Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q2 2021 Earnings Presentation
37 slides from Banc Of California's earnings presentation, Jul 22, 2021
Slide 1: Investor Presentation 2021 Second Quarter Earnings
INVESTOR PRESENTATION 2021 Second 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: Second Quarter 2021 Results
3(1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation SECOND QUARTER 2021 RESULTS ($ in Thousands Except EPS) 2Q21 1Q21 2Q20 Net interest income $ 59,847 $ 57,916 $ 55,315 (Reversal of) provision for credit losses $ (2,154) $ (1,107) $ 11,826 Net inco
Slide 4: Enhancing Franchise Value: 2nd Quarter 2021 Summary
4 ENHANCING FRANCHISE VALUE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 2nd Quarter 2021 Summary Accelerating Loan Growth Driving Improvement in Profitability • $904 million in total loan production, up $162 million from 1Q21 • $847 million i
Slide 5: Net Income Available to Common Stockholders Reconciliation
5 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS RECONCILIATION • Noninterest expense adjustments relate to merger-related costs and indemnified professional fees, net of recoveries • 2Q21 included $1.0 million (after tax) in net recoveries of professional fees versus $0.5 million (after tax) of net ex
Slide 6: Adjusted Pre-tax Pre-provision Income Trend
6 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 0.83% 0.98% 1.25% 1.06% 1.13% 3Q20 $16.0 $24.5 2Q20 $18.9 4Q20 $20.6 1Q21 $22.0
Slide 7: Rapidly Improving Deposit Franchise
7 RAPIDLY IMPROVING DEPOSIT FRANCHISE (1) Reflects balance as of period end (2) As of July 20th, the spot rate is 0.17% • $109 million quarterly increase in noninterest- bearing deposits • Large percentage of noninterest-bearing and low-cost deposits • Targeted deposit strategy has transformed depos
Slide 8: Business Units Generating Solid Demand Deposit Growth
8 Period end balances ($ in millions) BUSINESS UNITS GENERATING SOLID DEMAND DEPOSIT GROWTH $1,692 $1,535 $399 $544 2Q20 $618 3Q20 $754 $4,026 $3,496 $1,803 $496 $615 $771 $416 $824 $2,141 $471 2Q21 $623$638 1Q21 $825 $1,856 $437 $3,789 $3,667 $761 $3,238 4Q20 +24% Community Banking Specialty & Busi
Slide 9: Diversified Loan Portfolio Mitigates Risk and Generates Attractive Risk-Adjusted Yield
9 DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND GENERATES ATTRACTIVE RISK-ADJUSTED YIELD PPP Loan Overview • As of June 30, 2021, PPP loans (net of fees) comprised $194 million of the SBA portfolio • Of the total 1,128 PPP loans funded in the 1st round, 182 loans remain outstanding and represent $65
Slide 10: Loan Balances, Fundings and Payoffs
10 LOAN BALANCES FUNDINGS AND PAYOFFS (1) Includes net change in warehouse lending (2) Includes deferred costs/fees, transfers and sales ($ in millions) Loans Beginning Balance Total Fundings Total Payoffs Net Difference Other Change(2) Loans Ending Balance Total Loan Yield Rate on Production Rate o
Slide 11: Forbearance and Deferments Decline
11 ($ in millions) Deferrals by Loan Type as of 6/30/21 (1),(2) Total Deferrals $ # Total Portfolio % of Portfolio Deferred Change in Deferral Balance from prior quarter Single Family Residential $ 52 46 $ 1,288 4% $ 4 Multifamily - 0 1,326 0% (17) CRE 1 1 872 0% (3) Construction & Development - 0 1
Slide 12: Asset Quality Remains Strong
12 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) $35.0 1.46% 0.54% 2Q20 $24.9 1Q21 $70.3 $71.1 1.69% $1
Slide 13: Top Relationships
