Banc of California Reports First Quarter 2020 Financial Results

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Banc of California, Inc. (NYSE: BANC) today reported net loss available to common stockholders for the first quarter of 2020 of $9.7 million, or diluted loss per common share of $0.19.

First quarter results included:

  • Common Equity Tier 1 capital at 11.57%

  • Noninterest-bearing deposit balances increased $167.6 million to 23% of total deposits, up from 20%

  • Total DDA balances increased $206.1 million to 51% of total deposits

  • End of period deposit costs dropped to 0.89%; average total deposit costs decreased 16 basis points to 1.11%

  • Allowance for credit losses increased to 1.45% of total loans, up from 1.04%

  • Day 2 CECL provision for credit losses of $15.8 million

Jared Wolff, President & CEO of Banc of California, commented, "Our first quarter results demonstrate our continued progress transforming Banc of California into a relationship focused business bank. Our work over the past 15 months to de-risk our balance sheet created significant excess capital to help absorb first quarter COVID-19 and CECL-related provisions while remaining very well-capitalized. As a result of our ongoing balance sheet transformation, we have also substantially increased our noninterest-bearing and low-cost deposits as a percent of total deposits. For 2020, while remaining vigilant about credit, we will continue to look to improve the deposit franchise, remix our loan portfolio towards relationship lending, and opportunistically deploy capital for the benefit of shareholders, building franchise value for the long term."

Mr. Wolff continued, "During this time of uncertainty caused by the COVID-19 pandemic, we are focused on keeping our employees safe and healthy, so we can support our clients and our communities. We are actively assisting our clients who are experiencing disruption and hardship during these times. We are particularly proud of our colleagues who have been tireless in those efforts on the front lines and behind the scenes. At this time, we are demonstrating what true relationship banking is all about, solidifying relationships with existing clients and building new relationships as well."

Lynn Hopkins, Chief Financial Officer of Banc of California said, "We finished the first quarter in a strong financial position, with healthy capital levels, increased on-balance sheet liquidity, and continued growth in noninterest bearing and demand deposits. Net income was negatively impacted by a $15.8 million provision for credit losses under CECL and in response to the pandemic. Excluding the impact of the provision for credit losses and certain non-core expenses, pre-tax income was $10.6 million, and benefited from a $5 million reduction in core expenses that was set in motion before the crisis, and put us in a better position to operate with the lower revenues from the economic disruption and significant cuts in market interest rates. Our net interest margin held up relatively well at 2.97% against these rate cuts, as our dedicated and proactive deposit efforts lowered deposit costs another 16 basis points to an average of 1.11% for the first quarter, and ended the period with a spot rate of 89 basis points. This quarter marked the fifth consecutive quarter of growth in average noninterest-bearing deposits. While the economic outlook remains uncertain, our healthy reserves and strong capital position will serve the Company well with the potential challenges ahead, as we continue to focus on closely managing credit, actively improving the mix and cost of deposits, reducing expenses, and continuing to strengthen our balance sheet."

COVID-19 Operational Update

With the onset of the COVID-19 pandemic, we successfully implemented our business continuity plan to enable our team to work remotely while continuing to serve our clients with as little disruption as possible. Early in March, we took meaningful steps to transition our team members to a "work from home" environment and we have over 80% of our team working remotely. We continue to operate 25 of our 31 branches as we temporarily consolidated some overlapping areas to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. For the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), we redeployed resources to this program in support of our clients and others seeking financial relief under the program. As of April 28, 2020, we estimate we helped our clients save over 8,500 jobs through pending applications or approvals for more than $270 million in PPP funds. We expect to earn fees of just under 3% on the total amount that ultimately funds. We are actively engaged with our borrowers who are seeking payment relief and waiving certain fees for impacted clients.

Adoption of the Current Expected Credit Loss (CECL) Model

On January 1, 2020, we adopted the new accounting standard, commonly known as CECL, which uses a current expected credit loss model for determining allowance for credit losses (ACL). Upon adoption, we recognized a Day 1 increase in the ACL of $6.4 million and a related after-tax decrease to retained earnings of $4.5 million. Our Day 1 ACL under the new CECL methodology totaled $68.1 million compared to $61.7 million under the incurred loss model at December 31, 2019, and represented 1.14% of total loans. We recorded a Day 2 provision for credit losses of $15.8 million which reflects the new CECL methodology using current economic forecasts and the estimated future impact of the COVID-19 pandemic on lifetime credit losses. At March 31, 2020, the ACL totaled $82.1 million resulting in an ACL to total loans coverage ratio of 1.45%, up from 1.04% at December 31, 2019. The ACL and provision for credit losses include amounts for unfunded commitments.

Income Statement Highlights

Three Months Ended

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in thousands)

Total interest and dividend income

$

74,714

$

83,702

$

92,657

$

104,040

$

110,712

Total interest expense

22,853

27,042

33,742

39,260

42,904

Net interest income

51,861

56,660

58,915

64,780

67,808

Total noninterest income (loss)

2,061

4,930

3,181

(2,290

)

6,295

Total revenue

53,922

61,590

62,096

62,490

74,103

Total noninterest expense

46,919

47,483

43,240

43,500

62,249

Pre-tax / pre-provision income

7,003

14,107

18,856

18,990

11,854

Provision for (reversal of) credit losses

15,761

(2,976

)

38,607

(1,900

)

2,098

Income tax (benefit) expense

(2,165

)

2,811

(5,619

)

4,308

2,719

Net (loss) income

$

(6,593

)

$

14,272

$

(14,132

)

$

16,582

$

7,037

Net (loss) income available to common stockholders(1)

$

(9,694

)

$

10,415

$

(22,722

)

$

11,909

$

2,527

(1)

Balance represents the net (loss) income 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 (loss) income. Refer to the Statement of Operations for additional detail on these amounts.

Net interest income

Net interest income decreased $4.8 million to $51.9 million for the first quarter due to the combination of lower average interest-earning assets and a lower net interest margin. Average interest-earning assets declined from the prior quarter by $354.7 million to $7.03 billion, including a $440.4 million reduction in average loans to $5.78 billion, and our net interest margin declined 7 basis points to 2.97%.

