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Banc of California Reports Solid Earnings and Stable Deposits in Second Quarter 2023 Financial Results

The Company Also Announced in a Separate Release that it has Entered into a Transformational Merger Agreement with PacWest Bancorp, Including Committed Capital Raise of $400 Million

Transaction Also Expected to be Immediately Accretive to Tangible Book Value Per Share and to 2024 Estimated EPS

Banc of California, Inc. (NYSE: BANC) today reported net income of $17.9 million, or $0.31 per diluted common share, for the second quarter of 2023. This compares to net income of $20.3 million, or $0.34 per diluted common share for the first quarter of 2023. On an adjusted basis, net income was $18.4 million for the quarter, or $0.32 per diluted common share.(1) This compares to adjusted net income of $21.7 million, or $0.37 per diluted common share, for the first quarter of 2023.(1)

Second quarter highlights:

  • Interest income growth, up $9.2 million or 9% from the prior quarter due to higher interest rates and changes in the portfolio as new originations have higher yields than payoffs. Overall, net interest income was down $3.4 million or 5% from the prior quarter due to higher funding costs, changes in the balance sheet mix and the impact of the strategy to hold extra liquidity, which resulted in higher short-term borrowings from the FHLB and FRB.
  • Stable overall deposits, down approximately 1% on average and period-end balances, with the period-end noninterest-bearing percentage stable at approximately 36% quarter over quarter.
  • Noninterest-bearing deposit growth from new clients, which contributed inflows of $74.8 million in the quarter, consistent with the prior quarter’s growth and up 13% over the same period last year.
  • Loan growth, up $101.8 million or 1% from the prior quarter and 6% annualized, highlighted by core commercial and industrial growth of $64 million or 6% and increased warehouse utilization.
  • Lower noninterest expenses, which declined $2.1 million or 4% from the prior quarter due primarily to lower losses in alternative energy partnerships and compensation expenses.
  • High liquidity levels, with immediately available on-balance sheet liquidity and unused borrowing capacity of $3.9 billion. Available liquidity was 2.2 times the level of uninsured and uncollateralized deposits, which was consistent with the prior quarter.
  • Low unrealized losses, with AFS unrealized losses of $54.1 million on securities of $922.1 million, representing 4.3% of CET1 capital. Total AFS and HTM unrealized losses of $115.5 million on total securities of $1.25 billion represented 9.1% of CET1 capital.
  • Strong capital ratios(2) well above the regulatory thresholds for "well capitalized" banks, including an estimated 14.26% Total risk-based capital ratio, 11.88% Tier 1 capital ratio, 11.88% CET1 capital ratio and 9.54% Tier 1 leverage ratio.
  • Other performance highlights as follows:
    • Book value per share of $16.67, up from $16.33
    • Tangible common equity per share of $14.56, up from $14.26(1)
    • Repurchased $16.0 million of common stock during the quarter and $21.1 million during the six months ended June 30, 2023

Jared Wolff, Chairman, President & CEO of Banc of California, commented, "We are very excited to announce our merger with PacWest Bancorp. This is a reflection of the strength of the franchise we have built and our continued ability to create value for our stockholders. Our second quarter results reflect strong performance in several areas. Notwithstanding an uncertain economic landscape, our team did an exceptional job to bring in nearly $75 million of noninterest-bearing deposits from new relationships, maintaining ending and average noninterest-bearing deposits at 36%, in line with noninterest-bearing deposits at the end of first quarter. Loan growth came in above expectation in core C&I, and expenses remain well-controlled. Our margin reflected excess cash balances held for a good part of the quarter, but our June margin of 3.24% is more representative of where we expect to see our margin in the quarter ahead. Due to our solid financial performance and prudent balance sheet management, we increased our tangible common equity ratio to more than 9%, grew our tangible book value per share by 2.1% and repurchased $16.0 million of our common stock at well below tangible book value per share.”

Mr. Wolff continued, “We expect to see earnings growth ahead. As noted, we exited the second quarter with a 13 basis points higher net interest margin in the month of June than our margin for the entire second quarter. We continue to experience positive trends in noninterest-bearing deposit inflows, and higher end-of-period loan balances than average balances for the quarter. Over the longer term, we believe we are in an excellent position to capitalize on the dramatic change we have seen in the competitive environment in California over the past two years in which many banks have either completely exited or significantly pulled back from the markets in which we operate. The proposed merger with PacWest will only accelerate the exceptional opportunity for us to continue adding new clients and banking talent that we believe will increase our market share, increase our scale and level of efficiencies, generate profitable growth, and further enhance the value of our franchise.”

(1)

 

Non-GAAP measures; refer to section 'Non-GAAP Measures'

(2)

 

Capital ratios are preliminary.

Income Statement Highlights

 

Three Months Ended

 

Six Months Ended

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

 

($ in thousands)

Total interest and dividend income

$

116,151

 

$

106,919

 

$

104,112

 

 

$

95,973

 

$

88,418

 

$

223,070

 

$

172,687

 

Total interest expense

 

46,519

 

 

33,866

 

 

23,895

 

 

 

16,565

 

 

10,119

 

 

80,385

 

 

17,947

 

Net interest income

 

69,632

 

 

73,053

 

 

80,217

 

 

 

79,408

 

 

78,299

 

 

142,685

 

 

154,740

 

Net (loss) gain on sale of securities available for sale

 

 

 

 

 

(7,708

)

 

 

 

 

 

 

 

 

16

 

Other noninterest income

 

6,024

 

 

7,859

 

 

6,281

 

 

 

5,681

 

 

7,186

 

 

13,883

 

 

13,080

 

Total noninterest income

 

6,024

 

 

7,859

 

 

(1,427

)

 

 

5,681

 

 

7,186

 

 

13,883

 

 

13,096

 

Total revenue

 

75,656

 

 

80,912

 

 

78,790

 

 

 

85,089

 

 

85,485

 

 

156,568

 

 

167,836

 

Total noninterest expense

 

49,132

 

 

51,239

 

 

48,203

 

 

 

50,962

 

 

48,612

 

 

100,371

 

 

95,208

 

Pre-tax / pre-provision income(1)

 

26,524

 

 

29,673

 

 

30,587

 

 

 

34,127

 

 

36,873

 

 

56,197

 

 

72,628

 

Provision for (reversal of) credit losses

 

1,900

 

 

2,000

 

 

 

 

 

 

 

 

 

3,900

 

 

(31,542

)

Income tax expense

 

6,745

 

 

7,395

 

 

9,068

 

 

 

9,931

 

 

10,161

 

 

14,140

 

 

28,946

 

Net income

$

17,879

 

$

20,278

 

$

21,519

 

 

$

24,196

 

$

26,712

 

$

38,157

 

$

75,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders(2)

$

17,879

 

$

20,278

 

$

21,519

 

 

$

24,196

 

$

26,712

 

$

38,157

 

$

70,057

 

(1)

 

Non-GAAP Measure; refer to section 'Non-GAAP Measures'

(2)

 

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

Net interest income

Q2-2023 vs Q1-2023

Net interest income decreased $3.4 million, or 4.7%, to $69.6 million for the second quarter primarily due to the impact of the higher market interest rates, changes in the balance sheet mix, and the cost of excess short-term borrowings from the FHLB and FRB related to maintaining higher levels of liquidity during the first two months of the quarter, which was partially offset by higher average balances and yields on interest-earning assets.

The net interest margin decreased 30 basis points to 3.11% for the second quarter as the average cost of funds increased 52 basis points while the average interest-earning assets yield increased 21 basis points.

The yield on average interest-earning assets increased to 5.20% for the second quarter from 4.99% in the first quarter mainly due to higher yields on loans, securities and other interest-earning assets. The overall loan yield increased 21 basis points to 5.28% during the second quarter as a result of the impact of higher market interest rates and changes in portfolio mix from originations and payoffs. The yield on securities increased 17 basis points to 4.83% due mostly to rate resets in the CLO portfolio.

The average cost of funds increased 52 basis points to 2.20% for the second quarter from 1.68% in the first quarter, driven by higher market interest rates and changes in the balance sheet mix. The cost of average interest-bearing liabilities increased 61 basis points to 3.08% for the second quarter from 2.47% in the first quarter. This increase was due partially to the cost of excess short-term borrowings from the FHLB and FRB related to maintaining excess liquidity at the end of the first quarter and into the second quarter due to the operating environment. Average noninterest-bearing deposits were $192.3 million lower and average total deposits were $61.3 million lower for the second quarter.

YTD 2023 vs YTD 2022

Net interest income decreased $12.1 million, or 7.8%, to $142.7 million for the six months ended June 30, 2023 due primarily to higher funding costs from higher market interest rates, changes in the balance sheet mix and the conservative strategy to hold extra liquidity at the end of the first quarter and into the second quarter due to the operating environment.

The net interest margin decreased 29 basis points to 3.26% as the average cost of funds increased 151 basis points while the average interest-earning assets yield increased 114 basis points between periods.

