Banc of California Reports Second Quarter 2019 Earnings

SANTA ANA, Calif.--()--Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $11.9 million, for the second quarter of 2019, resulting in diluted earnings per common share of $0.23.

Highlights for the second quarter included:

  • Net interest margin increased by 5 basis points from the prior quarter to 2.86% for the second quarter, resulting from a 5 basis point decline in our cost of deposits
  • Loan production was $599 million for the quarter, including $186 million of commercial and industrial loan commitments
  • Loan delinquencies decreased by 12.2% from the prior quarter to $52.2 million
  • Held-for-investment loan balances for the second quarter decreased to $6.7 billion as we sold lower coupon single family and multifamily loans and transferred $574 million of multifamily loans to held-for-sale, pending a planned Freddie Mac securitization
  • Collateralized loan obligations declined to $737 million following $298 million of sales and calls
  • Noninterest expense was $43.6 million for the quarter, including non-core expenses of $6.2 million of litigation, indemnification, investigation and other legal fees, $12.6 million of insurance recoveries, and net project charge-offs of $869 thousand
  • Efficiency ratio for the second quarter decreased to 69.75%
  • Return on average assets increased to 0.69%, while return on average tangible common equity was 7.43%

Jared Wolff, President and Chief Executive Officer of Banc of California, commented, “The second quarter results reflect our accelerated efforts to focus on our three initiatives designed to improve our franchise and profitability on an ongoing basis: reducing our cost of deposits, optimizing the balance sheet to focus on higher-margin products and appropriately managing down expenses to the size and complexity of the business. Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our high credit quality and serving businesses, entrepreneurs and individuals within our footprint. Further, as part of our efforts to improve our balance sheet, we commenced today a tender offer for our preferred equity for up to $75 million aggregate purchase price.”

Speaking specifically about operational results for the quarter, John Bogler, Chief Financial Officer of Banc of California said “The sales of non-core and low-margin assets allowed us to reduce high costing deposits, resulting in a 5 basis point decline in the cost of total deposits. Efforts to simplify our operating model allowed noninterest expense and operating expenses each to come in below $50 million for the quarter, which is ahead of our schedule for reducing expenses.”

Business Results - Income Statement Highlights

 

Three Months Ended

 

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

 

June 30,
2018

Total interest and dividend income

$

104,040

 

 

$

110,712

 

 

$

111,130

 

 

$

107,774

 

 

$

105,185

 

Total interest expense

 

39,260

 

 

 

42,904

 

 

 

40,448

 

 

 

36,582

 

 

 

32,421

 

(Reversal of) provision for loan and lease losses

 

(1,987

)

 

 

2,512

 

 

 

6,653

 

 

 

1,410

 

 

 

2,653

 

Net interest income after provision for loan and lease losses

 

66,767

 

 

 

65,296

 

 

 

64,029

 

 

 

69,782

 

 

 

70,111

 

Total noninterest (loss) income

 

(2,290

)

 

 

6,295

 

 

 

2,448

 

 

 

4,824

 

 

 

8,061

 

Total noninterest expense

 

43,587

 

 

 

61,835

 

 

 

49,569

 

 

 

60,877

 

 

 

62,539

 

Income tax expense

 

4,308

 

 

 

2,719

 

 

 

6,117

 

 

 

3,301

 

 

 

1,779

 

Income from continuing operations

 

16,582

 

 

 

7,037

 

 

 

10,791

 

 

 

10,428

 

 

 

13,854

 

Income from discontinued operations

 

 

 

 

 

247

 

 

 

668

 

 

 

926

 

Net income

$

16,582

 

 

$

7,037

 

 

$

11,038

 

 

$

11,096

 

 

$

14,780

 

Net interest income

Net interest income for the second quarter decreased to $64.8 million as we sold non-core assets and repaid high cost funding during the quarter. For the second quarter, average interest-earning assets declined from the prior quarter by $695 million to $9.1 billion, while the net interest margin improved by 5 basis points versus the prior quarter.

Our average yield on interest-earning assets remained flat at 4.59% for the second quarter as compared to the first quarter of 2019, primarily attributable to an increase in our average yield on loans partially offset by a decrease in our average yield on securities. Our average yield on loans came in at 4.80% for the second quarter which increased by 4 basis points from the prior quarter, primarily attributable to a reduction in lower-yielding single family residential mortgage and multifamily loans. Our average yield on securities decreased primarily as a result of an interest rate reset on our collateralized loan obligations and a decrease in our average balance attributable to the sale and calls of $298 million of our higher yielding collateralized loan obligations during the second quarter. The decline in the average balance of collateralized loan obligations was also due to sales that occurred late in the first quarter of 2019. We sold a significant amount of these securities at the end of the first quarter, with the full impact of the first quarter sales reflected in the second quarter.

Our average cost of interest-bearing liabilities decreased to 2.09% for the second quarter from 2.12% for the first quarter, primarily resulting from a 5 basis point decrease in our average cost of total deposits from the prior quarter to 1.62% for the second quarter. The decrease in our cost of deposits from the prior quarter primarily resulted from the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.

Provision for loan losses

During the second quarter, we released $2.0 million of our allowance for loan losses primarily attributable to a decrease in the held-for-investment loan portfolio, partially offset by an increase in net charge-offs and other qualitative provisions during the quarter. The decrease in the loan portfolio primarily resulted from the sale of $178 million of multifamily loans and the transfer of $574 million of multifamily loans to held-for-sale. During the quarter, we had $2.4 million in net charge-off activity and a $900 thousand increase in our specific reserves. The net charge-offs were driven primarily by a charge-off of $2.0 million on one commercial and industrial loan relationship.

Noninterest (loss) income

Noninterest (loss) income for the second quarter was $(2.3) million, which represented a decrease of $8.6 million, or 136.38% from the prior quarter. The decrease is primarily attributable to a $9.6 million loss on our hedge of the pending Freddie Mac multifamily securitization in which we also plan to sell the associated mortgage servicing rights. The $9.6 million hedging loss is due to a decline in interest rates since the hedge was executed and is expected to be mostly offset by the gain in fair value of the loans sold into the securitization in the third quarter. This was partially offset by an increase of $1.3 million in our gain on sale of loans during the second quarter, resulting from the sale of $178 million and $344 million of multifamily and single family residential mortgage loans, respectively.

Noninterest expense

Noninterest expense for the second quarter was $43.6 million, which represented a decrease of $18.2 million, or 29.5%, from the prior quarter. The decrease primarily relates to: (1) a $13.9 million decline in our professional fees, primarily attributable to $6.2 million of insurance recoveries net of expenses related to securities litigation, indemnification, investigation and other legal expenses in the second quarter as compared to $3.0 million of net expense in the prior quarter, (2) $158 thousand reversal true-up related to restructuring expense in the second quarter as compared to $2.8 million of restructuring expense in the prior quarter, and (3) a 933 thousand decrease in our compensation expense resulting from lower headcount. The net recovery of $6.2 million in insurance proceeds from the securities litigation, indemnification, investigation and other legal expenses reduced our efficiency ratio by 10%.

Income taxes

Taxes totaled $4.3 million for the quarter, representing an increase of 58% from the prior quarter, and an effective tax rate of 20.62%. During the second quarter of 2019, we closed on a tax planning strategy investment that is expected to produce $3.4 million of investment tax credits in 2019, resulting in a 5% reduction in the projected annual effective tax rate. For the full year, we expect our tax rate to normalize closer to 20%.

