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): January 25, 2022
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 7.00% Non-Cumulative Perpetual Preferred Stock, Series E | BANC PRE | New York Stock Exchange |
Item 2.02 Results of Operations and Financial Condition.
On January 25, 2022, Banc of California, Inc. (the “Company”) issued a press release announcing 2021 fourth 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 fourth quarter results at 10:00 A.M. Pacific Time on Tuesday, January 25, 2022. Interested parties may attend the conference call by dialing (888) 317-6003, and referencing event code 7050527. 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 January 25, 2022.
99.2 Banc of California, Inc. Earnings Conference Call Presentation Materials dated January 25, 2022.
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.
| January 25, 2022 | /s/ Lynn M. Hopkins |
|---|---|
| Lynn M. Hopkins | |
| Executive Vice President and Chief Financial Officer |
3
Document
Banc of California Reports Fourth Quarter 2021 Financial Results
SANTA ANA, Calif., (January 25, 2022) — Banc of California, Inc. (NYSE: BANC) today reported net income of $5.8 million and net income available to common stockholders for the fourth quarter of 2021 of $4.0 million, or $0.07 per diluted common share. This compares to net income of $23.2 million and net income available to common stockholders of $21.4 million, or $0.42 per diluted common share, for the third quarter. The fourth quarter of 2021 included $13.5 million of pre-tax merger costs and $11.3 million of provision for credit losses for the loans acquired in the Pacific Mercantile Bancorp acquisition. For the year ended December 31, 2021, net income totaled $62.3 million and net income available to common stockholders totaled $50.6 million, or $0.95 per diluted common share. The year-to-date results for 2021 included $27.1 million of pre-tax merger costs and provision for credit losses related to the acquisition of Pacific Mercantile Bancorp.
Fourth quarter summary:
•Completed the acquisition of Pacific Mercantile Bancorp (the "PMB Acquisition") on October 18, 2021, for total purchase consideration of $225.4 million, adding $1.54 billion in total assets, $962.9 million in loans and $1.28 billion in deposits at acquisition date
•Completed the system conversion for the PMB Acquisition in November 2021
•Return on average assets of 0.24%
•Adjusted pre-tax pre-provision return on average assets of 1.39%, up from 1.34% in the prior quarter
•Net interest margin of 3.28%, flat with the prior quarter
•Average cost of total deposits of 0.11%, a 4 basis point decrease from the previous quarter
•Noninterest-bearing deposit balances represented 37% of total deposits at December 31, 2021, up from 26% a year earlier
•Allowance for credit losses at 1.35% of total loans and 187% of non-performing loans
•Non-performing loans increased 15.2% to $52.6 million as a result of loans acquired in the PMB Acquisition
•Common Equity Tier 1 capital at 11.38%
Jared Wolff, President & CEO of Banc of California, commented, “Our continued organic growth and initial benefits of the Pacific Mercantile Bancorp acquisition combined to produce a significant improvement in our core earnings power during the fourth quarter, with our adjusted pre-tax pre-provision income increasing 18% from the prior quarter and our adjusted pre-tax pre-provision return on average assets increasing 5 basis points to 1.39%. We finished the year with one of our largest quarters of loan fundings, with well balanced production across markets, asset classes and industries, while our deposit mix continued to improve with noninterest-bearing deposits increasing to 37% of total deposits at the end of 2021 and our spot rate cost of deposits declining to 0.07%.”
Mr. Wolff continued, “We continue to see good loan demand and high quality lending opportunities, and the deposit gathering engine we have built enables us to fund these loans with low-cost core deposits. With the combination of our continued momentum in business development, the positive impact of the Pacific Mercantile acquisition, and our increasing level of asset sensitivity, we believe we are very well positioned to deliver continued growth in revenue, earnings per share and franchise value.”
Lynn Hopkins, Chief Financial Officer of Banc of California, said, “Excluding the loans added from the Pacific Mercantile acquisition, we saw continued improvement in our asset quality with non-performing loans declining 32% from the end of the prior quarter, while criticized and classified loans declined 23%. Given the strength of our balance sheet and capital ratios, we remain in good position to redeem our Series E Preferred Stock during the first half of 2022, subject to regulatory approval, which will provide another catalyst for earnings growth going forward.”
Pacific Mercantile Bancorp Acquisition
On October 18, 2021, we acquired Pacific Mercantile Bancorp pursuant to an Agreement and Plan of Merger dated as of March 22, 2021. As a result of the PMB Acquisition, we issued approximately 11.9 million shares and $3.2 million in cash for total consideration of $225.4 million. We acquired $1.54 billion in total assets, including $962.9 million in loans, $1.3 billion in deposits, $17.5 million in trust preferred securities, and $57.2 million of goodwill. The PMB Acquisition reduced our tangible book value per share by approximately $0.10. The system conversion was completed in November 2021.
Income Statement Highlights
| Three Months Ended | Year Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | |||||||
| ( in thousands) | |||||||||||||
| Total interest and dividend income | $ | 71,791 | $ | 69,677 | $ | 68,618 | $ | 73,530 | $ | 291,659 | $ | 290,607 | |
| Total interest expense | 8,534 | 8,815 | 9,830 | 10,702 | 11,967 | 37,881 | 66,013 | ||||||
| Net interest income | 73,039 | 62,976 | 59,847 | 57,916 | 61,563 | 253,778 | 224,594 | ||||||
| Total noninterest income | 4,860 | 5,519 | 4,170 | 4,381 | 6,975 | 18,930 | 18,518 | ||||||
| Total revenue | 77,899 | 68,495 | 64,017 | 62,297 | 68,538 | 272,708 | 243,112 | ||||||
| Total noninterest expense | 58,127 | 37,811 | 40,559 | 46,735 | 38,950 | 183,232 | 199,033 | ||||||
| Pre-tax / pre-provision income | 19,772 | 30,684 | 23,458 | 15,562 | 29,588 | 89,476 | 44,079 | ||||||
| Provision for (reversal of) credit losses | 11,262 | (1,147) | (2,154) | (1,107) | 991 | 6,854 | 29,719 | ||||||
| Income tax expense | 2,759 | 8,661 | 6,562 | 2,294 | 6,894 | 20,276 | 1,786 | ||||||
| Net income | $ | 23,170 | $ | 19,050 | $ | 14,375 | $ | 21,703 | $ | 62,346 | $ | 12,574 | |
| Net income (loss) available to common stockholders(1) | $ | 21,443 | $ | 17,323 | $ | 7,825 | $ | 17,706 | $ | 50,563 | $ | (1,103) |
All values are in US Dollars.
(1)Balance represents the net income (loss) available to common stockholders after subtracting preferred stock dividends, income allocated to participating securities, participating securities dividends, and impact of preferred stock redemption from net income (loss). Refer to the Statements of Operations for additional detail on these amounts.
Net interest income
Q4-2021 vs Q3-2021
Net interest income increased $10.1 million to $73.0 million for the fourth quarter due to higher average interest-earning assets and a lower cost of interest-bearing liabilities, offset by a lower yield on interest-earning assets and higher average interest-bearing liabilities.
The net interest margin remained steady at 3.28% for the fourth quarter as the average earning-assets yield decreased 7 basis points and the average cost of total funding decreased 8 basis points. The yield on average interest-earning assets decreased to 3.66% for the fourth quarter from 3.73% for the third quarter due primarily to the impact of cash balances added in the PMB Acquisition that was subsequently deployed later in the fourth quarter. Average loans increased by $888.0 million and average securities and other interest-earning assets increased $314.8 million due mostly to the PMB Acquisition. The average yield on loans increased 2 basis points to 4.20% during the fourth quarter as a result of the portfolio mix and an increase in prepayment penalties, offset by a decrease in total PPP income. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased the loan yield by 12 basis points in the fourth quarter and 11 basis points in the third quarter.
The average cost of funds decreased 8 basis points to 0.41% for the fourth quarter from 0.49% for the third quarter. This decrease was driven by the lower average cost of interest-bearing liabilities due to an improved funding mix, including higher average noninterest-bearing deposits as a result of the PMB Acquisition. Average noninterest-bearing deposits represented 35% of total average deposits for the fourth quarter compared to 30% of total average deposits for the third quarter. Average noninterest-bearing deposits were $674.8 million higher in the fourth quarter compared to the third quarter while average deposits were $1.09 billion higher for the linked quarters due mostly to the PMB Acquisition. Average Federal Home Loan
Bank (FHLB) advances and other borrowings decreased $127.9 million, offset by the impact of $17.5 million of trust preferred securities added in the PMB Acquisition. The average cost of interest-bearing liabilities decreased 6 basis points to 0.61% for the fourth quarter from 0.67% for the third quarter due to our continuing efforts to actively manage down the cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 5 basis points to 0.17% for the fourth quarter from 0.22% for the third quarter. The average cost of total deposits decreased 4 basis points to 0.11% for the fourth quarter. The spot rate of total deposits was 0.07% at the end of the fourth quarter.
YTD 2021 vs YTD 2020
Net interest income for the year ended December 31, 2021 increased $29.2 million to $253.8 million from $224.6 million for 2020. Net interest income was positively impacted by higher average interest-earning assets, lower average interest-bearing liabilities and improved funding costs, offset by lower yields on average interest-earning assets. For the year ended December 31, 2021, average interest-earning assets increased $628.3 million to $7.79 billion, and the net interest margin increased 13 basis points to 3.26% compared to 3.13% for 2020.
The net interest margin expanded due to a 47 basis point decrease in the average cost of funds outpacing a 32 basis point decline in the average interest-earning assets yield. The average yield on interest-earning assets decreased to 3.74% for the year ended December 31, 2021, from 4.06% for 2020 due mostly to the impact of lower average market interest rates on loan and securities yields over these same timeframes. The average fed funds rate for the year ended December 31, 2021 was 0.08% compared to 0.38% for 2020. The average yield on loans was 4.24% for the year ended December 31, 2021, compared to 4.52% for 2020 and the average yield on securities decreased 48 basis points to 2.13% due mostly to CLOs repricing into the lower rate environment.
The average cost of funds decreased to 0.52% for the year ended December 31, 2021, from 0.99% for 2020. This decrease was driven by the lower average cost of interest-bearing liabilities and the overall improved funding mix, including higher average noninterest-bearing deposits. The average cost of interest-bearing liabilities decreased 51 basis points to 0.72% for the year ended December 31, 2021 from 1.23% for 2020 due to the combination of actively managing deposit pricing down into the lower interest rate environment and the overall reduced usage of FHLB advances to fund loan growth. Compared to 2020, the average cost of interest-bearing deposits declined 58 basis points to 0.27% and the average cost of total deposits decreased 47 basis points to 0.19%. Additionally, average noninterest-bearing deposits increased by $673.8 million or 50.9% for the year ended December 31, 2021 when compared to 2020.
Provision for credit losses
Q4-2021 vs Q3-2021
The provision for credit losses was $11.3 million for the fourth quarter, compared to a reversal of $1.1 million for the third quarter. The fourth quarter provision for credit losses of $11.3 million related to the initial charge for the expected lifetime losses related to loans acquired in the PMB Acquisition which are not credit impaired, referred to as "non-PCD loans", as well as the impact of net organic loan growth, specific reserves, improved economic forecasts and lower unfunded commitments at December 31, 2021.
YTD 2021 vs YTD 2020
During the year ended December 31, 2021, the provision for credit losses was $6.9 million, compared to $29.7 million during 2020. The lower provision for credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, lower specific reserves and consideration of credit quality metrics, offset partially by higher period end loan balances of $1.35 billion, which included the $11.3 million charge related to the initial allowance for credit losses established for non-PCD loans acquired in the PMB Acquisition.
Noninterest income
Q4-2021 vs Q3-2021
Noninterest income decreased $659 thousand to $4.9 million for the fourth quarter due mostly to a decrease in all other income offset by increases in customer service fees and net gains on the sale of loans. The $1.0 million decrease in all other income was due mostly to the third quarter including an $841 thousand gain related to a sale-leaseback transaction. The $137 thousand increase in customer service fees was due mostly to the increase in customer activity as a result of the PMB Acquisition. Net gain on sale of loans totaled $275 thousand during the fourth quarter and related to the sale of $11.2 million in underperforming loans.
YTD 2021 vs YTD 2020
Noninterest income for the year ended December 31, 2021 increased $412 thousand to $18.9 million compared to 2020. The increase in noninterest income was mainly due to higher customer service fees, income from bank-owned life insurance, and fair value gain for loans held for sale, offset by lower net gain on sale of securities and all other income. The $1.9 million increase in customer services fees was due mostly to higher deposit activity fees of $2.1 million. The increase in deposit activity fees is attributed to higher average deposit balances and our initiative to bring our service fee schedules more in line with market. Fair value adjustment for loans held for sale improved $1.7 million as 2020 included valuation losses on loans held for sale due to the impact of the decreases in market interest rates. There were no gains from sale of securities for the year ended December 31, 2021, compared to $2.0 million in net gains in 2020 from the sale of $20.7 million in securities, primarily consisting of corporate securities. The $1.7 million decrease in all other income is due mostly to 2020 including legal settlement income of $3.2 million and earnout income of $1.6 million which ended in 2020, offset by the increases from the aforementioned $841 thousand gain related to the sale-leaseback transaction, higher loan processing fees of $1.1 million and higher interest rate swap income of $502 thousand.
Noninterest expense
Q4-2021 vs Q3-2021
Noninterest expense increased $20.3 million to $58.1 million for the fourth quarter compared to the prior quarter. The increase was due mostly to higher merger-related costs of $12.5 million, salaries and employee benefits of $3.0 million, occupancy and equipment of $731 thousand, professional fees of $3.0 million, all other expense of $410 thousand and lower net gain in alternative energy partnership investments of $565 thousand. Total merger-related costs increased $12.5 million to $13.5 million for the fourth quarter compared to the prior quarter as the result of severance, system conversion, facilities-related and other transaction costs. The increase in salaries and employee benefits and occupancy and equipment is due mostly to the increase in employees and facilities as a result of the PMB Acquisition. Professional fees included net indemnified legal expenses of $642 thousand in the fourth quarter compared to net recoveries of $2.2 million during the third quarter.
Total operating costs, defined as noninterest expense adjusted for certain expense items (refer to section Non-GAAP Measures), increased $4.5 million to $45.2 million for the fourth quarter compared to $40.7 million for the prior quarter primarily due to the higher salaries and benefits of $3.0 million, higher occupancy and equipment of $731 thousand, and higher all other expense of $410 thousand.
YTD 2021 vs YTD 2020
Noninterest expense for the year ended December 31, 2021 decreased $15.8 million to $183.2 million compared to the prior year. The decrease was primarily due to: (i) 2020 including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, (ii) lower professional fees of $5.2 million, due mostly to a $3.0 million decrease in legal fees, net of insurance recoveries and a $1.9 million decrease in other professional fees, (iii) lower advertising fees of $2.8 million due to the termination of the LAFC agreements in May 2020, and (iv) lower all other expense of $4.2 million resulting from the previous year including a $2.5 million debt extinguishment fee for the early repayment of certain FHLB term advances and a $1.2 million charge for two legacy legal settlements combined with overall expense reduction efforts. These decreases were partially offset by: (i) higher salaries and employee benefits of $6.5 million due to the increase in personnel from the PMB Acquisition and higher commissions and incentive-based compensation due to higher production and financial performance levels, (ii) merger-related costs of $15.9 million, and (iii) higher operating costs in most other categories due to the impact of the PMB Acquisition.
Income taxes
Q4-2021 vs Q3-2021
Income tax expense totaled $2.8 million for the fourth quarter resulting in an effective tax rate of 32.4% compared to $8.7 million for the third quarter and an effective tax rate of 27.2%. The increase in effective tax rate during the fourth quarter was due mostly to the impact the PMB Acquisition had on our annual effective tax rate and other permanent items.
YTD 2021 vs YTD 2020
Income tax expense totaled $20.3 million for the year ended December 31, 2021, representing an effective tax rate of 24.5%, compared to $1.8 million and an effective tax rate of 12.4% for 2020. The effective tax rate for the year ended December 31, 2021 differs from the 29.5% combined federal and state statutory rate due primarily to the net tax benefit of $2.5 million resulting from the exercise of all previously issued outstanding stock appreciation rights in the first quarter of 2021, the impact the PMB Acquisition, and other discrete tax items that impact our effective tax rate.
