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

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EX-99.2 - EX-99.2 - BANC OF CALIFORNIA, INC.	d582344dex992.htm
8-K - 8-K - BANC OF CALIFORNIA, INC.	d582344d8k.htm

Exhibit 99.1

LOGO

Banc of California Reports First Quarter 2018 Earnings

SANTA ANA, Calif., (April 27, 2018) – Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $3.4 million, for the first quarter of 2018, resulting in diluted earnings per common share of $0.06 for the quarter.

Highlights for the first quarter included:

•

Strong Organic Loan Growth: Held for investment loans increased by $271 million, or 4%, during the quarter to $6.9 billion, representing a 16% annualized growth rate.

•

Gross loan commitment originations totaled $867 million for the first quarter at an average production yield of 4.99%.

•

Stabilization of Core Deposit Balances: Stabilized the deposit base and completed the run-off of legacy high-rate, high-volatility deposit balances, which comprised $207 million of deposit outflows in the first quarter. Core deposit balances increased by $55 million and brokered deposit balances declined by $31 million, which coupled with the legacy run-off, drove total reported deposit balances down by $183 million during the first quarter.

•

Continuation of Balance Sheet Re-Mix: Reduced securities by $151 million, or 6%, driven by the sale of all remaining master limited partnership debt securities (“MLPs”) totaling $77 million and the sale of $103 million of commercial mortgage-backed securities (“CMBS”). Additionally, the Company completed the sale of $26 million of mortgage servicing rights (“MSRs”) during the first quarter, which resulted in $2.3 million of expenses which are reflected in all other income and a $1.8 million benefit from the release of the associated loan repurchase reserve.

•

Bolstered Talent: Added key leadership talent including Kris Gagnon as Chief Credit Officer and Leticia Aguilar as Head of Community Banking. Executing on hiring and talent plan to support deposit growth initiatives including commercial deposit and treasury management sales and product leadership, Commercial Banking Los Angeles Market Executive and team, and bolstered Commercial Banking and Private Banking teams in San Diego.

•

Disciplined Expense Management: First quarter noninterest expense totaled $59.8 million.

•

Credit and Charge-offs: Net charge-offs totaled $14.1 million for the first quarter, primarily driven by the previously announced $13.9 million fraudulent credit. Our review of the underwriting process for this loan continues but, based upon our review to date, we believe this loan involved an isolated event of external fraud. Provision for loan and lease losses was $19.5 million for the quarter, primarily driven by the single credit described above, and excluding this item, provision expense was $5.6 million. Non-performing assets to total assets were 0.22% at quarter end, compared to 0.21% at the prior quarter end, and compared to 0.18% a year ago. The ALLL / total loan ratio was 0.79% at quarter end, up from 0.74% at the prior quarter end and up from 0.70% a year ago.

•

Strong Capital Ratios: Common equity tier 1 capital ratio of 9.8%, compared to 9.4% a year ago.

The Company’s first quarter reported financial results included non-recurring expense items, which included $4.4 million of legal and professional fees, a $0.7 million recovery of legal settlement expense reflected in all other expense, $0.9 million benefit to salaries from the reversal of a portion of the 2017 bonus accrual, and $1.8 million of release of the loan repurchase reserve as a result of the sale of MSRs in the quarter. The net impact of these items totaled $1.0 million of net, nonrecurring expenses for the quarter.

“The first quarter marked another important step in our transformation as we continued to re-mix the balance sheet by lowering securities balances and increasing core lending activities,” said Doug Bowers, President and Chief Executive Officer of Banc of California. “We have now completed the sale of all MLP debt securities, have started to work down our CMBS portfolio, and we completed the sale of the majority of our mortgage servicing rights. All of these activities we believe lower our overall risk profile, reduce volatility on the balance sheet, and focus us ever more so on core commercial banking activities. On the deposit front, core deposit balances increased modestly from year-end as we reduced our brokered deposit balances, and completed the reduction of legacy high-rate, high-volatility deposit balances we had discussed over the past few quarters. We saw substantial hiring momentum in the first quarter to support our plan, namely around core deposit generation initiatives. At the same time, we continued to be diligent around expense management as we invest in adding front-line bankers and teams.”

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

The Company will host a conference call to discuss its first quarter 2018 financial results at 7:00 a.m. Pacific Time (PT) on Friday, April 27, 2018. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 1373989. 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.

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 / James Bourne / Sarah Dhanaphatana, (213) 630-6550 idc@abmac.com / jab@abmac.com / skd@abmac.com

- 2 -

Banc of California, Inc.

Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)


	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
ASSETS
Cash and cash equivalents	$	346,704		$	387,699		$	611,826		$	511,190		$	409,281
Time deposits in financial institutions		—			—			1,000			1,000			1,000
Securities available-for-sale		2,424,593			2,575,469			2,755,664			2,915,103			2,434,541
Securities held-to-maturity		—			—			—			—			863,269
Loans held-for-sale		20,180			67,069			50,130			278,824			228,196
Loans and leases receivable		6,930,507			6,659,407			6,226,897			5,956,337			6,105,321
Allowance for loan and lease losses		(54,763	)		(49,333	)		(45,072	)		(42,385	)		(42,736	)
Federal Home Loan Bank and other bank stock		82,715			75,654			67,063			63,438			63,238
Servicing rights, net		6,739			33,708			40,448			43,834			44,451
Other real estate owned, net		1,024			1,796			3,682			3,267			3,345
Premises and equipment, net		135,198			135,699			139,326			143,398			146,631
Investments in alternative energy partnerships, net		48,344			48,826			43,817			37,605			47,633
Goodwill		37,144			37,144			37,144			37,144			37,144
Other intangible assets, net		8,510			9,353			10,219			11,135			12,191
Deferred income tax, net		43,192			31,074			23,333			9,499			18,673
Income tax receivable		10,126			8,739			7,699			14,984			15,973
Bank owned life insurance investment		105,384			104,851			104,292			103,709			103,093
Other assets		153,834			161,797			142,985			113,534			128,036
Assets of discontinued operations		29,888			38,900			59,575			164,152			432,805

Total assets	$	10,329,319		$	10,327,852		$	10,280,028		$	10,365,768		$	11,052,085


LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,039,116		$	1,071,608		$	1,075,782		$	1,138,095		$	1,273,649
Interest-bearing deposits		6,071,049			6,221,295			6,327,811			6,906,816			7,324,044

Total deposits		7,110,165			7,292,903			7,403,593			8,044,911			8,597,693
Advances from Federal Home Loan Bank		1,905,000			1,695,000			1,470,000			870,000			1,080,000
Securities sold under repurchase agreements		—			—			36,520			53,242			26,320
Other borrowings		—			—			—			—			67,981
Notes payable, net		172,966			172,941			172,865			172,790			174,090
Reserve for loss on repurchased loans		3,426			6,306			6,173			8,028			8,118
Income taxes payable		—			—			—			—			618
Due on unsettled securities purchases		59,000			—			54,500			116,090			—
Accrued expenses and other liabilities		84,997			140,575			109,969			77,186			81,208
Liabilities of discontinued operations		9			7,819			12,500			17,229			30,309

Total liabilities		9,335,563			9,315,544			9,266,120			9,359,476			10,066,337
Commitments and contingent liabilities
Preferred stock		269,071			269,071			269,071			269,071			269,071
Common stock		517			517			542			540			537
Common stock, class B non-voting non-convertible		5			5			4			4			3
Additional paid-in capital		623,483			621,435			619,849			616,251			614,983
Retained earnings		141,008			144,839			145,420			140,331			139,926
Treasury stock		(28,786	)		(28,786	)		(28,786	)		(28,786	)		(29,070	)
Accumulated other comprehensive income/(loss), net		(11,542	)		5,227			7,808			8,881			(9,702	)

Total stockholders’ equity		993,756			1,012,308			1,013,908			1,006,292			985,748

Total liabilities and stockholders’ equity	$	10,329,319		$	10,327,852		$	10,280,028		$	10,365,768		$	11,052,085

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Interest and dividend income
Loans, including fees	$	74,912		$	71,695		$	70,208		$	69,661		$	69,507
Securities		21,631			23,170			24,337			24,996			27,239
Other interest-earning assets		2,164			2,292			2,206			1,783			2,096

Total interest and dividend income		98,707			97,157			96,751			96,440			98,842
Interest expense
Deposits		16,795			16,044			15,468			14,942			13,960
Federal Home Loan Bank advances		7,392			5,402			3,352			2,774			1,423
Securities sold under repurchase agreements		750			194			500			180			6
Notes payable and other interest-bearing liabilities		2,332			2,344			2,395			3,044			2,972

Total interest expense		27,269			23,984			21,715			20,940			18,361

Net interest income		71,438			73,173			75,036			75,500			80,481
Provision for loan and lease losses		19,499			5,052			3,561			2,503			2,583

