~~0001169770banc:RestrictedStockAndRestrictedStockUnitsMember2021-09-30~~

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 ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35522

BANC OF CALIFORNIA, INC.

(Exact name of registrant as specified in its charter)

Maryland

(State or other jurisdiction of

incorporation or organization)

04-3639825

(IRS Employer Identification No.)

3 MacArthur Place, Santa Ana, California

(Address of principal executive offices)

92707

(Zip Code)

(855) 361-2262

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☒☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

Table of Contents

Securities registered pursuant to Section 12(b) of the Act:

Title of each 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 7.00% 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 ~~November 1, 2021,~~May 5, 2022, the registrant had outstanding ~~62,180,037~~60,912,972 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

~~September 30, 2021~~March 31, 2022

Table of Contents


		Page

Part I – Financial Information		4

Item 1 –	Financial Statements	4

	Consolidated Statements of Financial Condition	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Comprehensive Income	76
	Consolidated Statements of Stockholders' Equity	87
	Consolidated Statements of Cash Flows	108
	Notes to Consolidated Financial Statements	119

Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4642

Item 3 –	Quantitative and Qualitative Disclosures About Market Risk	7971

Item 4 –	Controls and Procedures	8174

Part II – Other Information		8275

Item 1 –	Legal Proceedings	8275

Item 1A –	Risk Factors	8275

Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	8375

Item 3 –	Defaults Upon Senior Securities	8375

Item 4 –	Mine Safety Disclosures	8375

Item 5 –	Other Information	8375

Item 6 –	Exhibits	8476

Signatures		8577

Table of Contents

Forward-Looking Statements -

When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California, Inc. and its affiliates (“BANC,” the “Company”, “we”, “us” or “our”)~~, 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.the continuing effects of the COVID-19 pandemic and steps taken by governmental and other authorities to contain, mitigate and combat the pandemic on our business, operations, financial performance and prospects;

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

iii.the risk that we will not be successful in the implementation of our capital utilization strategy, new lines of business, new products and services, or other strategic ~~project~~ initiatives;

iv.risks that the Company’s merger and acquisition transactions, including its recent acquisition of Pacific Mercantile Bancorp, 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;

v.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 may lead to increased loan delinquencies, losses, and nonperforming assets in our loan portfolio, and may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves;

vi.the quality and composition of our securities portfolio;

vii.changes in general economic conditions, either nationally or in our market areas, including ~~the~~any impact of supply chain disruptions, or changes in financial markets;

viii.~~continuation of, or~~ changes in the ~~short-term~~ interest rate environment ~~changes in the~~and levels of general interest rates, ~~volatility~~including any anticipated increases by the FRB in its benchmark rate, the ~~interest rate environment,~~impacts of inflation, the relative differences between short- and long-term interest rates, deposit interest rates, and their impact on our net interest margin, tangible book value, and the cost of funding ~~sources;~~sources, including deposits;

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

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

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

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

xiii.our ability to control operating costs and expenses;

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

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

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

xvii.uncertainty regarding the expected discontinuation of the London Interbank Offered Rate (“LIBOR”) and the use of alternative reference rates;

xviii.failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including but not limited to, due to cybersecurity threats;

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

~~xix.~~xx.increased competitive pressures among financial services companies;

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

~~xxi.~~xxii.the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business;

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

~~xxiii.~~xxiv.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 standards;

~~xxiv.~~xxv.continuing impact of the Financial Accounting Standards Board’s credit loss accounting standard, referred to as Current Expected Credit Loss, 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;

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

~~xxvi.~~xxvii.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; and

~~xxvii.~~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, ~~2020.~~2021.

Further, statements about the potential effects of the Pacific Mercantile Bancorp ~~(“PMBC”)~~ acquisition on ~~the~~our business, financial results and condition ~~of BANC and its subsidiaries~~ 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 ~~the~~our control, ~~of BANC,~~ including (i) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which ~~BANC~~Banc of California, Inc. and ~~PMBC~~Pacific Mercantile Bancorp operate; (ii) the ability to promptly and effectively integrate the businesses of ~~BANC~~Banc of California, Inc. and ~~PMBC;~~Pacific Mercantile Bancorp; (iii) ~~the reaction to the transaction of the companies’ customers, employees and counterparties; (iv)~~ diversion of management time on integration-related issues; ~~(v)~~(iv) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and ~~(vi)~~(v) other risks that are described in ~~BANC’s~~Banc of California, Inc.’s public filings with the SEC.

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)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	31,594	$	38,330	Cash and due from banks	$	34,968	$	41,729
Interest-earning deposits in financial institutions	Interest-earning deposits in financial institutions	154,246		182,489		Interest-earning deposits in financial institutions	219,273		186,394
Total cash and cash equivalents	Total cash and cash equivalents	185,840		220,819		Total cash and cash equivalents	254,241		228,123

Securities held-to-maturity, at amortized cost (fair value of $310,952 at March 31, 2022)						Securities held-to-maturity, at amortized cost (fair value of $310,952 at March 31, 2022)	329,381		—
Securities available-for-sale, at fair value	Securities available-for-sale, at fair value	1,303,368		1,231,431		Securities available-for-sale, at fair value	898,775		1,315,703
Loans held-for-sale, carried at fair value		3,422		1,413

Loans receivable	Loans receivable	6,228,575		5,898,405		Loans receivable	7,451,573		7,251,480
Allowance for loan losses	Allowance for loan losses	(73,524)		(81,030)		Allowance for loan losses	(93,226)		(92,584)
Loans receivable, net	Loans receivable, net	6,155,051		5,817,375		Loans receivable, net	7,358,347		7,158,896
Federal Home Loan Bank and other bank stock, at cost	Federal Home Loan Bank and other bank stock, at cost	44,604		44,506		Federal Home Loan Bank and other bank stock, at cost	51,456		44,632

Premises and equipment, net	Premises and equipment, net	114,011		121,520		Premises and equipment, net	109,593		112,868
Bank owned life insurance	Bank owned life insurance	113,884		111,807		Bank owned life insurance	124,516		123,720
Operating lease right-of-use assets	Operating lease right-of-use assets	29,054		19,633		Operating lease right-of-use assets	34,189		35,442
Investments in alternative energy partnerships, net	Investments in alternative energy partnerships, net	25,196		27,977		Investments in alternative energy partnerships, net	25,156		25,888
Deferred income taxes, net	Deferred income taxes, net	40,659		45,957		Deferred income taxes, net	51,516		50,774

Income tax receivable						Income tax receivable	1,045		7,952
Goodwill	Goodwill	37,144		37,144		Goodwill	95,127		94,301
Other intangible assets, net	Other intangible assets, net	1,787		2,633		Other intangible assets, net	4,990		6,411

Other assets	Other assets	224,721		195,119		Other assets	245,208		189,033
Total assets	Total assets	$	8,278,741	$	7,877,334	Total assets	$	9,583,540	$	9,393,743
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	Noninterest-bearing deposits	$	2,107,709	$	1,559,248	Noninterest-bearing deposits	$	2,958,632	$	2,788,196
Interest-bearing deposits	Interest-bearing deposits	4,435,516		4,526,552		Interest-bearing deposits	4,521,069		4,651,239
Total deposits	Total deposits	6,543,225		6,085,800		Total deposits	7,479,701		7,439,435
Federal Home Loan Bank advances, net	Federal Home Loan Bank advances, net	405,738		539,795		Federal Home Loan Bank advances, net	556,374		476,059

Other borrowings	Other borrowings	100,000		—		Other borrowings	190,000		25,000
Long-term debt, net	Long-term debt, net	256,706		256,315		Long-term debt, net	274,468		274,386
Reserve for loss on repurchased loans	Reserve for loss on repurchased loans	5,023		5,515		Reserve for loss on repurchased loans	3,877		4,348

Operating lease liabilities	Operating lease liabilities	30,390		20,647		Operating lease liabilities	39,259		40,675

Accrued expenses and other liabilities	Accrued expenses and other liabilities	92,856		72,055		Accrued expenses and other liabilities	60,852		68,550
Total liabilities	Total liabilities	7,433,938		6,980,127		Total liabilities	8,604,531		8,328,453
Commitments and contingent liabilities	Commitments and contingent liabilities	0		0		Commitments and contingent liabilities	0		0
Preferred stock	Preferred stock	94,956		184,878		Preferred stock	—		94,956
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,732,060 shares issued and 50,321,096 shares outstanding at September 30, 2021; 52,178,453 shares issued and 49,767,489 shares outstanding at December 31, 2020		527		522
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 September 30, 2021 and at December 31, 2020		5		5
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 64,633,226 shares issued and 62,077,312 shares outstanding at March 31, 2022; 64,599,170 shares issued and 62,188,206 shares outstanding at December 31, 2021						Common stock, $0.01 par value per share, 446,863,844 shares authorized; 64,633,226 shares issued and 62,077,312 shares outstanding at March 31, 2022; 64,599,170 shares issued and 62,188,206 shares outstanding at December 31, 2021	646		646
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at March 31, 2022 and at December 31, 2021						Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at March 31, 2022 and at December 31, 2021	5		5
Additional paid-in capital	Additional paid-in capital	631,512		634,704		Additional paid-in capital	855,198		854,873
Retained earnings	Retained earnings	147,682		110,179		Retained earnings	187,457		147,894
Treasury stock, at cost (2,410,964 and 2,410,964 shares at September 30, 2021 and December 31, 2020)		(40,827)		(40,827)
Accumulated other comprehensive income, net		10,948		7,746
Treasury stock, at cost (2,555,914 and 2,410,964 shares at March 31, 2022 and December 31, 2021)						Treasury stock, at cost (2,555,914 and 2,410,964 shares at March 31, 2022 and December 31, 2021)	(45,125)		(40,827)
Accumulated other comprehensive (loss) income, net						Accumulated other comprehensive (loss) income, net	(19,172)		7,743
Total stockholders’ equity	Total stockholders’ equity	844,803		897,207		Total stockholders’ equity	979,009		1,065,290
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	8,278,741	$	7,877,334	Total liabilities and stockholders’ equity	$	9,583,540	$	9,393,743

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)


		Three Months Ended						Nine Months Ended September 30,					Three Months Ended
		September 30, 2021		June 30, 2021		September 30, 2020		2021		2020			March 31, 2022		December 31, 2021		March 31, 2021
Interest and dividend income	Interest and dividend income											Interest and dividend income
Loans, including fees	Loans, including fees	$	63,837	$	61,900	$	62,019	$	187,082	$	191,195	Loans, including fees	$	76,234	$	73,605	$	61,345
Securities	Securities	7,167		6,986		6,766		20,654		22,402		Securities	7,309		6,934		6,501
Other interest-earning assets	Other interest-earning assets	787		791		881		2,350		3,480		Other interest-earning assets	726		1,034		772
Total interest and dividend income	Total interest and dividend income	71,791		69,677		69,666		210,086		217,077		Total interest and dividend income	84,269		81,573		68,618
Interest expense	Interest expense											Interest expense
Deposits	Deposits	2,412		3,543		7,564		10,241		32,380		Deposits	1,388		2,072		4,286
Federal Home Loan Bank advances	Federal Home Loan Bank advances	2,990		2,944		3,860		9,046		14,561		Federal Home Loan Bank advances	2,953		2,977		3,112
Securities sold under repurchase agreements		—		—		2		—		4

Long-term debt and other interest-bearing liabilities	Long-term debt and other interest-bearing liabilities	3,413		3,343		2,385		10,060		7,101		Long-term debt and other interest-bearing liabilities	3,487		3,485		3,304
Total interest expense	Total interest expense	8,815		9,830		13,811		29,347		54,046		Total interest expense	7,828		8,534		10,702
Net interest income	Net interest income	62,976		59,847		55,855		180,739		163,031		Net interest income	76,441		73,039		57,916
(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	(1,147)		(2,154)		1,141		(4,408)		28,728		(Reversal of) provision for credit losses	(31,542)		11,262		(1,107)
Net interest income after (reversal of) provision for credit losses	Net interest income after (reversal of) provision for credit losses	64,123		62,001		54,714		185,147		134,303		Net interest income after (reversal of) provision for credit losses	107,983		61,777		59,023
Noninterest income	Noninterest income											Noninterest income
Customer service fees	Customer service fees	1,900		1,990		1,498		5,648		3,818		Customer service fees	2,434		2,037		1,758
Loan servicing income	Loan servicing income	170		38		186		476		356		Loan servicing income	212		119		268
Income from bank owned life insurance	Income from bank owned life insurance	715		690		629		2,077		1,798		Income from bank owned life insurance	796		794		672

Net gain on sale of securities available-for-sale	Net gain on sale of securities available-for-sale	—		—		—		—		2,011		Net gain on sale of securities available-for-sale	16		—		—
Fair value adjustment for loans held-for-sale		160		20		24		180		(1,537)

Net gain on sale of loans	Net gain on sale of loans	—		—		272		—		245		Net gain on sale of loans	—		275		—

Other income	Other income	2,574		1,432		1,345		5,689		4,852		Other income	2,452		1,635		1,683
Total noninterest income	Total noninterest income	5,519		4,170		3,954		14,070		11,543		Total noninterest income	5,910		4,860		4,381
Noninterest expense	Noninterest expense											Noninterest expense
Salaries and employee benefits	Salaries and employee benefits	24,786		25,042		23,277		75,547		70,973		Salaries and employee benefits	28,987		27,811		25,719
Naming rights termination		—		—		—		—		26,769

Occupancy and equipment	Occupancy and equipment	7,124		7,277		7,457		21,597		21,790		Occupancy and equipment	7,855		7,855		7,196
Professional fees	Professional fees	892		1,749		5,147		6,663		15,707		Professional fees	2,907		3,921		4,022

Data processing	Data processing	1,646		1,621		1,657		4,922		4,966		Data processing	1,828		1,939		1,655
Advertising and promotion		122		78		219		318		3,132

Regulatory assessments	Regulatory assessments	812		769		784		2,355		1,993		Regulatory assessments	775		1,040		774
(Gain) loss on investments in alternative energy partnerships		(1,785)		(829)		(1,430)		1,016		308
Loss (gain) on investments in alternative energy partnerships												Loss (gain) on investments in alternative energy partnerships	158		(1,220)		3,630
Reversal of provision for loan repurchases	Reversal of provision for loan repurchases	(42)		(99)		(91)		(273)		(725)		Reversal of provision for loan repurchases	(471)		(675)		(132)
Amortization of intangible assets	Amortization of intangible assets	282		282		353		846		1,212		Amortization of intangible assets	441		430		282

Merger-related costs	Merger-related costs	1,000		700		—		2,400		—		Merger-related costs	—		13,469		700

All other expense	All other expense	2,974		3,969		3,021		9,714		13,958		All other expense	4,116		3,557		2,889
Total noninterest expense	Total noninterest expense	37,811		40,559		40,394		125,105		160,083		Total noninterest expense	46,596		58,127		46,735
Income (loss) from operations before income taxes		31,831		25,612		18,274		74,112		(14,237)
Income tax expense (benefit)		8,661		6,562		2,361		17,517		(5,108)
Income from operations before income taxes												Income from operations before income taxes	67,297		8,510		16,669
Income tax expense												Income tax expense	18,785		2,759		2,294

Net income (loss)		23,170		19,050		15,913		56,595		(9,129)
Net income												Net income	48,512		5,751		14,375
Preferred stock dividends	Preferred stock dividends	1,727		1,727		3,447		6,595		10,422		Preferred stock dividends	1,420		1,727		3,141
Income allocated to participating securities	Income allocated to participating securities	—		—		281		160		—		Income allocated to participating securities	—		—		62
Participating securities dividends		—		—		94		—		282

Impact of preferred stock redemption	Impact of preferred stock redemption	—		—		7		3,347		(568)		Impact of preferred stock redemption	3,747		—		3,347
Net income (loss) available to common stockholders		$	21,443	$	17,323	$	12,084	$	46,493	$	(19,265)
Earnings (loss) per common share:
Net income available to common stockholders												Net income available to common stockholders	$	43,345	$	4,024	$	7,825
Earnings per common share:												Earnings per common share:

Basic	Basic	$	0.42	$	0.34	$	0.24	$	0.92	$	(0.38)	Basic	$	0.69	$	0.07	$	0.16

Diluted	Diluted	$	0.42	$	0.34	$	0.24	$	0.91	$	(0.38)	Diluted	$	0.69	$	0.07	$	0.15
Earnings (loss) per class B common share:
Earnings per class B common share:												Earnings per class B common share:

Basic	Basic	$	0.42	$	0.34	$	0.24	$	0.92	$	(0.38)	Basic	$	0.69	$	0.07	$	0.16

Diluted	Diluted	$	0.42	$	0.34	$	0.24	$	0.92	$	(0.38)	Diluted	$	0.69	$	0.07	$	0.15

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

Three Months Ended Nine Months Ended
September 30,
September 30,
2021 June 30,
2021 September 30,
2020 2021 2020
Net income (loss) $ 23,170 $ 19,050 $ 15,913 $ 56,595 $ (9,129)
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on available-for-sale securities:
Unrealized (loss) gain arising during the period (3,792) 9,555 16,831 3,202 14,585
Reclassification adjustment for gain included in net (loss) income — — — — (1,419)
Total change in unrealized (loss) gain on available-for-sale securities (3,792) 9,555 16,831 3,202 13,166
Total other comprehensive (loss) income (3,792) 9,555 16,831 3,202 13,166
Comprehensive income $ 19,378 $ 28,605 $ 32,744 $ 59,797 $ 4,037


	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
Net income	$	48,512	$	5,751	$	14,375
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale securities:
Unrealized loss arising during the period	(26,913)		(3,205)		(2,561)


Reclassification adjustment for gain included in net income	(11)		—		—
Total change in unrealized loss on available-for-sale securities	(26,924)		(3,205)		(2,561)





Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity	9		—		—
Total other comprehensive loss	(26,915)		(3,205)		(2,561)
Comprehensive income	$	21,597	$	2,546	$	11,814

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in ~~thousands)~~thousands, except share and per share data)

(Unaudited)


		Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity			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									Voting					Class B Non-Voting
Three Months Ended September 30, 2021
Balance at June 30, 2021		$	94,956		$	527		$	5	$	630,654	$	129,307	$	(40,827)		$	14,740	$	829,362
Three Months Ended March 31, 2022																					Three Months Ended March 31, 2022
Balance at December 31, 2021																					Balance at December 31, 2021	$	94,956	$	646	$	5	$	854,873	$	147,894	$	(40,827)	$	7,743	$	1,065,290

Comprehensive income:	Comprehensive income:																				Comprehensive income:
Net income	Net income	—			—			—		—		23,170		—			—		23,170		Net income	—		—		—		—		48,512		—		—		48,512
Other comprehensive loss, net	Other comprehensive loss, net	—			—			—		—		—		—			(3,792)		(3,792)		Other comprehensive loss, net	—		—		—		—		—		—		(26,915)		(26,915)

Redemption of preferred stock																					Redemption of preferred stock	(94,956)		—		—		—		(3,747)		—		—		(98,703)

Purchase of 215,550 shares of treasury stock																					Purchase of 215,550 shares of treasury stock	—		—		—		—		—		(4,298)		—		(4,298)

Share-based compensation expense	Share-based compensation expense	—			—			—		1,106		—		—			—		1,106		Share-based compensation expense	—		—		—		1,285		—		—		—		1,285

Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(278)		—		—			—		(278)		Restricted stock surrendered due to employee tax liability	—		—		—		(960)		—		—		—		(960)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		30		(30)		—			—		—		Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(30)		—		—		(30)

Dividends declared ($0.06 per common share)	Dividends declared ($0.06 per common share)	—			—			—		—		(3,038)		—			—		(3,038)		Dividends declared ($0.06 per common share)	—		—		—		—		(3,752)		—		—		(3,752)
Preferred stock dividends	Preferred stock dividends	—			—			—		—		(1,727)		—			—		(1,727)		Preferred stock dividends	—		—		—		—		(1,420)		—		—		(1,420)
Balance at September 30, 2021		$	94,956		$	527		$	5	$	631,512	$	147,682	$	(40,827)		$	10,948	$	844,803
Balance at March 31, 2022																					Balance at March 31, 2022	$	—	$	646	$	5	$	855,198	$	187,457	$	(45,125)	$	(19,172)	$	979,009

Three Months Ended September 30, 2020
Balance at June 30, 2020		$	185,037		$	522		$	5	$	632,117	$	85,670	$	(40,827)		$	(15,565)	$	846,959
Three Months Ended March 31, 2021																					Three Months Ended March 31, 2021
Balance at December 31, 2020																					Balance at December 31, 2020	$	184,878	$	522	$	5	$	634,704	$	110,179	$	(40,827)	$	7,746	$	897,207

Comprehensive income:	Comprehensive income:																				Comprehensive income:
Net income	Net income	—			—			—		—		15,913		—			—		15,913		Net income	—		—		—		—		14,375		—		—		14,375
Other comprehensive income, net		—			—			—		—		—		—			16,831		16,831

Other comprehensive loss, net																					Other comprehensive loss, net	—		—		—		—		—		—		(2,561)		(2,561)
Issuance of common stock																					Issuance of common stock	—		1		—		(1)		—		—		—		—

Redemption of preferred stock	Redemption of preferred stock	(159)			—			—		—		(7)		—			—		(166)		Redemption of preferred stock	(89,922)		—		—		—		(3,347)		—		—		(93,269)

Exercise of stock options																					Exercise of stock options	—		—		—		300		—		—		—		300
Exercise of stock appreciation rights																					Exercise of stock appreciation rights	—		3		—		(5,375)		—		—		—		(5,372)

Share-based compensation expense	Share-based compensation expense	—			—			—		1,346		—		—			—		1,346		Share-based compensation expense	—		—		—		1,544		—		—		—		1,544
Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(54)		—		—			—		(54)		Restricted stock surrendered due to employee tax liability	—		—		—		(1,328)		—		—		—		(1,328)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		—		(27)		—			—		(27)		Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(29)		—		—		(29)
Stock appreciation right dividend equivalents		—			—			—		—		(94)		—			—		(94)

Dividends declared ($0.06 per common share)	Dividends declared ($0.06 per common share)	—			—			—		—		(3,007)		—			—		(3,007)		Dividends declared ($0.06 per common share)	—		—		—		—		(3,033)		—		—		(3,033)
Preferred stock dividends	Preferred stock dividends	—			—			—		—		(3,447)		—			—		(3,447)		Preferred stock dividends	—		—		—		—		(3,141)		—		—		(3,141)
Balance at September 30, 2020		$	184,878		$	522		$	5	$	633,409	$	95,001	$	(40,827)		$	1,266	$	874,254
Balance at March 31, 2021																					Balance at March 31, 2021	$	94,956	$	526	$	5	$	629,844	$	115,004	$	(40,827)	$	5,185	$	804,693

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY, continued~~

~~(Amounts in thousands)~~

~~(Unaudited)~~

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
Nine Months Ended September 30, 2021
Balance at December 31, 2020 $ 184,878 $ 522 $ 5 $ 634,704 $ 110,179 $ (40,827) $ 7,746 $ 897,207
Comprehensive income:
Net income — — — — 56,595 — — 56,595
Other comprehensive income, net — — — — — — 3,202 3,202
Issuance of common stock — 2 — (2) — — — —
Redemption of preferred stock (89,922) — — — (3,347) — — (93,269)
Exercise of stock options — — — 300 — — — 300
Exercise of SARs — 3 — (5,375) — — — (5,372)
Share-based compensation expense — — — 3,988 — — — 3,988
Restricted stock surrendered due to employee tax liability — — — (2,133) — — — (2,133)
Shares purchased under the Dividend Reinvestment Plan — — — 30 (89) — — (59)
Dividends declared ($0.18 per common share) — — — — (9,061) — — (9,061)
Preferred stock dividends — — — — (6,595) — — (6,595)
Balance at September 30, 2021 $ 94,956 $ 527 $ 5 $ 631,512 $ 147,682 $ (40,827) $ 10,948 $ 844,803
Nine Months Ended September 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 — — — — (9,129) — — (9,129)
Other comprehensive income, net — — — — — — 13,166 13,166
Issuance of common stock — 2 — (2) — — — —
Redemption of preferred stock (4,947) — — — 568 — — (4,379)
Repurchase of 827,584 shares of common stock — — — — — (12,041) — (12,041)
Share-based compensation expense — — — 4,392 — — — 4,392
Restricted stock surrendered due to employee tax liability — — — (829) — — — (829)
Shares purchased under the Dividend Reinvestment Plan — — — — (74) — — (74)
Stock appreciation right dividend equivalents — — — — (282) — — (282)
Dividends declared ($0.18 per common share) — — — — (8,890) — — (8,890)
Preferred stock dividends — — — — (10,422) — — (10,422)
Balance at September 30, 2020 $ 184,878 $ 522 $ 5 $ 633,409 $ 95,001 $ (40,827) $ 1,266 $ 874,254

~~See accompanying notes to consolidated financial statements (unaudited)~~

~~Table of~~ ~~Contents~~

~~BANC OF CALIFORNIA, INC.~~

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	56,595	$	(9,129)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
(Reversal of) provision for credit losses		(4,408)		28,728
Net income						Net income	$	48,512	$	14,375
Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Reversal of provision for credit losses						Reversal of provision for credit losses	(31,542)		(1,107)

Reversal of provision for loan repurchases	Reversal of provision for loan repurchases	(273)		(725)		Reversal of provision for loan repurchases	(471)		(132)
Depreciation on premises and equipment	Depreciation on premises and equipment	11,414		12,378		Depreciation on premises and equipment	3,982		3,885
Amortization of intangible assets	Amortization of intangible assets	846		1,212		Amortization of intangible assets	441		282
Amortization of debt issuance costs	Amortization of debt issuance costs	1,283		537		Amortization of debt issuance costs	397		385
Net amortization of premium on securities	Net amortization of premium on securities	1,184		676		Net amortization of premium on securities	328		432

Net accretion of deferred loan costs and fees	Net accretion of deferred loan costs and fees	(3,430)		(2,007)		Net accretion of deferred loan costs and fees	(430)		(1,315)
Net amortization (accretion) of premiums (discounts) on purchased loans		2,367		(361)
Write-off of other assets related to naming rights termination, net		—		6,669
Debt extinguishment fee		—		2,515
Deferred income tax benefit		(3,476)		(2,553)
Net amortization of premiums on purchased loans						Net amortization of premiums on purchased loans	846		426

Deferred income tax expense (benefit)						Deferred income tax expense (benefit)	3,198		(845)
Bank owned life insurance income	Bank owned life insurance income	(2,077)		(1,798)		Bank owned life insurance income	(796)		(672)
Share-based compensation expense	Share-based compensation expense	3,988		4,392		Share-based compensation expense	1,285		1,544
(Income) loss on interest rate swaps		(240)		285
Income from interest rate swaps						Income from interest rate swaps	(102)		(271)
Loss on investments in alternative energy partnerships and affordable housing investments	Loss on investments in alternative energy partnerships and affordable housing investments	4,130		4,327		Loss on investments in alternative energy partnerships and affordable housing investments	1,704		4,812

Impairment on capitalized software projects		—		157

Fair value adjustment for loans held-for-sale		(180)		1,537
Net gain on sale of loans		—		(245)

Net gain on sale of securities available-for-sale	Net gain on sale of securities available-for-sale	—		(2,011)		Net gain on sale of securities available-for-sale	(16)		—

Gain on sale-leaseback of branch	Gain on sale-leaseback of branch	(841)		—		Gain on sale-leaseback of branch	(771)		—
Loss on disposal of property and equipment		4		106

Repurchase of mortgage loans		(1,852)		—

Proceeds from sales of and principal collected on loans held-for-sale		23		18,853

Change in accrued interest receivable and other assets	Change in accrued interest receivable and other assets	5,063		(673)		Change in accrued interest receivable and other assets	(13,566)		4,990

Change in accrued interest payable and other liabilities	Change in accrued interest payable and other liabilities	5,579		(24,273)		Change in accrued interest payable and other liabilities	(7,734)		(2,886)
Net cash provided by operating activities	Net cash provided by operating activities	75,699		38,597		Net cash provided by operating activities	5,265		23,903

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sales of securities available-for-sale	Proceeds from sales of securities available-for-sale	—		22,727		Proceeds from sales of securities available-for-sale	17,646		—
Proceeds from maturities and calls of securities available-for-sale		120,230		30,000
Proceeds from principal repayments of securities available-for-sale		22,499		5,075

Proceeds from principal repayments of securities held-to-maturity and available-for-sale						Proceeds from principal repayments of securities held-to-maturity and available-for-sale	8,074		9,378

Purchases of securities available-for-sale	Purchases of securities available-for-sale	(226,813)		(371,092)		Purchases of securities available-for-sale	(5,000)		(52,845)

Loan originations and principal collections, net	Loan originations and principal collections, net	281,951		427,308		Loan originations and principal collections, net	195,846		267,366
Purchases of loans	Purchases of loans	(615,359)		(154,864)		Purchases of loans	(364,371)		(132,866)
Redemption of Federal Home Loan Bank stock		436		23,972

Purchases of Federal Home Loan Bank and other bank stock	Purchases of Federal Home Loan Bank and other bank stock	(534)		(9,361)		Purchases of Federal Home Loan Bank and other bank stock	(6,824)		(458)

Proceeds from sale of other real estate owned		3,618		1,078

Purchases of premises and equipment	Purchases of premises and equipment	(2,256)		(4,547)		Purchases of premises and equipment	(529)		(849)
Proceeds from sale-leaseback of branch	Proceeds from sale-leaseback of branch	3,913		—		Proceeds from sale-leaseback of branch	2,400		—
Payments of capital lease obligations		(103)		(398)
Funding of equity investment		(6,320)		(17,346)
Decrease (increase) in investments in alternative energy partnerships		1,765		(2,019)
Net cash used in investing activities		(416,973)		(49,467)

Funding of equity investments						Funding of equity investments	(2,789)		(876)
Decrease in investments in alternative energy partnerships						Decrease in investments in alternative energy partnerships	574		538
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(154,973)		89,388

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in deposits	Net increase in deposits	457,425		605,099		Net increase in deposits	40,266		56,242
Net decrease in short-term Federal Home Loan Bank advances		(135,000)		(505,000)
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)
Net increase in short-term Federal Home Loan Bank advances						Net increase in short-term Federal Home Loan Bank advances	80,000		95,000

Net increase in other borrowings	Net increase in other borrowings	100,000		—		Net increase in other borrowings	165,000		—

Redemption of preferred stock	Redemption of preferred stock	(93,269)		(4,379)		Redemption of preferred stock	(98,703)		(93,269)

Purchase of treasury stock	Purchase of treasury stock	—		(12,041)		Purchase of treasury stock	(4,298)		—
Proceeds from exercise of stock options	Proceeds from exercise of stock options	300		—		Proceeds from exercise of stock options	—		300

Purchase of stock surrendered to pay tax liability	Purchase of stock surrendered to pay tax liability	(7,505)		(829)		Purchase of stock surrendered to pay tax liability	(960)		(6,700)
Dividend equivalents paid on participating securities		—		(282)

Dividends paid on preferred stock	Dividends paid on preferred stock	(6,595)		(10,422)		Dividends paid on preferred stock	(1,727)		(3,141)
Dividends paid on common stock	Dividends paid on common stock	(9,061)		(8,890)		Dividends paid on common stock	(3,752)		(3,033)
Net cash provided by (used in) financing activities		306,295		(70,112)
Net cash provided by financing activities						Net cash provided by financing activities	175,826		45,399
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(34,979)		(80,982)		Net change in cash and cash equivalents	26,118		158,690
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	220,819		373,472		Cash and cash equivalents at beginning of period	228,123		220,819
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	185,840	$	292,490	Cash and cash equivalents at end of period	$	254,241	$	379,509

Supplemental cash flow information	Supplemental cash flow information					Supplemental cash flow information
Interest paid on deposits and borrowed funds	Interest paid on deposits and borrowed funds	25,133		52,577		Interest paid on deposits and borrowed funds	4,291		7,313
Income taxes paid	Income taxes paid	11,975		758		Income taxes paid	—		—

Supplemental disclosure of non-cash activities	Supplemental disclosure of non-cash activities					Supplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, net		3,253		1,116

Reclassification of securities available-for-sale to held-to-maturity						Reclassification of securities available-for-sale to held-to-maturity	329,416		—

Equipment acquired under capital leases		256		30

Operating lease right-of-use assets recognized	Operating lease right-of-use assets recognized	14,172		(960)		Operating lease right-of-use assets recognized	786		4,023
Operating lease liabilities recognized	Operating lease liabilities recognized	14,172		960		Operating lease liabilities recognized	786		4,023
Impact of adoption of ASU 2016-13 on retained earnings		—		(4,503)

Receivable on unsettled securities sales	Receivable on unsettled securities sales	40,500		—		Receivable on unsettled securities sales	28,500		—

Due on unsettled securities purchases		25,000		—
Commitments to fund low income housing tax credit investments						Commitments to fund low income housing tax credit investments	2,000		—
Goodwill adjustments for purchase accounting						Goodwill adjustments for purchase accounting	826		—

See accompanying notes to consolidated financial statements (unaudited)

Table of Contents

BANC OF CALIFORNIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~September 30, 2021~~March 31, 2022

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”) and its 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”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (“FDIC”).

The Bank offers a variety of financial services to meet the banking and financial needs of the communities it serves, with operations conducted through 3332 full-service branches located throughout Southern California as of ~~September 30, 2021.~~

~~Merger with Pacific Mercantile Bancorp:~~On October 18, 2021, the Company completed the acquisition of Pacific Mercantile Bancorp, pursuant to which Pacific Mercantile Bancorp merged with and into the Company, with the Company as the surviving corporation. Refer to Note 18, ~~Subsequent Events~~.March 31, 2022.

Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed by us with the SEC. The December 31, ~~2020~~2021 consolidated statements of financial condition presented herein have been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC. Certain prior period amounts have been reclassified to conform to current period presentation, including i) reclassification of ~~income taxes receivable~~(i) loans held for sale to other assets in the consolidated statement of financial condition, (ii) fair value adjustment for loans held-for-sale to other income, and ~~ii) reclassification of outside services~~(iii) advertising and promotion to all other expense ~~from "outside services fees" to "all other expense"~~ in the accompanying 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022.

Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 and for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. Significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its then wholly-owned subsidiaries.

~~Adopted Accounting Pronouncements:~~ ~~On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~ (“ASU 2019-12”) which simplifies the accounting for income taxes by removing certain exceptions for investments, intra-period allocations, and interim calculations, and adding guidance to reduce the complexity of applying Topic 740. The adoption of these amendments did not have a material effect on our consolidated financial statements.

Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. We have not made any significant changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the ~~SEC.~~SEC, except for the accounting for securities held-to-maturity, as described below.

Securities Held-to-Maturity. Securities held-to-maturity consist of debt securities that the Company has the positive intent and ability to hold to maturity. These securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Premiums and discounts are amortized or accreted over the life of the security as an adjustment to its yield using the interest method. Transfers of debt securities into the held-to-maturity portfolio are accounted for at fair value. The unrealized gain or loss at the date of transfer is recognized as part of the amortized cost of the transferred security. This amount, along with the unrealized gain or loss included in accumulated other comprehensive income, is amortized or accreted over the life of the security as an adjustment to its yield using the interest method.

Securities held-to-maturity are analyzed for credit losses under ASC 326, which requires the Company to determine whether any impairment exists as of the reporting date and, as applicable, whether that impairment is due to credit deterioration. An allowance for credit losses would be established for losses on held-to-maturity debt securities due to credit deterioration and would be recorded as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. Held-to-maturity debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest recognized as interest income is 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

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assumptions affect the amounts reported in the consolidated financial statements and disclosures provided, and actual results could differ. The allowance for credit losses (“ACL”) (which includes the allowance for loan losses (“ALL”) and the reserve for unfunded loan commitments), provision for credit losses, loan repurchase reserve, realization of deferred tax assets, valuation of goodwill and other intangible assets, valuation of investments in alternative energy partnerships, and the fair value measurement of financial instruments are particularly ~~subject to change~~complex and ~~such change could~~require judgment which may have a material effect on the consolidated financial statements.