Balance Sheet
At December 31, 2021, total assets were $9.39 billion, which represented a linked-quarter increase of $1.12 billion. The following table shows selected balance sheet line items as of the dates indicated:
| Amount Change | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | Q4-21 vs. Q3-21 | Q4-21 vs. Q4-20 | |||||||
| ( in thousands) | |||||||||||||
| Securities available-for-sale | $ | 1,303,368 | $ | 1,353,154 | $ | 1,270,830 | $ | 1,231,431 | $ | 12,335 | $ | 84,272 | |
| Loans held-for-investment | $ | 6,228,575 | $ | 5,985,477 | $ | 5,764,401 | $ | 5,898,405 | $ | 1,022,905 | $ | 1,353,075 | |
| Loans held-for-sale | $ | 3,422 | $ | 2,853 | $ | 1,408 | $ | 1,413 | $ | (14) | $ | 1,995 | |
| Total assets | $ | 8,278,741 | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 | $ | 1,115,002 | $ | 1,516,409 | |
| Noninterest-bearing deposits | $ | 2,107,709 | $ | 1,808,918 | $ | 1,700,343 | $ | 1,559,248 | $ | 680,487 | $ | 1,228,948 | |
| Total deposits | $ | 6,543,225 | $ | 6,206,544 | $ | 6,142,042 | $ | 6,085,800 | $ | 896,210 | $ | 1,353,635 | |
| Borrowings (1) | $ | 762,444 | $ | 871,973 | $ | 891,546 | $ | 796,110 | $ | 13,001 | $ | (20,665) | |
| Total liabilities | $ | 7,433,938 | $ | 7,198,051 | $ | 7,128,766 | $ | 6,980,127 | $ | 894,515 | $ | 1,348,326 | |
| Total equity | $ | 844,803 | $ | 829,362 | $ | 804,693 | $ | 897,207 | $ | 220,487 | $ | 168,083 |
All values are in US Dollars.
(1)Represents Advances from Federal Home Loan Bank, Other Borrowings and Long Term Debt, net.
Investments
Securities available-for-sale increased $12.3 million during the fourth quarter to $1.32 billion at December 31, 2021 primarily due to purchases of $60.9 million, offset by payoffs of $30.5 million from CLO calls, principal payments of $13.1 million, and lower unrealized net gains of $4.5 million. The decrease in unrealized net gains was due mostly to decreases in the value of mortgage-backed securities, corporate debt securities and municipal securities as a result of increases in longer term interest rates during the fourth quarter, offset by improved pricing of CLOs. As of December 31, 2021, the securities portfolio included $519.0 million of CLOs, $433.5 million of agency securities, $119.0 million of municipal securities, $173.6 million of corporate debt securities, $56.0 million of residential collateralized mortgage obligations, and $14.6 million of SBA securities. The CLO portfolio, which is comprised only of AA and AAA rated securities, represented 39% of the total securities portfolio and the carrying value included an unrealized net loss of $2.3 million at December 31, 2021 compared to 42% of the total securities portfolio and an unrealized net loss of $2.5 million at September 30, 2021.
Loans
The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:
| December 31,2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in thousands) | ||||||||||||||
| Composition of held-for-investment loans | ||||||||||||||
| Commercial real estate | $ | 907,224 | $ | 871,790 | $ | 839,965 | $ | 807,195 | ||||||
| Multifamily | 1,361,054 | 1,295,613 | 1,325,770 | 1,258,278 | 1,289,820 | |||||||||
| Construction | 181,841 | 130,536 | 150,557 | 169,122 | 176,016 | |||||||||
| Commercial and industrial | 1,066,497 | 773,681 | 725,596 | 760,150 | 748,299 | |||||||||
| Commercial and industrial - warehouse lending | 1,602,487 | 1,522,945 | 1,345,314 | 1,118,175 | 1,340,009 | |||||||||
| SBA | 205,548 | 181,582 | 253,924 | 338,903 | 273,444 | |||||||||
| Total commercial loans | 5,728,532 | 4,811,581 | 4,672,951 | 4,484,593 | 4,634,783 | |||||||||
| Single-family residential mortgage | 1,420,023 | 1,393,696 | 1,288,176 | 1,253,251 | 1,230,236 | |||||||||
| Other consumer | 102,925 | 23,298 | 24,350 | 26,557 | 33,386 | |||||||||
| Total consumer loans | 1,522,948 | 1,416,994 | 1,312,526 | 1,279,808 | 1,263,622 | |||||||||
| Total gross loans | $ | 6,228,575 | $ | 5,985,477 | $ | 5,764,401 | $ | 5,898,405 | ||||||
| Composition percentage of held-for-investment loans | ||||||||||||||
| Commercial real estate | 18.1 | % | 14.6 | % | 14.6 | % | 14.6 | % | 13.7 | % | ||||
| Multifamily | 18.8 | % | 20.7 | % | 22.2 | % | 21.8 | % | 21.9 | % | ||||
| Construction | 2.5 | % | 2.1 | % | 2.5 | % | 2.9 | % | 3.0 | % | ||||
| Commercial and industrial | 14.7 | % | 12.4 | % | 12.1 | % | 13.2 | % | 12.7 | % | ||||
| Commercial and industrial - warehouse lending | 22.1 | % | 24.5 | % | 22.5 | % | 19.4 | % | 22.6 | % | ||||
| SBA | 2.8 | % | 2.9 | % | 4.2 | % | 5.9 | % | 4.6 | % | ||||
| Total commercial loans | 79.0 | % | 77.2 | % | 78.1 | % | 77.8 | % | 78.5 | % | ||||
| Single-family residential mortgage | 19.6 | % | 22.4 | % | 21.5 | % | 21.7 | % | 20.9 | % | ||||
| Other consumer | 1.4 | % | 0.4 | % | 0.4 | % | 0.5 | % | 0.6 | % | ||||
| Total consumer loans | 21.0 | % | 22.8 | % | 21.9 | % | 22.2 | % | 21.5 | % | ||||
| Total gross loans | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in US Dollars.
Held-for-investment loans increased $1.02 billion during the fourth quarter of 2021 to $7.25 billion due in part to $905.3 million in loans added in the PMB Acquisition and outstanding at the end of the year. The increase in the fourth quarter included higher commercial real estate loans of $403.9 million, multifamily loans of $65.4 million, construction loans of $51.3 million, commercial and industrial (C&I) loans related to warehouse credit facilities of $79.5 million, other C&I loans of $292.8 million, and SBA loans of $24.0 million. The PMB Acquisition added $76.3 million in SBA PPP loans and $63.4 million in PPP loans were forgiven during the fourth quarter. At December 31, 2021, SBA loans included $123.1 million of PPP loans, net of fees.
The single-family residential mortgage loans increased by $26.3 million as a result of $210.2 million in purchases offset by repayment activity and other consumer loans increased by $79.6 million due mostly to auto loans from the PMB Acquisition.
The C&I industry concentrations in dollars and as a percentage of total outstanding C&I loan balances are summarized in the following table:
| December 31, 2021 | |||
|---|---|---|---|
| Amount | % of Portfolio | ||
| ( in thousands) | |||
| C&I Portfolio by Industry | |||
| Finance and Insurance - Warehouse Lending | 60 | % | |
| Real Estate & Rental Leasing | 252,610 | 9 | % |
| Finance and Insurance - Other | 108,098 | 4 | % |
| Manufacturing | 91,533 | 3 | % |
| Healthcare | 85,666 | 3 | % |
| Gas Stations | 71,381 | 3 | % |
| Wholesale Trade | 54,227 | 2 | % |
| Professional Services | 47,924 | 2 | % |
| Television / Motion Pictures | 46,762 | 2 | % |
| Other Retail Trade | 43,202 | 2 | % |
| Food Services | 32,598 | 1 | % |
| Transportation | 16,783 | 1 | % |
| Accommodations | 2,069 | — | % |
| All Other | 213,644 | 8 | % |
| Total | 100 | % |
All values are in US Dollars.
Deposits
The following table sets forth the composition of our deposits at the dates indicated:
| December 31,2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in thousands) | ||||||||||||||
| Composition of deposits | ||||||||||||||
| Noninterest-bearing checking | $ | 2,107,709 | $ | 1,808,918 | $ | 1,700,343 | $ | 1,559,248 | ||||||
| Interest-bearing checking | 2,393,386 | 2,214,678 | 2,217,306 | 2,088,528 | 2,107,942 | |||||||||
| Savings and money market | 1,751,135 | 1,661,013 | 1,593,724 | 1,684,703 | 1,646,660 | |||||||||
| Non-brokered certificates of deposit | 506,718 | 559,825 | 586,596 | 668,468 | 755,727 | |||||||||
| Brokered certificates of deposit | — | — | — | — | 16,223 | |||||||||
| Total deposits | $ | 6,543,225 | $ | 6,206,544 | $ | 6,142,042 | $ | 6,085,800 | ||||||
| Composition percentage of deposits | ||||||||||||||
| Noninterest-bearing checking | 37.5 | % | 32.2 | % | 29.1 | % | 27.7 | % | 25.6 | % | ||||
| Interest-bearing checking | 32.2 | % | 33.8 | % | 35.7 | % | 34.0 | % | 34.6 | % | ||||
| Savings and money market | 23.5 | % | 25.4 | % | 25.7 | % | 27.4 | % | 27.0 | % | ||||
| Non-brokered certificates of deposit | 6.8 | % | 8.6 | % | 9.5 | % | 10.9 | % | 12.4 | % | ||||
| Brokered certificates of deposit | — | % | — | % | — | % | — | % | 0.4 | % | ||||
| Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in US Dollars.
Total deposits increased $896.2 million during the fourth quarter of 2021 to $7.44 billion at December 31, 2021 due mostly to $1.13 billion in deposits that were added in the PMB Acquisition and outstanding at the end of the year. The increase in the fourth quarter included higher noninterest-bearing checking balances of $680.5 million, interest-bearing checking of $178.7 million, and savings and money market balances of $90.1 million, offset by lower non-brokered certificates of deposit of $53.1 million. Noninterest-bearing deposits totaled $2.79 billion and represented 37% of total deposits at December 31, 2021 compared to $2.11 billion, or 32% of total deposits, at September 30, 2021.
Debt
Advances from the FHLB increased $70.3 million during the fourth quarter to $476.1 million at December 31, 2021, due to higher overnight advances. At December 31, 2021, FHLB advances included $70.0 million of overnight borrowings and $411.0 million in term advances with a weighted average life of 4.0 years and weighted average interest rate of 2.53%. Other borrowings totaled $25.0 million at December 31, 2021 and related to unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform. Long-term debt increased $17.7 million during the fourth quarter primarily from trust preferred securities acquired from PMB.
Equity
At December 31, 2021, total stockholders’ equity increased by $220.5 million to $1.07 billion and tangible common equity increased by $158.7 million to $869.6 million on a linked-quarter basis. The increase in total stockholders’ equity for the fourth quarter included the value of the shares issued in the PMB Acquisition of $222.2 million, net income of $5.8 million and share-based award compensation of $1.3 million, offset by lower net accumulated other comprehensive income of $3.2 million, and dividends to common and preferred stockholders of $5.5 million. Book value per share increased to $15.48 as of December 31, 2021 from $14.76 at September 30, 2021. Tangible book value per share decreased to $13.88 as of December 31, 2021 from $13.99 at September 30, 2021.
Capital ratios remain strong with total risk-based capital at 15.07% and a tier 1 leverage ratio of 10.42% at December 31, 2021. The interim capital relief related to the adoption of the current expected credit losses (CECL) accounting standard increased the Bank's leverage ratio by approximately 11 basis points at December 31, 2021. The following table sets forth our regulatory capital ratios as of the dates indicated:
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Capital Ratios(1) | ||||||||||
| Banc of California, Inc. | ||||||||||
| Total risk-based capital ratio | 15.07 | % | 14.73 | % | 15.33 | % | 15.87 | % | 17.01 | % |
| Tier 1 risk-based capital ratio | 12.63 | % | 12.35 | % | 12.71 | % | 13.17 | % | 14.35 | % |
| Common equity tier 1 capital ratio | 11.38 | % | 10.86 | % | 11.14 | % | 11.50 | % | 11.19 | % |
| Tier 1 leverage ratio | 10.42 | % | 9.80 | % | 9.89 | % | 9.62 | % | 10.90 | % |
| Banc of California, NA | ||||||||||
| Total risk-based capital ratio | 15.75 | % | 16.31 | % | 17.25 | % | 17.82 | % | 17.27 | % |
| Tier 1 risk-based capital ratio | 14.64 | % | 15.22 | % | 16.09 | % | 16.57 | % | 16.02 | % |
| Common equity tier 1 capital ratio | 14.64 | % | 15.22 | % | 16.09 | % | 16.57 | % | 16.02 | % |
| Tier 1 leverage ratio | 12.07 | % | 12.08 | % | 12.52 | % | 12.13 | % | 12.19 | % |
(1)December 31, 2021 capital ratios are preliminary.
Credit Quality
| December 31,2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Asset quality information and ratios | ( in thousands) | |||||||||||||
| Delinquent loans held-for-investment | ||||||||||||||
| 30 to 89 days delinquent | $ | 23,144 | $ | 16,983 | $ | 31,005 | $ | 13,981 | ||||||
| 90+ days delinquent | 32,609 | 21,979 | 17,998 | 30,292 | 17,636 | |||||||||
| Total delinquent loans | $ | 45,123 | $ | 34,981 | $ | 61,297 | $ | 31,617 | ||||||
| Total delinquent loans to total loans | 1.00 | % | 0.72 | % | 0.58 | % | 1.06 | % | 0.54 | % | ||||
| Non-performing assets, excluding loans held-for-sale | ||||||||||||||
| Non-accrual loans | $ | 45,621 | $ | 51,299 | $ | 55,920 | $ | 35,900 | ||||||
| 90+ days delinquent and still accruing loans | — | — | — | — | 728 | |||||||||
| Non-performing loans | 52,558 | 45,621 | 51,299 | 55,920 | 36,628 | |||||||||
| Other real estate owned | — | — | 3,253 | — | — | |||||||||
| Non-performing assets | $ | 45,621 | $ | 54,552 | $ | 55,920 | $ | 36,628 | ||||||
| ALL to non-performing loans | 176.16 | % | 161.16 | % | 147.93 | % | 141.90 | % | 221.22 | % | ||||
| Non-performing loans to total loans held-for-investment | 0.72 | % | 0.73 | % | 0.86 | % | 0.97 | % | 0.62 | % | ||||
| Non-performing assets to total assets | 0.56 | % | 0.55 | % | 0.68 | % | 0.70 | % | 0.46 | % | ||||
| Troubled debt restructurings (TDRs) | ||||||||||||||
| Performing TDRs | $ | 5,835 | $ | 6,029 | $ | 6,347 | $ | 4,733 | ||||||
| Non-performing TDRs | 4,146 | 2,366 | 3,120 | 4,130 | 4,264 | |||||||||
| Total TDRs | $ | 8,201 | $ | 9,149 | $ | 10,477 | $ | 8,997 |
All values are in US Dollars.
Total delinquent loans increased $27.6 million in the fourth quarter to $72.8 million at December 31, 2021, due mostly to additions of $45.8 million, offset by $5.8 million returning to current status and $12.5 million in other reductions including paydowns. The additions included (i) $19.1 million in loans acquired in the PMB Acquisition consisting mostly of $10.1 million in commercial & industrial loans and $8.5 million in SBA PPP and (ii) $25.8 million in single-family residential mortgage loans. At December 31, 2021, delinquent loans included SFR loans of $31.9 million, SBA PPP loans of $8.5 million and other SBA loans of $10.8 million of which $17.2 million is guaranteed, and other loans of $21.5 million.