Net interest income after provision for loan and lease losses		51,939			68,121			71,475			72,997			77,898
Noninterest income
Customer service fees		1,592			1,624			1,576			1,669			1,623
Loan servicing income (loss)		2,311			(2,416	)		553			132			2,756
Net gain on sale of securities available for sale		5,241			2,688			7,625			1,099			3,356
Net gain (loss) on sale of loans		(41	)		1,205			5,735			983			4,019
All other income		(521	)		2,594			2,876			1,824			3,149

Total noninterest income		8,582			5,695			18,365			5,707			14,903
Noninterest expense
Salaries and employee benefits		31,115			33,146			30,216			33,348			32,443
Occupancy and equipment		7,687			9,565			10,085			9,776			10,668
Professional fees		9,177			7,853			7,697			11,794			15,073
Data processing		1,656			1,562			1,901			2,246			2,179
Advertising		3,277			1,420			1,051			1,117			1,725
Regulatory assessments		2,092			2,174			2,350			1,140			2,441
Reversal of provision for loan repurchases		(1,788	)		(335	)		(749	)		(403	)		(325	)
Amortization of intangible assets		843			866			916			1,056			1,090
Restructuring expense		—			(43	)		—			82			5,287
All other expenses		5,775			6,179			13,856			6,402			10,633

Total noninterest expense excluding (gain) loss on investments in alternative energy partnerships		59,834			62,387			67,323			66,558			81,214
(Gain) loss on investments in alternative energy partnerships		(34	)		3,995			8,348			9,761			8,682

Total noninterest expense		59,800			66,382			75,671			76,319			89,896

Income from continuing operations before income taxes		721			7,434			14,169			2,385			2,905
Income tax benefit		(6,353	)		(3,418	)		(3,939	)		(12,753	)		(6,471	)

Income from continuing operations		7,074			10,852			18,108			15,138			9,376

Income (loss) from discontinued operations before income taxes		2,044			765			(1,958	)		(4,991	)		13,348
Income tax expense (benefit)		560			315			(799	)		(2,110	)		5,523

Income (loss) from discontinued operations		1,484			450			(1,159	)		(2,881	)		7,825

Net income		8,558			11,302			16,949			12,257			17,201
Preferred stock dividends		5,113			5,113			5,112			5,113			5,113

Net income available to common stockholders	$	3,445		$	6,189		$	11,837		$	7,144		$	12,088

Basic earnings per total common share
Income from continuing operations	$	0.03		$	0.11		$	0.25		$	0.20		$	0.08
Income (loss) from discontinued operations		0.03			0.01			(0.02	)		(0.06	)		0.15

Net income	$	0.06		$	0.12		$	0.23		$	0.14		$	0.23

Diluted earnings per total common share
Income from continuing operations	$	0.03		$	0.11		$	0.25		$	0.20		$	0.08
Income (loss) from discontinued operations		0.03			0.01			(0.02	)		(0.06	)		0.15

Net income	$	0.06		$	0.12		$	0.23		$	0.14		$	0.23

Weighted average number of shares outstanding
Basic		50,590,545			50,532,544			50,362,314			50,289,590			49,991,186
Diluted		50,925,530			50,943,165			50,933,358			50,942,324			50,754,145
Dividends declared per common share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13

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 March 31, 2018
	Continuing Operations			Discontinued Operations		Consolidated Operations
Interest and dividend income	$	98,707		$	186	$	98,893
Interest expense		27,269			—		27,269

Net interest income		71,438			186		71,624
Provision for loan and lease losses		19,499			—		19,499

Net interest income after provision for loan and lease losses		51,939			186		52,125
Noninterest income
Customer service fees		1,592			—		1,592
Loan servicing income		2,311			—		2,311
Net gain on sale of securities available for sale		5,241			—		5,241
Net loss on sale of loans		(41	)		—		(41	)
Mortgage banking income		—			232		232
Gain on disposal of discontinued operations		—			1,003		1,003
All other income		(521	)		635		114

Total noninterest income		8,582			1,870		10,452
Noninterest expense
Salaries and employee benefits		31,115			9		31,124
Occupancy and equipment		7,687			—		7,687
Professional fees		9,177			—		9,177
Data processing		1,656			—		1,656
Advertising		3,277			—		3,277
Regulatory assessments		2,092			—		2,092
Reversal of provision for loan repurchases		(1,788	)		—		(1,788	)
Gain on investments in alternative energy partnerships		(34	)		—		(34	)
Amortization of intangible assets		843			—		843
All other expenses		5,775			3		5,778

Total noninterest expense		59,800			12		59,812

Income before income taxes		721			2,044		2,765
Income tax (benefit) expense		(6,353	)		560		(5,793	)

Net income	$	7,074		$	1,484	$	8,558

Banc of California, Inc.

