Group 1: Bank of California (BNC) - The company trades below book value, making it an attractive investment opportunity, especially as a large Southern California bank [2] - The bank has reduced its balance sheet and improved credit management, positioning itself for future growth [2][3] - The bank has been opportunistic with its capital, buying back stock below book value, which has enhanced its book value [3] Group 2: Home Street Bank - Home Street was recently acquired by Mechanics Bank, which has a market cap of approximately $3 billion [4] - The acquisition will lead to Home Street being added to the Russell 2000, creating significant demand for its shares [5] - The presence of private equity backing suggests potential for improved financial performance and a possible sale within the next 18 months [6] Group 3: First Horizon - First Horizon operates in attractive markets such as the Southeast, Texas, and North Carolina, which enhances its investment appeal [7] - The bank maintains a conservative culture with moderate loan growth and a stock buyback program, making it attractive to larger banks [8] - The failed merger with TD Bank was not due to First Horizon's performance, presenting a potential opportunity for investors [9]

Company Overview - Banc of California is a $35 billion commercial bank headquartered in Los Angeles, making it the third largest bank in California and the largest independent bank based in Los Angeles [2]. Business Structure - The bank operates through three main segments: a commercial and community bank focused on traditional relationship banking, targeting small and medium-sized businesses with 80 branches primarily in California, and some in Colorado and North Carolina [3].

Company Overview - Banc of California is a $35 billion commercial bank headquartered in Los Angeles, making it the third largest bank in California and the largest independent bank based in Los Angeles [2]. Business Structure - The bank operates through three main segments: a commercial and community bank focused on traditional relationship banking, targeting small and medium-sized businesses with 80 branches primarily in California, and some in Colorado and North Carolina [3].

Summary of PacWest Bancorp FY Conference Call (September 09, 2025) Company Overview - **Company**: PacWest Bancorp (NYSE:BANC) - **Headquarters**: Los Angeles, California - **Market Position**: Third largest bank headquartered in California, largest independent bank in Los Angeles - **Total Assets**: $35 billion [4] Business Segments - **Commercial and Community Banking**: Traditional banking targeting small and medium-sized businesses through 80 branches, primarily in California, Colorado, and North Carolina [4] - **Specialty Businesses**: Includes media and entertainment banking, SBA lending, venture banking, and HOA deposit services [5] - **Payment Solutions**: Treasury management, credit card issuance, and merchant acquiring [5] Recent Developments - **Acquisition**: Acquired Banc of California in November 2023, with integration completed in 2024 [5] - **Earnings Growth**: Achieved double-digit quarter-over-quarter earnings growth since the integration [6] Market Conditions and Growth Drivers - **Economic Outlook**: California's economy is robust, with the state being the fourth largest economy globally. Southern California is a significant contributor [11] - **Job Creation**: California continues to create more jobs than any other state, with substantial venture capital investment [11] - **Upcoming Events**: Major events like the World Cup, Super Bowl, and Olympics are expected to boost the economy [12] Loan Production and Growth - **Loan Growth**: Loan production has exceeded market growth, with a focus on niche markets with less competition [6][7] - **Specialty Lending**: Growth in lender finance, fund finance, and warehouse lending, with a conservative approach to pricing [18][19] - **Community Banking**: Starting to see growth in community banking after restructuring and leadership changes [20] Profitability and Margin Expansion - **Loan Pricing**: A significant portion of the loan portfolio is maturing at lower rates, expected to enhance profitability as new loans are issued at higher rates [14] - **Deposit Repricing**: The bank has been proactive in repricing deposits, achieving a beta of around 55% compared to the industry average of mid-30s [15] Capital Management and Share Buybacks - **Buyback Program**: $150 million remaining in the buyback program, with plans to be opportunistic [27][55] - **Capital Levels**: Current CET1 capital levels are above well-capitalized standards, with a target range of $10.5 million to $11.5 million [56] Credit Quality and Allowance Levels - **Credit Performance**: Credit quality remains stable, with a current allowance for credit losses (ACL) of $107 million [61] - **Loan Portfolio Composition**: 29% of the loan portfolio consists of low-risk, short-duration loans, contributing to a high coverage ratio [61] Technology and AI Integration - **AI Initiatives**: The bank is exploring AI applications across various functions, with a focus on maintaining fundamental banking skills among employees [43][45] Conclusion - **Future Outlook**: The bank is optimistic about continued growth in earnings and loan production, with a focus on maintaining strong credit quality and capital management [63]

Core Points - Steadfast LA, in collaboration with Banc of California, has initiated a Small Business Initiative to support local businesses [1] - A total of $125,000 in small business recovery grants has been distributed to three key businesses in Altadena [1] - The recipients of the grants include Webster's Community Pharmacy, Fair Oaks Burger, and Altadena Cookie Co., which will utilize the funds to recover from fire-related damages [1] Summary by Category Financial Support - The Small Business Initiative has allocated a total of $125,000 for recovery grants [1] - The grants are aimed at assisting small businesses in overcoming financial challenges due to fire-related incidents [1] Business Impact - Webster's Community Pharmacy is notable for its upcoming 100th anniversary, highlighting its long-standing service to the Altadena community [1] - Fair Oaks Burger and Altadena Cookie Co. are also significant local businesses benefiting from the recovery grants [1] Community Engagement - The initiative reflects a commitment to supporting cornerstone businesses that contribute to the local economy and community identity [1]

Group 1 - Banc of California (NYSE: BANC) has shown minimal movement in share price over the past three years, with a net return close to zero [1] - The investment group European Small Cap Ideas focuses on high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

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]