Operator:
Hello, and welcome to Banc of California, Inc.'s First Quarter 2026 Earnings Conference Call. I will now turn it over to Ann Park DeVries, Head of Investor Relations at Banc of California, Inc. Please go ahead.

Ann Park DeVries:
Good morning, and thank you for joining Banc of California, Inc.'s first quarter earnings call. Today's call is being recorded, and a copy of the recording will be available later today on our Investor Relations website. Today's presentation will also include non-GAAP measures. The reconciliations for these measures and additional required information are available in the earnings press release and earnings presentation, which are available on our Investor Relations website. Before we begin, we would also like to remind everyone that today's call will include forward-looking statements, including statements about our targets, goals, strategies, and outlook for 2026 and beyond. These statements are subject to risks, uncertainties, and other factors outside of our control, and actual results may differ materially. For a discussion of some of the risks that could affect our results, please see our safe harbor statement on forward-looking statements included in both the earnings release and the earnings presentation as well as the Risk Factors section of our most recent 10-Ks. Joining me on today's call are Jared M. Wolff, Chairman and Chief Executive Officer, and Joseph Kauder, Chief Financial Officer. After our prepared remarks, we will be taking questions from the analyst community. I would now like to turn the conference call over to Jared.

Jared M. Wolff:
Thanks, Ann. Good morning, everybody. We are pleased to report another strong quarter for Banc of California, Inc. with year-over-year earnings growth, net interest margin expansion, and continued positive operating leverage. First quarter earnings per share grew 50% from a year ago to $0.39, driven by continued net interest margin expansion and positive operating leverage. Pretax, pre-provision income increased 28% while our adjusted efficiency ratio improved by nearly 500 basis points year over year. More importantly, the quarter reinforced our confidence in the earnings trajectory ahead. We continue to see durable momentum across the core drivers of the franchise, including margin expansion, deposit mix improvement, disciplined expense management, and embedded balance sheet remixing that should support profitability and shareholder value for the coming quarters. Efficient use of capital remains an important priority for us. In the first quarter, we repurchased 1.7 million shares, extended our buyback program through March 2027, and increased our dividend from $0.10 per share to $0.12 per share. We also announced our plans to redeem $385 million of subordinated debt in May. These actions reflect both our confidence in the long-term value we are building and our commitment to deploying capital thoughtfully and opportunistically for the benefit of shareholders. Our core earnings engine continues to generate capital at a healthy pace. With a CET1 ratio of 10.18% at quarter end, our tangible book value per share increased 1.5% quarter over quarter to $17.77. Core deposit trends were constructive during the quarter with continued growth in average noninterest-bearing deposits of 4% annualized quarter over quarter and an improvement in deposit mix with NIB representing about 29% of total average deposits. We continue to steadily attract new business relationships and are also seeing noninterest-bearing deposit balances ramp up in previously opened accounts, with average balances per account up 2.5% from the prior quarter. That reflects the quality of the relationships our teams are bringing in and the strength of our relationship-based deposit strategy. Loan production and disbursements remained strong at $2.1 billion in the quarter, with healthy and broad-based activity across the portfolio. Strong production levels continue to drive the remixing of the balance sheet toward higher-rate loans from lower fixed-rate legacy CRE loans. This remixing has helped protect our overall loan yield and net interest margin despite a declining rate environment. We expect the margin benefit from remixing to continue as new production comes in at meaningfully higher rates than maturing loans, providing embedded earnings upside in the portfolio. New production in Q1 came in at a rate of 6.65%, while fixed-rate and hybrid loan repricings or maturities by year end have a weighted average coupon of 4.7%. We view that ongoing remixing as an important driver of future net interest income growth. This quarter, we continued to manage credit proactively—remaining quick to downgrade and slow to upgrade. This resulted in some credit migration during the quarter, which was concentrated in a few specific real estate credits and does not reflect a broad change in portfolio performance or underwriting standards. We believe this disciplined approach to managing credit is important because it allows us to address issues early, helps reduce the risk of larger surprises later, and should keep credit from becoming a more meaningful headwind as we continue to grow earnings. As in the past, we will migrate credit when appropriate to take proactive action. We expect the ratios to improve over several quarters; importantly, such migration will not disrupt our earnings trajectory. This quarter's delinquency and special mention inflows were primarily driven by a limited number of credits with defined resolution paths. Special mention inflows and delinquency inflows were driven primarily by LIHTC, or low-income housing tax credit, loans tied to a longstanding customer where we have had a relationship for more than 20 years with no historical losses. The loans have low loan-to-values, personal guarantees in place, and strong collateral values, and we expect them to be made current before the end of the second quarter. Classified inflows were tied mainly to two multifamily loans in a single relationship to a longstanding customer of the company. These loans were restructured with credit enhancements and are not expected to result in any losses. Overall, we do not expect losses to appear with migrated loans based on our strong collateral and defined resolution paths. Net charge-offs were $13.8 million, or 23 basis points annualized, and were driven by two specific situations that had already been identified and actively managed. Net charge-offs also included a partial charge-off related to a hotel property that migrated to nonperforming status in 2025 and an office loan where the balance was adjusted to reflect an updated appraisal, while the loan remains current and performing. We do not view these items as indicative of a broader deterioration trend in any of our portfolios. Importantly, reserve levels remain solid. We increased reserves where appropriate in the areas that saw migration. Taken together, we do not expect this quarter's credit migration to disrupt our earnings trajectory. The balance sheet remains strong with healthy capital and liquidity positions. We are also encouraged by the constructive backdrop from proposed regulation around capital requirements, which, if finalized substantially as proposed, could provide $150 million to $160 million of additional CET1. That would create additional flexibility as we evaluate attractive capital deployment opportunities, including further optimizing our balance sheet to accelerate our earnings trajectory, supporting prudent balance sheet growth, and returning capital to our shareholders. $150 million to $160 million is a baseline projection; it could be higher under various scenarios. Overall, this was another strong quarter for Banc of California, Inc. We continue to build the company the right way with disciplined execution, a strong and resilient balance sheet, and a clear focus on sustainable growth and long-term shareholder value. Let me now turn it over to Joe for some additional financial details, and I will return afterwards. Joe?

