UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~March 31,~~June 30, 2023


☐			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 C o ~~ntents~~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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

As of ~~May~~August 4, 2023, the registrant had outstanding ~~57,594,900~~56,956,386 shares of voting common stock and 477,321 shares of Class B non-voting common stock.

Table of C o ~~ntents~~Contents

BANC OF CALIFORNIA, INC.

FORM 10-Q QUARTERLY REPORT

~~March 31,~~June 30, 2023

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	6
	Consolidated Statements of Stockholders' Equity	7
	Consolidated Statements of Cash Flows	89
	Notes to Consolidated Financial Statements	910

Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4447

Item 3 –	Quantitative and Qualitative Disclosures About Market Risk	7276

Item 4 –	Controls and Procedures	7478

Part II – Other Information		7680

Item 1 –	Legal Proceedings	7680

Item 1A –	Risk Factors	7680

Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	7684

Item 3 –	Defaults Upon Senior Securities	7685

Item 4 –	Mine Safety Disclosures	7685

Item 5 –	Other Information	7685

Item 6 –	Exhibits	7786

Signatures		7887

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Forward-Looking Statements

When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California, Inc. and its affiliates (“BANC,” the “Company”, “we”, “us” or “our”). By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:

i.changes in general economic conditions, either nationally or in our market areas, including the impact of supply chain disruptions, and the risk of recession or an economic downturn;

ii.risks related to the proposed merger with PacWest Bancorp (“PacWest”) including, among others, (a) the risk that the proposed merger may not be completed in a timely manner or at all; (b) the failure to satisfy the conditions to the consummation of the proposed merger, including obtaining the requisite approval of the Company stockholders and PacWest stockholders within the time period provided in the merger agreement; (c) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement or the related investment agreements; (d) the inability to obtain alternative capital in the event it becomes necessary to complete the proposed merger; (e) the effect of the announcement or pendency of the proposed merger on Company’s and PacWest’s business relationships, operating results and business generally; (f) risks that the proposed transaction disrupts current plans and operations of the Company and PacWest; (g) potential difficulties in retaining the Company and PacWest customers and employees as a result of the proposed transaction; (h) diversion of management’s attention from ongoing business operations and opportunities; and (i) certain restrictions during the pendency of the proposed transaction that may impact the parties’ ability to pursue certain business opportunities or strategic transactions;

iii.changes in the interest rate environment, including the recent and anticipated increases in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity;

~~iii.~~iv.the impacts of continuing inflation;

~~iv.~~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 the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and nonperforming assets, and may result in our allowance for credit losses not being adequate;

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

~~vi.~~vii.the quality and composition of our securities portfolio;

~~vii.~~viii.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment;

~~viii.~~ix.the rapid withdrawal of a significant amount of demand deposits over a short period of time;

~~ix.~~x.the costs and effects of litigation;

x.xi.risks related to the Company’s acquisitions, including disruption to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; and our inability to achieve expected revenues, cost savings, synergies, and other benefits; and in the case of our recent acquisition of Deepstack Technologies, LLC (Deepstack), reputational risk, regulatory risk and potential adverse reactions of the ~~Company's~~Company’s or ~~Deepstack's~~Deepstack’s customers, suppliers, vendors, employees or other business partners;

~~xi.~~xii.results of examinations by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, restrict our ability to invest in certain assets, refrain from issuing an approval or non-objection to certain capital or other actions, increase our allowance for credit losses, result in write-downs of asset values, restrict our ability or that of our bank subsidiary to pay dividends, or impose fines, penalties or sanctions;

~~xii.~~xiii.legislative or regulatory changes that adversely affect our business, including changes in tax laws and policies, accounting policies and practices, privacy laws, and regulatory capital or other rules;

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

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

~~xv.~~xvi.failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including due to cybersecurity threats

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

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

~~xviii.~~xix.the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;

~~xix.~~xx.the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital;

xxi.the risks, uncertainties and assumptions set forth under the heading, “Cautionary Note Regarding Forward-Looking Statements” in the joint press release issued by the Company and PacWest Bancorp on the date hereof with respect to the proposed merger transaction between the Company and PacWest Bancorp; and

~~xx.~~xxii.other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC, including, without limitation, the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Table of C o ~~ntents~~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)


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	36,982	$	47,434	Cash and due from banks	$	42,532	$	47,434
Interest-earning deposits in financial institutions	Interest-earning deposits in financial institutions	973,969		181,462		Interest-earning deposits in financial institutions	241,197		181,462
Total cash and cash equivalents	Total cash and cash equivalents	1,010,951		228,896		Total cash and cash equivalents	283,729		228,896

Securities held-to-maturity, at amortized cost (fair value of $272,915 and $262,460 at March 31, 2023 and December 31, 2022)		328,520		328,641
Securities available-for-sale, at fair value		958,427		868,297
Securities held-to-maturity, at amortized cost (fair value of $267,045 and $262,460 at June 30, 2023 and December 31, 2022)						Securities held-to-maturity, at amortized cost (fair value of $267,045 and $262,460 at June 30, 2023 and December 31, 2022)	328,405		328,641
Securities available-for-sale, at fair value (amortized cost of $977,249 and $909,563 at June 30, 2023 and December 31, 2022; allowance for credit losses of $1,036 and $0 at June 30, 2023 and December 31, 2022)						Securities available-for-sale, at fair value (amortized cost of $977,249 and $909,563 at June 30, 2023 and December 31, 2022; allowance for credit losses of $1,036 and $0 at June 30, 2023 and December 31, 2022)	922,091		868,297

Loans receivable	Loans receivable	7,054,380		7,115,038		Loans receivable	7,156,206		7,115,038
Allowance for loan losses	Allowance for loan losses	(84,560)		(85,960)		Allowance for loan losses	(80,883)		(85,960)
Loans receivable, net	Loans receivable, net	6,969,820		7,029,078		Loans receivable, net	7,075,323		7,029,078
Federal Home Loan Bank and other bank stock, at cost	Federal Home Loan Bank and other bank stock, at cost	70,334		57,092		Federal Home Loan Bank and other bank stock, at cost	60,281		57,092

Premises and equipment, net	Premises and equipment, net	108,087		107,345		Premises and equipment, net	108,235		107,345
Bank owned life insurance	Bank owned life insurance	128,022		127,122		Bank owned life insurance	128,973		127,122

Deferred income taxes, net	Deferred income taxes, net	54,450		50,518		Deferred income taxes, net	64,001		50,518

Goodwill	Goodwill	114,312		114,312		Goodwill	114,312		114,312
Other intangibles	Other intangibles	7,065		7,526		Other intangibles	6,603		7,526

Other assets	Other assets	288,913		278,189		Other assets	278,312		278,189
Total assets	Total assets	$	10,038,901	$	9,197,016	Total assets	$	9,370,265	$	9,197,016
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	Noninterest-bearing deposits	$	2,506,616	$	2,809,328	Noninterest-bearing deposits	$	2,446,693	$	2,809,328
Interest-bearing deposits	Interest-bearing deposits	4,445,358		4,311,593		Interest-bearing deposits	4,424,383		4,311,593
Total deposits	Total deposits	6,951,974		7,120,921		Total deposits	6,871,076		7,120,921
Federal Home Loan Bank (FHLB) advances, net and Federal Reserve Bank (FRB) borrowings	Federal Home Loan Bank (FHLB) advances, net and Federal Reserve Bank (FRB) borrowings	1,732,670		727,348		Federal Home Loan Bank (FHLB) advances, net and Federal Reserve Bank (FRB) borrowings	1,147,997		727,348

Long-term debt, net	Long-term debt, net	274,995		274,906		Long-term debt, net	274,121		274,906

Accrued expenses and other liabilities	Accrued expenses and other liabilities	120,355		114,223		Accrued expenses and other liabilities	120,017		114,223
Total liabilities	Total liabilities	9,079,994		8,237,398		Total liabilities	8,413,211		8,237,398
Commitments and contingent liabilities	Commitments and contingent liabilities					Commitments and contingent liabilities

Common stock, $0.01 par value per share, 446,863,844 shares authorized; 65,272,095 shares issued and 58,237,303 shares outstanding at March 31, 2023; 65,168,380 shares issued and 58,544,534 shares outstanding at December 31, 2022		653		651
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at March 31, 2023 and December 31, 2022		5		5
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 65,328,043 shares issued and 56,944,706 shares outstanding at June 30, 2023; 65,168,380 shares issued and 58,544,534 shares outstanding at December 31, 2022						Common stock, $0.01 par value per share, 446,863,844 shares authorized; 65,328,043 shares issued and 56,944,706 shares outstanding at June 30, 2023; 65,168,380 shares issued and 58,544,534 shares outstanding at December 31, 2022	653		651
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2023 and December 31, 2022						Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2023 and December 31, 2022	5		5
Additional paid-in capital	Additional paid-in capital	866,306		866,478		Additional paid-in capital	867,994		866,478
Retained earnings	Retained earnings	263,524		248,988		Retained earnings	275,430		248,988
Treasury stock, at cost (7,034,792 and 6,623,846 shares at March 31, 2023 and December 31, 2022)		(121,092)		(115,907)
Treasury stock, at cost (8,383,337 and 6,623,846 shares at June 30, 2023 and December 31, 2022)						Treasury stock, at cost (8,383,337 and 6,623,846 shares at June 30, 2023 and December 31, 2022)	(137,270)		(115,907)
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(50,489)		(40,597)		Accumulated other comprehensive loss, net	(49,758)		(40,597)
Total stockholders’ equity	Total stockholders’ equity	958,907		959,618		Total stockholders’ equity	957,054		959,618
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	10,038,901	$	9,197,016	Total liabilities and stockholders’ equity	$	9,370,265	$	9,197,016

See accompanying notes to consolidated financial statements (unaudited)

Table of C o ~~ntents~~Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)


		Three Months Ended						Three Months Ended						Six Months Ended June 30,
		March 31, 2023		December 31, 2022		March 31, 2022				June 30, 2023		March 31, 2023		June 30, 2022		2023		2022
Interest and dividend income	Interest and dividend income								Interest and dividend income
Loans, including fees	Loans, including fees	$	87,418	$	88,717	$	76,234		Loans, including fees	$	92,889	$	87,418	$	78,895	$	180,307	$	155,129
Securities	Securities	14,909		12,905		7,309			Securities	15,804		14,909		8,124		30,713		15,433
Other interest-earning assets	Other interest-earning assets	4,592		2,490		726			Other interest-earning assets	7,458		4,592		1,399		12,050		2,125
Total interest and dividend income	Total interest and dividend income	106,919		104,112		84,269			Total interest and dividend income	116,151		106,919		88,418		223,070		172,687
Interest expense	Interest expense								Interest expense
Deposits	Deposits	20,527		14,278		1,388			Deposits	28,118		20,527		3,180		48,645		4,568
FHLB advances and FRB borrowings	FHLB advances and FRB borrowings	9,648		5,528		2,953			FHLB advances and FRB borrowings	14,703		9,648		3,114		24,351		6,067

Other interest-bearing liabilities	Other interest-bearing liabilities	3,691		4,089		3,487			Other interest-bearing liabilities	3,698		3,691		3,825		7,389		7,312
Total interest expense	Total interest expense	33,866		23,895		7,828			Total interest expense	46,519		33,866		10,119		80,385		17,947
Net interest income	Net interest income	73,053		80,217		76,441			Net interest income	69,632		73,053		78,299		142,685		154,740
Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	2,000		—		(31,542)			Provision for (reversal of) credit losses	1,900		2,000		—		3,900		(31,542)
Net interest income after provision for (reversal of) credit losses	Net interest income after provision for (reversal of) credit losses	71,053		80,217		107,983			Net interest income after provision for (reversal of) credit losses	67,732		71,053		78,299		138,785		186,282
Noninterest income	Noninterest income								Noninterest income
Customer service fees	Customer service fees	1,979		2,066		2,434			Customer service fees	2,022		1,979		2,578		4,001		5,012
Loan servicing income	Loan servicing income	547		561		212			Loan servicing income	574		547		109		1,121		321

Income from bank owned life insurance	Income from bank owned life insurance	900		923		796			Income from bank owned life insurance	951		900		810		1,851		1,606

Net (loss) gain on sale of securities available-for-sale		—		(7,708)		16
Net gain on sale of securities available-for-sale									Net gain on sale of securities available-for-sale	—		—		—		—		16

All other income	All other income	4,433		2,731		2,452			All other income	2,477		4,433		3,689		6,910		6,141
Total noninterest income	Total noninterest income	7,859		(1,427)		5,910			Total noninterest income	6,024		7,859		7,186		13,883		13,096
Noninterest expense	Noninterest expense								Noninterest expense
Salaries and employee benefits	Salaries and employee benefits	29,656		27,812		28,987			Salaries and employee benefits	28,282		29,656		28,264		57,938		57,251

Occupancy and equipment	Occupancy and equipment	5,526		5,740		5,637			Occupancy and equipment	5,603		5,526		5,741		11,129		11,378
Professional fees	Professional fees	4,072		3,193		2,839			Professional fees	4,001		4,072		4,001		8,073		6,840

Data processing	Data processing	1,563		1,744		1,828			Data processing	1,686		1,563		1,782		3,249		3,610

Regulatory assessments	Regulatory assessments	1,202		905		775			Regulatory assessments	1,301		1,202		1,021		2,503		1,796
Software and technology	Software and technology	3,274		3,197		2,700			Software and technology	3,579		3,274		2,747		6,853		5,447
Loss on investments in alternative energy partnerships		1,618		608		158
(Gain) loss on investments in alternative energy partnerships									(Gain) loss on investments in alternative energy partnerships	(36)		1,618		1,043		1,582		1,201
Reversal of loan repurchase reserves	Reversal of loan repurchase reserves	(11)		(17)		(471)			Reversal of loan repurchase reserves	(808)		(11)		(490)		(819)		(961)
Amortization of other intangibles	Amortization of other intangibles	461		555		441			Amortization of other intangibles	462		461		313		923		754

Other expense	Other expense	3,878		4,466		3,702			Other expense	5,062		3,878		4,190		8,940		7,892
Total noninterest expense	Total noninterest expense	51,239		48,203		46,596			Total noninterest expense	49,132		51,239		48,612		100,371		95,208
Income before income taxes	Income before income taxes	27,673		30,587		67,297			Income before income taxes	24,624		27,673		36,873		52,297		104,170
Income tax expense	Income tax expense	7,395		9,068		18,785			Income tax expense	6,745		7,395		10,161		14,140		28,946

Net income	Net income	20,278		21,519		48,512			Net income	17,879		20,278		26,712		38,157		75,224
Preferred stock dividends	Preferred stock dividends	—		—		1,420			Preferred stock dividends	—		—		—		—		1,420

Impact of preferred stock redemption	Impact of preferred stock redemption	—		—		3,747			Impact of preferred stock redemption	—		—		—		—		3,747
Net income available to common stockholders	Net income available to common stockholders	$	20,278	$	21,519	$	43,345		Net income available to common stockholders	$	17,879	$	20,278	$	26,712	$	38,157	$	70,057
Earnings per common share:	Earnings per common share:								Earnings per common share:

Basic	Basic	$	0.34	$	0.36	$	0.69		Basic	$	0.31	$	0.34	$	0.44	$	0.65	$	1.13

Diluted	Diluted	$	0.34	$	0.36	$	0.69		Diluted	$	0.31	$	0.34	$	0.43	$	0.65	$	1.13
Earnings per class B common share:	Earnings per class B common share:								Earnings per class B common share:

Basic	Basic	$	0.34	$	0.36	$	0.69		Basic	$	0.31	$	0.34	$	0.44	$	0.65	$	1.13

Diluted	Diluted	$	0.34	$	0.36	$	0.69		Diluted	$	0.31	$	0.34	$	0.44	$	0.65	$	1.13

See accompanying notes to consolidated financial statements (unaudited)

Table of C o ~~ntents~~Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

Three Months Ended
March 31,
2023 December 31,
2022 March 31,
2022
Net income $ 20,278 $ 21,519 $ 48,512
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on available-for-sale securities:
Unrealized (loss) gain arising during the period (3,926) 1,484 (26,913)
Reclassification adjustment for loss (gain) included in net income — 5,315 (11)
Total change in unrealized (loss) gain on available-for-sale securities (3,926) 6,799 (26,924)
Unrealized loss on cash flow hedge:
Unrealized loss arising during the period (6,146) — —
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity 180 183 9
Total other comprehensive (loss) income (9,892) 6,982 (26,915)
Comprehensive income $ 10,386 $ 28,501 $ 21,597


	Three Months Ended						Six Months Ended June 30,
	June 30, 2023		March 31, 2023		June 30, 2022		2023		2022
Net income	$	17,879	$	20,278	$	26,712	$	38,157	$	75,224
Other comprehensive income (loss), net of tax:
Unrealized loss on available-for-sale securities:
Unrealized loss arising during the period	(5,215)		(3,926)		(15,113)		(9,141)		(42,026)


Reclassification adjustment for gain included in net income	—		—		—		—		(11)
Total change in unrealized loss on available-for-sale securities	(5,215)		(3,926)		(15,113)		(9,141)		(42,037)
Unrealized gain (loss) on cash flow hedge:
Unrealized gain (loss) arising during the period	5,764		(6,146)		—		(382)		—



Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity	182		180		226		362		235
Total other comprehensive income (loss)	731		(9,892)		(14,887)		(9,161)		(41,802)
Comprehensive income	$	18,610	$	10,386	$	11,825	$	28,996	$	33,422

See accompanying notes to consolidated financial statements (unaudited)

Table of C o ~~ntents~~Contents

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in 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			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					Total Stockholders' Equity
Three Months Ended March 31, 2023
Balance at December 31, 2022		$	—		$	651		$	5	$	866,478	$	248,988	$	(115,907)		$	(40,597)	$	959,618
Three Months Ended June 30, 2023																					Three Months Ended June 30, 2023
Balance at March 31, 2023																					Balance at March 31, 2023	$	653	$	5		$	866,306	$	263,524	$	(121,092)	$	(50,489)	$	958,907

Comprehensive income:	Comprehensive income:																				Comprehensive income:
Net income	Net income	—			—			—		—		20,278		—			—		20,278		Net income	—		—			—		17,879		—		—		17,879
Other comprehensive loss, net	Other comprehensive loss, net	—			—			—		—		—		—			(9,892)		(9,892)		Other comprehensive loss, net	—		—			—		—		—		731		731
Issuance of common stock		—			3			—		(3)		—		—			—		—

Purchase of 410,946 shares of treasury stock		—			—			—		—		—		(5,185)			—		(5,185)

Purchase of 1,348,545 shares of treasury stock, including excise tax																					Purchase of 1,348,545 shares of treasury stock, including excise tax	—		—			—		—		(16,178)		—		(16,178)

Share-based compensation expense	Share-based compensation expense	—			—			—		1,455		—		—			—		1,455		Share-based compensation expense	—		—			1,726		—		—		—		1,726

Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			(1)			—		(1,624)		—		—			—		(1,625)		Restricted stock surrendered due to employee tax liability	—		—			(38)		—		—		—		(38)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		—		(96)		—			—		(96)		Shares purchased under the Dividend Reinvestment Plan	—		—			—		(93)		—		—		(93)

Dividends declared ($0.10 per common share)	Dividends declared ($0.10 per common share)	—			—			—		—		(5,646)		—			—		(5,646)		Dividends declared ($0.10 per common share)	—		—			—		(5,880)		—		—		(5,880)

Balance at March 31, 2023		$	—		$	653		$	5	$	866,306	$	263,524	$	(121,092)		$	(50,489)	$	958,907
Balance at June 30, 2023																					Balance at June 30, 2023	$	653	$	5		$	867,994	$	275,430	$	(137,270)	$	(49,758)	$	957,054

Three Months Ended March 31, 2022
Balance at December 31, 2021		$	94,956		$	646		$	5	$	854,873	$	147,894	$	(40,827)		$	7,743	$	1,065,290
Three Months Ended June 30, 2022																					Three Months Ended June 30, 2022
Balance at March 31, 2022																					Balance at March 31, 2022	$	646	$	5		$	855,198	$	187,457	$	(45,125)	$	(19,172)	$	979,009

Comprehensive income:	Comprehensive income:																				Comprehensive income:
Net income	Net income	—			—			—		—		48,512		—			—		48,512		Net income	—		—			—		26,712		—		—		26,712
Other comprehensive loss, net	Other comprehensive loss, net	—			—			—		—		—		—			(26,915)		(26,915)		Other comprehensive loss, net	—		—			—		—		—		(14,887)		(14,887)
Issuance of common stock																					Issuance of common stock	1		—			(1)		—		—		—		—

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

Repurchase of 215,550 shares of common stock					—			—		—		—		(4,298)			—		(4,298)
Repurchase of 2,113,176 shares of common stock																					Repurchase of 2,113,176 shares of common stock	—		—			—		—		(38,888)		—		(38,888)

Share-based compensation expense	Share-based compensation expense	—			—			—		1,285		—		—			—		1,285		Share-based compensation expense	—		—			1,482		—		—		—		1,482
Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(960)		—		—			—		(960)		Restricted stock surrendered due to employee tax liability	—		—			(600)		—		—		—		(600)

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)	—			—			—		—		(3,752)		—			—		(3,752)		Dividends declared ($0.06 per common share)	—		—			—		(3,668)		—		—		(3,668)
Preferred stock dividends		—			—			—		—		(1,420)		—			—		(1,420)
Balance at March 31, 2022		$	—		$	646		$	5	$	855,198	$	187,457	$	(45,125)		$	(19,172)	$	979,009

Balance at June 30, 2022																					Balance at June 30, 2022	$	647	$	5		$	856,079	$	210,471	$	(84,013)	$	(34,059)	$	949,130

See accompanying notes to consolidated financial statements (unaudited)

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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
Six Months Ended June 30, 2023
Balance at December 31, 2022	$	—	$	651	$	5	$	866,478	$	248,988	$	(115,907)	$	(40,597)	$	959,618

Comprehensive income:
Net income	—		—		—		—		38,157		—		—		38,157
Other comprehensive loss, net	—		—		—		—		—		—		(9,161)		(9,161)
Issuance of common stock	—		3		—		(3)		—		—		—		—



Purchase of 1,759,491 shares of treasury stock, including excise tax	—		—		—		—		—		(21,363)		—		(21,363)




Share-based compensation expense	—		—		—		3,181		—		—		—		3,181

Restricted stock surrendered due to employee tax liability	—		(1)		—		(1,662)		—		—		—		(1,663)

Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(189)		—		—		(189)

Dividends declared ($0.20 per common share)	—		—		—		—		(11,526)		—		—		(11,526)
Preferred stock dividends	—		—		—		—		—		—		—		—
Balance at June 30, 2023	$	—	$	653	$	5	$	867,994	$	275,430	$	(137,270)	$	(49,758)	$	957,054

Six Months Ended June 30, 2022
Balance at December 31, 2021	$	94,956	$	646	$	5	$	854,873	$	147,894	$	(40,827)	$	7,743	$	1,065,290

Comprehensive loss:
Net income	—		—		—		—		75,224		—		—		75,224
Other comprehensive loss, net	—		—		—		—		—		—		(41,802)		(41,802)
Issuance of common stock	—		1		—		(1)		—		—		—		—


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

Repurchase of 2,328,726 shares of common stock	—		—		—		—		—		(43,186)		—		(43,186)





Share-based compensation expense	—		—		—		2,767		—		—		—		2,767
Restricted stock surrendered due to employee tax liability	—		—		—		(1,560)		—		—		—		(1,560)

Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(60)		—		—		(60)

Dividends declared ($0.12 per common share)	—		—		—		—		(7,420)		—		—		(7,420)
Preferred stock dividends	—		—		—		—		(1,420)		—		—		(1,420)
Balance at June 30, 2022	$	—	$	647	$	5	$	856,079	$	210,471	$	(84,013)	$	(34,059)	$	949,130

See accompanying notes to consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
		2023		2022			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	20,278	$	48,512	Net income	$	38,157	$	75,224
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	2,000		(31,542)		Provision for (reversal of) credit losses	3,900		(31,542)

Reversal of loan repurchase reserves	Reversal of loan repurchase reserves	(11)		(471)		Reversal of loan repurchase reserves	(819)		(961)
Depreciation on premises and equipment	Depreciation on premises and equipment	3,611		3,982		Depreciation on premises and equipment	7,345		7,920
Amortization of other intangibles	Amortization of other intangibles	461		441		Amortization of other intangibles	923		754
Amortization of debt issuance costs	Amortization of debt issuance costs	411		397		Amortization of debt issuance costs	864		837
Net amortization of premium on securities	Net amortization of premium on securities	46		328		Net amortization of premium on securities	184		587

Net (accretion) amortization of deferred loan costs (fees) and purchased premiums (discounts)	Net (accretion) amortization of deferred loan costs (fees) and purchased premiums (discounts)	(324)		416		Net (accretion) amortization of deferred loan costs (fees) and purchased premiums (discounts)	684		571

Deferred income tax (benefit) expense		(727)		3,198
Deferred income tax expense						Deferred income tax expense	1,669		975
Bank owned life insurance income	Bank owned life insurance income	(900)		(796)		Bank owned life insurance income	(1,851)		(1,606)
Share-based compensation expense	Share-based compensation expense	1,455		1,285		Share-based compensation expense	3,181		2,767
Income from interest rate swaps		23		(102)
Income (loss) from interest rate swaps						Income (loss) from interest rate swaps	14		(185)
Loss on investments in alternative energy partnerships and affordable housing investments	Loss on investments in alternative energy partnerships and affordable housing investments	3,129		1,704		Loss on investments in alternative energy partnerships and affordable housing investments	4,520		3,456

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

Gain on redemption of senior notes						Gain on redemption of senior notes	(80)		—
Gain on sale-leaseback of branch	Gain on sale-leaseback of branch	—		(771)		Gain on sale-leaseback of branch	—		(771)

Loss on disposal of property and equipment						Loss on disposal of property and equipment	—		8

Repurchase of mortgage loans	Repurchase of mortgage loans	(416)		—		Repurchase of mortgage loans	(609)		(1,262)

Proceeds from sales of and principal collected on loans held-for-sale	Proceeds from sales of and principal collected on loans held-for-sale	323		—		Proceeds from sales of and principal collected on loans held-for-sale	346		—

Change in accrued interest receivable and other assets	Change in accrued interest receivable and other assets	(14,988)		(13,566)		Change in accrued interest receivable and other assets	(15,319)		26,514

Change in accrued interest payable and other liabilities	Change in accrued interest payable and other liabilities	(3,298)		(7,734)		Change in accrued interest payable and other liabilities	7,327		(8,122)
Net cash provided by operating activities	Net cash provided by operating activities	11,073		5,265		Net cash provided by operating activities	50,436		75,148

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	—		17,646		Proceeds from sales of securities available-for-sale	—		17,645

Proceeds from maturities and calls of securities available-for-sale						Proceeds from maturities and calls of securities available-for-sale	20,000		38,500
Purchases of securities available-for-sale	Purchases of securities available-for-sale	(101,740)		(5,000)		Purchases of securities available-for-sale	(101,740)		(15,000)
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	6,415		8,074		Proceeds from principal repayments of securities held-to-maturity and available-for-sale	14,613		20,495

Loan originations and principal collections, net	Loan originations and principal collections, net	118,502		195,846		Loan originations and principal collections, net	9,277		474,252
Purchases of loans	Purchases of loans	(61,420)		(364,371)		Purchases of loans	(61,420)		(641,556)
Redemption of FHLB stock	Redemption of FHLB stock	6,137		—		Redemption of FHLB stock	30,543		—
Purchases of FHLB and other bank stock	Purchases of FHLB and other bank stock	(19,379)		(6,824)		Purchases of FHLB and other bank stock	(33,732)		(6,857)

Purchase of mortgage servicing rights						Purchase of mortgage servicing rights	—		(20,563)

Purchases of premises and equipment	Purchases of premises and equipment	(2,630)		(529)		Purchases of premises and equipment	(5,016)		(1,381)
Proceeds from sale-leaseback of branch	Proceeds from sale-leaseback of branch	—		2,400		Proceeds from sale-leaseback of branch	—		2,400

Funding of equity investments	Funding of equity investments	(689)		(2,789)		Funding of equity investments	(3,597)		(3,950)
Decrease in investments in alternative energy partnerships	Decrease in investments in alternative energy partnerships	365		574		Decrease in investments in alternative energy partnerships	717		1,156
Net cash used in investing activities	Net cash used in investing activities	(54,439)		(154,973)		Net cash used in investing activities	(130,355)		(134,859)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net (decrease) increase in deposits	Net (decrease) increase in deposits	(168,911)		40,266		Net (decrease) increase in deposits	(249,777)		119,248
Net increase in short-term FHLB advances and FRB borrowings	Net increase in short-term FHLB advances and FRB borrowings	905,000		80,000		Net increase in short-term FHLB advances and FRB borrowings	320,000		35,000

Proceeds from FHLB long-term advances and FRB borrowings	Proceeds from FHLB long-term advances and FRB borrowings	100,000		—		Proceeds from FHLB long-term advances and FRB borrowings	100,000		—

Net increase in other borrowings	Net increase in other borrowings	—		165,000		Net increase in other borrowings	—		73,000

Redemption of preferred stock	Redemption of preferred stock	—		(98,703)		Redemption of preferred stock	—		(98,703)

Redemption of long term debt						Redemption of long term debt	(920)		—
Purchase of treasury stock						Purchase of treasury stock	(21,363)		(43,186)

Purchase of treasury stock		(3,398)		(4,298)

Purchase of stock surrendered to pay tax liability	Purchase of stock surrendered to pay tax liability	(1,624)		(960)		Purchase of stock surrendered to pay tax liability	(1,662)		(1,560)

Dividends paid on preferred stock	Dividends paid on preferred stock	—		(1,727)		Dividends paid on preferred stock	—		(1,727)
Dividends paid on common stock	Dividends paid on common stock	(5,646)		(3,752)		Dividends paid on common stock	(11,526)		(7,420)
Net cash provided by financing activities	Net cash provided by financing activities	825,421		175,826		Net cash provided by financing activities	134,752		74,652
Net change in cash and cash equivalents	Net change in cash and cash equivalents	782,055		26,118		Net change in cash and cash equivalents	54,833		14,941
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	228,896		228,123		Cash and cash equivalents at beginning of period	228,896		228,123
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,010,951	$	254,241	Cash and cash equivalents at end of period	$	283,729	$	243,064

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	26,013		4,291		Interest paid on deposits and borrowed funds	71,734		16,574

Income taxes paid						Income taxes paid	—		9,692

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						Transfer from loans to other real estate owned, net	882		—

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

Operating lease right-of-use assets received in exchange for lease liabilities	Operating lease right-of-use assets received in exchange for lease liabilities	647		786		Operating lease right-of-use assets received in exchange for lease liabilities	1,633		1,253

Commitments to fund low income housing tax credit investments	Commitments to fund low income housing tax credit investments	—		2,000		Commitments to fund low income housing tax credit investments	—		7,000
Goodwill adjustments for purchase accounting	Goodwill adjustments for purchase accounting	—		826		Goodwill adjustments for purchase accounting	—		826
Receivable on unsettled securities sales		—		28,500

See accompanying notes to consolidated financial statements (unaudited)

Table of C o ~~ntents~~Contents

BANC OF CALIFORNIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~March 31,~~June 30, 2023

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California, National Association (the “Bank”), a California-based bank. When we refer to the “parent” or the “holding company", we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company”, we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively. We are regulated as a bank holding company by the FRB and the Bank operates under a national bank charter issued by the Office of the Comptroller of the Currency (“OCC”), the ~~Bank's~~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 2833 offices including 27 full-service branches located throughout Southern California as of ~~March 31,~~June 30, 2023.

Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed by us with the SEC. Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications are immaterial and have no effect on net income, comprehensive income (loss), total assets or total shareholders’ equity previously reported.

In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. The results of operations for the three and six months ended ~~March 31,~~June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of ~~March 31,~~June 30, 2023 and December 31, 2022 and for the three and six months ended ~~March 31,~~June 30, 2023 ~~December 31, 2022~~ and ~~March 31,~~June 30, 2022. Significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its then wholly-owned subsidiaries.

Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. We have not made any changes in our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC, except for those described ~~below.~~below, which reflect a new accounting policy adopted and the impact of the adoption of ASU 2022-02:

Derivative Instruments - Cash Flow Hedge: The Company applies hedge accounting for certain derivative instruments used to manage interest rate risk. A cash flow hedge is a derivative instrument used to manage the variability in future expected cash flows that would otherwise be impacted by movements in interest rates. To quality for hedge accounting, the cash flow hedge must be highly effective at reducing the risk associated with the hedged exposure. The effectiveness of the hedging relationship is documented at inception and is monitored at least quarterly through the life of the transaction.

A cash flow hedge that is designated as highly effective is carried at fair value with the change in fair value included in the assessment of hedge effectiveness recorded in other comprehensive income (loss) (“AOCI”) and subsequently recognized in earnings in the same period that the hedged forecasted transaction affects earnings. At that time, the amount reclassified from AOCI is presented in the same income statement line item in which the hedged transaction is reported (interest income or expense). If the cash flow hedge becomes ineffective, the change in fair value is reclassified from AOCI to earnings.

Loan Modifications to Borrowers Experiencing Financial Difficulty: Prior to the adoption of ASU 2022-02, we accounted for the modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a troubled debt restructuring (“TDR”). Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. Loans that were considered a TDR prior to the adoption of ASU 2022-02 will continue to be accounted for under the superseded TDR accounting guidance until the loan is paid off, liquidated, or subsequently modified. Since adoption of ASU 2022-02 on January 1, 2023, we have

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evaluated all loan modifications under ASC 310-20 to determine whether a modification made to a borrower results in a new loan or is a continuation of the existing loan.

~~Table of C~~o ~~ntents~~

Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and disclosures provided, and actual results could differ. The allowance for credit losses (“ACL”) (which includes the allowance for loan losses (“ALL”) and the reserve for unfunded noncancellable loan ~~commitments)~~commitments (“RUC”)), loan repurchase reserve, realization of deferred tax assets, the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of goodwill and other intangible assets, other derivatives, hypothetical liquidation at book value (“HLBV”) of investments in alternative energy partnerships, and the fair value measurement of financial instruments are particularly subject to change and such change could have a material effect on the consolidated financial statements.

Recently Adopted Accounting Guidance: In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures, which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (“ASU 2016-13”) that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for TDRs by creditors that have adopted the CECL model and enhances the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We adopted ASU 2022-02 on January 1, 2023 and the impact of adoption did not have a material effect on our consolidated financial statements.

