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Section 1: 8-K (8-K)

banc-20200723
0001169770falseDepositary Shares -- 7.375% non-cumulative perpetual preferred stock, series DDepositary Shares -- 7.00% non-cumulative perpetual preferred stock, series E00011697702020-07-232020-07-230001169770us-gaap:CommonStockMember2020-07-232020-07-230001169770us-gaap:SeriesDPreferredStockMember2020-07-232020-07-230001169770us-gaap:SeriesEPreferredStockMember2020-07-232020-07-23

 
 
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 23, 2020
 
BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
 
 
Maryland001-3552204-3639825
(State or other jurisdiction
of incorporation)
(Commission File Number)(IRS Employer
Identification No.)
 
3 MacArthur Place,Santa Ana,California92707
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (855361-2262
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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBANCNew York Stock Exchange
Depositary Shares each representing a 1/40th Interest in a share of 7.375% Non-Cumulative Perpetual Preferred Stock, Series DBANC PRDNew York Stock Exchange
Depositary Shares each representing a 1/40th Interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series EBANC PRENew York Stock Exchange

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Item 2.02 Results of Operations and Financial Condition.
On July 23, 2020, Banc of California, Inc. (the “Company”) issued a press release announcing 2020 second quarter financial results.
A copy of the press release is attached to this report as Exhibit 99.1 and is incorporated by reference herein.

Item 7.01 Regulation FD Disclosure.
The Company will host a conference call to discuss its second quarter results at 10:00 A.M. Pacific Time on Thursday, July 23, 2020. Interested parties may attend the conference call by dialing (888) 317-6003, and referencing event code 0284271. 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. A copy of the presentation materials is attached to this report as Exhibit 99.2 and is incorporated by reference herein.


Item 9.01  Financial Statements and Exhibits.

(d) Exhibits.
99.1 Banc of California, Inc. Press Release dated July 23, 2020.

99.2 Banc of California, Inc. Earnings Conference Call Presentation Materials dated July 23, 2020.

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

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 23, 2020/s/ Lynn M. Hopkins
Lynn M. Hopkins
Executive Vice President and Chief Financial Officer

             
             

 
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Section 2: EX-99.1 (EX-99.1)

Document
EX 99.1
404717861_logoa071.jpg

Banc of California Reports Second Quarter 2020 Financial Results

SANTA ANA, Calif., (July 23, 2020) — Banc of California, Inc. (NYSE: BANC) today reported net loss available to common stockholders for the second quarter of 2020 of $21.9 million, or diluted loss per common share of $0.44. Financial results for the second quarter of 2020 included a one-time pre-tax charge of $26.8 million related to the termination of the Company’s multi-year naming rights agreements, entered into in 2017 with the Los Angeles Football Club (“LAFC”). The buyout of the agreement and restructuring of the relationship will result in estimated pre-tax cost savings of approximately $89 million over the next 12.5 years, or approximately $7 million per year.
Highlights for the second quarter included:
Noninterest-bearing deposit balances increased $135.4 million during the quarter and represented 23% of total deposits at June 30, 2020, up from 16% a year earlier
Total checking balances increased $409.7 million during the quarter and represented 54% of total deposits at June 30, 2020, up from 40% a year earlier
Net interest margin increased 12 basis points from the prior quarter to 3.09%
Average cost of total deposits declined 40 basis points from the prior quarter to 0.71%, with period-end cost of deposits at 0.59%
Allowance for credit losses strengthened to 1.68% of total loans
Common Equity Tier 1 capital at 11.68%
Jared Wolff, President & CEO of Banc of California, commented, “Our second quarter was highlighted by our expanding net interest margin, growth in noninterest-bearing deposits, reduction in our deposit costs, and the sustained improvement in operating leverage and core pre-tax, pre-provision earnings. While we continue to build on these elements to enhance franchise value, we are positioned with significant excess capital, healthy reserves and a conservatively underwritten loan portfolio, 66% of which is secured by residential real estate and with limited exposure to higher risk industries. As we help our clients manage through the impact of the pandemic, the current public health and economic crisis has not impeded our overall progress on implementing our strategic initiatives that is building long-term value for shareholders.”
Mr. Wolff continued, “Notably, we also had the opportunity to accelerate our transformation through the restructuring of our agreement with LAFC. Our buyout will save the Company approximately $7 million in annual expenses and enhance our future operating leverage. Given the uncertainty of the economic environment, we intend to remain conservative by protecting capital and building core deposits, although we expect our results in the second half of the year to continue to reflect the increased operating leverage and growing earnings power that we have been building at the Company.”​
Lynn Hopkins, Chief Financial Officer of Banc of California, said, “The positioning of our balance sheet entering the pandemic has helped us to effectively manage through this crisis. We continue to have a high level of capital and a loan portfolio that it is heavily weighted towards conservatively underwritten real estate loans with low loan-to-values. While net income was negatively impacted by the one-time costs associated with the restructuring of our partnership with LAFC, we are pleased with the positive trends we experienced throughout most areas of our operations, including a 40 basis point decline in our average cost of total deposits and a 12 basis point increase in our net interest margin from the prior quarter. Notwithstanding our net loss for the quarter of $18.4 million, these positive trends helped drive a 31.7% increase in our adjusted pre-tax pre-provision income of $16.0 million compared to the prior quarter, which excludes the impact of provision for credit losses and certain other non-core income and expenses. We continue to build momentum in our core underlying earnings power and we believe we can continue that progress in the second half of 2020.”
1

