8-K
BANC OF CALIFORNIA, INC. (BANC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 22, 2021
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 July 22, 2021, Banc of California, Inc. (the “Company”) issued a press release announcing 2021 second quarter financial results.
A copy of the press release is attached to this report as Exhibit 99.1 and is incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
The Company will host a conference call to discuss its second quarter results at 10:00 A.M. Pacific Time on Thursday, July 22, 2021. Interested parties may attend the conference call by dialing (888) 317-6003, and referencing event code 7494802. A live audio webcast will be available through the webcast link to be posted on the Company’s Investor Relations website at www.bancofcal.com/investor, in addition to the slide presentation for investor review prior to the call. A copy of the presentation materials is attached to this report as Exhibit 99.2 and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Banc of California, Inc. Press Release dated July 22, 2021.
99.2 Banc of California, Inc. Earnings Conference Call Presentation Materials dated July 22, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BANC OF CALIFORNIA, INC.
| July 22, 2021 | /s/ Lynn M. Hopkins |
|---|---|
| Lynn M. Hopkins | |
| Executive Vice President and Chief Financial Officer |
3
Document
Banc of California Reports Second Quarter 2021 Financial Results
SANTA ANA, Calif., (July 22, 2021) — Banc of California, Inc. (NYSE: BANC) today reported net income of $19.1 million and net income available to common stockholders for the second quarter of 2021 of $17.3 million, or diluted earnings per common share of $0.34.
Highlights for the second quarter included:
•Return on average assets of 0.98%
•Total loan production of $904.1 million, including loan fundings of $847.0 million
•Period-end total cost of deposits of 0.20% and average cost of total deposits of 0.23%, a 5 basis point decrease from the prior quarter
•Net interest margin expanded to 3.27%, an 8 basis point increase from the prior quarter
•Noninterest-bearing deposit balances represented 29% of total deposits at June 30, 2021, up from 23% a year earlier
•Allowance for credit losses at 1.33% of total loans and 155% of non-performing loans
•Total deferrals/forbearances declined to $86.6 million at June 30, 2021 from $108.7 million at March 31, 2021
•Common Equity Tier 1 capital at 11.14%
Jared Wolff, President & CEO of Banc of California, commented, “Our strong second quarter results reflect the acceleration of our organic growth and our success in attracting new commercial client relationships. During the second quarter, our total loans increased at an annualized rate of 15%. The significant loan growth combined with an expanding net interest margin and disciplined expense control helped to produce a solid quarter of earnings.”
Mr. Wolff continued, “Our loan pipeline remains strong. We believe that we are well positioned to deliver continued organic balance sheet growth and even greater profitability in the second half of the year, barring any setbacks to the economic recovery. We will also benefit from the significant earnings accretion that we expect from the Pacific Mercantile Bancorp acquisition, which we anticipate to close during the third quarter. We now have visibility on cost savings of at least 40%, with substantially all of the savings expected to be realized by the end of this year.”
Lynn Hopkins, Chief Financial Officer of Banc of California, said, “The continued decline in our deposit costs combined with the redeployment of our excess liquidity into higher yielding earning assets drove an eight basis point increase in our net interest margin to 3.27%. We continued to drive a positive shift in the composition of our funding base with eight consecutive quarters of demand deposit growth, which now account for 65% of our total deposits. We also saw improved asset quality with declines in total delinquencies, deferrals and non-performing loans. As a result of the positive trends in asset quality and improving economic forecasts, we had a reserve release this quarter while still maintaining a high coverage ratio of allowance to total loans of 1.33%. Our capital optimization actions resulted in a $1.4 million increase to net income available to common stockholders in the second quarter following the redemption of our Series D Preferred Stock, and we continue to view the redemption of our Series E Preferred Stock as a late 2021 or early 2022 event, subject to regulatory approval, which we expect to provide additional earnings accretion.”
Income Statement Highlights
| Three Months Ended | Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | June 30,<br>2021 | June 30,<br>2020 | |||||||
| ( in thousands) | |||||||||||||
| Total interest and dividend income | $ | 68,618 | $ | 73,530 | $ | 69,666 | $ | 72,697 | $ | 138,295 | $ | 147,411 | |
| Total interest expense | 9,830 | 10,702 | 11,967 | 13,811 | 17,382 | 20,532 | 40,235 | ||||||
| Net interest income | 59,847 | 57,916 | 61,563 | 55,855 | 55,315 | 117,763 | 107,176 | ||||||
| Total noninterest income | 4,170 | 4,381 | 6,975 | 3,954 | 5,528 | 8,551 | 7,589 | ||||||
| Total revenue | 64,017 | 62,297 | 68,538 | 59,809 | 60,843 | 126,314 | 114,765 | ||||||
| Total noninterest expense | 40,559 | 46,735 | 38,950 | 40,394 | 72,770 | 87,294 | 119,689 | ||||||
| Pre-tax / pre-provision income (loss) | 23,458 | 15,562 | 29,588 | 19,415 | (11,927) | 39,020 | (4,924) | ||||||
| (Reversal of) provision for credit losses | (2,154) | (1,107) | 991 | 1,141 | 11,826 | (3,261) | 27,587 | ||||||
| Income tax expense (benefit) | 6,562 | 2,294 | 6,894 | 2,361 | (5,304) | 8,856 | (7,469) | ||||||
| Net income (loss) | $ | 14,375 | $ | 21,703 | $ | 15,913 | $ | (18,449) | $ | 33,425 | $ | (25,042) | |
| Net income (loss) available to common stockholders(1) | $ | 7,825 | $ | 17,706 | $ | 12,084 | $ | (21,936) | $ | 25,088 | $ | (31,630) |
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
Q2-2021 vs Q1-2021
Net interest income increased $1.9 million to $59.8 million for the second quarter due to the higher yield on earning-assets, the lower cost and volume of interest-bearing liabilities, and the impact of one additional day in the current quarter.
The net interest margin increased 8 basis points to 3.27% for the second quarter from 3.19% for the first quarter as the average earning-assets yield increased 3 basis points and the average cost of total funding decreased 6 basis points. The yield on average interest-earning assets increased to 3.81% for the second quarter from 3.78% for the first quarter due mostly to an improved earning-asset mix as excess liquidity was redeployed. Average securities increased $72.1 million while average other interest-earning assets decreased $77.5 million and loans decreased by $12.6 million. The average yield on loans remained unchanged at 4.30% during the second quarter and included the impact of prepayment penalty fees, net reversal of nonaccrual loan interest, and accelerated fees from PPP loan forgiveness; these items increased the second quarter loan yield by 18 basis points and the first quarter loan yield by 13 basis points. The average yield on securities increased 1 basis point to 2.14% between quarters, including a 4 basis points decrease in the average yield on collateralized loan obligations (CLOs) to 1.87% for the second quarter due mostly to an increase in fair value of such investments.
The average cost of funds decreased 6 basis points to 0.57% for the second quarter from 0.63% for the first quarter. This decrease was driven by the lower average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits. During the second quarter, average deposits increased $52.8 million, consisting of higher average noninterest-bearing deposits of $114.2 million and lower average interest-bearing deposits of $61.4 million. Average noninterest-bearing deposits represented 28% of total average deposits for the second quarter compared to 27% of total average deposits for the first quarter. Average Federal Home Loan Bank (FHLB) advances decreased $28.5 million due to lower average term advances during the second quarter from maturities of term advances in the first and second quarters of 2021. Average long-term debt and other interest-bearing liabilities increased $13.9 million as a result of an increase in unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform. The average cost of interest-bearing liabilities decreased 6 basis points to 0.77% for the second quarter from 0.83% for the first quarter due to continuing to actively managing down the cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 6 basis points to 0.32% for the second quarter from 0.38% for the first quarter. The average cost of total deposits decreased 5 basis points to 0.23% for the second quarter. The spot rate of total deposits at the end of the second quarter was 0.20%.
YTD 2021 vs YTD 2020
Net interest income for the six months ended June 30, 2021 increased $10.6 million to $117.8 million from $107.2 million for the same 2020 period. Net interest income was positively impacted by higher average interest-earning assets, lower average interest-earning liabilities and improved funding costs, offset by lower yields on average interest-earning assets. For the six months ended June 30, 2021, average interest-earning assets increased $233.8 million to $7.35 billion, and the net interest margin increased 20 basis points to 3.23% for the six months ended June 30, 2021 compared to 3.03% for the same 2020 period.
The net interest margin expanded due to a 62 basis point decrease in the average cost of funds outpacing a 37 basis point decline in the average interest-earning assets yield. The average yield on interest-earning assets decreased to 3.80% for the six months ended June 30, 2021, from 4.17% for same 2020 period due mostly to the impact of lower market interest rates on loan and securities yields over this time period. The average fed funds rate for the six months ended June 30, 2021 was 0.08% compared to 0.66% for the same 2020 period. The average yield on loans was 4.30% for the six months ended June 30, 2021, compared to 4.52% for the same 2020 period and the average yield on securities decreased 98 basis points to 2.14% due mostly to CLOs repricing into the lower rate environment.
The average cost of funds decreased to 0.60% for the six months ended June 30, 2021, from 1.22% for the same 2020 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The average cost of interest-bearing liabilities decreased 70 basis points to 0.80% for the six months ended June 30, 2021 from 1.50% for the same 2020 period due to the combination of actively managing deposit pricing down into the lower interest rate environment and the lower average cost of FHLB term advances resulting from maturities, early termination and refinancing of certain term advances during 2020. Compared to the same 2020 period, the average cost of interest-bearing deposits declined 81 basis points to 0.35% and the average cost of total deposits decreased 65 basis points to 0.25%. Additionally, average noninterest-bearing deposits increased by $469.4 million or 37.8% for the six months ended June 30, 2021 when compared to the same 2020 period.
Provision for credit losses
Q2-2021 vs Q1-2021
The provision for credit losses was a reversal of $2.2 million for the second quarter, compared to a reversal of $1.1 million for the first quarter. The second quarter reversal of credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $221.1 million.
YTD 2021 vs YTD 2020
During the six months ended June 30, 2021, the provision for credit losses was a reversal of $3.3 million, compared to a provision of $27.6 million during the same 2020 period. The lower provision for credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $357.8 million.
Noninterest income
Q2-2021 vs Q1-2021
Noninterest income decreased $211 thousand, to $4.2 million for the second quarter due mostly to certain legal settlements for the benefit of the Company occurring in the first quarter and recorded in other income. Customer service fees increased by $232 thousand due to higher loan fees of $91 thousand due to extension fees and higher deposit activity fees of $140 thousand attributed to higher average deposit balances and our initiative to bring our service fee schedules more in line with market.
YTD 2021 vs YTD 2020
Noninterest income for the six months ended June 30, 2021 increased $1.0 million to $8.6 million compared to the same 2020 period. The increase in noninterest income was mainly due to higher customer service fees and lower fair value adjustment for loans held for sale, offset by lower net gain on sale of securities. The $1.4 million increase in customer services fees was due to higher loan fees of $363 thousand and higher deposit and interchange fees of $1.1 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 $1.6 million as the comparable period included valuation losses on loans held for sale due to the impact of the decreases in market interest rates; there were no similar losses in 2021. The were no gains
from sale of securities for the six months ended June 30, 2021, compared to $2.0 million in net gains in the same 2020 period from the sale of $20.7 million in securities, primarily consisting of corporate securities.
Noninterest expense
Q2-2021 vs Q1-2021
Noninterest expense decreased $6.2 million to $40.6 million for the second quarter compared to the prior quarter. The decrease was primarily due to lower professional fees of $2.3 million and higher net gain in alternative energy partnership investments of $4.5 million, offset by higher all other expense of $1.2 million. Professional fees included net recoveries of indemnified legal expenses of $1.3 million in the second quarter compared to net indemnified legal expenses of $721 thousand during the first quarter. The increase in all other expense was due to a $1.2 million increase in net losses on equity investments due to net losses of $727 thousand in the second quarter compared to net gains of $428 thousand in the prior quarter. Our equity investments without readily determinable fair values include investments in privately held companies and limited partnerships and our income or loss from these investments fluctuates based on their underlying performance. Total operating costs, defined as noninterest expense adjusted for certain non-core items (refer to section Non-GAAP Measures), increased $288 thousand to $42.0 million for the second quarter compared to $41.7 million for the prior quarter primarily due to the aforementioned net losses on equity investments offset by lower salaries and benefits and professional fees.
YTD 2021 vs YTD 2020
Noninterest expense for the six months ended June 30, 2021 decreased $32.4 million to $87.3 million compared to the prior year. The decrease was primarily due to: (i) the same 2020 period including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, (ii) lower professional fees of $4.8 million, due to overall reductions in indemnified legal fees for resolved legal proceedings and various other litigations, (iii) lower advertising fees of $2.7 million due to the termination of our LAFC agreements in May 2020 and (iv) lower all other expense of $4.2 million resulting from overall expense reduction efforts, the comparable 2020 period including the aforementioned $2.5 million debt extinguishment fee and a $1.2 million charge to settle and conclude two legacy legal matters, and a $304 thousand increase in loss on equity investments between periods. These decreases were partially offset by higher (i) salaries and employee benefits of $3.1 million due to higher commissions and incentive-based compensation, (ii) merger-related costs of $1.4 million associated with our proposed merger with PMB, and (iii) net losses in alternative energy partnership investments of $1.1 million.
Income taxes
Q2-2021 vs Q1-2021
Income tax expense totaled $6.6 million for the second quarter resulting in an effective tax rate of 25.6% compared to $2.3 million for the first quarter and an effective tax rate of 13.8%. The higher effective tax rate between quarters was due to the first quarter including a net tax benefit of $2.1 million resulting from the exercise of all previously issued outstanding stock appreciation rights. The effective tax rate is expected to be in the 25% to 27% range for the remaining quarters in 2021.
YTD 2021 vs YTD 2020
Income tax expense totaled $8.9 million for the six months ended June 30, 2021, representing an effective tax rate of 20.9%, compared to an income tax benefit of $7.5 million and an effective tax rate of 23.0% for the same 2020 period. The effective tax rate for the six months ended June 30, 2021 differs from the 21% federal statutory rate due primarily to the aforementioned tax benefit resulting from the exercise of all previously issued outstanding stock appreciation rights.
