Banc of California Reports Fourth Quarter 2020 Financial Results
01/21/2021 - 06:00 AM
Banc of California, Inc. (NYSE: BANC) today reported net income of $21.7 million and net income available to common stockholders for the fourth quarter of 2020 of $17.7 million , or diluted earnings per common share of $0.35 .
Highlights for the fourth quarter included:
Return on average assets of 1.11%
Net interest margin of 3.38% , a 29 basis points increase from the prior quarter
Average cost of total deposits of 0.36% , a 15 basis points decrease from the prior quarter, and period-end cost of deposits at 0.29%
Noninterest-bearing deposit balances increased $108.5 million during the quarter and represented 26% of total deposits at December 31, 2020, up from 20% a year earlier
Allowance for credit losses remained strong at 1.43% of total loans and 230% of non-performing assets
Non-performing loans decreased 45% to $36.6 million or 0.62% of total loans
Total deferrals/forbearances declined to $201.5 million at December 31, 2020 from $282.5 million at September 30, 2020
Common Equity Tier 1 capital at 11.19%
Jared Wolff, President & CEO of Banc of California, commented, “We ended 2020 with a strong quarter that demonstrates the potential of our franchise. We continued to execute on our key initiatives, lowering deposit costs and controlling noninterest expense, while increasing our level of quality earning assets. As a result, we saw significant growth in pre-tax pre-provision income, net income and earnings per share, while generating a return on average assets of more than 1.0% for the fourth quarter.”
“While the operating environment remains uncertain as we begin 2021, we are confident in our ability to continue to execute well on the strategies that are driving earnings growth and franchise value. We believe that we can continue to generate balance sheet growth while protecting our net interest margin and managing expenses, improving operating leverage over the course of 2021,” said Mr. Wolff.
Lynn Hopkins, Chief Financial Officer of Banc of California, said, “In addition to the strong operating results we generated in the fourth quarter, noninterest income benefited from recoveries on a number of legacy legal matters that we strategically decided to pursue, impacting net income by approximately $2.8 million , or $0.05 per share. We continue to pursue additional recovery opportunities that could positively impact earnings and tangible book value per share in future quarters.”
“Our focus on reducing deposit costs, shifting excess liquidity into higher yielding earning assets, and increasing production of quality loans at attractive risk-adjusted yields resulted in our net interest margin expanding 29 basis points to 3.38% during the fourth quarter. We also continued to see positive trends in asset quality, with two of our largest non-performing assets being resolved during the quarter with no additional provision required, and total loan deferrals continuing to decline. We also successfully raised $85 million in subordinated debt during the fourth quarter. Although the additional subordinated debt temporarily weighs on our cost of funds, it will position the Company to move forward on capital actions during 2021, subject to regulatory approval, that are expected to be accretive to earnings,” said Ms. Hopkins.
Income Statement Highlights
Three Months Ended
Year Ended
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
($ in thousands)
Total interest and dividend income
$
73,530
$
69,666
$
72,697
$
74,714
$
83,702
$
290,607
$
391,111
Total interest expense
11,967
13,811
17,382
22,853
27,042
66,013
142,948
Net interest income
61,563
55,855
55,315
51,861
56,660
224,594
248,163
Total noninterest income
6,975
3,954
5,528
2,061
4,930
18,518
12,116
Total revenue
68,538
59,809
60,843
53,922
61,590
243,112
260,279
Total noninterest expense
38,950
40,394
72,770
46,919
47,483
199,033
196,472
Pre-tax / pre-provision income (loss)
29,588
19,415
(11,927)
7,003
14,107
44,079
63,807
Provision for (reversal of) credit losses
991
1,141
11,826
15,761
(2,976)
29,719
35,829
Income tax expense (benefit)
6,894
2,361
(5,304)
(2,165)
2,811
1,786
4,219
Net income (loss)
$
21,703
$
15,913
$
(18,449)
$
(6,593)
$
14,272
$
12,574
$
23,759
Net income (loss) available to common stockholders(1)
$
17,706
$
12,084
$
(21,936)
$
(9,694)
$
10,415
$
(1,103)
$
2,624
(1) Balance represents the net income (loss) available to common stockholders after subtracting preferred stock dividends, income allocated to participating securities, participating securities dividends, and impact of preferred stock redemption from net income (loss). Refer to the Statement of Operations for additional detail on these amounts.
Net interest income
Q4-2020 vs Q3 -2020
Net interest income increased $5.7 million to $61.6 million for the fourth quarter due to both lower funding costs, higher yields on interest-earning assets and higher average interest-earning assets. Compared to the prior quarter, average interest-earning assets increased by $64.7 million to $7.25 billion , including higher average loans of $211.3 million and higher average securities of $48.5 million , offset by lower other interest-earning assets of $195.2 million . During the fourth quarter, average deposits increased $66.4 million , consisting of higher average noninterest-bearing deposits of $91.0 million , offset by lower average interest-bearing deposits of $24.6 million . Average FHLB advances decreased $73.9 million primarily due to maturities of $105.0 million in advances during the quarter. Average long-term debt and other interest-bearing liabilities increased $64.4 million due to the issuance of $85.0 million in subordinated notes in October 2020.
The net interest margin increased 29 basis points to 3.38% for the fourth quarter from 3.09% for the third quarter as the average earning-assets yield increased 18 basis points and the average cost of funds decreased 12 basis points. The yield on average interest-earning assets increased to 4.04% for the fourth quarter from 3.86% for the third quarter due to an overall higher loan yield and improved mix of interest-earning assets. The average yield on loans increased 12 basis points to 4.58% during the fourth quarter due to higher average commercial and industrial loans and higher prepayment penalty fees from refinancing activity and accelerated accretion from PPP loan forgiveness. The average yield on securities decreased 13 basis points to 2.13% due mostly to a 22 basis point decrease in average yield on collateralized loan obligations (CLOs) to 1.94% for the fourth quarter from 2.16% for the third quarter as these securities reprice quarterly.
The average cost of funds decreased 12 basis points to 0.70% for the fourth quarter from 0.82% for the third quarter. This decrease was driven by the lower average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits during the fourth quarter. We continue to reduce our reliance on high cost transaction accounts, non-brokered certificates of deposits, and wholesale funds as we execute on our relationship-focused business banking strategy. The average cost of interest-bearing liabilities decreased 13 basis points to 0.89% for the fourth quarter from 1.02% for the third quarter due to actively managing down the cost of interest-bearing deposits into the current rate environment. The average cost of interest-bearing deposits declined 19 basis points to 0.47% for the fourth quarter from 0.66% for the prior quarter. Additionally, average noninterest-bearing deposits increased by $91.0 million and represented 24.1% of total average deposits in the fourth quarter compared to 22.9% of total average deposits for the third quarter. Our total cost of average deposits decreased 15 basis points to 0.36% for the fourth quarter. The spot rate of total deposits at the end of the fourth quarter of 2020 was 0.29% .
YTD 2020 vs YTD 2019
Net interest income for the year ended December 31, 2020 decreased $23.6 million to $224.6 million from $248.2 million for 2019. Net interest income was impacted by lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship-based lending, offset by improved funding costs. For the year ended December 31, 2020, average interest-earning assets declined $1.44 billion to $7.16 billion , and the net interest margin increased 24 basis points to 3.13% for the year ended December 31, 2020 compared to 2.89% for the same 2019 period.
