Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q2 2020 Earnings Presentation
36 slides from Banc Of California's earnings presentation, Jul 23, 2020
Slide 1: 2020 Second Quarter Earnings Investor Presentation
INVESTOR PRESENTATIONbancofcal.com 2020 Second 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: Second Quarter 2020 Results
SECOND QUARTER 2020 RESULTS ($ in Thousands Except EPS) 2Q20 1Q20 2Q19 Net interest income $ 55,315 $ 51,861 $ 64,780 Provision (reversal) for credit losses $ 11,826 $ 15,761 $ (1,900) Net income (loss) $ (18,449) $ (6,593) $ 16,582 Pre-tax pre-provision (loss) income1 $ (11,927) $ 7,003 $ 18,990 Ad
Slide 4: 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 � Non-interest bearing deposits increased to 23% of mix and grow DDA performan
Slide 5: Continued Execution on Strategic Plan Through the COVID-19 Crisis
CONTINUED EXECUTION ON STRATEGIC PLAN THROUGH THE COVID-19 CRISIS 2nd Quarter 2020 Progress � Conservatively underwritten, real estate heavy loan portfolio Strong Credit continues to demonstrate stability during pandemic Metrics � ACL/Total Loans strengthened to 1.68% (1.76% net of PPP loans) � Noni
Slide 6: Proactive Approach to Address COVID-19 Uncertainty
PROACTIVE APPROACH TO ADDRESS COVID-19 UNCERTAINTY EMPLOYEES Developing a Return To The Workplace (RTTW) Playbook. The Playbook is a coordinated plan to safely return our employees to the workplace � Based on federal guidelines and directives from local and state public health authorities � Phased a
Slide 7: Developing Recurring and Sustainable Earnings Profile
DEVELOPING RECURRING AND SUSTAINABLE EARNINGS PROFILE ($ in millions) 2Q20 � 31.7% increase in adjusted Adjusted pre-tax pre-provision (PTPP) PTPP ROAA: income 0.83% $0.9 $(0.2) $(0.0) $16.0 � Higher adjusted PTPP income $2.5 $(2.0) relative to average asset growth � Recurring PTPP income underlies
Slide 8: Rapidly Improving Deposit Franchise
RAPIDLY IMPROVING DEPOSIT FRANCHISE Average Cost of deposits Money Market & Savings � $135.4 million quarterly increase 1.62% Noninterest-bearing Brokered CDs in noninterest-bearing deposits 1.48% Interest-bearing checking CDs 1.27% � Large percentage of noninterest- Spot 1.11% bearing and low-cost
Slide 9: Demand Deposit Growth by Business Units
DEMAND DEPOSIT GROWTH BY BUSINESS UNITS1 ($ in millions) +26% $3,238 $2,828 $2,572 $2,611 $2,622 $904 $770 $796 $775 $758 $1,908 $1,580 $1,458 $1,500 $1,545 $255 $302 $296 $457 $399 $62 $33 $24 $22 $27 2Q19 3Q19 4Q19 1Q20 2Q20 Community & Business Banking Commercial Real Estate & Banking Private & S
Slide 10: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO 2nd Quarter 2020 1st Quarter 2020 Change Loan Segment $1 % Av g. Yie ld $1 % Av g. Yie ld $ % Av g. Yie ld $ in Millions C&I $ 1,437 26% 4.45% $ 1,578 28% 4.72% $ (141) -2% -0.27% Multifam ily 1,434 25% 4.50% 1,466 26% 4.50% (32) -1% 0.00% CRE 823 15% 4.86% 810 14% 4.80% 1
Slide 11: Additional Detail on Deferrals and Loan Exposure
ADDITIONAL DETAIL ON DEFERRALS AND LOAN EXPOSURE Forbearance / Deferrals by Loan Category1,2 CRE Exposure by Property Type ($ in millions) % of Total Total Approved % of Balance ($ in millions) Approved Loans Deferrals Balance Total WALTV WADSCR (as of June 30, 2020) Deferrals $ % $ # % Loans 1-4 Fa
Slide 12: Asset Quality: Higher Delinquencies & NPL Ratios Mitigated by Low LTVs
