BANC OF CALIFORNIA, INC. - FORM 8-K - EX-99.1

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EX-99.2 - EX-99.2 - BANC OF CALIFORNIA, INC.	d519880dex992.htm
8-K - FORM 8-K - BANC OF CALIFORNIA, INC.	d519880d8k.htm

Exhibit 99.1

LOGO

Banc of California Reports Fourth Quarter 2017 Earnings

SANTA ANA, Calif., (January 25, 2018) – Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $6.2 million, for the fourth quarter of 2017, resulting in diluted earnings per common share of $0.12 for the quarter. Net income available to common stockholders for the full year was $37.3 million, resulting in diluted earnings per common share of $0.71 for the full year. Diluted earnings per common share from continuing operations were $0.11 for the fourth quarter, and $0.63 for the full year.

Highlights for the fourth quarter included:

•

Strong Organic Loan Growth: Held for investment loans increased by $433 million, or 7%, during the quarter to $6.7 billion.

•

Commercial loan balances increased by $308 million, or 7%, from the prior quarter, and by $680 million, or 18%, from a year ago.

•

Continuation of Balance Sheet Re-Mix: Reduced securities by $180 million, or 7%, driven by decline of collateralized loan obligation (“CLO”) balances of $117 million, and the sales of $24 million of master limited partnership debt securities (“MLPs”) and $23 million of bank debt.

•

Disciplined Expense Management: Achieved targeted quarterly, recurring, run-rate expenses of $59.1 million for the quarter, excluding expense related to loss on investments in alternative energy partnerships and non-recurring expenses.

•

Maintained Strong Credit: Asset quality remained strong with non-performing assets to total assets of 0.21% at quarter end. The ALLL / total loan ratio was 0.74% at quarter end, up from 0.72% at prior quarter end and up from 0.67% a year ago.

•

Strong Capital Ratios: Common equity tier 1 capital ratio of 9.9%, the highest level in over three years.

The Company’s fourth quarter reported financial results included $3.3 million of non-recurring expenses, $4.4 million of negative valuation adjustments to the mortgage servicing rights (“MSRs”), and $2.1 million of a net tax benefit as a result of re-measurement of the Company’s deferred tax assets and liabilities due to the recently enacted tax reform legislation.

“During the fourth quarter, we continued to make substantial progress on our strategy to re-mix the balance sheet, reducing securities by $180 million, and increasing loan balances by $433 million, as our banking teams delivered a strong finish to cap off 2017,” said Doug Bowers, President and Chief Executive Officer of Banc of California. “These results reflect the focused effort centered on growing our core, commercial banking businesses. We continue to work hard on improving the funding profile of the institution, and although we saw a modest decline in overall deposit balances as we reduced select high-rate and high volatility deposits this quarter, we did see increased deposit balances collectively in commercial, private and retail banking, which increased by $290 million. Improving our funding base continues to be our number one goal and priority. In wrapping up 2017, I want to say thank you to all my colleagues for their hard work and dedication over the course of the year. As I look into the new year, we have a tremendous opportunity in front of us, and while there is certainly much work that lies ahead, I believe we have a strong foundation in place, with a great brand and talented people across the company, which position us well to achieve our goals for California’s Bank in 2018.”

The Company will host a conference call to discuss its fourth quarter and full year 2017 financial results at 7:00 a.m. Pacific Time (PT) on Thursday, January 25, 2018. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 8198599. 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.

3 MacArthur Place ● Santa Ana, CA 92707 ● (949) 236-5250 ● www.bancofcal.com

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) provides comprehensive banking services to California’s diverse businesses, entrepreneurs and communities. Banc of California operates 34 offices in California.

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. 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:		MEDIA INQUIRIES:
Banc of California, Inc.		Abernathy MacGregor
Timothy Sedabres, (855) 361-2262		Ian Campbell / Joe Hixson, (213) 630-6550 idc@abmac.com / jrh@abmac.com

Banc of California, Inc.

Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)


	December 31,			September 30,			June 30,			March 31,			December 31,
	2017			2017			2017			2017			2016
ASSETS
Cash and cash equivalents	$	387,699		$	611,826		$	511,190		$	409,281		$	439,510
Time deposits in financial institutions		—			1,000			1,000			1,000			1,000
Securities available-for-sale		2,575,469			2,755,664			2,915,103			2,434,541			2,381,488
Securities held-to-maturity		—			—			—			863,269			884,234
Loans held-for-sale		67,069			50,130			278,824			228,196			298,018
Loans and leases receivable		6,659,407			6,226,897			5,956,337			6,105,321			6,034,752
Allowance for loan and lease losses		(49,333	)		(45,072	)		(42,385	)		(42,736	)		(40,444	)
Federal Home Loan Bank and other bank stock		75,654			67,063			63,438			63,238			67,842
Servicing rights, net		33,708			40,448			43,834			44,451			39,936
Other real estate owned, net		1,796			3,682			3,267			3,345			2,502
Premises and equipment, net		135,699			139,326			143,398			146,631			140,917
Investments in alternative energy partnerships, net		48,826			43,817			37,605			47,633			25,639
Goodwill		37,144			37,144			37,144			37,144			37,144
Other intangible assets, net		9,353			10,219			11,135			12,191			13,617
Deferred income tax, net		31,074			23,333			9,499			18,673			9,989
Income tax receivable		8,739			7,699			14,984			15,973			16,009
Bank owned life insurance investment		104,851			104,292			103,709			103,093			102,512
Other assets		161,797			142,985			113,534			128,036			92,694
Assets of discontinued operations		38,900			59,575			164,152			432,805			482,494

