Thanks, everybody. We'll get started. We're excited to have Jared Wolff from Banc of California join us today. Banc of California is headquartered in Southern California, has recently expanded, or not, I guess recently anymore, but has expanded with a large deal with the former PacWest and has had an exciting year and a half, two years, I guess maybe a little more than that since the deal. Thank you for having me. Thanks. Maybe just starting off, maybe an overview of where the bank is today, how you're looking at it, and maybe a little bit of an update of how things are going this quarter. Sure. Thank you again for a great conference, Jared. We appreciate being here. Banc of California is a $35 billion commercial bank headquartered in Los Angeles. We're the third largest bank headquartered in California, and we are currently the largest independent bank based in Los Angeles. We view our market opportunity to be the business bank of choice for in all of our markets. Today, the bank is split up into really three different engines. We have our commercial and community bank, which is traditional relationship banking, targeting small and medium-sized businesses through 80 branches. Think about it as regional presidents, relationship managers, primarily in California, throughout the state, and then some in Colorado and some in North Carolina. Paired with our commercial and community bank, we have our specialty businesses, which are not geography-based. They're true specialty businesses that are verticals, targeting niches, lender finance, warehouse lending. We have an entertainment business, SBA, a venture business, which includes fund finance, as well as lending into life science and tech companies. We have an HOA deposit gathering business. Our third engine is really our payment business, which is treasury management that we do through specialists that partner with our relationship managers, as well as we issue credit cards to our clients, and we also are a merchant acquirer. Those are our three businesses today. As you mentioned, we acquired PacWest in November 2023. We spent most of 2024 restructuring, integrating, consolidating the two businesses, two banks. Beginning in the fourth quarter of last year, we called it return to normalcy, business as usual. We finished the integration. We started growing in our markets. Since that time, we've shown basically double-digit quarter-over-quarter earnings growth. Our loan production has been much higher, and loan growth has been much higher than our market, showing that we're taking advantage of the specific opportunities that we have, and that's going to continue this quarter. What's driving your optimism on growth in the markets? I think a couple of things. First of all, the economy is holding up very well. California actually has a little bit higher unemployment than the rest of the country, but it's pocketed, and overall, the economy is growing well. Our niches are taking advantage of that. Some of our specialty niches have less competition, specifically warehouse, fund finance, and lender finance, and those seem to be growing well. I would say that we are winning relationships in markets where we tend to compete more with larger banks. When you think about Southern California and the California landscape, how dramatically it's changed over the last three years, people know I like to list the banks that are no longer there to make the point, but when you think about First Republic, Silicon Valley, Signature, Union Bank, Bank of the West, OneWest, B&T, PacWest, HomeStreet, Pacific Premier, City National is changing its name to RBC. In some ways, it's going away. I could go on. That's a lot of banks. If you were a Union Bank customer and you chose to bank with that bank for many, many years, you did so because of the relationship orientation, the nature of those bankers in the market. When they were acquired by US Bank, that changed. It was a very different model. When First Republic was acquired by Chase, it became a very different model. We end up taking relationships, in many cases, not all cases, but in many cases, from banks that acquire these relationships. Somebody could say, what about you and PacWest? What's the difference? We were much more similar in size in our relationship orientation. As many of you know, I came from PacWest, so I had a cultural similarity. I think we were able to retain our customers a little bit better. That's one of the things that's driving our growth as well. What about, you know, we hear a lot about California and the exodus of people to other states, but it still has density of small and mid-sized businesses. What are some of the catalysts that you see in the market over the coming years? The rumors of its death are a little bit premature for California. It is currently the fourth largest economy in the world. I would say that means that it grew faster than the one above it or it shrunk less, but it's the fourth largest economy in the world. Southern California is really the engine that is powering that economy. The Southern California economy itself might be the eighth or 10th largest economy in the world. It's very, very large. California still creates more jobs than any state in the country, has more venture capital invested in it than any state in the country, has more small businesses that start there and that live there than any state in the country. The economic diversity is pretty dramatic. In addition to that, we have some special events that are coming that will keep the economy moving. First of all, we had the unfortunate wildfires, but we expect to have a rebound economically as rebuilding occurs. There is some momentum for rebuilding given what we have coming to Southern California. First of all, we have the World Cup coming in about a year, a little less. We have the Super Bowl coming in 2027. We have the Olympics coming in 2028. That's a lot of momentum and a lot of good things. I think I heard Casey Wasserman, who's our Olympic chairman, say that the Olympics is like throwing eight Super Bowls a day for two weeks. It's a