EX-99.1 2 d258888dex991.htm EX-99.1

EX-99.1

March 6, 2017 Investor Presentation Sandler O'Neill 2017 West Coast Financial Services Conference Exhibit 99.1

When used in this presentation and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California Inc. and its affiliates (“BANC,” the “Company,” “we,” “us” or “our”). By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.   Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (i) Pending governmental and internal investigations may result in adverse findings, reputational damage, the imposition of sanctions and other negative consequences; (ii) management time and resources may be diverted to address pending governmental and internal investigations as well as any related litigation; (iii) the recent resignation of our chief executive officer might cause a loss of confidence among certain customers who may withdraw their deposits or terminate their business relationships with us; (iv) our performance may be adversely affected by the management transition resulting from the recent resignation of our chief executive officer; (v) risks that the Company’s acquisitions and dispositions, including the acquisitions of branches from Banco Popular, The Private Bank of California, and CS Financial, Inc., and the acquisition and disposition of The Palisades Group, may disrupt current plans and operations, the potential difficulties in customer and employee retention as a result of those transactions and the amount of the costs, fees, expenses and charges related to those transactions; (vi) the credit risks of lending activities, which may be affected by further deterioration in real estate markets and the financial condition of borrowers, may lead to increased loan and lease delinquencies, losses and nonperforming assets in our loan portfolio, and may result in our allowance for loan and lease losses not being adequate to cover actual losses and require us to materially increase our loan and lease loss reserves; (vii) the quality and composition of our securities and loan portfolios; (viii) changes in general economic conditions, either nationally or in our market areas; (ix) continuation of the historically low short-term interest rate environment, changes in the levels of general interest rates, and the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin and funding sources; (x) fluctuations in the demand for loans and leases, the number of unsold homes and other properties and fluctuations in commercial and residential real estate values in our market area; (xi) results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan and lease losses, write-down asset values, increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; (xii) legislative or regulatory changes that adversely affect our business, including changes in regulatory capital or other rules; (xiii) our ability to control operating costs and expenses; (xiv) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (xv) errors in our estimates in determining fair value of certain of our assets, which may result in significant declines in valuation; (xvi) the network and computer systems on which we depend could fail or experience a security breach; (xvii) our ability to attract and retain key members of our senior management team; (xviii) costs and effects of litigation, including settlements and judgments; (xix) increased competitive pressures among financial services companies; (xx) changes in consumer spending, borrowing and saving habits; (xxi) adverse changes in the securities markets; (xxii) earthquake, fire or other natural disasters affecting the condition of real estate collateral; (xxiii) the availability of resources to address changes in laws, rules or regulations or to respond to regulatory actions; (xxiv) inability of key third-party providers to perform their obligations to us; (xxv) changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business or final audit adjustments, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; (xxvi) war or terrorist activities; and (xxvii) other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made. Forward-looking Statements

ENTREPRENEURIALISM SUPERIOR ANALYTICS OPERATIONAL EXCELLENCE WE ARE CALIFORNIA’S BANK. Empowering California Through Its Diverse Businesses, Entrepreneurs and Communities

We Are California’s Bank Mission-based Approach has Delivered Compelling Financial Results Commercial Banking Focus with Strong and Stable Asset Quality Key Highlights (4Q16) Assets $11.0 billion Net Income $33.3 million Deposits $9.1 billion ROAA 1.1% Loans $6.7 billion ROATCE 17.3% CET1 Ratio 9.44% NPA / Assets 0.16% # of Branches 39 Efficiency Ratio1 67% +75% Net Income3 Adjusted efficiency ratio for 4Q16 including the pre-tax effect of investments in alternative energy partnerships Source: SNL Financial, Data as of 3/3/2017. P/E based on consensus 2017 earnings Dollars in millions Market Valuation Ticker: NYSE: BANC Market Cap: $1.0 billion2 P/E: 11.9x2 P/TBV: 154%

