Banc of California Inc. ((BANC)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Banc of California Inc. presented a mixed sentiment, reflecting both achievements and challenges. The bank reported strong loan growth and margin expansion, alongside a robust share buyback program. However, concerns were raised due to credit downgrades, economic uncertainty, and a decline in certain loan segments. Despite these challenges, the bank remains cautiously optimistic about its market position in the face of a challenging macroeconomic environment.
Strong Loan Growth
Banc of California reported significant loan production, including unfunded commitments, amounting to $2.6 billion, up from $1.8 billion in the previous quarter. This resulted in a loan portfolio growth of 6% on an annualized basis, showcasing the bank’s ability to expand its lending operations despite a challenging economic landscape.
Share Buyback Program
The bank announced a substantial $150 million share buyback program, which was successfully completed with an initial repurchase of 6.8% of shares. The program was further expanded to cover both common and preferred stock, with an additional $150 million allocated, reflecting the bank’s commitment to returning value to shareholders.
Net Interest Margin Expansion
Banc of California achieved a net interest margin increase of four basis points to 3.08%, primarily due to a 13 basis point decline in the cost of funds. This margin expansion is a positive indicator of the bank’s operational efficiency in managing its interest income and expenses.
Stable Non-Interest Expenses
The bank maintained stable non-interest expenses at $183.7 million, despite facing seasonally higher compensation-related expenses. This stability in expenses demonstrates effective cost management practices within the organization.
Credit Downgrades
There was an uptick in classified and non-performing assets, driven by a single commercial real estate loan and multifamily rate-sensitive loans. This highlights the challenges the bank faces in managing credit risk in a volatile economic environment.
Decline in Construction Loans
The bank experienced a decline in construction loans, which partially offset the overall loan growth. This decline was attributed to payoffs and completed projects, indicating a slowdown in new construction lending activities.
Economic Uncertainty
Concerns about the macroeconomic environment, including potential impacts of tariffs, led the bank to revise its outlook for loan growth to mid-single-digit growth. This cautious approach reflects the bank’s awareness of external economic pressures.
Lower Net Interest Income
Net interest income was reported at $232 million, slightly down from the previous quarter. This decline was due to factors such as a lower day count, fewer loan prepayments, and lower market interest rates, affecting the bank’s income from interest-bearing assets.
Forward-Looking Guidance
Looking ahead, Banc of California provided guidance for the remainder of 2025, with a focus on maintaining a strong balance sheet and capital liquidity positions amid market volatility. The bank aims to increase its noninterest-bearing deposits to 30% of total deposits by the end of the year, with a long-term target of 35%. Despite economic uncertainties, the bank targets high single-digit loan growth and remains committed to enhancing shareholder value through strategic initiatives.
In summary, Banc of California’s earnings call highlighted a balanced view of achievements and challenges. While the bank demonstrated strong loan growth and a commitment to shareholder returns, it remains cautious due to economic uncertainties and credit risks. The bank’s strategic focus on maintaining a strong market position and enhancing operational efficiency will be crucial as it navigates the evolving financial landscape.