Banc of California’s Strong Start to 2025: Loan Growth and Buyback Boost Prospects

Banc of California, Inc. (BANC) has kicked off 2025 with encouraging financial results, reporting a first-quarter diluted EPS of $0.26 and 6% annualized loan growth. The bank also announced a significant increase in its stock buyback program to $300 million, signaling confidence in its balance sheet and future earnings potential. Let’s dissect the numbers to assess whether this regional bank’s momentum is sustainable.

EPS Performance: Steady but Modest

While the first-quarter diluted EPS of $0.26 was slightly below the prior quarter’s $0.28 (Q4 2024), it marks a notable rebound from the net loss of $0.01 in Q3 2024. The full-year 2024 adjusted EPS of $0.80 (excluding one-time costs) suggests a gradual recovery. However, to sustain investor optimism, BANC must demonstrate consistent quarterly EPS growth moving forward.

Loan Growth Accelerates: A Key Growth Lever

The 6% annualized loan growth in Q1 2025 outpaces the 4.3% annualized rate reported in Q4 2024, driven by strategic segments like warehouse lending, equity funds, and residential mortgages. Total loans reached $23.8 billion as of December 31, 2024, but the first-quarter growth likely pushed this figure higher.

The bank’s focus on higher-yielding assets is paying off: Q1 loan originations carried a weighted average rate of 7.02%, up from 8.29% in Q3 2024. This bodes well for net interest margin (NIM), which expanded to 3.04% in Q4 2024—a 135 basis point jump year-over-year. If maintained, this trend could bolster profitability.

Buyback Upsizing: A Vote of Confidence

BANC’s decision to double its buyback program to $300 million from $150 million (announced in March 2025) underscores management’s belief in undervalued shares. With a current market cap of ~$1.2 billion, the $300 million buyback represents ~25% of the outstanding shares. This move could boost EPS per share and signal a strategic shift toward shareholder returns, provided the bank maintains robust capital ratios.

Financial Health: Solid but Not Unblemished

• Capital Ratios: The CET1 ratio rose to 10.55% in Q4 2024, up 41 basis points year-over-year, reflecting disciplined balance sheet management.
• Cost Control: Noninterest expenses dropped 7.6% sequentially to $181.4 million in Q4 2024, aided by merger-related efficiencies.
• Credit Quality: While delinquencies and nonperforming loans (NPLs) rose slightly in Q3 2024 (to 0.72% of total loans), Q1 2025 data (if available) would be critical to assess whether this trend has stabilized.

Risks on the Horizon

1. Loan Delinquency Risks: The prior uptick in NPLs (driven by commercial loan downgrades) remains a concern, especially in a slowing economy.
2. Interest Rate Sensitivity: While rising rates benefit NIM in the short term, prolonged high rates could strain borrowers’ repayment capacity.
3. Wildfire Exposure: Though the bank reported no material damage from recent wildfires, California’s climate risks remain a long-term uncertainty.

Conclusion: A Bank to Watch, but with Caution

Banc of California’s first-quarter results highlight strengths in loan growth and cost management, supported by an aggressive buyback. The 6% loan growth and expanding NIM suggest the bank is capitalizing on its strategic repositioning. However, investors should monitor credit metrics and macroeconomic conditions closely.

With a tangible book value of $15.72 per share (as of Q4 2024) and a current stock price hovering around $16, BANC is trading near its intrinsic value. The $300 million buyback could provide a near-term boost, but sustained EPS growth and stable credit quality are prerequisites for long-term success.

In summary, BANC’s fundamentals are improving, but the path to outsized returns hinges on execution in a competitive and volatile banking landscape.

Data as of Q1 2025 estimates. Actual figures may vary based on full earnings releases.