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Banc of California Reports Third Quarter 2018 Earnings

SANTA ANA, Calif., Oct. 25, 2018 /PRNewswire/ -- Banc of California, Inc. (BANC) today reported net income available to common stockholders of $3.8 million, for the third quarter of 2018, resulting in diluted earnings per common share of $0.07 for the quarter. 

Highlights for the Third quarter included:

  • Strong Core Deposit Growth: Core deposits grew by $171 million, or an 11% annualized rate of growth, allowing for a $70 million reduction in wholesale funding.
  • Organic Loan Growth: Held for investment loans increased by $217 million during the quarter to $7.3 billion. Annualized loan portfolio growth for the year to date period was 12%.
  • Continuation of Balance Sheet Re-Mix: Reduced securities by $237 million, or 10%, driven by the continued reduction of Collateralized Loan Obligations ("CLOs").
  • Bolstered Talent: Named key leadership positions for Middle Market Banking and Business Banking.
  • Disciplined Expense Management: Third quarter noninterest expense totaled $61 million.
  • Strong Credit Performance: Non-performing assets of 0.25% and total delinquencies of 0.49%. Net charge-offs totaled $306,000. The ALLL / total loan ratio was 0.80% at quarter end, down from 0.81% at the prior quarter end and up from 0.72% a year ago.
  • Strong Capital Ratios: Called the Series C $40 million preferred equity class during the quarter. Common equity tier 1 capital ratio of 9.80%, compared to 9.91% a year ago.

The Company's third quarter reported financial results included $7.6 million of legal and professional fees partially offset by a $1.7 million insurance recovery related to ongoing indemnification expense, a software write-off of $1.5 million and a $553,000 restructuring expense. The aggregate impact of these items resulted in $8.0 million of net, nonrecurring expenses for the quarter.  In connection with redeeming all $40 million of the Series C preferred stock during the quarter, the Company recorded a one-time reduction to net income available to common stockholders of $2.3 million, which represented the issuance cost of the Series C preferred stock.

"We continue to execute on our strategic plan and the third quarter saw yet more progress," said Doug Bowers, President and Chief Executive Officer of Banc of California.  "We saw strong growth in our core deposits with balances increasing $171 million for the quarter or 11% annualized.  Loan growth was also strong at $217 million or 12% annualized.  Efforts to streamline, simplify and create efficiencies are also paying dividends as noninterest expense, excluding non-recurring items, once again declined.  Credit quality remained strong with non-performing assets to total assets at 0.25%."

The Company will host a conference call to discuss its third quarter 2018 financial results at 7:00 a.m. Pacific Time (PT) on Thursday, October 25, 2018.  Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 1013055.  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. (BANC) provides comprehensive banking services to California's diverse businesses, entrepreneurs and communities. Banc of California operates 34 offices in California.

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. 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.

INVESTOR RELATIONS INQUIRIES:

MEDIA INQUIRIES:

Banc of California, Inc.

Abernathy MacGregor

John A. Bogler, (949) 236-5400

Ian Campbell / James Bourne / Sarah Dhanaphatana, (213) 630-6550

idc@abmac.com / jab@abmac.com / skd@abmac.com

 

Banc of California, Inc.

Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)








September 30,

June 30,

March 31,

December 31,

September 30,


2018

2018

2018

2017

2017

ASSETS






Cash and cash equivalents

$        372,221

$       385,691

$      346,704

$       387,699

$       611,826

Time deposits in financial institutions

-

-

-

-

1,000

Securities available-for-sale

2,059,832

2,297,124

2,424,593

2,575,469

2,755,664

Loans held-for-sale

9,382

13,753

20,180

67,069

50,130

Loans and leases receivable

7,253,293

7,036,004

6,930,507

6,659,407

6,226,897

Allowance for loan and lease losses

(57,782)

(56,678)

(54,763)

(49,333)

(45,072)

