holdings of any one issuer, other than U.S. government agency and sponsored enterprises, in an amount greater than 10 percent of our stockholders’ equity.
Pledged Securities
Investment securities with carrying values of $544.0 million and $356.5 million as of March 31, 2023 and December 31, 2022 were pledged to secure FHLB advances, FRB borrowings, public deposits and for other deposits as required or permitted by law.
Securities Available-for-Sale
The following table presents proceeds from sales and calls of securities available-for-sale and the associated gross gains and losses realized through earnings upon the sales and calls of securities available-for-sale for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Gross realized gains$— $209 
Gross realized losses— (193)
Net realized gains on sales and calls$— $16 
Proceeds from sales and calls$— $17,646 

16
The following table summarizes the investment securities available-for-sale with unrealized losses by security type and length of time in a continuous, unrealized loss position as of the dates indicated:
Less Than 12 Months12 Months or LongerTotal
($ in thousands)Fair
Value		Gross Unrealized LossesFair
Value		Gross Unrealized LossesFair
Value		Gross Unrealized Losses
March 31, 2023
Securities available-for-sale:
SBA loan pool securities
$— $— $8,317 $(53)$8,317 $(53)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities84,376 (363)— — 84,376 (363)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations
26,609 (71)38,693 (4,897)65,302 (4,968)
Non-agency residential mortgage-backed securities
60,712 (999)41,133 (9,640)101,845 (10,639)
Collateralized loan obligations
51,073 (1,012)428,550 (10,225)479,623 (11,237)
Corporate debt securities
116,634 (11,655)39,374 (8,126)156,008 (19,781)
Total securities available-for-sale
$339,404 $(14,100)$556,067 $(32,941)$895,471 $(47,041)
December 31, 2022
Securities available-for-sale:
SBA loan pool securities$2,260 $(3)$8,927 $(51)$11,187 $(54)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities
40,206 (225)— — 40,206 (225)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations
76,441 (2,533)16,750 (3,351)93,191 (5,884)
Non-agency residential mortgage-backed securities
80,492 (10,340)— — 80,492 (10,340)
Collateralized loan obligations
235,936 (7,492)240,667 (8,108)476,603 (15,600)
Corporate debt securities
159,492 (8,374)4,180 (821)163,672 (9,195)
Total securities available-for-sale
$594,827 $(28,967)$270,524 $(12,331)$865,351 $(41,298)
At March 31, 2023, our securities available-for-sale portfolio consisted of 87 securities, of which 80 securities were in an unrealized loss position. At December 31, 2022, our securities available-for-sale portfolio consisted of 77 securities, of which 76 securities were in an unrealized loss position.
During the three months ended March 31, 2023 and 2022, there was no provision for credit losses related to securities available-for-sale. We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment. As of March 31, 2023, we believe there was no credit impairment and the decline in fair value of our securities since acquisition was attributable to a combination of changes in interest rates and general volatility in credit market conditions. We do not have the current intent to sell securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery. As of March 31, 2023, all of our investment securities in an unrealized loss position received an investment grade credit rating.
17
The following table presents the amortized cost and fair value of the investment securities portfolio, based on the earlier of contractual maturity dates or next repricing date, as of March 31, 2023:
Held-to-MaturityAvailable-for-Sale
($ in thousands)Amortized CostFair ValueAmortized CostFair Value
Earlier of maturity or next repricing date:
Within one year$— $— $506,741 $495,361 
One to five years— — 191,467 171,486 
Five to ten years36,254 31,312 42,363 37,747 
Greater than ten years292,266 241,603 264,645 253,833 
Total$328,520 $272,915 $1,005,216 $958,427 
Contractual maturities may not reflect the actual maturities of the investments. The average lives for mortgage-backed securities and collateralized mortgage obligations will likely be shorter than their contractual maturities due to prepayments and amortization.
18
The following table presents the fair value and weighted average yields using amortized cost of the securities available-for-sale portfolio as of March 31, 2023, based on the earlier of contractual maturity dates or next repricing dates:
One year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Fair
Value		Weighted-Average YieldFair
Value		Weighted-Average YieldFair
Value		Weighted-Average YieldFair
Value		Weighted-Average YieldFair
Value		Weighted-Average Yield
Securities available-for-sale:
SBA loan pool securities$10,279 4.23 %$— — %$— — %$— — %$10,279 4.23 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities
— — %— — %— — %84,376 5.59 %84,376 5.59 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations
5,459 5.19 %7,972 3.43 %25,234 2.96 %54,086 5.01 %92,751 4.26 %
Non-agency residential mortgage-backed securities
— — %— — %— — %115,371 3.82 %115,371 3.82 %
Collateralized loan obligations
479,623 6.42 %— — %— — %— — %479,623 6.42 %
Corporate debt securities
— — %163,514 4.95 %12,513 5.73 %— — %176,027 5.00 %
Total securities available-for-sale
$495,361 6.36 %$171,486 4.88 %$37,747 3.83 %$253,833 4.63 %$958,427 5.52 %
The following table presents the amortized cost and weighted average yields using amortized cost of the securities held-to-maturity portfolio as of March 31, 2023, based on the earlier of contractual maturity dates or next repricing dates:
One year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Amortized
Cost		Weighted-Average YieldAmortized
Cost		Weighted-Average YieldAmortized
Cost		Weighted-Average YieldAmortized
Cost		Weighted-Average YieldAmortized
Cost		Weighted-Average Yield
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$— — %$— — %$9,354 2.51 %$143,583 2.70 %$152,937 2.69 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations— — %— — %— — %61,380 2.64 %61,380 2.64 %
Municipal securities— — %— — %26,900 2.31 %87,303 2.71 %114,203 2.62 %
Total securities held-to-maturity$— — %$— — %$36,254 2.36 %$292,266 2.69 %$328,520 2.66 %

19
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
The following table presents the balances in our loan portfolio as of the dates indicated:
($ in thousands)March 31,
2023		December 31,
2022
Commercial:
Commercial and industrial(1)
$1,787,147 $1,845,960 
Commercial real estate1,302,277 1,259,651 
Multifamily1,678,300 1,689,943 
SBA65,040 68,137 
Construction260,167 243,553 
Consumer:
Single family residential mortgage1,877,114 1,920,806 
Other consumer84,335 86,988 
Total loans$7,054,380 $7,115,038 
Allowance for loan losses(84,560)(85,960)
Loans receivable, net$6,969,820 $7,029,078 
(1)Includes warehouse lending balances of $636.7 million and $602.5 million at March 31, 2023 and December 31, 2022.

The following table presents the balances of total loans as of the dates indicated:
($ in thousands)March 31,
2023		December 31,
2022
Unpaid principal balance$7,047,034 $7,107,897 
Unamortized net premiums17,972 18,319 
Unamortized net deferred (fees) costs(1,690)(1,880)
Fair value adjustment(1)
(8,936)(9,298)
Total loans$7,054,380 $7,115,038 
(1)At March 31, 2023, includes $7.7 million related to the acquisition of Pacific Mercantile Bancorp (“PMB Acquisition”), of which $3.9 million related to PCD loans. At December 31, 2022, includes $8.0 million related to the PMB Acquisition, of which $4.1 million related to PCD loans.

Credit Quality Indicators
We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze the associated risks in the current loan portfolio and individually grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate loans. We use the following definitions for risk ratings:
Pass: Loans risk rated “Pass” are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful.”
Special Mention: Loans risk rated “Special Mention” have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of our credit position at some future date.
Substandard: Loans risk rated “Substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or a weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful: Loans risk rated “Doubtful” have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
20
The following table presents the risk categories for total loans by class of loans and origination year as of March 31, 2023:
Term Loans Amortized Cost Basis by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term		Total
March 31, 2023
Commercial:
Commercial and industrial
Pass$23,951 $248,472 $176,677 $57,802 $49,220 $237,512 $920,462 $14,680 $1,728,776 
Special mention— — 2,930 996 — 2,162 10,344 1,187 17,619 
Substandard— 5,531 226 2,646 401 3,052 22,473 2,484 36,813 
Doubtful (1)
3,939 — — — — — — — 3,939 
Commercial and industrial27,890 254,003 179,833 61,444 49,621 242,726 953,279 18,351 1,787,147 
Commercial real estate
Pass25,592 395,257 357,157 60,289 90,326 361,861 1,164 59 1,291,705 
Special mention— — 7,780 — — — — — 7,780 
Substandard— — — — — 1,924 — 868 2,792 
Doubtful— — — — — — — — — 
Commercial real estate25,592 395,257 364,937 60,289 90,326 363,785 1,164 927 1,302,277 
Multifamily
Pass20,051 628,450 392,823 154,137 226,686 217,859 3 9,260 1,649,269 
Special mention— — — 2,999 — 11,019 — — 14,018 
Substandard— — — — — 15,013 — — 15,013 
Doubtful— — — — — — — — — 
Multifamily20,051 628,450 392,823 157,136 226,686 243,891 3 9,260 1,678,300 
SBA
Pass— 9,357 14,662 3,615 5,838 19,115 780 112 53,479 
Special mention— — — — — 998 — 1 999 
Substandard— — — 312 323 8,713 411 803 10,562 
Doubtful— — — — — — — — — 
SBA— 9,357 14,662 3,927 6,161 28,826 1,191 916 65,040 
21
Construction
Pass2,892 90,405 110,969 27,839 3,100 24,962 — — 260,167 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Construction2,892 90,405 110,969 27,839 3,100 24,962 — — 260,167 
Consumer:
Single family residential mortgage
Pass— 616,287 781,990 72,227 45,305 322,292 2,410 — 1,840,511 
Special mention— 4,548 2,232 — — 4,558 — — 11,338 
Substandard— 5,262 5,311 2,167 — 10,644 1,881 — 25,265 
Doubtful— — — — — — — — — 
Single family residential mortgage— 626,097 789,533 74,394 45,305 337,494 4,291 — 1,877,114 
Other consumer
Pass7,615 20,894 14,833 8,210 4,592 17,116 9,526 1,086 83,872 
Special mention— — — — 2 2 62 53 119 
Substandard— — 115 57 — 91 81 — 344 
Doubtful— — — — — — — — — 
Other consumer7,615 20,894 14,948 8,267 4,594 17,209 9,669 1,139 84,335 
Total loans$84,040 $2,024,463 $1,867,705 $393,296 $425,793 $1,258,893 $969,597 $30,593 $7,054,380 
Total loans
Pass$80,101 $2,009,122 $1,849,111 $384,119 $425,067 $1,200,717 $934,345 $25,197 $6,907,779 
Special mention— 4,548 12,942 3,995 2 18,739 10,406 1,241 51,873 
Substandard— 10,793 5,652 5,182 724 39,437 24,846 4,155 90,789 
Doubtful (1)
3,939 — — — — — — — 3,939 
Total loans$84,040 $2,024,463 $1,867,705 $393,296 $425,793 $1,258,893 $969,597 $30,593 $7,054,380 

(1) Related to one commercial and industrial loan that was modified and accounted for as a new loan in the first quarter of 2023.

22
The following table presents the risk categories for total loans by class of loans and origination year as of December 31, 2022:
Term Loans Amortized Cost Basis by Origination Year
($ in thousands)20222021202020192018PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term		Total
December 31, 2022
Commercial:
Commercial and industrial
Pass$269,367 $170,513 $62,931 $53,001 $76,811 $164,394 $932,464 $19,803 $1,749,284 
Special mention— 19,203 1,042 — 1 11,528 17,142 483 49,399 
Substandard3,833 64 3,002 502 3,630 2,729 23,012 6,501 43,273 
Doubtful— — — 4,004 — — — — 4,004 
Commercial and industrial273,200 189,780 66,975 57,507 80,442 178,651 972,618 26,787 1,845,960 
Commercial real estate
Pass348,298 363,335 60,564 94,772 155,790 224,213 1,163 61 1,248,196 
Special mention— — — — — 1,745 — — 1,745 
Substandard— — — — 1 8,799 910 — 9,710 
Doubtful— — — — — — — — — 
Commercial real estate348,298 363,335 60,564 94,772 155,791 234,757 2,073 61 1,259,651 
Multifamily
Pass626,186 390,928 154,636 229,511 109,887 138,063 3 9,307 1,658,521 
Special mention— — 2,997 — — — — — 2,997 
Substandard— — — — 11,069 17,356 — — 28,425 
Doubtful— — — — — — — — — 
Multifamily626,186 390,928 157,633 229,511 120,956 155,419 3 9,307 1,689,943 
SBA
Pass9,421 15,468 4,009 5,899 1,176 19,090 603 123 55,789 
Special mention— — — — 201 598 — 1 800 
Substandard— — 320 339 385 9,097 628 779 11,548 
Doubtful— — — — — — — — — 
SBA9,421 15,468 4,329 6,238 1,762 28,785 1,231 903 68,137 
23
Construction
Pass85,430 98,572 27,704 6,495 — 25,352 — — 243,553 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Construction85,430 98,572 27,704 6,495 — 25,352 — — 243,553 
Consumer:
Single family residential mortgage
Pass627,213 797,744 72,658 47,284 89,492 255,520 — — 1,889,911 
Special mention1,716 218 — 1,537 3,378 2,252 — — 9,101 
Substandard3,571 — 2,171 — 8,573 7,479 — — 21,794 
Doubtful— — — — — — — — — 
Single family residential mortgage632,500 797,962 74,829 48,821 101,443 265,251 — — 1,920,806 
Other consumer
Pass23,340 15,986 8,805 5,524 3,363 15,920 10,914 2,747 86,599 
Special mention— — — 3 — 19 62 54 138 
Substandard— — 56 — 83 31 81 — 251 
Doubtful— — — — — — — — — 
Other consumer23,340 15,986 8,861 5,527 3,446 15,970 11,057 2,801 86,988 
Total loans$1,998,375 $1,872,031 $400,895 $448,871 $463,840 $904,185 $986,982 $39,859 $7,115,038 
Total loans
Pass$1,989,255 $1,852,546 $391,307 $442,486 $436,519 $842,552 $945,147 $32,041 $6,931,853 
Special mention1,716 19,421 4,039 1,540 3,580 16,142 17,204 538 64,180 
Substandard7,404 64 5,549 841 23,741 45,491 24,631 7,280 115,001 
Doubtful— — — 4,004 — — — — 4,004 
Total loans$1,998,375 $1,872,031 $400,895 $448,871 $463,840 $904,185 $986,982 $39,859 $7,115,038 

24
Past Due Loans
The following table presents the aging of the recorded investment in past due loans, excluding accrued interest receivable (which is not considered to be material), by class of loans as of the dates indicated:
($ in thousands)30 - 59 Days Past Due60 - 89 Days Past DueGreater than 89 Days Past dueTotal Past DueCurrentTotal
March 31, 2023
Commercial:
Commercial and industrial2,859 1,787 14,864 19,510 1,767,637 1,787,147 
Commercial real estate495 264 — 759 1,301,518 1,302,277 
Multifamily1,128 — — 1,128 1,677,172 1,678,300 
SBA172 — 9,667 9,839 55,201 65,040 
Construction— — — — 260,167 260,167 
Consumer:
Single family residential mortgage19,057 9,419 12,448 40,924 1,836,190 1,877,114 
Other consumer343 57 81 481 83,854 84,335 
Total$24,054 $11,527 $37,060 $72,641 $6,981,739 $7,054,380 
December 31, 2022
Commercial:
Commercial and industrial4,002 481 13,833 18,316 1,827,644 1,845,960 
Commercial real estate311 — 910 1,221 1,258,430 1,259,651 
Multifamily— — — — 1,689,943 1,689,943 
SBA287 — 10,299 10,586 57,551 68,137 
Construction— — — — 243,553 243,553 
Consumer:
Single family residential mortgage36,338 5,068 19,431 60,837 1,859,969 1,920,806 
Other consumer163 16 81 260 86,728 86,988 
Total$41,101 $5,565 $44,554 $91,220 $7,023,818 $7,115,038 
Nonaccrual Loans
The following table presents nonaccrual loans as of the dates indicated:
March 31, 2023December 31, 2022
($ in thousands)Total
Nonaccrual Loans		Nonaccrual Loans with no ACLTotal
Nonaccrual Loans		Nonaccrual Loans with no ACL
Nonaccrual loans
Commercial:
Commercial and industrial$21,025 $6,431 $22,613 $10,959 
Commercial real estate868 868 910 910 
SBA9,775 7,952 10,417 5,613 
Consumer:
Single family residential mortgage24,590 24,590 21,116 17,187 
Other consumer287 172 195 195 
Total nonaccrual loans$56,545 $40,013 $55,251 $34,864 
At March 31, 2023 and December 31, 2022, there were no loans that were past due 90 days or more and still accruing.