Balance Sheet
At June 30, 2021, total assets were $8.03 billion, which represented a linked-quarter increase of $94.0 million. The following table shows selected balance sheet line items as of the dates indicated.
| Amount Change | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | Q2-21 vs. Q1-21 | Q2-21 vs. Q2-20 | |||||||
| ( in thousands) | |||||||||||||
| Securities available-for-sale | $ | 1,270,830 | $ | 1,231,431 | $ | 1,245,867 | $ | 1,176,029 | $ | 82,324 | $ | 177,125 | |
| Loans held-for-investment | $ | 5,764,401 | $ | 5,898,405 | $ | 5,678,002 | $ | 5,627,696 | $ | 221,076 | $ | 357,781 | |
| Loans held-for-sale | $ | 1,408 | $ | 1,413 | $ | 1,849 | $ | 19,768 | $ | 1,445 | $ | (16,915) | |
| Total assets | $ | 7,933,459 | $ | 7,877,334 | $ | 7,738,106 | $ | 7,770,138 | $ | 93,954 | $ | 257,275 | |
| Noninterest-bearing deposits | $ | 1,700,343 | $ | 1,559,248 | $ | 1,450,744 | $ | 1,391,504 | $ | 108,575 | $ | 417,414 | |
| Total deposits | $ | 6,142,042 | $ | 6,085,800 | $ | 6,032,266 | $ | 6,037,465 | $ | 64,502 | $ | 169,079 | |
| Borrowings (1) | $ | 891,546 | $ | 796,110 | $ | 733,105 | $ | 790,707 | $ | (19,573) | $ | 81,266 | |
| Total liabilities | $ | 7,128,766 | $ | 6,980,127 | $ | 6,863,852 | $ | 6,923,179 | $ | 69,285 | $ | 274,872 | |
| Total equity | $ | 804,693 | $ | 897,207 | $ | 874,254 | $ | 846,959 | $ | 24,669 | $ | (17,597) |
All values are in US Dollars.
(1)Represents Advances from Federal Home Loan Bank, Notes Payable, Net and Other Borrowings
Investments
Securities available-for-sale increased $82.3 million during the second quarter to $1.35 billion at June 30, 2021 primarily due to purchases of $174.0 million, offset by calls and maturities of $100.2 million and principal payments of $4.6 million, and higher unrealized net gains of $13.5 million. The increase in unrealized net gains was due mostly to increases in the value of mortgage-backed securities as a result of decreases in longer term interest rates during the second quarter, coupled with improved pricing of CLOs and corporate debt securities due to lower credit spreads. As of June 30, 2021, our securities portfolio included $584.3 million of CLOs, $462.9 million of agency securities, $121.0 million of municipal securities, $168.6 million of corporate debt securities, and $16.2 million of SBA pool securities. The CLO portfolio, which is comprised only of AA and AAA rated securities, represented 43.2% of the total securities portfolio and the carrying value included an unrealized net loss of $3.0 million at June 30, 2021 compared to an unrealized net loss of $3.6 million at March 31, 2021.
Loans
The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:
| June 30,2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in thousands) | ||||||||||||||
| Composition of held-for-investment loans | ||||||||||||||
| Commercial real estate | $ | 839,965 | $ | 807,195 | $ | 826,683 | $ | 822,694 | ||||||
| Multifamily | 1,325,770 | 1,258,278 | 1,289,820 | 1,476,803 | 1,434,071 | |||||||||
| Construction | 150,557 | 169,122 | 176,016 | 197,629 | 212,979 | |||||||||
| Commercial and industrial | 725,596 | 760,150 | 748,299 | 710,667 | 764,839 | |||||||||
| Commercial and industrial - warehouse lending | 1,345,314 | 1,118,175 | 1,340,009 | 876,157 | 672,151 | |||||||||
| SBA | 253,924 | 338,903 | 273,444 | 320,573 | 310,784 | |||||||||
| Total commercial loans | 4,672,951 | 4,484,593 | 4,634,783 | 4,408,512 | 4,217,518 | |||||||||
| Single-family residential mortgage | 1,288,176 | 1,253,251 | 1,230,236 | 1,234,479 | 1,370,785 | |||||||||
| Other consumer | 24,350 | 26,557 | 33,386 | 35,011 | 39,393 | |||||||||
| Total consumer loans | 1,312,526 | 1,279,808 | 1,263,622 | 1,269,490 | 1,410,178 | |||||||||
| Total gross loans | $ | 5,764,401 | $ | 5,898,405 | $ | 5,678,002 | $ | 5,627,696 | ||||||
| Composition percentage of held-for-investment loans | ||||||||||||||
| Commercial real estate | 14.6 | % | 14.6 | % | 13.7 | % | 14.6 | % | 14.6 | % | ||||
| Multifamily | 22.2 | % | 21.8 | % | 21.9 | % | 26.0 | % | 25.5 | % | ||||
| Construction | 2.5 | % | 2.9 | % | 3.0 | % | 3.5 | % | 3.8 | % | ||||
| Commercial and industrial | 12.1 | % | 13.2 | % | 12.7 | % | 12.5 | % | 13.6 | % | ||||
| Commercial and industrial - warehouse lending | 22.5 | % | 19.4 | % | 22.6 | % | 15.5 | % | 11.9 | % | ||||
| SBA | 4.2 | % | 5.9 | % | 4.6 | % | 5.6 | % | 5.5 | % | ||||
| Total commercial loans | 78.1 | % | 77.8 | % | 78.5 | % | 77.7 | % | 74.9 | % | ||||
| Single-family residential mortgage | 21.5 | % | 21.7 | % | 20.9 | % | 21.7 | % | 24.4 | % | ||||
| Other consumer | 0.4 | % | 0.5 | % | 0.6 | % | 0.6 | % | 0.7 | % | ||||
| Total consumer loans | 21.9 | % | 22.2 | % | 21.5 | % | 22.3 | % | 25.1 | % | ||||
| Total gross loans | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in US Dollars.
Held-for-investment loans increased $221.1 million to $5.99 billion from the prior quarter, resulting from higher commercial and industrial (C&I) loans related to our warehouse credit facilities of $227.1 million and increases in multifamily loans of $67.5 million and commercial real estate loans of $31.8 million. The increases were partially offset by decreases in construction loans of $18.6 million due to prepayment activity and SBA loans of $85.0 million due mostly to the forgiveness of $94.9 million in PPP loans during the quarter, offset by $11.8 million of PPP loans originated and outstanding at June 30, 2021. At June 30, 2021, SBA loans included $193.9 million of PPP loans, net of fees, of which $65.5 million related to PPP loans originated in 2020.
The C&I industry concentrations in dollars and as a percentage of total outstanding C&I loan balances are summarized below:
| June 30, 2021 | |||
|---|---|---|---|
| Amount | % of Portfolio | ||
| ( in thousands) | |||
| C&I Portfolio by Industry | |||
| Finance and Insurance - Warehouse Lending | 65 | % | |
| Real Estate & Rental Leasing | 192,323 | 9 | % |
| Finance and Insurance - Other | 84,528 | 4 | % |
| Gas Stations | 73,169 | 4 | % |
| Healthcare | 71,941 | 3 | % |
| Wholesale Trade | 40,757 | 2 | % |
| Manufacturing | 34,086 | 2 | % |
| Television / Motion Pictures | 30,002 | 1 | % |
| Food Services | 29,371 | 1 | % |
| Other Retail Trade | 28,999 | 1 | % |
| Professional Services | 19,448 | 1 | % |
| Transportation | 4,739 | — | % |
| Accommodations | 2,200 | — | % |
| All Other | 114,033 | 6 | % |
| Total | 100 | % |
All values are in US Dollars.
Deposits
The following table sets forth the composition of our deposits at the dates indicated.
| June 30,2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in thousands) | ||||||||||||||
| Composition of deposits | ||||||||||||||
| Noninterest-bearing checking | $ | 1,700,343 | $ | 1,559,248 | $ | 1,450,744 | $ | 1,391,504 | ||||||
| Interest-bearing checking | 2,217,306 | 2,088,528 | 2,107,942 | 2,045,115 | 1,846,698 | |||||||||
| Savings | 901,334 | 909,631 | 932,363 | 946,293 | 939,018 | |||||||||
| Money market | 692,390 | 775,072 | 714,297 | 689,769 | 765,854 | |||||||||
| Non-brokered certificates of deposit | 586,596 | 668,468 | 755,727 | 820,531 | 924,630 | |||||||||
| Brokered certificates of deposit | — | — | 16,223 | 79,814 | 169,761 | |||||||||
| Total deposits | $ | 6,142,042 | $ | 6,085,800 | $ | 6,032,266 | $ | 6,037,465 | ||||||
| Composition percentage of deposits | ||||||||||||||
| Noninterest-bearing checking | 29.1 | % | 27.7 | % | 25.6 | % | 24.1 | % | 23.0 | % | ||||
| Interest-bearing checking | 35.7 | % | 34.0 | % | 34.6 | % | 33.9 | % | 30.6 | % | ||||
| Savings | 14.5 | % | 14.8 | % | 15.3 | % | 15.7 | % | 15.6 | % | ||||
| Money market | 11.2 | % | 12.6 | % | 11.7 | % | 11.4 | % | 12.7 | % | ||||
| Non-brokered certificates of deposit | 9.5 | % | 10.9 | % | 12.4 | % | 13.6 | % | 15.3 | % | ||||
| Brokered certificates of deposit | — | % | — | % | 0.4 | % | 1.3 | % | 2.8 | % | ||||
| Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in US Dollars.
Total deposits increased $64.5 million during the second quarter of 2021 to $6.21 billion due to higher noninterest-bearing checking balances of $108.6 million and interest-bearing checking of $128.8 million, offset by lower money market balances of $82.7 million, savings balances of $8.3 million, and non-brokered certificates of deposit of $81.9 million. We continue to focus on growing relationship-based deposits, strategically augmented by wholesale funding, as we actively managed down deposit costs in response to the current interest rate environment. Noninterest-bearing deposits totaled $1.81 billion and represented 29.1% of total deposits at June 30, 2021 compared to $1.70 billion, or 27.7% of total deposits, at March 31, 2021.
Debt
Advances from the FHLB decreased $144.7 million to $490.4 million, as of June 30, 2021, due to lower overnight advances, and maturities of $5.0 million in term advances during the second quarter. At June 30, 2021, FHLB advances included $85.0 million in overnight borrowings and $411.0 million in term advances with a weighted average life of 4.5 years and weighted average interest rate of 2.53%. Other borrowings totaled $125.0 million at June 30, 2021 and related to unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform.
Equity
At June 30, 2021, total stockholders’ equity increased by $24.7 million to $829.4 million and tangible common equity increased by $25.0 million to $695.2 million on a linked-quarter basis. The increase in total stockholders’ equity for the second quarter included net income of $19.1 million, share-based award compensation of $1.3 million, and higher net accumulated other comprehensive income of $9.6 million, offset by dividends to common and preferred stockholders of $4.7 million and the impact of vested and exercised share-based awards of $0.5 million. Tangible book value per share increased to $13.69 as of June 30, 2021 from $13.24 at March 31, 2021.
Capital ratios remain strong with total risk-based capital at 15.33% and a tier 1 leverage ratio of 9.89%. The following table sets forth our regulatory capital ratios at June 30, 2021 and the previous four quarters. 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 8 basis points at June 30, 2021.
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Capital Ratios(1) | ||||||||||
| Banc of California, Inc. | ||||||||||
| Total risk-based capital ratio | 15.33 | % | 15.87 | % | 17.01 | % | 16.19 | % | 16.35 | % |
| Tier 1 risk-based capital ratio | 12.71 | % | 13.17 | % | 14.35 | % | 14.94 | % | 15.10 | % |
| Common equity tier 1 capital ratio | 11.14 | % | 11.50 | % | 11.19 | % | 11.59 | % | 11.68 | % |
| Tier 1 leverage ratio | 9.89 | % | 9.62 | % | 10.90 | % | 10.79 | % | 10.56 | % |
| Banc of California, NA | ||||||||||
| Total risk-based capital ratio | 17.25 | % | 17.82 | % | 17.27 | % | 18.14 | % | 18.17 | % |
| Tier 1 risk-based capital ratio | 16.09 | % | 16.57 | % | 16.02 | % | 16.89 | % | 16.92 | % |
| Common equity tier 1 capital ratio | 16.09 | % | 16.57 | % | 16.02 | % | 16.89 | % | 16.92 | % |
| Tier 1 leverage ratio | 12.52 | % | 12.13 | % | 12.19 | % | 12.21 | % | 11.84 | % |
(1)June 30, 2021 capital ratios are preliminary.
Credit Quality
| June 30,2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Asset quality information and ratios | ( in thousands) | |||||||||||||
| Delinquent loans held-for-investment | ||||||||||||||
| 30 to 89 days delinquent | $ | 31,005 | $ | 13,981 | $ | 51,229 | $ | 49,810 | ||||||
| 90+ days delinquent | 17,998 | 30,292 | 17,636 | 31,809 | 45,384 | |||||||||
| Total delinquent loans | $ | 61,297 | $ | 31,617 | $ | 83,038 | $ | 95,194 | ||||||
| Total delinquent loans to total loans | 0.58 | % | 1.06 | % | 0.54 | % | 1.46 | % | 1.69 | % | ||||
| Non-performing assets, excluding loans held-for-sale | ||||||||||||||
| Non-accrual loans | $ | 55,920 | $ | 35,900 | $ | 66,337 | $ | 72,703 | ||||||
| 90+ days delinquent and still accruing loans | — | — | 728 | 547 | — | |||||||||
| Non-performing loans | 51,299 | 55,920 | 36,628 | 66,884 | 72,703 | |||||||||
| Other real estate owned | 3,253 | — | — | — | — | |||||||||
| Non-performing assets | $ | 55,920 | $ | 36,628 | $ | 66,884 | $ | 72,703 | ||||||
| ALL to non-performing loans | 147.93 | % | 141.90 | % | 221.22 | % | 135.95 | % | 124.30 | % | ||||
| Non-performing loans to total loans held-for-investment | 0.86 | % | 0.97 | % | 0.62 | % | 1.18 | % | 1.29 | % | ||||
| Non-performing assets to total assets | 0.68 | % | 0.70 | % | 0.46 | % | 0.86 | % | 0.94 | % | ||||
| Troubled debt restructurings (TDRs) | ||||||||||||||
| Performing TDRs | $ | 6,347 | $ | 4,733 | $ | 5,408 | $ | 5,597 | ||||||
| Non-performing TDRs | 3,120 | 4,130 | 4,264 | 20,002 | 20,275 | |||||||||
| Total TDRs | $ | 10,477 | $ | 8,997 | $ | 25,410 | $ | 25,872 |
All values are in US Dollars.
