Banc of California (BANC) Q1 2025 Earnings Call April 24, 2025 01:00 PM ET Company Participants Ann DeVries - Head of Investor RelationsJared Wolff - President, CEO & ChairmanJoseph Kauder - Executive VP & CFOBen Gerlinger - Vice President of Equity ResearchJared Shaw - Managing DirectorDavid Feaster - Director - BankingAnthony Elian - Equity Research – BanksChristopher Mcgratty - MD & Head of U.S. Bank ResearchTimur Braziler - Director - Mid-Cap Bank Equity ResearchAndrew Terrell - Managing Director Confer ...

Banc of California (BANC) Q1 2025 Earnings Call April 24, 2025 01:00 PM ET Company Participants Ann DeVries - Head of Investor RelationsJared Wolff - President, CEO & ChairmanJoseph Kauder - Executive VP & CFOBen Gerlinger - Vice President of Equity ResearchJared Shaw - Managing DirectorDavid Feaster - Director - BankingAnthony Elian - Equity Research – BanksChristopher Mcgratty - MD & Head of U.S. Bank ResearchTimur Braziler - Director - Mid-Cap Bank Equity ResearchAndrew Terrell - Managing Director Confer ...

Draft v4.5 1/21/24 Investor Presentation First Quarter 2025 Results Forward-Looking Statements and Other Matters This presentation includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, liquidity and capital ratios and other non-historical statements. Words or phrases such as "believe," "wi ...

Group 1: Earnings Performance - Banc of California reported quarterly earnings of $0.26 per share, exceeding the Zacks Consensus Estimate of $0.24 per share, and up from $0.19 per share a year ago, representing an earnings surprise of 8.33% [1] - Over the last four quarters, the company has surpassed consensus EPS estimates three times [2] - The company posted revenues of $266.01 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 2.37%, and down from $272.96 million year-over-year [2] Group 2: Stock Performance and Outlook - Banc of California shares have declined approximately 13.6% since the beginning of the year, compared to a decline of 10.1% for the S&P 500 [3] - The company's earnings outlook is favorable, with a current consensus EPS estimate of $0.29 on revenues of $282.9 million for the coming quarter, and $1.24 on $1.16 billion in revenues for the current fiscal year [7] - The Zacks Industry Rank for Banks - Southwest is currently in the top 9% of over 250 Zacks industries, indicating a strong potential for outperformance [8] Group 3: Estimate Revisions and Future Expectations - The estimate revisions trend for Banc of California is favorable, leading to a Zacks Rank 2 (Buy) for the stock, suggesting expected outperformance in the near future [6] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Banc of California reported diluted earnings per share of $0.26 for Q1 2025, down from $0.28 in Q4 2024, with net earnings available to common stockholders at $43.6 million[3]. - Net earnings for Q1 2025 were $53,568,000, a decrease of 5.2% from $56,919,000 in Q4 2024 and an increase of 73.5% from $30,852,000 in Q1 2024[56]. - The return on average assets for Q1 2025 was 0.65%, down from 0.67% in Q4 2024 and up from 0.33% in Q1 2024[58]. - The efficiency ratio improved to 66.35% in Q1 2025 from 68.63% in Q4 2024 and 76.87% in Q1 2024[58]. - Total revenue for Q1 2025 was $266,014,000, compared to $264,274,000 in Q4 2024 and $262,918,000 in Q1 2024, indicating stable revenue generation[81]. Loan and Deposit Growth - Total loans reached $24.1 billion, reflecting a 6% annualized growth, driven by increases in nearly all loan segments, particularly in commercial and industrial portfolios[6]. - New loan originations totaled $2.6 billion with a weighted average interest rate of 7.20%[6]. - Loans and leases held for investment increased by $344.9 million to $24.1 billion in Q1-2025, with loan originations totaling $2.6 billion[25]. - Total deposits remained relatively stable, with a slight increase of $1.3 million to $27.2 billion compared to Q4-2024[20]. - Total deposits remained mostly flat at $27.2 billion as of March 31, 2025, compared to $27.2 billion at December 31, 2024[36]. Credit Quality and Losses - The provision for credit losses was $9.3 million in Q1 2025, down from $12.8 million in Q4 2024, reflecting improved credit quality with net charge-offs at 0.24% of average loans[14]. - As of March 31, 2025, total delinquent loans and leases increased to $200.6 million, up from $180.2 million at December 31, 2024, representing an increase of 11.4%[28]. - Nonperforming loans and leases rose to $213.5 million at March 31, 2025, compared to $189.6 million at December 31, 2024, marking an increase of 12.6%[29]. - The allowance for loan and lease losses decreased to $234.986 million at March 31, 2025, from $239.360 million at December 31, 2024, a decline of 1.6%[32]. - The annualized net charge-offs to average loans and leases was 0.24% for the first quarter, down from 0.45% for the fourth quarter of 2024[35]. Stockholder Equity and Repurchase Program - The company announced an increase in its stock repurchase program from $150 million to $300 million, having repurchased $38.5 million of common stock at an average price of $14.36 per share during Q1[4]. - Total stockholders' equity increased by $21.7 million to $3.5 billion, driven by net earnings of $53.6 million[41]. - Book value per common share rose to $18.17 at March 31, 2025, compared to $17.78 at December 31, 2024[41]. - The company reported a total of 166,403,086 common shares outstanding as of March 31, 2025, down from 168,825,656 shares as of December 31, 2024[54]. Interest Income and Margin - Total interest income for Q1 2025 was $406,655,000, a decrease of 4.2% from $424,519,000 in Q4 2024 and a decrease of 15.0% from $478,704,000 in Q1 2024[56]. - Net interest income after provision for credit losses was $223,064,000, slightly up from $222,484,000 in Q4 2024 and up from $219,102,000 in Q1 2024[56]. - Net interest margin improved to 3.08%, up 4 basis points from 3.04% in Q4 2024, primarily due to lower average costs of deposits[10]. - The average yield on loans and leases decreased to 5.90% in Q1 2025 from 6.01% in Q4 2024 and 6.08% in Q1 2024[58]. Economic and Market Risks - The company highlighted risks including economic downturns, interest rate fluctuations, and credit risks that could impact future performance[49]. - The company enhanced its credit monitoring process to proactively manage potential risks amid economic uncertainty[26].