Balance Sheet

The following table shows selected balance sheet line items as of June 30, 2019 and for the previous four quarters. As indicated in the table below, at June 30, 2019, total assets were approximately $9.4 billion, which represented a decrease of $527 million million consistent with our strategic shift towards reducing our balance sheet and focusing on relationship lending.

 

As of and for the Three Months Ended

Amount Change

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Q2-19 vs. Q1
19

Q2-19 vs. Q2
18

 

 

 

 

 

 

 

 

Total assets

$

9,359,931

 

$

9,886,525

 

$

10,630,067

 

$

10,260,822

 

$

10,319,280

 

$

(526,594

)

$

(959,349

)

Securities available-for-sale

$

1,167,687

 

$

1,471,303

 

$

1,992,500

 

$

2,059,832

 

$

2,297,124

 

$

(303,616

)

$

(1,129,437

)

Loans held-for-investment

$

6,719,570

 

$

7,557,200

 

$

7,700,873

 

$

7,253,293

 

$

7,036,004

 

$

(837,630

)

$

(316,434

)

Loans held-for-sale

$

597,720

 

$

25,191

 

$

8,116

 

$

9,382

 

$

13,753

 

$

572,529

 

$

583,967

 

 

 

 

 

 

 

 

 

Demand deposits

$

2,571,646

 

$

2,694,199

 

$

2,579,770

 

$

2,775,347

 

$

2,783,432

 

$

(122,553

)

$

(211,786

)

Other core deposits

 

3,239,667

 

 

3,735,667

 

 

3,793,605

 

 

3,638,624

 

 

3,666,159

 

 

(496,000

)

 

(426,492

)

Brokered deposits

 

480,977

 

 

1,295,066

 

 

1,543,269

 

 

987,771

 

 

686,203

 

 

(814,089

)

 

(205,226

)

Total Deposits

$

6,292,290

 

$

7,724,932

 

$

7,916,644

 

$

7,401,742

 

$

7,135,794

 

$

(1,432,642

)

$

(843,504

)

As percentage of total deposits

 

 

 

 

 

 

 

Demand deposits

 

40.87

%

 

34.88

%

 

32.59

%

 

37.50

%

 

39.01

%

 

5.99

%

 

1.86

%

Other core deposits

 

51.49

%

 

48.36

%

 

47.92

%

 

49.16

%

 

51.38

%

 

3.13

%

 

0.11

%

Brokered deposits

 

7.64

%

 

16.76

%

 

19.49

%

 

13.35

%

 

9.62

%

 

(9.12

)%

 

(1.98

)%

 

 

 

 

 

 

 

 

Average Loan Yield

 

4.80

%

 

4.76

%

 

4.74

%

 

4.70

%

 

4.63

%

 

0.04

%

 

0.17

%

Average Cost of Interest-Bearing Deposits

 

1.89

%

 

1.92

%

 

1.77

%

 

1.58

%

 

1.34

%

 

(0.03

)%

 

0.55

%

Investments

Securities available-for-sale declined to $1.2 billion, a decrease of 20.6% from the previous quarter, primarily due to the continued reduction in the size of the collateralized loan obligation portfolio. During the second quarter, $298 million of collateralized loan obligations were sold or called. As of June 30, 2019, our securities balance included $737 million of collateralized loan obligations, $852 thousand of small business administration loan pool securities, $429 million of agency residential mortgage-backed securities and $285 thousand of non-agency residential mortgage-backed securities.

Loans

The following table sets forth the composition, by loan category, of our loan portfolio at June 30, 2019 and the previous four quarters.

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Composition of held-for-investment loans

 

 

 

 

 

Commercial real estate

$

856,497

 

$

865,521

 

$

867,013

 

$

823,193

 

$

793,855

 

Multifamily

 

1,598,978

 

 

2,332,527

 

 

2,241,246

 

 

2,112,190

 

 

1,959,965

 

Construction

 

209,029

 

 

211,549

 

 

203,976

 

 

200,294

 

 

211,110

 

Commercial and industrial

 

1,951,707

 

 

1,907,102

 

 

1,944,142

 

 

1,673,055

 

 

1,742,559

 

SBA

 

80,929

 

 

74,998

 

 

68,741

 

 

71,494

 

 

78,092

 

Total commercial loans

 

4,697,140

 

 

5,391,697

 

 

5,325,118

 

 

4,880,226

 

 

4,785,581

 

Single family residential mortgage

 

1,961,065

 

 

2,102,694

 

 

2,305,490

 

 

2,300,069

 

 

2,174,183

 

Other consumer

 

61,365

 

 

62,809

 

 

70,265

 

 

72,998

 

 

76,240

 

Total consumer loans

 

2,022,430

 

 

2,165,503

 

 

2,375,755

 

 

2,373,067

 

 

2,250,423

 

Total gross loans

$

6,719,570

 

$

7,557,200

 

$

7,700,873

 

$

7,253,293

 

$

7,036,004

 

Composition percentage of held-for-investment loans

 

 

 

 

 

Commercial real estate

 

12.7

%

 

11.5

%

 

11.3

%

 

11.3

%

 

11.3

%

Multifamily

 

23.8

%

 

30.9

%

 

29.2

%

 

29.1

%

 

27.9

%

Construction

 

3.1

%

 

2.8

%

 

2.6

%

 

2.8

%

 

3.0

%

Commercial and industrial

 

29.1

%

 

25.2

%

 

25.2

%

 

23.1

%

 

24.8

%

SBA

 

1.2

%

 

1.0

%

 

0.9

%

 

1.0

%

 

1.1

%

Total commercial loans

 

69.9

%

 

71.4

%

 

69.2

%

 

67.3

%

 

68.1

%

Single family residential mortgage

 

29.2

%

 

27.8

%

 

29.9

%

 

31.7

%

 

30.9

%

Other consumer

 

0.9

%

 

0.8

%

 

0.9

%

 

1.0

%

 

1.0

%

Total consumer loans

 

30.1

%

 

28.6

%

 

30.8

%

 

32.7

%

 

31.9

%

Total gross loans

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

Held-for-investment loans decreased to $6.7 billion driven mostly by the transfer of $574 million of multifamily loans from held-for-investment to held-for-sale during the quarter and the sale of $178 million and $131 million of multifamily and single family residential mortgage loans, respectively, partially offset by quarterly net production of $45 million. The quarterly net production increased from the prior quarter primarily as a result of new loan growth of $63 million during the quarter, and $128 million of single family residential mortgage loan production in the second quarter as opposed to $183 million during the first quarter of 2019. The $128 million of single family residential mortgage loan production in the second quarter represented funding on commitments made prior to our decision to discontinue the single family residential mortgage loan business. Going forward, we would expect minimal production from this business in the third and fourth quarters of 2019 as we focus on relationship lending.

Commercial real estate loans comprised 12.7% of the loan portfolio and commercial and industrial loans constituted 29.1%, with yields of 4.67% and 5.77%, respectively. During the second quarter of 2019, our commercial and industrial loan production was $186 million, which represented an increase of 12.6% over the prior quarter.

Held-for-sale loans increased by $573 million primarily resulting from the transfer of certain multifamily loans from loans held-for-investment related to our pending Freddie Mac multifamily securitization which is expected to close during the third quarter of 2019. The loans included in the securitization have a weighted average coupon of 3.79% and a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights will also be sold.

