Good morning and welcome to the Banc of California Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Timothy Sedabres, Director of Investor Relations. Please go ahead.

Thank you and good morning everyone. Thank you for joining us today for today’s fourth quarter 2015 earnings conference call. Joining me on the call today to discuss fourth quarter results are Banc of California’s Chairman and Chief Executive Officer, Steven Sugarman; Chief Financial Officer, Jim McKinney; Chief Strategy Officer, Fran Turner; and Chief Risk Officer, Hugh Boyle. I’d like to remind everyone that today’s conference call is being recorded and a copy of that recording will be available later on the company’s Investor Relations website. We’ve furnished a presentation that management will reference on today’s call and that presentation as well 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 certain 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. Those forward-looking statements are outlined on slide 1 of today’s presentation which apply to our comments today. We will provide an opportunity for Q&A at the end of the presentation. And with that, I’ll turn it over to our Chairman and CEO, Steven Sugarman.

Thank you, Tim, and welcome to everyone joining our fourth earnings call. Let me begin on slide 2. Banc of California saw tangible evidence of accelerating success in growing our franchise value in 2015. This was reflected in the company’s ability to generate over $100 million in pre-tax profits for the year, resulting in an increase of nearly 300% from a year earlier. Consistent with our guidance, we finished the year with an ROA of 1% and an ROTCE of 17% in the fourth quarter. These strong results led the Banc of California being recognized as one of America’s Top 100 banks by Forbes magazine this month. On that list, we ranked number 4 in terms of total shareholders return in 2015 and I’m proud to say that we were number 1 amongst West Coast banks in terms of total shareholder return. These accomplishments are a result of the strategic investments the company has made over the last two plus years since I took the helm as CEO of our bank during the fourth quarter of 2013. I’m thankful to our strong and independent Board of Directors for providing the company the capital, the strategic oversight and the resources needed to build California’s top performing bank in terms of total return to shareholders in 2015. We entered 2016 optimistic for continuing our strong trends related to growth and profitability. The fourth quarter marked the seventh consecutive quarter that the company has beat consensus analysts’ estimates. For the entire year, the company exceeded analyst estimates by approximately 20%. Management believes that the company is poised to outperform consensus expectations in 2016 as well as a result of estimates not currently reflecting management’s preliminary guidance for 2016 or the scale and profitability of our year-end balance sheet. It appears that expectations continue…

Thank you, Steve. Turning to slide 7. The fourth quarter marks the seventh consecutive quarter that Banc of California has delivered an ROAA above 75 basis points and a return on tangible common equity above 10%. It also happens to be the seventh straight quarter we have delivered earnings per share above analyst consensus estimates. The strength and stability of earnings is even more impressive given that over the past six quarters we have continued to invest in and grow the company from $4 billion in assets to $8.2 billion today. Earnings per share of $0.39 for the quarter was a record, as was pre-tax income of $31 million. ROA of 1% for the fourth quarter was in line with our previous guidance and ROTCE of 17% was above our public guidance of 15%-plus. Slide 8 outlines our returns by business segment. Our Commercial Banking segment has seen its quarterly pre-tax profits increase by approximately $30 million since our acquisition of Popular Community Bank in the fourth quarter of 2014. These results are aligned with our previously stated goal to improve our business mix by increasing the percentage of our pre-tax earnings coming from our Commercial Banking segment. By growing the Commercial Bank, we have diversified the company away from its legacy mortgage banking focus and as you can see on the slide, mortgage banking and financial advisory earnings for 2015 now account for less than 20% of our total business segment pre-tax income on a fully allocated basis. Slides 19 and 20 of the presentation appendix provides detail on the allocations within the SEC reporting segments. Turning to slide 9, we have summarized the dramatically reduced earnings volatility over the past year and a half where Banc of California’s earnings volatility has fallen to below most of our commercial…

Thank you, Jim. Slide 14 highlights few of our recently expanded product and service offerings which we have launched over the past few months. As we think about our value proposition of empowering California’s diverse entrepreneurs, private businesses and communities having a comprehensive suite of products serving a broad set of client needs is key to winning our clients’ primary banking relationship. As you think about our target client, it is the business owner and the entrepreneur who are at the center with our offering serving their holistic needs, including personal private banking, deposits, lending and foreign exchange for the portfolio companies which they own and/or operate, along with lending on their various personal and real estate investment properties. In California, many business owners have businesses and private banking needs as well as investor real estate lending needs as many of our clients own a handful of multi-family properties. Trust services, for example, is foundational to serving the needs of the private and commercial banking clients and fits well within our Financial Institutions Group partnering with broker dealers and ROAAs. Family, charitable and special need trust are critical component of a client’s personal and business life and our full scope of trust services are designed to meet those needs. Foreign exchange serves both the businesses and the private banking clients who either operate in or invest internationally, including import or export or even are entertainment clients who produce films or tour internationally. The launch of our interest rate swaps primarily serves the commercial real estate and multi-family clients who often seek a fixed rate product, whereas we often prefer a variable rate product as part of our asset sensitivity modeling. With an in-house swap solution, we are able to serve the needs of the clients while at the same time…

Thank you, Fran, and good morning everyone. Asset quality at Banc of California remains strong and steady. Slide 15 in our investor presentation deck addresses a few asset quality highlights and our allowance for loan and lease losses. Overall for the quarter, the bank saw stable to improving asset quality metrics. On a percentage basis, non-performing assets to total assets declined to 56 basis points, the lowest level experienced in two years. Year-over-year, our non-performing assets to total assets ratio has improved by 9 basis points or 14%. The absolute level of non-performing loans remained flat for the quarter and OREO remained low at $1 million. Based on the continued stability in our asset quality and the relatively benign macroeconomic environment, the bank’s allowance for loan and lease losses or ALLL increased by less than $800,000 to $35.5 million. Net loan growth was the key driver of provisions and the increased level of reserves. Banc of California’s ALLL to total non-performing loans ratio was 79% at year-end 2015. When both the ALLL and fair value discounts are combined relative to total HFI loans, the bank has a 2.66% reserve coverage ratio at year end. With that, I’ll turn it back over to Steven Sugarman, our CEO.

