8-K
BANC OF CALIFORNIA, INC. (BANC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 2020
BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 001-35522 | 04-3639825 | ||
|---|---|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) | ||
| 3 MacArthur Place, | Santa Ana, | California | 92707 | |
| --- | --- | --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (855) 361-2262
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | BANC | New York Stock Exchange |
| Depositary Shares each representing a 1/40th Interest in a share of 7.375% Non-Cumulative Perpetual Preferred Stock, Series D | BANC PRD | New York Stock Exchange |
| Depositary Shares each representing a 1/40th Interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series E | BANC PRE | New York Stock Exchange |
Item 2.02 Results of Operations and Financial Condition.
On July 23, 2020, Banc of California, Inc. (the “Company”) issued a press release announcing 2020 second quarter financial results.
A copy of the press release is attached to this report as Exhibit 99.1 and is incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
The Company will host a conference call to discuss its second quarter results at 10:00 A.M. Pacific Time on Thursday, July 23, 2020. Interested parties may attend the conference call by dialing (888) 317-6003, and referencing event code 0284271. A live audio webcast will be available through the webcast link to be posted on the Company’s Investor Relations website at www.bancofcal.com/investor, in addition to the slide presentation for investor review prior to the call. A copy of the presentation materials is attached to this report as Exhibit 99.2 and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Banc of California, Inc. Press Release dated July 23, 2020.
99.2 Banc of California, Inc. Earnings Conference Call Presentation Materials dated July 23, 2020.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BANC OF CALIFORNIA, INC.
| July 23, 2020 | /s/ Lynn M. Hopkins |
|---|---|
| Lynn M. Hopkins | |
| Executive Vice President and Chief Financial Officer |
3
Document
EX 99.1
Banc of California Reports Second Quarter 2020 Financial Results
SANTA ANA, Calif., (July 23, 2020) — Banc of California, Inc. (NYSE: BANC) today reported net loss available to common stockholders for the second quarter of 2020 of $21.9 million, or diluted loss per common share of $0.44. Financial results for the second quarter of 2020 included a one-time pre-tax charge of $26.8 million related to the termination of the Company’s multi-year naming rights agreements, entered into in 2017 with the Los Angeles Football Club (“LAFC”). The buyout of the agreement and restructuring of the relationship will result in estimated pre-tax cost savings of approximately $89 million over the next 12.5 years, or approximately $7 million per year.
Highlights for the second quarter included:
•Noninterest-bearing deposit balances increased $135.4 million during the quarter and represented 23% of total deposits at June 30, 2020, up from 16% a year earlier
•Total checking balances increased $409.7 million during the quarter and represented 54% of total deposits at June 30, 2020, up from 40% a year earlier
•Net interest margin increased 12 basis points from the prior quarter to 3.09%
•Average cost of total deposits declined 40 basis points from the prior quarter to 0.71%, with period-end cost of deposits at 0.59%
•Allowance for credit losses strengthened to 1.68% of total loans
•Common Equity Tier 1 capital at 11.68%
Jared Wolff, President & CEO of Banc of California, commented, “Our second quarter was highlighted by our expanding net interest margin, growth in noninterest-bearing deposits, reduction in our deposit costs, and the sustained improvement in operating leverage and core pre-tax, pre-provision earnings. While we continue to build on these elements to enhance franchise value, we are positioned with significant excess capital, healthy reserves and a conservatively underwritten loan portfolio, 66% of which is secured by residential real estate and with limited exposure to higher risk industries. As we help our clients manage through the impact of the pandemic, the current public health and economic crisis has not impeded our overall progress on implementing our strategic initiatives that is building long-term value for shareholders.”
Mr. Wolff continued, “Notably, we also had the opportunity to accelerate our transformation through the restructuring of our agreement with LAFC. Our buyout will save the Company approximately $7 million in annual expenses and enhance our future operating leverage. Given the uncertainty of the economic environment, we intend to remain conservative by protecting capital and building core deposits, although we expect our results in the second half of the year to continue to reflect the increased operating leverage and growing earnings power that we have been building at the Company.”
Lynn Hopkins, Chief Financial Officer of Banc of California, said, “The positioning of our balance sheet entering the pandemic has helped us to effectively manage through this crisis. We continue to have a high level of capital and a loan portfolio that it is heavily weighted towards conservatively underwritten real estate loans with low loan-to-values. While net income was negatively impacted by the one-time costs associated with the restructuring of our partnership with LAFC, we are pleased with the positive trends we experienced throughout most areas of our operations, including a 40 basis point decline in our average cost of total deposits and a 12 basis point increase in our net interest margin from the prior quarter. Notwithstanding our net loss for the quarter of $18.4 million, these positive trends helped drive a 31.7% increase in our adjusted pre-tax pre-provision income of $16.0 million compared to the prior quarter, which excludes the impact of provision for credit losses and certain other non-core income and expenses. We continue to build momentum in our core underlying earnings power and we believe we can continue that progress in the second half of 2020.”
EX 99.1
COVID-19 Operational Update
We continue to operate 25 of our 31 branches as we temporarily consolidated some overlapping areas to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. We participated in the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), deploying resources to this program in support of our clients and others seeking financial relief under the program. As of June 30, 2020, we estimate we helped businesses that represent an aggregate workforce of more than 25,000 jobs through approvals of $262 million in PPP funds. While we focused on serving existing clients with our high-touch model, we also used our framework to attract new clients and used the PPP to differentiate ourselves by showing how true service can make a meaningful difference. As a result, we added many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts. During the three months ended June 30, 2020, we collected $7.5 million in fees on PPP loans originated during the quarter, which will be recognized over their estimated life of 9 months. While we have started the loan forgiveness process with a number of clients, we expect this will continue into the first half of next year.
We are also actively engaged with our borrowers seeking payment relief. Refer also to the Credit Quality discussion for details regarding loans that have requested relief under the CARES Act.
Termination of LAFC Agreement
As previously disclosed, during the second quarter, we terminated our naming rights agreements with LAFC, which the Company had entered into in 2017. We incurred a pre-tax, one-time charge to operations of $26.8 million and we expect aggregate pre-tax expense savings of $89 million over the remaining 12 1/2 year life of our former agreements with LAFC, or approximately $7 million per year. The amended agreements allow LAFC to expand its roster of sponsors and partners into categories that were previously exclusive to us under the original agreements. In connection with the termination, we will step away from our naming-rights position on LAFC's soccer stadium, but we will continue to serve as LAFC's primary banking partner, subject to any new sponsor in the financial services space that offers banking services, and remain as a partner on a number of other collaborations. We paid LAFC a $20.1 million termination fee and will not have any continuing payment obligations to LAFC after December 31, 2020.
Income Statement Highlights
| Three Months Ended | Six Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | June 30,<br>2020 | June 30,<br>2019 | ||||||||
| ( in thousands) | ||||||||||||||
| Total interest and dividend income | $ | 74,714 | $ | 83,702 | $ | 92,657 | $ | 104,040 | $ | 147,411 | $ | 214,752 | ||
| Total interest expense | 17,382 | 22,853 | 27,042 | 33,742 | 39,260 | 40,235 | 82,164 | |||||||
| Net interest income | 55,315 | 51,861 | 56,660 | 58,915 | 64,780 | 107,176 | 132,588 | |||||||
| Total noninterest income (loss) | 5,528 | 2,061 | 4,930 | 3,181 | (2,290) | 7,589 | 4,005 | |||||||
| Total revenue | 60,843 | 53,922 | 61,590 | 62,096 | 62,490 | 114,765 | 136,593 | |||||||
| Total noninterest expense | 72,770 | 46,919 | 47,483 | 43,240 | 43,500 | 119,689 | 105,749 | |||||||
| Pre-tax / pre-provision (loss) income | (11,927) | 7,003 | 14,107 | 18,856 | 18,990 | (4,924) | 30,844 | |||||||
| Provision for (reversal of) credit losses | 11,826 | 15,761 | (2,976) | 38,607 | (1,900) | 27,587 | 198 | |||||||
| Income tax (benefit) expense | (5,304) | (2,165) | 2,811 | (5,619) | 4,308 | (7,469) | 7,027 | |||||||
| Net (loss) income | $ | (6,593) | $ | 14,272 | $ | (14,132) | $ | 16,582 | $ | (25,042) | $ | 23,619 | ||
| Net (loss) income available to common stockholders^(1)^ | $ | (9,694) | $ | 10,415 | $ | (22,722) | $ | 11,909 | $ | (31,630) | $ | 14,555 |
All values are in US Dollars.
(1)Balance represents the net (loss) 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 (loss) income. Refer to the Statement of Operations for additional detail on these amounts.
EX 99.1
Net interest income
Q2-2020 vs Q1-2020
Net interest income increased $3.5 million to $55.3 million for the second quarter due mostly to lower funding costs and higher average interest-earning assets, offset by a lower yield on average earning assets. Compared to the prior quarter, average interest-earning assets increased by $165.1 million to $7.20 billion, due to higher average securities of $111.0 million and other interest-earning assets of $127.3 million, offset by lower average loans of $73.2 million. The average interest-earning assets growth was funded by higher average noninterest-bearing deposits of $216.4 million and interest-bearing deposits of $251.7 million, offset by lower average FHLB advances of $219.9 million.
The net interest margin increased 12 basis points to 3.09% for the second quarter from 2.97% for the prior quarter. The increase was due to the 42 basis point decline on the average cost of interest-bearing liabilities, outpacing the 21 basis point decline in the average yield on interest-earning assets. The decrease in the average interest-earning asset yield from 4.27% for the first quarter to 4.06% for the second quarter was due to lower yields on most interest-earning asset classes and the change in the mix of interest-earning assets. The lower yields on total loans, securities and other interest-earning assets was due to originating new business and repricing variable rate loans and investments in the lower interest rate environment given the rate cuts by the Federal Reserve in March of 2020. Our average yield on loans declined 8 basis points to 4.48% and our average yield on securities decreased 35 basis points to 2.95%. The second quarter includes $1.7 million of PPP fee income, which increased the net interest margin by 3 basis points. The lower securities yield is due mostly to a 38 basis point decrease in the collateralized loan obligations (CLOs) yield to 3.22% for the second quarter from 3.60% for the first quarter as these CLOs reprice quarterly.
The average cost of funds decreased 39 basis points to 1.03% for the second quarter from 1.41% for the first quarter. This decrease was driven by the lower average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits. We have reduced our reliance on high cost transaction accounts, non-brokered certificates of deposits, and wholesale funds as we continue to execute on our relationship-focused business banking strategy. The 42 basis point decline in the average cost of interest-bearing liabilities to 1.29% for the second quarter from 1.71% for the first quarter was driven by the lower average cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 48 basis points to 0.93% from the prior quarter due to actively managing down deposit rates in response to the interest rate cuts by the Federal Reserve in March of 2020. Additionally, average noninterest-bearing deposits increased by $216.4 million and represented 23.4% of total average deposits in the second quarter compared to 21.4% of total average deposits for the first quarter. Our total cost of average deposits decreased 40 basis points to 0.71% for the second quarter. The spot rate of total deposits at the end of the second quarter of 2020 was 0.59%.
YTD 2020 vs YTD 2019
Net interest income for the six months ended June 30, 2020 decreased $25.4 million to $107.2 million from $132.6 million for the same 2019 period. This increase was due to lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship based-lending, offset by a higher net interest margin. For the six months ended June 30, 2020, average interest-earning assets declined $2.33 billion to $7.11 billion, and the net interest margin increased 20 basis points to 3.03% for the six months ended June 30, 2020 compared to 2.83% for the same 2019 period.
Our average yield on interest-earning assets decreased 42 basis points to 4.17% for the six months ended June 30, 2020 as compared to 4.59% during the same 2019 period. The decrease in yield was primarily attributable to lower average yields on the loan and securities portfolios, offset by an increased mix of loans versus securities. Our average yield on loans was 4.52% for the six months ended June 30, 2020, compared to 4.78% for the same 2019 period, primarily due to lower market interest rates and a lower percentage of higher-yielding commercial and industrial balances in the portfolio. Our average yield on securities decreased 88 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.
The average cost of funds decreased to 1.22% for the six months ended June 30, 2020 from 1.86% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The 61 basis point decline in the average cost of interest-bearing liabilities to 1.50% for the six months ended June 30, 2020 from 2.11% for the same 2019 period was driven by the lower average cost of interest-bearing deposits and the rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 75 basis points to 1.16% from the prior period due to actively managing down deposit rates in response to the interest rate cuts by the Federal Reserve in March of 2020 and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $213.5 million when compared to the same 2019 period. Our cost of average total deposits decreased 74 basis points to 0.90% for the six months ended June 30, 2020 when compared to the same 2019 period.
EX 99.1
Provision for credit losses
Q2-2020 vs Q1-2020
We recognized a provision for credit losses of $11.8 million during the second quarter, compared to $15.8 million during the first quarter. Our provision for credit losses during the second quarter included $307 thousand related to unfunded commitments, compared to $1.1 million during the first quarter. The second quarter provision for credit losses is comprised of $5.0 million of general reserves and $6.8 million related to specific reserves, primarily related to a previously reported nonaccrual shared national credit. The general provision is due to a continued deterioration in key macro-economic forecast variables, such as unemployment and gross domestic product and loan risk rating downgrades, offset by lower period end loan balances.
YTD 2020 vs YTD 2019
During the six months ended June 30, 2020, we recognized a provision for credit losses of $27.6 million under the CECL model, compared to $198 thousand under the incurred loss model during 2019. Our provision for credit losses included $1.4 million related to unfunded commitments during the six months ended June 30, 2020, compared to provision release of $327 thousand during the six months ended June 30, 2019. The higher provision for credit losses was driven by using the new CECL model, the estimated future impact of the health crisis on our loans, net charge-offs, and increase in specific reserves partially offset by lower period end loan balances of $1.09 billion.
Noninterest income
Q2-2020 vs Q1-2020
Noninterest income increased $3.5 million, or 168%, to $5.5 million for the second quarter. The increase was primarily due to a gain of $2.0 million on the sale of $20.7 million in securities, primarily corporate securities; there were no sales in the prior quarter. In addition, the first quarter included a $1.6 million charge to reflect the reduction in fair value of loans held for sale compared to a $25 thousand increase in the fair value in the second quarter.
YTD 2020 vs YTD 2019
Noninterest income for the six months ended June 30, 2020 increased $3.6 million, or 89.5%, to $7.6 million compared to the prior year. The increase was primarily attributable to (1) a higher net gain on sale of investment securities of $1.8 million, and (2) higher other income of $8.4 million as the second quarter of 2019 included a previously reported $9.6 million unrealized loss from interest rate swap agreements entered into in order to offset variability in the fair value of the Freddie Mac securitization completed during the third quarter of 2019. These increases were partially offset by (1) lower net gain on sale of loans of $4.3 million, (2) a $1.6 million loss due to decreases in the fair value of loans held for sale, and (3) lower customer fees of $629 thousand.
EX 99.1
Noninterest expense
Q2-2020 vs Q1-2020
Noninterest expense increased $25.9 million to $72.8 million for the second quarter compared to the prior quarter. The increase was primarily due to: (i) the aforementioned $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, (ii) a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, and (iii) higher salaries and benefits expense of $824 thousand due mostly to higher incentive accruals. These increases were offset by: (i) lower professional fees of $1.4 million as a result of the timing of certain indemnified legal costs and recoveries compared to the prior quarter, (ii) a $2.1 million decrease in loss on investments in alternative energy partnerships, and (iii) a $599 thousand decrease in advertising costs. Total operating costs, defined as noninterest expense adjusted for certain non-core items (refer to section Non-GAAP Measures), decreased $558 thousand to $42.8 million for the second quarter compared to $43.3 million for the prior quarter.
