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

Attached files

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EX-99.2 - EX-99.2 - BANC OF CALIFORNIA, INC.	d582337dex992.htm
8-K - 8-K - BANC OF CALIFORNIA, INC.	d582337d8k.htm

Exhibit 99.1

LOGO

Banc of California Reports Second Quarter 2018 Earnings

SANTA ANA, Calif., (July 26, 2018) – Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $9.7 million, for the second quarter of 2018, resulting in diluted earnings per common share of $0.18 for the quarter.

Highlights for the second quarter included:

•

Strong Core Deposit Growth: Core deposits grew by $357 million allowing for the reduction of brokered deposits by $332 million and the reduction of FHLB advances by $100 million.

•

Organic Loan Growth: Held for investment loans increased by $105 million during the quarter to $7.0 billion. Annualized growth in the portfolio is 11% for the first half of 2018.

Gross loan commitment originations totaled $765 million for the second quarter at an average production yield of 5.05%.

•

Continuation of Balance Sheet Re-Mix: Reduced securities by $127 million, or 5%, driven by the continued reduction of Collateralized Loan Obligations (“CLO”). Additionally, the Company completed the sale of mortgage servicing rights (“MSRs”) totaling $3 million.

•

Bolstered Talent: Added key leadership talent in Jim Hazboun as Chief Human Resources Officer.

•

Disciplined Expense Management: Second quarter noninterest expense totaled $62.5 million. Previously announced expense reduction initiative expected to reduce noninterest expense by approximately $15 million annually.

•

Strong Credit Performance: Non-performing assets of 0.22% and total delinquencies declined to 0.38%. Net charge-offs totaled $738,000 and included $372,000 related to the sale of a performing loan. The ALLL / total loan ratio was 0.81% at quarter end, up from 0.79% at the prior quarter end and up from 0.71% a year ago.

•

Strong Capital Ratios: Common equity tier 1 capital ratio of 9.90%, compared to 9.83% a year ago.

The Company’s second quarter reported financial results included $6.9 million of legal and professional fees partially offset by a $5.4 million insurance recovery related to ongoing indemnification expense, a $4.0 million restructuring expense and $900,000 of other expense. The aggregate impact of these items resulted in $6.4 million of net, nonrecurring expenses for the quarter.

“We continue to be very focused on our strategic plan and the second quarter saw yet more progress,” said Doug Bowers, President and Chief Executive Officer of Banc of California. “We are seeing early signs of core deposit growth with balances increasing $357 million for the quarter or 25% annualized. Alongside varying key metrics, we remain committed to achieving operational efficiencies as noninterest expense, excluding non-recurring items, once again declined. Credit quality also remained very strong with non-performing assets to total assets at 0.22%.”

The Company will host a conference call to discuss its second quarter 2018 financial results at 7:00 a.m. Pacific Time (PT) on Thursday, July 26, 2018. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 7007407. 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.

3 MacArthur Place • Santa Ana, CA 92707 • (949) 236-5250 • 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. 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
John A. Bogler, (949) 236-5400		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)


	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
ASSETS
Cash and cash equivalents	$	385,691		$	346,704		$	387,699		$	611,826		$	511,190
Time deposits in financial institutions		—			—			—			1,000			1,000
Securities available-for-sale		2,297,124			2,424,593			2,575,469			2,755,664			2,915,103
Loans held-for-sale		13,753			20,180			67,069			50,130			278,824
Loans and leases receivable		7,036,004			6,930,507			6,659,407			6,226,897			5,956,337
Allowance for loan and lease losses		(56,678	)		(54,763	)		(49,333	)		(45,072	)		(42,385	)
Federal Home Loan Bank and other bank stock		75,737			82,715			75,654			67,063			63,438
Servicing rights, net		3,869			6,739			33,708			40,448			43,834
Other real estate owned, net		710			1,024			1,796			3,682			3,267
Premises and equipment, net		135,478			135,198			135,699			139,326			143,398
Investments in alternative energy partnerships, net		44,806			48,344			48,826			43,817			37,605
Goodwill		37,144			37,144			37,144			37,144			37,144
Other intangible assets, net		7,683			8,510			9,353			10,219			11,135
Deferred income tax, net		42,334			43,192			31,074			23,333			9,499
Income tax receivable		7,995			10,126			8,739			7,699			14,984
Bank owned life insurance investment		105,917			105,384			104,851			104,292			103,709
Other assets		155,298			153,834			161,797			142,985			113,534
Assets of discontinued operations		26,415			29,888			38,900			59,575			164,152

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

LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,005,032		$	1,039,116		$	1,071,608		$	1,075,782		$	1,138,095
Interest-bearing deposits		6,130,762			6,071,049			6,221,295			6,327,811			6,906,816