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Other Real Estate Owned, Net and Loans in Process of Foreclosure
At March 31, 2023 and December 31, 2022, there was no other real estate owned. At March 31, 2023, there were 4 consumer mortgage loans totaling $5.0 million secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction. There were 9 consumer mortgage loans totaling $11.7 million secured by residential real estate properties in foreclosure at December 31, 2022.
Allowance for Credit Losses
The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables released by the model provider during March 2023. The published forecasts consider the Federal Reserve's monetary policy, labor market constraints, inflation levels, global oil prices and changes in real estate values, among other factors.
The ACL also incorporates qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better or worse than current estimates.
The ACL process involves subjective and complex judgments as well as adjustments for numerous factors including those described in the federal banking agencies' joint interagency policy statement on ALL, which include underwriting experience and collateral value changes, among others.
The reserve for unfunded noncancellable loan commitments is established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. At March 31, 2023 and December 31, 2022, the reserve for unfunded loan commitments was $4.8 million and $5.3 million, respectively, and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.
The following table presents a summary of activity in the ACL for the periods indicated:
Three Months Ended March 31,
($ in thousands)20232022
Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses		Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$85,960 $5,305 $91,265 $92,584 $5,605 $98,189 
Charge-offs(3,949)— (3,949)(231)— (231)
Recoveries49 — 49 32,215 — 32,215 
Net (charge-offs) recoveries(3,900)— (3,900)31,984 — 31,984 
Provision for (reversal of) credit losses2,500 (500)2,000 (31,342)(200)(31,542)
Balance at end of period$84,560 $4,805 $89,365 $93,226 $5,405 $98,631 

During the three months ended March 31, 2022, total recoveries included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. This recovery resulted in a reversal of provision for credit losses during the same period.

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Accrued interest receivable on loans receivable, net totaled $27.1 million and $28.6 million at March 31, 2023 and December 31, 2022, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the allowance of credit losses.
The following table presents the activity and balance in the ALL as of or for the three months ended March 31, 2023:
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Three Months Ended March 31, 2023:
Balance at December 31, 2022$34,156 $15,977 $14,696 $2,648 $5,850 $12,050 $583 $85,960 
Charge-offs
(3,261)(300)— — — (372)(16)(3,949)
Recoveries
17 — — 24 — 1 7 49 
Net (charge-offs) recoveries(3,244)(300)— 24 — (371)(9)(3,900)
Provision for (reversal of) credit losses - loans1,732 442 342 (575)575 (198)182 2,500 
Balance at March 31, 2023$32,644 $16,119 $15,038 $2,097 $6,425 $11,481 $756 $84,560 

The following table presents the gross charge-offs by class of loans and origination year as of March 31, 2023:
Gross Charge-offs
($ in thousands)20232022202120202019PriorTotal
Three Months Ended March 31, 2023
Commercial:
Commercial and industrial$— $(1,599)$(753)$— $— $(909)$(3,261)
Commercial real estate— — — — — (300)(300)
Consumer:
Single family residential mortgage— — — (372)— — (372)
Other consumer— (16)— — — — (16)
Total loans$— $(1,615)$(753)$(372)$— $(1,209)$(3,949)


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The following table presents the activity and balance in the ALL as of or for the three months ended March 31, 2022:
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Three Months Ended March 31, 2022:
Balance at December 31, 2021$33,557 $21,727 $17,893 $3,017 $5,622 $9,608 $1,160 $92,584 
Charge-offs(182)— — (13)— (10)(26)(231)
Recoveries31,417 — — 758 — 38 2 32,215 
Net recoveries (charge-offs)31,235 — — 745 — 28 (24)31,984 
(Reversal of) provision for credit losses - loans(24,825)(5,237)(2,556)(721)646 1,393 (42)(31,342)
Balance at March 31, 2022$39,967 $16,490 $15,337 $3,041 $6,268 $11,029 $1,094 $93,226 
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Collateral Dependent Loans
A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are evaluated individually and the ALL is determined based on the amount by which amortized costs exceed the estimated fair value of the collateral, adjusted for estimated selling costs.
Collateral dependent loans consisted of the following as of the dates indicated:
March 31, 2023
Real Estate
($ in thousands)CommercialResidentialBusiness AssetsAutomobileTotal
Commercial:
Commercial and industrial$— $— $13,545 $— $13,545 
Commercial real estate868 — — — 868 
SBA21 4,195 5,559 — 9,775 
Consumer:
Single family residential mortgage— 25,689 — — 25,689 
Other consumer— 81 — 207 288 
Total loans$889 $29,965 $19,104 $207 $50,165 
December 31, 2022
Real Estate
($ in thousands)CommercialResidentialBusiness AssetsAutomobileTotal
Commercial:
Commercial and industrial$— $— $18,392 $— $18,392 
Commercial real estate910 — — — 910 
SBA23 4,702 5,691 — 10,416 
Consumer:
Single family residential mortgage— 21,262 — — 21,262 
Other consumer— 81 — 113 194 
Total loans$933 $26,045 $24,083 $113 $51,174 
Loan Modifications to Borrowers Experiencing Financial Difficulty
Loans modified for borrowers experiencing financial difficulty consisted of the following as of the dates indicated:
($ in thousands)Commercial and industrialSingle family residential mortgageTotal
March 31, 2023
Interest rate reduction:
Amortized cost basis$— $1,071 $1,071 
% of total class of loans— %0.1 %— %
Combination - principal reduction and payment delays:
Amortized cost basis$3,939 $— $3,939 
% of total class of loans0.2 %— %0.1 %
Total amortized cost basis$3,939 $1,071 $5,010 
Percentage of total loans0.2 %0.1 %0.1 %




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The following table presents the aging of loans modified to borrowers experiencing financial difficulty at March 31, 2023:
($ in thousands)30-59 Days
Past Due		60-89 Days
Past Due		Over 90 Days
Past Due		Total
Past Due		CurrentTotal
March 31, 2023
Commercial:
Commercial and industrial$— $— $— $— $3,939 $3,939 
Consumer:
Single family residential mortgage— — — — 1,071 1,071 
$— $— $— $— $5,010 $5,010 
There were no loan modifications made to borrowers experiencing financial difficulty during the quarter ended March 31, 2023 that subsequently defaulted.
Troubled Debt Restructurings (for modifications to borrowers experiencing financial difficulty prior to January 1, 2023)
At March 31, 2023 and December 31, 2022, we had 11 and 15 loans classified as TDRs, with an aggregate balance of $8.7 million and $16.1 million. During the three months ended March 31, 2023 a $3.9 million commercial and industrial loan that was restructured during 2022 was modified and accounted for as a new loan.
Accruing TDRs were $2.6 million and nonaccrual TDRs were $6.1 million at March 31, 2023, compared to accruing TDRs of $2.7 million and nonaccrual TDRs of $13.4 million at December 31, 2022.

Purchases, Sales, and Transfers
From time to time, we purchase and sell loans in the secondary market. During the three months ended March 31, 2023, we purchased loans aggregating $61.4 million. During the three months ended March 31, 2022, we purchased loans aggregating $364.4 million.
There were no loans transferred from held for investment to loans held-for-sale and there were no sales of loans for the three months ended March 31, 2023 and 2022.
Non-Traditional Mortgage (“NTM”) Loans
NTM loans are included in our SFR mortgage portfolio and are comprised primarily of interest only loans. As of March 31, 2023 and December 31, 2022, the NTM loans totaled $846.5 million, or 12.0% of total loans, and $862.3 million, or 12.1% of total loans, respectively. The total NTM portfolio decreased by $15.8 million, or 1.8% during the three months ended March 31, 2023. The decrease was due to principal paydowns and payoffs.

We no longer originate SFR loans, however we have purchased and may continue to purchase pools of loans that include NTM loans such as interest only loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the life of the loan. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan.
At March 31, 2023 and December 31, 2022, nonperforming NTM loans totaled $7.2 million and $3.0 million.
Non-Traditional Mortgage Performance Indicators
Our risk management policy and credit monitoring include reviewing delinquency, FICO scores, and LTV ratios on the NTM loan portfolio. We also continually monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for NTM first lien loans are LTV ratios. At March 31, 2023, our NTM first lien portfolio had a weighted average LTV of approximately 60%.

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NOTE 5 – GOODWILL AND OTHER INTANGIBLES
Goodwill
Goodwill represents the excess consideration paid for net assets acquired in a business combination over their fair values. At March 31, 2023 and December 31, 2022, we had goodwill of $114.3 million.
The following table presents changes in the carrying amount of goodwill for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Goodwill, beginning of period$114,312 $94,301 
Goodwill adjustments for purchase accounting— 826 
Goodwill, end of period$114,312 $95,127 
The acquisition of Deepstack in the third quarter of 2022 resulted in the recognition of $18.2 million in goodwill. We also adjusted goodwill as a result of updates to the initial fair value of core deposit intangibles and finalization of income tax returns related to the PMB acquisition during the three months ended March 31, 2022.
We evaluate goodwill for impairment as of October 1 each year, and more frequently if events or circumstances indicate that there may be impairment. We completed our most recent annual goodwill impairment test as of October 1, 2022 and determined that no goodwill impairment existed. For the three months ended March 31, 2023, due to the observed market volatility relating to recent events in the banking sector, we analyzed indicators related to potential goodwill impairment. Based on this analysis, we did not identify any impairment to goodwill.
Other Intangibles
Other intangibles are comprised of the following at March 31, 2023 and December 31, 2022:
($ in thousands)March 31,
2023		December 31,
2022
Core deposit intangibles$3,647 $3,932 
Developed technology2,497 2,637 
Other intangibles921 957 
Total other intangibles$7,065 $7,526 
Other intangibles are amortized over their estimated useful lives and reviewed for impairment at least quarterly. As of March 31, 2023, the weighted average remaining amortization period for core deposit intangibles was approximately 6.5 years. Amortization periods for developed technology and other intangibles acquired in the Deepstack Acquisition have useful lives ranging from 3 to 10 years.
The following table presents changes in the carrying amount of other intangibles for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Other intangibles:
Balance, beginning of period$38,778 $35,958 
Purchase accounting adjustments— (980)
Balance, end of period38,778 34,978 
Accumulated amortization:
Balance, beginning of period31,252 29,547 
Amortization of other intangibles461 441 
Balance, end of period31,713 29,988 
Other intangibles$7,065 $4,990 
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The following table presents estimated future amortization expense of other intangibles as of March 31, 2023:
($ in thousands)Remainder of 202320242025202620272028 and AfterTotal
Estimated future amortization expense$1,338 $1,425 $1,107 $1,013 $811 $1,371 $7,065 
NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES, FEDERAL RESERVE BANKING BORROWINGS AND OTHER BORROWINGS
Federal Home Loan Bank (FHLB) Advances
The following table presents advances from the FHLB as of the dates indicated:
($ in thousands)March 31,
2023		December 31,
2022
Fixed rate:
Outstanding balance (1)
$811,000 $711,000 
Interest rates ranging from0.64 %0.64 %
Interest rates ranging to3.70 %3.70 %
Weighted average interest rate3.04 %2.97 %
Variable rate:
Outstanding balance$325,000 $20,000 
Weighted average interest rate5.11 %4.59 %
(1)Excludes $3.3 million and $3.7 million of unamortized debt issuance costs at March 31, 2023 and December 31, 2022.    

As of March 31, 2023, FHLB advances included $325.0 million in overnight borrowings with a weighted average interest rate of 5.11% and $811.0 million in term advances with a weighted average life of 3.6 years and a weighted average interest rate of 3.04%.
FHLB advances are collateralized by a blanket lien on all real estate loans. As of March 31, 2023, our secured borrowing capacity with the FHLB totaled $2.37 billion, of which the Bank was eligible to borrow an additional $821.9 million based on qualifying loans with an aggregate unpaid principal balance of $3.50 billion as of that date.
The Bank’s investment in capital stock of the FHLB of San Francisco totaled $35.7 million and $22.6 million at March 31, 2023 and December 31, 2022.
Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty.
Federal Reserve Bank (FRB) Borrowings
At March 31, 2023, the Bank had borrowing capacity with the Federal Reserve Bank of San Francisco (the “Federal Reserve”) of $1.51 billion, including the secured borrowing capacity through the FRB Discount Window, Borrower-in-Custody (“BIC”), and Bank Term Funding (“BTFP”) programs. Borrowings under the BIC program are overnight advances with interest chargeable at the primary credit borrowing rate. Borrowings under the BTFP, which was established in March 2023, are for periods up to one year in length, with interest rates based on the one-year overnight index swap (“OIS”) rate plus a spread of 10 basis points. BTFP borrowings are collateralized by eligible investment securities valued at par and provide an additional source of liquidity leveraging high-quality securities.
At March 31, 2023, the Bank pledged certain qualifying loans with an unpaid principal balance of $1.47 billion and securities with a carrying value of $524.3 million as collateral for the FRB credit programs.
Borrowings from the Federal Reserve through the FRB Discount Window and BIC programs were $600.0 million and zero at March 31, 2023 and December 31, 2022. There were no borrowings under the BTFP at March 31, 2023.
The Bank’s investment in capital stock of the Federal Reserve totaled $34.5 million and $34.5 million at March 31, 2023 and December 31, 2022.
Other Borrowings
The Bank maintained available unsecured federal funds lines with five correspondent banks totaling $210.0 million, with no outstanding borrowings at March 31, 2023 and December 31, 2022. The Bank also has the ability to access unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform ("AFX"). The availability of
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such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled $345.0 million and $445.0 million at March 31, 2023 and December 31, 2022. Borrowings under the AFX totaled zero at March 31, 2023 and December 31, 2022.
In December 2022, the holding company renewed its $50.0 million revolving line of credit with another financial institution. The line of credit matures on December 18, 2023 and is subject to certain operational and financial covenants. There were no borrowings under this line of credit at March 31, 2023 and December 31, 2022, and we were in compliance with all covenants.
The Bank also maintained repurchase agreements and had no outstanding securities sold under agreements to repurchase at March 31, 2023 and December 31, 2022. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.
NOTE 7 – LONG-TERM DEBT
The following table presents our long-term debt as of the dates indicated:
March 31, 2023December 31, 2022
($ in thousands)Interest
Rate		Maturity
Date		Par
Value		Unamortized Debt Issuance Cost and DiscountPar
Value		Unamortized Debt Issuance Cost and Discount
Senior notes
5.25%
4/15/2025$175,000 $(679)$175,000 $(722)
Subordinated notes(1)
4.375%
10/30/203085,000 (1,853)85,000 (1,899)
PMB Statutory Trust III, junior subordinated debentures
LIBOR + 3.40%
9/26/20327,217 — 7,217 — 
PMB Capital Trust III, junior subordinated debentures
LIBOR + 2.00%
10/8/203410,310 — 10,310 — 
Total$277,527 $(2,532)$277,527 $(2,621)

(1) The Subordinated Notes bear interest at an initial fixed rate of 4.375% per annum, payable semi-annually in arrears. From and including October 30, 2025 to, but excluding, the maturity date or the date of earlier redemption, the Subordinated Notes bear interest at a floating rate per annum equal to a benchmark rate, which is expected to be 3-Month Term SOFR, plus a spread of 419.5 basis points, payable quarterly in arrears.
At March 31, 2023, we were in compliance with all covenants under our long-term debt agreements.
NOTE 8 – INCOME TAXES
For the three months ended March 31, 2023, income tax expense was $7.4 million, resulting in an effective tax rate of 26.7%. For the three months ended March 31, 2022, income tax expense was $18.8 million, resulting in an effective tax rate of 27.9%. The effective tax rate for the three months ended March 31, 2023 and 2022, differs from the combined federal and state statutory rate for the consolidated company of 28.9% due primarily to various permanent tax differences, tax credits and other discrete tax items that impact our effective tax rate.
We account for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of our assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies. Based on this analysis, management determined, it was more likely than not, that all of the deferred tax assets would be realized; therefore, no valuation allowance was provided against the net deferred tax assets of $54.5 million and $50.5 million at March 31, 2023 and December 31, 2022.
ASC 740-10-25 relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We had unrecognized tax benefits of $816 thousand at both March 31, 2023 and December 31, 2022. We do not believe that the unrecognized tax benefits will change materially in the next twelve months. As of March 31, 2023, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was $599 thousand.
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At March 31, 2023 and December 31, 2022, we had no accrued interest or penalties. In the event we are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense.
We are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. We are no longer subject to examination by U.S. federal taxing authorities for years before 2019. The statute of limitations for the assessment of California franchise taxes has expired for tax years before 2018 (other state income and franchise tax statutes of limitations vary by state).
NOTE 9 – DERIVATIVE INSTRUMENTS
We use derivative instruments and other risk management techniques to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with our risk management policies and for certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans.
The Company recognizes all derivatives on the consolidated balance sheet at fair value in other assets and other liabilities. On the date we enter into a derivative contract, the derivative is designated as either a fair value hedge, cash flow hedge, or a hedge designation is not made as it is a customer-related transaction. When a derivative is designated as a fair value hedge or cash flow hedge, the Company performs an assessment at inception, and, at least quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the fair value or cash flows of the hedged items.
Cash flow hedge
In March 2023, the Company entered into pay-fixed, receive-variable interest-rate swap contracts classified as cash flow hedges with notional amounts aggregating $300.0 million, five year terms and varying maturity dates through 2028. These swap contracts were entered into with institutional counterparties to hedge against variability in cash flows attributable to interest rate risk related to changes in the SOFR benchmark interest rate on a portion of the Company’s variable rate deposits and borrowings. The cash flow hedges were deemed highly effective at inception.
The portion of changes in the fair value of the cash flow hedges considered highly effective are recognized in other comprehensive income (loss) until the related cash flows from the hedged item are recognized in earnings.
At March 31, 2023, the fair value of the cash flow hedges represent a liability of $8.6 million, of which $6.1 million (net of tax) was included in accumulated other comprehensive loss on the consolidated statements of financial condition.
Other interest rate swaps and foreign exchange contracts not designated for hedge accounting
During the three months ended March 31, 2023 and 2022, changes in fair value of other interest rate swaps on loans and foreign exchange contracts with customers were losses of $24 thousand and gains of $103 thousand and were included in other income on the consolidated statements of operations.
The following table presents the notional amount and fair value of our derivative instruments as of the dates indicated.
March 31, 2023December 31, 2022
($ in thousands)Notional AmountFair
Value		Notional AmountFair
Value
Derivative assets:
Interest rate swaps on loans$33,186 $1,516 $33,694 $2,134 
Foreign exchange contracts5,747 134 5,885 158 
Total$38,933 $1,650 $39,579 $2,292 
Derivative liabilities:
Cash flow hedges$300,000 $8,622 $— $— 
Interest rate swaps on loans33,186 1,509 33,694 2,107 
Foreign exchange contracts5,747 123 5,885 144 
Total$338,933 $10,254 $39,579 $2,251 

