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

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EX-99.2 - EX-99.2 - BANC OF CALIFORNIA, INC.	d643483dex992.htm
8-K - FORM 8-K - BANC OF CALIFORNIA, INC.	d643483d8k.htm

Exhibit 99.1

LOGO

Banc of California Reports Third Quarter 2018 Earnings

SANTA ANA, Calif., (October 25, 2018) – Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $3.8 million, for the third quarter of 2018, resulting in diluted earnings per common share of $0.07 for the quarter.

Highlights for the Third quarter included:

•

Strong Core Deposit Growth: Core deposits grew by $171 million, or an 11% annualized rate of growth, allowing for a $70 million reduction in wholesale funding.

•

Organic Loan Growth: Held for investment loans increased by $217 million during the quarter to $7.3 billion. Annualized loan portfolio growth for the year to date period was 12%.

•

Gross loan commitment originations totaled $907 million for the third quarter at an average production yield of 5.22%.

•

Continuation of Balance Sheet Re-Mix: Reduced securities by $237 million, or 10%, driven by the continued reduction of Collateralized Loan Obligations (“CLOs”).

•

Bolstered Talent: Named key leadership positions for Middle Market Banking and Business Banking.

•

Disciplined Expense Management: Third quarter noninterest expense totaled $61 million.

•

Strong Credit Performance: Non-performing assets of 0.25% and total delinquencies of 0.49%. Net charge-offs totaled $306,000. The ALLL / total loan ratio was 0.80% at quarter end, down from 0.81% at the prior quarter end and up from 0.72% a year ago.

•

Strong Capital Ratios: Called the Series C $40 million preferred equity class during the quarter. Common equity tier 1 capital ratio of 9.80%, compared to 9.91% a year ago.

The Company’s third quarter reported financial results included $7.6 million of legal and professional fees partially offset by a $1.7 million insurance recovery related to ongoing indemnification expense, a software write-off of $1.5 million and a $553,000 restructuring expense. The aggregate impact of these items resulted in $8.0 million of net, nonrecurring expenses for the quarter. In connection with redeeming all $40 million of the Series C preferred stock during the quarter, the Company recorded a one-time reduction to net income available to common stockholders of $2.3 million, which represented the issuance cost of the Series C preferred stock.

“We continue to execute on our strategic plan and the third quarter saw yet more progress,” said Doug Bowers, President and Chief Executive Officer of Banc of California. “We saw strong growth in our core deposits with balances increasing $171 million for the quarter or 11% annualized. Loan growth was also strong at $217 million or 12% annualized. Efforts to streamline, simplify and create efficiencies are also paying dividends as noninterest expense, excluding non-recurring items, once again declined. Credit quality remained strong with non-performing assets to total assets at 0.25%.”

The Company will host a conference call to discuss its third quarter 2018 financial results at 7:00 a.m. Pacific Time (PT) on Thursday, October 25, 2018. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 1013055. 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)


	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
ASSETS
Cash and cash equivalents	$	372,221		$	385,691		$	346,704		$	387,699		$	611,826
Time deposits in financial institutions		—			—			—			—			1,000
Securities available-for-sale		2,059,832			2,297,124			2,424,593			2,575,469			2,755,664
Loans held-for-sale		9,382			13,753			20,180			67,069			50,130
Loans and leases receivable		7,253,293			7,036,004			6,930,507			6,659,407			6,226,897
Allowance for loan and lease losses		(57,782	)		(56,678	)		(54,763	)		(49,333	)		(45,072	)
Federal Home Loan Bank and other bank stock		71,308			75,737			82,715			75,654			67,063
Servicing rights, net		3,770			3,869			6,739			33,708			40,448
Other real estate owned, net		434			710			1,024			1,796			3,682
Premises and equipment, net		133,129			135,478			135,198			135,699			139,326
Investments in alternative energy partnerships, net		41,781			44,806			48,344			48,826			43,817
Goodwill		37,144			37,144			37,144			37,144			37,144
Other intangible assets, net		6,990			7,683			8,510			9,353			10,219
Deferred income tax, net		47,865			42,334			43,192			31,074			23,333
Income tax receivable		1,764			7,995			10,126			8,739			7,699
Bank owned life insurance investment		106,468			105,917			105,384			104,851			104,292
Other assets		152,933			155,298			153,834			161,797			142,985
Assets of discontinued operations		20,290			26,415			29,888			38,900			59,575

Total assets	$	10,260,822		$	10,319,280		$	10,329,319		$	10,327,852		$	10,280,028

LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,061,557		$	1,005,032		$	1,039,116		$	1,071,608		$	1,075,782
Interest-bearing deposits		6,340,185			6,130,762			6,071,049			6,221,295			6,327,811