Non-performing loans increased $6.9 million to $52.6 million as of December 31, 2021, of which $19.8 million, or 38%, relates to loans in a current payment status. The fourth quarter increase was due mostly to the addition of $35.5 million in non-performing loans, including $21.6 million from the PMB Acquisition, offset by $3.7 million in loans returning to accrual status and $24.9 million in payoffs, paydowns, charge-offs and sales. At December 31, 2021, non-performing loans included (i) a $12.8 million commercial & industrial relationship acquired from PMB, (ii) SBA PPP loans of $5.5 million and other SBA loans totaling $11.1 million, of which $14.3 million is guaranteed, (iii) SFR loans totaling $7.1 million, and (iv) other commercial loans of $15.8 million.
In light of the pandemic, we provided support to clients by granting loan deferments or forbearances. The loans on deferment or forbearance status as of the dates indicated are shown below:
| December 31, 2021 | September 30, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Count | % of Loans in Category | Count | Amount(1) | % of Loans in Category | |||||
| ( in thousands) | |||||||||
| Single-family residential mortgage | 19 | 20,245 | 1 | % | 40 | $ | 49,501 | 4 | % |
| All other loans | 3 | — | % | 5 | 4,691 | — | % | ||
| Total | 22 | 24,562 | — | % | 45 | $ | 54,192 | 1 | % |
All values are in US Dollars.
(1)Includes loans in the process of deferment or forbearance which are not reported as delinquent.
Allowance for Credit Losses
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | ||||||||||
| ( in thousands) | ||||||||||||||
| Allowance for loan losses (ALL) | ||||||||||||||
| Balance at beginning of period | $ | 75,885 | $ | 79,353 | $ | 81,030 | $ | 90,927 | ||||||
| Initial reserve for purchased credit-deteriorated loans(1) | 13,650 | — | — | — | — | |||||||||
| Loans charged off | (8,108) | (327) | (886) | (565) | (11,520) | |||||||||
| Recoveries | 2,628 | 532 | 26 | 172 | 609 | |||||||||
| Net (charge-offs) recoveries | (5,480) | 205 | (860) | (393) | (10,911) | |||||||||
| Provision for (reversal of) loan losses | 10,890 | (2,566) | (2,608) | (1,284) | 1,014 | |||||||||
| Balance at end of period | $ | 73,524 | $ | 75,885 | $ | 79,353 | $ | 81,030 | ||||||
| Reserve for unfunded loan commitments | ||||||||||||||
| Balance at beginning of period | $ | 3,814 | $ | 3,360 | $ | 3,183 | $ | 3,206 | ||||||
| Provision for (reversal of) credit losses | 372 | 1,419 | 454 | 177 | (23) | |||||||||
| Balance at end of period | 5,605 | 5,233 | 3,814 | 3,360 | 3,183 | |||||||||
| Allowance for credit losses (ACL) | $ | 78,757 | $ | 79,699 | $ | 82,713 | $ | 84,213 | ||||||
| ALL to total loans | 1.28 | % | 1.18 | % | 1.27 | % | 1.38 | % | 1.37 | % | ||||
| ACL to total loans | 1.35 | % | 1.26 | % | 1.33 | % | 1.43 | % | 1.43 | % | ||||
| ACL to total loans, excluding PPP loans | 1.38 | % | 1.29 | % | 1.38 | % | 1.51 | % | 1.48 | % | ||||
| ACL to NPLs | 186.82 | % | 172.63 | % | 155.36 | % | 147.91 | % | 229.91 | % | ||||
| Annualized net loan charge-offs (recoveries) to average total loans held-for-investment | 0.32 | % | (0.01) | % | 0.06 | % | 0.03 | % | 0.77 | % | ||||
| Reserve for loss on repurchased loans | ||||||||||||||
| Balance at beginning of period | $ | 5,095 | $ | 5,383 | $ | 5,515 | $ | 5,487 | ||||||
| Initial provision for loan repurchases | — | — | — | — | — | |||||||||
| (Reversal of) provision for loan repurchases | (675) | (42) | (99) | (132) | 28 | |||||||||
| Utilization of reserve for loan repurchases | — | (30) | (189) | — | — | |||||||||
| Balance at end of period | $ | 5,023 | $ | 5,095 | $ | 5,383 | $ | 5,515 |
All values are in US Dollars.
(1)Represents the amounts, at acquisition date, of expected credit losses on PCD loans and expected recoveries of PCD loans charged-off prior to acquisition date that we have a contractual right to receive.
The allowance for expected credit losses (ACL), which includes the reserve for unfunded loan commitments, totaled $98.2 million, or 1.35% of total loans, at December 31, 2021, compared to $78.8 million, or 1.26% of total loans, at September 30, 2021. The $19.4 million increase in the ACL was due to: (i) a $13.7 million initial allowance for credit losses established for purchased credit-deteriorated ("PCD") loans from the PMB Acquisition, (ii) an $11.3 million initial charge for all other loans acquired from PMB, partially offset by (iii) net charge-offs of $5.5 million, including $2.3 million of net charge-offs related to loans acquired in the PMB Acquisition. The ACL coverage of non-performing loans was 187% at December 31, 2021 compared to 173% at September 30, 2021.
At the date of acquisition, a reserve is established for PCD loans using our current expected credit losses methodology with a corresponding adjustment to the acquired loan balance. Similarly, a reserve is also established for loans not considered PCD loans, however, this reserve is established through a charge to the provision for credit losses.
Our ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and
peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic
variables (MEVs) released by our model provider during December 2021. The December 2021 forecasts reflect a consistent view of the economy as compared to the September 2021 forecasts. While the current forecasts generally reflect an improving economy with the availability of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variants, further government stimulus, supply chain issues, and the ultimate pace of
economic recovery. Accordingly, the economic assumptions used in the model and the resulting ACL level and provision consider both the positive assumptions and potential uncertainties.
Conference Call
The Company will host a conference call to discuss its fourth quarter 2021 financial results at 10:00 a.m. Pacific Time (PT) on Tuesday, January 25, 2022. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 7050527. 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 7843092.
About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with $9.4 billion in assets at December 31, 2021 and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 38 offices including 32 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 to building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.
Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission (SEC). In addition to those, statements about the potential effects of the COVID-19 pandemic on the business, financial results and condition of Banc of California, Inc. and its subsidiaries may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the control of Banc of California, Inc., including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on Banc of California, Inc. and its subsidiaries, their customers and third parties. Further, statements about the potential effects of the Pacific Mercantile Bancorp acquisition 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 (i) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Banc of California Inc. operates; (ii) the ability to promptly and effectively integrate the businesses of Banc of California, Inc. and Pacific Mercantile Bancorp; (iii) diversion of management time on integration-related issues; (iv) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (v) other risks that are described in Banc of California, Inc.’s public filings with the SEC. 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 |
Banc of California, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 227,873 | $ | 185,840 | $ | 163,332 | $ | 379,509 | $ | 220,819 |
| Interest-bearing time deposits with financial institutions | 250 | — | — | — | — | |||||
| Securities available-for-sale | 1,315,703 | 1,303,368 | 1,353,154 | 1,270,830 | 1,231,431 | |||||
| Loans held-for-sale | 3,408 | 3,422 | 2,853 | 1,408 | 1,413 | |||||
| Loans held-for-investment | 7,251,480 | 6,228,575 | 5,985,477 | 5,764,401 | 5,898,405 | |||||
| Allowance for loan losses | (92,584) | (73,524) | (75,885) | (79,353) | (81,030) | |||||
| Federal Home Loan Bank and other bank stock | 44,632 | 44,604 | 44,569 | 44,964 | 44,506 | |||||
| Servicing rights, net | 1,309 | 1,022 | 1,162 | 1,407 | 1,454 | |||||
| Other real estate owned, net | — | — | 3,253 | — | — | |||||
| Premises and equipment, net | 112,868 | 114,011 | 118,649 | 120,071 | 121,520 | |||||
| Alternative energy partnership investments, net | 25,888 | 25,196 | 24,068 | 23,809 | 27,977 | |||||
| Goodwill | 94,301 | 37,144 | 37,144 | 37,144 | 37,144 | |||||
| Other intangible assets, net | 6,411 | 1,787 | 2,069 | 2,351 | 2,633 | |||||
| Deferred income tax, net | 50,774 | 40,659 | 41,628 | 47,877 | 45,957 | |||||
| Income tax receivable | 7,952 | 2,107 | 4,084 | 210 | 1,105 | |||||
| Bank owned life insurance investment | 123,720 | 113,884 | 113,168 | 112,479 | 111,807 | |||||
| Right of use assets | 35,442 | 29,054 | 20,364 | 22,069 | 19,633 | |||||
| Other assets | 184,316 | 221,592 | 188,324 | 184,283 | 192,560 | |||||
| Total assets | $ | 9,393,743 | $ | 8,278,741 | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Noninterest-bearing deposits | $ | 2,788,196 | $ | 2,107,709 | $ | 1,808,918 | $ | 1,700,343 | $ | 1,559,248 |
| Interest-bearing deposits | 4,651,239 | 4,435,516 | 4,397,626 | 4,441,699 | 4,526,552 | |||||
| Total deposits | 7,439,435 | 6,543,225 | 6,206,544 | 6,142,042 | 6,085,800 | |||||
| Advances from Federal Home Loan Bank | 476,059 | 405,738 | 490,419 | 635,105 | 539,795 | |||||
| Other borrowings | 25,000 | 100,000 | 125,000 | — | — | |||||
| Long-term debt, net | 274,386 | 256,706 | 256,554 | 256,441 | 256,315 | |||||
| Reserve for loss on repurchased loans | 4,348 | 5,023 | 5,095 | 5,383 | 5,515 | |||||
| Lease liabilities | 40,675 | 30,390 | 21,588 | 23,173 | 20,647 | |||||
| Accrued expenses and other liabilities | 68,550 | 92,856 | 92,851 | 66,622 | 72,055 | |||||
| Total liabilities | 8,328,453 | 7,433,938 | 7,198,051 | 7,128,766 | 6,980,127 | |||||
| Commitments and contingent liabilities | ||||||||||
| Preferred stock | 94,956 | 94,956 | 94,956 | 94,956 | 184,878 | |||||
| Common stock | 646 | 527 | 527 | 526 | 522 | |||||
| Common stock, class B non-voting non-convertible | 5 | 5 | 5 | 5 | 5 | |||||
| Additional paid-in capital | 854,873 | 631,512 | 630,654 | 629,844 | 634,704 | |||||
| Retained earnings | 147,894 | 147,682 | 129,307 | 115,004 | 110,179 | |||||
| Treasury stock | (40,827) | (40,827) | (40,827) | (40,827) | (40,827) | |||||
| Accumulated other comprehensive income, net | 7,743 | 10,948 | 14,740 | 5,185 | 7,746 | |||||
| Total stockholders’ equity | 1,065,290 | 844,803 | 829,362 | 804,693 | 897,207 | |||||
| Total liabilities and stockholders’ equity | $ | 9,393,743 | $ | 8,278,741 | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 |
Banc of California, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
| Three Months Ended | Year Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | ||||||||
| Interest and dividend income | ||||||||||||||
| Loans, including fees | $ | 73,605 | $ | 63,837 | $ | 61,900 | $ | 61,345 | $ | 66,105 | $ | 260,687 | $ | 257,300 |
| Securities | 6,934 | 7,167 | 6,986 | 6,501 | 6,636 | 27,588 | 29,038 | |||||||
| Other interest-earning assets | 1,034 | 787 | 791 | 772 | 789 | 3,384 | 4,269 | |||||||
| Total interest and dividend income | 81,573 | 71,791 | 69,677 | 68,618 | 73,530 | 291,659 | 290,607 | |||||||
| Interest expense | ||||||||||||||
| Deposits | 2,072 | 2,412 | 3,543 | 4,286 | 5,436 | 12,313 | 37,816 | |||||||
| Federal Home Loan Bank advances | 2,977 | 2,990 | 2,944 | 3,112 | 3,479 | 12,023 | 18,040 | |||||||
| Other interest-bearing liabilities | 3,485 | 3,413 | 3,343 | 3,304 | 3,052 | 13,545 | 10,157 | |||||||
| Total interest expense | 8,534 | 8,815 | 9,830 | 10,702 | 11,967 | 37,881 | 66,013 | |||||||
| Net interest income | 73,039 | 62,976 | 59,847 | 57,916 | 61,563 | 253,778 | 224,594 | |||||||
| Provision for (reversal of) credit losses | 11,262 | (1,147) | (2,154) | (1,107) | 991 | 6,854 | 29,719 | |||||||
| Net interest income after provision for (reversal of) credit losses | 61,777 | 64,123 | 62,001 | 59,023 | 60,572 | 246,924 | 194,875 | |||||||
| Noninterest income | ||||||||||||||
| Customer service fees | 2,037 | 1,900 | 1,990 | 1,758 | 1,953 | 7,685 | 5,771 | |||||||
| Loan servicing income | 119 | 170 | 38 | 268 | 149 | 595 | 505 | |||||||
| Income from bank owned life insurance | 794 | 715 | 690 | 672 | 691 | 2,871 | 2,489 | |||||||
| Net gain on sale of securities available for sale | — | — | — | — | — | — | 2,011 | |||||||
| Fair value adjustment on loans held for sale | 26 | 160 | 20 | — | 36 | 206 | (1,501) | |||||||
| Net gain on sale of loans | 275 | — | — | — | — | 275 | 245 | |||||||
| All other income | 1,609 | 2,574 | 1,432 | 1,683 | 4,146 | 7,298 | 8,998 | |||||||
| Total noninterest income | 4,860 | 5,519 | 4,170 | 4,381 | 6,975 | 18,930 | 18,518 | |||||||
| Noninterest expense | ||||||||||||||
| Salaries and employee benefits | 27,811 | 24,786 | 25,042 | 25,719 | 25,836 | 103,358 | 96,809 | |||||||
| Naming rights termination | — | — | — | — | — | — | 26,769 | |||||||
| Occupancy and equipment | 7,855 | 7,124 | 7,277 | 7,196 | 7,560 | 29,452 | 29,350 | |||||||
| Professional fees | 3,921 | 892 | 1,749 | 4,022 | 29 | 10,584 | 15,736 | |||||||
| Data processing | 1,939 | 1,646 | 1,621 | 1,655 | 1,608 | 6,861 | 6,574 | |||||||
| Advertising | 173 | 122 | 78 | 118 | 171 | 491 | 3,303 | |||||||
| Regulatory assessments | 1,040 | 812 | 769 | 774 | 748 | 3,395 | 2,741 | |||||||
| (Reversal of) provision for loan repurchase reserves | (675) | (42) | (99) | (132) | 28 | (948) | (697) | |||||||
| Amortization of intangible assets | 430 | 282 | 282 | 282 | 306 | 1,276 | 1,518 | |||||||
| Merger-related costs | 13,469 | 1,000 | 700 | 700 | — | 15,869 | — | |||||||
| All other expense | 3,384 | 2,974 | 3,969 | 2,771 | 3,337 | 13,098 | 17,295 | |||||||
| Total noninterest expense before (gain) loss in alternative energy partnership investments | 59,347 | 39,596 | 41,388 | 43,105 | 39,623 | 183,436 | 199,398 | |||||||
| (Gain) loss in alternative energy partnership investments | (1,220) | (1,785) | (829) | 3,630 | (673) | (204) | (365) | |||||||
| Total noninterest expense | 58,127 | 37,811 | 40,559 | 46,735 | 38,950 | 183,232 | 199,033 | |||||||
| Income before income taxes | 8,510 | 31,831 | 25,612 | 16,669 | 28,597 | 82,622 | 14,360 | |||||||
| Income tax expense | 2,759 | 8,661 | 6,562 | 2,294 | 6,894 | 20,276 | 1,786 | |||||||
| Net income | 5,751 | 23,170 | 19,050 | 14,375 | 21,703 | 62,346 | 12,574 | |||||||
| Preferred stock dividends | 1,727 | 1,727 | 1,727 | 3,141 | 3,447 | 8,322 | 13,869 | |||||||
| Income allocated to participating securities | — | — | — | 62 | 456 | 114 | — | |||||||
| Participating securities dividends | — | — | — | — | 94 | — | 376 | |||||||
| Impact of preferred stock redemption | — | — | — | 3,347 | — | 3,347 | (568) | |||||||
| Net income (loss) available to common stockholders | $ | 4,024 | $ | 21,443 | $ | 17,323 | $ | 7,825 | $ | 17,706 | $ | 50,563 | $ | (1,103) |
| Earnings (loss) per common share: | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Basic | $ | 0.07 | $ | 0.42 | $ | 0.34 | $ | 0.16 | $ | 0.35 | $ | 0.95 | $ | (0.02) |
| Diluted | $ | 0.07 | $ | 0.42 | $ | 0.34 | $ | 0.15 | $ | 0.35 | $ | 0.95 | $ | (0.02) |
| Weighted average number of common shares outstanding | ||||||||||||||
| Basic | 60,401,366 | 50,716,680 | 50,650,186 | 50,350,897 | 50,125,462 | 53,050,980 | 50,182,096 | |||||||
| Diluted | 60,690,046 | 50,909,317 | 50,892,202 | 50,750,522 | 50,335,271 | 53,302,926 | 50,182,096 | |||||||
| Dividends declared per common share | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.24 | $ | 0.24 |
Banc of California, Inc.
