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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______
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Commission File Number 001-35522
BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
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| Maryland |
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04-3639825 |
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(I.R.S. Employer Identification No.) |
11611 San Vicente Boulevard, Suite 500
Los Angeles, CA 90049
(Address of Principal Executive Offices, Including Zip Code)
(855) 361-2262
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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| Common Stock, par value $0.01 per share |
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BANC |
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New York Stock Exchange |
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| Depositary Shares, each representing a 1/40th interest |
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| in a share of 7.75% fixed rate reset non-cumulative |
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| perpetual preferred stock, Series F |
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BANC/PF |
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New York Stock Exchange |
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(Trading Symbol) |
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(Name of Exchange on Which Registered) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of October 31, 2024, there were 158,329,608 shares of the registrant's voting common stock outstanding, excluding 216,753 shares of unvested restricted stock, and there were 477,321 shares of the registrant's class B non-voting common stock outstanding.
BANC OF CALIFORNIA, INC.
SEPTEMBER 30, 2024 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Page |
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| PART I. FINANCIAL INFORMATION |
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| Item 1. |
Condensed Consolidated Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets (Unaudited) |
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Condensed Consolidated Statements of Earnings (Loss) (Unaudited) |
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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) |
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Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) |
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Condensed Consolidated Statements of Cash Flows (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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| Item 4. |
Controls and Procedures |
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| PART II. OTHER INFORMATION |
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| Item 1. |
Legal Proceedings |
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| Item 1A. |
Risk Factors |
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| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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| Item 3. |
Defaults Upon Senior Securities |
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| Item 4. |
Mine Safety Disclosures |
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| Item 5. |
Other Information |
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| Item 6. |
Exhibits |
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| Signatures |
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PART I. FINANCIAL INFORMATION
Glossary of Acronyms, Abbreviations, and Terms
The acronyms, abbreviations, and terms listed below are used in various sections of this Quarterly Report on Form 10-Q, including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."
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| ACL |
Allowance for Credit Losses |
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HFS |
Held for Sale |
| AFS |
Available-for-Sale |
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HLBV |
Hypothetical Liquidation at Book Value |
| AFX |
American Financial Exchange |
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HTM |
Held-to-Maturity |
| ALLL |
Allowance for Loan and Lease Losses |
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ICS |
IntraFi Cash Service |
| ASC |
Accounting Standards Codification |
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IRR |
Interest Rate Risk |
| ASU |
Accounting Standards Update |
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LIHTC |
Low Income Housing Tax Credit |
| BAM |
BofCal Asset Management Inc. |
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LOCOM |
Lower of Cost or Market |
| Basel III |
A comprehensive capital framework and rules for U.S. banking organizations approved by the FRB and the FDIC in 2013 |
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MBS |
Mortgage-Backed Securities |
| BOLI |
Bank Owned Life Insurance |
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NAV |
Net Asset Value |
| CDI |
Core Deposit Intangible Assets |
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NII |
Net Interest Income |
| CECL |
Current Expected Credit Loss |
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NVCE |
Non-Voting Common Stock Equivalents |
| CET1 |
Common Equity Tier 1 |
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OREO |
Other Real Estate Owned |
| Civic |
Civic Financial Services, LLC (a company acquired on February 1, 2021) |
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PCD |
Purchased Credit Deteriorated |
| CMBS |
Commercial Mortgage-Backed Securities |
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PRSUs |
Performance-Based Restricted Stock Units |
| CMOs |
Collateralized Mortgage Obligations |
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ROU |
Right-of-use |
| COVID-19 |
Coronavirus Disease |
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RSUs |
Restricted Stock Units |
| CRA |
Community Reinvestment Act |
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S&P |
Standard & Poor's |
| CRI |
Customer Relationship Intangible Assets |
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SBA |
Small Business Administration |
| DFPI |
California Department of Financial Protection and Innovation |
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SBIC |
Small Business Investment Company |
| EVE |
Economic Value of Equity |
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SEC |
Securities and Exchange Commission |
| FDIC |
Federal Deposit Insurance Corporation |
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SOFR |
Secured Overnight Financing Rate |
| FHLB |
Federal Home Loan Bank of San Francisco |
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TRSAs |
Time-Based Restricted Stock Awards |
| FRB |
Board of Governors of the Federal Reserve System |
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U.S. GAAP |
U.S. Generally Accepted Accounting Principles |
| FRBSF |
Federal Reserve Bank of San Francisco |
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, |
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December 31, |
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2024 |
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2023 |
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(Unaudited) |
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(Dollars in thousands, except par value amounts) |
| ASSETS: |
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| Cash and due from banks |
$ |
251,869 |
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202,427 |
|
| Interest-earning deposits in financial institutions |
2,302,358 |
|
|
5,175,149 |
|
| Total cash, cash equivalents, and restricted cash |
2,554,227 |
|
|
5,377,576 |
|
| Securities available-for-sale, at fair value, net of allowance for credit losses |
|
|
|
(amortized cost of $2,526,306 and $2,699,255, respectively) |
2,300,284 |
|
|
2,346,864 |
|
| Securities held-to-maturity, at amortized cost, net of allowance for credit losses (fair value of |
|
|
|
$2,229,482 and $2,168,316, respectively) |
2,301,263 |
|
|
2,287,291 |
|
| FRB and FHLB stock, at cost |
145,123 |
|
|
126,346 |
|
| Total investment securities |
4,746,670 |
|
|
4,760,501 |
|
| Loans held for sale |
28,639 |
|
|
122,757 |
|
| Loans and leases held for investment |
23,553,534 |
|
|
25,534,730 |
|
| Deferred fees, net |
(25,757) |
|
|
(45,043) |
|
| Allowance for loan and lease losses |
(254,345) |
|
|
(281,687) |
|
| Total loans and leases held for investment, net |
23,273,432 |
|
|
25,208,000 |
|
| Equipment leased to others under operating leases |
314,998 |
|
|
344,325 |
|
| Premises and equipment, net |
143,200 |
|
|
146,798 |
|
| Bank owned life insurance |
343,212 |
|
|
339,643 |
|
| Goodwill |
216,770 |
|
|
198,627 |
|
| Intangible assets, net |
140,562 |
|
|
165,477 |
|
| Deferred tax asset, net |
706,849 |
|
|
739,111 |
|
| Other assets |
964,054 |
|
|
1,131,249 |
|
| Total assets |
$ |
33,432,613 |
|
|
$ |
38,534,064 |
|
| LIABILITIES: |
|
|
|
| Noninterest-bearing deposits |
$ |
7,811,796 |
|
|
$ |
7,774,254 |
|
| Interest-bearing deposits |
19,016,473 |
|
|
22,627,515 |
|
| Total deposits |
26,828,269 |
|
|
30,401,769 |
|
Borrowings (including $119,624 and $123,116 at fair value, respectively) |
1,591,833 |
|
|
2,911,322 |
|
| Subordinated debt |
942,151 |
|
|
936,599 |
|
| Accrued interest payable and other liabilities |
574,162 |
|
|
893,609 |
|
| Total liabilities |
29,936,415 |
|
|
35,143,299 |
|
| Commitments and contingencies |
|
|
|
| STOCKHOLDERS' EQUITY: |
|
|
|
| Preferred stock |
498,516 |
|
|
498,516 |
|
Common stock ($0.01 par value, 158,611,645 shares issued and 158,328,021 outstanding at |
|
|
|
September 30, 2024; 157,651,752 shares issued and 156,790,349 outstanding at December 31 |
|
|
|
2023) |
1,586 |
|
|
1,577 |
|
Class B non-voting common stock ($0.01 par value, 477,321 shares issued at September 30, 2024 |
|
|
|
and 477,321 shares issued at December 31, 2023) |
5 |
|
|
5 |
|
Non-voting common stock equivalents ($0.01 par value, 9,790,600 shares issued at |
|
|
|
September 30, 2024 and 10,829,990 shares issued at December 31, 2023) |
98 |
|
|
108 |
|
| Additional paid-in capital |
3,802,314 |
|
|
3,840,974 |
|
| Retained deficit |
(478,173) |
|
|
(518,301) |
|
| Accumulated other comprehensive loss, net |
(328,148) |
|
|
(432,114) |
|
| Total stockholders' equity |
3,496,198 |
|
|
3,390,765 |
|
| Total liabilities and stockholders' equity |
$ |
33,432,613 |
|
|
$ |
38,534,064 |
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
| |
2024 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(Unaudited) |
| |
(In thousands, except per share amounts) |
| Interest income: |
|
|
|
|
|
|
|
|
|
| Loans and leases |
$ |
369,913 |
|
|
$ |
388,853 |
|
|
$ |
310,392 |
|
|
$ |
1,144,231 |
|
|
$ |
1,150,049 |
|
| Investment securities |
34,912 |
|
|
33,836 |
|
|
45,326 |
|
|
103,051 |
|
|
133,716 |
|
| Deposits in financial institutions |
42,068 |
|
|
39,900 |
|
|
90,366 |
|
|
140,904 |
|
|
219,995 |
|
| Total interest income |
446,893 |
|
|
462,589 |
|
|
446,084 |
|
|
1,388,186 |
|
|
1,503,760 |
|
| Interest expense: |
|
|
|
|
|
|
|
|
|
| Deposits |
180,986 |
|
|
186,106 |
|
|
205,982 |
|
|
561,899 |
|
|
540,663 |
|
| Borrowings |
16,970 |
|
|
30,311 |
|
|
94,234 |
|
|
85,405 |
|
|
324,270 |
|
| Subordinated debt |
16,762 |
|
|
16,684 |
|
|
15,139 |
|
|
50,117 |
|
|
42,750 |
|
| Total interest expense |
214,718 |
|
|
233,101 |
|
|
315,355 |
|
|
697,421 |
|
|
907,683 |
|
| Net interest income |
232,175 |
|
|
229,488 |
|
|
130,729 |
|
|
690,765 |
|
|
596,077 |
|
| Provision for credit losses |
9,000 |
|
|
11,000 |
|
|
— |
|
|
30,000 |
|
|
5,000 |
|
| Net interest income after provision for |
|
|
|
|
|
|
|
|
|
| credit losses |
223,175 |
|
|
218,488 |
|
|
130,729 |
|
|
660,765 |
|
|
591,077 |
|
| Noninterest income: |
|
|
|
|
|
|
|
|
|
| Leased equipment income |
17,176 |
|
|
11,487 |
|
|
14,554 |
|
|
40,379 |
|
|
50,798 |
|
| Other commissions and fees |
8,256 |
|
|
8,629 |
|
|
7,641 |
|
|
25,027 |
|
|
29,226 |
|
| Service charges on deposit accounts |
4,568 |
|
|
4,540 |
|
|
4,018 |
|
|
13,813 |
|
|
11,906 |
|
| (Loss) gain on sale of loans and leases |
(62) |
|
|
1,135 |
|
|
(1,901) |
|
|
625 |
|
|
(157,820) |
|
| Loss on sale of securities |
(59,946) |
|
|
— |
|
|
— |
|
|
(59,946) |
|
|
— |
|
| Dividends and gains on equity |
|
|
|
|
|
|
|
|
|
| investments |
3,730 |
|
|
1,166 |
|
|
3,837 |
|
|
7,964 |
|
|
7,593 |
|
| Warrant income (loss) |
211 |
|
|
(324) |
|
|
(88) |
|
|
65 |
|
|
(545) |
|
| LOCOM HFS adjustment |
(74) |
|
|
(38) |
|
|
307 |
|
|
218 |
|
|
(11,636) |
|
| Other income |
10,689 |
|
|
3,197 |
|
|
15,440 |
|
|
20,011 |
|
|
22,595 |
|
| Total noninterest (loss) income |
(15,452) |
|
|
29,792 |
|
|
43,808 |
|
|
48,156 |
|
|
(47,883) |
|
| Noninterest expense: |
|
|
|
|
|
|
|
|
|
| Compensation |
85,585 |
|
|
85,914 |
|
|
71,642 |
|
|
263,735 |
|
|
242,999 |
|
| Customer related expense |
34,475 |
|
|
32,405 |
|
|
26,971 |
|
|
97,799 |
|
|
78,278 |
|
| Insurance and assessments |
12,708 |
|
|
26,431 |
|
|
38,298 |
|
|
59,600 |
|
|
75,650 |
|
| Occupancy |
16,892 |
|
|
17,455 |
|
|
15,293 |
|
|
52,315 |
|
|
45,743 |
|
| Information technology and data |
|
|
|
|
|
|
|
|
|
| processing |
14,995 |
|
|
15,459 |
|
|
12,840 |
|
|
45,872 |
|
|
38,706 |
|
| Intangible asset amortization |
8,485 |
|
|
8,484 |
|
|
2,389 |
|
|
25,373 |
|
|
7,189 |
|
| Leased equipment depreciation |
7,144 |
|
|
7,511 |
|
|
8,333 |
|
|
22,175 |
|
|
26,796 |
|
| Other professional services |
5,101 |
|
|
5,183 |
|
|
5,597 |
|
|
15,359 |
|
|
21,643 |
|
| Loan expense |
3,994 |
|
|
4,332 |
|
|
4,243 |
|
|
12,817 |
|
|
16,012 |
|
| Acquisition, integration and |
|
|
|
|
|
|
|
|
|
| reorganization costs |
(510) |
|
|
(12,650) |
|
|
9,925 |
|
|
(13,160) |
|
|
30,833 |
|
| Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,376,736 |
|
| Other expense |
7,340 |
|
|
13,119 |
|
|
5,572 |
|
|
28,485 |
|
|
133,958 |
|
| Total noninterest expense |
196,209 |
|
|
203,643 |
|
|
201,103 |
|
|
610,370 |
|
|
2,094,543 |
|
| Earnings (loss) before income taxes |
11,514 |
|
|
44,637 |
|
|
(26,566) |
|
|
98,551 |
|
|
(1,551,349) |
|
| Income tax expense (benefit) |
2,730 |
|
|
14,304 |
|
|
(3,222) |
|
|
28,582 |
|
|
(135,167) |
|
| Net earnings (loss) |
8,784 |
|
|
30,333 |
|
|
(23,344) |
|
|
69,969 |
|
|
(1,416,182) |
|
| Preferred stock dividends |
9,947 |
|
|
9,947 |
|
|
9,947 |
|
|
29,841 |
|
|
29,841 |
|
| Net (loss) earnings available to common |
|
|
|
|
|
|
|
|
|
| and equivalent stockholders |
$ |
(1,163) |
|
|
$ |
20,386 |
|
|
$ |
(33,291) |
|
|
$ |
40,128 |
|
|
$ |
(1,446,023) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
2024 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(Unaudited) |
|
(In thousands, except per share amounts) |
| Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
| Basic |
$ |
(0.01) |
|
|
$ |
0.12 |
|
|
$ |
(0.42) |
|
|
$ |
0.24 |
|
|
$ |
(18.61) |
|
| Diluted |
$ |
(0.01) |
|
|
$ |
0.12 |
|
|
$ |
(0.42) |
|
|
$ |
0.24 |
|
|
$ |
(18.61) |
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
2024 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(Unaudited) |
|
(In thousands) |
| Net earnings (loss) |
$ |
8,784 |
|
|
$ |
30,333 |
|
|
$ |
(23,344) |
|
|
$ |
69,969 |
|
|
$ |
(1,416,182) |
|
| Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized net holding gains (losses) on securities |
|
|
|
|
|
|
|
|
|
| available-for-sale arising during the period |
83,902 |
|
|
729 |
|
|
(149,201) |
|
|
66,423 |
|
|
(145,375) |
|
|
|
|
|
|
|
|
|
|
|
| Income tax (expense) benefit related to unrealized net |
|
|
|
|
|
|
|
|
|
| holding gains (losses) arising during the period |
(23,810) |
|
|
(207) |
|
|
41,328 |
|
|
(18,850) |
|
|
40,268 |
|
|
|
|
|
|
|
|
|
|
|
| Unrealized net holding gains (losses) on securities |
|
|
|
|
|
|
|
|
|
| available-for-sale, net of tax |
60,092 |
|
|
522 |
|
|
(107,873) |
|
|
47,573 |
|
|
(105,107) |
|
|
|
|
|
|
|
|
|
|
|
| Reclassification adjustment for net losses included in |
|
|
|
|
|
|
|
|
|
net earnings (1) |
59,946 |
|
|
— |
|
|
— |
|
|
59,946 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
| Income tax benefit related to reclassification adjustment |
(17,011) |
|
|
— |
|
|
— |
|
|
(17,011) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
| Reclassification adjustment for net losses included |
|
|
|
|
|
|
|
|
|
| in net earnings, net of tax |
42,935 |
|
|
— |
|
|
— |
|
|
42,935 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization of unrealized net loss on securities |
|
|
|
|
|
|
|
|
|
| transferred from available-for-sale to held-to-maturity |
8,226 |
|
|
8,106 |
|
|
7,998 |
|
|
24,442 |
|
|
23,759 |
|
| Income tax expense related to amortization of unrealized |
|
|
|
|
|
|
|
|
|
| net loss on securities transferred from |
|
|
|
|
|
|
|
|
|
| available-for-sale to held-to-maturity |
(2,354) |
|
|
(2,300) |
|
|
(2,215) |
|
|
(6,956) |
|
|
(6,581) |
|
| Amortization of unrealized net loss on securities |
|
|
|
|
|
|
|
|
|
| transferred from available-for-sale |
|
|
|
|
|
|
|
|
|
| to held-to-maturity, net of tax |
5,872 |
|
|
5,806 |
|
|
5,783 |
|
|
17,486 |
|
|
17,178 |
|
| Change in fair value of credit-linked notes |
(1,495) |
|
|
636 |
|
|
3,050 |
|
|
(2,110) |
|
|
7,107 |
|
| Income tax benefit (expense) related to change in fair |
|
|
|
|
|
|
|
|
|
| value of credit-linked notes |
424 |
|
|
(149) |
|
|
(839) |
|
|
630 |
|
|
(1,957) |
|
| Change in fair value of credit-linked notes, |
|
|
|
|
|
|
|
|
|
| net of tax |
(1,071) |
|
|
487 |
|
|
2,211 |
|
|
(1,480) |
|
|
5,150 |
|
| Unrealized (loss) gain on cash flow hedges arising |
|
|
|
|
|
|
|
|
|
| during the period |
(10,216) |
|
|
1,283 |
|
|
— |
|
|
(3,508) |
|
|
— |
|
| Income tax benefit (expense) related to unrealized gain |
|
|
|
|
|
|
|
|
|
| on cash flow hedges arising during the period |
2,899 |
|
|
(321) |
|
|
— |
|
|
960 |
|
|
— |
|
| Unrealized (loss) gain on cash flow hedges, |
|
|
|
|
|
|
|
|
|
| net of tax |
(7,317) |
|
|
962 |
|
|
— |
|
|
(2,548) |
|
|
— |
|
| Other comprehensive income (loss), net of tax |
100,511 |
|
|
7,777 |
|
|
(99,879) |
|
|
103,966 |
|
|
(82,779) |
|
| Comprehensive income (loss) |
$ |
109,295 |
|
|
$ |
38,110 |
|
|
$ |
(123,223) |
|
|
$ |
173,935 |
|
|
$ |
(1,498,961) |
|
__________________________________
(1) Entire amount recognized in "Loss on sale of securities" on the Condensed Consolidated Statements of Earnings (Loss).
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Voting |
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Class B |
|
Common |
|
Additional |
|
|
|
Other |
|
|
|
Preferred |
|
|
|
Non- |
|
Stock |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
|
| |
Stock |
|
Voting |
|
Voting |
|
Equivalents |
|
Capital |
|
Deficit |
|
Loss, Net |
|
Total |
|
(Unaudited) |
|
(In thousands, except per share amount) |
| Balance, December 31, 2023 |
$ |
498,516 |
|
|
$ |
1,577 |
|
|
$ |
5 |
|
|
$ |
108 |
|
|
$ |
3,840,974 |
|
|
$ |
(518,301) |
|
|
$ |
(432,114) |
|
|
$ |
3,390,765 |
|
| Net earnings |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
30,852 |
|
|
— |
|
|
30,852 |
|
| Other comprehensive loss, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,322) |
|
|
(4,322) |
|
| Restricted stock awarded and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| earned stock compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of shares forfeited |
— |
|
|
(1) |
|
|
— |
|
|
— |
|
|
4,657 |
|
|
— |
|
|
— |
|
|
4,656 |
|
| Conversion of non-voting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| to voting common stock |
— |
|
|
7 |
|
|
— |
|
|
(7) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Restricted stock surrendered |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,238) |
|
|
— |
|
|
— |
|
|
(1,238) |
|
| Shares purchased under the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend Reinvestment Plan |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
70 |
|
|
— |
|
|
— |
|
|
70 |
|
| Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.48/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,947) |
|
|
— |
|
|
(9,947) |
|
Common stock, $0.10/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16,686) |
|
|
— |
|
|
— |
|
|
(16,686) |
|
| Balance, March 31, 2024 |
$ |
498,516 |
|
|
$ |
1,583 |
|
|
$ |
5 |
|
|
$ |
101 |
|
|
$ |
3,827,777 |
|
|
$ |
(497,396) |
|
|
$ |
(436,436) |
|
|
$ |
3,394,150 |
|
| Net earnings |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
30,333 |
|
|
— |
|
|
30,333 |
|
| Other comprehensive income, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,777 |
|
|
7,777 |
|
| Restricted stock awarded and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| earned stock compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of shares forfeited |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,912 |
|
|
— |
|
|
— |
|
|
3,912 |
|
| Restricted stock surrendered |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,154) |
|
|
— |
|
|
— |
|
|
(1,154) |
|
| Shares purchased under the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend Reinvestment Plan |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
78 |
|
— |
|
|
— |
|
|
78 |
| Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.48/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,947) |
|
|
— |
|
|
(9,947) |
|
Common stock, $0.10/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,301) |
|
|
— |
|
|
— |
|
|
(17,301) |
|
| Balance, June 30, 2024 |
$ |
498,516 |
|
|
$ |
1,583 |
|
|
$ |
5 |
|
|
$ |
101 |
|
|
$ |
3,813,312 |
|
|
$ |
(477,010) |
|
|
$ |
(428,659) |
|
|
$ |
3,407,848 |
|
| Net earnings |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
8,784 |
|
|
— |
|
|
8,784 |
|
| Other comprehensive income, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100,511 |
|
|
100,511 |
|
| Restricted stock awarded and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| earned stock compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of shares forfeited |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,445 |
|
|
— |
|
|
— |
|
|
5,445 |
|
| Conversion of non-voting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| to voting common stock |
— |
|
|
3 |
|
|
— |
|
|
(3) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Restricted stock surrendered |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(158) |
|
|
— |
|
|
— |
|
|
(158) |
|
| Shares purchased under the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend Reinvestment Plan |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
95 |
|
|
— |
|
|
— |
|
|
95 |
|
| Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.48/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,947) |
|
|
— |
|
|
(9,947) |
|
Common stock, $0.10/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16,380) |
|
|
— |
|
|
— |
|
|
(16,380) |
|
| Balance, September 30, 2024 |
$ |
498,516 |
|
|
$ |
1,586 |
|
|
$ |
5 |
|
|
$ |
98 |
|
|
$ |
3,802,314 |
|
|
$ |
(478,173) |
|
|
$ |
(328,148) |
|
|
$ |
3,496,198 |
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Voting |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Common |
|
|
|
|
|
|
|
|
|
Preferred |
|
|
|
Class B |
|
Stock |
|
|
|
|
|
|
|
|
|
Stock |
|
Voting |
|
Non-Voting |
|
Equivalents |
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
(In ones) |
|
|
|
|
|
|
|
|
| Number of shares, December 31, 2023 |
513,250 |
|
|
157,651,752 |
|
|
477,321 |
|
|
10,829,990 |
|
|
|
|
|
|
|
|
|
| Restricted stock awarded and earned stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| compensation, net of shares forfeited |
— |
|
|
67,209 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Restricted stock surrendered |
— |
|
|
(17,364) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Shares purchased under Dividend Reinvestment Plan |
— |
|
|
4,721 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Conversion of non-voting common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| to voting common stock |
— |
|
|
684,390 |
|
|
— |
|
|
(684,390) |
|
|
|
|
|
|
|
|
|
| Number of shares, March 31, 2024 |
513,250 |
|
|
158,390,708 |
|
|
477,321 |
|
|
10,145,600 |
|
|
|
|
|
|
|
|
|
| Restricted stock awarded and earned stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| compensation, net of shares forfeited |
— |
|
|
(66,623) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Restricted stock surrendered |
— |
|
|
(77,549) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Shares purchased under Dividend Reinvestment Plan |
— |
|
|
6,255 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Number of shares, June 30, 2024 |
513,250 |
|
|
158,252,791 |
|
|
477,321 |
|
|
10,145,600 |
|
|
|
|
|
|
|
|
|
| Restricted stock awarded and earned stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| compensation, net of shares forfeited |
— |
|
|
2,001 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Restricted stock surrendered |
— |
|
|
(3,384) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Shares purchased under Dividend Reinvestment Plan |
— |
|
|
5,237 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Conversion of non-voting common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| to voting common stock |
— |
|
|
355,000 |
|
|
— |
|
|
(355,000) |
|
|
|
|
|
|
|
|
|
| Number of shares, September 30, 2024 |
513,250 |
|
|
158,611,645 |
|
|
477,321 |
|
|
9,790,600 |
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Voting |
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Class B |
|
Common |
|
Additional |
|
|
|
Other |
|
|
|
Preferred |
|
|
|
Non- |
|
Stock |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
|
| |
Stock |
|
Voting |
|
Voting |
|
Equivalents |
|
Capital |
|
Earnings |
|
Loss, Net |
|
Total |
|
(Unaudited) |
|
(In thousands, except per share amount) |
| Balance, December 31, 2022 |
$ |
498,516 |
|
|
$ |
1,230 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,821,064 |
|
|
$ |
1,420,624 |
|
|
$ |
(790,903) |
|
|
$ |
3,950,531 |
|
| Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,195,424) |
|
|
— |
|
|
(1,195,424) |
|
| Other comprehensive income, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
54,843 |
|
|
54,843 |
|
| Restricted stock awarded and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| earned stock compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of shares forfeited |
— |
|
|
2 |
|
|
— |
|
|
— |
|
|
4,981 |
|
|
— |
|
|
— |
|
|
4,983 |
|
| Restricted stock surrendered |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,053) |
|
|
— |
|
|
— |
|
|
(4,053) |
|
| Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.48/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,947) |
|
|
— |
|
|
(9,947) |
|
Common stock, $0.38/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(29,456) |
|
|
— |
|
|
— |
|
|
(29,456) |
|
| Balance, March 31, 2023 |
$ |
498,516 |
|
|
$ |
1,232 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,792,536 |
|
|
$ |
215,253 |
|
|
$ |
(736,060) |
|
|
$ |
2,771,477 |
|
| Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(197,414) |
|
|
— |
|
|
(197,414) |
|
| Other comprehensive loss, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(37,743) |
|
|
(37,743) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Restricted stock awarded and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| earned stock compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of shares forfeited |
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
8,933 |
|
|
— |
|
|
— |
|
|
8,934 |
|
| Restricted stock surrendered |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,019) |
|
|
— |
|
|
— |
|
|
(1,019) |
|
| Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.48/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,947) |
|
|
— |
|
|
(9,947) |
|
Common stock, $0.02/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,093) |
|
|
— |
|
|
— |
|
|
(1,093) |
|
| Balance, June 30, 2023 |
$ |
498,516 |
|
|
$ |
1,233 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,799,357 |
|
|
$ |
7,892 |
|
|
$ |
(773,803) |
|
|
$ |
2,533,195 |
|
| Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(23,344) |
|
|
— |
|
|
(23,344) |
|
| Other comprehensive loss, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(99,879) |
|
|
(99,879) |
|
| Restricted stock awarded and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| earned stock compensation, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| net of shares forfeited |
— |
|
|
(2) |
|
|
— |
|
|
— |
|
|
259 |
|
|
— |
|
|
— |
|
|
257 |
|
| Restricted stock surrendered |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(194) |
|
|
— |
|
|
— |
|
|
(194) |
|
| Cash dividends paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.48/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,947) |
|
|
— |
|
|
(9,947) |
|
Common stock, $0.02/share |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(811) |
|
|
— |
|
|
— |
|
|
(811) |
|
| Balance, September 30, 2023 |
$ |
498,516 |
|
|
$ |
1,231 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,798,611 |
|
|
$ |
(25,399) |
|
|
$ |
(873,682) |
|
|
$ |
2,399,277 |
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
Non-Voting |
|
|
|
Common Stock |
|
Common |
|
Preferred |
|
|
|
Class B |
|
Stock |
|
Stock |
|
Voting |
|
Non-Voting |
|
Equivalents |
|
(Unaudited) |
|
(In ones) |
| Number of shares, December 31, 2022 |
513,250 |
|
|
78,973,869 |
|
|
— |
|
|
— |
|
| Restricted stock awarded and earned stock |
|
|
|
|
|
|
|
| compensation, net of shares forfeited |
— |
|
|
110,661 |
|
|
— |
|
|
— |
|
| Restricted stock surrendered |
— |
|
|
(96,106) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Number of shares, March 31, 2023 |
513,250 |
|
|
78,988,424 |
|
|
— |
|
|
— |
|
| Restricted stock awarded and earned stock |
|
|
|
|
|
|
|
| compensation, net of shares forfeited |
— |
|
|
54,188 |
|
|
— |
|
|
— |
|
| Restricted stock surrendered |
— |
|
|
(103,588) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Number of shares, June 30, 2023 |
513,250 |
|
|
78,939,024 |
|
|
— |
|
|
— |
|
| Restricted stock awarded and earned stock |
|
|
|
|
|
|
|
| compensation, net of shares forfeited |
— |
|
|
(116,014) |
|
|
— |
|
|
— |
|
| Restricted stock surrendered |
— |
|
|
(16,041) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
| Number of shares, September 30, 2023 |
513,250 |
|
|
78,806,969 |
|
|
— |
|
|
— |
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
| |
September 30, |
| |
2024 |
|
2023 |
|
(Unaudited) |
| |
(In thousands) |
| Cash flows from operating activities: |
|
|
|
| Net earnings (loss) |
$ |
69,969 |
|
|
$ |
(1,416,182) |
|
| Adjustments to reconcile net earnings (loss) to net cash (used in) provided by operating activities: |
|
|
|
| Goodwill impairment |
— |
|
|
1,376,736 |
|
| Depreciation and amortization |
41,199 |
|
|
40,295 |
|
| Amortization of net premiums on investment securities |
18,468 |
|
|
28,981 |
|
| Decrease in deferred loan fees and discounts, net |
(87,108) |
|
|
(62,420) |
|
| Amortization of intangible assets |
25,373 |
|
|
7,189 |
|
| Amortization of operating lease ROU assets |
27,614 |
|
|
20,937 |
|
| Provision for credit losses |
30,000 |
|
|
5,000 |
|
| Gain on sale of foreclosed assets |
(947) |
|
|
(793) |
|
| Provision for losses on foreclosed assets |
1,020 |
|
|
701 |
|
| (Gain) loss on sale of loans and leases |
(625) |
|
|
157,820 |
|
| Loss (gain) on sale of premises and equipment |
24 |
|
|
(647) |
|
| Loss on sale of securities |
59,946 |
|
|
— |
|
| Gain on BOLI death benefit |
(52) |
|
|
(416) |
|
| Unrealized (gain) loss on derivatives, foreign currencies, and credit-linked notes, net |
(825) |
|
|
4,026 |
|
| LOCOM HFS adjustment |
(218) |
|
|
11,636 |
|
| Earned stock compensation |
14,013 |
|
|
14,174 |
|
|
|
|
|
| Acquisition, integration, and reorganization costs |
— |
|
|
70 |
|
| Decrease (increase) in other assets |
124,162 |
|
|
(166,765) |
|
| (Decrease) increase in accrued interest payable and other liabilities |
(324,435) |
|
|
33,857 |
|
| Net cash (used in) provided by operating activities |
(2,422) |
|
|
54,199 |
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
| Net (increase) decrease in loans and leases |
(399,666) |
|
|
450,455 |
|
| Proceeds from sales of loans and leases |
2,455,794 |
|
|
5,946,033 |
|
| Proceeds from maturities and paydowns of securities available-for-sale |
151,634 |
|
|
203,958 |
|
| Proceeds from sales of securities available-for-sale |
681,888 |
|
|
— |
|
| Purchases of securities available-for-sale |
(729,612) |
|
|
(12,752) |
|
| Proceeds from maturities and paydowns of securities held-to-maturity |
1,095 |
|
|
1,061 |
|
| Purchases of FHLB and FRB stock |
(20,790) |
|
|
(194,918) |
|
| Redemptions of FHLB and FRB stock |
2,013 |
|
|
211,958 |
|
| Proceeds from sales of foreclosed assets |
14,561 |
|
|
14,235 |
|
| Purchases of premises and equipment, net |
(8,913) |
|
|
(12,106) |
|
| Proceeds from sales of premises and equipment |
136 |
|
|
9,018 |
|
| Proceeds from BOLI death benefit |
2,074 |
|
|
3,567 |
|
| Net decrease in equipment leased to others under operating leases |
7,152 |
|
|
25,151 |
|
| Net cash provided by investing activities |
2,157,366 |
|
|
6,645,660 |
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
| Net increase (decrease) in noninterest-bearing deposits |
37,542 |
|
|
(5,633,324) |
|
| Net decrease in interest-bearing deposits |
(3,611,042) |
|
|
(1,704,329) |
|
| Repayments of borrowings |
(2,422,278) |
|
|
(1,525,037) |
|
| Proceeds from borrowings |
1,100,000 |
|
|
6,058,743 |
|
|
|
|
|
|
|
|
|
| Shares purchased under the Dividend Reinvestment Plan |
243 |
|
|
— |
|
| Restricted stock surrendered |
(2,550) |
|
|
(5,266) |
|
| Preferred stock dividends paid |
(29,841) |
|
|
(29,841) |
|
| Common stock dividends paid |
(50,367) |
|
|
(31,360) |
|
| Net cash used in financing activities |
(4,978,293) |
|
|
(2,870,414) |
|
|
|
|
|
| Net (decrease) increase in cash, cash equivalents, and restricted cash |
(2,823,349) |
|
|
3,829,445 |
|
| Cash, cash equivalents, and restricted cash, beginning of period |
5,377,576 |
|
|
2,240,222 |
|
| Cash, cash equivalents, and restricted cash, end of period |
$ |
2,554,227 |
|
|
$ |
6,069,667 |
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
| |
September 30, |
| |
2024 |
|
2023 |
|
(Unaudited) |
| |
(In thousands) |
| Supplemental disclosures of cash flow information: |
|
|
|
| Cash paid for interest |
$ |
819,859 |
|
|
$ |
715,421 |
|
| Cash (received) paid for income taxes |
(7,160) |
|
|
1,095 |
|
| Loans transferred to foreclosed assets |
15,564 |
|
|
15,950 |
|
| Transfers from loans held for investment to loans held for sale |
1,930,285 |
|
|
3,076,427 |
|
| Transfers to loans held for investment from loans held for sale |
1,179 |
|
|
394,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and member of the FRB. When we refer to the “parent” or the “holding company," we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company,” we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively. As a bank holding company, Banc of California, Inc. is subject to ongoing and comprehensive supervision, regulation, examination, and enforcement by the FRB. As a California state-chartered bank and a member of the FRB, the Bank is subject to ongoing and comprehensive supervision, regulation, examination, and enforcement by the DFPI and the FRB. The Bank is also a member of the FHLB system, and its deposit accounts are insured by the Deposit Insurance Fund (the "DIF") of the FDIC.
Banc of California is one of the nation's premier relationship-based business banks focused on providing banking and treasury management services to small-, middle-market, and venture-backed businesses. The Bank provides a broad range of loan and deposit products and services through 80 full-service branches located throughout California and in Denver, Colorado, and Durham, North Carolina, as well as full-stack payment processing solutions through its subsidiary, Deepstack Technologies, LLC (“Deepstack”). Banc of California also serves the Community Association Management Industry nationwide with its technology-forward platform SmartStreet™. The Bank is committed to its local communities by supporting organizations that provide financial literacy and job training, small business support, affordable housing, and more.
We generate our revenue primarily from interest received on loans and leases and, to a lesser extent, from interest received on investment securities, and fees received in connection with deposit services, extending credit and other services offered, including treasury management and investment management services. Our major operating expenses are interest paid by the Bank on deposits and borrowings, compensation, occupancy, and general operating expenses.
Significant Accounting Policies
Our accounting policies are described in Note 1. Nature of Operations and Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC ("Form 10-K").
Accounting Standards Adopted in 2024
Effective January 1, 2024, the Company adopted ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." This standard clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The Company does not take into account contractual sale restrictions in determining the fair value of its equity securities, therefore, the adoption of this amendment did not have a material impact on the Company's consolidated financial statements.
Effective January 1, 2024, the Company adopted ASU 2023-02, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)." This standard expands the proportional amortization method to account for investments in all tax credit structures. That accounting method was previously allowed only for low-income housing tax credit ("LIHTC") investments, but now is available, by election, to all community development tax credit investment reporting that meets five conditions. Under the new guidance, reporting entities can make accounting policy elections on a tax-credit-program-by-tax-credit-program basis, rather than for individual investments or at the reporting entity level. The Company adopted this update on a prospective basis and determined that the adoption of this amendment did not have a material impact on the Company's consolidated financial statements.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Basis of Presentation
The accounting and reporting policies of the Company are in accordance with U.S. generally accepted accounting principles, which we may refer to as U.S. GAAP. In the opinion of management, all significant intercompany accounts and transactions have been eliminated and adjustments, consisting solely of normal recurring accruals and considered necessary for the fair presentation of financial statements, have been included.
On November 30, 2023, PacWest Bancorp merged with and into Banc of California, Inc. (the “Merger”), with Banc of California, Inc. continuing as the surviving legal corporation and Banc of California, Inc. concurrently closed a $400 million equity capital raise. The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, PacWest Bancorp was deemed the acquirer for financial reporting purposes, even though Banc of California, Inc. was the legal acquirer. The Merger was an all-stock transaction and has been accounted for as a business combination. Banc of California, Inc.'s financial results for all periods ended prior to November 30, 2023 reflect PacWest Bancorp results only on a standalone basis. In addition, Banc of California, Inc.'s reported financial results for the year ended December 31, 2023 reflect PacWest Bancorp financial results only on a standalone basis until the closing of the Merger on November 30, 2023, and results of the combined company for the month of December 2023. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Banc of California, Inc. have been retrospectively restated to reflect the equivalent number of shares issued in the Merger as the Merger was accounted for as a reverse merger. Under the reverse merger method of accounting, the assets and liabilities of legacy Banc of California, Inc. as of November 30, 2023 were recorded at their respective fair values. The interim condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K.
Use of Estimates
The Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with U.S. GAAP. Actual results could differ from those estimates. Material estimates subject to change in the near term include, among other items, the allowance for credit losses (the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments), the carrying value of goodwill and other intangible assets, the fair value of assets and liabilities acquired in business combinations and the related purchase price allocation, and the realization of deferred tax assets. These estimates may be adjusted as more current information becomes available, and any adjustment may be significant.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period's presentation format.
NOTE 2. BUSINESS COMBINATIONS
On November 30, 2023 (the “Merger Date”), PacWest Bancorp merged with and into Banc of California, Inc., with Banc of California, Inc. continuing as the surviving legal corporation (the “Merger”). Promptly following the Merger, Banc of California, Inc.’s wholly owned bank subsidiary, Banc of California, N.A., merged with and into PacWest Bancorp’s wholly owned bank subsidiary, Pacific Western Bank, with Pacific Western Bank surviving the merger. The name of the bank was then changed to Banc of California. Refer to Note 1. Organization and Summary of Significant Accounting Policies under the Basis of Presentation for more information pertaining to the completed Merger.
The Merger was accounted for as a reverse merger using the acquisition method of accounting; therefore, PacWest Bancorp was deemed the acquirer for financial reporting purposes, even though Banc of California, Inc. was the legal acquirer. The Merger was an all-stock transaction and has been accounted for as a business combination. Pursuant to the merger agreement, on the Merger Date, each holder of PacWest Bancorp common stock received 0.6569 of a share (the “Exchange Ratio”) of Banc of California, Inc.'s common stock for each share of PacWest Bancorp common stock held. Each outstanding share of common stock of Banc of California, Inc. remained outstanding. As of the Merger Date, PacWest Bancorp had approximately 120.0 million and Banc of California, Inc. had approximately 57.0 million shares of common stock outstanding. On the Merger Date, the shares of PacWest Bancorp common stock, which previously traded under the ticker symbol “PACW” on NASDAQ, ceased trading on, and were delisted from, NASDAQ. Following the Merger, Banc of California, Inc. common stock continues to trade on NYSE, with the ticker symbol of “BANC.”