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NOTE 10 – EMPLOYEE STOCK COMPENSATION
On May 31, 2018, our stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (“2018 Omnibus Plan”). The 2018 Omnibus Plan provides that the maximum number of shares available for awards is 4,417,882. As of March 31, 2023, there were 1,974,066 shares available for future awards.
Stock-based Compensation Expense
The following table presents total stock-based compensation expense and the related tax benefits for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Restricted stock awards and units$1,455 $1,285 
Related tax benefits$421 $371 

Total stock-based compensation expense represents the cost of service-based restricted stock units, performance-based restricted stock units and performance-based restricted stock units with market conditions. At March 31, 2023, unrecognized compensation expense totaled $14.5 million and will be recognized over a weighted average remaining period of 2.8 years.
Restricted Stock Awards and Restricted Stock Units
We have granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are measured based on grant-date fair value, which generally reflect the closing price of our stock on the date of grant. For awards containing market conditions, we engage a third party to perform a valuation analysis using a Monte Carlo simulation model to determine grant-date fair value. The restricted stock awards and units fully vest after a specified period (generally ranging from one to five years) of continued service from the date of grant plus, in some cases, the satisfaction of performance and/or market conditions. Such targets include conditions relating to our profitability, our total shareholder return (TSR), stock price and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of our Board of Directors upon the Committee's certification of the satisfaction of the target level of performance. We recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally upon vesting or, in the case of restricted stock units, when settled.
The following table presents unvested restricted stock awards and restricted stock units activity for the three months ended March 31, 2023:

Three Months Ended
March 31, 2023
Number of SharesWeighted Average Grant Date Fair Value Per Share
Outstanding at beginning of period1,403,245 $14.68 
Granted (1)
293,805 $17.68 
Vested (2)
(231,783)$17.26 
Forfeited (3)
(14,728)$16.38 
Outstanding at end of period1,450,539 $14.85 
(1)There were 79,784 performance-based shares/units included in shares granted for the three months ended March 31, 2023.
(2)There were 66,699 performance-based shares/units included in vested shares for the three months ended March 31, 2023.
(3)The number of forfeited shares included aggregate performance-based shares/units of 11,232 for the three months ended March 31, 2023.

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Stock Options
We have issued stock options to certain employees, officers, and directors. Stock options are issued at the closing market price immediately before the grant date and generally have a three to five year vesting period and contractual terms of seven to ten years. We recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair
market value of the shares acquired at the time of exercise less the exercise price. There were no stock options granted and no unvested stock options as of March 31, 2023 and December 31, 2022. The following tables represents stock option activity for the three months ended March 31, 2023:
Three Months Ended March 31, 2023
($ in thousands, except per share data)Number
of Shares		Weighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregate Intrinsic Value
Outstanding at beginning of period14,904 $13.05 
Exercised— $— 
Outstanding at end of period14,904 $13.05 2.0 years$(8)
Exercisable at end of period14,904 $13.05 2.0 years$(8)
NOTE 11 – STOCKHOLDERS’ EQUITY
Preferred Stock
We are authorized to issue 50,000,000 shares of preferred stock with par value of $0.01 per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but generally have no voting rights. All of our shares of preferred stock had a $1,000 per share liquidation preference and there were no preferred shares outstanding since March 2022.

The following table summarizes redemptions and repurchases of these depositary shares for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Series E Preferred Stock:
Depositary shares repurchased— 3,948,080 
Preferred Stock retired (shares)— 98,702 
Consideration paid$— $98,703 
Carrying value— 94,956 
Impact of preferred stock redemption$— $3,747 

During the first quarter of 2022, we redeemed all of our outstanding Series E Depositary Shares, resulting in an after-tax charge of $3.7 million in the accompanying consolidated statements of operations.
Common Share Repurchase Program
On February 13, 2023, we announced our Board of Directors authorized the repurchase of up to $35 million of our common stock. The repurchase authorization expires in February 2024. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions.
During the three months ended March 31, 2023, common stock repurchased under the program totaled 410,946 shares at a weighted average price of $12.59. As of March 31, 2023, the Company had $29.8 million remaining under the current stock repurchase authorization.
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Change in Accumulated Other Comprehensive (Loss) Income ("AOCI")
Our AOCI includes unrealized gain (loss) on securities available-for-sale and cash flow hedges. Changes to AOCI are presented net of the tax effect as a component of stockholders' equity. Reclassifications from AOCI occur when a security is sold, called or matures and are recorded on the consolidated statements of operations either as a gain or loss. During the three months ended March 31, 2022, we transferred certain debt securities available-for-sale to held-to-maturity. The unrealized loss on such securities at the time of transfer continues to be reported in AOCI and is amortized over the remaining life of the security as a yield adjustment.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. If a cash flow hedge is terminated or is no longer deemed highly effective, the hedge accounting is ceased and any gain or loss included in AOCI is reclassified into earnings.
The following table presents changes to AOCI for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Balance at beginning of period$(40,597)$7,743 
Unrealized loss on securities available-for-sale:
Unrealized loss arising during the period(5,523)(38,087)
Reclassification adjustment from other comprehensive income— (16)
Total unrealized loss on securities available-for-sale(5,523)(38,103)
Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity253 87 
Unrealized loss on cash flow hedges:
Unrealized loss arising during the period(8,622)— 
Tax effect of current period changes4,000 11,101 
Total changes, net of taxes(9,892)(26,915)
Balance at end of period$(50,489)$(19,172)
NOTE 12 – VARIABLE INTEREST ENTITIES
We hold ownership interests in alternative energy partnerships, qualified affordable housing partnerships and other CRA investments and have a variable interest in a multifamily securitization trust. We evaluate our interests in these entities to determine whether they meet the definition of a variable interest entity ("VIE") and whether we are required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We have determined that our interests in these entities meet the definition of variable interests; however none of the VIE's meet the criteria for consolidation.
Unconsolidated VIEs
Alternative Energy Partnerships
We invested in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits). These entities were formed to invest in newly established residential and commercial solar leases and power purchase agreements. As a result of our investments, we have the right to certain investment tax credits and tax depreciation benefits (recognized on the flow through income statement method in accordance with ASC 740), and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. While our interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, we have determined that we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact the economic performance of the entities including operational and credit risk management activities. As we are not the primary beneficiary, we did not consolidate the entities.
We use the HLBV method to account for our investments in alternative energy partnerships as an equity investment. Under the HLBV method, an equity method investor determines its share of an investee's net earnings by comparing its claim on the
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investee's book value at the beginning and end of the period, assuming the investee were to liquidate all assets at their U.S. GAAP amounts and distribute the resulting cash to creditors and investors under their respective priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period. To account for the tax credits earned on investments in alternative energy partnerships, we use the flow-through income statement method. Under this method, the tax credits are recognized as a reduction to income tax expense and the initial book-tax differences in the basis of the investments are recognized as additional tax expense in the year they are earned. Investments in alternative energy partnerships totaled $19.4 million and $21.4 million at March 31, 2023 and December 31, 2022.
The following table presents information regarding activity in our alternative energy partnerships for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Return of capital$365 $574 
Loss on investments in alternative energy partnerships(1,618)(158)
Tax benefit recognized from HLBV application(467)(46)
There were no fundings of alternative energy partnership or related income tax credits recognized for the three months ended March 31, 2023 and 2022.
The following table represents the carrying value of the associated unconsolidated assets and liabilities and the associated maximum loss exposure for alternative energy partnerships as of the dates indicated:
($ in thousands)March 31,
2023		December 31,
2022
Cash$4,501 $4,110 
Equipment, net of depreciation235,522 237,641 
Other assets9,976 9,838 
Total unconsolidated assets$249,999 $251,589 
Total unconsolidated liabilities$11,600 $11,679 
Maximum loss exposure
$19,427 $21,410 

The maximum loss exposure that would be absorbed by us in the event that all of the assets in alternative energy partnerships are deemed worthless is $19.4 million, which is our recorded investment amount at March 31, 2023.
We believe that the loss exposure on our investments is reduced considering our return on our investment is provided not only by the cash flows of the underlying client leases and power purchase agreements, but also through the tax benefits, including the federal tax credit carryover that resulted from the investments. In addition, our exposure is further limited as the arrangements include a transition manager to support any transition of the solar company sponsor, whose role includes that of the servicer and operation and maintenance provider, in the event the sponsor would be required to be removed from its responsibilities (e.g., bankruptcy, breach of contract, etc.).
Qualified Affordable Housing Partnerships - Low Income Housing Tax Credits
We invest in limited partnerships that operate qualified affordable housing projects that qualify for low income housing tax credits (“LIHTC”). The returns on these investments are generated primarily through allocated federal tax credits and other tax benefits. In addition, LIHTC investments contribute to our compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. As a result, we do not consolidate these partnerships.
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The following table presents information regarding balances in LIHTC investments for the periods indicated:
($ in thousands)March 31,
2023		December 31,
2022
Ending balance(1)
$44,424 $45,726 
Aggregate funding commitment73,176 72,967 
Total amount funded56,122 55,487 
Unfunded commitment17,054 17,480 
Maximum loss exposure44,424 45,726 
(1)Included in other assets in the accompanying Consolidated Statements of Financial Condition.
The following table presents information regarding activity in our LIHTC investments for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Fundings$635 $1,105 
Proportional amortization recognized1,511 1,546 
Income tax credits recognized1,687 1,373 
Other CRA Investments
We invest in other CRA investments that are accounted for using the equity method of accounting or the measurement alternative to fair value for equity investments without a readily determinable fair value. Other CRA investments totaled $87.3 million and $85.0 million at March 31, 2023 and December 31, 2022.
CRA investments that are accounted for under the equity method consist primarily of investments in small business investment companies (SBICs) and limited partnerships which provide affordable housing where our ownership percentage exceeds 3%. Under the equity method of accounting, we record our proportionate share of the profits or losses of the investment entity as an adjustment to the carrying value of the investment and as a component of noninterest income. Equity investments that do not meet the criteria to be accounted for under the equity method and do not have a readily determinable fair value are accounted for at cost under the measurement alternative to fair value with adjustments for impairment and observable price changes as applicable. These investments consist primarily of investments in limited partnerships which provide affordable housing where our partnership percentage is less than 3% and other qualifying investments such as CDFI stock.
Multifamily Securitization
During the third quarter of 2019, we transferred $573.5 million of multifamily loans, through a two-step process, to a third-party depositor which placed the multifamily loans into a third-party trust (a VIE) that issued structured pass-through certificates to investors. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860. We determined that we are not the primary beneficiary of this VIE as we do not have the power to direct the activities that will have the most significant economic impact on the entity, therefore we do not consolidate the securitization trust. Our continuing involvement in this securitization is limited to customary obligations associated with the securitization of loans, including the obligation to cure, repurchase, or substitute loans in the event of a material breach in representations. Additionally, we have the obligation to guarantee credit losses up to 12% of the aggregate unpaid principal balances at cut-off date of the securitization. This obligation is supported by a $68.8 million letter of credit between Freddie Mac and the FHLB.
The maximum loss exposure that would be absorbed by us in the event that all of the assets in the securitization trust are deemed worthless is $68.8 million, which represents the aforementioned obligation to guarantee credit losses up to 12%. We believe that the loss exposure on the multifamily securitization is reduced by both loan-to-value ratios of the underlying collateral balances and the overcollateralization that exists within the securitization trust. At March 31, 2023, the remaining unpaid principal balance on the securitization totaled $97.5 million, and we have a $2.0 million repurchase reserve related to this VIE.
Capital Trusts - Trust Preferred Securities
In connection with our merger with PMB, we acquired investments in two grantor trusts. These grantor trusts were originally formed to sell and issue trust preferred securities to institutional investors (Refer to Note 7 - Long-term Debt). We are not the primary beneficiary, and consequently, these grantor trusts are not consolidated in the consolidated financial statements. At March 31, 2023 and December 31, 2022, our investment in these grantor trusts, which is included in other assets in the consolidated statements of financial condition, totaled $527 thousand.
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NOTE 13 – EARNINGS PER COMMON SHARE
The following table presents computations of basic and diluted earnings per common share ("EPS") for the three months ended March 31, 2023:
Three Months Ended
March 31, 2023
($ in thousands except per share data)Common StockClass B
Common Stock
Net income$20,114 $164 
Weighted average common shares outstanding
58,536,866 477,321 
Dilutive effects of restricted shares/units
189,559 — 
Dilutive effects of stock options
2,873 — 
Average shares and dilutive common shares
58,729,298 477,321 
Basic earnings per common share$0.34 $0.34 
Diluted earnings per common share$0.34 $0.34 

For the three months ended March 31, 2023, there were 212,956 anti-dilutive restricted shares/units and no anti-dilutive stock options that were excluded from computing diluted earnings per common share.
The following table presents computations of basic and diluted EPS for the three months ended March 31, 2022:
Three Months Ended
March 31, 2022
($ in thousands except per share data)Common StockClass B Common Stock
Net income$48,142 $370 
Less: preferred stock dividends(1,409)(11)
Less: preferred stock redemption(3,718)(29)
Net income allocated to common stockholders$43,015 $330 
Weighted average common shares outstanding
62,129,129 477,321 
Dilutive effects of stock units
294,432 — 
Dilutive effects of stock options
5,121 — 
Average shares and dilutive common shares
62,428,682 477,321 
Basic earnings per common share$0.69 $0.69 
Diluted earnings per common share$0.69 $0.69 
For the three months ended March 31, 2022, there were 92,987 anti-dilutive restricted shares/units and no anti-dilutive stock options that were excluded from computing diluted earnings per common share.
NOTE 14 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
Some financial instruments, such as unfunded loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met prior to their expiration dates. Commitments may expire without being used. Risk of credit loss exists up to the face amount of these instruments. The same credit policies are used to make such commitments as are used for originating loans, including obtaining collateral at exercise of the commitment.
The following table presents the contractual amount of financial instruments with off-balance-sheet risk as of the periods indicated:
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March 31, 2023December 31, 2022
($ in thousands)Fixed RateVariable RateFixed RateVariable Rate
Commitments to extend credit
$43,044 $183,196 $50,193 $180,696 
Unused lines of credit46,407 1,545,036 8,392 1,505,122 
Letters of credit1,696 7,457 2,461 7,016 

Other Commitments
At March 31, 2023, we had unfunded commitments of $17.1 million, $7.7 million, and $9.4 million for LIHTC investments, Small Business Investment Company ("SBIC") investments, and other investments, respectively. At December 31, 2022, we had unfunded commitments of $17.5 million, $8.6 million, and $9.8 million for LIHTC investments, SBIC investments, and other investments, respectively.
NOTE 15 – OTHER ASSETS AND OTHER LIABILITIES
The following table presents the components of other assets as of the dates indicated:
($ in thousands)March 31,
2023		December 31,
2022
Accrued interest receivable$39,850 $37,942 
Prepaid expenses9,499 8,068 
Derivative instruments(1)
1,650 2,292 
Operating lease right-of-use assets27,502 28,780 
Servicing assets21,718 22,484 
Income taxes receivable133 7,679 
Investments:
CRA and other equity investments(2)
92,637 90,295 
Low income housing tax credits (“LIHTC”)(2)
44,424 45,726 
Alternative energy partnerships(2)
19,427 21,410 
Other assets32,073 13,513 
Total other assets$288,913 $278,189 
(1)See Note 9 - Derivative Instruments for information regarding derivative instruments
(2)See Note 12 - Variable Interest Entities regarding alternative energy partnerships, LIHTC and other CRA investments
The following table presents the components of accrued expenses and other liabilities as of the dates indicated:
($ in thousands)March 31,
2023		December 31,
2022
Accrued interest payable$14,446 $7,004 
Accounts payable and accrued expenses32,998 37,560 
Derivative liabilities(1)
10,254 2,251 
Lease liability31,640 33,122 
Commitments to fund LIHTC(2)
17,054 17,480 
Reserve for unfunded noncancellable loan commitments
4,805 5,305 
Reserve for loss on repurchased loans2,846 2,989 
Other liabilities6,312 8,512 
Total accrued expenses and other liabilities$120,355 $114,223 
(1)See Note 9 - Derivative Instruments for information regarding derivative instruments
(2)See Note 14 - Loan Commitments and Other Related Activities regarding commitments to fund LIHTC
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NOTE 16 – REVENUE RECOGNITION
The following table presents noninterest income, segregated by revenue streams, in-scope and out-of-scope of Topic 606 - Revenue From Contracts With Customers, for the periods indicated:
Three Months Ended
March 31,
($ in thousands)20232022
Noninterest income
In scope of Topic 606
Deposit service fees$1,263 $1,654 
Debit card fees377 453 
Other368 159 
Noninterest income (in-scope of Topic 606)2,008 2,266 
Noninterest income (out-of-scope of Topic 606)5,851 3,644 
Total noninterest income$7,859 $5,910 

We do not typically enter into long-term revenue contracts with clients and as of March 31, 2023 and December 31, 2022, we did not have any significant contract balances within the scope of Topic 606. As of March 31, 2023, we did not capitalize any revenue contract acquisition costs.
Sale-leaseback Transactions
In January 2022, we completed a sale-leaseback transaction for $2.4 million and recognized a gain of $771 thousand. Gains related to sale-leaseback are included in other income in the accompanying consolidated statements of operations.
NOTE 17 – RELATED-PARTY TRANSACTIONS
Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with the Bank in the ordinary course of business, including deposits, loans and other financial services related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. As of March 31, 2023, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans.
Transactions with Related Parties
The Company and the Bank have engaged in transactions described below with the Company’s current or former directors, executive officers, and beneficial owners of more than five percent of the outstanding shares of the Company’s voting common stock and certain persons related to them.
As previously disclosed, the Company’s Board of Directors has authorized and directed the Company to provide indemnification, advancement and/or reimbursement for the costs of separate independent counsel retained by any then-current officer or director, in their individual capacity, with respect to matters related to (i) an investigation by the Special Committee of the Company’s Board of Directors in late 2016, (ii) a formal order of investigation issued by the SEC on January 4, 2017 (since resolved), and (iii) any civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the Company (collectively, the “Indemnified Matters”).
Indemnification costs were paid or reimbursed by the Company or its insurance carriers on behalf of certain current directors in connection with the Indemnified Matters, in an aggregate amount less than $120 thousand for each of the three months ended March 31, 2023 and 2022.

