Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q4 2023 Earnings Presentation
33 slides from Banc Of California's earnings presentation, Jan 25, 2024
Slide 1: Investor Presentation: 2023 Fourth Quarter Results
Draft v4.5 1/21/24 Investor Presentation 2023 Fourth Quarter Results
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Words or phrases such as “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,”
Slide 3: Table of Contents
Table of Contents 4 THE NEW BANC OF CALIFORNIA 10 UPDATE ON BALANCE SHEET 21 INTEGRATION AND RESTRUCTURING UPDATE 26 INVESTMENT THESIS 27 APPENDIX Fourth Quarter 2023 Earnings | 3
Slide 4: The New Banc of California: California's premier commercial bank
California’s premier commercial bank The New Banc of 12/31/23 metrics, except where noted California Scale and • $38.5bn of assets • ~3% SoCal deposit market share ❖ Merger closed on Nov. 30, 2023 market position • #3 largest California-headquartered bank ❖ Clear strategic focus on in-market • 14% c
Slide 5: Focus on relationship banking that generates low-cost commercial deposits and high-quality lending
Focus on relationship banking that generates low-cost commercial deposits and high-quality lending opportunities Full-service commercial banking, with complementary specialty businesses and expertise COMMUNITY BANKING SPECIALTY BANKING Business Banking HOA Middle Market Banking Media & Entertainment
Slide 6: Robust deposit gathering engine designed to build low-cost deposit base
Robust deposit gathering engine designed to build low-cost deposit base Continue to prioritize core deposit funding(1) HOA Banking Payments Noninterest-bearing Brokered CDs Leading Homeowner Association Deepstack is a differentiated payment Banking Business CDs 12% processing platform 26% $4 billion
Slide 7: California-based commercial bank with national reach and select specialty business lines
California-based commercial bank with national reach and select specialty business lines California focused National presence Fresno Tulare THE Monterey Kings 3rd Boston LARGEST BANK San Luis HEADQUARTERED IN Obispo Kern CALIFORNIA1 New York Menlo Park Chicago Chevy Chase Santa Campbell Barbara San
Slide 8: CA Market Opportunity
California’s premier commercial bank with significant CA Market opportunity to increase market share Opportunity 2019 California deposit market share rankings(1) 2023 California deposit market share rankings(1) California California (#) Bank HQ Deposits Market share ❖ 3rd largest bank headquartered
Slide 9: Experienced management team with track record of success at leading institutions
Experienced management team with track record of success at leading institutions Jared Wolff Joe Kauder John Sotoodeh Hamid Hussain President and Chief Executive Chief Financial Officer Chief Operating Officer President of the Bank Officer 30+ years banking experience, 30+ years of banking 25+ years
Slide 10: Update on Balance Sheet
Update on Balance Sheet
Slide 11: Balance Sheet Repositioning Actions Taken
Strong, highly-liquid balance sheet post merger Balance Sheet Repositioning ($ in millions) 4Q22 3Q23 4Q23 Noninterest-bearing deposits / deposits Total cash and cash equivalents $2,240 $6,070 $5,378 Actions Taken Total investment securities Loans held for sale 7,147 65 6,787 189 4,761 123 21.0% 25.
Slide 12: Building a strong commercial deposit franchise
Opportunity to Build Superior Deposit Franchise Building a strong Management has track record of successful deposit strategy execution commercial ($ in millions) 4Q22 1Q23 2Q23 3Q23 4Q23 deposit franchise Noninterest-bearing Checking Checking $11,212 7,939 $7,031 5,361 $6,055 7,113 $5,579 7,039 $7,7
Slide 13: Diversified Loan Portfolio
High-quality relationship-based core portfolio Diversified Loan positioned for strong performance Portfolio Existing portfolios have very low historical loss rates Loan Segment HFI Percent of ($ in millions) 4Q23 Total Wtd. Avg. Rate NPL % Highlights MF $6,025 23.6% 4.0% 0.02% CRE 4,395 17.2% 5.5% 0
Slide 14: California-Centric CRE Portfolio
California-centric CRE portfolio has low weighted- California-Centric average LTV and solid credit quality CRE Portfolio CRE comprises 17% of total loans and is well diversified across multiple industries % of % of Avg Highlights Property Type Total Total Loan WA ($ in millions) Count 4Q23 CRE Loans
Slide 15: Asset quality ratios improved post merger
Strong credit quality with healthy reserve levels Asset quality ratios improved post merger ACL / Total Loans ($M) Nonperforming Loans (NPLs) ($M) 1.22% 0.57% 1.15% 1.15% Highlights 1.02% 1.11% 0.47% 0.36% 0.34% • NPL ratio declined 28 bps to 0.29% 0.29% • Classified loan ratio declined 6 bps $291.8
Slide 16: Allowance for Credit Losses (ACL) Walk
Purchase accounting and 4Q provision build healthy Allowance for Credit ACL coverage ratio Losses (ACL) Walk • ACL increased by $59.4 million due to ($ in millions) $311.3 $24.8 $(13.2) – (i) legal day one purchased credit deteriorated (PCD) gross up $25.6 million $47.8 $251.9 – (ii) the ALL provisi
Slide 17: Securities Portfolio Detail
