Welcome to the Banc of California, Inc. First Quarter 2015 Earnings Conference. [Operator Instructions]. I would now like to turn the conference over to Tim Sedabres, Director of Investor Relations. Please go ahead.

Thank you and good morning everyone. Thank you for joining us for today's first quarter 2015 earnings conference call. Joining me today in the call is Banc of California's, President and Chief Executive Officer, Steven Sugarman; Chief Financial Officer, Ronald Nicolas; and Chief Risk Officer Hugh Boyle. I'd like to remind everyone that today's conference call is being recorded and a copy of the recording will be available later on the company's Investor Relations website. We have furnished a presentation that management will reference on today's call and that presentation is also available on our website under the Investor Relations section. Before I turn it over to Steve, I'd like to remind everyone that as always elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. Those elements can change as the world changes. Please interpret them in that light. The forward-looking statements are outlined on slide one of today's presentation which apply to our comments today. And we'll provide an opportunity for Q&A at the end of the presentation. With that, I'll turn it over to President and CEO, Steven Sugarman.

Thank you, Tim. And welcome everyone to this morning's first quarter earnings call for Banc of California. The first quarter of 2015 was marked -- mark a significant period for the company as Banc of California has emerged as California's banks. We're now a $6 billion financial institution with 38 branches across Southern California serving California's diverse private businesses, entrepreneurs and homeowners. Management continues to be pleased by the accelerating earnings power of the franchise. Looking to the remainder of the year and including the interest costs of our newly issued debt and preferred securities, management continues to believe the company is positioned to deliver earnings that will meet or exceed the $1.14 per share consensus estimate for the full year 2015 which we referenced in our prior call. Turning to slide two of the presentation, we highlight a few key accomplishments in the quarter. The company earned $0.29 per share on a fully diluted basis for the first quarter with $11.7 million of net income to common shareholders. This represents a new high watermark for the company's quarterly net income. Importantly, these earnings can be considered core as the company has had no material or significant special items during the quarter. These core earnings before the return on average assets of approximately 0.9% and a return on average tangible common equity of 13.5% and a consolidated efficiency ratio of approximately 77%. We remain confident in our ability to achieve our stated run-rate operating target of over 1% ROA, 15% ROTCE and 70% to 75% efficiency ratio by the end of the year. Our capital ratios remained strong at the end of the quarter with our tangible equity to tangible assets ratio finishing the quarter at 7.6%. Following the end of the first quarter, the company raised approximately $290 million…

Thanks, Steve and good morning everyone. I will be directing my comments to the supplemental presentation that accompanied our release starting with the highlights for the first quarter on slide three. Today, we reported net income of $12.6 million compared to $10.1 million in the prior quarter and $749,000 a year ago. Net income available to common shareholders totaled $11.7 million after accounting for our preferred dividends or $0.29 per diluted share with the return on average tangible common equity of 13.5%. The first quarter included a tax expense of $9.5 million which represented a 43% effective tax rate. We expect the tax-rate of 42% to 43% going forward on a combined state and federal basis. First quarter revenues totaled $98 million and increased $10.8 million or 12% from the fourth quarter. As highlighted strong growth in both net interest income and non-interest income contributed to the approximately $11 million increase. Higher net interest income was driven primarily by a full quarter of benefit from the Popular acquisition which closed in November of last year. In aggregate, the Popular acquisition contributed $12 million to the net interest income for the quarter. Non-interest income increased by 12% from the fourth quarter due to a higher mortgage banking revenues driven by the increased originations as well as higher gain on sale margins. Non-interest expense decreased to $75.9 million as fourth quarter expenses included one-time costs of $5.9 million. Excluding the fourth quarter one-time costs, expenses increased by $3.6 million largely attributable to the higher volume related expense in mortgage banking. This yielded a marginal efficiency ratio of just 33% for the incremental revenue growth during the quarter. Revenue growth at this marginal efficiency ratio is a key driver of the lower consolidated efficiency ratio which moved to 77%, down from 90% in…

Thank you, Ron and good morning everyone. As of March 31st, 2015 Bank of California stands with approximately $5.1 billion in loans. Comprised of roughly $3.9 billion and held for investment loans at approximately $1.2 billion in held for sale of loans. Of the $4 billion in HFI loans, we have approximately $1 billion in loan balances in each of the three following business lines. Commercial real estate mortgages, one-to-four family residential first mortgages and multi-family loans. In addition, with the integration of the Popular loans, our commercial and industrial loan balances are now approximately $500 million. The remaining loan balances are comprised of equipment finance leases, SBA, construction and other consumer or HELOC loans. Consistent with one of the central themes of our strategic plan to diversify and strengthen our loan portfolio and business platform, as of March 31st, 2015 single-family residential mortgages remained flat quarter-over-quarter at 29% of total HFI loans down from over 48% one year ago. Correspondingly total commercial loans registered at 66% as of quarter end up from 46% one year ago. With regard to the Popular Community Bank loan acquisition which closed in November 2014, our initial experience with the new book of business continues to be positive. Banc of California has proactively reached out to our acquired relationships, many of which represent desirable C&I businesses and established a strong dialog oftentimes with our executive team personally involved. We have reiterated our support for our newly acquired customers and have already begun to expand and move many of these relationships forward with additional loan extensions, competitive deposit products and other banking services. Recall that Banc of California only acquired performing loans, all the loans with delinquencies greater than 90 days were excluded from the purchase and we excluded loans that were high risk from…

