Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q1 2020 Earnings Presentation
28 slides from Banc Of California's earnings presentation, Apr 29, 2020
Slide 1: 2020 First Quarter Earnings
INVESTOR PRESENTATIONbancofcal.com 2020 First Quarter Earnings bancofcal.com
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: First Quarter 2020 Results
FIRST QUARTER 2020 RESULTS ($ in Thousands Except EPS) 1Q20 4Q19 1Q19 Net interest income $ 51,861 $ 56,660 $ 67,808 Pre-tax pre-provision income1 $ 7,003 $ 14,107 $ 11,854 Provision for credit losses $ 15,761 $ (2,976) $ 2,098 Net (loss) income $ (6,593) $ 14,272 $ 7,037 EPS $ (0.19) $ 0.20 $ 0.05
Slide 4: Strategic Plan Through the Crisis
STRATEGIC PLAN THROUGH THE CRISIS High Capital • Common Equity Tier 1 ratio at 11.57% • Strategic de-risking of balance sheet in 2019 created significant excess capital Levels • Capital provides buffer against uncertainty and opportunity for value-enhancing investments • ACL coverage ratio of 1.45%
Slide 5: Proactive Approach to Address COVID-19 Uncertainty
PROACTIVE APPROACH TO ADDRESS COVID-19 UNCERTAINTY EMPLOYEES • Early implementation of business continuity plan, transitioned transition more than 80% of our team members to a remote work environment • Maintaining culture through weekly executive video updates, virtual Town Hall meetings and other e
Slide 6: CECL Implementation Walk Through
CECL IMPLEMENTATION WALK THROUGH $ in millions $19.0 $82.1 $6.4 $68.1 ($3.3) $61.7 ($1.7) 1.45%1 1.14%1 1.04%1 ALLL & OBS Day 1 ACL Day 1 Portfolio Charge-offs Economic ACL Day 2 (12/31/19) Adjustment (1/1/20) Changes Forecast (3/31/20) and Other • Day 1: Transition adjustment increased ACL $6.4 mil
Slide 7: Strong Capital Base
STRONG CAPITAL BASE 1Q20 4Q19 3Q19 2Q19 1Q19 Common Equity Tier 1 11.57% 11.56% 10.34% 10.50% 9.72% Tier 1 Risk-based Capital 14.91% 14.83% 13.32% 14.03% 13.03% Leverage Ratio 11.20% 10.89% 9.84% 9.62% 8.87% Tangible Equity / Tangible Assets1 10.42% 11.12% 10.01% 9.89% 9.20% Tangible Common Equity /
Slide 8: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO Loan Portfolio by Segment Growing Commercial Loan Balances • Continued focus on becoming relationship- C&I SFR focused business bank demonstrated by 28% 26% current loan concentrations Consumer 1% • Reduced reliance on brokered SFR MF segment will improve yields and deposi
Slide 9: Real Estate Loan Portfolio Has Low LTVs
REAL ESTATE LOAN PORTOFLIO HAS LOW LTVS Real Estate Loan Balances1 Real Estate1 LTVs $ % Count $ in millions $ in Millions $5,512 <50% $1,028 26% 887 $4,626 $4,459 73% $4,136 $3,971 50% to 60% 1,001 25% 571 60% to 70% 1,466 37% 720 70% to 80% 351 9% 252 70% 70% 69% 69% >80% 125 3% 111 Total $3,971 1
Slide 10: California-Centric CRE and Multifamily Portfolio Have Low Weighted-Average LTV
CALIFORNIA-CENTRIC CRE AND MULTIFAMILY PORTFOLIO HAVE LOW WEIGHTED-AVERAGE LTV CRE & Multifamily by Collateral Type CRE & Multifamily Portfolio by State AZ All Others Industrial 2% 3% 4% Hospitality NV <1% Other 2% 9% Retail 14% MultiFamily 64% CA Office 93% 9% Collateral Type Count Balance Avg. Loa
Slide 11: Diversified and Low Average Balance C&I Portfolio
DIVERSIFIED AND LOW AVERAGE BALANCE C&I PORTFOLIO Professional Transportation Accomodations Services 1% 0.1% Food Services 1% 2% • ~68% C&I Concentration toward All Other Television / C&I Businesses focused on Finance and Motion Pictures 8% 2% Insurance, and Real Estate and Rental Other Retail Leasi
Slide 12: Asset Quality Is Strong; Legacy SFR Portfolio Creates Noise
ASSET QUALITY IS STRONG LEGACY SFR PORTFOLIO CREATES NOISE Delinquencies % of Delinquencies by Category: $ in millions SFR Delinquencies $85.0 2.00% CRE & Other Delinquencies (ex-SFR) Constr., 1% Total delinquencies $13.6 Consumer, 1% Delinquencies/Total loans 1Q20 SFR, 84% C&I, 8% Delinquencies (ex
Slide 13: Securities Portfolio Has Diversified Exposure
SECURITIES PORTFOLIO HAS DIVERSIFIED EXPOSURE $969 Million Total Investment Portfolio CLO INDUSTRY BREAKDOWN $ in millions $47.9 $54.4 Corporate, Other Healthcare & Municipal, 4.9% 17% Pharmaceuticals 5.6% 13% Aerospace & Defense Construction & 3% Building 3% High Tech Industries Containers, Packagi
Slide 14: Rapidly Improving Deposit Franchise