Large and Attractive Demographic Base 39.3 Million CA population1 5.4% Population growth 15% higher Than National Average2 $61,818 Household Income 15% Higher than National Average3 Solid and Improving Employment Trends 5.2% CA Unemployment Rate 2016 saw lowest rate since 20074 14.0 Million CA Private Nonfarm Employment >11% of Total National Employment5 3.6 Million CA Small Businesses6 Robust and Growing Economy 6th Largest World Economy $2.4 Trillion GDP7 >13% of Total U.S. GDP Largest of Any State8 3.0% CA GDP Growth in 20158 Attractive Investment Opportunity Largest and most liquid residential and commercial real estate market in the country CA is a national leader in the technology, aerospace and life sciences industries as well as entertainment, tourism and agriculture CA firms have attracted venture capital funding in recent years that has equated or exceeded the amount received by firms in the other 49 states combined9 California banks have historically traded at a premium to national average given attractive market demographics 1 Census.gov (2017 est.); 2 Census.gov (April 1, 2010 to July 1, 2016 ); 3 Census.gov (2011-2015) in 2015 dollars; 4 BLS.gov (Dec. 2016); 5 ADP Employment Report (Dec. 2016); 6 SBA.gov; 7 IMF World Economic Outlook (April 2016); 8 BEA Global Insight; 9 PWC Money Tree Report (Feb 2017)

Rank Name Total Assets1 Focus 1 Wells Fargo & Company $ 1,930,115 National 2 First Republic Bank 73,278 National High Net Worth 3 SVB Financial Group 44,684 National Technology Sector Focused 4 East West Bancorp, Inc. 34,789 U.S./China Focused 5 PacWest Bancorp 21,870 National Specialty 6 Cathay General Bancorp 14,521 U.S./China Focused 7 Hope Bancorp, Inc. 13,442 Korean American Focused 8 Banc of California, Inc. 11,030 Exclusively California Focused 9 CVB Financial Corp. 8,074 California Focused 10 Opus Bank 7,883 West Coast Focused Mid-Sized Banks Source: SNL, data as of 12/31/2016, Dollars in millions The Only Mid-Sized Bank Focused Exclusively on CA Five Other Mid-Sized Banks Have a National, Ethnic or Sector Focus Outside of California

We Empower California’s Businesses and Entrepreneurs Funded Over $4 Billion of Commercial Banking Segment Loans to Clients in 2016 Lending Platforms Commercial Lending Commercial Real Estate Multi-Family Residential Jumbo Portfolio SBA Asset-Backed Lines of Credit Security-Backed Lines of Credit Warehouse Construction and Rehabilitation Entertainment and Private Healthcare, Municipal, Nonprofit Banking Platforms Commercial Private Retail Institutional Payment Solutions

BANC businesses approaching full scalability of platform BANC Business Units Ranked Across J-Curve of Scalability J-Curve Businesses Qualitatively Trending Towards Increased Scalability CRE & Multi Family Lending Commercial Banking Private Banking Construction & Rehab Lending SBA Lending Warehouse Lending Retail Banking Institutional Banking Payment Solutions Healthcare, Municipal & Nonprofit Portfolio Lending Portfolio of Scaling Commercial Businesses Investment in Diverse Businesses Supports Vision of Being California’s Bank Investment required for businesses to reach inflection towards growth

Guiding Principles: Fresh Perspective on Business Outlook Four Pillar Approach Supports Shareholders, Clients, Employees and Communities Mission & Vision We are California’s Bank Responsible & Disciplined Growth Strong & Stable Asset Quality Focus & Optimization Growing Spread-Based Revenue Demonstrating Expense Management & Efficiency Investing in Scalable Products & Businesses Shareholders Clients Employees Communities Strong Corporate Governance 1 2 3 4

Diluted Dollars in millions 3 Annualized Return on Assets and Return on Tangible Common Equity based on average assets and average tangible common equity, respectively, over stated time periods Net Income2 Earnings per Share1 Return on Tangible Common Equity3 Return on Assets3 Track Record of Improving Financial Results Responsible and Disciplined Growth will Drive Core Earnings and Profitability +38% +75% 1

+36% Total Commercial Loan Balances1 Annual deposit growth of $2.8 billion, Commercial loan balance growth of $1.0 billion +45% Total Deposits1 Dollars in billions $3.8 billion after sale of Commercial Equipment Finance division Disciplined and Responsible Deposit & Loan Growth Concerted Focus on Increasing Solid Deposit Base to Fund Increased Commercial Banking Lending 1

