Banc Of California, Inc. · NYSE:BANC
Banc Of California — Q2 2024 Earnings Presentation
32 slides from Banc Of California's earnings presentation, Jul 23, 2024
Slide 1: Investor Presentation Second Quarter 2024 Results
Draft v4.5 1/21/24 Investor Presentation Second Quarter 2024 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. These statements include, but are not limited to, statements related to our expectations regarding the performa
Slide 3: California's premier commercial bank with a national reach
California’s premier commercial bank with a national reach and select specialty business lines California Focused National Presence & Specialty Businesses ❖Fund Finance ❖Mortgage Warehouse Lending Fresno ❖HOA ❖Payments Solutions Tulare ❖Lender & Specialty Finance ❖SBA THE Monterey ❖Media & Entertain
Slide 4: Key Investor Takeaways
Solid progress in 2Q as we head towards sustainable Key Investor growth and profitability Takeaways ❖ Improvement in core results with NIM expanding to 2.80% driven by lower funding costs • 2024 is a transformational year for our company Improving core and higher loan yields. Average NIB balances up
Slide 5: We are transforming the combined franchise to drive long-term growth
We are transforming the combined franchise to drive long-term growth and shareholder value Current state Near-term focus Future state Repositioning for success Generating profitable growth Top-tier target performance • Reposition to right-size balance • Expand and deepen customer • Consistent high-q
Slide 6: 2Q24 Financial Highlights
Growth in pre-tax pre-provision earnings power driven by 2Q24 Financial continued balance sheet repositioning and merger synergies Highlights 2Q24 1Q24 ❖ Continued increase in PTPP(1) due to PTPP(1) $55.6mm $52.4mm NIM expansion and compensation EPS $0.12 $0.12 expense savings Operating ROAA 0.34% 0
Slide 7: 2Q24 Earnings Results
Cost of funds 2Q24 Earnings ($ in millions) 2Q24 1Q24 4Q23 -7 bps Results Total interest income Total interest expense $ 462.6 $ 233.1 478.7 $ 249.6 467.2 316.2 3.02% 2.95% ❖ Net interest income of $229.5mm Net interest income 229.5 229.1 151.1 Noninterest income 28.7 34.3 45.5 increased slightly Qo
Slide 8: Balance Sheet Repositioning Continues
Increased balance sheet efficiency with improved Balance Sheet deposit mix and lower wholesale funding Repositioning ($ in millions) Cash and cash equivalents $ 2Q24 2,699 $ 1Q24 3,085 $ 4Q23 5,378 Investment securities 4,673 4,708 4,761 Continues Loans held for sale Loans and leases HFI, net of def
Slide 9: Management Outlook
2024 outlook focused on improving core earnings Management drivers and strengthening balance sheet Outlook 4Q24 outlook Key assumptions ❖ Continue executing on plan to lower cost of funds and expand net interest margin ❖ NIM of 2.90% to 3.00% ❖ Balance sheet repositioning, higher average NIB deposit
Slide 10: Interest Rate Sensitivity
Well-positioned for declining rate environment Interest Rate Rate-Sensitive Liabilities Rate-Sensitive Earning Assets Sensitivity 2Q24 Interest-Bearing Deposits Borrowings 2Q24 6.3% 9.0% Other 2.4% ❖ Rate-sensitive earning assets: 40%(1) 14.1% ❖ $10.1 billion of loans are variable or reprice / matur
Slide 11: Net Interest Income and Net Interest Margin Expansion
Lower funding costs and improved asset yields and mix Net Interest Income drive NII and NIM expansion and Net Interest Net Interest Income (NII) ($M) and Net Interest Margin (NIM) Margin Expansion Quarter NIM NII Month(1) 2.80% 2.83% 2.66% 2.69% 2Q24 Highlights 2.15% 1.69% ❖ NIM expanded 14 bps to 2
Slide 12: Noninterest Income Composition
Noninterest income remains consistent and reflects Noninterest Income diversified fee sources excluding elevated mark-to- Composition market adjustments in 2Q24 ($ in millions) 2Q24 includes negative marks of $2.4mm for Credit-linked Notes and $3.2mm for 2Q24 Highlights mark for equity CRA investmen
Slide 13: Expenses
Progress in reducing operating expenses expected to Expenses continue through remainder of the year 2Q24 Highlights ❖ Controllable expenses declined Normalized ($ in millions) primarily due to lower compensation 2Q24 1Q24 4Q23(1) and occupancy costs driven by merger Compensation $85.9 $92.2 $114.9 s
Slide 14: Funding Cost Reduction Actions
Ongoing interest expense reduction results from focused Funding Cost strategy to improve funding mix and reprice deposits lower Reduction Actions Improving Funding Mix(1) % of Total Funding(1) Highlights 23.4% 25.3% 25.9% ❖ NIB and IB deposit composition trends reflects results of balance sheet rest
Slide 15: Building a Strong Commercial Deposit Franchise
Focus on relationship banking that generates low-cost Building a Strong commercial deposits Management has a track record of successful deposit strategy execution Commercial ($ in m illions) 4Q23 1Q24 2Q24 Deposit Franchise Noninterest-bearing Checking Checking $ 7,774 7,809 $ 7,834 7,836 $ 7,825 7,
