Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q3 2021 Earnings Presentation
39 slides from Banc Of California's earnings presentation, Oct 21, 2021
Slide 1: Investor Presentation 2021 Third Quarter Earnings
INVESTOR PRESENTATION 2021 Third 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: Third Quarter 2021 Results
3(1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation THIRD QUARTER 2021 RESULTS ($ in Thousands Except EPS) 3Q21 2Q21 3Q20 Net interest income $ 62,976 $ 59,847 $ 55,855 (Reversal of) provision for credit losses $ (1,147) $ (2,154) $ 1,141 Net income
Slide 4: Enhancing Franchise Value
4 ENHANCING FRANCHISE VALUE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 3rd Quarter 2021 Summary Significant Increase in Profitability • Net income available to common stockholders up 24% from prior quarter • ROAA up 16% from prior quarter •
Slide 5: Strong Visibility on Earnings Growth
5 STRONG VISIBILITY ON EARNINGS GROWTH Continued Opportunities to Reduce Deposit Costs • Continued strong inflows of low-cost deposits generated from business development efforts across all areas of the bank in conjunction with repricing efforts achieved a deposit spot rate at September 30, 2021 of
Slide 6: Progress Report on Franchise Transformation
6 Progress Report on Franchise Transformation Strong Execution on Franchise Enhancing Initiatives Has Produced Substantial Financial Improvement (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 3Q21 1Q19 Improved By Net interest margin 3.28% 2.81%
Slide 7: Net Income Available to Common Stockholders Reconciliation
7 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS RECONCILIATION • Net income available to common stockholders growth of 24% • Noninterest expense adjustments relate to merger-related costs, indemnified professional fees, net of recoveries, and gain on alternative energy partnerships • 3Q21 included $1.
Slide 8: Adjusted Pre-tax Pre-provision Income Trend
8 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 ADJUSTED PRE-TAX PRE-PROVISION INCOME TREND 0.98% 1.25% 1.06% 1.13% 1.34% 2Q211Q21 $18.9 4Q203Q20 $20.6 $24.5 $22.0 $27.6 3
Slide 9: Rapidly Improving Deposit Franchise
9 RAPIDLY IMPROVING DEPOSIT FRANCHISE (1) Reflects balance as of period end • $299 million quarterly increase in noninterest- bearing deposits • Large percentage of noninterest-bearing and low-cost deposits • Targeted deposit strategy has transformed deposit mix and contributed to asset-sensitive pr
Slide 10: Business Units Generating Solid Demand Deposit Growth
10 Period end balances ($ in millions) BUSINESS UNITS GENERATING SOLID DEMAND DEPOSIT GROWTH $2,872 $416 $771 $754 3Q20 $2,282 $2,397 1Q21 $496 $21 4Q20 $824 $2,476 $471 $18 $825 $2,735 $437 $571 $29 2Q21 $848 $32 3Q21 $3,496 $28 $3,667 $3,789 $4,026 $4,322 +24% Community Banking OtherCommercial & R
Slide 11: Diversified Loan Portfolio Mitigates Risk and Generates Attractive Yield
11 DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND GENERATES ATTRACTIVE RISK-ADJUSTED YIELD PPP Loan Overview • As of September 30, 2021, PPP loans (net of fees) comprised $116 million of the SBA portfolio • Of the total 1,128 PPP loans funded in the 1st round, 57 loans remain outstanding and represen
Slide 12: Loan Balances Fundings and Payoffs
12 LOAN BALANCES FUNDINGS AND PAYOFFS (1) Includes net change in warehouse lending and loan purchases (2) Includes deferred costs/fees, transfers and sales $253 $351 $487 $533 $503 $109 $151 $63 $87 $82 $204 $464 $227 $178 $566 $966 $550 $847 $763 ($367) ($515) ($321) ($496) ($385) ($149) ($227) ($1
Slide 13: Forbearance and Deferments Decline
13 ($ in millions) Deferrals by Loan Type as of 9/30/21 (1),(2) Total Deferrals $ # Total Portfolio % of Portfolio Deferred Single Family Residential (SFR) $ 49.5 40 $ 1,394 4% Multifamily - 0 1,296 0% CRE - 0 907 0% Construction & Development - 0 131 0% Commercial & Industrial 3.8 1 2,297 0% Other