Total deposits		7,401,742			7,135,794			7,110,165			7,292,903			7,403,593
Advances from Federal Home Loan Bank		1,640,000			1,805,000			1,905,000			1,695,000			1,470,000
Securities sold under repurchase agreements		—			—			—			—			36,520
Notes payable, net		173,096			173,017			172,966			172,941			172,865
Reserve for loss on repurchased loans		2,575			3,149			3,426			6,306			6,173
Due on unsettled securities purchases		17,500			132,546			59,000			—			54,500
Accrued expenses and other liabilities		79,231			81,086			84,997			140,575			109,969
Liabilities of discontinued operations		—			—			9			7,819			12,500

Total liabilities		9,314,144			9,330,592			9,335,563			9,315,544			9,266,120
Commitments and contingent liabilities
Preferred stock		231,128			269,071			269,071			269,071			269,071
Common stock		518			517			517			517			542
Common stock, class B non-voting non-convertible		5			4			5			5			4
Additional paid-in capital		624,789			623,372			623,483			621,435			619,849
Retained earnings		140,971			143,880			141,008			144,839			145,420
Treasury stock		(28,786	)		(28,786	)		(28,786	)		(28,786	)		(28,786	)
Accumulated other comprehensive (loss) income, net		(21,947	)		(19,370	)		(11,542	)		5,227			7,808

Total stockholders’ equity		946,678			988,688			993,756			1,012,308			1,013,908

Total liabilities and stockholders’ equity	$	10,260,822		$	10,319,280		$	10,329,319		$	10,327,852		$	10,280,028

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Nine Months Ended
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			September 30, 2018			September 30, 2017
Interest and dividend income
Loans, including fees	$	84,795		$	81,307		$	74,912		$	71,695		$	70,208		$	241,014		$	209,376
Securities		20,599			21,455			21,631			23,170			24,337			63,685			76,572
Other interest-earning assets		2,380			2,423			2,164			2,292			2,206			6,967			6,085

Total interest and dividend income		107,774			105,185			98,707			97,157			96,751			311,666			292,033
Interest expense
Deposits		25,154			20,315			16,795			16,044			15,468			62,264			44,370
Federal Home Loan Bank advances		8,996			9,539			7,392			5,402			3,352			25,927			7,549
Securities sold under repurchase agreements		47			211			750			194			500			1,008			686
Notes payable and other interest-bearing liabilities		2,385			2,356			2,332			2,344			2,395			7,073			8,411

Total interest expense		36,582			32,421			27,269			23,984			21,715			96,272			61,016

Net interest income		71,192			72,764			71,438			73,173			75,036			215,394			231,017
Provision for loan and lease losses		1,410			2,653			19,499			5,052			3,561			23,562			8,647

Net interest income after provision for loan and lease losses		69,782			70,111			51,939			68,121			71,475			191,832			222,370
Noninterest income
Customer service fees		1,446			1,491			1,592			1,624			1,576			4,529			4,868
Loan servicing income (loss)		439			948			2,311			(2,416	)		553			3,698			3,441
Net gain on sale of securities available for sale		13			278			5,241			2,688			7,625			5,532			12,080
Net gain (loss) on sale of loans		279			821			(41	)		1,205			5,735			1,059			10,737
All other income (loss)		2,647			4,523			(521	)		2,594			2,876			6,649			7,849

Total noninterest income		4,824			8,061			8,582			5,695			18,365			21,467			38,975
Noninterest expense
Salaries and employee benefits		24,832			29,440			31,115			33,146			30,216			85,387			96,007
Occupancy and equipment		8,213			7,883			7,687			9,565			10,085			23,783			30,529
Professional fees		11,966			6,303			9,177			7,853			7,697			27,446			34,564
Data processing		1,884			1,678			1,656			1,562			1,901			5,218			6,326
Advertising		3,152			2,864			3,277			1,420			1,051			9,293			3,893
Regulatory assessments		2,138			2,196			2,092			2,174			2,350			6,426			5,931
Reversal of provision for loan repurchases		(360	)		(218	)		(1,788	)		(335	)		(749	)		(2,366	)		(1,477	)
Amortization of intangible assets		693			827			843			866			916			2,363			3,062
Restructuring expense		553			3,983			—			(43	)		—			4,536			5,369
All other expenses		5,322			5,775			5,775			6,179			13,856			16,872			30,891

Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships		58,393			60,731			59,834			62,387			67,323			178,958			215,095
Loss (gain) on investments in alternative energy partnerships		2,484			1,808			(34	)		3,995			8,348			4,258			26,791

Total noninterest expense		60,877			62,539			59,800			66,382			75,671			183,216			241,886

Income from continuing operations before income taxes		13,729			15,633			721			7,434			14,169			30,083			19,459
Income tax expense (benefit)		3,301			1,779			(6,353	)		(3,418	)		(3,939	)		(1,273	)		(23,163	)

Income from continuing operations		10,428			13,854			7,074			10,852			18,108			31,356			42,622

