PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The company's total assets grew to $34.25 billion, with net earnings increasing to $82.0 million for the six-month period [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets rose to $34.25 billion, driven by loan growth, while stockholders' equity slightly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$34,250,453** | **$33,542,864** | | Total Loans and Leases Held for Investment, net | $24,016,549 | $23,542,303 | | Total Investment Securities | $4,725,142 | $4,700,761 | | **Total Liabilities** | **$30,823,610** | **$30,042,915** | | Total Deposits | $27,528,433 | $27,191,909 | | Borrowings | $1,917,180 | $1,391,814 | | **Total Stockholders' Equity** | **$3,426,843** | **$3,499,949** | [Condensed Consolidated Statements of Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Q2 net earnings fell to $28.4 million due to higher credit loss provisions, though six-month earnings improved year-over-year Key Earnings Data (in thousands, except per share amounts) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $240,216 | $232,364 | $229,488 | | Provision for Credit Losses | $39,100 | $9,300 | $11,000 | | Noninterest Income | $32,633 | $33,650 | $29,792 | | Noninterest Expense | $185,869 | $183,653 | $203,643 | | **Net Earnings** | **$28,385** | **$53,568** | **$30,333** | | **Diluted EPS** | **$0.12** | **$0.26** | **$0.12** | Six-Month Earnings Comparison (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income | $472,580 | $458,590 | | Provision for Credit Losses | $48,400 | $21,000 | | **Net Earnings** | **$81,953** | **$61,185** | [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash decreased by $148.7 million due to loan growth, partially offset by increased deposits and borrowings Six Months Ended June 30, 2025 Cash Flow Summary (in thousands) | Cash Flow Category | Amount | | :--- | :--- | | Net cash provided by operating activities | $77,836 | | Net cash used in investing activities | ($878,282) | | Net cash provided by financing activities | $651,786 | | **Net decrease in cash and cash equivalents** | **($148,660)** | - Significant financing activities included a net increase in interest-bearing deposits of **$615.3 million** and proceeds from borrowings of **$700.0 million**, which were offset by common stock repurchases of **$151.8 million** and repayments of borrowings of **$176.2 million**[30](index=30&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment information, and subsequent events like dividend declarations - The company operates as one reportable segment, **Commercial Banking**, with the Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)[233](index=233&type=chunk)[234](index=234&type=chunk) - Subsequent to the quarter end, on August 8, 2025, the Board of Directors declared a quarterly cash dividend of **$0.10 per common share** and **$0.4845 per Depositary Share** for preferred stock[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=72&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth, a strategic loan sale, stock repurchases, and stable capital ratios - In Q2 2025, the company initiated a strategic loan sale process, reclassifying **$506.7 million** of loans to held for sale, resulting in charge-offs of **$36.9 million** and an incremental provision expense of **$26.3 million**[253](index=253&type=chunk)[254](index=254&type=chunk) - The company repurchased **11.5 million shares for $150.0 million** in the first half of 2025 under its stock repurchase program, with **$150.0 million** remaining under the authorization as of June 30, 2025[251](index=251&type=chunk)[277](index=277&type=chunk) - Q2 2025 results included a one-time non-cash income tax expense of **$9.8 million** due to the revaluation of deferred tax assets related to recent California state tax changes[275](index=275&type=chunk)[277](index=277&type=chunk) [Results of Operations](index=80&type=section&id=Results%20of%20Operations) Q2 results show increased net interest income, a higher provision for credit losses, and an elevated effective tax rate - Net interest income increased by **$7.9 million** sequentially in Q2 2025, driven by higher loan balances and yields, with the net interest margin expanding by **2 basis points to 3.10%**[286](index=286&type=chunk)[287](index=287&type=chunk) - The provision for credit losses was **$39.1 million** for Q2 2025, a sharp increase from **$9.3 million** in Q1 2025, including **$26.3 million** related to loans transferred to held for sale[296](index=296&type=chunk)[297](index=297&type=chunk) - The effective tax rate for Q2 2025 was **40.7%**, significantly higher than Q1's **26.7%**, due to a **$9.8 million** non-cash expense from the revaluation of deferred tax assets[309](index=309&type=chunk)[310](index=310&type=chunk) [Balance Sheet Analysis](index=89&type=section&id=Balance%20Sheet%20Analysis) The balance sheet reflects loan and deposit growth, improved credit quality, and a strong liquidity position - Total loans and leases held for investment increased by **$464.2 million to $24.2 billion** at June 30, 2025, from year-end 2024[321](index=321&type=chunk) - Credit quality metrics improved, with nonaccrual loans decreasing to **$167.5 million (0.69% of loans)** and special mention loans decreasing by **$435.7 million** from year-end 2024[343](index=343&type=chunk)[349](index=349&type=chunk) - Total deposits grew by **$336.5 million to $27.5 billion** since year-end 2024, with noninterest-bearing deposits representing **27% of total deposits**[350](index=350&type=chunk) - The company's available liquidity of **$14.8 billion** provided a coverage ratio of **196%** for uninsured and uncollateralized deposits as of June 30, 2025[351](index=351&type=chunk) [Regulatory Matters and Capital](index=105&type=section&id=Regulatory%20Matters%20and%20Capital) The