Total deposits		7,135,794			7,110,165			7,292,903			7,403,593			8,044,911
Advances from Federal Home Loan Bank		1,805,000			1,905,000			1,695,000			1,470,000			870,000
Securities sold under repurchase agreements		—			—			—			36,520			53,242
Notes payable, net		173,017			172,966			172,941			172,865			172,790
Reserve for loss on repurchased loans		3,149			3,426			6,306			6,173			8,028
Due on unsettled securities purchases		132,546			59,000			—			54,500			116,090
Accrued expenses and other liabilities		81,086			84,997			140,575			109,969			77,186
Liabilities of discontinued operations		—			9			7,819			12,500			17,229

Total liabilities		9,330,592			9,335,563			9,315,544			9,266,120			9,359,476
Commitments and contingent liabilities
Preferred stock		269,071			269,071			269,071			269,071			269,071
Common stock		517			517			517			542			540
Common stock, class B non-voting non-convertible		4			5			5			4			4
Additional paid-in capital		623,372			623,483			621,435			619,849			616,251
Retained earnings		143,880			141,008			144,839			145,420			140,331
Treasury stock		(28,786	)		(28,786	)		(28,786	)		(28,786	)		(28,786	)
Accumulated other comprehensive income/(loss), net		(19,370	)		(11,542	)		5,227			7,808			8,881

Total stockholders’ equity		988,688			993,756			1,012,308			1,013,908			1,006,292

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

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2018			2018			2017			2017			2017			2018			2017
Interest and dividend income
Loans, including fees	$	81,307		$	74,912		$	71,695		$	70,208		$	69,661		$	156,219		$	139,168
Securities		21,455			21,631			23,170			24,337			24,996			43,086			52,235
Other interest-earning assets		2,423			2,164			2,292			2,206			1,783			4,587			3,879

Total interest and dividend income		105,185			98,707			97,157			96,751			96,440			203,892			195,282
Interest expense
Deposits		20,315			16,795			16,044			15,468			14,942			37,110			28,902
Federal Home Loan Bank advances		9,539			7,392			5,402			3,352			2,774			16,931			4,197
Securities sold under repurchase agreements		211			750			194			500			180			961			186
Notes payable and other interest-bearing liabilities		2,356			2,332			2,344			2,395			3,044			4,688			6,016

Total interest expense		32,421			27,269			23,984			21,715			20,940			59,690			39,301

Net interest income		72,764			71,438			73,173			75,036			75,500			144,202			155,981
Provision for loan and lease losses		2,653			19,499			5,052			3,561			2,503			22,152			5,086

Net interest income after provision for loan and lease losses		70,111			51,939			68,121			71,475			72,997			122,050			150,895
Noninterest income
Customer service fees		1,491			1,592			1,624			1,576			1,669			3,083			3,292
Loan servicing income (loss)		948			2,311			(2,416	)		553			132			3,259			2,888
Net gain on sale of securities available for sale		278			5,241			2,688			7,625			1,099			5,519			4,455
Net gain (loss) on sale of loans		821			(41	)		1,205			5,735			983			780			5,002
All other income		4,523			(521	)		2,594			2,876			1,824			4,002			4,973

Total noninterest income		8,061			8,582			5,695			18,365			5,707			16,643			20,610
Noninterest expense
Salaries and employee benefits		29,440			31,115			33,146			30,216			33,348			60,555			65,791
Occupancy and equipment		7,883			7,687			9,565			10,085			9,776			15,570			20,444
Professional fees		6,303			9,177			7,853			7,697			11,794			15,480			26,867
Data processing		1,678			1,656			1,562			1,901			2,246			3,334			4,425
Advertising		2,864			3,277			1,420			1,051			1,117			6,141			2,842
Regulatory assessments		2,196			2,092			2,174			2,350			1,140			4,288			3,581
Reversal of provision for loan repurchases		(218	)		(1,788	)		(335	)		(749	)		(403	)		(2,006	)		(728	)
Amortization of intangible assets		827			843			866			916			1,056			1,670			2,146
Restructuring expense		3,983			—			(43	)		—			82			3,983			5,369
All other expenses		5,775			5,775			6,179			13,856			6,402			11,550			17,035

Total noninterest expense excluding (gain) loss on investments in alternative energy partnerships		60,731			59,834			62,387			67,323			66,558			120,565			147,772
(Gain) loss on investments in alternative energy partnerships		1,808			(34	)		3,995			8,348			9,761			1,774			18,443

Total noninterest expense		62,539			59,800			66,382			75,671			76,319			122,339			166,215

Income from continuing operations before income taxes		15,633			721			7,434			14,169			2,385			16,354			5,290
Income tax expense (benefit)		1,779			(6,353	)		(3,418	)		(3,939	)		(12,753	)		(4,574	)		(19,224	)

Income from continuing operations		13,854			7,074			10,852			18,108			15,138			20,928			24,514

Income (loss) from discontinued operations before income taxes		1,281			2,044			765			(1,958	)		(4,991	)		3,325			8,357
Income tax expense (benefit)		355			560			315			(799	)		(2,110	)		915			3,413