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table provides the preliminary purchase price allocation as of the Merger Date and the assets acquired and liabilities assumed at their estimated fair value as of the Merger Date as recorded by the Company. The estimates of fair value were recorded based on initial valuations available at the Merger Date and further adjusted in the third quarter based on new information. These estimates, including initial accounting for deferred taxes and acquired loans, are considered preliminary as of September 30, 2024 and remain subject to additional adjustment for up to one year after the Merger Date. In many cases, the determination of fair value required management to make estimates about discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change. While the Company believes that the information available on the Merger Date provided a reasonable basis for estimating fair value, additional information obtained during the measurement period resulted in changes in the second and third quarters of 2024 and further additional information that may be obtained during the remaining measurement period may result in additional changes to the estimated fair value amounts. The measurement period ends on the earlier of one year after the Merger Date or the date the Company concludes that all necessary information about the facts and circumstances that existed as of the Merger Date have been obtained. The fair value of acquired net tax assets may change once the final tax returns have been filed and the fair value of acquired loans may change due to additional information being obtained during the measurement period, including the determination of PCD loans as the Company further evaluates the information as of the acquisition date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2023 |
|
|
|
|
Purchase Price Consideration: |
|
|
|
|
(In thousands) |
| Total merger consideration |
|
|
|
|
|
$ |
663,004 |
|
| Fair value of assets acquired: |
|
|
|
|
|
|
| Cash and due from banks |
|
|
|
$ |
335,300 |
|
|
|
| Investment securities available-for-sale |
|
872,800 |
|
|
|
| Loans and leases held for sale |
|
2,179,860 |
|
|
|
| Loans and leases held for investment, net of allowance for loan and lease losses |
|
3,952,073 |
|
|
|
| Premises and equipment |
|
|
|
103,500 |
|
|
|
| Other intangible assets |
|
|
|
145,500 |
|
|
|
| Current and deferred tax assets, net |
|
209,602 |
|
|
|
| Other assets |
|
|
|
391,050 |
|
|
|
| Total assets acquired |
|
|
|
$ |
8,189,685 |
|
|
|
| Fair value of liabilities assumed: |
|
|
|
|
| Deposits |
|
|
|
$ |
6,547,659 |
|
|
|
| FHLB advances |
|
794,000 |
|
|
|
| Long-term debt |
|
|
|
257,600 |
|
|
|
| Other liabilities |
|
|
|
144,192 |
|
|
|
| Total liabilities assumed |
|
$ |
7,743,451 |
|
|
|
| Net assets acquired |
|
|
|
|
|
446,234 |
|
| Goodwill |
|
|
|
|
|
$ |
216,770 |
|
In connection with the Merger, the Company recorded approximately $216.8 million of goodwill. Goodwill represents the excess of the purchase price over the fair value of the assets acquired, net of fair value of liabilities assumed. Information regarding the allocation of goodwill recorded as a result of the acquisition, as well as the carrying amounts and amortization of core deposit and other intangible assets, are provided in Note 6. Goodwill and Other Intangible Assets, Net of the Notes to Consolidated Financial Statements. None of the goodwill recognized is expected to be deductible for income tax purposes.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 3. RESTRICTED CASH
The Company is required to maintain reserve balances with the FRBSF. Such reserve requirements are based on a percentage of deposit liabilities and may be satisfied by cash on hand. There were no average reserves required to be held at the FRBSF for the periods ended September 30, 2024 and 2023. The following restricted cash balances are included in "Interest-earning deposits in financial institutions" on the condensed consolidated balance sheets. As of September 30, 2024 and December 31, 2023, we pledged cash collateral for our derivative contracts of $3.5 million and $3.3 million. In connection with the issuance of the credit-linked notes on September 29, 2022, legacy Pacific Western Bank established a correspondent bank account at a third party financial institution as the collateral account for the credit-linked notes. The repayment of principal on the credit-linked notes is secured by this collateral account, which had a balance of $121.1 million at September 30, 2024 and $125.2 million at December 31, 2023. Starting in the second quarter of 2023, we began to pledge cash to secure the standby letters of credit that we have issued on behalf of our customers. As of September 30, 2024 and December 31, 2023, the balance of such restricted cash totaled $58.7 million and $56.6 million.
NOTE 4. INVESTMENT SECURITIES
Securities Available-for-Sale
The following table presents amortized cost, gross unrealized gains and losses, and fair values of securities available-for-sale as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
September 30, 2024 |
|
|
|
Allowance |
|
|
|
Gross |
|
Gross |
|
|
|
Amortized |
|
for Credit |
|
Net Carrying |
|
Unrealized |
|
Unrealized |
|
Fair |
| Security Type |
Cost |
|
Losses |
|
Amount |
|
Gains |
|
Losses |
|
Value |
| |
(In thousands) |
| Agency residential MBS |
$ |
1,071,154 |
|
|
$ |
— |
|
|
$ |
1,071,154 |
|
|
$ |
— |
|
|
$ |
(148,706) |
|
|
$ |
922,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Agency commercial MBS |
34,193 |
|
|
— |
|
|
34,193 |
|
|
— |
|
|
(661) |
|
|
33,532 |
|
| Agency residential CMOs |
432,183 |
|
|
— |
|
|
432,183 |
|
|
1,910 |
|
|
(15,853) |
|
|
418,240 |
|
| Municipal securities |
602 |
|
|
— |
|
|
602 |
|
|
— |
|
|
(5) |
|
|
597 |
|
| Corporate debt securities |
300,996 |
|
|
(199) |
|
|
300,797 |
|
|
1,753 |
|
|
(35,920) |
|
|
266,630 |
|
| Private label residential CMOs |
367,168 |
|
|
— |
|
|
367,168 |
|
|
823 |
|
|
(28,266) |
|
|
339,725 |
|
| Collateralized loan obligations |
284,743 |
|
|
— |
|
|
284,743 |
|
|
365 |
|
|
(135) |
|
|
284,973 |
|
| Private label commercial MBS |
14,415 |
|
|
— |
|
|
14,415 |
|
|
— |
|
|
(793) |
|
|
13,622 |
|
| Asset-backed securities |
16,287 |
|
|
— |
|
|
16,287 |
|
|
— |
|
|
(83) |
|
|
16,204 |
|
| SBA securities |
4,565 |
|
|
— |
|
|
4,565 |
|
|
— |
|
|
(252) |
|
|
4,313 |
|
Total (1) |
$ |
2,526,306 |
|
|
$ |
(199) |
|
|
$ |
2,526,107 |
|
|
$ |
4,851 |
|
|
$ |
(230,674) |
|
|
$ |
2,300,284 |
|
_________________________
(1) Excludes accrued interest receivable of $12.7 million at September 30, 2024 which is recorded in "Other assets" on the condensed consolidated balance sheets.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
December 31, 2023 |
|
|
|
Allowance |
|
|
|
Gross |
|
Gross |
|
|
|
Amortized |
|
for Credit |
|
Net Carrying |
|
Unrealized |
|
Unrealized |
|
Fair |
| Security Type |
Cost |
|
Losses |
|
Amount |
|
Gains |
|
Losses |
|
Value |
| |
(In thousands) |
| Agency residential MBS |
$ |
1,388,801 |
|
|
$ |
— |
|
|
$ |
1,388,801 |
|
|
$ |
— |
|
|
$ |
(201,192) |
|
|
$ |
1,187,609 |
|
| U.S. Treasury securities |
4,965 |
|
|
— |
|
|
4,965 |
|
|
3 |
|
|
— |
|
|
4,968 |
|
| Agency commercial MBS |
268,639 |
|
|
— |
|
|
268,639 |
|
|
— |
|
|
(15,333) |
|
|
253,306 |
|
| Agency residential CMOs |
320,984 |
|
|
— |
|
|
320,984 |
|
|
— |
|
|
(36,650) |
|
|
284,334 |
|
| Municipal securities |
29,192 |
|
|
— |
|
|
29,192 |
|
|
— |
|
|
(1,109) |
|
|
28,083 |
|
| Corporate debt securities |
327,426 |
|
|
(199) |
|
|
327,227 |
|
|
259 |
|
|
(60,254) |
|
|
267,232 |
|
| Private label residential CMOs |
193,071 |
|
|
— |
|
|
193,071 |
|
|
— |
|
|
(34,659) |
|
|
158,412 |
|
| Collateralized loan obligations |
109,168 |
|
|
— |
|
|
109,168 |
|
|
— |
|
|
(752) |
|
|
108,416 |
|
| Private label commercial MBS |
22,126 |
|
|
— |
|
|
22,126 |
|
|
— |
|
|
(1,313) |
|
|
20,813 |
|
| Asset-backed securities |
20,241 |
|
|
— |
|
|
20,241 |
|
|
— |
|
|
(289) |
|
|
19,952 |
|
| SBA securities |
14,642 |
|
|
— |
|
|
14,642 |
|
|
— |
|
|
(903) |
|
|
13,739 |
|
Total (1) |
$ |
2,699,255 |
|
|
$ |
(199) |
|
|
$ |
2,699,056 |
|
|
$ |
262 |
|
|
$ |
(352,454) |
|
|
$ |
2,346,864 |
|
_________________________
(1) Excludes accrued interest receivable of $10.0 million at December 31, 2023 which is recorded in "Other assets" on the condensed consolidated balance sheets.
As of September 30, 2024, the Company had recorded an allowance for credit losses on securities available-for-sale of $199,000 on one corporate debt security of other financial institutions that were downgraded to below investment grade by external credit agencies. Except for the corporate debt security noted, we believe there was no credit impairment and the decline in fair value of our securities since acquisition was primarily attributable to changes in interest rates and credit spreads. We do not currently intend to sell any of the securities in an unrealized loss position and it is not more likely than not the Company will be required to sell these securities before their anticipated recovery and the Company has therefore recorded the unrealized losses in accumulated other comprehensive income/(loss) ("AOCI").
As of September 30, 2024, securities available-for-sale with a fair value of $4.3 million were pledged as collateral solely for public deposits.
Realized Gains and Losses on Securities Available-for-Sale
The following table presents the amortized cost of securities sold with related gross realized gains, gross realized losses, and net realized (losses) gains for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands) |
| Amortized cost of securities sold |
$ |
741,834 |
|
|
$ |
— |
|
|
$ |
741,834 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
| Gross realized gains |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Gross realized losses |
(59,946) |
|
|
— |
|
|
(59,946) |
|
|
— |
|
| Net realized (losses) gains |
$ |
(59,946) |
|
|
$ |
— |
|
|
$ |
(59,946) |
|
|
$ |
— |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Unrealized Losses on Securities Available-for-Sale
The following tables present the gross unrealized losses and fair values of securities available-for-sale that were in unrealized loss positions as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
| |
Less Than 12 Months |
|
12 Months or More |
|
Total |
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| Security Type |
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
| |
(In thousands) |
| Agency residential MBS |
$ |
— |
|
|
$ |
— |
|
|
$ |
922,448 |
|
|
$ |
(148,706) |
|
|
$ |
922,448 |
|
|
$ |
(148,706) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency commercial MBS (1) |
21,289 |
|
|
— |
|
|
12,243 |
|
|
(661) |
|
|
33,532 |
|
|
(661) |
|
| Agency residential CMOs |
— |
|
|
— |
|
|
109,796 |
|
|
(15,853) |
|
|
109,796 |
|
|
(15,853) |
|
| Municipal securities |
— |
|
|
— |
|
|
597 |
|
|
(5) |
|
|
597 |
|
|
(5) |
|
| Corporate debt securities |
— |
|
|
— |
|
|
247,200 |
|
|
(35,920) |
|
|
247,200 |
|
|
(35,920) |
|
| Private label residential CMOs |
— |
|
|
— |
|
|
138,448 |
|
|
(28,266) |
|
|
138,448 |
|
|
(28,266) |
|
| Collateralized loan obligations |
73,503 |
|
|
(135) |
|
|
— |
|
|
— |
|
|
73,503 |
|
|
(135) |
|
| Private label commercial MBS |
— |
|
|
— |
|
|
13,622 |
|
|
(793) |
|
|
13,622 |
|
|
(793) |
|
| Asset-backed securities |
16,204 |
|
|
(83) |
|
|
— |
|
|
— |
|
|
16,204 |
|
|
(83) |
|
| SBA securities |
— |
|
|
— |
|
|
4,313 |
|
|
(252) |
|
|
4,313 |
|
|
(252) |
|
| Total |
$ |
110,996 |
|
|
$ |
(218) |
|
|
$ |
1,448,667 |
|
|
$ |
(230,456) |
|
|
$ |
1,559,663 |
|
|
$ |
(230,674) |
|
_________________________
(1) Gross unrealized loss is less than $500 in the "Less than 12 months" category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
| |
Less Than 12 Months |
|
12 Months or More |
|
Total |
|
|
|
Gross |
|
|
|
Gross |
|
|
|
Gross |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| Security Type |
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
| |
(In thousands) |
| Agency residential MBS |
$ |
— |
|
|
$ |
— |
|
|
$ |
1,187,609 |
|
|
$ |
(201,192) |
|
|
$ |
1,187,609 |
|
|
$ |
(201,192) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Agency commercial MBS |
— |
|
|
— |
|
|
253,306 |
|
|
(15,333) |
|
|
253,306 |
|
|
(15,333) |
|
| Agency residential CMOs |
— |
|
|
— |
|
|
284,334 |
|
|
(36,650) |
|
|
284,334 |
|
|
(36,650) |
|
| Municipal securities |
— |
|
|
— |
|
|
28,083 |
|
|
(1,109) |
|
|
28,083 |
|
|
(1,109) |
|
| Corporate debt securities |
— |
|
|
— |
|
|
265,431 |
|
|
(60,254) |
|
|
265,431 |
|
|
(60,254) |
|
| Private label residential CMOs |
— |
|
|
— |
|
|
158,412 |
|
|
(34,659) |
|
|
158,412 |
|
|
(34,659) |
|
| Collateralized loan obligations |
— |
|
|
— |
|
|
66,886 |
|
|
(752) |
|
|
66,886 |
|
|
(752) |
|
| Private label commercial MBS |
— |
|
|
— |
|
|
20,813 |
|
|
(1,313) |
|
|
20,813 |
|
|
(1,313) |
|
| Asset-backed securities |
— |
|
|
— |
|
|
19,952 |
|
|
(289) |
|
|
19,952 |
|
|
(289) |
|
| SBA securities |
— |
|
|
— |
|
|
13,739 |
|
|
(903) |
|
|
13,739 |
|
|
(903) |
|
| Total |
$ |
— |
|
|
$ |
— |
|
|
$ |
2,298,565 |
|
|
$ |
(352,454) |
|
|
$ |
2,298,565 |
|
|
$ |
(352,454) |
|
The securities that were in an unrealized loss position at September 30, 2024, were considered impaired and required further review to determine if the unrealized losses were credit-related. We concluded the unrealized losses were a result of the level of market interest rates relative to the types of securities and pricing changes caused by shifting supply and demand dynamics and not a result of downgraded credit ratings or other indicators of deterioration of the underlying issuers' ability to repay. We also considered the seniority of the tranches and U.S. government agency guarantees, if any, to assess whether an unrealized loss was credit-related. Accordingly, we determined the unrealized losses were not credit-related and recognized the unrealized losses in "Accumulated other comprehensive loss, net" of "Stockholders' equity" on the condensed consolidated balance sheets.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Contractual Maturities of Securities Available-for-Sale
The following tables present the contractual maturities of our securities available-for-sale portfolio based on amortized cost and fair value as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
Due After |
|
Due After |
|
|
|
|
|
Due |
|
One Year |
|
Five Years |
|
Due |
|
|
|
Within |
|
Through |
|
Through |
|
After |
|
|
| Security Type |
One Year |
|
Five Years |
|
Ten Years |
|
Ten Years |
|
Total |
|
(In thousands) |
| Amortized Cost: |
|
|
|
|
|
|
|
|
|
| Agency residential MBS |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,071,154 |
|
|
$ |
1,071,154 |
|
|
|
|
|
|
|
|
|
|
|
| Agency commercial MBS |
610 |
|
|
21,290 |
|
|
— |
|
|
12,293 |
|
|
34,193 |
|
| Agency residential CMOs |
— |
|
|
— |
|
|
— |
|
|
432,183 |
|
|
432,183 |
|
| Municipal securities |
— |
|
|
602 |
|
|
— |
|
|
— |
|
|
602 |
|
| Corporate debt securities |
— |
|
|
5,000 |
|
|
295,996 |
|
|
— |
|
|
300,996 |
|
| Private label residential CMOs |
— |
|
|
— |
|
|
— |
|
|
367,168 |
|
|
367,168 |
|
| Collateralized loan obligations |
— |
|
|
— |
|
|
125,705 |
|
|
159,038 |
|
|
284,743 |
|
| Private label commercial MBS |
— |
|
|
— |
|
|
1,083 |
|
|
13,332 |
|
|
14,415 |
|
| Asset-backed securities |
— |
|
|
— |
|
|
— |
|
|
16,287 |
|
|
16,287 |
|
| SBA securities |
— |
|
|
— |
|
|
4,565 |
|
|
— |
|
|
4,565 |
|
| Total |
$ |
610 |
|
|
$ |
26,892 |
|
|
$ |
427,349 |
|
|
$ |
2,071,455 |
|
|
$ |
2,526,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
Due After |
|
Due After |
|
|
|
|
|
Due |
|
One Year |
|
Five Years |
|
Due |
|
|
|
Within |
|
Through |
|
Through |
|
After |
|
|
| Security Type |
One Year |
|
Five Years |
|
Ten Years |
|
Ten Years |
|
Total |
|
(In thousands) |
| Fair Value: |
|
|
|
|
|
|
|
|
|
| Agency residential MBS |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
922,448 |
|
|
$ |
922,448 |
|
|
|
|
|
|
|
|
|
|
|
| Agency commercial MBS |
606 |
|
|
21,289 |
|
|
— |
|
|
11,637 |
|
|
33,532 |
|
| Agency residential CMOs |
— |
|
|
— |
|
|
— |
|
|
418,240 |
|
|
418,240 |
|
| Municipal securities |
— |
|
|
597 |
|
|
— |
|
|
— |
|
|
597 |
|
| Corporate debt securities |
— |
|
|
4,866 |
|
|
261,764 |
|
|
— |
|
|
266,630 |
|
| Private label residential CMOs |
— |
|
|
— |
|
|
— |
|
|
339,725 |
|
|
339,725 |
|
| Collateralized loan obligations |
— |
|
|
— |
|
|
125,884 |
|
|
159,089 |
|
|
284,973 |
|
| Private label commercial MBS |
— |
|
|
— |
|
|
1,062 |
|
|
12,560 |
|
|
13,622 |
|
| Asset-backed securities |
— |
|
|
— |
|
|
— |
|
|
16,204 |
|
|
16,204 |
|
| SBA securities |
— |
|
|
— |
|
|
4,313 |
|
|
— |
|
|
4,313 |
|
| Total |
$ |
606 |
|
|
$ |
26,752 |
|
|
$ |
393,023 |
|
|
$ |
1,879,903 |
|
|
$ |
2,300,284 |
|
CMBS, CMOs, and MBS have contractual maturity dates, but require periodic payments based upon scheduled amortization terms. Actual principal collections on these securities usually occur more rapidly than the scheduled amortization terms because of prepayments made by obligors of the underlying loan collateral.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Securities Held-to-Maturity
Effective June 1, 2022, the Company transferred securities with a fair value of $2.3 billion from available-for-sale to held-to-maturity. At the time of transfer, $218.3 million of unrealized losses, net of tax, was retained in "Accumulated other comprehensive loss, net" on the condensed consolidated balance sheets. The amount remaining in "Accumulated other comprehensive loss, net" at September 30, 2024 was $163.9 million. The following table presents amortized cost, allowance for credit losses, gross unrealized gains and losses, and fair values of securities held-to-maturity as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
September 30, 2024 |
|
|
|
Allowance |
|
|
|
|
|
|
|
|
|
|
|
for |
|
Net |
|
Gross |
|
Gross |
|
|
|
Amortized |
|
Credit |
|
Carrying |
|
Unrealized |
|
Unrealized |
|
Fair |
| Security Type |
Cost |
|
Losses |
|
Amount |
|
Gains |
|
Losses |
|
Value |
| |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
1,250,254 |
|
|
$ |
(140) |
|
|
$ |
1,250,114 |
|
|
$ |
2,670 |
|
|
$ |
(16,849) |
|
|
$ |
1,235,935 |
|
| Agency commercial MBS |
438,781 |
|
|
— |
|
|
438,781 |
|
|
— |
|
|
(18,745) |
|
|
420,036 |
|
| Private label commercial MBS |
354,098 |
|
|
— |
|
|
354,098 |
|
|
— |
|
|
(14,694) |
|
|
339,404 |
|
| U.S. Treasury securities |
189,239 |
|
|
— |
|
|
189,239 |
|
|
— |
|
|
(8,812) |
|
|
180,427 |
|
| Corporate debt securities |
70,391 |
|
|
(1,360) |
|
|
69,031 |
|
|
— |
|
|
(15,351) |
|
|
53,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (1) |
$ |
2,302,763 |
|
|
$ |
(1,500) |
|
|
$ |
2,301,263 |
|
|
$ |
2,670 |
|
|
$ |
(74,451) |
|
|
$ |
2,229,482 |
|
__________________________
(1) Excludes accrued interest receivable of $11.3 million at September 30, 2024 which is recorded in "Other assets" on the condensed consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
December 31, 2023 |
|
|
|
Allowance |
|
|
|
|
|
|
|
|
|
|
|
for |
|
Net |
|
Gross |
|
Gross |
|
|
|
Amortized |
|
Credit |
|
Carrying |
|
Unrealized |
|
Unrealized |
|
Fair |
| Security Type |
Cost |
|
Losses |
|
Amount |
|
Gains |
|
Losses |
|
Value |
| |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
1,247,310 |
|
|
$ |
(140) |
|
|
$ |
1,247,170 |
|
|
$ |
1,760 |
|
|
$ |
(28,170) |
|
|
$ |
1,220,760 |
|
| Agency commercial MBS |
433,827 |
|
|
— |
|
|
433,827 |
|
|
— |
|
|
(30,665) |
|
|
403,162 |
|
| Private label commercial MBS |
350,493 |
|
|
— |
|
|
350,493 |
|
|
— |
|
|
(29,289) |
|
|
321,204 |
|
| U.S. Treasury securities |
187,033 |
|
|
— |
|
|
187,033 |
|
|
— |
|
|
(11,454) |
|
|
175,579 |
|
| Corporate debt securities |
70,128 |
|
|
(1,360) |
|
|
68,768 |
|
|
— |
|
|
(21,157) |
|
|
47,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (1) |
$ |
2,288,791 |
|
|
$ |
(1,500) |
|
|
$ |
2,287,291 |
|
|
$ |
1,760 |
|
|
$ |
(120,735) |
|
|
$ |
2,168,316 |
|
__________________________
(1) Excludes accrued interest receivable of $13.4 million at December 31, 2023 which is recorded in "Other assets" on the condensed consolidated balance sheets.
As of September 30, 2024, securities held-to-maturity with an amortized cost of $2.2 billion and a fair value of $2.2 billion were pledged as collateral primarily for the FRB secured line of credit and public deposits.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Allowance for Credit Losses on Securities Held-to-Maturity
The following table presents the changes by major security type in our allowance for credit losses on securities held-to-maturity for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for |
|
Provision |
|
|
|
|
|
Allowance for |
|
Credit Losses, |
|
for |
|
|
|
|
|
Credit Losses, |
|
Beginning |
|
Credit |
|
|
|
|
|
End of |
| Security Type |
of Period |
|
Losses |
|
Charge-offs |
|
Recoveries |
|
Period |
|
(In thousands) |
| Three Months Ended September 30, 2024 |
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
140 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
140 |
|
| Corporate debt securities |
1,360 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,360 |
|
| Total |
$ |
1,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,500 |
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2024 |
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
140 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
140 |
|
| Corporate debt securities |
1,360 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,360 |
|
| Total |
$ |
1,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for |
|
Provision |
|
|
|
|
|
Allowance for |
|
Credit Losses, |
|
for |
|
|
|
|
|
Credit Losses, |
|
Beginning |
|
Credit |
|
|
|
|
|
End of |
| Security Type |
of Period |
|
Losses |
|
Charge-offs |
|
Recoveries |
|
Period |
|
(In thousands) |
| Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
140 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
140 |
|
| Corporate debt securities |
1,360 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,360 |
|
| Total |
$ |
1,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,500 |
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
140 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
140 |
|
| Corporate debt securities |
1,360 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,360 |
|
| Total |
$ |
1,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,500 |
|
Credit losses on HTM securities are recorded at the time of purchase, acquisition, or when the Company designates securities as held-to-maturity. Credit losses on HTM securities are representative of current expected credit losses that may be incurred over the life of the investment. Accrued interest receivable on HTM securities, which is included in other assets on the condensed consolidated balance sheets, is excluded from the estimate of expected credit losses. HTM U.S. treasury securities and agency-backed MBS securities are considered to have no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The change in fair value in the HTM private label CMBS portfolio is solely driven by changes in interest rates. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates and, thus, there is no related ACL for this portfolio. The underlying bonds in the Company’s HTM municipal securities and HTM corporate debt securities portfolios are evaluated for credit losses in conjunction with management’s estimate of the allowance for credit losses based primarily on credit ratings.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Securities Held-to-Maturity by Credit Quality Indicator
The Company uses S&P, Moody's, Fitch, Kroll, and Egan Jones ratings as the credit quality indicators for its held-to-maturity securities. The following table presents our securities held-to-maturity portfolio at amortized cost by the lowest available credit rating as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
| Security Type |
AAA |
|
AA+ |
|
AA |
|
AA- |
|
A+ |
|
A |
|
A- |
|
BBB |
|
NR |
|
Total |
|
(In thousands) |
| Amortized Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
570,454 |
|
|
$ |
368,821 |
|
|
$ |
218,026 |
|
|
$ |
60,843 |
|
|
$ |
11,990 |
|
|
$ |
1,671 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,449 |
|
|
$ |
1,250,254 |
|
| Agency commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MBS |
— |
|
|
438,781 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
438,781 |
|
| Private label |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| commercial MBS |
354,098 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
354,098 |
|
| U.S. Treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| securities |
— |
|
|
189,239 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
189,239 |
|
| Corporate debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| securities |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
44,472 |
|
|
25,919 |
|
|
70,391 |
|
| Total |
$ |
924,552 |
|
|
$ |
996,841 |
|
|
$ |
218,026 |
|
|
$ |
60,843 |
|
|
$ |
11,990 |
|
|
$ |
1,671 |
|
|
$ |
— |
|
|
$ |
44,472 |
|
|
$ |
44,368 |
|
|
$ |
2,302,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
| Security Type |
AAA |
|
AA+ |
|
AA |
|
AA- |
|
A+ |
|
A |
|
A- |
|
BBB |
|
NR |
|
Total |
|
(In thousands) |
| Amortized Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
564,127 |
|
|
$ |
397,542 |
|
|
$ |
167,905 |
|
|
$ |
86,243 |
|
|
$ |
12,007 |
|
|
$ |
1,787 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
17,699 |
|
|
$ |
1,247,310 |
|
| Agency commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MBS |
— |
|
|
433,827 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
433,827 |
|
| Private label |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| commercial MBS |
350,493 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
350,493 |
|
| U.S. Treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| securities |
— |
|
|
187,033 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
187,033 |
|
| Corporate debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| securities |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
44,371 |
|
|
25,757 |
|
|
70,128 |
|
| Total |
$ |
914,620 |
|
|
$ |
1,018,402 |
|
|
$ |
167,905 |
|
|
$ |
86,243 |
|
|
$ |
12,007 |
|
|
$ |
1,787 |
|
|
$ |
— |
|
|
$ |
44,371 |
|
|
$ |
43,456 |
|
|
$ |
2,288,791 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Contractual Maturities of Securities Held-to-Maturity
The following tables present the contractual maturities of our securities held-to-maturity portfolio based on amortized cost and fair value as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
Due After |
|
Due After |
|
|
|
|
|
Due |
|
One Year |
|
Five Years |
|
Due |
|
|
|
Within |
|
Through |
|
Through |
|
After |
|
|
| Security Type |
One Year |
|
Five Years |
|
Ten Years |
|
Ten Years |
|
Total |
|
(In thousands) |
| Amortized Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
— |
|
|
$ |
20,246 |
|
|
$ |
441,137 |
|
|
$ |
788,871 |
|
|
$ |
1,250,254 |
|
| Agency commercial MBS |
— |
|
|
— |
|
|
438,781 |
|
|
— |
|
|
438,781 |
|
| Private label commercial MBS |
— |
|
|
— |
|
|
36,733 |
|
|
317,365 |
|
|
354,098 |
|
| U.S. Treasury securities |
— |
|
|
— |
|
|
189,239 |
|
|
— |
|
|
189,239 |
|
| Corporate debt securities |
— |
|
|
— |
|
|
10,162 |
|
|
60,229 |
|
|
70,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
— |
|
|
$ |
20,246 |
|
|
$ |
1,116,052 |
|
|
$ |
1,166,465 |
|
|
$ |
2,302,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
Due After |
|
Due After |
|
|
|
|
|
Due |
|
One Year |
|
Five Years |
|
Due |
|
|
|
Within |
|
Through |
|
Through |
|
After |
|
|
| Security Type |
One Year |
|
Five Years |
|
Ten Years |
|
Ten Years |
|
Total |
|
(In thousands) |
| Fair Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
— |
|
|
$ |
20,275 |
|
|
$ |
436,537 |
|
|
$ |
779,123 |
|
|
$ |
1,235,935 |
|
| Agency commercial MBS |
— |
|
|
— |
|
|
420,036 |
|
|
— |
|
|
420,036 |
|
| Private label commercial MBS |
— |
|
|
— |
|
|
35,873 |
|
|
303,531 |
|
|
339,404 |
|
| U.S. Treasury securities |
— |
|
|
— |
|
|
180,427 |
|
|
— |
|
|
180,427 |
|
| Corporate debt securities |
— |
|
|
— |
|
|
9,544 |
|
|
44,136 |
|
|
53,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
— |
|
|
$ |
20,275 |
|
|
$ |
1,082,417 |
|
|
$ |
1,126,790 |
|
|
$ |
2,229,482 |
|
Commercial MBS have contractual maturity dates, but require periodic payments based upon scheduled amortization terms. Actual principal collections on these securities usually occur more rapidly than the scheduled amortization terms because of prepayments made by obligors of the underlying loan collateral.
Interest Income on Investment Securities
The following table presents the composition of our interest income on investment securities, including available-for-sale and held-to-maturity, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands) |
| Taxable interest |
$ |
28,576 |
|
|
$ |
38,062 |
|
|
$ |
83,241 |
|
|
$ |
114,961 |
|
| Non-taxable interest |
4,622 |
|
|
4,872 |
|
|
14,088 |
|
|
14,697 |
|
| Dividend income |
1,714 |
|
|
2,392 |
|
|
5,722 |
|
|
4,058 |
|
| Total interest income on investment securities |
$ |
34,912 |
|
|
$ |
45,326 |
|
|
$ |
103,051 |
|
|
$ |
133,716 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 5. LOANS AND LEASES
Our loans are carried at the principal amount outstanding, net of deferred fees and costs, and in the case of acquired and purchased loans, net of purchase discounts and premiums. Deferred fees and costs and purchase discounts and premiums on acquired loans are recognized as an adjustment to interest income over the contractual life of the loans primarily using the effective interest method or taken into income when the related loans are paid off or included in the carrying amount of loans that are sold.
Loans and Leases Held for Investment
The following table summarizes the composition of our loans and leases held for investment as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2024 |
|
2023 |
|
(In thousands) |
| Real estate mortgage |
$ |
13,527,145 |
|
|
$ |
16,378,537 |
|
Real estate construction and land (1) |
3,476,332 |
|
|
3,183,357 |
|
| Commercial |
6,329,861 |
|
|
5,780,346 |
|
| Consumer |
414,357 |
|
|
454,474 |
|
| Total gross loans and leases held for investment |
23,747,695 |
|
|
25,796,714 |
|
Unearned discounts, net (2) |
(194,161) |
|
|
(261,984) |
|
| Deferred fees, net |
(25,757) |
|
|
(45,043) |
|
| Total loans and leases held for investment, net of unearned discounts and deferred fees |
23,527,777 |
|
|
25,489,687 |
|
| Allowance for loan and lease losses |
(254,345) |
|
|
(281,687) |
|
Total loans and leases held for investment, net (3) |
$ |
23,273,432 |
|
|
$ |
25,208,000 |
|
____________________
(1) Includes land and acquisition and development loans of $208.3 million and $228.9 million at September 30, 2024 and December 31, 2023.
(2) Represents net acquisition discounts of $258.9 million and purchase premiums of $64.7 million at September 30, 2024, and net acquisition discounts of $334.2 million and purchase premiums of $72.2 million at December 31, 2023.
(3) Excludes accrued interest receivable of $99.0 million and $111.3 million at September 30, 2024 and December 31, 2023, respectively, which is recorded in "Other assets" on the condensed consolidated balance sheets.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present an aging analysis of our loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
30 - 89 |
|
90 or More |
|
|
|
|
|
|
|
Days |
|
Days |
|
Total |
|
|
|
|
|
Past Due |
|
Past Due |
|
Past Due |
|
Current |
|
Total |
| |
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
17,261 |
|
|
$ |
29,412 |
|
|
$ |
46,673 |
|
|
$ |
4,511,266 |
|
|
$ |
4,557,939 |
|
| Multi-family |
— |
|
|
— |
|
|
— |
|
|
6,009,280 |
|
|
6,009,280 |
|
| Other residential |
19,703 |
|
|
39,546 |
|
|
59,249 |
|
|
2,707,938 |
|
|
2,767,187 |
|
| Total real estate mortgage |
36,964 |
|
|
68,958 |
|
|
105,922 |
|
|
13,228,484 |
|
|
13,334,406 |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
836,902 |
|
|
836,902 |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
2,622,507 |
|
|
2,622,507 |
|
| Total real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
3,459,409 |
|
|
3,459,409 |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
| Asset-based |
1,097 |
|
|
— |
|
|
1,097 |
|
|
2,114,214 |
|
|
2,115,311 |
|
| Venture capital |
— |
|
|
— |
|
|
— |
|
|
1,353,626 |
|
|
1,353,626 |
|
| Other commercial |
12,417 |
|
|
2,669 |
|
|
15,086 |
|
|
2,835,449 |
|
|
2,850,535 |
|
| Total commercial |
13,514 |
|
|
2,669 |
|
|
16,183 |
|
|
6,303,289 |
|
|
6,319,472 |
|
| Consumer |
2,449 |
|
|
410 |
|
|
2,859 |
|
|
411,631 |
|
|
414,490 |
|
| Total |
$ |
52,927 |
|
|
$ |
72,037 |
|
|
$ |
124,964 |
|
|
$ |
23,402,813 |
|
|
$ |
23,527,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
30 - 89 |
|
90 or More |
|
|
|
|
|
|
|
Days |
|
Days |
|
Total |
|
|
|
|
|
Past Due |
|
Past Due |
|
Past Due |
|
Current |
|
Total |
| |
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
12,618 |
|
|
$ |
15,168 |
|
|
$ |
27,786 |
|
|
$ |
4,998,711 |
|
|
$ |
5,026,497 |
|
| Multi-family |
2,302 |
|
|
1,020 |
|
|
3,322 |
|
|
6,021,857 |
|
|
6,025,179 |
|
| Other residential |
93,042 |
|
|
4,341 |
|
|
97,383 |
|
|
4,962,926 |
|
|
5,060,309 |
|
| Total real estate mortgage |
107,962 |
|
|
20,529 |
|
|
128,491 |
|
|
15,983,494 |
|
|
16,111,985 |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
759,585 |
|
|
759,585 |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
2,399,684 |
|
|
2,399,684 |
|
| Total real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
3,159,269 |
|
|
3,159,269 |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
| Asset-based |
608 |
|
|
2,689 |
|
|
3,297 |
|
|
2,185,788 |
|
|
2,189,085 |
|
| Venture capital |
— |
|
|
— |
|
|
— |
|
|
1,446,362 |
|
|
1,446,362 |
|
| Other commercial |
1,276 |
|
|
6,993 |
|
|
8,269 |
|
|
2,121,591 |
|
|
2,129,860 |
|
| Total commercial |
1,884 |
|
|
9,682 |
|
|
11,566 |
|
|
5,753,741 |
|
|
5,765,307 |
|
| Consumer |
3,461 |
|
|
670 |
|
|
4,131 |
|
|
448,995 |
|
|
453,126 |
|
| Total |
$ |
113,307 |
|
|
$ |
30,881 |
|
|
$ |
144,188 |
|
|
$ |
25,345,499 |
|
|
$ |
25,489,687 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
It is our policy to discontinue accruing interest when principal or interest payments are past due 90 days or more (unless the loan is both well secured and in the process of collection) or when, in the opinion of management, there is a reasonable doubt as to the collectability of a loan or lease in the normal course of business. Interest income on nonaccrual loans is recognized only to the extent cash is received and the principal balance of the loan is deemed collectable.
The following table presents our nonaccrual and performing loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
September 30, 2024 |
|
December 31, 2023 |
|
Nonaccrual |
|
Performing |
|
Total |
|
Nonaccrual |
|
Performing |
|
Total |
| |
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
78,478 |
|
|
$ |
4,479,461 |
|
|
$ |
4,557,939 |
|
|
$ |
15,669 |
|
|
$ |
5,010,828 |
|
|
$ |
5,026,497 |
|
| Multi-family |
916 |
|
|
6,008,364 |
|
|
6,009,280 |
|
|
1,020 |
|
|
6,024,159 |
|
|
6,025,179 |
|
| Other residential |
50,514 |
|
|
2,716,673 |
|
|
2,767,187 |
|
|
31,041 |
|
|
5,029,268 |
|
|
5,060,309 |
|
| Total real estate mortgage |
129,908 |
|
|
13,204,498 |
|
|
13,334,406 |
|
|
47,730 |
|
|
16,064,255 |
|
|
16,111,985 |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
836,902 |
|
|
836,902 |
|
|
— |
|
|
759,585 |
|
|
759,585 |
|
| Residential |
— |
|
|
2,622,507 |
|
|
2,622,507 |
|
|
— |
|
|
2,399,684 |
|
|
2,399,684 |
|
| Total real estate construction and land |
— |
|
|
3,459,409 |
|
|
3,459,409 |
|
|
— |
|
|
3,159,269 |
|
|
3,159,269 |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
2,295 |
|
|
2,113,016 |
|
|
2,115,311 |
|
|
2,689 |
|
|
2,186,396 |
|
|
2,189,085 |
|
| Venture capital |
19,957 |
|
|
1,333,669 |
|
|
1,353,626 |
|
|
325 |
|
|
1,446,037 |
|
|
1,446,362 |
|
| Other commercial |
15,662 |
|
|
2,834,873 |
|
|
2,850,535 |
|
|
10,972 |
|
|
2,118,888 |
|
|
2,129,860 |
|
| Total commercial |
37,914 |
|
|
6,281,558 |
|
|
6,319,472 |
|
|
13,986 |
|
|
5,751,321 |
|
|
5,765,307 |
|
| Consumer |
519 |
|
|
413,971 |
|
|
414,490 |
|
|
811 |
|
|
452,315 |
|
|
453,126 |
|
| Total |
$ |
168,341 |
|
|
$ |
23,359,436 |
|
|
$ |
23,527,777 |
|
|
$ |
62,527 |
|
|
$ |
25,427,160 |
|
|
$ |
25,489,687 |
|
At September 30, 2024, nonaccrual loans and leases included $72.0 million of loans and leases 90 or more days past due, $29.5 million of loans and leases 30 to 89 days past due, and $66.8 million of loans and leases current with respect to contractual payments that were placed on nonaccrual status based on management’s judgment regarding their collectability. At December 31, 2023, nonaccrual loans and leases included $19.1 million of loans and leases 90 or more days past due, $11.4 million of loans and leases 30 to 89 days past due, and $32.0 million of current loans and leases that were placed on nonaccrual status based on management’s judgment regarding their collectability.