Joseph Kauder:
Thank you, Jared. For the quarter, we reported net income of $62 million, or $0.39 per diluted share, which was up 50% from $0.26 per diluted share in the comparable prior-year period. Net interest income of $251.6 million increased 8% year over year and was relatively flat versus the prior quarter. The increase in net interest income from a year ago reflects materially improved funding costs, while the linked-quarter variance was mainly due to two fewer days in Q1 versus Q4. Q1 interest income from securities also increased due to the purchase of high-yielding securities and a $1.3 million special dividend on FHLB stock. Net interest margin expanded to 3.24%, up four basis points from Q4 and six basis points from a year ago, driven primarily by lower funding costs. Our spot NIM at March 31 was 3.22% after normalizing for the FHLB special dividend. We expect NIM to continue expanding through the remainder of the year supported by strong production, ongoing balance sheet remixing, and disciplined deposit pricing and mix. These tailwinds are evident in our portfolio today. As a result, we continue to expect average quarterly NIM expansion of three to four basis points, though the path may not be perfectly linear. As always, we do not assume any Fed rate cuts in our outlook. Average loan yield declined nine basis points to 5.74% versus the Q4 loan yield of 5.83% and was relatively flat to the December 31 spot yield of 5.75%. The Q1 loan yield reflects the full-quarter impact of two Fed rate cuts on the rates for new production and on our floating-rate loan portfolio, which represents 38% of total loans. Our spot loan yield at the end of Q1 remained stable at 5.75%. Total average loan balances increased 4% annualized. While Q1 loan production was strong, end-of-period loans declined modestly from the prior quarter mainly due to higher payoffs and paydowns, which were primarily in warehouse, fund finance, and other CRE. We continue to expect full-year loan growth in the mid-single digits, depending on broader economic conditions. Deposit trends remain solid, with average noninterest-bearing deposits continuing to grow in the quarter and average core deposits, excluding one-way ICS deposit sales, also increasing modestly. We use one-way ICS sales to move deposits off balance sheet and manage excess liquidity. In the first quarter, average balances swept off balance sheet through one-way ICS sales were $271 million. End-of-period deposits declined slightly from the fourth quarter due to lower brokered deposits and retail CD deposits. We continue to expect deposits to grow mid-single digits over the course of this year. Deposit costs declined 11 basis points to 1.78%, driven by the benefit of Q4 Fed rate cuts and the continued runoff of higher-cost deposits. We remain disciplined on pricing and achieved an interest-bearing deposit beta of 57% in the first quarter. Spot cost of deposits at March 31 was 1.78%. Our balance sheet remains positioned to perform well across rate environments and is largely neutral to changes in rates from a net interest income perspective. Sitting at neutral, we have the flexibility to manage our balance sheet to optimize results in any interest rate environment. For example, in a rising rate environment, we would expect to manage deposit betas to be more measured than in a down-rate cycle, and the interest-rate impact would be outpaced by the impact on interest income of the contractual repricing of our variable-rate loans. At the same time, we expect ongoing balance sheet remixing to continue to support net interest income expansion across rate environments. Fixed-rate and hybrid loan repricings or maturities by year end have a weighted average coupon of 4.7%, well below current production rates. Approximately $3.2 billion of multifamily loans are expected to mature or reprice over the next two and a half years. That embedded repricing opportunity remains an important earnings tailwind. Noninterest income was $35.3 million, which was relatively flat quarter over quarter when excluding the $6 million lease residual gain in the fourth quarter. Noninterest expense of $181.4 million was relatively flat from the prior quarter and down 1% from a year ago. Compensation expense increased linked quarter due to seasonality, which includes Q1 resets for payroll taxes and benefits. Customer-related expenses declined $1.1 million quarter over quarter due to the impact from Q4 rate cuts on ECR cost. The broader expense base remains well controlled, and we continue to target positive operating leverage through revenue growth, margin expansion, and disciplined expense management. Turning to credit, reserve levels remain solid, with the ACL ratio stable at 1.12% and the economic coverage ratio at 1.6%. Provision expense of $9.8 million reflects the Q1 migration and impact of other credit activity. While the Moody’s updated economic forecast, which included a significant improvement in the CRE price index, would have supported a reserve release, we continue to maintain a more conservative outlook for purposes of our methodology and increased the weighting of adverse scenarios, offsetting that benefit. We continue to believe overall loan reserve levels are appropriate, particularly given the continued shift in growth towards historically lower-loss categories, which now represent 34% of loans held for investment. We are pleased with the strong start to the year and the progress we are making in building the company's earnings power. As we look ahead to the rest of 2026, we are reaffirming our guidance for pretax, pre-provision income growth of 20% to 25% and noninterest expense growth of 3% to 3.5%. Our net drivers of earnings growth remain firmly in place, including continued loan portfolio remixing, disciplined expense management, healthy client activity, and further benefits from deposit repricing and mix. Taken together, those levers give us good visibility into continued earnings growth through the balance of the year. And with that, I will turn the call back over to Jared.