Recently Issued Accounting Guidance Not Yet Adopted: In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)(“ASU 2023-02”), which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method, which was previously allowed only for low-income housing tax credit (“LIHTC”) investments, if certain conditions are met. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, and including interim periods within those fiscal years. The amendment must be applied on either a modified retrospective or a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures, including assessing eligibility to apply the updated guidance to our investments in alternative energy partnerships currently accounted for using the HLBV method of the equity method of accounting.

NOTE 2 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair Value Hierarchy

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

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

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

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

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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Assets and Liabilities Measured on a Recurring Basis

Securities ~~Available-for-Sale:~~Available-for-Sale (“AFS”): The fair values of AFS securities ~~available-for-sale~~ are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, we primarily employ independent pricing services that utilize pricing models to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments (Level 2). We adhere to established processes to monitor the pricing ~~services'~~services’ assumptions and challenge the valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. Level 2 securities include SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and ~~management's~~management’s judgment and evaluation for valuation.

Derivative Assets and Liabilities:

Cash Flow Hedge. We have entered into pay-fixed, receive-variable interest rate swap contracts with institutional counterparties to hedge against variability in cash flows attributable to interest rate risk caused by changes in interest rates on our deposits and borrowings. We estimate the fair value of these contracts based on inputs from a third-party pricing model, which incorporates such factors as the Treasury curve, SOFR rates, and the pay rate on the interest rate swaps. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.

Interest Rate Swaps. We offer interest rate swap products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee.

The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.

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

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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)
March 31, 2023
June 30, 2023										June 30, 2023
Assets	Assets									Assets
Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pools securities	SBA loan pools securities	$	10,279	$	—	$	10,279	$	—	SBA loan pools securities	$	9,215	$	—	$	9,215	$	—
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	84,376		—		84,376		—		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	81,708		—		81,708		—
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	92,751		—		92,751		—		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	89,260		—		89,260		—

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	115,371		—		115,371		—		Non-agency residential mortgage-backed securities	111,508		—		111,508		—

Collateralized loan obligations	Collateralized loan obligations	479,623		—		479,623		—		Collateralized loan obligations	482,831		—		482,831		—
Corporate debt securities	Corporate debt securities	176,027		—		176,027		—		Corporate debt securities	147,569		—		147,569		—

Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps and foreign exchange contracts(1)	Interest rate swaps and foreign exchange contracts(1)	1,650		—		1,650		—		Interest rate swaps and foreign exchange contracts(1)	2,199		—		2,199		—

Liabilities	Liabilities									Liabilities
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Cash flow hedges(2)	Cash flow hedges(2)	8,622		—		8,622		—		Cash flow hedges(2)	454		—		454		—
Interest rate swaps and foreign exchange contracts(2)	Interest rate swaps and foreign exchange contracts(2)	1,632		—		1,632		—		Interest rate swaps and foreign exchange contracts(2)	2,172		—		2,172		—

December 31, 2022	December 31, 2022									December 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	$	11,187	$	—	$	11,187	$	—	SBA loan pools securities	$	11,187	$	—	$	11,187	$	—
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	40,206		—		40,206		—		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	40,206		—		40,206		—
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	93,191		—		93,191		—		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	93,191		—		93,191		—
Municipal securities	Municipal securities	—		—		—		—		Municipal securities	—		—		—		—
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	80,492		—		80,492		—		Non-agency residential mortgage-backed securities	80,492		—		80,492		—

Collateralized loan obligations	Collateralized loan obligations	476,603		—		476,603		—		Collateralized loan obligations	476,603		—		476,603		—
Corporate debt securities	Corporate debt securities	166,618		—		166,618		—		Corporate debt securities	166,618		—		166,618		—

Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps and foreign exchange contracts(1)	Interest rate swaps and foreign exchange contracts(1)	2,292		—		2,292		—		Interest rate swaps and foreign exchange contracts(1)	2,292		—		2,292		—

Liabilities	Liabilities									Liabilities
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Interest rate swaps and foreign exchange contracts(2)	Interest rate swaps and foreign exchange contracts(2)	2,251		—		2,251		—		Interest rate swaps and foreign exchange contracts(2)	2,251		—		2,251		—

(1)Included in other assets in the consolidated statements of financial condition.

(2)Included in accrued expenses and other liabilities in the consolidated statements of financial condition.

There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended ~~March 31,~~June 30, 2023 and 2022.

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Assets and Liabilities Measured on a Non-Recurring Basis

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

Other Real Estate Owned (“OREO”):The fair value of OREO is generally based on recent real estate appraisals, less estimated costs to sell. 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)	Fair 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)
March 31, 2023
June 30, 2023										June 30, 2023
Assets	Assets									Assets

Individually evaluated loans:	Individually evaluated loans:									Individually evaluated loans:

Commercial and industrial	Commercial and industrial	$	5,002	$	—	$	—	$	5,002	Commercial and industrial	$	756	$	—	$	—	$	756

SBA	SBA	1,117		—		—		1,117		SBA	16		—		—		16
Other consumer	Other consumer	114		—		—		114		Other consumer	93		—		—		93

Other real estate owned:										Other real estate owned:
Single family residential										Single family residential	882		—		—		882

December 31, 2022	December 31, 2022									December 31, 2022
Assets	Assets									Assets
Individually evaluated loans:	Individually evaluated loans:									Individually evaluated loans:
Single family residential mortgage	Single family residential mortgage	$	3,600	$	—	$	—	$	3,600	Single family residential mortgage	$	3,600	$	—	$	—	$	3,600

Commercial and industrial	Commercial and industrial	7,115		—		—		7,115		Commercial and industrial	7,115		—		—		7,115
SBA	SBA	3,704		—		—		3,704		SBA	3,704		—		—		3,704

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

Three Months Ended
March 31,
($ in thousands) 2023 2022
Individually evaluated loans:
Single family residential mortgage $ (43) $ (339)
Commercial and industrial (7,143) (634)
SBA 395 26
Other consumer (18) (27)
Commercial real estate (300) —

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	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2023		2022		2023		2022
Individually evaluated loans:
Single family residential mortgage	$	—	$	(1)	$	(43)	$	(340)
Commercial and industrial	(5,157)		(564)		(12,300)		(1,198)
SBA	(470)		(198)		(75)		(172)
Other consumer	(152)		(216)		(170)		(243)
Commercial real estate	—		—		(300)		—

Other real estate owned:
Single family residential	(165)		—		(165)		—

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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
March 31, 2023
June 30, 2023																June 30, 2023
Financial assets	Financial assets															Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	1,010,951		$	1,010,951		$	—		$	—		$	1,010,951	Cash and cash equivalents	$	283,729		$	283,729		$	—		$	—		$	283,729

Securities held-to-maturity	Securities held-to-maturity	328,520			—			272,915			—			272,915		Securities held-to-maturity	328,405			—			267,045			—			267,045
Securities available-for-sale	Securities available-for-sale	958,427			—			958,427			—			958,427		Securities available-for-sale	922,091			—			922,091			—			922,091
Federal Home Loan Bank and other bank stock	Federal Home Loan Bank and other bank stock	70,334			—			70,334			—			70,334		Federal Home Loan Bank and other bank stock	60,281			—			60,281			—			60,281

Loans receivable, net of allowance for credit losses	Loans receivable, net of allowance for credit losses	6,969,820			—			—			6,585,663			6,585,663		Loans receivable, net of allowance for credit losses	7,075,323			—			—			6,578,187			6,578,187
Accrued interest receivable	Accrued interest receivable	39,850			39,850			—			—			39,850		Accrued interest receivable	35,821			35,821			—			—			35,821
Interest rate swaps and foreign exchange contracts	Interest rate swaps and foreign exchange contracts	1,650			—			1,650			—			1,650		Interest rate swaps and foreign exchange contracts	2,199			—			2,199			—			2,199
Financial liabilities	Financial liabilities															Financial liabilities
Deposits	Deposits	6,951,974			5,366,984			1,574,301			—			6,941,285		Deposits	6,871,076			5,217,484			1,642,237			—			6,859,721
Advances from Federal Home Loan Bank and Federal Reserve Bank borrowings	Advances from Federal Home Loan Bank and Federal Reserve Bank borrowings	1,732,670			—			1,708,419			—			1,708,419		Advances from Federal Home Loan Bank and Federal Reserve Bank borrowings	1,147,997			—			1,116,711			—			1,116,711

Long-term debt	Long-term debt	274,995			—			254,406			—			254,406		Long-term debt	274,121			—			256,378			—			256,378
Cash flow hedges	Cash flow hedges	8,622						8,622						8,622		Cash flow hedges	454						454						454
Interest rate swaps and foreign exchange contracts	Interest rate swaps and foreign exchange contracts	1,632			—			1,632			—			1,632		Interest rate swaps and foreign exchange contracts	2,172			—			2,172			—			2,172
Accrued interest payable	Accrued interest payable	14,446			14,446			—			—			14,446		Accrued interest payable	14,791			14,791			—			—			14,791

December 31, 2022	December 31, 2022															December 31, 2022
Financial assets	Financial assets															Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	228,896		$	228,896		$	—		$	—		$	228,896	Cash and cash equivalents	$	228,896		$	228,896		$	—		$	—		$	228,896

Securities held-to-maturity	Securities held-to-maturity	328,641			—			262,460			—			262,460		Securities held-to-maturity	328,641			—			262,460			—			262,460
Securities available-for-sale	Securities available-for-sale	868,297			—			868,297			—			868,297		Securities available-for-sale	868,297			—			868,297			—			868,297
Federal Home Loan Bank and other bank stock	Federal Home Loan Bank and other bank stock	57,092			—			57,092			—			57,092		Federal Home Loan Bank and other bank stock	57,092			—			57,092			—			57,092

Loans receivable, net of allowance for credit losses	Loans receivable, net of allowance for credit losses	7,029,078			—			—			6,526,916			6,526,916		Loans receivable, net of allowance for credit losses	7,029,078			—			—			6,526,916			6,526,916
Accrued interest receivable	Accrued interest receivable	37,942			37,942			—			—			37,942		Accrued interest receivable	37,942			37,942			—			—			37,942
Interest rate swaps and foreign exchange contracts	Interest rate swaps and foreign exchange contracts	2,292			—			2,292			—			2,292		Interest rate swaps and foreign exchange contracts	2,292			—			2,292			—			2,292
Financial liabilities	Financial liabilities															Financial liabilities
Deposits	Deposits	7,120,921			5,931,500			1,175,857			—			7,107,357		Deposits	7,120,921			5,931,500			1,175,857			—			7,107,357
Advances from Federal Home Loan Bank	Advances from Federal Home Loan Bank	727,348			—			699,730			—			699,730		Advances from Federal Home Loan Bank	727,348			—			699,730			—			699,730

Long-term debt	Long-term debt	274,906			—			269,673			—			269,673		Long-term debt	274,906			—			269,673			—			269,673
Interest rate swaps and foreign exchange contracts	Interest rate swaps and foreign exchange contracts	2,251			—			2,251			—			2,251		Interest rate swaps and foreign exchange contracts	2,251			—			2,251			—			2,251
Accrued interest payable	Accrued interest payable	7,004			7,004			—			—			7,004		Accrued interest payable	7,004			7,004			—			—			7,004

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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		Allowance for Credit Losses		Fair Value
March 31, 2023
June 30, 2023										June 30, 2023
Securities held-to-maturity:	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	$	152,937	$	—	$	(24,952)	$	127,985	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	152,843	$	—	$	(27,987)	$	—	$	124,856
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	61,380		—		(10,742)		50,638		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,359		—		(11,937)		—		49,422
Municipal securities	Municipal securities	114,203		—		(19,911)		94,292		Municipal securities	114,203		—		(21,436)		—		92,767

Total securities held-to-maturity	Total securities held-to-maturity	$	328,520	$	—	$	(55,605)	$	272,915	Total securities held-to-maturity	$	328,405	$	—	$	(61,360)	$	—	$	267,045
Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	10,332	$	—	$	(53)	$	10,279	SBA loan pool securities	$	9,251	$	7	$	(43)	$	—	$	9,215
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	84,739		—		(363)		84,376		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	82,913		—		(1,205)		—		81,708
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	97,579		140		(4,968)		92,751		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	95,760		—		(6,500)		—		89,260

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	125,917		93		(10,639)		115,371		Non-agency residential mortgage-backed securities	122,995		—		(11,487)		—		111,508

Collateralized loan obligations	Collateralized loan obligations	490,860		—		(11,237)		479,623		Collateralized loan obligations	490,534		—		(7,703)		—		482,831
Corporate debt securities	Corporate debt securities	195,789		19		(19,781)		176,027		Corporate debt securities	175,796		—		(27,191)		(1,036)		147,569
Total securities available-for-sale	Total securities available-for-sale	$	1,005,216	$	252	$	(47,041)	$	958,427	Total securities available-for-sale	$	977,249	$	7	$	(54,129)	$	(1,036)	$	922,091
December 31, 2022	December 31, 2022									December 31, 2022
Securities held-to-maturity:	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	$	153,033	$	—	$	(29,807)	$	123,226	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	153,033	$	—	$	(29,807)	$	—	$	123,226
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,404		—		(11,946)		49,458		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,404		—		(11,946)		—		49,458
Municipal securities	Municipal securities	114,204		—		(24,428)		89,776		Municipal securities	114,204		—		(24,428)		—		89,776
Total securities held-to-maturity	Total securities held-to-maturity	$	328,641	$	—	$	(66,181)	$	262,460	Total securities held-to-maturity	$	328,641	$	—	$	(66,181)	$	—	$	262,460
Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	11,241	$	—	$	(54)	$	11,187	SBA loan pool securities	$	11,241	$	—	$	(54)	$	—	$	11,187
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	40,431		—		(225)		40,206		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	40,431		—		(225)		—		40,206
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	99,075		—		(5,884)		93,191		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	99,075		—		(5,884)		—		93,191

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	90,832		—		(10,340)		80,492		Non-agency residential mortgage-backed securities	90,832		—		(10,340)		—		80,492

Collateralized loan obligations	Collateralized loan obligations	492,203		—		(15,600)		476,603		Collateralized loan obligations	492,203		—		(15,600)		—		476,603
Corporate debt securities	Corporate debt securities	175,781		32		(9,195)		166,618		Corporate debt securities	175,781		32		(9,195)		—		166,618
Total securities available-for-sale	Total securities available-for-sale	$	909,563	$	32	$	(41,298)	$	868,297	Total securities available-for-sale	$	909,563	$	32	$	(41,298)	$	—	$	868,297

During the first quarter of 2022, certain longer-duration fixed-rate mortgage-backed securities and municipal securities with an amortized cost basis of $346.0 million were transferred from the available-for-sale (“AFS”) portfolio to the held-to-maturity (“HTM”) portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which became part of the securities’ amortized cost basis. This amount, along with the unrealized loss included in accumulated other comprehensive income, is subsequently amortized over the remaining life of the security as an adjustment to its yield using the interest method. As a result, there is no impact on the consolidated statements of operations. At June 30, 2023, the gross unrealized loss included in accumulated other comprehensive income was $15.3 million.

At ~~March 31,~~June 30, 2023, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities (“MBS”), 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.

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~~There was no allowance for credit losses for debt securities held-to-maturity and available-for sale as of March 31, 2023 and December 31, 2022.~~

Accrued interest receivable on ~~debt~~AFS and HTM securities ~~held-to-maturity and available-for-sale~~ totaled ~~$10.9~~$10.4 million and $9.2 million at ~~March 31,~~June 30, 2023 and December 31, 2022, and is included within other assets in the accompanying consolidated statements of financial condition.

At ~~March 31,~~June 30, 2023 and December 31, 2022, there were no holdings of any one issuer, other than U.S. government agency and sponsored enterprises, in an amount greater than 10 percent of our stockholders’ equity.

Pledged Securities

Investment securities with carrying values of ~~$544.0~~$535.1 million and $356.5 million as of ~~March 31,~~June 30, 2023 and December 31, 2022 were pledged to secure FHLB advances, FRB borrowings, public deposits and for other deposits as required or permitted by law.

Securities Available-for-Sale

The following table presents proceeds from sales and calls of AFS securities ~~available-for-sale~~ and the associated gross gains and losses realized through earnings upon the sales and calls of AFS securities ~~available-for-sale~~ for the periods indicated:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Gross realized gains	Gross realized gains	$	—	$	209		Gross realized gains	$	—	$	—	$	—	$	209
Gross realized losses	Gross realized losses	—		(193)			Gross realized losses	—		—		—		(193)
Net realized gains on sales and calls	Net realized gains on sales and calls	$	—	$	16		Net realized gains on sales and calls	$	—	$	—	$	—	$	16
Proceeds from sales and calls	Proceeds from sales and calls	$	—	$	17,646		Proceeds from sales and calls	$	20,000	$	38,500	$	20,000	$	56,146

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The following table summarizes the AFS 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
March 31, 2023
June 30, 2023														June 30, 2023

Securities available-for-sale:	Securities available-for-sale:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	—	$	—	$	8,317	$	(53)	$	8,317	$	(53)	SBA loan pool securities	$	—	$	—	$	7,461	$	(43)	$	7,461	$	(43)
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	84,376		(363)		—		—		84,376		(363)		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	81,708		(1,205)		—		—		81,708		(1,205)
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	26,609		(71)		38,693		(4,897)		65,302		(4,968)		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	51,780		(767)		37,478		(5,733)		89,258		(6,500)

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	60,712		(999)		41,133		(9,640)		101,845		(10,639)		Non-agency residential mortgage-backed securities	71,394		(1,734)		40,114		(9,753)		111,508		(11,487)

Collateralized loan obligations	Collateralized loan obligations	51,073		(1,012)		428,550		(10,225)		479,623		(11,237)		Collateralized loan obligations	41,278		(481)		441,552		(7,222)		482,830		(7,703)
Corporate debt securities	Corporate debt securities	116,634		(11,655)		39,374		(8,126)		156,008		(19,781)		Corporate debt securities	95,031		(10,265)		52,538		(16,926)		147,569		(27,191)
Total securities available-for-sale	Total securities available-for-sale	$	339,404	$	(14,100)	$	556,067	$	(32,941)	$	895,471	$	(47,041)	Total securities available-for-sale	$	341,191	$	(14,452)	$	579,143	$	(39,677)	$	920,334	$	(54,129)

December 31, 2022	December 31, 2022													December 31, 2022

Securities available-for-sale:	Securities available-for-sale:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	2,260	$	(3)	$	8,927	$	(51)	$	11,187	$	(54)	SBA loan pool securities	$	2,260	$	(3)	$	8,927	$	(51)	$	11,187	$	(54)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	40,206		(225)		—		—		40,206		(225)		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	40,206		(225)		—		—		40,206		(225)
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	76,441		(2,533)		16,750		(3,351)		93,191		(5,884)		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	76,441		(2,533)		16,750		(3,351)		93,191		(5,884)

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	80,492		(10,340)		—		—		80,492		(10,340)		Non-agency residential mortgage-backed securities	80,492		(10,340)		—		—		80,492		(10,340)

Collateralized loan obligations	Collateralized loan obligations	235,936		(7,492)		240,667		(8,108)		476,603		(15,600)		Collateralized loan obligations	235,936		(7,492)		240,667		(8,108)		476,603		(15,600)
Corporate debt securities	Corporate debt securities	159,492		(8,374)		4,180		(821)		163,672		(9,195)		Corporate debt securities	159,492		(8,374)		4,180		(821)		163,672		(9,195)
Total securities available-for-sale	Total securities available-for-sale	$	594,827	$	(28,967)	$	270,524	$	(12,331)	$	865,351	$	(41,298)	Total securities available-for-sale	$	594,827	$	(28,967)	$	270,524	$	(12,331)	$	865,351	$	(41,298)

At ~~March 31,~~June 30, 2023, our AFS securities ~~available-for-sale~~ portfolio consisted of 8786 securities, of which 8085 securities were in an unrealized loss position. At December 31, 2022, our AFS securities ~~available-for-sale~~ portfolio consisted of 77 securities, of which 76 securities were in an unrealized loss position.

We monitor our securities portfolio for identification of potential credit impairment. During the three and six months ended ~~March 31,~~June 30, 2023, we recognized a $1.0 million provision for credit losses on three corporate debt securities of other financial institutions that were downgraded to below investment grade by external credit agencies. During the three and six months ended June 30, 2022, there was no provision for credit losses related to AFS or HTM securities.

Except for the corporate debt securities ~~available-for-sale.~~ ~~We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment. As of March 31, 2023,~~noted above, we believe there was no credit impairment and the decline in fair value of our securities since acquisition was attributable to a combination of changes in interest rates and general volatility in ~~credit~~ market conditions. ~~We do~~As of June 30, 2023, we did not have the ~~current~~ intent to sell securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery. As of ~~March 31,~~June 30, 2023, ~~all~~82 of our ~~investment~~85 AFS securities in an unrealized loss position received an investment grade credit rating, and all of our HTM securities in an unrealized loss position received an investment grade credit rating.

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The following table presents the amortized cost and fair value of the investment securities portfolio as of June 30, 2023, based on the earlier of contractual maturity dates or next repricing ~~date, as of March 31, 2023:~~date:


		Held-to-Maturity				Available-for-Sale					Held-to-Maturity				Available-for-Sale
($ in thousands)	($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Earlier of maturity or next repricing date:	Earlier of maturity or next repricing date:									Earlier of maturity or next repricing date:
Within one year	Within one year	$	—	$	—	$	506,741	$	495,361	Within one year	$	—	$	—	$	505,106	$	497,279
One to five years	One to five years	—		—		191,467		171,486		One to five years	—		—		171,438		144,892
Five to ten years	Five to ten years	36,254		31,312		42,363		37,747		Five to ten years	37,339		31,963		42,240		34,914
Greater than ten years	Greater than ten years	292,266		241,603		264,645		253,833		Greater than ten years	291,066		235,082		258,465		245,006
Total	Total	$	328,520	$	272,915	$	1,005,216	$	958,427	Total	$	328,405	$	267,045	$	977,249	$	922,091

Contractual maturities may not reflect the actual maturities of the investments. The average lives for ~~mortgage-backed securities~~MBS and collateralized mortgage obligations (“CMOs”) will likely be shorter than their contractual maturities due to prepayments and amortization.

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The following table presents the fair value and weighted average yields using amortized cost of the AFS securities ~~available-for-sale~~ portfolio as of ~~March 31,~~June 30, 2023, based on the earlier of contractual 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	$	10,279	4.23	%	$	—	—	%	$	—	—	%	$	—	—	%	$	10,279	4.23	%	SBA loan pool securities	$	9,215	3.87	%	$	—	—	%	$	—	—	%	$	—	—	%	$	9,215	3.87	%
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	—		—	%	—		—	%	—		—	%	84,376		5.59	%	84,376		5.59	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	81,708		5.54	%	81,708		5.54	%
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	5,459		5.19	%	7,972		3.43	%	25,234		2.96	%	54,086		5.01	%	92,751		4.26	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	5,233		5.70	%	7,795		3.61	%	24,442		3.14	%	51,790		5.19	%	89,260		4.45	%

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	115,371		3.82	%	115,371		3.82	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	111,508		3.92	%	111,508		3.92	%

Collateralized loan obligations	Collateralized loan obligations	479,623		6.42	%	—		—	%	—		—	%	—		—	%	479,623		6.42	%	Collateralized loan obligations	482,831		6.88	%	—		—	%	—		—	%	—		—	%	482,831		6.88	%
Corporate debt securities	Corporate debt securities	—		—	%	163,514		4.95	%	12,513		5.73	%	—		—	%	176,027		5.00	%	Corporate debt securities	—		—	%	137,097		4.82	%	10,472		5.73	%	—		—	%	147,569		4.89	%
Total securities available-for-sale	Total securities available-for-sale	$	495,361	6.36	%	$	171,486	4.88	%	$	37,747	3.83	%	$	253,833	4.63	%	$	958,427	5.52	%	Total securities available-for-sale	$	497,279	6.81	%	$	144,892	4.76	%	$	34,914	3.95	%	$	245,006	4.70	%	$	922,091	5.77	%

The following table presents the amortized cost and weighted average yields using amortized cost of the HTM securities ~~held-to-maturity~~ portfolio as of ~~March 31,~~June 30, 2023, based on the earlier of contractual 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)	Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		($ in thousands)	Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield
Securities held-to-maturity:	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	$	—	—	%	$	—	—	%	$	9,354	2.51	%	$	143,583	2.70	%	$	152,937	2.69	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	9,344	2.52	%	$	143,499	2.70	%	$	152,843	2.69	%
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	—		—	%	—		—	%	—		—	%	61,380		2.64	%	61,380		2.64	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	—		—	%	—		—	%	—		—	%	61,359		2.64	%	61,359		2.64	%
Municipal securities	Municipal securities	—		—	%	—		—	%	26,900		2.31	%	87,303		2.71	%	114,203		2.62	%	Municipal securities	—		—	%	—		—	%	27,995		2.32	%	86,208		2.72	%	114,203		2.62	%

Total securities held-to-maturity	Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	36,254	2.36	%	$	292,266	2.69	%	$	328,520	2.66	%	Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	37,339	2.37	%	$	291,066	2.69	%	$	328,405	2.66	%

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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)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022

Commercial:	Commercial:					Commercial:
Commercial and industrial(1)	Commercial and industrial(1)	$	1,787,147	$	1,845,960	Commercial and industrial(1)	$	2,000,408	$	1,845,960
Commercial real estate	Commercial real estate	1,302,277		1,259,651		Commercial real estate	1,266,438		1,259,651
Multifamily	Multifamily	1,678,300		1,689,943		Multifamily	1,654,152		1,689,943
SBA	SBA	65,040		68,137		SBA	62,898		68,137
Construction	Construction	260,167		243,553		Construction	264,684		243,553

Consumer:	Consumer:					Consumer:
Single family residential mortgage	Single family residential mortgage	1,877,114		1,920,806		Single family residential mortgage	1,820,721		1,920,806

Other consumer	Other consumer	84,335		86,988		Other consumer	86,905		86,988
Total loans	Total loans	$	7,054,380	$	7,115,038	Total loans	$	7,156,206	$	7,115,038

Allowance for loan losses	Allowance for loan losses	(84,560)		(85,960)		Allowance for loan losses	(80,883)		(85,960)
Loans receivable, net	Loans receivable, net	$	6,969,820	$	7,029,078	Loans receivable, net	$	7,075,323	$	7,029,078

(1)Includes warehouse lending balances of ~~$636.7~~$786.1 million and $602.5 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

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


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022
Unpaid principal balance	Unpaid principal balance	$	7,047,034	$	7,107,897	Unpaid principal balance	$	7,148,929	$	7,107,897
Unamortized net premiums	Unamortized net premiums	17,972		18,319		Unamortized net premiums	16,997		18,319
Unamortized net deferred (fees) costs	Unamortized net deferred (fees) costs	(1,690)		(1,880)		Unamortized net deferred (fees) costs	(1,238)		(1,880)

Fair value adjustment(1)	Fair value adjustment(1)	(8,936)		(9,298)		Fair value adjustment(1)	(8,482)		(9,298)
Total loans	Total loans	$	7,054,380	$	7,115,038	Total loans	$	7,156,206	$	7,115,038

(1)At ~~March 31,~~June 30, 2023, includes ~~$7.7~~$7.4 million related to the acquisition of Pacific Mercantile Bancorp (“~~PMB Acquisition”~~PMB”), of which ~~$3.9~~$3.7 million related to ~~PCD~~purchased credit deteriorated (“PCD”) loans. At December 31, 2022, includes $8.0 million related to the PMB Acquisition, of which $4.1 million related to PCD loans.

Credit Quality Indicators

We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze the associated risks in the current loan portfolio and individually grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate (“CRE”) loans. We use the following definitions for risk ratings:

Pass: Loans risk rated “Pass” are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful.”

Special Mention: Loans risk rated “Special Mention” have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of our credit position at some future date.

Substandard: Loans risk rated “Substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or a weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans risk rated “Doubtful” have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

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The following table presents the risk categories for total loans by class of loans and origination year as of ~~March 31,~~June 30, 2023:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
($ in thousands)	($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total		($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total
March 31, 2023
June 30, 2023																				June 30, 2023

Commercial:	Commercial:																			Commercial:
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	$	23,951	$	248,472	$	176,677	$	57,802	$	49,220	$	237,512	$	920,462	$	14,680	$	1,728,776	Pass	$	50,265	$	250,300	$	172,125	$	54,809	$	38,087	$	219,373	$	1,120,399	$	17,845	$	1,923,203
Special mention	Special mention	—		—		2,930		996		—		2,162		10,344		1,187		17,619		Special mention	—		1,568		3,761		—		8,817		9,660		6,800		392		30,998
Substandard	Substandard	—		5,531		226		2,646		401		3,052		22,473		2,484		36,813		Substandard	—		4,051		135		2,422		301		13,056		14,167		2,716		36,848
Doubtful (1)	Doubtful (1)	3,939		—		—		—		—		—		—		—		3,939		Doubtful (1)	3,910		—		—		71		—		—		5,378		—		9,359
Commercial and industrial	Commercial and industrial	27,890		254,003		179,833		61,444		49,621		242,726		953,279		18,351		1,787,147		Commercial and industrial	54,175		255,919		176,021		57,302		47,205		242,089		1,146,744		20,953		2,000,408
Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	25,592		395,257		357,157		60,289		90,326		361,861		1,164		59		1,291,705		Pass	25,752		393,803		342,564		59,987		82,821		343,679		2,265		57		1,250,928
Special mention	Special mention	—		—		7,780		—		—		—		—		—		7,780		Special mention	—		—		5,352		—		6,899		—		—		—		12,251
Substandard	Substandard	—		—		—		—		—		1,924		—		868		2,792		Substandard	—		1,761		—		—		—		658		—		840		3,259
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	Commercial real estate	25,592		395,257		364,937		60,289		90,326		363,785		1,164		927		1,302,277		Commercial real estate	25,752		395,564		347,916		59,987		89,720		344,337		2,265		897		1,266,438
Multifamily	Multifamily																			Multifamily
Pass	Pass	20,051		628,450		392,823		154,137		226,686		217,859		3		9,260		1,649,269		Pass	23,474		624,664		387,413		153,613		225,130		212,731		3		9,215		1,636,243
Special mention	Special mention	—		—		—		2,999		—		11,019		—		—		14,018		Special mention	—		—		—		2,995		—		—		—		—		2,995
Substandard	Substandard	—		—		—		—		—		15,013		—		—		15,013		Substandard	—		—		—		—		—		14,914		—		—		14,914
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	Multifamily	20,051		628,450		392,823		157,136		226,686		243,891		3		9,260		1,678,300		Multifamily	23,474		624,664		387,413		156,608		225,130		227,645		3		9,215		1,654,152
SBA	SBA																			SBA
Pass	Pass	—		9,357		14,662		3,615		5,838		19,115		780		112		53,479		Pass	—		9,288		12,199		3,543		5,787		19,274		326		447		50,864
Special mention	Special mention	—		—		—		—		—		998		—		1		999		Special mention	—		—		676		—		—		579		—		1		1,256
Substandard	Substandard	—		—		—		312		323		8,713		411		803		10,562		Substandard	—		—		—		303		877		8,443		351		502		10,476
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		302		302
SBA	SBA	—		9,357		14,662		3,927		6,161		28,826		1,191		916		65,040		SBA	—		9,288		12,875		3,846		6,664		28,296		677		1,252		62,898

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Construction	Construction																			Construction
Pass	Pass	2,892		90,405		110,969		27,839		3,100		24,962		—		—		260,167		Pass	1,996		96,130		113,770		27,795		—		24,984		9		—		264,684
Special mention	Special mention	—		—		—		—		—		—		—		—		—		Special mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—		—		—
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Construction	Construction	2,892		90,405		110,969		27,839		3,100		24,962		—		—		260,167		Construction	1,996		96,130		113,770		27,795		—		24,984		9		—		264,684
Consumer:	Consumer:																			Consumer:
Single family residential mortgage	Single family residential mortgage																			Single family residential mortgage
Pass	Pass	—		616,287		781,990		72,227		45,305		322,292		2,410		—		1,840,511		Pass	—		595,050		768,940		70,311		44,030		302,777		2,445		—		1,783,553
Special mention	Special mention	—		4,548		2,232		—		—		4,558		—		—		11,338		Special mention	—		—		680		—		—		2,321		—		—		3,001
Substandard	Substandard	—		5,262		5,311		2,167		—		10,644		1,881		—		25,265		Substandard	—		9,656		6,607		2,161		—		13,876		1,867		—		34,167
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Single family residential mortgage	Single family residential mortgage	—		626,097		789,533		74,394		45,305		337,494		4,291		—		1,877,114		Single family residential mortgage	—		604,706		776,227		72,472		44,030		318,974		4,312		—		1,820,721
Other consumer	Other consumer																			Other consumer
Pass	Pass	7,615		20,894		14,833		8,210		4,592		17,116		9,526		1,086		83,872		Pass	16,210		18,972		13,592		7,650		4,288		15,541		8,696		1,183		86,132
Special mention	Special mention	—		—		—		—		2		2		62		53		119		Special mention	—		—		—		—		—		1		349		52		402
Substandard	Substandard	—		—		115		57		—		91		81		—		344		Substandard	—		—		111		—		122		57		81		—		371
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Other consumer	Other consumer	7,615		20,894		14,948		8,267		4,594		17,209		9,669		1,139		84,335		Other consumer	16,210		18,972		13,703		7,650		4,410		15,599		9,126		1,235		86,905

Total loans	Total loans	$	84,040	$	2,024,463	$	1,867,705	$	393,296	$	425,793	$	1,258,893	$	969,597	$	30,593	$	7,054,380	Total loans	$	121,607	$	2,005,243	$	1,827,925	$	385,660	$	417,159	$	1,201,924	$	1,163,136	$	33,552	$	7,156,206

Total loans	Total loans																			Total loans
Pass	Pass	$	80,101	$	2,009,122	$	1,849,111	$	384,119	$	425,067	$	1,200,717	$	934,345	$	25,197	$	6,907,779	Pass	$	117,697	$	1,988,207	$	1,810,603	$	377,708	$	400,143	$	1,138,359	$	1,134,143	$	28,747	$	6,995,607
Special mention	Special mention	—		4,548		12,942		3,995		2		18,739		10,406		1,241		51,873		Special mention	—		1,568		10,469		2,995		15,716		12,561		7,149		445		50,903
Substandard	Substandard	—		10,793		5,652		5,182		724		39,437		24,846		4,155		90,789		Substandard	—		15,468		6,853		4,886		1,300		51,004		16,466		4,058		100,035
Doubtful (1)	Doubtful (1)	3,939		—		—		—		—		—		—		—		3,939		Doubtful (1)	3,910		—		—		71		—		—		5,378		302		9,661
Total loans	Total loans	$	84,040	$	2,024,463	$	1,867,705	$	393,296	$	425,793	$	1,258,893	$	969,597	$	30,593	$	7,054,380	Total loans	$	121,607	$	2,005,243	$	1,827,925	$	385,660	$	417,159	$	1,201,924	$	1,163,136	$	33,552	$	7,156,206