company remains 'well capitalized' with strong capital ratios despite a slight decrease due to stock repurchases Consolidated Capital Ratios | Ratio | June 30, 2025 | December 31, 2024 | Minimum for Well Capitalized | | :--- | :--- | :--- | :--- | | CET1 Capital Ratio | 9.95% | 10.55% | 6.50% (Bank) | | Tier 1 Capital Ratio | 12.34% | 12.97% | 8.00% (Bank) | | Total Capital Ratio | 16.37% | 17.05% | 10.00% (Bank) | | Tier 1 Leverage Ratio | 9.74% | 10.15% | 5.00% (Bank) | - The decrease in capital ratios during the first six months of 2025 was mainly due to **stock repurchases**, lower net earnings, and growth in risk-weighted assets[360](index=360&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages a near 'neutral' interest rate risk profile using NII and EVE models and mitigates risks with derivatives Interest Rate Sensitivity Analysis as of June 30, 2025 | Change in Interest Rates | EVE Change (%) | NII Change (%) | | :--- | :--- | :--- | | +200 bps | (5.7)% | 2.0% | | +100 bps | (2.7)% | 1.1% | | 0 bps | -- | -- | | -100 bps | 3.1% | (0.7)% | | -200 bps | 4.2% | (1.8)% | - The company's interest rate risk profile was considered near **'neutral'** as of June 30, 2025[400](index=400&type=chunk) - When considering rate-sensitive noninterest expenses, the company's overall Earnings-at-Risk profile is considered **'liability sensitive'**, a risk mitigated by entering into **$1.0 billion** notional of interest rate collars[403](index=403&type=chunk)[404](index=404&type=chunk) [Item 4. Controls and Procedures](index=114&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures with no material changes in internal controls - Management concluded that disclosure controls and procedures were **effective** as of the end of the period[406](index=406&type=chunk) - **No changes** in internal control over financial reporting occurred during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, internal controls[407](index=407&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=114&type=section&id=Item%201.%20Legal%20Proceedings) Ongoing legal actions are not expected to have a material adverse effect on the company's financial condition - The company is involved in various legal actions incidental to its business, but management does not expect them to have a **material adverse effect** on its financial condition[409](index=409&type=chunk)[410](index=410&type=chunk) [Item 1A. Risk Factors](index=114&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been identified for the risk factors previously disclosed in the Annual Report on Form 10-K - **No material changes** to the risk factors disclosed in the company's Form 10-K have occurred[411](index=411&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=115&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 8.9 million shares in Q2 2025 under an expanded $300 million stock repurchase program Common Stock Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | April 2025 | 8,811,011 | $12.65 | 8,809,814 | | May 2025 | 48,759 | $13.77 | 0 | | June 2025 | 119 | $13.97 | 0 | | **Total Q2** | **8,859,889** | **$12.66** | **8,809,814** | - The stock repurchase program was increased from **$150.0 million to $300.0 million** on April 23, 2025, with approximately **$150.0 million** remaining available for repurchase[412](index=412&type=chunk)[413](index=413&type=chunk)

Financial Data and Key Metrics Changes - The company reported net income of $18.4 million or $0.12 per share, with adjusted net income of $48.4 million or $0.31 per share, reflecting a strong performance in the second quarter [12][13] - Net interest income increased by 3.4% from the prior quarter to $240 million, driven by strong loan growth and higher loan yields [14] - The net interest margin expanded to 3.1%, supported by a three basis point increase in average loan yields to 5.93% [14][15] Business Line Data and Key Metrics Changes - Total annualized loan growth reached 9%, with significant contributions from lender finance, fund finance, and purchased single-family residential loans [5][14] - Core held for sale loans increased by 12% annualized, while construction loans declined due to payoffs and completed projects [7][8] - Non-interest income totaled $32.6 million, down 3% from the prior quarter, primarily due to fluctuations in CRA-related equity investments [18] Market Data and Key Metrics Changes - The company experienced strong production levels in loan origination, achieving the highest level of originations since the merger at $1.2 billion [7] - Average core deposits increased by 5% annualized, although the average balance per account faced pressure due to seasonal and macroeconomic factors [16][19] - The multifamily portfolio, representing 26% of the loan portfolio, has significant repricing opportunities with $3.2 billion maturing over the next two and a half years [17] Company Strategy and Development Direction - The company is focused on optimizing its balance sheet through strategic sales of loans, aiming for high-quality, consistent, and sustainable earnings growth [5][10] - There is a strong emphasis on maintaining disciplined pricing and underwriting standards while proactively managing credit risk [9][11] - The company aims to capitalize on growth opportunities in California, leveraging its position as a leading business bank in the region [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the market and strong demand for products and services, despite uncertainties in the broader macroeconomic environment [11] - The outlook for the second half of 2025 includes expectations for continued growth in core profitability and mid-single-digit increases in net interest income [21][22] - Management highlighted the importance of maintaining a strong credit quality profile while pursuing growth opportunities [20][21] Other Important Information - The company repurchased $150 million of common stock, representing about 6.8% of shares, with $150 million remaining in the buyback program [6] - A one-time non-cash income tax expense of $9.8 million was recorded, primarily related to the revaluation of deferred tax assets [13] - The company anticipates $243 million of loan sales to close in the third quarter, with a focus on maintaining a healthy capital position [13][19] Q&A Session Summary Question: Loan sales and balance sheet impact - Management clarified that loan sales do not necessitate a one-to-one relationship with unwinding wholesale funding, as they have been growing rapidly and providing leverage on sold loans [31][34] Question: Expense guidance and ECR - Management indicated that while expenses came in below guidance, they expect to settle at the lower end of the range due to investments in compensation and infrastructure [38][39] Question: Asset quality and provisioning expectations - Management expects normalized provisioning to be around $10 to $12 million per quarter, depending on the type of loans being grown [109][110] Question: M&A considerations - Management emphasized the focus on organic growth and maintaining independence, while remaining open to opportunities if market conditions normalize [112][114]

Financial Performance - Adjusted EPS for 2Q25 was $031, a 19% increase QoQ and a 9% annualized total loan growth[6] - The Net Interest Margin (NIM) was 310%, up 2 bps QoQ and 30 bps YoY[6,9] - Adjusted Return on Average Tangible Common Equity (ROATCE) was 834%[6,11] - Adjusted Pre-Tax Pre-Provision (PTPP) income was $870 million, up 56% QoQ and 563% YoY[6,11] Loan Portfolio and Credit Quality - Total loans increased by 9% annualized, with core loans up approximately 12%[6] - Strategic sales of approximately $507 million in CRE loans led to improved credit quality metrics[6,43] - Non-Performing Loans (NPL), Classified and Special Mention ratios decreased by 19 bps, 46 bps, and 115 bps, respectively[6] - The Allowance for Credit Losses (ACL) ratio was 107%[6] Capital and Shareholder Value - Tangible Book Value Per Share (TBVPS) was $1646, a 2% increase QoQ[6] - The CET 1 capital ratio was 992%[6] - The company repurchased $150 million of common shares YTD, representing 68% of shares, at a VWAP of $1305[6] Deposits - Core deposits remained stable QoQ[6] - Noninterest-bearing deposits accounted for 270% of total deposits[20] Outlook - The company is targeting a Net Interest Margin (NIM) of 320%-330% by 4Q25[76] - The company anticipates Noninterest Expense (NIE) to average $190 million-$195 million per quarter[76]

Company Performance - Banc of California reported quarterly earnings of $0.31 per share, exceeding the Zacks Consensus Estimate of $0.27 per share, and showing a significant increase from $0.10 per share a year ago, representing an earnings surprise of +14.81% [1] - The company posted revenues of $272.85 million for the quarter ended June 2025, which was 2.25% below the Zacks Consensus Estimate, but an increase from $259.28 million year-over-year [2] - Over the last four quarters, Banc of California has surpassed consensus EPS estimates four times, but has only topped consensus revenue estimates once [2] Stock Performance and Outlook - Banc of California shares have declined approximately 2.5% since the beginning of the year, contrasting with the S&P 500's gain of 7.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The current consensus EPS estimate for the next quarter is $0.33 on revenues of $290.29 million, and for the current fiscal year, it is $1.20 on revenues of $1.13 billion [7] Industry Context - The Zacks Industry Rank indicates that the Banks - Southwest industry is currently in the top 13% of over 250 Zacks industries, suggesting a favorable environment for stocks in this sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors or through tools like the Zacks Rank [5][6]

[Banc of California, Inc. Second Quarter 2025 Results](index=1&type=section&id=Banc%20of%20California%2C%20Inc.%20Second%20Quarter%202025%20Results) [Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) The company reported strong loan growth and improved credit quality, though earnings were impacted by a loan sale provision and a one-time tax expense Q2 2025 Key Metrics | Metric | Value | | :--- | :--- | | Earnings Per Share (GAAP) | $0.12 | | Adjusted Earnings Per Share (Non-GAAP) | $0.31 | | Book Value Per Share | $18.58 | | Tangible Book Value Per Share (Non-GAAP) | $16.46 | | CET1 Ratio | 9.92% | | Annualized Loan Growth | 9% | - Total revenue increased **3% QoQ to $272.8 million**, and pre-tax pre-provision income grew **6% QoQ to $87.0 million**, driven by solid loan growth and prudent expense management[6](index=6&type=chunk) - Total loans grew by **2% (9% annualized) from Q1 2025 to $24.7 billion**, with strong originations of **$2.2 billion** at a weighted average interest rate of 7.29%[6](index=6&type=chunk) - Initiated the sale of **$506.7 million** in loans, transferring **$476.2 million** to held for sale, which substantially improved credit quality metrics[6](index=6&type=chunk) - Repurchased **8.8 million shares** of common stock for **$111.5 million** during the quarter, with **$150.0 million** remaining under the current repurchase authorization[6](index=6&type=chunk) - Results include a one-time, non-cash income tax expense of **$9.8 million** from the revaluation of deferred tax assets due to California state tax changes[3](index=3&type=chunk)[6](index=6&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) The CEO emphasized strong core earnings, disciplined execution, and an enhanced credit profile from strategic actions - The CEO noted **double-digit growth in adjusted EPS**, the third consecutive quarter of