Jared M. Wolff:
Thank you, Joe. This was another strong quarter for Banc of California, Inc., with continued progress in key areas—positive operating leverage, growth in our core earnings drivers, strong balance sheet fundamentals, disciplined expense and credit management, and, of course, thoughtful capital deployment. The consistency of our results reflects the quality of the franchise we have built and the discipline with which our teams continue to execute. As we look ahead, we remain mindful of the uncertainty created by the conflict in the Middle East and the potential for second-order effects on growth, inflation, and client activity. That said, what we are seeing today across our business lines is very positive, with strong pipelines, a resilient client base, and a healthy balance sheet. Our teams continue to win relationships in all areas of our business. We remain very optimistic with strong pipelines. Importantly, our outlook is supported primarily by company-specific levers already in motion, rather than by the need for a more favorable macro environment. We remain confident in the path ahead as our drivers of earnings growth are tangible, diversified, and already underway. We have a valuable deposit franchise, attractive business segments, strong pipelines, and a healthy balance sheet. We also have meaningful embedded earnings opportunities over time, including, as Joe mentioned, the runoff of approximately $8 billion of lower-yielding assets, the redemption of expensive capital, including our preferred stock, and the opportunity to further optimize the balance sheet as the regulatory backdrop improves. These levers provide additional flexibility to accelerate earnings growth and compound shareholder value. We are also making strong progress in deploying AI tools broadly across the company, with nearly universal employee access, a robust Copilot active user rate, broad developer adoption, and more than 80% of our developers using AI in their daily workflows. We see AI as a practical enabler of productivity, operating leverage, risk management, and scalable growth, and we are already seeing early signs of efficiency gains across code development, reporting, compliance support, and workflow automation. We also have a number of targeted use cases underway, including BSA review support and customer service applications. Over time, we expect these efforts to contribute to a more efficient operating model and improved client service. Our focus remains the same: to continue growing high-quality, consistent, and sustainable earnings by serving clients well, adding strong new relationships, maintaining disciplined underwriting and expense management, and further optimizing the balance sheet to drive long-term shareholder value. We like the momentum in the business, we see multiple embedded levers for future earnings growth, and we believe Banc of California, Inc. is well positioned for continued progress in 2026 and beyond. I want to thank our employees for everything they are doing to move the company forward. Their execution, commitment, and focus continue to set us apart in all of our markets. With that, operator, let us open up the line for questions.