The yield on average interest-earning assets increased 114 basis points to 5.10% for the six months ended June 30, 2023, from 3.96% for the same period in 2022 due mostly to higher market interest rates and changes in the mix of interest-earning assets. The yield on average loans increased 86 basis points to 5.17% for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The yield on average investment securities increased 227 basis points for the same period. Average loans represented 80% of average earnings assets for the six months ended June 30, 2023 compared to 83% for the six months ended June 30, 2022. Average loans decreased by $238.1 million due mostly to lower average warehouse balances, partially offset by organic loan growth in other loan categories.

The average cost of funds increased 151 basis points to 1.95% for the six months ended June 30, 2023 from 0.44% for the six months ended June 30, 2022 due mostly to higher market interest rates and changes in the balance sheet mix. The average cost of total deposits increased 132 basis points to 1.44% for the six months ended June 30, 2023 compared to the same period in 2022. The cost of average interest-bearing liabilities increased 213 basis points to 2.79% for the six months ended June 30, 2023 compared to 0.66% for the same period in 2022 and included a 209 basis point increase in the cost of average interest-bearing deposits to 2.29%. The increase in the cost of these funding sources was mainly due to the impact of higher market interest rates as the average effective Federal Funds rate increased 430 basis points to 4.75% for the six months ended June 30, 2023 from 0.45% in the same period in 2022. Average noninterest-bearing deposits decreased $279.0 million for the six months ended June 30, 2023 compared to the same period in 2022 and average total deposits decreased $593.0 million. Average noninterest-bearing deposits represented 37% of total average deposits for the six months ended June 30, 2023 compared to 38% for the same period in 2022.

Provision for credit losses

Q2-2023 vs Q1-2023

The provision for credit losses was $1.9 million for the second quarter and included a $1.7 million provision for loan losses and a $1.0 million provision for credit loss for securities available-for-sale, partially offset by an $800 thousand reversal of the provision for credit losses related to lower unfunded commitments. There was a $2.0 million provision for credit losses for the first quarter of 2023. The provision for credit losses in the second quarter was mainly due to net charge-offs and an increase in specific reserves, partially offset by the change in portfolio mix and lower unfunded commitments.

YTD 2023 vs YTD 2022

During the six months ended June 30, 2023, the provision for credit losses was $3.9 million, and included a $4.2 million provision for loan losses and a $1.0 million provision for credit loss for securities available-for-sale, partially offset by a $1.3 million reversal of the provision for credit losses related to lower unfunded commitments. The provision for credit losses was a reversal of $31.5 million during the six months ended June 30, 2022, and included a $31.3 million recovery from the settlement of a loan previously charged-off in 2019.

Noninterest income

Q2-2023 vs Q1-2023

Noninterest income decreased $1.8 million to $6.0 million for the second quarter mainly due to the timing of revenue received from equity investments of $1.2 million and the prior quarter included $1.1 million in recoveries of certain charged-off loans acquired in a business combination.

YTD 2023 vs YTD 2022

Noninterest income for the six months ended June 30, 2023 increased $0.8 million to $13.9 million compared to the same period in 2022. The increase was mainly due to higher loan servicing income from higher purchased mortgage servicing asset balances, lower valuation losses on loan held for sale, and higher rental income due to an increase in subleased facilities, partially offset by lower customer services fees.

Noninterest expense

Q2-2023 vs Q1-2023

Noninterest expense decreased $2.1 million to $49.1 million for the second quarter compared to the first quarter. The decrease was due primarily to (i) lower net losses in alternative energy partnership investments of $1.7 million, (ii) lower salaries and employee benefits of $1.4 million as the first quarter included $1.0 million of severance costs and higher payroll taxes, (iii) the reversal of a provision for loan repurchases of $797 thousand, partially offset by (iv) higher marketing, recruiting and other expense of $1.2 million and (v) higher software and technology expense of $305 thousand as we continue to invest in our technology infrastructure.

Adjusted noninterest expense, which represents total operating costs(1), decreased $825 thousand to $48.4 million for the second quarter compared to $49.2 million for the prior quarter. This decrease was due to lower salaries and benefits of $1.4 million, the reversal of a provision for loan repurchases of $797 thousand and lower professional fees of $443 thousand, partially offset by higher marketing, recruiting and other expense of $1.2 million and software and technology expense of $305 thousand.

YTD 2023 vs YTD 2022

Noninterest expense for the six months ended June 30, 2023 increased $5.2 million to $100.4 million compared to the same period in 2022. The increase was due to higher (i) software and technology expense of $1.4 million related to investments in our technology infrastructure, (ii) professional fees of $1.2 million, including a $783 thousand increase in indemnified legal fees (net of insurance recoveries), (iii) marketing, recruiting and other expenses of $1.0 million, (iv) regulatory assessments of $707 thousand as the FDIC increased assessment rates in 2023 and (v) salaries and employee benefits of $687 thousand due mostly to the aforementioned severance costs.

Income taxes

Q2-2023 vs Q1-2023

Income tax expense totaled $6.7 million for the second quarter resulting in an effective tax rate of 27.4% compared to $7.4 million for the first quarter and an effective tax rate of 26.7%. The effective tax rate for the full year 2023 is estimated to be 27% to 28%.

YTD 2023 vs YTD 2022

Income tax expense totaled $14.1 million for the six months ended June 30, 2023, representing an effective tax rate of 27.0%, compared to $28.9 million and an effective tax rate of 27.8% for the six months ended June 30, 2022.

(1)

 

Non-GAAP measures; refer to section 'Non-GAAP Measures'

Balance Sheet

At June 30, 2023, total assets were $9.37 billion, which represented a linked-quarter decrease of $668.6 million. The following table shows selected balance sheet line items as of the dates indicated:

 

 

 

Amount Change

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

Q2-23 vs.

Q1-23

 

Q2-23 vs.

Q2-22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

Cash and cash equivalents

$

283,729

 

$

1,010,951

 

$

228,896

 

$

256,058

 

$

243,064

 

$

(727,222

)

 

$

40,665

 

Securities held-to-maturity

$

328,405

 

$

328,520

 

$

328,641

 

$

328,757

 

$

329,272

 

$

(115

)

 

$

(867

)

Securities available-for-sale

$

922,091

 

$

958,427

 

$

868,297

 

$

847,565

 

$

865,435

 

$

(36,336

)

 

$

56,656

 

Loans held-for-investment

$

7,156,206

 

$

7,054,380

 

$

7,115,038

 

$

7,289,320

 

$

7,451,264

 

$

101,826

 

 

$

(295,058

)

Total assets

$

9,370,265

 

$

10,038,901

 

$

9,197,016

 

$

9,368,578

 

$

9,502,113

 

$

(668,636

)

 

$

(131,848

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,446,693

 

$

2,506,616

 

$

2,809,328

 

$

2,943,585

 

$

2,826,599

 

$

(59,923

)

 

$

(379,906

)

Total deposits

$

6,871,076

 

$

6,951,974

 

$

7,120,921

 

$

7,280,385

 

$

7,558,683

 

$

(80,898

)

 

$

(687,607

)

Borrowings (1)

$

1,422,118

 

$

2,007,665

 

$

1,002,254

 

$

1,011,767

 

$

884,282

 

$

(585,547

)

 

$

537,836

 

Total liabilities

$

8,413,211

 

$

9,079,994

 

$

8,237,398

 

$

8,416,588

 

$

8,552,983

 

$

(666,783

)

 

$

(139,772

)

Total equity

$

957,054

 

$

958,907

 

$

959,618

 

$

951,990

 

$

949,130

 

$

(1,853

)

 

$

7,924

 

(1)

 

Represents FHLB advances and FRB borrowings, Other borrowings, and Long-term debt, net.

Investments

Securities held-to-maturity totaled $328.4 million at June 30, 2023 and included $214.2 million in agency securities and $114.2 million in municipal securities. As of June 30, 2023, securities held-to-maturity had aggregate unrealized net losses of $61.4 million, of which $15.3 million related to unrealized losses from the transfer of certain fixed-rate mortgage-backed securities (MBS) and municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio in the prior year. These unrealized losses related primarily to changes in overall interest rates.

Securities available-for-sale decreased $36.3 million during the second quarter to $922.1 million at June 30, 2023, due to one bond of $20.0 million that was called, principal payments of $8.0 million and an increase in unrealized net losses of $7.3 million. The increase in unrealized net losses were due to wider credit spreads within corporate debt securities and the impact of higher market interest rates on agency collateralized mortgage obligations (CMOs) and non-agency residential mortgage-backed securities (MBS), which was partly offset by improvement in the valuation of collateralized loan obligations (CLOs). Securities available-for-sale had aggregate unrealized net losses of $54.1 million. These unrealized net losses related primarily to changes in overall interest rates and spreads and the resulting impact on valuations of MBS, CMOs, CLOs and corporate debt securities. We also recorded a provision for credit losses of $1.0 million for corporate debt securities of other financial institutions due to downgrades in their ratings.

As of June 30, 2023, the securities available-for-sale portfolio included $482.8 million of CLOs, $171.0 million of agency securities, $147.6 million of corporate debt securities, $111.5 million of residential CMOs, and $9.2 million of SBA securities. The CLO portfolio, which is comprised of AAA and AA-rated securities, represented 39% of the total securities portfolio and the carrying value included an unrealized net loss of $7.7 million at June 30, 2023, compared to 37% of the total securities portfolio and an unrealized net loss of $11.2 million at March 31, 2023.