~~Table of~~ ~~Contents~~

Recent Accounting Guidance: In ~~August 2021, the FASB issued ASU 2021-06,~~ Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services— Investment Companies (Topic 946), Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants("ASU 2021-06")~~. This ASU incorporates recent SEC rule changes into the FASB Codification, including SEC Final Rule Releases No. 33-10786,~~ ~~Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835,~~ ~~Update of Statistical Disclosures for Bank and Savings and Loan Registrants Disclosures for Bank and Savings and Loan Registrants. The amendments in this update are effective upon addition to the FASB Codification and are not expected to have a material impact on the consolidated financial statements.~~

~~Beginning in June 2023, the London Interbank Offered Rate (“LIBOR”) will be discontinued. To assist entities with the transition away from LIBOR,~~March 2022, the Financial Accounting Standards Board (“FASB”) ~~has~~ issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to ~~clarify GAAP~~disclose current-period gross write-offs for financing receivables and ~~provide practical expedients for entities to utilize during the time~~net investment in leases by year of ~~transition. We are~~origination in the process of evaluating the potential impact the discontinuation of LIBOR will have on our consolidated financial statements. The optional expedients and exceptions provided through this relief are set forth below and were effective immediately; however, certain provisions from this relief are not yet determined due to the fact that LIBOR has not yet been discontinued.

~~In March 2020, the FASB issued~~vintage disclosures. ASU ~~2020-04,~~ ~~Reference Rate Reform (Topic 848)~~, ("ASU 2020-04") which provided 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 were elective and applied to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provided optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. When elected, the 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 codification that contains the guidance that otherwise would be required to be applied. The amendments in ASU 2020-04 were2022-02 is effective for ~~all entities as of March 12, 2020 through~~fiscal years beginning after December ~~31, 2022.~~

~~In January 2021, the FASB issued ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848)~~("ASU 2021-01"). The amendments in ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848,15, 2022, including interim periods within those fiscal years. Early adoption is permitted if ~~elected by~~ an entity apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments inhas adopted ASU 2021-01 are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable-rate, pay-variable-rate cross-currency interest rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform. The amendments in2016-13. ASU ~~2021-01 were effective immediately for all entities. ASU 2021-01~~2022-02 is not expected to have a material effect on our consolidated financial statements.

~~Sale-leaseback Transaction:~~Business Combination: ~~In September~~On October 18, 2021, we completed our merger with Pacific Mercantile Bancorp (“PMB”), pursuant to which PMB merged with and into the Company, ~~completed~~with the Company as the surviving corporation. PMB was the bank holding company of the wholly-owned Pacific Mercantile Bank, a ~~sale-leaseback transaction~~California state chartered commercial bank headquartered in Costa Mesa, California and operated seven banking offices, including three full service branches, located throughout Southern California.

Under the terms and conditions of the merger, each outstanding share of PMB common stock, aggregating 23,713,417 shares, was converted into the right to receive 0.5 (the "Exchange Ratio") of a share of the Company's common stock. In addition, at the effective time of the merger, the Company paid $3.2 million in cash for 1all outstanding PMB share-based awards, including outstanding shares subject to unvested restricted stock awards. In the merger, the Company issued 11,856,713 shares of ~~its branch locations.~~common stock with an estimated fair value of $222.2 million based upon the $18.74 closing price of the Company's common stock on October 18, 2021. Together with the $3.2 million of cash consideration, this resulted in an aggregate purchase price of $225.4 million. The ~~Company sold~~operating results of PMB have been included since the ~~branch~~date of acquisition and consequently, may impact the comparison of the financial results for ~~$4.2~~the periods presented.

Goodwill in the amount of $58.0 million was recognized and ~~recognized a gain~~represents the synergies and economies of ~~$841 thousand. The Company also entered into a 5-year lease agreement~~scale expected

from combining the operations of PMB with ours. Refer to Note 2 - Business Combinations in Item 8 of our Annual Report on Form 10-K for ~~this branch and recognized a right-of-use asset and lease liability~~the year ended December 31, 2021 filed with the SEC for ~~$811 thousand.~~further information.

NOTE 2 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair Value Hierarchy

ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value:

•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

•Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

~~Table of~~ ~~Contents~~

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, we primarily employ independent pricing services that utilize pricing models to calculate fair value. Such fair value measurements consider observable data such as dealer

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quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments (Level 2). We ~~employ procedures~~adhere to established processes to monitor the pricing ~~service's~~services' assumptions and ~~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 SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation. We had no securities available-for-sale classified as Level 3 at ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~

~~Loans Held-for-Sale, Carried at Fair Value:~~ The fair value of loans held-for-sale is based on commitments outstanding from investors and current offerings in the secondary market 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. 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 and any accrued interest.2021.

Derivative Assets and Liabilities:

Interest Rate Swaps. We offer interest rate swap products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.

Foreign Exchange Contracts.

We offer short-term foreign exchange contracts to customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products, we also enter into offsetting back-to-back contracts with institutional counterparties to hedge ~~the Company’s~~our foreign exchange rate risk. These back-to-back contracts are intended to offset each other and allow us to offer our customers foreign exchange products. The fair value of both of these offsetting asset and liability instruments is based on the change in the underlying foreign exchange rate. We are subject to counterparty risk in the event our customers or institutional counterparties default under these contracts. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and typically result in no adjustments to the valuation of the short-term foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of these contracts is classified as Level 2.

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The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:


				Fair Value Measurement Level									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)		($ 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)
September 30, 2021
March 31, 2022										March 31, 2022
Assets	Assets									Assets
Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pools securities	SBA loan pools securities	$	15,421	$	—	$	15,421	$	—	SBA loan pools securities	$	13,810	$	—	$	13,810	$	—
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	193,286		—		193,286		—		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	11,733		—		11,733		—
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	255,305		—		255,305		—		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	166,215		—		166,215		—
Municipal securities		120,417		—		120,417		—

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	154		—		154		—		Non-agency residential mortgage-backed securities	50,462		—		50,462		—

Collateralized loan obligations	Collateralized loan obligations	549,277		—		549,277		—		Collateralized loan obligations	487,973		—		487,973		—
Corporate debt securities	Corporate debt securities	169,508		—		169,508		—		Corporate debt securities	168,582		—		168,582		—
Loans held-for-sale, carried at fair value		3,422		—		2,427		995

Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps (1)	Interest rate swaps (1)	4,495		—		4,495		—		Interest rate swaps (1)	1,071		—		1,071		—
Foreign exchange contracts (1)	Foreign exchange contracts (1)	173		—		173		—		Foreign exchange contracts (1)	244		—		244		—
Liabilities	Liabilities									Liabilities
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Interest rate swaps (2)	Interest rate swaps (2)	4,739		—		4,739		—		Interest rate swaps (2)	1,152		—		1,152		—

Foreign exchange contracts (2)	Foreign exchange contracts (2)	159		—		159		—		Foreign exchange contracts (2)	236		—		236		—

December 31, 2020
December 31, 2021										December 31, 2021
Assets	Assets									Assets
Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pools securities	SBA loan pools securities	$	17,354	$	—	$	17,354	$	—	SBA loan pools securities	$	14,591	$	—	$	14,591	$	—
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	106,384		—		106,384		—		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	191,969		—		191,969		—
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	211,831		—		211,831		—		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	241,541		—		241,541		—
Municipal securities	Municipal securities	68,623		—		68,623		—		Municipal securities	119,015		—		119,015		—
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	160		—		160		—		Non-agency residential mortgage-backed securities	56,025		—		56,025		—

Collateralized loan obligations	Collateralized loan obligations	677,785		—		677,785		—		Collateralized loan obligations	518,964		—		518,964		—
Corporate debt securities	Corporate debt securities	149,294		—		149,294		—		Corporate debt securities	173,598		—		173,598		—
Loans held-for-sale, carried at fair value		1,413		—		468		945

Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps (1)	Interest rate swaps (1)	7,304		—		7,304		—		Interest rate swaps (1)	3,390		—		3,390		—
Foreign exchange contracts (1)	Foreign exchange contracts (1)	328		—		328		—		Foreign exchange contracts (1)	175		—		175		—
Liabilities	Liabilities									Liabilities
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Interest rate swaps (2)	Interest rate swaps (2)	7,789		—		7,789		—		Interest rate swaps (2)	3,594		—		3,594		—
Foreign exchange contracts (2)	Foreign exchange contracts (2)	313		—		313		—		Foreign exchange contracts (2)	146		—		146		—

(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.

~~Table of~~ ~~Contents~~

~~The following table presents a reconciliation of~~There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the ~~periods indicated:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2021 2020 2021 2020
Loans repurchased from GNMA Loan Pools
Balance at beginning of period $ 941 $ 16,685 $ 945 $ 19,233
Total gains (losses) (realized/unrealized):
Included in earnings—fair value adjustment 57 18 57 (1,351)
Sales, settlements, and other (3) (15,320) (7) (16,499)
Balance at end of period $ 995 $ 1,383 $ 995 $ 1,383

~~Loans repurchased from GNMA loan pools had aggregate unpaid principal balances of $1.0 million as of September 30, 2021~~three months ended March 31, 2022 and December 31, 2020. The significant unobservable inputs used in the fair value measurement of our loans repurchased from GNMA loan pools at September 30, 2021 and December 31, 2020 included an expected loss rate of 1.55% for insured loans and 20.00% for uninsured loans. There may be inherent weaknesses in any valuation technique and/or changes in the underlying assumptions used, such as discount rates and estimates of future cash flows, that could significantly affect the results.

~~Fair Value Option~~

~~Loans Held-for-Sale, Carried at Fair Value:~~ 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. We also elected to record loans repurchased from GNMA at fair value, as we intend to sell them after curing any defects and, accordingly, they are classified as held-for-sale.

~~The following table presents the fair value and aggregate principal balance of certain assets under the fair value option:~~

September 30, 2021 December 31, 2020
($ in thousands) Fair Value Unpaid Principal Balance Difference Fair Value Unpaid Principal Balance Difference
Loans held-for-sale, carried at fair value:
Total loans $ 3,422 $ 3,677 $ (255) $ 1,413 $ 1,680 $ (267)
Nonaccrual loans (1)
698 747 (49) 654 750 (96)

~~(1)Includes loans guaranteed by the U.S. government of $189 thousand and $190 thousand at September 30, 2021 and December 31, 2020.~~

~~There were no loans held-for-sale that were 90 days or more past due and still accruing interest as of September 30, 2021 and December 31, 2020.~~

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:

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2021 2020 2021 2020
Net gains (losses) from fair value changes:
Fair value adjustment for loans held-for-sale $ 160 $ 24 $ 180 $ (1,537)

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 in the consolidated statements of operations.2021.

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Assets and Liabilities Measured on a Non-Recurring Basis

~~Impaired~~Individually Evaluated Loans: The fair value of ~~impaired~~individually evaluated loans with specific allocations of the ACL based on collateral values is generally based on recent real estate appraisals and automated valuation models (“AVMs”). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.

The following table presents our financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:


				Fair Value Measurement Level									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)		($ in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2021
March 31, 2022										March 31, 2022
Assets	Assets									Assets

Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:
Single family residential mortgage	Single family residential mortgage	$	2,319	$	—	$	—	$	2,319	Single family residential mortgage	$	3,600	$	—	$	—	$	3,600
Commercial and industrial										Commercial and industrial	11,578		—		—		11,578

Other consumer										Other consumer	13		—		—		13
SBA	SBA	3,925		—		—		3,925		SBA	3,893		—		—		3,893

December 31, 2020
December 31, 2021										December 31, 2021
Assets	Assets									Assets
Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:

Commercial and industrial										Commercial and industrial	$	12,272	$	—	$	—	$	12,272
SBA	SBA	$	629	$	—	$	—	$	629	SBA	3,886		—		—		3,886

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:
Single family residential mortgage	Single family residential mortgage	$	—	$	(191)	$	(211)	$	(169)	Single family residential mortgage	$	(339)	$	—
Commercial and industrial	Commercial and industrial	—		(2,285)		38		(9,707)		Commercial and industrial	(634)		18
SBA	SBA	(1,377)		(533)		(1,886)		(1,722)		SBA	26		(133)

Commercial real estate		2		—		(138)		—
Other consumer										Other consumer	(27)		—

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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 as of the dates indicated:


		Carrying Amount			Fair Value Measurement Level												Carrying Amount			Fair Value Measurement Level
($ in thousands)	($ in thousands)			Level 1			Level 2			Level 3			Total	($ in thousands)					Level 1			Level 2			Level 3			Total
September 30, 2021
March 31, 2022																March 31, 2022
Financial assets	Financial assets															Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	185,840		$	185,840		$	—		$	—		$	185,840	Cash and cash equivalents	$	254,241		$	254,241		$	—		$	—		$	254,241

Securities held-to-maturity																Securities held-to-maturity	329,381			—			310,952			—			310,952
Securities available-for-sale	Securities available-for-sale	1,303,368			—			1,303,368			—			1,303,368		Securities available-for-sale	898,775			—			898,775			—			898,775
Federal Home Loan Bank and other bank stock																Federal Home Loan Bank and other bank stock	51,456			—			51,456			—			51,456

Federal Home Loan Bank and other bank stock		44,604			—			44,604			—			44,604
Loans held-for-sale, carried at fair value		3,422			—			2,427			995			3,422

Loans receivable, net of allowance for credit losses	Loans receivable, net of allowance for credit losses	6,155,051			—			—			6,235,625			6,235,625		Loans receivable, net of allowance for credit losses	7,358,347			—			—			7,119,002			7,119,002
Accrued interest receivable	Accrued interest receivable	30,546			30,546			—			—			30,546		Accrued interest receivable	34,026			34,026			—			—			34,026
Derivative assets	Derivative assets	4,668			—			4,668			—			4,668		Derivative assets	1,315			—			1,315			—			1,315
Financial liabilities	Financial liabilities															Financial liabilities
Deposits	Deposits	6,543,225			—			—			6,543,653			6,543,653		Deposits	7,479,701			6,959,049			518,051			—			7,477,100
Advances from Federal Home Loan Bank	Advances from Federal Home Loan Bank	405,738			—			437,111			—			437,111		Advances from Federal Home Loan Bank	556,374			—			559,016			—			559,016

Other borrowings	Other borrowings	100,000			—			100,000			—			100,000		Other borrowings	190,000			—			190,028			—			190,028
Long-term debt	Long-term debt	256,706			—			274,493			—			274,493		Long-term debt	274,468			—			279,410			—			279,410
Derivative liabilities	Derivative liabilities	4,898			—			4,898			—			4,898		Derivative liabilities	1,388			—			1,388			—			1,388
Accrued interest payable	Accrued interest payable	6,645			6,645			—			—			6,645		Accrued interest payable	6,686			6,686			—			—			6,686

December 31, 2020
December 31, 2021																December 31, 2021
Financial assets	Financial assets															Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	220,819		$	220,819		$	—		$	—		$	220,819	Cash and cash equivalents	$	228,123		$	228,123		$	—		$	—		$	228,123

Securities available-for-sale	Securities available-for-sale	1,231,431			—			1,231,431			—			1,231,431		Securities available-for-sale	1,315,703			—			1,315,703			—			1,315,703

Federal Home Loan Bank and other bank stock	Federal Home Loan Bank and other bank stock	44,506			—			44,506			—			44,506		Federal Home Loan Bank and other bank stock	44,632			—			44,632			—			44,632
Loans held-for-sale		1,413			—			468			945			1,413

Loans receivable, net of allowance for credit losses	Loans receivable, net of allowance for credit losses	5,817,375			—			—			5,936,708			5,936,708		Loans receivable, net of allowance for credit losses	7,158,896			—			—			7,150,703			7,150,703
Accrued interest receivable	Accrued interest receivable	29,445			29,445			—			—			29,445		Accrued interest receivable	30,991			30,991			—			—			30,991
Derivative assets	Derivative assets	7,632			—			7,632			—			7,632		Derivative assets	3,565			—			3,565			—			3,565
Financial liabilities	Financial liabilities															Financial liabilities
Deposits	Deposits	6,085,800			—			—			6,087,714			6,087,714		Deposits	7,439,435			6,932,717			506,711			—			7,439,428
Advances from Federal Home Loan Bank	Advances from Federal Home Loan Bank	539,795			—			585,416			—			585,416		Advances from Federal Home Loan Bank	476,059			—			500,323			—			500,323

Other borrowings																Other borrowings	25,000			—			25,000			—			25,000
Long-term debt	Long-term debt	256,315			—			273,230			—			273,230		Long-term debt	274,386			—			294,404			—			294,404
Derivative liabilities	Derivative liabilities	8,102			—			8,102			—			8,102		Derivative liabilities	3,740			—			3,740			—			3,740
Accrued interest payable	Accrued interest payable	3,714			3,714			—			—			3,714		Accrued interest payable	3,546			3,546			—			—			3,546

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NOTE 3 – INVESTMENT SECURITIES

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


($ in thousands)	($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2021
March 31, 2022										March 31, 2022
Securities held-to-maturity:										Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities										U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	153,713	$	—	$	(7,832)	$	145,881
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	61,464		—		(3,646)		57,818
Municipal securities										Municipal securities	114,204		—		(6,951)		107,253

Total securities held-to-maturity										Total securities held-to-maturity	$	329,381	$	—	$	(18,429)	$	310,952
Securities available-for-sale:										Securities available-for-sale:
SBA loan pool securities										SBA loan pool securities	$	13,918	$	—	$	(108)	$	13,810
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities										U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	12,084		—		(351)		11,733
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	170,827		438		(5,050)		166,215

Non-agency residential mortgage-backed securities										Non-agency residential mortgage-backed securities	54,417		—		(3,955)		50,462

Collateralized loan obligations										Collateralized loan obligations	492,775		—		(4,802)		487,973
Corporate debt securities										Corporate debt securities	165,259		4,700		(1,377)		168,582
Total securities available-for-sale										Total securities available-for-sale	$	909,280	$	5,138	$	(15,643)	$	898,775
December 31, 2021										December 31, 2021

Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	15,489	$	—	$	(68)	$	15,421	SBA loan pool securities	$	14,679	$	—	$	(88)	$	14,591
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	190,708		3,556		(978)		193,286		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	190,382		2,898		(1,311)		191,969
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	254,775		2,062		(1,532)		255,305		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	242,458		1,171		(2,088)		241,541
Municipal securities	Municipal securities	117,955		3,167		(705)		120,417		Municipal securities	117,913		2,641		(1,539)		119,015
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	149		5		—		154		Non-agency residential mortgage-backed securities	56,014		11		—		56,025

Collateralized loan obligations	Collateralized loan obligations	551,775		—		(2,498)		549,277		Collateralized loan obligations	521,275		—		(2,311)		518,964
Corporate debt securities	Corporate debt securities	156,995		12,513		—		169,508		Corporate debt securities	162,002		11,603		(7)		173,598
Total securities available-for-sale	Total securities available-for-sale	$	1,287,846	$	21,303	$	(5,781)	$	1,303,368	Total securities available-for-sale	$	1,304,723	$	18,324	$	(7,344)	$	1,315,703
December 31, 2020

Securities available-for-sale:
SBA loan pool securities		$	17,436	$	—	$	(82)	$	17,354
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities		99,591		6,793		—		106,384
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations		209,426		2,571		(166)		211,831
Municipal securities		64,355		4,272		(4)		68,623
Non-agency residential mortgage-backed securities		156		4		—		160

Collateralized loan obligations		687,505		—		(9,720)		677,785
Corporate debt securities		141,975		7,319		—		149,294
Total securities available-for-sale		$	1,220,444	$	20,959	$	(9,972)	$	1,231,431

During the first quarter of 2022, certain longer-duration fixed-rate mortgage-backed securities and municipal securities with an amortized cost basis of $346.0 million were transferred from the available-for-sale portfolio to the held-to-maturity portfolio. At ~~September 30, 2021,~~the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which along with the related unrealized loss in accumulated other comprehensive income, will be amortized into interest income as a yield adjustment over the remaining term of the securities.

At March 31, 2022, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities, collateralized loan obligations (“CLOs”), 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 no allowance for credit losses for debt securities held-to-maturity and available-for sale as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Accrued interest receivable on debt securities held-to-maturity and available-for-sale totaled ~~$5.9~~$6.0 million and $4.7 million at ~~both September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, and is included within other assets in the accompanying consolidated statements of financial condition.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were no holdings of any one issuer, other than U.S. government agency and sponsored enterprises, in an amount greater than 10 percent of our stockholders’ equity.

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
September 30, Nine Months Ended
September 30,
($ in thousands) 2021 2020 2021 2020
Gross realized gains $ — $ — $ — $ 2,011
Gross realized losses — — — —
Net realized gains on sales and calls $ — $ — $ — $ 2,011
Proceeds from sales and calls(1)
$ 20,000 $ — $ 120,230 $ 52,727

~~(1) Includes proceeds from CLO resets~~

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	Three Months Ended March 31,
($ in thousands)	2022		2021
Gross realized gains	$	209	$	—
Gross realized losses	(193)		—
Net realized gains on sales and calls	$	16	$	—
Proceeds from sales and calls	$	17,646	$	—

Investment securities with carrying values of ~~$28.9~~$28.8 million and ~~$43.7~~$28.9 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, were pledged to secure FHLB advances, public deposits or for other purposes as required or permitted by law.

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


		Less Than 12 Months				12 Months or Longer				Total					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		($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2021
March 31, 2022														March 31, 2022

Securities available-for-sale:														Securities available-for-sale:
SBA loan pool securities														SBA loan pool securities	$	—	$	—	$	13,810	$	(108)	$	13,810	$	(108)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities														U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	11,733		(351)		—		—		11,733		(351)
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	84,047		(2,866)		15,723		(2,184)		99,770		(5,050)

Non-agency residential mortgage-backed securities														Non-agency residential mortgage-backed securities	50,462		(3,955)		—		—		50,462		(3,955)

Collateralized loan obligations														Collateralized loan obligations	226,353		(1,147)		251,620		(3,655)		477,973		(4,802)
Corporate debt securities														Corporate debt securities	46,123		(1,377)		—		—		46,123		(1,377)
Total securities available-for-sale														Total securities available-for-sale	$	418,718	$	(9,696)	$	281,153	$	(5,947)	$	699,871	$	(15,643)

December 31, 2021														December 31, 2021

Securities available-for-sale:	Securities available-for-sale:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	3,476	$	(6)	$	11,945	$	(62)	$	15,421	$	(68)	SBA loan pool securities	$	—	$	—	$	14,591	$	(88)	$	14,591	$	(88)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	54,501		(978)		—		—		54,501		(978)		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	67,588		(1,311)		—		—		67,588		(1,311)
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	77,262		(1,048)		9,686		(484)		86,948		(1,532)		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	85,290		(1,184)		17,754		(904)		103,044		(2,088)
Municipal securities	Municipal securities	43,346		(261)		10,945		(444)		54,291		(705)		Municipal securities	44,748		(919)		10,762		(620)		55,510		(1,539)

Collateralized loan obligations	Collateralized loan obligations	66,956		(44)		258,320		(2,454)		325,276		(2,498)		Collateralized loan obligations	81,962		(38)		253,002		(2,273)		334,964		(2,311)

Corporate debt securities														Corporate debt securities	4,993		(7)		—		—		4,993		(7)
Total securities available-for-sale	Total securities available-for-sale	$	245,541	$	(2,337)	$	290,896	$	(3,444)	$	536,437	$	(5,781)	Total securities available-for-sale	$	284,581	$	(3,459)	$	296,109	$	(3,885)	$	580,690	$	(7,344)

December 31, 2020

SBA loan pool securities		$	17,354	$	(82)	$	—	$	—	$	17,354	$	(82)

U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations		19,033		(166)		—		—		19,033		(166)
Municipal securities		11,401		(4)		—		—		11,401		(4)

Collateralized loan obligations		64,775		(225)		613,010		(9,495)		677,785		(9,720)

Total securities available-for-sale		$	112,563	$	(477)	$	613,010	$	(9,495)	$	725,573	$	(9,972)

At ~~September 30, 2021,~~March 31, 2022, our securities available-for-sale portfolio consisted of ~~116~~79 securities, of which 4456 securities were in an unrealized loss position. At December 31, ~~2020,~~2021, our securities available-for-sale portfolio consisted of ~~103~~119 securities, of which 5046 securities were in an unrealized loss position.

We monitor our securities portfolio to ensure it has adequate credit support. ~~The majority of unrealized losses are related to our collateralized loan obligations.~~ We consider the lowest credit rating for identification of credit impairment for collateralized loan obligations and other securities. ~~As of September 30, 2021, all~~The decline in fair value of our ~~collateralized loan obligations investment~~ securities ~~in an unrealized loss position received an investment grade credit rating. The improvement in fair value~~since acquisition was attributable to a combination of changes in interest rates and ~~tightening~~general volatility in the credit

Table of ~~credit spreads from improving~~Contents

market conditions in response to the economic ~~conditions.~~uncertainty caused by the global pandemic, rising inflation and conflict between Russia and Ukraine. We do not currently intend to sell any of the securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery. ~~Securities that are~~As of March 31, 2022, all of our collateralized loan obligations investment securities in an unrealized ~~gain~~loss position ~~or are trading at par are evaluated for continued inclusion in our portfolio based on interest rate, liquidity and yield objectives of the Company.~~received an investment grade credit rating.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~there was no provision for credit losses related to securities ~~available-for-sale was recorded.~~held-to-maturity or available-for-sale.

The following table presents the amortized cost and fair value of the investment securities portfolio, based on the earlier of maturity dates or next repricing date, as of March 31, 2022:


	Held-to-Maturity				Available-for-Sale
($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity:
Within one year	$	—	$	—	$	600,944	$	596,427
One to five years	—		—		162,258		163,524
Five to ten years	14,825		14,143		66,735		64,402
Greater than ten years	314,556		296,809		79,343		74,422
Total	$	329,381	$	310,952	$	909,280	$	898,775

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The following table presents the fair value and ~~yield information~~weighted average yields using amortized cost, of the ~~investment~~ securities held-to-maturity portfolio as of March 31, 2022, based on the earlier of maturity dates or next repricing ~~date,~~dates:


	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 held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	—	—	%	$	145,881	2.69	%	$	145,881	2.69	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	—		—	%	—		—	%	—		—	%	57,818		2.64	%	57,818		2.64	%
Municipal securities	—		—	%	—		—	%	14,143		2.20	%	93,110		2.68	%	107,253		2.62	%



Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	14,143	2.20	%	$	296,809	2.68	%	$	310,952	2.66	%

The following table presents the fair value and weighted average yields using amortized cost, of the securities available-for-sale portfolio as of ~~September 30, 2021:~~March 31, 2022, based on the earlier of maturity dates or next repricing dates:


		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)	($ 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:																					Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	15,421	0.93	%	$	—	—	%	$	—	—	%	$	—	—	%	$	15,421	0.93	%	SBA loan pool securities	$	13,810	0.98	%	$	—	—	%	$	—	—	%	$	—	—	%	$	13,810	0.98	%
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	29,294		2.20	%	163,992		2.16	%	193,286		2.17	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	11,733		2.23	%	—		—	%	11,733		2.23	%
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	105,662		0.63	%	10,978		1.97	%	42,423		1.34	%	96,242		1.75	%	255,305		1.23	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	94,644		0.80	%	9,923		1.98	%	37,688		1.36	%	23,960		1.74	%	166,215		1.14	%
Municipal securities		—		—	%	—		—	%	15,425		2.62	%	104,992		2.37	%	120,417		2.40	%

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	154		6.36	%	154		6.36	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	50,462		2.51	%	50,462		2.51	%

Collateralized loan obligations	Collateralized loan obligations	549,277		1.76	%	—		—	%	—		—	%	—		—	%	549,277		1.76	%	Collateralized loan obligations	487,973		1.87	%	—		—	%	—		—	%	—		—	%	487,973		1.87	%
Corporate debt securities	Corporate debt securities	—		—	%	151,201		4.82	%	18,307		5.73	%	—		—	%	169,508		4.91	%	Corporate debt securities	—		—	%	153,601		4.71	%	14,981		5.73	%	—		—	%	168,582		4.80	%
Total securities available-for-sale	Total securities available-for-sale	$	670,360	1.56	%	$	162,179	4.62	%	$	105,449	2.42	%	$	365,380	2.11	%	$	1,303,368	2.15	%	Total securities available-for-sale	$	596,427	1.68	%	$	163,524	4.54	%	$	64,402	2.39	%	$	74,422	2.27	%	$	898,775	2.29	%

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NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table presents the balances in our loan portfolio as of the dates indicated:


($ in thousands)	($ in thousands)	September 30, 2021		December 31, 2020		($ in thousands)	March 31, 2022		December 31, 2021

Commercial:	Commercial:					Commercial:
Commercial and industrial(1)	Commercial and industrial(1)	$	2,296,626	$	2,088,308	Commercial and industrial(1)	$	2,799,457	$	2,668,984
Commercial real estate	Commercial real estate	907,224		807,195		Commercial real estate	1,163,381		1,311,105
Multifamily	Multifamily	1,295,613		1,289,820		Multifamily	1,397,761		1,361,054
SBA(2)	SBA(2)	181,582		273,444		SBA(2)	133,116		205,548
Construction	Construction	130,536		176,016		Construction	225,153		181,841

Consumer:	Consumer:					Consumer:
Single family residential mortgage	Single family residential mortgage	1,393,696		1,230,236		Single family residential mortgage	1,637,307		1,420,023

Other consumer	Other consumer	23,298		33,386		Other consumer	95,398		102,925
Total loans~~(3)~~	Total loans~~(3)~~	$	6,228,575	$	5,898,405	Total loans~~(3)~~	$	7,451,573	$	7,251,480

Allowance for loan losses	Allowance for loan losses	(73,524)		(81,030)		Allowance for loan losses	(93,226)		(92,584)
Loans receivable, net	Loans receivable, net	$	6,155,051	$	5,817,375	Loans receivable, net	$	7,358,347	$	7,158,896

(1)Includes warehouse lending balances of ~~$1.52~~$1.57 billion and ~~$1.34~~$1.60 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

(2)Includes ~~566~~226 PPP loans totaling ~~$116.5~~$58.3 million, net of unamortized loan fees totaling ~~$2.0 million~~$203 thousand at ~~September 30, 2021~~March 31, 2022 and ~~949~~397 PPP loans totaling ~~$210.0~~$123.1 million, net of unamortized loan fees totaling ~~$1.6 million~~$772 thousand at December 31, ~~2020.~~2021.

~~(3)~~

The following table presents the balances of total loans as of the dates indicated:


($ in thousands)	March 31, 2022		December 31, 2021
Unpaid principal balance	$	7,436,856	$	7,245,952
Unamortized net premiums	25,696		18,005
Unamortized net deferred costs	832		819
Unamortized SBA PPP fees	(234)		(831)
Fair value adjustment(1)	(11,577)		(12,465)
Total loans	$	7,451,573	$	7,251,480

(1)Includes ~~net deferred loan origination costs (fees) and premiums (discounts)~~$9.6 million related to the PMB Acquisition, of ~~$12.5~~which $4.3 million ~~and $6.2~~related to PCD loans at March 31, 2022. Includes $10.6 million related to the PMB Acquisition, of which $3.9 million related to PCD loans at ~~September 30, 2021 and~~ December 31, ~~2020.~~2021.

Credit Quality Indicators

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

Pass: Loans ~~risk rated~~classified 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 risk rated as special mention have a potential ~~weaknesses~~weakness that ~~deserve~~deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of our credit position at some future date.

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

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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.