13 TOP 10 RELATIONSHIPS Non-performing & delinquent loans rollforward • Non-performing loans decreased $4.6 million, or 8%, to $51.3 million due mostly to the legacy SFR portfolio. • $32.0 million, or 62% of total NPLs, are in current status • Delinquencies decreased $26.3 million, or 43%, due mostl
Slide 14: Allowance for Credit Losses Walk
14 $82.7 $1.2 $79.7 ($3.3) ($0.9) $70.0 $72.0 $74.0 $76.0 $78.0 $80.0 $82.0 $84.0 $86.0 $88.0 ACL (3/31/21) Portfolio Mix Charge-offs (net of Recoveries) Specific Reserves ACL (6/30/21) ALLOWANCE FOR CREDIT LOSSES WALK 2Q21: The ACL reserve decreased $3.0 million due to (1) lower general reserves of
Slide 15: Continued Focus on Expense Management
15 CONTINUED FOCUS ON EXPENSE MANAGEMENT Non-core expense/benefits relate to: (1) timing of indemnified legal costs/recoveries, (2) merger-related costs and (3) loss/gain on investments in alternative energy partnerships(1) (1) Investments in alternative energy partnerships created tax credits in th
Slide 16: Strong Capital Base
16 STRONG CAPITAL BASE (1) Denotes a non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation Strategic decision to exit non-franchise enhancing assets resulted in build-up of significant capital and steadily improving ratios Capital provides a buffer for optionality t
Slide 17: 2021 Strategic Objectives
17 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 18: Appendix
BANC OF CALIFORNIA APPENDIX bancofcal.com 18
Slide 19: Loan Portfolio Characteristics
19 81% in California LOAN PORTFOLIO CHARACTERISTICS Construction $151 3% Consumer $24 <1% SBA(1) $254 4% Northern California $448 7% Central California $204 3% South $630 11% Other West $278 5% Northeast $139 2% Midwest $112 2% • 69% of loan portfolio is secured by residential real estate (primary r
Slide 20: Real Estate Loan Portfolio Has Low LTVs
20 REAL ESTATE LOAN PORTFOLIO HAS LOW LTVS $ in millions (1) Excludes Warehouse credit facilities Real Estate Loan Balances(1) SFR Portfolio by LTV 66% 4Q20 61% 2Q212Q20 68% $3,736 3Q20 59% 1Q21 61% $3,841 $3,503 $3,521 $3,636 RE Loans / Loans-HFI RE Loans 60% to 70% 50% to 60% <50% 70% to 80% >80%
Slide 21: California-Centric CRE and Multifamily Portfolios Have Low Weighted-Average LTV
21 CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIOS HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type Multifamily 60% Other 12% 11% Retail 13% Industrial 4% Hospitality 0% Owner Occupied 10% Residential 97.5% Mixed Use 2.5% Multi Tenant 42% Single Tenant 16% Strip Center 8% Non Own
Slide 22: Diversified and Low Average Balance C&I Portfolio
22 ~78% C&I Concentration toward Businesses focused on Finance (including Warehouse), and Real Estate and Rental Leasing Limited Exposure to High Stressed Business Industries • 1% Television / Motion Pictures • 1% Food Services • <1% Transportation • <1% in Accommodations All Other C&I includes a di
Slide 23: Strong Allowance Coverage Ratio; Allocation of Reserve by Loan Type
23 STRONG ALLOWANCE COVERAGE RATIO; ALLOCATION OF RESERVE BY LOAN TYPE • Allowance for Credit Losses (ACL) includes Reserve for Unfunded Commitments • Excluding PPP loans, the ACL coverage was 1.38% at the end of 2Q21 ACL Composition 2Q21 1Q21 ($ in thousands) Amount % of Loans Amount % of Loans Com
Slide 24: Securities Portfolio
24(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 4Q20 1Q21 2.13% 2.95% 2Q20 2.26% 3Q
Slide 25: CLO Industry Breakdown
25 CLO Industry Breakdown $584 million at June 30, 2021 (net of $2.9 million unrealized loss) Healthcare & Pharmaceuticals 13% High Tech Industries 10% Services - Business 9% FIRE - Banking, Finance, Insurance & Real Estate 8% Telecommunications 4% Services Consumer 4% Beverage, Food & Tobacco 4% Ho
