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Banc of California Reports Strong Profitability and Continued Growth in Noninterest-bearing Deposits for Third Quarter 2022

Banc of California, Inc. (NYSE: BANC) today reported net income and net income available to common stockholders of $24.2 million, or $0.40 per diluted common share, for the third quarter of 2022. This compares to net income and net income available to common stockholders of $26.7 million, or $0.43 per diluted common share, for the second quarter of 2022. The third quarter includes pre-tax transaction costs of $2.1 million related to the Deepstack acquisition.

Third quarter highlights:

  • Acquisition of Deepstack Technologies completed on September 15, 2022
  • Adjusted diluted EPS of $0.44
  • Return on average assets of 1.02%
  • Adjusted return on average assets of 1.13%
  • Pre-tax pre-provision return on average assets of 1.44%
  • Adjusted pre-tax pre-provision return on average assets of 1.59%
  • Net interest margin of 3.58%
  • Noninterest-bearing deposits increased $117.0 million or 17% annualized to represent 40% of total quarter end deposits
  • Average cost of total deposits of 0.47%
  • Allowance for credit losses at 1.36% of total loans and 232% of non-performing loans, up from 1.34% and 224% in the prior quarter
  • Repurchased $13.0 million of common stock during the quarter and $63.7 million cumulatively this year through October 18

Jared Wolff, President & CEO of Banc of California, commented, “During the third quarter, we executed further on the areas that drive franchise value. Our stable noninterest-bearing deposit base continued to expand, as noninterest-bearing deposits grew $117.0 million hitting 40% of total deposits at the end of the quarter. Our margin held up, even as we locked in some longer-term fixed-rate funding, and core loan growth outside of warehouse continued at a double digit annualized pace. Our core earnings power remained consistent in a challenging operating environment and we expect our asset sensitivity to support earnings growth going forward.”

Mr. Wolff continued, “While we continued to deliver strong financial results for shareholders in the third quarter, we also took another significant step in building long-term franchise value with our acquisition of Deepstack Technologies and entry into the payments processing business. Our payments business adds a high value solution that will further enhance the banking experience we provide to clients, and as we scale this business over the next few years, we expect it to become a consistent source of high margin fee income and noninterest-bearing deposits that will be another catalyst for generating consistent and profitable growth.”

Lynn Hopkins, Chief Financial Officer of Banc of California, said, “During the third quarter, our net interest margin remained constant as we managed changes in the mix of earning assets, including lower warehouse balances, and the mix of funding sources as we strategically replaced certain higher costing deposits with longer-term fixed-rate funding. We believe our longer-term fixed-rate funding and noninterest-bearing deposits growth will improve our ability to manage our funding costs and expand our margin as we expect to see rising interest rates. In an operating environment that makes it challenging for banks to grow tangible book value, excluding our use of capital from the acquisition of Deepstack, we have protected and grown our tangible book value while also repurchasing 5% of our common shares this year. We also saw positive trends in credit quality with declines in non-performing loans and non-performing assets.”

Acquisition of Deepstack Technologies

On September 15, 2022, the Company completed its acquisition of the payments platform and technology of Global Payroll Gateway, Inc. and its wholly owned subsidiary, Deepstack Technologies, LLC (collectively, "Deepstack") for $24 million in cash and stock. Deepstack is a differentiated software-led and e-commerce payments platform that provides clients with payment solutions, including merchant processing, payments acceptance and disbursements, tokenization, virtual accounts, fraud protection tools, chargeback management, and reconciliation and reporting services. Deepstack advances Banc of California's goal to be the hub of the financial services ecosystem for clients while creating another driver of profitable long-term growth and franchise value including:

  • Scalable, meaningful fee-based income
  • New clients in verticals attractive to Banc of California
  • New source of noninterest-bearing deposits

The Deepstack acquisition is accounted for as a business combination under U.S. GAAP and initial estimates of the fair value of identifiable intangible assets acquired are reflected in the Company's balance sheet as of September 30, 2022.

Income Statement Highlights

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

 

($ in thousands)

Total interest and dividend income

$

95,973

 

$

88,418

 

$

84,269

 

 

$

81,573

 

$

71,791

 

 

$

268,660

 

 

$

210,086

 

Total interest expense

 

16,565

 

 

10,119

 

 

7,828

 

 

 

8,534

 

 

8,815

 

 

 

34,512

 

 

 

29,347

 

Net interest income

 

79,408

 

 

78,299

 

 

76,441

 

 

 

73,039

 

 

62,976

 

 

 

234,148

 

 

 

180,739

 

Total noninterest income

 

5,681

 

 

7,186

 

 

5,910

 

 

 

5,605

 

 

5,519

 

 

 

18,777

 

 

 

13,771

 

Total revenue

 

85,089

 

 

85,485

 

 

82,351

 

 

 

78,644

 

 

68,495

 

 

 

252,925

 

 

 

194,510

 

Total noninterest expense

 

50,962

 

 

48,612

 

 

46,596

 

 

 

58,872

 

 

37,811

 

 

 

146,170

 

 

 

124,806

 

Pre-tax / pre-provision income(1)

 

34,127

 

 

36,873

 

 

35,755

 

 

 

19,772

 

 

30,684

 

 

 

106,755

 

 

 

69,704

 

Provision for (reversal of) credit losses

 

 

 

 

 

(31,542

)

 

 

11,262

 

 

(1,147

)

 

 

(31,542

)

 

 

(4,408

)

Income tax expense

 

9,931

 

 

10,161

 

 

18,785

 

 

 

2,759

 

 

8,661

 

 

 

38,877

 

 

 

17,517

 

Net income

$

24,196

 

$

26,712

 

$

48,512

 

 

$

5,751

 

$

23,170

 

 

$

99,420

 

 

$

56,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders(2)

$

24,196

 

$

26,712

 

$

43,345

 

 

$

4,024

 

$

21,443

 

 

$

94,253

 

 

$

46,493

 

(1)

Non-GAAP Measure

(2)

Balance represents the net income available to common stockholders after subtracting preferred stock dividends, income allocated to participating securities, participating securities dividends, and impact of preferred stock redemption from net income. Refer to the Statements of Operations for additional detail on these amounts.

Net interest income

Q3-2022 vs Q2-2022

Net interest income increased $1.1 million to $79.4 million for the third quarter due to higher average balances and yield on interest-earning assets, partially offset by higher average balances and costs on interest-bearing liabilities.

The net interest margin remained unchanged at 3.58% for the third quarter as the average interest-earning assets yield increased 29 basis points and the cost of average total funding increased 30 basis points. The yield on average interest-earning assets increased to 4.33% for the third quarter from 4.04% for the second quarter due to the mix of interest-earning assets and higher yields on loans, securities and other interest-earning assets. The overall loan yield increased 19 basis points to 4.54% during the third quarter as a result of the portfolio mix and the impact of higher market interest rates. The loan yields include the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest and accelerated discount accretion on the early payoff of purchased loans; these items increased the overall loan yield by 6 basis points in the third quarter, compared to 10 basis points in the prior quarter.

The average cost of funds increased 30 basis points to 0.79% for the third quarter from 0.49% for the second quarter. This increase was driven by the higher cost of average interest-bearing liabilities, which increased 46 basis points to 1.20% for the third quarter from 0.74% for the second quarter. The cost of average interest-bearing deposits increased 49 basis points to 0.77% for the third quarter from 0.28% for the second quarter while the cost of average FHLB advances increased 35 basis points to 2.92% for the third quarter from 2.57% for the second quarter. The increases in the cost of these funding sources were mostly a result of higher market interest rates.

Average noninterest-bearing deposits were $50.3 million higher in the third quarter compared to the second quarter while average deposits were $111.0 million higher for the linked quarters. Average noninterest-bearing deposits represented 38% of total average deposits for both the third quarter and the second quarter. The cost of total average deposits increased 30 basis points to 0.47% for the third quarter. The spot rate of total deposits was 0.56% at the end of the third quarter.

YTD 2022 vs YTD 2021

Net interest income increased $53.4 million to $234.1 million for the nine months ended September 30, 2022 due to higher average balances and yield on interest-earning assets, partially offset by higher average balances and costs of interest-bearing liabilities. Interest income increased $58.6 million and interest expense increased $5.2 million as average earning assets increased $1.36 billion and average funding sources increased $1.29 billion due largely to the impact of the acquisition of Pacific Mercantile Bancorp (PMB) in the fourth quarter of 2021.

The net interest margin increased 31 basis points to 3.56% as the average earning-assets yield increased 31 basis points and the average cost of total funding remained unchanged between periods. The yield on average interest-earning assets increased to 4.08% for the nine months ended September 30, 2022, from 3.77% for 2021 due mostly to the mix of interest-earning assets and higher market interest rates. Average loans represented 83% of average earnings assets in 2022 compared to 79% for the same period in 2021. Average loans increased by $1.41 billion from ongoing loan growth and the impact of the PMB acquisition. The yield on average loans for the nine months ended September 30, 2022 was 4.38% compared to 4.26% for the same period in 2021. The yield on average investment securities and other interest-earning assets increased 65 basis points and 83 basis points, respectively, for the nine months ended September 30, 2022, compared to the same period in 2021.