Income (loss) from discontinued operations before income taxes		924			1,281			2,044			765			(1,958	)		4,249			6,399
Income tax expense (benefit)		256			355			560			315			(799	)		1,171			2,614

Income (loss) from discontinued operations		668			926			1,484			450			(1,159	)		3,078			3,785

Net income		11,096			14,780			8,558			11,302			16,949			34,434			46,407
Preferred stock dividends		4,970			5,113			5,113			5,113			5,112			15,196			15,338
Impact of preferred stock redemption		2,307			—			—			—			—			2,307			—

Net income available to common stockholders	$	3,819		$	9,667		$	3,445		$	6,189		$	11,837		$	16,931		$	31,069

Basic earnings per total common share
Income from continuing operations	$	0.06		$	0.17		$	0.03		$	0.11		$	0.25		$	0.26		$	0.52
Income (loss) from discontinued operations		0.01			0.02			0.03			0.01			(0.02	)		0.06			0.08

Net income	$	0.07		$	0.19		$	0.06		$	0.12		$	0.23		$	0.32		$	0.60

Diluted earnings per total common share
Income from continuing operations	$	0.06		$	0.16		$	0.03		$	0.11		$	0.25		$	0.26		$	0.52
Income (loss) from discontinued operations		0.01			0.02			0.03			0.01			(0.02	)		0.06			0.07

Net income	$	0.07		$	0.18		$	0.06		$	0.12		$	0.23		$	0.32		$	0.59

Weighted average number of shares outstanding
Basic		50,656,076			50,593,429			50,590,545			50,532,544			50,362,314			50,613,590			50,160,928
Diluted		50,899,464			50,919,091			50,925,530			50,943,165			50,933,358			50,873,002			50,810,407
Dividends declared per common share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13		$	0.39		$	0.39

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 September 30, 2018								Nine Months Ended September 30, 2018
	Continuing Operations			Discontinued Operations		Consolidated Operations			Continuing Operations			Discontinued Operations		Consolidated Operations
Interest and dividend income	$	107,774		$	130	$	107,904		$	311,666		$	505	$	312,171
Interest expense		36,582			—		36,582			96,272			—		96,272

Net interest income		71,192			130		71,322			215,394			505		215,899
Provision for loan and lease losses		1,410			—		1,410			23,562			—		23,562

Net interest income after provision for loan and lease losses		69,782			130		69,912			191,832			505		192,337
Noninterest income
Customer service fees		1,446			—		1,446			4,529			—		4,529
Loan servicing income		439			—		439			3,698			—		3,698
Net gain on sale of securities available for sale		13			—		13			5,532			—		5,532
Net gain on sale of loans		279			—		279			1,059			—		1,059
Mortgage banking income		—			108		108			—			396		396
Gain on disposal of discontinued operations		—			—		—			—			1,275		1,275
All other income		2,647			786		3,433			6,649			2,200		8,849

Total noninterest income		4,824			894		5,718			21,467			3,871		25,338
Noninterest expense
Salaries and employee benefits		24,832			5		24,837			85,387			20		85,407
Occupancy and equipment		8,213			—		8,213			23,783			—		23,783
Professional fees		11,966			—		11,966			27,446			—		27,446
Data processing		1,884			—		1,884			5,218			—		5,218
Advertising		3,152			—		3,152			9,293			—		9,293
Regulatory assessments		2,138			—		2,138			6,426			—		6,426
Reversal of provision for loan repurchases		(360	)		—		(360	)		(2,366	)		—		(2,366	)
Loss on investments in alternative energy partnerships		2,484			—		2,484			4,258			—		4,258
Amortization of intangible assets		693			—		693			2,363			—		2,363
Restructuring expense		553			—		553			4,536			—		4,536
All other expenses		5,322			95		5,417			16,872			107		16,979

Total noninterest expense		60,877			100		60,977			183,216			127		183,343

Income before income taxes		13,729			924		14,653			30,083			4,249		34,332
Income tax (benefit) expense		3,301			256		3,557			(1,273	)		1,171		(102	)

Net income	$	10,428		$	668	$	11,096		$	31,356		$	3,078	$	34,434

Banc of California, Inc.

Selected Financial Data

(Dollars in thousands)

(Unaudited)


