Banc of California Reports Net Income of $42.6 million, with Stable Deposit Mix and Improved Net Interest Margin in Third Quarter 2023 Financial Results

Banc of California, Inc. (NYSE: BANC) (“Banc of California”) today reported net income of $42.6 million, or $0.74 per diluted common share, for the third quarter of 2023. This compares to net income of $17.9 million, or $0.31 per diluted common share for the second quarter of 2023. On an adjusted basis, net income was $17.1 million for the quarter, or $0.30 per diluted common share.(1) This compares to adjusted net income of $18.4 million, or $0.32 per diluted common share, for the second quarter of 2023.(1) The third quarter of 2023 included a $46.2 million pre-tax mark-to-market gain on derivative instruments used to hedge the interest rate risk associated with various assets on the Company’s balance sheet, in anticipation of the anticipated sale of such assets in connection with the proposed merger with PacWest Bancorp (“PacWest”). The gain was partly offset by $9.3 million of other transaction costs.

Third quarter highlights:

  • Net income of $42.6 million, or $0.74 per diluted common share, up 138% from the prior quarter as the bank strategically positioned the balance sheet ahead of the merger, which included a $46.2 million gain from derivative instruments, partly offset by $9.3 million of transaction costs.
  • Stable overall deposit mix, with the period-end noninterest-bearing deposit percentage consistent with the prior quarter at 36% of total deposits.
  • Addition of new clients with noninterest-bearing deposits, which contributed inflows of $52.2 million in the quarter and $201.5 million year-to-date.
  • Net interest margin improvement of 8 basis points from 3.11% to 3.19% in comparison to the prior quarter, as the increase in the yield on loans and securities exceeded the increase in the cost of funds.
  • Disciplined noninterest expense management, with total noninterest expense of $56.2 million reflecting an increase of $7.0 million over the prior quarter. Excluding the impact of $9.3 million of merger-related expenses, adjusted noninterest expense(1) decreased $2.2 million to $46.2 million for the third quarter.
  • High liquidity levels, with immediately available on-balance sheet liquidity and unused borrowing capacity of $3.67 billion. Available liquidity was 2.1 times the level of uninsured and uncollateralized deposits, which was consistent with the prior quarter.
  • Strong capital ratios(2) well above the regulatory thresholds for "well capitalized" banks, including an estimated 14.48% Total risk-based capital ratio, 12.19% Tier 1 capital ratio, 12.19% CET1 capital ratio and 10.15% Tier 1 leverage ratio.
  • Low unrealized losses relative to capital, with AFS unrealized pre-tax losses of $51.9 million on securities of $915.1 million, representing 3.9% of CET1 capital. Total AFS and HTM unrealized pre-tax losses of $129.9 million on total securities of $1.24 billion represented 9.8% of CET1 capital.
  • Continued growth in book value and tangible book value, with book value per share of $17.44, up from $16.67, and tangible book value per share of $15.34, up from $14.56.(1)

(1)

Non-GAAP measures; refer to section 'Non-GAAP Measures'

(2)

Capital ratios are preliminary.

Jared Wolff, Chairman, President & CEO of Banc of California, commented, "Our third quarter results reflect the impact of our strategic approach to positioning our balance sheet ahead of our merger with PacWest, continuing to bring new relationships to the bank, limiting reliance on high cost deposits, effectively hedging interest rate risk on our balance sheet, and accelerating the resolution of certain acquired credits. Due in large part to this strategic approach, we generated net income of $42.6 million during the quarter, which resulted in increases in all of our capital ratios, a 4.6% increase in our book value per share and a 5.4% increase in our tangible book value per share. We also continue to be active in our new business development efforts with $201.5 million in noninterest-bearing deposits added from new commercial relationships year-to-date.”

Mr. Wolff continued, “As announced last week, we are very pleased to have received regulatory approval for the merger. We expect to close the merger on or about November 30, 2023. We remain focused on our overall strategy for the combined company which includes a strong, liquid balance sheet with strong credit, ample reserves and capital, and growth centered around relationship banking and high quality commercial clients. Our two organizations have made significant progress on our integration planning that will enable our combined institution post-closing to immediately focus on the strategic market opportunities presented by our merger, generate long-term profitable growth, and further enhance the value of our franchise.”

Proposed Merger with PacWest

On July 25, 2023, we announced the signing of a definitive agreement with PacWest pursuant to which the companies will combine in an all-stock merger transaction. Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, PacWest will merge into Banc of California, and Banc of California, N.A. will merge into Pacific Western Bank (together, the “Merger”). The combined holding company and bank will operate under the Banc of California name and brand following closing of the Merger. Under the terms of the merger agreement, PacWest stockholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock. On October 19, 2023, we announced that the Board of Governors of the Federal Reserve System granted its approval of the Merger. In addition, on October 5, 2023, the California Department of Financial Protection and Innovation granted its approval of the merger of Banc of California, N.A. and Pacific Western Bank. No further regulatory approvals are required to complete the proposed transaction. Banc of California and PacWest will each hold a special meeting of its respective stockholders in connection with the Merger on November 22, 2023. The consummation of the proposed transaction is expected to close on or about November 30, 2023, subject to the satisfaction of the remaining closing conditions set forth in the merger agreement, including receipt of the requisite stockholder approvals, and the concurrent closing of a $400 million equity capital raise.

We are monitoring the economic environment and its impact on the projected combined company’s opening day and post-restructuring balance sheets and the combined company’s projected performance in future periods as compared to the estimates and projections set forth in the Investor Presentation dated July 25, 2023 (the “Investor Presentation”).

After considering developments occurring subsequent to the issuance of the Investor Presentation, including the volatility and changes in the interest rate environment, the relative performance of the two companies, the potential impacts on the opening day and post-restructuring balance sheets, and refinements to many of the assumptions and estimates used in the creation of projections included in the Investor Presentation, we are not aware of any material changes to the projected 2024 EPS range or CET1 regulatory capital levels for the combined company as stated in the Investor Presentation.

The recent volatility and resulting increase in longer term (7 and 10-year) interest rates decreased the current valuation of PacWest’s portfolio of available-for-sale securities which, with the corresponding increase in unrealized losses included in accumulated other comprehensive income (AOCI), reduced PacWest’s tangible book value. If these conditions persist through the closing date of the merger, there would be a corresponding decrease in the opening day tangible book value of the combined company as compared to the projections included in the Investor Presentation. In addition, PacWest’s third quarter 2023 net income was lower than forecasted in the estimates set forth in the Investor Presentation, which could also negatively impact the opening day tangible book value of the combined company. The noninterest-bearing deposit percentage at PacWest has decreased from the projections used in the Investor Presentation, which could impact the percentage of noninterest-bearing deposits forecasted in the opening day and the post-restructuring balance sheets.

The economic environment remains dynamic with heightened levels of volatility in interest rates, market levels and potentially other economic impacts. Accordingly, we will continue to monitor the effects of these and other potential impacts on the financial projections and estimates included in the Investor Presentation.

Income Statement Highlights

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

 

($ in thousands)

Total interest and dividend income

$

116,222

 

$

116,151

 

$

106,919

 

 

$

104,112

 

 

$

95,973

 

$

339,292

 

$

268,660

 

Total interest expense

 

47,004

 

 

46,519

 

 

33,866

 

 

 

23,895

 

 

 

16,565

 

 

127,389

 

 

34,512

 

Net interest income

 

69,218

 

 

69,632

 

 

73,053

 

 

 

80,217

 

 

 

79,408

 

 

211,903

 

 

234,148

 

Net (loss) gain on sale of securities available for sale

 

 

 

 

 

 

 

 

(7,708

)

 

 

 

 

 

 

16

 

Change in fair value of derivative instruments(1)

 

46,186

 

 

10

 

 

(24

)

 

 

(8

)

 

 

39

 

 

46,172

 

 

224

 

Other noninterest income

 

4,592

 

 

6,014

 

 

7,883

 

 

 

6,289

 

 

 

5,642

 

 

18,489

 

 

18,537

 

Total noninterest income

 

50,778

 

 

6,024

 

 

7,859

 

 

 

(1,427

)

 

 

5,681

 

 

64,661

 

 

18,777

 

Total revenue

 

119,996

 

 

75,656

 

 

80,912

 

 

 

78,790

 

 

 

85,089

 

 

276,564

 

 

252,925

 

Acquisition, integration and transaction costs

 

9,329

 

 

 

 

 

 

 

 

 

 

2,080

 

 

9,329

 

 

2,080

 

Other noninterest expense

 

46,835

 

 

49,132

 

 

51,239

 

 

 

48,203

 

 

 

48,882

 

 

147,206

 

 

144,090

 

Total noninterest expense

 

56,164

 

 

49,132

 

 

51,239

 

 

 

48,203

 

 

 

50,962

 

 

156,535

 

 

146,170

 

Pre-tax / pre-provision income(2)

 

63,832

 

 

26,524

 

 

29,673

 

 

 

30,587

 

 

 

34,127

 

 

120,029

 

 

106,755

 

Provision for (reversal of) credit losses

 

5,000

 

 

1,900

 

 

2,000

 

 

 

 

 

 

 

 

8,900

 

 

(31,542

)

Income tax expense

 

16,258

 

 

6,745

 

 

7,395

 

 

 

9,068

 

 

 

9,931

 

 

30,398

 

 

38,877

 

Net income

$

42,574

 

$

17,879

 

$

20,278

 

 

$

21,519

 

 

$

24,196

 

$

80,731

 

$

99,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders(3)

$

42,574

 

$

17,879

 

$

20,278

 

 

$

21,519

 

 

$

24,196

 

$

80,731

 

$

94,253

 

(1)

For the three and nine months ended September 30, 2023, balance includes a $46.2 million pre-tax mark-to-market gain on derivative instruments, including interest rate swaptions and a contingent forward sale agreement on the single family residential (SFR) loan portfolio executed concurrently with the announcement of the proposed merger with PacWest

(2)

Non-GAAP Measure; refer to section 'Non-GAAP Measures'

(3)

For the nine months ended September 30, 2022, balance represents the net income available to common stockholders after subtracting preferred stock dividends and the impact of preferred stock redemption from net income. Refer to the Statements of Operations for additional detail on these amounts.