EX 99.1
COVID-19 Operational Update
We continue to operate 25 of our 31 branches as we temporarily consolidated some overlapping areas to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. We participated in the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), deploying resources to this program in support of our clients and others seeking financial relief under the program. As of June 30, 2020, we estimate we helped businesses that represent an aggregate workforce of more than 25,000 jobs through approvals of $262 million in PPP funds. While we focused on serving existing clients with our high-touch model, we also used our framework to attract new clients and used the PPP to differentiate ourselves by showing how true service can make a meaningful difference. As a result, we added many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts. During the three months ended June 30, 2020, we collected $7.5 million in fees on PPP loans originated during the quarter, which will be recognized over their estimated life of 9 months. While we have started the loan forgiveness process with a number of clients, we expect this will continue into the first half of next year.

We are also actively engaged with our borrowers seeking payment relief. Refer also to the Credit Quality discussion for details regarding loans that have requested relief under the CARES Act.


Termination of LAFC Agreement
As previously disclosed, during the second quarter, we terminated our naming rights agreements with LAFC, which the Company had entered into in 2017. We incurred a pre-tax, one-time charge to operations of $26.8 million and we expect aggregate pre-tax expense savings of $89 million over the remaining 12 1/2 year life of our former agreements with LAFC, or approximately $7 million per year. The amended agreements allow LAFC to expand its roster of sponsors and partners into categories that were previously exclusive to us under the original agreements. In connection with the termination, we will step away from our naming-rights position on LAFC's soccer stadium, but we will continue to serve as LAFC's primary banking partner, subject to any new sponsor in the financial services space that offers banking services, and remain as a partner on a number of other collaborations. We paid LAFC a $20.1 million termination fee and will not have any continuing payment obligations to LAFC after December 31, 2020.


Income Statement Highlights
Three Months EndedSix Months Ended
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
June 30,
2020
June 30,
2019
($ in thousands)
Total interest and dividend income$72,697  $74,714  $83,702  $92,657  $104,040  $147,411  $214,752  
Total interest expense17,382  22,853  27,042  33,742  39,260  40,235  82,164  
Net interest income55,315  51,861  56,660  58,915  64,780  107,176  132,588  
Total noninterest income (loss)5,528  2,061  4,930  3,181  (2,290) 7,589  4,005  
Total revenue60,843  53,922  61,590  62,096  62,490  114,765  136,593  
Total noninterest expense72,770  46,919  47,483  43,240  43,500  119,689  105,749  
Pre-tax / pre-provision (loss) income(11,927) 7,003  14,107  18,856  18,990  (4,924) 30,844  
Provision for (reversal of) credit losses11,826  15,761  (2,976) 38,607  (1,900) 27,587  198  
Income tax (benefit) expense(5,304) (2,165) 2,811  (5,619) 4,308  (7,469) 7,027  
Net (loss) income$(18,449) $(6,593) $14,272  $(14,132) $16,582  $(25,042) $23,619  
Net (loss) income available to common stockholders(1)
$(21,936) $(9,694) $10,415  $(22,722) $11,909  $(31,630) $14,555  
(1)Balance represents the net (loss) income available to common stockholders after subtracting preferred stock dividends, income allocated to participating securities, participating securities dividends and impact of preferred stock redemption from net (loss) income. Refer to the Statement of Operations for additional detail on these amounts.
2