Income (loss) from discontinued operations		926			1,484			450			(1,159	)		(2,881	)		2,410			4,944

Net income		14,780			8,558			11,302			16,949			12,257			23,338			29,458
Preferred stock dividends		5,113			5,113			5,113			5,112			5,113			10,226			10,226

Net income available to common stockholders	$	9,667		$	3,445		$	6,189		$	11,837		$	7,144		$	13,112		$	19,232

Basic earnings per total common share
Income from continuing operations	$	0.17		$	0.03		$	0.11		$	0.25		$	0.20		$	0.20		$	0.27
Income (loss) from discontinued operations		0.02			0.03			0.01			(0.02	)		(0.06	)		0.05			0.10

Net income	$	0.19		$	0.06		$	0.12		$	0.23		$	0.14		$	0.25		$	0.37

Diluted earnings per total common share
Income from continuing operations	$	0.16		$	0.03		$	0.11		$	0.25		$	0.20		$	0.20		$	0.27
Income (loss) from discontinued operations		0.02			0.03			0.01			(0.02	)		(0.06	)		0.05			0.10

Net income	$	0.18		$	0.06		$	0.12		$	0.23		$	0.14		$	0.25		$	0.37

Weighted average number of shares outstanding
Basic		50,593,429			50,590,545			50,532,544			50,362,314			50,289,590			50,591,995			50,058,540
Diluted		50,919,091			50,925,530			50,943,165			50,933,358			50,942,324			50,900,887			50,736,098
Dividends declared per common share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13		$	0.26		$	0.26

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 June 30, 2018								Six Months Ended June 30, 2018
	Continuing			Discontinued		Consolidated			Continuing			Discontinued		Consolidated
	Operations			Operations		Operations			Operations			Operations		Operations
Interest and dividend income	$	105,185		$	189	$	105,374		$	203,892		$	375	$	204,267
Interest expense		32,421			—		32,421			59,690			—		59,690

Net interest income		72,764			189		72,953			144,202			375		144,577
Provision for loan and lease losses		2,653			—		2,653			22,152			—		22,152

Net interest income after provision for loan and lease losses		70,111			189		70,300			122,050			375		122,425
Noninterest income
Customer service fees		1,491			—		1,491			3,083			—		3,083
Loan servicing income		948			—		948			3,259			—		3,259
Net gain on sale of securities available for sale		278			—		278			5,519			—		5,519
Net gain on sale of loans		821			—		821			780			—		780
Mortgage banking income		—			56		56			—			288		288
Gain on disposal of discontinued operations		—			272		272			—			1,275		1,275
All other income		4,523			779		5,302			4,002			1,414		5,416

Total noninterest income		8,061			1,107		9,168			16,643			2,977		19,620
Noninterest expense
Salaries and employee benefits		29,440			6		29,446			60,555			15		60,570
Occupancy and equipment		7,883			—		7,883			15,570			—		15,570
Professional fees		6,303			—		6,303			15,480			—		15,480
Data processing		1,678			—		1,678			3,334			—		3,334
Advertising		2,864			—		2,864			6,141			—		6,141
Regulatory assessments		2,196			—		2,196			4,288			—		4,288
Reversal for loan repurchases		(218	)		—		(218	)		(2,006	)		—		(2,006	)
Loss on investments in alternative energy partnerships		1,808			—		1,808			1,774			—		1,774
Amortization of intangible assets		827			—		827			1,670			—		1,670
Restructuring expense		3,983			—		3,983			3,983			—		3,983
All other expenses		5,775			9		5,784			11,550			12		11,562

Total noninterest expense		62,539			15		62,554			122,339			27		122,366

Income before income taxes		15,633			1,281		16,914			16,354			3,325		19,679
Income tax (benefit) expense		1,779			355		2,134			(4,574	)		915		(3,659	)

Net income	$	13,854		$	926	$	14,780		$	20,928		$	2,410	$	23,338

Banc of California, Inc.

Selected Financial Data

(Dollars in thousands)

(Unaudited)


