Banc of California, Inc. (NYSE:BANC) today reported net income of $48.5 million and net income available to common stockholders of $43.3 million, or $0.69 per diluted common share for the first quarter of 2022. This compares to net income of $5.8 million and net income available to common stockholders of $4.0 million, or $0.07 per diluted common share, for the fourth quarter of 2021. The first quarter of 2022 net income available to common stockholders included a $31.3 million pre-tax recovery from the settlement of a previously charged-off loan and a $3.7 million after-tax charge related to the redemption of Series E Preferred Stock. The fourth quarter of 2021 included $13.5 million of pre-tax merger costs and $11.3 million of provision for credit losses for the loans acquired in the Pacific Mercantile Bancorp (PMB) acquisition.

First quarter highlights:

Return on average assets of 2.09%, up from 0.24% in the prior quarter
Pre-tax pre-provision return on average assets of 1.54%, up from 0.84% in the prior quarter
Adjusted pre-tax pre-provision return on average assets of 1.55%, up from 1.39% in the prior quarter
Net interest margin of 3.51%, an increase of 23 basis points from the prior quarter
Noninterest-bearing deposits represented 40% of total deposits at March 31, 2022, up from 28% a year earlier
Average cost of total deposits of 0.08%, a 3 basis point decrease from the prior quarter
Redemption of all Series E Preferred Stock for total consideration of $98.7 million
Repurchase of $4.3 million of common stock under a $75 million authorization announced on March 15, 2022
Allowance for credit losses at 1.32% of total loans and 181% of non-performing loans
Common Equity Tier 1 capital at 11.39%

Jared Wolff, President & CEO of Banc of California, commented, "We had a terrific first quarter with strong financial performance across the board that demonstrated the momentum of our franchise: high quality loan growth; solid inflows of noninterest-bearing deposits; net interest margin expansion; higher levels of noninterest income; and strong asset quality. Our core earnings continue to grow via both our organic loan generation as well as the accretive benefits of the Pacific Mercantile Bancorp acquisition."

Mr. Wolff continued, "Since the start of the year, our loan pipeline has been steadily building and is now more than twice as large as it was at the beginning of the second quarter of 2021, with good contributions coming from all asset classes and markets. Given our strong loan pipeline, our asset sensitive position that will benefit from higher interest rates, and the operating leverage we are realizing as we grow our balance sheet, we see many catalysts for driving further growth in earnings and returns as we move through 2022."

Lynn Hopkins, Chief Financial Officer of Banc of California, said, "During the first quarter, we were able to successfully execute on a number of initiatives that positively impact shareholder value including recovering approximately $31 million from a previously charged-off loan, announcing a $75 million common stock repurchase program, and redeeming our Series E Preferred Stock which will add approximately $7 million annually to our net income available to common stockholders."

Income Statement Highlights

	Three Months Ended
	March 31, 2022			December 31, 2021		September 30, 2021			June 30, 2021			March 31, 2021
	($ in thousands)
Total interest and dividend income	$	84,269		$	81,573	$	71,791		$	69,677		$	68,618
Total interest expense		7,828			8,534		8,815			9,830			10,702
Net interest income		76,441			73,039		62,976			59,847			57,916
Total noninterest income		5,910			4,860		5,519			4,170			4,381
Total revenue		82,351			77,899		68,495			64,017			62,297
Total noninterest expense		46,596			58,127		37,811			40,559			46,735
Pre-tax / pre-provision income⁽¹⁾		35,755			19,772		30,684			23,458			15,562
(Reversal of) provision for credit losses		(31,542	)		11,262		(1,147	)		(2,154	)		(1,107	)
Income tax expense		18,785			2,759		8,661			6,562			2,294
Net income	$	48,512		$	5,751	$	23,170		$	19,050		$	14,375

Net income available to common stockholders⁽²⁾	$	43,345		$	4,024	$	21,443		$	17,323		$	7,825

(1)		Non-GAAP Measure
(2)		Balance represents the net income available to common stockholders after subtracting preferred stock dividends, income allocated to participating securities, participating securities dividends, and impact of preferred stock redemption from net income. Refer to the Statements of Operations for additional detail on these amounts.

Net interest income

Q1-2022 vs Q4-2021

Net interest income increased $3.4 million to $76.4 million for the first quarter due to higher yield on interest-earning assets and lower average balances and costs of interest-bearing liabilities, partially offset by lower average interest-earning assets.