strong loan growth, and expanded net interest income[7](index=7&type=chunk) - The opportunistic sale of select CRE loans was a key action taken to enhance the credit profile and strengthen the balance sheet for consistent, high-quality earnings[7](index=7&type=chunk) - **Tangible book value per share has increased for five straight quarters**, reflecting the company's positive trajectory[7](index=7&type=chunk) [Income Statement Analysis](index=3&type=section&id=INCOME%20STATEMENT%20HIGHLIGHTS) Q2 results show increased net interest income, a higher provision due to a loan sale, and a one-time tax expense Q2 2025 Income Statement Summary (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $240,216 | $232,364 | $229,488 | | Provision for Credit Losses | $39,100 | $9,300 | $11,000 | | Total Noninterest Income | $32,633 | $33,650 | $29,792 | | Total Noninterest Expense | $185,869 | $183,653 | $203,643 | | Net Earnings Available to Common Stockholders | $18,438 | $43,621 | $20,386 | | Diluted EPS | $0.12 | $0.26 | $0.12 | [Net Interest Income and Margin](index=3&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income and margin expanded due to loan growth and a stable cost of funds Net Interest Margin Analysis (Q2-2025 vs Q1-2025) | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Net Interest Margin | 3.10% | 3.08% | +2 bps | | Average Yield on Loans & Leases | 5.93% | 5.90% | +3 bps | | Average Total Cost of Funds | 2.42% | 2.42% | 0 bps | - The QoQ increase in net interest income was primarily driven by a **$16.2 million** rise in interest income from loans due to higher average balances and yields[10](index=10&type=chunk) Net Interest Margin Analysis (YTD 2025 vs YTD 2024) | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Margin | 3.09% | 2.73% | +36 bps | | Average Yield on Interest-Earning Assets | 5.41% | 5.60% | -19 bps | | Average Total Cost of Funds | 2.42% | 2.99% | -57 bps | - The year-over-year improvement in NIM was mainly due to a **57 basis point decrease** in the average cost of funds, reflecting deposit rate repricing and payoff of higher-cost borrowings[16](index=16&type=chunk)[17](index=17&type=chunk) [Provision For Credit Losses](index=6&type=section&id=Provision%20For%20Credit%20Losses) The provision for credit losses increased significantly, driven by the strategic transfer of loans to held for sale - The Q2 provision for credit losses of **$39.1 million** included **$26.3 million** specifically related to loans transferred to held for sale (HFS)[22](index=22&type=chunk)[23](index=23&type=chunk) - The remaining **$12.3 million** in provision for loan losses was driven by net charge-offs, an updated economic forecast, and higher qualitative reserves for office-secured loans[23](index=23&type=chunk) - For the first six months of 2025, the provision was **$48.4 million**, compared to **$21.0 million** for the same period in 2024, with the HFS transfer being the primary driver of the increase[25](index=25&type=chunk)[26](index=26&type=chunk) [Noninterest Income](index=6&type=section&id=Noninterest%20Income) Noninterest income decreased slightly due to fair value losses on equity investments - Q2 noninterest income was **$32.6 million**, down from **$33.7 million** in Q1[28](index=28&type=chunk) - The decrease was primarily caused by fair value losses on Small Business Investment Company (SBIC) investments, compared to gains in the previous quarter[28](index=28&type=chunk) [Noninterest Expense](index=7&type=section&id=Noninterest%20Expense) Noninterest expense increased modestly quarter-over-quarter but showed significant year-over-year improvement from merger efficiencies - Q2 noninterest expense rose to **$185.9 million** from **$183.7 million** in Q1, mainly due to a **$2.1 million** increase in insurance and assessments and a **$1.9 million** increase in compensation expense[31](index=31&type=chunk) - For the first six months of 2025, noninterest expense fell by **$44.6 million** year-over-year, primarily due to a **$30.2 million** decrease in insurance and assessments and cost savings post-merger[32](index=32&type=chunk) [Income Taxes](index=7&type=section&id=Income%20Taxes) A one-time, non-cash expense related to California tax changes resulted in an unusually high effective tax rate - The effective tax rate for Q2 2025 was **40.7%**, significantly higher than **26.7%** in Q1 2025[33](index=33&type=chunk) - The high rate was driven by a one-time, non-cash expense of **$9.8 million** related to the revaluation of deferred tax assets (DTA) due to new California state tax legislation[34](index=34&type=chunk) - The company anticipates that this state tax rule change will be beneficial to its tax rate in future periods[34](index=34&type=chunk) [Balance Sheet Analysis](index=8&type=section&id=BALANCE%20SHEET%20HIGHLIGHTS) The balance sheet expanded with loan growth, improved credit quality, and higher deposits, offset by equity reduction from buybacks Selected Balance Sheet Items (in thousands) | Item | June 30, 2025 | March 31, 2025 | QoQ Change | | :--- | :--- | :--- | :--- | | Total Assets | $34,250,453 | $33,779,918 | +$470,535 | | Total Loans | $24,711,464 | $24,152,324 | +$559,140 | | Total Deposits | $27,528,433 | $27,193,191 | +$335,242 | | Total Stockholders' Equity | $3,426,843 | $3,521,656 | -$94,813 | [Securities](index=8&type=section&id=Securities) The securities portfolio experienced minor changes, primarily driven by principal paydowns in the available-for-sale portfolio - Securities available-for-sale (AFS) decreased by **$87.9 million to $2.2 billion**, primarily due to **$109.3 million** in principal paydowns[38](index=38&type=chunk) - Securities held-to-maturity (HTM) increased by **$4.8 million to $2.3 billion**[39](index=39&type=chunk) [Loans and Leases](index=9&type=section&id=Loans%20and%20Leases) Total