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

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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, 2022:


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
















Commercial:
Commercial and industrial
Pass	$	269,367	$	170,513	$	62,931	$	53,001	$	76,811	$	164,394	$	932,464	$	19,803	$	1,749,284
Special mention	—		19,203		1,042		—		1		11,528		17,142		483		49,399
Substandard	3,833		64		3,002		502		3,630		2,729		23,012		6,501		43,273
Doubtful	—		—		—		4,004		—		—		—		—		4,004
Commercial and industrial	273,200		189,780		66,975		57,507		80,442		178,651		972,618		26,787		1,845,960
Commercial real estate
Pass	348,298		363,335		60,564		94,772		155,790		224,213		1,163		61		1,248,196
Special mention	—		—		—		—		—		1,745		—		—		1,745
Substandard	—		—		—		—		1		8,799		910		—		9,710
Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	348,298		363,335		60,564		94,772		155,791		234,757		2,073		61		1,259,651
Multifamily
Pass	626,186		390,928		154,636		229,511		109,887		138,063		3		9,307		1,658,521
Special mention	—		—		2,997		—		—		—		—		—		2,997
Substandard	—		—		—		—		11,069		17,356		—		—		28,425
Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	626,186		390,928		157,633		229,511		120,956		155,419		3		9,307		1,689,943
SBA
Pass	9,421		15,468		4,009		5,899		1,176		19,090		603		123		55,789
Special mention	—		—		—		—		201		598		—		1		800
Substandard	—		—		320		339		385		9,097		628		779		11,548
Doubtful	—		—		—		—		—		—		—		—		—
SBA	9,421		15,468		4,329		6,238		1,762		28,785		1,231		903		68,137

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Construction
Pass	85,430		98,572		27,704		6,495		—		25,352		—		—		243,553
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Construction	85,430		98,572		27,704		6,495		—		25,352		—		—		243,553
Consumer:
Single family residential mortgage
Pass	627,213		797,744		72,658		47,284		89,492		255,520		—		—		1,889,911
Special mention	1,716		218		—		1,537		3,378		2,252		—		—		9,101
Substandard	3,571		—		2,171		—		8,573		7,479		—		—		21,794
Doubtful	—		—		—		—		—		—		—		—		—
Single family residential mortgage	632,500		797,962		74,829		48,821		101,443		265,251		—		—		1,920,806
Other consumer
Pass	23,340		15,986		8,805		5,524		3,363		15,920		10,914		2,747		86,599
Special mention	—		—		—		3		—		19		62		54		138
Substandard	—		—		56		—		83		31		81		—		251
Doubtful	—		—		—		—		—		—		—		—		—
Other consumer	23,340		15,986		8,861		5,527		3,446		15,970		11,057		2,801		86,988


Total loans	$	1,998,375	$	1,872,031	$	400,895	$	448,871	$	463,840	$	904,185	$	986,982	$	39,859	$	7,115,038

Total loans
Pass	$	1,989,255	$	1,852,546	$	391,307	$	442,486	$	436,519	$	842,552	$	945,147	$	32,041	$	6,931,853
Special mention	1,716		19,421		4,039		1,540		3,580		16,142		17,204		538		64,180
Substandard	7,404		64		5,549		841		23,741		45,491		24,631		7,280		115,001
Doubtful	—		—		—		4,004		—		—		—		—		4,004
Total loans	$	1,998,375	$	1,872,031	$	400,895	$	448,871	$	463,840	$	904,185	$	986,982	$	39,859	$	7,115,038

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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
March 31, 2023
June 30, 2023														June 30, 2023
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	2,859		1,787		14,864		19,510		1,767,637		1,787,147		Commercial and industrial	1,430		4,442		16,631		22,503		1,977,905		2,000,408
Commercial real estate	Commercial real estate	495		264		—		759		1,301,518		1,302,277		Commercial real estate	2,047		831		1,760		4,638		1,261,800		1,266,438
Multifamily	Multifamily	1,128		—		—		1,128		1,677,172		1,678,300		Multifamily	—		1,124		—		1,124		1,653,028		1,654,152
SBA	SBA	172		—		9,667		9,839		55,201		65,040		SBA	735		247		9,193		10,175		52,723		62,898
Construction	Construction	—		—		—		—		260,167		260,167		Construction	—		—		—		—		264,684		264,684

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	19,057		9,419		12,448		40,924		1,836,190		1,877,114		Single family residential mortgage	43,956		9,466		12,504		65,926		1,754,795		1,820,721
Other consumer	Other consumer	343		57		81		481		83,854		84,335		Other consumer	119		349		81		549		86,356		86,905
Total	Total	$	24,054	$	11,527	$	37,060	$	72,641	$	6,981,739	$	7,054,380	Total	$	48,287	$	16,459	$	40,169	$	104,915	$	7,051,291	$	7,156,206

December 31, 2022	December 31, 2022													December 31, 2022
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	4,002		481		13,833		18,316		1,827,644		1,845,960		Commercial and industrial	4,002		481		13,833		18,316		1,827,644		1,845,960
Commercial real estate	Commercial real estate	311		—		910		1,221		1,258,430		1,259,651		Commercial real estate	311		—		910		1,221		1,258,430		1,259,651
Multifamily	Multifamily	—		—		—		—		1,689,943		1,689,943		Multifamily	—		—		—		—		1,689,943		1,689,943
SBA	SBA	287		—		10,299		10,586		57,551		68,137		SBA	287		—		10,299		10,586		57,551		68,137
Construction	Construction	—		—		—		—		243,553		243,553		Construction	—		—		—		—		243,553		243,553

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	36,338		5,068		19,431		60,837		1,859,969		1,920,806		Single family residential mortgage	36,338		5,068		19,431		60,837		1,859,969		1,920,806
Other consumer	Other consumer	163		16		81		260		86,728		86,988		Other consumer	163		16		81		260		86,728		86,988
Total	Total	$	41,101	$	5,565	$	44,554	$	91,220	$	7,023,818	$	7,115,038	Total	$	41,101	$	5,565	$	44,554	$	91,220	$	7,023,818	$	7,115,038

Nonaccrual Loans

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


		March 31, 2023				December 31, 2022					June 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Total Nonaccrual Loans		Nonaccrual Loans with no ACL		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	$	21,025	$	6,431	$	22,613	$	10,959	Commercial and industrial	$	21,228	$	10,824	$	22,613	$	10,959
Commercial real estate	Commercial real estate	868		868		910		910		Commercial real estate	2,600		2,600		910		910

SBA	SBA	9,775		7,952		10,417		5,613		SBA	9,611		9,502		10,417		5,613

Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	24,590		24,590		21,116		17,187		Single family residential mortgage	33,496		33,495		21,116		17,187

Other consumer	Other consumer	287		172		195		195		Other consumer	371		260		195		195
Total nonaccrual loans	Total nonaccrual loans	$	56,545	$	40,013	$	55,251	$	34,864	Total nonaccrual loans	$	67,306	$	56,681	$	55,251	$	34,864

At ~~March 31,~~June 30, 2023 and December 31, 2022, there were no loans that were past due 90 days or more and still accruing.

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

At ~~March 31,~~June 30, 2023, other real estate owned totaled $0.9 million and ~~December 31, 2022, there~~consisted of one single-family residence acquired as a result of foreclosure in the second quarter. There was no other real estate ~~owned.~~ owned at December 31, 2022.

At ~~March 31,~~June 30, 2023, there were 4 ~~consumer~~ single-family residential mortgage loans totaling ~~$5.0~~$3.2 million ~~secured by residential real estate properties for which formal foreclosure proceedings were~~ in process ~~according to local requirements~~ of ~~the applicable jurisdiction.~~foreclosure. There were 9 ~~consumer~~single-family residential mortgage loans totaling $11.7 million ~~secured by residential real estate properties~~ in process of foreclosure at December 31, 2022.

Allowance for Credit Losses - Loans

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables released by the model provider during ~~March~~June 2023. The published forecasts consider the Federal ~~Reserve's~~Reserve’s monetary policy, labor market constraints, inflation levels, global oil prices and changes in real estate values, among other factors.

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

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

The ~~reserve for unfunded noncancellable loan commitments~~RUC is established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. At ~~March 31,~~June 30, 2023 and December 31, 2022, the reserve for unfunded loan commitments was ~~$4.8~~$4.0 million and $5.3 million ~~respectively,~~ and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.

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


		Three Months Ended March 31,												Three Months Ended June 30,
($ in thousands)	($ in thousands)	2023						2022							($ in thousands)	2023						2022
		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	$	85,960	$	5,305	$	91,265	$	92,584	$	5,605	$	98,189		Balance at beginning of period	$	84,560	$	4,805	$	89,365	$	93,226	$	5,405	$	98,631

Charge-offs	Charge-offs	(3,949)		—		(3,949)		(231)		—		(231)			Charge-offs	(5,667)		—		(5,667)		(494)		—		(494)
Recoveries	Recoveries	49		—		49		32,215		—		32,215			Recoveries	326		—		326		1,561		—		1,561
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(3,900)		—		(3,900)		31,984		—		31,984			Net (charge-offs) recoveries	(5,341)		—		(5,341)		1,067		—		1,067

Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	2,500		(500)		2,000		(31,342)		(200)		(31,542)			Provision for (reversal of) credit losses	1,664		(800)		864		(500)		500		—
Balance at end of period	Balance at end of period	$	84,560	$	4,805	$	89,365	$	93,226	$	5,405	$	98,631		Balance at end of period	$	80,883	$	4,005	$	84,888	$	93,793	$	5,905	$	99,698


	Six Months Ended June 30,
($ in thousands)	2023						2022
	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	$	85,960	$	5,305	$	91,265	$	92,584	$	5,605	$	98,189

Charge-offs	(9,616)		—		(9,616)		(725)		—		(725)
Recoveries	375		—		375		33,776		—		33,776
Net (charge-offs) recoveries	(9,241)		—		(9,241)		33,051		—		33,051

Provision for (reversal of) credit losses	4,164		(1,300)		2,864		(31,842)		300		(31,542)
Balance at end of period	$	80,883	$	4,005	$	84,888	$	93,793	$	5,905	$	99,698

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, total recoveries included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. This recovery resulted in a reversal of provision for credit losses during the same period.

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Accrued interest receivable on loans receivable, net totaled ~~$27.1~~$25.1 million and $28.6 million at ~~March 31,~~June 30, 2023 and December 31, 2022, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the allowance of credit losses.

The following table presents the activity and balance in the ALL as of or for the three and six months ended ~~March 31,~~June 30, 2023:

($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Single Family Residential Mortgage Other Consumer Total
ALL:
Three Months Ended March 31, 2023:
Balance at December 31, 2022 $ 34,156 $ 15,977 $ 14,696 $ 2,648 $ 5,850 $ 12,050 $ 583 $ 85,960
Charge-offs (3,261) (300) — — — (372) (16) (3,949)
Recoveries 17 — — 24 — 1 7 49
Net (charge-offs) recoveries (3,244) (300) — 24 — (371) (9) (3,900)
Provision for (reversal of) credit losses - loans 1,732 442 342 (575) 575 (198) 182 2,500
Balance at March 31, 2023 $ 32,644 $ 16,119 $ 15,038 $ 2,097 $ 6,425 $ 11,481 $ 756 $ 84,560

~~The following table presents the gross charge-offs by class of loans and origination year as of March 31, 2023:~~

Gross Charge-offs
($ in thousands) 2023 2022 2021 2020 2019 Prior Total
Three Months Ended March 31, 2023
Commercial:
Commercial and industrial $ — $ (1,599) $ (753) $ — $ — $ (909) $ (3,261)
Commercial real estate — — — — — (300) (300)
Consumer:
Single family residential mortgage — — — (372) — — (372)
Other consumer — (16) — — — — (16)
Total loans $ — $ (1,615) $ (753) $ (372) $ — $ (1,209) $ (3,949)


($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total
ALL:
Three Months Ended June 30, 2023:
Balance at March 31, 2023	$	32,644	$	16,119	$	15,038	$	2,097	$	6,425	$	11,481	$	756	$	84,560

Charge-offs	(4,450)		—		—		(1,081)		—		—		(136)		(5,667)
Recoveries	22		—		—		286		—		1		17		326
Net (charge-offs) recoveries	(4,428)		—		—		(795)		—		1		(119)		(5,341)

Provision for (reversal of) credit losses - loans	4,607		(352)		(341)		85		(372)		(1,964)		1		1,664
Balance at June 30, 2023	$	32,823	$	15,767	$	14,697	$	1,387	$	6,053	$	9,518	$	638	$	80,883

Six Months Ended June 30, 2023:
Balance at December 31, 2022	$	34,156	$	15,977	$	14,696	$	2,648	$	5,850	$	12,050	$	583	$	85,960

Charge-offs	(7,711)		(300)		—		(1,081)		—		(372)		(152)		(9,616)
Recoveries	39		—		—		310		—		2		24		375
Net (charge-offs) recoveries	(7,672)		(300)		—		(771)		—		(370)		(128)		(9,241)

Provision for (reversal of) credit losses - loans	6,339		90		1		(490)		203		(2,162)		183		4,164
Balance at June 30, 2023	$	32,823	$	15,767	$	14,697	$	1,387	$	6,053	$	9,518	$	638	$	80,883

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The following table presents the activity and balance in the ALL as of or for the three and six months ended ~~March 31,~~June 30, 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 March 31, 2022:
Three Months Ended June 30, 2022:																		Three Months Ended June 30, 2022:
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

Charge-offs																		Charge-offs	(138)		—		—		(139)		—		—		(217)		(494)
Recoveries																		Recoveries	1,400		—		—		3		—		154		4		1,561
Net recoveries (charge-offs)																		Net recoveries (charge-offs)	1,262		—		—		(136)		—		154		(213)		1,067

Provision for (reversal of) credit losses - loans																		Provision for (reversal of) credit losses - loans	184		(748)		341		128		(2,013)		1,622		(14)		(500)
Balance at June 30, 2022																		Balance at June 30, 2022	$	41,413	$	15,742	$	15,678	$	3,033	$	4,255	$	12,805	$	867	$	93,793

Six Months Ended June 30, 2022:																		Six Months Ended June 30, 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	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	(182)		—		—		(13)		—		(10)		(26)		(231)		Charge-offs	(320)		—		—		(152)		—		(10)		(243)		(725)
Recoveries	Recoveries	31,417		—		—		758		—		38		2		32,215		Recoveries	32,817		—		—		761		—		192		6		33,776
Net recoveries (charge-offs)	Net recoveries (charge-offs)	31,235		—		—		745		—		28		(24)		31,984		Net recoveries (charge-offs)	32,497		—		—		609		—		182		(237)		33,051

(Reversal of) provision for credit losses - loans	(Reversal of) provision for credit losses - loans	(24,825)		(5,237)		(2,556)		(721)		646		1,393		(42)		(31,342)		(Reversal of) provision for credit losses - loans	(24,641)		(5,985)		(2,215)		(593)		(1,367)		3,015		(56)		(31,842)
Balance at March 31, 2022		$	39,967	$	16,490	$	15,337	$	3,041	$	6,268	$	11,029	$	1,094	$	93,226
Balance at June 30, 2022																		Balance at June 30, 2022	$	41,413	$	15,742	$	15,678	$	3,033	$	4,255	$	12,805	$	867	$	93,793

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The following table presents the gross charge-offs by class of loans and origination year as of June 30, 2023:


	Gross Charge-offs
($ in thousands)	2023		2022		2021		2020		2019		Prior		Total
Three Months Ended June 30, 2023
Commercial:
Commercial and industrial	$	—	$	(4,118)	$	(332)	$	—	$	—	$	—	$	(4,450)


SBA	—		—		(64)		—		—		(1,017)		(1,081)

Consumer:

Other consumer	—		—		—		(59)		—		(77)		(136)
Total loans	$	—	$	(4,118)	$	(396)	$	(59)	$	—	$	(1,094)	$	(5,667)

Six Months Ended June 30, 2023
Commercial:
Commercial and industrial	$	—	$	(5,717)	$	(1,085)	$	—	$	—	$	(909)	$	(7,711)
Commercial real estate	—		—		—		—		—		(300)		(300)

SBA	—		—		(64)		—		—		(1,017)		(1,081)

Consumer:
Single family residential mortgage	—		—		—		(372)		—		—		(372)
Other consumer	—		(16)		—		(59)		—		(77)		(152)
Total loans	$	—	$	(5,733)	$	(1,149)	$	(431)	$	—	$	(2,303)	$	(9,616)

Table of C o ~~ntents~~Contents

Collateral Dependent Loans

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

Collateral dependent loans consisted of the following as of the dates indicated:


		March 31, 2023											June 30, 2023
		Real Estate											Real Estate
($ in thousands)	($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total		($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total
Commercial:	Commercial:											Commercial:
Commercial and industrial	Commercial and industrial	$	—	$	—	$	13,545	$	—	$	13,545	Commercial and industrial	$	—	$	—	$	15,538	$	62	$	15,600
Commercial real estate	Commercial real estate	868		—		—		—		868		Commercial real estate	2,600		—		—		—		2,600

SBA	SBA	21		4,195		5,559		—		9,775		SBA	18		2,948		6,645		—		9,611

Consumer:	Consumer:											Consumer:
Single family residential mortgage	Single family residential mortgage	—		25,689		—		—		25,689		Single family residential mortgage	—		33,496		—		—		33,496
Other consumer	Other consumer	—		81		—		207		288		Other consumer	—		81		—		290		371
Total loans	Total loans	$	889	$	29,965	$	19,104	$	207	$	50,165	Total loans	$	2,618	$	36,525	$	22,183	$	352	$	61,678


	December 31, 2022
	Real Estate
($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total
Commercial:
Commercial and industrial	$	—	$	—	$	18,392	$	—	$	18,392
Commercial real estate	910		—		—		—		910

SBA	23		4,702		5,691		—		10,416


Consumer:
Single family residential mortgage	—		21,262		—		—		21,262
Other consumer	—		81		—		113		194
Total loans	$	933	$	26,045	$	24,083	$	113	$	51,174

Loan Modifications to Borrowers Experiencing Financial Difficulty

Loans modified for borrowers experiencing financial difficulty consisted of the following as of the dates indicated:

($ in thousands) Commercial and industrial Single family residential mortgage Total
March 31, 2023
Interest rate reduction:
Amortized cost basis $ — $ 1,071 $ 1,071
% of total class of loans — % 0.1 % — %
Combination - principal reduction and payment delays:
Amortized cost basis $ 3,939 $ — $ 3,939
% of total class of loans 0.2 % — % 0.1 %
Total amortized cost basis $ 3,939 $ 1,071 $ 5,010
Percentage of total loans 0.2 % 0.1 % 0.1 %


($ in thousands)	Commercial and industrial			Single family residential mortgage			Total
June 30, 2023
Interest rate reduction:
Amortized cost basis	$	—		$	1,071		$	1,071
% of total class of loans	—		%	0.1		%	—		%

Term extension:
Amortized cost basis	$	—		$	286		$	286
% of total class of loans	—		%	—		%	—		%









Combination - principal reduction and payment delays:
Amortized cost basis	$	3,910		$	—		$	3,910
% of total class of loans	0.2		%	—		%	0.1		%






Total amortized cost basis	$	3,910		$	1,357		$	5,267
Percentage of total class of loans	0.2		%	0.1		%	0.1		%

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The following table presents the aging of loans modified to borrowers experiencing financial difficulty at ~~March 31,~~June 30, 2023:


($ in thousands)	($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total		($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due		Current		Total
March 31, 2023
June 30, 2023														June 30, 2023
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	$	—	$	—	$	—	$	—	$	3,939	$	3,939	Commercial and industrial	$	—	$	3,910	$	—	$	3,910	$	—	$	3,910

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	—		—		—		—		1,071		1,071		Single family residential mortgage	—		—		—		—		1,357		1,357

		$	—	$	—	$	—	$	—	$	5,010	$	5,010		$	—	$	3,910	$	—	$	3,910	$	1,357	$	5,267

There were no loan modifications made to borrowers experiencing financial difficulty during the quarter ended ~~March 31,~~June 30, 2023 that subsequently defaulted.

Troubled Debt Restructurings (for modifications to borrowers experiencing financial difficulty prior to January 1, 2023)

At ~~March 31,~~June 30, 2023 and December 31, 2022, we had 1110 and 15 loans classified as TDRs, with an aggregate balance of ~~$8.7~~$8.0 million and $16.1 million. During the ~~three~~six months ended ~~March 31,~~June 30, 2023 a $3.9 million commercial and industrial (“C&I”) loan that was restructured during 2022 was modified and accounted for as a new loan. Additionally, $4.0 million relating to two commercial relationships were paid down during this same period.

Accruing TDRs were ~~$2.6~~$2.5 million and nonaccrual TDRs were ~~$6.1~~$5.5 million at ~~March 31,~~June 30, 2023, compared to accruing TDRs of $2.7 million and nonaccrual TDRs of $13.4 million at December 31, 2022.

Purchases, Sales, and Transfers

From time to time, we purchase and sell loans in the secondary market. ~~During~~There were no loans purchased during the three months ended ~~March 31,~~June 30, 2023. During the six months ended June 30, 2023, we purchased loans aggregating $61.4 million. During the three and six months ended ~~March 31,~~June 30, 2022, we purchased loans aggregating ~~$364.4~~$277.2 million and $641.5 million.

There were no loans transferred from held for investment to loans held-for-sale, and there were no sales of loans for the three and six months ended ~~March 31,~~June 30, 2023 and 2022.

Non-Traditional Mortgage (“NTM”) Loans

NTM loans are included in our SFR mortgage portfolio and are comprised primarily of interest only loans. As of March 31, 2023 and December 31, 2022, the NTM loans totaled $846.5 million, or 12.0% of total loans, and $862.3 million, or 12.1% of total loans, respectively. The total NTM portfolio decreased by $15.8 million, or 1.8% during the three months ended March 31, 2023. The decrease was due to principal paydowns and payoffs.

We no longer originate SFR loans, however we have purchased and may continue to purchase pools of loans that include NTM loans such as interest only loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the life of the loan. ~~Interest only~~

NTM loans are included in our SFR mortgage portfolio and are comprised 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~~loans. As of June 30, 2023 and December 31, 2022, the NTM loans totaled $811.7 million, or 11.3% of total loans, and $862.3 million, or 12.1% of total loans. The total NTM portfolio decreased by $50.7 million, or 5.9% during the six months ended June 30, 2023. The decrease was due to ~~a fully amortizing loan.~~principal paydowns and payoffs.

At ~~March 31,~~June 30, 2023 and December 31, 2022, nonperforming NTM loans totaled ~~$7.2~~$13.3 million and $3.0 million.

Non-Traditional Mortgage Performance Indicators

Our risk management policy and credit monitoring include reviewing delinquency, FICO scores, and LTV ratios on the NTM loan portfolio. We also continually monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for NTM ~~first lien~~ loans are LTV ratios. At ~~March 31,~~June 30, 2023, our NTM ~~first lien~~ portfolio had a weighted average LTV of approximately ~~60%~~61%.

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NOTE 5 – GOODWILL AND OTHER INTANGIBLES

Goodwill

Goodwill represents the excess consideration paid for net assets acquired in a business combination over their fair values. At ~~March 31,~~June 30, 2023 and December 31, 2022, we had goodwill of $114.3 million.

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Goodwill, beginning of period	Goodwill, beginning of period	$	114,312	$	94,301		Goodwill, beginning of period	$	114,312	$	95,127	$	114,312	$	94,301

Goodwill adjustments for purchase accounting	Goodwill adjustments for purchase accounting	—		826			Goodwill adjustments for purchase accounting	—		—		—		826

Goodwill, end of period	Goodwill, end of period	$	114,312	$	95,127		Goodwill, end of period	$	114,312	$	95,127	$	114,312	$	95,127

The acquisition of Deepstack in the third quarter of 2022 resulted in the recognition of $18.2 million in goodwill. We also adjusted goodwill in the first quarter of 2022 as a result of updates to the initial fair value of core deposit intangibles and finalization of income tax returns related to the ~~PMB~~ acquisition ~~during the three months ended March 31, 2022.~~of PMB.

We evaluate goodwill for impairment as of October 1 each year, and more frequently if events or circumstances indicate that there may be impairment. We completed our most recent annual goodwill impairment test as of October 1, 2022 and determined that no goodwill impairment existed. For the three and six months ended ~~March 31,~~June 30, 2023, ~~due to the observed market volatility relating to recent events in the banking sector,~~ we analyzed indicators related to potential goodwill ~~impairment.~~impairment due to volatility in the financial markets and recent events in the banking sector. Based on this analysis, we did not identify any impairment to goodwill.

Other Intangibles

Other intangibles are comprised of the following at ~~March 31,~~June 30, 2023 and December 31, 2022:


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022
Core deposit intangibles	Core deposit intangibles	$	3,647	$	3,932	Core deposit intangibles	$	3,363	$	3,932
Developed technology	Developed technology	2,497		2,637		Developed technology	2,357		2,637

Other intangibles	Other intangibles	921		957		Other intangibles	883		957
Total other intangibles	Total other intangibles	$	7,065	$	7,526	Total other intangibles	$	6,603	$	7,526

Other intangibles are amortized over their estimated useful lives and reviewed for impairment at least quarterly. As of ~~March 31,~~June 30, 2023, the weighted average remaining amortization period for core deposit intangibles was approximately ~~6.5~~6.3 years. Amortization periods for developed technology and other intangibles acquired in the acquisition of Deepstack ~~Acquisition~~ have useful lives ranging from 3 to 10 years.

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Other intangibles:	Other intangibles:						Other intangibles:
Balance, beginning of period	Balance, beginning of period	$	38,778	$	35,958		Balance, beginning of period	$	38,778	$	34,978	$	38,778	$	35,958

Purchase accounting adjustments	Purchase accounting adjustments	—		(980)			Purchase accounting adjustments	—		—		—		(980)
Balance, end of period	Balance, end of period	38,778		34,978			Balance, end of period	38,778		34,978		38,778		34,978
Accumulated amortization:	Accumulated amortization:						Accumulated amortization:
Balance, beginning of period	Balance, beginning of period	31,252		29,547			Balance, beginning of period	31,713		29,988		31,252		29,547
Amortization of other intangibles	Amortization of other intangibles	461		441			Amortization of other intangibles	462		313		923		754
Balance, end of period	Balance, end of period	31,713		29,988			Balance, end of period	32,175		30,301		32,175		30,301
Other intangibles	Other intangibles	$	7,065	$	4,990		Other intangibles	$	6,603	$	4,677	$	6,603	$	4,677

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The following table presents estimated future amortization expense of other intangibles as of ~~March 31,~~June 30, 2023:


($ in thousands)	($ in thousands)	Remainder of 2023		2024		2025		2026		2027		2028 and After		Total		($ in thousands)	Remainder of 2023		2024		2025		2026		2027		2028 and After		Total
Estimated future amortization expense	Estimated future amortization expense	$	1,338	$	1,425	$	1,107	$	1,013	$	811	$	1,371	$	7,065	Estimated future amortization expense	$	876	$	1,425	$	1,107	$	1,013	$	811	$	1,371	$	6,603

NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES, FEDERAL RESERVE ~~BANKING~~BANK BORROWINGS AND OTHER BORROWINGS

Federal Home Loan Bank (FHLB) Advances

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


($ in thousands)	($ in thousands)	March 31, 2023			December 31, 2022			($ in thousands)	June 30, 2023			December 31, 2022
Fixed rate:	Fixed rate:							Fixed rate:
Outstanding balance (1)	Outstanding balance (1)	$	811,000		$	711,000		Outstanding balance (1)	$	811,000		$	711,000
Interest rates ranging from	Interest rates ranging from	0.64		%	0.64		%	Interest rates ranging from	0.64		%	0.64		%
Interest rates ranging to	Interest rates ranging to	3.70		%	3.70		%	Interest rates ranging to	3.70		%	3.70		%
Weighted average interest rate	Weighted average interest rate	3.04		%	2.97		%	Weighted average interest rate	3.04		%	2.97		%
Variable rate:	Variable rate:							Variable rate:
Outstanding balance	Outstanding balance	$	325,000		$	20,000		Outstanding balance	$	—		$	20,000
Weighted average interest rate	Weighted average interest rate	5.11		%	4.59		%	Weighted average interest rate	—		%	4.59		%

(1)Excludes ~~$3.3~~$3.0 million and $3.7 million of unamortized debt issuance costs at ~~March 31,~~June 30, 2023 and December 31, 2022.

As of ~~March 31,~~June 30, 2023, FHLB advances ~~included $325.0 million in overnight borrowings with a weighted average interest rate~~consisted of ~~5.11% and $811.0~~$611 million in term advances with a weighted average life of ~~3.6~~3 years and a weighted average interest rate of ~~3.04%~~2.91% and $200 million in putable advances with a weighted average life of 4.5 years and a weighted average interest rate of 3.44%. Term advances are payable at maturity date, and advances paid early are subject to a prepayment penalty. The putable advances can be called quarterly until maturity at the option of the FHLB beginning in December 2023.

FHLB advances are collateralized by a blanket lien on all real estate loans. As of ~~March 31,~~June 30, 2023, our secured borrowing capacity with the FHLB totaled ~~$2.37~~$2.39 billion, of which the Bank was eligible to borrow an additional ~~$821.9 million~~$1.16 billion based on qualifying loans with an aggregate unpaid principal balance of ~~$3.50~~$3.47 billion as of that date.

The Bank’s investment in the capital stock of the FHLB of San Francisco totaled ~~$35.7~~$25.7 million and $22.6 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

~~Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty.~~

Federal Reserve Bank (FRB) Borrowings

At ~~March 31,~~June 30, 2023, the Bank had borrowing capacity with the Federal Reserve Bank of San Francisco (the “Federal Reserve”) of ~~$1.51~~$1.45 billion, including the secured borrowing capacity through the FRB Discount Window, Borrower-in-Custody (“BIC”), and Bank Term Funding (“BTFP”) programs. Borrowings under the BIC program are overnight advances with interest chargeable at the primary credit borrowing rate. Borrowings under the BTFP, which was established in March 2023, are for periods up to one year in length, with interest rates based on the one-year overnight index swap (“OIS”) rate plus a spread of 10 basis points. BTFP borrowings are collateralized by eligible investment securities valued at par and provide an additional source of liquidity leveraging high-quality securities.

At ~~March 31,~~June 30, 2023, the Bank pledged certain qualifying loans with an unpaid principal balance of ~~$1.47~~$1.40 billion and securities with a carrying value of ~~$524.3~~$515.3 million as collateral for the FRB credit programs.

Borrowings from the Federal Reserve through the FRB Discount Window and BIC programs were ~~$600.0~~$340.0 million and zero at ~~March 31,~~June 30, 2023 and December 31, 2022. There were no borrowings under the BTFP at ~~March 31,~~June 30, 2023.

The Bank’s investment in capital stock of the Federal Reserve totaled ~~$34.5~~$34.6 million and $34.5 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

Other Borrowings

The Bank maintained available unsecured federal funds lines with ~~five~~six correspondent banks totaling ~~$210.0~~$290.0 million, with no outstanding borrowings at ~~March 31,~~June 30, 2023 and December 31, 2022. The Bank also has the ability to access unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform ("AFX"). The availability of

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such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled ~~$345.0~~$365.0 million and $445.0 million at ~~March 31,~~June 30, 2023 and December 31, 2022. Borrowings ~~under~~from the correspondent banks and AFX totaled zero at ~~March 31,~~June 30, 2023 and December 31, 2022.

In December 2022, the holding company renewed its $50.0 million revolving line of credit with another financial institution. The line of credit matures on December 18, 2023 and is subject to certain operational and financial covenants. There were no borrowings under this line of credit at ~~March 31,~~June 30, 2023 and December 31, 2022, and we were in compliance with all covenants.

The Bank also maintained repurchase agreements and had no outstanding securities sold under agreements to repurchase at ~~March 31,~~June 30, 2023 and December 31, 2022. Availabilities and terms on repurchase agreements are subject to the ~~counterparties'~~counterparties’ discretion and the pledging of additional investment securities.

NOTE 7 – LONG-TERM DEBT

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


				March 31, 2023				December 31, 2022							June 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Interest Rate	Maturity Date	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
Senior notes	Senior notes	5.25%	4/15/2025	$	175,000	$	(679)	$	175,000	$	(722)	Senior notes	5.25%	4/15/2025	$	174,000	$	(609)	$	175,000	$	(722)
Subordinated notes(1)	Subordinated notes(1)	4.375%	10/30/2030	85,000		(1,853)		85,000		(1,899)		Subordinated notes(1)	4.375%	10/30/2030	85,000		(1,797)		85,000		(1,899)
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 Statutory Trust III, junior subordinated debentures	SOFR + 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		—		PMB Capital Trust III, junior subordinated debentures	SOFR + 2.00%	10/8/2034	10,310		—		10,310		—
Total	Total			$	277,527	$	(2,532)	$	277,527	$	(2,621)	Total			$	276,527	$	(2,406)	$	277,527	$	(2,621)

(1) The Subordinated Notes bear interest at an initial fixed rate of 4.375% per annum, payable semi-annually in arrears. From and including October 30, 2025 to, but excluding, the maturity date or the date of earlier redemption, the Subordinated Notes bear interest at a floating rate per annum equal to a benchmark rate, which is expected to be 3-Month Term SOFR, plus a spread of 419.5 basis points, payable quarterly in arrears.

During the three and six months ended June 30, 2023, we repurchased senior notes with an outstanding balance of $1.0 million at a discount and recognized an $80 thousand gain.

At ~~March 31,~~June 30, 2023, we were in compliance with all covenants under our long-term debt agreements.

NOTE 8 – INCOME TAXES

For the three and six months ended ~~March 31,~~June 30, 2023, income tax expense was ~~$7.4~~$6.7 million and $14.1 million, resulting in an effective tax rate of ~~26.7%~~27.4% and 27.0%. For the three and six months ended ~~March 31,~~June 30, 2022, income tax expense was ~~$18.8~~$10.2 million and $28.9 million, resulting in an effective tax rate of ~~27.9%~~27.6% and 27.8%. The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2023 and 2022, differs from the combined federal and state statutory rate for the consolidated company of 28.9% due primarily to various permanent tax differences, tax credits and other discrete tax items that impact our effective tax rate.

We account for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of our assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies. Based on this analysis, management determined, it was more likely than not, that all of the deferred tax assets would be realized; therefore, no valuation allowance was provided against the net deferred tax assets of ~~$54.5~~$64.0 million and $50.5 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

ASC 740-10-25 relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties,

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accounting in interim periods, disclosure and transition. We had unrecognized tax benefits of ~~$816 thousand~~$0.8 million at both ~~March 31,~~June 30, 2023 and December 31, 2022. We do not believe that the unrecognized tax benefits will change materially in the next twelve months. As of ~~March 31,~~June 30, 2023, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was ~~$599 thousand.~~

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$0.6 million.