High-quality securities portfolio Securities Portfolio Portfolio Profile Effective Credit Rating Detail Security Type ($ in millions) 4Q23 Duration (yrs) 4Q23 2% AAA 0% 1% AFS - Gov't & Agency $1,744 6.9 4% 17% • Average yield increased quarter over AA AFS - CLO's 108 0.1 A quarter AFS - Corporate B
Slide 18: High Level of Available Liquidity
Maintain high levels of primary and secondary liquidity High Level of as prudent risk management Available Liquidity ($ in Millions) Current Highlights December 31, 2023 Availability Utilization Capacity Primary Liquidity • Total available primary liquidity of Cash $ 5,192 $5.2 billion excluding unp
Slide 19: Moderately Liability Sensitive Balance Sheet
Balance Sheet Positioning and Interest Rate Sensitivity Moderately Average-Interest Earning Assets Mix Liability Sensitive 3Q23 Loans HFI + Leases 4Q23 Investment Securities Balance Sheet 19% Cash & Cash Equivalents 16% 4Q23 Highlights 17% • -100 bps rate scenario: Approximately 19% 62% +3% impact t
Slide 20: Strong Capital Base
Focus on building capital levels to strengthen franchise Strong Capital and optimize flexibility Base Regulatory Well- Excess of Well- 4Q23 • CET 1 ratio of 10.1% inclusive of: Capitalized Ratios Capitalized 1 Total Risk-Based Ratio 16.40% 10.00% 6.40% – Loss on previously executed sales of Tier 1 R
Slide 21: Integration and Restructuring Update
Integration and Restructuring Update
Slide 22: Integration roadmap
Integration roadmap Strong execution and achievement of deal closing timeline creates opportunity to complete integration and realize full cost savings in 2024 Accomplished since announcement of deal Items to be completed in 2024 Target ✓ • Closed merger with PacWest • Complete balance sheet restruc
Slide 23: Asset Sales
Balance sheet restructuring largely accomplished Asset Sales ($ in billions) $46.1 $2.3 $1.8 $1.2 $1.0 $0.7 $38.5 $0.6 Highlights • Asset sales began in 4Q23 • Sold all BANC securities and BANC SFR loans • Retained $0.8 billion of BANC multifamily loans. Generates an attractive book yield of over 10
Slide 24: Liabilities Paydowns
Restructuring substantially reduced wholesale funding Liabilities Paydowns ($ in billions) $16.2 Highlights $4.2 • Wholesale paydowns started shortly $2.3 after deal announcement $1.3 $0.8 $7.3 • Retained $2.6 billion BTFP to benefit $0.3 from rate of 4.35% compared to incremental brokered deposit c
Slide 25: Balance sheet restructuring will increase NIM
Balance sheet restructuring will increase NIM Spread between assets sold and wholesale funding repaid of approximately 160 bps Yield / Cost Transaction $ Assets • BANC SFR • 4.4% • $1.8bn • $6bn • BANC Multifamily • 4.4% • 0.7bn Liquid assets • BANC Total securities • 5.4% • 1.2bn • 3.6% Weighted av
Slide 26: Attractive Investment Opportunity
On track to leverage strength of restructured balance ATTRACTIVE sheet and merger synergies to achieve steady growth INVESTMENT in earnings and capital OPPORTUNITY 1. ATTRACTIVE VALUATION ON TBV WITH RESTRUCTURED BALANCE SHEET, CLEAN CREDIT PROFILE AND HEALTHY RESERVES 2. MERGER SYNERGIES ENHANCE EA
Slide 27: Appendix
Appendix
Slide 28: Fourth Quarter Income Statement
Fourth Quarter Income Statement ($ in millions) 4Q23 3Q23 4Q22 Total interest income $467 $446 $473 Total interest expense 316 315 150 Net interest income 151 131 323 Provision for credit losses 47 0 10 (Loss) gain on sale of loans (4) (2) 0 Loss on sale of securities (442) 0 (49) Other noninterest
Slide 29: Net Purchase Accounting Impact Five Year Estimate
Net Purchase Accounting Impact Five Year Estimate ($ in millions except per share data) Pro forma CDI amortization and accretion schedule Year - post close FY2024 FY2025 FY2026 FY2027 FY2028 Pre-tax Expense Core deposit intangibles ($26) ($24) ($21) ($18) ($16) Net Interest Income Loan FV mark 68 61
Slide 30: Non-GAAP Financial Information
Non-GAAP Financial Information Tangible assets, tangible equity, tangible common equity, tangible common Management believes the presentation of these financial measures adjusting equity to tangible assets, tangible book value per common share, return on the impact of these items provides useful sup
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands, except per share data) 4Q23 3Q23 2Q23 1Q23 4Q22 Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Common Share Total stockholders' equity $3,390,765 $2,399,277 $2,533,195 $2,771,477 $3,950,531 Less: preferred stock 498,516 498,516 49
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 4Q23 3Q23 2Q23 1Q23 4Q22 Return on tangible common equity Net (loss) earnings ($482,955) ($23,344) ($197,414) ($1,195,424) $49,509 (Loss) earnings before income taxes ($659,989) ($26,566) ($264,443) ($1,260,340) $67,151 Add: Goodwill impairment 0 0 0 1,376,73
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 4Q23 3Q23 2Q23 1Q23 4Q22 Adjusted Noninterest Income to Adjusted Total Revenue and Noninterest Expense to Average Assets Net interest income $151,051 $130,729 $186,076 $279,272 $322,939 Noninterest (loss) income (400,402) 43,808 (128,082) 36,391 (18,956) Tota