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.	d687025dex992.htm
8-K - 8-K - BANC OF CALIFORNIA, INC.	d687025d8k.htm

Exhibit 99.1

LOGO

Banc of California Reports Fourth Quarter 2018 Earnings

SANTA ANA, Calif., (January 24, 2019) – Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $6.7 million, for the fourth quarter of 2018, resulting in diluted earnings per common share of $0.13 for the quarter.

Highlights for the fourth quarter included:

•

Core Deposits: Core deposit balances were flat for the quarter. Full year core deposit balances grew 10% to $6.2 billion.

•

Organic Loan Growth: Held for investment loans increased by $448 million during the quarter to $7.7 billion. Loan portfolio growth for the full year was 16%.

•

Gross loan commitment originations totaled $1.0 billion for the fourth quarter at an average production yield of 5.26%.

•

Asset Re-Mix: Investment securities balance declined by $67 million during the quarter and represented 19% of total assets at quarter end, down from 20% at the end of the prior quarter and 25% from a year ago.

•

Disciplined Expense Management: Fourth quarter noninterest expense totaled $49.6 million, down from $60.9 million for the third quarter. Fourth quarter noninterest expense to average total assets ratio of 1.92%, down from 2.38% for the third quarter.

•

Strong Credit Performance: Non-performing assets to total assets at quarter end of 0.21% and total delinquent loans to total loans at quarter end of 0.53%, compared to 0.25% and 0.49%, respectively, at the prior quarter end and 0.21% and 0.63%, respectively, a year ago. Net charge-offs during the quarter totaled $2.2 million, compared with $306 thousand during the prior quarter and $791 thousand during the same quarter a year ago. The ALLL / total loan ratio was 0.81% at quarter end, up from 0.80% at the prior quarter end and 0.74% a year ago.

•

Strong Capital Ratios: Common equity tier 1 capital ratio at quarter end of 9.53%, compared to 9.80% at the prior quarter end and 9.92% a year ago.

The Company’s fourth quarter results included $7.1 million of legal and professional fees and $1.1 million in project related expenses, offset by a $9.8 million insurance recovery related to ongoing indemnification expense and a gain from the sale of an owned branch office of $1.8 million. The aggregate impact of these items resulted in a net benefit of $3.4 million from non-recurring items for the quarter.

“We continue to lay the foundation to support the development of our core commercial banking platform,” said Doug Bowers, President and Chief Executive Officer of Banc of California. “We saw strong organic loan growth with balances increasing $448 million for the quarter or 25% annualized. Core deposit growth came in below expectations for the quarter, but was up 10% for the full year. Efforts to de-risk the balance sheet, build front line business units and simplify the operating platform further reflect our efforts to build California’s bank. Credit quality remained strong with non-performing assets to total assets at 0.21% at quarter end.”

The Company will host a conference call to discuss its fourth quarter 2018 financial results at 7:00 a.m. Pacific Time (PT) on Thursday, January 24, 2019. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 1216098. 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 32 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)


	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017
ASSETS
Cash and cash equivalents	$	391,592		$	372,221		$	385,691		$	346,704		$	387,699
Securities available-for-sale		1,992,500			2,059,832			2,297,124			2,424,593			2,575,469
Loans held-for-sale		8,116			9,382			13,753			20,180			67,069
Loans and leases receivable		7,700,873			7,253,293			7,036,004			6,930,507			6,659,407
Allowance for loan and lease losses		(62,192	)		(57,782	)		(56,678	)		(54,763	)		(49,333	)
Federal Home Loan Bank and other bank stock		68,094			71,308			75,737			82,715			75,654
Servicing rights, net		3,428			3,770			3,869			6,739			33,708
Other real estate owned, net		672			434			710			1,024			1,796
Premises and equipment, net		129,394			133,129			135,478			135,198			135,699
Investments in alternative energy partnerships, net		28,988			41,781			44,806			48,344			48,826
Goodwill		37,144			37,144			37,144			37,144			37,144
Other intangible assets, net		6,346			6,990			7,683			8,510			9,353
Deferred income tax, net		49,404			47,865			42,334			43,192			31,074
Income tax receivable		2,695			1,764			7,995			10,126			8,739
Bank owned life insurance investment		107,027			106,468			105,917			105,384			104,851
Other assets		146,496			152,933			155,298			153,834			161,797
Assets of discontinued operations		19,490			20,290			26,415			29,888			38,900

Total assets	$	10,630,067		$	10,260,822		$	10,319,280		$	10,329,319		$	10,327,852

LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	$	1,023,360		$	1,061,557		$	1,005,032		$	1,039,116		$	1,071,608
Interest-bearing deposits		6,893,284			6,340,185			6,130,762			6,071,049			6,221,295

