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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 June 30, ~~2019~~2020



☐			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~~) (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

☐

~~Large accelerated~~Non-accelerated filer

☒

☐

~~Accelerated filer~~Smaller reporting company

☐

~~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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

BANC

New York Stock Exchange

Depositary Shares each representing a 1/40th interest in a share of 7.375% Non-Cumulative Perpetual Preferred Stock, Series D

BANC PRD

New York Stock Exchange

Depositary Shares each representing a 1/40th interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series E

BANC PRE

New 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 August ~~5, 2019,~~3, 2020, the registrant had outstanding ~~50,402,771~~49,754,330 shares of voting common stock and 477,321 shares of Class B non-voting common stock.

Table of Contents

BANC OF CALIFORNIA, INC.

FORM 10-Q QUARTERLY REPORT

June 30, ~~2019~~2020

Table of Contents


			Page

				~~Page~~

Part I – Financial Information		45

Item 1 –	Financial Statements		45

	Consolidated Statements of Financial Condition		45
	Consolidated Statements of ~~Income~~Operations		56
	Consolidated Statements of Comprehensive Income (Loss)		68
	Consolidated Statements of Stockholders' Equity		79
	Consolidated Statements of Cash Flows		811
	Notes to Consolidated Financial Statements		913

Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations		4550

Item 3 –	Quantitative and Qualitative Disclosures About Market Risk		7680

Item 4 –	Controls and Procedures		7782

Part II – Other Information					7883

Item 1 –	Legal Proceedings		7883

Item 1A –	Risk Factors		7983

Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds		7983

Item 3 –	Defaults Upon Senior Securities		7984

Item 4 –	Mine Safety Disclosures		7984

Item 5 –	Other Information		7984

Item 6 –	Exhibits		8085

Signatures					8186

Table of Contents

Forward-Looking Statements

When used in this report and in public stockholder communications, in other documents of Banc of California, Inc. (the Company, we, us and our) filed with or furnished to the Securities and Exchange Commission (the SEC), 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,” “guidance” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to our future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California Inc. and its affiliates (the "Company", "we", "us" or "our")., as well as the continuing effects of the COVID-19 pandemic on the Company’s business, operations, financial performance and prospects. 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.	an ongoing investigation by the SEC as well as any related litigation or other litigation may result in adverse findings, reputational damage, the imposition of sanctions, increased costs, the diversion of management time and resources, and other negative consequences;


~~ii.~~	~~the costs and effects of litigation generally, including legal fees and other expenses, settlements and judgments;~~


~~iii.~~	~~the risk that our performance may be adversely affected by the CEO transition we have recently undergone;~~


~~iv.~~	the risk that the benefits we realize from exiting the third party mortgage origination and brokered single-family residential lending business will be less than anticipated and that the costs we incur from exiting that business will be greater than anticipated;


v.	~~the risk that we will not be successful in the implementation of our capital utilization strategy and our other strategies for transitioning to a traditional community bank;~~

~~vi.~~

i.the costs and effects of litigation, including legal fees and other expenses, settlements and judgments;

ii.the effect of the novel coronavirus (COVID-19) pandemic and steps taken by governmental and other authorities to contain, mitigate, and combat the pandemic on our business, operations, loan portfolio, financial performance, and prospects;

iii.the risk that the benefits we realize from exiting the third party mortgage origination and brokered single family residential lending business will be less than anticipated and that the costs we incur from exiting that business will be greater than anticipated;

iv.the risk that we will not be successful in the implementation of our capital utilization strategy and our other strategies for transitioning to a traditional community bank;

v.our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or our bank subsidiary or repurchases of our common or preferred stock;

vi.risks that any merger and acquisition transactions of the Company may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all;

~~vii.~~

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 but not limited to the effectiveness of our underwriting practices and the risk of fraud, any of which credit and operational risks may lead to increased loan and lease delinquencies, losses and nonperforming assets in our loan and lease portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our loan and lease loss reserves;


~~viii.~~	the transition to a new accounting standard adopted by the Financial Accounting Standards Board, referred to as Current Expected Credit Loss, which will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;


~~ix.~~	~~the quality and composition of our securities portfolio;~~


x.	~~changes in general economic conditions, either nationally or in our market areas, or changes in financial markets;~~


~~xi.~~	continuation of or changes in the short-term interest rate environment, changes in the levels of general interest rates, volatility in the interest rate environment, the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin and funding sources;


~~xii.~~	~~fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in commercial and residential real estate values in our market area;~~


~~xiii.~~	~~our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;~~

~~xiv.~~

results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, increase our allowance for loan losses, write-down asset values, or increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits, any of which could adversely affect our liquidity and earnings;


~~xv.~~	legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;


~~xvi.~~	~~our ability to control operating costs and expenses;~~


~~xvii.~~	~~staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;~~


~~xviii.~~	~~the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;~~


~~xix.~~	~~errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;~~


~~xx.~~	~~the network and computer systems on which we depend could fail or experience a security breach;~~


~~xxi.~~	~~our ability to attract and retain key members of our senior management team;~~


~~xxii.~~	~~increased competitive pressures among financial services companies;~~


~~xxiii.~~	~~changes in consumer spending, borrowing and saving habits;~~


~~xxiv.~~	~~the effects of severe weather, natural disasters, acts of war or terrorism and other external events on our business;~~


~~xxv.~~	~~the ability of key third-party providers to perform their obligations to us;~~


~~xxvi.~~	changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods;


~~xxvii.~~	share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common shares and attempting to generate negative publicity about us; and

~~xxviii.~~

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, 2018 and under “Part II. Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

~~The~~ Company ~~undertakes~~may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies, and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all;

vii.fluctuations in the demand for loans and fluctuations in commercial and residential real estate values in our market area;

viii.the credit risks of lending activities, which may be affected by deterioration in real estate markets, the financial condition of borrowers, and the operational risk of lending activities, including but not limited to, the effectiveness of our underwriting practices and the risk of fraud; any of which may lead to increased loan delinquencies, losses, and non-performing assets in our loan portfolio which may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves;

ix.the Financial Accounting Standards Board's Current Expected Credit Loss accounting standard, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;

x.the quality and composition of our securities portfolio, particularly the credit risks within our collateralized loan obligation investment portfolio and other asset classes;

xi.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;

xii.changes in general economic conditions, either nationally or in our market areas, or changes in financial markets;

xiii.continuation of, or changes in, the short-term interest rate environment, changes in the levels of general interest rates, volatility in the interest rate environment, the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin, and funding sources;

xiv.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;

xv.results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, increase our allowance for credit losses, write-down asset values, increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits, any of which could adversely affect our liquidity and earnings;

xvi.legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;

xvii.our ability to control operating costs and expenses;

xviii.staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;

xix.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;

xx.failures or security breaches with respect to the network and computer systems on which we depend;

xxi.our ability to attract and retain key members of our senior management team;

xxii.increased competitive pressures among financial services companies;

xxiii.changes in consumer spending, borrowing and saving habits;

xxiv.the effects of severe weather, natural disasters, pandemics, acts of war or terrorism and other external events on our business;

xxv.the ability of key third-party providers to perform their obligations to us;

xxvi.changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods;

xxvii.share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common shares and attempting to generate negative publicity about us; and

xxviii.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, 2019 and under Part II. Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Further, statements about the continuing effects of the COVID-19 pandemic on our business, operations, financial performance, and prospects may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our clients, third parties, and us.

We undertake no obligation to update any such statement to reflect circumstances or events that occur after the date, on which the forward-looking statement is made, except as required by law.

Table of Contents

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)


	June 30, 2019			December 31, 2018				June 30, 2020		December 31, 2019
ASSETS							ASSETS
Cash and due from banks	$	26,283		$	21,875		Cash and due from banks	$	23,394	$	28,890
Interest-earning deposits in financial institutions	287,567			369,717			Interest-earning deposits in financial institutions	397,246		344,582
Total cash and cash equivalents	313,850			391,592			Total cash and cash equivalents	420,640		373,472

Securities available-for-sale, at fair value	1,167,687			1,992,500			Securities available-for-sale, at fair value	1,176,029		912,580
Loans held-for-sale, carried at fair value	23,794			7,690			Loans held-for-sale, carried at fair value	19,768		22,642
Loans held-for-sale, carried at lower of cost or fair value	573,926			426

Loans receivable	6,719,570			7,700,873			Loans receivable	5,627,696		5,951,885
Allowance for loan losses	(59,523		)	(62,192		)
Allowance for credit losses - loans							Allowance for credit losses - loans	(90,370)		(57,649)
Loans receivable, net	6,660,047			7,638,681			Loans receivable, net	5,537,326		5,894,236
Federal Home Loan Bank and other bank stock, at cost	76,373			68,094			Federal Home Loan Bank and other bank stock, at cost	46,585		59,420
Premises, equipment, and capital leases, net	129,227			129,394

Premises, equipment, net							Premises, equipment, net	125,247		128,021
Bank owned life insurance	108,132			107,027			Bank owned life insurance	110,487		109,819
Operating lease right of use assets	24,118			—
Goodwill	37,144			37,144
Operating lease right-of-use assets							Operating lease right-of-use assets	19,408		22,540
Investments in alternative energy partnerships, net	26,633			28,988			Investments in alternative energy partnerships, net	26,967		29,300
Deferred income taxes, net	42,798			49,404			Deferred income taxes, net	48,288		44,906
Income tax receivable	2,547			2,695			Income tax receivable	13,094		4,233
Goodwill							Goodwill	37,144		37,144
Other intangible assets, net	5,105			6,346			Other intangible assets, net	3,292		4,151

Other assets	168,550			150,596			Other assets	185,863		185,946
Assets of discontinued operations	—			19,490
Total assets	$	9,359,931		$	10,630,067		Total assets	$	7,770,138	$	7,828,410
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	$	993,745		$	1,023,360		Noninterest-bearing deposits	$	1,391,504	$	1,088,516
Interest-bearing deposits	5,298,545			6,893,284			Interest-bearing deposits	4,645,961		4,338,651
Total deposits	6,292,290			7,916,644			Total deposits	6,037,465		5,427,167
Advances from Federal Home Loan Bank	1,825,000			1,520,000
Long term debt, net	173,257			173,174
Federal Home Loan Bank advances, net							Federal Home Loan Bank advances, net	617,170		1,195,000

Long-term debt, net							Long-term debt, net	173,537		173,421
Reserve for loss on repurchased loans							Reserve for loss on repurchased loans	5,567		6,201

Operating lease liabilities	25,457			—			Operating lease liabilities	20,531		23,692

Accrued expenses and other liabilities	80,383			74,715			Accrued expenses and other liabilities	68,909		95,684
Total liabilities	8,396,387			9,684,533			Total liabilities	6,923,179		6,921,165
Commitments and contingent liabilities							Commitments and contingent liabilities
Preferred stock	231,128			231,128			Preferred stock	185,037		189,825
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 51,981,149 shares issued and 50,397,769 shares outstanding at June 30, 2019; 51,755,398 shares issued and 50,172,018 shares outstanding at December 31, 2018	520			518
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 June 30, 2019 and 477,321 shares issued and outstanding at December 31, 2018	5			5
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,161,922 shares issued and 49,750,958 shares outstanding at June 30, 2020; 51,997,061 shares issued and 50,413,681 shares outstanding at December 31, 2019							Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,161,922 shares issued and 49,750,958 shares outstanding at June 30, 2020; 51,997,061 shares issued and 50,413,681 shares outstanding at December 31, 2019	522		520
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 June 30, 2020 and at December 31, 2019							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 June 30, 2020 and at December 31, 2019	5		5
Additional paid-in capital	627,306			625,834			Additional paid-in capital	632,117		629,848
Retained earnings	146,039			140,952			Retained earnings	85,670		127,733
Treasury stock, at cost (1,583,380 shares at June 30, 2019 and December 31, 2018)	(28,786		)	(28,786		)
Treasury stock, at cost (2,410,964 and 1,583,380 shares at June 30, 2020 and December 31, 2019)							Treasury stock, at cost (2,410,964 and 1,583,380 shares at June 30, 2020 and December 31, 2019)	(40,827)		(28,786)
Accumulated other comprehensive loss, net	(12,668		)	(24,117		)	Accumulated other comprehensive loss, net	(15,565)		(11,900)
Total stockholders’ equity	963,544			945,534			Total stockholders’ equity	846,959		907,245
Total liabilities and stockholders’ equity	$	9,359,931		$	10,630,067		Total liabilities and stockholders’ equity	$	7,770,138	$	7,828,410

See ~~Accompanying Notes~~accompanying notes to ~~Consolidated Financial Statements (Unaudited)~~consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

Three Months Ended Six Months Ended June 30,
June 30,
2019 March 31,
2019 June 30,
2018 2019 2018
Interest and dividend income
Loans, including fees $ 89,159
$ 90,558
$ 81,307
$ 179,717
$ 156,219
Securities 12,457
17,841
21,455
30,298
43,086
Other interest-earning assets 2,424
2,313
2,423
4,737
4,587
Total interest and dividend income 104,040
110,712
105,185
214,752
203,892
Interest expense
Deposits 28,598
31,443
20,315
60,041
37,110
Federal Home Loan Bank advances 8,289
9,081
9,539
17,370
16,931
Securities sold under repurchase agreements 16
18
211
34
961
Long term debt and other interest-bearing liabilities 2,357
2,362
2,356
4,719
4,688
Total interest expense 39,260
42,904
32,421
82,164
59,690
Net interest income 64,780
67,808
72,764
132,588
144,202
(Reversal of) provision for loan losses (1,987 ) 2,512
2,653
525
22,152
Net interest income after provision for loan losses 66,767
65,296
70,111
132,063
122,050
Noninterest income
Customer service fees 1,434
1,515
1,491
2,949
3,083
Loan servicing income 121
118
948
239
3,259
Income from bank owned life insurance 580
525
533
1,105
1,066
Net gain on sale of securities available-for-sale —
208
278
208
5,519
Net gain on sale of loans 2,826
1,553
821
4,379
780
Net loss on sale of mortgage servicing rights —
—
(155 ) —
(2,450 )
Other (loss) income (7,251 ) 2,376
4,145
(4,875 ) 5,386
Total noninterest (loss) income (2,290 ) 6,295
8,061
4,005
16,643
Noninterest expense
Salaries and employee benefits 27,506
28,439
29,440
55,945
60,555
Occupancy and equipment 7,955
7,686
7,883
15,641
15,570
Professional fees (reimbursement) (2,903 ) 11,041
6,303
8,138
15,480
Outside service fees 489
403
413
892
2,959
Data processing 1,672
1,496
1,678
3,168
3,334
Advertising and promotion 2,048
2,057
2,864
4,105
6,141
Regulatory assessments 2,136
2,482
2,196
4,618
4,288
(Gain) loss on investments in alternative energy partnerships (355 ) 1,950
1,808
1,595
1,774
Reversal of provision for loan repurchases (61 ) (116 ) (218 ) (177 ) (2,006 )
Amortization of intangible assets 621
620
827
1,241
1,670
Restructuring (reversal) expense (158 ) 2,795
3,983
2,637
3,983
All other expense 4,637
2,982
5,362
7,619
8,591
Total noninterest expense 43,587
61,835
62,539
105,422
122,339
Income from continuing operations before income taxes 20,890
9,756
15,633
30,646
16,354
Income tax expense (benefit) 4,308
2,719
1,779
7,027
(4,574 )
Income from continuing operations 16,582
7,037
13,854
23,619
20,928
Income from discontinued operations before income taxes (including net gain on disposal of $0, $0 and $272 for the three months ended June 30, 2019, March 31, 2019 and 2018, respectively, and $0 and $1,275 for the six months ended June 30, 2019 and 2018, respectively) —
—
1,281
—
3,325
Income tax expense —
—
355
—
915
Income from discontinued operations —
—
926
—
2,410
Net income 16,582
7,037
14,780
23,619
23,338
Preferred stock dividends 4,308
4,308
5,113
8,616
10,226
Income allocated to participating securities 271
—
86
153
—
Participating securities dividends 94
202
203
295
406
Net income available to common stockholders $ 11,909
$ 2,527
$ 9,378
$ 14,555
$ 12,706
Basic earnings per common share
Income from continuing operations $ 0.23
$ 0.05
$ 0.17
$ 0.29
$ 0.20
Income from discontinued operations —
—
0.02
—
0.05
Net income $ 0.23
$ 0.05
$ 0.19
$ 0.29
$ 0.25
Diluted earnings per common share
Income from continuing operations $ 0.23
$ 0.05
$ 0.16
$ 0.29
$ 0.20
Income from discontinued operations —
—
0.02
—
0.05
Net income $ 0.23
$ 0.05
$ 0.18
$ 0.29
$ 0.25
Basic earnings per class B common share
Income from continuing operations $ 0.23
$ 0.05
$ 0.17
$ 0.29
$ 0.20
Income from discontinued operations —
—
0.02
—
0.05
Net income $ 0.23
$ 0.05
$ 0.19
$ 0.29
$ 0.25
Diluted earnings per class B common share
Income from continuing operations $ 0.23
$ 0.05
$ 0.17
$ 0.29
$ 0.20
Income from discontinued operations —
—
0.02
—
0.05
Net income $ 0.23
$ 0.05
$ 0.19
$ 0.29
$ 0.25


	Three Months Ended										Six Months Ended June 30,
	June 30, 2020		March 31, 2020		June 30, 2019		2020		2019
Interest and dividend income
Loans, including fees	$	63,642	$	65,534	$	89,159	$	129,176	$	179,717
Securities	7,816		7,820		12,457		15,636		30,298
Other interest-earning assets	1,239		1,360		2,424		2,599		4,737
Total interest and dividend income	72,697		74,714		104,040		147,411		214,752
Interest expense
Deposits	10,205		14,611		28,598		24,816		60,041
Federal Home Loan Bank advances	4,818		5,883		8,289		10,701		17,370
Securities sold under repurchase agreements	2		—		16		2		34
Long-term debt and other interest-bearing liabilities	2,357		2,359		2,357		4,716		4,719
Total interest expense	17,382		22,853		39,260		40,235		82,164
Net interest income	55,315		51,861		64,780		107,176		132,588
Provision for (reversal of) credit losses	11,826		15,761		(1,900)		27,587		198
Net interest income after provision for (reversal of) credit losses	43,489		36,100		66,680		79,589		132,390
Noninterest income
Customer service fees	1,224		1,096		1,434		2,320		2,949
Loan servicing income	95		75		121		170		239
Income from bank owned life insurance	591		578		580		1,169		1,105

Net gain on sale of securities available-for-sale	2,011		—		—		2,011		208
Fair value adjustment for loans held-for-sale	25		(1,586)		59		(1,561)		60
Net (loss) gain on sale of loans	—		(27)		2,767		(27)		4,319

Other income (loss)	1,582		1,925		(7,251)		3,507		(4,875)
Total noninterest income (loss)	5,528		2,061		(2,290)		7,589		4,005
Noninterest expense
Salaries and employee benefits	24,260		23,436		27,506		47,696		55,945
Naming rights termination	26,769		—		—		26,769		—
Occupancy and equipment	7,090		7,243		7,955		14,333		15,641
Professional fees	4,596		5,964		(2,903)		10,560		8,138

Data processing	1,536		1,773		1,672		3,309		3,168
Advertising and promotion	1,157		1,756		2,048		2,913		4,105
Regulatory assessments	725		484		2,136		1,209		4,618
(Gain) loss on investments in alternative energy partnerships	(167)		1,905		(355)		1,738		1,595
Reversal of provision for loan repurchases	(34)		(600)		(61)		(634)		(177)
Amortization of intangible assets	430		429		621		859		1,241

Restructuring (reversal) expense	—		—		(158)		—		2,637
All other expense	6,408		4,529		5,039		10,937		8,838
Total noninterest expense	72,770		46,919		43,500		119,689		105,749
(Loss) income from operations before income taxes	(23,753)		(8,758)		20,890		(32,511)		30,646
Income tax (benefit) expense	(5,304)		(2,165)		4,308		(7,469)		7,027




Net (loss) income	(18,449)		(6,593)		16,582		(25,042)		23,619
Preferred stock dividends	3,442		3,533		4,308		6,975		8,616
Income allocated to participating securities	—		—		271		—		153
Participating securities dividends	94		94		94		188		295
Impact of preferred stock redemption	(49)		(526)		—		(575)		—
Net (loss) income available to common stockholders	$	(21,936)	$	(9,694)	$	11,909	$	(31,630)	$	14,555
(Loss) earnings per common share:


Basic	$	(0.44)	$	(0.19)	$	0.23	$	(0.63)	$	0.29



Diluted	$	(0.44)	$	(0.19)	$	0.23	$	(0.63)	$	0.29
(Loss) earnings per class B common share:


Basic	$	(0.44)	$	(0.19)	$	0.23	$	(0.63)	$	0.29



Diluted	$	(0.44)	$	(0.19)	$	0.23	$	(0.63)	$	0.29

See ~~Accompanying Notes~~accompanying notes to ~~Consolidated Financial Statements (Unaudited)~~consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(Unaudited)


	Three Months Ended										Six Months Ended June 30,
	June 30, 2020		March 31, 2020		June 30, 2019		2020		2019
Net (loss) income	$	(18,449)	$	(6,593)	$	16,582	$	(25,042)	$	23,619
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities:
Unrealized gain (loss) arising during the period	40,002		(42,248)		5,423		(2,246)		11,596


Reclassification adjustment for (gain) loss included in net (loss) income	(1,419)		—		—		(1,419)		(147)
Total change in unrealized gain (loss) on available-for-sale securities	38,583		(42,248)		5,423		(3,665)		11,449




Total other comprehensive income (loss)	38,583		(42,248)		5,423		(3,665)		11,449
Comprehensive income (loss)	$	20,134	$	(48,841)	$	22,005	$	(28,707)	$	35,068

Three Months Ended Six Months Ended June 30,
June 30,
2019 March 31,
2019 June 30,
2018 2019 2018
Net income $ 16,582
$ 7,037
$ 14,780
$ 23,619
$ 23,338
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities:
Unrealized gain (loss) arising during the period 5,423
6,173
(7,631 ) 11,596
(21,192 )
Reclassification adjustment for gain included in net income —
(147 ) (197 ) (147 ) (3,901 )
Total change in unrealized gain (loss) on available-for-sale securities 5,423
6,026
(7,828 ) 11,449
(25,093 )
Total other comprehensive income (loss) 5,423
6,026
(7,828 ) 11,449
(25,093 )
Comprehensive income (loss) $ 22,005
$ 13,063
$ 6,952
$ 35,068
$ (1,755 )

See ~~Accompanying Notes~~accompanying notes to ~~Consolidated Financial Statements (Unaudited)~~consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands)

(Unaudited)


	Preferred Stock		Common Stock								Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
					Voting			Class B Non-Voting
Three Months Ended June 30, 2020
Balance at March 31, 2020	$	187,687	$	520		$	5		$	631,125	$	110,640	$	(40,827)	$	(54,148)	$	835,002

Comprehensive loss:
Net loss	—		—			—			—		(18,449)		—		—		(18,449)
Other comprehensive income, net	—		—			—			—		—		—		38,583		38,583
Issuance of common stock	—		2			—			(2)		—		—		—		—

Redemption of preferred stock	(2,650)		—			—			—		49		—		—		(2,601)




Share-based compensation expense	—		—			—			1,470		—		—		—		1,470

Restricted stock surrendered due to employee tax liability	—		—			—			(476)		—		—		—		(476)

Shares purchased under the Dividend Reinvestment Plan	—		—			—			—		(28)		—		—		(28)
Stock appreciation right dividend equivalents	—		—			—			—		(94)		—		—		(94)
Dividends declared ($0.06 per common share)	—		—			—			—		(3,006)		—		—		(3,006)
Preferred stock dividends	—		—			—			—		(3,442)		—		—		(3,442)
Balance at June 30, 2020	$	185,037	$	522		$	5		$	632,117	$	85,670	$	(40,827)	$	(15,565)	$	846,959


Three Months Ended June 30, 2019
Balance at March 31, 2019	$	231,128	$	518		$	5		$	626,608	$	136,943	$	(28,786)	$	(18,091)	$	948,325
Comprehensive income:
Net income	—		—			—			—		16,582		—		—		16,582
Other comprehensive income, net	—		—			—			—		—		—		5,423		5,423
Issuance of common stock	—		2			—			(2)		—		—		—		—









Share-based compensation expense	—		—			—			1,497		—		—		—		1,497
Restricted stock surrendered due to employee tax liability	—		—			—			(797)		—		—		—		(797)

Shares purchased under the Dividend Reinvestment Plan	—		—			—			—		(26)		—		—		(26)
Stock appreciation right dividend equivalents	—		—			—			—		(94)		—		—		(94)
Dividends declared ($0.06 per common share)	—		—			—			—		(3,058)		—		—		(3,058)
Preferred stock dividends	—		—			—			—		(4,308)		—		—		(4,308)
Balance at June 30, 2019	$	231,128	$	520		$	5		$	627,306	$	146,039	$	(28,786)	$	(12,668)	$	963,544
Six Months Ended June 30, 2020
Balance at December 31, 2019	$	189,825	$	520		$	5		$	629,848	$	127,733	$	(28,786)	$	(11,900)	$	907,245
Impact of adoption of ASU No. 2016-13	—		—			—			—		(4,503)		—		—		(4,503)
Comprehensive loss:
Net loss	—		—			—			—		(25,042)		—		—		(25,042)
Other comprehensive loss, net	—		—			—			—		—		—		(3,665)		(3,665)
Issuance of common stock	—		2			—			(2)		—		—		—		—

Redemption of preferred stock	(4,788)		—			—			—		575		—		—		(4,213)

Purchase of 827,584 shares of treasury stock	—		—			—			—		—		(12,041)		—		(12,041)


Share-based compensation expense	—		—			—			3,046		—		—		—		3,046

Restricted stock surrendered due to employee tax liability	—		—			—			(775)		—		—		—		(775)

Shares purchased under the Dividend Reinvestment Plan	—		—			—			—		(47)		—		—		(47)
Stock appreciation right dividend equivalents	—		—			—			—		(188)		—		—		(188)
Dividends declared ($0.12 per common share)	—		—			—			—		(5,883)		—		—		(5,883)
Preferred stock dividends	—		—			—			—		(6,975)		—		—		(6,975)
Balance at June 30, 2020	$	185,037	$	522		$	5		$	632,117	$	85,670	$	(40,827)	$	(15,565)	$	846,959


Six Months Ended June 30, 2019
Balance at December 31, 2018	$	231,128	$	518		$	5		$	625,834	$	140,952	$	(28,786)	$	(24,117)	$	945,534
Comprehensive income:
Net income	—		—			—			—		23,619		—		—		23,619
Other comprehensive income, net	—		—			—			—		—		—		11,449		11,449
Issuance of common stock	—		2			—			(2)		—		—		—		—









Share-based compensation expense	—		—			—			2,350		—		—		—		2,350
Restricted stock surrendered due to employee tax liability	—		—			—			(876)		—		—		—		(876)

Shares purchased under the Dividend Reinvestment Plan	—		—			—			—		(76)		—		—		(76)
Stock appreciation right dividend equivalents	—		—			—			—		(296)		—		—		(296)
Dividends declared ($0.19 per common share)	—		—			—			—		(9,544)		—		—		(9,544)
Preferred stock dividends	—		—			—			—		(8,616)		—		—		(8,616)
Balance at June 30, 2019	$	231,128	$	520		$	5		$	627,306	$	146,039	$	(28,786)	$	(12,668)	$	963,544

Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
Voting Class B Non-Voting
Balance at December 31, 2017 $ 269,071
$ 517
$ 5
$ 621,435
$ 144,839
$ (28,786 ) $ 5,227
$ 1,012,308
Reclassification of stranded tax effects to retained earnings —
—
—
—
(496 ) —
496
—
Adjusted Balance at December 31, 2017 269,071
517
5
621,435
144,343
(28,786 ) 5,723
1,012,308
Comprehensive income (loss):
Net income —
—
—
—
8,558
—
—
8,558
Other comprehensive loss, net —
—
—
—
—
—
(17,265 ) (17,265 )
Share-based compensation expense —
—
—
2,087
—
—
—
2,087
Restricted stock surrendered due to employee tax liability —
—
—
(97 ) —
—
—
(97 )
Shares purchased under the Dividend Reinvestment Plan —
—
—
58
(74 ) —
—
(16 )
Stock appreciation right dividend equivalents —
—
—
—
(203 ) —
—
(203 )
Dividends declared ($0.13 per common share) —
—
—
—
(6,503 ) —
—
(6,503 )
Preferred stock dividends —
—
—
—
(5,113 ) —
—
(5,113 )
Balance at March 31, 2018 $ 269,071
$ 517
$ 5
$ 623,483
$ 141,008
$ (28,786 ) $ (11,542 ) $ 993,756

Comprehensive income (loss):
Net income —
—
—
—
14,780
—
—
14,780
Other comprehensive loss, net —
—
—
—
—
—
(7,828 ) (7,828 )
Issuance of common stock —
1
(1 ) —
—
—
—
—
Share-based compensation expense —
—
—
1,788
—
—
—
1,788
Restricted stock surrendered due to employee tax liability —
(1 ) —
(1,973 ) —
—
—
(1,974 )
Shares purchased under the Dividend Reinvestment Plan —
—
—
74
(68 ) —
—
6
Stock appreciation right dividend equivalents —
—
—
—
(203 ) —
—
(203 )
Dividends declared ($0.13 per common share) —
—
—
—
(6,524 ) —
—
(6,524 )
Preferred stock dividends —
—
—
—
(5,113 ) —
—
(5,113 )
Balance at June 30, 2018 $ 269,071
$ 517
$ 4
$ 623,372
$ 143,880
$ (28,786 ) $ (19,370 ) —
$ 988,688

Balance at December 31, 2018 $ 231,128
$ 518
$ 5
$ 625,834
$ 140,952
$ (28,786 ) $ (24,117 ) $ 945,534
Comprehensive income:
Net income —
—
—
—
7,037
—
—
7,037
Other comprehensive income, net —
—
—
—
—
—
6,026
6,026
Share-based compensation expense —
—
—
853
—
—
—
853
Restricted stock surrendered due to employee tax liability —
—
—
(79 ) —
—
—
(79 )
Shares purchased under the Dividend Reinvestment Plan —
—
—
—
(50 ) —
—
(50 )
Stock appreciation right dividend equivalents —
—
—
—
(202 ) —
—
(202 )
Dividends declared ($0.13 per common share) —
—
—
—
(6,486 ) —
—
(6,486 )
Preferred stock dividends —
—
—
—
(4,308 ) —
—
(4,308 )
Balance at March 31, 2019 $ 231,128
$ 518
$ 5
$ 626,608
$ 136,943
$ (28,786 ) $ (18,091 ) $ 948,325

Comprehensive income:
Net income —
—
—
—
16,582
—
—
16,582
Other comprehensive income, net —
—
—
—
—
—
5,423
5,423
Issuance of common stock —
2
—
(2 ) —
—
—
—
Share-based compensation expense —
—
—
1,497
—
—
—
1,497
Restricted stock surrendered due to employee tax liability —
—
—
(797 ) —
—
—
(797 )
Shares purchased under the Dividend Reinvestment Plan —
—
—
—
(26 ) —
—
(26 )
Stock appreciation right dividend equivalents —
—
—
—
(94 ) —
—
(94 )
Dividends declared ($0.06 per common share) —
—
—
—
(3,058 ) —
—
(3,058 )
Preferred stock dividends —
—
—
—
(4,308 ) —
—
(4,308 )
Balance at June 30, 2019 $ 231,128
$ 520
$ 5
$ 627,306
$ 146,039
$ (28,786 ) $ (12,668 ) $ 963,544

See ~~Accompanying Notes~~accompanying notes to ~~Consolidated Financial Statements (Unaudited)~~consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net (loss) income	$	(25,042)	$	23,619
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Provision for credit losses	27,587		198

Reversal of provision for loan repurchases	(634)		(177)
Depreciation on premises and equipment	8,404		5,290
Amortization of intangible assets	859		1,241
Amortization of debt issuance costs	139		83
Net amortization of premium on securities	258		649

Net amortization of deferred loan costs and fees	(553)		83
Accretion of discounts on purchased loans	(355)		(125)
Write-off of other assets related to naming rights termination, net	6,669		—
Debt extinguishment fee	2,515		—
Deferred income tax (benefit) expense	(71)		1,841
Bank owned life insurance income	(1,169)		(1,105)
Share-based compensation expense	3,046		2,350
Loss on interest rate swaps	288		9,583
Loss on investments in alternative energy partnerships and affordable housing investments	4,033		2,785

Impairment on capitalized software projects	157		835


Fair value adjustment for loans held-for-sale	1,561		(60)
Net loss (gain) on sale of loans	27		(4,319)
Net gain on sale of securities available-for-sale	(2,011)		(208)

Loss on sale or disposal of property and equipment	106		9



Repurchase of mortgage loans	—		(699)


Proceeds from sales of and principal collected on loans held-for-sale	613		3,849
Proceeds from sales of and principal collected on other loans held-for-sale	—		426


Change in accrued interest receivable and other assets	1,119		(14,593)

Change in accrued interest payable and other liabilities	(30,093)		(5,341)
Net cash (used in) provided by operating activities	(2,547)		26,214

Cash flows from investing activities:
Proceeds from sales of securities available-for-sale	22,728		782,019
Proceeds from maturities and calls of securities available-for-sale	30,000		38,029
Proceeds from principal repayments of securities available-for-sale	2,971		20,538

Purchases of securities available-for-sale	(322,590)		—


Cash received from bank-owned life insurance	501		—




Loan originations and principal collections, net	349,818		(149,182)
Purchase of loans and leases	(25,839)		—
Redemption of Federal Home Loan Bank stock	22,171		29,760
Purchase of Federal Home Loan Bank and other bank stock	(9,336)		(38,039)
Proceeds from sale of loans	—		558,021

Proceeds from sale of other real estate owned	—		551


Purchases of premises and equipment	(3,467)		(5,967)
Payments of capital lease obligations	(266)		(259)
Funding of equity investment	(14,201)		(1,501)
(Increase) decrease in investments in alternative energy partnerships	(2,630)		760
Net cash provided by investing activities	49,860		1,234,730


Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposits	610,298		(1,624,354)
Net (decrease) increase in short-term Federal Home Loan Bank advances	(447,000)		305,000
Repayment of long-term Federal Home Loan Bank advances	(235,000)		—
Proceeds from long-term Federal Home Loan Bank advances	111,000		—
Debt extinguishment and financing fees paid	(9,368)		—




Redemption of preferred stock	(4,213)		—




Purchase of treasury stock	(12,041)		—


Purchase of restricted stock surrendered due to employee tax liability	(775)		(876)
Dividend equivalents paid on stock appreciation rights	(188)		(296)
Dividends paid on preferred stock	(6,975)		(8,616)
Dividends paid on common stock	(5,883)		(9,544)
Net cash used in financing activities	(145)		(1,338,686)
Net change in cash and cash equivalents	47,168		(77,742)
Cash and cash equivalents at beginning of period	373,472		391,592
Cash and cash equivalents at end of period	$	420,640	$	313,850

Supplemental cash flow information
Interest paid on deposits and borrowed funds	40,626		85,733
Income taxes paid	62		2,822
Income taxes refunds received	—		7

Supplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, net	—		276
Transfer of loans held-for-investment to loans held-for-sale	—		1,127,339



Equipment acquired under capital leases	30		40
Operating lease right-of-use assets recognized	—		27,421
Operating lease liabilities recognized	—		28,822
Impact of adoption of ASU 2016-13 on retained earnings	(4,503)		—

Six Months Ended June 30,
2019 2018
Cash flows from operating activities:
Net income $ 23,619
$ 23,338
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 525
22,152
(Reversal of) provision for unfunded loan commitments (327 ) 315
Reversal of provision for loan repurchases (177 ) (2,006 )
Depreciation on premises and equipment 5,290
5,212
Amortization of intangible assets 1,241
1,670
Amortization of debt issuance cost 83
76
Net amortization of premium and discount on securities 649
530
Net accretion of deferred loan costs and fees 83
(228 )
Accretion of discounts on purchased loans (125 ) (562 )
Deferred income tax expense (benefit) 1,841
(852 )
Bank owned life insurance income (1,105 ) (1,066 )
Share-based compensation expense 2,350
3,875
Loss on interest rate swaps 9,583
—
Loss on investments in alternative energy partnerships 1,595
1,774
Impairment on capitalized software projects 835
498
Net revenue from mortgage banking activities —
(288 )
Net gain on sale of loans (4,379 ) (780 )
Net gain on sale of securities available for sale (208 ) (5,519 )
Loss from change of fair value of mortgage servicing rights —
1,241
Loss on sale or disposal of property and equipment 9
61
Loss on sale of mortgage servicing rights —
2,450
Net gain on disposal of discontinued operations —
(1,275 )
Repurchase of mortgage loans (699 ) (11,091 )
Originations of other loans held-for-sale —
(6,274 )
Proceeds from sales of and principal collected on loans held-for-sale from mortgage banking 3,849
15,417
Proceeds from sales of and principal collected on other loans held-for-sale 426
5,751
Change in accrued interest receivable and other assets (13,403 ) 5,117
Change in accrued interest payable and other liabilities (5,341 ) (8,678 )
Net cash provided by operating activities 26,214
50,858
Cash flows from investing activities:
Proceeds from sales of securities available-for-sale 782,019
392,556
Proceeds from maturities and calls of securities available-for-sale 38,029
220,400
Proceeds from principal repayments of securities available-for-sale 20,538
20,451
Purchases of securities available-for-sale —
(247,530 )
Loan and lease originations and principal collections, net (149,182 ) (602,103 )
Redemption of Federal Home Loan Bank stock (38,039 ) 13,642
Purchase of Federal Home Loan Bank and other bank stock 29,760
(13,725 )
Proceeds from sale of loans 558,021
211,459
Proceeds from sale of other real estate owned 551
1,484
Proceeds from sale of mortgage servicing rights —
30,056
Proceeds from sale of premises and equipment —
19
Purchases of premises and equipment (5,967 ) (5,569 )
Payments of capital lease obligations (259 ) (253 )
Funding of equity investment (1,501 ) (1,864 )
Decrease in investments in alternative energy partnerships 760
1,027
Net cash provided by investing activities 1,234,730
20,050
Cash flows from financing activities:
Net decrease in deposits (1,624,354 ) (157,109 )
Net increase (decrease) in short-term Federal Home Loan Bank advances 305,000
(270,000 )
Proceeds from long-term Federal Home Loan Bank advances —
380,000
Purchase of restricted stock surrendered due to employee tax liability (876 ) (2,071 )
Dividend equivalents paid on stock appreciation rights (296 ) (404 )
Dividends paid on preferred stock (8,616 ) (10,226 )
Dividends paid on common stock (9,544 ) (13,106 )
Net cash used in financing activities (1,338,686 ) (72,916 )
Net change in cash and cash equivalents (77,742 ) (2,008 )
Cash and cash equivalents at beginning of period 391,592
387,699
Cash and cash equivalents at end of period $ 313,850
$ 385,691
Supplemental cash flow information
Interest paid on deposits and borrowed funds 85,733
58,727
Income taxes paid 2,822
2,337
Income taxes refunds received 7
24
Supplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, net 276
434
Transfer of loans held-for-investment to loans held-for-sale 1,127,339
211,824
Equipment acquired under capital leases 40
21
Operating lease right of use assets recognized 27,421
—
Operating lease liabilities recognized

28,822

Reclassification of stranded tax effects to retained earnings —
496
Due on unsettled securities purchases —
132,546

See ~~Accompanying Notes~~accompanying notes to ~~Consolidated Financial Statements (Unaudited)~~consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, ~~2019~~2020

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: Banc of California, Inc. (collectively, with its consolidated subsidiaries, the Company, we, us, and our) is a financial holding company under the Bank Holding Company Act of 1956, as amended, headquartered in Santa Ana, California and incorporated under the laws of Maryland. Banc of California, Inc. is subject to regulation by the Board of Governors of the Federal Reserve System ~~(FRB)~~(“FRB”) and its ~~wholly owned~~wholly-owned subsidiary, Banc of California, National Association (the Bank), operates under a national bank charter issued by the Office of the Comptroller of the Currency ~~(OCC)~~(“OCC”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank ~~(FHLB)~~(“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation ~~(FDIC)~~(“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 ~~32 banking offices, serving San Diego, Los Angeles, Santa Barbara, and Orange counties in~~31 full-service branches located throughout Southern California as of June 30, ~~2019.~~2020.

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)~~(“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, ~~2018~~2019 filed by ~~the Company~~us with the SEC. The December 31, ~~2018~~2019 consolidated statements of financial condition presented herein has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the ~~SEC, but does not include all~~SEC. Certain prior period amounts have been reclassified to conform to current period presentation, including i) reclassification of the ~~disclosures required by GAAP~~provision for ~~complete financial statements.~~losses on unfunded loan commitments from being included in other noninterest expense to being included within provision for credit losses, ii) showing the unrealized fair value adjustment for loans held-for-sale separate from the realized net (loss) gain on sale of loans, and iii) reclassification of outside services expense from "outside services fees" to "all other expense" in the consolidated statements of operations.

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 and six months ended June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020.

Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and for the three and six months ended June 30, ~~2019~~2020 and ~~2018.~~2019. 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~~wholly-owned subsidiaries.

Adopted Accounting Pronouncements:

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses. The measurement of expected credit losses under the CECL model is applicable to financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities and off-balance sheet credit exposures. ASU 2016-13 also requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. In addition, ASU 2016-13 modifies the other-than-temporary impairment (“OTTI”) model for available-for-sale (“AFS”) debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on improvements in credit quality.

We adopted ASU 2016-13 using the modified retrospective method for our financial assets measured at cost, including loans receivable and off-balance sheet credit exposures. Results for reporting periods beginning January 1, 2020 are reported under ASU 2016-13 (or Accounting Standards Codification 326), while prior period results continue to be reported under the previously applicable GAAP. The adoption of ASU 2016-13 on January 1, 2020 resulted in an increase of $6.4 million to our allowance for credit losses and an after-tax net decrease in retained earnings of $4.5 million. This transition adjustment reflects the development of our models to estimate lifetime expected credit losses on our loans, unfunded commitments, and other off-balance sheet credit exposure primarily using a lifetime loss methodology.

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The following table presents the impact of adopting ASU 2016-13 on January 1, 2020:


($ in thousands)	As Reported Under ASC 326		Pre- ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses - loans
Commercial:
Commercial and industrial	$	23,015	$	22,353	$	662
Commercial real estate	10,788		5,941		4,847
Multifamily	13,214		11,405		1,809
SBA	3,508		3,120		388
Construction	4,009		3,906		103
Consumer:
Single family residential mortgage	10,066		10,486		(420)
Other consumer	658		438		220
Total	65,258		57,649		7,609

Liabilities:
Allowance for credit losses - unfunded loan commitments	$	2,838	$	4,064	$	(1,226)

Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. ~~The Company has~~We have not made any significant changes in ~~its~~our critical accounting policies from those disclosed in ~~its~~our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the SEC, except for the accounting for ~~leases~~loans and the allowance for credit losses, the allowance for credit losses on unfunded loan commitments, troubled debt restructurings, and available-for-sale debt securities as described below.

~~Leases.~~Allowance for Credit Losses (ACL): The ~~Company determines if an arrangement~~ACL is a ~~lease~~reserve established through a provision for credit loss expense and represents management’s best estimate of the net amount expected to be collected from loans receivable as of the date of the consolidated statements of financial condition. Confirmed losses are charged against the ACL. Subsequent recoveries, if any, are credited to the ACL. We perform an analysis of the adequacy of the ACL at ~~inception.~~least quarterly. Management estimates the required ACL balance using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions, and other factors. The ~~Company’s operating lease agreements are primarily~~ACL consists of; (i) a specific allowance established for ~~real estate space and are included within right of use (ROU) assets and lease liabilities~~probable losses on ~~the June 30, 2019 consolidated balance sheet. The ROU asset is~~individually identified impaired loans, (ii) a quantitative allowance for current expected loan losses based on the ~~operating lease liabilities~~portfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the life of loan; and (iii) a qualitative allowance to capture factors and trends that are not adequately reflected in the quantitative allowance, including an evaluation of our underwriting, other credit-related processes, and other credit risk factors such as concentration risk. Accrued interest is excluded from our expected credit loss estimates.

Expected credit losses are estimated over the contractual term of the loans, adjusted for ~~any prepaid~~prepayments, as appropriate. The contractual term excludes expected extensions and renewals unless those extension or ~~deferred rent.~~renewal options are included in the underlying contract and we do not have the ability to unconditionally cancel. The ~~Company~~contractual term also excludes expected modifications unless management has ~~elected not~~a reasonable expectation, at the reporting period, that a troubled debt restructuring will be executed.

A loan is deemed impaired when, based on current information and events, it is probable that we will be unable to ~~recognize on its consolidated balance sheet leases with~~collect all amounts due according to the contractual terms of ~~one-year or less.~~the loan agreement. We measure expected credit losses on all impaired loans individually under the guidance of ASC 326, Receivables, primarily through the evaluation of collateral values and estimated cash flows expected to be collected. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal and then to interest income. Loans for which the terms have been modified by granting a concession that normally would not be provided and where the borrower is experiencing financial difficulties are considered troubled debt restructurings (“TDRs”) and classified as impaired.

~~ROU assets represent our right to use an underlying asset~~Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls, generally, are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the

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borrower, including the length of the delay, the reasons for the ~~lease term~~delay, the borrower’s prior payment record, and ~~lease liabilities represent our obligation~~the amount of the shortfall in relation to ~~make lease payments arising from~~ the ~~lease. ROU assets~~principal and ~~lease liabilities~~interest owed. The impairment amount on a collateral dependent loan is generally charged-off to the ACL and the impairment amount on a loan, that is not collateral dependent, is set-up as a specific reserve. TDRs are ~~recognized~~also measured at ~~the commencement date based on~~ the present value of ~~lease~~estimated future cash flows using the loan’s effective rate at inception or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral. For TDRs that subsequently default, we determine the amount of reserve in accordance with the accounting policy for the ACL.

At June 30, 2020, the following loan portfolio segments have been identified:

•Commercial and industrial (general commercial and industrial, warehouse lending, and indirect/direct leveraged lending)

•Commercial real estate

•Multifamily

•Small Business Administration (“SBA”)

•Construction

•SFR - 1st deeds of trust (generally SFR mortgage and other)

•Other consumer (HELOC and other)

We categorize loans into risk categories based on relevant information about the ability of borrowers to service their obligations such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk.

Loans secured by multifamily and commercial real estate properties generally involve a greater degree of credit risk than SFR mortgage loans. Because payments on loans secured by multifamily and commercial real estate properties are often dependent on the successful operation or management of the properties, repayment of these loans may be subject to adverse conditions in the real estate market or the economy. Commercial and industrial loans are also considered to have a greater degree of credit risk than SFR mortgage loans due to the fact commercial and industrial loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may be substantially dependent on the success of the business itself (which, in turn, is often dependent, in part, upon general economic conditions). SBA loans are similar to commercial and industrial loans, however, they have additional credit enhancement in the form of a guaranty provided by the U.S. Small Business Administration, for up to 85% of the loan amount for loans up to $150 thousand and 75% of the loan amount for loans of more than $150 thousand. SBA loans originated as part of the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) have additional credit enhancement provided by the U.S. Small Business Administration for up to 100% of the loan amount. As of June 30, 2020, we funded $240.7 million in PPP loans. During the three months ended June 30, 2020, we collected $7.5 million in fees on PPP loans funded during the quarter, which will be recognized over ~~the lease term. As most~~their estimated life of 9 months. The 9 months estimated life of PPP loans is based on our understanding of our ~~leases~~clients' cash use, expected forgiveness probability, and loan forgiveness process. The availability of funds for the repayment of financing may be substantially dependent on the success of the business itself which is often dependent, in part, upon general economic conditions. Consumer loans may have greater risk than SFR mortgage loans given that collection of these loans is dependent on the borrower’s continuing financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy.