The net interest margin expanded due to a 78 basis point decrease in the average cost of funds, outpacing a 49 basis point decline in the average interest-earning asset yield. The average yield on interest-earning assets decreased to 4.06% for the year ended December 31, 2020, from 4.55% for 2019 due mostly to the impact of lower market interest rates on loan and securities yields over this time period. The average yield on loans was 4.52% for the year ended December 31, 2020, compared to 4.76% for the same 2019 period and the average yield on securities decreased 125 basis points due mostly to CLOs repricing into the lower rate environment.
The average cost of funds decreased to 0.99% for the year ended December 31, 2020, from 1.77% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The average cost of interest-bearing liabilities decreased 81 basis points to 1.23% for the year ended December 31, 2020 from 2.04% for 2019 due to the combination of actively managing deposit pricing down into the lower interest rate environment and the lower average cost of FHLB term advances resulting from maturities and refinancing certain term advances during 2020. Compared to the prior year, the average cost of interest-bearing deposits declined 96 basis points to 0.85% and the average cost of total deposits decreased 86 basis points to 0.66% . Additionally, average noninterest-bearing deposits increased by $269.5 million when compared to the same 2019 period.
Provision for credit losses
Q4-2020 vs Q3 -2020
The provision for credit losses totaled $1.0 million for the fourth quarter, compared to $1.1 million for the third quarter. The fourth quarter provision for credit losses was comprised of $684 thousand in general reserves and $306 thousand related to specific reserves, offset by provision release of $23 thousand related to unfunded commitments. The general provision is due to changes in key macro-economic forecast variables, such as unemployment and gross domestic product, improved credit quality metrics, and higher period end loan balances of $220.4 million .
YTD 2020 vs YTD 2019
During the year ended December 31, 2020, the provision for credit losses totaled $29.7 million under the CECL model, compared to $35.8 million under the incurred loss model during 2019. The lower provision for credit losses was primarily the result of lower net charge-offs and lower period end loan balances of $53.5 million , offset by increases from using the new CECL model, the estimated future impact of the health crisis, and higher specific reserves.
Noninterest income
Q4-2020 vs Q3 -2020
Noninterest income increased $3.0 million , to $7.0 million for the fourth quarter due mostly to higher legacy legal settlements for the benefit of the Company of $2.4 million . In addition, customer service fees increased $455 thousand and processing fees for credit facilities increased $292 thousand , offset by lower gains on sale of loans of $297 thousand . There were no sales of loans during the fourth quarter of 2020.
YTD 2020 vs YTD 2019
Noninterest income for the year ended December 31, 2020 increased $6.4 million to $18.5 million compared to the prior year. Noninterest income in 2019 included a $4.5 million loss on the multifamily loans securitization, which was offset by a reduction in the provision for credit losses of $5.1 million . There was no similar securitization activity in 2020. Excluding the impact of the 2019 multifamily loans securitization, noninterest income increased $1.9 million as a result of (i) higher net gain on sale of investment securities of $6.9 million , (ii) lower impairment losses on investment securities of $731 thousand and (iii) higher other income of $2.5 million related to legacy legal settlements for the benefit of the Company. These increases were offset by (iv) lower other net gains on sales of loans of $3.0 million , (v) lower earn-out income related to the sale of our mortgage banking division of $1.4 million , (vi) lower other income of $2.0 million due in part to lower rental income and (vii) a $1.6 million loss due to decreases in the fair value of loans held for sale in 2020.
Noninterest expense
Q4-2020 vs Q3 -2020
Noninterest expense decreased $1.4 million to $39.0 million for the fourth quarter compared to the prior quarter. The decrease was primarily due to lower professional fees of $5.1 million due to higher recoveries of indemnified legal costs which totaled $4.2 million in the fourth quarter compared to $1.3 million during the third quarter, offset by higher salaries and benefits expense of $2.6 million due mostly to higher incentive compensation accruals and lower gains in alternative energy partnership investments of $757 thousand . Total operating costs, defined as noninterest expense adjusted for certain non-core items (refer to section Non-GAAP Measures ), increased $3.4 million to $44.0 million for the fourth quarter compared to $40.7 million for the prior quarter primarily due to higher incentive compensation.
YTD 2020 vs YTD 2019
Noninterest expense for the year ended December 31, 2020 increased $2.6 million to $199.0 million compared to the prior year. The increase was primarily due to: (i) the $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, (ii) a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, and (iii) higher professional fees of $3.5 million , due to overall reductions in recoveries of $18.2 million related to indemnified legal fees for resolved legal proceedings and various other litigations. These increases were partially offset by: (i) lower losses in alternative energy partnership investments of $2.1 million , (ii) lower salaries and benefits expense of $9.1 million resulting from lower headcount, (iii) lower advertising costs of $5.1 million due to the termination of our LAFC naming rights agreements and reductions in overall events and media spending, (iv) lower regulatory assessments of $5.0 million due to changes in our asset size and an FDIC assessment credit, (v) lower restructuring costs of $4.3 million and (vi) lower occupancy, equipment and other expenses of $4.7 million due to gaining other efficiencies.
Income taxes
Q4-2020 vs Q3 -2020
Income tax expense totaled $6.9 million for the fourth quarter resulting in an effective tax rate of 24.1% compared to a $2.4 million expense for the third quarter resulting in an effective tax rate of 12.9% . The increase in effective tax rate between quarters was based on the increase in pre-tax income.
YTD 2020 vs YTD 2019
Income tax expense totaled $1.8 million for the year ended December 31, 2020, representing an effective tax rate of 12.4% , compared to income tax expense of $4.2 million and an effective tax rate of 15.1% for year ended December 31, 2019. The effective tax rate for the year ended December 31, 2020 differs from the 21% federal statutory rate due to the impact of state taxes as well as various permanent tax differences.
Balance Sheet
At December 31, 2020, total assets were $7.88 billion , which represented a linked-quarter increase of $139.2 million . The following table shows selected balance sheet line items as of the dates indicated.
Amount Change
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Q4-20 vs. Q3-20
Q4-20 vs. Q4-19
($ in thousands)
Securities available-for-sale
$
1,231,431
$
1,245,867
$
1,176,029
$
969,427
$
912,580
$
(14,436)
$
318,851
Loans held-for-investment
$
5,898,405
$
5,678,002
$
5,627,696
$
5,667,464
$
5,951,885
$
220,403
$
(53,480)
Loans held-for-sale
$
1,413
$
1,849
$
19,768
$
20,234
$
22,642
$
(436)
$
(21,229)
Total assets
$
7,877,334
$
7,738,106
$
7,770,138
$
7,662,607
$
7,828,410
$
139,228
$
48,924
Noninterest-bearing deposits
$
1,559,248
$
1,450,744
$
1,391,504
$
1,256,081
$
1,088,516
$
108,504
$
470,732
Total deposits
$
6,085,800
$
6,032,266
$
6,037,465
$
5,562,838
$
5,427,167
$
53,534
$
658,633
Borrowings (1)
$
796,110
$
733,105
$
790,707
$
1,151,479
$
1,368,421
$
63,005
$
(572,311)
Total liabilities
$
6,980,127
$
6,863,852
$
6,923,179
$
6,827,605
$
6,921,165
$
116,275
$
58,962
Total equity
$
897,207
$
874,254
$
846,959
$
835,002
$
907,245
$
22,953
$
(10,038)
(1) Represents Advances from Federal Home Loan Bank and Notes payable, net
Investments
Securities available-for-sale decreased $14.4 million during the fourth quarter to $1.23 billion at December 31, 2020 primarily due to the call of $16.1 million in CLOs and principal payments of $7.1 million , partially offset by higher unrealized net gains of $9.2 million . The increase in the unrealized net gain was due mostly to credit spreads tightening during the quarter resulting in a positive change on the pricing of the CLOs and corporate debt securities. There were no sales of securities during the fourth quarter. As of December 31, 2020, our securities portfolio included $677.8 million of CLOs, $318.2 million of agency securities, $68.6 million of municipal securities, $149.3 million of corporate debt securities, and $17.4 million of SBA pool securities. The CLO portfolio, which is comprised only of AA and AAA rated securities, represented 55.1% of the total securities portfolio and the carrying value included an unrealized net loss of $9.7 million at December 31, 2020 compared to an unrealized net loss of $17.7 million at September 30, 2020.
