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Section 1: 8-K (8-K)

Document



 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 

FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 25, 2019
 

BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
 

 
 
 
 
Maryland
001-35522
04-3639825
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
 
 
 
3 MacArthur Place, Santa Ana, California
92707
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (855) 361-2262
N/A
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐

    




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
BANC
 
New York Stock Exchange
Depositary Shares each representing a 1/40th Interest in a share of 7.375% Non-Cumulative Perpetual Preferred Stock, Series D
 
BANC PRD
 
New York Stock Exchange
Depositary Shares each representing a 1/40th Interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series E
 
BANC PRE
 
New York Stock Exchange


 
 



2




Item 2.02 Results of Operations and Financial Condition.
On July 25, 2019, Banc of California, Inc. (the “Company”) issued a press release announcing 2019 second quarter financial results. The Company will host a conference call to discuss these results at 10:00 A.M. Pacific Time on Thursday, July 25, 2019. Interested parties may attend the conference call by dialing 888-317-6003, and referencing event code 4783507. A live audio webcast will be available through the webcast link to be posted on the Company’s Investor Relations website at www.bancofcal.com/investor, in addition to the slide presentation for investor review prior to the call.

Copies of the press release and presentation materials are attached to this report as Exhibits 99.1 and 99.2 and are incorporated by reference herein.

Forward-Looking Statements
This Current Report on Form 8-K 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.

Item 9.01     Financial Statements and Exhibits.

(d) Exhibits.
99.1Banc of California, Inc. Press Release dated July 25, 2019.

99.2Banc of California, Inc. Earnings Conference Call Presentation Materials dated July 25, 2019.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

BANC OF CALIFORNIA, INC.

July 25, 2019
/s/ John A. Bogler
 
John A. Bogler
 
Executive Vice President and Chief Financial Officer

    

 


3

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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

398880706_logoa04.jpg

Banc of California Reports Second Quarter 2019 Earnings
SANTA ANA, Calif., (July 25, 2019) — (BUSINESS WIRE) — Banc of California, Inc. (NYSE: BANC) today reported net income available to common stockholders of $11.9 million, for the second quarter of 2019, resulting in diluted earnings per common share of $0.23.
Highlights for the second quarter included:
Net interest margin increased by 5 basis points from the prior quarter to 2.86% for the second quarter, resulting from a 5 basis point decline in our cost of deposits
Loan production was $599 million for the quarter, including $186 million of commercial and industrial loan commitments
Loan delinquencies decreased by 12.2% from the prior quarter to $52.2 million
Held-for-investment loan balances for the second quarter decreased to $6.7 billion as we sold lower coupon single family and multifamily loans and transferred $574 million of multifamily loans to held-for-sale, pending a planned Freddie Mac securitization
Collateralized loan obligations declined to $737 million following $298 million of sales and calls
Noninterest expense was $43.6 million for the quarter, including non-core expenses of $6.2 million of litigation, indemnification, investigation and other legal fees, $12.6 million of insurance recoveries, and net project charge-offs of $869 thousand
Efficiency ratio for the second quarter decreased to 69.75%
Return on average assets increased to 0.69%, while return on average tangible common equity was 7.43%

Jared Wolff, President and Chief Executive Officer of Banc of California, commented, “The second quarter results reflect our accelerated efforts to focus on our three initiatives designed to improve our franchise and profitability on an ongoing basis: reducing our cost of deposits, optimizing the balance sheet to focus on higher-margin products and appropriately managing down expenses to the size and complexity of the business. Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our high credit quality and serving businesses, entrepreneurs and individuals within our footprint. Further, as part of our efforts to improve our balance sheet, we commenced today a tender offer for our preferred equity for up to $75 million aggregate purchase price.”
Speaking specifically about operational results for the quarter, John Bogler, Chief Financial Officer of Banc of California said “The sales of non-core and low-margin assets allowed us to reduce high costing deposits, resulting in a 5 basis point decline in the cost of total deposits. Efforts to simplify our operating model allowed noninterest expense and operating expenses each to come in below $50 million for the quarter, which is ahead of our schedule for reducing expenses.”




Exhibit 99.1

Business Results - Income Statement Highlights
 
Three Months Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Total interest and dividend income
$
104,040

 
$
110,712

 
$
111,130

 
$
107,774

 
$
105,185

Total interest expense
39,260

 
42,904

 
40,448

 
36,582

 
32,421

(Reversal of) provision for loan and lease losses
(1,987
)
 
2,512

 
6,653

 
1,410

 
2,653

Net interest income after provision for loan and lease losses
66,767

 
65,296

 
64,029

 
69,782

 
70,111

Total noninterest (loss) income
(2,290
)
 
6,295

 
2,448

 
4,824

 
8,061

Total noninterest expense
43,587

 
61,835

 
49,569

 
60,877

 
62,539

Income tax expense
4,308

 
2,719

 
6,117

 
3,301

 
1,779

Income from continuing operations
16,582

 
7,037

 
10,791

 
10,428

 
13,854

Income from discontinued operations

 