Loans

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

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

($ in thousands)

Composition of loans

 

 

 

 

 

 

 

 

 

Commercial real estate

$

1,266,438

 

 

$

1,302,277

 

 

$

1,259,651

 

 

$

1,240,927

 

 

$

1,204,414

 

Multifamily

 

1,654,152

 

 

 

1,678,300

 

 

 

1,689,943

 

 

 

1,698,455

 

 

 

1,572,308

 

Construction

 

264,684

 

 

 

260,167

 

 

 

243,553

 

 

 

236,495

 

 

 

228,341

 

Commercial and industrial

 

1,214,314

 

 

 

1,150,416

 

 

 

1,243,452

 

 

 

1,227,054

 

 

 

1,273,307

 

Commercial and industrial - warehouse lending

 

786,094

 

 

 

636,731

 

 

 

602,508

 

 

 

766,362

 

 

 

1,160,157

 

SBA

 

62,898

 

 

 

65,040

 

 

 

68,137

 

 

 

85,674

 

 

 

92,235

 

Total commercial loans

 

5,248,580

 

 

 

5,092,931

 

 

 

5,107,244

 

 

 

5,254,967

 

 

 

5,530,762

 

Single-family residential mortgage

 

1,820,721

 

 

 

1,877,114

 

 

 

1,920,806

 

 

 

1,947,652

 

 

 

1,832,279

 

Other consumer

 

86,905

 

 

 

84,335

 

 

 

86,988

 

 

 

86,701

 

 

 

88,223

 

Total consumer loans

 

1,907,626

 

 

 

1,961,449

 

 

 

2,007,794

 

 

 

2,034,353

 

 

 

1,920,502

 

Total gross loans

$

7,156,206

 

 

$

7,054,380

 

 

$

7,115,038

 

 

$

7,289,320

 

 

$

7,451,264

 

Composition percentage of loans

 

 

 

 

 

 

 

 

 

Commercial real estate

 

17.7

%

 

 

18.5

%

 

 

17.7

%

 

 

17.0

%

 

 

16.2

%

Multifamily

 

23.1

%

 

 

23.8

%

 

 

23.8

%

 

 

23.3

%

 

 

21.1

%

Construction

 

3.7

%

 

 

3.7

%

 

 

3.4

%

 

 

3.2

%

 

 

3.1

%

Commercial and industrial

 

17.0

%

 

 

16.3

%

 

 

17.5

%

 

 

16.8

%

 

 

17.1

%

Commercial and industrial - warehouse lending

 

11.0

%

 

 

9.0

%

 

 

8.4

%

 

 

10.6

%

 

 

15.5

%

SBA

 

0.9

%

 

 

0.9

%

 

 

1.0

%

 

 

1.2

%

 

 

1.2

%

Total commercial loans

 

73.4

%

 

 

72.2

%

 

 

71.8

%

 

 

72.1

%

 

 

74.2

%

Single-family residential mortgage

 

25.4

%

 

 

26.6

%

 

 

27.0

%

 

 

26.7

%

 

 

24.6

%

Other consumer

 

1.2

%

 

 

1.2

%

 

 

1.2

%

 

 

1.2

%

 

 

1.2

%

Total consumer loans

 

26.6

%

 

 

27.8

%

 

 

28.2

%

 

 

27.9

%

 

 

25.8

%

Total gross loans

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Total loans ended the second quarter of 2023 at $7.16 billion, up $101.8 million from $7.05 billion at March 31, 2023, due mostly to a $149.4 million increase in warehouse lending balances and a $63.9 million increase in commercial and industrial loans, partially offset by a $56.4 million decrease in single-family residential (SFR) loans, a $35.8 million decrease in commercial real estate (CRE) loans, and a $24.1 million decrease in multifamily loans. Loan fundings of $441.1 million in the second quarter included net warehouse advances of $149.4 million, offset by other loan paydowns and payoffs of $340.1 million.

Loan concentrations were well-diversified between products and industries. Notably, the CRE portfolio of $1.27 billion had balances related to office loans of $351.9 million, which was 4.9% of total loans. This portfolio was comprised of general office of $265.1 million with a weighted average LTV of 53% and debt service coverage ratio of 1.6x and medical office of $86.8 million with a weighted average LTV of 55% and debt service coverage ratio of 2.3x.

Deposits

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

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

($ in thousands)

Composition of deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

$

2,446,693

 

 

$

2,506,616

 

 

$

2,809,328

 

 

$

2,943,585

 

 

$

2,826,599

 

Interest-bearing checking

 

1,713,465

 

 

 

1,862,003

 

 

 

1,947,247

 

 

 

1,921,816

 

 

 

2,359,857

 

Savings and money market

 

1,057,326

 

 

 

998,365

 

 

 

1,174,925

 

 

 

1,478,045

 

 

 

1,622,922

 

Non-brokered certificates of deposit

 

579,789

 

 

 

585,272

 

 

 

584,476

 

 

 

614,569

 

 

 

615,719

 

Brokered certificates of deposit

 

1,073,803

 

 

 

999,718

 

 

 

604,945

 

 

 

322,370

 

 

 

133,586

 

Total deposits

$

6,871,076

 

 

$

6,951,974

 

 

$

7,120,921

 

 

$

7,280,385

 

 

$

7,558,683

 

Composition percentage of deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

 

35.6

%

 

 

36.1

%

 

 

39.5

%

 

 

40.4

%

 

 

37.4

%

Interest-bearing checking

 

24.9

%

 

 

26.8

%

 

 

27.3

%

 

 

26.4

%

 

 

31.2

%

Savings and money market

 

15.4

%

 

 

14.3

%

 

 

16.5

%

 

 

20.4

%

 

 

21.5

%

Non-brokered certificates of deposit

 

8.5

%

 

 

8.4

%

 

 

8.2

%

 

 

8.4

%

 

 

8.1

%

Brokered certificates of deposit

 

15.6

%

 

 

14.4

%

 

 

8.5

%

 

 

4.4

%

 

 

1.8

%

Total deposits

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Total deposits decreased $80.9 million during the second quarter of 2023 to $6.87 billion at June 30, 2023, due mostly to lower interest-bearing checking balances of $148.5 million and noninterest-bearing checking balances of $59.9 million, partially offset by higher certificate of deposit balances of $68.6 million and higher savings and money market balances of $59.0 million.

We continue to focus on growing granular relationship-based deposits and strategically replacing short-term wholesale funding as we actively manage our funding costs. Noninterest-bearing checking totaled $2.45 billion and represented 36% of total deposits at June 30, 2023, compared to $2.51 billion, or 36% of total deposits, at March 31, 2023.

Insured deposits of $4.80 billion and collateralized deposits of $314.8 million represented 74% of total deposits at June 30, 2023, compared to insured deposits of $4.77 billion and collateralized deposits of $314.6 million, which represented 73% of total deposits at March 31, 2023.

Debt

During the first quarter of 2023, in response to volatility in the financial markets, we proactively performed liquidity-enhancing measures, including additional advances from the FHLB and draws on available FRB facilities. We reduced our excess liquidity toward the end of the second quarter as volatility in the markets began to stabilize. Advances from the FHLB and FRB borrowings decreased $584.7 million during the second quarter to $1.15 billion at June 30, 2023. FHLB advances included $811.0 million in term advances with a weighted average life of 3.4 years and weighted average interest rate of 3.04%. We also utilized available capacity from the FRB through $340.0 million in short-term borrowings.

During the second quarter of 2023, we repurchased senior notes with an outstanding balance of $1.0 million at a discount and recognized an $80 thousand gain.

Equity

During the second quarter, total stockholders’ equity decreased by $1.9 million to $957.1 million and tangible common equity(1) decreased by $1.4 million to $836.1 million at June 30, 2023. The decrease in total stockholders’ equity for the second quarter resulted from (i) repurchases of common stock of $16.0 million, (ii) dividends to common stockholders of $6.0 million, partially offset by (iii) net income of $17.9 million, (iv) share-based compensation expense of $1.7 million and (v) net unrealized gains in accumulated other comprehensive income of $0.7 million.

Book value per common share increased $0.34 during the second quarter to $16.67 as of June 30, 2023 due mostly to net income and common stock repurchases, offset by dividends. Tangible common equity per share(1) also increased $0.30 during the second quarter to $14.56 as of June 30, 2023 due to the same drivers.

(1)

 

Non-GAAP measures; refer to section 'Non-GAAP Measures'

Capital and Liquidity

Capital ratios remain strong with total risk-based capital at 14.26% and a tier 1 leverage ratio of 9.54% at June 30, 2023. The following table sets forth our regulatory capital ratios as of the dates indicated:

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Capital Ratios(1)

 

 

 

 

 

 

 

 

 

Banc of California, Inc.