Total delinquent loans decreased $26.3 million in the second quarter to $35.0 million at June 30, 2021, due to $45.5 million returning to current status offset by $19.8 million of additions including $4.3 million in guaranteed SBA loans that were repurchased and are pending resolution. Delinquent loans included single-family residential (SFR) loans of $21.7 million, or 62% of the total delinquent balance at quarter end, and represented $26.1 million of the quarter over quarter decrease. Excluding delinquent SFR loans, the remaining delinquent loans totaled $13.3 million, or 0.28% of total loans at June 30, 2021.
Non-performing loans decreased $4.6 million to $51.3 million as of June 30, 2021, of which $32.0 million, or 62%, relates to loans in a current payment status. The second quarter decrease was due to $16.1 million in cured loans and payoffs offset by $11.5 million of loans placed on non-accrual status, including $6.6 million in guaranteed SBA loans that were repurchased and are pending resolution. At June 30, 2021, non-performing loans included (i) a legacy relationship totaling $7.2 million that is well-secured by a combination of commercial real estate and SFR properties with an average loan-to-value ratio of 50%, (ii) SFR loans totaling $21.2 million, (iii) repurchased guaranteed SBA loans of $6.6 million, and (iv) other commercial loans of $16.3 million.
At June 30, 2021, non-performing assets includes other real estate, consisting of one SFR property, totaling $3.3 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:
| June 30, 2021 | March 31, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Count | % of Loans in Category | Count | Amount | % of Loans in Category | |||||
| ( in thousands) | |||||||||
| Single-family residential mortgage | 46 | 52,384 | 4 | % | 47 | $ | 48,831 | 4 | % |
| All other loans | 10 | 1 | % | 15 | 59,858 | 1 | % | ||
| Total | 56 | 86,558 | 1 | % | 62 | $ | 108,689 | 2 | % |
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 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||||||
| ( in thousands) | ||||||||||||||
| Allowance for loan losses (ALL) | ||||||||||||||
| Balance at beginning of period | $ | 81,030 | $ | 90,927 | $ | 90,370 | $ | 78,243 | ||||||
| Loans charged off | (886) | (565) | (11,520) | (1,821) | — | |||||||||
| Recoveries | 26 | 172 | 609 | 248 | 608 | |||||||||
| Net (charge-offs) recoveries | (860) | (393) | (10,911) | (1,573) | 608 | |||||||||
| (Reversal of) provision for loan losses | (2,608) | (1,284) | 1,014 | 2,130 | 11,519 | |||||||||
| Balance at end of period | $ | 79,353 | $ | 81,030 | $ | 90,927 | $ | 90,370 | ||||||
| Reserve for unfunded loan commitments | ||||||||||||||
| Balance at beginning of period | $ | 3,183 | $ | 3,206 | $ | 4,195 | $ | 3,888 | ||||||
| Provision for (reversal of) credit losses | 454 | 177 | (23) | (989) | 307 | |||||||||
| Balance at end of period | 3,814 | 3,360 | 3,183 | 3,206 | 4,195 | |||||||||
| Allowance for credit losses (ACL) | $ | 82,713 | $ | 84,213 | $ | 94,133 | $ | 94,565 | ||||||
| ALL to total loans | 1.27 | % | 1.38 | % | 1.37 | % | 1.60 | % | 1.61 | % | ||||
| ACL to total loans | 1.33 | % | 1.43 | % | 1.43 | % | 1.66 | % | 1.68 | % | ||||
| ACL to total loans, excluding PPP loans | 1.38 | % | 1.51 | % | 1.48 | % | 1.74 | % | 1.76 | % | ||||
| ACL to NPLs | 155.36 | % | 147.91 | % | 229.91 | % | 140.74 | % | 130.07 | % | ||||
| Annualized net loan charge-offs (recoveries) to average total loans held-for-investment | 0.06 | % | 0.03 | % | 0.77 | % | 0.12 | % | (0.04) | % | ||||
| Reserve for loss on repurchased loans | ||||||||||||||
| Balance at beginning of period | $ | 5,515 | $ | 5,487 | $ | 5,567 | $ | 5,601 | ||||||
| Initial provision for loan repurchases | — | — | — | 11 | — | |||||||||
| (Reversal of) provision for loan repurchases | (99) | (132) | 28 | (91) | (34) | |||||||||
| Utilization of reserve for loan repurchases | (189) | — | — | — | — | |||||||||
| Balance at end of period | $ | 5,383 | $ | 5,515 | $ | 5,487 | $ | 5,567 |
All values are in US Dollars.
The allowance for expected credit losses (ACL), which includes the reserve for unfunded loan commitments, totaled $79.7 million, or 1.33% of total loans, at June 30, 2021, compared to $82.7 million, or 1.43% of total loans, at March 31, 2021. The $3.0 million decrease in the ACL was due to: (i) lower general reserves of $3.3 million from portfolio mix, including higher portfolio balances, offset by improved economic assumptions and asset quality trends, (ii) net charge-offs of $860 thousand, and (iii) higher specific reserves of $1.2 million. The ACL coverage of non-performing loans was 155% at June 30, 2021 compared to 148% at March 31, 2021.
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 June 2021. In contrast to the March 2021 forecasts, the assumptions in the June 2021 forecasts generally reflect a more favorable view of the economy (i.e. higher GDP growth rates and lower unemployment rates). While the June 2021 forecasts reflect an improving economy with the rollout of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variants and the ultimate pace of the recovery. Accordingly, our economic assumptions and the resulting ACL level and provision reversal consider both the positive assumptions and potential uncertainties. The ACL also incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.
The Company will host a conference call to discuss its second quarter 2021 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, July 22, 2021. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 7494802. 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 10157715.
About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $8.0 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 36 offices including 30 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 proposed acquisition of Pacific Mercantile Bancorp 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 possibility that the merger does not close when expected or at all because required regulatory approvals, financial tests or other conditions to closing are not received or satisfied on a timely basis or at all; (ii) changes in Banc of California Inc.’s or Pacific Mercantile Bancorp’s stock price before closing, including as a result of its financial performance prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; (iii) 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; (iv) the ability to promptly and effectively integrate the businesses of Banc of California Inc. and Pacific Mercantile Bancorp; (v) the reaction to the transaction of the companies’ customers, employees and counterparties; (vi) diversion of management time on merger-related issues; (vii) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (viii) other risks that are described in Banc of California Inc.’s and Pacific Mercantile Bancorp’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)
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 163,332 | $ | 379,509 | $ | 220,819 | $ | 292,490 | $ | 420,640 |
| Securities available-for-sale | 1,353,154 | 1,270,830 | 1,231,431 | 1,245,867 | 1,176,029 | |||||
| Loans held-for-sale | 2,853 | 1,408 | 1,413 | 1,849 | 19,768 | |||||
| Loans held-for-investment | 5,985,477 | 5,764,401 | 5,898,405 | 5,678,002 | 5,627,696 | |||||
| Allowance for loan losses | (75,885) | (79,353) | (81,030) | (90,927) | (90,370) | |||||
| Federal Home Loan Bank and other bank stock | 44,569 | 44,964 | 44,506 | 44,809 | 46,585 | |||||
| Servicing rights, net | 1,162 | 1,407 | 1,454 | 1,621 | 1,753 | |||||
| Other real estate owned, net | 3,253 | — | — | — | — | |||||
| Premises and equipment, net | 118,649 | 120,071 | 121,520 | 123,812 | 125,247 | |||||
| Alternative energy partnership investments, net | 24,068 | 23,809 | 27,977 | 27,786 | 26,967 | |||||
| Goodwill | 37,144 | 37,144 | 37,144 | 37,144 | 37,144 | |||||
| Other intangible assets, net | 2,069 | 2,351 | 2,633 | 2,939 | 3,292 | |||||
| Deferred income tax, net | 41,628 | 47,877 | 45,957 | 43,744 | 48,288 | |||||
| Income tax receivable | 4,084 | 210 | 1,105 | 10,701 | 13,094 | |||||
| Bank owned life insurance investment | 113,168 | 112,479 | 111,807 | 111,115 | 110,487 | |||||
| Right of use assets | 20,364 | 22,069 | 19,633 | 18,909 | 19,408 | |||||
| Other assets | 188,324 | 184,283 | 192,560 | 188,245 | 184,110 | |||||
| Total assets | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 | $ | 7,738,106 | $ | 7,770,138 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Noninterest-bearing deposits | $ | 1,808,918 | $ | 1,700,343 | $ | 1,559,248 | $ | 1,450,744 | $ | 1,391,504 |
| Interest-bearing deposits | 4,397,626 | 4,441,699 | 4,526,552 | 4,581,522 | 4,645,961 | |||||
| Total deposits | 6,206,544 | 6,142,042 | 6,085,800 | 6,032,266 | 6,037,465 | |||||
| Advances from Federal Home Loan Bank | 490,419 | 635,105 | 539,795 | 559,482 | 617,170 | |||||
| Other borrowings | 125,000 | — | — | — | — | |||||
| Long-term debt, net | 256,554 | 256,441 | 256,315 | 173,623 | 173,537 | |||||
| Reserve for loss on repurchased loans | 5,095 | 5,383 | 5,515 | 5,487 | 5,567 | |||||
| Lease liabilities | 21,588 | 23,173 | 20,647 | 19,938 | 20,531 | |||||
| Due on unsettled securities purchases | 28,629 | — | — | — | — | |||||
| Accrued expenses and other liabilities | 64,222 | 66,622 | 72,055 | 73,056 | 68,909 | |||||
| Total liabilities | 7,198,051 | 7,128,766 | 6,980,127 | 6,863,852 | 6,923,179 | |||||
| Commitments and contingent liabilities | ||||||||||
| Preferred stock | 94,956 | 94,956 | 184,878 | 184,878 | 185,037 | |||||
| Common stock | 527 | 526 | 522 | 522 | 522 | |||||
| Common stock, class B non-voting non-convertible | 5 | 5 | 5 | 5 | 5 | |||||
| Additional paid-in capital | 630,654 | 629,844 | 634,704 | 633,409 | 632,117 | |||||
| Retained earnings | 129,307 | 115,004 | 110,179 | 95,001 | 85,670 | |||||
| Treasury stock | (40,827) | (40,827) | (40,827) | (40,827) | (40,827) | |||||
| Accumulated other comprehensive income (loss), net | 14,740 | 5,185 | 7,746 | 1,266 | (15,565) | |||||
| Total stockholders’ equity | 829,362 | 804,693 | 897,207 | 874,254 | 846,959 | |||||
| Total liabilities and stockholders’ equity | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 | $ | 7,738,106 | $ | 7,770,138 |
Banc of California, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | June 30,<br>2021 | June 30,<br>2020 | ||||||||
| Interest and dividend income | ||||||||||||||
| Loans, including fees | $ | 61,900 | $ | 61,345 | $ | 66,105 | $ | 62,019 | $ | 63,642 | $ | 123,245 | $ | 129,176 |
| Securities | 6,986 | 6,501 | 6,636 | 6,766 | 7,816 | 13,487 | 15,636 | |||||||
| Other interest-earning assets | 791 | 772 | 789 | 881 | 1,239 | 1,563 | 2,599 | |||||||
| Total interest and dividend income | 69,677 | 68,618 | 73,530 | 69,666 | 72,697 | 138,295 | 147,411 | |||||||
| Interest expense | ||||||||||||||
| Deposits | 3,543 | 4,286 | 5,436 | 7,564 | 10,205 | 7,829 | 24,816 | |||||||
| Federal Home Loan Bank advances | 2,944 | 3,112 | 3,479 | 3,860 | 4,818 | 6,056 | 10,701 | |||||||
| Notes payable and other interest-bearing liabilities | 3,343 | 3,304 | 3,052 | 2,387 | 2,359 | 6,647 | 4,718 | |||||||
| Total interest expense | 9,830 | 10,702 | 11,967 | 13,811 | 17,382 | 20,532 | 40,235 | |||||||
| Net interest income | 59,847 | 57,916 | 61,563 | 55,855 | 55,315 | 117,763 | 107,176 | |||||||
| (Reversal of) provision for credit losses | (2,154) | (1,107) | 991 | 1,141 | 11,826 | (3,261) | 27,587 | |||||||
| Net interest income after (reversal of) provision for credit losses | 62,001 | 59,023 | 60,572 | 54,714 | 43,489 | 121,024 | 79,589 | |||||||
| Noninterest income | ||||||||||||||
| Customer service fees | 1,990 | 1,758 | 1,953 | 1,498 | 1,224 | 3,748 | 2,320 | |||||||
| Loan servicing income | 38 | 268 | 149 | 186 | 95 | 306 | 170 | |||||||
| Income from bank owned life insurance | 690 | 672 | 691 | 629 | 591 | 1,362 | 1,169 | |||||||
| Net gain on sale of securities available for sale | — | — | — | — | 2,011 | — | 2,011 | |||||||
| Fair value adjustment on loans held for sale | 20 | — | 36 | 24 | 25 | 20 | (1,561) | |||||||
| Net gain (loss) on sale of loans | — | — | — | 272 | — | — | (27) | |||||||
| All other income | 1,432 | 1,683 | 4,146 | 1,345 | 1,582 | 3,115 | 3,507 | |||||||
| Total noninterest income | 4,170 | 4,381 | 6,975 | 3,954 | 5,528 | 8,551 | 7,589 | |||||||
| Noninterest expense | ||||||||||||||
| Salaries and employee benefits | 25,042 | 25,719 | 25,836 | 23,277 | 24,260 | 50,761 | 47,696 | |||||||
| Naming rights termination | — | — | — | — | 26,769 | — | 26,769 | |||||||
| Occupancy and equipment | 7,277 | 7,196 | 7,560 | 7,457 | 7,090 | 14,473 | 14,333 | |||||||
| Professional fees | 1,749 | 4,022 | 29 | 5,147 | 4,596 | 5,771 | 10,560 | |||||||
| Data processing | 1,621 | 1,655 | 1,608 | 1,657 | 1,536 | 3,276 | 3,309 | |||||||
| Advertising | 78 | 118 | 171 | 219 | 1,157 | 196 | 2,913 | |||||||
| Regulatory assessments | 769 | 774 | 748 | 784 | 725 | 1,543 | 1,209 | |||||||
| (Reversal of) provision for loan repurchase reserves | (99) | (132) | 28 | (91) | (34) | (231) | (634) | |||||||
| Amortization of intangible assets | 282 | 282 | 306 | 353 | 430 | 564 | 859 | |||||||
| Merger-related costs | 700 | 700 | — | — | — | 1,400 | — | |||||||
| All other expense | 3,969 | 2,771 | 3,337 | 3,021 | 6,408 | 6,740 | 10,937 | |||||||
| Total noninterest expense before (gain) loss in alternative energy partnership investments | 41,388 | 43,105 | 39,623 | 41,824 | 72,937 | 84,493 | 117,951 | |||||||
| (Gain) loss in alternative energy partnership investments | (829) | 3,630 | (673) | (1,430) | (167) | 2,801 | 1,738 | |||||||
| Total noninterest expense | 40,559 | 46,735 | 38,950 | 40,394 | 72,770 | 87,294 | 119,689 | |||||||
| Income (loss) before income taxes | 25,612 | 16,669 | 28,597 | 18,274 | (23,753) | 42,281 | (32,511) | |||||||
| Income tax expense (benefit) | 6,562 | 2,294 | 6,894 | 2,361 | (5,304) | 8,856 | (7,469) | |||||||
| Net income (loss) | 19,050 | 14,375 | 21,703 | 15,913 | (18,449) | 33,425 | (25,042) | |||||||
| Preferred stock dividends | 1,727 | 3,141 | 3,447 | 3,447 | 3,442 | 4,868 | 6,975 | |||||||
| Income allocated to participating securities | — | 62 | 456 | 281 | — | 122 | — | |||||||
| Participating securities dividends | — | — | 94 | 94 | 94 | — | 188 | |||||||
| Impact of preferred stock redemption | — | 3,347 | — | 7 | (49) | 3,347 | (575) | |||||||
| Net income (loss) available to common stockholders | $ | 17,323 | $ | 7,825 | $ | 17,706 | $ | 12,084 | $ | (21,936) | $ | 25,088 | $ | (31,630) |
| Earnings (loss) per common share: | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Basic | $ | 0.34 | $ | 0.16 | $ | 0.35 | $ | 0.24 | $ | (0.44) | $ | 0.50 | $ | (0.63) |
| Diluted | $ | 0.34 | $ | 0.15 | $ | 0.35 | $ | 0.24 | $ | (0.44) | $ | 0.49 | $ | (0.63) |
| Weighted average number of common shares outstanding | ||||||||||||||
| Basic | 50,650,186 | 50,350,897 | 50,125,462 | 50,108,655 | 50,030,919 | 50,501,369 | 50,247,848 | |||||||
| Diluted | 50,892,202 | 50,750,522 | 50,335,271 | 50,190,933 | 50,030,919 | 50,810,285 | 50,247,848 | |||||||
| Dividends declared per common share | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.06 | $ | 0.12 | $ | 0.12 |
Banc of California, Inc.
