Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $11.9 million, for the second quarter of 2019, resulting in diluted earnings per common share of $0.23.
Highlights for the second quarter included:
- Net interest margin increased by 5 basis points from the prior quarter to 2.86% for the second quarter, resulting from a 5 basis point decline in our cost of deposits
- Loan production was $599 million for the quarter, including $186 million of commercial and industrial loan commitments
- Loan delinquencies decreased by 12.2% from the prior quarter to $52.2 million
- Held-for-investment loan balances for the second quarter decreased to $6.7 billion as we sold lower coupon single family and multifamily loans and transferred $574 million of multifamily loans to held-for-sale, pending a planned Freddie Mac securitization
- Collateralized loan obligations declined to $737 million following $298 million of sales and calls
- Noninterest expense was $43.6 million for the quarter, including non-core expenses of $6.2 million of litigation, indemnification, investigation and other legal fees, $12.6 million of insurance recoveries, and net project charge-offs of $869 thousand
- Efficiency ratio for the second quarter decreased to 69.75%
- Return on average assets increased to 0.69%, while return on average tangible common equity was 7.43%
Jared Wolff, President and Chief Executive Officer of Banc of California, commented, “The second quarter results reflect our accelerated efforts to focus on our three initiatives designed to improve our franchise and profitability on an ongoing basis: reducing our cost of deposits, optimizing the balance sheet to focus on higher-margin products and appropriately managing down expenses to the size and complexity of the business. Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our high credit quality and serving businesses, entrepreneurs and individuals within our footprint. Further, as part of our efforts to improve our balance sheet, we commenced today a tender offer for our preferred equity for up to $75 million aggregate purchase price.”
Speaking specifically about operational results for the quarter, John Bogler, Chief Financial Officer of Banc of California said “The sales of non-core and low-margin assets allowed us to reduce high costing deposits, resulting in a 5 basis point decline in the cost of total deposits. Efforts to simplify our operating model allowed noninterest expense and operating expenses each to come in below $50 million for the quarter, which is ahead of our schedule for reducing expenses.”
Business Results - Income Statement Highlights
Three Months Ended | ||||||||||||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||||||||||||
Total interest and dividend income | $ | 104,040 | $ | 110,712 | $ | 111,130 | $ | 107,774 | $ | 105,185 | ||||||||||||||||||||
Total interest expense | 39,260 | 42,904 | 40,448 | 36,582 | 32,421 | |||||||||||||||||||||||||
(Reversal of) provision for loan and lease losses | (1,987 | ) | 2,512 | 6,653 | 1,410 | 2,653 | ||||||||||||||||||||||||
Net interest income after provision for loan and lease losses | 66,767 | 65,296 | 64,029 | 69,782 | 70,111 | |||||||||||||||||||||||||
Total noninterest (loss) income | (2,290 | ) | 6,295 | 2,448 | 4,824 | 8,061 | ||||||||||||||||||||||||
Total noninterest expense | 43,587 | 61,835 | 49,569 | 60,877 | 62,539 | |||||||||||||||||||||||||
Income tax expense | 4,308 | 2,719 | 6,117 | 3,301 | 1,779 | |||||||||||||||||||||||||
Income from continuing operations | 16,582 | 7,037 | 10,791 | 10,428 | 13,854 | |||||||||||||||||||||||||
Income from discontinued operations | — | — | 247 | 668 | 926 | |||||||||||||||||||||||||
Net income | $ | 16,582 | $ | 7,037 | $ | 11,038 | $ | 11,096 | $ | 14,780 | ||||||||||||||||||||
Net interest income
Net interest income for the second quarter decreased to $64.8 million as we sold non-core assets and repaid high cost funding during the quarter. For the second quarter, average interest-earning assets declined from the prior quarter by $695 million to $9.1 billion, while the net interest margin improved by 5 basis points versus the prior quarter.
Our average yield on interest-earning assets remained flat at 4.59% for the second quarter as compared to the first quarter of 2019, primarily attributable to an increase in our average yield on loans partially offset by a decrease in our average yield on securities. Our average yield on loans came in at 4.80% for the second quarter which increased by 4 basis points from the prior quarter, primarily attributable to a reduction in lower-yielding single family residential mortgage and multifamily loans. Our average yield on securities decreased primarily as a result of an interest rate reset on our collateralized loan obligations and a decrease in our average balance attributable to the sale and calls of $298 million of our higher yielding collateralized loan obligations during the second quarter. The decline in the average balance of collateralized loan obligations was also due to sales that occurred late in the first quarter of 2019. We sold a significant amount of these securities at the end of the first quarter, with the full impact of the first quarter sales reflected in the second quarter.
Our average cost of interest-bearing liabilities decreased to 2.09% for the second quarter from 2.12% for the first quarter, primarily resulting from a 5 basis point decrease in our average cost of total deposits from the prior quarter to 1.62% for the second quarter. The decrease in our cost of deposits from the prior quarter primarily resulted from the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.
Provision for loan losses
During the second quarter, we released $2.0 million of our allowance for loan losses primarily attributable to a decrease in the held-for-investment loan portfolio, partially offset by an increase in net charge-offs and other qualitative provisions during the quarter. The decrease in the loan portfolio primarily resulted from the sale of $178 million of multifamily loans and the transfer of $574 million of multifamily loans to held-for-sale. During the quarter, we had $2.4 million in net charge-off activity and a $900 thousand increase in our specific reserves. The net charge-offs were driven primarily by a charge-off of $2.0 million on one commercial and industrial loan relationship.
Noninterest (loss) income
Noninterest (loss) income for the second quarter was $(2.3) million, which represented a decrease of $8.6 million, or 136.38% from the prior quarter. The decrease is primarily attributable to a $9.6 million loss on our hedge of the pending Freddie Mac multifamily securitization in which we also plan to sell the associated mortgage servicing rights. The $9.6 million hedging loss is due to a decline in interest rates since the hedge was executed and is expected to be mostly offset by the gain in fair value of the loans sold into the securitization in the third quarter. This was partially offset by an increase of $1.3 million in our gain on sale of loans during the second quarter, resulting from the sale of $178 million and $344 million of multifamily and single family residential mortgage loans, respectively.
Noninterest expense
Noninterest expense for the second quarter was $43.6 million, which represented a decrease of $18.2 million, or 29.5%, from the prior quarter. The decrease primarily relates to: (1) a $13.9 million decline in our professional fees, primarily attributable to $6.2 million of insurance recoveries net of expenses related to securities litigation, indemnification, investigation and other legal expenses in the second quarter as compared to $3.0 million of net expense in the prior quarter, (2) $158 thousand reversal true-up related to restructuring expense in the second quarter as compared to $2.8 million of restructuring expense in the prior quarter, and (3) a 933 thousand decrease in our compensation expense resulting from lower headcount. The net recovery of $6.2 million in insurance proceeds from the securities litigation, indemnification, investigation and other legal expenses reduced our efficiency ratio by 10%.
Income taxes
Taxes totaled $4.3 million for the quarter, representing an increase of 58% from the prior quarter, and an effective tax rate of 20.62%. During the second quarter of 2019, we closed on a tax planning strategy investment that is expected to produce $3.4 million of investment tax credits in 2019, resulting in a 5% reduction in the projected annual effective tax rate. For the full year, we expect our tax rate to normalize closer to 20%.
Balance Sheet
The following table shows selected balance sheet line items as of June 30, 2019 and for the previous four quarters. As indicated in the table below, at June 30, 2019, total assets were approximately $9.4 billion, which represented a decrease of $527 million million consistent with our strategic shift towards reducing our balance sheet and focusing on relationship lending.