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

14.26%

 

14.22%

 

14.21%

 

13.86%

 

13.69%

Tier 1 risk-based capital ratio

11.88%

 

11.79%

 

11.80%

 

11.43%

 

11.29%

Common equity tier 1 capital ratio

11.88%

 

11.79%

 

11.80%

 

11.43%

 

11.29%

Tier 1 leverage ratio

9.54%

 

9.65%

 

9.70%

 

9.52%

 

9.58%

Banc of California, NA

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

15.64%

 

15.93%

 

16.02%

 

15.70%

 

15.54%

Tier 1 risk-based capital ratio

14.60%

 

14.83%

 

14.94%

 

14.56%

 

14.41%

Common equity tier 1 capital ratio

14.60%

 

14.83%

 

14.94%

 

14.56%

 

14.41%

Tier 1 leverage ratio(2)

11.56%

 

12.14%

 

12.25%

 

12.12%

 

12.27%

(1)

 

June 30, 2023 capital ratios are preliminary.

(2)

 

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 5 basis points at June 30, 2023.

At June 30, 2023, total cash and cash equivalents were $283.7 million, a decrease of $727.2 million from March 31, 2023 as we reduced the extra liquidity that was deployed in the first quarter as a result of the operating environment. Combined with unpledged securities available-for-sale of $716.4 million and total available borrowing capacity of $2.93 billion, total liquid assets and unused borrowing capacity of $3.93 billion was 2.2 times greater than total uninsured and uncollateralized deposits of $1.76 billion.

Credit Quality

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

Asset quality information and ratios

($ in thousands)

Delinquent loans held-for-investment

 

 

 

 

 

 

 

 

 

30 to 89 days delinquent

$

64,746

 

 

$

35,581

 

 

$

46,666

 

 

$

38,694

 

 

$

38,285

 

90+ days delinquent

 

40,169

 

 

 

37,060

 

 

 

44,554

 

 

 

18,843

 

 

 

23,905

 

Total delinquent loans

$

104,915

 

 

$

72,641

 

 

$

91,220

 

 

$

57,537

 

 

$

62,190

 

Total delinquent loans to total loans

 

1.47

%

 

 

1.03

%

 

 

1.28

%

 

 

0.79

%

 

 

0.83

%

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

 

 

 

 

 

 

 

 

 

Non-accrual loans

$

67,306

 

 

$

56,545

 

 

$

55,251

 

 

$

42,674

 

 

$

44,443

 

90+ days delinquent and still accruing loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans

 

67,306

 

 

 

56,545

 

 

 

55,251

 

 

 

42,674

 

 

 

44,443

 

Other real estate owned

 

882

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing assets

$

68,188

 

 

$

56,545

 

 

$

55,251

 

 

$

42,674

 

 

$

44,443

 

ALL to non-performing loans

 

120.17

%

 

 

149.54

%

 

 

155.58

%

 

 

216.63

%

 

 

211.04

%

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

 

0.94

%

 

 

0.80

%

 

 

0.78

%

 

 

0.59

%

 

 

0.60

%

Non-performing assets to total assets

 

0.73

%

 

 

0.56

%

 

 

0.60

%

 

 

0.46

%

 

 

0.47

%

At June 30, 2023, total delinquent loans were $104.9 million, and included SFR mortgages of $65.9 million, or 62.8% of total delinquent loans. During the second quarter, delinquent loans increased $32.3 million due to total additions of $49.4 million, offset by cures of $9.0 million and amortization and other removals of $8.1 million.

At June 30, 2023, non-performing loans were $67.3 million, and included $33.5 million of SFR mortgage loans, $21.2 million of commercial and industrial loans and $9.6 million of SBA loans. During the second quarter, non-performing loans increased $10.8 million due to total additions of $16.7 million, offset by $6.0 million in charge-offs, amortization and other removals. Excluding SFR mortgages, which are well-secured with low loan-to-value ratios, non-performing loans increased $1.9 million from the prior quarter. At June 30, 2023, there were $2.7 million of non-performing loans, primarily consisting of SFR mortgages that were in a current payment status, however are considered nonaccrual based on other criteria.

At June 30, 2023, non-performing assets included $882 thousand of real estate owned, consisting of one single-family residence we acquired in the second quarter.

Allowance for Credit Losses - Loans

Three Months Ended

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

($ in thousands)

Allowance for loan losses (ALL)

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

84,560

 

 

$

85,960

 

 

$

92,444

 

 

$

93,793

 

 

$

93,226

 

Loans charged off

 

(5,667

)

 

 

(3,949

)

 

 

(7,641

)

 

 

(912

)

 

 

(494

)

Recoveries

 

326

 

 

 

49

 

 

 

57

 

 

 

63

 

 

 

1,561

 

Net (charge-offs) recoveries

 

(5,341

)

 

 

(3,900

)

 

 

(7,584

)

 

 

(849

)

 

 

1,067

 

Provision for (reversal of) loan losses

 

1,664

 

 

 

2,500

 

 

 

1,100

 

 

 

(500

)

 

 

(500

)

Balance at end of period

$

80,883

 

 

$

84,560

 

 

$

85,960

 

 

$

92,444

 

 

$

93,793

 

Reserve for unfunded loan commitments (RUC)

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

4,805

 

 

$

5,305

 

 

$

6,405

 

 

$

5,905

 

 

$

5,405

 

(Reversal of) provision for credit losses

 

(800

)

 

 

(500

)

 

 

(1,100

)

 

 

500

 

 

 

500

 

Balance at end of period

 

4,005

 

 

 

4,805

 

 

 

5,305

 

 

 

6,405

 

 

 

5,905

 

Allowance for credit losses (ACL) - Loans

$

84,888

 

 

$

89,365

 

 

$

91,265

 

 

$

98,849

 

 

$

99,698

 

 

 

 

 

 

 

 

 

 

 

ALL to total loans

 

1.13

%

 

 

1.20

%

 

 

1.21

%

 

 

1.27

%

 

 

1.26

%

ACL to total loans

 

1.19

%

 

 

1.27

%

 

 

1.28

%

 

 

1.36

%

 

 

1.34

%

ACL to NPLs

 

126.12

%

 

 

158.04

%

 

 

165.18

%

 

 

231.64

%

 

 

224.33

%

ACL to NPAs

 

124.49

%

 

 

158.04

%

 

 

165.18

%

 

 

231.64

%

 

 

224.33

%

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

 

0.30

%

 

 

0.22

%

 

 

0.42

%

 

 

0.05

%

 

 

(0.06

)%

The allowance for credit losses, which includes the reserve for unfunded loan commitments, totaled $84.9 million, or 1.19% of total loans, at June 30, 2023, compared to $89.4 million, or 1.27% of total loans, at March 31, 2023. The ACL decreased by $4.5 million due to: (i) net charge-offs of $5.3 million of which $3.0 million was specifically reserved for at March 31, 2023, (ii) lower reserves of $4.2 million due to changes in the portfolio mix including lower non-warehouse loans and other factors, partially offset by (iii) new and increases to existing specific reserves totaling $3.1 million. The ACL coverage of non-performing loans was 126% at June 30, 2023 compared to 158% at March 31, 2023.

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 June 2023. The published forecasts consider the Federal Reserve's monetary policy, labor market constraints, inflation levels, global oil prices and changes in real estate values, among other factors.

Conference Call

In light of today’s announcement that the Company and PacWest Bancorp have entered into a definitive merger agreement, the Company has canceled its conference call to discuss its second quarter 2023 financial results that was scheduled for 10:00 a.m. Pacific Time (PT) on Wednesday, July 26, 2023. Instead, the Company and PacWest Bancorp will jointly host a conference call today (July 25, 2023) at 2:30 p.m. Pacific Time (PT) to discuss the merger and the Company will also discuss its second quarter 2023 financial results. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 2706567. 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 2726440.

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) is a bank holding company with $9.37 billion in assets at June 30, 2023 and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 33 offices including 27 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. Words or phrases such as “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “strategy,” or similar expressions are intended to identify these forward-looking statements. You are cautioned not to place undue reliance on any 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. (the Company) with the Securities and Exchange Commission (SEC). The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to: (i) changes in general economic conditions, either nationally or in our market areas, including the impact of supply chain disruptions, and the risk of recession or an economic downturn; (ii) changes in the interest rate environment, including the recent and anticipated increases in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity, the impacts of continuing inflation; (iii) the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and non-performing assets, and may result in our allowance for credit losses not being adequate; (iv) fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area; (v) the quality and composition of our securities portfolio; (vi) our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment; (vii) the rapid withdrawal of a significant amount of demand deposits over a short period of time; (viii) the costs and effects of litigation; (ix) risks related to the Company’s acquisitions, including disruption to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; and our inability to achieve expected revenues, cost savings, synergies, and other benefits; and in the case of our recent acquisition of Deepstack Technologies, LLC (Deepstack), reputational risk, regulatory risk and potential adverse reactions of the Company's or Deepstack's customers, suppliers, vendors, employees or other business partners; (x) results of examinations by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, restrict our ability to invest in certain assets, refrain from issuing an approval or non-objection to certain capital or other actions, increase our allowance for credit losses, result in write-downs of asset values, restrict our ability or that of our bank subsidiary to pay dividends, or impose fines, penalties or sanctions; (xi) legislative or regulatory changes that adversely affect our business, including changes in tax laws and policies, accounting policies and practices, privacy laws, and regulatory capital or other rules; (xii) the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses; (xiii) errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation; (xiv) failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including due to cybersecurity threats; (xv) our ability to attract and retain key members of our senior management team; (xvi) the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; (xvii) the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; (xviii) the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; (xix) the risks, uncertainties and assumptions set forth under the heading, “Cautionary Note Regarding Forward-Looking Statements” in the joint press release issued by the Company and PacWest Bancorp on the date hereof with respect to the proposed merger transaction between the Company and PacWest Bancorp; and (xx) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this press release and from time to time in other documents that we file with or furnish to the SEC.