Selected Financial Data
(Unaudited)
| Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | ||||||
| Profitability and other ratios of consolidated operations | ||||||||||
| Return on average assets(1) | 0.98 | % | 0.74 | % | 1.11 | % | 0.82 | % | (0.96) | % |
| Return on average equity(1) | 9.38 | % | 6.56 | % | 9.67 | % | 7.32 | % | (8.69) | % |
| Return on average tangible common equity(2) | 10.34 | % | 4.77 | % | 10.69 | % | 7.68 | % | (13.83) | % |
| Pre-tax pre-provision income (loss) ROAA(2) | 1.20 | % | 0.80 | % | 1.52 | % | 1.00 | % | (0.62) | % |
| Adjusted pre-tax pre-provision income ROAA(1)(2) | 1.13 | % | 1.06 | % | 1.25 | % | 0.98 | % | 0.83 | % |
| Dividend payout ratio(3) | 17.65 | % | 37.50 | % | 17.14 | % | 25.00 | % | (13.64) | % |
| Average loan yield | 4.30 | % | 4.30 | % | 4.58 | % | 4.46 | % | 4.48 | % |
| Average cost of interest-bearing deposits | 0.32 | % | 0.38 | % | 0.47 | % | 0.66 | % | 0.93 | % |
| Average cost of total deposits | 0.23 | % | 0.28 | % | 0.36 | % | 0.51 | % | 0.71 | % |
| Net interest spread | 3.04 | % | 2.95 | % | 3.15 | % | 2.84 | % | 2.77 | % |
| Net interest margin(1) | 3.27 | % | 3.19 | % | 3.38 | % | 3.09 | % | 3.09 | % |
| Noninterest income to total revenue(4) | 6.51 | % | 7.03 | % | 10.18 | % | 6.61 | % | 9.09 | % |
| Noninterest income to average total assets(1) | 0.21 | % | 0.23 | % | 0.36 | % | 0.20 | % | 0.29 | % |
| Noninterest expense to average total assets(1) | 2.08 | % | 2.41 | % | 2.00 | % | 2.09 | % | 3.78 | % |
| Adjusted noninterest expense to average total assets(1)(2) | 2.15 | % | 2.15 | % | 2.26 | % | 2.10 | % | 2.22 | % |
| Efficiency ratio(2)(5) | 63.36 | % | 75.02 | % | 56.83 | % | 67.54 | % | 119.60 | % |
| Adjusted efficiency ratio(2)(5) | 65.58 | % | 66.91 | % | 64.26 | % | 68.31 | % | 72.74 | % |
| Average loans held-for-investment to average deposits | 92.74 | % | 93.74 | % | 95.65 | % | 92.86 | % | 98.51 | % |
| Average securities available-for-sale to average total assets | 16.71 | % | 15.73 | % | 15.96 | % | 15.49 | % | 13.75 | % |
| Average stockholders’ equity to average total assets | 10.41 | % | 11.30 | % | 11.49 | % | 11.26 | % | 11.04 | % |
(1)Ratios are presented on an annualized basis.
(2)The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.
(3)The ratio is calculated by dividing dividends declared per common share by basic earnings (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)The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.
Banc of California, Inc.
Average Balance, Average Yield Earned, and Average Cost Paid
(Dollars in thousands)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | December 31, 2020 | |||||||||||||||||||
| Average | Yield | Average | Yield | Average | Yield | ||||||||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||||||
| Interest-earning assets | |||||||||||||||||||||
| Loans held-for-sale | $ | 1,987 | $ | 15 | 3.03 | % | $ | 1,413 | $ | 7 | 2.01 | % | $ | 1,564 | $ | 8 | 2.03 | % | |||
| SFR mortgage | 1,277,552 | 11,410 | 3.58 | % | 1,210,105 | 11,747 | 3.94 | % | 1,224,865 | 12,955 | 4.21 | % | |||||||||
| Commercial real estate, multifamily, and construction | 2,313,483 | 27,222 | 4.72 | % | 2,322,509 | 26,387 | 4.61 | % | 2,507,950 | 30,371 | 4.82 | % | |||||||||
| Commercial and industrial, SBA, and lease financing | 2,154,512 | 22,978 | 4.28 | % | 2,221,494 | 22,910 | 4.18 | % | 1,978,684 | 21,984 | 4.42 | % | |||||||||
| Other consumer | 23,881 | 275 | 4.62 | % | 28,520 | 294 | 4.18 | % | 31,856 | 787 | 9.83 | % | |||||||||
| Gross loans and leases | 5,771,415 | 61,900 | 4.30 | % | 5,784,041 | 61,345 | 4.30 | % | 5,744,919 | 66,105 | 4.58 | % | |||||||||
| Securities | 1,308,230 | 6,986 | 2.14 | % | 1,236,138 | 6,501 | 2.13 | % | 1,239,295 | 6,636 | 2.13 | % | |||||||||
| Other interest-earning assets | 258,915 | 791 | 1.23 | % | 336,443 | 772 | 0.93 | % | 262,363 | 789 | 1.20 | % | |||||||||
| Total interest-earning assets | 7,338,560 | 69,677 | 3.81 | % | 7,356,622 | 68,618 | 3.78 | % | 7,246,577 | 73,530 | 4.04 | % | |||||||||
| Allowance for loan losses | (79,103) | (81,111) | (83,745) | ||||||||||||||||||
| BOLI and noninterest-earning assets | 567,549 | 585,441 | 602,165 | ||||||||||||||||||
| Total assets | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | |||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||
| Interest-bearing checking | $ | 2,182,419 | $ | 679 | 0.12 | % | $ | 2,140,314 | $ | 901 | 0.17 | % | $ | 2,086,146 | $ | 1,131 | 0.22 | % | |||
| Savings | 903,940 | 1,974 | 0.88 | % | 928,446 | 2,013 | 0.88 | % | 937,649 | 2,128 | 0.90 | % | |||||||||
| Money market | 734,165 | 270 | 0.15 | % | 726,079 | 377 | 0.21 | % | 671,949 | 414 | 0.25 | % | |||||||||
| Certificates of deposit | 633,101 | 620 | 0.39 | % | 720,180 | 995 | 0.56 | % | 860,131 | 1,763 | 0.82 | % | |||||||||
| Total interest-bearing deposits | 4,453,625 | 3,543 | 0.32 | % | 4,515,019 | 4,286 | 0.38 | % | 4,555,875 | 5,436 | 0.47 | % | |||||||||
| FHLB advances | 418,111 | 2,944 | 2.82 | % | 446,618 | 3,112 | 2.83 | % | 534,303 | 3,479 | 2.59 | % | |||||||||
| Long-term debt and other interest-bearing liabilities | 274,412 | 3,343 | 4.89 | % | 260,488 | 3,304 | 5.14 | % | 238,265 | 3,052 | 5.10 | % | |||||||||
| Total interest-bearing liabilities | 5,146,148 | 9,830 | 0.77 | % | 5,222,125 | 10,702 | 0.83 | % | 5,328,443 | 11,967 | 0.89 | % | |||||||||
| Noninterest-bearing deposits | 1,767,711 | 1,653,517 | 1,448,422 | ||||||||||||||||||
| Noninterest-bearing liabilities | 98,174 | 97,136 | 95,567 | ||||||||||||||||||
| Total liabilities | 7,012,033 | 6,972,778 | 6,872,432 | ||||||||||||||||||
| Total stockholders’ equity | 814,973 | 888,174 | 892,565 | ||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | |||||||||||||||
| Net interest income/spread | $ | 59,847 | 3.04 | % | $ | 57,916 | 2.95 | % | $ | 61,563 | 3.15 | % | |||||||||
| Net interest margin | 3.27 | % | 3.19 | % | 3.38 | % | |||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 143 | % | 141 | % | 136 | % | |||||||||||||||
| Total deposits | $ | 6,221,336 | $ | 3,543 | 0.23 | % | $ | 6,168,536 | $ | 4,286 | 0.28 | % | $ | 6,004,297 | $ | 5,436 | 0.36 | % | |||
| Total funding (1) | $ | 6,913,859 | $ | 9,830 | 0.57 | % | $ | 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.