+40% Dollars in millions High quality earnings driven by increased commercial loan balances Loans Held for Investment1 Net Interest Income1 +16% Growing Commercial Loans and Net Interest Income Consistent Performance in Spread-Based Revenue Complemented by Increased Commercial Mix 1

Dollars in millions C &I Loans include C&I, SBA and Lease loans Total 4Q16 loan balance before sales 100% = $1.0 billion 4Q16 Commercial Banking Segment Loan Production 4Q16 Net Loan Growth1 +5% Loan Growth Offset by Balance Sheet Optimization Strong Loan Production Diversified Across Asset Classes 1

BANC Capital Ratios Dollars in millions Capital Ratios Exceeding Basel III Guidelines Common Equity Tier 1 Ratio and Tier 1 Risk-Based Ratio at Highest Levels in Over a Year 1

NPAs/Equity Nonperforming Assets1 ALLL and NPL Coverage Total Delinquent Loans2/Total Loans -75% -52% Dollars in millions Total delinquent loans are loans 30+ days delinquent Asset Quality Remains Strong and Stable Proactive Risk Reduction Continues to Strengthen Asset Quality 2

NPAs/Assets2 Peer group figures contain the most recently available public data as of 2/5/17 Source: SNL Financial; Non-performing assets ex restructured loans / Total Assets Nonperforming Asset Levels Among Best in Peer Group Strategic Focus on Asset Quality has Driven NPAs/Assets to Among Best in Class Relative to Peers1 2

Announced divestiture of Banc Home Loans which lowers reliance on gain on sale income, and through disposition of MSRs, reduces select operational and compliance risks associated with the complexity of mortgage lending operations. Also, improves efficiency ratio and allows the Bank to redeploy capital to commercial lending operations. In the fourth quarter of 2016, the Company: Completed divestiture of Commercial Equipment Finance division, representing $243 million of loans, to reduce credit risk within loan portfolio and to refocus on California and its communities Optimized balance sheet through the sale of $604 million of seasoned residential mortgage loans to support more traditional client relationship originations by unlocking capital and balance sheet capacity Reduced risk through disposition of $18 million of nonperforming loans Reduced NPA’s to assets to 0.16% = near best in class through proactive balance sheet de-risking Increased contingent liquidity by reducing FHLB borrowings by 36% during the fourth quarter to 4% of total assets Strategic Actions to Focus & Optimize Balance Sheet Recent Strategic Actions Enhance Focus on Commercial Banking Businesses 3

Transaction Overview Divestiture of BANC Home Loans Transaction: Transaction Value: Sale of BANC Home Loans, including origination platform, direct staff, and selected BANC shared service support staff. Buyer: Caliber Home Loans, Inc. (CHL) Upfront: $25 million cash premium payment, plus approximately $3 million for certain net assets at book value Up to an additional $5 million premium available tied to loan officer retention by Caliber upon final transfer date Earn-out: tied to origination volumes produced by BHL over following 38 months In the near term, reinvestment of some of the unlocked capital resulting from this sale into loans and securities that will partially offset the immediate impacts of lost gain on sale revenue due to the removal of the agency mortgage operations Substitute BHL Loans Held for Sale with higher yielding commercial loans and select securities Balance Sheet Impact: Closing Date: Regulatory Approval: March 30, 2017 No Approvals Required 3 MSR Sale: Concurrently, BANC will sell Mortgage Servicing Rights to Caliber for approximately $36 million, resulting in an expected loss of approximately $3.5 million

57% 57% Advances BANC Commercial Banking Strategy Reduces Risk and Earnings Volatility Improves Efficiencies Shifts our focus and investment on simplification of lending platform as well as scalable products and services Increases revenue concentration toward recurring spread-based income Allows for expansion and focus on core competencies related to C&I, CRE & Multifamily, Portfolio lending, Institutional and Private Banking Expect to continue to operate Portfolio Lending business with jumbo residential loans Rising interest rate risk can create volatility in the mortgage banking business Reduces credit and compliance risk associated with mortgage lending Increased focus on generating recurring spread based income will provide stable earnings base Will reduce consolidated efficiency ratio Noninterest expenses will decrease by over $160 million annually Reduction in total headcount by 50% Increases efficiency of Assets / FTE to above peer median1 Additional cost reduction strategies being implemented Strategic Rationale of Banc Home Loans Divestiture Directly Aligned with Emphasis on Focus and Optimization of Business 3 Source: SNL Financial. Peer figures as of Q3 2016 and includes FRC, SIVB, EWBC, PACW, WAL, CATY, WAFD, HOPE, WABC, CVBF, BOFI, OPB

