Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q2 2019 Earnings Presentation
23 slides from Banc Of California's earnings presentation, Jul 25, 2019
Slide 1: Second Quarter Earnings July 25, 2019
Exhibit 99.2 Investor Presentation 2019 Second Quarter Earnings July 25, 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: Second Quarter 2019 Highlights
Second Quarter 2019 Highlights Continued Progress Towards a Relationship Based Commercial Banking Platform Improved Second quarter average cost of total deposits decreased by 5bps from the first quarter Funding Costs Total cost of funds improved 4bps during the quarter to 1.84% Held for invest
Slide 4: Three Key Drivers of Community Banking Business
Three Key Drivers of Community Banking Business 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 high c
Slide 5: Right-Sizing the Balance Sheet: Assets
Right-Sizing the Balance Sheet: Assets Lending Strategy Shifting Toward Relationship Based Loans Other¹ 4Q18 Other 2Q19 8% 1% C&I C&I Securities Securities 21% 24% 21% 14% CRE 11% CRE SFR 13% SFR 23% 24% Multi Multi 23% 19% YTD Movements Loans and Securities 2Q19 Avg. 2Q19 Ending • ($ in millions) $
Slide 6: Relationship Lending Focus Enhances Franchise Value
Relationship Lending Focus Enhances Franchise Value De-emphasizing Low Margin, non-Relationship Lending to Drive Portfolio Yields Overall Portfolio Yields Increased 4bps to 4.80% With Lower SFR and MF Balances HFI Loan Production Yields vs. Portfolio Yields1 5.22% 5.26% 5.29% 5.25% 5.05% 4.74% 4.76%
Slide 7: Right-Sizing the Balance Sheet: Liabilities
Right-Sizing the Balance Sheet: Liabilities Strategy Shifting to Lower Costing Relationship Based Deposits 4Q18 2Q19 FHLB FHLB¹ Demand 16% 22% Demand Deposit Deposit Checking Checking Non- 27% 32% Brokered Non- CDs Brokered 17% Savings/ CDs Savings/ Money 18% Money Brokered Market Brokered Market CD
Slide 8: 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 Reduction in Transactional Deposit Balances Resulted in 5bps Decrease in Cost of Deposits Deposit Composition1 1.67% 1.62% 1.52% 1.36% 1.15% $7,9161 $7,725 $7,
Slide 9: Net Interest Margin Trend at an Inflection
Net Interest Margin Trend at an Inflection Further NIM Improvement Expected to Occur Via Lower Cost of Deposits Average Interest-Earning Assets1 Net Interest Margin Components $9.8 $9.8 $9.1 $0.3 $0.3 $0.4 $2.0 $1.8 4.53% 4.59% 4.59% $1.3 4.35% 4.43% $7.4 $7.7 $7.4 3.01% 2.93% 2.88% 2.81% 2.86% 4Q18
Slide 10: Expenses are Being Better Allocated to Asset Base
Expenses are Being Better Allocated to Asset Base Simplifying Operating Model and Delivering Operational Efficiencies Non-Core Adjustments to Reported Operating Expenses Noninterest Q2 Core Q2 Non-Core ($ in millions) Expenses – Operating Adjustments1 Reported Expenses1 Salaries and employee benefit
Slide 11: Developing Recurring and Sustainable Earnings Profile
Developing Recurring and Sustainable Earnings Profile Q2 Included some Non-Core Adjustments to Reported Operations Q2 Earnings from Core ($ in millions, except for EPS) Reported Q2 Adjustments1 Operations2 Normalized Tax Rate at 20% Net Interest Income $ 64.8 $ - $ 64.8 Provision for loan and lease
Slide 12: Maintaining Strong Asset Quality