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The following table presents the risk categories for total loans by class of loans and origination year as of ~~September 30, 2021:~~March 31, 2022:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
($ in thousands)	($ in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total		($ in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total
September 30, 2021
March 31, 2022																				March 31, 2022

Commercial:	Commercial:																			Commercial:
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	$	146,752	$	70,137	$	64,881	$	61,184	$	45,261	$	99,395	$	1,712,167	$	10,548	$	2,210,325	Pass	$	57,130	$	300,020	$	74,250	$	75,320	$	81,579	$	203,069	$	1,865,584	$	10,573	$	2,667,525
Special mention	Special mention	—		3,242		13,803		3,617		11,976		8,690		14,498		7,135		62,961		Special mention	—		1,070		4,224		13,801		2,517		19,082		35,140		798		76,632
Substandard	Substandard	—		—		3,076		4,969		—		9,641		3,194		2,460		23,340		Substandard	—		—		1,637		15,278		10,330		3,856		21,819		2,380		55,300
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Commercial and industrial	Commercial and industrial	146,752		73,379		81,760		69,770		57,237		117,726		1,729,859		20,143		2,296,626		Commercial and industrial	57,130		301,090		80,111		104,399		94,426		226,007		1,922,543		13,751		2,799,457
Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	255,677		57,232		132,886		161,355		54,060		213,050		2,108		73		876,441		Pass	90,570		386,465		66,308		131,716		165,035		296,892		6,587		68		1,143,641
Special mention	Special mention	—		—		—		1,934		—		10,999		3,762		—		16,695		Special mention	—		—		—		—		7,532		1,782		—		—		9,314
Substandard	Substandard	—		—		508		—		—		13,580		—		—		14,088		Substandard	—		—		—		503		—		9,007		916		—		10,426
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	Commercial real estate	255,677		57,232		133,394		163,289		54,060		237,629		5,870		73		907,224		Commercial real estate	90,570		386,465		66,308		132,219		172,567		307,681		7,503		68		1,163,381
Multifamily	Multifamily																			Multifamily
Pass	Pass	280,570		209,591		295,012		218,476		78,659		148,610		107		—		1,231,025		Pass	141,872		410,193		169,678		283,990		129,384		213,799		4		—		1,348,920
Special mention	Special mention	—		2,004		15,397		11,308		—		33,949		—		—		62,658		Special mention	—		—		1,978		—		11,212		32,969		—		—		46,159
Substandard	Substandard	—		—		—		—		—		1,930		—		—		1,930		Substandard	—		—		—		—		—		2,682		—		—		2,682
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	Multifamily	280,570		211,595		310,409		229,784		78,659		184,489		107		—		1,295,613		Multifamily	141,872		410,193		171,656		283,990		140,596		249,450		4		—		1,397,761
SBA	SBA																			SBA
Pass	Pass	101,405		30,143		7,555		249		3,508		19,750		358		303		163,271		Pass	—		55,111		13,474		7,407		1,481		32,976		856		174		111,479
Special mention	Special mention	—		—		1,731		900		—		1,181		255		4		4,071		Special mention	—		—		—		4,143		227		582		70		4		5,026
Substandard	Substandard	—		—		—		390		3,631		7,017		247		918		12,203		Substandard	—		—		4,725		—		389		10,064		598		835		16,611
Doubtful	Doubtful	—		—		—		—		—		1,777		—		260		2,037		Doubtful	—		—		—		—		—		—		—		—		—
SBA	SBA	101,405		30,143		9,286		1,539		7,139		29,725		860		1,485		181,582		SBA	—		55,111		18,199		11,550		2,097		43,622		1,524		1,013		133,116

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Construction	Construction																			Construction
Pass	Pass	24,867		30,494		19,184		16,694		29,622		—		—		—		120,861		Pass	33,862		80,317		31,154		26,873		17,365		25,428		—		—		214,999
Special mention	Special mention	—		—		—		1,537		—		8,138		—		—		9,675		Special mention	—		—		—		—		1,607		8,547		—		—		10,154
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Construction	Construction	24,867		30,494		19,184		18,231		29,622		8,138		—		—		130,536		Construction	33,862		80,317		31,154		26,873		18,972		33,975		—		—		225,153
Consumer:	Consumer:																			Consumer:
Single family residential mortgage	Single family residential mortgage																			Single family residential mortgage
Pass	Pass	550,466		125,669		79,395		162,821		103,351		328,357		12,557		—		1,362,616		Pass	210,294		823,638		79,427		57,423		112,118		331,774		5,881		—		1,620,555
Special mention	Special mention	—		—		—		1,255		696		6,831		—		—		8,782		Special mention	—		224		1,635		—		905		1,752		—		—		4,516
Substandard	Substandard	—		—		—		6,403		1,707		13,949		239		—		22,298		Substandard	—		—		—		339		9,092		2,575		—		230		12,236
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Single family residential mortgage	Single family residential mortgage	550,466		125,669		79,395		170,479		105,754		349,137		12,796		—		1,393,696		Single family residential mortgage	210,294		823,862		81,062		57,762		122,115		336,101		5,881		230		1,637,307
Other consumer	Other consumer																			Other consumer
Pass	Pass	1,110		—		—		8		—		1,753		18,022		2,221		23,114		Pass	6,304		23,390		11,590		7,609		4,429		22,094		17,594		1,720		94,730
Special mention	Special mention	—		—		—		—		—		27		60		—		87		Special mention	—		—		—		3		—		24		63		—		90
Substandard	Substandard	—		—		—		—		—		—		97		—		97		Substandard	—		—		192		14		144		41		—		187		578
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Other consumer	Other consumer	1,110		—		—		8		—		1,780		18,179		2,221		23,298		Other consumer	6,304		23,390		11,782		7,626		4,573		22,159		17,657		1,907		95,398

Total loans	Total loans	$	1,360,847	$	528,512	$	633,428	$	653,100	$	332,471	$	928,624	$	1,767,671	$	23,922	$	6,228,575	Total loans	$	540,032	$	2,080,428	$	460,272	$	624,419	$	555,346	$	1,218,995	$	1,955,112	$	16,969	$	7,451,573

Total loans	Total loans																			Total loans
Pass	Pass	$	1,360,847	$	523,266	$	598,913	$	620,787	$	314,461	$	810,915	$	1,745,319	$	13,145	$	5,987,653	Pass	$	540,032	$	2,079,134	$	445,881	$	590,338	$	511,391	$	1,126,032	$	1,896,506	$	12,535	$	7,201,849
Special mention	Special mention	—		5,246		30,931		20,551		12,672		69,815		18,575		7,139		164,929		Special mention	—		1,294		7,837		17,947		24,000		64,738		35,273		802		151,891
Substandard	Substandard	—		—		3,584		11,762		5,338		46,117		3,777		3,378		73,956		Substandard	—		—		6,554		16,134		19,955		28,225		23,333		3,632		97,833
Doubtful	Doubtful	—		—		—		—		—		1,777		—		260		2,037		Doubtful	—		—		—		—		—		—		—		—		—
Total loans	Total loans	$	1,360,847	$	528,512	$	633,428	$	653,100	$	332,471	$	928,624	$	1,767,671	$	23,922	$	6,228,575	Total loans	$	540,032	$	2,080,428	$	460,272	$	624,419	$	555,346	$	1,218,995	$	1,955,112	$	16,969	$	7,451,573

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The following table presents the risk categories for total loans by class of loans and origination year as of December 31, ~~2020:~~2021:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
($ in thousands)	($ in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total		($ in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total
December 31, 2020
December 31, 2021																				December 31, 2021

Commercial:	Commercial:																			Commercial:
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	$	99,015	$	78,783	$	70,248	$	52,786	$	44,536	$	92,129	$	1,572,259	$	9,945	$	2,019,701	Pass	$	254,218	$	81,177	$	71,950	$	78,461	$	56,439	$	110,490	$	1,888,126	$	9,679	$	2,550,540
Special mention	Special mention	—		928		2,748		7,986		1,574		2,271		1,500		225		17,232		Special mention	1,206		5,971		13,721		835		7,272		9,846		20,460		6,348		65,659
Substandard	Substandard	—		13,937		6,262		4,618		—		9,264		12,598		4,696		51,375		Substandard	2		241		17,853		11,378		3,374		117		17,429		2,391		52,785
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Commercial and industrial	Commercial and industrial	99,015		93,648		79,258		65,390		46,110		103,664		1,586,357		14,866		2,088,308		Commercial and industrial	255,426		87,389		103,524		90,674		67,085		120,453		1,926,015		18,418		2,668,984
Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	75,432		150,731		192,831		63,144		91,454		182,756		2,682		1,582		760,612		Pass	465,524		82,759		140,108		192,263		85,755		317,941		8,416		71		1,292,837
Special mention	Special mention	—		—		9,452		—		2,518		14,754		3,761		—		30,485		Special mention	—		—		—		1,925		—		2,920		—		—		4,845
Substandard	Substandard	—		—		—		—		—		16,098		—		—		16,098		Substandard	—		—		506		—		—		9,084		3,833		—		13,423
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	Commercial real estate	75,432		150,731		202,283		63,144		93,972		213,608		6,443		1,582		807,195		Commercial real estate	465,524		82,759		140,614		194,188		85,755		329,945		12,249		71		1,311,105
Multifamily	Multifamily																			Multifamily
Pass	Pass	239,449		407,532		275,881		110,105		97,160		154,841		27		—		1,284,995		Pass	410,958		208,396		315,119		157,640		61,457		158,464		4		—		1,312,038
Special mention	Special mention	—		2,050		—		—		—		803		—		—		2,853		Special mention	—		1,988		—		11,261		—		33,065		—		—		46,314
Substandard	Substandard	—		—		—		—		—		1,972		—		—		1,972		Substandard	—		—		—		—		—		2,702		—		—		2,702
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	Multifamily	239,449		409,582		275,881		110,105		97,160		157,616		27		—		1,289,820		Multifamily	410,958		210,384		315,119		168,901		61,457		194,231		4		—		1,361,054
SBA	SBA																			SBA
Pass	Pass	211,962		14,082		1,260		3,746		11,087		18,589		3,111		1,014		264,851		Pass	106,749		23,972		8,049		1,957		10,836		28,495		928		143		181,129
Special mention	Special mention	—		1,768		—		212		415		874		—		6		3,275		Special mention	—		1,586		3,618		236		—		596		—		4		6,040
Substandard	Substandard	—		—		—		1,319		682		1,855		226		755		4,837		Substandard	—		5,888		—		390		3,358		7,245		599		899		18,379
Doubtful	Doubtful	—		—		390		—		—		—		—		91		481		Doubtful	—		—		—		—		—		—		—		—		—
SBA	SBA	211,962		15,850		1,650		5,277		12,184		21,318		3,337		1,866		273,444		SBA	106,749		31,446		11,667		2,583		14,194		36,336		1,527		1,046		205,548

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Construction	Construction																			Construction
Pass	Pass	41,677		30,387		45,397		50,024		—		—		—		—		167,485		Pass	67,074		32,995		29,038		17,139		25,485		—		—		—		171,731
Special mention	Special mention	—		—		1,537		—		6,994		—		—		—		8,531		Special mention	—		—		—		1,607		—		8,503		—		—		10,110
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Construction	Construction	41,677		30,387		46,934		50,024		6,994		—		—		—		176,016		Construction	67,074		32,995		29,038		18,746		25,485		8,503		—		—		181,841
Consumer:	Consumer:																			Consumer:
Single family residential mortgage	Single family residential mortgage																			Single family residential mortgage
Pass	Pass	149,382		140,129		271,667		161,332		237,285		227,711		15,252		—		1,202,758		Pass	713,844		96,339		67,075		140,329		88,123		277,247		12,828		—		1,395,785
Special mention	Special mention	—		—		1,837		688		4,868		4,460		—		—		11,853		Special mention	—		1,644		339		910		692		6,838		—		—		10,423
Substandard	Substandard	—		157		491		1,079		4,978		8,920		—		—		15,625		Substandard	—		—		—		11,005		975		1,601		—		234		13,815
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Single family residential mortgage	Single family residential mortgage	149,382		140,286		273,995		163,099		247,131		241,091		15,252		—		1,230,236		Single family residential mortgage	713,844		97,983		67,414		152,244		89,790		285,686		12,828		234		1,420,023
Other consumer	Other consumer																			Other consumer
Pass	Pass	38		—		47		—		—		1,876		27,644		2,218		31,823		Pass	26,179		13,556		8,891		5,265		9,038		15,951		21,327		2,331		102,538
Special mention	Special mention	—		—		—		—		—		30		1,185		—		1,215		Special mention	—		—		4		—		—		25		63		—		92
Substandard	Substandard	—		—		—		—		—		—		274		74		348		Substandard	—		61		14		148		46		26		—		—		295
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Other consumer	Other consumer	38		—		47		—		—		1,906		29,103		2,292		33,386		Other consumer	26,179		13,617		8,909		5,413		9,084		16,002		21,390		2,331		102,925

Total loans	Total loans	$	816,955	$	840,484	$	880,048	$	457,039	$	503,551	$	739,203	$	1,640,519	$	20,606	$	5,898,405	Total loans	$	2,045,754	$	556,573	$	676,285	$	632,749	$	352,850	$	991,156	$	1,974,013	$	22,100	$	7,251,480

Total loans	Total loans																			Total loans
Pass	Pass	$	816,955	$	821,644	$	857,331	$	441,137	$	481,522	$	677,902	$	1,620,975	$	14,759	$	5,732,225	Pass	$	2,044,546	$	539,194	$	640,230	$	593,054	$	337,133	$	908,588	$	1,931,629	$	12,224	$	7,006,598
Special mention	Special mention	—		4,746		15,574		8,886		16,369		23,192		6,446		231		75,444		Special mention	1,206		11,189		17,682		16,774		7,964		61,793		20,523		6,352		143,483
Substandard	Substandard	—		14,094		6,753		7,016		5,660		38,109		13,098		5,525		90,255		Substandard	2		6,190		18,373		22,921		7,753		20,775		21,861		3,524		101,399
Doubtful	Doubtful	—		—		390		—		—		—		—		91		481		Doubtful	—		—		—		—		—		—		—		—		—
Total loans	Total loans	$	816,955	$	840,484	$	880,048	$	457,039	$	503,551	$	739,203	$	1,640,519	$	20,606	$	5,898,405	Total loans	$	2,045,754	$	556,573	$	676,285	$	632,749	$	352,850	$	991,156	$	1,974,013	$	22,100	$	7,251,480

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Past Due Loans

The following table presents the aging of the recorded investment in past due loans, excluding accrued interest receivable (which is not considered to be material), by class of loans as of the dates indicated:


($ in thousands)	($ in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total		($ in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total
September 30, 2021
Non-Traditional Mortgage (NTM) loans:
Single family residential mortgage		$	7,098	$	—	$	2,407	$	9,505	$	560,276	$	569,781

Other consumer		—		—		—		—		1,597		1,597
Total NTM loans		7,098		—		2,407		9,505		561,873		571,378
Traditional loans:
March 31, 2022														March 31, 2022
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	3,624		3,796		2,876		10,296		2,286,330		2,296,626		Commercial and industrial	1,255		3,157		8,770		13,182		2,786,275		2,799,457
Commercial real estate	Commercial real estate	—		—		—		—		907,224		907,224		Commercial real estate	—		—		916		916		1,162,465		1,163,381
Multifamily	Multifamily	791		—		—		791		1,294,822		1,295,613		Multifamily	781		—		—		781		1,396,980		1,397,761
SBA	SBA	2,545		—		12,385		14,930		166,652		181,582		SBA	198		—		14,748		14,946		118,170		133,116
Construction	Construction	—		—		—		—		130,536		130,536		Construction	—		—		—		—		225,153		225,153

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	4,274		1,016		4,311		9,601		814,314		823,915		Single family residential mortgage	19,970		967		9,431		30,368		1,606,939		1,637,307
Other consumer	Other consumer	—		—		—		—		21,701		21,701		Other consumer	593		146		65		804		94,594		95,398
Total traditional loans		11,234		4,812		19,572		35,618		5,621,579		5,657,197

Total	Total	$	18,332	$	4,812	$	21,979	$	45,123	$	6,183,452	$	6,228,575	Total	$	22,797	$	4,270	$	33,930	$	60,997	$	7,390,576	$	7,451,573

December 31, 2020
NTM loans:
Single family residential mortgage		$	4,200	$	641	$	6,548	$	11,389	$	424,126	$	435,515

Other consumer		—		—		—		—		1,598		1,598
Total NTM loans		4,200		641		6,548		11,389		425,724		437,113
Traditional loans:
December 31, 2021														December 31, 2021
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	67		—		4,284		4,351		2,083,957		2,088,308		Commercial and industrial	9,342		1,351		9,503		20,196		2,648,788		2,668,984
Commercial real estate	Commercial real estate	—		—		—		—		807,195		807,195		Commercial real estate	—		—		—		—		1,311,105		1,311,105
Multifamily	Multifamily	—		—		—		—		1,289,820		1,289,820		Multifamily	786		—		—		786		1,360,268		1,361,054
SBA	SBA	354		626		3,062		4,042		269,402		273,444		SBA	987		2,360		15,941		19,288		186,260		205,548
Construction	Construction	—		—		—		—		176,016		176,016		Construction	—		—		—		—		181,841		181,841

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	6,836		980		3,742		11,558		783,163		794,721		Single family residential mortgage	24,867		—		7,076		31,943		1,388,080		1,420,023
Other consumer	Other consumer	216		61		—		277		31,511		31,788		Other consumer	449		—		89		538		102,387		102,925
Total traditional loans		7,473		1,667		11,088		20,228		5,441,064		5,461,292

Total	Total	$	11,673	$	2,308	$	17,636	$	31,617	$	5,866,788	$	5,898,405	Total	$	36,431	$	3,711	$	32,609	$	72,751	$	7,178,729	$	7,251,480

~~In accordance with regulatory guidance, borrowers that are on forbearance or deferment, that were current prior to becoming affected by the global pandemic should not be reported as past due.~~

~~Table of~~ ~~Contents~~

Nonaccrual Loans

The following table presents nonaccrual loans as of the dates indicated:


		September 30, 2021								December 31, 2020									March 31, 2022				December 31, 2021
($ in thousands)	($ in thousands)	NTM Loans		Traditional Loans		Total Nonaccrual Loans		Nonaccrual Loans with no ACL		NTM Loans		Traditional Loans		Total Nonaccrual Loans		Nonaccrual Loans with no ACL		($ in thousands)	Total Nonaccrual Loans		Nonaccrual Loans with no ACL		Total Nonaccrual Loans		Nonaccrual Loans with no ACL
Nonaccrual loans	Nonaccrual loans																	Nonaccrual loans
Commercial:	Commercial:																	Commercial:
Commercial and industrial	Commercial and industrial	$	—	$	11,834	$	11,834	$	11,834	$	—	$	13,821	$	13,821	$	13,088	Commercial and industrial	$	27,368	$	8,154	$	28,594	$	9,137
Commercial real estate	Commercial real estate	—		4,419		4,419		4,419		—		4,654		4,654		4,654		Commercial real estate	916		916		—		—

SBA	SBA	—		12,824		12,824		5,204		—		3,749		3,749		648		SBA	15,381		10,201		16,653		11,443

Consumer:	Consumer:																	Consumer:
Single family residential mortgage	Single family residential mortgage	6,644		9,900		16,544		14,015		8,697		4,822		13,519		13,519		Single family residential mortgage	10,345		6,416		7,076		7,076

Other consumer	Other consumer	—		—		—		—		—		157		157		157		Other consumer	519		504		235		235
Total nonaccrual loans	Total nonaccrual loans	$	6,644	$	38,977	$	45,621	$	35,472	$	8,697	$	27,203	$	35,900	$	32,066	Total nonaccrual loans	$	54,529	$	26,191	$	52,558	$	27,891

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were ~~zero and $728 thousand of~~no loans that were past due 90 days or more and still accruing.

~~The non-traditional mortgage (“NTM”) loans on nonaccrual status included $3.3 million~~

Table of ~~Green Loans and $3.3 million of Interest Only loans at September 30, 2021 compared to $4.0 million of Green Loans and $4.7 million of Interest Only loans at December 31, 2020.~~Contents

Other Real Estate Owned, Net and Loans in Process of Foreclosure

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there was no other real estate owned. During the three and nine months ended September 30, 2021, other real estate owned, consisting of 1 SFR property totaling $3.3 million, was sold at a gain of $365 thousand. During the three and nine months ended September 30, 2020, other real estate owned, consisting of 1 SFR property totaling $1.1 million, was sold at a loss of $38 thousand.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there was 1 and ~~zero~~no consumer mortgage loans secured by residential real estate properties ~~totaling $2.5 million and zero~~ for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.

Allowance for Credit Losses

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (MEVs) released by ~~our~~the model provider during ~~September 2021.~~March 2022. The ~~September 2021~~published forecasts ~~reflect a more favorable view of the economy (i.e.~~consider rising inflation, higher GDP growth rates and lower unemployment rates) compared to the June 2021 forecasts. While the current forecasts generally reflect an improving economy with the availability of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variants, further government stimulus,oil prices, ongoing supply chain issues and the military conflict between Russia and Ukraine, among other factors, and while they reflect a less optimistic view of the economy as compared to the December 2021 forecasts, certain MEVs used in the model during the current quarter, such as California employment and the CRE price index, reflect improvements. Nonetheless, the ultimate pace of economic recovery remains uncertain and accordingly, the ~~recovery. Accordingly, our~~ economic assumptions used in the model and the resulting ACL level and provision ~~reversal~~ consider both the positive assumptions and potential uncertainties.

The ACL also ~~incorporated~~incorporates qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.

The ACL process involves subjective and complex judgments as well as adjustments for numerous factors including those described in the federal banking agencies' joint interagency policy statement on ALL, which include underwriting experience and collateral value changes, among others.

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

~~Table of~~ ~~Contents~~

fulfill their contractual payment requirements within the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing these loans on nonaccrual 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 current expected credit losses in the loan portfolio.

The reserve for unfunded loan commitments is established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the reserve for unfunded loan commitments was ~~$5.2~~$5.4 million and ~~$3.2~~$5.6 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 September 30,												Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021						2020							($ in thousands)	2022						2021
		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				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	Balance at beginning of period	$	75,885	$	3,814	$	79,699	$	90,370	$	4,195	$	94,565		Balance at beginning of period	$	92,584	$	5,605	$	98,189	$	81,030	$	3,183	$	84,213

Loans charged off	Loans charged off	(327)		—		(327)		(1,821)		—		(1,821)			Loans charged off	(231)		—		(231)		(565)		—		(565)
Recoveries of loans previously charged off	Recoveries of loans previously charged off	532		—		532		248		—		248			Recoveries of loans previously charged off	32,215		—		32,215		172		—		172
Net recoveries (charge-offs)	Net recoveries (charge-offs)	205		—		205		(1,573)		—		(1,573)			Net recoveries (charge-offs)	31,984		—		31,984		(393)		—		(393)

(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	(2,566)		1,419		(1,147)		2,130		(989)		1,141			(Reversal of) provision for credit losses	(31,342)		(200)		(31,542)		(1,284)		177		(1,107)
Balance at end of period	Balance at end of period	$	73,524	$	5,233	$	78,757	$	90,927	$	3,206	$	94,133		Balance at end of period	$	93,226	$	5,405	$	98,631	$	79,353	$	3,360	$	82,713

Nine Months Ended September 30,
($ in thousands) 2021 2020
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 $ 81,030 $ 3,183 $ 84,213 $ 57,649 $ 4,064 $ 61,713
Impact of adopting ASU 2016-13 — — — 7,609 (1,226) 6,383
Loans charged off (1,778) — (1,778) (3,897) — (3,897)
Recoveries of loans previously charged off 730 — 730 1,206 — 1,206
Net charge-offs (1,048) — (1,048) (2,691) — (2,691)
(Reversal of) provision for credit losses (6,458) 2,050 (4,408) 28,360 368 28,728
Balance at end of period $ 73,524 $ 5,233 $ 78,757 $ 90,927 $ 3,206 $ 94,133

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

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Accrued interest receivable on loans receivable, net totaled ~~$23.8~~$27.5 million and ~~$24.7~~$25.8 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 as of or for the three ~~and nine~~ months ended ~~September 30, 2021:~~March 31, 2022:


($ in thousands)	($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total		($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total
ALL:	ALL:																	ALL:
Three Months Ended September 30, 2021:
Balance at June 30, 2021		$	20,156	$	16,424	$	21,403	$	3,696	$	4,734	$	9,108	$	364	$	75,885
Three Months Ended March 31, 2022:																		Three Months Ended March 31, 2022:
Balance at December 31, 2021																		Balance at December 31, 2021	$	33,557	$	21,727	$	17,893	$	3,017	$	5,622	$	9,608	$	1,160	$	92,584

Charge-offs	Charge-offs	(115)		(138)		—		(74)		—		—		—		(327)		Charge-offs	(182)		—		—		(13)		—		(10)		(26)		(231)
Recoveries	Recoveries	484		—		—		1		—		46		1		532		Recoveries	31,417		—		—		758		—		38		2		32,215
Net recoveries (charge-offs)	Net recoveries (charge-offs)	369		(138)		—		(73)		—		46		1		205		Net recoveries (charge-offs)	31,235		—		—		745		—		28		(24)		31,984

(Reversal of) provision for credit losses - loans	(Reversal of) provision for credit losses - loans	(270)		(269)		(2,678)		1,112		(616)		150		5		(2,566)		(Reversal of) provision for credit losses - loans	(24,825)		(5,237)		(2,556)		(721)		646		1,393		(42)		(31,342)
Balance at September 30, 2021		$	20,255	$	16,017	$	18,725	$	4,735	$	4,118	$	9,304	$	370	$	73,524
Balance at March 31, 2022																		Balance at March 31, 2022	$	39,967	$	16,490	$	15,337	$	3,041	$	6,268	$	11,029	$	1,094	$	93,226

Nine Months Ended September 30, 2021:
Balance at December 31, 2020		$	20,608	$	19,074	$	22,512	$	3,145	$	5,849	$	9,191	$	651	$	81,030

Charge-offs		(1,180)		(138)		—		(460)		—		—		—		(1,778)
Recoveries		553		—		—		130		—		46		1		730
Net (charge-offs) recoveries		(627)		(138)		—		(330)		—		46		1		(1,048)

Provision for (reversal of) credit losses - loans		274		(2,919)		(3,787)		1,920		(1,731)		67		(282)		(6,458)
Balance at September 30, 2021		$	20,255	$	16,017	$	18,725	$	4,735	$	4,118	$	9,304	$	370	$	73,524

~~Table of~~ ~~Contents~~

($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Single Family Residential Mortgage Other Consumer Total
ALL:
Three Months Ended September 30, 2020:
Balance at June 30, 2020 $ 26,618 $ 17,372 $ 25,105 $ 4,184 $ 6,675 $ 9,665 $ 751 $ 90,370
Charge-offs (1,597) — — (224) — — — (1,821)
Recoveries 116 — — 132 — — — 248
Net charge-offs (1,481) — — (92) — — — (1,573)
Provision for (reversal of) credit losses - loans 1,454 2,001 454 (535) (470) (689) (85) 2,130
Balance at September 30, 2020 $ 26,591 $ 19,373 $ 25,559 $ 3,557 $ 6,205 $ 8,976 $ 666 $ 90,927
Nine Months Ended September 30, 2020:
Balance at December 31, 2019 $ 22,353 $ 5,941 $ 11,405 $ 3,120 $ 3,906 $ 10,486 $ 438 $ 57,649
Adoption of ASU No. 2016-13 662 4,847 1,809 388 103 (420) 220 7,609
Charge-offs (2,761) — — (580) — (552) (4) (3,897)
Recoveries 265 — — 253 — 639 49 1,206
Net (charge-offs) recoveries (2,496) — — (327) — 87 45 (2,691)
Provision for (reversal of) credit losses - loans 6,072 8,585 12,345 376 2,196 (1,177) (37) 28,360
Balance at September 30, 2020 $ 26,591 $ 19,373 $ 25,559 $ 3,557 $ 6,205 $ 8,976 $ 666 $ 90,927


($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total
ALL:
Three Months Ended March 31, 2021:
Balance at December 31, 2020	$	20,608	$	19,074	$	22,512	$	3,145	$	5,849	$	9,191	$	651	$	81,030

Charge-offs	(565)		—		—		—		—		—		—		(565)
Recoveries	45		—		—		126		—		—		1		172
Net (charge-offs) recoveries	(520)		—		—		126		—		—		1		(393)

(Reversal of) provision for credit losses - loans	(385)		(1,974)		1,372		180		(297)		(30)		(150)		(1,284)
Balance at March 31, 2021	$	19,703	$	17,100	$	23,884	$	3,451	$	5,552	$	9,161	$	502	$	79,353

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Collateral Dependent Loans

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are evaluated individually and the ACL is determined based on the amount by which amortized costs exceed the estimated fair value of the collateral, adjusted for estimated selling costs.

Collateral dependent loans consisted of the following as of ~~September 30, 2021 and December 31, 2020:~~the dates indicated:


		September 30, 2021									March 31, 2022
		Real Estate									Real Estate
($ in thousands)	($ in thousands)	Commercial		Residential		Business Assets		Total		($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total
Commercial:	Commercial:									Commercial:
Commercial and industrial	Commercial and industrial	5,121		—		4,424		9,545		Commercial and industrial	$	14,439	$	14	$	4,499	—		$	18,952
Commercial real estate	Commercial real estate	2,529		1,890		—		4,419		Commercial real estate	5,160		—		—		—		5,160

SBA	SBA	70		4,241		8,466		12,777		SBA	658		4,582		10,144		—		15,384

Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	—		22,192		—		22,192		Single family residential mortgage	—		15,464		—		—		15,464

Other consumer										Other consumer	—		187		—		332		519
Total loans	Total loans	$	7,720	$	28,323	$	12,890	$	48,933	Total loans	$	20,257	$	20,247	$	14,643	$	332	$	55,479


		December 31, 2020									December 31, 2021
		Real Estate									Real Estate
($ in thousands)	($ in thousands)	Commercial		Residential		Business Assets		Total		($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total
Commercial:	Commercial:									Commercial:
Commercial and industrial	Commercial and industrial	5,492		—		4,965		10,457		Commercial and industrial	$	13,518	$	37	$	4,776	$	—	$	18,331
Commercial real estate		2,644		2,010		—		4,654

SBA	SBA	349		497		2,750		3,596		SBA	689		4,458		11,511		—		16,658

Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	—		17,820		—		17,820		Single family residential mortgage	—		14,012		—		—		14,012
Other consumer	Other consumer	—		157		—		157		Other consumer	—		—		—		235		235
Total loans	Total loans	$	8,485	$	20,484	$	7,715	$	36,684	Total loans	$	14,207	$	18,507	$	16,287	$	235	$	49,236

Troubled Debt Restructurings

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


		September 30, 2021						December 31, 2020
($ in thousands)	($ in thousands)	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total		($ in thousands)	March 31, 2022		December 31, 2021

Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	$	—	$	2,289	$	2,289	$	—	$	3,884	$	3,884	Commercial and industrial	$	20,281	$	5,241
Commercial real estate														Commercial real estate	4,244		4,243
SBA	SBA	—		264		264		—		265		265		SBA	265		265
Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	3,432		2,216		5,648		2,631		2,217		4,848		Single family residential mortgage	5,119		6,935

Other consumer		—		—		—		—		—		—

Total	Total	$	3,432	$	4,769	$	8,201	$	2,631	$	6,366	$	8,997	Total	$	29,909	$	16,684

We had commitments to lend to customers with outstanding loans that were classified as TDRs of $664 thousand and $63 thousand at ~~both September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Accruing TDRs were ~~$5.8~~$14.9 million and nonaccrual TDRs were ~~$2.4~~$15.1 million at ~~September 30, 2021,~~March 31, 2022, compared to accruing TDRs of ~~$4.7~~$12.5 million and nonaccrual TDRs of ~~$4.3~~$4.1 million at December 31, ~~2020.~~2021. The increase in TDRs during the three months ended March 31, 2022 was due to the modification of a non-performing PCD loan acquired in the PMB acquisition.

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

Three Months Ended Nine 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
September 30, 2021
Consumer:
Single family residential mortgage — $ — $ — 1 1,800 1,800
Total — — — 1 $ 1,800 $ 1,800
September 30, 2020
Commercial:
Commercial and industrial — $ — $ — 1 $ 5,000 $ 5,000
Total — $ — $ — 1 $ 5,000 $ 5,000



	Three Months Ended
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
March 31, 2022
Commercial:
Commercial and industrial(1)	1	$	12,840	$	12,840






March 31, 2021



Consumer:
Single family residential mortgage(1)	1	$	1,800	$	1,800

(1) Modifications during the three months ended March 31, 2022 and 2021 consisted of extensions of maturity.

We consider a TDR to be in payment default once it becomes 30 days or more past due following a modification. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ there were no loans that were modified as a TDR during the past 12 months that had subsequent payment defaults.

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

Nine Months Ended
Modification Type
Extension of Maturity Total
($ in thousands) Count Amount Count Amount
September 30, 2021
Consumer:
Single family residential mortgage 1 1,800 1 1,800
Total 1 $ 1,800 1 $ 1,800
September 30, 2020
Commercial:
Commercial and industrial 1 $ 5,000 1 $ 5,000
Total 1 $ 5,000 1 $ 5,000

Purchases, Sales, and Transfers

From time to time, we purchase and sell loans in the secondary market. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, we purchased loans aggregating $364.4 million. During the three months ended March 31, 2021, we purchased loans aggregating ~~$249.4 million and $615.4 million. During the three and nine months ended September 30, 2020, we purchased loans aggregating $129.0 million and $154.9~~$132.9 million.

There were no loans transferred from (to) loans held-for-sale and there were no sales of loans for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Non-Traditional Mortgage Loans (“NTM”)

~~Our~~As of March 31, 2022 and December 31, 2021, the NTM loans totaled $717.6 million, or 9.6% of total loans, and $635.3 million, or 8.8% of total loans, respectively. NTM loans are included in our SFR mortgage portfolio ~~includes 3~~and are comprised of interest only loans and Green Loans.

We no longer originate SFR loans, however we have and may continue to purchase pools of loans that include NTM loans such as interest only loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the life of the loan. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At March 31, 2022 and December 31, 2021, interest only loans totaled $706.9 million and $613.3 million. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of ~~interest-only loans:~~deposits and withdrawals to be performed. Green Loans ~~Interest Only~~are generally interest only for a 15-year term with a balloon payment due at maturity. At March 31, 2022 and December 31, 2021, Green Loans totaled $10.2 million and $21.5 million.

At March 31, 2022 and December 31, 2021, nonperforming NTM loans totaled zero and ~~a small number of loans with the potential for negative amortization. The initial~~$4.0 million.

Non-Traditional Mortgage Performance Indicators

Our risk management policy and credit ~~guidelines for~~monitoring include reviewing delinquency, FICO scores, and LTV ratios on 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~~portfolio. We also continuously monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for ~~NTMs~~NTM first lien loans are LTV ratios and for Green Loans are FICO scores. ~~We review the~~At March 31, 2022, all of our $717.6 million NTM ~~loan~~first lien portfolio ~~periodically by refreshing~~had LTVs of 80% or less. At March 31, 2022, $6.4 million or 63% of our $10.2 million Green Loans first lien portfolio had FICO scores ~~on the Green Loans and HELOCs and ordering third party automated valuation models ("AVMs") to confirm collateral~~of 700 or greater.

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~~values. We no longer originate NTM loans, however, loans may be purchased which meet the criteria to be considered NTM loans.~~

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

September 30, 2021 December 31, 2020
($ in thousands) Count Amount Percent Count Amount Percent
Consumer:
Single family residential mortgage:
Green Loans (HELOC) - first liens 36 $ 25,074 4.4 % 48 $ 31,587 7.2 %
Interest Only - first liens 337 543,243 95.1 % 283 401,640 91.9 %
Negative amortization 4 1,464 0.3 % 8 2,288 0.5 %
Total NTM - first liens 377 569,781 99.7 % 339 435,515 99.6 %
Other consumer:
Green Loans (HELOC) - second liens 5 1,597 0.3 % 5 1,598 0.4 %
Total NTM - second liens 5 1,597 0.3 % 5 1,598 0.4 %
Total NTM loans 382 $ 571,378 100.0 % 344 $ 437,113 100.0 %
Total loans receivable $ 6,228,575 $ 5,898,405
% of total NTM loans to total loans receivable 9.2 % 7.4 %

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had goodwill of ~~$37.1~~$95.1 million and $94.3 million. We evaluate goodwill for impairment as of October 1st each year, and more frequently if events or circumstances indicate that there may be impairment. We completed our most recent annual goodwill impairment test as of October 1, ~~2020~~2021 and determined that no goodwill impairment existed.

The following table presents changes in the carrying amount of goodwill for the periods indicated:


	Three Months Ended March 31,
($ in thousands)	2022		2021
Goodwill, beginning of period	$	94,301	$	37,144

Goodwill adjustments for purchase accounting	826		—


Goodwill, end of period	$	95,127	$	37,144
Accumulated impairment losses at end of period	$	2,100	$	2,100

During the three months ended March 31, 2022, goodwill was adjusted for final fair value and deferred tax adjustments related to the PMB acquisition.

Core deposit intangibles are amortized over their useful lives ~~ranging from~~ ~~four~~ to of ten years. As of ~~September 30, 2021,~~March 31, 2022, the weighted average remaining amortization period for core deposit intangibles was approximately ~~3.1~~7.7 years.

($ in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value
September 30, 2021
Core deposit intangibles $ 30,904 $ 29,117 $ 1,787
December 31, 2020
Core deposit intangibles $ 30,904 $ 28,271 $ 2,633
The following table presents changes in the carrying amount of intangible assets, net for the periods indicated:

Aggregate amortization of intangible assets was $282 thousand and $353 thousand for the three months ended September 30, 2021 and 2020 and $846 thousand and $1.2 million for the nine months ended September 30, 2021 and 2020.


	Three Months Ended March 31,
($ in thousands)	2022		2021
Core deposit intangibles:
Balance, beginning of period	$	35,958	$	30,904

Core deposit intangible adjustments for purchase accounting	(980)		—
Balance, end of period	34,978		30,904
Accumulated amortization:
Balance, beginning of period	29,547		28,271
Amortization of intangible assets	441		282
Balance, end of period	29,988		28,553
Intangible assets, net	$	4,990	$	2,351

The following table presents estimated future amortization ~~expenses~~expense of intangible assets, net as of ~~September 30, 2021:~~March 31, 2022:


($ in thousands)	($ in thousands)	Remainder of 2021		2022		2023		2024		Total		($ in thousands)	Remainder of 2022		2023		2024		2025		2026		2027 and After		Total
Estimated future amortization expense	Estimated future amortization expense	$	236	$	799	$	517	$	235	$	1,787	Estimated future amortization expense	$	1,058	$	1,092	$	719	$	420	$	373	$	1,328	$	4,990

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NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

The following table presents advances from the FHLB as of the dates indicated:


($ in thousands)	($ in thousands)	September 30, 2021			December 31, 2020			($ in thousands)	March 31, 2022			December 31, 2021
Fixed rate:	Fixed rate:							Fixed rate:
Outstanding balance ~~(2)~~(1)	Outstanding balance ~~(2)~~(1)	$	411,000		$	461,000		Outstanding balance ~~(2)~~(1)	$	411,000		$	411,000
Interest rates ranging from ~~(2)~~	Interest rates ranging from ~~(2)~~	0.64		%	—		%	Interest rates ranging from ~~(2)~~	0.64		%	0.64		%
Interest rates ranging to	Interest rates ranging to	3.32		%	3.32		%	Interest rates ranging to	3.32		%	3.32		%
Weighted average interest rate	Weighted average interest rate	2.53		%	2.51		%	Weighted average interest rate	2.53		%	2.53		%
Variable rate:	Variable rate:							Variable rate:
Outstanding balance	Outstanding balance	$	—		$	85,000		Outstanding balance	$	150,000		$	70,000
Weighted average interest rate	Weighted average interest rate	—		%	0.17		%	Weighted average interest rate	0.43		%	0.20		%

(1)Excludes ~~$5.3~~$4.6 million and ~~$6.2~~$4.9 million of unamortized debt issuance costs at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~

~~(2)Includes zero and $5.0 million in FHLB recovery advances at September 30, 2021 and December 31, 2020 with an interest rate of 0.00% that matured on May 27,~~ 2021.

Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty. At the end of the ~~third~~first quarter of ~~2021,~~2022, FHLB advances included no$150.0 million in overnight borrowings and $411.0 million in term advances with a weighted average life of ~~4.2~~3.7 years and weighted average interest rate of 2.53%.

The Bank’s advances from the FHLB are collateralized by a blanket lien on all real estate loans. Our secured borrowing capacity with the FHLB totaled ~~$1.63~~$1.88 billion, of which the Bank was eligible to borrow an additional ~~$894.9 million~~$1.08 billion at ~~September 30, 2021~~March 31, 2022 based on qualifying loans with an aggregate unpaid principal balance of ~~$2.09~~$2.44 billion as of that date.

The Bank’s investment in capital stock of the FHLB of San Francisco totaled $17.3 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

At ~~September 30, 2021,~~March 31, 2022, the ~~Company~~Bank had borrowing capacity with the Federal Reserve Bank of San Francisco (“Federal Reserve”) of ~~$349.3~~$752.8 million, including the secured borrowing capacity through the Federal Reserve Discount Window and Borrower-in-Custody ("BIC") program. At ~~September 30, 2021,~~March 31, 2022, the Bank has pledged certain qualifying loans with an unpaid principal balance of ~~$617.4 million~~$1.09 billion and securities with a carrying value of $8.9 million as collateral for these lines 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

The Bank’s investment in capital stock of the Federal Reserve totaled $34.2 million and $27.3 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021.

The Bank maintained available unsecured federal funds lines with 5 correspondent banks totaling $210.0 million, with no outstanding borrowings at ~~September 30, 2021.~~March 31, 2022. The Bank also has the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform (AFX). The availability of such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled $441.0 million ~~and $196.0 million~~ at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Borrowings under the AFX totaled ~~$100.0~~$170.0 million and $25.0 million at March 31, 2022 and December 31, 2021.

In December 2021, the holding company entered into a $50.0 million revolving line of credit, which matures on December 19, 2022. There were $20.0 million and zero in borrowings under this line of credit at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. At March 31, 2022, we were in compliance with all covenants under our revolving line of credit.

The Bank also maintained repurchase agreements and had no outstanding securities sold under agreements to repurchase at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.

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NOTE 7 – LONG-TERM DEBT

The following table presents our long-term debt as of the dates indicated:


		September 30, 2021				December 31, 2020							March 31, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount		($ in thousands)	Interest Rate	Maturity Date	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	$	(1,104)	$	175,000	$	(1,291)
4.375% subordinated notes due October 30, 2030		85,000		(2,190)		85,000		(2,394)
Senior notes										Senior notes	5.25%	4/15/2025	$	175,000	$	(975)	$	175,000	$	(1,014)
Subordinated notes										Subordinated notes	4.375%	10/30/2030	85,000		(2,084)		85,000		(2,127)
PMB Statutory Trust III, junior subordinated debentures										PMB Statutory Trust III, junior subordinated debentures	Libor + 3.40%	9/26/2032	7,217		—		7,217		—
PMB Capital Trust III, junior subordinated debentures										PMB Capital Trust III, junior subordinated debentures	Libor + 2.00%	10/8/2034	10,310		—		10,310		—
Total	Total	$	260,000	$	(3,294)	$	260,000	$	(3,685)	Total			$	277,527	$	(3,059)	$	277,527	$	(3,141)

At ~~September 30, 2021,~~March 31, 2022, we were in compliance with all covenants under our long-term debt agreements.

NOTE 8 – INCOME TAXES

For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, income tax expense was ~~$8.7 million and $17.5~~$18.8 million, resulting in an effective tax rate of ~~27.2% and 23.6%~~27.9%. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, income tax expense ~~(benefit)~~ was ~~an expense of $2.4~~$2.3 million, ~~and a benefit of $5.1 million and the~~resulting in an effective tax rate was ~~12.9% and 35.9%~~13.8%. The effective tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 differs from the combined federal and state statutory rate for the consolidated company of 28.9% due primarily to various permanent tax differences, tax credits and other discrete tax items that impact our effective tax rate. The effective tax rate for the three months ended March 31, 2021 differs from the ~~29.5%~~28.9% combined federal and state statutory rate due primarily to the net tax benefit of ~~$2.5~~$2.3 million from share-based awards, including the exercise of all previously issued outstanding stock appreciation rights in the first quarter of 2021 and various permanent tax differences, tax credits and other discrete tax items that impact our effective tax rate. The effective tax rate for the nine months ended September 30, 2020 differs from the 29.5% combined federal and state statutory rate due primarily to applying the discrete effective tax rate method for 2020 based on our actual and projected level of earnings and permanent tax differences for the year.

We account for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of our assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies. Based on this analysis, management determined, it was more likely than not, that all of the deferred tax assets would be realized; therefore, no valuation allowance was provided against the net deferred tax assets of ~~$40.7~~$51.5 million and ~~$46.0~~$50.8 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively.~~2021.

ASC 740-10-25 relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We had unrecognized tax benefits of ~~$1.0 million~~$940 thousand and ~~$924~~$925 thousand at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. We do not believe that the unrecognized tax benefits will change materially in the next twelve months. As of ~~September 30, 2021,~~March 31, 2022, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was ~~$780~~$712 thousand.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had no accrued interest or penalties. In the event we are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense.

We are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. We are no longer subject to examination by U.S. federal taxing authorities for years before ~~2017.~~2018. The statute of limitations for the assessment of California franchise taxes has expired for tax years before ~~2014~~2017 (other state income and franchise tax statutes of limitations vary by state).

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NOTE 9 – DERIVATIVE INSTRUMENTS

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

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During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, changes in fair value of interest rate swaps on loans and foreign exchange contracts were gains of ~~$41~~$103 thousand and ~~$240~~$271 thousand, ~~compared to a gain of $3 thousand and a loss of $285 thousand for the three and nine months endedSeptember 30, 2020,~~ and were included in other income on the consolidated statements of operations.

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


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Notional Amount		Fair Value(1)		Notional Amount		Fair Value(1)		($ in thousands)	Notional Amount		Fair Value(1)		Notional Amount		Fair Value(1)
Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps on loans	Interest rate swaps on loans	$	63,514	$	4,495	$	67,840	$	7,304	Interest rate swaps on loans	$	49,807	$	1,071	$	58,834	$	3,390
Foreign exchange contracts	Foreign exchange contracts	5,295		173		7,010		328		Foreign exchange contracts	6,540		244		4,725		175
Total	Total	$	68,809	$	4,668	$	74,850	$	7,632	Total	$	56,347	$	1,315	$	63,559	$	3,565
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Interest rate swaps on loans	Interest rate swaps on loans	$	63,514	$	4,739	$	67,840	7,789		Interest rate swaps on loans	$	49,807	$	1,152	$	58,834	3,594

Foreign exchange contracts	Foreign exchange contracts	5,295		159		7,010		313		Foreign exchange contracts	6,540		236		4,725		146
Total	Total	$	68,809	$	4,898	$	74,850	$	8,102	Total	$	56,347	$	1,388	$	63,559	$	3,740

(1)The fair value of interest rate swaps on loans and foreign exchange contracts are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated statements of financial condition.

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. We elect, however, to account for all derivatives with counterparty institutions on a gross basis.

NOTE 10 – EMPLOYEE STOCK COMPENSATION

On May 31, 2018, our stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (“2018 Omnibus Plan”). The 2018 Omnibus Plan provides that the maximum number of shares available for awards is 4,417,882. As of ~~September 30, 2021, 3,221,555~~March 31, 2022, 2,910,126 shares were available for future awards.

Stock-based Compensation Expense

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Stock options		$	—	$	—	$	—	$	4

Restricted stock awards and units	Restricted stock awards and units	1,106		1,346		3,988		4,388		Restricted stock awards and units	$	1,285	$	1,544

Total share-based compensation expense		$	1,106	$	1,346	$	3,988	$	4,392

Related tax benefits	Related tax benefits	$	326	$	396	$	1,175	$	1,293	Related tax benefits	$	371	$	455

Total stock-based compensation expense represents the cost of time-based and performance-based stock units and awards. At ~~September 30, 2021,~~March 31, 2022, unrecognized compensation expense related to restricted stock awards and restricted stock units totaled ~~$7.0~~$9.1 million and will be recognized over a weighted average remaining period of ~~2.1~~2.6 years.

Restricted Stock Awards and Restricted Stock Units

We have granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are valued at the closing price of 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 our

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profitability and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of our Board of Directors upon the Committee's certification of the satisfaction of the target level of

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performance. We recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally upon vesting or, in the case of restricted stock units, when settled.

The following table presents unvested restricted stock awards and restricted stock units activity for the three ~~and nine~~ months ended ~~September 30, 2021:~~March 31, 2022:


		Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021				Three Months Ended March 31, 2022
		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	Outstanding at beginning of period	697,088	$	17.13	848,302	$	14.42	Outstanding at beginning of period	649,010	$	17.17
Granted (1)	Granted (1)	14,312	$	17.47	283,642	$	19.87	Granted (1)	270,567	$	19.56
Vested (2)	Vested (2)	(11,809)	$	15.14	(367,089)	$	13.75	Vested (2)	(116,581)	$	17.06
Forfeited (3)	Forfeited (3)	(38,724)	$	17.31	(103,988)	$	14.24	Forfeited (3)	(18,205)	$	16.19
Outstanding at end of period	Outstanding at end of period	660,867	$	17.16	660,867	$	17.16	Outstanding at end of period	784,791	$	18.08

(1)There were ~~zero and 66,472~~69,125 performance-based shares/units included in shares granted for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022.

(2)There were zero ~~and 77,327~~ performance-based shares/units included in vested shares for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022.

(3)The number of forfeited shares ~~includes~~included aggregate performance-based shares/units of ~~8,643 and 48,803~~9,428 for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022.

Stock Options

~~We also issued~~There were no stock options ~~to certain employees, officers, and directors. Stock options are issued at~~granted during the ~~closing market price immediately before the grant date and generally have a~~ three to ~~five~~ ~~year vesting period and contractual terms of~~ ~~seven~~ to ~~ten~~ years. We recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair market value of the shares acquired at the time of exercise less the exercise price.

months ended March 31, 2022. The following table represents stock option activity for the three months ended ~~September 30, 2021:~~March 31, 2022:

Three Months Ended September 30, 2021
($ 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 14,904 $ 13.05
Exercised — $ —
Outstanding at end of period 14,904 $ 13.05 3.5 years $ 81
Exercisable at end of period 14,904 $ 13.05 3.5 years $ 81

~~The following table represents stock option activity for the nine months ended September 30, 2021:~~

Nine Months Ended September 30, 2021
($ 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 55,069 $ 13.96
Exercised (40,165) $ 14.30
Outstanding at end of period 14,904 $ 13.05 3.5 years $ 81
Exercisable at end of period 14,904 $ 13.05 3.5 years $ 81

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	Three Months Ended March 31, 2022
($ 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	14,904	$	13.05


Exercised	—	$	—


Outstanding at end of period	14,904	$	13.05	3.0 years	$	94
Exercisable at end of period	14,904	$	13.05	3.0 years	$	94

There were no unvested stock options as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Stock Appreciation Rights

~~On August 21, 2012, we granted to~~In the first quarter of 2021, all of our then ~~and now former, chief executive officer,~~ ~~ten-year~~outstanding stock appreciation rights (“SARs”)~~, which~~ were fully exercised ~~during the first quarter of 2021~~ resulting in the issuance of 305,772 shares of voting common stock. In connection with the exercise of the SARs, we recognized a tax benefit of $2.1 million (refer to Note 8 - Income Taxes). There are no further outstanding SARs. ~~The following table represents SARs activity and the weighted average exercise price per share as of and for the three and nine months ended September 30, 2021:~~

Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2021
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Number of Shares Weighted-Average Exercise Price Per Share
Outstanding at beginning of period — $ — 1,559,012 $ 11.60
Exercised — $ — (1,559,012) $ 11.60
Outstanding at end of period — $ — — $ —
Exercisable at end of period — $ — — $ —

NOTE 11 – STOCKHOLDERS’ EQUITY

Preferred Stock

We are authorized to issue 50,000,000 shares of preferred stock with par value of $0.01 per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but generally have no voting rights. All of our outstanding shares of preferred stock ~~have~~had a $1,000 per share liquidation preference.

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The following table presents our total outstanding preferred stock as of the dates indicated:


		September 30, 2021					December 31, 2020						March 31, 2022					December 31, 2021
($ in thousands)	($ in thousands)	Shares Outstanding	Liquidation Preference		Carrying Value		Shares Outstanding	Liquidation Preference		Carrying Value		($ in thousands)	Shares Outstanding	Liquidation Preference		Carrying Value		Shares Outstanding	Liquidation Preference		Carrying Value

Series D 7.375% non-cumulative perpetual		—	$	—	$	—	93,270	$	93,270	$	89,922

Series E 7.00% non-cumulative perpetual	Series E 7.00% non-cumulative perpetual	98,702	98,702		94,956		98,702	98,702		94,956		Series E 7.00% non-cumulative perpetual	—	—		—		98,702	98,702		94,956
Total	Total	98,702	$	98,702	$	94,956	191,972	$	191,972	$	184,878	Total	—	$	—	$	—	98,702	$	98,702	$	94,956

During certain periods, we have repurchased Series D Depositary Shares and Series E Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock and Series E Preferred Stock. When the consideration paid to repurchase shares exceeds the repurchased shares' carrying value, the difference reduces net income allocated to common shareholders. When the consideration paid to repurchase shares is less than the repurchased shares' carrying value, the difference increases net income allocated to common shareholders. The following table summarizes repurchases of these depositary shares for the periods indicated:

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		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Series D Preferred Stock:	Series D Preferred Stock:									Series D Preferred Stock:
Depositary shares repurchased	Depositary shares repurchased	—		100		3,730,767		134,410		Depositary shares repurchased	—		3,730,767
Preferred Stock retired (shares)	Preferred Stock retired (shares)	—		3		93,269		3,360		Preferred Stock retired (shares)	—		93,269

Consideration paid	Consideration paid	$	—	$	2	$	93,269	$	2,698	Consideration paid	$	—	$	93,269
Carrying value	Carrying value	—		2		89,922		3,240		Carrying value	—		89,922
Impact of preferred stock redemption	Impact of preferred stock redemption	$	—	$	—	$	3,347	$	(541)	Impact of preferred stock redemption	$	—	$	3,347

Series E Preferred Stock:	Series E Preferred Stock:									Series E Preferred Stock:
Depositary shares repurchased	Depositary shares repurchased	—		6,502		—		70,967		Depositary shares repurchased	3,948,080		—
Preferred Stock retired (shares)	Preferred Stock retired (shares)	—		163		—		1,774		Preferred Stock retired (shares)	98,702		—

Consideration paid	Consideration paid	$	—	$	164	$	—	$	1,680	Consideration paid	$	98,703	$	—
Carrying value	Carrying value	—		156		—		1,707		Carrying value	94,956		—
Impact of preferred stock redemption	Impact of preferred stock redemption	$	—	$	7	$	—	$	(27)	Impact of preferred stock redemption	$	3,747	$	—

During the first quarter of 2022, we redeemed all of our outstanding Series E Depositary Shares, resulting in an after-tax charge of $3.7 million in the accompanying consolidated statements of operations. During the first quarter of 2021, we redeemed all of our outstanding Series D Depositary Shares, resulting in an ~~impact of preferred stock redemption~~after-tax charge of $3.3 million in the accompanying consolidated statements of operations.

Stock Repurchase Program

On March 15, 2022, we announced that our Board of Directors authorized the repurchase of up to $75 million of our common stock. The repurchase authorization expires in March 2023. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions

During the first quarter of 2022, common stock repurchased under the program totaled 215,550 shares at a weighted average price of $19.92. As of March 31, 2022, the Company had $70.7 million remaining under the current stock repurchase authorization.

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

Our AOCI includes unrealized gain (loss) on securities available-for-sale. Changes to AOCI are presented net of the tax effect as a component of stockholders' equity. Reclassifications from AOCI occur when a security is sold, called or matures and are recorded on the consolidated statements of operations either as a gain or loss. During the quarter ended March 31, 2022, we transferred certain AFS debt securities to HTM. The unrealized loss on such securities at the time of transfer continues to be reported in AOCI and is amortized over the remaining lift of the security as a yield adjustment. The following table presents changes to AOCI for the periods indicated:

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2021 2020 2021 2020
Unrealized gain (loss) on securities available-for-sale
Balance at beginning of period $ 14,740 $ (15,565) $ 7,746 $ (11,900)
Unrealized gain (loss) arising during the period (5,377) 23,859 4,535 20,677
Reclassification adjustment from other comprehensive income — — — (2,011)
Tax effect of current period changes 1,585 (7,028) (1,333) (5,500)
Total changes, net of taxes (3,792) 16,831 3,202 13,166
Balance at end of period $ 10,948 $ 1,266 $ 10,948 $ 1,266

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	Three Months Ended March 31,
($ in thousands)	2022		2021
Balance at beginning of period	$	7,743	$	7,746
Unrealized loss on securities available-for-sale:
Unrealized loss arising during the period	(38,087)		(3,638)

Reclassification adjustment from other comprehensive income	(16)		—

Total unrealized loss on securities available-for-sale	(38,103)		(3,638)
Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity	87		—
Tax effect of current period changes	11,101		1,077
Total changes, net of taxes	(26,915)		(2,561)

Balance at end of period	$	(19,172)	$	5,185

NOTE 12 – VARIABLE INTEREST ENTITIES

We hold ownership interests in alternative energy partnerships and qualified affordable housing 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 we are required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We have determined that our interests in these entities meet the definition of variable ~~interests.~~

~~Table~~interests; however none of ~~Contents~~the VIE's meet the criteria for consolidation.

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, therefore we ~~did~~do not consolidate the securitization trust. Our continuing involvement in this securitization is limited to customary obligations associated with the securitization of loans, including the obligation to cure, repurchase, or substitute loans in the event of a material breach in representations. Additionally, we have the obligation to guarantee credit losses up to 12% of the aggregate unpaid principal balances at cut-off date of the securitization. This obligation is supported by a $68.8 million letter of credit between 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 ~~September 30, 2021,~~March 31, 2022, we have a ~~$3.6~~$2.5 million repurchase reserve related to this VIE.

Alternative Energy Partnerships

We invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits). These entities were formed to invest in newly established residential and commercial solar leases and power purchase agreements. As a result of our investments, we have the right to certain investment tax credits and tax depreciation benefits (recognized on the flow through income statement method in accordance with ASC 740), and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. While our interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, we have determined that we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact the economic performance of the entities including operational and credit risk management activities. As we are not the primary beneficiary, we did not consolidate the entities.

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We use the Hypothetical Liquidation at Book Value ("HLBV") method to account for our investments in energy tax projects 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 under their respective priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period. To account for the tax credits earned on investments in alternative energy partnerships, we use the flow-through income statement method. Under this method, the tax credits are recognized as a reduction to income tax expense and the initial book-tax differences in the basis of the investments are recognized as additional tax expense in the year they are earned. Investments in alternative energy partnerships totaled $25.2 million and ~~$28.0~~$25.9 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

The following table presents information regarding activity in our alternative energy partnerships for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Fundings	Fundings	$	—	$	—	$	—	$	3,631	Fundings	$	—	$	—
Cash distribution from investment	Cash distribution from investment	657		611		1,765		1,612		Cash distribution from investment	574		538

Gain (loss) on investments in alternative energy partnerships		1,785		1,430		(1,016)		(308)
Loss on investments in alternative energy partnerships										Loss on investments in alternative energy partnerships	(158)		(3,630)
Income tax credits recognized	Income tax credits recognized	—		—		—		—		Income tax credits recognized	—		—
Tax expense (benefit) recognized from HLBV application		491		185		(280)		(111)
Tax benefit recognized from HLBV application										Tax benefit recognized from HLBV application	(46)		(992)

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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)	($ in thousands)	September 30, 2021		December 31, 2020		($ in thousands)	March 31, 2022		December 31, 2021
Cash	Cash	$	3,109	$	3,228	Cash	$	5,820	$	4,227
Equipment, net of depreciation	Equipment, net of depreciation	234,972		241,015		Equipment, net of depreciation	244,299		246,421
Other assets	Other assets	8,715		7,470		Other assets	9,199		9,098
Total unconsolidated assets	Total unconsolidated assets	$	246,796	$	251,713	Total unconsolidated assets	$	259,318	$	259,746
Total unconsolidated liabilities	Total unconsolidated liabilities	$	6,230	$	6,357	Total unconsolidated liabilities	$	12,087	$	12,129

Maximum loss exposure	Maximum loss exposure	$	25,196	$	27,977	Maximum loss exposure	$	25,156	$	25,888

The maximum loss exposure that would be absorbed by us in the event that all of the assets in alternative energy partnerships are deemed worthless is $25.2 million, which is our recorded investment amount at ~~September 30, 2021.~~March 31, 2022.

We believe that the loss exposure on our investments is reduced considering our return on our investment is provided not only by the cash flows of the underlying client leases and power purchase agreements, but also through the significant tax benefits, including the federal tax credit carryover that resulted from the investments. In addition, our exposure is further limited as the arrangements include a transition manager to support any transition of the solar company sponsor, whose role includes that of the servicer and operation and maintenance provider, in the event the sponsor would be required to be removed from its responsibilities (e.g., bankruptcy, breach of contract, etc.).

Capital Trusts - Trust Preferred Securities

In connection with our merger with PMB, we acquired investments in 2 grantor trusts. These grantor trusts were originally formed to sell and issue trust preferred securities to institutional investors (Refer to Note 7 - Long-term Debt). We are not the primary beneficiary, and consequently, these grantor trusts are not consolidated in the consolidated financial statements. At March 31, 2022 and December 31, 2021, our investment in these grantor trusts, which is included in other assets in the consolidated balance sheets, totaled $527 thousand.

Qualified Affordable Housing Partnerships - Low Income Housing Tax Credits

We invest in limited partnerships that operate qualified affordable housing ~~projects.~~projects that qualify for low income housing tax credits (“LIHTC”). The returns on these investments are generated primarily through allocated Federal tax credits and other tax

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benefits. In addition, ~~these~~LIHTC investments contribute to our compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. As a result, we do not consolidate these partnerships.

The following table presents information regarding balances in ~~our qualified affordable housing partnerships~~LIHTC investments for the periods indicated:


($ in thousands)	($ in thousands)	September 30, 2021		December 31, 2020		($ in thousands)	March 31, 2022		December 31, 2021
Ending balance(1)	Ending balance(1)	$	40,095	$	43,209	Ending balance(1)	$	40,133	$	38,982
Aggregate funding commitment	Aggregate funding commitment	61,278		61,278		Aggregate funding commitment	63,278		61,278
Total amount funded	Total amount funded	48,718		42,991		Total amount funded	52,119		51,014
Unfunded commitment	Unfunded commitment	12,560		18,287		Unfunded commitment	11,159		10,264
Maximum loss exposure	Maximum loss exposure	40,095		43,209		Maximum loss exposure	40,133		38,982

(1)Included in other assets in the accompanying Consolidated Statements of Financial Condition.

The following table presents information regarding activity in our ~~qualified affordable housing partnerships~~LIHTC investments for the periods indicated:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Fundings	Fundings	$	3,563	$	1,602	$	5,727	$	15,473	Fundings	$	1,105	$	1,003
Proportional amortization recognized	Proportional amortization recognized	1,051		1,724		3,114		4,019		Proportional amortization recognized	1,546		1,182
Income tax credits recognized	Income tax credits recognized	1,155		1,007		3,466		3,215		Income tax credits recognized	1,373		1,116

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NOTE 13 – EARNINGS ~~(LOSS)~~ PER COMMON SHARE

The following table presents computations of basic and diluted earnings (loss) per common share ("EPS") for the three ~~and nine~~ months ended ~~September 30, 2021:~~March 31, 2022:


		Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021					Three Months Ended March 31, 2022
($ in thousands except per share data)	($ in thousands except per share data)	Common Stock		Class B Common Stock			Common Stock		Class B Common Stock			($ in thousands except per share data)	Common Stock		Class B Common Stock
Net income	Net income	$	22,953	$	217		$	56,061	$	534		Net income	$	48,142	$	370
Less: Income allocated to participating securities		—		—			(158)		(2)

Less: preferred stock dividends	Less: preferred stock dividends	(1,711)		(16)			(6,533)		(62)			Less: preferred stock dividends	(1,409)		(11)
Less: preferred stock redemption	Less: preferred stock redemption	—		—			(3,315)		(32)			Less: preferred stock redemption	(3,718)		(29)

Net income allocated to common stockholders	Net income allocated to common stockholders	$	21,242	$	201		$	46,055	$	438		Net income allocated to common stockholders	$	43,015	$	330

Weighted average common shares outstanding	Weighted average common shares outstanding	50,239,359		477,321			50,096,607		477,321			Weighted average common shares outstanding	62,129,129		477,321
Dilutive effects of restricted shares/units	Dilutive effects of restricted shares/units	188,850		—			242,803		—			Dilutive effects of restricted shares/units	294,432		—

Dilutive effects of stock options	Dilutive effects of stock options	3,787		—			5,241		—			Dilutive effects of stock options	5,121		—

Average shares and dilutive common shares	Average shares and dilutive common shares	50,431,996		477,321			50,344,651		477,321			Average shares and dilutive common shares	62,428,682		477,321

Basic earnings per common share	Basic earnings per common share	$	0.42	$	0.42		$	0.92	$	0.92		Basic earnings per common share	$	0.69	$	0.69

Diluted earnings per common share	Diluted earnings per common share	$	0.42	$	0.42		$	0.91	$	0.92		Diluted earnings per common share	$	0.69	$	0.69

For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, there were ~~206,035 and 194,615 of~~92,987 anti-dilutive restricted shares/units and no anti-dilutive stock options that were ~~not considered in~~excluded from computing diluted earnings per common ~~share, because they~~share.

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The following table presents computations of basic and diluted EPS for the three months ended March 31, 2021:



	Three Months Ended March 31, 2021
($ in thousands except per share data)	Common Stock		Class B Common Stock
Net income	$	14,239	$	136
Less: income allocated to participating securities	(61)		(1)

Less: preferred stock dividends	(3,111)		(30)
Less: preferred stock redemption	(3,316)		(31)


Net income allocated to common stockholders	$	7,751	$	74

Weighted average common shares outstanding	49,873,576		477,321
Dilutive effects of stock units	391,206		—

Dilutive effects of stock options	8,419		—

Average shares and dilutive common shares	50,273,201		477,321




Basic earnings per common share	$	0.16	$	0.16



Diluted earnings per common share	$	0.15	$	0.15

For the three months ended March 31, 2021, there were ~~anti-dilutive.~~56,839 anti-dilutive restricted shares/units and no anti-dilutive stock options that were excluded from computing diluted earnings per common share.

During the first quarter of 2021 all of the Company's outstanding stock appreciation rights (SARs) were exercised resulting in the net issuance of 305,772 shares of voting common stock. Prior to this exercise, the SARs were considered participating securities and income was allocated to the respective holder and not part of income (loss) available to common stockholders. After the exercise of all of the Company's outstanding SARs, there are no longer any participating securities outstanding and the net shares issued in settlement of such SARs are included in the computation of average common shares for both basic and diluted earnings per share.

~~The following table presents computations of basic and diluted EPS for the three and nine months ended September 30, 2020:~~

Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
($ in thousands except per share data) Common Stock Class B Common Stock Common Stock Class B Common Stock
Net loss $ 15,761 $ 152 $ (9,043) $ (86)
Less: income allocated to participating securities (278) (3) — —
Less: participating securities dividends (93) (1) (279) (3)
Less: preferred stock dividends (3,414) (33) (10,323) (99)
Less: preferred stock redemption (7) — 563 5
Net loss allocated to common stockholders $ 11,969 $ 115 $ (19,082) $ (183)
Weighted average common shares outstanding 49,631,334 477,321 49,723,791 477,321
Dilutive effects of stock units 82,278 — — —
Dilutive effects of stock options — — — —
Average shares and dilutive common shares 49,713,612 477,321 49,723,791 477,321
Basic earnings (loss) per common share $ 0.24 $ 0.24 $ (0.38) $ (0.38)
Diluted earnings (loss) per common share $ 0.24 $ 0.24 $ (0.38) $ (0.38)

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For the three and nine months ended September 30, 2020, there were 643,901 and 938,526 of restricted shares/units and 55,069 and 55,314 of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

NOTE 14 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as unfunded loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met prior to their expiration dates. Commitments may expire without being used. Risk of credit loss exists up to the face amount of these instruments. The same credit policies are used to make such commitments as are used for originating loans, including obtaining collateral at exercise of the commitment.

The following table presents the contractual amount of financial instruments with off-balance-sheet risk as of the periods indicated:


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to extend credit	Commitments to extend credit	$	28,983	$	124,427	$	17,555	$	38,141	Commitments to extend credit	$	39,506	$	148,930	$	37,107	$	136,921
Unused lines of credit	Unused lines of credit	3,043		1,462,873		1,783		1,348,138		Unused lines of credit	45,381		1,649,476		6,894		1,699,933
Letters of credit	Letters of credit	487		7,694		234		8,274		Letters of credit	2,809		5,299		2,553		5,617

Other Commitments

At ~~September 30, 2021,~~March 31, 2022, we had unfunded commitments of ~~$12.6~~$11.2 million, ~~$5.6~~$7.3 million, and ~~$2.5~~$8.1 million for ~~qualified affordable housing fund partnerships,~~LIHTC investments, Small Business Investment Company ("SBIC") investments, and other investments, respectively.

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NOTE 15 – REVENUE RECOGNITION

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

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2021 2020 2021 2020
Noninterest income
In scope of Topic 606
Deposit service fees $ 913 $ 648 $ 2,548 $ 1,607
Debit card fees 451 384 1,333 941
Other 146 49 327 157
Noninterest income (in-scope of Topic 606) 1,510 1,081 4,208 2,705
Noninterest income (out-of-scope of Topic 606) 4,009 2,873 9,862 8,838
Total noninterest income $ 5,519 $ 3,954 $ 14,070 $ 11,543


	Three Months Ended March 31,
($ in thousands)	2022		2021
Noninterest income
In scope of Topic 606
Deposit service fees	$	1,654	$	810
Debit card fees	453		387

Other	159		79
Noninterest income (in-scope of Topic 606)	2,266		1,276
Noninterest income (out-of-scope of Topic 606)	3,644		3,105
Total noninterest income	$	5,910	$	4,381

We do not typically enter into long-term revenue contracts with ~~customers~~clients and as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we did not have any significant contract ~~balances.~~balances within the scope of Topic 606. As of ~~September 30, 2021,~~March 31, 2022, we did not capitalize any revenue contract acquisition costs.

Sale-leaseback Transaction: In January 2022, we completed a sale-leaseback transaction for 1 of our branch locations. We sold the branch for $2.4 million and recognized a gain of $771 thousand which is included in other income in the accompanying consolidated statements of operations.

NOTE 16 – RELATED-PARTY TRANSACTIONS

Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with the Bank in the ordinary course of business, including deposits, loans and other financial services related transactions. From time to

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time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. As of March 31, 2022, no ~~of September 30, 2021,~~ norelated party loans were categorized as nonaccrual, past due, restructured or potential problem loans.

Transactions with Related Parties

The Company and the Bank have engaged in transactions described below with the Company’s current or former directors, executive officers, and beneficial owners of more than 5five percent of the outstanding shares of the Company’s voting common stock and certain persons related to them.

As previously disclosed, the Company’s Board of Directors has authorized and directed the Company to provide indemnification, advancement and/or reimbursement for the costs of separate independent counsel retained by any then-current officer or director, in their individual capacity, with respect to matters related to (i) an investigation by the Special Committee of the Company’s Board of Directors, (ii) a formal order of investigation issued by the SEC on January 4, 2017 (since resolved), and (iii) any civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the Company (collectively, the “Indemnified Matters”).

~~During the three and nine months ended September 30, 2021, indemnification~~Indemnification costs were paid or reimbursed by the Company on behalf of certain current directors in connection with the Indemnified Matters, in the aggregate amounts of $244 thousand and $400 thousand. During the three and nine months ended September 30, 2021, indemnification costs were paid on behalf of certain former directors and former executive officers in connection with the Indemnified Matters, in the aggregate amounts of $513 thousand and $1.2 million.

~~Indemnification costs were paid~~or its insurance carriers on behalf of certain current directors in connection with the Indemnified Matters, in an aggregate amount less than $120 thousand for each of the three ~~and nine~~ months ended ~~September 30, 2020. During the three~~March 31, 2022 and nine months ended September 30, 2020, indemnification costs were paid on behalf of certain former directors and former executive officers in connection with the Indemnified Matters, in the aggregate amounts of $465 thousand and $687 thousand.2021.

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NOTE 17 – LITIGATION

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

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

NOTE 18 – SUBSEQUENT EVENTS

We have evaluated events from the date of the consolidated financial statements on ~~September 30, 2021~~March 31, 2022 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~On October 18, 2021,~~Subsequent to March 31, 2022, we repurchased 1,108,657 shares of common stock at a weighted average price of $18.68, or $20.7 million. Since the ~~Company completed the acquisition of Pacific Mercantile Bancorp (“PMBC”), pursuant to which PMBC merged (the “Merger”) with and into the Company, with the Company as the surviving corporation.~~

~~Under the terms and conditions~~announcement of the ~~Merger Agreement, each outstanding share~~stock repurchase program on March 15, 2022, we have repurchased 1,324,207 shares of ~~PMBC~~ common stock ~~was converted into the right~~at a weighted average price of $18.88 per share, or $25.0 million.

There have been no other subsequent events that occurred during such period that would require disclosure in this report or would be required to ~~receive 0.5 of a share of the Company's common stock. This resulted~~be recognized in the issuance of 11,856,713 shares of BOC common stock with an estimated fair value of $222.2 million based upon the $18.74 closing price of BANC’s common stock on October 18, 2021. In addition, cash consideration totaled $3.2 million for all outstanding PMBC share-based awards, including stock options and outstanding shares subject to unvested restricted stock awards, based upon the volume weighted average common stock price of the Company on each of the last 20 trading days ending on the fifth trading day prior to the closing of the Merger. The aggregate purchase price totaled $225.4 million.

~~At September 30, 2021, PMBC had total gross loans of $982.4 million and total assets of $1.49 billion. Total deposits were $1.29 billion at September 30, 2021.~~

~~The fair value of intangible assets and acquired assets and liabilities will be determined~~consolidated financial statements as of ~~the acquisition date but are still being evaluated as of the date of these consolidated financial statements. As of September 30, 2021, on a pro forma combined~~March 31, 2022.

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~~basis with PMBC and excluding purchase accounting adjustments, the Company would have had approximately $9.8 billion in assets with 33 full-service branches throughout Southern California.~~

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 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 ~~September 30, 2021.~~March 31, 2022.

Executive Overview

We are focused on providing core banking products and services, including customized and innovative banking and lending solutions, designed to cater to the unique needs of California's diverse businesses, entrepreneurs and communities through our 3332 full service branches in Orange, Los Angeles, San Diego, and Santa Barbara Counties. Through our over ~~700~~670 dedicated professionals, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a variety of financial products and services designed around our target clients in order to serve their banking and financial needs. We continue to grow average loans and earning assets, improve our deposit mix, reduce our cost of deposits, and maintain disciplined expense control. Strong loan production helped to offset runoff in certain legacy areas of our portfolio. Our loan pipeline is steadily building which is expected to support continued loan and earning asset growth through the year, assuming improving economic trends continue.

On October 18, 2021, we announced the completion of our merger with Pacific Mercantile Bancorp. Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our credit quality and serving businesses, entrepreneurs and individuals within our footprint.