As of and for the Three Months Ended | Amount Change | |||||||||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| Q2-19 vs. Q1
| Q2-19 vs. Q2
| ||||||||||||||||||||||
Total assets | $ | 9,359,931 | $ | 9,886,525 | $ | 10,630,067 | $ | 10,260,822 | $ | 10,319,280 | $ | (526,594 | ) | $ | (959,349 | ) | ||||||||||||
Securities available-for-sale | $ | 1,167,687 | $ | 1,471,303 | $ | 1,992,500 | $ | 2,059,832 | $ | 2,297,124 | $ | (303,616 | ) | $ | (1,129,437 | ) | ||||||||||||
Loans held-for-investment | $ | 6,719,570 | $ | 7,557,200 | $ | 7,700,873 | $ | 7,253,293 | $ | 7,036,004 | $ | (837,630 | ) | $ | (316,434 | ) | ||||||||||||
Loans held-for-sale | $ | 597,720 | $ | 25,191 | $ | 8,116 | $ | 9,382 | $ | 13,753 | $ | 572,529 | $ | 583,967 | ||||||||||||||
Demand deposits | $ | 2,571,646 | $ | 2,694,199 | $ | 2,579,770 | $ | 2,775,347 | $ | 2,783,432 | $ | (122,553 | ) | $ | (211,786 | ) | ||||||||||||
Other core deposits | 3,239,667 | 3,735,667 | 3,793,605 | 3,638,624 | 3,666,159 | (496,000 | ) | (426,492 | ) | |||||||||||||||||||
Brokered deposits | 480,977 | 1,295,066 | 1,543,269 | 987,771 | 686,203 | (814,089 | ) | (205,226 | ) | |||||||||||||||||||
Total Deposits | $ | 6,292,290 | $ | 7,724,932 | $ | 7,916,644 | $ | 7,401,742 | $ | 7,135,794 | $ | (1,432,642 | ) | $ | (843,504 | ) | ||||||||||||
As percentage of total deposits | ||||||||||||||||||||||||||||
Demand deposits | 40.87 | % | 34.88 | % | 32.59 | % | 37.50 | % | 39.01 | % | 5.99 | % | 1.86 | % | ||||||||||||||
Other core deposits | 51.49 | % | 48.36 | % | 47.92 | % | 49.16 | % | 51.38 | % | 3.13 | % | 0.11 | % | ||||||||||||||
Brokered deposits | 7.64 | % | 16.76 | % | 19.49 | % | 13.35 | % | 9.62 | % | (9.12 | )% | (1.98 | )% | ||||||||||||||
Average Loan Yield | 4.80 | % | 4.76 | % | 4.74 | % | 4.70 | % | 4.63 | % | 0.04 | % | 0.17 | % | ||||||||||||||
Average Cost of Interest-Bearing Deposits | 1.89 | % | 1.92 | % | 1.77 | % | 1.58 | % | 1.34 | % | (0.03 | )% | 0.55 | % | ||||||||||||||
Investments
Securities available-for-sale declined to $1.2 billion, a decrease of 20.6% from the previous quarter, primarily due to the continued reduction in the size of the collateralized loan obligation portfolio. During the second quarter, $298 million of collateralized loan obligations were sold or called. As of June 30, 2019, our securities balance included $737 million of collateralized loan obligations, $852 thousand of small business administration loan pool securities, $429 million of agency residential mortgage-backed securities and $285 thousand of non-agency residential mortgage-backed securities.
Loans
The following table sets forth the composition, by loan category, of our loan portfolio at June 30, 2019 and the previous four quarters.
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Composition of held-for-investment loans | ||||||||||||||||||||
Commercial real estate | $ | 856,497 | $ | 865,521 | $ | 867,013 | $ | 823,193 | $ | 793,855 | ||||||||||
Multifamily | 1,598,978 | 2,332,527 | 2,241,246 | 2,112,190 | 1,959,965 | |||||||||||||||
Construction | 209,029 | 211,549 | 203,976 | 200,294 | 211,110 | |||||||||||||||
Commercial and industrial | 1,951,707 | 1,907,102 | 1,944,142 | 1,673,055 | 1,742,559 | |||||||||||||||
SBA | 80,929 | 74,998 | 68,741 | 71,494 | 78,092 | |||||||||||||||
Total commercial loans | 4,697,140 | 5,391,697 | 5,325,118 | 4,880,226 | 4,785,581 | |||||||||||||||
Single family residential mortgage | 1,961,065 | 2,102,694 | 2,305,490 | 2,300,069 | 2,174,183 | |||||||||||||||
Other consumer | 61,365 | 62,809 | 70,265 | 72,998 | 76,240 | |||||||||||||||
Total consumer loans | 2,022,430 | 2,165,503 | 2,375,755 | 2,373,067 | 2,250,423 | |||||||||||||||
Total gross loans | $ | 6,719,570 | $ | 7,557,200 | $ | 7,700,873 | $ | 7,253,293 | $ | 7,036,004 | ||||||||||
Composition percentage of held-for-investment loans | ||||||||||||||||||||
Commercial real estate | 12.7 | % | 11.5 | % | 11.3 | % | 11.3 | % | 11.3 | % | ||||||||||
Multifamily | 23.8 | % | 30.9 | % | 29.2 | % | 29.1 | % | 27.9 | % | ||||||||||
Construction | 3.1 | % | 2.8 | % | 2.6 | % | 2.8 | % | 3.0 | % | ||||||||||
Commercial and industrial | 29.1 | % | 25.2 | % | 25.2 | % | 23.1 | % | 24.8 | % | ||||||||||
SBA | 1.2 | % | 1.0 | % | 0.9 | % | 1.0 | % | 1.1 | % | ||||||||||
Total commercial loans | 69.9 | % | 71.4 | % | 69.2 | % | 67.3 | % | 68.1 | % | ||||||||||
Single family residential mortgage | 29.2 | % | 27.8 | % | 29.9 | % | 31.7 | % | 30.9 | % | ||||||||||
Other consumer | 0.9 | % | 0.8 | % | 0.9 | % | 1.0 | % | 1.0 | % | ||||||||||
Total consumer loans | 30.1 | % | 28.6 | % | 30.8 | % | 32.7 | % | 31.9 | % | ||||||||||
Total gross loans | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Held-for-investment loans decreased to $6.7 billion driven mostly by the transfer of $574 million of multifamily loans from held-for-investment to held-for-sale during the quarter and the sale of $178 million and $131 million of multifamily and single family residential mortgage loans, respectively, partially offset by quarterly net production of $45 million. The quarterly net production increased from the prior quarter primarily as a result of new loan growth of $63 million during the quarter, and $128 million of single family residential mortgage loan production in the second quarter as opposed to $183 million during the first quarter of 2019. The $128 million of single family residential mortgage loan production in the second quarter represented funding on commitments made prior to our decision to discontinue the single family residential mortgage loan business. Going forward, we would expect minimal production from this business in the third and fourth quarters of 2019 as we focus on relationship lending.
Commercial real estate loans comprised 12.7% of the loan portfolio and commercial and industrial loans constituted 29.1%, with yields of 4.67% and 5.77%, respectively. During the second quarter of 2019, our commercial and industrial loan production was $186 million, which represented an increase of 12.6% over the prior quarter.
Held-for-sale loans increased by $573 million primarily resulting from the transfer of certain multifamily loans from loans held-for-investment related to our pending Freddie Mac multifamily securitization which is expected to close during the third quarter of 2019. The loans included in the securitization have a weighted average coupon of 3.79% and a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights will also be sold.
Excluding the aforementioned loan sales and loans transferred to held-for-sale, the loan portfolio had net growth of $45 million from the prior quarter.
Deposits
The following table sets forth the composition of our deposits at June 30, 2019 and the previous four quarters.