massive, massive event. We're looking forward to all of those things. On your second quarter earnings stack, you laid out some profitability drivers. Could you walk through that a little bit? Let's explore the path you get to your profitability goals. I think there's a couple of things that we have that's helping us expand our margin and continue to grow earnings quarter -over- quarter at a fairly healthy clip. The first thing is that we have a backbook of loans that is suboptimally priced that is maturing. We have $6 billion of multifamily loans that will mature. Half of it matures in the next 2.5 years. That multifamily book is priced at 4%, a legacy PacWest book for the most part. If we do nothing and those loans come off, we will make more money. We expect to. The second thing is we are growing. Our production has been over $1 billion per quarter of line utilization and new production. That's been steady for the last three quarters, and we expect it to continue this quarter. We're putting on loans at much higher rates than the loans that are coming off. Third is we are making great progress in repricing our deposits. We've moved a little faster than the field. Our beta has been around 55%. The field, I think, is closer to the mid 30%. I think we can do better than that, but I'm pleased with that we're getting 55%, and we'll see how we do with the next rate cuts, whenever they materialize. We are generally liability asset interest rate neutral right now. However, we have an HOA platform that I mentioned that pays earnings credit rate that comes through OpEx. For every 25 basis points of rate cuts, it's about $6 million of expense that we save annually, so $1.5 million per quarter. All of those things are contributing to our growing profitability. On the deposit pricing, when you mentioned the HOA deposit services business, that's, there's several other banks that are involved in that. I'm sure it's a competitive dynamic to attract new business and retain business. How much does pricing play into that component versus maybe some of the other benefits of banking with you? It's a component, but it's not the primary driver. It becomes a more important component the larger the relationships. The primary driver for bringing in HOA business really is the suite of services that you can offer to these property management companies that are trying to serve their underlying HOAs. We have special software that we use. This is a business that PacWest bought from Union Bank many years ago. We have a little under $4 billion of deposits. The average cost is pretty reasonable, but we have some that earn a higher rate because they're a larger relationship. I would say it's not the primary driver. On the loan growth side, where are you seeing, you know, are there certain subsectors of commercial lending that you're seeing better strength? Where do you see the opportunity to maybe leg in there and take some market share? The last several quarters, we've seen our lender finance business, our fund finance business, which is providing capital call lines of credit to private equity and venture capital firms, and our warehouse business really expand. Warehouse has slowed a little bit as pricing has gotten tighter. Similarly, we haven't bought as many single-family loans this quarter because we've seen pricing get tighter. It's an active space. We're just conservative on our pricing requirements for that business. I think fund finance will continue to grow. We are targeting a sweet spot that I think is not being as well served by some of the larger banks that need much larger relationships. Typically in fund finance, the line size that we provide as a capital call line of credit is about 20% of the fund. If you have a $400 million fund, it's an $80 million line of credit. If you have a $1 billion fund, it's a $200 million line of credit. We are targeting the $400 million funds. We're not targeting the $1 billion funds. It's not that we don't have them. We're just not targeting them. That larger fund and larger line size is a much better target for the First Citizens, for the Western Alliances, for the JPMorgans of the world that have some of the former Silicon Valleyer or First Republic folks. We find that that lower level is less targeted because it doesn't move the needle for them, but it moves it for us. Therefore, we're winning a lot more logos in that space. The last several quarters, those three areas have been expanding. Our community bank wasn't growing as fast. This quarter, we're starting to see more broad-based loan production, and our community bank is starting to grow again. As you remember, I described it as our relationship-based banking in our geographic markets. That's good to see, but it's not surprising that it took a little bit longer. We did a lot of shuffling in the group. These are the people that are out in the market. They're bringing in new deposits. They have new leadership. They had to get used to it. They're working in teams. It takes a while. We're starting to see those engines. It really feels like we're business as usual now. That's great to see. I remember when I joined Banc of California in 2019 and I helped restructure that business. It took about two years. We're, I think, ahead of pace now from where we were then. It's nice to see things starting to move together. Last quarter, great loan growth, great loan production. Deposits didn't really drive anything last quarter. This quarter, we're seeing really good deposit growth across all of our channels of deposits. Loan production is holding up, but loan payoffs are higher. Loan growth is going to be a little flatter. Production will be up, but we've remixed our loans. Our earnings are going to grow. Our margin is going to continue to grow. Things are working. They just don't always work in tandem the same way. We have a few questions for the audience. We'd love to get your opinion on a few things here. The first is, what's your current position in Banc of California shares? One, long; two, equal weight; three, underweight or short; or four, not involved. You know, good mix. You have some winners. We got to convert the not interested and appreciate all the longs here. Yeah, I think we should call it not involved as opposed to not interested. Obviously, you're interested here. All right, next question. Which would have the largest impact on improving the relative valuation of shares of Banc of California? One, better relative margin performance. Two, above-peer loan growth. Three, better expense control. Four, credit quality outperformance. Five, more active share repurchases. Six, accrued bank acquisitions. 