Banc of California Reports Fourth Quarter 2020 Financial Results

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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
in Category

Count

Amount

% of Loans
in Category

($ 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.
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, 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