Excluding the aforementioned loan sales and loans transferred to held-for-sale, the loan portfolio had net growth of $45 million from the prior quarter.

Deposits

The following table sets forth the composition of our deposits at June 30, 2019 and the previous four quarters.

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Composition of deposits

 

 

 

 

 

Noninterest-bearing checking

$

993,745

 

$

1,120,700

 

$

1,023,360

 

$

1,061,557

 

$

1,005,032

 

Interest-bearing checking

 

1,577,901

 

 

1,573,499

 

 

1,556,410

 

 

1,713,790

 

 

1,778,400

 

Money market

 

800,898

 

 

899,330

 

 

873,153

 

 

856,886

 

 

1,136,335

 

Savings

 

1,061,115

 

 

1,151,442

 

 

1,265,847

 

 

1,269,489

 

 

1,175,275

 

Non-brokered certificates of deposit

 

1,479,137

 

 

1,684,895

 

 

1,654,605

 

 

1,512,249

 

 

1,354,549

 

Brokered certificates of deposit

 

379,494

 

 

1,295,066

 

 

1,543,269

 

 

987,771

 

 

686,203

 

Total deposits

$

6,292,290

 

$

7,724,932

 

$

7,916,644

 

$

7,401,742

 

$

7,135,794

 

Composition percentage of deposits

 

 

 

 

 

Noninterest-bearing checking

 

15.8

%

 

14.5

%

 

12.9

%

 

14.3

%

 

14.1

%

Interest-bearing checking

 

25.1

%

 

20.4

%

 

19.7

%

 

23.2

%

 

24.9

%

Money market

 

12.7

%

 

11.6

%

 

11.0

%

 

11.6

%

 

15.9

%

Savings

 

16.9

%

 

14.9

%

 

16.0

%

 

17.2

%

 

16.5

%

Non-brokered certificates of deposit

 

23.5

%

 

21.8

%

 

20.9

%

 

20.4

%

 

19.0

%

Brokered certificates of deposit

 

6.0

%

 

16.8

%

 

19.5

%

 

13.3

%

 

9.6

%

Total deposits

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

Deposits finished the second quarter at $6.3 billion, with noninterest-bearing deposits decreasing approximately $127 million. The decline in noninterest-bearing deposits for the quarter consisted primarily of transactional balances that fluctuate throughout the quarter but are expected to return. For the second quarter, the average balance of noninterest-bearing deposits was $1.034 billion up from the first quarter average balance of $1.022 billion. Total deposits decreased by $1.4 billion, of which $916 million was as a result of maturities on our brokered certificates of deposit and no new brokered certificates of deposit were acquired during the quarter.

Debt

Advances from the Federal Home Loan Bank (“FHLB”) increased $890 million, or 95%, to $1.8 billion as of June 30, 2019, as a result of overnight advances with the FHLB that we plan to pay down with the proceeds from the sale of loans sold into the Freddie Mac multifamily securitization which is expected to close in the third quarter. At the end of the quarter, the maturity dates of FHLB advances consisted of $645 million of overnight, $400 million maturing in 3 months or less, and $780 million maturing beyond 3 months. As of the end of the quarter, the overnight advance interest rate was 2.52%.

Equity

At June 30, 2019, stockholders’ equity increased by $15.2 million to $963.5 million, while tangible common equity was $690.2 million. The improvement in stockholders’ equity partially related to the improvement within our accumulated other comprehensive income as a result of other comprehensive income of $5.4 million. During the second quarter of 2019, we reduced the dividend per common share from 13 cents to 6 cents. Subsequent to June 30, 2019, we launched a tender offer for our preferred equity for up to $75 million aggregate purchase price with the tender offer expected to close by the end of August.

Capital remains strong with total risk based capital at 14.88% and a tier 1 leverage ratio of 9.62%. The following table sets forth our regulatory capital ratios at June 30, 2019 and the previous four quarters.

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Capital Ratios

 

 

 

 

 

Banc of California, Inc.

 

 

 

 

 

Total risk-based capital ratio

14.88

%

14.01

%

13.71

%

14.05

%

14.71

%

Tier 1 risk-based capital ratio

13.91

%

13.03

%

12.77

%

13.15

%

13.83

%

Common equity tier 1 capital ratio

10.41

%

9.72

%

9.53

%

9.80

%

9.90

%

Tier 1 leverage ratio

9.62

%

8.87

%

8.95

%

8.99

%

9.30

%

Banc of California, NA

 

 

 

 

 

Total risk-based capital ratio

16.56

%

15.79

%

15.71

%

15.94

%

16.63

%

Tier 1 risk-based capital ratio

15.60

%

14.81

%

14.77

%

15.04

%

15.74

%

Common equity tier 1 capital ratio

15.60

%

14.81

%

14.77

%

15.04

%

15.74

%

Tier 1 leverage ratio

10.80

%

10.07

%

10.36

%

10.29

%

10.58

%

Credit Quality

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Asset quality information and ratios

($ in thousands)

Delinquent loans held-for-investment

 

 

 

 

 

30 to 89 days delinquent

$

34,938

 

$

44,840

 

$

26,684

 

$

20,265

 

$

15,097

 

90+ days delinquent

 

17,272

 

 

14,623

 

 

13,846

 

 

15,269

 

 

11,453

 

Total delinquent loans

$

52,210

 

$

59,463

 

$

40,530

 

$

35,534

 

$

26,550

 

Total delinquent loans to total loans

 

0.78

%

 

0.79

%

 

0.53

%

 

0.49

%

 

0.38

%

Non-performing assets, excluding loans held-for-sale

 

 

 

 

 

Non-performing loans

$

28,499

 

$

27,739

 

$

21,585

 

$

25,523

 

$

22,290

 

90+ days delinquent and still accruing loans

 

275

 

 

731

 

 

470

 

 

 

Other real estate owned

 

276

 

 

316

 

 

672

 

 

434

 

 

710

 

Non-performing assets

$

29,050

 

$

28,786

 

$

22,727

 

$

25,957

 

$

23,000

 

ALLL to non-performing loans

 

206.86

%

 

224.40

%

 

281.99

%

 

226.39

%

 

254.28

%

Non-performing loans to total loans held-for-investment

 

0.43

%

 

0.38

%

 

0.29

%

 

0.35

%

 

0.32

%

Non-performing assets to total assets

 

0.31

%

 

0.29

%

 

0.21

%

 

0.25

%

 

0.22

%

Troubled debt restructurings (TDRs)

 

 

 

 

 

Performing TDRs

$

20,245

 

$

5,574

 

$

5,745

 

$

5,580

 

$

5,648

 

Non-performing TDRs

 

2,428

 

 

1,943

 

 

2,276

 

 

2,684

 

 

2,701

 

Total TDRs

$

22,673

 

$

7,517

 

$

8,021

 

$

8,264

 

$

8,349

 

Loan delinquencies decreased by 12.2% to $52.2 million at June 30, 2019, primarily related to the decrease in our 30 to 89 days delinquent loans. The decrease in our total delinquent loans resulted from $12.6 million returning to current status and $11.7 million of principal payments or payoffs, partially offset by $17.0 million of additions. Loans 90+ days delinquent includes single family mortgage residential loans, which account for 44% of the balance. Loan delinquencies as a percentage of total loans held-for-investment decreased to 78 basis points for the quarter, primarily resulting from the improvement in our delinquent loans, partially offset by the reduction in our balance sheet over the same period.