50%. Can we stay here for a second? Yeah. This is interesting. We said that our NIM target for the end of the year for the fourth quarter is 3.20% - 3.30%. I feel very comfortable that we're there. Above-peer loan growth is we're already achieving that. I expect on a growth basis, like I said, this quarter is probably flat at growth, but production is super high. I expect our pure loan growth will continue. Above-peer loan growth will continue. I appreciate that people feel like we're managing our expenses better. Credit quality, I think we've all talked about that in the past, and we've made some moves recently to make sure that that's not a headwind. I'd love to have the opportunity to do an acquisition if our price improves so that we have a currency that's usable. Right now, I wouldn't feel comfortable using our currency for acquisitions, but we want to have that opportunistically in the future. However, I feel really good about our ability to grow organically. We're doing that at a really good pace, and that's a very comfortable place to be. Interesting on the share repurchases, we have $150 million left on our authorization. We've said that we would continue to be opportunistic around that, and I think people should expect us to do that. I've put in place the limiter that I'd like the CET1 to make sure we're staying around 10% and growing from there. I do think we'll be opportunistic on repurchases as long as we're trading at tangible book value and around there and not meaningfully above that. I think our stock is certainly undervalued. Yeah, that seems a little bit of a surprise. Lack of familiarity. All right, number three. What will organic loan growth be at Banc of California next year in 2026? One, 3% - 5%. Two, 5% - 7%. Three, 7% - 9%. Or four, 9% +. I assume this is assuming a healthy economy. Yeah. While people are answering, one of the things that I worry about is these expectations for six rate cuts. That doesn't suggest a very healthy economy to me. If we actually do get to six rate cuts, that's probably not good. Right now, the economy is performing fine. We have some noise around unemployment, and I think there's some fears about inflation. Six rate cuts is probably not good. Two or three sounds reasonable. Seems like reasonable answers to me. Yeah, 5%-7% seems to be a popular choice for the mid-caps today. Great. Next one. This could be maybe a little in the weeds for the group today, but what will core expenses average in 2026 for the bank? The current guidance for this year is $190 million- $195 million. Number one, a little bit less, $185 million- $190 million. Number two, $190 million-$195 million. Three, $195 million-$200 million. We should give clues to the audience that we've hit our guidance on expenses every quarter and maybe been a touch below it. We are a growth company, so we do plan to invest in our company, and expenses are not going to shrink. They're probably going to grow in the future. Yeah. 50% expecting it relatively the same. Where are the areas you are investing in? When you look at the money you're spending, how much of that is to, you know, maybe create a more optimal, current experience for the way you're running the business versus growing it? Yeah. I'd say the first place we're investing money is in people, both in hiring and in development. We have a really good training and development team, and we are constantly, we believe that we have to grow from within and try to help our people achieve their career expectations at our company. We spend a lot of money to bring people to our company. We don't want to lose them, and we want to train them and make them really good. One of the things I'm most proud of is a lot of our new talent that is coming to the bank is coming from internal referrals. People are saying to their former peers at other banks they used to be at, you should really look at an opportunity here at Banc of California. About 50% of our hires come from peer referrals. I'm really proud about that. We're spending a lot of money hiring people, both on the front end and the back end. You can't forget about the gearing ratio you need in the back office to make sure those people don't get soaked as you continue to grow. We monitor that pretty carefully. The first is people. Second is client experience. We have to make sure that we have the right systems to deliver on the promise for our clients to make sure that they are having an exceptional experience banking with Banc of California and that we can help them achieve their business objectives. We want to be their partner of choice. To do that, we have to make sure that our tools that connect them with us and the amount of money we're investing in APIs and in client-facing technologies is fairly significant. The third place I'd say is data. We have a data modernization project going on right now to consolidate data from all these different systems that we either owned or inherited so that we can have a single source of truth, look at the data, and feed it into systems to get really, really intelligent information. I'm most excited about that in our payments business as we continue to grow our payments business by building this out in front. We're going to be able to have real insights that will help our clients. Is there anything that's more remedial that needs to be fixed or that needs to be improved to support the next layer or the next level of growth, in terms of more legacy systems, whether it's core or lending? The first thing that comes to mind is our digital