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NOTE 18 – LITIGATION
From time to time, we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In accordance with applicable accounting guidance, we establish an accrued liability when those matters present loss contingencies that are both probable and estimable.

While the ultimate liability with respect to legal actions cannot be determined at this time, we believe that damages, if any, and other amounts relating to pending matters are not likely to be material to the consolidated financial statements.

NOTE 19 – SUBSEQUENT EVENTS
We have evaluated events from the date of the consolidated financial statements on March 31, 2023 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.
Subsequent to March 31, 2023, we repurchased 652,672 shares of common stock at a weighted average price of $11.75, or $7.7 million. Since the announcement of the stock repurchase program on February 13, 2023, we have repurchased a total of 1,063,618 shares of common stock at a weighted average price of $12.08 per share, or $12.8 million.
There have been no other subsequent events that occurred during such period that would require disclosure in this report or would be required to be recognized in the consolidated financial statements as of March 31, 2023.
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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, 2023. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023.

Executive Overview
We are focused on providing core banking products and services, including customized and innovative banking and lending solutions, designed to cater to the unique needs of California's diverse businesses, entrepreneurs and communities through our 28 full service branches in California, extending from San Diego to Santa Barbara. Through our dedicated professionals, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a
variety of financial products and services designed to serve the banking and financial needs of our target clients. We also acquired Deepstack Technologies in 2022 to be able to offer full stack payment processing solutions and further our ability to serve as the hub of our clients' financial services ecosystem.
Economy and Banking Industry Impact
Economic uncertainty and concerns regarding the stability of the U.S. banking system following recent bank failures contributed to a challenging operating environment for our Company in the first quarter of 2023. Additionally, the Federal Reserve continued to raise the short-term federal funds rate, which increased 75 basis points since the start of the year, as inflation persists. As our assets and liabilities are primarily monetary in nature, the effect of changes in interest rates has a significant impact on our performance.
The rising interest rate environment may lead to lower demand for loans, higher credit losses, decreased values for our investment securities, among other negative effects. Additionally, it may create more intense competition for low-cost deposits, potential for deposit outflows as rate-sensitive depositors seek higher yielding products or investment alternatives, and increased deposit rates and borrowing costs. The recent industry events could further accelerate the deposit outflows experienced by most mid-sized banks during the quarter.
While our deposit base has been largely stable since the recent banking industry disruption, we increased our level of overnight borrowings and added short-term brokered deposits to increase our liquidity at March 31, 2023. We had primary and secondary liquidity availability of just over $4.0 billion, or 2.2 times our uninsured and uncollateralized deposits, with $1.0 billion of cash at quarter end. While these actions had an impact on our level of profitability and net interest margin in the first quarter, we believe it was prudent from a risk management perspective. The short-term nature of this additional liquidity provides flexibility to make adjustments in our liability mix as market conditions evolve.
Our first quarter of 2023 results show continued progress on the execution of our strategic initiatives to build long-term franchise value while maintaining disciplined expense management. We remained steadfastly focused on credit quality and continued to grow a stable, high quality deposit base by bringing new commercial relationships to the bank. In the past several quarters, we have also taken a proactive approach to reposition our balance sheet, conservatively managed to maintain a strong capital position, and temporarily increased our liquidity in response to market events at the end of the quarter Through our disciplined approach, we believe that we are well positioned to manage through the current rising rate environment and navigate time of stress in the banking system.
Financial Highlights
For the first quarter of 2023, net income was $20.3 million, or $0.34 per diluted common share. This compares to net income of $21.5 million, or $0.36 per diluted common share, for the fourth quarter of 2022 and net income of $48.5 million and net income available to common stockholders of $43.3 million, or $0.69 per diluted common share, for the first quarter of 2022. The first quarter of 2022 net income available to common stockholders included a $31.3 million pre-tax recovery from the settlement of a previously charged-off loan and a $3.7 million after-tax charge related to the redemption of Series E Preferred Stock.
On an adjusted basis, net income was $21.7 million for the quarter, or $0.37 per diluted common share, for the first quarter of 2023.(1) This compares to adjusted net income of $26.8 million, or $0.45 per diluted common share, for the fourth quarter of 2022, which excluded a pre-tax loss on sale of securities of $7.7 million, and $48.5 million, or $0.75 per diluted common share for the first quarter of 2022.(1)
1 Non-GAAP measures; refer to section “Non-GAAP Measures”
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Table of Contents
First quarter of 2023 highlights:
•Diversified core deposit base with noninterest-bearing deposits representing 38% of average deposits and 36% at quarter end. Uninsured and uncollateralized deposits comprised 27% of total deposits.
•Significant available excess liquidity with immediately available on-balance sheet liquidity and unused borrowing capacity of $4.0 billion, including $1.0 billion in cash. Available liquidity was 2.2 times the level of uninsured and uncollateralized deposits.
•Low unrealized losses, with AFS unrealized losses of $46.8 million on securities of $958.4 million, representing 3.8% of CET1 capital. Total AFS and HTM unrealized losses of $102.4 million on total securities of $1.29 billion represented 8.3% of CET1 capital.
•High capital ratios remained well above the regulatory thresholds for "well capitalized" banks, including a 14.22% total risk-based capital ratio, a 11.79% Tier 1 capital ratio, a 11.79% CET1 capital ratio and a 9.65% Tier 1 leverage ratio.
•Stable asset quality as total delinquent loans decreased 20%, or 25 bps, to 1.03% and classified assets also decreased 20%, or 33 bps, to 1.34% from the prior quarter. Total net annualized charge-offs for the quarter were 0.22% of average loans. The ACL ratio remained relatively flat at 1.27% of total loans and 158% of nonperforming assets.
•Other performance highlights as follows:
◦Book value per share of $16.33, up from $16.26
◦Tangible common equity per share of $14.26, up from $14.19(1)
◦Repurchased $5.2 million of common stock through March 31, 2023 and $12.8 million total as of May 4, 2023
◦Increased the quarterly dividend 67% to $0.10 per share
◦Net deposit outflow in the first quarter of only 2%

CRITICAL ACCOUNTING ESTIMATES
We follow accounting and reporting policies and procedures that conform, in all material respects, to GAAP and to practices generally applicable to the financial services industry, the most significant of which are described in Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make judgments and accounting estimates that affect the amounts reported for assets, liabilities, revenues and expenses on the Consolidated Financial Statements and accompanying notes, and amounts disclosed as contingent assets and liabilities. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.
Accounting estimates are necessary in the application of certain accounting policies and procedures that are particularly susceptible to significant change. Critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties, and could potentially result in materially different results under different assumptions and conditions. Management has identified our most critical accounting policies and accounting estimates as: allowance for credit losses, business combinations, value of acquired loans, goodwill and deferred income taxes. See Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Unaudited) included in Item 1 for a description of these policies.
Allowance for Credit Losses (“ACL”). The ACL is estimated on a quarterly basis and represents management’s estimate of CECL in our loan portfolio. The ACL estimate is based on the accounting standard commonly known as CECL. Under the CECL method, pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Collective loss estimates are determined by applying loss factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining life of the collectively evaluated portfolio. The allowance for loan losses includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including those described in the federal banking agencies' joint interagency policy statement on ALL. These factors include, among others, inherent imprecision in forecasting economic variables, including determining the depth and duration of economic cycles and their impact to relevant economic variables; qualitative adjustments based on our evaluation of different forecast scenarios and known recent events impacting relevant economic variables; data factors that address the risk that certain model inputs may not reflect all available information including (i) risk factors that have not been fully addressed in internal risk ratings, (ii) changes
in lending policies and procedures, (iii) changes in the level and quality of experience held by lending management, (iv) imprecision in the risk rating system and (v) limitations in data available for certain loan portfolios. The ACL process also includes challenging and calibrating the model and model results against observed information, trends and events within the loan portfolio, among others. The ACL and provision for credit losses include amounts and changes from both the allowance
for loan losses and the reserve for unfunded noncancellable loan commitments.
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Table of Contents
Business Combinations. Business combinations are accounted for using the acquisition method of accounting under ASC Topic 805 - Business Combinations. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
We allocate the fair value of the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The fair values of other intangibles are determined utilizing information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management. The estimates used to determine the fair values of assets and liabilities acquired in a business combination can be complex and require judgment, as such we typically engage third-party valuation specialists for significant items.
For example, we generally value core deposit intangible assets using a discounted cash flow approach, which require a number of critical estimates that include, but are not limited to, future expected cash flows from depositor relationships, expected "decay" rates, and the determination of discount rates. We use the multi-period excess earnings method to value developed technology, the foregone cash flow method to value client relationships, and the relief from royalty method to value trademarks. Non-compete agreements are estimated using a with and without scenario where cash flows are projected through the term of the non-compete agreement assuming the agreement is in place and compared to cash flows assuming it is not in place. In valuing these intangibles, we make forward looking assumptions regarding expected future revenues and expenses to develop the underlying forecasts, applied contributory asset charges, discount rates, useful lives and other estimates. These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our initial valuation of net assets and liabilities acquired.
Goodwill. Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired. Goodwill is not subject to amortization and is evaluated for impairment at least annually, normally during the fourth fiscal quarter, or more frequently in the interim if events occur or circumstances change indicating impairment may have occurred. The determination of whether impairment has occurred is based on an assessment of several factors, including, but not limited to, operating results, business plans, economic projections, anticipated future cash flows, and current market data. Any impairment identified as part of this testing is recognized through a charge to noninterest expense.
The assessment of impairment discussed above incorporate inherent uncertainties, including projected operating results and future market conditions, which are often difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts.
Acquired Loans. At acquisition date, loans are evaluated to determine whether they meet the criteria of a PCD loan. PCD loans are loans that in management's judgment have experienced more than insignificant deterioration in credit quality since origination. Factors that indicate a loan may have experienced more than insignificant credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by management at the time of initial assessment. PCD loans are initially recorded at fair value, with the resulting non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the date of acquisition, an ACL is established with a corresponding increase to the overall acquired loan balance. This initial ACL is determined using our application of the CECL method.
Acquired loans that are not considered PCD loans (“non-PCD loans”) are also recognized at fair value at the acquisition date, with the resulting credit and non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the time of acquisition, we establish an initial ACL for acquired non-PCD loans through a charge to the provision for credit losses. This initial ACL is determined using our application of the CECL method.
Subsequent to acquisition date, the ACL for both PCD and non-PCD loans is determined using the same methodology to determine current expected credit losses that is applied to all other loans in our portfolio.
The estimates used to determine the fair values of PCD and non-PCD acquired loans can be complex and require significant judgment regarding items such as default rates, timing and amount of future cash flows, prepayment rates and other factors. These critical estimates are difficult to predict and may result in provisions for credit losses in future periods if actual losses materially differ from the estimated assumptions utilized in our initial valuation of acquired loans.
Deferred Taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. Accounting guidance requires that companies assess whether a valuation allowance should be established against the deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
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it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies.
Although we believe our assessments of the realizability of deferred income taxes are reasonable, no assurance can be given that their realizability will not be different from that which is reflected in our net deferred tax asset balance.
Tax positions that are uncertain but meet a more-likely-than-not recognition threshold are initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position meets the more likely than not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management's judgment.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.
Recently Issued Accounting Pronouncements Not Yet Adopted
See Note 1 - Summary of Significant Accounting Policies.
Non-GAAP Financial Measures
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.
Tangible assets, tangible equity, tangible common equity, tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest income to adjusted total revenue, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, adjusted PTPP income, PTPP income ROAA, adjusted PTPP income ROAA, efficiency ratio, adjusted efficiency ratio, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS), adjusted return on average assets (ROAA), and adjusted common equity tier 1 (CET 1) capital constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.
Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock, as applicable, from tangible equity. Return on average tangible common equity is calculated by dividing net income available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding net interest income and adjusted noninterest income (adjusted total revenue) and subtracting adjusted noninterest expense. PTPP income ROAA is calculated by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is calculated by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is calculated by dividing noninterest expense by total revenue. Adjusted efficiency ratio is calculated by dividing adjusted noninterest expense by adjusted total revenue.
Adjusted net income is calculated by adjusting net income for tax-effected noninterest income and noninterest expense adjustments and the tax impact from the exercise of stock appreciation rights for the periods indicated. Adjusted ROAA is calculated by dividing annualized adjusted net income by average assets. Adjusted net income available to common stockholders is calculated by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted
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earnings per share is calculated by dividing adjusted net income available to common stockholders by the weighted average diluted common shares outstanding.
Common equity tier 1 and the common equity tier 1 ratio are defined by regulatory capital rules. Adjusted CET 1 is calculated by subtracting net unrealized losses on securities from CET 1 capital and provided to reflect management’s assessment of capital impacts from net unrealized losses on securities.
Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.
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(Dollars in thousands, except per share data)
(Unaudited)		March 31,
2023		December 31,
2022
Tangible common equity, and tangible common equity to tangible assets ratio
Total assets$10,038,901 $9,197,016 
Less goodwill(114,312)(114,312)
Less other intangible assets(7,065)(7,526)
Tangible assets(1)
$9,917,524 $9,075,178 
Total stockholders' equity$958,907 $959,618 
Less goodwill(114,312)(114,312)
Less other intangible assets(7,065)(7,526)
Tangible common equity(1)
$837,530 $837,780 
Total stockholders' equity to total assets9.55 %10.43 %
Tangible common equity to tangible assets(1)
8.44 %9.23 %
Common shares outstanding58,237,303 58,544,534 
Class B non-voting non-convertible common shares outstanding477,321 477,321 
Total common shares outstanding58,714,624 59,021,855 
Book value per common share$16.33 $16.26 
Tangible common equity per common share(1)
$14.26 $14.19 
(1)Non-GAAP measure.
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Three Months Ended
(Dollars in thousands)
(Unaudited)		March 31,
2023		December 31,
2022		March 31,
2022
Return on tangible common equity
Average total stockholders' equity$1,004,794 $989,414 $1,049,912 
Less average preferred stock— — (75,965)
Average total common stockholders' equity1,004,794 989,414 973,947 
Less average goodwill(114,312)(114,312)(94,307)
Less average other intangibles(7,355)(7,869)(6,224)
Average tangible common equity(1)
$883,127 $867,233 $873,416 
Net income available to common stockholders$20,278 $21,519 $43,345 
Add amortization of other intangibles461 555 441 
Less tax effect on amortization of other intangibles(2)
(136)(164)(130)
Net income available to common stockholders(1)
$20,603 $21,910 $43,656 
Return on average equity8.18 %8.63 %18.74 %
Return on average tangible common equity(1)
9.46 %10.02 %20.27 %
(1)Non-GAAP measure.
(2)Adjustments shown net of a statutory Federal tax rate of 29.6%.

Three Months Ended
(Dollars in thousands)
(Unaudited)		March 31,
2023		December 31,
2022		March 31,
2022
Adjusted noninterest income
Total noninterest income$7,859 $(1,427)$5,910 
Noninterest income adjustments:
Net loss (gain) on securities available-for-sale— 7,708 (16)
Total noninterest income adjustments— 7,708 (16)
Adjusted noninterest income(1)
$7,859 $6,281 $5,894 
Adjusted noninterest expense
Total noninterest expense$51,239 $48,203 $46,596 
Noninterest expense adjustments:
Indemnified legal (fees) recoveries(380)869 106 
Noninterest expense adjustments before (loss) gain in alternative energy partnership investments(380)869 106 
(Loss) gain in alternative energy partnership investments(1,618)(608)(158)
Total noninterest expense adjustments(1,998)261 (52)
Adjusted noninterest expense(1)
$49,241 $48,464 $46,544 
Average assets$9,317,209 $9,257,311 $9,392,305 
Noninterest income to total revenue9.71 %(1.81)%7.18 %
Adjusted noninterest income to adjusted total revenue(1)
9.71 %7.26 %7.16 %
Noninterest expense to average total assets(2)
2.23 %2.07 %2.01 %
Adjusted noninterest expense to average total assets(1)(2)
2.14 %2.08 %2.01 %
(1)Non-GAAP measure.
(2)Ratio presented on an annualized basis.

