Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q4 2021 Earnings Presentation
38 slides from Banc Of California's earnings presentation, Jan 25, 2022
Slide 1: Investor Presentation 2021 Fourth Quarter Earnings
INVESTOR PRESENTATION 2021 Fourth Quarter Earnings bancofcal.com
Slide 2: Forward Looking Statements
2 FORWARD LOOKING STATEMENTS When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the wor
Slide 3: Fourth Quarter 2021 Results
3 (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation (2) 4Q21 capital ratios are preliminary FOURTH QUARTER 2021 RESULTS ($ in Thousands Except EPS) 4Q21 3Q21 4Q20 Net interest income $ 73,039 $ 62,976 $ 61,563 Provision for (reversal of) credit los
Slide 4: Enhancing Franchise Value: 4th Quarter 2021 Summary
4 ENHANCING FRANCHISE VALUE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 4th Quarter 2021 Summary Increase in Core Earnings Power • Adjusted PTPP Income(1) up 18% from prior quarter • Adjusted PTPP ROAA(1) improved 4 bps to 1.39% from prior qu
Slide 5: Growing Core Earnings Power
5 GROWING CORE EARNINGS POWER • Adjusted pre-tax pre-provision income increased $5 million, or 18% • Adjusted PTPP increase due mostly to higher net interest income driven by higher average loan balances from both organic and acquired growth, offset by higher operating costs related to including PMB
Slide 6: Escalating Adjusted Pre-Tax Pre-Provision Income Trend
6 Adjusted Pre-tax Pre-provision (PTPP) Income (1) $16.0 $13.2 $12.2 $18.9 (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 0.65% 0.83% 0.98% 1.25% 1.06% 1.13% 1.34% 1.39% $16.0 1Q21 $12.2 1Q20 2Q20 $22.0 4Q20 $18.9 $24.5 3Q20 $20.6 2Q21 $27.6 3Q2
Slide 7: Net Income Available to Common Stockholders Reconciliation
7 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS RECONCILIATION • Noninterest expense adjustments relate to merger-related costs, indemnified professional fees, net of recoveries • 4Q21 is reduced by a $11.3 million pre-tax charge for the expected lifetime credit losses for non-purchased credit deterio
Slide 8: Rapidly Improving Deposit Franchise
8 RAPIDLY IMPROVING DEPOSIT FRANCHISE (1) After fair value adjustments (2) Reflects balance as of period end • $1.1 billion deposits acquired from PMB outstanding as of 12/31/21: $610 million noninterest- bearing and $523 interest- bearing(1) • $70 million organic quarterly increase in noninterest-
Slide 9: Business Units Generating Solid Demand Deposit Growth
9 Period end balances ($ in millions) BUSINESS UNITS GENERATING SOLID DEMAND DEPOSIT(1) GROWTH 4Q20 $2,397 $754 4Q21 $437 1Q21 $848 $471 $21 $496 $824 $2,476 $18 $825 $5,182 3Q21 $2,735 $29 2Q21 $2,872 $1,081 $571 $32 $914 $3,157 $29 $3,667 $3,789 $4,026 $4,322 +41% Commercial & Real Estate BankingC
Slide 10: Diversified Loan Portfolio Mitigates Risk and Generates Attractive Yield
10 DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND GENERATES ATTRACTIVE RISK-ADJUSTED YIELD PPP Loan Overview • As of December 31, 2021, PPP loans (net of fees) comprised $123 million of the SBA portfolio • Of the total 1,128 PPP loans funded in the 1st round, 32 loans remain outstanding and represent
Slide 11: Loan Balances, Fundings and Payoffs
11 $351 $487 $533 $503 $583 $151 $63 $87 $82 $243 $464 $- $227 $178 $80 $966 $550 $847 $763 $906 ($515) ($321) ($496) ($385) ($575) ($227) ($141) ($138) ($144) ($254) ($222) ($742) ($683) ($634) ($528) ($828) 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% $0 $100 $200 $300 $400 $5
Slide 12: Asset Quality Remains Strong
12 ASSET QUALITY REMAINS STRONG NPLs, Delinquencies, and Classified Loans Delinquencies ($ in millions) Non-performing Loans (NPLs) ($ in millions) Criticized and Classified Loans ($ in millions) ACL / Non-performing Loans (NPLs) ($ in millions) 1Q21 $13.5 $22.9 $8.7 0.54% 4Q20 1.06% $47.8 $21.7 $13
Slide 13: Top Relationships: Non-performing and Delinquent Loans Rollforward