Green Loans are considered to carry a higher degree of credit risk due to their unique cash flows. Credit risk on this asset class is also managed through the completion of regular third party automated valuation models (“AVMs”) of the underlying collateral and monitoring of the borrower’s usage of this account to determine if the borrower is making monthly payments from external sources or “drawdowns” on their line. In cases where the property values have declined to levels less than the original loan to value (“LTV”) ratios, or other levels deemed prudent by us, we may curtail the line and/or require monthly payments or principal reductions to bring the loan in balance.

On interest only loans, we project future payment changes to determine if there will be a material increase in the required payment and then monitor the loans for possible delinquency. Individual loans are monitored for possible downgrading of risk rating.

Troubled Debt Restructurings: A loan is identified as a TDR when a borrower is experiencing financial difficulties and, for economic or legal reasons related to these difficulties, we grant a concession to the borrower in the restructuring that we would not otherwise consider. We have granted a concession when, as a result of the restructuring to a troubled borrower, we do not ~~provide~~expect to collect all amounts due, including principal and/or interest accrued at the original terms of the loan. The concessions may be granted in various forms, including a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an ~~implicit~~extension of the maturity date, or a note split with principal forgiveness. Loans for which the borrower has been discharged under Chapter 7 bankruptcy are considered collateral dependent TDRs, impaired at the date of discharge, and

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charged down to the fair value of collateral less cost to sell. A restructuring executed at an interest rate that is at market interest rates based on the current credit characteristics of the borrower is not a TDR.

Our policy is to place consumer loan TDRs, except those that were performing prior to TDR status, on non-accrual status for a minimum period of 6 months. Commercial TDRs are evaluated on a case-by-case basis for determination whether or not to place them on non-accrual status. Loans qualify for return to accrual status once they have demonstrated performance under the restructured terms of the loan for a minimum of 6 months. Initially, all TDRs are reported as impaired. Generally, TDRs are classified as impaired loans and reported as TDRs for the remaining life of the loan. Impaired and TDR classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of 6 months, through one fiscal year-end and the restructuring agreement specifies a market rate of interest equal to that which would be provided to a borrower with similar credit at the time of restructuring. In the limited circumstance that a loan is removed from TDR classification, it is our policy to continue to base our measure of loan impairment on the contractual terms specified by the loan agreement.

Troubled Debt Restructuring (TDR) Relief: Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the CARES Act and U.S. banking regulatory agencies have provided relief from TDR accounting. The main benefits of TDR relief include 1) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; 2) a delinquency status benefit, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and 3) a non-accrual status benefit as the loans are generally not reported as non-accrual during the modification period.

Reserve for Unfunded Loan Commitments: The reserve for unfunded loan commitments provides for estimated credit losses for the unused portion of lending commitments expected to be funded, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. The reserve for unfunded loan commitments includes factors that are consistent with ACL methodology for loans using the expected loss factors and a draw down factor applied to the underlying borrower risk and facility grades. Changes in the reserve for unfunded loan commitments are reported as a component of provision for credit losses in the consolidated statements of operations and the reserve for unfunded loan commitments is included in other liabilities in the consolidated statements of financial condition.

Available-for-Sale Debt Securities:Available-for-sale debt securities are analyzed for credit losses under ASC 326, which requires the Company ~~uses its incremental borrowing rate, which is the rate incurred~~ to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment, at lease commencement date in determining the present value of lease payments. Manydetermine whether impairment exists as of the ~~Company’s lessee agreements include options~~reporting date and whether that impairment is due to ~~extend~~credit losses. An allowance for credit losses is established for losses on available-for-sale debt securities due to credit losses and is reported as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. Available-for-sale debt securities are typically classified as non-accrual when the ~~lease, which~~contractual payment of principal or interest has become 90 days past due or management has serious doubts about the ~~Company does not include in its minimum lease terms unless they~~further collectability of principal or interest. When available-for-sale debt securities are reasonably certain to be exercised. The Company elected the practical expedient to combine its lease and related nonlease components for the Company’s building leases. Rental expense for lease payments related to operating leasesplaced on non-accrual status, unpaid interest recognized as interest income is ~~recognized on a straight-line basis over the lease term~~reversed.

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 loan losses (ALLL),~~ACL, reserve for loss on repurchased loans, reserve for unfunded loan commitments,

realization of deferred tax assets, the valuation of goodwill and other intangible assets, mortgage banking, ~~and~~ other derivatives, Hypothetical Liquidation at Book Value ~~(HLBV)~~(“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.

~~Discontinued Operations:~~Recent Accounting Guidance, Not Yet Effective: ~~During~~In December 2019, the ~~three months ended March 31, 2017,~~FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the ~~Company completed~~Accounting for Income Taxes (“ASU 2019-12”). The amendments in this Update simplify the ~~sale~~accounting for income taxes by removing certain exceptions for investments, intra-period allocations, and interim calculations, and add guidance to reduce the complexity of ~~its Banc Home Loans division, which largely represented the Company's Mortgage Banking segment. In accordance with Accounting Standards Codification (ASC) 205-20, the Company determined~~applying Topic 740. This ASU will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. We will adopt this guidance on January 1, 2021. We do not expect that the ~~sale~~adoption of ~~the Banc Home Loans division and certain other mortgage banking related assets and liabilities that would be sold or settled separately within one year met the criteria to be classified as~~these amendments will have a ~~discontinued operation and the related operating results and financial condition have been presented as discontinued operations~~material effect on ~~the~~our consolidated financial statements. See Note 2 for additional information. Unless otherwise indicated, information included in these notes to the consolidated financial statements is presented on a consolidated operations basis, which includes results from both continuing and discontinued operations, as of December 31, 2018 and for the three and six months ended June 30, 2018. There were no material assets, liabilities or operating income as of and for the three and six months ended June 30, 2019 related to discontinued operations.

~~Restructuring Expense:~~ During the three and six months ended June 30, 2019, the Company continued to implement its strategic objective to de-emphasize the production of low margin loan products through its exit from the third-party mortgage origination ("TPMO") and brokered single family lending business. The Company recognized a reversal of restructuring costs of $(158) thousand and restructuring costs of $2.6 million for the three and six months ended June 30, 2019, respectively, associated with the exit from the TPMO and brokered single family lending business and CEO transition.

~~Adopted Accounting Pronouncements:~~ ~~During the six months ended June 30, 2019, the following pronouncements applicable to the Company were adopted:~~

In ~~February 2016,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued ~~Accounting Standards Update (ASU) 2016-02 Topic 842, “Leases”~~ASU 2020-04, Reference Rate Reform (Topic 848), which ~~increases transparency~~provides optional guidance, for a limited period of time, to ease the potential burden in accounting for (or recognizing the benefits of) reference rate reform on financial reporting. The amendments in ASU 2020-04 are elective and ~~comparability among organizations by requiring~~apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. When elected, the ~~recognition~~optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant topic or industry subtopic within the

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codification that contains the guidance that otherwise would be required to be applied. The amendments in ASU 2020-04 are effective for all entities as of ~~use (ROU) assets and lease liabilities on the balance sheet. Most prominent among the changes~~March 12, 2020 through December 31, 2022. We are in the ~~standard is~~process of evaluating the ~~recognition~~potential impact the discontinuation of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted Topic 842 and related updates effective January 1, 2019 and used the effective date as the date of initial application, and therefore, periods prior to January 1, 2019 were not restated. The Company elected the package of practical expedients, which permits us not to reassess prior conclusions about lease identifications, lease classification and initial direct costs under the new standard. The Company did not elect to apply the hindsight practical expedient pertaining to using hindsight knowledge as of the effective date when determining lease terms and impairment. The Company also has elected the short-term lease recognition exemption (leases with terms 12 months or less) for all leases that qualify, and thusLIBOR will not recognize ROU assets or lease liabilities for those leases. In addition, the Company elected the practical expedient to not separate lease and non-lease components for all of our leases. Upon adoption, the Company recognized on its consolidated balance sheet ROU assets of approximately $23.3 million (inclusive of an adjustment to remove the Company's existing deferred rent liability of approximately $1.4 million) with a corresponding operating lease liability of approximately $24.7 million. The standard did not have ~~an impact~~ on our ~~consolidated statements of income. In addition,~~contracts and expect to elect the ~~Company's accounting for finance leases remained substantially unchanged.~~

~~NOTE 2 – SALE OF BUSINESS UNIT (DISCONTINUED OPERATIONS)~~

~~Banc Home Loans Sale~~

~~On March 30, 2017, the Company completed the sale of specific assets~~optional expedients and activities related to its Banc Home Loans division to Caliber Home Loans, Inc. (Caliber). The Banc Home Loans division largely represented the Company's Mortgage Banking segment, the activities of which related to originating, servicing, underwriting, funding and selling single family residential (SFR) mortgage loans. Assets sold to Caliber included mortgage servicing rights (MSRs) on certain conventional agency SFR mortgage loans. The Banc Home Loans division, along with certain other mortgage banking related assets and liabilities that were sold or settled separately within one year, was classified as discontinued operationsexceptions set forth in the accompanying Consolidated Statements of Financial Condition and Consolidated Statements of Income at December 31, 2018 and for the three and six months ended June 30, 2018. Certain components of the Company’s Mortgage Banking segment, including MSRs on certain conventional agency SFR mortgage loans that were not sold as part of the Banc Home Loans sale and repurchase reserves related to previously sold loans, have been classified as continuing operations in the consolidated financial statements as they remain part of the Company’s ongoing operations. Refer to Note 2 of the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for additional information related to this sale.amendments.

There were no gains related to the disposal during the three and six months ended June 30, 2019. For the three and six months ended June 30, 2018, the Company recognized gains related to the disposal of $272 thousand and $1.3 million, respectively.

During the three months ended June 30, 2019 and 2018, the Company recognized earn-out income of $755 thousand and $777 thousand, respectively, related to the sale to Caliber. During the six months ended June 30, 2019 and 2018, the Company recognized an earn-out of $1.2 million and $1.4 million, respectively. At June 30, 2019 there were no material assets or liabilities associated with discontinued operations. At December 31, 2018, assets and liabilities of discontinued operations totaled $19.5 million and zero, respectively.

NOTE 32 – 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.

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, ~~the Company~~we primarily ~~employs~~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. ~~The Company employs~~We employ procedures to monitor the pricing service's assumptions and ~~establishes~~establish processes to challenge the pricing service's 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 ~~U.S. Small Business Administration (SBA)~~SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise ~~(GSE)~~ 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~~management's judgment and evaluation for valuation. ~~The Company~~We had no0 securities available-for-sale classified as Level 3 at June 30, ~~2019~~2020 or December 31, ~~2018.~~2019.

Loans Held-for-Sale, Carried at Fair Value: The fair value of loans held-for-sale is based on commitments outstanding from investors ~~as well as what~~and current offerings in the secondary market ~~investors are currently offering~~ for portfolios with similar characteristics, except for loans that are repurchased out of GNMA loan pools that become severely delinquent which are valued based on an internal model that estimates the expected loss the Company will incur on these loans. Loans previously sold to GNMA that are delinquent more than 90 days are subject to a repurchase option when that condition exists. These loans are re-recognized at fair value and offset by a secured borrowing, as the loans are still legally owned by GNMA but failed sale accounting treatment under GAAP due to the repurchase option.model. Loans held-for-sale subject to recurring fair value adjustments are classified as Level 2, or in the case of loans repurchased, Level 3. The fair value includes the servicing value of the loans ~~as well as~~and any accrued interest. ~~As of June 30, 2019 and December 31, 2018, there were no loans that were delinquent more than 90 days and eligible to be repurchased out of GNMA loan pools.~~

Derivative Assets and ~~Liabilities~~Liabilities::

Interest Rate Swaps and Caps.

~~The Company offers~~ We offer interest rate ~~swaps~~swap and ~~caps~~cap products to certain loan ~~customers~~clients to allow them to hedge the risk of rising interest rates on their variable rate loans. ~~The Company originates~~We originate a variable rate loan and ~~enters~~enter into a variable-to-fixed interest rate swap with the ~~customer. The Company~~client. We also ~~enters~~enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow ~~the Company~~us to originate a variable rate loan while providing a contract for fixed interest payments for the ~~customer.~~client. The net cash flow for ~~the Company~~us is equal to the interest income received from a variable rate loan originated with the ~~customer.~~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. ~~At June 30, 2019, derivative liabilities included interest rate swaps~~

~~related to the pending Freddie Mac multifamily securitization in which we also plan to sell the associated mortgage servicing rights.~~

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Foreign Exchange Contracts.

~~The Company offers~~We offer short-term foreign exchange contracts to ~~its~~ 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, ~~the Company~~we also ~~enters~~enter into offsetting contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. These back-to-back contracts allow ~~the Company~~us to offer ~~its~~our customers foreign exchange products while minimizing ~~its~~ exposure to foreign exchange rate fluctuations. The fair value of these instruments is determined at each reporting period based on the change in the foreign exchange rate. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and ~~resulted~~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.

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The following table presents ~~the Company’s~~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 Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2020
Assets
Securities available-for-sale:

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	105,555	$	—	$	105,555	$	—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	201,136		—		201,136		—
Municipal securities	57,174		—		57,174		—
Non-agency residential mortgage-backed securities	164		—		164		—

Collateralized loan obligations	668,353		—		668,353		—
Corporate debt securities	143,647		—		143,647		—
Loans held-for-sale, carried at fair value	19,768		—		3,083		16,685

Derivative assets:


Interest rate swaps and caps ⁽¹⁾	8,598		—		8,598		—
Foreign exchange contracts ⁽¹⁾	137		—		137		—
Liabilities
Derivative liabilities:


Interest rate swaps and caps ⁽²⁾	9,239		—		9,239		—

Foreign exchange contracts ⁽²⁾	54		—		54		—

December 31, 2019
Assets
Securities available-for-sale:

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	36,456	$	—	$	36,456	$	—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	91,299		—		91,299		—
Municipal securities	52,689		—		52,689		—
Non-agency residential mortgage-backed securities	196		—		196		—

Collateralized loan obligations	718,361		—		718,361		—
Corporate debt securities	13,579		—		13,579		—
Loans held-for-sale, carried at fair value	22,642		—		3,409		19,233

Derivative assets:


Interest rate swaps and caps ⁽¹⁾	3,445		—		3,445		—
Foreign exchange contracts ⁽¹⁾	138		—		138		—
Liabilities
Derivative liabilities:


Interest rate swaps and caps ⁽²⁾	3,717		—		3,717		—
Foreign exchange contracts ⁽²⁾	136		—		136		—

(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.

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Fair Value Measurement Level
($ in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
June 30, 2019
Assets
Securities available-for-sale:
SBA loan pools securities $ 853
$ —
$ 853
$ —
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 429,347
—
429,347
—
Non-agency residential mortgage-backed securities 285
—
285
—
Collateralized loan obligations 737,202
—
737,202
—
Loans held-for-sale, carried at fair value 23,794
—
2,719
21,075
Derivative assets:
Interest rate swaps and caps ⁽¹⁾
4,119
—
4,119
—
Foreign exchange contracts ⁽¹⁾
30
—
30
—
Liabilities
Derivative liabilities:
Interest rate swaps and caps ⁽²⁾
14,041
—
14,041
—
Foreign exchange contracts ⁽²⁾
14
—
14
—
December 31, 2018
Assets
Securities available-for-sale:
SBA loan pools securities $ 910
$ —
$ 910
$ —
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 437,442
—
437,442
—
Non-agency residential mortgage-backed securities 427
—
427
—
Non-agency commercial mortgage-backed securities 132,199
—
132,199
—
Collateralized loan obligations 1,421,522
—
1,421,522
—
Loans held-for-sale, carried at fair value ⁽³⁾
27,180
—
2,140
25,040
Derivative assets:
Interest rate swaps and caps ⁽¹⁾
1,534
—
1,534
—
Liabilities
Derivative liabilities:
Interest rate swaps and caps ⁽²⁾
1,600
—
1,600
—


~~(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.~~


~~(3)~~	Includes loans held-for-sale carried at fair value of $19.5 million ($2.1 million at Level 2 and $17.4 million at Level 3) of discontinued operations, which are included in Assets of Discontinued Operations in the Consolidated Statements of Financial Condition.

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), on a consolidated operations basis, for the periods indicated:


														Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)													($ in thousands)	2020		2019		2020		2019

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019			2018			2019			2018
Loans repurchased from GNMA Loan Pools ⁽¹⁾

Loans repurchased from GNMA Loan Pools													Loans repurchased from GNMA Loan Pools
Balance at beginning of period	$	23,069		$	42,962		$	25,040		$	98,940		Balance at beginning of period	$	17,127	$	23,069	$	19,233	$	25,040
Total gains or losses (realized/unrealized):

Total gains (losses) (realized/unrealized):													Total gains (losses) (realized/unrealized):

Included in earnings—fair value adjustment	(6		)	(248		)	(3		)	(254		)	Included in earnings—fair value adjustment	22		(6)		(1,369)		(3)

Additions	—			2,765			—			27,385			Additions	—		—		—		—
Sales, settlements, and other	(1,988		)	(12,245		)	(3,962		)	(92,837		)	Sales, settlements, and other	(464)		(1,988)		(1,179)		(3,962)
Balance at end of period	$	21,075		$	33,234		$	21,075		$	33,234		Balance at end of period	$	16,685	$	21,075	$	16,685	$	21,075

~~(1)~~

Includes loans repurchased from GNMA Loan Pools of discontinued operations, which is included in Assets of Discontinued Operations in the Consolidated Statements of Financial Condition, of zero and $24.0 million, respectively, for the three months ended June 30, 2019 and 2018 and $17.3 million and $32.3 million for the six months ended June 30, 2019 and 2018 in balance at beginning of period, and zero and $20.9 million, respectively, for both the three and six months ended June 30, 2019 and 2018 in balance at end of period.

Loans repurchased from GNMA loan pools had aggregate unpaid principal balances of $18.6 million and $19.8 million as of June 30, 2020 and December 31, 2019. The significant unobservable inputs used in the fair value measurement of ~~the Company's~~our loans repurchased from GNMA loan pools at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 included an expected loss rate of ~~1.55 percent~~1.55% for insured loans and ~~20.00 percent~~20.00% for uninsured loans. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results.

Fair Value Option

Loans Held-for-Sale, Carried at Fair Value: ~~The Company~~We elected the fair value option for certain SFR mortgage loans held-for-sale. Electing to measure SFR mortgage loans held-for-sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. ~~The Company~~We also elected to record loans repurchased from GNMA at fair value, as ~~the Company intends~~we intend to sell them after curing any defects and, accordingly, they are classified as held-for-sale. Loans previously sold to GNMA that are delinquent more than 90 days are subject to a repurchase option when that condition ~~exists. These~~exists and typically are repurchased by us. To the extent loans are subject to a repurchase option and not repurchased, the loans are re-recognized at fair value and offset by a secured borrowing, as the loans are still legally owned by GNMA. As of June 30, 2020 and December 31, 2019, there were 0 loans subject to such repurchase option and accordingly 0 related secured borrowings.

The following table presents the fair value and aggregate principal balance of certain assets, on a consolidated operations basis, under the fair value option:


																June 30, 2020										December 31, 2019
($ in thousands)															($ in thousands)	Fair Value		Unpaid Principal Balance		Difference		Fair Value		Unpaid Principal Balance		Difference
Loans held-for-sale, carried at fair value:															Loans held-for-sale, carried at fair value:
Total loans															Total loans	$	19,768	$	22,208	$	(2,440)	$	22,642	$	23,455	$	(813)
Non-accrual loans ⁽¹⁾															Non-accrual loans ⁽¹⁾	6,147		7,244		(1,097)		8,125		8,370		(245)

	June 30, 2019							December 31, 2018
($ in thousands)	Fair Value		Unpaid Principal Balance		Difference			Fair Value		Unpaid Principal Balance		Difference
Loans held-for-sale, carried at fair value in continuing operations:
Total loans	$	23,794	$	24,495	$	(701	)	$	7,690	$	7,906	$	(216	)
Non-accrual loans ⁽¹⁾	6,594		6,685		(91		)	2,427		2,538		(111		)
Loans held-for-sale, carried at fair value in discontinued operations:
Total loans	$	—	$	—	$	—		$	19,490	$	20,027	$	(537	)
Non-accrual loans ⁽²⁾	—		—		—			8,430		8,496		(66		)


~~(1)~~	~~Includes loans guaranteed by the U.S. government of $5.9 million and $1.6 million, respectively, at June 30, 2019 and December 31, 2018.~~


~~(2)~~	~~Includes loans guaranteed by the U.S. government of zero and $7.6 million, respectively, at June 30, 2019 and December 31, 2018.~~

(1) Includes loans guaranteed by the U.S. government of $4.4 million and $6.7 million at June 30, 2020 and December 31, 2019.

There were no0 loans held-for-sale that were 90 days or more past due and still accruing interest as of June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The following table presents changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value for the periods indicated:

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Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2018 2019 2018
Net gains (losses) from fair value changes
Net gain (loss) on sale of loans (continuing operations) $ 59
$ 6
$ 60
$ (20 )
Net revenue on mortgage banking activities (discontinued operations) —
(247 ) —
(245 )


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Net (losses) gains from fair value changes:
Fair value adjustment for loans held-for-sale	$	25	$	59	$	(1,561)	$	60

~~Changes in fair value due to instrument-specific credit risk were immaterial for the three and six months ended June 30, 2019 and 2018.~~ Interest income on loans held-for-sale under the fair value option is measured based on the contractual interest rate and reported in interest income on loans, including fees ~~and income from discontinued operations~~ in the consolidated statements of ~~income.~~operations.

Assets and Liabilities Measured on a Non-Recurring Basis

Impaired Loans: The fair value of impaired loans with specific allocations of the ~~ALLL~~ACL based on collateral is generally based on recent real estate appraisals and automated valuation models ~~(AVMs)~~(“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 ~~to adjust~~ 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 ~~the Company’s~~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)									($ in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2020									June 30, 2020
Assets									Assets

Impaired loans:									Impaired loans:

Commercial and industrial									Commercial and industrial	$	10,049	$	—	$	—	$	10,049

			Fair Value Measurement Level
($ in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2019
SBA									SBA	664		—		—		664

December 31, 2019									December 31, 2019
Assets									Assets
Impaired loans:									Impaired loans:
Single family residential mortgage									Single family residential mortgage	$	3,678	$	—	$	—	$	3,678

Commercial and industrial	$	486	$	—	$	—	$	486	Commercial and industrial	15,409		—		—		15,409
SBA	448		—		—		448		SBA	1,711		—		—		1,711
December 31, 2018
Assets
Impaired loans:
SBA	$	226	—		—		$	226

The following table presents the losses recognized on assets measured at fair value on a non-recurring basis for the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Impaired loans:
Single family residential mortgage	$	—	$	—	$	(531)	$	(490)
Commercial and industrial	(6,090)		—		(8,514)		—
SBA	(670)		—		(1,544)		(46)
Other consumer	—		—		(4)		(88)

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2018 2019 2018
Impaired loans:
Single family residential mortgage $ —
$ —
$ (490 ) $ (115 )
Commercial and industrial —
(231 ) —
(292 )
SBA —
—
(46 ) (380 )
Other consumer —
—
(88 ) (141 )

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Estimated Fair Values of Financial Instruments

The following table presents the carrying amounts and estimated fair values of financial assets and liabilities ~~on a consolidated operations basis,~~ as of the dates indicated:


	Carrying Amount		Fair Value Measurement Level
($ in thousands)					Level 1			Level 2			Level 3			Total
June 30, 2020
Financial assets
Cash and cash equivalents	$	420,640	$	420,640		$	—		$	—		$	420,640

Securities available-for-sale	1,176,029		—			1,176,029			—			1,176,029

Federal Home Loan Bank and other bank stock	46,585		—			46,585			—			46,585
Loans held-for-sale, carried at fair value	19,768		—			3,083			16,685			19,768

Loans receivable, net of allowance for loan losses	5,537,326		—			—			5,642,634			5,642,634
Accrued interest receivable	29,515		29,515			—			—			29,515
Derivative assets	8,735		—			8,735			—			8,735
Financial liabilities
Deposits	6,037,465		—			—			6,042,349			6,042,349
Advances from Federal Home Loan Bank	617,170		—			666,177			—			666,177


Long-term debt	173,537		—			178,030			—			178,030
Derivative liabilities	9,293		—			9,293			—			9,293
Accrued interest payable	4,297		4,297			—			—			4,297

December 31, 2019
Financial assets
Cash and cash equivalents	$	373,472	$	373,472		$	—		$	—		$	373,472

Securities available-for-sale	912,580		—			912,580			—			912,580

Federal Home Loan Bank and other bank stock	59,420		—			59,420			—			59,420
Loans held-for-sale	22,642		—			3,409			19,233			22,642
Loans receivable, net of allowance for credit losses	5,894,236		—			—			5,894,732			5,894,732
Accrued interest receivable	24,523		24,523			—			—			24,523
Derivative assets	3,583		—			3,583			—			3,583
Financial liabilities
Deposits	5,427,167		—			—			5,430,536			5,430,536
Advances from Federal Home Loan Bank	1,195,000		—			1,222,709			—			1,222,709

Long-term debt	173,421		—			180,213			—			180,213
Derivative liabilities	3,853		—			3,853			—			3,853
Accrued interest payable	4,687		4,687			—			—			4,687

Carrying Amount Fair Value Measurement Level
($ in thousands) Level 1 Level 2 Level 3 Total
June 30, 2019
Financial assets
Cash and cash equivalents $ 313,850
$ 313,850
$ —
$ —
$ 313,850
Securities available-for-sale 1,167,687
—
1,167,687
—
1,167,687
Federal Home Loan Bank and other bank stock 76,373
—
76,373
—
76,373
Loans held-for-sale, carried at fair value 23,794
—
2,719
21,075
23,794
Loans held-for-sale, carried at lower of cost or fair value 573,926
—
—
578,911
573,926
Loans receivable, net of ALLL 6,660,047
—
—
6,550,673
6,550,673
Accrued interest receivable 31,908
31,908
—
—
31,908
Derivative assets 4,149
—
4,149
—
4,149
Financial liabilities
Deposits 6,292,290
—
—
6,231,819
6,231,819
Advances from Federal Home Loan Bank 1,825,000
—
1,850,016
—
1,850,016
Long term debt 173,257
—
177,693
—
177,693
Derivative liabilities 14,055
—
14,055
—
14,055
Accrued interest payable 9,681
9,681
—
—
9,681
December 31, 2018
Financial assets
Cash and cash equivalents $ 391,592
$ 391,592
$ —
$ —
$ 391,592
Securities available-for-sale 1,992,500
—
1,992,500
—
1,992,500
Federal Home Loan Bank and other bank stock 68,094
—
68,094
—
68,094
Loans held-for-sale⁽¹⁾
27,606
—
2,566
25,040
27,606
Loans receivable, net of allowance 7,638,681
—
—
7,513,910
7,513,910
Accrued interest receivable 38,807
38,807
—
—
38,807
Derivative assets 1,534
—
1,534
—
1,534
Financial liabilities
Deposits 7,916,644
—
—
7,689,324
7,689,324
Advances from Federal Home Loan Bank 1,520,000
—
1,517,761
—
1,517,761
Long-term debt 173,174
—
174,059
—
174,059
Derivative liabilities 1,600
—
1,600
—
1,600
Accrued interest payable 13,253
13,253
—
—
13,253


~~(1)~~	~~Includes loans held-for-sale carried at fair value of $19.5 million ($2.1 million at Level 2 and $17.4 million at Level 3) of discontinued operations.~~

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NOTE 43 – INVESTMENT SECURITIES

The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated:


($ in thousands)										($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2020										June 30, 2020

($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2019

Securities available-for-sale:										Securities available-for-sale:
SBA loan pool securities	$	831	$	22	$	—		$	853

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	436,049		196		(6,898		)	429,347		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	100,128	$	5,427	$	—	$	105,555
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations										U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	199,262		1,906		(32)		201,136
Municipal securities										Municipal securities	52,973		4,201		—		57,174
Non-agency residential mortgage-backed securities	275		10		—			285		Non-agency residential mortgage-backed securities	161		3		—		164

Collateralized loan obligations	748,502		—		(11,300		)	737,202		Collateralized loan obligations	703,605		—		(35,252)		668,353
Corporate debt securities										Corporate debt securities	141,962		2,387		(702)		143,647
Total securities available-for-sale	$	1,185,657	$	228	$	(18,198	)	$	1,167,687	Total securities available-for-sale	$	1,198,091	$	13,924	$	(35,986)	$	1,176,029
December 31, 2018
December 31, 2019										December 31, 2019

Securities available-for-sale:										Securities available-for-sale:
SBA loan pool securities	$	911	$	—	$	(1	)	$	910

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	461,987		—		(24,545		)	437,442		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	37,613	$	—	$	(1,157)	$	36,456
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations										U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	91,543		16		(260)		91,299
Municipal securities										Municipal securities	52,997		51		(359)		52,689
Non-agency residential mortgage-backed securities	418		9		—			427		Non-agency residential mortgage-backed securities	191		5		—		196
Non-agency commercial mortgage-backed securities	132,199		—		—			132,199

Collateralized loan obligations	1,431,171		141		(9,790		)	1,421,522		Collateralized loan obligations	733,605		—		(15,244)		718,361
Corporate debt securities										Corporate debt securities	13,500		79		—		13,579
Total securities available-for-sale	$	2,026,686	$	150	$	(34,336	)	$	1,992,500	Total securities available-for-sale	$	929,449	$	151	$	(17,020)	$	912,580

As of December 31, 2018, the Company changed its intent and decided to sell its non-agency commercial mortgage-backed securities in an unrealized loss position due to its strategy to reposition its securities profile and recognized $3.3 million of other-than-temporary impairment (OTTI) losses during the fourth quarter of 2018. During the first quarter of 2019, the Company completed the sale of all remaining non-agency commercial mortgage-backed securities totaling $132.2 million resulting in a gain of $9 thousand. Additionally, during the three and six months ended June 30, 2019, the Company sold $279.2 million and $644.5 million, respectively, in collateralized loan obligations resulting in a gain of zero and $143 thousand, respectively. During the first quarter of 2018, the Company completed the sale of all remaining corporate debt securities, totaling $76.8 million resulting in a gain of $4.9 million, to reposition its securities available-for-sale portfolio.

At June 30, ~~2019, the Company's~~2020, our investment securities portfolio consisted of ~~SBA loan pool~~agency securities, municipal securities, mortgage-backed securities, ~~and~~ collateralized loan ~~obligations.~~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.

There was 0 allowance for credit losses for debt securities as of June 30, 2020. Accrued interest receivable on debt securities available-for-sale totaled $5.5 million and $5.6 million at June 30, 2020 and December 31, 2019, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.

At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, there were no holdings of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10 percent of ~~the Company's~~our stockholders’ equity.

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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018		($ in thousands)	2020		2019		2020		2019
Gross realized gains on sales and calls of securities available-for-sale	$	—	$	278	$	208	$	5,519	Gross realized gains on sales and calls of securities available-for-sale	$	2,011	$	—	$	2,011	$	208
Gross realized losses on sales and calls of securities available-for-sale	—		—		—		—		Gross realized losses on sales and calls of securities available-for-sale	—		—		—		—
Net realized gains on sales and calls of securities available-for-sale	$	—	$	278	$	208	$	5,519	Net realized gains on sales and calls of securities available-for-sale	$	2,011	$	—	$	2,011	$	208
Proceeds from sales and calls of securities available-for-sale	$	298,156	$	325,439	$	820,048	$	612,956	Proceeds from sales and calls of securities available-for-sale	$	22,728	$	298,156	$	52,728	$	820,048

Investment securities with carrying values of ~~$106.3~~$42.2 million and ~~$163.0~~$44.0 million as of June 30, ~~2019~~2020 and December 31, ~~2018, respectively,~~2019, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.

Table of Contents

The following table summarizes the investment securities with unrealized losses by security type and length of time in a continuous, unrealized loss position as of the dates indicated:


																	Less Than 12 Months						12 Months or Longer						Total
($ in thousands)																($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
June 30, 2020																June 30, 2020

	Less Than 12 Months					12 Months or Longer					Total
($ in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
June 30, 2019

Securities available-for-sale:																Securities available-for-sale:
SBA loan pool securities	$	—	$	—		$	—	$	—		$	—	$	—

U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations																U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	$	9,416	$	(32)	$	—	$	—	$	9,416	$	(32)

Collateralized loan obligations																Collateralized loan obligations	63,040		(1,960)		605,313		(33,292)		668,353		(35,252)
Corporate debt securities																Corporate debt securities	31,798		(702)		—		—		31,798		(702)
Total securities available-for-sale																Total securities available-for-sale	$	104,254	$	(2,694)	$	605,313	$	(33,292)	$	709,567	$	(35,986)

December 31, 2019																December 31, 2019

Securities available-for-sale:																Securities available-for-sale:

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—			370,676		(6,898		)	370,676		(6,898		)	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	35,872	$	(1,157)	$	—	$	—	$	35,872	$	(1,157)
Non-agency residential mortgage-backed securities	—		—			—		—			—		—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations																U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	73,379		(260)		—		—		73,379		(260)
Municipal securities																Municipal securities	31,723		(359)		—		—		31,723		(359)

Collateralized loan obligations	497,963		(6,664		)	239,239		(4,636		)	737,202		(11,300		)	Collateralized loan obligations	49,553		(447)		668,808		(14,797)		718,361		(15,244)

Total securities available-for-sale	$	497,963	$	(6,664	)	$	609,915	$	(11,534	)	$	1,107,878	$	(18,198	)	Total securities available-for-sale	$	190,527	$	(2,223)	$	668,808	$	(14,797)	$	859,335	$	(17,020)
December 31, 2018
Securities available-for-sale:
SBA loan pool securities	$	—	$	—		$	910	$	(1	)	$	910	$	(1	)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	13,494		(133		)	423,916		(24,412		)	437,410		(24,545		)
Non-agency residential mortgage-backed securities	90		—			16		—			106		—
Collateralized loan obligations	1,364,317		(9,480		)	32,790		(310		)	1,397,107		(9,790		)
Total securities available-for-sale	$	1,377,901	$	(9,613	)	$	457,632	$	(24,723	)	$	1,835,533	$	(34,336	)

~~The Company did not record OTTI for investment securities for the three and six months ended June 30, 2019 or 2018.~~

At June 30, ~~2019, the Company’s~~2020, our securities available-for-sale portfolio consisted of 82102 securities, 64 of which 50 securities were in an unrealized loss position. At December 31, ~~2018, the Company’s~~2019, our securities available-for-sale portfolio consisted of ~~145~~70 securities, ~~118~~ of which 60 securities were in an unrealized loss position.

~~The Company monitors its~~We monitor our securities portfolio to ensure it has adequate credit support. The majority of unrealized losses are related to ~~the Company's mortgage-backed securities issued by U.S government sponsored entities and agencies. The Company~~our collateralized loan obligations. We also ~~considers~~consider the lowest credit rating for identification of ~~potential OTTI~~credit impairment for other securities. As of June 30, ~~2019, nearly~~2020, all of ~~the Company's non-agency mortgage-backed securities or~~our collateralized loan obligations investment securities in an unrealized loss position received an investment grade credit rating. The decline in fair value iswas attributable to a combination of changes in interest rates and general volatility in the credit market conditions in response to the economic uncertainty caused by the global pandemic. We do not ~~credit quality. The Company believes there was no OTTI as of June 30, 2019 and does not have the intent~~currently intend to sell ~~its~~these 50 securities in an unrealized loss position and further ~~believes~~believe, it is more likely than not, ~~likely~~ that itwe will not be required to sell these securities before their anticipated recovery.

Table of Contents

The following table presents maturities, based on the ~~composition and the~~earlier of maturity dates or next repricing date, and yield information of the investment securities portfolio as of June 30, ~~2019:~~2020:


	One year or less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total					One year or less						More than One Year through Five Years						More than Five Years through Ten Years						More than Ten Years		Total
($ in thousands)	Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		($ in thousands)	Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield
Securities available-for-sale:																					Securities available-for-sale:
SBA loan pool securities	$	—	—	%	$	—	—	%	$	—	—	%	$	853	2.08	%	$	853	2.08	%

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	243		2.36	%	3,069		2.67	%	—		—	%	426,035		2.74	%	429,347		2.74	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	30,413	2.20	%	$	75,142	2.35	%	$	105,555	2.31	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations																					U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	118,163		0.74	%	11,608		2.02	%	25,579		1.63	%	45,786		0.93	%	201,136		0.96	%
Municipal securities																					Municipal securities	—		—	%	—		—	%	—		—	%	57,174		2.79	%	57,174		2.79	%
Non-agency residential mortgage-backed securities	66		3.23	%	—		—	%	—		—	%	219		5.74	%	285		5.16	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	164		6.14	%	164		6.14	%

Collateralized loan obligations	737,202		3.71	%	—		—	%	—		—	%	—		—	%	737,202		3.71	%	Collateralized loan obligations	668,353		2.73	%	—		—	%	—		—	%	—		—	%	668,353		2.73	%
Corporate debt securities																					Corporate debt securities	—		—	%	122,301		4.99	%	21,346		5.64	%	—		—	%	143,647		5.08	%
Total securities available-for-sale	$	737,511	3.71	%	$	3,069	2.67	%	$	—	—	%	$	427,107	2.74	%	$	1,167,687	3.35	%	Total securities available-for-sale	$	786,516	2.45	%	$	133,909	4.74	%	$	77,338	2.96	%	$	178,266	2.11	%	$	1,176,029	2.68	%

Table of Contents

NOTE 54 – LOANS AND ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES

The following table presents the balances in ~~the Company’s~~our loan ~~portfolios as of the dates indicated:~~

($ in thousands) June 30,
2019 December 31,
2018
Commercial:
Commercial and industrial $ 1,951,707
$ 1,944,142
Commercial real estate 856,497
867,013
Multifamily 1,598,978
2,241,246
SBA 80,929
68,741
Construction 209,029
203,976
Consumer:
Single family residential mortgage 1,961,065
2,305,490
Other consumer 61,365
70,265
Total loans⁽¹⁾
$ 6,719,570
$ 7,700,873
Percentage to total loans 100.0 % 100.0 %
Allowance for loan losses (59,523 ) (62,192 )
Loans receivable, net $ 6,660,047
$ 7,638,681


~~(1)~~	~~Total loans include deferred loan origination costs/(fees) and premiums/(discounts), net of $16.1 million and $17.7 million, respectively, at June 30, 2019 and December 31, 2018.~~

~~Non-Traditional Mortgage Loans ("NTM")~~

~~The following table presents the composition of the NTM~~ portfolio as of the dates indicated:

June 30, 2019 December 31, 2018
($ in thousands) Count Amount Percent Count Amount Percent
Consumer:
Single family residential mortgage:

Green Loans (HELOC) - first liens⁽¹⁾
78
$ 61,439
8.2 % 88
$ 67,729
8.2 %
Interest-only - first liens⁽²⁾
444
680,361
91.0 % 519
753,061
91.1 %
Negative amortization⁽³⁾
10
3,219
0.4 % 11
3,528
0.4 %
Total NTM - first liens 532
745,019
99.7 % 618
824,318
99.7 %
Other consumer:
Green Loans (HELOC) - second liens⁽¹⁾
7
2,247
0.3 % 10
2,413
0.3 %
Total NTM - second liens 7
2,247
0.3 % 10
2,413
0.3 %
Total NTM loans 539
$ 747,266
100.0 % 628
$ 826,731
100.0 %
Total loans receivable $ 6,719,570
$ 7,700,873

% of total NTM loans to total loans receivable 11.1 % 10.7 %

~~Green Loans~~


($ in thousands)	June 30, 2020		December 31, 2019

Commercial:
Commercial and industrial	$	1,436,990	$	1,691,270
Commercial real estate	822,694		818,817
Multifamily	1,434,071		1,494,528
SBA⁽¹⁾	310,784		70,981
Construction	212,979		231,350

Consumer:
Single family residential mortgage	1,370,785		1,590,774


Other consumer	39,393		54,165
Total loans⁽²⁾	$	5,627,696	$	5,951,885

Allowance for loan losses	(90,370)		(57,649)
Loans receivable, net	$	5,537,326	$	5,894,236

~~Green Loans are single family residential first and second mortgage lines~~(1)Includes 1,069 PPP loans totaling $240.7 million, which included $5.6 million of ~~credit with a linked checking account that allows all types of deposits and withdrawals to be performed. These loans are generally interest only for a 15-year term with a balloon payment due~~net unamortized loan fees at ~~maturity. At~~ June 30, ~~2019~~2020.

(2)Total loans include deferred loan origination costs/(fees) and premiums/(discounts), net, of $6.0 million and $14.3 million, respectively, at June 30, 2020 and December 31, 2018, $286 thousand and $0, respectively, of the Company's Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on LTV ratios and the Company’s contractual ability to curtail loans when the value of the underlying collateral declines. The Company discontinued origination of Green Loans in 2011.2019.

~~Interest Only Loans~~

Interest only loans are primarily single family residential first mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At June 30, 2019 and December 31, 2018, interest only loans totaled $680.4 million and $753.1 million, respectively. At June 30, 2019 and December 31, 2018, $827 thousand and $0, respectively, of the interest only loans were non-performing.

~~Loans with the Potential for Negative Amortization~~

Negative amortization loans totaled $3.2 million and $3.5 million at June 30, 2019 and December 31, 2018, respectively. The Company discontinued origination of negative amortization loans in 2007. At June 30, 2019 and December 31, 2018, none of the loans with the potential for negative amortization were non-performing. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the credit risk associated with these loans is mitigated through the loan terms and underwriting standards, including the Company’s policies on LTV ratios.

~~Allowance for Loan Losses~~

The Company has established credit risk management processes that include regular management review of the loan portfolio to identify problem loans. During the ordinary course of business, management may become aware of borrowers and lessees who may not be able to fulfill the contractual payment requirements of the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing the loan or lease on non-accrual status, assessing the need for additional ALLL, and partial or full charge off the principal balance. The Company maintains the ALLL at a level that is considered adequate to cover the estimated incurred losses in the loan portfolio.

The Company also maintains a separate reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated incurred loss. The estimated funding of the loan commitments and credit risk factors are determined based on outstanding loans that share similar credit risk exposure are used to determine the adequacy of the reserve. At June 30, 2019 and December 31, 2018, the reserve for unfunded loan commitments was $4.3 million and $4.6 million, respectively, which are included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition.

The credit risk monitoring system is designed to identify impaired and potential problem loans, and to perform periodic evaluation of impairment and the adequacy of the allowance for credit losses in a timely manner. In addition, the Board of Directors of the Bank has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that the Company maintains an adequate allowance for loan losses. The Board of Directors also provides oversight and guidance for management’s allowance evaluation process.

~~The following table presents a summary of activity in the ALLL for the periods indicated:~~

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2018 2019 2018
Balance at beginning of period $ 63,885
$ 54,763
$ 62,192
$ 49,333
Loans charged off (2,451 ) (950 ) (3,514 ) (15,589 )
Recoveries of loans previously charged off 76
212
320
782
Net charge-offs (2,375 ) (738 ) (3,194 ) (14,807 )
(Reversal of) provision for loan losses (1,987 ) 2,653
525
22,152
Balance at end of period $ 59,523
$ 56,678
$ 59,523
$ 56,678

During the three months ended March 31, 2018, the Company recorded a charge-off of $13.9 million, which reflected the outstanding balance under a $15.0 million line of credit that was originated during the three months ended March 31, 2018. Subsequent to the granting of the line of credit, representations from the borrower in applying for the line of credit were determined by the Bank to be false, and third party bank account statements provided by the borrower to secure the line of credit were found to be fraudulent. The line of credit was granted after the borrower appeared to have satisfied a pre-condition that the line of credit be fully cash collateralized and secured by a bank account at a third party financial institution pledged to the Bank. As part of the Bank’s credit review and portfolio management process, the line of credit and disbursements were reviewed subsequent to closing and compliance with the borrower’s covenants was monitored. As part of this process, on March 9, 2018, the Bank received information that caused it to believe the existence of the pledged bank account had been misrepresented by the borrower and that the account had previously been closed. The Bank filed an action in Federal court pursuing the borrower and other parties. That action was voluntarily dismissed by the Bank without prejudice, and a substantially similar action was filed in Los Angeles County Superior Court. The Bank is also considering other available sources of collection and other potential means of mitigating the loss; however, no assurance can be given that it will be successful in this regard. Upon extensive review of the underwriting process for this loan, the Bank determined that this loan was the result of an isolated event of external fraud.

The following table presents the activity and balance in the ALLL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and six months ended June 30, 2019:

($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Lease Financing Single Family Residential Mortgage Other Consumer Total
ALLL:
Balance at March 31, 2019 $ 18,893
$ 6,838
$ 18,898
$ 3,057
$ 3,453
$ —
$ 12,142
$ 604
$ 63,885
Charge-offs (2,022 ) —
(6 ) 8
—
—
(425 ) (6 ) (2,451 )
Recoveries 11
—
—
60
—
3
—
2
76
Net charge-offs (2,011 ) —
(6 ) 68
—
3
(425 ) (4 ) (2,375 )
Provision (reversal) 4,647
39
(6,267 ) (5 ) 262
(3 ) (645 ) (15 ) (1,987 )
Balance at June 30, 2019 $ 21,529
$ 6,877
$ 12,625
$ 3,120
$ 3,715
$ —
$ 11,072
$ 585
$ 59,523

Balance at December 31, 2018 $ 18,191
$ 6,674
$ 17,970
$ 1,827
$ 3,461
$ —
$ 13,128
$ 941
$ 62,192
Charge-offs (2,115 ) —
(6 ) (348 ) —
—
(951 ) (94 ) (3,514 )
Recoveries 44
—
—
101
—
6
150
19
320
Net charge-offs (2,071 ) —
(6 ) (247 ) —
6
(801 ) (75 ) (3,194 )
Provision 5,409
203
(5,339 ) 1,540
254
(6 ) (1,255 ) (281 ) 525
Balance at June 30, 2019 $ 21,529
$ 6,877
$ 12,625
$ 3,120
$ 3,715
$ —
$ 11,072
$ 585
$ 59,523

Individually evaluated for impairment $ 1,239
$ —
$ —
$ 1,563
$ —
$ —
$ —
$ 22
$ 2,824
Collectively evaluated for impairment 20,290
6,877
12,625
1,557
3,715
—
11,072
563
56,699
Total ending ALLL balance $ 21,529
$ 6,877
$ 12,625
$ 3,120
$ 3,715
$ —
$ 11,072
$ 585
$ 59,523
Loans:
Individually evaluated for impairment $ 20,429
$ —
$ —
$ 3,262
$ 2,519
$ —
$ 21,021
$ 1,169
$ 48,400
Collectively evaluated for impairment 1,931,278
856,497
1,598,978
77,667
206,510
—
1,940,044
60,196
6,671,170
Total ending loan balances $ 1,951,707
$ 856,497
$ 1,598,978
$ 80,929
$ 209,029
$ —
$ 1,961,065
$ 61,365
$ 6,719,570

($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Lease Financing Single Family Residential Mortgage Other Consumer Total
ALLL:
Balance at March 31, 2018 $ 17,571
$ 5,417
$ 14,219
$ 1,577
$ 3,220
$ —
$ 11,969
$ 790
$ 54,763
Charge-offs (276 ) —
(8 ) (302 ) —
—
(364 ) —
(950 )
Recoveries 36
—
—
167
—
5
—
4
212
Net charge-offs (240 ) —
(8 ) (135 ) —
5
(364 ) 4
(738 )
Provision (reversal) (467 ) 315
419
398
199
(5 ) 1,631
163
2,653
Balance at June 30, 2018 $ 16,864
$ 5,732
$ 14,630
$ 1,840
$ 3,419
$ —
$ 13,236
$ 957
$ 56,678

Balance at December 31, 2017 $ 14,280
$ 4,971
$ 13,265
$ 1,701
$ 3,318
$ —
$ 10,996
$ 802
$ 49,333
Charge-offs (347 ) —
(8 ) (683 ) —
—
(479 ) (14,072 ) (15,589 )
Recoveries 97
—
—
232
—
9
436
8
782
Net charge-offs (250 ) —
(8 ) (451 ) —
9
(43 ) (14,064 ) (14,807 )
Provision 2,834
761
1,373
590
101
(9 ) 2,283
14,219
22,152
Balance at June 30, 2018 $ 16,864
$ 5,732
$ 14,630
$ 1,840
$ 3,419
$ —
$ 13,236
$ 957
$ 56,678

Individually evaluated for impairment $ 595
$ —
$ —
$ 124
$ —
$ —
$ 461
$ 8
$ 1,188
Collectively evaluated for impairment 16,269
5,732
14,630
1,716
3,419
—
12,775
949
55,490
Total ending ALLL balance $ 16,864
$ 5,732
$ 14,630
$ 1,840
$ 3,419
$ —
$ 13,236
$ 957
$ 56,678
Loans:
Individually evaluated for impairment $ 5,829
$ —
$ —
$ 646
$ —
$ —
$ 20,140
$ 750
$ 27,365
Collectively evaluated for impairment 1,736,730
793,855
1,959,965
77,446
211,110
—
2,154,043
75,490
7,008,639
Total ending loan balances $ 1,742,559
$ 793,855
$ 1,959,965
$ 78,092
$ 211,110
$ —
$ 2,174,183
$ 76,240
$ 7,036,004

The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and net of any deferred fees and costs and any purchase premium or discount.