At ~~March 31,~~June 30, 2023 and December 31, 2022, we had no accrued interest or penalties. In the event we are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense.

We are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. We are no longer subject to examination by U.S. federal taxing authorities for years before 2019. The statute of limitations for the assessment of California franchise taxes has expired for tax years before 2018 (other state income and franchise tax statutes of limitations vary by state).

NOTE 9 – DERIVATIVE INSTRUMENTS

We use derivative instruments and other risk management techniques to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with our risk management policies and for certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans.

The Company recognizes all derivatives on the consolidated balance sheet at fair value in other assets and other liabilities. On the date we enter into a derivative contract, the derivative is designated as either a fair value hedge, cash flow hedge, or a hedge designation is not made as it is a customer-related transaction. When a derivative is designated as a fair value hedge or cash flow hedge, the Company performs an assessment at inception, and, at least quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the fair value or cash flows of the hedged items.

Cash flow hedge

In March 2023, the Company entered into pay-fixed, receive-variable interest-rate swap contracts classified as cash flow hedges with notional amounts aggregating $300.0 million, five year terms and varying maturity dates through 2028. These swap contracts were entered into with institutional counterparties to hedge against variability in cash flows attributable to interest rate risk related to changes in the SOFR benchmark interest rate on a portion of the Company’s variable rate deposits and borrowings. The cash flow hedges were deemed highly effective at inception.

The portion of changes in the fair value of the cash flow hedges considered highly effective are recognized in other comprehensive income (loss) until the related cash flows from the hedged item are recognized in earnings.

At ~~March 31,~~June 30, 2023, the fair value of the cash flow hedges represent a liability of ~~$8.6~~$0.5 million, of which ~~$6.1~~$0.4 million (net of tax) was included in accumulated other comprehensive loss on the consolidated statements of financial condition.

Other interest rate swaps and foreign exchange contracts not designated for hedge accounting

During the three and six months ended ~~March 31,~~June 30, 2023, ~~and 2022,~~ changes in fair value of ~~other~~ interest rate swaps on loans and foreign exchange contracts ~~with customers~~ were gains of $10 thousand and losses of ~~$24 thousand and gains of $103~~$14 thousand and were included in other income on the consolidated statements of operations. During the three and six months ended June 30, 2022, changes in fair value of interest rate swaps on loans and foreign exchange contracts were gains of $82 thousand and $0.2 million.

The following table presents the notional amount and fair value of our derivative instruments as of the dates indicated.


		March 31, 2023				December 31, 2022					June 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value		($ in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps on loans	Interest rate swaps on loans	$	33,186	$	1,516	$	33,694	$	2,134	Interest rate swaps on loans	$	32,677	$	2,158	$	33,694	$	2,134
Foreign exchange contracts	Foreign exchange contracts	5,747		134		5,885		158		Foreign exchange contracts	4,892		41		5,885		158
Total	Total	$	38,933	$	1,650	$	39,579	$	2,292	Total	$	37,569	$	2,199	$	39,579	$	2,292
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Cash flow hedges	Cash flow hedges	$	300,000	$	8,622	$	—	$	—	Cash flow hedges	$	300,000	$	454	$	—	$	—
Interest rate swaps on loans	Interest rate swaps on loans	33,186		1,509		33,694		2,107		Interest rate swaps on loans	32,677		2,138		33,694		2,107

Foreign exchange contracts	Foreign exchange contracts	5,747		123		5,885		144		Foreign exchange contracts	4,892		34		5,885		144
Total	Total	$	338,933	$	10,254	$	39,579	$	2,251	Total	$	337,569	$	2,626	$	39,579	$	2,251

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NOTE 10 – EMPLOYEE STOCK COMPENSATION

On May 31, 2018, our stockholders approved the ~~Company's~~Company’s 2018 Omnibus Stock Incentive Plan (“2018 Omnibus Plan”). The 2018 Omnibus Plan provides that the maximum number of shares available for awards is 4,417,882. As of ~~March 31,~~June 30, 2023, there were ~~1,974,066~~1,901,039 shares available for future awards.

Stock-based Compensation Expense

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022

Restricted stock awards and units	Restricted stock awards and units	$	1,455	$	1,285		Restricted stock awards and units	$	1,726	$	1,482	$	3,181	$	2,767

Related tax benefits	Related tax benefits	$	421	$	371		Related tax benefits	$	499	$	428	$	920	$	799

Total stock-based compensation expense represents the cost of service-based restricted stock units, performance-based restricted stock units and performance-based restricted stock units with market conditions. At ~~March 31,~~June 30, 2023, unrecognized compensation expense totaled ~~$14.5~~$12.8 million and will be recognized over a weighted average remaining period of ~~2.8~~2.5 years.

Restricted Stock Awards and Restricted Stock Units

We have granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are measured based on grant-date fair value, which generally reflect the closing price of our stock on the date of grant. For awards containing market conditions, we engage a third party to perform a valuation analysis using a Monte Carlo simulation model to determine grant-date fair value. The restricted stock awards and units fully vest after a specified period (generally ranging from one to five years) of continued service from the date of grant plus, in some cases, the satisfaction of performance and/or market conditions. Such targets include conditions relating to our profitability, our total shareholder return (TSR), stock price and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation, Nominating and Corporate Governance Committee of our Board of Directors upon the ~~Committee's~~Committee’s certification of the satisfaction of the target level of performance. We recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally upon vesting or, in the case of restricted stock units, when settled.

The following table presents unvested restricted stock awards and restricted stock units activity for the three and six months ended ~~March 31,~~June 30, 2023:


		Three Months Ended March 31, 2023			Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
		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	1,403,245	$	14.68		Outstanding at beginning of period	1,450,539	$	14.85	1,403,245	$	14.68
Granted (1)	Granted (1)	293,805	$	17.68		Granted (1)	80,395	$	10.20	374,200	$	16.07
Vested (2)	Vested (2)	(231,783)	$	17.26		Vested (2)	(51,294)	$	17.94	(283,077)	$	17.39
Forfeited (3)	Forfeited (3)	(14,728)	$	16.38		Forfeited (3)	(129,430)	$	20.32	(144,158)	$	13.55
Outstanding at end of period	Outstanding at end of period	1,450,539	$	14.85		Outstanding at end of period	1,350,210	$	14.61	1,350,210	$	14.61

(1)There were zero and 79,784 performance-based shares/units included in shares granted for the three and six months ended ~~March 31,~~June 30, 2023.

(2)There were zero and 66,699 performance-based shares/units included in vested shares for the three and six months ended ~~March 31,~~June 30, 2023.

(3)The number of forfeited shares included aggregate performance-based shares/units of ~~11,232~~113,650 and 124,882 for the three and six months ended ~~March 31,~~June 30, 2023.

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Stock Options

We have issued stock options to certain employees, officers, and directors. Stock options are issued at the closing market price immediately before the grant date and generally have a three to five year vesting period and contractual terms of seven to ten years. We recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair

market value of the shares acquired at the time of exercise less the exercise price. There were no stock options granted and no unvested stock options as of ~~March 31,~~June 30, 2023 and December 31, 2022. The following tables represents stock option activity for the three and six months ended ~~March 31,~~June 30, 2023:


		Three Months Ended March 31, 2023						Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
($ in thousands, except per share data)	($ in thousands, except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregate Intrinsic Value			($ in thousands, except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregate Intrinsic Value
Outstanding at beginning of period	Outstanding at beginning of period	14,904	$	13.05					Outstanding at beginning of period	14,904	$	13.05	14,904	$	13.05

Exercised	Exercised	—	$	—					Exercised	—	$	—	—	$	—

Outstanding at end of period	Outstanding at end of period	14,904	$	13.05	2.0 years	$	(8)		Outstanding at end of period	14,904	$	13.05	14,904	$	13.05	1.8 years	$	2
Exercisable at end of period	Exercisable at end of period	14,904	$	13.05	2.0 years	$	(8)		Exercisable at end of period	14,904	$	13.05	14,904	$	13.05	1.8 years	$	2

NOTE 11 – STOCKHOLDERS’ EQUITY

Preferred Stock

We are authorized to issue 50,000,000 shares of preferred stock with par value of $0.01 per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but generally have no voting rights. All of our shares of preferred stock had a $1,000 per share liquidation preference and there were no preferred shares outstanding since March 2022.

The following table summarizes redemptions and repurchases of these depositary shares for the periods indicated:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022

Series E Preferred Stock:	Series E Preferred Stock:						Series E Preferred Stock:
Depositary shares repurchased	Depositary shares repurchased	—		3,948,080			Depositary shares repurchased	—		—		—		3,948,080
Preferred Stock retired (shares)	Preferred Stock retired (shares)	—		98,702			Preferred Stock retired (shares)	—		—		—		98,702

Consideration paid	Consideration paid	$	—	$	98,703		Consideration paid	$	—	$	—	$	—	$	98,703
Carrying value	Carrying value	—		94,956			Carrying value	—		—		—		94,956
Impact of preferred stock redemption	Impact of preferred stock redemption	$	—	$	3,747		Impact of preferred stock redemption	$	—	$	—	$	—	$	3,747

During the first quarter of 2022, we redeemed all of our outstanding Series E Depositary Shares, resulting in an after-tax charge of $3.7 million in the accompanying consolidated statements of operations.

Common Share Repurchase Program

On February 13, 2023, we announced our Board of Directors authorized the repurchase of up to $35 million of our common stock. The repurchase authorization expires in February 2024. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions.

During the three and six months ended ~~March 31,~~June 30, 2023, common stock repurchased under the program totaled ~~410,946~~1,348,545 shares and 1,759,491 shares at a weighted average price of ~~$12.59.~~$11.85 and $12.02. As of ~~March 31,~~June 30, 2023, the Company had ~~$29.8~~$13.9 million remaining under the current stock repurchase authorization.

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

Our AOCI includes unrealized gain (loss) on AFS securities ~~available-for-sale~~ and cash flow hedges. Changes to AOCI are presented net of the tax effect as a component of ~~stockholders'~~stockholders’ equity. Reclassifications from AOCI occur when a security is sold, called or matures and are recorded on the consolidated statements of operations either as a gain or loss. During the ~~three months ended March 31,~~first quarter of 2022, we transferred certain ~~debt~~AFS securities ~~available-for-sale~~ to ~~held-to-maturity.~~HTM. The unrealized loss on such securities at the time of transfer continues to be reported in AOCI and is amortized over the remaining life of the security as a yield adjustment.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. If a cash flow hedge is terminated or is no longer deemed highly effective, the hedge accounting is ceased and any gain or loss included in AOCI is reclassified into earnings.

The following table presents changes to AOCI for the periods indicated:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	(40,597)	$	7,743		Balance at beginning of period	$	(50,489)	$	(19,172)	$	(40,597)	$	7,743
Unrealized loss on securities available-for-sale:	Unrealized loss on securities available-for-sale:						Unrealized loss on securities available-for-sale:
Unrealized loss arising during the period	Unrealized loss arising during the period	(5,523)		(38,087)			Unrealized loss arising during the period	(7,334)		(21,016)		(12,857)		(59,103)

Reclassification adjustment from other comprehensive income	Reclassification adjustment from other comprehensive income	—		(16)			Reclassification adjustment from other comprehensive income	—		—		—		(16)

Total unrealized loss on securities available-for-sale	Total unrealized loss on securities available-for-sale	(5,523)		(38,103)			Total unrealized loss on securities available-for-sale	(7,334)		(21,016)		(12,857)		(59,119)
Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity	Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity	253		87			Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity	252		246		505		333
Unrealized loss on cash flow hedges:
Unrealized loss arising during the period		(8,622)		—
Unrealized gain (loss) on cash flow hedges:							Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) arising during the period							Unrealized gain (loss) arising during the period	8,168		—		(454)		—
Tax effect of current period changes	Tax effect of current period changes	4,000		11,101			Tax effect of current period changes	(355)		5,883		3,645		16,984
Total changes, net of taxes	Total changes, net of taxes	(9,892)		(26,915)			Total changes, net of taxes	731		(14,887)		(9,161)		(41,802)

Balance at end of period	Balance at end of period	$	(50,489)	$	(19,172)		Balance at end of period	$	(49,758)	$	(34,059)	$	(49,758)	$	(34,059)

NOTE 12 – VARIABLE INTEREST ENTITIES

We hold ownership interests in alternative energy partnerships, qualified affordable housing partnerships and other CRA investments and have a variable interest in a multifamily securitization trust. We evaluate our interests in these entities to determine whether they meet the definition of a variable interest entity ("VIE") and whether we are required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We have determined that our interests in these entities meet the definition of variable interests; however none of the ~~VIE's~~VIE’s meet the criteria for consolidation.

Unconsolidated VIEs

Alternative Energy Partnerships

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

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We use the HLBV method to account for our investments in alternative energy partnerships as an equity investment. Under the HLBV method, an equity method investor determines its share of an ~~investee's~~investee’s net earnings by comparing its claim on the

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~~investee's~~ investee’s book value at the beginning and end of the period, assuming the investee were to liquidate all assets at their U.S. GAAP amounts and distribute the resulting cash to creditors and investors under their respective priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period. To account for the tax credits earned on investments in alternative energy partnerships, we use the flow-through income statement method. Under this method, the tax credits are recognized as a reduction to income tax expense and the initial book-tax differences in the basis of the investments are recognized as additional tax expense in the year they are earned. Investments in alternative energy partnerships totaled ~~$19.4~~$19.1 million and $21.4 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022

Return of capital	Return of capital	$	365	$	574		Return of capital	$	352	$	582	$	717	$	1,156

Loss on investments in alternative energy partnerships		(1,618)		(158)
Gain (loss) on investments in alternative energy partnerships							Gain (loss) on investments in alternative energy partnerships	36		(1,043)		(1,582)		(1,201)

Tax benefit recognized from HLBV application		(467)		(46)
Tax expense (benefit) recognized from HLBV application							Tax expense (benefit) recognized from HLBV application	10		(301)		(457)		(347)

There were no fundings of alternative energy ~~partnership~~partnerships or related income tax credits recognized for the three and six months ended ~~March 31,~~June 30, 2023 and 2022.

The following table represents the carrying value of the associated unconsolidated assets and liabilities and the associated maximum loss exposure for alternative energy partnerships as of the dates indicated:


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022
Cash	Cash	$	4,501	$	4,110	Cash	$	2,910	$	4,110
Equipment, net of depreciation	Equipment, net of depreciation	235,522		237,641		Equipment, net of depreciation	233,152		237,641
Other assets	Other assets	9,976		9,838		Other assets	10,078		9,838
Total unconsolidated assets	Total unconsolidated assets	$	249,999	$	251,589	Total unconsolidated assets	$	246,140	$	251,589
Total unconsolidated liabilities	Total unconsolidated liabilities	$	11,600	$	11,679	Total unconsolidated liabilities	$	11,426	$	11,679

Maximum loss exposure	Maximum loss exposure	$	19,427	$	21,410	Maximum loss exposure	$	19,111	$	21,410

The maximum loss exposure that would be absorbed by us in the event that all of the assets in alternative energy partnerships are deemed worthless is ~~$19.4~~$19.1 million, which is our recorded investment amount at ~~March 31,~~June 30, 2023.

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

Qualified Affordable Housing Partnerships - Low Income Housing Tax Credits

We invest in limited partnerships that operate qualified affordable housing projects that qualify for ~~low income housing tax credits (“LIHTC”).~~LIHTC. The returns on these investments are generated primarily through allocated federal tax credits and other tax benefits. In addition, LIHTC investments contribute to our compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. As a result, we do not consolidate these partnerships.

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The following table presents information regarding balances in LIHTC investments for the periods indicated:


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022
Ending balance(1)	Ending balance(1)	$	44,424	$	45,726	Ending balance(1)	$	42,818	$	45,726
Aggregate funding commitment	Aggregate funding commitment	73,176		72,967		Aggregate funding commitment	72,997		72,967
Total amount funded	Total amount funded	56,122		55,487		Total amount funded	57,290		55,487
Unfunded commitment	Unfunded commitment	17,054		17,480		Unfunded commitment	15,707		17,480
Maximum loss exposure	Maximum loss exposure	44,424		45,726		Maximum loss exposure	42,818		45,726

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

The following table presents information regarding activity in our LIHTC investments for the periods indicated:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Fundings	Fundings	$	635	$	1,105		Fundings	$	1,168	$	919	$	1,803	$	2,024
Proportional amortization recognized	Proportional amortization recognized	1,511		1,546			Proportional amortization recognized	1,427		1,027		2,938		2,573
Income tax credits recognized	Income tax credits recognized	1,687		1,373			Income tax credits recognized	1,688		1,163		3,375		2,536

Other CRA Investments

We invest in other CRA investments that are accounted for using the equity method of accounting or the measurement alternative to fair value for equity investments without a readily determinable fair value. Other CRA investments totaled ~~$87.3~~$89.0 million and $85.0 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

CRA investments that are accounted for under the equity method consist primarily of investments in small business investment companies ~~(SBICs)~~(“SBICs”) and limited partnerships which provide affordable housing where our ownership percentage exceeds 3%. Under the equity method of accounting, we record our proportionate share of the profits or losses of the investment entity as an adjustment to the carrying value of the investment and as a component of noninterest income. Equity investments that do not meet the criteria to be accounted for under the equity method and do not have a readily determinable fair value are accounted for at cost under the measurement alternative to fair value with adjustments for impairment and observable price changes as applicable. These investments consist primarily of investments in limited partnerships which provide affordable housing where our partnership percentage is less than 3% and other qualifying investments such as ~~CDFI~~Community Development Financial Institutions (“CDFI”) stock.

Multifamily Securitization

During the third quarter of 2019, we transferred $573.5 million of multifamily loans, through a two-step process, to a third-party depositor which placed the multifamily loans into a third-party trust (a VIE) that issued structured pass-through certificates to investors. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860. We determined that we are not the primary beneficiary of this VIE as we do not have the power to direct the activities that will have the most significant economic impact on the entity, therefore we do not consolidate the securitization trust. Our continuing involvement in this securitization is limited to customary obligations associated with the securitization of loans, including the obligation to cure, repurchase, or substitute loans in the event of a material breach in representations. Additionally, we have the obligation to guarantee credit losses up to 12% of the aggregate unpaid principal balances at cut-off date of the securitization. This obligation is supported by a $68.8 million letter of credit between Freddie Mac and the FHLB.

The maximum loss exposure that would be absorbed by us in the event that all of the assets in the securitization trust are deemed worthless is $68.8 million, which represents the aforementioned obligation to guarantee credit losses up to 12%. We believe that the loss exposure on the multifamily securitization is reduced by both loan-to-value ratios of the underlying collateral balances and the overcollateralization that exists within the securitization trust. At ~~March 31,~~June 30, 2023, the remaining unpaid principal balance on the securitization totaled ~~$97.5~~$91.0 million, and we have a ~~$2.0~~$1.2 million repurchase reserve related to this VIE.

Capital Trusts - Trust Preferred Securities

In connection with our ~~merger with~~acquisition of PMB, we acquired investments in two grantor trusts. These grantor trusts were originally formed to sell and issue trust preferred securities to institutional investors (Refer to Note 7 - Long-term Debt). We are not the primary beneficiary, and consequently, these grantor trusts are not consolidated in the consolidated financial statements. At ~~March 31,~~

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June 30, 2023 and December 31, 2022, our investment in these grantor trusts, which is included in other assets in the consolidated statements of financial condition, totaled ~~$527 thousand.~~$0.5 million.

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NOTE 13 – EARNINGS PER COMMON SHARE

The following table presents computations of basic and diluted earnings per common share ~~("EPS"~~(“EPS”) for the three and six months ended ~~March 31,~~June 30, 2023:


		Three Months Ended March 31, 2023				Three Months Ended June 30, 2023	Six Months Ended June 30, 2023
($ in thousands except per share data)	($ in thousands except per share data)	Common Stock		Class B Common Stock				($ in thousands except per share data)	Common Stock		Class B Common Stock		Common Stock		Class B Common Stock
Net income	Net income	$	20,114	$	164			Net income	$	17,732	$	147	$	37,846	$	311

Weighted average common shares outstanding	Weighted average common shares outstanding	58,536,866		477,321				Weighted average common shares outstanding	57,503,213		477,321		58,017,185		477,321
Dilutive effects of restricted shares/units	Dilutive effects of restricted shares/units	189,559		—				Dilutive effects of restricted shares/units	45,268		—		104,941		—

Dilutive effects of stock options	Dilutive effects of stock options	2,873		—				Dilutive effects of stock options	205		—		866		—

Average shares and dilutive common shares	Average shares and dilutive common shares	58,729,298		477,321				Average shares and dilutive common shares	57,548,686		477,321		58,122,992		477,321

Basic earnings per common share	Basic earnings per common share	$	0.34	$	0.34			Basic earnings per common share	$	0.31	$	0.31	$	0.65	$	0.65

Diluted earnings per common share	Diluted earnings per common share	$	0.34	$	0.34			Diluted earnings per common share	$	0.31	$	0.31	$	0.65	$	0.65

For the three and six months ended ~~March 31,~~June 30, 2023, there were ~~212,956~~609,324 and 457,960 anti-dilutive restricted shares/units and no11,232 and zero anti-dilutive stock options that were excluded from computing diluted earnings per common share.

The following table presents computations of basic and diluted EPS for the three and six months ended ~~March 31,~~June 30, 2022:


		Three Months Ended March 31, 2022				Three Months Ended June 30, 2022	Six Months Ended June 30, 2022
($ in thousands except per share data)	($ in thousands except per share data)	Common Stock		Class B Common Stock				($ in thousands except per share data)	Common Stock		Class B Common Stock		Common Stock		Class B Common Stock
Net income	Net income	$	48,142	$	370			Net income	$	26,504	$	208	$	74,645	$	579

Less: preferred stock dividends	Less: preferred stock dividends	(1,409)		(11)				Less: preferred stock dividends	—		—		(1,409)		(11)
Less: preferred stock redemption	Less: preferred stock redemption	(3,718)		(29)				Less: preferred stock redemption	—		—		(3,718)		(29)

Net income allocated to common stockholders	Net income allocated to common stockholders	$	43,015	$	330			Net income allocated to common stockholders	$	26,504	$	208	$	69,518	$	539

Weighted average common shares outstanding	Weighted average common shares outstanding	62,129,129		477,321				Weighted average common shares outstanding	60,873,481		477,321		61,497,261		477,321
Dilutive effects of stock units	Dilutive effects of stock units	294,432		—				Dilutive effects of stock units	245,571		—		269,093		—

Dilutive effects of stock options	Dilutive effects of stock options	5,121		—				Dilutive effects of stock options	4,242		—		4,701		—

Average shares and dilutive common shares	Average shares and dilutive common shares	62,428,682		477,321				Average shares and dilutive common shares	61,123,294		477,321		61,771,055		477,321

Basic earnings per common share	Basic earnings per common share	$	0.69	$	0.69			Basic earnings per common share	$	0.44	$	0.44	$	1.13	$	1.13

Diluted earnings per common share	Diluted earnings per common share	$	0.69	$	0.69			Diluted earnings per common share	$	0.43	$	0.44	$	1.13	$	1.13

For the three and six months ended ~~March 31,~~June 30, 2022, there were ~~92,987~~354,484 and 806 anti-dilutive restricted shares/units and no anti-dilutive stock options that were excluded from computing diluted earnings per common share.

NOTE 14 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

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

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

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		March 31, 2023				December 31, 2022					June 30, 2023				December 31, 2022
($ 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	$	43,044	$	183,196	$	50,193	$	180,696	Commitments to extend credit	$	39,729	$	161,036	$	50,193	$	180,696
Unused lines of credit	Unused lines of credit	46,407		1,545,036		8,392		1,505,122		Unused lines of credit	47,334		1,330,913		8,392		1,505,122
Letters of credit	Letters of credit	1,696		7,457		2,461		7,016		Letters of credit	1,671		7,462		2,461		7,016

Other Commitments

At ~~March 31,~~June 30, 2023, we had unfunded commitments of ~~$17.1~~$15.7 million, ~~$7.7~~$7.5 million, and ~~$9.4~~$20.0 million for LIHTC investments, ~~Small Business Investment Company ("SBIC")~~SBIC investments, and other ~~investments, respectively.~~investments. At December 31, 2022, we had unfunded commitments of $17.5 million, $8.6 million, and $9.8 million for LIHTC investments, SBIC investments, and other ~~investments, respectively.~~investments.

NOTE 15 – OTHER ASSETS AND OTHER LIABILITIES

The following table presents the components of other assets as of the dates indicated:


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022
Accrued interest receivable	Accrued interest receivable	$	39,850	$	37,942	Accrued interest receivable	$	35,821	$	37,942
Prepaid expenses	Prepaid expenses	9,499		8,068		Prepaid expenses	9,816		8,068

Derivative instruments(1)	Derivative instruments(1)	1,650		2,292		Derivative instruments(1)	2,199		2,292

Operating lease right-of-use assets	Operating lease right-of-use assets	27,502		28,780		Operating lease right-of-use assets	26,630		28,780
Servicing assets	Servicing assets	21,718		22,484		Servicing assets	21,051		22,484

Other real estate owned						Other real estate owned	882		—
Income taxes receivable	Income taxes receivable	133		7,679		Income taxes receivable	—		7,679

Investments:	Investments:					Investments:
CRA and other equity investments(2)	CRA and other equity investments(2)	92,637		90,295		CRA and other equity investments(2)	94,703		90,295
Low income housing tax credits (“LIHTC”)(2)		44,424		45,726
LIHTCs(2)						LIHTCs(2)	42,818		45,726
Alternative energy partnerships(2)	Alternative energy partnerships(2)	19,427		21,410		Alternative energy partnerships(2)	19,111		21,410

Other assets	Other assets	32,073		13,513		Other assets	25,281		13,513
Total other assets	Total other assets	$	288,913	$	278,189	Total other assets	$	278,312	$	278,189

(1)See Note 9 - Derivative Instruments for information regarding derivative instruments

(2)See Note 12 - Variable Interest Entities regarding alternative energy partnerships, LIHTC and other CRA investments

The following table presents the components of accrued expenses and other liabilities as of the dates indicated:


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		($ in thousands)	June 30, 2023		December 31, 2022
Accrued interest payable	Accrued interest payable	$	14,446	$	7,004	Accrued interest payable	$	14,791	$	7,004
Accounts payable and accrued expenses	Accounts payable and accrued expenses	32,998		37,560		Accounts payable and accrued expenses	43,791		37,560

Income taxes payable						Income taxes payable	682		—
Derivative liabilities(1)	Derivative liabilities(1)	10,254		2,251		Derivative liabilities(1)	2,626		2,251
Lease liability	Lease liability	31,640		33,122		Lease liability	30,505		33,122

Commitments to fund LIHTC(2)	Commitments to fund LIHTC(2)	17,054		17,480		Commitments to fund LIHTC(2)	15,707		17,480
Reserve for unfunded noncancellable loan commitments	Reserve for unfunded noncancellable loan commitments	4,805		5,305		Reserve for unfunded noncancellable loan commitments	4,005		5,305
Reserve for loss on repurchased loans	Reserve for loss on repurchased loans	2,846		2,989		Reserve for loss on repurchased loans	1,977		2,989
Other liabilities	Other liabilities	6,312		8,512		Other liabilities	5,933		8,512
Total accrued expenses and other liabilities	Total accrued expenses and other liabilities	$	120,355	$	114,223	Total accrued expenses and other liabilities	$	120,017	$	114,223

(1)See Note 9 - Derivative Instruments for information regarding derivative instruments

(2)See Note 14 - Loan Commitments and Other Related Activities regarding commitments to fund LIHTC

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NOTE 16 – REVENUE RECOGNITION

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


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Noninterest income	Noninterest income						Noninterest income
In scope of Topic 606	In scope of Topic 606						In scope of Topic 606
Deposit service fees	Deposit service fees	$	1,263	$	1,654		Deposit service fees	$	1,377	$	1,627	$	2,640	$	3,281
Debit card fees	Debit card fees	377		453			Debit card fees	424		542		801		995

Other	Other	368		159			Other	331		137		699		296
Noninterest income (in-scope of Topic 606)	Noninterest income (in-scope of Topic 606)	2,008		2,266			Noninterest income (in-scope of Topic 606)	2,132		2,306		4,140		4,572
Noninterest income (out-of-scope of Topic 606)	Noninterest income (out-of-scope of Topic 606)	5,851		3,644			Noninterest income (out-of-scope of Topic 606)	3,892		4,880		9,743		8,524
Total noninterest income	Total noninterest income	$	7,859	$	5,910		Total noninterest income	$	6,024	$	7,186	$	13,883	$	13,096

We do not typically enter into long-term revenue contracts with clients and as of ~~March 31,~~June 30, 2023 and December 31, 2022, we did not have any significant contract balances within the scope of Topic ~~606. As of March 31, 2023,~~606 and we did not capitalize any revenue contract acquisition costs.

Sale-leaseback Transactions

In January 2022, we completed a sale-leaseback transaction for $2.4 million and recognized a gain of ~~$771 thousand.~~$0.8 million. Gains related to sale-leaseback are included in other income in the accompanying consolidated statements of operations.

NOTE 17 – RELATED-PARTY TRANSACTIONS

Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with the Bank in the ordinary course of business, including deposits, loans and other financial services related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. As of ~~March 31,~~June 30, 2023, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans.

Transactions with Related Parties

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

As previously disclosed, the Company’s Board of Directors has authorized and directed the Company to provide indemnification, advancement and/or reimbursement for the costs of separate independent counsel retained by any then-current officer or director, in their individual capacity, with respect to matters related to (i) an investigation by the Special Committee of the Company’s Board of Directors in late 2016, (ii) a formal order of investigation issued by the SEC on January 4, 2017 (since resolved), and (iii) any civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the Company (collectively, the “Indemnified Matters”).

Indemnification costs were paid or reimbursed by the Company or its insurance carriers on behalf of certain current directors in connection with the Indemnified Matters, in an aggregate amount less than $120 thousand for each of the three and six months ended ~~March 31,~~June 30, 2023 and 2022.

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NOTE 18 – LITIGATION

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

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

NOTE 19 – SUBSEQUENT EVENTS

We have evaluated events from the date of the consolidated financial statements on ~~March 31,~~June 30, 2023 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~Subsequent~~On July 25, 2023, the Company and PacWest announced the execution of an Agreement and Plan of Merger, pursuant to ~~March 31, 2023, we repurchased 652,672~~which (a) a newly formed merger subsidiary of the Company will merge with and into PacWest, with PacWest surviving (the “merger”), (b) immediately following the merger, PacWest will merge into the Company, with the Company surviving (the “second-step merger”), (c) promptly following the second-step merger, Pacific Western Bank, a California-chartered non-member bank and prior to the second-step merger, a wholly-owned subsidiary of PacWest (“PacWest Bank”), will become a member of the Federal Reserve System (the “FRS Membership”) and (d) promptly following the effectiveness of the FRS Membership, the Bank will merge into PacWest Bank, with PacWest Bank surviving as a wholly-owned subsidiary of the Company. Upon closing of the transaction, the combined holding company and bank will operate under the Banc of California name and brand. At the closing of the merger, PacWest stockholders will be entitled to receive 0.6569 of a share of the Company’s common stock for each share held of PacWest common stock. Each outstanding share of PacWest’s 7.75% series A fixed-rate reset noncumulative perpetual preferred stock will be converted into the right to receive one share of a newly created series of substantially identical preferred stock of the Company with the same terms and conditions.

In connection with the proposed transaction, the Company also entered into separate investment agreements (the “Investment Agreements”) with affiliates of funds managed by Warburg Pincus LLC (the “Warburg Investors”) and certain investment vehicles sponsored, managed or advised by Centerbridge Partners, L.P. and its affiliates (the “Centerbridge Investors” and, together with the Warburg Investors, the “Investors”), which together will invest a total of $400 million for newly issued equity securities of the Company substantially concurrently with and subject to closing of the transaction.

Subject to the terms and conditions of the Investment Agreements, at the closing of the transactions contemplated thereby, the Company expects to issue to the Warburg Investors and the Centerbridge Investors, in the aggregate, approximately 21.8 million shares of common stock at a ~~weighted average~~purchase price of ~~$11.75, or $7.7 million. Since the announcement of the stock repurchase program on February 13, 2023, we have repurchased a total of 1,063,618~~$12.30 per share and 10.8 million shares of ~~common~~a new class of nonvoting, common-equivalent stock at a ~~weighted average~~purchase price of ~~$12.08~~$12.30 per ~~share,~~share.

Additionally, the Warburg Investors will receive warrants to purchase approximately 15.9 million of the Company’s nonvoting, common-equivalent shares, and the Centerbridge Investors will receive warrants to purchase approximately 3.0 million shares of the Company’s common stock, each with an exercise price of $15.375 per share. The warrants are exercisable for a period of seven years and subject to mandatory exercise when the market price of the Company’s common stock reaches or ~~$12.8 million.~~exceeds $24.60 for twenty or more trading days during any thirty-consecutive trading day period.

~~There~~Simultaneously with entering into the definitive merger agreement, Banc of California, N.A. entered into an aggregate of $3.5 billion in interest rate swap options to hedge interest rate risk for a total cost of $15.7 million, and a contingent forward asset sale agreement on the SFR loan portfolio of $1.8 billion.

Except as noted, there have been no other subsequent events that occurred during such period that would require disclosure in this report or would be required to be recognized in the consolidated financial statements as of ~~March 31,~~June 30, 2023.

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

The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and six months ended ~~March 31,~~June 30, 2023. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~June 30, 2023.

Executive Overview

We are focused on providing core banking products and services, including customized and innovative banking and lending solutions, designed to cater to the unique needs of ~~California's~~California’s diverse businesses, entrepreneurs and communities through our 2827 full service branches in California, extending from San Diego to Santa Barbara. Through our dedicated professionals, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a

variety of financial products and services designed to serve the banking and financial needs of our target clients. We also acquired Deepstack Technologies in 2022 to be able to offer full stack payment processing solutions and further our ability to serve as the hub of our clients' financial services ecosystem.

Economy and Banking Industry Impact

Economic uncertainty and concerns regarding the stability of the U.S. banking system following recent bank failures earlier in the year contributed to a challenging operating environment for our Company in the first ~~quarter~~half of 2023. Additionally, the Federal Reserve continued to raise the short-term federal funds rate, which increased 75100 basis points since the start of the year through July 2023, as inflation persists. Since the beginning of 2022 through July 2023, the Federal Reserve has increased the federal funds target rate 525 basis points. As our assets and liabilities are primarily monetary in nature, the effect of changes in interest rates has a significant impact on our performance.