Thank you, Ron, thank you, Hugh. I'll now turn to slide 13 of the presentation where we recap our progress towards our stated financial targets. The first quarter was a significant step forward towards meeting all of our financial targets. With the Popular acquisition under our belt and positively contributing to consolidated performance, we continue to be focused on growing our core businesses to drive increasing returns for our shareholders. As we've demonstrated this quarter incremental revenue growth and marginal efficiency ratios sub 50% will continue to be the key factor for our company on our path towards delivering our stated financial targets. Looking towards the remainder of 2015, we continue to believe there are attractive growth opportunities for Banc of California across our various existing business units. With the additional capital we raised in April, we're able to fully fund these attractive opportunities being generated by our existing businesses. Management expects that amongst other things, this will enable the company to increase our focus on held for investment lending. This would result in additional asset growth, higher quality earnings and improved cost efficiencies. Finally, before opening this call up to questions given that we have a growing list for shareholders, I want to highlight that the company continues to have an active dividend reinvestment plan. As part of this plan all investors have the option to have the dividends reinvested back into shares of common stock at a 3% discount to prevailing market prices for our common stock. This enables interested investors to grow their holdings in Banc of California at a discount to prevailing market prices. Any investor seeking additional information can contact Tim Sedabres our Head of Investor Relations. His contact information is at the bottom of this quarter's earnings press release. This completes our prepared remarks this morning. Operator, we're now ready for questions.

[Operator Instructions]. The first question is from Andrew Liesch of Sandler O'Neill. Please go ahead.

Question on, you mentioned a couple of times capital deployment opportunities with what you just recently raised and I am just curious like what that sort like if you could just dive into that deeper and how you think that will generate loan growth especially with the high level of pay-ups and pay-down this quarter?

This quarter we originated approximately $1.5 billion of loans which was up $200 million over the fourth quarter. One of the key questions is, whether those loans are originated for sale or for investment. And that is primarily a management decision. So the pace and rate of our asset growth is largely a function of management's decision around capital deployment and capital efficiency and profitability at any point in time. That being said, it's important to note that we have provided guidance that we expect over $7 billion of originations this year. And our target of $1.5 billion of those originations coming from commercial lending. Considering that level of commercial lending with average durations of four years to five years you're looking at a run-rate volume of commercial lending which is well above the existing size of our commercial loan portfolio. So when we think about the deployment of this capital, management believes we're able to do it with the existing businesses we have, with the existing pace of originations that we expect for this year. And then, with time our loan portfolio will continue to grow to levels, they grow the bank up towards $10 billion.

Okay. So then if I heard you correctly, commercial originations were $191 million this quarter.

That's correct, Andrew. Yes.

Did you get that $1.5 billion Hugh. I would assume that they would then accelerate pretty substantially as we move through the next few quarters?

Yes, and just as you look towards our originations, you'll expect similar trends, one thing I'd refer you back to is, I believe, you asked a similar question in the fourth quarter of 2013, after we completed an integration of two of our subsidiary banks. And during the fourth quarter of 2013 our total assets actually remained flat for the quarter, because as is our practice and what we believe is prudent, as we finish an integration and consolidation it's often best to focus on your operations and consolidating the platform and driving some efficiencies. And at that time, a question came up about our ability to generate loan growth. And I think that my response was, it was the first time that anyone had questioned Banc of California's ability to grow quickly. And so, I think that you're seeing here a pretty predictable pattern that when we do meaningful transactions, we don't look to grow without restraint. We look to consolidate the growth, we look to make sure our relationships are stronger, our processes are strong. This quarter's slower growth rate is very reflective of the same thing that happened at the end of 2013. And that ushered in the period of pretty responsible, but attractive growth throughout 2014.

Got you. I think, I do remember that too. And then just one other question. The other non-interest income line, they were down to about 327,000, just curious what the difference was between this quarter and fourth quarter of last year.

That one in particular, Andrew, I don't have off the top of my head, I'll have to get back to you on that one.

The next question is from Don Worthington of Raymond James. Please go ahead.