Total deposits		7,916,644			7,401,742			7,135,794			7,110,165			7,292,903
Advances from Federal Home Loan Bank		1,520,000			1,640,000			1,805,000			1,905,000			1,695,000
Notes payable, net		173,174			173,096			173,017			172,966			172,941
Reserve for loss on repurchased loans		2,506			2,575			3,149			3,426			6,306
Due on unsettled securities purchases		—			17,500			132,546			59,000			—
Accrued expenses and other liabilities		72,209			79,231			81,086			84,997			140,575
Liabilities of discontinued operations		—			—			—			9			7,819

Total liabilities		9,684,533			9,314,144			9,330,592			9,335,563			9,315,544
Commitments and contingent liabilities
Preferred stock		231,128			231,128			269,071			269,071			269,071
Common stock		518			518			517			517			517
Common stock, class B non-voting non-convertible		5			5			4			5			5
Additional paid-in capital		625,834			624,789			623,372			623,483			621,435
Retained earnings		140,952			140,971			143,880			141,008			144,839
Treasury stock		(28,786	)		(28,786	)		(28,786	)		(28,786	)		(28,786	)
Accumulated other comprehensive (loss) income, net		(24,117	)		(21,947	)		(19,370	)		(11,542	)		5,227

Total stockholders’ equity		945,534			946,678			988,688			993,756			1,012,308

Total liabilities and stockholders’ equity	$	10,630,067		$	10,260,822		$	10,319,280		$	10,329,319		$	10,327,852

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2018			2018			2018			2018			2017			2018			2017
Interest and dividend income
Loans, including fees	$	88,258		$	84,795		$	81,307		$	74,912		$	71,695		$	329,272		$	281,071
Securities		19,882			20,599			21,455			21,631			23,170			83,567			99,742
Other interest-earning assets		2,990			2,380			2,423			2,164			2,292			9,957			8,377

Total interest and dividend income		111,130			107,774			105,185			98,707			97,157			422,796			389,190
Interest expense
Deposits		28,972			25,154			20,315			16,795			16,044			91,236			60,414
Federal Home Loan Bank advances		9,068			8,996			9,539			7,392			5,402			34,995			12,951
Securities sold under repurchase agreements		25			47			211			750			194			1,033			880
Notes payable and other interest-bearing liabilities		2,383			2,385			2,356			2,332			2,344			9,456			10,755

Total interest expense		40,448			36,582			32,421			27,269			23,984			136,720			85,000

Net interest income		70,682			71,192			72,764			71,438			73,173			286,076			304,190
Provision for loan and lease losses		6,653			1,410			2,653			19,499			5,052			30,215			13,699

Net interest income after provision for loan and lease losses		64,029			69,782			70,111			51,939			68,121			255,861			290,491
Noninterest income
Customer service fees		1,786			1,446			1,491			1,592			1,624			6,315			6,492
Loan servicing income (loss)		22			439			948			2,311			(2,416	)		3,720			1,025
Impairment loss on investment securities		(3,252	)		—			—			—			—			(3,252	)		—
Net gain on sale of securities available for sale		—			13			278			5,241			2,688			5,532			14,768
Net gain (loss) on sale of loans		873			279			821			(41	)		1,205			1,932			11,942
All other income (loss)		3,019			2,647			4,523			(521	)		2,594			9,668			10,443

Total noninterest income		2,448			4,824			8,061			8,582			5,695			23,915			44,670
Noninterest expense
Salaries and employee benefits		24,587			24,832			29,440			31,115			33,146			109,974			129,153
Occupancy and equipment		8,064			8,213			7,883			7,687			9,565			31,847			38,391
Professional fees		6,206			11,966			6,303			9,177			7,853			33,652			42,417
Data processing		1,733			1,884			1,678			1,656			1,562			6,951			7,888
Advertising		3,371			3,152			2,864			3,277			1,420			12,664			5,313
Regulatory assessments		1,252			2,138			2,196			2,092			2,174			7,678			8,105
Reversal of provision for loan repurchases		(122	)		(360	)		(218	)		(1,788	)		(335	)		(2,488	)		(1,812	)
Amortization of intangible assets		644			693			827			843			866			3,007			3,928
Restructuring expense		(105	)		553			3,983			—			(43	)		4,431			5,326
All other expenses		3,153			5,322			5,775			5,775			6,179			20,025			38,773

Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships		48,783			58,393			60,731			59,834			62,387			227,741			277,482
Loss (gain) on investments in alternative energy partnerships		786			2,484			1,808			(34	)		3,995			5,044			30,786

Total noninterest expense		49,569			60,877			62,539			59,800			66,382			232,785			308,268

Income from continuing operations before income taxes		16,908			13,729			15,633			721			7,434			46,991			26,893
Income tax expense (benefit)		6,117			3,301			1,779			(6,353	)		(3,418	)		4,844			(26,581	)

Income from continuing operations		10,791			10,428			13,854			7,074			10,852			42,147			53,474

Income from discontinued operations before income taxes		347			924			1,281			2,044			765			4,596			7,164
Income tax expense		100			256			355			560			315			1,271			2,929

Income from discontinued operations		247			668			926			1,484			450			3,325			4,235