YTD 2020 vs YTD 2019
Noninterest expense for the six months ended June 30, 2020 increased $13.9 million, or 13.2%, to $119.7 million compared to the prior year. The increase was primarily due to: (i) the aforementioned $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, and (ii) a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances. These increases were offset by: (i) lower professional fees of $2.4 million, due to overall reductions in indemnified legal fees, net of insurance recoveries, (ii) lower consulting fees for bank projects and initiatives, and lower legal expenses related to the now resolved SEC investigation and various other litigations, (iii) lower salaries and benefits expense of $8.2 million resulting from lower headcount, (iv) lower advertising costs of $1.2 million due to reductions in overall events and media spending, and (vi) lower regulatory assessments of $3.4 million due to changes in our asset size and an FDIC assessment credit.
Income taxes
Q2-2020 vs Q1-2020
Income tax benefit totaled $5.3 million for the second quarter resulting in an effective tax benefit rate of 22.3%. This compares to a $2.2 million benefit for the first quarter and an effective tax benefit rate of 24.7%. The full year estimated effective tax rate for 2020 is expected to be approximately 23%.
YTD 2020 vs YTD 2019
Income tax benefit totaled $7.5 million for the six months ended June 30, 2020, representing an effective tax rate of 23.0%, compared to a $7.0 million expense and an effective tax rate of 22.9% for six months ended June 30, 2019.
EX 99.1
Balance Sheet
At June 30, 2020, total assets were $7.77 billion, which represented a linked-quarter increase of $107.5 million. The following table shows selected balance sheet line items as of the dates indicated.
| As of and for the Three Months Ended | Amount Change | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | Q2-20 vs. Q1-20 | Q2-20 vs. Q2-19 | |||||||||||||||
| ( in thousands) | |||||||||||||||||||||
| Total assets | $ | 7,662,607 | $ | 7,828,410 | $ | 8,625,337 | $ | 9,359,931 | $ | 107,531 | $ | (1,589,793) | |||||||||
| Securities available-for-sale | $ | 969,427 | $ | 912,580 | $ | 775,662 | $ | 1,167,687 | $ | 206,602 | $ | 8,342 | |||||||||
| Loans held-for-investment | $ | 5,667,464 | $ | 5,951,885 | $ | 6,383,259 | $ | 6,719,570 | $ | (39,768) | $ | (1,091,874) | |||||||||
| Loans held-for-sale | $ | 20,234 | $ | 22,642 | $ | 23,936 | $ | 597,720 | $ | (466) | $ | (577,952) | |||||||||
| Demand deposits | $ | 2,828,470 | $ | 2,622,398 | $ | 2,602,011 | $ | 2,510,233 | $ | 409,732 | $ | 727,969 | |||||||||
| Other core deposits | 2,619,502 | 2,515,703 | 2,794,769 | 3,074,936 | 3,301,080 | 103,799 | (681,578) | ||||||||||||||
| Brokered deposits | 179,761 | 218,665 | 10,000 | 93,111 | 480,977 | (38,904) | (301,216) | ||||||||||||||
| Total Deposits | $ | 5,562,838 | $ | 5,427,167 | $ | 5,770,058 | $ | 6,292,290 | $ | 474,627 | $ | (254,825) | |||||||||
| As percentage of total deposits | |||||||||||||||||||||
| Demand deposits | 53.64 | % | 50.85 | % | 48.32 | % | 45.10 | % | 39.89 | % | 2.79 | % | 13.75 | % | |||||||
| Other core deposits | 43.39 | % | 45.22 | % | 51.50 | % | 53.29 | % | 52.46 | % | (1.83) | % | (9.07) | % | |||||||
| Brokered deposits | 2.98 | % | 3.93 | % | 0.18 | % | 1.61 | % | 7.64 | % | (0.95) | % | (4.66) | % | |||||||
| Average loan yield | 4.48 | % | 4.56 | % | 4.71 | % | 4.75 | % | 4.80 | % | (0.08) | % | (0.32) | % | |||||||
| Average cost of interest-bearing deposits | 0.93 | % | 1.41 | % | 1.57 | % | 1.78 | % | 1.89 | % | (0.48) | % | (0.96) | % | |||||||
| Average cost of total deposits | 0.71 | % | 1.11 | % | 1.27 | % | 1.48 | % | 1.62 | % | (0.40) | % | (0.91) | % |
All values are in US Dollars.
Investments
Securities available-for-sale increased $206.6 million to $1.18 billion at June 30, 2020. This increase was due to $175.2 million in purchases of corporate and government agency securities and lower unrealized net losses of $54.7 million due mostly to credit spreads tightening during the quarter for a positive change on our CLO portfolio pricing, offset by $20.7 million in sales of mainly corporate securities. As of June 30, 2020, our securities portfolio included $668.4 million of CLOs, $306.7 million of agency securities, $57.2 million of municipal securities, and $143.6 million of corporate debt securities. Our CLO portfolio, which is comprised only of AA and AAA rated securities, comprises 56.8% of our securities portfolio and the carrying value includes an unrealized net loss of $35.3 million at June 30, 2020 compared to an unrealized net loss of $80.0 million at March 31, 2020.
EX 99.1
Loans
The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:
| June 30,2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in thousands) | ||||||||||||||
| Composition of held-for-investment loans | ||||||||||||||
| Commercial real estate | $ | 810,024 | $ | 818,817 | $ | 891,029 | $ | 856,497 | ||||||
| Multifamily | 1,434,071 | 1,466,083 | 1,494,528 | 1,563,757 | 1,598,978 | |||||||||
| Construction | 212,979 | 227,947 | 231,350 | 228,561 | 209,029 | |||||||||
| Commercial and industrial | 1,436,990 | 1,578,223 | 1,691,270 | 1,789,478 | 1,951,707 | |||||||||
| SBA | 310,784 | 70,583 | 70,981 | 75,359 | 80,929 | |||||||||
| Total commercial loans | 4,217,518 | 4,152,860 | 4,306,946 | 4,548,184 | 4,697,140 | |||||||||
| Single-family residential mortgage | 1,370,785 | 1,467,375 | 1,590,774 | 1,775,953 | 1,961,065 | |||||||||
| Other consumer | 39,393 | 47,229 | 54,165 | 59,122 | 61,365 | |||||||||
| Total consumer loans | 1,410,178 | 1,514,604 | 1,644,939 | 1,835,075 | 2,022,430 | |||||||||
| Total gross loans | $ | 5,667,464 | $ | 5,951,885 | $ | 6,383,259 | $ | 6,719,570 | ||||||
| Composition percentage of held-for-investment loans | ||||||||||||||
| Commercial real estate | 14.6 | % | 14.3 | % | 13.8 | % | 14.0 | % | 12.7 | % | ||||
| Multifamily | 25.5 | % | 25.9 | % | 25.1 | % | 24.5 | % | 23.8 | % | ||||
| Construction | 3.8 | % | 4.0 | % | 3.9 | % | 3.6 | % | 3.1 | % | ||||
| Commercial and industrial | 25.5 | % | 27.9 | % | 28.4 | % | 28.0 | % | 29.1 | % | ||||
| SBA | 5.5 | % | 1.2 | % | 1.2 | % | 1.2 | % | 1.2 | % | ||||
| Total commercial loans | 74.9 | % | 73.3 | % | 72.4 | % | 71.3 | % | 69.9 | % | ||||
| Single-family residential mortgage | 24.4 | % | 25.9 | % | 26.7 | % | 27.8 | % | 29.2 | % | ||||
| Other consumer | 0.7 | % | 0.8 | % | 0.9 | % | 0.9 | % | 0.9 | % | ||||
| Total consumer loans | 25.1 | % | 26.7 | % | 27.6 | % | 28.7 | % | 30.1 | % | ||||
| Total gross loans | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in US Dollars.
Held-for-investment loans decreased $39.8 million to $5.63 billion from the prior quarter, due mostly to lower single-family residential mortgage loans of $96.6 million, lower commercial and industrial (C&I) loans of $141.2 million, and lower multifamily loans of $32.0 million. The decline in single-family residential is attributed to payoffs as the loans refinance away in the lower rate environment and these proceeds are invested in other core business loans. The decline in C&I loans is primarily in response to strategically reducing certain credit facilities in response to the changed economic landscape and corresponding lower outstanding balances. These decreases were partially offset by a $240.2 million increase in SBA loans, which is attributable to the funding of the loans under the SBA's PPP. As we dedicated resources to processing PPP loans, this tempered other loan production in addition to the impact of the COVID-19 pandemic in the market and we did not experience any significant increase in credit line usage.
We continue to remix our real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. Single-family residential mortgage and multifamily loans comprised 49.9% of the total held-for-investment loan portfolio as compared to 53.0% one year ago. Commercial real estate loans comprised 14.6% of the loan portfolio and commercial and industrial loans constituted 25.5%. Currently, loans secured by residential real estate (single-family, multifamily, single-family construction, and warehouse credit facilities) represent approximately 66% of our total loans outstanding.
EX 99.1
The C&I portfolio has limited exposure to certain business sectors undergoing severe stress, as demonstrated by the following (as a percentage of total outstanding C&I loan balances):
| June 30, 2020 | |||
|---|---|---|---|
| Amount | % of Portfolio | ||
| ( in thousands) | |||
| C&I Portfolio by Industry | |||
| Finance and insurance (includes Warehouse lending) | 54 | % | |
| Real estate and rental leasing | 201,630 | 14 | % |
| Gas stations | 76,510 | 5 | % |
| Manufacturing | 60,128 | 4 | % |
| Healthcare | 43,256 | 3 | % |
| Wholesale trade | 39,740 | 3 | % |
| Other retail trade | 37,699 | 3 | % |
| Television/motion pictures | 33,590 | 2 | % |
| Food services | 30,216 | 2 | % |
| Professional services | 14,975 | 1 | % |
| Transportation | 5,363 | — | % |
| Accommodations | 1,496 | — | % |
| All other | 115,372 | 8 | % |
| Total | 100 | % |
All values are in US Dollars.
Deposits
The following table sets forth the composition of our deposits at the dates indicated.
| June 30,2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in thousands) | ||||||||||||||
| Composition of deposits | ||||||||||||||
| Noninterest-bearing checking | $ | 1,256,081 | $ | 1,088,516 | $ | 1,107,442 | $ | 993,745 | ||||||
| Interest-bearing checking | 1,846,698 | 1,572,389 | 1,533,882 | 1,503,208 | 1,577,901 | |||||||||
| Money market | 765,854 | 575,820 | 715,479 | 695,530 | 800,898 | |||||||||
| Savings | 939,018 | 877,947 | 885,246 | 1,042,162 | 1,061,115 | |||||||||
| Non-brokered certificates of deposit | 924,630 | 1,071,936 | 1,204,044 | 1,367,284 | 1,479,137 | |||||||||
| Brokered certificates of deposit | 169,761 | 208,665 | — | 54,432 | 379,494 | |||||||||
| Total deposits | $ | 5,562,838 | $ | 5,427,167 | $ | 5,770,058 | $ | 6,292,290 | ||||||
| Composition percentage of deposits | ||||||||||||||
| Noninterest-bearing checking | 23.0 | % | 22.6 | % | 20.1 | % | 19.2 | % | 15.8 | % | ||||
| Interest-bearing checking | 30.6 | % | 28.3 | % | 28.2 | % | 26.1 | % | 25.1 | % | ||||
| Money market | 12.7 | % | 10.3 | % | 13.2 | % | 12.0 | % | 12.7 | % | ||||
| Savings | 15.6 | % | 15.8 | % | 16.3 | % | 18.1 | % | 16.9 | % | ||||
| Non-brokered certificates of deposit | 15.3 | % | 19.3 | % | 22.2 | % | 23.7 | % | 23.5 | % | ||||
| Brokered certificates of deposit | 2.8 | % | 3.7 | % | — | % | 0.9 | % | 6.0 | % | ||||
| Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in US Dollars.
Total deposits increased $474.6 million during the second quarter of 2020 to $6.04 billion due to higher noninterest-bearing checking balances of $135.4 million, interest-bearing checking balances of $274.3 million, money market balances of $190.0 million, and savings balances of $61.1 million, offset by lower non-brokered certificates of deposit balances of $147.3 million and brokered certificates of deposit balances of $38.9 million. We continue to focus on growing relationship-based deposits, strategically augmented by wholesale funding, as we proactively reduce our deposit costs in response to the interest rate cuts by the Federal Reserve in March of 2020. Noninterest-bearing deposits totaled $1.39 billion and represented 23.0% of total deposits at June 30, 2020 compared to $1.26 billion and 22.6% at March 31, 2020 and $993.7 million and 15.8% one year ago.
EX 99.1
Debt
Advances from the FHLB decreased $360.8 million, or 37%, to $617.2 million, as of June 30, 2020, due in part to a $90.0 million reduction in overnight borrowings to $0 at June 30, 2020 and a $164.0 million reduction in short-term advances to $213.0 million at June 30, 2020. We repaid a $100.0 million FHLB term advance with weighted average interest rate of 2.07% and incurred a $2.5 million extinguishment fee that is included in other noninterest expense. Additionally, in June 2020 we refinanced $111.0 million of FHLB term advances to take advantage of the rapid decline in market interest rates. As a result of this refinancing, our weighted average effective interest rate on such FHLB term advances changed from 2.81% to 2.02% and the weighted average life extended from 2.52 years to 5.18 years. At the end of the second quarter, FHLB advances included no overnight borrowings, $58.0 million maturing within three months, and $566.0 million maturing beyond three months with a weighted average life of 4.1 years and weighted average interest rate of 2.39%.
Equity
At June 30, 2020, total stockholders’ equity increased by $12.0 million to $847.0 million and tangible common equity increased by $15.0 million to $621.5 million on a linked-quarter basis. The increase in total stockholders’ equity was a result of a lower net accumulated other comprehensive loss of $38.6 million related to the higher fair values of CLOs and other securities available-for-sale, offset by the net loss of $18.4 million, dividends to common and preferred stockholders of $6.6 million, and redemption of preferred stock of $2.6 million. Tangible book value per share increased to $12.37 as of June 30, 2020 from $12.11 at March 31, 2020.
Capital ratios remain strong with total risk-based capital at 16.35% and a tier 1 leverage ratio of 10.56%. The following table sets forth our regulatory capital ratios at June 30, 2020 and the previous four quarters. The interim capital relief related to the adoption of CECL increased the Bank's leverage ratio approximately 12 basis points at June 30, 2020.
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Capital Ratios^(1)^ | ||||||||||
| Banc of California, Inc. | ||||||||||
| Total risk-based capital ratio | 16.35 | % | 16.16 | % | 15.90 | % | 14.37 | % | 15.00 | % |
| Tier 1 risk-based capital ratio | 15.10 | % | 14.91 | % | 14.83 | % | 13.32 | % | 14.03 | % |
| Common equity tier 1 capital ratio | 11.68 | % | 11.58 | % | 11.56 | % | 10.34 | % | 10.50 | % |
| Tier 1 leverage ratio | 10.56 | % | 11.20 | % | 10.89 | % | 9.84 | % | 9.62 | % |
| Banc of California, NA | ||||||||||
| Total risk-based capital ratio | 18.19 | % | 18.21 | % | 17.46 | % | 15.65 | % | 16.70 | % |
| Tier 1 risk-based capital ratio | 16.94 | % | 16.96 | % | 16.39 | % | 14.60 | % | 15.73 | % |
| Common equity tier 1 capital ratio | 16.94 | % | 16.96 | % | 16.39 | % | 14.60 | % | 15.73 | % |
| Tier 1 leverage ratio | 11.86 | % | 12.67 | % | 12.02 | % | 10.75 | % | 10.80 | % |
(1)June 30, 2020 capital ratios are preliminary.