Net interest income

Q3-2023 vs Q2-2023

Net interest income decreased $0.4 million, or 0.6%, to $69.2 million for the third quarter primarily due to lower average interest-earning assets partially offset by net interest margin expansion.

Average interest-earning assets of $8.61 billion decreased $360.4 million from the prior quarter as the Company used cash to pay down FHLB borrowings and other liabilities reducing the excess liquidity that was carried in the prior quarter. The net interest margin increased 8 basis points to 3.19% for the third quarter as average interest-earning assets yield increased 16 basis points while the average cost of funds increased 9 basis points.

The yield on average interest-earning assets increased 16 basis points to 5.36% for the third quarter from 5.20% in the second quarter mainly due to higher yields on loans, securities and other interest-earning assets. The yield on average loans increased 10 basis points to 5.38% during the third quarter as a result of higher market interest rates and changes in portfolio mix from originations and payoffs. The yield on average investment securities increased 34 basis points to 5.17% due mainly to rate resets in the collateralized loan obligations (CLO) portfolio.

The average cost of funds increased 9 basis points to 2.29% for the third quarter from 2.20% in the second quarter due mainly to higher market interest rates and changes in the balance sheet mix. The average cost of total deposits increased 19 basis points to 1.86% for the third quarter compared to 1.67% in the second quarter. The average cost of interest-bearing liabilities increased 13 basis points to 3.21% for the third quarter from 3.08% in the second quarter. Average noninterest-bearing deposits decreased $80.5 million for the third quarter compared to the second quarter and average total deposits decreased $83.2 million.

YTD 2023 vs YTD 2022

Net interest income decreased $22.2 million, or 9.5%, to $211.9 million for the nine months ended September 30, 2023 from the same period in 2022 due primarily to higher funding costs from higher market interest rates, changes in the balance sheet mix, and the enhanced liquidity management strategies in the first half of 2023 due to the operating environment.

The net interest margin decreased 32 basis points to 3.24% as the average cost of funds increased 150 basis points while the average interest-earning assets yield increased 110 basis points.

The yield on average interest-earning assets increased 110 basis points to 5.18% for the nine months ended September 30, 2023 from 4.08% for the same period in 2022 due mainly to higher market interest rates and changes in the mix of interest-earning assets. The yield on average loans increased 86 basis points to 5.24% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The yield on average investment securities increased 211 basis points to 4.89% for the same period. Average loans represented 80% of average earnings assets for the nine months ended September 30, 2023 compared to 83% for the nine months ended September 30, 2022. Average loans decreased by $248.1 million due mainly to lower average warehouse balances, partially offset by organic loan growth in other loan categories.

The average cost of funds increased 150 basis points to 2.06% for the nine months ended September 30, 2023 from 0.56% for the nine months ended September 30, 2022 due mainly to higher market interest rates and changes in the balance sheet mix. The average cost of total deposits increased 134 basis points to 1.58% for the nine months ended September 30, 2023 compared to the same period in 2022. The average cost of interest-bearing liabilities increased 209 basis points to 2.93% for the nine months ended September 30, 2023 compared to 0.84% for the same period in 2022 driven primarily by a 210 basis point increase in the cost of average interest-bearing deposits to 2.49% from 0.39% for the same period in 2022. The increase in the cost of these funding sources was mainly due to the impact of higher market interest rates as the average effective Federal Funds rate increased 389 basis points to 4.92% for the nine months ended September 30, 2023 from 1.03% in the same period in 2022. Average noninterest-bearing deposits decreased $356.8 million for the nine months ended September 30, 2023 compared to the same period in 2022 and average total deposits decreased $670.7 million. Average noninterest-bearing deposits represented 36% of total average deposits for the nine months ended September 30, 2023 compared to 38% for the same period in 2022.

Provision for credit losses

Q3-2023 vs Q2-2023

The provision for credit losses was $5.0 million for the third quarter and related entirely to the provision for loan losses which was driven primarily by net charge-offs of legacy loans from the acquisition of Pacific Mercantile Bank. The provision for credit losses was $1.9 million for the second quarter and included a $1.7 million provision for loan losses and a $1.0 million provision for credit loss for securities available-for-sale, partially offset by an $0.8 million reversal of the provision for credit losses related to lower unfunded commitments.

YTD 2023 vs YTD 2022

During the nine months ended September 30, 2023, the provision for credit losses was $8.9 million and included a $9.2 million provision for loan losses and a $1.0 million provision for credit loss for securities available-for-sale, partially offset by a $1.3 million reversal of the provision for credit losses related to lower unfunded commitments. The provision for credit losses was a reversal of $31.5 million during the nine months ended September 30, 2022, and included a $31.3 million recovery from the settlement of a loan previously charged-off in 2019.

Noninterest income

Q3-2023 vs Q2-2023

Noninterest income increased $44.8 million to $50.8 million for the third quarter primarily due to a $46.2 million mark-to-market gain recognized on derivative instruments, partially offset by a $1.7 million decrease in income from equity investments. Concurrently with the announcement of the proposed merger with PacWest, we entered into an aggregate of $3.1 billion in interest rate swaptions and a contingent forward sale agreement on the SFR loan portfolio of $1.8 billion to hedge the interest rate risk component of the change in fair value of our balance sheet in anticipation of the application of purchase accounting upon the closing of the proposed merger transaction with PacWest. These derivatives were marked to market at the end of the period and reflected an increase in value from the changes in market interest rates.

YTD 2023 vs YTD 2022

Noninterest income for the nine months ended September 30, 2023 increased $45.9 million to $64.7 million compared to the same period in 2022 mainly due to the $46.2 million market-to-market gain recognized on derivative instruments, higher loan servicing income from higher purchased mortgage servicing asset balances and higher rental income due to an increase in subleased facilities, partially offset by lower customer service fees.

Noninterest expense

Q3-2023 vs Q2-2023

Noninterest expense increased $7.0 million to $56.2 million for the third quarter compared to the second quarter. The increase was due mainly to acquisition, integration and transaction costs of $9.3 million incurred related to our proposed merger with PacWest, partially offset by lower salaries and employee benefits of $2.5 million.

Adjusted noninterest expense(1), which represents total operating costs, decreased $2.2 million to $46.2 million for the third quarter compared to $48.4 million for the second quarter mainly due to lower salaries and employee benefits of $2.5 million. Adjusted noninterest expense for the third quarter excludes acquisition, integration and transaction costs of $9.3 million incurred for the proposed merger with PacWest.

YTD 2023 vs YTD 2022

Noninterest expense for the nine months ended September 30, 2023 increased $10.4 million to $156.5 million compared to the same period in 2022. The increase was mainly due to higher (i) acquisition, integration and transaction costs of $7.2 million, (ii) software and technology expense of $1.6 million related to investments in technology infrastructure, (iii) regulatory assessments of $1.2 million as the FDIC increased assessment rates in 2023, (iv) marketing and other expenses of $1.0 million, and (v) professional fees of $0.9 million, including a $0.4 million increase in indemnified legal fees (net of insurance recoveries), partially offset by lower salaries and employee benefits of $1.5 million. Acquisition, integration and transactions costs related to the proposed merger with PacWest were $9.3 million for the nine months ended September 30, 2023, compared to $2.1 million related to the acquisition of Deepstack for the nine months ended September 30, 2022.

Adjusted noninterest expense(1) for the nine months ended September 30, 2023 increased $2.9 million to $143.9 million compared to the same period in 2022. The increase was mainly due to higher (i) software and technology expense of $1.6 million related to investments in technology infrastructure, (ii) regulatory assessments of $1.2 million as the FDIC increased assessment rates in 2023, (iii) marketing and other expenses of $1.0 million, and (iv) professional fees of $0.5 million, partially offset by lower salaries and employee benefits of $1.5 million. Adjusted noninterest expense excludes acquisition, integration and transactions costs, indemnified legal fees and loss in alternative energy partnership investments in both periods.

(1)

Non-GAAP measures; refer to section 'Non-GAAP Measures'

Income taxes

Q3-2023 vs Q2-2023

Income tax expense totaled $16.3 million for the third quarter resulting in an effective tax rate of 27.6% compared to $6.7 million for the second quarter and an effective tax rate of 27.4%. The effective tax rate for the full year 2023 is estimated to be 27% to 28%.

YTD 2023 vs YTD 2022

Income tax expense totaled $30.4 million for the nine months ended September 30, 2023, representing an effective tax rate of 27.4%, compared to $38.9 million and an effective tax rate of 28.1% for the nine months ended September 30, 2022.

Balance Sheet

At September 30, 2023, total assets were $9.25 billion, which represented a decrease of $123.2 million from the prior quarter. The following table shows selected balance sheet line items as of the dates indicated:

 

 

 

Amount Change

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

Q3-23 vs. Q2-23

 

Q3-23 vs. Q3-22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

Cash and cash equivalents

$

310,985

 

$

283,729

 

$

1,010,951

 

$

228,896

 

$

256,058

 

$

27,256

 

 

$

54,927

 

Securities held-to-maturity

$

328,287

 

$

328,405

 

$

328,520

 

$

328,641

 

$

328,757

 

$

(118

)

 

$

(470

)

Securities available-for-sale

$

915,054

 

$

922,091

 

$

958,427

 

$

868,297

 

$

847,565

 

$

(7,037

)

 

$

67,489

 

Loans held-for-investment

$

6,961,032

 

$

7,156,206

 

$

7,054,380

 

$

7,115,038

 

$

7,289,320

 

$

(195,174

)

 

$

(328,288

)

Total assets

$

9,247,072

 

$

9,370,265

 

$

10,038,901

 

$

9,197,016

 

$

9,368,578

 

$

(123,193

)

 

$

(121,506

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,366,544

 

$

2,446,693

 

$

2,506,616

 

$

2,809,328

 

$

2,943,585

 

$

(80,149

)

 

$

(577,041

)

Total deposits

$

6,640,630

 

$

6,871,076

 

$

6,951,974

 

$

7,120,921

 

$

7,280,385

 

$

(230,446

)

 

$

(639,755

)

Borrowings (1)

$

1,468,374

 

$

1,422,118

 

$

2,007,665

 

$

1,002,254

 

$

1,011,767

 

$

46,256

 

 

$

456,607

 

Total liabilities

$

8,245,352

 

$

8,413,211

 

$

9,079,994

 

$

8,237,398

 

$

8,416,588

 

$

(167,859

)

 

$

(171,236

)

Total equity

$

1,001,720

 

$

957,054

 

$

958,907

 

$

959,618

 

$

951,990

 

$

44,666

 

 

$

49,730

 

(1)

Represents Federal Home Loan Bank (FHLB) advances and Federal Reserve Bank (FRB) borrowings, Other borrowings, and Long-term debt, net.

