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Banc of California Reports Third Quarter Results

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Banc of California, Inc. (NYSE:BANC) today reported net income of $11.2 million and net income available to common shareholders of $10.3 million, or $0.31 per diluted common share for the quarter ended September 30, 2014. This compares to net income available to common shareholders of $7.2 million, or $0.27 per diluted common share, for the quarter ended June 30, 2014, and a net loss to common shareholders of $9.5 million, or $(0.53) per diluted common share, for the year ago quarter ended September 30, 2013.

“This quarter’s performance is the result of our employees continuing to successfully execute on our key strategic initiatives with the goal of building California’s Bank,” said Steven Sugarman, President and Chief Executive Officer. “We remain focused on closing the acquisition and integration of Popular Community Bank’s California banking operations on November 7, which will expand our franchise and provide us additional scale to further leverage our infrastructure and deliver increasing value to shareholders.”

The Company’s consolidated assets totaled $4.54 billion at September 30, 2014, an increase of $151 million compared to the prior quarter, and an increase of $820 million compared to a year ago.

Return on average assets for the third quarter was 1.0%, up from 0.8% for the prior quarter. Return on average tangible common equity was 13.2% for the third quarter, up from 12.0% for the prior quarter.

Total loans and leases, representing both loans held for investment and held for sale, of $3.84 billion at September 30, 2014 increased $141 million compared to $3.70 billion at June 30, 2014, and have increased by $876 million compared to the year ago quarter ending September 30, 2013.

Loans held for investment increased by $110 million, or 4.2% from the prior quarter to $2.71 billion.

Total deposits of $3.63 billion at September 30, 2014 represented an increase of $284 million compared to $3.35 billion at June 30, 2014, and an increase of $372 million compared to $3.26 billion at September 30, 2013.

Total revenue of $82.3 million increased by $11.3 million compared with the prior quarter, and was $37.1 million higher compared to the third quarter 2013.

Net interest income for the third quarter was $38.2 million, an increase of $2.6 million, or 7.3%, compared to the prior quarter. Net interest margin for the third quarter was 3.58%.

Noninterest income for the third quarter totaled $44.1 million, compared to $35.4 million for the prior quarter and $18.2 million for the year ago quarter. The increase in third quarter noninterest income was primarily driven by the net gain on sale of loans of $10.3 million, compared to $3.0 million in the prior quarter. The third quarter increase in net gain on sale of loans was driven by the sale of $202 million of jumbo loans and seasoned SFR mortgage loans with a carrying value of $50 million. Mortgage banking income was $26.9 million for the quarter, an increase of $0.8 million compared to the prior quarter, and an increase of $10.7 million compared to a year ago.

Total noninterest expense for the quarter ending September 30, 2014 totaled $67.6 million, an increase of $7.1 million compared to the prior quarter. Third quarter noninterest expense included approximately $2.4 million of non-recurring costs. Additionally, volume-related loan origination expense of $13.2 million for the quarter, increased by $0.9 million compared to the prior quarter.

During the third quarter, the Company implemented certain enhancements to its allowance for loan and lease losses (ALLL) methodology which resulted in a total ALLL of $25.3 million for the third quarter, equal to 1.33% of originated loans, and represents a coverage ratio of 66% of nonperforming loans at September 30, 2014. The provision for loan losses for the third quarter was $2.8 million. Total delinquent loans of $74.0 million for the third quarter declined by 26% compared to $99.3 million from the prior quarter. Nonperforming assets declined 8% to $38.9 million compared to the prior quarter. The ratio of nonperforming assets to total assets declined from 0.96% at the prior quarter and stands at 0.86% for the third quarter. Net charge offs for the third quarter were $0.2 million, compared to a net recovery of $0.2 million during the prior quarter.

Capital ratios remain strong with a Tier 1 Risk-Based Capital Ratio of 14.0% and a Tangible Common Equity to Tangible Assets Ratio (TCE/TA) of 7.2% as of September 30, 2014.