Selected Financial Data

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Profitability and other ratios of consolidated operations
Return on average assets⁽¹⁾		0.34	%		0.44	%		0.67	%		0.46	%		0.62	%
Return on average equity ⁽¹⁾		3.40	%		4.42	%		6.69	%		4.85	%		6.96	%
Return on average tangible common equity ⁽²⁾		2.37	%		3.84	%		7.16	%		4.51	%		7.76	%
Dividend payout ratio ⁽³⁾		216.67	%		108.33	%		56.52	%		92.86	%		56.52	%
Net interest spread		2.74	%		2.79	%		2.92	%		2.90	%		3.03	%
Net interest margin⁽¹⁾		2.98	%		3.01	%		3.15	%		3.09	%		3.19	%
Noninterest income to total revenue ⁽⁴⁾		12.73	%		8.07	%		19.86	%		20.20	%		41.62	%
Noninterest income to average total assets⁽¹⁾		0.41	%		0.25	%		0.74	%		0.74	%		2.16	%
Noninterest expense to average total assets⁽¹⁾		2.36	%		2.59	%		3.10	%		3.68	%		4.52	%
Efficiency ratio⁽⁵⁾		72.87	%		83.37	%		83.36	%		100.10	%		86.87	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships ^{(2) , (5)}		65.70	%		75.46	%		72.49	%		80.51	%		78.76	%
Average held-for-investment loans and leases to average deposits		94.87	%		86.09	%		77.33	%		73.54	%		68.33	%
Average investment securities to average total assets		24.60	%		26.10	%		27.64	%		28.09	%		30.18	%
Average stockholders’ equity to average total assets		9.94	%		9.98	%		9.95	%		9.48	%		8.95	%
Allowance for loan and lease losses (ALLL)
Balance at beginning of period	$	49,333		$	45,072		$	42,385		$	42,736		$	40,444
Loans and leases charged off		(14,639	)		(1,367	)		(959	)		(2,898	)		(357	)
Recoveries		570			576			85			44			66
Provision for loan and lease losses		19,499			5,052			3,561			2,503			2,583

Balance at end of period	$	54,763		$	49,333		$	45,072		$	42,385		$	42,736

Annualized net loan charge-offs to average total loans and leases held-for-investment		0.84	%		0.05	%		0.06	%		0.19	%		0.02	%
Reserve for loss on repurchased loans
Balance at beginning of period	$	6,306		$	6,173		$	8,028		$	8,118		$	7,974
Provision (reversal) for loan repurchases		(1,786	)		(326	)		(651	)		270			517
Utilization of reserve for loan repurchases		(1,094	)		(301	)		(1,204	)		(360	)		(373	)
Other adjustments		—			760			—			—			—

Balance at end of period	$	3,426		$	6,306		$	6,173		$	8,028		$	8,118

(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)


	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Asset quality information and ratios
Delinquent loans and leases held-for-investment
30 to 89 days delinquent, excluding purchased credit impaired (PCI) loans	$	31,936		$	32,087		$	20,286		$	23,305		$	22,596
90+ days delinquent, excluding PCI loans		11,526			9,542			11,150			6,508			9,802

Total delinquent loans, excluding PCI loans		43,462			41,629			31,436			29,813			32,398

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

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

Total delinquent loans	$	43,462		$	41,629		$	31,436		$	30,963		$	53,751

Total delinquent non-PCI loans to total non-PCI loans		0.63	%		0.63	%		0.50	%		0.50	%		0.54	%
Total delinquent loans and leases to total loans and leases		0.63	%		0.63	%		0.50	%		0.52	%		0.88	%
Non-performing assets, excluding loans held-for-sale
Non-performing loans and leases, excluding PCI loans	$	21,220		$	19,382		$	12,275		$	9,064		$	16,222
90+ days delinquent and still accruing loans and leases, excluding PCI loans		—			—			—			—			—
Other real estate owned		1,024			1,796			3,682			3,267			3,345

Non-performing assets	$	22,244		$	21,178		$	15,957		$	12,331		$	19,567

ALLL to non-performing loans and leases		258.07	%		254.53	%		367.19	%		467.62	%		263.44	%
Non-performing loans and leases to total loans and leases		0.31	%		0.29	%		0.20	%		0.15	%		0.27	%
Non-performing assets to total assets		0.22	%		0.21	%		0.16	%		0.12	%		0.18	%
Troubled debt restructurings (TDRs)
Performing TDRs	$	5,787		$	5,646		$	5,668		$	4,579		$	4,309
Non-performing TDRs		2,632			2,675			—			1,125			1,144

