Banc of California, Inc. Reports 2013 Financial Results

Banc of California, Inc. (NASDAQ: BANC) (the “Company”), the holding company for Banc of California, National Association (the “Bank”), today announced financial results for the three and twelve months ending December 31, 2013.

The Company reported pretax earnings of $8.8 million for the fourth quarter and $7.3 million for the full year ending December 31, 2013. The Company’s net income was $3.3 million for the quarter, with net income available to common shareholders of $2.4 million, or $.12 per diluted common share, compared with a loss of $3.5 million, or $(.30) per diluted common share, for the fourth quarter ending December 31, 2012. The Company’s effective tax rate for the full year 2013 was 99% as a result of management’s decision to fully reserve for its net Deferred Tax Asset (“DTA”) of $17.3 million as of December 31, 2013. As a result, net income for the full year was reduced to $0.08 million, with a net loss available to common shareholders of $(2.1) million, or $(.14) per diluted common share, compared with net income of $4.6 million or $.40 per diluted share common share for the full year 2012.

Steven Sugarman, President and Chief Executive Officer of the Company, stated: “2013 was a transformational year for Banc of California. I am very proud of our team and all that we have accomplished this year. The Bank and our registered investment advisor subsidiary each made tremendous strides and finished the year profitably with accelerating pre-tax earnings. We are poised and excited to continue to execute on our strategic plans in 2014.”

Total gross loans and leases were $3.2 billion as of December 31, 2013 compared with $1.4 billion as of December 31, 2012, an increase of $1.8 billion or 132%. During the fourth quarter, the Company moved approximately $500 million of its jumbo mortgage loans previously classified as held for investment to a held for sale classification.

“We were pleased with the robust loan growth we saw in the fourth quarter. This included over $200 million of commercial loan originations during the period. We believe that the synergies of our previous bank acquisitions are starting to deliver meaningful results,” Sugarman noted.

Deposits totaled $2.9 billion as of December 31, 2013, more than doubled from $1.3 billion in deposits as of December 31, 2012, an increase of 123%. Total deposits decreased from September 2013 as a result of the sale of eight branches located in non-target markets, representing approximately $464 million in deposits. Adjusting for the branch sale transaction, the Bank’s deposits increased at an annualized growth rate of over 18% during the fourth quarter.

Sugarman commented, “The organic growth of our retail branch deposit franchise continued to provide strong liquidity and our prudent loan to deposit ratio provides ample liquidity for loan growth in 2014.”

Consolidated capital was approximately $325 million as of December 31, 2013 compared with approximately $189 million as of December 31, 2012. The Company, which became a financial holding company in January, and the Bank are both considered to be “well capitalized” under regulatory capital standards.

The Company will discuss its 2013 earnings, among other items, during a conference call on March 13, 2014, at 8:00 a.m. Pacific Time. All interested parties are welcome to attend the conference call at 888-339-2688, event code 11634944.

About Banc of California, Inc.

Since 1941, Banc of California, Inc. (NASDAQ:BANC) through its banking subsidiary Banc of California, National Association, has provided banking services and home loans to businesses and families in California and the West. Today, Banc of California, Inc. has over $3.6 billion in consolidated assets and more than 80 banking locations.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

Financial Highlights

As of or for the three months endedAs of or for the year ended
December 31,September 30,December 31,December 31,December 31,
20132013201220132012
($ in thousands, except per share data)
Net income (loss) $ 3,321 $ (8,534 ) $ (3,185 ) $ 79 $ 5,996
Net income (loss) available to common stockholders $ 2,370 $ (9,480 ) $ (3,502 ) $ (2,106 ) $ 4,637
Diluted earnings (loss) per share $ 0.12 $ (0.53 ) $ (0.30 ) $ (0.14 ) $ 0.40
Return on average assets 0.37 % -0.98 % -0.75 % 0.00 % 0.45 %
Return on average equity 4.06 % -10.05 % -6.49 % 0.03 % 3.17 %
Net interest margin 3.90 % 3.25 % 3.72 % 3.67 % 3.69 %
Non-interest income $ 34,517 $ 18,226 $ 15,965 $ 96,743 $ 36,619
Non-interest expense $ 57,214 $ 52,304 $ 28,943 $ 178,670 $ 71,560
Provision for loan and lease losses $ 1,768 $ 2,109 $ 3,499 $ 7,963 $ 5,500
Loans and leases receivable, net of allowance $ 2,427,306 $ 2,577,058 $ 1,234,023
Total deposits $ 2,918,644 $ 3,259,374 $ 1,306,342
Non-accrual loans $ 31,648 $ 15,408 $ 22,993
Net charge-offs $ 650 $ (42 ) $ 1,430 $ 2,163 $ 3,832
Allowance for loan and lease losses (ALLL) to total loans 0.77 % 0.74 % 1.16 %