The net interest margin increased 23 basis points to 3.51% for the first quarter as the average earning-assets yield increased 21 basis points and the average cost of total funding decreased 2 basis points. The yield on average interest-earning assets increased to 3.87% for the first quarter from 3.66% for the fourth quarter due to the mix of interest-earning assets and higher yields on loan and securities. Average loans increased by $315.4 million from ongoing loan growth and including the loans acquired in the PMB acquisition for a full quarter while other interest-earning assets decreased $328.4 million. The average yield on loans increased 6 basis points to 4.26% during the first quarter as a result of the portfolio mix. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased the loan yield by 12 basis points in both the first quarter and prior quarter.

The average cost of funds decreased 2 basis points to 0.39% for the first quarter from 0.41% for the fourth quarter. This decrease was driven by the lower average cost of interest-bearing liabilities due to an improved funding mix, including higher average noninterest-bearing deposits as a result of the PMB acquisition and growth from business development efforts. Average noninterest-bearing deposits represented 38% of total average deposits for the first quarter compared to 35% of total average deposits for the fourth quarter. Average noninterest-bearing deposits were $180.9 million higher in the first quarter compared to the fourth quarter while average deposits were $81.0 million lower for the linked quarters. Average Federal Home Loan Bank (FHLB) advances and other borrowings increased $141.8 million due mostly to higher overnight borrowings. The average cost of interest-bearing liabilities decreased 3 basis points to 0.58% for the first quarter from 0.61% for the fourth quarter due to the funding mix including the impact of including PMB's deposits for a full quarter. The average cost of interest-bearing deposits declined 5 basis points to 0.12% for the first quarter from 0.17% for the fourth quarter. The average cost of total deposits decreased 3 basis points to 0.08% for the first quarter. The spot rate of total deposits was 0.07% at the end of the first quarter.

Provision for credit losses

Q1-2022 vs Q4-2021

The provision for credit losses was a reversal of $31.5 million for the first quarter, compared to a charge of $11.3 million for the fourth quarter. The first quarter reversal of credit losses included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. The fourth quarter of 2021 provision charge was due primarily to the initial charge for the non-purchased credit deteriorated loans acquired in the PMB acquisition.

Noninterest income

Q1-2022 vs Q4-2021

Noninterest income increased $1.1 million to $5.9 million for the first quarter due mostly to higher customer service fees and all other income, offset by lower net gains on the sale of loans. The $397 thousand increase in customer service fees was due mostly to including PMB's operations for a full quarter. The $817 thousand increase in all other income was due mostly to a $771 thousand gain related to a sale-leaseback transaction.

Noninterest expense

Q1-2022 vs Q4-2021

Noninterest expense decreased $11.5 million to $46.6 million for the first quarter compared to the prior quarter. The decrease was due mostly to lower merger-related costs of $13.5 million, offset by higher net loss in alternative energy partnership investments of $1.4 million and an increase in salaries and employee benefits of $1.2 million. The increase in salaries and employee benefits is attributed to including PMB operations for a full quarter and higher taxes and benefits typical of the first quarter. Professional fees included net recoveries of indemnified legal expenses of $106 thousand in the first quarter compared to net expenses of $642 thousand during the fourth quarter.

Total operating costs, defined as noninterest expense adjusted for certain expense items (refer to section Non-GAAP Measures), increased $1.3 million to $46.5 million for the first quarter compared to $45.2 million for the prior quarter. This increase is due mostly to higher salaries and benefits of $1.2 million and all other expense of $559 thousand as a result of including PMB's operations for a full quarter and higher payroll-related items typical of the first quarter.

Income taxes

Q1-2022 vs Q4-2021

Income tax expense totaled $18.8 million for the first quarter resulting in an effective tax rate of 27.9% compared to $2.8 million for the fourth quarter and an effective tax rate of 32.4%. The decrease in the effective tax rate during the first quarter was due mostly to the previous quarter including the impact of the PMB acquisition on our annual effective tax rate. The effective tax rate for 2022 is expected to be similar to the effective income tax rate for the first quarter.