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | June 30, 2020 | |||||||||||||
| Average | Yield | Average | Yield | |||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||
| Interest-earning assets | ||||||||||||||
| Loans held-for-sale | $ | 19,544 | $ | 139 | 2.83 | % | $ | 19,967 | $ | 155 | 3.12 | % | ||
| SFR mortgage | 1,311,513 | 13,178 | 4.00 | % | 1,416,358 | 14,187 | 4.03 | % | ||||||
| Commercial real estate, multifamily, and construction | 2,493,408 | 29,666 | 4.73 | % | 2,524,477 | 29,459 | 4.69 | % | ||||||
| Commercial and industrial, SBA, and lease financing | 1,673,548 | 18,585 | 4.42 | % | 1,706,120 | 19,392 | 4.57 | % | ||||||
| Other consumer | 35,563 | 451 | 5.05 | % | 40,697 | 449 | 4.44 | % | ||||||
| Gross loans and leases | 5,533,576 | 62,019 | 4.46 | % | 5,707,619 | 63,642 | 4.48 | % | ||||||
| Securities | 1,190,765 | 6,766 | 2.26 | % | 1,063,941 | 7,816 | 2.95 | % | ||||||
| Other interest-earning assets | 457,558 | 881 | 0.77 | % | 424,776 | 1,239 | 1.17 | % | ||||||
| Total interest-earning assets | 7,181,899 | 69,666 | 3.86 | % | 7,196,336 | 72,697 | 4.06 | % | ||||||
| Allowance for loan losses | (89,679) | (78,528) | ||||||||||||
| BOLI and noninterest-earning assets | 594,885 | 622,398 | ||||||||||||
| Total assets | $ | 7,687,105 | $ | 7,740,206 | ||||||||||
| Interest-bearing liabilities | ||||||||||||||
| Interest-bearing checking | $ | 1,919,327 | $ | 1,660 | 0.34 | % | $ | 1,710,038 | $ | 2,186 | 0.51 | % | ||
| Savings | 948,898 | 2,353 | 0.99 | % | 905,997 | 2,718 | 1.21 | % | ||||||
| Money market | 681,421 | 645 | 0.38 | % | 592,872 | 850 | 0.58 | % | ||||||
| Certificates of deposit | 1,030,829 | 2,906 | 1.12 | % | 1,214,939 | 4,451 | 1.47 | % | ||||||
| Total interest-bearing deposits | 4,580,475 | 7,564 | 0.66 | % | 4,423,846 | 10,205 | 0.93 | % | ||||||
| FHLB advances | 608,169 | 3,860 | 2.52 | % | 819,166 | 4,818 | 2.37 | % | ||||||
| Securities sold under repurchase agreements | 1,309 | 2 | 0.61 | % | 1,024 | 2 | 0.79 | % | ||||||
| Long-term debt and other interest-bearing liabilities | 173,911 | 2,385 | 5.46 | % | 173,977 | 2,357 | 5.45 | % | ||||||
| Total interest-bearing liabilities | 5,363,864 | 13,811 | 1.02 | % | 5,418,013 | 17,382 | 1.29 | % | ||||||
| Noninterest-bearing deposits | 1,357,411 | 1,349,735 | ||||||||||||
| Noninterest-bearing liabilities | 100,424 | 118,208 | ||||||||||||
| Total liabilities | 6,821,699 | 6,885,956 | ||||||||||||
| Total stockholders’ equity | 865,406 | 854,250 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 7,687,105 | $ | 7,740,206 | ||||||||||
| Net interest income/spread | $ | 55,855 | 2.84 | % | $ | 55,315 | 2.77 | % | ||||||
| Net interest margin | 3.09 | % | 3.09 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 134 | % | 133 | % | ||||||||||
| Total deposits | $ | 5,937,886 | $ | 7,564 | 0.51 | % | $ | 5,773,581 | $ | 10,205 | 0.71 | % | ||
| Total funding (1) | $ | 6,721,275 | $ | 13,811 | 0.82 | % | $ | 6,767,748 | $ | 17,382 | 1.03 | % |
(1)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
| Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | June 30, 2020 | |||||||||||||
| Average | Yield | Average | Yield | |||||||||||
| Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||
| Interest-earning assets | ||||||||||||||
| Loans held-for-sale | $ | 1,701 | $ | 21 | 2.49 | % | $ | 21,120 | $ | 376 | 3.58 | % | ||
| SFR mortgage | 1,244,015 | 23,157 | 3.75 | % | 1,474,663 | 29,481 | 4.02 | % | ||||||
| Commercial real estate, multifamily, and construction | 2,317,971 | 53,610 | 4.66 | % | 2,544,480 | 59,682 | 4.72 | % | ||||||
| Commercial and industrial, SBA, and lease financing | 2,187,818 | 45,888 | 4.23 | % | 1,659,722 | 38,550 | 4.67 | % | ||||||
| Other consumer | 26,188 | 569 | 4.38 | % | 44,229 | 1,087 | 4.94 | % | ||||||
| Gross loans and leases | 5,777,693 | 123,245 | 4.30 | % | 5,744,214 | 129,176 | 4.52 | % | ||||||
| Securities | 1,272,383 | 13,487 | 2.14 | % | 1,008,454 | 15,636 | 3.12 | % | ||||||
| Other interest-earning assets | 297,465 | 1,563 | 1.06 | % | 361,110 | 2,599 | 1.45 | % | ||||||
| Total interest-earning assets | 7,347,541 | 138,295 | 3.80 | % | 7,113,778 | 147,411 | 4.17 | % | ||||||
| Allowance for credit losses | (80,102) | (69,499) | ||||||||||||
| BOLI and noninterest-earning assets | 576,446 | 607,296 | ||||||||||||
| Total assets | $ | 7,843,885 | $ | 7,651,575 | ||||||||||
| Interest-bearing liabilities | ||||||||||||||
| Interest-bearing checking | $ | 2,161,483 | $ | 1,581 | 0.15 | % | $ | 1,615,480 | $ | 5,915 | 0.74 | % | ||
| Savings | 916,125 | 3,987 | 0.88 | % | 898,414 | 6,013 | 1.35 | % | ||||||
| Money market | 730,144 | 647 | 0.18 | % | 600,899 | 2,610 | 0.87 | % | ||||||
| Certificates of deposit | 676,400 | 1,614 | 0.48 | % | 1,183,229 | 10,278 | 1.75 | % | ||||||
| Total interest-bearing deposits | 4,484,152 | 7,829 | 0.35 | % | 4,298,022 | 24,816 | 1.16 | % | ||||||
| FHLB advances | 432,286 | 6,056 | 2.83 | % | 929,110 | 10,701 | 2.32 | % | ||||||
| Securities sold under repurchase agreements | — | — | — | % | 512 | 2 | 0.79 | % | ||||||
| Long-term debt and other interest-bearing liabilities | 267,488 | 6,647 | 5.01 | % | 174,017 | 4,716 | 5.45 | % | ||||||
| Total interest-bearing liabilities | 5,183,926 | 20,532 | 0.80 | % | 5,401,661 | 40,235 | 1.50 | % | ||||||
| Noninterest-bearing deposits | 1,710,930 | 1,241,521 | ||||||||||||
| Noninterest-bearing liabilities | 97,658 | 123,244 | ||||||||||||
| Total liabilities | 6,992,514 | 6,766,426 | ||||||||||||
| Total stockholders’ equity | 851,371 | 885,149 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 7,843,885 | $ | 7,651,575 | ||||||||||
| Net interest income/spread | $ | 117,763 | 3.00 | % | $ | 107,176 | 2.67 | % | ||||||
| Net interest margin | 3.23 | % | 3.03 | % | ||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 142 | % | 132 | % | ||||||||||
| Total deposits | $ | 6,195,082 | $ | 7,829 | 0.25 | % | $ | 5,539,543 | $ | 24,816 | 0.90 | % | ||
| Total funding (1) | $ | 6,894,856 | $ | 20,532 | 0.60 | % | $ | 6,643,182 | $ | 40,235 | 1.22 | % |
(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 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)
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tangible common equity, and tangible common equity to tangible assets ratio | |||||||||||||||
| Total assets | $ | 8,027,413 | $ | 7,933,459 | $ | 7,877,334 | $ | 7,738,106 | $ | 7,770,138 | |||||
| Less goodwill | (37,144) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less other intangible assets | (2,069) | (2,351) | (2,633) | (2,939) | (3,292) | ||||||||||
| Tangible assets(1) | $ | 7,988,200 | $ | 7,893,964 | $ | 7,837,557 | $ | 7,698,023 | $ | 7,729,702 | |||||
| Total stockholders' equity | $ | 829,362 | $ | 804,693 | $ | 897,207 | $ | 874,254 | $ | 846,959 | |||||
| Less goodwill | (37,144) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less other intangible assets | (2,069) | (2,351) | (2,633) | (2,939) | (3,292) | ||||||||||
| Tangible equity(1) | 790,149 | 765,198 | 857,430 | 834,171 | 806,523 | ||||||||||
| Less preferred stock | (94,956) | (94,956) | (184,878) | (184,878) | (185,037) | ||||||||||
| Tangible common equity(1) | $ | 695,193 | $ | 670,242 | $ | 672,552 | $ | 649,293 | $ | 621,486 | |||||
| Total stockholders' equity to total assets | 10.33 | % | 10.14 | % | 11.39 | % | 11.30 | % | 10.90 | % | |||||
| Tangible equity to tangible assets(1) | 9.89 | % | 9.69 | % | 10.94 | % | 10.84 | % | 10.43 | % | |||||
| Tangible common equity to tangible assets(1) | 8.70 | % | 8.49 | % | 8.58 | % | 8.43 | % | 8.04 | % | |||||
| Common shares outstanding | 50,313,228 | 50,150,447 | 49,767,489 | 49,760,543 | 49,750,958 | ||||||||||
| Class B non-voting non-convertible common shares outstanding | 477,321 | 477,321 | 477,321 | 477,321 | 477,321 | ||||||||||
| Total common shares outstanding | 50,790,549 | 50,627,768 | 50,244,810 | 50,237,864 | 50,228,279 | ||||||||||
| Tangible common equity per common share(1) | $ | 13.69 | $ | 13.24 | $ | 13.39 | $ | 12.92 | $ | 12.37 | |||||
| Book value per common share | $ | 14.46 | $ | 14.02 | $ | 14.18 | $ | 13.72 | $ | 13.18 |
(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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||||||||
| Return on tangible common equity | |||||||||||||||
| Average total stockholders' equity | $ | 814,973 | $ | 888,174 | $ | 892,565 | $ | 865,406 | $ | 854,250 | |||||
| Less average preferred stock | (94,956) | (164,895) | (184,878) | (184,910) | (185,471) | ||||||||||
| Less average goodwill | (37,144) | (37,144) | (37,144) | (37,144) | (37,144) | ||||||||||
| Less average other intangible assets | (2,224) | (2,517) | (2,826) | (3,172) | (3,574) | ||||||||||
| Average tangible common equity(1) | $ | 680,649 | $ | 683,618 | $ | 667,717 | $ | 640,180 | $ | 628,061 | |||||
| Net income (loss) available to common stockholders | 17,323 | 7,825 | 17,706 | 12,084 | (21,936) | ||||||||||
| Add amortization of intangible assets | 282 | 282 | 306 | 353 | 430 | ||||||||||
| Less tax effect on amortization of intangible assets | (59) | (59) | (64) | (74) | (90) | ||||||||||
| Net income (loss) available to common stockholders after adjustments for intangible assets(1) | $ | 17,546 | $ | 8,048 | $ | 17,948 | $ | 12,363 | $ | (21,596) | |||||
| Return on average equity | 9.38 | % | 6.56 | % | 9.67 | % | 7.32 | % | (8.69) | % | |||||
| Return on average tangible common equity(1) | 10.34 | % | 4.77 | % | 10.69 | % | 7.68 | % | (13.83) | % | |||||
| Statutory Federal tax rate utilized for calculating tax effect on amortization of intangible assets | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % |
(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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||||||||
| Adjusted noninterest income and expense | |||||||||||||||
| Total noninterest income | $ | 4,170 | $ | 4,381 | $ | 6,975 | $ | 3,954 | $ | 5,528 | |||||
| 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 | (20) | — | (36) | (24) | (25) | ||||||||||
| Total noninterest income adjustments | (20) | — | (36) | (296) | (2,036) | ||||||||||
| Adjusted noninterest income(1) | $ | 4,150 | $ | 4,381 | $ | 6,939 | $ | 3,658 | $ | 3,492 | |||||
| Total noninterest expense | $ | 40,559 | $ | 46,735 | $ | 38,950 | $ | 40,394 | $ | 72,770 | |||||
| Noninterest expense adjustments: | |||||||||||||||
| Naming rights termination | — | — | — | — | (26,769) | ||||||||||
| Extinguishment of debt | — | — | — | — | (2,515) | ||||||||||
| Professional recoveries (fees) | 1,284 | (721) | 4,398 | (1,172) | (875) | ||||||||||
| Merger-related costs | (700) | (700) | — | — | — | ||||||||||
| Noninterest expense adjustments before gain (loss) in alternative energy partnership investments | 584 | (1,421) | 4,398 | (1,172) | (30,159) | ||||||||||
| Gain (loss) in alternative energy partnership investments | 829 | (3,630) | 673 | 1,430 | 167 | ||||||||||
| Total noninterest expense adjustments | 1,413 | (5,051) | 5,071 | 258 | (29,992) | ||||||||||
| Adjusted noninterest expense(1) | $ | 41,972 | $ | 41,684 | $ | 44,021 | $ | 40,652 | $ | 42,778 | |||||
| Average assets | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | $ | 7,687,105 | $ | 7,740,206 | |||||
| Noninterest expense to average total assets | 2.08 | % | 2.41 | % | 2.00 | % | 2.09 | % | 3.78 | % | |||||
| Adjusted noninterest expense to average total assets(1) | 2.15 | % | 2.15 | % | 2.26 | % | 2.10 | % | 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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||||||||
| Adjusted pre-tax pre-provision income | |||||||||||||||
| Net interest income | $ | 59,847 | $ | 57,916 | $ | 61,563 | $ | 55,855 | $ | 55,315 | |||||
| Noninterest income | 4,170 | 4,381 | 6,975 | 3,954 | 5,528 | ||||||||||
| Total revenue | 64,017 | 62,297 | 68,538 | 59,809 | 60,843 | ||||||||||
| Noninterest expense | 40,559 | 46,735 | 38,950 | 40,394 | 72,770 | ||||||||||
| Pre-tax pre-provision income (loss)(1) | $ | 23,458 | $ | 15,562 | $ | 29,588 | $ | 19,415 | $ | (11,927) | |||||
| Total revenue | $ | 64,017 | $ | 62,297 | $ | 68,538 | $ | 59,809 | $ | 60,843 | |||||
| Total noninterest income adjustments | (20) | — | (36) | (296) | (2,036) | ||||||||||
| Adjusted total revenue(1) | 63,997 | 62,297 | 68,502 | 59,513 | 58,807 | ||||||||||
| Noninterest expense | 40,559 | 46,735 | 38,950 | 40,394 | 72,770 | ||||||||||
| Total noninterest expense adjustments | 1,413 | (5,051) | 5,071 | 258 | (29,992) | ||||||||||
| Adjusted noninterest expense(1) | 41,972 | 41,684 | 44,021 | 40,652 | 42,778 | ||||||||||
| Adjusted pre-tax pre-provision income(1) | $ | 22,025 | $ | 20,613 | $ | 24,481 | $ | 18,861 | $ | 16,029 | |||||
| Average assets | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | $ | 7,687,105 | $ | 7,740,206 | |||||
| Pre-tax pre-provision income (loss) ROAA(1) | 1.20 | % | 0.80 | % | 1.52 | % | 1.00 | % | (0.62) | % | |||||
| Adjusted pre-tax pre-provision income ROAA(1) | 1.13 | % | 1.06 | % | 1.25 | % | 0.98 | % | 0.83 | % | |||||
| Efficiency ratio(1) | 63.36 | % | 75.02 | % | 56.83 | % | 67.54 | % | 119.60 | % | |||||
| Adjusted efficiency ratio(1) | 65.58 | % | 66.91 | % | 64.26 | % | 68.31 | % | 72.74 | % |
(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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | June 30,<br>2020 | |||||||||||
| Adjusted net income (loss) | |||||||||||||||
| Net income (loss) | $ | 19,050 | $ | 14,375 | $ | 21,703 | $ | 15,913 | $ | (18,449) | |||||
| Adjustments, net:(1) | |||||||||||||||
| Noninterest income | 15 | — | 27 | 222 | 1,527 | ||||||||||
| Noninterest expense | (1,060) | 3,788 | (3,803) | (194) | 22,494 | ||||||||||
| Adjusted net income before tax adjustment | 18,005 | 18,163 | 17,927 | 15,941 | 5,572 | ||||||||||
| Tax adjustment: tax impact from exercise of stock appreciation rights | — | 2,093 | — | — | — | ||||||||||
| Adjusted net income(2) | $ | 18,005 | $ | 16,070 | $ | 17,927 | $ | 15,941 | $ | 5,572 | |||||
| Average assets | $ | 7,827,006 | $ | 7,860,952 | $ | 7,764,997 | $ | 7,687,105 | $ | 7,740,206 | |||||
| ROAA | 0.98 | % | 0.74 | % | 1.11 | % | 0.82 | % | (0.96) | % | |||||
| Adjusted ROAA(2) | 0.92 | % | 0.83 | % | 0.92 | % | 0.82 | % | 0.29 | % | |||||
| Adjusted net income available to common stockholders | |||||||||||||||
| Net income (loss) available to common stockholders | $ | 17,323 | $ | 7,825 | $ | 17,706 | $ | 12,084 | $ | (21,936) | |||||
| Adjustments to net income (loss)(3) | (1,045) | 1,695 | (3,776) | 28 | 24,021 | ||||||||||
| Adjustments for impact of preferred stock redemption | — | 3,347 | — | 7 | (49) | ||||||||||
| Adjusted net income available to common stockholders(2) | $ | 16,278 | $ | 12,867 | $ | 13,930 | $ | 12,119 | $ | 2,036 | |||||
| Average diluted common shares | 50,892,202 | 50,750,522 | 50,335,271 | 50,190,933 | 50,030,919 | ||||||||||
| Diluted EPS | $ | 0.34 | $ | 0.15 | $ | 0.35 | $ | 0.24 | $ | (0.44) | |||||
| Adjusted diluted EPS(2)(4) | $ | 0.32 | $ | 0.25 | $ | 0.28 | $ | 0.24 | $ | 0.04 |
(1)Adjustments shown net of an effective tax rate of 25%
(2)Non-GAAP measure.