As of September 30, 2024, our three largest loan relationships on nonaccrual status had an aggregate carrying value of $49.0 million and represented 29% of total nonaccrual loans and leases.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present the credit risk rating categories for loans and leases held for investment, net of deferred fees, by loan portfolio segment and class as of the dates indicated. Classified loans and leases are those with a credit risk rating of either substandard or doubtful.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
Classified |
|
Special Mention |
|
Pass |
|
Total |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
| Commercial |
$ |
256,581 |
|
|
$ |
339,559 |
|
|
$ |
3,961,799 |
|
|
$ |
4,557,939 |
|
| Multi-family |
152,288 |
|
|
46,332 |
|
|
5,810,660 |
|
|
6,009,280 |
|
| Other residential |
53,140 |
|
|
14,775 |
|
|
2,699,272 |
|
|
2,767,187 |
|
| Total real estate mortgage |
462,009 |
|
|
400,666 |
|
|
12,471,731 |
|
|
13,334,406 |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
| Commercial |
— |
|
|
111,195 |
|
|
725,707 |
|
|
836,902 |
|
| Residential |
— |
|
|
3,164 |
|
|
2,619,343 |
|
|
2,622,507 |
|
| Total real estate construction and land |
— |
|
|
114,359 |
|
|
3,345,050 |
|
|
3,459,409 |
|
| Commercial: |
|
|
|
|
|
|
|
| Asset-based |
5,731 |
|
|
11,156 |
|
|
2,098,424 |
|
|
2,115,311 |
|
| Venture capital |
39,699 |
|
|
145,441 |
|
|
1,168,486 |
|
|
1,353,626 |
|
| Other commercial |
25,511 |
|
|
32,358 |
|
|
2,792,666 |
|
|
2,850,535 |
|
| Total commercial |
70,941 |
|
|
188,955 |
|
|
6,059,576 |
|
|
6,319,472 |
|
| Consumer |
641 |
|
|
7,908 |
|
|
405,941 |
|
|
414,490 |
|
| Total |
$ |
533,591 |
|
|
$ |
711,888 |
|
|
$ |
22,282,298 |
|
|
$ |
23,527,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
Classified |
|
Special Mention |
|
Pass |
|
Total |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
| Commercial |
$ |
75,739 |
|
|
$ |
219,687 |
|
|
$ |
4,731,071 |
|
|
$ |
5,026,497 |
|
| Multi-family |
74,954 |
|
|
108,356 |
|
|
5,841,869 |
|
|
6,025,179 |
|
| Other residential |
38,155 |
|
|
54,197 |
|
|
4,967,957 |
|
|
5,060,309 |
|
| Total real estate mortgage |
188,848 |
|
|
382,240 |
|
|
15,540,897 |
|
|
16,111,985 |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
759,585 |
|
|
759,585 |
|
| Residential |
— |
|
|
2,757 |
|
|
2,396,927 |
|
|
2,399,684 |
|
| Total real estate construction and land |
— |
|
|
2,757 |
|
|
3,156,512 |
|
|
3,159,269 |
|
| Commercial: |
|
|
|
|
|
|
|
| Asset-based |
4,561 |
|
|
12,506 |
|
|
2,172,018 |
|
|
2,189,085 |
|
| Venture capital |
7,805 |
|
|
98,633 |
|
|
1,339,924 |
|
|
1,446,362 |
|
| Other commercial |
26,044 |
|
|
9,984 |
|
|
2,093,832 |
|
|
2,129,860 |
|
| Total commercial |
38,410 |
|
|
121,123 |
|
|
5,605,774 |
|
|
5,765,307 |
|
| Consumer |
1,159 |
|
|
7,192 |
|
|
444,775 |
|
|
453,126 |
|
| Total |
$ |
228,417 |
|
|
$ |
513,312 |
|
|
$ |
24,747,958 |
|
|
$ |
25,489,687 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents our nonaccrual loans and leases by loan portfolio segment and class and by with and without an allowance recorded as of the date indicated and interest income recognized on nonaccrual loans and leases for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Nine Months |
|
|
|
Three Months |
|
Nine Months |
|
|
|
Ended |
|
Ended |
|
|
|
Ended |
|
Ended |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
| |
2024 |
|
2024 |
|
2024 |
|
2023 |
|
2023 |
|
2023 |
|
Nonaccrual |
|
Interest |
|
Interest |
|
Nonaccrual |
|
Interest |
|
Interest |
|
Recorded |
|
Income |
|
Income |
|
Recorded |
|
Income |
|
Income |
|
Investment |
|
Recognized |
|
Recognized |
|
Investment |
|
Recognized |
|
Recognized |
| |
(In thousands) |
| With An Allowance Recorded: |
|
|
|
|
|
|
|
|
|
|
|
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
201 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
55 |
|
|
$ |
— |
|
|
$ |
— |
|
| Multi-family |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other residential |
232 |
|
|
— |
|
|
— |
|
|
372 |
|
|
— |
|
|
— |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Venture capital |
19,957 |
|
|
— |
|
|
— |
|
|
2,001 |
|
|
— |
|
|
— |
|
| Other commercial |
6,950 |
|
|
— |
|
|
— |
|
|
672 |
|
|
— |
|
|
— |
|
| Consumer |
519 |
|
|
— |
|
|
— |
|
|
207 |
|
|
— |
|
|
— |
|
| With No Related Allowance |
|
|
|
|
|
|
|
|
|
|
|
| Recorded: |
|
|
|
|
|
|
|
|
|
|
|
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
78,277 |
|
|
$ |
3 |
|
|
$ |
10 |
|
|
$ |
31,410 |
|
|
$ |
24 |
|
|
$ |
80 |
|
| Multi-family |
916 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other residential |
50,282 |
|
|
— |
|
|
— |
|
|
87,957 |
|
|
— |
|
|
— |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
2,295 |
|
|
— |
|
|
— |
|
|
363 |
|
|
— |
|
|
— |
|
| Venture capital |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other commercial |
8,712 |
|
|
— |
|
|
— |
|
|
2,359 |
|
|
8 |
|
|
8 |
|
| Consumer |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total Loans and Leases With and |
|
|
|
|
|
|
|
|
|
|
|
| Without an Allowance Recorded: |
|
|
|
|
|
|
|
|
|
|
|
| Real estate mortgage |
$ |
129,908 |
|
|
$ |
3 |
|
|
$ |
10 |
|
|
$ |
119,794 |
|
|
$ |
24 |
|
|
$ |
80 |
|
| Real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Commercial |
37,914 |
|
|
— |
|
|
— |
|
|
5,395 |
|
|
8 |
|
|
8 |
|
| Consumer |
519 |
|
|
— |
|
|
— |
|
|
207 |
|
|
— |
|
|
— |
|
| Total |
$ |
168,341 |
|
|
$ |
3 |
|
|
$ |
10 |
|
|
$ |
125,396 |
|
|
$ |
32 |
|
|
$ |
88 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present our loans held for investment by loan portfolio segment and class, by credit quality indicator (internal risk ratings), and by year of origination (vintage year) as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted |
|
|
Amortized Cost Basis (1) |
Term Loans by Origination Year |
|
Revolving |
|
to Term |
|
|
| September 30, 2024 |
2024 |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
Prior |
|
Loans |
|
Loans |
|
Total |
|
(In thousands) |
| Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
1,702 |
|
|
$ |
— |
|
|
$ |
28,984 |
|
|
$ |
27,455 |
|
|
$ |
11,507 |
|
|
$ |
91,870 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
161,519 |
|
| 3-4.5 Pass |
107,554 |
|
|
168,787 |
|
|
815,924 |
|
|
703,752 |
|
|
478,959 |
|
|
1,437,575 |
|
|
55,407 |
|
|
32,322 |
|
|
3,800,280 |
|
| 5 Special mention |
— |
|
|
1,325 |
|
|
103,785 |
|
|
11,804 |
|
|
4,331 |
|
|
217,510 |
|
|
804 |
|
|
— |
|
|
339,559 |
|
| 6-8 Classified |
— |
|
|
1,812 |
|
|
12,673 |
|
|
68,314 |
|
|
17,212 |
|
|
156,570 |
|
|
— |
|
|
— |
|
|
256,581 |
|
| Total |
$ |
109,256 |
|
|
$ |
171,924 |
|
|
$ |
961,366 |
|
|
$ |
811,325 |
|
|
$ |
512,009 |
|
|
$ |
1,903,525 |
|
|
$ |
56,212 |
|
|
$ |
32,322 |
|
|
$ |
4,557,939 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
175 |
|
|
$ |
10,030 |
|
|
$ |
9,714 |
|
|
$ |
1,375 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
51,103 |
|
|
$ |
223,538 |
|
|
$ |
79,409 |
|
|
$ |
138,645 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
492,695 |
|
| 3-4.5 Pass |
71,993 |
|
|
85,449 |
|
|
2,168,365 |
|
|
1,145,375 |
|
|
492,934 |
|
|
1,294,278 |
|
|
11,571 |
|
|
48,000 |
|
|
5,317,965 |
|
| 5 Special mention |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
46,332 |
|
|
— |
|
|
— |
|
|
46,332 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
40,019 |
|
|
17,254 |
|
|
11,795 |
|
|
83,220 |
|
|
— |
|
|
— |
|
|
152,288 |
|
| Total |
$ |
71,993 |
|
|
$ |
85,449 |
|
|
$ |
2,259,487 |
|
|
$ |
1,386,167 |
|
|
$ |
584,138 |
|
|
$ |
1,562,475 |
|
|
$ |
11,571 |
|
|
$ |
48,000 |
|
|
$ |
6,009,280 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,014 |
|
|
$ |
— |
|
|
$ |
4,014 |
|
| 3-4.5 Pass |
— |
|
|
4,582 |
|
|
317,480 |
|
|
2,276,938 |
|
|
40,062 |
|
|
19,374 |
|
|
36,733 |
|
|
89 |
|
|
2,695,258 |
|
| 5 Special mention |
— |
|
|
590 |
|
|
9,857 |
|
|
4,049 |
|
|
— |
|
|
279 |
|
|
— |
|
|
— |
|
|
14,775 |
|
| 6-8 Classified |
— |
|
|
4,068 |
|
|
29,385 |
|
|
17,669 |
|
|
— |
|
|
1,671 |
|
|
347 |
|
|
— |
|
|
53,140 |
|
| Total |
$ |
— |
|
|
$ |
9,240 |
|
|
$ |
356,722 |
|
|
$ |
2,298,656 |
|
|
$ |
40,062 |
|
|
$ |
21,324 |
|
|
$ |
41,094 |
|
|
$ |
89 |
|
|
$ |
2,767,187 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
3,355 |
|
|
$ |
25,538 |
|
|
$ |
6,394 |
|
|
$ |
350 |
|
|
$ |
67 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
35,704 |
|
____________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted |
|
|
Amortized Cost Basis (1) |
Term Loans by Origination Year |
|
Revolving |
|
to Term |
|
|
| September 30, 2024 |
2024 |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
Prior |
|
Loans |
|
Loans |
|
Total |
|
(In thousands) |
| Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| and Land: Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| 3-4.5 Pass |
20,371 |
|
|
36,461 |
|
|
457,681 |
|
|
123,977 |
|
|
52,446 |
|
|
10,727 |
|
|
24,044 |
|
|
— |
|
|
725,707 |
|
| 5 Special mention |
— |
|
|
— |
|
|
— |
|
|
111,195 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
111,195 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total |
$ |
20,371 |
|
|
$ |
36,461 |
|
|
$ |
457,681 |
|
|
$ |
235,172 |
|
|
$ |
52,446 |
|
|
$ |
10,727 |
|
|
$ |
24,044 |
|
|
$ |
— |
|
|
$ |
836,902 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| and Land: Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| 3-4.5 Pass |
89,504 |
|
|
159,489 |
|
|
1,433,928 |
|
|
597,557 |
|
|
237,151 |
|
|
— |
|
|
101,714 |
|
|
— |
|
|
2,619,343 |
|
| 5 Special mention |
— |
|
|
— |
|
|
— |
|
|
3,164 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,164 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total |
$ |
89,504 |
|
|
$ |
159,489 |
|
|
$ |
1,433,928 |
|
|
$ |
600,721 |
|
|
$ |
237,151 |
|
|
$ |
— |
|
|
$ |
101,714 |
|
|
$ |
— |
|
|
$ |
2,622,507 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: Asset-Based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
32,730 |
|
|
$ |
39,510 |
|
|
$ |
207,755 |
|
|
$ |
228,132 |
|
|
$ |
17,496 |
|
|
$ |
267,152 |
|
|
$ |
178,231 |
|
|
$ |
— |
|
|
$ |
971,006 |
|
| 3-4.5 Pass |
70,694 |
|
|
91,341 |
|
|
183,245 |
|
|
73,496 |
|
|
10,467 |
|
|
68,513 |
|
|
575,366 |
|
|
54,296 |
|
|
1,127,418 |
|
| 5 Special mention |
— |
|
|
198 |
|
|
5,670 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,288 |
|
|
— |
|
|
11,156 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,731 |
|
|
— |
|
|
5,731 |
|
| Total |
$ |
103,424 |
|
|
$ |
131,049 |
|
|
$ |
396,670 |
|
|
$ |
301,628 |
|
|
$ |
27,963 |
|
|
$ |
335,665 |
|
|
$ |
764,616 |
|
|
$ |
54,296 |
|
|
$ |
2,115,311 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
92 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: Venture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
(56) |
|
|
$ |
(82) |
|
|
$ |
(2) |
|
|
$ |
— |
|
|
$ |
1,998 |
|
|
$ |
— |
|
|
$ |
155,156 |
|
|
$ |
23,691 |
|
|
$ |
180,705 |
|
| 3-4.5 Pass |
58,318 |
|
|
122,614 |
|
|
64,856 |
|
|
89,910 |
|
|
4,325 |
|
|
18,601 |
|
|
550,660 |
|
|
78,497 |
|
|
987,781 |
|
| 5 Special mention |
— |
|
|
34,003 |
|
|
19,926 |
|
|
15,647 |
|
|
— |
|
|
— |
|
|
69,334 |
|
|
6,531 |
|
|
145,441 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
13,994 |
|
|
19,957 |
|
|
— |
|
|
— |
|
|
5,748 |
|
|
— |
|
|
39,699 |
|
| Total |
$ |
58,262 |
|
|
$ |
156,535 |
|
|
$ |
98,774 |
|
|
$ |
125,514 |
|
|
$ |
6,323 |
|
|
$ |
18,601 |
|
|
$ |
780,898 |
|
|
$ |
108,719 |
|
|
$ |
1,353,626 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
2,272 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
140 |
|
|
$ |
— |
|
|
$ |
2,414 |
|
____________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted |
|
|
Amortized Cost Basis (1) |
Term Loans by Origination Year |
|
Revolving |
|
to Term |
|
|
| September 30, 2024 |
2024 |
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
Prior |
|
Loans |
|
Loans |
|
Total |
|
(In thousands) |
| Commercial: Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
230 |
|
|
$ |
715 |
|
|
$ |
3,831 |
|
|
$ |
4,028 |
|
|
$ |
50 |
|
|
$ |
1,271 |
|
|
$ |
72,074 |
|
|
$ |
— |
|
|
$ |
82,199 |
|
| 3-4.5 Pass |
53,584 |
|
|
83,370 |
|
|
144,198 |
|
|
207,356 |
|
|
43,073 |
|
|
166,708 |
|
|
1,981,850 |
|
|
30,328 |
|
|
2,710,467 |
|
| 5 Special mention |
— |
|
|
11,288 |
|
|
497 |
|
|
1,890 |
|
|
710 |
|
|
3,502 |
|
|
14,362 |
|
|
109 |
|
|
32,358 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
3,160 |
|
|
3,128 |
|
|
1,322 |
|
|
9,585 |
|
|
7,571 |
|
|
745 |
|
|
25,511 |
|
| Total |
$ |
53,814 |
|
|
$ |
95,373 |
|
|
$ |
151,686 |
|
|
$ |
216,402 |
|
|
$ |
45,155 |
|
|
$ |
181,066 |
|
|
$ |
2,075,857 |
|
|
$ |
31,182 |
|
|
$ |
2,850,535 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
565 |
|
|
$ |
453 |
|
|
$ |
— |
|
|
$ |
747 |
|
|
$ |
1,157 |
|
|
$ |
387 |
|
|
$ |
3,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
22 |
|
|
$ |
17 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
1,623 |
|
|
$ |
— |
|
|
$ |
1,664 |
|
| 3-4.5 Pass |
23,648 |
|
|
20,948 |
|
|
61,226 |
|
|
183,592 |
|
|
20,250 |
|
|
88,553 |
|
|
5,804 |
|
|
256 |
|
|
404,277 |
|
| 5 Special mention |
— |
|
|
— |
|
|
2,165 |
|
|
4,310 |
|
|
113 |
|
|
1,320 |
|
|
— |
|
|
— |
|
|
7,908 |
|
| 6-8 Classified |
— |
|
|
— |
|
|
55 |
|
|
163 |
|
|
53 |
|
|
358 |
|
|
— |
|
|
12 |
|
|
641 |
|
| Total |
$ |
23,648 |
|
|
$ |
20,948 |
|
|
$ |
63,468 |
|
|
$ |
188,082 |
|
|
$ |
20,418 |
|
|
$ |
90,231 |
|
|
$ |
7,427 |
|
|
$ |
268 |
|
|
$ |
414,490 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
199 |
|
|
$ |
603 |
|
|
$ |
2,197 |
|
|
$ |
332 |
|
|
$ |
1,102 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
4,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Loans and Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-2 High pass |
$ |
34,606 |
|
|
$ |
40,143 |
|
|
$ |
291,693 |
|
|
$ |
483,170 |
|
|
$ |
110,462 |
|
|
$ |
498,938 |
|
|
$ |
411,099 |
|
|
$ |
23,691 |
|
|
$ |
1,893,802 |
|
| 3-4.5 Pass |
495,666 |
|
|
773,041 |
|
|
5,646,903 |
|
|
5,401,953 |
|
|
1,379,667 |
|
|
3,104,329 |
|
|
3,343,149 |
|
|
243,788 |
|
|
20,388,496 |
|
| 5 Special mention |
— |
|
|
47,404 |
|
|
141,900 |
|
|
152,059 |
|
|
5,154 |
|
|
268,943 |
|
|
89,788 |
|
|
6,640 |
|
|
711,888 |
|
| 6-8 Classified |
— |
|
|
5,880 |
|
|
99,286 |
|
|
126,485 |
|
|
30,382 |
|
|
251,404 |
|
|
19,397 |
|
|
757 |
|
|
533,591 |
|
| Total |
$ |
530,272 |
|
|
$ |
866,468 |
|
|
$ |
6,179,782 |
|
|
$ |
6,163,667 |
|
|
$ |
1,525,665 |
|
|
$ |
4,123,614 |
|
|
$ |
3,863,433 |
|
|
$ |
274,876 |
|
|
$ |
23,527,777 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
5,826 |
|
|
$ |
26,881 |
|
|
$ |
19,074 |
|
|
$ |
10,488 |
|
|
$ |
3,293 |
|
|
$ |
1,298 |
|
|
$ |
387 |
|
|
$ |
67,247 |
|
______________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted |
|
|
Amortized Cost Basis (1) |
Term Loans by Origination Year |
|
Revolving |
|
to Term |
|
|
| December 31, 2023 |
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
Prior |
|
Loans |
|
Loans |
|
Total |
|
(In thousands) |
| Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
— |
|
|
$ |
16,976 |
|
|
$ |
17,432 |
|
|
$ |
16,832 |
|
|
$ |
17,337 |
|
|
$ |
69,205 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
137,783 |
|
| 4-6 Pass |
182,236 |
|
|
933,294 |
|
|
814,564 |
|
|
510,952 |
|
|
298,985 |
|
|
1,765,454 |
|
|
76,866 |
|
|
10,937 |
|
|
4,593,288 |
|
| 7 Special mention |
— |
|
|
14,021 |
|
|
32,235 |
|
|
25,485 |
|
|
17,147 |
|
|
129,549 |
|
|
1,250 |
|
|
— |
|
|
219,687 |
|
| 8-9 Classified |
749 |
|
|
— |
|
|
26,172 |
|
|
439 |
|
|
17,063 |
|
|
29,566 |
|
|
1,750 |
|
|
— |
|
|
75,739 |
|
| Total |
$ |
182,985 |
|
|
$ |
964,291 |
|
|
$ |
890,403 |
|
|
$ |
553,708 |
|
|
$ |
350,532 |
|
|
$ |
1,993,774 |
|
|
$ |
79,867 |
|
|
$ |
10,937 |
|
|
$ |
5,026,497 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
34 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
76 |
|
|
$ |
14,185 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
14,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
— |
|
|
$ |
28,155 |
|
|
$ |
140,424 |
|
|
$ |
58,959 |
|
|
$ |
57,988 |
|
|
$ |
109,423 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
394,949 |
|
| 4-6 Pass |
66,143 |
|
|
2,221,235 |
|
|
1,193,052 |
|
|
539,660 |
|
|
564,420 |
|
|
794,599 |
|
|
67,811 |
|
|
— |
|
|
5,446,920 |
|
| 7 Special mention |
— |
|
|
2,610 |
|
|
17,784 |
|
|
12,201 |
|
|
39,808 |
|
|
35,953 |
|
|
— |
|
|
— |
|
|
108,356 |
|
| 8-9 Classified |
— |
|
|
— |
|
|
17,283 |
|
|
8,576 |
|
|
26,543 |
|
|
22,552 |
|
|
— |
|
|
— |
|
|
74,954 |
|
| Total |
$ |
66,143 |
|
|
$ |
2,252,000 |
|
|
$ |
1,368,543 |
|
|
$ |
619,396 |
|
|
$ |
688,759 |
|
|
$ |
962,527 |
|
|
$ |
67,811 |
|
|
$ |
— |
|
|
$ |
6,025,179 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,769 |
|
|
$ |
— |
|
|
$ |
6,769 |
|
| 4-6 Pass |
188,561 |
|
|
1,824,253 |
|
|
2,812,293 |
|
|
65,230 |
|
|
— |
|
|
19,518 |
|
|
51,246 |
|
|
87 |
|
|
4,961,188 |
|
| 7 Special mention |
— |
|
|
46,263 |
|
|
7,568 |
|
|
— |
|
|
— |
|
|
— |
|
|
366 |
|
|
— |
|
|
54,197 |
|
| 8-9 Classified |
3,847 |
|
|
18,263 |
|
|
12,908 |
|
|
1,223 |
|
|
— |
|
|
1,764 |
|
|
65 |
|
|
85 |
|
|
38,155 |
|
| Total |
$ |
192,408 |
|
|
$ |
1,888,779 |
|
|
$ |
2,832,769 |
|
|
$ |
66,453 |
|
|
$ |
— |
|
|
$ |
21,282 |
|
|
$ |
58,446 |
|
|
$ |
172 |
|
|
$ |
5,060,309 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
3,402 |
|
|
$ |
23,544 |
|
|
$ |
5,385 |
|
|
$ |
740 |
|
|
$ |
— |
|
|
$ |
4 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33,075 |
|
____________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted |
|
|
Amortized Cost Basis (1) |
Term Loans by Origination Year |
|
Revolving |
|
to Term |
|
|
| December 31, 2023 |
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
Prior |
|
Loans |
|
Loans |
|
Total |
|
(In thousands) |
| Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| and Land: Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| 4-6 Pass |
23,916 |
|
|
388,165 |
|
|
214,303 |
|
|
68,833 |
|
|
16,781 |
|
|
27,175 |
|
|
20,412 |
|
|
— |
|
|
759,585 |
|
| 7 Special mention |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| 8-9 Classified |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total |
$ |
23,916 |
|
|
$ |
388,165 |
|
|
$ |
214,303 |
|
|
$ |
68,833 |
|
|
$ |
16,781 |
|
|
$ |
27,175 |
|
|
$ |
20,412 |
|
|
$ |
— |
|
|
$ |
759,585 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| and Land: Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| 4-6 Pass |
64,341 |
|
|
1,185,297 |
|
|
668,083 |
|
|
336,636 |
|
|
— |
|
|
26,896 |
|
|
115,674 |
|
|
— |
|
|
2,396,927 |
|
| 7 Special mention |
— |
|
|
— |
|
|
2,757 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,757 |
|
| 8-9 Classified |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total |
$ |
64,341 |
|
|
$ |
1,185,297 |
|
|
$ |
670,840 |
|
|
$ |
336,636 |
|
|
$ |
— |
|
|
$ |
26,896 |
|
|
$ |
115,674 |
|
|
$ |
— |
|
|
$ |
2,399,684 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: Asset-Based |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
32,485 |
|
|
$ |
237,936 |
|
|
$ |
223,088 |
|
|
$ |
39,380 |
|
|
$ |
119,364 |
|
|
$ |
254,638 |
|
|
$ |
89,667 |
|
|
$ |
— |
|
|
$ |
996,558 |
|
| 4-6 Pass |
122,064 |
|
|
238,206 |
|
|
132,449 |
|
|
17,823 |
|
|
7,447 |
|
|
25,945 |
|
|
630,073 |
|
|
1,453 |
|
|
1,175,460 |
|
| 7 Special mention |
— |
|
|
101 |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
12,394 |
|
|
10 |
|
|
12,506 |
|
| 8-9 Classified |
— |
|
|
— |
|
|
— |
|
|
701 |
|
|
— |
|
|
340 |
|
|
3,520 |
|
|
— |
|
|
4,561 |
|
| Total |
$ |
154,549 |
|
|
$ |
476,243 |
|
|
$ |
355,537 |
|
|
$ |
57,904 |
|
|
$ |
126,811 |
|
|
$ |
280,924 |
|
|
$ |
735,654 |
|
|
$ |
1,463 |
|
|
$ |
2,189,085 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
60 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
150 |
|
|
$ |
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: Venture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
(84) |
|
|
$ |
(7) |
|
|
$ |
— |
|
|
$ |
1,998 |
|
|
$ |
— |
|
|
$ |
(3) |
|
|
$ |
136,339 |
|
|
$ |
(140) |
|
|
$ |
138,103 |
|
| 4-6 Pass |
101,038 |
|
|
128,485 |
|
|
113,183 |
|
|
6,473 |
|
|
6,216 |
|
|
622 |
|
|
770,941 |
|
|
74,863 |
|
|
1,201,821 |
|
| 7 Special mention |
17,481 |
|
|
10,984 |
|
|
31,928 |
|
|
— |
|
|
19,986 |
|
|
— |
|
|
13,260 |
|
|
4,994 |
|
|
98,633 |
|
| 8-9 Classified |
— |
|
|
— |
|
|
7,808 |
|
|
— |
|
|
— |
|
|
— |
|
|
(3) |
|
|
— |
|
|
7,805 |
|
| Total |
$ |
118,435 |
|
|
$ |
139,462 |
|
|
$ |
152,919 |
|
|
$ |
8,471 |
|
|
$ |
26,202 |
|
|
$ |
619 |
|
|
$ |
920,537 |
|
|
$ |
79,717 |
|
|
$ |
1,446,362 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
2,245 |
|
|
$ |
2,759 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9 |
|
|
$ |
— |
|
|
$ |
5,013 |
|
____________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted |
|
|
Amortized Cost Basis (1) |
Term Loans by Origination Year |
|
Revolving |
|
to Term |
|
|
| December 31, 2023 |
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
Prior |
|
Loans |
|
Loans |
|
Total |
|
(In thousands) |
| Commercial: Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
815 |
|
|
$ |
4,350 |
|
|
$ |
5,216 |
|
|
$ |
130 |
|
|
$ |
29 |
|
|
$ |
2,148 |
|
|
$ |
66,827 |
|
|
$ |
— |
|
|
$ |
79,515 |
|
| 4-6 Pass |
98,643 |
|
|
201,215 |
|
|
285,249 |
|
|
50,582 |
|
|
39,951 |
|
|
158,810 |
|
|
1,176,946 |
|
|
2,921 |
|
|
2,014,317 |
|
| 7 Special mention |
1,748 |
|
|
1,306 |
|
|
442 |
|
|
554 |
|
|
540 |
|
|
5,071 |
|
|
254 |
|
|
69 |
|
|
9,984 |
|
| 8-9 Classified |
— |
|
|
912 |
|
|
4,011 |
|
|
1,706 |
|
|
1,299 |
|
|
13,768 |
|
|
3,257 |
|
|
1,091 |
|
|
26,044 |
|
| Total |
$ |
101,206 |
|
|
$ |
207,783 |
|
|
$ |
294,918 |
|
|
$ |
52,972 |
|
|
$ |
41,819 |
|
|
$ |
179,797 |
|
|
$ |
1,247,284 |
|
|
$ |
4,081 |
|
|
$ |
2,129,860 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
6,867 |
|
|
$ |
24 |
|
|
$ |
— |
|
|
$ |
28 |
|
|
$ |
75 |
|
|
$ |
1,013 |
|
|
$ |
431 |
|
|
$ |
8,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
— |
|
|
$ |
27 |
|
|
$ |
22 |
|
|
$ |
4 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,304 |
|
|
$ |
— |
|
|
$ |
1,357 |
|
| 4-6 Pass |
26,468 |
|
|
71,523 |
|
|
207,751 |
|
|
23,390 |
|
|
42,338 |
|
|
63,919 |
|
|
7,684 |
|
|
345 |
|
|
443,418 |
|
| 7 Special mention |
— |
|
|
1,286 |
|
|
4,224 |
|
|
371 |
|
|
1,100 |
|
|
181 |
|
|
30 |
|
|
— |
|
|
7,192 |
|
| 8-9 Classified |
— |
|
|
281 |
|
|
42 |
|
|
135 |
|
|
198 |
|
|
486 |
|
|
1 |
|
|
16 |
|
|
1,159 |
|
| Total |
$ |
26,468 |
|
|
$ |
73,117 |
|
|
$ |
212,039 |
|
|
$ |
23,900 |
|
|
$ |
43,636 |
|
|
$ |
64,586 |
|
|
$ |
9,019 |
|
|
$ |
361 |
|
|
$ |
453,126 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
— |
|
|
$ |
432 |
|
|
$ |
540 |
|
|
$ |
76 |
|
|
$ |
255 |
|
|
$ |
1,081 |
|
|
$ |
1 |
|
|
$ |
12 |
|
|
$ |
2,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Loans and Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Internal risk rating: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-3 High pass |
$ |
33,216 |
|
|
$ |
287,437 |
|
|
$ |
386,182 |
|
|
$ |
117,303 |
|
|
$ |
194,718 |
|
|
$ |
435,411 |
|
|
$ |
300,907 |
|
|
$ |
(140) |
|
|
$ |
1,755,034 |
|
| 4-6 Pass |
873,410 |
|
|
7,191,673 |
|
|
6,440,927 |
|
|
1,619,579 |
|
|
976,138 |
|
|
2,882,938 |
|
|
2,917,653 |
|
|
90,606 |
|
|
22,992,924 |
|
| 7 Special mention |
19,229 |
|
|
76,571 |
|
|
96,938 |
|
|
38,611 |
|
|
78,581 |
|
|
170,755 |
|
|
27,554 |
|
|
5,073 |
|
|
513,312 |
|
| 8-9 Classified |
4,596 |
|
|
19,456 |
|
|
68,224 |
|
|
12,780 |
|
|
45,103 |
|
|
68,476 |
|
|
8,590 |
|
|
1,192 |
|
|
228,417 |
|
| Total |
$ |
930,451 |
|
|
$ |
7,575,137 |
|
|
$ |
6,992,271 |
|
|
$ |
1,788,273 |
|
|
$ |
1,294,540 |
|
|
$ |
3,557,580 |
|
|
$ |
3,254,704 |
|
|
$ |
96,731 |
|
|
$ |
25,489,687 |
|
| Current YTD period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross charge-offs |
$ |
3,436 |
|
|
$ |
33,088 |
|
|
$ |
8,708 |
|
|
$ |
876 |
|
|
$ |
359 |
|
|
$ |
15,345 |
|
|
$ |
1,023 |
|
|
$ |
593 |
|
|
$ |
63,428 |
|
____________________
(1) Amounts with negative balances are loans with zero principal balances and deferred loan origination fees.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
On January 1, 2023, the Company adopted ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"), which eliminated the accounting guidance for troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis.
The following table presents our loan modifications made to borrowers experiencing financial difficulty by type of modification for the period indicated with related amortized cost balances as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2024 |
|
Loan Modifications |
|
Balances (Amortized Cost Basis) at |
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
Combination - Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension and |
|
Total Loan |
|
Term Extension |
|
Payment Delay |
|
|
|
Payment Delay |
|
Modifications |
|
|
|
% of |
|
|
|
% of |
|
|
|
|
|
|
|
% of |
|
|
|
% of |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
|
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
|
|
|
|
Portfolio |
|
|
|
Portfolio |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
|
|
|
|
Balance |
|
Class |
|
Balance |
|
Class |
|
(Dollars in thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
93,551 |
|
|
2.1 |
% |
|
$ |
45,957 |
|
|
1.0 |
% |
|
|
|
|
|
$ |
— |
|
|
— |
% |
|
$ |
139,508 |
|
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
1,528 |
|
|
0.1 |
% |
|
— |
|
|
— |
% |
|
|
|
|
|
— |
|
|
— |
% |
|
1,528 |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
2,195 |
|
|
0.1 |
% |
|
— |
|
|
— |
% |
|
|
|
|
|
— |
|
|
— |
% |
|
2,195 |
|
|
0.1 |
% |
| Venture capital |
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
|
|
|
|
13,156 |
|
|
1.0 |
% |
|
13,156 |
|
|
1.0 |
% |
| Other commercial |
2,141 |
|
|
0.1 |
% |
|
— |
|
|
— |
% |
|
|
|
|
|
— |
|
|
— |
% |
|
2,141 |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
99,415 |
|
|
|
|
$ |
45,957 |
|
|
|
|
|
|
|
|
$ |
13,156 |
|
|
|
|
$ |
158,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
Loan Modifications |
|
Balances (Amortized Cost Basis) at |
|
September 30, 2024 |
|
|
|
|
|
|
|
|
|
Combination - Term |
|
Combination - Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension and |
|
Extension and |
|
Total Loan |
|
Term Extension |
|
Payment Delay |
|
Principal Forgiveness |
|
Payment Delay |
|
Modifications |
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
(Dollars in thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
94,690 |
|
|
2.1 |
% |
|
$ |
60,117 |
|
|
1.3 |
% |
|
$ |
13,500 |
|
|
0.3 |
% |
|
$ |
— |
|
|
— |
% |
|
$ |
168,307 |
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
5,092 |
|
|
0.2 |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
5,092 |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
2,195 |
|
|
0.1 |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
2,195 |
|
|
0.1 |
% |
| Venture capital |
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
13,156 |
|
|
1.0 |
% |
|
13,156 |
|
|
1.0 |
% |
| Other commercial |
2,386 |
|
|
0.1 |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
45 |
|
|
— |
% |
|
2,431 |
|
|
0.1 |
% |
| Consumer |
11 |
|
|
— |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
11 |
|
|
— |
% |
| Total |
$ |
104,374 |
|
|
|
|
$ |
60,117 |
|
|
|
|
$ |
13,500 |
|
|
|
|
$ |
13,201 |
|
|
|
|
$ |
191,192 |
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
Loan Modifications |
|
Balances (Amortized Cost Basis) at |
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
Combination - Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
Total Loan |
|
Term Extension |
|
Payment Delay |
|
Reduction |
|
Modifications |
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
(Dollars in thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
$ |
4,001 |
|
|
0.1 |
% |
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
$ |
4,001 |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other commercial |
1,508 |
|
|
0.2 |
% |
|
41 |
|
|
— |
% |
|
6 |
|
|
— |
% |
|
1,555 |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
5,509 |
|
|
|
|
$ |
41 |
|
|
|
|
$ |
6 |
|
|
|
|
$ |
5,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
Loan Modifications |
|
Balances (Amortized Cost Basis) at |
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
Combination - Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extension and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
|
|
Total Loan |
|
Term Extension |
|
Payment Delay |
|
Reduction |
|
|
|
Modifications |
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
|
|
|
|
|
|
% of |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
Loan |
|
|
|
|
|
|
|
Loan |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
Portfolio |
|
|
|
|
|
|
|
Portfolio |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
Balance |
|
Class |
|
|
|
|
|
Balance |
|
Class |
|
(Dollars in thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
$ |
15,311 |
|
|
0.3 |
% |
|
$ |
— |
|
|
— |
% |
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
$ |
15,311 |
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other commercial |
2,556 |
|
|
0.3 |
% |
|
41 |
|
|
— |
% |
|
6 |
|
|
— |
% |
|
|
|
|
|
2,603 |
|
|
0.3 |
% |
| Consumer |
15 |
|
|
— |
% |
|
— |
|
|
— |
% |
|
2 |
|
|
— |
% |
|
|
|
|
|
17 |
|
|
— |
% |
| Total |
$ |
17,882 |
|
|
|
|
$ |
41 |
|
|
|
|
$ |
8 |
|
|
|
|
|
|
|
|
$ |
17,931 |
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following tables present the financial effect of our loan modifications made to borrowers experiencing financial difficulty by type of modification for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2024 |
|
Term Extension - Financial Effect |
| Real estate mortgage: |
|
| Commercial |
Extended maturity by a weighted average 15 months. |
|
|
| Other residential |
Extended maturity by a weighted average 8 months. |
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
| Asset-based |
Extended maturity by a weighted average 4 months. |
|
|
| Other commercial |
Extended maturity by a weighted average 14 months. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2024 |
|
Payment Delay - Financial Effect |
| Real estate mortgage: |
|
| Commercial |
Deferred partial payments for 24 months. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2024 |
|
Combination - Term Extension and Payment Delay - Financial Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
| Venture capital |
Extended maturity by a weighted average 3 months and granted 3 months of partial payment deferrals. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
Term Extension - Financial Effect |
| Real estate mortgage: |
|
| Commercial |
Extended maturity by a weighted average 15 months. |
|
|
| Other residential |
Extended maturity by a weighted average 10 months. |
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
| Asset-based |
Extended maturity by a weighted average 4 months. |
|
|
| Other commercial |
Extended maturity by a weighted average 15 months. |
| Consumer |
Extended maturity by a weighted average 12 months. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
Payment Delay - Financial Effect |
| Real estate mortgage: |
|
| Commercial |
Deferred partial payments for up to 20 months. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
Combination - Term Extension and Principal Forgiveness - Financial Effect |
| Real estate mortgage: |
|
| Commercial |
Extended maturity by a weighted average 3 years and granted principal forgiveness totaling $4.0 million. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
Combination - Term Extension and Payment Delay - Financial Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
| Venture capital |
Extended maturity by a weighted average 3 months and granted 3 months of partial payment deferrals. |
| Other commercial |
Extended maturity by a weighted average 10 years and granted 4 months of partial payment deferrals. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
Term Extension - Financial Effect |
| Real estate mortgage: |
|
|
|
|
|
| Other residential |
Extended maturity by a weighted average 8 months. |
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
| Other commercial |
Extended maturity by a weighted average 17 months. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
|
Payment Delay - Financial Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other commercial |
|
Provided 18 months of reduced payments to borrowers without extending the loan term. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
Combination - Term Extension and Interest Rate Reduction– Financial Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consumer |
Extended maturity by a weighted average 3 years and reduced weighted average contractual interest rate from 11.75% to 7.50%. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
Term Extension - Financial Effect |
| Real estate mortgage: |
|
|
|
|
|
| Other residential |
Extended maturity by a weighted average 10 months. |
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
| Other commercial |
Extended maturity by a weighted average 22 months. |
| Consumer |
Extended maturity by a weighted average 12 months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
Payment Delay - Financial Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
| Other commercial |
Provided 18 months of reduced payments to borrowers without extending the loan term. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
Combination - Term Extension and Interest Rate Reduction– Financial Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
| Other commercial |
Extended maturity by a weighted average 3 years and reduced weighted average contractual interest rate from 11.75% to 7.50%. |
| Consumer |
Extended maturity by a weighted average 2 years and reduced weighted average contractual interest rate from 9.5% to 2.0%. |
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the payment status of loans that were modified during the preceding 12-month period, with related amortized cost balances as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Status (Amortized Cost Basis) at |
|
September 30, 2024 |
|
|
|
30-89 Days |
|
90 or More Days |
|
|
|
Current |
|
Past Due |
|
Past Due |
|
Total |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
| Commercial |
$ |
154,206 |
|
|
$ |
14,160 |
|
|
$ |
— |
|
|
$ |
168,366 |
|
|
|
|
|
|
|
|
|
| Other residential |
3,112 |
|
|
91 |
|
|
3,986 |
|
|
7,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
| Asset-based |
2,195 |
|
|
— |
|
|
— |
|
|
2,195 |
|
| Venture capital |
13,156 |
|
|
— |
|
|
— |
|
|
13,156 |
|
| Other commercial |
672 |
|
|
3,161 |
|
|
— |
|
|
3,833 |
|
| Consumer |
11 |
|
|
— |
|
|
— |
|
|
11 |
|
| Total |
$ |
173,352 |
|
|
$ |
17,412 |
|
|
$ |
3,986 |
|
|
$ |
194,750 |
|
The following table presents the payment status of loans that were modified during the nine months ended September 30, 2023, subsequent to the adoption of ASU 2022-02 on January 1, 2023, with related amortized cost balances as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Status (Amortized Cost Basis) at |
|
September 30, 2023 |
|
|
|
30-89 Days |
|
90 or More Days |
|
|
|
Current |
|
Past Due |
|
Past Due |
|
Total |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
$ |
6,225 |
|
|
$ |
7,662 |
|
|
$ |
1,424 |
|
|
$ |
15,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other commercial |
2,599 |
|
|
4 |
|
|
— |
|
|
2,603 |
|
| Consumer |
17 |
|
|
— |
|
|
— |
|
|
17 |
|
| Total |
$ |
8,841 |
|
|
$ |
7,666 |
|
|
$ |
1,424 |
|
|
$ |
17,931 |
|
The following table presents information on loans that defaulted during the periods indicated, which had been modified during the preceding 12-month period, with related amortized cost balances as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2024 |
|
Nine Months Ended September 30, 2024 |
|
Modified Loans That |
|
Modified Loans That |
|
Subsequently Defaulted |
|
Subsequently Defaulted |
|
Amortized Cost Basis at |
|
Amortized Cost Basis at |
|
September 30, 2024 |
|
September 30, 2024 |
|
Term Extension |
|
Payment Delay |
|
Total |
|
Term Extension |
|
Payment Delay |
|
|
|
|
|
Total |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
— |
|
|
$ |
14,160 |
|
|
$ |
14,160 |
|
|
$ |
— |
|
|
$ |
14,160 |
|
|
|
|
|
|
$ |
14,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
556 |
|
|
— |
|
|
556 |
|
|
4,077 |
|
|
— |
|
|
|
|
|
|
4,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
556 |
|
|
$ |
14,160 |
|
|
$ |
14,716 |
|
|
$ |
4,077 |
|
|
$ |
14,160 |
|
|
|
|
|
|
$ |
18,237 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents information on loans that defaulted during the periods indicated, which had been modified during the nine months ended September 30, 2023, subsequent to the adoption of ASU 2022-02 on January 1, 2023, with related amortized cost balances as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
Nine Months Ended September 30, 2023 |
|
Modified Loans That |
|
Modified Loans That |
|
Subsequently Defaulted |
|
Subsequently Defaulted |
|
Amortized Cost Basis at |
|
Amortized Cost Basis at |
|
September 30, 2024 |
|
September 30, 2024 |
|
Term Extension |
|
Term Extension |
|
|
|
|
|
|
|
|
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other residential |
$ |
8,700 |
|
|
$ |
9,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other commercial |
4 |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
8,704 |
|
|
$ |
9,104 |
|
|
|
|
|
|
|
|
|
Leases Receivable
We provide equipment financing to our customers primarily with operating and direct financing leases. For direct financing leases, lease receivables are recorded on the balance sheet but the leased equipment is not, although we generally retain legal title to the leased equipment until the end of each lease. Direct financing leases are stated at the net amount of minimum lease payments receivable, plus any unguaranteed residual value, less the amount of unearned income and net acquisition discount at the reporting date. Direct lease origination costs are amortized using the effective interest method over the life of the leases. Direct financing leases are subject to our accounting for allowance for loan and lease losses. See Note 8. Leases for information regarding operating leases where we are the lessor.