The Company also announced today certain agreements relating to the imminent closing of its previously announced direct registered sale of common stock to entities managed by Oaktree Capital Management and Patriot Financial Partners, LP. As a result of these sales, the Company expects to receive proceeds, before offering-related expenses, of $52 million for 5,187,954 shares concurrent with the closing of the Popular Community Bank branch acquisition, which the Company expects to occur at the close of business on November 7, 2014. The transactions include a new purchase and sale agreement with Patriot that enables Patriot to increase its previously announced investment commitment by 824,000 shares at a per share price equal to $11.55 for each incremental share to be purchased.

Upon closing of the Popular Community Bank transaction, as well as the sales of common stock to Oaktree and Patriot, the Company expects a pro-forma Tangible Common Equity to Tangible Assets Ratio (TCE/TA) of 6.4% and a pro-forma Tier 1 Leverage Ratio of 8.0%.

The Company will host a conference call to discuss its third quarter earnings at 8:00 a.m. Pacific Time (PT) today, October 30, 2014. Interested parties are welcome to attend the conference call by dialing 877-474-9506, and referencing event code 83328951. The slide presentation for the call will be available on the Company’s website prior to the call.

About Banc of California, Inc.

Since 1941, Banc of California, Inc. (NYSE:BANC) through its banking subsidiary Banc of California, National Association, has provided banking services and loans to businesses and families in California and the West. Today, Banc of California, Inc. has over $4 billion in consolidated assets and more than 80 banking locations.

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.

Banc of California, Inc
Consolidated Statements of Financial Condition
(Dollars in thousands)
(Unaudited)
September 30, June 30, December 31, September 30,
2014 2014 2013 2013
ASSETS
Cash and due from banks $ 5,646 $ 5,764 $ 4,937 $ 7,951
Interest-bearing deposits 179,339 252,287 105,181 408,059
Total cash and cash equivalents 184,985 258,051 110,118 416,010
Time deposits in financial institutions 1,900 2,145 1,846 2,938
Securities available for sale 310,385 233,013 170,022 167,998
Loans held for sale 1,127,339 1,095,741 716,733 367,111
Loans and leases receivable 2,712,068 2,602,213 2,446,111 2,596,188
Allowance for loan and lease losses (25,283 ) (22,627 ) (18,805 ) (19,130 )
Federal Home Loan Bank and other bank stock 35,432 34,392 22,600 14,789
Servicing rights, net 11,745 10,191 13,883 7,603
Other real estate owned, net 605 605 1,383
Premises and equipment, net 67,323 67,457 66,260 61,443
Premises and equipment held for sale 3,080
Goodwill 31,591 32,150 30,143 22,086
Other intangible assets, net 10,829 10,959 12,152 13,191
Deferred income tax 8,663 2,546 5,515
Income tax receivable 2,995 4,077
Bank-owned life insurance investment 19,038 18,984 18,881 18,834
Other assets 41,376 40,702 35,084 35,257
Total assets $ 4,537,996 $ 4,386,522 $ 3,628,023 $ 3,718,373
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits $ 457,743 $ 408,404 $ 429,158 $ 418,759
Interest-bearing deposits 3,173,967 2,938,951 2,489,486 2,377,847
Deposits held for sale - - - 462,768
Total deposits 3,631,710 3,347,355 2,918,644 3,259,374
Advances from Federal Home Loan Bank 305,000 450,000 250,000 25,000
Federal funds purchased
Notes payable, net 95,549 96,481 82,320 82,224
Reserve for loss reimbursements on sold loans 7,045 6,174 5,427 4,282
Income taxes payable 2,158 31
Accrued expenses and other liabilities 49,653 47,163 46,763 44,913
Total liabilities 4,091,115 3,947,204 3,303,154 3,415,793
Commitments and contingent liabilities
Preferred stock, Series A, non-cumulative perpetual preferred stock 31,934 31,934 31,934 31,934
Preferred stock, Series B, non-cumulative perpetual preferred stock 10,000 10,000 10,000 10,000
Preferred stock, Series C, 8.00% non-cumulative perpetual preferred stock 37,943 37,943 37,943 37,943
Common stock 297 287 210 188
Common stock, class B non-voting non-convertible 6 6 6 5
Additional paid-in capital 371,738 369,530 256,306 230,804
Retained earnings 24,862 18,779 16,981 17,027
Treasury stock (29,798 ) (29,652 ) (27,911 ) (25,455 )
Accumulated other comprehensive (loss)/income, net (101 ) 491 (600 ) 134
Total shareholders’ equity 446,881 439,318 324,869 302,580
Total liabilities and shareholders’ equity $ 4,537,996 $ 4,386,522 $ 3,628,023 $ 3,718,373
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, September 30, September 30, September 30,
2014 2014 2013 2014 2013
Interest and dividend income
Loans, including fees $ 44,555 $ 42,077 $ 32,061 $ 128,162 $ 76,751
Securities 1,460 993 1,292 3,377 2,159
Dividends and other interest-earning assets 634 564 493 1,520 845
Total interest and dividend income 46,649 43,634 33,846 133,059 79,755
Interest expense
Deposits 6,165 6,071 5,084 17,971 10,386
Federal Home Loan Bank advances 118 99 56 317 177
Notes payable and other interest-bearing liabilities 2,180 1,889 1,763 5,825 5,265
Total interest expense 8,463 8,059 6,903 24,113 15,828
Net interest income 38,186 35,575 26,943 108,946 63,927
Provision for loan and lease losses 2,780 2,108 2,109 6,817 6,195
Net interest income after provision for loan and lease losses 35,406 33,467 24,834 102,129 57,732
Noninterest income
Customer service fees 230 356 621 839 1,676
Net gain on sale of loans 10,260 3,038 484 15,901 4,520
Mortgage banking income 26,943 26,133 16,231 70,400 52,862
All other income 6,665 5,845 890 17,608 3,168

