BANC of California (BANC) risk factors, FY2025 10-K

BANC of California's FY2025 10-K, filed Feb 27, 2026, lists 48 risk factors in 4 groups. Against the prior year's 54: 2 new, 8 dropped, 19 substantially reworded.

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Risk factors listed
484 groups
New this year
2vs 54 last year
Dropped
8since the prior 10-K
Substantially reworded
19of those kept
Section length
12k wordsItem 1A

What the changes say

  • Banc of California increased its total outstanding indebtedness to $3.0 billion and reported that 39% of its loans held for investment are adjustable rate loans.
  • The company added specific risk disclosures concerning payment processing compliance and losses from asset sales.

What changed since the prior 10-K

New

  • NewRisks Relating to Our Operations

    Our payment processing and merchant acquiring activities expose us to regulatory, fraud, third-party, and operational risks that could materially adversely affect our business and financial results

    Payment processing and merchant acquiring activities expose us to regulatory requirements from NACHA and card networks, fraud, chargebacks, and potential financial liabilities.

  • NewRisks Relating to Our Operations

    Changes in market conditions or strategic balance sheet actions may result in realized losses on investment securities or other assets

    Our balance sheet repositioning strategy and market conditions have resulted in realized and unrealized losses on investment securities, mortgage loans, and other financial assets.

Dropped

  • DroppedRisks Relating to Our Operations

    If 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

  • DroppedRisks Relating to Our Operations

    Fraud 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

  • DroppedRisks Relating to Our Operations

    We face significant operational risks, including fraud and loss due to execution errors, data processing and technology errors

  • DroppedRisks Relating to Our Operations

    Our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses

  • DroppedRisks Relating to Our Operations

    We rely on numerous external vendors

  • DroppedRisks Relating to Our Operations

    We have suffered significant losses from the balance sheet repositioning and may suffer significant losses from future asset sales

  • DroppedRisks Related to Credit and Interest Rate

    We have a number of large credit relationships and individual commitments

  • DroppedRisks Relating to External Factors and Markets

    We are subject to risk arising from the soundness of other financial institutions and counterparties

    Payment processing compliance risks with Visa, Mastercard, and NACHA.

Reworded

  • 99% rewrittenRisks Relating to Our Operations

    The development and use of new technologies, including artificial intelligence (“AI”), presents risks and challenges that may adversely impact our business

    Expanded to detail risks from third-party artificial intelligence tools, including service disruptions, compliance failures, processing errors, and unintentional disclosure of confidential information.

  • 76% rewrittenRisks Related to Credit and Interest Rates

    There 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

    Refined language regarding lending activities and allowance for credit losses by restructuring explanatory bullet points into continuous descriptive sentences.

  • 76% rewrittenRisks Related to Credit and Interest Rates

    Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank

    Added financial market disruptions and increased expenses to the consequences of instability and defaults at other financial institutions.

  • 73% rewrittenRisks Related to Credit and Interest Rates

    As of December 31, 2025, we had $2.5 billion of AFS securities, as compared with $2.2 billion of AFS securities as of December 31, 2024

    Updated figures to show $2.5 billion of AFS securities as of December 31, 2025, with $1.4 billion in unrealized loss positions totaling $196.9 million.

    Was: As 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

  • 68% rewrittenRisks Relating to Our Operations

    Our level of indebtedness could adversely affect our ability to raise capital and meet our debt obligations

    Updated total outstanding indebtedness to approximately $3.0 billion as of December 31, 2025.

  • 49% rewrittenRisks Related to Credit and Interest Rates

    Our loan portfolio possesses increased risk due to our level of adjustable rate loans

    Updated the proportion of adjustable-rate loans held for investment to approximately 39% as of December 31, 2025.

  • 46% rewrittenRisks Relating to External Factors and Markets

    Our 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

    Minor stylistic and reference formatting updates regarding economic conditions in California, Colorado, and North Carolina.

  • 45% rewrittenLegal and Compliance Risks

    We 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

    Minor stylistic change to internal cross-reference formatting regarding supervision and regulation.

  • 40% rewrittenLegal and Compliance Risks

    Changes in federal, state or local tax laws, or audits from tax authorities, could negatively affect our financial condition and results of operations

  • 38% rewrittenRisks Related to Credit and Interest Rates

    Our 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

  • 36% rewrittenLegal and Compliance Risks

    We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties

  • 35% rewrittenRisks Related to Credit and Interest Rates

    Our business may be adversely affected by credit risk associated with residential property and declining property values

  • 30% rewrittenRisks Relating to External Factors and Markets

    Severe 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

  • 29% rewrittenRisks Related to Credit and Interest Rates

    As of December 31, 2025, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion. As of December 31, 2024, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion

    Was: As 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

  • 24% rewrittenRisks Related to Credit and Interest Rates

    We may not be able to develop and maintain a strong core deposit base or other low cost funding sources

  • 24% rewrittenRisks Related to Credit and Interest Rates

    If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer

  • 23% rewrittenLegal and Compliance Risks

    We are a party to a variety of litigation and other actions

  • 23% rewrittenRisks Relating to Our Operations

    We have a net deferred tax asset that may not be fully realized

  • 22% rewrittenRisks Related to Credit and Interest Rates

    Our real estate loan portfolio is subject to certain risks including market, environmental and project-specific risks

All 48 risk factors

Headings as the filing states them, in filing order.

