Banc Of California, Inc. · NYSE:BANC
Banc Of California — IPO Roadshow (October 2020)
48 slides from Banc Of California's IPO roadshow presentation, Oct 27, 2020
Slide 1: Fixed Income Presentation
Issuer Free Writing Prospectus Dated October 27, 2020 Filed Pursuant to Rule 433 Registration Statement No. 333-236001 FIXED INCOME PRESENTATION bancofcal.com D October 2020 bancofcal.comIssuer Free Writing Prospectus Dated October 27, 2020 Filed Pursuant to Rule 433 Registration Statement No. 333-2
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS When used in this presentation 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
Slide 3: Preliminary Term Sheet
PRELIMINARY TERM SHEET Issuer (Exchange: Ticker) Banc of California, Inc. (NYSE: BANC) Security Offered Holding company fixed-to-floating subordinated notes due 2030 (1) Current Security Rating BBB- by Kroll Bond Rating Agency Offering Type SEC Registered Term 10-year Optional Redemption Non-call fo
Slide 4: Franchise Overview
bancofcal.com FRANCHISE OVERVIEWbancofcal.com FRANCHISE OVERVIEW
Slide 5: Overview of Banc of California
OVERVIEW OF BANC OF CALIFORNIA Relationship-Focused Business Banking Our Franchise Select Financial Highlights as of 9/30/2020 Balance Sheet ($ in Millions) Total Assets $7,738 31 Branches (1) Total Loans HFI 5,678 Allowance for Loan Losses 91 18 Total Deposits 6,032 Los Angeles County Total Common
Slide 6: Banking Solutions Designed for Businesses and Entrepreneurs
BANKING SOLUTIONS DESIGNED FOR BUSINESSES AND ENTREPRENEURS COMMERCIAL & REAL PRIVATE & ESTATE BANKING SPECIALTY BANKING • Commercial Banking • Healthcare, Education, Solutions Legal and Professional Services Banking • Bridge, CRE & Multifamily Lending • Nonprofit Banking • Construction Lending • En
Slide 7: Banc of California Is Positioned for the Future
BANC OF CALIFORNIA IS POSITIONED FOR THE FUTURE • Experienced new management team has successfully transformed the franchise Ø Over the last 18 months, effective transition to relationship focused-business bank with strong fundamentals Ø Implementation of high touch service-oriented model with full
Slide 8: Experienced Management Team
EXPERIENCED MANAGEMENT TEAM Jared Wolff Hamid Hussain CEO & President President, Commercial & Real Estate Banking • Joined in March 2019 from City National Bank • Joined the Company in September 2019, with • Spent 12 years at PacWest Bancorp as over 25 years of experience in finance President, Gener
Slide 9: Transforming Banc of California
TRANSFORMING BANC OF CALIFORNIA Phase One (completed) Phase Two Phase Three Building the Foundation Generating Profitable High Performing Growth Institution • Improved deposit mix • Continue to • Consistently optimize deposit generate ü Noninterest-bearing deposits increased to 24% of mix and grow D
Slide 10: Delivering Anticipated Earnings Improvement
DELIVERING ANTICIPATED EARNINGS IMPROVEMENT rd 3 Quarter 2020 Summary • Net income of $15.9 million compared to $18.5 million net loss in 2Q20 Significant Increase in (1) • Adjusted pre-tax pre-provision income (“PTPP”) of $18.9 million, an increase of Profitability 17.7% from 2Q20 and larger than t
Slide 11: Key Credit Investor Highlights
KEY CREDIT INVESTOR HIGHLIGHTS • Leadership transition at BANC started in March 2019 with Jared Wolff joining the bank as CEO Experienced • Effectively transformed the business in terms of strategic focus, balance sheet composition and capital levels Management Team • Increased earnings visibility a
Slide 12: Financial Highlights
bancofcal.com FINANCIAL HIGHLIGHTSbancofcal.com FINANCIAL HIGHLIGHTS
Slide 13: Third Quarter 2020 Results