50

Three Months Ended
(Dollars in thousands)
(Unaudited)		March 31,
2023		December 31,
2022		March 31,
2022
Adjusted pre-tax pre-provision income
Net interest income$73,053 $80,217 $76,441 
Noninterest income7,859 (1,427)5,910 
Total revenue80,912 78,790 82,351 
Noninterest expense51,239 48,203 46,596 
Pre-tax pre-provision income(1)
$29,673 $30,587 $35,755 
Total revenue$80,912 $78,790 $82,351 
Total noninterest income adjustments— 7,708 (16)
Adjusted total revenue(1)
80,912 86,498 82,335 
Noninterest expense51,239 48,203 46,596 
Total noninterest expense adjustments(1,998)261 (52)
Adjusted noninterest expense(1)
49,241 48,464 46,544 
Adjusted pre-tax pre-provision income(1)
$31,671 $38,034 $35,791 
Average assets$9,317,209 $9,257,311 $9,392,305 
Pre-tax pre-provision income ROAA(1)(2)
1.29 %1.31 %1.54 %
Adjusted pre-tax pre-provision income ROAA(1)(2)
1.38 %1.63 %1.55 %
Efficiency ratio(1)(2)
63.33 %61.18 %56.58 %
Adjusted efficiency ratio(1)(2)
60.86 %56.03 %56.53 %
(1)Non-GAAP measure.
(2)Ratio presented on an annualized basis.







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Three Months Ended
March 31,
2023		December 31,
2022		March 31,
2022
Adjusted net income
Net income(1)(2)
$20,278 $21,519 $48,512 
Adjustments:
Noninterest income— 7,708 (16)
Noninterest expense adjustments1,998 (261)52 
Tax impact of adjustments above(3)
(591)(2,202)(11)
Adjustments to net income1,407 5,245 25 
Adjusted net income(2)(4)
$21,685 $26,764 $48,537 
Average assets$9,317,209 $9,257,311 $9,392,305 
ROAA (5)
0.88 %0.92 %2.09 %
Adjusted ROAA(4)(5)
0.94 %1.15 %2.10 %
Adjusted net income available to common stockholders
Net income available to common stockholders$20,278 $21,519 $43,345 
Adjustments to net income1,407 5,245 25 
Adjustments for impact of preferred stock redemption— — 3,747 
Adjusted net income available to common stockholders(4)
$21,685 $26,764 $47,117 
Average diluted common shares59,206,619 59,725,283 62,906,003 
Diluted EPS$0.34 $0.36 $0.69 
Adjusted diluted EPS(4)(6)
$0.37 $0.45 $0.75 
(1)Net income for the three months ended December 31, 2022 includes a $7.7 million pre-tax loss on sale of securities.
(2)Net income and adjusted net income for the three months ended March 31, 2022 includes a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan; there is no similar recovery in any of the other periods presented. The Bank previously recognized a $35.1 million charge-off for this loan during the third quarter of 2019.
(3)Tax impact of adjustments shown at an effective tax rate of 29.6%.
(4)Non-GAAP measure.
(5)Ratio presented on an annualized basis.
(6)Represents adjusted net income available to common stockholders divided by average diluted common shares.
















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March 31,
2023
Adjusted Common Equity Tier 1 (CET 1) capital(1)
CET 1 capital$888,339 
Less unrealized loss on AFS securities, net of tax(33,687)
Less unrealized loss on HTM securities, net of tax(40,036)
Adjusted CET 1 capital(2)
$814,616 
Unrealized loss on AFS securities, net of tax, to CET 1 capital3.79 %
Unrealized loss on HTM securities, net of tax, to CET 1 capital4.51 %
Total unrealized loss on AFS and HTM securities, net of tax, to CET 1 capital8.30 %
Total risk-weighted assets$7,533,336 
CET 1 ratio11.79 %

(1)March 31, 2023 presented to reflect management’s assessment of capital impact from net unrealized losses on securities. Tax rate of 28.0% used for calculation purposes.
(2)Non-GAAP measure.










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RESULTS OF OPERATIONS
Net Interest Income
The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022:
Three Months Ended
March 31, 2023December 31, 2022March 31, 2022
($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/
Cost		Average BalanceInterest and DividendsYield/Cost
Interest-earning assets:
Total loans(1)(2)
$6,994,958 $87,418 5.07 %$7,155,780 $88,717 4.92 %$7,262,774 $76,234 4.26 %
Securities1,297,640 14,909 4.66 %1,221,147 12,905 4.19 %1,292,079 7,309 2.29 %
Other interest-earning assets (3)
389,051 4,592 4.79 %239,336 2,490 4.13 %265,339 726 1.11 %
Total interest-earning assets8,681,649 106,919 4.99 %8,616,263 104,112 4.79 %8,820,192 84,269 3.87 %
Allowance for loan losses(84,267)(91,606)(92,618)
BOLI and noninterest-earning assets (4)
719,827 732,654 664,731 
Total assets$9,317,209 $9,257,311 $9,392,305 
Interest-bearing liabilities:
Interest-bearing checking$1,951,618 8,514 1.77 %$1,854,333 4,998 1.07 %$2,409,262 641 0.11 %
Savings and money market1,070,911 2,001 0.76 %1,308,383 2,379 0.72 %1,673,244 510 0.12 %
Certificates of deposit1,189,658 10,012 3.41 %1,072,953 6,901 2.55 %508,244 237 0.19 %
Total interest-bearing deposits4,212,187 20,527 1.98 %4,235,669 14,278 1.34 %4,590,750 1,388 0.12 %
FHLB advances and FRB borrowings1,067,125 9,648 3.67 %684,177 5,528 3.21 %459,749 2,953 2.60 %
Other borrowings4,773 57 4.84 %41,075 414 4.00 %116,495 55 0.19 %
Long-term debt274,939 3,634 5.36 %274,812 3,675 5.31 %274,417 3,432 5.07 %
Total interest-bearing liabilities5,559,024 33,866 2.47 %5,235,733 23,895 1.81 %5,441,411 7,828 0.58 %
Noninterest-bearing deposits2,617,973 2,897,755 2,795,633 
Noninterest-bearing liabilities135,418 134,409 105,349 
Total liabilities8,312,415 8,267,897 8,342,393 
Total stockholders’ equity1,004,794 989,414 1,049,912 
Total liabilities and stockholders’ equity$9,317,209 $9,257,311 $9,392,305 
Net interest income/spread$73,053 2.52 %$80,217 2.98 %$76,441 3.29 %
Net interest margin (5)
3.41 %3.69 %3.51 %
Ratio of interest-earning assets to interest-bearing liabilities156 %165 %162 %
Total deposits(6)
6,830,160 20,527 1.22 %7,133,424 14,278 0.79 %7,386,383 1,388 0.08 %
Total funding (7)
8,176,997 33,866 1.68 %8,133,488 23,895 1.17 %8,237,044 7,828 0.39 %
(1)Includes average loans held for sale of $4.3 million, $4.4 million and $3.4 million for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively, which are included in other assets in the accompanying consolidated statements of financial condition.
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(2)Total loans are net of deferred fees, related direct costs, premiums and discounts, but exclude the allowance for credit losses. Nonaccrual loans are included in the average balance. Interest income includes net (amortization) accretion of deferred loan (costs) fees and purchased (premiums) discounts of $324 thousand, $456 thousand and $(416) thousand for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
(3)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.
(4)Includes average balance of bank-owned life insurance of $127.4 million, $126.5 million and $124.0 million for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
(5)Annualized net interest income divided by average interest-earning assets.
(6)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(7)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Three Months Ended March 31, 2023 Compared to Three Months Ended December 31, 2022
Net interest income decreased $7.2 million to $73.1 million for the first quarter of 2023 from the fourth quarter of 2022 due to a higher average balance and cost of interest-bearing liabilities, partially offset by a higher average balance and yield on interest-earning assets. The net interest margin decreased 28 basis points to 3.41% for the first quarter as the average interest-earning assets yield increased 20 basis points and the cost of average total funding increased 51 basis points.
The yield on average interest-earning assets increased to 4.99% for the first quarter from 4.79% for the fourth quarter mainly due to higher yields on loans, securities and other interest-earning assets. The overall loan yield increased 15 basis points to 5.07% during the first quarter compared to the fourth quarter of 2022 as a result of the impact of higher market interest rates and changes in portfolio mix. The loan yields include the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest and accelerated discount accretion on the early payoff of purchased loans; these items increased the overall loan yield by 8 basis points in the first quarter and 6 basis points in the fourth quarter. The yield on securities increased 47 basis points to 4.66% due mostly to rate resets in the CLO portfolio and the positive impact of the investment portfolio repositioning during the fourth quarter to sell lower-yielding securities and reinvest the proceeds in higher-yielding securities.
The average cost of funds increased 51 basis points to 1.68% for the first quarter from 1.17% for the fourth quarter. This increase was due partially to the conservative strategy to hold extra liquidity toward the end of the quarter due to the operating environment. The increase in the average cost of funds was driven by the higher cost of average interest-bearing liabilities, which increased 66 basis points to 2.47% for the first quarter from 1.81% for the fourth quarter. The cost of average interest-bearing deposits increased 64 basis points to 1.98% for the first quarter from 1.34% for the fourth quarter while the cost of average FHLB advances and FRB borrowings increased 46 basis points to 3.67% for the first quarter from 3.21% for the fourth quarter. The increase in the cost of these funding sources was due to the increase in higher cost borrowed funds and the impact of higher market interest rates as the average effective Federal Funds rate increased 86 basis points from 3.65% in the fourth quarter to 4.51% in the first quarter.
Average noninterest-bearing deposits were $279.8 million lower in the first quarter compared to the fourth quarter, and average total deposits were $303.3 million lower for the linked quarter. Average noninterest-bearing deposits represented 38% of average total deposits for the first quarter, compared to 41% for the fourth quarter. The cost of average total deposits increased 43 basis points to 1.22% for the first quarter.
Average FHLB advances, FRB borrowings and other borrowings were $346.6 million higher in the first quarter compared to the fourth quarter as wholesale funding sources were strategically utilized to further improve liquidity and manage funding costs.

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Net interest income for the first quarter of 2023 decreased $3.4 million to $73.1 million compared to $76.4 million for the same 2022 period. Net interest income was negatively impacted by higher average balance and cost of interest-bearing liabilities, partially offset by a higher average balance and yield on interest-earning assets.
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The net interest margin decreased 10 basis points to 3.41% for the first quarter of 2023 as the average interest-earning assets yield increased 112 basis points and the average cost of total funding increased 129 basis points. The average yield on interest-earning assets increased to 4.99% for the first quarter of 2023 from 3.87% for the same 2022 period due to the mix of interest-earning assets and higher yields on securities and other interest-earning assets driven by higher market interest rates. Average loans decreased by $267.8 million due mostly to reductions in average warehouse lending balances, offset by loan growth within other loans classes. The average yield on loans increased 81 basis points to 5.07% for the first quarter of 2023, compared to 4.26% for the same 2022 period. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, and accelerated discount accretion on the early payoff of purchased loans; these items increased the loan yield by 8 basis points in the first quarter of 2023 compared to 12 basis points for same 2022 period.

The average cost of funds increased 129 basis points to 1.68% for the first quarter of 2023, from 0.39% for the same 2022 period. This increase was driven by the higher cost of average interest-bearing liabilities impacted by higher market interest rates and the conservative strategy to hold extra liquidity toward the end of first quarter of 2023 due to the operating environment. The average cost of interest-bearing liabilities increased 189 basis points to 2.47% for the first quarter of 2023 from 0.58% for the same 2022 period, partially offset by changes in funding mix, including lower average interest-bearing deposit balances and average other borrowings. Average noninterest-bearing deposits represented 38% of total average deposits for the first quarter of 2023 and 2022. The average cost of interest-bearing deposits increased 186 basis points to 1.98% for the first quarter of 2023 from 0.12% for the same 2022 period while the average cost of total deposits increased 114 basis points to 1.22% for the first quarter of 2023, compared to 0.08% for the same 2022 period. The average Federal funds rate was 4.51% for the first quarter of 2022 compared to 0.12% for the same 2022 period.

Average FHLB advances, FRB borrowings and other borrowings increased $495.7 million due to our proactive strategy to increase liquidity in the first quarter of 2023.


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Rate/Volume Analysis
The following table presents the changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities. The information provided presents the changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
Three Months Ended
March 31, 2023 vs. March 31, 2022
Increase (Decrease) Due toNet
Increase (Decrease)
($ In thousands)VolumeRate
Interest and dividend income:
Total loans$(2,891)$14,075 $11,184 
Securities32 7,568 7,600 
Other interest-earning assets477 3,389 3,866 
Total interest and dividend income$(2,382)$25,032 $22,650 
Interest expense:
Interest-bearing checking$(147)$8,020 $7,873 
Savings and money market(226)1,717 1,491 
Certificates of deposit716 9,059 9,775 
FHLB advances and FRB borrowings5,109 1,586 6,695 
Other borrowings(100)102 2 
Long-term debt7 195 202 
Total interest expense5,359 20,679 26,038 
Net interest income$(7,741)$4,353 $(3,388)

Provision for Credit Losses
The provision for credit losses is charged to operations and is adjusted in each period to a level required to cover current expected credit losses in our loan portfolio and unfunded commitments. The following table presents the components of our provision for credit losses:
Three Months Ended
($ in thousands)March 31,
2023		December 31,
2022		March 31,
2022
Provision for (reversal of) credit losses - loans$2,500 $1,100 $(31,342)
(Reversal of) credit losses - unfunded noncancellable loan commitments(500)(1,100)(200)
Total provision for (reversal of) credit losses$2,000 $— $(31,542)

Three Months Ended March 31, 2023 Compared to Three Months Ended December 31, 2022
The provision for credit losses was $2.0 million for the first quarter and included a $2.5 million provision for credit losses related to loans, partially offset by a $500 thousand reversal of credit losses related to lower unfunded commitments. There was no provision for credit losses for the fourth quarter. The increase in provision for credit losses was due to an increase in specific reserves and deterioration in the macroeconomic outlook, partially offset by net charge-off activity, changes in the portfolio mix and a decrease in total loan balances.
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The provision for credit losses for the first quarter of 2023 was $2.0 million, compared to a reversal of $31.5 million for the same 2022 period. The reversal of credit losses in the first quarter of 2022 included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019.

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Noninterest Income
The following table presents the components of noninterest income for the periods indicated:
Three Months Ended
($ in thousands)March 31,
2023		December 31,
2022		March 31,
2022
Customer service fees$1,979 $2,066 $2,434 
Loan servicing income547 561 212 
Income from bank owned life insurance900 923 796 
Net (loss) gain on sale of securities available-for-sale— (7,708)16 
Other income4,433 2,731 2,452 
Total noninterest income$7,859 $(1,427)$5,910 

Three Months Ended March 31, 2023 Compared to Three Months Ended December 31, 2022
Noninterest income increased $9.3 million to $7.9 million for the first quarter due mainly to the previous quarter including a $7.7 million loss on the sale of investment securities, coupled with higher other income of $1.7 million. Other income included $1.1 million in recoveries of certain charged-off loans acquired in a previous business combination and higher income from equity investments of $750 thousand.
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Noninterest income for the first quarter of 2023 increased $1.9 million to $7.9 million compared to the same quarter in 2022 due to higher other income of $2.0 million and loan servicing income of $335 thousand, partially offset by lower customer service fees of $455 thousand. The increase in other income was due mostly to higher income from equity investments of $1.7 million and the aforementioned $1.1 million in recoveries of certain charged-off loans acquired in a previous business combination, partially offset by lower gain of $771 thousand related to a sale-leaseback transaction recognized in the first quarter of 2022. The increase in loan servicing income was due mostly to the acquisition of mortgage servicing rights in the second quarter of 2022. The decrease in customer services fees was due mainly to lower deposit activity fees of $437 thousand attributed to lower average deposit balances between periods.
Noninterest Expense
The following table presents the breakdown of noninterest expense for the periods indicated:
Three Months Ended
($ in thousands)March 31,
2023		December 31,
2022		March 31,
2022
Salaries and employee benefits$29,656 $27,812 $28,987 
Occupancy and equipment5,526 5,740 5,637 
Professional fees4,072 3,193 2,839 
Data processing1,563 1,744 1,828 
Regulatory assessments1,202 905 775 
Software and technology3,274 3,197 2,700 
Reversal of loan repurchase reserves(11)(17)(471)
Amortization of other intangibles461 555 441 
Other expense3,878 4,466 3,702 
Noninterest expense before loss on investments in alternative energy partnerships49,621 47,595 46,438 
Loss on investments in alternative energy partnerships1,618 608 158 
Total noninterest expense$51,239 $48,203 $46,596 

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Three Months Ended March 31, 2023 Compared to Three Months Ended December 31, 2022
Noninterest expense increased $3.0 million to $51.2 million for the first quarter compared to the fourth quarter. The increase was due to (i) higher salaries and employee benefits of $1.8 million including $1.0 million of severance costs related to expense management and higher payroll taxes normally incurred during the first quarter, (ii) higher net loss in alternative energy partnership investments of $1.0 million, (iii) higher professional fees of $879 thousand, due to a $1.2 million increase in indemnified legal fees (net of recoveries) offset by a $370 thousand decrease in other professional fees, and (iv) higher regulatory assessments of $297 thousand as the FDIC increased assessment rates in the first quarter. These increases were partially offset by lower other expenses of $994 thousand due to ongoing expense management. Professional fees included net indemnified legal expenses of $380 thousand in the first quarter compared to net indemnified legal recoveries of $869 thousand in the fourth quarter.