	Three Months Ended															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2018			2018			2017			2017			2017			2018			2017
Profitability and other ratios of consolidated operations
Return on average assets⁽¹⁾		0.58	%		0.34	%		0.44	%		0.67	%		0.46	%		0.46	%		0.54	%
Return on average equity ⁽¹⁾		5.92	%		3.40	%		4.42	%		6.69	%		4.85	%		4.66	%		5.89	%
Return on average tangible common equity ⁽²⁾		6.03	%		2.37	%		3.84	%		7.16	%		4.51	%		4.18	%		6.11	%
Dividend payout ratio ⁽³⁾		68.42	%		216.67	%		108.33	%		56.52	%		92.86	%		104.00	%		70.27	%
Net interest spread		2.75	%		2.74	%		2.79	%		2.92	%		2.90	%		2.74	%		2.97	%
Net interest margin⁽¹⁾		3.01	%		2.98	%		3.01	%		3.15	%		3.09	%		3.00	%		3.14	%
Noninterest income to total revenue ⁽⁴⁾		11.16	%		12.73	%		8.07	%		19.86	%		20.20	%		11.95	%		32.92	%
Noninterest income to average total assets⁽¹⁾		0.36	%		0.41	%		0.25	%		0.74	%		0.74	%		0.39	%		1.47	%
Noninterest expense to average total assets⁽¹⁾		2.45	%		2.36	%		2.59	%		3.10	%		3.68	%		2.41	%		4.11	%
Efficiency ratio⁽⁵⁾		76.17	%		72.87	%		83.37	%		83.36	%		100.10	%		74.52	%		92.25	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships ^{(2) , (5)}		73.50	%		65.70	%		75.46	%		72.49	%		80.51	%		69.41	%		79.51	%
Average held-for-investment loans and leases to average deposits		98.63	%		94.87	%		86.09	%		77.33	%		73.54	%		96.77	%		70.85	%
Average investment securities to average total assets		22.27	%		24.60	%		26.10	%		27.64	%		28.09	%		23.43	%		29.15	%
Average stockholders’ equity to average total assets		9.78	%		9.94	%		9.98	%		9.95	%		9.48	%		9.86	%		9.21	%
Allowance for loan and lease losses (ALLL)
Balance at beginning of period	$	54,763		$	49,333		$	45,072		$	42,385		$	42,736		$	49,333		$	40,444
Loans and leases charged off		(950	)		(14,639	)		(1,367	)		(959	)		(2,898	)		(15,589	)		(3,255	)
Recoveries		212			570			576			85			44			782			110
Provision for loan and lease losses		2,653			19,499			5,052			3,561			2,503			22,152			5,086

Balance at end of period	$	56,678		$	54,763		$	49,333		$	45,072		$	42,385		$	56,678		$	42,385

Annualized net loan charge-offs to average total loans and leases held-for-investment		0.04	%		0.84	%		0.05	%		0.06	%		0.19	%		0.43	%		0.10	%
Reserve for loss on repurchased loans
Balance at beginning of period	$	3,426		$	6,306		$	6,173		$	8,028		$	8,118		$	6,306		$	7,974
Provision (reversal) for loan repurchases		(165	)		(1,786	)		(326	)		(651	)		270			(1,951	)		787
Utilization of reserve for loan repurchases		(112	)		(1,094	)		(301	)		(1,204	)		(360	)		(1,206	)		(733	)
Other adjustments		—			—			760			—			—			—			—

Balance at end of period	$	3,149		$	3,426		$	6,306		$	6,173		$	8,028		$	3,149		$	8,028

(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)


	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Asset quality information and ratios
Delinquent loans and leases held-for-investment 30 to 89 days delinquent, excluding purchased credit impaired (PCI) loans	$	15,097		$	31,936		$	32,087		$	20,286		$	23,305
90+ days delinquent, excluding PCI loans		11,453			11,526			9,542			11,150			6,508

Total delinquent loans, excluding PCI loans		26,550			43,462			41,629			31,436			29,813

PCI loans, 30 to 89 days delinquent		—			—			—			—			343
PCI loans, 90+ days delinquent		—			—			—			—			807

Total delinquent PCI loans		—			—			—			—			1,150

Total delinquent loans	$	26,550		$	43,462		$	41,629		$	31,436		$	30,963

Total delinquent non-PCI loans to total non-PCI loans		0.38	%		0.63	%		0.63	%		0.50	%		0.50	%
Total delinquent loans and leases to total loans and leases		0.38	%		0.63	%		0.63	%		0.50	%		0.52	%
Non-performing assets, excluding loans held-for-sale
Non-performing loans and leases, excluding PCI loans	$	22,290		$	21,220		$	19,382		$	12,275		$	9,064
90+ days delinquent and still accruing loans and leases, excluding PCI loans		—			—			—			—			—
Other real estate owned		710			1,024			1,796			3,682			3,267

Non-performing assets	$	23,000		$	22,244		$	21,178		$	15,957		$	12,331

ALLL to non-performing loans and leases		254.28	%		258.07	%		254.53	%		367.19	%		467.62	%
Non-performing loans and leases to total loans and leases		0.32	%		0.31	%		0.29	%		0.20	%		0.15	%
Non-performing assets to total assets		0.22	%		0.22	%		0.21	%		0.16	%		0.12	%
Troubled debt restructurings (TDRs)
Performing TDRs	$	5,648		$	5,787		$	5,646		$	5,668		$	4,579
Non-performing TDRs		2,701			2,632			2,675			—			1,125

Total TDRs	$	8,349		$	8,419		$	8,321		$	5,668		$	5,704

Loans and leases and ALLL by loan origination type
Loan and lease breakdown by origination type
Originated loans and leases	$	6,446,127		$	6,295,843		$	5,988,101		$	5,488,018		$	5,159,823
Acquired loans not impaired at acquisition		589,877			634,664			671,306			738,879			792,213
Acquired with deteriorated credit quality		—			—			—			—			4,301

