Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q3 2019 Earnings Presentation
26 slides from Banc Of California's earnings presentation, Oct 23, 2019
Slide 1: Third Quarter Earnings October 23, 2019
Investor Presentation 2019 Third Quarter Earnings October 23, 2019
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 2019 Results
Third Quarter 2019 Results Execution in key areas of business driving strategic transformation Improving Funding • Cost of deposits for the third quarter declined 14bps from the second quarter • Total cost of funds improved 9bps during the quarter to 1.75% Costs • Noninterest bearing deposits increa
Slide 4: Third Quarter 2019 Provision Large Charge-off Impacts EPS
Third Quarter 2019 Provision Large Charge-off Impacts EPS • During the third quarter, we recognized a loan loss provision of $38.5 million ($0.60 EPS) • As previously reported, the loan loss provision was primarily attributable to a $35 million charge- Large Provision from off of a line of credit •
Slide 5: Overall Asset Quality Remains Stable
Overall Asset Quality Remains Stable Relationship Banking Focus Increases Asset Underwriting Transparency NPLs & OREO1 NPAs / Equity 0.71% Increase in NPL 0.36% 0.37% 0.43% and NPAs 5.0% 0.29% primarily from a $45.2 current-pay C&I $28.1 $28.8 $26.0 $22.3 loan of $14.5MM 3.0% 3.0% 2.7% 2.4% 3Q18 4Q1
Slide 6: Non-Performing Loans Increase Primarily from a Current-Pay C&I Loan
Non-Performing Loans Increase Primarily from a Current-Pay, Non-accrual Commercial and Industrial Loan Non-Performing Loans by Loan Category (HFI)1 1 Dollars in actuals 5
Slide 7: Delinquencies Net Increase from Non-Core SFR Mortgage Portfolio
Delinquencies Net Increase from Non-Core SFR Mortgage Portfolio Total Delinquencies (HFI)1 90+ Day Delinquencies (HFI)1 1 Dollars in thousands 6
Slide 8: Non-Performing Loans Rollforward Top-10 Relationships
Non-Performing Loans Rollforward Top-10 Relationships Increase in NPLs Primarily Attributed to One Shared National Credit on Current Status Borrower Rank @ 2Q Accrual 3Q Accrual 3Q Delinquency 3Q19 2Q19 Delta 3Q19 Loan Category Status Status Status 1 $ — $ 14,526 $ 14,526 C&I Accrual Non-Accrual Cur
Slide 9: Delinquent Loans Rollforward Top-10 Relationships
Delinquent Loans Rollforward Top-10 Relationships Increase in Delinquencies Primarily Attributed to SFR Portfolio Borrower Rank @ Accrual 2Q Delinquency 3Q Delinquency 3Q19 2Q19 Delta 3Q19 Loan Category Status Status Status 1 $ 9,066 $ (1) $ 9,065 SFR Non-Accrual 30-59 Days 60-89 Days 2 3,253 — 3,25
Slide 10: Continued Progress on Three Strategic Drivers for 2019
Continued Progress on Three Strategic Drivers for 2019 Relationship-Based Strategy Will Enhance Franchise Value Lower Deposit Costs through Relationship Focus • Increase relationship-based lending with deposits and reduce reliance on broker-driven loans • Re-price down high-cost retail CDs and other
Slide 11: Right-Sizing the Balance Sheet: Liabilities
Right-Sizing the Balance Sheet: Liabilities Portfolio Mix Shifting Towards Lower Costing, Less Transactional Deposits 4Q18 3Q19 Demand FHLB FHLB Deposit 16% 22% Checking Demand Deposit 27% Brokered Brokered Checking CDs CDs 35% 1% 16% Non-Brokered Savings/ CDs Non- Savings/ Money 18% Brokered Money
Slide 12: Deposit Base Showing Effects of Transformation
Deposit Base Showing Effects of Transformation Relationship Based Approach to Depository Services Expected to Reduce Future Cost of Deposits Higher Mix of Noninterest-Bearing Deposits Driving 14bps Decrease in Cost of Deposits Deposit Composition1 1.67% 1.62% 1.52% 1.48% 1.36% $1,655 $1,685 $1,512 $
Slide 13: Right-Sizing the Balance Sheet: Assets
Right-Sizing the Balance Sheet: Assets Lending Strategy Shifting Toward Relationship Based Loans 4Q18 3Q19 Other Other 1% Securities 1% 11% C&I Securities 21% 21% C&I 26% SFR 25% CRE 11% SFR CRE 24% 16% MF MF 22% 23% Highlighted YTD Portfolio Changes Loans and Securities • Reducing commodity loans a
Slide 14: Relationship Lending Focus Enhances Franchise Value
