Banc of California, Inc. Q4 FY2025 earnings call

• 2025 was a strong year with successful integration post-merger, strong loan and deposit growth, margin expansion, and expense controls.
• Q4 saw EPS grow 11% sequentially to $0.42, pretax pre-provision income up 10%, and double-digit return on average tangible common equity at 10.75%.
• Credit quality improved with nonperforming and special mention loans decreasing 9% QoQ. Classified loans were partially impacted by a CRE loan, but excluding that, ratios improved.
• Strong loan pipelines, unfunded new commitments up 90% QoQ to $1.7 billion, and positive deposit activity trends.

In 2025, loan production disbursements were $9.6 billion, up 31% from 2024. NIB deposits saw nearly $530 million of new balances and 10.5% annualized growth. Margin expanded 30 basis points, with Q4 NIM at 3.2%. Expenses were down 7% year over year, and adjusted efficiency ratio dropped nearly 900 basis points. Adjusted pretax pre-provision grew 39%, and adjusted EPS was $1.35, up 69% year over year. Q4 EPS was $0.42, up 11% sequentially. Loan production disbursements in Q4 were $2.7 billion, up 32% QoQ, with total loan growth 15% annualized. NIB deposit growth continued strongly in Q4.

• 2026 full-year net interest income expected to increase 10-12% from 2025.
• NIM expected to expand throughout 2026, driven by lower deposit costs and higher-yielding loan production.
• 2026 loan growth forecast mid-single digits, broad-based across C&I and real estate lending.
• 2026 deposit growth forecast mid-single digits.
• 2026 pretax pre-provision income expected to grow 20-25%.
• Expenses targeted to increase 3-3.5% in 2026, with Q1 expecting lower customer-related expenses due to rate cut impacts.

• Impact of Fed rate cuts on margin and net interest income, though neutral balance sheet sensitivity mostly offsets, but economic activity effects could be beneficial.
• Dependence on broader economic conditions for loan growth.
• Credit risks related to loan portfolios, including potential impacts from CRE loans and delinquency fluctuations.

Q: David Feaster asked about NIM trajectory and NII if the Fed cuts rates, and deposit beta expectations.

A: Jared Wolff and Joe Kauder responded that margin would expand faster with rate cuts, deposit beta expected to be around 50% and potentially higher.

Q: Matthew Clark inquired about NII growth guidance base, PPNR growth base, and single-family loan purchases.

A: Joe Kauder clarified NII growth includes accretion, PPNR growth is off 2025 full-year results, and single-family purchases were ~$250 million with plans to continue moderately.

Q: Christopher McGratty asked about expense growth and technology investment, tax rate, and preferred stock maturity.

A: Jared Wolff discussed technology investment for growth, Joe Kauder mentioned $2 million FDIC benefit in Q4 and tax rate around 25%, and preferred stock maturing in September 2027 contributing to earnings.

Q: Ben Gerlinger inquired about expense guidance and strategic momentum in 2026.

A: Jared Wolff stated no rate cuts are contemplated in the forecast, and momentum continues with marketing and hiring supporting growth.

Q: Andrew Terrell asked about expense benefit in Q4 and drivers of expense growth in 2026.

A: Joe Kauder said Q4 expense benefit was ~$5 million, and expense growth is driven by conservative guidance and decentralized budget management allowing teams to invest for growth.