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Composition of deposits | ||||||||||||||||||||
Noninterest-bearing checking | $ | 993,745 | $ | 1,120,700 | $ | 1,023,360 | $ | 1,061,557 | $ | 1,005,032 | ||||||||||
Interest-bearing checking | 1,577,901 | 1,573,499 | 1,556,410 | 1,713,790 | 1,778,400 | |||||||||||||||
Money market | 800,898 | 899,330 | 873,153 | 856,886 | 1,136,335 | |||||||||||||||
Savings | 1,061,115 | 1,151,442 | 1,265,847 | 1,269,489 | 1,175,275 | |||||||||||||||
Non-brokered certificates of deposit | 1,479,137 | 1,684,895 | 1,654,605 | 1,512,249 | 1,354,549 | |||||||||||||||
Brokered certificates of deposit | 379,494 | 1,295,066 | 1,543,269 | 987,771 | 686,203 | |||||||||||||||
Total deposits | $ | 6,292,290 | $ | 7,724,932 | $ | 7,916,644 | $ | 7,401,742 | $ | 7,135,794 | ||||||||||
Composition percentage of deposits | ||||||||||||||||||||
Noninterest-bearing checking | 15.8 | % | 14.5 | % | 12.9 | % | 14.3 | % | 14.1 | % | ||||||||||
Interest-bearing checking | 25.1 | % | 20.4 | % | 19.7 | % | 23.2 | % | 24.9 | % | ||||||||||
Money market | 12.7 | % | 11.6 | % | 11.0 | % | 11.6 | % | 15.9 | % | ||||||||||
Savings | 16.9 | % | 14.9 | % | 16.0 | % | 17.2 | % | 16.5 | % | ||||||||||
Non-brokered certificates of deposit | 23.5 | % | 21.8 | % | 20.9 | % | 20.4 | % | 19.0 | % | ||||||||||
Brokered certificates of deposit | 6.0 | % | 16.8 | % | 19.5 | % | 13.3 | % | 9.6 | % | ||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Deposits finished the second quarter at $6.3 billion, with noninterest-bearing deposits decreasing approximately $127 million. The decline in noninterest-bearing deposits for the quarter consisted primarily of transactional balances that fluctuate throughout the quarter but are expected to return. For the second quarter, the average balance of noninterest-bearing deposits was $1.034 billion up from the first quarter average balance of $1.022 billion. Total deposits decreased by $1.4 billion, of which $916 million was as a result of maturities on our brokered certificates of deposit and no new brokered certificates of deposit were acquired during the quarter.
Debt
Advances from the Federal Home Loan Bank (“FHLB”) increased $890 million, or 95%, to $1.8 billion as of June 30, 2019, as a result of overnight advances with the FHLB that we plan to pay down with the proceeds from the sale of loans sold into the Freddie Mac multifamily securitization which is expected to close in the third quarter. At the end of the quarter, the maturity dates of FHLB advances consisted of $645 million of overnight, $400 million maturing in 3 months or less, and $780 million maturing beyond 3 months. As of the end of the quarter, the overnight advance interest rate was 2.52%.
Equity
At June 30, 2019, stockholders’ equity increased by $15.2 million to $963.5 million, while tangible common equity was $690.2 million. The improvement in stockholders’ equity partially related to the improvement within our accumulated other comprehensive income as a result of other comprehensive income of $5.4 million. During the second quarter of 2019, we reduced the dividend per common share from 13 cents to 6 cents. Subsequent to June 30, 2019, we launched a tender offer for our preferred equity for up to $75 million aggregate purchase price with the tender offer expected to close by the end of August.
Capital remains strong with total risk based capital at 14.88% and a tier 1 leverage ratio of 9.62%. The following table sets forth our regulatory capital ratios at June 30, 2019 and the previous four quarters.
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| |||||||||||
Capital Ratios | |||||||||||||||
Banc of California, Inc. | |||||||||||||||
Total risk-based capital ratio | 14.88 | % | 14.01 | % | 13.71 | % | 14.05 | % | 14.71 | % | |||||
Tier 1 risk-based capital ratio | 13.91 | % | 13.03 | % | 12.77 | % | 13.15 | % | 13.83 | % | |||||
Common equity tier 1 capital ratio | 10.41 | % | 9.72 | % | 9.53 | % | 9.80 | % | 9.90 | % | |||||
Tier 1 leverage ratio | 9.62 | % | 8.87 | % | 8.95 | % | 8.99 | % | 9.30 | % | |||||
Banc of California, NA | |||||||||||||||
Total risk-based capital ratio | 16.56 | % | 15.79 | % | 15.71 | % | 15.94 | % | 16.63 | % | |||||
Tier 1 risk-based capital ratio | 15.60 | % | 14.81 | % | 14.77 | % | 15.04 | % | 15.74 | % | |||||
Common equity tier 1 capital ratio | 15.60 | % | 14.81 | % | 14.77 | % | 15.04 | % | 15.74 | % | |||||
Tier 1 leverage ratio | 10.80 | % | 10.07 | % | 10.36 | % | 10.29 | % | 10.58 | % | |||||
Credit Quality
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Asset quality information and ratios | ($ in thousands) | |||||||||||||||||||
Delinquent loans held-for-investment | ||||||||||||||||||||
30 to 89 days delinquent | $ | 34,938 | $ | 44,840 | $ | 26,684 | $ | 20,265 | $ | 15,097 | ||||||||||
90+ days delinquent | 17,272 | 14,623 | 13,846 | 15,269 | 11,453 | |||||||||||||||
Total delinquent loans | $ | 52,210 | $ | 59,463 | $ | 40,530 | $ | 35,534 | $ | 26,550 | ||||||||||
Total delinquent loans to total loans | 0.78 | % | 0.79 | % | 0.53 | % | 0.49 | % | 0.38 | % | ||||||||||
Non-performing assets, excluding loans held-for-sale | ||||||||||||||||||||
Non-performing loans | $ | 28,499 | $ | 27,739 | $ | 21,585 | $ | 25,523 | $ | 22,290 | ||||||||||
90+ days delinquent and still accruing loans | 275 | 731 | 470 | — | — | |||||||||||||||
Other real estate owned | 276 | 316 | 672 | 434 | 710 | |||||||||||||||
Non-performing assets | $ | 29,050 | $ | 28,786 | $ | 22,727 | $ | 25,957 | $ | 23,000 | ||||||||||
ALLL to non-performing loans | 206.86 | % | 224.40 | % | 281.99 | % | 226.39 | % | 254.28 | % | ||||||||||
Non-performing loans to total loans held-for-investment | 0.43 | % | 0.38 | % | 0.29 | % | 0.35 | % | 0.32 | % | ||||||||||
Non-performing assets to total assets | 0.31 | % | 0.29 | % | 0.21 | % | 0.25 | % | 0.22 | % | ||||||||||
Troubled debt restructurings (TDRs) | ||||||||||||||||||||
Performing TDRs | $ | 20,245 | $ | 5,574 | $ | 5,745 | $ | 5,580 | $ | 5,648 | ||||||||||
Non-performing TDRs | 2,428 | 1,943 | 2,276 | 2,684 | 2,701 | |||||||||||||||
Total TDRs | $ | 22,673 | $ | 7,517 | $ | 8,021 | $ | 8,264 | $ | 8,349 | ||||||||||
Loan delinquencies decreased by 12.2% to $52.2 million at June 30, 2019, primarily related to the decrease in our 30 to 89 days delinquent loans. The decrease in our total delinquent loans resulted from $12.6 million returning to current status and $11.7 million of principal payments or payoffs, partially offset by $17.0 million of additions. Loans 90+ days delinquent includes single family mortgage residential loans, which account for 44% of the balance. Loan delinquencies as a percentage of total loans held-for-investment decreased to 78 basis points for the quarter, primarily resulting from the improvement in our delinquent loans, partially offset by the reduction in our balance sheet over the same period.
Non-performing loans increased slightly to $28.5 million as of June 30, 2019, while non-performing assets finished the second quarter at $29.1 million attributable to an increase in our nonperforming loans as of June 30, 2019, partially offset by a reduction in our other real estate owned and loans 90+ days delinquent and still accruing interest. The increase in performing TDRs during the second quarter was primarily due to one loan relationship.