The following table provides the components of leases receivable income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands) |
| Component of leases receivable income: |
|
|
|
|
|
|
|
| Interest income on net investments in leases |
$ |
4,711 |
|
|
$ |
4,319 |
|
|
$ |
14,323 |
|
|
$ |
12,186 |
|
The following table presents the components of leases receivable as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
(In thousands) |
| Net Investment in Direct Financing Leases: |
|
|
|
| Lease payments receivable |
$ |
223,181 |
|
|
$ |
249,223 |
|
| Unguaranteed residual assets |
23,816 |
|
|
25,488 |
|
| Deferred costs and other |
2,194 |
|
|
2,715 |
|
| Aggregate net investment in leases |
$ |
249,191 |
|
|
$ |
277,426 |
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents maturities of leases receivable as of the date indicated:
|
|
|
|
|
|
|
September 30, 2024 |
|
(In thousands) |
| Period ending December 31, |
|
| 2024 |
$ |
20,341 |
|
| 2025 |
78,813 |
|
| 2026 |
61,079 |
|
| 2027 |
40,526 |
|
| 2028 |
23,552 |
|
| Thereafter |
25,400 |
|
| Total undiscounted cash flows |
249,711 |
|
| Less: Unearned income |
(26,530) |
|
| Present value of lease payments |
$ |
223,181 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Allowance for Loan and Lease Losses
The following tables present a summary of the activity in the allowance for loan and lease losses on loans and leases held for investment by loan portfolio segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2024 |
|
|
|
Real Estate |
|
|
|
|
|
|
|
Real Estate |
|
Construction |
|
|
|
|
|
|
|
Mortgage |
|
and Land |
|
Commercial |
|
Consumer |
|
Total |
|
(In thousands) |
| Allowance for Loan and Lease Losses: |
|
|
|
|
|
|
|
|
|
| Balance, beginning of period |
$ |
155,260 |
|
|
$ |
25,281 |
|
|
$ |
51,194 |
|
|
$ |
16,027 |
|
|
$ |
247,762 |
|
| Charge-offs |
(640) |
|
|
— |
|
|
(1,963) |
|
|
(1,560) |
|
|
(4,163) |
|
| Recoveries |
216 |
|
|
— |
|
|
1,253 |
|
|
277 |
|
|
1,746 |
|
| Net charge-offs |
(424) |
|
|
— |
|
|
(710) |
|
|
(1,283) |
|
|
(2,417) |
|
| Provision |
9,798 |
|
|
(11,943) |
|
|
10,387 |
|
|
758 |
|
|
9,000 |
|
| Balance, end of period |
$ |
164,634 |
|
|
$ |
13,338 |
|
|
$ |
60,871 |
|
|
$ |
15,502 |
|
|
$ |
254,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2024 |
|
|
|
Real Estate |
|
|
|
|
|
|
|
Real Estate |
|
Construction |
|
|
|
|
|
|
|
Mortgage |
|
and Land |
|
Commercial |
|
Consumer |
|
Total |
|
(In thousands) |
| Allowance for Loan and Lease Losses: |
|
|
|
|
|
|
|
|
|
| Balance, beginning of period |
$ |
186,827 |
|
|
$ |
33,830 |
|
|
$ |
45,156 |
|
|
$ |
15,874 |
|
|
$ |
281,687 |
|
|
|
|
|
|
|
|
|
|
|
| Charge-offs |
(56,998) |
|
|
— |
|
|
(5,815) |
|
|
(4,434) |
|
|
(67,247) |
|
| Recoveries |
2,536 |
|
|
— |
|
|
4,956 |
|
|
413 |
|
|
7,905 |
|
| Net charge-offs |
(54,462) |
|
|
— |
|
|
(859) |
|
|
(4,021) |
|
|
(59,342) |
|
| Provision |
32,269 |
|
|
(20,492) |
|
|
16,574 |
|
|
3,649 |
|
|
32,000 |
|
| Balance, end of period |
$ |
164,634 |
|
|
$ |
13,338 |
|
|
$ |
60,871 |
|
|
$ |
15,502 |
|
|
$ |
254,345 |
|
|
|
|
|
|
|
|
|
|
|
| Ending Allowance by |
|
|
|
|
|
|
|
|
|
| Evaluation Methodology: |
|
|
|
|
|
|
|
|
|
| Individually evaluated |
$ |
— |
|
|
$ |
— |
|
|
$ |
8,196 |
|
|
$ |
— |
|
|
$ |
8,196 |
|
| Collectively evaluated |
$ |
164,634 |
|
|
$ |
13,338 |
|
|
$ |
52,675 |
|
|
$ |
15,502 |
|
|
$ |
246,149 |
|
|
|
|
|
|
|
|
|
|
|
Ending Loans and Leases by |
|
|
|
|
|
|
|
|
|
Evaluation Methodology: |
|
|
|
|
|
|
|
|
|
| Individually evaluated |
$ |
129,829 |
|
|
$ |
— |
|
|
$ |
36,527 |
|
|
$ |
— |
|
|
$ |
166,356 |
|
| Collectively evaluated |
13,204,577 |
|
|
3,459,409 |
|
|
6,282,945 |
|
|
414,490 |
|
|
23,361,421 |
|
| Ending balance |
$ |
13,334,406 |
|
|
$ |
3,459,409 |
|
|
$ |
6,319,472 |
|
|
$ |
414,490 |
|
|
$ |
23,527,777 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
|
|
Real Estate |
|
|
|
|
|
|
|
Real Estate |
|
Construction |
|
|
|
|
|
|
|
Mortgage |
|
and Land |
|
Commercial |
|
Consumer |
|
Total |
|
(In thousands) |
| Allowance for Loan and Lease Losses: |
|
|
|
|
|
|
|
|
|
| Balance, beginning of period |
$ |
132,808 |
|
|
$ |
39,679 |
|
|
$ |
37,221 |
|
|
$ |
9,526 |
|
|
$ |
219,234 |
|
| Charge-offs |
(5,757) |
|
|
— |
|
|
(335) |
|
|
(603) |
|
|
(6,695) |
|
| Recoveries |
535 |
|
|
— |
|
|
1,199 |
|
|
24 |
|
|
1,758 |
|
| Net charge-offs |
(5,222) |
|
|
— |
|
|
864 |
|
|
(579) |
|
|
(4,937) |
|
| Provision |
8,944 |
|
|
686 |
|
|
(1,411) |
|
|
(219) |
|
|
8,000 |
|
| Balance, end of period |
$ |
136,530 |
|
|
$ |
40,365 |
|
|
$ |
36,674 |
|
|
$ |
8,728 |
|
|
$ |
222,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
|
|
Real Estate |
|
|
|
|
|
|
|
Real Estate |
|
Construction |
|
|
|
|
|
|
|
Mortgage |
|
and Land |
|
Commercial |
|
Consumer |
|
Total |
|
(In thousands) |
| Allowance for Loan and Lease Losses: |
|
|
|
|
|
|
|
|
|
| Balance, beginning of period |
$ |
87,309 |
|
|
$ |
52,320 |
|
|
$ |
52,849 |
|
|
$ |
8,254 |
|
|
$ |
200,732 |
|
| Charge-offs |
(39,467) |
|
|
— |
|
|
(7,819) |
|
|
(1,514) |
|
|
(48,800) |
|
| Recoveries |
797 |
|
|
— |
|
|
2,916 |
|
|
152 |
|
|
3,865 |
|
| Net charge-offs |
(38,670) |
|
|
— |
|
|
(4,903) |
|
|
(1,362) |
|
|
(44,935) |
|
| Provision |
87,891 |
|
|
(11,955) |
|
|
(11,272) |
|
|
1,836 |
|
|
66,500 |
|
| Balance, end of period |
$ |
136,530 |
|
|
$ |
40,365 |
|
|
$ |
36,674 |
|
|
$ |
8,728 |
|
|
$ |
222,297 |
|
|
|
|
|
|
|
|
|
|
|
| Ending Allowance by |
|
|
|
|
|
|
|
|
|
| Evaluation Methodology: |
|
|
|
|
|
|
|
|
|
| Individually evaluated |
$ |
— |
|
|
$ |
— |
|
|
$ |
497 |
|
|
$ |
— |
|
|
$ |
497 |
|
| Collectively evaluated |
$ |
136,530 |
|
|
$ |
40,365 |
|
|
$ |
36,177 |
|
|
$ |
8,728 |
|
|
$ |
221,800 |
|
|
|
|
|
|
|
|
|
|
|
Ending Loans and Leases by |
|
|
|
|
|
|
|
|
|
Evaluation Methodology: |
|
|
|
|
|
|
|
|
|
| Individually evaluated |
$ |
120,491 |
|
|
$ |
— |
|
|
$ |
4,723 |
|
|
$ |
— |
|
|
$ |
125,214 |
|
| Collectively evaluated |
13,914,000 |
|
|
2,737,537 |
|
|
4,749,707 |
|
|
394,488 |
|
|
21,795,732 |
|
| Ending balance |
$ |
14,034,491 |
|
|
$ |
2,737,537 |
|
|
$ |
4,754,430 |
|
|
$ |
394,488 |
|
|
$ |
21,920,946 |
|
The allowance for loan and lease losses increased by $6.6 million in the third quarter of 2024 to $254.3 million due primarily to a $9.0 million provision, offset by net charge-offs of $2.4 million. For additional information regarding the calculation of the allowance for loan and lease losses using the CECL methodology, including discussion of forecasts used to estimate the allowance, please see Note 1(j). Nature of Operations and Summary of Significant Accounting Policies - Allowance for Credit Losses on Loans and Leases Held for Investment of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" of the Form 10-K.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
A loan is considered collateral-dependent, and is individually evaluated for reserve purposes, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent loans held for investment by collateral type as of the following dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
Real |
|
Business |
|
|
|
|
|
Real |
|
Business |
|
|
|
Property |
|
Assets |
|
|
|
Total |
|
Property |
|
Assets |
|
Total |
|
(In thousands) |
| Real estate mortgage |
$ |
129,424 |
|
|
$ |
— |
|
|
|
|
$ |
129,424 |
|
|
$ |
47,952 |
|
|
$ |
— |
|
|
$ |
47,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
11,303 |
|
|
|
|
11,303 |
|
|
— |
|
|
3,616 |
|
|
3,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
129,424 |
|
|
$ |
11,303 |
|
|
|
|
$ |
140,727 |
|
|
$ |
47,952 |
|
|
$ |
3,616 |
|
|
$ |
51,568 |
|
Allowance for Credit Losses
The allowance for credit losses is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. The reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets.
The following tables present a summary of the activity in the allowance for loan and lease losses and reserve for unfunded loan commitments for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, 2024 |
|
|
|
|
|
|
|
Allowance for |
|
Reserve for |
|
Total |
|
|
|
|
|
|
|
Loan and |
|
Unfunded Loan |
|
Allowance for |
|
|
|
|
|
|
|
Lease Losses |
|
Commitments |
|
Credit Losses |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
| Balance, beginning of period |
$ |
247,762 |
|
|
$ |
27,571 |
|
|
$ |
275,333 |
|
|
|
|
|
|
|
| Charge-offs |
(4,163) |
|
|
— |
|
|
(4,163) |
|
|
|
|
|
|
|
| Recoveries |
1,746 |
|
|
— |
|
|
1,746 |
|
|
|
|
|
|
|
| Net charge-offs |
(2,417) |
|
|
— |
|
|
(2,417) |
|
|
|
|
|
|
|
| Provision |
9,000 |
|
|
— |
|
|
9,000 |
|
|
|
|
|
|
|
| Balance, end of period |
$ |
254,345 |
|
|
$ |
27,571 |
|
|
$ |
281,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, 2024 |
|
|
|
Allowance for |
|
Reserve for |
|
Total |
|
|
|
|
|
|
|
Loan and |
|
Unfunded Loan |
|
Allowance for |
|
|
|
|
|
|
|
Lease Losses |
|
Commitments |
|
Credit Losses |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
| Balance, beginning of period |
$ |
281,687 |
|
|
$ |
29,571 |
|
|
$ |
311,258 |
|
|
|
|
|
|
|
| Charge-offs |
(67,247) |
|
|
— |
|
|
(67,247) |
|
|
|
|
|
|
|
| Recoveries |
7,905 |
|
|
— |
|
|
7,905 |
|
|
|
|
|
|
|
| Net charge-offs |
(59,342) |
|
|
— |
|
|
(59,342) |
|
|
|
|
|
|
|
| Provision |
32,000 |
|
|
(2,000) |
|
|
30,000 |
|
|
|
|
|
|
|
| Balance, end of period |
$ |
254,345 |
|
|
$ |
27,571 |
|
|
$ |
281,916 |
|
|
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, 2023 |
|
|
|
|
|
|
|
Allowance for |
|
Reserve for |
|
Total |
|
|
|
|
|
|
|
Loan and |
|
Unfunded Loan |
|
Allowance for |
|
|
|
|
|
|
|
Lease Losses |
|
Commitments |
|
Credit Losses |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
| Balance, beginning of period |
$ |
219,234 |
|
|
$ |
37,571 |
|
|
$ |
256,805 |
|
|
|
|
|
|
|
| Charge-offs |
(6,695) |
|
|
— |
|
|
(6,695) |
|
|
|
|
|
|
|
| Recoveries |
1,758 |
|
|
— |
|
|
1,758 |
|
|
|
|
|
|
|
| Net charge-offs |
(4,937) |
|
|
— |
|
|
(4,937) |
|
|
|
|
|
|
|
| Provision |
8,000 |
|
|
(8,000) |
|
|
— |
|
|
|
|
|
|
|
| Balance, end of period |
$ |
222,297 |
|
|
$ |
29,571 |
|
|
$ |
251,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, 2023 |
|
|
|
Allowance for |
|
Reserve for |
|
Total |
|
|
|
|
|
|
|
Loan and |
|
Unfunded Loan |
|
Allowance for |
|
|
|
|
|
|
|
Lease Losses |
|
Commitments |
|
Credit Losses |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
| Balance, beginning of period |
$ |
200,732 |
|
|
$ |
91,071 |
|
|
$ |
291,803 |
|
|
|
|
|
|
|
| Charge-offs |
(48,800) |
|
|
— |
|
|
(48,800) |
|
|
|
|
|
|
|
| Recoveries |
3,865 |
|
|
— |
|
|
3,865 |
|
|
|
|
|
|
|
| Net charge-offs |
(44,935) |
|
|
— |
|
|
(44,935) |
|
|
|
|
|
|
|
| Provision |
66,500 |
|
|
(61,500) |
|
|
5,000 |
|
|
|
|
|
|
|
| Balance, end of period |
$ |
222,297 |
|
|
$ |
29,571 |
|
|
$ |
251,868 |
|
|
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill and other intangible assets arise from the acquisition method of accounting for business combinations. Goodwill and other intangible assets generated from business combinations and deemed to have indefinite lives are not subject to amortization and instead are tested for impairment annually at the reporting unit level unless a triggering event occurs thereby requiring an updated assessment. Our regular annual impairment assessment occurs in the fourth quarter. Goodwill represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. Impairment exists when the carrying value of the goodwill exceeds the fair value of the reporting unit. An impairment loss would be recognized in an amount equal to that excess as a charge to "Noninterest expense" in the condensed consolidated statements of earnings (loss). During the nine months ended September 30, 2024, the Company recorded adjustments related to the Merger resulting in an increase to goodwill of $18.1 million, within the one-year measurement period subsequent to the acquisition date of November 30, 2023. These adjustments largely relate to the estimated fair value of acquired loans.
The following table presents the changes in the carrying amount of goodwill for the years indicated:
|
|
|
|
|
|
| |
Goodwill |
| |
(In thousands) |
|
|
|
|
|
|
| Balance, December 31, 2023 |
$ |
198,627 |
|
| Purchase accounting adjustments |
18,143 |
|
| Balance, September 30, 2024 |
$ |
216,770 |
|
Our other intangible assets with definite lives are CDI and CRI. CDI and CRI are amortized on an accelerated basis over their respective estimated useful lives and reviewed for impairment at least quarterly. The amortization expense represents the estimated decline in the value of the underlying deposits or customer relationships acquired.
The following table presents the changes in CDI and CRI and the related accumulated amortization for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
| |
(In thousands) |
| Gross Amount of CDI and CRI: |
|
|
|
|
|
|
|
| Balance, beginning of period |
$ |
236,264 |
|
|
$ |
90,800 |
|
|
$ |
236,264 |
|
|
$ |
91,550 |
|
| Fully amortized portion |
— |
|
|
— |
|
|
— |
|
|
(750) |
|
| Balance, end of period |
236,264 |
|
|
90,800 |
|
|
236,264 |
|
|
90,800 |
|
| Accumulated Amortization: |
|
|
|
|
|
|
|
| Balance, beginning of period |
(87,370) |
|
|
(64,219) |
|
|
(70,787) |
|
|
(60,169) |
|
| Amortization expense |
(8,332) |
|
|
(2,389) |
|
|
(24,915) |
|
|
(7,189) |
|
| Fully amortized portion |
— |
|
|
— |
|
|
— |
|
|
750 |
|
| Balance, end of period |
(95,702) |
|
|
(66,608) |
|
|
(95,702) |
|
|
(66,608) |
|
| Net CDI and CRI, end of period |
$ |
140,562 |
|
|
$ |
24,192 |
|
|
$ |
140,562 |
|
|
$ |
24,192 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the estimated aggregate future amortization expense for our current CDI and CRI as of the date indicated:
|
|
|
|
|
|
|
September 30, 2024 |
|
(In thousands) |
| Period ending December 31, |
|
| 2024 |
$ |
7,618 |
|
| 2025 |
27,657 |
|
| 2026 |
24,412 |
|
| 2027 |
21,166 |
|
| 2028 |
17,920 |
|
| Thereafter |
41,789 |
|
| Net CDI and CRI |
$ |
140,562 |
|
NOTE 7. OTHER ASSETS
The following table presents the detail of our other assets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
| Other Assets |
2024 |
|
2023 |
|
(In thousands) |
| LIHTC investments |
$ |
310,672 |
|
|
$ |
347,478 |
|
| Interest receivable |
129,001 |
|
|
138,522 |
|
| SBIC investments |
108,591 |
|
|
105,433 |
|
Operating lease ROU assets, net (1) |
104,173 |
|
|
133,126 |
|
| Equity investments without readily determinable fair values |
72,452 |
|
|
71,332 |
|
| Prepaid expenses |
37,640 |
|
|
43,498 |
|
| Taxes receivable |
26,307 |
|
|
34,268 |
|
| HLBV investments |
17,217 |
|
|
18,442 |
|
| Foreclosed assets, net |
8,661 |
|
|
7,394 |
|
| Equity warrants |
3,297 |
|
|
3,689 |
|
| Equity investments with readily determinable fair values |
1 |
|
|
1 |
|
| Other receivables/assets |
146,042 |
|
|
228,066 |
|
| Total other assets |
$ |
964,054 |
|
|
$ |
1,131,249 |
|
____________________
(1) See Note 8. Leases for further details regarding the operating lease ROU assets.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 8. LEASES
Operating Leases as a Lessee
Our lease expense is a component of "Occupancy expense" on our condensed consolidated statements of earnings (loss). The following table presents the components of lease expense for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands) |
| Operating lease expense: |
|
|
|
|
|
|
|
| Fixed costs |
$ |
7,689 |
|
|
$ |
8,580 |
|
|
$ |
26,051 |
|
|
$ |
24,749 |
|
| Variable costs |
299 |
|
|
115 |
|
|
447 |
|
|
180 |
|
| Short-term lease costs |
267 |
|
|
148 |
|
|
407 |
|
|
770 |
|
| Sublease income |
(1,129) |
|
|
(273) |
|
|
(3,646) |
|
|
(1,518) |
|
| Net lease expense |
$ |
7,126 |
|
|
$ |
8,570 |
|
|
$ |
23,259 |
|
|
$ |
24,181 |
|
The following table presents supplemental cash flow information related to leases for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 30, |
|
2024 |
|
2023 |
|
(In thousands) |
| Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
| Operating cash flows from operating leases |
$ |
28,689 |
|
|
$ |
27,609 |
|
| ROU assets obtained in exchange for lease obligations: |
|
|
|
| Operating leases |
$ |
3,437 |
|
|
$ |
20,909 |
|
The following table presents supplemental balance sheet and other information related to operating leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2024 |
|
2023 |
|
(Dollars in thousands) |
| Operating leases: |
|
|
|
| Operating lease right-of-use assets, net |
$ |
104,173 |
|
|
$ |
133,126 |
|
| Operating lease liabilities |
$ |
132,802 |
|
|
$ |
161,308 |
|
|
|
|
|
| Weighted average remaining lease term (in years) |
6.0 |
|
6.1 |
| Weighted average discount rate |
3.50 |
% |
|
3.40 |
% |
The following table presents the maturities of operating lease liabilities as of the date indicated:
|
|
|
|
|
|
|
September 30, 2024 |
|
(In thousands) |
| Period ending December 31, |
|
| 2024 |
$ |
8,779 |
|
| 2025 |
32,475 |
|
| 2026 |
28,073 |
|
| 2027 |
20,676 |
|
| 2028 |
16,531 |
|
| Thereafter |
41,606 |
|
| Total operating lease liabilities |
148,140 |
|
| Less: Imputed interest |
(15,338) |
|
| Present value of operating lease liabilities |
$ |
132,802 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Operating Leases as a Lessor
We provide equipment financing to our customers through operating leases where we facilitate the purchase of equipment leased to our customers. The equipment is shown on the condensed consolidated balance sheets as "Equipment leased to others under operating leases" and is depreciated to its estimated residual value at the end of the lease term, shown as "Leased equipment depreciation" in the condensed consolidated statements of earnings (loss), according to our fixed asset accounting policy. We receive periodic rental income payments under the leases, which are recorded as "Noninterest Income" in the condensed consolidated statements of earnings (loss). The equipment is tested periodically for impairment. No impairment was recorded on "Equipment leased to others under operating leases" during the nine months ended September 30, 2024 and 2023.
The following table presents the rental payments to be received on operating leases as of the date indicated:
|
|
|
|
|
|
|
September 30, 2024 |
|
(In thousands) |
| Year Ending December 31, |
|
| 2024 |
$ |
9,752 |
|
| 2025 |
40,332 |
|
| 2026 |
36,111 |
|
| 2027 |
29,145 |
|
| 2028 |
25,020 |
|
| Thereafter |
68,751 |
|
| Total undiscounted cash flows |
$ |
209,111 |
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 9. BORROWINGS AND SUBORDINATED DEBT
Borrowings
The following table summarizes our borrowings as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
Average |
|
|
|
Average |
|
Balance |
|
Rate |
|
Balance |
|
Rate |
|
(Dollars in thousands) |
| FHLB secured advances |
$ |
1,100,000 |
|
|
3.93 |
% |
|
$ |
— |
|
|
— |
% |
| FRB secured discount window advance |
200,000 |
|
|
5.00 |
% |
|
— |
|
|
— |
% |
| Senior Notes |
174,000 |
|
|
5.25 |
% |
|
174,000 |
|
|
5.25 |
% |
| Credit-linked notes |
119,624 |
|
|
16.05 |
% |
|
123,116 |
|
|
16.02 |
% |
| Bank Term Funding Program |
— |
|
|
— |
% |
|
2,618,300 |
|
|
4.37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total borrowings |
1,593,624 |
|
|
5.12 |
% |
|
2,915,416 |
|
|
4.92 |
% |
| Acquisition discount on senior notes |
(1,791) |
|
|
|
|
(4,094) |
|
|
|
Total borrowings, net (1) |
$ |
1,591,833 |
|
|
|
|
$ |
2,911,322 |
|
|
|
___________________
(1) All borrowings were held at the Bank level with the exception of the 5.25% Senior Notes due April 2025 ("Senior Notes"), which were issued at the holding company level.
The Bank has established secured and unsecured lines of credit under which it may borrow funds from time to time on a term or overnight basis from the FHLB, the FRBSF, and other financial institutions.
FHLB Secured Line of Credit. The Bank had secured financing capacity with the FHLB as of September 30, 2024 of $6.6 billion, collateralized by a blanket lien on $10.5 billion of qualifying loans and $20.9 million of securities. As of September 30, 2024, there were $471.6 million in letters of credit pledged and $1.1 billion outstanding. As of December 31, 2023, there were $243.8 million in letters of credit pledged and no balance outstanding.
The following table presents the interest rates and maturity dates of FHLB secured advances as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
|
|
|
|
Maturity |
|
|
|
|
|
|
|
Balance |
|
Rate |
|
Date |
|
|
|
|
|
|
|
(Dollars in thousands) |
| Term advance |
$ |
150,000 |
|
|
4.59 |
% |
|
6/26/2026 |
|
|
|
|
|
|
| Term advance |
150,000 |
|
|
4.63 |
% |
|
5/28/2027 |
|
|
|
|
|
|
| Term advance |
150,000 |
|
|
4.63 |
% |
|
6/3/2027 |
|
|
|
|
|
|
| Term advance |
150,000 |
|
|
4.39 |
% |
|
6/3/2027 |
|
|
|
|
|
|
| Callable term advance |
500,000 |
|
|
3.18 |
% |
|
9/18/2034 |
|
|
|
|
|
|
| Total FHLB secured advances |
$ |
1,100,000 |
|
|
3.93 |
% |
|
|
|
|
|
|
|
|
FRBSF Secured Line of Credit. The Bank has a secured line of credit with the FRBSF. As of September 30, 2024, the Bank had secured borrowing capacity of $6.9 billion collateralized by liens covering $6.7 billion of qualifying loans and $1.8 billion of securities. As of September 30, 2024, the balance outstanding was $200.0 million, which was subsequently paid off on the maturity date of October 3, 2024. As of December 31, 2023, there was no balance outstanding.
Senior Notes. The Senior Notes are unsecured debt obligations and rank equally with our other present and future unsecured unsubordinated obligations. We make interest payments on the Senior Notes semi-annually in arrears. We have the option to redeem the Senior Notes either in whole or in part on or after January 15, 2025 (i.e., 90 days prior to the maturity date of April 15, 2025). Notification of no less than 30 nor more than 60 days is required for redemption. The Senior Notes will be redeemable at a price equal to 100% of the principal amount of the Senior Notes to be redeemed plus accrued and unpaid interest to the date of redemption.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Credit-Linked Notes. The notes were issued in five classes, each with an interest rate of SOFR plus a spread that ranges from 8.00% to 13.25%, with a weighted average spread of 10.72% at September 30, 2024. The notes are linked to the credit risk of an approximately $2.38 billion reference pool of previously purchased single-family residential mortgage loans at September 30, 2024. The notes are due June 27, 2052. Principal payments on the notes are based only on principal that is actually collected on these loans. The notes are reported at fair value of $119.6 million at September 30, 2024. See Note 12. Fair Value Option for additional information.
FRBSF Bank Term Funding Program. In March of 2023, the Bank participated in the FRBSF Bank Term Funding Program. As of September 30, 2024, the was no balance outstanding. As of December 31, 2023, the balance outstanding was $2.6 billion consisting of two term advances that matured in March 2024.
Federal Funds Arrangements with Commercial Banks. As of September 30, 2024, the Bank had unsecured lines of credit of $290.0 million in the aggregate with several correspondent banks for the purchase of overnight funds, subject to availability of funds. These lines are renewable annually and have no unused commitment fees. As of September 30, 2024 and December 31, 2023, there were no balances outstanding. The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks. The availability of funds changes daily. As of September 30, 2024 and December 31, 2023 there was no balance outstanding.
Subordinated Debt
The following table summarizes the terms of each issuance of subordinated debt outstanding as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
Date |
|
Maturity |
|
Rate Index |
| Series |
Balance |
|
Rate (1) |
|
Balance |
|
Rate (1) |
|
Issued |
|
Date |
|
(Quarterly Reset) |
|
(Dollars in thousands) |
|
|
|
|
|
|
Subordinated notes, net (2)(7) |
$ |
381,050 |
|
|
3.25 |
% |
|
$ |
380,651 |
|
|
3.25 |
% |
|
4/30/2021 |
|
5/1/2031 |
|
Fixed rate (3) |
| Subordinated notes |
75,000 |
|
|
4.375 |
% |
|
75,000 |
|
|
4.375 |
% |
|
10/30/2020 |
|
10/30/2030 |
|
Fixed rate (6) |
| Trust V |
10,310 |
|
|
8.30 |
% |
|
10,310 |
|
|
8.74 |
% |
|
8/15/2003 |
|
9/17/2033 |
|
3-month Term SOFR + 3.10 |
| Trust VI |
10,310 |
|
|
8.26 |
% |
|
10,310 |
|
|
8.70 |
% |
|
9/3/2003 |
|
9/15/2033 |
|
3-month Term SOFR + 3.05 |
| Trust CII |
5,155 |
|
|
8.15 |
% |
|
5,155 |
|
|
8.59 |
% |
|
9/17/2003 |
|
9/17/2033 |
|
3-month Term SOFR + 2.95 |
| Trust VII |
61,856 |
|
|
8.27 |
% |
|
61,856 |
|
|
8.40 |
% |
|
2/5/2004 |
|
4/23/2034 |
|
3-month Term SOFR + 2.75 |
| Trust CIII |
20,619 |
|
|
6.90 |
% |
|
20,619 |
|
|
7.34 |
% |
|
8/15/2005 |
|
9/15/2035 |
|
3-month Term SOFR + 1.69 |
| Trust FCCI |
16,495 |
|
|
6.81 |
% |
|
16,495 |
|
|
7.25 |
% |
|
1/25/2007 |
|
3/15/2037 |
|
3-month Term SOFR + 1.60 |
| Trust FCBI |
10,310 |
|
|
6.76 |
% |
|
10,310 |
|
|
7.20 |
% |
|
9/30/2005 |
|
12/15/2035 |
|
3-month Term SOFR + 1.55 |
| Trust CS 2005-1 |
82,475 |
|
|
7.16 |
% |
|
82,475 |
|
|
7.60 |
% |
|
11/21/2005 |
|
12/15/2035 |
|
3-month Term SOFR + 1.95 |
| Trust CS 2005-2 |
128,866 |
|
|
7.47 |
% |
|
128,866 |
|
|
7.60 |
% |
|
12/14/2005 |
|
1/30/2036 |
|
3-month Term SOFR + 1.95 |
| Trust CS 2006-1 |
51,545 |
|
|
10.45 |
% |
|
51,545 |
|
|
10.45 |
% |
|
2/22/2006 |
|
4/30/2036 |
|
Prime + 1.95 |
| Trust CS 2006-2 |
51,550 |
|
|
7.47 |
% |
|
51,550 |
|
|
7.60 |
% |
|
9/27/2006 |
|
10/30/2036 |
|
3-month Term SOFR + 1.95 |
Trust CS 2006-3 (4) |
28,700 |
|
|
5.71 |
% |
|
28,453 |
|
|
6.00 |
% |
|
9/29/2006 |
|
10/30/2036 |
|
3-month EURIBOR + 2.05 |
| Trust CS 2006-4 |
16,470 |
|
|
10.45 |
% |
|
16,470 |
|
|
10.45 |
% |
|
12/5/2006 |
|
1/30/2037 |
|
Prime + 1.95 |
| Trust CS 2006-5 |
6,650 |
|
|
7.47 |
% |
|
6,650 |
|
|
7.60 |
% |
|
12/19/2006 |
|
1/30/2037 |
|
3-month Term SOFR + 1.95 |
| Trust CS 2007-2 |
39,177 |
|
|
7.47 |
% |
|
39,177 |
|
|
7.60 |
% |
|
6/13/2007 |
|
7/30/2037 |
|
3-month Term SOFR + 1.95 |
| PMB Statutory Trust III |
7,217 |
|
|
8.32 |
% |
|
7,217 |
|
|
9.02 |
% |
|
9/16/2002 |
|
9/26/2032 |
|
3-month Term SOFR + 3.40 |
| PMB Capital Trust III |
10,310 |
|
|
7.54 |
% |
|
10,310 |
|
|
7.66 |
% |
|
10/4/2004 |
|
10/8/2034 |
|
3-month Term SOFR + 2.00 |
| Total subordinated debt |
1,014,065 |
|
|
5.82 |
% |
|
1,013,419 |
|
|
5.93 |
% |
|
|
|
|
|
|
Acquisition discount (5) |
(71,914) |
|
|
|
|
(76,820) |
|
|
|
|
|
|
|
|
|
| Net subordinated debt |
$ |
942,151 |
|
|
|
|
$ |
936,599 |
|
|
|
|
|
|
|
|
|
___________________
(1) Rates do not include the effects of discounts and issuance costs.
(2) Net of unamortized issuance costs of $4.0 million.
(3) Interest rate is fixed until May 1, 2026, when it changes to a floating rate and resets quarterly at a benchmark rate plus 252 basis points.
(4) Denomination is in Euros with a value of €25.8 million.
(5) Amount represents the fair value adjustment on trust preferred securities assumed in acquisitions.
(6) Interest rate is fixed until October 30, 2025, when it changes to a floating rate equal to a benchmark rate, which is expected to be 3-month Term SOFR, plus a spread of 419.5 basis points.
(7) Subordinated notes, net issued at the Bank level rather than the holding company level.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 10. DERIVATIVES
To a limited extent, the Company utilizes interest rate swaps contracts with clients and counterparty banks for the purpose of offsetting or hedging exposures arising out of lending and borrowing transactions. The Company offers borrowers interest rate swaps under a "back-to-back" loan hedging program and offsets these "pay floating/receive fixed" contracts with borrowers with "receive floating/pay fixed" swaps with counterparty banks. The total notional balance of these offsetting hedging contracts was $198.2 million at September 30, 2024. The Company has also hedged the interest rate risk and foreign currency risk on €25.8 million of subordinated debt utilizing a combined cross currency swap/interest rate swap, which has had the effect of hedging the foreign currency risk and fixing the Euribor-based floating rate instrument at a fixed rate of 2.76% through July 2025. The outputs from the Company's NII simulation analysis and EVE modeling reflect the impact of these interest rate/currency swaps, however, the impact is not material. Our derivatives are carried at fair value and recorded in "Other assets" or "Accrued interest payable and other liabilities," as appropriate, in the condensed consolidated balance sheets. For derivatives not designated as hedging instruments, the changes in fair value of our derivatives and the related fees are recognized in "Noninterest income - other" in the condensed consolidated statements of earnings (loss). For the three and nine months ended September 30, 2024, changes in fair value and fees recorded in noninterest income in the condensed consolidated statements of earnings (loss) were immaterial.
Cash flow hedges in the table below included pay-fixed, receive-floating interest rate swap contracts with notional amounts aggregating $300.0 million, five year terms, and varying maturity dates throughout 2028. These swap contracts were entered into with institutional counterparties to hedge against variability in cash flow attributable to interest rate risk on a portion of the Company's borrowings. Also included in cash flow hedges in the table below are pay-fixed, receive-floating interest rate swap contracts with notional amounts aggregating $100.0 million, with forward-starting dates in 2024 and varying maturity dates throughout 2025. These swap contracts were entered into with institutional counterparties to hedge against variability in cash flow attributable to interest rate risk on future issuance of brokered deposits. The cash flow hedges were deemed highly effective at inception and thereafter. For derivatives designated as cash flow hedges, the portion of changes in fair value considered to be highly effective are reported as a component of AOCI on the condensed consolidated balance sheets until the related cash flows from the hedged items are recognized in earnings. As of September 30, 2024, the fair value of the cash flow hedges represented a net liability of $6.9 million, related to which a loss of $6.6 million (net of tax) was included in AOCI. The estimated amount to be reclassified in the next 12 months out of AOCI into earnings is $1.9 million.
The following table presents the U.S. dollar notional amounts and fair values of our derivative instruments included in the condensed consolidated balance sheets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
Notional |
|
Fair Value |
|
Notional |
|
Fair Value |
|
Amount |
|
Asset |
|
Liability |
|
Amount |
|
Asset |
|
Liability |
|
(In thousands) |
| Derivatives Designated as Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
| Cash flow hedges |
$ |
400,000 |
|
|
$ |
1,368 |
|
|
$ |
8,281 |
|
|
$ |
300,000 |
|
|
$ |
— |
|
|
$ |
4,090 |
|
| Derivatives Not Designated as Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
| Interest rate contracts |
198,205 |
|
|
5,027 |
|
|
4,973 |
|
|
168,850 |
|
|
6,426 |
|
|
6,331 |
|
| Foreign exchange contracts |
36,535 |
|
|
1,170 |
|
|
73 |
|
|
45,742 |
|
|
1,883 |
|
|
128 |
|
| Equity warrant assets |
16,333 |
|
|
3,297 |
|
|
— |
|
|
17,008 |
|
|
3,689 |
|
|
— |
|
| Total contracts |
$ |
651,073 |
|
|
$ |
10,862 |
|
|
$ |
13,327 |
|
|
$ |
531,600 |
|
|
$ |
11,998 |
|
|
$ |
10,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
During the third quarter of 2024, we closed out a portion of our pay-fixed, receive-floating interest rate swap contracts classified as cash flow hedges with notional amounts of $255.0 million. At September 30, 2024, we had a net loss of $0.7 million (net of tax) deferred in AOCI related to closed out cash flow hedges. Amounts deferred in AOCI from closed out cash flow hedges will be amortized into interest expense on a straight-line basis through the original maturity dates of the hedges as long as the hedged forecasted transactions continue to be expected to occur. During the three and nine months ended September 30, 2024, interest expense from the amortization of closed out cash flow hedges totaled $90,000.
For further information regarding our derivatives, see Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" of the Form 10-K.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 11. COMMITMENTS AND CONTINGENCIES
The following table presents a summary of commitments described below as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2024 |
|
2023 |
|
(In thousands) |
| Loan commitments to extend credit |
$ |
5,008,449 |
|
|
$ |
5,578,907 |
|
| Standby letters of credit |
201,317 |
|
|
252,572 |
|
| Total |
$ |
5,209,766 |
|
|
$ |
5,831,479 |
|
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the condensed consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement that the Company has in particular classes of financial instruments.
