INVESTOR PRESENTATION

2022 First Quarter Earnings

bancofcal.com

FORWARD LOOKING STATEMENTS

When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the "SEC"), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will," "should," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California, Inc. and its affiliates ("BANC," the "Company", "we", "us" or "our"). By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (i) the continuing effects of the COVID-19 pandemic and steps taken by governmental and other authorities to contain, mitigate, and combat the pandemic on our business, operations, financial performance and prospects; (ii) the costs and effects of litigation, including legal fees and other expenses, settlements and judgments; (iii) the risk that we will not be successful in the implementation of our capital utilization strategy, new lines of business, new products and services, or other strategic project initiatives; (iv) risks that the Company's merger and acquisition transactions, including its recent acquisition of Pacific Mercantile Bancorp, may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies, and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all; (v) the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including but not limited to, the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and nonperforming assets in our loan portfolio, and may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves; (vi) the quality and composition of our securities portfolio; (vii) changes in general economic conditions, either nationally or in our market areas, including the impact of supply chain disruptions, or changes in financial markets; (viii) changes in the interest rate environment and levels of general interest rates, including the anticipated increases by the FRB in its benchmark rate, the impacts of inflation, the relative differences between short- and long-term

interest rates, deposit interest rates, our net interest margin, and funding sources; (ix) fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area; (x) our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities; (xi) results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, restrict our ability to invest in certain assets, increase our allowance for credit losses, write-down asset values, increase our capital levels, affect our ability to borrow funds or maintain or increase deposits, or impose fines, penalties or sanctions, any of which could adversely affect our liquidity and earnings; (xii) legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (xiii) our ability to control operating costs and expenses; (xiv) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (xv) the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses; (xvi) errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation; (xvii) uncertainty regarding the expected discontinuation of the London Interbank Offered Rate ("LIBOR") and the use of alternative reference rates; (xviii) failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including but not limited to, due to cybersecurity threats; (xix) our ability to attract and retain key members of our senior management team; (xx) increased competitive pressures among financial services companies; (xxi) changes in consumer spending, borrowing and saving habits; (xxii) the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; (xxiii) the ability of key third-party providers to perform their obligations to us; (xxiv) changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting standards; (xxv) continuing impact of the Financial Accounting Standards Board's credit loss accounting standard, referred to as Current Expected Credit Loss, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses; (xxvi) share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common shares and attempting to generate negative publicity about us; (xxvii) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or our bank subsidiary, or repurchases of our common or preferred stock; and (xxviii) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC.

Further, statements about the potential effects of the Pacific Mercantile Bancorp acquisition on our business, financial results and condition 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 our control, including (i) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and

the degree of competition in the geographic and business areas in which Banc of California, Inc. and Pacific Mercantile Bancorp operate; (ii) the ability to promptly and effectively integrate the businesses of Banc of California, Inc. and Pacific Mercantile Bancorp; (iii) diversion of management time on integration-related issues; (iv) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (v) other risks that are described in Banc of California, Inc.'s public filings with the SEC.

FIRST QUARTER 2022 RESULTS

($ in Thousands Except EPS)

Net interest income

$

1Q22 76,441

$

4Q21 73,039

$

1Q21 57,916

(Reversal of) provision for credit losses

$

(31,542)

$

11,262

$

(1,107)

Net income

$

48,512

$

5,751

$

14,375

Net income available to common stockholders

$

43,345

$

4,024

$

7,825

Earnings per diluted common share

$

0.69

$

0.07

$

0.15

Adjusted net income available to common stockholders(1)

$

47,129

$

13,104

$

12,637

Adjusted earnings per diluted common share(1)

$

0.75

$

0.22

$

0.25

Pre-tax pre-provision (PTPP) income(1)

$

35,755

$

19,772

$

15,562

Adjusted PTPP income(1)

$

35,807

$

32,663

$

20,613

Return on average assets (ROAA)

2.09%

0.24%

0.74%

PTPP ROAA(1)

1.54%

0.84%

0.80%

Adjusted PTPP ROAA(1)

1.55%

1.39%

1.06%

Average assets

$

9,392,305

$

9,331,955

$

7,860,952

Net interest margin

3.51%

3.28%

3.19%

Allowance for credit losses coverage ratio

1.32%

1.35%

1.43%

Common equity tier 1(2)

11.39%

11.31%

11.50%

Tangible common equity per share(1)

$

14.05

$

13.88

$

13.24

Noninterest-bearing deposits as % of total deposits

39.6%

37.5%

27.7%

  • (1) Denotes a non-GAAP financial measure; see "Non-GAAP Reconciliation" slides at end of presentation

  • (2) 1Q22 capital ratios are preliminary

ENHANCING FRANCHISE VALUE

1st Quarter 2022 Summary

Increase in Core Earnings Power

  • Profitable organic growth and accretive benefits of PMB acquisition driving increase in core earnings power

  • Adjusted PTPP Income(1) up 10% from prior quarter and 74% year over year

  • Adjusted PTPP ROAA(1) improved 16 bps to 1.55% from prior quarter and 49 bps year over year

Strong Execution on Opportunities to Enhance

Shareholder Value

  • 40%+ cost savings achieved within 6 months of closing PMB acquisition ($1.5 billion in assets) on October 18, 2021; system conversion competed on November 15, 2021

  • Legal settlement resulting in $31.3 million recovery recoups shareholder value from 3Q19 charge off

  • 1Q22 redemption of Series E Preferred Stock will positively impact net income available to common shareholders by $6.9 million annually

  • $75 million share repurchase program authorized in March. Repurchased $4.3 million.

  • Total loan fundings increased 7% from 4Q21

  • Adding high quality earning assets with improved pricing on new loan production

  • 8% annualized growth in total commercial loans (ex. PPP and warehouse lending)

  • Improved deposit mix: NIB represented 40% of deposits at the end of 1Q22 versus 28% at the end of 1Q21

  • 10th consecutive quarter of demand deposit growth

  • Reduced average cost of deposits to 0.08% for 1Q22 from 0.28% for 1Q21

(1) Denotes a non-GAAP financial measure; see "Non-GAAP Reconciliation" slides at end of presentation

GROWING CORE EARNINGS POWER

($ in millions)

1Q 2022

Highlights

Pre-tax, pre-provision income (1)

Noninterest expense adjustmentsLoss on alternative energy partnerships

4Q 2021

Adjusted pre-tax, pre-provision income (1)

$19.8

PTPP ROAA 0.84%

$14.1

$32.7

$(1.2)

Adjusted

PTPP ROAA 1.39%

Pre-tax, pre-provision income (1)Noninterest expense adjustments

(Gain) on alternative engergy partnershipsAdjusted pre-tax, pre-provision income (1)

(1) Denotes a non-GAAP financial measure; see "Non-GAAP Reconciliation" slides at end of presentation

  • Adjusted sequential pre-tax pre-provision income increased $3.1 million, or 10%

  • Adjusted sequential PTPP ROAA increased 16 bps to 1.55%.

  • Adjusted PTPP increase due mostly to higher net interest income driven by higher average loan balances, partially offset by higher operating costs due to including PMB's operations for a full quarter and seasonal payroll costs

  • 1Q22 noninterest expense adjustments include indemnified professional fees, net of recoveries

  • 4Q21 expense adjustments include PMB merger costs and indemnified professional fees, net of recoveries

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Banc of California Inc. published this content on 21 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 April 2022 11:04:01 UTC.