Operator:
Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. The first question comes from David Cioverini with Jefferies. Please go ahead.

David Cioverini:
Hi. Thanks for taking the questions. Good morning. I wanted to start on credit quality. You touched on this a bit, but can you walk through what the plan is for working out the increases in special mention and nonperforming loans? You mentioned the two credits that were restructured with credit enhancements. Can you talk about what those enhancements were? Did these borrowers contribute more equity into their projects?

Jared M. Wolff:
Yes, they contributed more equity in both cases in those loans that were downgraded. They brought more equity. What we want to see is more time; we want to see them work according to plan. We have every expectation that they will. But when we talk about being quick to downgrade and slow to upgrade, we do not immediately make a change to the rating just because they provided a credit enhancement. We want to see performance over time, and we expect that these projects will return to normalcy over time and be upgraded with improvement over several quarters. We also have visibility to other projects in those classifications that we expect to be upgraded. And so that is why, over time, we expect to see benefits not only from those projects but other projects in those categories.

David Cioverini:
Got it. Very helpful. And then shifting over to the net interest margin, it sounds like you have some good tailwinds in place, especially with the 6.65% production versus the 4.7% rolling off. The three to four basis points of quarterly expansion—how linear should that be? And remind us of the sensitivity to rate cuts to the extent we do get some rate cuts later this year?

Jared M. Wolff:
I will start, and I will let Joe jump in. We sit today relatively neutral, and we believe, as Joe mentioned, we have the ability to pivot depending on the rate environment. We have already seen that in a down-rate environment, our net interest margin expands. In an up-rate environment, we would expect deposit increases to trail and go much more slowly, and we benefit from rising rates in our floating-rate loan portfolio and new production. We would expect to benefit in a rising-rate environment as well, and we think that those benefits would more than offset any contribution that ECR would take in an up-rate environment. Joe, do you want to comment specifically on how linear our NIM should move?

Joseph Kauder:
In theory, it should be pretty linear through the year, picking up as the year goes on. As we grow our balance sheet and as we add more higher-yielding loans and continue to manage our funding costs, the NIM improvement and benefit will expand as the year goes on. What we do not have in there is accelerated accretion. We have this $8 billion of loans which we know are going to pay off or pay down at some point, and when that happens, we will get the accelerated accretion from the portion that was marked during the merger.

David Cioverini:
Thank you.

Operator:
The next question comes from Matthew Timothy Clark with Piper Sandler. Please go ahead.

Matthew Timothy Clark:
Hey, good morning. The expense run rate—relative to last year you are on pace to be flattish, and you maintained the 3% to 3.5% growth guide. What are the things coming online that would cause that run rate to grow from here this year?

Joseph Kauder:
As we look into the next couple of quarters, you will see a little bit of a continued increase in compensation expense as year-end inflation adjustments and those items kick in. They will be somewhat mitigated by the payroll taxes and other benefit adjustments rolling off, but they should step up just a little bit. We are also making some more investments in our platform, so you will see a little bit of an increase potentially in some professional fees and other things as we move forward in some of our really important projects to grow earnings and help the balance sheet.

Jared M. Wolff:
I would just add that we are going to continue to be disciplined. It is normal to expect those increases through the year. If we find ways to offset them, we will do that because we believe that we can keep finding efficiencies. The AI initiatives are real, and we are seeing some early signs and some early wins. We will not lose the opportunity to manage expenses as we always have.

Matthew Timothy Clark:
Okay. And then just on the ECR deposit balances—understand the sensitivity to rate—but with no rate cuts this year, assuming there are no rate cuts, is there any effort to try to remix away from those deposits or to try to incrementally push those costs down?