Net income		11,038			11,096			14,780			8,558			11,302			45,472			57,709
Preferred stock dividends		4,308			4,970			5,113			5,113			5,113			19,504			20,451
Impact of preferred stock redemption		—			2,307			—			—			—			2,307			—

Net income available to common stockholders	$	6,730		$	3,819		$	9,667		$	3,445		$	6,189		$	23,661		$	37,258

Basic earnings per common share
Income from continuing operations	$	0.12		$	0.06		$	0.17		$	0.03		$	0.11		$	0.38		$	0.64
Income from discontinued operations		0.01			0.01			0.02			0.03			0.01			0.07			0.08

Net income	$	0.13		$	0.07		$	0.19		$	0.06		$	0.12		$	0.45		$	0.72

Diluted earnings per common share
Income from continuing operations	$	0.12		$	0.06		$	0.16		$	0.03		$	0.11		$	0.38		$	0.63
Income from discontinued operations		0.01			0.01			0.02			0.03			0.01			0.07			0.08

Net income	$	0.13		$	0.07		$	0.18		$	0.06		$	0.12		$	0.45		$	0.71

Weighted average number of common shares outstanding
Basic		50,651,805			50,656,076			50,593,429			50,590,545			50,532,544			50,623,222			50,254,595
Diluted		50,812,874			50,899,464			50,919,091			50,925,530			50,943,165			50,851,594			50,819,790
Dividends declared per common share	$	0.13		$	0.13		$	0.13		$	0.13		$	0.13		$	0.52		$	0.52

Banc of California, Inc.

Reconciliation of Consolidated Statements of Operations between Continuing and Discontinued Operations

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended December 31, 2018								Year Ended December 31, 2018
	Continuing			Discontinued		Consolidated			Continuing			Discontinued		Consolidated
	Operations			Operations		Operations			Operations			Operations		Operations
Interest and dividend income	$	111,130		$	160	$	111,290		$	422,796		$	665	$	423,461
Interest expense		40,448			—		40,448			136,720			—		136,720

Net interest income		70,682			160		70,842			286,076			665		286,741
Provision for loan and lease losses		6,653			—		6,653			30,215			—		30,215

Net interest income after provision for loan and lease losses		64,029			160		64,189			255,861			665		256,526
Noninterest income
Customer service fees		1,786			—		1,786			6,315			—		6,315
Loan servicing income		22			—		22			3,720			—		3,720
Impairment loss on investment securities		(3,252	)		—		(3,252	)		(3,252	)		—		(3,252	)
Net gain on sale of securities available for sale		—			—		—			5,532			—		5,532
Net gain on sale of loans		873			—		873			1,932			—		1,932
Mortgage banking income		—			32		32			—			428		428
Gain on disposal of discontinued operations		—			164		164			—			1,439		1,439
All other income		3,019			—		3,019			9,668			2,200		11,868

Total noninterest income		2,448			196		2,644			23,915			4,067		27,982
Noninterest expense
Salaries and employee benefits		24,587			—		24,587			109,974			20		109,994
Occupancy and equipment		8,064			—		8,064			31,847			—		31,847
Professional fees		6,206			—		6,206			33,652			—		33,652
Data processing		1,733			8		1,741			6,951			8		6,959
Advertising		3,371			—		3,371			12,664			—		12,664
Regulatory assessments		1,252			—		1,252			7,678			—		7,678
Reversal of provision for loan repurchases		(122	)		—		(122	)		(2,488	)		—		(2,488	)
Loss on investments in alternative energy partnerships		786			—		786			5,044			—		5,044
Amortization of intangible assets		644			—		644			3,007			—		3,007
Restructuring expense		(105	)		—		(105	)		4,431			—		4,431
All other expenses		3,153			1		3,154			20,025			108		20,133

Total noninterest expense		49,569			9		49,578			232,785			136		232,921

Income before income taxes		16,908			347		17,255			46,991			4,596		51,587
Income tax expense		6,117			100		6,217			4,844			1,271		6,115

Net income	$	10,791		$	247	$	11,038		$	42,147		$	3,325	$	45,472

Banc of California, Inc.

Selected Financial Data

(Dollars in thousands)

(Unaudited)