The average cost of funds was 0.56% for both the nine months ended September 30, 2022 and 2021 despite a rising rate environment during the current year. The increase in the cost of average interest-bearing liabilities was offset by the overall improved funding mix, including higher average noninterest-bearing deposits as a result of growth from business development efforts and the impact of the acquisition of PMB. The cost of average interest-bearing liabilities increased 9 basis points to 0.84% for the nine months ended September 30, 2022 compared to the same period in 2021 and included an 8 basis points increase in the cost of average interest-bearing deposits to 0.39%.

Average noninterest-bearing deposits represented 38% of total average deposits for the nine months ended September 30, 2022 compared to 29% for the same period in 2021. Average noninterest-bearing deposits were $1.03 billion higher for the nine months ended September 30, 2022 compared to the same period in 2021 while average total deposits were $1.18 billion higher. The average cost of total deposits increased 2 basis points to 0.24% for the nine months ended September 30, 2022 compared to the same period in 2021.

Provision for credit losses

Q3-2022 vs Q2-2022

There was no provision for credit losses for both the third quarter and the second quarter as the benefits of the continuing favorable credit quality performance in the loan portfolio combined with a decrease in total loan balances offset the estimated allowance resulting from changes in the portfolio mix and our reasonable and supportable forecast, primarily related to the economic outlook from the Federal Reserve's actions to control inflation.

YTD 2022 vs YTD 2021

During the nine months ended September 30, 2022, the provision for credit losses was a reversal of $31.5 million, compared to a reversal of $4.4 million during 2021. The higher reversal of credit losses for the nine months ended September 30, 2022 was due to a $31.3 million recovery from the settlement of a loan previously charged-off in 2019.

Noninterest income

Q3-2022 vs Q2-2022

Noninterest income decreased $1.5 million to $5.7 million for the third quarter compared to the prior quarter primarily due to lower all other income of $2.0 million, offset by higher loan servicing income of $527 thousand. All other income decreased due mostly to lower gains from equity investments of $2.1 million, which are recorded based on the most recent information available from the investee and fluctuates based on their underlying performance. The higher loan servicing income related to the purchase of loan servicing rights at the end of the second quarter of 2022, with an underlying loan servicing portfolio of $1.7 billion and a remaining asset value of $22.0 million at September 30, 2022.

YTD 2022 vs YTD 2021

Noninterest income for the nine months ended September 30, 2022 increased $5.0 million to $18.8 million compared to 2021. The increase was mainly due to higher customer service fees, loan servicing income, income from bank-owned life insurance, and all other income. Many of these increases are a result of including PMB's operations for a full nine months in 2022 compared to 2021. Customer services fees increased $1.8 million due mostly to higher deposit activity fees of $2.4 million attributed to higher average deposit balances, partially offset by lower loan fees of $657 thousand. Loan servicing income increased $481 thousand due mostly to the acquisition of servicing rights during the second quarter of 2022. Income from bank-owned life insurance increased $402 thousand due to higher average balances. The $2.3 million increase in all other income is due mostly to higher income from equity investments of $2.8 million, partially offset by a $773 thousand decrease in the change in fair value of loans held for sale between periods.

Noninterest expense

Q3-2022 vs Q2-2022

Noninterest expense increased $2.4 million to $51.0 million for the third quarter compared to the second quarter. The increase was due mostly to (i) acquisition, integration and transaction costs of $2.1 million related to the Deepstack acquisition, (ii) higher occupancy and equipment expense of $773 thousand including an early lease termination charge of $285 thousand, (iii) higher professional fees of $400 thousand, due mostly to a $562 thousand increase in indemnified legal fees (net of insurance recoveries), and (iv) lower reversal of provision for loan repurchases of $464 thousand. These increases were offset by lower net loss in alternative energy partnership investments of $539 thousand and lower all other expenses of $465 thousand. Professional fees included net indemnified legal expenses of $1.0 million in the third quarter compared to net indemnified legal expenses of $455 thousand in the second quarter.

Total operating costs, defined as noninterest expense adjusted for certain expense items (refer to section Non-GAAP Measures), increased $247 thousand to $47.4 million for the third quarter compared to $47.1 million for the prior quarter. This increase is due mostly to (i) higher occupancy and equipment expense of $773 thousand, (ii) lower reversal of provision for loan repurchase reserves of $464 thousand, offset by a decrease in other expenses of $990 thousand, including lower salary and employee benefits, professional fees and all other expenses.

YTD 2022 vs YTD 2021

Noninterest expense for the nine months ended September 30, 2022 increased $21.4 million to $146.2 million compared to 2021. The increase was primarily due to: (i) higher salaries and employee benefits of $9.7 million and occupancy and equipment expense of $2.8 million due to the increases in personnel and facilities from the acquisition of PMB, (ii) higher professional fees of $4.9 million, due mostly to a $4.3 million increase in indemnified legal fees (net of insurance recoveries), (iii) higher all other expenses of $3.3 million due to including the operations of PMB since the date of acquisition and (iv) higher loss in alternative energy partnership investments of $689 thousand. These increases were partially offset by: (i) higher reversal of loan repurchase reserves of $714 thousand and (ii) lower acquisition, integration and transaction costs of $320 thousand.

Income taxes

Q3-2022 vs Q2-2022

Income tax expense totaled $9.9 million for the third quarter resulting in an effective tax rate of 29.1% compared to $10.2 million for the second quarter and an effective tax rate of 27.6%. The effective tax rate for the full year 2022 is estimated to be 28%.

YTD 2022 vs YTD 2021

Income tax expense totaled $38.9 million for the nine months ended September 30, 2022, representing an effective tax rate of 28.1%, compared to $17.5 million and an effective tax rate of 23.6% for 2021. The effective tax rate for the nine months ended September 30, 2022 was higher than the comparable 2021 period due mostly to the first quarter of 2021 including a net tax benefit of $2.1 million resulting from the exercise of all previously issued outstanding stock appreciation rights.

Balance Sheet

At September 30, 2022, total assets were $9.4 billion, which represented a linked-quarter decrease of $133.5 million. The following table shows selected balance sheet line items as of the dates indicated:

 

 

 

Amount Change

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

Q3-22 vs. Q2-22

 

Q3-22 vs. Q3-21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

Securities held-to-maturity

$

328,757

 

$

329,272

 

$

329,381

 

$

 

$

 

$

(515

)

 

$

328,757

 

Securities available-for-sale

$

847,565

 

$

865,435

 

$

898,775

 

$

1,315,703

 

$

1,303,368

 

$

(17,870

)

 

$

(455,803

)

Loans held-for-investment

$

7,289,320

 

$

7,451,264

 

$

7,451,573

 

$

7,251,480

 

$

6,228,575

 

$

(161,944

)

 

$

1,060,745

 

Total assets

$

9,368,578

 

$

9,502,113

 

$

9,583,540

 

$

9,393,743

 

$

8,278,741

 

$

(133,535

)

 

$

1,089,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,943,585

 

$

2,826,599

 

$

2,958,632

 

$

2,788,196

 

$

2,107,709

 

$

116,986

 

 

$

835,876

 

Total deposits

$

7,280,385

 

$

7,558,683

 

$

7,479,701

 

$

7,439,435

 

$

6,543,225

 

$

(278,298

)

 

$

737,160

 

Borrowings (1)

$

1,011,767

 

$

884,282

 

$

1,020,842

 

$

775,445

 

$

762,444

 

$

127,485

 

 

$

249,323

 

Total liabilities

$

8,416,588

 

$

8,552,983

 

$

8,604,531

 

$

8,328,453

 

$

7,433,938

 

$

(136,395

)

 

$

982,650

 

Total equity

$

951,990

 

$

949,130

 

$

979,009

 

$

1,065,290

 

$

844,803

 

$

2,860

 

 

$

107,187

 

(1)

Represents Advances from Federal Home Loan Bank, Other Borrowings and Long Term Debt, net.

Investments

Securities held-to-maturity totaled $328.8 million at September 30, 2022 and included $214.6 million in agency securities and $114.2 million in municipal securities.

Securities available-for-sale decreased $17.9 million during the third quarter to $847.6 million at September 30, 2022, due mostly to principal payments of $10.9 million and higher unrealized net losses of $19.3 million, offset by purchases of $12.5 million. The higher net unrealized losses were due mostly to the impact of increases in longer-term market interest rates on the value of each class of securities. As of September 30, 2022, the securities available-for-sale portfolio included $472.7 million of CLOs, $169.4 million of corporate debt securities, $151.9 million of agency securities, $41.5 million of residential collateralized mortgage obligations, and $12.1 million of SBA securities. The CLO portfolio, which is comprised of AAA and AA-rated securities, represented 40% of the total securities portfolio and the carrying value included an unrealized net loss of $20.1 million at September 30, 2022, compared to 40% of the total securities portfolio and an unrealized net loss of $14.6 million at June 30, 2022.