ALLL that were collectively evaluated for impairment to originated loans

1.46 % 1.30 % 1.48 %

ALLL and Discount to total originated and non-credit impaired loans acquired through business acquisitions(1)

1.63 % 1.56 % 1.52 %
(1) The ratio was calculated by dividing a sum of ALLL and discounts by carrying value of loans
Banc of California, Inc.
Consolidated Statements of Financial Condition
(Dollars in thousands, except per share data)
(Unaudited)
December 31,September 30,December 31,
201320132012
ASSETS
Cash and due from banks $ 4,937 $ 7,951 $ 8,254
Interest-bearing deposits 105,181408,059100,389
Total cash and cash equivalents 110,118 416,010 108,643
Time deposits in financial institutions 1,846 2,938 5,027
Securities available for sale 170,022 167,998 121,419
Federal Home Loan Bank and Other Bank stock, at cost 22,600 14,789 8,842
Loans held for sale 716,733 367,111 113,158
Loans and leases receivable, net of allowance 2,427,306 2,577,058 1,234,023
Servicing rights, net 13,883 7,603 2,278
Accrued interest receivable 10,866 10,425 5,002
Other real estate owned, net - 1,383 4,527
Premises and equipment, net 66,260 61,443 16,147
Premises and equipment held-for-sale - 3,080 -
Bank owned life insurance investment 18,881 18,834 18,704
Deferred income tax - 5,515 7,572
Goodwill 30,143 22,086 7,048
Affordable housing fund investment 5,628 5,787 6,197
Income tax receivable 2,995 4,077 5,545
Other intangible assets, net 12,152 13,191 5,474
Other assets 18,59019,04513,096
Total assets$3,628,023$3,718,373$1,682,702
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing deposits $ 429,158 $ 418,759 $ 194,662
Interest-bearing deposits 2,489,486 2,377,847 1,111,680
Deposits held for sale -462,768-
Total deposits 2,918,644 3,259,374 1,306,342
Advances from Federal Home Loan Bank 250,000 25,000 75,000
Notes payable, net 82,320 82,224 81,935
Reserve for loss reimbursements on sold loans 5,427 4,282 3,485
Accrued expenses and other liabilities 46,76344,91327,183
Total liabilities 3,303,154 3,415,793 1,493,945
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY
Preferred stock, Series A, non-cumulative perpetual preferred stock 31,934 31,934 31,934
Preferred stock, Series B, non-cumulative perpetual preferred stock 10,000 10,000 -
Preferred stock, Series C, 8.00% non-cumulative perpetual preferred stock 37,943 37,943 -
Common stock 210 188 120
Common stock, class B non-voting non-convertible 6 5 11
Additional paid-in capital 256,306 230,804 154,563
Retained earnings 16,981 17,027 26,550
Treasury stock (27,911 ) (25,455 ) (25,818 )
Accumulated other comprehensive (loss)/income, net (600)1341,397
Total shareholders’ equity 324,869302,580188,757
Total liabilities and shareholders’ equity$3,628,023$3,718,373$1,682,702
Banc of California, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three months endedYear ended
December 31,September 30,December 31,December 31,December 31,
20132013201220132012
Interest and dividend income
Loans, including fees $ 39,922 $ 32,061 $ 16,882 $ 116,673 $ 51,942
Securities 473 1,292 597 2,632 2,736
Dividends and other interest-earning assets 3614931271,206353
Total interest and dividend income 40,756 33,846 17,606 120,511 55,031
Interest expense
Deposits 5,665 5,084 1,675 16,051 5,960
Federal Home Loan Bank advances 92 56 82 269 348
Capital leases (38 ) 27 5 21 9
Notes payable 1,7351,7361,0076,9412,162
Total interest expense 7,4546,9032,76923,2828,479
Net interest income 33,302 26,943 14,837 97,229 46,552
Provision for loan and lease losses 1,7682,1093,4997,9635,500
Net interest income after provision for loan and lease losses 31,534 24,834 11,338 89,266 41,052
Noninterest income
Customer service fees 266 621 601 1,942 1,883
Mortgage banking income 15,028 16,231 15,764 67,890 21,310
All other income 19,2231,374(400)26,91113,426
Total noninterest income 34,517 18,226 15,965 96,743 36,619
Noninterest expense
Salaries and employee benefits 36,117 30,179 18,234 110,687 41,891
Occupancy and equipment 7,592 5,247 3,109 19,662 7,902
All other expenses 13,50516,8787,60048,32121,767
Total noninterest expense 57,21452,30428,943178,67071,560
Income (loss) before income taxes8,837(9,244)(1,640)7,3396,111
Income tax (benefit) expense 5,516(710)1,5457,260115
Net income (loss)3,321(8,534)(3,185)795,996
Preferred stock dividends and discount accretion 9519463172,1851,359
Net income (loss) available to common shareholders$2,370$(9,480)$(3,502)$(2,106)$4,637
Basic earnings (loss) per common share $ 0.13 $ (0.53 ) $ (0.30 ) $ (0.14 ) $ 0.40
Diluted earnings (loss) per common share $ 0.12 $ (0.53 ) $ (0.30 ) $ (0.14 ) $ 0.40
Basic earnings (loss) per class B common share $ 0.13 $ (0.53 ) $ (0.30 ) $ (0.14 ) $ 0.40
Diluted earnings (loss) per class B common share $ 0.13 $ (0.53 ) $ (0.30 ) $ (0.14 ) $ 0.40
Banc of California, Inc.
Selected Financial Data
(Dollars in thousands)
As of or for the three months ended,As of or for the year ended,
December 31,September 30,December 31,December 31,December 31,
20132013201220132012
Quarterly average balance:
Total assets $ 3,555,265 $ 3,439,433 $ 1,687,680 $ 2,773,276 $ 1,342,844
Total gross loans and leases 3,056,232 2,530,856 1,348,304 2,217,421 1,053,240
Securities available for sale 170,350 221,245 127,297 153,229 115,467
Total interest earning assets 3,387,120 3,286,840 1,588,273 2,647,070 1,266,609
Total deposits 2,936,922 2,948,644 1,339,639 2,313,733 1,056,937
Total borrowings 244,708 124,419 126,546 160,045 80,870
Total shareholders’ equity 324,290 336,963 195,305 264,818 189,411
Interest bearing liabilities 2,752,010 2,659,186 1,244,603 2,186,453 996,234
Profitability and other ratios:

