Banc of California(US:BANC)2019-10-24 00:10Financial Data and Key Metrics Changes - The company reported a net loss to common stockholders of $22.7 million, translating to a diluted loss per common share of $0.45, primarily due to a $35 million charge-off related to a fraudulent scheme [4][18] - Total assets decreased by $735 million to $8.6 billion, driven by a $574 million multi-family securitization and the sale of $371 million in mortgage-backed securities [12][13] - The net interest margin remained flat at 2.86%, with net interest income decreasing by $5.9 million to $58.9 million [20][21] Business Line Data and Key Metrics Changes - Non-interest-bearing deposits increased by 11% from the prior quarter to over $1.1 billion, now comprising almost 20% of the total deposit portfolio [8] - The loan portfolio mix of single-family residential (SFR) and multi-family loans decreased to 52%, down from 59% at the end of the prior year [15] - Held-for-investment loans decreased to $6.4 billion, primarily due to a $220 million net reduction in SFR and multi-family balances [14] Market Data and Key Metrics Changes - Brokered deposits now make up less than 2% of total deposit balances, with a significant reduction in higher-cost brokered CDs, which decreased by 86% to $54 million [8][17] - The average cost of deposits decreased by 14 basis points to 1.48% [17] Company Strategy and Development Direction - The company is focused on reducing the cost of deposits, lowering quarterly operating expenses, and eliminating non-core assets to create a foundation for growth in 2020 [7][29] - The strategic initiatives include enhancing client relationships and improving technology to streamline operations and client onboarding [26][27] - The company aims to increase the proportion of commercial real estate (CRE) loans to 70%-75% of the total commercial loan portfolio, while C&I loans will comprise the remaining 25%-30% [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to generate loans above the current portfolio yield, indicating a focus on relationship-based lending [38] - The company is actively managing its deposit costs and expects to see continued reductions in the future [39][84] - Management acknowledged the challenges posed by the competitive rate environment but remains committed to disciplined growth [48][50] Other Important Information - The company has initiated a review of all loan relationships of $5 million and above not secured by real estate, with no additional instances of fraud identified to date [6][76] - The Common Equity Tier 1 capital ratio improved to 10.3%, and Tier 1 risk-based capital totaled 14.31% [23] Q&A Session Summary Question: Outlook on the size of the balance sheet - Management expects to maintain a balance around $8.6 billion, with loan generation replacing payoffs [34] Question: NIM outlook - Management anticipates potential expansion of the net interest margin, aiming to exceed 3% [35][38] Question: Details on Shared National Credit (SNC) - The SNC in question is a $14.5 million relationship in the apparel industry, currently paying but reclassified to non-accrual [41] Question: Expense outlook - Management is confident in maintaining expenses below $50 million, with ongoing initiatives expected to yield savings [58][59] Question: CD maturities and retention rates - Approximately $600 million of CDs maturing in the fourth quarter, with retention rates expected to be lower due to higher rates [64][66]