Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q3 2020 Earnings Presentation
38 slides from Banc Of California's earnings presentation, Oct 22, 2020
Slide 1: 2020 Third Quarter Earnings Investor Presentation
INVESTOR D PRESENTATIONbancofcal.com 2020 Third Quarter Earnings bancofcal.com
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: 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 4: Delivering Anticipated Earnings Improvement
DELIVERING ANTICIPATED EARNINGS IMPROVEMENT 3rd Quarter 2020 Summary • Net income of $15.9 million, or $0.24 per diluted share Significant Increase • Net income includes an effective tax rate of 12.9%, a benefit of $0.04 per diluted share if adjusted for an effective tax rate of 25% in Profitability
Slide 5: Transforming Banc of California
TRANSFORMING BANC OF CALIFORNIA Phase One Phase Two Phase Three Building the Foundation Generating Profitable High Performing Growth Institution • Improve deposit mix • Continue to • Consistently optimize deposit generate � Noninterest-bearing deposits increased to 24% of mix and grow DDA performanc
Slide 6: Proven Earnings Growth Trajectory
PROVEN EARNINGS GROWTH TRAJECTORY Adjusted Pre-tax Pre-provision Income (1) ($ in millions) 0.98% 0.83% $18.9 $16.0 0.66% 0.65% $13.2 $12.2 4Q19 1Q20 2Q20 3Q20 Adjusted Pre-tax, pre-provision income Adjusted PTPP Income / Avg. Assets (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconcilia
Slide 7: Stabilized and Growing Core Earnings
STABILIZED AND GROWING CORE EARNINGS ($ in millions) 3Q20 • 17.7% increase in adjusted Adjusted PTPP ROAA: pre-tax pre-provision 0.98% (PTPP) income $19.4 $18.9 • PTPP ROAA increased to $0.0 $0.0 $1.2 $(1.4) $(0.3) $0.0 0.98% due to higher core earnings 3Q20 PTPP LAFC Debt Non- Gain on Gain on sale
Slide 8: Rapidly Improving Deposit Franchise
RAPIDLY IMPROVING DEPOSIT FRANCHISE Average Cost of deposits Money Market & Savings • $59.2 million quarterly Noninterest-bearing Brokered CDs increase in noninterest- 1.48% Interest-bearing checking CDs bearing deposits 1.27% Spot 1.11% Rate • Large percentage of 0.39% noninterest-bearing and 0.71%
Slide 9: All Business Units Showing Solid Deposit Growth
ALL BUSINESS UNITS SHOWING SOLID DEPOSIT GROWTH Period end balances ($ in millions) +34% $3,496 $3,238 $2,828 $924 $2,611 $2,622 $904 $770 $775 $758 $2,128 $1,908 $1,580 $1,500 $1,545 $302 $296 $457 $399 $416 $33 $24 $22 $27 $28 3Q19 4Q19 1Q20 2Q20 3Q20 Community & Business Banking Commercial Real E
Slide 10: Diversified Loan Portfolio Mitigates Risk and Is Holding Yield
DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND IS HOLDING YIELD 3rd Quarter 2020 2nd Quarter 2020 Change Loan Segment $(1) % Av g. Yie ld $1 % Av g. Yie ld $ % Av g. Yie ld $ in Millions C&I $ 1,587 28% 4.43% $ 1,437 26% 4.45% $ 150 2% -0.02% Multifam ily 1,477 26% 4.72% 1,434 25% 4.50% 43 1% 0.22% C
Slide 11: Forbearance and Deferments Decline
FORBEARANCE AND DEFERMENTS DECLINE ($ in millions) Deferrals by Loan Type as of 9/30/20(1),(2) Approved or Booked Under Review(3) Total Deferrals % of % of % of Change in Total $ # Portfolio $ # Portfolio $ # Portfolio Deferral Balance Portfolio Deferred Deferred Deferred from 6/30/20 1-4 Family Res
Slide 12: Asset Quality: Declining Levels of NPLs, Delinquencies, Classified Loans
ASSET QUALITY DECLINING LEVELS OF NPLS, DELINQUENCIES, AND CLASSIFIED LOANS Delinquencies ($ in millions) Criticized and Classified Loans ($ in millions) SFR Delinquencies Criticized Loans Delinquencies (ex-SFR) Classified Loans -8.52% Delinquencies /Total Loans 1.69% $195 1.50% 1.46% $186 $170 $167
Slide 13: Non-Performing & Delinquent Loans Rollforward, Top Relationships
NON-PERFORMING & DELINQUENT LOANS ROLLFORWARD TOP 10 RELATIONSHIPS Non-performing Loans ($ in thousands) 3Q 3Q Loan 2Q • Non-performing loans # 2Q20 Delta 3Q20 Accrual Delinquency Category Accrual Status Status Status decreased $5.8 million to $66.9 1 $ 16,353 $ (206) $ 16,147 C&I Non-Accrual Non-Ac
Slide 14: Allowance for Credit Losses Walk
ALLOWANCE FOR CREDIT LOSSES WALK $100.0 $ in millions $94.6 $0.9 $1.2 $95.0 $94.1 ($1.6) ($1.0) $90.0 $85.0 1.68%(1),(2) 1.66%(1),(2) $80.0 $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) ● Q3 ‘20: The Allowance
Slide 15: Continued Focus on Expense Management
CONTINUED FOCUS ON EXPENSE MANAGEMENT • Adjusted noninterest expense(1) 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 restr
Slide 16: Strong Capital Base
STRONG CAPITAL BASE 3Q20 2Q20 1Q20 4Q19 3Q19 Common Equity Tier 1 11.64% 11.68% 11.58% 11.56% 10.34% Tier 1 Risk-based Capital 14.98% 15.10% 14.91% 14.83% 13.32% Leverage Ratio 10.83% 10.56% 11.20% 10.89% 9.84% Tangible Equity / Tangible Assets(1) 10.84% 10.43% 10.42% 11.12% 10.01% Tangible Common E
Slide 17: 2020 Strategic Objectives
