Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q3 2024 Earnings Presentation
35 slides from Banc Of California's earnings presentation, Oct 22, 2024
Slide 1: Investor Presentation: Third Quarter 2024 Results
Draft v4.5 1/21/24 Investor Presentation Third Quarter 2024 Results
Slide 2: Forward-Looking Statements and Other Matters
Forward-Looking Statements and Other Matters This presentation includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to our expectations rega
Slide 3: Key Third Quarter Highlights
Adjusted 3Q24 EPS(1) of $0.25 and achieved outlook Key Third Quarter targets for NIM and expenses a quarter early Highlights ❖ Freed up approximately $100mm of capital to reposition the balance sheet and • Significantly grew core earnings through: Sale of $1.95B Civic improve capital ratios loan por
Slide 4: 3Q24 Financial Highlights
Delivered strong earnings growth, repositioned balance 3Q24 Financial sheet and increased capital Highlights 3Q24 2Q24 PTPP(1) / Adjusted PTPP(1) $20.5mm/$80.0mm $55.6mm/NA ❖ Adjusted PTPP(1) of $80mm compared to PTPP of $55.6mm in 2Q24 EPS / Adjusted EPS(1) ($0.01)/$0.25 $0.12/NA Operating ROAA / A
Slide 5: 3Q24 Earnings Results
Cost of funds 3Q24 Earnings ($ in millions) Total interest income $ 3Q24 446.9 $ 2Q24 462.6 $ 1Q24 478.7 $ 4Q23 467.2 -13 bps Results Total interest expense Net interest income 214.7 232.2 233.1 229.5 249.6 229.1 316.2 151.1 2.95% 2.82% Other noninterest income 44.6 28.7 34.3 45.5 ❖ Net interest inc
Slide 6: 3Q24 Noteworthy Items
3Q24 results included multiple noteworthy items, which 3Q24 Noteworthy provided $0.05 EPS benefit Items ❖ 3Q24 reported EPS of ($0.01). ($ in millions) After-tax P&L impact(1) Adjusted EPS of $0.25 excludes Revenue $60mm securities repositioning pre- Lease residual gain $4.6 tax loss and a $0.5mm me
Slide 7: Significant balance sheet repositioning largely completed
Significant balance sheet repositioning largely completed; drives NIM improvement and positions company for future growth Repositioning Actions Transaction Size Comments Sold Civic loan portfolio $1.95B Generated ~$1.91B liquidity and ~$100mm of capital Assets Repositioned securities portfolio $742m
Slide 8: Interest Rate Sensitivity
Well positioned for declining rate environment with $7.3B Interest Rate more in rate sensitive liabilities than assets Sensitivity Asset/Liabilities Repricing Mix ($B) Short ❖ Well-positioned for declining rates with $12.6$12.9 Term A/L $19.7 $19.9 $7.3B more liabilities repricing or maturing than a
Slide 9: Near-term fixed rate maturities will reset higher
Near-term fixed rate maturities will reset higher Loan Interest Rate Floors: Variable Rate Loans Loan Portfolio by Index Rate 3Q24 3Q24 Sensitivity 1% ❖ Over 99% of adjustable-rate loans 14% 17% 19% 2% with floors are at or above their respective floors 14% ❖ Variable rate loans are almost entirely
Slide 10: Management Outlook
4Q24 outlook focused on strengthening core earnings Management in uncertain economic environment Outlook 4Q24 outlook Key factors ❖ NIM improvement to be driven by ❖ Assumes consistent balance sheet levels benefits of balance sheet repositioning, Net interest ❖ NIM of 3.00% to 3.10% ❖ Assumes one ad
Slide 11: Balance Sheet
Increased balance sheet efficiency with shift into core Balance Sheet funding driven by lower wholesale ($ in millions) 3Q24 2Q24 1Q24 4Q23 3Q24 Highlights Cash and cash equivalents Investment securities $ 2,554 $ 4,747 2,699 $ 4,673 3,085 $ 4,708 5,378 4,761 Loans held for sale 29 1,935 81 123 ❖ In
Slide 12: Net Interest Income and Net Interest Margin Expansion