Return on avg. assets(1)

0.37 % -0.98 % -0.75 % 0.00 % 0.45 %

Return on avg. equity(1)

4.06 % -10.05 % -6.49 % 0.03 % 3.17 %

Net interest margin(1)

3.90 % 3.25 % 3.72 % 3.67 % 3.69 %

Noninterest income to total revenue(2)

50.90 % 40.35 % 51.83 % 49.87 % 44.03 %

Noninterest income to avg. assets(1)

3.85 % 2.10 % 3.76 % 3.49 % 2.73 %

Noninterest exp. to avg. assets(1)

6.38 % 6.03 % 6.82 % 6.44 % 5.33 %

Efficiency ratio(3)

84.36 % 115.80 % 93.96 % 92.11 % 86.04 %
Avg. loans to average deposits 104.06 % 85.83 % 100.65 % 95.84 % 99.65 %
Average securities available for sale to average total assets 4.79 % 6.43 % 7.54 % 5.53 % 8.60 %
Average interest-earning assets to average interest-bearing liabilities 123.08 % 123.60 % 127.61 % 121.07 % 127.14 %
Average stockholders’ equity to average total assets 9.12 % 9.80 % 11.57 % 9.55 % 14.11 %
Asset quality information and ratios:
Nonaccrual Loans, excluding PCI loans $ 31,648 $ 15,408 $ 22,993
90+ delinquent loans, excluding PCI loans 13,441 14,100 9,123
Other real estate owned (OREO), net - 1,383 4,527
Net loan charge-offs 650 (42 ) 1,430 $ 2,163 $ 3,832
Loan breakdown by evaluation type:
Originated loans
Individually evaluated for impairment $ 16,704 $ 18,027 $ 28,859
Collectively evaluated for impairment 1,168,195 1,234,648 894,952
Acquired loans through business acquisitions - non-impaired
Individually evaluated for impairment 2,243 2,207 4,669

