Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q2 2023 Earnings Presentation
31 slides from Banc Of California's earnings presentation, Jul 26, 2023
Slide 1: Investor Presentation: 2023 Second Quarter Earnings
www.bancofcal.com Investor Presentation 2023 Second Quarter Earnings
Slide 2: Forward Looking Statements
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 words
Slide 3: Second Quarter 2023 Results
SECOND QUARTER 2023 RESULTS ($ in Thousands Except Per Share Data) 2Q23 1Q23 2Q22 Net interest income $ 69,632 $ 73,053 $ 78,299 Provision for credit losses $ 1,900 $ 2,000 - Net income $ 17,879 $ 20,278 $ 26,712 Earnings per diluted common share $ 0.31 $ 0.34 $ 0.43 (1) Adjusted net income $ 18,383
Slide 4: Strong Deposit Base, Liquidity and Capital
STRONG DEPOSIT BASE, LIQUIDITY AND CAPITAL 2Q23 Summary Business model built for all cycles, with a focus on high-touch commercial relationships and value-added services and solutions to drive noninterest-bearing deposit growth • Stable deposit base with noninterest-bearing deposits comprising 36% o
Slide 5: Deposit Engine Consistently Generates New Low-Cost Commercial Deposit Relationships
DEPOSIT ENGINE CONSISTENTLY GENERATES NEW LOW-COST COMMERCIAL DEPOSIT RELATIONSHIPS Accelerating growth in number of commercial deposit accounts and new relationships 14,835 15,204 4Q21 14,244 14,292 14,300 14,541 14,580 Includes PMB Acquisition 11,270 11,444 11,644 $2,570 $2,516 $2,506 10,945 $2,43
Slide 6: Deposit Engine Consistently Generates New NIB Deposits From New Relationships
DEPOSIT ENGINE CONSISTENTLY GENERATES NEW NIB DEPOSITS FROM NEW RELATIONSHIPS Strong YTD growth in new NIB deposits from BANC’s deposit engine ($ in millions) +13.4% +25.6% $92.0 $74.5 $74.8 $66.0 $59.3 $22.0 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 New NIB Deposits From New Relationships New NIB deposit growt
Slide 7: Low Cost Deposit Franchise
LOW COST DEPOSIT FRANCHISE Widening spread against Fed funds rate driven by stable NIB deposit % Highlights Average Cost of deposits Noninterest-bearing Money Market & Savings Brokered CDs 4.99% Interest-bearing checking CDs 4.51% • Solid NIB mix, including Average Fed Funds Rate 3.65% 36% average a
Slide 8: High Level of Available Liquidity
HIGH LEVEL OF AVAILABLE LIQUIDITY Total available primary and secondary liquidity ($3.93B) exceeds uninsured and uncollateralized deposits ($1.76B) by 2.2x ($ in Millions) Current June 30, 2023 Availability Utilization Capacity Primary Liquidity Cash $ 284 AFS Securities (unpledged)* 716 Total Prima
Slide 9: Strong Capital Base
STRONG CAPITAL BASE Provides Buffer for Economic Environment Regulatory MRQ Ratios Well- in Excess of 2Q23 1Q23 4Q22 3Q22 2Q22 Capitalized Well- Ratios Capitalized Total Risk-Based Capital Ratio(1) 14.26% 14.22% 14.21% 13.86% 13.69% 10.00% 4.26% (1) Tier 1 Risk-based Capital 11.88% 11.79% 11.80% 11.
