Company: BANC-PF
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0001169770-25-000029
Chunk: 196

Company: BANC OF CALIFORNIA, INC.
Filing Date: 2025-08-08
Form: 10-Q
Item: Item 8
Chunk 196
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)(2.7)%$1,048 $11 1.1 %0 bps$5,432 $1,037 -100 bps$5,602 $171 3.1 %$1,029 $(7)(0.7)%-200 bps$5,658 $226 4.2 %$1,018 $(19)(1.8)%____________________

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

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Earnings-at-Risk

In addition to interest rate risk associated with net interest income, certain noninterest expense items are also sensitive to changes in market interest rates. One such item is the cost of earnings credit rates ("ECRs") provided on certain deposit accounts, primarily those associated with our HOA business. ECRs comprise most of our customer related expense and fluctuate in response to changes in short term rates and can therefore influence the Company's overall earnings sensitivity profile. We expect that a declining interest rate environment would reduce ECR costs and thereby reduce noninterest expense, conversely, when interest rates rise, ECR costs would also rise, thereby increasing noninterest expense. The Company's Earnings-at-Risk ("EaR") modeling incorporates the impact of these rate-sensitive noninterest expenses, in addition to interest income and expense, to assess the effect of interest rate movements on projected earnings over a twelve-month horizon.

As of June 30, 2025, client deposits eligible for ECRs totaled approximately $3.7 billion. Taking into account the rate sensitivity of ECRs, which are primarily attributable to such deposits, the Company's overall earnings profile would be considered "liability sensitive." During the second quarter of 2025, the Company also entered into interest rate collars with a notional value of $1.0 billion to mitigate the risk of increasing interest expense if short term interest rates increase. For further information on the interest rate collars, see Note 9. Derivatives, of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

113

ITEM 4. CONTROLS AND PROCEDURES 

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of June 30, 2025 and have concluded that these disclosure controls and procedures are effective to ensure that information required