Company Overview - Banc of California (BANC) shares increased by 8% to $13.03 in the last trading session, following a significant volume of trading, contrasting with a 9.3% loss over the previous four weeks [1][2] Market Influence - The stock's rally was influenced by a broader market surge, particularly due to President Donald Trump's announcement of a 90-day tariff pause for non-retaliating nations, which positively impacted investor sentiment [2] Earnings Expectations - Banc of California is projected to report quarterly earnings of $0.24 per share, reflecting a year-over-year increase of 26.3%. Expected revenues are $272.46 million, a slight decrease of 0.2% from the same quarter last year [3] Earnings Estimate Trends - The consensus EPS estimate for Banc of California has remained stable over the past 30 days, indicating that stock price movements may not sustain without changes in earnings estimate revisions [4] Industry Context - Banc of California is categorized under the Zacks Banks - Southwest industry, where BancFirst (BANF) also operates. BANF's stock closed 6.1% higher at $108.29, but has seen a return of -5.9% over the past month [4] Competitor Analysis - BancFirst's consensus EPS estimate is unchanged at $1.58, representing a year-over-year change of 5.3%. BancFirst currently holds a Zacks Rank of 4 (Sell) [5]

Core Viewpoint - Banc of California (BANC) is positioned well to continue its trend of beating earnings estimates, supported by a strong earnings history and positive analyst sentiment [1][6]. Earnings Performance - Banc of California has consistently beaten earnings estimates, with an average surprise of 50.16% over the last two quarters [2]. - In the last reported quarter, the company achieved earnings of $0.28 per share, exceeding the Zacks Consensus Estimate of $0.23 per share, resulting in a surprise of 21.74% [3]. - For the previous quarter, Banc of California was expected to report earnings of $0.14 per share but delivered $0.25 per share, leading to a surprise of 78.57% [3]. Analyst Sentiment - Recent earnings estimates for Banc of California have been revised upward, indicating growing bullishness among analysts [6]. - The company currently has a positive Earnings ESP of +3.31%, suggesting a strong potential for another earnings beat [9]. - Banc of California holds a Zacks Rank of 2 (Buy), further indicating favorable conditions for upcoming earnings [9]. Earnings ESP Insights - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [8]. - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [7].