Investments

Securities held-to-maturity (HTM) totaled $328.3 million at September 30, 2023 and included $214.1 million in agency securities and $114.2 million in municipal securities. As of September 30, 2023, HTM securities had aggregate unrealized net pre-tax losses of $78.0 million, of which $15.0 million related to unrealized losses from the transfer of certain fixed-rate mortgage-backed securities (MBS) and municipal securities from the available-for-sale portfolio to the HTM portfolio in the prior year. These HTM unrealized losses are related to changes in overall interest rates.

Securities available-for-sale (AFS) decreased $7.0 million during the third quarter to $915.1 million at September 30, 2023, primarily due to principal payments of $9.4 million partially offset by a reduction in unrealized net pre-tax losses of $2.2 million. The decrease in unrealized net losses was due to the impact of decreasing credit spreads within corporate debt securities and improvement in the valuation of CLOs, partially offset by the impact of higher market interest rates on agency collateralized mortgage obligations (CMOs) and non-agency residential MBS. AFS securities had aggregate unrealized net pre-tax losses of $51.9 million. These AFS unrealized net losses related primarily to changes in overall interest rates and spreads and the resulting impact on valuations of MBS, CMOs, CLOs and corporate debt securities.

As of September 30, 2023, the AFS securities portfolio included $483.8 million of CLOs, $162.7 million of agency securities, $154.9 million of corporate debt securities, $105.0 million of residential CMOs, and $8.7 million of Small Business Administration (SBA) securities. The CLO portfolio, which is comprised of AAA and AA-rated securities, represented 39% of the total securities portfolio and the carrying value included an unrealized net loss of $6.1 million at September 30, 2023, compared to 39% of the total securities portfolio and an unrealized net loss of $7.7 million at June 30, 2023.

Loans

The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

($ in thousands)

Composition of loans

 

 

 

 

 

 

 

 

 

Commercial real estate

$

1,173,332

 

 

$

1,266,438

 

 

$

1,302,277

 

 

$

1,259,651

 

 

$

1,240,927

 

Multifamily

 

1,654,272

 

 

 

1,654,152

 

 

 

1,678,300

 

 

 

1,689,943

 

 

 

1,698,455

 

Construction

 

262,715

 

 

 

264,684

 

 

 

260,167

 

 

 

243,553

 

 

 

236,495

 

Commercial and industrial

 

1,295,270

 

 

 

1,214,314

 

 

 

1,150,416

 

 

 

1,243,452

 

 

 

1,227,054

 

Commercial and industrial - warehouse lending

 

647,694

 

 

 

786,094

 

 

 

636,731

 

 

 

602,508

 

 

 

766,362

 

SBA

 

56,600

 

 

 

62,898

 

 

 

65,040

 

 

 

68,137

 

 

 

85,674

 

Total commercial loans

 

5,089,883

 

 

 

5,248,580

 

 

 

5,092,931

 

 

 

5,107,244

 

 

 

5,254,967

 

Single-family residential mortgage

 

1,782,655

 

 

 

1,820,721

 

 

 

1,877,114

 

 

 

1,920,806

 

 

 

1,947,652

 

Other consumer

 

88,494

 

 

 

86,905

 

 

 

84,335

 

 

 

86,988

 

 

 

86,701

 

Total consumer loans

 

1,871,149

 

 

 

1,907,626

 

 

 

1,961,449

 

 

 

2,007,794

 

 

 

2,034,353

 

Total gross loans

$

6,961,032

 

 

$

7,156,206

 

 

$

7,054,380

 

 

$

7,115,038

 

 

$

7,289,320

 

Composition percentage of loans

 

 

 

 

 

 

 

 

 

Commercial real estate

 

16.9

%

 

 

17.7

%

 

 

18.5

%

 

 

17.7

%

 

 

17.0

%

Multifamily

 

23.8

%

 

 

23.1

%

 

 

23.8

%

 

 

23.8

%

 

 

23.3

%

Construction

 

3.7

%

 

 

3.7

%

 

 

3.7

%

 

 

3.4

%

 

 

3.2

%

Commercial and industrial

 

18.6

%

 

 

17.0

%

 

 

16.3

%

 

 

17.5

%

 

 

16.8

%

Commercial and industrial - warehouse lending

 

9.3

%

 

 

11.0

%

 

 

9.0

%

 

 

8.4

%

 

 

10.6

%

SBA

 

0.8

%

 

 

0.9

%

 

 

0.9

%

 

 

1.0

%

 

 

1.2

%

Total commercial loans

 

73.1

%

 

 

73.4

%

 

 

72.2

%

 

 

71.8

%

 

 

72.1

%

Single-family residential mortgage

 

25.6

%

 

 

25.4

%

 

 

26.6

%

 

 

27.0

%

 

 

26.7

%

Other consumer

 

1.3

%

 

 

1.2

%

 

 

1.2

%

 

 

1.2

%

 

 

1.2

%

Total consumer loans

 

26.9

%

 

 

26.6

%

 

 

27.8

%

 

 

28.2

%

 

 

27.9

%

Total gross loans

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Total loans ended the third quarter of 2023 at $6.96 billion, down $195.2 million from $7.16 billion at June 30, 2023, primarily due to decreases in warehouse lending balances of $138.4 million, SFR loans of $38.1 million, commercial and industrial loans of $21.7 million, and SBA loans of $6.3 million, partially offset by an increase in commercial real estate (CRE) loans of $9.2 million. Additionally, $102.3 million of owner-occupied CRE loans were moved to the commercial and industrial category from the CRE category during the third quarter. Loan fundings were $266.0 million in the third quarter and were offset by loan paydowns and payoffs of $314.3 million and net warehouse paydowns of $135.3 million.

Loan concentrations were well-diversified between products and industries. Notably, the CRE portfolio of $1.17 billion had balances related to office loans of $327.6 million, which was 4.7% of total loans. This portfolio was comprised of general office loans of $256.5 million with a weighted average LTV of 53% and debt service coverage ratio of 1.6x and medical office loans of $71.2 million with a weighted average LTV of 53% and debt service coverage ratio of 1.3x.

In connection with our proposed merger with PacWest, we entered into a contingent forward sale agreement on our SFR mortgage portfolio of $1.8 billion. The contingent forward sale agreement was entered to reduce volatility related to the potential sale proceeds by determining a fixed price to be settled on a future date contingent upon completion of the proposed merger. At September 30, 2023, we continue to classify the SFR portfolio as held-for-investment as the sale agreement is contingent upon the closing of the merger with PacWest and should the merger not close for any reason, we intend to continue to hold the SFR portfolio for investment.

Deposits

The following table sets forth the composition of our deposits at the dates indicated:

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

($ in thousands)

Composition of deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

$

2,366,544

 

 

$

2,446,693

 

 

$

2,506,616

 

 

$

2,809,328

 

 

$

2,943,585

 

Interest-bearing checking

 

1,531,306

 

 

 

1,713,465

 

 

 

1,862,003

 

 

 

1,947,247

 

 

 

1,921,816

 

Savings and money market

 

1,157,126

 

 

 

1,057,326

 

 

 

998,365

 

 

 

1,174,925

 

 

 

1,478,045

 

Non-brokered certificates of deposit

 

567,111

 

 

 

579,789

 

 

 

585,272

 

 

 

584,476

 

 

 

614,569

 

Brokered certificates of deposit

 

1,018,543

 

 

 

1,073,803

 

 

 

999,718

 

 

 

604,945

 

 

 

322,370

 

Total deposits

$

6,640,630

 

 

$

6,871,076

 

 

$

6,951,974

 

 

$

7,120,921

 

 

$

7,280,385

 

Composition percentage of deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing checking

 

35.6

%

 

 

35.6

%

 

 

36.1

%

 

 

39.5

%

 

 

40.4

%

Interest-bearing checking

 

23.1

%

 

 

24.9

%

 

 

26.8

%

 

 

27.3

%

 

 

26.4

%

Savings and money market

 

17.5

%

 

 

15.4

%

 

 

14.3

%

 

 

16.5

%

 

 

20.4

%

Non-brokered certificates of deposit

 

8.5

%

 

 

8.5

%

 

 

8.4

%

 

 

8.2

%

 

 

8.4

%

Brokered certificates of deposit

 

15.3

%

 

 

15.6

%

 

 

14.4

%

 

 

8.5

%

 

 

4.4

%

Total deposits

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Total deposits decreased $230.4 million during the third quarter of 2023 to $6.64 billion at September 30, 2023, due to lower interest-bearing checking balances of $182.2 million, noninterest-bearing checking balances of $80.1 million, and certificate of deposit balances of $67.9 million, partially offset by higher savings and money market balances of $99.8 million.

Noninterest-bearing checking totaled $2.37 billion and represented 36% of total deposits at September 30, 2023, compared to $2.45 billion, or 36% of total deposits, at June 30, 2023. Period-end noninterest-bearing deposit percentage remained stable as we continued to focus on growing granular relationship-based deposits and strategically replacing short-term brokered deposits as we actively manage our funding costs.

Insured deposits of $4.57 billion and collateralized deposits of $312.5 million represented 74% of total deposits at September 30, 2023, compared to insured deposits of $4.80 billion and collateralized deposits of $314.8 million, or 74% of total deposits at June 30, 2023.

Debt

Advances from the FHLB and FRB borrowings decreased $139.7 million during the third quarter to $1.01 billion, while other borrowings increased $185.8 million due to higher unsecured overnight borrowings as we continue to actively manage our funding sources and costs.

At September 30, 2023, FHLB advances included $811.0 million in term advances with a weighted average life of 3.1 years and weighted average interest rate of 3.04%. We also utilized available capacity from the FRB through $200.0 million in short-term borrowings.

Equity

During the third quarter, total stockholders’ equity increased $44.7 million to $1.00 billion and tangible common equity(1) increased $45.1 million to $881.3 million at September 30, 2023. The increase in total stockholders’ equity for the third quarter resulted from (i) net income of $42.6 million, (ii) lower accumulated other comprehensive net loss of $6.3 million, and (iii) share-based compensation expense of $1.6 million, partially offset by dividends to common stockholders of $5.8 million.