Total noninterest income

44,098 35,372 18,226 104,748 62,226
Noninterest expense
Salaries and employee benefits 41,094 39,130 30,179 114,905 74,570
Occupancy and equipment 7,969 7,425 5,247 23,931 12,070
All other expenses 18,494 13,910 16,878 46,954 34,816
Total noninterest expense 67,557 60,465 52,304 185,790 121,456
Income before income taxes 11,947 8,374 (9,244 ) 21,087 (1,498 )
Income tax expense 721 253 (710 ) 983 1,744
Net income 11,226 8,121 (8,534 ) 20,104 (3,242 )
Preferred stock dividends 910 910 946 2,730 1,234
Net income (loss) available to common shareholders $ 10,316 $ 7,211 $ (9,480 ) $ 17,374 $ (4,476 )
Basic earnings (loss) per total common share $ 0.31 $ 0.27 $ (0.53 ) $ 0.64 $ (0.32 )
Diluted earnings (loss) per total common share $ 0.31 $ 0.27 $ (0.53 ) $ 0.63 $ (0.32 )
Banc of California, Inc
Selected Financial Data
(Dollars in thousands)
(Unaudited)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2014 2014 2013 2014 2013
Average balances:
Total assets $ 4,391,523 $ 4,034,447 $ 3,439,433 $ 4,053,810 $ 2,509,750
Total gross loans and leases 3,829,204 3,553,693 2,530,856 3,559,505 1,934,555
Securities available for sale 257,067 168,230 221,245 196,446 147,459
Total interest earning assets 4,228,555 3,858,772 3,286,840 3,887,559 2,397,486
Total interest-bearing deposits 3,070,130 2,855,650 2,534,767 2,841,303 1,864,342
Total borrowings 378,671 319,774 124,419 349,794 131,513
Interest bearing liabilities 3,448,801 3,175,424 2,659,186 3,191,097 1,995,855
Total shareholders’ equity 449,392 385,098 336,963 388,474 244,778
Profitability and other ratios:
Return on average assets (1) 1.01 % 0.81 % -0.98 % 0.66 % -0.17 %
Return on average equity (1) 9.91 % 8.46 %