13 TOP 10 RELATIONSHIPS Non-performing & delinquent loans rollforward Non-performing loans • Non-performing loans increased $6.9 million, or 15%, to $52.6 million due mostly to $21.6 million of non-performing loans acquired from PMB, including one $12.8 million C&I credit and $5.5 million of PPP loa
Slide 14: Allowance for Credit Losses Walk
14 ALLOWANCE FOR CREDIT LOSSES WALK 4Q21: The ACL reserve increased $19.4 million due to: (1) a $13.7 million initial allowance for credit losses established for purchased credit-deteriorated ("PCD") loans from the PMB Acquisition, (2) an $11.3 million initial charge for all other loans acquired fro
Slide 15: Continued Focus on Expense Management
15 CONTINUED FOCUS ON EXPENSE MANAGEMENT Noninterest expense adjustments relate to: (1) timing of indemnified legal costs/recoveries, (2) merger-related costs and (3) loss/gain on investments in alternative energy partnerships(2) Noninterest Expense to Average Assets ($ millions) Adjusted Noninteres
Slide 16: Strong Capital Base
16 (1) 4Q21 capital ratios are preliminary (2) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 4Q21 3Q21 2Q21 1Q21 4Q20 Common Equity Tier 1 (1) 11.38% 10.86% 11.14% 11.50% 11.19% Tier 1 Risk-based Capital (1) 12.63% 12.35% 12.71% 13.17% 14.35% Lever
Slide 17: Interest Rate Risk Management
17 Interest Rate Risk Position (within 12 months) Loan & Deposit Mix Rate Sensitive Assets at 43% of Total Assets Loan Portfolio • $3.1 Billion matures or resets within 12 months • $1.7 Billion of loans are at or below their floors • Given a 100 bps market rate increase 76% of loans with floors are
Slide 18: 2022 Strategic Objectives
18 2022 STRATEGIC OBJECTIVES • Well positioned to see lower deposit beta and more positive impact on NIM than in last rising interest rate cycle • Robust deposit gathering engine has increased noninterest-bearing deposits to 37% of total deposits at 4Q21 from 15% in 1Q19 • One year positive gap rati
Slide 19: Appendix
BANC OF CALIFORNIA APPENDIX bancofcal.com 19
Slide 20: Loan Portfolio Characteristics
20 79% of total loans in California LOAN PORTFOLIO CHARACTERISTICS Construction $182 3% Consumer $103 1% SBA(1) $206 3% Northern California $592 8% Central California $217 3% South $784 11% Other West $332 5% Northeast $250 3% Midwest $137 2% • 63% of loan portfolio is secured by residential real es
Slide 21: Real Estate Loan Portfolio Has Low LTVs
21 REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS $ in millions (1) Excludes Warehouse credit facilities Real Estate Loan Balances(1) SFR Portfolio by LTV 2Q211Q21 3Q21 59% 4Q20 60%61% 61% 59% 4Q21 $3,503 $3,521 $3,636 $3,727 $4,274 RE Loans / Loans-HFI RE Loans 60% to 70% 50% to 60% <50% 70% to 80% >80% •
Slide 22: California-Centric CRE and Multifamily Portfolios Have Low LTV
22 CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type Multifamily 51% Health Facility 3% 13% Retail 13% Industrial 10% Owner Occupied 17% Mixed Use 3.1% Multi Tenant 45% Single Tenant 17% Strip Center 6% Non Owner Occupied 83% Neighbo
Slide 23: Diversified and Low Average Balance C&I Portfolio
23 ~74% C&I Concentration toward Businesses focused on Finance (including Warehouse), and Real Estate and Rental Leasing Limited Exposure to High Stressed Business Industries • 1% Food Services • <1% Transportation • <1% in Accommodations All Other C&I includes a diverse mix of industry sectors • 2%
Slide 24: Forbearance and Deferments Decline
24 FORBEARANCE AND DEFERMENTS DECLINE Total loan deferrals and forbearances declined $30 million from 3Q21 • $20 million, or 82%, of deferments/forbearances at the end of 4Q21 relate to legacy Single Family Residential loans (1) Loans within the SFR portfolio are forbearances or deferments $440 $145
Slide 25: Strong Allowance Coverage Ratio; Allocation of Reserve by Loan Type
25 STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE • Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments • 4Q21 Allowance for loan losses of $92.6 million includes initial provision for loan losses for non-purchase credit deteriorated loans acquired in the
