Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q3 2017 Earnings Presentation
23 slides from Banc Of California's earnings presentation, Oct 26, 2017
Slide 1: 2017 Third Quarter Earnings Investor Presentation
October 26, 2017 2017 Third Quarter Earnings Investor Presentation Exhibit 99.2
Slide 2: 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 shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,
Slide 3: Third Quarter 2017 Highlights
Re-Mixed the Balance Sheet Towards Core Assets Organic Loan Growth Disciplined Expense Management Securities declined by $159 million from the second quarter, driven by the sale of $87 million of MLPs and $32 million of bank debt Held for sale loans declined by $229 million driven primarily by jumbo
Slide 4: Strategic Asset Re-Mix Continues
Dollars in millions $88 million of loans transferred from HFS to HFI & $46 million of loans sold from HFI, for a net $42 million addition to HFI during Q3. Total Assets1 Strategic Asset Re-Mix Continues Re-Mix of Balance Sheet Toward Core HFI Loans Through Targeted Security & Loan Sales Q3 Strategic
Slide 5: Strong Organic Loan Growth
Dollars in millions Total 3Q17 held for investment loan balance before sales and transfers Loans Held for Investment1 Strong Organic Loan Growth Total Held for Investment Loans Grew by an Annualized 18% in the Third Quarter Total held for investment loans increased by $271 million, or 5%, from the p
Slide 6: Originated HFI Loans Grew 14% YoY Despite Portfolio Re-Mix
Dollars in billions Originated HFI Loans Grew 14% YoY Despite Portfolio Re-Mix Loan Yields at 5 Quarter High Despite De-Risking Efforts HFI Loan Mix by Source1 4Q16: Sold Equipment Finance division ($243 million) Sold seasoned SFR residential mortgage loans ($604 million) De-Risking of Balance Sheet
Slide 7: Loan Balances Increasingly Driven by Commercial Lending
Loan Balances Increasingly Driven by Commercial Lending Change in Loan Mix Driving Higher Quality Revenue Stream Dollars in billions Includes Construction Re-mixing Loan Portfolio Toward Increased Commercial Loan Balances Loans Held for Investment1 Total Commercial Loan Balances1 +9% 2
Slide 8: Interest Income Increasingly Driven by Core Loans
Dollars in millions, consolidated operations Dollars in billions Includes other interest earning assets Commercial Loan Interest Income Increased 6% QoQ Interest Income1 Interest Income Increasingly Driven by Core Loans SFR Pool and Securities Sales Drove Overall Decline for Q3 Interest Income Mix
Slide 9: Net Interest Margin Relatively Stable
Net Interest Margin Relatively Stable Interest Earning Asset Contraction Driven by Balance Sheet Re-Mix Net Interest Margin Components Average Interest Earning Assets1 Dollars in billions
Slide 10: Transition to Core Deposits Continues
Dollars in millions 4Q17 Expected column included for illustrative purposes only and is not calculated to scale Total Deposits1 Transition to Core Deposits Continues Focused on Reducing High Rate and High Volatility Deposits and Funding High Rate, High Volatility Run-Off $(641) Total deposits declin
Slide 11: Continued Efforts to Right-Size Expense Structure
Continued Efforts to Right-Size Expense Structure Select Non-Recurring Expenses Remain Elevated, Including Legal and Professional Fees Noninterest Expense Run-Rate1 Dollars in millions Loss on investments in alternative energy partnerships create tax credits to offset expense incurred Continuing ope
Slide 12: Asset Quality Remains Strong and Stable
Nonperforming Assets1 Asset Quality Remains Strong and Stable Disciplined Credit Culture Continues to Drive Strong Asset Quality Dollars in millions NPAs/Equity -57% ALLL and NPL Coverage Total Delinquent Loans/Total Loans -69%
Slide 13: Solid Capital Ratios Exceeding Basel III Guidelines
Tangible Equity / Tangible Assets1 +15% Solid Capital Ratios Exceeding Basel III Guidelines Tier 1 Risk-Based Capital Ratio Supported by $269 Million of Preferred Equity Common Equity Tier 1 Ratio (CET1) +12% Tangible Common Equity / Tangible Assets1 +18% Tier 1 Risk-Based Capital Ratio +10% Basel I
Slide 14: Equity Capital Levels In Line With CA Peers
Equity Capital Levels In Line With CA Peers BANC's Preferred Equity Provides Capital Cushion Tangible Equity / Tangible Assets (BANC)1 On TE / TA basis, BANC is in line with peers (including $269 million of Preferred Equity) TCE / TA at its highest since 4Q14 TE / TA at its highest since 2Q13 Capita
Slide 15: BANC's Journey of Transformation
Strengthening Management Team & Bolstering Talent and Bench Strength De-Risking and Re-Mixing Balance Sheet BANC's Journey of Transformation Significant Improvement and Events Since Q4 2016 4Q16 3Q17 2Q17 1Q17 Sold Commercial Equipment Finance Division ($243mm) Sold $604mm of Seasoned SFR Loan Pools
Slide 16: Near Term Priorities
Near Term Priorities Agenda for Next 90 Days Continue to Re-Mix the Balance Sheet: Pruning higher risk securities including MLPs, bank debt and CLOs 1 2 3 Organic Loan Growth: Grow held for investment loan balances to rebuild earning asset balances. Re-energizing loan production Refresh Our Compensa
Slide 17: BANC's Core Foundation
BANCs Core Foundation Foundation in Place to Support Franchise Growth Drive Disciplined Growth: Increase loans and deposits, grow asset base Go Forward Strategy 1 2 3 Sustainable Strategy: Building a bank with a more reliable, repeatable earnings profile Lowered Cost of Funds: Become a premier depos
Slide 18: Appendix
Appendix
Slide 19: Securities Portfolio
Securities Portfolio Dollars in millions Based on book value balances of rated securities, data at each quarter end Dollars in billions Securities Portfolio Detail1 Security Type Book Value 2Q17 Book Value 3Q17 Q3 Change Fair Value 3Q17 Book Yield 3Q17 Duration 3Q17 Gov’t & Agency (Agency MBS) $ 515
Slide 20: BANC Fast Facts: Five Quarter Trends
BANC Fast Facts Five Quarter Trends Show Transformation in Action All figures from Continuing Operations unless noted; dollars in millions unless noted per share or percentage. Consolidated operations; Efficiency ratio adjusted for including the pre-tax effect of investments in alternative energy pa
Slide 21: Non-GAAP financial measures
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 continuing operations and operating expense from continuing operations, each excluding loss
Slide 22: Reconciliation of noninterest expense
(in thousands) 3Q17 2Q17 1Q17 4Q16 3Q16 Noninterest expense $ 79,008 $ 98,216 $ 124,615 $ 129,239 $ 124,262 Loss on investments in alternative energy partnerships, net (8,348) (9,761) (8,682) (13,850) (17,660) Adjusted noninterest expense $ 70,660 $ 88,455 $ 115,933 $ 115,389 $ 106,602 Net interest
Slide 23: Tangible common equity to tangible assets reconciliation
(in thousands) 3Q17 2Q17 1Q17 4Q16 3Q16 Tangible common equity to tangible assets ratio Total assets $ 10,280,028 $ 10,365,768 $ 11,052,085 $ 11,029,853 $ 11,216,404 Less goodwill (37,144) (37,144) (37,144) (39,244) (39,244) Less other intangible assets (10,219) (11,135) (12,191) (13,617) (15,335) T