Total assets	$	10,327,852		$	10,280,028		$	10,365,768		$	11,052,085		$	11,029,853


LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,071,608		$	1,075,782		$	1,138,095		$	1,273,649		$	1,282,629
Interest-bearing deposits		6,221,295			6,327,811			6,906,816			7,324,044			7,859,521

Total deposits		7,292,903			7,403,593			8,044,911			8,597,693			9,142,150
Advances from Federal Home Loan Bank		1,695,000			1,470,000			870,000			1,080,000			490,000
Securities sold under repurchase agreements		—			36,520			53,242			26,320			—
Other borrowings		—			—			—			67,981			67,922
Notes payable, net		172,941			172,865			172,790			174,090			175,378
Reserve for loss on repurchased loans		6,306			6,173			8,028			8,118			7,974
Income taxes payable		—			—			—			618			92
Accrued expenses and other liabilities		140,575			164,469			193,276			81,208			131,618
Liabilities of discontinued operations		7,819			12,500			17,229			30,309			34,480

Total liabilities		9,315,544			9,266,120			9,359,476			10,066,337			10,049,614
Commitments and contingent liabilities
Preferred stock		269,071			269,071			269,071			269,071			269,071
Common stock		517			542			540			537			537
Common stock, class B non-voting non-convertible		5			4			4			3			2
Additional paid-in capital		621,435			619,849			616,251			614,983			614,226
Retained earnings		144,839			145,420			140,331			139,926			134,515
Treasury stock		(28,786	)		(28,786	)		(28,786	)		(29,070	)		(29,070	)
Accumulated other comprehensive income/(loss), net		5,227			7,808			8,881			(9,702	)		(9,042	)

Total stockholders’ equity		1,012,308			1,013,908			1,006,292			985,748			980,239

Total liabilities and stockholders’ equity	$	10,327,852		$	10,280,028		$	10,365,768		$	11,052,085		$	11,029,853

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2017			2017			2017			2017			2016			2017			2016
Interest and dividend income
Loans, including fees	$	71,695		$	70,208		$	69,661		$	69,507		$	71,613		$	281,071		$	281,868
Securities		23,170			24,337			24,996			27,239			24,153			99,742			79,527
Other interest-earning assets		2,292			2,206			1,783			2,096			3,965			8,377			8,449

Total interest and dividend income		97,157			96,751			96,440			98,842			99,731			389,190			369,844
Interest expense
Deposits		16,044			15,468			14,942			13,960			12,504			60,414			40,220
Federal Home Loan Bank advances		5,402			3,352			2,774			1,423			1,076			12,951			5,717
Securities sold under repurchase agreements		194			500			180			6			221			880			818
Notes payable and other interest-bearing liabilities		2,344			2,395			3,044			2,972			2,998			10,755			12,744

Total interest expense		23,984			21,715			20,940			18,361			16,799			85,000			59,499

Net interest income		73,173			75,036			75,500			80,481			82,932			304,190			310,345
Provision for loan and lease losses		5,052			3,561			2,503			2,583			589			13,699			5,271

Net interest income after provision for loan and lease losses		68,121			71,475			72,997			77,898			82,343			290,491			305,074
Noninterest income
Customer service fees		1,624			1,576			1,669			1,623			1,560			6,492			5,147
Loan servicing income (loss)		(2,416	)		553			132			2,756			4,699			1,025			633
Net gain (loss) on sale of securities available for sale		2,688			7,625			1,099			3,356			(695	)		14,768			29,405
Net gain on sale of loans		1,205			5,735			983			4,019			20,490			11,942			35,895
Loan brokerage income		—			—			34			1,027			1,331			1,061			4,251
Gain on sale of subsidiary and business unit		—			—			—			—			2,629			—			6,323
All other income		2,594			2,876			1,790			2,122			2,490			9,382			16,976

Total noninterest income		5,695			18,365			5,707			14,903			32,504			44,670			98,630
Noninterest expense
Salaries and employee benefits		33,146			30,216			33,348			32,443			42,800			129,153			146,147
Occupancy and equipment		9,565			10,085			9,776			10,668			10,012			40,094			38,046
Professional fees		7,853			7,697			11,794			15,073			11,562			42,417			30,373
Data processing		1,562			1,901			2,246			2,179			2,357			7,888			8,311
Amortization of intangible assets		866			916			1,056			1,090			1,028			3,928			4,851
Restructuring expense		(43	)		—			82			5,287			—			5,326			—
All other expenses		9,438			16,508			8,256			14,474			11,286			48,676			43,977

Total noninterest expense excluding loss on investments in alternative energy partnerships		62,387			67,323			66,558			81,214			79,045			277,482			271,705
Loss on investments in alternative energy partnerships		3,995			8,348			9,761			8,682			13,850			30,786			31,510

Total noninterest expense		66,382			75,671			76,319			89,896			92,895			308,268			303,215

Income from continuing operations before income taxes		7,434			14,169			2,385			2,905			21,952			26,893			100,489
Income tax (benefit) expense		(3,418	)		(3,939	)		(12,753	)		(6,471	)		(2,543	)		(26,581	)		13,749

Income from continuing operations		10,852			18,108			15,138			9,376			24,495			53,474			86,740

Income (loss) from discontinued operations before income taxes		765			(1,958	)		(4,991	)		13,348			14,965			7,164			48,917
Income tax expense (benefit)		315			(799	)		(2,110	)		5,523			6,196			2,929			20,241