Financial Highlights

For the ~~three months ended September 30, 2021, June 30, 2021 and September 30, 2020,~~first quarter of 2022, net income was ~~$23.2 million, $19.1~~$48.5 million and ~~$15.9 million. Diluted earnings from operations~~net income available to common stockholders was $43.3 million, or $0.69 per diluted common share. This compares to net income of $5.8 million and net income available to common stockholders of $4.0 million, or $0.07 per diluted common share, ~~were $0.42, $0.34 and $0.24~~ for the ~~three months ended September 30,~~fourth quarter of 2021; and net income of $14.4 million and net income available to common stockholders of $7.8 million, or $0.15 per diluted common share for the first quarter of 2021. The first quarter of 2022 net income available to common stockholders included a $31.3 million pre-tax recovery from the settlement of a previously charged-off loan and a $3.7 million after-tax charge related to the redemption of Series E Preferred Stock. The fourth quarter of 2021 ~~June 30,~~included $13.5 million of pre-tax merger costs and $11.3 million of provision for credit losses for the loans acquired in the Pacific Mercantile Bancorp (PMB) acquisition. The first quarter of 2021 included $700 thousand of pre-tax merger costs and ~~September 30, 2020.~~a $3.3 million after-tax charge related to the redemption of Series D Preferred Stock.

Financial results for the ~~third~~first quarter of ~~2021~~2022 included:

•Return on average assets of ~~1.13%~~2.09%, up from 0.24% in the fourth quarter of 2021

•~~Annualized loan growth, excluding PPP,~~Pre-tax pre-provision return on average assets of ~~16%~~1.54%, up from 0.84% in the fourth quarter of 2021

•~~Period-end total cost~~Adjusted pre-tax pre-provision return on average assets of ~~deposits~~1.55%, up from 1.39% in the fourth quarter of ~~0.08%~~2021

•Net interest margin of 3.51%, ~~a 12~~an increase of 23 basis ~~point decrease~~points from the ~~end~~fourth quarter of ~~the second quarter~~2021

•Noninterest-bearing deposits represented 40% of total deposits at March 31, 2022, up from 28% a year earlier

•Average cost of total deposits of ~~0.15%~~0.08%, ~~an 8~~a 3 basis point decrease from the ~~previous~~fourth quarter of 2021

•~~Net interest margin~~Redemption of ~~3.28%, a 1 basis point increase from the previous quarter~~all Series E Preferred Stock for total consideration of $98.7 million

•~~Noninterest-bearing deposit balances represented 32%~~Repurchase of ~~total deposits at September 30, 2021, up from 24%~~$4.3 million of common stock under a ~~year earlier~~$75 million authorization announced on March 15, 2022

•Allowance for credit losses at ~~1.26%~~1.32% of total loans and ~~173%~~181% of non-performing loans

•~~Total deferrals/forbearances declined to $54.2 million at September 30, 2021 from $86.6 million at June 30, 2021~~

•Common Equity Tier 1 capital at ~~10.86%~~11.40%

~~Merger with Pacific Mercantile Bancorp~~

~~On October 18, 2021, the Company completed the acquisition of PMBC, pursuant to which PMBC merged (the “Merger”) with and into the Company, with the Company as the surviving corporation.~~

Under the terms and conditions of the Merger Agreement, each outstanding share of PMBC common stock was converted into the right to receive 0.5 of a share of the Company's common stock. This resulted in the issuance of 11,856,713 shares of BOC common stock with an estimated fair value of $222.2 million based upon the $18.74 closing price of BANC’s common stock on October 18, 2021. In addition, the cash consideration totaled $3.2 million for all outstanding PMBC share-based awards, including stock options and outstanding shares subject to unvested restricted stock awards, based upon the volume weighted average common stock price of BANC on each of the last 20 trading days ending on the fifth trading day prior to the closing of the Merger. The aggregate purchase price totaled $225.4 million.

~~At September 30, 2021, PMBC had total gross loans of $982.4 million and total assets of $1.49 billion. Total deposits were $1.29 billion at September 30, 2021.~~

COVID-19 Operational Update

The markets in which we operate are impacted by continuing uncertainty about the pace and strength of reopening and recovering from the COVID-19 pandemic. Despite the challenges created by the pandemic, we continue to execute on our

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strategic initiatives and the transformation of our balance sheet. We continue to operate 3128 of our 3332 branches as we temporarily closed 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. We have adopted a hybrid workplace environment, allowing many of our employees outside of our branches the flexibility to continue to work ~~remotely, and providing our vaccinated employees a safe place to return to the workplace within all of our corporate office locations.~~remotely. We encourage our employees to get vaccinated and we continue to monitor all federal, state, and local laws to ensure we are in compliance with the latest health orders.

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~~CARES Act Response Efforts~~

On March 27, 2020, the U.S. federal government signed the CARES Act into law, which provided emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic. The CARES Act allocated nearly $660 billion for the PPP and was intended to assist small businesses negatively affected by the pandemic and economic downturn by providing funds for payroll and other qualifying expenses made through August 8, 2020. The loans are 100% guaranteed by the SBA and the full principal amount of the loans may qualify for loan forgiveness if certain conditions are met.

~~Paycheck Protection Program Flexibility Act of 2020~~

On October 7, 2020, the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”) extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period). The extension of the deferral period under the Flexibility Act automatically applied to all PPP loans.

~~Economic Aid Act~~

The Economic Aid Act became law December 27, 2020 extending the SBA authority to make PPP loans through May 31, 2021. The SBA issued an Interim Final Rule (IFR) January 6, 2021 and eligible applicants were able to obtain a first or second PPP loan. We elected to continue our participation in the PPP and resumed the origination of PPP loans effective January 11, 2021.

The PPP has provided an opportunity to differentiate ourselves by demonstrating how true client service can make a meaningful difference. We assisted numerous existing clients with our high touch business framework in addition to successfully attracting many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts.

As of ~~September 30, 2021,~~March 31, 2022, we have helped businesses through the ~~approvals~~funding of ~~$262~~$411 million in PPP ~~funds during the first round~~loans and ~~$144 million during the second round. We~~ continue to support our clients as we work with them through the forgiveness process. Prior to acquisition, PMB originated $390 million in PPP loans. At ~~September 30, 2021,~~March 31, 2022, outstanding PPP loans totaled ~~$116.5~~$58.3 million, net of fees, of which ~~$27.5~~$13.9 million ~~relates~~related to round one and ~~$88.9~~$44.4 million ~~relates~~related to round two of the SBA program.

Borrower Payment Relief Efforts

We ~~are~~have been 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~~single-family residential mortgage loans, the forbearance period was initially 90 days in length and was patterned after the HUD guidelines where applicable. With respect to our non-SFR loan portfolio, the forbearance and deferment periods were also initially 90 days in length and were permitted to be extended.

Although many of our loans on assistance have reached the expiration of their deferral and forbearance periods, we continue to work with our borrowers to provide reasonable solutions to assist each unique situation during this period of economic uncertainty. We are reviewing their current financial condition as we evaluate additional extension requests of deferral periods. For those commercial borrowers that ~~demonstrate~~demonstrated a continuing need for a deferral, we generally ~~expect to obtain~~obtained 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%.

At this time, we no longer offer COVID-related deferments or forbearances.

For a discussion of the risk factors related to COVID-19, please refer to Part II, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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~~The following table presents the composition of our loan portfolio for borrowers that received payment relief as of September 30, 2021 and June 30, 2021:~~

Deferment & Forbearances(1)(2)
September 30, 2021 June 30, 2021
($ in thousands) Number of Loans
Amount(1)(2)
% of
Loan Category Number of Loans
Amount(1)(2)
% of
Loan Category
Commercial:
Commercial and industrial 1 $ 3,837 0.2 % 5 $ 29,246 1.4 %
Commercial real estate — — — % 1 1,141 0.1 %
SBA 1 279 0.2 % 2 3,315 1.3 %
Total commercial 2 4,116 0.1 % 8 33,702 0.7 %
Consumer:
Single family residential mortgage 40 49,501 3.6 % 46 52,384 4.1 %
Other consumer 3 575 2.5 % 2 472 1.9 %
Total consumer 43 50,076 3.5 % 48 52,856 4.0 %
Total 45 $ 54,192 0.9 % 56 $ 86,558 1.4 %

~~(1)Excludes loans in forbearance that are current~~

~~(2)Excludes loans delinquent prior to COVID-19~~

Loans on deferment or forbearance status decreased $32.4 million during the third quarter of 2021. The Bank is in contact with borrowers to provide additional assistance as needed and we continue to actively monitor and manage all lending relationships in a manner that we believe supports our clients and protects the Bank.

Other Efforts

ToWe continue to support ~~our community, we continue~~and seek to meet the immediate needs of ~~our~~the most vulnerable ~~neighbors.~~members of our community. We ~~meet these needs~~do this by providing donations, grants and sponsorships that support affordable housing, workforce and economic development and community services. Our employee volunteers have continued to provide financial literacy classes in a virtual environment as well as developing a virtual tour of the Bank’s headquarters that introduces students to a variety of different career paths and business unit leaders.

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

~~Our consolidated financial statements are prepared~~We follow accounting and reporting policies and procedures that conform, in ~~accordance with~~all material respects, to GAAP and ~~general~~to practices ~~within~~generally applicable to the ~~banking industry. As certain accounting policies require~~financial services industry, the most significant ~~estimates and assumptions that have a material impact on the carrying value~~ of ~~assets and liabilities, we have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. Our critical accounting policies~~which are described in Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements ~~and~~included in ~~the “Critical Accounting Policies” section~~Item 8 of ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2020 and in Note 1~~2021 filed with the SEC. The preparation of Consolidated Financial Statements ~~(unaudited)~~in conformity with GAAP requires management to make judgments and accounting estimates that affect the amounts reported for assets, liabilities, revenues and expenses on the Consolidated Financial Statements and accompanying notes, and amounts disclosed as contingent assets and liabilities. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

Accounting estimates are necessary in the application of certain accounting policies and procedures that are particularly susceptible to significant change. Critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties, and could potentially result in materially different results under different assumptions and conditions. Management has identified our most critical accounting policies and accounting estimates as: investment securities, allowance for credit losses, business combinations, valuation of acquired loans, goodwill and deferred income taxes. See Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Unuadited) included in ~~Part I~~Item 1 for a description of these policies.

Investment Securities. Held-to-maturity debt securities are carried at amortized cost and available-for-sale debt securities are carried at fair value. These securities are analyzed for credit deterioration under ASC 326, which requires the Company to determine whether impairment exists as of the reporting date and whether that impairment is due to credit deterioration. An allowance for credit losses would be established for losses on held-to-maturity and available-for-sale debt securities due to credit losses and would be reported as a component of provision for credit losses.

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The valuation of investment securities considers 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. We employ procedures to monitor the pricing service's assumptions and 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. All securities available-for-sale were classified as Level 2 at March 31, 2022 and December 31, 2021. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation. We had no securities available-for-sale classified as Level 3 at March 31, 2022 and December 31, 2021.

The estimates used to determine the fair values of investment securities can be complex and require judgment. These critical estimates are difficult to predict and may result in credit losses in future periods if actual results materially differ from the estimated assumptions utilized in our valuation of these assets.

Allowance for Credit Losses (“ACL”).The ACL is estimated on a quarterly basis and represents management’s estimate of current expected credit losses (“CECL”) in our loan portfolio. The ACL estimate is based on the accounting standard commonly known as CECL. Under the CECL method, pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Collective loss estimates are determined by applying loss factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining life of the collectively evaluated portfolio. The allowance for loan losses includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including those described in the federal banking agencies' joint interagency policy statement on ALL. These factors include, among others, inherent imprecision in forecasting economic variables, including determining the depth and duration of economic cycles and their impact to relevant economic variables; qualitative adjustments based on our evaluation of different forecast scenarios and known recent events impacting relevant economic variables; data factors that address the risk that certain model inputs may not reflect all available information including (i) risk factors that have not been fully addressed in internal risk ratings, (ii) changes in lending policies and procedures, (iii) changes in the level and quality of experience held by lending management, (iv) imprecision in the risk rating system and (v) limitations in data available for certain loan portfolios. The ACL process also includes challenging and calibrating the model and model results against observed information, trends and events within the loan portfolio, among others. The ACL and provision for credit losses include amounts and changes from both the allowance for loan losses and the reserve for unfunded commitments.

Business Combinations.Business combinations are accounted for using the acquisition method of accounting under ASC Topic 805 - Business Combinations. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

The estimates used to determine the fair values of assets and liabilities acquired in a business combination can be complex and require judgment. For example, we generally value core deposit intangible assets using a discounted cash flow approach, which require a number of critical estimates that include, but are not limited to, future expected cash flows from depositor relationships, expected "decay" rates, and the determination of discount rates. These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our initial valuation of net assets and liabilities acquired.

Goodwill. Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired. Goodwill is not subject to amortization and is evaluated for impairment at least annually, normally during the fourth fiscal quarter, or more frequently in the interim if events occur or circumstances change indicating impairment may have occurred. The determination of whether impairment has occurred is based on an assessment of several factors, including, but not limited to, operating results, business plans, economic projections, anticipated future cash flows, and current market data. Any impairment identified as part of this ~~Quarterly Report~~testing is recognized through a charge to noninterest expense.

The assessment of impairment discussed above incorporate inherent uncertainties, including projected operating results and future market conditions, which are often difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts.

Acquired Loans.At acquisition date, loans are evaluated to determine whether they meet the criteria of a purchased credit-deteriorated (“PCD”) loan. PCD loans are loans that in management's judgement have experienced more than insignificant deterioration in credit quality since origination. Factors that indicate a loan may have experienced more than insignificant credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by

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management at the time of initial assessment. PCD loans are initially recorded at fair value, with the resulting non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the date of acquisition, an ACL is established with a corresponding increase to the overall acquired loan balance. This initial ACL is determined using the Company's current expected credit losses methodology.

Acquired loans that are not considered PCD loans (“non-PCD loans”) are also recognized at fair value at the acquisition date, with the resulting credit and non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the time of acquisition, the Company establishes an initial ACL for acquired non-PCD loans through a charge to the provision for credit losses. This initial ACL is determined using the Company's current expected credit losses methodology.

Subsequent to acquisition date, the ACL for both PCD and non-PCD loans is determined using the same methodology to determine current expected credit losses that is applied to all other loans.

The estimates used to determine the fair values of non-PCD and PCD acquired loans can be complex and require significant judgment regarding items such as default rates, timing and amount of future cash flows, prepayment rates and other factors. These critical estimates are difficult to predict and may result in provisions for credit losses in future periods if actual losses materially differ from the estimated assumptions utilized in our initial valuation of acquired loans.

Deferred Taxes.Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on ~~Form 10-Q.~~enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. Accounting guidance requires that companies assess whether a valuation allowance should be established against the deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies.

Although we believe our assessments of the realizability of deferred income taxes are reasonable, no assurance can be given that their realizability will not be different from that which is reflected in our net deferred tax asset balance.

Tax positions that are uncertain but meet a more-likely-than-not recognition threshold are initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position meets the more likely than not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management's judgment.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

Recent Accounting Pronouncements Not Yet Adopted

Our recent accounting pronouncements not yet adopted are described in Note 1 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

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Non-GAAP Financial Measures

Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.

Tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per ~~common~~ share, return on average tangible common equity, ~~adjusted noninterest income,~~ adjusted noninterest expense, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, ~~(loss),~~ adjusted PTPP income, ~~(loss),~~ PTPP income (loss) ROAA, adjusted PTPP income ~~(loss)~~ ROAA, efficiency ratio, adjusted efficiency ratio, ~~adjusted total revenue,~~ adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS) and adjusted return on average assets (ROAA) constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.

Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.

PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding ~~net interest income and adjusted noninterest income (adjusted~~ total ~~revenue)~~revenue and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by ~~adjusted~~ total revenue.

Adjusted net income ~~(loss)~~ is calculated by adjusting net income ~~(loss)~~ for tax-effected noninterest ~~income and~~ expense adjustments and the tax impact from the exercise of stock appreciation ~~rights.~~rights for the periods indicated. Adjusted ROAA is computed by dividing annualized adjusted net income by average assets. Adjusted net income ~~(loss)~~ available to common ~~shareholders~~stockholders is computed by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted earnings per share is computed by dividing adjusted net income ~~(loss).~~available to common stockholders by the weighted average diluted common shares outstanding.

Management believes the presentation of these non-GAAP financial measures ~~provides~~provide useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.

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(Dollars in thousands, except per share data) (Unaudited)	(Dollars in thousands, except per share data) (Unaudited)	September 30, 2021			December 31, 2020			(Dollars in thousands, except per share data) (Unaudited)	March 31, 2022			December 31, 2021
Tangible common equity, and tangible common equity to tangible assets ratio	Tangible common equity, and tangible common equity to tangible assets ratio							Tangible common equity, and tangible common equity to tangible assets ratio
Total assets	Total assets	$	8,278,741		$	7,877,334		Total assets	$	9,583,540		$	9,393,743
Less goodwill	Less goodwill	(37,144)			(37,144)			Less goodwill	(95,127)			(94,301)
Less other intangible assets	Less other intangible assets	(1,787)			(2,633)			Less other intangible assets	(4,990)			(6,411)
Tangible assets(1)	Tangible assets(1)	$	8,239,810		$	7,837,557		Tangible assets(1)	$	9,483,423		$	9,293,031

Total stockholders' equity								Total stockholders' equity	$	979,009		$	1,065,290
Less preferred stock								Less preferred stock	—			(94,956)
Total common stockholders' equity								Total common stockholders' equity	$	979,009		$	970,334

Total stockholders' equity	Total stockholders' equity	$	844,803		$	897,207		Total stockholders' equity	$	979,009		$	1,065,290
Less goodwill	Less goodwill	(37,144)			(37,144)			Less goodwill	(95,127)			(94,301)
Less other intangible assets	Less other intangible assets	(1,787)			(2,633)			Less other intangible assets	(4,990)			(6,411)
Tangible equity(1)	Tangible equity(1)	805,872			857,430			Tangible equity(1)	878,892			964,578
Less preferred stock	Less preferred stock	(94,956)			(184,878)			Less preferred stock	—			(94,956)
Tangible common equity(1)	Tangible common equity(1)	$	710,916		$	672,552		Tangible common equity(1)	$	878,892		$	869,622

Total stockholders' equity to total assets	Total stockholders' equity to total assets	10.20		%	11.39		%	Total stockholders' equity to total assets	10.22		%	11.34		%
Tangible equity to tangible assets(1)	Tangible equity to tangible assets(1)	9.78		%	10.94		%	Tangible equity to tangible assets(1)	9.27		%	10.38		%
Tangible common equity to tangible assets(1)	Tangible common equity to tangible assets(1)	8.63		%	8.58		%	Tangible common equity to tangible assets(1)	9.27		%	9.36		%

Common shares outstanding	Common shares outstanding	50,321,096			49,767,489			Common shares outstanding	62,077,312			62,188,206
Class B non-voting non-convertible common shares outstanding	Class B non-voting non-convertible common shares outstanding	477,321			477,321			Class B non-voting non-convertible common shares outstanding	477,321			477,321
Total common shares outstanding	Total common shares outstanding	50,798,417			50,244,810			Total common shares outstanding	62,554,633			62,665,527

Book value per common share								Book value per common share	$	15.65		$	15.48
Tangible common equity per common share(1)	Tangible common equity per common share(1)	$	13.99		$	13.39		Tangible common equity per common share(1)	$	14.05		$	13.88
Book value per common share		$	14.76		$	14.18

(1)Non-GAAP measure.

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		Three Months Ended						Nine Months Ended September 30,				Three Months Ended
(Dollars in thousands) (Unaudited)	(Dollars in thousands) (Unaudited)	September 30, 2021			June 30, 2021				September 30, 2020				2021			2020			(Dollars in thousands) (Unaudited)	March 31, 2022			December 31, 2021			March 31, 2021
Return on tangible common equity	Return on tangible common equity																		Return on tangible common equity
Average total stockholders' equity	Average total stockholders' equity	$	847,941		$	814,973			$	865,406			$	850,215		$	878,520		Average total stockholders' equity	$	1,049,912		$	1,035,782		$	888,174
Less average preferred stock	Less average preferred stock	(94,956)			(94,956)				(184,910)				(118,013)			(186,656)			Less average preferred stock	(75,965)			(94,956)			(164,895)
Average total common stockholders' equity																			Average total common stockholders' equity	973,947			940,826			723,279
Less average goodwill	Less average goodwill	(37,144)			(37,144)				(37,144)				(37,144)			(37,144)			Less average goodwill	(94,307)			(86,911)			(37,144)
Less average other intangible assets	Less average other intangible assets	(1,941)			(2,224)				(3,172)				(2,226)			(3,581)			Less average other intangible assets	(6,224)			(4,994)			(2,517)
Average tangible common equity(1)	Average tangible common equity(1)	$	713,900		$	680,649			$	640,180			$	692,832		$	651,139		Average tangible common equity(1)	$	873,416		$	848,921		$	683,618

Net income (loss) available to common stockholders		$	21,443		$	17,323			$	12,084			$	46,493		$	(19,265)
Net income available to common stockholders																			Net income available to common stockholders	$	43,345		$	4,024		$	7,825
Add amortization of intangible assets	Add amortization of intangible assets	282			282				353				846			1,212			Add amortization of intangible assets	441			430			282

Less tax effect on amortization of intangible assets(2)	Less tax effect on amortization of intangible assets(2)	(59)			(59)				(74)				(178)			(255)			Less tax effect on amortization of intangible assets(2)	(93)			(90)			(59)
Net income (loss) available to common stockholders(1)		$	21,666		$	17,546			$	12,363			$	47,161		$	(18,308)
Net income available to common stockholders(1)																			Net income available to common stockholders(1)	$	43,693		$	4,364		$	8,048

Return on average equity	Return on average equity	10.84		%	9.38		%		7.32		%		8.90		%	(1.39)		%	Return on average equity	18.74		%	2.20		%	6.56		%
Return on average tangible common equity(1)	Return on average tangible common equity(1)	12.04		%	10.34		%		7.68		%		9.10		%	(3.76)		%	Return on average tangible common equity(1)	20.29		%	2.04		%	4.77		%

(1)Non-GAAP measure.

(2)Adjustments shown net of a statutory Federal tax rate of of 21%.

Three Months Ended Nine Months Ended September 30,
(Dollars in thousands)
(Unaudited) September 30,
2021 June 30,
2021 September 30,
2020 2021 2020
Adjusted noninterest income and expense
Total noninterest income $ 5,519 $ 4,170 $ 3,954 $ 14,070 $ 11,543
Noninterest income adjustments:
Net (gain) loss on securities available for sale — — — — (2,011)
Net (gain) loss on sale of legacy SFR loans held for sale — — (272) — (272)
Fair value adjustment on legacy SFR loans held for sale (160) (20) (24) (180) 1,537
Total noninterest income adjustments (160) (20) (296) (180) (746)
Adjusted noninterest income(1)
$ 5,359 $ 4,150 $ 3,658 $ 13,890 $ 10,797
Total noninterest expense $ 37,811 $ 40,559 $ 40,394 $ 125,105 $ 160,083
Noninterest expense adjustments:
Naming rights termination — — — — (26,769)
Extinguishment of debt — — — — (2,515)
Professional (fees) recoveries 2,152 1,284 (1,172) 2,715 (3,725)
Merger-related costs (1,000) (700) — (2,400) —
Adjustments to noninterest expense before gain (loss) in alternative energy partnership investments 1,152 584 (1,172) 315 (33,009)
Gain (loss) in alternative energy partnership investments 1,785 829 1,430 (1,016) (308)
Total noninterest expense adjustments 2,937 1,413 258 (701) (33,317)
Adjusted noninterest expense(1)
$ 40,748 $ 41,972 $ 40,652 $ 124,404 $ 126,766
Average assets $ 8,141,613 $ 7,827,006 $ 7,687,105 $ 7,944,218 $ 7,663,504
Noninterest expense to average total assets 1.84 % 2.08 % 2.09 % 2.11 % 2.79 %
Adjusted noninterest expense to average total assets(1)
1.99 % 2.15 % 2.10 % 2.09 % 2.21 %


	Three Months Ended
(Dollars in thousands) (Unaudited)	March 31, 2022			December 31, 2021			March 31, 2021
Adjusted noninterest expense








Total noninterest expense	$	46,596		$	58,127		$	46,735
Noninterest expense adjustments:




Professional recoveries (fees)	106			(642)			(721)
Merger-related costs	—			(13,469)			(700)


Noninterest expense adjustments before (loss) gain in alternative energy partnership investments	106			(14,111)			(1,421)
(Loss) gain in alternative energy partnership investments	(158)			1,220			(3,630)
Total noninterest expense adjustments	(52)			(12,891)			(5,051)
Adjusted noninterest expense(1)	$	46,544		$	45,236		$	41,684

Average assets	$	9,392,305		$	9,331,955		$	7,860,952
Noninterest expense to average total assets	2.01		%	2.47		%	2.41		%
Adjusted noninterest expense to average total assets(1)	2.01		%	1.92		%	2.15		%

(1)Non-GAAP measure.

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		Three Months Ended						Nine Months Ended September 30,				Three Months Ended
(Dollars in thousands) (Unaudited)	(Dollars in thousands) (Unaudited)	September 30, 2021			June 30, 2021				September 30, 2020				2021			2020			(Dollars in thousands) (Unaudited)	March 31, 2022			December 31, 2021			March 31, 2021
Adjusted pre-tax pre-provision income	Adjusted pre-tax pre-provision income																		Adjusted pre-tax pre-provision income
Net interest income	Net interest income	$	62,976		$	59,847			$	55,855			$	180,739		$	163,031		Net interest income	$	76,441		$	73,039		$	57,916
Noninterest income	Noninterest income	5,519			4,170				3,954				14,070			11,543			Noninterest income	5,910			4,860			4,381
Total revenue	Total revenue	68,495			64,017				59,809				194,809			174,574			Total revenue	82,351			77,899			62,297
Noninterest expense	Noninterest expense	37,811			40,559				40,394				125,105			160,083			Noninterest expense	46,596			58,127			46,735
Pre-tax pre-provision income (loss)(1)		$	30,684		$	23,458			$	19,415			$	69,704		$	14,491
Pre-tax pre-provision income(1)																			Pre-tax pre-provision income(1)	$	35,755		$	19,772		$	15,562

Total revenue	Total revenue	$	68,495		$	64,017			$	59,809			$	194,809		$	174,574		Total revenue	$	82,351		$	77,899		$	62,297
Total noninterest income adjustments		(160)			(20)				(296)				(180)			(746)
Adjusted total revenue(1)		68,335			63,997				59,513				194,629			173,828

Noninterest expense	Noninterest expense	37,811			40,559				40,394				125,105			160,083			Noninterest expense	46,596			58,127			46,735
Total noninterest expense adjustments	Total noninterest expense adjustments	2,937			1,413				258				(701)			(33,317)			Total noninterest expense adjustments	(52)			(12,891)			(5,051)
Adjusted noninterest expense(1)	Adjusted noninterest expense(1)	40,748			41,972				40,652				124,404			126,766			Adjusted noninterest expense(1)	46,544			45,236			41,684
Adjusted pre-tax pre-provision income(1)	Adjusted pre-tax pre-provision income(1)	$	27,587		$	22,025			$	18,861			$	70,225		$	47,062		Adjusted pre-tax pre-provision income(1)	$	35,807		$	32,663		$	20,613

Average assets	Average assets	$	8,141,613		$	7,827,006			$	7,687,105			$	7,944,218		$	7,663,504		Average assets	$	9,392,305		$	9,331,955		$	7,860,952
Pre-tax pre-provision income ROAA(1)	Pre-tax pre-provision income ROAA(1)	1.50		%	1.20		%		1.00		%		1.17		%	0.25		%	Pre-tax pre-provision income ROAA(1)	1.54		%	0.84		%	0.80		%
Adjusted pre-tax pre-provision income ROAA(1)	Adjusted pre-tax pre-provision income ROAA(1)	1.34		%	1.13		%		0.98		%		1.18		%	0.82		%	Adjusted pre-tax pre-provision income ROAA(1)	1.55		%	1.39		%	1.06		%
Efficiency ratio(1)	Efficiency ratio(1)	55.20		%	63.36		%		67.54		%		64.22		%	91.70		%	Efficiency ratio(1)	56.58		%	74.62		%	75.02		%
Adjusted efficiency ratio(1)	Adjusted efficiency ratio(1)	59.63		%	65.58		%		68.31		%		63.92		%	72.93		%	Adjusted efficiency ratio(1)	56.52		%	58.07		%	66.91		%

(1)Non-GAAP measure.


	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
Adjusted net income
Net income(1)(2)	$	48,512		$	5,751		$	14,375
Adjustments:

Noninterest expense adjustments	52			12,891			5,051


Tax impact of adjustments above(3)	(15)			(3,811)			(1,493)
Tax impact from exercise of stock appreciation rights	—			—			(2,093)
Adjustments to net income	37			9,080			1,465
Adjusted net income(4)	$	48,549		$	14,831		$	15,840

Average assets	$	9,392,305		$	9,331,955		$	7,860,952
ROAA	2.09		%	0.24		%	0.74		%
Adjusted ROAA(4)	2.10		%	0.63		%	0.82		%

Adjusted net income available to common stockholders
Net income available to common stockholders	$	43,345		$	4,024		$	7,825
Adjustments to net income	37			9,080			1,465
Adjustments for impact of preferred stock redemption	3,747			—			3,347
Adjusted net income available to common stockholders(4)	$	47,129		$	13,104		$	12,637

Average diluted common shares	62,906,003			60,690,046			50,750,522
Diluted EPS	$	0.69		$	0.07		$	0.15
Adjusted diluted EPS(4)(5)	$	0.75		$	0.22		$	0.25

(1)Net income for the three months ended March 31, 2022 includes a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan; there is no similar recovery in any of the other periods presented. The Bank previously recognized a $35.1 million charge-off for this loan during the third quarter of 2019.

(2)Net income for the three months ended December 31, 2021 includes an $11.3 million pre-tax charge for the expected lifetime credit losses for non-purchased credit deteriorated loans acquired in the PMB Acquisition; there is no similar charge in any of the other periods presented.

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Three Months Ended Nine Months Ended September 30,
September 30,
2021 June 30,
2021 September 30,
2020 2021 2020
Adjusted net income (loss)
Net income (loss) $ 23,170 $ 19,050 $ 15,913 $ 56,595 $ (9,129)
Adjustments:
Noninterest income 160 20 296 180 746
Noninterest expense (2,937) (1,413) (258) 701 33,317
Total adjustments (2,777) (1,393) 38 881 34,063
Tax impact of adjustments above(1)
694 348 (10) (220) (8,515)
Tax impact from exercise of stock appreciation rights — — — (2,093) —
Adjustments to net income (2,083) (1,045) 28 (1,432) 25,548
Adjusted net income(2)
$ 21,087 $ 18,005 $ 15,941 $ 55,163 $ 16,419
Average assets $ 8,141,613 $ 7,827,006 $ 7,687,105 $ 7,944,218 $ 7,663,504
ROAA 1.13 % 0.98 % 0.82 % 0.95 % (0.16) %
Adjusted ROAA(2)
1.03 % 0.92 % 0.82 % 0.93 % 0.29 %
Adjusted net income available to common stockholders
Net income (loss) available to common stockholders $ 21,443 $ 17,323 $ 12,084 $ 46,493 $ (19,265)
Adjustments to net income (loss) (2,083) (1,045) 28 (1,432) 25,548
Adjustments for impact of preferred stock redemption — — 7 3,347 (568)
Adjusted net income available to common stockholders(2)
$ 19,360 $ 16,278 $ 12,119 $ 48,408 $ 5,715
Average diluted common shares 50,909,317 50,892,202 50,190,933 50,821,972 50,201,112
Diluted EPS $ 0.42 $ 0.34 $ 0.24 $ 0.91 $ (0.38)
Adjusted diluted EPS(2)(3)
$ 0.38 $ 0.32 $ 0.24 $ 0.95 $ 0.11

~~(1)~~(3)Tax impact of adjustments shown at an effective tax rate of ~~25%~~29.6%.

~~(2)~~(4)Non-GAAP measure.

~~(3)~~(5)Represents adjusted net income available to common stockholders divided by average diluted common shares.

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RESULTS OF OPERATIONS

Net Interest Income

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates for the three months ended ~~September 30, 2021, June 30,~~March 31, 2022, December 31, 2021 and ~~September 30, 2020:~~March 31, 2021:


		Three Months Ended																						Three Months Ended
		September 30, 2021							June 30, 2021							September 30, 2020								March 31, 2022							December 31, 2021							March 31, 2021
($ in thousands)	($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/Cost		($ 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:	Interest-earning assets:																						Interest-earning assets:
Total loans~~(1)~~(2)	Total loans~~(1)~~(2)	$	6,059,330		$	63,837	4.18	%	$	5,771,415		$	61,900	4.30	%	$	5,533,576		$	62,019	4.46	%	Total loans~~(1)~~(2)	$	7,262,774		$	76,234	4.26	%	$	6,947,336		$	73,605	4.20	%	$	5,784,041		$	61,345	4.30	%
Securities	Securities	1,347,317			7,167		2.11	%	1,308,230			6,986		2.14	%	1,190,765			6,766		2.26	%	Securities	1,292,079			7,309		2.29	%	1,290,664			6,934		2.13	%	1,236,138			6,501		2.13	%
Other interest-earning assets ~~(2)~~(3)	Other interest-earning assets ~~(2)~~(3)	222,274			787		1.40	%	258,915			791		1.23	%	457,558			881		0.77	%	Other interest-earning assets ~~(2)~~(3)	265,339			726		1.11	%	593,739			1,034		0.69	%	336,443			772		0.93	%
Total interest-earning assets	Total interest-earning assets	7,628,921			71,791		3.73	%	7,338,560			69,677		3.81	%	7,181,899			69,666		3.86	%	Total interest-earning assets	8,820,192			84,269		3.87	%	8,831,739			81,573		3.66	%	7,356,622			68,618		3.78	%
Allowance for loan losses	Allowance for loan losses	(76,028)							(79,103)							(89,679)							Allowance for loan losses	(92,618)							(92,367)							(81,111)
BOLI and noninterest-earning assets ~~(3)~~(4)	BOLI and noninterest-earning assets ~~(3)~~(4)	588,720							567,549							594,885							BOLI and noninterest-earning assets ~~(3)~~(4)	664,731							592,583							585,441
Total assets	Total assets	$	8,141,613						$	7,827,006						$	7,687,105						Total assets	$	9,392,305						$	9,331,955						$	7,860,952
Interest-bearing liabilities:	Interest-bearing liabilities:																						Interest-bearing liabilities:
Interest-bearing checking	Interest-bearing checking	$	2,280,429		632		0.11	%	$	2,182,419		679		0.12	%	$	1,919,327		1,660		0.34	%	Interest-bearing checking	$	2,409,262		641		0.11	%	$	2,461,397		693		0.11	%	$	2,140,314		901		0.17	%

Savings and money market	Savings and money market	1,583,791			1,350		0.34	%	1,638,105			2,244		0.55	%	1,630,319			2,998		0.73	%	Savings and money market	1,673,244			510		0.12	%	1,780,483			1,078		0.24	%	1,654,525			2,390		0.59	%
Certificates of deposit	Certificates of deposit	571,822			430		0.30	%	633,101			620		0.39	%	1,030,829			2,906		1.12	%	Certificates of deposit	508,244			237		0.19	%	610,766			301		0.20	%	720,180			995		0.56	%
Total interest-bearing deposits	Total interest-bearing deposits	4,436,042			2,412		0.22	%	4,453,625			3,543		0.32	%	4,580,475			7,564		0.66	%	Total interest-bearing deposits	4,590,750			1,388		0.12	%	4,852,646			2,072		0.17	%	4,515,019			4,286		0.38	%
FHLB advances	FHLB advances	435,984			2,990		2.72	%	418,111			2,944		2.82	%	608,169			3,860		2.52	%	FHLB advances	459,749			2,953		2.60	%	407,122			2,977		2.90	%	446,618			3,112		2.83	%
Securities sold under repurchase agreements		—			—		—	%	—			—		—	%	1,309			2		0.61	%

Other borrowings	Other borrowings	126,352			34		0.11	%	17,920			4		0.09	%	325			2		2.45	%	Other borrowings	116,495			55		0.19	%	27,300			7		0.10	%	4,127			2		0.20	%
Long-term debt	Long-term debt	256,634			3,379		5.22	%	256,492			3,339		5.22	%	173,586			2,383		5.46	%	Long-term debt	274,417			3,432		5.07	%	270,879			3,478		5.09	%	256,361			3,302		5.22	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,255,012			8,815		0.67	%	5,146,148			9,830		0.77	%	5,363,864			13,811		1.02	%	Total interest-bearing liabilities	5,441,411			7,828		0.58	%	5,557,947			8,534		0.61	%	5,222,125			10,702		0.83	%
Noninterest-bearing deposits	Noninterest-bearing deposits	1,939,912							1,767,711							1,357,411							Noninterest-bearing deposits	2,795,633							2,614,712							1,653,517
Noninterest-bearing liabilities	Noninterest-bearing liabilities	98,748							98,174							100,424							Noninterest-bearing liabilities	105,349							123,514							97,136
Total liabilities	Total liabilities	7,293,672							7,012,033							6,821,699							Total liabilities	8,342,393							8,296,173							6,972,778
Total stockholders’ equity	Total stockholders’ equity	847,941							814,973							865,406							Total stockholders’ equity	1,049,912							1,035,782							888,174
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	8,141,613						$	7,827,006						$	7,687,105						Total liabilities and stockholders’ equity	$	9,392,305						$	9,331,955						$	7,860,952
Net interest income/spread	Net interest income/spread				$	62,976	3.06	%				$	59,847	3.04	%				$	55,855	2.84	%	Net interest income/spread				$	76,441	3.29	%				$	73,039	3.05	%				$	57,916	2.95	%
Net interest margin ~~(4)~~(5)	Net interest margin ~~(4)~~(5)						3.28	%						3.27	%						3.09	%	Net interest margin ~~(4)~~(5)						3.51	%						3.28	%						3.19	%

Ratio of interest-earning assets to interest-bearing liabilities	Ratio of interest-earning assets to interest-bearing liabilities	145		%					143		%					134		%					Ratio of interest-earning assets to interest-bearing liabilities	162		%					159		%					141		%
Total deposits~~(5)~~(6)	Total deposits~~(5)~~(6)	6,375,954			2,412		0.15	%	6,221,336			3,543		0.23	%	5,937,886			7,564		0.51	%	Total deposits~~(5)~~(6)	7,386,383			1,388		0.08	%	7,467,358			2,072		0.11	%	6,168,536			4,286		0.28	%
Total funding ~~(6)~~(7)	Total funding ~~(6)~~(7)	7,194,924			8,815		0.49	%	6,913,859			9,830		0.57	%	6,721,275			13,811		0.82	%	Total funding ~~(6)~~(7)	8,237,044			7,828		0.39	%	8,172,659			8,534		0.41	%	6,875,642			10,702		0.63	%

(1)Includes average loans held for sale of $3.4 million, $3.3 million and $1.4 million for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively, which are included in other assets in the accompanying consolidated balance sheets.