Federal Home Loan Bank and other bank stock

71,308

75,737

82,715

75,654

67,063

Servicing rights, net

3,770

3,869

6,739

33,708

40,448

Other real estate owned, net

434

710

1,024

1,796

3,682

Premises and equipment, net

133,129

135,478

135,198

135,699

139,326

Investments in alternative energy partnerships, net

41,781

44,806

48,344

48,826

43,817

Goodwill

37,144

37,144

37,144

37,144

37,144

Other intangible assets, net

6,990

7,683

8,510

9,353

10,219

Deferred income tax, net

47,865

42,334

43,192

31,074

23,333

Income tax receivable

1,764

7,995

10,126

8,739

7,699

Bank owned life insurance investment

106,468

105,917

105,384

104,851

104,292

Other assets

152,933

155,298

153,834

161,797

142,985

Assets of discontinued operations

20,290

26,415

29,888

38,900

59,575

Total assets 

$   10,260,822

$  10,319,280

$ 10,329,319

$  10,327,852

$  10,280,028







LIABILITIES AND STOCKHOLDERS' EQUITY






Noninterest-bearing deposits

$     1,061,557

$    1,005,032

$   1,039,116

$    1,071,608

$    1,075,782

Interest-bearing deposits

6,340,185

6,130,762

6,071,049

6,221,295

6,327,811

Total deposits

7,401,742

7,135,794

7,110,165

7,292,903

7,403,593

Advances from Federal Home Loan Bank

1,640,000

1,805,000

1,905,000

1,695,000

1,470,000

Securities sold under repurchase agreements

-

-

-

-

36,520

Notes payable, net

173,096

173,017

172,966

172,941

172,865

Reserve for loss on repurchased loans

2,575

3,149

3,426

6,306

6,173

Due on unsettled securities purchases

17,500

132,546

59,000

-

54,500

Accrued expenses and other liabilities

79,231

81,086

84,997

140,575

109,969

Liabilities of discontinued operations

-

-

9

7,819

12,500

Total liabilities

9,314,144

9,330,592

9,335,563

9,315,544

9,266,120

Commitments and contingent liabilities






Preferred stock

231,128

269,071

269,071

269,071

269,071

Common stock

518

517

517

517

542

Common stock, class B non-voting non-convertible

5

4

5

5

4

Additional paid-in capital

624,789

623,372

623,483

621,435

619,849

Retained earnings

140,971

143,880

141,008

144,839

145,420

Treasury stock

(28,786)

(28,786)

(28,786)

(28,786)

(28,786)

Accumulated other comprehensive (loss)/income, net

(21,947)

(19,370)

(11,542)

5,227

7,808

Total stockholders' equity

946,678

988,688

993,756

1,012,308

1,013,908

Total liabilities and stockholders' equity 

$   10,260,822

$  10,319,280

$ 10,329,319

$  10,327,852

$  10,280,028

 

Banc of California, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)


Three Months Ended

Nine Months Ended


September 30,

June 30,

March 31,

December 31,

September 30,

September 30,

September 30,


2018

2018

2018

2017

2017

2018

2017

Interest and dividend income








Loans, including fees

$          84,795

$         81,307

$        74,912

$         71,695

$         70,208

$       241,014

$       209,376

Securities

20,599

21,455

21,631

23,170

24,337

63,685

76,572

Other interest-earning assets

2,380

2,423

2,164

2,292

2,206

6,967

6,085

Total interest and dividend income

107,774

105,185

98,707

97,157

96,751

311,666

292,033

Interest expense








Deposits

25,154

20,315

16,795

16,044

15,468

62,264

44,370

Federal Home Loan Bank advances

8,996

9,539

7,392

5,402

3,352

25,927

7,549

Securities sold under repurchase agreements

47

211

750

194

500

1,008

686

Notes payable and other interest-bearing liabilities

2,385

2,356

2,332

2,344

2,395

7,073

8,411

Total interest expense

36,582

32,421

27,269

23,984

21,715

96,272

61,016

Net interest income

71,192

72,764

71,438

73,173

75,036

215,394

231,017

Provision for loan and lease losses

1,410

2,653

19,499

5,052

3,561

23,562

8,647

Net interest income after provision for loan and lease losses

69,782

70,111

51,939

68,121

71,475

191,832

222,370

Noninterest income








Customer service fees

1,446

1,491

1,592

1,624

1,576

4,529

4,868

Loan servicing income (loss) 

439

948

2,311

(2,416)

553

3,698

3,441

Net gain on sale of securities available for sale

13

278

5,241

2,688

7,625

5,532

12,080

Net gain (loss) on sale of loans

279

821

(41)

1,205

5,735

1,059

10,737

All other income (loss)

2,647

4,523

(521)

2,594

2,876

6,649

7,849

Total noninterest income

4,824

8,061

8,582

5,695

18,365

21,467

38,975

Noninterest expense








Salaries and employee benefits

24,832

29,440

31,115

33,146

30,216

85,387

96,007

Occupancy and equipment

8,213

7,883

7,687

9,565

10,085

23,783

30,529

Professional fees

11,966

6,303

9,177

7,853

7,697

27,446

34,564

Data processing

1,884

1,678

1,656

1,562

1,901

5,218

6,326

Advertising

3,152

2,864

3,277

1,420

1,051

9,293

3,893

Regulatory assessments

2,138

2,196

2,092

2,174

2,350

6,426

5,931

Reversal of provision for loan repurchases

(360)