Allowance for Loan Losses
Three Months Ended | ||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
($ in thousands) | ||||||||||||||||||||
Allowance for loan losses (ALLL) | ||||||||||||||||||||
Balance at beginning of period | $ | 63,885 | $ | 62,192 | $ | 57,782 | $ | 56,678 | $ | 54,763 | ||||||||||
Loans and leases charged off | $ | (2,451 | ) | $ | (1,063 | ) | $ | (2,522 | ) | $ | (388 | ) | $ | (950 | ) | |||||
Recoveries | $ | 76 | $ | 244 | $ | 279 | $ | 82 | $ | 212 | ||||||||||
Net charge-offs | $ | (2,375 | ) | $ | (819 | ) | $ | (2,243 | ) | $ | (306 | ) | $ | (738 | ) | |||||
(Reversal of) provision for loan losses | $ | (1,987 | ) | $ | 2,512 | $ | 6,653 | $ | 1,410 | $ | 2,653 | |||||||||
Balance at end of period | $ | 59,523 | $ | 63,885 | $ | 62,192 | $ | 57,782 | $ | 56,678 | ||||||||||
Annualized net loan charge-offs to average total loans held-for-investment | 0.13 | % | 0.04 | % | 0.12 | % | 0.02 | % | 0.04 | % | ||||||||||
Reserve for loss on repurchased loans | ||||||||||||||||||||
Balance at beginning of period | $ | 2,486 | $ | 2,506 | $ | 2,575 | $ | 3,149 | $ | 3,426 | ||||||||||
Reversal of provision for loan repurchases | (8 | ) | (20 | ) | (69 | ) | (342 | ) | (165 | ) | ||||||||||
Utilization of reserve for loan repurchases | — | — | — | (232 | ) | (112 | ) | |||||||||||||
Balance at end of period | $ | 2,478 | $ | 2,486 | $ | 2,506 | $ | 2,575 | $ | 3,149 | ||||||||||
Charge-offs for the second quarter totaled $2.5 million, which primarily consisted of a $2.0 million write-down related to one loan relationship and a write-down of $425 thousand related to the sale of single family residential mortgage loans during the quarter. The allowance for loan losses decreased to $59.5 million, or 0.89% of total loans held-for-investment, primarily attributable to the release of $5.0 million resulting from the upcoming securitization of our multifamily portfolio and other decreases in the loan portfolio, partially offset by net charge-offs of $2.4 million and increases in other qualitative provisions during the quarter.
The Company will host a conference call to discuss its second quarter 2019 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, July 25, 2019. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 4783507. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call.
About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $9 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the “Bank”). The Bank has 43 offices including 32 full-service branches located throughout Southern California. Through our 700+ dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.
Forward-Looking Statements
This press release includes forward-looking statements. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
Additional Information
This press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer for the outstanding depositary shares representing Banc of California, Inc.’s 7.00% Non-Cumulative Perpetual Preferred Stock, Series E and its 7.375% Non-Cumulative Perpetual Preferred Stock, Series D described in this press release is being made pursuant to an Offer to Purchase and related materials that Banc of California, Inc. has filed or will file with the Securities and Exchange Commission (the “SEC”) pursuant to a Schedule TO. The Schedule TO, Offer to Purchase, a related letter of transmittal and other tender offer documents contain important information that should be read carefully before any decision is made with respect to the tender offer. These materials (and all other documents Banc of California, Inc. has filed with the SEC) are available at no charge on the SEC's website at www.sec.gov.
Banc of California, Inc. | ||||||||||||||||||||
Consolidated Statements of Financial Condition | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents | $ | 313,850 | $ | 304,705 | $ | 391,592 | $ | 372,221 | $ | 385,691 | ||||||||||
Securities available-for-sale | 1,167,687 | 1,471,303 | 1,992,500 | 2,059,832 | 2,297,124 | |||||||||||||||
Loans held-for-sale | 597,720 | 25,191 | 8,116 | 9,382 | 13,753 | |||||||||||||||
Loans held-for-investment | 6,719,570 | 7,557,200 | 7,700,873 | 7,253,293 | 7,036,004 | |||||||||||||||
Allowance for loan losses | (59,523 | ) | (63,885 | ) | (62,192 | ) | (57,782 | ) | (56,678 | ) | ||||||||||
Federal Home Loan Bank and other bank stock | 76,373 | 55,794 | 68,094 | 71,308 | 75,737 | |||||||||||||||
Servicing rights, net | 2,715 | 3,053 | 3,428 | 3,770 | 3,869 | |||||||||||||||
Other real estate owned, net | 276 | 316 | 672 | 434 | 710 | |||||||||||||||
Premises and equipment, net | 129,227 | 130,417 | 129,394 | 133,129 | 135,478 | |||||||||||||||
Investments in alternative energy partnerships, net | 26,633 | 26,578 | 28,988 | 41,781 | 44,806 | |||||||||||||||
Goodwill | 37,144 | 37,144 | 37,144 | 37,144 | 37,144 | |||||||||||||||
Other intangible assets, net | 5,105 | 5,726 | 6,346 | 6,990 | 7,683 | |||||||||||||||
Deferred income tax, net | 42,798 | 45,111 | 49,404 | 47,865 | 42,334 | |||||||||||||||
Income tax receivable | 2,547 | 4,787 | 2,695 | 1,764 | 7,995 | |||||||||||||||
Bank owned life insurance investment | 108,132 | 107,552 | 107,027 | 106,468 | 105,917 | |||||||||||||||
Right of use assets | 24,118 | 24,519 | — | — | — | |||||||||||||||
Other assets | 165,559 | 151,014 | 146,496 | 152,933 | 155,298 | |||||||||||||||
Assets of discontinued operations | — | — | 19,490 | 20,290 | 26,415 | |||||||||||||||
Total assets | $ | 9,359,931 | $ | 9,886,525 | $ | 10,630,067 | $ | 10,260,822 | $ | 10,319,280 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Noninterest-bearing deposits | $ | 993,745 | $ | 1,120,700 | $ | 1,023,360 | $ | 1,061,557 | $ | 1,005,032 | ||||||||||
Interest-bearing deposits | 5,298,545 | 6,604,232 | 6,893,284 | 6,340,185 | 6,130,762 | |||||||||||||||
Total deposits | 6,292,290 | 7,724,932 | 7,916,644 | 7,401,742 | 7,135,794 | |||||||||||||||
Advances from Federal Home Loan Bank | 1,825,000 | 935,000 | 1,520,000 | 1,640,000 | 1,805,000 | |||||||||||||||
Notes payable, net | 173,257 | 173,203 | 173,174 | 173,096 | 173,017 | |||||||||||||||
Reserve for loss on repurchased loans | 2,478 | 2,486 | 2,506 | 2,575 | 3,149 | |||||||||||||||
Lease liabilities | 25,457 | 25,893 | — | — | — | |||||||||||||||
Due on unsettled securities purchases | — | — | — | 17,500 | 132,546 | |||||||||||||||