loans grew, led by residential real estate and venture capital, with strong origination volume - Loans held for investment grew by **$119.4 million** during Q2 to **$24.2 billion**[41](index=41&type=chunk) - Growth was led by other residential real estate mortgage, venture capital, and asset-based loan portfolios[41](index=41&type=chunk) - Loan originations, including new commitments, totaled **$2.2 billion** in Q2 with a weighted average interest rate of **7.29%**[41](index=41&type=chunk) - Loans held for sale increased by **$439.8 million to $465.6 million**, driven by the transfer of **$476.2 million** in loans related to the pending strategic sale[41](index=41&type=chunk)[42](index=42&type=chunk) [Credit Quality](index=10&type=section&id=Credit%20Quality) Credit quality metrics improved substantially as a direct result of transferring problem loans to held for sale Key Credit Quality Ratios | Ratio | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | NPLs to Loans HFI | 0.69% | 0.88% | -19 bps | | Classified Loans to Loans HFI | 2.71% | 3.17% | -46 bps | | Special Mention Loans to Loans HFI | 2.73% | 3.88% | -115 bps | | NPAs to Total Assets | 0.51% | 0.65% | -14 bps | - The improvement in credit metrics was primarily due to the transfer of loans to held for sale (HFS) in connection with pending strategic loan sales[44](index=44&type=chunk) - Nonperforming loans and leases (NPLs) decreased by **$46.0 million** during the quarter to **$167.5 million**[46](index=46&type=chunk) [Allowance for Credit Losses – Loans](index=12&type=section&id=Allowance%20for%20Credit%20Losses%20%E2%80%93%20Loans) The allowance for credit losses decreased as charge-offs related to the loan sale outpaced the quarterly provision Allowance for Credit Losses (ACL) - Loans (in millions) | Item | Q2 2025 | | :--- | :--- | | Beginning ACL | $264.6 | | Net Charge-offs | ($44.2) | | Provision for Credit Losses | $38.2 | | Ending ACL | $258.6 | - The transfer of **$506.7 million** of loans to HFS resulted in charge-offs of **$36.9 million** and a related provision impact of **$26.3 million**[50](index=50&type=chunk) - The ACL to total loans ratio was **1.07%** at June 30, 2025, down from **1.10%** at March 31, 2025, due to the improved credit metrics of the portfolio post-transfer[49](index=49&type=chunk)[53](index=53&type=chunk) - The 'economic coverage ratio', a non-GAAP measure including credit-linked notes and unearned credit marks, was **1.61%** of total loans[54](index=54&type=chunk) [Deposits and Client Investment Funds](index=13&type=section&id=Deposits%20and%20Client%20Investment%20Funds) Total deposits increased, driven by growth in interest-bearing accounts that offset a decline in noninterest-bearing deposits - Total deposits grew by **$335.2 million to $27.5 billion** at quarter-end[57](index=57&type=chunk) - The increase was driven by higher brokered time deposits (**+$317.3 million**) and interest-bearing checking accounts (**+$227.4 million**)[57](index=57&type=chunk) - Noninterest-bearing checking deposits decreased by **$152.8 million to $7.4 billion**, representing **27%** of total deposits[57](index=57&type=chunk)[58](index=58&type=chunk) - Off-balance sheet client investment funds, including those managed by BofCal Asset Management, totaled **$1.5 billion**[59](index=59&type=chunk)[60](index=60&type=chunk) [Borrowings](index=14&type=section&id=Borrowings) Total borrowings increased as the company added favorable long-term FHLB advances while paying off higher-cost senior notes - Borrowings increased by **$246.4 million to $1.9 billion**, mainly due to higher FHLB borrowings[61](index=61&type=chunk) - The company paid off **$174.0 million** of Senior Notes and added **$400.0 million** in long-term FHLB advances at a weighted average rate of **3.81%**[61](index=61&type=chunk) [Equity](index=14&type=section&id=Equity) Stockholders' equity decreased due to significant share repurchases, which in turn boosted book value per share - Stockholders' equity decreased by **$94.8 million**, mainly due to **$111.5 million** in common stock repurchases[62](index=62&type=chunk) - Book value per common share increased to **$18.58** from **$18.17** in Q1 2025[62](index=62&type=chunk) - Tangible book value per common share (a non-GAAP measure) increased to **$16.46** from **$16.12** in Q1 2025[62](index=62&type=chunk) - The company repurchased **8.8 million shares** at a weighted average price of **$12.65** per share during the quarter[62](index=62&type=chunk) [Capital and Liquidity](index=15&type=section&id=CAPITAL%20AND%20LIQUIDITY) The company maintained robust capital ratios well above regulatory requirements and strong total available liquidity Preliminary Capital Ratios (June 30, 2025) | Ratio | Banc of California, Inc. | | :--- | :--- | | Total risk-based capital | 16.32% | | Tier 1 risk-based capital | 12.30% | | Common equity tier 1 capital | 9.92% | | Tier 1 leverage | 9.74% | - Total available liquidity stood at **$14.8 billion** at the end of Q2, consisting of **$2.2 billion** in immediately available cash, **$10.6 billion** in borrowing capacity, and **$2.1 billion** in unpledged AFS securities[65](index=65&type=chunk) [Appendix](index=16&type=section&id=Appendix) This section provides supplementary details including conference call information, non-GAAP reconciliations, and financial statements [Conference Call Information](index=16&type=section&id=Conference%20Call) The company will host a conference call to discuss its Q2 2025 financial results - A conference call is scheduled for **10:00 a.m. PT on July 24, 2025**, to discuss the quarterly results[67](index=67&type=chunk) [About Banc of California, Inc.](index=16&type=section&id=About%20Banc%20of%20California%2C%20Inc.) Banc of California is a premier relationship-based business bank serving small