Company: BANC-PF
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0001169770-25-000029
Chunk: 32

Company: BANC OF CALIFORNIA, INC.
Filing Date: 2025-08-08
Form: 10-Q
Item: Item 2
Chunk 32
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 the provision for loan and lease losses, the provision for unfunded loan commitments, the provision for AFS debt securities, and the provision for HTM debt securities.

Under the CECL methodology, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates. 

For further information regarding the calculation of the ACL on loans and leases held for investment using the CECL methodology, see Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" of our Form 10-K. 

In calculating our ACL, we continued to consider higher inflation rates, the Federal Reserve's monetary policy, the risk of a recession, technical or otherwise, and the impact of various geopolitical risks on the economy in our process for estimating expected credit losses given the changes in economic forecasts and assumptions along with the uncertainty related to the severity and duration of the economic consequences resulting from such events. Our methodology and framework along with the 4-quarter reasonable and supportable forecast period and 2-quarter reversion period have remained consistent since the implementation of CECL on January 1, 2020. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.

For the second quarter of 2025, we used the Moody’s June 30, 2025 Baseline and S2 Downside 75th Percentile for the calculation of our quantitative component. The weightings of the scenarios were based on management’s current expectations for the economic forecast, acknowledging the risk of recession over our reasonable and supportable forecast period and the current economic uncertainty. 

During the quarter, the total ACL decreased when compared to the previous quarter which was driven by a decrease in the quantitative reserve that was partially offset by an increase in the qualitative reserves. The primary drivers behind lower quantitative reserves was the sale or reclassification of more than $500 million of loans to held for sale during the quarter and net charge-off activity. The decrease in quantitative reserves was partially offset by updates to the macro-economic forecast, including the scenario weighting, and higher qualitative reserves. Growth in the loans held for investment portfolio during the quarter was primarily in portfolios