 
247

 
668

 
926

Net income
$
16,582

 
$
7,037

 
$
11,038

 
$
11,096

 
$
14,780

Net interest income
Net interest income for the second quarter decreased to $64.8 million as we sold non-core assets and repaid high cost funding during the quarter. For the second quarter, average interest-earning assets declined from the prior quarter by $695 million to $9.1 billion, while the net interest margin improved by 5 basis points versus the prior quarter.
Our average yield on interest-earning assets remained flat at 4.59% for the second quarter as compared to the first quarter of 2019, primarily attributable to an increase in our average yield on loans partially offset by a decrease in our average yield on securities. Our average yield on loans came in at 4.80% for the second quarter which increased by 4 basis points from the prior quarter, primarily attributable to a reduction in lower-yielding single family residential mortgage and multifamily loans. Our average yield on securities decreased primarily as a result of an interest rate reset on our collateralized loan obligations and a decrease in our average balance attributable to the sale and calls of $298 million of our higher yielding collateralized loan obligations during the second quarter. The decline in the average balance of collateralized loan obligations was also due to sales that occurred late in the first quarter of 2019. We sold a significant amount of these securities at the end of the first quarter, with the full impact of the first quarter sales reflected in the second quarter.
Our average cost of interest-bearing liabilities decreased to 2.09% for the second quarter from 2.12% for the first quarter, primarily resulting from a 5 basis point decrease in our average cost of total deposits from the prior quarter to 1.62% for the second quarter. The decrease in our cost of deposits from the prior quarter primarily resulted from the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.
Provision for loan losses
During the second quarter, we released $2.0 million of our allowance for loan losses primarily attributable to a decrease in the held-for-investment loan portfolio, partially offset by an increase in net charge-offs and other qualitative provisions during the quarter. The decrease in the loan portfolio primarily resulted from the sale of $178 million of multifamily loans and the transfer of $574 million of multifamily loans to held-for-sale. During the quarter, we had $2.4 million in net charge-off activity and a $900 thousand increase in our specific reserves. The net charge-offs were driven primarily by a charge-off of $2.0 million on one commercial and industrial loan relationship.
Noninterest (loss) income
Noninterest (loss) income for the second quarter was $(2.3) million, which represented a decrease of $8.6 million, or 136.38% from the prior quarter. The decrease is primarily attributable to a $9.6 million loss on our hedge of the pending Freddie Mac multifamily securitization in which we also plan to sell the associated mortgage servicing rights. The $9.6 million hedging loss is due to a decline in interest rates since the hedge was executed and is expected to be mostly offset by the gain in fair value of the loans sold into the securitization in the third quarter. This was partially offset by an increase of $1.3 million in our gain on sale of loans during the second quarter, resulting from the sale of $178 million and $344 million of multifamily and single family residential mortgage loans, respectively.



Exhibit 99.1

Noninterest expense
Noninterest expense for the second quarter was $43.6 million, which represented a decrease of $18.2 million, or 29.5%, from the prior quarter. The decrease primarily relates to: (1) a $13.9 million decline in our professional fees, primarily attributable to $6.2 million of insurance recoveries net of expenses related to securities litigation, indemnification, investigation and other legal expenses in the second quarter as compared to $3.0 million of net expense in the prior quarter, (2) $158 thousand reversal true-up related to restructuring expense in the second quarter as compared to $2.8 million of restructuring expense in the prior quarter, and (3) a 933 thousand decrease in our compensation expense resulting from lower headcount. The net recovery of $6.2 million in insurance proceeds from the securities litigation, indemnification, investigation and other legal expenses reduced our efficiency ratio by 10%.
Income taxes
Taxes totaled $4.3 million for the quarter, representing an increase of 58% from the prior quarter, and an effective tax rate of 20.62%. During the second quarter of 2019, we closed on a tax planning strategy investment that is expected to produce $3.4 million of investment tax credits in 2019, resulting in a 5% reduction in the projected annual effective tax rate. For the full year, we expect our tax rate to normalize closer to 20%.

Balance Sheet
The following table shows selected balance sheet line items as of June 30, 2019 and for the previous four quarters. As indicated in the table below, at June 30, 2019, total assets were approximately $9.4 billion, which represented a decrease of $527 million million consistent with our strategic shift towards reducing our balance sheet and focusing on relationship lending.
 
As of and for the Three Months Ended
 
Amount Change
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
Q2-19 vs. Q1-19
 
Q2-19 vs. Q2-18
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
9,359,931

 
$
9,886,525

 
$
10,630,067

 
$
10,260,822

 
$
10,319,280

 
$
(526,594
)
 
$
(959,349
)
Securities available-for-sale
$
1,167,687

 
$
1,471,303

 
$
1,992,500

 
$
2,059,832

 
$
2,297,124

 
$
(303,616
)
 
$
(1,129,437
)
Loans held-for-investment
$
6,719,570

 
$
7,557,200

 
$
7,700,873

 
$
7,253,293

 
$
7,036,004

 
$
(837,630
)
 
$
(316,434
)
Loans held-for-sale
$
597,720

 
$
25,191

 
$
8,116

 
$
9,382

 
$
13,753

 
$
572,529

 
$
583,967

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
$
2,571,646

 
$
2,694,199

 
$
2,579,770

 
$
2,775,347

 
$
2,783,432

 
$
(122,553
)
 
$
(211,786
)
Other core deposits
3,239,667

 
3,735,667

 
3,793,605

 
3,638,624

 
3,666,159

 
(496,000
)
 
(426,492
)
Brokered deposits
480,977

 
1,295,066

 
1,543,269

 
987,771

 
686,203

 
(814,089
)
 
(205,226
)
Total Deposits
$
6,292,290

 
$
7,724,932

 
$
7,916,644

 
$
7,401,742

 
$
7,135,794

 
$
(1,432,642
)
 
$
(843,504
)
As percentage of total deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
40.87
%
 