June 30, 2019 December 31, 2018
($ in thousands) Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Unpaid Principal Balance Recorded Investment Allowance for Loan Losses
With no related ALLL recorded:
Commercial:
Commercial and industrial $ 18,434
$ 18,404
$ —
$ 5,491
$ 5,455
$ —
Commercial real estate —
—
—
—
—
—
SBA 1,320
1,251
—
1,668
1,588
—
Construction 2,519
2,519
—
—
—
—
Consumer:
Single family residential mortgage 20,938
21,021
—
12,115
12,161
—
Other consumer 1,167
1,147
—
469
469
—
With an ALLL recorded:
Commercial:
Commercial and industrial 2,025
2,025
1,239
—
—
—
SBA 2,107
2,011
1,563
823
788
562
Consumer:
Single family residential mortgage —
—
—
5,993
6,032
161
Other consumer 22
22
22
468
452
106
Total $ 48,532
$ 48,400
$ 2,824
$ 27,027
$ 26,945
$ 829

~~The following table presents information on impaired loans, disaggregated by class, for the periods indicated:~~

Three Months Ended Six Months Ended
($ in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized
June 30, 2019
Commercial:
Commercial and industrial $ 20,794
$ 255
$ 254
$ 12,921
$ 255
$ 254
Commercial real estate —
—
—
289
—
—
SBA 3,297
4
4
3,571
8
8
Construction 2,519
—
—
2,519
—
—
Consumer:
Single family residential mortgage 21,092
58
48
20,208
116
97
Other consumer 1,177
4
3
1,011
7
6
Total $ 48,879
$ 321
$ 309
$ 40,519
$ 386
$ 365
June 30, 2018
Commercial:
Commercial and industrial $ 5,900
$ 1
$ 1
$ 5,616
$ 4
$ 4
SBA 654
—
—
514
—
—
Consumer:
Single family residential mortgage 20,274
58
47
19,994
115
96
Other consumer 760
3
3
755
6
5
Total $ 27,588
$ 62
$ 51
$ 26,879
$ 125
$ 105

~~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 dates indicated:

($ in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due Greater than 89 Days Past due Total Past Due Current Total
June 30, 2019
NTM loans:
Single family residential mortgage $ 19,960
$ —
$ 827
$ 20,787
$ 724,232
$ 745,019
Other consumer —
—
—
—
2,247
2,247
Total NTM loans 19,960
—
827
20,787
726,479
747,266
Traditional loans:
Commercial:
Commercial and industrial 1,063
997
4,017
6,077
1,945,630
1,951,707
Commercial real estate —
—
—
—
856,497
856,497
Multifamily —
—
—
—
1,598,978
1,598,978
SBA 944
73
2,672
3,689
77,240
80,929
Construction —
—
2,519
2,519
206,510
209,029
Consumer:
Single family residential mortgage 7,447
3,645
6,683
17,775
1,198,271
1,216,046
Other consumer 514
295
554
1,363
57,755
59,118
Total traditional loans 9,968
5,010
16,445
31,423
5,940,881
5,972,304
Total $ 29,928
$ 5,010
$ 17,272
$ 52,210
$ 6,667,360
$ 6,719,570
December 31, 2018
NTM loans:
Single family residential mortgage $ 7,430
$ 617
$ —
$ 8,047
$ 816,271
$ 824,318
Other consumer —
—
—
—
2,413
2,413
Total NTM loans 7,430
617
—
8,047
818,684
826,731
Traditional loans:
Commercial:
Commercial and industrial 350
1,596
3,340
5,286
1,938,856
1,944,142
Commercial real estate —
582
—
582
866,431
867,013
Multifamily 356
—
—
356
2,240,890
2,241,246
SBA 551
77
862
1,490
67,251
68,741
Construction —
939
—
939
203,037
203,976
Consumer:
Single family residential mortgage 7,321
3,160
9,198
19,679
1,461,493
1,481,172
Other consumer 3,132
573
446
4,151
63,701
67,852
Total traditional loans 11,710
6,927
13,846
32,483
6,841,659
6,874,142
Total $ 19,140
$ 7,544
$ 13,846
$ 40,530
$ 7,660,343
$ 7,700,873

~~Non-accrual Loans~~

~~The following table presents non-accrual loans as of the dates indicated:~~

June 30, 2019 December 31, 2018
($ in thousands) NTM Loans Traditional Loans Total NTM Loans Traditional Loans Total
Non-accrual loans
Commercial:
Commercial and industrial $ —
$ 5,716
$ 5,716
$ —
$ 5,455
$ 5,455
Commercial real estate —
—
—
—
—
—
SBA —
3,440
3,440
—
2,574
2,574
Construction —
2,519
2,519
—
—
—
Consumer:
Single family residential mortgage 1,113
14,836
15,949
—
12,929
12,929
Other consumer —
875
875
—
627
627
Total non-accrual loans $ 1,113
$ 27,386
$ 28,499
$ —
$ 21,585
$ 21,585

~~At June 30, 2019 and December 31, 2018, $275 thousand and $470 thousand of loans were past due 90 days or more and still accruing.~~

~~Loans in Process of Foreclosure~~

At June 30, 2019 and December 31, 2018, consumer mortgage loans of $8.8 million and $5.1 million, respectively, were secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.

~~Troubled Debt Restructurings~~

A modification of a loan constitutes a troubled debt restructuring (TDR) when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of the loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

~~Troubled debt restructured loans consisted of the following as of the dates indicated:~~

June 30, 2019 December 31, 2018
($ in thousands) NTM Loans Traditional Loans Total NTM Loans Traditional Loans Total
Commercial:
Commercial and industrial $ —
$ 16,250
$ 16,250
$ —
$ 2,276
$ 2,276
SBA —
1,057
1,057
—
187
187
Consumer:
Single family residential mortgage 2,653
2,419
5,072
2,668
2,596
5,264
Other consumer 294
—
294
294
—
294
Total $ 2,947
$ 19,726
$ 22,673
$ 2,962
$ 5,059
$ 8,021

The Company did not have any commitments to lend to customers with outstanding loans that were classified as TDRs as of June 30, 2019 or December 31, 2018. Accruing TDRs were $20.2 million and non-accrual TDRs were $2.4 million at June 30, 2019 compared to accruing TDRs of $5.7 million and non-accrual TDRs of $2.3 million at December 31, 2018.

~~The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:~~

Three Months Ended Six Months Ended
($ in thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment
June 30, 2019
Commercial:
Commercial and industrial 10
$ 17,339
$ 17,020
10
$ 17,339
$ 17,020
SBA 2
3,214
869
2
3,214
869
Consumer:
Single family residential mortgage —
—
—
—
—
—
Other consumer —
$ —
$ —
—
$ —
$ —
Total 12
20,553
17,889
12
$ 20,553
$ 17,889
June 30, 2018
Commercial:
Commercial and industrial —
$ —
$ —
2
$ 171
$ 163
Total —
$ —
$ —
2
$ 171
$ 163

~~The Company considers a TDR to be in payment default once it becomes 30 days or more past due following a modification.During the six months ended June 30, 2019 and 2018, there were no loans that were modified as TDRs during the past 12 months that had subsequent payment defaults during the periods.~~

~~The following table summarizes TDRs by modification type for the periods indicated:~~

Three Months Ended
Modification Type
Change in Principal Payments and Interest Rates Change in Principal Payments Total
($ in thousands) Count Amount Count Amount Count Amount
June 30, 2019
Commercial:
Commercial and industrial 10
$ 17,020
—
$ —
10
$ 17,020
SBA 2
$ 869
—
$ —
2
$ 869
Total 12
$ 17,889
—
$ —
12
$ 17,889

June 30, 2018
Total —
$ —
—
$ —
—
$ —

Six Months Ended
Modification Type
Change in Principal Payments and Interest Rates Change in Principal Payments Total
($ in thousands) Count Amount Count Amount Count Amount
June 30, 2019
Commercial:
Commercial and industrial 10
$ 17,020
—
$ —
10
$ 17,020
SBA 2
$ 869
—
$ —
2
$ 869
Total 12
$ 17,889
—
$ —
12
$ 17,889

June 30, 2018
Commercial:
Commercial and industrial —
$ —
2
$ 163
2
$ 163
Total —
$ —
2
$ 163
2
$ 163

Credit Quality Indicators

~~The Company categorizes~~We categorize loans into risk categories based on relevant information about the ability of borrowers to ~~service~~repay their debt such ~~as:~~as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. ~~The Company performs~~We perform a historical loss analysis that is combined with a comprehensive loan ~~or lease~~ to value analysis to analyze the associated risks in the current loan ~~and lease~~ portfolio. ~~The Company analyzes~~We analyze loans individually ~~by classifying the loans as to~~and 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. ~~The Company uses~~We use the following definitions for credit risk ratings:

Pass: Loans ~~classified~~risk rated as 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 ~~classified~~risk rated as 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 loan or ~~lease or~~ of ~~the Company’s~~our credit position at some future date.

Substandard: Loans ~~classified~~risk rated as 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~~risk rated have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that ~~the Company~~we will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as 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.

Table of Contents

The following table presents the risk categories for total loans by class of loans and origination year as of June 30, 2020:


	Term Loans Amortized Cost Basis by Origination Year
($ in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total
June 30, 2020
















Commercial:
Commercial and industrial
Pass	$	59,122	$	111,437	$	104,299	$	63,923	$	41,163	$	111,761	$	851,369	$	4,252	$	1,347,326
Special mention	—		6,382		5,988		—		—		1,379		812		189		14,750
Substandard	2,117		16,658		—		4,864		20,677		9,632		10,752		10,214		74,914
Doubtful	—		—		—		—		—		—		—		—		—
Commercial and industrial	61,239		134,477		110,287		68,787		61,840		122,772		862,933		14,655		1,436,990
Commercial real estate
Pass	15,261		153,017		215,385		72,949		102,465		198,242		36,628		1,586		795,533
Special mention	—		1,829		9,570		—		—		6,732		—		—		18,131
Substandard	—		—		—		—		—		9,030		—		—		9,030
Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	15,261		154,846		224,955		72,949		102,465		214,004		36,628		1,586		822,694
Multifamily
Pass	84,873		421,045		334,029		272,657		131,646		187,823		—		—		1,432,073
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		1,998		—		—		1,998
Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	84,873		421,045		334,029		272,657		131,646		189,821		—		—		1,434,071
SBA
Pass	241,305		16,021		1,359		5,195		14,975		19,479		3,238		797		302,369
Special mention	—		—		—		226		417		948		—		6		1,597
Substandard	—		—		—		1,009		1,513		1,440		320		1,126		5,408
Doubtful	—		—		390		—		—		633		—		387		1,410
SBA	241,305		16,021		1,749		6,430		16,905		22,500		3,558		2,316		310,784
Construction
Pass	14,139		33,423		63,217		86,787		—		—		—		—		197,566
Special mention	—		—		10,526		—		4,887		—		—		—		15,413
Substandard	—		—		—		—		—		—		—		—		—

Table of Contents


Doubtful	—		—		—			—		—		—		—		—		—
Construction	14,139		33,423		73,743			86,787		4,887		—		—		—		212,979
Consumer:
Single family residential mortgage
Pass	31,007		166,668		329,175			204,392		297,182		281,160		20,844		—		1,330,428
Special mention	—		—		1,152			668		4,416		3,503		—		—		9,739
Substandard	—		1,064		1,697			3,414		3,900		20,543		—		—		30,618
Doubtful	—		—		—			—		—		—		—		—		—
Single family residential mortgage	31,007		167,732		332,024		��	208,474		305,498		305,206		20,844		—		1,370,785
Other consumer
Pass	26		93		72			—		8		2,485		31,303		2,577		36,564
Special mention	—		—		27			—		—		33		248		147		455
Substandard	—		—		—			—		—		2,016		281		77		2,374
Doubtful	—		—		—			—		—		—		—		—		—
Other consumer	26		93		99			—		8		4,534		31,832		2,801		39,393


Total loans	$	447,850	$	927,637	$	1,076,886		$	716,084	$	623,249	$	858,837	$	955,795	$	21,358	$	5,627,696

The following table presents the risk categories for total loans by class of loans as of December 31, 2019:


($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total






























December 31, 2019







Commercial:
Commercial and industrial	1,580,269		45,323		65,678		—		1,691,270
Commercial real estate	813,846		2,532		2,439		—		818,817
Multifamily	1,484,931		4,256		5,341		—		1,494,528
SBA	60,982		2,760		5,621		1,618		70,981
Construction	229,771		1,579		—		—		231,350

Consumer:
Single family residential mortgage	1,559,253		10,735		20,269		517		1,590,774
Other consumer	53,331		346		488		—		54,165










Total	$	5,782,383	$	67,531	$	99,836	$	2,135	$	5,951,885

Table of Contents

Past Due Loans


($ in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total
June 30, 2020
Non-Traditional Mortgage (NTM) loans:
Single family residential mortgage	$	9,262	$	647	$	18,552	$	28,461	$	481,144	$	509,605


Other consumer	—		—		—		—		1,598		1,598
Total NTM loans	9,262		647		18,552		28,461		482,742		511,203
Traditional loans:
Commercial:
Commercial and industrial	891		28		13,072		13,991		1,422,999		1,436,990
Commercial real estate	—		1,464		2,189		3,653		819,041		822,694
Multifamily	664		—		—		664		1,433,407		1,434,071
SBA	1,517		—		2,627		4,144		306,640		310,784
Construction	—		—		—		—		212,979		212,979

Consumer:
Single family residential mortgage	29,281		4,286		8,252		41,819		819,361		861,180
Other consumer	285		1,485		692		2,462		35,333		37,795
Total traditional loans	32,638		7,263		26,832		66,733		5,049,760		5,116,493









Total	$	41,900	$	7,910	$	45,384	$	95,194	$	5,532,502	$	5,627,696

December 31, 2019
NTM loans:
Single family residential mortgage	$	3,973	$	3,535	$	13,019	$	20,527	$	577,830	$	598,357


Other consumer	—		—		—		—		2,299		2,299
Total NTM loans	3,973		3,535		13,019		20,527		580,129		600,656
Traditional loans:
Commercial:
Commercial and industrial	780		5,670		3,862		10,312		1,680,958		1,691,270
Commercial real estate	—		—		—		—		818,817		818,817
Multifamily	—		—		—		—		1,494,528		1,494,528
SBA	586		842		2,152		3,580		67,401		70,981
Construction	—		—		—		—		231,350		231,350

Consumer:
Single family residential mortgage	13,752		3,496		5,606		22,854		969,563		992,417
Other consumer	199		40		95		334		51,532		51,866
Total traditional loans	15,317		10,048		11,715		37,080		5,314,149		5,351,229









Total	$	19,290	$	13,583	$	24,734	$	57,607	$	5,894,278	$	5,951,885

In accordance with regulatory guidance, borrowers that received forbearance or deferment, which were current prior to becoming affected by the global pandemic, generally should not be reported as past due. At June 30, 2020, 0 loans that received forbearance or deferment were considered past due and, accordingly, are not included in the table above.

Table of Contents

($ in thousands) Pass Special Mention Substandard Doubtful Total
June 30, 2019
NTM loans:
Single family residential mortgage $ 729,845
$ 12,751
$ 2,423
$ —
$ 745,019
Other consumer 2,247
—
—
—
2,247
Total NTM loans 732,092
12,751
2,423
—
747,266
Traditional loans:
Commercial:
Commercial and industrial 1,844,472
50,702
56,533
—
1,951,707
Commercial real estate 832,173
14,519
9,805
—
856,497
Multifamily 1,581,629
11,488
5,861
—
1,598,978
SBA 66,448
4,074
9,605
802
80,929
Construction 194,842
9,172
5,015
—
209,029
Consumer:
Single family residential mortgage 1,193,532
6,017
15,980
517
1,216,046
Other consumer 57,177
471
1,470
—
59,118
Total traditional loans 5,770,273
96,443
104,269
1,319
5,972,304
Total $ 6,502,365
$ 109,194
$ 106,692
$ 1,319
$ 6,719,570

December 31, 2018
NTM loans:
Single family residential mortgage $ 811,056
$ 10,966
$ 2,296
$ —
$ 824,318
Other consumer 2,413
—
—
—
2,413
Total NTM loans 813,469
10,966
2,296
—
826,731
Traditional loans:
Commercial:
Commercial and industrial 1,859,569
41,302
43,271
—
1,944,142
Commercial real estate 851,604
11,376
4,033
—
867,013
Multifamily 2,239,301
—
1,945
—
2,241,246
SBA 53,433
6,114
8,340
854
68,741
Construction 197,851
3,606
2,519
—
203,976
Consumer:
Single family residential mortgage 1,461,721
2,602
16,849
—
1,481,172
Other consumer 66,228
979
645
—
67,852
Total traditional loans 6,729,707
65,979
77,602
854
6,874,142
Total $ 7,543,176
$ 76,945
$ 79,898
$ 854
$ 7,700,873
Non-accrual Loans

The following table presents non-accrual loans as of the dates indicated:


	June 30, 2020														December 31, 2019
($ in thousands)	NTM Loans		Traditional Loans		Total Non-accrual Loans		Non-accrual Loans with no ACL		NTM Loans		Traditional Loans		Total Non-accrual Loans		Non-accrual Loans with no ACL
Non-accrual loans
Commercial:
Commercial and industrial	$	—	$	30,398	$	30,398	$	10,728	$	—	$	19,114	$	19,114	$	337
Commercial real estate	—		6,633		6,633		6,632		—		—		—		—

SBA	—		5,026		5,026		1,485		—		5,230		5,230		1,474
Construction	—		—		—		—		—		—		—		—

Consumer:
Single family residential mortgage	19,199		9,271		28,470		28,470		13,019		5,606		18,625		14,373


Other consumer	—		2,176		2,176		2,177		—		385		385		380
Total non-accrual loans	$	19,199	$	53,504	$	72,703	$	49,492	$	13,019	$	30,335	$	43,354	$	16,564

At June 30, 2020 and December 31, 2019, there were 0loans that were past due 90 days or more and still accruing.

The non-traditional mortgage (“NTM”) loans on non-accrual status included $4.6 million of Green Loans and $14.6 million of interest-only loans at June 30, 2020 compared to $1.5 million of Green Loans and $11.5 million of interest-only loans at December 31, 2019.

Loans in Process of Foreclosure

At June 30, 2020 and December 31, 2019, consumer mortgage loans of $6.3 million and $15.7 million, respectively, were secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.

Allowance for Credit Losses

Our ACL is comprised of our allowance for loan losses (“ALL”) and reserve for unfunded loan commitments. Our ACL methodology and resulting provision continues to be impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (“MEVs”). As of June 30, 2020, we used economic forecasts released by our model provider during June 2020. Similar to the late March 2020 forecasts, these June 2020 forecasts reflect the onset of the pandemic, its impact on MEVs and the future economic recovery. These forecasts published by our model provider have deteriorated since the end of the first quarter of 2020, with June baseline unemployment rate forecasts for 2020 and 2021 increasing and real gross domestic product growth rates decreasing. Similar to our methodology used in the first quarter of 2020, we incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by our third-party model, including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, we expect the ACL to be impacted in future periods by economic volatility, changing economic forecasts, actual and projected credit experience, and underlying model assumptions; all of which may be better than or worse than our current estimate.

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. We evaluate all impaired loans individually using guidance from ASC 310 primarily through the evaluation of cash flows or collateral values.

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We have established credit risk management processes that include regular management review of the loan portfolio to identify problem loans. During the ordinary course of business, management may become aware of borrowers who may not be able to fulfill their contractual payment requirements within the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing these loans on non-accrual status, assessing the need for additional allowance for loan loss, and partially or fully charging off the principal balance. We maintain the allowance for loan losses at a level that is considered adequate to cover the expected credit losses in the loan portfolio.

The reserve for unfunded loan commitments is established to cover the 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 June 30, 2020 and December 31, 2019, the reserve for unfunded loan commitments was $4.2 million and $4.1 million, respectively, and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.

The credit risk monitoring system is designed to identify impaired and potential problem loans, perform periodic evaluation of impairment, and determine the adequacy of the allowance for credit losses in a timely manner. In addition, management has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that we maintain an adequate allowance for credit losses. Further, the Board of Directors provides oversight and guidance for management’s allowance evaluation process.

The following table presents a summary of activity in the ACL for the periods indicated:


	Three Months Ended June 30,
($ in thousands)	2020										2019
	Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	$	78,243	$	3,888	$	82,131	$	63,885	$	4,208	$	68,093

Loans charged off	—		—		—		(2,451)		—		(2,451)
Recoveries of loans previously charged off	608		—		608		76		—		76
Net charge-offs	608		—		608		(2,375)		—		(2,375)

Provision for (reversal of) credit losses	11,519		307		11,826		(1,987)		87		(1,900)
Balance at end of period	$	90,370	$	4,195	$	94,565	$	59,523	$	4,295	$	63,818


	Six Months Ended June 30,
($ in thousands)	2020										2019
	Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	$	57,649	$	4,064	$	61,713	$	62,192	$	4,622	$	66,814
Impact of adopting ASU 2016-13	7,609		(1,226)		6,383		—		—		—
Loans charged off	(2,076)		—		(2,076)		(3,514)		—		(3,514)
Recoveries of loans previously charged off	958		—		958		320		—		320
Net charge-offs	(1,118)		—		(1,118)		(3,194)		—		(3,194)

Provision for (reversal of) credit losses	26,230		1,357		27,587		525		(327)		198
Balance at end of period	$	90,370	$	4,195	$	94,565	$	59,523	$	4,295	$	63,818

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Accrued interest receivable on loans receivable, net totaled $23.8 million and $18.9 million at June 30, 2020 and December 31, 2019, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.

The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and six months ended June 30, 2020:


($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total
ALL:
Balance at March 31, 2020	$	23,573	$	13,620	$	20,072	$	3,652	$	7,052	$	9,593	$	681	$	78,243

Charge-offs	—		—		—		—		—		—		—		—
Recoveries	119		—		—		—		—		488		1		608
Net recoveries (charge-offs)	119		—		—		—		—		488		1		608

Provision for (reversal of) credit losses	2,926		3,752		5,033		532		(377)		(416)		69		11,519
Balance at June 30, 2020	$	26,618	$	17,372	$	25,105	$	4,184	$	6,675	$	9,665	$	751	$	90,370

Balance at December 31, 2019	$	22,353	$	5,941	$	11,405	$	3,120	$	3,906	$	10,486	$	438	$	57,649
Impact of adopting ASC 326	662		4,847		1,809		388		103		(420)		220		7,609
Charge-offs	(1,164)		—		—		(356)		—		(552)		(4)		(2,076)
Recoveries	149		—		—		121		—		639		49		958
Net (charge-offs) recoveries	(1,015)		—		—		(235)		—		87		45		(1,118)

Provision (reversal)	4,618		6,584		11,891		911		2,666		(488)		48		26,230
Balance at June 30, 2020	$	26,618	$	17,372	$	25,105	$	4,184	$	6,675	$	9,665	$	751	$	90,370

Individually evaluated for impairment	$	9,697	$	—	$	—	$	2,878	$	—	$	—	$	—	$	12,575
Collectively evaluated for impairment	16,921		17,372		25,105		1,306		6,675		9,665		751		77,795

Total ending ALL balance	$	26,618	$	17,372	$	25,105	$	4,184	$	6,675	$	9,665	$	751	$	90,370
Loans:
Individually evaluated for impairment	$	31,129	$	5,168	$	—	$	4,959	$	—	$	32,999	$	970	$	75,225
Collectively evaluated for impairment	1,405,861		817,526		1,434,071		305,825		212,979		1,337,786		38,423		5,552,471

Total ending loan balances	$	1,436,990	$	822,694	$	1,434,071	$	310,784	$	212,979	$	1,370,785	$	39,393	$	5,627,696

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($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Lease Financing		Single Family Residential Mortgage		Other Consumer		Total
ALL:
Balance at March 31, 2019	$	18,893	$	6,838	$	18,898	$	3,057	$	3,453	$	—	$	12,142	$	604	$	63,885
Charge-offs	(2,022)		—		(6)		8		—		—		(425)		(6)		(2,451)
Recoveries	11		—		—		60		—		3		—		2		76
Net (charge-offs) recoveries	(2,011)		—		(6)		68		—		3		(425)		(4)		(2,375)

Provision for (reversal of) credit losses	4,647		39		(6,267)		(5)		262		(3)		(645)		(15)		(1,987)
Balance at June 30, 2019	$	21,529	$	6,877	$	12,625	$	3,120	$	3,715	$	—	$	11,072	$	585	$	59,523

Balance at December 31, 2018	$	18,191	$	6,674	$	17,970	$	1,827	$	3,461	$	—	$	13,128	$	941	$	62,192
Charge-offs	(2,115)		—		(6)		(348)		—		—		(951)		(94)		(3,514)
Recoveries	44		—		—		101		—		6		150		19		320
Net (charge-offs) recoveries	(2,071)		—		(6)		(247)		—		6		(801)		(75)		(3,194)

Provision (reversal)	5,409		203		(5,339)		1,540		254		(6)		(1,255)		(281)		525
Balance at June 30, 2019	$	21,529	$	6,877	$	12,625	$	3,120	$	3,715	$	—	$	11,072	$	585	$	59,523

Individually evaluated for impairment	$	1,239	$	—	$	—	$	1,563	$	—	$	—	$	—	$	22	$	2,824
Collectively evaluated for impairment	20,290		6,877		12,625		1,557		3,715		—		11,072		563		56,699

Total ending ALL balance	$	21,529	$	6,877	$	12,625	$	3,120	$	3,715	$	—	$	11,072	$	585	$	59,523
Loans:
Individually evaluated for impairment	$	20,429	$	—	$	—	$	3,262	$	2,519	$	—	$	21,021	$	1,169	$	48,400
Collectively evaluated for impairment	1,931,278		856,497		1,598,978		77,667		206,510		—		1,940,044		60,196		6,671,170

Total ending loan balances	$	1,951,707	$	856,497	$	1,598,978	$	80,929	$	209,029	$	—	$	1,961,065	$	61,365	$	6,719,570

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	June 30, 2020										December 31, 2019
($ in thousands)	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses
With no related ALL recorded:
Commercial:
Commercial and industrial	$	11,455	$	11,383	$	—	$	1,471	$	1,460	$	—
Commercial real estate	5,418		5,168		—		—		—		—

SBA	1,474		1,417		—		1,439		1,379		—


Consumer:
Single family residential mortgage	32,849		32,999		—		19,319		19,405		—
Other consumer	1,431		970		—		671		675		—
With an ALL recorded:
Commercial:
Commercial and industrial	19,739		19,746		9,697		18,776		18,776		3,367


SBA	3,731		3,542		2,878		3,921		3,757		2,045

Consumer:
Single family residential mortgage	—		—		—		4,213		4,252		574
Other consumer	—		—		—		4		4		4
Total	$	76,097	$	75,225	$	12,575	$	49,814	$	49,708	$	5,990

The following table presents information on impaired loans, disaggregated by class, for the periods indicated:



	Three Months Ended										Six Months Ended
($ in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
June 30, 2020
Commercial:
Commercial and industrial	$	29,992	$	16	$	18	$	26,452	$	37	$	39
Commercial real estate	5,210		—		—		3,992		—		—

SBA	5,172		3		4		5,293		6		7


Consumer:
Single family residential mortgage	33,356		56		34		31,420		110		79
Other consumer	2,084		—		—		1,351		3		3
Total	$	75,814	$	75	$	56	$	68,508	$	156	$	128

June 30, 2019
Commercial:
Commercial and industrial	$	20,794	$	255	$	254	$	12,921	$	255	$	254
Commercial real estate	—		—		—		289		—		—

SBA	3,297		4		4		3,571		8		8
Construction	2,519		—		—		2,519		—		—

Consumer:
Single family residential mortgage	21,092		58		48		20,208		116		97
Other consumer	1,177		4		3		1,011		7		6
Total	$	48,879	$	321	$	309	$	40,519	$	386	$	365

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Troubled Debt Restructurings

A modification of a loan constitutes a TDR when we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. A concession or concessions may be granted in various forms, including a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a note split with principal forgiveness. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.

TDR loans consisted of the following as of the dates indicated:


	June 30, 2020										December 31, 2019
($ in thousands)	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
Commercial:
Commercial and industrial	$	—	$	20,808	$	20,808	$	—	$	16,245	$	16,245
SBA	—		266		266		—		266		266
Consumer:
Single family residential mortgage	2,628		2,170		4,798		2,638		2,394		5,032


Other consumer	—		—		—		294		—		294
Total	$	2,628	$	23,244	$	25,872	$	2,932	$	18,905	$	21,837

We had commitments to lend to customers with outstanding loans that were classified as TDRs of $135 thousand as of June 30, 2020 and December 31, 2019. Accruing TDRs were $5.6 million and non-accrual TDRs were $20.3 million at June 30, 2020 compared to accruing TDRs of $6.6 million and non-accrual TDRs of $15.2 million at December 31, 2019. The increase in TDRs during the six months ended June 30, 2020 was primarily due to one commercial and industrial relationship.

The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:



	Three Months Ended								Six Months Ended
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
June 30, 2020
Commercial:
Commercial and industrial	—	$	—	$	—	1	$	5,000	$	5,000




Total	—	—		—		1	$	5,000	$	5,000
June 30, 2019
Commercial:
Commercial and industrial	10	$	17,339	$	17,020	10	$	17,339	$	17,020
SBA	2	$	3,214	$	869	2	$	3,214	$	869



Total	12	$	20,553	$	17,889	12	$	20,553	$	17,889

We consider a TDR to be in payment default once it becomes 30 days or more past due following a modification. During each of the three and six months ended June 30, 2020, there was 1 loan that was modified as a TDR during the past 12 months that had subsequent payment defaults. During each of the three and six months ended June 30, 2019, there were 0 loans that were modified as TDRs during the past 12 months that had subsequent payment defaults.

The following table summarizes TDRs by modification type for the periods indicated:

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	Three Months Ended
	Modification Type
	Change in Principal Payments and Interest Rates				Change in Principal Payments					Total
($ in thousands)	Count	Amount		Count	Amount		Count	Amount
June 30, 2020
Commercial:
Commercial and industrial	—	$	—	—	$	—	—	$	—




Total	—	$	—	—	$	—	—	$	—

June 30, 2019
Commercial:
Commercial and industrial	10	$	17,020	—	$	—	10	$	17,020
SBA	2	$	869	—	$	—	2	$	869



Total	12	$	17,889	—	$	—	12	$	17,889


	Six Months Ended
	Modification Type
	Change in Principal Payments and Interest Rates				Change in Principal Payments					Total
($ in thousands)	Count	Amount		Count	Amount		Count	Amount
June 30, 2020
Commercial:
Commercial and industrial	1	$	5,000	—	$	—	1	$	5,000



Total	1	$	5,000	—	$	—	1	$	5,000

June 30, 2019
Commercial:
Commercial and industrial	10	$	17,020	—	$	—	10	$	17,020
SBA	2	869		—	—		2	869
Consumer:
Single family residential mortgage	—	—		—	—		—	—
Total	12	$	17,889	—	$	—	12	$	17,889

Purchases, Sales, and Transfers

From time to time, ~~the Company purchases~~we purchase and ~~sells~~sell loans in the secondary market. Certain loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value and any reductions in value on transfer are reflected as write-downs to allowance for ~~loan~~credit losses. ~~The Company had no purchases of loans, excluding loans held-for-sale, for~~During the three and six months ended June 30, ~~2019~~2020 we purchased $25.8 million of single family residential mortgage loans. There were 0 purchases of loans during the three and ~~2018.~~six months ended June 30, 2019. The following table presents loans transferred from (to) loans held-for-sale by portfolio segment for the periods indicated:

Three Months Ended Six Months Ended
($ in thousands) Transfers from Held-For-Sale Transfers (to) Held-For-Sale Transfers from Held-For-Sale Transfers (to) Held-For-Sale
June 30, 2019
Commercial:
Commercial real estate $ —
$ (573 ) $ —
$ (573 )
Multifamily —
(752,087 ) —
(752,087 )
Consumer:
Single family residential mortgage $ —
$ (131,315 ) $ —
$ (374,679 )
Total $ —
$ (883,975 ) $ —
$ (1,127,339 )
June 30, 2018
Commercial:
Multifamily $ —
$ (71,449 ) $ —
$ (71,449 )
Consumer:
Single family residential mortgage —
(133,829 ) —
(136,013 )
Other consumer —
—
—
(4,362 )
Total $ —
$ (205,278 ) $ —
$ (211,824 )

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	Three Months Ended						Six Months Ended
($ in thousands)	Transfers from Held-For-Sale		Transfers (to) Held-For-Sale		Transfers from Held-For-Sale		Transfers (to) Held-For-Sale
June 30, 2020










Total	$	—	$	—	$	—	$	—

June 30, 2019
Commercial:

Commercial real estate	$	—	$	(573)	$	—	$	(573)
Multifamily	—		(752,087)		—		(752,087)



Consumer:
Single family residential mortgage	—		(131,315)		—		(374,679)

Total	$	—	$	(883,975)	$	—	$	(1,127,339)

~~Included in transfers to~~There were 0 sales of loans ~~held for sale is $573.9 million in multifamily loans from loans held-for-investment related to our pending Freddie Mac multifamily securitization which is expected to close~~ during the ~~third quarter of 2019. The loans included in the securitization have a weighted average coupon of 3.79%~~three and ~~a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights will also be sold.~~

In connection with the anticipated securitization, during the second quarter of 2019, the Company entered into interest rate swap agreements with a combined notional value of $543.4 million to offset variability in fair value of the related loans as a result of changes in market interest rates. During the threesix months ended June 30, ~~2019,~~2020. Loss on sale of loans during the ~~Company recognized a $9.6 million unrealized loss. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution~~three and ~~is expected to be primarily offset by the anticipated gain in fair value of the loans sold into the securitization in the third quarter. Subsequent to~~six months ended June 30, ~~2019, this securitization was completed (refer~~2020 totaled 0 and $27 thousand and related to ~~Note 20 — Subsequent Events~~certain adjustments for ~~more information).~~previously sold loans.

During the three and six months ended June 30, 2019, ~~the Company~~we sold $131.5 million and $374.7 million ~~respectively,~~ in single family residential loans, resulting in ~~a gain~~gains of $125 thousand and $1.8 ~~million, respectively.~~million.

During the three and six months ended June 30, 2019, the Company sold $178.2 million and $178.2 million, respectively, in multifamily residential loans, resulting in a gain of $2.9 million and $2.9 million, respectively.

~~NOTE 6 – LEASES~~

The Company has operating leases for corporate offices, branches and loan production offices. The Company’s leases have remaining lease terms of one month to twenty years, some of which include options to extend the leases generally for periods of three years to five years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

~~The components of lease expense were as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2019
Operating Lease Expense $ 1,720
$ 3,496
Variable Lease Expense 89
178
Sublease Income (15 ) (250 )
Total Lease Expense $ 1,794
$ 3,424

~~Supplemental cash flow information related to leases was as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2019
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows $ 1,738
$ 3,619
ROU assets obtained in the exchange for lease liabilities:
ROU assets obtained in exchange for lease liabilities $ 1,055
$ 4,089
ROU assets recognized upon adoption of new lease standard $ —
$ 23,332

~~Supplemental balance sheet information related~~

Non-Traditional Mortgage Loans (“NTM”)

Our NTM portfolio is comprised of 3 interest only products: Green Loans, Interest Only loans and a small number of additional loans with the potential for negative amortization. The initial credit guidelines for the NTM portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, LTV ratio, property type, occupancy type, loan amount, and geography. Additionally, from an ongoing credit risk management perspective, we have determined that the most significant performance indicators for NTMs are LTV ratios and FICO scores. We review the NTM loan portfolio periodically by refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (AVMs) to ~~leases was~~confirm collateral values. We no longer originate NTM loans.

The following table presents the composition of the NTM portfolio, which are included in the single family residential mortgage portfolio, as ~~follows:~~

of the dates indicated:

($ in thousands) June 30,
2019
Operating Leases:
Operating lease right-of-use assets $ 24,118
Operating lease liabilities 25,457


	June 30, 2020										December 31, 2019
($ in thousands)	Count	Amount			Percent		Count	Amount			Percent
Consumer:
Single family residential mortgage:
Green Loans (HELOC) - first liens	61	$	43,604		8.5	%	69	$	49,959		8.3	%
Interest-only - first liens	329	463,666			90.7	%	376	545,371			90.8	%
Negative amortization	8	2,335			0.5	%	9	3,027			0.5	%
Total NTM - first liens	398	509,605			99.7	%	454	598,357			99.6	%
Other consumer:
Green Loans (HELOC) - second liens	5	1,598			0.3	%	7	2,299			0.4	%

Total NTM - second liens	5	1,598			0.3	%	7	2,299			0.4	%
Total NTM loans	403	$	511,203		100.0	%	461	$	600,656		100.0	%
Total loans receivable		$	5,627,696					$	5,951,885
% of total NTM loans to total loans receivable		9.1		%				10.1		%



	~~June 30, 2019~~
~~Weighted-average remaining lease term (in years):~~
~~Operating leases~~	~~6.64 years~~
~~Weighted-average discount rate:~~
~~Operating leases~~	~~2.88~~	%

~~Maturities of lease liabilities at June 30, 2019 were as follows:~~

($ in thousands)
Operating
Leases
Remainder of 2019 $ 3,325
2020 6,590
2021 4,827
2022 3,250
2023 2,440
2024 1,568
Thereafter 6,338
Total lease payments 28,338
Less: present value discount (2,881 )
Total Lease Liability $ 25,457

NOTE 75 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET

At June 30, ~~2019~~2020 and December 31, ~~2018, the Company~~2019, we had goodwill of $37.1 million. ~~The Company evaluates~~We evaluate goodwill impairment as of August 31^st each year, and more frequently if events or circumstances indicate that there may be impairment. ~~The Company~~We completed ~~its~~our most recent annual goodwill impairment test ~~(Step 0)~~ as of August 31, ~~2018~~2019 and determined that no0 goodwill impairment existed. As a

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result of the economic volatility caused by COVID-19 pandemic in both the second and first quarters of 2020, we analyzed the risk indicators related to potential goodwill impairment. Based on these analyses, we did 0t identify any impairment to goodwill during the first six months of 2020, however, there can be no assurance that prolonged market volatility resulting from the COVID-19 pandemic or other factors will not result in impairments to goodwill or other intangibles in future periods.

Core deposit intangibles are amortized over their useful lives ranging from four to ten years. As of June 30, ~~2019,~~2020, the weighted average remaining amortization period for core deposit intangibles was approximately ~~5.1~~4.3 years.


($ in thousands)							($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
June 30, 2020							June 30, 2020
Core deposit intangibles							Core deposit intangibles	$	30,904	$	27,612	$	3,292

($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
June 30, 2019
December 31, 2019							December 31, 2019
Core deposit intangibles	$	30,904	$	25,799	$	5,105	Core deposit intangibles	$	30,904	$	26,753	$	4,151
December 31, 2018
Core deposit intangibles	$	30,904	$	24,558	$	6,346

Aggregate amortization of intangible assets was ~~$621~~$430 thousand and ~~$827~~$621 thousand for the three months ended June 30, 2020 and 2019 and ~~2018, respectively~~$859 thousand and $1.2 ~~million and $1.7~~ million for the six months ended June 30, ~~2019~~2020 and ~~2018, respectively.~~2019. The following table presents estimated future amortization expenses as of June 30, ~~2019:~~2020:


($ in thousands)	Remainder of 2019		2020		2021		2022		2023		2024 and After		Total		($ in thousands)	Remainder of 2020		2021		2022		2023		2024		Total
Estimated future amortization expense	$	954	$	1,518	$	1,082	$	799	$	517	$	235	$	5,105	Estimated future amortization expense	$	659	$	1,082	$	799	$	517	$	235	$	3,292

NOTE 86 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

The following table presents ~~the Company's~~ advances from the FHLB as of the dates indicated:


($ in thousands)	June 30, 2020				December 31, 2019
Fixed rate:
Outstanding balance	$	624,000		⁽¹⁾	$	730,000
Interest rates ranging from	—		%	⁽²⁾	1.82		%
Interest rates ranging to	3.32		%		3.32		%
Weighted average interest rate	2.24		%		2.66		%
Variable rate:
Outstanding balance	—				465,000
Weighted average interest rate	—		%		1.66		%

(1)Excludes $6.8 million of unamortized debt issuance costs at June 30, 2020.

($ in thousands) June 30,
2019 December 31,
2018
Fixed rate:
Outstanding balance $ 1,180,000
$ 805,000
Interest rates ranging from 1.61 % 1.61 %
Interest rates ranging to 3.32 % 3.32 %
Weighted average interest rate 2.51 % 2.58 %
Variable rate:
Outstanding balance 645,000
715,000
Weighted average interest rate 2.52 % 2.56 %
(2)Includes $10.0 million in FHLB recovery advances with an interest rate of 0.00%, consisting of $5.0 million with a maturity date of November 27, 2020 and $5.0 million with a maturity date of May 27, 2021.

Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty. In June 2020, we repaid a $100.0 million FHLB term advance with a weighted average interest rate of 2.07% and incurred a $2.5 million extinguishment fee that is included in other noninterest expense. Additionally, in June 2020 we refinanced $111.0 million of FHLB term advances to take advantage of the rapid decline in market interest rates. As a result of this refinancing, our weighted average effective interest rate on such FHLB term advances changed from 2.81% to 2.02% and the weighted average life extended from 2.52 years to 5.18 years. At the end of the second quarter, FHLB advances included 0 overnight borrowings, $58.0 million maturing within three months, and $566.0 million maturing beyond three months with a weighted average life of 4.1 years and weighted average interest rate of 2.39%.

At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Bank’s advances from the FHLB were collateralized by certain real estate loans with an aggregate unpaid principal balance of ~~$3.71~~$2.66 billion and ~~$4.05~~$3.05 billion. Based on this collateral, the Bank was eligible to borrow an additional $1.06 billion ~~respectively.~~ at June 30, 2020.

The Bank’s investment in capital stock of the FHLB of San Francisco totaled ~~$49.3~~$19.4 million and ~~$41.0~~$32.3 million at June 30, ~~2019~~2020 and December 31, ~~2018, respectively. Based on this collateral and~~2019.

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During the ~~Bank’s holdings~~second quarter of ~~FHLB stock,~~2020, we expanded our existing secured borrowing capacity with the Federal Reserve Bank ~~was eligible~~of San Francisco (“Federal Reserve”) by participating in its Borrower-in-Custody (“BIC”) program. As a result, our borrowing capacity with the Federal Reserve increased to ~~borrow an additional $942.6~~$370.4 million at June 30, ~~2019.~~

~~The Bank maintained a line of credit of $21.0 million from~~2020. Prior to participating in the ~~Federal Reserve Discount Window, to which~~BIC program, the Bank only pledged securities as collateral for access to the discount window. At June 30, 2020, the Bank has pledged certain qualifying loans with an unpaid principal balance of $870.1 million and securities with a carrying value of ~~$28.3~~$23.0 million as collateral for this line of credit. Borrowings under this BIC program are overnight advances with ~~no outstanding~~interest chargeable at the discount window (“primary credit”) borrowing rate. There were 0 borrowings atunder this arrangement for the three and six months ended June 30, 2020 and 2019.

The Bank maintained available unsecured federal funds lines with 5 correspondent banks totaling $185.0 million, with no0 outstanding borrowings at June 30, ~~2019.~~2020.

The Bank also maintained repurchase agreements and had no0 outstanding securities sold under agreements to repurchase at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.

On February 14, 2019, the Company entered into a new line of credit for $15.0 million, which bears interest at LIBOR plus 2.00% and has a maturity date of February 13, 2020. At June 30, 2019, total borrowings under the line of credit were $0.

NOTE 97 – LONG-TERM DEBT

The following table presents ~~the Company's~~our long-term debt as of the dates indicated:


	June 30, 2019					December 31, 2018						June 30, 2020						December 31, 2019
($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount			Par Value		Unamortized Debt Issuance Cost and Discount			($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025	$	175,000	$	(1,743	)	$	175,000	$	(1,826	)	5.25% senior notes due April 15, 2025	$	175,000	$	(1,463)	$	175,000	$	(1,579)
Total	$	175,000	$	(1,743	)	$	175,000	$	(1,826	)	Total	$	175,000	$	(1,463)	$	175,000	$	(1,579)

~~Senior Notes~~

~~On April 6, 2015, the Company completed the issuance and sale of $175.0 million aggregate principal amount of its 5.25 percent~~We were in compliance with all covenants under our 5.25% senior notes due April 15, 2025 ~~(the Senior Notes). Net proceeds after discount were approximately $172.8 million.~~

The Senior Notes are the Company’s senior unsecured debt obligations and rank equally with all of the Company’s other present and future unsecured unsubordinated obligations. The Company makes interest payments on the Senior Notes semi-annually in arrears.

The Company may, at its option, on or after January 15, 2025 (i.e., 90 days prior to the maturity date of the Senior Notes), redeem the Senior Notes in whole at any time or in part from time to time, in each case on not less than 30 nor more than 60 days’ prior notice. The Senior Notes will be redeemable at a redemption price equal to 100 percent of the principal amount of the Senior Notes to be redeemed plus accrued and unpaid interest to the date of redemption.

The Senior Notes were issued under the Senior Debt Securities Indenture, dated as of April 23, 2012 (the Base Indenture), as supplemented by the Second Supplemental Indenture dated as of April 6, 2015 (the Supplemental Indenture and together with the Base Indenture, the Indenture). The Indenture contains several covenants which, among other things, restrict the Company’s ability and the ability of the Company’s subsidiaries to dispose of or incur liens on the voting stock of certain subsidiaries and also contains customary events of default. The Company was in compliance with all covenants under the Indenture at June 30, ~~2019.~~2020.

NOTE 108 – INCOME TAXES

For the three and six months ended June 30, 2020, income tax benefit was $5.3 million and $7.5 million and the effective tax rate was 22.3% and 23.0%. For the three and six months ended June 30, 2019, income tax expense ~~on a consolidated operations basis,~~ was $4.3 million and $7.0 million ~~respectively,~~ and the effective tax rate was 20.6% and 22.9%~~, respectively. For the three and six months ended June 30, 2018 income tax expense (benefit), on a consolidated operations basis, was $2.1 million and $(3.7) million, respectively, and the~~. Our effective tax rate ~~was 12.6%~~of 22.3% and (18.6)%, respectively. The Company recognized higher income tax expense for the 2019 periods mainly due to the reduction in the recognition of year-to-date tax credits from the investments in alternative energy partnerships of $1.9 million and $9.2 million23.0% for the three and six months ended June 30, ~~2018, respectively, compared~~2020 differs from the 21% federal statutory rate due to ~~$1.7 million and $1.7 million, respectively,~~the impact of state taxes as well as various tax ~~credits recognized for the three and six months ended June 30, 2019, respectively. The Company uses the flow-through income statement method to~~credits.

We account for the investment tax credits earned on the solar investments. Under this method, investment tax credits are recognized as a reduction to income tax expense and the initial book-tax difference in the basis of the investments are recognized as additional tax expense in the year they are earned.