Income (loss) from discontinued operations		450			(1,159	)		(2,881	)		7,825			8,769			4,235			28,676

Net income		11,302			16,949			12,257			17,201			33,264			57,709			115,416
Preferred stock dividends		5,113			5,112			5,113			5,113			5,113			20,451			19,914

Net income available to common stockholders	$	6,189		$	11,837		$	7,144		$	12,088		$	28,151		$	37,258		$	95,502

Basic earnings per total common share
Income from continuing operations	$	0.11		$	0.25		$	0.20		$	0.08		$	0.37		$	0.64		$	1.36
Income (loss) from discontinued operations		0.01			(0.02	)		(0.06	)		0.15			0.18			0.08			0.61

Net income	$	0.12		$	0.23		$	0.14		$	0.23		$	0.55		$	0.72		$	1.97

Diluted earnings per total common share
Income from continuing operations	$	0.11		$	0.25		$	0.20		$	0.08		$	0.36		$	0.63		$	1.34
Income (loss) from discontinued operations		0.01			(0.02	)		(0.06	)		0.15			0.18			0.08			0.60

Net income	$	0.12		$	0.23		$	0.14		$	0.23		$	0.54		$	0.71		$	1.94

Weighted average number of shares outstanding
Basic		50,532,544			50,362,314			50,289,590			49,991,186			50,008,234			50,254,595			46,828,463
Diluted		50,943,165			50,933,358			50,942,324			50,754,145			50,702,110			50,819,790			47,638,105
Dividends declared per common share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13		$	0.52		$	0.49

Banc of California, Inc.

Reconciliation of Consolidated Statements of Operations between Continuing and Discontinued Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended December 31, 2017									Year Ended December 31, 2017
	Continuing Operations			Discontinued Operations			Consolidated Operations			Continuing Operations			Discontinued Operations		Consolidated Operations
Interest and dividend income	$	97,157		$	73		$	97,230		$	389,190		$	7,052	$	396,242
Interest expense		23,984			—			23,984			85,000			—		85,000

Net interest income		73,173			73			73,246			304,190			7,052		311,242
Provision for loan and lease losses		5,052			—			5,052			13,699			—		13,699

Net interest income after provision for loan and lease losses		68,121			73			68,194			290,491			7,052		297,543
Noninterest income
Customer service fees		1,624			—			1,624			6,492			—		6,492
Loan servicing income (loss)		(2,416	)		—			(2,416	)		1,025			1,551		2,576
Net gain on sale of securities available for sale		2,688			—			2,688			14,768			—		14,768
Net gain on sale of loans		1,205			—			1,205			11,942			—		11,942
Mortgage banking income (loss)		—			(194	)		(194	)		—			42,889		42,889
Loan brokerage income		—			—			—			1,061			164		1,225
Gain on disposal of discontinued operations		—			47			47			—			13,796		13,796
All other income		2,594			881			3,475			9,382			1,707		11,089

Total noninterest income		5,695			734			6,429			44,670			60,107		104,777
Noninterest expense
Salaries and employee benefits		33,146			(10	)		33,136			129,153			38,374		167,527
Occupancy and equipment		9,565			210			9,775			40,094			3,964		44,058
Professional fees		7,853			84			7,937			42,417			2,546		44,963
Data processing		1,562			19			1,581			7,888			687		8,575
Loss on investments in alternative energy partnerships		3,995			—			3,995			30,786			—		30,786
Amortization of intangible assets		866			—			866			3,928			—		3,928
Restructuring expense		(43	)		—			(43	)		5,326			3,794		9,120
All other expenses		9,438			(261	)		9,177			48,676			10,630		59,306

Total noninterest expense		66,382			42			66,424			308,268			59,995		368,263

Income before income taxes		7,434			765			8,199			26,893			7,164		34,057
Income tax (benefit) expense		(3,418	)		315			(3,103	)		(26,581	)		2,929		(23,652	)

Net income	$	10,852		$	450		$	11,302		$	53,474		$	4,235	$	57,709

Banc of California, Inc.

Selected Financial Data

(Dollars in thousands)

(Unaudited)


	Three Months Ended															Year Ended
	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
Profitability and other ratios of consolidated operations
Return on average assets ⁽¹⁾		0.44	%		0.67	%		0.46	%		0.62	%		1.14	%		0.55	%		1.12	%
Return on average equity ⁽¹⁾		4.42	%		6.69	%		4.85	%		6.96	%		13.29	%		5.72	%		12.73	%
Return on average tangible common equity ⁽²⁾		3.84	%		7.16	%		4.51	%		7.76	%		17.30	%		5.79	%		16.97	%
Dividend payout ratio ⁽³⁾		108.33	%		56.52	%		92.86	%		56.52	%		23.64	%		72.22	%		24.87	%
Net interest spread		2.79	%		2.92	%		2.90	%		3.03	%		2.99	%		2.92	%		3.15	%
Net interest margin ⁽¹⁾		3.01	%		3.15	%		3.09	%		3.19	%		3.13	%		3.11	%		3.30	%
Noninterest income to total revenue ⁽⁴⁾		8.07	%		19.86	%		20.20	%		41.62	%		47.79	%		25.19	%		45.51	%
Noninterest income to average total assets ⁽¹⁾		0.25	%		0.74	%		0.74	%		2.16	%		2.74	%		0.99	%		2.63	%
Noninterest expense to average total assets ⁽¹⁾		2.59	%		3.10	%		3.68	%		4.52	%		4.44	%		3.50	%		4.28	%
Efficiency ratio ⁽⁵⁾		83.37	%		83.36	%		100.10	%		86.87	%		77.51	%		88.52	%		74.11	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships ^(2), (5)		75.46	%		72.49	%		80.51	%		78.76	%		66.87	%		77.18	%		67.13	%
Average held-for-investment loans and leases to average deposits		86.09	%		77.33	%		73.54	%		68.33	%		69.11	%		75.92	%		76.26	%
Average investment securities to average total assets		26.10	%		27.64	%		28.09	%		30.18	%		27.97	%		28.04	%		26.23	%
Average stockholders’ equity to average total assets		9.98	%		9.95	%		9.48	%		8.95	%		8.61	%		9.58	%		8.77	%
Allowance for loan and lease losses (ALLL)
Balance at beginning of period	$	45,072		$	42,385		$	42,736		$	40,444		$	40,233		$	40,444		$	35,533
Loans and leases charged off		(1,367	)		(959	)		(2,898	)		(357	)		(1,351	)		(5,581	)		(2,618	)
Recoveries		576			85			44			66			973			771			2,258
Provision for loan and lease losses		5,052			3,561			2,503			2,583			589			13,699			5,271