ASSET QUALITY HIGHER DELINQUENCIES & NPL RATIOS MITIGATED BY LOW LTVS Delinquencies ($ in millions) Delinquencies / Loans SFR Delinquencies Delinquencies /Total Loans Delinquencies (ex-SFR) $95.2 Delinquencies (ex-SFR)/Loans (ex-SFR) 1.69% $85.0 1.50% $56.3 $57.6 0.97% $52.2 $70.3 0.78% 0.88% $71.4
Slide 13: Non-Performing & Delinquent Loans Rollforward, Top Relationships
NON-PERFORMING & DELINQUENT LOANS ROLLFORWARD TOP 10 RELATIONSHIPS Non-performing Loans ($ in thousands) 1Q 2Q 2Q Loan # 1Q20 Delta 2Q20 Accrual Accrual Delinquency Category � NPLs include 3 relationships totaling Status Status Status 1 $ 16,363 $ (10) $ 16,353 C&I Non-Accrual Non-Accrual Current $3
Slide 14: Allowance for Credit Losses Walk Through
ALLOWANCE FOR CREDIT LOSSES WALK THROUGH $ in millions $100.0 $95.0 $5.7 $94.6 $90.0 $85.0 $6.8 $0.6 1.68%1,2 $80.0 $82.1 ($0.6) 1.45%1 $75.0 $70.0 ACL Portfolio Recoveries Specific Economic ACL (3/31/20) Changes (net of Charge- Reserves Forecast (6/30/20) offs) and Other � 2Q20: Provision increased
Slide 15: 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 $668 million at June 30, 2020 & Pharmaceuticals at 13% (net of $35.3 million unrealized lo
Slide 16: Continued Focus on Expense Management
CONTINUED FOCUS ON EXPENSE MANAGEMENT � Adjusted noninterest expense1 was flat with prior quarter with a 2% increase 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 restructure expense
Slide 17: Termination of LAFC Agreement
TERMINATION OF LAFC AGREEMENT On May 22, 2020, we entered into a termination agreement with LAFC 2Q20 Impact Future Expense Savings Agreement Terms While retaining our �������� a� LAFC�� primary banking partner Incurred a one-time, and remaining as a For a termination fee of pre-tax charge to partne
Slide 18: Strong Capital Base
STRONG CAPITAL BASE 2Q20 1Q20 4Q19 3Q19 2Q19 Common Equity Tier 1 11.68% 11.58% 11.56% 10.34% 10.50% Tier 1 Risk-based Capital 15.10% 14.91% 14.83% 13.32% 14.03% Leverage Ratio 10.56% 11.20% 10.89% 9.84% 9.62% Tangible Equity / Tangible Assets1 10.43% 10.42% 11.12% 10.01% 9.89% Tangible Common Equit
Slide 19: 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 20: Appendix
BANC OF CALIFORNIA APPENDIX Woneoféalison
Slide 21: Real Estate Loan Portfolio Has Low LTVs
REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS 1 Real Estate Loan Balances1 Real Estate LTVs $ % Count $ in Millions $ in millions $4,626 $4,459 <50% $ 1,035 27% 904 $4,135 $3,971 $3,841 50% to 60% 990 26% 571 69% 70% 69% 70% 68% 60% to 70% 1,399 36% 673 70% to 80% 296 8% 186 >80% 122 3% 87 Total $ 3,841 1
Slide 22: California-Centric CRE and Multifamily Portfolio Have Low Weighted-Average LTV
CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIO HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type CRE & Multifamily Portfolio by State Industrial NV ALL Others 3.9% AZ Hospitality Other 0.3% 9.6% Retail 13.7% MultiFamily Office 63.5% 9.0% CA 93.5% Collateral Type Count Balance Av g
Slide 23: Diversified and Low Average Balance C&I Portfolio
DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO Transportation Professional Accomodations 1% � ~68% C&I Concentration toward Services… 0.1% Food Services 2% Businesses focused on Finance and All Other Television / Motion C&I Insurance, and Real Estate and Rental Pictures 8% 2% Leasing Other Retail
Slide 24: Strong Allowance Coverage Ratio; Allocation of Reserve by Loan Type
STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE ACL Composition 2Q20 1Q20 At CECL Adoption 4Q19 ($ in thousands) Amount % of Loans Amount % of Loans Amount % of Loans Amount % of Loans Commercial real estate $ 17,372 2.11% $ 13,620 1.68% $ 10,788 1.32% $ 5,941 0.73% Multifamily 2
Slide 25: Securities Portfolio
SECURITIES PORTFOLIO Securities Portfolio Detail1 Amortized Cost Amortized Cost QoverQ Fair Value Duration Security Type 1Q20 2Q20 Change 2Q20 2Q20 Gov�t � Agency �MBS � CMO� $ 242 $ 299 $ 58 $ 307 7.66 CLOs 704 704 - 668 0.07 Municipal 53 53 (0) 57 7.73 Corporate Securities 48 142 94 144 7.61 Total
Slide 26: 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 2.85% 2.86% 2.74% 2.74% 2.75% 2.42% 2.34% 2.10% 1.89% 1.78% 1.65% 1.84% 1.57% 1.61% 1.75% 1.62% 1.55% 1.48% 1.41% 1.27% 1.03% 1.11% 0.93% 0.71% 2Q19 3Q19 4Q19 1Q20 2Q20 Cost of Interest-bearing deposits LT FHLB bo
Slide 27: Declining Deposit Costs Expand Net Interest Margin
DECLINING DEPOSIT COSTS EXPAND NET INTEREST MARGIN1 Net Interest Margin Drivers 4.59% 4.50% 4.50% 4.27% 4.06% 3.09% 3.04% 2.97% 2.86% 2.86% 2.50% 2.09% 2.03% 1.85% 1.71% 2.00% 1.29% 1.75% 0.25% 0.25% 2Q19 3Q19 4Q19 1Q20 2Q20 Earning Asset Yield Net Interest Margin Fed Funds Rate Interest-Bearing Lia
Slide 28: Earning Asset Yield Protected by Floors and Fixed Rate Assets
EARNING ASSET YIELD PROTECTED BY FLOORS AND FIXED RATE ASSETS Interest-Earning Asset Mix ($ in millions) Yields on Average Earning Asset Types 4.80% 4.75% 4.71% Fixed 4.56% 4.48% 3.83% $1,298 3.60% 3.72% Hybrid (18%) 3.30% $2,882 2.84% 2.95% $1,045 2.57% (40%) Variable Floor 2.35% (14%) 1.84% 2.50%
Slide 29: BANC Fast Facts
BANC FAST FACTS (Dollars in millions1) 2Q20 1Q20 4Q19 3Q19 2Q19 Total assets $ 7,770 $ 7,663 $ 7,828 $ 8,625 $ 9,360 Securities available-for-sale 1,176 969 913 776 1,168 Loans receivable 5,628 5,667 5,952 6,383 6,720 Total deposits 6,037 5,563 5,427 5,770 6,292 Net interest income 55.3 51.9 56.7 58
Slide 30: 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, noninterest expen
Slide 31: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Noninterest expense $ 72,770 $ 46,919 $ 47,483 $ 43,240 $ 43,500 (Loss) gain on investments in alternative energy partnerships (167) 1,905 1,039 (940) (355) Adjusted noninterest expense 72,937 45,014 46,444 44,180 43,855 Net int
Slide 32: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Tangible Common Equity to Tangible Assets Ratio Total assets $ 7,770,138 $ 7,662,607 $ 7,828,410 $ 8,625,337 $ 9,359,931 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (3,292) (3,722) (
Slide 33: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Return on tangible common equity Average total stockholders' equity $ 854,250 $ 916,047 $ 912,749 $ 961,739 $ 962,933 Less: Average preferred stock (185,471) (189,607) (189,824) (213,619) (231,128) Less: Average goodwill (37,144
Slide 34: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Adjusted Noninterest Expense Total noninterest expense $ 72,770 $ 46,919 $ 47,483 $ 43,240 $ 43,500 Less: non-core items Naming rights termination (26,769) - - - - Debt retirement expense (2,515) - - - - Data processing fees - -
Slide 35: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Net interest income $ 55,315 $ 51,861 $ 56,660 $ 58,915 $ 64,780 Noninterest income 5,528 2,061 4,930 3,181 (2,290) Total revenue 60,843 53,922 61,590 62,096 62,490 Noninterest expense 72,770 46,919 47,483 43,240 43,500 Pre-tax
Slide 36: bancofcal.com
bancofcal.com bancofcal.com