In terms of, I think you mentioned in the press release, deposit reprise, just wondering if you could give a little more color, are you kind of intentionally managing higher rate accounts out or I guess, I was just looking for more of what that meant?

Sure. There are two elements I would highlight, one is, real focus on non-interest bearing deposits. As you'll see in the presentation we've seen our non-interest bearing deposits almost double over the last year and it's been a primary focus of our businesses to deliver those high quality relationship accounts. Secondly, given the growth our banks experienced over the last four years, a number of our relationships are newer. And we view that with newer relationships there is a seasoning process where we want to add services and products and ways that we can interact with and serve those relationships which make them longer-term, stickier and more -- and higher quality core deposits. That's been the primary focus of our deposit strategy. And with that becomes pricing improvements because as you have a more robust relationship with your clients and deeper relationship, the products, the deposit products they use and the pricing on those products should reflect a lowering cost to deposit.

And then in terms of the mortgage banking business, what do you expect the volumes to be in the second quarter? Are they still looking strong, obviously first quarter was seasonally strong, but just curious on the outlook?

Yes, first quarter for mortgage banking is seasonally, typically a pretty slow quarter. So the strong performance in the first quarter was partially a reflection of macro market conditions which were positive I think across the sector. But our origination volumes also reflected a lot of the positive strides our mortgage banking team has made. And adjusted general tailwind in terms of production that we'd expect over time. As we look forward into the second quarter in the summer, at least for this early part of the second quarter, we continue to see volumes on pace consistent with the first quarter. And just as a follow-up to Andrew's earlier question, on the other income, some of those fluctuations relate to our mortgage servicing rights and fluctuations that come with fluctuating interest rates and duration assumptions.

[Operator Instructions]. The next question is from Jackie Chimera of KBW. Please go ahead.

Looking at the movements, if I write it down correctly, I think you said that purchase volume was 43% in the first quarter. How did that move between January, February and then into March and where we're at in April?

Sure, Jackie, this is Ron, January was fairly balanced at roughly the 50%-50% and then we saw an acceleration of the refi in February and March and pretty much a continuation, although we saw a slight slowdown of the refinance business in April. But, pretty much it's been running, the purchase refi business has been running in that 45% - 55% respectively range for each of them.

Jackie, I would also add with what we're seeing in April. While our loss volumes consistent with March, our purchase activity has increased as you'd expect with kind of the second and third quarter, where it's approximating about 50%. And just to put out a point, a finer point on that, that's our agency and conforming business. Our jumbo originations continue to be very high purchase related at 70%.

And then you had mentioned that with the movement up to 341 for the gain on sale margin you expected that to come down to a more normalized level in 2Q. At this point in the cycle what do you view a more normalized level as maybe just a range?

Yes, so I think that that number is somewhere on a net basis right around 3% and fluctuates really between 3% and 3.25% what I would consider, I think what we would consider a more normalized level. It obviously expanded with the drop in interest rates. We saw consistency with our pull through and up on delivery of course, we got the benefit of the lower rates notwithstanding the hedge impact that we had as well. So, but again the more normalized levels probably in that 3%, 3.25% kind of range.

Okay. And if refinances continue, let's say, they go back to more of the February-March pickup that you saw, could we see that be a little higher than 3%, 3.5% next quarter?

Jackie, I think we previously have provided guidance that we target about 75 basis points of pre-tax profit within our mortgage business for agency and conforming. And against originations. So that continues to be our targets. So this could bounce around a little bit. But with our overall origination targets that we laid out earlier, we're budgeting for north of $5 billion of mortgage banking originations.

And Jackie, the gain on sale between purchase and refi really is, there is really no real meaningful difference between the gain on sale from those two products.

[Operator Instructions]. Next question is from Gary Tenner of D.A. Davidson. Please go ahead.

Just a question on the capital comments you made where that you mentioned the capital issuance and the debt issuance in early April takes you through '16 on your planning process including redemptions. Obviously, it gets, you got SBLF that re-prices next year. How about timing on the callable senior notes that are at the higher rate than what this most recent slog was issued at. Any sense of timing on when you may consider calling some of that?

Yes. We're actively considering that question right now. I don't have anything to share with you forward-looking on that. They have become callable securities. That said accompanying the higher existing interest rate is also some capitalized expenses in the order of about $3 million. So to the extent that there was a decision to repay those, you'd get a one-time hit. But we've made the decision at this point, but are very comfortable with our overall capital position financing our business plan.

This concludes our question-and-answer session. I would now like to turn the conference back over to Tim Sedabres for any closing remarks.

Thank you everyone for joining today's call. As always, we're happy to talk to you. If you have any follow-up questions don't hesitate to reach out and we'll make ourselves available. Thanks for joining us.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.