Balance at end of period	$	49,333		$	45,072		$	42,385		$	42,736		$	40,444		$	49,333		$	40,444

Annualized net loan charge-offs to average total loans and leases held-for-investment		0.05	%		0.06	%		0.19	%		0.02	%		0.02	%		0.11	%		0.01	%
Reserve for loss on repurchased loans
Balance at beginning of period	$	6,173		$	8,028		$	8,118		$	7,974		$	11,369			7,974		$	9,700
Provision for loan repurchases		(326	)		(651	)		270			517			(1,881	)		(190	)		590
Utilization of reserve for loan repurchases		(301	)		(1,204	)		(360	)		(373	)		(1,514	)		(2,238	)		(2,316	)
Other adjustments		760			—			—			—			—			760			—

Balance at end of period	$	6,306		$	6,173		$	8,028		$	8,118		$	7,974		$	6,306		$	7,974

(1)

Ratios are presented on an annualized basis.

(2)

The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.

(3)

The ratio is calculated by dividing dividends declared per common share by basic earnings per share

(4)

Total revenue is equal to the sum of net interest income before provision for loan and lease losses and noninterest income.

(5)

The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for loan and lease losses and noninterest income.

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Asset quality information and ratios
Delinquent loans and leases held-for-investment 30 to 89
days delinquent, excluding purchased credit impaired (PCI) loans	$	32,087		$	20,286		$	23,305		$	22,596		$	30,140
90+ days delinquent, excluding PCI loans		9,542			11,150			6,508			9,802			14,218

Total delinquent loans, excluding PCI loans		41,629			31,436			29,813			32,398			44,358

PCI loans, 30 to 89 days delinquent		—			—			343			16,410			15,078
PCI loans, 90+ days delinquent		—			—			807			4,943			2,577

Total delinquent PCI loans		—			—			1,150			21,353			17,655

Total delinquent loans	$	41,629		$	31,436		$	30,963		$	53,751		$	62,013

Total delinquent non-PCI loans to total non-PCI loans		0.63	%		0.50	%		0.50	%		0.54	%		0.75	%
Total delinquent loans and leases to total loans and leases		0.63	%		0.50	%		0.52	%		0.88	%		1.03	%
Non-performing assets, excluding loans held-for-sale
Non-performing loans and leases, excluding PCI loans	$	19,382		$	12,275		$	9,064		$	16,222		$	14,942
90+ days delinquent and still accruing loans and leases, excluding PCI loans		—			—			—			—			—
Other real estate owned		1,796			3,682			3,267			3,345			2,502

Non-performing assets	$	21,178		$	15,957		$	12,331		$	19,567		$	17,444

ALLL to non-performing loans and leases		254.53	%		367.19	%		467.62	%		263.44	%		270.67	%
Non-performing loans and leases to total loans and leases		0.29	%		0.20	%		0.15	%		0.27	%		0.25	%
Non-performing assets to total assets		0.21	%		0.16	%		0.12	%		0.18	%		0.16	%
Troubled debt restructurings (TDRs)
Performing TDRs	$	5,646		$	5,668		$	4,579		$	4,309		$	4,827
Non-performing TDRs		2,675			—			1,125			1,144			—

Total TDRs	$	8,321		$	5,668		$	5,704		$	5,453		$	4,827

Loans and leases and ALLL by loan origination type
Loan and lease breakdown by origination type
Originated loans and leases	$	5,988,101		$	5,488,018		$	5,159,823		$	5,109,175		$	4,943,549
Acquired loans not impaired at acquisition		671,306			738,879			792,213			834,983			927,422
Seasoned SFR mortgage loan pools—non-impaired		—			—			—			21,464			21,955
Acquired with deteriorated credit quality		—			—			4,301			139,699			141,826

Total loans and leases	$	6,659,407		$	6,226,897		$	5,956,337		$	6,105,321		$	6,034,752

ALLL breakdown by origination type
Originated loans and leases	$	48,110		$	43,723		$	41,090		$	41,221		$	38,531
Acquired loans not impaired at acquisition		1,223			1,349			1,271			1,234			1,703
Seasoned SFR mortgage loan pools—non-impaired		—			—			—			120			106
Acquired with deteriorated credit quality		—			—			24			161			104