2020 STRATEGIC OBJECTIVES • Heightened monitoring for signs of stress in well-underwritten loan portfolio mainly secured by Heightened Focus CA-based real estate with relatively low LTVs on Credit • Maintain a high level of reserves given uncertain environment • New production focused on high qualit
Slide 18: Appendix
BANC OF CALIFORNIA APPENDIX Woneoféalison
Slide 19: Loan Portfolio Characteristics
LOAN PORTFOLIO CHARACTERISTICS Loan Portfolio by Segment Loan Portfolio by Geography $ in millions $ in millions Northeast Midwest Northern California (1) $151 SBA South $120 $382 $414 3% 2% $321 Consumer 7% Central 6% 7% Single Family Res. $35 California $1,234 1% Other West $172 3% Construction 22
Slide 20: Real Estate Loan Portfolio Has Low LTVs
REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS (1) Real Estate Loan Balances(1) Real Estate LTVs $ % Count $ in Millions $ in millions $4,459 <50% $ 1,004 27% 884 $4,135 $3,971 $3,841 $3,736 50% to 60% 988 26% 537 70% 69% 70% 68% 66% 60% to 70% 1,379 37% 621 70% to 80% 258 7% 154 >80% 106 3% 79 Total $ 3,7
Slide 21: California-Centric CRE and Multifamily Portfolios Have Low LTV
CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type Strip Center Other 8.1% 2.9% Multi Tenant Other 47.5% Industrial Single Tenant 8.8% 16.7% 4.0% Hospitality Mixed Use Other 0.3% 2.4% 0.2% Neighborhood Shopping Center 24.9% Retail Own
Slide 22: Construction Portfolio
CONSTRUCTION PORTFOLIO Construction Portfolio Use Construction Portfolio Income Land C&I Buildings Health Facility 6% 4% 3% SFR Income 39% 55% Multi-Family 93% • As of 3Q20, Construction Portfolio was $198mm and represented 3% of total HFI loans • Weighted average LTV is 53% Third Quarter 2020 | 21
Slide 23: Diversified and Low Average Balance C&I Portfolio
DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO Professional Services Transportation Accomodations • ~72% C&I Concentration toward Food Services 1% 0.3% 0.1% 2% Businesses focused on Finance and Television / Motion Pictures All Other Insurance, and Real Estate and Rental 2% C&I Other Retail 6% Lea
Slide 24: Strong Allowance Coverage Ratio; Allocation of Reserve by Loan Type
STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE ACL Composition 3Q20 2Q20 At CECL Adoption 4Q19 ($ in thousands) Amount % of Loans Amount % of Loans Amount % of Loans Amount % of Loans Commercial real estate $ 19,373 2.34% $ 17,372 2.11% $ 10,788 1.32% $ 5,941 0.73% Multifamily 2
Slide 25: Securities Portfolio
SECURITIES PORTFOLIO Securities Portfolio Detail(1) Fair Value Fair Value QoQ Duration Security Type 2Q20 3Q20 Change 3Q20 Gov’t & Agency (MBS, CMO, & $ 307 $ 344 $ 37 7.41 SBA) 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 3.2
Slide 26: 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 Healthcare $686 million at September 30, 2020 & Pharmaceuticals at 13% (net of $17.7 million unrealiz
Slide 27: Active Management of Deposit Costs Is Driving Down Cost of Funds
ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS Cost of Funds Drivers 3.10% 2.85% 2.86% 2.74% 2.75% 2.34% 2.10% 1.78% 1.65% 1.57% 1.61% 1.75% 1.41% 1.55% 1.32% 1.48% 1.41% 1.27% 1.03% 1.11% 0.93% 0.82% 0.66% 0.71% 0.51% 3Q19 4Q19 1Q20 2Q20 3Q20 Cost of Interest-bearing deposits LT F
Slide 28: Declining Deposit Costs Protect Net Interest Margin
DECLINING DEPOSIT COSTS PROTECT NET INTEREST MARGIN(1) Net Interest Margin Drivers 4.50% 4.50% 4.27% 4.06% 3.86% 3.09% 3.09% 3.04% 2.97% 2.86% 2.03% 1.85% 2.00% 1.75% 1.71% 1.29% 1.02% 0.25% 0.25% 0.25% 3Q19 4Q19 1Q20 2Q20 3Q20 Earning Asset Yield Net Interest Margin Fed Funds Rate Interest-Bearing
Slide 29: Interest Rate Risk Management – Earning Assets Analysis
INTEREST RATE RISK MANAGEMENT – EARNING ASSETS ANALYSIS Assets Repricing/Maturing by Duration ($millions) Repricing/Maturity by Product Type ($millions) $1,600 $1,400 $1,200 $1,000 $3,128 $3,408 43% $800 47% $600 $400 $200 $683 10% - < 1 Year 1 - 2 Years > 2 Years Variable Rate Loan Floors & Assets
Slide 30: Interest Rate Sensitivity
INTEREST RATE SENSITIVITY 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%) (1.4%) (1.2%) -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 ($000) Amount C
Slide 31: Banc Fast Facts
BANC FAST FACTS (Dollars in millions(1)) 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 51.9
Slide 32: 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 33: 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 34: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (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) (3,292) (
Slide 35: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 3Q20 2Q20 1Q20 4Q19 3Q19 Return on 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 goodwill (37,144
Slide 36: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (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 fees - -
Slide 37: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (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 Pre-tax pr
Slide 38: bancofcal.com
bancofcal.com bancofcal.com