Maintaining Strong Asset Quality Relationship Banking Focus Increases Asset Underwriting Transparency NPLs & OREO1 NPAs / Equity 0.36% 0.38% 0.33% 0.43% 0.29% 3.0% 3.0% $28.1 $28.8 $26.0 2.7% 2.4% $23.0 $22.3 2.3% 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 NPLs & OREO NPLs & OREO / Loans and
Slide 13: Strengthening Capital Base Supports Business Strategy
Strengthening Capital Base Supports Business Strategy Right-Sizing the Balance Sheet has Improved Capital Ratios Across the Board Common Equity Tier 1 Ratio Tier 1 Risk-Based Capital Ratio 13.8% 13.9% 13.2% 12.8% 13.0% 13.4% 10.4% 11.0% 9.9% 9.8% 9.5% 9.7% 2Q18 3Q18 4Q18 1Q19 2Q19 2Q19 PF² 2Q18 3Q18
Slide 14: Appendix
Appendix
Slide 15: Rate Floors and Timing of Hybrid Rate Resets
Rate Floors and Timing of Hybrid Rate Resets IRR Position is Slightly Liability Sensitive in a Decreasing Rate Environment Variable Rate HFI Loans, Collateralized Loan Obligations and Mortgage Backed Securities1 1 Month Distance to Floor 3 Month Libor 6 Month Libor 1 Year Libor Prime Other Index2 To
Slide 16: Timing and Costs of Funding Liabilities
Timing and Costs of Funding Liabilities Deposits and FHLB Borrowing Maturities1 Funding Type 0 <= 6 Months 7 <= 12 Months >12 <= 24 > 24 Months Total Balance Avg. Cost Balance Avg. Cost Balance Avg. Cost Balance Avg. Cost Balance Avg. Cost Money Market $ 800.9 1.71% - - - - - - $ 800.9 1.71% Demand
Slide 17: Securities Portfolio Balances, Composition and Yields
Securities Portfolio Balances, Composition and Yields Securities Portfolio Detail1 Amortized Amortized Duration 2Q Fair Value Book Yield Security Type Cost Cost 2Q19 Change 2Q19 2Q19 1Q19 2Q19 (years) Gov’t & Agency (Agency MBS) $ 449 $ 436 ($ 13) $ 429 2.50% 6.06 CLOs 1,047 749 (298) 737 4.24% 0.07
Slide 18: BANC Fast Facts & Preferred Equity Capital Structure
BANC Fast Facts & Preferred Equity Capital Structure (Dollars in millions)1 2Q19 1Q19 4Q18 3Q18 2Q18 Total assets2 $ 9,360 $ 9,887 $ 10,630 $ 10,261 $ 10,319 Securities available-for-sale 1,168 1,471 1,993 2,060 2,297 Loans and leases receivable 6,720 7,557 7,701 7,253 7,036 Total deposits 6,292 7,7
Slide 19: 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 20: 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) 2Q19 1Q19 4Q18 3Q18 2Q18 Noninterest expense $ 43,587 $ 61,835 $ 49,578 $ 60,977 $ 62,554 (Loss) gain on investments in alternative energy partnersh
Slide 21: 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) 2Q19 1Q19 4Q18 3Q18 2Q18 Tangible common equity to tangible assets ratio Total assets $ 9,359,931 $ 9,886,525 $ 10,630,067 $ 10,260,822 $ 10,319,280 Less goodwill (37,144)
Slide 22: Non-GAAP Reconciliation: Return on Average Tangible Common Equity
Non-GAAP Reconciliation Return on Average Tangible Common Equity (Dollars in thousands) 2Q19 1Q19 4Q18 3Q18 2Q18 Return on tangible common equity Average total stockholders' equity $ 962,933 $ 956,700 $ 960,242 $1,000,819 $1,000,856 Less average preferred stock (231,128) (231,128) (231,128) (260,822
Slide 23: Non-GAAP Reconciliation: Noninterest Expense / Average Assets
Non-GAAP Reconciliation Noninterest Expense / Average Assets (in millions) 2Q19 1Q19 4Q18 3Q18 2Q18 Operating Expense (NIE) Total noninterest expense $ 43.6 $ 61.8 $ 49.6 $ 60.9 $ 62.5 Less gain/(loss) on investments in alternative energy partnerships 0.4 (2.0) (0.8) (2.5) (1.8) Less non-core items