Total ALLL	$	49,333		$	45,072		$	42,385		$	42,736		$	40,444

Discount on Purchased/Acquired Loans
Acquired loans not impaired at acquisition	$	14,943		$	15,983		$	15,446		$	16,275		$	17,820
Seasoned SFR mortgage loan pools—non-impaired		—			—			—			1,219			1,280
Acquired with deteriorated credit quality		—			—			1,754			21,538			22,454

Total Discount	$	14,943		$	15,983		$	17,200		$	39,032		$	41,554

Percentage of ALLL to:
Originated loans and leases:		0.80	%		0.80	%		0.80	%		0.81	%		0.78	%
Originated loans and leases and acquired loans not impaired at acquisition:		0.74	%		0.72	%		0.71	%		0.71	%		0.69	%
Total loans and leases		0.74	%		0.72	%		0.71	%		0.70	%		0.67	%

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Composition of held-for-investment loans and leases
Commercial real estate	$	717,415		$	713,120		$	716,771		$	750,592		$	729,959
Multifamily		1,816,141			1,617,890			1,545,888			1,449,715			1,365,262
Construction		182,960			176,397			156,246			142,164			125,100
Commercial and industrial		1,701,951			1,602,805			1,560,916			1,585,656			1,522,960
SBA		78,699			78,604			77,254			76,040			73,840
Lease financing		13			91			173			285			379

Total commercial loans		4,497,179			4,188,907			4,057,248			4,004,452			3,817,500

Single family residential mortgage		2,055,649			1,920,310			1,778,536			1,975,055			2,106,630
Other consumer		106,579			117,680			120,553			125,814			110,622

Total consumer loans		2,162,228			2,037,990			1,899,089			2,100,869			2,217,252

Total gross loans and leases	$	6,659,407		$	6,226,897		$	5,956,337		$	6,105,321		$	6,034,752

Composition percentage of held-for-investment loans and leases
Commercial real estate		10.8	%		11.5	%		12.0	%		12.3	%		12.1	%
Multifamily		27.3	%		26.0	%		26.0	%		23.7	%		22.6	%
Construction		2.7	%		2.8	%		2.6	%		2.3	%		2.1	%
Commercial and industrial		25.5	%		25.7	%		26.2	%		26.1	%		25.2	%
SBA		1.2	%		1.3	%		1.3	%		1.2	%		1.2	%
Lease financing		0.0	%		0.0	%		0.0	%		0.0	%		0.1	%

Total commercial loans		67.5	%		67.3	%		68.1	%		65.6	%		63.3	%

Single family residential mortgage		30.9	%		30.8	%		29.9	%		32.3	%		34.9	%
Other consumer		1.6	%		1.9	%		2.0	%		2.1	%		1.8	%

Total consumer loans		32.5	%		32.7	%		31.9	%		34.4	%		36.7	%

Total gross loans and leases		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Composition of deposits
Noninterest-bearing checking	$	1,071,608		$	1,075,782		$	1,138,095		$	1,273,649		$	1,282,629
Interest-bearing checking		2,089,016			2,011,943			2,058,130			1,998,778			2,048,839
Money market		1,146,859			1,728,937			2,265,380			2,610,376			2,731,314
Savings		1,059,628			945,699			985,001			1,008,218			1,118,175
Certificates of deposit		1,925,792			1,641,232			1,598,305			1,706,672			1,961,193

Total deposits	$	7,292,903		$	7,403,593		$	8,044,911		$	8,597,693		$	9,142,150

Composition percentage of deposits
Noninterest-bearing checking		14.7	%		14.5	%		14.1	%		14.8	%		14.0	%
Interest-bearing checking		28.7	%		27.2	%		25.6	%		23.2	%		22.4	%
Money market		15.7	%		23.3	%		28.2	%		30.4	%		29.9	%
Savings		14.5	%		12.8	%		12.2	%		11.7	%		12.2	%
Certificates of deposit		26.4	%		22.2	%		19.9	%		19.9	%		21.5	%

Total deposits		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	December 31, 2017								September 30, 2017								June 30, 2017
	Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	127,139		$	363		1.13	%	$	246,675		$	2,319		3.73	%	$	575,669		$	4,876		3.40	%
SFR mortgage		1,957,754			19,487		3.95	%		1,775,443			17,435		3.90	%		1,832,524			18,006		3.94	%
Seasoned SFR mortgage loan pools		—			—		—			84,128			1,208		5.70	%		151,759			2,121		5.61	%
Commercial real estate, multifamily, and construction		2,613,940			28,856		4.38	%		2,494,284			27,980		4.45	%		2,394,487			25,821		4.33	%
Commercial and industrial, SBA, and lease financing		1,630,886			21,829		5.31	%		1,553,816			20,820		5.32	%		1,565,583			20,233		5.18	%
Other consumer		107,664			1,233		4.54	%		114,569			1,363		4.72	%		119,644			1,400		4.69	%

Gross loans and leases		6,437,383			71,768		4.42	%		6,268,915			71,125		4.50	%		6,639,666			72,457		4.38	%
Securities		2,653,838			23,170		3.46	%		2,791,585			24,337		3.46	%		3,004,551			24,996		3.34	%
Other interest-earning assets		548,171			2,292		1.66	%		519,593			2,206		1.68	%		517,349			1,783		1.38	%

Total interest-earning assets		9,639,392			97,230		4.00	%		9,580,093			97,668		4.04	%		10,161,566			99,236		3.92	%
Allowance for loan and lease losses		(45,681	)							(42,696	)							(42,896	)
BOLI and non-interest earning assets		572,692								563,784								578,333