Accrued expenses and other liabilities | 77,905 | 76,686 | 72,209 | 79,231 | 81,086 | |||||||||||||||
Total liabilities | 8,396,387 | 8,938,200 | 9,684,533 | 9,314,144 | 9,330,592 | |||||||||||||||
Commitments and contingent liabilities | ||||||||||||||||||||
Preferred stock | 231,128 | 231,128 | 231,128 | 231,128 | 269,071 | |||||||||||||||
Common stock | 520 | 518 | 518 | 518 | 517 | |||||||||||||||
Common stock, class B non-voting non-convertible | 5 | 5 | 5 | 5 | 4 | |||||||||||||||
Additional paid-in capital | 627,306 | 626,608 | 625,834 | 624,789 | 623,372 | |||||||||||||||
Retained earnings | 146,039 | 136,943 | 140,952 | 140,971 | 143,880 | |||||||||||||||
Treasury stock | (28,786 | ) | (28,786 | ) | (28,786 | ) | (28,786 | ) | (28,786 | ) | ||||||||||
Accumulated other comprehensive loss, net | (12,668 | ) | (18,091 | ) | (24,117 | ) | (21,947 | ) | (19,370 | ) | ||||||||||
Total stockholders’ equity | 963,544 | 948,325 | 945,534 | 946,678 | 988,688 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 9,359,931 | $ | 9,886,525 | $ | 10,630,067 | $ | 10,260,822 | $ | 10,319,280 | ||||||||||
Banc of California, Inc. | ||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Interest and dividend income | ||||||||||||||||||||
Loans, including fees | $ | 89,159 | $ | 90,558 | $ | 88,258 | $ | 84,795 | $ | 81,307 | ||||||||||
Securities | 12,457 | 17,841 | 19,882 | 20,599 | 21,455 | |||||||||||||||
Other interest-earning assets | 2,424 | 2,313 | 2,990 | 2,380 | 2,423 | |||||||||||||||
Total interest and dividend income | 104,040 | 110,712 | 111,130 | 107,774 | 105,185 | |||||||||||||||
Interest expense | ||||||||||||||||||||
Deposits | 28,598 | 31,443 | 28,972 | 25,154 | 20,315 | |||||||||||||||
Federal Home Loan Bank advances | 8,289 | 9,081 | 9,068 | 8,996 | 9,539 | |||||||||||||||
Securities sold under repurchase agreements | 16 | 18 | 25 | 47 | 211 | |||||||||||||||
Notes payable and other interest-bearing liabilities | 2,357 | 2,362 | 2,383 | 2,385 | 2,356 | |||||||||||||||
Total interest expense | 39,260 | 42,904 | 40,448 | 36,582 | 32,421 | |||||||||||||||
Net interest income | 64,780 | 67,808 | 70,682 | 71,192 | 72,764 | |||||||||||||||
(Reversal of) provision for loan and lease losses | (1,987 | ) | 2,512 | 6,653 | 1,410 | 2,653 | ||||||||||||||
Net interest income after provision for loan and lease losses | 66,767 | 65,296 | 64,029 | 69,782 | 70,111 | |||||||||||||||
Noninterest income | ||||||||||||||||||||
Customer service fees | 1,434 | 1,515 | 1,786 | 1,446 | 1,491 | |||||||||||||||
Loan servicing income | 121 | 118 | 22 | 439 | 948 | |||||||||||||||
Impairment loss on investment securities | — | — | (3,252 | ) | — | — | ||||||||||||||
Net gain on sale of securities available for sale | — | 208 | — | 13 | 278 | |||||||||||||||
Net gain on sale of loans | 2,826 | 1,553 | 873 | 279 | 821 | |||||||||||||||
All other income (loss) | (6,671 | ) | 2,901 | 3,019 | 2,647 | 4,523 | ||||||||||||||
Total noninterest income | (2,290 | ) | 6,295 | 2,448 | 4,824 | 8,061 | ||||||||||||||
Noninterest expense | ||||||||||||||||||||
Salaries and employee benefits | 27,506 | 28,439 | 24,587 | 24,832 | 29,440 | |||||||||||||||
Occupancy and equipment | 7,955 | 7,686 | 8,064 | 8,213 | 7,883 | |||||||||||||||
Professional fees (reimbursement) | (2,903 | ) | 11,041 | 6,206 | 11,966 | 6,303 | ||||||||||||||
Data processing | 1,672 | 1,496 | 1,733 | 1,884 | 1,678 | |||||||||||||||
Advertising | 2,048 | 2,057 | 3,371 | 3,152 | 2,864 | |||||||||||||||
Regulatory assessments | 2,136 | 2,482 | 1,252 | 2,138 | 2,196 | |||||||||||||||
Reversal of provision for loan repurchases | (61 | ) | (116 | ) | (122 | ) | (360 | ) | (218 | ) | ||||||||||
Amortization of intangible assets | 621 | 620 | 644 | 693 | 827 | |||||||||||||||
Restructuring (reversal) expense | (158 | ) | 2,795 | (105 | ) | 553 | 3,983 | |||||||||||||
All other expenses | 5,126 | 3,385 | 3,153 | 5,322 | 5,775 | |||||||||||||||
Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships | 43,942 | 59,885 | 48,783 | 58,393 | 60,731 | |||||||||||||||
(Gain) loss on investments in alternative energy partnerships | (355 | ) | 1,950 | 786 | 2,484 | 1,808 | ||||||||||||||
Total noninterest expense | 43,587 | 61,835 | 49,569 | 60,877 | 62,539 | |||||||||||||||
Income from continuing operations before income taxes | 20,890 | 9,756 | 16,908 | 13,729 | 15,633 | |||||||||||||||
Income tax expense | 4,308 | 2,719 | 6,117 | 3,301 | 1,779 | |||||||||||||||
Income from continuing operations | 16,582 | 7,037 | 10,791 | 10,428 | 13,854 | |||||||||||||||
Income from discontinued operations before income taxes | — | — | 347 | 924 | 1,281 | |||||||||||||||
Income tax expense | — | — | 100 | 256 | 355 | |||||||||||||||
Income from discontinued operations | — | — | 247 | 668 | 926 | |||||||||||||||
Net income | 16,582 | 7,037 | 11,038 | 11,096 | 14,780 | |||||||||||||||
Preferred stock dividends | 4,308 | 4,308 | 4,308 | 4,970 | 5,113 | |||||||||||||||
Income allocated to participating securities | 271 | — | — | — | 86 | |||||||||||||||
Participating securities dividends | 94 | 202 | 203 | 202 | 203 | |||||||||||||||
Impact of preferred stock redemption | — | — | — | 2,307 | — | |||||||||||||||
Net income available to common stockholders | $ | 11,909 | $ | 2,527 | $ | 6,527 | $ | 3,617 | $ | 9,378 | ||||||||||
Basic earnings per common share | ||||||||||||||||||||
Income from continuing operations | $ | 0.23 | $ | 0.05 | $ | 0.12 | $ | 0.06 | $ | 0.17 | ||||||||||
Income from discontinued operations | — | — | 0.01 | 0.01 | 0.02 | |||||||||||||||
Net income | $ | 0.23 | $ | 0.05 | $ | 0.13 | $ | 0.07 | $ | 0.19 | ||||||||||
Diluted earnings per common share | ||||||||||||||||||||
Income from continuing operations | $ | 0.23 | $ | 0.05 | $ | 0.12 | $ | 0.06 | $ | 0.16 | ||||||||||
Income from discontinued operations | — | — | 0.01 | 0.01 | 0.02 | |||||||||||||||
Net income | $ | 0.23 | $ | 0.05 | $ | 0.13 | $ | 0.07 | $ | 0.18 | ||||||||||
Weighted average number of common shares outstanding | ||||||||||||||||||||
Basic | 50,857,137 | 50,676,722 | 50,651,805 | 50,656,076 | 50,593,429 | |||||||||||||||
Diluted | 50,964,956 | 50,846,722 | 50,812,874 | 50,899,464 | 50,919,091 | |||||||||||||||
Dividends declared per common share | $ | 0.06 | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 | ||||||||||