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(2)Total loans are net of deferred fees, related direct costs, premiums and discounts. Nonaccrual loans are included in the average balance. ~~Net~~Interest income includes net accretion ~~(amortization)~~ of deferred loan fees ~~(costs)~~ of ~~$1.5~~$1.1 million, ~~$1.0~~$1.6 million and ~~$1.5~~$1.4 million and ~~(amortization) accretion~~net amortization of ~~(premium) discount~~premium on purchased loans of ~~$(651)~~$(954) thousand, ~~$(1.0)~~$(2.0) million and $6$(411) thousand for the three months ended ~~September 30, 2021, June 30,~~March 31, 2022, December 31, 2021 and ~~September 30, 2020, respectively, are included in interest income.~~March 31, 2021, respectively.

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~~(2)~~(3)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.

~~(3)~~(4)Includes average balance of bank-owned life insurance of ~~$113.4~~$124.0 million, ~~$112.7~~$121.2 million and ~~$110.7~~$112.0 million for the three months ended ~~September 30, 2021, June 30,~~March 31, 2022, December 31, 2021 and ~~September 30, 2020.~~March 31, 2021.

~~(4)~~(5)Annualized net interest income divided by average interest-earning assets.

~~(5)~~(6)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.

~~(6)~~(7)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~June 30,~~December 31, 2021

Net interest income increased ~~$3.1~~$3.4 million to ~~$63.0~~$76.4 million for the ~~third~~first quarter due to higher yield on interest-earning assets and lower average balances and costs of interest-bearing liabilities, partially offset by lower average interest-earning assets ~~lower cost of interest-bearing liabilities,~~ and two less days during the ~~impact of one additional day in the current~~ quarter.

The net interest margin increased 123 basis ~~point~~points to ~~3.28%~~3.51% for the ~~third~~first quarter as the average ~~earning-assets~~interest-earning assets yield ~~decreased 8~~increased 21 basis points and the average cost of total funding decreased 82 basis points. The yield on average interest-earning assets ~~decreased~~increased to ~~3.73%~~3.87% for the ~~third~~first quarter from ~~3.81%~~3.66% for the ~~second~~fourth quarter due ~~mostly~~ to ~~a reduction of prepayment penalties, offset by a higher level of accelerated PPP fees and an improved~~the mix of ~~earning assets.~~interest-earning assets and higher yields on loan and securities. Average loans increased by ~~$287.9~~$315.4 million from ongoing loan growth, including purchases during the quarter, and including the loans acquired in the PMB acquisition for a full quarter while ~~average securities and~~ other interest-earning assets decreased ~~$2.4~~$328.4 million. The average yield on loans ~~decreased 12~~increased 6 basis points to ~~4.18%~~4.26% during the ~~third quarter.~~first quarter as a result of the portfolio mix. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased the loan yield by 1112 basis points in both the ~~third~~first quarter and ~~18 basis points in the second~~prior quarter. The average yield on securities decreased 3 basis point to 2.11% between quarters, including a 5 basis points decrease in the average yield on collateralized loan obligations (CLOs) to 1.82% for the third quarter due mostly to an increase in fair value of such investments.

The average cost of funds decreased 82 basis points to ~~0.49%~~0.39% for the ~~third~~first quarter from ~~0.57%~~0.41% for the ~~second~~fourth quarter. This decrease was driven by the lower average cost of interest-bearing liabilities ~~and~~due to an improved funding mix, including higher average noninterest-bearing ~~deposits.~~deposits as a result of the PMB acquisition and growth from business development efforts. Average noninterest-bearing deposits represented ~~30%~~38% of total average deposits for the ~~third~~first quarter compared to ~~28%~~35% of total average deposits for the ~~second~~fourth quarter. Average noninterest-bearing deposits were ~~$172.2~~$180.9 million higher in the ~~third~~first quarter compared to the ~~second~~fourth quarter while average deposits were ~~$154.6~~$81.0 million ~~higher~~lower for the linked ~~quarter.~~quarters. Average Federal Home Loan Bank (FHLB) advances and other borrowings increased ~~$126.3~~$141.8 million due mostly to higher ~~average~~ overnight ~~balances from loan portfolio growth during the third quarter.~~borrowings. The average cost of interest-bearing liabilities decreased 103 basis points to ~~0.67%~~0.58% for the ~~third~~first quarter from ~~0.77%~~0.61% for the ~~second~~fourth quarter due to ~~our continuing efforts to actively manage down~~ the ~~cost~~funding mix including the impact of ~~interest-bearing deposits.~~including PMB's deposits for a full quarter. The average cost of interest-bearing deposits declined 105 basis points to ~~0.22%~~0.12% for the ~~third~~first quarter from ~~0.32%~~0.17% for the ~~second~~fourth quarter. The average cost of total deposits decreased 83 basis points to ~~0.15%~~0.08% for the ~~third~~first quarter. The spot rate of total deposits was ~~0.08%~~0.07% at the end of the ~~third~~first quarter.

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021

Net interest income for the ~~third~~first quarter of ~~2021~~2022 increased ~~$7.1~~$18.5 million to ~~$63.0~~$76.4 million from ~~$55.9~~$57.9 million for the same ~~2020~~2021 period. Net interest income was positively impacted by a higher average interest-earning assets, ~~lower average interest-bearing liabilities~~a higher yield on such assets, and improved funding costs, offset by ~~lower yields on~~higher average interest-earning assets. Average interest-earning assets increased $447.0 million to $7.63 billion, and the net interest margin increased 19 basis points to 3.28% for the third quarter of 2021 compared to 3.09% for the same 2020 period.

interest-bearing liabilities.

The net interest margin ~~expanded due to a 33~~increased 32 basis points ~~decrease in~~to 3.51% for the first quarter of 2022 as the average interest-earning assets yield increased 9 basis points and the average cost of ~~funds outpacing a 13~~total funding decreased 24 basis ~~points decline in average interest-earning assets yield.~~points. The average yield on interest-earning assets ~~decreased~~increased to ~~3.73%~~3.87% for the ~~third~~first quarter of ~~2021~~2022 from ~~3.86%~~3.78% for the same ~~2020~~2021 period due ~~mostly~~ to the ~~impact~~mix of ~~lower market~~interest-earning assets, due in part to the acquisition of PMB, and higher yields on securities and other interest-earning assets. Average loans increased by $1.48 billion from ongoing loan growth and the loans acquired in the PMB acquisition. The average yield on loans decreased 4 basis points to 4.26% for the

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~~interest rates on loans and securities yields over this time period. The average yield on loans was 4.18% for the third~~first quarter of ~~2021,~~2022, compared to ~~4.46%~~4.30% for the same ~~2020 period~~2021 period. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased the ~~average~~loan yield ~~on securities decreased 15~~by 12 basis points in the first quarter of 2022 compared to ~~2.11% due mostly to CLOs repricing into the lower rate environment.~~

13 basis points for same 2021 period.

The average cost of funds decreased 24 basis points to ~~0.49%~~0.39% for the ~~third~~first quarter of ~~2021,~~2022, from ~~0.82%~~0.63% for the same ~~2020~~2021 period. This decrease was driven by the lower average cost of interest-bearing liabilities ~~and the~~due to an improved funding mix, including higher average noninterest-bearing deposits as a result of the PMB acquisition and growth from business development efforts. Average noninterest-bearing deposits represented 38% of total average deposits for the first quarter of 2022, compared to ~~fund loan growth.~~27% for the same 2021 period. Average noninterest-bearing deposits were $1.14 billion higher in the first quarter of 2022, compared to same 2021 period, while average deposits were $1.22 billion higher. Average Federal Home Loan Bank (FHLB) advances and other borrowings increased $125.5 million due mostly to higher overnight borrowings, offset by lower term advances. The average cost of interest-bearing liabilities decreased 3525 basis points to ~~0.67%~~0.58% for the ~~third~~first quarter of ~~2021~~2022 from ~~1.02%~~0.83% for the same ~~2020~~2021 period due to the ~~combination~~funding mix including the impact of ~~actively managing deposit pricing down in~~including deposits from the ~~lower interest rate environment and the overall reduced usage of FHLB advances. Compared to the same 2020 period, the~~PMB acquisition. The average cost of interest-bearing deposits declined 4426 basis points to ~~0.22% and~~0.12% for the first quarter of 2022, from 0.38% for the same 2021 period while the average cost of total deposits decreased 36 basis points to 0.15%. Additionally, average noninterest-bearing deposits increased by $582.5 million, or 42.9%, for the third quarter of 2021 when compared to the same 2020 period, and represented 30% of average deposits for the third quarter of 2021 compared to 23% for the same 2020 period.

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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 nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,
2021 2020
($ in thousands) Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:
Total loans (1)
$ 5,872,604 $ 187,082 4.26 % $ 5,673,488 $ 191,195 4.50 %
Securities 1,297,636 20,654 2.13 % 1,069,668 22,402 2.80 %
Other interest-earning assets (2)
272,126 2,350 1.15 % 393,495 3,480 1.18 %
Total interest-earning assets 7,442,366 210,086 3.77 % 7,136,651 217,077 4.06 %
Allowance for loan losses (78,729) (76,275)
BOLI and noninterest-earning assets (3)
580,581 603,128
Total assets $ 7,944,218 $ 7,663,504
Interest-bearing liabilities:
Interest-bearing checking $ 2,201,568 2,212 0.13 % $ 1,717,483 7,575 0.59 %
Savings and money market 1,625,214 5,985 0.49 % 1,543,291 11,621 1.01 %
Certificates of deposit 641,157 2,044 0.43 % 1,132,058 13,184 1.56 %
Total interest-bearing deposits 4,467,939 10,241 0.31 % 4,392,832 32,380 0.98 %
FHLB advances 433,532 9,046 2.79 % 821,349 14,561 2.37 %
Securities sold under repurchase agreements — — — 779 4 0.69 %
Other borrowings 49,914 40 0.11 % 469 9 2.56 %
Long-term debt 256,497 10,020 5.22 % 173,512 7,092 5.46 %
Total interest-bearing liabilities 5,207,882 29,347 0.75 % 5,388,941 54,046 1.34 %
Noninterest-bearing deposits 1,788,096 1,280,461
Noninterest-bearing liabilities 98,025 115,582
Total liabilities 7,094,003 6,784,984
Total stockholders’ equity 850,215 878,520
Total liabilities and stockholders’ equity $ 7,944,218 $ 7,663,504
Net interest income/spread $ 180,739 3.02 % $ 163,031 2.72 %
Net interest margin (4)
3.25 % 3.05 %
Ratio of interest-earning assets to interest-bearing liabilities 143 % 132 %
Total deposits(5)
6,256,035 10,241 0.22 % 5,673,293 32,380 0.76 %
Total funding (6)
6,995,978 29,347 0.56 % 6,669,402 54,046 1.08 %

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~~(1)~~Total loans are net of deferred fees, related direct costs, premiums and discounts, but exclude the allowance for credit losses. Nonaccrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of $3.9 million and $2.0 million and (amortization) accretion of (premium) discount on purchased loans of $(2.1) million and $361 thousand for the nine months ended September 30, 2021 and 2020, respectively, are included in interest income.

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

~~(3)Includes average balance of bank-owned life insurance of $112.7 million and $110.4 million for the nine months ended September 30, 2021 and 2020.~~

~~(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.

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

Net interest income for the nine months ended September 30, 2021 increased $17.7 million to $180.7 million from $163.0 million for the same 2020 period. Net interest income was positively impacted by higher average interest-earning assets, lower average interest-bearing liabilities and improved funding costs, offset by lower yields on average interest-earning assets. For the nine months ended September 30, 2021, average interest-earning assets increased $305.7 million to $7.44 billion, and the net interest margin increased 20 basis points to ~~3.25%~~0.08% for the first quarter of 2022, compared to ~~3.05%~~0.28% for the same ~~2020 period.~~

The net interest margin expanded due to a 52 basis point decrease in the average cost of funds outpacing a 29 basis point decline in the average interest-earning assets yield. The average yield on interest-earning assets decreased to 3.77% for the nine months ended September 30, 2021 from 4.06% for same 2020 period due mostly to the impact of lower market interest rates on loan and securities yields over this time period. The average fed funds rate for the nine months ended September 30, 2021 was 0.08% compared to 0.47% for the same 2020 period. The average yield on loans was 4.26% for the nine months ended September 30, 2021, compared to 4.50% for the same 2020 period and the average yield on securities decreased 67 basis points to 2.13% due mostly to CLOs repricing into the lower rate environment.

The average cost of funds decreased to 0.56% for the nine months ended September 30, 2021, from 1.08% for the same 2020 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, to fund loan growth. The average cost of interest-bearing liabilities decreased 59 basis points to 0.75% for the nine months ended September 30, 2021 from 1.34% for the same 2020 period due to the combination of actively managing deposit pricing down into the lower interest rate environment and the overall reduced usage of FHLB advances. Compared to the same 2020 period, the average cost of interest-bearing deposits declined 67 basis points to 0.31% and the average cost of total deposits decreased 54 basis points to 0.22%. Additionally, average noninterest-bearing deposits increased by $507.6 million or 39.6% for the nine months ended September 30, 2021 when compared to the same 2020 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. The information provided presents the changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.


		Three Months Ended September 30, 2021 vs. 2020						Nine Months Ended September 30, 2021 vs. 2020												Three Months Ended March 31, 2022 vs. 2021
			Increase (Decrease) Due to					Net Increase (Decrease)		Increase (Decrease) Due to						Net Increase (Decrease)						Increase (Decrease) Due to		Net Increase (Decrease)
($ In thousands)	($ In thousands)			Volume			Rate					Volume			Rate			($ In thousands)					Volume			Net Increase (Decrease)
Interest and dividend income:	Interest and dividend income:																				Interest and dividend income:
Total loans	Total loans				$	5,797		$	(3,979)	$	1,818		$	6,452		$	(10,565)	$	(4,113)		Total loans			$	15,467				$	(578)			$	14,889
Securities	Securities				865			(464)		401			4,227			(5,975)		(1,748)			Securities			304			504				808
Other interest-earning assets	Other interest-earning assets				(597)			503		(94)			(1,044)			(86)		(1,130)			Other interest-earning assets			(180)			134				(46)
Total interest and dividend income	Total interest and dividend income				$	6,065		$	(3,940)	$	2,125		$	9,635		$	(16,626)	$	(6,991)		Total interest and dividend income			$	15,591		$	60			$	15,651
Interest expense:	Interest expense:																				Interest expense:
Interest-bearing checking	Interest-bearing checking				$	260		$	(1,288)	$	(1,028)		$	1,714		$	(7,077)	$	(5,363)		Interest-bearing checking			$	98		$	(358)			$	(260)

Savings and money market	Savings and money market				(147)			(1,501)		(1,648)			306			(5,942)		(5,636)			Savings and money market			(382)			(1,498)				(1,880)
Certificates of deposit	Certificates of deposit				(936)			(1,540)		(2,476)			(4,172)			(6,968)		(11,140)			Certificates of deposit			(234)			(524)				(758)
FHLB advances	FHLB advances				(1,159)			289		(870)			(7,762)			2,247		(5,515)			FHLB advances			93			(252)				(159)
Securities sold under repurchase agreements					(1)			(1)		(2)			(2)			(2)		(4)

Other borrowings	Other borrowings				36			(4)		32			49			(18)		31			Other borrowings			53			—				53
Long-term debt	Long-term debt				1,105			(109)		996			3,252			(324)		2,928			Long-term debt			227			(97)				130
Total interest expense	Total interest expense				(842)			(4,154)		(4,996)			(6,615)			(18,084)		(24,699)			Total interest expense			(145)			(2,729)				(2,874)
Net interest income	Net interest income				$	6,907		$	214	$	7,121		$	16,250		$	1,458	$	17,708		Net interest income			$	15,736		$	2,789			$	18,525

Provision for Credit Losses

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


		Three Months Ended						Nine Months Ended September 30,					Three Months Ended
($ in thousands)	($ in thousands)	September 30, 2021		June 30, 2021		September 30, 2020		2021		2020		($ in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
(Reversal of) provision for loan losses	(Reversal of) provision for loan losses	$	(2,566)	$	(2,608)	$	2,130	$	(6,458)	$	28,360	(Reversal of) provision for loan losses	$	(31,342)	$	10,890	$	(1,284)
Provision for (reversal of) credit losses - unfunded loan commitments		1,419		454		(989)		2,050		368
(Reversal of) provision for credit losses - unfunded loan commitments												(Reversal of) provision for credit losses - unfunded loan commitments	(200)		372		177

Total (reversal of) provision for credit losses	Total (reversal of) provision for credit losses	$	(1,147)	$	(2,154)	$	1,141	$	(4,408)	$	28,728	Total (reversal of) provision for credit losses	$	(31,542)	$	11,262	$	(1,107)

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Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~June 30,~~December 31, 2021

~~There~~The provision for credit losses was a reversal of $31.5 million for the first quarter, compared to a charge of $11.3 million for the fourth quarter. The first quarter reversal of credit losses included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. The fourth quarter of 2021 provision charge was due primarily to the initial charge for the non-purchased credit deteriorated loans acquired in the PMB acquisition.

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The provision for credit losses was a reversal of $31.5 million for the first quarter of 2022, compared to $1.1 million for the ~~third~~same 2021 period. The first quarter ~~compared~~reversal of credit losses included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. The reversal of ~~$2.2 million for~~credit losses in the ~~second quarter. The third~~first quarter ~~reversal~~ of 2021was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, ~~and~~ consideration of credit quality metrics, ~~offset partially by higher~~and lower period end loan balances ~~of $243.1 million.~~

~~Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020~~

~~There was a reversal of provision for credit losses of $1.1 million for the third quarter of 2021,~~ compared to a provision of $1.1 million for the same 2020 period. The lower provision for credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $550.6 million.December 31, 2020.

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

During the nine months ended September 30, 2021, the provision for credit losses was a reversal of $4.4 million, compared to a provision of $28.7 million during the same 2020 period. The lower provision for credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, lower specific reserves and consideration of credit quality metrics, offset partially by higher period end loan balances of $550.6 million. The provision for credit losses during the comparable 2020 period also reflected increases from using the new CECL model, the estimated impact of the health crisis on our loans, and higher specific reserves.

See further discussion in "Allowance for Credit Losses."

Noninterest Income

The following table presents the components of noninterest income for the periods indicated:


		Three Months Ended						Nine Months Ended September 30,					Three Months Ended
($ in thousands)	($ in thousands)	September 30, 2021		June 30, 2021		September 30, 2020		2021		2020		($ in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
Customer service fees	Customer service fees	$	1,900	$	1,990	$	1,498	$	5,648	$	3,818	Customer service fees	$	2,434	$	2,037	$	1,758
Loan servicing income	Loan servicing income	170		38		186		476		356		Loan servicing income	212		119		268
Income from bank owned life insurance	Income from bank owned life insurance	715		690		629		2,077		1,798		Income from bank owned life insurance	796		794		672

Net gain on sale of securities available-for-sale	Net gain on sale of securities available-for-sale	—		—		—		—		2,011		Net gain on sale of securities available-for-sale	16		—		—
Fair value adjustment on loans held-for-sale		160		20		24		180		(1,537)

Net gain on sale of loans	Net gain on sale of loans	—		—		272		—		245		Net gain on sale of loans	—		275		—

Other income	Other income	2,574		1,432		1,345		5,689		4,852		Other income	2,452		1,635		1,683
Total noninterest income	Total noninterest income	$	5,519	$	4,170	$	3,954	$	14,070	$	11,543	Total noninterest income	$	5,910	$	4,860	$	4,381

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~June 30,~~December 31, 2021

Noninterest income increased ~~$1.3~~$1.1 million to ~~$5.5~~$5.9 million for the ~~third~~first quarter due mostly to anhigher customer service fees and all other income, offset by lower net gains on the sale of loans. The $397 thousand increase in ~~all other income.~~customer service fees was due mostly to including PMB's operations for a full quarter. The ~~$1.1 million~~$817 thousand increase in all other income was due mostly to ~~an $841~~a $771 thousand gain related to a sale-leaseback ~~transaction of one branch location.~~transaction.

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021

Noninterest income for the ~~third~~first quarter of ~~2021~~2022 increased ~~$1.6~~$1.5 million to ~~$5.5~~$5.9 million compared to the same ~~2020~~2021 period due mostly to an increase in customer services fees and other ~~income offset by a decrease in net gain on sale of loans as there were no sales of loans in the third quarter of 2021.~~income. The ~~$402~~$676 thousand increase in customer services fees was due ~~to higher deposit and interchange fees of $414 thousand. The increase in deposit activity fees is attributed~~mostly to higher average deposit balances ~~and our initiative to bring our service fee schedules more in line with market.~~from the PMB acquisition. The ~~$1.2 million~~$769 thousand increase in other income was due mostly to the aforementioned gain related to the sale-leaseback ~~transaction and higher rental income.~~transaction.

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

Noninterest income for the nine months ended September 30, 2021 increased $2.5 million to $14.1 million compared to the same 2020 period. The increase in noninterest income was mainly due to higher customer service fees, lower fair value

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adjustment for loans held for sale and higher all other income, offset by lower net gain on sale of securities and loans. The $1.8 million increase in customer services fees was due to higher loan fees of $351 thousand and higher deposit activity fees of $1.5 million. The increase in deposit activity fees is attributed to higher average deposit balances and our initiative to bring our service fee schedules more in line with market. Fair value adjustment for loans held for sale improved $1.7 million as the comparable period included valuation losses on loans held for sale due to the impact of the decreases in market interest rates. There were no gains from sale of securities for the nine months ended September 30, 2021, compared to $2.0 million in net gains in the same 2020 period from the sale of $20.7 million in securities, primarily consisting of corporate securities. The $837 thousand increase in all other income is due mostly to the aforementioned gain related to the sale-leaseback transaction, higher rental income, interest rate swap income and processing fees, offset by lower legal settlement income and lower earnout income which ended in the second quarter of 2020.

Noninterest Expense

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


		Three Months Ended						Nine Months Ended September 30,					Three Months Ended
($ in thousands)	($ in thousands)	September 30, 2021		June 30, 2021		September 30, 2020		2021		2020		($ in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
Salaries and employee benefits	Salaries and employee benefits	$	24,786	$	25,042	$	23,277	$	75,547	$	70,973	Salaries and employee benefits	$	28,987	$	27,811	$	25,719
Naming rights termination		—		—		—		—		26,769

Occupancy and equipment	Occupancy and equipment	7,124		7,277		7,457		21,597		21,790		Occupancy and equipment	7,855		7,855		7,196
Professional fees	Professional fees	892		1,749		5,147		6,663		15,707		Professional fees	2,907		3,921		4,022

Data processing	Data processing	1,646		1,621		1,657		4,922		4,966		Data processing	1,828		1,939		1,655
Advertising		122		78		219		318		3,132

Regulatory assessments	Regulatory assessments	812		769		784		2,355		1,993		Regulatory assessments	775		1,040		774
Reversal of provision for loan repurchases	Reversal of provision for loan repurchases	(42)		(99)		(91)		(273)		(725)		Reversal of provision for loan repurchases	(471)		(675)		(132)
Amortization of intangible assets	Amortization of intangible assets	282		282		353		846		1,212		Amortization of intangible assets	441		430		282

Merger-related costs	Merger-related costs	1,000		700		—		2,400		—		Merger-related costs	—		13,469		700

All other expense	All other expense	2,974		3,969		3,021		9,714		13,958		All other expense	4,116		3,557		2,889
Noninterest expense before (gain) loss on investments in alternative energy partnerships		39,596		41,388		41,824		124,089		159,775
(Gain) loss on investments in alternative energy partnerships		(1,785)		(829)		(1,430)		1,016		308
Noninterest expense before loss (gain) on investments in alternative energy partnerships												Noninterest expense before loss (gain) on investments in alternative energy partnerships	46,438		59,347		43,105
Loss (gain) on investments in alternative energy partnerships												Loss (gain) on investments in alternative energy partnerships	158		(1,220)		3,630
Total noninterest expense	Total noninterest expense	$	37,811	$	40,559	$	40,394	$	125,105	$	160,083	Total noninterest expense	$	46,596	$	58,127	$	46,735

Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~June 30,~~December 31, 2021

Noninterest expense decreased ~~$2.7~~$11.5 million to ~~$37.8~~$46.6 million for the ~~third~~first quarter compared to the prior quarter. The decrease was due mostly to lower ~~professional fees~~merger-related costs of ~~$857 thousand, lower all other expense of $995 thousand and~~$13.5 million, offset by higher net ~~gain~~loss in alternative energy partnership investments of ~~$956 thousand, offset by~~$1.4 million and an increase in salaries and employee benefits of $1.2 million. The increase in salaries and employee benefits is attributed to including PMB operations for a full quarter and higher ~~merger-related costs~~taxes and benefits typical of ~~$300 thousand.~~the first quarter. Professional fees included net recoveries of indemnified legal expenses of ~~$2.2 million~~$106 thousand in the ~~third~~first quarter compared to net ~~recoveries~~expenses of ~~$1.3 million~~$642 thousand during the second quarter. The $995 thousand decrease in all other expense was due mostly to the third quarter including a gain on sale of other real estate owned of $365 thousand compared to $0 in the prior quarter, and higher equity investment income as the prior quarter included net losses of $727 thousand compared to $0 in the third quarter. Equity investments without readily determinable fair values include investments in privately held companies and limited partnerships and income or loss from these investments fluctuates based on their underlying performance. Total merger-related costs increased $300 thousand to $1.0 million for the third quarter compared to the priorfourth quarter.

Total operating costs, defined as noninterest expense adjusted for certain expense items (refer to section Non-GAAP Measures), ~~decreased $1.2~~increased $1.3 million to ~~$40.7~~$46.5 million for the ~~third~~first quarter compared to ~~$42.0~~$45.2 million for the prior ~~quarter primarily~~quarter. This increase is due mostly to ~~the lower~~higher salaries and benefits of $1.2 million and all other expense of $559 thousand as a result of higher ~~gain on sale~~payroll-related items typical of ~~other real estate owned~~the first quarter and ~~lower losses on equity investments.~~including PMB's operations for a full quarter.

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Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021

Noninterest expense was ~~$37.8~~$46.6 million for the ~~third~~first quarter of ~~2021,~~2022, a decrease of ~~$2.6 million~~$139 thousand from ~~$40.4~~$46.7 million for the comparable ~~2020~~2021 period. The decrease was mainly due to (i) lower professional fees of ~~$4.3~~$1.1 million, due to overall reductions in indemnified legal fees, net of recoveries, for resolved legal proceedings and various other litigations, (ii) lower ~~occupancy and equipment of $333 thousand due to reductions in depreciation and (iii) a higher gain~~loss on alternative energy partnerships of ~~$355 thousand~~$3.5 million from decreased loss sharing ~~allocations. These increases were~~allocations and (iii) lower merger-related costs of $700 thousand resulting from completion of the PMB acquisition, offset by (iv) higher salaries and employee benefits of ~~$1.5~~$3.3 million, ~~due to higher commissions~~occupancy and ~~incentive-based compensation~~equipment of $659 thousand, and ~~higher merger-related costs of $1.0 million associated with our merger with PMBC.~~

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

Noninterest expense for the nine months ended September 30, 2021 decreased $35.0 million to $125.1 million compared to the prior year. The decrease was primarily due to: (i) the same 2020 period including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, (ii) lower professional fees of $9.0 million, due mostly to a $7.6 million decrease in legal fees, net of insurance recoveries, (iii) lower advertising fees of $2.8 million due to the termination of the LAFC agreements in May 2020, and (iv) lower all other expense of ~~$4.2 million resulting from the previous year including a $2.5 million debt extinguishment fee for the early repayment of certain FHLB term advances and a~~ $1.2 million ~~charge for two legacy legal settlements combined with overall expense reduction efforts. These decreases were partially offset by higher (i) salaries and employee benefits of $4.6 million~~ due mainly to ~~higher commissions and incentive-based compensation due to higher production and financial performance levels, (ii) merger-related costs of $2.4 million associated with~~ the ~~approved merger with PMBC, and (iii) net losses in alternative energy partnership investments of $708 thousand.~~PMB acquisition.

Income Tax ~~(Benefit)~~ Expense

For the three months ended ~~September 30, 2021, June 30,~~March 31, 2022, December 31, 2021 and ~~September 30, 2020,~~March 31, 2021, income tax expense was ~~$8.7~~$18.8 million, ~~$6.6~~$2.8 million, and ~~$2.4~~$2.3 million, resulting in an effective tax rate of ~~27.2%~~27.9%, ~~25.6%~~32.4% and ~~12.9%~~13.8%, respectively. ~~Our 27.2%~~The decrease in the effective tax rate during the first quarter of 2022 was due mostly to the fourth quarter of 2021 including the impact of the PMB acquisition on our annual effective tax rate. The effective tax rate for 2022 is expected to be similar to the effective income tax rate for the first quarter.

The 13.8% effective tax rate for the ~~three months ended September 30,~~first quarter of 2021 ~~differs from the 29.5% statutory rate due to the impact of various permanent tax differences, tax credits and other discrete items.~~

For the nine months ended September 30, 2021 and 2020, income taxes were an expense of $17.5 million and a benefit of $5.1 million, resulting in an effective tax rate of 23.6% and 35.9%, respectively. During the nine months ended September 30, 2021, income tax expense included a ~~$2.5~~$2.1 million tax benefit from ~~share-based awards, including~~ the exercise of all previously issued outstanding stock appreciation rights, inwhich lowered the ~~first quarter of 2021 and other discrete tax items that impacted our~~ effective tax ~~rate.~~rate by 12.6%.

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For additional information, see Note 8 to Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.

FINANCIAL CONDITION

Investment Securities

~~At September 30, 2021, all of 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, Federal Reserve Discount Window capacity, repurchase agreements, and certain public deposits.

Investment Securities Held-to-Maturity

Securities held-to-maturity totaled $329.4 million at March 31, 2022 and included $215.2 million in agency securities and $114.2 million in municipal securities. During the first quarter of 2022, we transferred certain longer-duration fixed-rate mortgage-backed securities and municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio to lower the adverse impact rising interest rates may have on the fair value of such securities. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which along with the related unrealized loss in accumulated other comprehensive income, will be amortized into interest income as a yield adjustment over the remaining term of the securities.

61The following table presents the amortized cost and fair value of investment securities held-to-maturity as of the dates


	March 31, 2022						December 31, 2021
($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	153,713	$	145,881	$	(7,832)	$	—	$	—	$	—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,464		57,818		(3,646)		—		—		—
Municipal securities	114,204		107,253		(6,951)		—		—		—



Total securities held-to-maturity	$	329,381	$	310,952	$	(18,429)	$	—	$	—	$	—

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Investment Securities Available-for-Sale

The following table presents the amortized cost and fair value of the investment securities available for sale portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income as of the dates indicated:


		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
($ in thousands)	($ 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:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	15,489	$	15,421	$	(68)	$	17,436	$	17,354	$	(82)	SBA loan pool securities	$	13,918	$	13,810	$	(108)	$	14,679	$	14,591	$	(88)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	190,708		193,286		2,578		99,591		106,384		6,793		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	12,084		11,733		(351)		190,382		191,969		1,587
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	254,775		255,305		530		209,426		211,831		2,405		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	170,827		166,215		(4,612)		242,458		241,541		(917)
Municipal securities	Municipal securities	117,955		120,417		2,462		64,355		68,623		4,268		Municipal securities	—		—		—		117,913		119,015		1,102
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	149		154		5		156		160		4		Non-agency residential mortgage-backed securities	54,417		50,462		(3,955)		56,014		56,025		11

Collateralized loan obligations	Collateralized loan obligations	551,775		549,277		(2,498)		687,505		677,785		(9,720)		Collateralized loan obligations	492,775		487,973		(4,802)		521,275		518,964		(2,311)
Corporate debt securities	Corporate debt securities	156,995		169,508		12,513		141,975		149,294		7,319		Corporate debt securities	165,259		168,582		3,323		162,002		173,598		11,596
Total securities available-for-sale	Total securities available-for-sale	$	1,287,846	$	1,303,368	$	15,522	$	1,220,444	$	1,231,431	$	10,987	Total securities available-for-sale	$	909,280	$	898,775	$	(10,505)	$	1,304,723	$	1,315,703	$	10,980

Securities available-for-sale were ~~$1.30 billion~~$898.8 million at ~~September 30, 2021, an increase~~March 31, 2022, a decrease of ~~$71.9~~$416.9 million, or ~~5.8%~~31.7%, from ~~$1.23~~$1.32 billion at December 31, ~~2020.~~2021. The ~~increase~~decrease was mainly due to the aforementioned transfer of certain securities to the held-to-maturity

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portfolio, collateralized loan obligation (CLO) payoffs of $28.5 million, principal payments of $8.0 million, sales of $17.6 million and higher unrealized net losses of $21.5 million, offset by purchases of ~~$226.8 million, including $158.1 million in U.S. government agency and government sponsored enterprise securities, $53.7 million in municipal securities and $15.0 million in corporate securities and~~$5.0 million. The higher net unrealized ~~gains of $4.5 million, offset by CLO resets totaling $135.7 million and principal reductions of $22.5 million. The increase in unrealized net gains was~~losses were due mostly to ~~improved pricing~~the impact of ~~CLOs and corporate debt securities due to lower credit spreads, offset by decreases~~increases in longer-term market interest rates on the value of ~~municipal securities and mortgage-backed securities as a result~~each class of securities.