Adjusted noninterest expense increased $777 thousand to $49.2 million for the first quarter compared to $48.5 million for the prior quarter. This increase was due to higher salaries and benefits of $1.8 million and regulatory assessments of $297 thousand, partially offset by lower professional fees of $370 thousand, and other expenses of $994 thousand.
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Noninterest expense increased $4.6 million to $51.2 million for the first quarter of 2023 from $46.6 million for the comparable 2022 period due mostly to (i) higher loss on investments in alternative energy partnerships of $1.5 million, (ii) higher professional fees of $1.2 million, due mostly to higher legal fees of $446 thousand and higher net indemnified legal costs of $380 thousand for the first quarter of 2023 compared to net recoveries of $106 thousand during 2022, (iii) higher salaries and employee benefits of $669 thousand due to the first quarter of 2023 including $1.0 million of severance costs related to expense management, partially offset by lower headcount, (iv) higher software and technology costs of $574 thousand, and (v) higher regulatory assessments of $427 thousand due to higher assessment rates and (vi) lower reversal of loss on repurchased loans of $460 thousand.

(1) Non-GAAP measure.
Income Tax Expense
For the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, income tax expense was $7.4 million, $9.1 million, and $18.8 million, resulting in an effective tax rate of 26.7%, 29.6% and 27.9%, respectively. The effective tax rate for the full year 2023 is estimated to be 27% to 28%.
For additional information, see Note 8 to Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.

FINANCIAL CONDITION
Investment Securities
The primary goal of our investment securities portfolio is to provide a relatively stable source of interest income while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk, and interest rate risk. Certain investment securities can be pledged as collateral to obtain public deposits or to provide a secondary source of liquidity in the form of secured borrowings from the FHLB, the FRB, or other financial institutions for repurchase agreements.

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Investment Securities Available-for-Sale
The following table presents the amortized cost and fair value of the investment securities available-for-sale portfolio and the corresponding amounts of gross unrealized gains and losses recognized in AOCI as of the dates indicated:
March 31, 2023December 31, 2022
($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)
Securities available-for-sale:
SBA loan pool securities$10,332 $10,279 $(53)$11,241 $11,187 $(54)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities84,739 84,376 (363)40,431 40,206 (225)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations97,579 92,751 (4,828)99,075 93,191 (5,884)
Non-agency residential mortgage-backed securities125,917 115,371 (10,546)90,832 80,492 (10,340)
Collateralized loan obligations490,860 479,623 (11,237)492,203 476,603 (15,600)
Corporate debt securities195,789 176,027 (19,762)175,781 166,618 (9,163)
Total securities available-for-sale$1,005,216 $958,427 $(46,789)$909,563 $868,297 $(41,266)

Securities available-for-sale were $958.4 million at March 31, 2023, an increase of $90.1 million, or 10.4%, from $868.3 million at December 31, 2022. The increase was mainly due to purchases of $101.7 million, offset by principal payments of $6.2 million, and net unrealized losses of $5.5 million.
Net unrealized losses on securities available-for-sale were $46.8 million at March 31, 2023, compared to $41.3 million at December 31, 2022. The net unrealized gain or loss on securities available-for-sale, net of tax, is reflected in accumulated other comprehensive income (loss). During the first quarter of 2023, wider credit spreads within corporate debt securities, offset by improvement in the valuation of CLOs, agency CMOs, and non-agency residential MBS securities resulted in higher net unrealized losses in our securities portfolio.
CLOs totaled $479.6 million and $476.6 million and were all AAA and AA-rated at March 31, 2023 and December 31, 2022. We perform due diligence and ongoing credit quality review of our CLO holdings, which includes monitoring performance factors such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors.
We did not record credit impairment for any investment securities for the three months ended March 31, 2023 or 2022.
We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment. As of March 31, 2023, we believe there was no credit impairment and the decline in fair value of our securities since acquisition was attributable to a combination of changes in interest rates and general volatility in credit market conditions. We do not have the current intent to sell securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery. As of March 31, 2023, all of our investment securities in an unrealized loss position received an investment grade credit rating.
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Investment Securities Held-to-Maturity
The following table presents the amortized cost and fair value of investment securities held-to-maturity as of the dates indicated:
March 31, 2023December 31, 2022
($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$152,937 $127,985 $(24,952)$153,033 $123,226 $(29,807)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations61,380 50,638 (10,742)61,404 49,458 (11,946)
Municipal securities114,203 94,292 (19,911)114,204 89,776 (24,428)
Total securities held-to-maturity$328,520 $272,915 $(55,605)$328,641 $262,460 $(66,181)
Securities held-to-maturity totaled $328.5 million at March 31, 2023, compared to $328.6 million at December 31, 2022. At March 31, 2023, securities held-to-maturity included $214.3 million in agency securities and $114.2 million in municipal securities.
During the first quarter of 2022, certain longer-duration fixed-rate mortgage-backed securities and municipal securities with an amortized cost basis of $346.0 million were transferred from the available-for-sale portfolio to the held-to-maturity portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which became part of the securities’ amortized cost basis. This amount, along with the unrealized loss included in AOCI, is subsequently amortized over the life of the security as an adjustment to its yield using the interest method. As a result, there is no impact on the consolidated statements of operations.
Net unrealized losses on securities held-to-maturity were $55.6 million at March 31, 2023, compared to $66.2 million, at December 31, 2022. For both periods, net unrealized losses included $15.5 million and $15.8 million related to the unamortized portion of the unrealized losses from the transfer of certain fixed-rate mortgage-backed securities and municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio.
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The following table presents the fair values and weighted average yields using amortized cost of the securities available-for-sale portfolio as of March 31, 2023, based on the earlier of contractual maturity dates or next repricing dates:
One Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Fair
Value		Weighted Average YieldFair
Value		Weighted Average YieldFair
Value		Weighted Average YieldFair
Value		Weighted Average YieldFair
Value		Weighted Average Yield
Securities available-for-sale:
SBA loan pools securities
$10,279 4.23 %$— — %$— — %$— — %$10,279 4.23 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities
— — %— — %— — %84,376 5.59 %84,376 5.59 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations
5,459 5.19 %7,972 3.43 %25,234 2.96 %54,086 5.01 %92,751 4.26 %
Non-agency residential mortgage-backed securities
— — %— — %— — %115,371 3.82 %115,371 3.82 %
Collateralized loan obligations
479,623 6.42 %— — %— — %— — %479,623 6.42 %
Corporate debt securities
— — %163,514 4.95 %12,513 5.73 %— — %176,027 5.00 %
Total securities available-for-sale
$495,361 6.36 %$171,486 4.88 %$37,747 3.83 %$253,833 4.63 %$958,427 5.52 %

The following table presents the amortized cost and weighted average yields using amortized cost of the securities held-to-maturity portfolio as of March 31, 2023, based on the earlier of contractual maturity dates or next repricing dates:
One Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Amortized
Cost		Weighted Average YieldAmortized
Cost		Weighted Average YieldAmortized
Cost		Weighted Average YieldAmortized
Cost		Weighted Average YieldAmortized
Cost		Weighted Average Yield
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$— — %$— — %$9,354 2.51 %$143,583 2.70 %$152,937 2.69 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations— — %— — %— — %61,380 2.64 %61,380 2.64 %
Municipal securities— — %— — %26,900 2.31 %87,303 2.71 %114,203 2.62 %
Total securities held-to-maturity$— — %$— — %$36,254 2.36 %$292,266 2.69 %$328,520 2.66 %

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Loans Receivable, Net
The following table presents the composition of our loan and lease portfolio as of the dates indicated:
($ in thousands)March 31,
2023		December 31, 2022Amount ChangePercentage Change
Commercial:
Commercial and industrial(1)
$1,787,147 $1,845,960 $(58,813)(3.2)%
Commercial real estate1,302,277 1,259,651 42,626 3.4 %
Multifamily1,678,300 1,689,943 (11,643)(0.7)%
SBA65,040 68,137 (3,097)(4.5)%
Construction260,167 243,553 16,614 6.8 %
Total commercial loans5,092,931 5,107,244 (14,313)(0.3)%
Consumer:
Single family residential mortgage1,877,114 1,920,806 (43,692)(2.3)%
Other consumer84,335 86,988 (2,653)(3.0)%
Total consumer loans1,961,449 2,007,794 (46,345)(2.3)%
Total loans(2)
7,054,380 7,115,038 (60,658)(0.9)%
Allowance for loan losses(84,560)(85,960)1,400 (1.6)%
Total loans receivable, net$6,969,820 $7,029,078 $(59,258)(0.8)%
(1)Includes warehouse lending balances of $636.7 million and $602.5 million at March 31, 2023 and December 31, 2022.
(2)Total loans include net deferred loan origination costs (fees), purchased premiums (discounts), and fair value allocations of premiums (discounts) totaling $7.3 million and $7.1 million at March 31, 2023 and December 31, 2022.

Total loans ended the first quarter of 2023 at $7.05 billion, down $60.7 million from $7.12 billion at December 31, 2022, comprised of a $14.3 million decrease in our commercial portfolio and a $46.3 million in our consumer portfolio.
During the three months ended March 31, 2023, the decrease in our commercial portfolio included (i) a $58.8 million decrease commercial and industrial loans, comprised of a $93.0 million decrease in non-warehouse loans offset partially by a $34.2 million increase in warehouse lending balances, (ii) an $11.6 million decrease in multifamily loans driven by payoff activity, and (iii) a $3.1 million decrease in SBA loans, partially offset by (iv) a $42.6 million increase in commercial real estate loans and (v) a $16.6 million increase in construction loan balances. The decrease in our consumer portfolio was due mostly to a $43.7 million decrease in single-family residential (SFR) loans.
Loan fundings of $398.9 million in the first quarter included net warehouse advances of $34.2 million, offset by other loan paydowns and payoffs of $453.9 million.

Loan concentrations were well-diversified between products and industries. In particular, at March 31, 2023, the CRE portfolio of $1.30 billion had balances related to office loans of $359.8 million. This was comprised of general office of $273.7 million with a weighted average LTV of 54% and debt service coverage ratio of 1.6x and medical office of $86.1 million with a weighted average LTV of 58% and debt service coverage ratio of 1.7x.
Credit Quality Indicators
We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze the associated risks in the current loan portfolio and individually grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate loans.
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The following table presents the risk categories for total loans by class of loans as of March 31, 2023 and December 31, 2022:
($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal
March 31, 2023
Commercial:
Commercial and industrial$1,728,776 $17,619 $36,813 $3,939 $1,787,147 
Commercial real estate1,291,705 7,780 2,792 — 1,302,277 
Multifamily1,649,269 14,018 15,013 — 1,678,300 
SBA53,479 999 10,562 — 65,040 
Construction260,167 — — — 260,167 
Consumer:
Single family residential mortgage1,840,511 11,338 25,265 — 1,877,114 
Other consumer83,872 119 344 — 84,335 
Total$6,907,779 $51,873 $90,789 $3,939 $7,054,380 

($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal
December 31, 2022
Commercial:
Commercial and industrial$1,749,284 $49,399 $43,273 $4,004 $1,845,960 
Commercial real estate1,248,196 1,745 9,710 — 1,259,651 
Multifamily1,658,521 2,997 28,425 — 1,689,943 
SBA55,789 800 11,548 — 68,137 
Construction243,553 — — — 243,553 
Consumer:
Single family residential mortgage1,889,911 9,101 21,794 — 1,920,806 
Other consumer86,599 138 251 — 86,988 
Total$6,931,853 $64,180 $115,001 $4,004 $7,115,038 

During the three months ended March 31, 2023, total criticized and classified assets decreased $36.6 million to $146.6 million at March 31, 2023 from decreases in all categories as described below.

Total classified assets, consisting of loans risk rated substandard, doubtful and loss, decreased $24.3 million to $94.7 million at March 31, 2023. The decrease was due mostly to upgrades of $14.5 million and payoffs, paydowns and other reductions aggregating $38.8 million, partially offset by downgrades of $29.0 million. At March 31, 2023 and December 31, 2022 loans risk rated doubtful related to one commercial and industrial relationship.

Total criticized assets, consisting of loans risk rated special mention, decreased $12.3 million to $51.9 million at March 31, 2023 compared to $64.2 million at December 31, 2022 due mostly to upgrades of $30.9 million and payoffs, paydowns and other reductions aggregating $6.6 million, partially offset by downgrades of $14.2 million and upgrades from substandard loans of $11.0 million.


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Nonperforming Assets
The following table presents a summary of total nonperforming assets, excluding loans held-for-sale, as of the dates indicated:
($ in thousands)March 31,
2023		December 31, 2022Amount ChangePercentage Change
Loans past due 90 days or more still on accrual$— $— $— — %
Nonaccrual loans56,545 55,251 1,294 2.3 %
Total nonperforming loans56,545 55,251 1,294 2.3 %
Other real estate owned— — — — %
Total nonperforming assets$56,545 $55,251 $1,294 2.3 %
Nonaccrual loans to total loans0.80 %0.78 %
Nonperforming loans to total loans0.80 %0.78 %
Total nonperforming assets to total assets0.56 %0.60 %
ALL to nonperforming loans149.54 %155.58 %
ACL to nonperforming loans158.04 %165.18 %

Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full.

Additional interest income of approximately $933 thousand would have been recorded during the three months ended March 31, 2023, had these loans been paid in accordance with their original terms throughout the periods indicated.

Non-performing loans increased $1.3 million to $56.5 million as of March 31, 2023, of which $8.8 million, or 16%, related to loans in a current payment status. The increase was due mostly to additions of $16.2 million, partially offset by $13.8 million in payoffs, paydowns, and charge-offs, and $1.1 million in loans returning to accrual status. Of the $16.2 million of loans placed on non-accrual status, $8.6 million related to SFR loans.
Modifications to Borrowers Experiencing Financial Difficulty (effective January 1, 2023 upon adoption of ASU 2022-02)
During the three months ended March 31, 2023, we had 2 loan modifications made to borrowers experiencing financial difficulty, with an aggregate balance of $5.0 million, of which one commercial and industrial loan of $3.9 million was previously classified as a TDR. At March 31, 2023, both loans were current.
Troubled Debt Restructurings (for modifications to borrowers experiencing financial difficulty prior to January 1, 2023)
At March 31, 2023 and December 31, 2022, we had 11 and 15 loans classified as TDRs, with an aggregate balance of $8.7 million and $16.1 million. The decrease in TDRs during the three months ended March 31, 2023 was due mostly to the aforementioned $3.9 million commercial and industrial loan that was restructured during 2022 was modified and accounted for as a new loan in the first quarter of 2023, and a $3.4 million paydown of a commercial and industrial loan.
Accruing TDRs were $2.6 million and nonaccrual TDRs were $6.1 million at March 31, 2023, compared to accruing TDRs of $2.7 million and nonaccrual TDRs of $13.4 million at December 31, 2022.
Allowance for Credit Losses (ACL)
The ACL, which includes the reserve for unfunded loan commitments, totaled $89.4 million, or 1.27% of total loans, at March 31, 2023, compared to $91.3 million, or 1.28% of total loans, at December 31, 2022. The $1.9 million decrease in the ACL was due to: (i) net charge-offs of $3.9 million, of which $3.2 million related to commercial and industrial loans, and (ii) $3.2 million from lower loan balances and changes in portfolio mix and (iii) $500 thousand lower RUC from lower unfunded commitments, partially offset by (iv) new specific reserves totaling $3.2 million, and (v) a $2.5 million increase in general reserves due mainly to the impact of the deterioration in the macroeconomic outlook. The ACL coverage of non-performing loans was 158% at March 31, 2023 compared to 165% at December 31, 2022.
The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:
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($ in thousands)March 31,
2023		December 31, 2022
Allowance for credit losses:
Allowance for loan losses (ALL)$84,560 $85,960 
Reserve for unfunded loan commitments
4,805 5,305 
Total allowance for credit losses (ACL)$89,365 $91,265 
ALL to total loans1.20 %1.21 %
ACL to total loans1.27 %1.28 %

The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:
Three Months Ended March 31,
($ in thousands)20232022
Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses		Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$85,960 $5,305 $91,265 $92,584 $5,605 $98,189 
Loans charged off(3,949)— (3,949)(231)— (231)
Recoveries of loans previously charged off49 — 49 32,215 — 32,215 
Net (charge-offs) recoveries(3,900)— (3,900)31,984 — 31,984 
(Reversal of) provision for credit losses2,500 (500)2,000 (31,342)(200)(31,542)
Balance at end of period$84,560 $4,805 $89,365 $93,226 $5,405 $98,631 

The following table presents a summary of net (charge-offs) recoveries and the annualized ratio of net charge-offs to average loans by loan class for the periods indicated:
Three Months Ended March 31,
($ in thousands)20232022
Net
(Charge-offs) Recoveries		Average LoansAnnualized (Charge-off) Recovery RatioNet
(Charge-offs) Recoveries		Average LoansAnnualized (Charge-off) Recovery Ratio
Commercial:
Commercial and industrial$(3,244)$1,733,055 (0.15)%$31,235 $2,632,387 4.75 %
Commercial real estate(300)1,297,498 (0.09)%— 1,322,949 — %
Multifamily— 1,689,938 — %— 1,339,067 — %
SBA24 32,244 0.30 %745 116,154 2.57 %
Construction— 255,344 — %— 188,795 — %
Consumer:
Single family residential mortgage(371)1,897,763 (0.08)%28 1,562,478 0.01 %
Other consumer(9)84,786 (0.04)%(24)97,516 (0.10)%
Total loans$(3,900)$6,990,628 (0.22)%$31,984 $7,259,346 1.76 %
Net charge-offs were $3.9 million during the first quarter of 2023, compared to net recoveries of $32.0 million during the comparable 2022 period. Net charge-offs in the first quarter of 2023 were mainly due to charge-offs within the commercial and industrial portfolio, and net recoveries in the first quarter of 2022 included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019.
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The following table presents a summary of the allocation of the allowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:
March 31, 2023December 31, 2022
($ in thousands)Allowance for Loan LossesLoans Receivable% of
Loans in Category to Total Loans		Allowance for Loan LossesLoans Receivable% of
Loans in Category to
Total Loans
Commercial:
Commercial and industrial$32,644 $1,787,147 25.3 %$34,156 $1,845,960 25.9 %
Commercial real estate16,119 1,302,277 18.5 %15,977 1,259,651 17.7 %
Multifamily15,038 1,678,300 23.8 %14,696 1,689,943 23.8 %
SBA2,097 65,040 0.9 %2,648 68,137 1.0 %
Construction6,425 260,167 3.7 %5,850 243,553 3.4 %
Consumer:
Single family residential mortgage11,481 1,877,114 26.6 %12,050 1,920,806 27.0 %
Other consumer756 84,335 1.2 %583 86,988 1.2 %
Total$84,560 $7,054,380 100.0 %$85,960 $7,115,038 100.0 %

Servicing Rights
We have retained servicing rights from certain sales of SFR mortgage loans and SBA loans and purchased mortgage servicing rights from unrelated third parties. Purchased mortgage servicing rights are recorded at the purchase price at the time of acquisition, which approximates the fair value. Subsequent to acquisition, we account for these servicing rights using the amortization method. We utilize a subservicer to service all of the loans underlying the purchased mortgage servicing rights.
Loans underlying retained and purchased servicing rights are not included in our consolidated statements of financial condition.