No Offer or Solicitation

This press release is not a proxy statement or solicitation or a proxy, consent or authorization with respect to any securities or in respect of the proposed transaction and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of the Company, PacWest Bancorp or the combined company, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be deemed to be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act, and otherwise in accordance with applicable law.

Additional Information and Where to Find It

This press release relates to the proposed transaction between the Company and PacWest Bancorp and the proposed investment in the Company by Warburg Pincus LLC and Centerbridge Partners, L.P. The Company intends to file a registration statement on Form S-4 with the SEC, which will include a preliminary joint proxy statement/prospectus to be distributed to holders of the Company’s common stock and PacWest Bancorp’s common stock in connection with the Company’s and PacWest Bancorp’s solicitation of proxies for the vote by the Company’s stockholders and PacWest Bancorp’s stockholders with respect to the proposed transaction. After the registration statement has been filed and declared effective, the Company and PacWest Bancorp will mail a definitive joint proxy statement/prospectus to their respective stockholders that, as of the applicable record date, are entitled to vote on the matters being considered at the Company stockholder meeting and at the PacWest Bancorp stockholder meeting, as applicable. The Company or PacWest Bancorp may also file other documents with the SEC regarding the proposed transaction.

Before making any voting or investment decision, investors and security holders are urged to carefully read the entire registration statement and joint proxy statement/prospectus (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) when they become available, and any other relevant documents filed with the SEC, And the definitive versions thereof (when they become available), as well as any amendments or supplements to SUCH documents, CAREFULLY AND IN THEIR ENTIRETY because they will contain important information about the proposed transaction.

Investors and security holders will be able to obtain free copies of the registration statement, the joint proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by the Company or PacWest Bancorp through the website maintained by the SEC at www.sec.gov.

The documents filed by the Company or PacWest Bancorp with the SEC also may be obtained free of charge at the Company’s or PacWest Bancorp’s website at https://investors.bancofcal.com, under the heading “Financials and Filings” or www.pacwestbancorp.com, under the heading “SEC Filings”, respectively, or upon written request to the Company, Attention: Investor Relations, 3 MacArthur Place, Santa Ana, CA 92707 or PacWest Bancorp, Attention: Investor Relations, 9701 Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212 , respectively.

Participants in Solicitation

The Company and PacWest Bancorp and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s stockholders or PacWest Bancorp’s stockholders in connection with the proposed transaction under the rules of the SEC. The Company’s stockholders, PacWest Bancorp’s stockholders and other interested persons will be able to obtain, without charge, more detailed information regarding the names, affiliations and interests of directors and executive officers of the Company and PacWest Bancorp in the Company’s registration statement on Form S-4 that will be filed, as well other documents filed by the Company or PacWest Bancorp from time to time with the SEC. Other information regarding persons who may, under the rules of the SEC, be deemed the participants in the proxy solicitation of the Company’s or PacWest Bancorp’s stockholders in connection with the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the preliminary joint proxy statement/prospectus and will be contained in other relevant materials to be filed with the SEC regarding the proposed transaction (if and when they become available). You may obtain free copies of these documents at the SEC’s website at www.sec.gov. Copies of documents filed with the SEC by the Company or PacWest Bancorp will also be available free of charge from the Company or PacWest Bancorp using the contact information above.

Banc of California, Inc.

Consolidated Statements of Financial Condition (Unaudited)

(Dollars in thousands)

 

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

283,729

 

 

$

1,010,951

 

 

$

228,896

 

 

$

256,058

 

 

$

243,064

 

Securities held-to-maturity

 

328,405

 

 

 

328,520

 

 

 

328,641

 

 

 

328,757

 

 

 

329,272

 

Securities available-for-sale

 

922,091

 

 

 

958,427

 

 

 

868,297

 

 

 

847,565

 

 

 

865,435

 

Loans

 

7,156,206

 

 

 

7,054,380

 

 

 

7,115,038

 

 

 

7,289,320

 

 

 

7,451,264

 

Allowance for loan losses

 

(80,883

)

 

 

(84,560

)

 

 

(85,960

)

 

 

(92,444

)

 

 

(93,793

)

Federal Home Loan Bank and other bank stock

 

60,281

 

 

 

70,334

 

 

 

57,092

 

 

 

54,428

 

 

 

51,489

 

Premises and equipment, net

 

108,235

 

 

 

108,087

 

 

 

107,345

 

 

 

107,728

 

 

 

108,523

 

Goodwill

 

114,312

 

 

 

114,312

 

 

 

114,312

 

 

 

114,312

 

 

 

95,127

 

Other intangible assets, net

 

6,603

 

 

 

7,065

 

 

 

7,526

 

 

 

8,081

 

 

 

4,677

 

Deferred income tax, net

 

64,001

 

 

 

54,450

 

 

 

50,518

 

 

 

56,376

 

 

 

54,455

 

Bank owned life insurance investment

 

128,973

 

 

 

128,022

 

 

 

127,122

 

 

 

126,199

 

 

 

125,326

 

Other assets

 

278,312

 

 

 

288,913

 

 

 

278,189

 

 

 

272,198

 

 

 

267,274

 

Total assets

$

9,370,265

 

 

$

10,038,901

 

 

$

9,197,016

 

 

$

9,368,578

 

 

$

9,502,113

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,446,693

 

 

$

2,506,616

 

 

$

2,809,328

 

 

$

2,943,585

 

 

$

2,826,599

 

Interest-bearing deposits

 

4,424,383

 

 

 

4,445,358

 

 

 

4,311,593

 

 

 

4,336,800

 

 

 

4,732,084

 

Total deposits

 

6,871,076

 

 

 

6,951,974

 

 

 

7,120,921

 

 

 

7,280,385

 

 

 

7,558,683

 

FHLB advances and FRB borrowings

 

1,147,997

 

 

 

1,732,670

 

 

 

727,348

 

 

 

727,021

 

 

 

511,695

 

Other borrowings

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

98,000

 

Long-term debt, net

 

274,121

 

 

 

274,995

 

 

 

274,906

 

 

 

274,746

 

 

 

274,587

 

Accrued expenses and other liabilities

 

120,017

 

 

 

120,355

 

 

 

114,223

 

 

 

124,436

 

 

 

110,018

 

Total liabilities

 

8,413,211

 

 

 

9,079,994

 

 

 

8,237,398

 

 

 

8,416,588

 

 

 

8,552,983

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

Common stock

 

653

 

 

 

653

 

 

 

651

 

 

 

652

 

 

 

647

 

Common stock, class B non-voting non-convertible

 

5

 

 

 

5

 

 

 

5

 

 

 

5

 

 

 

5

 

Additional paid-in capital

 

867,994

 

 

 

866,306

 

 

 

866,478

 

 

 

864,806

 

 

 

856,079

 

Retained earnings

 

275,430

 

 

 

263,524

 

 

 

248,988

 

 

 

231,084

 

 

 

210,471

 

Treasury stock

 

(137,270

)

 

 

(121,092

)

 

 

(115,907

)

 

 

(96,978

)

 

 

(84,013

)

Accumulated other comprehensive loss, net

 

(49,758

)

 

 

(50,489

)

 

 

(40,597

)

 

 

(47,579

)

 

 

(34,059

)

Total stockholders’ equity

 

957,054

 

 

 

958,907

 

 

 

959,618

 

 

 

951,990

 

 

 

949,130

 

Total liabilities and stockholders’ equity

$

9,370,265

 

 

$

10,038,901

 

 

$

9,197,016

 

 

$

9,368,578

 

 

$

9,502,113

 

Banc of California, Inc.