Loans
The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
($ in thousands)
Composition of held-for-investment loans
Commercial real estate
$
807,195
$
826,683
$
822,694
$
810,024
$
818,817
Multifamily
1,289,820
1,476,803
1,434,071
1,466,083
1,494,528
Construction
176,016
197,629
212,979
227,947
231,350
Commercial and industrial
2,088,308
1,586,824
1,436,990
1,578,223
1,691,270
SBA
273,444
320,573
310,784
70,583
70,981
Total commercial loans
4,634,783
4,408,512
4,217,518
4,152,860
4,306,946
Single-family residential mortgage
1,230,236
1,234,479
1,370,785
1,467,375
1,590,774
Other consumer
33,386
35,011
39,393
47,229
54,165
Total consumer loans
1,263,622
1,269,490
1,410,178
1,514,604
1,644,939
Total gross loans
$
5,898,405
$
5,678,002
$
5,627,696
$
5,667,464
$
5,951,885
Composition percentage of held-for-investment loans
Commercial real estate
13.7
%
14.6
%
14.6
%
14.3
%
13.8
%
Multifamily
21.9
%
26.0
%
25.5
%
25.9
%
25.1
%
Construction
3.0
%
3.5
%
3.8
%
4.0
%
3.9
%
Commercial and industrial
35.3
%
28.0
%
25.5
%
27.9
%
28.4
%
SBA
4.6
%
5.6
%
5.5
%
1.2
%
1.2
%
Total commercial loans
78.5
%
77.7
%
74.9
%
73.3
%
72.4
%
Single-family residential mortgage
20.9
%
21.7
%
24.4
%
25.9
%
26.7
%
Other consumer
0.6
%
0.6
%
0.7
%
0.8
%
0.9
%
Total consumer loans
21.5
%
22.3
%
25.1
%
26.7
%
27.6
%
Total gross loans
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Held-for-investment loans increased $220.4 million to $5.90 billion from the prior quarter, resulting from higher commercial and industrial (C&I) loans of $501.5 million due, in part, to increased utilization of credit facilities. The increases were partially offset by decreases in commercial real estate loans of $19.5 million , multifamily loans of $187.0 million , construction loans of $21.6 million due to prepayment activity. SBA loans decreased $47.1 million due to the SBA's processing of forgiveness requests for 268 PPP loans totaling $45.0 million during the quarter. At December 31, 2020, SBA loans included $210.0 million of PPP loans, net of fees.
We continue to focus the real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. Currently, loans secured by residential real estate (single-family, multifamily, single-family construction, and credit facilities) represent approximately 68% of our total loans outstanding.
The C&I portfolio has limited exposure to certain business sectors undergoing severe stress. The C&I industry concentrations in dollars and as a percentage of total outstanding C&I loan balances are summarized below:
December 31, 2020
Amount
% of Portfolio
($ in thousands)
C&I Portfolio by Industry
Finance and insurance (includes Warehouse lending)
$
1,397,278
67
%
Real Estate & Rental Leasing
245,748
12
%
Gas Stations
69,743
3
%
Healthcare
69,381
3
%
Wholesale Trade
38,700
2
%
Television / Motion Pictures
38,416
2
%
Manufacturing
34,276
2
%
Food Services
30,280
1
%
Other Retail Trade
20,759
1
%
Professional Services
16,572
1
%
Transportation
5,286
—
%
Accommodations
1,452
—
%
All other
120,417
6
%
Total
$
2,088,308
100
%
Deposits
The following table sets forth the composition of our deposits at the dates indicated.
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
($ in thousands)
Composition of deposits
Noninterest-bearing checking
$
1,559,248
$
1,450,744
$
1,391,504
$
1,256,081
$
1,088,516
Interest-bearing checking
2,107,942
2,045,115
1,846,698
1,572,389
1,533,882
Money market
714,297
689,769
765,854
575,820
715,479
Savings
932,363
946,293
939,018
877,947
885,246
Non-brokered certificates of deposit
755,727
820,531
924,630
1,071,936
1,204,044
Brokered certificates of deposit
16,223
79,814
169,761
208,665
—
Total deposits
$
6,085,800
$
6,032,266
$
6,037,465
$
5,562,838
$
5,427,167
Composition percentage of deposits
Noninterest-bearing checking
25.6
%
24.1
%
23.0
%
22.6
%
20.1
%
Interest-bearing checking
34.6
%
33.9
%
30.6
%
28.3
%
28.2
%
Money market
11.7
%
11.4
%
12.7
%
10.3
%
13.2
%
Savings
15.3
%
15.7
%
15.6
%
15.8
%
16.3
%
Non-brokered certificates of deposit
12.4
%
13.6
%
15.3
%
19.3
%
22.2
%
Brokered certificates of deposit
0.4
%
1.3
%
2.8
%
3.7
%
—
%
Total deposits
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Total deposits increased $53.5 million during the fourth quarter of 2020 to $6.09 billion due to higher noninterest-bearing checking balances of $108.5 million , interest-bearing checking of $62.8 million , and money market balances of $24.5 million , offset by lower savings balances of $13.9 million , brokered certificates of deposit of $63.6 million and non-brokered certificates of deposit of $64.8 million . We continue to focus on growing relationship-based deposits, strategically augmented by wholesale funding, as we actively managed down deposit costs in response to the interest rate cuts by the Federal Reserve in March of 2020. Noninterest-bearing deposits totaled $1.56 billion and represented 25.6% of total deposits at December 31, 2020 compared to $1.45 billion , or 24.1% of total deposits, at September 30, 2020 and $1.09 billion , or 20.1% of total deposits at December 31, 2019.
Debt
Advances from the FHLB decreased $19.7 million , or 4% , to $539.8 million , as of December 31, 2020, due to maturities of $105.0 million in term advances, offset by overnight advances. At the end of the fourth quarter, FHLB advances included $85.0 million in overnight borrowings, $45.0 million in term advances maturing within three months, and $416.0 million maturing beyond three months with a weighted average life of 4.9 years and weighted average interest rate of 2.5% .
During the fourth quarter of 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% fixed-to-floating rate subordinated notes due October 30, 2030. Net proceeds after debt issuance costs were approximately $82.6 million .
