Banc of California, Inc. Q1 FY2026 earnings call

• Strong quarter with year-over-year earnings growth, net interest margin expansion, and positive operating leverage. EPS grew 50% to $0.39. Pretax, pre-provision income up 28%, adjusted efficiency ratio improved nearly 500 basis points. • Repurchased 1.7 million shares, extended buyback program, increased dividend, and announced plans to redeem $385 million of subordinated debt. • Core deposit trends constructive with noninterest-bearing deposits growth and deposit mix improvement. • Loan production strong, remixing balance sheet toward higher-rate loans. • Managed credit proactively, some credit migration but not broad change. • Balance sheet strong with healthy capital and liquidity. • AI tools being deployed broadly with early efficiency gains.

Net income was $62 million, or $0.39 per diluted share, up 50% from prior-year period. Net interest income was $251.6 million, up 8% year over year. Net interest margin expanded to 3.24%. Noninterest income was $35.3 million, relatively flat quarter over quarter excluding lease residual gain. Noninterest expense was $181.4 million, relatively flat from prior quarter and down 1% from year ago. Core deposit trends constructive with average noninterest-bearing deposits up 4% annualized quarter over quarter and deposit mix improvement. Loan production and disbursements at $2.1 billion in quarter with strong activity across portfolio.

• Reaffirming pretax, pre-provision income growth of 20% to 25% and noninterest expense growth of 3% to 3.5%. • Expect NIM to continue expanding through remainder of year with average quarterly expansion of three to four basis points. • Expect full-year loan growth in mid-single digits depending on economic conditions. • Expect deposits to grow mid-single digits over course of year.

• Uncertainty created by conflict in Middle East and potential second-order effects on growth, inflation, and client activity. • Credit migration could potentially disrupt earnings if not managed properly. • Sensitivity to interest rate changes affecting net interest margin and deposit costs.

Q: Can you walk through plan for working out increases in special mention and nonperforming loans?

A: Borrowers contributed more equity, but we want to see performance over time.

Q: How linear should NIM expansion be?

A: In theory pretty linear, picking up as year goes on with balance sheet growth and higher-yielding loans.

Q: What causes expense run rate to grow?

A: Continued increase in compensation expense due to seasonality and investments in platform.

Q: Top priorities with regulatory capital relief?

A: Buybacks, redeeming preferred, and looking at balance sheet for low-hanging fruit.

Q: What is different or similar in credit process this year?

A: Similar to last year with larger legacy relationships, migrated without getting in way of earnings.

Q: How have deposit flows been early in second quarter?

A: Higher this quarter than last quarter at same point in time.

Q: On brokered deposits, any term?

A: Largely within three to six months, all less than a year.

Q: On NII cadence, still feel range is right?

A: Still feel comfortable with guidance provided, first quarter historically weaker.

Q: Quantify comp expense seasonal resets?

A: Increase in compensation from fourth to first quarter substantially driven by resets, half to two-thirds roll off over year.