Total TDRs	$	8,419		$	8,321		$	5,668		$	5,704		$	5,453

Loans and leases and ALLL by loan origination type
Loan and lease breakdown by origination type
Originated loans and leases	$	6,295,843		$	5,988,101		$	5,488,018		$	5,159,823		$	5,109,175
Acquired loans not impaired at acquisition		634,664			671,306			738,879			792,213			834,983
Seasoned SFR mortgage loan pools - non-impaired		—			—			—			—			21,464
Acquired with deteriorated credit quality		—			—			—			4,301			139,699

Total loans and leases	$	6,930,507		$	6,659,407		$	6,226,897		$	5,956,337		$	6,105,321

ALLL breakdown by origination type
Originated loans and leases	$	53,605		$	48,110		$	43,723		$	41,090		$	41,221
Acquired loans not impaired at acquisition		1,158			1,223			1,349			1,271			1,234
Seasoned SFR mortgage loan pools - non-impaired		—			—			—			—			120
Acquired with deteriorated credit quality		—			—			—			24			161

Total ALLL	$	54,763		$	49,333		$	45,072		$	42,385		$	42,736

Discount on Purchased/Acquired Loans
Acquired loans not impaired at acquisition	$	14,255		$	14,943		$	15,983		$	15,446		$	16,275
Seasoned SFR mortgage loan pools - non-impaired		—			—			—			—			1,219
Acquired with deteriorated credit quality		—			—			—			1,754			21,538

Total Discount	$	14,255		$	14,943		$	15,983		$	17,200		$	39,032

Percentage of ALLL to:
Originated loans and leases:		0.85	%		0.80	%		0.80	%		0.80	%		0.81	%
Originated loans and leases and acquired loans not impaired at acquisition:		0.79	%		0.74	%		0.72	%		0.71	%		0.71	%
Total loans and leases		0.79	%		0.74	%		0.72	%		0.71	%		0.70	%

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Composition of held-for-investment loans and leases
Commercial real estate	$	773,193		$	717,415		$	713,120		$	716,771		$	750,592
Multifamily		1,944,082			1,816,141			1,617,890			1,545,888			1,449,715
Construction		200,766			182,960			176,397			156,246			142,164
Commercial and industrial		1,638,559			1,701,951			1,602,805			1,560,916			1,585,656
SBA		79,022			78,699			78,604			77,254			76,040
Lease financing		3			13			91			173			285

Total commercial loans		4,635,625			4,497,179			4,188,907			4,057,248			4,004,452

Single family residential mortgage		2,201,358			2,055,649			1,920,310			1,778,536			1,975,055
Other consumer		93,524			106,579			117,680			120,553			125,814

Total consumer loans		2,294,882			2,162,228			2,037,990			1,899,089			2,100,869

Total gross loans and leases	$	6,930,507		$	6,659,407		$	6,226,897		$	5,956,337		$	6,105,321

Composition percentage of held-for-investment loans and leases
Commercial real estate		11.2	%		10.8	%		11.5	%		12.0	%		12.3	%
Multifamily		28.1	%		27.3	%		26.0	%		26.0	%		23.7	%
Construction		2.9	%		2.7	%		2.8	%		2.6	%		2.3	%
Commercial and industrial		23.6	%		25.5	%		25.7	%		26.2	%		26.1	%
SBA		1.1	%		1.2	%		1.3	%		1.3	%		1.2	%
Lease financing		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Total commercial loans		66.9	%		67.5	%		67.3	%		68.1	%		65.6	%

Single family residential mortgage		31.8	%		30.9	%		30.8	%		29.9	%		32.3	%
Other consumer		1.3	%		1.6	%		1.9	%		2.0	%		2.1	%

Total consumer loans		33.1	%		32.5	%		32.7	%		31.9	%		34.4	%

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

Composition of deposits
Noninterest-bearing checking	$	1,039,116		$	1,071,608		$	1,075,782		$	1,138,095		$	1,273,649
Interest-bearing checking		1,864,629			2,089,016			2,011,943			2,058,130			1,998,778
Money market		1,091,735			1,146,859			1,728,937			2,265,380			2,610,376
Savings		1,051,267			1,059,628			945,699			985,001			1,008,218
Certificates of deposit		2,063,418			1,925,792			1,641,232			1,598,305			1,706,672