	Three Months Ended															Year Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2018			2018			2018			2018			2017			2018			2017
Profitability and other ratios of consolidated operations
Return on average assets⁽¹⁾		0.43	%		0.43	%		0.58	%		0.34	%		0.44	%		0.44	%		0.55	%
Return on average equity ⁽¹⁾		4.56	%		4.40	%		5.92	%		3.40	%		4.42	%		4.57	%		5.72	%
Return on average tangible common equity ⁽²⁾		4.19	%		2.49	%		6.03	%		2.37	%		3.84	%		3.76	%		5.79	%
Dividend payout ratio ⁽³⁾		100.00	%		185.71	%		68.42	%		216.67	%		108.33	%		115.56	%		72.22	%
Net interest spread		2.56	%		2.62	%		2.75	%		2.74	%		2.79	%		2.67	%		2.92	%
Net interest margin⁽¹⁾		2.88	%		2.93	%		3.01	%		2.98	%		3.01	%		2.95	%		3.11	%
Noninterest income to total revenue ⁽⁴⁾		3.60	%		7.42	%		11.16	%		12.73	%		8.07	%		8.89	%		25.19	%
Noninterest income to average total assets⁽¹⁾		0.10	%		0.22	%		0.36	%		0.41	%		0.25	%		0.27	%		0.99	%
Noninterest expense to average total assets⁽¹⁾		1.92	%		2.38	%		2.45	%		2.36	%		2.59	%		2.28	%		3.50	%
Efficiency ratio⁽⁵⁾		67.47	%		79.15	%		76.17	%		72.87	%		83.37	%		74.01	%		88.52	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships ^{(2) , (5)}		67.09	%		77.88	%		73.50	%		65.70	%		75.46	%		70.87	%		77.18	%
Average held-for-investment loans and leases to average deposits		97.40	%		97.00	%		98.63	%		94.87	%		86.09	%		96.99	%		75.92	%
Average investment securities to average total assets		19.85	%		21.28	%		22.27	%		24.60	%		26.10	%		21.99	%		28.04	%
Average stockholders’ equity to average total assets		9.38	%		9.85	%		9.78	%		9.94	%		9.98	%		9.73	%		9.58	%
Allowance for loan and lease losses (ALLL)
Balance at beginning of period	$	57,782		$	56,678		$	54,763		$	49,333		$	45,072		$	49,333		$	40,444
Loans and leases charged off		(2,522	)		(388	)		(950	)		(14,639	)		(1,367	)		(18,499	)		(5,581	)
Recoveries		279			82			212			570			576			1,143			771
Provision for loan and lease losses		6,653			1,410			2,653			19,499			5,052			30,215			13,699

Balance at end of period	$	62,192		$	57,782		$	56,678		$	54,763		$	49,333		$	62,192		$	49,333

Annualized net loan charge-offs to average total loans and leases held-for-investment		0.12	%		0.02	%		0.04	%		0.84	%		0.05	%		0.25	%		0.11	%
Reserve for loss on repurchased loans
Balance at beginning of period	$	2,575		$	3,149		$	3,426		$	6,306		$	6,173			6,306		$	7,974
Reversal of provision for loan repurchases		(69	)		(342	)		(165	)		(1,786	)		(326	)		(2,362	)		(190	)
Utilization of reserve for loan repurchases		—			(232	)		(112	)		(1,094	)		(301	)		(1,438	)		(2,238	)
Other adjustments		—			—			—			—			760			—			760

Balance at end of period	$	2,506		$	2,575		$	3,149		$	3,426		$	6,306		$	2,506		$	6,306

(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 common share.

(4)

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

(5)

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

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017
Asset quality information and ratios
Delinquent loans and leases held-for-investment 30 to 89 days delinquent	$	26,684		$	20,265		$	15,097		$	31,936		$	32,087
90+ days delinquent		13,846			15,269			11,453			11,526			9,542

Total delinquent loans	$	40,530		$	35,534		$	26,550		$	43,462		$	41,629

Total delinquent loans and leases to total loans and leases		0.53	%		0.49	%		0.38	%		0.63	%		0.63	%
Non-performing assets, excluding loans held-for-sale
Non-performing loans and leases	$	21,585		$	25,523		$	22,290		$	21,220		$	19,382
90+ days delinquent and still accruing loans and leases		470			—			—			—			—
Other real estate owned		672			434			710			1,024			1,796

Non-performing assets	$	22,727		$	25,957		$	23,000		$	22,244		$	21,178

ALLL to non-performing loans and leases		281.99	%		226.39	%		254.28	%		258.07	%		254.53	%
Non-performing loans and leases to total loans and leases		0.29	%		0.35	%		0.32	%		0.31	%		0.29	%
Non-performing assets to total assets		0.21	%		0.25	%		0.22	%		0.22	%		0.21	%
Troubled debt restructurings (TDRs)
Performing TDRs	$	5,745		$	5,580		$	5,648		$	5,787		$	5,646
Non-performing TDRs		2,276			2,684			2,701			2,632			2,675

Total TDRs	$	8,021		$	8,264		$	8,349		$	8,419		$	8,321

Loans and leases and ALLL by loan origination type
Loan and lease breakdown by origination type
Originated loans and leases	$	7,105,171		$	6,683,683		$	6,446,127		$	6,295,843		$	5,988,101
Acquired loans not impaired at acquisition		595,702			569,610			589,877			634,664			671,306

Total loans and leases	$	7,700,873		$	7,253,293		$	7,036,004		$	6,930,507		$	6,659,407

ALLL breakdown by origination type
Originated loans and leases	$	61,256		$	56,672		$	55,534		$	53,605		$	48,110
Acquired loans not impaired at acquisition		937			1,110			1,144			1,158			1,223