Balance Sheet

At March 31, 2022, total assets were $9.58 billion, which represented a linked-quarter increase of $189.8 million. The following table shows selected balance sheet line items as of the dates indicated:

											Amount Change
	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021		Q1-22 vs. Q4-21			Q1-22 vs. Q1-21

	($ in thousands)
Securities held-to-maturity	$	329,381	$	—	$	—	$	—	$	—	$	329,381		$	329,381
Securities available-for-sale	$	898,775	$	1,315,703	$	1,303,368	$	1,353,154	$	1,270,830	$	(416,928	)	$	(372,055	)
Loans held-for-investment	$	7,451,573	$	7,251,480	$	6,228,575	$	5,985,477	$	5,764,401	$	200,093		$	1,687,172
Total assets	$	9,583,540	$	9,393,743	$	8,278,741	$	8,027,413	$	7,933,459	$	189,797		$	1,650,081

Noninterest-bearing deposits	$	2,958,632	$	2,788,196	$	2,107,709	$	1,808,918	$	1,700,343	$	170,436		$	1,258,289
Total deposits	$	7,479,701	$	7,439,435	$	6,543,225	$	6,206,544	$	6,142,042	$	40,266		$	1,337,659
Borrowings ⁽¹⁾	$	1,020,842	$	775,445	$	762,444	$	871,973	$	891,546	$	245,397		$	129,296
Total liabilities	$	8,604,531	$	8,328,453	$	7,433,938	$	7,198,051	$	7,128,766	$	276,078		$	1,475,765
Total equity	$	979,009	$	1,065,290	$	844,803	$	829,362	$	804,693	$	(86,281	)	$	174,316

(1)

Represents Advances from Federal Home Loan Bank, Other Borrowings and Long Term Debt, net.

Investments

Securities held-to-maturity totaled $329.4 million at March 31, 2022 and included $215.2 million in agency securities and $114.2 million in municipal securities. To position the balance sheet for rising interest rates, during the first quarter we transferred certain longer-duration fixed-rate mortgage-backed securities and municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million.

Securities available-for-sale decreased $416.9 million during the first quarter to $898.8 million at March 31, 2022, primarily due to transferring certain securities to the held-to-maturity portfolio, collateralized loan obligation (CLO) payoffs of $28.5 million, principal payments of $8.0 million, sales of $17.6 million and higher unrealized net losses of $38.1 million, offset by purchases of $5.0 million. The higher net unrealized losses were due mostly to the impact of increases in longer-term market interest rates on the value of each class of securities. As of March 31, 2022, the securities available-for-sale portfolio included $488.0 million of CLOs, $177.9 million of agency securities, $168.6 million of corporate debt securities, $50.5 million of residential collateralized mortgage obligations, and $13.8 million of SBA securities. The CLO portfolio, which is comprised only of AA and AAA rated securities, represented 40% of the total securities portfolio and the carrying value included an unrealized net loss of $4.8 million at March 31, 2022, compared to 39% of the total securities portfolio and an unrealized net loss of $2.3 million at December 31, 2021.

Loans

The following table sets forth the composition, by loan category, of our loan portfolio as of the dates indicated:

	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
	($ in thousands)
Composition of loans
Commercial real estate	$	1,163,381		$	1,311,105		$	907,224		$	871,790		$	839,965
Multifamily		1,397,761			1,361,054			1,295,613			1,325,770			1,258,278
Construction		225,153			181,841			130,536			150,557			169,122
Commercial and industrial		1,224,908			1,066,497			773,681			725,596			760,150
Commercial and industrial - warehouse lending		1,574,549			1,602,487			1,522,945			1,345,314			1,118,175
SBA		133,116			205,548			181,582			253,924			338,903
Total commercial loans		5,718,868			5,728,532			4,811,581			4,672,951			4,484,593
Single-family residential mortgage		1,637,307			1,420,023			1,393,696			1,288,176			1,253,251
Other consumer		95,398			102,925			23,298			24,350			26,557
Total consumer loans		1,732,705			1,522,948			1,416,994			1,312,526			1,279,808
Total gross loans	$	7,451,573		$	7,251,480		$	6,228,575		$	5,985,477		$	5,764,401
Composition percentage of loans
Commercial real estate		15.6	%		18.1	%		14.6	%		14.6	%		14.6	%
Multifamily		18.8	%		18.8	%		20.7	%		22.2	%		21.8	%
Construction		3.0	%		2.5	%		2.1	%		2.5	%		2.9	%
Commercial and industrial		16.4	%		14.7	%		12.4	%		12.1	%		13.2	%
Commercial and industrial - warehouse lending		21.1	%		22.1	%		24.5	%		22.5	%		19.4	%
SBA		1.8	%		2.8	%		2.9	%		4.2	%		5.9	%
Total commercial loans		76.7	%		79.0	%		77.2	%		78.1	%		77.8	%
Single-family residential mortgage		22.0	%		19.6	%		22.4	%		21.5	%		21.7	%
Other consumer		1.3	%		1.4	%		0.4	%		0.4	%		0.5	%
Total consumer loans		23.3	%		21.0	%		22.8	%		21.9	%		22.2	%
Total gross loans		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Loans increased $200.1 million during the first quarter of 2022 to $7.45 billion due to loan fundings of $968.0 million, including single-family residential purchases of $364.4 million. During the first quarter, $150.1 million of owner-occupied commercial real estate loans acquired in the PMB acquisition were moved to the other commercial and industrial category from the commercial real estate category. At March 31, 2022, SBA loans included $58.3 million of PPP loans, net of fees of $203 thousand, compared to $123.1 million, net of fees of $772 thousand at December 31, 2021. Total commercial loans, excluding PPP loans and warehouse lending, increased $83.0 million, or 8.3% on an annualized basis during the first quarter.