Banc of California, Inc. | |||||||||||||||
Selected Financial Data | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | |||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| |||||||||||
Profitability and other ratios of consolidated operations | |||||||||||||||
Return on average assets(1) | 0.69 | % | 0.28 | % | 0.43 | % | 0.43 | % | 0.58 | % | |||||
Return on average equity(1) | 6.91 | % | 2.98 | % | 4.56 | % | 4.40 | % | 5.92 | % | |||||
Return on average tangible common equity(2) | 7.43 | % | 1.91 | % | 4.19 | % | 2.49 | % | 6.03 | % | |||||
Dividend payout ratio(3) | 26.09 | % | 260.00 | % | 100.00 | % | 185.71 | % | 68.42 | % | |||||
Net interest spread | 2.50 | % | 2.47 | % | 2.56 | % | 2.62 | % | 2.75 | % | |||||
Net interest margin(1) | 2.86 | % | 2.81 | % | 2.88 | % | 2.93 | % | 3.01 | % | |||||
Noninterest income (loss) to total revenue(4) | (3.66 | )% | 8.49 | % | 3.60 | % | 7.42 | % | 11.16 | % | |||||
Noninterest income (loss) to average total assets(1) | (0.10 | )% | 0.25 | % | 0.10 | % | 0.22 | % | 0.36 | % | |||||
Noninterest expense to average total assets(1) | 1.82 | % | 2.43 | % | 1.92 | % | 2.38 | % | 2.45 | % | |||||
Efficiency ratio(2)(5) | 69.75 | % | 83.44 | % | 67.47 | % | 79.15 | % | 76.17 | % | |||||
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(2)(5) | 67.84 | % | 83.00 | % | 67.09 | % | 77.88 | % | 73.50 | % | |||||
Average loans held-for-investment to average deposits | 104.38 | % | 100.45 | % | 97.40 | % | 97.00 | % | 98.63 | % | |||||
Average securities available-for-sale to average total assets | 13.58 | % | 17.00 | % | 19.85 | % | 21.28 | % | 22.27 | % | |||||
Average stockholders’ equity to average total assets | 10.02 | % | 9.29 | % | 9.38 | % | 9.85 | % | 9.78 | % | |||||
(1) | Ratios are presented on an annualized basis. | |
(2) | The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation. | |
(3) | The ratio is calculated by dividing dividends declared per common share by basic earnings per common share. | |
(4) | Total revenue is equal to the sum of net interest income before provision for loan and lease losses and noninterest income (loss). | |
(5) | The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for loan and lease losses and noninterest income (loss). |
Banc of California, Inc. | ||||||||||||||||||||
Selected Financial Data, Continued | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Loans and ALLL by loan origination type | ||||||||||||||||||||
Loan breakdown by origination type | ||||||||||||||||||||
Originated loans | $ | 6,181,583 | $ | 6,991,056 | $ | 7,105,171 | $ | 6,683,683 | $ | 6,446,127 | ||||||||||
Acquired loans not impaired at acquisition | 537,987 | 566,144 | 595,702 | 569,610 | 589,877 | |||||||||||||||
Total loans | $ | 6,719,570 | $ | 7,557,200 | $ | 7,700,873 | $ | 7,253,293 | $ | 7,036,004 | ||||||||||
ALLL breakdown by origination type | ||||||||||||||||||||
Originated loans | $ | 58,135 | $ | 63,003 | $ | 61,256 | $ | 56,672 | $ | 55,534 | ||||||||||
Acquired loans not impaired at acquisition | 1,388 | 882 | 937 | 1,110 | 1,144 | |||||||||||||||
Total ALLL | $ | 59,523 | $ | 63,885 | $ | 62,193 | $ | 57,782 | $ | 56,678 | ||||||||||
Discount on acquired loans not impaired at acquisition | $ | 10,680 | $ | 11,184 | $ | 11,645 | $ | 12,311 | $ | 12,932 | ||||||||||
Percentage of ALLL to: | ||||||||||||||||||||
Originated loans | 0.94 | % | 0.90 | % | 0.86 | % | 0.85 | % | 0.86 | % | ||||||||||
Originated loans and acquired loans not impaired at acquisition | 0.89 | % | 0.85 | % | 0.81 | % | 0.80 | % | 0.81 | % | ||||||||||
Total loans | 0.89 | % | 0.85 | % | 0.81 | % | 0.80 | % | 0.81 | % | ||||||||||
Banc of California, Inc. | |||||||||||||||||||||||||||||
Average Balance, Average Yield Earned, and Average Cost Paid | |||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||
June 30, 2019 | March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||
Average | Yield | Average | Yield | Average | Yield | ||||||||||||||||||||||||
Balance | Interest | / Cost | Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||||||||||||||
Interest earning assets | |||||||||||||||||||||||||||||
Loans held-for-sale (1) | $ | 47,233 | $ | 265 | 2.25 | % | $ | 31,374 | $ | 228 | 2.95 | % | $ | 33,243 | $ | 221 | 2.64 | % | |||||||||||
SFR mortgage | 2,059,704 | 21,390 | 4.17 | % | 2,312,900 | 24,062 | 4.22 | % | 2,260,205 | 23,585 | 4.14 | % | |||||||||||||||||
Commercial real estate, multifamily, and construction | 3,406,672 | 39,659 | 4.67 | % | 3,387,698 | 38,117 | 4.56 | % | 3,246,860 | 37,403 | 4.57 | % | |||||||||||||||||
Commercial and industrial, SBA, and lease financing | 1,872,289 | 26,940 | 5.77 | % | 1,920,220 | 27,235 | 5.75 | % | 1,791,708 | 26,219 | 5.81 | % | |||||||||||||||||
Other consumer | 59,806 | 905 | 6.07 | % | 62,558 | 916 | 5.94 | % | 68,479 | 990 | 5.74 | % | |||||||||||||||||
Gross loans and leases | 7,445,704 | 89,159 | 4.80 | % | 7,714,750 | 90,558 | 4.76 | % | 7,400,495 | 88,418 | 4.74 | % | |||||||||||||||||
Securities | 1,304,876 | 12,457 | 3.83 | % | 1,751,509 | 17,841 | 4.13 | % | 2,032,632 | 19,882 | 3.88 | % | |||||||||||||||||
Other interest-earning assets | 342,908 | 2,424 | 2.84 | % | 321,823 | 2,313 | 2.91 | % | 318,419 | 2,990 | 3.73 | % | |||||||||||||||||
Total interest-earning assets | 9,093,488 | 104,040 | 4.59 | % | 9,788,082 | 110,712 | 4.59 | % | 9,751,546 | 111,290 | 4.53 | % | |||||||||||||||||
Allowance for loan losses | (63,046 | ) | (61,924 | ) | (58,099 | ) | |||||||||||||||||||||||
BOLI and non-interest earning assets | 580,133 | 575,559 | 544,302 | ||||||||||||||||||||||||||
Total assets | $ | 9,610,575 | $ | 10,301,717 | $ | 10,237,749 | |||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||
Savings | $ | 1,083,571 | $ | 4,950 | 1.83 | % | $ | 1,201,802 | $ | 5,480 | 1.85 | % | $ | 1,279,155 | $ | 5,663 | 1.76 | % | |||||||||||
Interest-bearing checking | 1,580,165 | 4,554 | 1.16 | % | 1,554,846 | 4,525 | 1.18 | % | 1,666,884 | 4,916 | 1.17 | % | |||||||||||||||||
Money market | 853,007 | 3,902 | 1.83 | % | 887,538 | 4,128 | 1.89 | % | 803,157 | 3,168 | 1.56 | % | |||||||||||||||||
Certificates of deposit | 2,537,060 | 15,192 | 2.40 | % | 2,982,980 | 17,310 | 2.35 | % | 2,759,665 | 15,225 | 2.19 | % | |||||||||||||||||
Total interest-bearing deposits | 6,053,803 | 28,598 | 1.89 | % | 6,627,166 | 31,443 | 1.92 | % | 6,508,861 | 28,972 | 1.77 | % | |||||||||||||||||