Total ALLL	$	62,193		$	57,782		$	56,678		$	54,763		$	49,333

Discount on Purchased/Acquired Loans
Acquired loans not impaired at acquisition	$	11,645		$	12,311		$	12,932		$	14,255		$	14,943

Total Discount	$	11,645		$	12,311		$	12,932		$	14,255		$	14,943

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

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)


	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017
Composition of held-for-investment loans and leases
Commercial real estate	$	867,013		$	823,193		$	793,855		$	773,193		$	717,415
Multifamily		2,241,246			2,112,190			1,959,965			1,944,082			1,816,141
Construction		203,976			200,294			211,110			200,766			182,960
Commercial and industrial		1,944,142			1,673,055			1,742,559			1,638,559			1,701,951
SBA		68,741			71,494			78,092			79,022			78,699
Lease financing		—			—			—			3			13

Total commercial loans		5,325,118			4,880,226			4,785,581			4,635,625			4,497,179

Single family residential mortgage		2,305,490			2,300,069			2,174,183			2,201,358			2,055,649
Other consumer		70,265			72,998			76,240			93,524			106,579

Total consumer loans		2,375,755			2,373,067			2,250,423			2,294,882			2,162,228

Total gross loans and leases	$	7,700,873		$	7,253,293		$	7,036,004		$	6,930,507		$	6,659,407

Composition percentage of held-for-investment loans and leases
Commercial real estate		11.3	%		11.3	%		11.3	%		11.2	%		10.8	%
Multifamily		29.2	%		29.1	%		27.9	%		28.1	%		27.3	%
Construction		2.6	%		2.8	%		3.0	%		2.9	%		2.7	%
Commercial and industrial		25.2	%		23.1	%		24.8	%		23.6	%		25.5	%
SBA		0.9	%		1.0	%		1.1	%		1.1	%		1.2	%
Lease financing		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Total commercial loans		69.2	%		67.3	%		68.1	%		66.9	%		67.5	%

Single family residential mortgage		29.9	%		31.7	%		30.9	%		31.8	%		30.9	%
Other consumer		0.9	%		1.0	%		1.0	%		1.3	%		1.6	%

Total consumer loans		30.8	%		32.7	%		31.9	%		33.1	%		32.5	%

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

Composition of deposits
Noninterest-bearing checking	$	1,023,360		$	1,061,557		$	1,005,032		$	1,039,116		$	1,071,608
Interest-bearing checking		1,556,410			1,713,790			1,778,400			1,864,629			2,089,016
Money market		873,153			856,886			1,136,335			1,091,735			1,146,859
Savings		1,265,847			1,269,489			1,175,275			1,051,267			1,059,628
Brokered certificates of deposit		1,543,269			987,771			686,203			974,706			915,623
Non-brokered certificates of deposit		1,654,605			1,512,249			1,354,549			1,088,712			1,010,169

Total deposits	$	7,916,644		$	7,401,742		$	7,135,794		$	7,110,165		$	7,292,903

Composition percentage of deposits
Noninterest-bearing checking		12.9	%		14.3	%		14.1	%		14.6	%		14.7	%
Interest-bearing checking		19.7	%		23.2	%		24.9	%		26.2	%		28.7	%
Money market		11.0	%		11.6	%		15.9	%		15.4	%		15.7	%
Savings		16.0	%		17.2	%		16.5	%		14.8	%		14.5	%
Brokered certificates of deposit		19.5	%		13.3	%		9.6	%		13.7	%		12.5	%
Non-brokered certificates of deposit		20.9	%		20.4	%		19.0	%		15.3	%		13.9	%

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

Capital Ratios
Banc of California, Inc.
Total risk-based capital ratio		13.71	%		14.05	%		14.71	%		14.60	%		14.56	%
Tier 1 risk-based capital ratio		12.77	%		13.15	%		13.83	%		13.74	%		13.79	%
Common equity tier 1 capital ratio		9.53	%		9.80	%		9.90	%		9.80	%		9.92	%
Tier 1 leverage ratio		8.95	%		8.99	%		9.30	%		9.21	%		9.39	%
Banc of California, NA
Total risk-based capital ratio		15.71	%		15.94	%		16.63	%		16.53	%		16.56	%
Tier 1 risk-based capital ratio		14.77	%		15.04	%		15.74	%		15.67	%		15.78	%
Common equity tier 1 capital ratio		14.77	%		15.04	%		15.74	%		15.67	%		15.78	%
Tier 1 leverage ratio		10.36	%		10.29	%		10.58	%		10.50	%		10.67	%