Non-performing loans increased slightly to $28.5 million as of June 30, 2019, while non-performing assets finished the second quarter at $29.1 million attributable to an increase in our nonperforming loans as of June 30, 2019, partially offset by a reduction in our other real estate owned and loans 90+ days delinquent and still accruing interest. The increase in performing TDRs during the second quarter was primarily due to one loan relationship.

Allowance for Loan Losses

 

Three Months Ended

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

 

($ in thousands)

Allowance for loan losses (ALLL)

 

 

 

 

 

Balance at beginning of period

$

63,885

 

$

62,192

 

$

57,782

 

$

56,678

 

$

54,763

 

Loans and leases charged off

$

(2,451

)

$

(1,063

)

$

(2,522

)

$

(388

)

$

(950

)

Recoveries

$

76

 

$

244

 

$

279

 

$

82

 

$

212

 

Net charge-offs

$

(2,375

)

$

(819

)

$

(2,243

)

$

(306

)

$

(738

)

(Reversal of) provision for loan losses

$

(1,987

)

$

2,512

 

$

6,653

 

$

1,410

 

$

2,653

 

Balance at end of period

$

59,523

 

$

63,885

 

$

62,192

 

$

57,782

 

$

56,678

 

Annualized net loan charge-offs to average total loans held-for-investment

 

0.13

%

 

0.04

%

 

0.12

%

 

0.02

%

 

0.04

%

Reserve for loss on repurchased loans

 

 

 

 

 

Balance at beginning of period

$

2,486

 

$

2,506

 

$

2,575

 

$

3,149

 

$

3,426

 

Reversal of provision for loan repurchases

 

(8

)

 

(20

)

 

(69

)

 

(342

)

 

(165

)

Utilization of reserve for loan repurchases

 

 

 

 

(232

)

 

(112

)

Balance at end of period

$

2,478

 

$

2,486

 

$

2,506

 

$

2,575

 

$

3,149

 

Charge-offs for the second quarter totaled $2.5 million, which primarily consisted of a $2.0 million write-down related to one loan relationship and a write-down of $425 thousand related to the sale of single family residential mortgage loans during the quarter. The allowance for loan losses decreased to $59.5 million, or 0.89% of total loans held-for-investment, primarily attributable to the release of $5.0 million resulting from the upcoming securitization of our multifamily portfolio and other decreases in the loan portfolio, partially offset by net charge-offs of $2.4 million and increases in other qualitative provisions during the quarter.

The Company will host a conference call to discuss its second quarter 2019 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, July 25, 2019. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 4783507. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call.

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $9 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the “Bank”). The Bank has 43 offices including 32 full-service branches located throughout Southern California. Through our 700+ dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.

Forward-Looking Statements

This press release includes forward-looking statements. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

Additional Information

This press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer for the outstanding depositary shares representing Banc of California, Inc.’s 7.00% Non-Cumulative Perpetual Preferred Stock, Series E and its 7.375% Non-Cumulative Perpetual Preferred Stock, Series D described in this press release is being made pursuant to an Offer to Purchase and related materials that Banc of California, Inc. has filed or will file with the Securities and Exchange Commission (the “SEC”) pursuant to a Schedule TO. The Schedule TO, Offer to Purchase, a related letter of transmittal and other tender offer documents contain important information that should be read carefully before any decision is made with respect to the tender offer. These materials (and all other documents Banc of California, Inc. has filed with the SEC) are available at no charge on the SEC's website at www.sec.gov.

 

Banc of California, Inc.

Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

ASSETS

 

 

 

 

 

Cash and cash equivalents

$

313,850

 

$

304,705

 

$

391,592

 

$

372,221

 

$

385,691

 

Securities available-for-sale

 

1,167,687

 

 

1,471,303

 

 

1,992,500

 

 

2,059,832

 

 

2,297,124

 

Loans held-for-sale

 

597,720

 

 

25,191

 

 

8,116

 

 

9,382

 

 

13,753

 

Loans held-for-investment

 

6,719,570

 

 

7,557,200

 

 

7,700,873

 

 

7,253,293

 

 

7,036,004

 

Allowance for loan losses

 

(59,523

)

 

(63,885

)

 

(62,192

)

 

(57,782

)

 

(56,678

)

Federal Home Loan Bank and other bank stock

 

76,373

 

 

55,794

 

 

68,094

 

 

71,308

 

 

75,737

 

Servicing rights, net

 

2,715

 

 

3,053

 

 

3,428

 

 

3,770

 

 

3,869

 

Other real estate owned, net

 

276

 

 

316

 

 

672

 

 

434

 

 

710

 

Premises and equipment, net

 

129,227

 

 

130,417

 

 

129,394

 

 

133,129

 

 

135,478

 

Investments in alternative energy partnerships, net

 

26,633

 

 

26,578

 

 

28,988

 

 

41,781

 

 

44,806

 

Goodwill

 

37,144

 

 

37,144

 

 

37,144

 

 

37,144

 

 

37,144

 

Other intangible assets, net

 

5,105

 

 

5,726

 

 

6,346

 

 

6,990

 

 

7,683

 

Deferred income tax, net

 

42,798

 

 

45,111

 

 

49,404

 

 

47,865

 

 

42,334

 

Income tax receivable

 

2,547

 

 

4,787

 

 

2,695

 

 

1,764

 

 

7,995

 

Bank owned life insurance investment

 

108,132

 

 

107,552

 

 

107,027

 

 

106,468

 

 

105,917

 

Right of use assets

 

24,118

 

 

24,519

 

 

 

 

Other assets

 

165,559

 

 

151,014

 

 

146,496

 

 

152,933

 

 

155,298

 

Assets of discontinued operations

 

 

 

19,490

 

 

20,290

 

 

26,415

 

Total assets

$

9,359,931

 

$

9,886,525

 

$

10,630,067

 

$

10,260,822

 

$

10,319,280

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Noninterest-bearing deposits

$

993,745

 

$

1,120,700

 

$

1,023,360

 

$

1,061,557

 

$

1,005,032

 

Interest-bearing deposits

 

5,298,545

 

 

6,604,232

 

 

6,893,284

 

 

6,340,185

 

 

6,130,762

 

Total deposits

 

6,292,290

 

 

7,724,932

 

 

7,916,644

 

 

7,401,742

 

 

7,135,794

 

Advances from Federal Home Loan Bank

 

1,825,000

 

 

935,000

 

 

1,520,000

 

 

1,640,000

 

 

1,805,000

 

Notes payable, net

 

173,257

 

 

173,203

 

 

173,174

 

 

173,096

 

 

173,017

 

Reserve for loss on repurchased loans

 

2,478

 

 

2,486

 

 

2,506

 

 

2,575

 

 

3,149

 

Lease liabilities

 

25,457

 

 

25,893

 

 

 

 

Due on unsettled securities purchases

 

 

 

 

17,500

 

 

132,546

 

Accrued expenses and other liabilities

 

77,905

 

 

76,686

 

 

72,209

 

 

79,231

 

 

81,086

 

Total liabilities

 

8,396,387

 

 

8,938,200

 

 

9,684,533

 

 

9,314,144

 

 

9,330,592

 

Commitments and contingent liabilities

 

 

 

 

 

Preferred stock

 

