Company: BANC-PF
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0001628280-25-009438
Chunk: 211

Company: BANC OF CALIFORNIA, INC.
Filing Date: 2025-03-03
Form: 10-K
Item: Item 1
Chunk 211
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3 originated business-purpose loans secured by non-owner-occupied residential properties undergoing renovation. In the second quarter of 2023, we ceased making new originations of Civic loans. We divested a portion of this non-core loan portfolio in 2023 and 2024, and continued to run off the remaining portfolio.

9

Our real estate portfolio is subject to certain risks including, but not limited to, the following:

•increased competition in pricing and loan structure;

•the economic conditions of the United States and in the markets where we lend;

•decreased demand or decreased values as a result of legislative changes such as new rent control laws, and permanent shifts in corporate work environment such as remote working and consumer behavior such as online retail;

•changes in interest rate;

•decreased commercial and residential real estate values in the markets where we lend;

•the borrower's inability to repay our loan due to decreased cash flow or operating losses; 

•the borrower’s inability to refinance or payoff our loan upon maturity; 

•loss of our loan principal stemming from a collateral foreclosure; and

•various environmental risks, including natural disasters.

In addition to the points above, real estate construction loans are also subject to project-specific risks including, but not limited to, the following:

•construction costs being more than anticipated;

•construction taking longer than anticipated;

•failure by developers and contractors to meet project specifications or timelines;

•disagreement between contractors, subcontractors and developers;

•estimated value and/or demand for completed projects being less than anticipated, particularly in a weaker economy or recession; and

•buyers of the completed projects not being able to secure permanent financing.

Many of the risks outlined above result from market conditions and are not controllable by us. When considering the markets in which to pursue real estate loans, we consider the market conditions, our current loan portfolio concentrations by property type and by market, and our past experiences with the borrower, within the specific market, and with the property type.

When underwriting real estate loans, we seek to mitigate risk by using the following framework:

•requiring borrowers to invest and maintain a meaningful cash equity interest in the properties securing our loans;

•reviewing each loan request and renewal individually;

•using a credit committee approval process for the approval of loan requests (or aggregated credit exposures) over a certain dollar amount;

•adhering to written loan acceptance standards, including among other factors, maximum loan to acquisition or construction cost ratios, maximum loan to as-is or stabilized value