Banc of California's Q2 2025: Unpacking Key Contradictions in Loan Growth, Deposit Costs, and Credit Quality

Loan growth outlook, deposit cost management, loan sales strategy, credit quality and allowance for loan losses, and loan growth strategy are the key contradictions discussed in Banc of California's latest 2025Q2 earnings call.



Strong Revenue Growth:
- Banc of California reported ``net income`` of $18.4 million in Q2 2025 and adjusted net income`` of $48.4 million, representing a 6% quarter-over-quarter increase in pretax pre-provision income.
- The growth was driven by solid revenue growth outpacing a slight increase in expenses, and strong loan growth.

Loan and Credit Quality Improvements:
- The company achieved a 9% annualized loan growth, with a 12% annualized increase in held-for-sale loans.
- This growth was complemented by a proactive approach to address credit concerns, such as the sale of $507 million in commercial real estate loans, which improved credit quality metrics.

Deposit and Funding Strategy:
- Average core deposits increased by 5% annually, although the average cost of deposits rose slightly by 1 basis point.
- The increase in deposit costs was due to competitive factors and a need to fund strong loan growth, which was partially offset by a decline in borrowing costs.

Margin Expansion and Earnings Outlook:
- The net interest margin expanded to 3.10%, driven by a 3 basis point``` increase in average loan yields.
- Banc of California expects continued margin expansion in the fourth quarter, driven by fixed asset repricing and remixing the balance sheet with higher-yielding loans.