Total loans and leases	$	7,036,004		$	6,930,507		$	6,659,407		$	6,226,897		$	5,956,337

ALLL breakdown by origination type
Originated loans and leases	$	55,534		$	53,605		$	48,110		$	43,723		$	41,090
Acquired loans not impaired at acquisition		1,144			1,158			1,223			1,349			1,271
Acquired with deteriorated credit quality		—			—			—			—			24

Total ALLL	$	56,678		$	54,763		$	49,333		$	45,072		$	42,385

Discount on Purchased/Acquired Loans
Acquired loans not impaired at acquisition	$	12,932		$	14,255		$	14,943		$	15,983		$	15,446
Acquired with deteriorated credit quality		—			—			—			—			1,754

Total Discount	$	12,932		$	14,255		$	14,943		$	15,983		$	17,200

Percentage of ALLL to:
Originated loans and leases		0.86	%		0.85	%		0.80	%		0.80	%		0.80	%
Originated loans and leases and acquired loans not impaired at acquisition		0.81	%		0.79	%		0.74	%		0.72	%		0.71	%
Total loans and leases		0.81	%		0.79	%		0.74	%		0.72	%		0.71	%

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Composition of held-for-investment loans and leases
Commercial real estate	$	793,855		$	773,193		$	717,415		$	713,120		$	716,771
Multifamily		1,959,965			1,944,082			1,816,141			1,617,890			1,545,888
Construction		211,110			200,766			182,960			176,397			156,246
Commercial and industrial		1,742,559			1,638,559			1,701,951			1,602,805			1,560,916
SBA		78,092			79,022			78,699			78,604			77,254
Lease financing		—			3			13			91			173

Total commercial loans		4,785,581			4,635,625			4,497,179			4,188,907			4,057,248

Single family residential mortgage		2,174,183			2,201,358			2,055,649			1,920,310			1,778,536
Other consumer		76,240			93,524			106,579			117,680			120,553

Total consumer loans		2,250,423			2,294,882			2,162,228			2,037,990			1,899,089

Total gross loans and leases	$	7,036,004		$	6,930,507		$	6,659,407		$	6,226,897		$	5,956,337

Composition percentage of held-for-investment loans and leases
Commercial real estate		11.3	%		11.2	%		10.8	%		11.5	%		12.0	%
Multifamily		27.9	%		28.1	%		27.3	%		26.0	%		26.0	%
Construction		3.0	%		2.9	%		2.7	%		2.8	%		2.6	%
Commercial and industrial		24.8	%		23.6	%		25.5	%		25.7	%		26.2	%
SBA		1.1	%		1.1	%		1.2	%		1.3	%		1.3	%
Lease financing		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

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

Single family residential mortgage		30.9	%		31.8	%		30.9	%		30.8	%		29.9	%
Other consumer		1.0	%		1.3	%		1.6	%		1.9	%		2.0	%

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

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

Composition of deposits
Noninterest-bearing checking	$	1,005,032		$	1,039,116		$	1,071,608		$	1,075,782		$	1,138,095
Interest-bearing checking		1,778,400			1,864,629			2,089,016			2,011,943			2,058,130
Money market		1,136,335			1,091,735			1,146,859			1,728,937			2,265,380
Savings		1,175,275			1,051,267			1,059,628			945,699			985,001
Certificates of deposit		2,040,752			2,063,418			1,925,792			1,641,232			1,598,305

Total deposits	$	7,135,794		$	7,110,165		$	7,292,903		$	7,403,593		$	8,044,911

Composition percentage of deposits
Noninterest-bearing checking		14.1	%		14.6	%		14.7	%		14.5	%		14.1	%
Interest-bearing checking		24.9	%		26.2	%		28.7	%		27.2	%		25.6	%
Money market		15.9	%		15.4	%		15.7	%		23.3	%		28.2	%
Savings		16.5	%		14.8	%		14.5	%		12.8	%		12.2	%
Certificates of deposit		28.6	%		29.0	%		26.4	%		22.2	%		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		14.71	%		14.60	%		14.56	%		14.48	%		14.39	%
Tier 1 risk-based capital ratio		13.83	%		13.74	%		13.79	%		13.77	%		13.72	%
Common equity tier 1 capital ratio		9.90	%		9.80	%		9.92	%		9.91	%		9.83	%
Tier 1 leverage ratio		9.30	%		9.21	%		9.39	%		9.55	%		8.93	%
Banc of California, NA
Total risk-based capital ratio		16.63	%		16.53	%		16.56	%		16.39	%		16.13	%
Tier 1 risk-based capital ratio		15.74	%		15.67	%		15.78	%		15.68	%		15.45	%
Common equity tier 1 capital ratio		15.74	%		15.67	%		15.78	%		15.68	%		15.45	%
Tier 1 leverage ratio		10.58	%		10.50	%		10.67	%		10.88	%		10.05	%