Slide 26: Securities Portfolio
26(1) Dollars in millions. Values that are greater than $0.0 million (or 0.0%) but less than $0.5 million (or 0.5%) are not shown. Portfolio Average Balances & Yields Securities Portfolio Detail(1) SECURITIES PORTFOLIO Portfolio Profile(1) CompositionCredit Rating AAA 44% AA 43% BBB 13% The quarter-
Slide 27: CLO Portfolio Has Diversified Exposure
27 CLO Industry Breakdown $519 million at December 31, 2021 (net of $2.3 million unrealized loss) • CLO portfolio has underlying diversified exposure with largest segment in Healthcare & Pharmaceuticals at 13% • Limited exposure to severely stressed industries • AA and AAA holdings provide principal
Slide 28: Active Management of Deposit Costs Is Driving Down Cost of Funds
28 ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS Cost of Funds Drivers 0.63% 4Q21 0.09% 0.47% 0.28% 0.38% 0.22% 0.17% 1Q214Q20 0.36% 0.70% 0.32% 0.09% 0.57% 0.23% 0.49% 2Q21 0.12% 0.15% 3Q21 0.11% 0.17% 0.11% 0.41% Cost of Interest-bearing deposits Cost of total deposits Overnight
Slide 29: Declining Deposit Costs Protect Net Interest Margin
29 DECLINING DEPOSIT COSTS PROTECT NET INTEREST MARGIN Net Interest Margin Drivers 3.19% 4.04% 3.27% 3Q21 3.78% 3.38% 0.25% 3.66% 0.25% 4Q21 3.73% 4Q20 0.89% 0.83% 3.28% 2Q211Q21 3.81% 0.25% 0.77% 0.25% 0.67% 3.28% 0.25% 0.61% Earning Asset Yield Fed Funds RateNet Interest Margin Interest-Bearing Li
Slide 30: Pacific Mercantile Bancorp Acquisition
30 PACIFIC MERCANTILE BANCORP ACQUISITION (Dollars in thousands) 10/18/2021 Cash $ 475,561 Total Gross Loans 962,856 Allowance for Loan Losses (13,622) Goodwill 57,156 CDI 5,054 Other assets 51,833 Total Assets $ 1,538,838 Deposits $ 1,284,714 Notes payable, net 17,527 Other Liabilities 14,403 Total
Slide 31: BANC Fast Facts
31 BANC FAST FACTS (1) Non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 4Q21 3Q21 2Q21 1Q21 4Q20 $ 9,394 $ 8,279 $ 8,027 $ 7,933 $ 7,877 1,316 1,303 1,353 1,271 1,231 7,251 6,229 5,985 5,764 5,898 7,439 6,543 6,207 6,142 6,086 $ 73.0 $ 63.0 $ 59.8 $ 57.9 $ 61.6
Slide 32: Non-GAAP Financial Information
32 NON-GAAP FINANCIAL INFORMATION This presentation contains certain financial measures determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). These measures include tangible assets, tangible equity, tangible common equity, tangible equity to tangib
Slide 33: Non-GAAP Reconciliation
33 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Tangible Common Equity to Tangible Assets Ratio Total assets $ 9,393,743 $ 8,278,741 $ 8,027,413 $ 7,933,459 $ 7,877,334 Less: goodwill (94,301) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (6,411) (1,787
Slide 34: Non-GAAP Reconciliation
34 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Return on tangible common equity Average total stockholders' equity $ 1,035,782 $ 847,941 $ 814,973 $ 888,174 $ 892,565 Less: Average preferred stock (94,956) (94,956) (94,956) (164,895) (184,878) Less: Average goodwill (86,9
Slide 35: Non-GAAP Reconciliation
35 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Adjusted Noninterest Income and Expense Total noninterest income $ 4,860 $ 5,519 $ 4,170 $ 4,381 $ 6,975 Noninterest income adjustments: Fair Value adjustment on legacy SFR loans held for sale (26) (160) (20) - (36) Total non
Slide 36: Non-GAAP Reconciliation
36 NON-GAAP RECONCILIATION (Dollars in thousands) 4Q21 3Q21 2Q21 1Q21 4Q20 Net interest income $ 73,039 $ 62,976 $ 59,847 $ 57,916 $ 61,563 Noninterest income 4,860 5,519 4,170 4,381 6,975 Total revenue 77,899 68,495 64,017 62,297 68,538 Noninterest expense 58,127 37,811 40,559 46,735 38,950 Pre-tax
Slide 37: Non-GAAP Reconciliation
37 NON-GAAP RECONCILIATION (1) 4Q21 is reduced by a $11.3 million pre-tax charge for the expected lifetime credit losses for non-purchased credit deteriorated loans acquired in the PMB acquisition; there is no similar charge in any of the other periods presented (2) Adjustments shown net of an effec
Slide 38: bancofcal.com
bancofcal.com