FHLB advances | 1,287,121 | 8,289 | 2.58 | % | 1,422,100 | 9,081 | 2.59 | % | 1,447,348 | 9,068 | 2.49 | % | |||||||||||||||||
Securities sold under repurchase agreements | 2,173 | 16 | 2.95 | % | 2,350 | 18 | 3.11 | % | 3,116 | 25 | 3.18 | % | |||||||||||||||||
Long-term debt and other interest-bearing liabilities | 174,161 | 2,357 | 5.43 | % | 174,230 | 2,362 | 5.50 | % | 174,281 | 2,383 | 5.42 | % | |||||||||||||||||
Total interest-bearing liabilities | 7,517,258 | 39,260 | 2.09 | % | 8,225,846 | 42,904 | 2.12 | % | 8,133,606 | 40,448 | 1.97 | % | |||||||||||||||||
Noninterest-bearing deposits | 1,034,205 | 1,021,741 | 1,054,790 | ||||||||||||||||||||||||||
Non-interest-bearing liabilities | 96,179 | 97,430 | 89,111 | ||||||||||||||||||||||||||
Total liabilities | 8,647,642 | 9,345,017 | 9,277,507 | ||||||||||||||||||||||||||
Total stockholders’ equity | 962,933 | 956,700 | 960,242 | ||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 9,610,575 | $ | 10,301,717 | $ | 10,237,749 | |||||||||||||||||||||||
Net interest income/spread | $ | 64,780 | 2.50 | % | $ | 67,808 | 2.47 | % | $ | 70,842 | 2.56 | % | |||||||||||||||||
Net interest margin | 2.86 | % | 2.81 | % | 2.88 | % | |||||||||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 120.97 | % | 118.99 | % | 119.89 | % | |||||||||||||||||||||||
Total deposits | $ | 7,088,008 | $ | 28,598 | 1.62 | % | $ | 7,648,907 | $ | 31,443 | 1.67 | % | $ | 7,563,651 | $ | 28,972 | 1.52 | % | |||||||||||
Total funding (2) | $ | 8,551,463 | $ | 39,260 | 1.84 | % | $ | 9,247,587 | $ | 42,904 | 1.88 | % | $ | 9,188,396 | $ | 40,448 | 1.75 | % | |||||||||||
(1) | Includes loans held-for-sale of discontinued operations for the three months ended December 31, 2018. | ||
(2) | Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding. | ||
Three Months Ended | ||||||||||||||||||||
September 30, 2018 | June 30, 2018 | |||||||||||||||||||
Average | Yield | Average | Yield | |||||||||||||||||
Balance | Interest | / Cost | Balance | Interest | / Cost | |||||||||||||||
Interest earning assets | ||||||||||||||||||||
Loans held-for-sale (1) | $ | 42,754 | $ | 263 | 2.44 | % | $ | 54,791 | $ | 328 | 2.40 | % | ||||||||
SFR mortgage | 2,222,602 | 23,461 | 4.19 | % | 2,223,608 | 22,790 | 4.11 | % | ||||||||||||
Commercial real estate, multifamily, and construction | 3,091,706 | 35,838 | 4.60 | % | 2,989,014 | 33,736 | 4.53 | % | ||||||||||||
Commercial and industrial, SBA, and lease financing | 1,739,711 | 24,382 | 5.56 | % | 1,707,478 | 23,664 | 5.56 | % | ||||||||||||
Other consumer | 69,600 | 981 | 5.59 | % | 80,188 | 978 | 4.89 | % | ||||||||||||
Gross loans and leases | 7,166,373 | 84,925 | 4.70 | % | 7,055,079 | 81,496 | 4.63 | % | ||||||||||||
Securities | 2,163,037 | 20,599 | 3.78 | % | 2,279,416 | 21,455 | 3.78 | % | ||||||||||||
Other interest-earning assets | 335,160 | 2,380 | 2.82 | % | 392,342 | 2,423 | 2.48 | % | ||||||||||||
Total interest-earning assets | 9,664,570 | 107,904 | 4.43 | % | 9,726,837 | 105,374 | 4.35 | % | ||||||||||||
Allowance for loan losses | (56,730 | ) | (54,903 | ) | ||||||||||||||||
BOLI and non-interest earning assets | 554,636 | 565,224 | ||||||||||||||||||
Total assets | $ | 10,162,476 | $ | 10,237,158 | ||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||
Savings | 1,231,696 | 5,122 | 1.65 | % | 1,055,693 | 3,886 | 1.48 | % | ||||||||||||
Interest-bearing checking | 1,789,679 | 5,054 | 1.12 | % | 1,822,856 | 4,182 | 0.92 | % | ||||||||||||
Money market | 966,165 | 3,455 | 1.42 | % | 1,134,280 | 3,689 | 1.30 | % | ||||||||||||
Certificates of deposit | 2,332,181 | 11,523 | 1.96 | % | 2,079,932 | 8,558 | 1.65 | % | ||||||||||||
Total interest-bearing deposits | 6,319,721 | 25,154 | 1.58 | % | 6,092,761 | 20,315 | 1.34 | % | ||||||||||||
FHLB advances | 1,528,674 | 8,996 | 2.33 | % | 1,827,307 | 9,539 | 2.09 | % | ||||||||||||
Securities sold under repurchase agreements | 6,418 | 47 | 2.91 | % | 29,907 | 211 | 2.83 | % | ||||||||||||
Long-term debt and other interest-bearing liabilities | 174,361 | 2,385 | 5.43 | % | 174,296 | 2,356 | 5.42 | % | ||||||||||||
Total interest-bearing liabilities | 8,029,174 | 36,582 | 1.81 | % | 8,124,271 | 32,421 | 1.60 | % | ||||||||||||
Noninterest-bearing deposits | 1,023,890 | 1,004,502 | ||||||||||||||||||
Non-interest-bearing liabilities | 108,593 | 107,529 | ||||||||||||||||||
Total liabilities | 9,161,657 | 9,236,302 | ||||||||||||||||||
Total stockholders’ equity | 1,000,819 | 1,000,856 | ||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 10,162,476 | $ | 10,237,158 | ||||||||||||||||
Net interest income/spread | $ | 71,322 | 2.62 | % | $ | 72,953 | 2.75 | % | ||||||||||||
Net interest margin | 2.93 | % | 3.01 | % | ||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities | 120.37 | % | 119.73 | % | ||||||||||||||||
Total deposits | $ | 7,343,611 | $ | 25,154 | 1.36 | % | $ | 7,097,263 | $ | 20,315 | 1.15 | % | ||||||||
Total funding (2) | $ | 9,053,064 | $ | 36,582 | 1.60 | % | $ | 9,128,773 | $ | 32,421 | 1.42 | % | ||||||||
(1) | Includes loans held-for-sale of discontinued operations. | |
(2) | Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding. |
Banc of California, Inc.
Consolidated Operations
Non-GAAP Measures
(Dollars in thousands, except per share data)
(Unaudited)
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.
Return on average tangible common equity and efficiency ratio, as adjusted, tangible common equity to tangible assets, and tangible common equity per common share constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.
Tangible common equity is calculated by subtracting preferred stock, goodwill, and other intangible assets from stockholders' equity. Tangible assets is calculated by subtracting goodwill and other intangible assets from total assets. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
Adjusted efficiency ratio is calculated by subtracting loss on investments in alternative energy partnerships from noninterest expense and adding total pre-tax return, which includes the loss on investments in alternative energy partnerships, to the sum of net interest income and noninterest income (total revenue). Management believes the presentation o these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the final results and operating performance of the Company.