	Three Months Ended															Nine Months Ended
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			September 30, 2018			September 30, 2017
Profitability and other ratios of consolidated operations
Return on average assets⁽¹⁾		0.43	%		0.58	%		0.34	%		0.44	%		0.67	%		0.45	%		0.58	%
Return on average equity ⁽¹⁾		4.40	%		5.92	%		3.40	%		4.42	%		6.69	%		4.57	%		6.16	%
Return on average tangible common equity ⁽²⁾		2.49	%		6.03	%		2.37	%		3.84	%		7.16	%		3.61	%		6.46	%
Dividend payout ratio ⁽³⁾		185.71	%		68.42	%		216.67	%		108.33	%		56.52	%		121.88	%		65.00	%
Net interest spread		2.62	%		2.75	%		2.74	%		2.79	%		2.92	%		2.70	%		2.96	%
Net interest margin⁽¹⁾		2.93	%		3.01	%		2.98	%		3.01	%		3.15	%		2.97	%		3.14	%
Noninterest income to total revenue ⁽⁴⁾		7.42	%		11.16	%		12.73	%		8.07	%		19.86	%		10.50	%		29.24	%
Noninterest income to average total assets⁽¹⁾		0.22	%		0.36	%		0.41	%		0.25	%		0.74	%		0.33	%		1.23	%
Noninterest expense to average total assets⁽¹⁾		2.38	%		2.45	%		2.36	%		2.59	%		3.10	%		2.40	%		3.79	%
Efficiency ratio⁽⁵⁾		79.15	%		76.17	%		72.87	%		83.37	%		83.36	%		76.00	%		89.74	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships ^{(2) , (5)}		77.88	%		73.50	%		65.70	%		75.46	%		72.49	%		71.97	%		77.58	%
Average held-for-investment loans and leases to average deposits		97.00	%		98.63	%		94.87	%		86.09	%		77.33	%		96.85	%		72.88	%
Average investment securities to average total assets		21.28	%		22.27	%		24.60	%		26.10	%		27.64	%		22.71	%		28.67	%
Average stockholders’ equity to average total assets		9.85	%		9.78	%		9.94	%		9.98	%		9.95	%		9.85	%		9.45	%
Allowance for loan and lease losses (ALLL)
Balance at beginning of period	$	56,678		$	54,763		$	49,333		$	45,072		$	42,385		$	49,333		$	40,444
Loans and leases charged off		(388	)		(950	)		(14,639	)		(1,367	)		(959	)		(15,977	)		(4,214	)
Recoveries		82			212			570			576			85			864			195
Provision for loan and lease losses		1,410			2,653			19,499			5,052			3,561			23,562			8,647

Balance at end of period	$	57,782		$	56,678		$	54,763		$	49,333		$	45,072		$	57,782		$	45,072

Annualized net loan charge-offs to average total loans and leases held-for-investment		0.02	%		0.04	%		0.84	%		0.05	%		0.06	%		0.29	%		0.09	%
Reserve for loss on repurchased loans
Balance at beginning of period	$	3,149		$	3,426		$	6,306		$	6,173		$	8,028			6,306		$	7,974
Provision (reversal) for loan repurchases		(342	)		(165	)		(1,786	)		(326	)		(651	)		(2,293	)		136
Utilization of reserve for loan repurchases		(232	)		(112	)		(1,094	)		(301	)		(1,204	)		(1,438	)		(1,937	)
Other adjustments		—			—			—			760			—			—			—

Balance at end of period	$	2,575		$	3,149		$	3,426		$	6,306		$	6,173		$	2,575		$	6,173

(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)


	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Asset quality information and ratios
Delinquent loans and leases held-for-investment
30 to 89 days delinquent	$	20,265		$	15,097		$	31,936		$	32,087		$	20,286
90+ days delinquent		15,269			11,453			11,526			9,542			11,150

Total delinquent loans	$	35,534		$	26,550		$	43,462		$	41,629		$	31,436

Total delinquent loans and leases to total loans and leases		0.49	%		0.38	%		0.63	%		0.63	%		0.50	%
Non-performing assets, excluding loans held-for-sale
Non-performing loans and leases	$	25,523		$	22,290		$	21,220		$	19,382		$	12,275
90+ days delinquent and still accruing loans and leases		—			—			—			—			—
Other real estate owned		434			710			1,024			1,796			3,682

Non-performing assets	$	25,957		$	23,000		$	22,244		$	21,178		$	15,957

ALLL to non-performing loans and leases		226.39	%		254.28	%		258.07	%		254.53	%		367.19	%
Non-performing loans and leases to total loans and leases		0.35	%		0.32	%		0.31	%		0.29	%		0.20	%
Non-performing assets to total assets		0.25	%		0.22	%		0.22	%		0.21	%		0.16	%
Troubled debt restructurings (TDRs)
Performing TDRs	$	5,580		$	5,648		$	5,787		$	5,646		$	5,668
Non-performing TDRs		2,684			2,701			2,632			2,675			–

Total TDRs	$	8,264		$	8,349		$	8,419		$	8,321		$	5,668

Loans and leases and ALLL by loan origination type
Loan and lease breakdown by origination type
Originated loans and leases	$	6,683,683		$	6,446,127		$	6,295,843		$	5,988,101		$	5,488,018
Acquired loans not impaired at acquisition		569,610			589,877			634,664			671,306			738,879

Total loans and leases	$	7,253,293		$	7,036,004		$	6,930,507		$	6,659,407		$	6,226,897