The rising interest rate environment may lead to lower demand for loans, higher credit losses, and decreased values for our investment securities, among other negative effects. Additionally, it may create more intense competition for low-cost deposits, potential for deposit outflows as rate-sensitive depositors seek higher yielding products or investment alternatives, and increased deposit rates and borrowing costs. The recent industry events could further accelerate the deposit outflows experienced by ~~most~~some mid-sized ~~banks during~~banks.

During the ~~quarter.~~

~~While~~first quarter of 2023, in response to volatility in the financial markets, we proactively performed liquidity-enhancing measures, including additional advances from the FHLB and draws on available FRB facilities. We reduced our ~~deposit base has been largely stable since~~excess liquidity toward the ~~recent banking industry disruption, we increased our level~~end of ~~overnight borrowings and added short-term brokered deposits~~the second quarter as volatility in the markets began to ~~increase our liquidity at March 31, 2023.~~stabilize. We had primary and secondary liquidity availability of just over ~~$4.0~~$3.9 billion, or 2.2 times our uninsured and uncollateralized deposits ~~with $1.0 billion of cash~~ at quarter end. While these actions had ana negative impact on our level of profitability and net interest margin in the ~~first~~second quarter and year-to-date period, we believe it was prudent from a risk management perspective. ~~The short-term nature of this additional liquidity provides flexibility to make adjustments in our liability mix as market conditions evolve.~~

~~Our first quarter of~~Recently Announced Merger with PacWest

On July 25, 2023, ~~results show continued progress on~~the Company and PacWest announced the execution of ~~our strategic initiatives~~a definitive merger agreement pursuant to build long-term franchise value while maintaining disciplined expense management. We remained steadfastly focused on credit quality and continued to grow a stable, high quality deposit base by bringing new commercial relationshipswhich the companies will combine in an all-stock merger transaction. Pursuant to the ~~bank.~~ terms and conditions of the agreement, PacWest will merge into the Company, with the Company surviving, and the Bank will merge into PacWest Bank, with PacWest Bank surviving as wholly-owned subsidiary of the Company. The combined holding company and bank will operate under the Banc of California name and brand following closing of the transaction. At the closing of the merger, PacWest stockholders will be entitled to receive 0.6569 of a share of the Company’s common stock for each share held of PacWest common stock.

In connection with entering into the ~~past several quarters, we have~~definitive merger agreement, the Company also ~~taken a proactive approach~~entered into the Investment Agreements with the Warburg Investors and the Centerbridge Investors. Subject to the terms and conditions of the Investment Agreements, at closing, the Investors will invest an aggregate of $400 million for newly issued equity securities substantially concurrently with, and subject to, closing of the merger. The proceeds from this capital raise are expected to be utilized in conjunction with other planned actions to reposition ~~our~~the combined company’s balance ~~sheet, conservatively managed~~sheet. It is expected that, after closing the transaction, the combined company will repay approximately $13 billion in wholesale borrowings and high-cost deposits using proceeds from the sale of certain loan and investment securities assets. The Bank has also entered into an aggregate of $3.5 billion notional amount in interest rate swap options to ~~maintain~~hedge interest rate risk and a ~~strong capital position, and temporarily increased our liquidity~~contingent forward asset sale agreement to lock in ~~response to market events at~~proceeds for certain asset sales contemplated in connection with the ~~end~~closing of the ~~quarter Through our disciplined approach, we believe that we are well positioned~~transaction.

Upon completion of the proposed transaction, (a) the shares issued to ~~manage through the current rising rate environment and navigate time of stress~~PacWest stockholders in the ~~banking system.~~merger are expected to represent approximately 47% of the outstanding shares of the combined company, (b) the shares issued to the Investors in the equity capital raise transaction discussed above are expected to represent approximately 19% of the outstanding shares of the

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combined company and (c) the shares of Banc of California common stock that are outstanding immediately prior to completion of the merger are expected to represent approximately 34% of the outstanding shares of the combined company.

Financial Highlights

For the ~~first~~second quarter of 2023, net income was ~~$20.3~~$17.9 million, or ~~$0.34~~$0.31 per diluted common share. This compares to net income of ~~$21.5~~$20.3 million, or ~~$0.36 per diluted common share, for the fourth quarter of 2022 and net income of $48.5 million and net income available to common stockholders of $43.3 million, or $0.69~~$0.34 per diluted common share, for the first quarter of ~~2022. The first~~2023 and net income of $26.7 million, or $0.43 per diluted common share, for the second 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.2022.

On an adjusted basis, net income was ~~$21.7~~$18.4 million for the quarter, or $0.32 per diluted common share, for the second quarter of 2023.(1) This compares to adjusted net income of $21.7 million, or $0.37 per diluted c~~ommon~~common share, for the first quarter of 2023,.~~(1)~~ ~~This compares to~~ ~~adjusted net income of $26.8~~ and $27.8 million, or $0.45 per diluted common share for the ~~fourth quarter of 2022, which excluded a pre-tax loss on sale of securities of $7.7 million, and $48.5 million, or $0.75 per diluted common share for the first~~second quarter of 2022.(1)

1~~Non-GAAP measures; refer to section “Non-GAAP Measures”~~

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~~First~~Second quarter of 2023 highlights:

•~~Diversified core deposit base with noninterest-bearing deposits representing 38%~~Interest income growth, up $9.2 million or 9% from the prior quarter due to higher interest rates and changes in the portfolio as new originations have higher yields than payoffs. Overall, net interest income was down $3.4 million or 5% from the prior quarter due to higher funding costs, changes in the balance sheet mix and the impact of ~~average deposits~~the strategy to hold extra liquidity, which resulted in higher short-term borrowings from the FHLB and ~~36% at quarter end. Uninsured and uncollateralized deposits comprised 27% of total deposits.~~FRB.

•~~Significant available excess~~Stable overall deposits, down approximately 1% on average and period-end balances, with the period-end noninterest-bearing percentage stable at approximately 36% quarter over quarter.

•Noninterest-bearing deposit growth from new clients, which contributed inflows of $74.8 million in the quarter, consistent with the prior quarter’s growth and up 13% over the same period last year.

•Loan growth, up $101.8 million or 1% from the prior quarter and 6% annualized, highlighted by core commercial and industrial growth of $64 million or 6% and increased warehouse utilization.

•Lower noninterest expenses, which declined $2.1 million or 4% from the prior quarter due primarily to lower losses in alternative energy partnerships and compensation expenses.

•High liquidity levels, with immediately available on-balance sheet liquidity and unused borrowing capacity of ~~$4.0 billion, including $1.0 billion in cash.~~$3.9 billion. Available liquidity was 2.2 times the level of uninsured and uncollateralized ~~deposits.~~deposits, which was consistent with the prior quarter.

•Low unrealized losses, with AFS unrealized losses of ~~$46.8~~$54.1 million on securities of ~~$958.4~~$922.1 million, representing ~~3.8%~~4.3% of CET1 capital. Total AFS and HTM unrealized losses of ~~$102.4~~$115.5 million on total securities of ~~$1.29~~$1.25 billion represented ~~8.3%~~9.1% of CET1 capital.

•~~High~~Strong capital ratios ~~remained~~ well above the regulatory thresholds for ~~"well capitalized"~~“well capitalized” banks, including a ~~14.22% total~~14.26% Total risk-based capital ratio, ~~a 11.79%~~11.88% Tier 1 capital ratio, ~~a 11.79%~~11.88% CET1 capital ratio and ~~a 9.65%~~9.39% Tier 1 leverage ratio.

•Stable asset quality as total delinquent loans decreased 20%, or 25 bps, to 1.03% and classified assets also decreased 20%, or 33 bps, to 1.34% from the prior quarter. Total net annualized charge-offs for the quarter were 0.22% of average loans. The ACL ratio remained relatively flat at 1.27% of total loans and 158% of nonperforming assets.

•Other performance highlights as follows:

◦Book value per share of ~~$16.33,~~$16.67, up fr~~om $16.26~~from $16.33

◦Tangible common equity per share of ~~$14.26,~~$14.56, up from ~~$14.19~~$14.26(1)

◦Repurchased ~~$5.2~~$16.0 million of common stock ~~through March 31,~~during the quarter and $21.1 million during the six months ended June 30, 2023 ~~and $12.8 million total as of May 4, 2023~~

◦~~Increased the quarterly dividend 67% to $0.10 per share~~

◦~~Net deposit outflow in the first quarter of only 2%~~

CRITICAL ACCOUNTING ESTIMATES

We follow accounting and reporting policies and procedures that conform, in all material respects, to GAAP and to practices generally applicable to the financial services industry, the most significant of which are described in Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make judgments and accounting estimates that affect the amounts reported for assets, liabilities, revenues and expenses on the Consolidated Financial Statements and accompanying notes, and amounts disclosed as contingent assets and liabilities. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

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

~~Allowance for Credit Losses (“ACL”).~~1Non-GAAP measures; refer to section “Non-GAAP Measures”

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ACL - Loans. The ACL on loans is estimated on a quarterly basis and represents management’s estimate of CECL in our loan portfolio. The ACL estimate is based on the accounting standard commonly known as CECL. Under the CECL method, pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Collective loss estimates are determined by applying loss factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining life of the collectively evaluated portfolio. The ~~allowance for loan losses~~ALL 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'~~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~~ALL and the ~~reserve~~RUC.

ACL - AFS Securities. For AFS securities which are in an unrealized loss position, we assess whether we intend to sell, or it is more likely than not, that we will be required to sell the security before recovery of the amortized cost basis. If either of the criteria is met, the amortized cost basis of the security is written down to fair value through income. For AFS securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from an actual or estimated credit loss event or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, changes to the rating of the security, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss is likely, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded as a valuation allowance for ~~unfunded noncancellable loan commitments.~~

~~Table~~the estimated credit loss, reducing the carrying value of C o ~~ntents~~the securities on the balance sheet and limited by the amount that the fair value is less than the amortized cost basis. Changes in the ACL are recorded as a provision for credit loss. Losses are charged against the allowance when we believe the uncollectibility of an AFS security has been confirmed or if either of the criteria regarding intent or requirement to sell is met.

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

We allocate the fair value of the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The fair values of other intangibles are determined utilizing information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management. The estimates used to determine the fair values of assets and liabilities acquired in a business combination can be complex and require judgment, as such we typically engage third-party valuation specialists for significant items.

For example, we generally value core deposit intangible assets using a discounted cash flow approach, which require a number of critical estimates that include, but are not limited to, future expected cash flows from depositor relationships, expected "decay" rates, and the determination of discount rates. We use the multi-period excess earnings method to value developed technology, the foregone cash flow method to value client relationships, and the relief from royalty method to value trademarks. Non-compete agreements are estimated using a with and without scenario where cash flows are projected through the term of the non-compete agreement assuming the agreement is in place and compared to cash flows assuming it is not in place. In valuing these intangibles, we make forward looking assumptions regarding expected future revenues and expenses to develop the underlying forecasts, applied contributory asset charges, discount rates, useful lives and other estimates. These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our initial valuation of net assets and liabilities acquired.

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

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

Acquired Loans. At acquisition date, loans are evaluated to determine whether they meet the criteria of a PCD loan. PCD loans are loans that in ~~management's~~management’s judgment have experienced more than insignificant deterioration in credit quality since origination. Factors that indicate a loan may have experienced more than insignificant credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by management at the time of initial assessment. PCD loans are initially recorded at fair value, with the resulting non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the date of acquisition, an ACL is established with a corresponding increase to the overall acquired loan balance. This initial ACL is determined using our application of the CECL method.

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

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

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

Deferred Taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. Accounting guidance requires that companies assess whether a valuation allowance should be established against the deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,

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it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies.

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

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted

See Note 1 - Summary of Significant Accounting Policies.

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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~~company’s management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the ~~company's~~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~~company’s management uses the non-GAAP financial measure.

Tangible assets, tangible equity, tangible common equity, tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest income to adjusted total revenue, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, adjusted PTPP income, PTPP income ROAA, adjusted PTPP income ROAA, efficiency ratio, adjusted efficiency ratio, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS), adjusted return on average assets (ROAA), and adjusted common equity tier 1 (CET 1) ~~capital~~ constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.

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

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

Adjusted net income is calculated by adjusting net income for tax-effected noninterest income and noninterest expense adjustments and the tax impact from the exercise of stock appreciation rights for the periods indicated. Adjusted ROAA is calculated by dividing annualized adjusted net income by average assets. Adjusted net income available to common stockholders is calculated by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted

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earnings per share is calculated by dividing adjusted net income available to common stockholders by the weighted average diluted common shares outstanding.

Common equity tier 1 and the common equity tier 1 ratio are defined by regulatory capital rules. Adjusted CET 1 is calculated by subtracting net unrealized losses, net of tax, on securities from CET 1 capital and provided to reflect management’s assessment of capital impacts from net unrealized losses on securities.

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

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

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(Dollars in thousands, except per share data) (Unaudited)		March 31, 2023			December 31, 2022
($ in thousands, except per share data) (Unaudited)								($ in thousands, except per share data) (Unaudited)	June 30, 2023			December 31, 2022
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	$	10,038,901		$	9,197,016		Total assets	$	9,370,265		$	9,197,016
Less goodwill	Less goodwill	(114,312)			(114,312)			Less goodwill	(114,312)			(114,312)
Less other intangible assets	Less other intangible assets	(7,065)			(7,526)			Less other intangible assets	(6,603)			(7,526)
Tangible assets(1)	Tangible assets(1)	$	9,917,524		$	9,075,178		Tangible assets(1)	$	9,249,350		$	9,075,178

Total stockholders' equity	Total stockholders' equity	$	958,907		$	959,618		Total stockholders' equity	$	957,054		$	959,618
Less goodwill	Less goodwill	(114,312)			(114,312)			Less goodwill	(114,312)			(114,312)
Less other intangible assets	Less other intangible assets	(7,065)			(7,526)			Less other intangible assets	(6,603)			(7,526)

Tangible common equity(1)	Tangible common equity(1)	$	837,530		$	837,780		Tangible common equity(1)	$	836,139		$	837,780

Total stockholders' equity to total assets	Total stockholders' equity to total assets	9.55		%	10.43		%	Total stockholders' equity to total assets	10.21		%	10.43		%

Tangible common equity to tangible assets(1)	Tangible common equity to tangible assets(1)	8.44		%	9.23		%	Tangible common equity to tangible assets(1)	9.04		%	9.23		%

Common shares outstanding	Common shares outstanding	58,237,303			58,544,534			Common shares outstanding	56,944,706			58,544,534
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	58,714,624			59,021,855			Total common shares outstanding	57,422,027			59,021,855

Book value per common share	Book value per common share	$	16.33		$	16.26		Book value per common share	$	16.67		$	16.26
Tangible common equity per common share(1)	Tangible common equity per common share(1)	$	14.26		$	14.19		Tangible common equity per common share(1)	$	14.56		$	14.19

(1)Non-GAAP measure.

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		Three Months Ended						Three Months Ended					Six Months Ended June 30,
(Dollars in thousands) (Unaudited)		March 31, 2023			December 31, 2022				March 31, 2022
($ in thousands) (Unaudited)												($ in thousands) (Unaudited)	June 30, 2023			March 31, 2023			June 30, 2022			2023			2022
Return on tangible common equity	Return on tangible common equity											Return on tangible common equity
Average total stockholders' equity	Average total stockholders' equity	$	1,004,794		$	989,414			$	1,049,912		Average total stockholders' equity	$	997,049		$	1,004,794		$	969,885		$	1,000,900		$	1,009,677
Less average preferred stock	Less average preferred stock	—			—				(75,965)			Less average preferred stock	—			—			—			—			(37,773)
Average total common stockholders' equity	Average total common stockholders' equity	1,004,794			989,414				973,947			Average total common stockholders' equity	997,049			1,004,794			969,885			1,000,900			971,904
Less average goodwill	Less average goodwill	(114,312)			(114,312)				(94,307)			Less average goodwill	(114,312)			(114,312)			(95,127)			(114,312)			(94,719)
Less average other intangibles	Less average other intangibles	(7,355)			(7,869)				(6,224)			Less average other intangibles	(6,885)			(7,355)			(4,869)			(7,119)			(5,543)
Average tangible common equity(1)	Average tangible common equity(1)	$	883,127		$	867,233			$	873,416		Average tangible common equity(1)	$	875,852		$	883,127		$	869,889		$	879,469		$	871,642

Net income available to common stockholders	Net income available to common stockholders	$	20,278		$	21,519			$	43,345		Net income available to common stockholders	$	17,879		$	20,278		$	26,712		$	38,157		$	70,057
Add amortization of other intangibles	Add amortization of other intangibles	461			555				441			Add amortization of other intangibles	462			461			313			923			754

Less tax effect on amortization of other intangibles(2)	Less tax effect on amortization of other intangibles(2)	(136)			(164)				(130)			Less tax effect on amortization of other intangibles(2)	(137)			(136)			(93)			(273)			(223)
Net income available to common stockholders(1)	Net income available to common stockholders(1)	$	20,603		$	21,910			$	43,656		Net income available to common stockholders(1)	$	18,204		$	20,603		$	26,932		$	38,807		$	70,588

Return on average equity	Return on average equity	8.18		%	8.63		%		18.74		%	Return on average equity	7.19		%	8.18		%	11.05		%	7.69		%	15.02		%
Return on average tangible common equity(1)	Return on average tangible common equity(1)	9.46		%	10.02		%		20.27		%	Return on average tangible common equity(1)	8.34		%	9.46		%	12.42		%	8.90		%	16.33		%

(1)Non-GAAP measure.

(2)Adjustments shown net of a statutory Federal tax rate of 29.6%.

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

Table of Contents


	Three Months Ended						Six Months Ended June 30,
($ in thousands) (Unaudited)	June 30, 2023			March 31, 2023				June 30, 2022			2023			2022
Adjusted noninterest income
Total noninterest income	$	6,024		$	7,859			$	7,186		$	13,883		$	13,096
Noninterest income adjustments:
Net loss (gain) on securities available-for-sale	—			—				—			—			(16)


Total noninterest income adjustments	—			—				—			—			(16)
Adjusted noninterest income(1)	$	6,024		$	7,859			$	7,186		$	13,883		$	13,080

Adjusted noninterest expense
Total noninterest expense	$	49,132		$	51,239			$	48,612		$	100,371		$	95,208
Noninterest expense adjustments:




Indemnified legal (fees) recoveries	(752)			(380)				(455)			(1,132)			(349)



Noninterest expense adjustments before (loss) gain in alternative energy partnership investments	(752)			(380)				(455)			(1,132)			(349)
(Loss) gain in alternative energy partnership investments	36			(1,618)				(1,043)			(1,582)			(1,201)
Total noninterest expense adjustments	(716)			(1,998)				(1,498)			(2,714)			(1,550)
Adjusted noninterest expense(1)	$	48,416		$	49,241			$	47,114		$	97,657		$	93,658

Average assets	$	9,611,239		$	9,317,209			$	9,342,696		$	9,465,035		$	9,367,364
Noninterest income to total revenue	7.96		%	9.71		%		8.41		%	8.87		%	7.80		%
Adjusted noninterest income to adjusted total revenue(1)	7.96		%	9.71		%		8.41		%	8.87		%	7.79		%
Noninterest expense to average total assets(2)	2.05		%	2.23		%		2.09		%	2.14		%	2.05		%
Adjusted noninterest expense to average total assets(1)(2)	2.02		%	2.14		%		2.02		%	2.08		%	2.02		%

(1)Non-GAAP measure.

(2)Ratio presented on an annualized basis.

5053

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		Three Months Ended						Three Months Ended					Six Months Ended June 30,
(Dollars in thousands) (Unaudited)		March 31, 2023			December 31, 2022				March 31, 2022
($ in thousands) (Unaudited)												($ in thousands) (Unaudited)	June 30, 2023			March 31, 2023			June 30, 2022			2023			2022
Adjusted pre-tax pre-provision income	Adjusted pre-tax pre-provision income											Adjusted pre-tax pre-provision income
Net interest income	Net interest income	$	73,053		$	80,217			$	76,441		Net interest income	$	69,632		$	73,053		$	78,299		$	142,685		$	154,740
Noninterest income	Noninterest income	7,859			(1,427)				5,910			Noninterest income	6,024			7,859			7,186			13,883			13,096
Total revenue	Total revenue	80,912			78,790				82,351			Total revenue	75,656			80,912			85,485			156,568			167,836
Noninterest expense	Noninterest expense	51,239			48,203				46,596			Noninterest expense	49,132			51,239			48,612			100,371			95,208
Pre-tax pre-provision income(1)	Pre-tax pre-provision income(1)	$	29,673		$	30,587			$	35,755		Pre-tax pre-provision income(1)	$	26,524		$	29,673		$	36,873		$	56,197		$	72,628

Total revenue	Total revenue	$	80,912		$	78,790			$	82,351		Total revenue	$	75,656		$	80,912		$	85,485		$	156,568		$	167,836
Total noninterest income adjustments	Total noninterest income adjustments	—			7,708				(16)			Total noninterest income adjustments	—			—			—			—			(16)
Adjusted total revenue(1)	Adjusted total revenue(1)	80,912			86,498				82,335			Adjusted total revenue(1)	75,656			80,912			85,485			156,568			167,820

Noninterest expense	Noninterest expense	51,239			48,203				46,596			Noninterest expense	49,132			51,239			48,612			100,371			95,208
Total noninterest expense adjustments	Total noninterest expense adjustments	(1,998)			261				(52)			Total noninterest expense adjustments	(716)			(1,998)			(1,498)			(2,714)			(1,550)
Adjusted noninterest expense(1)	Adjusted noninterest expense(1)	49,241			48,464				46,544			Adjusted noninterest expense(1)	48,416			49,241			47,114			97,657			93,658
Adjusted pre-tax pre-provision income(1)	Adjusted pre-tax pre-provision income(1)	$	31,671		$	38,034			$	35,791		Adjusted pre-tax pre-provision income(1)	$	27,240		$	31,671		$	38,371		$	58,911		$	74,162

Average assets	Average assets	$	9,317,209		$	9,257,311			$	9,392,305		Average assets	$	9,611,239		$	9,317,209		$	9,342,696		$	9,465,035		$	9,367,364
Pre-tax pre-provision income ROAA(1)(2)	Pre-tax pre-provision income ROAA(1)(2)	1.29		%	1.31		%		1.54		%	Pre-tax pre-provision income ROAA(1)(2)	1.11		%	1.29		%	1.58		%	1.20		%	1.56		%
Adjusted pre-tax pre-provision income ROAA(1)(2)	Adjusted pre-tax pre-provision income ROAA(1)(2)	1.38		%	1.63		%		1.55		%	Adjusted pre-tax pre-provision income ROAA(1)(2)	1.14		%	1.38		%	1.65		%	1.26		%	1.60		%
Efficiency ratio(1)(2)	Efficiency ratio(1)(2)	63.33		%	61.18		%		56.58		%	Efficiency ratio(1)(2)	64.94		%	63.33		%	56.87		%	64.11		%	56.73		%
Adjusted efficiency ratio(1)(2)	Adjusted efficiency ratio(1)(2)	60.86		%	56.03		%		56.53		%	Adjusted efficiency ratio(1)(2)	63.99		%	60.86		%	55.11		%	62.37		%	55.81		%

(1)Non-GAAP measure.

(2)Ratio presented on an annualized basis.

5154

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		Three Months Ended						Three Months Ended					Six Months Ended June 30,
		March 31, 2023			December 31, 2022				March 31, 2022
($ in thousands) (Unaudited)												($ in thousands) (Unaudited)	June 30, 2023			March 31, 2023			June 30, 2022			2023			2022
Adjusted net income	Adjusted net income											Adjusted net income
Net income~~(2)~~(1)	Net income~~(2)~~(1)	$	20,278		$	21,519			$	48,512		Net income~~(2)~~(1)	$	17,879		$	20,278		$	26,712		$	38,157		$	75,224
Adjustments:	Adjustments:											Adjustments:
Noninterest income	Noninterest income	—			7,708				(16)			Noninterest income	—			—			—			—			(16)
Noninterest expense adjustments	Noninterest expense adjustments	1,998			(261)				52			Noninterest expense adjustments	716			1,998			1,498			2,714			1,550

Tax impact of adjustments above~~(3)~~(2)	Tax impact of adjustments above~~(3)~~(2)	(591)			(2,202)				(11)			Tax impact of adjustments above~~(3)~~(2)	(212)			(591)			(443)			(802)			(454)

Adjustments to net income	Adjustments to net income	1,407			5,245				25			Adjustments to net income	504			1,407			1,055			1,912			1,080
Adjusted net income~~(4)~~(3)	Adjusted net income~~(4)~~(3)	$	21,685		$	26,764			$	48,537		Adjusted net income~~(4)~~(3)	$	18,383		$	21,685		$	27,767		$	40,069		$	76,304

Average assets	Average assets	$	9,317,209		$	9,257,311			$	9,392,305		Average assets	$	9,611,239		$	9,317,209		$	9,342,696		$	9,465,035		$	9,367,364
ROAA ~~(5)~~(4)	ROAA ~~(5)~~(4)	0.88		%	0.92		%		2.09		%	ROAA ~~(5)~~(4)	0.75		%	0.88		%	1.15		%	0.81		%	1.62		%
Adjusted ROAA~~(5)~~(4)	Adjusted ROAA~~(5)~~(4)	0.94		%	1.15		%		2.10		%	Adjusted ROAA~~(5)~~(4)	0.77		%	0.94		%	1.19		%	0.85		%	1.64		%

Adjusted net income available to common stockholders	Adjusted net income available to common stockholders											Adjusted net income available to common stockholders
Net income available to common stockholders	Net income available to common stockholders	$	20,278		$	21,519			$	43,345		Net income available to common stockholders	$	17,879		$	20,278		$	26,712		$	38,157		$	70,057
Adjustments to net income	Adjustments to net income	1,407			5,245				25			Adjustments to net income	504			1,407			1,055			1,912			1,080
Adjustments for impact of preferred stock redemption	Adjustments for impact of preferred stock redemption	—			—				3,747			Adjustments for impact of preferred stock redemption	—			—			—			—			3,747
Adjusted net income available to common stockholders~~(4)~~(3)	Adjusted net income available to common stockholders~~(4)~~(3)	$	21,685		$	26,764			$	47,117		Adjusted net income available to common stockholders~~(4)~~(3)	$	18,383		$	21,685		$	27,767		$	40,069		$	74,884

Average diluted common shares	Average diluted common shares	59,206,619			59,725,283				62,906,003			Average diluted common shares	58,026,007			59,206,619			61,600,615			58,600,313			62,248,376
Diluted EPS	Diluted EPS	$	0.34		$	0.36			$	0.69		Diluted EPS	$	0.31		$	0.34		$	0.43		$	0.65		$	1.13
Adjusted diluted EPS~~(6)~~(5)	Adjusted diluted EPS~~(6)~~(5)	$	0.37		$	0.45			$	0.75		Adjusted diluted EPS~~(6)~~(5)	$	0.32		$	0.37		$	0.45		$	0.68		$	1.20

(1)~~Net income for the three months ended December 31, 2022 includes a $7.7 million pre-tax loss on sale of securities.~~

~~(2)~~Net income and adjusted net income for the ~~three~~six months ended ~~March 31,~~June 30, 2022 includes a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan; there is no similar recovery in any of the other periods presented. The Bank previously recognized a $35.1 million charge-off for this loan during the third quarter of 2019.

~~(3)~~(2)Tax impact of adjustments shown at an effective tax rate of 29.6%.

~~(4)~~(3)Non-GAAP measure.

~~(5)~~(4)Ratio presented on an annualized basis.

~~(6)~~(5)Represents adjusted net income available to common stockholders divided by average diluted common shares.

~~Table of C~~o ~~ntents~~

($ in thousands)
(Unaudited)

~~March 31,~~June 30,
2023

Adjusted Common Equity Tier 1 (CET 1) capital(1)

CET 1 capital

~~888,339~~892,009

Less unrealized loss on AFS securities, net of tax

~~(33,687)~~(38,103)

Less unrealized loss on HTM securities, net of tax

~~(40,036)~~(43,197)

Adjusted CET 1 capital(2)

~~814,616~~810,709

Unrealized loss on AFS securities, net of tax, to CET 1 capital

~~3.79~~4.27

~~Unrealized loss on HTM securities, net of tax, to CET 1 capital~~

~~4.51~~

Total unrealized loss on AFS and HTM securities, net of tax, to CET 1 capital

~~8.30~~9.11

~~Total risk-weighted assets~~

~~7,533,336~~

~~CET 1 ratio~~

~~11.79~~

(1)~~March 31,~~June 30, 2023 presented to reflect management’s assessment of capital impact from net unrealized losses on securities. Tax rate of ~~28.0%~~29.6% used for calculation purposes.

(2)Non-GAAP measure.

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RESULTS OF OPERATIONS

Net Interest Income

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates for the three months ended June 30, 2023, March 31, 2023 ~~December 31, 2022~~ and ~~March 31,~~June 30, 2022:


		Three Months Ended																						Three Months Ended
		March 31, 2023							December 31, 2022							March 31, 2022								June 30, 2023							March 31, 2023							June 30, 2022
($ 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)	$	6,994,958		$	87,418	5.07	%	$	7,155,780		$	88,717	4.92	%	$	7,262,774		$	76,234	4.26	%	Total loans(1)(2)	$	7,061,016		$	92,889	5.28	%	$	6,994,958		$	87,418	5.07	%	$	7,269,655		$	78,895	4.35	%
Securities	Securities	1,297,640			14,909		4.66	%	1,221,147			12,905		4.19	%	1,292,079			7,309		2.29	%	Securities	1,311,362			15,804		4.83	%	1,297,640			14,909		4.66	%	1,216,612			8,124		2.68	%
Other interest-earning assets (3)	Other interest-earning assets (3)	389,051			4,592		4.79	%	239,336			2,490		4.13	%	265,339			726		1.11	%	Other interest-earning assets (3)	595,234			7,458		5.03	%	389,051			4,592		4.79	%	295,715			1,399		1.90	%
Total interest-earning assets	Total interest-earning assets	8,681,649			106,919		4.99	%	8,616,263			104,112		4.79	%	8,820,192			84,269		3.87	%	Total interest-earning assets	8,967,612			116,151		5.20	%	8,681,649			106,919		4.99	%	8,781,982			88,418		4.04	%
Allowance for loan losses	Allowance for loan losses	(84,267)							(91,606)							(92,618)							Allowance for loan losses	(82,282)							(84,267)							(94,217)
BOLI and noninterest-earning assets (4)	BOLI and noninterest-earning assets (4)	719,827							732,654							664,731							BOLI and noninterest-earning assets (4)	725,909							719,827							654,931
Total assets	Total assets	$	9,317,209						$	9,257,311						$	9,392,305						Total assets	$	9,611,239						$	9,317,209						$	9,342,696
Interest-bearing liabilities:	Interest-bearing liabilities:																						Interest-bearing liabilities:
Interest-bearing checking	Interest-bearing checking	$	1,951,618		8,514		1.77	%	$	1,854,333		4,998		1.07	%	$	2,409,262		641		0.11	%	Interest-bearing checking	$	1,761,341		9,751		2.22	%	$	1,951,618		8,514		1.77	%	$	2,363,233		1,457		0.25	%

Savings and money market	Savings and money market	1,070,911			2,001		0.76	%	1,308,383			2,379		0.72	%	1,673,244			510		0.12	%	Savings and money market	1,015,181			2,609		1.03	%	1,070,911			2,001		0.76	%	1,598,663			860		0.22	%
Certificates of deposit	Certificates of deposit	1,189,658			10,012		3.41	%	1,072,953			6,901		2.55	%	508,244			237		0.19	%	Certificates of deposit	1,566,636			15,758		4.03	%	1,189,658			10,012		3.41	%	631,415			863		0.55	%
Total interest-bearing deposits	Total interest-bearing deposits	4,212,187			20,527		1.98	%	4,235,669			14,278		1.34	%	4,590,750			1,388		0.12	%	Total interest-bearing deposits	4,343,158			28,118		2.60	%	4,212,187			20,527		1.98	%	4,593,311			3,180		0.28	%
FHLB advances and FRB borrowings	FHLB advances and FRB borrowings	1,067,125			9,648		3.67	%	684,177			5,528		3.21	%	459,749			2,953		2.60	%	FHLB advances and FRB borrowings	1,441,244			14,703		4.09	%	1,067,125			9,648		3.67	%	485,629			3,114		2.57	%

Other borrowings	Other borrowings	4,773			57		4.84	%	41,075			414		4.00	%	116,495			55		0.19	%	Other borrowings	358			3		3.36	%	4,773			57		4.84	%	117,688			325		1.11	%
Long-term debt	Long-term debt	274,939			3,634		5.36	%	274,812			3,675		5.31	%	274,417			3,432		5.07	%	Long-term debt	275,012			3,695		5.39	%	274,939			3,634		5.36	%	274,515			3,500		5.11	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,559,024			33,866		2.47	%	5,235,733			23,895		1.81	%	5,441,411			7,828		0.58	%	Total interest-bearing liabilities	6,059,772			46,519		3.08	%	5,559,024			33,866		2.47	%	5,471,143			10,119		0.74	%
Noninterest-bearing deposits	Noninterest-bearing deposits	2,617,973							2,897,755							2,795,633							Noninterest-bearing deposits	2,425,719							2,617,973							2,804,877
Noninterest-bearing liabilities	Noninterest-bearing liabilities	135,418							134,409							105,349							Noninterest-bearing liabilities	128,699							135,418							96,791
Total liabilities	Total liabilities	8,312,415							8,267,897							8,342,393							Total liabilities	8,614,190							8,312,415							8,372,811
Total stockholders’ equity	Total stockholders’ equity	1,004,794							989,414							1,049,912							Total stockholders’ equity	997,049							1,004,794							969,885
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	9,317,209						$	9,257,311						$	9,392,305						Total liabilities and stockholders’ equity	$	9,611,239						$	9,317,209						$	9,342,696
Net interest income/spread	Net interest income/spread				$	73,053	2.52	%				$	80,217	2.98	%				$	76,441	3.29	%	Net interest income/spread				$	69,632	2.12	%				$	73,053	2.52	%				$	78,299	3.30	%
Net interest margin (5)	Net interest margin (5)						3.41	%						3.69	%						3.51	%	Net interest margin (5)						3.11	%						3.41	%						3.58	%

Ratio of interest-earning assets to interest-bearing liabilities	Ratio of interest-earning assets to interest-bearing liabilities	156		%					165		%					162		%					Ratio of interest-earning assets to interest-bearing liabilities	148		%					156		%					161		%
Total deposits(6)	Total deposits(6)	6,830,160			20,527		1.22	%	7,133,424			14,278		0.79	%	7,386,383			1,388		0.08	%	Total deposits(6)	6,768,877			28,118		1.67	%	6,830,160			20,527		1.22	%	7,398,188			3,180		0.17	%
Total funding (7)	Total funding (7)	8,176,997			33,866		1.68	%	8,133,488			23,895		1.17	%	8,237,044			7,828		0.39	%	Total funding (7)	8,485,491			46,519		2.20	%	8,176,997			33,866		1.68	%	8,276,020			10,119		0.49	%

(1)Includes average loans held for sale of $4.4 million, $4.3 million ~~$4.4 million~~ and ~~$3.4~~$3.6 million for the three months ended June 30, 2023, March 31, 2023 ~~December 31,~~and June 30, 2022, ~~and March 31, 2022, respectively,~~ which are included in other assets in the accompanying consolidated statements of financial condition.