to middle-market businesses - Banc of California is a bank holding company with over **$34 billion** in assets, headquartered in Los Angeles[68](index=68&type=chunk) [Forward-Looking Statements](index=16&type=section&id=Forward-Looking%20Statements) This section contains standard safe-harbor language regarding risks and uncertainties that could affect future results - The press release includes forward-looking statements subject to risks and uncertainties as defined by the Private Securities Litigation Reform Act of 1995[69](index=69&type=chunk) - Key risk factors include changes in economic conditions, interest rate environment, credit risks, regulatory changes, and cybersecurity threats[71](index=71&type=chunk) [Non-GAAP Financial Measures](index=17&type=section&id=Non-GAAP%20Financial%20Measures) The report provides reconciliations for non-GAAP measures used to supplement the analysis of the company's performance - The company uses non-GAAP measures like tangible common equity, adjusted net earnings, pre-tax pre-provision income, and economic coverage ratio to analyze performance[72](index=72&type=chunk)[89](index=89&type=chunk) Reconciliation of Book Value to Tangible Book Value Per Share (June 30, 2025) | Metric | Value (per share) | | :--- | :--- | | Book Value (GAAP) | $18.58 | | Tangible Book Value (Non-GAAP) | $16.46 | Reconciliation of Diluted EPS to Adjusted Diluted EPS (Q2 2025) | Metric | Value (per share) | | :--- | :--- | | Diluted EPS (GAAP) | $0.12 | | Adjusted Diluted EPS (Non-GAAP) | $0.31 | [Consolidated Financial Statements](index=19&type=section&id=Consolidated%20Financial%20Statements) This section presents the detailed unaudited consolidated financial statements and related tables for the reported periods - Presents the unaudited Consolidated Statements of Financial Condition as of June 30, 2025, and comparative periods[76](index=76&type=chunk) - Presents the unaudited Consolidated Statements of Earnings for the three and six months ended June 30, 2025, and comparative periods[78](index=78&type=chunk) - Includes detailed tables on average balances, yields earned, and costs paid for interest-earning assets and interest-bearing liabilities[83](index=83&type=chunk)[86](index=86&type=chunk)

Group 1 - The merger between Banc of California and PacWest Bancorp was agreed upon in July 2023, with Banc of California viewed as the winner of the deal [1] - The focus of Crude Value Insights is on cash flow and companies that generate it, leading to value and growth prospects in the oil and natural gas sector [1] Group 2 - Subscribers have access to a 50+ stock model account and in-depth cash flow analyses of exploration and production firms [2] - The service includes live chat discussions about the oil and gas sector [2]

Core Viewpoint - Banc of California (BANC) is anticipated to report a year-over-year increase in earnings driven by higher revenues, with a consensus estimate of $0.27 per share, reflecting a 170% increase compared to the previous year, and revenues expected to reach $279.13 million, up 7.7% from the prior year [1][3]. Earnings Expectations - The upcoming earnings report is scheduled for July 23, and the stock may experience upward movement if the reported figures exceed expectations, while a miss could lead to a decline [2]. - The consensus EPS estimate has been revised down by 0.6% over the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Banc of California aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [12]. - The stock currently holds a Zacks Rank of 4, suggesting a less favorable outlook for an earnings beat [12][13]. Historical Performance - In the last reported quarter, Banc of California exceeded the expected earnings of $0.24 per share by reporting $0.26, achieving a surprise of +8.33% [14]. - Over the past four quarters, the company has surpassed consensus EPS estimates three times [15]. Conclusion - Despite the potential for an earnings beat, Banc of California does not appear to be a strong candidate for exceeding expectations based on current indicators, and investors should consider additional factors before making investment decisions [18].

```markdown PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Q1 2025, including balance sheets, earnings, comprehensive income, equity, and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $33.78 billion, driven by loan growth, with stable deposits and increased stockholders' equity Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$33,779,918** | **$33,542,864** | | Total loans and leases held for investment, net | $23,891,541 | $23,542,303 | | Total investment securities | $4,801,300 | $4,700,761 | | Goodwill | $214,521 | $214,521 | | **Total Liabilities** | **$30,258,262** | **$30,042,915** | | Total deposits | $27,193,191 | $27,191,909 | | Borrowings | $1,670,782 | $1,391,814 | | **Total Stockholders' Equity** | **$3,521,656** | **$3,499,949** |[15](index=15&type=chunk) [Condensed Consolidated Statements of Earnings](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Q1 2025 net earnings were $53.6 million, down from Q4 2024 but significantly up year-over-year Quarterly Earnings Summary (in thousands, except per share data) | Metric | Q1 2025 (in thousands) | Q4 2024 (Unaudited) (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Net Interest Income | $232,364 | $235,285 | $229,102 | | Provision for credit losses | $9,300 | $12,801 | $10,000 | | Total Noninterest Income | $33,650 | $28,989 | $33,816 | | Total Noninterest Expense | $183,653 | $181,370 | $210,518 | | Net Earnings | $53,568 | $56,919 | $30,852 | | Net Earnings Available to Common Stockholders | $43,621 | $46,972 | $20,905 | | Diluted EPS | $0.26 | $0.28 | $0.12 |[17](index=17&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q1 2025 significantly increased to $85.0 