Total assets	$	10,166,403							$	10,101,181							$	10,697,003


Interest-bearing liabilities
Savings	$	1,019,659			2,947		1.15	%	$	968,158			2,263		0.93	%	$	1,002,797			2,262		0.90	%
Interest-bearing checking		2,082,677			4,267		0.81	%		2,037,729			3,871		0.75	%		2,013,751			3,609		0.72	%
Money market		1,294,537			3,262		1.00	%		1,935,262			5,095		1.04	%		2,359,173			5,482		0.93	%
Certificates of deposit		1,822,010			5,568		1.21	%		1,560,078			4,239		1.08	%		1,606,270			3,589		0.90	%

Total interest-bearing deposits		6,218,883			16,044		1.02	%		6,501,227			15,468		0.94	%		6,981,991			14,942		0.86	%
FHLB advances		1,448,326			5,402		1.48	%		962,391			3,352		1.38	%		990,780			2,774		1.12	%
Securities sold under repurchase agreements		33,513			194		2.30	%		88,810			500		2.23	%		34,298			180		2.11	%
Long-term debt and other interest-bearing liabilities		174,066			2,344		5.34	%		173,772			2,395		5.47	%		240,201			3,044		5.08	%

Total interest-bearing liabilities		7,874,788			23,984		1.21	%		7,726,200			21,715		1.12	%		8,247,270			20,940		1.02	%
Noninterest-bearing deposits		1,110,815								1,178,062								1,261,338
Non-interest-bearing liabilities		166,432								191,457								174,128

Total liabilities		9,152,035								9,095,719								9,682,736
Total stockholders’ equity		1,014,368								1,005,462								1,014,267

Total liabilities and stockholders’ equity	$	10,166,403							$	10,101,181							$	10,697,003


Net interest income/spread				$	73,246		2.79	%				$	75,953		2.92	%				$	78,296		2.90	%


Net interest margin							3.01	%							3.15	%							3.09	%

Ratio of interest-earning assets to interest-bearing liabilities		122.41	%							123.99	%							123.21	%
Total deposits	$	7,329,698		$	16,044		0.87	%	$	7,679,289		$	15,468		0.80	%	$	8,243,329		$	14,942		0.73	%
Total funding ⁽²⁾	$	8,985,603		$	23,984		1.06	%	$	8,904,262		$	21,715		0.97	%	$	9,508,608		$	20,940		0.88	%

(1)

Includes loans held-for-sale of discontinued operations

(2)

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.

Average Balance, Average Yield Earned, and Average Cost Paid, Continued

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	March 31, 2017								December 31, 2016
	Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	699,671		$	6,111		3.54	%	$	912,468		$	7,817		3.41	%
SFR mortgage		1,963,861			19,105		3.95	%		1,843,381			17,760		3.83	%
Seasoned SFR mortgage loan pools		154,736			2,145		5.62	%		570,006			6,281		4.38	%
Commercial real estate, multifamily, and construction		2,336,323			25,851		4.49	%		2,146,067			23,405		4.34	%
Commercial and industrial, SBA, and lease financing		1,508,756			18,293		4.92	%		1,628,177			19,228		4.70	%
Other consumer		121,666			1,268		4.23	%		109,142			1,248		4.55	%

Gross loans and leases		6,785,013			72,773		4.35	%		7,209,241			75,739		4.18	%
Securities		3,376,698			27,239		3.27	%		3,236,253			24,153		2.97	%
Other interest-earning assets		500,123			2,096		1.70	%		629,873			3,965		2.50	%

Total interest-earning assets		10,661,834			102,108		3.88	%		11,075,367			103,857		3.73	%
Allowance for loan and lease losses		(41,285	)							(39,163	)
BOLI and non-interest earning assets		568,257								532,645

Total assets	$	11,188,806							$	11,568,849


Interest-bearing liabilities
Savings	$	1,042,031			2,292		0.89	%	$	941,404			1,917		0.81	%
Interest-bearing checking		2,008,828			3,414		0.69	%		2,081,105			3,371		0.64	%
Money market		2,735,810			4,691		0.70	%		2,830,271			3,909		0.55	%
Certificates of deposit		1,937,392			3,563		0.75	%		1,972,256			3,307		0.67	%

Total interest-bearing deposits		7,724,061			13,960		0.73	%		7,825,036			12,504		0.64	%
FHLB advances		812,444			1,423		0.71	%		892,120			1,076		0.48	%
Securities sold under repurchase agreements		2,123			6		1.15	%		59,761			221		1.47	%
Long-term debt and other interest-bearing liabilities		244,040			2,972		4.94	%		238,179			2,998		5.01	%

Total interest-bearing liabilities		8,782,668			18,361		0.85	%		9,015,096			16,799		0.74	%
Noninterest-bearing deposits		1,181,279								1,286,642
Non-interest-bearing liabilities		223,075								271,203

Total liabilities		10,187,022								10,572,941
Total stockholders’ equity		1,001,784								995,908

Total liabilities and stockholders’ equity	$	11,188,806							$	11,568,849


Net interest income/spread				$	83,747		3.03	%				$	87,058		2.99	%


Net interest margin							3.19	%							3.13	%

Ratio of interest-earning assets to interest-bearing liabilities		121.40	%							122.85	%

Total deposits	$	8,905,340		$	13,960		0.64	%	$	9,111,678		$	12,504		0.55	%
Total funding ⁽²⁾	$	9,963,947		$	18,361		0.75	%	$	10,301,738		$	16,799		0.65	%

(1)

Includes loans held-for-sale of discontinued operations

(2)