EX 99.1
Net interest income
Q2-2020 vs Q1-2020
Net interest income increased $3.5 million to $55.3 million for the second quarter due mostly to lower funding costs and higher average interest-earning assets, offset by a lower yield on average earning assets. Compared to the prior quarter, average interest-earning assets increased by $165.1 million to $7.20 billion, due to higher average securities of $111.0 million and other interest-earning assets of $127.3 million, offset by lower average loans of $73.2 million. The average interest-earning assets growth was funded by higher average noninterest-bearing deposits of $216.4 million and interest-bearing deposits of $251.7 million, offset by lower average FHLB advances of $219.9 million.
The net interest margin increased 12 basis points to 3.09% for the second quarter from 2.97% for the prior quarter. The increase was due to the 42 basis point decline on the average cost of interest-bearing liabilities, outpacing the 21 basis point decline in the average yield on interest-earning assets. The decrease in the average interest-earning asset yield from 4.27% for the first quarter to 4.06% for the second quarter was due to lower yields on most interest-earning asset classes and the change in the mix of interest-earning assets. The lower yields on total loans, securities and other interest-earning assets was due to originating new business and repricing variable rate loans and investments in the lower interest rate environment given the rate cuts by the Federal Reserve in March of 2020. Our average yield on loans declined 8 basis points to 4.48% and our average yield on securities decreased 35 basis points to 2.95%. The second quarter includes $1.7 million of PPP fee income, which increased the net interest margin by 3 basis points. The lower securities yield is due mostly to a 38 basis point decrease in the collateralized loan obligations (CLOs) yield to 3.22% for the second quarter from 3.60% for the first quarter as these CLOs reprice quarterly.
The average cost of funds decreased 39 basis points to 1.03% for the second quarter from 1.41% for the first quarter. This decrease was driven by the lower average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits. We have reduced our reliance on high cost transaction accounts, non-brokered certificates of deposits, and wholesale funds as we continue to execute on our relationship-focused business banking strategy. The 42 basis point decline in the average cost of interest-bearing liabilities to 1.29% for the second quarter from 1.71% for the first quarter was driven by the lower average cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 48 basis points to 0.93% from the prior quarter due to actively managing down deposit rates in response to the interest rate cuts by the Federal Reserve in March of 2020. Additionally, average noninterest-bearing deposits increased by $216.4 million and represented 23.4% of total average deposits in the second quarter compared to 21.4% of total average deposits for the first quarter. Our total cost of average deposits decreased 40 basis points to 0.71% for the second quarter. The spot rate of total deposits at the end of the second quarter of 2020 was 0.59%.
YTD 2020 vs YTD 2019
Net interest income for the six months ended June 30, 2020 decreased $25.4 million to $107.2 million from $132.6 million for the same 2019 period. This increase was due to lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship based-lending, offset by a higher net interest margin. For the six months ended June 30, 2020, average interest-earning assets declined $2.33 billion to $7.11 billion, and the net interest margin increased 20 basis points to 3.03% for the six months ended June 30, 2020 compared to 2.83% for the same 2019 period.
Our average yield on interest-earning assets decreased 42 basis points to 4.17% for the six months ended June 30, 2020 as compared to 4.59% during the same 2019 period. The decrease in yield was primarily attributable to lower average yields on the loan and securities portfolios, offset by an increased mix of loans versus securities. Our average yield on loans was 4.52% for the six months ended June 30, 2020, compared to 4.78% for the same 2019 period, primarily due to lower market interest rates and a lower percentage of higher-yielding commercial and industrial balances in the portfolio. Our average yield on securities decreased 88 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.
The average cost of funds decreased to 1.22% for the six months ended June 30, 2020 from 1.86% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The 61 basis point decline in the average cost of interest-bearing liabilities to 1.50% for the six months ended June 30, 2020 from 2.11% for the same 2019 period was driven by the lower average cost of interest-bearing deposits and the rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 75 basis points to 1.16% from the prior period due to actively managing down deposit rates in response to the interest rate cuts by the Federal Reserve in March of 2020 and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $213.5 million when compared to the same 2019 period. Our cost of average total deposits decreased 74 basis points to 0.90% for the six months ended June 30, 2020 when compared to the same 2019 period.
3

EX 99.1
Provision for credit losses
Q2-2020 vs Q1-2020
We recognized a provision for credit losses of $11.8 million during the second quarter, compared to $15.8 million during the first quarter. Our provision for credit losses during the second quarter included $307 thousand related to unfunded commitments, compared to $1.1 million during the first quarter. The second quarter provision for credit losses is comprised of $5.0 million of general reserves and $6.8 million related to specific reserves, primarily related to a previously reported nonaccrual shared national credit. The general provision is due to a continued deterioration in key macro-economic forecast variables, such as unemployment and gross domestic product and loan risk rating downgrades, offset by lower period end loan balances.
YTD 2020 vs YTD 2019
During the six months ended June 30, 2020, we recognized a provision for credit losses of $27.6 million under the CECL model, compared to $198 thousand under the incurred loss model during 2019. Our provision for credit losses included $1.4 million related to unfunded commitments during the six months ended June 30, 2020, compared to provision release of $327 thousand during the six months ended June 30, 2019. The higher provision for credit losses was driven by using the new CECL model, the estimated future impact of the health crisis on our loans, net charge-offs, and increase in specific reserves partially offset by lower period end loan balances of $1.09 billion.
Noninterest income
Q2-2020 vs Q1-2020
Noninterest income increased $3.5 million, or 168%, to $5.5 million for the second quarter. The increase was primarily due to a gain of $2.0 million on the sale of $20.7 million in securities, primarily corporate securities; there were no sales in the prior quarter. In addition, the first quarter included a $1.6 million charge to reflect the reduction in fair value of loans held for sale compared to a $25 thousand increase in the fair value in the second quarter.
YTD 2020 vs YTD 2019
Noninterest income for the six months ended June 30, 2020 increased $3.6 million, or 89.5%, to $7.6 million compared to the prior year. The increase was primarily attributable to (1) a higher net gain on sale of investment securities of $1.8 million, and (2) higher other income of $8.4 million as the second quarter of 2019 included a previously reported $9.6 million unrealized loss from interest rate swap agreements entered into in order to offset variability in the fair value of the Freddie Mac securitization completed during the third quarter of 2019. These increases were partially offset by (1) lower net gain on sale of loans of $4.3 million, (2) a $1.6 million loss due to decreases in the fair value of loans held for sale, and (3) lower customer fees of $629 thousand.