The lower net interest margin was due to a 23 basis point decline in the average yield on interest-earning assets to 4.27%, partially offset by a 14 basis point decline on the average cost of interest bearing liabilities to 1.71%. The decline in the earning asset yield was due mostly to lower yields on most interest-earning asset classes due to originating new business and repricing variable rate loans and investments in the lower interest rate environment given the cuts in the federal funds target rates during the current and prior quarters. On a linked-quarter basis, our average yield on loans declined 15 basis points to 4.56% and our average yield on securities decreased 42 basis points. The average yield for variable rate collateralized loan obligations (CLOs) was 3.60% for the first quarter compared to 3.81% for the fourth quarter as this investment class reprices quarterly.

The 14 basis point decline in the average cost of interest-bearing liabilities to 1.71% for the first quarter from 1.85% for the fourth quarter, was driven by the lower average cost of interest-bearing deposits and higher average noninterest-bearing deposits. The average cost of interest-bearing deposits declined 16 basis points to 1.41% from the prior quarter. Additionally, average noninterest-bearing deposits increased by $25.2 million, or 2.3%, and represented 21.4% of total average deposits in the first quarter. Our total cost of deposits decreased 16 basis points to 1.11% for the first quarter. The decrease in our funding cost is due to a lower reliance on high cost transaction accounts and wholesale funds as we have managed down the balance sheet and continue to execute on our strategy to focus on relationship clients.

Provision for credit losses

We recognized a provision for credit losses of $15.8 million under the CECL model compared to a recovery of credit losses of $3.0 million in the prior quarter under the incurred loss model. Our provision for credit losses includes $1.1 million related to unfunded commitments. The higher provision for credit losses was driven by using the new CECL model, the estimated future impact of the health crisis on our loans, and net charge-offs, partially offset by lower period end loan balances of $284.4 million. For the first quarter, approximately $19 million of the provision for credit losses was attributed to the change in the economic forecast.

Noninterest income

Noninterest income decreased $2.9 million, or 58%, to $2.1 million for the first quarter from the prior quarter. The decrease was primarily due to the impact of lower market interest rates on certain assets subject to fair value accounting including a $1.6 million decrease in the fair value of loans held for sale, a $333 thousand decrease in the fair value of customer-related loan swaps, and a $166 thousand decrease in the value of servicing assets due mostly to the impact of prepayment assumptions. In addition, the prior quarter included a $650 thousand insurance recovery; there was no similar insurance recovery in the current quarter. These decreases were offset in part by lower net losses on sales of loans of $860 thousand.

Noninterest expense

Noninterest expense decreased $564 thousand to $46.9 million for the first quarter compared to the prior quarter. Noninterest expense decreased due to: (1) lower salaries and benefits expense of $600 thousand primarily related to lower headcount and loan production-based incentives, (2) lower regulatory assessments of $1.4 million related to changes in the size of our asset base and an FDIC assessment credit, and (3) lower restructuring expense of $1.6 million as the prior quarter included certain severance costs compared to none in the current quarter. These decreases were offset in part by higher professional fees of $3.4 million as a result of the timing of certain legal costs and recoveries compared to the prior quarter, and a $866 thousand increase in loss on investments in alternative energy partnerships. The change in professional fees attributed to the timing difference of certain indemnified legal costs and recoveries was $1.7 million. When such indemnified legal costs and recoveries are excluded, professional fees would have decreased $1.9 million from the prior quarter and totaled $4.3 million for the first quarter. Other includes an $850 thousand charge to settle a legacy lending claim from an acquired bank; there was no similar item in the prior quarter. Total operating costs, defined as noninterest expense adjusted for certain non-core items (refer to section Non-GAAP Measures), decreased $5.0 million to $43.3 million for the first quarter compared to the prior quarter.

Income taxes

Income tax benefit totaled $2.2 million for the first quarter resulting in an effective tax rate of 24.7%. This compares to a $2.8 million expense for the fourth quarter and an effective tax benefit rate of 16.5%. The estimated effective tax rate for 2020 is approximately 25%.

Balance Sheet

At March 31, 2020, total assets were $7.66 billion, which represented a linked quarter decrease of $165.8 million, consistent with our strategic shift towards reducing non-core assets and focus on relationship lending. The following table shows selected balance sheet line items as of the dates indicated.

As of and for the Three Months Ended

Amount Change

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Q1-20 vs. Q4-19

Q1-20 vs. Q1-19

($ in thousands)

Total assets

$

7,662,607

$

7,828,410

$

8,625,337

$

9,359,931

$

9,886,525

$

(165,803

)

$

(2,223,918

)

Securities available-for-sale

$

969,427

$

912,580

$

775,662

$

1,167,687

$

1,471,303

$

56,847

$

(501,876

)

Loans held-for-investment

$

5,667,464

$

5,951,885

$

6,383,259

$

6,719,570

$

7,557,200

$

(284,421

)

$

(1,889,736

)

Loans held-for-sale

$

20,234

$

22,642

$

23,936

$

597,720

$

25,191

$

(2,408

)

$

(4,957

)

Demand deposits

$

2,828,470

$

2,622,398

$

2,602,011

$

2,510,233

$

2,690,738

$

206,072

$

137,732

Other core deposits

2,515,703

2,794,769

3,074,936

3,301,080

3,575,140

(279,066

)

(1,059,437

)

Brokered deposits

218,665

10,000

93,111

480,977

1,459,054

208,665

(1,240,389

)

Total Deposits

$

5,562,838

$

5,427,167

$

5,770,058

$

6,292,290

$

7,724,932

$

135,671

$

(2,162,094

)

As percentage of total deposits

Demand deposits

50.85

%

48.32

%

45.10

%

39.89

%

34.83

%

2.53

%

16.02

%

Other core deposits

45.22

%

51.50

%

53.29

%

52.46

%

46.28

%

(6.28

)%

(1.06

)%

Brokered deposits

3.93

%

0.18

%

1.61

%

7.64

%

18.89

%

3.75

%

(14.96

)%

Average loan yield

4.56

%

4.71

%

4.75

%

4.80

%

4.76

%

(0.15

)%

(0.20

)%

Average cost of interest-bearing deposits

1.41

%

1.57

%

1.78

%

1.89

%

1.92

%

(0.16

)%

(0.51

)%

Average cost of deposits

1.11

%

1.27

%

1.48

%

1.62

%

1.67

%

(0.16

)%

(0.56

)%

Investments

Securities available-for-sale increased $56.8 million to $969.4 million at March 31, 2020, primarily due to purchases of $147.4 million of corporate debt and government agency securities, offset by net CLO maturities of $30.0 million and a higher net unrealized loss of $59.9 million due to changes in market prices and expectations attributed mainly to the estimated impact of the COVID-19 pandemic. The CLOs are AA and AAA rated and the carrying value includes an unrealized net loss of $80.0 million. As of March 31, 2020, our securities portfolio included $623.6 million of CLOs, $243.4 million of agency securities, $54.4 million of municipal securities, and $47.9 million of corporate debt securities.