EX 99.1
Credit Quality
| June 30,2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Asset quality information and ratios | ( in thousands) | |||||||||||||
| Delinquent loans held-for-investment | ||||||||||||||
| 30 to 89 days delinquent | $ | 56,338 | $ | 32,873 | $ | 39,122 | $ | 34,938 | ||||||
| 90+ days delinquent | 45,384 | 28,632 | 24,734 | 17,220 | 17,272 | |||||||||
| Total delinquent loans | $ | 84,970 | $ | 57,607 | $ | 56,342 | $ | 52,210 | ||||||
| Total delinquent loans to total loans | 1.69 | % | 1.50 | % | 0.97 | % | 0.88 | % | 0.78 | % | ||||
| Non-performing assets, excluding loans held-for-sale | ||||||||||||||
| Non-performing loans | $ | 56,471 | $ | 43,354 | $ | 45,169 | $ | 28,499 | ||||||
| 90+ days delinquent and still accruing loans | — | — | — | — | 275 | |||||||||
| Other real estate owned | — | — | — | — | 276 | |||||||||
| Non-performing assets | $ | 56,471 | $ | 43,354 | $ | 45,169 | $ | 29,050 | ||||||
| ALL to non-performing loans | 124.30 | % | 138.55 | % | 132.97 | % | 139.31 | % | 206.86 | % | ||||
| Non-performing loans to total loans held-for-investment | 1.29 | % | 1.00 | % | 0.73 | % | 0.71 | % | 0.43 | % | ||||
| Non-performing assets to total assets | 0.94 | % | 0.74 | % | 0.55 | % | 0.52 | % | 0.31 | % | ||||
| Troubled debt restructurings (TDRs) | ||||||||||||||
| Performing TDRs | $ | 6,100 | $ | 6,620 | $ | 6,800 | $ | 20,245 | ||||||
| Non-performing TDRs | 20,275 | 20,852 | 21,837 | 14,605 | 2,428 | |||||||||
| Total TDRs | $ | 26,952 | $ | 28,457 | $ | 21,405 | $ | 22,673 |
All values are in US Dollars.
Total delinquent loans increased $10.2 million in the second quarter to $95.2 million at June 30, 2020, due to $43.3 million of additions, offset by $27.6 million returning to current status and $5.5 million of principal payments or payoffs. Our delinquent loans increased due primarily to one lending relationship well-secured by commercial real estate and single-family residential properties totaling $11.5 million. Delinquent loans included primarily legacy single-family residential loans, which accounted for 74% of the balance at quarter end and represented a decrease of $1.1 million quarter over quarter. Excluding delinquent single-family residential loans, delinquent loans totaled $24.9 million, or 0.59% of total loans, excluding single-family residential loans, at June 30, 2020.
Non-performing loans totaled $72.7 million as of June 30, 2020, of which $21.9 million, or 30% of the balance relates to loans in a current payment status. The $16.2 million increase during the second quarter was primarily due to $18.6 million of loans being placed on nonaccrual status, offset by cured loans and payoffs. The quarter-end balance includes three large loan relationships totaling $36.9 million, or 51% of our total nonperforming loans, which consist of one $16.4 million legacy shared national credit, a $9.1 million single-family mortgage residential loan with a loan-to-value ratio of 58%, and an $11.5 million legacy relationship well-secured by commercial real estate and single-family residential properties with an average loan-to-value ratio of 51%. Aside from those three loan relationships, non-performing single-family residential loans totaled $19.4 million and the remaining non-performing loans totaled $16.4 million.
In light of the pandemic, during the quarter we provided support to clients by granting loan deferments or forbearance. As of June 30, 2020, in our single-family residential portfolio, we had 142 loans on active forbearance for $164 million of principal balances, or approximately 12% of this loan portfolio. With respect to the remaining loan portfolio excluding the single-family residential portfolio, as of June 30, 2020, we had 156 active deferments on $440 million of principal balances, or 10% of this portion of the loan portfolio. As with our entire portfolio, we will continue to actively monitor and manage our lending relationships in a manner that supports our clients and protects the Bank.
EX 99.1
Allowance for Credit Losses
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||||||
| ( in thousands) | ||||||||||||||
| Allowance for loan losses (ALL) | ||||||||||||||
| Balance at beginning of period | $ | 57,649 | $ | 62,927 | $ | 59,523 | $ | 63,885 | ||||||
| Adoption of ASU 2016-13 ^(1)^ | — | 7,609 | — | — | — | |||||||||
| Loans charged off | — | (2,076) | (2,706) | (35,546) | (2,451) | |||||||||
| Recoveries | 608 | 350 | 106 | 410 | 76 | |||||||||
| Net recoveries (charge-offs) | 608 | (1,726) | (2,600) | (35,136) | (2,375) | |||||||||
| Provision for (reversal of) loan losses | 11,519 | 14,711 | (2,678) | 38,540 | (1,987) | |||||||||
| Balance at end of period | 90,370 | $ | 78,243 | $ | 57,649 | $ | 62,927 | $ | 59,523 | |||||
| Reserve for unfunded loan commitments | ||||||||||||||
| Balance at beginning of period | 3,888 | 4,064 | 4,362 | 4,295 | 4,208 | |||||||||
| Adoption of ASU 2016-13 ^(1)^ | — | (1,226) | — | — | — | |||||||||
| Provision for credit losses | 307 | 1,050 | (298) | 67 | 87 | |||||||||
| Balance at end of period | 4,195 | 3,888 | 4,064 | 4,362 | 4,295 | |||||||||
| Allowance for credit losses (ACL) | $ | 82,131 | $ | 61,713 | $ | 67,289 | $ | 63,818 | ||||||
| ALL to total loans | 1.61 | % | 1.38 | % | 0.97 | % | 0.99 | % | 0.89 | % | ||||
| ACL to total loans | 1.68 | % | 1.45 | % | 1.04 | % | 1.05 | % | 0.95 | % | ||||
| Annualized net loan charge-offs (recoveries) to average total loans held-for-investment | (0.04) | % | 0.12 | % | 0.17 | % | 2.19 | % | 0.13 | % | ||||
| Reserve for loss on repurchased loans | ||||||||||||||
| Balance at beginning of period | $ | 6,201 | $ | 6,561 | $ | 2,478 | $ | 2,486 | ||||||
| Initial provision for loan repurchases | — | — | — | 4,415 | 53 | |||||||||
| Reversal of provision for loan repurchases | (34) | (600) | (360) | (123) | (61) | |||||||||
| Utilization of reserve for loan repurchases | — | — | — | (209) | — | |||||||||
| Balance at end of period | $ | 5,601 | $ | 6,201 | $ | 6,561 | $ | 2,478 |
All values are in US Dollars.
(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather than the previously applied incurred loss methodology.
The allowance for expected credit losses, which includes the reserve for unfunded loan commitments, totaled $94.6 million, or 1.68% of total loans at June 30, 2020 compared to $82.1 million or 1.45% at March 31, 2020. The $12.4 million increase in the allowance for expected credit losses was due to: (i) $6.8 million provided for specific reserves, primarily related to one previously reported nonaccrual shared national credit, (ii) $5.0 million provided for general reserves related to the continued deterioration in key macro-economic forecast variables, offset by the impact of lower loan balances, and (iii) net recoveries of $608 thousand. The ACL coverage of non-performing loans was 130% at June 30, 2020 compared to 145% at March 31, 2020 and 142% at December 31, 2019.
Our ACL methodology and resulting provision continues to be impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables ("MEVs"). As of June 30, 2020, we used economic forecasts released by our model provider during June 2020. Similar to the late March 2020 forecasts, these June 2020 forecasts reflect the onset of the pandemic, its impact on the MEVs and the future economic recovery. These forecasts published by our model provider have deteriorated since the end of the first quarter, with June baseline unemployment rate forecasts for 2020 and 2021 increasing and real GDP growth rates decreasing. Similar to the first quarter of 2020, we incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by our third-party model including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, we expect the ACL to be impacted in future periods by economic volatility, changing economic forecasts, and underlying model assumptions, all of which may be better than or worse than our current estimate.
EX 99.1
The Company will host a conference call to discuss its second quarter 2020 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, July 23, 2020. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 0284271. 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 10145608.
About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $7.8 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the “Bank”). The Bank has 39 offices including 31 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. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.
Forward-Looking Statements
This press release includes forward-looking statements 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. 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.
| Source: Banc of California, Inc. |
|---|
| Investor Relations Inquiries: |
| Banc of California, Inc. |
| (855) 361-2262 |
| Jared Wolff, (949) 385-8700 |
| Lynn Hopkins, (949) 265-6599 |
EX 99.1
Banc of California, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 420,640 | $ | 435,992 | $ | 373,472 | $ | 526,874 | $ | 313,850 |
| Securities available-for-sale | 1,176,029 | 969,427 | 912,580 | 775,662 | 1,167,687 | |||||
| Loans held-for-sale | 19,768 | 20,234 | 22,642 | 23,936 | 597,720 | |||||
| Loans held-for-investment | 5,627,696 | 5,667,464 | 5,951,885 | 6,383,259 | 6,719,570 | |||||
| Allowance for loan losses | (90,370) | (78,243) | (57,649) | (62,927) | (59,523) | |||||
| Federal Home Loan Bank and other bank stock | 46,585 | 57,237 | 59,420 | 71,679 | 76,373 | |||||
| Servicing rights, net | 1,753 | 2,009 | 2,299 | 2,407 | 2,715 | |||||
| Other real estate owned, net | — | — | — | — | 276 | |||||
| Premises and equipment, net | 125,247 | 127,379 | 128,021 | 128,979 | 129,227 | |||||
| Investments in alternative energy partnerships, net | 26,967 | 27,347 | 29,300 | 27,039 | 26,633 | |||||
| Goodwill | 37,144 | 37,144 | 37,144 | 37,144 | 37,144 | |||||
| Other intangible assets, net | 3,292 | 3,722 | 4,151 | 4,605 | 5,105 | |||||
| Deferred income tax, net | 48,288 | 63,849 | 44,906 | 45,950 | 42,798 | |||||
| Income tax receivable | 13,094 | 7,198 | 4,233 | 4,459 | 2,547 | |||||
| Bank owned life insurance investment | 110,487 | 110,397 | 109,819 | 108,720 | 108,132 | |||||
| Right of use assets | 19,408 | 20,882 | 22,540 | 23,907 | 24,118 | |||||
| Due from unsettled securities sales | — | — | — | 334,769 | — | |||||
| Other assets | 184,110 | 190,569 | 183,647 | 188,875 | 165,559 | |||||
| Total assets | $ | 7,770,138 | $ | 7,662,607 | $ | 7,828,410 | $ | 8,625,337 | $ | 9,359,931 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Noninterest-bearing deposits | $ | 1,391,504 | $ | 1,256,081 | $ | 1,088,516 | $ | 1,107,442 | $ | 993,745 |
| Interest-bearing deposits | 4,645,961 | 4,306,757 | 4,338,651 | 4,662,616 | 5,298,545 | |||||
| Total deposits | 6,037,465 | 5,562,838 | 5,427,167 | 5,770,058 | 6,292,290 | |||||
| Advances from Federal Home Loan Bank | 617,170 | 978,000 | 1,195,000 | 1,650,000 | 1,825,000 | |||||
| Notes payable, net | 173,537 | 173,479 | 173,421 | 173,339 | 173,257 | |||||
| Reserve for loss on repurchased loans | 5,567 | 5,601 | 6,201 | 6,561 | 2,478 | |||||
| Lease liabilities | 20,531 | 22,075 | 23,692 | 25,210 | 25,457 | |||||
| Accrued expenses and other liabilities | 68,909 | 85,612 | 95,684 | 99,181 | 77,905 | |||||
| Total liabilities | 6,923,179 | 6,827,605 | 6,921,165 | 7,724,349 | 8,396,387 | |||||
| Commitments and contingent liabilities | ||||||||||
| Preferred stock | 185,037 | 187,687 | 189,825 | 189,825 | 231,128 | |||||
| Common stock | 522 | 520 | 520 | 520 | 520 | |||||
| Common stock, class B non-voting non-convertible | 5 | 5 | 5 | 5 | 5 | |||||
| Additional paid-in capital | 632,117 | 631,125 | 629,848 | 628,774 | 627,306 | |||||
| Retained earnings | 85,670 | 110,640 | 127,733 | 120,221 | 146,039 | |||||
| Treasury stock | (40,827) | (40,827) | (28,786) | (28,786) | (28,786) | |||||
| Accumulated other comprehensive loss, net | (15,565) | (54,148) | (11,900) | (9,571) | (12,668) | |||||
| Total stockholders’ equity | 846,959 | 835,002 | 907,245 | 900,988 | 963,544 | |||||
| Total liabilities and stockholders’ equity | $ | 7,770,138 | $ | 7,662,607 | $ | 7,828,410 | $ | 8,625,337 | $ | 9,359,931 |
EX 99.1
Banc of California, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
| Three Months Ended | Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | June 30,<br>2020 | June 30,<br>2019 | |||||||||
| Interest and dividend income | |||||||||||||||
| Loans, including fees | $ | 63,642 | $ | 65,534 | $ | 73,930 | $ | 80,287 | $ | 89,159 | $ | 129,176 | $ | 179,717 | |
| Securities | 7,816 | 7,820 | 7,812 | 10,024 | 12,457 | 15,636 | 30,298 | ||||||||
| Other interest-earning assets | 1,239 | 1,360 | 1,960 | 2,346 | 2,424 | 2,599 | 4,737 | ||||||||
| Total interest and dividend income | 72,697 | 74,714 | 83,702 | 92,657 | 104,040 | 147,411 | 214,752 | ||||||||
| Interest expense | |||||||||||||||
| Deposits | 10,205 | 14,611 | 18,247 | 22,811 | 28,598 | 24,816 | 60,041 | ||||||||
| Federal Home Loan Bank advances | 4,818 | 5,883 | 6,396 | 8,519 | 8,289 | 10,701 | 17,370 | ||||||||
| Notes payable and other interest-bearing liabilities | 2,359 | 2,359 | 2,399 | 2,412 | 2,373 | 4,718 | 4,753 | ||||||||
| Total interest expense | 17,382 | 22,853 | 27,042 | 33,742 | 39,260 | 40,235 | 82,164 | ||||||||
| Net interest income | 55,315 | 51,861 | 56,660 | 58,915 | 64,780 | 107,176 | 132,588 | ||||||||
| Provision for (reversal of) credit losses | 11,826 | 15,761 | (2,976) | 38,607 | (1,900) | 27,587 | 198 | ||||||||