4

EX 99.1
Noninterest expense
Q2-2020 vs Q1-2020
Noninterest expense increased $25.9 million to $72.8 million for the second quarter compared to the prior quarter. The increase was primarily due to: (i) the aforementioned $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, (ii) a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, and (iii) higher salaries and benefits expense of $824 thousand due mostly to higher incentive accruals. These increases were offset by: (i) lower professional fees of $1.4 million as a result of the timing of certain indemnified legal costs and recoveries compared to the prior quarter, (ii) a $2.1 million decrease in loss on investments in alternative energy partnerships, and (iii) a $599 thousand decrease in advertising costs. Total operating costs, defined as noninterest expense adjusted for certain non-core items (refer to section Non-GAAP Measures), decreased $558 thousand to $42.8 million for the second quarter compared to $43.3 million for the prior quarter.
YTD 2020 vs YTD 2019
Noninterest expense for the six months ended June 30, 2020 increased $13.9 million, or 13.2%, to $119.7 million compared to the prior year. The increase was primarily due to: (i) the aforementioned $26.8 million one-time charge related to the termination of our LAFC naming rights agreements, and (ii) a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances. These increases were offset by: (i) lower professional fees of $2.4 million, due to overall reductions in indemnified legal fees, net of insurance recoveries, (ii) lower consulting fees for bank projects and initiatives, and lower legal expenses related to the now resolved SEC investigation and various other litigations, (iii) lower salaries and benefits expense of $8.2 million resulting from lower headcount, (iv) lower advertising costs of $1.2 million due to reductions in overall events and media spending, and (vi) lower regulatory assessments of $3.4 million due to changes in our asset size and an FDIC assessment credit.

Income taxes
Q2-2020 vs Q1-2020
Income tax benefit totaled $5.3 million for the second quarter resulting in an effective tax benefit rate of 22.3%. This compares to a $2.2 million benefit for the first quarter and an effective tax benefit rate of 24.7%. The full year estimated effective tax rate for 2020 is expected to be approximately 23%.
YTD 2020 vs YTD 2019
Income tax benefit totaled $7.5 million for the six months ended June 30, 2020, representing an effective tax rate of 23.0%, compared to a $7.0 million expense and an effective tax rate of 22.9% for six months ended June 30, 2019.



5

EX 99.1
Balance Sheet
At June 30, 2020, total assets were $7.77 billion, which represented a linked-quarter increase of $107.5 million. The following table shows selected balance sheet line items as of the dates indicated.
As of and for the Three Months EndedAmount Change
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Q2-20 vs. Q1-20Q2-20 vs. Q2-19
($ in thousands)
Total assets$7,770,138  $7,662,607  $7,828,410  $8,625,337  $9,359,931  $107,531  $(1,589,793) 
Securities available-for-sale$1,176,029  $969,427  $912,580  $775,662  $1,167,687  $206,602  $8,342  
Loans held-for-investment$5,627,696  $5,667,464  $5,951,885  $6,383,259  $6,719,570  $(39,768) $(1,091,874) 
Loans held-for-sale$19,768  $20,234  $22,642  $23,936  $597,720  $(466) $(577,952) 
Demand deposits $3,238,202  $2,828,470  $2,622,398  $2,602,011  $2,510,233  $409,732  $727,969  
Other core deposits2,619,502  2,515,703  2,794,769  3,074,936  3,301,080  103,799  (681,578) 
Brokered deposits179,761  218,665  10,000  93,111  480,977  (38,904) (301,216) 
Total Deposits$6,037,465  $5,562,838  $5,427,167  $5,770,058  $6,292,290  $474,627  $(254,825) 
As percentage of total deposits
Demand deposits53.64 %50.85 %48.32 %45.10 %39.89 %2.79 %13.75 %
Other core deposits43.39 %45.22 %51.50 %53.29 %52.46 %(1.83)%(9.07)%
Brokered deposits2.98 %3.93 %0.18 %1.61 %7.64 %(0.95)%(4.66)%
Average loan yield4.48 %4.56 %4.71 %4.75 %4.80 %(0.08)%(0.32)%
Average cost of interest-bearing deposits0.93 %1.41 %1.57 %1.78 %1.89 %(0.48)%(0.96)%
Average cost of total deposits0.71 %1.11 %1.27 %1.48 %1.62 %(0.40)%(0.91)%
Investments
Securities available-for-sale increased $206.6 million to $1.18 billion at June 30, 2020. This increase was due to $175.2 million in purchases of corporate and government agency securities and lower unrealized net losses of $54.7 million due mostly to credit spreads tightening during the quarter for a positive change on our CLO portfolio pricing, offset by $20.7 million in sales of mainly corporate securities. As of June 30, 2020, our securities portfolio included $668.4 million of CLOs, $306.7 million of agency securities, $57.2 million of municipal securities, and $143.6 million of corporate debt securities. Our CLO portfolio, which is comprised only of AA and AAA rated securities, comprises 56.8% of our securities portfolio and the carrying value includes an unrealized net loss of $35.3 million at June 30, 2020 compared to an unrealized net loss of $80.0 million at March 31, 2020.
6