Loans

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

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in thousands)

Composition of held-for-investment loans

Commercial real estate

$

810,024

$

818,817

$

891,029

$

856,497

$

865,521

Multifamily

1,466,083

1,494,528

1,563,757

1,598,978

2,332,527

Construction

227,947

231,350

228,561

209,029

211,549

Commercial and industrial

1,578,223

1,691,270

1,789,478

1,951,707

1,907,102

SBA

70,583

70,981

75,359

80,929

74,998

Total commercial loans

4,152,860

4,306,946

4,548,184

4,697,140

5,391,697

Single-family residential mortgage

1,467,375

1,590,774

1,775,953

1,961,065

2,102,694

Other consumer

47,229

54,165

59,122

61,365

62,809

Total consumer loans

1,514,604

1,644,939

1,835,075

2,022,430

2,165,503

Total gross loans

$

5,667,464

$

5,951,885

$

6,383,259

$

6,719,570

$

7,557,200

Composition percentage of held-for-investment loans

Commercial real estate

14.3

%

13.8

%

14.0

%

12.7

%

11.5

%

Multifamily

25.9

%

25.1

%

24.5

%

23.8

%

30.9

%

Construction

4.0

%

3.9

%

3.6

%

3.1

%

2.8

%

Commercial and industrial

27.9

%

28.4

%

28.0

%

29.1

%

25.2

%

SBA

1.2

%

1.2

%

1.2

%

1.2

%

1.0

%

Total commercial loans

73.3

%

72.4

%

71.3

%

69.9

%

71.4

%

Single-family residential mortgage

25.9

%

26.7

%

27.8

%

29.2

%

27.8

%

Other consumer

0.8

%

0.9

%

0.9

%

0.9

%

0.8

%

Total consumer loans

26.7

%

27.6

%

28.7

%

30.1

%

28.6

%

Total gross loans

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Held-for-investment loans decreased $284.4 million to $5.67 billion from the prior quarter, due mostly to lower single-family residential mortgage loans of $123.4 million, lower commercial and industrial (C&I) loans of $113.0 million, and lower multifamily loans of $28.4 million. The decline in single-family residential is attributed to accelerated payoffs as the loans refinance away in the lower rate environment and proceeds are invested in other core business loans. The decline in C&I loans is primarily in response to strategically reducing certain credit facilities in response to the changed economic landscape and corresponding lower outstanding balances. The impact of the COVID-19 pandemic tempered loan production for the last part of the quarter and we did not experience any significant increase in credit line usage.

We continue to remix our real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. We are no longer originating single-family residential mortgage loans. Single-family residential mortgage and multifamily loans comprise 51.8% of the total held-for-investment loan portfolio as compared to 58.7% one year ago. Commercial real estate loans comprised 14.3% of the loan portfolio and commercial and industrial loans constituted 27.9%. Currently, loans secured by residential real estate (single-family, multifamily, single-family construction, and credit facilities) represent approximately 83% of our total loans outstanding.

The C&I portfolio has limited exposure to certain business sectors undergoing severe stress, as demonstrated by the following (as a percentage of total outstanding C&I loan balances):

March 31, 2020

Amount

% of Portfolio

C&I Portfolio by Industry

($ in thousands)

Real estate and rental and leasing

$

205,206

13

%

Retail trade

116,202

7

%

Finance and insurance

872,049

55

%

Manufacturing

73,299

5

%

Healthcare and social assistance

54,091

3

%

Wholesale trade

43,285

3

%

Accommodation and food services

31,867

2

%

All other

182,224

12

%

$

1,578,223

100

%

Deposits

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

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in thousands)

Composition of deposits

Noninterest-bearing checking

$

1,256,081

$

1,088,516

$

1,107,442

$

993,745

$

1,120,700

Interest-bearing checking

1,572,389

1,533,882

1,503,208

1,577,901

1,573,499

Money market

575,820

715,479

695,530

800,898

899,330

Savings

877,947

885,246

1,042,162

1,061,115

1,151,442

Non-brokered certificates of deposit

1,071,936

1,204,044

1,367,284

1,479,137

1,684,895

Brokered certificates of deposit

208,665

54,432

379,494

1,295,066

Total deposits

$

5,562,838

$

5,427,167

$

5,770,058

$

6,292,290

$

7,724,932

Composition percentage of deposits

Noninterest-bearing checking

22.6

%

20.1

%

19.2

%

15.8

%

14.5

%

Interest-bearing checking

28.3

%

28.2

%

26.1

%

25.1

%

20.4

%

Money market

10.3

%

13.2

%

12.0

%

12.7

%

11.6

%

Savings

15.8

%

16.3

%

18.1

%

16.9

%

14.9

%

Non-brokered certificates of deposit

19.3

%

22.2

%

23.7

%

23.5

%

21.8

%

Brokered certificates of deposit

3.7

%

%

0.9

%

6.0

%

16.8

%

Total deposits

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Total deposits increased $135.7 million during the first quarter of 2020 to $5.56 billion due to higher noninterest-bearing checking balances of $167.6 million, interest-bearing checking balances of $38.5 million and brokered certificates of deposit balances of $208.7 million, offset by lower money market balances of $139.7 million, savings balances of $7.3 million, and non-brokered certificates of deposit balances of $132.1 million. We continue to focus on growing relationship-based deposits, strategically supplemented wholesale funding, as we proactively drive our funding costs down. Noninterest-bearing deposits totaled $1.26 billion and represented 22.6% of total deposits at March 31, 2020 compared to $1.09 billion and 20.1% at December 31, 2019 and $1.12 billion and 14.5% one year ago.