-10.05

% 6.92 % -1.77 %
Dividend payout ratio (2) 38.71 % 44.44 % 56.25 %
Net interest spread 3.41 % 3.52 % 3.06 % 3.57 % 3.39 %
Net interest margin (1) 3.58 % 3.70 % 3.25 % 3.75 % 3.56 %
Noninterest income to total revenue (3) 53.59 % 49.86 % 40.35 % 49.02 % 49.33 %
Noninterest income to average total assets (1) 3.98 % 3.52 % 2.10 % 3.45 % 3.31 %
Noninterest expense to average total assets (1) 6.10 % 6.01 % 6.03 % 6.13 % 6.47 %
Efficiency ratio (4) 82.10 % 85.23 % 115.80 % 86.94 % 96.28 %
Average held for investment loans and leases to average deposits 75.39 % 74.60 % 75.86 % 76.60 % 83.11 %
Average securities available for sale to average total assets 5.85 % 4.17 % 6.43 % 4.85 % 5.88 %
Average shareholders’ equity to average total assets 10.23 % 9.55 % 9.80 % 9.58 % 9.75 %
Allowance for loan and lease losses (ALLL):
Balance at beginning of period $ 22,627 $ 20,003 $ 16,979 $ 18,805 $ 14,448
Loans and leases charged off (312 ) (383 ) (211 ) (898 ) (2,145 )
Recoveries of loans and leases previously charged off 96 641 253 1,172 632
Transfer of loans from (to) held-for-sale 92 258 (613 )
Provision for loan and lease losses 2,780 2,108 2,109 6,817 6,195
Balance at end of period $ 25,283 $ 22,627 $ 19,130 $ 25,283 $ 19,130
Reserve for loss on repurchased loans
Balance at beginning of period $ 6,174 $ 5,866 $ 3,974 $ 5,427 $ 3,485
Provision for loan repurchases 1,556 968 375 3,094 1,363
Payment made for loss reimbursement on sold loans (685 ) (660 ) (67 ) (1,476 ) (566 )
Balance at end of period $ 7,045 $ 6,174 $ 4,282 $ 7,045 $ 4,282
(1) Ratios are presented on an annualized basis
(2) Dividends declared per common share divided by basic earnings per share. Not applicable for the three and nine months ended September 30, 2013, due to the net loss attributable to shareholders.
(3) Total revenue is equal to the sum of net interest income before provision and noninterest income.
(4) The ratios were 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, December 31, September 30,
2014 2014 2013 2013
Asset quality information and ratios:
30 to 89 days delinquent, excluding PCI loans $ 35,531 $ 44,894 $ 37,699 $ 30,964
90+ days delinquent, excluding PCI loans 15,672 16,925 13,441 14,100
Total delinquent loans, excluding PCI loans 51,203 61,819 51,140 45,064
PCI loans, 30 to 89 days delinquent 18,743 25,109 30,514 25,538
PCI loans, 90+ days delinquent 4,017 12,398 12,205 9,168
Total delinquent PCI loans 22,760 37,507 42,719 34,706
Total delinquent loans $ 73,963 $ 99,326 $ 93,859 $ 79,770
Total delinquent non-PCI loans to total non-PCI loans 2.08 % 2.69 % 2.43 % 2.01 %
Total delinquent loans to gross loans 2.73 % 3.82 % 3.84 % 3.07 %
Non-performing loans, excluding PCI loans $ 38,333 $ 41,611 $ 31,648 $ 15,408
90+ days delinquent and still accruing loans, excluding PCI loans
Other real estate owned 605 605 - 1,383
Non-performing assets 38,938 42,216 31,648 16,791
ALLL to non-performing loans 65.96 % 54.38 % 59.42 % 124.16 %
Non-performing loans to gross loans 1.41 % 1.60 % 1.29 % 0.59 %
Non-performing assets to total assets 0.86 % 0.96 % 0.87 % 0.45 %
Loan breakdown by ALLL evaluation type:
Originated loans
Individually evaluated for impairment $ 29,030 $ 29,763 $ 16,704 $ 18,027