million, driven by net earnings and unrealized gains on securities Comprehensive Income (in thousands) | Component | Q1 2025 (in thousands) | Q4 2024 (Unaudited) (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Net Earnings | $53,568 | $56,919 | $30,852 | | Other comprehensive income (loss), net of tax | $31,460 | $(26,632) | $(4,322) | | **Comprehensive Income** | **$85,028** | **$30,287** | **$26,530** |[22](index=22&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased to $3.52 billion in Q1 2025, driven by earnings and comprehensive income, offset by repurchases and dividends - Key activities impacting equity in Q1 2025 included: - Net earnings: **+$53.6 million** - Other comprehensive income: **+$31.5 million** - Stock repurchases: **-$38.9 million** - Preferred stock dividends: **-$9.9 million** - Common stock dividends: **-$17.3 million**[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased by $158.3 million in Q1 2025 due to investing outflows, partially offset by operating and financing inflows Cash Flow Summary for Three Months Ended March 31 (in thousands) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $15,122 | $(88,396) | | Net cash (used in) provided by investing activities | $(384,739) | $107,402 | | Net cash provided by (used in) financing activities | $211,294 | $(2,311,354) | | **Net decrease in cash, cash equivalents, and restricted cash** | **$(158,323)** | **$(2,292,348)** |[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes provide detailed disclosures on accounting policies, investment and loan portfolios, credit quality, borrowings, and fair value measurements Investment Securities Composition at March 31, 2025 (in thousands) | Category | Fair Value (AFS) (in thousands) | Amortized Cost (HTM) (in thousands) | | :--- | :--- | :--- | | Agency residential MBS/CMOs | $1,432,110 | - | | Municipal securities | $597 | $1,252,435 | | Corporate debt securities | $263,403 | $69,993 | | Private label MBS/CMOs | $314,773 | $356,586 | | Other | $261,971 | $632,898 | | **Total** | **$2,334,058** | **$2,311,912** |[43](index=43&type=chunk)[55](index=55&type=chunk) Loan Portfolio Composition at March 31, 2025 (in thousands) | Loan Category | Balance (in thousands) | % of Total | | :--- | :--- | :--- | | Real estate mortgage | $13,655,592 | 56.2% | | Real estate construction and land | $2,873,608 | 11.8% | | Commercial | $7,392,651 | 30.4% | | Consumer | $392,953 | 1.6% | | **Total Gross Loans** | **$24,314,804** | **100.0%** |[68](index=68&type=chunk) - Nonaccrual loans increased to **$213.5 million** (**0.88%** of total loans) at Q1 2025, up from **$189.6 million** (**0.80%** of total loans) at year-end 2024[74](index=74&type=chunk)[302](index=302&type=chunk) - Subsequent to quarter-end, the company upsized its stock repurchase program from **$150 million** to **$300 million** and repaid **$174.0 million** of Senior Notes[213](index=213&type=chunk)[217](index=217&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial performance, highlighting loan growth, NIM expansion, stable deposits, strong credit quality, and capital levels [Results of Operations](index=69&type=section&id=Results%20of%20Operations) Q1 2025 net earnings available to common stockholders were $43.6 million, driven by loan growth, NIM expansion, and reduced noninterest expense Key Performance Ratios | Ratio | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Return on average assets | 0.65% | 0.67% | 0.33% | | Return on average tangible common equity | 7.56% | 7.35% | 4.36% | | Net interest margin | 3.08% | 3.04% | 2.66% | | Efficiency ratio | 66.35% | 65.96% | 76.87% |[248](index=248&type=chunk) - Key operational highlights for Q1 2025 include: - Total loans grew by **$344.9 million** (**6%** annualized) - Repurchased **$38.5 million** of common stock - Net interest margin expanded to **3.08%** - Average cost of deposits declined **14 bps** to **2.12%**[247](index=247&type=chunk) [Net Interest Income and Net Interest Margin](index=71&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income was $232.4 million, with NIM improving to 3.08% due to a lower cost of funds, despite lower asset yields - Compared to Q4 2024, NIM increased by **4 bps** to **3.08%** due to a **13 bps** decrease in the average cost of funds, which outpaced the **9 bps** decrease in the average yield on interest-earning assets[253](index=253&type=chunk)[254](index=254&type=chunk) - Compared to Q1 2024, NIM increased by **42 bps** from **2.66%**, driven by a **60 bps** decrease in the average cost of funds, reflecting lower market rates and reduced reliance on higher-cost wholesale funding[255](index=255&type=chunk)[256](index=256&type=chunk) [Balance Sheet Analysis](index=79&type=section&id=Balance%20Sheet%20Analysis) The balance sheet grew to $33.8 billion with loan growth, stable deposits, strong credit quality, and robust liquidity levels Loan Portfolio Composition at March 31, 2025 | Loan Type | Balance (in billions) | % of Total | | :--- | :--- | :--- | | Total real estate | $16.4 | 68% | | Commercial | $7.4 | 30% | | Consumer | $0.4 | 2% | | **Total Loans** | **$24.1** | **100%** |[279](index=279&type=chunk) Deposit Composition at March 31, 2025 | Deposit Type | Balance (in billions) | % of Total | | :--- | :--- | :--- | | Noninterest-bearing checking | $7.6 | 28% | | Interest-bearing checking | $7.7 | 29% | | Money market & Savings | $7.4 | 27% | | Time deposits | $4.5 | 16% | | **Total Deposits** | **$27.2** | **100%** |[309](index=309&type=chunk) - The Allowance for Credit Losses (ACL) to total loans ratio was **1.10%** at quarter-end. Net charge-offs were low at **0.24%** of average loans[257](index=257&type=chunk) - Available liquidity of **$15.1 billion** provided a coverage ratio of **205%** for uninsured and uncollateralized deposits of **$7.4 