Jared M. Wolff:
We are looking for ways to improve our deposit costs across the board. The biggest and most important way to do that is to bring in noninterest-bearing deposits that have no expectation of yield and that rely on our services. We have a lot of efforts underway and continue to make progress there. I am really pleased with what our teams are doing. I see stories every day of clients coming to the bank and bringing more. For example, this morning we heard about a client that was acquired, and the company that acquired them decided to keep all of the deposits at our bank because we were providing better service, and they brought more deposits in. Another example: a customer that left after the merger to a large bank was not getting the service they expected and brought back $3 million of deposits. These stories are meaningful. So first, we can grow operating accounts, and our teams are doing a great job. Second, we are very proactive on deposit costs regardless of Fed moves. As it relates to ECR, those contracts generally come up annually, and when they come up, depending upon our deposit flexibility, we will negotiate to improve our positioning. That has been the case the last two years as our deposit positioning has improved, and we have been able to negotiate those accounts to our benefit.

Matthew Timothy Clark:
Okay. Great. Thank you.

Jared M. Wolff:
Thank you.

Operator:
The next question comes from David Pipkin Feaster with Raymond James. Please go ahead.

David Pipkin Feaster:
Hey. Good morning.

Jared M. Wolff:
Morning.

David Pipkin Feaster:
Jared, I wanted to follow up on your commentary on the capital side with the regulatory capital relief. What are your top priorities? Obviously, buybacks are extremely attractive, but are there other capital optimization opportunities that you are considering?

Jared M. Wolff:
We run a lot of different scenarios. Buybacks are a big part of it. Using it to redeem preferred is also in our plans; we would not need other funding sources if we did that. We will also look at our balance sheet for low-hanging fruit and suboptimally priced items and assess the earn-back. The $150 million to $160 million is a very conservative estimate of what we could achieve under these new rules. We are still doing the analysis, but a third party reviewed it and they think we will get more than that. I feel very good about that opportunity and the number of things we could do.

David Pipkin Feaster:
That is helpful. Switching gears to loan growth—you reiterated the loan growth guide. How do you get to your mid-single-digit pace of growth this year? Production was solid and diversified, but how do you think about production over the course of the year, and how do ongoing payoffs and paydowns play into expectations?

Jared M. Wolff:
We added a new chart in the deck—page 15—that shows production and disbursements as well as paydowns and payoffs, so people can see how heavy and broad-based production actually was and the average rate. One of the best things about that chart is it shows our weighted average rate on loans has stayed flat since the first quarter of last year despite a declining rate environment, which demonstrates that remixing our portfolio as deposit costs have dropped has resulted in our margin expansion and making more money on a flat balance sheet. We know that will continue. Whether or not we have net growth or just remixing from high production, we will continue to make more money. If we also grow the balance sheet, earnings will grow even faster than projected. Our budget hits our numbers without needing fast balance sheet growth, and if we grow faster, we will make even more money. We have line of sight into payoffs; they were elevated in the first quarter. Whether they remain elevated is hard to know, but right now, production looks set to outpace payoffs and paydowns for the foreseeable future. There are certain loan pools we can buy to improve the balance sheet if necessary. Overall, we still expect mid-single-digit loan growth. Even if net growth were lower than our estimates, we still hit our earnings targets based on our ability to remix the balance sheet.

David Pipkin Feaster:
That is helpful. Thanks.

Jared M. Wolff:
Thank you.

Operator:
The next question comes from Jared David Shaw with Barclays. Please go ahead.

Jared David Shaw:
Hey, everybody. Thanks. Sticking with production, numbers are relatively stable—what would have to happen to really see that grow? You have spoken about the strength of your economies and competitive disruption. What is keeping production from growing more?

Jared M. Wolff:
First quarter is generally a little bit lower. We were at $2.1 billion versus $2.2 billion last year; in the fourth quarter we were at $2.7 billion. Those are pretty good numbers on a loan portfolio that is about $24 billion—to do $8 billion of production annually on a $24 billion loan portfolio. Could we move faster? We probably could by asking certain business units to increase sizes or take larger positions, but we believe it is necessary to grow in balance. We look at deposit flows and our balance sheet overall. We are at a very comfortable loan-to-deposit ratio; we could move that up. I am not looking to grow as fast as we can; we are looking to do it in a sustainable, reliable way so earnings are repeatable—consistent, reliable, high-quality earnings. We could move faster, but it feels like we are at a good pace and moving a little faster than the economy around us.

Jared David Shaw:
On the $8 billion of identified target runoff—how long does that take to move through the system?