Mortgage servicing rights totaled $21.7 million and $22.5 million at March 31, 2023 and December 31, 2022, which are included in other assets in the accompanying consolidated balance sheets. We purchased $22.7 million of SFR mortgage servicing rights, with underlying mortgage balances of $1.73 billion, during the second quarter of 2022. At March 31, 2023,
the carrying value of these purchased servicing rights was $20.7 million and the unpaid principal balance of the loans underlying these purchased servicing rights was $1.66 billion.
During the three months ended March 31, 2023 and 2022, we recognized loan servicing income of $547 thousand and $212 thousand.
Alternative Energy Partnerships
We invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits) and other tax benefits. These investments help promote the development of renewable energy sources and lower the cost of housing for residents by lowering homeowners’ monthly utility costs.
The following table presents the activity related to our investment in alternative energy partnerships for the three months ended March 31, 2023 and 2022:
Three Months Ended
March 31,
($ in thousands)20232022
Balance at beginning of period$21,410 $25,888 
Return of capital(365)(574)
Gain (loss) on investments using HLBV method(1,618)(158)
Balance at end of period$19,427 $25,156 
Unfunded equity commitments at end of period$— $— 

During the three months ended March 31, 2023 and 2022, we did not fund into our alternative energy partnerships but received a return of capital of $365 thousand and $574 thousand.
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During the three months ended March 31, 2023 and 2022, we recognized net losses on investment of $1.6 million and $158 thousand. From an income tax benefits perspective, we recognized no investment tax credits during these periods; however, we recorded income tax benefits related to these investments of $467 thousand and $46 thousand for the three months ended March 31, 2023 and 2022.
For additional information, see Note 12 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.
Deposits
The following table shows the composition of deposits by type as of the dates indicated:
March 31, 2023December 31, 2022
($ in thousands)Amount% of Total DepositsAmount% of Total DepositsAmount Change
Noninterest-bearing deposits$2,506,616 36.1 %$2,809,328 39.5 %$(302,712)
Interest-bearing demand deposits1,862,003 26.8 %1,947,247 27.3 %(85,244)
Savings and money market accounts998,365 14.3 %1,174,925 16.5 %(176,560)
Certificates of deposit of $250,000 or less1,178,786 17.0 %793,040 11.1 %385,746 
Certificates of deposit of more than $250,000406,204 5.8 %396,381 5.6 %9,823 
Total deposits$6,951,974 100.0 %$7,120,921 100.0 %$(168,947)

Total deposits were $6.95 billion at March 31, 2023, a decrease of $168.9 million, or 2.4%, from $7.12 billion at December 31, 2022 due mostly to lower noninterest-bearing checking balances of $302.7 million, lower savings and money market balances of $176.6 million and lower interest-bearing demand deposits of $85.2 million, partially offset by higher certificates of deposits of $395.6 million. We continue to focus on growing granular relationship-based deposits and strategically replacing short-term wholesale funding as we actively manage our funding costs. We also executed a $300 million cash flow hedge during the first quarter of 2023 to further manage our interest rate risk and reduce our exposure to higher funding costs resulting from higher interest rates. Noninterest-bearing deposits totaled $2.51 billion and represented 36% of total deposits at March 31, 2023 compared to $2.81 billion and 39% at December 31, 2022.
Insured deposits of $4.77 billion and collateralized deposits of $314.6 million represented 73% of total deposits at March 31, 2023, compared to insured deposits of $3.93 billion and collateralized deposits of $341.6 million which represented 60% of total deposits at December 31, 2022.
Brokered deposits were $1.01 billion and $614.9 million at March 31, 2023 and December 31, 2022. During the three months ended March 31, 2023, we added short-term brokered deposits to increase our liquidity due to the current operating environment.
The following table presents the scheduled maturities of certificates of deposit as of March 31, 2023:
($ in thousands)Three Months or LessOver Three Months Through Six MonthsOver Six Months Through Twelve MonthsOver One YearTotal
Certificates of deposit of $250,000 or less$543,007 $236,277 $277,078 $122,424 $1,178,786 
Certificates of deposit of more than $250,000138,621 184,075 41,128 42,380 406,204 
Total certificates of deposit$681,628 $420,352 $318,206 $164,804 $1,584,990 

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Borrowings
We have various available lines of credit. These include the ability to borrow funds from time to time on a long-term, short-term, or overnight basis from the FHLB, the FRB, or other financial institutions. The following table presents our borrowings as of the dates indicated:
March 31, 2023December 31,
2022
($ in thousands)Weighted Average Interest
Rate		Weighted Average Maturity (years)Outstanding BalanceOutstanding Balance
FHLB advances:
Overnight advances5.11%0.01$325,000 $20,000 
Term advances2.91%3.25611,000 611,000 
Term advances (putable)3.44%4.75200,000 100,000 
Unamortized costs(3,330)(3,652)
Total FHLB advances3.63%2.59$1,132,670 $727,348 
FRB borrowings:
Overnight advances5.00%0.01$600,000 $— 
In light of current volatility, we proactively performed liquidity-enhancing measures, including additional advances from FHLB and draws on available FRB facilities, during the first quarter of 2023.
FHLB Advances. FHLB advances are collateralized by a blanket lien on all real estate loans. At March 31, 2023, our secured borrowing capacity with the FHLB totaled $2.37 billion, of which the Bank was eligible to borrow an additional $821.9 million based on qualifying loans with an aggregate unpaid principal balance of $3.50 billion as of that date.
As of March 31, 2023, FHLB advances increased $405.3 million, or 55.7%, to $1.13 billion mainly due to an increase in overnight borrowings of $305.0 million and term advances of $100.0 million.
FRB Borrowings. At March 31, 2023, the Bank had borrowing capacity with the Federal Reserve Bank of San Francisco (the “Federal Reserve”) of $1.51 billion, including the secured borrowing capacity through the FRB Discount Window, Borrower-in-Custody (“BIC”), and Bank Term Funding (“BTFP”) programs. The FRB credit programs are collateralized by certain qualifying loans with an unpaid principal balance of $1.47 billion and securities with a carrying value of $524.3 million.
We utilized available capacity in the FRB Discount Window and BIC programs through $600.0 million in overnight borrowings, but did not utilize the BTFP and there was no outstanding borrowing under this program at March 31, 2023.
Other Borrowings. The Bank maintains available unsecured federal funds lines with five correspondent banks totaling $210.0 million, with no outstanding borrowings at March 31, 2023.
The Bank also has the ability to perform unsecured overnight borrowing from various financial institutions through AFX. The availability of such unsecured borrowings fluctuates regularly, is subject to the counterparties discretion and totaled $345.0 million and $445.0 million at March 31, 2023 and December 31, 2022. Borrowings under the AFX totaled zero at March 31, 2023 and December 31, 2022.
In addition, the holding company maintains a $50.0 million revolving line of credit, with no borrowings under this line of credit at March 31, 2023 and December 31, 2022.
For additional information, see Note 6 - Federal Home Loan Bank Advances, Federal Reserve Bank Borrowings and Other Borrowings of the Notes to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.
Long-term Debt
The following table presents our long-term debt as of the dates indicated:
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March 31, 2023December 31, 2022
($ in thousands)Interest
Rate		Maturity
Date		Par
Value		Unamortized Debt Issuance Cost and DiscountPar
Value		Unamortized Debt Issuance Cost and Discount
Senior notes
5.25%
4/15/2025$175,000 $(679)$175,000 $(722)
Subordinated notes (1)
4.375%
10/30/203085,000 (1,853)85,000 (1,899)
PMB Statutory Trust III, junior subordinated debentures
LIBOR + 3.40%
9/26/20327,217 — 7,217 — 
PMB Capital Trust III, junior subordinated debentures
LIBOR + 2.00%
10/8/203410,310 — 10,310 — 
Total$277,527 $(2,532)$277,527 $(2,621)
(1) The Subordinated Notes bear interest at an initial fixed rate of 4.375% per annum, payable semi-annually in arrears. From and including October 30, 2025 to, but excluding, the maturity date or the date of earlier redemption, the Subordinated Notes bear interest at a floating rate per annum equal to a benchmark rate, which is expected to be 3-Month Term SOFR, plus a spread of 419.5 basis points, payable quarterly in arrears.
At March 31, 2023, we were in compliance with all covenants under our long-term debt agreements.
Liquidity Management
We are required to maintain sufficient liquidity to ensure a safe and sound operation. Liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including both expected and unexpected cash flow needs such as funding loan commitments, potential deposit outflows and dividend payments. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained. We also monitor our liquidity requirements in light of rising interest rate trends, changes in the economy and scheduled maturity and interest rate sensitivity of our investment and loan portfolio and deposits.
Banc of California, N.A.
Primary Sources of Liquidity: The Bank's liquidity, represented by cash and cash equivalents and securities available-for-sale, is a product of its operating, investing, and financing activities. The Bank's primary sources of funds are deposits, payments and maturities of outstanding loans and investment securities; sales of loans, investment securities, and other short-term investments; and funds provided from operations. While scheduled payments and maturities of loans, investment securities and other short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.
At March 31, 2023, we had primary liquidity of $1.73 billion, including total cash and cash equivalents of $1.01 billion and unpledged securities available-for-sale of $724.2 million. Our cash increased $782.1 million from December 31, 2022 as we deployed a conservative strategy to hold extra liquidity due to the current operating environment.
Secondary Sources of Liquidity: The Bank also generates cash through secured and unsecured secondary sources of funds. The Bank maintains pre-established secured lines of credit with the FHLB and the FRB as secondary sources of liquidity to provide funds for lending and investment activities and to enhance interest rate risk and liquidity risk management. At March 31, 2023, we had available unused secured borrowing capacities of $821.9 million from the FHLB and $913.9 million through the FRB Discount Window, BIC and BTFP programs.
The Bank has additional sources of secondary liquidity through pre-established unsecured federal funds lines with correspondent banks and pre-approved unsecured overnight borrowing lines with various financial institutions through the AFX platform totaling $555.0 million at March 31, 2023. These facilities are subject to counterparty discretion.
As of March 31, 2023, the Company had high levels of liquidity available with total cash and cash equivalents of $1.01 billion, unpledged securities available-for-sale of $724.2 million, and unused borrowing capacity of $2.29 billion, resulting in total primary and secondary liquidity available of $4.03 billion. This was 2.2 times total uninsured and uncollateralized deposits of $1.87 billion.
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Banc of California, Inc.
Primary Sources of Liquidity: The primary sources of funds for Banc of California, Inc., on a stand-alone holding company basis, are dividends and intercompany tax payments from the Bank, outside borrowing, and its ability to raise capital and issue debt securities. Dividends from the Bank are largely dependent upon the Bank's earnings and are subject to restrictions under certain regulations that limit its ability to transfer funds to the holding company. OCC regulations impose various restrictions on the ability of a bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. Generally, a well-capitalized bank may make capital distributions during any calendar year equal to up to 100 percent of year-to-date net income plus retained net income for the two preceding years without prior OCC approval. However, any dividend paid by the Bank would be limited by the need to maintain its well-capitalized status plus the capital buffer in order to avoid additional dividend restrictions (Refer to Capital - Dividend Restrictions below for additional information). Currently, the Bank does not have sufficient dividend-paying capacity to declare and pay such dividends to the holding company without obtaining prior approval from the OCC under the applicable regulations. During the three months ended March 31, 2023, the Bank paid $20.0 million of dividends to Banc of California, Inc. At March 31, 2023, Banc of California, Inc. had $35.8 million in cash, all of which was on deposit at the Bank.
Secondary Sources of Liquidity: In addition, the holding company has a $50.0 million revolving line of credit and there were no borrowings under this line of credit at March 31, 2023 and December 31, 2022, and we were in compliance with all covenants.
On February 13, 2023, we announced our Board of Directors authorized the repurchase of up to $35 million of our common stock. The repurchase authorization expires in February 2024. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions.
During the three months ended March 31, 2023, common stock repurchased under the program totaled 410,946 shares at a weighted average price of $12.59. As of March 31, 2023, the Company had $29.8 million remaining under the current stock repurchase authorization.
Commitments and Contractual Obligations
The following table presents our commitments and contractual obligations as of March 31, 2023:
Commitments and Contractual Obligations
($ in thousands)Total Amount CommittedWithin
One Year		More Than One Year Through Three YearsMore Than Three Years Through Five Years
Over Five Years
Commitments to extend credit$226,240 $19,938 $145,390 $34,054 $26,858 
Unused lines of credit1,591,443 1,191,283 269,822 103,862 26,476 
Standby letters of credit9,153 6,257 2,896 — — 
Total commitments$1,826,836 $1,217,478 $418,108 $137,916 $53,334 
FHLB advances and FRB borrowings$1,736,000 $925,000 $291,000 $520,000 $— 
Long-term debt277,527 — 175,000 — 102,527 
Operating and capital lease obligations32,823 8,501 14,345 7,235 2,742 
Certificates of deposit1,584,990 1,420,186 162,676 2,128 — 
Total contractual obligations$3,631,340 $2,353,687 $643,021 $529,363 $105,269 