RAPIDLY IMPROVING DEPOSIT FRANCHISE • $167.6 million quarterly increase Brokered CDs CDs in noninterest-bearing deposits Money Market & Savings 1.67% 1.62% Interest-bearing Noninterest-bearing • Large percentage of noninterest- 1.48% Average Cost of deposits bearing and low-cost deposits 1.27% • Tar
Slide 15: Declining Deposit Costs Offset Variable Rate Loan Resets to Protect Net Interest Margin
DECLINING DEPOSIT COSTS OFFSET VARIABLE RATE LOAN RESETS TO PROTECT NET INTEREST MARGIN Net Interest Margin Drivers 4.59% 4.59% 4.50% 4.50% 4.27% 3.04% 2.97% 2.81% 2.86% 2.86% 2.50% 2.50% 2.03% 1.85% 1.71% 2.12% 2.09% 2.00% 1.75% 0.25% 1Q19 2Q19 2Q19 4Q19 1Q20 Earning Asset Yield Net Interest Margin
Slide 16: Slightly Asset Sensitive Portfolio Will Benefit in Rising Rate Environment
SLIGHTLY ASSET SENSITIVE PORTFOLIO WILL BENEFIT IN RISING RATE ENVIRONMENT Loan Portfolio by Repricing Type Yields on Average Earning Asset Types $ in millions Loans Securities $809 Other interest-earning assets Fed Funds Fixed Rate 14% 6.00% 4.76% 4.80% 4.75% 4.71% 5.00% 4.56% 4.00% $1,853 $3,003 4
Slide 17: Active Management of Deposit Costs Is Driving Down Cost of Funds
ACTIVE MANAGEMENT OF DEPOSIT COSTS IS DRIVING DOWN COST OF FUNDS Cost of Funds Drivers 5.50% 5.43% 5.47% 5.43% 5.45% 2.85% 2.71% 2.74% 2.74% 2.75% 2.34% 2.48% 2.42% 2.10% 1.92% 1.89% 1.78% 1.57% 1.88% 1.84% 1.75% 1.65% 1.41% 1.67% 1.62% 1.55% 1.48% 1.41% 1.27% 1.11% 1Q19 2Q19 2Q19 4Q19 1Q20 Cost of
Slide 18: Continued Focus on Expense Management
CONTINUED FOCUS ON EXPENSE MANAGEMENT • Adjusted noninterest expense1 decreased $5.0 million versus prior quarter • Salaries and employee benefits decreased in line total headcount • Non-core expense/benefits relates to timing of indemnified legal costs/recoveries and loss/gain on investments in alt
Slide 19: Developing Recurring and Sustainable Earnings Profile
DEVELOPING RECURRING AND SUSTAINABLE EARNINGS PROFILE Core Expenses Remain Inline with Revenues $ in millions $13.1 $0.9 • Recurring pre-tax pre- $10.6 $1.6 provision income underlies $1.9 reported net income and shows consistent trend $7.0 $1.7 when fair value adjustment on loans held for sale and
Slide 20: 2020 Strategic Objectives
2020 STRATEGIC OBJECTIVES • Heightened focus and resources added to monitor portfolio even more closely in uncertain Laser Focus on environment • Rely on relationship-lending in our footprint Credit • Well-underwritten credit portfolio mainly secured by CA-based real estate with relatively low LTVs
Slide 21: BANC Fast Facts
BANC FAST FACTS (Dollars in millions1) 1Q20 4Q19 3Q19 2Q19 1Q19 Total assets $ 7,663 $ 7,828 $ 8,625 $ 9,360 $ 9,887 Securities available-for-sale 969 913 776 1,168 1,471 Loans receivable 5,667 5,952 6,383 6,720 7,557 Total deposits 5,563 5,427 5,770 6,292 7,725 Net interest income 51.9 56.7 58.9 64
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
NON-GAAP RECONCILIATION (Dollars in thousands) 1Q20 4Q19 3Q19 2Q19 1Q19 Noninterest expense $ 46,919 $ 47,483 $ 43,240 $ 43,500 $ 62,249 (Loss) gain on investments in alternative energy partnerships (1,905) (1,039) 940 355 (1,950) Adjusted noninterest expense 45,014 46,444 44,180 43,855 60,299 Net i
Slide 24: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 1Q20 4Q19 3Q19 2Q19 1Q19 Tangible Common Equity to Tangible Assets Ratio Total assets $ 7,662,607 $ 7,828,410 $ 8,625,337 $ 9,359,931 $ 9,886,525 Less: goodwill (37,144) (37,144) (37,144) (37,144) (37,144) Less: other intangible assets (3,722) (4,151) (
Slide 25: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 1Q20 4Q19 3Q19 2Q19 1Q19 Return on tangible common equity Average total stockholders' equity $ 916,047 $ 912,749 $ 961,739 $ 962,933 $ 956,700 Less: Average preferred stock (189,607) (189,824) (213,619) (231,128) (231,128) Less: Average goodwill (37,144
Slide 26: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 1Q20 4Q19 3Q19 2Q19 1Q19 Adjusted Noninterest Expense Total noninterest expense $ 46,919 $ 47,483 $ 43,240 $ 43,500 $ 62,249 Less: non-core items Data processing fees — — — (797) — Professional fees (1,678) 3,557 2,615 6,214 (2,979) Restructuring expens
Slide 27: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 1Q20 4Q19 3Q19 2Q19 1Q19 Net interest income $ 51,861 $ 56,660 $ 58,915 $ 64,780 $ 67,808 Noninterest income 2,061 4,930 3,181 (2,290) 6,295 Total revenue 53,922 61,590 62,096 62,490 74,103 Noninterest expense 46,919 47,483 43,240 43,500 62,249 Pre-tax
Slide 28: bancofcal.com
bancofcal.com bancofcal.com