Banc of California(BANC) - 2023 Q2 - Quarterly Report

Financial Performance - The company reported a net income of $XX thousand for the quarter ended June 30, 2023, compared to $XX thousand for the same period last year, reflecting a year-over-year change of XX%[20] - Net income for Q2 2023 was $17,879,000, down from $20,278,000 in Q1 2023 and $26,712,000 in Q2 2022, representing a year-over-year decline of 33.0%[21] - Basic earnings per common share for the three months ended June 30, 2023, was $0.31, consistent with the same period in 2022[170] - Adjusted net income for Q2 2023 was $18.4 million, or $0.32 per diluted share, compared to $21.7 million, or $0.37 per diluted share in Q1 2023, and $27.8 million, or $0.45 per diluted share in Q2 2022[195] - The total risk-based capital ratio was 14.26%, well above regulatory thresholds for "well capitalized" banks[195] Asset and Liability Management - Total assets increased to $9,370,265 thousand as of June 30, 2023, up from $9,197,016 thousand at December 31, 2022, representing a growth of 1.88%[18] - The company’s total liabilities increased to $8,413,211 thousand from $8,237,398 thousand, marking a rise of 2.14%[18] - Total deposits decreased to $6,871,076 thousand from $7,120,921 thousand, reflecting a decline of 3.50%[18] - The company’s retained earnings increased to $275,430 thousand as of June 30, 2023, up from $248,988 thousand at the end of 2022, a growth of 10.65%[18] - The total carrying value of collateralized loan obligations is $482,831,000, with non-agency residential mortgage-backed securities valued at $111,508,000 as of June 30, 2023[45] Loan Portfolio - Loans receivable rose to $7,156,206 thousand, compared to $7,115,038 thousand at the end of 2022, indicating an increase of 0.58%[18] - The allowance for loan losses decreased to $80,883 thousand from $85,960 thousand, indicating improved credit quality[75] - The commercial and industrial loan portfolio grew to $2,000,408 thousand, up from $1,845,960 thousand, representing an increase of about 8.4%[75] - The total loans reported were $7,156,206, with a pass category of $121,607, indicating a significant portion of loans are performing well[83] - The total amount of substandard loans across all categories was $100,035, indicating potential risk in the loan portfolio[83] Income and Expenses - Total interest and dividend income for Q2 2023 was $116,151,000, an increase of 9.5% from $106,919,000 in Q1 2023 and up 31.4% from $88,418,000 in Q2 2022[21] - Net interest income after provision for credit losses was $67,732,000 for Q2 2023, down from $71,053,000 in Q1 2023 and $78,299,000 in Q2 2022[21] - Noninterest income decreased to $6,024,000 in Q2 2023 from $7,859,000 in Q1 2023 and $7,186,000 in Q2 2022[21] - Total noninterest expense for Q2 2023 was $49,132,000, a decrease from $51,239,000 in Q1 2023 and an increase from $48,612,000 in Q2 2022[21] - The company reported a provision for credit losses of $1.7 million for the three months ended June 30, 2023[97] Mergers and Acquisitions - The proposed merger with PacWest Bancorp is subject to various risks, including the potential for delays or failure to complete the transaction[16] - The company announced a merger with PacWest, where PacWest stockholders will receive 0.6569 shares of the company's common stock for each share held[186] - The shares issued to PacWest stockholders in the merger are expected to represent approximately 47% of the outstanding shares of the combined company[192] - The merger is expected to result in the combined company repaying approximately $13 billion in wholesale borrowings and high-cost deposits using proceeds from asset sales[192] Market and Economic Conditions - The Federal Reserve raised the federal funds target rate by 525 basis points from the beginning of 2022 through July 2023, impacting the company's performance[191] - The company believes that the decline in fair value of securities is primarily due to changes in interest rates and market volatility, with no credit impairment expected for the majority of the portfolio[65] Stockholder Information - The company repurchased 1,348,545 shares of treasury stock during the quarter, resulting in a reduction of $16,178 thousand in equity[27] - Dividends declared for the quarter were $0.10 per common share, totaling $5,880 thousand[27] - The company has authorized a common stock repurchase program of up to $35 million, with 1,348,545 shares repurchased at a weighted average price of $11.85 during the three months ended June 30, 2023[152] Risk Management - The allowance for credit losses was $1,036 thousand as of June 30, 2023, compared to $0 at December 31, 2022, indicating a proactive approach to risk management[18] - The company has entered into $3.5 billion in interest rate swap options to hedge interest rate risk, costing $15.7 million[186] - The company recognized a loss of $165 on single family residential real estate owned in the three months ended June 30, 2023[51] Taxation - For the three months ended June 30, 2023, the income tax expense was $6.7 million, resulting in an effective tax rate of 27.4%[135] - The total unrecognized tax benefit that could impact the effective tax rate was $0.6 million as of June 30, 2023[137]