34.88
%
 
32.59
%
 
37.50
%
 
39.01
%
 
5.99
 %
 
1.86
 %
Other core deposits
51.49
%
 
48.36
%
 
47.92
%
 
49.16
%
 
51.38
%
 
3.13
 %
 
0.11
 %
Brokered deposits
7.64
%
 
16.76
%
 
19.49
%
 
13.35
%
 
9.62
%
 
(9.12
)%
 
(1.98
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Loan Yield
4.80
%
 
4.76
%
 
4.74
%
 
4.70
%
 
4.63
%
 
0.04
 %
 
0.17
 %
Average Cost of Interest-Bearing Deposits
1.89
%
 
1.92
%
 
1.77
%
 
1.58
%
 
1.34
%
 
(0.03
)%
 
0.55
 %
Investments
Securities available-for-sale declined to $1.2 billion, a decrease of 20.6% from the previous quarter, primarily due to the continued reduction in the size of the collateralized loan obligation portfolio. During the second quarter, $298 million of collateralized loan obligations were sold or called. As of June 30, 2019, our securities balance included $737 million of collateralized loan obligations, $852 thousand of small business administration loan pool securities, $429 million of agency residential mortgage-backed securities and $285 thousand of non-agency residential mortgage-backed securities.



Exhibit 99.1

Loans
The following table sets forth the composition, by loan category, of our loan portfolio at June 30, 2019 and the previous four quarters.
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Composition of held-for-investment loans
 
 
 
 
 
 
 
 
 
Commercial real estate
$
856,497

 
$
865,521

 
$
867,013

 
$
823,193

 
$
793,855

Multifamily
1,598,978

 
2,332,527

 
2,241,246

 
2,112,190

 
1,959,965

Construction
209,029

 
211,549

 
203,976

 
200,294

 
211,110

Commercial and industrial
1,951,707

 
1,907,102

 
1,944,142

 
1,673,055

 
1,742,559

SBA
80,929

 
74,998

 
68,741

 
71,494

 
78,092

Total commercial loans
4,697,140

 
5,391,697

 
5,325,118

 
4,880,226

 
4,785,581

Single family residential mortgage
1,961,065

 
2,102,694

 
2,305,490

 
2,300,069

 
2,174,183

Other consumer
61,365

 
62,809

 
70,265

 
72,998

 
76,240

Total consumer loans
2,022,430

 
2,165,503

 
2,375,755

 
2,373,067

 
2,250,423

Total gross loans
$
6,719,570

 
$
7,557,200

 
$
7,700,873

 
$
7,253,293

 
$
7,036,004

Composition percentage of held-for-investment loans
 
 
 
 
 
 
 
 
 
Commercial real estate
12.7
%
 
11.5
%
 
11.3
%
 
11.3
%
 
11.3
%
Multifamily
23.8
%
 
30.9
%
 
29.2
%
 
29.1
%
 
27.9
%
Construction
3.1
%
 
2.8
%
 
2.6
%
 
2.8
%
 
3.0
%
Commercial and industrial
29.1
%
 
25.2
%
 
25.2
%
 
23.1
%
 
24.8
%
SBA
1.2
%
 
1.0
%
 
0.9
%
 
1.0
%
 
1.1
%
Total commercial loans
69.9
%
 
71.4
%
 
69.2
%
 
67.3
%
 
68.1
%
Single family residential mortgage
29.2
%
 
27.8
%
 
29.9
%
 
31.7
%
 
30.9
%
Other consumer
0.9
%
 
0.8
%
 
0.9
%
 
1.0
%
 
1.0
%
Total consumer loans
30.1
%
 
28.6
%
 
30.8
%
 
32.7
%
 
31.9
%
Total gross loans
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Held-for-investment loans decreased to $6.7 billion driven mostly by the transfer of $574 million of multifamily loans from held-for-investment to held-for-sale during the quarter and the sale of $178 million and $131 million of multifamily and single family residential mortgage loans, respectively, partially offset by quarterly net production of $45 million. The quarterly net production increased from the prior quarter primarily as a result of new loan growth of $63 million during the quarter, and $128 million of single family residential mortgage loan production in the second quarter as opposed to $183 million during the first quarter of 2019. The $128 million of single family residential mortgage loan production in the second quarter represented funding on commitments made prior to our decision to discontinue the single family residential mortgage loan business. Going forward, we would expect minimal production from this business in the third and fourth quarters of 2019 as we focus on relationship lending.
Commercial real estate loans comprised 12.7% of the loan portfolio and commercial and industrial loans constituted 29.1%, with yields of 4.67% and 5.77%, respectively. During the second quarter of 2019, our commercial and industrial loan production was $186 million, which represented an increase of 12.6% over the prior quarter.
Held-for-sale loans increased by $573 million primarily resulting from the transfer of certain multifamily loans from loans held-for-investment related to our pending Freddie Mac multifamily securitization which is expected to close during the third quarter of 2019. The loans included in the securitization have a weighted average coupon of 3.79% and a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights will also be sold.
Excluding the aforementioned loan sales and loans transferred to held-for-sale, the loan portfolio had net growth of $45 million from the prior quarter.