Divestiture of BHL Increasingly Drives Revenue Toward NII Revenue Transformation Focused on Increased Concentration of Recurring Spread-based Revenue Transformative shift in revenue generation Target revenue mix aligned with refined focus on Commercial Banking activities Dependence upon gain on sale items decreases dramatically Improving revenue contribution from core-banking activities consistent with traditional, spread based lender FY 2016 FY 2016 Ex-BHL1 FY 2016 results backing out Banc Home Loans contribution 3

% Share of Revenue for FY 20161 Commercial Banks Mortgage-focused banks Banc of California vs Peers Revenue Mix Commercial Banking Franchises Less Reliant on Gain on Sale of Loans NII Median 86% NII Median 60% Data from SNL Financial BANC FY2016 Ex-BHL 3

Price / Earnings (x)1 Price / Tangible Book Value2 Commercial Bank Peers Trade at Higher Valuations Peer Commercial Banks Have Higher Median P/E and P/TBV Ratios 3 Estimated Price/2017E multiple as of 3/3/2017, SNL Data as of 3/3/2017, SNL

Non-Recurring Expenses Total $22 million in Q1 2017 due to the following: Q1 2017 Expected Costs BANC Expects Non-Recurring Items Totaling $22 million Expense Item Amount ($ in millions) BHL Transaction Expense $ 4 BHL Goodwill Write-Off $ 2 MSR Sale $1.5 million loss / $2 million deal related expense $ 3.5 Executive Severance $ 5 Organizational Restructuring Severance $ 2.5 Special Investigation Legal, data review, investigational consulting etc. $ 5 Total Pre-Tax Expenses $ 22 3

Demonstrating Expense Management & Optimization Disciplined Cost Management & Organizational Consolidation Results in Significant Expense Savings Mission & Vision We are California’s Bank Responsible & Disciplined Growth Strong & Stable Asset Quality Focus & Optimization Growing Spread-Based Revenue Demonstrating Expense Management & Efficiency Investing in Scalable Products & Businesses Shareholders Clients Employees Communities Strong Corporate Governance Reduce Efficiency Ratio Expect to realize $20 million annualized savings through reduction in force efforts on compensation and benefits via FTE reduction. This is included in the $160 million expense run-rate reduction Achieve Adjusted Efficiency Ratio of sub-60%1 by YE 2017 Organizational Consolidation Reduction in Headcount Department Consolidation / Elimination Role Elimination Implement right-sizing and restructuring plan Merging of Analytical Groups: Business Intelligence, Business Transformation, and Operational Excellence Real Estate Savings Intent to exit duplicative executive office space Consolidate offices and reduce rent costs Lease out office spaces for additional income Technology / Outsourcing Selective outsourcing Savings on Encompass LOS Licensing, Microsoft Software Licensing, and Circuit Costs Other Savings Opportunities Contracts and Sponsorships 3 1 Adjusted efficiency ratio includes the pre-tax effect of investments in alternative energy partnerships

Adjusted efficiency ratio includes the pre-tax effect of investments in alternative energy partnerships Dollars in millions Source: SNL Financial. Peer figures as of Q3 2016 and includes FRC, SIVB, EWBC, PACW, WAL, CATY, WAFD, HOPE, WABC, CVBF, BOFI, OPB Adjusted Efficiency Ratio1 -27% Assets / FTE2 Improving Long-Term Efficiency Trend Continued Scalability Facilitates Increased Asset Productivity +135% 3 Peer Median3 $11.5