This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Tangible common equity, and 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 | ) | (37,144 | ) | (37,144 | ) | (37,144 | ) | (37,144 | ) | ||||||||||
Less other intangible assets | (5,105 | ) | (5,726 | ) | (6,346 | ) | (6,990 | ) | (7,683 | ) | ||||||||||
Tangible assets(1) | $ | 9,317,682 | $ | 9,843,655 | $ | 10,586,577 | $ | 10,216,688 | $ | 10,274,453 | ||||||||||
Total stockholders' equity | $ | 963,544 | $ | 948,325 | $ | 945,534 | $ | 946,678 | $ | 988,688 | ||||||||||
Less goodwill | (37,144 | ) | (37,144 | ) | (37,144 | ) | (37,144 | ) | (37,144 | ) | ||||||||||
Less other intangible assets | (5,105 | ) | (5,726 | ) | (6,346 | ) | (6,990 | ) | (7,683 | ) | ||||||||||
Tangible equity(1) | 921,295 | 905,455 | 902,044 | 902,544 | 943,861 | |||||||||||||||
Less preferred stock | (231,128 | ) | (231,128 | ) | (231,128 | ) | (231,128 | ) | (269,071 | ) | ||||||||||
Tangible common equity(1) | $ | 690,167 | $ | 674,327 | $ | 670,916 | $ | 671,416 | $ | 674,790 | ||||||||||
Total stockholders' equity to total assets | 10.29 | % | 9.59 | % | 8.89 | % | 9.23 | % | 9.58 | % | ||||||||||
Tangible equity to tangible assets(1) | 9.89 | % | 9.20 | % | 8.52 | % | 8.83 | % | 9.19 | % | ||||||||||
Tangible common equity to tangible assets(1) | 7.41 | % | 6.85 | % | 6.34 | % | 6.57 | % | 6.57 | % | ||||||||||
Common shares outstanding | 50,397,769 | 50,315,490 | 50,172,018 | 50,180,607 | 50,142,955 | |||||||||||||||
Class B non-voting non-convertible common shares outstanding | 477,321 | 477,321 | 477,321 | 477,321 | 403,778 | |||||||||||||||
Total common shares outstanding | 50,875,090 | 50,792,811 | 50,649,339 | 50,657,928 | 50,546,733 | |||||||||||||||
Tangible common equity per common share(1) | $ | 13.57 | $ | 13.28 | $ | 13.25 | $ | 13.25 | $ | 13.35 | ||||||||||
Book value per common share | $ | 14.40 | $ | 14.12 | $ | 14.10 | $ | 14.13 | $ | 14.24 | ||||||||||
(1) | NonGAAP measure. |
Banc of California, Inc. | ||||||||||||||||||||
Consolidated Operations | ||||||||||||||||||||
Non-GAAP Measures, Continued | ||||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
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 | ) | (269,071 | ) | ||||||||||
Less average goodwill | (37,144 | ) | (37,144 | ) | (37,144 | ) | (37,144 | ) | (37,144 | ) | ||||||||||
Less average other intangible assets | (5,503 | ) | (6,128 | ) | (6,731 | ) | (7,412 | ) | (8,110 | ) | ||||||||||
Average tangible common equity(1) | $ | 689,158 | $ | 682,300 | $ | 685,239 | $ | 695,441 | $ | 686,531 | ||||||||||
Net income | $ | 16,582 | $ | 7,037 | $ | 11,038 | $ | 11,096 | $ | 14,780 | ||||||||||
Less preferred stock dividends and impact of preferred stock redemption | (4,308 | ) | (4,308 | ) | (4,308 | ) | (7,277 | ) | (5,113 | ) | ||||||||||
Add amortization of intangible assets | 621 | 620 | 644 | 693 | 827 | |||||||||||||||
Add impairment on intangible assets | — | — | — | — | — | |||||||||||||||
Less tax effect on amortization and impairment of intangible assets | (130 | ) | (130 | ) | (135 | ) | (146 | ) | (174 | ) | ||||||||||
Net income available to common stockholders(1) | $ | 12,765 | $ | 3,219 | $ | 7,239 | $ | 4,366 | $ | 10,320 | ||||||||||
Return on average equity | 6.91 | % | 2.98 | % | 4.56 | % | 4.40 | % | 5.92 | % | ||||||||||
Return on average tangible common equity(1) | 7.43 | % | 1.91 | % | 4.19 | % | 2.49 | % | 6.03 | % | ||||||||||
Statutory tax rate utilized for calculating tax effect on amortization and impairment of intangible assets | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | ||||||||||
Three Months Ended | ||||||||||||||||||||
June 30,
| March 31,
| December 31,
| September 30,
| June 30,
| ||||||||||||||||
Adjusted efficiency ratio including the pre-tax effect of
| ||||||||||||||||||||
Noninterest expense | $ | 43,587 | $ | 61,835 | $ | 49,578 | $ | 60,977 | $ | 62,554 | ||||||||||
Gain (loss) on investments in alternative energy partnerships | 355 | (1,950 | ) | (786 | ) | (2,484 | ) | (1,808 | ) | |||||||||||
Adjusted noninterest expense(1) | $ | 43,942 | $ | 59,885 | $ | 48,792 | $ | 58,493 | $ | 60,746 | ||||||||||
Net interest income | $ | 64,780 | $ | 67,808 | $ | 70,842 | $ | 71,322 | $ | 72,953 | ||||||||||
Noninterest income | (2,290 | ) | 6,295 | 2,644 | 5,718 | 9,168 | ||||||||||||||
Total revenue | 62,490 | 74,103 | 73,486 | 77,040 | 82,121 | |||||||||||||||
Tax credit from investments in alternative energy partnerships | 1,680 | — | — | 412 | 1,912 | |||||||||||||||
Deferred tax expense on investments in alternative energy partnerships | (176 | ) | — | — | (43 | ) | (211 | ) | ||||||||||||
Tax effect on tax credit and deferred tax expense | 426 | — | 26 | 180 | 631 | |||||||||||||||
Gain (loss) on investments in alternative energy partnerships | 355 | (1,950 | ) | (786 | ) | (2,484 | ) | (1,808 | ) | |||||||||||
Total pre-tax adjustments for investments in alternative energy partnerships | 2,285 | (1,950 | ) | (760 | ) | (1,935 | ) | 524 | ||||||||||||
Adjusted total revenue(1) | $ | 64,775 | $ | 72,153 | $ | 72,726 | $ | 75,105 | $ | 82,645 | ||||||||||
Efficiency ratio(1) | 69.75 | % | 83.44 | % | 67.47 | % | 79.15 | % | 76.17 | % | ||||||||||
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(1) | 67.84 | % | 83.00 | % | 67.09 | % | 77.88 | % | 73.50 | % | ||||||||||
Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense | 22.07 | % | 27.00 | % | 27.42 | % | 32.81 | % | 27.07 | % | ||||||||||
(1) | NonGAAP measure. |
Banc of California, Inc. | ||||||||||||
Consolidated Operations | ||||||||||||
Non-GAAP Measures, Continued | ||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
(Unaudited) | ||||||||||||
Noninterest Expense | Q2 2019 non-core
| Q2 Core Operating
| ||||||||||
Salaries and employee benefits | $ | 27,506 | $ | — | $ | 27,506 | ||||||
Occupancy and equipment | 7,955 | (797 | ) | 7,158 | ||||||||
Professional fees (reimbursement) | (2,903 | ) | 6,214 | 3,311 | ||||||||
Data processing | 1,672 | — | 1,672 | |||||||||
Advertising | 2,048 | — | 2,048 | |||||||||
Regulatory assessments | 2,136 | — | 2,136 | |||||||||
Reversal of provision for loan repurchases | (61 | ) | — | (61 | ) | |||||||
Amortization of intangible assets | 621 | — | 621 | |||||||||
Restructuring (reversal) expense | (158 | ) | 158 | — | ||||||||
All other expenses | 5,126 | — | 5,126 | |||||||||
Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships | 43,942 | 5,575 | 49,517 | |||||||||
(Gain) loss on investments in alternative energy partnerships | (355 | ) | — | (355 | ) | |||||||
Total noninterest expense | $ | 43,587 | $ | 5,575 | $ | 49,162 | ||||||
(1) | Non-GAAP measure. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190725005338/en/
Contacts:
Banc of California, Inc.
John A. Bogler, (855) 361-2262