Jared M. Wolff:
We have $6 billion of multifamily loans that will reprice or mature; about half of those mature or reprice in the next two and a half years. We show this on page 16 of our deck. Less than one year is $1.7 billion, one to two years is $1.1 billion, and then a big chunk—$2.3 billion—is more than three years. We see $2.8 billion in the next one and a half to two years, and then about $1 billion in the next two to three years. That is how you get to $3.2 billion over two and a half years.

Jared David Shaw:
And on the deposit side, how have flows been early in the second quarter?

Jared M. Wolff:
We are up this quarter relative to last quarter at the same point in time. Inflows have been higher early this quarter versus last quarter. Last quarter, our averages were pretty up. Oftentimes in the first quarter, balances come down for taxes; we focus on averages because they move the balance sheet, and it was a really good quarter. So far, we are higher this quarter than last quarter at this point.

Jared David Shaw:
One more on the allowance—you talked about utilizing more of the adverse scenario to prevent reserve releases. With the loan book the way it is right now, is 96 basis points a good level to expect for the rest of the year, assuming no broader macro change?

Joseph Kauder:
Our ACL is 1.12% and our economic coverage ratio is about 1.6%. That feels very comfortable. That assumes we continue provisioning around this quarter’s level—$9 million to $9.5 million—and, depending on production, it could be $10 million to $11 million. It feels like the right level.

Jared David Shaw:
Great. Thank you.

Jared M. Wolff:
Thank you.

Operator:
The next question comes from Robert Andrew Terrell with Stephens. Please go ahead.

Robert Andrew Terrell:
Hey, good morning.

Jared M. Wolff:
Morning.

Robert Andrew Terrell:
On brokered time deposits, over the past year they are up about $500 million. As we think about mid-single-digit deposit growth this year, should we expect more brokered deposit additions to support that growth, or is there opportunity to remix the brokered position?

Jared M. Wolff:
We focus on overall deposit costs and keep brokered within a band. We will opportunistically use brokered, especially when we see paydowns in certain areas or big chunks of deposits running off, and we will selectively go into the brokered market when pricing is attractive relative to alternatives. We continue to move our cost of deposits down, so we do not mind selectively using brokered.

Joseph Kauder:
Brokered was 9.3% of total fundings this quarter compared to 9.7% in the fourth quarter—pretty flat year over year. Brokered also depends a bit on loan growth. If loan growth accelerates and we can put really good high-quality loans on the books, we need to keep balance with deposits, but we are not afraid to dip into brokered a bit to help put those loans on, knowing deposits will catch up.

Jared M. Wolff:
To that point, we saw loans coming in late and average balances moving down, so we grabbed some brokered to keep our loan-to-deposit ratio in balance. If we have excess, we will invest it. Our team is pretty good at balance sheet management, and we can let our loan-to-deposit ratio float up as well if we want.

Robert Andrew Terrell:
Understood. Do you have any term in the brokered deposit portfolio, or is it all shorter or floating rate?

Joseph Kauder:
We do a little bit of term, but it is largely within three to six months. All is less than a year, with a little that goes out to nine or twelve months.

Robert Andrew Terrell:
Okay. Great. Thanks for taking the questions.

Joseph Kauder:
Thank you.

Operator:
The next question comes from Christopher Edward McGratty with KBW. Please go ahead.

Christopher Edward McGratty:
Hey. Jared, on credit, you went through a similar set of portfolio downgrades last year where you ultimately worked things through. What is different or similar this year as you go through this process?

Jared M. Wolff:
It is pretty similar. These are some larger legacy relationships where we are trying to migrate them down to more manageable levels. Similar to last year, we migrated this, it did not get in the way of earnings, and we earned through it. Gradually, our ratios improved. Is this the last chunk? Probably—it is pretty close. You never say never because something else can pop up, but I feel pretty good about where we are, and it was time to move some things around. You have conversations with borrowers and say, “We do not want these relationships to be this large anymore,” and ask them to move faster—that was the case in a couple of loans. In other loans, they did not manage well; we watched them and held their feet to the fire. As we mentioned, we have personal guarantees and plenty of support. These LIHTC loans are very valuable, really good projects, and housing that is sorely needed with tax benefits. I am not worried about the outcome. Sometimes this is just the right thing to do. So, similar to last year, we expect the ratios to migrate better over several quarters. These are large relationships, and we set expectations a little more aggressively than perhaps in the past.