~~The Company accounts~~ for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and tax basis of its 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 ~~its~~existing taxable temporary differences, ~~the existence~~future taxable income exclusive of ~~its historical earnings, the amounts of~~reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future ~~projected earnings as well as the~~ tax ~~expiration periods of its income tax credits.~~planning strategies. Based on this analysis, management determined, ~~that~~ it was more likely than not, that all of the deferred tax assets would be realized; therefore, no0 valuation allowance was provided against the net deferred tax assets of ~~$42.8~~$48.3 million and ~~$49.4~~$44.9 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The overall ~~decrease~~increase in net deferred tax assets was primarily due to ~~increases of $1.8 million~~an increase in deferred tax ~~liabilities resulting from year-to-date temporary book-tax differences and an increase~~assets of ~~$4.8~~$1.5 million ~~in deferred tax liabilities~~ from the ~~decrease of~~increase in net unrealized loss on securities ~~available-for-sale.~~available-for-sale and $1.9 million from the adoption of ASU 2016-13.

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. ~~The Company~~We had unrecognized tax benefits of ~~$1.3~~$1.0 million and ~~$1.2 million~~$977 thousand at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. ~~The Company does~~We do not ~~expect~~believe that the ~~total amount of~~ unrecognized

tax benefits ~~to significantly~~will change materially in the next twelve months. As of June 30, ~~2019,~~2020, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was ~~$1.1 million.~~ $820 thousand.

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At June 30, ~~2019~~2020 and December 31, ~~2018, the Company~~2019, we had no0 accrued interest or penalties. In the event ~~the Company is~~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.

~~The Company and its subsidiaries~~We are subject to U.S. ~~Federal~~federal income tax as well as income tax in multiple state jurisdictions. ~~The Company is~~We are no longer subject to ~~the assessment of~~examination by U.S. federal ~~income tax~~taxing authorities for years before ~~2015.~~2016. The statute of limitations for the assessment of California ~~Franchise~~franchise taxes has expired for tax years before 2014 (other state income and franchise tax statutes of limitations vary by state).

NOTE 119 – DERIVATIVE INSTRUMENTS

~~The Company uses~~We use derivative instruments and other risk management techniques to reduce ~~its~~our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with ~~its~~our risk management policies.

~~Interest Rate Swaps and Caps on Loans:~~The Company offers interest rate swap and cap products to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. When such products are issued, the Company also enters into an offsetting swap with institutional counterparties to eliminate the interest rate risk. These back-to-back derivative agreements, which generate fee income for the Company, are intended to offset each other. The Company retains the credit risk of the original loan. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer plus the fee. These swaps and caps are not designated as hedging instruments and are recorded at fair value in Other Assets and Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition. The changes in fair value are recorded in Other Income in the Consolidated Statements of Income. ForDuring the three and six months ended June 30, ~~2018,~~2020, changes in fair value ~~recorded through Other Income in the Consolidated Statements of Income~~on interest rate swaps and caps on loans and foreign exchange contracts were ~~immaterial.~~

~~For~~$(107) thousand and $(288) thousand, respectively, compared to $(9.7) million and $(9.8) million for the three and six months endedJune 30, 2019, respectively, and were included in other income also includes a $9.6 million unrealized loss on interest rate swaps related to the pending Freddie Mac multifamily securitization in which we planned to sell the associated mortgage servicing rights. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and is expected to be primarily offset by the anticipated gain in fair value of the loans sold into the securitization in the third quarter. Subsequent to June 30, 2019, this securitization was completed (refer to ~~Note 20 — Subsequent Events~~ ~~for more information).~~

~~Foreign Exchange Contracts:~~ The Company offers short-term foreign exchange contracts to its 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 the Company also enters into offsetting contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. These back-to-back contracts allow the Company to offer its customers foreign exchange products while minimizing its exposure to foreign exchange rate fluctuations. These foreign exchange contracts are not designated as hedging instruments and are recorded at fair value in Other Assets and Accrued Expenses and Other Liabilities on the ~~Consolidated Statements~~consolidated statements of ~~Financial Condition. For the three and six months ended June 30, 2019 and 2018, changes in fair value recorded through Other Income in the Consolidated Statements of Income were immaterial.~~operations.

The following table presents the notional amount and fair value of derivative instruments included in the ~~Consolidated Statements~~consolidated statements of ~~Financial Condition~~financial condition as of the dates indicated.


	June 30, 2020						December 31, 2019
($ in thousands)	Notional Amount		Fair Value(1)		Notional Amount		Fair Value(1)
Derivative assets:



Interest rate swaps and caps on loans	$	69,266	$	8,598	$	70,674	$	3,445
Foreign exchange contracts	3,657		137		4,643		138
Total	$	72,923	$	8,735	$	75,317	$	3,583
Derivative liabilities:



Interest rate swaps and caps on loans	$	69,266	$	9,239	$	70,674	3,717

Foreign exchange contracts	3,657		54		4,643		136
Total	$	72,923	$	9,293	$	75,317	$	3,853

(1)

June 30, 2019 December 31, 2018
($ in thousands) Notional Amount Fair Value(1) Notional Amount Fair Value(1)
Derivative assets:
Interest rate swaps and caps on loans $ 130,121
$ 4,119
$ 103,812
$ 1,534
Foreign exchange contracts 1,209
30
—
—
Total $ 131,330
$ 4,149
$ 103,812
$ 1,534
Derivative liabilities:
Interest rate swaps and caps on loans $ 673,514
$ 14,041
$ 103,812
1,600
Foreign exchange contracts 1,209
14
—
—
Total $ 674,723
$ 14,055
$ 103,812
$ 1,600

The fair value of interest rate swaps and caps on loans are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated statements of financial condition.


~~(1)~~	~~The fair value of derivative assets and derivative liabilities are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets.~~

~~The Company has~~We have entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. ~~However, the Company elected~~We elect, however, to account for all derivatives with counterparty institutions on a gross basis. ~~Due to clearinghouse rule changes, variation margin payments are treated as settlements of derivative exposure rather than as collateral.~~

NOTE 1210 – EMPLOYEE STOCK COMPENSATION

On May 31, 2018, ~~(the Effective Date), the Company's~~our stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (2018 Omnibus Plan). As of the Effective Date, the Company discontinued granting awards under the Company’s 2013 Omnibus Incentive Plan (2013 Omnibus Plan) or any prior equity incentive plans and future stock-based compensation awards to its directors and employees will be made pursuant to the (“2018 Omnibus ~~Plan.~~Plan”). The 2018 Omnibus Plan provides that the maximum number of shares ~~that will be~~ available for awards is ~~4,417,882, which represents the number of shares that were available for new awards under the 2013 Omnibus Plan immediately prior to the Effective Date.~~4,417,882. As of June 30, ~~2019, 3,644,293~~2020, 3,359,922 shares were available for future awards.

Stock-based Compensation Expense

The following table presents stock-based compensation expense and the related tax benefits for the periods indicated:


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019			2018		2019			2018		($ in thousands)	2020		2019		2020		2019
Stock options	$	(24	)	$	80	$	(16	)	$	113	Stock options	$	2	$	(24)	$	4	$	(16)
Restricted stock awards and units	1,521			1,708		2,366			3,762		Restricted stock awards and units	1,468		1,521		3,042		2,366

Total share-based compensation expense	$	1,497		$	1,788	$	2,350		$	3,875	Total share-based compensation expense	$	1,470	$	1,497	$	3,046	$	2,350
Related tax benefits	$	440		$	524	$	691		$	1,136	Related tax benefits	$	433	$	440	$	897	$	691

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The following table presents unrecognized stock-based compensation expense as of June 30, ~~2019:~~2020:

($ in thousands) Unrecognized Expense Weighted-Average Remaining Expected Recognition Period
Stock option awards $ 11
1.0 year
Restricted stock awards and restricted stock units 12,826
2.5 years
Total $ 12,837
2.5 years

($ in thousands)

Unrecognized Expense

Weighted-Average Remaining Expected Recognition Period

Restricted stock awards and restricted stock units

9,530

2.3 years

Total

9,530

2.3 years

Stock Options

~~The Company has~~We 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. ~~The Company recognizes~~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.

The following table represents stock option activity for the three months ended June 30, ~~2019:~~2020:


	Three Months Ended June 30, 2019								Three Months Ended June 30, 2020
($ in thousands except per share data)	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value		($ in thousands except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
Outstanding at beginning of period	170,973		$	13.56	5.5 years			Outstanding at beginning of period	55,069	$	13.96	4.0 years
Exercised	(1,836	)	$	10.90	5.1 years
Forfeited	(33,616	)	$	13.37	6.0 years

Outstanding at end of period	135,521		$	13.65	5.1 years	$	43	Outstanding at end of period	55,069	$	13.96	3.7 years	$	(194)
Exercisable at end of period	127,673		$	13.67	5.0 years	$	38	Exercisable at end of period	52,821	$	13.97	3.6 years	$	(187)

The following table represents stock option activity for the six months ended June 30, ~~2019:~~2020:


	Six Months Ended June 30, 2019								Six Months Ended June 30, 2020
($ in thousands except per share data)	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value		($ in thousands except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
Outstanding at beginning of period	186,973		$	13.54	5.8 years			Outstanding at beginning of period	62,521	$	13.85	4.3 years

Exercised	(1,836	)	$	10.90	5.1 years			Exercised	(7,452)	$	13.05	5.2 years
Forfeited	(49,616	)	$	13.34	6.1 years

Outstanding at end of period	135,521		$	13.65	5.1 years	$	43	Outstanding at end of period	55,069	$	13.96	3.7 years	$	(194)
Exercisable at end of period	127,673		$	13.67	5.0 years	$	38	Exercisable at end of period	52,821	$	13.97	3.6 years	$	(187)

The following table sets forth information regarding unvested stock options for the three and six months ended June 30, ~~2019:~~2020:


	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Number of Shares	Weighted-Average Exercise Price Per Share		Number of Shares	Weighted-Average Exercise Price Per Share
Outstanding at beginning of period	2,248	$	13.75	2,248	$	13.75

Vested	—	$	—	—	$	—
Forfeited	—	$	—	—	$	—
Outstanding at end of period	2,248	$	13.75	2,248	$	13.75

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Number of Shares Weighted-Average Exercise Price Per Share Number of Shares Weighted-Average
Exercise Price
Per Share
Outstanding at beginning of period 47,848
$ 13.30
63,848
$ 13.30
Vested (12,000 ) $ 13.29
(12,000 ) $ 13.29
Forfeited (28,000 ) $ 13.29
(44,000 ) $ 13.29
Outstanding at end of period 7,848
$ 13.35
7,848
$ 13.35

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Restricted Stock Awards and Restricted Stock Units

~~The Company~~We also ~~has~~have granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are valued at the closing price of ~~the Company’s~~our stock on the measurement date. 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 conditions. These performance targets include conditions relating to ~~the Company’s~~our profitability and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of ~~the Company's~~our Board of Directors upon the Committee's certification of the satisfaction of the target level of performance. ~~The Company recognizes~~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 and six months ended June 30, ~~2019:~~2020:


	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019					Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share			Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding at beginning of period	848,644		$	18.20	833,601		$	19.02	Outstanding at beginning of period	1,083,107	$	15.65	923,482	$	15.74
Granted ⁽¹⁾	587,804		$	14.23	723,398		$	14.33	Granted ⁽¹⁾	84,998	$	8.76	354,136	$	13.79
Vested ⁽²⁾	(201,816	)	$	19.07	(215,257	)	$	18.94	Vested ⁽²⁾	(231,362)	$	16.09	(293,695)	$	15.95
Forfeited ⁽³⁾	(127,778	)	$	18.19	(234,888	)	$	19.19	Forfeited ⁽³⁾	(24,073)	$	18.20	(71,253)	$	16.85
Outstanding at end of period	1,106,854		$	15.93	1,106,854		$	15.93	Outstanding at end of period	912,670	$	14.91	912,670	$	14.91

(1)There were 0 and 78,771 performance-based shares/units included in shares granted for the three and six months ended June 30, 2020.

(2)There were 13,074 and 18,473 performance-based shares/units included in vested shares for the three and six months ended June 30, 2020.

(3)The number of forfeited shares includes aggregate performance-based shares/units of 1,782 and 17,404 for the three and six months ended June 30, 2020.


~~(1)~~	~~There were 151,395 performance-based shares/units included in shares granted for the three and six months ended June 30, 2019.~~


~~(2)~~	~~There were 37,572 performance-based shares/units included in vested shares for the three and six months ended June 30, 2019.~~


~~(3)~~	~~The number of forfeited shares includes aggregate performance-based shares/units of 69,966 and 142,533 for the three and six months ended June 30, 2019, respectively.~~

Stock Appreciation Rights

On August 21, 2012, ~~the Company~~we granted to ~~it then-acting~~the then, and now former, chief executive officer, ~~Steven A. Sugarman,~~ a ~~ten-year~~ten-year stock appreciation right ~~(SAR)~~(“SAR”).

The following table represents SARs activity and the weighted average exercise price per share as of and for the three months ended June 30, ~~2019:~~2020:


	Three Months Ended June 30, 2019							Three Months Ended June 30, 2020
($ in thousands except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value		($ in thousands except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
Outstanding at beginning of period	1,559,012	$	11.60	3.4 years	$	3,488	Outstanding at beginning of period	1,559,012	$	11.60	2.4 years	$	(5,616)

Outstanding at end of period	1,559,012	$	11.60	3.2 years	$	3,691	Outstanding at end of period	1,559,012	$	11.60	2.1 years	$	(1,812)
Exercisable at end of period	1,559,012	$	11.60	3.2 years	$	3,691	Exercisable at end of period	1,559,012	$	11.60	2.1 years	$	(1,812)

The following table represents SARs activity and the weighted average exercise price per share as of and for the six months ended June 30, ~~2019:~~2020:

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	Six Months Ended June 30,							Six Months Ended June 30,
($ in thousands except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value		($ in thousands except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
Outstanding at beginning of period	1,559,012	$	11.60	3.6 years	$	2,662	Outstanding at beginning of period	1,559,012	$	11.60	2.6 years	$	8,508

Outstanding at end of period	1,559,012	$	11.60	3.2 years	$	3,691	Outstanding at end of period	1,559,012	$	11.60	2.1 years	$	(1,812)
Exercisable at end of period	1,559,012	$	11.60	3.2 years	$	3,691	Exercisable at end of period	1,559,012	$	11.60	2.1 years	$	(1,812)

NOTE 1311 – STOCKHOLDERS’ EQUITY

~~Warrants~~

On November 1, 2010, the Company issued warrants to COR Advisors LLC (COR Advisors), an entity controlled by Steven A. Sugarman, who became a director of the Company on that date and later became President and Chief Executive Officer of the Company (and resigned from those and all other positions with the Company and the Bank on January 23, 2017). The warrants entitled COR Advisors to purchase up to 1,395,000 shares of non-voting common stock at an exercise price of $11.00 per share, subject to certain adjustments to the number of shares underlying the warrants as well as certain adjustments to the warrant exercise price as applicable. On August 3, 2011, COR Advisors transferred warrants for the right to purchase 960,000 shares of non-voting common stock to COR Capital Holdings LLC (COR Capital Holdings), an entity controlled by Steven A. Sugarman, and transferred warrants for the right to purchase the remaining 435,000 shares of non-voting common stock to Jeffrey T. Seabold, the Company's then- (now former) Executive Vice President and Management Vice-Chair.

On August 22, 2012, COR Capital Holdings transferred its warrants for the right to purchase 960,000 shares of non-voting common stock to a living trust for Steven A. Sugarman and his spouse. These warrants vested in tranches, with each tranche being exercisable for 5 years after the tranche's vesting date. With respect to the warrants transferred by COR Capital Holdings to the living trust for Steven A. Sugarman and his spouse, warrants to purchase 50,000 shares vested on October 1, 2011 and the remainder vested in seven equal quarterly installments beginning January 1, 2012 and ending on July 1, 2013. With respect to the warrants transferred by COR Advisors to Mr. Seabold, warrants to purchase 95,000 shares vested on January 1, 2011; warrants to acquire 130,000 shares vested on each of April 1 and July 1, 2011, and warrants to purchase 80,000 shares vested on October 1, 2011.

On August 17, 2016, the living trust for Steven A. Sugarman and his spouse transferred warrants to purchase 480,000 shares to Steven A. Sugarman's brother, Jason Sugarman. These transferred warrants were last exercisable on September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017 for 50,000, 130,000, 130,000, 130,000, and 40,000 shares, respectively. On August 17, 2016, Jason Sugarman irrevocably elected to fully exercise each tranche of the transferred warrants. Under his irrevocable election, Jason Sugarman directed that each such exercise would occur on the last exercisable date for each tranche using a cashless (net) exercise method and also directed that each exercise be for either non-voting common stock, or, if allowed under the terms of the warrant, for voting common stock. At September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017, in accordance with Jason Sugarman’s irrevocable election, warrants to purchase 50,000, 130,000, 130,000,130,000, and 40,000 shares, respectively, had been exercised, resulting in issuances of 25,051 and 64,962 shares of the Company's voting common stock and 75,875, 77,376 and 23,237 shares of the Company's non-voting common stock, respectively. Based on automatic adjustments to the original $11.00 exercise price, the exercise price at the time of exercise was $8.80, $8.72, $8.66, $8.61 and $8.55 per share, respectively. As a result of these exercises, Jason Sugarman no longer holds any warrants to purchase shares of the Company’s stock. During the three months ended June 30, 2018, based on additional documentation received from Jason Sugarman, it was determined that Jason Sugarman was eligible to receive voting common stock under the terms of the transferred warrant for the exercises that

previously occurred on March 31, 2017, June 30, 2017 and September 30, 2017. Accordingly, on June 6, 2018, an aggregate of 176,488 shares of the Company's non-voting common stock owned by Jason Sugarman were canceled and he was issued 176,488 shares of the Company's voting common stock in lieu thereof.

On August 16, 2016, the living trust for Steven A. Sugarman and his spouse irrevocably elected to exercise its warrants to purchase 480,000 shares. Under its irrevocable election, the living trust for Steven A. Sugarman and his spouse directed that each such exercise would occur on the last exercisable date for each tranche of such warrants (September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018 with respect to 90,000, 130,000, 130,000, and 130,000 shares, respectively) using a cashless net exercise method and also directed that each exercise be for non-voting common stock. On September 30, 2017, in accordance with its irrevocable election, warrants to purchase 90,000 shares were exercised by the living trust for Steven A. Sugarman and his spouse, resulting in the issuance of 52,284 shares of the Company's non-voting common stock. Based on an automatic adjustment to the original $11.00 exercise price, the exercise price at the time of exercise was $8.55 per share.

On each of December 27, 2017, March 30, 2018 and June 29, 2018, the Company was notified that the living trust for Steven A. Sugarman and his spouse purportedly transferred warrants with respect to 130,000 shares, with a last exercisable date of December 31, 2017, 130,000 shares with a last exercisable date of March 31, 2018 and 130,000 shares with a last exercisable date of June 30, 2018, respectively, to a separate entity, Sugarman Family Partners. In accordance with the irrevocable election to exercise previously submitted by the living trust for Steven A. Sugarman and his spouse, the Company considered these transferred warrants to have been exercised with respect to 130,000 shares on December 31, 2017, 130,000 shares on March 31, 2018 and 130,000 shares on June 30, 2018, respectively, resulting in the issuance of 77,413, 72,159, and 73,543 shares of the Company's non-voting common stock, respectively, on December 31, 2017, April 2, 2018 and July 2, 2018, respectively. Based on an automatic adjustment to the original $11.00 exercise price, the exercise price at the time of exercise was $8.49 per share, $8.44 per share and $8.38 per share, respectively. As a result of these exercises, none of these warrants remain outstanding.

On December 8, 2015, March 9, 2016, June 17, 2016, and September 30, 2016, Mr. Seabold exercised his warrants with respect to 95,000, 130,000, 130,000, and 80,000 shares, respectively, using cashless (net) exercises, resulting in a net number of shares of non-voting common stock issued in the aggregate of 37,355, 53,711, 70,775, and 40,081, respectively. Based on automatic adjustments to the original $11.00 exercise price, the exercise price at the time of exercise was $9.04, $8.90, $8.84, and $8.80 per share, respectively. As a result of these exercises, Mr. Seabold no longer holds any warrants to purchase shares of the Company's stock.

Under the terms of the respective warrants, the warrants were exercisable for voting common stock in lieu of non-voting common stock following a transfer of the warrants under certain circumstances described in the terms of the warrants. The terms and issuance of the foregoing warrants were approved by the Company's stockholders at a special meeting held on October 25, 2010.

Preferred Stock

~~The Company is~~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 ~~the Company's~~our outstanding shares of preferred stock have a $1,000 per share liquidation preference. The following table presents ~~the Company's~~our total outstanding preferred stock as of the dates indicated:

June 30, 2019 December 31, 2018
($ in thousands) Shares Authorized and Outstanding Liquidation Preference Carrying Value Shares Authorized and Outstanding Liquidation Preference Carrying Value
Series C
8.00% non-cumulative perpetual
$ —
$ —
$ —
$ —
$ —
$ —
Series D
7.375% non-cumulative perpetual
115,000
115,000
110,873
115,000
115,000
110,873
Series E
7.00% non-cumulative perpetual
125,000
125,000
120,255
125,000
125,000
120,255
Total $ 240,000
$ 240,000
$ 231,128
$ 240,000
$ 240,000
$ 231,128


	June 30, 2020								December 31, 2019
($ in thousands)	Shares Outstanding	Liquidation Preference		Carrying Value		Shares Outstanding	Liquidation Preference		Carrying Value



Series D  7.375% non-cumulative perpetual	93,272	$	93,272	$	89,924	96,629	$	96,629	$	93,162
Series E  7.00% non-cumulative perpetual	98,865	98,865		95,113		100,477	100,477		96,663
Total	192,137	$	192,137	$	185,037	197,106	$	197,106	$	189,825

~~On September 17, 2018,~~During the Company completed the redemption of all 40,250 outstanding shares of the Company's 8.00 percent Series C Non-Cumulative Perpetual Preferred Stock (Series C Preferred Stock), which resulted in the simultaneous redemption of all 1,610,000 of the outstanding relatedthree and six months ended June 30, 2020, we repurchased depositary shares (Series ~~C Depository~~D Depositary Shares), each representing a 1/40^thinterest in a share of Series CD Preferred Stock, ~~at a redemption price of the~~ liquidation amount of $1,000 per share of Series CD Preferred Stock, ~~(equivalent~~resulting in the repurchase of 53,006 and 134,310 outstanding Series D Depositary Shares and the related retirement of 1,325 and 3,357 outstanding shares of Series D Preferred Stock. The repurchase price aggregated to ~~$25 per Series C Depository Share). The redemption price represented an aggregate~~

~~amount of $40.3~~$1.2 million and ~~did not accrue interest from~~$2.7 million. The $40 thousand and ~~following~~$541 thousand difference between the ~~regularly scheduled dividend payment date of September 15, 2018. Deferred stock issuance costs of $2.3 million originally recorded as a reduction to preferred stock upon issuance~~consideration paid and the carrying value of the Series CD Preferred Stock ~~were~~was reclassified to retained earnings and resulted in ~~a one-time, non-cash reduction~~an increase to net (loss) income allocated to common stockholders.

During the three and six months ended June 30, 2020, we repurchased depositary shares (Series E Depositary Shares), each representing a 1/40^thinterest in a share of Series E Preferred Stock, liquidation amount of $1,000 per share of Series E Preferred Stock, resulting in the repurchase of 57,065 and 64,465 outstanding Series E Depositary Shares and the related retirement of 1,427 and 1,612 outstanding shares of Series E Preferred Stock. The repurchase price aggregated to $1.4 million and $1.5 million. The $9 thousand and $34 thousand difference between the consideration paid and the carrying value of the Series E Preferred Stock was reclassified to retained earnings and resulted in an increase to net (loss) income allocated to common stockholders.

Share Repurchase Program

On ~~July 25, 2019,~~February 10, 2020, we announced that our Board of Directors (the “Board”) authorized the ~~Company commenced a tender offer~~repurchase of up to $45 million of our common stock. The repurchase authorization expires in February 2021, however given current macroeconomic conditions and the COVID-19 pandemic, we have suspended common stock repurchases for the ~~depositary shares representing~~immediate future. There were 0 repurchases of common stock for the three months ended June 30, 2020. During the six months ended June 30, 2020, we repurchased 827,584 shares of ~~its Series D~~common stock at a weighted average price of $14.50 per share and ~~Series E preferred stock for up to $75 million~~an aggregate amount of $12.0 million. Purchases may be made in ~~aggregate purchase price. Subject to~~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 ~~terms~~regulations of the Securities and ~~conditions described in~~Exchange Commission. The timing of purchases and the ~~tender offer materials,~~number of shares repurchased under the ~~tender offer is expected to close by the end~~program will depend on a variety of ~~August 2019.~~factors including price, trading volume, corporate and regulatory requirements, and market conditions.

Change in Accumulated Other Comprehensive (Loss) Income ~~(Loss)~~("AOCI")

~~The Company’s~~Our AOCI includes unrealized gain (loss) on securities available-for-sale. Changes to AOCI are presented net of tax effect as a component of stockholders' equity. Reclassifications from AOCI are recorded on the ~~Consolidated Statements~~consolidated statements of ~~Income~~operations either as a gain or loss. The following table presents changes to AOCI for the periods indicated:

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	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019			2018			2019			2018			($ in thousands)	2020		2019		2020		2019
Unrealized gain (loss) on securities available-for-sale
Unrealized(loss) gain on securities available-for-sale													Unrealized(loss) gain on securities available-for-sale
Balance at beginning of period	$	(18,091	)	$	(11,542	)	$	(24,117	)	$	5,227		Balance at beginning of period	$	(54,148)	$	(18,091)	$	(11,900)	$	(24,117)
Unrealized gain (loss) arising during the period	7,678			(10,796		)	16,422			(30,478		)	Unrealized gain (loss) arising during the period	56,701		7,678		(3,182)		16,422

Reclassification adjustment from other comprehensive income	—			(278		)	(208		)	(5,519		)	Reclassification adjustment from other comprehensive income	(2,011)		—		(2,011)		(208)
Tax effect of current period changes	(2,255		)	3,246			(4,765		)	10,904			Tax effect of current period changes	(16,107)		(2,255)		1,528		(4,765)
Total changes, net of taxes	5,423			(7,828		)	11,449			(25,093		)	Total changes, net of taxes	38,583		5,423		(3,665)		11,449
Reclassification of stranded tax effects to retained earnings	—			—			—			496

Balance at end of period	$	(12,668	)	$	(19,370	)	$	(12,668	)	$	(19,370	)	Balance at end of period	$	(15,565)	$	(12,668)	$	(15,565)	$	(12,668)

NOTE 1412 – VARIABLE INTEREST ENTITIES

T~~he Company holds~~We hold ownership interests in alternative energy partnerships and qualified affordable housing ~~partnerships. The Company evaluates its~~partnerships 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 ~~the Company is~~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 ~~the Company holds~~we hold could potentially be significant to the VIE, ~~the Company considers~~we consider both qualitative and quantitative factors regarding the nature, size, and form of ~~the Company's~~our involvement with the VIE. ~~The Company has~~We have determined that ~~its~~our interests in these entities meet the definition of a variable ~~interest.~~interests.

Unconsolidated VIEs

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. 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 the 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 June 30, 2020, we have a $3.5 million repurchase reserve related to this VIE.

Alternative Energy Partnerships

~~The Company invests~~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). These entities were formed to invest in ~~either~~ newly ~~installed~~established residential ~~rooftop~~and commercial solar leases and ~~power purchase agreements or newly installed ground mount solar~~ power purchase agreements. As a result of ~~its~~our investments, ~~the Company has~~we have the right to certain investment tax credits and tax depreciation benefits (recognized on the flow through and income statement method in accordance with ASC 740), and to a lesser extent, cash flows generated from the installed solar systems leased to ~~customers~~individual consumers for a fixed period of time.

While ~~the Company's~~our interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, ~~the Company has~~we have determined that ~~the Company is~~we are not the primary beneficiary because ~~the Company does~~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 ~~the Company is~~we are not the primary beneficiary, ~~the Company~~we did not consolidate the entities. ~~The Company uses~~

We use the Hypothetical Liquidation at Book Value (HLBV) method to account for ~~these~~our investments in energy tax credits as an equity investment under ASC 970-323-25-17. Under the HLBV method, an equity method investor determines its share of an investee's earnings by comparing its claim on the 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

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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 ~~the Company’s~~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, ~~the Company uses~~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.

~~During the three and six months ended June 30, 2019 and 2018, the Company funded $235 thousand for its~~ Investments in alternative energy partnerships ~~and did not receive any return of capital from its alternative energy partnerships. During the three months ended June 30, 2018, the Company received a return of capital of $1.0~~totaled $27.0 million and funded $13 thousand, respectively, from and into these partnerships. During the six months ended June 30, 2018, the Company received a return of capital of $1.0 million and funded $30.9 million, respectively, from and into these partnerships.

During the three months ended June 30, 2019 and 2018, the Company recognized a (gain) loss on investment of $(0.4) million and $1.8 million, respectively, through its HLBV application. During the six months ended June 30, 2019 and 2018, the Company recognized a loss on investment of $1.6 million and $1.8 million, respectively, through its HLBV application. As a result, the balance of these investments was $26.6 million and $44.8$29.3 million at June 30, ~~2019~~2020 and ~~2018, respectively. From an income tax benefit perspective, the Company recognized investment tax credits of $1.7 million and $1.9 million~~December 31, 2019.

The following table presents information regarding activity in our alternative energy partnerships for the three months ended June 30, 2019 and 2018, respectively, and $1.7 million and $9.2 million during the six months ended June 30, 2019 and 2018, respectively, as well as income tax benefits (expense) relating to the recognition of its loss (gain) through its HLBV application during these periods.periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Fundings	$	—	$	235	$	3,631	$	235
Cash distribution from investment	547		535		1,001		995

Gain (loss) on investments in alternative energy partnerships	167		355		(1,738)		(1,595)
Income tax credits recognized	—		1,723		—		1,723
Tax (expense) benefit recognized from HLBV application	(38)		380		398		380

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)	June 30, 2019		December 31, 2018		($ in thousands)	June 30, 2020		December 31, 2019
Cash	$	3,610	$	3,012	Cash	$	2,958	$	4,224
Equipment, net of depreciation	252,888		259,464		Equipment, net of depreciation	244,961		248,920
Other assets	4,842		4,470		Other assets	6,751		6,301
Total unconsolidated assets	$	261,340	$	266,946	Total unconsolidated assets	$	254,670	$	259,445
Total unconsolidated liabilities	$	6,166	$	6,269	Total unconsolidated liabilities	$	6,326	$	7,143

Maximum loss exposure	$	30,429	$	28,988	Maximum loss exposure	$	26,967	$	32,525

The maximum loss exposure that would be absorbed by ~~the Company~~us in the event that all of the assets in alternative energy partnerships are deemed worthless is ~~$30.4~~$27.0 million, which is ~~the Company's~~our recorded investment amount ~~and remaining unfunded commitment~~ at June 30, ~~2019.~~2020.

~~The Company believes~~We believe that the loss exposure on ~~its investment~~our investments is reduced considering ~~that the~~our return on ~~its~~our investment is provided not only by the cash flows of the underlying ~~customer~~client leases and power purchase agreements, but also through the significant tax benefits, including federal tax credits generated from the investments. In addition, the ~~management~~ 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.), thereby further limiting ~~the Company’s~~our exposure.

Qualified Affordable Housing Partnerships

~~The Company also invests~~We invest in limited partnerships that operate qualified affordable housing projects. The returns on these investments are generated primarily through allocated Federal tax credits and other tax benefits. In addition, these investments contribute to ~~the Company's~~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, ~~the Company is~~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. ~~Therefore, the Company does~~As a result, we do not consolidate these partnerships.

~~At June 30, 2019 and December 31, 2018, the Company had a total investment~~

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The following table presents information regarding balances in qualified affordable housing projects of $18.8 million and $20.0 million, respectively. During the three and six months ended June 30, 2019, the Company funded zero and $454 thousand, respectively, and recognized proportional amortization expense of $553 thousand and $1.2 million, respectively. The Company has funded $18.2 million of its $29.3 million aggregated funding commitments and had an unfunded commitment of $11.1 million at June 30, 2019. During the three and six months ended June 30, 2018, the Company funded $1.6 million and $1.6 million, respectively, into qualified affordable housing projects and recognized proportional amortization expense of $477 thousand and $974 thousand, respectively. From an income tax benefit perspective, the Company recognized investment tax credits of $554 thousand and $466 thousand, respectively, during the three months ended June 30, 2019 and 2018 and $1.1 million and $941 thousand for the six months ended June 30, 2019 and 2018, respectively. At June 30,

2019 and December 31, 2018, the maximum loss exposure that would be absorbed by the Company in the event that all of the assets in this investment are deemed worthless is $18.8 million and $20.0 million, respectively, which is the Company's recorded investment amount. The recorded investment amount is included in Other Assets in the Consolidated Statements of Financial Condition and the proportional amortization expense is recorded in Income Tax Expense (Benefit) in the Consolidated Statements of Income.

~~As the investments in alternative energy partnerships and~~our qualified affordable housing partnerships ~~represent unconsolidated VIEs to~~for the ~~Company,~~periods indicated:


($ in thousands)	June 30, 2020		December 31, 2019
Ending balance⁽¹⁾	$	46,167	$	36,462
Aggregate funding commitment	61,278		49,278
Total amount funded	40,776		26,905
Unfunded commitment	20,502		22,373
Maximum loss exposure	46,167		36,462

(1)Included in other assets in the ~~assets and liabilities~~accompanying consolidated statements of financial condition.

The following table presents information regarding activity in our qualified affordable housing partnerships for the ~~investments themselves are not recorded on the Company's Statements of Financial Condition.~~periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Fundings	$	9,312	$	—	$	13,871	$	454
Proportional amortization recognized	1,148		553		2,295		1,190
Income tax credits recognized	1,152		554		2,208		1,109

NOTE 1513 – (LOSS) EARNINGS PER COMMON SHARE

The following table presents computations of basic and diluted (loss) earnings per common share ("EPS") for the three and six months ended June 30, 2020:



	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
($ in thousands except per share data)	Common Stock		Class B Common Stock		Common Stock		Class B Common Stock
Loss from operations	$	(18,273)	$	(176)	$	(24,804)	$	(238)

Less: participating securities dividends	(93)		(1)		(186)		(2)
Less: preferred stock dividends	(3,409)		(33)		(6,909)		(66)
Less: preferred stock redemption	49		—		570		5


Net loss allocated to common stockholders	$	(21,726)	$	(210)	$	(31,329)	$	(301)

Weighted average common shares outstanding	49,553,598		477,321		49,770,527		477,321
Dilutive effects of restricted shares/units	—		—		—		—

Dilutive effects of stock options	—		—		—		—

Average shares and dilutive common shares	49,553,598		477,321		49,770,527		477,321




Basic loss per common share	$	(0.44)	$	(0.44)	$	(0.63)	$	(0.63)



Diluted loss per common share	$	(0.44)	$	(0.44)	$	(0.63)	$	(0.63)

For the three and six months ended June 30, 2020, there were 960,090 and 960,883 of restricted shares/units and 55,069 and 55,438 of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

The following table presents computations of basic and diluted EPS for the three and six months ended June 30, 2019:

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	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019										Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
($ in thousands except per share data)	Common Stock			Class B Common Stock			Total			Common Stock			Class B Common Stock			Total			($ in thousands except per share data)	Common Stock		Class B Common Stock		Common Stock		Class B Common Stock
Income from continuing operations	$	16,426		$	156		$	16,582		$	23,397		$	222		$	23,619
Income from operations																			Income from operations	$	16,426	$	156	$	23,397	$	222
Less: income allocated to participating securities	(268		)	(3		)	(271		)	(152		)	(1		)	(153		)	Less: income allocated to participating securities	(268)		(3)		(152)		(1)
Less: participating securities dividends	(93		)	(1		)	(94		)	(292		)	(3		)	(295		)	Less: participating securities dividends	(93)		(1)		(292)		(3)
Less: preferred stock dividends	(4,268		)	(40		)	(4,308		)	(8,535		)	(81		)	(8,616		)	Less: preferred stock dividends	(4,268)		(40)		(8,535)		(81)
Income from continuing operations allocated to common stockholders	11,797			112			11,909			14,418			137			14,555
Income from discontinued operations	—			—			—			—			—			—

Net income allocated to common stockholders	$	11,797		$	112		$	11,909		$	14,418		$	137		$	14,555		Net income allocated to common stockholders	$	11,797	$	112	$	14,418	$	137

Weighted average common shares outstanding	50,379,816			477,321			50,857,137			50,290,107			477,321			50,767,428			Weighted average common shares outstanding	50,379,816		477,321		50,290,107		477,321
Dilutive effects of stock units	103,677			—			103,677			119,967			—			119,967			Dilutive effects of stock units	103,677		—		119,967		—

Dilutive effects of stock options	4,142			—			4,142			7,795			—			7,795			Dilutive effects of stock options	4,142		—		7,795		—
Dilutive effects of warrants	—			—			—			—			—			—

Average shares and dilutive common shares	50,487,635			477,321			50,964,956			50,417,869			477,321			50,895,190			Average shares and dilutive common shares	50,487,635		477,321		50,417,869		477,321

Basic earnings per common share																			Basic earnings per common share	$	0.23	$	0.23	$	0.29	$	0.29
Income from continuing operations	$	0.23		$	0.23		$	0.23		$	0.29		$	0.29		$	0.29
Income from discontinued operations	—			—			—			—			—			—
Net income	$	0.23		$	0.23		$	0.23		$	0.29		$	0.29		$	0.29

Diluted earnings per common share																			Diluted earnings per common share	$	0.23	$	0.23	$	0.29	$	0.29
Income from continuing operations	$	0.23		$	0.23		$	0.23		$	0.29		$	0.29		$	0.29
Income from discontinued operations	—			—			—			—			—			—
Net income	$	0.23		$	0.23		$	0.23		$	0.29		$	0.29		$	0.29

For the three and six months ended June 30, 2019, there were 517,833 and 484,163, respectively, of stock units and 58,859 and 33,013, respectively, of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

~~The following table presents computations of basic and diluted EPS for the three and six months ended June 30, 2018:~~

Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
($ in thousands except per share data) Common Stock Class B Common Stock Total Common Stock Class B Common Stock Total
Income from continuing operations $ 13,709
$ 145
$ 13,854
$ 20,713
$ 215
$ 20,928
Less: income allocated to participating securities (85 ) (1 ) (86 ) —
—
—
Less: participating securities dividends (201 ) (2 ) (203 ) (402 ) (4 ) (406 )
Less: preferred stock dividends (5,059 ) (54 ) (5,113 ) (10,121 ) (105 ) (10,226 )
Income from continuing operations allocated to common stockholders 8,364
88
8,452
10,190
106
10,296
Income from discontinued operations 916
10
926
2,385
25
2,410
Net income allocated to common stockholders $ 9,280
$ 98
$ 9,378
$ 12,575
$ 131
$ 12,706
Weighted average common shares outstanding 50,062,442
530,987
50,593,429
50,072,385
519,610
50,591,995
Dilutive effects of stock units 211,380
—
211,380
153,029
—
153,029
Dilutive effects of stock options 40,561
—
40,561
44,082
—
44,082
Dilutive effects of warrants 73,721
—
73,721
111,781
—
111,781
Average shares and dilutive common shares 50,388,104
530,987
50,919,091
50,381,277
519,610
50,900,887
Basic earnings per common share
Income from continuing operations $ 0.17
$ 0.17
$ 0.17
$ 0.20
$ 0.20
$ 0.20
Income from discontinued operations 0.02
0.02
0.02
0.05
0.05
0.05
Net income $ 0.19
$ 0.19
$ 0.19
$ 0.25
$ 0.25
$ 0.25
Diluted earnings per common share
Income from continuing operations $ 0.16
$ 0.17
$ 0.16
$ 0.20
$ 0.20
$ 0.20
Income from discontinued operations 0.02
0.02
0.02
0.05
0.05
0.05
Net income $ 0.18
$ 0.19
$ 0.18
$ 0.25
$ 0.25
$ 0.25

For the three and six months ended June 30, 2018, there were 38,836 and 222,431, respectively, of stock units and 0 and 0, respectively of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

NOTE 1614 – 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, and usually have 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 ~~was~~ as ~~follows for~~of the ~~dates~~periods indicated:


	June 30, 2019				December 31, 2018					June 30, 2020						December 31, 2019
($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to extend credit⁽¹⁾	$	60	$	247,435	$	2,167	$	288,770
Commitments to extend credit									Commitments to extend credit	$	6,249	$	73,844	$	473	$	129,495
Unused lines of credit	817		904,298		1,514		1,119,158		Unused lines of credit	590		1,391,625		703		1,049,632
Letters of credit	1,847		8,402		1,266		8,561		Letters of credit	336		3,243		134		5,316


~~(1)~~	~~Included no commitments to extend credit related to discontinued operations at December 31, 2018.~~

Other Commitments

During the three months ended March 31, 2017, the Bank entered into certain definitive agreements which grant the Bank the exclusive naming rights to the Banc of California Stadium, a soccer stadium of The Los Angeles Football Club (LAFC), as well as the right to be the official bank of LAFC. In exchange for the Bank’s rights as set forth in the agreements, the Bank agreed to pay LAFC $100.0 million over a period of 15 years, beginning in 2017 and ending in 2032. The advertising benefits of such rights are amortized on a straight-line basis and recorded as advertising and promotion expense beginning in 2018. During the

three months ended June 30, 2019 and 2018, advertising and promotion expense related to the LAFC commitment was $1.7 million. During the six months ended June 30, 2019 and 2018, advertising and promotion expense related to the LAFC commitment was $3.3 million. As of June 30, 2019, the Bank has paid $18.0 million of the $100.0 million commitment. The prepaid commitment balance, net of amortization, was $8.0 million as of June 30, 2019, which was recognized as a prepaid asset and included in Other Assets in the Consolidated Statements of Financial Condition. See Note 18 for additional information.

At June 30, ~~2019, the Company~~2020, we had unfunded commitments of ~~$11.1~~$20.5 million, ~~$7.6~~$7.1 million, and $501 thousand for affordable housing fund investments, Small Business Investment Company (SBIC) investments, and other investments, respectively.

NOTE 1715 – REVENUE RECOGNITION

The following presents noninterest ~~(loss)~~ income, segregated by revenue streams, in-scope and out-of-scope of Topic 606 - Revenue From Contracts With Customers, for the periods ~~indicated.~~indicated:

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2018 2019 2018
Noninterest income
In scope of Topic 606
Deposit service fees $ 575
$ 708
$ 1,242
$ 1,486
Debit card fees 178
177
291
402
Investment commissions 260
619
539
942
Other 109
—
216
155
Noninterest income (in-scope of Topic 606) 1,122
1,504
2,288
2,985
Noninterest (loss) income (out-of-scope of Topic 606) (3,412 ) 6,557
1,717
13,658
Total noninterest (loss) income $ (2,290 ) $ 8,061
$ 4,005
$ 16,643

Table of Contents


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2020		2019		2020		2019
Noninterest income (loss)
In scope of Topic 606
Deposit service fees	$	420	$	575	$	959	$	1,242
Debit card fees	380		178		557		291
Investment commissions	—		260		—		539
Other	59		109		108		216
Noninterest income (in-scope of Topic 606)	859		1,122		1,624		2,288
Noninterest income (out-of-scope of Topic 606)	4,669		(3,412)		5,965		1,717
Total noninterest income (loss)	$	5,528	$	(2,290)	$	7,589	$	4,005

~~The Company does~~We do not typically enter into long-term revenue contracts with customers. As of June 30, ~~2019~~2020 and December 31, ~~2018, the Company~~2019, we did not have any significant contract balances. As of June 30, ~~2019, the Company~~2020, we did not capitalize any contract acquisition costs.

NOTE 1816 – RELATED-PARTY TRANSACTIONS

~~General.~~ 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~~guidelines. These loans do not involve more than the normal risk of collectability or present other unfavorable features. As of ~~the date of this filing,~~June 30, 2020, no related party loans were categorized as ~~nonaccrual,~~non-accrual, past due, restructured, or potential problem loans.

The Bank also has an Employee Loan Program which is available to all employees and offers executive officers, directors and principal stockholders that meet the eligibility requirements the opportunity to participate on the same terms as employees generally, provided that any loan to an executive officer, director or principal stockholder must be approved by the Bank’s Board of Directors. The sole benefit provided under the Employee Loan Program is a reduction in loan fees.

Transactions with ~~Current~~ 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 5 percent of the outstanding shares of the Company’s voting common stock and certain persons related to them.

~~Indemnification for Costs of Counsel in Connection with Special Committee Investigation, SEC Investigation and Related Matters.~~ ~~On November 3, 2016, in connection with an investigation by the Special Committee of~~As previously disclosed, the Company’s Board of Directors ~~the Company Board~~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 ~~investigation, and to advise them on their rights and obligations with respect to the investigation. At the direction~~Special Committee of the ~~Company~~Company’s Board this indemnification, advancement and/or reimbursement is, to the extent applicable, subject to the indemnification agreement that each officer and director previously entered into with the Company, which includes an undertaking to repay any expenses advanced if it is ultimately determined that the officer or

~~director was not entitled to indemnification under such agreements and applicable law. In addition, the Company is providing indemnification, advancement and/or reimbursement for costs related to (i)~~of Directors, (ii) a formal order of investigation issued by the SEC on January 4, 2017 ~~directed primarily at certain of the issues that the Special Committee reviewed~~(since resolved), and ~~(ii)~~(iii) any related civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the Company (collectively, the “Indemnity Matters”).

Indemnification costs were paid on behalf of certain current and former executive officers and directors in amounts less than $120 thousand for the three and six months ended June 30, 2020. During the three and six months ended June 30, 2019, indemnification costs paid by the Company included $2 thousand and $149 thousand, respectively, incurred by the Company's General Counsel Emeritus John Grosvenor, who retired from that position effective April 15, 2019. Indemnification costs were paid on behalf of other executive officers and directors in lesser amounts for the three and six months ended June 30, 2019.

During the three and six months ended June 30, 2018, indemnification costs paid by the Company included $233 thousand and $272 thousand, respectively, incurred by director Halle J. Benett; $233 thousand and $272 thousand, respectively, incurred by director Jonah F. Schnel; and $233 thousand and $272 thousand, respectively, incurred by director Robert Sznewajs. Indemnification costs were paid on behalf of other executive officers and directors in lesser amounts for the three and six months ended June 30, 2018.

~~Sabal Loan.~~ On September 5, 2017, John A. Bogler became the Chief Financial Officer of the Company and the Bank. Mr. Bogler is a founding member, and since 2015 and up until his employment with the Company, was a board member and Chief Financial Officer, of Sabal Capital Partners, LLC and Sabal Investment Advisors, LLC. Sabal Capital Partners, LLC is the sole owner of Sabal Opportunities Fund I, LLC, which in turn is the sole owner of Sabal TL1, LLC; Sabal Investment Advisors, LLC is the investment manager of SIA Debt Opportunities Fund, LP. SDOF GP, LLC is the general partner of Sabal Investment Advisors, LLC (together, Sabal). As of September 1, 2018, Mr. Bogler had completely divested his ownership in Sabal, except for an investment in SDOF GP, LLC that represents only a right of Mr. Bogler to receive his pro-rata share of pass through distributions (net of expenses) by SIA Debt Opportunities Fund, LP with respect to underlying investments that were made by the fund. Effective June 26, 2015, the Bank provided a $35.0 million committed revolving repurchase facility, which was increased to $40.0 million effective June 11, 2017, to Sabal TL1, LLC, with a maximum funding amount of $100.0 million in certain situations. On June 6, 2018, the revolving repurchase facility was extended for 90 days beyond its original maturity date of June 10, 2018. The repurchase facility's outstanding balance was $3.5 million before it was completely paid off in August 2018. The extension was not renewed and expired on September 10, 2018.