(3)Represents the difference between net income (loss) and adjusted net income
(4)Represents adjusted net income available to common stockholders divided by average diluted common shares
24
banc2021q2investordeckfi
INVESTOR PRESENTATION 2021 Second 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, 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 proposed acquisition of Pacific Mercantile Bancorp 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 possibility that the merger does not close when expected or at all because required regulatory approvals, financial tests or other conditions to closing are not received or satisfied on a timely basis or at all; (ii) changes in Banc of California, Inc.’s or Pacific Mercantile Bancorp’s stock price before closing, including as a result of its financial performance prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; (iii) 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; (iv) the ability to promptly and effectively integrate the businesses of Banc of California, Inc. and Pacific Mercantile Bancorp; (v) the reaction to the transaction of the companies’ customers, employees and counterparties; (vi) diversion of management time on merger-related issues; (vii) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (viii) other risks that are described in Banc of California, Inc.’s and Pacific Mercantile Bancorp’s public filings with the SEC.
3(1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation SECOND QUARTER 2021 RESULTS ($ in Thousands Except EPS) 2Q21 1Q21 2Q20 Net interest income $ 59,847 $ 57,916 $ 55,315 (Reversal of) provision for credit losses $ (2,154) $ (1,107) $ 11,826 Net income (loss) $ 19,050 $ 14,375 $ (18,449) Net income (loss) available to common stockholders $ 17,323 $ 7,825 $ (21,936) Earnings (loss) per diluted common share $ 0.34 $ 0.15 $ (0.44) Adjusted net income available to common stockholders (1) $ 16,278 $ 12,867 $ 2,036 Adjusted diluted earnings per share (1) $ 0.32 $ 0.25 $ 0.04 Pre-tax pre-provision (PTPP) income (loss) (1) $ 23,458 $ 15,562 $ (11,927) Adjusted PTPP income (1) $ 22,025 $ 20,613 $ 16,029 Average assets $ 7,827,006 $ 7,860,952 $ 7,740,206 Return on average assets (ROAA) 0.98% 0.74% -0.96% Adjusted ROAA 0.92% 0.83% 0.29% Net interest margin 3.27% 3.19% 3.09% Allowance for credit losses coverage ratio 1.33% 1.43% 1.68% Common equity tier 1 11.14% 11.50% 11.68% Tangible common equity per common share (1) $ 13.69 $ 13.24 $ 12.37 Noninterest-bearing deposits as % of total deposits 29.1% 27.7% 23.0%
4 ENHANCING FRANCHISE VALUE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 2nd Quarter 2021 Summary Accelerating Loan Growth Driving Improvement in Profitability • $904 million in total loan production, up $162 million from 1Q21 • $847 million in total loan fundings; up 54% from 1Q21 • Excess liquidity from continued deposit inflows utilized to fund strategic purchases of high quality loans with attractive risk-adjusted yields to offset loan payoffs New Banking Talent Contributing to Positive Trends in Business Development • Portion of cost savings realized over past two years being reinvested to strengthen business development capabilities • New bankers have expanded and deepened BANC’s presence in key markets including Los Angeles, San Diego, Central California and Northern California • The new banking talent added over past several quarters have quickly built pipelines and contributed to growth in loans and deposits Continued Execution on Franchise Enhancing Initiatives • Improved deposit mix: NIB represents 29% of deposits at end of 2Q21 versus 28% at end of 1Q21 • Reduced cost of funds: 0.57% for 2Q21 from 0.63% for 1Q21 • Expanded net interest margin: 3.27% for 2Q21 from 3.19% for 1Q21 • Disciplined expense control driving improvement in adjusted efficiency ratio(1) • 65.6% for 2Q21 versus 66.9% for 1Q21 Credit Quality Remains Strong • Delinquent loans and non-accrual loans declined 33% and 8% • ACL to NPLs increases from 148% to 155% • Improved asset quality and improving economic forecasts resulted in a reserve release Acquisition of Pacific Mercantile Bancorp • On track to close during 3Q21 • Substantial progress on integration planning has increased visibility on expected cost savings to 40%
5 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS RECONCILIATION • Noninterest expense adjustments relate to merger-related costs and indemnified professional fees, net of recoveries • 2Q21 included $1.0 million (after tax) in net recoveries of professional fees versus $0.5 million (after tax) of net expense in 1Q21 • Series D Preferred Stock redemption costs during 1Q21 reduced diluted earnings per share by $0.07 • No Series D Preferred Stock dividends in 2Q21 compared to $1.4 million in 1Q21 ($ in millions) (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation (2) Adjustments presented utilizing an effective normalized tax rate of 25% $17.3 $16.3 Net Income Available to Common Stockholders Tax impact from exercise of stock appreciation awards $(0.4) $(0.6) Noninterest expense adjustments (2) $-0$-0 Gain on alternative energy partnerships (2) Impact of preferred stock redemption Adjusted Net Income Available to Common Stockholders (1) $7.8 $12.9 $2.7 $(2.1) $3.4 Tax impact from exercise of stock appreciation awards Net Income Available to Common Stockholders $1.1 Adjusted Net Income Available to Common Stockholders (1) Loss on alternative engergy partnerships (2) Noninterest expense adjustments (2) Impact of preferred stock redemption EPS $0.34 EPS $0.25EPS $0.15 EPS $0.32 2Q 2021 1Q 2021
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 ADJUSTED PRE-TAX PRE-PROVISION INCOME TREND 0.83% 0.98% 1.25% 1.06% 1.13% 3Q20 $16.0 $24.5 2Q20 $18.9 4Q20 $20.6 1Q21 $22.0 2Q21 Adjusted PTPP Income Adjusted PTPP Income / Avg. Assets
7 RAPIDLY IMPROVING DEPOSIT FRANCHISE (1) Reflects balance as of period end (2) As of July 20th, the spot rate is 0.17% • $109 million 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 • Spot rate(2) on June 30, 2021 was 20 bps, down from 24 bps at March 31, 2021 Cost of Deposits 23% 27% 31% 0.71% 28% 3% 10%15% 2Q20 35% 0.51% 14% 24% 2Q21 34% 1% 26% 3Q20 0.36% 1Q21 26% 27% 0% 12% 4Q20 0.28% 28% 0% 34% 27% 11% 0.23% 29% 36% 0% Average Cost of deposits Noninterest-bearing Interest-bearing checking Money Market & Savings Brokered CDs CDs Spot Rate 0.20% Category 2Q20 3Q20 4Q20 1Q21 2Q21 $ in millions Noninterest-bearing checking $1,391.5 $1,450.7 $1,559.2 $1,700.3 $1,808.9 Interest-bearing checking 1,846.7 2,045.1 2,107.9 2,088.5 2,217.3 Demand deposits 3,238.2 3,495.9 3,667.2 3,788.9 4,026.2 Savings 939.0 946.3 932.4 909.6 901.3 Money Market 765.9 689.8 714.3 775.1 692.4 Non-maturity deposits 1,704.9 1,636.1 1,646.7 1,684.7 1,593.7 CDs 924.6 820.5 755.7 668.5 586.6 Brokered CDs 169.8 79.8 16.2 00.0 00.0 Total(1) $6,037.5 $6,032.3 $6,085.8 $6,142.0 $6,206.5
8 Period end balances ($ in millions) BUSINESS UNITS GENERATING SOLID DEMAND DEPOSIT GROWTH $1,692 $1,535 $399 $544 2Q20 $618 3Q20 $754 $4,026 $3,496 $1,803 $496 $615 $771 $416 $824 $2,141 $471 2Q21 $623$638 1Q21 $825 $1,856 $437 $3,789 $3,667 $761 $3,238 4Q20 +24% Community Banking Specialty & Business Banking Commercial & Real Estate Banking Other
9 DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND GENERATES ATTRACTIVE RISK-ADJUSTED YIELD PPP Loan Overview • As of June 30, 2021, PPP loans (net of fees) comprised $194 million of the SBA portfolio • Of the total 1,128 PPP loans funded in the 1st round, 182 loans remain outstanding and represent $65 million of the PPP loan portfolio balance • Of the total 956 PPP loans funded in the 2nd round, 812 loans remain outstanding and represent $128 million of the PPP loan portfolio balance Real Estate Secured with Low LTVs • 69% of loan portfolio is secured by residential real estate (primary residences) • Weighted average loan-to-values (LTVs) of 63% • ~88% of all real estate secured loans have LTVs of less than 70% • ~81% of the SFR portfolio have LTVs of less than 70% (1) Reflects balance as of period end 2nd Quarter 2021 1st Quarter 2021 Change Loan Segment $(1) % Avg. Yield $1 % Avg. Yield $1 % Avg. Yield $ in Millions C&I $ 2,071 35% 4.34% $ 1,878 33% 4.22% $ 193 2% 0.12% Multifamily 1,326 22% 4.58% 1,258 22% 4.52% 67 0% 0.06% CRE 872 15% 4.83% 840 15% 4.68% 32 0% 0.15% Construction 151 3% 5.22% 169 3% 4.92% (19) 0% 0.30% SBA 254 4% 3.84% 339 6% 3.93% (85) -2% -0.09% SFR 1,288 22% 3.58% 1,253 22% 3.94% 35 0% -0.36% Consumer 24 0% 4.61% 27 0% 4.18% (2) 0% 0.43% Total Loans HFI $ 5,985 100% 4.30% $ 5,764 100% 4.30% $ 0 N/A 0.00% The average loan yield remained flat at 4.30% for 2Q21 compared to 1Q21 as the reduction in coupon rates was offset by a higher level of prepayment penalty fees, the amortization of PPP fees due to forgiveness, and the return of loans to accrual status.