Selected Financial Data
(Unaudited)
| Three Months Ended | Year Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | ||||||||
| Profitability and other ratios of consolidated operations | ||||||||||||||
| Return on average assets(1) | 0.24 | % | 1.13 | % | 0.98 | % | 0.74 | % | 1.11 | % | 0.75 | % | 0.16 | % |
| Return on average equity(1) | 2.20 | % | 10.84 | % | 9.38 | % | 6.56 | % | 9.67 | % | 6.95 | % | 1.43 | % |
| Return on average tangible common equity(1)(2) | 2.04 | % | 12.04 | % | 10.34 | % | 4.77 | % | 10.69 | % | 7.04 | % | 0.01 | % |
| Pre-tax pre-provision income (loss) ROAA(1)(2) | 0.84 | % | 1.50 | % | 1.20 | % | 0.80 | % | 1.52 | % | 1.08 | % | 0.57 | % |
| Adjusted pre-tax pre-provision income ROAA(1)(2) | 1.39 | % | 1.34 | % | 1.13 | % | 1.06 | % | 1.25 | % | 1.24 | % | 0.93 | % |
| Dividend payout ratio(3) | 85.71 | % | 14.29 | % | 17.65 | % | 37.50 | % | 17.14 | % | 25.26 | % | (1200.00) | % |
| Average loan yield | 4.20 | % | 4.18 | % | 4.30 | % | 4.30 | % | 4.58 | % | 4.24 | % | 4.52 | % |
| Average cost of interest-bearing deposits | 0.17 | % | 0.22 | % | 0.32 | % | 0.38 | % | 0.47 | % | 0.27 | % | 0.85 | % |
| Average cost of total deposits | 0.11 | % | 0.15 | % | 0.23 | % | 0.28 | % | 0.36 | % | 0.19 | % | 0.66 | % |
| Net interest spread | 3.05 | % | 3.06 | % | 3.04 | % | 2.95 | % | 3.15 | % | 3.02 | % | 2.83 | % |
| Net interest margin(1) | 3.28 | % | 3.28 | % | 3.27 | % | 3.19 | % | 3.38 | % | 3.26 | % | 3.13 | % |
| Noninterest income to total revenue(4) | 6.24 | % | 8.06 | % | 6.51 | % | 7.03 | % | 10.18 | % | 6.94 | % | 7.62 | % |
| Noninterest income to average total assets(1) | 0.21 | % | 0.27 | % | 0.21 | % | 0.23 | % | 0.36 | % | 0.23 | % | 0.24 | % |
| Noninterest expense to average total assets(1) | 2.47 | % | 1.84 | % | 2.08 | % | 2.41 | % | 2.00 | % | 2.21 | % | 2.59 | % |
| Adjusted noninterest expense to average total assets(1)(2) | 1.92 | % | 1.99 | % | 2.15 | % | 2.15 | % | 2.26 | % | 2.05 | % | 2.22 | % |
| Efficiency ratio(2)(5) | 74.62 | % | 55.20 | % | 63.36 | % | 75.02 | % | 56.83 | % | 67.19 | % | 81.87 | % |
| Adjusted efficiency ratio(2)(6) | 58.09 | % | 59.63 | % | 65.58 | % | 66.91 | % | 64.26 | % | 62.25 | % | 70.48 | % |
| Average loans held-for-investment to average deposits | 92.99 | % | 94.99 | % | 92.74 | % | 93.74 | % | 95.65 | % | 93.59 | % | 98.60 | % |
| Average securities available-for-sale to average total assets | 13.83 | % | 16.55 | % | 16.71 | % | 15.73 | % | 15.96 | % | 15.62 | % | 14.47 | % |
| Average stockholders’ equity to average total assets | 11.10 | % | 10.41 | % | 10.41 | % | 11.30 | % | 11.49 | % | 10.81 | % | 11.47 | % |
(1)Ratio presented on an annualized basis.
(2)Ratio determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.
(3)Ratio calculated by dividing dividends declared per common share by basic earnings (loss) per common share.
(4)Total revenue is equal to the sum of net interest income before provision for (reversal of) credit losses and noninterest income.
(5)Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.
(6)Ratio calculated by dividing adjusted noninterest expense by the sum of net interest income before provision for credit losses and adjusted noninterest income.
Banc of California, Inc.
Average Balance, Average Yield Earned, and Average Cost Paid
(Dollars in thousands)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2021 | September 30, 2021 | June 30, 2021 | |||||||||||||||||||
| Average | Yield | Average | Yield | Average | Yield | ||||||||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||||||
| Interest-earning assets | |||||||||||||||||||||
| Commercial real estate, multifamily, and construction | $ | 2,809,181 | $ | 32,184 | 4.55 | % | $ | 2,379,962 | $ | 26,542 | 4.42 | % | $ | 2,313,483 | $ | 27,222 | 4.72 | % | |||
| Commercial and industrial and SBA | 2,631,596 | 28,028 | 4.23 | % | 2,322,372 | 25,345 | 4.33 | % | 2,154,512 | 22,978 | 4.28 | % | |||||||||
| SFR mortgage | 1,418,057 | 11,884 | 3.32 | % | 1,331,876 | 11,683 | 3.48 | % | 1,277,552 | 11,410 | 3.58 | % | |||||||||
| Other consumer | 85,193 | 1,483 | 6.91 | % | 22,164 | 238 | 4.26 | % | 23,881 | 275 | 4.62 | % | |||||||||
| Loans held-for-sale | 3,309 | 26 | 3.12 | % | 2,956 | 29 | 3.89 | % | 1,987 | 15 | 3.03 | % | |||||||||
| Gross loans and leases | 6,947,336 | 73,605 | 4.20 | % | 6,059,330 | 63,837 | 4.18 | % | 5,771,415 | 61,900 | 4.30 | % | |||||||||
| Securities | 1,290,664 | 6,934 | 2.13 | % | 1,347,317 | 7,167 | 2.11 | % | 1,308,230 | 6,986 | 2.14 | % | |||||||||
| Other interest-earning assets | 593,739 | 1,034 | 0.69 | % | 222,274 | 787 | 1.40 | % | 258,915 | 791 | 1.23 | % | |||||||||
| Total interest-earning assets | 8,831,739 | 81,573 | 3.66 | % | 7,628,921 | 71,791 | 3.73 | % | 7,338,560 | 69,677 | 3.81 | % | |||||||||
| Allowance for loan losses | (92,367) | (76,028) | (79,103) | ||||||||||||||||||
| BOLI and noninterest-earning assets | 592,583 | 588,720 | 567,549 | ||||||||||||||||||
| Total assets | $ | 9,331,955 | $ | 8,141,613 | $ | 7,827,006 | |||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||
| Interest-bearing checking | $ | 2,461,397 | $ | 693 | 0.11 | % | $ | 2,280,429 | $ | 632 | 0.11 | % | $ | 2,182,419 | $ | 679 | 0.12 | % | |||
| Savings and money market | 1,780,483 | 1,078 | 0.24 | % | 1,583,791 | 1,350 | 0.34 | % | 1,638,105 | 2,244 | 0.55 | % | |||||||||
| Certificates of deposit | 610,766 | 301 | 0.20 | % | 571,822 | 430 | 0.30 | % | 633,101 | 620 | 0.39 | % | |||||||||
| Total interest-bearing deposits | 4,852,646 | 2,072 | 0.17 | % | 4,436,042 | 2,412 | 0.22 | % | 4,453,625 | 3,543 | 0.32 | % | |||||||||
| FHLB advances | 407,122 | 2,977 | 2.90 | % | 435,984 | 2,990 | 2.72 | % | 418,111 | 2,944 | 2.82 | % | |||||||||
| Other borrowings | 27,300 | 7 | 0.10 | % | 126,352 | 34 | 0.11 | % | 17,920 | 4 | 0.09 | % | |||||||||
| Long-term debt | 270,879 | 3,478 | 5.09 | % | 256,634 | 3,379 | 5.22 | % | 256,492 | 3,339 | 5.22 | % | |||||||||
| Total interest-bearing liabilities | 5,557,947 | 8,534 | 0.61 | % | 5,255,012 | 8,815 | 0.67 | % | 5,146,148 | 9,830 | 0.77 | % | |||||||||
| Noninterest-bearing deposits | 2,614,712 | 1,939,912 | 1,767,711 | ||||||||||||||||||
| Noninterest-bearing liabilities | 123,514 | 98,748 | 98,174 | ||||||||||||||||||
| Total liabilities | 8,296,173 | 7,293,672 | 7,012,033 | ||||||||||||||||||
| Total stockholders’ equity | 1,035,782 | 847,941 | 814,973 | ||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 9,331,955 | $ | 8,141,613 | $ | 7,827,006 | |||||||||||||||
| Net interest income/spread | $ | 73,039 | 3.05 | % | $ | 62,976 | 3.06 | % | $ | 59,847 | 3.04 | % | |||||||||
| Net interest margin | 3.28 | % | 3.28 | % | 3.27 | % | |||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 159 | % | 145 | % | 143 | % | |||||||||||||||
| Total deposits | $ | 7,467,358 | $ | 2,072 | 0.11 | % | $ | 6,375,954 | $ | 2,412 | 0.15 | % | $ | 6,221,336 | $ | 3,543 | 0.23 | % | |||
| Total funding (1) | $ | 8,172,659 | $ | 8,534 | 0.41 | % | $ | 7,194,924 | $ | 8,815 | 0.49 | % | $ | 6,913,859 | $ | 9,830 | 0.57 | % |
(1)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2021 | December 31, 2020 | |||||||||||||
| Average | Yield | Average | Yield | |||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||
| Interest-earning assets | ||||||||||||||
| Commercial real estate, multifamily, and construction | $ | 2,322,509 | $ | 26,387 | 4.61 | % | $ | 2,507,950 | $ | 30,371 | 4.82 | % | ||
| Commercial and industrial and SBA | 2,221,494 | 22,910 | 4.18 | % | 1,978,684 | 21,984 | 4.42 | % | ||||||
| SFR mortgage | 1,210,105 | 11,747 | 3.94 | % | 1,224,865 | 12,955 | 4.21 | % | ||||||
| Other consumer | 28,520 | 294 | 4.18 | % | 31,856 | 787 | 9.83 | % | ||||||
| Loans held-for-sale | 1,413 | 7 | 2.01 | % | 1,564 | 8 | 2.03 | % | ||||||
| Gross loans and leases | 5,784,041 | 61,345 | 4.30 | % | 5,744,919 | 66,105 | 4.58 | % | ||||||
| Securities | 1,236,138 | 6,501 | 2.13 | % | 1,239,295 | 6,636 | 2.13 | % | ||||||
| Other interest-earning assets | 336,443 | 772 | 0.93 | % | 262,363 | 789 | 1.20 | % | ||||||
| Total interest-earning assets | 7,356,622 | 68,618 | 3.78 | % | 7,246,577 | 73,530 | 4.04 | % | ||||||
| Allowance for loan losses | (81,111) | (83,745) | ||||||||||||
| BOLI and noninterest-earning assets | 585,441 | 602,165 | ||||||||||||
| Total assets | $ | 7,860,952 | $ | 7,764,997 | ||||||||||
| Interest-bearing liabilities | ||||||||||||||
| Interest-bearing checking | $ | 2,140,314 | $ | 901 | 0.17 | % | $ | 2,086,146 | $ | 1,131 | 0.22 | % | ||
| Savings and money market | 1,654,525 | 2,390 | 0.59 | % | 1,609,598 | 2,542 | 0.63 | % | ||||||
| Certificates of deposit | 720,180 | 995 | 0.56 | % | 860,131 | 1,763 | 0.82 | % | ||||||
| Total interest-bearing deposits | 4,515,019 | 4,286 | 0.38 | % | 4,555,875 | 5,436 | 0.47 | % | ||||||
| FHLB advances | 446,618 | 3,112 | 2.83 | % | 534,303 | 3,479 | 2.59 | % | ||||||
| Other borrowings | 4,127 | 2 | 0.20 | % | 8,026 | 3 | 0.15 | % | ||||||
| Long-term debt | 256,361 | 3,302 | 5.22 | % | 230,239 | 3,049 | 5.27 | % | ||||||
| Total interest-bearing liabilities | 5,222,125 | 10,702 | 0.83 | % | 5,328,443 | 11,967 | 0.89 | % | ||||||
| Noninterest-bearing deposits | 1,653,517 | 1,448,422 | ||||||||||||
| Noninterest-bearing liabilities | 97,136 | 95,567 | ||||||||||||
| Total liabilities | 6,972,778 | 6,872,432 | ||||||||||||
| Total stockholders’ equity | 888,174 | 892,565 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 7,860,952 | $ | 7,764,997 | ||||||||||
| Net interest income/spread | $ | 57,916 | 2.95 | % | $ | 61,563 | 3.15 | % | ||||||
| Net interest margin | 3.19 | % | 3.38 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 141 | % | 136 | % | ||||||||||
| Total deposits | $ | 6,168,536 | $ | 4,286 | 0.28 | % | $ | 6,004,297 | $ | 5,436 | 0.36 | % | ||
| Total funding (1) | $ | 6,875,642 | $ | 10,702 | 0.63 | % | $ | 6,776,865 | $ | 11,967 | 0.70 | % |
(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.
| Year Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2021 | December 31, 2020 | |||||||||||||
| Average | Yield | Average | Yield | |||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||
| Interest-earning assets | ||||||||||||||
| Commercial real estate, multifamily, and construction | $ | 2,457,408 | $ | 112,335 | 4.57 | % | $ | 2,522,459 | $ | 119,720 | 4.75 | % | ||
| Commercial and industrial and SBA | 2,333,589 | 99,262 | 4.25 | % | 1,743,374 | 79,119 | 4.54 | % | ||||||
| SFR mortgage | 1,310,029 | 46,723 | 3.57 | % | 1,370,862 | 55,614 | 4.06 | % | ||||||
| Other consumer | 40,046 | 2,290 | 5.72 | % | 38,941 | 2,325 | 5.97 | % | ||||||
| Loans held-for-sale | 2,423 | 77 | 3.18 | % | 15,808 | 522 | 3.30 | % | ||||||
| Gross loans and leases | 6,143,495 | 260,687 | 4.24 | % | 5,691,444 | 257,300 | 4.52 | % | ||||||
| Securities | 1,295,879 | 27,588 | 2.13 | % | 1,112,306 | 29,038 | 2.61 | % | ||||||
| Other interest-earning assets | 353,190 | 3,383 | 0.96 | % | 360,532 | 4,269 | 1.18 | % | ||||||
| Total interest-earning assets | 7,792,564 | 291,658 | 3.74 | % | 7,164,282 | 290,607 | 4.06 | % | ||||||
| Allowance for credit losses | (82,166) | (78,152) | ||||||||||||
| BOLI and noninterest-earning assets | 583,606 | 602,886 | ||||||||||||
| Total assets | $ | 8,294,004 | $ | 7,689,016 | ||||||||||
| Interest-bearing liabilities | ||||||||||||||
| Interest-bearing checking | $ | 2,267,059 | $ | 2,906 | 0.13 | % | $ | 1,810,152 | $ | 8,705 | 0.48 | % | ||
| Savings and money market | 1,664,350 | 7,063 | 0.42 | % | 1,559,958 | 14,164 | 0.91 | % | ||||||
| Certificates of deposit | 633,497 | 2,344 | 0.37 | % | 1,063,705 | 14,947 | 1.41 | % | ||||||
| Total interest-bearing deposits | 4,564,906 | 12,313 | 0.27 | % | 4,433,815 | 37,816 | 0.85 | % | ||||||
| FHLB advances | 426,875 | 12,023 | 2.82 | % | 749,195 | 18,040 | 2.41 | % | ||||||
| Securities sold under repurchase agreements | — | — | — | % | 584 | 4 | 0.68 | % | ||||||
| Other borrowings | 44,214 | 46 | 0.10 | % | 2,369 | 12 | 0.51 | % | ||||||
| Long-term debt | 260,122 | 13,498 | 5.19 | % | 187,771 | 10,141 | 5.40 | % | ||||||
| Total interest-bearing liabilities | 5,296,117 | 37,880 | 0.72 | % | 5,373,734 | 66,013 | 1.23 | % | ||||||
| Noninterest-bearing deposits | 1,996,449 | 1,322,681 | ||||||||||||
| Noninterest-bearing liabilities | 104,450 | 110,551 | ||||||||||||
| Total liabilities | 7,397,016 | 6,806,966 | ||||||||||||
| Total stockholders’ equity | 896,988 | 882,050 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 8,294,004 | $ | 7,689,016 | ||||||||||
| Net interest income/spread | $ | 253,778 | 3.02 | % | $ | 224,594 | 2.83 | % | ||||||
| Net interest margin | 3.26 | % | 3.13 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 147 | % | 133 | % | ||||||||||
| Total deposits | $ | 6,561,355 | $ | 12,313 | 0.19 | % | $ | 5,756,496 | $ | 37,816 | 0.66 | % | ||
| Total funding (1) | $ | 7,292,566 | $ | 37,880 | 0.52 | % | $ | 6,696,415 | $ | 66,013 | 0.99 | % |
(1)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures
(Dollars in thousands, except per share data)
(Unaudited)
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.
Tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per common share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income (loss), adjusted PTPP income (loss), PTPP income (loss) ROAA, adjusted PTPP income (loss) ROAA, efficiency ratio, adjusted efficiency ratio, adjusted total revenue, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS) and adjusted return on average assets (ROAA) constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.
Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding net interest income and adjusted noninterest income (adjusted total revenue) and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by adjusted total revenue.
Adjusted net income (loss) is calculated by adjusting net income (loss) for tax-effected noninterest income and expense adjustments and the tax impact from the exercise of stock appreciation rights. Adjusted ROAA is computed by dividing annualized adjusted net income by average assets. Adjusted net income (loss) available to common shareholders is computed by removing the impact of preferred stock redemptions from adjusted net income (loss).
Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tangible common equity, and tangible common equity to tangible assets ratio | |||||||||||||||
| Total assets | $ | 9,393,743 | $ | 8,278,741 | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 | |||||
| Less goodwill | (94,301) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less other intangible assets | (6,411) | (1,787) | (2,069) | (2,351) | (2,633) | ||||||||||
| Tangible assets(1) | $ | 9,293,031 | $ | 8,239,810 | $ | 7,988,200 | $ | 7,893,964 | $ | 7,837,557 | |||||
| Total stockholders' equity | $ | 1,065,290 | $ | 844,803 | $ | 829,362 | $ | 804,693 | $ | 897,207 | |||||
| Less goodwill | (94,301) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less other intangible assets | (6,411) | (1,787) | (2,069) | (2,351) | (2,633) | ||||||||||
| Tangible equity(1) | 964,578 | 805,872 | 790,149 | 765,198 | 857,430 | ||||||||||
| Less preferred stock | (94,956) | (94,956) | (94,956) | (94,956) | (184,878) | ||||||||||
| Tangible common equity(1) | $ | 869,622 | $ | 710,916 | $ | 695,193 | $ | 670,242 | $ | 672,552 | |||||
| Total stockholders' equity to total assets | 11.34 | % | 10.20 | % | 10.33 | % | 10.14 | % | 11.39 | % | |||||
| Tangible equity to tangible assets(1) | 10.38 | % | 9.78 | % | 9.89 | % | 9.69 | % | 10.94 | % | |||||
| Tangible common equity to tangible assets(1) | 9.36 | % | 8.63 | % | 8.70 | % | 8.49 | % | 8.58 | % | |||||
| Common shares outstanding | 62,188,206 | 50,321,096 | 50,313,228 | 50,150,447 | 49,767,489 | ||||||||||
| Class B non-voting non-convertible common shares outstanding | 477,321 | 477,321 | 477,321 | 477,321 | 477,321 | ||||||||||
| Total common shares outstanding | 62,665,527 | 50,798,417 | 50,790,549 | 50,627,768 | 50,244,810 | ||||||||||
| Tangible common equity per common share(1) | $ | 13.88 | $ | 13.99 | $ | 13.69 | $ | 13.24 | $ | 13.39 | |||||
| Book value per common share | $ | 15.48 | $ | 14.76 | $ | 14.46 | $ | 14.02 | $ | 14.18 |
(1)Non-GAAP measure.
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | |||||||||||||||
| Return on tangible common equity | |||||||||||||||||||||
| Average total stockholders' equity | $ | 1,035,782 | $ | 847,941 | $ | 814,973 | $ | 888,174 | $ | 892,565 | $ | 896,988 | $ | 882,050 | |||||||
| Less average preferred stock | (94,956) | (94,956) | (94,956) | (164,895) | (184,878) | (112,201) | (186,209) | ||||||||||||||
| Less average goodwill | (86,911) | (37,144) | (37,144) | (37,144) | (37,144) | (49,688) | (37,144) | ||||||||||||||
| Less average other intangible assets | (4,994) | (1,941) | (2,224) | (2,517) | (2,826) | (2,924) | (3,392) | ||||||||||||||
| Average tangible common equity(1) | $ | 848,921 | $ | 713,900 | $ | 680,649 | $ | 683,618 | $ | 667,717 | $ | 732,175 | $ | 655,305 | |||||||
| Net income (loss) available to common stockholders | $ | 4,024 | $ | 21,443 | $ | 17,323 | $ | 7,825 | $ | 17,706 | $ | 50,563 | $ | (1,103) | |||||||
| Add amortization of intangible assets | 430 | 282 | 282 | 282 | 306 | 1,276 | 1,518 | ||||||||||||||
| Less tax effect on amortization of intangible assets(2) | (90) | (59) | (59) | (59) | (64) | (268) | (319) | ||||||||||||||
| Net income (loss) available to common stockholders after adjustments for intangible assets(1) | $ | 4,364 | $ | 21,666 | $ | 17,546 | $ | 8,048 | $ | 17,948 | $ | 51,571 | $ | 96 | |||||||
| Return on average equity | 2.20 | % | 10.84 | % | 9.38 | % | 6.56 | % | 9.67 | % | 6.95 | % | 1.43 | % | |||||||
| Return on average tangible common equity(1) | 2.04 | % | 12.04 | % | 10.34 | % | 4.77 | % | 10.69 | % | 7.04 | % | 0.01 | % |
(1)Non-GAAP measure.
(2)Adjustments shown net of a statutory Federal tax rate of of 21%.
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | |||||||||||||||
| Adjusted noninterest income and expense | |||||||||||||||||||||
| Total noninterest income | $ | 4,860 | $ | 5,519 | $ | 4,170 | $ | 4,381 | $ | 6,975 | $ | 18,930 | $ | 18,518 | |||||||
| Noninterest income adjustments: | |||||||||||||||||||||
| Net gain on securities available for sale | — | — | — | — | — | — | (2,011) | ||||||||||||||
| Net gain on sale of legacy SFR loans held for sale | — | — | — | — | — | — | (272) | ||||||||||||||
| Fair value adjustment on legacy SFR loans held for sale | (26) | (160) | (20) | — | (36) | (206) | 1,501 | ||||||||||||||
| Total noninterest income adjustments | (26) | (160) | (20) | — | (36) | (206) | (782) | ||||||||||||||
| Adjusted noninterest income(1) | $ | 4,834 | $ | 5,359 | $ | 4,150 | $ | 4,381 | $ | 6,939 | $ | 18,724 | $ | 17,736 | |||||||
| Total noninterest expense | $ | 58,127 | $ | 37,811 | $ | 40,559 | $ | 46,735 | $ | 38,950 | $ | 183,232 | $ | 199,033 | |||||||
| Noninterest expense adjustments: | |||||||||||||||||||||
| Naming rights termination | — | — | — | — | — | — | (26,769) | ||||||||||||||
| Extinguishment of debt | — | — | — | — | — | — | (2,515) | ||||||||||||||
| Professional recoveries (fees) | (642) | 2,152 | 1,284 | (721) | 4,398 | 2,073 | 673 | ||||||||||||||
| Merger-related costs | (13,469) | (1,000) | (700) | (700) | — | (15,869) | — | ||||||||||||||
| Noninterest expense adjustments before gain (loss) in alternative energy partnership investments | (14,111) | 1,152 | 584 | (1,421) | 4,398 | (13,796) | (28,611) | ||||||||||||||
| Gain (loss) in alternative energy partnership investments | 1,220 | 1,785 | 829 | (3,630) | 673 | 204 | 365 | ||||||||||||||
| Total noninterest expense adjustments | (12,891) | 2,937 | 1,413 | (5,051) | 5,071 | (13,592) | (28,246) | ||||||||||||||
| Adjusted noninterest expense(1) | $ | 45,236 | $ | 40,748 | $ | 41,972 | $ | 41,684 | $ | 44,021 | $ | 169,640 | $ | 170,787 | |||||||
| Average assets | $ | 9,331,955 | $ | 8,141,613 | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | $ | 8,294,004 | $ | 7,689,016 | |||||||
| Noninterest expense to average total assets | 2.47 | % | 1.84 | % | 2.08 | % | 2.41 | % | 2.00 | % | 2.21 | % | 2.59 | % | |||||||
| Adjusted noninterest expense to average total assets(1) | 1.92 | % | 1.99 | % | 2.15 | % | 2.15 | % | 2.26 | % | 2.05 | % | 2.22 | % |
(1)Non-GAAP measure.
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | |||||||||||||||
| Adjusted pre-tax pre-provision income | |||||||||||||||||||||
| Net interest income | $ | 73,039 | $ | 62,976 | $ | 59,847 | $ | 57,916 | $ | 61,563 | $ | 253,778 | $ | 224,594 | |||||||
| Noninterest income | 4,860 | 5,519 | 4,170 | 4,381 | 6,975 | 18,930 | 18,518 | ||||||||||||||
| Total revenue | 77,899 | 68,495 | 64,017 | 62,297 | 68,538 | 272,708 | 243,112 | ||||||||||||||
| Noninterest expense | 58,127 | 37,811 | 40,559 | 46,735 | 38,950 | 183,232 | 199,033 | ||||||||||||||
| Pre-tax pre-provision income(1) | $ | 19,772 | $ | 30,684 | $ | 23,458 | $ | 15,562 | $ | 29,588 | $ | 89,476 | $ | 44,079 | |||||||
| Total revenue | $ | 77,899 | $ | 68,495 | $ | 64,017 | $ | 62,297 | $ | 68,538 | $ | 272,708 | $ | 243,112 | |||||||
| Total noninterest income adjustments | (26) | (160) | (20) | — | (36) | (206) | (782) | ||||||||||||||
| Adjusted total revenue(1) | 77,873 | 68,335 | 63,997 | 62,297 | 68,502 | 272,502 | 242,330 | ||||||||||||||
| Noninterest expense | 58,127 | 37,811 | 40,559 | 46,735 | 38,950 | 183,232 | 199,033 | ||||||||||||||
| Total noninterest expense adjustments | (12,891) | 2,937 | 1,413 | (5,051) | 5,071 | (13,592) | (28,246) | ||||||||||||||
| Adjusted noninterest expense(1) | 45,236 | 40,748 | 41,972 | 41,684 | 44,021 | 169,640 | 170,787 | ||||||||||||||
| Adjusted pre-tax pre-provision income(1) | $ | 32,637 | $ | 27,587 | $ | 22,025 | $ | 20,613 | $ | 24,481 | $ | 102,862 | $ | 71,543 | |||||||
| Average assets | $ | 9,331,955 | $ | 8,141,613 | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | $ | 8,294,004 | $ | 7,689,016 | |||||||
| Pre-tax pre-provision income ROAA(1) | 0.84 | % | 1.50 | % | 1.20 | % | 0.80 | % | 1.52 | % | 1.08 | % | 0.57 | % | |||||||
| Adjusted pre-tax pre-provision income ROAA(1) | 1.39 | % | 1.34 | % | 1.13 | % | 1.06 | % | 1.25 | % | 1.24 | % | 0.93 | % | |||||||
| Efficiency ratio(1) | 74.62 | % | 55.20 | % | 63.36 | % | 75.02 | % | 56.83 | % | 67.19 | % | 81.87 | % | |||||||
| Adjusted efficiency ratio(1) | 58.09 | % | 59.63 | % | 65.58 | % | 66.91 | % | 64.26 | % | 62.25 | % | 70.48 | % |
(1)Non-GAAP measure.
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures, Continued
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br>2021 | September 30,<br>2021 | June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | December 31,<br>2021 | December 31,<br>2020 | |||||||||||||||
| Adjusted net income | |||||||||||||||||||||
| Net income (1) | $ | 5,751 | $ | 23,170 | $ | 19,050 | $ | 14,375 | $ | 21,703 | $ | 62,346 | $ | 12,574 | |||||||
| Adjustments: | |||||||||||||||||||||
| Noninterest income | (26) | (160) | (20) | — | (36) | (206) | (782) | ||||||||||||||
| Noninterest expense | 12,891 | (2,937) | (1,413) | 5,051 | (5,071) | 13,592 | 28,246 | ||||||||||||||
| Total adjustments | 12,865 | (3,097) | (1,433) | 5,051 | (5,107) | 13,386 | 27,464 | ||||||||||||||
| Tax impact of adjustments above(2) | (3,216) | 774 | 358 | (1,263) | 1,277 | (3,347) | (6,865) | ||||||||||||||
| Tax impact from exercise of stock appreciation rights | — | — | — | (2,093) | — | (2,093) | — | ||||||||||||||
| Adjustments to net income | 9,649 | (2,323) | (1,075) | 1,695 | (3,830) | 7,946 | 20,599 | ||||||||||||||
| Adjusted net income(3) | $ | 15,400 | $ | 20,847 | $ | 17,975 | $ | 16,070 | $ | 17,873 | $ | 70,292 | $ | 33,173 | |||||||
| Average assets | $ | 9,331,955 | $ | 8,141,613 | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | $ | 8,294,004 | $ | 7,689,016 | |||||||
| ROAA | 0.24 | % | 1.13 | % | 0.98 | % | 0.74 | % | 1.11 | % | 0.75 | % | 0.16 | % | |||||||
| Adjusted ROAA(3) | 0.65 | % | 1.02 | % | 0.92 | % | 0.83 | % | 0.92 | % | 0.85 | % | 0.43 | % | |||||||
| Adjusted net income available to common stockholders | |||||||||||||||||||||
| Net income (loss) available to common stockholders | $ | 4,024 | $ | 21,443 | $ | 17,323 | $ | 7,825 | $ | 17,706 | $ | 50,563 | $ | (1,103) | |||||||
| Adjustments to net income (loss) | 9,649 | (2,323) | (1,075) | 1,695 | (3,830) | 7,946 | 20,599 | ||||||||||||||
| Adjustments for impact of preferred stock redemption | — | — | — | 3,347 | — | 3,347 | (568) | ||||||||||||||
| Adjusted net income available to common stockholders(3) | $ | 13,673 | $ | 19,120 | $ | 16,248 | $ | 12,867 | $ | 13,876 | $ | 61,856 | $ | 18,928 | |||||||
| Average diluted common shares | 60,690,046 | 50,909,317 | 50,892,202 | 50,750,522 | 50,335,271 | 53,302,926 | 50,182,096 | ||||||||||||||
| Diluted EPS | $ | 0.07 | $ | 0.42 | $ | 0.34 | $ | 0.15 | $ | 0.35 | $ | 0.95 | $ | (0.02) | |||||||
| Adjusted diluted EPS(3)(4) | $ | 0.23 | $ | 0.38 | $ | 0.32 | $ | 0.25 | $ | 0.28 | $ | 1.16 | $ | 0.38 |
(1)Net income for the three months ended December 31, 2021 includes an $11.3 million pre-tax charge for the expected lifetime credit losses for non-purchased credit deteriorated loans acquired in the PMB Acquisition; there is no similar charge in any of the other periods presented.