THIRD QUARTER 2020 RESULTS ($ in Thousands Except EPS) 3Q20 2Q20 3Q19 Net interest income $ 55,855 $ 55,315 $ 58,915 Provision for credit losses $ 1,141 $ 11,826 $ 38,607 Net income (loss) $ 15,913 $ (18,449) $ (14,132) Net income (loss) available to common stockholders $ 12,084 $ (21,936) $ (22,722
Slide 14: Transformation of Balance Sheet Resulted in Strong Fundamentals and Excess Capital
TRANSFORMATION OF BALANCE SHEET RESULTED IN STRONG FUNDAMENTALS AND SIGNIFICANT EXCESS CAPITAL Total Assets ($ in millions) Total Loans HFI ($ in millions) Excess capital built through strategic reduction in balance sheet $8,625 16.35% 16.16% 16.24% $6,383 15.90% 14.37% Total Risk- based Capital $7,
Slide 15: Positive Profitability Metrics and Trends
POSITIVE PROFITABILITY METRICS AND TRENDS Successful transformation of the business has reduced non-core assets and lowered reliance on wholesale funding, while building a relationship-banking business model funded by a valuable core deposit franchise, has positioned the company for solid performanc
Slide 16: Stabilized and Growing Core Earnings
STABILIZED AND GROWING CORE EARNINGS 3Q20 Adjusted PTPP ROAA: 0.98% ($ in millions) $19.4 $18.9 +17.7% increase to 0.98% $1.2 $(1.4) $0.0 $0.0 $(0.3) $0.0 adjusted pre-tax pre-provision (PTPP) income due to higher core earnings 3Q20 PTPP LAFC Debt Non- Gain on Gain on sale Gain on sale 3Q20 Income R
Slide 17: Active Management of Deposit Mix and Cost Driving Down Cost of Funds
ACTIVE MANAGEMENT OF DEPOSIT MIX AND COST IS DRIVING DOWN THE COST OF FUNDS (1) Decreasing Cost of Funds Driven By… Decreasing Cost of Total Deposits 1.75% 1.48% 1.27% 1.55% 1.11% 0.71% 0.51% 1.41% 3Q19 4Q19 1Q20 2Q20 3Q20 1.03% Decreasing Cost of Short-term FHLB Borrowings 0.82% 2.34% 2.10% 1.65% 1
Slide 18: Which Drives Expansion of Net Interest Margin
…WHICH DRIVES EXPANSION OF NET INTEREST MARGIN (1) Expanding NIM Driven By… Meaningful Decrease In Interest-bearing Liabilities 3.09% 3.09% 3.04% 2.03% 1.85% 1.71% 1.29% 2.97% 1.02% 3Q19 4Q19 1Q20 2Q20 3Q20 2.86% And Measured Earning Asset Yield Decline 4.50% 4.50% 4.27% 3Q19 4Q19 1Q20 2Q20 3Q20 4.0
Slide 19: Continued Focus on Expense Management
CONTINUED FOCUS ON EXPENSE MANAGEMENT (1) • Adjusted noninterest expense decreased $2 million from prior quarter with a 1% decrease in average assets • Non-core expense/benefits relates to: 1) timing of indemnified legal costs/recoveries, 2) the impact of the LAFC agreement termination, 3) debt rest
Slide 20: Loan Portfolio and Asset Quality
bancofcal.com LOAN PORTFOLIO AND ASSET QUALITYbancofcal.com LOAN PORTFOLIO AND ASSET QUALITY
Slide 21: Well-Diversified, Balanced Loan Portfolio Mitigates Risk
WELL–DIVERSIFIED, BALANCED LOAN PORTFOLIO MITIGATES RISK Loan Portfolio by Segment Loan Portfolio by Geography $ in millions $ in millions Northeast Midwest Northern California (1) $151 $120 South SBA $382 3% 2% $414 $321 7% Central Consumer 7% 6% California $35 Single Family Res. $172 1% Other West
Slide 22: Diversified and Low Average Balance C&I Portfolio
DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO Transportation Accomodations Professional Services 0.3% Food Services 0.1% 1% 2% All Other Television / Motion Pictures • ~72% C&I Concentration toward C&I 2% 6% Businesses focused on Finance and Other Retail Trade Insurance, and Real Estate and Rent
Slide 23: California-Centric CRE and Multifamily Portfolios Have Low Weighted-Average LTV
CALIFORNIA–CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type $ in millions Owner Occupied Industrial Hospitality 11% $91 $7 4% 0.3% Other Mixed Use Other Non Owner 0.2% 2.4% Occupied $202 89% 9% Office $220 Multi Tenant 47% 10% Other 3% Retail
Slide 24: Real Estate Loan Portfolio Has Low LTVs
REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS (1) Balance % Count Real Estate LTVs (1) Real Estate Loan Balances $ in Millions $ in millions <50% $ 1,004 27% 884 $4,459 $4,135 $3,971 $3,841 50% to 60% 988 26% 537 $3,736 70% 69% 60% to 70% 1,379 37% 621 70% 68% 66% 70% to 80% 258 7% 154 >80% 106 3% 79 Tota
Slide 25: Construction Portfolio
CONSTRUCTION PORTFOLIO Construction Portfolio Use Construction Portfolio Income $ in millions Land $ in millions $12 6% C&I Buildings $4 4% Health Facility SFR $3 $77 Income Multi-Family 3% 39% $108 $100 55% 93% • As of 3Q20, Construction Portfolio was $198 million and represented 3% of total HFI lo
Slide 26: Forbearance and Deferments Decline
FORBEARANCE AND DEFERMENTS DECLINE Total approved loan deferrals and forbearances declined $321 million from 2Q20 • $138 million, or 49% of total 3Q20 deferrals, relate to legacy 1-4 Family Residential loans • $107 million, or 38% of total 3Q20 deferrals, are secured by CRE Retail, Office, and Multi
Slide 27: Well-Managed Credit Portfolio
WELL–MANAGED CREDIT PORTFOLIO DECLINING LEVELS OF NON-PERFORMING LOANS, DELINQUENCIES, AND CLASSIFIED LOANS Delinquencies ($ in millions) Classified and Criticized Loans Criticized Loans SFR Delinquencies Classified Loans Delinquencies (ex-SFR) -8.52% Delinquencies /Total Loans 1.69% $195 1.50% $186
Slide 28: Allowance for Credit Losses
ALLOWANCE FOR CREDIT LOSSES ($ in millions) $100.0 $0.9 $1.2 $94.6 $94.1 $95.0 ($1.0) ($1.6) $90.0 $85.0 $80.0 (1)(2) 1.68% (1)(2) 1.66% $75.0 $70.0 ACL Portfolio Charge-offs Specific Economic Forecast ACL (6/30/20) Changes (net of Recoveries) Reserves and Other (9/30/20) ACL Composition 3Q20 2Q20 A
Slide 29: Deposit Franchise
bancofcal.com DEPOSIT FRANCHISEbancofcal.com DEPOSIT FRANCHISE
Slide 30: Rapidly Improving Deposit Franchise
RAPIDLY IMPROVING DEPOSIT FRANCHISE Average Cost of deposits Money Market & Savings • $59.2 million quarterly Noninterest-bearing Brokered CDs 1.48% increase in noninterest- Interest-bearing checking CDs bearing deposits 1.27% 1.11% Spot Rate • Large percentage of 0.39% 0.71% noninterest-bearing and
Slide 31: All Business Units Showing Solid Deposit Growth
ALL BUSINESS UNITS SHOWING SOLID DEPOSIT GROWTH Period end balances ($ in millions) +34% $3,496 $3,238 $924 $2,828 $904 $2,622 $2,611 $770 $758 $775 $2,128 $1,908 $1,580 $1,545 $1,500 $457 $399 $416 $302 $296 $33 $24 $22 $27 $28 3Q19 4Q19 1Q20 2Q20 3Q20 Community & Business Banking Commercial Real E
Slide 32: Capital, Asset-Liability Management, Interest Rate Management and Liquidity
CAPITAL, ASSET-LIABILITY MANAGEMENT, INTEREST RATE MANAGEMENT AND bancofcal.com LIQUIDITYCAPITAL, ASSET-LIABILITY MANAGEMENT, INTEREST RATE MANAGEMENT AND bancofcal.com LIQUIDITY
Slide 33: Strong Capital and Liquidity
STRONG CAPITAL AND LIQUIDITY Consolidated Capital Ratios Liquidity Sources Type Amount $ in Millions 16.35% 16.24% 16.16% 15.90% Cash and Cash Equivalents (A) $292.5 15.10% 14.98% 14.91% 14.83% Secondary Liquidity: 14.37% Secured FHLB Borrowing Capacity 890.0 Secured Federal Reserve Borrowing Capaci
Slide 34: Pro Forma Capital Ratios
PRO FORMA CAPITAL RATIOS Standalone Pro Forma for $75 million 17.57% (1) subordinated debt raise 16.24% 14.98% 14.98% 11.64% 11.64% 10.83% 10.72% 8.43% 8.35% (2) TCE / TA Tier 1 Leverage CET1 Ratio Tier 1 Capital Total Risk-based Ratio Ratio Capital Ratio (1) Assumes $75 million subordinated debt ra
Slide 35: Securities Portfolio
SECURITIES PORTFOLIO (1) Securities Portfolio Detail Fair Value Fair Value QoQ Duration Security Type 2Q20 3Q20 Change 3Q20 Gov’t & Agency (MBS, CMO, & SBA) $ 307 $ 344 $ 37 7.41 CLOs 668 686 18 0.07 Municipal 57 69 12 7.69 Corporate Securities 144 147 3 7.44 Total Securities $ 1,176 $ 1,246 $ 70 3.