Equity
At December 31, 2020, total stockholders’ equity increased by $23.0 million to $897.2 million and tangible common equity increased by $23.3 million to $672.6 million on a linked-quarter basis. The increase in total stockholders’ equity for the fourth quarter, was a result of net income of $21.7 million , higher net accumulated other comprehensive income of $6.5 million and share-based compensation of $1.4 million , offset by dividends to common and preferred stockholders of $6.5 million . Tangible book value per share increased to $13.39 as of December 31, 2020 from $12.92 at September 30, 2020.
Capital ratios remain strong with total risk-based capital at 17.01% and a tier 1 leverage ratio of 10.90% . The following table sets forth our regulatory capital ratios at December 31, 2020 and the previous four quarters. The interim capital relief related to the adoption of CECL increased the Bank's leverage ratio approximately 10 basis points at December 31, 2020.
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Capital Ratios(1)
Banc of California, Inc.
Total risk-based capital ratio
17.01
%
16.19
%
16.35
%
16.16
%
15.90
%
Tier 1 risk-based capital ratio
14.35
%
14.94
%
15.10
%
14.91
%
14.83
%
Common equity tier 1 capital ratio
11.19
%
11.59
%
11.68
%
11.58
%
11.56
%
Tier 1 leverage ratio
10.90
%
10.79
%
10.56
%
11.20
%
10.89
%
Banc of California, NA
Total risk-based capital ratio
17.27
%
18.14
%
18.17
%
18.21
%
17.46
%
Tier 1 risk-based capital ratio
16.02
%
16.89
%
16.92
%
16.96
%
16.39
%
Common equity tier 1 capital ratio
16.02
%
16.89
%
16.92
%
16.96
%
16.39
%
Tier 1 leverage ratio
12.19
%
12.21
%
11.84
%
12.67
%
12.02
%
(1) December 31, 2020 capital ratios are preliminary.
Credit Quality
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Asset quality information and ratios
($ in thousands)
Delinquent loans held-for-investment
30 to 89 days delinquent
$
13,981
$
51,229
$
49,810
$
56,338
$
32,873
90+ days delinquent
17,636
31,809
45,384
28,632
24,734
Total delinquent loans
$
31,617
$
83,038
$
95,194
$
84,970
$
57,607
Total delinquent loans to total loans
0.54
%
1.46
%
1.69
%
1.50
%
0.97
%
Non-performing assets, excluding loans held-for-sale
Non-performing loans
$
35,900
$
66,337
$
72,703
$
56,471
$
43,354
90+ days delinquent and still accruing loans
728
547
—
—
—
Other real estate owned
—
—
—
—
—
Non-performing assets
$
36,628
$
66,884
$
72,703
$
56,471
$
43,354
ALL to non-performing loans
221.22
%
135.95
%
124.30
%
138.55
%
132.97
%
Non-performing loans to total loans held-for-investment
0.62
%
1.18
%
1.29
%
1.00
%
0.73
%
Non-performing assets to total assets
0.46
%
0.86
%
0.94
%
0.74
%
0.55
%
Troubled debt restructurings (TDRs)
Performing TDRs
$
4,733
$
5,408
$
5,597
$
6,100
$
6,620
Non-performing TDRs
4,264
20,002
20,275
20,852
21,837
Total TDRs
$
8,997
$
25,410
$
25,872
$
26,952
$
28,457
Total delinquent loans decreased $51.4 million in the fourth quarter to $31.6 million at December 31, 2020, due to $58.8 million returning to current status and $0.1 million of principal payments or payoffs, offset by $7.5 million of additions. Delinquent loans included primarily legacy single-family residential loans of $22.9 million , or 73% of the total balance at quarter end, and represented $48.1 million of the quarter over quarter decrease. Excluding delinquent single-family residential loans, delinquent loans totaled $8.7 million , or 0.19% of total loans at December 31, 2020.
Non-performing loans decreased $30.3 million to $36.6 million as of December 31, 2020, of which $17.7 million , or 48% relates to loans in a current payment status. The fourth quarter decrease was due primarily to $35.8 million in cured loans and payoffs, offset by $5.5 million of loans placed on non-accrual status. During the quarter, a previously disclosed $9.1 million single-family mortgage residential loan with a loan-to-value ratio of 58% returned to accrual status and a $16.1 million legacy shared national credit was resolved resulting in a charge-off of $10.7 million in previously established specific reserves.
At December 31, 2020, non-performing loans included (i) single-family residential loans totaling $13.5 million , or 37% of total non-performing loans, (ii) commercial loans of $15.6 million , or 43% of total non-performing loans, and (iii) a legacy relationship totaling $7.5 million , or 20% of total non-performing loans, that is well-secured by a combination of commercial real estate and single-family residential properties with an average loan-to-value ratio of 51% .
In light of the pandemic, we provided support to clients by granting loan deferments or forbearances. As of December 31, 2020 loans on deferment or forbearance status totaled $201.5 million as shown below:
December 31, 2020
September 30, 2020
Count
Amount(1)
% of Loans
Count
Amount
% of Loans
($ in thousands)
Single-family residential mortgage
80
$
88,343
7
%
123
$
137,510
11
%
All other loans
33
113,163
2
%
35
145,036
3
%
Total
113
$
201,506
3
%
158
$
282,546
5
%
(1) Includes loans in the process of deferment or forbearance which are not reported as delinquent.
Of the balances as of December 31, 2020, $61.7 million of all other loans are in their second or third deferment and 8 commercial loans totaling $38.8 million were under review and pending approval for a first or second deferral. We continue to actively monitor and manage all lending relationships in a manner that supports our clients and protects the Bank.
Allowance for Credit Losses
Three Months Ended
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
($ in thousands)
Allowance for loan losses (ALL)
Balance at beginning of period
$
90,927
$
90,370
$
78,243
$
57,649
$
62,927
Adoption of ASU 2016-13 (1)
—
—
—
7,609
—
Loans charged off
(11,520)
(1,821)
—
(2,076)
(2,706)
Recoveries
609
248
608
350
106
Net (charge-offs) recoveries
(10,911)
(1,573)
608
(1,726)
(2,600)
Provision for (reversal of) loan losses
1,014
2,130
11,519
14,711
(2,678)
Balance at end of period
$
81,030
$
90,927
$
90,370
$
78,243
$
57,649
Reserve for unfunded loan commitments
Balance at beginning of period
$
3,206
$
4,195
$
3,888
$
4,064
$
4,362
Adoption of ASU 2016-13 (1)
—
—
—
(1,226)
—
(Reversal of) provision for credit losses
(23)
(989)
307
1,050
(298)
Balance at end of period
3,183
3,206
4,195
3,888
4,064
Allowance for credit losses (ACL)
$
84,213
$
94,133
$
94,565
$
82,131
$
61,713
ALL to total loans
1.37
%
1.60
%
1.61
%
1.38
%
0.97
%
ACL to total loans
1.43
%
1.66
%
1.68
%
1.45
%
1.04
%
ACL to total loans, excluding PPP loans
1.48
%
1.74
%
1.76
%
1.45
%
1.04
%
ACL to NPLs
229.91
%
140.74
%
130.07
%
145.44
%
142.35
%
Annualized net loan charge-offs (recoveries) to average total loans held-for-investment
0.77
%
0.12
%
(0.04)
%
0.12
%
0.17
%
Reserve for loss on repurchased loans
Balance at beginning of period
$
5,487
$
5,567
$
5,601
$
6,201
$
6,561
Initial provision for loan repurchases
—
11
—
—
—
Provision for (reversal of) provision for loan repurchases
28
(91)
(34)
(600)
(360)
Balance at end of period
$
5,515
$
5,487
$
5,567
$
5,601
$
6,201
(1) Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather than the previously applied incurred loss methodology.