(2)Tax impact of adjustments shown at an effective tax rate of 25%.
(3)Non-GAAP measure.
(4)Represents adjusted net income available to common stockholders divided by average diluted common shares.
24
banc2021q4investordeckfi
INVESTOR PRESENTATION 2021 Fourth Quarter Earnings bancofcal.com
2 FORWARD LOOKING STATEMENTS When used in this report 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 “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” 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 “Company”, “we”, “us” or “our”), as well as the continuing effects of the COVID-19 pandemic on the Company’s 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 effect of the 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; (ii) the costs and effects of litigation generally, including legal fees and other expenses, settlements and judgments; (iii) the risk that we will not be successful in the implementation of our capital utilization strategy, new lines of business, new products and services, or other strategic project initiatives; (iv) risks that the Company’s 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; (v) 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 delinquencies, losses, and nonperforming assets in our loan portfolio, and may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves; (vi) the quality and composition of our securities portfolio; (vii) changes in general economic conditions, either nationally or in our market areas, or changes in financial markets; (viii) 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; (ix) fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area; (x) our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities; (xi) 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, 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; (xii) 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; (xiii) our ability to control operating costs and expenses; (xiv) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (xv) the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses; (xvi) errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation; (xvii) 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; (xviii) our ability to attract and retain key members of our senior management team; (xix) increased competitive pressures among financial services companies; (xx) changes in consumer spending, borrowing and saving habits; (xxi) the effects of severe weather, including as a result of climate change, natural disasters, pandemics, acts of war or terrorism, and other external events on our business; (xxii) the ability of key third-party providers to perform their obligations to us; (xxiii) 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 standards; (xxiv) continuing impact of the Financial Accounting Standards Board’s credit loss accounting standard, referred to as Current Expected Credit Loss, which requires 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; (xxv) 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; (xxvi) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or our bank subsidiary, or repurchases of our common or preferred stock; and (xxvii) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC. Further, statements about the potential effects of the Pacific Mercantile Bancorp acquisition on our business, financial results and condition 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 our control, including (i) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Banc of California, Inc. and Pacific Mercantile Bancorp operate; (ii) the ability to promptly and effectively integrate the businesses of Banc of California, Inc. and Pacific Mercantile Bancorp; (iii) diversion of management time on integration-related issues; (iv) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (v) other risks that are described in Banc of California, Inc.’s public filings with the SEC.
3 (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation (2) 4Q21 capital ratios are preliminary FOURTH QUARTER 2021 RESULTS ($ in Thousands Except EPS) 4Q21 3Q21 4Q20 Net interest income $ 73,039 $ 62,976 $ 61,563 Provision for (reversal of) credit losses $ 11,262 $ (1,147) $ 991 Net income $ 5,751 $ 23,170 $ 21,703 Net income available to common stockholders $ 4,024 $ 21,443 $ 17,706 Earnings per diluted common share $ 0.07 $ 0.42 $ 0.35 Adjusted net income available to common stockholders (1) $ 13,672 $ 19,120 $ 13,876 Adjusted earnings per diluted common share (1) $ 0.23 $ 0.38 $ 0.28 Pre-tax pre-provision (PTPP) income (1) $ 19,772 $ 30,684 $ 29,588 Adjusted PTPP income (1) $ 32,637 $ 27,587 $ 24,481 Return on average assets (ROAA) 0.24% 1.13% 1.11% PTPP ROAA (1) 0.84% 1.50% 1.52% Adjusted PTPP ROAA (1) 1.39% 1.34% 1.25% Average assets $ 9,331,955 $ 8,141,613 $ 7,764,997 Net interest margin 3.28% 3.28% 3.38% Allowance for credit losses coverage ratio 1.35% 1.26% 1.43% Common equity tier 1 (2) 11.38% 10.86% 11.19% Tangible common equity per common share (1) $ 13.88 $ 13.99 $ 13.39 Noninterest-bearing deposits as % of total deposits 37.5% 32.2% 25.6%
4 ENHANCING FRANCHISE VALUE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 4th Quarter 2021 Summary Increase in Core Earnings Power • Adjusted PTPP Income(1) up 18% from prior quarter • Adjusted PTPP ROAA(1) improved 4 bps to 1.39% from prior quarter Acquisition of Pacific Mercantile Bancorp (“PMB”) • Closed October 18, 2021; system conversion completed November 15, 2021 • All measures necessary to achieve 40%+ cost savings put in place by end of 2021 • $1.5 billion in total assets acquired, including $963 million in loans • Excess liquidity utilized to optimize NIM through repayment of borrowings and improvement of deposit mix while funding loan growth Continued Strong Loan Production • Largest quarter of total loan fundings of 2021 • New loan fundings increased 16% from 3Q21 • Well balanced production across markets, asset classes and industries Further Improvement in Deposit Franchise • Improved deposit mix: NIB represented 37% of deposits at the end of 4Q21 versus 32% at the end of 3Q21 • Time deposits declined to 6.8% of total deposits at end of 4Q21 versus 8.6% at end of 3Q21 • Reduced average cost of deposits to 0.11% for 4Q21 from 0.15% for 3Q21; spot rate of 0.07% at the end of 4Q21 Positive Trends in Asset Quality • Non-performing loans of $52.6 million at December 31, 2021 reflects addition of loans from PMB acquisition • BANC originated non-performing loans declined 32% from end of prior quarter(1) • BANC originated criticized and classified loans declined 23% from end of prior quarter
5 GROWING CORE EARNINGS POWER • Adjusted pre-tax pre-provision income increased $5 million, or 18% • Adjusted PTPP increase due mostly to higher net interest income driven by higher average loan balances from both organic and acquired growth, offset by higher operating costs related to including PMB’s operations since the acquisition date • Annualized adjusted PTPP ROAA increase of 4% • Noninterest expense adjustments include merger-related costs and indemnified professional fees, net of recoveries • Merger-related costs totaled $13.5 million for 4Q21 versus $1.0 million for 3Q21; and • Indemnified net professional fees totaled $0.6 million in 4Q21 versus $2.2 million in net recoveries in 3Q21, an increase of $2.8 million ($ in millions) (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation $19.8 $32.6 $14.1 Pre-tax, pre- provision income $(1.2) Noninterest expense adjustments $(0.0) Gain on alternative energy partnerships Noninterest income adjustments Adjusted pre-tax, pre- provision income (1) $30.7 $27.6 Noninterest expense adjustments Pre-tax, pre- provision income $(1.2) Adjusted pre-tax, pre- provision income (1) $(1.8) Noninterest income adjustments $(0.2) Gain on alternative engergy partnerships Adjusted PTPP ROAA 1.34% 4Q 2021 3Q 2021 Adjusted PTPP ROAA 1.39%
6 Adjusted Pre-tax Pre-provision (PTPP) Income (1) $16.0 $13.2 $12.2 $18.9 (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 0.65% 0.83% 0.98% 1.25% 1.06% 1.13% 1.34% 1.39% $16.0 1Q21 $12.2 1Q20 2Q20 $22.0 4Q20 $18.9 $24.5 3Q20 $20.6 2Q21 $27.6 3Q21 $32.6 4Q21 Adjusted PTPP Income Adjusted PTPP Income / Avg. Assets ESCALATING ADJUSTED PRE-TAX PRE-PROVISION INCOME TREND
7 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS RECONCILIATION • Noninterest expense adjustments relate to merger-related costs, indemnified professional fees, net of recoveries • 4Q21 is reduced by a $11.3 million pre-tax charge for the expected lifetime credit losses for non-purchased credit deteriorated loans acquired in the PMB acquisition; there is no similar charge in 3Q21 ($ in millions) (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation presented utilizing an effective normalized tax rate of 25%; $4.0 $13.7 $10.6 $(0.0)$(0.9) Net Income Available to Common Stockholders Noninterest expense adjustments Gain on alternative energy partnerships Noninterest income adjustments Adjusted Net Income Available to Common Stockholders (1)(2) $21.4 $19.1 Gain on alternative engergy partnerships Net income available to common stockholders $(0.9) Noninterest expense adjustments $(1.3) $(0.1) Noninterest income adjustments Adjusted Net Income Available to Common Stockholders (1)(2) EPS $0.07 EPS $0.38 EPS $0.42 4Q 2021 3Q 2021 EPS $0.23
8 RAPIDLY IMPROVING DEPOSIT FRANCHISE (1) After fair value adjustments (2) Reflects balance as of period end • $1.1 billion deposits acquired from PMB outstanding as of 12/31/21: $610 million noninterest- bearing and $523 interest- bearing(1) • $70 million organic quarterly increase in noninterest- bearing deposits • Large percentage of noninterest-bearing and low-cost deposits • Targeted deposit strategy has transformed deposit mix and contributed to asset- sensitive profile • Deposit spot rate on December 31, 2021 was 7 bps, down from 8 bps at September 30, 2021 Cost of Deposits 0.23% 27% 35% 0.11% 0.36% 27% 28%26% 3Q21 0% 34% 32% 4Q20 12% 34% 0% 11% 0.28% 7% 0.15% 29% 36% 26% 0%10% 2Q21 32% 25% 0%9% 37% 24% 0% 4Q211Q21 Average Cost of deposits Money Market & Savings Interest-bearing checking Noninterest-bearing Brokered CDs CDs Spot Rate 0.07% Category 4Q20 1Q21 2Q21 3Q21 4Q21 $ in millions Noninterest-bearing checking $1,559.2 $1,700.3 $1,808.9 $2,107.7 $2,788.2 Interest-bearing checking 2,107.9 2,088.5 2,217.3 2,214.7 2,393.4 Demand deposits 3,667.2 3,788.9 4,026.2 4,322.4 5,181.6 Money Market & Savings 1,646.7 1,684.7 1,593.7 1,661.0 1,751.1 CDs 755.7 668.5 586.6 559.8 506.7 Brokered CDs 16.2 0.0 0.0 0.0 0.0 Total(2) $6,085.8 $6,142.0 $6,206.5 $6,543.2 $7,439.4
9 Period end balances ($ in millions) BUSINESS UNITS GENERATING SOLID DEMAND DEPOSIT(1) GROWTH 4Q20 $2,397 $754 4Q21 $437 1Q21 $848 $471 $21 $496 $824 $2,476 $18 $825 $5,182 3Q21 $2,735 $29 2Q21 $2,872 $1,081 $571 $32 $914 $3,157 $29 $3,667 $3,789 $4,026 $4,322 +41% Commercial & Real Estate BankingCommunity Banking Specialty & Business Banking Other Includes $777 million in Demand Deposits from PMB acquisition (1) Demand deposits include noninterest-bearing checking and interest-bearing checking
10 DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND GENERATES ATTRACTIVE RISK-ADJUSTED YIELD PPP Loan Overview • As of December 31, 2021, PPP loans (net of fees) comprised $123 million of the SBA portfolio • Of the total 1,128 PPP loans funded in the 1st round, 32 loans remain outstanding and represent $16 million of the PPP loan portfolio balance • Of the total 956 PPP loans funded in the 2nd round, 276 loans remain outstanding and represent $52 million of the PPP loan portfolio balance • 89 loans remain outstanding from the PMB acquisition and represent $55 million of the PPP portfolio balance Real Estate Secured with Low LTVs • 63% of loan portfolio is secured by residential real estate (primary residences) • Real Estate secured loans weighted average loan-to-values (LTVs) of 57% • ~85% of all real estate secured loans have LTVs of less than 70% • ~76% of the SFR portfolio have LTVs of less than 70% (1) Acquired $963 million in loans, including fair value adjustments, as of the October 18, 2021 acquisition date, of which $905 million is outstanding at December 31, 2021 (2) Reflects balance as of period end 4th Quarter 2021 3rd Quarter 2021 Change Loan Segment $(2) % Avg. Yield $(2) % Avg. Yield $(2) % Avg. Yield $ in Millions C&I $ 2,669 37% 4.21% $ 2,297 37% 4.19% $ 372 0% 0.02% Multifamily 1,361 19% 4.62% 1,296 21% 4.21% 65 -2% 0.41% CRE 1,311 18% 4.33% 907 15% 4.63% 404 3% -0.30% Construction 182 3% 5.42% 131 2% 5.11% 51 1% 0.31% SBA 206 3% 4.44% 182 3% 6.05% 24 0% -1.61% SFR 1,420 19% 3.30% 1,394 22% 3.48% 26 -3% -0.18% Consumer 103 1% 6.91% 23 0% 4.26% 80 1% 2.65% Total Loans HFI $ 7,251 100% 4.19% $ 6,229 100% 4.18% $ 1,023 N/A 0.01% The average HFI loan yield increased to 4.19% for 4Q21 compared to 4.18% for 3Q21 due to the mix of loans acquired from PMB and an increase in prepayment penalties, offset by a decrease in total PPP income. Includes $905 million in loans from the PMB acquisition (1)
11 $351 $487 $533 $503 $583 $151 $63 $87 $82 $243 $464 $- $227 $178 $80 $966 $550 $847 $763 $906 ($515) ($321) ($496) ($385) ($575) ($227) ($141) ($138) ($144) ($254) ($222) ($742) ($683) ($634) ($528) ($828) 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Total Loan Fundings of $906 Million in Q4 2021(1) Fundings Advances Warehouse Net Advances/Paydowns Payoffs Paydowns Warehouse Net Advances/Paydowns Total Loan Yield Rate on Production Rate on Production excl. PPP ($ in millions) LOAN BALANCES FUNDINGS AND PAYOFFS (1) Includes net change in warehouse lending (2) Reflects fair value of PMB acquired loans and is excluded from the chart and the total loan fundings (3) Includes deferred costs/fees, transfers, sales and other adjustments Total Loan Fundings of $906 Million in 4Q21( ) ($ in millions) Loans Beginning Balance Total Fundings PMB Acquired(2) Total Payoffs Net Di fference Other Change (3) Loans Ending Balance Total Loan Yield Rate on Production Rate on Production excl . PPP Q4 2021 6,232$ 906$ 963$ 828$ 77$ (17)$ 7,255$ 4.20% 3.74% 3.74% Q3 2021 5,988$ 763$ -$ 528$ 234$ 9$ 6,232$ 4.18% 3.83% 3.83% Q2 2021 5,766$ 847$ -$ 634$ 213$ 10$ 5,988$ 4.30% 3.86% 3.91% Q1 2021 5,900$ 550$ -$ 683$ (133)$ (1)$ 5,766$ 4.30% 3.16% 3.76% Q4 2020 5,680$ 966$ -$ 742$ 224$ (4)$ 5,900$ 4.58% 3.67% 3.67%
