Doug Bowers - President and CEO John Bogler - CFO.

Jackie Bohlen - KBW Matthew Clark - Piper Jaffray Gary Tenner - DA Davidson Steve Moss - B. Riley FBR Andrew Liesch - Sandler O'Neill Tim Coffey - FIG Partners Timur Braziler - Wells Fargo.

Hello, and welcome to Banc of California's Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Today's conference call is being recorded.

And a copy of the recording will be available later today on the Company's Investor Relations website. A presentation that management will reference on today's call is also available on the Company's Investor Relations website. I would now like to turn the conference over to Mr. Doug Bowers, Banc of California's President and Chief Executive Officer..

Thank you and good morning everyone. I appreciate your joining us for today's third quarter 2018 earnings conference call. Joining me on the call today is John Bogler, Banc of California's Chief Financial Officer.

Before we begin discussing the quarterly results, I would like to refer you to our Safe Harbor statement on forward-looking statements included in both the earnings release and the earnings presentation.

Our third quarter performance continues to demonstrate progress against our three year strategic roadmap with year-to-date core fundamentals trending towards our long-term targets. To remind everyone that road map included four primary points of focus that we expect to achieve over the ensuing 12 quarters.

Before John speaks to the detailed financial results for the quarter, I want to spend some time updating you on our progress and work to-date on these strategic goals. In short, we are happy with the early accomplishments and remained confident in our ability to execute on the full three-year strategic plan.

That said, we will recognize the path maybe bumpy along the way and from quarter-to-quarter. As a reminder, the four focus points on the Banc B-A-N-C roadmap are B, build core deposits; A, amplify lending; N, normalize expenses; and C, create stockholder value. First and most importantly, build core deposits.

For the quarter, core deposits grew by $171 million; and for the year-to date period, core deposits have grown by $584 million or 14% annualized. The 14% annualized rate of growth compares favorably with our long-term target range of low-to mid-teens rate of growth.

While we saw strong growth in core deposits, we also recognized the challenge of growing deposits in a rising interest rate environment along with increased market competition for low-cost deposits.

That said, with our various deposit gathering initiatives underway, we continue to see opportunities to remix the portfolio away from wholesale funding and into core deposits and then ultimately into lower cost in core deposits. As we noted in the past, we envisioned our overall funding transformation occurring in three phases.

The initial phase of exiting high rate, high volatile institutional bank deposits, was completed in the first quarter of this year. The second phase of transitioning out of wholesale funding and into core deposits is well underway.

Somewhat concurrent with the second phase and extending further out, the third phase is to convert the higher costing core deposits into lower cost relationship-based deposits.

During the past quarter, we were pleased to see non-interest bearing deposits grew by $57 million, reversing a downward trend that had been experienced for the past several quarters and providing another proof point of our ability to execute strategic plan. Across our various channels, community banking turned as strong performance for the quarter.

Under Leticia Aguilar's leadership, the Community Bank channel continues its transformation toward a model increasingly focused on serving small business. The private banking division also turned in yet another strong quarter of gathering low-cost deposits.

We continue to add talented members to the private banking team, which will further contribute to the success of the division. The real estate banking division while relatively modest contributor continues to add low cost deposits as well.

A year ago, the real estate banking division was not focused on gathering deposits and today, we are seeking the depository relationship along with every credit extended. The commercial banking division is in the early innings of re-launching middle market and business banking and as a promising pipeline of deposit opportunities.

Grounding now to deposit gathering efforts especially market division continue to grow and supplement our core deposit gathering efforts. Our second strategic initiative is to amplify lending.

Third quarter loan production met our expectations and continues its steady march towards our target of originated more than $1 billion of new commitments each quarter.

The bulk of production volume for the quarter was evenly distributed across our main product categories of single-family, commercial real estate and C&I with each of these production groups generating loan commitments in excess of $240 million. Additional volume for the quarter was sourced from our construction group and the private banking division.

The construction loans are largely focused on individual single-family projects while the private banking loans are primarily commercial loans.

We continue to see opportunities to add talented each of our C&I banking units middle market banking, business banking and small business banking as well as our private banking group, all of which will further contribute to production and shift more of our loan production to C&I.

Additionally, we believe the growth in our suite of commercial business products enhances our ability to deepen client relationships by providing treasury management depository services. Through three quarters of the year, our loan portfolio has grown at an annualized rate of 12%.

We remain optimistic with the momentum for the third quarter will continue to build on the fourth quarter, and we fully expect to achieve our mid teens target rate for the full-year. Third, normalize expenses.

In the second quarter, we announced reduction in force resulting from the simplification of our operating structure and in response to the process improvements being implemented throughout the bank.