Slide 14: Asset Quality Remains Strong
14 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) 2Q21 $12.0 $8.7 $71.1 0.54% 1.46% 3Q213Q20 $22.9 $35.0
Slide 15: Top Relationships: Non-performing & Delinquent Loans Rollforward
15 TOP 10 RELATIONSHIPS Non-performing & delinquent loans rollforward Non-performing loans • Non-performing loans decreased $5.7 million, or 11%, to $45.6 million due mostly to SFR loans paying off and migrating back to accrual status • $22.7 million, or 50% of total NPLs, are in current status • NP
Slide 16: Allowance for Credit Losses Walk
16 $79.7 $0.2 $0.8 $78.8 ($1.9) $70.0 $72.0 $74.0 $76.0 $78.0 $80.0 $82.0 ACL (6/30/21) Portfolio Mix Recoveries (net of Charge-offs) Specific Reserves ACL (9/30/21) ALLOWANCE FOR CREDIT LOSSES WALK 3Q21: The ACL reserve decreased $0.9 million due to (1) lower reserves of $1.9 million from portfolio
Slide 17: Continued Focus on Expense Management
17 CONTINUED FOCUS ON EXPENSE MANAGEMENT Noninterest expense adjustments relate to: (1) timing of indemnified legal costs/recoveries, (2) merger-related costs and (3) loss/gain on investments in alternative energy partnerships(2) Noninterest Expense to Average Assets ($ millions) Adjusted Noninteres
Slide 18: Strong Capital Base
18(1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 3Q21 2Q21 1Q21 4Q20 3Q20 Common Equity Tier 1 10.89% 11.14% 11.50% 11.19% 11.59% Tier 1 Risk-based Capital 12.38% 12.71% 13.17% 14.35% 14.94% Leverage Ratio 9.80% 9.89% 9.62% 10.90% 10.79% Tangibl
Slide 19: 2021 Strategic Objectives
19 2021 STRATEGIC OBJECTIVES • Continue adding full banking relationships that provide low-cost transaction deposits • Additional opportunities to reduce deposit costs primarily centered around larger money market contracts and time deposits maturing during the remainder 2021 • Continued focus on ea
Slide 20: Appendix
BANC OF CALIFORNIA APPENDIX bancofcal.com 20
Slide 21: Loan Portfolio Characteristics
21 78% of total loans in California LOAN PORTFOLIO CHARACTERISTICS Construction $131 2% Consumer $23 <1% SBA(1) $182 3% Northern California $509 8% Central California $213 3% South $748 12% Other West $305 5% Northeast $185 3% Midwest $148 2% • 70% of loan portfolio is secured by residential real es
Slide 22: Real Estate Loan Portfolio Has Low LTVs
22 REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS $ in millions (1) Excludes Warehouse credit facilities Real Estate Loan Balances(1) SFR Portfolio by LTV 66% 3Q20 1Q21 $3,521 59% 2Q214Q20 $3,636 61% 61% 3Q21 $3,736 $3,503 RE Loans / Loans-HFI RE Loans 60% to 70% 50% to 60% <50% 70% to 80% >80% • ~87% of a
Slide 23: California-Centric CRE and Multifamily Portfolios Have Low LTV
23 CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type Multifamily 59% Other 12% 12% Retail 12% Industrial 5% Hospitality 0.1% Owner Occupied 12% Residential 96.7% Mixed Use 3.3% Multi Tenant 40% Single Tenant 16% Strip Center 7% Non O
Slide 24: Diversified and Low Average Balance C&I Portfolio
24 ~80% C&I Concentration toward Businesses focused on Finance (including Warehouse), and Real Estate and Rental Leasing Limited Exposure to High Stressed Business Industries • 2% Television / Motion Pictures • 1% Food Services • <1% Transportation • <1% in Accommodations All Other C&I includes a di
Slide 25: Strong Allowance Coverage Ratio; Allocation of Reserve by Loan Type
25 STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE • Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments • Excluding PPP loans, the ACL coverage was 1.29% at the end of 3Q21 compared to 1.38% at the end of 2Q21 ACL Composition 3Q21 2Q21 ($ in thousands) Am
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 AA 44% AAA 43% BBB 13% The quarter-