231,128

 

 

231,128

 

 

231,128

 

 

231,128

 

 

269,071

 

Common stock

 

520

 

 

518

 

 

518

 

 

518

 

 

517

 

Common stock, class B non-voting non-convertible

 

5

 

 

5

 

 

5

 

 

5

 

 

4

 

Additional paid-in capital

 

627,306

 

 

626,608

 

 

625,834

 

 

624,789

 

 

623,372

 

Retained earnings

 

146,039

 

 

136,943

 

 

140,952

 

 

140,971

 

 

143,880

 

Treasury stock

 

(28,786

)

 

(28,786

)

 

(28,786

)

 

(28,786

)

 

(28,786

)

Accumulated other comprehensive loss, net

 

(12,668

)

 

(18,091

)

 

(24,117

)

 

(21,947

)

 

(19,370

)

Total stockholders’ equity

 

963,544

 

 

948,325

 

 

945,534

 

 

946,678

 

 

988,688

 

Total liabilities and stockholders’ equity

$

9,359,931

 

$

9,886,525

 

$

10,630,067

 

$

10,260,822

 

$

10,319,280

 

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)

 

Three Months Ended

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Interest and dividend income

 

 

 

 

 

Loans, including fees

$

89,159

 

$

90,558

 

$

88,258

 

$

84,795

 

$

81,307

 

Securities

 

12,457

 

 

17,841

 

 

19,882

 

 

20,599

 

 

21,455

 

Other interest-earning assets

 

2,424

 

 

2,313

 

 

2,990

 

 

2,380

 

 

2,423

 

Total interest and dividend income

 

104,040

 

 

110,712

 

 

111,130

 

 

107,774

 

 

105,185

 

Interest expense

 

 

 

 

 

Deposits

 

28,598

 

 

31,443

 

 

28,972

 

 

25,154

 

 

20,315

 

Federal Home Loan Bank advances

 

8,289

 

 

9,081

 

 

9,068

 

 

8,996

 

 

9,539

 

Securities sold under repurchase agreements

 

16

 

 

18

 

 

25

 

 

47

 

 

211

 

Notes payable and other interest-bearing liabilities

 

2,357

 

 

2,362

 

 

2,383

 

 

2,385

 

 

2,356

 

Total interest expense

 

39,260

 

 

42,904

 

 

40,448

 

 

36,582

 

 

32,421

 

Net interest income

 

64,780

 

 

67,808

 

 

70,682

 

 

71,192

 

 

72,764

 

(Reversal of) provision for loan and lease losses

 

(1,987

)

 

2,512

 

 

6,653

 

 

1,410

 

 

2,653

 

Net interest income after provision for loan and lease losses

 

66,767

 

 

65,296

 

 

64,029

 

 

69,782

 

 

70,111

 

Noninterest income

 

 

 

 

 

Customer service fees

 

1,434

 

 

1,515

 

 

1,786

 

 

1,446

 

 

1,491

 

Loan servicing income

 

121

 

 

118

 

 

22

 

 

439

 

 

948

 

Impairment loss on investment securities

 

 

 

(3,252

)

 

 

Net gain on sale of securities available for sale

 

 

208

 

 

 

13

 

 

278

 

Net gain on sale of loans

 

2,826

 

 

1,553

 

 

873

 

 

279

 

 

821

 

All other income (loss)

 

(6,671

)

 

2,901

 

 

3,019

 

 

2,647

 

 

4,523

 

Total noninterest income

 

(2,290

)

 

6,295

 

 

2,448

 

 

4,824

 

 

8,061

 

Noninterest expense

 

 

 

 

 

Salaries and employee benefits

 

27,506

 

 

28,439

 

 

24,587

 

 

24,832

 

 

29,440

 

Occupancy and equipment

 

7,955

 

 

7,686

 

 

8,064

 

 

8,213

 

 

7,883

 

Professional fees (reimbursement)

 

(2,903

)

 

11,041

 

 

6,206

 

 

11,966

 

 

6,303

 

Data processing

 

1,672

 

 

1,496

 

 

1,733

 

 

1,884

 

 

1,678

 

Advertising

 

2,048

 

 

2,057

 

 

3,371

 

 

3,152

 

 

2,864

 

Regulatory assessments

 

2,136

 

 

2,482

 

 

1,252

 

 

2,138

 

 

2,196

 

Reversal of provision for loan repurchases

 

(61

)

 

(116

)

 

(122

)

 

(360

)

 

(218

)

Amortization of intangible assets

 

621

 

 

620

 

 

644

 

 

693

 

 

827

 

Restructuring (reversal) expense

 

(158

)

 

2,795

 

 

(105

)

 

553

 

 

3,983

 

All other expenses

 

5,126

 

 

3,385

 

 

3,153

 

 

5,322

 

 

5,775

 

Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships

 

43,942

 

 

59,885

 

 

48,783

 

 

58,393

 

 

60,731

 

(Gain) loss on investments in alternative energy partnerships

 

(355

)

 

1,950

 

 

786

 

 

2,484

 

 

1,808

 

Total noninterest expense

 

43,587

 

 

61,835

 

 

49,569

 

 

60,877

 

 

62,539

 

Income from continuing operations before income taxes

 

20,890

 

 

9,756

 

 

16,908

 

 

13,729

 

 

15,633

 

Income tax expense

 

4,308

 

 

2,719

 

 

6,117

 

 

3,301

 

 

1,779

 

Income from continuing operations

 

16,582

 

 

7,037

 

 

10,791

 

 

10,428

 

 

13,854

 

Income from discontinued operations before income taxes

 

 

 

347

 

 

924

 

 

1,281

 

Income tax expense

 

 

 

100

 

 

256

 

 

355

 

Income from discontinued operations

 

 

 

247

 

 

668

 

 

926

 

Net income

 

16,582

 

 

7,037

 

 

11,038

 

 

11,096

 

 

14,780

 

Preferred stock dividends

 

4,308

 

 

4,308

 

 

4,308

 

 

4,970

 

 

5,113

 

Income allocated to participating securities

 

271

 

 

 

 

 

86

 

Participating securities dividends

 

94

 

 

202

 

 

203

 

 

202

 

 

203

 

Impact of preferred stock redemption

 

 

 

 

2,307

 

 

Net income available to common stockholders

$

11,909

 

$

2,527

 

$

6,527

 

$

3,617

 

$

9,378

 

Basic earnings per common share

 

 

 

 

 

Income from continuing operations

$

0.23

 

$

0.05

 

$

0.12

 

$

0.06

 

$

0.17

 

Income from discontinued operations

 

 

 

0.01

 

 

0.01

 

 

0.02

 

Net income

$

0.23

 

$

0.05

 

$

0.13

 

$

0.07

 

$

0.19

 

Diluted earnings per common share

 

 

 

 

 

Income from continuing operations

$

0.23

 

$

0.05

 

$

0.12

 

$

0.06

 

$

0.16

 

Income from discontinued operations

 

 

 

0.01

 

 

0.01

 

 

0.02

 

Net income

$

0.23

 

$

0.05

 

$

0.13

 

$

0.07

 

$

0.18

 

Weighted average number of common shares outstanding

 

 

 

 

 

Basic

 

50,857,137

 

 

50,676,722

 

 

50,651,805

 

 

50,656,076

 

 

50,593,429

 

Diluted

 

50,964,956

 

 

50,846,722

 

 

50,812,874

 

 

50,899,464

 

 

50,919,091

 

Dividends declared per common share

$

0.06

 

$

0.13

 

$

0.13

 

$

0.13

 

$

0.13

 

Banc of California, Inc.

