Company: BANC-PF
Filing Date: 2025-05-09
Form Type: 10-Q
Source: 0001169770-25-000024
Chunk: 113

Company: BANC OF CALIFORNIA, INC.
Filing Date: 2025-05-09
Form: 10-Q
Item: Item 8
Chunk 113
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The Company may elect to report financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings. The election is made upon the initial recognition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not otherwise be revoked once an election is made. The changes in fair value are recorded in "Noninterest income" on the condensed consolidated statements of earnings. However, movements in debt valuation adjustments are reported as a component of "Accumulated other comprehensive loss, net" on the condensed consolidated balance sheets. Debt valuation adjustments represent the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk.Fair Value Option for Certain Debt LiabilitiesThe Company has elected the fair value option for the credit-linked notes issued in September 2022. The Company elected the fair value option because these exposures are considered to be structured notes, which are financial instruments that contain embedded derivatives. The notes are linked to the credit risk of an approximately $2.3 billion reference pool of previously purchased single-family residential mortgage loans. The principal balance of the credit-linked notes was $118.1 million at March 31, 2025. The carrying value of the credit-linked notes at March 31, 2025 was the estimated fair value of $117.2 million. For the three months ended March 31, 2025 and 2024, interest expense on the credit-linked notes totaled $4.5 million and $5.0 million, respectively, and was recorded in "Interest expense - borrowings" on the condensed consolidated statements of earnings.The following table presents the changes in fair value of the credit-linked notes for which the fair value option has been elected for the periods indicated:   Three Months EndedMarch 31,Credit-Linked Notes20252024 (In thousands)Changes in fair value - gains (losses) included in earnings$482 $(348)Changes in fair value - other comprehensive income (loss) $146 $(1,251)The following table provides information about the credit-linked notes carried at fair value as of the dates indicated:  March 31,December 31,Credit-Linked Notes20252024(In thousands)Carrying value reported on the condensed consolidated balance sheets$117,196 $118,838 Aggregate unpaid principal balance in excess of fair value$929 $301 

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BANC OF CALIF