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	December 31, 2018								September 30, 2018								June 30, 2018
	Average					Yield			Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	33,243		$	221		2.64	%	$	42,754		$	263		2.44	%	$	54,791		$	328		2.40	%
SFR mortgage		2,260,205			23,585		4.14	%		2,222,602			23,461		4.19	%		2,223,608			22,790		4.11	%
Seasoned SFR mortgage loan pools		—			—		—			—			—		—			—			—		—
Commercial real estate, multifamily, and construction		3,246,860			37,403		4.57	%		3,091,706			35,838		4.60	%		2,989,014			33,736		4.53	%
Commercial and industrial, SBA, and lease financing		1,791,708			26,219		5.81	%		1,739,711			24,382		5.56	%		1,707,478			23,664		5.56	%
Other consumer		68,479			990		5.74	%		69,600			981		5.59	%		80,188			978		4.89	%

Gross loans and leases		7,400,495			88,418		4.74	%		7,166,373			84,925		4.70	%		7,055,079			81,496		4.63	%
Securities		2,032,632			19,882		3.88	%		2,163,037			20,599		3.78	%		2,279,416			21,455		3.78	%
Other interest-earning assets		318,419			2,990		3.73	%		335,160			2,380		2.82	%		392,342			2,423		2.48	%

Total interest-earning assets		9,751,546			111,290		4.53	%		9,664,570			107,904		4.43	%		9,726,837			105,374		4.35	%
Allowance for loan and lease losses		(58,099	)							(56,730	)							(54,903	)
BOLI and non-interest earning assets		544,302								554,636								565,224

Total assets	$	10,237,749							$	10,162,476							$	10,237,158

Interest-bearing liabilities
Savings	$	1,279,155			5,663		1.76	%	$	1,231,696			5,122		1.65	%	$	1,055,693			3,886		1.48	%
Interest-bearing checking		1,666,884			4,916		1.17	%		1,789,679			5,054		1.12	%		1,822,856			4,182		0.92	%
Money market		803,157			3,168		1.56	%		966,165			3,455		1.42	%		1,134,280			3,689		1.30	%
Certificates of deposit		2,759,665			15,225		2.19	%		2,332,181			11,523		1.96	%		2,079,932			8,558		1.65	%

Total interest-bearing deposits		6,508,861			28,972		1.77	%		6,319,721			25,154		1.58	%		6,092,761			20,315		1.34	%
FHLB advances		1,447,348			9,068		2.49	%		1,528,674			8,996		2.33	%		1,827,307			9,539		2.09	%
Securities sold under repurchase agreements		3,116			25		3.18	%		6,418			47		2.91	%		29,907			211		2.83	%
Long-term debt and other interest-bearing liabilities		174,281			2,383		5.42	%		174,361			2,385		5.43	%		174,296			2,356		5.42	%

Total interest-bearing liabilities		8,133,606			40,448		1.97	%		8,029,174			36,582		1.81	%		8,124,271			32,421		1.60	%
Noninterest-bearing deposits		1,054,790								1,023,890								1,004,502
Non-interest-bearing liabilities		89,111								108,593								107,529

Total liabilities		9,277,507								9,161,657								9,236,302
Total stockholders’ equity		960,242								1,000,819								1,000,856

Total liabilities and stockholders’ equity	$	10,237,749							$	10,162,476							$	10,237,158

Net interest income/spread				$	70,842		2.56	%				$	71,322		2.62	%				$	72,953		2.75	%

Net interest margin							2.88	%							2.93	%							3.01	%
Ratio of interest-earning assets to interest-bearing liabilities		119.89	%							120.37	%							119.73	%
Total deposits	$	7,563,651		$	28,972		1.52	%	$	7,343,611		$	25,154		1.36	%	$	7,097,263		$	20,315		1.15	%
Total funding ⁽²⁾	$	9,188,396		$	40,448		1.75	%	$	9,053,064		$	36,582		1.60	%	$	9,128,773		$	32,421		1.42	%

(1)

Includes loans held-for-sale of discontinued operations.

(2)

Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Banc of California, Inc.

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

(Dollars in thousands)

(Unaudited)


	Three Months Ended
	March 31, 2018								December 31, 2017
	Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	97,095		$	297		1.24	%	$	127,139		$	363		1.13	%
SFR mortgage		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		2,856,290			31,439		4.46	%		2,613,940			29,696		4.51	%
Commercial and industrial, SBA, and lease financing		1,625,549			20,850		5.20	%		1,630,886			20,989		5.11	%
Other consumer		103,676			1,160		4.54	%		107,664			1,233		4.54	%

Gross loans and leases		6,805,276			75,098		4.48	%		6,437,383			71,768		4.42	%
Securities		2,525,220			21,631		3.47	%		2,653,838			23,170		3.46	%
Other interest-earning assets		407,064			2,164		2.16	%		548,171			2,292		1.66	%

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

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

Interest-bearing liabilities
Savings	$	1,055,338			3,300		1.27	%	$	1,019,659			2,947		1.15	%
Interest-bearing checking		1,976,160			4,108		0.84	%		2,082,677			4,267		0.81	%
Money market		1,076,117			2,834		1.07	%		1,294,537			3,262		1.00	%
Certificates of deposit		1,906,556			6,553		1.39	%		1,822,010			5,568		1.21	%