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

92,889

 

 

$

87,418

 

 

$

88,717

 

 

$

83,699

 

 

$

78,895

 

 

$

180,307

 

 

$

155,129

 

Securities

 

15,804

 

 

 

14,909

 

 

 

12,905

 

 

 

10,189

 

 

 

8,124

 

 

 

30,713

 

 

 

15,433

 

Other interest-earning assets

 

7,458

 

 

 

4,592

 

 

 

2,490

 

 

 

2,085

 

 

 

1,399

 

 

 

12,050

 

 

 

2,125

 

Total interest and dividend income

 

116,151

 

 

 

106,919

 

 

 

104,112

 

 

 

95,973

 

 

 

88,418

 

 

 

223,070

 

 

 

172,687

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

28,118

 

 

 

20,527

 

 

 

14,278

 

 

 

8,987

 

 

 

3,180

 

 

 

48,645

 

 

 

4,568

 

FHLB advances and FRB borrowings

 

14,703

 

 

 

9,648

 

 

 

5,528

 

 

 

3,558

 

 

 

3,114

 

 

 

24,351

 

 

 

6,067

 

Other interest-bearing liabilities

 

3,698

 

 

 

3,691

 

 

 

4,089

 

 

 

4,020

 

 

 

3,825

 

 

 

7,389

 

 

 

7,312

 

Total interest expense

 

46,519

 

 

 

33,866

 

 

 

23,895

 

 

 

16,565

 

 

 

10,119

 

 

 

80,385

 

 

 

17,947

 

Net interest income

 

69,632

 

 

 

73,053

 

 

 

80,217

 

 

 

79,408

 

 

 

78,299

 

 

 

142,685

 

 

 

154,740

 

Provision for (reversal of) credit losses

 

1,900

 

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

3,900

 

 

 

(31,542

)

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

 

67,732

 

 

 

71,053

 

 

 

80,217

 

 

 

79,408

 

 

 

78,299

 

 

 

138,785

 

 

 

186,282

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service fees

 

2,022

 

 

 

1,979

 

 

 

2,066

 

 

 

2,462

 

 

 

2,578

 

 

 

4,001

 

 

 

5,012

 

Loan servicing income

 

574

 

 

 

547

 

 

 

561

 

 

 

636

 

 

 

109

 

 

 

1,121

 

 

 

321

 

Income from bank owned life insurance

 

951

 

 

 

900

 

 

 

923

 

 

 

873

 

 

 

810

 

 

 

1,851

 

 

 

1,606

 

Net (loss) gain on sale of securities available for sale

 

 

 

 

 

 

 

(7,708

)

 

 

 

 

 

 

 

 

 

 

 

16

 

All other income

 

2,477

 

 

 

4,433

 

 

 

2,731

 

 

 

1,710

 

 

 

3,689

 

 

 

6,910

 

 

 

6,141

 

Total noninterest income

 

6,024

 

 

 

7,859

 

 

 

(1,427

)

 

 

5,681

 

 

 

7,186

 

 

 

13,883

 

 

 

13,096

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

28,282

 

 

 

29,656

 

 

 

27,812

 

 

 

27,997

 

 

 

28,264

 

 

 

57,938

 

 

 

57,251

 

Occupancy and equipment

 

5,603

 

 

 

5,526

 

 

 

5,740

 

 

 

5,796

 

 

 

5,741

 

 

 

11,129

 

 

 

11,378

 

Professional fees

 

4,001

 

 

 

4,072

 

 

 

3,193

 

 

 

3,957

 

 

 

4,001

 

 

 

8,073

 

 

 

6,840

 

Data processing

 

1,686

 

 

 

1,563

 

 

 

1,744

 

 

 

1,699

 

 

 

1,782

 

 

 

3,249

 

 

 

3,610

 

Regulatory assessments

 

1,301

 

 

 

1,202

 

 

 

905

 

 

 

925

 

 

 

1,021

 

 

 

2,503

 

 

 

1,796

 

Software and technology

 

3,579

 

 

 

3,274

 

 

 

3,197

 

 

 

3,659

 

 

 

2,747

 

 

 

6,853

 

 

 

5,447

 

Reversal of loan repurchase reserves

 

(808

)

 

 

(11

)

 

 

(17

)

 

 

(26

)

 

 

(490

)

 

 

(819

)

 

 

(961

)

Amortization of intangible assets

 

462

 

 

 

461

 

 

 

555

 

 

 

396

 

 

 

313

 

 

 

923

 

 

 

754

 

Acquisition, integration and transaction costs

 

 

 

 

 

 

 

 

 

 

2,080

 

 

 

 

 

 

 

 

 

 

All other expense

 

5,062

 

 

 

3,878

 

 

 

4,466

 

 

 

3,975

 

 

 

4,190

 

 

 

8,940

 

 

 

7,892

 

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

 

49,168

 

 

 

49,621

 

 

 

47,595

 

 

 

50,458

 

 

 

47,569

 

 

 

98,789

 

 

 

94,007

 

Loss (gain) in alternative energy partnership investments

 

(36

)

 

 

1,618

 

 

 

608

 

 

 

504

 

 

 

1,043

 

 

 

1,582

 

 

 

1,201

 

Total noninterest expense

 

49,132

 

 

 

51,239

 

 

 

48,203

 

 

 

50,962

 

 

 

48,612

 

 

 

100,371

 

 

 

95,208

 

Income before income taxes

 

24,624

 

 

 

27,673

 

 

 

30,587

 

 

 

34,127

 

 

 

36,873

 

 

 

52,297

 

 

 

104,170

 

Income tax expense

 

6,745

 

 

 

7,395

 

 

 

9,068

 

 

 

9,931

 

 

 

10,161

 

 

 

14,140

 

 

 

28,946

 

Net income

 

17,879

 

 

 

20,278

 

 

 

21,519

 

 

 

24,196

 

 

 

26,712

 

 

 

38,157

 

 

 

75,224

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,420

 

Impact of preferred stock redemption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,747

 

Net income available to common stockholders

$

17,879

 

 

$

20,278

 

 

$

21,519

 

 

$

24,196

 

 

$

26,712

 

 

$

38,157

 

 

$

70,057

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.31

 

 

$

0.34

 

 

$

0.36

 

 

$

0.40

 

 

$

0.44

 

 

$

0.65

 

 

$

1.13

 

Diluted

$

0.31

 

 

$

0.34

 

 

$

0.36

 

 

$

0.40

 

 

$

0.43

 

 

$

0.65

 

 

$

1.13

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

57,980,534

 

 

 

59,014,187

 

 

 

59,252,995

 

 

 

60,044,403

 

 

 

61,350,802

 

 

 

58,494,506

 

 

 

61,974,582

 

Diluted

 

58,026,007

 

 

 

59,206,619

 

 

 

59,725,283

 

 

 

60,492,460

 

 

 

61,600,615

 

 

 

58,600,313

 

 

 

62,248,376

 

Dividends declared per common share

$

0.10

 

 

$

0.10

 

 

$

0.06

 

 

$

0.06

 

 

$

0.06

 

 

$

0.20

 

 

$

0.12

 

Banc of California, Inc.

Selected Financial Data

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Profitability and other ratios of consolidated operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (ROAA)(1)

0.75

%

 

0.88

%

 

0.92

%

 

1.02

%

 

1.15

%

 

0.81

%

 

1.62

%

Adjusted ROAA(1)(2)

0.77

%

 

0.94

%

 

1.15

%

 

1.13

%

 

1.19

%

 

0.85

%

 

1.64

%

Return on average equity(1)

7.19

%

 

8.18

%

 

8.63

%

 

9.99

%

 

11.05

%

 

7.69

%

 

15.02

%

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

8.34

%

 

9.46

%

 

10.02

%

 

11.33

%

 

12.42

%

 

8.90

%

 

16.33

%

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

1.11

%

 

1.29

%

 

1.31

%

 

1.44

%

 

1.58

%

 

1.20

%

 

1.56

%

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

1.14

%

 

1.38

%

 

1.63

%

 

1.59

%

 

1.65

%

 

1.26

%

 

1.60

%

Dividend payout ratio(3)

32.26

%

 

29.41

%

 

16.67

%

 

15.00

%

 

13.64

%

 

30.77

%

 

10.62

%

Average loan yield

5.28

%

 

5.07

%

 

4.92

%

 

4.54

%

 

4.35

%

 

5.17

%

 

4.31

%

Average cost of interest-bearing deposits

2.60

%

 

1.98

%

 

1.34

%

 

0.77

%

 

0.28

%

 

2.29

%

 

0.20

%

Average cost of total deposits

1.67

%

 

1.22

%

 

0.79

%

 

0.47

%

 

0.17

%

 

1.44

%

 

0.12

%

Net interest spread

2.12

%

 

2.52

%

 

2.98

%

 

3.13

%

 

3.30

%

 

2.31

%

 

3.30

%

Net interest margin(1)

3.11

%

 

3.41

%

 

3.69

%

 

3.58

%

 

3.58

%

 

3.26

%

 

3.55

%

Noninterest income to total revenue(4)

7.96

%

 

9.71

%

 

(1.81

)%

 

6.68

%

 

8.41

%

 

8.87

%

 

7.80

%

Adjusted noninterest income to adjusted total revenue(2)(4)

7.96

%

 

9.71

%

 

7.26

%

 

6.68

%

 

8.41

%

 

8.87

%

 

7.79

%

Noninterest expense to average total assets(1)

2.05

%

 

2.23

%

 

2.07

%

 

2.15

%

 

2.09

%

 

2.14

%

 

2.05

%

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

2.02

%

 

2.14

%

 

2.08

%

 

2.00

%

 

2.02

%

 

2.08

%

 

2.02

%

Efficiency ratio(2)(5)

64.94

%

 

63.33

%

 

61.18

%

 

59.89

%

 

56.87

%

 

64.11

%

 

56.73

%

Adjusted efficiency ratio(2)(6)

63.99

%

 

60.86

%

 

56.03

%

 

55.66

%

 

55.11

%

 

62.37

%

 

55.81

%

Average loans to average deposits

104.25

%

 

102.35

%

 

100.25

%

 

97.34

%

 

98.21

%

 

103.30

%

 

98.25

%

Average securities to average total assets

13.64

%

 

13.93

%

 

13.19

%

 

12.70

%

 

13.02

%

 

13.78

%

 

13.39

%

Average stockholders’ equity to average total assets

10.37

%

 