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(2)Total loans are net of deferred fees, related direct costs, premiums and discounts, but exclude the ~~allowance for credit losses.~~ACL. Nonaccrual loans are included in the average balance. Interest income includes net (amortization) accretion of deferred loan (costs) fees and purchased (premiums) discounts of ~~$324 thousand~~$(1.0) million, $~~456 thousand~~0.3 million and $~~(416) thousand~~(0.2) million for the three months ended June 30, 2023, March 31, 2023 ~~December 31, 2022~~ and ~~March 31, 2022, respectively.~~June 30, 2022.

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

(4)Includes average balance of bank-owned life insurance of $128.4 million, $127.4 million ~~$126.5 million~~ and ~~$124.0~~$124.8 million for the three months ended June 30, 2023, March 31, 2023 ~~December 31, 2022~~ and ~~March 31, 2022, respectively.~~June 30, 2022.

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

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

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

Three Months Ended ~~March 31,~~June 30, 2023 Compared to Three Months Ended ~~December~~March 31, ~~2022~~2023

Net interest income decreased ~~$7.2~~$3.4 million, or 4.7%, to ~~$73.1~~$69.6 million for the ~~first~~second quarter primarily due to the impact of ~~2023~~higher market interest rates, changes in the balance sheet mix, and the cost of excess short-term borrowings from the ~~fourth~~FHLB and FRB related to maintaining higher levels of liquidity during the quarter, ~~of 2022 due to a higher average balance and cost of interest-bearing liabilities,~~which was partially offset by a higher average ~~balance~~balances and ~~yield~~yields on interest-earning assets.

The net interest margin decreased 2830 basis points to ~~3.41%~~3.11% for the ~~first~~second quarter as the average cost of funds increased 52 basis points while the average interest-earning assets yield increased ~~20 basis points and the cost of average total funding increased 51~~21 basis points.

The yield on average interest-earning assets increased 21 basis points to ~~4.99%~~5.20% for the ~~first~~second quarter from ~~4.79% for~~4.99% in the ~~fourth~~first quarter mainly due to higher yields on loans, securities and other interest-earning assets. The overall loan yield increased 1521 basis points to ~~5.07%~~5.28% during the ~~first~~second quarter ~~compared to the fourth quarter of 2022~~ as a result of the impact of higher market interest rates and changes in portfolio ~~mix. The loan yields include the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest~~mix from originations and ~~accelerated discount accretion on the early payoff of purchased loans; these items increased the overall loan yield by 8 basis points in the first quarter and 6 basis points in the fourth quarter.~~payoffs. The yield on securities increased 4717 basis points to ~~4.66%~~4.83% due mostly to rate resets in the CLO ~~portfolio and the positive impact of the investment portfolio repositioning during the fourth quarter to sell lower-yielding securities and reinvest the proceeds in higher-yielding securities.~~portfolio.

The average cost of funds increased 5152 basis points to 2.20% for the second quarter from 1.68% ~~for~~in the first quarter, ~~from 1.17%~~driven by higher market interest rates and changes in the balance sheet mix. The cost of average interest-bearing liabilities increased 61 basis points to 3.08% for the ~~fourth~~second quarter from 2.47% in the first quarter. This increase was due partially to the cost of excess short-term borrowings from the FHLB and FRB related to maintaining excess liquidity at the end of the first quarter and into the second quarter due to the operating environment. Average noninterest-bearing deposits were $192.3 million lower and average total deposits were $61.3 million lower for the second quarter.

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Net interest income for the second quarter of 2023 decreased $8.7 million, or 11.1%, to $69.6 million compared to $78.3 million for the same 2022 period. Net interest income for the second quarter of 2023 was impacted by higher market interest rates, changes in the balance sheet mix, and the cost of excess short-term borrowings from the FHLB and FRB related to maintaining higher levels of liquidity during the second quarter of 2023, which was partially offset by higher average yields on interest-earning assets.

The net interest margin decreased 47 basis points to 3.11% for the second quarter of 2023 as average cost of total funding increased 171 basis points while the average interest-earning assets yield increased 116 basis points.

The yield on average interest-earning assets increased 116 basis points to 5.20% for the second quarter of 2023 from 4.04% for the same 2022 period mainly due to higher market interest rates and changes in the mix of interest-earning assets. The yield on average loans increased 93 basis points to 5.28% compared to the same 2022 period as a

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result of the impact of higher market interest rates and changes in portfolio mix. The yield on securities increased 215 basis points to 4.83% for the second quarter of 2023, compared to 2.68% for the same 2022 period. Average loans represented 79% of average earnings assets for the three months ended June 30, 2023 compared to 83% for the three months ended June 30, 2022. Average loans decreased by $208.6 million due mostly to lower average warehouse balances, partially offset by loan growth within other loans categories.

The average cost of funds increased 171 basis points to 2.20% for the second quarter of 2023, from 0.49% for the same 2022 period, due mostly to higher market interest rates as the average effective Federal Funds rate increased 422 basis points to 4.99% for the second quarter of 2023 from 0.77% in the same 2022 period, changes in the balance sheet mix and the cost of excess short-term borrowings from the FHLB and FRB related to maintaining excess liquidity in 2023 due to the operating environment. The average cost of total deposits increased 150 basis points to 1.67% for the second quarter of 2023 compared to the same 2022 period. The cost of average interest-bearing liabilities increased 234 basis points to 3.08% for the second quarter of 2023 from 0.74% for the same 2022 period and included a 232 basis point increase in the cost of average interest-bearing deposits to 2.60%. Average noninterest-bearing deposits decreased $379.2 million for the second quarter of 2023 compared to the same 2022 period and average deposits decreased $629.3 million. Average noninterest-bearing deposits represented 36% of total average deposits for the second quarter of 2023 and 38% for the second quarter of 2022.

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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 six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023							2022
($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/Cost
Interest-earning assets:
Total loans (1)(2)	$	7,028,169		$	180,307	5.17	%	$	7,266,234		$	155,129	4.31	%
Securities	1,304,539			30,713		4.75	%	1,254,137			15,433		2.48	%
Other interest-earning assets (3)	492,712			12,050		4.93	%	280,611			2,125		1.53	%
Total interest-earning assets	8,825,420			223,070		5.10	%	8,800,982			172,687		3.96	%
Allowance for loan losses	(83,269)							(93,422)
BOLI and noninterest-earning assets (4)	722,884							659,804
Total assets	$	9,465,035						$	9,367,364
Interest-bearing liabilities:
Interest-bearing checking	$	1,855,954		18,265		1.98	%	$	2,386,120		2,097		0.18	%


Savings and money market	1,042,892			4,610		0.89	%	1,635,747			1,371		0.17	%
Certificates of deposit	1,379,188			25,770		3.77	%	570,170			1,100		0.39	%
Total interest-bearing deposits	4,278,034			48,645		2.29	%	4,592,037			4,568		0.20	%
FHLB advances	1,255,218			24,351		3.91	%	472,760			6,067		2.59	%

Other borrowings	2,554			59		4.66	%	117,095			379		0.65	%
Long-term debt	274,975			7,330		5.38	%	274,466			6,933		5.09	%
Total interest-bearing liabilities	5,810,781			80,385		2.79	%	5,456,358			17,947		0.66	%
Noninterest-bearing deposits	2,521,314							2,800,281
Noninterest-bearing liabilities	132,040							101,048
Total liabilities	8,464,135							8,357,687
Total stockholders’ equity	1,000,900							1,009,677
Total liabilities and stockholders’ equity	$	9,465,035						$	9,367,364
Net interest income/spread				$	142,685	2.31	%				$	154,740	3.30	%
Net interest margin (5)						3.26	%						3.55	%

Ratio of interest-earning assets to interest-bearing liabilities	152		%					161		%
Total deposits(6)	6,799,348			48,645		1.44	%	7,392,318			4,568		0.12	%
Total funding (7)	8,332,095			80,385		1.95	%	8,256,639			17,947		0.44	%

(1)Includes average loans held for sale of $4.4 million and $3.5 million for the six months ended June 30, 2023 and 2022, which are included in other assets in the accompanying consolidated statements of financial condition.

(2)Total loans are net of deferred fees, related direct costs, premiums and discounts, but exclude the ACL. Nonaccrual loans are included in the average balance. Interest income includes net (amortization) accretion of deferred loan (costs) fees and purchased (premiums) discounts of $(0.7) million and $(0.6) million for the six months ended June 30, 2023 and 2022 are included in interest income.

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

(4)Includes average balance of bank-owned life insurance of $127.9 million and $124.4 million for the six months ended June 30, 2023 and 2022.

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

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Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net interest income decreased $12.1 million, or 7.8%, to $142.7 million for the six months ended June 30, 2023 due primarily to higher funding costs from higher market interest rates, changes in the balance sheet mix and the conservative strategy to hold extra liquidity ~~toward~~at the end of the first quarter and into the second quarter due to the operating environment.

The ~~increase in~~net interest margin decreased 29 basis points to 3.26% as the average cost of funds ~~was driven~~increased 151 basis points while the average interest-earning assets yield increased 114 basis points between periods.

The yield on average interest-earning assets increased 114 basis points to 5.10% for the six months ended June 30, 2023, from 3.96% for the same period in 2022 due mostly to higher market interest rates and changes in the mix of interest-earning assets. The yield on average loans increased 86 basis points to 5.17% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The yield on average investment securities increased 227 basis points for the same period. Average loans represented 80% of average earnings assets for the six months ended June 30, 2023 compared to 83% for the six months ended June 30, 2022. Average loans decreased by $238.1 million due mostly to lower average warehouse balances, partially offset by organic loan growth in other loan categories.

The average cost of funds increased 151 basis points to 1.95% for the six months ended June 30, 2023 from 0.44% for the six months ended June 30, 2022 due mostly to higher market interest rates and changes in the balance sheet mix. The average cost of total deposits increased 132 basis points to 1.44% for the six months ended June 30, 2023 compared to the same period in 2022. The cost of average interest-bearing liabilities ~~which~~ increased 66213 basis points to ~~2.47%~~2.79% for the ~~first quarter from 1.81%~~six months ended June 30, 2023 compared to 0.66% for the ~~fourth quarter. The~~same period in 2022 and included a 209 basis point increase in the cost of average interest-bearing deposits ~~increased 64 basis points~~ to 1.98% for the first quarter from 1.34% for the fourth quarter while the cost of average FHLB advances and FRB borrowings increased 46 basis points to 3.67% for the first quarter from 3.21% for the fourth quarter.2.29%. The increase in the cost of these funding sources was mainly due to ~~the increase in higher cost borrowed funds and~~ the impact of higher market interest rates as the average effective Federal Funds rate increased 86430 basis points to 4.75% for the six months ended June 30, 2023 from ~~3.65%~~0.45% in the ~~fourth quarter to 4.51%~~same period in ~~the first quarter.~~

2022. Average noninterest-bearing deposits ~~were $279.8~~decreased $279.0 million ~~lower in~~for the ~~first quarter~~six months ended June 30, 2023 compared to the ~~fourth quarter,~~same period in 2022 and average total deposits ~~were $303.3 million lower for the linked quarter.~~decreased $593.0 million. Average noninterest-bearing deposits represented ~~38% of average total deposits for the first quarter, compared to 41% for the fourth quarter. The cost of average total deposits increased 43 basis points to 1.22% for the first quarter.~~

Average FHLB advances, FRB borrowings and other borrowings were $346.6 million higher in the first quarter compared to the fourth quarter as wholesale funding sources were strategically utilized to further improve liquidity and manage funding costs.

~~Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022~~

Net interest income for the first quarter of 2023 decreased $3.4 million to $73.1 million compared to $76.4 million for the same 2022 period. Net interest income was negatively impacted by higher average balance and cost of interest-bearing liabilities, partially offset by a higher average balance and yield on interest-earning assets.

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

The average cost of funds increased 129 basis points to 1.68% for the first quarter of 2023, from 0.39% for the same 2022 period. This increase was driven by the higher cost of average interest-bearing liabilities impacted by higher market interest rates and the conservative strategy to hold extra liquidity toward the end of first quarter of 2023 due to the operating environment. The average cost of interest-bearing liabilities increased 189 basis points to 2.47% for the first quarter of 2023 from 0.58% for the same 2022 period, partially offset by changes in funding mix, including lower average interest-bearing deposit balances and average other borrowings. Average noninterest-bearing deposits represented 38%37% of total average deposits for the ~~first quarter of~~six months ended June 30, 2023 ~~and 2022. The average cost of interest-bearing deposits increased 186 basis points~~compared to ~~1.98% for the first quarter of 2023 from 0.12%~~38% for the same ~~2022~~ period while the average cost of total deposits increased 114 basis points to 1.22% for the first quarter of 2023, compared to 0.08% for the same 2022 period. The average Federal funds rate was 4.51% for the first quarter of 2022 compared to 0.12% for the same 2022 period.in 2022.

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

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Rate/Volume Analysis

The following table presents the changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities. The information provided presents the changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.


		Three Months Ended March 31, 2023 vs. March 31, 2022										Three Months Ended June 30, 2023 vs. June 30, 2022			Six Months Ended June 30, 2023 vs. 2022
			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						($ In thousands)			Volume		Rate	Net Increase (Decrease)						Volume				Rate		Net Increase (Decrease)
Interest and dividend income:	Interest and dividend income:													Interest and dividend income:
Total loans	Total loans				$	(2,891)		$	14,075	$	11,184			Total loans							$	(2,327)			$	16,321			$	13,994			$	(5,226)			$	30,404			$	25,178
Securities	Securities				32			7,568		7,600				Securities					678				7,002				7,680				645				14,635				15,280
Other interest-earning assets	Other interest-earning assets				477			3,389		3,866				Other interest-earning assets					2,310				3,749				6,059				2,513				7,412				9,925
Total interest and dividend income	Total interest and dividend income				$	(2,382)		$	25,032	$	22,650			Total interest and dividend income					$	661			$	27,072			$	27,733			$	(2,068)			$	52,451			$	50,383
Interest expense:	Interest expense:													Interest expense:
Interest-bearing checking	Interest-bearing checking				$	(147)		$	8,020	$	7,873			Interest-bearing checking					$	(467)			$	8,761			$	8,294			$	(567)			$	16,735			$	16,168

Savings and money market	Savings and money market				(226)			1,717		1,491				Savings and money market					(373)				2,122				1,749				(603)				3,842				3,239
Certificates of deposit	Certificates of deposit				716			9,059		9,775				Certificates of deposit					2,822				12,073				14,895				3,465				21,205				24,670
FHLB advances and FRB borrowings	FHLB advances and FRB borrowings				5,109			1,586		6,695				FHLB advances and FRB borrowings					8,908				2,681				11,589				13,967				4,317				18,284

Other borrowings	Other borrowings				(100)			102		2				Other borrowings					(542)				220				(322)				(684)				364				(320)
Long-term debt	Long-term debt				7			195		202				Long-term debt					6				189				195				13				384				397
Total interest expense	Total interest expense				5,359			20,679		26,038				Total interest expense					10,354				26,046				36,400				15,591				46,847				62,438
Net interest income	Net interest income				$	(7,741)		$	4,353	$	(3,388)			Net interest income					$	(9,693)			$	1,026			$	(8,667)			$	(17,659)			$	5,604			$	(12,055)

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Provision for Credit Losses

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


		Three Months Ended						Three Months Ended						Six Months Ended June 30,
($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		March 31, 2022			($ in thousands)	June 30, 2023		March 31, 2023		June 30, 2022		2023		2022
Provision for (reversal of) credit losses - loans	Provision for (reversal of) credit losses - loans	$	2,500	$	1,100	$	(31,342)		Provision for (reversal of) credit losses - loans	$	1,664	$	2,500	$	(500)	$	4,164	$	(31,842)
(Reversal of) credit losses - unfunded noncancellable loan commitments		(500)		(1,100)		(200)

(Reversal of) provision for credit losses - unfunded noncancellable loan commitments									(Reversal of) provision for credit losses - unfunded noncancellable loan commitments	(800)		(500)		500		(1,300)		300
Provision for credit losses - securities									Provision for credit losses - securities	1,036		—		—		1,036		—
Total provision for (reversal of) credit losses	Total provision for (reversal of) credit losses	$	2,000	$	—	$	(31,542)		Total provision for (reversal of) credit losses	$	1,900	$	2,000	$	—	$	3,900	$	(31,542)

Three Months Ended ~~March 31,~~June 30, 2023 Compared to Three Months Ended ~~December~~March 31, ~~2022~~2023

The provision for credit losses was ~~$2.0~~$1.9 million for the ~~first~~second quarter and included a ~~$2.5~~$1.7 million provision for loan losses and a $1.0 million provision for credit ~~losses related to loans,~~loss for AFS securities, partially offset by ~~a $500 thousand~~an $0.8 million reversal of the provision for credit losses related to lower unfunded commitments. There was noprovision for credit losses for the fourth quarter. The increase in provision for credit losses was due to an increase in specific reserves and deterioration in the macroeconomic outlook, partially offset by net charge-off activity, changes in the portfolio mix and a ~~decrease in total loan balances.~~

~~Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022~~

~~The~~$2.0 million provision for credit losses for the first quarter of 2023. The provision for credit losses in the second quarter was mainly due to net charge-offs and an increase in specific reserves, partially offset by the change in portfolio mix and lower unfunded commitments.

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The provision for credit losses was ~~$2.0~~$1.9 million ~~compared~~for the second quarter of 2023 and included a $1.7 million provision for loan losses and a $1.0 million provision for credit loss for AFS securities, partially offset by an $0.8 million reversal of the provision for credit losses related to lower unfunded commitments. There was no provision for credit losses for the same 2022 period.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

During the six months ended June 30, 2023, the provision for credit losses was $3.9 million, and included a $4.2 million provision for loan losses and a $1.0 million provision for credit loss for AFS securities, partially offset by a $1.3 million reversal of the provision for credit losses related to lower unfunded commitments. The provision for credit losses was a reversal of $31.5 million ~~for~~during the ~~same~~six months ended June 30, 2022, ~~period. The reversal of credit losses in the first quarter of 2022~~and included a $31.3 million ~~related to a~~ recovery from the settlement of a loan previously charged-off in 2019.

See further discussion in "Allowance for Credit Losses."

~~Table of C~~o ~~ntents~~

Noninterest Income

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


		Three Months Ended						Three Months Ended						Six Months Ended June 30,
($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		March 31, 2022			($ in thousands)	June 30, 2023		March 31, 2023		June 30, 2022		2023		2022
Customer service fees	Customer service fees	$	1,979	$	2,066	$	2,434		Customer service fees	$	2,022	$	1,979	$	2,578	$	4,001	$	5,012
Loan servicing income	Loan servicing income	547		561		212			Loan servicing income	574		547		109		1,121		321
Income from bank owned life insurance	Income from bank owned life insurance	900		923		796			Income from bank owned life insurance	951		900		810		1,851		1,606

Net (loss) gain on sale of securities available-for-sale		—		(7,708)		16
Net gain on sale of securities available-for-sale									Net gain on sale of securities available-for-sale	—		—		—		—		16

Other income	Other income	4,433		2,731		2,452			Other income	2,477		4,433		3,689		6,910		6,141
Total noninterest income	Total noninterest income	$	7,859	$	(1,427)	$	5,910		Total noninterest income	$	6,024	$	7,859	$	7,186	$	13,883	$	13,096

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Three Months Ended ~~March 31,~~June 30, 2023 Compared to Three Months Ended ~~December~~March 31, ~~2022~~2023

Noninterest income ~~increased $9.3~~decreased $1.8 million to ~~$7.9~~$6.0 million for the ~~first~~second quarter mainly due ~~mainly~~ to the ~~previous~~timing of revenue received from equity investments of $1.2 million and the prior quarter ~~including a $7.7 million loss on the sale of investment securities, coupled with higher other income of $1.7 million. Other income~~ included $1.1 million in recoveries of certain charged-off loans acquired in a ~~previous~~ business ~~combination and higher income from equity investments of $750 thousand.~~combination.

Three Months Ended ~~March 31,~~June 30, 2023 Compared to Three Months Ended ~~March 31,~~June 30, 2022

Noninterest income for the ~~first~~second quarter of 2023 ~~increased $1.9~~decreased $1.2 million to ~~$7.9~~$6.0 million compared to the same quarter in 2022 mainly due to ~~higher~~lower revenue received from equity investments and other income of ~~$2.0~~$1.2 million and lower customer service fees of $0.6 million, partially offset by higher loan servicing income of ~~$335 thousand,~~$0.5 million from higher purchased mortgage servicing asset balances.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Noninterest income for the six months ended June 30, 2023 increased $0.8 million to $13.9 million compared to the same period in 2022. The increase was mainly due to higher loan servicing income from higher purchased mortgage servicing asset balances, lower valuation losses on loan held for sale, and higher rental income due to an increase in subleased facilities, partially offset by lower customer service fees of $455 thousand. The increase in other income was due mostly to higher income from equity investments of $1.7 million and the aforementioned $1.1 million in recoveries of certain charged-off loans acquired in a previous business combination, partially offset by lower gain of $771 thousand related to a sale-leaseback transaction recognized in the first quarter of 2022. The increase in loan servicing income was due mostly to the acquisition of mortgage servicing rights in the second quarter of 2022. The decrease in customer services ~~fees was due mainly to lower deposit activity fees of $437 thousand attributed to lower average deposit balances between periods.~~

fees.

Noninterest Expense

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


		Three Months Ended						Three Months Ended						Six Months Ended June 30,
($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		March 31, 2022			($ in thousands)	June 30, 2023		March 31, 2023		June 30, 2022		2023		2022
Salaries and employee benefits	Salaries and employee benefits	$	29,656	$	27,812	$	28,987		Salaries and employee benefits	$	28,282	$	29,656	$	28,264	$	57,938	$	57,251

Occupancy and equipment	Occupancy and equipment	5,526		5,740		5,637			Occupancy and equipment	5,603		5,526		5,741		11,129		11,378
Professional fees	Professional fees	4,072		3,193		2,839			Professional fees	4,001		4,072		4,001		8,073		6,840

Data processing	Data processing	1,563		1,744		1,828			Data processing	1,686		1,563		1,782		3,249		3,610

Regulatory assessments	Regulatory assessments	1,202		905		775			Regulatory assessments	1,301		1,202		1,021		2,503		1,796
Software and technology	Software and technology	3,274		3,197		2,700			Software and technology	3,579		3,274		2,747		6,853		5,447
Reversal of loan repurchase reserves	Reversal of loan repurchase reserves	(11)		(17)		(471)			Reversal of loan repurchase reserves	(808)		(11)		(490)		(819)		(961)
Amortization of other intangibles	Amortization of other intangibles	461		555		441			Amortization of other intangibles	462		461		313		923		754

Other expense	Other expense	3,878		4,466		3,702			Other expense	5,062		3,878		4,190		8,940		7,892
Noninterest expense before loss on investments in alternative energy partnerships		49,621		47,595		46,438
Loss on investments in alternative energy partnerships		1,618		608		158
Noninterest expense before (gain) loss on investments in alternative energy partnerships									Noninterest expense before (gain) loss on investments in alternative energy partnerships	49,168		49,621		47,569		98,789		94,007
(Gain) loss on investments in alternative energy partnerships									(Gain) loss on investments in alternative energy partnerships	(36)		1,618		1,043		1,582		1,201
Total noninterest expense	Total noninterest expense	$	51,239	$	48,203	$	46,596		Total noninterest expense	$	49,132	$	51,239	$	48,612	$	100,371	$	95,208

~~Table of C~~o ~~ntents~~

Three Months Ended ~~March 31, 2023 Compared to Three Months Ended December 31, 2022~~

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

Adjusted noninterest expense increased $777 thousand to $49.2 million for the first quarter compared to $48.5 million for the prior quarter. This increase was due to higher salaries and benefits of $1.8 million and regulatory assessments of $297 thousand, partially offset by lower professional fees of $370 thousand, and other expenses of $994 thousand.

~~Three Months Ended March 31,~~June 30, 2023 Compared to Three Months Ended March 31, 2023

Noninterest expense decreased $2.1 million to $49.1 million for the second quarter compared to the first quarter. The decrease was due primarily to (i) lower net losses in alternative energy partnership investments of $1.7 million, (ii) lower salaries and employee benefits of $1.4 million as the first quarter included $1.0 million of severance costs and higher payroll taxes, (iii) the reversal of a provision for loan repurchases of $0.8 million, partially offset by (iv) higher marketing, recruiting and other expense of $1.2 million and (v) higher software and technology expense of $0.3 million as we continue to invest in our technology infrastructure.

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Noninterest expense increased ~~$4.6~~$0.5 million to ~~$51.2~~$49.1 million for the ~~first~~second quarter of 2023 from ~~$46.6~~$48.6 million for the comparable 2022 period due mostly to ~~(i)~~ higher marketing, recruiting and other expense of $0.9 million and software and technology costs of $0.8 million related to investments in our technology infrastructure, partially offset by lower loss on investments in alternative energy partnerships of ~~$1.5~~$1.1 million.

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Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Noninterest expense for the six months ended June 30, 2023 increased $5.2 million to $100.4 million compared to the same period in 2022. The increase was due to higher (i) software and technology expense of $1.4 million related to investments in our technology infrastructure, (ii) ~~higher~~ professional fees of $1.2 million, ~~due mostly to higher~~including a $0.8 million increase in indemnified legal fees (net of ~~$446 thousand~~insurance recoveries), (iii) marketing, recruiting and ~~higher net indemnified legal costs~~other expenses of ~~$380 thousand for~~$1.0 million, (iv) regulatory assessments of $0.7 million as the ~~first quarter of~~FDIC increased assessment rates in 2023 ~~compared to net recoveries of $106 thousand during 2022, (iii) higher~~and (v) salaries and employee benefits of ~~$669 thousand~~$0.7 million due mostly to the ~~first quarter of 2023 including $1.0 million of~~aforementioned severance costs related to expense management, partially offset by lower headcount, (iv) higher software and technology costs of $574 thousand, and (v) higher regulatory assessments of $427 thousand due to higher assessment rates and (vi) lower reversal of loss on repurchased loans of $460 thousand.

~~(1) Non-GAAP measure.~~costs.

Income Tax Expense

For the three months ended June 30, 2023, March 31, 2023 ~~December 31, 2022~~ and ~~March 31,~~June 30, 2022, income tax expense was $6.7 million, $7.4 million, ~~$9.1 million,~~ and ~~$18.8~~$10.2 million resulting in an effective tax rate of ~~26.7%~~27.4%, ~~29.6%~~26.7% and ~~27.9%, respectively. The~~27.6%.

Income tax expense totaled $14.1 million for the six months ended June 30, 2023, representing an effective tax rate of 27.0%, compared to $28.9 million and an effective tax rate of 27.8% for the ~~full year 2023 is estimated to be 27% to 28%.~~six months ended June 30, 2022.

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

FINANCIAL CONDITION

Investment Securities

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

~~Table of C~~o ~~ntents~~

Investment Securities Available-for-Sale

The following table presents the amortized cost and fair value of the ~~investment~~AFS securities ~~available-for-sale~~ portfolio and the corresponding amounts of ~~gross~~ unrealized gains and losses recognized in AOCI as of the dates indicated:


		March 31, 2023						December 31, 2022							June 30, 2023								December 31, 2022 (1)
($ in thousands)	($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)		($ in thousands)	Amortized Cost		Unrealized Gain (Loss)		Allowance for Credit Losses		Fair Value		Amortized Cost		Unrealized Gain (Loss)		Fair Value
Securities available-for-sale:	Securities available-for-sale:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	10,332	$	10,279	$	(53)	$	11,241	$	11,187	$	(54)	SBA loan pool securities	$	9,251	$	(36)	$	—	$	9,215	$	11,241	$	(54)	$	11,187
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	84,739		84,376		(363)		40,431		40,206		(225)		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	82,913		(1,205)		—		81,708		40,431		(225)		40,206
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	97,579		92,751		(4,828)		99,075		93,191		(5,884)		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	95,760		(6,500)		—		89,260		99,075		(5,884)		93,191

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	125,917		115,371		(10,546)		90,832		80,492		(10,340)		Non-agency residential mortgage-backed securities	122,995		(11,487)		—		111,508		90,832		(10,340)		80,492

Collateralized loan obligations	Collateralized loan obligations	490,860		479,623		(11,237)		492,203		476,603		(15,600)		Collateralized loan obligations	490,534		(7,703)		—		482,831		492,203		(15,600)		476,603
Corporate debt securities	Corporate debt securities	195,789		176,027		(19,762)		175,781		166,618		(9,163)		Corporate debt securities	175,796		(27,191)		(1,036)		147,569		175,781		(9,163)		166,618
Total securities available-for-sale	Total securities available-for-sale	$	1,005,216	$	958,427	$	(46,789)	$	909,563	$	868,297	$	(41,266)	Total securities available-for-sale	$	977,249	$	(54,122)	$	(1,036)	$	922,091	$	909,563	$	(41,266)	$	868,297

(1)There was no ACL related to AFS securities at December 31, 2022.

~~Securities available-for-sale~~AFS securities were ~~$958.4~~$922.1 million at ~~March 31,~~June 30, 2023, an increase of ~~$90.1~~$53.8 million, or ~~10.4%~~6.2%, from $868.3 million at December 31, 2022. The increase was mainly due to purchases of $101.7 million, partly offset by calls of $20.0 million, principal payments of ~~$6.2~~$14.1 million, a $1.0 million provision for credit losses for corporate debt securities of other financial institutions due to downgrades in their ratings, and an increase in net unrealized losses of ~~$5.5~~$12.9 million.

Net unrealized losses on AFS securities ~~available-for-sale~~ were ~~$46.8~~$54.1 million at ~~March 31,~~June 30, 2023, compared to $41.3 million at December 31, 2022. The net unrealized gain or loss on AFS securities, ~~available-for-sale,~~ net of tax, is reflected in accumulated other comprehensive income (loss). ~~During~~The increases in unrealized net losses during the ~~first quarter of~~six months ended June 30, 2023 were due to wider credit spreads within

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corporate debt securities and the impact of higher market interest rates on agency CMOs and non-agency residential MBS, which was partly offset by improvement in the valuation of ~~CLOs, agency CMOs, and non-agency residential MBS securities resulted in higher net unrealized losses in our securities portfolio.~~CLOs.

CLOs totaled ~~$479.6~~$482.8 million and $476.6 million and were all AAA and AA-rated at ~~March 31,~~June 30, 2023 and December 31, 2022. We perform due diligence and ongoing credit quality review of our CLO holdings, which includes monitoring performance factors such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors.

During the three and six months ended June 30, 2023, we recorded a $1.0 million provision for credit losses on three corporate debt securities of other financial institutions that were downgraded to below investment grade by external credit agencies. We did not record credit impairment for any investment securities for the three and six months ended ~~March 31, 2023 or~~June 30, 2022.

We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment. ~~As of March 31, 2023,~~Except for the corporate debt securities noted above, we believe there was no other credit impairment, and the decline in fair value of our securities since acquisition was attributable to a combination of changes in interest rates and general volatility in ~~credit~~ market conditions. ~~We do~~As of June 30, 2023, we did not have the ~~current~~ intent to sell securities in an unrealized loss position and further believe it is more likely than not that we will not be required to sell these securities before their anticipated recovery. AsExcept for the corporate debt securities noted above, as of ~~March 31,~~June 30, 2023, all of our investment securities in an unrealized loss position received an investment grade credit rating.

~~Table of C~~o ~~ntents~~

Investment Securities Held-to-Maturity

The following table presents the amortized cost and fair value of ~~investment~~HTM securities ~~held-to-maturity~~ as of the dates indicated:


		March 31, 2023						December 31, 2022							June 30, 2023						December 31, 2022
($ in thousands)	($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)		($ in thousands)	Amortized Cost		Unrealized Gain (Loss)		Fair Value		Amortized Cost		Unrealized Gain (Loss)		Fair Value
Securities held-to-maturity:	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	$	152,937	$	127,985	$	(24,952)	$	153,033	$	123,226	$	(29,807)	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	152,843	$	(27,987)	$	124,856	$	153,033	$	(29,807)	$	123,226
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	61,380		50,638		(10,742)		61,404		49,458		(11,946)		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,359		(11,937)		49,422		61,404		(11,946)		49,458
Municipal securities	Municipal securities	114,203		94,292		(19,911)		114,204		89,776		(24,428)		Municipal securities	114,203		(21,436)		92,767		114,204		(24,428)		89,776

Total securities held-to-maturity	Total securities held-to-maturity	$	328,520	$	272,915	$	(55,605)	$	328,641	$	262,460	$	(66,181)	Total securities held-to-maturity	$	328,405	$	(61,360)	$	267,045	$	328,641	$	(66,181)	$	262,460

~~Securities held-to-maturity~~HTM securities totaled ~~$328.5~~$328.4 million at ~~March 31,~~June 30, 2023, compared to $328.6 million at December 31, 2022. At ~~March 31,~~June 30, 2023, HTM securities ~~held-to-maturity~~ included ~~$214.3~~$214.2 million in agency securities and $114.2 million in municipal securities.

During the first quarter of 2022, certain longer-duration fixed-rate ~~mortgage-backed securities~~MBS and municipal securities with an amortized cost basis of $346.0 million were transferred from the ~~available-for-sale~~AFS portfolio to the ~~held-to-maturity~~HTM portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which became part of the securities’ amortized cost basis. This amount, along with the unrealized loss included in AOCI, is subsequently amortized over the remaining life of the security as an adjustment to its yield using the interest method. As a result, there is no impact on the consolidated statements of operations.

~~Net~~As of June 30, 2023 and December 31, 2022, HTM securities had aggregate unrealized net losses ~~on securities held-to-maturity were $55.6~~of $61.4 million ~~at March 31, 2023, compared to~~and $66.2 million, ~~at December 31, 2022. For both periods, net unrealized losses included $15.5~~of which $15.3 million and $15.8 million related to ~~the unamortized portion of the~~ unrealized losses from the transfer of certain fixed-rate ~~mortgage-backed securities~~MBS and municipal securities from the ~~available-for-sale~~AFS portfolio to the ~~held-to-maturity portfolio.~~HTM portfolio in the prior year. These unrealized losses related primarily to changes in overall interest rates.