Total interest-bearing deposits		6,014,171			16,795		1.13	%		6,218,883			16,044		1.02	%
FHLB advances		1,711,089			7,392		1.75	%		1,448,326			5,402		1.48	%
Securities sold under repurchase agreements		119,543			750		2.54	%		33,513			194		2.30	%
Long-term debt and other interest-bearing liabilities		174,424			2,332		5.42	%		174,066			2,344		5.34	%

Total interest-bearing liabilities		8,019,227			27,269		1.38	%		7,874,788			23,984		1.21	%
Noninterest-bearing deposits		1,056,700								1,110,815
Non-interest-bearing liabilities		167,345								166,432

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

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

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

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

(1)

Includes loans held-for-sale of discontinued operations.

(2)

Banc of California, Inc.

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

(Dollars in thousands)

(Unaudited)


	Year Ended
	December 31, 2018								December 31, 2017
	Average					Yield			Average					Yield
	Balance			Interest		/ Cost			Balance			Interest		/ Cost
Interest earning assets
Loans held-for-sale ⁽¹⁾	$	56,757		$	1,109		1.95	%	$	410,266		$	13,669		3.33	%
SFR mortgage		2,207,689			91,188		4.13	%		1,882,086			74,033		3.93	%
Seasoned SFR mortgage loan pools		—			—		—			97,195			5,474		5.63	%
Commercial real estate, multifamily, and construction		3,047,164			138,416		4.54	%		2,460,614			108,508		4.41	%
Commercial and industrial, SBA, and lease financing		1,716,631			95,115		5.54	%		1,565,065			81,175		5.19	%
Other consumer		80,359			4,109		5.11	%		115,843			5,264		4.54	%

Gross loans and leases		7,108,600			329,937		4.64	%		6,531,069			288,123		4.41	%
Securities		2,248,488			83,567		3.72	%		2,954,235			99,742		3.38	%
Other interest-earning assets		362,927			9,957		2.74	%		516,832			8,377		1.62	%

Total interest-earning assets		9,720,015			423,461		4.36	%		10,002,136			396,242		3.96	%
Allowance for loan and lease losses		(54,777	)							(43,150	)
BOLI and non-interest earning assets		559,675								575,363

Total assets	$	10,224,913							$	10,534,349

Interest-bearing liabilities
Savings	$	1,156,292			17,971		1.55	%	$	1,007,990			9,764		0.97	%
Interest-bearing checking		1,812,980			18,261		1.01	%		2,035,954			15,161		0.74	%
Money market		994,103			13,146		1.32	%		2,076,847			18,530		0.89	%
Certificates of deposit		2,272,093			41,858		1.84	%		1,730,652			16,959		0.98	%

Total interest-bearing deposits		6,235,468			91,236		1.46	%		6,851,443			60,414		0.88	%
FHLB advances		1,627,608			34,995		2.15	%		1,054,978			12,951		1.23	%
Securities sold under repurchase agreements		39,336			1,033		2.63	%		39,907			880		2.21	%
Long-term debt and other interest-bearing liabilities		174,340			9,456		5.42	%		207,734			10,755		5.18	%

Total interest-bearing liabilities		8,076,752			136,720		1.69	%		8,154,062			85,000		1.04	%
Noninterest-bearing deposits		1,034,937								1,182,667
Non-interest-bearing liabilities		117,904								188,625

Total liabilities		9,229,593								9,525,354
Total stockholders’ equity		995,320								1,008,995

Total liabilities and stockholders’ equity	$	10,224,913							$	10,534,349

Net interest income/spread				$	286,741		2.67	%				$	311,242		2.92	%

Net interest margin							2.95	%							3.11	%

Ratio of interest-earning assets to interest-bearing liabilities		120.35	%							122.66	%

Total deposits	$	7,270,405		$	91,236		1.25	%	$	8,034,110		$	60,414		0.75	%
Total funding ⁽²⁾	$	9,111,689		$	136,720		1.50	%	$	9,336,729		$	85,000		0.91	%

(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 constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company’s performance.

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

Adjusted efficiency ratio is calculated by subtracting loss on investments in alternative energy partnerships from noninterest expense and adding total pre-tax return, which includes the loss on investments in alternative energy partnerships, to the sum of net interest income and noninterest income (total revenue). Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company.

This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.