Commitments to extend credit are contractual agreements to lend to our customers when customers are in compliance with their contractual credit agreements and when customers have contractual availability to borrow under such agreements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The estimated exposure to loss from these commitments is included in the reserve for unfunded loan commitments, which amounted to $27.6 million at September 30, 2024 and $29.6 million at December 31, 2023.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. We provide standby letters of credit in conjunction with several of our lending arrangements and property lease obligations. Most guarantees expire within one year from the date of issuance. If a borrower defaults on its commitments subject to any letter of credit issued under these arrangements, we would be required to meet the borrower's financial obligation but would seek repayment of that financial obligation from the borrower. In some cases, borrowers have pledged cash and investment securities as collateral under these arrangements.
In addition, we invest in SBICs that call for capital contributions up to an amount specified in the partnership agreements, and in CRA-related loan pools. As of September 30, 2024 and December 31, 2023, we had commitments to contribute capital to these entities totaling $74.2 million and $94.5 million.
The following table presents the years in which commitments are expected to be paid for our commitments to contribute capital to SBICs and CRA-related loan pools as of the date indicated:
|
|
|
|
|
|
|
September 30, 2024 |
|
(In thousands) |
| Period ending December 31, |
|
| 2024 |
$ |
37,114 |
|
| 2025 |
37,113 |
|
|
|
|
|
|
|
|
|
| Total |
$ |
74,227 |
|
Legal Matters
In the ordinary course of our business, the Company is party to various legal actions, which we believe are incidental to the operation of our business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon currently available information, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a material adverse effect on the Company’s financial statements or operations. The range of any reasonably possible liabilities is also not significant.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 12. FAIR VALUE OPTION
The Company may elect to report financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings. The election is made upon the initial recognition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not otherwise be revoked once an election is made. The changes in fair value are recorded in "Noninterest income" on the condensed consolidated statements of earnings (loss). However, movements in debt valuation adjustments are reported as a component of "Accumulated other comprehensive loss, net" on the condensed consolidated balance sheets. Debt valuation adjustments represent the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk.
Fair Value Option for Certain Debt Liabilities
The Company has elected the fair value option for the credit-linked notes issued in September 2022. The Company elected the fair value option because these exposures are considered to be structured notes, which are financial instruments that contain embedded derivatives. The notes are linked to the credit risk of an approximately $2.38 billion reference pool of previously purchased single-family residential mortgage loans. The principal balance of the credit-linked notes was $120.6 million at September 30, 2024. The carrying value of the credit-linked notes at September 30, 2024 was the estimated fair value of $119.6 million. For the three and nine months ended September 30, 2024, interest expense on the credit-linked notes totaled $5.0 million and $15.0 million, respectively, and are recorded in "Interest expense - borrowings" on the condensed consolidated statements of earnings (loss).
The following table presents the changes in fair value of the credit-linked notes for which the fair value option has been elected for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
| Credit-Linked Notes |
2024 |
|
2023 |
|
2024 |
|
2023 |
| |
(In thousands) |
| Changes in fair value - losses (gains) included in earnings |
$ |
(4,399) |
|
|
$ |
5,422 |
|
|
$ |
(1,624) |
|
|
$ |
3,896 |
|
| Changes in fair value - other comprehensive (income) loss |
$ |
1,495 |
|
|
$ |
(3,050) |
|
|
$ |
2,110 |
|
|
$ |
(7,107) |
|
The following table provides information about the credit-linked notes carried at fair value as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
| Credit-Linked Notes |
2024 |
|
2023 |
|
(In thousands) |
|
|
|
|
| Carrying value reported on the condensed consolidated balance sheets |
$ |
119,624 |
|
|
$ |
123,116 |
|
| Aggregate unpaid principal balance in excess of fair value |
$ |
993 |
|
|
$ |
1,479 |
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 13. FAIR VALUE MEASUREMENTS
The Company uses fair value to measure certain assets and liabilities on a recurring basis, primarily securities available-for-sale, derivatives, and certain debt liabilities. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for individually evaluated loans and leases and other real estate owned and also to record impairment on certain assets, such as goodwill, CDI, and other long-lived assets.
For information regarding the valuation methodologies used to measure our assets recorded at fair value (under ASC Topic 820), and for estimating fair value for financial instruments not recorded at fair value (under ASC Topic 825, as amended by ASU 2016-01 and ASU 2018-03), see Note 1. Nature of Operations and Summary of Significant Accounting Policies and Note 15. Fair Value Measurements to the Consolidated Financial Statements of the Company's Form 10-K.
The Company also holds SBIC investments measured at fair value using the NAV per share practical expedient that are not required to be classified in the fair value hierarchy. At September 30, 2024, the fair value of these investments was $108.6 million.
The following tables present information on the assets and liabilities measured and recorded at fair value on a recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
September 30, 2024 |
| Measured on a Recurring Basis |
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
(In thousands) |
| Securities available-for-sale: |
|
|
|
|
|
|
|
| Agency residential MBS |
$ |
922,448 |
|
|
$ |
— |
|
|
$ |
922,448 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
| Agency commercial MBS |
33,532 |
|
|
— |
|
|
33,532 |
|
|
— |
|
| Agency residential CMOs |
418,240 |
|
|
— |
|
|
418,240 |
|
|
— |
|
| Municipal securities |
597 |
|
|
— |
|
|
597 |
|
|
— |
|
| Corporate debt securities |
266,630 |
|
|
— |
|
|
251,221 |
|
|
15,409 |
|
| Private label residential CMOs |
339,725 |
|
|
— |
|
|
339,725 |
|
|
— |
|
| Collateralized loan obligations |
284,973 |
|
|
— |
|
|
284,973 |
|
|
— |
|
| Private label commercial MBS |
13,622 |
|
|
— |
|
|
13,622 |
|
|
— |
|
| Asset-backed securities |
16,204 |
|
|
— |
|
|
16,204 |
|
|
— |
|
| SBA securities |
4,313 |
|
|
— |
|
|
4,313 |
|
|
— |
|
| Total securities available-for-sale |
$ |
2,300,284 |
|
|
$ |
— |
|
|
$ |
2,284,875 |
|
|
$ |
15,409 |
|
| Equity investments with readily determinable fair values |
$ |
1 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
— |
|
Derivatives (1): |
|
|
|
|
|
|
|
| Equity warrants |
3,297 |
|
|
— |
|
|
— |
|
|
3,297 |
|
| Interest rate and economic contracts |
7,565 |
|
|
— |
|
|
7,565 |
|
|
— |
|
| Derivative liabilities |
13,327 |
|
|
— |
|
|
13,327 |
|
|
— |
|
| Credit-linked notes |
119,624 |
|
|
— |
|
|
— |
|
|
119,624 |
|
|
|
|
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of |
|
December 31, 2023 |
| Measured on a Recurring Basis |
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
(In thousands) |
| Securities available-for-sale: |
|
|
|
|
|
|
|
| Agency residential MBS |
$ |
1,187,609 |
|
|
$ |
— |
|
|
$ |
1,187,609 |
|
|
$ |
— |
|
| U.S. Treasury securities |
4,968 |
|
|
4,968 |
|
|
— |
|
|
— |
|
| Agency commercial MBS |
253,306 |
|
|
— |
|
|
253,306 |
|
|
— |
|
| Agency residential CMOs |
284,334 |
|
|
— |
|
|
284,334 |
|
|
— |
|
| Municipal securities |
28,083 |
|
|
— |
|
|
28,083 |
|
|
— |
|
| Corporate debt securities |
267,232 |
|
|
— |
|
|
226,983 |
|
|
40,249 |
|
| Private label residential CMOs |
158,412 |
|
|
— |
|
|
158,412 |
|
|
— |
|
| Collateralized loan obligations |
108,416 |
|
|
— |
|
|
108,416 |
|
|
— |
|
| Private label commercial MBS |
20,813 |
|
|
— |
|
|
20,813 |
|
|
— |
|
| Asset-backed securities |
19,952 |
|
|
— |
|
|
19,952 |
|
|
— |
|
| SBA securities |
13,739 |
|
|
— |
|
|
13,739 |
|
|
— |
|
| Total securities available-for-sale |
$ |
2,346,864 |
|
|
$ |
4,968 |
|
|
$ |
2,301,647 |
|
|
$ |
40,249 |
|
| Equity investments with readily determinable fair values |
$ |
1 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
— |
|
Derivatives (1): |
|
|
|
|
|
|
|
| Equity warrants |
3,689 |
|
|
— |
|
|
— |
|
|
3,689 |
|
| Interest rate and economic contracts |
8,309 |
|
|
— |
|
|
8,309 |
|
|
— |
|
| Derivative liabilities |
10,549 |
|
|
— |
|
|
10,549 |
|
|
— |
|
| Credit-linked notes |
123,116 |
|
|
— |
|
|
— |
|
|
123,116 |
|
|
|
|
|
|
|
|
|
____________________
(1) For information regarding derivative instruments, see Note 10. Derivatives.
During the nine months ended September 30, 2024, there was a $20,000 transfer from Level 3 equity warrants to Level 1 equity investments with readily determinable fair values measured on a recurring basis. There was also a $38.1 million transfer of corporate debt securities from Level 3 to Level 2 during the nine months ended September 30, 2024 and an $16.8 million transfer of corporate debt securities from Level 2 to Level 3 during the same period.
The following table presents information about quantitative inputs and assumptions used to determine the fair values provided by our third-party pricing service for our Level 3 corporate debt securities available-for-sale measured at fair value on a recurring basis as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
Corporate Debt Securities |
|
Input or |
|
Weighted |
|
Range |
|
Average |
| Unobservable Inputs |
of Inputs |
|
Input (1) |
| Spread to 10 Year Treasury |
4.0% - 9.2% |
|
5.6% |
| Discount rates |
7.8% - 13.0% |
|
9.4% |
____________________
(1) Unobservable inputs for corporate debt securities were weighted by the relative fair values of the instruments.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents information about quantitative inputs and assumptions used in the modified Black-Scholes option pricing model to determine the fair value for our Level 3 equity warrants measured at fair value on a recurring basis as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
Equity Warrants |
|
|
|
Weighted |
|
Range |
|
Average |
| Unobservable Inputs |
of Inputs |
|
Input (1) |
| Volatility |
20.8% - 166.8% |
|
25.7% |
| Risk-free interest rate |
3.6% - 4.9% |
|
3.7% |
| Remaining life assumption (in years) |
0.08 - 4.98 |
|
3.18 |
____________________
(1) Unobservable inputs for equity warrants were weighted by the relative fair values of the instruments.
The following table summarizes activity for our Level 3 corporate debt securities available-for-sale, equity warrants, and credit-linked notes measured at fair value on a recurring basis for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
Equity |
|
Credit-Linked |
|
Debt Securities |
|
Warrants |
|
Notes |
|
(In thousands) |
| Balance, December 31, 2023 |
$ |
40,249 |
|
|
$ |
3,689 |
|
|
$ |
123,116 |
|
| Total included in earnings |
— |
|
|
65 |
|
|
(1,624) |
|
| Total included in other comprehensive income |
(3,441) |
|
|
— |
|
|
2,110 |
|
|
|
|
|
|
|
| Issuances |
— |
|
|
347 |
|
|
— |
|
| Principal payments |
— |
|
|
— |
|
|
(3,978) |
|
|
|
|
|
|
|
| Transfer from Level 2 |
16,750 |
|
|
— |
|
|
— |
|
| Transfer to Level 2 |
(38,149) |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
| Exercises and settlements |
— |
|
|
(784) |
|
|
— |
|
| Transfers to Level 1 (equity investments with readily |
|
|
|
|
|
| determinable fair values) |
— |
|
|
(20) |
|
|
— |
|
| Balance, September 30, 2024 |
$ |
15,409 |
|
|
$ |
3,297 |
|
|
$ |
119,624 |
|
|
|
|
|
|
|
| Unrealized net gains (losses) for the period included in other |
|
|
|
|
|
| comprehensive income for securities held at quarter-end |
$ |
(4,341) |
|
|
|
|
|
|
|
|
|
|
|
The following tables present assets measured at fair value on a non-recurring basis as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement as of |
|
September 30, 2024 |
| Measured on a Non-Recurring Basis |
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
(In thousands) |
| Individually evaluated loans and leases |
$ |
55,519 |
|
|
$ |
— |
|
|
$ |
34,204 |
|
|
$ |
21,315 |
|
|
|
|
|
|
|
|
|
| OREO |
4,479 |
|
|
— |
|
|
4,479 |
|
|
— |
|
| Total non-recurring |
$ |
59,998 |
|
|
$ |
— |
|
|
$ |
38,683 |
|
|
$ |
21,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement as of |
|
December 31, 2023 |
| Measured on a Non-Recurring Basis |
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
(In thousands) |
| Individually evaluated loans and leases |
$ |
6,402 |
|
|
$ |
— |
|
|
$ |
4,051 |
|
|
$ |
2,351 |
|
| OREO |
3,422 |
|
|
— |
|
|
3,422 |
|
|
— |
|
| Total non-recurring |
$ |
9,824 |
|
|
$ |
— |
|
|
$ |
7,473 |
|
|
$ |
2,351 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents losses recognized on assets measured on a nonrecurring basis for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
| Losses on Assets |
September 30, |
|
September 30, |
| Measured on a Non-Recurring Basis |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands) |
| Individually evaluated loans and leases |
$ |
8,945 |
|
|
$ |
6,108 |
|
|
$ |
29,192 |
|
|
$ |
11,083 |
|
|
|
|
|
|
|
|
|
| OREO |
207 |
|
|
16 |
|
|
336 |
|
|
16 |
|
| Total losses |
$ |
9,152 |
|
|
$ |
6,124 |
|
|
$ |
29,528 |
|
|
$ |
11,099 |
|
The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a nonrecurring basis as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
|
Valuation |
|
Unobservable |
|
Input or |
|
Weighted |
| Asset |
|
Fair Value |
|
Technique |
|
Inputs |
|
Range |
|
Average |
|
|
(In thousands) |
| Individually evaluated |
|
|
|
|
|
|
|
|
|
|
loans and leases (1) |
|
$ |
13,957 |
|
Discounted cash flows |
|
Discount rates |
|
8.50% - 8.50% |
|
8.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Individually evaluated |
|
|
|
|
|
|
|
|
|
|
| loans and leases |
|
7,358 |
|
Third-party appraisals |
|
No discounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-recurring Level 3 |
|
$ |
21,315 |
|
|
|
|
|
|
|
|
__________________
(1) Relates to one loan at September 30, 2024.
The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
Carrying |
|
Estimated Fair Value |
|
Amount |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
(In thousands) |
| Financial Assets: |
|
|
|
|
|
|
|
|
|
| Cash and due from banks |
$ |
251,869 |
|
|
$ |
251,869 |
|
|
$ |
251,869 |
|
|
$ |
— |
|
|
$ |
— |
|
| Interest-earning deposits in financial institutions |
2,302,358 |
|
|
2,302,358 |
|
|
2,302,358 |
|
|
— |
|
|
— |
|
| Securities available-for-sale |
2,300,284 |
|
|
2,300,284 |
|
|
— |
|
|
2,284,875 |
|
|
15,409 |
|
| Securities held-to-maturity |
2,301,263 |
|
|
2,229,482 |
|
|
180,427 |
|
|
2,045,576 |
|
|
3,479 |
|
| Investment in FRB and FHLB stock |
145,123 |
|
|
145,123 |
|
|
— |
|
|
145,123 |
|
|
— |
|
| Loans held for sale |
28,639 |
|
|
29,355 |
|
|
— |
|
|
29,355 |
|
|
— |
|
| Loans and leases held for investment, net |
23,273,432 |
|
|
22,198,131 |
|
|
— |
|
|
34,204 |
|
|
22,163,927 |
|
| Equity investments with readily determinable fair values |
1 |
|
|
1 |
|
|
1 |
|
|
— |
|
|
— |
|
| Equity warrants |
3,297 |
|
|
3,297 |
|
|
— |
|
|
— |
|
|
3,297 |
|
| Interest rate and economic contracts |
7,565 |
|
|
7,565 |
|
|
— |
|
|
7,565 |
|
|
— |
|
| Servicing rights |
20,102 |
|
|
20,661 |
|
|
— |
|
|
— |
|
|
20,661 |
|
|
|
|
|
|
|
|
|
|
|
| Financial Liabilities: |
|
|
|
|
|
|
|
|
|
| Demand, checking, money market, and savings deposits |
22,383,666 |
|
|
22,383,666 |
|
|
— |
|
|
22,383,666 |
|
|
— |
|
| Time deposits |
4,444,603 |
|
|
4,513,879 |
|
|
— |
|
|
4,513,879 |
|
|
— |
|
| Borrowings |
1,591,833 |
|
|
1,564,364 |
|
|
— |
|
|
1,444,740 |
|
|
119,624 |
|
| Subordinated debt |
942,151 |
|
|
886,815 |
|
|
— |
|
|
886,815 |
|
|
— |
|
| Derivative liabilities |
13,327 |
|
|
13,327 |
|
|
— |
|
|
13,327 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
Carrying |
|
Estimated Fair Value |
|
Amount |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
(In thousands) |
| Financial Assets: |
|
|
|
|
|
|
|
|
|
| Cash and due from banks |
$ |
202,427 |
|
|
$ |
202,427 |
|
|
$ |
202,427 |
|
|
$ |
— |
|
|
$ |
— |
|
| Interest-earning deposits in financial institutions |
5,175,149 |
|
|
5,175,149 |
|
|
5,175,149 |
|
|
— |
|
|
— |
|
| Securities available-for-sale |
2,346,864 |
|
|
2,346,864 |
|
|
4,968 |
|
|
2,301,647 |
|
|
40,249 |
|
| Securities held-to-maturity |
2,287,291 |
|
|
2,168,316 |
|
|
175,579 |
|
|
1,976,015 |
|
|
16,722 |
|
| Investment in FRB and FHLB stock |
126,346 |
|
|
126,346 |
|
|
— |
|
|
126,346 |
|
|
— |
|
| Loans held for sale |
122,757 |
|
|
126,646 |
|
|
— |
|
|
126,646 |
|
|
— |
|
| Loans and leases held for investment, net |
25,208,000 |
|
|
23,551,725 |
|
|
— |
|
|
4,051 |
|
|
23,547,674 |
|
| Equity investments with readily determinable fair values |
1 |
|
|
1 |
|
|
1 |
|
|
— |
|
|
— |
|
| Equity warrants |
3,689 |
|
|
3,689 |
|
|
— |
|
|
— |
|
|
3,689 |
|
| Interest rate and economic contracts |
8,309 |
|
|
8,309 |
|
|
— |
|
|
8,309 |
|
|
— |
|
| Servicing rights |
22,174 |
|
|
22,174 |
|
|
— |
|
|
— |
|
|
22,174 |
|
|
|
|
|
|
|
|
|
|
|
| Financial Liabilities: |
|
|
|
|
|
|
|
|
|
| Demand, checking, money market, and savings deposits |
23,768,896 |
|
|
23,768,896 |
|
|
— |
|
|
23,768,896 |
|
|
— |
|
| Time deposits |
6,632,873 |
|
|
6,732,246 |
|
|
— |
|
|
6,732,246 |
|
|
— |
|
| Borrowings |
2,911,322 |
|
|
2,908,527 |
|
|
— |
|
|
2,785,411 |
|
|
123,116 |
|
| Subordinated debt |
936,599 |
|
|
851,625 |
|
|
— |
|
|
851,625 |
|
|
— |
|
| Derivative liabilities |
10,549 |
|
|
10,549 |
|
|
— |
|
|
10,549 |
|
|
— |
|
Limitations
Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect income taxes or any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a portion of the Company’s financial instruments, fair value estimates are based on what management believes to be reasonable judgments regarding expected future cash flows, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimated fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Since the fair values have been estimated as of September 30, 2024, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 14. (LOSS) EARNINGS PER SHARE
The following table presents the computations of basic and diluted net earnings (loss) per share for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
September 30, |
|
2024 |
|
2023 |
|
(In thousands, except per share amounts) |
|
|
|
|
|
Non-Voting |
|
|
|
|
|
|
|
Class B |
|
Common |
|
|
|
|
|
Voting |
|
Non-Voting |
|
Stock |
|
Total |
|
Total |
|
Common |
|
Common |
|
Equivalents |
|
Common |
|
Common (2) |
| Basic Loss Per Share: |
|
|
|
|
|
|
|
|
|
| Net loss available to common |
|
|
|
|
|
|
|
|
|
| and equivalent stockholders |
$ |
(1,092) |
|
|
$ |
(3) |
|
|
$ |
(68) |
|
|
$ |
(1,163) |
|
|
$ |
(33,291) |
|
| Less: Earnings allocated to unvested restricted stock (1) |
59 |
|
|
— |
|
|
— |
|
|
59 |
|
|
374 |
|
| Net loss allocated to common |
|
|
|
|
|
|
|
|
|
| and equivalent shares |
$ |
(1,033) |
|
|
$ |
(3) |
|
|
$ |
(68) |
|
|
$ |
(1,104) |
|
|
$ |
(32,917) |
|
|
|
|
|
|
|
|
|
|
|
| Weighted average basic shares and unvested restricted |
|
|
|
|
|
|
|
|
|
| stock outstanding |
158,503 |
|
|
477 |
|
|
9,903 |
|
|
168,883 |
|
|
78,831 |
|
| Less: weighted average unvested restricted stock |
|
|
|
|
|
|
|
|
|
| outstanding |
(300) |
|
|
— |
|
|
— |
|
|
(300) |
|
|
(950) |
|
| Weighted average basic shares outstanding |
158,203 |
|
|
477 |
|
|
9,903 |
|
|
168,583 |
|
|
77,881 |
|
|
|
|
|
|
|
|
|
|
|
| Basic loss per share |
$ |
(0.01) |
|
|
$ |
(0.01) |
|
|
$ |
(0.01) |
|
|
$ |
(0.01) |
|
|
$ |
(0.42) |
|
|
|
|
|
|
|
|
|
|
|
| Diluted Loss Per Share: |
|
|
|
|
|
|
|
|
|
| Net loss allocated to common |
|
|
|
|
|
|
|
|
|
| and equivalent shares |
$ |
(1,033) |
|
|
$ |
(3) |
|
|
$ |
(68) |
|
|
$ |
(1,104) |
|
|
$ |
(32,917) |
|
| Weighted average diluted shares outstanding |
158,203 |
|
|
477 |
|
|
9,903 |
|
|
168,583 |
|
|
77,881 |
|
| Diluted loss per share |
$ |
(0.01) |
|
|
$ |
(0.01) |
|
|
$ |
(0.01) |
|
|
$ |
(0.01) |
|
|
$ |
(0.42) |
|
________________________
(1) Represents cash dividends paid to holders of unvested restricted stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.
(2) Share amounts for the three months ended September 30, 2023 have been restated by multiplying historical amounts by the Merger exchange ratio of 0.6569.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 30, |
|
2024 |
|
2023 |
|
(In thousands, except per share amounts) |
|
|
|
|
|
Non-Voting |
|
|
|
|
|
|
|
Class B |
|
Common |
|
|
|
|
|
Voting |
|
Non-Voting |
|
Stock |
|
Total |
|
Total |
|
Common |
|
Common |
|
Equivalents |
|
Common |
|
Common (2) |
| Basic Earnings (Loss) Per Share: |
|
|
|
|
|
|
|
|
|
| Net earnings (loss) available to common |
|
|
|
|
|
|
|
|
|
| and equivalent stockholders |
$ |
37,575 |
|
|
$ |
114 |
|
|
$ |
2,439 |
|
|
$ |
40,128 |
|
|
$ |
(1,446,023) |
|
|
|
|
|
|
|
|
|
|
|
| Less: Earnings allocated to unvested restricted stock (1) |
27 |
|
|
— |
|
|
— |
|
|
27 |
|
|
136 |
|
| Net earnings (loss) allocated to common |
|
|
|
|
|
|
|
|
|
| and equivalent shares |
$ |
37,602 |
|
|
$ |
114 |
|
|
$ |
2,439 |
|
|
$ |
40,155 |
|
|
$ |
(1,445,887) |
|
|
|
|
|
|
|
|
|
|
|
| Weighted average basic shares and unvested restricted |
|
|
|
|
|
|
|
|
|
| stock outstanding |
158,242 |
|
|
477 |
|
|
10,234 |
|
|
168,953 |
|
|
78,941 |
|
| Less: weighted average unvested restricted stock |
|
|
|
|
|
|
|
|
|
| outstanding |
(567) |
|
|
— |
|
|
— |
|
|
(567) |
|
|
(1,263) |
|
| Weighted average basic shares outstanding |
157,675 |
|
|
477 |
|
|
10,234 |
|
|
168,386 |
|
|
77,678 |
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings (loss) per share |
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
(18.61) |
|
|
|
|
|
|
|
|
|
|
|
| Diluted Earnings (Loss) Per Share: |
|
|
|
|
|
|
|
|
|
| Net earnings (loss) allocated to common |
|
|
|
|
|
|
|
|
|
| and equivalent shares |
$ |
37,602 |
|
|
$ |
114 |
|
|
$ |
2,439 |
|
|
$ |
40,155 |
|
|
$ |
(1,445,887) |
|
| Weighted average diluted shares outstanding |
157,675 |
|
|
477 |
|
|
10,234 |
|
|
168,386 |
|
|
77,678 |
|
| Diluted earnings (loss) per share |
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
(18.61) |
|
________________________
(1) Represents cash dividends paid to holders of unvested restricted stock, net of forfeitures, plus undistributed earnings amounts available to holders of unvested restricted stock, if any.
(2) Share amounts for the nine months ended September 30, 2023 have been restated by multiplying historical amounts by the Merger exchange ratio of 0.6569.
The following table presents the weighted average outstanding restricted shares and warrants that were not included in the computation of diluted earnings (loss) per share because their effect would be anti-dilutive for the three and nine months ended September 30, 2024 and 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands) |
Restricted stock awards and units (1) |
300 |
|
|
950 |
|
|
567 |
|
|
1,263 |
|
| Warrants |
18,902 |
|
|
— |
|
|
18,902 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________________
(1) Share amounts for the three and nine months ended September 30, 2023 have been restated by multiplying historical amounts by the Merger exchange ratio of 0.6569.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 15. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following table presents interest income and noninterest income, the components of total revenue, as disclosed in the condensed consolidated statements of earnings (loss) and the related amounts which are from contracts with customers within the scope of ASC Topic 606, "Revenue from Contracts with Customers," for the periods indicated. As illustrated here, substantially all of our revenue is specifically excluded from the scope of ASC Topic 606.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
2024 |
|
2023 |
|
Total |
|
Revenue from |
|
Total |
|
Revenue from |
|
Recorded |
|
Contracts with |
|
Recorded |
|
Contracts with |
|
Revenue |
|
Customers |
|
Revenue |
|
Customers |
|
(In thousands) |
| Total Interest Income |
$ |
446,893 |
|
|
$ |
— |
|
|
$ |
446,084 |
|
|
$ |
— |
|
| Noninterest Income: |
|
|
|
|
|
|
|
| Service charges on deposit accounts |
4,568 |
|
|
4,568 |
|
|
4,018 |
|
|
4,018 |
|
| Other commissions and fees |
8,256 |
|
|
4,322 |
|
|
7,641 |
|
|
3,974 |
|
| Leased equipment income |
17,176 |
|
|
— |
|
|
14,554 |
|
|
— |
|
| Loss on sale of loans |
(62) |
|
|
— |
|
|
(1,901) |
|
|
— |
|
| Loss on sale of securities |
(59,946) |
|
|
— |
|
|
— |
|
|
— |
|
| Dividends and gains on equity investments |
3,730 |
|
|
— |
|
|
3,837 |
|
|
— |
|
| Warrant income (loss) |
211 |
|
|
— |
|
|
(88) |
|
|
— |
|
| LOCOM HFS adjustment |
(74) |
|
|
— |
|
|
307 |
|
|
— |
|
| Other income |
10,689 |
|
|
170 |
|
|
15,440 |
|
|
117 |
|
| Total noninterest (loss) income |
(15,452) |
|
|
9,060 |
|
|
43,808 |
|
|
8,109 |
|
| Total Revenue |
$ |
431,441 |
|
|
$ |
9,060 |
|
|
$ |
489,892 |
|
|
$ |
8,109 |
|
The following table presents revenue from contracts with customers based on the timing of revenue recognition for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
September 30, |
|
2024 |
|
2023 |
|
(In thousands) |
| Products and services transferred at a point in time |
$ |
4,012 |
|
|
$ |
3,698 |
|
| Products and services transferred over time |
5,048 |
|
|
4,411 |
|
| Total revenue from contracts with customers |
$ |
9,060 |
|
|
$ |
8,109 |
|
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2024 |
|
2023 |
|
Total |
|
Revenue from |
|
Total |
|
Revenue from |
|
Recorded |
|
Contracts with |
|
Recorded |
|
Contracts with |
|
Revenue |
|
Customers |
|
Revenue |
|
Customers |
|
(In thousands) |
| Total Interest Income |
$ |
1,388,186 |
|
|
$ |
— |
|
|
$ |
1,503,760 |
|
|
$ |
— |
|
| Noninterest Income: |
|
|
|
|
|
|
|
| Service charges on deposit accounts |
13,813 |
|
|
13,813 |
|
|
11,906 |
|
|
11,906 |
|
| Other commissions and fees |
25,027 |
|
|
13,708 |
|
|
29,226 |
|
|
12,528 |
|
| Leased equipment income |
40,379 |
|
|
— |
|
|
50,798 |
|
|
— |
|
| Gain (loss) on sale of loans |
625 |
|
|
— |
|
|
(157,820) |
|
|
— |
|
| Loss on sale of securities |
(59,946) |
|
|
— |
|
|
— |
|
|
— |
|
| Dividends and gains on equity investments |
7,964 |
|
|
— |
|
|
7,593 |
|
|
— |
|
| Warrant gain (loss) |
65 |
|
|
— |
|
|
(545) |
|
|
— |
|
| LOCOM HFS adjustment |
218 |
|
|
— |
|
|
(11,636) |
|
|
— |
|
| Other income |
20,011 |
|
|
396 |
|
|
22,595 |
|
|
628 |
|
| Total noninterest income (loss) |
48,156 |
|
|
27,917 |
|
|
(47,883) |
|
|
25,062 |
|
| Total Revenue |
$ |
1,436,342 |
|
|
$ |
27,917 |
|
|
$ |
1,455,877 |
|
|
$ |
25,062 |
|
The following table presents revenue from contracts with customers based on the timing of revenue recognition for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 30, |
|
2024 |
|
2023 |
|
(In thousands) |
| Products and services transferred at a point in time |
$ |
13,093 |
|
|
$ |
11,899 |
|
| Products and services transferred over time |
14,824 |
|
|
13,163 |
|
| Total revenue from contracts with customers |
$ |
27,917 |
|
|
$ |
25,062 |
|
Contract Balances
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
(In thousands) |
| Receivables, which are included in "Other assets" |
$ |
1,457 |
|
|
$ |
1,615 |
|
|
|
|
|
| Contract liabilities, which are included in "Accrued interest payable and other liabilities" |
$ |
366 |
|
|
$ |
418 |
|
Contract liabilities relate to advance consideration received from customers for which revenue is recognized over the life of the contract. The change in contract liabilities for the nine months ended September 30, 2024 due to revenue recognized that was included in the contract liability balance at the beginning of the period was $52,000.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 16. STOCKHOLDERS' EQUITY
Stock-Based Compensation
At the special meeting of stockholders held on November 22, 2023, the Company's stockholders approved the Amended and Restated Banc of California, Inc. 2018 Stock Incentive Plan (the “Amended and Restated 2018 Plan”). The Company’s Amended and Restated 2018 Plan permits stock-based compensation awards to officers, directors, employees, and consultants and will remain in effect until November 30, 2033. The Amended and Restated 2018 Plan authorizes grants of stock-based compensation instruments to purchase or issue up to 10,717,882 shares. As of September 30, 2024, there were 4,744,823 shares available for grant under the Amended and Restated 2018 Plan. In addition to the Amended and Restated 2018 Plan, in connection with the Merger, the Company assumed the Amended and Restated PacWest Bancorp 2017 Stock Incentive Plan (the "PacWest 2017 Plan") with respect to PacWest's outstanding stock-based awards.
Restricted Stock
Restricted stock amortization totaled $5.2 million and $0.3 million for the three months ended September 30, 2024 and 2023 and $13.3 million and $12.9 million nine months ended September 30, 2024 and 2023. Such amounts are included in "Compensation expense" on the condensed consolidated statements of earnings (loss). The amount of unrecognized compensation expense related to all unvested RSUs, TRSAs, and PRSUs as of September 30, 2024 totaled $49.9 million.
Time-Based Restricted Stock Awards
At September 30, 2024, there were 1,810,224 shares of unvested RSUs outstanding pursuant to the Amended and Restated 2018 Plan. At September 30, 2024, there were 283,624 shares of unvested TRSAs outstanding pursuant to the PacWest 2017 Plan. The RSUs and TRSAs generally vest over a service period of three or four years from the date of the grant or immediately upon death of an employee. Compensation expense related to RSUs and TRSAs is based on the fair value of the underlying stock on the award date and is recognized over the vesting period using the straight‑line method. TRSAs were assumed by the Company in connection with the Merger and continue to vest in accordance with the original vesting schedule of the awards.
Performance-Based Restricted Stock Units
At September 30, 2024, there were 2,473,467 units of unvested PRSUs that have been granted. Compensation expense related to PRSUs is based on the fair value of the underlying stock on the award date and is amortized over the vesting period using the straight-line method unless it is determined that: (1) attainment of the financial metrics is less than probable, in which case a portion of the amortization is suspended, or (2) attainment of the financial metrics is improbable, in which case a portion of the previously recognized amortization is reversed and also suspended. Annual PRSU expense may vary during the performance period based upon changes in management's estimate of the number of shares that may ultimately vest. In the case where the performance target for the PRSUs is based on a market condition (such as total shareholder return), the amortization is neither reversed nor suspended if it is subsequently determined that the attainment of the performance target is less than probable or improbable and the employee continues to meet the service requirement of the award.
Classes of Stock and Equity Instruments
Preferred Stock
Depositary shares each representing 1/40th of a share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series F (“Series F Preferred Stock”) are listed on the NYSE under the symbol “BANC/PF.” The Series F Preferred Stock ranks senior to our common stock and common stock equivalents both as to dividends and liquidation preference but generally have no voting rights. There are 50,000,000 total preferred shares authorized, of which 27,000,000 were authorized for the non-voting common stock equivalents (“NVCE”) and 513,250 were authorized and outstanding for the Series F Preferred stock at September 30, 2024 and December 31, 2023.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Common Stock
Our voting common stock is listed on the NYSE under the symbol “BANC” and there were 446,863,844 shares authorized at September 30, 2024 and December 31, 2023 and 158,328,021 shares outstanding at September 30, 2024 and 156,790,349 shares outstanding at December 31, 2023.
Class B Non-Voting Common Stock
Our Class B non-voting common stock is not listed or traded on any national securities exchange or automated quotation system, and there currently is no established trading market for such stock. The Class B non-voting common stock ranks equally with, and has identical rights, preferences, and privileges as the voting common stock with respect to dividends and liquidation preference but generally have no voting rights. There were 3,136,156 shares authorized at September 30, 2024 and December 31, 2023 and 477,321 shares outstanding at September 30, 2024 and 477,321 shares outstanding at December 31, 2023.
Non-Voting Common Stock Equivalents
In conjunction with the Merger, the Company issued a new class of NVCE from authorized preferred stock, which were issued under the Investment Agreements (as defined below). Our NVCE stock is not listed or traded on any national securities exchange or automated quotation system, and there currently is no established trading market for such stock. The NVCE stock does not have voting rights and ranks equally with, and has identical rights, preferences, and privileges as, the voting common stock with respect to dividends or distributions (including regular quarterly dividends) declared by the Board and rights upon any liquidation, dissolution, winding up or similar proceeding of the Company. There were 27,000,000 shares authorized at September 30, 2024 and December 31, 2023 and 9,790,600 shares outstanding at September 30, 2024 and 10,829,990 shares outstanding at December 31, 2023.
Warrants
In conjunction with the Merger and per the terms of the investment agreements, each dated July 25, 2023, entered into by Banc of California, Inc. with the Warburg Investors (such agreement, the "Warburg Investment Agreement") and the Centerbridge Investor (together with the Warburg Investment Agreement, the "Investment Agreements"), respectively, the Warburg Investors received warrants to purchase 15,853,659 shares of NVCE stock, and the Centerbridge Investor received warrants to purchase 3,048,780 shares of voting common stock (the “Centerbridge Warrants”), each with an initial exercise price of $15.375 per share, subject to customary anti-dilution adjustments provided for under the warrant agreements. The warrants carry a term of seven years but are subject to mandatory exercise when the market price of the voting common stock reaches or exceeds $24.60 for 20 or more trading days during any 30-consecutive trading day period. These warrants are being accounted for as equity. The exercise price of the Centerbridge Warrants will be adjusted downward, per the terms of the agreement, for cash distributions to stockholders of the Company's voting common stock, including the Company's quarterly cash dividend.
NOTE 17. RELATED PARTY TRANSACTIONS
Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with, the Bank in the ordinary course of business, including deposits, loans, and other financial services-related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank's underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. As of September 30, 2024, no related party loans were categorized as nonaccrual, past due, restructured, or potential problem loans.
Transactions with Related Parties
The Company and the Bank have engaged in the transaction described below with the Company's current directors, executive officers, and beneficial owners of more than five percent of the outstanding shares of the Company's voting common stock and certain persons related to them.
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company is a party to a services agreement with IntraFi Network LLC (“IntraFi”) whereby IntraFi provides the Bank with certain insured cash sweep services from time to time. Affiliates of funds managed by Warburg Pincus LLC hold a material investment interest in IntraFi. Additionally, one of Warburg Pincus LLC’s principals, Todd Schell, who currently serves as a member of the Board, is a member of the board of directors of IntraFi. Affiliates of funds managed by Warburg Pincus LLC beneficially owned approximately 9.9% of the Company’s outstanding voting common stock as of July 30, 2023, based on information reported on a Schedule 13D filed with the SEC on August 1, 2024. For the three and nine months ended September 30, 2024, the amounts paid to IntraFi for certain insured cash sweep services were $1.8 million and $6.0 million and were $2.6 million and $6.6 million for the three and nine months ended September 30, 2023.
NOTE 18. SUBSEQUENT EVENTS
Common Stock Dividends
On November 8, 2024, the Company announced that the Board of Directors had declared a quarterly cash dividend of $0.10 per common share. The cash dividend is payable on January 2, 2025, to stockholders of record at the close of business on December 16, 2024.
Preferred Stock Dividend
On November 8, 2024, the Company announced the that the Board of Directors had declared a quarterly cash dividend of $0.4845 per Depositary Share. The cash dividend is payable on December 2, 2024 to stockholders of record at the close of business on November 21, 2024.
NOTE 19. RECENTLY ISSUED ACCOUNTING STANDARDS
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective |
|
Effect on the Financial Statements |
| Standard |
|
Description |
|
Date |
|
or Other Significant Matters |
ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative |
|
This standard amends certain Subtopics of the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532, "Disclosure Update and Simplification" that was issued in 2018. The amendments in this standard should be applied prospectively. Early adoption is prohibited.
|
|
The effective date for each amendment will be the date on which the SEC's removal of the related disclosure from Regulation S-X or Regulation S-K becomes effective. |
|
The Company does not expect the adoption of ASU 2023-06 to have a material impact on its consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective |
|
Effect on the Financial Statements |
| Standard |
|
Description |
|
Date |
|
or Other Significant Matters |
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures |
|
The standard improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The enhanced segment disclosure requirements apply retrospectively to all prior periods presented in the financial statements. Additionally, early adoption is permitted. |
|
December 31, 2024 |
|
The Company is evaluating the impact of this standard on its consolidated financial statements. |
BANC OF CALIFORNIA, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective |
|
Effect on the Financial Statements |
| Standard |
|
Description |
|
Date |
|
or Other Significant Matters |
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures |
|
The standard, among other changes, improves annual income tax disclosures by requiring disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The enhanced income tax disclosure requirements apply on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. Additionally, early adoption is permitted. |
|
January 1, 2025 |
|
The Company is evaluating the impact of this standard on its consolidated financial statements. |
|
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|
|
|
|
|
Effective |
|
Effect on the Financial Statements |
| Standard |
|
Description |
|
Date |
|
or Other Significant Matters |
ASU 2024-02, Codification Improvements: Amendments to Remove References to the Concepts Statements |
|
The ASU amends the Codification to remove references to various concepts and impacts a variety of topics in the Codification. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Concept Statements to provide guidance in certain topical areas. The amendment in this ASU should be applied using one of the following transition methods: (1) prospectively to all new transactions recognized on or after the date that the entity first applies the amendments; or (2) retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. Additionally, early adoption is permitted. |
|
January 1, 2025 |
|
The Company is evaluating the impact of this standard on its consolidated financial statements. |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and nine months ended September 30, 2024. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the "Form 10-K") and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q.
