Banc of California Shares (BANC) Make New 52 Wk High As Earnings Impress

Banc of California Inc (NYSE:BANC) recently disclosed its financial results for the third quarter, confronting a complex economic environment while implementing strategic measures to solidify its balance sheet and streamline its operations.

Markets have reacted positively to the report, with the BANC stock price gaining 4.19% on the day and hitting a new 52 week high of $15.64. Over the past year, shareholders have plenty to smile about, with gains of 36.82% being supported by a solid dividend.

Looking now at the details of the report, and for the third quarter of 2024, Banc of California posted a GAAP net loss of $0.01 per share, contrasting with an adjusted Earnings Per Share of $0.25, indicative of the adjustments made by the company. Net Interest Income saw a slight increase, reaching $232 million compared to the preceding quarter. Furthermore, the bank's Net Interest Margin saw an improvement, growing by 13 basis points to 2.93%.

Notably, the company reduced its Cost of Funds from 2.95% to 2.82%, demonstrating effective fund management despite economic pressures. Total Non-Interest Expense correspondingly decreased by $7.4 million, settling at $196.2 million and hitting the targeted range of $195 million to $200 million for the period.

Loan Production and Line Utilisation were strong, with Banc of California facilitating $1.8 billion in loans, exceeding paydowns which totaled $1.5 billion. The bank also managed a low level of Net Charge-Offs, which came in at $2.4 million or 0.04% of loans, maintaining a stable asset quality. Total Loans Held for Investment increased by roughly $300 million.

The bank successfully executed the sale of $1.95 billion of Civic loans at 98% of par, aligning with its strategy to optimise its loan portfolio.

On the operational front, Banc of California completed a core system conversion, consolidating over 20,000 customers onto a unified platform, which is expected to yield long-term efficiencies. The company also highlighted its success in growing new client relationships, adding more than 1,700 in the quarter.

CEO Jared Wolff expressed an outlook focused on growth in HOA balances and reducing deposit costs in response to expected rate decreases. The company aims to nurture new deposit relationships to safeguard liquidity for prospective loan growth.

CFO Joseph Kauder is anticipating a continued decrease in the cost of funds and expects further Net Interest Margin expansion. According to Wolff, loan growth is projected to be subdued until rates diminish by 50 basis points, with attention pivoting to specific lending sectors.

In addition, Wolff detailed the potential of lender finance as a growth domain, justifying the acquisition made by the bank in this sector. He also indicated that the bank is focusing on capital optimization without asset sales and is considering adjustments to the capital stack by the end of the year.

Kauder added that an additional rate cut could potentially contribute $0.01 to earnings, with the full impact materialising in the subsequent year.

Banc of California Inc has navigated through the third quarter with careful strategic maneuvers, achieving modest financial gains while positioning itself for potential challenges and opportunities ahead. With steps taken to optimize the balance sheet, cut costs, and streamline operations, the bank is seeking to build a resilient financial profile under uncertain economic conditions.