12 ASSET QUALITY REMAINS STRONG NPLs, Delinquencies, and Classified Loans Delinquencies ($ in millions) Non-performing Loans (NPLs) ($ in millions) Criticized and Classified Loans ($ in millions) ACL / Non-performing Loans (NPLs) ($ in millions) 1Q21 $13.5 $22.9 $8.7 0.54% 4Q20 1.06% $47.8 $21.7 $13.3 2Q21 0.58% $19.1 $26.0 0.72% 3Q21 $31.9 $61.3 $19.1 $21.7 1.00% 4Q21 $31.6 $35.0 $45.1 $72.8 SFR Delinquencies Delinquencies (ex-SFR) PMBC Acquired Delinquencies Delinquencies /Total Loans $91 3Q211Q214Q20 $126 $102 2Q21 $76 $101 $60 $241 4Q21 $166 $227 $259 $245 Classified Loans Criticized and Classified Loans PMB Acquired Criticized and Classified Loans $23.1 $13.5 0.62% $23.9 4Q20 $23.5 $21.6 $32.4 0.97% 1Q21 $21.2 $30.1 0.86% 2Q21 $16.5 $29.1 0.73% 3Q21 0.72% $7.1 4Q21 $51.3 $36.6 $55.9 $45.6 $52.6 SFR NPLs NPLs/Total Loans-HFIPMBC Acquired NPLs NPLs (ex-SFR) 230% 148% 155% 173% 187% $82.7$84.2 4Q20 1Q21 $79.7 $78.8 2Q21 3Q21 $98.2 4Q21 ACL / NPLs ACL 0.49% excluding loans acquired from PMB(1) $14.3mm Criticized and $45.3mm Classified loans acquired from PMB (1) The NPL ratio related to BANC originated loans is 0.49% when PMB’s NPLs of $21.6 million and PMB acquired loans outstanding at December 31, 2021 of $905 million are excluded
13 TOP 10 RELATIONSHIPS Non-performing & delinquent loans rollforward Non-performing loans • Non-performing loans increased $6.9 million, or 15%, to $52.6 million due mostly to $21.6 million of non-performing loans acquired from PMB, including one $12.8 million C&I credit and $5.5 million of PPP loans • Non-performing loans also included other SBA guaranteed loans of $10.6 million Delinquencies • Delinquencies increased $27.6 million, or 61%, due mostly to $19.1 million in PMB loans acquired and outstanding, of which $8.5 million are PPP loans • Delinquencies also included other SBA guaranteed loans of $10.8 million and $31.9 million of well-secured SFR loans Non-performing Loans ($ in thousands) # 4Q21 3Q21 Delta Loan Category 4Q Accrual Status 4Q Delinquency Status 3Q Accrual Status 1 12,840$ - 12,840$ C&I Non-Accrual Current (1) 2 6,617 - 6,617 C&I Non-Accrual 90+ Accrual 3 4,096 - 4,096 SBA Non-Accrual 90+ (1) 4 3,958 - 3,958 SFR Non-Accrual 90+ Accrual 5 3,803 3,837 (34) C&I Non-Accrual Current Non-Accrual 6 3,236 3,236 - SBA Non-Accrual 90+ Non-Accrual 7 2,977 3,017 (40) SBA Non-Accrual 90+ Non-Accrual 8 2,658 - 2,658 SFR Non-Accrual 90+ Accrual 9 2,410 - 2,410 C&I Non-Accrual Current (1) 10 1,924 1,924 - SBA Non-Accrual 90+ Non-Accrual 11+ 8,040 33,608 (25,568) Total 52,558$ 45,622$ 6,937$ Delinquent Loans ($ in thousands) # 4Q21 3Q21 Delta Loan Category 4Q Accrual Status 4Q Delinquency Status 3Q Delinquency Status 1 6,617$ 6,617$ - C&I Non-Accrual 90+ 30-59 2 5,387 - 5,387 C&I Accrual 30-59 (1) 3 4,096 - 4,096 SBA Non-Accrual 90+ (1) 4 3,958 3,958 (0) SFR Non-Accrual 90+ 30-59 5 3,393 - 3,393 SFR Accrual 30-59 Current 6 3,236 3,236 - C&I Non-Accrual 90+ 90+ 7 3,077 - 3,077 SFR Accrual 30-59 Current 8 2,977 3,017 (40) SBA Non-Accrual 90+ 90+ 9 2,871 - 2,871 SFR Accrual 30-59 Current 10 2,658 - 2,658 SFR Non-Accrual 90+ Current 11+ 34,484 28,295 6,189 Total 72,753$ 45,123$ 27,630$ (1) Acquired in PMB acquisition on October 18, 2021
14 ALLOWANCE FOR CREDIT LOSSES WALK 4Q21: The ACL reserve increased $19.4 million due to: (1) a $13.7 million initial allowance for credit losses established for purchased credit-deteriorated ("PCD") loans from the PMB Acquisition, (2) an $11.3 million initial charge for all other loans acquired from PMB, and (3) higher specific reserves of $1.3 million, offset by (4) net charge-offs of $5.5 million and (5) lower general reserves of $1.3 million from portfolio mix. ACL includes Allowance for Loan Losses (ALL) and Reserve for Unfunded Loan Commitments (RUC) – Our ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (MEVs) released by our model provider during December 2021. The December 2021 forecasts reflect a consistent view of the economy as compared to the September 2021 forecasts. While the current forecasts generally reflect an improving economy with the availability of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variants, further government stimulus, supply chain issues, and the ultimate pace of economic recovery. Accordingly, the economic assumptions used in the model and the resulting ACL level and provision consider both the positive assumptions and potential uncertainties. (1) Coverage percentage equals ACL to Total Loans. PPP loans improved Coverage ratio by 3 bps at 9/30/21 and 12/31/21 ($ in millions) 1.33% (1) 1.26% (1) $78.8 $98.2 $13.7 $11.3 Portfolio Mix $(1.3) PMB non-PCD loans and unfunded commitments ACL (9/30/21) $(5.5) PMB PCD loans Charge-offs (net of recoveries) $1.3 Specific Reserve ACL (12/31/21) 1.26% (1) 1.35% ( )
15 CONTINUED FOCUS ON EXPENSE MANAGEMENT Noninterest expense adjustments relate to: (1) timing of indemnified legal costs/recoveries, (2) merger-related costs and (3) loss/gain on investments in alternative energy partnerships(2) Noninterest Expense to Average Assets ($ millions) Adjusted Noninterest Expense(1) to Average Assets ($ millions) -$5.1 $41.7$44.0 2.00% 1Q214Q20 2.41% 2Q21 $5.1 -$1.4 $42.0 2.08% -$2.9 $40.7 1.84% 3Q21 $12.9 $45.2 2.47% 4Q21 $39.0 $46.7 $40.6 $37.8 $58.1 Noninterest expense adjustments Noninterest Expense / Average Assets Adjusted Noninterest Expense $44.0 2.26% 2.15% 2Q214Q20 $41.7 2.15% $42.0 1Q21 $40.7 1.99% 3Q21 $45.2 1.92% 4Q21 Adjusted Noninterest Expense Adjusted Noninterest Expense / Average Assets
16 (1) 4Q21 capital ratios are preliminary (2) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 4Q21 3Q21 2Q21 1Q21 4Q20 Common Equity Tier 1 (1) 11.38% 10.86% 11.14% 11.50% 11.19% Tier 1 Risk-based Capital (1) 12.63% 12.35% 12.71% 13.17% 14.35% Leverage Ratio (1) 10.42% 9.80% 9.89% 9.62% 10.90% Tangible Equity / Tangible Assets (2) 10.38% 9.78% 9.89% 9.69% 10.94% Tangible Common Equity / Tangible Assets (2) 9.36% 8.63% 8.70% 8.49% 8.58% STRONG CAPITAL BASE Provides buffer to deploy for shareholders’ benefit
17 Interest Rate Risk Position (within 12 months) Loan & Deposit Mix Rate Sensitive Assets at 43% of Total Assets Loan Portfolio • $3.1 Billion matures or resets within 12 months • $1.7 Billion of loans are at or below their floors • Given a 100 bps market rate increase 76% of loans with floors are eligible to reprice Cash & Investments • $631 Million reprice in 12 months, mostly CLOs • $228 Million in Interest Bearing Cash INTEREST RATE RISK MANAGEMENT Well positioned for higher rates with a One Year Positive Gap Ratio of 38% HFI Loans: $7.3 billion Total Deposits: $7.4 billion Non interest- bearing 37% Interest- bearing, Non- Maturity 56% Time 7% Hybrid 30% Variable 39% Fixed 31% LESS Rate Sensitive Liabilities at 5% of Total Assets • $333 million CD’s mature or reprice within 12 months • $95 million in overnight borrowings One Year Positive Gap Ratio is 38% of Total Assets 12 Month Net Interest Income Sensitivity 3.2% 6.3% 9.1% 5.5% 10.9% 16.0% 7.7% 15.3% 22.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% UP 100 UP 200 UP 300 12 Month Net Interest Income (NII) Sensitivity Historical Beta 50% of Historical Beta Zero Beta
18 2022 STRATEGIC OBJECTIVES • Well positioned to see lower deposit beta and more positive impact on NIM than in last rising interest rate cycle • Robust deposit gathering engine has increased noninterest-bearing deposits to 37% of total deposits at 4Q21 from 15% in 1Q19 • One year positive gap ratio has increased to 38% at 4Q21 from 7% at 4Q19 • Increasingly productive commercial banking team • Continue expanding presence in large vertical markets • Capitalize on position as a talent magnet in California to continue selectively adding proven commercial bankers • Achieve 40% cost savings during first half of 2022 • Identify additional opportunities for cost savings from larger organization • Expand relationships with new clients that have larger financing needs • Redeem Series E preferred stock during first half of 2022, subject to regulatory approval • Evaluate other strategic opportunities to further elevate the client experience and positively impact shareholder returns • Capitalize on enhanced scale following PMB acquisition to increase technology investments while still realizing improved operating leverage • Position BANC as the financial services ecosystem hub for our clients • Elevate the client experience and offer innovative solutions either directly or through fintech partnerships Fully Realize Synergies of PMBC Acquisition Continue Generating Strong Loan Production Capitalize on Increased Asset Sensitivity Accelerate Investment in Technology Continue Optimizing Use of Capital to Increase Earnings and Enhance Franchise Value Continued Balance Sheet Growth and Expanding Profitability
19 APPENDIX bancofcal.com
20 79% of total loans in California LOAN PORTFOLIO CHARACTERISTICS Construction $182 3% Consumer $103 1% SBA(1) $206 3% Northern California $592 8% Central California $217 3% South $784 11% Other West $332 5% Northeast $250 3% Midwest $137 2% • 63% of loan portfolio is secured by residential real estate (primary residences) • ~85% of all real estate secured loans have LTVs of less than 70% • ~76% of the SFR portfolio have LTVs of less than 70% $ in millions$ in millions 92% of RE loans in California Loan Portfolio by Segment Loan Portfolio by Geography (1) Includes $123 million of PPP loans. Key Commentary Southern California $4,918 68% CRE $1,311 18% Single Family Res. $1,420 20% Multifamily $1,361 19% C&I $2,669 37% Loan Segment Avg. Yield C&I 4.21% Multifamily 4.62% CRE 4.33% Construction 5.42% SBA 4.44% Single Family Res. 3.30% Consumer 6.91% Total Loans HFI 4.19%
21 REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS $ in millions (1) Excludes Warehouse credit facilities Real Estate Loan Balances(1) SFR Portfolio by LTV 2Q211Q21 3Q21 59% 4Q20 60%61% 61% 59% 4Q21 $3,503 $3,521 $3,636 $3,727 $4,274 RE Loans / Loans-HFI RE Loans 60% to 70% 50% to 60% <50% 70% to 80% >80% • ~85% of all real estate secured loans have LTVs of less than 70% • Weighted average LTV is 57% Real Estate(1) LTVs $ % Count <50% $ 1,232 29% 1,063 50% to 60% 1,037 24% 485 60% to 70% 1,346 31% 461 70% to 80% 613 14% 320 >80% 46 1% 25 Total $ 4,274 100% 2,354 $ in Millions SFR LTVs $ % Count <50% $ 492 35% 578 50% to 60% 308 22% 247 60% to 70% 280 20% 194 70% to 80% 336 24% 250 >80% 4 0% 4 Total $ 1,420 100% 1,273 $ in Millions • ~76% of all existing SFR have LTVs of less than 70% • Weighted average LTV is 56%
22 CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type Multifamily 51% Health Facility 3% 13% Retail 13% Industrial 10% Owner Occupied 17% Mixed Use 3.1% Multi Tenant 45% Single Tenant 17% Strip Center 6% Non Owner Occupied 83% Neighborhood Shopping Center 27% Other 5% Office Other 0.7% Residential 96.2% Other 8% Hospitality 3% Collateral Type Count Balance Avg. Loan Size W.A. LTV W.A. DSCR $ in Millions MultiFamily 587 $ 1,361 $ 2.3 58.8% 1.4x Office 81 335 4.1 55.5% 2.6x Retail 70 335 4.8 54.3% 1.7x Hospitality 41 72 1.8 54.7% 5.1x Health Facility 6 74 12.3 62.8% 1.4x Industrial 106 269 2.5 59.9% 2.2x Other 141 226 1.6 57.5% 1.8x Total CRE & MF 1032 $ 2,672 $ 2.6 57.8% 1.8x
23 ~74% C&I Concentration toward Businesses focused on Finance (including Warehouse), and Real Estate and Rental Leasing Limited Exposure to High Stressed Business Industries • 1% Food Services • <1% Transportation • <1% in Accommodations All Other C&I includes a diverse mix of industry sectors • 2% Professional Services • 1% Management of Companies • 1% Administrative and Support • 1% Education Services • 1% Construction / Contracting Finance and Insurance: Warehouse 66% Real Estate & Rental Leasing 9% Finance and Insurance: Other 4% Gas Stations 3% Manufacturing 2% Healthcase and Social Assistance 3% Wholesale Trade 3% Other Retail Trade 2% Television / Motion Pictures 2% Food Services 1% Professional Services 2% Transport ation 0.6% Accomodations 0.2% All Other C&I 8% DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO NAICS Industry Count $ Avg. Loan Size $ in Millions Finance: Warehouse 68 $ 1,602 $ 23.6 Real Estate & Rental Leasing 156 253 1.6 Finance: Other 52 108 2.1 Gas Stations 48 71 1.5 Healthcare and Social Assistance 93 86 0.9 Wholesale Trade 80 54 0.7 Manufacturing 123 92 0.7 Professional Services 137 48 0.3 Television / Motion Pictures 31 47 1.5 Other Retail Trade 70 43 0.6 Food Services 22 33 1.5 Transportation 44 17 0.4 Accommodations 5 2 0.4 All Other C&I 350 214 0.6 Total C&I 1279 $ 2,669 $ 2.1
24 FORBEARANCE AND DEFERMENTS DECLINE Total loan deferrals and forbearances declined $30 million from 3Q21 • $20 million, or 82%, of deferments/forbearances at the end of 4Q21 relate to legacy Single Family Residential loans (1) Loans within the SFR portfolio are forbearances or deferments $440 $145 $113 $60 $4 $164 $138 $139 $49 $52 $50$34 12/31/20206/30/2020 $25 3/31/20219/30/2020 $87 6/30/2021 $54 9/30/2021 $5 $20 12/31/2021 $604 $283 $252 $109 -55% SFR Non-SFR ($ in millions) Deferrals by Loan Type as of 12/31/21 (1) Total Deferrals $ # Total Portfolio % of Portfolio Deferred Single Family Residential (SFR) $ 20.2 19 $ 1,420 1.4% Multifamily - 0 1,361 0.0% CRE - 0 1,311 0.0% Construction & Development - 0 182 0.0% Commercial & Industrial 3.8 1 2,669 0.1% Other Consumer 0.5 2 103 0.5% SBA - 0 206 0.0% 4Q2021 Total $ 24.6 22 $ 7,251 0.3% 3Q2021 Total $ 54.2 45 $ 6,229 0.9%