During the first quarter of 2022, increases in ~~longer term~~market interest rates ~~during~~resulted in higher net unrealized losses in our securities portfolio and stockholders’ equity. As market interest rates increase, bond prices tend to fall and, consequently, the ~~year.~~fair value of our securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and tangible stockholders’ equity.

CLOs totaled ~~$549.3~~$488.0 million and ~~$677.8~~$519.0 million and were all AAA and AA rated at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. We perform due diligence and ongoing credit quality review of our CLO holdings, which includes monitoring performance factors such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors.

We did not record credit impairment for any investment securities for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 or ~~2020.~~2021. We monitor our securities portfolio to ensure it has adequate credit ~~support.~~support and we consider the lowest credit rating for identification of potential credit impairment. As of ~~September 30, 2021,~~March 31, 2022, we believe there was no credit impairment and we did not have the current intent to sell securities with a fair value below amortized cost at ~~September 30, 2021,~~March 31, 2022, 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 credit impairment.~~ As of ~~September 30, 2021,~~March 31, 2022, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net ~~increase~~decreases in fair value during the ~~year~~period were attributable to a combination of changes in interest rates and credit market conditions.

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The following table presents ~~maturities,~~the fair values and weighted average yields using amortized cost, of the securities held-to-maturity portfolio as of March 31, 2022, based on the earlier of maturity dates or next repricing ~~dates,~~dates:


	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 held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	—	—	%	$	145,881	2.69	%	$	145,881	2.69	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	—		—	%	—		—	%	—		—	%	57,818		2.64	%	57,818		2.64	%
Municipal securities	—		—	%	—		—	%	14,143		2.20	%	93,110		2.68	%	107,253		2.62	%



Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	14,143	2.20	%	$	296,809	2.68	%	$	310,952	2.66	%

The following table presents the fair values and ~~yield information~~weighted average yields using amortized cost, of the ~~investment~~ securities available-for-sale portfolio as of ~~September 30, 2021:~~March 31, 2022, based on the earlier of maturity dates or next repricing dates:


		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)	($ 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:																					Securities available-for-sale:
SBA loan pools securities	SBA loan pools securities	$	15,421	0.93	%	$	—	—	%	$	—	—	%	$	—	—	%	$	15,421	0.93	%	SBA loan pools securities	$	13,810	0.98	%	$	—	—	%	$	—	—	%	$	—	—	%	$	13,810	0.98	%
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	29,294		2.20	%	163,992		2.16	%	193,286		2.17	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	11,733		2.23	%	—		—	%	11,733		2.23	%
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	105,662		0.63	%	10,978		1.97	%	42,423		1.34	%	96,242		1.75	%	255,305		1.23	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	94,644		0.80	%	9,923		1.98	%	37,688		1.36	%	23,960		1.74	%	166,215		1.14	%
Municipal securities		—		—	%	—		—	%	15,425		2.62	%	104,992		2.37	%	120,417		2.40	%

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	154		6.36	%	154		6.36	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	50,462		2.51	%	50,462		2.51	%

Collateralized loan obligations	Collateralized loan obligations	549,277		1.76	%	—		—	%	—		—	%	—		—	%	549,277		1.76	%	Collateralized loan obligations	487,973		1.87	%	—		—	%	—		—	%	—		—	%	487,973		1.87	%
Corporate debt securities	Corporate debt securities	—		—	%	151,201		4.82	%	18,307		5.73	%	—		—	%	169,508		4.91	%	Corporate debt securities	—		—	%	153,601		4.71	%	14,981		5.73	%	—		—	%	168,582		4.80	%
Total securities available-for-sale	Total securities available-for-sale	$	670,360	1.56	%	$	162,179	4.62	%	$	105,449	2.42	%	$	365,380	2.11	%	$	1,303,368	2.15	%	Total securities available-for-sale	$	596,427	1.68	%	$	163,524	4.54	%	$	64,402	2.39	%	$	74,422	2.27	%	$	898,775	2.29	%

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~~Loans Held-for-Sale~~

Total loans held-for-sale carried at fair value were $3.4 million at September 30, 2021 and $1.4 million at December 31, 2020 and consisted mainly of repurchased conforming SFR mortgage loans that were previously sold and repurchased GNMA loans that were previously sold and became delinquent more than 90 days.

Loans Receivable, Net

The following table presents the composition of our loan and lease portfolio as of the dates indicated:


($ in thousands)	($ in thousands)	September 30, 2021		December 31, 2020		Amount Change		Percentage Change		($ in thousands)	March 31, 2022		December 31, 2021		Amount Change		Percentage Change
Commercial:	Commercial:									Commercial:
Commercial and industrial(1)	Commercial and industrial(1)	$	2,296,626	$	2,088,308	$	208,318	10.0	%	Commercial and industrial(1)	$	2,799,457	$	2,668,984	$	130,473	4.9	%
Commercial real estate	Commercial real estate	907,224		807,195		100,029		12.4	%	Commercial real estate	1,163,381		1,311,105		(147,724)		(11.3)	%
Multifamily	Multifamily	1,295,613		1,289,820		5,793		0.4	%	Multifamily	1,397,761		1,361,054		36,707		2.7	%
SBA(2)	SBA(2)	181,582		273,444		(91,862)		(33.6)	%	SBA(2)	133,116		205,548		(72,432)		(35.2)	%
Construction	Construction	130,536		176,016		(45,480)		(25.8)	%	Construction	225,153		181,841		43,312		23.8	%

Total commercial loans										Total commercial loans	5,718,868		5,728,532		(9,664)		(0.2)	%
Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	1,393,696		1,230,236		163,460		13.3	%	Single family residential mortgage	1,637,307		1,420,023		217,284		15.3	%

Other consumer	Other consumer	23,298		33,386		(10,088)		(30.2)	%	Other consumer	95,398		102,925		(7,527)		(7.3)	%
Total consumer loans										Total consumer loans	1,732,705		1,522,948		209,757		13.8	%
Total loans(3)	Total loans(3)	6,228,575		5,898,405		330,170		5.6	%	Total loans(3)	7,451,573		7,251,480		200,093		2.8	%
Allowance for loan losses	Allowance for loan losses	(73,524)		(81,030)		7,506		(9.3)	%	Allowance for loan losses	(93,226)		(92,584)		(642)		0.7	%
Total loans receivable, net	Total loans receivable, net	$	6,155,051	$	5,817,375	$	337,676	5.8	%	Total loans receivable, net	$	7,358,347	$	7,158,896	$	199,451	2.8	%

(1)Includes warehouse lending balances of ~~$1.52~~$1.57 billion and ~~$1.34~~$1.60 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

(3)Total loans include net deferred loan origination costs (fees), purchased premiums (discounts), and fair value allocations of premiums (discounts) ~~of $12.5~~totaling $14.7 million and ~~$6.2~~$5.5 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

~~Held-for-investment~~Gross loans increased ~~$330.2~~$200.1 million to ~~$6.23~~$7.45 billion from December 31, ~~2020, resulting from higher commercial and industrial (C&I) loans~~2021 due to loan fundings of ~~$208.3~~$968.0 million, ~~due, in part, to increased utilization~~including single-family residential purchases of ~~credit facilities,~~$364.4 million. During the first quarter, $150.1 million of owner-occupied commercial real estate loans ~~of $100.0 million, multifamily loans of $5.8 million~~acquired in the PMB acquisition were moved to the other commercial and ~~single family residential loans of $163.5 million, offset by lower construction loans of $45.5 million due to prepayment activity.~~industrial category from the commercial real estate category. SBA loans ~~also~~ decreased by ~~$91.9~~$72.4 million due mostly from the SBA processing forgiveness ~~requests of $237.0 million offset by $143.7 million in new PPP loans originated.~~requests. At ~~September 30, 2021,~~March 31, 2022, SBA loans included ~~$116.5~~$58.3 million of PPP loans, net of ~~fees.~~fees of $203 thousand, compared to $123.1 million, net of fees of $772 thousand at December 31, 2021.

~~During~~Total commercial loans, excluding PPP loans and warehouse lending, increased $83.0 million, or 8.3% on an annualized basis during the ~~year, we purchased $615.4 million in loans, comprised of single family residential loans of $585.6 million and multifamily loans of $29.8 million.~~

first quarter.

We continue to focus the real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. As of ~~September 30, 2021,~~March 31, 2022, loans secured by residential real estate (single-family, multifamily, single-family construction, and warehouse lending credit facilities) represent approximately ~~70%~~65% of our total loans outstanding.

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Credit Quality Indicators

Table of Contents

The following table presents the risk categories for total loans by class of loans as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2021
March 31, 2022												March 31, 2022
Commercial:	Commercial:											Commercial:
Commercial and industrial	Commercial and industrial	$	2,210,325	$	62,961	$	23,340	$	—	$	2,296,626	Commercial and industrial	$	2,667,525	$	76,632	$	55,300	$	—	$	2,799,457
Commercial real estate	Commercial real estate	876,441		16,695		14,088		—		907,224		Commercial real estate	1,143,641		9,314		10,426		—		1,163,381
Multifamily	Multifamily	1,231,025		62,658		1,930		—		1,295,613		Multifamily	1,348,920		46,159		2,682		—		1,397,761
SBA	SBA	163,271		4,071		12,203		2,037		181,582		SBA	111,479		5,026		16,611		—		133,116
Construction	Construction	120,861		9,675		—		—		130,536		Construction	214,999		10,154		—		—		225,153

Consumer:	Consumer:											Consumer:
Single family residential mortgage	Single family residential mortgage	1,362,616		8,782		22,298		—		1,393,696		Single family residential mortgage	1,620,555		4,516		12,236		—		1,637,307
Other consumer	Other consumer	23,114		87		97		—		23,298		Other consumer	94,730		90		578		—		95,398
Total	Total	$	5,987,653	$	164,929	$	73,956	$	2,037	$	6,228,575	Total	$	7,201,849	$	151,891	$	97,833	$	—	$	7,451,573


($ in thousands)	($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2020
December 31, 2021												December 31, 2021
Commercial:	Commercial:											Commercial:
Commercial and industrial	Commercial and industrial	$	2,019,701	$	17,232	$	51,375	$	—	$	2,088,308	Commercial and industrial	$	2,550,540	$	65,659	$	52,785	$	—	$	2,668,984
Commercial real estate	Commercial real estate	760,612		30,485		16,098		—		807,195		Commercial real estate	1,292,837		4,845		13,423		—		1,311,105
Multifamily	Multifamily	1,284,995		2,853		1,972		—		1,289,820		Multifamily	1,312,038		46,314		2,702		—		1,361,054
SBA	SBA	264,851		3,275		4,837		481		273,444		SBA	181,129		6,040		18,379		—		205,548
Construction	Construction	167,485		8,531		—		—		176,016		Construction	171,731		10,110		—		—		181,841

Consumer:	Consumer:											Consumer:
Single family residential mortgage	Single family residential mortgage	1,202,758		11,853		15,625		—		1,230,236		Single family residential mortgage	1,395,785		10,423		13,815		—		1,420,023
Other consumer	Other consumer	31,823		1,215		348		—		33,386		Other consumer	102,538		92		295		—		102,925
Total	Total	$	5,732,225	$	75,444	$	90,255	$	481	$	5,898,405	Total	$	7,006,598	$	143,483	$	101,399	$	—	$	7,251,480

Loans risk rated special mention increased ~~$89.5~~$8.4 million to ~~$164.9~~$151.9 million at ~~September 30, 2021~~March 31, 2022 compared to ~~$75.4~~$143.5 million at December 31, ~~2020~~2021 due mostly to downgrades of certain ~~multifamily and~~ commercial and industrial and commercial real estate loans, primarily offset by loan upgrades or loan payoffs within the single family residential, and ~~loan amortization.~~SBA portfolios. Loans risk rated substandard decreased ~~$16.3~~$3.6 million to ~~$74.0~~$97.8 million at ~~September 30, 2021~~March 31, 2022 compared to ~~$90.3~~$101.4 million at December 31, ~~2020~~2021 due mostly to the pay off or upgrade ~~and payoff~~ of certain loans in all loan categories except commercial and industrial ~~loans, offset by the downgrade of certain single family residential loans~~ and ~~the repurchase of guaranteed SBA~~other consumer loans. There were no loans ~~pending resolution. Loans~~ risk rated doubtful ~~increased $1.6 million to $2.0 million~~ at ~~September 30, 2021 compared to $481 thousand due mostly to downgrades of one SBA relationship.~~March 31, 2022 and December 31, 2021.

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The commercial and industrial ("C&I&I") portfolio has limited exposure to certain business sectors undergoing severe stress as a result of the pandemic. The C&I industry concentrations in dollars and as a percentage of total outstanding C&I loan balances are summarized below:


		September 30, 2021					March 31, 2022
($ in thousands)	($ in thousands)	Amount		% of Portfolio		($ in thousands)	Amount		% of Portfolio
C&I Portfolio by Industry	C&I Portfolio by Industry					C&I Portfolio by Industry
Finance and Insurance - Warehouse Lending	Finance and Insurance - Warehouse Lending	$	1,522,945	66	%	Finance and Insurance - Warehouse Lending	$	1,574,549	56	%
Real Estate & Rental Leasing		221,541		10	%
Real Estate and Rental Leasing						Real Estate and Rental Leasing	270,333		10	%
Finance and Insurance - Other	Finance and Insurance - Other	84,569		4	%	Finance and Insurance - Other	128,758		5	%
Manufacturing						Manufacturing	118,912		4	%
Healthcare						Healthcare	92,615		3	%
Wholesale Trade						Wholesale Trade	75,066		3	%
Gas Stations	Gas Stations	73,926		3	%	Gas Stations	70,038		3	%
Healthcare		72,252		3	%
Other Retail Trade						Other Retail Trade	59,758		2	%
Professional Services						Professional Services	56,073		2	%
Construction						Construction	46,431		2	%
Television / Motion Pictures	Television / Motion Pictures	51,097		2	%	Television / Motion Pictures	39,184		1	%
Manufacturing		47,421		2	%
Wholesale Trade		38,770		2	%
Other Retail Trade		29,950		1	%
Food Services	Food Services	29,034		1	%	Food Services	37,409		1	%
Professional Services		15,339		1	%
Transportation	Transportation	4,685		—	%	Transportation	21,233		1	%
Accommodations	Accommodations	2,135		—	%	Accommodations	9,031		—	%
All Other	All Other	102,962		4	%	All Other	200,067		7	%
Total	Total	$	2,296,626	100	%	Total	$	2,799,457	100	%

Non-Traditional Mortgage Portfolio ("NTM")

~~Our~~We no longer originate SFR loans, however we have and may continue to purchase pools of loans that include NTM ~~portfolio is comprised of three interest-only products: Green Loans, Interest Only~~ loans ~~and a small number of additional~~such as interest only loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the ~~potential for negative amortization.~~ life of the loan.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the NTM ~~portfolio~~loans totaled ~~$571.4~~$717.6 million, or ~~9.2%~~9.6% of ~~the~~ total ~~gross loan portfolio,~~loans, and ~~$437.1~~$635.3 million, or ~~7.4%~~8.8% of total loans, respectively. These SFR loans are comprised of interest only loans and Green Loans. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the ~~total gross loan portfolio.~~ time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At March 31, 2022 and December 31, 2021, interest only loans totaled $706.9 million and $613.3 million. 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. Green Loans are generally interest only for a 15-year term with a balloon payment due at maturity. At March 31, 2022 and December 31, 2021, Green Loans totaled $10.2 million and $21.5 million.

The total NTM portfolio increased by ~~$134.3~~$82.3 million, or ~~30.7%~~13.0% during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily due to loan purchases, offset by principal paydowns and payoffs. ~~We no longer originate~~

At March 31, 2022 and December 31, 2021, nonperforming NTM loans ~~however loans were purchased which meet the criteria to be considered NTM loans. NTM loans~~totaled zero and $4.0 million.

Non-Traditional Mortgage Performance Indicators

Our risk management policy and credit monitoring include reviewing delinquency, FICO scores, and LTV ratios on nonaccrual status included $3.3 million of Green Loans and $3.3 million of Interest Only loans at September 30, 2021 compared to $4.0 million of Green Loans and $4.7 million of Interest Only loans at December 31, 2020.

~~The initial credit guidelines for~~ the NTM ~~portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, loan-to-value ("LTV") ratio, property type, occupancy type,~~ loan ~~amount, and geography. Additionally, from an ongoing credit risk management perspective, we~~portfolio. We also regularly monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for ~~NTMs~~NTM loans are LTV ratios and FICO scores. ~~We review the~~At March 31, 2022, all of our $717.6 million NTM ~~loan~~first lien portfolio ~~at least quarterly, which includes refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (“AVMs”) to confirm collateral values.~~

~~Green Loans, including first and second liens, totaled $26.7 million at September 30, 2021, a decrease~~had LTVs of ~~$6.5~~80% or less. At March 31, 2022, $6.4 million or ~~19.6% from $33.2~~63% of our $10.2 million ~~at December 31, 2020. The following table presents our~~ Green Loans first lien portfolio ~~at September 30, 2021 by~~had FICO scores ~~that were obtained during the quarter ended September 30, 2021, compared to the FICO scores for those same loans that were obtained during the quarter ended December 31, 2020:~~

By FICO Scores Obtained
During the Quarter Ended
September 30, 2021
By FICO Scores Obtained
During the Quarter Ended
December 31, 2020
Change
($ in thousands) Count Amount Percent Count Amount Percent Count Amount Percent
FICO Score
800+ 8 $ 2,472 9.9 % 9 $ 4,699 18.7 % (1) $ (2,227) (47.4) %
700-799 20 18,024 71.8 % 19 13,907 55.5 % 1 4,117 29.6 %
600-699 5 3,781 15.1 % 5 5,671 22.6 % — (1,890) (33.3) %
<600 1 272 1.1 % 1 272 1.1 % — — — %
No FICO 2 525 2.1 % 2 525 2.1 % — — — %
Totals 36 $ 25,074 100.0 % 36 $ 25,074 100.0 % — $ — — %
of 700 or greater.

~~Table of~~ ~~Contents~~

~~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 our policy. The table below represents our single family residential NTM first lien portfolio by LTV ratio ranges as of the dates indicated:

($ in thousands) Green Interest Only Negative Amortization Total
LTV ratio range Count Amount Percent Count Amount Percent Count Amount Percent Count Amount Percent
September 30, 2021
< 61% 34 $ 22,807 91.0 % 181 $ 278,990 51.4 % 4 $ 1,464 100.0 % 219 $ 303,261 53.2 %
61-80% 2 2,267 9.0 % 154 258,419 47.6 % — — — % 156 260,686 45.8 %
81-100% — — — % 1 2,316 0.4 % — — — % 1 2,316 0.4 %
> 100% — — — % 1 3,518 0.6 % — — — % 1 3,518 0.6 %
Total 36 $ 25,074 100.0 % 337 $ 543,243 100.0 % 4 $ 1,464 100.0 % 377 $ 569,781 100.0 %
December 31, 2020
< 61% 42 $ 25,946 82.1 % 190 $ 271,108 67.5 % 8 $ 2,288 100.0 % 240 $ 299,342 68.7 %
61-80% 6 5,641 17.9 % 91 126,281 31.4 % — — —�� % 97 131,922 30.3 %
81-100% — — — % 2 4,251 1.1 % — — — % 2 4,251 1.0 %
> 100% — — — % — — — % — — — % — — — %
Total 48 $ 31,587 100.0 % 283 $ 401,640 100.0 % 8 $ 2,288 100.0 % 339 $ 435,515 100.0 %

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Nonperforming Assets

The following table presents a summary of total nonperforming assets, excluding loans held-for-sale, as of the dates indicated:


($ in thousands)	($ in thousands)	September 30, 2021			December 31, 2020			Amount Change		Percentage Change		($ in thousands)	March 31, 2022			December 31, 2021			Amount Change		Percentage Change
Loans past due 90 days or more still on accrual	Loans past due 90 days or more still on accrual	$	—		$	728		$	(728)	(100.0)	%	Loans past due 90 days or more still on accrual	$	—		$	—		$	—	—	%
Nonaccrual loans	Nonaccrual loans	45,621			35,900			9,721		27.1	%	Nonaccrual loans	54,529			52,558			1,971		3.8	%
Total nonperforming loans	Total nonperforming loans	45,621			36,628			8,993		24.6	%	Total nonperforming loans	54,529			52,558			1,971		3.8	%
Other real estate owned	Other real estate owned	—			—			—		—	%	Other real estate owned	—			—			—		—	%
Total nonperforming assets	Total nonperforming assets	$	45,621		$	36,628		$	8,993	24.6	%	Total nonperforming assets	$	54,529		$	52,558		$	1,971	3.8	%
Performing restructured loans (1)	Performing restructured loans (1)	$	5,835		$	4,733		$	1,102	23.3	%	Performing restructured loans (1)	$	14,850		$	12,538		$	2,312	18.4	%
Total nonperforming loans to total loans		0.73		%	0.62		%
Nonaccrual loans to total loans												Nonaccrual loans to total loans	0.73		%	0.72		%
Nonperforming loans to total loans												Nonperforming loans to total loans	0.73		%	0.72		%
Total nonperforming assets to total assets	Total nonperforming assets to total assets	0.55		%	0.46		%					Total nonperforming assets to total assets	0.57		%	0.56		%
ALL to nonperforming loans	ALL to nonperforming loans	161.16		%	221.22		%					ALL to nonperforming loans	170.97		%	176.16		%
ACL to nonperforming loans	ACL to nonperforming loans	172.63		%	229.91		%					ACL to nonperforming loans	180.88		%	186.82		%

(1) Excluded from nonperforming loans

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

Additional interest income of approximately ~~$724~~$696 thousand ~~and $1.9 million~~ would have been recorded during the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, had these loans been paid in accordance with their original terms throughout the periods indicated.

Non-performing loans increased ~~$9.0~~$2.0 million to ~~$45.6~~$54.5 million as of ~~September 30, 2021,~~March 31, 2022, of which ~~$22.7~~$19.5 million, or ~~50%~~36%, relates to loans in a current payment status. The increase was due mostly to ~~$36.7~~additions of $9.4 million, offset by $1.0 million in loans returning to accrual status and $6.4 million in payoffs, paydowns, and charge-offs. Of the $9.4 million of loans placed on non-accrual status, including $9.3 million in guaranteed SBA loans that were repurchased and are pending resolution, offset by $25.1 million in cured loans and payoffs. Of the $36.7 million of loans placed on non-accrual status, $23.8$7.2 million, related to SFR loans.

At ~~September 30, 2021,~~March 31, 2022, non-performing loans included (i) a ~~legacy relationship~~$12.6 million commercial and industrial loan acquired in the PMB acquisition, (ii) SBA PPP loans of $4.4 million and other SBA loans totaling ~~$7.0~~$11.0 million, ~~that~~of which $13.1 million is ~~well-secured by a combination of commercial real estate and SFR properties with an average loan-to-value ratio of 50%, (ii)~~guaranteed, (iii) SFR loans totaling ~~$16.5~~$10.3 million, ~~(iii) SBA loans totaling $12.8 million, of which $8.7 million is guaranteed,~~ and (iv) other commercial loans of ~~$9.2~~$15.7 million.

During the three and nine months ended September 30, 2021, other real estate owned, consisting of one SFR property totaling $3.3 million, was sold at a gain of $365 thousand. During the three and nine months ended September 30, 2020, other real estate owned, consisting of one SFR property totaling $1.1 million, was sold at a loss of $38 thousand.

Troubled Debt Restructurings

Loans that we modify or restructure where the debtor is experiencing financial difficulties and makes a concession to the borrower in 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 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 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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had 919 and 1318 loans classified as TDRs, with an aggregate balance of ~~$8.2~~$29.9 million and ~~$9.0~~$16.7 million. When a loan becomes a TDR, we cease accruing interest, and classify it as nonaccrual until the borrower demonstrates that the loan is again performing. The ~~decrease~~increase in TDRs during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was due mostly to ~~payoffs~~modifying the $12.6 million non-performing commercial and ~~paydowns offset by an addition for one single family residential~~industrial loan ~~totaling $1.8 million.~~

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acquired in the PMB acquisition.

At ~~September 30, 2021,~~March 31, 2022, of the 919 loans classified as TDRs, 713 loans totaling ~~$5.8~~$14.9 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, ~~2020,~~2021, of the 1318 loans classified as TDRs, 1011 loans totaling ~~$4.7~~$12.5 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

Troubled Debt Restructuring (TDR) Relief: 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 i) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; ii) 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 iii) a nonaccrual status benefit as the loans are generally not reported as nonaccrual during the modification period. Refer to "Borrower Payment Relief Efforts" above for additional information regarding CARES Act deferrals.

Allowance for Credit Losses (ACL)

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including ~~macroeconomic variables (MEVs)~~MEVs released by ~~our~~the model provider during ~~September 2021.~~March 2022. The ~~September 2021~~published forecasts ~~reflect a more favorable view of the economy (i.e.~~consider rising inflation, higher GDP growth rates and lower unemployment rates) compared to the June 2021 forecasts. While the current forecasts generally reflect an improving economy with the availability of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variants, further government stimulus,oil prices, ongoing supply chain issues and the military conflict between Russia and Ukraine, among other factors, and while they reflect a less optimistic view of the economy as compared to the December 2021 forecasts, certain MEVs used in the model during the current quarter, such as California employment and the CRE price index, reflect improvements. Nonetheless, the ultimate pace of economic recovery remains uncertain and accordingly, the ~~recovery. Accordingly, our~~ economic assumptions used in the model and the resulting ACL level and provision ~~reversal~~ consider both the positive assumptions and potential uncertainties. The ACL also incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.

The ~~allowance for expected credit losses (ACL),~~ACL, which includes the reserve for unfunded loan commitments, totaled ~~$78.8~~$98.6 million, or ~~1.26%~~1.32% of total loans, at ~~September 30, 2021,~~March 31, 2022, compared to ~~$84.2~~$98.2 million, or ~~1.43%~~1.35% of total loans, at December 31, ~~2020.~~2021. The ~~$5.5 million decrease~~$442 thousand increase in the ACL was due primarily to: (i) ~~lower general reserves of $6.4 million due to improved economic assumptions and asset quality trends, offset by higher period-end portfolio balances , (ii) net charge-offs of $1.0 million, and (iii)~~ higher specific reserves of ~~$2.0 million.~~$744 thousand and (ii) other net recoveries of $642 thousand (excluding the $31.3 million recovery) offset by (iii) a $944 thousand reduction in general reserves from changes in portfolio mix, improved MEVs used for model purposes, the general credit quality of the portfolio, and lower unfunded commitments, offset by overall loan growth. The $31.3 million recovery from the settlement of a loan previously charged-off in 2019 also resulted in a reversal of provision for credit losses and therefore had no net impact on the ACL. The ACL coverage of non-performing loans was ~~173%~~181% at ~~September 30, 2021~~March 31, 2022 compared to ~~230%~~187% at December 31, ~~2020.~~2021.

The reserve for unfunded loan commitments was established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required.

The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:


($ in thousands)	($ in thousands)	September 30, 2021			December 31, 2020			($ in thousands)	March 31, 2022			December 31, 2020

Allowance for credit losses:	Allowance for credit losses:							Allowance for credit losses:
Allowance for loan losses (ALL)	Allowance for loan losses (ALL)	$	73,524		$	81,030		Allowance for loan losses (ALL)	$	93,226		$	92,584
Reserve for unfunded loan commitments	Reserve for unfunded loan commitments	5,233			3,183			Reserve for unfunded loan commitments	5,405			5,605
Total allowance for credit losses (ACL)	Total allowance for credit losses (ACL)	$	78,757		$	84,213		Total allowance for credit losses (ACL)	$	98,631		$	98,189

ALL to total loans	ALL to total loans	1.18		%	1.37		%	ALL to total loans	1.25		%	1.28		%
ACL to total loans	ACL to total loans	1.26		%	1.43		%	ACL to total loans	1.32		%	1.35		%
ACL to total loans, excluding PPP loans	ACL to total loans, excluding PPP loans	1.29		%	1.48		%	ACL to total loans, excluding PPP loans	1.33		%	1.39		%

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The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:


		Three Months Ended September 30,												Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021						2020							($ in thousands)	2022						2021
		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				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	Balance at beginning of period	$	75,885	$	3,814	$	79,699	$	90,370	$	4,195	$	94,565		Balance at beginning of period	$	92,584	$	5,605	$	98,189	$	81,030	$	3,183	$	84,213

Loans charged off	Loans charged off	(327)		—		(327)		(1,821)		—		(1,821)			Loans charged off	(231)		—		(231)		(565)		—		(565)
Recoveries of loans previously charged off	Recoveries of loans previously charged off	532		—		532		248		—		248			Recoveries of loans previously charged off	32,215		—		32,215		172		—		172
Net recoveries (charge-offs)	Net recoveries (charge-offs)	205		—		205		(1,573)		—		(1,573)			Net recoveries (charge-offs)	31,984		—		31,984		(393)		—		(393)

(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	(2,566)		1,419		(1,147)		2,130		(989)		1,141			(Reversal of) provision for credit losses	(31,342)		(200)		(31,542)		(1,284)		177		(1,107)
Balance at end of period	Balance at end of period	$	73,524	$	5,233	$	78,757	$	90,927	$	3,206	$	94,133		Balance at end of period	$	93,226	$	5,405	$	98,631	$	79,353	$	3,360	$	82,713

Nine Months Ended September 30,
($ in thousands) 2021 2020
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 $ 81,030 $ 3,183 $ 84,213 $ 57,649 $ 4,064 $ 61,713
Impact of adopting ASU 2016-13(1)
— — — 7,609 (1,226) 6,383
Loans charged off (1,778) — (1,778) (3,897) — (3,897)
Recoveries of loans previously charged off 730 — 730 1,206 — 1,206
Net charge-offs (1,048) — (1,048) (2,691) — (2,691)
(Reversal of) provision for credit losses (6,458) 2,050 (4,408) 28,360 368 28,728
Balance at end of period $ 73,524 $ 5,233 $ 78,757 $ 90,927 $ 3,206 $ 94,133
The following table presents a summary of net (charge-offs) recoveries and the annualized ratio of net charge-offs to average loans by loan class for the periods indicated:

~~(1)Represents~~


	Three Months Ended March 31,
($ in thousands)	2022						2021
	Net (Charge-offs) Recoveries		Average Loans		Annualized (Charge-off) Recovery Ratio		Net (Charge-offs) Recoveries		Average Loans		Annualized (Charge-off) Recovery Ratio
Commercial:
Commercial and industrial	$	31,235	$	2,632,387	4.75	%	$	(520)	$	1,949,138	(0.11)	%
Commercial real estate	—		1,322,949		—	%	—		868,874		—	%
Multifamily	—		1,339,067		—	%	—		1,282,838		—	%
SBA	745		116,154		2.57	%	126		272,356		0.19	%
Construction	—		188,795		—	%	—		170,797		—	%

Consumer:
Single family residential mortgage	28		1,562,478		0.01	%	—		1,210,105		—	%
Other consumer	(24)		97,516		(0.10)	%	1		28,520		0.01	%
Total loans	$	31,984	$	7,259,346	1.76	%	$	(393)	$	5,782,628	(0.03)	%

Net recoveries were $32.0 million during the ~~impact~~first quarter of ~~adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As~~2022, compared to net charge-offs of $393 thousand during the comparable 2021 period. The increase in net recoveries between periods was mainly due to a ~~result~~$31.3 million recovery from the settlement 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~~loan previously ~~applied incurred loss methodology.~~charged-off in 2019.

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The following table provides a summary of the allocation of the allowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:

September 30, 2021 December 31, 2020
($ 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 $ 20,255 $ 2,296,626 36.8 % $ 20,608 $ 2,088,308 35.3 %
Commercial real estate 16,017 907,224 14.6 % 19,074 807,195 13.7 %
Multifamily 18,725 1,295,613 20.8 % 22,512 1,289,820 21.9 %
SBA 4,735 181,582 2.9 % 3,145 273,444 4.6 %
Construction 4,118 130,536 2.1 % 5,849 176,016 3.0 %
Consumer:
Single family residential mortgage 9,304 1,393,696 22.4 % 9,191 1,230,236 20.9 %
Other consumer 370 23,298 0.4 % 651 33,386 0.6 %
Total $ 73,524 $ 6,228,575 100.0 % $ 81,030 $ 5,898,405 100.0 %

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~~The following table provides information regarding activity by loan class in the allowance for loan losses during the periods indicated:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2021 2020 2021 2020
ALL at beginning of period $ 75,885 $ 90,370 $ 81,030 $ 57,649
Impact of adopting ASU 2016-13(1)
— — — 7,609
Charge-offs:
Commercial and industrial (115) (1,597) (1,180) (2,761)
Commercial real estate (138) — (138) —
Multifamily — — — —
SBA (74) (224) (460) (580)
Single family residential mortgage — — — (552)
Other consumer — — — (4)
Total charge-offs (327) (1,821) (1,778) (3,897)
Recoveries:
Commercial and industrial 484 116 553 265
SBA 1 132 130 253
Single family residential mortgage 46 — 46 639
Other consumer 1 — 1 49
Total recoveries 532 248 730 1,206
Net recoveries (charge-offs) 205 (1,573) (1,048) (2,691)
(Reversal of) provision for credit losses - loans (2,566) 2,130 (6,458) 28,360
ALL at end of period $ 73,524 $ 90,927 $ 73,524 $ 90,927
Average total loans held-for-investment $ 6,056,374 $ 5,514,032 $ 5,870,480 $ 5,652,897
Total loans held-for-investment at end of period $ 6,228,575 $ 5,678,002 $ 6,228,575 $ 5,678,002
Ratios:
Annualized net charge-offs to average total loans held-for-investment (0.01) % 0.11 % 0.02 % 0.06 %
ALL to total loans held-for-investment 1.18 % 1.60 % 1.18 % 1.60 %


	March 31, 2022						December 31, 2021
($ 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	$	39,967	$	2,799,457	37.5	%	$	33,557	$	2,668,984	36.8	%
Commercial real estate	16,490		1,163,381		15.6	%	21,727		1,311,105		18.1	%
Multifamily	15,337		1,397,761		18.8	%	17,893		1,361,054		18.8	%
SBA	3,041		133,116		1.8	%	3,017		205,548		2.8	%
Construction	6,268		225,153		3.0	%	5,622		181,841		2.5	%

Consumer:
Single family residential mortgage	11,029		1,637,307		22.0	%	9,608		1,420,023		19.6	%
Other consumer	1,094		95,398		1.3	%	1,160		102,925		1.4	%

Total	$	93,226	$	7,451,573	100.0	%	$	92,584	$	7,251,480	100.0	%

~~(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.