Deposits

The following table sets forth the composition of our deposits at the dates indicated:

	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
	($ in thousands)
Composition of deposits
Noninterest-bearing checking	$	2,958,632		$	2,788,196		$	2,107,709		$	1,808,918		$	1,700,343
Interest-bearing checking		2,395,329			2,393,386			2,214,678			2,217,306			2,088,528
Savings and money market		1,605,088			1,751,135			1,661,013			1,593,724			1,684,703
Non-brokered certificates of deposit		520,652			506,718			559,825			586,596			668,468
Total deposits	$	7,479,701		$	7,439,435		$	6,543,225		$	6,206,544		$	6,142,042
Composition percentage of deposits
Noninterest-bearing checking		39.6	%		37.5	%		32.2	%		29.1	%		27.7	%
Interest-bearing checking		32.0	%		32.2	%		33.8	%		35.7	%		34.0	%
Savings and money market		21.4	%		23.5	%		25.4	%		25.7	%		27.4	%
Non-brokered certificates of deposit		7.0	%		6.8	%		8.6	%		9.5	%		10.9	%
Total deposits		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Total deposits increased $40.3 million during the first quarter of 2022 to $7.48 billion at March 31, 2022, due mostly to higher noninterest-bearing checking balances of $170.4 million, offset by lower savings and money market balances of $146.0 million. Noninterest-bearing deposits totaled $2.96 billion and represented 40% of total deposits at March 31, 2022, compared to $2.79 billion, or 38% of total deposits, at December 31, 2021.

Debt

Advances from the FHLB increased $80.3 million during the first quarter to $556.4 million at March 31, 2022, due to higher overnight advances. At March 31, 2022, FHLB advances included $150.0 million of overnight borrowings and $411.0 million in term advances with a weighted average life of 3.7 years and weighted average interest rate of 2.53%. Other borrowings totaled $190.0 million at March 31, 2022, and related to unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform and $20.0 million of advances under a line of credit.

Equity

During the first quarter total stockholders' equity decreased by $86.3 million to $979.0 million primarily due to the $98.7 million redemption of Series E Preferred Stock, while total common stockholders equity increased by $8.7 million to $979.0 million and tangible common equity increased by $9.3 million to $878.9 million at March 31, 2022. The increase in total common stockholders' equity for the first quarter included net income of $48.5 million and share-based award compensation of $1.3 million, offset by an increase in accumulated other comprehensive net loss of $26.9 million, dividends to common and preferred stockholders of $5.2 million, and the repurchase of common stock of $4.3 million. Book value per common share increased to $15.65 as of March 31, 2022, from $15.48 at December 31, 2021. Tangible book value per common share increased to $14.05 as of March 31, 2022, from $13.88 at December 31, 2021.

During the first quarter of 2022, common stock repurchased under the program authorized on March 15, 2022 totaled 215,550 shares at a weighted average price of $19.92. As of March 31, 2022, the Company had $70.7 million remaining under the current stock repurchase authorization. Through April 19, 2022, repurchases of Company common stock total 1,018,962 shares at a weighted average price of $18.87 per share, or $19.2 million under the stock repurchase plan.