Under the Sabal repurchase facility, commercial mortgage loans originated by Sabal were purchased from Sabal by the Bank, together with a simultaneous agreement by Sabal to repurchase the commercial mortgage loans from the Bank at a future date. The advances under the Sabal repurchase facility were secured by commercial mortgage loans that had a market value in excess of the balance of the advances under the facility. During the year ended December 31, 2018, the largest aggregate amount of principal outstanding under the Sabal repurchase facility was $32.5 million. The Sabal repurchase facility was paid off during the year ended December 31, 2018.

Interest on the outstanding balance under the Sabal repurchase facility accrued at the six month LIBOR rate plus a margin. $210.4 million in principal and $370 thousand in interest were paid by Sabal on the facility to the Bank during the year ended December 31, 2018.

~~Transactions with Former Related Parties~~

In addition to the transactions described above with the Company’s current directors, executive officers, and 5% or greater stockholders, and related persons, the Company and the Bank have engaged in transactions described below with the Company’s then (now former) directors and executive officers, and certain persons related to them.

~~Indemnification for Costs of Counsel for Former Executive Officers and Former Directors in Connection with the Indemnity Matters.~~

~~During the three and six months ended June 30, 2019, indemnification costs paid by the Company in connection with the Indemnity Matters included~~ $4.7 million and $6.9 million ~~respectively,~~ incurred by the Company’s former Chair, President, and Chief Executive Officer, Steven A. Sugarman; ~~and~~ $186 thousand and $741 thousand ~~respectively,~~ jointly incurred by the Company’s former Interim Chief Financial Officer and Chief Strategy Officer, J. Francisco A. ~~Turner~~Turner; and the Company’s former Chief Financial Officer, James J. McKinney; and $139 thousand and $142 thousand incurred by the Bank’s former director, Cynthia Abercrombie. Indemnification costs ~~were paid on behalf of other former executive officers and other former directors in lesser amounts e~~ for the ~~three and~~Company's former General Counsel Emeritus John Grosvenor were $149 thousand for the six months ended June 30, 2019.

During the three and six months ended June 30, 2018, indemnification costs paid by the Company included $1.8 million and $2.0 million, respectively, incurred by the Company’s former Chair, President and Chief Executive Officer Steven A. Sugarman; $64 thousand and $135 thousand, respectively, incurred by the Bank’s former Management Vice Chair Jeffrey T. Seabold; and $173 thousand and $287 thousand, respectively, incurred by the Bank’s former director Cynthia Abercrombie; and $233 thousand and $272 thousand, respectively, incurred by the Company’s former director Jeffrey Karish. Indemnification

costs were paid on behalf of other former executive officers and other former directors in lesser amounts for the three and six months ended June 30, ~~2018.~~2019.

~~Settlement Agreement.~~ On September 5, 2017, Jeffrey T. Seabold, the Bank’s former Management Vice Chair, submitted a notice of termination of employment pursuant to his employment agreement with the Bank and, that same day, filed a complaint in the Superior Court of the State of California, County of Los Angeles, against the Company and the Bank and multiple unnamed defendants asserting claims for breach of contract, wrongful termination, retaliation and unfair business practices. On January 19, 2018, the parties reached a settlement in principle through mediation and a final settlement agreement was entered into by the Company, the Bank and Mr. Seabold on February 14, 2018 (the "Settlement Agreement"). Under the Settlement Agreement, which provided for a mutual release of claims and the dismissal of Mr. Seabold’s complaint with prejudice, Mr. Seabold received lump sum cash payments from the Company and the Bank aggregating $4.3 million, less applicable withholdings for the portions of such payments representing employee compensation. Included within this amount were cash payments totaling $576 thousand representing a benefit with respect to Mr. Seabold's unvested stock options and restricted stock awards. Mr. Seabold also received a cash payment of $38 thousand as reimbursement for his premiums for health care coverage for the period October 1, 2017 through March 2019. In addition, in accordance with the Settlement Agreement the Bank paid $650 thousand of attorneys’ fees incurred by Mr. Seabold in connection with his lawsuit and the Settlement Agreement. All the cash payments to Mr. Seabold under the Settlement Agreement were made during the three months ended March 31, 2018. The Settlement Agreement contains certain standstill provisions that, prior to December 31, 2018, generally restricted Mr. Seabold and his affiliates from, among other things, acquiring beneficial ownership of any shares of the Company’s common stock or common stock equivalents to the extent this would result in Mr. Seabold beneficially owning in excess of 4.99 percent of the total number of shares of common stock outstanding, soliciting proxies in opposition to any matter not recommended by the Company’s Board of Directors or in favor of any matter not approved by the Company’s Board of Directors or initiating any stockholder proposal.

NOTE 1917 – 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, ~~the Company establishes~~we establish an accrued liability when those matters present loss contingencies that are both probable and estimable. ~~The Company continues~~We continue to monitor the ~~matter~~matters for further developments that could affect the amount of the accrued liability that has been previously established. As

Table of ~~June 30, 2019,~~Contents

While the ~~Company accrued $475 thousand for various litigation filed against the Company~~ultimate liability with respect to legal actions cannot be determined at this time, we believe that damages, if any, and ~~the Bank.~~

The Company was named as a defendant in several complaints filed in the United States District Court for the Central District of California in January 2017 alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaints were brought as purported class actions on behalf of stockholders who purchased shares of the Company’s common stock between varying dates, inclusive of August 7, 2015 through January 23, 2017. Those actions were consolidated, a lead plaintiff was appointed, and the lead plaintiff filed a Consolidated Amended Complaint on May 31, 2017. The defendants movedother amounts relating to ~~dismiss the Consolidated Amended Complaint. On September 18, 2017, the district court granted in part and denied in part Defendants’ motions~~pending matters are not likely to ~~dismiss. Specifically, the court denied the defendants’ motions as~~be material to the Company’s April 15, 2016 Proxy Statement which listed the positions held by Steven A. Sugarman (the Company’s then (now former) Chairman, President and Chief Executive Officer) with COR Securities Holdings Inc., COR Clearing LLC, and COR Capital LLC while omitting their alleged connections with Jason Galanis. On May 31, 2018, the court certified a class of shareholders who purchased Company stock between April 15, 2016 and January 20, 2017. Trial is currently set for February 18, 2020. The Company believes that the action is without merit and intends to vigorously contest it.consolidated financial statements.

NOTE 2018 – SUBSEQUENT EVENTS

~~The Company~~We have evaluated events from the date of the consolidated financial statements on June 30, ~~2019~~2020 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~On July 25, 2019, the Company commenced a tender offer for the depositary shares representing shares~~

Table of its Series D and Series E preferred stock for up to $75 million in aggregate purchase price. Subject to the terms and conditions described in the tender offer materials, the tender offer is expected to close by the end of August 2019.Contents

~~On August 1, 2019, the Company completed the Freddie Mac multifamily securitization and sold the associated mortgage servicing rights.~~

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 and six months ended June 30, ~~2019.~~2020. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 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 June 30, ~~2019.~~2020.

CRITICAL ACCOUNTING POLICIES

~~The Company's~~Our consolidated financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within these financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated statements of financial condition dates and our results of operations for the reporting periods. As certain accounting policies require significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, ~~the Company has~~we have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. ~~The Company's~~Our critical accounting policies are described in Note 1 to Consolidated Financial Statements and in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Adoption of the Current Expected Credit Loss (CECL) Model

On January 1, 2020, we adopted the new accounting standard, commonly known as CECL, which uses a current expected credit loss model for determining allowance for credit losses (ACL). Upon adoption, we recognized a Day 1 increase in the ACL of $6.4 million and a related after-tax decrease to retained earnings of $4.5 million. Our Day 1 ACL under the new CECL model totaled $68.1 million compared to $61.7 million under the incurred loss model at December 31, 2019, and represented 1.14% of total loans. At June 30, 2020, the ACL totaled $94.6 million resulting in an ACL to total loans coverage ratio of 1.68%, up from 1.04% at December 31, 2019. Excluding PPP loans, the ACL to total loans coverage ratio was 1.76% at June 30, 2020. The ACL and provision for credit losses include amounts for the reserve for unfunded loan commitments.

Recent Accounting Pronouncements Not Yet ~~Adopted:~~Adopted ~~The following are recently issued~~

Our recent accounting pronouncements ~~applicable to the Company that have~~ not yet ~~been adopted:~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326)~~ ~~("ASU 2016-13").~~ ~~This guidance is intended~~adopted are described in Note 1 to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this guidance replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to credit loss estimates. This ASU will be effective for fiscal years beginning after December 15, 2019. Early adoption is available for fiscal years beginning after December 15, 2018. Currently, the Company cannot reasonably estimate the impact that adoption of ASU 2016-13 will have on its Consolidated Financial ~~Statements; however,~~Statements in the impact may be significant. That assessment is based upon the fact that, unlike the incurred loss models in existing GAAP, the current expected credit loss (“CECL”) model in ASU 2016-13 does not specify a thresholdCompany's Annual Report on Form 10-K for the ~~recognition~~year ended December 31, 2019 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of an impairment allowance. Rather, the Company will recognize an impairment allowance equal to its estimate of lifetime expected credit losses, adjusted for prepayments, for in-scope financial instruments as of the end of the reporting period. Accordingly, the impairment allowance measured under the CECL model could increase significantly from the impairment allowance measured under the Company’s existing incurred loss model. We have established a working group under the direction of the ALLL Committee composed of our Chief Financial Officer, Chief Credit Officer, Chief Risk Officer and Chief Accounting Officer. The Company has engaged a third-party vendor to assist in the CECL calculation and has developed an internal governance framework to oversee the CECL implementation. Other significant CECL implementation matters in process and being addressed by the Company include selecting loss estimation methodologies, identifying, sourcing and storing data, addressing data gaps, defining a reasonable and supportable forecast period, selecting historical loss information which will be reverted to, documenting the CECL estimation process, assessing the impact to internal control over financial reporting, capital planning and seeking process approval from audit and regulatory stakeholders. The Company expects to begin parallel calculations, testing, and sensitivity analysisthis Quarterly Report on ~~its initial modeling assumptions and results in the third quarter of 2019.~~Form 10-Q.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ ~~("ASU 2017-04").~~ The amendments in this ASU simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to adopt the ASU on January 1, 2020. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~ ~~("ASU 2018-13").~~ The primary objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted. The Company plans to adopt the

~~ASU on January 1, 2020. The adoption of ASU 2018-13 is not expected to significantly impact the Company's consolidated financial statements.~~

Executive Overview

~~The Company is~~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 ~~its 32~~our 31 full service branches in Orange, Los Angeles, San Diego, ~~Orange,~~and Santa Barbara ~~and Los Angeles~~ Counties. Through our ~~700+~~over 600 dedicated professionals, ~~the Company is~~we are committed to ~~service~~servicing and building enduring relationships by providing a higher standard of banking. ~~The Company offers~~We offer a variety of financial products and services designed around ~~its~~our target clients in order to serve all of their banking and financial needs. ~~The Company continues~~We continue to focus on three main initiatives designed to improve our franchise and profitability on an ongoing basis: reducing our cost of deposits while adding value, optimizing the balance sheet to focus on higher-margin products while managing credit risk, and appropriately managing down expenses to the size and complexity of the business. Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our ~~high~~ credit quality and serving businesses, entrepreneurs and individuals within our footprint.

Financial Highlights

For the three months ended June 30, 2020 and 2019, ~~and 2018,~~ net (loss) income ~~from continuing operations~~ was ~~$16.6~~$(18.4) million and ~~$13.9 million, respectively.~~$16.6 million. Diluted (loss) earnings from ~~continuing~~ operations per common share were ~~$0.23~~$(0.44) and ~~$0.16, respectively,~~$0.23 for the three months ended June 30, ~~2019~~2020 and ~~2018. The increase in net income from continuing operations~~2019. Financial results for the three months ended June 30, 2019 compared to same period last year was due mainly to reductions in noninterest expense and provision for loan losses, partially offset by decreases in net interest income and noninterest income coupled with an increase in income taxes.

~~Total assets were $9.36 billion at June 30, 2019,~~second quarter of 2020 included a ~~decrease~~one-time pre-tax charge of ~~$1.27 billion from $10.63 billion at December 31, 2018. The decrease was mainly due~~$26.8 million related to the restructuring of the Company’s ~~continued progress towards transitioning to a core commercial banking platform. As part~~relationship with the Los Angeles Football Club (“LAFC”). The restructuring of ~~this transition,~~ the ~~Company is de-emphasizing~~relationship will result in estimated pre-tax cost savings of approximately $89 million over the ~~production of lower margin loan products and is opportunistically reducing its holdings of certain investment securities.~~next 12.5 years, or approximately $7.1 million per year.

Significant financial highlights during the three months ended June 30, ~~2019~~2020 included:

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•Noninterest-bearing deposit balances increased $135.4 million during the quarter and represented 23% of total deposits at June 30, 2020, up from 16% a year earlier

•Total checking balances increased $409.7 million during the quarter and represented 54% of total deposits at June 30, 2020, up from 40% a year earlier

•Net interest margin increased ~~by 5~~12 basis points from the prior quarter to ~~2.86% for the second quarter, resulting from a 5 basis point decline in our~~3.09%

•Average cost of deposits

~~Loan production was $599 million for the quarter, including $186 million of commercial and industrial loan commitments~~

~~Loan delinquencies decreased by 12.2%~~ declined 40 basis points from the prior quarter to ~~$52.2 million~~0.71%

~~Held-for-investment loan balances~~•Allowance for ~~the second quarter decreased~~credit losses strengthened to ~~$6.7 billion as we sold lower coupon single family and multifamily~~1.68% of total loans ~~and transferred $574 million of multifamily loans to held-for-sale, pending a planned Freddie Mac securitization~~

~~Collateralized loan obligations declined to $737.2 million following $298.2 million of sales and calls~~

Noninterest expense was $43.6 million for the quarter, including $6.2 million of litigation, indemnification, investigation and other legal fees, $12.6 million of insurance recoveries, and net project charge-offs of $869 thousand

~~The Company's~~ •Common Equity Tier 1 ~~ratio was 10.50%~~capital at 11.68%

COVID-19 Operational Update

The markets in which we operate are marked by continuing uncertainty about the pace and strength of reopening and recovering from the impacts of the global pandemic. Despite the challenges created by the coronavirus, we continue to execute on our strategic initiatives and the transformation of our balance sheet. We continue to operate 25 of our 31 branches as we temporarily consolidated some overlapping areas at the beginning of the pandemic to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. The majority of our employees outside of our branches are working offsite with only essential employees onsite. We are classified as an 'essential' business and we have implemented social and physical safeguards for our customers and employees within all of our locations.

CARES Act Response Efforts

On March 27, 2020, the U.S. federal government signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act provides emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic and includes numerous measures which we are utilizing to support our customers, including the Paycheck Protection Program (“PPP”).

The CARES Act initially allocated nearly $350 billion for the PPP, with an additional $310 billion added through an amendment bill several weeks later. This program is intended to assist small businesses affected by the pandemic and economic downturn with funds to pay payroll and other expenses through June 30, ~~2019, compared~~2020. The program has been extended through August 8, 2020. The loans are 100% guaranteed by the Small Business Administration (“SBA”) and the full principal amount of the loans may qualify for loan forgiveness if certain conditions are met.

Within seven business days of the announcement of PPP, we redeployed resources to ~~9.53% at December~~this program in support of our clients and others seeking financial relief under the program. As of June 30, 2020, we estimate we helped businesses that represent an aggregate workforce of more than 25,000 jobs through approvals of $262 million in PPP funds. We served existing clients with our high touch business framework in addition to successfully attracting many new clients by using the PPP opportunity to differentiate ourselves by demonstrating how true service can make a meaningful difference. As a result, we added many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts. During the three months ended June 30, 2020, we collected $7.5 million in fees on the 1,069 PPP loans funded, which will be recognized over their estimated life of nine months. We have started the loan forgiveness process with a number of clients and we expect this will be complete early next year.

Borrower Payment Relief Efforts

We are committed to supporting our existing borrowers and customers during this period of economic uncertainty. We actively engaged with our borrowers seeking payment relief and waived certain fees for impacted clients. One method we deployed was to offer forbearance and deferments to qualified clients. For single family residential (“SFR”) loans, the forbearance period is 90 days in length and is patterned after the U.S. Department of Housing and Urban Development (“HUD”) guidelines where applicable. With respect to our non-SFR loan portfolio, deferments are 90 days in length.

Many of our deferred loans have recently reached the expiration of their initial 90-day deferral period and we are reviewing their current financial condition as we evaluate extension requests of deferral periods. For those commercial borrowers that demonstrate a continuing need for a deferral, we generally expect to obtain credit enhancements such as additional collateral, personal guarantees, and/or reserve requirements in order to grant an additional deferral period. We expect the legacy SFR loans to continue with a higher percentage of forbearances due to the applicable consumer regulations, however, the SFR portfolio is well secured with an average portfolio LTV below 70%.

For a discussion of the related risk factors, please refer to Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2018.~~2020.

~~RESULTS OF OPERATIONS~~

~~Condensed Statements~~

Table of ~~Continuing Operations, Discontinued Operations and Consolidated Operations~~Contents

The following table presents ~~condensed statements~~the composition of ~~continuing operations, discontinued operations and consolidated operations~~our loan portfolio for ~~the three and six months ended~~borrowers that received payment relief as of June 30, ~~2018. Operating income~~2020:


	Deferment & Forbearances⁽¹⁾⁽²⁾
		June 30, 2020
($ in thousands)		Number of Loans	Amount⁽¹⁾⁽²⁾		% of Loan Category

Commercial:
Commercial and industrial		55	$	53,255	3.7	%
Commercial real estate		53	218,537		26.6	%
Multifamily		30	114,296		8.0	%
SBA		6	21,819		7.0	%
Construction		8	31,544		14.8	%

Total commercial		152	439,451		10.4	%
Consumer:
Single family residential mortgage		142	163,815		12.0	%
Other consumer		4	969		2.5	%
Total consumer		146	164,784		11.7	%
Total		298	$	604,235	10.7	%

(1)Excludes loans in forbearance that are current

(2)Excludes loans delinquent prior to COVID-19

With respect to our commercial portfolio, as of July 31, 2020, 67 loans totaling $192.8 million have reached expiration of their initial deferral period and have not requested an additional 90-day deferral period as of that date. As of July 31, 2020, 18 loans totaling $121.3 million have requested an additional 90-day deferral period, of which 5 loans totaling $35.2 million have been approved. We continue to review the remaining requests and will evaluate additional requests from commercial borrowers that have or will soon reach expiration of their initial deferral period as described above.

With respect to our consumer portfolio, consisting primarily of single family residential mortgage loans, as of July 31, 2020, the number of loans on forbearance remained relatively unchanged compared to June 30, 2020.

Other Efforts

To support our community, we partnered with Food Finders to provide over 300,000 meals to our most vulnerable neighbors in Southern California. We also made a donation to the Los Angeles Fire Department to help supply critical personal protective equipment to these first-responders. We developed online financial literacy classes for ~~discontinued operations~~young adults and we sponsored five LAFC blood drives in ~~2019 was~~

partnership with the American Red Cross and Banc of California Stadium.

~~immaterial.~~

Termination of LAFC Agreement

On May 22, 2020, we entered into an agreement (the “Termination Agreement”) with the Los Angeles Football Club (LAFC) to amend and terminate certain agreements that we previously entered into with LAFC in 2017 (the “LAFC Agreements”). Among other things, the LAFC Agreements granted us the exclusive naming rights to the Banc of California Stadium, a soccer stadium of LAFC, as well as the right to be the official bank of LAFC. Pursuant to the LAFC Agreements, we agreed to pay LAFC $100 million over a period of 15 years, of which $15.9 million had been recognized as expense from January 1, 2018 through May 22, 2020. In addition to the stated contract amount of $100 million, the LAFC Agreements obligated us to pay for other annual expenses, which have averaged approximately $500 thousand per year.

Under the Termination Agreement, we agreed to restructure our partnership to allow LAFC to expand its roster of sponsors and partners into categories that were previously exclusive to us under the LAFC Agreements and we stepped away from our naming-rights position on LAFC’s soccer stadium. We will continue to serve as LAFC’s primary banking partner, subject to any new sponsor in the financial services space that offers banking services, and remain as a partner on a number of other collaborations. As part of the Termination Agreement, we agreed to pay LAFC a $20.1 million termination fee. The LAFC Agreements will be terminated on December 31, 2020, unless otherwise terminated earlier by LAFC pursuant to the Termination Agreement (the “Termination Date”). We will not have any continuing payment obligations to LAFC following the Termination Date. With respect to the remainder of 2020, we do not expect to have any additional payment obligations except in certain specified circumstances set forth in the Termination Agreement, which amount would not exceed $2.8 million.

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Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
($ in thousands) Continuing Operations Discontinued Operations Consolidated Operations Continuing Operations Discontinued Operations Consolidated Operations
Interest and dividend income $ 105,185
$ 189
$ 105,374
$ 203,892
$ 375
$ 204,267
Interest expense 32,421
—
32,421
59,690
—
59,690
Net interest income 72,764
189
72,953
144,202
375
144,577
Provision for loan losses 2,653
—
2,653
22,152
—
22,152
Noninterest income 8,061
1,107
9,168
16,643
2,977
19,620
Noninterest expense 62,539
15
62,554
122,339
27
122,366
Income from continuing operations before income taxes 15,633
1,281
16,914
16,354
3,325
19,679
Income tax (benefit) expense 1,779
355
2,134
(4,574 ) 915
(3,659 )
Net income $ 13,854
$ 926
$ 14,780
$ 20,928
$ 2,410
$ 23,338
The pre-tax impact from our entry into the Termination Agreement was a one-time charge to operations of $26.8 million during the second quarter of 2020. The charge to operations includes the write-off of all of a prepaid advertising asset. As a result of the Termination Agreement, the Bank estimates an aggregate pre-tax cost savings of approximately $89.1 million, or approximately $7.1 million per year, over the remaining 12 ½ year life of the original LAFC Agreements.

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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 ~~on a consolidated operations basis,~~ for the three months ended June 30, ~~2019,~~2020, March 31, ~~2019~~2020 and June 30, ~~2018:~~2019:


	Three Months Ended
	June 30, 2020												March 31, 2020									June 30, 2019
($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/Cost
Interest-earning assets:
Total loans⁽¹⁾	$	5,707,619		$	63,642	4.48	%	$	5,780,810		$	65,534	4.56	%	$	7,445,704		$	89,159	4.80	%
Securities	1,063,941			7,816		2.95	%	952,966			7,820		3.30	%	1,304,876			12,457		3.83	%
Other interest-earning assets ⁽²⁾	424,776			1,239		1.17	%	297,444			1,360		1.84	%	342,908			2,424		2.84	%
Total interest-earning assets	7,196,336			72,697		4.06	%	7,031,220			74,714		4.27	%	9,093,488			104,040		4.59	%
ACL	(78,528)							(60,470)							(63,046)
BOLI and noninterest-earning assets ⁽³⁾	622,398							592,192							580,133
Total assets	$	7,740,206						$	7,562,942						$	9,610,575
Interest-bearing liabilities:
Savings	$	905,997		2,718		1.21	%	$	890,830		3,296		1.49	%	$	1,083,571		4,950		1.83	%
Interest-bearing checking	1,710,038			2,186		0.51	%	1,520,922			3,728		0.99	%	1,580,165			4,554		1.16	%
Money market	592,872			850		0.58	%	608,926			1,760		1.16	%	853,007			3,902		1.83	%
Certificates of deposit	1,214,939			4,451		1.47	%	1,151,518			5,827		2.04	%	2,537,060			15,192		2.40	%
Total interest-bearing deposits	4,423,846			10,205		0.93	%	4,172,196			14,611		1.41	%	6,053,803			28,598		1.89	%
FHLB advances	819,166			4,818		2.37	%	1,039,055			5,883		2.28	%	1,287,121			8,289		2.58	%
Securities sold under repurchase agreements	1,024			2		0.79	%	—			—		—	%	2,173			16		2.95	%
Long-term debt and other interest-bearing liabilities	173,977			2,357		5.45	%	174,056			2,359		5.45	%	174,161			2,357		5.43	%
Total interest-bearing liabilities	5,418,013			17,382		1.29	%	5,385,307			22,853		1.71	%	7,517,258			39,260		2.09	%
Noninterest-bearing deposits	1,349,735							1,133,306							1,034,205
Noninterest-bearing liabilities	118,208							128,282							96,179
Total liabilities	6,885,956							6,646,895							8,647,642
Total stockholders’ equity	854,250							916,047							962,933
Total liabilities and stockholders’ equity	$	7,740,206						$	7,562,942						$	9,610,575
Net interest income/spread				$	55,315	2.77	%				$	51,861	2.56	%				$	64,780	2.50	%
Net interest margin ⁽⁴⁾						3.09	%						2.97	%						2.86	%

Ratio of interest-earning assets to interest-bearing liabilities	132.82		%					130.56		%					120.97		%
Total deposits⁽⁵⁾	5,773,581			10,205		0.71	%	5,305,502			14,611		1.11	%	7,088,008			28,598		1.62	%
Total funding⁽⁶⁾	6,767,748			17,382		1.03	%	6,518,613			22,853		1.41	%	8,551,463			39,260		1.84	%

(1)Total loans are net of deferred fees, related direct costs and discounts. Non-accrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of $1.1 million, $(587) thousand and $106 thousand and accretion of discount on purchased loans of $347 thousand, $8 thousand and $28 thousand for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively, are included in interest income.

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Three Months Ended
June 30, 2019 March 31, 2019 June 30, 2018
($ in thousands) Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:
Total loans⁽¹⁾
$ 7,445,704
$ 89,159
4.80 % $ 7,714,751
$ 90,558
4.76 % $ 7,055,079
$ 81,496
4.63 %
Securities 1,304,876
12,457
3.83 % 1,751,509
17,841
4.13 % 2,279,416
21,455
3.78 %
Other interest-earning assets ⁽²⁾
342,908
2,424
2.84 % 321,823
2,313
2.91 % 392,342
2,423
2.48 %
Total interest-earning assets 9,093,488
104,040
4.59 % 9,788,083
110,712
4.59 % 9,726,837
105,374
4.35 %
ALLL (63,046 ) (61,924 ) (54,903 )
BOLI and non-interest earning assets ⁽³⁾
580,133
575,558
565,224

Total assets $ 9,610,575
$ 10,301,717
$ 10,237,158

Interest-bearing liabilities:
Savings $ 1,083,571
4,950
1.83 % $ 1,201,802
5,480
1.85 % $ 1,055,693
3,886
1.48 %
Interest-bearing checking 1,580,165
4,554
1.16 % 1,554,846
4,525
1.18 % 1,822,856
4,182
0.92 %
Money market 853,007
3,902
1.83 % 887,538
4,128
1.89 % 1,134,280
3,689
1.30 %
Certificates of deposit 2,537,060
15,192
2.40 % 2,982,980
17,310
2.35 % 2,079,932
8,558
1.65 %
Total interest-bearing deposits 6,053,803
28,598
1.89 % 6,627,166
31,443
1.92 % 6,092,761
20,315
1.34 %
FHLB advances 1,287,121
8,289
2.58 % 1,422,100
9,081
2.59 % 1,827,307
9,539
2.09 %
Securities sold under repurchase agreements 2,173
16
2.95 % 2,350
18
3.11 % 29,907
211
2.83 %
Long term debt and other interest-bearing liabilities 174,161
2,357
5.43 % 174,230
2,362
5.50 % 174,296
2,356
5.42 %
Total interest-bearing liabilities 7,517,258
39,260
2.09 % 8,225,846
42,904
2.12 % 8,124,271
32,421
1.60 %
Noninterest-bearing deposits 1,034,205
1,021,741
1,004,502

Non-interest-bearing liabilities 96,179
97,426
107,529

Total liabilities 8,647,642
9,345,013
9,236,302

Total stockholders’ equity 962,933
956,704
1,000,856

Total liabilities and stockholders’ equity $ 9,610,575
$ 10,301,717
$ 10,237,158

Net interest income/spread $ 64,780
2.50 % $ 67,808
2.47 % $ 72,953
2.75 %
Net interest margin ⁽⁴⁾
2.86 % 2.81 % 3.01 %
(2)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.

~~(1)~~

For the three months ended June 30, 2018, total loans includes average loans and related interest income from discontinued operations. Total loans are net of deferred fees, related direct costs and discounts, but exclude the allowance for loan losses. Non-accrual loans are included in the average balance. Net (amortization) accretion of deferred loan fees and costs of $106 thousand, $(289) thousand and $106 thousand and accretion of discount on purchased loans of $28 thousand, $97 thousand and $552 thousand for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, are included in interest income.


~~(2)~~	~~Includes average balance of FHLB and other bank stock at cost and average time deposits with other financial institutions.~~

(3)Includes average balance of bank-owned life insurance of $110.4 million, $110.0 million and $107.8 million for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019.


~~(3)~~	~~Includes average balance of bank-owned life insurance of $107.8 million, $107.2 million and $105.6 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively.~~


~~(4)~~	~~Annualized net interest income divided by average interest-earning assets.~~

(4)Annualized net interest income divided by average interest-earning assets.

(5)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.

(6)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 June 30, 2020 Compared to Three Months Ended March 31, 2020

Net interest income increased $3.5 million to $55.3 million for the second quarter of 2020 due mostly to lower funding costs and higher average interest-earning assets, offset by a lower yield on such assets. Compared to the prior quarter, average interest-earning assets increased by $165.1 million to $7.20 billion, due to higher average securities of $111.0 million and other interest-earning assets of $127.3 million, offset by lower average loans of $73.2 million. The average interest-earning assets growth was funded by higher average noninterest-bearing deposits of $216.4 million and interest-bearing deposits of $251.7 million, partially offset by lower average FHLB advances of $219.9 million.

The net interest margin increased 12 basis points to 3.09% for the second quarter from 2.97% for the prior quarter. The increase was due to the 42 basis point decline on the average cost of interest-bearing liabilities outpacing the 21 basis point decline in the average yield on interest-earning assets. The decrease in the average interest-earning asset yield to 4.06% for the second quarter from 4.27% for the first quarter was due to lower yields on most interest-earning asset classes and the change in the mix of interest-earning assets. The lower yields on total loans, securities and other interest-earning assets was due to originating new business and repricing variable rate loans and investments in the lower interest rate environment given the rate cuts by the Federal Reserve in March 2020. Our average yield on loans declined 8 basis points to 4.48% and our average yield on securities decreased 35 basis points to 2.95%. The second quarter includes $1.7 million of PPP fee income, which increased the net interest margin by 3 basis points. The lower securities yield is due mostly to a 38 basis point decrease in the collateralized loan obligations (“CLOs”) yield to 3.22% for the second quarter from 3.60% for the first quarter as these CLOs reprice quarterly.

The average cost of funds decreased 39 basis points to 1.03% for the second quarter from 1.41% for the first quarter. This decrease was driven by the lower average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits. We have reduced our reliance on high cost transaction accounts, non-brokered certificates of deposits, and wholesale funds as we continue to execute on our relationship-focused business banking strategy. The 42 basis point decline in the average cost of interest-bearing liabilities to 1.29% for the second quarter, from 1.71% for the first quarter, was driven by the lower average cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 48 basis points to 0.93% from the prior quarter due to actively managing down deposit rates in response to the interest rate cuts by the Federal Reserve in March 2020. Additionally, average noninterest-bearing deposits increased by $216.4 million and represented 23.4% of total average deposits in the second quarter compared to 21.4% of total average deposits for the first quarter. Our total cost of average deposits decreased 40 basis points to 0.71% for the second quarter. The spot rate of total deposits at the end of the second quarter of 2020 was 0.59%.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Net interest income was $55.3 million for the three months ended June 30, 2020, a decrease of $9.5 million, or 14.6%, from $64.8 million for the three months ended June 30, 2019. The decrease in net interest income from the prior period was due to lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship based-lending, offset by a higher net interest margin. For the three months ended June 30, 2020, average interest-earning assets declined $1.90 billion to $7.20 billion and the net interest margin increased 23 basis points to 3.09% for the three months ended June 30, 2020 compared to 2.86% for the same 2019 period.

Our average yield on interest-earning assets decreased 53 basis points to 4.06% for the three months ended June 30, 2020, as compared to 4.59% during the same 2019 period. The decrease in yield was primarily attributable to lower average yields on the loan and securities portfolios, partially offset by an increased mix of loans versus

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securities. Our average yield on loans was 4.48% for the three months ended June 30, 2020, compared to 4.80% for the same 2019 period, primarily due to lower market interest rates and a lower percentage of higher-yielding commercial and industrial balances in the portfolio due to the market interest rate cuts totaling 225 basis points by the Federal Reserve in the third quarter of 2019 through March of 2020. Our average yield on securities decreased 88 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.

The average cost of funds decreased to 1.03% for the three months ended June 30, 2020 from 1.84% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The 80 basis point decline in the average cost of interest-bearing liabilities to 1.29% for the three months ended June 30, 2020 from 2.09% for the same 2019 period was driven by the lower average cost of interest-bearing deposits and rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 96 basis points to 0.93% from the prior period due to actively managing down deposit rates in response to the previously described interest rate cuts by the Federal Reserve and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $315.5 million when compared to the same 2019 period. Our cost of average total deposits decreased 91 basis points to 0.71% for the three months ended June 30, 2020 when compared to the same 2019 period due to the lower cost of interest-bearing deposits and a higher mix of noninterest-bearing deposits. Average noninterest-bearing deposits represented 23.4% of total average deposits for the three months ended June 30, 2020 compared to 14.6% of total average deposits for the first quarter of 2019.

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, on a consolidated operations basis, for the six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:

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Six Months Ended June 30,
2019 2018
($ in thousands) Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:
Total loans ⁽¹⁾
$ 7,579,485
$ 179,717
4.78 % $ 6,930,867
$ 156,594
4.56 %
Securities 1,526,959
30,298
4.00 % 2,401,639
43,086
3.62 %
Other interest-earning assets ⁽²⁾
332,424
4,737
2.87 % 399,662
4,587
2.31 %
Total interest-earning assets 9,438,868
214,752
4.59 % 9,732,168
204,267
4.23 %
ALLL (62,488 ) (52,095 )
BOLI and non-interest earning assets ⁽³⁾
577,858
570,050

Total assets $ 9,954,238
$ 10,250,123

Interest-bearing liabilities: ��
Savings $ 1,142,360
10,429
1.84 % $ 1,055,516
7,186
1.37 %
Interest-bearing checking 1,567,575
9,079
1.17 % 1,899,085
8,291
0.88 %
Money market 870,177
8,031
1.86 % 1,105,359
6,523
1.19 %
Certificates of deposit 2,758,789
32,502
2.38 % 1,993,723
15,110
1.53 %
Total interest-bearing deposits 6,338,901
60,041
1.91 % 6,053,683
37,110
1.24 %
FHLB advances 1,354,238
17,370
2.59 % 1,769,520
16,931
1.93 %
Securities sold under repurchase agreements 2,261
34
3.03 % 74,477
961
2.60 %
Long term debt and other interest-bearing liabilities 174,195
4,719
5.46 % 174,360
4,688
5.42 %
Total interest-bearing liabilities 7,869,595
82,164
2.11 % 8,072,040
59,690
1.49 %
Noninterest-bearing deposits 1,028,008
1,030,457

Non-interest-bearing liabilities 96,801
137,271

Total liabilities 8,994,404
9,239,768

Total stockholders’ equity 959,834
1,010,355

Total liabilities and stockholders’ equity $ 9,954,238
$ 10,250,123

Net interest income/spread $ 132,588
2.48 % $ 144,577
2.74 %
Net interest margin ⁽⁴⁾
2.83 % 3.00 %


~~(1)~~	For the six months ended June 30, 2018, total loans includes average loans and related interest income from discontinued operations. Total loans are net of deferred fees, related direct costs and discounts, but exclude the allowance for loan losses. Non-accrual loans are included in the average balance. Net (amortization) accretion of deferred loan fees and


	Six Months Ended June 30,
	2020												2019
($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/Cost
Interest-earning assets:
Total loans ⁽¹⁾	$	5,744,214		$	129,176	4.52	%	$	7,579,485		$	179,717	4.78	%
Securities	1,008,454			15,636		3.12	%	1,526,959			30,298		4.00	%
Other interest-earning assets ⁽²⁾	361,110			2,599		1.45	%	332,424			4,737		2.87	%
Total interest-earning assets	7,113,778			147,411		4.17	%	9,438,868			214,752		4.59	%
ACL	(69,499)							(62,488)
BOLI and non-interest earning assets ⁽³⁾	607,296							577,858
Total assets	$	7,651,575						$	9,954,238
Interest-bearing liabilities:
Savings	$	898,414		6,013		1.35	%	$	1,142,360		10,429		1.84	%
Interest-bearing checking	1,615,480			5,915		0.74	%	1,567,575			9,079		1.17	%
Money market	600,899			2,610		0.87	%	870,177			8,031		1.86	%
Certificates of deposit	1,183,229			10,278		1.75	%	2,758,789			32,502		2.38	%
Total interest-bearing deposits	4,298,022			24,816		1.16	%	6,338,901			60,041		1.91	%
FHLB advances	929,110			10,701		2.32	%	1,354,238			17,370		2.59	%
Securities sold under repurchase agreements	512			2		0.79		2,261			34		3.03	%
Long-term debt and other interest-bearing liabilities	174,017			4,716		5.45	%	174,195			4,719		5.46	%
Total interest-bearing liabilities	5,401,661			40,235		1.50	%	7,869,595			82,164		2.11	%
Noninterest-bearing deposits	1,241,521							1,028,008
Noninterest-bearing liabilities	123,244							96,801
Total liabilities	6,766,426							8,994,404
Total stockholders’ equity	885,149							959,834
Total liabilities and stockholders’ equity	$	7,651,575						$	9,954,238
Net interest income/spread				$	107,176	2.67	%				$	132,588	2.48	%
Net interest margin ⁽⁴⁾						3.03	%						2.83	%

Ratio of interest-earning assets to interest-bearing liabilities	131.70		%					119.94		%
Total deposits⁽⁵⁾	5,539,543			24,816		0.90	%	7,366,909			60,041		1.64	%
Total funding⁽⁶⁾	6,643,182			40,235		1.22	%	8,897,603			82,164		1.86	%

(1)Total loans are net of deferred fees, related direct costs and discounts, but exclude the allowance for credit losses. Non-accrual loans are included in the average balance. Net accretion (amortization) of ~~$(83)~~deferred loan fees (costs) of $553 thousand and ~~$228~~$(83) thousand and accretion of discount on purchased loans of ~~$125~~$355 thousand and ~~$562~~$125 thousand for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, are included in interest income.


~~(2)~~	~~Includes average balance of FHLB and other bank stock at cost and average time deposits with other financial institutions.~~


~~(3)~~	~~Includes average balance of bank-owned life insurance of $107.5 million and $105.3 million for the six months ended June 30, 2019 and 2018, respectively.~~


~~(4)~~	~~Annualized net interest income divided by average interest-earning assets.~~

(2)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.

Table of Contents

(3)Includes average balance of bank-owned life insurance of $110.2 million and $107.5 million for the six months ended June 30, 2020 and 2019.

(4)Annualized net interest income divided by average interest-earning assets.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net interest income for the six months ended June 30, 2020 decreased $25.4 million to $107.2 million from $132.6 million for the same 2019 period. This decrease was due to lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship based-lending, partially offset by a higher net interest margin. For the six months ended June 30, 2020, average interest-earning assets declined $2.33 billion to $7.11 billion, and the net interest margin increased 20 basis points to 3.03% for the six months ended June 30, 2020 compared to 2.83% for the same 2019 period.

Our average yield on interest-earning assets decreased 42 basis points to 4.17% for the six months ended June 30, 2020 as compared to 4.59% during the same 2019 period. The decrease in yield was primarily attributable to lower average yields on the loan and securities portfolios, partially offset by an increased mix of loans versus securities. Our average yield on loans was 4.52% for the six months ended June 30, 2020, compared to 4.78% for the same 2019 period, primarily due to lower market interest rates and a lower percentage of higher-yielding commercial and industrial balances in the portfolio. Our average yield on securities decreased 88 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.

The average cost of funds decreased to 1.22% for the six months ended June 30, 2020 from 1.86% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The 61 basis point decline in the average cost of interest-bearing liabilities to 1.50% for the six months ended June 30, 2020 from 2.11% for the same 2019 period was driven by the lower average cost of interest-bearing deposits and rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 75 basis points to 1.16% from the prior period due to actively managing down deposit rates in response to the previously described market interest rate cuts by the Federal Reserve and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $213.5 million when compared to the same 2019 period. Our cost of average total deposits decreased 74 basis points to 0.90% for the six months ended June 30, 2020 when compared to the same 2019 period due to the lower cost of interest-bearing deposits and higher noninterest-bearing deposits. Average noninterest-bearing deposits represented 22.4% of total average deposits for the six months ended June 30, 2020 compared to 14.0% of total average deposits for the same 2019 period.

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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. ~~Information is~~The information provided onpresents 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 June 30, 2019 vs. 2018										Six Months Ended June 30, 2019 vs. 2018														Three Months Ended June 30, 2020 vs. 2019														Six Months Ended June 30, 2020 vs. 2019
	Increase (Decrease) Due to						Net Increase (Decrease)				Increase (Decrease) Due to								Net Increase (Decrease)						Increase (Decrease) Due to								Net Increase (Decrease)			Increase (Decrease) Due to							Net Increase (Decrease)
($ In thousands)	Volume			Rate						Volume				Rate				($ In thousands)						Volume			Rate					Volume				Rate						Net Increase (Decrease)
Interest and dividend income:																							Interest and dividend income:
Total loans ⁽¹⁾	$	4,608		$	3,055		$	7,663			$	15,258			$	7,865			$	23,123
Total loans																						Total loans			$	(19,848)		$	(5,669)	$	(25,517)			$	(41,270)		$	(9,271)		$	(50,541)
Securities	(9,279		)	281			(8,998		)		(16,953		)		4,165				(12,788		)	Securities			(2,068)			(2,573)		(4,641)			(8,897)			(5,765)			(14,662)
Other interest-earning assets	(327		)	328			1				(848		)		998				150			Other interest-earning assets			480			(1,665)		(1,185)			379			(2,517)			(2,138)
Total interest and dividend income	$	(4,998	)	$	3,664		$	(1,334	)		$	(2,543	)		$	13,028			$	10,485		Total interest and dividend income			$	(21,436)		$	(9,907)	$	(31,343)		$	(49,788)		$	(17,553)		$	(67,341)
Interest expense:																						Interest expense:
Savings	$	107		$	957		$	1,064			$	627			$	2,616			$	3,243		Savings			$	(728)		$	(1,504)	$	(2,232)		$	(1,965)		$	(2,451)		$	(4,416)
Interest-bearing checking	(612		)	984			372				(1,619		)		2,407				788			Interest-bearing checking			351			(2,719)		(2,368)			272			(3,436)			(3,164)
Money market	(1,053		)	1,266			213				(1,601		)		3,109				1,508			Money market			(942)			(2,110)		(3,052)			(1,993)			(3,428)			(5,421)
Certificates of deposit	2,162			4,472			6,634				7,105				10,287				17,392			Certificates of deposit			(6,161)			(4,580)		(10,741)			(15,186)			(7,038)			(22,224)
FHLB advances	(3,186		)	1,936			(1,250		)		(4,535		)		4,974				439			FHLB advances			(2,837)			(634)		(3,471)			(5,007)			(1,662)			(6,669)
Securities sold under repurchase agreements	(191		)	(4		)	(195		)		(1,063		)		136				(927		)	Securities sold under repurchase agreements			(6)			(8)		(14)			(16)			(16)			(32)
Long term debt and other interest-bearing liabilities	(2		)	3			1				(4		)		35				31
Long-term debt and other interest-bearing liabilities																						Long-term debt and other interest-bearing liabilities			(2)			2		—			(1)			(2)			(3)
Total interest expense	(2,775		)	9,614			6,839				(1,090		)		23,564				22,474			Total interest expense			(10,325)			(11,553)		(21,878)			(23,896)			(18,033)			(41,929)
Net interest income	$	(2,223	)	$	(5,950	)	$	(8,173	)		$	(1,453	)		$	(10,536	)		$	(11,989	)	Net interest income			$	(11,111)		$	1,646	$	(9,465)		$	(25,892)		$	480		$	(25,412)


~~(1)~~	~~For the three and six months ended June 30, 2018, total loans includes interest income from discontinued operations.~~

~~Three Months Ended June 30, 2019 Compared to Three Months Ended March 31, 2019~~

Net interest income was $64.8 million for the three months ended June 30, 2019, a decrease of $3.0 million, or 4.5 percent, from $67.8 million for the three months ended March 31, 2019. The decrease in net interest income from the prior period was largely due to an overall decrease in average interest earning assets, partially offset by a decrease in average cost of interest-bearing liabilities.

Interest income on total loans was $89.2 million for the three months ended June 30, 2019, a decrease of $1.4 million, or 1.5 percent, from $90.6 million for the three months ended March 31, 2019. The decrease in interest income on loans was primarily due to a $269.0 million decrease in the average balance of total loans and partially offset by a 4 basis points (bps) increase in average yield. The decrease in average balance was due mainly to the sale of $131.5 million in single family residential loans and $178.2 million in multifamily residential loans, partially offset by loan originations. The increase in average yield was primarily attributable to a reduction in lower-yielding single family residential mortgage and multifamily loans.

Interest income on securities was $12.5 million for the three months ended June 30, 2019, a decrease of $5.4 million, or 30.2 percent, from $17.8 million for the three months ended March 31, 2019. The decrease in interest income on securities was due to a $446.6 million decrease in average balance and a 30 bps decrease in average yield. The decrease in average yield is primarily the result of an interest rate reset on our collateralized loan obligations and a decrease in our average balance attributable to the sale and calls of $298.2 million of our higher yielding collateralized loan obligations during the second quarter of 2019. The decline in the average balance of collateralized loan obligations was also due to sales that occurred late in the first quarter of 2019. We sold a significant amount of these securities at the end of the first quarter, with the full impact of the first quarter sales reflected in the second quarter 2019.

Dividends and interest income on other interest-earning assets was $2.4 million for the three months ended June 30, 2019, an increase of $111 thousand, or 4.8%, from $2.3 million for the three months ended March 31, 2019. The increase in dividends and interest income on other interest-earning assets was due to a $21.1 million increase in average balance, partially offset by a 7 bps decrease in average yield. The decrease in average yield was mainly due to lower interest rates on deposits with financial institutions. The increase in average balance was mainly due to increases in interest-bearing deposits in financial institutions as a result of sales of investment securities and loans.

Interest expense on interest-bearing deposits was $28.6 million for the three months ended June 30, 2019, a decrease of $2.8 million, or 9.0%, from $31.4 million for the three months ended March 31, 2019. The decrease in interest expense on interest-bearing deposits was due to a 3 bps decrease in average cost, coupled with a $573.4 million decrease in average balance. The decrease in average cost and average balance primarily resulted from the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.

Interest expense on FHLB advances was $8.3 million for the three months ended June 30, 2019, a decrease of $0.8 million, or 8.7%, from $9.1 million for the three months ended March 31, 2019. The decrease was due mainly to a 1 bps decrease in average cost, couple with a $135.0 million decrease in average balance for the quarter ended June 30, 2019. The decrease in average cost was mainly due to a reduction in average overnight borrowing rates during the quarter ended June 30, 2019. The decrease in average balance was mainly due to reduced use of overnight borrowings, based on available cash resulting from the Company's sales of investment securities and loans during the quarter ended June 30, 2019.

Interest expense on securities sold under repurchase agreements was $16 thousand for the three months ended June 30, 2019, a decrease of $2 thousand, or 11.1 percent from $18 thousand for the three months ended March 31, 2019. The Company utilized a reduced amount of repurchase agreements during the three months ended June 30, 2019 as a result of cash received from sales of loans and securities over the past year used to redeem its higher yield borrowings, including securities sold under repurchase agreements.

Interest expense on long term debt and other interest-bearing liabilities was $2.4 million for the three months ended June 30, 2019, a decrease of $5 thousand, or 0.2 percent, from $2.4 million for the three months ended March 31, 2019. The average balance and average cost remained relatively flat during the three months ended June 30, 2019 as compared to the previous quarter.