Lower funding costs and strengthening asset mix drive Net Interest Income NII and NIM expansion and Net Interest Net Interest Income (NII) ($mm) and Net Interest Margin (NIM) (%) Margin Expansion 2.66% 2.80% 2.93% 3Q24 Highlights 1.69% ❖ NIM expanded 13 bps to 2.93% $229.1 $229.5 $232.2 ❖ NII increa
Slide 13: Funding Cost Reduction Actions and Mix Shift
Ongoing interest expense reduction results from focused Funding Cost strategy to strengthen funding mix and reprice deposits Reduction Actions Strengthening Funding Mix(1) % of Total Funding(1) and Mix Shift 3Q24 Highlights 80.8% 82.1% 81.9% 87.4% ❖ Deposit composition trends reflects results of bal
Slide 14: Noninterest Income Composition
3Q24 noninterest income elevated due to lease residual Noninterest Income gain and positive fair value mark Composition 3Q24 includes $6.4mm lease residual gain, $4.4mm positive mark for credit-linked notes and ($1.6mm) mark for equity CRA investments 3Q24 Highlights ($ in millions) $44.6(1) ❖ Lease
Slide 15: Noninterest Expenses
Achieved noninterest expense target range of Noninterest $195mm to $200mm Expenses ($ in millions) 3Q24 (2) 2Q24 (3) 1Q24 (2) Normalized 4Q23(4) Compensation $ 85.6 $ 85.9 $ 92.2 $ 114.9 Occupancy 16.9 17.5 18.0 18.0 3Q24 Highlights Information technology and data processing 15.0 15.5 15.4 16.3 Prof
Slide 16: Customer-Related Expenses
Customer-related expenses are primarily driven Customer-Related by ECR expenses Expenses Noninterest Expense Detail ($mm) Customer-Related Expenses ($mm) 3Q24 Highlights FDIC Special Assessment: 1Q24: $4.8 $34.5 ❖ Customer-related expenses of $216.3 $210.5 $32.4 $34.5mm $196.7 $30.9 $4.6 $30.9 $32.4
Slide 17: Building a Strong Commercial Deposit Franchise
Focus on relationship banking that generates low-cost Building a Strong commercial deposits Management has a track record of successful deposit strategy execution Commercial ($ in m illions) 3Q24 2Q24 1Q24 4Q23 Deposit Franchise Noninterest-bearing Checking Checking 7,812 7,540 7,825 7,310 7,834 7,8
Slide 18: NIB Deposit Growth Remains a Key Priority
Deposit gathering engine designed to build low-cost NIB Deposit deposit base Growth Remains a Consistently generating new noninterest-bearing business Key Priority deposits from new relationships since 4Q23 merger close 3Q24 Highlights 1,712 ❖ Enterprise-wide focus ❖ Deposit incentive programs, incl
Slide 19: Diversified Loan Portfolio
High-quality relationship-based core portfolio is well Diversified Loan diversified with strong metrics Portfolio Existing portfolios have strong credit quality Loan Segment HFI % of Total Wtd. Avg. NPL % DQ % ❖ Core portfolio increased $366mm or 7% ($ in millions) 3Q24 2Q24 Variance Loans 3Q24 Rate
Slide 20: California-Centric CRE Portfolio
High quality CRE portfolio has low weighted-average LTV California-Centric and high debt-service coverage ratio (DSCR) CRE Portfolio Total CRE is well diversified across multiple industries 3Q24 Highlights Property Type ($ in millions) Count 3Q24 % of Total CRE % of Total Loans Avg Loan Size WA LTV(
Slide 21: Loan Activity
Net loan growth driven by strong production, net line Loan Activity utilization and acquisitions 8.21% 7.80% 8.29% Rate on Production 3Q24 Highlights 7.24% 6.18% Total Loan Yield 6.08% 6.18% 5.82% ❖ Rate on new production of 8.29% $1,908 ($ in millions) $1,832 $1,781 $1,654 ❖ Loan production and lin
Slide 22: Asset Quality Ratios and Trends
Continuing conservative outlook and heightened Asset Quality Ratios monitoring given uncertain economic environment and Trends ACL / Total Loans ($mm) Nonperforming Loans (NPLs) ($mm) 0.72% ❖ NPL inflows primarily driven by: 0.57% 1.26% 0.50% 1.22% ❖ Two commercial loan exposures with 1.19% 1.20% 0.