Slide 10: Securities Have Short / Moderate Duration with Low Unrealized AFS and HTM Losses
SECURITIES HAVE SHORT / MODERATE DURATION WITH LOW UNREALIZED AFS AND HTM LOSSES Securities Portfolio Detail Effective Security Type QoQ ($ in millions) Duration (yrs) Unrealized Loss 2Q23 1Q23 Change 2Q23 2Q23 Gov’t & Agency (MBS, CMO, & SBA) $ 180.2 $ 187.4 $ (7.2) 3.6 $ (7.7) CLOs 482.8 479.6 3.2
Slide 11: Low Unrealized Securities Losses as a % of Capital
LOW UNREALIZED SECURITIES LOSSES AS A % OF CAPITAL(1) Highlights (Dollars in thousands) 2Q23 AFS (Unrealized Loss Pre-Tax) $ 54,124 • 2Q23 AFS unrealized HTM (Unrealized Loss Pre-Tax) 61,360 losses were 4.3% of 2Q23 CET1 Capital Total Securities Unrealized Loss Pre-Tax $ 115,483 Net Unrealized Loss
Slide 12: Continued TBV Per Share Growth
CONTINUED TBV PER SHARE GROWTH Growth in TBV per common share(1) driven by strong earnings and prudent balance sheet management that more than offset negative AOCI marks, dividends, common stock repurchases and acquisitions of Pacific Mercantile Bank and Deepstack Technologies Tangible common equity
Slide 13: Diversified Loan Portfolio Mitigates Risk and Generates Attractive Risk-Adjusted Yields
DIVERSIFIED LOAN PORTFOLIO MITIGATES RISK AND GENERATES ATTRACTIVE RISK-ADJUSTED YIELDS 2Q23 1Q23 Change (1) (1) (1) Loan Segment $ % Avg. Yield $ % Avg. Yield $ % Avg. Yield $ in Millions C&I: Warehouse $ 786 11.0% 8.66% $ 637 9.0% 8.15% $ 149 23.5% 0.52% C&I: All Other 1,214 17.0% 6.55% 1,150 16.3
Slide 14: California-Centric CRE Portfolio Has Low Weighted-Average LTV and Solid Credit Quality
CALIFORNIA-CENTRIC CRE PORTFOLIO HAS LOW WEIGHTED-AVERAGE LTV AND SOLID CREDIT QUALITY CRE comprises 17.7% of total loans; General Office at only 3.7% of total loans Collateral Type Count Balance % of Total Loans Avg. Loan Size WA LTV ($ millions) ($ millions) General Office 71 $ 265 3.7% $ 3.7 53%
Slide 15: Diversified Business Mix: Loan Yields on New Production Continue to Rise
DIVERSIFIED BUSINESS MIX LOAN YIELDS ON NEW PRODUCTION CONTINUE TO RISE ($ in millions) Total Loan Fundings of $441 Million in Q2 2023 $1,400 8.00% $1,211($1,208) $1,200 7.00% ($980) $1,000 $380 ($414) 6.00% $821 $800 5.00% ($394) ($662) 4.00% $600 ($334) $262 ($166) $496 ($454) $441 3.00% $399 $400
Slide 16: Allowance for Credit Losses Walk
ALLOWANCE FOR CREDIT LOSSES WALK Lower non-warehouse balances impacted portfolio mix ($ in millions) $89.4 $3.1 $(5.3) $1.9 $(4.2) $84.9 1.27% 1.19% ACL (3/31/23) Specific Reserve Net Charge-offs Provision Portfolio Mix ACL (6/30/23) • ACL includes the Allowance for Loan Losses (ALL) and Reserve for
Slide 17: Asset Quality Remains Strong
ASSET QUALITY REMAINS STRONG NPLs, Delinquencies, and Classified Loans NPLs excluding SFR loans stable: SFR loans have low LTVs and minimal loss exposure Delinquencies ($ in millions) Criticized and Classified Loans ($ in millions) SFR Delinquencies Delinquencies (ex-SFR) Delinquencies /Total Loans
Slide 18: Interest Rate Risk Management
INTEREST RATE RISK MANAGEMENT Positioned for future rate cycles with a neutral balance sheet Interest Rate Risk Position (within 12 months) Loan & Deposit Mix HFI Loans: $7.2 billion Rate Sensitive Assets at 35% of Total Assets Loan Portfolio • $2.5 billion mature or reset within 12 months Hybrid Va
Slide 19: 2023 Strategic Objectives
2023 STRATEGIC OBJECTIVES Well-Positioned to Grow Franchise Value Protect The Balance Sheet • Continued focus on noninterest-bearing deposits, credit quality, robust capital and tangible book value growth Proactively Manage Asset- • Balance asset sensitivity while also proactively taking advantage o
Slide 20: Appendix
APPENDIX BANC OF CALIFORNIA