Forward-Looking Information
This Quarterly Report on Form 10-Q contains certain “forward-looking statements” about the Company and its subsidiaries within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, strategies, goals, and projections and including statements about our expectations regarding our operating expenses, profitability, allowance for credit losses, net interest margin, net interest income, deposit growth, loan and lease portfolio growth and production, acquisitions and related integrations, maintaining capital adequacy, liquidity, goodwill, and interest rate risk management. All statements contained in this Quarterly Report on Form 10-Q that are not clearly historical in nature are forward-looking, and the words “anticipate,” “assume,” “intend,” “believe,” “forecast,” “expect,” “estimate,” “plan,” “continue,” “will,” “should,” “look forward” and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and their results) involve risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. Actual results could differ materially from those contained or implied by such forward-looking statements for a variety of factors, including without limitation:
•changes in general economic conditions, either nationally or in our market areas, including the impact of supply chain disruptions, and the risk of recession or an economic downturn;
•changes in the interest rate environment, including the recent and potential future changes in the FRB benchmark rate, which could adversely affect our revenue and expenses, the value of assets and obligations, the realization of deferred tax assets, the availability and cost of capital and liquidity, and the impacts of continuing inflation;
•the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and non-performing assets, and may result in our allowance for credit losses not being adequate;
•fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area;
•the quality and composition of our securities portfolio;
•our ability to develop and maintain a strong core deposit base, including among our venture banking clients, or other low cost funding sources necessary to fund our activities particularly in a rising or high interest rate environment;
•the rapid withdrawal of a significant amount of demand deposits over a short period of time;
•the costs and effects of litigation;
•risks related to the Company's acquisitions, including disruption to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; and our inability to achieve expected revenues, cost savings, synergies, and other benefits; and in the case of our recent merger with PacWest, reputational risk, regulatory risk and potential adverse reactions of the Company's or PacWest's customers, suppliers, vendors, employees or other business partners;
•results of examinations by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, restrict our ability to invest in certain assets, refrain from issuing an approval or non-objection to certain capital or other actions, increase our allowance for credit losses, result in write-downs of asset values, restrict our ability or that of our bank subsidiary to pay dividends, or impose fines, penalties or sanctions;
•legislative or regulatory changes that adversely affect our business, including changes in tax laws and policies, accounting policies and practices, privacy laws, and regulatory capital or other rules;
•the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;
•errors in estimates of fair values of certain of our assets and liabilities, which may result in significant changes in valuation;
•failures or security breaches with respect to the network, applications, vendors, and computer systems on which we depend, including due to cybersecurity threats;
•our ability to attract and retain key members of our senior management team;
•the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business;
•the impact of bank failures or other adverse developments at other banks on general depositor and investor sentiment regarding the stability and liquidity of banks;
•the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital;
•our existing indebtedness, together with any future incurrence of additional indebtedness, could adversely affect our ability to raise additional capital and to meet our debt obligations;
•the risk that we may incur significant losses on future asset sales; and
•other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this Quarterly Report on Form 10-Q and from time to time in other documents that we file with or furnish to the SEC.
All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available at the time the statement is made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.
Presentation of Results – PacWest Bancorp Merger
On November 30, 2023, PacWest Bancorp merged with and into Banc of California, Inc. (the “Merger” or "PACW Merger"), with Banc of California, Inc. continuing as the surviving legal corporation and Banc of California, Inc. concurrently closed a $400 million equity capital raise. The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, PacWest Bancorp was deemed the acquirer for financial reporting purposes, even though Banc of California, Inc. was the legal acquirer. The Merger was an all-stock transaction and has been accounted for as a business combination. Banc of California, Inc.'s financial results for all periods ended prior to November 30, 2023 reflect PacWest Bancorp results only on a standalone basis. In addition, Banc of California, Inc.'s reported financial results for the year ended December 31, 2023 reflect PacWest Bancorp financial results only on a standalone basis until the closing of the Merger on November 30, 2023, and results of the combined company for the month of December 2023. The number of shares issued and outstanding, earnings per share, and all references to share quantities or metrics of Banc of California, Inc. have been retrospectively restated to reflect the equivalent number of shares issued in the Merger as the Merger was accounted for as a reverse merger. Under the reverse merger method of accounting, the assets and liabilities of legacy Banc of California, Inc. as of November 30, 2023 were recorded at their respective fair values.
Overview
Banc of California, Inc., a Maryland corporation, was incorporated in March 2002 and serves as the holding company for its wholly owned subsidiary, Banc of California (the “Bank”), a California state-chartered bank and member of the FRB. When we refer to the “parent” or the “holding company," we are referring to Banc of California, Inc., the parent company, on a stand-alone basis. When we refer to “we,” “us,” “our,” or the “Company,” we are referring to Banc of California, Inc. and its consolidated subsidiaries including the Bank, collectively.
The Bank is a relationship-based community bank focused on providing business banking and treasury management services to small, middle-market, and venture-backed businesses. The Bank offers a broad range of loan and lease and deposit products and services through 80 full-service branches located throughout California and in Durham, North Carolina and Denver, Colorado, and loan production offices around the country.
At September 30, 2024, the Company had total assets of $33.4 billion, including $23.6 billion of total loans and leases, net of deferred fees, $2.3 billion of securities available-for-sale, $2.3 billion of securities held-to-maturity, and $2.3 billion of interest-earning deposits in financial institutions compared to $38.5 billion of total assets at December 31, 2023, including $25.6 billion of total loans and leases, net of deferred fees, $2.3 billion of securities available-for-sale, $2.3 billion securities held-to-maturity, and $5.2 billion of interest-earning deposits in financial institutions. The $5.1 billion decrease in total assets since year-end was due mainly to a $2.9 billion decrease in interest-earning deposits in financial institutions and a $2.1 billion decrease in total loans and leases, net of deferred fees.
At September 30, 2024, the Company had total liabilities of $29.9 billion, including total deposits of $26.8 billion and borrowings of $1.6 billion, compared to $35.1 billion of total liabilities at December 31, 2023, including $30.4 billion of total deposits and $2.9 billion borrowings. The $5.2 billion decrease in total liabilities since year-end was due mainly to a $3.6 billion decrease in deposits and a $1.3 billion decrease in borrowings.
The Company had total stockholders' equity of $3.5 billion at September 30, 2024 and $3.4 billion at December 31, 2023. The increase was due mainly to a $104.0 million decrease in in the unrealized after-tax net loss in accumulated other comprehensive loss and net earnings of $70.0 million, offset partially by common and preferred stock dividends of $80.2 million. Our consolidated common equity Tier 1 (CET1), Tier 1 capital and Total capital ratios were 10.46%, 12.88%, and 17.00% at September 30, 2024.
Recent Events
Civic Loan Sale
On July 18, 2024, the Bank closed the sale of $1.95 billion of Civic business-purpose residential loans which had been moved to held for sale at LOCOM of $1.91 billion during the second quarter of 2024. The loan sale generated net proceeds of $1.91 billion and provided liquidity and capital to support the repositioning of approximately $742 million of securities and pay down higher-cost brokered deposits and borrowings, as discussed further below.
PacWest Bancorp Merger
On November 30, 2023, Banc of California, Inc. completed the Merger, pursuant to which PacWest Bancorp merged with and into Banc of California, Inc., with Banc of California, Inc. continuing as the surviving legal corporation and, as of December 1, 2023, Banc of California, N.A. merged into Pacific Western Bank with Pacific Western Bank continuing under the Banc of California name and brand as the Bank. Concurrent with the completion of the Merger, Banc of California, Inc. also completed its $400 million equity raise from affiliates of funds managed by Warburg Pincus LLC and certain investment vehicles sponsored, managed, or advised by Centerbridge Partners, L.P. and its affiliates. The stock issued by Banc of California, Inc. as consideration in the Merger totaled approximately $663 million.
The Merger was accounted for as a reverse merger using the acquisition method of accounting, therefore, PacWest Bancorp was deemed the accounting acquirer, even though Banc of California, Inc. was the legal acquirer. We recorded the legacy Banc of California, Inc. acquired assets and assumed liabilities, both tangible and intangible, at their estimated fair values as of the acquisition date. The application of the acquisition method of accounting resulted in goodwill of $216.8 million. The Bank is headquartered in Los Angeles, California, and operates 80 branches located throughout California, and in North Carolina and Colorado. We completed the Merger to, among other things, enhance our scale and presence in California and augment and diversify our sources of revenue.
Balance Sheet Repositioning
In connection with the Merger, we implemented our previously announced balance sheet repositioning strategy. From the announcement of the Merger on July 25, 2023, through the end of the year, the combined company, legacy PacWest Bancorp and legacy Banc of California, Inc., sold assets totaling $6.1 billion and completed the paydown of $8.6 billion of high-cost liabilities, which improved the mix of earning assets and reduced the amount of higher-cost funding. The sold assets included $3.9 billion of securities from both the legacy Banc of California, Inc. and PacWest Bancorp portfolios, and $1.5 billion of single-family loans and $0.7 billion of multi-family loans from the legacy Banc of California, Inc. portfolios. The liabilities that were paid down included $4.7 billion of borrowings and $3.9 billion of brokered deposits from both legacy entities.
In the third quarter of 2024, we closed on the sale of $1.95 billion of Civic loans which had been moved to held for sale during the second quarter of 2024. The loan sale generated net proceeds of $1.91 billion, which provided capital and liquidity to support the repositioning of a portion of the available-for-sale securities portfolio and pay down higher-cost brokered deposits and borrowings. We sold $742 million of securities with a weighted average yield of 2.94% resulting in a pre-tax loss of $60 million and purchased $724 million of similar quality securities with a weighted average yield of 5.65%. The liabilities that were paid off included $1.85 billion of brokered deposits with an average cost of 5.35% at the time of retirement and the remaining $545 million in Bank Term Funding Program balance with a rate of 5.40%. We replaced a portion of these higher-cost fundings with the addition of a $500 million long-term FHLB advance with a rate of 3.18%. These balance sheet repositioning actions that we executed during the quarter resulted in net interest margin expansion and improved both our capital and liquidity. As of September 30, 2024, the repositioning as contemplated as a result of the Merger has been largely completed.
Key Performance Indicators
Among other factors, our operating results generally depend on the following key performance indicators:
The Level of Net Interest Income
Net interest income is the excess of interest earned on our interest-earning assets over the interest paid on our interest-bearing liabilities. Net interest margin is net interest income (annualized if related to a quarterly period) expressed as a percentage of average interest-earning assets. Tax equivalent net interest income is net interest income increased by an adjustment for tax-exempt interest on certain loans and investment securities based on a 21% federal statutory tax rate. Tax equivalent net interest margin is calculated as tax equivalent net interest income divided by average interest-earning assets.
Net interest income is affected by changes in both interest rates and the volume of average interest-earning assets and interest-bearing liabilities. Our primary interest-earning assets are loans and investment securities, and our primary interest-bearing liabilities are deposits and borrowings. While our deposit balances will fluctuate depending on our customers’ liquidity and cash flow, market conditions, and competitive pressures, we seek to minimize the impact of these variances by attracting a high percentage of noninterest-bearing deposits. Our current priorities are to increase customer deposits to replace brokered deposits, which will reduce our interest expense.
Loan and Lease Production
We actively seek new lending opportunities under an array of lending products. Our lending activities include real estate mortgage loans, real estate construction and land loans, commercial loans and leases, and a small amount of consumer lending. Our commercial real estate loans and real estate construction loans are secured by a range of property types. Our commercial loans and leases portfolio is diverse and generally includes various asset-secured loans, equipment-secured loans and leases, venture capital loans to support venture capital firms’ operations and the operations of entrepreneurial and venture-backed companies during the various phases of their early life cycles, and secured business loans.
Our loan origination process emphasizes credit quality. On occasion, to augment our internal loan production, we have purchased loans such as multi-family loans from other banks, private student loans from third-party lenders, and single-family residential mortgage loans. These loan purchases help us manage the concentrations in our portfolio as they diversify the geographic risk, interest-rate risk, credit risk, and product composition of our loan portfolio. Achieving net loan growth is subject to many factors, including maintaining strict credit standards, competition from other lenders, and borrowers that opt to prepay loans.
The Magnitude of Credit Losses
We emphasize credit quality in originating and monitoring our loans and leases, and we measure our success by the levels of our classified loans and leases, nonaccrual loans and leases, and net charge-offs. We maintain an allowance for credit losses on loans and leases, which is the sum of the allowance for loan and lease losses and the reserve for unfunded loan commitments. Provisions for credit losses are charged to operations as and when needed for both on and off-balance sheet credit exposures. Loans and leases that are deemed uncollectable are charged off and deducted from the allowance for loan and lease losses. Recoveries on loans and leases previously charged off are added to the allowance for loan and lease losses. The provision for credit losses on the loan and lease portfolio is based on our allowance methodology, which considers the impact of assumptions and is reflective of historical experience, economic forecasts viewed to be reasonable and supportable by management, the current loan and lease composition, and relative credit risks known as of the balance sheet date. For originated and acquired credit-deteriorated loans, a provision for credit losses may be recorded to reflect credit deterioration after the origination date or after the acquisition date, respectively.
We regularly review loans and leases to determine whether there has been any deterioration in credit quality resulting from borrower operations or changes in collateral value or other factors which may affect collectability of our loans and leases. Changes in economic conditions, such as the rate of economic growth, the unemployment rate, rate of inflation, increases in the general level of interest rates, declines in real estate values, changes in commodity prices, and adverse conditions in borrowers’ businesses, could negatively impact our borrowers and cause us to adversely classify loans and leases. An increase in classified loans and leases generally results in increased provisions for credit losses and an increased allowance for credit losses. Any deterioration in the commercial real estate market may lead to increased provisions for credit losses because our loans are concentrated in commercial real estate loans.
The Level of Noninterest Expense
Our noninterest expense includes fixed and controllable overhead, the largest components of which are compensation expense, customer related expense, and occupancy expense. Customer related expenses are primarily earnings credit rate payments to customers and are mostly driven by the Homeowners Association ("HOA") business. It also includes costs that tend to vary based on the volume of activity, such as loan and lease production and the number and complexity of foreclosed assets. Additionally, noninterest expense included acquisition, integration and reorganization costs related to the Merger and a goodwill impairment charge recorded in 2023. We measure success in controlling both fixed and variable costs through monitoring of the ratio of noninterest expense to average total assets.
The following table presents the calculation of our ratio of noninterest expense to average total assets and for the periods indicated:
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Three Months Ended |
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Nine Months Ended |
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|
September 30, |
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June 30, |
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|
September 30, |
| Noninterest Expense to Average Total Assets |
2024 |
|
2024 |
|
|
|
2024 |
|
2023 |
|
|
(Dollars in thousands) |
| Noninterest expense |
$ |
196,209 |
|
|
$ |
203,643 |
|
|
|
|
$ |
610,370 |
|
|
$ |
2,094,543 |
|
| Average total assets |
$ |
34,426,185 |
|
|
$ |
35,834,467 |
|
|
|
|
$ |
35,928,284 |
|
|
$ |
41,187,428 |
|
Noninterest expense to average total assets (1) |
2.27 |
% |
|
2.29 |
% |
|
|
|
2.27 |
% |
|
6.80 |
% |
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___________________________________
(1) Annualized.
Critical Accounting Policies and Estimates
The following discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements and the notes thereto, which have been prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. We believe that our estimates and assumptions are reasonable; however, actual results may ultimately differ significantly from these estimates and assumptions, which could have a material adverse effect on the carrying value of assets and liabilities at the balance sheet dates and on our results of operations for the reporting periods.
Our accounting policies and estimates are fundamental to understanding the following discussion and analysis of financial condition and results of operations. We identify critical policies and estimates as those that require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies and estimates relate to the allowance for credit losses on loans and leases held for investment, business combinations, the carrying value of goodwill and other intangible assets, and the realization of deferred income tax assets and liabilities.
Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Form 10-K.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP. The methodology for determining these non-GAAP measures may differ among companies and may not be comparable. We used the following non-GAAP measures in this Quarterly Report on Form 10-Q:
•Return on average tangible common equity ("ROATCE"), tangible common equity ratio, and tangible book value per common share: Given that the use of these measures is prevalent among banking regulators, investors, and analysts, we disclose them in addition to the related GAAP measures of return on average equity, equity to assets ratio, and book value per common share, respectively. The reconciliations of these non-GAAP measures to the GAAP measures are presented in the following tables for and as of the periods presented.
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|
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|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
|
|
September 30, |
Return on Average Tangible Common Equity |
2024 |
|
2024 |
|
|
|
2024 |
|
2023 |
|
|
(Dollars in thousands) |
| Net earnings (loss) |
$ |
8,784 |
|
|
$ |
30,333 |
|
|
|
|
$ |
69,969 |
|
|
$ |
(1,416,182) |
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes |
$ |
11,514 |
|
|
$ |
44,637 |
|
|
|
|
$ |
98,551 |
|
|
$ |
(1,551,349) |
|
| Add: |
Intangible asset amortization |
8,485 |
|
|
8,484 |
|
|
|
|
25,373 |
|
|
7,189 |
|
| Add: |
Goodwill impairment |
— |
|
|
— |
|
|
|
|
— |
|
|
1,376,736 |
|
|
Adjusted earnings (loss) before income taxes |
19,999 |
|
|
53,121 |
|
|
|
|
123,924 |
|
|
(167,424) |
|
Adjusted income tax expense (benefit) (1) |
5,522 |
|
|
15,203 |
|
|
|
|
34,215 |
|
|
(15,319) |
|
|
Adjusted net earnings (loss) |
14,477 |
|
|
37,918 |
|
|
|
|
89,709 |
|
|
(152,105) |
|
| Less: |
Preferred stock dividends |
9,947 |
|
|
9,947 |
|
|
|
|
29,841 |
|
|
29,841 |
|
|
Adjusted net earnings (loss) available to |
|
|
|
|
|
|
|
|
|
|
common and equivalent stockholders |
$ |
4,530 |
|
|
$ |
27,971 |
|
|
|
|
$ |
59,868 |
|
|
$ |
(181,946) |
|
|
|
|
|
|
|
|
|
|
|
|
| Average stockholders' equity |
$ |
3,452,575 |
|
|
$ |
3,395,350 |
|
|
|
|
$ |
3,412,964 |
|
|
$ |
3,060,696 |
|
| Less: |
Average intangible assets |
361,316 |
|
|
352,934 |
|
|
|
|
358,321 |
|
|
476,721 |
|
| Less: |
Average preferred stock |
498,516 |
|
|
498,516 |
|
|
|
|
498,516 |
|
|
498,516 |
|
|
Average tangible common equity |
$ |
2,592,743 |
|
|
$ |
2,543,900 |
|
|
|
|
$ |
2,556,127 |
|
|
$ |
2,085,459 |
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity (2) |
1.01 |
% |
|
3.59 |
% |
|
|
|
2.74 |
% |
|
(61.86) |
% |
Return on average tangible common equity (3) |
0.70 |
% |
|
4.42 |
% |
|
|
|
3.13 |
% |
|
(11.66) |
% |
___________________________________
(1) Effective tax rates of 27.61%, 28.62% and 9.15% used for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively. Effective tax rates of 27.61% and 9.15% used for the nine months ended September 30, 2024 and 2023.
(2) Annualized net earnings (loss) divided by average stockholders' equity.
(3) Annualized adjusted net earnings (loss) available to common and equivalent stockholders divided by average tangible common equity.
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|
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|
|
|
|
|
|
|
|
|
| Tangible Common Equity to Tangible Assets and |
September 30, |
|
December 31, |
| Tangible Book Value Per Common Share |
2024 |
|
2023 |
|
(Dollars in thousands, except per share data) |
| Stockholders’ equity |
$ |
3,496,198 |
|
|
$ |
3,390,765 |
|
| Less: Preferred stock |
498,516 |
|
|
498,516 |
|
| Total common equity |
2,997,682 |
|
|
2,892,249 |
|
| Less: Goodwill and intangible assets |
357,332 |
|
|
364,104 |
|
| Tangible common equity |
$ |
2,640,350 |
|
|
$ |
2,528,145 |
|
|
|
|
|
| Total assets |
$ |
33,432,613 |
|
|
$ |
38,534,064 |
|
| Less: Goodwill and intangible assets |
357,332 |
|
|
364,104 |
|
| Tangible assets |
$ |
33,075,281 |
|
|
$ |
38,169,960 |
|
|
|
|
|
| Total stockholders' equity to total assets ratio |
10.46 |
% |
|
8.80 |
% |
| Tangible common equity to tangible assets ratio |
7.98 |
% |
|
6.62 |
% |
Book value per common share (1) |
$ |
17.75 |
|
|
$ |
17.12 |
|
Tangible book value per common share (2) |
$ |
15.63 |
|
|
$ |
14.96 |
|
Common and equivalent shares outstanding (3) |
168,879,566 |
|
|
168,959,063 |
|
_______________________________________
(1) Total common equity divided by common and equivalent shares outstanding.
(2) Tangible common equity divided by common and equivalent shares outstanding.
(3) Common and equivalent shares outstanding include non-voting common stock equivalents that are participating securities.
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|
|
|
|
|
|
|
| Adjusted Net Earnings, Net Earnings |
Three Months Ended |
|
Nine Months Ended |
| Available to Common and Equivalent |
September 30, |
|
September 30, |
|
September 30, |
| Stockholders, Diluted EPS, and ROAA |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands, except per share amounts) |
|
|
|
|
|
|
|
|
| Net earnings (loss) |
$ |
8,784 |
|
|
$ |
(23,344) |
|
|
$ |
69,969 |
|
|
$ |
(1,416,182) |
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes |
$ |
11,514 |
|
|
$ |
(26,566) |
|
|
$ |
98,551 |
|
|
$ |
(1,551,349) |
|
| Add: FDIC special assessment |
— |
|
|
— |
|
|
5,816 |
|
|
— |
|
| Add: Loss on sale of securities |
59,946 |
|
|
— |
|
|
59,946 |
|
|
— |
|
| Less: Acquisition, integration, and reorganization costs |
(510) |
|
|
9,925 |
|
|
(13,160) |
|
|
30,833 |
|
| Add: Loan fair value loss adjustments |
— |
|
|
— |
|
|
— |
|
|
170,971 |
|
| Add: Unfunded commitments fair value loss adjustments |
— |
|
|
— |
|
|
— |
|
|
106,767 |
|
| Add: Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
1,376,736 |
|
| Adjusted earnings (loss) before income taxes |
70,950 |
|
|
(16,641) |
|
|
151,153 |
|
|
133,958 |
|
Adjusted income tax expense (benefit) (1) |
19,589 |
|
|
(1,523) |
|
|
41,733 |
|
|
12,257 |
|
| Adjusted net earnings (loss) |
51,361 |
|
|
(15,118) |
|
|
109,420 |
|
|
121,701 |
|
| Less: Preferred stock dividends |
(9,947) |
|
|
(9,947) |
|
|
(29,841) |
|
|
(29,841) |
|
| Adjusted net earnings (loss) available to common |
|
|
|
|
|
|
|
| and equivalent stockholders |
$ |
41,414 |
|
|
$ |
(25,065) |
|
|
$ |
79,579 |
|
|
$ |
91,860 |
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding |
168,583 |
|
77,881 |
|
168,386 |
|
77,678 |
| Diluted (loss) earnings per common share |
$ |
(0.01) |
|
|
$ |
(0.42) |
|
|
$ |
0.24 |
|
|
$ |
(18.61) |
|
Adjusted diluted earnings (loss) per common share (2) |
$ |
0.25 |
|
|
$ |
(0.32) |
|
|
$ |
0.47 |
|
|
$ |
1.18 |
|
|
|
|
|
|
|
|
|
| Average total assets |
$ |
34,426,185 |
|
|
$ |
37,807,758 |
|
|
$ |
35,928,284 |
|
|
$ |
41,187,428 |
|
Return on average assets ("ROAA") (3) |
0.10 |
% |
|
(0.24) |
% |
|
0.26 |
% |
|
(4.60) |
% |
Adjusted ROAA (4) |
0.59 |
% |
|
(0.16) |
% |
|
0.41 |
% |
|
0.40 |
% |
_______________________________________
(1) Effective tax rates of 27.61% used for the 2024 periods and 9.15% for the 2023 periods.
(2) Adjusted net earnings (loss) available to common and equivalent stockholders divided by weighted average common shares outstanding.
(3) Annualized net earnings (loss) divided by average assets.
(4) Annualized adjusted net earnings (loss) divided by average assets.
Results of Operations
Earnings Performance
The following table presents performance metrics for the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
|
|
September 30, |
|
2024 |
|
2024 |
|
|
|
2024 |
|
2023 |
|
(Dollars in thousands, except per share data) |
| Earnings Summary: |
|
|
|
|
|
|
|
|
|
| Interest income |
$ |
446,893 |
|
|
$ |
462,589 |
|
|
|
|
$ |
1,388,186 |
|
|
$ |
1,503,760 |
|
| Interest expense |
(214,718) |
|
|
(233,101) |
|
|
|
|
(697,421) |
|
|
(907,683) |
|
| Net interest income |
232,175 |
|
|
229,488 |
|
|
|
|
690,765 |
|
|
596,077 |
|
| Provision for credit losses |
(9,000) |
|
|
(11,000) |
|
|
|
|
(30,000) |
|
|
(5,000) |
|
| Noninterest (loss) income |
(15,452) |
|
|
29,792 |
|
|
|
|
48,156 |
|
|
(47,883) |
|
| Operating expense |
(196,719) |
|
|
(216,293) |
|
|
|
|
(623,530) |
|
|
(686,974) |
|
| Acquisition, integration and reorganization costs |
510 |
|
|
12,650 |
|
|
|
|
13,160 |
|
|
(30,833) |
|
| Goodwill impairment |
— |
|
|
— |
|
|
|
|
— |
|
|
(1,376,736) |
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) before income taxes |
11,514 |
|
|
44,637 |
|
|
|
|
98,551 |
|
|
(1,551,349) |
|
| Income tax (expense) benefit |
(2,730) |
|
|
(14,304) |
|
|
|
|
(28,582) |
|
|
135,167 |
|
| Net earnings (loss) |
8,784 |
|
|
30,333 |
|
|
|
|
69,969 |
|
|
(1,416,182) |
|
| Preferred stock dividends |
(9,947) |
|
|
(9,947) |
|
|
|
|
(29,841) |
|
|
(29,841) |
|
| Net (loss) earnings available to |
|
|
|
|
|
|
|
|
|
| common and equivalent stockholders |
$ |
(1,163) |
|
|
$ |
20,386 |
|
|
|
|
$ |
40,128 |
|
|
$ |
(1,446,023) |
|
|
|
|
|
|
|
|
|
|
|
| Per Common Share Data: |
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share (1) |
$ |
(0.01) |
|
|
$ |
0.12 |
|
|
|
|
$ |
0.24 |
|
|
$ |
(18.61) |
|
Book value per share(1) |
$ |
17.75 |
|
|
$ |
17.23 |
|
|
|
|
|
|
|
Tangible book value per share (1)(2) |
$ |
15.63 |
|
|
$ |
15.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Performance Ratios: |
|
|
|
|
|
|
|
|
|
| Return on average assets |
0.10 |
% |
|
0.34 |
% |
|
|
|
0.26 |
% |
|
(4.60) |
% |
Return on average tangible common equity (1)(2) |
0.70 |
% |
|
4.42 |
% |
|
|
|
3.13 |
% |
|
(11.66) |
% |
| Net interest margin |
2.93 |
% |
|
2.80 |
% |
|
|
|
2.79 |
% |
|
2.07 |
% |
| Yield on average loans and leases |
6.18 |
% |
|
6.18 |
% |
|
|
|
6.14 |
% |
|
5.95 |
% |
| Cost of average total deposits |
2.54 |
% |
|
2.60 |
% |
|
|
|
2.60 |
% |
|
2.50 |
% |
| Noninterest expense to average total assets |
2.27 |
% |
|
2.29 |
% |
|
|
|
2.27 |
% |
|
6.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital Ratios (consolidated): |
|
|
|
|
|
|
|
|
|
| Common equity tier 1 capital ratio |
10.46 |
% |
|
10.27 |
% |
|
|
|
|
|
|
| Tier 1 capital ratio |
12.88 |
% |
|
12.62 |
% |
|
|
|
|
|
|
| Total capital ratio |
17.00 |
% |
|
16.57 |
% |
|
|
|
|
|
|
| Tier 1 leverage capital ratio |
9.83 |
% |
|
9.51 |
% |
|
|
|
|
|
|
| Risk-weighted assets |
$ |
26,040,959 |
|
|
$ |
26,888,980 |
|
|
|
|
|
|
|
_____________________________
(1) Shares include non-voting common stock equivalents that are participating securities.
(2) See "- Non-GAAP Financial Measures."
Third Quarter of 2024 Compared to Second Quarter of 2024
Net loss available to common and equivalent stockholders for the third quarter of 2024 was $1.2 million, or a loss of $0.01 per diluted common share, compared to a net earnings available to common and equivalent stockholders for the second quarter of 2024 of $20.4 million, or $0.12 per diluted common share. The $21.5 million decrease in net earnings available to common and equivalent stockholders from the second quarter of 2024 was due mainly to lower noninterest income of $45.2 million, offset partially offset by higher net interest income of $2.7 million, lower noninterest expense of $7.4 million, lower provision for credit losses of $2.0 million and lower income tax expense of $11.6 million. The decrease in noninterest income was due mainly to a $59.9 million loss on the sale of $741.8 million of securities in the third quarter of 2024, offset partially by a $7.5 million increase in other income and a $5.7 million increase in leased equipment income. Net interest income was higher in the third quarter compared to the second quarter due to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets. The decrease in noninterest expense was due mainly to decreases of $13.7 million in insurance and assessments expense and $5.8 million in other expense, offset partially by a $12.1 million increase in acquisition, integration and reorganization costs. The decrease in income tax expense was due to lower pre-tax income for the third quarter compared to the second quarter and a lower effective tax rate of 23.7% for the third quarter compared to 32.0% for the second quarter.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net earnings available to common and equivalent stockholders for the nine months ended September 30, 2024 was $40.1 million, or $0.24 per diluted common share, compared to a net loss available to common and equivalent stockholders for the nine months ended September 30, 2023 of $1.4 billion, or a loss of $18.61 per diluted common share. The $1.5 billion increase in net earnings available to common and equivalent stockholders was due mainly to lower noninterest expense of $1.5 billion, higher noninterest income of $96.0 million and higher net interest income of $94.7 million, offset partially by higher provision for credit losses of $25.0 million and higher income tax expense of $163.7 million . The decrease in noninterest expense was due, in part, to a $1.38 billion goodwill impairment charge in the first quarter of 2023. The increase in noninterest income was due mainly to a decrease in the loss on sale of loans and leases of $158.4 million, offset partially by an increase in the loss on sale of securities of $59.9 million. The increase in net interest income was due primarily to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets. The increase in income tax expense was due to the income tax expense recorded on earnings before taxes in the nine months ended September 30, 2024, compared to an income tax benefit recorded on a net loss before income taxes in the nine months ended September 30, 2023.
Net Interest Income
The following tables summarize the distribution of average assets, liabilities, and stockholders’ equity, as well as interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities, presented on a tax equivalent basis, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
September 30, 2024 |
|
June 30, 2024 |
|
|
|
|
Interest |
Yields |
|
|
Interest |
Yields |
|
|
|
|
|
Average |
Income/ |
and |
|
Average |
Income/ |
and |
|
|
|
|
|
Balance |
Expense |
Rates |
|
Balance |
Expense |
Rates |
|
|
|
|
|
(Dollars in thousands) |
| ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
Loans and leases (1) |
$ |
23,803,691 |
|
$ |
369,913 |
|
6.18 |
% |
|
$ |
25,325,578 |
|
$ |
388,853 |
|
6.18 |
% |
|
|
|
|
| Investment securities |
4,665,549 |
|
34,912 |
|
2.98 |
% |
|
4,658,690 |
|
33,836 |
|
2.92 |
% |
|
|
|
|
| Deposits in financial institutions |
3,106,227 |
|
42,068 |
|
5.39 |
% |
|
2,960,292 |
|
39,900 |
|
5.42 |
% |
|
|
|
|
Total interest‑earning assets |
31,575,467 |
|
446,893 |
|
5.63 |
% |
|
32,944,560 |
|
462,589 |
|
5.65 |
% |
|
|
|
|
| Other assets |
2,850,718 |
|
|
|
|
2,889,907 |
|
|
|
|
|
|
|
| Total assets |
$ |
34,426,185 |
|
|
|
|
$ |
35,834,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
| Interest checking |
$ |
7,644,515 |
|
61,880 |
|
3.22 |
% |
|
$ |
7,673,902 |
|
61,076 |
|
3.20 |
% |
|
|
|
|
| Money market |
4,958,777 |
|
32,361 |
|
2.60 |
% |
|
4,962,567 |
|
32,776 |
|
2.66 |
% |
|
|
|
|
| Savings |
2,028,931 |
|
17,140 |
|
3.36 |
% |
|
2,002,670 |
|
16,996 |
|
3.41 |
% |
|
|
|
|
| Time |
5,841,965 |
|
69,605 |
|
4.74 |
% |
|
6,274,242 |
|
75,258 |
|
4.82 |
% |
|
|
|
|
| Total interest‑bearing deposits |
20,474,188 |
|
180,986 |
|
3.52 |
% |
|
20,913,381 |
|
186,106 |
|
3.58 |
% |
|
|
|
|
| Borrowings |
1,063,541 |
|
16,970 |
|
6.35 |
% |
|
2,013,600 |
|
30,311 |
|
6.05 |
% |
|
|
|
|
| Subordinated debt |
940,480 |
|
16,762 |
|
7.09 |
% |
|
938,367 |
|
16,684 |
|
7.15 |
% |
|
|
|
|
| Total interest‑bearing liabilities |
22,478,209 |
|
214,718 |
|
3.80 |
% |
|
23,865,348 |
|
233,101 |
|
3.93 |
% |
|
|
|
|
Noninterest‑bearing demand deposits |
7,846,641 |
|
|
|
|
7,881,620 |
|
|
|
|
|
|
|
| Other liabilities |
648,760 |
|
|
|
|
692,149 |
|
|
|
|
|
|
|
| Total liabilities |
30,973,610 |
|
|
|
|
32,439,117 |
|
|
|
|
|
|
|
| Stockholders’ equity |
3,452,575 |
|
|
|
|
3,395,350 |
|
|
|
|
|
|
|
| Total liabilities and stockholders' equity |
$ |
34,426,185 |
|
|
|
|
$ |
35,834,467 |
|
|
|
|
|
|
|
| Net interest income |
|
$ |
232,175 |
|
|
|
|
$ |
229,488 |
|
|
|
|
|
|
| Net interest rate spread |
|
|
1.83 |
% |
|
|
|
1.72 |
% |
|
|
|
|
| Net interest margin |
|
|
2.93 |
% |
|
|
|
2.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits (2) |
$ |
28,320,829 |
|
$ |
180,986 |
|
2.54 |
% |
|
$ |
28,795,001 |
|
$ |
186,106 |
|
2.60 |
% |
|
|
|
|
Total funds (3) |
$ |
30,324,850 |
|
$ |
214,718 |
|
2.82 |
% |
|
$ |
31,746,968 |
|
$ |
233,101 |
|
2.95 |
% |
|
|
|
|
_____________________
(1) Includes net loan discount accretion of $23.0 million and $21.8 million for the three months ended September 30, 2024 and June 30, 2024.
(2) Total deposits is the sum of interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
(3) Total funds is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of total funds is calculated as annualized total interest expense divided by average total funds.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
September 30, 2024 |
|
September 30, 2023 |
|
|
|
|
|
|
Interest |
Yields |
|
|
Interest |
Yields |
|
|
|
|
|
Average |
Income/ |
and |
|
Average |
Income/ |
and |
|
|
|
|
|
Balance |
Expense |
Rates |
|
Balance |
Expense |
Rates |
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
| ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
Loans and leases (1)(2)(3) |
$ |
24,878,682 |
|
$ |
1,144,231 |
|
6.14 |
% |
|
$ |
25,910,694 |
|
$ |
1,152,393 |
|
5.95 |
% |
|
|
|
|
| Investment securities |
4,681,872 |
|
103,051 |
|
2.94 |
% |
|
7,097,438 |
|
133,716 |
|
2.52 |
% |
|
|
|
|
| Deposits in financial institutions |
3,479,130 |
|
140,904 |
|
5.41 |
% |
|
5,731,733 |
|
219,995 |
|
5.13 |
% |
|
|
|
|
Total interest‑earning assets (1) |
33,039,684 |
|
1,388,186 |
|
5.61 |
% |
|
38,739,865 |
|
1,506,104 |
|
5.20 |
% |
|
|
|
|
| Other assets |
2,888,600 |
|
|
|
|
2,447,563 |
|
|
|
|
|
|
|
| Total assets |
$ |
35,928,284 |
|
|
|
|
$ |
41,187,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
| Interest checking |
$ |
7,733,588 |
|
184,505 |
|
3.19 |
% |
|
$ |
6,890,661 |
|
159,992 |
|
3.10 |
% |
|
|
|
|
| Money market |
5,218,774 |
|
106,488 |
|
2.73 |
% |
|
7,049,910 |
|
145,748 |
|
2.76 |
% |
|
|
|
|
| Savings |
2,022,600 |
|
52,166 |
|
3.45 |
% |
|
833,719 |
|
14,532 |
|
2.33 |
% |
|
|
|
|
| Time |
6,073,993 |
|
218,740 |
|
4.81 |
% |
|
6,815,786 |
|
220,391 |
|
4.32 |
% |
|
|
|
|
| Total interest‑bearing deposits |
21,048,955 |
|
561,899 |
|
3.57 |
% |
|
21,590,076 |
|
540,663 |
|
3.35 |
% |
|
|
|
|
| Borrowings |
1,986,468 |
|
85,405 |
|
5.74 |
% |
|
7,688,698 |
|
324,270 |
|
5.64 |
% |
|
|
|
|
| Subordinated debt |
938,624 |
|
50,117 |
|
7.13 |
% |
|
869,353 |
|
42,750 |
|
6.57 |
% |
|
|
|
|
| Total interest‑bearing liabilities |
23,974,047 |
|
697,421 |
|
3.89 |
% |
|
30,148,127 |
|
907,683 |
|
4.03 |
% |
|
|
|
|
Noninterest‑bearing demand deposits |
7,804,534 |
|
|
|
|
7,323,673 |
|
|
|
|
|
|
|
| Other liabilities |
736,739 |
|
|
|
|
654,932 |
|
|
|
|
|
|
|
| Total liabilities |
32,515,320 |
|
|
|
|
38,126,732 |
|
|
|
|
|
|
|
| Stockholders’ equity |
3,412,964 |
|
|
|
|
3,060,696 |
|
|
|
|
|
|
|
| Total liabilities and stockholders' equity |
$ |
35,928,284 |
|
|
|
|
$ |
41,187,428 |
|
|
|
|
|
|
|
Net interest income (1) |
|
$ |
690,765 |
|
|
|
|
$ |
598,421 |
|
|
|
|
|
|
Net interest rate spread (1) |
|
|
1.72 |
% |
|
|
|
1.17 |
% |
|
|
|
|
Net interest margin (1) |
|
|
2.79 |
% |
|
|
|
2.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits (4) |
$ |
28,853,489 |
|
$ |
561,899 |
|
2.60 |
% |
|
$ |
28,913,749 |
|
$ |
540,663 |
|
2.50 |
% |
|
|
|
|
Total funds (5) |
$ |
31,778,581 |
|
$ |
697,421 |
|
2.93 |
% |
|
$ |
37,471,800 |
|
$ |
907,683 |
|
3.24 |
% |
|
|
|
|
_____________________
(1) Tax equivalent.
(2) Includes net loan discount accretion of $67.3 million for the nine months ended September 30, 2024 and net loan premium amortization of $6.0 million for the nine months ended September 30, 2023.
(3) Includes tax-equivalent adjustments of $0.0 million and $2.3 million for the nine months ended September 30, 2024 and 2023, related to tax-exempt income on loans. The federal statutory rate utilized was 21%.
(4) Total deposits is the sum of interest-bearing deposits and noninterest-bearing demand deposits. The cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
(5) Total funds is the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. The cost of total funds is calculated as annualized total interest expense divided by average total funds.
Third Quarter of 2024 Compared to Second Quarter of 2024
Net interest income increased by $2.7 million to $232.2 million for the third quarter of 2024 from $229.5 million for the second quarter of 2024 due to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets.