The allowance for expected credit losses ("ACL"), which includes the reserve for unfunded loan commitments, totaled $84.2 million , or 1.43% of total loans, at December 31, 2020, compared to $94.1 million , or 1.66% of total loans, at September 30, 2020. The $9.9 million decrease in the ACL was due to: (i) net charge-offs of $10.9 million , offset by increases in (ii) general reserves of $684 thousand due to the impact of higher loan balances, updated forecasts, and improved credit quality metrics, and (iii) specific reserves of $306 thousand . The ACL coverage of non-performing loans was 230% at December 31, 2020 compared to 141% at September 30, 2020 and 142% at December 31, 2019.
Our ACL methodology and resulting provision continues to be impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. 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 ("MEVs") released by our model provider during December 2020. In contrast to the September 2020 forecasts, these December forecasts reflect a more favorable view of the economy (i.e. higher GDP growth rates and lower unemployment rates). However, the Company-specific economic view recognizes that the foreseeable future continues to be uncertain with respect to the rollout of the approved vaccines for COVID-19; the lack of clarity regarding the impact of the most recent government stimulus; the continued unknown impact of the COVID-19 pandemic on the economy and certain industry segments; and the unknown benefit from Federal Reserve and other government actions. Accordingly, the ACL level and resulting provision reflect these uncertainties. The ACL also incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.
The Company will host a conference call to discuss its fourth quarter 2020 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, January 21, 2021. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 3636956. 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 10145608.
About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $7.9 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the “Bank”). The Bank has 36 offices including 29 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. 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. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission. In addition to those, statements about the potential effects of the COVID-19 pandemic on the business, financial results and condition of Banc of California, Inc. and its subsidiaries may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the control of Banc of California, Inc., including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on Banc of California Inc. and its subsidiaries, their customers and third parties. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
Banc of California, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
ASSETS
Cash and cash equivalents
$
220,819
$
292,490
$
420,640
$
435,992
$
373,472
Securities available-for-sale
1,231,431
1,245,867
1,176,029
969,427
912,580
Loans held-for-sale
1,413
1,849
19,768
20,234
22,642
Loans held-for-investment
5,898,405
5,678,002
5,627,696
5,667,464
5,951,885
Allowance for loan losses
(81,030)
(90,927)
(90,370)
(78,243)
(57,649)
Federal Home Loan Bank and other bank stock
44,506
44,809
46,585
57,237
59,420
Servicing rights, net
1,454
1,621
1,753
2,009
2,299
Premises and equipment, net
121,520
123,812
125,247
127,379
128,021
Alternative energy partnership investments, net
27,977
27,786
26,967
27,347
29,300
Goodwill
37,144
37,144
37,144
37,144
37,144
Other intangible assets, net
2,633
2,939
3,292
3,722
4,151
Deferred income tax, net
45,957
43,744
48,288
63,849
44,906
Income tax receivable
1,105
10,701
13,094
7,198
4,233
Bank owned life insurance investment
111,807
111,115
110,487
110,397
109,819
Right of use assets
19,633
18,909
19,408
20,882
22,540
Other assets
192,560
188,245
184,110
190,569
183,647
Total assets
$
7,877,334
$
7,738,106
$
7,770,138
$
7,662,607
$
7,828,410
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits
$
1,559,248
$
1,450,744
$
1,391,504
$
1,256,081
$
1,088,516
Interest-bearing deposits
4,526,552
4,581,522
4,645,961
4,306,757
4,338,651
Total deposits
6,085,800
6,032,266
6,037,465
5,562,838
5,427,167
Advances from Federal Home Loan Bank
539,795
559,482
617,170
978,000
1,195,000
Notes payable, net
256,315
173,623
173,537
173,479
173,421
Reserve for loss on repurchased loans
5,515
5,487
5,567
5,601
6,201
Lease liabilities
20,647
19,938
20,531
22,075
23,692
Accrued expenses and other liabilities
72,055
73,056
68,909
85,612
95,684
Total liabilities
6,980,127
6,863,852
6,923,179
6,827,605
6,921,165
Commitments and contingent liabilities
Preferred stock
184,878
184,878
185,037
187,687
189,825
Common stock
522
522
522
520
520
Common stock, class B non-voting non-convertible
5
5
5
5
5
Additional paid-in capital
634,704
633,409
632,117
631,125
629,848
Retained earnings
110,179
95,001
85,670
110,640
127,733
Treasury stock
(40,827)
(40,827)
(40,827)
(40,827)
(28,786)
Accumulated other comprehensive income (loss), net
7,746
1,266
(15,565)
(54,148)
(11,900)
Total stockholders’ equity
897,207
874,254
846,959
835,002
907,245
Total liabilities and stockholders’ equity
$
7,877,334
$
7,738,106
$
7,770,138
$
7,662,607
$
7,828,410
Banc of California, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
Year Ended
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Interest and dividend income
Loans, including fees
$
66,105
$
62,019
$
63,642
$
65,534
$
73,930
$
257,300
$
333,934
Securities
6,636
6,766
7,816
7,820
7,812
29,038
48,134
Other interest-earning assets
789
881
1,239
1,360
1,960
4,269
9,043
Total interest and dividend income
73,530
69,666
72,697
74,714
83,702
290,607
391,111
Interest expense
Deposits
5,436
7,564
10,205
14,611
18,247
37,816
101,099
Federal Home Loan Bank advances
3,479
3,860
4,818
5,883
6,396
18,040
32,285
Notes payable and other interest-bearing liabilities
3,052
2,387
2,359
2,359
2,399
10,157
9,564
Total interest expense
11,967
13,811
17,382
22,853
27,042
66,013
142,948
Net interest income
61,563
55,855
55,315
51,861
56,660
224,594
248,163
Provision for (reversal of) credit losses
991
1,141