account opening. It's good, it's not great. In fact, we invested in a Salesforce system for digital account opening. I have somebody new running that piece right now, and I gave him carte blanche to scrap it. I said, if you can do it better, we don't have to keep building this system. If you think that there's a better way to go that's cheaper, more reliable, maybe we should have bought something off the shelf, just licensed it from prelim or somebody else, not build it the way that we're building it today. I want to give you the flexibility to look at that and make the best decision for our company going forward. I never have a problem doing that. When you put somebody in charge of something, you've got to give them the authority and the responsibility, not just the responsibility. I'm waiting for that recommendation. The second thing is I think there's some finance modernization that we need to do with some of our systems. It's tied to our data project, but it is really necessary for us to get there. It's all embedded in our costs. It's part of our guidance, and we can absorb it. What about AI? How are you looking at AI as an opportunity or a risk? It's still early stages, but how could you see maybe early on integrating that into your process? There are three things that are really important to us and around AI. The first is we ended up hiring somebody to lead this for us that's a PhD. We didn't have all of our business leaders go around and tell us how they were going to use it. I had this person go around and interview our business leaders to investigate how we could use it because I think that that person is better experienced to help us see what the opportunities are than us trying to figure it out ourselves. We rolled out Copilot in an integrated way across the company. Through our own experience, I had all of our executives use ChatGPT on their own outside the bank. We all found that Copilot was good for some things, not good for other things. We are now adding ChatGPT. It will not be integrated the same way Microsoft has integrated Copilot into its suite, but it's going to be a tool. The third thing is we're going to be, I now have a list of projects. I have 220 projects that were identified, ranked by high impact, low effort, like that's at the top of the list, mid-impact, mid-effort, somewhere in the middle. These are all ranked. I'm going through the list right now with our team that went through and interviewed our leaders to decide which projects, what's it going to cost, how are we going to use it. Some of the biggest opportunities are in BSA and some of our routine areas. One thing to touch on is you talked about risks and you and I touched on this a little bit yesterday. I think that the opportunity for AI to replace and displace junior workers is significant to the economy. We are intentionally focused on making sure that we train people to do things the way that we learned to do them many years ago and still do them today. Not because AI can't do it faster, but because you want people to still be in touch with the fundamentals and understand if three years from now a VP is getting an output from an AI model about stats about the portfolio or about underwriting a real estate loan, we still want that VP to understand how to underwrite a real estate loan, not look at the model to decide should we do the real estate loan. I think there's a risk that you will outsource too much of the fundamental truth and the true skills in banking to a model. I think that that's a risk to the industry, and we want to make sure we don't lose that. Let's see if there's any questions from the audience. Happy to expand the questions. I think there's a microphone coming for you. Thanks. I wish you could just speak a little bit to what you're seeing on the loan growth front. What's driving the paydowns you mentioned? Is it just lower five-year? Is it credit-related? It sounds like there's also been some real strength in the production side. Maybe that still nets out to better than HOA loan growth. I'd just love to hear more on the. Yeah, we've seen paydowns in a lot of areas, some larger construction loans. There are some relationships that are pretty large that we inherited that we asked to size down. Some of that was kind of, can we move these to other banks? Can we shrink the relationships a little bit? PacWest had some really large relationships, and they tended to grow by doing a ton with some very concentrated positions of clients. I'd like to be more diversified than that. By the way, I know a lot of those relationships because I was at PacWest, and they're still there. I just think we can do it in a more diversified way and granular way. I'd say that the paydowns are pretty broad-based, and it's healthy. I don't think there's any noise to it, but we had a little bit more than usual because we asked some relationships to draw to pay down. I guess, you know, let's talk a little bit about the recent loan sales that you've identified. What was the strategic rationale behind that, and what was driving the marks there if there's any updates? Yeah, so, you know, about $500+ million of loans that we moved to held for sale last quarter. We said that the loans would get sold over the next several quarters. We're on plan. We sold them at, we moved them to held for sale at about a 5% discount based on indicative pricing that we had from potential buyers of the loans. That seems to be holding true. Whether it comes out to 4% - 6%, I don't know, but I think we're pretty much on track. Some examples I gave of the loans we moved were large construction loans that were backed by well-heeled institutions but had failed to lease us. Two of these loans were large industrial projects in Mesa, Arizona, for very, very large industrial bays, sizes of multiple football fields. I guess Mesa at some point was a hotspot because we had two loans there. Look, I mean, these are close. One of the loans was over $100 million. One was a little bit below $100 million. So almost $200 million of loans. They were going to sit on our books. They already