Total deposits	$	7,110,165		$	7,292,903		$	7,403,593		$	8,044,911		$	8,597,693

Composition percentage of deposits
Noninterest-bearing checking		14.6	%		14.7	%		14.5	%		14.1	%		14.8	%
Interest-bearing checking		26.2	%		28.7	%		27.2	%		25.6	%		23.2	%
Money market		15.4	%		15.7	%		23.3	%		28.2	%		30.4	%
Savings		14.8	%		14.5	%		12.8	%		12.2	%		11.7	%
Certificates of deposit		29.0	%		26.4	%		22.2	%		19.9	%		19.9	%

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

Capital Ratios
Banc of California, Inc.
Total risk-based capital ratio		14.60	%		14.56	%		14.48	%		14.39	%		13.72	%
Tier 1 risk-based capital ratio		13.74	%		13.79	%		13.77	%		13.72	%		13.08	%
Common equity tier 1 capital ratio		9.80	%		9.92	%		9.91	%		9.83	%		9.37	%
Tier 1 leverage ratio		9.21	%		9.39	%		9.55	%		8.93	%		8.51	%
Banc of California, NA
Total risk-based capital ratio		16.53	%		16.56	%		16.39	%		16.13	%		15.11	%
Tier 1 risk-based capital ratio		15.67	%		15.78	%		15.68	%		15.45	%		14.48	%
Common equity tier 1 capital ratio		15.67	%		15.78	%		15.68	%		15.45	%		14.48	%
Tier 1 leverage ratio		10.50	%		10.67	%		10.88	%		10.05	%		9.43	%

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	March 31, 2018								December 31, 2017								September 30, 2017
	Average					Yield			Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	97,095		$	297		1.24	%	$	127,139		$	363		1.13	%	$	246,675		$	2,319		3.73	%
SFR mortgage		2,122,666			21,352		4.08	%		1,957,754			19,487		3.95	%		1,775,443			17,435		3.90	%
Seasoned SFR mortgage loan pools		—			—		—			—			—		—			84,128			1,208		5.70	%
Commercial real estate, multifamily, and construction		2,856,290			31,439		4.46	%		2,613,940			29,696		4.51	%		2,494,284			28,659		4.56	%
Commercial and industrial, SBA, and lease financing		1,625,549			20,850		5.20	%		1,630,886			20,989		5.11	%		1,553,816			20,141		5.14	%
Other consumer		103,676			1,160		4.54	%		107,664			1,233		4.54	%		114,569			1,363		4.72	%

Gross loans and leases		6,805,276			75,098		4.48	%		6,437,383			71,768		4.42	%		6,268,915			71,125		4.50	%
Securities		2,525,220			21,631		3.47	%		2,653,838			23,170		3.46	%		2,791,585			24,337		3.46	%
Other interest-earning assets		407,064			2,164		2.16	%		548,171			2,292		1.66	%		519,593			2,206		1.68	%

Total interest-earning assets		9,737,560			98,893		4.12	%		9,639,392			97,230		4.00	%		9,580,093			97,668		4.04	%
Allowance for loan and lease losses		(49,257	)							(45,681	)							(42,696	)
BOLI and non-interest earning assets		574,930								572,692								563,784

Total assets	$	10,263,233							$	10,166,403							$	10,101,181


Interest-bearing liabilities
Savings	$	1,055,338			3,300		1.27	%	$	1,019,659			2,947		1.15	%	$	968,158			2,263		0.93	%
Interest-bearing checking		1,976,160			4,108		0.84	%		2,082,677			4,267		0.81	%		2,037,729			3,871		0.75	%
Money market		1,076,117			2,834		1.07	%		1,294,537			3,262		1.00	%		1,935,262			5,095		1.04	%
Certificates of deposit		1,906,556			6,553		1.39	%		1,822,010			5,568		1.21	%		1,560,078			4,239		1.08	%

Total interest-bearing deposits		6,014,171			16,795		1.13	%		6,218,883			16,044		1.02	%		6,501,227			15,468		0.94	%
FHLB advances		1,711,089			7,392		1.75	%		1,448,326			5,402		1.48	%		962,391			3,352		1.38	%
Securities sold under repurchase agreements		119,543			750		2.54	%		33,513			194		2.30	%		88,810			500		2.23	%
Long-term debt and other interest-bearing liabilities		174,424			2,332		5.42	%		174,066			2,344		5.34	%		173,772			2,395		5.47	%