Alternative Energy Partnerships

As our respective investments in these entities are more than minor, we have significant influence, but not control, over the investee’s activities that most significantly impact its economic performance. As a result, 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 our investment. As a result, 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 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 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 our investment in alternative energy partnerships for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Balance at beginning of period	Balance at beginning of period	$	24,068	$	26,967	$	27,977	$	29,300	Balance at beginning of period	$	25,888	$	27,977
New funding		—		—		—		3,631

Change in unfunded commitments		—		—		—		(3,225)

Cash distribution from investments	Cash distribution from investments	(657)		(611)		(1,765)		(1,612)		Cash distribution from investments	(574)		(538)
Gain (loss) on investments using HLBV method	Gain (loss) on investments using HLBV method	1,785		1,430		(1,016)		(308)		Gain (loss) on investments using HLBV method	(158)		(3,630)
Balance at end of period	Balance at end of period	$	25,196	$	27,786	$	25,196	$	27,786	Balance at end of period	$	25,156	$	23,809
Unfunded equity commitments at end of period	Unfunded equity commitments at end of period	$	—	$	—	$	—	$	—	Unfunded equity commitments at end of period	$	—	$	—

Our most recent investment in alternative energy partnerships totaling $3.6 million occurred in March 2020.

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During the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, we recognized gains on investment of $1.8 million and $1.4 million. During the nine months ended September 30, 2021 and 2020,~~ we recognized losses on investment of ~~$1.0 million~~$158 thousand and $308 thousand. The HLBV losses for the nine months ended September 30, 2021 and 2020 were largely driven by accelerated tax depreciation on equipment which reduces the amount distributable by the investee in a hypothetical liquidation under the contractual liquidation provisions.$3.6 million. From an income tax ~~benefit~~benefits perspective, we recognized no investment tax credits during these periods; however, we recorded income tax ~~expense~~benefit related to these investments of ~~$491~~$46 thousand and ~~$185~~$992 thousand for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020 and income tax benefit of $280 thousand and $111 thousand for the nine months ended September 30, 2021 and 2020.~~2021.

For additional information, see Note 12 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:


		September 30, 2021				December 31, 2020							March 31, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Amount		% of Total Deposits		Amount		% of Total Deposits		Amount Change		($ in thousands)	Amount		% of Total Deposits		Amount		% of Total Deposits		Amount Change
Noninterest-bearing deposits	Noninterest-bearing deposits	$	2,107,709	32.2	%	$	1,559,248	25.6	%	$	548,461	Noninterest-bearing deposits	$	2,958,632	39.6	%	$	2,788,196	37.5	%	$	170,436
Interest-bearing demand deposits	Interest-bearing demand deposits	2,214,678		33.8	%	2,107,942		34.6	%	106,736		Interest-bearing demand deposits	2,395,329		32.0	%	2,393,386		32.2	%	1,943

Savings and money market accounts	Savings and money market accounts	1,661,013		25.4	%	1,646,660		27.1	%	14,353		Savings and money market accounts	1,605,088		21.4	%	1,751,135		23.5	%	(146,047)
Certificates of deposit of $250,000 or less	Certificates of deposit of $250,000 or less	221,022		3.4	%	316,585		5.2	%	(95,563)		Certificates of deposit of $250,000 or less	261,229		3.5	%	285,768		3.8	%	(24,539)

Certificates of deposit of more than $250,000	Certificates of deposit of more than $250,000	338,803		5.2	%	455,365		7.6	%	(116,562)		Certificates of deposit of more than $250,000	259,423		3.5	%	220,950		3.0	%	38,473
Total deposits	Total deposits	$	6,543,225	100.0	%	$	6,085,800	100.0	%	$	457,425	Total deposits	$	7,479,701	100.0	%	$	7,439,435	100.0	%	$	40,266

Total deposits were ~~$6.5~~$7.5 billion at ~~September 30, 2021,~~March 31, 2022, an increase of ~~$457.4~~$40.3 million, or ~~7.5%~~0.5%, from ~~$6.1~~$7.4 billion at December 31, ~~2020. We continue~~2021 due mostly to ~~focus on growing relationship-based deposits, strategically augmented~~higher noninterest-bearing checking balances of $170.4 million, offset by ~~wholesale funding, as we actively managed down deposit costs in response to the current interest rate environment.~~lower savings and money market balances of $146.0 million. Noninterest-bearing deposits totaled ~~$2.11~~$2.96 billion and represented ~~32.2%~~39.6% of total deposits at ~~September 30, 2021~~March 31, 2022 compared to ~~$1.56~~$2.79 billion and ~~25.6%~~37.5% at December 31, ~~2020.~~

During the nine months ended September 30, 2021, demand deposits increased by $655.2 million, due to higher noninterest-bearing deposits of $548.5 million and interest-bearing demand deposits of $106.7 million. Savings and money market accounts also increased $14.4 million during the nine months ended September 30, 2021. ~~These increases were offset by decreases in time deposits of $212.1 million.~~

Brokered deposits were $10.0 million at ~~September 30, 2021,~~March 31, 2022 and ~~$26.2 million at~~ December 31, ~~2020. The decrease between periods related to maturities of brokered time deposits.~~2021.

The following table presents the scheduled maturities of certificates of deposit as of ~~September 30, 2021:~~March 31, 2022:


($ in thousands)	($ 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	Certificates of deposit of $250,000 or less	$	74,358	$	59,451	$	57,893	$	29,320	$	221,022	Certificates of deposit of $250,000 or less	$	85,582	$	72,892	$	67,789	$	34,966	$	261,229
Certificates of deposit of more than $250,000	Certificates of deposit of more than $250,000	253,133		24,665		53,462		7,543		338,803		Certificates of deposit of more than $250,000	185,919		34,133		31,393		7,978		259,423
Total certificates of deposit	Total certificates of deposit	$	327,491	$	84,116	$	111,355	$	36,863	$	559,825	Total certificates of deposit	$	271,501	$	107,025	$	99,182	$	42,944	$	520,652

Borrowings

We ~~utilized~~utilize FHLB advances to leverage our capital base, to provide funds for lending and investing activities, as a source of liquidity, and to enhance interest rate risk management. We also ~~maintained~~maintain additional borrowing availabilities from Federal Reserve Discount Window and unsecured federal funds lines of credit.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, FHLB advances ~~decreased $134.1~~increased $80.3 million, or ~~24.8%~~16.9%, to ~~$405.7~~$556.4 million, net of unamortized debt issuance costs of ~~$5.3~~$4.6 million, as of ~~September 30, 2021, primarily~~March 31, 2022, due to ~~repayment of~~an increase in overnight borrowings of ~~$85.0 million and maturities of term advances of $50.0~~$80.0 million.

At ~~September 30, 2021,~~March 31, 2022, FHLB advances included no$150.0 million in overnight borrowings and $411.0 million in term advances with a weighted average life of ~~4.2~~3.7 years and weighted average interest rate of 2.53%.

We did not utilize repurchase agreements at ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

The Bank ~~maintained~~maintains available unsecured federal funds lines with five correspondent banks totaling $210.0 million, with no outstanding borrowings at ~~September 30, 2021.~~March 31, 2022.

The Bank also has the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform ~~(AFX)~~("AFX"). The availability of such unsecured borrowings fluctuates regularly, ~~and are~~is subject

7367

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~~subject~~ to the counterparties discretion and totaled $441.0 million ~~and $196.0 million~~ at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Borrowings under the AFX totaled ~~$100.0~~$170.0 million and $25.0 million at March 31, 2022 and December 31, 2021.

The holding company maintains a $50.0 million revolving line of credit, which matures on December 19, 2022. Borrowings under the line of credit totaled $20.0 million and zero at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The line of credit is subject to certain operational and financial covenants and we were in compliance with these covenants at March 31, 2022.

For additional information, see Note 6 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Long-term Debt

The following table presents our long-term debt as of the dates indicated:


		September 30, 2021				December 31, 2020							March 31, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount		($ in thousands)	Interest Rate	Maturity Date	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	$	(1,104)	$	175,000	$	(1,291)

4.375% subordinated notes due October 30, 2030		85,000		(2,190)		85,000		(2,394)
Senior notes										Senior notes	5.25%	4/15/2025	$	175,000	$	(975)	$	175,000	$	(1,014)
Subordinated notes										Subordinated notes	4.375%	10/30/2030	85,000		(2,084)		85,000		(2,127)
PMB Statutory Trust III, junior subordinated debentures										PMB Statutory Trust III, junior subordinated debentures	Libor + 3.40%	9/26/2032	7,217		—		7,217		—
PMB Capital Trust III, junior subordinated debentures										PMB Capital Trust III, junior subordinated debentures	Libor + 2.00%	10/8/2034	10,310		—		10,310		—
Total	Total	$	260,000	$	(3,294)	$	260,000	$	(3,685)	Total			$	277,527	$	(3,059)	$	277,527	$	(3,141)

At ~~September 30, 2021,~~March 31, 2022, we were in compliance with all covenants under our long-term debt agreements.

Liquidity Management

We are required to maintain sufficient liquidity to ensure a safe and sound operation. Liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including both expected and unexpected cash flow needs such as funding loan commitments, potential deposit outflows and dividend payments. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained.

As a result of current economic conditions, including government stimulus in response to the pandemic, we have 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, we have maintained higher levels of liquid assets. We have ~~not~~ observed ~~a change~~reductions in average line usage due to the levels of liquidity in the ~~level of clients' credit~~marketplace. We expect to see higher line ~~usage and we expect additional~~utilization as liquidity ~~as the Bank's PPP loans are forgiven over the next several quarters.~~moderates to historical levels.

Banc of California, N.A.

At September 30, 2021, the Company had borrowing capacity with the Federal Reserve Bank of San Francisco (“Federal Reserve”) of $349.3 million, including the secured borrowing capacity through the Federal Reserve Discount Window and Borrower-in-Custody ("BIC") program. At September 30, 2021, the Bank has pledged certain qualifying loans with an unpaid principal balance of $617.4 million and securities with a carrying value of $8.9 million as collateral for these lines 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 nine months ended September 30, 2021.

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~~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.~~

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The Bank also generates cash through ~~borrowings.~~secured and unsecured secondary sources of funds. The Bank ~~mainly utilizes FHLB advances from~~maintains pre-established secured lines of credit with the FHLB and the FRB as a secondary ~~source~~sources of liquidity to provide funds for its lending and investment activities and to enhance its interest rate risk and liquidity risk management. At March 31, 2022, we had available unused secured borrowing capacities of $1.08 billion from the FHLB and $752.8 million through the Federal Reserve Bank's Discount Window and Borrower-in-Custody (“BIC”) programs. At March 31, 2022 and December 31, 2021, FHLB advances totaled $556.4 million and $476.1 million, net of unamortized debt issuance costs of $4.6 million and $4.9 million. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under the FRB's Discount Window and BIC programs at March 31, 2022 and December 31, 2021. At March 31, 2022, the Bank had pledged certain qualifying loans with an unpaid principal balance of $1.09 billion and securities with a carrying value of $8.9 million as collateral for these FRB programs. The Bank may also ~~has additional sources of secondary liquidity through its ability to obtain brokered deposits or use~~utilize securities sold under repurchase agreements to leverage its capital base ~~as well as a~~and while it maintains repurchase agreements, there were none outstanding at March 31, 2022 and December 31, 2021. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and our pledging additional investment securities. The Bank had unpledged securities held-to-maturity and available-for-sale aggregating $1.20 billion at March 31, 2022.

In addition, the Bank has additional sources of secondary liquidity through pre-established ~~secured line~~unsecured fed funds lines with correspondent banks, pre-approved unsecured overnight borrowing lines with various financial institutions through the AFX platform, and our ability to obtain brokered deposits. The availability of unsecured borrowings through the AFX platform fluctuates regularly and is subject to the counterparties' discretion and totaled $441.0 million at March 31, 2022. Borrowings under the AFX platform totaled $170.0 million and $25.0 million at March 31, 2022 and December 31, 2021. At March 31, 2022, the Bank had $210.0 million in pre-established unsecured federal funds lines of credit ~~through the Federal Reserve BIC program. Liquidity management is both a daily~~with correspondent banks. There were no borrowings with these correspondent banks at March 31, 2022 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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December 31, 2021.

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 ~~our~~its ability to raise capital and issue debt securities. Dividends from the Bank are largely dependent upon the Bank's earnings and are subject to restrictions under certain regulations that limit its ability to transfer funds to the holding company. OCC regulations impose various restrictions on the ability of a bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. Generally, a well-capitalized bank may make capital distributions during any calendar year equal to up to 100 percent of year-to-date net income plus retained net income for the two preceding years without prior OCC approval. However, any dividend paid by the Bank would be limited by the need to maintain its well-capitalized status plus the capital buffer in order to avoid additional dividend restrictions (Refer to Capital - Dividend Restrictions below for additional information). Currently, the Bank does not have sufficient dividend-paying capacity to declare and pay such dividends to the holding company without obtaining prior approval from the OCC under the applicable regulations. During the ~~nine~~three months ended ~~September 30, 2021, the Bank paid $36.0~~March 31, 2022, there were $16.0 million of dividends paid by the Bank to Banc of California, Inc. At ~~September 30, 2021,~~March 31, 2022, Banc of California, Inc. had ~~$54.8~~$26.6 million in cash, all of which was on deposit at the Bank.

On ~~February 10, 2020,~~March 15, 2022, we announced that our Board of Directors authorized the repurchase of up to ~~$45~~$75 million of our common stock. The repurchase authorization ~~expired~~expires in ~~February 2021. There were no~~March 2023. During the first quarter of 2022, common stock ~~repurchases during~~repurchased under the ~~nine months ended September 30, 2021.~~program totaled 215,550 shares at a weighted average price of $19.92. As of March 31, 2022, the Company had $70.7 million remaining under the current stock repurchase authorization.

~~During the nine months ended September 30, 2021,~~On March 15, 2022 we redeemed all outstanding Series E Preferred Stock, and the corresponding depositary shares, each representing ~~shares~~a 1/40th interest in a share of ~~our~~the Series D.E Preferred Stock. The ~~aggregate total consideration~~redemption price for the Series DE Preferred Stock was $1,000 per share (equivalent to $25 per Series E Depositary Share). Upon redemption, the Series E Preferred Stock and the Series E Depositary Shares were no longer outstanding and all rights with respect to such stock and depositary shares ~~purchased was $93.3 million.~~ceased and terminated, except the right to payment of the redemption price. Also upon redemption, the Series E Depositary Shares were delisted from trading on the New York Stock Exchange. The ~~$3.3~~$3.7 million difference between the consideration paid and the ~~$89.9~~$95.0 million aggregate carrying value of the Series DE Preferred Stock was reclassified to retained earnings and resulted in a decrease to net income allocated to common ~~stockholders.~~stockholders

On a consolidated basis, cash and cash equivalents totaled ~~$185.8~~$254.2 million, or ~~2.2%~~2.7% of total assets at ~~September 30, 2021.~~March 31, 2022. This compared to ~~$220.8~~$228.1 million, or ~~2.8%~~2.4% of total assets, at December 31, ~~2020.~~2021. The ~~$35.0~~$26.1 million ~~decrease~~increase was due mainly ~~due~~ to (i) net income of $48.5 million generated during the ~~net reduction~~year, (ii) a $245.0 million increase in FHLB advances and other ~~borrowings.~~

~~At September 30, 2021, we had available unused secured borrowing capacities~~borrowings, (iii) a $40.3 million increase in deposits, and (iv) net investment securities inflows of ~~$894.9~~$20.7 million from ~~the FHLB and $349.3~~repayments, net of securities purchases, offset by (iv) net loan outflows of $168.5 million from originations net of repayments and loan purchases, (v) a $98.7 million decrease due to the ~~Federal Reserve, as well as $210.0~~redemption of Series E Preferred Stock, (vi) a $5.5 million decrease from ~~unsecured federal funds lines~~payments of common and preferred dividends, and (vii) a $4.3 million decrease from repurchases of common stock.

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In December 2021, the holding company entered into a $50.0 million revolving line of credit. The line of credit matures on December 19, 2022. We ~~also maintained repurchase agreements~~have the option to pay interest using either (i) Prime Rate or (ii) LIBOR + 1.75%. The line of ~~which none were outstanding at September 30, 2021. Availabilities and terms on repurchase agreements are~~credit is also subject to ~~the counterparties' discretion and pledging additional investment securities. We also had unpledged securities available-for-sale~~an unused commitment fee of $1.27 billion at September 30, 2021. We also have the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform (AFX). The availability0.40% per annum. At March 31, 2022, there were $20.0 million in borrowings under this line of such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled $441.0 million at September 30, 2021. Borrowings under the AFX totaled $100.0 million and zero at September 30, 2021 and December 31, 2020.credit.

We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of ~~September 30, 2021.~~March 31, 2022. However, in light of the ongoing COVID-19 pandemic, we cannot predict at this time the extent to which the pandemic ~~will~~may negatively affect our business, financial condition, liquidity, capital and results of operations.

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Commitments and Contractual Obligations

The following table presents our commitments and contractual obligations as of ~~September 30, 2021:~~March 31, 2022:


		Commitments and Contractual Obligations											Commitments and Contractual Obligations
($ in thousands)	($ 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		($ 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	Commitments to extend credit	$	153,410	$	11,580	$	94,165	$	41,399	$	6,266	Commitments to extend credit	$	188,436	$	23,878	$	140,451	$	6,380	$	17,727
Unused lines of credit	Unused lines of credit	1,465,916		1,151,170		230,767		15,610		68,369		Unused lines of credit	1,694,857		1,401,159		164,497		90,623		38,578
Standby letters of credit	Standby letters of credit	8,181		6,095		2,086		—		—		Standby letters of credit	8,108		7,457		150		501		—
Total commitments	Total commitments	$	1,627,507	$	1,168,845	$	327,018	$	57,009	$	74,635	Total commitments	$	1,891,401	$	1,432,494	$	305,098	$	97,504	$	56,305
FHLB advances	FHLB advances	$	411,000	$	—	$	—	$	311,000	$	100,000	FHLB advances	$	561,000	$	150,000	$	—	$	411,000	$	—

Other borrowings	Other borrowings	100,000		100,000		—		—		—		Other borrowings	190,000		190,000		—		—		—
Long-term debt	Long-term debt	260,000		—		—		175,000		85,000		Long-term debt	277,527		—		—		175,000		102,527
Operating and capital lease obligations	Operating and capital lease obligations	32,928		6,429		10,962		9,167		6,370		Operating and capital lease obligations	40,314		8,957		16,357		10,246		4,754
Certificates of deposit	Certificates of deposit	559,825		522,962		34,140		2,723		—		Certificates of deposit	520,652		477,708		40,096		2,848		—
Total contractual obligations	Total contractual obligations	$	1,363,753	$	629,391	$	45,102	$	497,890	$	191,370	Total contractual obligations	$	1,589,493	$	826,665	$	56,453	$	599,094	$	107,281

At ~~September 30, 2021,~~March 31, 2022, we had unfunded commitments of ~~$12.6~~$11.2 million, ~~$5.6~~$7.3 million, and ~~$2.5~~$8.1 million for ~~affordable housing fund~~LIHTC investments, SBIC investments, and other investments, ~~including investments in alternative energy partnerships,~~ respectively.

Capital

In order to maintain adequate levels of capital, we continuously assess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on our capital base. During the first quarter of 2022, increases in market interest rates resulted in higher net unrealized losses in our securities portfolio and stockholders’ equity. As market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and tangible stockholders’ equity.

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
September 30, 2021
Banc of California, Inc.
Total risk-based capital $ 943,885 14.73 % $ 512,800 8.00 % N/A N/A
Tier 1 risk-based capital 791,367 12.35 % 384,600 6.00 % N/A N/A
Common equity tier 1 capital 696,411 10.86 % 288,450 4.50 % N/A N/A
Tier 1 leverage 791,367 9.80 % 323,009 4.00 % N/A N/A
Banc of California, NA
Total risk-based capital $ 1,044,540 16.31 % $ 512,304 8.00 % $ 640,380 10.00 %
Tier 1 risk-based capital 974,831 15.22 % 384,228 6.00 % 512,304 8.00 %
Common equity tier 1 capital 974,831 15.22 % 288,171 4.50 % 416,247 6.50 %
Tier 1 leverage 974,831 12.08 % 322,716 4.00 % 403,395 5.00 %
December 31, 2020
Banc of California, Inc.
Total risk-based capital $ 996,466 17.01 % $ 468,628 8.00 % N/A N/A
Tier 1 risk-based capital 840,501 14.35 % 351,471 6.00 % N/A N/A
Common equity tier 1 capital 655,623 11.19 % 263,603 4.50 % N/A N/A
Tier 1 leverage 840,501 10.90 % 308,555 4.00 % N/A N/A
Banc of California, NA
Total risk-based capital $ 1,011,587 17.27 % $ 468,698 8.00 % $ 585,873 10.00 %
Tier 1 risk-based capital 938,346 16.02 % 351,524 6.00 % 468,698 8.00 %
Common equity tier 1 capital 938,346 16.02 % 263,643 4.50 % 380,817 6.50 %
Tier 1 leverage 938,346 12.19 % 307,894 4.00 % 384,868 5.00 %

On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030, at a public offering price equal to 100% of the aggregate principal amount of the Notes which qualifies as Tier II capital.


					Minimum Capital Requirements				Minimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2022
Banc of California, Inc.
Total risk-based capital	$	1,090,964	13.79	%	$	632,953	8.00	%	N/A		N/A
Tier 1 risk-based capital	902,320		11.40	%	474,715		6.00	%	N/A		N/A
Common equity tier 1 capital	902,320		11.40	%	356,036		4.50	%	N/A		N/A
Tier 1 leverage	902,320		9.72	%	371,488		4.00	%	N/A		N/A
Banc of California, NA
Total risk-based capital	$	1,238,026	15.66	%	$	632,590	8.00	%	$	790,738	10.00	%
Tier 1 risk-based capital	1,149,825		14.54	%	474,443		6.00	%	632,590		8.00	%
Common equity tier 1 capital	1,149,825		14.54	%	355,832		4.50	%	513,979		6.50	%
Tier 1 leverage	1,149,825		12.38	%	371,468		4.00	%	464,335		5.00	%
December 31, 2021
Banc of California, Inc.
Total risk-based capital	$	1,140,480	14.98	%	$	609,062	8.00	%	N/A		N/A
Tier 1 risk-based capital	955,747		12.55	%	456,796		6.00	%	N/A		N/A
Common equity tier 1 capital	860,841		11.31	%	342,597		4.50	%	N/A		N/A
Tier 1 leverage	955,747		10.37	%	368,610		4.00	%	N/A		N/A
Banc of California, NA
Total risk-based capital	$	1,195,050	15.71	%	$	608,740	8.00	%	$	760,925	10.00	%
Tier 1 risk-based capital	1,110,767		14.60	%	456,555		6.00	%	608,740		8.00	%
Common equity tier 1 capital	1,110,767		14.60	%	342,416		4.50	%	494,601		6.50	%
Tier 1 leverage	1,110,767		12.06	%	368,306		4.00	%	460,382		5.00	%

Dividend Restrictions

Payment of dividends by the Company are subject to guidance provided by the Federal Reserve. That guidance provides that bank holding companies that plan to pay dividends that exceed net earnings for a given period should first consult with the Federal Reserve. To the extent future quarterly dividends exceed quarterly net earnings, payment of dividends in respect of the Company’s common and preferred stock will be subject to prior consultation and non-objection from the Federal Reserve.

Our principal source of funds for dividend payments is dividends received from the Bank. Federal banking laws and regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, in the case of the Bank, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Accordingly, any dividend granted by the Bank would be limited by the need to maintain its well capitalized status plus the capital buffer in order to avoid additional dividend restrictions. As described above, any near term dividend by the Bank will require OCC approval. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, the Bank paid ~~$24.0~~$16.0 million ~~and $36.0 million in~~ dividends to Banc of California, Inc.

During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we declared and paid dividends on our common stock of $0.06 ~~and $0.18~~ per share totaling ~~$3.0 million and $9.1~~$3.8 million in addition to dividends on our preferred stock totaling $1.7 ~~million and $6.6~~ million.

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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.

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How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.

We maintain both a management asset/liability committee (“Management ALCO”), comprised of select members of senior management, and a joint asset/liability committee of the Boards of Directors of the Company and the Bank (“Board ALCO”, together with Management ALCO, “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our 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, ~~and grow noninterest-bearing deposits which tend to have a lower expectation of yield,~~

•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 our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors.

As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and 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.

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.

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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~~our asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits.

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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 for 12 and 24 months.~~derivatives.

EVE ~~is a cash flow calculation that takes~~measures the ~~present~~period end market value of ~~all asset cash flows and subtracts~~assets minus the ~~present~~market value of ~~all liability cash flows. This calculation is used for asset/~~liabilities. Asset liability management ~~and measures~~uses this value to measure the changes in the economic value of the ~~bank~~Bank under various interest rate scenarios. ~~The~~In some ways, the economic value approach provides a ~~comparatively~~ broader scope than ~~the~~ 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 ~~September 30, 2021,~~March 31, 2022, 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 economic value of equity at ~~September 30, 2021~~March 31, 2022 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:


		Change in Interest Rates in Basis Points (bps) (1)													Change in Interest Rates in Basis Points (bps) (1)
($ in thousands)	($ 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
September 30, 2021
March 31, 2022														March 31, 2022
+200 bps	+200 bps	$	1,643,814	$	176,366	12.0	%	$	268,728	$	15,143	6.0	%	+200 bps	$	1,770,887	$	94,459	5.6	%	$	332,445	$	11,671	3.6	%
+100 bps	+100 bps	1,562,554		95,106		6.5	%	260,662		7,077		2.8	%	+100 bps	1,730,858		54,430		3.2	%	326,704		5,930		1.8	%
0 bps	0 bps	1,467,448						253,585						0 bps	1,676,428						320,774
-100 bps	-100 bps	1,361,480		(105,968)		(7.2)	%	246,101		(7,484)		(3.0)	%	-100 bps	1,590,425		(86,003)		(5.1)	%	311,686		(9,088)		(2.8)	%

(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.

We believe we are very well positioned to benefit from a potential cycle of rising interest rates. Due to the transformation of the franchise to our relationship-based banking model, with higher percentages of noninterest-bearing deposits and variable rate commercial loans, our one year gap ratio, which compares the percentage of earning assets that are scheduled to mature or reprice within one year to the percentage of rate sensitive term liabilities that are scheduled to mature or reprice within one year, has steadily increased. At March 31, 2022, our one year gap ratio stood at 35%. This is one measure of asset sensitivity and with a significant increase in this ratio, we expect to see some expansion in our net interest margin as short-term rates increase.

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.

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Interest rate risk is the most significant market risk affecting us. Other types of market risk, such as foreign currency exchange risk and commodity price risk, ~~infrequently~~do not arise in the normal course of our business activities and operations.

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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 ~~September 30, 2021~~March 31, 2022 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 ~~September 30, 2021,~~March 31, 2022, 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 ~~September 30, 2021~~March 31, 2022 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 a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II — OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business.

~~On April 2, 2019, the first~~ The outcome of ~~three shareholder derivative~~such legal 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 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. On September 23, 2019, the Court, ordered that the Gordon, Johnston, and Witmer actions are consolidated for all purposes, including pre-trial proceedings and trial, and the ~~matter was captioned~~ timing of ultimate resolution are inherently difficult to predict. In ~~re Banc~~the opinion of ~~California Inc. Stockholder Derivative Litigation, No. SA CV 19-621. On November 22, 2019, plaintiffs filed~~management, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a ~~consolidated complaint.~~

In general, the consolidated complaint alleges that our board wrongfully refused demands that the plaintiffs made to our board of directors that we should initiate litigation against the various current and former officers and directors basedmaterial adverse effect on their alleged role in the purported concealment of the 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 by the named defendants to the Company, adoption of corporate governance reforms, and equitable and injunctive relief.

On April 5, 2021, the parties informed the Court that they had reached agreement on a Memorandum of Understanding to resolve the action. The proposed settlement requires only governance changes by the Company and does not contain a monetary component except for a potential award of attorneys’ fees, which will be paid by the Company’s insurance carriers. The Court has granted preliminary approval to the settlement. Plaintiffs’ motion for final approval of the settlement and their motion for attorney’s fees are set for hearing on December 17, 2021.

financial statements or operations.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors that appeared under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Table of~~ ~~Contents~~

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Purchase of Equity Securities by the Issuer
($ in thousands, except per share data) Total Number of Shares Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Total Number of Shares (or Approximate Dollar Value) That May Yet be Purchased Under the Plan
Common Stock:
From July 1, 2021 to July 31, 2021 101 $ 17.54 — $ —
From August 1, 2021 to August 31, 2021 1,510 $ 17.62 — $ —
From September 1, 2021 to September 30, 2021 1,165 $ 17.48 — $ —
Total 2,776 $ 17.56 —
Preferred Stock (Depositary Shares):
From July 1, 2021 to July 31, 2021 — $ — — —
From August 1, 2021 to August 31, 2021 — $ — — —
From September 1, 2021 to September 30, 2021 — $ — — —
Total — $ — — —


	Purchase of Equity Securities by the Issuer
($ in thousands, except per share data)	Total Number of Shares	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Total Number of Shares (or Approximate Dollar Value) That May Yet be Purchased Under the Plan
Common Stock:
From January 1, 2022 to January 31, 2022	100	$	19.62	—	$	—
From February 1, 2022 to February 28, 2022	310	$	19.59	—	$	—
From March 1, 2022 to March 31, 2022	265,340	$	19.77	215,550	$	70,707
Total	265,750	$	19.77	215,550

Preferred Stock (Depositary Shares):
From January 1, 2022 to January 31, 2022	3,948,080	$	25.00	—	—
From February 1, 2022 to February 28, 2022	—	$	—	—	—
From March 1, 2022 to March 31, 2022	—	$	—	—	—
Total	3,948,080	$	25.00	—	—

During the three months ended ~~September 30, 2021,~~March 31, 2022, purchases of shares of common stock related to shares purchased under our stock repurchase program and shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under our employee stock benefit plans. ~~There were no~~

On March 15, 2022, we announced a repurchase program of up to $75 million of our common stock. The repurchase authorization expires in March 2023. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of ~~common stock during the three months ended September 30, 2021 related to the Company's previously announced stock repurchase program.~~factors including price, trading volume, corporate and regulatory requirements and market conditions.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable

ITEM 5 - OTHER INFORMATION

None

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ITEM 6 - EXHIBITS





3.1			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.)











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 ~~September 30, 2021~~March 31, 2022 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of 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)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		BANC OF CALIFORNIA, INC.

Date:	~~November 8, 2021~~May 9, 2022	/s/ Jared Wolff
		Jared Wolff
		President/Chief Executive Officer (Principal Executive Officer)

Date:	~~November 8, 2021~~May 9, 2022	/s/ Lynn M. Hopkins
		Lynn M. Hopkins
		Executive Vice President/Chief Financial Officer (Principal Financial Officer)





Date:	~~November 8, 2021~~May 9, 2022	/s/ Diana Hanson
		Diana Hanson
		Senior Vice President/Chief Accounting Officer (Principal Accounting Officer)

8477



	Three Months Ended					Nine 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
September 30, 2021



Consumer:
Single family residential mortgage	—	$	—	$	—	1	1,800		1,800

Total	—	—		—		1	$	1,800	$	1,800
September 30, 2020
Commercial:
Commercial and industrial	—	$	—	$	—	1	$	5,000	$	5,000




Total	—	$	—	$	—	1	$	5,000	$	5,000


			Nine Months Ended
			Modification Type
	Extension of Maturity	Total
($ in thousands)			Count	Amount		Count	Amount
September 30, 2021



Consumer:
Single family residential mortgage			1	1,800		1	1,800
Total			1	$	1,800	1	$	1,800

September 30, 2020
Commercial:
Commercial and industrial			1	$	5,000	1	$	5,000



Total			1	$	5,000	1	$	5,000


($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
September 30, 2021
Core deposit intangibles	$	30,904	$	29,117	$	1,787


December 31, 2020
Core deposit intangibles	$	30,904	$	28,271	$	2,633


	Nine Months Ended September 30, 2021
($ 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	55,069	$	13.96


Exercised	(40,165)	$	14.30


Outstanding at end of period	14,904	$	13.05	3.5 years	$	81
Exercisable at end of period	14,904	$	13.05	3.5 years	$	81



	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
($ in thousands except per share data)	Common Stock		Class B Common Stock			Common Stock		Class B Common Stock
Net loss	$	15,761	$	152		$	(9,043)	$	(86)
Less: income allocated to participating securities	(278)		(3)			—		—
Less: participating securities dividends	(93)		(1)			(279)		(3)
Less: preferred stock dividends	(3,414)		(33)			(10,323)		(99)
Less: preferred stock redemption	(7)		—			563		5


Net loss allocated to common stockholders	$	11,969	$	115		$	(19,082)	$	(183)

Weighted average common shares outstanding	49,631,334		477,321			49,723,791		477,321
Dilutive effects of stock units	82,278		—			—		—

Dilutive effects of stock options	—		—			—		—

Average shares and dilutive common shares	49,713,612		477,321			49,723,791		477,321




Basic earnings (loss) per common share	$	0.24	$	0.24		$	(0.38)	$	(0.38)



Diluted earnings (loss) per common share	$	0.24	$	0.24		$	(0.38)	$	(0.38)


	Deferment & Forbearances(1)(2)
	September 30, 2021					June 30, 2021
($ in thousands)	Number of Loans	Amount(1)(2)		% of Loan Category		Number of Loans	Amount(1)(2)		% of Loan Category

Commercial:
Commercial and industrial	1	$	3,837	0.2	%	5	$	29,246	1.4	%
Commercial real estate	—	—		—	%	1	1,141		0.1	%

SBA	1	279		0.2	%	2	3,315		1.3	%


Total commercial	2	4,116		0.1	%	8	33,702		0.7	%
Consumer:
Single family residential mortgage	40	49,501		3.6	%	46	52,384		4.1	%
Other consumer	3	575		2.5	%	2	472		1.9	%
Total consumer	43	50,076		3.5	%	48	52,856		4.0	%
Total	45	$	54,192	0.9	%	56	$	86,558	1.4	%



	By FICO Scores Obtained During the Quarter Ended September 30, 2021					By FICO Scores Obtained During the Quarter Ended December 31, 2020					Change
($ in thousands)	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
FICO Score
800+	8	$	2,472	9.9	%	9	$	4,699	18.7	%	(1)	$	(2,227)	(47.4)	%
700-799	20	18,024		71.8	%	19	13,907		55.5	%	1	4,117		29.6	%
600-699	5	3,781		15.1	%	5	5,671		22.6	%	—	(1,890)		(33.3)	%
<600	1	272		1.1	%	1	272		1.1	%	—	—		—	%
No FICO	2	525		2.1	%	2	525		2.1	%	—	—		—	%
Totals	36	$	25,074	100.0	%	36	$	25,074	100.0	%	—	$	—	—	%


($ in thousands)	Green					Interest Only					Negative Amortization					Total
LTV ratio range	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
September 30, 2021
< 61%	34	$	22,807	91.0	%	181	$	278,990	51.4	%	4	$	1,464	100.0	%	219	$	303,261	53.2	%
61-80%	2	2,267		9.0	%	154	258,419		47.6	%	—	—		—	%	156	260,686		45.8	%
81-100%	—	—		—	%	1	2,316		0.4	%	—	—		—	%	1	2,316		0.4	%
> 100%	—	—		—	%	1	3,518		0.6	%	—	—		—	%	1	3,518		0.6	%
Total	36	$	25,074	100.0	%	337	$	543,243	100.0	%	4	$	1,464	100.0	%	377	$	569,781	100.0	%
December 31, 2020
< 61%	42	$	25,946	82.1	%	190	$	271,108	67.5	%	8	$	2,288	100.0	%	240	$	299,342	68.7	%
61-80%	6	5,641		17.9	%	91	126,281		31.4	%	—	—		—��	%	97	131,922		30.3	%
81-100%	—	—		—	%	2	4,251		1.1	%	—	—		—	%	2	4,251		1.0	%
> 100%	—	—		—	%	—	—		—	%	—	—		—	%	—	—		—	%
Total	48	$	31,587	100.0	%	283	$	401,640	100.0	%	8	$	2,288	100.0	%	339	$	435,515	100.0	%