Average interest-earning assets decreased by $1.4 billion to $31.6 billion for the third quarter due mainly to the sale in July 2024 of $1.95 billion of Civic loans which had been moved to held for sale during the second quarter. The proceeds of the sale provided liquidity and capital to support the repositioning of approximately $742 million of securities and pay down higher-cost brokered deposits and borrowings. The net interest margin increased by 13 basis points to 2.93% for the third quarter compared to 2.80% for the second quarter due to a 2 basis points decrease in the average yield on interest-earning assets more than offset by a 13 basis point decrease in the average total cost of funds, which was positively impacted by a decrease in average borrowings.
The average yield on interest-earning assets decreased by 2 basis points to 5.63% for the third quarter from 5.65% in the second quarter due mainly to the average yield on deposits in financial institutions decreasing by 3 basis points and the average yield on loans and leases being flat.
The average yield on loans and leases was unchanged at 6.18% for the third quarter compared to the second quarter as a result of new originations being at rates higher than the existing portfolio, slightly higher loan discount accretion, and the change in the mix of loan product balances including the impact of the sale of the $1.95 billion Civic loan portfolio.
The average total cost of funds decreased by 13 basis points to 2.82% for the third quarter from 2.95% in the second quarter due mainly to lower market interest rates and reduced average borrowings. The average cost of interest-bearing liabilities decreased by 13 basis points to 3.80% for the third quarter from 3.93% for the second quarter. The average total cost of deposits decreased by 6 basis points to 2.54% for the third quarter compared to 2.60% in the second quarter. Average noninterest-bearing deposits decreased by $35.0 million for the third quarter compared to the second quarter, average total deposits decreased by $474.2 million, and average borrowings decreased by $950.1 million.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net interest income increased by $94.7 million to $690.8 million for the nine months ended September 30, 2024 compared to $596.1 million for the nine months ended September 30, 2023 due to lower interest expense on interest-bearing liabilities, offset partially by lower interest income on interest-earning assets.
Average interest-earning assets decreased by $5.7 billion to $33.0 billion for the first nine months of 2024 due to lower average balances in loans and leases, investments securities, and deposits in financial institutions. Average loans and leases decreased by $1.0 billion primarily due to the sale in July 2024 of $1.95 billion of Civic loans which had been moved to held for sale during the second quarter of 2024 and the sales of non-core loan portfolios in the second quarter of 2023, offset partially by the acquisition of legacy Banc of California loans completed in the fourth quarter of 2023. Average investment securities decreased by $2.4 billion mostly due to securities sales completed in the fourth quarter of 2023. Average deposits in financial institutions decreased by $2.3 billion due to lower cash balances which were used to pay down higher-cost borrowings. The net interest margin increased by 72 basis points to 2.79% for the nine months ended September 30, 2024 compared to 2.07% for the same period in 2023 due to the average yield on interest-earning assets increasing by 41 basis points, while the average total cost of funds decreased by 31 basis points.
The average yield on interest-earning assets increased by 41 basis points to 5.61% for the first nine months of 2024 from 5.20% for the same period in 2023 due mainly to the change in the interest-earning asset mix. This was driven by the increase in the balance of average loans and leases as a percentage of average interest-earning assets to 75% for the nine months ended September 30, 2024 from 67% for the nine months ended September 30, 2023, the decrease in the balance of average investment securities as a percentage of average interest-earning assets to 14% for the first nine months of 2024 from 18% for the same period in 2023, and the decrease in the balance of average deposits in financial institutions as a percentage of average interest-earning assets to 10% for the nine months ended September 30, 2024 from 15% for the same period in 2023.
The average yield on loans and leases increased by 19 basis points to 6.14% for the first nine months of 2024 from 5.95% for the same period in 2023 as a result of changes in portfolio mix and higher net accretion of loan discounts.
The average total cost of funds decreased by 31 basis points to 2.93% for the nine months ended September 30, 2024 from 3.24% for the nine months ended September 30, 2023 due mainly to changes in the total funds mix. This was driven by the increase in the balance of lower-cost average total deposits as a percentage of average total funds to 91% for the first nine months of 2024 from 77% for the same period in 2023, and the decrease in the balance of higher cost average borrowings as a percentage of average total funds to 6% for the nine months ended September 30, 2024 from 21% for the same period in 2023. The average cost of interest-bearing liabilities decreased by 14 basis points to 3.89% for the first nine months of 2024 from 4.03% for the same period in 2023. The average total cost of deposits increased by 10 basis points to 2.60% for the nine months ended September 30, 2024 compared to 2.50% for the nine months ended September 30, 2024. Average noninterest-bearing deposits increased by $480.9 million for the first nine months of 2024 compared to the same period in 2023 and average total deposits decreased by $60.3 million.
Provision for Credit Losses
The following table sets forth the details of the provision for credit losses on loans and leases held for investment and held-to-maturity securities and information regarding credit quality metrics for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
|
|
September 30, |
|
2024 |
|
2024 |
|
|
|
2024 |
|
2023 |
|
(Dollars in thousands) |
| Provision For Credit Losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Addition to allowance for loan and lease losses |
$ |
9,000 |
|
|
$ |
12,000 |
|
|
|
|
$ |
32,000 |
|
|
$ |
66,500 |
|
|
|
|
|
|
|
|
|
|
|
| Reduction in reserve for unfunded loan commitments |
— |
|
|
(1,000) |
|
|
|
|
(2,000) |
|
|
(61,500) |
|
| Total loan-related provision |
$ |
9,000 |
|
|
$ |
11,000 |
|
|
|
|
$ |
30,000 |
|
|
$ |
5,000 |
|
| Addition to allowances for held-to-maturity |
|
|
|
|
|
|
|
|
|
| and available-for-sale securities |
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
| Total provision for credit losses |
$ |
9,000 |
|
|
$ |
11,000 |
|
|
|
|
$ |
30,000 |
|
|
$ |
5,000 |
|
|
|
|
|
|
|
|
|
|
|
| Credit Quality Metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs on loans and leases held for investment (1) |
$ |
2,417 |
|
|
$ |
55,741 |
|
|
|
|
$ |
59,342 |
|
|
$ |
44,935 |
|
|
|
|
|
|
|
|
|
|
|
| Annualized net charge-offs to average loans and leases |
0.04 |
% |
|
0.89 |
% |
|
|
|
0.32 |
% |
|
0.23 |
% |
| At quarter-end: |
|
|
|
|
|
|
|
|
|
| Allowance for credit losses |
$ |
281,916 |
|
|
$ |
275,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance for credit losses to loans and leases held for investment |
1.20 |
% |
|
1.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allowance for credit losses to nonaccrual loans and leases held |
|
|
|
|
|
|
|
|
|
| for investment |
167.5 |
% |
|
235.2 |
% |
|
|
|
|
|
|
| Nonaccrual loans and leases held for investment |
$ |
168,341 |
|
|
$ |
117,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nonaccrual loans and leases held for investment to loans and leases |
|
|
|
|
|
|
|
|
|
| held for investment |
0.72 |
% |
|
0.50 |
% |
|
|
|
|
|
|
Classified loans and leases held for investment |
$ |
533,591 |
|
|
$ |
415,498 |
|
|
|
|
|
|
|
| Special mention loans and leases held for investment |
$ |
711,888 |
|
|
$ |
680,663 |
|
|
|
|
|
|
|
______________________
(1) See "- Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment" for detail of charge-offs and recoveries by loan portfolio segment, class, and subclass for the periods presented.
Provisions for credit losses are charged to earnings for the allowance for loan and lease losses, the reserve for unfunded loan commitments, and the allowance for credit losses on held-to-maturity securities. The provision for credit losses on our loans and leases held for investment is based on our allowance methodology and is an expense that, in our judgment, is required to maintain an adequate allowance for credit losses. For further details on our loan-related allowance for credit losses methodology, see “- Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment” contained herein.
Third Quarter of 2024 Compared to Second Quarter of 2024
The provision for credit losses was $9.0 million for the third quarter of 2024 compared to $11.0 million for the second quarter of 2024. The $9.0 million third quarter provision was driven by increases in qualitative reserves for loans secured by office properties and concentrations of credit, and specific reserves for nonperforming loan downgrades. The $11.0 million second quarter provision was driven by higher net charge-offs and higher qualitative reserves for office loans and other concentrations of credit, offset partially by the reserves released for the Civic loans transferred to held for sale.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The provision for credit losses increased by $25.0 million to $30.0 million for the nine months ended September 30, 2024 compared to $5.0 million for the nine months ended September 30, 2023. The higher provision in the 2024 period was generally due to higher net charge-offs and higher qualitative reserves for office loans and other concentrations of credits, offset partially by the reserves released for the Civic loans transferred to held for sale in the second quarter of 2024 and sold in the third quarter of 2024.
Certain circumstances may lead to increased provisions for credit losses on loans and leases in the future. Examples of such circumstances include deterioration in economic conditions and forecasts, an increased amount of classified and/or criticized loans and leases, and net loan and lease and unfunded commitment growth. Deterioration in economic conditions and forecasts include the rate of economic growth, the unemployment rate, the rate of inflation, changes in the general level of interest rates, changes in real estate values, and adverse conditions in borrowers’ businesses. See further discussion in “- Balance Sheet Analysis - Allowance for Credit Losses on Loans and Leases Held for Investment” contained herein.
Noninterest Income
The following table summarizes noninterest income by category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
|
|
September 30, |
| Noninterest Income |
2024 |
|
2024 |
|
|
|
2024 |
|
2023 |
|
(In thousands) |
| Leased equipment income |
$ |
17,176 |
|
|
$ |
11,487 |
|
|
|
|
$ |
40,379 |
|
|
$ |
50,798 |
|
| Other commissions and fees |
8,256 |
|
|
8,629 |
|
|
|
|
25,027 |
|
|
29,226 |
|
| Service charges on deposit accounts |
4,568 |
|
|
4,540 |
|
|
|
|
13,813 |
|
|
11,906 |
|
| (Loss) gain on sale of loans and leases |
(62) |
|
|
1,135 |
|
|
|
|
625 |
|
|
(157,820) |
|
| Loss on sale of securities |
(59,946) |
|
|
— |
|
|
|
|
(59,946) |
|
|
— |
|
| Dividends and gains on equity investments |
3,730 |
|
|
1,166 |
|
|
|
|
7,964 |
|
|
7,593 |
|
| Warrant income (loss) |
211 |
|
|
(324) |
|
|
|
|
65 |
|
|
(545) |
|
| LOCOM HFS adjustment |
(74) |
|
|
(38) |
|
|
|
|
218 |
|
|
(11,636) |
|
| Other |
10,689 |
|
|
3,197 |
|
|
|
|
20,011 |
|
|
22,595 |
|
| Total noninterest (loss) income |
$ |
(15,452) |
|
|
$ |
29,792 |
|
|
|
|
$ |
48,156 |
|
|
$ |
(47,883) |
|
Third Quarter of 2024 Compared to Second Quarter of 2024
Noninterest income decreased by $45.2 million to a loss of $15.5 million for the third quarter of 2024 due mainly to a $59.9 million loss on the sale of $741.8 million of securities in the third quarter of 2024, offset partially by a $7.5 million increase in other income and a $5.7 million increase in leased equipment income. The increase in other income was due primarily to a $6.8 million increase in the positive fair value mark on the credit-linked notes. The increase in leased equipment income was due mostly to higher gains from early lease terminations and sale of leased assets.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Noninterest income increased by $96.0 million to $48.2 million for the nine months ended September 30, 2024 compared to a loss of $47.9 million for the nine months ended September 30, 2023, due mostly to a decrease in the loss on sale of loans and leases of $158.4 million, offset partially by a $59.9 million loss on the sale of $741.8 million of securities in the third quarter of 2024. The decrease in the loss on sale of loans and leases was due to the sales of $2.5 billion of loans for a net gain of $0.6 million in the nine months ended September 30, 2024 compared to the sales of $6.1 billion of loans for a net loss of $157.8 million in the nine months ended September 30, 2023.
Noninterest Expense
The following table summarizes noninterest expense by category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
|
|
September 30, |
| Noninterest Expense |
2024 |
|
2024 |
|
|
|
2024 |
|
2023 |
|
(In thousands) |
| Compensation |
$ |
85,585 |
|
|
$ |
85,914 |
|
|
|
|
$ |
263,735 |
|
|
$ |
242,999 |
|
| Customer related expense |
34,475 |
|
|
32,405 |
|
|
|
|
97,799 |
|
|
78,278 |
|
| Occupancy |
16,892 |
|
|
17,455 |
|
|
|
|
52,315 |
|
|
45,743 |
|
| Information technology and data processing |
14,995 |
|
|
15,459 |
|
|
|
|
45,872 |
|
|
38,706 |
|
| Insurance and assessments |
12,708 |
|
|
26,431 |
|
|
|
|
59,600 |
|
|
75,650 |
|
| Intangible asset amortization |
8,485 |
|
|
8,484 |
|
|
|
|
25,373 |
|
|
7,189 |
|
| Leased equipment depreciation |
7,144 |
|
|
7,511 |
|
|
|
|
22,175 |
|
|
26,796 |
|
| Other professional services |
5,101 |
|
|
5,183 |
|
|
|
|
15,359 |
|
|
21,643 |
|
| Loan expense |
3,994 |
|
|
4,332 |
|
|
|
|
12,817 |
|
|
16,012 |
|
| Other |
7,340 |
|
|
13,119 |
|
|
|
|
28,485 |
|
|
133,958 |
|
| Total operating expense |
196,719 |
|
|
216,293 |
|
|
|
|
623,530 |
|
|
686,974 |
|
| Acquisition, integration and reorganization costs |
(510) |
|
|
(12,650) |
|
|
|
|
(13,160) |
|
|
30,833 |
|
| Goodwill impairment |
— |
|
|
— |
|
|
|
|
— |
|
|
1,376,736 |
|
| Total noninterest expense |
$ |
196,209 |
|
|
$ |
203,643 |
|
|
|
|
$ |
610,370 |
|
|
$ |
2,094,543 |
|
Third Quarter of 2024 Compared to Second Quarter of 2024
Noninterest expense decreased by $7.4 million to $196.2 million for the third quarter of 2024 due mainly to decreases of $13.7 million in insurance and assessments expense and $5.8 million in other expense, offset partially by a lower reversal of $12.1 million in acquisition, integration and reorganization costs. The decrease in insurance and assessments expense was due to lower assessment rates for both the regular FDIC assessment and the special assessment. The decrease in other expense was mostly due to a repurchase reserve recorded in the second quarter of 2024 for standard representations and warranties associated with the Civic loan sale. Acquisition, integration and reorganization costs included an adjustment of $0.5 million for the third quarter and $12.7 million for the second quarter due to actual amounts for certain expenses being lower than the estimated amounts accrued at merger close.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Noninterest expense decreased by $1.5 billion to $610.4 million for the nine months ended September 30, 2024 compared to $2.1 billion for the nine months ended September 30, 2023, due mainly to a $1.4 billion goodwill impairment recorded in the 2023 period.
Income Taxes
Third Quarter of 2024 Compared to Second Quarter of 2024
Income tax expense of $2.7 million was recorded for the third quarter resulting in an effective tax rate of 23.7% compared to income tax expense of $14.3 million for the second quarter and an effective tax rate of 32.0%. The lower third quarter effective tax rate was due primarily to a true-up to the full year tax rate, an increase in disallowed executive compensation expense, and loss of tax benefits with respect to restricted stock vested during the second quarter.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Income tax expense of $28.6 million was recorded for the nine months ended September 30, 2024, resulting in an effective tax rate of 29.0% compared to an income tax benefit of $135.2 million for the same period in 2023 and an effective tax rate of 8.7%. Excluding goodwill impairment, the effective tax rate for the nine months ended September 30, 2023 was 21.7%. The lower effective tax rate in 2023 was due primarily to higher FDIC insurance premiums in relation to the reported net loss for 2023.
Balance Sheet Analysis
Securities Available-for-Sale
The following table presents the composition and durations of our securities available-for-sale as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
September 30, 2024 |
|
December 31, 2023 |
|
Fair |
|
% of |
|
Duration |
|
Fair |
|
% of |
|
Duration |
| Security Type |
Value |
|
Total |
|
(in years) |
|
Value |
|
Total |
|
(in years) |
| |
(Dollars in thousands) |
| Agency residential MBS |
$ |
922,448 |
|
|
40 |
% |
|
8.6 |
|
|
$ |
1,187,609 |
|
|
51 |
% |
|
8.2 |
|
| Agency residential CMOs |
418,240 |
|
|
18 |
% |
|
2.6 |
|
|
284,334 |
|
|
12 |
% |
|
4.4 |
|
| Private label residential CMOs |
339,725 |
|
|
15 |
% |
|
4.4 |
|
|
158,412 |
|
|
7 |
% |
|
7.7 |
|
| Collateralized loan obligations |
284,973 |
|
|
12 |
% |
|
0.2 |
|
|
108,416 |
|
|
5 |
% |
|
0.1 |
|
| Corporate debt securities |
266,630 |
|
|
12 |
% |
|
1.7 |
|
|
267,232 |
|
|
11 |
% |
|
1.9 |
|
| Agency commercial MBS |
33,532 |
|
|
1 |
% |
|
1.3 |
|
|
253,306 |
|
|
11 |
% |
|
3.4 |
|
| Asset-backed securities |
16,204 |
|
|
1 |
% |
|
— |
|
|
19,952 |
|
|
1 |
% |
|
— |
|
| Private label commercial MBS |
13,622 |
|
|
1 |
% |
|
1.5 |
|
|
20,813 |
|
|
1 |
% |
|
2.1 |
|
| SBA securities |
4,313 |
|
|
— |
% |
|
3.5 |
|
|
13,739 |
|
|
— |
% |
|
3.2 |
|
| Municipal securities |
597 |
|
|
— |
% |
|
3.8 |
|
|
28,083 |
|
|
1 |
% |
|
4.5 |
|
| U.S. Treasury securities |
— |
|
|
— |
% |
|
— |
|
|
4,968 |
|
|
— |
% |
|
0.1 |
|
| Total securities available-for-sale |
$ |
2,300,284 |
|
|
100 |
% |
|
4.8 |
|
|
$ |
2,346,864 |
|
|
100 |
% |
|
5.9 |
|
Securities Held-to-Maturity
The following table presents the composition and durations of our securities held-to-maturity as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
September 30, 2024 |
|
December 31, 2023 |
|
|
|
Amortized |
|
% of |
|
Duration |
|
Amortized |
|
% of |
|
Duration |
|
|
|
|
|
|
| Security Type |
Cost |
|
Total |
|
(in years) |
|
Cost |
|
Total |
|
(in years) |
|
|
|
|
|
|
| |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Municipal securities |
$ |
1,250,254 |
|
|
55 |
% |
|
7.8 |
|
$ |
1,247,310 |
|
|
55 |
% |
|
8.1 |
|
|
|
|
|
|
| Agency commercial MBS |
438,781 |
|
|
19 |
% |
|
6.2 |
|
433,827 |
|
|
19 |
% |
|
6.8 |
|
|
|
|
|
|
| Private label commercial MBS |
354,098 |
|
|
15 |
% |
|
5.8 |
|
350,493 |
|
|
15 |
% |
|
6.3 |
|
|
|
|
|
|
| U.S. Treasury securities |
189,239 |
|
|
8 |
% |
|
6.0 |
|
187,033 |
|
|
8 |
% |
|
6.7 |
|
|
|
|
|
|
| Corporate debt securities |
70,391 |
|
|
3 |
% |
|
4.1 |
|
70,128 |
|
|
3 |
% |
|
4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total securities held-to-maturity |
$ |
2,302,763 |
|
|
100 |
% |
|
7.0 |
|
$ |
2,288,791 |
|
|
100 |
% |
|
7.4 |
|
|
|
|
|
|
The following table shows the geographic composition of the majority of our held-to-maturity municipal securities portfolio as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
Amortized |
|
% of |
| Municipal Securities by State |
Cost |
|
Total |
|
(Dollars in thousands) |
| California |
$ |
312,630 |
|
|
25 |
% |
| Texas |
277,159 |
|
|
22 |
% |
| Washington |
188,830 |
|
|
15 |
% |
| Oregon |
79,722 |
|
|
6 |
% |
| Maryland |
64,434 |
|
|
5 |
% |
| Georgia |
55,333 |
|
|
4 |
% |
| Colorado |
48,728 |
|
|
4 |
% |
| Minnesota |
34,840 |
|
|
3 |
% |
| Tennessee |
31,019 |
|
|
3 |
% |
| Florida |
21,959 |
|
|
2 |
% |
| Total of ten largest states |
1,114,654 |
|
|
89 |
% |
| All other states |
135,600 |
|
|
11 |
% |
| Total municipal securities held-to-maturity |
$ |
1,250,254 |
|
|
100 |
% |
Loans and Leases Held for Investment
The following table presents the composition of our loans and leases held for investment, net of deferred fees, by loan portfolio segment, class, and subclass as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
|
|
% of |
|
|
|
% of |
Loan and Lease Portfolio |
Balance |
|
Total |
|
Balance |
|
Total |
|
(Dollars in thousands) |
| Real Estate Mortgage: |
|
|
|
|
|
|
|
| Commercial real estate |
$ |
3,529,615 |
|
|
15 |
% |
|
$ |
3,874,804 |
|
|
15 |
% |
| SBA program |
628,875 |
|
|
3 |
% |
|
632,110 |
|
|
3 |
% |
| Hotel |
399,449 |
|
|
1 |
% |
|
519,583 |
|
|
2 |
% |
| Total commercial real estate mortgage |
4,557,939 |
|
|
19 |
% |
|
5,026,497 |
|
|
20 |
% |
| Multi-family |
6,009,280 |
|
|
25 |
% |
|
6,025,179 |
|
|
23 |
% |
| Residential mortgage |
2,619,372 |
|
|
11 |
% |
|
2,754,176 |
|
|
11 |
% |
| Investor-owned residential |
121,810 |
|
|
1 |
% |
|
2,234,531 |
|
|
9 |
% |
| Residential renovation |
26,005 |
|
|
— |
% |
|
71,602 |
|
|
— |
% |
| Total other residential real estate |
2,767,187 |
|
|
12 |
% |
|
5,060,309 |
|
|
20 |
% |
| Total real estate mortgage |
13,334,406 |
|
|
56 |
% |
|
16,111,985 |
|
|
63 |
% |
| Real Estate Construction and Land: |
|
|
|
|
|
|
|
| Commercial |
836,902 |
|
|
4 |
% |
|
759,585 |
|
|
3 |
% |
| Residential |
2,622,507 |
|
|
11 |
% |
|
2,399,684 |
|
|
9 |
% |
Total real estate construction and land (1) |
3,459,409 |
|
|
15 |
% |
|
3,159,269 |
|
|
12 |
% |
| Total real estate |
16,793,815 |
|
|
71 |
% |
|
19,271,254 |
|
|
75 |
% |
| Commercial: |
|
|
|
|
|
|
|
| Lender finance |
686,426 |
|
|
3 |
% |
|
486,966 |
|
|
2 |
% |
| Equipment finance |
646,477 |
|
|
3 |
% |
|
736,275 |
|
|
3 |
% |
| Premium finance |
586,730 |
|
|
2 |
% |
|
732,162 |
|
|
3 |
% |
| Other asset-based |
195,678 |
|
|
1 |
% |
|
233,682 |
|
|
1 |
% |
| Total asset-based |
2,115,311 |
|
|
9 |
% |
|
2,189,085 |
|
|
9 |
% |
| Equity fund loans |
576,498 |
|
|
3 |
% |
|
662,732 |
|
|
3 |
% |
| Venture lending |
777,128 |
|
|
3 |
% |
|
783,630 |
|
|
3 |
% |
| Total venture capital |
1,353,626 |
|
|
6 |
% |
|
1,446,362 |
|
|
6 |
% |
| Secured business loans |
731,215 |
|
|
3 |
% |
|
614,120 |
|
|
2 |
% |
| Warehouse lending |
1,230,105 |
|
|
5 |
% |
|
554,940 |
|
|
2 |
% |
| Other lending |
889,215 |
|
|
4 |
% |
|
960,800 |
|
|
4 |
% |
| Total other commercial |
2,850,535 |
|
|
12 |
% |
|
2,129,860 |
|
|
8 |
% |
| Total commercial |
6,319,472 |
|
|
27 |
% |
|
5,765,307 |
|
|
23 |
% |
| Consumer |
414,490 |
|
|
2 |
% |
|
453,126 |
|
|
2 |
% |
| Total loans and leases held for investment, |
|
|
|
|
|
|
|
| net of deferred fees |
$ |
23,527,777 |
|
|
100 |
% |
|
$ |
25,489,687 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
| Total unfunded loan commitments |
$ |
5,008,449 |
|
|
|
|
$ |
5,578,907 |
|
|
|
________________________________
(1) Includes land and acquisition and development loans of $208.3 million at September 30, 2024 and $228.9 million at December 31, 2023.
The following table presents the geographic composition of our real estate loans held for investment, net of deferred fees, by the top 10 states and all other states combined (in the order presented for the current quarter-end) as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
|
|
% of |
|
|
|
% of |
| Real Estate Loans by State |
Balance |
|
Total |
|
Balance |
|
Total |
|
(Dollars in thousands) |
| California |
$ |
11,907,187 |
|
|
71 |
% |
|
$ |
12,262,311 |
|
|
64 |
% |
| Colorado |
1,265,516 |
|
|
8 |
% |
|
1,167,659 |
|
|
6 |
% |
| Arizona |
546,893 |
|
|
3 |
% |
|
719,299 |
|
|
4 |
% |
| Texas |
517,569 |
|
|
3 |
% |
|
878,538 |
|
|
4 |
% |
| Florida |
451,590 |
|
|
3 |
% |
|
837,467 |
|
|
4 |
% |
| Washington |
395,643 |
|
|
2 |
% |
|
533,931 |
|
|
3 |
% |
| Nevada |
365,970 |
|
|
2 |
% |
|
411,020 |
|
|
2 |
% |
| Oregon |
310,164 |
|
|
2 |
% |
|
348,166 |
|
|
2 |
% |
| Utah |
147,727 |
|
|
1 |
% |
|
168,080 |
|
|
1 |
% |
| Illinois |
103,040 |
|
|
— |
% |
|
92,758 |
|
|
— |
% |
| Total of 10 largest states |
16,011,299 |
|
|
95 |
% |
|
17,419,229 |
|
|
90 |
% |
| All other states |
782,516 |
|
|
5 |
% |
|
1,852,025 |
|
|
10 |
% |
| Total real estate loans held for investment, net of deferred fees |
$ |
16,793,815 |
|
|
100 |
% |
|
$ |
19,271,254 |
|
|
100 |
% |
Due to hybrid and remote working policies adopted by most companies during the COVID-19 pandemic, many of which remain in place today, there are concerns over the utilization of commercial office space which could impact the long-term performance of some types of office properties within our commercial real estate portfolio. Furthermore, higher interest rates presented a risk for the variable rate and hybrid loans in our portfolio, even considering the recent interest rate cut and expected future incremental interest rate cuts. Due to these concerns and concentrations of credit associated with commercial real estate loans, excluding owner occupied real estate loans, we have increased the qualitative reserve component of our allowance for credit losses for our office loan exposure. At September 30, 2024, mortgage loans secured by office properties represent 7.5% of total loans and leases held for investment.
The risks outlined above result from market conditions and are not controllable by us. However, when considering the markets in which to pursue real estate loans, we consider the market conditions, our current loan portfolio concentrations by property type and by market, and our past experiences with the borrower, within the specific market, and with the property type.
When underwriting real estate loans, we seek to mitigate risk by using the following framework:
•Requiring our borrowers to invest and maintain a meaningful cash equity interest in the properties securing our loans;
•Reviewing each loan request and renewal individually;
•Using a credit committee approval process for the approval of loan requests (or aggregated credit exposures) over a certain dollar amount;
•Adhering to written loan acceptance standards, including among other factors, maximum loan to acquisition cost ratios, maximum loan to as-is or stabilized value ratios, and minimum operating cash flow requirements;
•Considering market rental and occupancy rates relative to our underwritten or projected rental and occupancy rates;
•Considering the experience of our borrowers and our borrowers' abilities to operate and manage the properties securing our loans;
•Evaluating the supply of comparable real estate and new supply under construction in the collateral's market area;
•Obtaining independent third party appraisals that are reviewed by our appraisal department; and
•Obtaining environmental risk assessments.
The following table presents a roll forward of loans and leases held for investment, net of deferred fees, for the period indicated:
|
|
|
|
|
|
|
Nine Months Ended |
| Roll Forward of Loans and Leases Held for Investment, Net of Deferred Fees |
September 30, 2024 |
|
(In thousands) |
| Balance, beginning of period |
$ |
25,489,687 |
|
| Additions: |
|
| Production |
1,223,782 |
|
| Disbursements |
3,757,575 |
|
| Total production and disbursements |
4,981,357 |
|
| Reductions: |
|
| Payoffs |
(2,607,236) |
|
| Paydowns |
(2,296,598) |
|
| Total payoffs and paydowns |
(4,903,834) |
|
| Sales |
(27,516) |
|
| Transfers to foreclosed assets |
(15,564) |
|
| Charge-offs |
(67,247) |
|
| Transfers to loans held for sale |
(1,930,285) |
|
| Total reductions |
(6,944,446) |
|
| Transfers from loans held for sale |
1,179 |
|
|
|
| Net decrease |
(1,961,910) |
|
| Balance, end of period |
$ |
23,527,777 |
|
|
|
Allowance for Credit Losses on Loans and Leases Held for Investment
The allowance for credit losses on loans and leases held for investment is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. The allowance for loan and lease losses is reported as a reduction of the amortized cost basis of loans and leases, while the reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets. The amortized cost basis of loans and leases does not include accrued interest receivable, which is included in "Other assets" on the condensed consolidated balance sheets. The "Provision for credit losses" on the condensed consolidated statement of earnings (loss) is a combination of the provision for loan and lease losses, the provision for unfunded loan commitments, and the provision for held-to-maturity debt securities.
Under the CECL methodology, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of prepayments and available information about the collectability of cash flows, including information about relevant historical experience, current conditions, and reasonable and supportable forecasts of future events and circumstances. Thus, the CECL methodology incorporates a broad range of information in developing credit loss estimates.
For further information regarding the calculation of the allowance for credit losses on loans and leases held for investment using the CECL methodology, see Note 1. Nature of Operations and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" of our Form 10-K.
In calculating our allowance for credit losses, we continued to consider higher inflation rates, the Federal Reserve's monetary policy, the risk of a recession, technical or otherwise, and the impact of various geopolitical risks on the economy in our process for estimating expected credit losses given the changes in economic forecasts and assumptions along with the uncertainty related to the severity and duration of the economic consequences resulting from such events. Our methodology and framework along with the 4-quarter reasonable and supportable forecast period and 2-quarter reversion period have remained consistent since the implementation of CECL on January 1, 2020. Certain management assumptions are reassessed every quarter based on current expectations for credit losses, while other assumptions are assessed and updated on at least an annual basis.
For the third quarter of 2024, we used the Moody’s September 30, 2024 Baseline and S2 Downside 75th Percentile for the calculation of our quantitative component. The weightings of the scenarios were based on management’s current expectations for the economic forecast, acknowledging the risk of recession over our reasonable and supportable forecast period and inherent uncertainty in the economy. Compared to the second quarter of 2024, updates to the economic forecasts, including the Company's scenario weighting, resulted in an immaterial impact to the allowance for credit losses.
The primary drivers behind higher quantitative reserves compared to the prior quarter were an increase of specific reserves associated with nonperforming loans and higher reserves due to risk rating migration. The increase in quantitative reserves was partially offset by changes in portfolio mix along with charge-off activity. The Company has successfully grown portfolios with lower risk of loss during the quarter, such as warehouse lending and lender finance, while portfolios requiring higher reserves, such as commercial real estate, have lower overall balances.
As part of our allowance for credit losses methodology, we consistently incorporate the use of qualitative factors in determining the overall allowance for credit losses to capture risks that may not be adequately reflected in our quantitative models. Such qualitative factors may include, but are not limited to: economic conditions not captured in in the quantitative reserve; collateral dependency related to certain loan portfolios including loans secured by office properties that were directly impacted by flexible/hybrid work environment; concentrations of credit within the loan portfolio including the commercial real estate portfolio; the quality of the Company’s credit review system; the volume and severity of adversely classified financial assets; the Company’s lending policies and procedures; and the effect of other external factors such as the regulatory and legal environments. During the third quarter of 2024, reserves associated with the qualitative adjustments increased when compared to the prior quarter. Primary qualitative adjustments are related to loans secured by office properties and concentration of credit associated with commercial real estate loans, multi-family loans, and construction loans.
The use of different economic forecasts, whether based on different scenarios, the use of multiple or single scenarios, or updated economic forecasts and scenarios, can change the outcome of the calculations. In addition to the economic forecasts, there are numerous components and assumptions that are integral to the overall estimation of allowance for credit losses. As part of our allowance for credit losses process, sensitivity analyses are performed to assess the impact of how changing certain assumptions could impact the estimated allowance for credit losses. At times, these analyses can provide information to further assist management in making decisions related to certain assumptions. We calculated alternative values for our ACL using various alternative forecast scenarios weightings and the calculated amounts for the quantitative component differed from the probability-weighted multiple scenario forecast ranging from decreases in the dollar amount of the quantitative component of the ACL by 2.03% to 6.65%. However, changing one assumption and not reassessing other assumptions used in the quantitative or qualitative process could yield results that are not reasonable or appropriate, hence all assumptions and information must be considered. From a sensitivity analysis perspective, changing key assumptions such as the macro-economic variable inputs from the economic forecasts, the reasonable and supportable forecast period, prepayment rates, loan segmentation, historical loss factors and/or periods, among others, would all change the outcome of the quantitative components of the allowance for credit losses. Those results would then need to be assessed from a qualitative perspective potentially requiring further adjustments to the qualitative component to arrive at a reasonable and appropriate allowance for credit losses.
The determination of the allowance for credit losses is complex and highly dependent on numerous models, assumptions, and judgments made by management. Management's current expectation for credit losses on loans and leases held for investment as quantified in the allowance for credit losses considers the impact of assumptions and is reflective of historical credit experience, economic forecasts viewed to be reasonable and supportable, current loan and lease composition, and relative credit risks known as of the balance sheet date.
Management believes the allowance for credit losses is appropriate for the current expected credit losses in our loan and lease portfolio and associated unfunded loan commitments, and the credit risk ratings and inherent loss rates currently assigned are reasonable and appropriate as of the reporting date. It is possible that others, given the same information, may at any point in time reach different conclusions that could result in a significant impact to the Company's financial statements.
The following table presents information regarding the allowance for credit losses on loans and leases held for investment as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
Allowance for Credit Losses Data |
2024 |
|
2023 |
|
(Dollars in thousands) |
| Allowance for loan and lease losses |
$ |
254,345 |
|
|
$ |
281,687 |
|
| Reserve for unfunded loan commitments |
27,571 |
|
|
29,571 |
|
| Total allowance for credit losses |
$ |
281,916 |
|
|
$ |
311,258 |
|
|
|
|
|
| Allowance for loan and lease losses to loans and leases held for investment |
1.08 |
% |
|
1.11 |
% |
|
|
|
|
|
|
|
|
| Allowance for credit losses to loans and leases held for investment |
1.20 |
% |
|
1.22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the changes in our allowance for credit losses on loans and leases held for investment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
Allowance for Credit Losses Roll Forward |
2024 |
|
2024 |
|
2024 |
|
2023 |
|
(Dollars in thousands) |
| Balance, beginning of period |
$ |
275,333 |
|
|
$ |
320,074 |
|
|
$ |
311,258 |
|
|
$ |
291,803 |
|
|
|
|
|
|
|
|
|
| Provision for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Addition to allowance for loan and lease losses |
9,000 |
|
|
12,000 |
|
|
32,000 |
|
|
66,500 |
|
|
|
|
|
|
|
|
|
| Reduction in reserve for unfunded loan commitments |
— |
|
|
(1,000) |
|
|
(2,000) |
|
|
(61,500) |
|
| Total provision for credit losses |
9,000 |
|
|
11,000 |
|
|
30,000 |
|
|
5,000 |
|
| Loans and leases charged off: |
|
|
|
|
|
|
|
| Real estate mortgage |
(640) |
|
|
(53,881) |
|
|
(56,998) |
|
|
(39,467) |
|
| Real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Commercial |
(1,963) |
|
|
(3,148) |
|
|
(5,815) |
|
|
(7,819) |
|
| Consumer |
(1,560) |
|
|
(1,041) |
|
|
(4,434) |
|
|
(1,514) |
|
| Total loans and leases charged off |
(4,163) |
|
|
(58,070) |
|
|
(67,247) |
|
|
(48,800) |
|
| Recoveries on loans charged off: |
|
|
|
|
|
|
|
| Real estate mortgage |
216 |
|
|
1,429 |
|
|
2,536 |
|
|
797 |
|
| Real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Commercial |
1,253 |
|
|
834 |
|
|
4,956 |
|
|
2,916 |
|
| Consumer |
277 |
|
|
66 |
|
|
413 |
|
|
152 |
|
| Total recoveries on loans charged off |
1,746 |
|
|
2,329 |
|
|
7,905 |
|
|
3,865 |
|
| Net charge-offs |
(2,417) |
|
|
(55,741) |
|
|
(59,342) |
|
|
(44,935) |
|
| Balance, end of period |
$ |
281,916 |
|
|
$ |
275,333 |
|
|
$ |
281,916 |
|
|
$ |
251,868 |
|
|
|
|
|
|
|
|
|
| Annualized net charge-offs to |
|
|
|
|
|
|
|
| average loans and leases |
0.04 |
% |
|
0.89 |
% |
|
0.32 |
% |
|
0.23 |
% |
The following table presents charge-offs by loan portfolio segment, class, and subclass for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
Allowance for Credit Losses Charge-offs |
2024 |
|
2024 |
|
2024 |
|
2023 |
|
(In thousands) |
| Real Estate Mortgage: |
|
|
|
|
|
|
|
| Commercial real estate |
$ |
185 |
|
|
$ |
20,183 |
|
|
$ |
20,368 |
|
|
$ |
11,525 |
|
| SBA program |
226 |
|
|
663 |
|
|
926 |
|
|
334 |
|
| Hotel |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total commercial real estate mortgage |
411 |
|
|
20,846 |
|
|
21,294 |
|
|
11,859 |
|
| Multi-family |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Residential mortgage |
67 |
|
|
— |
|
|
67 |
|
|
— |
|
| Investor-owned residential |
55 |
|
|
32,904 |
|
|
34,479 |
|
|
17,365 |
|
| Residential renovation |
107 |
|
|
131 |
|
|
1,158 |
|
|
10,243 |
|
| Total other residential real estate |
229 |
|
|
33,035 |
|
|
35,704 |
|
|
27,608 |
|
| Total real estate mortgage |
640 |
|
|
53,881 |
|
|
56,998 |
|
|
39,467 |
|
| Real Estate Construction and Land: |
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total real estate |
640 |
|
|
53,881 |
|
|
56,998 |
|
|
39,467 |
|
| Commercial: |
|
|
|
|
|
|
|
| Lender finance |
— |
|
|
— |
|
|
— |
|
|
150 |
|
| Equipment finance |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Premium finance |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other asset-based |
— |
|
|
92 |
|
|
92 |
|
|
— |
|
| Total asset-based |
— |
|
|
92 |
|
|
92 |
|
|
150 |
|
| Equity fund loans |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Venture lending |
— |
|
|
2,273 |
|
|
2,414 |
|
|
— |
|
| Total venture capital |
— |
|
|
2,273 |
|
|
2,414 |
|
|
— |
|
| Secured business loans |
732 |
|
|
— |
|
|
943 |
|
|
492 |
|
| Warehouse lending |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other lending |
1,231 |
|
|
783 |
|
|
2,366 |
|
|
7,177 |
|
| Total other commercial |
1,963 |
|
|
783 |
|
|
3,309 |
|
|
7,669 |
|
| Total commercial |
1,963 |
|
|
3,148 |
|
|
5,815 |
|
|
7,819 |
|
| Consumer |
1,560 |
|
|
1,041 |
|
|
4,434 |
|
|
1,514 |
|
| Total charge-offs |
$ |
4,163 |
|
|
$ |
58,070 |
|
|
$ |
67,247 |
|
|
$ |
48,800 |
|
The following table presents recoveries by portfolio segment, class, and subclass for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
| Allowance for Credit Losses Recoveries |
2024 |
|
2024 |
|
2024 |
|
2023 |
|
(In thousands) |
| Real Estate Mortgage: |
|
|
|
|
|
|
|
| Commercial real estate |
$ |
61 |
|
|
$ |
85 |
|
|
$ |
389 |
|
|
$ |
— |
|
| SBA program |
31 |
|
|
124 |
|
|
256 |
|
|
267 |
|
| Hotel |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total commercial real estate mortgage |
92 |
|
|
209 |
|
|
645 |
|
|
267 |
|
| Multi-family |
— |
|
|
500 |
|
|
500 |
|
|
— |
|
| Residential mortgage |
3 |
|
|
1 |
|
|
5 |
|
|
19 |
|
| Investor-owned residential |
121 |
|
|
299 |
|
|
721 |
|
|
102 |
|
| Residential renovation |
— |
|
|
420 |
|
|
665 |
|
|
409 |
|
| Total other residential real estate |
124 |
|
|
720 |
|
|
1,391 |
|
|
530 |
|
| Total real estate mortgage |
216 |
|
|
1,429 |
|
|
2,536 |
|
|
797 |
|
| Real Estate Construction and Land: |
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total real estate |
216 |
|
|
1,429 |
|
|
2,536 |
|
|
797 |
|
| Commercial: |
|
|
|
|
|
|
|
| Lender finance |
— |
|
|
— |
|
|
— |
|
|
324 |
|
| Equipment finance |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Premium finance |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other asset-based |
63 |
|
|
50 |
|
|
113 |
|
|
279 |
|
| Total asset-based |
63 |
|
|
50 |
|
|
113 |
|
|
603 |
|
| Equity fund loans |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Venture lending |
809 |
|
|
104 |
|
|
1,270 |
|
|
1,149 |
|
| Total venture capital |
809 |
|
|
104 |
|
|
1,270 |
|
|
1,149 |
|
| Secured business loans |
21 |
|
|
56 |
|
|
340 |
|
|
29 |
|
| Warehouse lending |
— |
|
|
— |
|
|
— |
|
|
— |
|
| Other lending |
360 |
|
|
624 |
|
|
3,233 |
|
|
1,135 |
|
| Total other commercial |
381 |
|
|
680 |
|
|
3,573 |
|
|
1,164 |
|
| Total commercial |
1,253 |
|
|
834 |
|
|
4,956 |
|
|
2,916 |
|
| Consumer |
277 |
|
|
66 |
|
|
413 |
|
|
152 |
|
| Total recoveries |
$ |
1,746 |
|
|
$ |
2,329 |
|
|
$ |
7,905 |
|
|
$ |
3,865 |
|
Deposits
The following table presents the composition of our deposit portfolio by account type as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
% of |
|
|
|
% of |
|
Increase |
| Deposit Composition |
Balance |
|
Total |
|
Balance |
|
Total |
|
(Decrease) |
|
(Dollars in thousands) |
| Noninterest-bearing checking |
$ |
7,811,796 |
|
|
29 |
% |
|
$ |
7,774,254 |
|
|
26 |
% |
|
$ |
37,542 |
|
| Interest-bearing: |
|
|
|
|
|
|
|
|
|
| Checking |
7,539,899 |
|
|
28 |
% |
|
7,808,764 |
|
|
26 |
% |
|
(268,865) |
|
| Money market |
5,039,607 |
|
|
19 |
% |
|
6,187,889 |
|
|
20 |
% |
|
(1,148,282) |
|
| Savings |
1,992,364 |
|
|
7 |
% |
|
1,997,989 |
|
|
6 |
% |
|
(5,625) |
|
| Time: |
|
|
|
|
|
|
|
|
|
| Non-brokered |
2,451,340 |
|
|
9 |
% |
|
3,139,270 |
|
|
10 |
% |
|
(687,930) |
|
| Brokered |
1,993,263 |
|
|
8 |
% |
|
3,493,603 |
|
|
12 |
% |
|
(1,500,340) |
|
| Total time deposits |
4,444,603 |
|
|
17 |
% |
|
6,632,873 |
|
|
22 |
% |
|
(2,188,270) |
|
| Total interest-bearing |
19,016,473 |
|
|
71 |
% |
|
22,627,515 |
|
|
74 |
% |
|
(3,611,042) |
|
| Total deposits |
$ |
26,828,269 |
|
|
100 |
% |
|
$ |
30,401,769 |
|
|
100 |
% |
|
$ |
(3,573,500) |
|
The following table presents time deposits based on the $250,000 FDIC insured limit as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
|
|
% of |
|
|
|
% of |
|
|
|
Total |
|
|
|
Total |
| Time Deposits |
Balance |
|
Deposits |
|
Balance |
|
Deposits |
|
(Dollars in thousands) |
| Time deposits $250,000 and under |
$ |
3,414,451 |
|
|
13 |
% |
|
$ |
5,526,396 |
|
|
18 |
% |
| Time deposits over $250,000 |
1,030,152 |
|
|
4 |
% |
|
1,106,477 |
|
|
4 |
% |
| Total time deposits |
$ |
4,444,603 |
|
|
17 |
% |
|
$ |
6,632,873 |
|
|
22 |
% |
During the nine months ended September 30, 2024, total deposits decreased by $3.6 billion, or 11.8%, to $26.8 billion at September 30, 2024, due primarily to a decrease of $1.5 billion in brokered time deposits and a decrease of $1.1 billion in money market accounts. At September 30, 2024, noninterest-bearing deposits totaled $7.8 billion, or 29%, of total deposits and interest-bearing deposits totaled $19.0 billion, or 71%, of total deposits.