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	June 30, 2018								March 31, 2018								December 31, 2017
	Average					Yield			Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	54,791		$	328		2.40	%	$	97,095		$	297		1.24	%	$	127,139		$	363		1.13	%
SFR mortgage		2,223,608			22,790		4.11	%		2,122,666			21,352		4.08	%		1,957,754			19,487		3.95	%
Seasoned SFR mortgage loan pools		—			—		—			—			—		—			—			—		—
Commercial real estate, multifamily, and construction		2,989,014			33,736		4.53	%		2,856,290			31,439		4.46	%		2,613,940			29,696		4.51	%
Commercial and industrial, SBA, and lease financing		1,707,478			23,664		5.56	%		1,625,549			20,850		5.20	%		1,630,886			20,989		5.11	%
Other consumer		80,188			978		4.89	%		103,676			1,160		4.54	%		107,664			1,233		4.54	%

Gross loans and leases		7,055,079			81,496		4.63	%		6,805,276			75,098		4.48	%		6,437,383			71,768		4.42	%
Securities		2,279,416			21,455		3.78	%		2,525,220			21,631		3.47	%		2,653,838			23,170		3.46	%
Other interest-earning assets		392,342			2,423		2.48	%		407,064			2,164		2.16	%		548,171			2,292		1.66	%

Total interest-earning assets		9,726,837			105,374		4.35	%		9,737,560			98,893		4.12	%		9,639,392			97,230		4.00	%
Allowance for loan and lease losses		(54,903	)							(49,257	)							(45,681	)
BOLI and non-interest earning assets		565,224								574,930								572,692

Total assets	$	10,237,158							$	10,263,233							$	10,166,403

Interest-bearing liabilities
Savings	$	1,055,693			3,886		1.48	%	$	1,055,338			3,300		1.27	%	$	1,019,659			2,947		1.15	%
Interest-bearing checking		1,822,856			4,182		0.92	%		1,976,160			4,108		0.84	%		2,082,677			4,267		0.81	%
Money market		1,134,280			3,689		1.30	%		1,076,117			2,834		1.07	%		1,294,537			3,262		1.00	%
Certificates of deposit		2,079,932			8,558		1.65	%		1,906,556			6,553		1.39	%		1,822,010			5,568		1.21	%

Total interest-bearing deposits		6,092,761			20,315		1.34	%		6,014,171			16,795		1.13	%		6,218,883			16,044		1.02	%
FHLB advances		1,827,307			9,539		2.09	%		1,711,089			7,392		1.75	%		1,448,326			5,402		1.48	%
Securities sold under repurchase agreements		29,907			211		2.83	%		119,543			750		2.54	%		33,513			194		2.30	%
Long-term debt and other interest-bearing liabilities		174,296			2,356		5.42	%		174,424			2,332		5.42	%		174,066			2,344		5.34	%

Total interest-bearing liabilities		8,124,271			32,421		1.60	%		8,019,227			27,269		1.38	%		7,874,788			23,984		1.21	%
Noninterest-bearing deposits		1,004,502								1,056,700								1,110,815
Non-interest-bearing liabilities		107,529								167,345								166,432

Total liabilities		9,236,302								9,243,272								9,152,035
Total stockholders’ equity		1,000,856								1,019,961								1,014,368

Total liabilities and stockholders’ equity	$	10,237,158							$	10,263,233							$	10,166,403

Net interest income/spread				$	72,953		2.75	%				$	71,624		2.74	%				$	73,246		2.79	%

Net interest margin							3.01	%							2.98	%							3.01	%
Ratio of interest-earning assets to interest-bearing liabilities		119.73	%							121.43	%							122.41	%
Total deposits	$	7,097,263		$	20,315		1.15	%	$	7,070,871		$	16,795		0.96	%	$	7,329,698		$	16,044		0.87	%
Total funding ⁽²⁾	$	9,128,773		$	32,421		1.42	%	$	9,075,927		$	27,269		1.22	%	$	8,985,603		$	23,984		1.06	%

(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
	September 30, 2017								June 30, 2017
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost			Balance			Interest		Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	246,675		$	2,319		3.73	%	$	575,669		$	4,876		3.40	%
SFR mortgage		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		2,494,284			28,659		4.56	%		2,394,487			27,038		4.53	%
Commercial and industrial, SBA, and lease financing		1,553,816			20,141		5.14	%		1,565,583			18,991		4.87	%
Other consumer		114,569			1,363		4.72	%		119,644			1,425		4.78	%

Gross loans and leases		6,268,915			71,125		4.50	%		6,639,666			72,457		4.38	%
Securities		2,791,585			24,337		3.46	%		3,004,551			24,996		3.34	%
Other interest-earning assets		519,593			2,206		1.68	%		517,349			1,783		1.38	%