Selected Financial Data

(Unaudited)

 

Three Months Ended

 

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

September 30,
2018

 

June 30,
2018

Profitability and other ratios of consolidated operations

 

 

 

 

 

 

 

 

 

Return on average assets(1)

0.69

%

 

0.28

%

 

0.43

%

 

0.43

%

 

0.58

%

Return on average equity(1)

6.91

%

 

2.98

%

 

4.56

%

 

4.40

%

 

5.92

%

Return on average tangible common equity(2)

7.43

%

 

1.91

%

 

4.19

%

 

2.49

%

 

6.03

%

Dividend payout ratio(3)

26.09

%

 

260.00

%

 

100.00

%

 

185.71

%

 

68.42

%

Net interest spread

2.50

%

 

2.47

%

 

2.56

%

 

2.62

%

 

2.75

%

Net interest margin(1)

2.86

%

 

2.81

%

 

2.88

%

 

2.93

%

 

3.01

%

Noninterest income (loss) to total revenue(4)

(3.66

)%

 

8.49

%

 

3.60

%

 

7.42

%

 

11.16

%

Noninterest income (loss) to average total assets(1)

(0.10

)%

 

0.25

%

 

0.10

%

 

0.22

%

 

0.36

%

Noninterest expense to average total assets(1)

1.82

%

 

2.43

%

 

1.92

%

 

2.38

%

 

2.45

%

Efficiency ratio(2)(5)

69.75

%

 

83.44

%

 

67.47

%

 

79.15

%

 

76.17

%

Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(2)(5)

67.84

%

 

83.00

%

 

67.09

%

 

77.88

%

 

73.50

%

Average loans held-for-investment to average deposits

104.38

%

 

100.45

%

 

97.40

%

 

97.00

%

 

98.63

%

Average securities available-for-sale to average total assets

13.58

%

 

17.00

%

 

19.85

%

 

21.28

%

 

22.27

%

Average stockholders’ equity to average total assets

10.02

%

 

9.29

%

 

9.38

%

 

9.85

%

 

9.78

%

(1)

Ratios are presented on an annualized basis.

(2)

The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.

(3)

The ratio is calculated by dividing dividends declared per common share by basic earnings per common share.

(4)

Total revenue is equal to the sum of net interest income before provision for loan and lease losses and noninterest income (loss).

(5)

The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for loan and lease losses and noninterest income (loss).

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Loans and ALLL by loan origination type

 

 

 

 

 

Loan breakdown by origination type

 

 

 

 

 

Originated loans

$

6,181,583

 

$

6,991,056

 

$

7,105,171

 

$

6,683,683

 

$

6,446,127

 

Acquired loans not impaired at acquisition

 

537,987

 

 

566,144

 

 

595,702

 

 

569,610

 

 

589,877

 

Total loans

$

6,719,570

 

$

7,557,200

 

$

7,700,873

 

$

7,253,293

 

$

7,036,004

 

ALLL breakdown by origination type

 

 

 

 

 

Originated loans

$

58,135

 

$

63,003

 

$

61,256

 

$

56,672

 

$

55,534

 

Acquired loans not impaired at acquisition

 

1,388

 

 

882

 

 

937

 

 

1,110

 

 

1,144

 

Total ALLL

$

59,523

 

$

63,885

 

$

62,193

 

$

57,782

 

$

56,678

 

Discount on acquired loans not impaired at acquisition

$

10,680

 

$

11,184

 

$

11,645

 

$

12,311

 

$

12,932

 

Percentage of ALLL to:

 

 

 

 

 

Originated loans

 

0.94

%

 

0.90

%

 

0.86

%

 

0.85

%

 

0.86

%

Originated loans and acquired loans not impaired at acquisition

 

0.89

%

 

0.85

%

 

0.81

%

 

0.80

%

 

0.81

%

Total loans

 

0.89

%

 

0.85

%

 

0.81

%

 

0.80

%

 

0.81

%

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)

 

Three Months Ended

 

June 30, 2019

March 31, 2019

December 31, 2018

 

Average

 

Yield

Average

 

Yield

Average

 

Yield

 

Balance

Interest

/ Cost

Balance

Interest

/ Cost

Balance

Interest

/ Cost

Interest earning assets

 

 

 

 

 

 

 

 

 

Loans held-for-sale (1)

$

47,233

 

$

265

2.25

%

$

31,374

 

$

228

2.95

%

$

33,243

 

$

221

2.64

%

SFR mortgage

 

2,059,704

 

 

21,390

4.17

%

 

2,312,900

 

 

24,062

4.22

%

 

2,260,205

 

 

23,585

4.14

%

Commercial real estate, multifamily, and construction

 

3,406,672

 

 

39,659

4.67

%

 

3,387,698

 

 

38,117

4.56

%

 

3,246,860

 

 

37,403

4.57

%

Commercial and industrial, SBA, and lease financing

 

1,872,289

 

 

26,940

5.77

%

 

1,920,220

 

 

27,235

5.75

%

 

1,791,708

 

 

26,219

5.81

%

Other consumer

 

59,806

 

 

905

6.07

%

 

62,558

 

 

916

5.94

%

 

68,479

 

 

990

5.74

%

Gross loans and leases

 

7,445,704

 

 

89,159

4.80

%

 

7,714,750

 

 

90,558

4.76

%

 

7,400,495

 

 

88,418

4.74

%

Securities

 

1,304,876

 

 

12,457

3.83

%

 

1,751,509

 

 

17,841

4.13

%

 

2,032,632

 

 

19,882

3.88

%

Other interest-earning assets

 

342,908

 

 

2,424

2.84

%

 

321,823

 

 

2,313

2.91

%

 

318,419

 

 

2,990

3.73

%

Total interest-earning assets

 

9,093,488

 

 

104,040

4.59

%

 

9,788,082

 

 

110,712

4.59

%

 

9,751,546

 

 

111,290

4.53

%

Allowance for loan losses

 

(63,046

)

 

 

 

(61,924

)

 

 

 

(58,099

)

 

 

BOLI and non-interest earning assets

 

580,133

 

 

 

 

575,559

 

 

 

 

544,302

 

 

 

Total assets

$

9,610,575

 

 

 

$

10,301,717

 

 

 

$

10,237,749

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

Savings

$

1,083,571

 

$

4,950

1.83

%

$

1,201,802

 

$

5,480

1.85

%

$

1,279,155

 

$

5,663

1.76

%

Interest-bearing checking

 

1,580,165

 

 

4,554

1.16

%

 

1,554,846

 

 

4,525

1.18

%

 

1,666,884

 

 

4,916

1.17

%

Money market

 

853,007

 

 

3,902

1.83

%

 

887,538

 

 

4,128

1.89

%

 

803,157

 

 

3,168

1.56

%

Certificates of deposit

 

2,537,060

 

 

15,192

2.40

%

 

2,982,980

 

 

17,310

2.35

%

 

2,759,665

 

 

15,225

2.19

%

Total interest-bearing deposits

 

6,053,803

 

 

28,598

1.89

%

 

6,627,166

 

 

31,443

1.92

%

 

6,508,861

 

 