As of September 30, 2024, FDIC-insured deposits represented approximately 72% of total deposits, including accounts eligible for pass-through insurance, down from 76% as of December 31, 2023. Available liquidity (on-balance sheet liquidity plus unused borrowing capacity and unpledged AFS securities) was $16.2 billion at September 30, 2024, which exceeded uninsured and uncollateralized deposits of $6.7 billion, with a coverage ratio of 241% as compared to a coverage ratio of 247% at December 31, 2023. Available liquidity also represented 60% of total deposits at September 30, 2024.
The Bank is a participant in the IntraFi Network, a network that offers deposit placement services such as ICS and CDARS, and other reciprocal deposit networks which offer products that qualify large deposits for FDIC insurance. At September 30, 2024, the Bank had $8.2 billion of reciprocal deposits compared to $8.9 billion at December 31, 2023.
The following table summarizes the maturities of time deposits as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits |
|
$250,000 |
|
Over |
|
|
| September 30, 2024 |
and Under |
|
$250,000 |
|
Total |
|
(In thousands) |
| Maturities: |
|
|
|
|
|
| Due in three months or less |
$ |
1,252,341 |
|
|
$ |
177,248 |
|
|
$ |
1,429,589 |
|
| Due in over three months through six months |
986,439 |
|
|
377,179 |
|
|
1,363,618 |
|
| Due in over six months through 12 months |
995,066 |
|
|
339,473 |
|
|
1,334,539 |
|
| Total due within 12 months |
3,233,846 |
|
|
893,900 |
|
|
4,127,746 |
|
| Due in over 12 months through 24 months |
175,054 |
|
|
130,917 |
|
|
305,971 |
|
| Due in over 24 months |
5,551 |
|
|
5,335 |
|
|
10,886 |
|
| Total due over twelve months |
180,605 |
|
|
136,252 |
|
|
316,857 |
|
| Total |
$ |
3,414,451 |
|
|
$ |
1,030,152 |
|
|
$ |
4,444,603 |
|
Client Investment Funds
In addition to deposit products, we also offer select clients non-depository cash investment options through BAM, our registered investment adviser subsidiary, and third-party money market sweep products. BAM provides customized investment advisory and asset management solutions. At September 30, 2024, total off-balance sheet client investment funds were $1.3 billion, of which $0.6 billion was managed by BAM. At December 31, 2023, total off-balance sheet client investment funds were $0.6 billion, of which $0.2 billion was managed by BAM.
Credit Quality
During the third quarter of 2024, we continued to remain conservative on risk rating of loans and leases. Increases to classified loans and leases that remained on accrual status resulted from downward migration for groups of loans and leases where performance deteriorated or increased borrower financial information was determined to be necessary. Nonaccrual loans and leases increased in the quarter primarily due to two commercial loans and one legacy Civic loan that migrated to nonperforming status.
Nonperforming Assets, Classified Loans and Leases, and Special Mention Loans and Leases
The following table presents information on our nonperforming assets, classified loans and leases, and special mention loans and leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2024 |
|
2023 |
|
(Dollars in thousands) |
| Nonaccrual loans and leases held for investment |
$ |
168,341 |
|
|
$ |
62,527 |
|
| Accruing loans contractually past due 90 days or more |
— |
|
|
11,750 |
|
| Total nonperforming loans and leases |
168,341 |
|
|
74,277 |
|
| Foreclosed assets, net |
8,661 |
|
|
7,394 |
|
| Total nonperforming assets |
$ |
177,002 |
|
|
$ |
81,671 |
|
|
|
|
|
| Classified loans and leases held for investment |
$ |
533,591 |
|
|
$ |
228,417 |
|
| Special mention loans and leases held for investment |
$ |
711,888 |
|
|
$ |
513,312 |
|
| Nonaccrual loans and leases held for investment to loans and leases held for investment |
0.72 |
% |
|
0.25 |
% |
| Nonperforming assets to loans and leases held for investment and foreclosed assets, net |
0.75 |
% |
|
0.32 |
% |
| Allowance for credit losses to nonaccrual loans and leases held for investment |
167.5 |
% |
|
497.8 |
% |
| Classified loans and leases held for investment to loans and leases held for investment |
2.27 |
% |
|
0.90 |
% |
| Special mention loans and leases held for investment to loans and leases held for investment |
3.03 |
% |
|
2.01 |
% |
Nonaccrual Loans and Leases Held for Investment
The following table presents our nonaccrual loans and leases held for investment and accruing loans and leases past due between 30 and 89 days by loan portfolio segment and class as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
December 31, 2023 |
|
Increase (Decrease) |
|
|
|
Accruing |
|
|
|
Accruing |
|
|
|
Accruing |
|
|
|
and 30-89 |
|
|
|
and 30-89 |
|
|
|
and 30-89 |
|
|
|
Days Past |
|
|
|
Days Past |
|
|
|
Days Past |
|
Nonaccrual |
|
Due |
|
Nonaccrual |
|
Due |
|
Nonaccrual |
|
Due |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
78,478 |
|
|
$ |
1,960 |
|
|
$ |
15,669 |
|
|
$ |
10,577 |
|
|
$ |
62,809 |
|
|
$ |
(8,617) |
|
| Multi-family |
916 |
|
|
— |
|
|
1,020 |
|
|
2,302 |
|
|
(104) |
|
|
(2,302) |
|
| Other residential |
50,514 |
|
|
15,680 |
|
|
31,041 |
|
|
83,747 |
|
|
19,473 |
|
|
(68,067) |
|
| Total real estate mortgage |
129,908 |
|
|
17,640 |
|
|
47,730 |
|
|
96,626 |
|
|
82,178 |
|
|
(78,986) |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Total real estate construction and land |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
2,295 |
|
|
1,097 |
|
|
2,689 |
|
|
608 |
|
|
(394) |
|
|
489 |
|
| Venture capital |
19,957 |
|
|
— |
|
|
325 |
|
|
— |
|
|
19,632 |
|
|
— |
|
| Other commercial |
15,662 |
|
|
2,221 |
|
|
10,972 |
|
|
1,187 |
|
|
4,690 |
|
|
1,034 |
|
| Total commercial |
37,914 |
|
|
3,318 |
|
|
13,986 |
|
|
1,795 |
|
|
23,928 |
|
|
1,523 |
|
| Consumer |
519 |
|
|
2,449 |
|
|
811 |
|
|
3,461 |
|
|
(292) |
|
|
(1,012) |
|
| Total held for investment |
$ |
168,341 |
|
|
$ |
23,407 |
|
|
$ |
62,527 |
|
|
$ |
101,882 |
|
|
$ |
105,814 |
|
|
$ |
(78,475) |
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended September 30, 2024, nonperforming loan and leases held for investment increased by $94.1 million to $168.3 million at September 30, 2024 due mainly to additions of $188.6 million, offset partially by transfers to held for sale of $19.6 million, transfers to accrual status of $15.3 million, charge-offs of $14.7 million, and principal and other reductions of $44.9 million. As of September 30, 2024, the Company's three largest loan relationships on nonaccrual status had an aggregate carrying value of $49.0 million and represented 29% of total nonaccrual loans and leases.
Loans and leases accruing 30-89 days past due decreased $78.5 million to $23.4 million as of September 30, 2024 due mainly to decreases in other residential and commercial real estate delinquent loans. Decrease in other residential real estate delinquent loans was primarily due to the Civic loan sale.
Foreclosed Assets
The following table presents foreclosed assets (primarily OREO), net of the valuation allowance, by property type as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
| Property Type |
2024 |
|
2023 |
|
(In thousands) |
|
|
|
|
| Single-family residential |
$ |
8,661 |
|
|
$ |
7,394 |
|
|
|
|
|
|
|
|
|
| Total OREO, net |
8,661 |
|
|
7,394 |
|
| Other foreclosed assets |
— |
|
|
— |
|
| Total foreclosed assets, net |
$ |
8,661 |
|
|
$ |
7,394 |
|
During the nine months ended September 30, 2024, foreclosed assets increased by $1.3 million to $8.7 million at September 30, 2024 due mainly to transfers from loans of $15.6 million, offset partially by sales of $13.6 million.
Classified and Special Mention Loans and Leases Held for Investment
The following table presents the credit risk ratings of our loans and leases held for investment, net of deferred fees, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
Loan and Lease Credit Risk Ratings |
2024 |
|
2023 |
|
(In thousands) |
| Pass |
$ |
22,282,298 |
|
|
$ |
24,747,958 |
|
| Special mention |
711,888 |
|
|
513,312 |
|
| Classified |
533,591 |
|
|
228,417 |
|
| Total loans and leases held for investment, net of deferred fees |
$ |
23,527,777 |
|
|
$ |
25,489,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified and special mention loans and leases fluctuate from period to period as a result of loan repayments and downgrades or upgrades from our ongoing active portfolio management.
The following table presents the classified and special mention credit risk rating categories for loans and leases held for investment, net of deferred fees, by loan portfolio segment and class and the related net changes as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
December 31, 2023 |
|
Increase (Decrease) |
|
|
|
Special |
|
|
|
Special |
|
|
|
Special |
|
Classified |
|
Mention |
|
Classified |
|
Mention |
|
Classified |
|
Mention |
|
(In thousands) |
| Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
$ |
256,581 |
|
|
$ |
339,559 |
|
|
$ |
75,739 |
|
|
$ |
219,687 |
|
|
$ |
180,842 |
|
|
$ |
119,872 |
|
| Multi-family |
152,288 |
|
|
46,332 |
|
|
74,954 |
|
|
108,356 |
|
|
77,334 |
|
|
(62,024) |
|
| Other residential |
53,140 |
|
|
14,775 |
|
|
38,155 |
|
|
54,197 |
|
|
14,985 |
|
|
(39,422) |
|
| Total real estate mortgage |
462,009 |
|
|
400,666 |
|
|
188,848 |
|
|
382,240 |
|
|
273,161 |
|
|
18,426 |
|
| Real estate construction and land: |
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
— |
|
|
111,195 |
|
|
— |
|
|
— |
|
|
— |
|
|
111,195 |
|
| Residential |
— |
|
|
3,164 |
|
|
— |
|
|
2,757 |
|
|
— |
|
|
407 |
|
| Total real estate construction and land |
— |
|
|
114,359 |
|
|
— |
|
|
2,757 |
|
|
— |
|
|
111,602 |
|
| Commercial: |
|
|
|
|
|
|
|
|
|
|
|
| Asset-based |
5,731 |
|
|
11,156 |
|
|
4,561 |
|
|
12,506 |
|
|
1,170 |
|
|
(1,350) |
|
| Venture capital |
39,699 |
|
|
145,441 |
|
|
7,805 |
|
|
98,633 |
|
|
31,894 |
|
|
46,808 |
|
| Other commercial |
25,511 |
|
|
32,358 |
|
|
26,044 |
|
|
9,984 |
|
|
(533) |
|
|
22,374 |
|
| Total commercial |
70,941 |
|
|
188,955 |
|
|
38,410 |
|
|
121,123 |
|
|
32,531 |
|
|
67,832 |
|
| Consumer |
641 |
|
|
7,908 |
|
|
1,159 |
|
|
7,192 |
|
|
(518) |
|
|
716 |
|
| Total |
$ |
533,591 |
|
|
$ |
711,888 |
|
|
$ |
228,417 |
|
|
$ |
513,312 |
|
|
$ |
305,174 |
|
|
$ |
198,576 |
|
During the nine months ended September 30, 2024, classified loans and leases increased by $305.2 million to $533.6 million at September 30, 2024 due mainly to increases of $180.8 million in commercial real estate mortgage classified loans, $77.3 million in multi-family real estate mortgage classified loans, $31.9 million in venture capital classified loans, and $15.0 million in other residential real estate mortgage classified loans.
During the nine months ended September 30, 2024, special mention loans and leases increased by $198.6 million to $711.9 million at September 30, 2024 due mainly to increases of $119.9 million in commercial real estate mortgage special mention loans, $111.2 million in commercial real estate construction and land special mention loans, and $46.8 million in venture capital special mention loans, offset partially by decreases of $62.0 million in multi-family real estate mortgage special mention loans and $39.4 million in other residential real estate mortgage special mention loans.
Regulatory Matters
Capital
Bank regulatory agencies measure capital adequacy through standardized risk-based capital guidelines that compare different levels of capital (as defined by such guidelines) to risk-weighted assets and off-balance sheet obligations. At September 30, 2024, banks considered to be “well capitalized” must maintain a minimum Tier 1 leverage ratio of 5.00%, a minimum common equity Tier 1 risk-based capital ratio of 6.50%, a minimum Tier 1 risk-based capital ratio of 8.00%, and a minimum Total risk-based capital ratio of 10.00%.
Regulatory capital requirements limit the amount of deferred tax assets that may be included when determining the amount of regulatory capital. Deferred tax asset amounts in excess of the calculated limit are disallowed from regulatory capital. At September 30, 2024, such disallowed amounts was $284.7 million for the Company. No assurance can be given that the regulatory capital deferred tax asset limitation will not increase in the future or that the Company will not have increased deferred tax assets that are disallowed.
Basel III currently requires all banking organizations to maintain a 2.50% capital conservation buffer above the minimum risk-based capital requirements to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the common equity Tier 1, Tier 1, and Total capital ratio minimums inclusive of the capital conservation buffer were 7.00%, 8.50%, and 10.50%. At September 30, 2024, the Company and the Bank were in compliance with the capital conservation buffer requirements.
The Company and the Bank elected the CECL 5-year regulatory transition guidance for calculating regulatory capital ratios and the September 30, 2024 ratios include this election. This regulatory guidance allows an entity to add back to capital 100% of the capital impact from the day one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through December 31, 2021. This cumulative amount is now being phased out of regulatory capital evenly over the three years from 2022 to 2024. The add-back as of September 30, 2024 ranged from 0 basis points to 3 basis points for the capital ratios below.
The following tables present a comparison of our actual capital ratios to the minimum required ratios and well capitalized ratios as of the dates indicated:
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Required |
|
|
|
|
|
For Capital |
|
For Capital |
|
For Well |
|
September 30, |
|
December 31, |
|
Adequacy |
|
Conservation |
|
Capitalized |
|
2024 |
|
2023 |
|
Purposes |
|
Buffer |
|
Classification |
| Banc of California, Inc.: |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital ratio |
9.83% |
|
9.00% |
|
4.00% |
|
N/A |
|
N/A |
| CET1 capital ratio |
10.46% |
|
10.14% |
|
4.50% |
|
7.00% |
|
N/A |
| Tier 1 capital ratio |
12.88% |
|
12.44% |
|
6.00% |
|
8.50% |
|
N/A |
| Total capital ratio |
17.00% |
|
16.43% |
|
8.00% |
|
10.50% |
|
N/A |
|
|
|
|
|
|
|
|
|
|
| Banc of California: |
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital ratio |
10.74% |
|
9.62% |
|
4.00% |
|
N/A |
|
5.00% |
| CET1 capital ratio |
14.08% |
|
13.27% |
|
4.50% |
|
7.00% |
|
6.50% |
| Tier 1 capital ratio |
14.08% |
|
13.27% |
|
6.00% |
|
8.50% |
|
8.00% |
| Total capital ratio |
16.61% |
|
15.75% |
|
8.00% |
|
10.50% |
|
10.00% |
The Company's consolidated risk-based capital ratios increased during the nine months ended September 30, 2024 due mainly to a decrease in risk-weighted assets and positive earnings for the period. The consolidated Tier 1 leverage ratio increased during the nine months ended September 30, 2024 due mainly to a decrease in average assets attributable primarily to decreased cash and cash equivalents.
Subordinated Debt
We issued or assumed through mergers subordinated debt to trusts that were established by us or entities we acquired, which, in turn, issued trust preferred securities. As of September 30, 2024, the carrying value of subordinated debt totaled $942.2 million. At September 30, 2024, $131.0 million of the trust preferred securities were included in the Company's Tier I capital and $796.2 million were included in Tier II capital.
Dividends on Common Stock and Interest on Subordinated Debt
As a bank holding company, Banc of California, Inc. is required to notify and receive approval from the FRB prior to declaring and paying a dividend to common stockholders during any period in which quarterly and/or cumulative twelve-month net earnings are insufficient to fund the dividend amount, among other requirements. Interest payments made on subordinated debt are considered dividend payments under FRB regulations. We may not pay a dividend if the FRB objects or until such time as we receive approval from the FRB or we no longer need to provide notice under applicable regulations. The Company currently is required to receive FRB approval to declare or pay a dividend to stockholders. Further, if the Company defaults or elects to defer the interest payments on its subordinated debt, it is restricted from paying dividends on its Series F preferred and common stock.
Dividends on Preferred Stock
The Company's ability to pay dividends on the Series F preferred stock depends on the ability of the Bank to pay dividends to the holding company. The ability of the Company and the Bank to pay dividends in the future is subject to bank regulatory requirements, including capital regulations and policies established by the FRB, and the DFPI, as applicable. Dividends on the Series F preferred stock will not be declared, paid, or set aside for payment to the extent such act would cause us to fail to comply with applicable laws and regulations, including applicable FRB capital adequacy regulations and policies.
Dividends on the Series F preferred stock are not cumulative or mandatory. If the Company's Board of Directors does not declare a dividend on the Series F preferred stock in respect of a dividend period, then no dividend shall be deemed to be payable for such dividend period or be cumulative, and the Company will have no obligation to pay any dividend for that dividend period, whether or not the Board of Directors declares a dividend on the Series F preferred stock or any other class or series of its capital stock for any future dividend period. However, if dividends on the Series F preferred stock have not been declared or paid for the equivalent of six dividend payments, whether or not for consecutive dividend periods, holders of the outstanding shares of Series F preferred stock, together with holders of any other series of the Company's preferred stock ranking equal with the Series F preferred stock with similar voting rights, will generally be entitled to vote for the election of two additional directors. Additionally, so long as any share of Series F preferred stock remains outstanding, unless dividends on all outstanding shares of Series F preferred stock for the most recently completed dividend period have been paid in full or declared and a sum sufficient for the payment thereof has been set aside for payment, no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on the Company's common stock.
Liquidity
Liquidity Management
Liquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet the needs and accommodate fluctuations in asset and liability levels due to changes in the Company’s business operations or unanticipated events.
We have a Management Finance Committee ("MFC") that is comprised of members of senior management and is responsible for managing commitments to meet the needs of customers while achieving our financial objectives. MFC meets regularly to review funding capacities, current and forecasted loan demand, and investment opportunities.
We manage our liquidity by maintaining pools of liquid assets on-balance sheet, consisting of cash and receivables due from banks, interest-earning deposits in other financial institutions, and unpledged available-for-sale securities, which we refer to as our primary liquidity. We also maintain available borrowing capacity under secured credit lines with the FHLB and the FRBSF, which we refer to as our secondary liquidity.
As a member of the FHLB, the Bank had secured borrowing capacity with the FHLB of $6.6 billion at September 30, 2024, and $471.6 million pledged for letters of credit and a balance outstanding of $1.1 billion as of that date. The FHLB secured credit line was collateralized by a blanket lien on $10.5 billion of certain qualifying loans and $20.9 million of securities. The Bank also had secured borrowing capacity with the FRBSF under the Discount Window program totaling $6.9 billion at September 30, 2024, of which $6.7 billion was available. The FRBSF Discount Window secured credit line was collateralized by liens on $6.7 billion of qualifying loans and $1.8 billion of pledged securities.
In addition to its secured lines of credit with the FHLB and FRBSF, the Bank also maintains unsecured lines of credit for the purpose of borrowing overnight funds, subject to availability, of $290.0 million in the aggregate with several correspondent banks. As of September 30, 2024, there was no balance outstanding related to these unsecured lines of credit. The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks. The availability of funds changes daily. As of September 30, 2024, there was no outstanding balance through the AFX.
The following tables provide a summary of the Bank’s primary and secondary liquidity levels at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
| Primary Liquidity - On-Balance Sheet |
2024 |
|
2023 |
|
(Dollars in thousands) |
| Cash and due from banks |
$ |
251,869 |
|
|
$ |
202,427 |
|
| Interest-earning deposits in financial institutions |
2,302,358 |
|
|
5,175,149 |
|
| Less: restricted cash |
(183,247) |
|
|
(185,147) |
|
| Securities available-for-sale, at fair value |
2,300,284 |
|
|
2,346,864 |
|
|
|
|
|
| Less: pledged securities, available-for-sale, at fair value |
(4,313) |
|
|
(2,063,754) |
|
|
|
|
|
| Total primary liquidity |
$ |
4,666,951 |
|
|
$ |
5,475,539 |
|
|
|
|
|
| Ratio of primary liquidity to total assets |
14.0 |
% |
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
| Secondary Liquidity - Off-Balance Sheet |
September 30, |
|
December 31, |
| Available Secured Borrowing Capacity |
2024 |
|
2023 |
|
(In thousands) |
| Total secured borrowing capacity with the FHLB |
$ |
6,552,711 |
|
|
$ |
5,302,210 |
|
| Less: letters of credit |
(471,580) |
|
|
(243,801) |
|
| Less: secured advances outstanding |
(1,100,000) |
|
|
— |
|
| Available secured borrowing capacity with the FHLB |
4,981,131 |
|
|
5,058,409 |
|
| Total secured borrowing capacity with the FRBSF |
6,942,509 |
|
|
6,916,235 |
|
| Less: secured advances outstanding |
(200,000) |
|
|
— |
|
| Available secured borrowing capacity with the FRBSF |
6,742,509 |
|
|
6,916,235 |
|
| Total secondary liquidity |
$ |
11,723,640 |
|
|
$ |
11,974,644 |
|
During the nine months ended September 30, 2024, the Company's primary liquidity decreased by $808.6 million to $4.7 billion at September 30, 2024 due mainly to a $2.9 billion decrease in interest-earning deposits in financial institutions, offset partially by a decrease of $2.1 billion in pledged AFS securities. During the nine months ended September 30, 2024, the Company's secondary liquidity decreased by $251.0 million to $11.7 billion at September 30, 2024 due to decreases in available secured borrowing capacity with the FHLB of $77.3 million and available secured borrowing capacity with the FRB of $173.7 million.
Obtaining new customer deposits, or having existing customers increase their deposit balances with us, are the primary sources of funding for our operations and is one the highest priorities of the Company. See "- Balance Sheet Analysis - Deposits" for additional information and detail of our deposits. Additionally, we fund our operations with cash flows from our loan and securities portfolios.
Our deposit balances may decrease if customers withdraw funds from the Bank. In order to address the Bank’s liquidity risk from fluctuating deposit balances, the Bank maintains adequate levels of available liquidity on and off the balance sheet.
We use brokered deposits, the availability of which is uncertain and subject to competitive market forces and regulation, for liquidity management purposes. At September 30, 2024, brokered deposits totaled $2.6 billion, consisting of $638.8 million of non-maturity brokered accounts and $2.0 billion of brokered time deposits. At December 31, 2023, brokered deposits totaled $4.6 billion, consisting of $1.1 billion of non-maturity brokered accounts and $3.5 billion of brokered time deposits.
Our liquidity policy includes guidelines, which are governed by the Company's Risk Appetite Statement, which include the following metrics: Primary Liquidity Ratio (unencumbered liquid assets and the market value of unpledged AFS securities, net of a haircut, divided by total assets), Brokered Deposits to Total Funding Ratio (wholesale deposits to total deposits plus borrowings), Total Borrowings to Total Funding Ratio (borrowings to total deposits and borrowings), Short-Term Non-Core Funding Ratio (retail time deposits of $250,000 or more that mature within one year, brokered deposits that mature within one year, listing service deposits that mature within one year, official checks, escrow and title company deposits, 1031 exchange accommodator deposits, Federal Funds purchased, and borrowings that mature within one year as a percentage of total assets) and the Wholesale Funding Ratio (wholesale deposits and borrowings to total assets). At September 30, 2024, the Bank was in compliance with all of its funding concentration liquidity guidelines.
Holding Company Liquidity
Banc of California, Inc. acts as a source of financial strength for the Bank which can also include being a source of liquidity. The primary sources of liquidity for the holding company include dividends from the Bank, intercompany tax payments from the Bank, and Banc of California, Inc.'s ability to raise capital, issue subordinated debt, and secure outside borrowings. Banc of California, Inc.'s ability to obtain funds for the payment of dividends to our stockholders, the repurchase of shares of common stock, and other cash requirements is largely dependent upon the Bank’s earnings. The Bank is subject to restrictions under certain federal and state laws and regulations that limit its ability to transfer funds to the holding company through intercompany loans, advances, or cash dividends. Banc of California, Inc.'s ability to pay dividends is also subject to the restrictions set forth by the FRB, and by certain covenants contained in our subordinated debt. See "-Regulatory Matters - Dividend on Preferred Stock" for information regarding the payment of dividends on the Series F preferred stock.
At September 30, 2024, Banc of California, Inc. had $192.4 million in cash and cash equivalents, of which a substantial amount was on deposit at the Bank. We believe this amount of cash, along with anticipated future dividends from the Bank, will be sufficient to fund the holding company’s cash flow needs over the next 12 months.
Our obligations also include off-balance sheet arrangements consisting of loan commitments, of which only a portion is expected to be funded, and standby letters of credit. At September 30, 2024, our loan commitments and standby letters of credit were $5.0 billion and $201.3 million. The loan commitments, a portion of which will eventually result in funded loans, increase our profitability through net interest income when drawn and unused commitment fees prior to being drawn. We manage our overall liquidity taking into consideration funded and unfunded commitments as a percentage of our liquidity sources. Our liquidity sources, as described in "- Liquidity - Liquidity Management," have been and are expected to be sufficient to meet the cash requirements of our lending activities. For further information on loan commitments, see Note 11. Commitments and Contingencies, of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This analysis should be read in conjunction with text under the caption "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the year ended December 31, 2023, which text is incorporated herein by reference. Our analysis of market risk and market-sensitive financial information contains forward-looking statements and is subject to the disclosure at the beginning of Item 2 regarding such forward-looking information.
Market Risk - Foreign Currency Exposure
We enter into foreign exchange contracts with our clients and counterparty banks primarily for the purpose of offsetting or hedging clients' foreign currency exposures arising out of commercial transactions, and we enter into cross currency swaps and foreign exchange contracts to hedge exposures to loans and debt instruments denominated in foreign currencies. We have experienced and will continue to experience fluctuations in our net earnings as a result of transaction gains or losses related to revaluing certain asset and liability balances that are denominated in currencies other than the U.S. Dollar and the derivatives that hedge those exposures. As of September 30, 2024, the U.S. Dollar notional amounts of loans receivable and subordinated debt payable denominated in foreign currencies were $8.1 million and $28.7 million, and the U.S. Dollar notional amounts of derivatives outstanding to hedge these foreign currency exposures were $8.1 million and $28.5 million. We recognized a foreign currency translation net loss of $752,000 for the nine months ended September 30, 2024 and a foreign currency translation net loss of $97,000 for the nine months ended September 30, 2023.
Asset/Liability Management and Interest Rate Sensitivity
Interest Rate Risk - Company Governance. On a monthly basis, we measure our IRR position using two methods: (i) Net Interest Income ("NII") simulation analysis and (ii) Economic Value of Equity ("EVE") modeling. The Management Finance Committee ("MFC") and the Finance Committee of the Company's Board of Directors review the results of these analyses at least quarterly. As discussed in more detail below, if projected changes to interest rates cause changes to our simulated net present value of equity and/or net interest income to be outside our pre-established IRR limits, we may adjust our asset and liability mix in an effort to bring our interest rate risk exposure within our established limits.
The pre-established IRR Limits are recommended by management, determined based on analytical review and available peer data published by regulatory agencies about the IRR Limits utilized by other regional banks, and documented in the Company's ALCO Policy. The ALCO Policy is approved by MFC and the Finance Committee of the Board of Directors annually. We believe our ALCO Policy IRR Limits are consistent with prevailing practice in the regional banking industry.
We use a balance sheet simulation model (the "IRR Model") to estimate changes in NII and EVE that would result from immediate and sustained changes in interest rates as of the measurement date. This IRR Model assesses the changes in NII and EVE that would occur in response to an instantaneous and sustained increase and decrease in market interest rates of +-100, +-200, +-300, and +400 basis points. This model is an IRR management tool, and the results are not necessarily an indication of our future net interest income. The IRR Model has inherent limitations and the model's results are based on a given set of rate changes and assumptions at a single point in time.
The IRR Model is updated monthly and the IRR Model results are reported to MFC and the Finance Committee of the Company's Board of Directors at each monthly or quarterly meeting, as applicable.
Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.
The Management Finance Committee ("MFC") is comprised of select members of senior management. The Company also has a Finance Committee of the Boards of Directors of the Company and the Bank (together with MFC, the “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our economic value of equity analysis.
In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability, and capital targets, we evaluate various strategies including:
•Complementing our current loan origination platform through strategic acquisitions of whole loans,
•Strategically managing multiple warehouse relationships,
•Originating shorter-term consumer loans,
•Managing the level of investments and duration of investment securities,
•Managing our deposits to establish stable deposit relationships, and
•Using FHLB advances and/or certain derivatives such as swaps as hedges to align maturities and repricing terms.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors. As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and our economic value of equity.
Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income
Interest rate risk results from our banking activities and is the primary market risk for us. Interest rate risk is caused by the following factors:
•Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
•Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;
•Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
•Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate, and SOFR.
Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Management of our interest rate risk is overseen by the Finance Committee of the Boards of Directors of the Company and Bank, which delegates the day to day management of interest rate risk to the MFC. MFC ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program. The Finance Committee of the Boards of Directors of the Company and the Bank reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of our asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and derivatives.
We used a NII simulation model to measure the estimated changes in NII that would result over the next twelve months from immediate and sustained changes in interest rates as of September 30, 2024. We have assumed no growth or changes in the product mix of either our total interest-sensitive assets or liabilities over the next twelve months, therefore the results reflect an interest rate shock to a static balance sheet. This model is an interest rate risk management tool and the results are not necessarily an indication of our future net interest income.
EVE measures the period end present value of assets minus the present value of liabilities. Asset liability management uses this value to measure the changes in the economic value of the Company under various interest rate scenarios. In some ways, the economic value approach provides a broader scope than net income volatility approach since it captures all anticipated cash flows.
The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest income, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our net interest income, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.
At September 30, 2024, our interest rate risk profile is “liability sensitive,” but less liability sensitive as compared to our interest rate risk profile position as of December 31, 2023. This shift is primarily due to the change in the mix of funding sources during the nine months ended September 30, 2024 resulting from the paydowns of the Bank Term Funding Program balances. Given the uncertainty of the magnitude, timing, and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary materially from those predicted by our model.
The following table presents the projected change in the Company’s economic value of equity at September 30, 2024 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change:
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Change in Interest Rates in Basis Points (bps) (1) |
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Economic Value of Equity |
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Net Interest Income |
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Amount |
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Percentage |
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Amount |
|
Percentage |
| September 30, 2024 |
Amount |
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Change |
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Change |
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Amount |
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Change |
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Change |
|
(Dollars in millions) |
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| +200 bps |
$ |
2,874 |
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|
$ |
(256) |
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|
(8.2) |
% |
|
$ |
1,131 |
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|
$ |
(10) |
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|
(0.9) |
% |
| +100 bps |
$ |
3,018 |
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|
$ |
(112) |
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|
(3.6) |
% |
|
$ |
1,134 |
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|
$ |
(7) |
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(0.6) |
% |
| 0 bps |
$ |
3,130 |
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$ |
1,141 |
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| -100 bps |
$ |
3,241 |
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$ |
111 |
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3.5 |
% |
|
$ |
1,148 |
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$ |
7 |
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0.6 |
% |
| -200 bps |
$ |
3,174 |
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$ |
44 |
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1.4 |
% |
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$ |
1,150 |
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$ |
9 |
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0.8 |
% |
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____________________
(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of September 30, 2024 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 11. Commitments and Contingencies of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated herein by reference.
In addition, in the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a material adverse effect on the Company’s financial statements or operations.
ITEM 1A. RISK FACTORS
For information regarding factors that could affect the Company's results of operations, financial condition, and liquidity, see the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2023. See also "Forward-Looking Information" disclosed in Part I, Item 2 of this Quarterly Report on Form 10-Q.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents stock purchases made during the third quarter of 2024:
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Total Number of |
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Maximum Dollar |
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Shares Purchased |
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Value of Shares |
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Total |
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as Part of |
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That May Yet |
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Number of |
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Average |
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Publicly |
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Be Purchased |
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Shares |
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Price Paid |
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Announced |
|
Under the |
| Purchase Dates |
Purchased (1) |
|
Per Share |
|
Program |
|
Program |
|
(Dollars in thousands, except per share amounts) |
July 1 - July 31, 2024 |
633 |
|
|
$ |
13.10 |
|
|
— |
|
|
$ |
— |
|
August 1 - August 31, 2024 |
10,787 |
|
|
$ |
13.42 |
|
|
— |
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|
$ |
— |
|
September 1 - September 30, 2024 |
325 |
|
|
$ |
13.81 |
|
|
— |
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|
$ |
— |
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| Total |
11,745 |
|
|
$ |
13.41 |
|
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— |
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|
__________________________
(1) Shares repurchased pursuant to net settlement by employees in satisfaction of income tax withholding obligations incurred through the vesting of Company stock awards.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Trading Arrangements
During the quarter ended September 30, 2024, none of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408 of Regulation S-K) for the purchase or sale of the Company’s securities.
ITEM 6. EXHIBITS
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| Exhibit Number |
Description |
| 2.1 |
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| 3.1 |
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| 3.2 |
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| 31.1 |
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| 31.2 |
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| 32.1+ |
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| 32.2+ |
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| 101 |
Interactive data files pursuant to Rule 405 of Regulation S-T formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, (ii) the Condensed Consolidated Statements of Earnings (Loss) for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023 and nine months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023 and nine months ended September 30, 2024 and 2023, (iv) the Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023, and (vi) the Notes to Condensed Consolidated Financial Statements. (Filed herewith). |
| 104 |
Cover page of Banc of California, Inc.'s Quarterly Report on Form 10-Q formatted as Inline XBRL and contained in Exhibit 101. |
__________________
+ This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
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, thereunto duly authorized.
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BANC OF CALIFORNIA, INC. |
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| Date: |
November 8, 2024 |
/s/ Jared M. Wolff |
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Jared M. Wolff |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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| Date: |
November 8, 2024 |
/s/ Joseph Kauder |
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Joseph Kauder |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial Officer) |
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| Date: |
November 8, 2024 |
/s/ Jeff Krumpoch |
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Jeff Krumpoch |
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Executive Vice President and Interim Chief Accounting Officer |
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(Principal Accounting Officer) |
EX-31.1
2
a09302410-qexhibit311.htm
EX-31.1
Document
Exhibit 31.1
Certification
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Jared M. Wolff, certify that:
1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2024 of Banc of California, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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| Date: |
November 8, 2024 |
/s/ JARED M. WOLFF |
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Jared M. Wolff
President and Chief Executive Officer
|
EX-31.2
3
a09302410-qexhibit312.htm
EX-31.2
Document
Exhibit 31.2
Certification
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Joseph Kauder, certify that:
1. I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2024 of Banc of California, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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| Date: |
November 8, 2024 |
/s/ JOSEPH KAUDER |
|
|
Joseph Kauder
Executive Vice President and Chief Financial Officer
|
EX-32.1
4
a09302410-qexhibit321.htm
EX-32.1
Document
Exhibit 32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned officer of Banc of California, Inc. (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
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|
|
| Date: |
November 8, 2024 |
/s/ JARED M. WOLFF |
|
|
Jared M. Wolff
President and Chief Executive Officer
|
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and is not being filed as part of the Report or as a separate disclosure document.
EX-32.2
5
a09302410-qexhibit322.htm
EX-32.2
Document
Exhibit 32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned officer of Banc of California, Inc. (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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|
| Date: |
November 8, 2024 |
/s/ JOSEPH KAUDER |
|
|
Joseph Kauder
Executive Vice President and Chief Financial Officer
|
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and is not being filed as part of the Report or as a separate disclosure document.
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