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid, Continued

(Dollars in thousands)

(Unaudited)


	Year Ended
	December 31, 2017								December 31, 2016
	Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	410,266		$	13,669		3.33	%	$	881,875		$	31,493		3.57	%
SFR mortgage		1,882,086			74,033		3.93	%		1,606,153			60,746		3.78	%
Seasoned SFR mortgage loan pools		97,195			5,474		5.63	%		807,522			43,318		5.36	%
Commercial real estate, multifamily, and construction		2,460,614			108,508		4.41	%		1,962,719			87,367		4.45	%
Commercial and industrial, SBA, and lease financing		1,565,065			81,175		5.19	%		1,414,653			69,268		4.90	%
Other consumer		115,843			5,264		4.54	%		107,904			4,804		4.45	%

Gross loans and leases		6,531,069			288,123		4.41	%		6,780,826			296,996		4.38	%
Securities		2,954,235			99,742		3.38	%		2,711,112			79,527		2.93	%
Other interest-earning assets		516,832			8,377		1.62	%		380,832			8,449		2.22	%

Total interest-earning assets		10,002,136			396,242		3.96	%		9,872,770			384,972		3.90	%
Allowance for loan and lease losses		(43,150	)							(37,664	)
BOLI and non-interest earning assets		575,363								500,599

Total assets	$	10,534,349							$	10,335,705


Interest-bearing liabilities
Savings	$	1,007,990			9,764		0.97	%	$	882,774			6,795		0.77	%
Interest-bearing checking		2,035,954			15,161		0.74	%		2,066,623			13,723		0.66	%
Money market		2,076,847			18,530		0.89	%		2,094,839			10,776		0.51	%
Certificates of deposit		1,730,652			16,959		0.98	%		1,465,679			8,926		0.61	%

Total interest-bearing deposits		6,851,443			60,414		0.88	%		6,509,915			40,220		0.62	%
FHLB advances		1,054,978			12,951		1.23	%		1,153,208			5,717		0.50	%
Securities sold under repurchase agreements		39,907			880		2.21	%		92,937			818		0.88	%
Long-term debt and other interest-bearing liabilities		207,734			10,755		5.18	%		218,737			12,744		5.83	%

Total interest-bearing liabilities		8,154,062			85,000		1.04	%		7,974,797			59,499		0.75	%
Noninterest-bearing deposits		1,182,667								1,225,656
Non-interest-bearing liabilities		188,625								228,421

Total liabilities		9,525,354								9,428,874
Total stockholders’ equity		1,008,995								906,831

Total liabilities and stockholders’ equity	$	10,534,349							$	10,335,705


Net interest income/spread				$	311,242		2.92	%				$	325,473		3.15	%


Net interest margin							3.11	%							3.30	%

Ratio of interest-earning assets to interest-bearing liabilities		122.66	%							123.80	%

Total deposits	$	8,034,110		$	60,414		0.75	%	$	7,735,571		$	40,220		0.52	%
Total funding ⁽²⁾	$	9,336,729		$	85,000		0.91	%	$	9,200,453		$	59,499		0.65	%

(1)

Includes loans held-for-sale of discontinued operations

(2)

Banc of California, Inc.

Capital Ratios

(Unaudited)


	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Capital Ratios
Banc of California, Inc.
Total risk-based capital ratio		14.56	%		14.48	%		14.39	%		13.72	%		13.70	%
Tier 1 risk-based capital ratio		13.79	%		13.77	%		13.72	%		13.08	%		13.22	%
Common equity tier 1 capital ratio		9.92	%		9.91	%		9.83	%		9.37	%		9.44	%
Tier 1 leverage ratio		9.39	%		9.55	%		8.93	%		8.51	%		8.17	%
Banc of California, NA
Total risk-based capital ratio		16.56	%		16.39	%		16.13	%		15.11	%		14.73	%
Tier 1 risk-based capital ratio		15.78	%		15.68	%		15.45	%		14.48	%		14.12	%
Common equity tier 1 capital ratio		15.78	%		15.68	%		15.45	%		14.48	%		14.12	%
Tier 1 leverage ratio		10.67	%		10.88	%		10.05	%		9.43	%		8.71	%

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures

(Dollars in thousands, except per share data)

(Unaudited)

Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company’s management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company’s financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company’s management uses the non-GAAP financial measure.

Return on average tangible common equity and efficiency ratio, as adjusted, tangible common equity to tangible assets, and tangible common equity per common share and tangible common equity per common share and per common share issuable under purchase contracts constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company’s performance.

Tangible common equity is calculated by subtracting preferred stock, goodwill, and other intangible assets from stockholders’ equity. Tangible assets is calculated by subtracting goodwill and other intangible assets from total assets. Banking regulators also exclude goodwill and other intangible assets from stockholders’ equity when assessing the capital adequacy of a financial institution.

Adjusted efficiency ratio is calculated by subtracting loss on investments in alternative energy partnerships from noninterest expense and adding total pre-tax return, which includes the loss on investments in alternative energy partnerships, to the sum of net interest income and noninterest income (total revenue). 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.