| Net interest income after provision for (reversal of) credit losses | 43,489 | 36,100 | 59,636 | 20,308 | 66,680 | 79,589 | 132,390 | ||||||||
| Noninterest income | |||||||||||||||
| Customer service fees | 1,224 | 1,096 | 1,451 | 1,582 | 1,434 | 2,320 | 2,949 | ||||||||
| Loan servicing income | 95 | 75 | 312 | 128 | 121 | 170 | 239 | ||||||||
| Income from bank owned life insurance | 591 | 578 | 599 | 588 | 580 | 1,169 | 1,105 | ||||||||
| Impairment loss on investment securities | — | — | — | (731) | — | — | — | ||||||||
| Net gain (loss) on sale of securities available for sale | 2,011 | — | 3 | (5,063) | — | 2,011 | 208 | ||||||||
| Fair value adjustment on loans held for sale | 25 | (1,586) | 30 | 16 | 59 | (1,561) | 60 | ||||||||
| Net (loss) gain on sale of loans | — | (27) | (863) | 4,310 | 2,767 | (27) | 4,319 | ||||||||
| All other income (loss) | 1,582 | 1,925 | 3,398 | 2,351 | (7,251) | 3,507 | (4,875) | ||||||||
| Total noninterest income (loss) | 5,528 | 2,061 | 4,930 | 3,181 | (2,290) | 7,589 | 4,005 | ||||||||
| Noninterest expense | |||||||||||||||
| Salaries and employee benefits | 24,260 | 23,436 | 24,036 | 25,934 | 27,506 | 47,696 | 55,945 | ||||||||
| Naming rights termination | 26,769 | — | — | — | — | 26,769 | — | ||||||||
| Occupancy and equipment | 7,090 | 7,243 | 7,900 | 7,767 | 7,955 | 14,333 | 15,641 | ||||||||
| Professional fees (reimbursement) | 4,596 | 5,964 | 2,611 | 1,463 | (2,903) | 10,560 | 8,138 | ||||||||
| Data processing | 1,536 | 1,773 | 1,684 | 1,568 | 1,672 | 3,309 | 3,168 | ||||||||
| Advertising | 1,157 | 1,756 | 2,227 | 2,090 | 2,048 | 2,913 | 4,105 | ||||||||
| Regulatory assessments | 725 | 484 | 1,854 | 1,239 | 2,136 | 1,209 | 4,618 | ||||||||
| Reversal of loan repurchase reserves | (34) | (600) | (360) | (123) | (61) | (634) | (177) | ||||||||
| Amortization of intangible assets | 430 | 429 | 454 | 500 | 621 | 859 | 1,241 | ||||||||
| Restructuring expense (reversal) | — | — | 1,626 | — | (158) | — | 2,637 | ||||||||
| All other expenses | 6,408 | 4,529 | 4,412 | 3,742 | 5,039 | 10,937 | 8,838 | ||||||||
| Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships | 72,937 | 45,014 | 46,444 | 44,180 | 43,855 | 117,951 | 104,154 | ||||||||
| Loss (gain) on investments in alternative energy partnerships | (167) | 1,905 | 1,039 | (940) | (355) | 1,738 | 1,595 | ||||||||
| Total noninterest expense | 72,770 | 46,919 | 47,483 | 43,240 | 43,500 | 119,689 | 105,749 | ||||||||
| (Loss) income from operations before income taxes | (23,753) | (8,758) | 17,083 | (19,751) | 20,890 | (32,511) | 30,646 | ||||||||
| Income tax (benefit) expense | (5,304) | (2,165) | 2,811 | (5,619) | 4,308 | (7,469) | 7,027 | ||||||||
| Net (loss) income | (18,449) | (6,593) | 14,272 | (14,132) | 16,582 | (25,042) | 23,619 | ||||||||
| Preferred stock dividends | 3,442 | 3,533 | 3,540 | 3,403 | 4,308 | 6,975 | 8,616 | ||||||||
| Income allocated to participating securities | — | — | 224 | — | 271 | — | 153 | ||||||||
| Participating securities dividends | 94 | 94 | 93 | 94 | 94 | 188 | 295 | ||||||||
| Impact of preferred stock redemption | (49) | (526) | — | 5,093 | — | (575) | — | ||||||||
| Net (loss) income available to common stockholders | $ | (21,936) | $ | (9,694) | $ | 10,415 | $ | (22,722) | $ | 11,909 | $ | (31,630) | $ | 14,555 |
EX 99.1
| (Loss) earnings per common share: | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Basic | $ | (0.44) | $ | (0.19) | $ | 0.21 | $ | (0.45) | $ | 0.23 | $ | (0.63) | $ | 0.29 |
| Diluted | $ | (0.44) | $ | (0.19) | $ | 0.20 | $ | (0.45) | $ | 0.23 | $ | (0.63) | $ | 0.29 |
| Weighted average number of common shares outstanding | ||||||||||||||
| Basic | 50,030,919 | 50,464,777 | 50,699,915 | 50,882,227 | 50,857,137 | 50,247,848 | 50,767,428 | |||||||
| Diluted | 50,030,919 | 50,464,777 | 50,927,978 | 50,882,227 | 50,964,956 | 50,247,848 | 50,895,190 | |||||||
| Dividends declared per common share | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.12 | $ | 0.19 |
EX 99.1
Banc of California, Inc.
Selected Financial Data
(Unaudited)
| Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||
| Profitability and other ratios of consolidated operations | ||||||||||
| Return on average assets^(1)^ | (0.96) | % | (0.35) | % | 0.71 | % | (0.64) | % | 0.69 | % |
| Return on average equity^(1)^ | (8.69) | % | (2.89) | % | 6.20 | % | (5.83) | % | 6.91 | % |
| Return on average tangible common equity^(2)^ | (13.77) | % | (5.44) | % | 6.46 | % | (12.49) | % | 7.43 | % |
| Dividend payout ratio^(3)^ | (13.64) | % | (31.58) | % | 28.57 | % | (13.33) | % | 26.09 | % |
| Net interest spread | 2.77 | % | 2.56 | % | 2.65 | % | 2.47 | % | 2.50 | % |
| Net interest margin^(1)^ | 3.09 | % | 2.97 | % | 3.04 | % | 2.86 | % | 2.86 | % |
| Noninterest income (loss) to total revenue^(4)^ | 9.09 | % | 3.82 | % | 8.00 | % | 5.12 | % | (3.66) | % |
| Noninterest income (loss) to average total assets^(1)^ | 0.29 | % | 0.11 | % | 0.25 | % | 0.15 | % | (0.10) | % |
| Noninterest expense to average total assets^(1)^ | 3.78 | % | 2.50 | % | 2.37 | % | 1.97 | % | 1.82 | % |
| Adjusted noninterest expense to average total assets^(1)^ | 2.22 | % | 2.30 | % | 2.41 | % | 2.13 | % | 2.06 | % |
| Efficiency ratio^(2)(5)^ | 119.60 | % | 87.01 | % | 77.10 | % | 69.63 | % | 69.61 | % |
| Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships^(2)(5)^ | 119.55 | % | 86.54 | % | 74.51 | % | 70.00 | % | 67.70 | % |
| Average loans held-for-investment to average deposits | 98.51 | % | 108.54 | % | 108.50 | % | 105.92 | % | 104.38 | % |
| Average securities available-for-sale to average total assets | 13.75 | % | 12.60 | % | 10.48 | % | 12.71 | % | 13.58 | % |
| Average stockholders’ equity to average total assets | 11.04 | % | 12.11 | % | 11.47 | % | 11.06 | % | 10.02 | % |
(1)Ratios are presented on an annualized basis.
(2)The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.
(3)The ratio is calculated by dividing dividends declared per common share by basic earnings per common share.
(4)Total revenue is equal to the sum of net interest income before provision for credit losses and noninterest income (loss).
(5)The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income (loss).
EX 99.1
Banc of California, Inc.
Average Balance, Average Yield Earned, and Average Cost Paid
(Dollars in thousands)
(Unaudited)
| Three Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||
| Average | Yield | Average | Yield | Average | Yield | |||||||||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | Balance | Interest | / Cost | ||||||||||||||
| Interest earning assets | ||||||||||||||||||||||
| Loans held-for-sale | $ | 19,967 | $ | 155 | 3.12 | % | $ | 22,273 | $ | 220 | 3.97 | % | $ | 23,527 | $ | 221 | 3.73 | % | ||||
| SFR mortgage | 1,416,358 | 14,187 | 4.03 | % | 1,532,967 | 15,295 | 4.01 | % | 1,689,228 | 16,788 | 3.94 | % | ||||||||||
| Commercial real estate, multifamily, and construction | 2,524,477 | 29,459 | 4.69 | % | 2,564,485 | 30,223 | 4.74 | % | 2,633,342 | 32,763 | 4.94 | % | ||||||||||
| Commercial and industrial, SBA, and lease financing | 1,706,120 | 19,392 | 4.57 | % | 1,613,324 | 19,157 | 4.78 | % | 1,821,064 | 23,381 | 5.09 | % | ||||||||||
| Other consumer | 40,697 | 449 | 4.44 | % | 47,761 | 639 | 5.38 | % | 54,088 | 777 | 5.70 | % | ||||||||||
| Gross loans and leases | 5,707,619 | 63,642 | 4.48 | % | 5,780,810 | 65,534 | 4.56 | % | 6,221,249 | 73,930 | 4.71 | % | ||||||||||
| Securities | 1,063,941 | 7,816 | 2.95 | % | 952,966 | 7,820 | 3.30 | % | 833,726 | 7,812 | 3.72 | % | ||||||||||
| Other interest-earning assets | 424,776 | 1,239 | 1.17 | % | 297,444 | 1,360 | 1.84 | % | 330,950 | 1,960 | 2.35 | % | ||||||||||
| Total interest-earning assets | 7,196,336 | 72,697 | 4.06 | % | 7,031,220 | 74,714 | 4.27 | % | 7,385,925 | 83,702 | 4.50 | % | ||||||||||
| Allowance for loan losses | (78,528) | (60,470) | (61,642) | |||||||||||||||||||
| BOLI and noninterest earning assets | 622,398 | 592,192 | 630,308 | |||||||||||||||||||
| Total assets | $ | 7,740,206 | $ | 7,562,942 | $ | 7,954,591 | ||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||
| Savings | $ | 905,997 | $ | 2,718 | 1.21 | % | $ | 890,830 | $ | 3,296 | 1.49 | % | $ | 981,346 | $ | 3,889 | 1.57 | % | ||||
| Interest-bearing checking | 1,710,038 | 2,186 | 0.51 | % | 1,520,922 | 3,728 | 0.99 | % | 1,546,322 | 4,234 | 1.09 | % | ||||||||||
| Money market | 592,872 | 850 | 0.58 | % | 608,926 | 1,760 | 1.16 | % | 743,695 | 2,593 | 1.38 | % | ||||||||||
| Certificates of deposit | 1,214,939 | 4,451 | 1.47 | % | 1,151,518 | 5,827 | 2.04 | % | 1,332,911 | 7,531 | 2.24 | % | ||||||||||
| Total interest-bearing deposits | 4,423,846 | 10,205 | 0.93 | % | 4,172,196 | 14,611 | 1.41 | % | 4,604,274 | 18,247 | 1.57 | % | ||||||||||
| FHLB advances | 819,166 | 4,818 | 2.37 | % | 1,039,055 | 5,883 | 2.28 | % | 1,020,478 | 6,396 | 2.49 | % | ||||||||||
| Securities sold under repurchase agreements | 1,024 | 2 | 0.79 | % | — | — | — | % | 2,223 | 15 | 2.68 | % | ||||||||||
| Long-term debt and other interest-bearing liabilities | 173,977 | 2,357 | 5.45 | % | 174,056 | 2,359 | 5.45 | % | 174,092 | 2,384 | 5.43 | % | ||||||||||
| Total interest-bearing liabilities | 5,418,013 | 17,382 | 1.29 | % | 5,385,307 | 22,853 | 1.71 | % | 5,801,067 | 27,042 | 1.85 | % | ||||||||||
| Noninterest-bearing deposits | 1,349,735 | 1,133,306 | 1,108,077 | |||||||||||||||||||
| Noninterest-bearing liabilities | 118,208 | 128,282 | 132,698 | |||||||||||||||||||
| Total liabilities | 6,885,956 | 6,646,895 | 7,041,842 | |||||||||||||||||||
| Total stockholders’ equity | 854,250 | 916,047 | 912,749 | |||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 7,740,206 | $ | 7,562,942 | $ | 7,954,591 | ||||||||||||||||
| Net interest income/spread | $ | 55,315 | 2.77 | % | $ | 51,861 | 2.56 | % | $ | 56,660 | 2.65 | % | ||||||||||
| Net interest margin | 3.09 | % | 2.97 | % | 3.04 | % | ||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 132.82 | % | 130.56 | % | 127.32 | % | ||||||||||||||||
| Total deposits | $ | 5,773,581 | $ | 10,205 | 0.71 | % | $ | 5,305,502 | $ | 14,611 | 1.11 | % | $ | 5,712,351 | $ | 18,247 | 1.27 | % | ||||
| Total funding ^(1)^ | $ | 6,767,748 | $ | 17,382 | 1.03 | % | $ | 6,518,613 | $ | 22,853 | 1.41 | % | $ | 6,909,144 | $ | 27,042 | 1.55 | % |
(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.
EX 99.1
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2019 | June 30, 2019 | |||||||||||||
| Average | Yield | Average | Yield | |||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||
| Interest earning assets | ||||||||||||||
| Loans held-for-sale | $ | 216,746 | $ | 1,894 | 3.47 | % | $ | 47,233 | $ | 265 | 2.25 | % | ||
| SFR mortgage | 1,866,103 | 19,179 | 4.08 | % | 2,059,704 | 21,390 | 4.17 | % | ||||||
| Commercial real estate, multifamily, and construction | 2,717,609 | 33,343 | 4.87 | % | 3,406,672 | 39,659 | 4.67 | % | ||||||
| Commercial and industrial, SBA, and lease financing | 1,840,202 | 24,970 | 5.38 | % | 1,872,289 | 26,940 | 5.77 | % | ||||||
| Other consumer | 58,652 | 901 | 6.09 | % | 59,806 | 905 | 6.07 | % | ||||||
| Gross loans and leases | 6,699,312 | 80,287 | 4.75 | % | 7,445,704 | 89,159 | 4.80 | % | ||||||
| Securities | 1,105,499 | 10,024 | 3.60 | % | 1,304,876 | 12,457 | 3.83 | % | ||||||
| Other interest-earning assets | 362,613 | 2,346 | 2.57 | % | 342,908 | 2,424 | 2.84 | % | ||||||
| Total interest-earning assets | 8,167,424 | 92,657 | 4.50 | % | 9,093,488 | 104,040 | 4.59 | % | ||||||
| Allowance for loan losses | (55,976) | (63,046) | ||||||||||||
| BOLI and noninterest-earning assets | 584,190 | 580,133 | ||||||||||||
| Total assets | $ | 8,695,638 | $ | 9,610,575 | ||||||||||
| Interest-bearing liabilities | ||||||||||||||
| Savings | 1,055,086 | 4,722 | 1.78 | % | 1,083,571 | 4,950 | 1.83 | % | ||||||
| Interest-bearing checking | 1,511,432 | 4,483 | 1.18 | % | 1,580,165 | 4,554 | 1.16 | % | ||||||
| Money market | 755,114 | 3,093 | 1.63 | % | 853,007 | 3,902 | 1.83 | % | ||||||
| Certificates of deposit | 1,750,970 | 10,513 | 2.38 | % | 2,537,060 | 15,192 | 2.40 | % | ||||||
| Total interest-bearing deposits | 5,072,602 | 22,811 | 1.78 | % | 6,053,803 | 28,598 | 1.89 | % | ||||||
| FHLB advances | 1,333,739 | 8,519 | 2.53 | % | 1,287,121 | 8,289 | 2.58 | % | ||||||
| Securities sold under repurchase agreements | 1,922 | 13 | 2.68 | % | 2,173 | 16 | 2.95 | % | ||||||
| Long-term debt and other interest-bearing liabilities | 174,111 | 2,399 | 5.47 | % | 174,161 | 2,357 | 5.43 | % | ||||||
| Total interest-bearing liabilities | 6,582,374 | 33,742 | 2.03 | % | 7,517,258 | 39,260 | 2.09 | % | ||||||
| Noninterest-bearing deposits | 1,047,858 | 1,034,205 | ||||||||||||
| Noninterest-bearing liabilities | 103,667 | 96,179 | ||||||||||||
| Total liabilities | 7,733,899 | 8,647,642 | ||||||||||||
| Total stockholders’ equity | 961,739 | 962,933 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 8,695,638 | $ | 9,610,575 | ||||||||||
| Net interest income/spread | $ | 58,915 | 2.47 | % | $ | 64,780 | 2.50 | % | ||||||
| Net interest margin | 2.86 | % | 2.86 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 124.08 | % | 120.97 | % | ||||||||||
| Total deposits | $ | 6,120,460 | $ | 22,811 | 1.48 | % | $ | 7,088,008 | $ | 28,598 | 1.62 | % | ||
| Total funding ^(1)^ | $ | 7,630,232 | $ | 33,742 | 1.75 | % | $ | 8,551,463 | $ | 39,260 | 1.84 | % |
(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.