Exhibit 99.1

Deposits
The following table sets forth the composition of our deposits at June 30, 2019 and the previous four quarters.
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Composition of deposits
 
 
 
 
 
 
 
 
 
Noninterest-bearing checking
$
993,745

 
$
1,120,700

 
$
1,023,360

 
$
1,061,557

 
$
1,005,032

Interest-bearing checking
1,577,901

 
1,573,499

 
1,556,410

 
1,713,790

 
1,778,400

Money market
800,898

 
899,330

 
873,153

 
856,886

 
1,136,335

Savings
1,061,115

 
1,151,442

 
1,265,847

 
1,269,489

 
1,175,275

Non-brokered certificates of deposit
1,479,137

 
1,684,895

 
1,654,605

 
1,512,249

 
1,354,549

Brokered certificates of deposit
379,494

 
1,295,066

 
1,543,269

 
987,771

 
686,203

Total deposits
$
6,292,290

 
$
7,724,932

 
$
7,916,644

 
$
7,401,742

 
$
7,135,794

Composition percentage of deposits
 
 
 
 
 
 
 
 
 
Noninterest-bearing checking
15.8
%
 
14.5
%
 
12.9
%
 
14.3
%
 
14.1
%
Interest-bearing checking
25.1
%
 
20.4
%
 
19.7
%
 
23.2
%
 
24.9
%
Money market
12.7
%
 
11.6
%
 
11.0
%
 
11.6
%
 
15.9
%
Savings
16.9
%
 
14.9
%
 
16.0
%
 
17.2
%
 
16.5
%
Non-brokered certificates of deposit
23.5
%
 
21.8
%
 
20.9
%
 
20.4
%
 
19.0
%
Brokered certificates of deposit
6.0
%
 
16.8
%
 
19.5
%
 
13.3
%
 
9.6
%
Total deposits
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Deposits finished the second quarter at $6.3 billion, with noninterest-bearing deposits decreasing approximately $127 million. The decline in noninterest-bearing deposits for the quarter consisted primarily of transactional balances that fluctuate throughout the quarter but are expected to return. For the second quarter, the average balance of noninterest-bearing deposits was $1.034 billion up from the first quarter average balance of $1.022 billion. Total deposits decreased by $1.4 billion, of which $916 million was as a result of maturities on our brokered certificates of deposit and no new brokered certificates of deposit were acquired during the quarter.
Debt
Advances from the Federal Home Loan Bank (“FHLB”) increased $890 million, or 95%, to $1.8 billion as of June 30, 2019, as a result of overnight advances with the FHLB that we plan to pay down with the proceeds from the sale of loans sold into the Freddie Mac multifamily securitization which is expected to close in the third quarter. At the end of the quarter, the maturity dates of FHLB advances consisted of $645 million of overnight, $400 million maturing in 3 months or less, and $780 million maturing beyond 3 months. As of the end of the quarter, the overnight advance interest rate was 2.52%.
Equity
At June 30, 2019, stockholders’ equity increased by $15.2 million to $963.5 million, while tangible common equity was $690.2 million. The improvement in stockholders’ equity partially related to the improvement within our accumulated other comprehensive income as a result of other comprehensive income of $5.4 million. During the second quarter of 2019, we reduced the dividend per common share from 13 cents to 6 cents. Subsequent to June 30, 2019, we launched a tender offer for our preferred equity for up to $75 million aggregate purchase price with the tender offer expected to close by the end of August.
Capital remains strong with total risk based capital at 14.88% and a tier 1 leverage ratio of 9.62%. The following table sets forth our regulatory capital ratios at June 30, 2019 and the previous four quarters.



Exhibit 99.1

 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Capital Ratios
 
 
 
 
 
 
 
 
 
Banc of California, Inc.
 
 
 
 
 
 
 
 
 
Total risk-based capital ratio
14.88
%
 
14.01
%
 
13.71
%
 
14.05
%
 
14.71
%
Tier 1 risk-based capital ratio
13.91
%
 
13.03
%
 
12.77
%
 
13.15
%
 
13.83
%
Common equity tier 1 capital ratio
10.41
%
 
9.72
%
 
9.53
%
 
9.80
%
 
9.90
%
Tier 1 leverage ratio
9.62
%
 
8.87
%
 
8.95
%
 
8.99
%
 
9.30
%
Banc of California, NA
 
 
 
 
 
 
 
 
 
Total risk-based capital ratio
16.56
%
 
15.79
%
 
15.71
%
 
15.94
%
 
16.63
%
Tier 1 risk-based capital ratio
15.60
%
 
14.81
%
 
14.77
%
 
15.04
%
 
15.74
%
Common equity tier 1 capital ratio
15.60
%
 
14.81
%
 
14.77
%
 
15.04
%
 
15.74
%
Tier 1 leverage ratio
10.80
%
 
10.07
%
 
10.36
%
 
10.29
%
 
10.58
%
Credit Quality
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Asset quality information and ratios
($ in thousands)
Delinquent loans held-for-investment
 
 
 
 
 
 
 
 
 
30 to 89 days delinquent
$
34,938

 
$
44,840

 
$
26,684

 
$
20,265

 
$
15,097

90+ days delinquent
17,272

 
14,623

 
13,846

 
15,269

 
11,453

Total delinquent loans
$
52,210

 
$
59,463

 
$
40,530

 
$
35,534

 
$
26,550

Total delinquent loans to total loans
0.78
%
 
0.79
%
 
0.53
%
 
0.49
%
 
0.38
%
Non-performing assets, excluding loans held-for-sale
 
 
 
 
 
 
 
 
 
Non-performing loans
$
28,499

 
$
27,739

 
$
21,585

 
$
25,523

 
$
22,290

90+ days delinquent and still accruing loans
275

 
731

 
470

 

 

