Banc of California(BANC) - 2023 Q3 - Quarterly Report

Financial Position - Total assets increased to $9,247,072 thousand as of September 30, 2023, compared to $9,197,016 thousand at December 31, 2022, reflecting a growth of approximately 0.54%[17] - The company reported a total stockholders' equity of $1,001,720 thousand, up from $959,618 thousand, reflecting an increase of about 4.38%[17] - Cash and cash equivalents at the end of the period increased to $310.985 million from $256.058 million, reflecting a positive liquidity position[31] - As of September 30, 2023, cash and cash equivalents totaled $310,985 thousand, an increase from $228,896 thousand as of December 31, 2022, representing a growth of 36%[56] - The company pledged investment securities with carrying values of $525,700 thousand as of September 30, 2023, up from $356,500 thousand at the end of 2022, indicating a significant increase of 47%[62] Loan Portfolio - Loans receivable decreased to $6,961,032 thousand from $7,115,038 thousand, representing a decline of about 2.17%[17] - The total loan portfolio as of September 30, 2023, was $6,961,032,000, a decrease from $7,115,038,000 as of December 31, 2022[76] - The allowance for loan losses improved to $74,390,000 from $85,960,000, indicating improved credit quality[76] - The company recognized a provision for credit losses of $1,000,000 on three corporate debt securities that were downgraded to below investment grade during the nine months ended September 30, 2023[67] - The total balance of loans was $74,390,000, a decrease from $80,883,000 as of June 30, 2023, representing a reduction of approximately 8.5%[106] Income and Expenses - Total interest and dividend income for Q3 2023 was $116,222 thousand, a slight increase from $116,151 thousand in Q2 2023 and a significant increase from $95,973 thousand in Q3 2022[20] - Net interest income after provision for credit losses was $64,218 thousand for Q3 2023, down from $67,732 thousand in Q2 2023 and down from $79,408 thousand in Q3 2022[20] - Noninterest income for Q3 2023 was $50,778 thousand, a substantial increase from $6,024 thousand in Q2 2023 and an increase from $5,681 thousand in Q3 2022[20] - Total noninterest expense increased to $56,164 thousand in Q3 2023 from $49,132 thousand in Q2 2023 and from $50,962 thousand in Q3 2022[20] - Net income for Q3 2023 was $42,574 thousand, compared to $17,879 thousand in Q2 2023 and $24,196 thousand in Q3 2022, reflecting a strong year-over-year growth[20] Credit Quality - The provision for credit losses was $5,000 thousand in Q3 2023, a notable increase from $1,900 thousand in Q2 2023, indicating a more cautious outlook on credit quality[20] - Total past due loans as of September 30, 2023, were $90,250 thousand, reflecting a slight decrease from $91,220 thousand on December 31, 2022[94] - The company had 8 single-family residential mortgage loans totaling $7.7 million in process of foreclosure as of September 30, 2023, down from 9 loans totaling $11.7 million at the end of 2022[98] - The total allowance for credit losses for loans was $78,395 thousand for the nine months ended September 30, 2023, compared to $98,849 thousand for the same period in 2022[101] - The overall credit quality indicators suggest a focus on managing potential weaknesses, with a notable increase in "Substandard" loans that may require management's attention[81] Strategic Initiatives - The company completed the acquisition of Deepstack Technologies, LLC, aiming to enhance its technological capabilities and market position[16] - The company is focused on expanding its market presence and enhancing its product offerings through strategic initiatives and technology investments[16] - The proposed merger with PacWest includes a stock exchange ratio of 0.6569 shares of Banc of California for each share of PacWest common stock[34] - The merger is expected to be accompanied by a $400 million investment from Warburg Pincus LLC and Centerbridge Partners, with shares priced at $12.30 each[34] - The proposed merger between Banc of California and PacWest is expected to close on or about November 30, 2023, pending stockholder approval and a concurrent $400 million equity capital raise[36] Market Conditions - The company anticipates continued challenges from rising interest rates and economic conditions impacting revenue and expenses[16] - The Federal Reserve has increased the federal funds target rate by 525 basis points from the beginning of 2022 to September 2023, impacting the company's performance due to its monetary asset and liability structure[205] - Economic uncertainty and recent bank failures have created a challenging operating environment, leading to proactive liquidity-enhancing measures by the company[205] Stockholder Information - The company declared dividends of $0.10 per common share, totaling $5,692 for the quarter ended September 30, 2023[26] - The company has a total of 446,863,844 shares authorized, with 65,342,478 shares issued and 56,959,141 shares outstanding as of September 30, 2023[17] - The shares issued to PacWest stockholders are expected to represent approximately 47% of the outstanding shares of the combined company[206] - The shares issued to investors in the equity capital raise are expected to represent approximately 19% of the outstanding shares of the combined company[206] - The outstanding shares of Banc of California prior to the merger are expected to represent approximately 34% of the combined company's shares[206]