Banc of California (BANC) Q3 2024 earnings summary

Executive summary

• Executed major balance sheet transformation, including sale of $1.95B Civic loans at 98% of par, $742M securities repositioning, and redeployment of liquidity to pay down $545M in Bank Term Funding and $1.85B in brokered deposits and borrowings, boosting capital and liquidity.

• Achieved core system conversion, consolidating over 20,000 customers and 50,000 accounts onto a single platform, and completed PacWest Bancorp merger and $400M equity raise.

• Achieved non-interest expense target of $195M-$200M and NIM targets one quarter ahead of schedule, aided by normalized FDIC assessment expenses and cost reductions.

• Added over 1,700 new client relationships in the past three quarters, with a more favorable deposit mix and 29% non-interest-bearing deposits at quarter-end.

• Focus shifting from internal transformation to external growth and market share expansion, leveraging improved franchise and capital position.

Financial highlights

• Adjusted EPS was $0.25 in Q3 2024, up from $0.12 in Q2, while reported GAAP net loss was $0.01 per share, including a $60M loss from securities repositioning.

• Net interest income rose to $232.2M in Q3, with NIM increasing to 2.93% from 2.80% sequentially.

• Noninterest income, excluding securities losses, increased due to lease residual gains and positive fair value marks; noninterest expense declined to $196.2M.

• CET1 capital ratio increased to 10.45%; tangible book value per share rose to $15.63.

• Loan balances grew by $300M–$366M, driven by mortgage warehouse, construction, and lender finance loans.

Outlook and guidance

• NIM expected to improve further in Q4, guided to 3.0%-3.10%, assuming a stable balance sheet and one additional Fed rate cut.

• Further cost savings anticipated from full-quarter benefit of systems conversion and headcount reduction, with noninterest expense targeted at $195M–$200M.

• Management expects improved profitability and market share as economic conditions recover, with focus on deposit growth and capital adequacy.