Loans

The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

($ in thousands)

Composition of loans

 

 

 

 

 

 

 

 

 

Commercial real estate

$

1,240,927

 

 

$

1,204,414

 

 

$

1,163,381

 

 

$

1,311,105

 

 

$

907,224

 

Multifamily

 

1,698,455

 

 

 

1,572,308

 

 

 

1,397,761

 

 

 

1,361,054

 

 

 

1,295,613

 

Construction

 

236,495

 

 

 

228,341

 

 

 

225,153

 

 

 

181,841

 

 

 

130,536

 

Commercial and industrial

 

1,227,054

 

 

 

1,273,307

 

 

 

1,224,908

 

 

 

1,066,497

 

 

 

773,681

 

Commercial and industrial - warehouse lending

 

766,362

 

 

 

1,160,157

 

 

 

1,574,549

 

 

 

1,602,487

 

 

 

1,522,945

 

SBA

 

85,674

 

 

 

92,235

 

 

 

133,116

 

 

 

205,548

 

 

 

181,582

 

Total commercial loans

 

5,254,967

 

 

 

5,530,762

 

 

 

5,718,868

 

 

 

5,728,532

 

 

 

4,811,581

 

Single-family residential mortgage

 

1,947,652

 

 

 

1,832,279

 

 

 

1,637,307

 

 

 

1,420,023

 

 

 

1,393,696

 

Other consumer

 

86,701

 

 

 

88,223

 

 

 

95,398

 

 

 

102,925

 

 

 

23,298

 

Total consumer loans

 

2,034,353

 

 

 

1,920,502

 

 

 

1,732,705

 

 

 

1,522,948

 

��

 

1,416,994

 

Total gross loans

$

7,289,320

 

 

$

7,451,264

 

 

$

7,451,573

 

 

$

7,251,480

 

 

$

6,228,575

 

Composition percentage of loans

 

 

 

 

 

 

 

 

 

Commercial real estate

 

17.0

%

 

 

16.2

%

 

 

15.6

%

 

 

18.1

%

 

 

14.6

%

Multifamily

 

23.3

%

 

 

21.1

%

 

 

18.8

%

 

 

18.8

%

 

 

20.7

%

Construction

 

3.2

%

 

 

3.1

%

 

 

3.0

%

 

 

2.5

%

 

 

2.1

%

Commercial and industrial

 

16.8

%

 

 

17.1

%

 

 

16.4

%

 

 

14.7

%

 

 

12.4

%

Commercial and industrial - warehouse lending

 

10.6

%

 

 

15.5

%

 

 

21.1

%

 

 

22.1

%

 

 

24.5

%

SBA

 

1.2

%

 

 

1.2

%

 

 

1.8

%

 

 

2.8

%

 

 

2.9

%

Total commercial loans

 

72.1

%

 

 

74.2

%

 

 

76.7

%

 

 

79.0

%

 

 

77.2

%

Single-family residential mortgage

 

26.7

%

 

 

24.6

%

 

 

22.0

%

 

 

19.6

%

 

 

22.4

%

Other consumer

 

1.2

%

 

 

1.2

%

 

 

1.3

%

 

 

1.4

%

 

 

0.4

%

Total consumer loans

 

27.9

%

 

 

25.8

%

 

 

23.3

%

 

 

21.0

%

 

 

22.8

%

Total gross loans

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Total loans ended the third quarter of 2022 at $7.29 billion, down $161.9 million from $7.45 billion at June 30, 2022, due mostly to a $393.8 million decrease in warehouse lending balances, offset by a net increase of $231.8 million in commercial real estate, multifamily, commercial and industrial and single-family residential (SFR) mortgage loans. Loan fundings of $820.6 million in the third quarter included SFR purchases of $172.7 million and were offset by net warehouse paydowns of $393.8 million and other loan paydowns and payoffs of $585.3 million. Total commercial loans, excluding warehouse lending, increased $118.0 million, or 10.8% on an annualized basis during the third quarter.

Deposits

The following table sets forth the composition of our deposits at the dates indicated:

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

($ in thousands)

Composition of deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

$

2,943,585

 

 

$

2,826,599

 

 

$

2,958,632

 

 

$

2,788,196

 

 

$

2,107,709

 

Interest-bearing checking

 

1,921,816

 

 

 

2,359,857

 

 

 

2,395,329

 

 

 

2,393,386

 

 

 

2,214,678

 

Savings and money market

 

1,478,045

 

 

 

1,622,922

 

 

 

1,605,088

 

 

 

1,751,135

 

 

 

1,661,013

 

Non-brokered certificates of deposit

 

614,569

 

 

 

615,719

 

 

 

520,652

 

 

 

506,718

 

 

 

559,825

 

Brokered certificates of deposit

 

322,370

 

 

 

133,586

 

 

 

 

 

 

 

 

 

 

Total deposits

$

7,280,385

 

 

$

7,558,683

 

 

$

7,479,701

 

 

$

7,439,435

 

 

$

6,543,225

 

Composition percentage of deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

 

40.4

%

 

 

37.4

%

 

 

39.6

%

 

 

37.5

%

 

 

32.2

%

Interest-bearing checking

 

26.4

%

 

 

31.2

%

 

 

32.0

%

 

 

32.2

%

 

 

33.8

%

Savings and money market

 

20.4

%

 

 

21.5

%

 

 

21.4

%

 

 

23.5

%

 

 

25.4

%

Non-brokered certificates of deposit

 

8.4

%

 

 

8.1

%

 

 

7.0

%

 

 

6.8

%

 

 

8.6

%

Brokered certificates of deposit

 

4.4

%

 

 

1.8

%

 

 

%

 

 

%

 

 

%

Total deposits

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Total deposits decreased $278.3 million during the third quarter of 2022 to $7.28 billion at September 30, 2022, due mostly to lower interest-bearing checking balances of $438.0 million and savings and money market balances of $144.9 million, partially offset by higher noninterest-bearing checking balances of $117.0 million and certificate of deposit balances of $187.6 million. Certain higher-costing deposits were strategically replaced with longer term fixed rate advances and other wholesale certificates of deposit. Noninterest-bearing checking totaled $2.94 billion and represented 40.4% of total deposits at September 30, 2022, compared to $2.83 billion, or 37.4% of total deposits, at June 30, 2022.

Debt

Advances from the FHLB increased $215.3 million during the third quarter to $727.0 million at September 30, 2022, due to higher term advances of $200.0 million and overnight advances of $15.0 million. At September 30, 2022, FHLB advances included $120.0 million of overnight borrowings and $611.0 million in term advances with a weighted average life of 3.7 years and weighted average interest rate of 2.91%. Other borrowings decreased $88 million to $10.0 million at September 30, 2022, due to lower unsecured overnight borrowings.

Equity

During the third quarter, total stockholders’ equity increased by $2.9 million to $952.0 million and tangible common equity decreased by $19.7 million to $829.6 million at September 30, 2022. The increase in total common stockholders’ equity for the third quarter included net income of $24.2 million, issuance of common shares of $7.2 million in the Deepstack acquisition, and share-based award compensation of $1.7 million, offset by the repurchase of common stock of $13.0 million, accumulated other comprehensive net loss of $13.5 million, and dividends to common stockholders of $3.6 million. Book value per common share increased to $15.83 as of September 30, 2022, from $15.70 at June 30, 2022. Tangible common equity per share (refer to section Non-GAAP Measures) decreased to $13.79 as of September 30, 2022 from $14.05 at June 30, 2022 due mostly to the addition of goodwill and other intangibles from the Deepstack acquisition.

During the third quarter of 2022, common stock repurchased under our authorized program totaled 740,332 shares at a weighted average price of $17.49. As of September 30, 2022, the Company had $18.9 million remaining under the current stock repurchase authorization. Through October 18, 2022, year-to-date repurchases of Company common stock totaled 3,521,752 shares at a weighted average price of $18.08 per share, or $63.7 million. Through October 18, 2022, the repurchased shares represent approximately 5% of the shares outstanding at the time this $75 million program was authorized.

Capital ratios remain strong with total risk-based capital at 13.81% and a tier 1 leverage ratio of 9.53% at September 30, 2022. The interim capital relief related to the adoption of the current expected credit losses (CECL) accounting standard increased the Bank's leverage ratio by approximately 9 basis points at September 30, 2022. The following table sets forth our regulatory capital ratios as of the dates indicated:

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Capital Ratios(1)

 

 

 

 

 

 

 

 

 

Banc of California, Inc.