Debt

Advances from the FHLB decreased $217.0 million, or 18%, to $978.0 million, as of March 31, 2020, due to lower short term and overnight advances of $193.0 million and the maturity of $24.0 million in long term fixed-rate advances. At the end of the first quarter, FHLB advances included $90.0 million of overnight borrowings, $174.0 million maturing within three months, and $714.0 million maturing beyond three months with a weighted average life of 3.2 years and weighted average rate of 2.58%.

Equity

At March 31, 2020, total stockholders’ equity decreased by $72.2 million to $835.0 million on a linked-quarter basis, while tangible common equity decreased by $69.7 million to $606.4 million. The decrease in total stockholders’ equity related to the net loss of $6.6 million, the cumulative-effect adjustment of adoption of CECL of $4.5 million, dividends to common and preferred stockholders of $6.5 million, redemption of preferred stock of $1.6 million, repurchases of common stock under our previously announced share repurchase program of $12.0 million, and an increase in accumulated other comprehensive loss, net, of $42.2 million related to the lower fair value of CLOs and other securities available-for-sale.

In February 2020 we announced a share repurchase program for a total amount of $45.0 million and we repurchased 827,584 shares of common stock for an aggregate cost of $12.0 million. Given current macroeconomic conditions and the yet-to-be-determined impacts of the COVID-19 crisis, we have suspended common stock repurchases for the immediate future.

Capital ratios remain strong with total risk-based capital at 16.16% and a tier 1 leverage ratio of 11.20%. The following table sets forth our regulatory capital ratios at March 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 March 31, 2020.

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Capital Ratios(1)

Banc of California, Inc.

Total risk-based capital ratio

16.16

%

15.90

%

14.37

%

15.00

%

14.01

%

Tier 1 risk-based capital ratio

14.91

%

14.83

%

13.32

%

14.03

%

13.03

%

Common equity tier 1 capital ratio

11.57

%

11.56

%

10.34

%

10.50

%

9.72

%

Tier 1 leverage ratio

11.20

%

10.89

%

9.84

%

9.62

%

8.87

%

Banc of California, NA

Total risk-based capital ratio

18.21

%

17.46

%

15.65

%

16.70

%

15.79

%

Tier 1 risk-based capital ratio

16.96

%

16.39

%

14.60

%

15.73

%

14.81

%

Common equity tier 1 capital ratio

16.96

%

16.39

%

14.60

%

15.73

%

14.81

%

Tier 1 leverage ratio

12.67

%

12.02

%

10.75

%

10.80

%

10.07

%

(1)

March 31, 2020 capital ratios are preliminary.

Credit Quality

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Asset quality information and ratios

($ in thousands)

Delinquent loans held-for-investment

30 to 89 days delinquent

$

56,338

$

32,873

$

39,122

$

34,938

$

44,840

90+ days delinquent

28,632

24,734

17,220

17,272

14,623

Total delinquent loans

$

84,970

$

57,607

$

56,342

$

52,210

$

59,463

Total delinquent loans to total loans

1.50

%

0.97

%

0.88

%

0.78

%

0.79

%

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

Non-performing loans

$

56,471

$

43,354

$

45,169

$

28,499

$

27,739

90+ days delinquent and still accruing loans

275

731

Other real estate owned

276

316

Non-performing assets

$

56,471

$

43,354

$

45,169

$

29,050

$

28,786

ALL to non-performing loans

138.55

%

132.97

%

139.31

%

206.86

%

224.40

%

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

1.00

%

0.73

%

0.71

%

0.43

%

0.38

%

Non-performing assets to total assets

0.74

%

0.55

%

0.52

%

0.31

%

0.29

%

Troubled debt restructurings (TDRs)

Performing TDRs

$

6,100

$

6,620

$

6,800

$

20,245

$

5,574

Non-performing TDRs

20,852

21,837

14,605

2,428

1,943

Total TDRs

$

26,952

$

28,457

$

21,405

$

22,673

$

7,517

Credit quality remains strong. Total delinquent loans increased $27.4 million in the first quarter to $85.0 million at March 31, 2020, due to $43.1 million of additions, offset by $8.5 million returning to current status and $7.3 million of principal payments or payoffs. Delinquent loans includes primarily legacy single-family residential mortgage loans, which account for 84% of the balance and $28.0 million of the increase quarter over quarter. Excluding delinquent legacy single-family loans, delinquent loans are $13.6 million, or 0.24%, of total loans at March 31, 2020. We ceased originating single-family mortgage loans in the second quarter of 2019.

Non-performing loans totaled $56.5 million as of March 31, 2020, of which $21.5 million or 38% of the balance relates to loans in a current payment status. The $13.1 million increase during the first quarter was primarily due to $14.1 million of loans being placed on nonaccrual status, offset by cured loans and payoffs. The quarter-end balance includes two large loans with delinquent payment status that comprise 45% of our total nonperforming loans, consisting of one $16.4 million legacy shared national credit and a $9.1 million single-family mortgage residential loan with a loan-to-value ratio of 67%. Aside from those two loans, nonperforming loans total $31.0 million, of which 49% relates to legacy single-family residential mortgage loans.

In light of the COVID-19 crisis, we have provided support to clients by granting loan deferments, when requested and supported by our borrowers. As of April 27, in our SFR portfolio, we had 122 active deferments on $123 million of principal balances, or approximately 8% of the portfolio. With respect to our non-SFR loan portfolio, as of April 27, we had 68 active deferments on $257 million of principal balances or 6% of our non-SFR portfolio. As with our entire portfolio, we will continue to actively monitor and manage our lending relationships in a manner that supports our clients and protects the bank.