EX 99.1
| Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2020 | June 30, 2019 | |||||||||||||
| Average | Yield | Average | Yield | |||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||
| Interest earning assets | ||||||||||||||
| Loans held-for-sale | $ | 21,120 | $ | 376 | 3.58 | % | $ | 39,340 | $ | 493 | 2.53 | % | ||
| SFR mortgage | 1,474,663 | 29,481 | 4.02 | % | 2,185,608 | 45,452 | 4.22 | % | ||||||
| Commercial real estate, multifamily, and construction | 2,544,480 | 59,682 | 4.72 | % | 3,397,241 | 77,776 | 4.62 | % | ||||||
| Commercial and industrial, SBA, and lease financing | 1,659,722 | 38,550 | 4.67 | % | 1,896,122 | 54,175 | 5.76 | % | ||||||
| Other consumer | 44,229 | 1,087 | 4.94 | % | 61,174 | 1,821 | 6.00 | % | ||||||
| Gross loans and leases | 5,744,214 | 129,176 | 4.52 | % | 7,579,485 | 179,717 | 4.78 | % | ||||||
| Securities | 1,008,454 | 15,636 | 3.12 | % | 1,526,959 | 30,298 | 4.00 | % | ||||||
| Other interest-earning assets | 361,110 | 2,599 | 1.45 | % | 332,424 | 4,737 | 2.87 | % | ||||||
| Total interest-earning assets | 7,113,778 | 147,411 | 4.17 | % | 9,438,868 | 214,752 | 4.59 | % | ||||||
| Allowance for credit losses | (69,499) | (62,488) | ||||||||||||
| BOLI and noninterest earning assets | 607,296 | 577,858 | ||||||||||||
| Total assets | $ | 7,651,575 | $ | 9,954,238 | ||||||||||
| Interest-bearing liabilities | ||||||||||||||
| Savings | 898,414 | 6,013 | 1.35 | % | 1,142,360 | 10,429 | 1.84 | % | ||||||
| Interest-bearing checking | 1,615,480 | 5,915 | 0.74 | % | 1,567,575 | 9,079 | 1.17 | % | ||||||
| Money market | 600,899 | 2,610 | 0.87 | % | 870,177 | 8,031 | 1.86 | % | ||||||
| Certificates of deposit | 1,183,229 | 10,278 | 1.75 | % | 2,758,789 | 32,502 | 2.38 | % | ||||||
| Total interest-bearing deposits | 4,298,022 | 24,816 | 1.16 | % | 6,338,901 | 60,041 | 1.91 | % | ||||||
| FHLB advances | 929,110 | 10,701 | 2.32 | % | 1,354,238 | 17,370 | 2.59 | % | ||||||
| Securities sold under repurchase agreements | 512 | 2 | 0.79 | % | 2,261 | 34 | 3.03 | % | ||||||
| Long-term debt and other interest-bearing liabilities | 174,017 | 4,716 | 5.45 | % | 174,195 | 4,719 | 5.46 | % | ||||||
| Total interest-bearing liabilities | 5,401,661 | 40,235 | 1.50 | % | 7,869,595 | 82,164 | 2.11 | % | ||||||
| Noninterest-bearing deposits | 1,241,521 | 1,028,008 | ||||||||||||
| Noninterest-bearing liabilities | 123,244 | 96,801 | ||||||||||||
| Total liabilities | 6,766,426 | 8,994,404 | ||||||||||||
| Total stockholders’ equity | 885,149 | 959,834 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 7,651,575 | $ | 9,954,238 | ||||||||||
| Net interest income/spread | $ | 107,176 | 2.67 | % | $ | 132,588 | 2.48 | % | ||||||
| Net interest margin | 3.03 | % | 2.83 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 131.70 | % | 119.94 | % | ||||||||||
| Total deposits | $ | 5,539,543 | $ | 24,816 | 0.90 | % | $ | 7,366,909 | $ | 60,041 | 1.64 | % | ||
| Total funding ^(1)^ | $ | 6,643,182 | $ | 40,235 | 1.22 | % | $ | 8,897,603 | $ | 82,164 | 1.86 | % |
(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.
EX 99.1
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures
(Dollars in thousands, except per share data)
(Unaudited)
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.
Return on average tangible common equity and efficiency ratio, as adjusted, tangible common equity, tangible common equity to tangible assets, tangible common equity per common share, and pre-tax pre-provision income constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.
Tangible common equity is calculated by subtracting preferred stock, goodwill, and other intangible assets from stockholders' equity. Tangible assets is calculated by subtracting goodwill and other intangible assets from total assets. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
Adjusted efficiency ratio is calculated by subtracting loss on investments in alternative energy partnerships from noninterest expense and adding total pre-tax return, which includes the loss on investments in alternative energy partnerships, to the sum of net interest income and noninterest income (total revenue). Pre-tax pre-provision income is calculated by adding total revenue and subtracting noninterest expense. 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 final results and operating performance of the Company.
This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.
EX 99.1
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tangible common equity, and tangible common equity to tangible assets ratio | |||||||||||||||
| Total assets | $ | 7,770,138 | $ | 7,662,607 | $ | 7,828,410 | $ | 8,625,337 | $ | 9,359,931 | |||||
| Less goodwill | (37,144) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less other intangible assets | (3,292) | (3,722) | (4,151) | (4,605) | (5,105) | ||||||||||
| Tangible assets^(1)^ | $ | 7,729,702 | $ | 7,621,741 | $ | 7,787,115 | $ | 8,583,588 | $ | 9,317,682 | |||||
| Total stockholders' equity | $ | 846,959 | $ | 835,002 | $ | 907,245 | $ | 900,988 | $ | 963,544 | |||||
| Less goodwill | (37,144) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less other intangible assets | (3,292) | (3,722) | (4,151) | (4,605) | (5,105) | ||||||||||
| Tangible equity^(1)^ | 806,523 | 794,136 | 865,950 | 859,239 | 921,295 | ||||||||||
| Less preferred stock | (185,037) | (187,687) | (189,825) | (189,825) | (231,128) | ||||||||||
| Tangible common equity^(1)^ | $ | 621,486 | $ | 606,449 | $ | 676,125 | $ | 669,414 | $ | 690,167 | |||||
| Total stockholders' equity to total assets | 10.90 | % | 10.90 | % | 11.59 | % | 10.45 | % | 10.29 | % | |||||
| Tangible equity to tangible assets^(1)^ | 10.43 | % | 10.42 | % | 11.12 | % | 10.01 | % | 9.89 | % | |||||
| Tangible common equity to tangible assets^(1)^ | 8.04 | % | 7.96 | % | 8.68 | % | 7.80 | % | 7.41 | % | |||||
| Common shares outstanding | 49,750,958 | 49,593,077 | 50,413,681 | 50,406,763 | 50,397,769 | ||||||||||
| Class B non-voting non-convertible common shares outstanding | 477,321 | 477,321 | 477,321 | 477,321 | 477,321 | ||||||||||
| Total common shares outstanding | 50,228,279 | 50,070,398 | 50,891,002 | 50,884,084 | 50,875,090 | ||||||||||
| Tangible common equity per common share^(1)^ | $ | 12.37 | $ | 12.11 | $ | 13.29 | $ | 13.16 | $ | 13.57 | |||||
| Book value per common share | $ | 13.18 | $ | 12.93 | $ | 14.10 | $ | 13.98 | $ | 14.40 |
(1)Non-GAAP measure.
EX 99.1
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | |||||||||||
| Return on tangible common equity | |||||||||||||||
| Average total stockholders' equity | $ | 854,250 | $ | 916,047 | $ | 912,749 | $ | 961,739 | $ | 962,933 | |||||
| Less average preferred stock | (185,471) | (189,607) | (189,824) | (213,619) | (231,128) | ||||||||||
| Less average goodwill | (37,144) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less average other intangible assets | (3,574) | (4,003) | (4,441) | (4,935) | (5,503) | ||||||||||
| Average tangible common equity^(1)^ | $ | 628,061 | $ | 685,293 | $ | 681,340 | $ | 706,041 | $ | 689,158 | |||||
| Net (loss) income | $ | (18,449) | $ | (6,593) | $ | 14,272 | $ | (14,132) | $ | 16,582 | |||||
| Less preferred stock dividends and impact of preferred stock redemption | (3,393) | (3,007) | (3,540) | (8,496) | (4,308) | ||||||||||
| Add amortization of intangible assets | 430 | 429 | 454 | 500 | 621 | ||||||||||
| Less tax effect on amortization and impairment of intangible assets | (90) | (90) | (95) | (105) | (130) | ||||||||||
| Net (loss) income available to common stockholders^(1)^ | $ | (21,502) | $ | (9,261) | $ | 11,091 | $ | (22,233) | $ | 12,765 | |||||
| Return on average equity | (8.69) | % | (2.89) | % | 6.20 | % | (5.83) | % | 6.91 | % | |||||
| Return on average tangible common equity^(1)^ | (13.77) | % | (5.44) | % | 6.46 | % | (12.49) | % | 7.43 | % | |||||
| Statutory tax rate utilized for calculating tax effect on amortization of intangible assets | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | |||||
| Three Months Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | |||||||||||
| Adjusted efficiency ratio including the pre-tax effect of <br> investments in alternative energy partnerships | |||||||||||||||
| Noninterest expense | $ | 72,770 | $ | 46,919 | $ | 47,483 | $ | 43,240 | $ | 43,500 | |||||
| (Loss) gain on investments in alternative energy partnerships | 167 | (1,905) | (1,039) | 940 | 355 | ||||||||||
| Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships^(1)^ | $ | 72,937 | $ | 45,014 | $ | 46,444 | $ | 44,180 | $ | 43,855 | |||||
| Net interest income | $ | 55,315 | $ | 51,861 | $ | 56,660 | $ | 58,915 | $ | 64,780 | |||||
| Noninterest income | 5,528 | 2,061 | 4,930 | 3,181 | (2,290) | ||||||||||
| Total revenue | 60,843 | 53,922 | 61,590 | 62,096 | 62,490 | ||||||||||
| Tax credit from investments in alternative energy partnerships | — | — | 1,689 | 77 | 1,680 | ||||||||||
| Deferred tax expense on investments in alternative energy partnerships | — | — | (177) | (8) | (176) | ||||||||||
| Tax effect on tax credit and deferred tax expense | — | — | 267 | 7 | 426 | ||||||||||
| (Loss) gain on investments in alternative energy partnerships | 167 | (1,905) | (1,039) | 940 | 355 | ||||||||||
| Total pre-tax adjustments for investments in alternative energy partnerships | 167 | (1,905) | 740 | 1,016 | 2,285 | ||||||||||
| Adjusted total revenue^(1)^ | $ | 61,010 | $ | 52,017 | $ | 62,330 | $ | 63,112 | $ | 64,775 | |||||
| Efficiency ratio^(1)^ | 119.60 | % | 87.01 | % | 77.10 | % | 69.63 | % | 69.61 | % | |||||
| Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships^(1)^ | 119.55 | % | 86.54 | % | 74.51 | % | 70.00 | % | 67.70 | % | |||||
| Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense | 22.90 | % | 24.03 | % | 15.00 | % | 9.36 | % | 22.07 | % |
(1)Non-GAAP measure.
EX 99.1
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||
| Total noninterest income | $ | 5,528 | $ | 2,061 | $ | 4,930 | $ | 3,181 | $ | (2,290) |
| Adjustments for non-core items: | ||||||||||
| Net (gain) loss on securities available for sale | (2,011) | — | (3) | 5,794 | — | |||||
| Fair value adjustment on loans held for sale | (25) | 1,586 | (30) | (16) | (59) | |||||
| Total non-core adjustments - noninterest income | (2,036) | 1,586 | (33) | 5,778 | (59) | |||||
| Adjusted noninterest income^(1)^ | $ | 3,492 | $ | 3,647 | $ | 4,897 | $ | 8,959 | $ | (2,349) |
| Total noninterest expense | $ | 72,770 | $ | 46,919 | $ | 47,483 | $ | 43,240 | $ | 43,500 |
| Adjustments for non-core items: | ||||||||||
| Naming rights termination | (26,769) | — | — | — | — | |||||
| Extinguishment of debt | (2,515) | — | — | — | — | |||||
| Data processing | — | — | — | — | (797) | |||||
| Professional fees (recoveries) | (875) | (1,678) | 3,557 | 2,615 | 6,214 | |||||
| Restructuring (expense) reversal | — | — | (1,626) | — | 158 | |||||
| Other expenses | — | — | — | (131) | — | |||||
| Total non-core adjustments - noninterest expense | (30,159) | (1,678) | 1,931 | 2,484 | 5,575 | |||||
| (Loss) gain on investments in alternative energy partnerships | 167 | (1,905) | (1,039) | 940 | 355 | |||||
| Total adjustments - noninterest expense | (29,992) | (3,583) | 892 | 3,424 | 5,930 | |||||
| Adjusted noninterest expense^(1)^ | $ | 42,778 | $ | 43,336 | $ | 48,375 | $ | 46,664 | $ | 49,430 |
| Three Months Ended | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | ||||||
| Net interest income | $ | 55,315 | $ | 51,861 | $ | 56,660 | $ | 58,915 | $ | 64,780 |
| Noninterest income | 5,528 | 2,061 | 4,930 | 3,181 | (2,290) | |||||
| Total revenue | 60,843 | 53,922 | 61,590 | 62,096 | 62,490 | |||||
| Noninterest expense | 72,770 | 46,919 | 47,483 | 43,240 | 43,500 | |||||
| Pre-tax pre-provision income^(1)^ | $ | (11,927) | $ | 7,003 | $ | 14,107 | $ | 18,856 | $ | 18,990 |
| Net interest income | $ | 55,315 | $ | 51,861 | $ | 56,660 | $ | 58,915 | $ | 64,780 |
| Noninterest income | 5,528 | 2,061 | 4,930 | 3,181 | (2,290) | |||||
| Total non-core adjustments - noninterest income | (2,036) | 1,586 | (33) | 5,778 | (59) | |||||
| Adjusted noninterest income^(1)^ | 3,492 | 3,647 | 4,897 | 8,959 | (2,349) | |||||
| Total revenue | 58,807 | 55,508 | 61,557 | 67,874 | 62,431 | |||||
| Noninterest expense | 72,770 | 46,919 | 47,483 | 43,240 | 43,500 | |||||
| Total adjustments - noninterest expense | (29,992) | (3,583) | 892 | 3,424 | 5,930 | |||||
| Adjusted noninterest expense^(1)^ | 42,778 | 43,336 | 48,375 | 46,664 | 49,430 | |||||
| Adjusted pre-tax pre-provision income^(1)^ | $ | 16,029 | $ | 12,172 | $ | 13,182 | $ | 21,210 | $ | 13,001 |
(1)Non-GAAP measure.