Christopher Edward McGratty:
While we are on credit, could you speak about the legacy Square 1 book from PacWest? Software is a big topic, but remind us of the makeup and how you are thinking about tech.

Jared M. Wolff:
Our venture ecosystem overall—outlined in our deck—includes more than just “tech.” Fund finance, which is capital call lines of credit to private equity and venture capital firms, is approximately $1.4 billion, and deposits are about the same. The rest of our venture and Square 1 ecosystem is about $950 million of loans, split evenly between tech and life sciences—call it roughly $475 million each. They have about $5 billion of deposits against that $950 million of loans. Of the ~$475 million in tech, we analyzed potential AI disruption—whether business models or funding could be negatively impacted. We ran this a couple of ways and identified a handful of loans with a little over $40 million of outstanding that we put on a high-risk watch list. We will keep monitoring, but we do not see material disruption to our portfolio today. It is important to remember that out of our $24 billion of loans, the tech group is about $450–$475 million, a small portion of which is attached to software that could be disrupted—against $5 billion of deposits between tech and life sciences.

Christopher Edward McGratty:
That is great color. Thank you.

Jared M. Wolff:
Thank you.

Operator:
The next question comes from Gary Peter Tenner with D.A. Davidson. Please go ahead.

Gary Peter Tenner:
Thanks. Good morning. A follow-up on NIM—Joe, you mentioned the pace of NIM expansion. Is that expansion pretty exclusively driven by the asset yield side, or is there any material contribution from further reduction of funding costs over the course of the year?

Joseph Kauder:
It is a combination of both. There is definitely benefit from loans continuing to grow and remix at higher rates. We also have deposit growth in conjunction with loan growth, and we really focus on bringing in noninterest-bearing deposits—there is little we can do that is more profitable than adding NIB. You saw the NIB percentage grow slightly this quarter, and we expect that to continue to grow this year. As our deposit mix shifts toward NIB and other lower-cost interest-bearing, we expect to pick up NIM from that as well as from loan growth.

Jared M. Wolff:
This quarter, we saw more contribution from the full-quarter benefit of deposit cost reduction from the Fed cuts in the fourth quarter, and the fact that our loan portfolio yield stayed flat in a declining rate environment is pretty powerful. In an up-rate environment, you would see more from loan yield; in a down-rate environment, more from deposits.

Gary Peter Tenner:
Thinking about a neutral environment for the rest of the year, is there more room on one side versus the other?

Jared M. Wolff:
In a neutral environment, a lot of it is probably loan-based because the loans we are putting on are at much higher rates than the loans coming off. That is a fair way to think about it.

Gary Peter Tenner:
Makes sense. Any updated thoughts you could share on the BankEdge product after bringing on Chris Healy to head that business?

Jared M. Wolff:
Chris is doing a great job with the team. I am getting an updated budget this week on expectations for BankEdge, which is our merchant acquiring platform, as well as our card products where we are issuing. Both are doing extremely well. We expect to provide more guidance in the back half of the year on how these will contribute. I am pleased with our focus, and I think Chris will bring ideas he used at his prior institution to accelerate growth in both card and merchant acquiring through partnerships and direct selling. More to come.

Gary Peter Tenner:
Great. Thank you.

Jared M. Wolff:
Thank you.

Operator:
The next question comes from Anthony Elian with JPMorgan. Please go ahead.

Anthony Elian:
Hi, everyone. On NII, last quarter you gave a range of up 10% to 12% for the full year, including accretion. Does that still feel like the right level? And can you talk about the cadence of NII over the course of this year?

Joseph Kauder:
We still feel pretty comfortable about all of our guidance we provided at the end of 2025. As loans pick up, we do have some seasonality—the first quarter is historically one of our weaker quarters. It usually picks up in the second quarter and continues throughout the year. We still feel confident about those numbers and the cadence.

Anthony Elian:
On comp expense, can you quantify how much the seasonal resets contributed to 1Q, and how much of that do you expect to come out going forward?

Joseph Kauder:
You can see it on the noninterest expense page—the increase in compensation from the fourth quarter to the first quarter is substantially all driven by the resets. Not all of it will come out; over the year, maybe half to two-thirds of those increases roll off as people hit their Social Security limits or 401(k) match limits.

Anthony Elian:
Thank you.

Operator:
This concludes our question-and-answer session and Banc of California, Inc.'s First Quarter 2026 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.