Book value per common share increased $0.77 during the third quarter to $17.44 as of September 30, 2023 due mainly to net income and lower accumulated other comprehensive net loss, partially offset by dividends. Tangible common equity per share(1) increased $0.78 during the third quarter to $15.34 as of September 30, 2023 due to the same drivers.

(1)

Non-GAAP measures; refer to section 'Non-GAAP Measures'

Capital and Liquidity

Capital ratios remain strong with total risk-based capital at 14.48% and a tier 1 leverage ratio of 10.15% at September 30, 2023. The following table sets forth our regulatory capital ratios as of the dates indicated:

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

Capital Ratios(1)

 

 

 

 

 

 

 

 

 

Banc of California, Inc.

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

14.48%

 

14.25%

 

14.22%

 

14.18%

 

13.83%

Tier 1 risk-based capital ratio

12.19%

 

11.88%

 

11.79%

 

11.78%

 

11.41%

Common equity tier 1 capital ratio

12.19%

 

11.88%

 

11.79%

 

11.78%

 

11.41%

Tier 1 leverage ratio

10.15%

 

9.39%

 

9.65%

 

9.70%

 

9.52%

Banc of California, NA

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

15.97%

 

15.64%

 

15.93%

 

16.00%

 

15.67%

Tier 1 risk-based capital ratio

15.00%

 

14.60%

 

14.83%

 

14.92%

 

14.54%

Common equity tier 1 capital ratio

15.00%

 

14.60%

 

14.83%

 

14.92%

 

14.54%

Tier 1 leverage ratio(2)

12.47%

 

11.56%

 

12.14%

 

12.25%

 

12.12%

(1)

September 30, 2023 capital ratios are preliminary.

(2)

The interim capital relief related to the adoption of the current expected credit losses (CECL) accounting standard increased the Bank's leverage ratio by approximately 5 basis points at September 30, 2023.

At September 30, 2023, total cash and cash equivalents were $311.0 million, an increase of $27.3 million from June 30, 2023. Combined with unpledged securities available-for-sale of $717.7 million and total available borrowing capacity of $2.67 billion, total liquid assets and unused borrowing capacity of $3.67 billion was 2.1 times greater than total uninsured and uncollateralized deposits of $1.76 billion.

Credit Quality

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

Asset quality information and ratios

($ in thousands)

Delinquent loans held-for-investment

 

 

 

 

 

 

 

 

 

30 to 89 days delinquent

$

50,558

 

 

$

64,746

 

 

$

35,581

 

 

$

46,666

 

 

$

38,694

 

90+ days delinquent

 

39,692

 

 

 

40,169

 

 

 

37,060

 

 

 

44,554

 

 

 

18,843

 

Total delinquent loans

$

90,250

 

 

$

104,915

 

 

$

72,641

 

 

$

91,220

 

 

$

57,537

 

Total delinquent loans to total loans

 

1.30

%

 

 

1.47

%

 

 

1.03

%

 

 

1.28

%

 

 

0.79

%

Non-performing assets, excluding loans held-for-sale

 

 

 

 

 

 

 

 

 

Non-accrual loans

$

60,556

 

 

$

67,306

 

 

$

56,545

 

 

$

55,251

 

 

$

42,674

 

90+ days delinquent and still accruing loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-performing loans

 

60,556

 

 

 

67,306

 

 

 

56,545

 

 

 

55,251

 

 

 

42,674

 

Other real estate owned

 

882

 

 

 

882

 

 

 

 

 

 

 

 

 

 

Non-performing assets

$

61,438

 

 

$

68,188

 

 

$

56,545

 

 

$

55,251

 

 

$

42,674

 

ALL to non-performing loans

 

122.84

%

 

 

120.17

%

 

 

149.54

%

 

 

155.58

%

 

 

216.63

%

Non-performing loans to total loans held-for-investment

 

0.87

%

 

 

0.94

%

 

 

0.80

%

 

 

0.78

%

 

 

0.59

%

Non-performing assets to total assets

 

0.66

%

 

 

0.73

%

 

 

0.56

%

 

 

0.60

%

 

 

0.46

%

At September 30, 2023, total delinquent loans were $90.3 million, and included SFR mortgages of $62.2 million, or 68.9% of total delinquent loans. During the third quarter, delinquent loans decreased $14.7 million due to borrowers that became current of $26.3 million and amortization and other removals of $15.6 million, partially offset by total additions of $27.2 million.

At September 30, 2023, non-performing loans were $60.6 million, and included $39.8 million of SFR mortgage loans, $9.7 million of commercial and industrial loans, $7.6 million of SBA loans, $1.9 million of CRE loans and $1.1 million of multifamily loans. During the third quarter, non-performing loans decreased $6.8 million due to charge-offs of $11.6 million, amortization and other removals of $2.4 million and borrowers that became current of $1.8 million, partially offset by additions of $9.2 million. Excluding SFR mortgages, which are well-secured with low loan-to-value ratios, non-performing loans decreased $13.1 million from the prior quarter. At September 30, 2023, there were $7.1 million of non-performing loans, primarily consisting of SFR mortgages, that despite having a current payment status are considered nonaccrual based on other criteria.

At September 30, 2023, non-performing assets included $0.9 million of real estate owned, consisting of one single-family residence we acquired in the second quarter.

Allowance for Credit Losses - Loans

 

Three Months Ended

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

($ in thousands)

Allowance for loan losses (ALL)

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

80,883

 

 

$

84,560

 

 

$

85,960

 

 

$

92,444

 

 

$

93,793

 

Loans charged off

 

(11,644

)

 

 

(5,667

)

 

 

(3,949

)

 

 

(7,641

)

 

 

(912

)

Recoveries

 

151

 

 

 

326

 

 

 

49

 

 

 

57

 

 

 

63

 

Net (charge-offs) recoveries

 

(11,493

)

 

 

(5,341

)

 

 

(3,900

)

 

 

(7,584

)

 

 

(849

)

Provision for (reversal of) loan losses

 

5,000

 

 

 

1,664

 

 

 

2,500

 

 

 

1,100

 

 

 

(500

)

Balance at end of period

$

74,390

 

 

$

80,883

 

 

$

84,560

 

 

$

85,960

 

 

$

92,444

 

Reserve for unfunded loan commitments (RUC)

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

4,005

 

 

$

4,805

 

 

$

5,305

 

 

$

6,405

 

 

$

5,905

 

(Reversal of) provision for credit losses

 

 

 

 

(800

)

 

 

(500

)

 

 

(1,100

)

 

 

500

 

Balance at end of period

 

4,005

 

 

 

4,005

 

 

 

4,805

 

 

 

5,305

 

 

 

6,405

 

Allowance for credit losses (ACL) - Loans

$

78,395

 

 

$

84,888

 

 

$

89,365

 

 

$

91,265

 

 

$

98,849

 

 

 

 

 

 

 

 

 

 

 

ALL to total loans

 

1.07

%

 

 

1.13

%

 

 

1.20

%

 

 

1.21

%

 

 

1.27

%

ACL to total loans

 

1.13

%

 

 

1.19

%

 

 

1.27

%

 

 

1.28

%

 

 

1.36

%

ACL to NPLs

 

129.46

%

 

 

126.12

%

 

 

158.04

%

 

 

165.18

%

 

 

231.64

%

ACL to NPAs

 

127.60

%

 

 

124.49

%

 

 

158.04

%

 

 

165.18

%

 

 

231.64

%

Annualized net loan charge-offs (recoveries) to average total loans held-for-investment

 

0.65

%

 

 

0.30

%

 

 

0.22

%

 

 

0.42

%

 

 

0.05

%

The allowance for credit losses, which includes the reserve for unfunded loan commitments, totaled $78.4 million, or 1.13% of total loans, at September 30, 2023, compared to $84.9 million, or 1.19% of total loans, at June 30, 2023. The ACL decreased by $6.5 million due to: (i) net charge-offs of $11.5 million of which $5.9 million was specifically reserved for at June 30, 2023, (ii) lower reserves of $1.4 million due to changes in specific reserves, partially offset by (iii) $1.4 million increase related to changes in portfolio mix. ACL provision for the third quarter was $5.0 million. The ACL coverage of non-performing loans was 129% at September 30, 2023 compared to 126% at June 30, 2023.

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables released by the model provider during September 2023. The published forecasts consider the Federal Reserve's monetary policy, labor market constraints, inflation levels, global oil prices and changes in real estate values, among other factors.

Conference Call

The Company will host a conference call to discuss its third quarter 2023 financial results at 10:00 a.m. Pacific Time (PT) on Tuesday, October 24, 2023. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 5886712. 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. A replay of the call will be made available approximately one hour after the call has ended on the Company’s Investor Relations website at www.bancofcal.com/investor or by dialing (877) 344-7529 and referencing event code 2187312.

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) is a bank holding company with $9.25 billion in assets at September 30, 2023 and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 32 offices including 26 full-service branches located throughout Southern California. Through our dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California, and full stack payment processing solution through our subsidiary Deepstack Technologies. 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 to 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 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,” “is anticipated,” “estimate,” “project,” “plans,” “strategy,” or similar expressions are intended to identify these forward-looking statements. You are cautioned not to place undue reliance on any 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. (the Company) with the Securities and Exchange Commission (SEC). The Company undertakes no obligation to revise or publicly release any revision or update to these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to: (i) changes in general economic conditions, either nationally or in our market areas, including the impact of supply chain disruptions, and the risk of recession or an economic downturn; (ii) changes in the interest rate environment, including the recent and potential future increases in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, the availability and cost of capital and liquidity, the impacts of continuing inflation; (iii) the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and non-performing assets, and may result in our allowance for credit losses not being adequate; (iv) fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area; (v) the quality and composition of our securities portfolio; (vi) our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment; (vii) the rapid withdrawal of a significant amount of demand deposits over a short period of time; (viii) the costs and effects of litigation; (ix) risks related to the Company’s acquisitions, including disruption to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; and our inability to achieve expected revenues, cost savings, synergies, and other benefits; and in the case of our recent acquisition of Deepstack Technologies, LLC (Deepstack), reputational risk, regulatory risk and potential adverse reactions of the Company's or Deepstack's customers, suppliers, vendors, employees or other business partners; (x) results of examinations by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, restrict our ability to invest in certain assets, refrain from issuing an approval or non-objection to certain capital or other actions, increase our allowance for credit losses, result in write-downs of asset values, restrict our ability or that of our bank subsidiary to pay dividends, or impose fines, penalties or sanctions; (xi) legislative or regulatory changes that adversely affect our business, including changes in tax laws and policies, accounting policies and practices, privacy laws, and regulatory capital or other rules; (xii) the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses; (xiii) errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation; (xiv) failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including due to cybersecurity threats; (xv) our ability to attract and retain key members of our senior management team; (xvi) the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; (xvii) the impact of bank failures or other adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; (xviii) the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital; and (xix) the risks, uncertainties and assumptions set forth under the heading “Cautionary Statement Regarding Forward-Looking Statements” in the registration statement (as defined below); and (xx) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this press release and from time to time in other documents that we file with or furnish to the SEC.