(218)

(1,788)

(335)

(749)

(2,366)

(1,477)

Amortization of intangible assets

693

827

843

866

916

2,363

3,062

Restructuring expense

553

3,983

-

(43)

-

4,536

5,369

All other expenses

5,322

5,775

5,775

6,179

13,856

16,872

30,891

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

58,393

60,731

59,834

62,387

67,323

178,958

215,095

Loss (gain) on investments in alternative energy partnerships

2,484

1,808

(34)

3,995

8,348

4,258

26,791

Total noninterest expense

60,877

62,539

59,800

66,382

75,671

183,216

241,886

Income from continuing operations before income taxes

13,729

15,633

721

7,434

14,169

30,083

19,459

Income tax expense (benefit)

3,301

1,779

(6,353)

(3,418)

(3,939)

(1,273)

(23,163)

Income from continuing operations

10,428

13,854

7,074

10,852

18,108

31,356

42,622

Income (loss) from discontinued operations before income taxes

924

1,281

2,044

765

(1,958)

4,249

6,399

Income tax expense (benefit)

256

355

560

315

(799)

1,171

2,614

Income (loss) from discontinued operations

668

926

1,484

450

(1,159)

3,078

3,785

Net income

11,096

14,780

8,558

11,302

16,949

34,434

46,407

Preferred stock dividends

4,970

5,113

5,113

5,113

5,112

15,196

15,338

Impact of preferred stock redemption

2,307

-

-

-

-

2,307

-

Net income available to common stockholders

$            3,819

$           9,667

$          3,445

$           6,189

$         11,837

$         16,931

$         31,069

Basic earnings per total common share








Income from continuing operations

$              0.06

$             0.17

$            0.03

$             0.11

$             0.25

$             0.26

$             0.52

Income (loss) from discontinued operations

0.01

0.02

0.03

0.01

(0.02)

0.06

0.08

Net income

$              0.07

$             0.19

$            0.06

$             0.12

$             0.23

$             0.32

$             0.60

Diluted earnings per total common share








Income from continuing operations

$              0.06

$             0.16

$            0.03

$             0.11

$             0.25

$             0.26

$             0.52

Income (loss) from discontinued operations

0.01

0.02

0.03

0.01

(0.02)

0.06

0.07

Net income

$              0.07

$             0.18

$            0.06

$             0.12

$             0.23

$             0.32

$             0.59

Weighted average number of shares outstanding








Basic

50,656,076

50,593,429

50,590,545

50,532,544

50,362,314

50,613,590

50,160,928

Diluted

50,899,464

50,919,091

50,925,530

50,943,165

50,933,358

50,873,002

50,810,407

Dividends declared per common share

$              0.13

$             0.13

$            0.13

$             0.13

$             0.13

$             0.39

$             0.39

 

Banc of California, Inc.

Reconciliation of Consolidated Statements of Operations between Continuing and Discontinued Operations

(Dollars in thousands, except per share data)

(Unaudited)


Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018


Continuing

Discontinued

Consolidated

Continuing

Discontinued

Consolidated


Operations

Operations

Operations

Operations

Operations

Operations

Interest and dividend income

$        107,774

$              130

$      107,904

$       311,666

$              505

$       312,171

Interest expense

36,582

-

36,582

96,272

-

96,272

Net interest income

71,192

130

71,322

215,394

505

215,899

Provision for loan and lease losses

1,410

-

1,410

23,562

-

23,562

Net interest income after provision for loan and lease losses

69,782

130

69,912

191,832

505

192,337

Noninterest income







Customer service fees

1,446

-

1,446

4,529

-

4,529

Loan servicing income

439

-

439

3,698

-

3,698

Net gain on sale of securities available for sale

13

-

13

5,532

-

5,532

Net gain on sale of loans

279

-

279

1,059

-

1,059

Mortgage banking income

-

108

108

-

396

396

Gain on disposal of discontinued operations

-

-

-

-

1,275

1,275

All other income

2,647

786

3,433

6,649

2,200

8,849

Total noninterest income

4,824

894

5,718

21,467

3,871

25,338

Noninterest expense







Salaries and employee benefits

24,832

5

24,837

85,387

20

85,407

Occupancy and equipment

8,213

-

8,213

23,783

-

23,783

Professional fees

11,966

-

11,966

27,446

-

27,446

Data processing

1,884

-

1,884

5,218

-

5,218

Advertising

3,152

-

3,152

9,293

-

9,293

Regulatory assessments

2,138

-

2,138

6,426

-

6,426

Reversal of provision for loan repurchases

(360)