Collectively evaluated for impairment 1,668,004 1,447,077 1,168,195 1,234,648
Acquired loans through business acquisitions – non-impaired
Individually evaluated for impairment 8,004 6,173 2,243 2,207
Collectively evaluated for impairment 377,554 409,745 469,916 523,590
Seasoned SFR mortgage loan pools – non-impaired 376,575 404,398 449,767 468,590
Acquired with deteriorated credit quality 252,901 305,057 339,286 349,126
Total loans $ 2,712,068 $ 2,602,213 $ 2,446,111 $ 2,596,188
ALLL breakdown:
Originated loans
Individually evaluated for impairment $ 517 $ 309 $ 96 $ 1,377
Collectively evaluated for impairment 22,011 19,427 17,103 15,999
Acquired loans through business acquisitions – non-impaired
Individually evaluated for impairment 7 22
Collectively evaluated for impairment 2,748 2,570 1,410 1,420
Seasoned SFR mortgage loan pools – non-impaired
Acquired with deteriorated credit quality - 321 196 312
Total ALLL $ 25,283 $ 22,627 $ 18,805 $ 19,130
Discount on Purchased/Acquired Loans:
Acquired loans through business acquisitions – non-impaired $ 6,512 $ 6,536 $ 8,354 $ 9,003
Seasoned SFR mortgage loan pools – non-impaired 30,811 33,044 38,240 38,002
Acquired with deteriorated credit quality 57,961 84,876 105,650 110,081
Total Discount $ 95,284 $ 124,456 $ 152,244 $ 157,086
Ratios:
To originated loans:
Individually evaluated for impairment 1.78 % 1.04 % 0.57 % 7.64 %
Collectively evaluated for impairment 1.32 % 1.34 % 1.46 % 1.30 %
Total ALLL 1.33 % 1.34 % 1.45 % 1.39 %
To originated and acquired non-impaired loans:
Individually evaluated for impairment 1.41 % 0.86 % 0.51 % 6.91 %
Collectively evaluated for impairment 1.21 % 1.18 % 1.13 % 0.99 %
Total ALLL 1.21 % 1.18 % 1.12 % 1.06 %
Total ALLL and discount (1) 1.53 % 1.52 % 1.63 % 1.56 %
To total loans:
Individually evaluated for impairment 1.41 % 0.86 % 0.51 % 6.91 %
Collectively evaluated for impairment 1.02 % 0.97 % 0.89 % 0.78 %
Total ALLL 0.93 % 0.87 % 0.77 % 0.74 %
Total ALLL and discount (1) 4.45 % 5.65 % 6.99 % 6.79 %
(1) The ratios were calculated by dividing a sum of ALLL and discounts by carrying value of loans.
Banc of California, Inc
Selected Financial Data, Continued
(Dollars in thousands)
(Unaudited)
September 30, June 30, December 31, September 30,
2014 2014 2013 2013
Composition of held for investment loans and leases
Commercial real estate $ 521,867 $ 535,744 $ 529,883 $ 482,260
Multi-family 367,364 234,179 141,580 131,280
Construction 25,997 30,761 24,933 22,838
Commercial and industrial 366,416 368,540 287,771 250,749
SBA 25,729 28,684 27,428 27,669
Lease financing 72,027 57,754 31,949 21,340
Total commercial loans 1,379,400 1,255,662 1,043,544 936,136
Single family residential mortgage 1,191,021 1,212,813 1,286,541 1,550,068
Other consumer 141,647 133,738 116,026 109,984
Total consumer loans 1,332,668 1,346,551 1,402,567 1,660,052
Total gross loans and leases $ 2,712,068 $ 2,602,213 $ 2,446,111 $ 2,596,188
Composition percentage of held for investment loans and leases
Commercial real estate 19.2 % 20.6 % 21.7 % 18.6 %
Multi-family 13.5 % 9.0 % 5.8 % 5.1 %
Construction 1.0 % 1.2 % 1.0 % 0.9 %
Commercial and industrial 13.5 % 14.2 % 11.8 % 9.7 %
SBA 0.9 % 1.1 % 1.1 % 1.1 %