No Offer or Solicitation

This press release is not a proxy statement or solicitation or a proxy, consent or authorization with respect to any securities or in respect of the proposed transaction and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of the Company, PacWest Bancorp or the combined company, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be deemed to be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act, and otherwise in accordance with applicable law.

Additional Information and Where to Find It

This press release includes information relating to the proposed transaction between the Company and PacWest Bancorp and the proposed investment in the Company by Warburg Pincus LLC and Centerbridge Partners, L.P. The Company filed a registration statement on Form S-4 (the registration statement) with the SEC on August 28, 2023 (as amended on September 29, 2023, further amended on October 16, 2023 and as further amended on October 19, 2023), which includes a joint proxy statement (the joint proxy statement / prospectus) of the Company and PacWest Bancorp distributed to holders of the Company’s common stock and PacWest Bancorp’s common stock in connection with the Company’s and PacWest Bancorp’s solicitation of proxies for the vote by the Company’s stockholders and PacWest Bancorp’s stockholders with respect to the proposed transaction and also constitutes a prospectus of the Company. The registration statement was declared effective by the SEC on October 20, 2023 and the definitive joint proxy statement / prospectus was first mailed on or around October 23, 2023 to the Company’s and PacWest Bancorp’s respective stockholders that, as of the applicable record date, are entitled to vote on the matters being considered at the Company stockholder meeting and at the PacWest Bancorp stockholder meeting, as applicable.

BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE ENTIRE REGISTRATION STATEMENT AND DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO), AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AND THE DEFINITIVE VERSIONS THEREOF, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO SUCH DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of the registration statement, the definitive joint proxy statement/prospectus and all other relevant documents filed with the SEC by the Company or PacWest Bancorp through the website maintained by the SEC at www.sec.gov.

The documents filed by the Company or PacWest Bancorp with the SEC also may be obtained free of charge at the Company’s or PacWest Bancorp’s website at https://investors.bancofcal.com, under the heading “Financials and Filings” or www.pacwestbancorp.com, under the heading “SEC Filings”, respectively, or upon written request to the Company, Attention: Investor Relations, 3 MacArthur Place, Santa Ana, CA 92707 or PacWest Bancorp, Attention: Investor Relations, 9701 Wilshire Boulevard, Suite 700, Beverly Hills, CA 90212, respectively.

Participants in Solicitation

The Company and PacWest Bancorp and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s stockholders or PacWest Bancorp’s stockholders in connection with the proposed transaction under the rules of the SEC. The Company’s stockholders, PacWest Bancorp’s stockholders and other interested persons may obtain, without charge, more detailed information regarding the names, affiliations and interests of directors and executive officers of the Company and PacWest Bancorp in the registration statement, as well as other documents filed by the Company or PacWest Bancorp from time to time with the SEC. Other information regarding persons who may, under the rules of the SEC, be deemed the participants in the proxy solicitation of the Company’s or PacWest Bancorp’s stockholders in connection with the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, is included in the definitive joint proxy statement/prospectus and other relevant materials filed with the SEC regarding the proposed transaction. You may obtain free copies of these documents at the SEC’s website at www.sec.gov. Copies of documents filed with the SEC by the Company or PacWest Bancorp will also be available free of charge from the Company or PacWest Bancorp using the contact information above.

Banc of California, Inc.

Consolidated Statements of Financial Condition (Unaudited)

(Dollars in thousands)

 

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

310,985

 

 

$

283,729

 

 

$

1,010,951

 

 

$

228,896

 

 

$

256,058

 

Securities held-to-maturity

 

328,287

 

 

 

328,405

 

 

 

328,520

 

 

 

328,641

 

 

 

328,757

 

Securities available-for-sale

 

915,054

 

 

 

922,091

 

 

 

958,427

 

 

 

868,297

 

 

 

847,565

 

Loans

 

6,961,032

 

 

 

7,156,206

 

 

 

7,054,380

 

 

 

7,115,038

 

 

 

7,289,320

 

Allowance for loan losses

 

(74,390

)

 

 

(80,883

)

 

 

(84,560

)

 

 

(85,960

)

 

 

(92,444

)

Federal Home Loan Bank and other bank stock

 

60,336

 

 

 

60,281

 

 

 

70,334

 

 

 

57,092

 

 

 

54,428

 

Premises and equipment, net

 

109,141

 

 

 

108,235

 

 

 

108,087

 

 

 

107,345

 

 

 

107,728

 

Goodwill

 

114,312

 

 

 

114,312

 

 

 

114,312

 

 

 

114,312

 

 

 

114,312

 

Other intangible assets, net

 

6,142

 

 

 

6,603

 

 

 

7,065

 

 

 

7,526

 

 

 

8,081

 

Deferred income tax, net

 

51,461

 

 

 

64,001

 

 

 

54,450

 

 

 

50,518

 

 

 

56,376

 

Bank owned life insurance investment

 

129,939

 

 

 

128,973

 

 

 

128,022

 

 

 

127,122

 

 

 

126,199

 

Derivative assets

 

70,625

 

 

 

2,199

 

 

 

1,650

 

 

 

2,292

 

 

 

2,677

 

Other assets

 

264,148

 

 

 

276,113

 

 

 

287,263

 

 

 

275,897

 

 

 

269,521

 

Total assets

$

9,247,072

 

 

$

9,370,265

 

 

$

10,038,901

 

 

$

9,197,016

 

 

$

9,368,578

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

2,366,544

 

 

$

2,446,693

 

 

$

2,506,616

 

 

$

2,809,328

 

 

$

2,943,585

 

Interest-bearing deposits

 

4,274,086

 

 

 

4,424,383

 

 

 

4,445,358

 

 

 

4,311,593

 

 

 

4,336,800

 

Total deposits

 

6,640,630

 

 

 

6,871,076

 

 

 

6,951,974

 

 

 

7,120,921

 

 

 

7,280,385

 

FHLB advances and FRB borrowings

 

1,008,293

 

 

 

1,147,997

 

 

 

1,732,670

 

 

 

727,348

 

 

 

727,021

 

Other borrowings

 

185,802

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

Long-term debt, net

 

274,279

 

 

 

274,121

 

 

 

274,995

 

 

 

274,906

 

 

 

274,746

 

Accrued expenses and other liabilities

 

136,348

 

 

 

120,017

 

 

 

120,355

 

 

 

114,223

 

 

 

124,436

 

Total liabilities

 

8,245,352

 

 

 

8,413,211

 

 

 

9,079,994

 

 

 

8,237,398

 

 

 

8,416,588

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

Common stock

 

653

 

 

 

653

 

 

 

653

 

 

 

651

 

 

 

652

 

Common stock, class B non-voting non-convertible

 

5

 

 

 

5

 

 

 

5

 

 

 

5

 

 

 

5

 

Additional paid-in capital

 

869,565

 

 

 

867,994

 

 

 

866,306

 

 

 

866,478

 

 

 

864,806

 

Retained earnings

 

312,219

 

 

 

275,430

 

 

 

263,524

 

 

 

248,988

 

 

 

231,084

 

Treasury stock

 

(137,269

)

 

 

(137,270

)

 

 

(121,092

)

 

 

(115,907

)

 

 

(96,978

)

Accumulated other comprehensive loss, net

 

(43,453

)

 

 

(49,758

)

 

 

(50,489

)

 

 

(40,597

)

 

 

(47,579

)

Total stockholders’ equity

 

1,001,720

 

 

 

957,054

 

 

 

958,907

 

 

 

959,618

 

 

 

951,990

 

Total liabilities and stockholders’ equity

$

9,247,072

 

 

$

9,370,265

 

 

$

10,038,901

 

 

$

9,197,016

 

 

$

9,368,578

 

Banc of California, Inc.

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

95,613

 

 

$

92,889

 

 

$

87,418

 

 

$

88,717

 

 

$

83,699

 

 

$

275,920

 

 

$

238,828

 

Securities

 

16,335

 

 

 

15,804

 

 

 

14,909

 

 

 

12,905

 

 

 

10,189

 

 

 

47,048

 

 

 

25,622

 

Other interest-earning assets

 

4,274

 

 

 

7,458

 

 

 

4,592

 

 

 

2,490

 

 

 

2,085

 

 

 

16,324

 

 

 

4,210

 

Total interest and dividend income

 

116,222

 

 

 

116,151

 

 

 

106,919

 

 

 

104,112

 

 

 

95,973

 

 

 

339,292

 

 

 

268,660

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

31,360

 

 

 

28,118

 

 

 

20,527

 

 

 

14,278

 

 

 

8,987

 

 

 

80,005

 

 

 

13,555

 

FHLB advances and FRB borrowings

 

7,773

 

 

 

14,703

 

 

 

9,648

 

 

 

5,528

 

 

 

3,558

 

 

 

32,124

 

 

 

9,625

 

Other interest-bearing liabilities

 

7,871

 

 

 

3,698

 

 

 

3,691

 

 

 

4,089

 

 

 

4,020

 

 

 

15,260

 

 

 

11,332

 

Total interest expense

 

47,004

 

 

 

46,519

 

 

 

33,866

 

 

 

23,895

 

 

 

16,565

 

 

 

127,389

 

 

 

34,512

 

Net interest income

 

69,218

 

 

 

69,632

 

 

 

73,053

 

 

 