	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
Tangible common equity to tangible assets ratio
Total assets	$	10,630,067		$	10,260,822		$	10,319,280		$	10,329,319		$	10,327,852
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(6,346	)		(6,990	)		(7,683	)		(8,510	)		(9,353	)

Tangible assets	$	10,586,577		$	10,216,688		$	10,274,453		$	10,283,665		$	10,281,355

Total stockholders’ equity	$	945,534		$	946,678		$	988,688		$	993,756		$	1,012,308
Less goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)
Less other intangible assets		(6,346	)		(6,990	)		(7,683	)		(8,510	)		(9,353	)

Tangible equity		902,044			902,544			943,861			948,102			965,811
Less preferred stock		(231,128	)		(231,128	)		(269,071	)		(269,071	)		(269,071	)

Tangible common equity	$	670,916		$	671,416		$	674,790		$	679,031		$	696,740

Total stockholders’ equity to total assets		8.89	%		9.23	%		9.58	%		9.62	%		9.80	%
Tangible equity to tangible assets		8.52	%		8.83	%		9.19	%		9.22	%		9.39	%
Tangible common equity to tangible assets		6.34	%		6.57	%		6.57	%		6.60	%		6.78	%

Common shares outstanding		50,172,018			50,180,607			50,142,955			50,079,736			50,083,345
Class B non-voting non-convertible common shares outstanding		477,321			477,321			403,778			508,107			508,107

Total common shares outstanding		50,649,339			50,657,928			50,546,733			50,587,843			50,591,452

Tangible common equity per common share	$	13.25		$	13.25		$	13.35		$	13.42		$	13.77
Book value per common share	$	14.10		$	14.13		$	14.24		$	14.33		$	14.69

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)


	Three Months Ended															Year Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Return on tangible common equity
Average total stockholders’ equity	$	960,242		$	1,000,819		$	1,000,856		$	1,019,961		$	1,014,368		$	995,320		$	1,008,995
Less average preferred stock		(231,128	)		(260,822	)		(269,071	)		(269,071	)		(269,071	)		(257,428	)		(269,071	)
Less average goodwill		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,144	)		(37,656	)
Less average other intangible assets		(6,731	)		(7,412	)		(8,110	)		(8,972	)		(9,788	)		(7,799	)		(11,375	)

Average tangible common equity	$	685,239		$	695,441		$	686,531		$	704,774		$	698,365		$	692,949		$	690,893

Net income	$	11,038		$	11,096		$	14,780		$	8,558		$	11,302		$	45,472		$	57,709
Less preferred stock dividends and impact of preferred stock redemption		(4,308	)		(7,277	)		(5,113	)		(5,113	)		(5,113	)		(21,811	)		(20,451	)
Add amortization of intangible assets		644			693			827			843			866			3,007			3,928
Add impairment on intangible assets		—			—			—			—			—			—			336
Less tax effect on amortization and impairment of intangible assets		(135	)		(146	)		(174	)		(177	)		(303	)		(631	)		(1,492	)

Net income available to common stockholders	$	7,239		$	4,366		$	10,320		$	4,111		$	6,752		$	26,037		$	40,030

Return on average equity		4.56	%		4.40	%		5.92	%		3.40	%		4.42	%		4.57	%		5.72	%
Return on average tangible common equity		4.19	%		2.49	%		6.03	%		2.37	%		3.84	%		3.76	%		5.79	%

Statutory tax rate utilized for calculating tax effect on amortization and impairment of intangible assets		21.00	%		21.00	%		21.00	%		21.00	%		35.00	%		21.00	%		35.00	%

	Three Months Ended															Year Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships
Noninterest expense	$	49,578		$	60,977		$	62,554		$	59,812		$	66,424		$	232,921		$	368,263
(Loss) gain on investments in alternative energy partnerships		(786	)		(2,484	)		(1,808	)		34			(3,995	)		(5,044	)		(30,786	)

Adjusted noninterest expense	$	48,792		$	58,493		$	60,746		$	59,846		$	62,429		$	227,877		$	337,477

Net interest income	$	70,842		$	71,322		$	72,953		$	71,624		$	73,246		$	286,741		$	311,242
Noninterest income		2,644			5,718			9,168			10,452			6,429			27,982			104,777

Total revenue		73,486			77,040			82,121			82,076			79,675			314,723			416,019
Tax credit from investments in alternative energy partnerships		—			412			1,912			7,323			4,908			9,647			38,196
Deferred tax expense on investments in alternative energy partnerships		—			(43	)		(211	)		(769	)		(859	)		(1,023	)		(6,684	)
Tax effect on tax credit and deferred tax expense		26			180			631			2,422			3,004			3,259			20,531
(Loss) gain on investments in alternative energy partnerships		(786	)		(2,484	)		(1,808	)		34			(3,995	)		(5,044	)		(30,786	)

Total pre-tax adjustments for investments in alternative energy partnerships		(760	)		(1,935	)		524			9,010			3,058			6,839			21,257

Adjusted total revenue	$	72,726		$	75,105		$	82,645		$	91,086		$	82,733		$	321,562		$	437,276

Efficiency ratio		67.47	%		79.15	%		76.17	%		72.87	%		83.37	%		74.01	%		88.52	%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships		67.09	%		77.88	%		73.50	%		65.70	%		75.46	%		70.87	%		77.18	%
Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense		100.00	%		32.81	%		27.07	%		26.98	%		42.59	%		27.42	%		39.45	%

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BANC OF CALIFORNIA, INC. Reports