EX 99.1
Loans
The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
($ in thousands)
Composition of held-for-investment loans
Commercial real estate$822,694  $810,024  $818,817  $891,029  $856,497  
Multifamily1,434,071  1,466,083  1,494,528  1,563,757  1,598,978  
Construction212,979  227,947  231,350  228,561  209,029  
Commercial and industrial1,436,990  1,578,223  1,691,270  1,789,478  1,951,707  
SBA310,784  70,583  70,981  75,359  80,929  
Total commercial loans4,217,518  4,152,860  4,306,946  4,548,184  4,697,140  
Single-family residential mortgage1,370,785  1,467,375  1,590,774  1,775,953  1,961,065  
Other consumer39,393  47,229  54,165  59,122  61,365  
Total consumer loans1,410,178  1,514,604  1,644,939  1,835,075  2,022,430  
Total gross loans$5,627,696  $5,667,464  $5,951,885  $6,383,259  $6,719,570  
Composition percentage of held-for-investment loans
Commercial real estate14.6 %14.3 %13.8 %14.0 %12.7 %
Multifamily25.5 %25.9 %25.1 %24.5 %23.8 %
Construction3.8 %4.0 %3.9 %3.6 %3.1 %
Commercial and industrial25.5 %27.9 %28.4 %28.0 %29.1 %
SBA5.5 %1.2 %1.2 %1.2 %1.2 %
Total commercial loans74.9 %73.3 %72.4 %71.3 %69.9 %
Single-family residential mortgage24.4 %25.9 %26.7 %27.8 %29.2 %
Other consumer0.7 %0.8 %0.9 %0.9 %0.9 %
Total consumer loans25.1 %26.7 %27.6 %28.7 %30.1 %
Total gross loans100.0 %100.0 %100.0 %100.0 %100.0 %
Held-for-investment loans decreased $39.8 million to $5.63 billion from the prior quarter, due mostly to lower single-family residential mortgage loans of $96.6 million, lower commercial and industrial (C&I) loans of $141.2 million, and lower multifamily loans of $32.0 million. The decline in single-family residential is attributed to payoffs as the loans refinance away in the lower rate environment and these proceeds are invested in other core business loans. The decline in C&I loans is primarily in response to strategically reducing certain credit facilities in response to the changed economic landscape and corresponding lower outstanding balances. These decreases were partially offset by a $240.2 million increase in SBA loans, which is attributable to the funding of the loans under the SBA's PPP. As we dedicated resources to processing PPP loans, this tempered other loan production in addition to the impact of the COVID-19 pandemic in the market and we did not experience any significant increase in credit line usage.
We continue to remix our real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. Single-family residential mortgage and multifamily loans comprised 49.9% of the total held-for-investment loan portfolio as compared to 53.0% one year ago. Commercial real estate loans comprised 14.6% of the loan portfolio and commercial and industrial loans constituted 25.5%. Currently, loans secured by residential real estate (single-family, multifamily, single-family construction, and warehouse credit facilities) represent approximately 66% of our total loans outstanding.

7

EX 99.1
The C&I portfolio has limited exposure to certain business sectors undergoing severe stress, as demonstrated by the following (as a percentage of total outstanding C&I loan balances):
June 30, 2020
Amount% of Portfolio
($ in thousands)
C&I Portfolio by Industry
Finance and insurance (includes Warehouse lending)$777,015  54 %
Real estate and rental leasing201,630  14 %
Gas stations76,510  %
Manufacturing60,128  %
Healthcare43,256  %
Wholesale trade39,740  %
Other retail trade37,699  %
Television/motion pictures33,590  %
Food services30,216  %
Professional services14,975  %
Transportation5,363  — %
Accommodations1,496  — %
All other115,372  %
Total$1,436,990  100 %

Deposits
The following table sets forth the composition of our deposits at the dates indicated.
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
($ in thousands)
Composition of deposits
Noninterest-bearing checking$1,391,504  $1,256,081  $1,088,516  $1,107,442  $993,745  
Interest-bearing checking1,846,698  1,572,389  1,533,882  1,503,208  1,577,901  
Money market765,854  575,820  715,479  695,530  800,898  
Savings939,018  877,947  885,246  1,042,162  1,061,115  
Non-brokered certificates of deposit924,630  1,071,936  1,204,044  1,367,284  1,479,137  
Brokered certificates of deposit169,761  208,665  —  54,432  379,494  
Total deposits$6,037,465  $5,562,838  $5,427,167  $5,770,058  $6,292,290  
Composition percentage of deposits
Noninterest-bearing checking23.0 %22.6 %20.1 %19.2 %15.8 %
Interest-bearing checking30.6 %28.3 %28.2 %26.1 %25.1 %
Money market12.7 %10.3 %13.2 %12.0 %12.7 %
Savings15.6 %15.8 %16.3 %18.1 %16.9 %
Non-brokered certificates of deposit15.3 %19.3 %22.2 %23.7 %23.5 %
Brokered certificates of deposit2.8 %3.7 %— %0.9 %6.0 %
Total deposits100.0 %100.0 %100.0 %100.0 %100.0 %
Total deposits increased $474.6 million during the second quarter of 2020 to $6.04 billion due to higher noninterest-bearing checking balances of $135.4 million, interest-bearing checking balances of $274.3 million, money market balances of $190.0 million, and savings balances of $61.1 million, offset by lower non-brokered certificates of deposit balances of $147.3 million and brokered certificates of deposit balances of $38.9 million. We continue to focus on growing relationship-based deposits, strategically augmented by wholesale funding, as we proactively reduce our deposit costs in response to the interest rate cuts by the Federal Reserve in March of 2020. Noninterest-bearing deposits totaled $1.39 billion and represented 23.0% of total deposits at June 30, 2020 compared to $1.26 billion and 22.6% at March 31, 2020 and $993.7 million and 15.8% one year ago.
8