Relationship Lending Focus Enhances Franchise Value De-emphasizing Low Margin, non-Relationship Lending to Drive Portfolio Yields New Relationship Loans Mitigating Variable Rate Loan Resets HFI Loan Production Yields vs. Portfolio Yields1 5.22% 5.26% 5.29% 5.25% 5.10% 4.80% 4.70% 4.74% 4.76% 4.75% $
Slide 15: Net Interest Margin Trend at an Inflection
Net Interest Margin Trend at an Inflection Decreasing Deposit Costs Offset Variable Rate Loan Resets to Hold NIM Steady Average Interest-Earning Assets1,2 Net Interest Margin Components $9.6 $9.7 $9.8 $0.3 $0.3 $0.3 $9.0 $1.8 $0.3 $8.0 $2.2 $2.0 $1.3 4.59% 4.59% $0.4 4.53% 4.50% $1.1 4.43% $7.7 $7.1
Slide 16: Expense Control Showing Continued Progress
Expense Control Showing Continued Progress Simplifying Operating Model and Delivering Operational Efficiencies Non-Core Adjustments to Reported Operating Expenses NIE / Average Assets & Operating Expense Noninterest Q3'19 Non-Core Q3'19 Core ($ in millions) Expenses - 1 Operating Reported Adjustment
Slide 17: Developing Recurring and Sustainable Earnings Profile
Developing Recurring and Sustainable Earnings Profile Q3 Included some Non-Core Adjustments to Reported Operations ($ in millions, except for EPS) Amount Per Diluted Share Net (loss) income available to common stockholders $ (22.7) $ (0.45) Adjustments: Provision for loan losses 37.7 Noninterest inc
Slide 18: Strengthening Capital Base Reflects Business Strategy
Strengthening Capital Base Reflects Business Strategy Capital Ratios Reflective of Effective Capital Management Activities Common Equity Tier 1 Ratio Tier 1 Risk-Based Capital Ratio 10.5% 10.3% 14.0% 9.8% 9.5% 9.7% 13.2% 12.8% 13.0% 13.3% 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 Tangible Eq
Slide 19: Appendix
Appendix
Slide 20: Securities Portfolio Balances, Composition and Yields
Securities Portfolio Balances, Composition and Yields Opportunistic sale of $371 million of MBS, Portfolio to be Repositioned in 4Q19 Securities Portfolio Detail1 Amortized Amortized Fair Value Book Yield Duration Security Type Cost 2Q19 Cost 3Q19 3Q19 Change 3Q19 3Q19 3Q19 (years) Gov't & Agency (A
Slide 21: BANC Fast Facts & Preferred Equity Capital Structure
BANC Fast Facts & Preferred Equity Capital Structure (Dollars in millions1) 3Q19 2Q19 1Q19 4Q18 3Q18 Total assets2 $ 8,625 $ 9,360 $ 9,887 $ 10,630 $ 10,261 Securities available-for-sale 776 1,168 1,471 1,993 2,060 Loans receivable 6,383 6,720 7,557 7,701 7,253 Total deposits 5,770 6,292 7,725 7,917
Slide 22: 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 from Core operations, operating expense from Core operations, noni
Slide 23: Non-GAAP Reconciliation Adjusted Efficiency Ratio
Non-GAAP Reconciliation Adjusted Efficiency Ratio Including the Pre-tax Effect of Investments in Alternative Energy Partnerships (Dollars in thousands) 3Q19 2Q19 1Q19 4Q18 3Q18 Noninterest expense $ 43,307 $ 43,587 $ 61,835 $ 49,578 $ 60,977 (Loss) gain on investments in alternative energy partnersh
Slide 24: Non-GAAP Reconciliation Tangible Common Equity to Tangible Assets
Non-GAAP Reconciliation Tangible Common Equity to Tangible Assets and Tangible Equity to Tangible Assets (Dollars in thousands) 3Q19 2Q19 1Q19 4Q18 3Q18 Tangible Common Equity to Tangible Assets Ratio Total assets $ 8,625,337 $ 9,359,931 $ 9,886,525 $ 10,630,067 $ 10,260,822 Less: goodwill (37,144)
Slide 25: Non-GAAP Reconciliation Return on Average Tangible Common Equity
Non-GAAP Reconciliation Return on Average Tangible Common Equity (Dollars in thousands) 3Q19 2Q19 1Q19 4Q18 3Q18 Return on tangible common equity Average total stockholders' equity $ 961,739 $ 962,933 $ 956,700 $ 960,242 $ 1,000,819 Less: Average preferred stock (213,619) (231,128) (231,128) (231,12
Slide 26: Non-GAAP Reconciliation Noninterest Expense / Average Assets
Non-GAAP Reconciliation Noninterest Expense / Average Assets (Dollars in millions) 3Q19 2Q19 1Q19 4Q18 3Q18 Operating Expense (NIE) Total noninterest expense $ 43.3 $ 43.6 $ 61.8 $ 49.6 $ 60.9 Less: gain/(loss) on investments in alternative energy partnerships 0.9 0.4 (2.0) (0.8) (2.5) Less: non-cor