Allowance for Credit Losses

Three Months Ended

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in thousands)

Allowance for loan losses (ALL)

Balance at beginning of period

$

57,649

$

62,927

$

59,523

$

63,885

$

62,192

Adoption of ASU 2016-13 (1)

7,609

Loans charged off

(2,076

)

(2,706

)

(35,546

)

(2,451

)

(1,063

)

Recoveries

350

106

410

76

244

Net charge-offs

(1,726

)

(2,600

)

(35,136

)

(2,375

)

(819

)

Provision for (reversal of) loan losses

14,711

(2,678

)

38,540

(1,987

)

2,512

Balance at end of period

78,243

$

57,649

$

62,927

$

59,523

$

63,885

Reserve for unfunded loan commitments

Balance at beginning of period

4,064

4,362

4,295

4,208

4,622

Adoption of ASU 2016-13 (1)

(1,226

)

Provision for credit losses

1,050

(298

)

67

87

(414

)

Balance at end of period

3,888

4,064

4,362

4,295

4,208

Allowance for credit losses (ACL)

$

82,131

$

61,713

$

67,289

$

63,818

$

68,093

ALL to total loans

1.38

%

0.97

%

0.99

%

0.89

%

0.85

%

ACL to total loans

1.45

%

1.04

%

1.05

%

0.95

%

0.90

%

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

0.12

%

0.17

%

2.19

%

0.13

%

0.04

%

Reserve for loss on repurchased loans

Balance at beginning of period

$

6,201

$

6,561

$

2,478

$

2,486

$

2,506

Initial provision for loan repurchases

4,415

53

96

Reversal of provision for loan repurchases

(600

)

(360

)

(123

)

(61

)

(116

)

Utilization of reserve for loan repurchases

(209

)

Balance at end of period

$

5,601

$

6,201

$

6,561

$

2,478

$

2,486

(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 that the previously applied incurred loss methodology.

The allowance for expected credit losses, which includes the reserve for unfunded loan commitments, totaled $82.1 million, or 1.45% of total loans at March 31, 2020 compared to $61.7 million or 1.04% at December 31, 2019. The $20.4 million increase in the allowance reflects a higher provision due to the earlier recognition of losses under CECL and the impact of the change in the economic forecast scenarios as of quarter end, including the expected impact of the COVID-19 pandemic on future losses. This increase includes a Day 1 transition adjustment amount of $6.4 million and a Day 2 provision of $15.8 million, offset by net charge-offs of $1.7 million. The net charge-offs included $1.1 million in C&I loans and $401 thousand in SFR mortgages. The ACL coverage of non-performing loans was 145% at March 31, 2020 compared to 142% at December 31, 2019.

Our ACL methodology and resulting provision is significantly impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally-recognized, third party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio risk profile, and economic forecasts. We used economic forecasts released by our model provider during the last week of March which included the onset of the pandemic. These forecasts included a sharp contraction in annualized GDP growth and a sharp spike in near-term unemployment rates ranging from 8% to 13%, before returning to moderate long-term economic trends. Our visibility at the end of the quarter indicated that local unemployment was heading higher and that the economic recovery would likely be slower. Accordingly, we incorporated qualitative factors to account for this visibility at quarter end related to actual conditions and an economic outlook that was worse than the late March forecasts incorporated into the CECL model. As a result of the COVID-19 pandemic and adoption of CECL, we expect our allowance for credit losses to continue to be impacted in future periods by economic volatility, changing economic forecasts, as well as the related impacts to CECL model assumptions, all of which may be better than or worse than our current estimate.

The reserve for loss on repurchased loans decreased by $600 thousand in the first quarter due to continued runoff of principal balances associated with the multifamily loan securitization and single-family residential mortgage loans previously sold. This reduction in the associated sold balances results in reduced anticipated losses from repurchases.

The Company will host a conference call to discuss its first quarter 2020 financial results at 10:00 a.m. Pacific Time (PT) on Wednesday, April 29, 2020. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 5112344. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call.

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $7.7 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the "Bank"). The Bank has 42 offices including 31 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 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)

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

ASSETS

Cash and cash equivalents

$

435,992

$

373,472

$

526,874

$

313,850

$

304,705

Securities available-for-sale

969,427

912,580

775,662

1,167,687

1,471,303

Loans held-for-sale

20,234

22,642

23,936

597,720

25,191

Loans held-for-investment

5,667,464

5,951,885

6,383,259

6,719,570

7,557,200

Allowance for loan losses

(78,243

)

(57,649

)

(62,927

)

(59,523

)

(63,885

)

Federal Home Loan Bank and other bank stock

57,237

59,420

71,679

76,373

55,794

Servicing rights, net

2,009

2,299

2,407

2,715

3,053

Other real estate owned, net

276

316

Premises and equipment, net

127,379

128,021

128,979

129,227

130,417

Investments in alternative energy partnerships, net

27,347

29,300

27,039

26,633

26,578

Goodwill

37,144

37,144

37,144

37,144

37,144

Other intangible assets, net

3,722

4,151

4,605

5,105

5,726

Deferred income tax, net

63,849

44,906

45,950

42,798

45,111

Income tax receivable

7,198

4,233

4,459

2,547

4,787

Bank owned life insurance investment

110,397

109,819

108,720

108,132

107,552

Right of use assets

20,882

22,540

23,907

24,118

24,519

Due from unsettled securities sales

334,769

Other assets

190,569

183,647

188,875

165,559

151,014

Total assets

$

7,662,607

$

7,828,410

$

8,625,337

$

9,359,931

$

9,886,525

LIABILITIES AND STOCKHOLDERS’ EQUITY

Noninterest-bearing deposits

$

1,256,081

$

1,088,516

$

1,107,442

$

993,745

$

1,120,700

Interest-bearing deposits

4,306,757

4,338,651

4,662,616

5,298,545

6,604,232

Total deposits

5,562,838

5,427,167

5,770,058

6,292,290

7,724,932

Advances from Federal Home Loan Bank

978,000

1,195,000

1,650,000

1,825,000

935,000

Notes payable, net

173,479

173,421

173,339

173,257

173,203

Reserve for loss on repurchased loans

5,601

6,201

6,561

2,478

2,486

Lease liabilities

22,075

23,692

25,210

25,457

25,893

Accrued expenses and other liabilities

85,612

95,684

99,181

77,905

76,686

Total liabilities

6,827,605

6,921,165

7,724,349

8,396,387

8,938,200

Commitments and contingent liabilities

Preferred stock

187,687

189,825

189,825

231,128

231,128

Common stock

520

520

520

520

518

Common stock, class B non-voting non-convertible

5

5

5

5

5

Additional paid-in capital

631,125

629,848

628,774

627,306

626,608

Retained earnings

110,640

127,733

120,221

146,039

136,943

Treasury stock

(40,827

)

(28,786

)

(28,786

)

(28,786

)

(28,786

)

Accumulated other comprehensive loss, net

(54,148

)

(11,900

)

(9,571

)

(12,668

)

(18,091

)

Total stockholders’ equity

835,002

907,245

900,988

963,544

948,325

Total liabilities and stockholders’ equity

$

7,662,607

$

7,828,410

$

8,625,337

$

9,359,931

$

9,886,525

Banc of California, Inc.