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

13.81

%

 

13.69

%

 

13.79

%

 

14.98

%

 

14.73

%

Tier 1 risk-based capital ratio

11.39

%

 

11.29

%

 

11.40

%

 

12.55

%

 

12.35

%

Common equity tier 1 capital ratio

11.39

%

 

11.29

%

 

11.40

%

 

11.31

%

 

10.86

%

Tier 1 leverage ratio

9.53

%

 

9.58

%

 

9.72

%

 

10.37

%

 

9.80

%

Banc of California, NA

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

15.64

%

 

15.54

%

 

15.66

%

 

15.71

%

 

16.31

%

Tier 1 risk-based capital ratio

14.51

%

 

14.41

%

 

14.54

%

 

14.60

%

 

15.22

%

Common equity tier 1 capital ratio

14.51

%

 

14.41

%

 

14.54

%

 

14.60

%

 

15.22

%

Tier 1 leverage ratio

12.14

%

 

12.27

%

 

12.38

%

 

12.06

%

 

12.08

%

(1)

September 30, 2022 capital ratios are preliminary

Credit Quality

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

Asset quality information and ratios

($ in thousands)

Delinquent loans held-for-investment

 

 

 

 

 

 

 

 

 

30 to 89 days delinquent

$

38,694

 

 

$

38,285

 

 

$

27,067

 

 

$

40,142

 

 

$

23,144

 

90+ days delinquent

 

18,843

 

 

 

23,905

 

 

 

33,930

 

 

 

32,609

 

 

 

21,979

 

Total delinquent loans

$

57,537

 

 

$

62,190

 

 

$

60,997

 

 

$

72,751

 

 

$

45,123

 

Total delinquent loans to total loans

 

0.79

%

 

 

0.83

%

 

 

0.82

%

 

 

1.00

%

 

 

0.72

%

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

 

 

 

 

 

 

 

 

 

Non-accrual loans

$

42,674

 

 

$

44,443

 

 

$

54,529

 

 

$

52,558

 

 

$

45,621

 

90+ days delinquent and still accruing loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans

 

42,674

 

 

 

44,443

 

 

 

54,529

 

 

 

52,558

 

 

 

45,621

 

Other real estate owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets

$

42,674

 

 

$

44,443

 

 

$

54,529

 

 

$

52,558

 

 

$

45,621

 

ALL to non-performing loans

 

216.63

%

 

 

211.04

%

 

 

170.97

%

 

 

176.16

%

 

 

161.16

%

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

 

0.59

%

 

 

0.60

%

 

 

0.73

%

 

 

0.72

%

 

 

0.73

%

Non-performing assets to total assets

 

0.46

%

 

 

0.47

%

 

 

0.57

%

 

 

0.56

%

 

 

0.55

%

Troubled debt restructurings (TDRs)

 

 

 

 

 

 

 

 

 

Performing TDRs

$

11,252

 

 

$

10,946

 

 

$

14,850

 

 

$

12,538

 

 

$

5,835

 

Non-performing TDRs

 

19,538

 

 

 

14,989

 

 

 

15,059

 

 

 

4,146

 

 

 

2,366

 

Total TDRs

$

30,790

 

 

$

25,935

 

 

$

29,909

 

 

$

16,684

 

 

$

8,201

 

During the third quarter, credit quality improved as total delinquent loans decreased $4.7 million to $57.5 million and non-performing loans decreased $1.8 million to $42.7 million. At September 30, 2022, non-performing loans included $17.9 million of loans in a current payment status, however are on nonaccrual based on other criteria.

Allowance for Credit Losses

 

Three Months Ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

($ in thousands)

Allowance for loan losses (ALL)

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

93,793

 

 

$

93,226

 

 

$

92,584

 

 

$

73,524

 

 

$

75,885

 

Initial reserve for purchased credit-deteriorated loans(1)

 

 

 

 

 

 

 

 

 

 

13,650

 

 

 

 

Loans charged off

 

(912

)

 

 

(494

)

 

 

(231

)

 

 

(8,108

)

 

 

(327

)

Recoveries

 

63

 

 

 

1,561

 

 

 

32,215

 

 

 

2,628

 

 

 

532

 

Net charge-offs recoveries

 

(849

)

 

 

1,067

 

 

 

31,984

 

 

 

(5,480

)

 

 

205

 

(Reversal of) provision for loan losses

 

(500

)

 

 

(500

)

 

 

(31,342

)

 

 

10,890

 

 

 

(2,566

)

Balance at end of period

$

92,444

 

 

$

93,793

 

 

$

93,226

 

 

$

92,584

 

 

$

73,524

 

Reserve for unfunded loan commitments

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

5,905

 

 

$

5,405

 

 

$

5,605

 

 

$

5,233

 

 

$

3,814

 

(Reversal of) provision for credit losses

 

500

 

 

 

500

 

 

 

(200

)

 

 

372

 

 

 

1,419

 

Balance at end of period

 

6,405

 

 

 

5,905

 

 

 

5,405

 

 

 

5,605

 

 

 

5,233

 

Allowance for credit losses (ACL)

$

98,849

 

 

$

99,698

 

 

$

98,631

 

 

$

98,189

 

 

$

78,757

 

 

 

 

 

 

 

 

 

 

 

ALL to total loans

 

1.27

%

 

 

1.26

%

 

 

1.25

%

 

 

1.28

%

 

 

1.18

%

ACL to total loans

 

1.36

%

 

 

1.34

%

 

 

1.32

%

 

 

1.35

%

 

 

1.26

%

ACL to total loans, excluding PPP loans

 

1.36

%

 

 

1.34

%

 

 

1.33

%

 

 

1.38

%

 

 

1.29

%

ACL to NPLs

 

231.64

%

 

 

224.33

%

 

 

180.88

%

 

 

186.82

%

 

 

172.63

%

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

 

0.05

%

 

 

(0.06

)%

 

 

(1.79

)%

 

 

0.32

%

 

 

(0.01

)%

 

 

 

 

 

 

 

 

 

 

Reserve for loss on repurchased loans

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

3,222

 

 

$

3,877

 

 

$

4,348

 

 

$

5,023

 

 

$

5,095

 

(Reversal of) provision for loan repurchases

 

(26

)

 

 

(490

)

 

 

(471

)

 

 

(675

)

 

 

(42

)

Utilization of reserve for loan repurchases

 

(190

)

 

 

(165

)

 

 

 

 

 

 

 

 

(30

)

Balance at end of period

$

3,006

 

 

$

3,222

 

 

$

3,877

 

 

$

4,348

 

 

$

5,023

 

(1)

Represents the amounts, at acquisition date, of expected credit losses on PCD loans and expected recoveries of PCD loans charged-off prior to acquisition date that we have a contractual right to receive.

The allowance for expected credit losses (ACL), which includes the reserve for unfunded loan commitments, totaled $98.8 million, or 1.36% of total loans, at September 30, 2022, compared to $99.7 million, or 1.34% of total loans, at June 30, 2022. The $849 thousand decrease in the ACL was due to: (i) net charge offs of $849 thousand and (ii) lower specific reserves of $571 thousand, offset by (iii) higher reserves for unfunded commitments of $500 thousand and (iv) higher general loan loss reserves of $70 thousand. Changes in general loan loss reserves were driven by changes in the portfolio mix including lower total loans, improved credit quality, and changes in macroeconomic variables used in the model. The ACL coverage of non-performing loans was 232% at September 30, 2022 compared to 224% at June 30, 2022.

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables released by the model provider during September 2022. The published forecasts consider the Federal Reserve's monetary policy, labor market constraints, rising inflation, higher oil prices and the military conflict between Russia and Ukraine, among other factors.

Conference Call

The Company will host a conference call to discuss its third quarter 2022 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, October 20, 2022. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 6394121. 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. A replay of the call will be made available approximately one hour after the call has ended on the Company’s Investor Relations website at www.bancofcal.com/investor or by dialing (877) 344-7529 and referencing event code 4395956.

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) is a bank holding company with $9.4 billion in assets at September 30, 2022 and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 34 offices including 29 full-service branches located throughout Southern California. Through our dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California, and full stack payment processing solution through our subsidiary Deepstack Technologies. 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 to 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 within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. 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 (SEC). In addition to those, statements about the potential effects of the COVID-19 pandemic on the business, financial results and condition of Banc of California, Inc. and its subsidiaries may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the control of Banc of California, Inc., including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on Banc of California, Inc. and its subsidiaries, their customers and third parties. 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.

Banc of California, Inc.