80,217

 

 

 

79,408

 

 

 

211,903

 

 

 

234,148

 

Provision for (reversal of) credit losses

 

5,000

 

 

 

1,900

 

 

 

2,000

 

 

 

 

 

 

 

 

 

8,900

 

 

 

(31,542

)

Net interest income after provision for (reversal of) credit losses

 

64,218

 

 

 

67,732

 

 

 

71,053

 

 

 

80,217

 

 

 

79,408

 

 

 

203,003

 

 

 

265,690

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service fees

 

2,114

 

 

 

2,022

 

 

 

1,979

 

 

 

2,066

 

 

 

2,462

 

 

 

6,115

 

 

 

7,474

 

Loan servicing income

 

563

 

 

 

574

 

 

 

547

 

 

 

561

 

 

 

636

 

 

 

1,684

 

 

 

957

 

Income from bank owned life insurance

 

966

 

 

 

951

 

 

 

900

 

 

 

923

 

 

 

873

 

 

 

2,817

 

 

 

2,479

 

Change in fair value of derivative instruments

 

46,186

 

 

 

10

 

 

 

(24

)

 

 

(8

)

 

 

39

 

 

 

46,172

 

 

 

224

 

Net (loss) gain on sale of securities available for sale

 

 

 

 

 

 

 

 

 

 

(7,708

)

 

 

 

 

 

 

 

 

16

 

All other income

 

949

 

 

 

2,467

 

 

 

4,457

 

 

 

2,739

 

 

 

1,671

 

 

 

7,873

 

 

 

7,627

 

Total noninterest income

 

50,778

 

 

 

6,024

 

 

 

7,859

 

 

 

(1,427

)

 

 

5,681

 

 

 

64,661

 

 

 

18,777

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

25,819

 

 

 

28,282

 

 

 

29,656

 

 

 

27,812

 

 

 

27,997

 

 

 

83,757

 

 

 

85,248

 

Occupancy and equipment

 

5,804

 

 

 

5,603

 

 

 

5,526

 

 

 

5,740

 

 

 

5,796

 

 

 

16,933

 

 

 

17,174

 

Professional fees

 

3,616

 

 

 

4,001

 

 

 

4,072

 

 

 

3,193

 

 

 

3,957

 

 

 

11,689

 

 

 

10,797

 

Data processing

 

1,657

 

 

 

1,686

 

 

 

1,563

 

 

 

1,744

 

 

 

1,699

 

 

 

4,906

 

 

 

5,309

 

Regulatory assessments

 

1,410

 

 

 

1,301

 

 

 

1,202

 

 

 

905

 

 

 

925

 

 

 

3,913

 

 

 

2,721

 

Software and technology

 

3,811

 

 

 

3,579

 

 

 

3,274

 

 

 

3,197

 

 

 

3,659

 

 

 

10,664

 

 

 

9,106

 

Reversal of loan repurchase reserves

 

 

 

 

(808

)

 

 

(11

)

 

 

(17

)

 

 

(26

)

 

 

(819

)

 

 

(987

)

Amortization of intangible assets

 

461

 

 

 

462

 

 

 

461

 

 

 

555

 

 

 

396

 

 

 

1,384

 

 

 

1,150

 

Acquisition, integration and transaction costs

 

9,329

 

 

 

 

 

 

 

 

 

 

 

 

2,080

 

 

 

9,329

 

 

 

2,080

 

All other expense

 

4,291

 

 

 

5,062

 

 

 

3,878

 

 

 

4,466

 

 

 

3,975

 

 

 

13,231

 

 

 

11,867

 

Total noninterest expense before loss (gain) in alternative energy partnership investments

 

56,198

 

 

 

49,168

 

 

 

49,621

 

 

 

47,595

 

 

 

50,458

 

 

 

154,987

 

 

 

144,465

 

Loss (gain) in alternative energy partnership investments

 

(34

)

 

 

(36

)

 

 

1,618

 

 

 

608

 

 

 

504

 

 

 

1,548

 

 

 

1,705

 

Total noninterest expense

 

56,164

 

 

 

49,132

 

 

 

51,239

 

 

 

48,203

 

 

 

50,962

 

 

 

156,535

 

 

 

146,170

 

Income before income taxes

 

58,832

 

 

 

24,624

 

 

 

27,673

 

 

 

30,587

 

 

 

34,127

 

 

 

111,129

 

 

 

138,297

 

Income tax expense

 

16,258

 

 

 

6,745

 

 

 

7,395

 

 

 

9,068

 

 

 

9,931

 

 

 

30,398

 

 

 

38,877

 

Net income

 

42,574

 

 

 

17,879

 

 

 

20,278

 

 

 

21,519

 

 

 

24,196

 

 

 

80,731

 

 

 

99,420

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,420

 

Impact of preferred stock redemption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,747

 

Net income available to common stockholders

$

42,574

 

 

$

17,879

 

 

$

20,278

 

 

$

21,519

 

 

$

24,196

 

 

$

80,731

 

 

$

94,253

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.74

 

 

$

0.31

 

 

$

0.34

 

 

$

0.36

 

 

$

0.40

 

 

$

1.39

 

 

$

1.54

 

Diluted

$

0.74

 

 

$

0.31

 

 

$

0.34

 

 

$

0.36

 

 

$

0.40

 

 

$

1.39

 

 

$

1.53

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

57,434,374

 

 

 

57,980,534

 

 

 

59,014,187

 

 

 

59,252,995

 

 

 

60,044,403

 

 

 

58,137,245

 

 

 

61,324,119

 

Diluted

 

57,521,836

 

 

 

58,026,007

 

 

 

59,206,619

 

 

 

59,725,283

 

 

 

60,492,460

 

 

 

58,230,137

 

 

 

61,659,900

 

Dividends declared per common share

$

0.10

 

 

$

0.10

 

 

$

0.10

 

 

$

0.06

 

 

$

0.06

 

 

$

0.30

 

 

$

0.18

 

Banc of California, Inc.

Selected Financial Data

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Profitability and other ratios of consolidated operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (ROAA)(1)

1.82

%

 

0.75

%

 

0.88

%

 

0.92

%

 

1.02

%

 

1.15

%

 

1.42

%

Adjusted ROAA(1)(2)

0.73

%

 

0.77

%

 

0.94

%

 

1.15

%

 

1.13

%

 

0.81

%

 

1.47

%

Return on average equity(1)

17.28

%

 

7.19

%

 

8.18

%

 

8.63

%

 

9.99

%

 

10.87

%

 

13.38

%

Return on average tangible common equity(1)(2)

19.87

%

 

8.34

%

 

9.46

%

 

10.02

%

 

11.33

%

 

12.53

%

 

14.66

%

Pre-tax pre-provision income ROAA(1)(2)

2.73

%

 

1.11

%

 

1.29

%

 

1.31

%

 

1.44

%

 

1.71

%

 

1.52

%

Adjusted pre-tax pre-provision income ROAA(1)(2)

1.18

%

 

1.14

%

 

1.38

%

 

1.63

%

 

1.59

%

 

1.23

%

 

1.59

%

Dividend payout ratio(3)

13.51

%

 

32.26

%

 

29.41

%

 

16.67

%

 

15.00

%

 

21.58

%

 

11.69

%

Average loan yield

5.38

%

 

5.28

%

 

5.07

%

 

4.92

%

 

4.54

%

 

5.24

%

 

4.38

%

Average cost of interest-bearing deposits

2.87

%

 

2.60

%

 

1.98

%

 

1.34

%

 

0.77

%

 

2.49

%

 

0.39

%

Average cost of total deposits

1.86

%

 

1.67

%

 

1.22

%

 

0.79

%

 

0.47

%

 

1.58

%

 

0.24

%

Net interest spread

2.15

%

 

2.12

%

 

2.52

%

 

2.98

%

 

3.13

%

 

2.25

%

 

3.24

%

Net interest margin(1)

3.19

%

 

3.11

%

 

3.41

%

 

3.69

%

 

3.58

%

 

3.24

%

 

3.56

%

Noninterest income to total revenue(4)

42.32

%

 

7.96

%

 

9.71

%

 

(1.81

)%

 

6.68

%

 

23.38

%

 

7.42

%

Adjusted noninterest income to adjusted total revenue(2)(4)

6.25

%

 

7.96

%

 

9.71

%

 

7.26

%

 

6.68

%

 

8.03

%

 

7.42

%

Noninterest expense to average total assets(1)

2.41

%

 

2.05

%

 

2.23

%

 

2.07

%

 

2.15

%

 

2.23

%

 

2.08

%

Adjusted noninterest expense to average total assets(1)(2)

1.98

%

 

2.02

%

 

2.14

%

 

2.08

%

 

2.00

%

 

2.05

%

 

2.01

%

Efficiency ratio(2)(5)

46.80

%

 

64.94

%

 

63.33

%

 

61.18

%

 

59.89

%

 

56.60

%

 

57.79

%

Adjusted efficiency ratio(2)(6)

62.62

%

 

63.99

%

 

60.86

%

 

56.03

%

 

55.66

%

 

62.45

%

 

55.76

%

Average loans to average deposits

105.32

%

 

104.25

%

 

102.35

%

 

100.25

%

 

97.34

%

 

103.98

%

 

97.94

%

Average securities to average total assets

13.52

%

 

13.64

%

 

13.93

%

 

13.19

%

 

12.70

%

 

13.70

%

 

13.16

%

Average stockholders’ equity to average total assets

10.55

%

 

10.37

%

 

10.78

%

 

10.69

%

 

10.21

%

 

10.57

%

 

10.59

%

(1)

Ratio presented on an annualized basis.

(2)

Ratio 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)

Ratio 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 (reversal of) credit losses and noninterest income.

(5)

Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for (reversal of) credit losses and noninterest income.

(6)

Ratio calculated by dividing adjusted noninterest expense by the sum of net interest income before provision for (reversal of) credit losses and adjusted noninterest income.

