BANC of California (BANC) risk factors, FY2024 10-K

Risks Relating to Our Operations

1. 01New lines of business, new products and services, or strategic project initiatives, or new partnerships may subject us to additional risks
2. 02Our cybersecurity measures may not be sufficient to mitigate losses or exposure to cyber-attack or cyber theft
3. 03Our security measures may not protect us from systems failures or interruptions
4. 04We rely on communications, information, operating and financial control systems technology from third party service providers, and we may suffer an interruption in those systems
5. 05The development and use of new technologies, including artificial intelligence (“AI”), presents risks and challenges that may adversely impact our business
6. 06To the extent we acquire other banks, bank branches, other assets, or other businesses, such as the Merger and the Deepstack Acquisition, we may be negatively impacted by certain risks inherent with such acquisitions
7. 07Acquiring other banks, bank branches, other assets or other businesses, such as the Merger, also involves risks associated with integration, which may cause us to not fully realize the benefits of an acquisition
8. 08If we fail to comply with the applicable requirements of the payment card networks or NACHA, they could seek to fine us, suspend us or terminate our registrations
9. 09Fraud by merchants or others could adversely affect our business, and our merchants may be unable to satisfy obligations, including chargebacks, for which we may also be liable
10. 10We face significant operational risks, including fraud and loss due to execution errors, data processing and technology errors
11. 11Our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses
12. 12Managing reputational risk is important to attracting and maintaining clients, investors and employees
13. 13We depend on key management personnel
14. 14We rely on numerous external vendors
15. 15We have a net deferred tax asset that may not be fully realized
16. 16We have suffered significant losses from the balance sheet repositioning and may suffer significant losses from future asset sales
17. 17Our level of indebtedness could adversely affect our ability to raise capital and meet our debt obligations

Risks Related to Credit and Interest Rate

1. 18If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer
2. 19There are risks associated with our lending activities and our allowance for credit losses may prove to be insufficient to absorb actual losses in our loan portfolio
3. 20Our business and operating results could be adversely affected by uncertainty in the political environment and governmental fiscal and monetary policies
4. 21Our business may be adversely affected by difficult economic conditions, including inflationary pressures or volatility in the financial markets, which may impact our business, financial position, and results of operations
5. 22Our business may be adversely affected by credit risk associated with residential property and declining property values
6. 23Our real estate loan portfolio is subject to certain risks including market, environmental and project-specific risks
7. 24Our loan portfolio possesses increased risk due to our level of adjustable rate loans
8. 25Our underwriting practices may not protect us against losses in our loan portfolio
9. 26Repayment of our commercial and industrial loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may not be sufficient to repay the loan in the event of default
10. 27We are exposed to risk of environmental liabilities with respect to real properties acquired
11. 28In addition to being affected by interest rates, the secondary mortgage markets are subject to investor demand for mortgage loans and mortgage-backed securities and investor yield requirements for those loans and securities. These conditions may fluctuate or even worsen in the future
12. 29Any breach of representations and warranties made by us to our loan purchasers or credit default on our loan sales may require us to repurchase loans we have sold
13. 30As of December 31, 2024, we had $2.2 billion of AFS securities, as compared with $2.3 billion of AFS securities as of December 31, 2023
14. 31As of December 31, 2024, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion. As of December 31, 2023, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion
15. 32Our income property loans, consisting of commercial real estate and multi-family loans, involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers
16. 33Our business is subject to interest rate risk and variations in interest rates may hurt our profits
17. 34A reduction in our credit ratings could adversely affect our access to capital and could increase our cost of funds
18. 35We have a number of large credit relationships and individual commitments
19. 36We may not be able to develop and maintain a strong core deposit base or other low cost funding sources
20. 37Liquidity risk could impair our ability to fund operations and jeopardize our financial condition
21. 38Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank
22. 39We are subject to regulatory capital requirements, which could be made more stringent in the discretion of our regulators
23. 40The FRB may require us to commit capital resources or take other action to support the Bank
24. 41We may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed or on acceptable terms
25. 42Our holding company relies on dividends from the Bank for substantially all of its income and as the primary source of funds for cash dividends to our preferred, common, and NVCE stockholders
26. 43There can be no assurance as to the level of dividends we may pay on our common stock and NVCE stock

Legal and Compliance Risks

1. 44We operate in a highly regulated environment and our business, operations, and income may be adversely affected by changes in laws, rules, and regulations governing our operations
2. 45We are a party to a variety of litigation and other actions
3. 46Changes in federal, state or local tax laws, or audits from tax authorities, could negatively affect our financial condition and results of operations
4. 47Failure to comply with applicable laws or regulations, or to satisfy our regulators' supervisory expectations, could subject us to supervisory or enforcement action, which could adversely affect our business, financial condition, and results of operations
5. 48Non-compliance with laws and regulations could result in fines or sanctions or operating restrictions
6. 49We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties
7. 50We are subject to a wide range of laws related to anti-money laundering, economic sanctions, and prevention of financial crime, which could increase our costs or subject us to significant penalties

Risks Relating to External Factors and Markets

1. 51Severe weather events, natural disasters such as earthquakes and wildfires, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events could significantly impact our business
2. 52Our financial condition and results of operations are dependent on the national and local economy, particularly in the Bank’s market areas. A worsening in economic conditions in the market areas we serve may impact our earnings adversely and could increase the credit risk of our loan portfolio
3. 53We are subject to risk arising from the soundness of other financial institutions and counterparties
4. 54Strong competition within our market areas may limit our growth and profitability