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Category: Banc of California (BANC)
Date: 22 January 2021 Stock price of Banc of California: $17.64 We take a look at the 4th quarter 2020 earnings report of Banc of California, a premier, relationship-focused, full-service business bank. For the quarter the group reported total income of $73.5 million and net income of $21.7 million
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Jared Wolff, President & CEO of Banc of California - We ended 2020 with a strong quarter that demonstrates the potential of our franchise. We continued to execute on our key initiatives, lowering deposit costs and controlling noninterest expense, while increasing our level of quality earning assets. "
More About Banc of California
Banc of California is California’s premier, relationship-focused, full-service business bank. Our depth of resources and financial strength allow us to adapt quickly and thoughtfully, delivering solutions to help our clients achieve their financial goals. For nearly 80 years, Banc of California has served small and medium-size businesses and their principals throughout California. As one of the largest banks headquartered in California, with branches extending from San Diego to Santa Barbara, we have the depth of resources to help your business grow and succeed.
Overview of Banc of California 4th quarter 2020 earnings report
Highlights for the fourth quarter included:
- Return on average assets of 1.11%
- Net interest margin of 3.38%, a 29 basis points increase from the prior quarter
- Average cost of total deposits of 0.36%, a 15 basis points decrease from the prior quarter, and period-end cost of deposits at 0.29%
- Noninterest-bearing deposit balances increased $108.5 million during the quarter and represented 26% of total deposits at December 31, 2020, up from 20% a year earlier
- Allowance for credit losses remained strong at 1.43% of total loans and 230% of non-performing assets
- Non-performing loans decreased 45% to $36.6 million or 0.62% of total loans
- Total deferrals/forbearances declined to $201.5 million at December 31, 2020 from $282.5 million at September 30, 2020
- Common Equity Tier 1 capital at 11.19%
Banc of California management commentary on their 4th quarter 2020 earnings report
SANTA ANA, Calif.--(BUSINESS WIRE)-- Banc of California, Inc. (NYSE: BANC) today reported net income of $21.7 million and net income available to common stockholders for the fourth quarter of 2020 of $17.7 million, or diluted earnings per common share of $0.35.
Jared Wolff, President & CEO of Banc of California, commented, “We ended 2020 with a strong quarter that demonstrates the potential of our franchise. We continued to execute on our key initiatives, lowering deposit costs and controlling noninterest expense, while increasing our level of quality earning assets. As a result, we saw significant growth in pre-tax pre-provision income, net income and earnings per share, while generating a return on average assets of more than 1.0% for the fourth quarter.”
“While the operating environment remains uncertain as we begin 2021, we are confident in our ability to continue to execute well on the strategies that are driving earnings growth and franchise value. We believe that we can continue to generate balance sheet growth while protecting our net interest margin and managing expenses, improving operating leverage over the course of 2021,” said Mr. Wolff.
Jared Wolff, President & CEO of Banc of California, commented, “We ended 2020 with a strong quarter that demonstrates the potential of our franchise. We continued to execute on our key initiatives, lowering deposit costs and controlling noninterest expense, while increasing our level of quality earning assets. As a result, we saw significant growth in pre-tax pre-provision income, net income and earnings per share, while generating a return on average assets of more than 1.0% for the fourth quarter.”
“While the operating environment remains uncertain as we begin 2021, we are confident in our ability to continue to execute well on the strategies that are driving earnings growth and franchise value. We believe that we can continue to generate balance sheet growth while protecting our net interest margin and managing expenses, improving operating leverage over the course of 2021,” said Mr. Wolff.
Lynn Hopkins, Chief Financial Officer of Banc of California, said, “In addition to the strong operating results we generated in the fourth quarter, noninterest income benefited from recoveries on a number of legacy legal matters that we strategically decided to pursue, impacting net income by approximately $2.8 million, or $0.05 per share. We continue to pursue additional recovery opportunities that could positively impact earnings and tangible book value per share in future quarters.”
“Our focus on reducing deposit costs, shifting excess liquidity into higher yielding earning assets, and increasing production of quality loans at attractive risk-adjusted yields resulted in our net interest margin expanding 29 basis points to 3.38% during the fourth quarter. We also continued to see positive trends in asset quality, with two of our largest non-performing assets being resolved during the quarter with no additional provision required, and total loan deferrals continuing to decline. We also successfully raised $85 million in subordinated debt during the fourth quarter. Although the additional subordinated debt temporarily weighs on our cost of funds, it will position the Company to move forward on capital actions during 2021, subject to regulatory approval, that are expected to be accretive to earnings,” said Ms. Hopkins.
“Our focus on reducing deposit costs, shifting excess liquidity into higher yielding earning assets, and increasing production of quality loans at attractive risk-adjusted yields resulted in our net interest margin expanding 29 basis points to 3.38% during the fourth quarter. We also continued to see positive trends in asset quality, with two of our largest non-performing assets being resolved during the quarter with no additional provision required, and total loan deferrals continuing to decline. We also successfully raised $85 million in subordinated debt during the fourth quarter. Although the additional subordinated debt temporarily weighs on our cost of funds, it will position the Company to move forward on capital actions during 2021, subject to regulatory approval, that are expected to be accretive to earnings,” said Ms. Hopkins.
Banc of California stock price chart over the last 5 years
The image below shows the stock price history of Banc of California (BANC) over the last 5 years. And its been a good time for Banc of California stockholders with the stock increasing sharply by 17.6% over the last 5 years.
The stock of Banc of California is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Banc of California stock is positive at this point in time.
The stock of Banc of California is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Banc of California stock is positive at this point in time.
Latest stock valuation of Banc of California
So what is Banc of California (BANC) stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Banc of California at $26.70 a stock
We therefore believe the stock of Banc of California is undervalued at its current price of $17.64
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $26.70, thus a good entry point into Banc of California would be at 23.90 or below.
We expect the stock of Banc of California to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued at its current price.
We therefore believe the stock of Banc of California is undervalued at its current price of $17.64
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $26.70, thus a good entry point into Banc of California would be at 23.90 or below.
We expect the stock of Banc of California to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued at its current price.
Next earnings release of Banc of California
It is expected that Banc of California will release their 1st quarter 2021 earnings report in mid April 2021
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