ALLL breakdown by origination type
Originated loans and leases	$	56,672		$	55,534		$	53,605		$	48,110		$	43,723
Acquired loans not impaired at acquisition		1,110			1,144			1,158			1,223			1,349

Total ALLL	$	57,782		$	56,678		$	54,763		$	49,333		$	45,072

Discount on Purchased/Acquired Loans
Acquired loans not impaired at acquisition	$	12,311		$	12,932		$	14,255		$	14,943		$	15,983

Total Discount	$	12,311		$	12,932		$	14,255		$	14,943		$	15,983

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

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Composition of held-for-investment loans and leases
Commercial real estate	$	823,193		$	793,855		$	773,193		$	717,415		$	713,120
Multifamily		2,112,190			1,959,965			1,944,082			1,816,141			1,617,890
Construction		200,294			211,110			200,766			182,960			176,397
Commercial and industrial		1,673,055			1,742,559			1,638,559			1,701,951			1,602,805
SBA		71,494			78,092			79,022			78,699			78,604
Lease financing		—			—			3			13			91

Total commercial loans		4,880,226			4,785,581			4,635,625			4,497,179			4,188,907

Single family residential mortgage		2,300,069			2,174,183			2,201,358			2,055,649			1,920,310
Other consumer		72,998			76,240			93,524			106,579			117,680

Total consumer loans		2,373,067			2,250,423			2,294,882			2,162,228			2,037,990

Total gross loans and leases	$	7,253,293		$	7,036,004		$	6,930,507		$	6,659,407		$	6,226,897

Composition percentage of held-for-investment loans and leases
Commercial real estate		11.3	%		11.3	%		11.2	%		10.8	%		11.5	%
Multifamily		29.1	%		27.9	%		28.1	%		27.3	%		26.0	%
Construction		2.8	%		3.0	%		2.9	%		2.7	%		2.8	%
Commercial and industrial		23.1	%		24.8	%		23.6	%		25.5	%		25.7	%
SBA		1.0	%		1.1	%		1.1	%		1.2	%		1.3	%
Lease financing		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

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

Single family residential mortgage		31.7	%		30.9	%		31.8	%		30.9	%		30.8	%
Other consumer		1.0	%		1.0	%		1.3	%		1.6	%		1.9	%

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

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

Composition of deposits
Noninterest-bearing checking	$	1,061,557		$	1,005,032		$	1,039,116		$	1,071,608		$	1,075,782
Interest-bearing checking		1,713,790			1,778,400			1,864,629			2,089,016			2,011,943
Money market		856,886			1,136,335			1,091,735			1,146,859			1,728,937
Savings		1,269,489			1,175,275			1,051,267			1,059,628			945,699
Brokered certificates of deposit		987,771			686,203			974,706			915,623			708,559
Non-brokered certificates of deposit		1,512,249			1,354,549			1,088,712			1,010,169			932,673

Total deposits	$	7,401,742		$	7,135,794		$	7,110,165		$	7,292,903		$	7,403,593

Composition percentage of deposits
Noninterest-bearing checking		14.3	%		14.1	%		14.6	%		14.7	%		14.5	%
Interest-bearing checking		23.2	%		24.9	%		26.2	%		28.7	%		27.2	%
Money market		11.6	%		15.9	%		15.4	%		15.7	%		23.3	%
Savings		17.2	%		16.5	%		14.8	%		14.5	%		12.8	%
Brokered certificates of deposit		13.3	%		9.6	%		13.7	%		12.5	%		9.6	%
Non-brokered certificates of deposit		20.4	%		19.0	%		15.3	%		13.9	%		12.6	%

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

Capital Ratios
Banc of California, Inc.
Total risk-based capital ratio		14.05	%		14.71	%		14.60	%		14.56	%		14.48	%
Tier 1 risk-based capital ratio		13.15	%		13.83	%		13.74	%		13.79	%		13.77	%
Common equity tier 1 capital ratio		9.80	%		9.90	%		9.80	%		9.92	%		9.91	%
Tier 1 leverage ratio		8.99	%		9.30	%		9.21	%		9.39	%		9.55	%
Banc of California, NA
Total risk-based capital ratio		15.94	%		16.63	%		16.53	%		16.56	%		16.39	%
Tier 1 risk-based capital ratio		15.04	%		15.74	%		15.67	%		15.78	%		15.68	%
Common equity tier 1 capital ratio		15.04	%		15.74	%		15.67	%		15.78	%		15.68	%
Tier 1 leverage ratio		10.29	%		10.58	%		10.50	%		10.67	%		10.88	%