Total interest-bearing liabilities		8,019,227			27,269		1.38	%		7,874,788			23,984		1.21	%		7,726,200			21,715		1.12	%
Noninterest-bearing deposits		1,056,700								1,110,815								1,178,062
Non-interest-bearing liabilities		167,345								166,432								191,457

Total liabilities		9,243,272								9,152,035								9,095,719
Total stockholders’ equity		1,019,961								1,014,368								1,005,462

Total liabilities and stockholders’ equity	$	10,263,233							$	10,166,403							$	10,101,181

Net interest income/spread				$	71,624		2.74	%				$	73,246		2.79	%				$	75,953		2.92	%

Net interest margin							2.98	%							3.01	%							3.15	%
Ratio of interest-earning assets to interest-bearing liabilities		121.43	%							122.41	%							123.99	%
Total deposits	$	7,070,871		$	16,795		0.96	%	$	7,329,698		$	16,044		0.87	%	$	7,679,289		$	15,468		0.80	%
Total funding ⁽²⁾	$	9,075,927		$	27,269		1.22	%	$	8,985,603		$	23,984		1.06	%	$	8,904,262		$	21,715		0.97	%

(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
	June 30, 2017								March 31, 2017
	Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	575,669		$	4,876		3.40	%	$	699,671		$	6,111		3.54	%
SFR mortgage		1,832,524			18,006		3.94	%		1,963,861			19,105		3.95	%
Seasoned SFR mortgage loan pools		151,759			2,121		5.61	%		154,736			2,145		5.62	%
Commercial real estate, multifamily, and construction		2,394,487			27,038		4.53	%		2,336,323			26,393		4.58	%
Commercial and industrial, SBA, and lease financing		1,565,583			18,991		4.87	%		1,508,756			17,751		4.77	%
Other consumer		119,644			1,425		4.78	%		121,666			1,268		4.23	%

Gross loans and leases		6,639,666			72,457		4.38	%		6,785,013			72,773		4.35	%
Securities		3,004,551			24,996		3.34	%		3,376,698			27,239		3.27	%
Other interest-earning assets		517,349			1,783		1.38	%		500,123			2,096		1.70	%

Total interest-earning assets		10,161,566			99,236		3.92	%		10,661,834			102,108		3.88	%
Allowance for loan and lease losses		(42,896	)							(41,285	)
BOLI and non-interest earning assets		578,333								568,257

Total assets	$	10,697,003							$	11,188,806


Interest-bearing liabilities
Savings	$	1,002,797			2,262		0.90	%	$	1,042,031			2,292		0.89	%
Interest-bearing checking		2,013,751			3,609		0.72	%		2,008,828			3,414		0.69	%
Money market		2,359,173			5,482		0.93	%		2,735,810			4,691		0.70	%
Certificates of deposit		1,606,270			3,589		0.90	%		1,937,392			3,563		0.75	%

Total interest-bearing deposits		6,981,991			14,942		0.86	%		7,724,061			13,960		0.73	%
FHLB advances		990,780			2,774		1.12	%		812,444			1,423		0.71	%
Securities sold under repurchase agreements		34,298			180		2.11	%		2,123			6		1.15	%
Long-term debt and other interest-bearing liabilities		240,201			3,044		5.08	%		244,040			2,972		4.94	%

Total interest-bearing liabilities		8,247,270			20,940		1.02	%		8,782,668			18,361		0.85	%
Noninterest-bearing deposits		1,261,338								1,181,279
Non-interest-bearing liabilities		174,128								223,075

Total liabilities		9,682,736								10,187,022
Total stockholders’ equity		1,014,267								1,001,784

Total liabilities and stockholders’ equity	$	10,697,003							$	11,188,806

Net interest income/spread				$	78,296		2.90	%				$	83,747		3.03	%

Net interest margin							3.09	%							3.19	%
Ratio of interest-earning assets to interest-bearing liabilities		123.21	%							121.40	%
Total deposits	$	8,243,329		$	14,942		0.73	%	$	8,905,340		$	13,960		0.64	%
Total funding ⁽²⁾	$	9,508,608		$	20,940		0.88	%	$	9,963,947		$	18,361		0.75	%

(1)

Includes loans held-for-sale of discontinued operations

(2)

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.


