• Net Income: $47 million or $0.28 per share for the fourth quarter.
• Net Interest Income: $235 million, up 1% from the prior quarter.
• Net Interest Margin (NIM): Increased 11 basis points to 3.04%.
• Noninterest Operating Expenses: Decreased by 36% from a normalized fourth quarter of 2024.
• Loan Production: $1.8 billion, resulting in portfolio growth of 1.5% or about 6% on an annualized basis.
• Cost of Deposits: Declined 28 basis points from 2.54% to 2.26%.
• Noninterest Income: $29 million in the fourth quarter.
• Total Deposits: $27.2 billion, increased by $364 million in the fourth quarter.
• Loan Portfolio Reserve Levels: 1.13% of total loans and 142% coverage of nonperforming loans.
• Commercial New Production Loan Rates: 7.6% for the quarter.

• Warning! GuruFocus has detected 8 Warning Signs with BANC.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Banc of California Inc (NYSE:BANC) reported a strong fourth quarter, marking the end of a transformational year with significant progress in executing its strategy and optimizing its balance sheet.
• The company achieved a notable increase in non-interest-bearing deposits (NIB), which grew to 29.1% of total average deposits, up nearly 7% from the previous year.
• Net interest margin (NIM) expanded by 135 basis points year over year, contributing to higher profitability.
• Banc of California Inc (NYSE:BANC) successfully reduced wholesale funding to 10.3% of assets, down from nearly 17% in the previous year.
• The company launched the Banc of California Wildfire Relief & Recovery Fund, donating $1 million to support relief efforts for the Los Angeles wildfires, demonstrating community commitment.

Negative Points

• The company experienced an increase in nonaccrual loans, primarily driven by a single borrower relationship, which could indicate potential credit risk.
• Despite strong performance, the company anticipates seasonal weakness in deposit flows and loan demand in the first quarter of 2025.
• There was a charge-off of two non-performing loans, one in Life Sciences and another in the Civic portfolio, indicating some credit quality issues.
• Banc of California Inc (NYSE:BANC) faces competitive pressure in deposit pricing, although it is starting to see less demand for higher rates.
• The company expects noninterest expenses to increase in the first quarter of 2025 due to seasonal factors such as payroll tax resets and wage inflation.

Q & A Highlights

Q: Can you help us understand the expected expenses for 2025 and the timing of any increases? A: Jared Wolff, CEO, explained that if they achieve the low end of their expense range for 2025, it would represent a 3% savings relative to a normalized 2024. The high end would be a 6% savings. Expenses are expected to increase slightly in the first quarter due to seasonal factors like payroll taxes and benefits resets, but they aim to grow the company and expand margins. Joseph Kauder, CFO, added that they are focused on managing costs while supporting growth.

Q: What are the expectations for loan growth in 2025, and what factors will drive this growth? A: Jared Wolff, CEO, stated that they expect mid- to upper-single-digit loan growth in 2025, driven by increased activity and economic optimism. They are seeing more loan demand, particularly in warehouse, fund finance, and lender finance portfolios. The growth is expected to be more pronounced in the latter half of the year as the economy expands.

Q: How is the competitive landscape affecting deposit costs, and what is the outlook for deposit growth? A: Jared Wolff, CEO, noted that they are seeing less competition in deposit pricing and less demand for higher rates, which allows them to reduce deposit costs. They are targeting deposit growth in the mid- to upper-single digits for 2025, with a focus on noninterest-bearing deposits. Joseph Kauder, CFO, mentioned that they have higher-cost deposits rolling over, which will help reduce overall deposit costs.

Q: What is the outlook for net interest income and margin expansion in 2025? A: Jared Wolff, CEO, indicated that they expect continued expansion in net interest margin as they reduce funding costs and loans reprice at higher rates. They are targeting a net interest margin range of 3.20% to 3.30% for 2025, assuming no further FED rate cuts. Joseph Kauder, CFO, added that they expect loan yields to continue increasing as older loans roll off and new loans come on at higher rates.

Q: Are there any plans to reposition the held-to-maturity securities book, and what are the considerations for capital deployment? A: Jared Wolff, CEO, mentioned that while they have not changed their intent to hold the securities to maturity, they are evaluating options for repositioning to improve earnings. They are considering various capital deployment strategies, including potential buybacks, but are focused on prudent management and optimizing shareholder value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.