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	September 30, 2018								June 30, 2018								March 31, 2018
	Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	42,754		$	263		2.44	%	$	54,791		$	328		2.40	%	$	97,095		$	297		1.24	%
SFR mortgage		2,222,602			23,461		4.19	%		2,223,608			22,790		4.11	%		2,122,666			21,352		4.08	%
Seasoned SFR mortgage loan pools		—			—		—			—			—		—			—			—		—
Commercial real estate, multifamily, and construction		3,091,706			35,838		4.60	%		2,989,014			33,736		4.53	%		2,856,290			31,439		4.46	%
Commercial and industrial, SBA, and lease financing		1,739,711			24,382		5.56	%		1,707,478			23,664		5.56	%		1,625,549			20,850		5.20	%
Other consumer		69,600			981		5.59	%		80,188			978		4.89	%		103,676			1,160		4.54	%

Gross loans and leases		7,166,373			84,925		4.70	%		7,055,079			81,496		4.63	%		6,805,276			75,098		4.48	%
Securities		2,163,037			20,599		3.78	%		2,279,416			21,455		3.78	%		2,525,220			21,631		3.47	%
Other interest-earning assets		335,160			2,380		2.82	%		392,342			2,423		2.48	%		407,064			2,164		2.16	%

Total interest-earning assets		9,664,570			107,904		4.43	%		9,726,837			105,374		4.35	%		9,737,560			98,893		4.12	%
Allowance for loan and lease losses		(56,730	)							(54,903	)							(49,257	)
BOLI and non-interest earning assets		554,636								565,224								574,930

Total assets	$	10,162,476							$	10,237,158							$	10,263,233

Interest-bearing liabilities
Savings	$	1,231,696			5,122		1.65	%	$	1,055,693			3,886		1.48	%	$	1,055,338			3,300		1.27	%
Interest-bearing checking		1,789,679			5,054		1.12	%		1,822,856			4,182		0.92	%		1,976,160			4,108		0.84	%
Money market		966,165			3,455		1.42	%		1,134,280			3,689		1.30	%		1,076,117			2,834		1.07	%
Certificates of deposit		2,332,181			11,523		1.96	%		2,079,932			8,558		1.65	%		1,906,556			6,553		1.39	%

Total interest-bearing deposits		6,319,721			25,154		1.58	%		6,092,761			20,315		1.34	%		6,014,171			16,795		1.13	%
FHLB advances		1,528,674			8,996		2.33	%		1,827,307			9,539		2.09	%		1,711,089			7,392		1.75	%
Securities sold under repurchase agreements		6,418			47		2.91	%		29,907			211		2.83	%		119,543			750		2.54	%
Long-term debt and other interest-bearing liabilities		174,361			2,385		5.43	%		174,296			2,356		5.42	%		174,424			2,332		5.42	%

Total interest-bearing liabilities		8,029,174			36,582		1.81	%		8,124,271			32,421		1.60	%		8,019,227			27,269		1.38	%
Noninterest-bearing deposits		1,023,890								1,004,502								1,056,700
Non-interest-bearing liabilities		108,593								107,529								167,345

Total liabilities		9,161,657								9,236,302								9,243,272
Total stockholders’ equity		1,000,819								1,000,856								1,019,961

Total liabilities and stockholders’ equity	$	10,162,476							$	10,237,158							$	10,263,233

Net interest income/spread				$	71,322		2.62	%				$	72,953		2.75	%				$	71,624		2.74	%

Net interest margin							2.93	%							3.01	%							2.98	%
Ratio of interest-earning assets to interest-bearing liabilities		120.37	%							119.73	%							121.43	%
Total deposits	$	7,343,611		$	25,154		1.36	%	$	7,097,263		$	20,315		1.15	%	$	7,070,871		$	16,795		0.96	%
Total funding ⁽²⁾	$	9,053,064		$	36,582		1.60	%	$	9,128,773		$	32,421		1.42	%	$	9,075,927		$	27,269		1.22	%

(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
	December 31, 2017								September 30, 2017
	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	%
SFR mortgage		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		2,613,940			29,696		4.51	%		2,494,284			28,659		4.56	%
Commercial and industrial, SBA, and lease financing		1,630,886			20,989		5.11	%		1,553,816			20,141		5.14	%
Other consumer		107,664			1,233		4.54	%		114,569			1,363		4.72	%

Gross loans and leases		6,437,383			71,768		4.42	%		6,268,915			71,125		4.50	%
Securities		2,653,838			23,170		3.46	%		2,791,585			24,337		3.46	%
Other interest-earning assets		548,171			2,292		1.66	%		519,593			2,206		1.68	%

Total interest-earning assets		9,639,392			97,230		4.00	%		9,580,093			97,668		4.04	%
Allowance for loan and lease losses		(45,681	)							(42,696	)
BOLI and non-interest earning assets		572,692								563,784

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

Interest-bearing liabilities
Savings	$	1,019,659			2,947		1.15	%	$	968,158			2,263		0.93	%
Interest-bearing checking		2,082,677			4,267		0.81	%		2,037,729			3,871		0.75	%
Money market		1,294,537			3,262		1.00	%		1,935,262			5,095		1.04	%
Certificates of deposit		1,822,010			5,568		1.21	%		1,560,078			4,239		1.08	%