~~Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018~~

Net interest income was $64.8 million for the three months ended June 30, 2019, a decrease of $8.2 million, or 11.2 percent, from $73.0 million for the three months ended June 30, 2018. The decrease in net interest income from the prior period was largely due to higher average cost of interest-bearing liabilities outpacing the increase in average yield on interest-earning assets, coupled by a decrease in interest earning assets.

Interest income on total loans was $89.2 million for the three months ended June 30, 2019, an increase of $7.7 million, or 9.4 percent, from $81.5 million for the three months ended June 30, 2018. The increase in interest income on loans was primarily due to a $390.6 million increase in the average balance of total loans and a 17 basis points (bps) increase in average yield. The increase in average balance was due mainly to increased loan originations. The increase in average yield was mainly due to higher interest rates on new loans and loans with variable interest rates increasing due to a rising interest rate environment over the past year.

Interest income on securities was $12.5 million for the three months ended June 30, 2019, a decrease of $9.0 million, or 41.9 percent, from $21.5 million for the three months ended June 30, 2018. The decrease in interest income on securities was due to a $974.5 million decrease in average balance, partially offset by a 5 bps increase in average yield. The decrease in average balance was mainly due to sales of certain longer-duration and fixed-rate mortgage-backed securities, corporate debt securities, collateralized loan obligations and commercial mortgage-backed securities between periods to navigate a volatile rate environment during 2018 and remix of our earning assets from investment securities to higher yielding loans. The increase in average yield was due to higher interest rates on purchased investment securities and investment securities with variable interest rates increasing due to a rising interest rate environment between periods.

Dividends and interest income on other interest-earning assets was $2.4 million for the three months ended June 30, 2019, remaining consistent with the prior period amount. Between periods, there was a 36 bps increase in average yield, offset by a $49.4 million decrease in average balance. The increase in average yield was mainly due to higher interest rates on interest-earning deposits with financial institutions from a rising interest rate environment. The decrease in average balance was mainly due to decreases in interest-bearing deposits in financial institutions and FHLB and other bank stock balances.

Interest expense on interest-bearing deposits was $28.6 million for the three months ended June 30, 2019, an increase of $8.3 million, or 40.8 percent, from $20.3 million for the three months ended June 30, 2018. The increase in interest expense on interest-bearing deposits was due to a 55 bps increase in average cost, partially offset by a $39.0 million decrease in average balance. The increase in average cost was mainly due to a rising interest rate environment. The decrease in average balance primarily resulted from the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.

Interest expense on FHLB advances was $8.3 million for the three months ended June 30, 2019, a decrease of $1.3 million, or 13.1 percent, from $9.5 million for the three months ended June 30, 2018. The decrease was due mainly to a $540.2 million decrease in average balance for the quarter ended June 30, 2019, partially offset by a 49 bps increase in average cost. The increase in average cost was mainly due to a rising interest rate environment. The decrease in average balance was mainly due to reduced term advances, primarily three- to ten-year duration, based on available cash resulting from the Company's sales and calls of investment securities and loans during the quarter ended June 30, 2019.

Interest expense on securities sold under repurchase agreements was $16 thousand for the three months ended June 30, 2019, a decrease of $195 thousand, or 92.4% from $211 thousand for the three months ended June 30, 2018. The Company utilized a reduced amount of repurchase agreements during the three months ended June 30, 2019 as a result of cash received from sales of loans and securities over the past year used to redeem its higher yield borrowings, including securities sold under repurchase agreements.

Interest expense on long term debt and other interest-bearing liabilities was $2.4 million for the three months ended June 30, 2019, an increase of $1 thousand from $2.4 million for the three months ended June 30, 2018. The average balance and average cost remained relatively flat during the three months ended June 30, 2019 as compared to the same period last year.

~~Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018~~

Net interest income was $132.6 million for the six months ended June 30, 2019, a decrease of $12.0 million, or 8.3 percent, from $144.6 million for the six months ended June 30, 2018. The decrease in net interest income from the prior period was largely due to higher average cost of interest-bearing liabilities outpacing the increase in average yield on interest-earning assets, coupled with an decrease in interest earning assets.

Interest income on total loans was $179.7 million for the six months ended June 30, 2019, an increase of $23.1 million, or 14.8 percent, from $156.6 million for the six months ended June 30, 2018. The increase in interest income on loans was primarily due to a $648.6 million increase in the average balance of total loans and a 22 bps

increase in average yield. The increase in average balance was due mainly to increased loan originations. The increase in average yield was mainly due to higher interest rates on new loans and loans with variable interest rates increasing due to a rising interest rate environment over the past year.

Interest income on securities was $30.3 million for the six months ended June 30, 2019, a decrease of $12.8 million, or 29.7 percent, from $43.1 million for the six months ended June 30, 2018. The decrease in interest income on securities was due to a $874.7 million decrease in average balance, partially offset by a 38 bps increase in average yield. The decrease in average balance was mainly due to sales of certain longer-duration and fixed-rate mortgage-backed securities, corporate debt securities, collateralized loan obligations and commercial mortgage-backed securities between periods to navigate a volatile rate environment during 2018 and remix of our earning assets from investment securities to higher yielding loans. The increase in average yield was due to higher interest rates on purchased investment securities and investment securities with variable interest rates increasing due to a rising interest rate environment between periods.

Dividends and interest income on other interest-earning assets was $4.7 million for the six months ended June 30, 2019, an increase of $150 thousand, or 3.3%, from $4.6 million for the six months ended June 30, 2018. The increase in dividends and interest income on other interest-earning assets was due to a 56 bps increase in average yield, partially offset by a $67.2 million decrease in average balance. The increase in average yield was mainly due to higher interest rates on interest-earning deposits with financial institutions from a rising interest rate environment. The decrease in average balance was mainly due to decreases in interest-bearing deposits in financial institutions and FHLB and other bank stock balances.

Interest expense on interest-bearing deposits was $60.0 million for the six months ended June 30, 2019, an increase of $22.9 million, or 61.8%, from $37.1 million for the six months ended June 30, 2018. The increase in interest expense on interest-bearing deposits was due to a 67 bps increase in average cost, coupled with a $285.2 million increase in average balance. The increase in average cost was mainly due to a rising interest rate environment. The increase in average balance was mainly due to shifts in deposit balances to higher yielding saving and certificates of deposit accounts as a result of increasing market interest rates between periods, partially offset by the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.

Interest expense on FHLB advances was $17.4 million for the six months ended June 30, 2019, an increase of $0.4 million, or 2.6%, from $16.9 million for the six months ended June 30, 2018. The increase was due mainly to a 66 bps increase in average cost, partially offset by a $415.3 million decrease in average balance for the six months ended June 30, 2019. The increase in average cost was mainly due to a rising interest rate environment. The decrease in average balance was mainly due to reduced term advances, primarily three- to ten-year duration, based on available cash resulting from the Company's sales of investment securities and loans during the six months ended June 30, 2019.

Interest expense on securities sold under repurchase agreements was $34 thousand for the six months ended June 30, 2019, a decrease of $927 thousand, or 96.5% from $1.0 million for the six months ended June 30, 2018. The Company utilized a reduced amount of repurchase agreements during the six months ended June 30, 2019 as a result of cash received from sales of loans and securities over the past year used to redeem its higher yield borrowings, including securities sold under repurchase agreements.

Interest expense on long term debt and other interest-bearing liabilities was $4.7 million for the six months ended June 30, 2019, an increase of $31 thousand, or 0.7%, from $4.7 million for the six months ended June 30, 2018. The average balance and average cost remained relatively flat during the six months ended June 30, 2019 as compared to the same period last year.

Provision for ~~Loan~~(Reversal of) Credit Losses

The provision for ~~loan~~(reversal of) credit losses is charged to operations to adjust the allowance for ~~loan~~credit losses to the level required to cover current estimated credit losses ~~inherent~~ in our loan portfolio and unfunded commitments. The following table presents the components of our provision for credit losses:


	Three Months Ended										Six Months Ended June 30,
($ in thousands)	June 30, 2020		March 31, 2020		June 30, 2019		2020		2019
Provision for (reversal of) loan losses	$	11,519	$	14,711	$	(1,987)	$	26,230	$	525
Provision for (reversal of) credit losses - unfunded loan commitments	307		1,050		87		1,357		(327)

Total provision for (reversal of) credit losses	$	11,826	$	15,761	$	(1,900)	$	27,587	$	198

Table of Contents

We recognized a provision for credit losses of $11.8 million during the second quarter of 2020, compared to $15.8 million during the first quarter of 2020 and a reversal of credit losses of $1.9 million for the second quarter of 2019. Our provision for credit losses during the second quarter of 2020 included $307 thousand related to unfunded commitments, compared to $1.1 million during the first quarter. The remaining second quarter of 2020 provision for credit losses was comprised of $5.0 million of general reserves and $6.8 million related to specific reserves, primarily related to a previously reported non-accrual, shared national credit. The general provision is due to a continued deterioration in key macro-economic forecast variables, such as unemployment and gross domestic product, and loan risk rating downgrades, offset by lower period end loan balances.

During the six months ended June 30, 2020, we recognized a provision for credit losses of $27.6 million under the CECL model, compared to $198 thousand under the incurred loss model during 2019. Our provision for credit losses included $1.4 million related to unfunded commitments during the six months ended June 30, 2020, compared to provision reversal of $327 thousand during the six months ended June 30, 2019. The higher provision for credit losses was driven by using the new CECL model, the estimated future impact of the health crisis on our loans, net charge-offs, and ~~lease portfolio.~~an increase in specific reserves, partially offset by lower period end loan balances of $1.09 billion as compared to June 30, 2019.

See further discussion in "Allowance for Credit Losses."

Noninterest Income (Loss)

The ~~Company recorded a (reversal of) provision~~following table presents the components of noninterest income for ~~loan losses of $(2.0) million and $2.5~~the periods indicated:


	Three Months Ended										Six Months Ended June 30,
($ in thousands)	June 30, 2020		March 31, 2020		June 30, 2019		2020		2019
Customer service fees	$	1,224	$	1,096	$	1,434	$	2,320	$	2,949
Loan servicing income	95		75		121		170		239
Income from bank owned life insurance	591		578		580		1,169		1,105

Net gain on sale of securities available-for-sale	2,011		—		—		2,011		208
Fair value adjustment on loans held-for-sale	25		(1,586)		59		(1,561)		60
Net (loss) gain on sale of loans	—		(27)		2,767		(27)		4,319

Other income	1,582		1,925		(7,251)		3,507		(4,875)
Total noninterest income (loss)	$	5,528	$	2,061	$	(2,290)	$	7,589	$	4,005

Three Months Ended June 30, 2020 Compared to Three Months Ended March 31, 2020

Noninterest income was $5.5 million for the three months ended June 30, ~~2019 and~~2020; an increase of $3.5 million, or 168.2%, from $2.1 million for the three months ended March 31, ~~2019, respectively. During the second quarter, the $2.0 million release of our allowance for loan losses~~2020. The increase was primarily ~~attributable~~due to a decrease in the held-for-investment loan portfolio, partially offset by an increase in net charge-offs and other qualitative provisions during the quarter. The decrease in the loan portfolio primarily resulted fromgain on the sale of ~~$178.2~~securities of $2.0 million ~~of multifamily loans,~~compared to $0 in the ~~sale of $131.5 million SFR sale~~prior quarter and ~~the transfer of $573.9 million of multifamily loans to held-for-sale.~~

~~The Company recorded a (reversal of) provision for loan~~lower net unrealized losses of ~~$(2.0)~~$1.6 million ~~and $2.7~~for the change in fair value adjustment on loans held-for sale. During the three months ended June 30, 2020, we sold $20.7 million ~~respectively,~~in securities, primarily consisting of corporate securities, resulting in a gain of $2.0 million. There were no sales of securities during the prior quarter.

In addition, during the three months ended June 30, 2020, customer service fees increased $128 thousand due mostly to higher depositor-related fees. Other income increased $343 thousand due mostly to lower sublease income of $423 thousand.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Noninterest income was $5.5 million for the three months ended June 30, 2019 and 2018. The decrease in the provision during the three months ended June 30, 2019 compared to same period in 2018 was mainly due to the aforementioned decrease in the held-for-investment loan portfolio, partially offset by2020, an increase ~~in net charge-offs and other qualitative provisions during the quarter.~~

~~The Company recorded provisions for loan losses~~ of ~~$0.5~~$7.8 million, and $22.2 million for the six months ended June 30, 2019 and 2018, respectively. During the six months ended June 30, 2019, the provision for loan losses reflects a $59.5 million increase in special mention, substandard and doubtful loans, coupled with increases in delinquencies and nonperforming loans. The reserve needs for these negative credit trends during the six months ended June 30, 2019 were partially offset by the $1.04 billion reduction in the pass-rated portfolio balances and overall decreases in average loan balances as a result of sales and transfers to held for sale since year-end. The provision for loan losses during the comparable 2018 period included an additional provision related to the charge-off of $13.9 million on a line of credit determined to have been fraudulently obtained and an increase due to a downgrade of a commercial and industrial loan with a carrying value of $28.5 millionor 341.4%, from ~~Special Mention to Substandard due to credit deterioration.~~

~~See further discussion in "Allowance for Loan Losses."~~

~~Noninterest (Loss) Income~~

~~The following table presents the breakdown of non-interest (loss) income for the periods indicated:~~

Three Months Ended Six Months Ended June 30,
($ in thousands) June 30,
2019 March 31,
2019 June 30,
2018 2019 2018
Customer service fees $ 1,434
$ 1,515
$ 1,491
$ 2,949
$ 3,083
Loan servicing income 121
118
948
239
3,259
Income from bank owned life insurance 580
525
533
1,105
1,066
Net gain on sale of securities available-for-sale —
208
278
208
5,519
Net gain on sale of loans 2,826
1,553
821
4,379
780
Net loss on sale of mortgage servicing rights —
—
(155 ) —
(2,450 )
Other (loss) income (7,251 ) 2,376
4,145
(4,875 ) 5,386
Total noninterest (loss) income $ (2,290 ) $ 6,295
$ 8,061
$ 4,005
$ 16,643

~~Three Months Ended June 30, 2019 Compared to Three Months Ended March 31, 2019~~

~~Noninterest (loss) income was~~ $(2.3) million for the three months ended June 30, ~~2019, a decrease of $8.6 million, or 136.4 percent, from $6.3 million for the three months ended March 31,~~ 2019. The ~~decrease~~increase in noninterest income was primarily due to a $9.6 million unrealized loss. The $9.6 million unrealized loss on interest rate swaps related to the pending Freddie Mac multifamily securitization in which we planned to sell the associated mortgage servicing rights. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and is expected to be primarily offset by the anticipated gain in fair value of the loans sold into the securitization in the third quarter. Subsequent to June 30, 2019, this securitization was completed (refer to ~~Note 20 — Subsequent Events~~ ~~for more information).~~

Net gain on sale of securities available-for-sale was zero for the three months ended June 30, 2019, compared to $208 thousand for the three months ended March 31, 2019. The Company sold securities available-for-sale of $279.5 million and $502.4 million, respectively, during the three months ended June 30, 2020 was mainly due to the aforementioned 2020 sale of securities and the 2019 ~~and March 31, 2019. During~~second quarter $9.6 million unrealized loss from interest rate swap agreements entered into in order to offset the variability in the fair value of the Freddie Mac securitization completed during the third quarter of 2019, offset by lower net gain on sale of loans of $2.8 million.

Customer service fees decreased $210 thousand, or 14.6%, during the three months ended June 30, ~~2019, the Company continued~~2020 due mostly to ~~reduce its collateralized~~lower borrower loan ~~obligations exposure~~fees, such as extension and exit fees, offset by ~~selling $279.2 million of these investments resulting in no gain or loss.~~

higher deposit-related transactional fees.

Net ~~gain~~gains on sale of ~~loans was $2.8~~securities available-for-sale increased to $2.0 million ~~for~~during the three months ended June 30, ~~2019, compared to $1.6 million for the three months ended March 31, 2019. During~~2020 from zero during the three months ended June 30, 2019. The increase between periods was due to the aforementioned $20.7 million

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sale of securities during the three months ended June 30, 2020, primarily consisting of corporate securities. There were no securities sales in the first quarter of 2019.

Net loss on sale of loans, which includes premium recapture of previously sold loans, was zero during the three months ended June 30, 2020 compared to $2.8 million during the comparable 2019 period. There were no sales of loans during the ~~Company~~second quarter of 2020. During the second quarter of 2019, we sold jumbo SFR mortgage loans of $131.5 million resulting in a gain of $125 thousand and $178.2 million of multifamily residential loans resulting in a gain of $2.9 million. ~~During the three months ended March 31, 2019, the Company sold SFR mortgage loans of $243.2 million resulting in a gain of $1.6 million.~~

Other ~~(loss)~~ income was ~~$(7.3)~~$1.6 million for the three months ended June 30, ~~2019,~~2020, compared to ~~$2.4~~a loss of $7.3 million ~~for~~in the ~~three months ended March 31, 2019.~~comparable 2019 period. The $8.8 million decrease iswas primarily attributable to ~~a $9.6 million unrealized loss. The~~the 2019 period including the aforementioned $9.6 million unrealized loss onfrom interest rate ~~swaps related~~swap agreements entered into in order to ~~the pending Freddie Mac multifamily securitization~~offset variability in ~~which we planned to sell~~ the associated mortgage servicing rights. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and is expected to be primarily offset by the anticipated gain in fair value of the ~~loans sold into the~~Freddie Mac securitization incompleted during the third ~~quarter. Subsequent to June 30, 2019, this securitization was completed (refer to~~ quarter of 2019.

~~Note 20 — Subsequent Events~~ ~~for more information).~~

~~Three~~Six Months Ended June 30, ~~2019~~2020 Compared to ~~Three~~Six Months Ended June 30, ~~2018~~2019

Noninterest ~~(loss)~~ income was ~~$(2.3)~~$7.6 million for the ~~three~~six months ended June 30, ~~2019, a decrease~~2020, an increase of ~~$10.4~~$3.6 million, or ~~128.4 percent,~~89.5%, from ~~$8.1~~$4.0 million for the ~~three~~six months ended June 30, ~~2018.~~2019. The ~~decrease~~increase in noninterest income was mainly due to ~~a $9.6~~the $1.8 million unrealized loss on our interest rate swaps related to the pending Freddie Mac multifamily securitization as previously mentioned, coupled with decreases in loan servicing income, net gain on sale of securities available-for-sale and other income, partially offset by an increase in net gain on the securities available-for-sale, coupled with a $8.4 million decrease in other income (loss), partially offset by higher unrealized net losses on loans held-for-sale of $1.6 million and lower net gains on sale of loans ~~and a decrease in net loss on sale~~ of ~~mortgage servicing rights.~~between periods of $4.3 million.

~~Loan servicing income was $121~~Customer service fees decreased $629 thousand, ~~for~~or 21.3%, during the three months ended June 30, ~~2019, a decrease of $827 thousand, or 87.2 percent, from $948 thousand for the three months ended June 30, 2018. The decrease between periods is attributable~~2020 due mostly to the sale during the first quarter of 2018 of $26.0 million of mortgage servicing rights on $3.21 billion in unpaid principal balances of conventional mortgage loans. In addition, gains (losses) on fair valuelower borrower loan fees, such as extension and runoff of servicing assets were $(200) thousand and $39 thousand for the three months ended June 30, 2019 and 2018, respectively. Servicing fees were $321 thousand and $909 thousand for the three months ended June 30, 2019 and 2018, respectively.exit fees.

Net gain on sale of securities available-for-sale was zero for the three months ended June 30, 2019, compared to $278 thousand for the three months ended June 30, 2018. The Company sold securities available-for-sale of $279.5 million and $201.4 million, respectively, during the three months ended June 30, 2019 and 2018. During the three months ended June 30, 2019, the Company continued to reduce its collateralized loan obligations exposure by selling $279.2 million of these investments resulting in no gain or loss. The Company sold securities available-for-sale of $201.4 million during the three months ended June 30, 2018 as it further repositioned its securities available-for-sale portfolio to reduce duration by selling longer-duration and fixed rate mortgage-backed securities.

Net gain on sale of loans was $2.8 million for the three months ended June 30, 2019, compared to $821 thousand for the three months ended June 30, 2018. During the three months ended June 30, 2019, the Company sold jumbo SFR mortgage loans of $131.5 million resulting in a gain of $125 thousand and $178.2 million of multifamily residential loans resulting in a gain of $2.9 million. During the three months ended June 30, 2018, the Company sold jumbo SFR mortgage loans of $133.2 million with a gain of $204 thousand, SBA loans of $5.3 million with a gain of $430 thousand and multifamily loans of $71.3 million with a gain of $187 thousand.

Net loss on sale of mortgage servicing rights (MSRs) was zero for the three months ended June 30, 2019, compared to $155 thousand for the three months ended June 30, 2018. During the three months ended June 30, 2018, the Company sold $2.6 million of MSRs on $334.1 million in unpaid principal balances of conventional mortgage loans. This transaction resulted in a loss on sale of MSRs of $155 thousand, primarily related to transaction costs, provision for early repayments of loans and expected repurchase obligations under standard representations and warranties.

Other (loss) income was $(7.3) million for the three months ended June 30, 2019, compared to $4.1 million for the three months ended June 30, 2018. The decrease is primarily attributable to a $9.6 million unrealized loss. The $9.6 million unrealized loss on interest rate swaps related to the pending Freddie Mac multifamily securitization in which we planned to sell the associated mortgage servicing rights. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and is expected to be primarily offset by the anticipated gain in fair value of the loans sold into the securitization in the third quarter. Subsequent to June 30, 2019, this securitization was completed (refer to ~~Note 20 — Subsequent Events~~ ~~for more information).~~

~~Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018~~

~~Noninterest income was $4.0~~$2.0 million for the six months ended June 30, ~~2019, a decrease of $12.6 million, or 75.9 percent, from $16.6 million for the six months ended June 30, 2018. The decrease in noninterest income was mainly due~~2020, compared to ~~a $9.6 million~~

unrealized loss on our hedge of the pending Freddie Mac multifamily securitization as previously mentioned, coupled with decreases in loan servicing income, net gain on sale of securities available-for-sale and other (loss) income, partially offset by an increase in net gain on sale of loans and a decrease in net loss on sale of mortgage servicing rights.

Loan servicing income was $239 thousand for the six months ended June 30, 2019, a decrease of $3.0 million, or 92.7 percent, from $3.3 million for the six months ended June 30, 2018. The decrease between periods is attributable to the sale during the six months ended June 30, 2018 of $28.5 million of mortgage servicing rights on $3.55 billion in unpaid principal balances of conventional mortgage loans. In addition, losses on fair value and runoff of servicing assets were $391 thousand and $881 thousand for the six months ended June 30, 2019 and 2018, respectively. Servicing fees were $630 thousand and $4.1 million for the six months ended June 30, 2019 and 2018, respectively.

~~Net gain on sale of securities available-for-sale was~~ $208 thousand for the six months ended June 30, 2019. During the six months ended June 30, 2020 we sold $20.7 million in securities, primarily consisting of corporate securities, resulting in a gain of $2.0 million. During the six months ended June 30, 2019, we sold $132.2 million of non-agency commercial mortgage-backed securities resulting in a gain of $9 thousand and $644.5 million in collateralized loan obligations resulting in a gain of $143 thousand.

Net (loss) gain on sale of loans, which includes premium recapture of previously sold loans, was $27 thousand for the six months ended June 30, 2020, compared to ~~$5.5~~a gain of $4.3 million for the six months ended June 30, ~~2018. The Company sold securities available-for-sale~~2019. There were no sales of ~~$782.0 million and $381.5 million, respectively,~~loans during the six months ended June 30, 2019 and 2018. Included in the $782.0 million in securities available for sale sold during the six months ended June 30, 2019 was $132.2 million of non-agency commercial mortgage-backed securities that were sold for a gain of $9 thousand. At December 31, 2018, the Company changed its intent and decided to sell its non-agency commercial mortgage-backed securities in an unrealized loss position due to its strategy to reposition its securities profile and recognized $3.3 million of OTTI losses during the fourth quarter of 2018. Additionally, during the six months ended June 30, 2019, the Company continued to reduce its collateralized loan obligations exposure by selling $644.5 million of these investments resulting in a gain of $143 thousand.

~~Net gain on sale of loans was $4.4 million for the six months ended June 30, 2019, compared to $780 thousand for the six months ended June 30, 2018.~~2020. During the six months ended June 30, 2019, ~~the Company~~we sold jumbo SFR mortgage loans of $374.7 million resulting in a gain of $1.8 million and $178.2 million of multifamily residential loans resulting in a gain of $2.9 million. During the six months ended June 30, 2018, the Company sold jumbo SFR mortgage loans of $135.4 million with a loss of $179 thousand and multifamily and other consumer loans of $75.7 million with a gain of $171 thousand

~~Net loss on sale of mortgage servicing rights~~Other income (loss) was ~~zero for the six months ended June 30, 2019, compared to $2.5~~$3.5 million for the six months ended June 30, 2018. During the six months ended June 30, 2018, the Company sold $28.5 million of MSRs on $3.55 billion in unpaid principal balances of conventional mortgage loans. These transactions resulted in a loss on sale of MSRs of $2.5 million, primarily related2020, compared to transaction costs, provision for early repayments of loans and expected repurchase obligations under standard representations and warranties. There were no sales of MSRs during the six months ended June 30, 2019.

~~Other (loss) income was~~ $(4.9) million for the six months ended June 30, ~~2019, compared to $5.4~~2019. The $8.4 million ~~for the six months ended June 30, 2018. The decrease is~~increase was primarily attributable to ~~a $9.6 million unrealized loss. The~~the aforementioned $9.6 million unrealized loss onfrom interest rate ~~swaps related~~swap agreements entered into in order to ~~the pending Freddie Mac multifamily securitization~~offset variability in ~~which we planned to sell~~ the associated mortgage servicing rights. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and is expected to be primarily offset by the anticipated gain in fair value of the ~~loans sold into the~~Freddie Mac securitization incompleted during the third ~~quarter. Subsequent to June 30,~~quarter of 2019, ~~this securitization was completed (refer to~~ offset by lower sublease income of $312 thousand.~~Note 20 — Subsequent Events~~ ~~for more information).~~

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Noninterest Expense

The following table presents the breakdown of noninterest expense for the periods indicated:


	Three Months Ended									Six Months Ended June 30,							Three Months Ended										Six Months Ended June 30,
($ in thousands)	June 30, 2019			March 31, 2019			June 30, 2018			2019			2018			($ in thousands)	June 30, 2020		March 31, 2020		June 30, 2019		2020		2019
Salaries and employee benefits	$	27,506		$	28,439		$	29,440		$	55,945		$	60,555		Salaries and employee benefits	$	24,260	$	23,436	$	27,506	$	47,696	$	55,945
Naming rights termination																Naming rights termination	26,769		—		—		26,769		—
Occupancy and equipment	7,955			7,686			7,883			15,641			15,570			Occupancy and equipment	7,090		7,243		7,955		14,333		15,641
Professional fees (reimbursement)	(2,903		)	11,041			6,303			8,138			15,480
Outside service fees	489			403			413			892			2,959
Professional fees																Professional fees	4,596		5,964		(2,903)		10,560		8,138

Data processing	1,672			1,496			1,678			3,168			3,334			Data processing	1,536		1,773		1,672		3,309		3,168
Advertising	2,048			2,057			2,864			4,105			6,141			Advertising	1,157		1,756		2,048		2,913		4,105
Regulatory assessments	2,136			2,482			2,196			4,618			4,288			Regulatory assessments	725		484		2,136		1,209		4,618
Reversal of provision for loan repurchases	(61		)	(116		)	(218		)	(177		)	(2,006		)	Reversal of provision for loan repurchases	(34)		(600)		(61)		(634)		(177)
Amortization of intangible assets	621			620			827			1,241			1,670			Amortization of intangible assets	430		429		621		859		1,241
Restructuring (reversal) expense	(158		)	2,795			3,983			2,637			3,983

Restructuring expense																Restructuring expense	—		—		(158)		—		2,637
All other expense	4,637			2,982			5,362			7,619			8,591			All other expense	6,408		4,529		5,039		10,937		8,838
Noninterest expense before (gain) loss on investments in alternative energy partnerships	43,942			59,885			60,731			103,827			120,565
Noninterest expense before loss on investments in alternative energy partnerships																Noninterest expense before loss on investments in alternative energy partnerships	72,937		45,014		43,855		117,951		104,154
(Gain) loss on investments in alternative energy partnerships	(355		)	1,950			1,808			1,595			1,774			(Gain) loss on investments in alternative energy partnerships	(167)		1,905		(355)		1,738		1,595
Total noninterest expense	$	43,587		$	61,835		$	62,539		$	105,422		$	122,339		Total noninterest expense	$	72,770	$	46,919	$	43,500	$	119,689	$	105,749

Three Months Ended June 30, ~~2019~~2020 Compared to Three Months Ended March 31, ~~2019~~2020

Noninterest expense was ~~$43.6~~$72.8 million for the three months ended June 30, ~~2019, a decrease~~2020, an increase of ~~$18.2~~$25.9 million, or ~~29.5 percent,~~55.1%, from ~~$61.8~~$46.9 million for the three months ended March 31, ~~2019.~~2020. The increase was mainly due to the aforementioned $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances. There were no similar charges in any of the other periods presented. When these charges are excluded, noninterest expense decreased $3.4 million, due to (i) lower professional fees of $1.4 million as a result of the timing of certain indemnified legal costs and recoveries compared to the prior quarter, (ii) higher net gains on investments in alternative energy partnerships of $2.1 million, and (iii) lower advertising costs of $599 thousand, offset by (iv) higher salaries and benefits expense of $824 thousand due mostly to higher incentive accruals, (v) lower reversals of loan repurchases, and (vi) higher regulatory assessments of $241 thousand.

Professional fees were $4.6 million for the three months ended June 30, 2020, a decrease of $1.4 million, or 22.9%, from $6.0 million for the three months ended March 31, 2020. The decrease included lower indemnified legal costs and recoveries as the current quarter included $875 thousand of such legal costs compared to $1.7 million for the prior quarter. When these indemnified legal costs and recoveries are excluded, professional fees would have decreased $565 thousand from the prior quarter. The remaining decrease relates to lower audit fees and other legal costs.

Advertising costs were $1.2 million for the three months ended June 30, 2020, a decrease of $599 thousand, or 34.1%, from $1.8 million for the three months ended March 31, 2020. The decrease was mainly due to ~~decreases~~reductions in ~~salaries~~overall events and ~~employee benefits, professional fees (reimbursement)~~media spending due, in part, to the termination of the LAFC Agreement on May 22, 2020. Refer to the earlier discussion in the "Termination of LAFC Agreement" section.

Regulatory assessments were $725 thousand for the three months ended June 30, 2020, an increase of $241 thousand, or 49.8%, ~~regulatory assessments, restructuring (reversal) expense,~~from $484 thousand for the three months ended March 31, 2020. The increase was mainly due to the first quarter of 2020 having a FDIC small bank assessment credit.

Reversal of provision for loan repurchases decreased $566 thousand and resulted in higher expenses. The reversal of provision for loan repurchases ~~and~~totaled $34 thousand for the three months ended June 30, 2020 compared to $600 thousand for the prior quarter. The decrease was due to changes in the credit quality of the previously sold loans resulting in a lower release of reserve amount.

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The (gain) loss on investments in alternative energy partnerships ~~partially offset by increases in outside services, data processing and other expenses.~~

~~Salaries and employee benefits expense~~ was ~~$27.5 million~~a gain of $167 thousand for the three months ended June 30, ~~2019,~~2020, an increase of $2.1 million, from a ~~decrease~~loss of ~~$0.9 million, or 3.3 percent, from $28.4~~$1.9 million for the three months ended March 31, ~~2019.~~2020. The ~~decrease was mainly due to decreases in number of employees, incentives and commissions, and temporary staff expenses.~~

Professional fees (reimbursement) were $(2.9) million for the three months ended June 30, 2019, a decrease of $13.9 million, or 126.3 percent, from $11.0 million for the three months ended March 31, 2019. The decrease was primarily attributable to $6.2 million of insurance recoveries net of expenses related to securities litigation, indemnification, investigation and other legal expenses in the second quarter as compared to $3.0 million of net expense in the prior quarter.

Data processing expense was $1.7 million for the three months ended June 30, 2019, an increase of $176 thousand, or 11.8 percent, from $1.5 million for the three months ended March 31, 2019. The increase was mainly due to a increased volume of transactions resulting from fluctuations in transactional account average balances during the three months ended June 30, 2019.

Regulatory assessments were $2.1 million for the three months ended June 30, 2019, a decrease of $346 thousand, or 13.9 percent, from $2.5 million for the three months ended March 31, 2019. The decrease was mainly due to a lower FDIC assessment rategain between periods ~~as a result of lower average balance of core deposits over total liabilities and a higher balance sheet liquidity ratio during the three months ended June 30, 2019.~~

Reversal of provision for loan repurchases was $61 thousand and $116 thousand for the three months ended June 30, 2019 and March 31, 2019, respectively. The decrease was mainly due to reduced repurchase settlement activities between periods.

For the three months ended June 30, 2019 and March 31, 2019, restructuring (reversal) expense was $(158) thousand and $2.8 million, respectively. The change between periods was due to a true-up of expected costs, consisting of severance and retention costs associated with the Company's exit from its third-party mortgage origination and brokered single family lending business and CEO transition during the first quarter of 2019.

(Gain) loss on investments in alternative energy partnerships was $(355) thousand for the three months ended June 30, 2019, a decrease of $2.3 million, from a loss of $2.0 million for the three months ended March 31, 2019. The decrease in loss was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.

All other expense for the three months ended June 30, 2020 increased $1.9 million or 41.5%, to $6.4 million from $4.5 million for the three months ended March 31, 2020.The increase was primarily attributable to a $2.5 million debt extinguishment fee, partially offset by decreases in other expenses such as legal settlements, business travel, and the write-off of certain capitalized software cost. During the three months ended June 30, 2020, we repaid a $100.0 million FHLB term advance with a weighted average interest rate of 2.07% and incurred a $2.5 million debt extinguishment fee. All other expense for the three months ended March 31, 2020 included an $850 thousand charge to settle and conclude a legacy loan sale claim from an acquired bank.

Three Months Ended June 30, ~~2019~~2020 Compared to Three Months Ended June 30, ~~2018~~2019

Noninterest expense was ~~$43.6~~$72.8 million for the three months ended June 30, ~~2019, a decrease~~2020, an increase of ~~$19.0~~$29.3 million, or ~~30.3 percent,~~67.3%, from ~~$62.5~~$43.5 million for the three months ended June 30, ~~2018.~~2019. The ~~decrease~~increase was mainly due to ~~decreases in~~the $26.8 million LAFC naming rights termination fee, coupled with higher professional fees of $7.5 million and other expenses of $1.4 million, offset by lower salaries and employee benefits ~~professional fees (reimbursement), advertising, amortization~~ of ~~intangible assets, restructuring (reversal) expenses, all other expense~~$3.2 million and ~~loss on investments in alternative energy partnerships, partially offset by increases in outside service fees.~~lower regulatory assessments of $1.4 million.

Salaries and employee benefits expense was $24.3 million for the three months ended June 30, 2020, a decrease of $3.2 million, or 11.8%, from $27.5 million for the three months ended June 30, ~~2019,~~2019. The decrease was primarily due to overall reductions in headcount between periods.

As discussed above, we terminated our naming rights agreements with LAFC and incurred a pre-tax, one-time charge to operations of $26.8 million. Refer to earlier discussion in "Termination of LAFC Agreement."

Occupancy and equipment was $7.1 million for the three months ended June 30, 2020, a decrease of ~~$1.9 million,~~$865 thousand or ~~6.6 percent,~~10.9% from ~~$29.4~~$8.0 million for the three months ended June 30, ~~2018.~~2019. The decrease was primarily due to overall reductions in costs between periods as a result of exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.

Professional fees were $4.6 million for the three months ended June 30, 2020, an increase of $7.5 million, or 258.3%, from recoveries of $2.9 million for the three months ended June 30, 2019. The increase was mainly due the 2019 period including net recoveries of legal fees of $6.4 million due to the timing of insurance recoveries related to securities litigation, indemnification, investigation and other legal expenses compared to legal fees of $1.7 million during the 2020 period. Offsetting this increase was a $677 thousand decrease in other professional fees.

Advertising costs were $1.2 million for the three months ended June 30, 2020, a decrease of $891 thousand, or 43.5%, from $2.0 million for the three months ended June 30, 2019. The decrease was mainly due to reductions in overall events and media spending due in part to the termination of the LAFC Agreement on May 22, 2020.

Regulatory assessments were $725 thousand for the three months ended June 30, 2020, a decrease of $1.4 million, or 66.1%, from $2.1 million for the three months ended June 30, 2019. The decrease was mainly due to a reduction in our FDIC assessment rate given the decrease in our asset size.

All other expense was $6.4 million for the three months ended June 30, 2020, an increase of $1.4 million, or 27.2%, from $5.0 million for the three months ended June 30, 2019. The increase was primarily attributable to the aforementioned $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances in the second quarter of 2020. All other expense during the same 2019 period included a $797 impairment of capitalized software projects. There were no similar impairment charges during the three months ended June 30, 2020.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Noninterest expense was $119.7 million for the six months ended June 30, 2020, an increase of $13.9 million, or 13.2%, from $105.7 million for the six months ended June 30, 2019. The increase was mainly due to the $26.8 million LAFC naming rights termination, coupled with a $2.4 million increase in professional fees and $2.1 million increase in all other expense, offset by a $8.2 million decrease in salaries and employee benefits, a $3.4 million decrease in regulatory assessments and a $2.6 million decrease in restructuring expense, as well as decreases in occupancy and equipment, and advertising expenses.

Salaries and employee benefits expense was $47.7 million for the six months ended June 30, 2020, a decrease of $8.2 million, or 14.7%, from $55.9 million for the six months ended June 30, 2019. The decrease was mainly due to decreases in number of employees, commissions, and temporary staff ~~expenses.~~expenses, including overall reductions in headcount between periods as a result of exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.

~~Professional fees (reimbursement) were $(2.9)~~

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Occupancy and equipment was $14.3 million for the three months ended June 30, ~~2019,~~2020, a decrease of ~~$9.2~~$1.3 million or ~~146.1 percent,~~8.4% from ~~$6.3 million for the three months ended June 30, 2018. The decrease was mainly due to insurance recoveries for legal expenses related to the SEC investigation and various other litigation.~~

Advertising costs were $2.0 million for the three months ended June 30, 2019, a decrease of $0.8 million, or 28.5 percent, from $2.9 million for the three months ended June 30, 2018. The decrease was mainly due to overall reductions in advertising expenses between periods due to a focus on digital rather than traditional marketing. Advertising costs include $1.7 million of the LAFC naming rights commitment being expensed to marketing and advertising expenses during both the three months ended June 30, 2019 and 2018.

Amortization of intangible assets was $621 thousand for the three months ended June 30, 2019, a decrease of $206 thousand, or 24.9 percent, from $827 thousand for the three months ended June 30, 2018. The decrease was mainly due to decreases in amortization of core deposit intangibles.

For the three months ended June 30, 2019, restructuring (reversal) expense was $158 thousand and consisted of a true-up of expected costs, consisting of severance and retention costs associated with the Company's exit from its third-party mortgage origination and brokered single family lending business and CEO transition during the first quarter of 2019. The comparable 2018 period included severance-related costs of $4.0 million, pre-tax, as a result of the reduction in force by approximately 9% of total staffing.

(Gain) loss on investments in alternative energy partnerships was $(355) thousand for the three months ended June 30, 2019, a decrease in loss of $2.2 million, from a loss of $1.8 million for the three months ended June 30, 2018. The decrease in loss was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.

All other expense was $4.6 million for the for the three months ended June 30, 2019, a decrease of $725 thousand or 13.5 percent from $5.4 million for the three months ended June 30, 2018. The decrease was mainly due to overall expense reductions from the Company's effort to manage its expenses on supplies, business travel, and other administrative expenditures, and insurance recoveries from previous accrued legal settlement expense, offset by impairment of capitalized software and an increase in provision for unfunded commitments.

~~Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018~~

~~Noninterest expense was $105.4~~$15.6 million for the six months ended June 30, ~~2019,~~2019. The decrease was primarily due to overall reductions in costs between periods as a ~~decrease~~result of ~~$16.9 million, or 13.8 percent, from $122.3~~exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.

Professional fees were $10.6 million for the six months ended June 30, ~~2018. The~~2020, an increase ~~was mainly due to decreases in salaries and employee benefits, professional fees, outside services, advertising, amortization~~ of intangible assets, all other expense and loss on investments in alternative energy partnerships, partially offset by increases in regulatory assessments, a reduction in reversal of provision for loan repurchases.

~~Salaries and employee benefits expense was $55.9 million for the six months ended June 30, 2019, a decrease of $4.6~~$2.4 million, or ~~7.6 percent,~~29.8%, from ~~$60.6 million for the six months ended June 30, 2018. The decrease was mainly due to decreases in number of employees, commissions, and temporary staff expenses.~~

~~Professional fees were~~ $8.1 million for the six months ended June 30, ~~2019, a decrease~~2019. The increase in fees was primarily the result of ~~$7.3 million, or 47.4 percent, from $15.5 million for the six months ended June 30, 2018. The decrease was mainly~~higher legal fees (net of recoveries of $2.5 million) due to ~~$12.6 million~~the timing of insurance recoveries related to securities litigation, indemnification, investigation and other legal expenses ~~during the 2019 period.~~of $6.6 million, offset by lower other professional fees of $2.4 million.

~~Outside service fees~~Advertising costs were ~~$892 thousand for the six months ended June 30, 2019, a decrease of $2.1 million, or 69.9 percent, from $3.0~~$2.9 million for the six months ended June 30, 2018. The decrease was primarily due to lower loan subservicing costs incurred during the six months ended June 30, 2019 as a result of the aforementioned sale of mortgage servicing rights on $3.55 billion in unpaid principal balances of conventional mortgage loans during the comparable 2018 period.

~~Data processing expense was $3.2 million for the six months ended June 30, 2019,~~2020, a decrease of ~~$166 thousand,~~$1.2 million, or ~~5.0 percent,~~29.0%, from $3.3 million for the six months ended June 30, 2018. The decrease was mainly due to a decreased volume of transactions resulting from the lower deposit average balances during the six months ended June 30, 2019.

~~Advertising costs were~~ $4.1 million for the six months ended June 30, ~~2019, a decrease of $2.0 million, or 33.2 percent, from $6.1 million for the six months ended June 30, 2018.~~2019. The decrease was mainly due to overall reductions in reductions in overall events and media spending, as well as a decrease in advertising ~~expenses between periods due~~costs related to ~~a focus on digital rather than traditional marketing. Advertising costs include $3.3 million of~~ the now-terminated LAFC naming rights ~~commitment being expensed to marketing and advertising expenses during both~~commitment. Advertising costs for the six months ended June 30, ~~2019 and 2018.~~2020 included $2.6 million related to the now-terminated LAFC naming rights agreement compared to $3.3 million during six months ended June 30, 2019.

Regulatory assessments were $1.2 million for the six months ended June 30, 2020, a decrease of $3.4 million, or 73.8%, from $4.6 million for the six months ended June 30, ~~2019,~~2019. The decrease was mainly due to a reduction in our FDIC assessment rate given the decrease in our asset size and an ~~increase of $330 thousand, or 7.7 percent, from $4.3 million~~FDIC small bank assessment credit.

Restructuring expense was zero for the six months ended June 30, 2018. The increase was mainly due to a higher FDIC assessment rate between periods as a result of lower average balance of core deposits over total liabilities and lower balance sheet liquidity ratio during the six months ended June 30, 2019.

Reversal of provision for loan repurchases was $177 thousand and $2.0 million for the six months ended June 30, 2019 and 2018, respectively. The decrease was mainly due to the aforementioned sale of mortgage servicing rights on $3.55 billion in unpaid principal balances of conventional mortgage loans and reduced repurchase settlement activities as well as methodology and data enhancements that occurred during 2018.

2020. For the six months ended June 30, 2019, restructuring expense was $2.6 million and consisted of severance and retention costs associated with ~~the Company's~~our exit from ~~its third-party mortgage origination~~the TPMO and brokered single family lending ~~business~~businesses and CEO transition during the first quarter of 2019. For the six months ended June 30, 2018, restructuring expense was $4.0 million and consisted of severance-related costs in the second quarter of 2018 of $4.0 million, pre-tax, as a result of the reduction in force.

All other expenses were ~~$7.6~~$10.9 million for the six months ended June 30, ~~2019, a decrease~~2020, an increase of ~~$972 thousand,~~$2.1 million, or ~~11.3 percent,~~23.7%, from ~~$8.6~~$8.8 million for the six months ended June 30, ~~2018.~~2019. The ~~decrease~~increase was mainly due to the aforementioned $2.5 million debt extinguishment fee associated with the early repayment of $100 million in FHLB term advances, combined with the aforementioned $850 thousand charge to settle and conclude a legacy loan sale claim from an acquired bank; All other expense during the comparable 2019 period included a $835 thousand impairment of capitalized software projects, compared to $157 thousand during the six months ended June 30, 2020. Offsetting these increases were overall expense reductions from ~~the Company's effort~~our efforts to manage ~~its~~ expenses on supplies, business travel, directors' fees, and other administrative ~~expenditures, a decrease in provision for unfunded loan commitments, and insurance recoveries from previous accrued legal settlement expense.~~expenditures.

Loss on investments in alternative energy partnerships was $1.6 million for the six months ended June 30, 2019, a decrease of $179 thousand, from $1.8 million for the six months ended June 30, 2018. The decrease in loss was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.

Income Tax (Benefit) Expense

For the three months ended June 30, ~~2019,~~2020, March 31, ~~2019~~2020 and June 30, ~~2018,~~2019, income tax (benefit) expense ~~(benefit), on a consolidated operations basis~~ was $(5.3) million, $(2.2) million, and $4.3 million, ~~$2.7 million and $2.1 million, respectively, and the~~resulting in an effective tax rate of 22.3%, 24.7% and 20.6%. Our 22.3% effective tax rate for the three months ended June 30, 2020 differs from the 21% federal statutory rate was ~~20.6 percent, 27.9 percent and 12.6 percent, respectively.~~ due to the impact of state taxes offset by various tax credits. The full year estimated effective tax rate for 2020 is expected to be approximately 23%.

For the six months ended June 30, 2020 and 2019, the income tax benefit was $7.5 million and ~~2018,~~the income tax expense ~~(benefit), on a consolidated operation basis,~~ was $7.0 million, ~~and $(3.7) million, respectively, and the~~resulting in an effective tax rate ~~was 22.9 percent~~of 23.0% and ~~(18.6) percent,~~22.9%, respectively.

The Company recognized higher income tax expense for the 2019 periods mainly due to the reduction in the recognition of year-to-date tax credits from the investments in alternative energy partnerships of $1.9 million and $9.2 million for the three and six months ended June 30, 2018, compared to $1.7 million and $1.7 million, respectively, of tax credits recognized for the three and six months ended June 30, 2019. The Company usesWe use the flow-through income statement method to account for the annual investment tax credits forecasted to be earned on the solar investments in ~~the Company’s~~our annual ~~Effective Tax Rate.~~effective tax rate. Under this method, ~~50% of~~ the ~~annual forecasted~~ investment tax credits are recognized as a reduction to income tax expense and the initial book-tax difference in the basis of the investments are recognized as additional tax expense ~~as of June 30, 2019.~~in the year they are earned.

For additional information, see Note 108 to Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.

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FINANCIAL CONDITION

Investment Securities

At June 30, ~~2019,~~2020, all of ~~the Company’s~~our investment securities were classified as available-for-sale.

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 provide a source of liquidity as collateral for FHLB advances, ~~repurchase agreements, certain public funds deposits, and for~~ Federal Reserve Discount Window ~~availability.~~capacity, repurchase agreements, and certain public deposits.