10.78

%

 

10.69

%

 

10.21

%

 

10.38

%

 

10.57

%

 

10.78

%

(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 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

 

June 30, 2023

 

March 31, 2023

 

December 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

$

3,240,280

 

 

$

38,350

 

4.75

%

 

$

3,242,780

 

 

$

37,066

 

4.64

%

 

$

3,223,614

 

 

$

36,214

 

4.46

%

Commercial and industrial and SBA

 

1,882,673

 

 

 

34,222

 

7.29

%

 

 

1,765,299

 

 

 

29,544

 

6.79

%

 

 

1,909,144

 

 

 

31,492

 

6.54

%

SFR mortgage

 

1,848,747

 

 

 

18,901

 

4.10

%

 

 

1,897,763

 

 

 

19,441

 

4.15

%

 

 

1,932,397

 

 

 

19,661

 

4.04

%

Other consumer

 

84,916

 

 

 

1,371

 

6.48

%

 

 

84,786

 

 

 

1,308

 

6.26

%

 

 

86,273

 

 

 

1,335

 

6.14

%

Loans held-for-sale

 

4,400

 

 

 

45

 

4.10

%

 

 

4,330

 

 

 

59

 

5.53

%

 

 

4,352

 

 

 

15

 

1.37

%

Gross loans and leases

 

7,061,016

 

 

 

92,889

 

5.28

%

 

 

6,994,958

 

 

 

87,418

 

5.07

%

 

 

7,155,780

 

 

 

88,717

 

4.92

%

Securities

 

1,311,362

 

 

 

15,804

 

4.83

%

 

 

1,297,640

 

 

 

14,909

 

4.66

%

 

 

1,221,147

 

 

 

12,905

 

4.19

%

Other interest-earning assets

 

595,234

 

 

 

7,458

 

5.03

%

 

 

389,051

 

 

 

4,592

 

4.79

%

 

 

239,336

 

 

 

2,490

 

4.13

%

Total interest-earning assets

 

8,967,612

 

 

 

116,151

 

5.20

%

 

 

8,681,649

 

 

 

106,919

 

4.99

%

 

 

8,616,263

 

 

 

104,112

 

4.79

%

Allowance for loan losses

 

(82,282

)

 

 

 

 

 

 

(84,267

)

 

 

 

 

 

 

(91,606

)

 

 

 

 

BOLI and noninterest-earning assets

 

725,909

 

 

 

 

 

 

 

719,827

 

 

 

 

 

 

 

732,654

 

 

 

 

 

Total assets

$

9,611,239

 

 

 

 

 

 

$

9,317,209

 

 

 

 

 

 

$

9,257,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

1,761,341

 

 

$

9,751

 

2.22

%

 

$

1,951,618

 

 

$

8,514

 

1.77

%

 

$

1,854,333

 

 

$

4,998

 

1.07

%

Savings and money market

 

1,015,181

 

 

 

2,609

 

1.03

%

 

 

1,070,911

 

 

 

2,001

 

0.76

%

 

 

1,308,383

 

 

 

2,379

 

0.72

%

Certificates of deposit

 

1,566,636

 

 

 

15,758

 

4.03

%

 

 

1,189,658

 

 

 

10,012

 

3.41

%

 

 

1,072,953

 

 

 

6,901

 

2.55

%

Total interest-bearing deposits

 

4,343,158

 

 

 

28,118

 

2.60

%

 

 

4,212,187

 

 

 

20,527

 

1.98

%

 

 

4,235,669

 

 

 

14,278

 

1.34

%

FHLB advances and FRB borrowings

 

1,441,244

 

 

 

14,703

 

4.09

%

 

 

1,067,125

 

 

 

9,648

 

3.67

%

 

 

684,177

 

 

 

5,528

 

3.21

%

Other borrowings

 

358

 

 

 

3

 

3.36

%

 

 

4,773

 

 

 

57

 

4.84

%

 

 

41,075

 

 

 

414

 

4.00

%

Long-term debt

 

275,012

 

 

 

3,695

 

5.39

%

 

 

274,939

 

 

 

3,634

 

5.36

%

 

 

274,812

 

 

 

3,675

 

5.31

%

Total interest-bearing liabilities

 

6,059,772

 

 

 

46,519

 

3.08

%

 

 

5,559,024

 

 

 

33,866

 

2.47

%

 

 

5,235,733

 

 

 

23,895

 

1.81

%

Noninterest-bearing deposits

 

2,425,719

 

 

 

 

 

 

 

2,617,973

 

 

 

 

 

 

 

2,897,755

 

 

 

 

 

Noninterest-bearing liabilities

 

128,699

 

 

 

 

 

 

 

135,418

 

 

 

 

 

 

 

134,409

 

 

 

 

 

Total liabilities

 

8,614,190

 

 

 

 

 

 

 

8,312,415

 

 

 

 

 

 

 

8,267,897

 

 

 

 

 

Total stockholders’ equity

 

997,049

 

 

 

 

 

 

 

1,004,794

 

 

 

 

 

 

 

989,414

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,611,239

 

 

 

 

 

 

$

9,317,209

 

 

 

 

 

 

$

9,257,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

69,632

 

2.12

%

 

 

 

$

73,053

 

2.52

%

 

 

 

$

80,217

 

2.98

%

Net interest margin

 

 

 

 

3.11

%

 

 

 

 

 

3.41

%

 

 

 

 

 

3.69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

148

%

 

 

 

 

 

 

156

%

 

 

 

 

 

 

165

%

 

 

 

 

Total deposits

$

6,768,877

 

 

$

28,118

 

1.67

%

 

$

6,830,160

 

 

$

20,527

 

1.22

%

 

$

7,133,424

 

 

$

14,278

 

0.79

%

Total funding(1)

$

8,485,491

 

 

$

46,519

 

2.20

%

 

$

8,176,997

 

 

$

33,866

 

1.68

%

 

$

8,133,488

 

 

$

23,895

 

1.17

%

(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

 

September 30, 2022

 

June 30, 2022

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

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

%

Commercial and industrial and SBA

 

2,151,511

 

 

 

29,296

 

5.40

%

 

 

2,527,506

 

 

 

29,334

 

4.66

%

SFR mortgage

 

1,927,694

 

 

 

18,699

 

3.85

%

 

 

1,755,719

 

 

 

16,795

 

3.84

%

Other consumer

 

87,335

 

 

 

1,331

 

6.05

%

 

 

93,160

 

 

 

1,450

 

6.24

%

Loans held-for-sale

 

4,207

 

 

 

104

 

9.81

%

 

 

3,618

 

 

 

26

 

2.88

%

Gross loans and leases

 

7,313,519

 

 

 

83,699

 

4.54

%

 

 

7,269,655

 

 

 

78,895

 

4.35

%

Securities

 

1,194,942

 

 

 

10,189

 

3.38

%

 

 

1,216,612

 

 

 

8,124

 

2.68

%

Other interest-earning assets

 

292,819

 

 

 

2,085

 

2.82

%

 

 

295,715

 

 

 

1,399

 

1.90

%

Total interest-earning assets

 

8,801,280

 

 

 

95,973

 

4.33

%

 

 

8,781,982

 

 

 

88,418

 

4.04

%

Allowance for loan losses

 

(93,517

)

 

 

 

 

 

 

(94,217

)

 

 

 

 

BOLI and noninterest-earning assets

 

700,977

 

 

 

 

 

 

 

654,931

 

 

 

 

 

Total assets

$

9,408,740

 

 

 

 

 

 

$

9,342,696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

2,285,071

 

 

$

3,880

 

0.67

%

 

$

2,363,233

 

 

$

1,457

 

0.25

%

Savings and money market

 

1,536,438

 

 

 

2,236

 

0.58

%

 

 

1,598,663

 

 

 

860

 

0.22

%

Certificates of deposit

 

832,506

 

 

 

2,871

 

1.37

%

 

 

631,415

 

 

 

863

 

0.55

%

Total interest-bearing deposits

 

4,654,015

 

 

 

8,987

 

0.77

%

 

 

4,593,311

 

 

 

3,180

 

0.28

%

FHLB advances

 

482,842

 

 

 

3,558

 

2.92

%

 

 

485,629

 

 

 

3,114

 

2.57

%

Other borrowings

 

70,431

 

 

 

412

 

2.32

%

 

 

117,688

 

 

 

325

 

1.11

%

Long-term debt

 

274,665

 

 

 

3,608

 

5.21

%

 

 

274,515

 

 

 

3,500

 

5.11

%

Total interest-bearing liabilities

 

5,481,953

 

 

 

16,565

 

1.20

%

 

 

5,471,143

 

 

 

10,119

 

0.74

%

Noninterest-bearing deposits

 

2,855,220

 

 

 

 

 

 

 

2,804,877

 

 

 

 

 

Noninterest-bearing liabilities

 

110,761

 

 

 

 

 

 

 

96,791

 

 

 

 

 

Total liabilities

 

8,447,934

 

 

 

 

 

 

 

8,372,811

 

 

 

 

 

Total stockholders’ equity

 

960,806

 

 

 

 

 

 

 

969,885

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,408,740

 

 

 

 

 

 

$

9,342,696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

79,408

 

3.13

%

 

 

 

$

78,299

 

3.30

%

Net interest margin

 

 

 

 

3.58

%

 

 

 

 

 

3.58

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

161

%

 

 

 

 

 

 

161

%

 

 

 

 

Total deposits

$

7,509,235

 

 

$

8,987

 

0.47

%

 

$

7,398,188

 

 

$

3,180

 

0.17

%

Total funding(1)

$

8,337,173

 

 

$

16,565

 

0.79

%

 

$

8,276,020

 

 

$

10,119

 

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.