Broader realignment of financial sponsorships, marketing and community reinvestment act (CRA) dollars Average annual expenses related to LAFC commitment will be partially offset by reallocating existing sponsorship, event, and CRA expenses over the 15 year period Direct sponsorships1$2.4 million Incremental sponsorship related costs1$0.4 million CRA efforts redeployed1$0.7 million Partnership will result in direct incremental banking opportunities including: Co-lead for stadium construction financing Significant core deposits Branch location at stadium Exclusive financial services provider for the stadium and team Cobranded team themed credit, debit, and prepaid cards Stadium construction directly results in incremental economic development including2: 1,800 Permanent full-time jobs 40% Local resident job commitment $350 million Development in south Los Angeles $129 million Annual economic activity Los Angeles Football Club (LAFC) Partnership LAFC Partnership Aligns with Mission and Provides Tangible Economic Returns Expect to Reallocate Existing Sponsorship Spend Towards LAFC to Partially Offset Partnership Expense 3 Figures shown are annual figures averaged over 15 years Economic figures from LAFC Re-allocating $3.5 million of existing expense to partially offset annual LAFC partnership expense

Board Has Significantly Enhanced Corporate Governance Review of Actions Completed to Date Over the Past 6 Weeks CEO Resigned as of January 23, 2017 Separated role of Non-Executive Chairman and CEO Elected new Independent Chairman; Eliminated Lead Independent and Vice Chair Roles Eliminated Executive Committee of the Board Separated Compensation and Nominating / Governance Committees Into Two Committees Positioned New Committee Members on Both Compensation and Governance Committees Former Lead Independent and Vice Chair Retired from Board Added to Bench of Board Experience: Added Richard Lashley (PL Capital) to Board, and added Kirk Wycoff (Patriot) to Board. Both are significant shareholders Reduced Director Compensation Revised Stock Ownership Guidelines to Increase from 3x to 5x for Director Stock Holdings as Multiple of Cash Base Retainer Adopted Revised Bylaws to Lower Threshold for Calling Special Meeting of the Board Approved New Policy to Tighten Controls on Outside Business Activities Approved New Policy to Add Rigor to Review and Approval of Related Party Transactions Further Actions to Strengthen the Company’s Corporate Governance are Under Consideration, Including: Increasing the Diversity on the Board Itself Review of All Executive Compensation and Benefit Programs 4

Successfully Filed 10-Q and Timely Filed 10-K SEC Filings and NYSE Listing Up to Date Third Quarter 2016 10-Q / Year End 2016 10-K contained an unqualified opinion on the financials No financial restatements Special Investigation by WilmerHale completed on February 9, 2017 WilmerHale did not find any violation of law, any evidence that Jason Galanis has any direct or indirect control or undue influence over the Company or that any loan, related party transaction, or any other circumstance impaired the independence of any Director. NYSE removed late filer status Material weakness in internal controls, however, several steps already taken to improve governance and internal controls including: New “tone from the top” originating from the Board, flowing to the Executive Management and throughout the organization Separation of the Chairman, CEO and President Roles Appointment of 2 new independent Board members from PL Capital, LLC & Patriot Financial LLC Implementation of new policies on related-party transactions and outside business activities Enhancement of the Sarbanes-Oxley program through the appointment of PwC to support SOX review process Elimination of the Board of Directors executive committee and the separation of the compensation, nominating and corporate governance committees into two separate committees Training programs and staff additions have been made to enhance current processes for risk assessment and monitoring New Chief Accounting Officer in place as of September 1, 2016 A nationwide search, led by Korn Ferry, is being currently conducted for a new CEO 4

Why Invest in Banc of California Mission-based Approach has Delivered Compelling Financial Results Recent Actions Enhance Focus on Core Commercial Banking Businesses 1 Scalable Platform Well-Positioned in Attractive California Markets 2 3 Significant Improvements Made to Corporate Governance 4 Attractive Market Valuation 5 Full Service Commercial Bank with Product Set that Rivals Larger Regional Banks (Commercial Banking, Institutional Banking, Private Banking, Residential Portfolio Jumbo, Warehouse, and Construction & Rehab Lending) Only Mid-Sized Bank Focused Exclusively on the 6th Largest World Economy Strategic Focus on Improving Asset Quality has Driven NPAs/Assets to .16%, Which is Among Best in Class Relative to Peers Additional Reviews of Corporate Governance and Executive Compensation Programs are Ongoing P/E1: 11.9x P/TBV: 154% 1 Source: SNL Financial, Data as of 3/3/2017. P/E based on consensus 2017 earnings Strong Credit Quality

VISION We Are California’s Bank.

MISSION Empowering California through its Diverse Businesses, Entrepreneurs and Communities

WE BELIEVE We Believe In Empowering Dreams. We Believe In Strong Partnerships. We Believe In California.