11,826
15,761
(2,976)
29,719
35,829
Net interest income after provision for (reversal of) credit losses
60,572
54,714
43,489
36,100
59,636
194,875
212,334
Noninterest income
Customer service fees
1,953
1,498
1,224
1,096
1,451
5,771
5,982
Loan servicing income
149
186
95
75
312
505
679
Income from bank owned life insurance
691
629
591
578
599
2,489
2,292
Impairment loss on investment securities
—
—
—
—
—
—
(731)
Net gain (loss) on sale of securities available for sale
—
—
2,011
—
3
2,011
(4,852)
Fair value adjustment on loans held for sale
36
24
25
(1,586)
30
(1,501)
106
Net gain (loss) on sale of loans
—
272
—
(27)
(863)
245
7,766
All other income (loss)
4,146
1,345
1,582
1,925
3,398
8,998
874
Total noninterest income
6,975
3,954
5,528
2,061
4,930
18,518
12,116
Noninterest expense
Salaries and employee benefits
25,836
23,277
24,260
23,436
24,036
96,809
105,915
Naming rights termination
—
—
26,769
—
—
26,769
—
Occupancy and equipment
7,560
7,457
7,090
7,243
7,900
29,350
31,308
Professional fees
29
5,147
4,596
5,964
2,611
15,736
12,212
Data processing
1,608
1,657
1,536
1,773
1,684
6,574
6,420
Advertising
171
219
1,157
1,756
2,227
3,303
8,422
Regulatory assessments
748
784
725
484
1,854
2,741
7,711
Reversal of loan repurchase reserves
28
(91)
(34)
(600)
(360)
(697)
(660)
Amortization of intangible assets
306
353
430
429
454
1,518
2,195
Restructuring expense
—
—
—
—
1,626
—
4,263
All other expenses
3,337
3,021
6,408
4,529
4,412
17,295
16,992
Total noninterest expense before (gain) loss in alternative energy partnership investments
39,623
41,824
72,937
45,014
46,444
199,398
194,778
(Gain) loss in alternative energy partnership investments
(673)
(1,430)
(167)
1,905
1,039
(365)
1,694
Total noninterest expense
38,950
40,394
72,770
46,919
47,483
199,033
196,472
Income (loss) from operations before income taxes
28,597
18,274
(23,753)
(8,758)
17,083
14,360
27,978
Income tax expense (benefit)
6,894
2,361
(5,304)
(2,165)
2,811
1,786
4,219
Net income (loss)
21,703
15,913
(18,449)
(6,593)
14,272
12,574
23,759
Preferred stock dividends
3,447
3,447
3,442
3,533
3,540
13,869
15,559
Income allocated to participating securities
456
281
—
—
224
—
—
Participating securities dividends
94
94
94
94
93
376
483
Impact of preferred stock redemption
—
7
(49)
(526)
—
(568)
5,093
Net income (loss) available to common stockholders
$
17,706
$
12,084
$
(21,936)
$
(9,694)
$
10,415
$
(1,103)
$
2,624
Earnings (loss) per common share:
Basic
$
0.35
$
0.24
$
(0.44)
$
(0.19)
$
0.21
$
(0.02)
$
0.05
Diluted
$
0.35
$
0.24
$
(0.44)
$
(0.19)
$
0.20
$
(0.02)
$
0.05
Weighted average number of common shares outstanding
Basic
50,125,462
50,108,655
50,030,919
50,464,777
50,699,915
50,182,096
50,621,785
Diluted
50,335,271
50,190,933
50,030,919
50,464,777
50,927,978
50,182,096
50,724,951
Dividends declared per common share
$
0.06
$
0.06
$
0.06
$
0.06
$
0.06
$
0.24
$
0.31
Banc of California, Inc.
Selected Financial Data
(Unaudited)
Three Months Ended
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Profitability and other ratios of consolidated operations
Return on average assets(1)
1.11
%
0.82
%
(0.96)
%
(0.35)
%
0.71
%
Return on average equity(1)
9.67
%
7.32
%
(8.69)
%
(2.89)
%
6.20
%
Return on average tangible common equity(2)
11.02
%
7.92
%
(13.77)
%
(5.44)
%
6.46
%
Pre-tax pre-provision income (loss) ROAA
1.52
%
1.00
%
(0.62)
%
0.37
%
0.70
%
Adjusted pre-tax pre-provision income ROAA(1)(2)
1.25
%
0.98
%
0.83
%
0.65
%
0.66
%
Dividend payout ratio(3)
17.14
%
25.00
%
(13.64)
%
(31.58)
%
28.57
%
Average loan yield
4.58
%
4.46
%
4.48
%
4.56
%
4.71
%
Average cost of interest-bearing deposits
0.47
%
0.66
%
0.93
%
1.41
%
1.57
%
Average cost of total deposits
0.36
%
0.51
%
0.71
%
1.11
%
1.27
%
Net interest spread
3.15
%
2.84
%
2.77
%
2.56
%
2.65
%
Net interest margin(1)
3.38
%
3.09
%
3.09
%
2.97
%
3.04
%
Noninterest income to total revenue(4)
10.18
%
6.61
%
9.09
%
3.82
%
8.00
%
Noninterest income to average total assets(1)
0.36
%
0.20
%
0.29
%
0.11
%
0.25
%
Noninterest expense to average total assets(1)
2.00
%
2.09
%
3.78
%
2.50
%
2.37
%
Adjusted noninterest expense to average total assets(1)
2.26
%
2.10
%
2.22
%
2.30
%
2.41
%
Efficiency ratio(2)(5)
56.83
%
67.54
%
119.60
%
87.01
%
77.10
%
Adjusted efficiency ratio(2)(5)
64.26
%
68.31
%
72.74
%
78.07
%
78.59
%
Average loans held-for-investment to average deposits
95.65
%
92.86
%
98.51
%
108.54
%
108.50
%
Average securities available-for-sale to average total assets
15.96
%
15.49
%
13.75
%
12.60
%
10.48
%
Average stockholders’ equity to average total assets
11.49
%
11.26
%
11.04
%
12.11
%
11.47
%
(1) Ratios are presented on an annualized basis.
(2) The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.
(3) The ratio is calculated by dividing dividends declared per common share by basic earnings (loss) 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) The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.
Banc of California, Inc.
Average Balance, Average Yield Earned, and Average Cost Paid
(Dollars in thousands)
(Unaudited)
Three Months Ended
December 31, 2020
September 30, 2020
June 30, 2020
Average
Yield
Average
Yield
Average
Yield
Balance
Interest
/ Cost
Balance
Interest
/ Cost
Balance
Interest
/ Cost
Interest-earning assets
Loans held-for-sale
$
1,564
$
8
2.03
%
$
19,544
$
139
2.83
%
$
19,967
$
155
3.12
%
SFR mortgage
1,224,865
12,955
4.21
%
1,311,513
13,178
4.00
%
1,416,358
14,187
4.03
%
Commercial real estate, multifamily, and construction
2,507,950
30,371
4.82
%
2,493,408
29,666
4.73
%
2,524,477
29,459
4.69
%
Commercial and industrial, SBA, and lease financing
1,978,684
21,984
4.42
%
1,673,548
18,585
4.42
%
1,706,120
19,392
4.57
%
Other consumer
31,856
787
9.83
%
35,563
451
5.05
%
40,697
449
4.44
%
Gross loans and leases
5,744,919
66,105
4.58
%
5,533,576
62,019
4.46
%
5,707,619
63,642
4.48
%
Securities
1,239,295
6,636
2.13
%
1,190,765
6,766
2.26
%
1,063,941
7,816
2.95
%
Other interest-earning assets
262,363
789
1.20
%
457,558
881
0.77
%
424,776
1,239
1.17
%
Total interest-earning assets
7,246,577
73,530
4.04
%
7,181,899
69,666
3.86
%
7,196,336
72,697
4.06
%
Allowance for loan losses
(83,745)
(89,679)
(78,528)
BOLI and noninterest-earning assets