Other real estate owned
276

 
316

 
672

 
434

 
710

Non-performing assets
$
29,050

 
$
28,786

 
$
22,727

 
$
25,957

 
$
23,000

ALLL to non-performing loans
206.86
%
 
224.40
%
 
281.99
%
 
226.39
%
 
254.28
%
Non-performing loans to total loans held-for-investment
0.43
%
 
0.38
%
 
0.29
%
 
0.35
%
 
0.32
%
Non-performing assets to total assets
0.31
%
 
0.29
%
 
0.21
%
 
0.25
%
 
0.22
%
Troubled debt restructurings (TDRs)
 
 
 
 
 
 
 
 
 
Performing TDRs
$
20,245

 
$
5,574

 
$
5,745

 
$
5,580

 
$
5,648

Non-performing TDRs
2,428

 
1,943

 
2,276

 
2,684

 
2,701

Total TDRs
$
22,673

 
$
7,517

 
$
8,021

 
$
8,264

 
$
8,349

Loan delinquencies decreased by 12.2% to $52.2 million at June 30, 2019, primarily related to the decrease in our 30 to 89 days delinquent loans. The decrease in our total delinquent loans resulted from $12.6 million returning to current status and $11.7 million of principal payments or payoffs, partially offset by $17.0 million of additions. Loans 90+ days delinquent includes single family mortgage residential loans, which account for 44% of the balance. Loan delinquencies as a percentage of total loans held-for-investment decreased to 78 basis points for the quarter, primarily resulting from the improvement in our delinquent loans, partially offset by the reduction in our balance sheet over the same period.
Non-performing loans increased slightly to $28.5 million as of June 30, 2019, while non-performing assets finished the second quarter at $29.1 million attributable to an increase in our nonperforming loans as of June 30, 2019, partially offset by a reduction in our other real estate owned and loans 90+ days delinquent and still accruing interest. The increase in performing TDRs during the second quarter was primarily due to one loan relationship.



Exhibit 99.1

Allowance for Loan Losses
 
Three Months Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
($ in thousands)
Allowance for loan losses (ALLL)
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
63,885

 
$
62,192

 
$
57,782

 
$
56,678

 
$
54,763

Loans and leases charged off
$
(2,451
)
 
$
(1,063
)
 
$
(2,522
)
 
$
(388
)
 
$
(950
)
Recoveries
$
76

 
$
244

 
$
279

 
$
82

 
$
212

Net charge-offs
$
(2,375
)
 
$
(819
)
 
$
(2,243
)
 
$
(306
)
 
$
(738
)
(Reversal of) provision for loan losses
$
(1,987
)
 
$
2,512

 
$
6,653

 
$
1,410

 
$
2,653

Balance at end of period
$
59,523

 
$
63,885

 
$
62,192

 
$
57,782

 
$
56,678

Annualized net loan charge-offs to average total loans held-for-investment
0.13
%
 
0.04
%
 
0.12
%
 
0.02
%
 
0.04
%
Reserve for loss on repurchased loans
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
2,486

 
$
2,506

 
$
2,575

 
$
3,149

 
$
3,426

Reversal of provision for loan repurchases
(8
)
 
(20
)
 
(69
)
 
(342
)
 
(165
)
Utilization of reserve for loan repurchases

 

 

 
(232
)
 
(112
)
Balance at end of period
$
2,478

 
$
2,486

 
$
2,506

 
$
2,575

 
$
3,149

Charge-offs for the second quarter totaled $2.5 million, which primarily consisted of a $2.0 million write-down related to one loan relationship and a write-down of $425 thousand related to the sale of single family residential mortgage loans during the quarter. The allowance for loan losses decreased to $59.5 million, or 0.89% of total loans held-for-investment, primarily attributable to the release of $5.0 million resulting from the upcoming securitization of our multifamily portfolio and other decreases in the loan portfolio, partially offset by net charge-offs of $2.4 million and increases in other qualitative provisions during the quarter.

The Company will host a conference call to discuss its second quarter 2019 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, July 25, 2019. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 4783507. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call.

About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $9 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the “Bank”). The Bank has 43 offices including 32 full-service branches located throughout Southern California. Through our 700+ dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.





Exhibit 99.1

Forward-Looking Statements
This press release includes forward-looking statements. 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.

Additional Information

This press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer for the outstanding depositary shares representing Banc of California, Inc.’s 7.00% Non-Cumulative Perpetual Preferred Stock, Series E and its 7.375% Non-Cumulative Perpetual Preferred Stock, Series D described in this press release is being made pursuant to an Offer to Purchase and related materials that Banc of California, Inc. has filed or will file with the Securities and Exchange Commission (the “SEC”) pursuant to a Schedule TO. The Schedule TO, Offer to Purchase, a related letter of transmittal and other tender offer documents contain important information that should be read carefully before any decision is made with respect to the tender offer. These materials (and all other documents Banc of California, Inc. has filed with the SEC) are available at no charge on the SEC's website at www.sec.gov.



Source: Banc of California, Inc.


