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The call conveyed a predominantly positive performance narrative: strong earnings momentum (EPS +50%), NIM expansion, robust production and constructive deposit mix shifts, supported by disciplined expense and capital actions (buybacks, dividend increase, planned subordinated debt redemption). Management acknowledged a few concentrated credit migrations and modest net charge-offs but emphasized proactive credit management, solid reserve coverage (ACL 1.12%, economic coverage ~1.6%), and defined resolution paths. Given multiple visible earnings levers (portfolio remixing, deposit mix improvement, embedded repricing, potential regulatory capital relief) and conservative reserve posture, the positives materially outweigh the limited, idiosyncratic credit and deposit risks discussed.
Banc of California reaffirmed a clear 2026 outlook centered on earnings and margin expansion: management reiterated pretax, pre-provision income growth of 20–25% and noninterest expense growth of 3–3.5%, and expects average quarterly NIM expansion of 3–4 bps (Q1 NIM 3.24%, spot 3.22%). They continue to target mid‑single‑digit loan and deposit growth, with Q1 production/disbursements of $2.1B, average loan balances +4% annualized, new production yield 6.65% vs. rolling repricing coupon 4.7% (38% of loans floating), and prior NII guidance (~+10–12% including accretion) still intact. Deposit cost discipline (Q1 cost 1.78%, beta 57%), solid reserves (ACL 1.12%, economic coverage 1.6%), provision run‑rate ~$9–9.5M (could be $10–11M with higher production), and capital actions (1.7M shares repurchased, dividend to $0.12, $385M subordinated debt redemption planned, CET1 10.18% with potential $150–160M regulatory relief) round out the guidance.
Net income of $62 million and diluted EPS of $0.39, up 50% year over year; pretax, pre-provision income increased 28% YoY; adjusted efficiency ratio improved by ~500 basis points YoY, demonstrating positive operating leverage.
Net interest income of $251.6 million, up 8% YoY and roughly flat Q/Q; net interest margin expanded to 3.24% (up 4 bps Q/Q and 6 bps YoY) with spot NIM of 3.22% after normalizing for a one-time FHLB dividend; management expects average quarterly NIM expansion of 3–4 bps for the remainder of the year.
Loan production and disbursements of $2.1 billion in the quarter with new production yielding 6.65% versus weighted-average coupon of 4.7% on loans repricing/maturing by year-end; total average loan balances increased 4% annualized and ~$3.2 billion of multifamily loans expected to mature or reprice over the next 2.5 years, creating embedded earnings upside.
Average noninterest-bearing deposits grew ~4% annualized Q/Q and NIB represented ~29% of total average deposits; average balances per account increased 2.5% Q/Q; cost of deposits declined 11 bps to 1.78% and the bank achieved an interest-bearing deposit beta of 57% in Q1.
Repurchased 1.7 million shares, extended buyback program through March 2027, increased dividend 20% from $0.10 to $0.12, and announced plan to redeem $385 million of subordinated debt; CET1 ratio at 10.18% and tangible book value per share up 1.5% Q/Q to $17.77.
Noninterest expense of $181.4 million was relatively flat Q/Q and down 1% YoY; management targets positive operating leverage and reaffirmed noninterest expense growth guidance of 3%–3.5% for the year while reaffirming pretax, pre-provision income growth guidance of 20%–25%.
Allowance for credit losses (ACL) ratio stable at 1.12% with an economic coverage ratio of ~1.6%; provision expense of $9.8 million reflecting targeted migration and increased weighting of adverse scenarios; reserves were increased where migration occurred and management does not expect migrated loans to produce material losses.
Potential regulatory capital relief estimated at $150–$160 million CET1 (conservative baseline) could provide additional deployment flexibility; broad AI deployment with high developer adoption (>80%), widespread Copilot access and early efficiency gains expected to help productivity, risk management and operating leverage.
Hello, and welcome to Banc of California, Inc.'s First Quarter 2026 Earnings Conference Call. I will now turn it over to Ann Park DeVries, Head of Investor Relations at Banc of California, Inc. Please go ahead.
Good morning, and thank you for joining Banc of California, Inc.'s first quarter earnings call. Today's call is being recorded, and a copy of the recording will be available later today on our Investor Relations website. Today's presentation will also include non-GAAP measures. The reconciliations for these measures and additional required information are available in the earnings press release and earnings presentation, which are available on our Investor Relations website. Before we begin, we would also like to remind everyone that today's call will include forward-looking statements, including statements about our targets, goals, strategies, and outlook for 2026 and beyond. These statements are subject to risks, uncertainties, and other factors outside of our control, and actual results may differ materially. For a discussion of some of the risks that could affect our results, please see our safe harbor statement on forward-looking statements included in both the earnings release and the earnings presentation as well as the Risk Factors section of our most recent 10-Ks. Joining me on today's call are Jared M.
Wolff, Chairman and Chief Executive Officer, and Joseph Kauder, Chief Financial Officer. After our prepared remarks, we will be taking questions from the analyst community. I would now like to turn the conference call over to Jared.
Thanks, Ann. Good morning, ...