At March 31, 2023, we had unfunded commitments of $17.1 million, $7.7 million, and $9.4 million for LIHTC investments, SBIC investments, and other investments, respectively.
Capital
In order to maintain adequate levels of capital, we continuously assess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on our capital base. Increases in market interest rates resulted in higher net unrealized losses in our securities portfolio and stockholders’ equity. As market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and tangible stockholders’ equity.
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Regulatory Capital
The Company and the Bank are subject to the regulatory capital adequacy guidelines that are established by the Federal banking regulators. Under the relevant rules and including the required conservation buffer, common equity Tier 1 capital, Tier 1 risk-based capital and total risk-based capital ratio minimums are 7.0%, 8.5% and 10.5%, respectively.
The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:
Banc of California, Inc.Banc of California, NAMinimum Capital RequirementsWell-Capitalized Requirements (Bank)Capital Conservation Buffer Requirements
March 31, 2023
Total risk-based capital14.22 %15.93 %8.00 %10.00 %10.50 %
Tier 1 risk-based capital11.79 %14.83 %6.00 %8.00 %8.50 %
Common equity tier 1 capital11.79 %14.83 %4.50 %6.50 %7.00 %
Tier 1 leverage9.65 %12.14 %4.00 %5.00 %N/A
December 31, 2022
Total risk-based capital14.21 %16.02 %8.00 %10.00 %10.50 %
Tier 1 risk-based capital11.80 %14.94 %6.00 %8.00 %8.50 %
Common equity tier 1 capital11.80 %14.94 %4.50 %6.50 %7.00 %
Tier 1 leverage9.70 %12.25 %4.00 %5.00 %N/A
Dividend Restrictions
Payment of dividends by the Company are subject to guidance provided by the Federal Reserve. That guidance provides that bank holding companies that plan to pay dividends that exceed net earnings for a given period should first consult with the Federal Reserve. To the extent future quarterly dividends exceed quarterly net earnings, payment of dividends in respect of the Company’s common stock will be subject to prior consultation and non-objection from the Federal Reserve.
Our principal source of funds for dividend payments is dividends received from the Bank. Federal banking laws and regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, in the case of the Bank, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Accordingly, any dividend granted by the Bank would be limited by the need to maintain its well capitalized status plus the capital buffer in order to avoid additional dividend restrictions. As described above, any near term dividend by the Bank will require OCC approval. During the three months ended March 31, 2023, the Bank paid $20.0 million in dividends to Banc of California, Inc.
During the three months ended March 31, 2023, we declared and paid dividends on our common stock of $0.10 per share totaling $5.6 million.
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.
We maintain both a management asset/liability committee (“Management ALCO”), comprised of select members of senior management, and a joint asset/liability committee of the Boards of Directors of the Company and the Bank (“Board ALCO”, together with Management ALCO, “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and
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spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our economic value of equity analysis.
In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we evaluate various strategies including:
•Complementing our current loan origination platform through strategic acquisitions of whole loans,
•Strategically managing multiple warehouse relationships,
•Originating shorter-term consumer loans,
•Managing the level of investments and duration of investment securities,
•Managing our deposits to establish stable deposit relationships, and
•Using FHLB advances and/or certain derivatives such as swaps as hedges to align maturities and repricing terms.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors. As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and our economic value of equity.
Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income
Interest rate risk results from our banking activities and is the primary market risk for us. Interest rate risk is caused by the following factors:
•Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
•Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;
•Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
•Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate, SOFR and London Interbank Offered Rate.
Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Management of our interest rate risk is overseen by the Board ALCO, which delegates the day to day management of interest rate risk to the Management ALCO. Management ALCO ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program. Board ALCO reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of our asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and derivatives.
EVE measures the period end present value of assets minus the present value of liabilities. Asset liability management uses this value to measure the changes in the economic value of the Company under various interest rate scenarios. In some ways, the economic value approach provides a broader scope than net income volatility approach since it captures all anticipated cash flows.
The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest margin, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates
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is expected to compress our net interest margin, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.
At March 31, 2023, our interest rate risk profile reflects a “neutral” position, a shift from an “asset sensitive” position as of December 31, 2022. The shift was primarily due to the increase in short-term fundings that were added to increase our on-balance sheet liquidity in response to market events at the end of the quarter. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary materially from those predicted by our model.
The following table presents the projected change in the Company’s economic value of equity at March 31, 2023 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change:
Change in Interest Rates in Basis Points (bps) (1)
($ in thousands)Economic Value of EquityNet Interest Income
AmountAmount ChangePercentage ChangeAmountAmount ChangePercentage Change
March 31, 2023
+200 bps$1,555,862 $5,009 0.3 %$306,990 $1,664 0.5 %
+100 bps1,561,461 10,608 0.7 %306,300 974 0.3 %
0 bps1,550,853 305,326 
-100 bps1,518,231 (32,622)(2.1)%301,635 (3,691)(1.2)%
-200 bps1,452,739 (98,114)(6.3)%295,615 (9,711)(3.2)%
(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.
Due to the transformation of the franchise to our relationship-based banking model since 2019, with higher relative percentages of noninterest-bearing deposits and variable rate commercial loans, we believe we are positioned for the current interest rate environment with a neutral balance sheet. Our one year gap ratio, which compares the percentage of earning assets that are scheduled to mature or reprice within one year to the percentage of rate sensitive term liabilities that are scheduled to mature or reprice within one year, was 14% at March 31, 2023.
As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.
ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Act) as of March 31, 2023 was carried out under the supervision and with the participation of the Company’s Principal Executive Officer, Principal Financial Officer and other members of the Company’s senior management. The Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of March 31, 2023, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Principal Executive Officer and Principal Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within
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the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
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PART II — OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a material adverse effect on the Company’s financial statements or operations.
ITEM 1A - RISK FACTORS
There have been no material changes to the risk factors that appeared under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Purchase of Equity Securities by the Issuer
($ in thousands, except per share data)Total Number of SharesAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced PlansApproximate Dollar Value of Shares That May Yet be Purchased Under the Plan
Common Stock:
From January 1, 2023 to January 31, 2023100 $15.93 — $— 
From February 1, 2023 to February 28, 2023700 $17.88 — $35,000 
From March 1, 2023 to March 31, 2023508,232 $13.35 410,946 $29,827 
Total509,032 $13.36 410,946 
During the three months ended March 31, 2023, purchases of shares of common stock related to shares purchased under our stock repurchase program and shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under our employee stock benefit plans.
On February 13, 2023, we announced a repurchase program of up to $35 million of our common stock. The repurchase authorization expires in February 2024. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions, or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable
ITEM 5 - OTHER INFORMATION
None
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ITEM 6 - EXHIBITS
3.1
3.2
10.0
31.1
31.2
32.0
101.0
The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BANC OF CALIFORNIA, INC.
Date:May 8, 2023
/s/ Jared Wolff
Jared Wolff
President and Chief Executive Officer
(Principal Executive Officer)
Date:May 8, 2023
/s/ Raymond Rindone
Raymond Rindone
Executive Vice President, Interim Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer and Principal Accounting Officer)
78

Exhibit 10.0
CONFIDENTIAL
SEPARATION AGREEMENT AND GENERAL RELEASE

Banc of California, Inc., a Maryland corporation (the “Company”), Banc of California, N.A., a national banking association (the “Bank,” and together with the Company, “Employer”) and Lynn Hopkins (“Executive”) (collectively the “Parties”) enter into this Separation Agreement and General Release (this “General Release”) on the following terms:

WHEREAS, Executive was employed by Employer pursuant to an employment agreement entered into by and between Executive and Employer dated as of November 13, 2019 (the “Employment Agreement”). Capitalized terms used but not defined herein shall have the meaning set forth in the Employment Agreement; and
WHEREAS, the Date of Termination of Executive’s employment with Employer is March 31, 2023, and Executive acknowledges that regardless of signing this General Release, she has received her final paycheck for all wages earned through the Date of Termination, except for any payments which, pursuant to the terms of the Employment Agreement, are not yet due to be paid;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained in this General Release, the Parties agree as follows:

1.Subject to Executive’s compliance with her promises and agreements contained in this General Release and the Employment Agreement (including, but not limited to, Sections 8(f), 8(g), and 9-12) and provided Executive does not revoke this General Release, Employer shall provide Executive with an amount equal to the Severance Amount as set forth in Section 8(b) of the Employment Agreement, plus a Monthly COBRA Supplement. The Monthly COBRA Supplement is an amount equal to the premium required to maintain Executive’s medical, dental and vision insurance benefits at the same level of coverage as of the Date of Termination, provided that such benefits may be adjusted from time to time by Employer to the same extent and on the same terms as such benefits are provided to other members of the ELG. For the avoidance of doubt, the COBRA Supplement shall not include life, disability, Armada Care or other insurance benefits that may be offered by Employer before or after the Date of Termination. In order to receive the Monthly COBRA Supplement, Executive must complete all applications or other paperwork necessary to obtain COBRA continuation coverage. Upon successful initiation of COBRA continuation coverage, Employer shall pay the required premium directly to Employer’s group health provider on Employee’s behalf. Employer shall pay the Monthly COBRA Supplement until the earlier of (a) December 31, 2023, or (b) the date on which Executive obtains other employment which includes group health coverage as a benefit of employment. Executive shall promptly notify Employer if she obtains employment which includes group health coverage as a benefit of employment, and the start date of such employment.

2.In consideration of the payments and benefits to which Executive is entitled under this General Release, Executive for herself, her heirs, administrators, representatives, executors, successors, and assigns (collectively “Releasors”) does hereby irrevocably and unconditionally release, acquit and forever discharge the Company, the Bank, and their respective parents, subsidiaries, affiliates and divisions (the “Affiliated Entities”) and their respective predecessors and successors and their respective, current and former, trustees, officers, directors, partners, shareholders, agents, employees, attorneys, consultants, independent contractors, and representatives, including, without limitation, all persons acting by, through, under, or in concert with any of them (collectively, “Releasees”), and each of them from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, remedies, actions, causes of action, suits, rights, demands, costs, losses, debts, and expenses (including attorneys’ fees and costs) of any nature whatsoever, known or unknown, whether in law or equity and whether arising under federal, state, or local law (“Claims”), including without limitation, Claims for personal injury; Claims for breach of any implied or express contract or covenant; Claims for promissory estoppel; Claims for failure to pay wages, benefits, vacation pay, severance pay, attorneys’ fees, or any compensation of any sort; Claims for failure to grant equity or allow equity to vest; Claims for wrongful termination, public policy violations, defamation, interference with contract or prospective economic


advantage, invasion of privacy, fraud, misrepresentation, emotional distress, breach of fiduciary duty, breach of the duty of loyalty or other common law or tort causes of action; Claims of harassment, retaliation or discrimination based upon race, color, sex, national origin, ancestry, age, disability, handicap, medical condition, religion, marital status, or any other protected class or status under federal, state, or local law; Claims arising under or relating to employment, employment contracts, unlawful effort to prevent employment, or unfair or unlawful business practices, including without limitation all claims arising under Title VII of the Civil Rights Act of 1964 (“Title VII”); the Civil Rights Act of 1991; the Civil Rights Acts of 1866 and/or 1871, 42 U.S.C. Section 1981; the Americans With Disabilities Act of 1990 (“ADA”), 42 U.S.C § 12101 et seq.; the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., the Older Workers Benefits Protection Act (“OWBPA”); the Family Medical Leave Act, 29 U.S.C. § 2601 et seq.; the California Labor Code; the California Fair Employment and Housing Act (“FEHA”), Cal. Gov. Code § 12900 et seq.; the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. § 651 et seq. or any other health/safety laws, statutes or regulations; the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.; the Internal Revenue Code; the California Family Rights Act (“CFRA”), Cal. Gov. Code § 12945 et seq.; including any amendments to or regulations promulgated under these statutes and including the similar laws of any other states, any state human rights act, or any other applicable federal, state or local employment statute, law or ordinance, which Executive and the Releasors had, now have, or may have in the future against each or any of the Releasees from the beginning of the world until and including the Execution Date (collectively, “Released Claims”).

3.OWBPA; Meaning of Signing This General Release. Executive expressly acknowledges and agrees that (a) Executive has carefully read this General Release and fully understands what it means, including the fact that she is waiving her rights under ADEA; (b) Executive has been advised in writing to consult an independent attorney of Executive’s choice before signing this General Release; (c) Executive has been given twenty-one (21) calendar days to consider this General Release, or, in the case of a group termination as set forth in 29 U.S.C. § 626(f)(1)(F)(ii), forty-five (45) days; (d) in the case of a group termination as set forth in 29 U.S.C. § 626(f)(1)(F)(ii), Executive has been provided the information required by 29 U.S.C. § 626(f)(1)(H); (e) Executive has agreed to this General Release knowingly and voluntarily of Executive’s own free will; (f) in consideration of Executive’s promises contained in this General Release, she is receiving consideration beyond that to which she is otherwise entitled, including, without limitation, the Severance Benefits; (g) Executive may revoke Executive’s waiver and release of Claims under the ADEA within seven (7) calendar days after the Execution Date by sending a written Notice of Revocation to the address of Employer as set forth in Section 24 of the Employment Agreement; and (h) except for Executive’s waiver and release of Claims under the ADEA, which shall not become effective or enforceable as to any Party until the date upon which the revocation period has expired without revocation by Executive, this General Release shall become effective on the Execution Date. Executive understands and agrees that modifications or amendments to this General Release will not restart the twenty-one (21) or forty-five (45) day consideration period, as applicable, set forth in this Section 3. For avoidance of doubt, if Executive revokes her waiver and release of Claims under the ADEA pursuant to this Section, Employer will not provide any of the Severance Benefits.

4.Notwithstanding anything else to the contrary in this General Release, this General Release shall not affect: the obligations of the Company set forth in the Employment Agreement or the indemnification agreement or other obligations that, in each case with respect to such other obligations, by their terms, are to be performed after the Execution Date (defined below), including, without limitation, Executive’s rights to any vested benefits, vested pension rights or vested rights to equity); any obligations of the Bank to repay any bank deposits; obligations to indemnify Executive respecting acts or omissions in connection with Executive’s service as a director, officer or employee of the Affiliated Entities; obligations with respect to insurance coverage under any of the Affiliated Entities’ (or any of their respective successors) directors’ and officers’ liability insurance policies; or any right Executive may have to obtain contribution in the event of the entry of judgment against Executive as a result of any act or failure to act for which both Executive and any of the Affiliated Entities are jointly responsible.

5.Executive represents that, except for anonymous whistleblower complaints filed with the SEC or other similar regulatory agencies, the Releasors have not initiated, filed, or caused to be filed any Released Claims against any of the Releasees. Executive further agrees not to initiate, file, cause to be filed, or otherwise pursue any Released Claims, either as an individual on her own behalf, or as a representative, member or shareholder in a class, collective or derivative action and further agrees not to encourage any


person, including any current or former employee of the Releasees, to file any kind of Claim against the Releasees. Executive, however, retains the right to challenge the validity of the waiver of Executive’s Claims under the ADEA set forth in Sections 2 and 3 of this General Release.

6.Executive further acknowledges that she may hereafter discover claims or facts in addition to or different than those that she now knows or believes to exist with respect to the subject matter of this General Release and that, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and Executive’s decision to enter into it. Nevertheless, Executive hereby waives any right, claim or cause of action that might arise as a result of such different or additional claims or facts and Executive expressly waives any and all rights and benefits confirmed upon her by the provisions of California Civil Code Section 1542, which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

Executive further expressly waives any rights she may have under Section 1542, as well as under any other statute or common law principles of similar effect in any other jurisdiction determined by a court of competent jurisdiction to apply.

7.This General Release shall be construed, enforced and interpreted in accordance with and governed by the laws of the State of California, without reference to its principles of conflict of laws.

8.The Parties intend for the provisions of this General Release to be enforced to the fullest extent permissible under all applicable laws and public policies. They also intend that unenforceability or the modification to conform with those laws or public policies of any provision of this General Release shall not render unenforceable or impair the remainder of this General Release. Accordingly, if any provision shall be determined to be invalid or unenforceable either in whole or in part, this General Release shall be deemed amended to delete or modify as necessary the invalid or unenforceable provisions to alter the balance of this General Release in order to render the same valid and enforceable.

9.This General Release may not be orally cancelled, changed, modified or amended, and no cancellation, change, modification or amendment shall be effective or binding, unless in writing and signed by both parties to this General Release.

10.In the event of the breach or a threatened breach by Executive of any of the provisions of this General Release, the Releasees would suffer irreparable harm, and in addition and supplementary to other rights and remedies existing in its favor, the Releasees shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof without posting a bond or other security.

11.Notwithstanding anything to the contrary in this General Release, Executive understands that nothing in this General Release is intended to prohibit Executive and Executive is not prohibited from reporting possible violations of law to, filing charges with, making disclosures protected under the whistleblower provisions of U.S. federal law or regulation, or participating in investigations of U.S. federal law or regulation by the U.S. Securities and Exchange Commission, National Labor Relations Board, Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the U.S. Department of Justice, the U.S. Congress, any U.S. agency Inspector General or any self-regulatory agencies such as the SEC or federal, state or local governmental agencies (collectively, “Government Agencies,” and each a “Government Agency”). Accordingly, Executive does not need the prior authorization of Employer to make any such reports or disclosures or otherwise communicate with Government Agencies and is not required to notify Employer that she has engaged in any such communications or made any such reports or disclosures. Executive agrees, however, to waive any right to receive any monetary award resulting from such a report, charge, disclosure, investigation or proceeding, except that Executive may receive and fully retain any award from a whistleblower award program administered by a Government Agency. In addition, Executive is hereby notified that 18 U.S.C. § 1833(b) states as follows:



“An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that-(A) is made-(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.”

Accordingly, notwithstanding anything to the contrary in this General Release, Executive understands that she has the right to disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. Executive understands that she also has the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Executive understands and acknowledges that nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

Executive, the Company and the Bank have executed this General Release on April 11, 2023 (the “Execution Date”).



BANC OF CALIFORNIA, INC.

By:    /s/    Ido Dotan        
Name:    Ido Dotan
Title:    Chief Administrative Officer of the Company and the Bank

BANC OF CALIFORNIA, N.A.

By:    /s/    Alex Kweskin        
Name:    Alex Kweskin
Title:    EVP, Chief Human Resources Officer


EXECUTIVE

By:  /s/    Lynn Hopkins        
Lynn Hopkins

Exhibit 31.1
CERTIFICATIONS
I, Jared Wolff, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Banc of California, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:May 8, 2023
/s/ Jared Wolff
Jared Wolff
President and Chief Executive Officer
(Principal Executive Officer)

Exhibit 31.2
CERTIFICATIONS
I, Raymond Rindone, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Banc of California, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:May 8, 2023
/s/ Raymond Rindone
Raymond Rindone
Executive Vice President, Interim Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.0
SECTION 1350 CERTIFICATION
Each of the undersigned hereby certifies in his or her capacity as an officer of Banc of California, Inc. (“the Company”) that this Quarterly Report of the Company on Form 10-Q for the quarter ended March 31, 2023 fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date:May 8, 2023
/s/ Jared Wolff
Jared Wolff
President and Chief Executive Officer
(Principal Executive Officer)
Date:May 8, 2023
/s/ Raymond Rindone
Raymond Rindone
Executive Vice President, Interim Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer and Principal Accounting Officer)