Banc of California, Inc. Announces Q2 2026 Results and Major Strategic Changes

Banc of California, Inc. (NYSE: BANC) has released its financial results for the second quarter ended June 30, 2026, accompanied by a series of significant strategic actions aimed at reshaping its balance sheet, enhancing earnings power, and increasing long-term shareholder value.

Key Highlights and Strategic Actions

• Strategic Balance Sheet Repositioning: The company executed three major actions:
  • Repositioned \$2.3 billion of lower-yielding securities, generating a 276 basis point yield pickup on redeployed balances.
  • Initiated the sale of \$827 million in selected commercial real estate and multi-family construction loans to reduce credit exposures and future earnings volatility.
  • Retired \$385 million of subordinated debt ahead of a contractual interest rate reset, reducing future funding costs.
• Immediate Financial Impact: These repositioning actions resulted in significant one-time charges, including:
  • A \$256.7 million pre-tax loss on securities sales.
  • A \$161.8 million provision expense due to marking loans for sale at the lower of cost or market value.
  • A net loss available to common shareholders of \$251.3 million, or \$(1.61) per diluted share, for the quarter.
• Improved Long-Term Earnings Power: Management expects these actions to drive higher recurring earnings, expand net interest margin, and boost organic capital generation, positioning the company for stronger future performance.

Financial Performance Details

• Loan and Deposit Growth:
  • Average loans increased by \$556.1 million (2.3%) during the quarter, with \$2.8 billion in new production and disbursements at a weighted average rate of 6.39%.
  • Total deposits rose by \$799 million (2.9%), with noninterest-bearing deposits making up 28.5% of the total.
  • Loan-to-deposit ratio decreased by 235 basis points to 89.3%, indicating improved funding stability.
• Credit Quality Trends:
  • Classified loans and leases fell 99 basis points as a percentage of total loans, and special mention loans fell 154 basis points.
  • Provision for credit losses spiked due to strategic loan sales, with \$161.6 million in charge-offs related to loans transferred to held-for-sale.
• Capital and Liquidity:
  • Capital ratios remain well above regulatory “well-capitalized” thresholds:
    • Estimated Tier 1 capital ratio: 11.67%
    • Estimated CET1 capital ratio: 9.25%, expected to rise to 9.50-9.60% after loan sales close
  • Book value per share: \$18.38; Tangible book value per share: \$16.44
  • Cash and cash equivalents: \$2.8 billion; Total available liquidity: \$14.1 billion
• Net Interest Income and Margin:
  • Net interest income: \$250.5 million, down \$1.1 million QoQ due to higher funding costs.
  • Net interest margin: 3.13%, down from 3.24% in Q1; expected to rebound to 3.30% after loan sales close.
• Noninterest Income and Expense:
  • Noninterest income dropped sharply, reflecting the \$256.7 million pre-tax loss on securities and \$12.5 million loan sale adjustment.
  • Noninterest expense increased by \$8.5 million, mainly due to higher FDIC insurance costs and software obsolescence charges.
• Share Repurchases:
  • 1.7 million shares repurchased during the first half of 2026 at an average price of \$18.68 per share.
  • \$82.6 million remains authorized for further repurchases through March 2027.
• Dividend Payments:
  • Preferred stock dividends totaled \$9.9 million for the quarter.

Balance Sheet and Loan Portfolio Composition

• Loan Portfolio:
  • Real estate loans comprise 61% of total loans; commercial loans 38%; consumer loans 1%.
  • Loan production in residential real estate, venture capital, and asset-based lending continued to grow despite strategic sales.
  • Loans held-for-sale increased to \$915.2 million due to targeted sales.
• Deposit Mix:
  • Interest-bearing deposits increased by \$838.5 million; noninterest-bearing deposits declined by \$39.4 million.
  • Uninsured and uncollateralized deposits totaled \$7.6 billion (27% of total deposits).
• Borrowings and Debt:
  • Borrowings decreased by \$90.9 million QoQ to \$2.5 billion.
  • Subordinated debt reduced to \$573.6 million after redemption of \$385 million of notes.

Credit Quality and Allowance for Losses

• Delinquencies and Nonperforming Assets:
  • Total delinquent loans fell to \$173.7 million from \$345.1 million in Q1.
  • Nonperforming loans and leases increased to \$203.7 million; nonperforming assets at \$220 million (0.63% of assets).
• Allowance for Credit Losses:
  • Allowance for credit losses (ACL) on loans: \$276.2 million (1.14% of loans and leases).
  • Economic coverage ratio (including credit-linked notes and unearned credit marks): 1.63%.

Capital Ratios and Liquidity

• Regulatory Capital:
  • All capital ratios remain comfortably above regulatory minimums, despite the losses incurred from repositioning.
  • Company expects capital ratios to improve further after completion of loan sales.
• Liquidity Position:
  • High liquidity with \$14.1 billion available, including cash, borrowing capacity, and unpledged securities.

Management Commentary and Forward Outlook

Jared Wolff, Chairman & CEO:
“During the second quarter, we made a strategic decision to reallocate capital toward opportunities that we believe will enhance long-term returns for our shareholders. These actions resulted in significant one-time charges, but they increase our long-term earnings power, improve capital efficiency and provide greater financial flexibility to support future growth.”

• Management emphasizes that near-term losses are the result of deliberate actions to position the company for sustained growth and profitability.
• The actions are expected to immediately improve net interest margin and recurring earnings, with the impact of higher-yielding assets and reduced credit risk playing out over the coming quarters.
• Shareholders should expect improved capital efficiency and flexibility, alongside a stronger credit profile.

Forward-Looking Statements and Risks

The company notes several risks and uncertainties that could impact future performance, including changes in economic conditions, interest rate environment, credit quality, deposit stability, regulatory changes, and other external factors such as technological disruption, litigation, and adverse developments in the banking sector.

Investors are cautioned that actual results may differ materially from projections as a result of these and other factors.

Investor Actions and Conference Call

• A conference call will be held at 8:00 a.m. Pacific Time on July 29, 2026, with webcast and replay available on the company’s investor relations website.
• Shareholders and prospective investors are encouraged to review the full presentation and financial tables for additional detail.

Potential Price-Sensitive Factors

• Significant one-time losses resulting in a quarterly net loss of \$(1.61) per share could have a negative impact on share price in the near term.
• Strategic repositioning is expected to improve recurring earnings and net interest margin, which may support share price recovery if the execution is successful.
• Share repurchases and strong capital ratios may provide support for valuation and investor confidence.
• Completion of targeted loan sales, improved credit quality, and higher-yielding asset mix are key developments that could affect future share performance.

Disclaimer: This article is intended for informational purposes only and does not constitute investment advice. Investors should consult the company’s official filings, review the full financial report, and seek professional advice before making investment decisions. Past performance is not indicative of future results. The information herein is based on publicly available data as of the report date and may be subject to change.

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