Slide 21: BANC Fast Facts
BANC FAST FACTS (Dollars in millions) 2Q23 1Q23 4Q22 3Q22 2Q22 Total assets $ 9,370 $ 10,039 $ 9,197 $ 9,369 $ 9,502 Securities available-for-sale 922 958 868 848 865 Securities held-to-maturity 328 329 329 329 329 Loans held-for-investment 7,156 7,054 7,115 7,289 7,451 Total deposits 6,871 6,952 7,
Slide 22: Diversified and Low LTV Real Estate Portfolio
DIVERSIFIED AND LOW LTV REAL ESTATE PORTFOLIO Real Estate Loan Balances(1) Real Estate (1) LTVs $ % Count $ in millions $ in Millions $5,124 $5,114 $5,118 $5,006 <50% $ 1,415 28% 1,031 $4,837 70% 72% 73% 70% 50% to 60% 1,134 23% 496 65% 60% to 70% 1,622 32% 616 70% to 80% 731 15% 447 >80% 105 2% 90
Slide 23: Strong Allowance Coverage Ratio: Reserve by Loan Type
STRONG ALLOWANCE COVERAGE RATIO RESERVE BY LOAN TYPE ACL Composition 6/30/2023 3/31/2023 ($ in thousands) Amount % of Loans Amount % of Loans Commercial real estate $ 15,767 1.24% $ 16,119 1.24% Multifamily 14,697 0.89% 15,038 0.90% Construction 6,053 2.29% 6,425 2.47% Commercial and industrial 30,2
Slide 24: CLO Portfolio Has Diversified Exposure
CLO PORTFOLIO HAS DIVERSIFIED EXPOSURE Credit Enhancement Provides Significant Principal Protection CLO Industry Breakdown Highlights $483 million at June 30, 2023 (net of $7.7 million unrealized loss) • CLO portfolio has underlying diversified exposure • AAA and AA holdings provide principal protec
Slide 25: Non-GAAP Financial Information
NON-GAAP FINANCIAL INFORMATION Tangible assets, tangible equity, tangible common equity, tangible Adjusted net income is calculated by adjusting net income for tax-effected common equity to tangible assets, tangible common equity per share, noninterest income and noninterest expense adjustments and
Slide 26: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands, except per share data) 2Q23 1Q23 4Q22 3Q22 2Q22 Tangible Common Equity to Tangible Assets Ratio Total assets $ 9,370,265 $ 10,038,901 $ 9,197,016 $ 9,368,578 $ 9,502,113 Less: goodwill (114,312) (114,312) (114,312) (114,312) (95,127) Less: other intangi
Slide 27: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q23 1Q23 4Q22 3Q22 2Q22 Return on tangible common equity Average total stockholders' equity $ 997,049 $ 1,004,794 $ 989,414 $ 960,806 $ 969,885 Less: Average preferred stock - - - - - Average common stockholders' equity 997,049 1,004,794 989,414 960,80
Slide 28: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q23 1Q23 4Q22 3Q22 2Q22 Adjusted Noninterest Income Total noninterest income 6,024 7,859 (1,427) 5,681 7,186 Net loss on securities available for sale - - 7,708 - - Adjusted noninterest income(1) $ 6,024 $ 7,859 $ 6,281 $ 5,681 $ 7,186 Adjusted Noninte
Slide 29: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q23 1Q23 4Q22 3Q22 2Q22 Adjusted pre-tax pre-provision income Net interest income $ 69,632 $ 73,053 $ 80,217 $ 79,408 $ 78,299 Noninterest income 6,024 7,859 (1,427) 5,681 7,186 Total revenue 75,656 80,912 78,790 85,089 85,485 Noninterest expense 49,13
Slide 30: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands, except per share data) 2Q23 1Q23 4Q22 3Q22 2Q22 Adjusted net income Net income(1)(2) $ 17,879 $ 20,278 $ 21,519 $ 24,196 $ 26,712 Adjustments: Noninterest income adjustments - - 7,708 - - Noninterest expense adjustments 716 1,998 (261) 3,601 1,498 Total
Slide 31: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION (Dollars in thousands) 2Q23 (1,3) Adjusted Common Equity Tier 1 (CET 1) capital CET 1 capital $ 892,009 Less unrealized loss on AFS securities, net of tax (38,103) Less unrealized loss on HTM securities, net of tax (43,197) (3) Adjusted CET 1 capital $ 810,709 Total risk-weig