Lease financing 2.7 % 2.2 % 1.3 % 0.8 %
Total commercial loans 50.8 % 48.3 % 42.7 % 36.2 %
Single family residential mortgage 44.0 % 46.6 % 52.6 % 59.6 %
Other consumer 5.2 % 5.1 % 4.7 % 4.2 %
Total consumer loans 49.2 % 51.7 % 57.3 % 63.8 %
Total gross loans and leases 100.0 % 100.0 % 100.0 % 100.0 %
Composition of deposits
Noninterest-bearing checking $ 457,743 $ 408,404 $ 429,158 $ 441,081
Interest-bearing checking 779,704 688,699 539,098 534,476
Money market 769,291 618,231 518,696 574,111
Savings 932,133 985,028 963,536 1,105,360
Certificates of deposit 692,839 646,993 468,156 604,346
Total deposits $ 3,631,710 $ 3,347,355 $ 2,918,644 $ 3,259,374
Composition percentage of deposits
Noninterest-bearing checking 12.6 % 12.2 % 14.7 % 13.5 %
Interest-bearing checking 21.5 % 20.6 % 18.5 % 16.4 %
Money market 21.2 % 18.5 % 17.8 % 17.6 %
Savings 25.6 % 29.4 % 33.0 % 34.0 %
Certificates of deposit 19.1 % 19.3 % 16.0 % 18.5 %
Total deposits 100.0 % 100.0 % 100.0 % 100.0 %
Banc of California, Inc
Average Balance, Average Yield Earned, and Average Cost Paid
(Dollars in thousands)
(Unaudited)
Three months ended
September 30, 2014 June 30, 2014 September 30, 2013
Average Yield Average Yield Average Yield
Balance Interest / Cost Balance Interest / Cost Balance Interest / Cost
Interest earning assets:
Loans held for sale and SFR mortgage $ 1,757,890 $ 16,979 3.83 % $ 1,590,982 $ 15,158 3.82 % $ 1,055,646 $ 11,151 4.19 %
Seasoned SFR mortgage loan pools 675,083 11,753 6.91 % 701,006 11,723 6.71 % 453,214 8,081 7.07 %
Commercial real estate, multi-family, and construction 827,934 9,592 4.60 % 734,472 8,689 4.75 % 624,632 7,503 4.77 %
Commercial and industrial, SBA, and lease financing 451,992 5,060 4.44 % 418,170 5,413 5.19 % 300,162 4,411 5.83 %
Other consumer 116,305 1,171 3.99 % 109,063 1,094 4.02 % 97,202 915 3.73 %
Gross loans and leases 3,829,204 44,555 4.62 % 3,553,693 42,077 4.75 % 2,530,856 32,061 5.03 %
Securities 257,067 1,460 2.25 % 168,230 993 2.37 % 221,245 1,292 2.32 %
Other interest-earning assets 142,284 634 1.77 % 136,849 564 1.65 % 534,739 493 0.37 %
Total interest-earning assets 4,228,555 46,649 4.38 % 3,858,772 43,634 4.54 % 3,286,840 33,846 4.09 %
Allowance for loan and lease losses (23,266 ) (20,567 ) (17,524 )
BOLI and non-interest earning assets 186,234 196,242 170,117
Total assets $ 4,391,523 $ 4,034,447 $ 3,439,433
Interest-bearing liabilities:
Savings 953,925 2,215 0.92 % 990,894 2,425 0.98 % 907,413 2,471 1.08 %
Interest-bearing checking 745,635 2,037 1.08 % 660,341 1,864 1.13 % 447,961 995 0.88 %
Money market 681,576 673 0.39 % 603,917 639 0.42 % 599,971 556 0.37 %
Certificates of deposit 688,994 1,240 0.71 % 600,498 1,143 0.76 % 579,422 1,062 0.73 %
FHLB advances 276,739 118 0.17 % 226,429 99 0.18 % 40,183 56 0.55 %
Long-term debt and other interest-bearing liabilities 101,932 2,180 8.48 % 93,345 1,889 8.12 % 84,236 1,763 8.30 %
Total interest-bearing liabilities 3,448,801 8,463 0.97 % 3,175,424 8,059 1.02 % 2,659,186 6,903 1.03 %
Noninterest-bearing deposits 448,825 428,221 413,877
Non-interest-bearing liabilities 44,505 45,704 29,407
Total liabilities 3,942,131 3,649,349 3,102,470
Total shareholders’ equity 449,392 385,098 336,963