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The following table presents the fair values and weighted average yields using amortized cost of the AFS securities ~~available-for-sale~~ portfolio as of ~~March 31,~~June 30, 2023, based on the earlier of contractual 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	$	10,279	4.23	%	$	—	—	%	$	—	—	%	$	—	—	%	$	10,279	4.23	%	SBA loan pools securities	$	9,215	3.87	%	$	—	—	%	$	—	—	%	$	—	—	%	$	9,215	3.87	%
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	—		—	%	—		—	%	—		—	%	84,376		5.59	%	84,376		5.59	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	81,708		5.54	%	81,708		5.54	%
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	5,459		5.19	%	7,972		3.43	%	25,234		2.96	%	54,086		5.01	%	92,751		4.26	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	5,233		5.70	%	7,795		3.61	%	24,442		3.14	%	51,790		5.19	%	89,260		4.45	%

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	115,371		3.82	%	115,371		3.82	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	111,508		3.92	%	111,508		3.92	%

Collateralized loan obligations	Collateralized loan obligations	479,623		6.42	%	—		—	%	—		—	%	—		—	%	479,623		6.42	%	Collateralized loan obligations	482,831		6.88	%	—		—	%	—		—	%	—		—	%	482,831		6.88	%
Corporate debt securities	Corporate debt securities	—		—	%	163,514		4.95	%	12,513		5.73	%	—		—	%	176,027		5.00	%	Corporate debt securities	—		—	%	137,097		4.82	%	10,472		5.73	%	—		—	%	147,569		4.89	%
Total securities available-for-sale	Total securities available-for-sale	$	495,361	6.36	%	$	171,486	4.88	%	$	37,747	3.83	%	$	253,833	4.63	%	$	958,427	5.52	%	Total securities available-for-sale	$	497,279	6.81	%	$	144,892	4.76	%	$	34,914	3.95	%	$	245,006	4.70	%	$	922,091	5.77	%


		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)	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		($ in thousands)	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
Securities held-to-maturity:	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	$	—	—	%	$	—	—	%	$	9,354	2.51	%	$	143,583	2.70	%	$	152,937	2.69	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	9,344	2.52	%	$	143,499	2.70	%	$	152,843	2.69	%
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	—		—	%	—		—	%	—		—	%	61,380		2.64	%	61,380		2.64	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	—		—	%	—		—	%	—		—	%	61,359		2.64	%	61,359		2.64	%
Municipal securities	Municipal securities	—		—	%	—		—	%	26,900		2.31	%	87,303		2.71	%	114,203		2.62	%	Municipal securities	—		—	%	—		—	%	27,995		2.32	%	86,208		2.72	%	114,203		2.62	%

Total securities held-to-maturity	Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	36,254	2.36	%	$	292,266	2.69	%	$	328,520	2.66	%	Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	37,339	2.37	%	$	291,066	2.69	%	$	328,405	2.66	%

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Loans Receivable, Net

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


($ in thousands)	($ in thousands)	March 31, 2023		December 31, 2022		Amount Change		Percentage Change		($ in thousands)	June 30, 2023		December 31, 2022		Amount Change		Percentage Change
Commercial:	Commercial:									Commercial:
Commercial and industrial(1)	Commercial and industrial(1)	$	1,787,147	$	1,845,960	$	(58,813)	(3.2)	%	Commercial and industrial(1)	$	2,000,408	$	1,845,960	$	154,448	8.4	%
Commercial real estate	Commercial real estate	1,302,277		1,259,651		42,626		3.4	%	Commercial real estate	1,266,438		1,259,651		6,787		0.5	%
Multifamily	Multifamily	1,678,300		1,689,943		(11,643)		(0.7)	%	Multifamily	1,654,152		1,689,943		(35,791)		(2.1)	%
SBA	SBA	65,040		68,137		(3,097)		(4.5)	%	SBA	62,898		68,137		(5,239)		(7.7)	%
Construction	Construction	260,167		243,553		16,614		6.8	%	Construction	264,684		243,553		21,131		8.7	%

Total commercial loans	Total commercial loans	5,092,931		5,107,244		(14,313)		(0.3)	%	Total commercial loans	5,248,580		5,107,244		141,336		2.8	%
Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	1,877,114		1,920,806		(43,692)		(2.3)	%	Single family residential mortgage	1,820,721		1,920,806		(100,085)		(5.2)	%

Other consumer	Other consumer	84,335		86,988		(2,653)		(3.0)	%	Other consumer	86,905		86,988		(83)		(0.1)	%
Total consumer loans	Total consumer loans	1,961,449		2,007,794		(46,345)		(2.3)	%	Total consumer loans	1,907,626		2,007,794		(100,168)		(5.0)	%
Total loans(2)	Total loans(2)	7,054,380		7,115,038		(60,658)		(0.9)	%	Total loans(2)	7,156,206		7,115,038		41,168		0.6	%
Allowance for loan losses	Allowance for loan losses	(84,560)		(85,960)		1,400		(1.6)	%	Allowance for loan losses	(80,883)		(85,960)		5,077		(5.9)	%
Total loans receivable, net	Total loans receivable, net	$	6,969,820	$	7,029,078	$	(59,258)	(0.8)	%	Total loans receivable, net	$	7,075,323	$	7,029,078	$	46,245	0.7	%

(1)Includes warehouse lending balances of ~~$636.7~~$786.1 million and $602.5 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

(2)Total loans include net deferred loan origination costs (fees), purchased premiums (discounts), and fair value allocations of premiums (discounts) totaling $7.3 million and $7.1 million at ~~March 31,~~June 30, 2023 and December 31, 2022.

Total loans ended the ~~first~~second quarter of 2023 at ~~$7.05~~$7.16 billion, ~~down $60.7~~up $41.2 million from $7.12 billion at December 31, 2022, comprised primarily of a ~~$14.3~~$141.3 million ~~decrease~~increase in our commercial portfolio, ~~and~~offset by a ~~$46.3~~$100.2 million decrease in our consumer portfolio.

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the ~~decrease~~increase in our commercial portfolio included (i) a ~~$58.8~~$154.4 million ~~decrease commercial and industrial~~net increase in C&I loans, ~~comprised of~~including a ~~$93.0 million decrease in non-warehouse loans offset partially by a $34.2~~$183.6 million increase in warehouse lending balances, partly offset by a decrease in other C&I loans of $29.1 million, (ii) ~~an $11.6~~a $21.1 million increase in construction loans, (iii) a $6.8 million increase in CRE loans, partially offset by a (iv) $35.8 million decrease in multifamily loans driven by payoff activity, and (iii) a $3.1 million decrease in SBA loans, partially offset by (iv) a $42.6 million increase in commercial real estate loans and (v) a $16.6 million increase in construction loan balances.activity. The decrease in our consumer portfolio was due ~~mostly~~primarily to a ~~$43.7~~$100.1 million decrease in single-family residential (SFR) loans.

Loan fundings of ~~$398.9~~$840.1 million induring the ~~first quarter~~six months ended June 30, 2023 included net warehouse advances of ~~$34.2~~$183.6 million, offset by other loan paydowns and payoffs of ~~$453.9~~$794.1 million.

Loan concentrations were well-diversified between products and industries. ~~In particular, at March 31, 2023,~~Notably, the CRE portfolio of ~~$1.30~~$1.27 billion had balances related to office loans of ~~$359.8 million. This~~$351.9 million, which was 4.9% of total loans. The office portfolio was comprised of general office of ~~$273.7~~$265.1 million with a weighted average LTV of ~~54%~~53% and debt service coverage ratio of 1.6x and medical office of ~~$86.1~~$86.8 million with a weighted average LTV of ~~58%~~55% and debt service coverage ratio of ~~1.7x.~~2.3x.

Credit Quality Indicators

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The following table presents the risk categories for total loans by class of loans as of ~~March 31,~~June 30, 2023 and December 31, 2022:


($ in thousands)	($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2023
June 30, 2023												June 30, 2023
Commercial:	Commercial:											Commercial:
Commercial and industrial	Commercial and industrial	$	1,728,776	$	17,619	$	36,813	$	3,939	$	1,787,147	Commercial and industrial	$	1,923,203	$	30,998	$	36,848	$	9,359	$	2,000,408
Commercial real estate	Commercial real estate	1,291,705		7,780		2,792		—		1,302,277		Commercial real estate	1,250,928		12,251		3,259		—		1,266,438
Multifamily	Multifamily	1,649,269		14,018		15,013		—		1,678,300		Multifamily	1,636,243		2,995		14,914		—		1,654,152
SBA	SBA	53,479		999		10,562		—		65,040		SBA	50,864		1,256		10,476		302		62,898
Construction	Construction	260,167		—		—		—		260,167		Construction	264,684		—		—		—		264,684

Consumer:	Consumer:											Consumer:
Single family residential mortgage	Single family residential mortgage	1,840,511		11,338		25,265		—		1,877,114		Single family residential mortgage	1,783,553		3,001		34,167		—		1,820,721
Other consumer	Other consumer	83,872		119		344		—		84,335		Other consumer	86,132		402		371		—		86,905
Total	Total	$	6,907,779	$	51,873	$	90,789	$	3,939	$	7,054,380	Total	$	6,995,607	$	50,903	$	100,035	$	9,661	$	7,156,206


($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2022
Commercial:
Commercial and industrial	$	1,749,284	$	49,399	$	43,273	$	4,004	$	1,845,960
Commercial real estate	1,248,196		1,745		9,710		—		1,259,651
Multifamily	1,658,521		2,997		28,425		—		1,689,943
SBA	55,789		800		11,548		—		68,137
Construction	243,553		—		—		—		243,553

Consumer:
Single family residential mortgage	1,889,911		9,101		21,794		—		1,920,806
Other consumer	86,599		138		251		—		86,988
Total	$	6,931,853	$	64,180	$	115,001	$	4,004	$	7,115,038

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, total criticized and classified assets decreased ~~$36.6~~$22.6 million to ~~$146.6~~$160.6 million at ~~March 31,~~June 30, 2023 from decreases in ~~all categories as described below.~~special mention and substandard loans, offset by an increase in doubtful loans.

Total classified assets, consisting of loans risk rated substandard, doubtful and loss, decreased ~~$24.3~~$9.3 million to ~~$94.7~~$109.7 million at ~~March 31,~~June 30, 2023. The decrease was due mostly to payoffs and paydowns of $59.2 million and upgrades of ~~$14.5 million and payoffs, paydowns and other reductions aggregating $38.8~~$3.7 million, partially offset by downgrades of ~~$29.0~~$53.6 million. At ~~March 31,~~June 30, 2023 ~~and December 31, 2022~~ loans risk rated doubtful related to five C&I relationships, compared to one ~~commercial and industrial relationship.~~C&I relationship at December 31, 2022.

Total criticized assets, consisting of loans risk rated special mention, decreased ~~$12.3~~$13.3 million to ~~$51.9~~$50.9 million at ~~March 31,~~June 30, 2023 compared to $64.2 million at December 31, 2022 due mostly to upgrades of ~~$30.9~~$34.1 million and payoffs, paydowns and other reductions ~~aggregating $6.6~~of $16.0 million, partially offset by downgrades of ~~$14.2 million and upgrades from substandard loans of $11.0~~$36.8 million.

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Nonperforming Assets

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


($ in thousands)	($ in thousands)	March 31, 2023			December 31, 2022			Amount Change		Percentage Change		($ in thousands)	June 30, 2023			December 31, 2022			Amount Change		Percentage Change
Loans past due 90 days or more still on accrual	Loans past due 90 days or more still on accrual	$	—		$	—		$	—	—	%	Loans past due 90 days or more still on accrual	$	—		$	—		$	—	—	%
Nonaccrual loans	Nonaccrual loans	56,545			55,251			1,294		2.3	%	Nonaccrual loans	67,306			55,251			12,055		21.8	%
Total nonperforming loans	Total nonperforming loans	56,545			55,251			1,294		2.3	%	Total nonperforming loans	67,306			55,251			12,055		21.8	%
Other real estate owned	Other real estate owned	—			—			—		—	%	Other real estate owned	882			—			882		—	%
Total nonperforming assets	Total nonperforming assets	$	56,545		$	55,251		$	1,294	2.3	%	Total nonperforming assets	$	68,188		$	55,251		$	12,937	23.4	%

Nonaccrual loans to total loans	Nonaccrual loans to total loans	0.80		%	0.78		%					Nonaccrual loans to total loans	0.94		%	0.78		%
Nonperforming loans to total loans	Nonperforming loans to total loans	0.80		%	0.78		%					Nonperforming loans to total loans	0.94		%	0.78		%
Total nonperforming assets to total assets	Total nonperforming assets to total assets	0.56		%	0.60		%					Total nonperforming assets to total assets	0.73		%	0.60		%
ALL to nonperforming loans	ALL to nonperforming loans	149.54		%	155.58		%					ALL to nonperforming loans	120.17		%	155.58		%
ACL to nonperforming loans	ACL to nonperforming loans	158.04		%	165.18		%					ACL to nonperforming loans	126.12		%	165.18		%

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

Additional interest income of approximately ~~$933 thousand~~$1.0 million and $1.9 million would have been recorded during the three and six months ended ~~March 31,~~June 30, 2023, had these loans been paid in accordance with their original terms throughout the periods indicated.

~~Non-performing~~At June 30, 2023, non-performing loans were $67.3 million, and included $33.5 million of SFR mortgage loans, $21.2 million of C&I loans and $9.6 million of SBA loans. During the six months ended June 30, 2023, non-performing loans increased ~~$1.3~~$12.1 million due to ~~$56.5 million as of March 31, 2023, of which $8.8 million, or 16%, related to loans in a current payment status. The increase was due mostly to~~total additions of ~~$16.2~~$32.9 million, ~~partially~~ offset by ~~$13.8~~$19.8 million in ~~payoffs, paydowns,~~charge-offs, amortization and ~~charge-offs,~~other removals and $1.1 million in loans returning to accrual status. ~~Of the $16.2~~Excluding SFR mortgages, which are well-secured with low loan-to-value ratios, non-performing loans decreased $0.3 million from year-end. At June 30, 2023, there were $2.7 million of non-performing loans, ~~placed~~primarily consisting of SFR mortgages that were in a current payment status, however are considered nonaccrual based on ~~non-accrual status, $8.6~~other criteria.

At June 30, 2023, non-performing assets included $0.9 million ~~related to SFR loans.~~of real estate owned, consisting of one single-family residence we acquired in the second quarter.

Modifications to Borrowers Experiencing Financial Difficulty (effective January 1, 2023 upon adoption of ASU 2022-02)

During the three and six months ended ~~March 31,~~June 30, 2023, we had 21 and 3 loan modifications made to borrowers experiencing financial difficulty, with an aggregate balance of ~~$5.0~~$5.3 million at June 30, 2023, of which one ~~commercial and industrial~~C&I loan of $3.9 million was previously classified as a TDR. At ~~March 31,~~June 30, 2023, ~~both~~$3.9 million of the $5.3 million in modified loans made to borrowers experiencing financial difficulty were ~~current.~~past due.

Troubled Debt Restructurings (for modifications to borrowers experiencing financial difficulty prior to January 1, 2023)

At ~~March 31,~~June 30, 2023 and December 31, 2022, we had 1110 and 15 loans classified as TDRs, with an aggregate balance of ~~$8.7~~$8.0 million and $16.1 million. The decrease in TDRs during the ~~three~~six months ended ~~March 31,~~June 30, 2023 was due mostly to the aforementioned $3.9 million ~~commercial and industrial~~C&I loan that was restructured during 2022 ~~was~~being modified and accounted for as a new loan in the first quarter of 2023, and a~~$3.4~~$4.0 million ~~paydown~~in paydowns of ~~a commercial and industrial loan.~~two C&I loans.

Allowance for Credit Losses (ACL) - Loans

The ACL, which includes the reserve for unfunded loan commitments, totaled ~~$89.4~~$84.9 million, or ~~1.27%~~1.19% of total loans, at ~~March 31,~~June 30, 2023, compared to $91.3 million, or 1.28% of total loans, at December 31, 2022. The ~~$1.9~~$6.4 million decrease in the ACL was due to: (i) net charge-offs of ~~$3.9~~$9.2 million ~~of which $3.2 million related to commercial and industrial loans,~~ and (ii) ~~$3.2~~$1.3 million ~~from lower loan balances and changes in portfolio mix and (iii) $500 thousand~~ lower RUC from lower unfunded commitments, partially offset by ~~(iv) new~~(iii) higher specific reserves ~~totaling $3.2~~of $3.3 million, and ~~(v)~~(iv) a ~~$2.5~~$0.9 million increase in general reserves due mainly to the

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impact of the deterioration in the macroeconomic outlook. The ACL coverage of non-performing loans was ~~158%~~126% at ~~March 31,~~June 30, 2023 compared to 165% at December 31, 2022.

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

~~Table of C~~o ~~ntents~~


($ in thousands)	($ in thousands)	March 31, 2023			December 31, 2022			($ in thousands)	June 30, 2023			December 31, 2022

Allowance for credit losses:	Allowance for credit losses:							Allowance for credit losses:
Allowance for loan losses (ALL)	Allowance for loan losses (ALL)	$	84,560		$	85,960		Allowance for loan losses (ALL)	$	80,883		$	85,960
Reserve for unfunded loan commitments	Reserve for unfunded loan commitments	4,805			5,305			Reserve for unfunded loan commitments	4,005			5,305
Total allowance for credit losses (ACL)	Total allowance for credit losses (ACL)	$	89,365		$	91,265		Total allowance for credit losses (ACL)	$	84,888		$	91,265

ALL to total loans	ALL to total loans	1.20		%	1.21		%	ALL to total loans	1.13		%	1.21		%
ACL to total loans	ACL to total loans	1.27		%	1.28		%	ACL to total loans	1.19		%	1.28		%

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


		Three Months Ended March 31,												Three Months Ended June 30,
($ in thousands)	($ in thousands)	2023						2022							($ in thousands)	2023						2022
		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	$	85,960	$	5,305	$	91,265	$	92,584	$	5,605	$	98,189		Balance at beginning of period	$	84,560	$	4,805	$	89,365	$	93,226	$	5,405	$	98,631

Loans charged off	Loans charged off	(3,949)		—		(3,949)		(231)		—		(231)			Loans charged off	(5,667)		—		(5,667)		(494)		—		(494)
Recoveries of loans previously charged off	Recoveries of loans previously charged off	49		—		49		32,215		—		32,215			Recoveries of loans previously charged off	326		—		326		1,561		—		1,561
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(3,900)		—		(3,900)		31,984		—		31,984			Net (charge-offs) recoveries	(5,341)		—		(5,341)		1,067		—		1,067

(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	2,500		(500)		2,000		(31,342)		(200)		(31,542)			(Reversal of) provision for credit losses	1,664		(800)		864		(500)		500		—
Balance at end of period	Balance at end of period	$	84,560	$	4,805	$	89,365	$	93,226	$	5,405	$	98,631		Balance at end of period	$	80,883	$	4,005	$	84,888	$	93,793	$	5,905	$	99,698


	Six Months Ended June 30,
($ in thousands)	2023						2022
	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	$	85,960	$	5,305	$	91,265	$	92,584	$	5,605	$	98,189


Loans charged off	(9,616)		—		(9,616)		(725)		—		(725)
Recoveries of loans previously charged off	375		—		375		33,776		—		33,776
Net recoveries (charge-offs)	(9,241)		—		(9,241)		33,051		—		33,051

(Reversal of) provision for credit losses	4,164		(1,300)		2,864		(31,842)		300		(31,542)
Balance at end of period	$	80,883	$	4,005	$	84,888	$	93,793	$	5,905	$	99,698

The following table presents a summary of net (charge-offs) recoveries and the annualized ratio of net ~~charge-offs~~(charge-offs) recoveries to average loans by loan class for the periods indicated:

Three Months Ended March 31,
($ in thousands) 2023 2022
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 $ (3,244) $ 1,733,055 (0.15) % $ 31,235 $ 2,632,387 4.75 %
Commercial real estate (300) 1,297,498 (0.09) % — 1,322,949 — %
Multifamily — 1,689,938 — % — 1,339,067 — %
SBA 24 32,244 0.30 % 745 116,154 2.57 %
Construction — 255,344 — % — 188,795 — %
Consumer:
Single family residential mortgage (371) 1,897,763 (0.08) % 28 1,562,478 0.01 %
Other consumer (9) 84,786 (0.04) % (24) 97,516 (0.10) %
Total loans $ (3,900) $ 6,990,628 (0.22) % $ 31,984 $ 7,259,346 1.76 %

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	Three Months Ended June 30,
($ in thousands)	2023						2022
	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	$	(4,428)	$	1,853,235	(0.96)	%	$	1,262	$	2,457,281	0.21	%
Commercial real estate	—		1,311,584		—	%	—		1,213,438		—	%
Multifamily	—		1,660,788		—	%	—		1,457,185		—	%
SBA	(795)		29,437		(10.80)	%	(136)		70,225		(0.77)	%
Construction	—		267,908		—	%	—		219,029		—	%

Consumer:
Single family residential mortgage	1		1,848,748		—	%	154		1,755,719		0.04	%
Other consumer	(119)		84,916		(0.56)	%	(213)		93,160		(0.91)	%
Total loans	$	(5,341)	$	7,056,616	(0.30)	%	$	1,067	$	7,266,037	0.06	%

Net charge-offs were ~~$3.9~~$5.3 million during the ~~first~~second quarter of 2023, compared to net recoveries of ~~$32.0~~$1.1 million during the comparable 2022 period. Net increase in net charge-offs in the ~~first~~second quarter of 2023 were mainly due to charge-offs within the ~~commercial~~C&I and ~~industrial portfolio, and~~SBA portfolio.


	Six Months Ended June 30,
($ in thousands)	2023						2022
	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	$	(7,672)	$	1,793,476	(0.86)	%	$	32,497	$	2,544,351	2.55	%
Commercial real estate	(300)		1,304,580		(0.05)	%	—		1,267,891		—	%
Multifamily	—		1,675,283		—	%	—		1,398,452		—	%
SBA	(771)		30,833		(5.00)	%	609		93,062		1.31	%
Construction	—		261,661		—	%	—		203,996		—	%

Consumer:
Single family residential mortgage	(370)		1,873,120		(0.04)	%	182		1,659,633		0.02	%
Other consumer	(128)		84,851		(0.30)	%	(237)		95,326		(0.50)	%
Total loans	$	(9,241)	$	7,023,804	(0.26)	%	$	33,051	$	7,262,711	0.91	%

Net charge-offs were $9.2 million during the six months ended June 30, 2023, compared to net recoveries of $33.1 million during the comparable 2022 period. The increase in net charge-offs between periods were due to charge-offs in the ~~first quarter~~C&I

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portfolio in 2023, and the comparable 2022 ~~included~~period including a $31.3 million ~~related to a~~ recovery from the settlement of a loan previously charged-off in 2019.

~~Table of C~~o ~~ntents~~

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


		March 31, 2023						December 31, 2022							June 30, 2023						December 31, 2022
($ in thousands)	($ 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		($ 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:													Commercial:
Commercial and industrial	Commercial and industrial	$	32,644	$	1,787,147	25.3	%	$	34,156	$	1,845,960	25.9	%	Commercial and industrial	$	32,823	$	2,000,408	28.0	%	$	34,156	$	1,845,960	25.9	%
Commercial real estate	Commercial real estate	16,119		1,302,277		18.5	%	15,977		1,259,651		17.7	%	Commercial real estate	15,767		1,266,438		17.7	%	15,977		1,259,651		17.7	%
Multifamily	Multifamily	15,038		1,678,300		23.8	%	14,696		1,689,943		23.8	%	Multifamily	14,697		1,654,152		23.1	%	14,696		1,689,943		23.8	%
SBA	SBA	2,097		65,040		0.9	%	2,648		68,137		1.0	%	SBA	1,387		62,898		0.9	%	2,648		68,137		1.0	%
Construction	Construction	6,425		260,167		3.7	%	5,850		243,553		3.4	%	Construction	6,053		264,684		3.7	%	5,850		243,553		3.4	%

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	11,481		1,877,114		26.6	%	12,050		1,920,806		27.0	%	Single family residential mortgage	9,518		1,820,721		25.4	%	12,050		1,920,806		27.0	%
Other consumer	Other consumer	756		84,335		1.2	%	583		86,988		1.2	%	Other consumer	638		86,905		1.2	%	583		86,988		1.2	%

Total	Total	$	84,560	$	7,054,380	100.0	%	$	85,960	$	7,115,038	100.0	%	Total	$	80,883	$	7,156,206	100.0	%	$	85,960	$	7,115,038	100.0	%

Servicing Rights

We have retained servicing rights from certain sales of SFR mortgage loans and SBA loans and purchased mortgage servicing rights from unrelated third parties. Purchased mortgage servicing rights are recorded at the purchase price at the time of acquisition, which approximates the fair value. Subsequent to acquisition, we account for these servicing rights using the amortization method. We utilize a subservicer to service all of the loans underlying the purchased mortgage servicing rights.

Loans underlying retained and purchased servicing rights are not included in our consolidated statements of financial condition.

Mortgage servicing rights totaled ~~$21.7~~$21.1 million and $22.5 million at ~~March 31,~~June 30, 2023 and December 31, 2022, which are included in other assets in the accompanying consolidated balance sheets. We purchased $22.7 million of SFR mortgage servicing rights, with underlying mortgage balances of $1.73 billion, during the second quarter of 2022. At ~~March 31,~~June 30, 2023,

the carrying value of these purchased servicing rights was ~~$20.7~~$20.2 million and the unpaid principal balance of the loans underlying these purchased servicing rights was ~~$1.66~~$1.62 billion.

During the three and six months ended ~~March 31,~~June 30, 2023, we recognized loan servicing income of $0.6 million and $1.1 million. During the three and six months ended June 30, 2022, we recognized loan servicing income of ~~$547 thousand~~$0.1 million and ~~$212 thousand.~~$0.3 million.

Alternative Energy Partnerships

We invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits) and other tax benefits. These investments help promote the development of renewable energy sources and lower the cost of housing for residents by lowering homeowners’ monthly utility costs.

The following table presents the activity related to our investment in alternative energy partnerships for the three and six months ended ~~March 31,~~June 30, 2023 and 2022:


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2023		2022			($ in thousands)	2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	21,410	$	25,888		Balance at beginning of period	$	19,427	$	25,156	$	21,410	$	25,888

Return of capital	Return of capital	(365)		(574)			Return of capital	(352)		(582)		(717)		(1,156)
Gain (loss) on investments using HLBV method	Gain (loss) on investments using HLBV method	(1,618)		(158)			Gain (loss) on investments using HLBV method	36		(1,043)		(1,582)		(1,201)
Balance at end of period	Balance at end of period	$	19,427	$	25,156		Balance at end of period	$	19,111	$	23,531	$	19,111	$	23,531
Unfunded equity commitments at end of period	Unfunded equity commitments at end of period	$	—	$	—		Unfunded equity commitments at end of period	$	—	$	—	$	—	$	—

~~During the three months ended March 31, 2023 and 2022, we did not fund into our alternative energy partnerships but received a return of capital of $365 thousand and $574 thousand.~~

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During the three months ended ~~March 31,~~June 30, 2023 and 2022, we received a return of capital of $0.4 million and $0.6 million. During the six months ended June 30, 2023 and 2022, we received a return of capital of $0.7 million and $1.2 million. We did not make any capital contributions during the periods indicated.

During the three months ended June 30, 2023 and 2022, we recognized a net gain on investment of $36 thousand and a net loss on investment of $1.0 million. During the six months ended June 30, 2023 and 2022, we recognized net losses on investment of $1.6 million and ~~$158 thousand.~~$1.2 million. From an income tax benefits perspective, we recognized no investment tax credits during these periods; however, we recorded income tax expense of $10 thousand and income tax benefits of $0.3 million related to these investments ~~of $467 thousand and $46 thousand~~ for the three months ended ~~March 31,~~June 30, 2023 and 2022 and income tax benefits of $0.5 million and $0.3 million during the six months ended June 30, 2023 and 2022.

For additional information, see Note 12 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Deposits

The following table shows the composition of deposits by type as of the dates indicated:


		March 31, 2023				December 31, 2022							June 30, 2023				December 31, 2022
($ 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	$	2,506,616	36.1	%	$	2,809,328	39.5	%	$	(302,712)	Noninterest-bearing deposits	$	2,446,693	35.6	%	$	2,809,328	39.5	%	$	(362,635)
Interest-bearing demand deposits	Interest-bearing demand deposits	1,862,003		26.8	%	1,947,247		27.3	%	(85,244)		Interest-bearing demand deposits	1,713,465		24.9	%	1,947,247		27.3	%	(233,782)

Savings and money market accounts	Savings and money market accounts	998,365		14.3	%	1,174,925		16.5	%	(176,560)		Savings and money market accounts	1,057,326		15.4	%	1,174,925		16.5	%	(117,599)
Certificates of deposit of $250,000 or less	Certificates of deposit of $250,000 or less	1,178,786		17.0	%	793,040		11.1	%	385,746		Certificates of deposit of $250,000 or less	1,245,279		18.2	%	793,040		11.1	%	452,239

Certificates of deposit of more than $250,000	Certificates of deposit of more than $250,000	406,204		5.8	%	396,381		5.6	%	9,823		Certificates of deposit of more than $250,000	408,313		5.9	%	396,381		5.6	%	11,932
Total deposits	Total deposits	$	6,951,974	100.0	%	$	7,120,921	100.0	%	$	(168,947)	Total deposits	$	6,871,076	100.0	%	$	7,120,921	100.0	%	$	(249,845)

Total deposits were ~~$6.95~~$6.87 billion at ~~March 31,~~June 30, 2023, a decrease of ~~$168.9~~$249.8 million, or ~~2.4%~~3.5%, from $7.12 billion at December 31, 2022 due ~~mostly~~ to lower noninterest-bearing checking balances of ~~$302.7~~$362.6 million, lower interest-bearing demand deposits of $233.8 million, and lower savings and money market balances of ~~$176.6 million and lower interest-bearing demand deposits of $85.2~~$117.6 million, partially offset by higher certificates of deposits of ~~$395.6~~$464.2 million.

We continue to focus on growing granular relationship-based deposits and strategically replacing short-term wholesale funding as we actively manage our funding costs. We also executed a $300 million cash flow hedge during the first quarter of 2023 to further manage our interest rate risk and reduce our exposure to higher funding costs resulting from higher interest rates. Noninterest-bearing deposits totaled ~~$2.51~~$2.45 billion and represented 36% of total deposits at ~~March 31,~~June 30, 2023 compared to $2.81 billion and 39% at December 31, 2022.

~~Insured~~Brokered deposits were $1.08 billion and $614.9 million at June 30, 2023 and December 31, 2022. During the six months ended June 30, 2023, we added short-term brokered deposits to increase our liquidity due to the operating environment during this period.

As of ~~$4.77~~June 30, 2023, insured deposits of $4.80 billion and collateralized deposits of ~~$314.6~~$314.8 million represented ~~73%~~74% of total deposits, ~~at March 31, 2023,~~ compared to insured deposits of $3.93 billion and collateralized deposits of $341.6 million, ~~which represented~~ or 60% of total deposits at December 31, 2022.

Brokered deposits were $1.01 billion and $614.9 million at March 31, 2023 and December 31, 2022. During the three months ended March 31, 2023, we added short-term brokered deposits to increase our liquidity due to the current operating environment.

The following table presents the scheduled maturities of certificates of deposit as of ~~March 31,~~June 30, 2023:


($ 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	$	543,007	$	236,277	$	277,078	$	122,424	$	1,178,786	Certificates of deposit of $250,000 or less	$	499,334	$	354,316	$	268,673	$	122,956	$	1,245,279
Certificates of deposit of more than $250,000	Certificates of deposit of more than $250,000	138,621		184,075		41,128		42,380		406,204		Certificates of deposit of more than $250,000	185,869		141,654		61,390		19,400		408,313
Total certificates of deposit	Total certificates of deposit	$	681,628	$	420,352	$	318,206	$	164,804	$	1,584,990	Total certificates of deposit	$	685,203	$	495,970	$	330,063	$	142,356	$	1,653,592

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Borrowings

We have various available lines of credit. These include the ability to borrow funds from time to time on a long-term, short-term, or overnight basis from the FHLB, the FRB, or other financial institutions. The following table presents our borrowings as of the dates indicated:


		March 31, 2023				December 31, 2022			June 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Weighted Average Interest Rate	Weighted Average Maturity (years)	Outstanding Balance		Outstanding Balance		($ in thousands)	Weighted Average Interest Rate	Weighted Average Maturity (years)	Outstanding Balance		Outstanding Balance
FHLB advances:	FHLB advances:							FHLB advances:
Overnight advances	Overnight advances	5.11%	0.01	$	325,000	$	20,000	Overnight advances	—%	—	$	—	$	20,000
Term advances	Term advances	2.91%	3.25	611,000		611,000		Term advances	2.91%	3.00	611,000		611,000
Term advances (putable)	Term advances (putable)	3.44%	4.75	200,000		100,000		Term advances (putable)	3.44%	4.50	200,000		100,000
Unamortized costs	Unamortized costs			(3,330)		(3,652)		Unamortized costs			(3,003)		(3,652)
Total FHLB advances	Total FHLB advances	3.63%	2.59	$	1,132,670	$	727,348	Total FHLB advances	3.04%	3.37	$	807,997	$	727,348
FRB borrowings:	FRB borrowings:							FRB borrowings:
Overnight advances		5.00%	0.01	$	600,000	$	—
Short-term advances								Short-term advances	5.25%	0.02	$	340,000	$	—

In light of ~~current~~market volatility in the first half of 2023, we proactively performed liquidity-enhancing measures, including additional advances from the FHLB and draws on available FRB ~~facilities, during~~facilities. We reduced our excess liquidity toward the ~~first~~end of the second quarter ~~of 2023.~~as market volatility began to stabilize.

FHLB Advances. FHLB advances are collateralized by a blanket lien on all real estate loans. At ~~March 31,~~June 30, 2023, our secured borrowing capacity with the FHLB totaled ~~$2.37~~$2.39 billion, of which the Bank was eligible to borrow an additional ~~$821.9 million~~$1.16 billion based on qualifying loans with an aggregate unpaid principal balance of ~~$3.50~~$3.47 billion as of that date.

As of ~~March 31,~~June 30, 2023, FHLB advances increased ~~$405.3~~$80.0 million, or ~~55.7%~~10.9%, to ~~$1.13 billion~~$808.0 million mainly due to an increase in ~~overnight borrowings of $305.0 million and~~ term putable advances of $100.0 million, partially offset by decrease in overnight advances of $20.0 million.