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

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

Interest-bearing liabilities
Savings	$	968,158			2,263		0.93	%	$	1,002,797			2,262		0.90	%
Interest-bearing checking		2,037,729			3,871		0.75	%		2,013,751			3,609		0.72	%
Money market		1,935,262			5,095		1.04	%		2,359,173			5,482		0.93	%
Certificates of deposit		1,560,078			4,239		1.08	%		1,606,270			3,589		0.90	%

Total interest-bearing deposits		6,501,227			15,468		0.94	%		6,981,991			14,942		0.86	%
FHLB advances		962,391			3,352		1.38	%		990,780			2,774		1.12	%
Securities sold under repurchase agreements		88,810			500		2.23	%		34,298			180		2.11	%
Long-term debt and other interest-bearing liabilities		173,772			2,395		5.47	%		240,201			3,044		5.08	%

Total interest-bearing liabilities		7,726,200			21,715		1.12	%		8,247,270			20,940		1.02	%
Noninterest-bearing deposits		1,178,062								1,261,338
Non-interest-bearing liabilities		191,457								174,128

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

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

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

Net interest margin							3.15	%							3.09	%
Ratio of interest-earning assets to interest-bearing liabilities		123.99	%							123.21	%
Total deposits	$	7,679,289		$	15,468		0.80	%	$	8,243,329		$	14,942		0.73	%
Total funding ⁽²⁾	$	8,904,262		$	21,715		0.97	%	$	9,508,608		$	20,940		0.88	%

(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)


	Six Months Ended
	June 30, 2018								June 30, 2017
	Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	75,826		$	625		1.66	%	$	374,916		$	6,062		3.26	%
SFR mortgage		2,173,415			44,141		4.10	%		2,160,241			42,038		3.92	%
Seasoned SFR mortgage loan pools		—			—		—			153,240			4,266		5.61	%
Commercial real estate, multifamily, and construction		2,923,019			65,175		4.50	%		2,365,566			51,670		4.40	%
Commercial and industrial, SBA, and lease financing		1,666,740			44,515		5.39	%		1,537,326			38,527		5.05	%
Other consumer		91,867			2,138		4.69	%		120,649			2,667		4.46	%

Gross loans and leases		6,930,867			156,594		4.56	%		6,711,938			145,230		4.36	%
Securities		2,401,639			43,086		3.62	%		3,189,596			52,235		3.30	%
Other interest-earning assets		399,662			4,587		2.31	%		508,784			3,879		1.54	%

Total interest-earning assets		9,732,168			204,267		4.23	%		10,410,318			201,344		3.90	%
Allowance for loan and lease losses		(52,095	)							(42,095	)
BOLI and non-interest earning assets		570,050								573,323

Total assets	$	10,250,123							$	10,941,546

Interest-bearing liabilities
Savings	$	1,055,516			7,186		1.37	%	$	1,022,305			4,555		0.90	%
Interest-bearing checking		1,899,085			8,291		0.88	%		2,011,303			7,023		0.70	%
Money market		1,105,359			6,523		1.19	%		2,546,452			10,173		0.81	%
Certificates of deposit		1,993,723			15,110		1.53	%		1,770,916			7,151		0.81	%

Total interest-bearing deposits		6,053,683			37,110		1.24	%		7,350,976			28,902		0.79	%
FHLB advances		1,769,520			16,931		1.93	%		902,105			4,197		0.94	%
Securities sold under repurchase agreements		74,477			961		2.60	%		18,300			186		2.05	%
Long-term debt and other interest-bearing liabilities		174,360			4,688		5.42	%		242,110			6,016		5.01	%

Total interest-bearing liabilities		8,072,040			59,690		1.49	%		8,513,491			39,301		0.93	%
Noninterest-bearing deposits		1,030,457								1,221,530
Non-interest-bearing liabilities		137,271								198,465

Total liabilities		9,239,768								9,933,486
Total stockholders’ equity		1,010,355								1,008,060

Total liabilities and stockholders’ equity	$	10,250,123							$	10,941,546

Net interest income/spread				$	144,577		2.74	%				$	162,043		2.97	%

Net interest margin							3.00	%							3.14	%

Ratio of interest-earning assets to interest-bearing liabilities		120.57	%							122.28	%

Total deposits	$	7,084,140		$	37,110		1.06	%	$	8,572,506		$	28,902		0.68	%
Total funding ⁽²⁾	$	9,102,497		$	59,690		1.32	%	$	9,735,021		$	39,301		0.81	%

(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.