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 business99% rewritten
  6. 06To the extent we acquire other banks, bank branches, other assets, or other businesses, we may be negatively impacted by certain risks inherent with such acquisitions
  7. 07Acquiring other banks, bank branches, other assets or other businesses, also involves risks associated with integration, which may cause us to not fully realize the benefits of an acquisition
  8. 08Our payment processing and merchant acquiring activities expose us to regulatory, fraud, third-party, and operational risks that could materially adversely affect our business and financial resultsNew
  9. 09Managing reputational risk is important to attracting and maintaining clients, investors and employees
  10. 10We depend on key management personnel
  11. 11We have a net deferred tax asset that may not be fully realized23% rewritten
  12. 12Changes in market conditions or strategic balance sheet actions may result in realized losses on investment securities or other assetsNew
  13. 13Our level of indebtedness could adversely affect our ability to raise capital and meet our debt obligations68% rewritten

Risks Related to Credit and Interest Rates

  1. 14If actual losses on our loans exceed our estimates used to establish our allowance for credit losses, our business, financial condition and profitability may suffer24% rewritten
  2. 15There 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 portfolio76% rewritten
  3. 16Our business and operating results could be adversely affected by uncertainty in the political environment and governmental fiscal and monetary policies
  4. 17Our 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. 18Our business may be adversely affected by credit risk associated with residential property and declining property values35% rewritten
  6. 19Our real estate loan portfolio is subject to certain risks including market, environmental and project-specific risks22% rewritten
  7. 20Our loan portfolio possesses increased risk due to our level of adjustable rate loans49% rewritten
  8. 21Our underwriting practices may not protect us against losses in our loan portfolio
  9. 22Repayment 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. 23We are exposed to risk of environmental liabilities with respect to real properties acquired
  11. 24In addition to being affected by interest rates, the secondary mortgage markets are subject to investor demand for mortgage loans and MBS and investor yield requirements for those loans and securities. These conditions may fluctuate or even worsen in the future
  12. 25Any 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. 26As of December 31, 2025, we had $2.5 billion of AFS securities, as compared with $2.2 billion of AFS securities as of December 31, 202473% rewritten
  14. 27As of December 31, 2025, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion. As of December 31, 2024, we had $2.3 billion of HTM securities, which had a total fair value of $2.2 billion29% rewritten
  15. 28Our 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 borrowers38% rewritten
  16. 29Our business is subject to interest rate risk and variations in interest rates may hurt our profits
  17. 30A reduction in our credit ratings could adversely affect our access to capital and could increase our cost of funds
  18. 31We may not be able to develop and maintain a strong core deposit base or other low cost funding sources24% rewritten
  19. 32Liquidity risk could impair our ability to fund operations and jeopardize our financial condition
  20. 33Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank76% rewritten
  21. 34We are subject to regulatory capital requirements, which could be made more stringent in the discretion of our regulators
  22. 35The FRB may require us to commit capital resources or take other action to support the Bank
  23. 36We 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
  24. 37Our 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
  25. 38There 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. 39We 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 operations45% rewritten
  2. 40We are a party to a variety of litigation and other actions23% rewritten
  3. 41Changes in federal, state or local tax laws, or audits from tax authorities, could negatively affect our financial condition and results of operations40% rewritten
  4. 42Failure 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. 43Non-compliance with laws and regulations could result in fines or sanctions or operating restrictions
  6. 44We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties36% rewritten
  7. 45We 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. 46Severe 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 business30% rewritten
  2. 47Our 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 portfolio46% rewritten
  3. 48Strong competition within our market areas may limit our growth and profitability

Other BANC of California 10-Ks

  • FY2024 10-K risk factors
    54 risks

    Banc of California faces significant risks from credit exposure in residential and real estate loan portfolios. Integration of mergers and balance sheet repositioning strategy drive material operational and financial uncertainties. Cyber threats and dependence on third-party payment platforms like Deepstack present major operational challenges. Extensive regulatory oversight and interest rate volatility significantly impact capital requirements and net interest income.

    Filed Mar 03, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.