FRB Borrowings. At ~~March 31,~~June 30, 2023, the Bank had borrowing capacity with the Federal Reserve ~~Bank~~ of ~~San Francisco (the “Federal Reserve”) of $1.51~~$1.45 billion, including the secured borrowing capacity through the FRB Discount Window, ~~Borrower-in-Custody (“BIC”),~~BIC and ~~Bank Term Funding (“BTFP”)~~BTFP programs. The FRB credit programs are collateralized by certain qualifying loans with an unpaid principal balance of ~~$1.47~~$1.40 billion and securities with a carrying value of ~~$524.3~~$515.3 million.

We utilized available capacity in the FRB Discount Window and BIC programs through ~~$600.0~~$340.0 million in overnight borrowings, but did not utilize the BTFP and there was no outstanding borrowing under this program at ~~March 31,~~June 30, 2023.

Other Borrowings. The Bank maintains available unsecured federal funds lines with ~~five~~six correspondent banks totaling ~~$210.0~~$290.0 million, with no outstanding borrowings at ~~March 31,~~June 30, 2023.

The Bank also has the ability to perform unsecured overnight borrowing from various financial institutions through AFX. The availability of such unsecured borrowings fluctuates regularly, is subject to the counterparties discretion and totaled ~~$345.0~~$365.0 million and $445.0 million at ~~March 31,~~June 30, 2023 and December 31, 2022. ~~Borrowings~~There were no borrowings under the AFX ~~totaled zero~~ at ~~March 31,~~June 30, 2023 and December 31, 2022.

In addition, the holding company maintains a $50.0 million revolving line of credit, with no borrowings under this line of credit at ~~March 31,~~June 30, 2023 and December 31, 2022.

For additional information, see Note 6 - Federal Home Loan Bank Advances, Federal Reserve Bank Borrowings and Other Borrowings of the Notes to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Table of Contents

Long-term Debt

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

~~Table of C~~o ~~ntents~~


				March 31, 2023				December 31, 2022							June 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Interest Rate	Maturity Date	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
Senior notes	Senior notes	5.25%	4/15/2025	$	175,000	$	(679)	$	175,000	$	(722)	Senior notes	5.25%	4/15/2025	$	174,000	$	(609)	$	175,000	$	(722)
Subordinated notes (1)	Subordinated notes (1)	4.375%	10/30/2030	85,000		(1,853)		85,000		(1,899)		Subordinated notes (1)	4.375%	10/30/2030	85,000		(1,797)		85,000		(1,899)
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 Statutory Trust III, junior subordinated debentures	SOFR + 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		—		PMB Capital Trust III, junior subordinated debentures	SOFR + 2.00%	10/8/2034	10,310		—		10,310		—
Total	Total			$	277,527	$	(2,532)	$	277,527	$	(2,621)	Total			$	276,527	$	(2,406)	$	277,527	$	(2,621)

During the three and six months ended June 30, 2023, we repurchased senior notes with an outstanding balance of $1.0 million at a discount and recognized an $80 thousand gain.

At ~~March 31,~~June 30, 2023, we were in compliance with all covenants under our long-term debt agreements.

Liquidity Management

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

Banc of California, N.A.

Primary Sources of Liquidity: The ~~Bank's~~Bank’s liquidity, represented by cash and cash equivalents and AFS securities, ~~available-for-sale,~~ is a product of its operating, investing, and financing activities. The ~~Bank's~~Bank’s primary sources of funds are deposits, payments and maturities of outstanding loans and investment securities; sales of loans, investment securities, and other short-term investments; and funds provided from operations. While scheduled payments and maturities of loans, investment securities and other short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.

At ~~March 31,~~June 30, 2023, we had primary liquidity of ~~$1.73~~$1.00 billion, including total cash and cash equivalents of ~~$1.01 billion~~$283.7 million and unpledged AFS securities ~~available-for-sale~~ of ~~$724.2~~$716.4 million. Our cash increased ~~$782.1~~$54.8 million from December 31, 2022 but decreased $727.2 million from March 31, 2023 as we reduced the excess liquidity that we deployed in the first quarter of 2023 as part of a conservative strategy to hold extra liquidity due to the ~~current~~ operating ~~environment.~~environment during this period.

Secondary Sources of Liquidity: The Bank also generates cash through secured and unsecured secondary sources of funds. The Bank maintains pre-established secured lines of credit with the FHLB and the FRB as secondary sources of liquidity to provide funds for lending and investment activities and to enhance interest rate risk and liquidity risk management. At ~~March 31,~~June 30, 2023, we had available unused secured borrowing capacities of ~~$821.9 million~~$1.16 billion from the FHLB and ~~$913.9 million~~$1.11 billion through the FRB Discount Window, BIC and BTFP programs.

The Bank has additional sources of secondary liquidity through pre-established unsecured federal funds lines with correspondent banks and pre-approved unsecured overnight borrowing lines with various financial institutions through the AFX platform totaling ~~$555.0~~$655.0 million at ~~March 31,~~June 30, 2023. These facilities are subject to counterparty discretion.

As of ~~March 31,~~June 30, 2023, the Company had high levels of liquidity available with total cash and cash equivalents of ~~$1.01 billion,~~$283.7 million, unpledged AFS securities ~~available-for-sale~~ of ~~$724.2~~$716.4 million, and unused borrowing capacity of ~~$2.29~~$2.93 billion, resulting in total primary and secondary liquidity available of ~~$4.03~~$3.93 billion. This was 2.2 times total uninsured and uncollateralized deposits of ~~$1.87~~$1.76 billion.

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Banc of California, Inc.

Primary Sources of Liquidity: The primary sources of funds for Banc of California, Inc., on a stand-alone holding company basis, are dividends and intercompany tax payments from the Bank, outside borrowing, and its ability to raise capital and issue debt securities. Dividends from the Bank are largely dependent upon the ~~Bank's~~Bank’s earnings and are subject to restrictions under certain regulations that limit its ability to transfer funds to the holding company. OCC regulations impose various restrictions on the ability of a bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. Generally, a well-capitalized bank may make capital distributions during any calendar year equal to up to 100 percent of year-to-date net income plus retained net income for the two preceding years without prior OCC approval. However, any dividend paid by the Bank would be limited by the need to maintain its well-capitalized status plus the capital buffer in order to avoid additional dividend restrictions (Refer to Capital - Dividend Restrictions below for additional information). Currently, the Bank does not have sufficient dividend-paying capacity to declare and pay such dividends to the holding company without obtaining prior approval from the OCC under the applicable regulations. During the three and six months ended ~~March 31,~~June 30, 2023, the Bank paid ~~$20.0~~$50.0 million and $70.0 million of dividends to Banc of California, Inc. At ~~March 31,~~June 30, 2023, Banc of California, Inc. had ~~$35.8~~$52.2 million in cash, all of which was on deposit at the Bank.

Secondary Sources of Liquidity: In addition, the holding company has a $50.0 million revolving line of ~~credit and there~~credit. There were no borrowings under this line of credit at ~~March 31,~~June 30, 2023 and at December 31, 2022, and we were in compliance with all covenants.

Commitments and Contractual Obligations

The following table presents our commitments and contractual obligations as of ~~March 31,~~June 30, 2023:


		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 Years Through Five Years		Over Five Years		($ in thousands)	Total Amount Committed		Within One Year		More Than One Year Through Three Years		More Than Three Years Through Five Years		Over Five Years
Commitments to extend credit	Commitments to extend credit	$	226,240	$	19,938	$	145,390	$	34,054	$	26,858	Commitments to extend credit	$	200,765	$	24,005	$	115,965	$	35,195	$	25,600
Unused lines of credit	Unused lines of credit	1,591,443		1,191,283		269,822		103,862		26,476		Unused lines of credit	1,378,247		946,093		291,952		114,201		26,001
Standby letters of credit	Standby letters of credit	9,153		6,257		2,896		—		—		Standby letters of credit	9,133		8,237		896		—		—
Total commitments	Total commitments	$	1,826,836	$	1,217,478	$	418,108	$	137,916	$	53,334	Total commitments	$	1,588,145	$	978,335	$	408,813	$	149,396	$	51,601
FHLB advances and FRB borrowings	FHLB advances and FRB borrowings	$	1,736,000	$	925,000	$	291,000	$	520,000	$	—	FHLB advances and FRB borrowings	$	1,151,000	$	340,000	$	311,000	$	500,000	$	—

Long-term debt	Long-term debt	277,527		—		175,000		—		102,527		Long-term debt	276,527		—		174,000		—		102,527
Operating and capital lease obligations	Operating and capital lease obligations	32,823		8,501		14,345		7,235		2,742		Operating and capital lease obligations	31,514		8,459		13,947		6,471		2,637
Certificates of deposit	Certificates of deposit	1,584,990		1,420,186		162,676		2,128		—		Certificates of deposit	1,653,592		1,511,236		141,322		1,034		—
Total contractual obligations	Total contractual obligations	$	3,631,340	$	2,353,687	$	643,021	$	529,363	$	105,269	Total contractual obligations	$	3,112,633	$	1,859,695	$	640,269	$	507,505	$	105,164

At ~~March 31,~~June 30, 2023, we had unfunded commitments of ~~$17.1~~$15.7 million, ~~$7.7~~$7.5 million, and ~~$9.4~~$20.0 million for LIHTC investments, SBIC investments, and other ~~investments, respectively.~~investments.

Capital

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

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Regulatory Capital

The Company and the Bank are subject to the regulatory capital adequacy guidelines that are established by the Federal banking regulators. Under the relevant rules and including the required conservation buffer, common equity Tier 1 capital, Tier 1 risk-based capital and total risk-based capital ratio minimums are 7.0%, 8.5% and 10.5%~~, respectively.~~.

The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:


		Banc of California, Inc.		Banc of California, NA		Minimum Capital Requirements		Well-Capitalized Requirements (Bank)			Capital Conservation Buffer Requirements				Banc of California, Inc.			Banc of California, NA			Minimum Capital Requirements			Well-Capitalized Requirements (Bank)	Capital Conservation Buffer Requirements
March 31, 2023
June 30, 2023														June 30, 2023

Total risk-based capital	Total risk-based capital	14.22	%	15.93	%	8.00	%		10.00	%		10.50	%	Total risk-based capital		14.26	%		15.64	%		8.00	%		10.00	%	10.50	%
Tier 1 risk-based capital	Tier 1 risk-based capital	11.79	%	14.83	%	6.00	%		8.00	%		8.50	%	Tier 1 risk-based capital		11.88	%		14.60	%		6.00	%		8.00	%	8.50	%
Common equity tier 1 capital	Common equity tier 1 capital	11.79	%	14.83	%	4.50	%		6.50	%		7.00	%	Common equity tier 1 capital		11.88	%		14.60	%		4.50	%		6.50	%	7.00	%
Tier 1 leverage	Tier 1 leverage	9.65	%	12.14	%	4.00	%		5.00	%		N/A		Tier 1 leverage		9.39	%		11.56	%		4.00	%		5.00	%	N/A

December 31, 2022	December 31, 2022													December 31, 2022

Total risk-based capital	Total risk-based capital	14.21	%	16.02	%	8.00	%		10.00	%		10.50	%	Total risk-based capital		14.19	%		16.00	%		8.00	%		10.00	%	10.50	%
Tier 1 risk-based capital	Tier 1 risk-based capital	11.80	%	14.94	%	6.00	%		8.00	%		8.50	%	Tier 1 risk-based capital		11.78	%		14.92	%		6.00	%		8.00	%	8.50	%
Common equity tier 1 capital	Common equity tier 1 capital	11.80	%	14.94	%	4.50	%		6.50	%		7.00	%	Common equity tier 1 capital		11.78	%		14.92	%		4.50	%		6.50	%	7.00	%
Tier 1 leverage	Tier 1 leverage	9.70	%	12.25	%	4.00	%		5.00	%		N/A		Tier 1 leverage		9.70	%		12.25	%		4.00	%		5.00	%	N/A

Dividend Restrictions

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

Our principal source of funds for dividend payments is dividends received from the Bank. Federal banking laws and regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, in the case of the Bank, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Accordingly, any dividend granted by the Bank would be limited by the need to maintain its well capitalized status plus the capital buffer in order to avoid additional dividend restrictions. As described above, any near term dividend by the Bank will require OCC approval. During the three and six months ended ~~March 31,~~June 30, 2023, the Bank paid ~~$20.0~~$50.0 million and $70.0 million in dividends to Banc of California, Inc.

During the three and six months ended ~~March 31,~~June 30, 2023, we declared and paid dividends on our common stock of $0.10 and $0.20 per share totaling ~~$5.6~~$5.9 million and $11.5 million.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

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

We maintain both a management asset/liability committee (“Management ALCO”), comprised of select members of senior management, and a joint asset/liability committee of the Boards of Directors of the Company and the Bank (“Board ALCO”, together with Management ALCO, “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and

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spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our economic value of equity analysis.

In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we evaluate various strategies including:

•Complementing our current loan origination platform through strategic acquisitions of whole loans,

•Strategically managing multiple warehouse relationships,

•Originating shorter-term consumer loans,

•Managing the level of investments and duration of investment securities,

•Managing our deposits to establish stable deposit relationships, and

•Using FHLB advances and/or certain derivatives such as swaps as hedges to align maturities and repricing terms.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors. As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and our economic value of equity.

Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income

Interest rate risk results from our banking activities and is the primary market risk for us. Interest rate risk is caused by the following factors:

•Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;

•Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;

•Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and

•Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate, SOFR and London Interbank Offered Rate.

Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Management of our interest rate risk is overseen by the Board ALCO, which delegates the day to day management of interest rate risk to the Management ALCO. Management ALCO ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program. Board ALCO reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of our asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and derivatives.

EVE measures the period end present value of assets minus the present value of liabilities. Asset liability management uses this value to measure the changes in the economic value of the Company under various interest rate scenarios. In some ways, the economic value approach provides a broader scope than net income volatility approach since it captures all anticipated cash flows.

The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest margin, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates

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is expected to compress our net interest margin, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.

At ~~March 31,~~June 30, 2023, our interest rate risk profile ~~reflects a~~remains “neutral” ~~position, a shift from an “asset sensitive”~~, in line with our interest rate risk profile position as of March 31, 2023 and December 31, 2022. ~~The shift was primarily due to the increase in short-term fundings that were added to increase our on-balance sheet liquidity in response to market events at the end of the quarter.~~ Given the uncertainty of the magnitude, timing and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary materially from those predicted by our model.

The following table presents the projected change in the Company’s economic value of equity at ~~March 31,~~June 30, 2023 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change:


		Change in Interest Rates in Basis Points (bps) (1)													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
March 31, 2023
June 30, 2023														June 30, 2023

+200 bps	+200 bps	$	1,555,862	$	5,009	0.3	%	$	306,990	$	1,664	0.5	%	+200 bps	$	1,498,619	$	(8,929)	(0.6)	%	$	319,495	$	7,443	2.4	%
+100 bps	+100 bps	1,561,461		10,608		0.7	%	306,300		974		0.3	%	+100 bps	1,509,568		2,020		0.1	%	315,895		3,843		1.2	%
0 bps	0 bps	1,550,853						305,326						0 bps	1,507,548						312,052
-100 bps	-100 bps	1,518,231		(32,622)		(2.1)	%	301,635		(3,691)		(1.2)	%	-100 bps	1,483,218		(24,330)		(1.6)	%	305,290		(6,762)		(2.2)	%
-200 bps	-200 bps	1,452,739		(98,114)		(6.3)	%	295,615		(9,711)		(3.2)	%	-200 bps	1,431,619		(75,929)		(5.0)	%	295,539		(16,513)		(5.3)	%

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

Due to the transformation of the franchise to our relationship-based banking model since 2019, with higher relative percentages of noninterest-bearing deposits and variable rate commercial loans, we believe we are positioned for the current interest rate environment with a neutral balance sheet. Our one year gap ratio, which compares the percentage of earning assets that are scheduled to mature or reprice within one year to the percentage of rate sensitive term liabilities that are scheduled to mature or reprice within one year, was ~~14%~~15% at ~~March 31,~~June 30, 2023.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Act) as of ~~March 31,~~June 30, 2023 was carried out under the supervision and with the participation of the Company’s Principal Executive Officer, Principal Financial Officer and other members of the Company’s senior management. The Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of ~~March 31,~~June 30, 2023, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Principal Executive Officer and Principal Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the ~~three~~six months ended ~~March 31,~~June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within

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the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of any

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control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II — OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a material adverse effect on the Company’s financial statements or operations.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors that appeared under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2022 other than as set forth below.

Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the merger with PacWest.

Before the merger with PacWest and the subsequent merger of the Bank and PacWest Bank (the “bank merger”) may be completed, the requisite approvals, consents and non-objections must be obtained from the Federal Reserve and the California Department of Financial Protection and Innovation (“CDFPI”). Under the Investment Agreements, before the $400 million (aggregate) equity investment (the “equity investment”) by the Investors may be completed, the Warburg Investors and the Centerbridge Investors each must have received reasonably satisfactory oral confirmation from staff of the legal division of the Federal Reserve that the consummation of the applicable equity investment will not result in such Investor being deemed to have, or to have acquired, “control” of the Company for purposes of the Bank Holding Company Act of 1956 (the “BHC Act”) or the Change in Bank Control Act of 1978 (the “CIBC Act”). Other approvals, waivers or consents from regulators may also be required, both for the merger and the equity investment.

In determining whether to grant these approvals and confirmations, such regulatory authorities consider a variety of factors. These approvals or confirmations could be delayed or not obtained at all, including due to (i) a party’s regulatory standing (or adverse development in respect thereof), (ii) the relationship between the Company, on the one hand, and the Investors, on the other hand or (iii) any other factors considered by regulators when granting such approvals or confirmations, including governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally.

The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement or the Investment Agreements. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying or jeopardizing the completion of any of the transactions contemplated by the merger agreement or the Investment Agreements, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reducing the anticipated benefits of the merger (including the equity investment and its inclusion as additional CET1 regulatory capital, assuming the merger and the equity investment are consummated successfully and within the expected timeframe). In addition, there can be no assurance that any such conditions, limitations, obligations or restrictions will not result in abandonment of the merger and the equity investment. Additionally, the completion of the merger and the equity investments is conditioned on the absence of certain orders, injunctions or decrees by any governmental entity of competent jurisdiction that would prevent, prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement or the equity investment, as applicable.

The Company and PacWest have agreed in the merger agreement to use reasonable best efforts to consummate the transactions contemplated by the merger agreement on the terms and conditions set forth herein, including using reasonable best efforts to satisfy all conditions and covenants under their control in the merger agreement. However, under the terms of the merger agreement, neither the Company nor PacWest, nor any of their respective subsidiaries, is required or permitted (without the written consent of the other party), to take any action, or commit to take or refrain from taking any action, or agree to any condition or restriction, in connection with obtaining the required permits, authorizations, consents, orders or approvals of governmental entities that would (i) reasonably be expected to require the combined company or any other person to issue equity securities or otherwise raise capital in excess of the amount contemplated by the equity investment under the merger agreement; or (ii) (A) not apply to a similarly sized financial holding company and state member bank that are well-capitalized and well-managed and (B) be materially more burdensome, individually or in the aggregate, on the operations, business or profitability of the combined company and its subsidiaries than those imposed on the Company or the Bank as of the date of the merger agreement (a “materially burdensome regulatory condition”).

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The Company and the Investors have agreed in the Investment Agreements to use reasonable best efforts to promptly prepare and file for all permits, consents, approvals, confirmations and authorizations of all third parties and governmental entities that are necessary or advisable to consummate the equity investment as promptly as reasonably practicable, and to respond to any request for information from any government authority related to the foregoing, so as to enable the parties to consummate the transaction contemplated by the Investment Agreements. However, under the terms of the Investment Agreements, neither the Company nor any of its subsidiaries is permitted (without the written consent of the other party), and none of the Investors or any of their affiliates is required, to take any action, or commit to take or refrain from taking any action, or accept or agree to any condition or restriction, that would reasonably be expected to cause any Investor, any of their respective affiliates or any of their partners or principals to (A) “control” the Company or be required to become a bank holding company, in each case, pursuant to the BHC Act; (B) “control” the Company or be required to provide prior notice pursuant to the CIBC Act; (C) serve as a source of financial strength to the Company pursuant to the BHC Act; or (D) enter into any capital or liquidity maintenance agreement or any similar agreement with any governmental entity, provide capital support to the Company, PacWest or any of their respective subsidiaries or otherwise commit to or contribute any additional capital to, provide other funds to, or make any other investment in, the Company, PacWest or any of their respective subsidiaries.

Consummation of the merger and each Investor’s equity investment is conditioned upon the substantially concurrent closing of an aggregate $400 million equity investment.

As a condition to the consummation of the merger with PacWest, the Company must substantially concurrently therewith receive a $400 million (in the aggregate) or greater equity investment in the Company’s equity securities qualifying as CET1 capital (“qualifying equity securities”). As a condition to the consummation of each Investor’s equity investment, the Company must have substantially concurrently received an investment of $400 million or greater in the Company’s qualifying equity securities. Although the Company has legally binding agreements with each of the Warburg Investors and the Centerbridge Investors pursuant to which the Investors (in the aggregate) have agreed to invest $400 million in the Company’s qualifying equity securities substantially concurrently with the consummation of the merger, the obligation of each Investor to make such investment is subject to various conditions. If any Investor fails to consummate its portion of the equity investment, the Company may be required to seek a new investment in the Company’s qualifying equity securities from other third parties, which may or may not be available (and may or may not be available on the same terms as the Investment Agreements). Failure to consummate (or a delay in consummating) the equity investment may cause the failure or delay in the ability of the parties to consummate the merger.

Failure to consummate the merger and equity investment could negatively impact the Company.

The consummation of the merger is subject to the receipt of requisite regulatory and stockholder approvals and the satisfaction of other closing conditions, including the substantially concurrent consummation of the equity investment, as noted above. If the merger is not completed for any reason, including as a result of the Company stockholders or PacWest stockholders failing to grant the applicable requisite stockholder approval at the applicable company’s special stockholders meeting or the imposition of a materially burdensome regulatory condition resulting in either the Company or PacWest refusing to consummate the merger, there may be various adverse consequences and the Company may experience negative reactions from the financial markets and from its customers and employees. For example, the Company’s business may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of consummating the merger. Additionally, if the merger agreement is terminated, the market price of the Company’s common stock could decline to the extent that current market prices reflect a market assumption that the merger and/or the equity investment will be beneficial and will be consummated. The Company also could be subject to litigation related to any failure to complete the merger or the equity investment or to proceedings commenced against the Company to perform its obligations under the merger agreement or the Investment Agreements. If the merger agreement is terminated under certain circumstances, the Company may be required to pay a termination fee of $39.5 million to PacWest and remit a portion of the termination fee obtained by the Company from PacWest to the Investors.

Additionally, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement and the Investment Agreements (including the equity investment and the balance sheet repositioning (as defined below)), as well as the costs and expenses of preparing, filing, printing and mailing of a joint proxy statement/prospectus in connection with the merger, and all filing and other fees paid in connection with the merger. If the merger and/or the equity investment is not completed, the Company would have to pay these expenses without realizing the expected benefits of the merger and/or the equity investment. Although the Company may be entitled to receive a termination fee of $39.5 million from PacWest and/or expense reimbursement with respect to certain costs and expenses associated with the balance sheet repositioning if the merger agreement is terminated under certain circumstances, (i) such payments may not be sufficient to fully compensate the Company for the losses it may incur in connection with a failure of the merger to be consummated and (ii) the Company may be required to remit a portion of the termination fee to the Investors.

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Combining the Company and PacWest may be more difficult, costly or time-consuming than expected, and the Company may fail to realize the anticipated benefits of the merger.

The success of the merger will depend, in part, on the ability of the Company and PacWest to dispose certain assets in the planned balance sheet repositioning (the “balance sheet repositioning”) along with anticipated cost savings from combining the businesses of the Company and PacWest. To realize the anticipated benefits and cost savings from the merger, the Company and PacWest must successfully dispose of assets at closing, which is inherently subject to market conditions and the risk that such conditions will be less favorable than what the parties expected when entering into the merger agreement, and successfully integrate and combine their businesses in a manner that permits those benefits and cost savings to be realized without adversely affecting current revenues and future growth. If the Company and PacWest are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of, the merger and the other transactions contemplated by the merger agreement (including the balance sheet repositioning), as well as any delays encountered in the integration process, could have an adverse effect upon the capital position, revenues, levels of expenses and operating results of the combined company following the completion of the merger, which may adversely affect the value of the common stock of the combined company following the completion of the merger.

The Company and PacWest have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with its stakeholders or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on the Company during this pre-closing period and for an undetermined period after consummation of the merger on the combined company.

Furthermore, the board of directors and executive leadership of the combined company and bank will consist of former directors and executive officers from each of the Company and PacWest, as well as a director designated by the Warburg Investors. Combining the boards of directors and management teams of each company into a single board of directors and a single management team could require the reconciliation of differing priorities and philosophies.

The combined company may be unable to retain the Company and/or PacWest personnel successfully after the merger is completed.

The success of the merger will depend, in part, on the combined company’s ability to retain the talent and dedication of key employees currently employed by the Company and PacWest. It is possible that these employees may decide not to remain with the Company or PacWest, as applicable, while the merger is pending or with the combined company after the merger is consummated. If the Company and PacWest are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company and PacWest could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. The Company and PacWest also may not be able to locate or retain suitable replacements for any key employees who leave either company.

The Company will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on the Company. These uncertainties may impair the Company’s ability to retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with the Company to seek to change existing business relationships with the Company. In addition, subject to certain exceptions, the Company has agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its ability to consummate (i) the transactions contemplated by the merger agreement on a timely basis without the consent of PacWest and (ii) the equity investment on a timely basis without the consent of the Investors. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the merger.

The Company has incurred and is expected to incur substantial costs related to the merger and integration.

The Company has incurred and expects to incur a number of non-recurring costs associated with the merger and the equity investment. These costs include legal, financial, accounting, consulting and other advisory fees, retention, severance and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs,

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closing, integration and other related costs. Some of these costs are payable by the Company regardless of whether the merger is completed.

Stockholder litigation related to the merger and/or the equity investment could prevent or delay the completion of the merger and/or the equity investment, result in the payment of damages or otherwise negatively impact the business and operations of the Company.

Stockholders may bring claims in connection with the proposed merger and/or the proposed equity investment and, among other remedies, may seek damages or an injunction preventing the merger and/or the equity investment from closing. If any plaintiff were successful in obtaining an injunction prohibiting the Company or PacWest from completing the merger or any other transactions contemplated by the merger agreement or the Company and the Investors from consummating the equity investment (or any portion thereof), then such injunction may delay or prevent the effectiveness of the merger and the equity investment and could result in costs to the Company, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the merger and/or the equity investment. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of the Company.

The merger agreement may be terminated in accordance with its terms, and the merger may not be consummated.

The obligation of the merger agreement parties to consummate the merger is subject to a number of conditions that must be satisfied or waived in order to consummate the merger. Those conditions include, among other things: (i) receiving the requisite approval by each of the Company stockholders and the PacWest stockholders of certain matters relating to the merger at each company’s respective special stockholders meeting; (ii) the receipt of required regulatory approvals from the Federal Reserve and the CDFPI; (iii) the absence of any order, injunction, decree or other legal restraint preventing the consummation of the merger, the bank merger or any of the other transactions contemplated by the merger agreement or making the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement illegal; and (iv) the Form S-4 for the merger being declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended; and (v) the consummation of a total of $400 million or greater investment in the Company’s qualifying equity securities substantially concurrently with the closing of the merger. Each party’s obligation to consummate the merger is also subject to certain additional conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party (including the absence of any material adverse effect, as defined in the merger agreement), (b) the performance in all material respects by the other party of its obligations under the merger agreement and (c) the receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

These conditions to the consummation of the merger may not be satisfied or waived in a timely manner or at all, and, accordingly, the merger may not be consummated. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after the requisite stockholder approvals, or PacWest or the Company may elect to terminate the merger agreement in certain other circumstances, including by the Company upon the occurrence of a material adverse effect under certain circumstances with respect to PacWest or by PacWest upon the occurrence of a material adverse effect under certain circumstances with respect to the Company.

The Investment Agreements may be terminated in accordance with their respective terms and the equity investment may not be consummated.

The obligation of the parties to each Investment Agreement to consummate the equity investment is subject to a number of conditions which must be satisfied or waived in order to consummate the equity investment. Those conditions include, among other things: (i) the substantially concurrent consummation of the merger and the satisfaction of the conditions to the merger under the merger agreement; (ii) the Warburg Investors and the Centerbridge Investors each must have received reasonably satisfactory oral confirmation from staff of the legal division of the Federal Reserve that the consummation of the applicable equity investment will not result in such Investor being deemed to have, or to have acquired, “control” of the Company for purposes of the BHC Act or CIBC Act; (iii) the absence of any order, injunction, decree or other legal restraint preventing the completion of the equity investment or making the completion of the equity investment or any of the other transactions contemplated by the Investment Agreements illegal; and (iv) the consummation of a total of $400 million or greater investment in the Company’s qualifying equity securities. Each party’s obligation to consummate the equity investment is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, and (b) the performance in all material respects by the other party of its obligations under the applicable Investment Agreement.

These conditions to the consummation of the equity investment may not be satisfied or waived in a timely manner or at all, and, accordingly, the equity investment may not be consummated. In addition, the parties to each Investment Agreement can mutually decide to terminate the applicable Investment Agreement at any time, before or after the requisite stockholder approvals, or the parties may elect to terminate the applicable Investment Agreement in certain other circumstances.

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Failure to complete the balance sheet repositioning could delay or hinder regulatory approvals.

Although neither the Company’s nor PacWest’s balance sheet repositioning is a condition to consummate the merger under the merger agreement, the regulators may not approve the merger until the balance sheet repositioning can be completed to minimize capital and liquidity risk of the combined company. Therefore, if either the Company or PacWest is unable to complete its balance sheet repositioning, regulatory approval may be delayed or denied.

The Company may suffer significant losses from the balance sheet repositioning.

Under the merger agreement, the Company and PacWest commit to use reasonable best efforts to enter into agreements to complete the balance sheet repositioning at the best commercially reasonably available price. Therefore, depending on the existence of various potential buyers and competitive prices, the Company may sell its assets at a significant loss.

Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Mergers or other ownership changes.

Both the Company and PacWest are expected to incur taxable losses in connection with the balance sheet repositioning. To the extent these taxable losses exceed our or PacWest’s taxable income, as applicable, unused losses will carry forward to offset a portion of future taxable income, if any, until such unused losses expire, if at all.

Under Sections 382 and 383 of the Internal Revenue Code (the “Code”), these federal net operating loss carryforwards, certain losses incurred following the mergers, and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in our or PacWest’s ownership. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Our ability to utilize net operating loss carryforwards, certain losses incurred following the mergers, and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the mergers or other transactions. Similar rules may apply under state tax laws. We have not yet determined the amount of the cumulative change in our and PacWest’s ownership resulting from the mergers or other transactions, or any resulting limitations on our ability to utilize our net operating loss carryforwards, certain losses incurred following the mergers, and other tax attributes. Such limitations could result in increased future income tax liability to us and our future cash flows could be adversely affected. The effect of such limitations could also adversely affect our regulatory capital ratios. In certain circumstances, to preserve our ability to utilize our tax attributes without limitation, we may take actions to attempt to prevent an “ownership change” from occurring, including by adopting provisions that would limit or discourage stockholders from acquiring 5% or more of the Company, or in the case of stockholders that already own 5% or more of the Company, from increasing their ownership. There can be no assurances that such actions will be available, or if such actions are available, whether we will decide to undertake any such actions and if such actions are undertaken, whether such actions would be effective in preventing an “ownership change” pursuant to Section 382 of the Code.

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 Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan
Common Stock:
From January 1, 2023 to January 31, 2023 100 $ 15.93 — $ —
From February 1, 2023 to February 28, 2023 700 $ 17.88 — $ 35,000
From March 1, 2023 to March 31, 2023 508,232 $ 13.35 410,946 $ 29,827
Total 509,032 $ 13.36 410,946


	Purchase of Equity Securities by the Issuer
	Total Number of Shares	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2023 to April 30, 2023	392,220	$	12.30	390,672	$	25,024,059
From May 1, 2023 to May 31, 2023	463,403	$	10.78	462,411	$	20,037,941
From June 1, 2023 to June 30, 2023	496,133	$	12.48	495,462	$	13,852,812
Total	1,351,756	$	11.85	1,348,545

During the three and six months ended ~~March 31,~~June 30, 2023, purchases of shares of common stock related to shares purchased under our stock repurchase program and shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under our employee stock benefit plans.

On February 13, 2023, we announced a repurchase program of up to $35 million of our common stock. The repurchase authorization expires in February 2024. Purchases may be made in open-market transactions, in block transactions on or off an

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exchange, in privately negotiated transactions, or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable

ITEM 5 - OTHER INFORMATION

None

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ITEM 6 - EXHIBITS





2.1			Agreement and Plan of Merger, dated as of July 25, by and among Registrant, Cal Merger Sub, Inc. and PacWest Bancorp (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on July 28, 2023 and incorporated herein by reference.)
3.1			Second Articles of Restatement of the charter of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 5, 2018 and incorporated herein by reference.)
3.2			~~Fifth~~Sixth 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~~May 15, 2023 and incorporated herein by reference.)











~~10.0~~10.1			~~Separation~~Employment Agreement, ~~and General Release,~~ dated as of ~~April 11,~~July 5, 2023, bybetween and among ~~the~~ Registrant and Banc of California, N.A. and ~~Lynn Hopkins.~~Joseph Kauder.
10.2			Investment Agreement, dated July 25 2023, by and between Registrant and affiliates of funds managed by Warburg Pincus LLC (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on July 28, 2023 and incorporated herein by reference.)
10.3			Investment Agreement, dated July 25 2023, by and between Registrant and investment vehicles sponsored, managed or advised by Centerbridge Partners, L.P. and its affiliates (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on July 28, 2023 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 ~~March 31,~~June 30, 2023 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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:	~~May 8,~~August 7, 2023	/s/ Jared Wolff
		Jared Wolff
		President and Chief Executive Officer (Principal Executive Officer)

Date:	~~May 8,~~August 7, 2023	/s/ Joseph Kauder
		Joseph Kauder
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)

Date:	August 7, 2023	/s/ Raymond Rindone
		Raymond Rindone
		Executive Vice President, ~~Interim~~Chief Accounting Officer and Deputy Chief Financial Officer ~~and Chief Accounting Officer~~ (~~Principal Financial Officer and~~ Principal Accounting Officer)

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