Capital ratios remain strong with total risk-based capital at 13.81% and a tier 1 leverage ratio of 9.70% at March 31, 2022. The interim capital relief related to the adoption of the current expected credit losses (CECL) accounting standard increased the Bank's leverage ratio by approximately 8 basis points at March 31, 2022. The following table sets forth our regulatory capital ratios as of the dates indicated:

	March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Capital Ratios⁽¹⁾
Banc of California, Inc.
Total risk-based capital ratio	13.81	%	14.98	%	14.73	%	15.33	%	15.87	%
Tier 1 risk-based capital ratio	11.39	%	12.55	%	12.35	%	12.71	%	13.17	%
Common equity tier 1 capital ratio	11.39	%	11.31	%	10.86	%	11.14	%	11.50	%
Tier 1 leverage ratio	9.70	%	10.37	%	9.80	%	9.89	%	9.62	%
Banc of California, NA
Total risk-based capital ratio	15.66	%	15.71	%	16.31	%	17.25	%	17.82	%
Tier 1 risk-based capital ratio	14.54	%	14.60	%	15.22	%	16.09	%	16.57	%
Common equity tier 1 capital ratio	14.54	%	14.60	%	15.22	%	16.09	%	16.57	%
Tier 1 leverage ratio	12.38	%	12.06	%	12.08	%	12.52	%	12.13	%

(1)

March 31, 2022 capital ratios are preliminary.

Credit Quality

	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Asset quality information and ratios	($ in thousands)
Delinquent loans held-for-investment
30 to 89 days delinquent	$	27,067		$	40,142		$	23,144		$	16,983		$	31,005
90+ days delinquent		33,930			32,609			21,979			17,998			30,292
Total delinquent loans	$	60,997		$	72,751		$	45,123		$	34,981		$	61,297
Total delinquent loans to total loans		0.82	%		1.00	%		0.72	%		0.58	%		1.06	%
Non-performing assets, excluding loans held-for-sale
Non-accrual loans	$	54,529		$	52,558		$	45,621		$	51,299		$	55,920
90+ days delinquent and still accruing loans		—			—			—			—			—
Non-performing loans		54,529			52,558			45,621			51,299			55,920
Other real estate owned		—			—			—			3,253			—
Non-performing assets	$	54,529		$	52,558		$	45,621		$	54,552		$	55,920
ALL to non-performing loans		170.97	%		176.16	%		161.16	%		147.93	%		141.90	%
Non-performing loans to total loans held-for-investment		0.73	%		0.72	%		0.73	%		0.86	%		0.97	%
Non-performing assets to total assets		0.57	%		0.56	%		0.55	%		0.68	%		0.70	%
Troubled debt restructurings (TDRs)
Performing TDRs	$	14,850		$	12,538		$	5,835		$	6,029		$	6,347
Non-performing TDRs		15,059			4,146			2,366			3,120			4,130
Total TDRs	$	29,909		$	16,684		$	8,201		$	9,149		$	10,477

Total delinquent loans decreased $11.8 million in the first quarter to $61.0 million at March 31, 2022, due mostly to $33.0 million returning to current status and $8.3 million in other reductions including paydowns, partially offset by additions of $29.5 million. The additions included (i) $23.8 million in single-family residential mortgage loans and (ii) $3.9 million in commercial and industrial loans. At March 31, 2022, delinquent loans included (i) SFR loans of $30.4 million, (ii) SBA PPP loans of $4.4 million and other SBA loans of $10.6 million, of which $13.1 million are guaranteed, and (iii) other loans of $15.7 million.

Non-performing loans increased $2.0 million to $54.5 million as of March 31, 2022, of which $19.5 million, or 36%, relates to loans in a current payment status. The first quarter increase was due mostly to additions of $9.4 million, offset by $1.0 million in loans returning to accrual status and $6.4 million in payoffs, paydowns, and charge-offs. At March 31, 2022, non-performing loans included (i) a $12.6 million commercial and industrial loan acquired in the PMB acquisition, (ii) SBA PPP loans of $4.4 million and other SBA loans totaling $11.0 million, of which $13.1 million is guaranteed, (iii) SFR loans totaling $10.3 million, and (iv) other commercial loans of $15.7 million. Non-performing TDRs increased by $10.9 million due mostly to modifying the $12.6 million non-performing commercial and industrial loan acquired in the PMB acquisition.