Consolidated Statements of Financial Condition (Unaudited)

(Dollars in thousands)

 

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

256,058

 

 

$

243,064

 

 

$

254,241

 

 

$

228,123

 

 

$

185,840

 

Securities held-to-maturity

 

328,757

 

 

 

329,272

 

 

 

329,381

 

 

 

 

 

 

 

Securities available-for-sale

 

847,565

 

 

 

865,435

 

 

 

898,775

 

 

 

1,315,703

 

 

 

1,303,368

 

Loans

 

7,289,320

 

 

 

7,451,264

 

 

 

7,451,573

 

 

 

7,251,480

 

 

 

6,228,575

 

Allowance for loan losses

 

(92,444

)

 

 

(93,793

)

 

 

(93,226

)

 

 

(92,584

)

 

 

(73,524

)

Federal Home Loan Bank and other bank stock

 

54,428

 

 

 

51,489

 

 

 

51,456

 

 

 

44,632

 

 

 

44,604

 

Premises and equipment, net

 

107,728

 

 

 

108,523

 

 

 

109,593

 

 

 

112,868

 

 

 

114,011

 

Alternative energy partnership investments, net

 

22,401

 

 

 

23,531

 

 

 

25,156

 

 

 

25,888

 

 

 

25,196

 

Goodwill

 

114,312

 

 

 

95,127

 

 

 

95,127

 

 

 

94,301

 

 

 

37,144

 

Other intangible assets, net

 

8,081

 

 

 

4,677

 

 

 

4,990

 

 

 

6,411

 

 

 

1,787

 

Deferred income tax, net

 

56,376

 

 

 

54,455

 

 

 

51,516

 

 

 

50,774

 

 

 

40,659

 

Income tax receivable

 

3,430

 

 

 

4,563

 

 

 

1,045

 

 

 

7,952

 

 

 

2,107

 

Bank owned life insurance investment

 

126,199

 

 

 

125,326

 

 

 

124,516

 

 

 

123,720

 

 

 

113,884

 

Operating lease right of use assets

 

30,321

 

 

 

32,632

 

 

 

34,189

 

 

 

35,442

 

 

 

29,054

 

Other assets

 

216,046

 

 

 

206,548

 

 

 

245,208

 

 

 

189,033

 

 

 

226,036

 

Total assets

$

9,368,578

 

 

$

9,502,113

 

 

$

9,583,540

 

 

$

9,393,743

 

 

$

8,278,741

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,943,585

 

 

$

2,826,599

 

 

$

2,958,632

 

 

$

2,788,196

 

 

$

2,107,709

 

Interest-bearing deposits

 

4,336,800

 

 

 

4,732,084

 

 

 

4,521,069

 

 

 

4,651,239

 

 

 

4,435,516

 

Total deposits

 

7,280,385

 

 

 

7,558,683

 

 

 

7,479,701

 

 

 

7,439,435

 

 

 

6,543,225

 

Advances from Federal Home Loan Bank

 

727,021

 

 

 

511,695

 

 

 

556,374

 

 

 

476,059

 

 

 

405,738

 

Other borrowings

 

10,000

 

 

 

98,000

 

 

 

190,000

 

 

 

25,000

 

 

 

100,000

 

Long-term debt, net

 

274,746

 

 

 

274,587

 

 

 

274,468

 

 

 

274,386

 

 

 

256,706

 

Reserve for loss on repurchased loans

 

3,006

 

 

 

3,222

 

 

 

3,877

 

 

 

4,348

 

 

 

5,023

 

Operating lease liabilities

 

34,937

 

 

 

37,500

 

 

 

39,259

 

 

 

40,675

 

 

 

30,390

 

Accrued expenses and other liabilities

 

86,493

 

 

 

69,296

 

 

 

60,852

 

 

 

68,550

 

 

 

92,856

 

Total liabilities

 

8,416,588

 

 

 

8,552,983

 

 

 

8,604,531

 

 

 

8,328,453

 

 

 

7,433,938

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

 

 

94,956

 

 

 

94,956

 

Common stock

 

652

 

 

 

647

 

 

 

646

 

 

 

646

 

 

 

527

 

Common stock, class B non-voting non-convertible

 

5

 

 

 

5

 

 

 

5

 

 

 

5

 

 

 

5

 

Additional paid-in capital

 

864,806

 

 

 

856,079

 

 

 

855,198

 

 

 

854,873

 

 

 

631,512

 

Retained earnings

 

231,084

 

 

 

210,471

 

 

 

187,457

 

 

 

147,894

 

 

 

147,682

 

Treasury stock

 

(96,978

)

 

 

(84,013

)

 

 

(45,125

)

 

 

(40,827

)

 

 

(40,827

)

Accumulated other comprehensive (loss) income, net

 

(47,579

)

 

 

(34,059

)

 

 

(19,172

)

 

 

7,743

 

 

 

10,948

 

Total stockholders’ equity

 

951,990

 

 

 

949,130

 

 

 

979,009

 

 

 

1,065,290

 

 

 

844,803

 

Total liabilities and stockholders’ equity

$

9,368,578

 

 

$

9,502,113

 

 

$

9,583,540

 

 

$

9,393,743

 

 

$

8,278,741

 

Banc of California, Inc.

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

83,699

 

 

$

78,895

 

 

$

76,234

 

 

$

73,605

 

 

$

63,837

 

 

$

238,828

 

 

$

187,082

 

Securities

 

10,189

 

 

 

8,124

 

 

 

7,309

 

 

 

6,934

 

 

 

7,167

 

 

 

25,622

 

 

 

20,654

 

Other interest-earning assets

 

2,085

 

 

 

1,399

 

 

 

726

 

 

 

1,034

 

 

 

787

 

 

 

4,210

 

 

 

2,350

 

Total interest and dividend income

 

95,973

 

 

 

88,418

 

 

 

84,269

 

 

 

81,573

 

 

 

71,791

 

 

 

268,660

 

 

 

210,086

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

8,987

 

 

 

3,180

 

 

 

1,388

 

 

 

2,072

 

 

 

2,412

 

 

 

13,555

 

 

 

10,241

 

Federal Home Loan Bank advances

 

3,558

 

 

 

3,114

 

 

 

2,953

 

 

 

2,977

 

 

 

2,990

 

 

 

9,625

 

 

 

9,046

 

Other interest-bearing liabilities

 

4,020

 

 

 

3,825

 

 

 

3,487

 

 

 

3,485

 

 

 

3,413

 

 

 

11,332

 

 

 

10,060

 

Total interest expense

 

16,565

 

 

 

10,119

 

 

 

7,828

 

 

 

8,534

 

 

 

8,815

 

 

 

34,512

 

 

 

29,347

 

Net interest income

 

79,408

 

 

 

78,299

 

 

 

76,441

 

 

 

73,039

 

 

 

62,976

 

 

 

234,148

 

 

 

180,739

 

(Reversal of) provision for credit losses

 

 

 

 

 

 

 

(31,542

)

 

 

11,262

 

 

 

(1,147

)

 

 

(31,542

)

 

 

(4,408

)

Net interest income after provision for (reversal of) credit losses

 

79,408

 

 

 

78,299

 

 

 

107,983

 

 

 

61,777

 

 

 

64,123

 

 

 

265,690

 

 

 

185,147

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service fees

 

2,462

 

 

 

2,578

 

 

 

2,434

 

 

 

2,037

 

 

 

1,900

 

 

 

7,474

 

 

 

5,648

 

Loan servicing income

 

636

 

 

 

109

 

 

 

212

 

 

 

119

 

 

 

170

 

 

 

957

 

 

 

476

 

Income from bank owned life insurance

 

873

 

 

 

810

 

 

 

796

 

 

 

794

 

 

 

715

 

 

 

2,479

 

 

 

2,077

 

Net gain on sale of securities available for sale

 

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

 

 

 

Net gain on sale of loans

 

 

 

 

 

 

 

 

 

 

275

 

 

 

 

 

 

 

 

 

 

All other income

 

1,710

 

 

 

3,689

 

 

 

2,452

 

 

 

2,380

 

 

 

2,734

 

 

 

7,851

 

 

 

5,570

 

Total noninterest income

 

5,681

 

 

 

7,186

 

 

 

5,910

 

 

 

5,605

 

 

 

5,519

 

 

 

18,777

 

 

 

13,771

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

27,997

 

 

 

28,264

 

 

 

28,987

 

 

 

27,811

 

 

 

24,786

 

 

 

85,248

 

 

 

75,547

 

Occupancy and equipment

 

8,649

 

 

 

7,876

 

 

 

7,855

 

 

 

7,855

 

 

 

7,124

 

 

 

24,380

 

 

 

21,597

 

Professional fees

 

4,507

 

 

 

4,107

 

 

 

2,907

 

 

 

3,921

 

 

 

892

 

 

 

11,521

 

 

 

6,663

 

Data processing

 

1,699

 

 

 

1,782

 

 

 

1,828

 

 

 

1,939

 

 

 

1,646

 

 

 

5,309

 

 

 

4,922

 

Regulatory assessments

 

925

 

 

 

1,021

 

 

 

775

 

 

 

1,040

 

 

 

812

 

 

 

2,721

 

 

 

2,355

 

Reversal of loan repurchase reserves

 

(26

)

 

 

(490

)

 

 

(471

)

 

 

(675

)

 

 

(42

)

 

 

(987

)

 

 

(273

)

Amortization of intangible assets

 

396

 

 

 

313

 

 

 

441

 

 

 

430

 

 

 

282

 

 

 

1,150

 

 

 

846

 

Acquisition, integration and transaction costs

 

2,080

 

 

 

 

 

 

 

 

 

13,469

 

 

 

1,000

 

 

 

2,080

 

 

 

2,400

 

All other expense

 

4,231

 

 

 

4,696

 

 

 

4,116

 

 

 

4,302

 

 

 

3,096

 

 

 

13,043

 

 

 

9,733

 

Total noninterest expense before loss (gain) in alternative energy partnership investments

 

50,458

 

 

 

47,569

 

 

 

46,438

 

 

 

60,092

 

 

 

39,596

 

 

 

144,465

 

 

 

123,790

 

Loss (gain) in alternative energy partnership investments

 

504

 

 

 

1,043

 

 

 

158

 

 

 

(1,220

)

 

 