billion**[310](index=310&type=chunk) [Regulatory Matters and Capital](index=96&type=section&id=Regulatory%20Matters%20and%20Capital) The company and Bank remained well-capitalized in Q1 2025, with CET1 ratio at 10.45%, despite slight decreases from prior quarter Consolidated Capital Ratios at March 31, 2025 | Ratio | Actual | Minimum for Well Capitalized (Bank) | | :--- | :--- | :--- | | CET1 capital ratio | 10.45% | 6.50% | | Tier 1 capital ratio | 12.86% | 8.00% | | Total capital ratio | 16.93% | 10.00% | | Tier 1 leverage capital ratio | 10.19% | 5.00% |[321](index=321&type=chunk) - Beginning in Q1 2025, the impact of the CECL accounting standard is fully reflected in regulatory capital, following the end of the three-year transition period[319](index=319&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=101&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's interest rate risk profile is 'neutral' based on NII and EVE models, but 'liability sensitive' when considering ECRs Interest Rate Sensitivity Analysis at March 31, 2025 | Rate Shock (bps) | Change in EVE | Change in NII (12-month) | | :--- | :--- | :--- | | +200 | -5.5% | +0.3% | | +100 | -2.5% | +0.5% | | -100 | +3.0% | -0.5% | | -200 | +4.6% | -1.5% |[362](index=362&type=chunk) - The company's interest rate risk profile is described as 'neutral' based on its NII and EVE models, reflecting a balanced composition of repricing assets and liabilities[361](index=361&type=chunk) - When including the impact of Earnings Credit Rates (ECRs) on HOA deposits, the company's overall Earnings-at-Risk profile is considered 'liability sensitive'[364](index=364&type=chunk)[365](index=365&type=chunk) [Item 4. Controls and Procedures](index=105&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[366](index=366&type=chunk) - No changes occurred in internal control over financial reporting during Q1 2025 that have materially affected, or are reasonably likely to materially affect, such controls[367](index=367&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=105&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions, with management believing no material adverse effect on financial condition is expected - Management opines that any liability from ongoing legal actions, beyond amounts already accrued, would not have a material adverse effect on the company's financial statements[370](index=370&type=chunk) [Item 1A. Risk Factors](index=105&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the company's Form 10-K[371](index=371&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=106&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company detailed Q1 2025 stock repurchase activity, including a new $150 million program upsized to $300 million post-quarter Stock Repurchases for Q1 2025 | Period | Total Shares Purchased | Average Price Paid ($) | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 4,326 | $14.82 | — | | Feb 2025 | 157,543 | $14.74 | — | | Mar 2025 | 2,706,434 | $14.36 | 2,684,823 |[372](index=372&type=chunk) - On March 17, 2025, the Board authorized a **$150 million** stock repurchase program. As of March 31, 2025, **$111.5 million** remained available under this authorization[372](index=372&type=chunk)[373](index=373&type=chunk) - On April 23, 2025, the company upsized its stock repurchase program from **$150 million** to **$300 million** and expanded it to include preferred stock[374](index=374&type=chunk) [Other Disclosures](index=106&type=section&id=Other%20Disclosures) This section confirms no defaults on senior securities, no mine safety disclosures, and no new Rule 10b5-1 trading arrangements - Item 3: No defaults upon senior securities were reported[376](index=376&type=chunk) - Item 5: No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[378](index=378&type=chunk) ```

Core Viewpoint - Investors in Banc of California, Inc. (BANC) should closely monitor the stock due to significant implied volatility in the options market, particularly for the July 18, 2025 $7.50 Call option [1] Group 1: Implied Volatility - Implied volatility indicates the market's expectation of future price movement, with high levels suggesting a potential significant move or an upcoming event that could lead to a rally or sell-off [2] - The current high implied volatility for Banc of California options suggests that traders anticipate a notable price movement [4] Group 2: Analyst Sentiment - Banc of California holds a Zacks Rank 3 (Hold) within the Banks - Southwest industry, which is in the top 8% of the Zacks Industry Rank [3] - Over the past 60 days, there has been a mixed revision in earnings estimates, with one analyst increasing and three decreasing their estimates, resulting in a consensus estimate drop from 29 cents to 28 cents per share for the current quarter [3]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Banc of California (BANC) as a strong value stock based on various financial metrics [2][8]. Company Analysis - Banc of California (BANC) currently holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential for value investors [4]. - The stock has a P/E ratio of 9.78, significantly lower than the industry average of 12.22, suggesting it may be undervalued [4]. - BANC's Forward P/E has fluctuated between 8.24 and 22.03 over the past year, with a median of 11.68 [4]. - The P/B ratio for BANC is 0.71, compared to the industry average of 1.76, further indicating its attractive valuation [5]. - BANC's P/S ratio stands at 1.15, while the industry average is 1.99, reinforcing the notion of undervaluation [6]. - The P/CF ratio for BANC is 13.69, lower than the industry average of 18.12, highlighting its strong cash flow outlook [7]. - Overall, the financial metrics suggest that Banc of California is likely undervalued and stands out as one of the market's strongest value stocks [8].