Allowance for Credit Losses

	Three Months Ended
	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
	($ in thousands)
Allowance for loan losses (ALL)
Balance at beginning of period	$	92,584		$	73,524		$	75,885		$	79,353		$	81,030
Initial reserve for purchased credit-deteriorated loans⁽¹⁾		—			13,650			—			—			—
Loans charged off		(231	)		(8,108	)		(327	)		(886	)		(565	)
Recoveries		32,215			2,628			532			26			172
Net recoveries (charge-offs)		31,984			(5,480	)		205			(860	)		(393	)
(Reversal of) provision for loan losses		(31,342	)		10,890			(2,566	)		(2,608	)		(1,284	)
Balance at end of period	$	93,226		$	92,584		$	73,524		$	75,885		$	79,353
Reserve for unfunded loan commitments
Balance at beginning of period	$	5,605		$	5,233		$	3,814		$	3,360		$	3,183
(Reversal of) provision for credit losses		(200	)		372			1,419			454			177
Balance at end of period		5,405			5,605			5,233			3,814			3,360
Allowance for credit losses (ACL)	$	98,631		$	98,189		$	78,757		$	79,699		$	82,713

ALL to total loans		1.25	%		1.28	%		1.18	%		1.27	%		1.38	%
ACL to total loans		1.32	%		1.35	%		1.26	%		1.33	%		1.43	%
ACL to total loans, excluding PPP loans		1.33	%		1.38	%		1.29	%		1.38	%		1.51	%
ACL to NPLs		180.88	%		186.82	%		172.63	%		155.36	%		147.91	%
Annualized net loan charge-offs (recoveries) to average total loans held-for-investment		(1.79	) %		0.32	%		(0.01	) %		0.06	%		0.03	%

Reserve for loss on repurchased loans
Balance at beginning of period	$	4,348		$	5,023		$	5,095		$	5,383		$	5,515
(Reversal of) provision for loan repurchases		(471	)		(675	)		(42	)		(99	)		(132	)
Utilization of reserve for loan repurchases		—			—			(30	)		(189	)		—
Balance at end of period	$	3,877		$	4,348		$	5,023		$	5,095		$	5,383

(1)

Represents the amounts, at acquisition date, of expected credit losses on PCD loans and expected recoveries of PCD loans charged-off prior to acquisition date that we have a contractual right to receive.

The allowance for expected credit losses (ACL), which includes the reserve for unfunded loan commitments, totaled $98.6 million, or 1.32% of total loans, at March 31, 2022, compared to $98.2 million, or 1.35% of total loans, at December 31, 2021. The $442 thousand increase in the ACL was due primarily to: (i) higher specific reserves of $744 thousand and (ii) other net recoveries of $642 thousand, offset by (iii) a $944 thousand reduction in general reserves from changes in portfolio mix, improved macroeconomic variables (MEVs) used for model purposes, the general credit quality of the portfolio, and lower unfunded commitments, offset by overall loan growth. The $31.3 million recovery from the settlement of a loan previously charged-off in 2019 also resulted in a reversal of provision for credit losses and therefore had no net impact on the ACL. The ACL coverage of non-performing loans was 181% at March 31, 2022 compared to 187% at December 31, 2021.

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including MEVs released by the model provider during March 2022. The published forecasts consider rising inflation, higher oil prices, ongoing supply chain issues and the military conflict between Russia and Ukraine, among other factors, and while they reflect a less optimistic view of the economy as compared to the December 2021 forecasts, certain MEVs used in the model during the current quarter, such as California employment and the CRE price index, reflect improvements. Nonetheless, the ultimate pace of economic recovery remains uncertain and accordingly, the economic assumptions used in the model and the resulting ACL level and provision consider both the positive assumptions and potential uncertainties.

Conference Call

The Company will host a conference call to discuss its first quarter 2022 financial results at 10:00 a.m. Pacific Time (PT) on Thursday, April 21, 2022. Interested parties are welcome to attend the conference call by dialing (888) 317-6003, and referencing event code 6630261. A live audio webcast will also be available and the webcast link will be posted on the Company's Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call. A replay of the call will be made available approximately one hour after the call has ended on the Company's Investor Relations website at www.bancofcal.com/investor or by dialing (877) 344-7529 and referencing event code 1181265.