602,165
594,885
622,398
Total assets
$
7,764,997
$
7,687,105
$
7,740,206
Interest-bearing liabilities
Savings
$
937,649
$
2,128
0.90
%
$
948,898
$
2,353
0.99
%
$
905,997
$
2,718
1.21
%
Interest-bearing checking
2,086,146
1,131
0.22
%
1,919,327
1,660
0.34
%
1,710,038
2,186
0.51
%
Money market
671,949
414
0.25
%
681,421
645
0.38
%
592,872
850
0.58
%
Certificates of deposit
860,131
1,763
0.82
%
1,030,829
2,906
1.12
%
1,214,939
4,451
1.47
%
Total interest-bearing deposits
4,555,875
5,436
0.47
%
4,580,475
7,564
0.66
%
4,423,846
10,205
0.93
%
FHLB advances
534,303
3,479
2.59
%
608,169
3,860
2.52
%
819,166
4,818
2.37
%
Securities sold under repurchase agreements
—
—
—
%
1,309
2
0.61
%
1,024
2
0.79
%
Long-term debt and other interest-bearing liabilities
238,265
3,052
5.10
%
173,911
2,385
5.46
%
173,977
2,357
5.45
%
Total interest-bearing liabilities
5,328,443
11,967
0.89
%
5,363,864
13,811
1.02
%
5,418,013
17,382
1.29
%
Noninterest-bearing deposits
1,448,422
1,357,411
1,349,735
Noninterest-bearing liabilities
95,567
100,424
118,208
Total liabilities
6,872,432
6,821,699
6,885,956
Total stockholders’ equity
892,565
865,406
854,250
Total liabilities and stockholders’ equity
$
7,764,997
$
7,687,105
$
7,740,206
Net interest income/spread
$
61,563
3.15
%
$
55,855
2.84
%
$
55,315
2.77
%
Net interest margin
3.38
%
3.09
%
3.09
%
Ratio of interest-earning assets to interest-bearing liabilities
136.00
%
133.89
%
132.82
%
Total deposits
$
6,004,297
$
5,436
0.36
%
$
5,937,886
$
7,564
0.51
%
$
5,773,581
$
10,205
0.71
%
Total funding (1)
$
6,776,865
$
11,967
0.70
%
$
6,721,275
$
13,811
0.82
%
$
6,767,748
$
17,382
1.03
%
(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
March 31, 2020
December 31, 2019
Average
Yield
Average
Yield
Balance
Interest
/ Cost
Balance
Interest
/ Cost
Interest-earning assets
Loans held-for-sale
$
22,273
$
220
3.97
%
$
23,527
$
221
3.73
%
SFR mortgage
1,532,967
15,295
4.01
%
1,689,228
16,788
3.94
%
Commercial real estate, multifamily, and construction
2,564,485
30,223
4.74
%
2,633,342
32,763
4.94
%
Commercial and industrial, SBA, and lease financing
1,613,324
19,157
4.78
%
1,821,064
23,381
5.09
%
Other consumer
47,761
639
5.38
%
54,088
777
5.70
%
Gross loans and leases
5,780,810
65,534
4.56
%
6,221,249
73,930
4.71
%
Securities
952,966
7,820
3.30
%
833,726
7,812
3.72
%
Other interest-earning assets
297,444
1,360
1.84
%
330,950
1,960
2.35
%
Total interest-earning assets
7,031,220
74,714
4.27
%
7,385,925
83,702
4.50
%
Allowance for loan losses
(60,470)
(61,642)
BOLI and noninterest-earning assets
592,192
630,308
Total assets
$
7,562,942
$
7,954,591
Interest-bearing liabilities
Savings
890,830
3,296
1.49
%
981,346
3,889
1.57
%
Interest-bearing checking
1,520,922
3,728
0.99
%
1,546,322
4,234
1.09
%
Money market
608,926
1,760
1.16
%
743,695
2,593
1.38
%
Certificates of deposit
1,151,518
5,827
2.04
%
1,332,911
7,531
2.24
%
Total interest-bearing deposits
4,172,196
14,611
1.41
%
4,604,274
18,247
1.57
%
FHLB advances
1,039,055
5,883
2.28
%
1,020,478
6,396
2.49
%
Securities sold under repurchase agreements
—
—
—
%
2,223
15
2.68
%
Long-term debt and other interest-bearing liabilities
174,056
2,359
5.45
%
174,092
2,384
5.43
%
Total interest-bearing liabilities
5,385,307
22,853
1.71
%
5,801,067
27,042
1.85
%
Noninterest-bearing deposits
1,133,306
1,108,077
Noninterest-bearing liabilities
128,282
132,698
Total liabilities
6,646,895
7,041,842
Total stockholders’ equity
916,047
912,749
Total liabilities and stockholders’ equity
$
7,562,942
$
7,954,591
Net interest income/spread
$
51,861
2.56
%
$
56,660
2.65
%
Net interest margin
2.97
%
3.04
%
Ratio of interest-earning assets to interest-bearing liabilities
130.56
%
127.32
%
Total deposits
$
5,305,502
$
14,611
1.11
%
$
5,712,351
$
18,247
1.27
%
Total funding (1)
$
6,518,613
$
22,853
1.41
%
$
6,909,144
$
27,042
1.55
%
(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.
Year Ended
December 31, 2020
December 31, 2019
Average
Yield
Average
Yield
Balance
Interest
/ Cost
Balance
Interest
/ Cost
Interest-earning assets
Loans held-for-sale
$
15,808
$
522
3.30
%
$
80,074
$
2,609
3.26
%
SFR mortgage
1,370,862
55,614
4.06
%
1,979,957
81,419
4.11
%
Commercial real estate, multifamily, and construction
2,522,459
119,720
4.75
%
3,033,392
143,882
4.74
%
Commercial and industrial, SBA, and lease financing
1,743,374
79,119
4.54
%
1,863,108
102,526
5.50
%
Other consumer
38,941
2,325
5.97
%
58,752
3,498
5.95
%
Gross loans and leases
5,691,444
257,300
4.52
%
7,015,283
333,934
4.76
%
Securities
1,112,306
29,038
2.61
%
1,245,995
48,134
3.86
%
Other interest-earning assets
360,532
4,269
1.18
%
339,661
9,043
2.66
%
Total interest-earning assets
7,164,282
290,607
4.06
%
8,600,939
391,111
4.55
%
Allowance for credit losses
(78,152)
(60,633)
BOLI and noninterest-earning assets
602,886
592,674
Total assets
$
7,689,016
$
9,132,980
Interest-bearing liabilities
Savings
920,966
10,495
1.14
%
1,079,778
19,040
1.76
%
Interest-bearing checking
1,810,152
8,705
0.48
%
1,548,067
17,797
1.15
%
Money market
638,992
3,669
0.57
%
809,295
13,717
1.69
%
Certificates of deposit
1,063,705
14,947
1.41
%
2,145,363
50,545
2.36
%
Total interest-bearing deposits
4,433,815
37,816
0.85
%
5,582,503
101,099
1.81
%
FHLB advances
749,195
18,040
2.41
%
1,264,945
32,285
2.55
%
Securities sold under repurchase agreements
584
4
0.68
%
2,166
62
2.86
%
Long-term debt and other interest-bearing liabilities
190,140
10,153
5.34
%
174,148
9,502
5.46
%
Total interest-bearing liabilities
5,373,734
66,013
1.23
%
7,023,762
142,948
2.04
%
Noninterest-bearing deposits
1,322,681
1,053,193
Noninterest-bearing liabilities
110,551
107,579
Total liabilities
6,806,966
8,184,534
Total stockholders’ equity
882,050
948,446
Total liabilities and stockholders’ equity
$
7,689,016
$
9,132,980
Net interest income/spread
$
224,594
2.83
%
$
248,163
2.51
%
Net interest margin
3.13
%
2.89
%
Ratio of interest-earning assets to interest-bearing liabilities
133.32
%
122.45
%
Total deposits
$
5,756,496
$
37,816
0.66
%
$
6,635,696
$
101,099
1.52
%
Total funding (1)
$
6,696,415
$
66,013
0.99
%
$
8,076,955
$
142,948
1.77
%
(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.