Thank you, Hugh. Turning to slide 16, I’d like to highlight the impressive progress that has been made at Banc of California since the new management team has been in place. Three-year compound annual growth rates for asset growth, loan growth and deposit growth have all been in excess of 60%. More importantly, pre-tax income has grown from $6 million in 2012 to over $104 million in 2015, representing a three-year compound annual growth rate of over 150% and earnings per share has grown from $0.39 in 2012 to $1.34 in 2015, representing a three-year compound annual growth rate of 51%. This significant financial progress we have made over the past three years is impressive and something that all of our employees, shareholders take tremendous pride in. Looking forward, I remain confident in the team’s ability to continue to drive accelerating earnings throughout 2016. With the team, platform and infrastructure we have built, we see considerable opportunities for continued growth of our businesses over the course of the year. As a result of this growth and the improving financial returns over the past three years, our total shareholder return for 2015 led our peer group at over 32%. This compared to a median return of our high-performing peers of 15% and the KBW Regional Bank Index of 6%. Meanwhile, the KBW Bank Index and Russell 3000 indexes were relatively flat during 2015. We believe the continued execution against our plan and the accelerating financial returns we see on the horizon support our goal of providing leading returns to shareholders over the course of 2016 and beyond. Slide 17 showcases the accelerated growth of Banc of California compared to market expectations. We continue to be focused on delivering against our commitments to shareholders and this includes the operational and financial guidance we provide to investors. We have continued to meet or exceed our public guidance. As you see here, our fourth quarter results for assets, loans, deposits are all largely aligned with market expectations for the second quarter of 2016. This highlights the fact that our growth rate is ahead of consensus estimates. This strong base at the end of 2015 provides us with a large balance sheet and more spread based revenues to start the year with. You can see the fourth quarter net interest income was almost right on top of market expectations for net interest income for the second quarter of 2016. We’re hopeful that the gap between consensus estimates and management guidance going forward will narrow, given management’s ongoing ability to hit our guidance, the lower level of our earnings volatility and the greater visibility into the earnings power of the franchise. That concludes our formal comments today. With that, operator, let’s open the call up for questions.

[Operator Instructions] Our first question comes from Andrew Liesch with Sandler O’Neill.

Just some questions on the loan production this past quarter on the commercial side, $951 millions, so very strong and it sounds like that’s going to continue into next year. But then I’m just trying to reconcile that with overall loan growth forecast, are you expecting – just given some seasonality or some seasoning of some of the credits that you have, some pay downs or are you anticipating loan sales, I’m just trying to reconcile your asset growth number with the loan growth number and the production expectation?

It’s a good question. We continue to have a healthy capital markets function which will continue to result in loan sales to prune the composition of the portfolio, but also to manage our balance sheet and capital efficiency. So as we move forward similarly to as we’ve done in the past, you should expect loan sales to dampen our overall total asset growth and those sales will primarily come from three segments, our jumbo residential private lending group, our multi-family group, and our small business SBA group.

And then were sales this quarter captured in that net gain on sale of loans, like the $15.2 million?

Yes. So what we’re finding is that the success of the businesses we’ve built that are originating high quality loans is resulting in originations above our capital capacity to hold HFI and at the same time we’re seeing attractive economics for selling those loans, which reflects the high credit quality, the strong pricing and the strong relationship-based lending that we do. And so instead of tempering our businesses production, we allow our businesses to produce high quality loans and those that we can’t fit onto our balance sheet within our growth guidelines will sell into the secondary markets and that can generate gain on sale revenue that is distinct and independent from our mortgage banking business.

Then switching to the expenses, just looking at the presentation, the acquisition non-core cost of $2.7 million, just curios what those were related to?

Those are diverse mix of things, but the primary drivers are we had some severance costs that came in in the fourth quarter relating to some of our mostly executive turnover that we saw previously last year and we also had some transaction-based expenses relating to some of the loan acquisition and trading that we did during the quarter which is classified under the acquisition bucket and not kind of a consistent run rate expense.

So backing that out and get to expenses in the quarter about $84 million and recognizing there could be some volume-related costs that increase as we get into the summer selling season, but is this a good run rate to build off heading into 2016?

We look to the base expenses in the chart provided to start to think about our run rate. The volume-related expenses tend to be purely pass-through or largely pass-through where we collect, for instance, loan officer commissions and then we pay it out to loan officers. So that tends to be something that is a pass-through expense and very volume-related. As you can see from the fourth quarter, that expense was down significantly given that our volume-based originations within our mortgage banking group were off compared to, for instance, the second quarter which was about $4.5 million higher. So the $67.9 million number is a base number that starts to be something that you can track as a base expense from non-volume businesses.

[Operator Instructions]

Just, Andrew, following up, I would also note that, as discussed previously, when performance outpaces our budget, many of our employee bonus programs will see higher than average payout because it’s profitability based. And so that is also embedded in part in the $67.9 million number.

[Operator Instructions] As we have no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Steve Sugarman for any closing remarks.

Thank you everyone for joining our fourth quarter and year-end earnings presentation. We look forward to providing you an update on our business after the completion of the first quarter.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.