23
banc2020q2investordeckre
INVESTOR PRESENTATIONbancofcal.com 2020 Second Quarter Earnings bancofcal.com
FORWARD LOOKING STATEMENTS When used in this presentation and in documents filed with or furnished to the Securities and Exchange Commission (the �SEC�), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases �be��e�e,� �����,� ������d,� ����� likely �e����,� �a�e expected ��,� ����� c������e,� ��� a���c��a�ed,� �e����a�e,� �����ec�,� ���a��,� or similar expressions are intended to identify �f���a�d-looking ��a�e�e���� within the meaning of the "Safe- Harbor" provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California Inc. and its affiliates (�BANC,� the �C���a��,� ��e,� ���� or �����), as well as the potential effects of the COVID-19 pandemic on the C���a���� business, operations, financial performance and prospects. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements. Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (i) the costs and effects of litigation generally, including legal fees and other expenses, settlements and judgments; (ii) the effect of the novel coronavirus (COVID-19) pandemic and steps taken by governmental and other authorities to contain, mitigate and combat the pandemic on our business, operations, financial performance and prospects; (iii) the risk that the benefits we realize from exiting the third party mortgage origination and brokered single-family residential lending business will be less than anticipated and that the costs we incur from exiting that business will be greater than anticipated; (iv) the risk that we will not be successful in the implementation of our capital utilization strategy and our other strategies for transitioning to a traditional community bank; (v) risks that the C���a���� merger and acquisition transactions may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all; (vi) 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 but not limited to the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan and lease delinquencies, losses and nonperforming assets in our loan and lease portfolio, and may result in our allowance for credit losses not being adequate and require us to materially increase our loan and lease loss reserves; (vii) the quality and composition of our securities portfolio; (viii) changes in general economic conditions, either nationally or in our market areas, or changes in financial markets; (ix) continuation of or changes in the short-term interest rate environment, changes in the levels of general interest rates, volatility in the interest rate environment, the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin and funding sources; (x) fluctuations in the demand for loans and leases, and fluctuations in commercial and residential real estate values in our market area; (xi) our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities; (xii) results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, restrict our ability to invest in certain assets, increase our allowance for credit losses, write-down asset values or increase our capital levels, affect our ability to borrow funds or maintain or increase deposits, or impose fines, penalties or sanctions, any of which could adversely affect our liquidity and earnings; (xiii) legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (xiv) our ability to control operating costs and expenses; (xv) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (xvi) the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses; (xvii) errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation; (xviii) failures or security breaches with respect to the network and computer systems on which we depend, including but not limited to, due to cybersecurity threats; (xix) our ability to attract and retain key members of our senior management team; (xx) increased competitive pressures among financial services companies; (xxi) changes in consumer spending, borrowing and saving habits; (xxii) the effects of severe weather, natural disasters, pandemics, acts of war or terrorism and other external events on our business; (xxiii) the ability of key third-party providers to perform their obligations to us; (xxiv) changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; (xxv) the transition to a new accounting standard adopted by the Financial Accounting Standards Board, referred to as Current Expected Credit Loss, which will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses; (xxvi) share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common shares and attempting to generate negative publicity about us; (xxvii) war or terrorist activities; and (xxviii) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described from time to time in other documents that we file with or furnish to the SEC. Second Quarter 2020 | 1
SECOND QUARTER 2020 RESULTS ($ in Thousands Except EPS) 2Q20 1Q20 2Q19 Net interest income $ 55,315 $ 51,861 $ 64,780 Provision (reversal) for credit losses $ 11,826 $ 15,761 $ (1,900) Net income (loss) $ (18,449) $ (6,593) $ 16,582 Pre-tax pre-provision (loss) income1 $ (11,927) $ 7,003 $ 18,990 Adjusted pre-tax pre-provision income1 $ 16,029 $ 12,172 $ 13,001 (Loss) / Earnings Per Share $ (0.44) $ (0.19) $ 0.23 Average assets $ 7,740,206 $ 7,562,942 $ 9,610,575 Net interest margin 3.09% 2.97% 2.86% Allowance for credit losses coverage ratio 1.68% 1.45% 0.95% Common equity tier 1 11.68% 11.58% 10.50% Tangible common equity per common share $ 12.37 $ 12.11 $ 13.57 Core deposits as % of total loans 97.02% 96.07% 92.36% � Strong capital ratios + reserve provide for buffer against uncertainty � Noninterest-bearing deposits increased $135.4 million to represent 23% of total deposits � Pre-tax pre-provision net loss due to the LAFC agreement termination (1) Denotes a non-GAAP f��a�c�a� �ea���e; �ee �N��-GAAP Rec��c���a����� ���de� a� e�d �f ��e�e��a���� Second Quarter 2020 | 2
TRANSFORMING BANC OF CALIFORNIA Phase One Phase Two Phase Three Building the Foundation Generating Profitable High Performing Growth Institution � Improve deposit mix � Continue to � Consistently optimize deposit generate � Non-interest bearing deposits increased to 23% of mix and grow DDA performance that total deposits from 16% on 6/30/19 balances favorably compares � Reduce cost of funds to peer group: � Grow total loan � Spot COD declined to 59 bps from 150 bps in 2Q19 balances � ROAA � Refinanced $111 million term debt in 2Q20 resulting � ROTCE in savings of 88 bps per year starting in 3Q20 � Realize operating � Rightsize balance sheet leverage � Efficiency Ratio � Total assets decreased 17% since 6/30/19; resulted � Expand net interest � Cost / Mix of in increased capital ratios margin Deposits � Reduce expenses � NCOs/Average Loans � Adjusted non-interest expense reduced 13% from � Expand customer 2Q19 base Opportunities to Accelerate Improvement in Financial Performance � Terminate LAFC Agreement � Redeem Preferred Stock Complete Started � Refinance FHLB Advances � Diversify Out of CLO Portfolio Not Started Second Quarter 2020 | 3
CONTINUED EXECUTION ON STRATEGIC PLAN THROUGH THE COVID-19 CRISIS 2nd Quarter 2020 Progress � Conservatively underwritten, real estate heavy loan portfolio Strong Credit continues to demonstrate stability during pandemic Metrics � ACL/Total Loans strengthened to 1.68% (1.76% net of PPP loans) � Noninterest-bearing deposits increased $135.4 million and Continued Growth in represent 23% of total deposits at 6/30/20 NIB and Low-Cost Deposits � Spot deposit rate declined 30 bps to 0.59% � NIM expanded 12 bps to 3.09% Term Debt � Refinanced / restructured $211 million in FHLB term advances to Management benefit future NIM Expense � LAFC agreement terminated, reducing future expenses by $7 Management million per year High Capital Levels � Common Equity Tier 1 Capital remains strong at 11.68% Second Quarter 2020 | 4
PROACTIVE APPROACH TO ADDRESS COVID-19 UNCERTAINTY EMPLOYEES Developing a Return To The Workplace (RTTW) Playbook. The Playbook is a coordinated plan to safely return our employees to the workplace � Based on federal guidelines and directives from local and state public health authorities � Phased approach designed to ensure an efficient and effective process for site entry, physical distancing, PPE and facial coverings, cleaning and hygiene and use of common areas � Includes Health Pre-Screening process as well as a tracking system to monitor and address COVID-19 cases/potential cases and workplace illness CLIENTS � PPP program: approved 1,106 loans with $262 million in balances and $7.5 million in fees � PPP funds supported over 25,000 jobs; over 300 new clients were provided with loans � Proactive outreach to clients to identify risk and mitigation strategies, and engage with stressed borrowers � 142 active SFR loans on forbearance for $164 million of loans and 156 non-SFR active payment deferrals for $440 million of loans as of June 30, 2020 1,2 � Operating 25 of 31 branches on reduced-hour schedules COMMUNITY � Developed online financial literacy classes for young adults to continue to support our community partners while keeping all participants safe � Sponsored and volunteered to support five LAFC black and gold blood drives in partnership with the American Red Cross at the Banc of California Stadium (1) Excludes loans in deferment or forbearance that are current (2) Excludes loans delinquent prior to COVID-19 Second Quarter 2020 | 5
DEVELOPING RECURRING AND SUSTAINABLE EARNINGS PROFILE ($ in millions) 2Q20 � 31.7% increase in adjusted Adjusted pre-tax pre-provision (PTPP) PTPP ROAA: income 0.83% $0.9 $(0.2) $(0.0) $16.0 � Higher adjusted PTPP income $2.5 $(2.0) relative to average asset growth � Recurring PTPP income underlies reported net $26.8 income/loss and shows consistent trend when excluding the LAFC naming rights agreement termination charge, debt retirement $(11.9) expense, fair value 2Q20 LAFC Debt Non- Gain on alt. Fair value Securities 2Q20 adjustment on loans held for PTPP Loss Restructure retirement Core energy adjustment gain on sale Adjusted sale, securities gain on sale, expense Expense partnerships on loans PTPP Income alternative energy partnership held for sale 1Q20 activity, and non-core Adjusted expenses PTPP ROAA: � Non-core expense relates to 0.65% indemnified legal expenses net of recoveries $12.2 $1.6 $0.0 � Loans held-for-sale fair value $1.9 $7.0 $1.7 adjustment in 1Q20 driven by $0.0 $0.0 change in market rates is unrealized 1Q20 PTPP LAFC Debt Non- Loss on Fair value Securities 1Q20 Income Restructure retirement Core alternative adjustment gain on sale Adjusted expense Expense energy on loans PTPP Income partnerships held for sale Second Quarter 2020 | 6
RAPIDLY IMPROVING DEPOSIT FRANCHISE Average Cost of deposits Money Market & Savings � $135.4 million quarterly increase 1.62% Noninterest-bearing Brokered CDs in noninterest-bearing deposits 1.48% Interest-bearing checking CDs 1.27% � Large percentage of noninterest- Spot 1.11% bearing and low-cost deposits Rate 0.59% � Targeted deposit strategy 0.71% resulting in lower deposit costs over time 19% 15% 24% 24% 22% 3% 1% 0% 4% � Selective use of brokered CDs 6% 30% 26% 28% to replace migration out of high- 29% 30% cost deposits Cost of Deposits 28% 31% 25% 26% 28% � Spot rate at June 30, 2020 was 16% 19% 20% 23% 23% 59 bps 2Q19 3Q19 4Q19 1Q20 2Q20 Category 2Q19 3Q19 4Q19 1Q20 2Q20 $ in millions Noninterest-bearing checking $993.7 $1,107.4 $1,088.5 $1,256.1 $1,391.5 Interest-bearing checking 1,577.9 1,503.2 1,533.9 1,572.4 1,846.7 Demand deposits 2,571.6 2,610.7 2,622.4 2,828.5 3,238.2 Savings 1,061.1 1,042.2 885.2 877.9 939.0 Money Market 800.9 695.5 715.5 575.8 765.9 Non-maturity deposits 1,862.0 1,737.7 1,600.7 1,453.8 1,704.9 CDs 1,479.1 1,367.3 1,204.0 1,071.9 924.6 Brokered CDs 379.5 54.4 - 208.7 169.8 Total1 $6,292.3 $5,770.1 $5,427.2 $5,562.8 $6,037.5 (1) Reflects balance as of period end Second Quarter 2020 | 7
DEMAND DEPOSIT GROWTH BY BUSINESS UNITS1 ($ in millions) +26% $3,238 $2,828 $2,572 $2,611 $2,622 $904 $770 $796 $775 $758 $1,908 $1,580 $1,458 $1,500 $1,545 $255 $302 $296 $457 $399 $62 $33 $24 $22 $27 2Q19 3Q19 4Q19 1Q20 2Q20 Community & Business Banking Commercial Real Estate & Banking Private & Specialty Other (1) Reflects balance as of period end Second Quarter 2020 | 8
DIVERSIFIED LOAN PORTFOLIO 2nd Quarter 2020 1st Quarter 2020 Change Loan Segment $1 % Av g. Yie ld $1 % Av g. Yie ld $ % Av g. Yie ld $ in Millions C&I $ 1,437 26% 4.45% $ 1,578 28% 4.72% $ (141) -2% -0.27% Multifam ily 1,434 25% 4.50% 1,466 26% 4.50% (32) -1% 0.00% CRE 823 15% 4.86% 810 14% 4.80% 13 1% 0.06% Construction 213 4% 5.30% 228 4% 6.03% (15) 0% -0.73% SBA 311 6% 5.64% 71 1% 7.79% 240 5% -2.15% SFR 1,371 24% 4.03% 1,467 26% 4.01% (97) -2% 0.02% Consumer 39 1% 4.44% 47 1% 5.38% (8) 0% -0.94% Total Loans HFI $ 5,628 100% 4.49% $ 5,667 100% 4.56% $ (40) N/A -0.07% Loan Balances by Segment Real Estate Secured with low LTVs $ in millions � 66% of loan portfolio is secured by $6,720 $6,383 $5,952 $5,667 $5,628 residential real estate (primary $2,022 $1,835 residences) $1,645 $1,515 $1,410 � ~89% of all real estate secured loans 70% 71% 72% 73% 75% have loan-to-values (LTVs) of less than 70% $4,697 $4,548 $4,307 $4,153 $4,218 � ~84% of all existing SFR have loan-to- values (LTVs) of less than 70% 2Q19 3Q19 4Q19 1Q20 2Q20 Commercial / Loans-HFI SFR & Consumer Commercial � We�g��ed a�e�age LTV�� �f 57% (1) Reflects balance as of period end Second Quarter 2020 | 9