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)

 

 

Three Months Ended

 

September 30, 2023

 

June 30, 2023

 

March 31, 2023

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

3,175,592

 

 

$

38,304

 

4.79

%

 

$

3,240,280

 

 

$

38,350

 

4.75

%

 

$

3,242,780

 

 

$

37,066

 

4.64

%

Commercial and industrial and SBA

 

1,976,919

 

 

 

36,778

 

7.38

%

 

 

1,882,673

 

 

 

34,222

 

7.29

%

 

 

1,765,299

 

 

 

29,544

 

6.79

%

SFR mortgage

 

1,802,091

 

 

 

18,980

 

4.18

%

 

 

1,848,747

 

 

 

18,901

 

4.10

%

 

 

1,897,763

 

 

 

19,441

 

4.15

%

Other consumer

 

86,978

 

 

 

1,437

 

6.55

%

 

 

84,916

 

 

 

1,371

 

6.48

%

 

 

84,786

 

 

 

1,308

 

6.26

%

Loans held-for-sale

 

4,112

 

 

 

114

 

11.00

%

 

 

4,400

 

 

 

45

 

4.10

%

 

 

4,330

 

 

 

59

 

5.53

%

Gross loans and leases

 

7,045,692

 

 

 

95,613

 

5.38

%

 

 

7,061,016

 

 

 

92,889

 

5.28

%

 

 

6,994,958

 

 

 

87,418

 

5.07

%

Securities

 

1,252,361

 

 

 

16,335

 

5.17

%

 

 

1,311,362

 

 

 

15,804

 

4.83

%

 

 

1,297,640

 

 

 

14,909

 

4.66

%

Other interest-earning assets

 

309,159

 

 

 

4,274

 

5.48

%

 

 

595,234

 

 

 

7,458

 

5.03

%

 

 

389,051

 

 

 

4,592

 

4.79

%

Total interest-earning assets

 

8,607,212

 

 

 

116,222

 

5.36

%

 

 

8,967,612

 

 

 

116,151

 

5.20

%

 

 

8,681,649

 

 

 

106,919

 

4.99

%

Allowance for loan losses

 

(79,883

)

 

 

 

 

 

 

(82,282

)

 

 

 

 

 

 

(84,267

)

 

 

 

 

BOLI and noninterest-earning assets

 

733,944

 

 

 

 

 

 

 

725,909

 

 

 

 

 

 

 

719,827

 

 

 

 

 

Total assets

$

9,261,273

 

 

 

 

 

 

$

9,611,239

 

 

 

 

 

 

$

9,317,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

1,663,803

 

 

$

10,240

 

2.44

%

 

$

1,761,341

 

 

$

9,751

 

2.22

%

 

$

1,951,618

 

 

$

8,514

 

1.77

%

Savings and money market

 

1,024,127

 

 

 

3,075

 

1.19

%

 

 

1,015,181

 

 

 

2,609

 

1.03

%

 

 

1,070,911

 

 

 

2,001

 

0.76

%

Certificates of deposit

 

1,652,445

 

 

 

18,045

 

4.33

%

 

 

1,566,636

 

 

 

15,758

 

4.03

%

 

 

1,189,658

 

 

 

10,012

 

3.41

%

Total interest-bearing deposits

 

4,340,375

 

 

 

31,360

 

2.87

%

 

 

4,343,158

 

 

 

28,118

 

2.60

%

 

 

4,212,187

 

 

 

20,527

 

1.98

%

FHLB advances and FRB borrowings

 

897,020

 

 

 

7,773

 

3.44

%

 

 

1,441,244

 

 

 

14,703

 

4.09

%

 

 

1,067,125

 

 

 

9,648

 

3.67

%

Other borrowings

 

304,138

 

 

 

4,136

 

5.40

%

 

 

358

 

 

 

3

 

3.36

%

 

 

4,773

 

 

 

57

 

4.84

%

Long-term debt

 

274,199

 

 

 

3,735

 

5.40

%

 

 

275,012

 

 

 

3,695

 

5.39

%

 

 

274,939

 

 

 

3,634

 

5.36

%

Total interest-bearing liabilities

 

5,815,732

 

 

 

47,004

 

3.21

%

 

 

6,059,772

 

 

 

46,519

 

3.08

%

 

 

5,559,024

 

 

 

33,866

 

2.47

%

Noninterest-bearing deposits

 

2,345,262

 

 

 

 

 

 

 

2,425,719

 

 

 

 

 

 

 

2,617,973

 

 

 

 

 

Noninterest-bearing liabilities

 

122,869

 

 

 

 

 

 

 

128,699

 

 

 

 

 

 

 

135,418

 

 

 

 

 

Total liabilities

 

8,283,863

 

 

 

 

 

 

 

8,614,190

 

 

 

 

 

 

 

8,312,415

 

 

 

 

 

Total stockholders’ equity

 

977,410

 

 

 

 

 

 

 

997,049

 

 

 

 

 

 

 

1,004,794

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,261,273

 

 

 

 

 

 

$

9,611,239

 

 

 

 

 

 

$

9,317,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

69,218

 

2.15

%

 

 

 

$

69,632

 

2.12

%

 

 

 

$

73,053

 

2.52

%

Net interest margin

 

 

 

 

3.19

%

 

 

 

 

 

3.11

%

 

 

 

 

 

3.41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

148

%

 

 

 

 

 

 

148

%

 

 

 

 

 

 

156

%

 

 

 

 

Total deposits

$

6,685,637

 

 

$

31,360

 

1.86

%

 

$

6,768,877

 

 

$

28,118

 

1.67

%

 

$

6,830,160

 

 

$

20,527

 

1.22

%

Total funding (1)

$

8,160,994

 

 

$

47,004

 

2.29

%

 

$

8,485,491

 

 

$

46,519

 

2.20

%

 

$

8,176,997

 

 

$

33,866

 

1.68

%

(1)

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

 

December 31, 2022

 

September 30, 2022

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

3,223,614

 

 

$

36,214

 

4.46

%

 

$

3,142,772

 

 

$

34,269

 

4.33

%

Commercial and industrial and SBA

 

1,909,144

 

 

 

31,492

 

6.54

%

 

 

2,151,511

 

 

 

29,296

 

5.40

%

SFR mortgage

 

1,932,397

 

 

 

19,661

 

4.04

%

 

 

1,927,694

 

 

 

18,699

 

3.85

%

Other consumer

 

86,273

 

 

 

1,335

 

6.14

%

 

 

87,335

 

 

 

1,331

 

6.05

%

Loans held-for-sale

 

4,352

 

 

 

15

 

1.37

%

 

 

4,207

 

 

 

104

 

9.81

%

Gross loans and leases

 

7,155,780

 

 

 

88,717

 

4.92

%

 

 

7,313,519

 

 

 

83,699

 

4.54

%

Securities

 

1,221,147

 

 

 

12,905

 

4.19

%

 

 

1,194,942

 

 

 

10,189

 

3.38

%

Other interest-earning assets

 

239,336

 

 

 

2,490

 

4.13

%

 

 

292,819

 

 

 

2,085

 

2.82

%

Total interest-earning assets

 

8,616,263

 

 

 

104,112

 

4.79

%

 

 

8,801,280

 

 

 

95,973

 

4.33

%

Allowance for loan losses

 

(91,606

)

 

 

 

 

 

 

(93,517

)

 

 

 

 

BOLI and noninterest-earning assets

 

732,654

 

 

 

 

 

 

 

700,977

 

 

 

 

 

Total assets

$

9,257,311

 

 

 

 

 

 

$

9,408,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

1,854,333

 

 

$

4,998

 

1.07

%

 

$

2,285,071

 

 

$

3,880

 

0.67

%

Savings and money market

 

1,308,383

 

 

 

2,379

 

0.72

%

 

 

1,536,438

 

 

 

2,236

 

0.58

%

Certificates of deposit

 

1,072,953

 

 

 

6,901

 

2.55

%

 

 

832,506

 

 

 

2,871

 

1.37

%

Total interest-bearing deposits

 

4,235,669

 

 

 

14,278

 

1.34

%

 

 

4,654,015

 

 

 

8,987

 

0.77

%

FHLB advances

 

684,177

 

 

 

5,528

 

3.21

%

 

 

482,842

 

 

 

3,558

 

2.92

%

Other borrowings

 

41,075

 

 

 

414

 

4.00

%

 

 

70,431

 

 

 

412

 

2.32

%

Long-term debt

 

274,812

 

 

 

3,675

 

5.31

%

 

 

274,665

 

 

 

3,608

 

5.21

%

Total interest-bearing liabilities

 

5,235,733

 

 

 

23,895

 

1.81

%

 

 

5,481,953

 

 

 

16,565

 

1.20

%

Noninterest-bearing deposits

 

2,897,755

 

 

 

 

 

 

 

2,855,220

 

 

 

 

 

Noninterest-bearing liabilities

 

134,409

 

 

 

 

 

 

 

110,761

 

 

 

 

 

Total liabilities

 

8,267,897

 

 

 

 

 

 

 

8,447,934

 

 

 

 

 

Total stockholders’ equity

 

989,414

 

 

 

 

 

 

 

960,806

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,257,311

 

 

 

 

 

 

$

9,408,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

80,217

 

2.98

%

 

 

 

$

79,408

 

3.13

%

Net interest margin

 

 

 

 

3.69

%

 

 

 

 

 

3.58

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

165

%

 

 

 

 

 

 

161

%

 

 

 

 

Total deposits

$

7,133,424

 

 

$

14,278

 

0.79

%

 

$

7,509,235

 

 

$

8,987

 

0.47

%

Total funding (1)

$

8,133,488

 

 

$

23,895

 

1.17

%

 

$

8,337,173

 

 

$

16,565

 

0.79

%

(1)

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.

