Banc of California, Inc. (BANC)

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Banc of California, Inc. (BANC)

Q4 2013 Earnings Conference Call

March 13, 2014 11:00 AM ET


John Grosvenor - General Counsel

Steven Sugarman - CEO

Ron Nicolas - CFO


Brett Rabatin - Sterne Agee

Andrew Liesch - Sandler O'Neill & Partners

Kevin Reynolds - Wunderlich Securities

Don Worthington - Raymond James & Associates

Jackie Chimera - Keefe, Bruyette & Wood



Good day ladies and gentlemen and welcome to the Banc of California Quarterly Earnings Conference Call. My name is Ketene and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call Mr. John Grosvenor, General Counsel. Please proceed.

John Grosvenor

Thank you, operator. Good morning everyone. And I am John Grosvenor and let me be the first to welcome you to this morning’s conference call to discuss Banc of California’s results of operations for the quarterly and annual period ending December 31, 2013. With me on the call this morning will be our Chief Executive Officer, Steven Sugarman and our Chief Financial Officer, Ronald Nicolas. This morning’s presentation is being recorded and a copy of the recording will be available later today on the Company’s Investor Relations Web site.

Now before I turn it over to Steven I want to take a moment to remind everyone that our presentation today contains forward-looking statements which reflects our best view of the world and our businesses as we see them today. Those views can change as the world changes, so please interpret those statements in that light. Further information regarding reliance on our forward-looking statements is included in today’s 8-K filing and applies as well to our comments during today’s call. The 8-K covering our earnings announcement is also available on our Investor Relations website.

Finally, we’ve reserved time at the end of the presentation to address questions. We’re concerning the announcement. So with those formalities concluded, it is my pleasure to introduce our Chief Executive Officer, Steven Sugarman ensuring the call [indiscernible].

Steven Sugarman

Thank you, John. Welcome to everyone. This is Banc of California earnings call for the period ending December 31, 2013. We issued a short presentation alongside our earnings release, which you can find on our Investor Relations Web site at You may find a worthwhile supplement for my comments this morning as I’ll reference the slides during the course of my remarks.

2013 was a year of significant transformation for Banc of California and I’m very proud of our team and all they’ve accomplished this year. This is my first full year as CEO of the holding company and 2014 will be my first full year running the Bank. During this period we have taken focused steps towards achieving our mission of becoming California’s bank. So far we’ve accomplished a lot.

I am more optimistic about the value we’re creating at the Bank and excited about the future of Banc of California today. This is primarily due to the talented leaders I’ve surrounding me and working in positions throughout the Bank. The change we’ve embarked on is not easy and we’ve seen some bumps in the road but the progress we’ve made over the past year is exceptional and the shared accomplishment of the broad group of professionals throughout the organization who’ve worked tirelessly and made sacrifice and performed very well.

During the fourth quarter we rewarded all of our employees by establishing an employee equity ownership plan that has result in each employee becoming an investor in the Company. So this morning we have a little bit over a 1,000 new owner employees interested in our financial results because each one of them is personally impacted by the price of our stock and the amount of the Company’s profits. I can tell you that now every meeting that I have with the Bank is a shareholder meeting and I think that’s how it should be.

Now turning to the presentation and Page 2 in particular our key accomplishments in 2013 included the completion of our acquisition of The Private Bank of California the acquisition of CS Financial and the acquisition of The Palisades Group. Each of these transactions added significant strategic assets and capabilities to our organization. In addition during the fourth quarter of 2013, we sold eight branch locations that were non-core to our franchise, merged our banking subsidiaries into a single national bank regulated by the OCC, and implemented a conversion on to a new core banking technology system while changing our name to Banc of California. The ability of our team to accomplish multiple significant strategic objectives during the fourth quarter was a testament to their expertise, commitment and capabilities. The results are meaningful.

Banc of California finished 2013 with 3.6 billion in assets and over 1.5 billion in assets under advisory fee agreements with our RIA subsidiary, The Palisades Group. Banc of California is quickly becoming the largest bank headquartered in California in Orange County, California and we’re also the 10th largest bank headquartered in California as measured by loan portfolio of us. Importantly, despite the significant acquisitions mentioned above, our growth in 2013 came primarily from organic sources not acquisitions. In fact approximately 1.3 billion of our 1.6 billion in deposit growth in 2013 was organic. This represents approximately 80% of our deposit growth.

The trends on the loan side are similar with only 500 million of our 1.8 billion in loan growth coming from acquisitions. This means that over 70% of our loan growth and 80% of our deposit growth came from sources other than our M&A activity. We saw a similar success in the increases in our overall assets under advisement by our Palisades Group registered investment advisor subsidiary which grew its assets under advisement by over 1.6 billion. We believe that the ability of Banc of California to generate strong organic growth distinguishes our Company in the marketplace. We also believe that this strong organic growth is a primary factor in Banc of California’s ability to raise capital efficiently as it did in 2013. We raised approximately $150 million through issuances in 2013 to support our growth based on a total leverage ratio of 9% to 10%.

We completed successful capital raises of non-cumulative perpetual preferred and common stock during the year. We were excited to welcome several new bank investors into our stock including the recent direct placement to Patriot Financial Partners. Management and our Board is very aware of the dilutive effect capital issuances can have and therefore we’re very focused on insuring that these capital raises are used to finance compelling projects that meet our economic return hurdles and enhance the overall value for our common shareholders. We recognize that growth is not meaningful without profitability and the increasing earnings power.

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