Total interest-bearing deposits		6,218,883			16,044		1.02	%		6,501,227			15,468		0.94	%
FHLB advances		1,448,326			5,402		1.48	%		962,391			3,352		1.38	%
Securities sold under repurchase agreements		33,513			194		2.30	%		88,810			500		2.23	%
Long-term debt and other interest-bearing liabilities		174,066			2,344		5.34	%		173,772			2,395		5.47	%

Total interest-bearing liabilities		7,874,788			23,984		1.21	%		7,726,200			21,715		1.12	%
Noninterest-bearing deposits		1,110,815								1,178,062
Non-interest-bearing liabilities		166,432								191,457

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

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

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

Net interest margin							3.01	%							3.15	%
Ratio of interest-earning assets to interest-bearing liabilities		122.41	%							123.99	%
Total deposits	$	7,329,698		$	16,044		0.87	%	$	7,679,289		$	15,468		0.80	%
Total funding ⁽²⁾	$	8,985,603		$	23,984		1.06	%	$	8,904,262		$	21,715		0.97	%

(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)


	Nine Months Ended
	September 30, 2018								September 30, 2017
	Average Balance			Interest		Yield / Cost			Average Balance			Interest		Yield / Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	64,681		$	888		1.84	%	$	281,177		$	6,979		3.32	%
SFR mortgage		2,189,991			67,603		4.13	%		2,081,088			60,873		3.91	%
Seasoned SFR mortgage loan pools		—			—		—			129,949			5,474		5.63	%
Commercial real estate, multifamily, and construction		2,979,866			101,013		4.53	%		2,408,943			79,651		4.42	%
Commercial and industrial, SBA, and lease financing		1,691,331			68,896		5.45	%		1,542,884			59,347		5.14	%
Other consumer		84,363			3,119		4.94	%		118,600			4,031		4.54	%

Gross loans and leases		7,010,232			241,519		4.61	%		6,562,641			216,355		4.41	%
Securities		2,321,231			63,685		3.67	%		3,055,468			76,572		3.35	%
Other interest-earning assets		377,925			6,967		2.46	%		512,426			6,085		1.59	%

Total interest-earning assets		9,709,388			312,171		4.30	%		10,130,535			299,012		3.95	%
Allowance for loan and lease losses		(53,657	)							(42,297	)
BOLI and non-interest earning assets		564,856								570,108

Total assets	$	10,220,587							$	10,658,346

Interest-bearing liabilities
Savings	$	1,114,888			12,308		1.48	%	$	1,004,058			6,817		0.91	%
Interest-bearing checking		1,862,215			13,345		0.96	%		2,020,208			10,894		0.72	%
Money market		1,058,451			9,978		1.26	%		2,340,484			15,268		0.87	%
Certificates of deposit		2,107,782			26,633		1.69	%		1,699,865			11,391		0.90	%

Total interest-bearing deposits		6,143,336			62,264		1.36	%		7,064,615			44,370		0.84	%
FHLB advances		1,688,355			25,927		2.05	%		922,421			7,549		1.09	%
Securities sold under repurchase agreements		51,542			1,008		2.61	%		42,061			686		2.18	%
Long-term debt and other interest-bearing liabilities		174,360			7,073		5.42	%		219,080			8,411		5.13	%

Total interest-bearing liabilities		8,057,593			96,272		1.60	%		8,248,176			61,016		0.99	%
Noninterest-bearing deposits		1,028,245								1,206,881
Non-interest-bearing liabilities		127,607								196,104

Total liabilities		9,213,445								9,651,161
Total stockholders’ equity		1,007,142								1,007,185

Total liabilities and stockholders’ equity	$	10,220,587							$	10,658,346

Net interest income/spread				$	215,899		2.70	%				$	237,996		2.96	%

Net interest margin							2.97	%							3.14	%
Ratio of interest-earning assets to interest-bearing liabilities		120.50	%							122.82	%
Total deposits	$	7,171,581		$	62,264		1.16	%	$	8,271,496		$	44,370		0.72	%
Total funding ⁽²⁾	$	9,085,838		$	96,272		1.42	%	$	9,455,057		$	61,016		0.86	%

(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.