10 LOAN BALANCES FUNDINGS AND PAYOFFS (1) Includes net change in warehouse lending (2) Includes deferred costs/fees, transfers and sales ($ in millions) Loans Beginning Balance Total Fundings Total Payoffs Net Difference Other Change(2) Loans Ending Balance Total Loan Yield Rate on Production Rate on Production excl. PPP 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% Q3 2020 5,647$ 566$ 516$ 50$ (18)$ 5,680$ 4.46% 3.99% 4.07% Q2 2020 5,688$ 471$ 505$ (33)$ (7)$ 5,647$ 4.48% 2.77% 4.11% $393 $253 $351 $487 $533 $78 $109 $151 $63 $87 $204 $464 $227 $471 $566 $966 $550 $847 ($243) ($367) ($515) ($321) ($496) ($177) ($149) ($227) ($141) ($138) ($85) ($222) ($505) ($516) ($742) ($683) ($634) 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 $1,000 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Fundings Advances Warehouse Net Advances/Paydowns Payoffs Paydowns Warehouse Net Advances/Paydowns Total Loan Yield Rate on Production Rate on Production excl. PPP ($ in millions) Total Loan Fundings of $847 Million in 2Q21
11 ($ in millions) Deferrals by Loan Type as of 6/30/21 (1),(2) Total Deferrals $ # Total Portfolio % of Portfolio Deferred Change in Deferral Balance from prior quarter Single Family Residential $ 52 46 $ 1,288 4% $ 4 Multifamily - 0 1,326 0% (17) CRE 1 1 872 0% (3) Construction & Development - 0 151 0% - Commercial & Industrial 29 5 2,071 1% 4 Other Consumer 0 2 24 2% 0 SBA 3 2 254 1% (10) 2Q2021 Total $ 87 56 $ 5,985 1% $ (22) 1Q2021 Total $ 109 62 $ 5,764 2% $ (143) FORBEARANCE AND DEFERMENTS DECLINE Total loan deferrals and forbearances declined $22 million from 1Q21 • $52 million, or 61%, of deferments/forbearances at the end of 2Q21 relate to legacy Single Family Residential (SFR) loans (1) Excludes loans in forbearance that are current and loans delinquent prior to COVID-19 (2) Loans within the SFR portfolio are forbearances or deferments (3) Loans in the process of deferment or forbearance are not reported as delinquent $440 $145 $113 $60 $164 $138 $139 $49 $52 6/30/2021 $604 $34 6/30/2020 9/30/2020 12/31/2020 $252 3/31/2021 $283 $109 $87 -21% SFR Non-SFR (3)
12 ASSET QUALITY REMAINS STRONG NPLs, Delinquencies, and Classified Loans Delinquencies ($ in millions) Non-performing Loans (NPLs) ($ in millions) Criticized and Classified Loans ($ in millions) ACL / Non-performing Loans (NPLs) ($ in millions) $35.0 1.46% 0.54% 2Q20 $24.9 1Q21 $70.3 $71.1 1.69% $12.0 3Q20 $83.0 $22.9 $8.7 4Q20 $47.8 $13.5 1.06% $21.7 $13.3 0.58% 2Q21 $95.2 $61.3 $31.6 SFR Delinquencies Delinquencies (ex-SFR) Delinquencies /Total Loans 3Q20 $129 4Q202Q20 $111 $91 1Q21 $126 $102 2Q21 $186 $170 $227 $166 $259 Criticized and Classified Loans Classified Loans $40.6 $28.5 1.18% $44.2 $26.3 2Q20 1.29% 3Q20 $30.1 4Q20 $13.5 $23.1 0.62% $32.4 $23.5 0.97% 1Q21 $21.2 0.86% 2Q21 $72.7 $66.9 $36.6 $55.9 $51.3 SFR NPLs NPLs (ex-SFR) NPLs/Total Loans-HFI 130% 141% 230% 148% 155% $82.7 4Q203Q202Q20 $94.6 $94.1 $84.2 1Q21 $79.7 2Q21 ACL / NPLs ACL
13 TOP 10 RELATIONSHIPS Non-performing & delinquent loans rollforward • Non-performing loans decreased $4.6 million, or 8%, to $51.3 million due mostly to the legacy SFR portfolio. • $32.0 million, or 62% of total NPLs, are in current status • Delinquencies decreased $26.3 million, or 43%, due mostly to SFR loans paying off and migrating back to accrual status • 2Q21 NPLs include $6.5 million of guaranteed SBA loans that were repurchased and pending resolution; $4.2 million were delinquent and $2.3 million were on deferment Non-performing Loans ($ in thousands) # 2Q21 1Q21 Delta Loan Category 2Q Accrual Status 2Q Delinquency Status 1Q Accrual Status 1 7,175$ 7,339$ (164) $ C&I / CRE Non-Accrual Current Non-Accrual 2 3,917 3,999 (82) C&I Non-Accrual Current Non-Accrual 3 3,709 3,709 - SFR Non-Accrual Current Non-Accrual 4 3,036 730 2,305 SBA Non-Accrual Current Non-Accrual 5 2,890 3,366 (475) C&I Non-Accrual 90+ Non-Accrual 6 2,571 2,644 (73) CRE Non-Accrual Current Non-Accrual 7 2,529 2,529 - SFR Non-Accrual 90+ Non-Accrual 8 2,037 662 1,374 SBA Non-Accrual 90+ Non-Accrual 9 1,948 1,948 (0) SFR Non-Accrual 90+ Non-Accrual 10 1,924 153 1,771 SBA Non-Accrual 90+ Non-Accrual 11+ 19,564 28,840 (9,275) Total 51,299$ 55,919$ (4,620) $ Delinquent Loans ($ in thousands) # 2Q21 1Q21 Delta Loan Category 2Q Accrual Status 2Q Delinquency Status 1Q Delinquency Status 1 2,890$ 3,366$ (475) $ C&I Non-Accrual 90+ 90+ 2 2,529 2,529 - SFR Non-Accrual 90+ 90+ 3 2,037 662 1,374 SBA Non-Accrual 90+ 90+ 4 1,948 1,948 (0) SFR Non-Accrual 90+ 90+ 5 1,924 153 1,771 SBA Non-Accrual 90+ - 6 1,914 - 1,914 SFR Accrual 30-59 Current 7 1,914 - 1,914 SFR Accrual 30-59 Current 8 1,449 - 1,449 SFR Accrual 30-59 Current 9 1,316 - 1,316 SFR Non-Accrual 90+ Current 10 1,240 - 1,240 SFR Accrual 30-59 Current 11+ 15,822 52,639 (36,817) Total 34,982$ 61,297$ (26,315) $
14 $82.7 $1.2 $79.7 ($3.3) ($0.9) $70.0 $72.0 $74.0 $76.0 $78.0 $80.0 $82.0 $84.0 $86.0 $88.0 ACL (3/31/21) Portfolio Mix Charge-offs (net of Recoveries) Specific Reserves ACL (6/30/21) ALLOWANCE FOR CREDIT LOSSES WALK 2Q21: The ACL reserve decreased $3.0 million due to (1) lower general reserves of $3.3 million from portfolio mix, including higher portfolio balances, offset by improved economic assumptions and asset quality trends, (2) net charge-offs of $0.9 million, and (3) higher specific reserves of $1.2 million. ACL includes Allowance for Loan Losses (ALL) and Reserve for Unfunded Loan Commitments (RUC) – The economic forecasts released during June include improvements to GDP growth rates and unemployment rates compared to the March forecast. While the June forecasts were more favorable than the March forecasts, there continues to be uncertainty regarding the impact of inflation, COVID-19 variants, and the ultimate pace of the recovery. Accordingly, our economic view reflects this uncertainty. – The reserve included qualitative factors to account for our visibility of actual conditions related to our loan portfolio. – Our ACL methodology uses a nationally-recognized, third party model that includes many assumptions based on our and peer historical loss data, our current loan portfolio risk profile, and economic forecasts. (1) Coverage percentage equals ACL to Total Loans. PPP loans improved Coverage ratio by 8 bps at 3/31/21 and 5 bps at 6/30/21 ($ in millions) 1.43% (1) 1.33% (1)
15 CONTINUED FOCUS ON EXPENSE MANAGEMENT Non-core expense/benefits relate to: (1) timing of indemnified legal costs/recoveries, (2) merger-related costs and (3) loss/gain on investments in alternative energy partnerships(1) (1) Investments in alternative energy partnerships created tax credits in the period of investment (2) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation Noninterest Expense to Average Assets ($ millions) Adjusted Noninterest Expense to Average Assets ($ millions) -$0.3 $42.8 $30.0 $40.7 $46.7 2.00% 3.78% 2Q20 3Q20 1Q21 2.09% -$5.1 $39.0 $44.0 4Q20 $5.1 $41.7 2.41% -$1.4 $42.0 2.08% 2Q21 $72.8 $40.4 $40.6 Total Non-Core expense Adjusted Noninterest Expense Noninterest Expense / Average Assets 3Q20 $42.8 2.26%2.22% 4Q202Q20 $40.7 2.10% $44.0 $41.7 2.15% 2.15% 1Q21 $42.0 2Q21 Adjusted Noninterest Expense / Average Assets Adjusted Noninterest Expense
16 STRONG CAPITAL BASE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation Strategic decision to exit non-franchise enhancing assets resulted in build-up of significant capital and steadily improving ratios Capital provides a buffer for optionality to deploy for benefit of shareholders 2Q21 1Q21 4Q20 3Q20 2Q20 Common Equity Tier 1 11.14% 11.50% 11.19% 11.59% 11.68% Tier 1 Risk-based Capital 12.71% 13.17% 14.35% 14.94% 15.10% Leverage Ratio 9.89% 9.62% 10.90% 10.79% 10.56% Tangible Equity / Tangible Assets (1) 9.89% 9.69% 10.94% 10.84% 10.43% Tangible Common Equity / Tangible Assets (1) 8.70% 8.49% 8.58% 8.43% 8.04%
17 2021 STRATEGIC OBJECTIVES • Continue adding full banking relationships that provide low-cost transaction deposits • Additional opportunities to reduce deposit costs primarily centered around larger money market contracts and time deposits maturing during the remainder 2021 • Continued focus on earning asset mix to support earning asset yields • Lending teams added over past two years continue to build their books of business with high-quality relationship loans in our footprint • Healthy commercial loan pipeline should lead to production levels exceeding runoff and continued growth in earning assets • Well-underwritten loan portfolio mainly secured by CA-based real estate with relatively low LTVs continues to provide strong defensive positioning in uncertain environment • Maintain a high level of capital, liquidity and reserves • Opportunity to redeem Series E preferred stock at appropriate time and subject to regulatory approval • Expected completion of announced Pacific Mercantile Bancorp acquisition in Q3 2021 • Redeemed Series D preferred stock in Q1 2021 • Evaluate other strategic opportunities • Generate balance sheet growth while keeping expenses flat to modestly higher in 2021 • Continue to leverage technology to increase efficiencies and enhance business development Maintain Credit and Capital Discipline Strategic Growth in Earning Assets Continue Driving Net Interest Margin Manage Expenses and Realize Additional Operating Leverage Evaluating Use of Capital to Increase Earnings and Improve Franchise Value
18 APPENDIX bancofcal.com
19 81% in California LOAN PORTFOLIO CHARACTERISTICS Construction $151 3% Consumer $24 <1% SBA(1) $254 4% Northern California $448 7% Central California $204 3% South $630 11% Other West $278 5% Northeast $139 2% Midwest $112 2% • 69% of loan portfolio is secured by residential real estate (primary residences) • Weighted average LTVs of 63% • ~88% of all real estate secured loans have LTVs of less than 70% • ~81% of the SFR portfolio have LTVs of less than 70% $ in millions$ in millions 92% of RE in California Loan Portfolio by Segment Loan Portfolio by Geography (1) Includes $194 million of PPP loans. Key Commentary Southern California $4,170 70% CRE $872 15% Single Family Res. $1,288 22% Multifamily $1,326 22% C&I $2,071 35% Loan Segment Avg. Yield C&I 4.34% Multifamily 4.58% CRE 4.83% Construction 5.22% SBA 3.84% Single Family Res. 3.58% Consumer 4.61% Total Loans HFI 4.30%
20 REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS $ in millions (1) Excludes Warehouse credit facilities Real Estate Loan Balances(1) SFR Portfolio by LTV 66% 4Q20 61% 2Q212Q20 68% $3,736 3Q20 59% 1Q21 61% $3,841 $3,503 $3,521 $3,636 RE Loans / Loans-HFI RE Loans 60% to 70% 50% to 60% <50% 70% to 80% >80% • ~88% of all real estate secured loans have LTVs of less than 70% • Weighted average LTV is 57% Real Estate(1) LTVs $ % Count <50% $ 1,031 28% 881 50% to 60% 966 27% 514 60% to 70% 1,217 33% 504 70% to 80% 381 10% 220 >80% 40 1% 26 Total $ 3,636 100% 2,145 $ in Millions SFR LTVs $ % Count <50% $ 423 33% 514 50% to 60% 332 26% 305 60% to 70% 288 22% 250 70% to 80% 226 18% 185 >80% 19 1% 17 Total $ 1,288 100% 1,271 $ in Millions • ~81% of all existing SFR have LTVs of less than 70% • Weighted average LTV is 56%
21 CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type Multifamily 60% Other 12% 11% Retail 13% Industrial 4% Hospitality 0% Owner Occupied 10% Residential 97.5% Mixed Use 2.5% Multi Tenant 42% Single Tenant 16% Strip Center 8% Non Owner Occupied 90% Neighborhood Shopping Center 32% Other 2% Office Collateral Type Count Balance Avg. Loan Size W.A. LTV W.A. DSCR $ in thousands MultiFamily 597 $ 1,325,770 $ 2,221 59.4% 1.4x Office 53 234,356 4,422 54.8% 2.4x Retail 73 287,380 3,937 53.4% 1.6x Hospitality 6 5,270 878 55.0% 1.3x Industrial 41 90,341 2,203 53.2% 1.7x Other 61 254,444 4,171 59.5% 1.6x Total CRE & MF 831 $ 2,197,560 $ 2,644 57.9% 1.6x
22 ~78% C&I Concentration toward Businesses focused on Finance (including Warehouse), and Real Estate and Rental Leasing Limited Exposure to High Stressed Business Industries • 1% Television / Motion Pictures • 1% Food Services • <1% Transportation • <1% in Accommodations All Other C&I includes a diverse mix of industry sectors • 1% Management of Companies • 1% Administrative and Support • 1% Education Services • 1% Arts / Recreation • <1% Construction / Contracting Finance and Insurance: Warehouse 65% Real Estate & Rental Leasing 9% Finance and Insurance: Other 4% Gas Stations 4% Manufacturing 2% Healthcare 3% Wholesale Trade 2% Other Retail Trade 1% Television / Motion Pictures 1% Food Services 1% Professional Services 1% Transport ation 0.2% Accomodations 0.1% All Other C&I 5% DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO NAICS Industry Count $ Avg. Loan Size Finance: Warehouse 65 $ 1,345,314 $ 20,697 Real Estate & Rental Leasing 141 192,323 1,364 Finance: Other 66 84,528 1,281 Gas Stations 52 73,169 1,407 Healthcare 58 71,941 1,240 Wholesale Trade 42 40,757 970 Manufacturing 42 34,086 812 Television / Motion Pictures 28 30,002 1,071 Food Services 21 29,371 1,399 Other Retail Trade 41 28,999 707 Professional Services 69 19,448 282 Transportation 15 4,739 316 Accommodations 5 2,200 440 All Other C&I 122 114,034 935 Total C&I 767 $ 2,070,910 $ 2,700 $ in thousands