28,972

1.77

%

FHLB advances

 

1,287,121

 

 

8,289

2.58

%

 

1,422,100

 

 

9,081

2.59

%

 

1,447,348

 

 

9,068

2.49

%

Securities sold under repurchase agreements

 

2,173

 

 

16

2.95

%

 

2,350

 

 

18

3.11

%

 

3,116

 

 

25

3.18

%

Long-term debt and other interest-bearing liabilities

 

174,161

 

 

2,357

5.43

%

 

174,230

 

 

2,362

5.50

%

 

174,281

 

 

2,383

5.42

%

Total interest-bearing liabilities

 

7,517,258

 

 

39,260

2.09

%

 

8,225,846

 

 

42,904

2.12

%

 

8,133,606

 

 

40,448

1.97

%

Noninterest-bearing deposits

 

1,034,205

 

 

 

 

1,021,741

 

 

 

 

1,054,790

 

 

 

Non-interest-bearing liabilities

 

96,179

 

 

 

 

97,430

 

 

 

 

89,111

 

 

 

Total liabilities

 

8,647,642

 

 

 

 

9,345,017

 

 

 

 

9,277,507

 

 

 

Total stockholders’ equity

 

962,933

 

 

 

 

956,700

 

 

 

 

960,242

 

 

 

Total liabilities and stockholders’ equity

$

9,610,575

 

 

 

$

10,301,717

 

 

 

$

10,237,749

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

$

64,780

2.50

%

 

$

67,808

2.47

%

 

$

70,842

2.56

%

Net interest margin

 

 

2.86

%

 

 

2.81

%

 

 

2.88

%

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

120.97

%

 

 

 

118.99

%

 

 

 

119.89

%

 

 

Total deposits

$

7,088,008

 

$

28,598

1.62

%

$

7,648,907

 

$

31,443

1.67

%

$

7,563,651

 

$

28,972

1.52

%

Total funding (2)

$

8,551,463

 

$

39,260

1.84

%

$

9,247,587

 

$

42,904

1.88

%

$

9,188,396

 

$

40,448

1.75

%

(1)

Includes loans held-for-sale of discontinued operations for the three months ended December 31, 2018.

(2)

Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
 

 

Three Months Ended

 

September 30, 2018

June 30, 2018

 

Average

 

Yield

Average

 

Yield

 

Balance

Interest

/ Cost

Balance

Interest

/ Cost

Interest earning assets

 

 

 

 

 

 

Loans held-for-sale (1)

$

42,754

 

$

263

2.44

%

$

54,791

 

$

328

2.40

%

SFR mortgage

 

2,222,602

 

 

23,461

4.19

%

 

2,223,608

 

 

22,790

4.11

%

Commercial real estate, multifamily, and construction

 

3,091,706

 

 

35,838

4.60

%

 

2,989,014

 

 

33,736

4.53

%

Commercial and industrial, SBA, and lease financing

 

1,739,711

 

 

24,382

5.56

%

 

1,707,478

 

 

23,664

5.56

%

Other consumer

 

69,600

 

 

981

5.59

%

 

80,188

 

 

978

4.89

%

Gross loans and leases

 

7,166,373

 

 

84,925

4.70

%

 

7,055,079

 

 

81,496

4.63

%

Securities

 

2,163,037

 

 

20,599

3.78

%

 

2,279,416

 

 

21,455

3.78

%

Other interest-earning assets

 

335,160

 

 

2,380

2.82

%

 

392,342

 

 

2,423

2.48

%

Total interest-earning assets

 

9,664,570

 

 

107,904

4.43

%

 

9,726,837

 

 

105,374

4.35

%

Allowance for loan losses

 

(56,730

)

 

 

 

(54,903

)

 

 

BOLI and non-interest earning assets

 

554,636

 

 

 

 

565,224

 

 

 

Total assets

$

10,162,476

 

 

 

$

10,237,158

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

Savings

 

1,231,696

 

 

5,122

1.65

%

 

1,055,693

 

 

3,886

1.48

%

Interest-bearing checking

 

1,789,679

 

 

5,054

1.12

%

 

1,822,856

 

 

4,182

0.92

%

Money market

 

966,165

 

 

3,455

1.42

%

 

1,134,280

 

 

3,689

1.30

%

Certificates of deposit

 

2,332,181

 

 

11,523

1.96

%

 

2,079,932

 

 

8,558

1.65

%

Total interest-bearing deposits

 

6,319,721

 

 

25,154

1.58

%

 

6,092,761

 

 

20,315

1.34

%

FHLB advances

 

1,528,674

 

 

8,996

2.33

%

 

1,827,307

 

 

9,539

2.09

%

Securities sold under repurchase agreements

 

6,418

 

 

47

2.91

%

 

29,907

 

 

211

2.83

%

Long-term debt and other interest-bearing liabilities

 

174,361

 

 

2,385

5.43

%

 

174,296

 

 

2,356

5.42

%

Total interest-bearing liabilities

 

8,029,174

 

 

36,582

1.81

%

 

8,124,271

 

 

32,421

1.60

%

Noninterest-bearing deposits

 

1,023,890

 

 

 

 

1,004,502

 

 

 

Non-interest-bearing liabilities

 

108,593

 

 

 

 

107,529

 

 

 

Total liabilities

 

9,161,657

 

 

 

 

9,236,302

 

 

 

Total stockholders’ equity

 

1,000,819

 

 

 

 

1,000,856

 

 

 

Total liabilities and stockholders’ equity

$

10,162,476

 

 

 

$

10,237,158

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

$

71,322

2.62

%

 

$

72,953

2.75

%

Net interest margin

 

 

2.93

%

 

 

3.01

%

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

120.37

%

 

 

 

119.73

%

 

 

Total deposits

$

7,343,611

 

$

25,154

1.36

%

$

7,097,263

 

$

20,315

1.15

%

Total funding (2)

$

9,053,064

 

$

36,582

1.60

%

$

9,128,773

 

$

32,421

1.42

%

(1)

Includes loans held-for-sale of discontinued operations.

(2)

Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures
(Dollars in thousands, except per share data)
(Unaudited)

Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.

Return on average tangible common equity and efficiency ratio, as adjusted, tangible common equity to tangible assets, and tangible common equity per common share constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.

Tangible common equity is calculated by subtracting preferred stock, goodwill, and other intangible assets from stockholders' equity. Tangible assets is calculated by subtracting goodwill and other intangible assets from total assets. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.

Adjusted efficiency ratio is calculated by subtracting loss on investments in alternative energy partnerships from noninterest expense and adding total pre-tax return, which includes the loss on investments in alternative energy partnerships, to the sum of net interest income and noninterest income (total revenue). Management believes the presentation o these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the final results and operating performance of the Company.

This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.