Total liabilities and shareholders’ equity

$ 4,391,523 $ 4,034,447 $ 3,439,433
Net interest income/spread $ 38,186 3.41 % $ 35,575 3.52 % $ 26,943 3.06 %
Net interest margin 3.58 % 3.70 % 3.25 %
Banc of California, Inc
Average Balance, Average Yield Earned, and Average Cost Paid, Continued
(Dollars in thousands)
(Unaudited)
Nine months ended September 30,
2014 2013
Average Yield Average Yield
Balance Interest / Cost Balance Interest / Cost
Interest earning assets:
Loans held for sale and SFR mortgage $ 1,583,494 $ 45,527 3.84 % $ 844,479 $ 25,985 4.11 %
Seasoned SFR mortgage loan pools 708,814 36,548 6.89 % 325,906 20,103 8.25 %
Commercial real estate, multi-family, and construction 749,350 26,501 4.73 % 523,795 19,477 4.97 %
Commercial and industrial, SBA, and lease financing 409,624 16,367 5.34 % 203,322 10,120 6.65 %
Other consumer 108,223 3,219 3.98 % 37,053 1,066 3.85 %
Gross loans and leases 3,559,505 128,162 4.81 % 1,934,555 76,751 5.30 %
Securities 196,446 3,377 2.30 % 147,459 2,159 1.96 %
Other interest-earning assets 131,608 1,520 1.54 % 315,472 845 0.36 %

Total interest-earning assets

3,887,559 133,059 4.58 % 2,397,486 79,755 4.45 %
Allowance for loan and lease losses (21,089 ) (16,446 )
BOLI and non-interest earning assets 187,340 128,710
Total assets $ 4,053,810 $ 2,509,750
Interest-bearing liabilities:
Savings 970,348 7,156 0.99 % 571,830 4,342 1.02 %
Interest-bearing checking 666,926 5,552 1.11 % 280,352 1,712 0.82 %
Money market 600,818 1,948 0.43 % 423,672 1,042 0.33 %
Certificates of deposit 603,211 3,315 0.73 % 588,488 3,290 0.75 %
FHLB advances 254,322 317 0.17 % 46,721 177 0.51 %
Long-term debt and other interest-bearing liabilities 95,472 5,825 8.16 % 84,792 5,265 8.30 %
Total interest-bearing liabilities 3,191,097 24,113 1.01 % 1,995,855 15,828 1.06 %
Noninterest-bearing deposits 431,160 239,379
Non-interest-bearing liabilities 43,079 29,738
Total liabilities 3,665,336 2,264,972
Total shareholders’ equity 388,474 244,778
Total liabilities and shareholders’ equity $ 4,053,810 $ 2,509,750
Net interest income/spread $ 108,946 3.57 % $ 63,927 3.39 %
Net interest margin 3.75 % 3.56 %
Banc of California, Inc
Capital Ratios
(Unaudited)
September 30, June 30, December 31, September 30,
2014 2014 2013 2013
Capital Ratios:
Banc of California, Inc.
Total risk-based capital ratio: 14.97 % 15.19 % 12.45 % 12.64 %
Tier 1 risk-based capital ratio: 14.03 % 14.10 % 11.41 % 11.58 %
Tier 1 leverage ratio: 9.28 % 9.89 % 8.02 % 7.82 %
Banc of California, NA (1)
Total risk-based capital ratio: 15.75 % 14.88 % 14.65 % 15.39 %
Tier 1 risk-based capital ratio: 14.81 % 13.79 % 13.60 % 14.14 %
Tier 1 leverage ratio: 9.80 % 9.72 % 9.58 % 8.11 %
The Private Bank of California (1)
Total risk-based capital ratio: N/A N/A N/A 11.55 %
Tier 1 risk-based capital ratio: N/A N/A N/A 11.06 %
Tier 1 leverage ratio: N/A N/A N/A 8.34 %
(1) On October 11, 2013, The Private Bank of California was merged with the Company’s other wholly owned banking subsidiary, Banc of California, NA.
Banc of California, Inc
Non-GAAP Measures
(Dollars in thousands, except per share data)
(Unaudited)
Non-GAAP performance measure:
Tangible common equity to tangible assets ratio and return on average tangible common equity are supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP measures are used by management in the analysis of Banc of California, Inc.’s capital strength and performance of businesses. Tangible equity is calculated by subtracting goodwill and other intangible assets from total stockholders’ equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from total stockholders’ equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Banc of California, Inc. This disclosure should not be viewed as a substitution 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 reconcile this non-GAAP performance measures to the GAAP performance measures for the periods indicated:
September 30, June 30, December 31, September
2014 2014 2013 2013
Tangible common equity to tangible assets ratio
Total assets $ 4,537,996 $ 4,386,522 $ 3,628,023 $ 3,718,373
Less goodwill (31,591 ) (32,150 ) (30,143 ) (22,086 )
Less other intangible assets (10,829 ) (10,959 ) (12,152 ) (13,191 )