 

Nine Months Ended

 

September 30, 2023

 

September 30, 2022

 

Average

 

 

 

Yield

 

Average

 

 

 

Yield

 

Balance

 

Interest

 

/ Cost

 

Balance

 

Interest

 

/ Cost

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate, multifamily, and construction

$

3,219,304

 

 

$

113,720

 

4.72

%

 

$

2,962,148

 

 

$

96,926

 

4.37

%

Commercial and industrial and SBA

 

1,875,739

 

 

 

100,545

 

7.17

%

 

 

2,473,666

 

 

 

88,672

 

4.79

%

SFR mortgage

 

1,849,183

 

 

 

57,321

 

4.14

%

 

 

1,749,968

 

 

 

48,767

 

3.73

%

Other consumer

 

85,568

 

 

 

4,116

 

6.43

%

 

 

92,633

 

 

 

4,305

 

6.21

%

Loans held-for-sale

 

4,280

 

 

 

218

 

6.81

%

 

 

3,754

 

 

 

158

 

5.63

%

Gross loans and leases

 

7,034,074

 

 

 

275,920

 

5.24

%

 

 

7,282,169

 

 

 

238,828

 

4.38

%

Securities

 

1,286,955

 

 

 

47,048

 

4.89

%

 

 

1,234,188

 

 

 

25,622

 

2.78

%

Other interest-earning assets

 

430,855

 

 

 

16,324

 

5.07

%

 

 

284,725

 

 

 

4,210

 

1.98

%

Total interest-earning assets

 

8,751,884

 

 

 

339,292

 

5.18

%

 

 

8,801,082

 

 

 

268,660

 

4.08

%

Allowance for credit losses

 

(82,124

)

 

 

 

 

 

 

(93,454

)

 

 

 

 

BOLI and noninterest-earning assets

 

726,608

 

 

 

 

 

 

 

673,679

 

 

 

 

 

Total assets

$

9,396,368

 

 

 

 

 

 

$

9,381,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking

$

1,791,200

 

 

$

28,505

 

2.13

%

 

$

2,352,067

 

 

$

5,978

 

0.34

%

Savings and money market

 

1,036,568

 

 

 

7,685

 

0.99

%

 

 

1,602,280

 

 

 

3,606

 

0.30

%

Certificates of deposit

 

1,471,275

 

 

 

43,815

 

3.98

%

 

 

658,576

 

 

 

3,971

 

0.81

%

Total interest-bearing deposits

 

4,299,043

 

 

 

80,005

 

2.49

%

 

 

4,612,923

 

 

 

13,555

 

0.39

%

FHLB advances

 

1,134,507

 

 

 

32,124

 

3.79

%

 

 

476,158

 

 

 

9,625

 

2.70

%

Other borrowings

 

104,186

 

 

 

4,195

 

5.38

%

 

 

101,369

 

 

 

792

 

1.04

%

Long-term debt

 

274,714

 

 

 

11,065

 

5.39

%

 

 

274,533

 

 

 

10,540

 

5.13

%

Total interest-bearing liabilities

 

5,812,450

 

 

 

127,389

 

2.93

%

 

 

5,464,983

 

 

 

34,512

 

0.84

%

Noninterest-bearing deposits

 

2,461,985

 

 

 

 

 

 

 

2,818,795

 

 

 

 

 

Noninterest-bearing liabilities

 

128,949

 

 

 

 

 

 

 

104,321

 

 

 

 

 

Total liabilities

 

8,403,384

 

 

 

 

 

 

 

8,388,099

 

 

 

 

 

Total stockholders’ equity

 

992,984

 

 

 

 

 

 

 

993,208

 

 

 

 

 

Total liabilities and stockholders’ equity

$

9,396,368

 

 

 

 

 

 

$

9,381,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income/spread

 

 

$

211,903

 

2.25

%

 

 

 

$

234,148

 

3.24

%

Net interest margin

 

 

 

 

3.24

%

 

 

 

 

 

3.56

%

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to interest-bearing liabilities

 

151

%

 

 

 

 

 

 

161

%

 

 

 

 

Total deposits

$

6,761,028

 

 

$

80,005

 

1.58

%

 

$

7,431,718

 

 

$

13,555

 

0.24

%

Total funding (1)

$

8,274,435

 

 

$

127,389

 

2.06

%

 

$

8,283,778

 

 

$

34,512

 

0.56

%

(1)

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.

Tangible assets, tangible equity, tangible common equity, tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest income to adjusted total revenue, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, adjusted PTPP income, PTPP income ROAA, adjusted PTPP income ROAA, efficiency ratio, adjusted efficiency ratio, adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS), adjusted return on average assets (ROAA) and adjusted common equity tier 1 (CET 1) 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 assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock, as applicable, from tangible equity. Return on average tangible common equity is calculated by dividing net income available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.

PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding net interest income and adjusted noninterest income (adjusted total revenue) and subtracting adjusted noninterest expense. PTPP income ROAA is calculated by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is calculated by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is calculated by dividing noninterest expense by total revenue. Adjusted efficiency ratio is calculated by dividing adjusted noninterest expense by adjusted total revenue.

Adjusted net income is calculated by adjusting net income for tax-effected noninterest income and noninterest expense adjustments and the tax impact from the exercise of stock appreciation rights for the periods indicated. Adjusted ROAA is calculated by dividing annualized adjusted net income by average assets. Adjusted net income available to common stockholders is calculated by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted earnings per share is calculated by dividing adjusted net income available to common stockholders by the weighted average diluted common shares outstanding.

Common equity tier 1 and the common equity tier 1 ratio are defined by regulatory capital rules. Adjusted CET 1 is calculated by subtracting net unrealized losses on securities from CET 1 capital and provided to reflect management’s assessment of capital impacts from net unrealized losses on securities. Capital ratios as of September 30, 2023 are preliminary.

Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial 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.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

Tangible common equity, and tangible common equity to tangible assets ratio

 

 

 

 

 

 

 

 

 

Total assets

$

9,247,072

 

 

$

9,370,265

 

 

$

10,038,901

 

 

$

9,197,016

 

 

$

9,368,578

 

Less goodwill

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

Less other intangible assets

 

(6,142

)

 

 

(6,603

)

 

 

(7,065

)

 

 

(7,526

)

 

 

(8,081

)

Tangible assets(1)

$

9,126,618

 

 

$

9,249,350

 

 

$

9,917,524

 

 

$

9,075,178

 

 

$

9,246,185

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

$

1,001,720

 

 

$

957,054

 

 

$

958,907

 

 

$

959,618

 

 

$

951,990

 

Less goodwill

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

Less other intangible assets

 

(6,142

)

 

 

(6,603

)

 

 

(7,065

)

 

 

(7,526

)

 

 

(8,081

)

Tangible common equity(1)

 

881,266

 

 

 

836,139

 

 

 

837,530

 

 

 

837,780

 

 

 

829,597

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity to total assets

 

10.83

%

 

 

10.21

%

 

 

9.55

%

 

 

10.43

%

 

 

10.16

%

Tangible common equity to tangible assets(1)

 

9.66

%

 

 

9.04

%

 

 

8.44

%

 

 

9.23

%

 

 

8.97

%

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

56,959,141

 

 

 

56,944,706

 

 

 

58,237,303

 

 

 

58,544,534

 

 

 

59,679,558

 

Class B non-voting non-convertible common shares outstanding

 

477,321

 

 

 

477,321

 

 

 

477,321

 

 

 

477,321

 

 

 

477,321

 

Total common shares outstanding

 

57,436,462

 

 

 

57,422,027

 

 

 

58,714,624

 

 

 

59,021,855

 

 

 

60,156,879

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

$

17.44

 

 

$

16.67

 

 

$

16.33

 

 

$

16.26

 

 

$

15.83

 

Tangible common equity per share(1)

$

15.34

 

 

$

14.56

 

 

$

14.26

 

 

$

14.19

 

 

$

13.79

 

(1)

Non-GAAP measure.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Return on tangible common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total stockholders' equity

$

977,410

 

 

$

997,049

 

 

$

1,004,794

 

 

$

989,414

 

 

$

960,806

 

 

$

992,984

 

 

$

993,208

 

Less average preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,043

)

Average common stockholders' equity

 

977,410

 

 

 

997,049

 

 

 

1,004,794

 

 

 

989,414

 

 

 

960,806

 

 

 

992,984

 

 

 

968,165

 

Less average goodwill

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(114,312

)

 

 

(98,916

)

 

 

(114,312

)

 

 

(96,133

)

Less average other intangible assets

 

(6,430

)

 

 

(6,885

)

 

 

(7,355

)

 

 

(7,869

)

 

 

(4,570

)

 

 

(6,887

)

 

 

(5,216

)

Average tangible common equity(1)

$

856,668

 

 

$

875,852

 

 

$

883,127

 

 

$

867,233

 

 

$

857,320

 

 

$

871,785

 

 

$

866,816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

$

42,574

 

 

$

17,879

 

 

$

20,278

 

 

$

21,519

 

 

$

24,196

 

 

$

80,731

 

 

$

94,253

 

Add amortization of intangible assets

 

461

 

 

 

462

 

 

 

461

 

 

 

555

 

 

 

396

 

 

 

1,384

 

 

 

1,150

 

Less tax effect on amortization of intangible assets(2)

 

(136

)

 

 

(137

)

 

 

(136

)

 

 

(164

)

 

 

(117

)

 

 

(409

)

 

 

(340

)

Net income available to common stockholders after adjustments for intangible assets(1)

$

42,899

 

 

$

18,204

 

 

$

20,603

 

 

$

21,910

 

 

$

24,475

 

 

$

81,706

 

 

$

95,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average equity

 

17.28

%

 

 

7.19

%

 

 

8.18

%

 

 

8.63

%

 

 

9.99

%

 

 

10.87

%

 

 

13.38

%

Return on average tangible common equity(1)

 

19.87

%

 

 

8.34

%

 

 

9.46

%

 

 

10.02

%

 

 

11.33

%

 

 

12.53

%

 

 

14.66

%

(1)

Non-GAAP measure.

(2)

Adjustments shown at a statutory tax rate of 29.6%.

Banc of California, Inc.

Consolidated Operations

Non-GAAP Measures, Continued

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

2023

 

June 30,

2023

 

March 31,

2023

 

December 31,

2022

 

September 30,

2022

 

September 30,

2023

 

September 30,

2022

Adjusted noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest income

$

50,778

 

 

$

6,024

 

 

$

7,859

 

 

$

(1,427

)

 

$

5,681

 

 

$

64,661

 

 

$

18,777

 

Noninterest income adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (gain) on sale of securities available for sale

 

 

 

 

 

 

 

 

 

 

7,708

 

 

 

 

 

 

 

 

 

(16

)

Gain on merger-related derivative instruments(1)

 

(46,165

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46,165

)

 

 

 

Total noninterest income adjustments

 

(46,165

)

 

 

 

 

 

 

 

 

7,708

 

 

 

 

 

 

(46,165

)

 

 

(16

)

Adjusted noninterest income(2)

$

4,613

 

 

$

6,024

 

 

$

7,859

 

 

$

6,281

 

 

$

5,681

 

 

$

18,496

 

 

$

18,761