Banc of California Sells $525 Million of CRE Loans, NPLs Fall 13%

Banc of California sold about $525 million of commercial real estate loans in the third quarter and ended it with $10.23 billion of CRE loans held for investment, down from $10.33 billion on June 30, while its nonperforming loans fell 13% to $177.2 million, the company said on Tuesday, Oct. 27. The bank (NYSE: BANC) released its results after the market close in a filing with the Securities and Exchange Commission.

Net earnings available to common shareholders were $73.1 million, or $0.46 a diluted share, up from $0.38 a year earlier. In the second quarter, it lost $251.3 million, or $1.61 a share, after what it called a strategic balance sheet repositioning.

How much CRE did Banc of California sell?

In the second quarter, the bank agreed to targeted sales of $827 million of commercial real estate and construction loans. About $525 million was sold in the third quarter. Of the remaining roughly $300 million of construction loans, $235 million was sold on Wednesday, Oct. 21, and $65 million was pulled from the sale after the project was finished and the loan became permanent financing, the release says. Loans held for sale fell to $498.8 million from $915.2 million, and the bank expects to sell the rest "over the next several quarters."

Where is the CRE credit stress?

Mostly in retail and office, the bank's investor presentation shows. Total CRE, which makes up 42% of loans held for investment, had a 57% weighted average loan-to-value ratio and 0.58% of balances, or $59.2 million, on nonperforming status. About 76% of the CRE book is in California.

CRE segment, Sept. 30	Balance	Nonperforming %	DSCR
Multifamily	$5.38 billion	0.13%	1.35x
Construction	$1.48 billion	0.16%	n/a
Office	$783 million	2.03%	2.34x
Retail	$543 million	5.44%	1.55x
Industrial / warehouse	$812 million	0.13%	1.96x
Total CRE	$10.23 billion	0.58%	1.60x

Source: Banc of California third-quarter 2026 investor presentation.

Bank-wide, classified loans fell to $507.4 million, or 2.06% of loans, from $582.8 million. The CRE special mention ratio fell 23 basis points. Net charge-offs were 0.27% of average loans, annualized, against 2.54% in the second quarter. The provision for credit losses was $10.4 million, down from $161.8 million.

Is Banc of California still making CRE loans?

Yes, but slowly. Multifamily balances fell to $5.38 billion from $6.12 billion a year earlier, with $63 million of new production against $129 million of payoffs in the quarter. About $2 billion of hybrid multifamily loans at rates below 4% will reprice or pay off over the next three years, the presentation says. Total loan production and disbursements were $2.6 billion at a weighted average rate of 6.58%.

Growth came from other lines, including mortgage warehouse loans to mortgage originators, which rose to $1.81 billion from $1.68 billion with no nonperforming balances. That is the bank side of the credit lines described in our warehouse line of credit guide.

The bank's average total cost of funds rose to 2.16% from 2.14%, which it tied in part to the Fed's rate increases during the quarter. See hard money and private lending rates today for current prime, SOFR and Treasury levels. For how other lenders' CRE books moved in the quarter, see our report on regional bank CRE nonaccruals in Q3.

Chief Executive Jared Wolff said in the release that he expects "further improvement in profitability in the fourth quarter" from the securities reinvestment and the completed loan sales. The bank scheduled a call with analysts for 8:30 a.m. Pacific time on Wednesday.