Core Points - The LA Parks Foundation announced a $1 million donation from FireAid for the restoration of the Pacific Palisades Playground, which was damaged in the Southern California wildfires in January [1] - The total funding for the playground restoration exceeds $1.3 million, including a $300,000 in-kind contribution from GameTime and additional donations from Banc of California's Wildfire Relief & Recovery Fund [1] - The project aims to modernize the playground in time for the July 4th holiday, enhancing recreational opportunities for families in the community [1][3] Company Overview - The Los Angeles Parks Foundation's mission is to enhance, expand, and promote public recreation across more than 500 parks in Los Angeles, with a focus on urgent needs at the Palisades Park and Recreation Center, which has served the community for over 35 years [2][4] - Banc of California, Inc. is a bank holding company with over $33 billion in assets, providing banking and treasury management services to various businesses and is committed to supporting local communities through its charitable foundation [5]

Group 1 - Banc of California (NYSE: BANC) was previously considered a buy due to its tangible book value (TBV) being priced below its historical average [1] - Since the last analysis, Banc of California's stock has outperformed the S&P 500 by approximately 7% [1] Group 2 - The analyst expresses a strong interest in the banking sector, viewing it as essential for understanding economic health [1]

Regulatory Compliance - The Company is subject to ongoing supervision and regulation by the FRB and DFPI as a bank holding company [82]. - The Company must serve as a source of financial and managerial strength for any FDIC-insured depository institution it controls [92]. - The regulatory framework requires prior approval for various corporate actions, including acquisitions and branch establishments [88]. - The Bank is subject to supervision and enforcement by the CFPB due to its assets exceeding $10 billion [125]. - The acting director of the CFPB directed staff to cease all supervision and examination activity, impacting regulatory oversight [126]. - The Company expects regulatory changes under the new presidential administration to impact rulemaking and supervision priorities [83]. - The Company cannot predict the future impact of regulatory changes on its business and financial condition [135]. Capital Ratios and Financial Health - As of December 31, 2024, the Company had capital ratios exceeding the minimums required to be considered "well capitalized" [90]. - As of December 31, 2024, the Bank was classified as "well capitalized" under the FDIC regulations [104]. - The Bank is in compliance with minimum CET1, Tier 1, total capital, and leverage ratios as of December 31, 2024 [109]. - The Bank adopted a five-year transition period to phase in the full effect of CECL on regulatory capital, with an add-back ranging from 0 to 3 basis points on various capital ratios as of December 31, 2024 [108]. - The ability of the Company to buy back stock and make capital distributions is limited by regulatory capital rules [90]. - The FRB may disapprove stock repurchases if deemed unsafe or unsound [90]. Dividends and Earnings - The Bank may declare dividends without the approval of the DFPI as long as total dividends do not exceed retained earnings or net earnings for the previous three fiscal years [100]. Regulatory Changes and Impact - The FDIC finalized a rule to increase the initial base deposit insurance assessment rate by 2.0 basis points starting from the first quarterly assessment period of 2023 [102]. - A special assessment was implemented by the FDIC at an annual rate of 13.4 basis points, expected to total $38.6 million over ten quarterly assessment periods [103]. - The Federal Reserve's monetary policies have materially affected the operating results of commercial banks and are expected to continue doing so [133]. - Future legislation or regulation could adversely affect the operating environment and profitability of the Company [135]. Cybersecurity and Privacy Regulations - Compliance with new cybersecurity incident notification rules was required by May 1, 2022, and the Company believes it is currently in compliance [129]. - The California Consumer Privacy Act and the California Privacy Rights Act have established stringent data privacy requirements, effective from January 1, 2020, and January 1, 2023, respectively [128]. - The Company is subject to increasing state-level privacy and cybersecurity regulations, which are being closely monitored [128]. Investment and Trading Regulations - The Volcker Rule imposes restrictions on short-term proprietary trading, but currently does not have a material impact on the Company's activities [131]. - The SEC has recommended enhancing examination authority over investment advisers, which may impact the Company's subsidiary BAM [134].