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.
Return on average tangible common equity and efficiency ratio, as adjusted, tangible common equity, tangible common equity to tangible assets, tangible common equity per common share, and pre-tax pre-provision income and return on average assets ("ROAA") constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.
Tangible common equity is calculated by subtracting preferred stock, goodwill, and other intangible assets from stockholders' equity. Tangible assets is calculated by subtracting goodwill and other intangible assets from total assets. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
Adjusted efficiency ratio is calculated by excluding (gain) loss in alternative energy partnership investments from noninterest expense and adding total pre-tax return, which includes the (gain) loss in alternative energy partnership investments, to the sum of net interest income and noninterest income (total revenue). Pre-tax pre-provision income is calculated by adding total revenue and subtracting noninterest expense. 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)
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Tangible common equity, and tangible common equity to tangible assets ratio
Total assets
$
7,877,334
$
7,738,106
$
7,770,138
$
7,662,607
$
7,828,410
Less goodwill
(37,144)
(37,144)
(37,144)
(37,144)
(37,144)
Less other intangible assets
(2,633)
(2,939)
(3,292)
(3,722)
(4,151)
Tangible assets(1)
$
7,837,557
$
7,698,023
$
7,729,702
$
7,621,741
$
7,787,115
Total stockholders' equity
$
897,207
$
874,254
$
846,959
$
835,002
$
907,245
Less goodwill
(37,144)
(37,144)
(37,144)
(37,144)
(37,144)
Less other intangible assets
(2,633)
(2,939)
(3,292)
(3,722)
(4,151)
Tangible equity(1)
857,430
834,171
806,523
794,136
865,950
Less preferred stock
(184,878)
(184,878)
(185,037)
(187,687)
(189,825)
Tangible common equity(1)
$
672,552
$
649,293
$
621,486
$
606,449
$
676,125
Total stockholders' equity to total assets
11.39
%
11.30
%
10.90
%
10.90
%
11.59
%
Tangible equity to tangible assets(1)
10.94
%
10.84
%
10.43
%
10.42
%
11.12
%
Tangible common equity to tangible assets(1)
8.58
%
8.43
%
8.04
%
7.96
%
8.68
%
Common shares outstanding
49,767,489
49,760,543
49,750,958
49,593,077
50,413,681
Class B non-voting non-convertible common shares outstanding
477,321
477,321
477,321
477,321
477,321
Total common shares outstanding
50,244,810
50,237,864
50,228,279
50,070,398
50,891,002
Tangible common equity per common share(1)
$
13.39
$
12.92
$
12.37
$
12.11
$
13.29
Book value per common share
$
14.18
$
13.72
$
13.18
$
12.93
$
14.10
(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
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Return on tangible common equity
Average total stockholders' equity
$
892,565
$
865,406
$
854,250
$
916,047
$
912,749
Less average preferred stock
(184,878)
(184,910)
(185,471)
(189,607)
(189,824)
Less average goodwill
(37,144)
(37,144)
(37,144)
(37,144)
(37,144)
Less average other intangible assets
(2,826)
(3,172)
(3,574)
(4,003)
(4,441)
Average tangible common equity(1)
$
667,717
$
640,180
$
628,061
$
685,293
$
681,340
Net income (loss)
$
21,703
$
15,913
$
(18,449)
$
(6,593)
$
14,272
Less preferred stock dividends and impact of preferred stock redemption
(3,447)
(3,454)
(3,393)
(3,007)
(3,540)
Add amortization of intangible assets
306
353
430
429
454
Less tax effect on amortization and impairment of intangible assets
(64)
(74)
(90)
(90)
(95)
Net income (loss) available to common stockholders(1)
$
18,498
$
12,738
$
(21,502)
$
(9,261)
$
11,091
Return on average equity
9.67
%
7.32
%
(8.69)
%
(2.89)
%
6.20
%
Return on average tangible common equity(1)
11.02
%
7.92
%
(13.77)
%
(5.44)
%
6.46
%
Statutory tax rate utilized for calculating tax effect on amortization of intangible assets
21.00
%
21.00
%
21.00
%
21.00
%
21.00
%
(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
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Adjusted noninterest income and expense
Total noninterest income
$
6,975
$
3,954
$
5,528
$
2,061
$
4,930
Noninterest income adjustments:
Net (gain) loss on securities available for sale
—
—
(2,011)
—
(3)
Net (gain) loss on sale of legacy SFR loans held for sale
—
(272)
—
—
—
Fair value adjustment on legacy SFR loans held for sale
(36)
(24)
(25)
1,586
(30)
Total noninterest income adjustments
(36)
(296)
(2,036)
1,586
(33)
Adjusted noninterest income(1)
$
6,939
$
3,658
$
3,492
$
3,647
$
4,897
Total noninterest expense
$
38,950
$
40,394
$
72,770
$
46,919
$
47,483
Noninterest expense adjustments:
Naming rights termination
—
—
(26,769)
—
—
Extinguishment of debt
—
—
(2,515)
—
—
Professional (fees) recoveries
4,398
(1,172)
(875)
(1,678)
3,557
Restructuring expense
—
—
—
—
(1,626)
Adjusted noninterest expense before gain (loss) in alternative energy partnership investments
4,398
(1,172)
(30,159)
(1,678)
1,931
Gain (loss) in alternative energy partnership investments
673
1,430
167
(1,905)
(1,039)
Total noninterest expense adjustments
5,071
258
(29,992)
(3,583)
892
Adjusted noninterest expense(1)
$
44,021
$
40,652
$
42,778
$
43,336
$
48,375
(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
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Adjusted pre-tax pre-provision income
Net interest income
$
61,563
$
55,855
$
55,315
$
51,861
$
56,660
Noninterest income
6,975
3,954
5,528
2,061
4,930
Total revenue
68,538
59,809
60,843
53,922
61,590
Noninterest expense
38,950
40,394
72,770
46,919
47,483
Pre-tax pre-provision income (loss)(1)
$
29,588
$
19,415
$
(11,927)
$
7,003
$
14,107
Total revenue
$
68,538
$
59,809
$
60,843
$
53,922
$
61,590
Total noninterest income adjustments
(36)
(296)
(2,036)
1,586
(33)
Adjusted total revenue
68,502
59,513
58,807
55,508
61,557
Noninterest expense
38,950
40,394
72,770
46,919
47,483
Total noninterest expense adjustments
5,071
258
(29,992)
(3,583)
892
Adjusted noninterest expense(1)
44,021
40,652
42,778
43,336
48,375
Adjusted pre-tax pre-provision income(1)
$
24,481
$
18,861
$
16,029
$
12,172
$
13,182
Average assets
$
7,764,997
$
7,687,105
$
7,740,206
$
7,562,942
$
7,954,591
Pre-tax pre-provision income (loss) ROAA
1.52
%
1.00
%
(0.62)
%
0.37
%
0.70
%
Adjusted pre-tax pre-provision income ROAA(1)
1.25
%
0.98
%
0.83
%
0.65
%
0.66
%
Efficiency ratio
56.83
%
67.54
%
119.60
%
87.01
%
77.10
%
Adjusted efficiency ratio
64.26
%
68.31
%
72.74
%
78.07
%
78.59
%
(1) Non-GAAP measure.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210121005301/en/