Slide 26: Active Management of Deposit Costs Is Driving Down Cost of Funds
26(1) Cost of funds includes senior debt with a fixed rate of 5.45% for all periods presented. Includes 4.375% fixed-to-floating subordinated debt starting in 4Q20. ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS(1) Cost of Funds Drivers 2.37% 0.23% 0.36% 0.93% 2.53% 0.71% 1.03% 0.5
Slide 27: Declining Deposit Costs Protect Net Interest Margin
27 DECLINING DEPOSIT COSTS PROTECT NET INTEREST MARGIN Net Interest Margin Drivers 3.78% 2Q20 0.25% 4.06% 3.09% 1.29% 3.09% 3.86% 0.25% 1.02% 3Q20 4.04% 3.38% 0.25% 0.89% 3.19% 4Q20 0.25% 0.83% 1Q21 3.81% 3.27% 0.25% 0.77% 2Q21 Earning Asset Yield Net Interest Margin Fed Funds Rate Interest-Bearing
Slide 28: Interest Rate Risk Management – Earning Assets Analysis
28 INTEREST RATE RISK MANAGEMENT – EARNING ASSETS ANALYSIS Assets Repricing/Maturing by Duration ($ millions) Repricing/Maturity by Product Type ($ millions) • $3.90 billion (52%) of earning assets mature or have rate resets <2 years • Earning assets with effective rate resets <2 years include: • $3
Slide 29: BANC Fast Facts
29 BANC FAST FACTS (1) Non-GAAP financial measure; see “Non-GAAP Reconciliation” slides at end of presentation 2Q21 1Q21 4Q20 3Q20 2Q20 $ 8,027 $ 7,933 $ 7,877 $ 7,738 $ 7,770 1,353 1,271 1,231 1,246 1,176 5,985 5,764 5,898 5,678 5,628 6,207 6,142 6,086 6,032 6,037 59.8 57.9 61.6 55.9 55.3 4.2 4.4 7
Slide 30: Merger: Pacific Mercantile Bancorp
30 Non-Int. Bearing 31% Int. Bearing Checking 30% MMDA & Sav. 28% CDs 11% C&I (Ex. PPP) 31% PPP 9% CRE 17% Multifamily 20% Consumer 1% SFR 18% C&D 3% MERGER PACIFIC MERCANTILE BANCORP 1) Pro forma excludes purchase accounting adjustments Note: Balances as of March 31, 2021; Loan yields shown for the
Slide 31: Non-GAAP Financial Information
31 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 32: Non-GAAP Reconciliation
32 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Tangible Common Equity to Tangible Assets Ratio Total assets $ 8,027,413 $ 7,933,459 $ 7,877,334 $ 7,738,106 $ 7,770,138 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (2,069) (2,351
Slide 33: Non-GAAP Reconciliation
33 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Return on tangible common equity Average total stockholders' equity $ 814,973 $ 888,174 $ 892,565 $ 865,406 $ 854,250 Less: Average preferred stock (94,956) (164,895) (184,878) (184,910) (185,471) Less: Average goodwill (37,1
Slide 34: Non-GAAP Reconciliation
34 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Adjusted Noninterest Income and Expense Total noninterest income $ 4,170 $ 4,381 $ 6,975 $ 3,954 $ 5,528 Noninterest income adjustments: Net (gain) on securities available for sale - - - - (2,011) Net (gain) on sale of legacy
Slide 35: Non-GAAP Reconciliation
35 NON-GAAP RECONCILIATION (Dollars in thousands) 2Q21 1Q21 4Q20 3Q20 2Q20 Net interest income $ 59,847 $ 57,916 $ 61,563 $ 55,855 $ 55,315 Noninterest income 4,170 4,381 6,975 3,954 5,528 Total revenue 64,017 62,297 68,538 59,809 60,843 Noninterest expense 40,559 46,735 38,950 40,394 72,770 Pre-tax
Slide 36: Non-GAAP Reconciliation
36 NON-GAAP RECONCILIATION (Dollars in thousands, except per share data) 2Q21 1Q21 4Q20 3Q20 2Q20 Adjusted net income (loss) Net income (loss) $ 19,050 $ 14,375 $ 21,703 $ 15,913 $ (18,449) Adjustments, net(1) Noninterest income 15 - 27 222 1,527 Noninterest expense (1,060) 3,788 (3,803) (194) 22,49
Slide 37: bancofcal.com
bancofcal.com