(1,785

)

 

 

1,705

 

 

 

1,016

 

Total noninterest expense

 

50,962

 

 

 

48,612

 

 

 

46,596

 

 

 

58,872

 

 

 

37,811

 

 

 

146,170

 

 

 

124,806

 

Income before income taxes

 

34,127

 

 

 

36,873

 

 

 

67,297

 

 

 

8,510

 

 

 

31,831

 

 

 

138,297

 

 

 

74,112

 

Income tax expense

 

9,931

 

 

 

10,161

 

 

 

18,785

 

 

 

2,759

 

 

 

8,661

 

 

 

38,877

 

 

 

17,517

 

Net income

 

24,196

 

 

 

26,712

 

 

 

48,512

 

 

 

5,751

 

 

 

23,170

 

 

 

99,420

 

 

 

56,595

 

Preferred stock dividends

 

 

 

 

 

 

 

1,420

 

 

 

1,727

 

 

 

1,727

 

 

 

1,420

 

 

 

6,595

 

Income allocated to participating securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

160

 

Impact of preferred stock redemption

 

 

 

 

 

 

 

3,747

 

 

 

 

 

 

 

 

 

3,747

 

 

 

3,347

 

Net income available to common stockholders

$

24,196

 

 

$

26,712

 

 

$

43,345

 

 

$

4,024

 

 

$

21,443

 

 

$

94,253

 

 

$

46,493

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.40

 

 

$

0.44

 

 

$

0.69

 

 

$

0.07

 

 

$

0.42

 

 

$

1.54

 

 

$

0.92

 

Diluted

$

0.40

 

 

$

0.43

 

 

$

0.69

 

 

$

0.07

 

 

$

0.42

 

 

$

1.53

 

 

$

0.91

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

60,044,403

 

 

 

61,350,802

 

 

 

62,606,450

 

 

 

60,401,366

 

 

 

50,716,680

 

 

 

61,324,119

 

 

 

50,573,928

 

Diluted

 

60,492,460

 

 

 

61,600,615

 

 

 

62,906,003

 

 

 

60,690,046

 

 

 

50,909,317

 

 

 

61,659,900

 

 

 

50,821,972

 

Dividends declared per common share

$

0.06

 

 

$

0.06

 

 

$

0.06

 

 

$

0.06

 

 

$

0.06

 

 

$

0.18

 

 

$

0.18

 

Banc of California, Inc.

Selected Financial Data

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Profitability and other ratios of consolidated operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (ROAA)(1)

1.02

%

 

1.15

%

 

2.09

%

 

0.24

%

 

1.13

%

 

1.42

%

 

0.95

%

Adjusted ROAA(1)(2)

1.13

%

 

1.19

%

 

2.10

%

 

0.63

%

 

1.03

%

 

1.47

%

 

0.93

%

Return on average equity(1)

9.99

%

 

11.05

%

 

18.74

%

 

2.20

%

 

10.84

%

 

13.38

%

 

8.90

%

Return on average tangible common equity(1)(2)

11.34

%

 

12.43

%

 

20.29

%

 

2.04

%

 

12.04

%

 

14.68

%

 

9.10

%

Pre-tax pre-provision income ROAA(1)(2)

1.44

%

 

1.58

%

 

1.54

%

 

0.84

%

 

1.50

%

 

1.52

%

 

1.17

%

Adjusted pre-tax pre-provision income ROAA(1)(2)

1.59

%

 

1.65

%

 

1.55

%

 

1.39

%

 

1.35

%

 

1.59

%

 

1.18

%

Dividend payout ratio(3)

15.00

%

 

13.64

%

 

8.70

%

 

85.71

%

 

14.29

%

 

11.69

%

 

19.57

%

Average loan yield

4.54

%

 

4.35

%

 

4.26

%

 

4.20

%

 

4.18

%

 

4.38

%

 

4.26

%

Average cost of interest-bearing deposits

0.77

%

 

0.28

%

 

0.12

%

 

0.17

%

 

0.22

%

 

0.39

%

 

0.31

%

Average cost of total deposits

0.47

%

 

0.17

%

 

0.08

%

 

0.11

%

 

0.15

%

 

0.24

%

 

0.22

%

Net interest spread

3.13

%

 

3.30

%

 

3.29

%

 

3.05

%

 

3.06

%

 

3.24

%

 

3.02

%

Net interest margin(1)

3.58

%

 

3.58

%

 

3.51

%

 

3.28

%

 

3.28

%

 

3.56

%

 

3.25

%

Noninterest income to total revenue(4)

6.68

%

 

8.41

%

 

7.18

%

 

7.13

%

 

8.06

%

 

7.42

%

 

7.08

%

Noninterest income to average total assets(1)

0.24

%

 

0.31

%

 

0.26

%

 

0.24

%

 

0.27

%

 

0.27

%

 

0.23

%

Noninterest expense to average total assets(1)

2.15

%

 

2.09

%

 

2.01

%

 

2.50

%

 

1.84

%

 

2.08

%

 

2.10

%

Adjusted noninterest expense to average total assets(1)(2)

2.00

%

 

2.02

%

 

2.01

%

 

1.95

%

 

1.99

%

 

2.01

%

 

2.09

%

Efficiency ratio(2)(5)

59.89

%

 

56.87

%

 

56.58

%

 

74.86

%

 

55.20

%

 

57.79

%

 

64.16

%

Adjusted efficiency ratio(2)(6)

55.66

%

 

55.11

%

 

56.52

%

 

58.47

%

 

59.49

%

 

55.76

%

 

63.80

%

Average loans to average deposits

97.34

%

 

98.21

%

 

98.28

%

 

92.99

%

 

94.99

%

 

97.94

%

 

93.84

%

Average securities to average total assets

12.70

%

 

13.02

%

 

13.76

%

 

13.83

%

 

16.55

%

 

13.16

%

 

16.33

%

Average stockholders’ equity to average total assets

10.21

%

 

10.38

%

 

11.18

%

 

11.10

%

 

10.41

%

 

10.59

%

 

10.70

%

(1)

Ratio presented on an annualized basis.

(2)

Ratio 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)

Ratio calculated by dividing dividends declared per common share by basic earnings (loss) per common share.

(4)

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

(5)

Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for (reversal of) credit losses and noninterest income.

(6)

Ratio calculated by dividing adjusted noninterest expense by the sum of net interest income before provision for (reversal of) credit losses and adjusted noninterest income.

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)

 

 

Three Months Ended

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

3,142,772

 

 

$

34,269

 

4.33

%

 

$

2,889,652

 

 

$

31,290

 

4.34

%

 

$

2,850,811

 

 

$

31,367

 

4.46

%

Commercial and industrial and SBA

 

2,151,511

 

 

 

29,296

 

5.40

%

 

 

2,527,506

 

 

 

29,334

 

4.66

%

 

 

2,748,541

 

 

 

30,043

 

4.43

%

SFR mortgage

 

1,927,694

 

 

 

18,699

 

3.85

%

 

 

1,755,719

 

 

 

16,795

 

3.84

%

 

 

1,562,478

 

 

 

13,273

 

3.45

%

Other consumer

 

87,335

 

 

 

1,331

 

6.05

%

 

 

93,160

 

 

 

1,450

 

6.24

%

 

 

97,516

 

 

 

1,523

 

6.33

%

Loans held-for-sale

 

4,207

 

 

 

104

 

9.81

%

 

 

3,618

 

 

 

26

 

2.88

%

 

 

3,428

 

 

 

28

 

3.31

%

Gross loans and leases

 

7,313,519

 

 

 

83,699

 

4.54

%

 

 

7,269,655

 

 

 

78,895

 

4.35

%

 

 

7,262,774

 

 

 

76,234

 

4.26

%

Securities

 

1,194,942

 

 

 

10,189

 

3.38

%

 

 

1,216,612

 

 

 

8,124

 

2.68

%

 

 

1,292,079

 

 

 

7,309

 

2.29

%

Other interest-earning assets

 

292,819

 

 

 

2,085

 

2.82

%

 

 

295,715

 

 

 

1,399

 

1.90

%

 

 

265,339

 

 

 

726

 

1.11

%

Total interest-earning assets

 

8,801,280

 

 

 

95,973

 

4.33

%

 

 

8,781,982

 

 

 

88,418

 

4.04

%

 

 

8,820,192

 

 

 

84,269

 

3.87

%

Allowance for loan losses

 

(93,517

)

 

 

 

 

 

 

(94,217

)

 

 

 

 

 

 

(92,618

)

 

 

 

 

BOLI and noninterest-earning assets

 

700,977

 

 

 

 

 

 

 

654,931

 

 

 

 

 

 

 

664,731

 

 

 

 

 

Total assets

$

9,408,740

 

 

 

 

 

 

$

9,342,696

 

 

 

 

 

 

$

9,392,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

2,285,071

 

 

$

3,880

 

0.67

%

 

$

2,363,233

 

 

$

1,457

 

0.25

%

 

$

2,409,262

 

 

$

641

 

0.11

%

Savings and money market

 

1,536,438

 

 

 

2,236

 