	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Tangible common equity to tangible assets ratio
Total assets	$	10,260,822		$	10,319,280		$	10,329,319		$	10,327,852		$	10,280,028
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(6,990	)		(7,683	)		(8,510	)		(9,353	)		(10,219	)

Tangible assets	$	10,216,688		$	10,274,453		$	10,283,665		$	10,281,355		$	10,232,665

Total stockholders’ equity	$	946,678		$	988,688		$	993,756		$	1,012,308		$	1,013,908
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(6,990	)		(7,683	)		(8,510	)		(9,353	)		(10,219	)

Tangible equity		902,544			943,861			948,102			965,811			966,545
Less preferred stock		(231,128	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)

Tangible common equity	$	671,416		$	674,790		$	679,031		$	696,740		$	697,474

Total stockholders’ equity to total assets		9.23	%		9.58	%		9.62	%		9.80	%		9.86	%
Tangible equity to tangible assets		8.83	%		9.19	%		9.22	%		9.39	%		9.45	%
Tangible common equity to tangible assets		6.57	%		6.57	%		6.60	%		6.78	%		6.82	%
Common stock outstanding		50,180,607			50,142,955			50,079,736			50,083,345			50,096,056
Class B non-voting non-convertible common stock outstanding		477,321			403,778			508,107			508,107			430,694

Total common stock outstanding		50,657,928			50,546,733			50,587,843			50,591,452			50,526,750

Tangible common equity per common stock	$	13.25		$	13.35		$	13.42		$	13.77		$	13.80
Book value per common stock	$	14.13		$	14.24		$	14.33		$	14.69		$	14.74

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Nine Months Ended
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			September 30, 2018			September 30, 2017
Return on tangible common equity
Average total stockholders’ equity	$	1,000,819		$	1,000,856		$	1,019,961		$	1,014,368		$	1,005,462		$	1,007,142		$	1,007,185
Less average preferred stock		(260,822	)		(269,071	)		(269,071	)		(269,071	)		(269,071	)		(266,291	)		(269,071	)
Less average goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,829	)
Less average other intangible assets		(7,412	)		(8,110	)		(8,972	)		(9,788	)		(10,760	)		(8,159	)		(11,910	)

Average tangible common equity	$	695,441		$	686,531		$	704,774		$	698,365		$	688,487		$	695,548		$	688,375

Net income	$	11,096		$	14,780		$	8,558		$	11,302		$	16,949		$	34,434		$	46,407
Less preferred stock dividends and impact of preferred stock redemption		(7,277	)		(5,113	)		(5,113	)		(5,113	)		(5,112	)		(17,503	)		(15,338	)
Add amortization of intangible assets		693			827			843			866			916			2,363			3,062
Add impairment on intangible assets		—			—			—			—			—			—			336
Less tax effect on amortization and impairment of intangible assets		(146	)		(174	)		(177	)		(303	)		(321	)		(496	)		(1,189	)

Net income available to common stockholders	$	4,366		$	10,320		$	4,111		$	6,752		$	12,432		$	18,798		$	33,278

Return on average equity		4.40	%		5.92	%		3.40	%		4.42	%		6.69	%		4.57	%		6.16	%
Return on average tangible common equity		2.49	%		6.03	%		2.37	%		3.84	%		7.16	%		3.61	%		6.46	%
Statutory tax rate utilized for calculating tax effect on amortization and impairment of intangible assets		21.00	%		21.00	%		21.00	%		35.00	%		35.00	%		21.00	%		35.00	%

	Three Months Ended															Nine Months Ended
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			September 30, 2018			September 30, 2017
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships
Noninterest expense	$	60,977		$	62,554		$	59,812		$	66,424		$	79,008		$	183,343		$	301,839
(Loss) gain on investments in alternative energy partnerships		(2,484	)		(1,808	)		34			(3,995	)		(8,348	)		(4,258	)		(26,791	)

Adjusted noninterest expense	$	58,493		$	60,746		$	59,846		$	62,429		$	70,660		$	179,085		$	275,048

Net interest income	$	71,322		$	72,953		$	71,624		$	73,246		$	75,953		$	215,899		$	237,996
Noninterest income		5,718			9,168			10,452			6,429			18,827			25,338			98,348

Total revenue		77,040			82,121			82,076			79,675			94,780			241,237			336,344
Tax credit from investments in alternative energy partnerships		412			1,912			7,323			4,908			8,777			9,647			33,287
Deferred tax expense on investments in alternative energy partnerships		(43	)		(211	)		(769	)		(859	)		(1,536	)		(1,023	)		(5,825	)
Tax effect on tax credit and deferred tax expense		180			631			2,422			3,004			3,804			3,233			17,528
(Loss) gain on investments in alternative energy partnerships		(2,484	)		(1,808	)		34			(3,995	)		(8,348	)		(4,258	)		(26,791	)

Total pre-tax adjustments for investments in alternative energy partnerships		(1,935	)		524			9,010			3,058			2,697			7,599			18,199

Adjusted total revenue	$	75,105		$	82,645		$	91,086		$	82,733		$	97,477		$	248,836		$	354,543

Efficiency ratio		79.15	%		76.17	%		72.87	%		83.37	%		83.36	%		76.00	%		89.74	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships		77.88	%		73.50	%		65.70	%		75.46	%		72.49	%		71.97	%		77.58	%
Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense		32.81	%		27.07	%		26.98	%		42.59	%		34.44	%		27.27	%		38.96	%

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BANC OF CALIFORNIA, INC. Reports