-

(360)

(2,366)

-

(2,366)

Loss on investments in alternative energy partnerships

2,484

-

2,484

4,258

-

4,258

Amortization of intangible assets

693

-

693

2,363

-

2,363

Restructuring expense

553

-

553

4,536

-

4,536

All other expenses

5,322

95

5,417

16,872

107

16,979

Total noninterest expense

60,877

100

60,977

183,216

127

183,343

Income before income taxes

13,729

924

14,653

30,083

4,249

34,332

Income tax (benefit) expense

3,301

256

3,557

(1,273)

1,171

(102)

Net income

$          10,428

$              668

$        11,096

$         31,356

$           3,078

$         34,434

 

Banc of California, Inc.

Selected Financial Data

(Dollars in thousands)

(Unaudited)


Three Months Ended

Nine Months Ended


September 30,

June 30,

March 31,

December 31,

September 30,

September 30,

September 30,


2018

2018

2018

2017

2017

2018

2017

Profitability and other ratios of consolidated operations








Return on average assets(1)

0.43%

0.58%

0.34%

0.44%

0.67%

0.45%

0.58%

Return on average equity (1)

4.40%

5.92%

3.40%

4.42%

6.69%

4.57%

6.16%

Return on average tangible common equity(2)

2.49%

6.03%

2.37%

3.84%

7.16%

3.61%

6.46%

Dividend payout ratio (3)

185.71%

68.42%

216.67%

108.33%

56.52%

121.88%

65.00%

Net interest spread

2.62%

2.75%

2.74%

2.79%

2.92%

2.70%

2.96%

Net interest margin(1)

2.93%

3.01%

2.98%

3.01%

3.15%

2.97%

3.14%

Noninterest income to total revenue (4)

7.42%

11.16%

12.73%

8.07%

19.86%

10.50%

29.24%

Noninterest income to average total assets(1)

0.22%

0.36%

0.41%

0.25%

0.74%

0.33%

1.23%

Noninterest expense to average total assets(1)

2.38%

2.45%

2.36%

2.59%

3.10%

2.40%

3.79%

Efficiency ratio(5)

79.15%

76.17%

72.87%

83.37%

83.36%

76.00%

89.74%

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

77.88%

73.50%

65.70%

75.46%

72.49%

71.97%

77.58%

Average held-for-investment loans and leases to average deposits

97.00%

98.63%

94.87%

86.09%

77.33%

96.85%

72.88%

Average investment securities to average total assets

21.28%

22.27%

24.60%

26.10%

27.64%

22.71%

28.67%

Average stockholders' equity to average total assets

9.85%

9.78%

9.94%

9.98%

9.95%

9.85%

9.45%

Allowance for loan and lease losses (ALLL)








Balance at beginning of period

$          56,678

$         54,763

$        49,333

$         45,072

$         42,385

$         49,333

$         40,444

Loans and leases charged off

(388)

(950)

(14,639)

(1,367)

(959)

(15,977)

(4,214)

Recoveries

82

212

570

576

85

864

195

Provision for loan and lease losses

1,410

2,653

19,499

5,052

3,561

23,562

8,647

Balance at end of period

$          57,782

$         56,678

$        54,763

$         49,333

$         45,072

$         57,782

$         45,072

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

0.02%

0.04%

0.84%

0.05%

0.06%

0.29%

0.09%

Reserve for loss on repurchased loans








Balance at beginning of period

$            3,149

$           3,426

$          6,306

$           6,173

$           8,028

6,306

$           7,974

Provision (reversal) for loan repurchases

(342)

(165)

(1,786)

(326)

(651)

(2,293)

136

Utilization of reserve for loan repurchases

(232)

(112)

(1,094)

(301)

(1,204)

(1,438)

(1,937)

Other adjustments

-

-

-

760

-

-

-

Balance at end of period

$            2,575

$           3,149

$          3,426

$           6,306

$           6,173

$           2,575

$           6,173









(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 share.

(4)

Total revenue is equal to the sum of net interest income before provision for loan and lease losses and noninterest income.

(5)

The ratios are calculated by dividing noninterest expense by the sum of net interest income before provision for loan and lease losses and noninterest income.