Slide 27: CLO Portfolio Has Diversified Exposure
27 CLO Industry Breakdown $549 million at September 30, 2021 (net of $2.5 million unrealized loss) • CLO portfolio has underlying diversified exposure with largest segment in Healthcare & Pharmaceuticals at 13% • Limited exposure to severely stressed industries • AA and AAA holdings provide principa
Slide 28: Active Management of Deposit Costs Is Driving Down Cost of Funds
28 ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS Cost of Funds Drivers 0.22% 0.70% 0.66% 0.23% 0.51% 0.82% 0.36% 3Q20 0.11% 0.47% 4Q20 0.15% 0.38% 0.28% 0.63% 1Q21 0.32% 0.57% 2Q21 0.49% 3Q21 0.17% 0.09% 0.12% Cost of Interest-bearing deposits Cost of total deposits Overnight fund
Slide 29: Declining Deposit Costs Protect Net Interest Margin
29 DECLINING DEPOSIT COSTS PROTECT NET INTEREST MARGIN Net Interest Margin Drivers 1.02% 4.04% 3Q21 3.86% 1Q21 0.25% 3Q20 0.25% 3.09% 3.38% 0.25% 3.78% 0.89% 4Q20 3.19% 3.73% 0.25% 0.83% 3.81% 3.27% 3.28% 0.25% 0.77% 2Q21 0.67% Interest-Bearing LiabilitiesFed Funds RateEarning Asset Yield Net Intere
Slide 30: Interest Rate Risk Management – Earning Assets Analysis
30 INTEREST RATE RISK MANAGEMENT – EARNING ASSETS ANALYSIS Assets Repricing/Maturing by Duration ($ millions) Repricing/Maturity by Product Type ($ millions) • $3.95 billion (51%) of earning assets mature or have rate resets <2 years • Earning assets with effective rate resets <2 years include: • $3
Slide 31: BANC Fast Facts
31 BANC FAST FACTS (1) Non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 3Q21 2Q21 1Q21 4Q20 3Q20 $ 8,279 $ 8,027 $ 7,933 $ 7,877 $ 7,738 1,303 1,353 1,271 1,231 1,246 6,229 5,985 5,764 5,898 5,678 6,543 6,207 6,142 6,086 6,032 $ 63.0 $ 59.8 $ 57.9 $ 61.6 $ 55.9
Slide 32: Merger: Pacific Mercantile Bancorp
32 Non-Int. Bearing 35% Int. Bearing Checking 31% MMDA & Sav. 26% CDs 9% C&I (Ex. PPP) 36% PPP 4% CRE 18% Multifamily 20% Consumer 1% SFR 19% C&D 2% MERGER PACIFIC MERCANTILE BANCORP 1) Pro forma excludes purchase accounting adjustments. Balances as of September 30, 2021; Loan yields shown for the q
Slide 33: Non-GAAP Financial Information
33 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 34: Non-GAAP Reconciliation
34 NON-GAAP RECONCILIATION (Dollars in thousands) 3Q21 2Q21 1Q21 4Q20 3Q20 Tangible Common Equity to Tangible Assets Ratio Total assets $ 8,278,741 $ 8,027,413 $ 7,933,459 $ 7,877,334 $ 7,738,106 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (1,787) (2,069
Slide 35: Non-GAAP Reconciliation
35 NON-GAAP RECONCILIATION (Dollars in thousands) 3Q21 2Q21 1Q21 4Q20 3Q20 Return on tangible common equity Average total stockholders' equity $ 847,941 $ 814,973 $ 888,174 $ 892,565 $ 865,406 Less: Average preferred stock (94,956) (94,956) (164,895) (184,878) (184,910) Less: Average goodwill (37,14
Slide 36: Non-GAAP Reconciliation
36 NON-GAAP RECONCILIATION (Dollars in thousands) 3Q21 2Q21 1Q21 4Q20 3Q20 1Q19 Adjusted Noninterest Income and Expense Total noninterest income $ 5,519 $ 4,170 $ 4,381 $ 6,975 $ 3,954 $ 6,295 Noninterest income adjustments: Net (gain) on securities available for sale - - - - - (208) Net (gain) on s
Slide 37: Non-GAAP Reconciliation
37 NON-GAAP RECONCILIATION (Dollars in thousands) 3Q21 2Q21 1Q21 4Q20 3Q20 1Q19 Net interest income $ 62,976 $ 59,847 $ 57,916 $ 61,563 $ 55,855 $ 67,808 Noninterest income 5,519 4,170 4,381 6,975 3,954 6,295 Total revenue 68,495 64,017 62,297 68,538 59,809 74,103 Noninterest expense 37,811 40,559 4
Slide 38: Non-GAAP Reconciliation
38 NON-GAAP RECONCILIATION (1) Adjustments shown net of an effective tax rate of 25% (2) Non-GAAP measure (3) Represents adjusted net income available to common stockholders divided by average diluted common shares (Dollars in thousands, except per share data) 3Q21 2Q21 1Q21 4Q20 3Q20 1Q19 Adjusted
Slide 39: bancofcal.com
bancofcal.com