Banc of California, Inc.

For the second quarter, Banc of California reported a net loss available to common and equivalent shareholders of $251.3 million, or $1.61 per diluted share. Net interest income was $250.5 million, reported net interest margin was 3.13% (down 11 bps sequentially), and noninterest expense was $189.9 million. Noninterest income was a loss of $234.1 million, mainly from the $256.7 million pretax loss on the securities repositioning and a $12.5 million lower-of-cost-or-market adjustment on loans held for sale. Loan production was $2.8 billion, annualized loan growth was 9%, and annualized deposit growth was 12%. The company said it had reinvested $1.7 billion of securities-sale proceeds at a 4.87% weighted-average yield, creating a 276 bps pickup, and that tangible book value earn-back should be about 1.4 years. Looking ahead, management said NIM should be around 3.30% in Q3 after the loan sale closes and securities proceeds are fully reinvested, with year-end NIM targeted at 3.30% to 3.40%; it also targeted fourth-quarter pretax pre-provision income of $125 million to $130 million.

Jared Wolff framed the quarter as a deliberate reset of the balance sheet to remove “weights” and let the franchise’s earnings power show through. He emphasized the 276 bps yield pickup from the securities repositioning, the reduction in funding costs from retiring $385 million of subordinated debt, and the capital flexibility created by doing all of this without raising equity. His tone was confident and upbeat, but he repeatedly described the outlook as conservative and said the team wants to keep pursuing high-quality, relationship-based growth.

Joseph Kauder focused on the mechanics of the quarter’s reported loss and the normalization path ahead. He attributed the quarter’s results to the $256.7 million securities loss, the loan-sale marks, and the debt retirement, while noting that NII would have risen about $3.9 million sequentially excluding a $5 million nonaccrual interest reversal. He also said the go-forward NIM should be around 3.30%, deposit costs were 1.80% and total cost of funds 2.14% in the quarter, the ACL ratio was 1.14%, and CET1 was 9.25% at June 30 with a path to roughly 10% in early 2027. On expenses, he said FDIC assessment expense should start coming down in Q3/Q4 and likely fully normalize in early 2027.

Analysts pressed on whether the loan sale implied a recurring credit issue, and management said the sale was a targeted cleanup, not a signal of ongoing problems; Jared said one loan that had temporarily lifted NPAs has since been sold and NPAs should fall by about $34 million this quarter. Questions also focused on how conservative the PPNR and ROTCE guide was, with management saying the outlook was intentionally modest because of macro uncertainty and because deposit, expense, and provision assumptions were not aggressive. On capital deployment, management said buybacks are still on the table once capital is back above 10%, and that preferred redemption remains a possible 2027 use of capital.