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

Three Months Ended

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Interest and dividend income

Loans, including fees

$

65,534

$

73,930

$

80,287

$

89,159

$

90,558

Securities

7,820

7,812

10,024

12,457

17,841

Other interest-earning assets

1,360

1,960

2,346

2,424

2,313

Total interest and dividend income

74,714

83,702

92,657

104,040

110,712

Interest expense

Deposits

14,611

18,247

22,811

28,598

31,443

Federal Home Loan Bank advances

5,883

6,396

8,519

8,289

9,081

Notes payable and other interest-bearing liabilities

2,359

2,399

2,412

2,373

2,380

Total interest expense

22,853

27,042

33,742

39,260

42,904

Net interest income

51,861

56,660

58,915

64,780

67,808

Provision for (reversal of) credit losses

15,761

(2,976

)

38,607

(1,900

)

2,098

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

36,100

59,636

20,308

66,680

65,710

Noninterest income

Customer service fees

1,096

1,451

1,582

1,434

1,515

Loan servicing income

75

312

128

121

118

Income from bank owned life insurance

578

599

588

580

525

Impairment loss on investment securities

(731

)

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

3

(5,063

)

208

Fair value adjustment on loans held for sale

(1,586

)

30

16

59

1

Net (loss) gain on sale of loans

(27

)

(863

)

4,310

2,767

1,552

All other income (loss)

1,925

3,398

2,351

(7,251

)

2,376

Total noninterest income (loss)

2,061

4,930

3,181

(2,290

)

6,295

Noninterest expense

Salaries and employee benefits

23,436

24,036

25,934

27,506

28,439

Occupancy and equipment

7,243

7,900

7,767

7,955

7,686

Professional fees (reimbursement)

5,964

2,611

1,463

(2,903

)

11,041

Data processing

1,773

1,684

1,568

1,672

1,496

Advertising

1,756

2,227

2,090

2,048

2,057

Regulatory assessments

484

1,854

1,239

2,136

2,482

Reversal of loan repurchase reserves

(600

)

(360

)

(123

)

(61

)

(116

)

Amortization of intangible assets

429

454

500

621

620

Restructuring expense (reversal)

1,626

(158

)

2,795

All other expenses

4,529

4,412

3,742

5,039

3,799

Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships

45,014

46,444

44,180

43,855

60,299

Loss (gain) on investments in alternative energy partnerships

1,905

1,039

(940

)

(355

)

1,950

Total noninterest expense

46,919

47,483

43,240

43,500

62,249

(Loss) income from operations before income taxes

(8,758

)

17,083

(19,751

)

20,890

9,756

Income tax (benefit) expense

(2,165

)

2,811

(5,619

)

4,308

2,719

Net (loss) income

(6,593

)

14,272

(14,132

)

16,582

7,037

Preferred stock dividends

3,533

3,540

3,403

4,308

4,308

Income allocated to participating securities

224

271

Participating securities dividends

94

93

94

94

202

Impact of preferred stock redemption

(526

)

5,093

Net (loss) income available to common stockholders

$

(9,694

)

$

10,415

$

(22,722

)

$

11,909

$

2,527

(Loss) earnings per common share:

Basic

$

(0.19

)

$

0.21

$

(0.45

)

$

0.23

$

0.05

Diluted

$

(0.19

)

$

0.20

$

(0.45

)

$

0.23

$

0.05

Weighted average number of common shares outstanding

Basic

50,464,777

50,699,915

50,882,227

50,857,137

50,676,722

Diluted

50,464,777

50,927,978

50,882,227

50,964,956

50,846,722

Dividends declared per common share

$

0.06

$

0.06

$

0.06

$

0.06

$

0.13

Banc of California, Inc.

Selected Financial Data

(Unaudited)

Three Months Ended

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Profitability and other ratios of consolidated operations

Return on average assets(1)

(0.35

)%

0.71

%

(0.64

)%

0.69

%

0.28

%

Return on average equity(1)

(2.89

)%

6.20

%

(5.83

)%

6.91

%

2.98

%

Return on average tangible common equity(2)

(5.44

)%

6.46

%

(12.49

)%

7.43

%

1.91

%

Dividend payout ratio(3)

(31.58

)%

28.57

%

(13.33

)%

26.09

%

260.00

%

Net interest spread

2.56

%

2.65

%

2.47

%

2.50

%

2.47

%

Net interest margin(1)

2.97

%

3.04

%

2.86

%

2.86

%

2.81

%

Noninterest income (loss) to total revenue(4)

3.82

%

8.00

%

5.12

%

(3.66

)%

8.49

%

Noninterest income (loss) to average total assets(1)

0.11

%

0.25

%

0.15

%

(0.10

)%

0.25

%

Noninterest expense to average total assets(1)

2.50

%

2.35

%

1.98

%

1.82

%

2.43

%

Efficiency ratio(2)(5)

87.01

%

77.10

%

69.63

%

69.61

%

84.00

%

Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(2)(5)

86.54

%

74.51

%

70.00

%

67.70

%

83.57

%

Average loans held-for-investment to average deposits

108.54

%

108.50

%

105.92

%

104.38

%

100.45

%

Average securities available-for-sale to average total assets

12.60

%

10.48

%

12.71

%

13.58

%

17.00

%

Average stockholders’ equity to average total assets

12.11

%

11.47

%

11.06

%

10.02

%

9.29

%

(1)

Ratios are presented on an annualized basis.

(2)

The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.

(3)

The ratio is calculated by dividing dividends declared per common share by basic earnings per common share.

(4)

Total revenue is equal to the sum of net interest income before provision for credit losses and noninterest income (loss).

(5)

The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income (loss).

Banc of California, Inc.

