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Banc of California Inc (BANC) Reports Q3 2023 Earnings: Net Income of $42. ...

  • Net income of $42.6 million, up 138% from the prior quarter.

  • Stable overall deposit mix, with noninterest-bearing deposit percentage consistent with the prior quarter at 36% of total deposits.

  • Net interest margin improvement of 8 basis points from 3.11% to 3.19% compared to the prior quarter.

  • Strong capital ratios well above the regulatory thresholds for "well capitalized" banks.


On October 24, 2023, Banc of California Inc (NYSE:BANC) reported a net income of $42.6 million for the third quarter of 2023, a significant increase from the net income of $17.9 million in the second quarter of 2023. The bank also reported a stable deposit mix and an improved net interest margin.

Financial Highlights


The third quarter of 2023 saw Banc of California Inc (NYSE:BANC) strategically positioning its balance sheet ahead of the merger with PacWest Bancorp, resulting in a net income of $42.6 million, up 138% from the prior quarter. This increase included a $46.2 million gain from derivative instruments, partly offset by $9.3 million of transaction costs.

The bank reported a stable overall deposit mix, with the period-end noninterest-bearing deposit percentage consistent with the prior quarter at 36% of total deposits. The addition of new clients with noninterest-bearing deposits contributed inflows of $52.2 million in the quarter and $201.5 million year-to-date.

Net interest margin improved by 8 basis points from 3.11% to 3.19% compared to the prior quarter, as the increase in the yield on loans and securities exceeded the increase in the cost of funds. The bank also reported disciplined noninterest expense management, with total noninterest expense of $56.2 million reflecting an increase of $7.0 million over the prior quarter.

Merger with PacWest


Banc of California Inc (NYSE:BANC) also highlighted the proposed merger with PacWest Bancorp, which was announced on July 25, 2023. The merger has received regulatory approval and is expected to close on or about November 30, 2023. The bank expects the merger to result in a strong, liquid balance sheet with strong credit, ample reserves and capital, and growth centered around relationship banking and high-quality commercial clients.

Income Statement Highlights


The bank's total interest and dividend income for the third quarter of 2023 was $116,222,000, while the total interest expense was $47,004,000. This resulted in a net interest income of $69,218,000. The bank also reported a net gain on sale of securities available for sale and a change in fair value of derivative instruments of $46,186,000. The total noninterest income was $50,778,000, resulting in total revenue of $119,996,000.

Conclusion


In conclusion, Banc of California Inc (NYSE:BANC)'s third quarter of 2023 financial results showed significant growth in net income, a stable deposit mix, and an improved net interest margin. The bank's strategic positioning ahead of the merger with PacWest Bancorp has resulted in strong financial performance, with the bank continuing to bring new relationships, limiting reliance on high-cost deposits, and effectively hedging interest rate risk on its balance sheet.

This article first appeared on GuruFocus.

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