Banc of California(US:BANC)2025-05-09 20:19markdown 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)