23 STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE • Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments • Excluding PPP loans, the ACL coverage was 1.38% at the end of 2Q21 ACL Composition 2Q21 1Q21 ($ in thousands) Amount % of Loans Amount % of Loans Commercial real estate $ 16,424 1.88% $ 17,100 2.04% Multifamily 21,403 1.61% 23,884 1.90% Construction 4,734 3.14% 5,552 3.28% Commercial and industrial 15,862 2.19% 16,563 2.18% Commercial and industrial - warehouse 4,294 0.32% 3,140 0.28% SBA 3,696 1.46% 3,451 1.02% Total commercial loans 66,413 1.42% 69,690 1.55% Single family residential mortgage 9,108 0.71% 9,161 0.73% Other consumer 364 1.49% 502 1.89% Total consumer loans 9,472 0.72% 9,663 0.76% Allowance for loan losses 75,885 1.27% 79,353 1.38% Reserve for unfunded commitments 3,814 0.06% 3,360 0.06% Allowance for credit losses $ 79,699 1.33% $ 82,713 1.43%
24(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 4Q20 1Q21 2.13% 2.95% 2Q20 2.26% 3Q20 2.13% 2.14% $1,064 2Q21 $1,191 $1,239 $1,236 $1,308 Average Balance ($ in millions) Yield AA 47% AAA 41% BBB 12% The quarter-over-quarter change in total securities is due to purchases of $174.0 million offset by $100.2 million in repayments and higher unrealized net gains of $13.5 million. The CLOs included an unrealized loss of $2.9 million as of 2Q21, down from $3.6 million as of 1Q21. Fair Value Fair Value QoQ Duration 1Q21 2Q21 Change 2Q21 ($ in Millions) Gov’t & Agency (MBS, CMO, & SBA) $ 351 $ 479 $ 128 8.25 CLOs 684 584 (100) 0.08 Municipal 86 121 35 8.78 Corporate Securities 150 169 18 7.19 Total Securities $ 1,271 $ 1,353 $ 82 4.64 Security Type CLO 43% Gov’t & AGC 35% Corporates 13% Munis 9%
25 CLO Industry Breakdown $584 million at June 30, 2021 (net of $2.9 million unrealized loss) Healthcare & Pharmaceuticals 13% High Tech Industries 10% Services - Business 9% FIRE - Banking, Finance, Insurance & Real Estate 8% Telecommunications 4% Services Consumer 4% Beverage, Food & Tobacco 4% Hotel, Gaming & Leisure 4% Media - Broadcasting & Subscription 4% Chemicals, Plastics, & Rubber 4% Capital Equipment 3% Construction & Building 3% Automotive 3% Aerospace & Defense 3% Containers, Packaging & Glass 3% Retail 3% Other 17% • 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 • 2Q21 average CLO portfolio yield of 1.87% • Quarterly reset based on 3 Month Libor + 1.64% CLO PORTFOLIO HAS DIVERSIFIED EXPOSURE CREDIT ENHANCEMENT PROVIDES SIGNIFICANT PRINCIPAL PROTECTION
26(1) Cost of funds includes senior debt with a fixed rate of 5.45% for all periods presented. Includes 4.375% fixed-to-floating subordinated debt starting in 4Q20. ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS(1) Cost of Funds Drivers 2.37% 0.23% 0.36% 0.93% 2.53% 0.71% 1.03% 0.57% 2Q20 0.51% 0.66% 0.82% 2.89% 3Q20 0.47% 0.63% 0.18% 2.77% 0.70% 4Q20 0.38% 0.28% 0.13% 2.86% 1Q21 0.32% 0.12% 2Q21 Cost of Interest-bearing deposits Overnight FHLB borrowings Term FHLB borrowings Cost of total deposits Cost of funds
27 DECLINING DEPOSIT COSTS PROTECT NET INTEREST MARGIN Net Interest Margin Drivers 3.78% 2Q20 0.25% 4.06% 3.09% 1.29% 3.09% 3.86% 0.25% 1.02% 3Q20 4.04% 3.38% 0.25% 0.89% 3.19% 4Q20 0.25% 0.83% 1Q21 3.81% 3.27% 0.25% 0.77% 2Q21 Earning Asset Yield Net Interest Margin Fed Funds Rate Interest-Bearing Liabilities
28 INTEREST RATE RISK MANAGEMENT – EARNING ASSETS ANALYSIS Assets Repricing/Maturing by Duration ($ millions) Repricing/Maturity by Product Type ($ millions) • $3.90 billion (52%) of earning assets mature or have rate resets <2 years • Earning assets with effective rate resets <2 years include: • $3,025 million of loans • $710 million of securities (primarily CLOs) • $163 million of interest-bearing cash deposits • $3.61 billion (48%) of earning assets mature or have rate resets >2 years $3,377 (45%) < 1 Year $521 (7%) 1 - 2 Years $3,607 (48%) > 2 Years $600 $0 $1,000 $200 $400 $1,400 $800 $1,200 $1,600 CashMF SFR CRESecurities WH C&I SBA Other > 2 Years< 1 Year 1 - 2 Years Category Total Balance % of Total Interest- Earning Assets Above the Floor 723 9.64% 25 bps below floor $ 545 7.26% 25-50 bps below floor 200 2.67% 50 to 100 bps below floor 486 6.48% 100+ bps below floor 347 4.62% Sub total below floor $ 1,578 21.03% Variable Loans $ 2,301 30.66% Hybrid Loans 2,139 28.51% Fixed Loans 1,545 20.58% Total HFI Loans $ 5,985 79.76% Total HFS Loans $ 3 0.04% Total Gross Loans $ 5,988 79.79% Fixed Securities 452 6.02% Variable Securities 901 12.01% Total Securities $ 1,353 18.03% Other Interest-Earning Assets $ 163 2.18% Total Earning Assets $ 7,505 100.00%
29 BANC FAST FACTS (1) Non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 2Q21 1Q21 4Q20 3Q20 2Q20 $ 8,027 $ 7,933 $ 7,877 $ 7,738 $ 7,770 1,353 1,271 1,231 1,246 1,176 5,985 5,764 5,898 5,678 5,628 6,207 6,142 6,086 6,032 6,037 59.8 57.9 61.6 55.9 55.3 4.2 4.4 7.0 4.0 5.5 64.0 62.3 68.5 59.8 60.8 41.4 43.1 39.6 41.8 72.9 (0.8) 3.6 (0.7) (1.4) (0.2) 40.6 46.7 39.0 40.4 72.8 23.5 15.6 29.6 19.4 (11.9) (2.2) (1.1) 1.0 1.1 11.8 19.1 14.4 21.7 15.9 (18.4) 1.7 6.6 4.0 3.8 3.5 $ 17.3 $ 7.8 $ 17.7 $ 12.1 $ (21.9) $ 0.34 $ 0.15 $ 0.35 $ 0.24 $ (0.44) 0.98% 0.74% 1.11% 0.82% (0.96%) 65.58% 66.91% 64.26% 68.31% 72.74% CUSIP Issue Date Par Value Dividend Rate ($000) / Coupon (%) Preferred Equity: Non-Cumulative, Perpetual E 05990K874 2/8/2016 98,702,000 7.000% 3/15/2021 (Dollars in millions) (Reversal of) provision for credit losses Net interest income Total noninterest income Total assets Securities available-for-sale Loans receivable Total deposits Total revenue Noninterest expense Loss (gain) in alternative energy partnership investments Total noninterest expense Pre-tax pre-provision income(1) Preferred dividend and other adjustments Net income (loss) available to common stockholders Diluted earnings (loss) per common share Net income (loss) Preferred Equity Class / Series Return on average assets Adjusted efficiency ratio(1) First Callable Date
30 Non-Int. Bearing 31% Int. Bearing Checking 30% MMDA & Sav. 28% CDs 11% C&I (Ex. PPP) 31% PPP 9% CRE 17% Multifamily 20% Consumer 1% SFR 18% C&D 3% MERGER PACIFIC MERCANTILE BANCORP 1) Pro forma excludes purchase accounting adjustments Note: Balances as of March 31, 2021; Loan yields shown for the quarter ended March 31, 2021; Cost of deposits represents spot rate as of March 31, 2021; Sum of each composition may not add to 100% due to rounding • Approximately 12.9% EPS accretion in 2022 (first full year of cost savings) • TBV per share earnback of 2.3 years (crossover method) • IRR of 15%+ • Adds $5 million+ recurring noninterest income annually • Pro forma capital ratios well in excess of regulatory minimums • Conservative cost savings assumptions of 35%-40% • Expected to close in 3Q21 • Acquiring a quality deposit franchise with: • 47% noninterest-bearing deposits • 0.25% cost of deposits • Established presence in Los Angeles market • Adds $1.2 billion in total loans • Adds $1.4 billion in total deposits • Adds $1.6 billion in total assets • Complimentary business models and cultural fit Key Highlights Loan Composition Deposit Composition Financial Highlights MRQ Yield on Loans: 4.31% Cost of Deposits: 0.23% Pro Forma 1 ($7.0B) Pro Forma ($7.5B)
31 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 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 32-36 of this presentation.
32 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Tangible Common Equity to Tangible Assets Ratio Total assets $ 8,027,413 $ 7,933,459 $ 7,877,334 $ 7,738,106 $ 7,770,138 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (2,069) (2,351) (2,633) (2,939) (3,292) Tangible assets $ 7,988,200 $ 7,893,964 $ 7,837,557 $ 7,698,023 $ 7,729,702 Total stockholders' equity $ 829,362 $ 804,693 $ 897,207 $ 874,254 $ 846,959 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (2,069) (2,351) (2,633) (2,939) (3,292) Tangible equity 790,149 765,198 857,430 834,171 806,523 Less: preferred stock (94,956) (94,956) (184,878) (184,878) (185,037) Tangible common equity $ 695,193 $ 670,242 $ 672,552 $ 649,293 $ 621,486 Total stockholders' equity to total assets 10.33% 10.14% 11.39% 11.30% 10.90% Tangible equity to tangible assets 9.89% 9.69% 10.94% 10.84% 10.43% Tangible common equity to tangible assets 8.70% 8.49% 8.58% 8.43% 8.04%
33 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Return on tangible common equity Average total stockholders' equity $ 814,973 $ 888,174 $ 892,565 $ 865,406 $ 854,250 Less: Average preferred stock (94,956) (164,895) (184,878) (184,910) (185,471) Less: Average goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: Average other intangible assets (2,224) (2,517) (2,826) (3,172) (3,574) Average tangible common equity $ 680,649 $ 683,618 $ 667,717 $ 640,180 $ 628,061 Net income (loss) available to common stockholders $ 17,323 $ 7,825 $ 17,706 $ 12,084 $ (21,936) Add: Amortization of intangible assets 282 282 306 353 430 Less: Tax effect on amortization of intangible assets (59) (59) (64) (74) (90) Net income (loss) available to common stockholders after the adjustments for intangible assets $ 17,546 $ 8,048 $ 17,948 $ 12,363 $ (21,596) Return on average equity 9.38% 6.56% 9.67% 7.32% (8.69%) Return on average tangible common equity 10.34% 4.77% 10.69% 7.68% (13.83%) Statutory Federal tax rate utilized for calculating tax effect on amortization of intangible assets 21.00% 21.00% 21.00% 21.00% 21.00%
34 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Adjusted Noninterest Income and Expense Total noninterest income $ 4,170 $ 4,381 $ 6,975 $ 3,954 $ 5,528 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 (20) - (36) (24) (25) Total noninterest income adjustments (20) - (36) (296) (2,036) Adjusted noninterest income $ 4,150 $ 4,381 $ 6,939 $ 3,658 $ 3,492 Total noninterest expense $ 40,559 $ 46,735 $ 38,950 $ 40,394 $ 72,770 Noninterest expense adjustments: Naming rights termination - - - - (26,769) Debt retirement expense - - - - (2,515) Professional recoveries (fees) 1,284 (721) 4,398 (1,172) (875) Merger-related costs (700) (700) - - - Noninterest expense adjustments before gain (loss) in alternative energy partnership investments 584 (1,421) 4,398 (1,172) (30,159) Gain (loss) in alternative energy partnership investments 829 (3,630) 673 1,430 167 Total noninterest expense adjustments 1,413 (5,051) 5,071 258 (29,992) Adjusted noninterest expense $ 41,972 $ 41,684 $ 44,021 $ 40,652 $ 42,778 Average assets $7,827,006 $7,860,952 $7,764,997 $7,687,105 $7,740,206 Noninterest expense / Average assets 2.08% 2.41% 2.00% 2.09% 3.78% Adjusted noninterest expense / Average assets 2.15% 2.15% 2.26% 2.10% 2.22%
35 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Net interest income $ 59,847 $ 57,916 $ 61,563 $ 55,855 $ 55,315 Noninterest income 4,170 4,381 6,975 3,954 5,528 Total revenue 64,017 62,297 68,538 59,809 60,843 Noninterest expense 40,559 46,735 38,950 40,394 72,770 Pre-tax pre-provision income 23,458 15,562 29,588 19,415 (11,927) Total revenue 64,017 62,297 68,538 59,809 60,843 Total noninterest income adjustments (20) - (36) (296) (2,036) Adjusted total revenue 63,997 62,297 68,502 59,513 58,807 Noninterest expense 40,559 46,735 38,950 40,394 72,770 Total noninterest expense adjustments 1,413 (5,051) 5,071 258 (29,992) Adjusted noninterest expense 41,972 41,684 44,021 40,652 42,778 Adjusted pre-tax pre-provision income $ 22,025 $ 20,613 $ 24,481 $ 18,861 $ 16,029 Average Assets $ 7,827,006 $ 7,860,952 $ 7,764,997 $ 7,687,105 $ 7,740,206 Pre-tax pre-provision ROAA 1.20% 0.80% 1.52% 1.00% (0.62%) Adjusted pre-tax pre-provision ROAA 1.13% 1.06% 1.25% 0.98% 0.83% Efficiency Ratio 63.36% 75.02% 56.83% 67.54% 119.60% Adjusted efficiency ratio 65.58% 66.91% 64.26% 68.31% 72.74%
36 NON-GAAP RECONCILIATION (Dollars in thousands, except per share data) 2Q21 1Q21 4Q20 3Q20 2Q20 Adjusted net income (loss) Net income (loss) $ 19,050 $ 14,375 $ 21,703 $ 15,913 $ (18,449) Adjustments, net(1) Noninterest income 15 - 27 222 1,527 Noninterest expense (1,060) 3,788 (3,803) (194) 22,494 Adjusted net income before tax adjustment 18,005 18,163 17,927 15,941 5,572 Tax adjustment: tax impact from exercise of stock appreciation rights - 2,093 - - - Adjusted net income $ 18,005 $ 16,070 $ 17,927 $ 15,941 $ 5,572 Average Assets $ 7,827,006 $ 7,860,952 $ 7,764,997 $ 7,687,105 $ 7,740,206 ROAA 0.98% 0.74% 1.11% 0.82% (0.96%) Adjusted ROAA 0.92% 0.83% 0.92% 0.82% 0.29% Adjusted net income (loss) available to common stockholders Net income (loss) available to common stockholders $ 17,323 $ 7,825 $ 17,706 $ 12,084 $ (21,936) Adjustments to net income (loss)(2) (1,045) 1,695 (3,776) 28 24,021 Adjustments for impact of preferred stock redemption - 3,347 - 7 (49) Adjusted net income available to common stockholders $ 16,278 $ 12,867 $ 13,930 $ 12,119 $ 2,036 Average diluted common shares 50,892,202 50,750,522 50,335,271 50,190,933 50,030,919 Diluted EPS $ 0.34 $ 0.15 $ 0.35 $ 0.24 $ (0.44) Adjusted diluted EPS $ 0.32 $ 0.25 $ 0.28 $ 0.24 $ 0.04 (1) Adjustments shown net of an effective tax rate of 25% (2) Represents the difference between net income and adjusted net income
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