The following table presents the amortized cost and fair value of the investment securities portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:


	June 30, 2019							December 31, 2018								June 30, 2020										December 31, 2019
($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Amortized Cost		Fair Value		Unrealized Gain (Loss)			($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Securities available-for-sale:															Securities available-for-sale:
SBA loan pool securities	$	831	$	853	$	22		$	911	$	910	$	(1	)

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	436,049		429,347		(6,702		)	461,987		437,442		(24,545		)	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	100,128	$	105,555	$	5,427	$	37,613	$	36,456	$	(1,157)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations															U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	199,262		201,136		1,874		91,543		91,299		(244)
Municipal securities															Municipal securities	52,973		57,174		4,201		52,997		52,689		(308)
Non-agency residential mortgage-backed securities	275		285		10			418		427		9			Non-agency residential mortgage-backed securities	161		164		3		191		196		5
Non-agency commercial mortgage-backed securities	—		—		—			132,199		132,199		—

Collateralized loan obligations	748,502		737,202		(11,300		)	1,431,171		1,421,522		(9,649		)	Collateralized loan obligations	703,605		668,353		(35,252)		733,605		718,361		(15,244)
Corporate debt securities															Corporate debt securities	141,962		143,647		1,685		13,500		13,579		79
Total securities available-for-sale	$	1,185,657	$	1,167,687	$	(17,970	)	$	2,026,686	$	1,992,500	$	(34,186	)	Total securities available-for-sale	$	1,198,091	$	1,176,029	$	(22,062)	$	929,449	$	912,580	$	(16,869)

Securities available-for-sale were ~~$1.17~~$1.18 billion at June 30, ~~2019, a decrease~~2020, an increase of ~~$824.8~~$263.4 million, or ~~41.4 percent,~~28.9%, from ~~$1.99 billion~~$912.6 million at December 31, ~~2018.~~2019. The ~~decrease~~increase was mainly due to ~~sales~~purchases of ~~$782.0~~$322.6 million, ~~calls~~including $174.0 million in U.S. government agency securities and ~~payoffs~~$148.6 million in corporate debt securities, offset by a $30.0 million pay-off of ~~$38.1 million, principal payments of~~one CLO holding, $20.7 million in sales, and ~~decrease in~~higher net unrealized losses of ~~$16.6~~$5.2 million.

As of December 31, 2018, the Company changed its intent and decided to sell its non-agency commercial mortgage-backed securities in an unrealized loss position due to its strategy to reposition its securities profile and recognized $3.3 million of OTTI losses during the fourth quarter of 2018. During the first quarter of 2019, the Company completed the sale of its non-agency commercial mortgage-backed securities totaling $132.2 million. Additionally, during the three and six months ended June 30, 2019, the Company continued to reduce its collateralized loan obligations exposure by selling $279.2 million of these investments resulting in no gain or loss. The net proceeds from the sale of securities and the run-off in collateralized loan obligations were used to redeem $1.16 billion of high cost brokered deposits and pay down $305.0 million of higher yielding FHLB advances.

CLOs totaled ~~$748.5~~$668.4 million and ~~$1.43 billion in amortized cost basis~~$718.4 million at June 30, ~~2019~~2020 and December 31, ~~2018 respectively.~~2019. CLOs are floating rate debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries. Underlying loans are generally secured by a company’s assets such as inventory, equipment, property, and/or real estate. CLOs are structured to diversify exposure to a broad sector of industries. The payments on these commercial loans support interest and principal on the CLOs across classes that range from ~~AAA rated~~AAA-rated to ~~equity~~equity-grade tranches. The Company believes that its CLO portfolio, consisting entirely of variable rate securities, supports the Company’s interest rate risk management strategy by lowering the extension risk and duration risk inherent to certain fixed rate investment securities. At June 30, ~~2019, the Company owned~~2020, all of our CLO holdings were AAA and AA ~~rated CLOs and did not own CLOs rated below AA. As all CLOs are~~rated. We also ~~rated above investment grade credit ratings and were diversified across issuers, the Company believes that these CLOs enhance the Company's liquidity position. The Company also maintains~~perform pre-purchase due diligence and ongoing credit quality review ~~processes by a dedicated credit administration team. The ongoing review process~~of our CLO holdings, which includes monitoring of performance factors ~~including~~such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors. ~~The Company~~We only ~~acquires~~acquire CLOs that ~~it believes~~we believe are Volcker Rule compliant.

~~The Company~~We did not record ~~OTTI~~credit impairment for any investment securities for the three and six months ended June 30, ~~2019~~2020 or ~~2018. The Company monitors its~~2019. We monitor our securities portfolio to ensure it has adequate credit support. As of June 30, ~~2019, the Company believed~~2020, we believe there was no ~~OTTI~~credit impairment and we did not have the current intent to sell securities with a fair value below amortized cost at June 30, ~~2019. The Company considers~~2020, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. We consider the lowest credit rating for identification of potential ~~OTTI.~~credit impairment. As of June 30, ~~2019,~~2020, all of ~~the Company's~~our investment securities in an unrealized loss position received an investment grade credit rating. ~~As part~~Credit spreads for CLOs widened during the first quarter of 2020 and have narrowed during the ~~OTTI analysis performed, the Company believes the CLO securities are not OTTI, and the~~second quarter. The overall net decline in fair value ~~is predominantly driven by~~during 2020 was attributable to a combination of changes in interest ~~rates.~~rates and general volatility in the credit market conditions.

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The following table presents maturities, based on the ~~composition~~earlier of ~~the~~maturity dates or next repricing dates, and yield information of the investment securities portfolio as of June 30, ~~2019:~~2020:


	One Year or Less						More than One Year through Five Years						More than Five Years through Ten Years						More than Ten Years		Total
($ in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield
Securities available-for-sale:

U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	30,413	2.20	%	$	75,142	2.35	%	$	105,555	2.31	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	118,163		0.74	%	11,608		2.02	%	25,579		1.63	%	45,786		0.93	%	201,136		0.96	%
Municipal securities	—		—	%	—		—	%	—		—	%	57,174		2.79	%	57,174		2.79	%
Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	164		6.14	%	164		6.14	%

Collateralized loan obligations	668,353		2.73	%	—		—	%	—		—	%	—		—	%	668,353		2.73	%
Corporate debt securities	—		—	%	122,301		4.99	%	21,346		5.64	%	—		—	%	143,647		5.08	%
Total securities available-for-sale	$	786,516	2.45	%	$	133,909	4.74	%	$	77,338	2.96	%	$	178,266	2.11	%	$	1,176,029	2.68	%

One Year or Less More than One Year through Five Years More than Five Years through Ten Years More than Ten Years Total
($ in thousands)
Fair
Value
Weighted Average Yield
Fair
Value
Weighted Average Yield
Fair
Value
Weighted Average Yield
Fair
Value
Weighted Average Yield
Fair
Value
Weighted Average Yield
Securities available-for-sale:
SBA loan pools securities $ —
— % $ —
— % $ —
— % $ 853
�� 2.08 % $ 853
2.08 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 243
2.36 % 3,069
2.67 % —
— % 426,035
2.74 % 429,347
2.74 %
Non-agency residential mortgage-backed securities 66
3.23 % —
— % —
— % 219
5.74 % 285
5.16 %
Collateralized loan obligations 737,202
3.71 % —
— % —
— % —
— % 737,202
3.71 %
Total securities available-for-sale $ 737,511
3.71 % $ 3,069
2.67 % $ —
— % $ 427,107
2.74 % $ 1,167,687
3.35 %

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Loans Held-for-Sale

Total ~~loans held-for-sale on a consolidated operations basis were $597.7 million and $27.6 million, respectively, at June 30, 2019 and December 31, 2018.~~

During the second quarter of 2019, the Company transferred $573.9 million in multifamily loans from loans held-for-investment to loans held-for-sale, carried at lower of cost or fair value, related to our pending Freddie Mac multifamily securitization which is expected to close during the third quarter of 2019. The loans included in the securitization have a weighted average coupon of 3.79% and a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights will also be sold.

In connection with the anticipated securitization, during the second quarter of 2019, the Company entered into an interest rate swap agreement with a notional value of $543.4 million to offset variability in fair value of the related loans as a result of changes in market interest rates. During the three months ended June 30, 2019, the Company recognized a $9.6 million unrealized loss. The $9.6 million unrealized loss on interest rate swaps related to the pending Freddie Mac multifamily securitization in which we planned to sell the associated mortgage servicing rights. The $9.6 million unrealized loss on these interest rate swaps was due to a decline in interest rates since their execution and is expected to be primarily offset by the anticipated gain in fair value of the loans sold into the securitization in the third quarter. Subsequent to June 30, 2019, this securitization was completed (refer to ~~Note 20 — Subsequent Events~~ ~~for more information).~~

As of June 30, 2019, loans held-for-sale carried at fair value, with a balance of $23.8 million, consisted of mainly repurchased conforming SFR mortgage loans that were previously sold. As of December 31, 2018, loans held-for-sale carried at fair value were $19.8 million and $22.6 million, respectively, at June 30, 2020 and December 31, 2019 and consisted mainly of repurchased conforming SFR mortgage loans that were previously sold and loans previously sold to GNMA that ~~are~~were delinquent more than 90 days and subject to a repurchase option by ~~the Company. Loans held-for-sale carried at fair value on a consolidated operations basis were $23.8 million and $27.2 million at June 30, 2019 and December 31, 2018, respectively.~~us. The ~~$3.4~~$2.9 million, or ~~12.5 percent,~~12.7%, decrease was mainly due to ~~sales and~~ payoffs of ~~$3.8 million, repurchases of $699~~$613 thousand and a ~~transfer of one loan, totaling $276 thousand, to other real estate owned, which is included~~decrease in ~~Other Assets in the Company's Consolidated Statements of Financial Condition.~~

~~Loans held-for-sale carried at~~ fair value ~~as a result~~ of ~~the sale of the Company's Banc Home Loans division (Refer to Note 2 -~~ $1.6 million.

~~Sale of Business Unit (Discontinued Operations)), that are included Assets of Discontinued Operations on the Consolidated Statements of Financial Condition totaled zero and $19.5 million at June 30, 2019 and December 31, 2018, respectively.~~

Loans Receivable, Net

The following table presents the composition of ~~the Company’s~~our loan and lease portfolio as of the dates indicated:


($ in thousands)	June 30, 2019			December 31, 2018			Amount Change			Percentage Change		($ in thousands)	June 30, 2020		December 31, 2019		Amount Change		Percentage Change
Commercial:												Commercial:
Commercial and industrial	$	1,951,707		$	1,944,142		$	7,565		0.4	%	Commercial and industrial	$	1,436,990	$	1,691,270	$	(254,280)	(15.0)	%
Commercial real estate	856,497			867,013			(10,516		)	(1.2	)%	Commercial real estate	822,694		818,817		3,877		0.5	%
Multifamily	1,598,978			2,241,246			(642,268		)	(28.7	)%	Multifamily	1,434,071		1,494,528		(60,457)		(4.0)	%
SBA	80,929			68,741			12,188			17.7	%
SBA⁽¹⁾												SBA⁽¹⁾	310,784		70,981		239,803		337.8	%
Construction	209,029			203,976			5,053			2.5	%	Construction	212,979		231,350		(18,371)		(7.9)	%

Consumer:												Consumer:
Single family residential mortgage	1,961,065			2,305,490			(344,425		)	(14.9	)%	Single family residential mortgage	1,370,785		1,590,774		(219,989)		(13.8)	%

Other consumer	61,365			70,265			(8,900		)	(12.7	)%	Other consumer	39,393		54,165		(14,772)		(27.3)	%
Total loans⁽¹⁾	6,719,570			7,700,873			(981,303		)	(12.7	)%
Total loans⁽²⁾												Total loans⁽²⁾	5,627,696		5,951,885		(324,189)		(5.4)	%
Allowance for loan losses	(59,523		)	(62,192		)	2,669			(4.3	)%	Allowance for loan losses	(90,370)		(57,649)		(32,721)		56.8	%
Total loans receivable, net	$	6,660,047		$	7,638,681		$	(978,634	)	(12.8	)%	Total loans receivable, net	$	5,537,326	$	5,894,236	$	(356,910)	(6.1)	%


~~(1)~~	~~Total loans include deferred loan origination costs/(fees) and premiums/(discounts), net of $16.1 million and $17.7 million, respectively,~~ (1)Includes PPP loans totaling $240.7 million, which included $5.6 million of net unamortized loan fees at ~~June 30, 2019 and December 31, 2018.~~

~~During the three and six months ended~~ June 30, ~~2019~~2020. There were no PPP loans outstanding at December 31, 2019.

(2)Total loans include deferred loan origination costs/(fees) and premiums/(discounts), ~~the Company sold $131.5~~net of $6.0 million and ~~$374.7~~$14.3 million, respectively, at June 30, 2020 and December 31, 2019.

Gross loans decreased $324.2 million to $5.63 billion during the year, due mostly to lower single family residential mortgage loans of $220.0 million, lower commercial and industrial (“C&I“) loans of $254.3 million, and lower multifamily loans of $60.5 million. The decline in single family residential mortgage loans ~~resulting~~was attributed to payoffs as the loans refinance away in the lower rate environment and these proceeds are invested in other core business loans. The decline in C&I loans was primarily in response to strategically reducing certain credit facilities in response to the changed economic landscape and corresponding lower outstanding balances. These decreases were partially offset by a ~~gain~~$239.8 million increase in SBA loans attributable to the funding of ~~$125 thousand and $1.8 million, respectively.~~loans under the SBA's PPP. Our focus on processing PPP loans, in addition to the impact of the COVID-19, pandemic tempered other loan production; additionally, we did not experience any significant increase in credit line usage.

~~During~~We continue to remix our real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. Single family residential mortgage and multifamily loans comprised 49.9% of the ~~three~~total held-for-investment loan portfolio as compared to 53.0% one year ago. Commercial real estate loans comprised 14.6% of the loan portfolio and ~~six months ended~~ commercial and industrial loans constituted 25.5%. As of June 30, ~~2019~~2020, loans secured by residential real estate (single family, multifamily, single family construction, and warehouse credit facilities) represent approximately 66% of our total loans outstanding.

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The C&I portfolio has limited exposure to certain business sectors undergoing severe stress, as demonstrated by the ~~Company sold $178.2 million~~following (as a percentage of ~~multifamily residential loans resulting in a gain of $2.9 million.~~total outstanding C&I loan balances):


	June 30, 2020
($ in thousands)	Amount		% of Portfolio
C&I Portfolio by Industry
Finance and insurance (includes Warehouse lending)	$	777,015	54	%
Real estate and rental leasing	201,630		14	%
Gas stations	76,510		5	%
Manufacturing	60,128		4	%
Healthcare	43,256		3	%
Wholesale trade	39,740		3	%
Other retail trade	37,699		3	%
Television/motion pictures	33,590		2	%
Food services	30,216		2	%
Professional services	14,975		1	%
Transportation	5,363		—	%
Accommodations	1,496		—	%
All other	115,372		8	%
Total	$	1,436,990	100	%

Non-Traditional Mortgage Portfolio ("NTM")

~~The Company’s~~Our NTM portfolio is comprised of three interest only products: Green Loans, Interest Only loans and a small number of additional loans with the potential for negative amortization. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the NTM portfolio totaled ~~$747.3~~$511.2 million, or ~~11.1 percent~~9.1% of the total gross loan portfolio, and ~~$826.7~~$600.7 million, or ~~10.7 percent~~10.1% of the total gross loan ~~portfolio, respectively.~~portfolio. The total NTM portfolio decreased by ~~$79.5~~$89.5 million, or ~~9.6 percent~~14.9% during the ~~three~~six months ended June 30, ~~2019.~~2020. The decrease was primarily due to principal paydowns and ~~amortization of $131.2 million, partially offset by originations of $61.5 million.~~payoffs.

The initial credit guidelines for the NTM portfolio were established based on the borrower's Fair Isaac Corporation ~~(FICO)~~(“FICO”) score, LTV ratio, property type, occupancy type, loan amount, and geography. Additionally, from an ongoing credit risk management perspective, ~~the Company has~~we have determined that the most significant performance indicators for NTMs are LTV ratios and FICO scores. ~~The Company reviews~~We review the NTM loan portfolio periodically, which includes refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models ~~(AVMs)~~(“AVMs”) to confirm collateral values.

~~Green Loans~~

The Company discontinued the origination of Green Loan products in 2011. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. The loans are generally interest only with a 15-year balloon payment due at maturity. The Company initiated the Green Loan products in 2005 and proactively refined underwriting and credit management practices and credit guidelines in response to changing economic environments, competitive conditions and portfolio performance. The Company continues to manage credit risk, to the extent possible, throughout the borrower’s credit cycle. We no longer originate NTM loans.

Green Loans totaled ~~$63.7~~$45.2 million at June 30, ~~2019,~~2020, a decrease of ~~$6.5~~$7.1 million, or ~~9.2 percent~~13.5% from ~~$70.1~~$52.3 million at December 31, ~~2018,~~2019, primarily due to ~~reductions in~~ principal ~~balances~~paydowns and payoffs. AtThe NTM loans on non-accrual status included $4.6 million of Green Loans and $14.6 million of interest-only loans at June 30, ~~2019~~2020 compared to $1.5 million of Green Loans and $11.5 million of interest-only loans at December 31, 2018, $286 thousand and zero, respectively, of the Company’s Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk due to the potential of negative amortization; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on loan-to-value ratios and the Company’s contractual ability to curtail loans when the value of underlying collateral declines.

The Green Loans are similar to HELOCs in that they are collateralized primarily by the equity in the borrower's home. However, some Green Loans differ from HELOCs relating to certain characteristics including one-action laws. Similar to Green Loans, HELOCs allow the borrower to draw down on the credit line based on an established loan amount for a period of time, typically 10 years, requiring an interest only payment with an option to pay principal at any time. A typical HELOC provides that at the end of the term the borrower can continue to make monthly principal and interest payments based on the loan balance until the maturity date. The Green Loan is an interest only loan with a maturity of 15 years, at which time the loan becomes due and payable with a balloon payment at maturity. The unique payment structure also differs from a traditional HELOC in that payments are made through the direct linkage of a personal checking account to the loan through a nightly sweep of funds into the Green Loan Account. This reduces any outstanding balance on the loan by the total amount deposited into the checking account. As a result, every time a deposit is made, effectively a payment to the Green Loan is made. HELOCs typically do not cause the loan to be paid down by a borrower’s depositing of funds into their checking account at the same bank.

Credit guidelines for Green Loans were established based on borrower FICO scores, property type, occupancy type, loan amount, and geography. Property types include single family residences and second trust deeds where the Company held the first liens, owner occupied as well as non-owner occupied properties. The Company utilized its underwriting guidelines for first liens to underwrite the Green Loan secured by second trust deeds as if the combined loans were a single Green Loan. For all Green Loans, the loan income was underwritten using either full income documentation or alternative income documentation.2019.

The following table presents ~~the Company’s~~our Green Loans first lien portfolio at June 30, ~~2019~~2020 by FICO scores that were obtained during the quarter ended June 30, ~~2019,~~2020, compared to the FICO scores for those same loans that were obtained during

the quarter ended ~~December~~March 31, ~~2018:~~2020:



	By FICO Scores Obtained During the Quarter Ended June 30, 2020								By FICO Scores Obtained During the Quarter Ended December 31, 2019							Change
($ in thousands)	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
FICO Score
800+	12	$	2,870	6.6	%	13	$	3,509	7.0	%	(1)	$	(639)	(18.2)	%
700-799	31	21,756		49.9	%	38	27,011		54.1	%	(7)	(5,255)		(19.5)	%
600-699	10	11,974		27.4	%	10	12,400		24.8	%	—	(426)		(3.4)	%
<600	5	3,253		7.5	%	5	3,286		6.6	%	—	(33)		(1.0)	%
No FICO	3	3,751		8.6	%	3	3,753		7.5	%	—	(2)		(0.1)	%
Totals	61	$	43,604	100.0	%	69	$	49,959	100.0	%	(8)	$	(6,355)	(12.7)	%

June 30, 2019
By FICO Scores Obtained During the Quarter Ended June 30, 2019 By FICO Scores Obtained During the Quarter Ended March 31, 2019 Change
($ in thousands) Count Amount Percent Count Amount Percent Count Amount Percent
FICO Score
800+ 15
$ 10,221
16.6 % 16
$ 5,277
8.2 % (1 ) $ 4,944
93.7 %
700-799 42
28,744
46.8 % 45
34,651
53.8 % (3 ) (5,907 ) (17.0 )%
600-699 16
17,948
29.2 % 16
16,820
26.1 % —
1,128
6.7 %
<600 2
771
1.3 % 3
3,918
6.1 % (1 ) (3,147 ) (80.3 )%
No FICO 3
3,755
6.1 % 3
3,778
5.9 % —
(23 ) (0.6 )%
Totals 78
$ 61,439
100.0 % 83
$ 64,444
100.1 % (5 ) $ (3,005 ) (4.7 )%

~~Interest Only Loans~~

Interest only loans are primarily SFR mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. Interest only loans totaled $680.4 million at June 30, 2019, a decreaseTable of $72.7 million, or 9.7 percent, from $753.1 million at December 31, 2018. The decrease was primarily due to paydowns and amortization of $124.4 million, partially offset by originations of $61.5 million. As of June 30, 2019 and December 31, 2018, $827 thousand of the interest only loans were non-performing.Contents

~~Loans with the Potential for Negative Amortization~~

Negative amortization loans other than Green Loans totaled $3.2 million at June 30, 2019, a decrease of $309 thousand, or 8.8 percent, from $3.5 million as of December 31, 2018. The Company discontinued origination of negative amortization loans in 2007. At June 30, 2019 and December 31, 2018, none of the loans that had the potential for negative amortization were non-performing. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the risk is mitigated through the loan terms and underwriting standards, including the Company’s policies on loan-to-value ratios.

~~NTM Loan Credit Risk Management~~

The Company performs detailed reviews of collateral values on loans collateralized by residential real property including its NTM portfolio based on appraisals or estimates from third party AVMs to analyze property value trends periodically. AVMs are used to identify loans that have experienced potential collateral deterioration. Once a loan has been identified that may have experienced collateral deterioration, the Company will obtain updated drive by or full appraisals in order to confirm the valuation. This information is used to update key monitoring metrics such as LTV ratios. Additionally, FICO scores are obtained in conjunction with the collateral analysis. In addition to LTV ratios and FICO scores, the Company evaluates the portfolio on a specific loan basis through delinquency and portfolio charge-offs to determine whether any risk mitigation or portfolio management actions are warranted. The borrowers may be contacted as necessary to discuss material changes in loan performance or credit metrics.

The Company’s risk management policy and credit monitoring includes reviewing delinquency, FICO scores, and collateral values on the NTM loan portfolio. The Company also continuously monitors market conditions for our geographic lending areas. The Company has determined that the most significant performance indicators for NTM are LTV ratios and FICO scores. The loan review provides an effective method of identifying borrowers who may be experiencing financial difficulty before they fail to make a loan payment. Upon receipt of the updated FICO scores, an exception report is run to identify loans with a decrease in FICO score of 10 percent or more and a resulting FICO score of 620 or less. The loans are then further analyzed to determine if the risk rating should be downgraded, which may require an increase in the ALLL the Company needs to establish for potential losses. A report is prepared and regularly monitored.

As these loans are revolving lines of credit, the Company, based on the loan agreement and loan covenants of the particular loan, as well as applicable rules and regulations, could suspend the borrowing privileges or reduce the credit limit at any time the Company reasonably believes that the borrower will be unable to fulfill their repayment obligations under the agreement or certain other conditions are met. In many cases, the decrease in FICO score is the first red flag that the borrower may have difficulty in making their future payment obligations.

As a result, the Company proactively manages the portfolio by performing a detailed analysis with emphasis on the non-traditional mortgage portfolio. The Company’s Management Credit Committee (MCC), formally known as Internal Asset Review Committee, conducts regular meetings to review the loans classified as special mention, substandard, or doubtful and

determines whether suspension of the line or reduction in the credit limit is warranted. If the line has been suspended and the borrower would like to have their credit privileges reinstated, they would need to provide updated financials showing their ability to meet their payment obligations. From the most recent review completed during the three months ended June 30, 2019, the Company made no curtailment in available commitments on Green Loans.

On the interest only loans, the Company projects future payment changes to determine if there will be an increase in payment of 3.50 percent or greater and then monitors the loans for possible delinquencies. The individual loans are monitored for possible downgrading of risk rating, and trends within the portfolio are identified that could affect other interest only loans scheduled for payment changes in the near future.

Consumer and NTM loans may entail greater risk than do traditional SFR mortgage loans, particularly in the case of consumer loans that are secured by rapidly depreciable assets, such as automobiles and recreational vehicles. In these cases, any repossessed collateral for a consumer and NTM loan are more dependent on the borrower‘s continued financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy.

Loan-to-Value Ratio

LTV ratio represents estimated current loan to value ratio, determined by dividing the current unpaid principal balance by the latest estimated property value received per ~~the Company~~our policy. The table below represents ~~the Company’s~~our single family residential NTM first lien portfolio by LTV ~~ratios~~ratio ranges as of the dates indicated:


	Green								Interest Only								Negative Amortization				Total
($ in thousands)	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
June 30, 2020
< 61%	49	$	32,547	74.7	%	208	$	294,171	63.4	%	8	$	2,335	100.0	%	265	$	329,053	64.6	%
61-80%	10	9,257		21.2	%	116	158,111		34.1	%	—	—		—	%	126	167,368		32.8	%
81-100%	2	1,800		4.1	%	3	4,875		1.1	%	—	—		—	%	5	6,675		1.3	%
> 100%	—	—		—	%	2	6,509		1.4	%	—	—		—	%	2	6,509		1.3	%
Total	61	$	43,604	100.0	%	329	$	463,666	100.0	%	8	$	2,335	100.0	%	398	$	509,605	100.0	%
December 31, 2019
< 61%	54	$	37,804	75.6	%	231	$	346,899	63.6	%	9	$	3,027	100.0	%	294	$	387,730	64.8	%
61-80%	12	8,531		17.1	%	136	183,664		33.7	%	—	—		—	%	148	192,195		32.1	%
81-100%	3	3,624		7.3	%	6	7,081		1.3	%	—	—		—	%	9	10,705		1.8	%
> 100%	—	—		—	%	3	7,727		1.4	%	—	—		—	%	3	7,727		1.3	%
Total	69	$	49,959	100.0	%	376	$	545,371	100.0	%	9	$	3,027	100.0	%	454	$	598,357	100.0	%

Green Interest Only Negative Amortization Total
($ in thousands) Count Amount Percent Count Amount Percent Count Amount Percent Count Amount Percent
June 30, 2019
< 61% 60
$ 45,675
74.4 % 267
$ 442,601
65.1 % 10
$ 3,219
100.0 % 337
$ 491,495
66.0 %
61-80% 14
12,930
21.0 % 163
216,625
31.8 % —
—
— % 177
229,555
30.8 %
81-100% 4
2,834
4.6 % 9
11,338
1.7 % —
—
— % 13
14,172
1.9 %
> 100% —
—
— % 5
9,797
1.4 % —
—
— % 5
9,797
1.3 %
Total 78
$ 61,439
100.0 % 444
$ 680,361
100.0 % 10
$ 3,219
100.0 % 532
$ 745,019
100.0 %
December 31, 2018
< 61% 69
$ 51,827
76.5 % 312
$ 495,930
65.9 % 11
$ 3,528
100.0 % 392
$ 551,285
66.9 %
61-80% 17
13,476
19.9 % 201
245,568
32.6 % —
—
— % 218
259,044
31.4 %
81-100% 2
2,426
3.6 % 5
7,441
1.0 % —
—
— % 7
9,867
1.2 %
> 100% —
—
— % 1
4,122
0.5 % —
—
— % 1
4,122
0.5 %
Total 88
$ 67,729
100.0 % 519
$ 753,061
100.0 % 11
$ 3,528
100.0 % 618
$ 824,318
100.0 %

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Non-Performing Assets

The following table presents a summary of total non-performing assets, excluding loans held-for-sale, as of the dates indicated:


($ in thousands)	June 30, 2019			December 31, 2018			Amount Change			Percentage Change		($ in thousands)	June 30, 2020			December 31, 2019			Amount Change		Percentage Change
Loans past due 90 days or more still on accrual	$	275		$	470		$	(195	)	(41.5	)%	Loans past due 90 days or more still on accrual	$	—		$	—		$	—	—	%
Non-accrual loans	28,499			21,585			6,914			32.0	%	Non-accrual loans	72,703			43,354			29,349		67.7	%
Total non-performing loans	28,774			22,055			6,719			30.5	%	Total non-performing loans	72,703			43,354			29,349		67.7	%
Other real estate owned	276			672			(396		)	(58.9	)%	Other real estate owned	—			—			—		—	%
Total non-performing assets	$	29,050		$	22,727		$	6,323		27.8	%	Total non-performing assets	$	72,703		$	43,354		$	29,349	67.7	%
Performing restructured loans ⁽¹⁾	$	20,245		$	5,745		$	14,500		252.4	%	Performing restructured loans ⁽¹⁾	$	5,597		$	6,621		$	(1,024)	(15.5)	%
Total non-performing loans to total loans	0.43		%	0.29		%						Total non-performing loans to total loans	1.29		%	0.73		%
Total non-performing assets to total assets	0.31		%	0.21		%						Total non-performing assets to total assets	0.94		%	0.55		%
ALLL to non-performing loans	206.86		%	281.99		%
ALL to non-performing loans												ALL to non-performing loans	124.30		%	132.97		%
ACL to non-performing loans												ACL to non-performing loans	130.07		%	142.35		%

(1) Excluded from non-performing loans

Loans are generally placed on non-accrual 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 ~~$535~~$952 thousand and ~~$653 thousand~~$1.7 million would have been recorded during the three and six months ended June 30, ~~2019, respectively,~~2020, had these loans been paid in accordance with their original terms throughout the periods indicated.

~~During the three months ended~~Non-performing loans totaled $72.7 million as of June 30, ~~2019, non-accrual~~2020, of which $21.9 million, or 30% of the balance relates to loans ~~increased $6.9~~in a current payment status. The $16.2 million increase during the second quarter was primarily due to ~~certain single family residential, SBA and construction~~$18.6 million of loans being placed on non-accrual status. During the six months ended June 30, 2019, the provision for loan losses reflects a $59.5 million increase in special mention, substandard and doubtful loans, coupled with increases in delinquencies and nonperforming loansstatus, offset by cured loans and payoffs. The quarter-end balance included three large loan relationships totaling $36.9 million, or 51% of our total non-performing loans, which consist of one $16.4 million legacy shared national credit, a $9.1 million single family mortgage residential loan with a loan-to-value ratio of 58%, and an $11.5 million legacy relationship well-secured by commercial real estate and single family residential properties with an average loan-to-value ratio of 51%. Aside from those three loan relationships, non-performing single family residential loans totaled $19.4 million and the ~~$1.04 billion reduction in the pass-rated portfolio balances and overall decreases in average loan balances as a result of sales and transfers to held for sale since year-end.~~remaining non-performing loans totaled $16.4 million.

Troubled Debt Restructurings

Loans that ~~the Company modifies~~we modify or ~~restructures~~restructure where the debtor is experiencing financial difficulties and makes a concession to the borrower in ~~the form of changes~~a below-market change in the ~~amortization terms, reductions~~stated interest rate, a reduction in the loan balance or accrued interest, ~~rates,~~an extension of the ~~acceptance of interest only payments and, in limited cases, reductions in the outstanding loan balances~~maturity date, or a note split with principal forgiveness are classified as troubled debt restructurings (“TDRs”). TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition. A workout plan between a borrower and ~~the Company~~us is designed to provide a bridge for the cash flow shortfalls in the near term. If the borrower works through the near term issues, in most cases, the original contractual terms of the loan will be reinstated.

At June 30, ~~2019~~2020 and December 31, ~~2018, the Company~~2019, we had 2426 and 1325 loans, respectively, with an aggregate balance of ~~$22.7~~$25.9 million and ~~$8.0~~$21.8 million, respectively, classified as TDRs. When a loan becomes a TDR, ~~the Company ceases~~we cease accruing interest, and ~~classifies~~classify it as non-accrual until the borrower demonstrates that the loan is again performing. The increase in TDRs during the three and six months ended June 30, 2020 was primarily due to one commercial and industrial relationship totaling $3.7 million.

At June 30, ~~2019,~~2020, of the 2426 loans classified as TDRs, 2112 loans totaling ~~$20.2~~$5.6 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status. At December 31, ~~2018,~~2019, of the 1325 loans classified as TDRs, 1214 loans totaling ~~$5.7~~$6.6 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status.

Table of Contents

from TDR accounting. The main benefits of TDR relief include 1) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; 2) a delinquency status benefit, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and 3) a non-accrual status benefit as the loans are generally not reported as non-accrual during the modification period. Refer to "Borrower Payment Relief Efforts" above for additional information regarding CARES Act deferrals.

Allowance for ~~Loan~~Credit Losses (ACL)

~~The Company maintains an ALLL~~Our ACL is comprised of our allowance for loan losses ("ALL") and reserve for unfunded loan commitments. Our ACL methodology and resulting provision continues to ~~absorb probable incurred losses inherent in~~be impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally recognized third-party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio atrisk profile including risk ratings, and economic forecasts including macroeconomic variables ("MEVs"). As of June 30, 2020, we used economic forecasts released by our model provider during June 2020. Similar to the ~~balance sheet date. The ALLL is based on an ongoing assessment~~late March 2020 forecasts, these June 2020 forecasts reflect the onset of the ~~estimated probable losses inherent~~pandemic, its impact on the MEVs, and the future economic recovery. These forecasts published by our model provider have deteriorated since the end of the first quarter, with June baseline unemployment rate forecasts for 2020 and 2021 increasing and real gross domestic product growth rates decreasing. Similar to the first quarter of 2020, we incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by our third-party model including underlying strengths and weaknesses in the loan portfolio. ~~In evaluating~~As is the ~~level~~case with all estimates, we expect the ACL to be impacted in future periods by economic volatility, changing economic forecasts, actual and projected credit experience, and underlying model assumptions, all of ~~the ALLL, management considers the types of loans and the amount of loans in the portfolio, peer group information, historical loss experience, adverse situations that~~which may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This methodology takes into account many factors, including the Company’s own historical and peer loss trends, loan-level credit quality ratings, loan specific attributes along with a review of various credit metrics and trends. be better than or worse than our current estimate.

The ACL process involves subjective ~~as well as~~and complex judgments. In addition, ~~the Company uses~~we use adjustments for numerous factors including those ~~found~~described in the federal banking agencies' joint ~~Interagency Policy Statement~~interagency policy statement on

~~ALLL,~~ ALL, which include ~~current economic conditions, loan seasoning,~~ underwriting experience and collateral value changes, among others. ~~The Company evaluates~~We evaluate all impaired loans individually using guidance from ASC 310 primarily through the evaluation of cash flows or collateral values.

The ACL, which includes the reserve for unfunded loan commitments, totaled $94.6 million, or 1.68% of total loans at June 30, 2020 compared to $82.1 million or 1.45% at March 31, 2020. The $12.4 million increase in the allowance for expected credit losses was due to: (i) $6.8 million provided for specific reserves, primarily related to one previously reported non-accrual shared national credit, (ii) $5.0 million provided for general reserves related to the continued deterioration in key macro-economic forecast variables, offset by the impact of lower loan balances, and (iii) net recoveries of $608 thousand. The ACL coverage of non-performing loans was 130% at June 30, 2020 compared to 145% at March 31, 2020 and 142% at December 31, 2019.

The reserve for unfunded loan commitments is established to cover the 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. The reserve for unfunded loan commitments is included in accrued expenses and other liabilities on the consolidated statements of financial condition.

The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:


($ in thousands)	June 30, 2020			December 31, 2019











Allowance for credit losses:
Allowance for loan losses (ALL)	$	90,370		$	57,649
Reserve for unfunded loan commitments	4,195			4,064
Total allowance for credit losses (ACL)	$	94,565		$	61,713

ALL to total loans	1.61		%	0.97		%
ACL to total loans	1.68		%	1.04		%

Table of Contents

The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:


	Three Months Ended June 30,
($ in thousands)	2020										2019
	Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	$	78,243	$	3,888	$	82,131	$	63,885	$	4,208	$	68,093

Loans charged off	—		—		—		(2,451)		—		(2,451)
Recoveries of loans previously charged off	608		—		608		76		—		76
Net charge-offs	608		—		608		(2,375)		—		(2,375)

Provision for credit losses	11,519		307		11,826		(1,987)		87		(1,900)
Balance at end of period	$	90,370	$	4,195	$	94,565	$	59,523	$	4,295	$	63,818


	Six Months Ended June 30,
($ in thousands)	2020										2019
	Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	$	57,649	$	4,064	$	61,713	$	62,192	$	4,622	$	66,814
Impact of adopting ASU 2016-13⁽¹⁾	7,609		(1,226)		6,383		—		—		—
Loans charged off	(2,076)		—		(2,076)		(3,514)		—		(3,514)
Recoveries of loans previously charged off	958		—		958		320		—		320
Net charge-offs	(1,118)		—		(1,118)		(3,194)		—		(3,194)

Provision for (reversal of) credit losses	26,230		1,357		27,587		525		(327)		198
Balance at end of period	$	90,370	$	4,195	$	94,565	$	59,523	$	4,295	$	63,818

(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather that the previously applied incurred loss methodology.

The following table provides a summary of the allocation of the ~~ALLL~~allowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:


	June 30, 2020										December 31, 2019
($ in thousands)	Allowance for Loan Losses		Loans Receivable		% of Loans in Category to Total Loans		Allowance for Loan Losses		Loans Receivable		% of Loans in Category to Total Loans
Commercial:
Commercial and industrial	$	26,618	$	1,436,990	25.5	%	$	22,353	$	1,691,270	28.4	%
Commercial real estate	17,372		822,694		14.6	%	5,941		818,817		13.8	%
Multifamily	25,105		1,434,071		25.5	%	11,405		1,494,528		25.1	%
SBA	4,184		310,784		5.5	%	3,120		70,981		1.2	%
Construction	6,675		212,979		3.8	%	3,906		231,350		3.9	%

Consumer:
Single family residential mortgage	9,665		1,370,785		24.4	%	10,486		1,590,774		26.7	%
Other consumer	751		39,393		0.7	%	438		54,165		0.9	%

Total	$	90,370	$	5,627,696	100.0	%	$	57,649	$	5,951,885	100.0	%

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June 30, 2019 December 31, 2018
($ in thousands) ALLL Loans Receivable
% of
Loans in Category to Total Loans
ALLL Loans Receivable
% of
Loans in Category to
Total Loans
Commercial:
Commercial and industrial $ 21,529
$ 1,951,707
29.1 % $ 18,191
$ 1,944,142
25.2 %
Commercial real estate 6,877
856,497
12.7 % 6,674
867,013
11.3 %
Multifamily 12,625
1,598,978
23.8 % 17,970
2,241,246
29.1 %
SBA 3,120
80,929
1.2 % 1,827
68,741
0.9 %
Construction 3,715
209,029
3.1 % 3,461
203,976
2.7 %
Consumer:
Single family residential mortgage 11,072
1,961,065
29.2 % 13,128
2,305,490
29.9 %
Other consumer 585
61,365
0.9 % 941
70,265
0.9 %
Total $ 59,523
$ 6,719,570
100.0 % $ 62,192
$ 7,700,873
100.0 %

~~The following table presents the ALLL allocation among loan origination types as of the dates indicated:~~

($ in thousands) June 30,
2019 December 31, 2018 Amount Change Percentage Change
Loan breakdown by origination type:
Originated loans $ 6,181,583
$ 7,105,171
$ (923,588 ) (13.0 )%
Acquired loans not impaired at acquisition 537,987
595,702
(57,715 ) (9.7 )%
Total loans $ 6,719,570
$ 7,700,873
$ (981,303 ) (12.7 )%
ALLL breakdown by origination type:
Originated loans $ 58,135
$ 61,255
$ (3,120 ) (5.1 )%
Acquired loans not impaired at acquisition 1,388
937
451
48.1 %
Total ALLL $ 59,523
$ 62,192
$ (2,669 ) (4.3 )%
Discount on purchased/acquired Loans:
Acquired loans not impaired at acquisition $ 10,680
$ 11,645
$ (965 ) (8.3 )%
Total discount $ 10,680
$ 11,645
$ (965 ) (8.3 )%
Percentage of ALLL to:
Originated loans 0.94 % 0.86 % 0.08 %
Originated loans and acquired loans not impaired at acquisition 0.89 % 0.81 % 0.08 %
Total loans 0.89 % 0.81 % 0.08 %

The following table provides information regarding activity by loan class in the ~~ALLL~~allowance for loan losses during the ~~periods~~periods: indicated:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,									Six Months Ended June 30,
($ in thousands)	2019			2018			2019			2018			($ in thousands)	2020			2019			2020			2019
ALLL at beginning of period	$	63,885		$	54,763		$	62,192		$	49,333
ALL at beginning of period													ALL at beginning of period	$	78,243		$	63,885		$	57,649		$	62,192
Impact of adopting ASU 2016-13⁽¹⁾													Impact of adopting ASU 2016-13⁽¹⁾	—			—			7,609			—
Charge-offs:													Charge-offs:
Commercial and industrial	(2,022		)	(276		)	(2,115		)	(347		)	Commercial and industrial	—			(2,022)			(1,164)			(2,115)
Multifamily	(6		)	(8		)	—			—

SBA	8			(302		)	(348		)	(683		)	SBA	—			8			(356)			(348)

Single family residential mortgage	(425		)	(364		)	(951		)	(479		)	Single family residential mortgage	—			(425)			(552)			(951)
Other consumer	(6		)	—			(94		)	(14,072		)	Other consumer	—			(6)			(4)			(94)
Total charge-offs	(2,451		)	(950		)	(3,514		)	(15,589		)	Total charge-offs	—			(2,451)			(2,076)			(3,514)
Recoveries:													Recoveries:
Commercial and industrial	11			36			44			97			Commercial and industrial	119			11			149			44

SBA	60			167			101			232			SBA	—			60			121			101

Lease financing	3			5			6			9			Lease financing	—			3			—			6
Single family residential mortgage	—			—			150			436			Single family residential mortgage	488			—			639			150
Other consumer	2			4			19			8			Other consumer	1			2			49			19
Total recoveries	76			212			320			782			Total recoveries	608			76			958			320
Net charge-offs	(2,375		)	(738		)	(3,194		)	(14,807		)	Net charge-offs	608			(2,375)			(1,118)			(3,194)
(Reversal of) Provision for loan losses	(1,987		)	2,653			525			22,152
ALLL at end of period	$	59,523		$	56,678		$	59,523		$	56,678

Provision for credit losses													Provision for credit losses	11,519			(1,987)			26,230			525
ALL at end of period													ALL at end of period	$	90,370		$	59,523		$	90,370		$	59,523
Average total loans held-for-investment	$	7,398,471		$	7,000,288		$	7,540,137		$	6,855,041		Average total loans held-for-investment	$	5,687,652		$	7,398,471		$	5,723,094		$	7,540,145
Total loans held-for-investment at end of period	$	6,719,570		$	7,036,004		$	6,719,570		$	7,036,004		Total loans held-for-investment at end of period	$	5,627,696		$	6,719,570		$	5,627,696		$	6,719,570
Ratios:													Ratios:
Annualized net charge-offs to average total loans held-for-investment	0.13		%	0.04		%	0.08		%	0.43		%
ALLL to total loans held-for-investment	0.89		%	0.81		%	0.89		%	0.81		%
Annualized net charge-offs (recoveries) to average total loans held-for-investment													Annualized net charge-offs (recoveries) to average total loans held-for-investment	(0.04)		%	0.13		%	0.04		%	0.08		%
ALL to total loans held-for-investment													ALL to total loans held-for-investment	1.61		%	0.89		%	1.61		%	0.89		%

~~During~~(1)Represents the ~~three and six months ended June 30, 2019, net charge-offs were $2.4 million and $3.2 million, respectively compared~~impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to ~~$738 thousand and $14.8 million, respectively, during the comparable 2018 periods. Included in net charge-offs during the three and six months ended June 30, 2019, was~~compute our allowance for credit losses is based on a charge off a $2.0 million commercial and industrial loan. During the six months ended June 30, 2018, the Company recorded a charge-off of $13.9 million, which reflected the outstanding balance under a $15.0 million line ofcurrent expected credit that was originated during the three months ended March 31, 2018. Subsequent to the granting of the line of credit, representations from the borrower in applying for the line of credit were determined by the Bank to be false, and bank account statements provided by the borrower to secure the line of credit were found to be fraudulent. The line of credit was granted after the borrower appeared to have satisfied a pre-conditionloss methodology, rather that the line of credit be fully cash collateralized and secured by a bank account at a third party financial institution pledged to the Bank. As part of the Bank’s credit review and portfolio management process, the line of credit and disbursements were reviewed subsequent to closing and compliance with the borrower’s covenants was monitored. As part of this process, on March 9, 2018, the Bank received information that caused it to believe the existence of the pledged bank account had been misrepresented by the borrower and that the account had previously been closed. The Bank filed an action in Federal court pursuing the borrower and other parties. That action was voluntarily dismissed by the Bank without prejudice, and a substantially similar action was filed in Los Angeles County Superior Court. The Bank is also considering other available sources of collection and other potential means of mitigating the loss; however, no assurance can be given that it will be successful in this regard. Upon extensive review of the underwriting process for this loan, the Bank determined that this loan was the result of an isolated event of external fraud.applied incurred loss methodology.

Alternative Energy Partnerships

As ~~the Company’s~~our respective investments in these entities are more than minor, ~~the Company has~~we have significant influence, but not control, over the investee’s activities that most significantly impact its economic performance. As a result, ~~the Company is~~we are required to apply the equity method of accounting, which generally prescribes applying the percentage ownership interest to the investee’s GAAP net income in order to determine the investor’s earnings or losses in a given period. However, because the liquidation rights, tax credit allocations and other benefits to investors can change upon the occurrence of specified events, application of the equity method based on the underlying ownership percentages would not accurately represent ~~the Company’s~~our investment. As a result, ~~the Company applies~~we apply the Hypothetical Liquidation at Book Value (“HLBV”) method of the equity method of accounting.

The HLBV method is a balance sheet approach whereby a calculation is prepared at each balance sheet date to estimate the amount that ~~the Company~~we would receive if the equity investment entity were to liquidate all of its assets (as valued in accordance with GAAP) and distribute that cash to the investors based on the contractually defined liquidation 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 ~~the Company’s~~our share of the earnings or losses from the equity investment for the period.

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The following table presents the activity related to ~~the Company’s~~our investment in alternative energy partnerships for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~

2019:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2019			2018			2019			2018			($ in thousands)	2020		2019		2020		2019
Balance at beginning of period	$	26,578		$	48,344		$	28,988		$	48,826		Balance at beginning of period	$	27,347	$	26,578	$	29,300	$	28,988
New funding	235			—			235			—			New funding	—		235		3,631		235
Return of unused capital	—			(1,027		)	—			(1,027		)

Change in unfunded commitments													Change in unfunded commitments	—		—		(3,225)		—
Cash distribution from investments	(535		)	(703		)	(995		)	(1,219		)	Cash distribution from investments	(547)		(535)		(1,001)		(995)
Gain (loss) on investments using HLBV method	355			(1,808		)	(1,595		)	(1,774		)	Gain (loss) on investments using HLBV method	167		355		(1,738)		(1,595)
Balance at end of period	$	26,633		$	44,806		$	26,633		$	44,806		Balance at end of period	$	26,967	$	26,633	$	26,967	$	26,633
Unfunded equity commitments	$	3,796		$	—		$	3,796		$	—
Unfunded equity commitments at end of period													Unfunded equity commitments at end of period	$	—	$	3,796	$	—	$	3,796

~~The Company’s~~

Our returns on investments in alternative energy partnerships are primarily obtained through the realization of energy tax credits and other tax benefits rather than through distributions or through the sale of the investment. The balance of these investments was $27.0 million and $29.3 million at June 30, 2020 and December 31, 2019.

