Company: BANC-PF
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0001628280-25-009438
Chunk: 369

Company: BANC OF CALIFORNIA, INC.
Filing Date: 2025-03-03
Form: 10-K
Item: Item 1B
Chunk 369
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 arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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Allowance for loan and lease losses - collectively evaluatedDescription of the MatterThe Company’s allowance for loan and lease losses (ALLL) was $239.4 million as of December 31, 2024, of which $234.0 million relates to the collectively evaluated ALLL. The provision for loan and lease losses was $43.5 million for the year ended December 31, 2024. As discussed in Note 1, the ALLL is measured using the current expected credit loss (CECL) approach for the Company’s loan and lease portfolio. The ALLL is comprised on an individually evaluated component for loans and leases that no longer share similar risk characteristics with other loans and leases and a pooled loans component for loans and leases that share similar risk characteristics. The Company’s CECL methodology for the pooled loans component includes both quantitative and qualitative loss factors which are applied to its population of loans and leases and assessed at a pool level. The quantitative CECL model estimates credit losses by applying pool-specific probability of default and loss given default rates to the expected exposure at default over the contractual life of loans and leases. The qualitative component considers internal and external risk factors that may not be adequately assessed in the quantitative model. Auditing management’s collectively evaluated ALLL estimate and related provision for loan and lease losses was complex due to the judgmental nature of the probability weighted economic scenarios, loss models and qualitative adjustments.How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over establishing the collectively evaluated ALLL. For example, we tested controls over: 1) the selection and application of forward-looking economic scenarios and the probability weights assigned to them; 2) loss models, including model validation and the completeness and accuracy of inputs and assumptions used in the models; and 3) management’s consideration of qualitative factors.We assessed the economic scenarios and related probability weights by, among other procedures, evaluating management