ADDITIONAL DETAIL ON DEFERRALS AND LOAN EXPOSURE Forbearance / Deferrals by Loan Category1,2 CRE Exposure by Property Type ($ in millions) % of Total Total Approved % of Balance ($ in millions) Approved Loans Deferrals Balance Total WALTV WADSCR (as of June 30, 2020) Deferrals $ % $ # % Loans 1-4 Family Residential $1,371 24% $164 142 3% $ % % # $ # Multifamily 1,434 25% 114 30 2% Retail $ 308 5% 54% 1.71x $ 130 31 CRE 823 15% 219 53 4% Office 202 4% 62% 2.64x 35 8 Construction & Dev. 213 4% 32 8 1% Industrial 88 2% 54% 2.11x 22 4 Commercial & Industrial 1,437 26% 53 55 1% Other Consumer 39 1% 1 4 <1% Hospitality 7 <1% 71% 2.32x 4 4 SBA3 311 6% 22 6 <1% Other 218 4% 89% 2.11x 28 6 Total $5,628 100% $604 298 11% Total $ 823 15% 65% 1.75x $ 219 53 # of Approved Deferrals Trend Commentary � All deferrals granted were 90 days in duration -58% � Deferments for SFR portfolio are forbearances � If further Covid-19 related hardship deferments are requested, an additional three-month period may be granted with supplementary credit enhancements -93% � Low exposure to High Stress CRE Sectors; weighted 205 average LTV for CRE portfolio is 65% � May and June deferment volume decreased significantly 87 following an influx of deferment requests prior to end of 6 April � Of real estate secured loans on deferment, 93% have an March - April May June LTV of 70% or lower (1) Excludes loans in forbearance that are current (2) Excludes loans delinquent prior to COVID-19 Second Quarter 2020 | 10 (3) The SBA deferrals are 504 loans
ASSET QUALITY HIGHER DELINQUENCIES & NPL RATIOS MITIGATED BY LOW LTVS Delinquencies ($ in millions) Delinquencies / Loans SFR Delinquencies Delinquencies /Total Loans Delinquencies (ex-SFR) $95.2 Delinquencies (ex-SFR)/Loans (ex-SFR) 1.69% $85.0 1.50% $56.3 $57.6 0.97% $52.2 $70.3 0.78% 0.88% $71.4 0.59% $43.4 $38.6 $45.4 0.29% 0.24% 0.33% 0.32% $24.9 $13.6 $10.9 $14.2 $13.6 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 Non-performing Loans (NPLs) ($ in millions) Non-performing Loans (NPLs) / Loans 207% NPLs/Total Loans-HFI 139% 133% 139% ACL / NPLs 124% NPLs (ex-SFR) / Loans (ex-SFR) 1.29% SFR NPLs 1.00% $72.7 NPLs (ex-SFR) 0.73% $56.5 0.71% 1.04% $28.5 0.43% $45.2 $43.4 $24.4 0.76% $28.8 $15.6 0.64% $18.6 0.57% $15.9 $44.2 0.27% $29.6 $24.7 $32.1 $12.8 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 � 2Q20 total delinquencies and NPLs increased $10.2 million and $16.2 million due mostly to one $11.5 million relationship well-secured by commercial and single-family residential properties Second Quarter 2020 | 11
NON-PERFORMING & DELINQUENT LOANS ROLLFORWARD TOP 10 RELATIONSHIPS Non-performing Loans ($ in thousands) 1Q 2Q 2Q Loan # 1Q20 Delta 2Q20 Accrual Accrual Delinquency Category � NPLs include 3 relationships totaling Status Status Status 1 $ 16,363 $ (10) $ 16,353 C&I Non-Accrual Non-Accrual Current $36.9 million, or 51% of total NPLs, 2 - 11,483 11,483 CRE / SFR Accrual Non-Accrual 90+ that are well-secured or specifically 3 9,065 - 9,065 SFR Non-Accrual Non-Accrual 90+ reserved. The remaining NPLs 4 3,658 - 3,658 C&I Non-Accrual Non-Accrual 90+ include $19.4 million of SFR loans 5 3,253 - 3,253 SFR Non-Accrual Non-Accrual 90+ and $16.4 million of non-SFR loans 6 2,763 (34) 2,729 CRE Non-Accrual Non-Accrual Current 7 - 2,486 2,486 SFR Accrual Non-Accrual 90+ 8 2,024 (49) 1,975 SFR Non-Accrual Non-Accrual 90+ 9 1,881 - 1,881 SFR Non-Accrual Non-Accrual 90+ � 2Q20 total delinquencies and NPLs 10 1,766 (80) 1,685 SBA / C&I Non-Accrual Non-Accrual Current increased $10.2 million and $16.2 11+ 15,699 2,436 18,135 million due mostly to one $11.5 Total $ 56,471 $ 16,232 $ 72,703 million relationship well-secured by Delinquent Loans ($ in thousands) commercial and single-family 2Q 1Q 2Q Loan residential properties. The # 1Q20 Delta 2Q20 Accrual Delinquency Delinquency Category Status Status Status delinquency increase also included 1 $ - $ 11,483 $ 11,483 CRE / SFR Non-Accrual Current 90+ $8.0 million of three SFR loans 2 9,065 - 9,065 SFR Non-Accrual 90+ 90+ 3 3,658 - 3,658 C&I Non-Accrual 60-89 90+ 4 3,253 - 3,253 SFR Non-Accrual 90+ 90+ 5 - 2,986 2,986 SFR Accrual Current 30-59 6 2,980 - 2,980 SFR Accrual 30-59 30-59 7 2,954 - 2,954 SFR Accrual 30-59 30-59 8 - 2,498 2,498 SFR Accrual Current 30-59 9 2,486 - 2,486 SFR Non-Accrual 30-59 90+ 10 - 2,486 2,486 SFR Accrual Current 30-59 11+ 60,573 (9,229) 51,345 Total $ 84,970 $ 10,224 $ 95,194 Second Quarter 2020 | 12
ALLOWANCE FOR CREDIT LOSSES WALK THROUGH $ in millions $100.0 $95.0 $5.7 $94.6 $90.0 $85.0 $6.8 $0.6 1.68%1,2 $80.0 $82.1 ($0.6) 1.45%1 $75.0 $70.0 ACL Portfolio Recoveries Specific Economic ACL (3/31/20) Changes (net of Charge- Reserves Forecast (6/30/20) offs) and Other � 2Q20: Provision increased ACL $12.5 million primarily due to (1) increased specific reserves of $6.8 (mainly one legacy SNC loan) and (2) economic factors somewhat offset by the positive impact of government stimulus programs on our portfolio � The economic forecasts used were released during June and included the increased level of unemployment reported in Q2 modified by the positive effect of government stimulus specific to our portfolio � The reserve included qualitative factors to account for our visibility of actual conditions related to our loan portfolio � Our ACL methodology uses a nationally-recognized, third party model that includes many assumptions based on our and peer historical loss data, our current loan portfolio risk profile, and economic forecasts � Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments (1) Coverage percentage equals ACL to Total Loans (2) Excluding PPP loans, the Coverage ratio would increase by 8 bps Second Quarter 2020 | 13
CLO PORTFOLIO HAS DIVERSIFIED EXPOSURE CREDIT ENHANCEMENT PROVIDES SIGNIFICANT PRINCIPAL PROTECTION CLO Industry Breakdown � CLO portfolio has underlying diversified exposure with largest segment in Healthcare $668 million at June 30, 2020 & Pharmaceuticals at 13% (net of $35.3 million unrealized loss) � Limited exposure to severely stressed industries Aerospace & Defense 3% Other Healthcare & � AA and AAA holdings provide principal 16% Pharmaceuticals protection � exposure to underlying credit Construction & 13% Building losses would require a combination of 3% High Tech Containers, Industries lifetime defaults (25-35% CDR), loss severity Packaging & 11% Glass (40-50%), and prepayment assumptions (0- 3% Automotive 10% CPR) 3% Services - Business Capital 10% � Under these assumptions, the underlying Equipment 3% securities would need to take losses of Chemicals, approximately 25% before we would Plastics, & Retail FIRE - Banking, Finance, Rubber 4% Insurance & Real Estate anticipate incurring losses on principal 4% 7% Media - Broadcasting & � 2Q20 CLO Portfolio yield of 3.22% Subscription 4% Hotel, Gaming � Quarterly reset based on 3 Month Libor + Services Consumer & Leisure 4% Beverage, Food & Telecommun 5% 1.64% Tobacco ications 4% 5% Second Quarter 2020 | 14
CONTINUED FOCUS ON EXPENSE MANAGEMENT � Adjusted noninterest expense1 was flat with prior quarter with a 2% increase in average assets � Non-core expense/benefits relates to: 1) timing of indemnified legal costs/recoveries, 2) the impact of the LAFC agreement termination, 3) debt restructure expense, and 4) loss/gain on investments in alternative energy partnerships2 � Adjusted noninterest expense decreased 13% versus 2Q19 Noninterest Expense to Average Assets Adjusted Noninterest Expense to Average Assets ($ millions) ($ millions) 3.78% 2.41% 2.37% 2.50% 2.30% 2.22% 1.82% 1.97% $73 2.06% 2.13% $43 $43 $47 $47 $43 -13% $49 $47 $48 $43 $49 $47 $48 $43 $43 $30 -$6 -$3 -$1 $4 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 Total Non-Core expense Noninterest Expense / Average Assets Adjusted Noninterest Expense Adjusted Noninterest Expense Adjusted Noninterest expense / Average Assets (1) Denotes a non-GAAP f��a�c�a� �ea���e; �ee �N��-GAAP Rec��c���a����� ���de� a� e�d �f ��e�e��a���� (2) Loss on investments in alternative energy partnerships create tax credits to offset expense incurred Second Quarter 2020 | 15
TERMINATION OF LAFC AGREEMENT On May 22, 2020, we entered into a termination agreement with LAFC 2Q20 Impact Future Expense Savings Agreement Terms While retaining our �������� a� LAFC�� primary banking partner Incurred a one-time, and remaining as a For a termination fee of pre-tax charge to partner on a number of $20.1 million, we will operations of $26.8 other collaborations, the not have any continuing termination of the LAFC million to terminate the payment obligations to agreements is expected naming-rights LAFC after to save approximately agreements with LAFC $89 million over the December 31, 2020 remaining 12.5 year life of our former agreements with LAFC, or approximately $7 million per year Second Quarter 2020 | 16
STRONG CAPITAL BASE 2Q20 1Q20 4Q19 3Q19 2Q19 Common Equity Tier 1 11.68% 11.58% 11.56% 10.34% 10.50% Tier 1 Risk-based Capital 15.10% 14.91% 14.83% 13.32% 14.03% Leverage Ratio 10.56% 11.20% 10.89% 9.84% 9.62% Tangible Equity / Tangible Assets1 10.43% 10.42% 11.12% 10.01% 9.89% Tangible Common Equity / Tangible Assets1 8.04% 7.96% 8.68% 7.80% 7.41% � Strategic decision to exit non-franchise enhancing assets during 2020 resulted in build up of significant capital and steadily improving ratios � Repurchased 827,584 common shares during 1Q20 for aggregate cost of $12.0 million � Repurchases of common stock suspended after March 16, 2020 until better clarity on length and severity of pandemic � Repurchased 198,775 shares of Series D and Series E preferred stock for an aggregate cost of $4.2 million during the first half of 2020 � Repurchases of preferred stock suspended after July 23, 2020 until better clarity on the impact of the pandemic � Capital provides a buffer for the uncertain outlook and optionality to deploy for benefit of shareholders (1) Denotes a non-GAAP f��a�c�a� �ea���e; �ee �N��-GAAP Rec��c���a����� ���de� a� e�d �f ��e�e��a���� Second Quarter 2020 | 17
2020 STRATEGIC OBJECTIVES � Heightened monitoring for signs of stress in well-underwritten loan portfolio mainly secured by Heightened Focus CA-based real estate with relatively low LTVs on Credit � Maintain a high level of reserves given uncertain environment � New production focused on high quality relationship loans in our footprint � Growing noninterest-bearing and DDA deposits continues to improve deposit mix and drive expansion in net interest margin Build High Quality � Cost of deposits actively managed down to achieve peer median, with longer term goal of Deposit Base reaching below peer median � High touch relationship-banking for businesses and entrepreneurs driving value creation and growth Remix Balance Sheet � Lending teams gaining traction after joining in latter half of 2019 � Loan demand picking up with stronger borrowers capitalizing on investment opportunities and Accelerate � Commercial loan growth expected to more than offset legacy SFR and Multifamily payoffs in Loan Growth 2H20, resulting in flattish balance sheet year over year � High capital from reduction in balance sheet provides strong buffer in uncertain environment Optimize Use � Stock repurchases paused to preserve capital and provide flexibility � Opportunity to redeem preferred stock at appropriate time of Capital � Evaluating other uses of capital that will enhance earnings and improve franchise for the long- term 2020 �b�ec���e� �e��e�e�� acce�e�a���� �f ��e C���a���� ��a��f���a���� �� �e��� �f ���a�eg�c f�c�� a�d balance sheet composition. With strong capital, improving deposit franchise and relationship focus, progress on 2020 objectives should position the company for solid performance in 2021 and beyond. Second Quarter 2020 | 18
APPENDIX bancofcal.com
REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS 1 Real Estate Loan Balances1 Real Estate LTVs $ % Count $ in Millions $ in millions $4,626 $4,459 <50% $ 1,035 27% 904 $4,135 $3,971 $3,841 50% to 60% 990 26% 571 69% 70% 69% 70% 68% 60% to 70% 1,399 36% 673 70% to 80% 296 8% 186 >80% 122 3% 87 Total $ 3,841 100% 2,421 � ~89% of all real estate secured loans have loan-to-values (LTVs) of less than 70% 2Q19 3Q19 4Q19 1Q20 2Q20 � Weighted average LTV is 59% RE Loans / Loans-HFI RE Loans SFR LTVs $ % Count SFR Portfolio by LTV $ in Millions <50% $ 387 28% 504 >80% 50% to 60% 362 27% 360 70% to 80% <50% 60% to 70% 396 29% 384 70% to 80% 177 13% 157 >80% 48 3% 62 60% to 70% Total $ 1,371 100% 1,467 � ~84% of all existing SFR have loan-to-values 50% to 60% (LTVs) of less than 70% � Weighted average LTV is 57% (1) Excludes credit facilities Second Quarter 2020 | 20
CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIO HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type CRE & Multifamily Portfolio by State Industrial NV ALL Others 3.9% AZ Hospitality Other 0.3% 9.6% Retail 13.7% MultiFamily Office 63.5% 9.0% CA 93.5% Collateral Type Count Balance Av g. Loan Siz e W.A. LT V $ in thousands MultiFam ily 641 $ 1,434,071 $ 2,237 59.6% Office 51 202,088 3,963 62.0% Retail 89 308,243 3,463 53.7% Hospitality 6 7,030 1,172 71.0% Industrial 31 87,611 2,826 53.9% Other 77 217,721 2,828 88.7% Total CRE & MF 895 $ 2,256,764 $ 2,522 61.6% Second Quarter 2020 | 21
DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO Transportation Professional Accomodations 1% � ~68% C&I Concentration toward Services… 0.1% Food Services 2% Businesses focused on Finance and All Other Television / Motion C&I Insurance, and Real Estate and Rental Pictures 8% 2% Leasing Other Retail Trade 3% Finance and � Limited Exposure to High Stressed Insurance Whole Sale Business Industries Trade 54% 3% � 5% Gas Stations Healthcare Real Estate & � 2% Television / Motion Pictures 3% Rental Leasing Manufacturing 14% � 2% Food Services 4% � <1% Transportation Gas Stations 5% � <1% in Accommodations NAICS Industry Count $ Avg. Loan Size $ in thousands � All Other C&I includes a diverse mix of Finance and Insurance1 169 $ 777,015 $ 4,598 industry sectors Real Estate & Rental Leasing 145 201,630 1,391 � 2% Administrative and Support Gas Stations 57 76,510 1,342 Manufacturing 71 60,128 847 � 2% Management of Companies Healthcare 43 43,256 1,006 � 1% Education Services Wholesale trade 35 39,740 1,135 Other Retail Trade 39 37,699 967 � 1% Arts / Recreation Television / Motion Pictures 27 33,590 1,244 � 1% Construction / Contracting Food Services 20 30,216 1,511 Professional Services 47 14,975 319 Transportation 12 5,363 447 Accommodations 4 1,496 374 All Other C&I 111 115,373 1,039 Total C&I 780 $ 1,436,990 $ 1,842 (1) Includes Warehouse lending Second Quarter 2020 | 22
STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE ACL Composition 2Q20 1Q20 At CECL Adoption 4Q19 ($ in thousands) Amount % of Loans Amount % of Loans Amount % of Loans Amount % of Loans Commercial real estate $ 17,372 2.11% $ 13,620 1.68% $ 10,788 1.32% $ 5,941 0.73% Multifamily 25,105 1.75% 20,072 1.37% 13,214 0.88% 11,405 0.76% Construction 6,675 3.13% 7,052 3.09% 4,009 1.73% 3,906 1.69% Commercial and industrial 26,618 1.85% 23,573 1.49% 23,015 1.36% 22,353 1.32% SBA 4,184 1.35% 3,652 5.17% 3,508 4.94% 3,120 4.40% Total commercial loans 79,954 1.90% 67,969 1.64% 54,534 1.27% 46,725 1.08% Single family residential mortgage 9,665 0.71% 9,593 0.65% 10,066 0.63% 10,486 0.66% Other consumer 751 1.91% 681 1.44% 658 1.21% 438 0.81% Total consumer loans 10,416 0.74% 10,274 0.68% 10,724 0.65% 10,924 0.66% Allowance for loan losses 90,370 1.61% 78,243 1.38% 65,258 1.10% 57,649 0.97% Reserve for unfunded commitments 4,195 0.07% 3,888 0.07% 2,838 0.05% 4,064 0.07% Allowance for credit losses $ 94,565 1.68% $ 82,131 1.45% $ 68,096 1.14% $ 61,713 1.04% � Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments � Excluding PPP loans, the ACL coverage increases from 1.68% to 1.76% at the end of 2Q20 � 2Q20 SBA coverage ratio decreased due to PPP loans Second Quarter 2020 | 23
SECURITIES PORTFOLIO Securities Portfolio Detail1 Amortized Cost Amortized Cost QoverQ Fair Value Duration Security Type 1Q20 2Q20 Change 2Q20 2Q20 Gov�t � Agency �MBS � CMO� $ 242 $ 299 $ 58 $ 307 7.66 CLOs 704 704 - 668 0.07 Municipal 53 53 (0) 57 7.73 Corporate Securities 48 142 94 144 7.61 Total Securities $ 1,046 $ 1,198 $ 152 $ 1,176 3.20 Portfolio Profile1 Portfolio Average Balances & Yields Credit Rating Composition $1,305 $1,105 BBB $1,064 Municipal $953 12% 5% $834 Corporate Securities 3.83% 3.72% 12% 3.60% AAA AA G���� & AGC CLO 3.30% 30% 58% 26% 57% 2.95% 2Q19 3Q19 4Q19 1Q20 2Q20 Average Balance ($ in millions) Yield (1) Dollars in millions. Values that are greater than $0.0 million (or 0.0%) but less than $0.5 million (or 0.5%) are not shown. Second Quarter 2020 | 24
ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS Cost of Funds Drivers 2.85% 2.86% 2.74% 2.74% 2.75% 2.42% 2.34% 2.10% 1.89% 1.78% 1.65% 1.84% 1.57% 1.61% 1.75% 1.62% 1.55% 1.48% 1.41% 1.27% 1.03% 1.11% 0.93% 0.71% 2Q19 3Q19 4Q19 1Q20 2Q20 Cost of Interest-bearing deposits LT FHLB borrowings Cost of funds1 ST FHLB borrowings Cost of total deposits (1) Cost of funds includes senior debt with a fixed rate of 5.45% Second Quarter 2020 | 25
DECLINING DEPOSIT COSTS EXPAND NET INTEREST MARGIN1 Net Interest Margin Drivers 4.59% 4.50% 4.50% 4.27% 4.06% 3.09% 3.04% 2.97% 2.86% 2.86% 2.50% 2.09% 2.03% 1.85% 1.71% 2.00% 1.29% 1.75% 0.25% 0.25% 2Q19 3Q19 4Q19 1Q20 2Q20 Earning Asset Yield Net Interest Margin Fed Funds Rate Interest-Bearing Liabilities (1) PPP loans improve NIM by 3 bps Second Quarter 2020 | 26
EARNING ASSET YIELD PROTECTED BY FLOORS AND FIXED RATE ASSETS Interest-Earning Asset Mix ($ in millions) Yields on Average Earning Asset Types 4.80% 4.75% 4.71% Fixed 4.56% 4.48% 3.83% $1,298 3.60% 3.72% Hybrid (18%) 3.30% $2,882 2.84% 2.95% $1,045 2.57% (40%) Variable Floor 2.35% (14%) 1.84% 2.50% $2,043 2.00% 1.17% 1.75% (28%) 0.25% 0.25% Variable 2Q19 3Q19 4Q19 1Q20 2Q20 % of Total Interest- Category Total Balance Earning Assets Loans Other interest-earning assets 100+ bps $ 63 0.86% Securities Fed Funds Rate 50-100 bps 45 0.62% 25-50 bps 155 2.13% Loan Fixed/Hybrid Years to Maturity/Repricing 0-25 bps 61 0.83% ($ millions) No Floor 308 4.23% Sub total Non-Floor Variable $ 631 8.68% Floor 1,045 14.37% $2,384 Variable Loans $ 1,675 23.05% Hybrid Loans 2,882 39.66% Fixed Loans 1,070 14.72% Total HFI Loans $ 5,628 77.44% Total HFS Loans $ 20 0.27% Total Gross Loans $ 5,647 77.71% $676 Variable Securities 948 13.05% $569 Fixed Securities 228 3.14% $320 Total Securities $ 1,176 16.18% Other Interest-Earning Assets $ 444 6.11% Total Interest-Earning Assets $ 7,267 100.00% 1 Year 2 Years 3 Years > 3 Years Second Quarter 2020 | 27
BANC FAST FACTS (Dollars in millions1) 2Q20 1Q20 4Q19 3Q19 2Q19 Total assets $ 7,770 $ 7,663 $ 7,828 $ 8,625 $ 9,360 Securities available-for-sale 1,176 969 913 776 1,168 Loans receivable 5,628 5,667 5,952 6,383 6,720 Total deposits 6,037 5,563 5,427 5,770 6,292 Net interest income 55.3 51.9 56.7 58.9 64.8 Total noninterest income (loss) 5.5 2.1 4.9 3.2 (2.3) Total revenue 60.8 53.9 61.6 62.1 62.5 Noninterest expense3,4 72.9 45.0 46.4 44.2 43.9 (Gain) loss on investments in alternative energy partnerships (0.2) 1.9 1.0 (0.9) (0.4) Total noninterest expense 72.8 46.9 47.5 43.2 43.5 Pre-tax pre-provision income5 (11.9) 7.0 14.1 18.9 19.0 Provision for (reversal of) credit losses 11.8 15.8 (3.0) 38.6 (1.9) Net (loss) income (18.4) (6.6) 14.3 (14.1) 16.6 Preferred dividend and other adjustments 3.5 3.1 3.9 8.6 4.7 Net (loss) income available to common stockholders $ (21.9) $ (9.7) $ 10.4 $ (22.7) $ 11.9 Diluted (loss) earnings per common share $ (0.44) $ (0.19) $ 0.20 $ (0.45) $ 0.23 Return on average assets2 (0.96%) (0.35%) 0.71% (0.64%) 0.69% Adjusted efficiency ratio2,5 119.55% 86.54% 74.51% 70.00% 67.70% Class / CUSIP Issue Date Par Value Dividend Rate First Callable Date Preferred Equity Series ($000) / Coupon (%) Preferred Equity: Non-Cumulative, Perpetual D 05990K882 4/8/2015 $ 93,272 7.375% 6/15/2020 Preferred Equity: Non-Cumulative, Perpetual E 05990K874 2/8/2016 98,865 7.000% 3/15/2021 Total Preferred Equity $ 192,137 (1) All figures from reported operations unless noted; dollars in millions unless noted per share or percentage (2) Consolidated operations; Efficiency ratio adjusted for including the pre-tax effect of investments in alternative energy partnerships (3) Excluding loss on investments in alternative energy partnerships (4) Non-GAAP measure, reconciliation in table above (5) Non-GAAP financial Second Quarter 2020 | 28 �ea���e; �ee �N��-GAAP Rec��c���a����� ���de� a� e�d �f ��e�e��a����
NON-GAAP FINANCIAL INFORMATION This presentation contains certain financial measures determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). These measures include noninterest expense to average assets, pre-tax pre-provision income, noninterest expense from Core operations, operating expense from Core operations, adjusted pre-tax pre-provision income, and diluted earnings per common share from Core operations, adjusted for non-core items, each excluding loss on investments in alternative energy partnerships and the latter four measurements adjusted for non-core items. Management believes that these particular measures provide useful supplemental information in understanding our core operating performance. These measures should not be viewed as substitutes for measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP measures that may be presented by other companies. Reconciliations of these measures to measures determined in accordance with GAAP are contained on slides 30-34 of this presentation. Non-GAAP measures in this presentation also include tangible equity to tangible assets, tangible common equity to tangible assets, return on average tangible common equity, and adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships. These particular measures are used by management in its analysis of the Company's capital strength and the performance of the C���a���� businesses. Banking and financial institution regulators also exclude goodwill and other intangible assets from total stockholders' equity when assessing the capital adequacy of a financial institution. Management believes the presentation of these measures excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital and financial strength of the Company and the performance of its businesses. These measures should not be viewed as substitutes for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP measures that may be presented by other companies. Reconciliations of these measures to measures determined in accordance with GAAP are contained on slides 30-34 of this presentation. Second Quarter 2020 | 29
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Noninterest expense $ 72,770 $ 46,919 $ 47,483 $ 43,240 $ 43,500 (Loss) gain on investments in alternative energy partnerships (167) 1,905 1,039 (940) (355) Adjusted noninterest expense 72,937 45,014 46,444 44,180 43,855 Net interest income 55,315 51,861 56,660 58,915 64,780 Noninterest income (loss) 5,528 2,061 4,930 3,181 (2,290) Total revenue 60,843 53,922 61,590 62,096 62,490 Tax credit from investments in alternative energy partnerships - - 1,689 77 1,680 Deferred tax expense on investments in alternative energy - - (177) (8) (176) partnerships Tax effect on tax credit and deferred tax expense - - 267 7 426 Gain (loss) on investments in alternative energy partnerships 167 (1,905) (1,039) 940 355 Total pre-tax adjustments for investments in alternative energy 167 (1,905) 740 1,016 2,285 partnerships Adjusted total revenue $ 61,010 $ 52,017 $ 62,330 $ 63,112 $ 64,775 Efficiency Ratio 119.60% 87.01% 77.10% 69.63% 69.61% Adjusted efficiency ratio including the pre-tax effect of 119.55% 86.54% 74.51% 70.00% 67.70% investments in alternative energy partnerships Effective tax rate utilized for calculating tax effect on tax credit 22.90% 24.03% 15.00% 9.36% 22.07% and deferred tax expense Second Quarter 2020 | 30
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Tangible Common Equity to Tangible Assets Ratio Total assets $ 7,770,138 $ 7,662,607 $ 7,828,410 $ 8,625,337 $ 9,359,931 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (3,292) (3,722) (4,151) (4,605) (5,105) Tangible assets $ 7,729,702 $ 7,621,741 $ 7,787,115 $ 8,583,588 $ 9,317,682 Total stockholders' equity $ 846,959 $ 835,002 $ 907,245 $ 900,988 $ 963,544 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (3,292) (3,722) (4,151) (4,605) (5,105) Tangible equity 806,523 794,136 865,950 859,239 921,295 Less: preferred stock (185,037) (187,687) (189,825) (189,825) (231,128) Tangible common equity $ 621,486 $ 606,449 $ 676,125 $ 669,414 $ 690,167 Total stockholders' equity to total assets 10.90% 10.90% 11.59% 10.45% 10.29% Tangible equity to tangible assets 10.43% 10.42% 11.12% 10.01% 9.89% Tangible common equity to tangible assets 8.04% 7.96% 8.68% 7.80% 7.41% Second Quarter 2020 | 31
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Return on tangible common equity Average total stockholders' equity $ 854,250 $ 916,047 $ 912,749 $ 961,739 $ 962,933 Less: Average preferred stock (185,471) (189,607) (189,824) (213,619) (231,128) Less: Average goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: Average other intangible assets (3,574) (4,003) (4,441) (4,935) (5,503) Average tangible common equity $ 628,061 $ 685,293 $ 681,340 $ 706,041 $ 689,158 Net (loss) income $ (18,449) $ (6,593) $ 14,272 $ (14,132) $ 16,582 Less: Preferred stock dividends and impact of preferred (3,393) (3,007) (3,540) (8,496) (4,308) stock redemption Add: Amortization of intangible assets 430 429 454 500 621 Less: Tax effect on amortization of intangible assets (90) (90) (95) (105) (130) Net (loss) income available to common stockholders $ (21,502) $ (9,261) $ 11,091 $ (22,233) $ 12,765 Return on average equity (8.69%) (2.89%) 6.20% (5.83%) 6.91% Return on average tangible common equity (13.77%) (5.44%) 6.46% (12.49%) 7.43% Statutory tax rate utilized for calculating tax effect on 21.00% 21.00% 21.00% 21.00% 21.00% amortization of intangible assets Second Quarter 2020 | 32
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Adjusted Noninterest Expense Total noninterest expense $ 72,770 $ 46,919 $ 47,483 $ 43,240 $ 43,500 Less: non-core items Naming rights termination (26,769) - - - - Debt retirement expense (2,515) - - - - Data processing fees - - - - (797) Professional fees (875) (1,678) 3,557 2,615 6,214 Restructuring expense - - (1,626) - 158 Other expense - - - (131) - Total non-core adjustments (30,159) (1,678) 1,931 2,484 5,575 Less: gain/(loss) on investments in alternative 167 (1,905) (1,039) 940 355 energy partnerships Total adjustments (29,992) (3,583) 892 3,424 5,930 Adjusted noninterest expense $ 42,778 $ 43,336 $ 48,375 $ 46,664 $ 49,430 Average assets $7,740,206 $7,562,942 $7,954,591 $8,695,638 $9,610,575 Noninterest expense / Average assets 3.78% 2.50% 2.37% 1.97% 1.82% Adjusted noninterest expense / Average assets 2.22% 2.30% 2.41% 2.13% 2.06% Second Quarter 2020 | 33
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Net interest income $ 55,315 $ 51,861 $ 56,660 $ 58,915 $ 64,780 Noninterest income 5,528 2,061 4,930 3,181 (2,290) Total revenue 60,843 53,922 61,590 62,096 62,490 Noninterest expense 72,770 46,919 47,483 43,240 43,500 Pre-tax pre-provision income (11,927) 7,003 14,107 18,856 18,990 Net interest income 55,315 51,861 56,660 58,915 64,780 Noninterest income 5,528 2,061 4,930 3,181 (2,290) Adjustments for non-core items - noninterest income (2,036) 1,586 (33) 5,778 (59) Adjusted noninterest income 3,492 3,647 4,897 8,959 (2,349) Total revenue 58,807 55,508 61,557 67,874 62,431 Noninterest expense 72,770 46,919 47,483 43,240 43,500 Total noninterest expense adjustments (29,992) (3,583) 892 3,424 5,930 Adjusted noninterest expense 42,778 43,336 48,375 46,664 49,430 Adjusted pre-tax pre-provision income $ 16,029 $ 12,172 $ 13,182 $ 21,210 $ 13,001 Second Quarter 2020 | 34
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