0.58

%

 

 

1,598,663

 

 

 

860

 

0.22

%

 

 

1,673,244

 

 

 

510

 

0.12

%

Certificates of deposit

 

832,506

 

 

 

2,871

 

1.37

%

 

 

631,415

 

 

 

863

 

0.55

%

 

 

508,244

 

 

 

237

 

0.19

%

Total interest-bearing deposits

 

4,654,015

 

 

 

8,987

 

0.77

%

 

 

4,593,311

 

 

 

3,180

 

0.28

%

 

 

4,590,750

 

 

 

1,388

 

0.12

%

FHLB advances

 

482,842

 

 

 

3,558

 

2.92

%

 

 

485,629

 

 

 

3,114

 

2.57

%

 

 

459,749

 

 

 

2,953

 

2.60

%

Other borrowings

 

70,431

 

 

 

412

 

2.32

%

 

 

117,688

 

 

 

325

 

1.11

%

 

 

116,495

 

 

 

55

 

0.19

%

Long-term debt

 

274,665

 

 

 

3,608

 

5.21

%

 

 

274,515

 

 

 

3,500

 

5.11

%

 

 

274,417

 

 

 

3,432

 

5.07

%

Total interest-bearing liabilities

 

5,481,953

 

 

 

16,565

 

1.20

%

 

 

5,471,143

 

 

 

10,119

 

0.74

%

 

 

5,441,411

 

 

 

7,828

 

0.58

%

Noninterest-bearing deposits

 

2,855,220

 

 

 

 

 

 

 

2,804,877

 

 

 

 

 

 

 

2,795,633

 

 

 

 

 

Noninterest-bearing liabilities

 

110,761

 

 

 

 

 

 

 

96,791

 

 

 

 

 

 

 

105,349

 

 

 

 

 

Total liabilities

 

8,447,934

 

 

 

 

 

 

 

8,372,811

 

 

 

 

 

 

 

8,342,393

 

 

 

 

 

Total stockholders’ equity

 

960,806

 

 

 

 

 

 

 

969,885

 

 

 

 

 

 

 

1,049,912

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,408,740

 

 

 

 

 

 

$

9,342,696

 

 

 

 

 

 

$

9,392,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

79,408

 

3.13

%

 

 

 

$

78,299

 

3.30

%

 

 

 

$

76,441

 

3.29

%

Net interest margin

 

 

 

 

3.58

%

 

 

 

 

 

3.58

%

 

 

 

 

 

3.51

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

161

%

 

 

 

 

 

 

161

%

 

 

 

 

 

 

162

%

 

 

 

 

Total deposits

$

7,509,235

 

 

$

8,987

 

0.47

%

 

$

7,398,188

 

 

$

3,180

 

0.17

%

 

$

7,386,383

 

 

$

1,388

 

0.08

%

Total funding (1)

$

8,337,173

 

 

$

16,565

 

0.79

%

 

$

8,276,020

 

 

$

10,119

 

0.49

%

 

$

8,237,044

 

 

$

7,828

 

0.39

%

(1)

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

 

December 31, 2021

 

September 30, 2021

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

2,809,181

 

 

$

32,184

 

4.55

%

 

$

2,379,962

 

 

$

26,542

 

4.42

%

Commercial and industrial and SBA

 

2,631,596

 

 

 

28,028

 

4.23

%

 

 

2,322,372

 

 

 

25,345

 

4.33

%

SFR mortgage

 

1,418,057

 

 

 

11,884

 

3.32

%

 

 

1,331,876

 

 

 

11,683

 

3.48

%

Other consumer

 

85,193

 

 

 

1,483

 

6.91

%

 

 

22,164

 

 

 

238

 

4.26

%

Loans held-for-sale

 

3,309

 

 

 

26

 

3.12

%

 

 

2,956

 

 

 

29

 

3.89

%

Gross loans and leases

 

6,947,336

 

 

 

73,605

 

4.20

%

 

 

6,059,330

 

 

 

63,837

 

4.18

%

Securities

 

1,290,664

 

 

 

6,934

 

2.13

%

 

 

1,347,317

 

 

 

7,167

 

2.11

%

Other interest-earning assets

 

593,739

 

 

 

1,034

 

0.69

%

 

 

222,274

 

 

 

787

 

1.40

%

Total interest-earning assets

 

8,831,739

 

 

 

81,573

 

3.66

%

 

 

7,628,921

 

 

 

71,791

 

3.73

%

Allowance for loan losses

 

(92,367

)

 

 

 

 

 

 

(76,028

)

 

 

 

 

BOLI and noninterest-earning assets

 

592,583

 

 

 

 

 

 

 

588,720

 

 

 

 

 

Total assets

$

9,331,955

 

 

 

 

 

 

$

8,141,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

2,461,397

 

 

$

693

 

0.11

%

 

$

2,280,429

 

 

$

632

 

0.11

%

Savings and money market

 

1,780,483

 

 

 

1,078

 

0.24

%

 

 

1,583,791

 

 

 

1,350

 

0.34

%

Certificates of deposit

 

610,766

 

 

 

301

 

0.20

%

 

 

571,822

 

 

 

430

 

0.30

%

Total interest-bearing deposits

 

4,852,646

 

 

 

2,072

 

0.17

%

 

 

4,436,042

 

 

 

2,412

 

0.22

%

FHLB advances

 

407,122

 

 

 

2,977

 

2.90

%

 

 

435,984

 

 

 

2,990

 

2.72

%

Other borrowings

 

27,300

 

 

 

7

 

0.10

%

 

 

126,352

 

 

 

34

 

0.11

%

Long-term debt

 

270,879

 

 

 

3,478

 

5.09

%

 

 

256,634

 

 

 

3,379

 

5.22

%

Total interest-bearing liabilities

 

5,557,947

 

 

 

8,534

 

0.61

%

 

 

5,255,012

 

 

 

8,815

 

0.67

%

Noninterest-bearing deposits

 

2,614,712

 

 

 

 

 

 

 

1,939,912

 

 

 

 

 

Noninterest-bearing liabilities

 

123,514

 

 

 

 

 

 

 

98,748

 

 

 

 

 

Total liabilities

 

8,296,173

 

 

 

 

 

 

 

7,293,672

 

 

 

 

 

Total stockholders’ equity

 

1,035,782

 

 

 

 

 

 

 

847,941

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,331,955

 

 

 

 

 

 

$

8,141,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

73,039

 

3.05

%

 

 

 

$

62,976

 

3.06

%

Net interest margin

 

 

 

 

3.28

%

 

 

 

 

 

3.28

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

159

%

 

 

 

 

 

 

145

%

 

 

 

 

Total deposits

$

7,467,358

 

 

$

2,072

 

0.11

%

 

$

6,375,954

 

 

$

2,412

 

0.15

%

Total funding (1)

$

8,172,659

 

 

$

8,534

 

0.41

%

 

$

7,194,924

 

 

$

8,815

 

0.49

%

(1)

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.

 

Nine Months Ended

 

September 30, 2022

 

September 30, 2021

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

2,962,148

 

 

$

96,926

 

4.37

%

 

$

2,338,862

 

 

$

80,152

 

4.58

%

Commercial and industrial and SBA

 

2,473,666

 

 

 

88,672

 

4.79

%

 

 

2,233,162

 

 

 

71,233

 

4.26

%

SFR mortgage

 

1,749,968

 

 

 

48,767

 

3.73

%

 

 

1,273,624

 

 

 

34,839

 

3.66

%

Other consumer

 

92,633

 

 

 

4,305

 

6.21

%

 

 

24,832

 

 

 

807

 

4.35

%

Loans held-for-sale

 

3,754

 

 

 

158

 

5.63

%

 

 

2,124

 

 

 

51

 

3.21

%

Gross loans and leases

 

7,282,169

 

 

 

238,828

 

4.38

%

 

 

5,872,604

 

 

 

187,082

 

4.26

%

Securities

 

1,234,188

 

 

 

25,622

 

2.78

%

 

 

1,297,636

 

 

 

20,654

 

2.13

%

Other interest-earning assets

 

284,725

 

 

 

4,210

 

1.98

%

 

 

272,126

 

 

 

2,350

 

1.15

%

Total interest-earning assets

 

8,801,082

 

 

 

268,660

 

4.08

%

 

 

7,442,366

 

 

 

210,086

 

3.77

%

Allowance for credit losses

 

(93,454

)

 

 

 

 

 

 

(78,729

)

 

 

 

 

BOLI and noninterest-earning assets

 

673,679

 

 

 

 

 

 

 

580,581

 

 

 

 

 

Total assets

$

9,381,307

 

 

 

 

 

 

$

7,944,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

2,352,067

 

 

$

5,978

 

0.34

%

 

$

2,201,568

 

 

$

2,212

 

0.13

%

Savings and money market

 

1,602,280

 

 

 

3,606

 

0.30

%

 

 

1,625,214

 

 

 

5,985

 

0.49

%

Certificates of deposit

 

658,576

 

 

 

3,971

 

0.81

%

 

 

641,157

 

 

 

2,044

 