EX 99.1
Debt
Advances from the FHLB decreased $360.8 million, or 37%, to $617.2 million, as of June 30, 2020, due in part to a $90.0 million reduction in overnight borrowings to $0 at June 30, 2020 and a $164.0 million reduction in short-term advances to $213.0 million at June 30, 2020. We repaid a $100.0 million FHLB term advance with weighted average interest rate of 2.07% and incurred a $2.5 million extinguishment fee that is included in other noninterest expense. Additionally, in June 2020 we refinanced $111.0 million of FHLB term advances to take advantage of the rapid decline in market interest rates. As a result of this refinancing, our weighted average effective interest rate on such FHLB term advances changed from 2.81% to 2.02% and the weighted average life extended from 2.52 years to 5.18 years. At the end of the second quarter, FHLB advances included no overnight borrowings, $58.0 million maturing within three months, and $566.0 million maturing beyond three months with a weighted average life of 4.1 years and weighted average interest rate of 2.39%.
Equity
At June 30, 2020, total stockholders’ equity increased by $12.0 million to $847.0 million and tangible common equity increased by $15.0 million to $621.5 million on a linked-quarter basis. The increase in total stockholders’ equity was a result of a lower net accumulated other comprehensive loss of $38.6 million related to the higher fair values of CLOs and other securities available-for-sale, offset by the net loss of $18.4 million, dividends to common and preferred stockholders of $6.6 million, and redemption of preferred stock of $2.6 million. Tangible book value per share increased to $12.37 as of June 30, 2020 from $12.11 at March 31, 2020.
Capital ratios remain strong with total risk-based capital at 16.35% and a tier 1 leverage ratio of 10.56%. The following table sets forth our regulatory capital ratios at June 30, 2020 and the previous four quarters. The interim capital relief related to the adoption of CECL increased the Bank's leverage ratio approximately 12 basis points at June 30, 2020.
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Capital Ratios(1)
Banc of California, Inc.
Total risk-based capital ratio16.35 %16.16 %15.90 %14.37 %15.00 %
Tier 1 risk-based capital ratio15.10 %14.91 %14.83 %13.32 %14.03 %
Common equity tier 1 capital ratio11.68 %11.58 %11.56 %10.34 %10.50 %
Tier 1 leverage ratio10.56 %11.20 %10.89 %9.84 %9.62 %
Banc of California, NA
Total risk-based capital ratio18.19 %18.21 %17.46 %15.65 %16.70 %
Tier 1 risk-based capital ratio16.94 %16.96 %16.39 %14.60 %15.73 %
Common equity tier 1 capital ratio16.94 %16.96 %16.39 %14.60 %15.73 %
Tier 1 leverage ratio11.86 %12.67 %12.02 %10.75 %10.80 %
(1)June 30, 2020 capital ratios are preliminary.

9

EX 99.1
Credit Quality
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
Asset quality information and ratios($ in thousands)
Delinquent loans held-for-investment
30 to 89 days delinquent$49,810  $56,338  $32,873  $39,122  $34,938  
90+ days delinquent45,384  28,632  24,734  17,220  17,272  
Total delinquent loans$95,194  $84,970  $57,607  $56,342  $52,210  
Total delinquent loans to total loans1.69 %1.50 %0.97 %0.88 %0.78 %
Non-performing assets, excluding loans held-for-sale
Non-performing loans$72,703  $56,471  $43,354  $45,169  $28,499  
90+ days delinquent and still accruing loans—  —  —  —  275  
Other real estate owned—  —  —  —  276  
Non-performing assets$72,703  $56,471  $43,354  $45,169  $29,050  
ALL to non-performing loans124.30 %138.55 %132.97 %139.31 %206.86 %
Non-performing loans to total loans held-for-investment1.29 %1.00 %0.73 %0.71 %0.43 %
Non-performing assets to total assets0.94 %0.74 %0.55 %0.52 %0.31 %
Troubled debt restructurings (TDRs)
Performing TDRs$5,597  $6,100  $6,620  $6,800  $20,245  
Non-performing TDRs20,275  20,852  21,837  14,605  2,428  
Total TDRs$25,872  $26,952  $28,457  $21,405  $22,673  
Total delinquent loans increased $10.2 million in the second quarter to $95.2 million at June 30, 2020, due to $43.3 million of additions, offset by $27.6 million returning to current status and $5.5 million of principal payments or payoffs. Our delinquent loans increased due primarily to one lending relationship well-secured by commercial real estate and single-family residential properties totaling $11.5 million. Delinquent loans included primarily legacy single-family residential loans, which accounted for 74% of the balance at quarter end and represented a decrease of $1.1 million quarter over quarter. Excluding delinquent single-family residential loans, delinquent loans totaled $24.9 million, or 0.59% of total loans, excluding single-family residential loans, at June 30, 2020.