	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Tangible common equity to tangible assets ratio
Total assets	$	10,327,852		$	10,280,028		$	10,365,768		$	11,052,085		$	11,029,853
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(39,244	)
Less other intangible assets		(9,353	)		(10,219	)		(11,135	)		(12,191	)		(13,617	)

Tangible assets	$	10,281,355		$	10,232,665		$	10,317,489		$	11,002,750		$	10,976,992

Total stockholders’ equity	$	1,012,308		$	1,013,908		$	1,006,292		$	985,748		$	980,239
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(39,244	)
Less other intangible assets		(9,353	)		(10,219	)		(11,135	)		(12,191	)		(13,617	)

Tangible equity		965,811			966,545			958,013			936,413			927,378
Less preferred stock		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)

Tangible common equity	$	696,740		$	697,474		$	688,942		$	667,342		$	658,307

Total stockholders’ equity to total assets		9.80	%		9.86	%		9.71	%		8.92	%		8.89	%
Tangible equity to tangible assets		9.39	%		9.45	%		9.29	%		8.51	%		8.45	%
Tangible common equity to tangible assets		6.78	%		6.82	%		6.68	%		6.07	%		6.00	%
Common stock outstanding		50,083,345			50,096,056			49,991,395			49,601,363			49,695,299
Class B non-voting non-convertible common stock outstanding		508,107			430,694			355,173			277,797			201,922

Total common stock outstanding		50,591,452			50,526,750			50,346,568			49,879,160			49,897,221

Minimum number of shares issuable under purchase contracts ⁽¹⁾		—			—			—			166,265			188,742

Total common stock outstanding and shares issuable under purchase contracts		50,591,452			50,526,750			50,346,568			50,045,425			50,085,963

(1) Purchase contracts relating to the tangible equity units

Tangible common equity per common stock	$	13.77		$	13.80		$	13.68		$	13.38		$	13.19
Book value per common stock	$	14.69		$	14.74		$	14.64		$	14.37		$	14.25

Tangible common equity per common stock and shares issuable under purchase contracts	$	13.77		$	13.80		$	13.68		$	13.33		$	13.14
Book value per common stock and shares issuable under purchase contracts	$	14.69		$	14.74		$	14.64		$	14.32		$	14.20

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Year Ended
	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
Return on tangible common equity
Average total stockholders’ equity	$	1,014,368		$	1,005,462		$	1,014,267		$	1,001,784		$	995,908		$	1,008,995		$	906,831
Less average preferred stock		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(267,054	)
Less average goodwill		(37,144	)		(37,144	)		(37,144	)		(39,221	)		(39,244	)		(37,656	)		(39,244	)
Less average other intangible assets		(9,788	)		(10,760	)		(11,808	)		(13,190	)		(14,704	)		(11,375	)		(16,654	)

Average tangible common equity	$	698,365		$	688,487		$	696,244		$	680,302		$	672,889		$	690,893		$	583,879

Net income	$	11,302		$	16,949		$	12,257		$	17,201		$	33,264		$	57,709		$	115,416
Less preferred stock dividends		(5,113	)		(5,112	)		(5,113	)		(5,113	)		(5,113	)		(20,451	)		(19,914	)
Add amortization of intangible assets		866			916			1,056			1,090			1,028			3,928			4,851
Add impairment on intangible assets		—			—			—			336			690			336			690
Less tax effect on amortization and impairment of intangible assets ⁽¹⁾		(303	)		(321	)		(370	)		(499	)		(601	)		(1,492	)		(1,939	)

Net income available to common stockholders	$	6,752		$	12,432		$	7,830		$	13,015		$	29,268		$	40,030		$	99,104

Return on average equity		4.42	%		6.69	%		4.85	%		6.96	%		13.29	%		5.72	%		12.73	%
Return on average tangible common equity		3.84	%		7.16	%		4.51	%		7.76	%		17.30	%		5.79	%		16.97	%
(1) Utilized a 35% effective tax rate

	Three Months Ended															Year Ended
	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships
Noninterest expense	$	66,424		$	79,008		$	98,216		$	124,615		$	129,239		$	368,263		$	442,676
Loss on investments in alternative energy partnerships		(3,995	)		(8,348	)		(9,761	)		(8,682	)		(13,850	)		(30,786	)		(31,510	)

Adjusted noninterest expense	$	62,429		$	70,660		$	88,455		$	115,933		$	115,389		$	337,477		$	411,166

Net interest income	$	73,246		$	75,953		$	78,296		$	83,747		$	87,058		$	311,242		$	325,473
Noninterest income		6,429			18,827			19,817			59,704			79,687			104,777			271,880

Total revenue		79,675			94,780			98,113			143,451			166,745			416,019			597,353
Tax credit from investments in alternative energy partnerships		4,908			8,777			15,681			8,829			14,048			38,196			33,405
Deferred tax expense on investments in alternative energy partnerships		(859	)		(1,536	)		(2,744	)		(1,545	)		(2,459	)		(6,684	)		(5,846	)
Tax effect on tax credit and deferred tax expense		3,004			3,804			8,584			5,140			8,078			20,531			19,080
Loss on investments in alternative energy partnerships, net		(3,995	)		(8,348	)		(9,761	)		(8,682	)		(13,850	)		(30,786	)		(31,510	)

Total pre-tax adjustments for investments in alternative energy partnerships		3,058			2,697			11,760			3,742			5,817			21,257			15,129

Adjusted total revenue	$	82,733		$	97,477		$	109,873		$	147,193		$	172,562		$	437,276		$	612,482


Efficiency ratio		83.37	%		83.36	%		100.10	%		86.87	%		77.51	%		88.52	%		74.11	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships		75.46	%		72.49	%		80.51	%		78.76	%		66.87	%		77.18	%		67.13	%
Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense		42.59	%		34.44	%		39.89	%		41.37	%		41.10	%		39.45	%		40.91	%

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BANC OF CALIFORNIA, INC. Reports