 

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Tangible common equity, and tangible common equity to tangible assets ratio

 

 

 

 

 

Total assets

$

9,359,931

 

$

9,886,525

 

$

10,630,067

 

$

10,260,822

 

$

10,319,280

 

Less goodwill

 

(37,144

)

 

(37,144

)

 

(37,144

)

 

(37,144

)

 

(37,144

)

Less other intangible assets

 

(5,105

)

 

(5,726

)

 

(6,346

)

 

(6,990

)

 

(7,683

)

Tangible assets(1)

$

9,317,682

 

$

9,843,655

 

$

10,586,577

 

$

10,216,688

 

$

10,274,453

 

 

 

 

 

 

 

Total stockholders' equity

$

963,544

 

$

948,325

 

$

945,534

 

$

946,678

 

$

988,688

 

Less goodwill

 

(37,144

)

 

(37,144

)

 

(37,144

)

 

(37,144

)

 

(37,144

)

Less other intangible assets

 

(5,105

)

 

(5,726

)

 

(6,346

)

 

(6,990

)

 

(7,683

)

Tangible equity(1)

 

921,295

 

 

905,455

 

 

902,044

 

 

902,544

 

 

943,861

 

Less preferred stock

 

(231,128

)

 

(231,128

)

 

(231,128

)

 

(231,128

)

 

(269,071

)

Tangible common equity(1)

$

690,167

 

$

674,327

 

$

670,916

 

$

671,416

 

$

674,790

 

 

 

 

 

 

 

Total stockholders' equity to total assets

 

10.29

%

 

9.59

%

 

8.89

%

 

9.23

%

 

9.58

%

Tangible equity to tangible assets(1)

 

9.89

%

 

9.20

%

 

8.52

%

 

8.83

%

 

9.19

%

Tangible common equity to tangible assets(1)

 

7.41

%

 

6.85

%

 

6.34

%

 

6.57

%

 

6.57

%

 

 

 

 

 

 

Common shares outstanding

 

50,397,769

 

 

50,315,490

 

 

50,172,018

 

 

50,180,607

 

 

50,142,955

 

Class B non-voting non-convertible common shares outstanding

 

477,321

 

 

477,321

 

 

477,321

 

 

477,321

 

 

403,778

 

Total common shares outstanding

 

50,875,090

 

 

50,792,811

 

 

50,649,339

 

 

50,657,928

 

 

50,546,733

 

 

 

 

 

 

 

Tangible common equity per common share(1)

$

13.57

 

$

13.28

 

$

13.25

 

$

13.25

 

$

13.35

 

Book value per common share

$

14.40

 

$

14.12

 

$

14.10

 

$

14.13

 

$

14.24

 

(1)

NonGAAP measure.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

Three Months Ended

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Return on tangible common equity

 

 

 

 

 

Average total stockholders' equity

$

962,933

 

$

956,700

 

$

960,242

 

$

1,000,819

 

$

1,000,856

 

Less average preferred stock

 

(231,128

)

 

(231,128

)

 

(231,128

)

 

(260,822

)

 

(269,071

)

Less average goodwill

 

(37,144

)

 

(37,144

)

 

(37,144

)

 

(37,144

)

 

(37,144

)

Less average other intangible assets

 

(5,503

)

 

(6,128

)

 

(6,731

)

 

(7,412

)

 

(8,110

)

Average tangible common equity(1)

$

689,158

 

$

682,300

 

$

685,239

 

$

695,441

 

$

686,531

 

 

 

 

 

 

 

Net income

$

16,582

 

$

7,037

 

$

11,038

 

$

11,096

 

$

14,780

 

Less preferred stock dividends and impact of preferred stock redemption

 

(4,308

)

 

(4,308

)

 

(4,308

)

 

(7,277

)

 

(5,113

)

Add amortization of intangible assets

 

621

 

 

620

 

 

644

 

 

693

 

 

827

 

Add impairment on intangible assets

 

 

 

 

 

Less tax effect on amortization and impairment of intangible assets

 

(130

)

 

(130

)

 

(135

)

 

(146

)

 

(174

)

Net income available to common stockholders(1)

$

12,765

 

$

3,219

 

$

7,239

 

$

4,366

 

$

10,320

 

 

 

 

 

 

 

Return on average equity

 

6.91

%

 

2.98

%

 

4.56

%

 

4.40

%

 

5.92

%

Return on average tangible common equity(1)

 

7.43

%

 

1.91

%

 

4.19

%

 

2.49

%

 

6.03

%

 

 

 

 

 

 

Statutory tax rate utilized for calculating tax effect on amortization and impairment of intangible assets

 

21.00

%

 

21.00

%

 

21.00

%

 

21.00

%

 

21.00

%

 

Three Months Ended

 

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Adjusted efficiency ratio including the pre-tax effect of
investments in alternative energy partnerships

 

 

 

 

 

Noninterest expense

$

43,587

 

$

61,835

 

$

49,578

 

$

60,977

 

$

62,554

 

Gain (loss) on investments in alternative energy partnerships

 

355

 

 

(1,950

)

 

(786

)

 

(2,484

)

 

(1,808

)

Adjusted noninterest expense(1)

$

43,942

 

$

59,885

 

$

48,792

 

$

58,493

 

$

60,746

 

 

 

 

 

 

 

Net interest income

$

64,780

 

$

67,808

 

$

70,842

 

$

71,322

 

$

72,953

 

Noninterest income

 

(2,290

)

 

6,295

 

 

2,644

 

 

5,718

 

 

9,168

 

Total revenue

 

62,490

 

 

74,103

 

 

73,486

 

 

77,040

 

 

82,121

 

Tax credit from investments in alternative energy partnerships

 

1,680

 

 

 

 

412

 

 

1,912

 

Deferred tax expense on investments in alternative energy partnerships

 

(176

)

 

 

 

(43

)

 

(211

)

Tax effect on tax credit and deferred tax expense

 

426

 

 

 

26

 

 

180

 

 

631

 

Gain (loss) on investments in alternative energy partnerships

 

355

 

 

(1,950

)

 

(786

)

 

(2,484

)

 

(1,808

)

Total pre-tax adjustments for investments in alternative energy partnerships

 

2,285

 

 

(1,950

)

 

(760

)

 

(1,935

)

 

524

 

Adjusted total revenue(1)

$

64,775

 

$

72,153

 

$

72,726

 

$

75,105

 

$

82,645

 

Efficiency ratio(1)

 

69.75

%

 

83.44

%

 

67.47

%

 

79.15

%

 

76.17

%

Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(1)

 

67.84

%

 

83.00

%

 

67.09

%

 

77.88

%

 

73.50

%

Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense

 

22.07

%

 

27.00

%

 

27.42

%

 

32.81

%

 

27.07

%

(1)

NonGAAP measure.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

Noninterest Expense

Q2 2019 non-core
adjustments

Q2 Core Operating
Expense(1)

Salaries and employee benefits

$

27,506

 

$

 

$

27,506

 

Occupancy and equipment

7,955

 

(797

)

7,158

 

Professional fees (reimbursement)

(2,903

)

6,214

 

3,311

 

Data processing

1,672

 

 

1,672

 

Advertising

2,048

 

 

2,048

 

Regulatory assessments

2,136

 

 

2,136

 

Reversal of provision for loan repurchases

(61

)

 

(61

)

Amortization of intangible assets

621

 

 

621

 

Restructuring (reversal) expense

(158

)

158

 

 

All other expenses

5,126

 

 

5,126

 

Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships

43,942

 

5,575

 

49,517

 

(Gain) loss on investments in alternative energy partnerships

(355

)

 

(355

)

Total noninterest expense

$

43,587

 

$

5,575

 

$

49,162

 

(1)

Non-GAAP measure.

 

Contacts

INVESTOR RELATIONS INQUIRIES:
Banc of California, Inc.
John A. Bogler, (855) 361-2262

Contacts

INVESTOR RELATIONS INQUIRIES:
Banc of California, Inc.
John A. Bogler, (855) 361-2262