Slide 36: CLO Portfolio Has Diversified Exposure
CLO PORTFOLIO HAS DIVERSIFIED EXPOSURE CREDIT ENHANCEMENT PROVIDES SIGNIFICANT PRINCIPAL PROTECTION CLO Industry Breakdown • CLO portfolio has underlying diversified exposure with largest segment in $686 million at September 30, 2020 Healthcare & Pharmaceuticals at 13% (net of $17.7 million unrealiz
Slide 37: Stable Interest Rate Sensitivity Profile
STABLE INTEREST RATE SENSITIVITY PROFILE Change in Economic Value of Equity Change in Net Interest Income 17.4% 7.0% 14.7% 5.7% 10.0% 8.3% 3.5% 2.4% (8.4%) (9.8%) (1.2%) (1.4%) -100 bps +100 bps +200 bps -100 bps +100 bps +200 bps 6/30/2020 9/30/2020 6/30/2020 9/30/2020 Amount Change from Base Case
Slide 38: Appendix
bancofcal.com APPENDIXbancofcal.com APPENDIX
Slide 39: Ratings Profile
RATINGS PROFILE (1) Entity Type Outlook Action Rating Banc of California, Inc. Senior Unsecured Debt BBB Stable Affirmed Subordinated Debt BBB- Stable Affirmed Short-Term Debt K3 N/A Affirmed Banc of California, National Association Deposit BBB+ Stable Affirmed Senior Unsecured Debt BBB+ Stable Affi
Slide 40: Historical Interest Coverage
HISTORICAL INTEREST COVERAGE (1) Pro Forma ($ in thousands) 2016 2017 2018 2019 3Q20 3Q20 Double Leverage Investment in subsidiaries $1,038,618 $1,146,788 $1,088,658 $994,600 983,321 $1,058,321 Consolidated equity 980,239 1,012,308 945,534 907,245 874,254 874,254 Double leverage ratio 106% 113% 115%
Slide 41: BANC Fast Facts
BANC FAST FACTS (1) (Dollars in millions ) 3Q20 2Q20 1Q20 4Q19 3Q19 Total assets $ 7,738 $ 7,770 $ 7,663 $ 7,828 $ 8,625 Securities available-for-sale 1,246 1,176 969 913 776 Loans receivable 5,678 5,628 5,667 5,952 6,383 Total deposits 6,032 6,037 5,563 5,427 5,770 Net interest income 55.9 55.3 51.
Slide 42: Non-GAAP Financial Information
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 noninterest expense to average assets, pre-tax pre-provision income, pre-tax pre-provi
Slide 43: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 3Q20 2Q20 1Q20 4Q19 3Q19 Noninterest expense $ 40,394 $ 72,770 $ 46,919 $ 47,483 $ 43,240 (Loss) gain on investments in alternative energy partnerships (1,430) (167) 1,905 1,039 (940) Adjusted noninterest expense 41,824 72,937 45,014 46,444 44,180 Net i
Slide 44: Non-GAAP Reconciliation (Cont.)
NON-GAAP RECONCILIATION (CONT.) (Dollars in thousands) 3Q20 2Q20 1Q20 4Q19 3Q19 Tangible Common Equity to Tangible Assets Ratio Total assets $ 7,738,106 $ 7,770,138 $ 7,662,607 $ 7,828,410 $ 8,625,337 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (2,939) (
Slide 45: Non-GAAP Reconciliation (Cont.)
NON-GAAP RECONCILIATION (CONT.) (Dollars in thousands) 3Q20 2Q20 1Q20 4Q19 3Q19 Return on average tangible common equity Average total stockholders' equity $ 865,406 $ 854,250 $ 916,047 $ 912,749 $ 961,739 Less: Average preferred stock (184,910) (185,471) (189,607) (189,824) (213,619) Less: Average
Slide 46: Non-GAAP Reconciliation (Cont.)
NON-GAAP RECONCILIATION (CONT.) (Dollars in thousands) 3Q20 2Q20 1Q20 4Q19 3Q19 Adjusted Noninterest Expense Total noninterest expense $ 40,394 $ 72,770 $ 46,919 $ 47,483 $ 43,240 Less: non-core items Naming rights termination - (26,769) - - - Debt retirement expense - (2,515) - - - Data processing
Slide 47: Non-GAAP Reconciliation (Cont.)
NON-GAAP RECONCILIATION (CONT.) (Dollars in thousands) 3Q20 2Q20 1Q20 4Q19 3Q19 Net interest income $ 55,855 $ 55,315 $ 51,861 $ 56,660 $ 58,915 Noninterest income 3,954 5,528 2,061 4,930 3,181 Total revenue 59,809 60,843 53,922 61,590 62,096 Noninterest expense 40,394 72,770 46,919 47,483 43,240 Pr
Slide 48: bancofcal.com bancofcal.combancofcal.com bancofcal.com
bancofcal.com bancofcal.combancofcal.com bancofcal.com