Collectively evaluated for impairment

469,916 523,590 219,771
Seasoned SFR mortgage loan pools - non-impaired 449,767 468,590 -
Acquired with deteriorated credit quality 339,286349,126100,220
Total loans $2,446,111$2,596,188$1,248,471
Allowance for loan and lease losses (ALLL) breakdown:
Originated loans
Individually evaluated for impairment $ 96 $ 1,377 $ 1,187
Collectively evaluated for impairment 17,103 15,999 13,208
Acquired loans through business acquisitions - non-impaired
Individually evaluated for impairment - 22 53
Collectively evaluated for impairment 1,410 1,420 -
Seasoned SFR mortgage loan pools - non-impaired - - -
Acquired with deteriorated credit quality 196312-
Total ALLL $18,805$19,130$14,448
Discount on Purchased/Acquired Loans:
Acquired loans through business acquisitions - non-impaired $ 8,354 $ 9,003 $ 3,019
Seasoned SFR mortgage loan pools - non-impaired 38,240 38,002 -
Acquired with deteriorated credit quality 105,650110,08151,572
Total Discount $152,244$157,086$54,591
Ratios:
To originated loans:
Individually evaluated for impairment 0.57 % 7.64 % 4.11 %
Collectively evaluated for impairment 1.46 % 1.30 % 1.48 %
Total ALLL 1.45 % 1.39 % 1.56 %
To originated and acquired non-impaired loans:
Individually evaluated for impairment 0.51 % 6.91 % 3.70 %
Collectively evaluated for impairment 1.13 % 0.99 % 1.18 %
Total ALLL 1.12 % 1.06 % 1.26 %

Total ALLL and discount(4)

1.63 % 1.56 % 1.52 %
To total loans:
Individually evaluated for impairment 0.51 % 6.91 % 3.70 %
Collectively evaluated for impairment 0.89 % 0.78 % 1.18 %
Total ALLL 0.77 % 0.74 % 1.16 %

Total ALLL and discount(4)

6.99 % 6.79 % 5.53 %

(1)

Ratios are presented on an annualized basis

(2)

Total revenue is equal to the sum of net interest income before provision and noninterest income

(3)

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

(4)

The ratios were calculated by dividing a sum of ALLL and discounts by carrying value of loans

Banc of California, Inc.
Selected Quarterly Financial Data
(Dollars in thousands, except per share data)
As of
December 31,September 30,December 31,
201320132012
Capital Ratios
Banc of California, Inc.
Total risk-based capital ratio: 12.45 % 12.64 % 15.50 %
Tier 1 risk-based capital ratio: 11.41 % 11.58 % 14.25 %
Tier 1 leverage ratio: 8.02 % 7.82 % 10.15 %

Banc of California, NA(1)

Total risk-based capital ratio: 14.65 % 15.39 % 17.59 %
Tier 1 risk-based capital ratio: 13.60 % 14.14 % 16.34 %
Tier 1 leverage ratio: 9.58 % 8.11 % 11.16 %

The Private Bank of California(1)

Total risk-based capital ratio: N/A 11.55 % 15.09 %
Tier 1 risk-based capital ratio: N/A 11.06 % 14.72 %
Tier 1 leverage ratio: N/A 8.34 % 11.96 %

(1)

On October 11, 2013, The Private Bank of California was merged with the Company's other wholly owned banking subsidiary, Banc of California, NA.

Tangible common equity to tangible assets ratio is supplemental financial information determined by a method other than in accordance with U.S. generally accepted accounting principles ("GAAP"). This non-GAAP measure is used by management in the analysis of Banc of California, Inc.’s. capital strength. Tangible equity is calculated by subtracting goodwill and other intangible assets from total stockholders' equity. Banking and financial institution regulators also exclude goodwill and other intangible assets from total stockholders' equity when assessing the capital adequacy of a financial institution. Management believes the presentation of this financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the capital strength of Banc of California, Inc. This disclosure should not be viewed as a substitution for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following table reconciles this non-GAAP performance measure to the GAAP performance measure for the periods indicated:

As of
December 31,September 30,December 31,
201320132012
Non-GAAP performance measure
Tangible common equity to tangible assets ratio
Total assets $ 3,628,023 $ 3,718,373 $ 1,682,702
Less goodwill (30,143 ) (22,086 ) (7,048 )
Less other intangible assets (12,152)(13,191)(5,474)
Tangible assets $3,585,728$3,683,096$1,670,180
Total stockholders' equity $ 324,869 $ 302,580 $ 188,757
Less preferred stock (79,877 ) (79,877 ) (31,934 )
Less goodwill (30,143 ) (22,086 ) (7,048 )
Less other intangible assets (12,152)(13,191)(5,474)
Tangible stockholders' equity $202,697$187,426$144,301
Total stockholders' equity to total assets 8.95 % 8.14 % 11.22 %
Tangible stockholders' equity to tangible assets 5.65 % 5.09 % 8.64 %
Common stock outstanding 19,561,469 17,439,562 10,780,427
Class B non-voting non-convertible common stock outstanding 584,674579,4901,112,188
Total common stock outstanding 20,146,14318,019,05211,892,615
Tangible common equity per common stock $ 10.06 $ 10.40 $ 12.13

Contacts:

INVESTOR RELATIONS INQUIRIES:
Banc of California, Inc.
Richard Herrin, 855-361-2262
or
MEDIA INQUIRIES:
Vectis Strategies
David Herbst, 213-973-4113 x101

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