About Banc of California, Inc.

Banc of California, Inc. (NYSE:BANC) is a bank holding company with $9.6 billion in assets at March 31, 2022 and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 37 offices including 32 full-service branches located throughout Southern California. Through our dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and to building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission (SEC). In addition to those, statements about the potential effects of the COVID-19 pandemic on the business, financial results and condition of Banc of California, Inc. and its subsidiaries may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the control of Banc of California, Inc., including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on Banc of California, Inc. and its subsidiaries, their customers and third parties. Further, statements about the potential effects of the Pacific Mercantile Bancorp acquisition on the business, financial results and condition of Banc of California, Inc. and its subsidiaries may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the control of Banc of California, Inc., including (i) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which Banc of California Inc. operates; (ii) the ability to promptly and effectively integrate the businesses of Banc of California, Inc. and Pacific Mercantile Bancorp; (iii) diversion of management time on integration-related issues; (iv) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (v) other risks that are described in Banc of California, Inc.'s public filings with the SEC. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

Banc of California, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)

	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
ASSETS
Cash and cash equivalents	$	254,241		$	228,123		$	185,840		$	163,332		$	379,509
Securities held-to-maturity		329,381			—			—			—			—
Securities available-for-sale		898,775			1,315,703			1,303,368			1,353,154			1,270,830
Loans		7,451,573			7,251,480			6,228,575			5,985,477			5,764,401
Allowance for loan losses		(93,226	)		(92,584	)		(73,524	)		(75,885	)		(79,353	)
Federal Home Loan Bank and other bank stock		51,456			44,632			44,604			44,569			44,964
Servicing rights, net		1,295			1,309			1,022			1,162			1,407
Other real estate owned, net		—			—			—			3,253			—
Premises and equipment, net		109,593			112,868			114,011			118,649			120,071
Alternative energy partnership investments, net		25,156			25,888			25,196			24,068			23,809
Goodwill		95,127			94,301			37,144			37,144			37,144
Other intangible assets, net		4,990			6,411			1,787			2,069			2,351
Deferred income tax, net		51,516			50,774			40,659			41,628			47,877
Income tax receivable		1,045			7,952			2,107			4,084			210
Bank owned life insurance investment		124,516			123,720			113,884			113,168			112,479
Operating lease right of use assets		34,189			35,442			29,054			20,364			22,069
Other assets		243,913			187,724			225,014			191,177			185,691
Total assets	$	9,583,540		$	9,393,743		$	8,278,741		$	8,027,413		$	7,933,459

LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits	$	2,958,632		$	2,788,196		$	2,107,709		$	1,808,918		$	1,700,343
Interest-bearing deposits		4,521,069			4,651,239			4,435,516			4,397,626			4,441,699
Total deposits		7,479,701			7,439,435			6,543,225			6,206,544			6,142,042
Advances from Federal Home Loan Bank		556,374			476,059			405,738			490,419			635,105
Other borrowings		190,000			25,000			100,000			125,000			—
Long-term debt, net		274,468			274,386			256,706			256,554			256,441
Reserve for loss on repurchased loans		3,877			4,348			5,023			5,095			5,383
Operating lease liabilities		39,259			40,675			30,390			21,588			23,173
Accrued expenses and other liabilities		60,852			68,550			92,856			92,851			66,622
Total liabilities		8,604,531			8,328,453			7,433,938			7,198,051			7,128,766
Commitments and contingent liabilities
Preferred stock		—			94,956			94,956			94,956			94,956
Common stock		646			646			527			527			526
Common stock, class B non-voting non-convertible		5			5			5			5			5
Additional paid-in capital		855,198			854,873			631,512			630,654			629,844
Retained earnings		187,457			147,894			147,682			129,307			115,004
Treasury stock		(45,125	)		(40,827	)		(40,827	)		(40,827	)		(40,827	)
Accumulated other comprehensive (loss) income, net		(19,172	)		7,743			10,948			14,740			5,185
Total stockholders' equity		979,009			1,065,290			844,803			829,362			804,693
Total liabilities and stockholders' equity	$	9,583,540		$	9,393,743		$	8,278,741		$

Banc of California Reports $0.69 EPS for First Quarter 2022