During the three and six months ended June 30, ~~2019, the Company~~2020, we funded ~~$235 thousand~~zero and $3.6 million for ~~its~~our alternative energy partnerships and did not receive any return of capital from ~~its~~our alternative energy partnerships. During each of the three ~~months ended June 30, 2018, the Company received a return of capital of $1.0 million~~ and ~~funded $13 thousand, respectively, from and into these partnerships. During the~~ six months ended June 30, ~~2018, the Company received a~~2019, we did not receive any return of capital ~~of $1.0 million~~ and funded ~~$30.9 million, respectively, from and~~$235 thousand into these partnerships.

During the three months ended June 30, 2020 and 2019, ~~and 2018, the Company~~we recognized a gain on investment of ~~$355~~$167 thousand and a loss on investment of ~~$1.8 million, respectively,~~$355 thousand through its HLBV application. During the six months ended June 30, 2020 and 2019, ~~and 2018, the Company~~we recognized a loss on investment of $1.6 million and a loss of $1.8 million, respectively, through its HLBV application. As a result, the balance of these investments was $26.6 million and $44.8 million at June 30, 2019 and 2018, respectively. From an income tax benefit perspective, the Company recognized investment tax credits of $1.7 million and ~~$1.9~~$1.6 million ~~for~~through our application of the ~~three months ended June 30, 2019 and 2018, respectively, and $1.7 million and $9.2 million during~~HLBV method of accounting. The HLBV losses for the six months ended June 30, ~~2019 and 2018, respectively, as well as income tax expense (benefits) relating to the recognition of its gain (loss) through its HLBV application during these periods.~~

~~The HLBV losses for the periods~~2020 were largely driven by accelerated tax depreciation on equipment and the recognition of energy tax credits which reduces the amount distributable by the investee in a hypothetical liquidation under the contractual liquidation provisions. From an income tax benefit perspective, we recognized no investment tax credits during these periods; however, we recorded income tax (expense) benefit related to these investments of $(38) thousand and $398 thousand for the three and six months ended June 30, 2020 and $380 thousand for each of the three and six months ended June 30, 2019.

For additional information, see Note 1412 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

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Deposits

The following table shows the composition of deposits by type as of the dates indicated:


											June 30, 2020						December 31, 2019
($ in thousands)	June 30, 2019		December 31, 2018		Amount Change			Percentage Change		($ in thousands)	Amount		% of Total Deposits		Amount		% of Total Deposits		Amount Change
Noninterest-bearing deposits	$	993,745	$	1,023,360	$	(29,615	)	(2.9	)%	Noninterest-bearing deposits	$	1,391,504	23.0	%	$	1,088,516	20.1	%	$	302,988
Interest-bearing demand deposits	1,577,901		1,556,410		21,491			1.4	%	Interest-bearing demand deposits	1,846,698		30.6	%	1,533,882		28.3	%	312,816
Money market accounts	800,898		873,153		(72,255		)	(8.3	)%	Money market accounts	765,854		12.7	%	715,479		13.2	%	50,375
Savings accounts	1,061,115		1,265,847		(204,732		)	(16.2	)%	Savings accounts	939,018		15.6	%	885,246		16.3	%	53,772
Certificates of deposit of $250,000 or less	1,126,052		2,388,592		(1,262,540		)	(52.9	)%	Certificates of deposit of $250,000 or less	585,314		9.7	%	582,772		10.7	%	2,542

Certificates of deposit of more than $250,000	732,579		809,282		(76,703		)	(9.5	)%	Certificates of deposit of more than $250,000	509,077		8.4	%	621,272		11.4	%	(112,195)
Total deposits	$	6,292,290	$	7,916,644	$	(1,624,354	)	(20.5	)%	Total deposits	$	6,037,465	100.0	%	$	5,427,167	100.0	%	$	610,298

Total deposits were ~~$6.29~~$6.04 billion at June 30, ~~2019, a decrease~~2020, an increase of ~~$1.62 billion,~~$610.3 million, or ~~20.5 percent,~~11.2%, from ~~$7.92~~$5.43 billion at December 31, ~~2018. The decrease was mainly due~~2019. We continue to ~~the Company's continuous efforts~~focus on growing relationship-based deposits, strategically supplemented by wholesale funding, as we proactively drive our funding costs down. Noninterest-bearing deposits totaled $1.39 billion and represented 23.0% of total deposits at June 30, 2020 compared to ~~build core deposits across the Company's business units, including strong growth from the community banking~~$1.09 billion and ~~private banking channel, offset by the Company's strategic reduction of high-rate and high-volatility deposits during the three and six months ended June 30,~~20.1% at December 31, 2019.

During the six months ended June 30, ~~2019,~~2020, demand deposits ~~decreased~~increased by ~~$8.1~~$615.8 million, ~~including $29.6~~consisting of increases of $303.0 million ~~of non-interest bearing~~in noninterest-bearing deposits and $312.8 million in interest-bearing demand deposits. In addition, ~~during the six months ended June 30, 2019, the Company used proceeds from the sale~~money market accounts increased $50.4 million and savings accounts increased $53.8 million, offset by a decrease of ~~loans and investments to redeem $1.16 billion of higher cost brokered certificates of~~$109.7 million in time deposits.

Brokered deposits were ~~$481.0~~$179.8 million at June 30, ~~2019, a decrease~~2020, an increase of ~~$1.23 billion, or 71.8 percent,~~$169.8 million from ~~$1.71 billion~~$10.0 million at December 31, ~~2018.~~2019. The ~~decrease~~increase between periods ~~is primarily~~ related to ~~the aforementioned $1.16 billion reduction~~brokered time deposits as we took advantage of attractive pricing in ~~higher cost brokered certificates~~that market to reduce some of our remaining higher-cost interest bearing deposits.

The following table presents the scheduled maturities of certificates of deposit as of June 30, ~~2019:~~

2020:


($ in thousands)	Three Months or Less		Over Three Months Through Six Months		Over Six Months Through Twelve Months		Over One Year		Total		($ in thousands)	Three Months or Less		Over Three Months Through Six Months		Over Six Months Through Twelve Months		Over One Year		Total
Certificates of deposit of $250,000 or less	$	410,842	$	215,937	$	318,964	$	180,309	$	1,126,052	Certificates of deposit of $250,000 or less	$	222,856	$	169,487	$	150,881	$	42,090	$	585,314
Certificates of deposit of more than $250,000	324,211		147,467		189,731		71,170		732,579		Certificates of deposit of more than $250,000	211,569		193,671		60,687		43,150		509,077
Total certificates of deposit	$	735,053	$	363,404	$	508,695	$	251,479	$	1,858,631	Total certificates of deposit	$	434,425	$	363,158	$	211,568	$	85,240	$	1,094,391

Borrowings

~~The Company utilizes FHLB~~We utilized Federal Home Loan Bank (“FHLB”) advances ~~and securities sold under repurchase agreements~~ to leverage ~~its~~our capital base, to provide funds for ~~its~~ lending and investing activities, as a source of liquidity, and to enhance ~~its~~ interest rate risk management. ~~The Company~~We also ~~maintains~~maintained additional borrowing availabilities from Federal Reserve Discount Window and unsecured federal funds lines of credit.

Advances from the ~~Federal Home Loan Bank (“FHLB”) increased $305.0~~FHLB decreased $577.8 million, or ~~20.1%~~48.4%, to ~~$1.8 billion~~$617.2 million as of June 30, ~~2019, as a result~~2020, due to repayment of $447.0 million in short-term and overnight advances with the FHLB ~~that we plan to pay down with~~and $124.0 million in maturities and early repayments of long-term advances. During the ~~proceeds from the sale of loans sold into the Freddie Mac multifamily securitization which is expected to close in the third quarter. As of~~three months ended June 30, ~~2019, the maturity dates~~2020, we repaid a $100.0 million FHLB long-term advance with a weighted average interest rate of 2.07% and incurred a $2.5 million extinguishment fee. Additionally, in June 2020 we refinanced $111.0 million of FHLB term advances ~~consisted~~to take advantage of ~~$645.0 million~~the rapid decline in market interest rates. As a result of this refinancing, our weighted average effective interest rate on such FHLB term advances changed from 2.81% to 2.02% and the weighted average life extended from 2.52 years to 5.18 years.

At June 30, 2020, FHLB advances included 0 overnight ~~$400.0~~borrowings, $58.0 million maturing ~~in 3~~within three months, ~~or less,~~ and ~~$780.0~~$566.0 million maturing beyond ~~3 months. As~~three months with a weighted average life of ~~the end of the quarter, the overnight advance~~4.1 years and weighted average interest rate ~~was 2.52%~~of 2.39%. ~~The Company~~

We did not utilize repurchase agreements at June 30, ~~2019~~2020 or December 31, ~~2018.~~2019.

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For additional information, see Note 86 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

~~Long Term~~Long-term Debt

The following table presents ~~the Company's long term~~our long-term debt as of the dates indicated:


	June 30, 2019					December 31, 2018						June 30, 2020						December 31, 2019
($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount			Par Value		Unamortized Debt Issuance Cost and Discount			($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount

5.25% senior notes due April 15, 2025	$	175,000	$	(1,743	)	$	175,000	$	(1,826	)	5.25% senior notes due April 15, 2025	$	175,000	$	(1,463)	$	175,000	$	(1,579)

Total	$	175,000	$	(1,743	)	$	175,000	$	(1,826	)	Total	$	175,000	$	(1,463)	$	175,000	$	(1,579)

~~For additional information, see Note 9 to Consolidated Financial Statements (unaudited) included Part I of this Quarterly Report on Form 10-Q.~~

~~Reserve for Unfunded Loan Commitments~~

~~The Company maintains a reserve for unfunded loan commitments~~We were in compliance with all covenants under our 5.25% senior notes due April 15, 2025 at a level that is considered adequate to cover the estimated and known inherent risks. The probability of usage of the unfunded loan commitments and credit risk factors are determined based on outstanding loans that share similar credit risk exposure. As of June 30, 2019 and December 31, 2018, the reserve for unfunded loan commitments was $4.3 million and $4.6 million, respectively. The decrease was mainly due to a reduction in expected utilization of unfunded loan commitments.2020.

~~The following table presents a summary of activity in the reserve for unfunded loan commitments for the periods indicated:~~

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2019 2018 2019 2018
Balance at beginning of period $ 4,208
$ 4,293
$ 4,622
$ 3,716
(Reversal of) provision for unfunded loan commitments 87
(262 ) (327 ) 315
Balance at end of period $ 4,295
$ 4,031
$ 4,295
$ 4,031

Liquidity Management

~~The Company is~~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, ~~the Company has~~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.

As a result of current economic conditions, including government stimulus in response to the pandemic, the Company has participated in the elevated levels of liquidity in the marketplace. A portion of the additional liquidity is viewed as short-term as it is expected to be used by clients in the near term and, accordingly, the Company has maintained higher levels of liquid assets. We have not observed a change in the level of clients' credit line usage and as the Bank's PPP loans are expected to be forgiven over the next 9 to 12 months, we expect additional liquidity that will likely be used to lower wholesale funding as it matures.

Banc of California, N.A.

During the second quarter of 2020, we expanded our existing secured borrowing capacity with the Federal Reserve by participating in its Borrower-in-Custody (“BIC”) program. As a result, our borrowing capacity with the Federal Reserve increased to $370.4 million at June 30, 2020. Prior to participating in the BIC program, the Bank had only pledged certain securities as collateral for access to the discount window. At June 30, 2020, the Bank has pledged certain qualifying loans with an unpaid principal balance of $870.1 million and securities with a carrying value of $23.0 million as collateral for this line of credit. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under this arrangement for the three and six months ended June 30, 2020 and 2019.

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 and investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and investment securities, and maturing investment securities and 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. In addition, the Bank invests excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. The Bank also generates cash through borrowings. The Bank mainly utilizes FHLB advances from pre-established secured lines of credit and securities sold under repurchase agreements to leverage its capital base, to provide funds for its lending activities, as a source of liquidity, and to enhance its interest rate risk management. The Bank also has the ability to obtain brokered deposits and collect deposits through its wholesale and treasury ~~operations.~~operations as well as secured borrowings advances through the Federal Reserve BIC program. Liquidity management is both a daily and long-term function of business management. Any excess liquidity is typically invested in federal funds or investment securities. On a longer-term basis, the Bank maintains a strategy of investing in various lending products. The Bank uses its sources of funds primarily to meet its ongoing loan and other commitments, and to pay maturing certificates of deposit and savings withdrawals.

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Banc of California, Inc.

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 ~~the~~ 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. ~~At June 30, 2019, the Bank had $37.9 million available to pay dividends to Banc of California, Inc. without prior OCC approval.~~ However, any dividend paid by the Bank would be limited by the need to maintain its ~~well capitalized~~well-capitalized status plus the capital buffer in order to avoid additional dividend ~~restrictions.~~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 six months ended June 30, ~~2019,~~2020, the Bank paid ~~dividends~~$25.0 million of ~~$54.0 million~~dividends to Banc of California, Inc. At June 30, ~~2019,~~2020, Banc of California, Inc. had ~~$59.4~~$61.1 million in cash, all of which was on deposit at the Bank. ~~In connection~~

On February 10, 2020, we announced that our Board of Directors authorized the repurchase of up to $45 million of our common stock. The repurchase authorization expires in February 2021, however given current macroeconomic conditions and the COVID-19 pandemic, we have suspended common stock repurchases for the immediate future. There were no repurchases of common stock for the three months ended June 30, 2020. During the six months ended June 30, 2020, we repurchased 827,584 shares of common stock at a weighted average price of $14.50 per share and an aggregate amount of $12.0 million. 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 ~~Company’s recently announced tender offer for~~regulations of the Securities and Exchange Commission. 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 June 30, 2020, we repurchased depositary shares representing shares of ~~its~~our Series D and Series E preferred ~~stock~~stock. The aggregate total consideration for ~~up to $75~~each Series D Depositary Share purchased was $1.2 million. The aggregate total consideration for each Series E Depositary Share purchased was $1.4 million. The $49 thousand difference between the consideration paid and the $2.7 million in aggregate ~~purchase price, the OCC has approved a dividend of $88.5 million from the Bank to Banc of California, Inc. to be declared and paid in the third quarter of 2019 to fund repurchases~~carrying value of the ~~Company’s capital stock~~Series D Preferred Stock and ~~support anticipated interest expense~~Series E Preferred Stock was reclassified to retained earnings and ~~operating costs through year-end 2019. The proposed dividend will exceed~~resulted in an increase to net income allocated to common stockholders.

During the ~~bank’s eligible amount pursuant to 12 USC 60, as of~~six months ended June 30, ~~2019. In exceeding~~2020, we repurchased depositary shares representing shares of our Series D and Series E preferred stock. The aggregate total consideration for the ~~eligible amount, any future dividend declarations will require prior OCC approval.~~Series D depositary shares purchased was $2.7 million. The aggregate total consideration for the Series E depositary shares purchased was $1.5 million. The $575 thousand difference between the consideration paid and the $4.8 million aggregate carrying value of the Series D Preferred Stock and Series E Preferred Stock was reclassified to retained earnings and resulted in an increase to net income allocated to common stockholders.

On a consolidated basis, ~~the Company~~we maintained ~~$313.9~~$420.6 million of cash and cash equivalents, which was ~~3.4 percent~~5.4% of total assets at June 30, ~~2019. The Company's~~2020. Our cash and cash equivalents ~~decreased~~increased by ~~$77.7~~$47.2 million, or ~~19.9 percent,~~12.6%, from ~~$391.6~~$373.5 million, or ~~3.7 percent~~4.8% of total assets, at December 31, ~~2018.~~2019. The ~~decrease~~increase was mainly due to the ~~decrease~~increase in deposits and runoff of our legacy single family residential mortgage portfolio, offset by reductions in FHLB advances, offset by sales of investment securities and loans. The Company has benefited from completion during late 2018 of its exit from high-rate and high-volatility institutional deposits and reduced the reliance on brokered deposits by replacing them with core deposits to fund new loan originations. During the three months ended June 30, 2019, the Company also strategically decreased its securities portfolio to navigate a volatile rate environment by completing the sale of its entire commercial mortgage-backed securities portfolio and reducing its collateralized loan obligations exposure by selling $279.2 million of these investments resulting in no gain or loss. All of these strategic actions were taken in order to expand core lending activities across the organization and reduce its reliance on higher costing brokered certificates of deposit and FHLB advances, while attempting to reduce risk on the Company's balance sheet.advances.

At June 30, ~~2019, the Company~~2020, we had available unused secured borrowing capacities of ~~$942.6~~$1.06 billion from the FHLB and $370.4 million from ~~FHLB and $21.0 million from~~the Federal Reserve, ~~Discount Window,~~ as well as $185.0 million from ~~unused~~ unsecured federal funds lines of credit. ~~The Company~~We also maintained repurchase agreements ~~and had no~~of which none were outstanding ~~securities sold under repurchase agreements~~ at June 30, ~~2019.~~2020. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and pledging additional investment securities. ~~The Company~~We also had unpledged securities available-for-sale of ~~$1.27~~$1.13 billion at June 30, ~~2019. On February 14, 2019, the Company entered into a new line of credit for $15.0 million, which bears interest at LIBOR plus 2.00% and has a maturity date of February 13,~~ 2020.

~~The Company believes~~We believe that ~~its~~our liquidity sources are stable and are adequate to meet ~~its~~our day-to-day cash flow ~~requirements. As~~requirements as of June 30, ~~2019,~~2020. However, in light of the ~~Company believes that there are no events, uncertainties, material commitments, or~~ongoing COVID-19 pandemic, we cannot predict at this time the extent to which the pandemic will negatively affect our business, financial condition, liquidity, capital ~~expenditures that were reasonably likely~~and results of operations. For a discussion of the related risk factors, please refer to ~~have a material effect~~Part II, Item 1A. "Risk Factors" in our Quarterly Report on ~~its liquidity position.~~Form 10-Q for the quarter ended March 31, 2020.

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Commitments and Contractual Obligations

The following table presents ~~the Company’s~~our commitments and contractual obligations as of June 30, ~~2019:~~

2020:


	Commitments and Contractual Obligations											Commitments and Contractual Obligations
($ in thousands)	Total Amount Committed		Within Than One Year		More Than One Year Through Three Years		More Than Three Year Through Five Years		Over Five Years		($ in thousands)	Total Amount Committed		Within One Year		More Than One Year Through Three Years		More Than Three Year Through Five Years		Over Five Years
Commitments to extend credit	$	247,495	$	70,337	$	141,269	$	4,051	$	31,838	Commitments to extend credit	$	80,093	$	36,078	$	36,785	$	1,842	$	5,388
Unused lines of credit	905,115		662,026		93,301		40,223		109,565		Unused lines of credit	1,392,215		1,225,270		70,385		52,710		43,850
Standby letters of credit	10,249		7,545		2,152		157		395		Standby letters of credit	3,579		3,258		210		111		—
Total commitments	$	1,162,859	$	739,908	$	236,722	$	44,431	$	141,798	Total commitments	$	1,475,887	$	1,264,606	$	107,380	$	54,663	$	49,238
FHLB advances	$	1,825,000	$	1,169,000	$	291,000	$	65,000	$	300,000	FHLB advances	$	624,000	$	213,000	$	—	$	291,000	$	120,000

Long-term debt	173,257		—		—		—		173,257		Long-term debt	175,000		—		—		175,000		—
Operating and capital lease obligations	28,469		6,698		14,381		3,262		4,128		Operating and capital lease obligations	23,274		6,461		6,787		3,805		6,221
Certificate of deposits	1,858,631		1,607,151		244,719		6,761		—		Certificate of deposits	1,094,391		1,009,151		80,783		4,457		—
Total contractual obligations	$	3,885,357	$	2,782,849	$	550,100	$	75,023	$	477,385	Total contractual obligations	$	1,916,665	$	1,228,612	$	87,570	$	474,262	$	126,221

During the three months ended March 31, 2017, the Bank entered into certain definitive agreements which grant the Bank the exclusive naming rights to Banc of California Stadium, a soccer stadium of LAFC, as well as the right to be the official bank of LAFC. In exchange for the Bank’s rights as set forth in the agreements, the Bank agreed to pay LAFC $100.0 million over a

period of 15 years, beginning in 2017 and ending in 2032. The advertising benefits of such rights are amortized on a straight-line basis and recorded as advertising and promotion expense beginning in 2018. As of June 30, 2019, the Bank has paid $18.0 million of the $100.0 million commitment. The prepaid commitment balance, net of amortization, was $8.0 million as of June 30, 2019, which was recognized as a prepaid asset and included in Other Assets in the Consolidated Statements of Financial Condition. See Note 18 of Notes to Consolidated Financial Statements (unaudited) for additional information.

At June 30, ~~2019, the Company~~2020, we had unfunded commitments of ~~$11.1~~$20.5 million, ~~$7.6~~$7.1 million, and ~~$4.3 million~~$501 thousand for affordable housing fund investments, SBIC investments, and other investments, including investments in alternative energy partnerships, respectively.

Capital

In order to maintain adequate levels of capital, ~~the Company~~we continuously ~~assesses~~assess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. ~~The Company considers,~~We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, ~~the Company performs~~we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on ~~the Company's~~our capital base.

Regulatory Capital

The Company and the Bank are subject to the regulatory capital adequacy guidelines that are established by the Federal banking regulators. In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel III and to address relevant provisions of the Dodd-Frank Act. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. The Company and the Bank became subject to the new rule on January 1, 2015 and certain provisions of the new rule were phased in through January 1, 2019. Inclusive of the fully phased-in capital conservation buffer, the 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.

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The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:


					Minimum Capital Requirements						Minimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2020
Banc of California, Inc.
Total risk-based capital	$	884,558	16.35	%	$	432,780	8.00	%	N/A		N/A
Tier 1 risk-based capital	816,655		15.10	%	324,585		6.00	%	N/A		N/A
Common equity tier 1 capital	631,618		11.68	%	243,439		4.50	%	N/A		N/A
Tier 1 leverage	816,655		10.56	%	309,388		4.00	%	N/A		N/A
Banc of California, NA
Total risk-based capital	$	981,477	18.17	%	$	432,124	8.00	%	$	540,155	10.00	%
Tier 1 risk-based capital	913,785		16.92	%	324,093		6.00	%	432,124		8.00	%
Common equity tier 1 capital	913,785		16.92	%	243,070		4.50	%	351,100		6.50	%
Tier 1 leverage	913,785		11.84	%	308,586		4.00	%	385,732		5.00	%
December 31, 2019
Banc of California, Inc.
Total risk-based capital	$	921,892	15.90	%	$	463,950	8.00	%	N/A		N/A
Tier 1 risk-based capital	860,179		14.83	%	347,963		6.00	%	N/A		N/A
Common equity tier 1 capital	670,355		11.56	%	260,972		4.50	%	N/A		N/A
Tier 1 leverage	860,179		10.89	%	315,825		4.00	%	N/A		N/A
Banc of California, NA
Total risk-based capital	$	1,007,762	17.46	%	$	461,843	8.00	%	$	577,304	10.00	%
Tier 1 risk-based capital	946,049		16.39	%	346,382		6.00	%	461,843		8.00	%
Common equity tier 1 capital	946,049		16.39	%	259,787		4.50	%	375,247		6.50	%
Tier 1 leverage	946,049		12.02	%	314,707		4.00	%	393,383		5.00	%

Minimum Capital Requirements Minimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands) Amount Ratio Amount Ratio Amount Ratio
June 30, 2019
Banc of California, Inc.
Total risk-based capital $ 983,254
15.00 % $ 524,366
8.00 % N/A
N/A
Tier 1 risk-based capital 919,436
14.03 % 393,274
6.00 % N/A
N/A
Common equity tier 1 capital 688,308
10.50 % 294,956
4.50 % N/A
N/A
Tier 1 leverage 919,436
9.62 % 382,152
4.00 % N/A
N/A
Banc of California, NA
Total risk-based capital $ 1,094,864
16.70 % $ 524,349
8.00 % $ 655,436
10.00 %
Tier 1 risk-based capital 1,031,046
15.73 % 393,262
6.00 % 524,349
8.00 %
Common equity tier 1 capital 1,031,046
15.73 % 294,946
4.50 % 426,033
6.50 %
Tier 1 leverage 1,031,046
10.80 % 381,907
4.00 % 477,384
5.00 %
December 31, 2018
Banc of California, Inc.
Total risk-based capital $ 977,342
13.71 % $ 570,368
8.00 % N/A
N/A
Tier 1 risk-based capital 910,528
12.77 % 427,776
6.00 % N/A
N/A
Common equity tier 1 capital 679,400
9.53 % 320,832
4.50 % N/A
N/A
Tier 1 leverage 910,528
8.95 % 407,145
4.00 % N/A
N/A
Banc of California, NA
Total risk-based capital $ 1,120,122
15.71 % $ 570,832
8.00 % $ 712,977
10.00 %
Tier 1 risk-based capital 1,053,308
14.77 % 427,786
6.00 % 570,382
8.00 %
Common equity tier 1 capital 1,053,308
14.77 % 320,840
4.50 % 463,435
6.50 %
Tier 1 leverage 1,053,308
10.36 % 406,694
4.00 % 508,368
5.00 %

Dividend Restrictions

~~Pursuant to the Dodd-Frank Act and regulations adopted~~Payment of dividends by the ~~federal banking regulators,~~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. Because the Company’s current and, ~~banks with average total consolidated assets greater than $10 billion were required~~for the near term, future quarterly dividends are expected to ~~conduct an annual “stress test”~~exceed the applicable quarterly net earnings, payment of capital and consolidated earnings and losses under the baseline, adverse and severely adverse scenarios provided by the federal banking regulators. On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”) was signed into law, which amended portionsdividends in respect of the ~~Dodd-Frank Act~~Company’s common and ~~immediately raised the asset threshold for company-run stress testing from $10 billion to $100 billion for bank holding companies. As a result, the Company is no longer~~preferred stock will be subject to prior consultation and non-objection from the Dodd-Frank Act company-run stress testing requirements. On July 6, 2018, the federal banking regulators issued an interagency statement that banks with less than $100 billion in total consolidated assets, including the Bank, would not be required to comply with company-run stress testing requirements until November 25, 2019, at which time such banks will become exempt from company-run stress testing requirements under the Economic Growth Act. In addition, the federal banking regulators have each proposed to amend their stress testing regulations consistent with the Economic Growth Act. The federal banking regulators noted in their July 6, 2018 interagency statement that the capital planning and risk management practices of banks with assets less than $100 billion will continue to be reviewed through the regular supervisory process.Federal Reserve.

~~Dividend Restrictions~~

~~The Company’s~~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. ~~At June 30, 2019, the Bank had $37.9 million available to pay dividends to the Company without prior OCC approval. However,~~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. ~~In addition~~As described below, any near term dividend by the Bank will require OCC approval. During the three and six months ended June 30, 2020, the Bank received approval from the OCC and paid $25.0 million in dividends to ~~dividends on its preferred stock,~~Banc of California, Inc.

During the ~~Company~~three and six months ended June 30, 2020, we declared and paid dividends on ~~its~~our common stock of $0.06 and $0.12 per share ~~for the three months ended June 30, 2019. During~~in addition to dividends on our preferred stock. Last year, in April 2019, ~~the Company’s~~our Board of Directors approved a plan to reduce the quarterly dividend from $0.13 to $0.06 per common share. ~~The Bank paid dividends~~

Table of $54.0 million to Banc of California, Inc. during the six months ended June 30, 2019. In connection with the Company’s recently announced tender offer for the depositary shares representing shares of its Series D and Series E preferred stock for up to $75 million in aggregate purchase price, the OCC has approved a dividend of $88.5 million from the Bank to Banc of California, Inc. to be declared and paid in the third quarter of 2019 to fund repurchases of the Company’s capital stock and support anticipated interest expense and operating costs through year-end 2019. The proposed dividend will exceed the bank’s eligible amount pursuant to 12 USC 60, as of June 30, 2019. In exceeding the eligible amount, any future dividend declarations will require prior OCC approval.Contents

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)~~(“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,~~(“Board ALCO”, together with Management ALCO, ~~ALCOs)~~“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 spreads, interest rate sensitivity and liquidity needs, while the ALCOs monitor adherence to those guidelines. 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 ~~periodically~~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 net present 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:

•Originating and purchasing adjustable rate mortgage loans,

•Selling longer duration fixed or hybrid mortgage loans,

•Originating shorter-term consumer loans,

•Managing the duration of investment securities,

•Managing our deposits to establish stable deposit relationships,

•Using FHLB advances and/or certain derivatives such as swaps to align maturities and repricing terms, and

•Managing the percentage of fixed rate loans in our portfolio.

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 ~~the Company’s~~our interest rate risk position within the asset/liability tolerance set forth by ~~the Company's~~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 market value of portfolio equity, which is defined as the net present value of an institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity.

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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 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. Board ALCO 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 the 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 market value of assets minus the market value of liabilities. Asset liability management uses this value to measure the changes in the economic value of the Bank 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 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 June 30, 2020, our interest rate risk profile reflects an “asset sensitive” position. 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 from those predicted by our model.

The following table presents the projected change in the Bank’s ~~net portfolio~~economic value of equity at June 30, ~~2019~~2020 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change:

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	Change in Interest Rates in Basis Points (bps) ⁽¹⁾															Change in Interest Rates in Basis Points (bps) ⁽¹⁾
($ in thousands)	Economic Value of Equity							Net Interest Income							($ in thousands)	Economic Value of Equity															Net Interest Income
	Amount		Amount Change			Percentage Change		Amount		Amount Change			Percentage Change					Amount			Amount Change			Percentage Change			Amount			Amount Change			Percentage Change
June 30, 2019
June 30, 2020															June 30, 2020
+200 bps	$	950,343	$	(81,382	)	(7.9	)%	$	248,094	$	(5,222	)	(2.1	)%	+200 bps	$	1,332,616		$	196,900		17.3	%		$	222,391		$	14,467		7.0	%
+100 bps	993,723		(38,002		)	(3.7	)%	250,850		(2,466		)	(1.0	)%	+100 bps	1,249,336			113,620			10.0	%		215,258			7,334			3.5	%
0 bp	1,031,725							253,316
0 bps															0 bps	1,135,716									207,924
-100 bps	1,063,721		31,996			3.1	%	255,645		2,329			0.9	%	-100 bps	1,024,455			(111,261)			(9.8)	%		205,107			(2,817)			(1.4)	%


~~(1)~~	~~Assumes an instantaneous uniform change in interest rates at all maturities.~~

(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.

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.

Interest rate risk is the most significant market risk affecting ~~the Company.~~us. Other types of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of ~~the Company’s~~our business activities and operations.

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 June 30, ~~2019~~2020 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 June 30, ~~2019,~~2020, 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 June 30, ~~2019~~2020 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 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 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 the 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.

Table of Contents

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.

On January 23, 2017, the first of three putative class action lawsuits, Garcia v. Banc of California, Inc. et al., Case No. 8:17-cv-00118, was filed against Banc of California, James J. McKinney, Ronald J. Nicolas, Jr., and Steven A. Sugarman in the United States District Court for the Central District of California. Thereafter, two related putative class action lawsuits were filed in the United States District Court for the Central District of California: (1) Malak v. Banc of California, Inc. et al., Case No. 8:17-cv-00138 (January 26, 2017), asserting claims against Banc of California, Inc., James J. McKinney, and Steven A. Sugarman, and (2) Cardona v. Banc of California, Inc. et al., Case No. 2:17-cv-00621 (January 26, 2017), asserting claims against Banc of California, Inc., James J. McKinney, Ronald J. Nicolas, Jr., and Steven A. Sugarman. Those actions were consolidated, a lead plaintiff was appointed, and the lead plaintiff filed a Consolidated Amended Complaint against Banc of California, Inc., Steve A. Sugarman and James J. McKinney on May 31, 2017 alleging that the defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

In general, the Consolidated Amended Complaint alleges that the purported concealment of the defendants’ alleged relationship with Jason Galanis caused various statements made by the defendants to be false and misleading. The defendants moved to dismiss the Consolidated Amended Complaint. The plaintiff thereafter dismissed Mr. McKinney, leaving the Company and Mr. Sugarman as the remaining defendants. On September 18, 2017, the district court granted in part and denied in part the defendants’ motions to dismiss. Specifically, the court denied the defendants’ motions as to the Company’s April 15, 2016 Proxy Statement which listed Mr. Sugarman’s positions with COR Securities Holdings Inc., COR Clearing LLC, and COR Capital LLC while omitting their alleged connections with Jason Galanis. The action purports to be brought on behalf of stockholders who purchased stock in the Company between varying dates, inclusive of August 7, 2015 through January 23, 2017. Plaintiff seeks an award of unspecified compensatory and punitive damages, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Court may deem just and proper. On May 31, 2018, the court certified a class of shareholders who purchased Company stock between April 15, 2016 and January 20, 2017. Trial is currently set for February 18, 2020. The Company believes that the consolidated action is without merit and intends to vigorously contest it.

On August 15, 2017, COR Securities Holdings, Inc., and COR Clearing LLC filed an action in the United States District Court for the Central District of California, captioned COR Securities Holdings, Inc., et al. v. Banc of California, N.A., et al., Case No. 8:17-cv-01403 (DOC JCGx), against the Bank and Hugh F. Boyle, the Company’s and the Bank’s Chief Risk Officer. The lawsuit asserts claims under various state and federal statutes related to computer fraud and abuse, as well as a claim of common law fraud. The plaintiffs allege that the Bank inappropriately gained access to their confidential and privileged documents on a cloud storage site. The parties settled this action for an immaterial amount and it has been dismissed with prejudice.

On December 7, 2017, Heather Endresen filed an action in the Los Angeles Superior Court, captioned Heather Endresen v. Banc of California, Inc.; Banc of California, N.A., Case No. BC685641. Ms. Endresen’s complaint purports to state claims for retaliation, wrongful termination, breach of contract, breach of the implied covenant of good faith and fair dealing, and various statutory claims. Ms. Endresen dismissed the action without prejudice. On May 23, 2018, Ms. Endresen filed an action in the United States District Court for the Central District of California, captioned Heather Endresen v. Banc of California, Inc. and Banc of California, N.A., Case No. 8:18-cv-00899, asserting the claims she had made in the state court action and adding a claim for violation of the Sarbanes-Oxley Act. The complaint does not specify any amount of alleged damages. On August 22, 2018, Banc of California, Inc. and Banc of California, N.A. moved to compel arbitration of all of Ms. Endresen’s claims except for the Sarbanes-Oxley Act claim, pursuant to Ms. Endresen’s binding arbitration agreement. On September 20, 2018, the court granted the motion to compel arbitration and stayed the litigation on the Sarbanes-Oxley Act claim pending arbitration. Ms. Endresen has commenced arbitration. The Company believes that the claims are without merit and intends to vigorously contest them.

On April 2, 2019, the first of three shareholder derivative actions, Gordon v. Benett, No. 8:19-cv-621, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Gordon action asserts claims for breach of fiduciary duty against Halle J. Benett, Jonah Schnel, Jeffrey Karish, Robert Sznewajs, Eric Holoman, Chad Brownstein, Steven Sugarman, Richard Lashley, Douglas Bowers and John Grosvenor. On June 10, 2019, a second shareholder derivative action, Johnston v. Sznewajs, No. 8:19-cv-01152, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Johnston action asserts claims for breach of fiduciary duty and unjust enrichment against Robert Sznewajs, Jonah Schnel, Halle Benett, Richard Lashley, Steven Sugarman, John Grosvenor, Chad Brownstein, Jeffrey Karish and Eric Holoman. On June 18, 2019, a third shareholder derivative action, Witmer v. Sugarman, No. 19STCV21088, was filed against current and former officers and directors of Banc of California, Inc. in Los Angeles County Superior Court. The Witmer action asserts claims for breach of fiduciary duty, unjust enrichment and corporate waste against Steven Sugarman, Ronald Nicolas,

Jr., Robert Sznewajs, Chad Brownstein, Halle Benett, Douglas Bowers, Jeffrey Karish, Richard Lashley, Jonah ~~Schel,~~Schnel, Eric Holoman and Jeffrey Seabold. On June 24, 2019, the Witmer Action was removed to the United States District Court for the Central District of California and assigned docket number 2:19-cv-5488. ~~Although~~On September 23, 2019, the ~~parties have discussed~~Court, ordered that the ~~possible consolidation of these~~Gordon, Johnston, and Witmer actions ~~the actions have not yet been~~are consolidated ~~at the present time.~~for all purposes, including pre-trial proceedings and trial. On November 22, 2019, plaintiffs filed a consolidated complaint. The Company’s motion to dismiss is currently due on August 14, 2020.

In general, ~~all three shareholder derivative plaintiffs allege~~the consolidated complaint alleges that ~~the Company’s~~our board wrongfully refused demands that the plaintiffs made to ~~the Company’s~~our board of directors that ~~the Company~~we should initiate litigation against the various current and former officers and directors based on their alleged role in the purported concealment of the ~~Company’s~~Company's alleged relationship with Jason Galanis and various statements made by the Company alleged to be false and misleading. The plaintiffs seek an unspecified amount of damages to be paid to the Company, adoption of corporate governance reforms, and equitable and injunctive relief. ~~The Company does~~We do not believe that the demands made by these shareholder derivative plaintiffs were wrongfully refused, and ~~it intends~~we intend to vigorously contest these actions on that basis.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors that appeared under ~~“Part~~Part I, Item 1A. ~~Risk~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019 and Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Table of Contents

Purchase of Equity Securities by the Issuer
Total Number of Shares Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Total Number of Shares That May Yet be Purchased Under the Plan
From April 1, 2019 to April 30, 2019 49,009
$ 14.07
—
—
From May 1, 2019 to May 31, 2019 2,843
$ 13.45
—
—
From June 1, 2019 to June 30, 2019 5,114
$ 13.63
—
—
Total 56,966
$ 14.00
—


	Purchase of Equity Securities by the Issuer
	Total Number of Shares	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Total Number of Shares That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2020 to April 30, 2020	47,939	$	8.19	—	—
From May 1, 2020 to May 31, 2020	2,188	$	11.40	—	—
From June 1, 2020 to June 30, 2020	7,610	$	10.62	—	—
Total	57,737	$	8.63	—	—

Preferred Stock (Depositary Shares):
From April 1, 2020 to April 30, 2020	94,813	$	23.39	—	—
From May 1, 2020 to May 31, 2020	12,269	$	24.80	—	—
From June 1, 2020 to June 30, 2020	2,989	$	24.97	—	—
Total	110,071	$	23.59	—	—

During the three months ended June 30, ~~2019,~~2020, purchases of shares of common stock related to shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under ~~the Company's~~our employee stock benefit plans. There were no purchases of shares of common stock during the three months ended June 30, 2020 related to the Company's previously announced stock repurchase program discussed below.

On February 10, 2020, we announced a repurchase program of up to $45 million of our common stock. The repurchase authorization expires in February 2021. 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 Securities and Exchange Commission. 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

~~Rita H. Dailey’s, EVP, Head~~None

Table of ~~Deposits & Products, employment with the Company terminated effective August 5, 2019.~~Contents

ITEM 6 - EXHIBITS



~~2.3~~		Asset Purchase Agreement, dated February 28, 2017, by and between Banc of California, N. A. and Caliber Home Loans, Inc. (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 5, 2017 and incorporated herein by reference.)
~~2.4~~3.1		Bulk Servicing Rights Purchase and Sale Agreement, dated February 28, 2017, by and between Banc of California, N. A. and Caliber Home Loans, Inc. (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 5, 2017 and incorporated herein by reference.)
~~3.1~~	Second Articles of Restatement of the charter of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 5, 2018 and incorporated herein by reference.)
3.2		Fifth Amended and Restated Bylaws of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 30, 2017 and incorporated herein by reference.)
~~4.1~~









10.1		~~Warrant to purchase up to 1,395,000 shares~~Amendment and Termination of the Registrant common stock originally issued on November 1, 2010 (Filed as an exhibit to the Registrant’s Current Report on Form 8-K/A filed on November 16, 2010 and incorporated herein by reference.)LAFC-Banc of California Agreements dated May 22, 2020
~~4.2~~31.1		Senior Debt Securities Indenture, dated as of April 23, 2012, between the Registrant and U.S. Bank National Association, as Trustee (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on April 23, 2012 and incorporated herein by reference.)
~~4.3~~	Supplemental Indenture, dated as of April 23, 2012, between the Registrant and U.S. Bank National Association, as Trustee, relating to the Registrant’s 7.50% Senior Notes due April 15, 2020 and form of 7.50% Senior Notes due April 15, 2020 (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on April 23, 2012 and incorporated herein by reference.)
~~4.4~~	Second Supplemental Indenture, dated as of April 6, 2015, between the Registrant and U.S. Bank National Association, as Trustee, relating to the Registrant’s 5.25% Senior Notes due April 15, 2025 and form of 5.25% Senior Notes due April 15, 2025 (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 6, 2015 and incorporated herein by reference.)
~~4.5~~	Deposit Agreement, dated as of June 12, 2013, among the Registrant, Registrar and Transfer Company, as Depositary and the holders from time to time of the depositary receipts described therein (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 12, 2013 and incorporated herein by reference.)
~~4.6~~	Deposit Agreement, dated as of April 8, 2015, among the Registrant, Computershare Inc. and Computershare Trust Company, N.A., collectively as Depositary, and the holders from time to time of the depositary receipts described therein (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 8, 2015 and incorporated herein by reference.)
~~4.7~~	Purchase Contract Agreement, dated May 21, 2014, between the Company and U.S. Bank National Association (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 21, 2014 and incorporated herein by reference.)
~~4.8~~	Indenture, dated May 21, 2014, between the Company and U.S. Bank National Association (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 21, 2014 and incorporated herein by reference.)
~~4.9~~	First Supplemental Indenture, dated May 21, 2014, between the Company and U.S. Bank National Association relating to the Registrant's 8% Tangible Equity Units due May 15, 2017 (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 21, 2014 and incorporated herein by reference.)
~~4.10~~	Deposit Agreement, dated as of February 8, 2016, among the Registrant, Computershare Inc. and Computershare Trust Company, N.A., collectively as Depositary, and the holders from time to time of the depositary receipts described therein. (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 8, 2016 and incorporated herein by reference.)
~~10.1~~	~~Executive Incentive Compensation Plan, effective as of April 29, 2019 (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on May 2, 2019 and incorporated herein by reference.)~~
~~10.2~~	~~Separation Agreement, effective as of May 1, 2019, by and between the Registrant and Angelee Harris~~
~~31.1~~	Rule 13a-14(a) Certification (Principal Executive Officer)
31.2		Rule 13a-14(a) Certification (Principal Financial Officer)
32.0		Rule 13a-14(b) and 18 U.S.C. 1350 Certification
101.0		The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2019~~2020 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of ~~Income;~~Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (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.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Table of Contents

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:		August 7, 2020	~~BANC OF CALIFORNIA, INC.~~

~~Date:~~	~~August 9, 2019~~	/s/ Jared Wolff
			Jared Wolff
			President/Chief Executive Officer (Principal Executive Officer)

Date:		August ~~9, 2019~~7, 2020	/s/ ~~John A. Bogler~~Lynn M. Hopkins
			~~John A. Bogler~~Lynn M. Hopkins
			Executive Vice President/Chief Financial Officer (Principal Financial Officer)

~~Date:~~



Date:		August ~~9, 2019~~7, 2020	/s/ Mike Smith
			Mike Smith
			Senior Vice President/Chief Accounting Officer ~~and Director of Treasury~~ (Principal Accounting Officer)



($ in thousands)	June 30, 2019
Operating Leases:
Operating lease right-of-use assets	$	24,118
Operating lease liabilities	25,457



($ in thousands)	Operating Leases
Remainder of 2019	$	3,325
2020	6,590
2021	4,827
2022	3,250
2023	2,440
2024	1,568
Thereafter	6,338
Total lease payments	28,338
Less: present value discount	(2,881		)
Total Lease Liability	$	25,457



	Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
($ in thousands except per share data)	Common Stock			Class B Common Stock			Total			Common Stock			Class B Common Stock			Total
Income from continuing operations	$	13,709		$	145		$	13,854		$	20,713		$	215		$	20,928
Less: income allocated to participating securities	(85		)	(1		)	(86		)	—			—			—
Less: participating securities dividends	(201		)	(2		)	(203		)	(402		)	(4		)	(406		)
Less: preferred stock dividends	(5,059		)	(54		)	(5,113		)	(10,121		)	(105		)	(10,226		)
Income from continuing operations allocated to common stockholders	8,364			88			8,452			10,190			106			10,296
Income from discontinued operations	916			10			926			2,385			25			2,410
Net income allocated to common stockholders	$	9,280		$	98		$	9,378		$	12,575		$	131		$	12,706
Weighted average common shares outstanding	50,062,442			530,987			50,593,429			50,072,385			519,610			50,591,995
Dilutive effects of stock units	211,380			—			211,380			153,029			—			153,029
Dilutive effects of stock options	40,561			—			40,561			44,082			—			44,082
Dilutive effects of warrants	73,721			—			73,721			111,781			—			111,781
Average shares and dilutive common shares	50,388,104			530,987			50,919,091			50,381,277			519,610			50,900,887
Basic earnings per common share
Income from continuing operations	$	0.17		$	0.17		$	0.17		$	0.20		$	0.20		$	0.20
Income from discontinued operations	0.02			0.02			0.02			0.05			0.05			0.05
Net income	$	0.19		$	0.19		$	0.19		$	0.25		$	0.25		$	0.25
Diluted earnings per common share
Income from continuing operations	$	0.16		$	0.17		$	0.16		$	0.20		$	0.20		$	0.20
Income from discontinued operations	0.02			0.02			0.02			0.05			0.05			0.05
Net income	$	0.18		$	0.19		$	0.18		$	0.25		$	0.25		$	0.25



	Three Months Ended
	June 30, 2019							March 31, 2019							June 30, 2018
($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/Cost
Interest-earning assets:
Total loans⁽¹⁾	$	7,445,704		$	89,159	4.80	%	$	7,714,751		$	90,558	4.76	%	$	7,055,079		$	81,496	4.63	%
Securities	1,304,876			12,457		3.83	%	1,751,509			17,841		4.13	%	2,279,416			21,455		3.78	%
Other interest-earning assets ⁽²⁾	342,908			2,424		2.84	%	321,823			2,313		2.91	%	392,342			2,423		2.48	%
Total interest-earning assets	9,093,488			104,040		4.59	%	9,788,083			110,712		4.59	%	9,726,837			105,374		4.35	%
ALLL	(63,046		)					(61,924		)					(54,903		)
BOLI and non-interest earning assets ⁽³⁾	580,133							575,558							565,224
Total assets	$	9,610,575						$	10,301,717						$	10,237,158
Interest-bearing liabilities:
Savings	$	1,083,571		4,950		1.83	%	$	1,201,802		5,480		1.85	%	$	1,055,693		3,886		1.48	%
Interest-bearing checking	1,580,165			4,554		1.16	%	1,554,846			4,525		1.18	%	1,822,856			4,182		0.92	%
Money market	853,007			3,902		1.83	%	887,538			4,128		1.89	%	1,134,280			3,689		1.30	%
Certificates of deposit	2,537,060			15,192		2.40	%	2,982,980			17,310		2.35	%	2,079,932			8,558		1.65	%
Total interest-bearing deposits	6,053,803			28,598		1.89	%	6,627,166			31,443		1.92	%	6,092,761			20,315		1.34	%
FHLB advances	1,287,121			8,289		2.58	%	1,422,100			9,081		2.59	%	1,827,307			9,539		2.09	%
Securities sold under repurchase agreements	2,173			16		2.95	%	2,350			18		3.11	%	29,907			211		2.83	%
Long term debt and other interest-bearing liabilities	174,161			2,357		5.43	%	174,230			2,362		5.50	%	174,296			2,356		5.42	%
Total interest-bearing liabilities	7,517,258			39,260		2.09	%	8,225,846			42,904		2.12	%	8,124,271			32,421		1.60	%
Noninterest-bearing deposits	1,034,205							1,021,741							1,004,502
Non-interest-bearing liabilities	96,179							97,426							107,529
Total liabilities	8,647,642							9,345,013							9,236,302
Total stockholders’ equity	962,933							956,704							1,000,856
Total liabilities and stockholders’ equity	$	9,610,575						$	10,301,717						$	10,237,158
Net interest income/spread				$	64,780	2.50	%				$	67,808	2.47	%				$	72,953	2.75	%
Net interest margin ⁽⁴⁾						2.86	%						2.81	%						3.01	%