were behind plan. The appraisals were well above our loan amount, and there was a ton of equity in the project. We weren't going to lose any money. They were going to be sitting on our books. They were already special mentioned. They were moving to classified because they're behind plan. They were going to sit there. I'm not good at predicting how long they're going to take to lease us. I had a choice. Should we talk to our team? Should we continue to sit on these loans? Or should we just move them out? I was in favor of just moving them out and not having them be a headline risk or maybe even getting worse. The rates on the loans weren't 9%. They were 6.5%. I'm funding them with 4% brokered money. I don't even know that they're a good trade to begin with. All of that factored in my mind of like, let's move them out. Let's run our capital scores. Let's move them out. Let's go. Yes, I would love to sell them at par, but that's not the way the market works. I thought 95% was a good number for somebody else. We provided some back leverage to our clients that wanted the loans. Great. We moved them out. In terms of whether it was, I get the question all the time of, was it interest rate risk or credit risk? I've just described the loans to you guys. I don't know. I don't know how the buyer viewed the 5% discount. To me, it was a 5% discount. I think the loans were money good to us all day long for the reasons I described. Somebody else said that they were willing to take it at that price with some back leverage. Let the buyer decide. Those were the characteristics of the loans we moved out. Let's shift a little bit to capital management. As you've been describing through this conversation, you're de-risking the balance sheet. You're focusing on higher quality growth. Where do you see optimal capital targets for the bank here? How should we think about, going back to the capital management question, your appetite for, you've indicated you're still in the market for buybacks. How should we think about that as we go through the rest of the year and going into next year? We have $150 million as of last quarter available in our buyback program from our $300 million authorization. We got through the first $150 million pretty fast. I said we would take our time with the second $150 million, but we would be opportunistic. I think we're doing just that. I think capital plays into that quite a bit. I don't think $11.5 million is the right number for CET1. We're well above the well-capitalized levels, and all banks got pretty capital healthy. It feels like people are coming closer to me than me going up to $11.5 million. I expect people settle in at $10.5 million- $11 million, and that's kind of where people get comfortable. I was looking at some numbers the other day. Banc of California, before we bought PacWest, ran with a lot of capital. We had very high capital levels. Actually, the capital that we have at the bank today, at Banc of California, at the bank level is extremely high. We do have a lot of capital. It's just being absorbed by the holding company a little bit. I think $10.5 million is probably still the right number. Great. I'm not uncomfortable at $10 million. We'll grow back into it. I do want to be opportunistic on buybacks. They're not mutually exclusive. Maybe we just wrap up, just talk a little bit about credit and your view on how things are progressing in general in the credit and sort of the credit migration cycle, and your thoughts on the allowance level and provisioning. So far, credit has been benign in the quarter, and it looks like things are holding up reasonably well. I was just in San Francisco, and that office market is coming back pretty strong. Folks at Blackstone have been talking about that as an investment for them, and their outlook for San Francisco is very strong as an office market, which is great to hear. Midtown Manhattan is wildly different today than it was 12 months ago. These are green shoots that hopefully will thrive going forward, given the fears that people had recently about the office market. I still think suburban office is a problem, and we're not looking to lend into it anytime soon. From an allowance standpoint, our ACL currently stands at 107 basis points. One of the slides that we have in our deck, which is really important, is reminding people that 29% of our loan portfolio is single-family, warehouse, fund finance, and lender finance, which is, other than single-family, very short duration. All of them have a history of no losses. When you strip that out and you put the rest of our loan portfolio up on an ACL, it's 144 basis points. points. Our coverage ratio on what is an apples-to-apples against other core banks is pretty high, and that's before we apply any of the coverage we have from the rate marks that we got from the acquired loan portfolio. I think the 107 basis points is, I don't really want it to be lower, but it is a model that we have to thrive. As these lower risk and shorter duration portfolios grow, they don't absorb as much under CECL. For now, like I said, I think this quarter, I don't know what's going to happen this quarter, but as of right now, it looks like loan growth will be flatter, even though production will be up, which would suggest that our reserve levels are not going to grow very much. I would think that the $10 million - $12 million that we've targeted for reserve levels is probably reasonable as a quarterly provision. It's probably enough to keep us constant. Of course, that's always subject to change. Great. Any final questions from the audience? I would just say that I'm very pleased with the trajectory that we're on. One of the things that's happened these last five or six months is that our stock has moved to, as the KRX has improved, we've outperformed it. We've been accelerating. I think that's been a reflection of just the consistency of the core earnings and the loan growth that we've had and the margin expansion. I see that continuing for several quarters. Great. Thank you very much. Appreciate everybody's time. Thank you. Thank you.