Banc of California Inc. ((BANC)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Banc of California Inc. recently held its earnings call, revealing a broadly positive sentiment among its executives. The call highlighted the bank’s robust core profitability growth, expansion in net interest margins, and successful realization of cost synergies following recent mergers. Despite facing challenges such as an increase in nonaccrual loans and charge-offs, these were described as isolated incidents, demonstrating the bank’s resilience against external adversities like the recent wildfires, which had no significant financial impact.
Strong Core Profitability Growth
The bank reported an increase in earnings per share (EPS) to $0.28, driven by significant improvements in core profitability. Profitability metrics showed marked enhancements across the board, underscoring the bank’s effective management strategies and operational efficiencies.
Net Interest Margin Expansion
Banc of California achieved a notable expansion in its net interest margin (NIM), which grew by 135 basis points year-over-year to 3.04%. The bank projects this figure to rise further to between 3.20% and 3.30% by 2025, assuming no additional rate cuts by the Federal Reserve.
Reduction in Wholesale Funding and Cost Synergies
The institution successfully reduced its reliance on wholesale funding from nearly 17% in Q4 2023 to 10.3% of assets. Concurrently, it achieved a 36% reduction in noninterest operating expenses, reflecting significant cost synergies.
Loan Growth and Portfolio Diversification
The bank saw its commercial and industrial (C&I) loans grow to constitute 30.1% of its core loan portfolio, up from 25.6% the previous year. New loan production rates exceeded 7%, indicating a strategic push towards diversifying its portfolio.
Improved Deposit Mix
Banc of California enhanced its deposit mix, with noninterest-bearing deposits (NIB) increasing to 29.1% of total average deposits, representing a nearly 7% growth from the previous year. This was accompanied by a 28 basis points decline in the cost of deposits to 2.26%.
Challenges with Nonaccrual Loans
The bank faced an uptick in nonaccrual loans, primarily due to a single borrower relationship. However, they assured stakeholders that no losses are expected, thanks to strong collateral coverage.
Charge-offs in Specific Loan Segments
Two nonperforming loans (NPLs) were written off, amounting to $14 million in the Life Sciences sector and an undisclosed amount in the Civic portfolio. These charge-offs reflect the bank’s proactive management of its loan portfolio.
Impact of Wildfires in Los Angeles
Despite the devastating wildfires in Los Angeles affecting clients and colleagues, the bank reported no material impact on its loan portfolio or collateral damage, showcasing its resilience amidst natural disasters.
Forward-Looking Guidance
Looking forward, Banc of California executives provided optimistic guidance, reporting a net income of $47 million and a rise in EPS to $0.28. The bank anticipates mid- to upper single-digit loan growth in 2025, focusing on warehouse, fund, and lender finance portfolios. They aim to continue reducing deposit costs while expanding client relationships, with a target NIM range of 3.20% to 3.30% for the year, barring further Fed rate cuts.
In summary, the earnings call for Banc of California Inc. reflected a positive outlook, highlighting strong profitability, strategic growth in loans and deposits, and resilience in the face of external challenges. These factors position the bank well for future growth, as indicated by their forward-looking guidance.