 

Six Months Ended

 

June 30, 2023

 

June 30, 2022

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/Cost

 

Balance

 

Interest

 

/Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

3,241,523

 

 

$

75,415

 

4.69

%

 

$

2,870,339

 

 

$

62,658

 

4.40

%

Commercial and industrial and SBA

 

1,824,310

 

 

 

63,768

 

7.05

%

 

 

2,637,413

 

 

 

59,376

 

4.54

%

SFR mortgage

 

1,873,120

 

 

 

38,341

 

4.13

%

 

 

1,659,633

 

 

 

30,068

 

3.65

%

Other consumer

 

84,851

 

 

 

2,679

 

6.37

%

 

 

95,326

 

 

 

2,973

 

6.29

%

Loans held-for-sale

 

4,365

 

 

 

104

 

4.80

%

 

 

3,523

 

 

 

54

 

3.09

%

Gross loans and leases

 

7,028,169

 

 

 

180,307

 

5.17

%

 

 

7,266,234

 

 

 

155,129

 

4.31

%

Securities

 

1,304,539

 

 

 

30,713

 

4.75

%

 

 

1,254,137

 

 

 

15,433

 

2.48

%

Other interest-earning assets

 

492,712

 

 

 

12,050

 

4.93

%

 

 

280,611

 

 

 

2,125

 

1.53

%

Total interest-earning assets

 

8,825,420

 

 

 

223,070

 

5.10

%

 

 

8,800,982

 

 

 

172,687

 

3.96

%

Allowance for credit losses

 

(83,269

)

 

 

 

 

 

 

(93,422

)

 

 

 

 

BOLI and noninterest-earning assets

 

722,884

 

 

 

 

 

 

 

659,804

 

 

 

 

 

Total assets

$

9,465,035

 

 

 

 

 

 

$

9,367,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

1,855,954

 

 

$

18,265

 

1.98

%

 

$

2,386,120

 

 

$

2,097

 

0.18

%

Savings and money market

 

1,042,892

 

 

 

4,610

 

0.89

%

 

 

1,635,747

 

 

 

1,371

 

0.17

%

Certificates of deposit

 

1,379,188

 

 

 

25,770

 

3.77

%

 

 

570,170

 

 

 

1,100

 

0.39

%

Total interest-bearing deposits

 

4,278,034

 

 

 

48,645

 

2.29

%

 

 

4,592,037

 

 

 

4,568

 

0.20

%

FHLB advances

 

1,255,218

 

 

 

24,351

 

3.91

%

 

 

472,760

 

 

 

6,067

 

2.59

%

Other borrowings

 

2,554

 

 

 

59

 

4.66

%

 

 

117,095

 

 

 

379

 

0.65

%

Long-term debt

 

274,975

 

 

 

7,330

 

5.38

%

 

 

274,466

 

 

 

6,933

 

5.09

%

Total interest-bearing liabilities

 

5,810,781

 

 

 

80,385

 

2.79

%

 

 

5,456,358

 

 

 

17,947

 

0.66

%

Noninterest-bearing deposits

 

2,521,314

 

 

 

 

 

 

 

2,800,281

 

 

 

 

 

Noninterest-bearing liabilities

 

132,040

 

 

 

 

 

 

 

101,048

 

 

 

 

 

Total liabilities

 

8,464,135

 

 

 

 

 

 

 

8,357,687

 

 

 

 

 

Total stockholders’ equity

 

1,000,900

 

 

 

 

 

 

 

1,009,677

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,465,035

 

 

 

 

 

 

$

9,367,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

142,685

 

2.31

%

 

 

 

$

154,740

 

3.30

%

Net interest margin

 

 

 

 

3.26

%

 

 

 

 

 

3.55

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

152

%

 

 

 

 

 

 

161

%

 

 

 

 

Total deposits

$

6,799,348

 

 

$

48,645

 

1.44

%

 

$

7,392,318

 

 

$

4,568

 

0.12

%

Total funding(1)

$

8,332,095

 

 

$

80,385

 

1.95

%

 

$

8,256,639

 

 

$

17,947

 

0.44

%

(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 common equity to tangible assets, tangible common equity per share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest income to adjusted total revenue, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, adjusted PTPP income, PTPP income ROAA, adjusted PTPP income ROAA, efficiency ratio, adjusted efficiency ratio, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS), adjusted return on average assets (ROAA) and adjusted common equity tier 1 (CET 1) 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, as applicable, from tangible equity. Return on average tangible common equity is calculated by dividing net income 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 net interest income and adjusted noninterest income (adjusted total revenue) and subtracting adjusted noninterest expense. PTPP income ROAA is calculated by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is calculated by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is calculated by dividing noninterest expense by total revenue. Adjusted efficiency ratio is calculated by dividing adjusted noninterest expense by adjusted total revenue.

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

Common equity tier 1 and the common equity tier 1 ratio are defined by regulatory capital rules. Adjusted CET 1 is calculated by subtracting net unrealized losses on securities from CET 1 capital and provided to reflect management’s assessment of capital impacts from net unrealized losses on securities. Capital ratios as of June 30, 2023 are preliminary.

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)

 

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

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

 

 

 

 

 

 

 

 

 

Total assets

$

9,370,265

 

 

$

10,038,901

 

 

$

9,197,016

 

 

$

9,368,578

 

 

$

9,502,113

 

Less goodwill

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(95,127

)

Less other intangible assets

 

(6,603

)

 

 

(7,065

)

 

 

(7,526

)

 

 

(8,081

)

 

 

(4,677

)

Tangible assets(1)

$

9,249,350

 

 

$

9,917,524

 

 

$

9,075,178

 

 

$

9,246,185

 

 

$

9,402,309

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

$

957,054

 

 

$

958,907

 

 

$

959,618

 

 

$

951,990

 

 

$

949,130

 

Less goodwill

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(95,127

)

Less other intangible assets

 

(6,603

)

 

 

(7,065

)

 

 

(7,526

)

 

 

(8,081

)

 

 

(4,677

)

Tangible common equity(1)

 

836,139

 

 

 

837,530

 

 

 

837,780

 

 

 

829,597

 

 

 

849,326

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity to total assets

 

10.21

%

 

 

9.55

%

 

 

10.43

%

 

 

10.16

%

 

 

9.99

%

Tangible common equity to tangible assets(1)

 

9.04

%

 

 

8.44

%

 

 

9.23

%

 

 

8.97

%

 

 

9.03

%

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

56,944,706

 

 

 

58,237,303

 

 

 

58,544,534

 

 

 

59,679,558

 

 

 

59,985,736

 

Class B non-voting non-convertible common shares outstanding

 

477,321

 

 

 

477,321

 

 

 

477,321

 

 

 

477,321

 

 

 

477,321

 

Total common shares outstanding

 

57,422,027

 

 

 

58,714,624

 

 

 

59,021,855

 

 

 

60,156,879

 

 

 

60,463,057

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

$

16.67

 

 

$

16.33

 

 

$

16.26

 

 

$

15.83

 

 

$

15.70

 

Tangible common equity per share(1)

$

14.56

 

 

$

14.26

 

 

$

14.19

 

 

$

13.79

 

 

$

14.05

 

(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

 

Six Months Ended

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

Return on tangible common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total stockholders' equity

$

997,049

 

 

$

1,004,794

 

 

$

989,414

 

 

$

960,806

 

 

$

969,885

 

 

$

1,000,900

 

 

$

1,009,677

 

Less average preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,773

)

Average common stockholders' equity

 

997,049

 

 

 

1,004,794

 

 

 

989,414

 

 

 

960,806

 

 

 

969,885

 

 

 

1,000,900

 

 

 

971,904

 

Less average goodwill

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(98,916

)

 

 

(95,127

)

 

 

(114,312

)

 

 

(94,719

)

Less average other intangible assets

 

(6,885

)

 

 

(7,355

)

 

 

(7,869

)

 

 

(4,570

)

 

 

(4,869

)

 

 

(7,119

)

 

 

(5,543

)

Average tangible common equity(1)

$

875,852

 

 

$

883,127

 

 

$

867,233

 

 

$

857,320

 

 

$

869,889

 

 

$

879,469

 

 

$

871,642

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

17,879

 

 

$

20,278

 

 

$

21,519

 

 

$

24,196

 

 

$

26,712

 

 

$

38,157

 

 

$

70,057

 

Add amortization of intangible assets

 

462

 

 

 

461

 

 

 

555

 

 

 

396

 

 

 

313

 

 

 

923

 

 

 

754

 

Less tax effect on amortization of intangible assets(2)

 

(137

)

 

 

(136

)

 

 

(164

)

 

 

(117

)

 

 

(93

)