 

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)








September 30,

June 30,

March 31,

December 31,

September 30,


2018

2018

2018

2017

2017

Asset quality information and ratios






Delinquent loans and leases held-for-investment






30 to 89 days delinquent

$          20,265

$         15,097

$        31,936

$         32,087

$         20,286

90+ days delinquent

15,269

11,453

11,526

9,542

11,150

Total delinquent loans

$          35,534

$         26,550

$        43,462

$         41,629

$         31,436

Total delinquent loans and leases to total loans and leases

0.49%

0.38%

0.63%

0.63%

0.50%

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






Non-performing loans and leases

$          25,523

$         22,290

$        21,220

$         19,382

$         12,275

90+ days delinquent and still accruing loans and leases

-

-

-

-

-

Other real estate owned

434

710

1,024

1,796

3,682

Non-performing assets

$          25,957

$         23,000

$        22,244

$         21,178

$         15,957

ALLL to non-performing loans and leases

226.39%

254.28%

258.07%

254.53%

367.19%

Non-performing loans and leases to total loans and leases

0.35%

0.32%

0.31%

0.29%

0.20%

Non-performing assets to total assets

0.25%

0.22%

0.22%

0.21%

0.16%

Troubled debt restructurings (TDRs)






Performing TDRs

$            5,580

$           5,648

$          5,787

$           5,646

$           5,668

Non-performing TDRs

2,684

2,701

2,632

2,675

-

Total TDRs

$            8,264

$           8,349

$          8,419

$           8,321

$           5,668

Loans and leases and ALLL by loan origination type






Loan and lease breakdown by origination type






Originated loans and leases

$     6,683,683

$    6,446,127

$   6,295,843

$    5,988,101

$    5,488,018

Acquired loans not impaired at acquisition

569,610

589,877

634,664

671,306

738,879

Total loans and leases

$     7,253,293

$    7,036,004

$   6,930,507

$    6,659,407

$    6,226,897

ALLL breakdown by origination type






Originated loans and leases

$          56,672

$         55,534

$        53,605

$         48,110

$         43,723

Acquired loans not impaired at acquisition

1,110

1,144

1,158

1,223

1,349

Total ALLL

$          57,782

$         56,678

$        54,763

$         49,333

$         45,072

Discount on Purchased/Acquired Loans






Acquired loans not impaired at acquisition

$          12,311

$         12,932

$        14,255

$         14,943

$         15,983

Total Discount

$          12,311

$         12,932

$        14,255

$         14,943

$         15,983

Percentage of ALLL to:






Originated loans and leases

0.85%

0.86%

0.85%

0.80%

0.80%

Originated loans and leases and acquired loans not impaired at acquisition

0.80%

0.81%

0.79%

0.74%

0.72%

Total loans and leases

0.80%

0.81%

0.79%

0.74%

0.72%

 

Banc of California, Inc.

Selected Financial Data, Continued

(Dollars in thousands)

(Unaudited)








September 30,

June 30,

March 31,

December 31,

September 30,


2018

2018

2018

2017

2017

Composition of held-for-investment loans and leases






Commercial real estate

$        823,193

$       793,855

$      773,193

$       717,415

$       713,120

Multifamily

2,112,190

1,959,965

1,944,082

1,816,141

1,617,890

Construction

200,294

211,110

200,766

182,960

176,397

Commercial and industrial

1,673,055

1,742,559

1,638,559

1,701,951

1,602,805

SBA

71,494

78,092

79,022

78,699

78,604

Lease financing

-

-

3

13

91

Total commercial loans

4,880,226

4,785,581

4,635,625

4,497,179

4,188,907

Single family residential mortgage

2,300,069

2,174,183

2,201,358

2,055,649

1,920,310

Other consumer

72,998

76,240

93,524

106,579

117,680

Total consumer loans

2,373,067

2,250,423

2,294,882

2,162,228

2,037,990

Total gross loans and leases

$     7,253,293

$    7,036,004

$   6,930,507

$    6,659,407

$    6,226,897

Composition percentage of held-for-investment loans and leases






Commercial real estate

11.3%

11.3%

11.2%

10.8%

11.5%

Multifamily

29.1%

27.9%

28.1%

27.3%

26.0%

Construction

2.8%

3.0%

2.9%

2.7%

2.8%

Commercial and industrial

23.1%

24.8%

23.6%

25.5%

25.7%

SBA

1.0%

1.1%

1.1%

1.2%

1.3%

Lease financing

0.0%

0.0%

0.0%

0.0%

0.0%

Total commercial loans

null