INVESTOR RELATIONS INQUIRIES:
Banc of California, Inc.
John A. Bogler, (855) 361-2262



Exhibit 99.1

Banc of California, Inc.
Consolidated Statements of Financial Condition
(Dollars in thousands)
(Unaudited)
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
313,850

 
$
304,705

 
$
391,592

 
$
372,221

 
$
385,691

Securities available-for-sale
1,167,687

 
1,471,303

 
1,992,500

 
2,059,832

 
2,297,124

Loans held-for-sale
597,720

 
25,191

 
8,116

 
9,382

 
13,753

Loans held-for-investment
6,719,570

 
7,557,200

 
7,700,873

 
7,253,293

 
7,036,004

Allowance for loan losses
(59,523
)
 
(63,885
)
 
(62,192
)
 
(57,782
)
 
(56,678
)
Federal Home Loan Bank and other bank stock
76,373

 
55,794

 
68,094

 
71,308

 
75,737

Servicing rights, net
2,715

 
3,053

 
3,428

 
3,770

 
3,869

Other real estate owned, net
276

 
316

 
672

 
434

 
710

Premises and equipment, net
129,227

 
130,417

 
129,394

 
133,129

 
135,478

Investments in alternative energy partnerships, net
26,633

 
26,578

 
28,988

 
41,781

 
44,806

Goodwill
37,144

 
37,144

 
37,144

 
37,144

 
37,144

Other intangible assets, net
5,105

 
5,726

 
6,346

 
6,990

 
7,683

Deferred income tax, net
42,798

 
45,111

 
49,404

 
47,865

 
42,334

Income tax receivable
2,547

 
4,787

 
2,695

 
1,764

 
7,995

Bank owned life insurance investment
108,132

 
107,552

 
107,027

 
106,468

 
105,917

Right of use assets
24,118

 
24,519

 

 

 

Other assets
165,559

 
151,014

 
146,496

 
152,933

 
155,298

Assets of discontinued operations

 

 
19,490

 
20,290

 
26,415

Total assets
$
9,359,931

 
$
9,886,525

 
$
10,630,067

 
$
10,260,822

 
$
10,319,280

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
$
993,745

 
$
1,120,700

 
$
1,023,360

 
$
1,061,557

 
$
1,005,032

Interest-bearing deposits
5,298,545

 
6,604,232

 
6,893,284

 
6,340,185

 
6,130,762

Total deposits
6,292,290

 
7,724,932

 
7,916,644

 
7,401,742

 
7,135,794

Advances from Federal Home Loan Bank
1,825,000

 
935,000

 
1,520,000

 
1,640,000

 
1,805,000

Notes payable, net
173,257

 
173,203

 
173,174

 
173,096

 
173,017

Reserve for loss on repurchased loans
2,478

 
2,486

 
2,506

 
2,575

 
3,149

Lease liabilities
25,457

 
25,893

 

 

 

Due on unsettled securities purchases

 

 

 
17,500

 
132,546

Accrued expenses and other liabilities
77,905

 
76,686

 
72,209

 
79,231

 
81,086

Total liabilities
8,396,387

 
8,938,200

 
9,684,533

 
9,314,144

 
9,330,592

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
Preferred stock
231,128

 
231,128

 
231,128

 
231,128

 
269,071

Common stock
520

 
518

 
518

 
518

 
517

Common stock, class B non-voting non-convertible
5

 
5

 
5

 
5

 
4

Additional paid-in capital
627,306

 
626,608

 
625,834

 
624,789

 
623,372

Retained earnings
146,039

 
136,943

 
140,952

 
140,971

 
143,880

Treasury stock
(28,786
)
 
(28,786
)
 
(28,786
)
 
(28,786
)
 
(28,786
)
Accumulated other comprehensive loss, net
(12,668
)
 
(18,091
)
 
(24,117
)
 
(21,947
)
 
(19,370
)
Total stockholders’ equity
963,544

 
948,325

 
945,534

 
946,678

 
988,688

Total liabilities and stockholders’ equity
$
9,359,931

 
$
9,886,525

 
$
10,630,067

 
$
10,260,822

 
$
10,319,280





Exhibit 99.1

Banc of California, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Interest and dividend income
 
 
 
 
 
 
 
 
 
Loans, including fees
$
89,159

 
$
90,558

 
$
88,258

 
$
84,795

 
$
81,307

Securities
12,457

 
17,841

 
19,882

 
20,599

 
21,455

Other interest-earning assets
2,424

 
2,313

 
2,990

 
2,380

 
2,423

Total interest and dividend income
104,040

 
110,712

 
111,130

 
107,774

 
105,185

Interest expense
 
 
 
 
 
 
 
 
 
Deposits
28,598

 
31,443

 
28,972

 
25,154

 
20,315

Federal Home Loan Bank advances
8,289

 
9,081

 
9,068

 
8,996

 
9,539

Securities sold under repurchase agreements
16

 
18

 
25

 
47

 
211

Notes payable and other interest-bearing liabilities
2,357

 
2,362

 
2,383

 
2,385

 
2,356

Total interest expense
39,260

 
42,904

 
40,448

 
36,582

 
32,421

Net interest income
64,780

 
67,808

 
70,682

 
71,192

 
72,764

(Reversal of) provision for loan and lease losses
(1,987
)
 
2,512

 
6,653

 
1,410

 
2,653

Net interest income after provision for loan and lease losses
66,767

 
65,296

 
64,029

 
69,782

 
70,111

Noninterest income
 
 
 
 
 
 
 
 
 
Customer service fees
1,434

 
1,515

 
1,786

 
1,446

 
1,491

Loan servicing income
121

 
118

 
22

 
439

 
948

Impairment loss on investment securities

 

 
(3,252
)
 

 

Net gain on sale of securities available for sale

 
208

 

 
13

 
278

Net gain on sale of loans
2,826

 
1,553

 
873

 
279

 
821

All other income (loss)
(6,671
)
 