Tangible assets

$ 4,495,576 $ 4,343,413 $ 3,585,728 $ 3,683,096
Total shareholders’ equity $ 446,881 $ 439,318 $ 324,869 $ 302,580
Less preferred stock (79,877 ) (79,877 ) (79,877 ) (79,877 )
Less goodwill (31,591 ) (32,150 ) (30,143 ) (22,086 )
Less other intangible assets (10,829 ) (10,959 ) (12,152 ) (13,191 )
Tangible common equity $ 324,584 $ 316,332 $ 202,697 $ 187,426
Total shareholders’ equity to total assets 9.85 % 10.02 % 8.95 % 8.14 %
Tangible common equity to tangible assets 7.22 % 7.28 % 5.65 % 5.09 %
Common stock outstanding 28,023,701 27,032,464 19,561,469 17,439,562
Class B non-voting non-convertible common stock outstanding 602,783 596,018 584,674 579,490
Total common stock outstanding 28,626,484 27,628,482 20,146,143 18,019,052
Minimum number of shares issuable under purchase contracts (1) 4,198,425 5,101,326 - -
Total common stock outstanding and shares issuable under purchase contracts 32,824,909 32,729,808 20,146,143 18,019,052
(1) Purchase contracts relating to the tangible equity units
Tangible common equity per common stock $ 11.34 $ 11.45 $ 10.06 $ 10.40
Book value per common stock $ 12.82 $ 13.01 $ 12.16 $ 12.36
Tangible equity per common stock and shares issuable under purchase contracts $ 9.89 $ 9.66 $ 10.06 $ 10.40
Book value per common stock and shares issuable under purchase contracts $ 11.18 $ 10.98 $ 12.16 $ 12.36
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2014 2014 2013 2014 2013
Return on tangible common equity
Average total shareholders’ equity $ 449,392 $ 385,098 $ 336,963 $ 388,474 $ 244,778
Less average preferred stock (79,877 ) (79,877 ) (80,302 ) (79,877 ) (48,331 )
Less average goodwill (32,209 ) (33,020 ) (21,722 ) (32,056 ) (11,993 )
Less average other intangible assets (10,634 ) (10,871 ) (15,009 ) (11,108 ) (8,474 )
Average tangible common equity $ 326,672 $ 261,330 $ 219,930 $ 265,433 $ 175,980
Net income $ 11,226 $ 8,121 $ (8,534 ) $ 20,104 $ (3,242 )
Less preferred stock dividends (910 ) (910 ) (946 ) (2,730 ) (1,234 )
Add tax-effected amortization of intangible assets (1) 579 614 632 1,802 1,110
Add tax-effected impairment on intangible assets (1) - - 634 - 634
Net income (loss) available to common shareholders $ 10,895 $ 7,825 $ (8,214 ) $ 19,176 $ (2,732 )
(1) Utilized a 35% effective tax rate
Return on average equity 9.91 % 8.46 % -10.05 % 6.92 % -1.77 %
Return on average tangible common equity 13.23 % 12.01 % -14.82 % 9.66 % -2.08 %

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