Non-performing loans totaled $72.7 million as of June 30, 2020, of which $21.9 million, or 30% of the balance relates to loans in a current payment status. The $16.2 million increase during the second quarter was primarily due to $18.6 million of loans being placed on nonaccrual status, offset by cured loans and payoffs. The quarter-end balance includes three large loan relationships totaling $36.9 million, or 51% of our total nonperforming loans, which consist of one $16.4 million legacy shared national credit, a $9.1 million single-family mortgage residential loan with a loan-to-value ratio of 58%, and an $11.5 million legacy relationship well-secured by commercial real estate and single-family residential properties with an average loan-to-value ratio of 51%. Aside from those three loan relationships, non-performing single-family residential loans totaled $19.4 million and the remaining non-performing loans totaled $16.4 million.
In light of the pandemic, during the quarter we provided support to clients by granting loan deferments or forbearance. As of June 30, 2020, in our single-family residential portfolio, we had 142 loans on active forbearance for $164 million of principal balances, or approximately 12% of this loan portfolio. With respect to the remaining loan portfolio excluding the single-family residential portfolio, as of June 30, 2020, we had 156 active deferments on $440 million of principal balances, or 10% of this portion of the loan portfolio. As with our entire portfolio, we will continue to actively monitor and manage our lending relationships in a manner that supports our clients and protects the Bank.

10

EX 99.1
Allowance for Credit Losses
Three Months Ended
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
($ in thousands)
Allowance for loan losses (ALL)
Balance at beginning of period$78,243  $57,649  $62,927  $59,523  $63,885  
Adoption of ASU 2016-13 (1)
—  7,609  —  —  —  
Loans charged off—  (2,076) (2,706) (35,546) (2,451) 
Recoveries608  350  106  410  76  
Net recoveries (charge-offs)608  (1,726) (2,600) (35,136) (2,375) 
Provision for (reversal of) loan losses11,519  14,711  (2,678) 38,540  (1,987) 
Balance at end of period90,370  $78,243  $57,649  $62,927  $59,523  
Reserve for unfunded loan commitments
Balance at beginning of period3,888  4,064  4,362  4,295  4,208  
Adoption of ASU 2016-13 (1)
—  (1,226) —  —  —  
Provision for credit losses307  1,050  (298) 67  87  
Balance at end of period4,195  3,888  4,064  4,362  4,295  
Allowance for credit losses (ACL)$94,565  $82,131  $61,713  $67,289  $63,818  
ALL to total loans1.61 %1.38 %0.97 %0.99 %0.89 %
ACL to total loans1.68 %1.45 %1.04 %1.05 %0.95 %
Annualized net loan charge-offs (recoveries) to average total loans held-for-investment(0.04)%0.12 %0.17 %2.19 %0.13 %
Reserve for loss on repurchased loans
Balance at beginning of period$5,601  $6,201  $6,561  $2,478  $2,486  
Initial provision for loan repurchases—  —  —  4,415  53  
Reversal of provision for loan repurchases(34) (600) (360) (123) (61) 
Utilization of reserve for loan repurchases—  —  —  (209) —  
Balance at end of period$5,567  $5,601  $6,201  $6,561  $2,478  
(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather than the previously applied incurred loss methodology.
The allowance for expected credit losses, which includes the reserve for unfunded loan commitments, totaled $94.6 million, or 1.68% of total loans at June 30, 2020 compared to $82.1 million or 1.45% at March 31, 2020. The $12.4 million increase in the allowance for expected credit losses was due to: (i) $6.8 million provided for specific reserves, primarily related to one previously reported nonaccrual shared national credit, (ii) $5.0 million provided for general reserves related to the continued deterioration in key macro-economic forecast variables, offset by the impact of lower loan balances, and (iii) net recoveries of $608 thousand. The ACL coverage of non-performing loans was 130% at June 30, 2020 compared to 145% at March 31, 2020 and 142% at December 31, 2019.

Our ACL methodology and resulting provision continues to be impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables ("MEVs"). As of June 30, 2020, we used economic forecasts released by our model provider during June 2020. Similar to the late March 2020 forecasts, these June 2020 forecasts reflect the onset of the pandemic, its impact on the MEVs and the future economic recovery. These forecasts published by our model provider have deteriorated since the end of the first quarter, with June baseline unemployment rate forecasts for 2020 and 2021 increasing and real GDP growth rates decreasing. Similar to the first quarter of 2020, we incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by our third-party model including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, we expect the ACL to be impacted in future periods by economic volatility, changing economic forecasts, and underlying model assumptions, all of which may be better than or worse than our current estimate.
11

EX 99.1


The Company will host a conference call to discuss its second quarter 2020 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, July 23, 2020. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 0284271. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call. A replay of the call will be made available approximately one hour after the call has ended on the Company’s Investor Relations website at www.bancofcal.com/investor or by dialing (877) 344-7529 and referencing event code 10145608.


About Banc of California, Inc.
Banc of California, Inc. (NYSE: BANC) is a bank holding company with approximately $7.8 billion in assets and one wholly-owned banking subsidiary, Banc of California, N.A. (the “Bank”). The Bank has 39 offices including 31 full-service branches located throughout Southern California. Through our dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.


Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission. In addition to those, statements about the potential effects of the COVID-19 pandemic on the business, financial results and condition of Banc of California, Inc. and its subsidiaries may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the control of Banc of California, Inc., including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on Banc of California Inc. and its subsidiaries, their customers and third parties. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.
Source: Banc of California, Inc.
Investor Relations Inquiries:
Banc of California, Inc.
(855) 361-2262
Jared Wolff, (949) 385-8700
Lynn Hopkins, (949) 265-6599

12

EX 99.1
Banc of California, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
ASSETS
Cash and cash equivalents$420,640  $435,992  $373,472  $526,874  $313,850  
Securities available-for-sale1,176,029  969,427  912,580  775,662  1,167,687  
Loans held-for-sale19,768  20,234  22,642  23,936  597,720  
Loans held-for-investment5,627,696  5,667,464  5,951,885  6,383,259  6,719,570  
Allowance for loan losses(90,370) (78,243) (57,649) (62,927) (59,523) 
Federal Home Loan Bank and other bank stock46,585  57,237  59,420  71,679  76,373  
Servicing rights, net1,753  2,009  2,299  2,407  2,715  
Other real estate owned, net—  —  —  —  276  
Premises and equipment, net125,247  127,379  128,021  128,979  129,227  
Investments in alternative energy partnerships, net26,967  27,347  29,300  27,039  26,633  
Goodwill37,144  37,144  37,144  37,144  37,144  
Other intangible assets, net3,292  3,722  4,151  4,605  5,105  
Deferred income tax, net48,288  63,849  44,906  45,950  42,798  
Income tax receivable13,094  7,198  4,233  4,459  2,547  
Bank owned life insurance investment110,487  110,397  109,819  108,720  108,132  
Right of use assets19,408  20,882  22,540  23,907  24,118  
Due from unsettled securities sales—  —  —  334,769  —  
Other assets184,110  190,569  183,647  188,875  165,559  
Total assets$7,770,138  $7,662,607  $7,828,410  $8,625,337  $9,359,931  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits$1,391,504  $1,256,081  $1,088,516  $1,107,442  $993,745  
Interest-bearing deposits4,645,961  4,306,757  4,338,651  4,662,616  5,298,545  
Total deposits6,037,465  5,562,838  5,427,167  5,770,058  6,292,290  
Advances from Federal Home Loan Bank617,170  978,000  1,195,000  1,650,000  1,825,000  
Notes payable, net173,537  173,479  173,421  173,339  173,257  
Reserve for loss on repurchased loans5,567  5,601  6,201  6,561  2,478  
Lease liabilities20,531  22,075  23,692  25,210  25,457  
Accrued expenses and other liabilities68,909  85,612  95,684  99,181  77,905  
Total liabilities6,923,179  6,827,605  6,921,165  7,724,349  8,396,387  
Commitments and contingent liabilities
Preferred stock185,037  187,687  189,825  189,825  231,128  
Common stock522  520  520  520  520  
Common stock, class B non-voting non-convertible     
Additional paid-in capital632,117  631,125  629,848  628,774  627,306  
Retained earnings85,670  110,640  127,733  120,221  146,039  
Treasury stock(40,827) (40,827) (28,786) (28,786) (28,786) 
Accumulated other comprehensive loss, net(15,565) (54,148) (11,900) (9,571) (12,668) 
Total stockholders’ equity846,959  835,002  907,245  900,988  963,544  
Total liabilities and stockholders’ equity$7,770,138  $7,662,607  $7,828,410  $8,625,337  $9,359,931  

13

EX 99.1
Banc of California, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
Three Months EndedSix Months Ended
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
June 30,
2020
June 30,
2019
Interest and dividend income
Loans, including fees$63,642  $65,534  $73,930  $80,287  $89,159  $129,176  $179,717  
Securities7,816  7,820  7,812  10,024  12,457  15,636  30,298  
Other interest-earning assets1,239  1,360  1,960  2,346  2,424  2,599  4,737  
Total interest and dividend income72,697  74,714  83,702  92,657  104,040  147,411  214,752  
Interest expense
Deposits10,205  14,611  18,247  22,811  28,598  24,816  60,041  
Federal Home Loan Bank advances4,818  5,883  6,396  8,519  8,289  10,701  17,370  
Notes payable and other interest-bearing liabilities2,359  2,359  2,399  2,412  2,373  4,718  4,753  
Total interest expense17,382  22,853  27,042  33,742  39,260  40,235  82,164  
Net interest income55,315  51,861  56,660  58,915  64,780  107,176  132,588  
Provision for (reversal of) credit losses11,826  15,761  (2,976) 38,607  (1,900) 27,587  198  
Net interest income after provision for (reversal of) credit losses43,489  36,100  59,636  20,308  66,680  79,589  132,390  
Noninterest income
Customer service fees1,224  1,096  1,451  1,582  1,434  2,320  2,949  
Loan servicing income95  75  312  128  121  170  239  
Income from bank owned life insurance591  578  599  588  580  1,169  1,105  
Impairment loss on investment securities—  —  —  (731) —  —  —  
Net gain (loss) on sale of securities available for sale2,011  —   (5,063) —  2,011  208  
Fair value adjustment on loans held for sale25  (1,586) 30  16  59  (1,561) 60  
Net (loss) gain on sale of loans—  (27) (863) 4,310  2,767  (27) 4,319  
All other income (loss)1,582  1,925