Average Balance, Average Yield Earned, and Average Cost Paid

(Dollars in thousands)

(Unaudited)

Three Months Ended

March 31, 2020

December 31, 2019

September 30, 2019

Average

Yield

Average

Yield

Average

Yield

Balance

Interest

/ Cost

Balance

Interest

/ Cost

Balance

Interest

/ Cost

Interest earning assets

Loans held-for-sale

$

22,273

$

220

3.97

%

$

23,527

$

221

3.73

%

$

216,746

$

1,894

3.47

%

SFR mortgage

1,532,967

15,295

4.01

%

1,689,228

16,788

3.94

%

1,866,103

19,179

4.08

%

Commercial real estate, multifamily, and construction

2,564,485

30,223

4.74

%

2,633,342

32,763

4.94

%

2,717,609

33,343

4.87

%

Commercial and industrial, SBA, and lease financing

1,613,324

19,157

4.78

%

1,821,064

23,381

5.09

%

1,840,202

24,970

5.38

%

Other consumer

47,761

639

5.38

%

54,088

777

5.70

%

58,652

901

6.09

%

Gross loans and leases

5,780,810

65,534

4.56

%

6,221,249

73,930

4.71

%

6,699,312

80,287

4.75

%

Securities

952,966

7,820

3.30

%

833,726

7,812

3.72

%

1,105,499

10,024

3.60

%

Other interest-earning assets

297,444

1,360

1.84

%

330,950

1,960

2.35

%

362,613

2,346

2.57

%

Total interest-earning assets

7,031,220

74,714

4.27

%

7,385,925

83,702

4.50

%

8,167,424

92,657

4.50

%

Allowance for loan losses

(60,470

)

(61,642

)

(55,976

)

BOLI and noninterest earning assets

592,192

630,308

584,190

Total assets

$

7,562,942

$

7,954,591

$

8,695,638

Interest-bearing liabilities

Savings

$

890,830

$

3,296

1.49

%

$

981,346

$

3,889

1.57

%

$

1,055,086

$

4,722

1.78

%

Interest-bearing checking

1,520,922

3,728

0.99

%

1,546,322

4,234

1.09

%

1,511,432

4,483

1.18

%

Money market

608,926

1,760

1.16

%

743,695

2,593

1.38

%

755,114

3,093

1.63

%

Certificates of deposit

1,151,518

5,827

2.04

%

1,332,911

7,531

2.24

%

1,750,970

10,513

2.38

%

Total interest-bearing deposits

4,172,196

14,611

1.41

%

4,604,274

18,247

1.57

%

5,072,602

22,811

1.78

%

FHLB advances

1,039,055

5,883

2.28

%

1,020,478

6,396

2.49

%

1,333,739

8,519

2.53

%

Securities sold under repurchase agreements

%

2,223

15

2.68

%

1,922

13

2.68

%

Long-term debt and other interest-bearing liabilities

174,056

2,359

5.45

%

174,092

2,384

5.43

%

174,111

2,399

5.47

%

Total interest-bearing liabilities

5,385,307

22,853

1.71

%

5,801,067

27,042

1.85

%

6,582,374

33,742

2.03

%

Noninterest-bearing deposits

1,133,306

1,108,077

1,047,858

Noninterest-bearing liabilities

128,282

132,698

103,667

Total liabilities

6,646,895

7,041,842

7,733,899

Total stockholders’ equity

916,047

912,749

961,739

Total liabilities and stockholders’ equity

$

7,562,942

$

7,954,591

$

8,695,638

Net interest income/spread

$

51,861

2.56

%

$

56,660

2.65

%

$

58,915

2.47

%

Net interest margin

2.97

%

3.04

%

2.86

%

Ratio of interest-earning assets to interest-bearing liabilities

130.56

%

127.32

%

124.08

%

Total deposits

$

5,305,502

$

14,611

1.11

%

$

5,712,351

$

18,247

1.27

%

$

6,120,460

$

22,811

1.48

%

Total funding (1)

$

6,518,613

$

22,853

1.41

%

$

6,909,144

$

27,042

1.55

%

$

7,630,232

$

33,742

1.75

%

(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

June 30, 2019

March 31, 2019

Average

Yield

Average

Yield

Balance

Interest

/ Cost

Balance

Interest

/ Cost

Interest earning assets

Loans held-for-sale

$

47,233

$

265

2.25

%

$

31,374

$

228

2.95

%

SFR mortgage

2,059,704

21,390

4.17

%

2,312,900

24,062

4.22

%

Commercial real estate, multifamily, and construction

3,406,672

39,659

4.67

%

3,387,698

38,117

4.56

%

Commercial and industrial, SBA, and lease financing

1,872,289

26,940

5.77

%

1,920,221

27,235

5.75

%

Other consumer

59,806

905

6.07

%

62,558

916

5.94

%

Gross loans and leases

7,445,704

89,159

4.80

%

7,714,751

90,558

4.76

%

Securities

1,304,876

12,457

3.83

%

1,751,509

17,841

4.13

%

Other interest-earning assets

342,908

2,424

2.84

%

321,823

2,313

2.91

%

Total interest-earning assets

9,093,488

104,040

4.59

%

9,788,083

110,712

4.59

%

Allowance for loan losses

(63,046

)

(61,924

)

BOLI and non-interest earning assets

580,133

575,558

Total assets

$

9,610,575

$

10,301,717

Interest-bearing liabilities

Savings

1,083,571

4,950

1.83

%

1,201,802

5,480

1.85

%

Interest-bearing checking

1,580,165

4,554

1.16

%

1,554,846

4,525

1.18

%

Money market

853,007

3,902

1.83

%

887,538

4,128

1.89

%

Certificates of deposit

2,537,060

15,192

2.40

%

2,982,980

17,310

2.35

%

Total interest-bearing deposits

6,053,803

28,598

1.89

%

6,627,166

31,443

1.92

%

FHLB advances

1,287,121

8,289

2.58

%

1,422,100

9,081

2.59

%

Securities sold under repurchase agreements

2,173

16

2.95

%

2,350

18

3.11

%

Long-term debt and other interest-bearing liabilities

174,161

2,357

5.43

%

174,230

2,362

5.50

%

Total interest-bearing liabilities

7,517,258

39,260

2.09

%

8,225,846

42,904

2.12

%

Noninterest-bearing deposits

1,034,205

1,021,741

Non-interest-bearing liabilities

96,179

97,426

Total liabilities

8,647,642

9,345,013

Total stockholders’ equity

962,933

956,704

Total liabilities and stockholders’ equity

$

9,610,575

$

10,301,717

Net interest income/spread

$

64,780

2.50

%

$

67,808

2.47

%

Net interest margin

2.86

%

2.81

%

Ratio of interest-earning assets to interest-bearing liabilities

120.97

%

118.99

%

Total deposits

$

7,088,008

$

28,598

1.62

%

$

7,648,907

$

31,443

1.67

%

Total funding (1)

$

8,551,463

$

39,260

1.84

%

$

9,247,587

$

42,904

1.88

%

(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.