	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017
Tangible common equity to tangible assets ratio
Total assets	$	10,319,280		$	10,329,319		$	10,327,852		$	10,280,028		$	10,365,768
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(7,683	)		(8,510	)		(9,353	)		(10,219	)		(11,135	)

Tangible assets	$	10,274,453		$	10,283,665		$	10,281,355		$	10,232,665		$	10,317,489

Total stockholders’ equity	$	988,688		$	993,756		$	1,012,308		$	1,013,908		$	1,006,292
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(7,683	)		(8,510	)		(9,353	)		(10,219	)		(11,135	)

Tangible equity		943,861			948,102			965,811			966,545			958,013
Less preferred stock		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)

Tangible common equity	$	674,790		$	679,031		$	696,740		$	697,474		$	688,942

Total stockholders’ equity to total assets		9.58	%		9.62	%		9.80	%		9.86	%		9.71	%
Tangible equity to tangible assets		9.19	%		9.22	%		9.39	%		9.45	%		9.29	%
Tangible common equity to tangible assets		6.57	%		6.60	%		6.78	%		6.82	%		6.68	%
Common stock outstanding		50,142,955			50,079,736			50,083,345			50,096,056			49,991,395
Class B non-voting non-convertible common stock outstanding		403,778			508,107			508,107			430,694			355,173

Total common stock outstanding		50,546,733			50,587,843			50,591,452			50,526,750			50,346,568

Tangible common equity per common stock	$	13.35		$	13.42		$	13.77		$	13.80		$	13.68
Book value per common stock	$	14.24		$	14.33		$	14.69		$	14.74		$	14.64

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Six Months Ended
	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			June 30, 2018			June 30, 2017
Return on tangible common equity
Average total stockholders’ equity	$	1,000,856		$	1,019,961		$	1,014,368		$	1,005,462		$	1,014,267		$	1,010,355		$	1,008,060
Less average preferred stock		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)
Less average goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(38,177	)
Less average other intangible assets		(8,110	)		(8,972	)		(9,788	)		(10,760	)		(11,808	)		(8,539	)		(12,495	)

Average tangible common equity	$	686,531		$	704,774		$	698,365		$	688,487		$	696,244		$	695,601		$	688,317

Net income	$	14,780		$	8,558		$	11,302		$	16,949		$	12,257		$	23,338		$	29,458
Less preferred stock dividends		(5,113	)		(5,113	)		(5,113	)		(5,112	)		(5,113	)		(10,226	)		(10,226	)
Add amortization of intangible assets		827			843			866			916			1,056			1,670			2,146
Add impairment on intangible assets		—			—			—			—			—			—			336
Less tax effect on amortization and impairment of intangible assets		(174	)		(177	)		(303	)		(321	)		(370	)		(351	)		(869	)

Net income available to common stockholders	$	10,320		$	4,111		$	6,752		$	12,432		$	7,830		$	14,431		$	20,845

Return on average equity		5.92	%		3.40	%		4.42	%		6.69	%		4.85	%		4.66	%		5.89	%
Return on average tangible common equity		6.03	%		2.37	%		3.84	%		7.16	%		4.51	%		4.18	%		6.11	%
Effective tax rate utilized for calculating tax effect on amortization and impairment of intangible assets		21.00	%		21.00	%		35.00	%		35.00	%		35.00	%		21.00	%		35.00	%

	Three Months Ended															Six Months Ended
	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017			June 30, 2018			June 30, 2017
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships
Noninterest expense	$	62,554		$	59,812		$	66,424		$	79,008		$	98,216		$	122,366		$	222,831
Gain (loss) on investments in alternative energy partnerships		(1,808	)		34			(3,995	)		(8,348	)		(9,761	)		(1,774	)		(18,443	)

Adjusted noninterest expense	$	60,746		$	59,846		$	62,429		$	70,660		$	88,455		$	120,592		$	204,388

Net interest income	$	72,953		$	71,624		$	73,246		$	75,953		$	78,296		$	144,577		$	162,043
Noninterest income		9,168			10,452			6,429			18,827			19,817			19,620			79,521

Total revenue		82,121			82,076			79,675			94,780			98,113			164,197			241,564
Tax credit from investments in alternative energy partnerships		1,912			7,323			4,908			8,777			15,681			9,235			24,510
Deferred tax expense on investments in alternative energy partnerships		(211	)		(769	)		(859	)		(1,536	)		(2,744	)		(980	)		(4,289	)
Tax effect on tax credit and deferred tax expense		631			2,422			3,004			3,804			8,584			3,053			13,724
Gain (loss) on investments in alternative energy partnerships		(1,808	)		34			(3,995	)		(8,348	)		(9,761	)		(1,774	)		(18,443	)

Total pre-tax adjustments for investments in alternative energy partnerships		524			9,010			3,058			2,697			11,760			9,534			15,502

Adjusted total revenue	$	82,645		$	91,086		$	82,733		$	97,477		$	109,873		$	173,731		$	257,066

Efficiency ratio		76.17	%		72.87	%		83.37	%		83.36	%		100.10	%		74.52	%		92.25	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships		73.50	%		65.70	%		75.46	%		72.49	%		80.51	%		69.41	%		79.51	%
Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense		27.07	%		26.98	%		42.59	%		34.44	%		39.89	%		27.00	%		40.43	%

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BANC OF CALIFORNIA, INC. Reports