	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Tangible common equity to tangible assets ratio
Total assets	$	10,329,319		$	10,327,852		$	10,280,028		$	10,365,768		$	11,052,085
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(8,510	)		(9,353	)		(10,219	)		(11,135	)		(12,191	)

Tangible assets	$	10,283,665		$	10,281,355		$	10,232,665		$	10,317,489		$	11,002,750

Total stockholders’ equity	$	993,756		$	1,012,308		$	1,013,908		$	1,006,292		$	985,748
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(8,510	)		(9,353	)		(10,219	)		(11,135	)		(12,191	)

Tangible equity		948,102			965,811			966,545			958,013			936,413
Less preferred stock		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)

Tangible common equity	$	679,031		$	696,740		$	697,474		$	688,942		$	667,342

Total stockholders’ equity to total assets		9.62	%		9.80	%		9.86	%		9.71	%		8.92	%
Tangible equity to tangible assets		9.22	%		9.39	%		9.45	%		9.29	%		8.51	%
Tangible common equity to tangible assets		6.60	%		6.78	%		6.82	%		6.68	%		6.07	%
Common stock outstanding		50,079,736			50,083,345			50,096,056			49,991,395			49,601,363
Class B non-voting non-convertible common stock outstanding		508,107			508,107			430,694			355,173			277,797

Total common stock outstanding		50,587,843			50,591,452			50,526,750			50,346,568			49,879,160

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

Total common stock outstanding and shares issuable under purchase contracts		50,587,843			50,591,452			50,526,750			50,346,568			50,045,425

(1) Purchase contracts relating to the tangible equity units
Tangible common equity per common stock	$	13.42		$	13.77		$	13.80		$	13.68		$	13.38
Book value per common stock	$	14.33		$	14.69		$	14.74		$	14.64		$	14.37
Tangible common equity per common stock and shares issuable under purchase contracts	$	13.42		$	13.77		$	13.80		$	13.68		$	13.33
Book value per common stock and shares issuable under purchase contracts	$	14.33		$	14.69		$	14.74		$	14.64		$	14.32

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Return on tangible common equity
Average total stockholders’ equity	$	1,019,961		$	1,014,368		$	1,005,462		$	1,014,267		$	1,001,784
Less average preferred stock		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)
Less average goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(39,221	)
Less average other intangible assets		(8,972	)		(9,788	)		(10,760	)		(11,808	)		(13,190	)

Average tangible common equity	$	704,774		$	698,365		$	688,487		$	696,244		$	680,302

Net income	$	8,558		$	11,302		$	16,949		$	12,257		$	17,201
Less preferred stock dividends		(5,113	)		(5,113	)		(5,112	)		(5,113	)		(5,113	)
Add amortization of intangible assets		843			866			916			1,056			1,090
Add impairment on intangible assets		—			—			—			—			336
Less tax effect on amortization and impairment of intangible assets ⁽¹⁾		(177	)		(303	)		(321	)		(370	)		(499	)

Net income available to common stockholders	$	4,111		$	6,752		$	12,432		$	7,830		$	13,015

Return on average equity		3.40	%		4.42	%		6.69	%		4.85	%		6.96	%
Return on average tangible common equity		2.37	%		3.84	%		7.16	%		4.51	%		7.76	%
Effective tax rate utilized for calculating tax effect on amortization and impairment of intangible assets		21.00	%		35.00	%		35.00	%		35.00	%		35.00	%

	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships
Noninterest expense	$	59,812		$	66,424		$	79,008		$	98,216		$	124,615
Gain (loss) on investments in alternative energy partnerships		34			(3,995	)		(8,348	)		(9,761	)		(8,682	)

Adjusted noninterest expense	$	59,846		$	62,429		$	70,660		$	88,455		$	115,933

Net interest income	$	71,624		$	73,246		$	75,953		$	78,296		$	83,747
Noninterest income		10,452			6,429			18,827			19,817			59,704

Total revenue		82,076			79,675			94,780			98,113			143,451
Tax credit from investments in alternative energy partnerships		7,323			4,908			8,777			15,681			8,829
Deferred tax expense on investments in alternative energy partnerships		(769	)		(859	)		(1,536	)		(2,744	)		(1,545	)
Tax effect on tax credit and deferred tax expense		2,422			3,004			3,804			8,584			5,140
Gain (loss) on investments in alternative energy partnerships		34			(3,995	)		(8,348	)		(9,761	)		(8,682	)

Total pre-tax adjustments for investments in alternative energy partnerships		9,010			3,058			2,697			11,760			3,742

Adjusted total revenue	$	91,086		$	82,733		$	97,477		$	109,873		$	147,193

Efficiency ratio		72.87	%		83.37	%		83.36	%		100.10	%		86.87	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships		65.70	%		75.46	%		72.49	%		80.51	%		78.76	%
Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense		26.98	%		42.59	%		34.44	%		39.89	%		41.37	%

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BANC OF CALIFORNIA, INC. Reports