25 STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE • Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments • 4Q21 Allowance for loan losses of $92.6 million includes initial provision for loan losses for non-purchase credit deteriorated loans acquired in the PMB acquisition of $11.3 million and $13.7 million allowance for credit losses established for purchased credit-deteriorated loans related to the acquisition • 4Q21 Reserve for unfunded commitments of $5.6 million includes an initial provision for unfunded commitments of $605 thousand in the PMB acquisition, and a negative provision of $233 thousand for other fourth quarter activity • Excluding PPP loans, the ACL coverage ratio was 1.38% at the end of 4Q21 compared to 1.29% at the end of 3Q21 PMB Loans(1) ACL Composition 9/30/2021 10/18/2021 12/31/2021 ($ in thousands) Amount % of Loans Amount % of Loans Amount % of Loans Commercial real estate $ 16,017 1.77% $ 6,396 1.78% $ 21,727 1.66% Multifamily 18,725 1.45% 2,076 1.51% 17,893 1.31% Construction 4,118 3.15% 409 3.13% 5,622 3.09% Commercial and industrial 15,824 2.05% 13,670 5.07% 29,126 2.73% Commercial and industrial - warehouse 4,431 0.29% - 0.00% 4,431 0.28% SBA 4,735 2.61% 829 0.82% 3,017 1.47% Total commercial loans 63,850 1.33% 23,380 2.66% 81,816 1.43% Single family residential mortgage 9,304 0.67% 3 0.13% 9,608 0.68% Other consumer 370 1.59% 895 1.12% 1,160 1.13% Total consumer loans 9,674 0.68% 898 1.09% 10,768 0.71% Allowance for loan losses 73,524 1.18% 24,278 2.52% 92,584 1.28% Reserve for unfunded commitments 5,233 0.08% 605 0.06% 5,605 0.08% Allowance for credit losses $ 78,757 1.26% $ 24,883 2.58% $ 98,189 1.35% (1) Represents net ACL established for purchase of credit deteriorated loans and non-purchase credit deteriorated loans acquired in the PMB acquisition
26(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. Portfolio Average Balances & Yields Securities Portfolio Detail(1) SECURITIES PORTFOLIO Portfolio Profile(1) CompositionCredit Rating AAA 44% AA 43% BBB 13% The quarter-over-quarter change in total securities is due to a $31mm reduction in the CLO position, $12mm pay-offs in the AGC positions, $56mm Private-Label RMBS acquisitions, $5mm Corporate Debt acquisition, and a $4.5mm reduction in total FV. CLOs included an unrealized loss of $2.3 million as of 4Q21, down from $2.5 million as of 3Q21. Private Label RMBS 4% CLO 39% Corporates 14% Gov’t & AGC 34% Munis 9% 4Q20 2.13% 1Q21 $1,239 2.13% 2.11% 2Q21 2.14% 3Q21 2.13% 4Q21 $1,236 $1,308 $1,347 $1,291 Average Balance ($ in millions) Yield Fair Value Fair Value QoQ Duration 3Q21 4Q21 Change 4Q21 ($ in Millions) Gov’t & Agency (MBS, CMO, & SBA) $ 464 $ 448 $ (16) 8.0 CLOs 549 519 (30) 0.1 Municipal 120 119 (1) 8.1 Corporate Securities 170 174 4 6.9 Private Label RMBS - 56 56 5.4 Total Securities $ 1,303 $ 1,316 $ 12 4.6 Security Type
27 CLO Industry Breakdown $519 million at December 31, 2021 (net of $2.3 million unrealized loss) • CLO portfolio has underlying diversified exposure with largest segment in Healthcare & Pharmaceuticals at 13% • Limited exposure to severely stressed industries • AA and AAA holdings provide principal protection – exposure to underlying credit losses would require a combination of lifetime defaults (25- 40% CDR), loss severity (40-50%), and prepayment assumptions (10-20% CPR) • Under these assumptions, the underlying securities would need to take losses of approximately 30% before we would anticipate incurring losses on principal • 4Q21 average CLO portfolio yield of 1.80% • Quarterly reset based on 3 Month Libor + 1.64% CLO PORTFOLIO HAS DIVERSIFIED EXPOSURE CREDIT ENHANCEMENT PROVIDES SIGNIFICANT PRINCIPAL PROTECTION Healthcare & Pharmaceuticals 13% High Tech Industries 10% Services: Business 9% FIRE: Banking, Finance, Insurance & Real Estate 8% Beverage, Food & Tobacco 5% Hotel, Gaming & Leisure 4% Media: Broadcasting & Subscription 4% Telecommunications 4% Services: Consumer 4% Automotive 3% Capital Equipment 3% Chemicals, Plastics, & Rubber 3% Construction & Building 3% Containers, Packaging & Glass 3% Aerospace & Defense 3% Retail 2% Other 19%
28 ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS Cost of Funds Drivers 0.63% 4Q21 0.09% 0.47% 0.28% 0.38% 0.22% 0.17% 1Q214Q20 0.36% 0.70% 0.32% 0.09% 0.57% 0.23% 0.49% 2Q21 0.12% 0.15% 3Q21 0.11% 0.17% 0.11% 0.41% Cost of Interest-bearing deposits Cost of total deposits Overnight funding Cost of funds 2.89% 5.22%5.22% 2.77% 5.27% 2.86% 5.22% 2.91% 2.91% 5.09% Term FHLB borrowings Notes payable, net
29 DECLINING DEPOSIT COSTS PROTECT NET INTEREST MARGIN Net Interest Margin Drivers 3.19% 4.04% 3.27% 3Q21 3.78% 3.38% 0.25% 3.66% 0.25% 4Q21 3.73% 4Q20 0.89% 0.83% 3.28% 2Q211Q21 3.81% 0.25% 0.77% 0.25% 0.67% 3.28% 0.25% 0.61% Earning Asset Yield Fed Funds RateNet Interest Margin Interest-Bearing Liabilities
30 PACIFIC MERCANTILE BANCORP ACQUISITION (Dollars in thousands) 10/18/2021 Cash $ 475,561 Total Gross Loans 962,856 Allowance for Loan Losses (13,622) Goodwill 57,156 CDI 5,054 Other assets 51,833 Total Assets $ 1,538,838 Deposits $ 1,284,714 Notes payable, net 17,527 Other Liabilities 14,403 Total shareholders' equity 222,195 Total Liabilities and Shareholders' Equity $ 1,538,838 On October 18, 2021, we acquired Pacific Mercantile Bancorp pursuant to an Agreement and Plan of Merger dated as of March 22, 2021. The fair value of assets and liabilities acquired were as follows: The purchase price allocation, including estimated fair values and related tax impacts used in determining goodwill, are preliminary and subject to adjustment for a period of up to one year after the acquisition date as additional information may become available
31 BANC FAST FACTS (1) Non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 4Q21 3Q21 2Q21 1Q21 4Q20 $ 9,394 $ 8,279 $ 8,027 $ 7,933 $ 7,877 1,316 1,303 1,353 1,271 1,231 7,251 6,229 5,985 5,764 5,898 7,439 6,543 6,207 6,142 6,086 $ 73.0 $ 63.0 $ 59.8 $ 57.9 $ 61.6 4.9 5.5 4.2 4.4 7.0 77.9 68.5 64.0 62.3 68.5 59.3 39.6 41.4 43.1 39.6 (1.2) (1.8) (0.8) 3.6 (0.7) 58.1 37.8 40.6 46.7 39.0 19.8 30.7 23.5 15.6 29.6 11.3 (1.1) (2.2) (1.1) 1.0 2.8 8.7 6.6 2.3 6.9 5.8 23.2 19.1 14.4 21.7 1.7 1.7 1.7 6.6 4.0 $ 4.0 $ 21.4 $ 17.3 $ 7.8 $ 17.7 $ 0.07 $ 0.42 $ 0.34 $ 0.15 $ 0.35 $ 13.88 $ 13.99 $ 13.69 $ 13.24 $ 13.39 0.24% 1.13% 0.98% 0.74% 1.11% 58.09% 59.63% 65.58% 66.91% 64.26% CUSIP Issue Date Par Value Dividend Rate ($000) / Coupon (%) Preferred Equity: Non-Cumulative, Perpetual E 05990K874 2/8/2016 98,702$ 7.000% 3/15/2021 (Dollars in millions) Income tax expense Net interest income Total noninterest income Total assets Securities available-for-sale Loans held-for-investment Total deposits Total revenue Noninterest expense Gain (loss) in alternative energy partnership investments Total noninterest expense Pre-tax pre-provision income(1) Provision for (reversal of) credit losses Preferred dividend and other adjustments Net income available to common stockholders Diluted earnings per common share Net income Tangible common equity per common share Preferred Equity Class / Series Return on average assets Adjusted efficiency ratio(1) First Callable Date
32 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 tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per common share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income (loss), adjusted PTPP income (loss), PTPP income (loss) ROAA, adjusted PTPP income (loss) ROAA, efficiency ratio, adjusted efficiency ratio, adjusted total revenue, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS) and adjusted return on average assets (ROAA) constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance. Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, adjusted for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution. PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding net interest income and adjusted noninterest income (adjusted total revenue) and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by adjusted total revenue. Adjusted net income (loss) is calculated by adjusting net income (loss) for tax-effected noninterest income and expense adjustments and the tax impact from the exercise of stock appreciation rights. Adjusted ROAA is computed by dividing annualized adjusted net income by average assets. Adjusted net income (loss) available to common shareholders is computed by removing the impact of preferred stock redemptions from adjusted net income (loss). Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these measures to measures determined in accordance with GAAP are contained on slides 33-37 of this presentation.
33 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Tangible Common Equity to Tangible Assets Ratio Total assets $ 9,393,743 $ 8,278,741 $ 8,027,413 $ 7,933,459 $ 7,877,334 Less: goodwill (94,301) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (6,411) (1,787) (2,069) (2,351) (2,633) Tangible assets(1) $ 9,293,031 $ 8,239,810 $ 7,988,200 $ 7,893,964 $ 7,837,557 Total stockholders' equity $ 1,065,290 $ 844,803 $ 829,362 $ 804,693 $ 897,207 Less: goodwill (94,301) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (6,411) (1,787) (2,069) (2,351) (2,633) Tangible equity(1) 964,578 805,872 790,149 765,198 857,430 Less: preferred stock (94,956) (94,956) (94,956) (94,956) (184,878) Tangible common equity(1) $ 869,622 $ 710,916 $ 695,193 $ 670,242 $ 672,552 Total stockholders' equity to total assets 11.34% 10.20% 10.33% 10.14% 11.39% Tangible equity to tangible assets(1) 10.38% 9.78% 9.89% 9.69% 10.94% Tangible common equity to tangible assets(1) 9.36% 8.63% 8.70% 8.49% 8.58% (1) Non-GAAP measure
34 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Return on tangible common equity Average total stockholders' equity $ 1,035,782 $ 847,941 $ 814,973 $ 888,174 $ 892,565 Less: Average preferred stock (94,956) (94,956) (94,956) (164,895) (184,878) Less: Average goodwill (86,911) (37,144) (37,144) (37,144) (37,144) Less: Average other intangible assets (4,994) (1,941) (2,224) (2,517) (2,826) Average tangible common equity(1) $ 848,921 $ 713,900 $ 680,649 $ 683,618 $ 667,717 Net income available to common stockholders $ 4,024 $ 21,443 $ 17,323 $ 7,825 $ 17,706 Add: Amortization of intangible assets 430 282 282 282 306 Less: Tax effect on amortization of intangible assets(2) (90) (59) (59) (59) (64) Net income available to common stockholders after the adjustments for intangible assets(1) $ 4,364 $ 21,666 $ 17,546 $ 8,048 $ 17,948 Return on average equity 2.20% 10.84% 9.38% 6.56% 9.67% Return on average tangible common equity(1) 2.04% 12.04% 10.34% 4.77% 10.69% (1) Non-GAAP measure (2) Adjustments shown net of a statutory Federal tax rate of 21%
35 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Adjusted Noninterest Income and Expense Total noninterest income $ 4,860 $ 5,519 $ 4,170 $ 4,381 $ 6,975 Noninterest income adjustments: Fair Value adjustment on legacy SFR loans held for sale (26) (160) (20) - (36) Total noninterest income adjustments (26) (160) (20) - (36) Adjusted noninterest income(1) $ 4,834 $ 5,359 $ 4,150 $ 4,381 $ 6,939 Total noninterest expense $ 58,127 $ 37,811 $ 40,559 $ 46,735 $ 38,950 Noninterest expense adjustments: Professional recoveries (fees) (642) 2,152 1,284 (721) 4,398 Merger-related costs (13,469) (1,000) (700) (700) - Noninterest expense adjustments before gain (loss) in alternative energy partnership investments (14,111) 1,152 584 (1,421) 4,398 Gain (loss) in alternative energy partnership investments 1,220 1,785 829 (3,630) 673 Total noninterest expense adjustments (12,891) 2,937 1,413 (5,051) 5,071 Adjusted noninterest expense(1) $ 45,236 $ 40,748 $ 41,972 $ 41,684 $ 44,021 Average assets $9,331,955 $8,141,613 $7,827,006 $7,860,952 $7,764,997 Noninterest expense / Average assets 2.47% 1.84% 2.08% 2.41% 2.00% Adjusted noninterest expense / Average assets(1) 1.92% 1.99% 2.15% 2.15% 2.26% (1) Non-GAAP measure
36 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Net interest income $ 73,039 $ 62,976 $ 59,847 $ 57,916 $ 61,563 Noninterest income 4,860 5,519 4,170 4,381 6,975 Total revenue 77,899 68,495 64,017 62,297 68,538 Noninterest expense 58,127 37,811 40,559 46,735 38,950 Pre-tax pre-provision income(1) $ 19,772 $ 30,684 $ 23,458 $ 15,562 $ 29,588 Total revenue $ 77,899 $ 68,495 $ 64,017 $ 62,297 $ 68,538 Total noninterest income adjustments (26) (160) (20) - (36) Adjusted total revenue(1) $ 77,873 $ 68,335 $ 63,997 $ 62,297 $ 68,502 Noninterest expense $ 58,127 $ 37,811 $ 40,559 $ 46,735 $ 38,950 Total noninterest expense adjustments (12,891) 2,937 1,413 (5,051) 5,071 Adjusted noninterest expense(1) 45,236 40,748 41,972 41,684 44,021 Adjusted pre-tax pre-provision income $ 32,637 $ 27,587 $ 22,025 $ 20,613 $ 24,481 Average Assets $ 9,331,955 $ 8,141,613 $ 7,827,006 $ 7,860,952 $ 7,764,997 Pre-tax pre-provision ROAA(1) 0.84% 1.50% 1.20% 0.80% 1.52% Adjusted pre-tax pre-provision ROAA(1) 1.39% 1.34% 1.13% 1.06% 1.25% Efficiency Ratio(1) 74.62% 55.20% 63.36% 75.02% 56.83% Adjusted efficiency ratio(1) 58.09% 59.63% 65.58% 66.91% 64.26% (1) Non-GAAP measure
37 NON-GAAP RECONCILIATION (1) 4Q21 is reduced by a $11.3 million pre-tax charge for the expected lifetime credit losses for non-purchased credit deteriorated loans acquired in the PMB acquisition; there is no similar charge in any of the other periods presented (2) Adjustments shown net of an effective tax rate of 25% (3) Non-GAAP measure (4) Represents adjusted net income available to common stockholders divided by average diluted common shares (Dollars in thousands, except per share data) 4Q21 3Q21 2Q21 1Q21 4Q20 Adjusted net income Net income(1) $ 5,751 $ 23,170 $ 19,050 $ 14,375 $ 21,703 Adjustments: Noninterest income (26) (160) (20) - (36) Noninterest expense 12,891 (2,937) (1,413) 5,051 (5,071) Total adjustments 12,865 (3,097) (1,433) 5,051 (5,107) Tax impact of adjustments above(2) (3,216) 774 358 (1,263) 1,277 Tax adjustment: tax impact from exercise of stock appreciation rights - - - (2,093) - Adjustments to net income 9,649 (2,323) (1,075) 1,695 (3,830) Adjusted net income(3) $ 15,399 $ 20,847 $ 17,975 $ 16,070 $ 17,873 Average Assets $ 9,331,955 $ 8,141,613 $ 7,827,006 $ 7,860,952 $ 7,764,997 ROAA 0.24% 1.13% 0.98% 0.74% 1.11% Adjusted ROAA(3) 0.65% 1.02% 0.92% 0.83% 0.92% Adjusted net income (loss) available to common stockholders Net income available to common stockholders $ 4,024 $ 21,443 $ 17,323 $ 7,825 $ 17,706 Adjustments to net income 9,649 (2,323) (1,075) 1,695 (3,830) Adjustments for impact of preferred stock redemption - - - 3,347 - Adjusted net income available to common stockholders(3) $ 13,673 $ 19,120 $ 16,248 $ 12,867 $ 13,876 Average diluted common shares 60,690,046 50,909,317 50,892,202 50,750,522 50,335,271 Diluted EPS $ 0.07 $ 0.42 $ 0.34 $ 0.15 $ 0.35 Adjusted diluted EPS(3)(4) $ 0.23 $ 0.38 $ 0.32 $ 0.25 $ 0.28
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