Slide 23: Allowance for Credit Losses Walk
ACL coverage ratio remains at robust levels Allowance for ($ in millions) Credit Losses Walk $275.3 $9.0 $281.9 $(2.4) 3Q24 Highlights ❖ ACL increased by $6.6mm due to $9mm provision 1.19% 1.19% 1.20% 1.20% ❖ Provision was largely driven by higher qualitative reserves for office loans and other conc
Slide 24: Securities Portfolio Detail
High-quality securities portfolio provides upside Securities Portfolio Portfolio Profile Detail Credit Rating 2% 1% (1) Duration (yrs) Security Type AAA 0% ($ in millions) 3Q24 2Q24 Variance 3Q24 5% 16% AA 3Q24 Highlights AFS - Gov't & Agency $ 1,379 $ 1,634 $ (255) 6.7 A AFS - CLO's 285 109 176 0.2
Slide 25: High Level of Available Liquidity
Maintain high levels of primary and secondary liquidity High Level of as prudent risk management Available Liquidity ($ in Millions) Current 3Q24 Highlights September 30, 2024 (1) Availability Utilization Capacity Primary Liquidity ❖ Total primary liquidity of $4.5B, Cash $ 2,371 AFS Securities (unp
Slide 26: Strong Capital Base
Focus on building capital levels for strength and flexibility Strong Capital Regulatory Well- Excess of Well- Base 3Q24 2Q24 1Q24 4Q23 Capitalized Capitalized Total Risk-Based Ratio 16.98% 16.57% 16.40% 16.43% 10.00% 6.98% Tier 1 Risk-Based Capital 12.87% 12.62% 12.38% 12.44% 8.00% 4.87% 3Q24 Highli
Slide 27: Appendix
Appendix
Slide 28: Non-GAAP Financial Information
Non-GAAP Financial Information Tangible assets, tangible common equity, tangible common equity to tangible assets, average assets. Adjusted ROAA is calculated by dividing annualized adjusted net tangible book value per common share, adjusted net earnings (loss), return on average earnings (loss) by
Slide 29: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands, except per share data) 3Q24 2Q24 1Q24 4Q23 Tangible Common Equity to Tangible Assets Total stockholders' equity $ 3,496,198 $ 3,407,848 $ 3,394,150 $ 3,390,765 Less: preferred stock 498,516 498,516 498,516 498,516 Total common equity 2,997,682 2,909,332 2,895
Slide 30: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 3Q24 2Q24 1Q24 4Q23 Return on Average Tangible Common Equity ("ROATCE") Net earnings (loss) $ 8,784 $ 30,333 $ 30,852 $ (482,955) Earnings (loss) before income taxes $ 11,514 $ 44,637 $ 42,400 $ (659,989) Add: Intangible asset amortization 8,485 8,484 8,404 4
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousand, except per share amounts) 3Q24 2Q24 1Q24 4Q23 Adjusted Net Earnings Net earnings (loss) $ 8,784 $ 30,333 $ 30,852 $ (482,955) Earnings (loss) before income taxes $ 11,514 $ 44,637 $ 42,400 $ (659,989) Add: FDIC special assessment - NA 4,814 32,746 Add: Loss on
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 3Q24 2Q24 1Q24 4Q23 PTPP Income Net interest income $ 232,175 $ 229,488 $ 229,102 $ 151,051 Add: Noninterest (loss) income (15,452) 29,792 33,816 (400,402) Total revenue (loss) 216,723 259,280 262,918 (249,351) Less: Noninterest expense (196,209) (203,643) (2
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 3Q24 2Q24 1Q24 4Q23 Adjusted Noninterest Expense to Average Total Assets Noninterest expense $ 196,209 $ 203,643 $ 210,518 $ 363,638 Less: Acquisition, integration, and reorganization costs $ 510 $ 12,650 $ - $ (111,800) Noninterest expense excluding acquisit
Slide 34: Integration roadmap update
Integration roadmap update Strong execution and swift delivery of merger integration milestones Accomplished since announcement of deal Remaining items to be completed Target ✓ • Closed merger with PacWest • Execution on incremental facilities 4Q ✓ • Closed on $400mm common equity with merger consol
Slide 35: Experienced management team with track record of success at leading institutions
Experienced management team with track record of success at leading institutions Jared Wolff Joe Kauder Bryan Corsini Chris Blake President and Chief Executive Chief Financial Officer Chief Credit Officer Officer Vice Chairman of the Bank 30+ years banking experience, 35+ years banking experience, 3