2,901

 
3,019

 
2,647

 
4,523

Total noninterest income
(2,290
)
 
6,295

 
2,448

 
4,824

 
8,061

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
27,506

 
28,439

 
24,587

 
24,832

 
29,440

Occupancy and equipment
7,955

 
7,686

 
8,064

 
8,213

 
7,883

Professional fees (reimbursement)
(2,903
)
 
11,041

 
6,206

 
11,966

 
6,303

Data processing
1,672

 
1,496

 
1,733

 
1,884

 
1,678

Advertising
2,048

 
2,057

 
3,371

 
3,152

 
2,864

Regulatory assessments
2,136

 
2,482

 
1,252

 
2,138

 
2,196

Reversal of provision for loan repurchases
(61
)
 
(116
)
 
(122
)
 
(360
)
 
(218
)
Amortization of intangible assets
621

 
620

 
644

 
693

 
827

Restructuring (reversal) expense
(158
)
 
2,795

 
(105
)
 
553

 
3,983

All other expenses
5,126

 
3,385

 
3,153

 
5,322

 
5,775

Total noninterest expense excluding loss (gain) on investments in alternative energy partnerships
43,942

 
59,885

 
48,783

 
58,393

 
60,731

(Gain) loss on investments in alternative energy partnerships
(355
)
 
1,950

 
786

 
2,484

 
1,808

Total noninterest expense
43,587

 
61,835

 
49,569

 
60,877

 
62,539

Income from continuing operations before income taxes
20,890

 
9,756

 
16,908

 
13,729

 
15,633

Income tax expense
4,308

 
2,719

 
6,117

 
3,301

 
1,779

Income from continuing operations
16,582

 
7,037

 
10,791

 
10,428

 
13,854

 
 
 
 
 
 
 
 
 
 
Income from discontinued operations before income taxes

 

 
347

 
924

 
1,281

Income tax expense

 

 
100

 
256

 
355

Income from discontinued operations

 

 
247

 
668

 
926

Net income
16,582

 
7,037

 
11,038

 
11,096

 
14,780

Preferred stock dividends
4,308

 
4,308

 
4,308

 
4,970

 
5,113




Exhibit 99.1

Income allocated to participating securities
271

 

 

 

 
86

Participating securities dividends
94

 
202

 
203

 
202

 
203

Impact of preferred stock redemption

 

 

 
2,307

 

Net income available to common stockholders
$
11,909

 
$
2,527

 
$
6,527

 
$
3,617

 
$
9,378

Basic earnings per common share
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.23

 
$
0.05

 
$
0.12

 
$
0.06

 
$
0.17

Income from discontinued operations

 

 
0.01

 
0.01

 
0.02

Net income
$
0.23

 
$
0.05

 
$
0.13

 
$
0.07

 
$
0.19

Diluted earnings per common share
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.23

 
$
0.05

 
$
0.12

 
$
0.06

 
$
0.16

Income from discontinued operations

 

 
0.01

 
0.01

 
0.02

Net income
$
0.23

 
$
0.05

 
$
0.13

 
$
0.07

 
$
0.18

Weighted average number of common shares outstanding
 
 
 
 
 
 
 
 
 
Basic
50,857,137

 
50,676,722

 
50,651,805

 
50,656,076

 
50,593,429

Diluted
50,964,956

 
50,846,722

 
50,812,874

 
50,899,464

 
50,919,091

Dividends declared per common share
$
0.06

 
$
0.13

 
$
0.13

 
$
0.13

 
$
0.13





Exhibit 99.1

Banc of California, Inc.
Selected Financial Data
(Unaudited)

 
Three Months Ended
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Profitability and other ratios of consolidated operations
 
 
 
 
 
 
 
 
 
Return on average assets(1)
0.69
 %
 
0.28
%
 
0.43
%
 
0.43
%
 
0.58
%
Return on average equity(1)
6.91
 %
 
2.98
%
 
4.56
%
 
4.40
%
 
5.92
%
Return on average tangible common equity(2)
7.43
 %
 
1.91
%
 
4.19
%
 
2.49
%
 
6.03
%
Dividend payout ratio(3)
26.09
 %
 
260.00
%
 
100.00
%
 
185.71
%
 
68.42
%
Net interest spread
2.50
 %
 
2.47
%
 
2.56
%
 
2.62
%
 
2.75
%
Net interest margin(1)
2.86
 %
 
2.81
%
 
2.88
%
 
2.93
%
 
3.01
%
Noninterest income (loss) to total revenue(4)
(3.66
)%
 
8.49
%
 
3.60
%
 
7.42
%
 
11.16
%
Noninterest income (loss) to average total assets(1)
(0.10
)%
 
0.25
%
 
0.10
%
 
0.22
%
 
0.36
%
Noninterest expense to average total assets(1)
1.82
 %
 
2.43
%
 
1.92
%
 
2.38
%
 
2.45
%
Efficiency ratio(2)(5)
69.75
 %
 
83.44
%
 
67.47
%
 
79.15
%
 
76.17
%
Adjusted efficiency ratio including the pre-tax effect of investments in alternative energy partnerships(2)(5)
67.84
 %
 
83.00
%
 
67.09
%
 
77.88
%
 
73.50
%
Average loans held-for-investment to average deposits
104.38
 %
 
100.45
%
 
97.40
%
 
97.00
%
 
98.63
%
Average securities available-for-sale to average total assets
13.58
 %
 
17.00
%
 
19.85
%
 
21.28
%
 
22.27
%
Average stockholders’ equity to average total assets
10.02
 %
 
9.29
%
 
9.38
%
 
9.85
%
 
9.78
%

(1)
Ratios are presented on an annualized basis.
(2)
The ratios are determined by methods other than in accordance with U.S. generally accepted accounting principles (GAAP). See Non-GAAP measures section for reconciliation of the calculation.
(3)
The ratio is calculated by dividing dividends declared per common share by basic earnings per common share.
(4)
Total revenue is equal to the sum of net interest income before provision for loan and lease losses and noninterest income (loss).
(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 (loss).



