BANC OF CALIFORNIA, INC. (BANC)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 headline: GAAP diluted EPS was $(0.01) on total revenue of $216.7M; adjusted EPS was $0.25, reflecting a $60M pre-tax loss on securities repositioning and strong NIM expansion to 2.93% .
• Balance sheet actions were the quarter’s catalyst: sale of $1.95B of Civic loans (net proceeds $1.91B), $742M AFS repositioning (sold 2.94% yield, bought 5.65% yield) and payoff of $545M BTFP; wholesale funding ratio fell to 10.7% and average total cost of deposits declined 6 bps to 2.54% .
• Guidance tilts positive: management raised Q4 NIM outlook to 3.00–3.10% (from 2.90–3.00% previously) and targets noninterest expense at the low end of $195–$200M; future-state targets (ROAA ~1.1%+, ROTCE ~13%+) maintained .
• Credit mixed but manageable: NPLs/loans rose to 0.72% (two commercial + one Civic loan), while ACL/loans edged up to 1.20% and net charge-offs fell sharply Q/Q to 0.04% annualized .

What Went Well and What Went Wrong

• What Went Well

  • Margin and funding: NIM expanded 13 bps Q/Q to 2.93% on a 13 bps decline in total cost of funds; avg. total cost of deposits fell 6 bps to 2.54% .
  • Strategic repositioning: Sold $1.95B Civic loans (net $1.91B), executed $742M AFS swap (2.94% → 5.65% yield) expected to add ~$4.8M interest income per quarter; paid off $545M BTFP .
  • Cost control and mix: Noninterest expense declined to $196.2M; achieved Q4 opex target early; spot NIB mix improved to 29% of deposits .
  • CEO quote: “We achieved our year-end targets…a quarter early…reposition[ed] a portion of our securities portfolio and significantly reduce[d] higher cost funding” .

• What Went Wrong

  • One-time loss: $60.0M loss on sale of securities drove negative noninterest income and GAAP EPS of $(0.01) despite stronger core earnings .
  • Credit migration: NPLs/loans rose to 0.72% from 0.50% Q/Q (two commercial and one Civic loan); delinquencies also increased to 0.53% of loans .
  • Revenue optics: Total revenue fell Q/Q to $216.7M (from $259.3M) due to the securities loss; headline “revenue” for banks is sensitive to noninterest items .

Financial Results

P&L and efficiency vs. prior year/quarter

Balance sheet and risk KPIs

Loan portfolio mix (as % of loans HFI)

KPIs and definitions per company disclosures; “Total revenue” equals NII + noninterest income .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic execution: “We achieved our year-end targets for net interest margin, noninterest expenses, and balance sheet metrics a quarter early…reposition[ed]…and significantly reduce[d] higher cost funding” — Jared Wolff, CEO .
• Outlook pivot: “We are…at an inflection point, shifting our focus…to external growth…well positioned to increase our market share” — Jared Wolff, CEO .
• Margin drivers and outlook: “Our net interest margin…increased 13 basis points to 2.93%…We provided our fourth quarter outlook…3% to 3.10%” — Joe Kauder, CFO .
• Funding progress: “3Q24 FDIC assessment accrual lowers to $13.0mm…Wholesale funding ratio of 10.7%…NIB deposit ratio of 29.1%” — Investor deck .

Q&A Highlights

• NIM path and rate sensitivity: Management expects further NIM expansion in Q4 with a full-quarter benefit from actions; deposit beta running “just over 50%” post-September cut; a second cut likely benefits 1Q more than Q4 .
• Deposit pricing/ECR: ECR expenses are formulaic (often tied to Fed funds) and expected to decline as rates fall; negotiations are annual in HOA and messaging has limited attrition .
• Loan growth mix: Near-term opportunity in warehouse and lender finance; organic growth to pick up as rates fall ~50 bps; added team and repurchased $319M lender finance at par .
• FDIC normalization and opex: Core FDIC run-rate improving; Q3 included a nonrecurring favorable adjustment; opex tracking to $195–$200M with a low-end bias in Q4 .
• Capital return: CET1 ~11% is the threshold for considering buybacks/preferred redemption; priorities will depend on valuation and regulatory dialogue .

Estimates Context

• We attempted to retrieve S&P Global consensus for EPS and Revenue for Q3 and forward periods but were unable to access estimates due to service limits at the time of analysis. As a result, we cannot state beats/misses versus S&P consensus for this quarter. The company reported GAAP EPS of $(0.01) and adjusted EPS of $0.25; “total revenue” was $216.7M .
• Where Street estimates influence the narrative (e.g., raised NIM guide), we anchor to company disclosures and calls; we explicitly note the unavailability of S&P consensus for numeric comparison.

Key Takeaways for Investors

• Core earnings power inflected: NIM rose to 2.93% and Q4 guide was raised to 3.00–3.10%, supported by lower funding costs, AFS repositioning, and richer loan production yields; opex targeted at the low end of $195–$200M in Q4 .
• Balance sheet optimization largely complete: Civic sale, AFS swaps, and BTFP payoff improved liquidity, capital, and funding mix; wholesale funding ratio now 10.7% .
• Mix improving: NIB reached 29% of deposits; average total cost of deposits declined to 2.54%; continued focus on HOA and commercial relationships should further lower funding costs as rates fall .
• Credit watchlist manageable: NPLs/loans rose to 0.72% on a few credits; ACL/loans is 1.20% and management remains conservative, with low Q3 NCOs (0.04% annualized) .
• Capital build ongoing: CET1 10.45% with pathway to ~11% enabling flexibility (buybacks/preferred/securities optimization) as earnings stabilize .
• 2025 setup: If funding costs continue to drift lower and Specialty Finance/warehouse scale prudently, the bank remains on track toward its future-state profitability targets (ROAA ~1.1%+, ROTCE ~13%+) with potential estimate revisions upward once Street models reflect the higher NIM guide and lower opex trajectory .

Additional Supporting Details (Selected KPIs)

• Deposit composition snapshot (Q3 vs Q2): Brokered time deposits fell to 8% of total deposits (from 14% Q/Q); NIB rose to 29% (from 27% Q/Q) .
• Liquidity: Total available liquidity $16.2B (2.4x uninsured/unsecured deposits); cash & equivalents $2.55B .
• Dividends: $0.10/share common dividend declared Aug 12 for Oct 1 payment; Series F preferred $0.4845 per depositary share declared for Sept 3 payment .

All data and quotations are sourced from the Q3 2024 8-K/press release, investor presentation, and earnings call transcript unless otherwise noted: ; –; –; Q2 prior-period comps and call: – –; Q1 call baseline: –; Additional Q3 press: –; Dividends: .