Banc of California(BANC) - 2024 Q3 - Quarterly Report

Financial Position - As of September 30, 2024, the company had total assets of $33.4 billion, a decrease of $5.1 billion from $38.5 billion at December 31, 2023[220] - Total loans and leases amounted to $23.6 billion, down from $25.6 billion at the end of 2023, reflecting a decrease of $2.1 billion[220] - Total liabilities were $29.9 billion, a reduction of $5.2 billion from $35.1 billion at December 31, 2023, primarily due to a $3.6 billion decrease in deposits[220] - The company reported total stockholders' equity of $3.5 billion at September 30, 2024, an increase from $3.4 billion at December 31, 2023[220] Mergers and Acquisitions - The merger with PacWest Bancorp was completed on November 30, 2023, with an all-stock transaction valued at approximately $663 million[222] - Goodwill resulting from the merger was recorded at $216.8 million[222] - The company raised $400 million in equity capital concurrent with the merger[222] Asset Management - The company completed the sale of $1.95 billion of Civic business-purpose residential loans, generating net proceeds of $1.91 billion[221] - The company sold assets totaling $6.1 billion and paid down $8.6 billion of high-cost liabilities as part of its balance sheet repositioning strategy following the merger[223] - The company sold $742 million of securities with a weighted average yield of 2.94%, resulting in a pre-tax loss of $60 million, while purchasing $724 million of similar quality securities with a yield of 5.65%[223] Income and Earnings - The adjusted net earnings available to common stockholders for Q3 2024 was $4.53 million, compared to a loss of $181.95 million in the same period last year[232] - The return on average tangible common equity for Q3 2024 was 0.70%, down from 3.13% in the previous year[233] - Net interest income for the three months ended September 30, 2024, was $232,175 thousand, compared to $229,488 thousand for the previous quarter, indicating a slight increase[238] - Adjusted net earnings available to common and equivalent stockholders were $41,414 thousand, a significant recovery from a loss of $25,065 thousand in the same period last year[236] Credit Quality - The provision for credit losses is based on the allowance methodology, reflecting historical experience and economic forecasts, with an emphasis on maintaining credit quality[226] - The provision for credit losses was $9.0 million for Q3 2024, down from $11.0 million in Q2 2024, driven by increases in qualitative reserves for office property loans[252] - The allowance for credit losses at quarter-end was $281.9 million, reflecting a slight increase from $275.3 million in the previous quarter[252] Deposits and Liquidity - Total deposits as of September 30, 2024, were $26,828,269,000, a decrease of $3,573,500,000 from $30,401,769,000 as of December 31, 2023[285] - Noninterest-bearing checking accounts increased to $7,811,796,000, representing 29% of total deposits, up from 26% in the previous period[285] - Available liquidity was $16.2 billion at September 30, 2024, exceeding uninsured and uncollateralized deposits of $6.7 billion, with a coverage ratio of 241%[286] Interest Rate Risk - Interest rate risk is the primary market risk for the company, with ongoing monitoring and management of interest rate sensitivity through established asset/liability committees[316] - The company utilizes a balance sheet simulation model to estimate changes in net interest income and economic value of equity due to interest rate fluctuations[315] - As of September 30, 2024, the company's interest rate risk profile is classified as "liability sensitive," indicating a potential compression in net interest income with rising short-term interest rates[318] Noninterest Income and Expenses - Noninterest income for Q3 2024 decreased by $45.2 million to a loss of $15.5 million, primarily due to a $59.9 million loss on the sale of securities[256] - Total noninterest expense for Q3 2024 decreased by $7.4 million to $196.2 million, mainly due to lower insurance and assessments expense[260] - Noninterest expense for the nine months ended September 30, 2024, decreased by $1.5 billion to $610.4 million compared to $2.1 billion for the same period in 2023, largely due to a $1.4 billion goodwill impairment recorded in 2023[261] Loan Portfolio - The loan and lease portfolio totaled $23,527,777 thousand, with real estate mortgage comprising 56% of the total[270] - Total loans and leases held for investment decreased to $23.5 billion as of September 30, 2024, down from $25.5 billion at December 31, 2023[296] - The company reported a net decrease in loans and leases held for investment of $1,961,910 thousand for the nine months ended September 30, 2024[273] Capital Ratios - The Tier 1 leverage capital ratio was 9.83% as of September 30, 2024, up from 9.00% at December 31, 2023, exceeding the minimum required ratio of 4.00%[300] - The CET1 capital ratio increased to 10.46% as of September 30, 2024, compared to 10.14% at December 31, 2023, surpassing the minimum required ratio of 4.50%[300] - Total capital ratio improved to 17.00% as of September 30, 2024, from 16.43% at December 31, 2023, well above the minimum required ratio of 8.00%[300]