0.43

%

Total interest-bearing deposits

 

4,612,923

 

 

 

13,555

 

0.39

%

 

 

4,467,939

 

 

 

10,241

 

0.31

%

FHLB advances

 

476,158

 

 

 

9,625

 

2.70

%

 

 

433,532

 

 

 

9,046

 

2.79

%

Other borrowings

 

101,369

 

 

 

792

 

1.04

%

 

 

49,914

 

 

 

40

 

0.11

%

Long-term debt

 

274,533

 

 

 

10,540

 

5.13

%

 

 

256,497

 

 

 

10,020

 

5.22

%

Total interest-bearing liabilities

 

5,464,983

 

 

 

34,512

 

0.84

%

 

 

5,207,882

 

 

 

29,347

 

0.75

%

Noninterest-bearing deposits

 

2,818,795

 

 

 

 

 

 

 

1,788,096

 

 

 

 

 

Noninterest-bearing liabilities

 

104,321

 

 

 

 

 

 

 

98,025

 

 

 

 

 

Total liabilities

 

8,388,099

 

 

 

 

 

 

 

7,094,003

 

 

 

 

 

Total stockholders’ equity

 

993,208

 

 

 

 

 

 

 

850,215

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,381,307

 

 

 

 

 

 

$

7,944,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

234,148

 

3.24

%

 

 

 

$

180,739

 

3.02

%

Net interest margin

 

 

 

 

3.56

%

 

 

 

 

 

3.25

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

161

%

 

 

 

 

 

 

143

%

 

 

 

 

Total deposits

$

7,431,718

 

 

$

13,555

 

0.24

%

 

$

6,256,035

 

 

$

10,241

 

0.22

%

Total funding (1)

$

8,283,778

 

 

$

34,512

 

0.56

%

 

$

6,995,978

 

 

$

29,347

 

0.56

%

(1)

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.

Tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, adjusted noninterest expense, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income (loss), adjusted PTPP income (loss), PTPP income (loss) ROAA, adjusted PTPP income (loss) ROAA, efficiency ratio, adjusted efficiency ratio, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS) and adjusted return on average assets (ROAA) 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 assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.

PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding total revenue and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by total revenue.

Adjusted net income (loss) is calculated by adjusting net income (loss) for tax-effected noninterest expense adjustments and the tax impact from the exercise of stock appreciation rights for the periods indicated. Adjusted ROAA is computed by dividing annualized adjusted net income by average assets. Adjusted net income (loss) available to common stockholders is computed by removing the impact of preferred stock redemptions from adjusted net income (loss). Adjusted diluted earnings per share is computed by dividing adjusted net income (loss) available to common stockholders by the weighted average diluted common shares outstanding.

Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial 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.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

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

 

 

 

 

 

 

 

 

 

Total assets

$

9,368,578

 

 

$

9,502,113

 

 

$

9,583,540

 

 

$

9,393,743

 

 

$

8,278,741

 

Less goodwill

 

(114,312

)

 

 

(95,127

)

 

 

(95,127

)

 

 

(94,301

)

 

 

(37,144

)

Less other intangible assets

 

(8,081

)

 

 

(4,677

)

 

 

(4,990

)

 

 

(6,411

)

 

 

(1,787

)

Tangible assets(1)

$

9,246,185

 

 

$

9,402,309

 

 

$

9,483,423

 

 

$

9,293,031

 

 

$

8,239,810

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

$

951,990

 

 

$

949,130

 

 

$

979,009

 

 

$

1,065,290

 

 

$

844,803

 

Less preferred stock

 

 

 

 

 

 

 

 

 

 

(94,956

)

 

 

(94,956

)

Total common stockholders' equity

$

951,990

 

 

$

949,130

 

 

$

979,009

 

 

$

970,334

 

 

$

749,847

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

$

951,990

 

 

$

949,130

 

 

$

979,009

 

 

$

1,065,290

 

 

$

844,803

 

Less goodwill

 

(114,312

)

 

 

(95,127

)

 

 

(95,127

)

 

 

(94,301

)

 

 

(37,144

)

Less other intangible assets

 

(8,081

)

 

 

(4,677

)

 

 

(4,990

)

 

 

(6,411

)

 

 

(1,787

)

Tangible equity(1)

 

829,597

 

 

 

849,326

 

 

 

878,892

 

 

 

964,578

 

 

 

805,872

 

Less preferred stock

 

 

 

 

 

 

 

 

 

 

(94,956

)

 

 

(94,956

)

Tangible common equity(1)

$

829,597

 

 

$

849,326

 

 

$

878,892

 

 

$

869,622

 

 

$

710,916

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity to total assets

 

10.16

%

 

 

9.99

%

 

 

10.22

%

 

 

11.34

%

 

 

10.20

%

Tangible equity to tangible assets(1)

 

8.97

%

 

 

9.03

%

 

 

9.27

%

 

 

10.38

%

 

 

9.78

%

Tangible common equity to tangible assets(1)

 

8.97

%

 

 

9.03

%

 

 

9.27

%

 

 

9.36

%

 

 

8.63

%

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

59,679,558

 

 

 

59,985,736

 

 

 

62,077,312

 

 

 

62,188,206

 

 

 

50,321,096

 

Class B non-voting non-convertible common shares outstanding

 

477,321

 

 

 

477,321

 

 

 

477,321

 

 

 

477,321

 

 

 

477,321

 

Total common shares outstanding

 

60,156,879

 

 

 

60,463,057

 

 

 

62,554,633

 

 

 

62,665,527

 

 

 

50,798,417

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

$

15.83

 

 

$

15.70

 

 

$

15.65

 

 

$

15.48

 

 

$

14.76

 

Tangible common equity per share(1)

$

13.79

 

 

$

14.05

 

 

$

14.05

 

 

$

13.88

 

 

$

13.99

 

(1)

Non-GAAP measure.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Return on tangible common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total stockholders' equity

$

960,806

 

 

$

969,885

 

 

$

1,049,912

 

 

$

1,035,782

 

 

$

847,941

 

 

$

993,208

 

 

$

850,215

 

Less average preferred stock

 

 

 

 

 

 

 

(75,965

)

 

 

(94,956

)

 

 

(94,956

)

 

 

(25,043

)

 

 

(118,013

)

Average common stockholders' equity

 

960,806

 

 

 

969,885

 

 

 

973,947

 

 

 

940,826

 

 

 

752,985

 

 

 

968,165

 

 

 

732,202

 

Less average goodwill

 

(98,916

)

 

 

(95,127

)

 

 

(94,307

)

 

 

(86,911

)

 

 

(37,144

)

 

 

(96,133

)

 

 

(37,144

)

Less average other intangible assets

 

(4,570

)

 

 

(4,869

)

 

 

(6,224

)

 

 

(4,994

)

 

 

(1,941

)

 

 

(5,216

)

 

 

(2,226

)

Average tangible common equity(1)

$

857,320

 

 

$

869,889

 

 

$

873,416

 

 

$

848,921

 

 

$

713,900

 

 

$

866,816

 

 

$

692,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

24,196

 

 

$

26,712

 

 

$

43,345

 

 

$

4,024

 

 

$

21,443

 

 

$

94,253

 

 

$

46,493

 

Add amortization of intangible assets

 

396

 

 

 

313

 

 

 

441

 

 

 

430

 

 

 

282

 

 

 

1,150

 

 

 

846

 

Less tax effect on amortization of intangible assets(2)

 

(83

)

 

 

(66

)

 

 

(93

)

 

 

(90

)

 

 

(59

)

 

 

(242

)

 

 

(178

)

Net income available to common stockholders after adjustments for intangible assets(1)

$

24,509

 

 

$

26,959

 

 

$

43,693

 

 

$

4,364

 

 

$

21,666

 

 

$

95,161

 

 

$

47,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average equity

 

9.99

%

 

 

11.05

%

 

 

18.74

%

 

 

2.20

%

 

 

10.84

%

 

 

13.38

%

 

 

8.90

%

Return on average tangible common equity(1)

 

11.34

%

 

 

12.43

%

 

 

20.29

%

 

 

2.04

%

 

 

12.04

%

 

 

14.68

%

 

 

9.10

%

(1)

Non-GAAP measure.

(2)

Adjustments shown net of a statutory Federal tax rate of 21%.

<

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

December 31,

2021

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Adjusted noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expense

$

50,962

 

 

$

48,612

 

 

$

46,596

 

 

$

58,872

 

 

$

37,811

 

 

$

146,170

 

 

$

124,806

 

Noninterest expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional (fees) recoveries

 

(1,017

)

 

 

(455

)

 

 

106

 

 

 

(642

)

 

 

2,152

 

 

 

(1,366

)

 

 

2,715

 

Acquisition, integration and transaction costs

 

(2,080

)

 

 

 

 

 

 

 

 

(13,469

)

 

 

(1,000

)

 

 

(2,080

)

 

 

(2,400

)

Noninterest expense adjustments before (loss) gain in alternative energy partnership investments

 

(3,097

)

 

 

(455

)

 

 

106

 

 

 

(14,111

)

 

 

1,152