Exhibit 99.1

Banc of California, Inc.
Selected Financial Data, Continued
(Dollars in thousands)
(Unaudited)

 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Loans and ALLL by loan origination type
 
 
 
 
 
 
 
 
 
Loan breakdown by origination type
 
 
 
 
 
 
 
 
 
Originated loans
$
6,181,583

 
$
6,991,056

 
$
7,105,171

 
$
6,683,683

 
$
6,446,127

Acquired loans not impaired at acquisition
537,987

 
566,144

 
595,702

 
569,610

 
589,877

Total loans
$
6,719,570

 
$
7,557,200

 
$
7,700,873

 
$
7,253,293

 
$
7,036,004

ALLL breakdown by origination type
 
 
 
 
 
 
 
 
 
Originated loans
$
58,135

 
$
63,003

 
$
61,256

 
$
56,672

 
$
55,534

Acquired loans not impaired at acquisition
1,388

 
882

 
937

 
1,110

 
1,144

Total ALLL
$
59,523

 
$
63,885

 
$
62,193

 
$
57,782

 
$
56,678

Discount on acquired loans not impaired at acquisition
$
10,680

 
$
11,184

 
$
11,645

 
$
12,311

 
$
12,932

Percentage of ALLL to:
 
 
 
 
 
 
 
 
 
Originated loans
0.94
%
 
0.90
%
 
0.86
%
 
0.85
%
 
0.86
%
Originated loans and acquired loans not impaired at acquisition
0.89
%
 
0.85
%
 
0.81
%
 
0.80
%
 
0.81
%
Total loans
0.89
%
 
0.85
%
 
0.81
%
 
0.80
%
 
0.81
%

 
 
 
 
 
 
 
 
 
 




Exhibit 99.1

Banc of California, Inc.
Average Balance, Average Yield Earned, and Average Cost Paid
(Dollars in thousands)
(Unaudited)
 
Three Months Ended
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
Average
 
 
 
Yield
 
Average
 
 
 
Yield
 
Average
 
 
 
Yield
 
Balance
 
Interest
 
/ Cost
 
Balance
 
Interest
 
/ Cost
 
Balance
 
Interest
 
/ Cost
Interest earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held-for-sale (1)
$
47,233

 
$
265

 
2.25
%
 
$
31,374

 
$
228

 
2.95
%
 
$
33,243

 
$
221

 
2.64
%
SFR mortgage
2,059,704

 
21,390

 
4.17
%
 
2,312,900

 
24,062

 
4.22
%
 
2,260,205

 
23,585

 
4.14
%
Commercial real estate, multifamily, and construction
3,406,672

 
39,659

 
4.67
%
 
3,387,698

 
38,117

 
4.56
%
 
3,246,860

 
37,403

 
4.57
%
Commercial and industrial, SBA, and lease financing
1,872,289

 
26,940

 
5.77
%
 
1,920,220

 
27,235

 
5.75
%
 
1,791,708

 
26,219

 
5.81
%
Other consumer
59,806

 
905

 
6.07
%
 
62,558

 
916

 
5.94
%
 
68,479

 
990

 
5.74
%
Gross loans and leases
7,445,704

 
89,159

 
4.80
%
 
7,714,750

 
90,558

 
4.76
%
 
7,400,495

 
88,418

 
4.74
%
Securities
1,304,876

 
12,457

 
3.83
%
 
1,751,509

 
17,841

 
4.13
%
 
2,032,632

 
19,882

 
3.88
%
Other interest-earning assets
342,908

 
2,424

 
2.84
%
 
321,823

 
2,313

 
2.91
%
 
318,419

 
2,990

 
3.73
%
Total interest-earning assets
9,093,488

 
104,040

 
4.59
%
 
9,788,082

 
110,712

 
4.59
%
 
9,751,546

 
111,290

 
4.53
%
Allowance for loan losses
(63,046
)
 
 
 
 
 
(61,924
)
 
 
 
 
 
(58,099
)
 
 
 
 
BOLI and non-interest earning assets
580,133

 
 
 
 
 
575,559

 
 
 
 
 
544,302

 
 
 
 
Total assets
$
9,610,575

 
 
 
 
 
$
10,301,717

 
 
 
 
 
$
10,237,749

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Savings
$
1,083,571

 
$
4,950

 
1.83
%
 
$
1,201,802

 
$
5,480

 
1.85
%
 
$
1,279,155

 
$
5,663

 
1.76
%
Interest-bearing checking
1,580,165

 
4,554

 
1.16
%
 
1,554,846

 
4,525

 
1.18
%
 
1,666,884

 
4,916

 
1.17
%
Money market
853,007

 
3,902

 
1.83
%
 
887,538

 
4,128

 
1.89
%
 
803,157

 
3,168

 
1.56
%
Certificates of deposit
2,537,060

 
15,192

 
2.40
%
 
2,982,980

 
17,310

 
2.35
%
 
2,759,665

 
15,225