Return on average tangible common equity and efficiency ratio, as adjusted, tangible common equity, tangible common equity to tangible assets, and tangible common equity per common share constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.

Tangible common equity is calculated by subtracting preferred stock, goodwill, and other intangible assets from stockholders' equity. Tangible assets is calculated by subtracting goodwill and other intangible assets from total assets. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.

Adjusted efficiency ratio is calculated by subtracting loss on investments in alternative energy partnerships from noninterest expense and adding total pre-tax return, which includes the loss on investments in alternative energy partnerships, to the sum of net interest income and noninterest income (total revenue). Management believes the presentation of these financial measures adjusting the impact of these items provides useful supplemental information that is essential to a proper understanding of the final results and operating performance of the Company.

This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

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

Total assets

$

7,662,607

$

7,828,410

$

8,625,337

$

9,359,931

$

9,886,525

Less goodwill

(37,144

)

(37,144

)

(37,144

)

(37,144

)

(37,144

)

Less other intangible assets

(3,722

)

(4,151

)

(4,605

)

(5,105

)

(5,726

)

Tangible assets(1)

$

7,621,741

$

7,787,115

$

8,583,588

$

9,317,682

$

9,843,655

Total stockholders' equity

$

835,002

$

907,245

$

900,988

$

963,544

$

948,325

Less goodwill

(37,144

)

(37,144

)

(37,144

)

(37,144

)

(37,144

)

Less other intangible assets

(3,722

)

(4,151

)

(4,605

)

(5,105

)

(5,726

)

Tangible equity(1)

794,136

865,950

859,239

921,295

905,455

Less preferred stock

(187,687

)

(189,825

)

(189,825

)

(231,128

)

(231,128

)

Tangible common equity(1)

$

606,449

$

676,125

$

669,414

$

690,167

$

674,327

Total stockholders' equity to total assets

10.90

%

11.59

%

10.45

%

10.29

%

9.59

%

Tangible equity to tangible assets(1)

10.42

%

11.12

%

10.01

%

9.89

%

9.20

%

Tangible common equity to tangible assets(1)

7.96

%

8.68

%

7.80

%

7.41

%

6.85

%

Common shares outstanding

49,593,077

50,413,681

50,406,763

50,397,769

50,315,490

Class B non-voting non-convertible common shares outstanding

477,321

477,321

477,321

477,321

477,321

Total common shares outstanding

50,070,398

50,891,002

50,884,084

50,875,090

50,792,811

Tangible common equity per common share(1)

$

12.11

$

13.29

$

13.16

$

13.57

$

13.28

Book value per common share

$

12.93

$

14.10

$

13.98

$

14.40

$

14.12

(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

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Return on tangible common equity

Average total stockholders' equity

$

916,047

$

912,749

$

961,739

$

962,933

$

956,700

Less average preferred stock

(189,607

)

(189,824

)

(213,619

)

(231,128

)

(231,128

)

Less average goodwill

(37,144

)

(37,144

)

(37,144

)

(37,144

)

(37,144

)

Less average other intangible assets

(4,003

)

(4,441

)

(4,935

)

(5,503

)

(6,128

)

Average tangible common equity(1)

$

685,293

$

681,340

$

706,041

$

689,158

$

682,300

Net (loss) income

$

(6,593

)

$

14,272

$

(14,132

)

$

16,582

$

7,037

Less preferred stock dividends and impact of preferred stock redemption

(3,007

)

(3,540

)

(8,496

)

(4,308

)

(4,308

)

Add amortization of intangible assets

429

454

500

621

620

Less tax effect on amortization and impairment of intangible assets

(90

)

(95

)

(105

)

(130

)

(130

)

Net (loss) income available to common stockholders(1)

$

(9,261

)

$

11,091

$

(22,233

)

$

12,765

$

3,219

Return on average equity

(2.89

)%

6.20

%

(5.83

)%

6.91

%

2.98

%

Return on average tangible common equity(1)

(5.44

)%

6.46

%

(12.49

)%

7.43

%

1.91

%

Statutory tax rate utilized for calculating tax effect on amortization of intangible assets

21.00

%

21.00

%

21.00

%

21.00

%

21.00

%

Three Months Ended

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships

Noninterest expense

$

46,919

$

47,483

$

43,240

$

43,500

$

62,249

(Loss) gain on investments in alternative energy partnerships

(1,905

)

(1,039

)

940

355

(1,950

)

Adjusted noninterest expense(1)

$

45,014

$

46,444

$

44,180

$

43,855

$

60,299

Net interest income

$

51,861

$

56,660

$

58,915

$

64,780

$

67,808

Noninterest income

2,061

4,930

3,181

(2,290

)

6,295

Total revenue

53,922

61,590

62,096

62,490

74,103

Tax credit from investments in alternative energy partnerships

1,689

77

1,680

Deferred tax expense on investments in alternative energy partnerships

(177

)

(8

)

(176

)

Tax effect on tax credit and deferred tax expense

267

7

426

(Loss) gain on investments in alternative energy partnerships

(1,905

)

(1,039

)

940

355

(1,950

)

Total pre-tax adjustments for investments in alternative energy partnerships

(1,905

)

740

1,016

2,285

(1,950

)

Adjusted total revenue(1)

$

52,017

$

62,330

$

63,112

$

64,775

$

72,153

Efficiency ratio(1)

87.01

%

77.10

%

69.63

%

69.61

%

84.00

%

Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(1)

86.54

%

74.51

%

70.00

%

67.70

%

83.57

%

Effective tax rate utilized for calculating tax effect on tax credit and deferred tax expense

24.03

%

15.00

%

9.36

%

22.07

%

27.00

%

(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

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Total noninterest expense

$

46,919