Slide 16: NIB Deposit Growth Remains a Key Priority
Deposit gathering engine designed to build low-cost NIB Deposit deposit base Growth Remains a Consistently generating new noninterest-bearing business Key Priority deposits from new relationships since 4Q23 merger close 1,124 2Q24 Highlights ❖ Enterprise-wide focus ❖ Deposit incentive programs, incl
Slide 17: Diversified Loan Portfolio
High-quality relationship-based core portfolio is well Diversified Loan diversified with strong metrics Portfolio Existing portfolios have strong credit quality Loan Segment HFI % of Total Wtd. Avg. NPL % DQ % ❖ Lender finance loans moved to core ($ in millions) 2Q24 1Q24 Variance Loans 2Q24 Rate 2Q
Slide 18: California-Centric CRE Portfolio
High quality CRE portfolio has low weighted-average LTV California-Centric and high debt-service coverage ratio (DSCR) CRE Portfolio Total CRE is well diversified across multiple industries 2Q24 Highlights Property Type ($ in millions) Count 2Q24 % of Total % of Total CRE Loans Avg Loan Size WA LTV(
Slide 19: Asset Quality Ratios and Trends
Improved NPL and DQ metrics due to transfer of Asset Quality Ratios historically volatile CIVIC loans to HFS and Trends ACL / Total Loans ($M) Nonperforming Loans (NPLs) ($M) ❖ ACL coverage ratio of 1.19% reflects 1.26% 0.57% 0.57% 1.22% 1.19% 4 bps increase from 1Q24 when 1.15% 1.15% 0.47% 0.50% ex
Slide 20: Credit Migration
Increase in “Classified” driven by migration of rate Credit Migration sensitive loans; however, low delinquency reflects stable underlying credit ❖ Lower NPLs primarily due to transfer Nonperforming loans 1Q24 to 2Q24 walk of CIVIC loans to HFS Nonpeforming Loans Net % of Total ❖ Delinquent loans do
Slide 21: Allowance for Credit Losses Walk
ACL coverage ratio remains robust subsequent to Allowance for elevated charge-offs including impact of CIVIC Credit Losses Walk ($ in millions) $320.0 ❖ ACL decreased due to charge-offs $(28.7) $275.3 related to transfer of CIVIC loans to the $(27.0) $11.0 HFS portfolio and charge-offs of other loan
Slide 22: Strong Capital Base
Focus on building capital levels for strength and flexibility Strong Capital Base 2Q24 1Q24 Regulatory Well- Excess of Well- Capitalized Ratios Capitalized Total Risk-Based Ratio 16.57% 16.40% 10.00% 6.57% 2Q24 Highlights Tier 1 Risk-Based Capital 12.62% 12.38% 8.00% 4.62% ❖ CET 1 ratio of 10.27% in
Slide 23: Securities Portfolio Detail
High-quality securities portfolio provides upside Securities Portfolio Portfolio Profile Detail Security Type ($ in millions) (1) 2Q24 1Q24 QoQ Change Credit Rating 3% AFS - Gov't & Agency $ 1,634 $ 1,675 $ (41) AAA 0% 1% 5% AFS - CLO's 109 109 0 AA 16% 2Q24 Highlights AFS - Corporate Bonds 282 277
Slide 24: 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 2Q24 Highlights June 30, 2024 Availability Utilization Capacity Primary Liquidity ❖ Total available primary liquidity of Cash $ 2,519 (1) $4.6 billion, includi
Slide 25: Appendix
Appendix
Slide 26: Non-GAAP Financial Information
Non-GAAP Financial Information Tangible assets, tangible equity, tangible common equity, tangible common equity to impact of these items provides useful supplemental information that is essential to a tangible assets, tangible book value per common share, return on average tangible proper understand
Slide 27: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands, except per share data) 2Q24 1Q24 2Q23 Tangible Common Equity to Tangible Assets Ratio Total stockholders' equity $ 3,407,848 $ 3,394,150 $ 2,533,195 Less: preferred stock 498,516 498,516 498,516 Total common equity 2,909,332 2,895,634 2,034,679 Less: intangib
Slide 28: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 2Q24 1Q24 2Q23 Return on Average Tangible Common Equity ("ROATCE") Net earnings (loss) $ 30,333 $ 30,852 $ (197,414) Earnings (loss) before income taxes $ 44,637 $ 42,400 $ (264,443) Add: Intangible asset amortization 8,484 8,404 2,389 Adjusted earnings (loss
Slide 29: Non-GAAP Reconciliation
Non-GAAP Reconciliation ($ in thousands) 2Q24 1Q24 2Q23 PTPP Income Net earnings (loss) $ 30,333 $ 30,852 $ (197,414) Net interest income $ 229,488 $ 229,102 $ 186,076 Add: Noninterest income (loss) 29,792 33,816 (128,082) Total revenue 259,280 262,918 57,994 Less: Noninterest expense (203,643) (210
Slide 30: Noteworthy items
2Q24 results included multiple noteworthy items, which Noteworthy items impacted financial results, but were largely offset ❖ Revenue items higher than historical levels; driven by normal MTM ($ in millions) P&L impact accounting Revenue ❖ The identified expense and tax items Credit Linked note MTM
Slide 31: Integration roadmap update
Integration roadmap update 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 2H24 Target ✓ • Closed merger with PacWest • Execution on consolidat
Slide 32: 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