Some of the expense savings associated with the staff reduction started to be realized in the third quarter and will be fully realized during the fourth quarter. We previously communicated that the expense savings would be redeployed to frontline units and that remains our intent.

That said, our adjusted operating expenses for the quarter once again came in below our expectations at $50.4 million, which equates to a 1.99% operating expense ratio versus our long-term target of 2% or lower.

While we have initially hit our target, we do caution that expenses are likely to increase in the near-term as we further build out our production units.

Fourth, creating stockholder value; the third quarter reported ROAA and ROATCE were 43 basis points and 2.49%, respectively, and were significantly impacted by certain non-recurring items, which John will describe more fully.

We recognize that achieving our long-term targets of 1% plus for ROAA and 12% plus for ROATCE will be a journey, but we are confident the building blocks are in place in order to achieve those targets.

In short, we are optimistic about our plan and initiatives to grow core deposits to accelerate core lending and to leverage our expense base, all of which when achieved will help us drive toward the targeted metric loans were better. Lastly, during the third quarter, we announced the appointment of new director, Barbara Fallon-Walsh.

Fallon is an accomplished executive, having run various units within Bank of America and more recently in Vanguard Group. Fallon also possesses considerable boardroom experience currently serving on the boards of Alliance Bernstein, Money America and Betterment for Business Advisory Board.

New Board of Directors remains committed to engaging members that are experienced business leaders, providing strategic guidance and operating with the highest ethical and governance standards. With those opening remarks, I would now like to turn it over to John to provide more detail around our third quarter financial results. John..

Thank you, Doug. During the third quarter, we further our efforts to remix the balance sheet toward more traditional core assets and liabilities with the overall size of the balance sheet remained relatively flat at 10.3 billion.

On the asset side, the securities portfolio declined by nearly 237 million and the securities portfolio as a percentage of total assets declined to 20% from 22% last quarter and just for the first time within our long-term target range from 15% to 20% of assets.

During the quarter, 258 million of CLO securities were called and 62.5 million of CLOs were purchased. Additionally, 25 million CMBS were sold. As loan growth continues over the next two quarters, we plan to continue shrinking the mix of CLO securities accordingly further easing us into our long-term targeted securities mix.

The asset remix was supported by continued growth of core held for investment loan balances, which increased by 217 million for the quarter.

While only a small amount of loans were sold this past quarter, we may selectively sell varying portions of the loan portfolio that necessary to manage interest rate risk, reduce concentrations in selective borrowers, or manage overall loan portfolio growth.

Through the first three quarters of this year the annualized loan growth rate is 12%; and as Doug mentioned, we remain confident that the 2018 full-year growth rate will meet or exceed the long-run target of mid teens annual loan growth rate.

Gross loan production totaled 907 million for the third quarter and new production yields on average were 5.22%, substantially above the blended portfolio loan yield of 4.70%. The higher loan production yields we saw in the third quarter were largely reflective of a higher macro rate environment, but also aided by a stronger mix of C&I loans.

Net held for investment loan growth during the quarter was primarily driven by multifamily growth of 152 million and 126 million of growth in the single-family portfolio. The commercial real estate portfolio grew by 29 million while the C&I portfolio declined by 70 million.

Total commercial loan balances collectively increased by 95 million or 2% from the prior quarter and are up 691 million or 17% from a year ago. At quarter end, commercial loan balances totaled 4.9 billion and represented 67% of the loan book.

Over the past year, the gross loan portfolio has increased by over 1 billion or 16%, further supporting our belief that attaining our loan growth target is achievable. On the deposit side, we saw a strong core deposit growth of 171 million which was used to reduce FHLB advances by 165 million.

The core deposit growth was largely centered on CDs which increased by 158 million over the prior quarter and savings accounts which increased by 94 million. Our particular importance non-interest-bearing checking account balances increased by 57 million for the quarter, reversing a declining trend over the past several quarters.

As we continue to gain traction in various deposits gathering business unit, we expect to migrate the core deposit portfolio towards the lower cost basis relative to where we currently stand. Core deposits or non-broker deposits now account for 84% of total deposits, up from 80% at the end of the fourth quarter.

On a more cautionary note, as we evaluate opportunities to operate more efficiently, we are in the process of assessing some of our depository relationships with the cost to monitor those accounts from a BSA perspective, starts to outweigh the benefits of holding the deposit.

During the fourth quarter, we expect to migrate away from a number of these higher risk accounts which may depress the rate of growth for core deposits in the quarter, but will eventually allow us to be more efficient as we monitor our remaining and forthcoming depository relationships.

Transitioning to the income statement, net income available to common stockholders for the third quarter was 3.8 million or $0.07 per diluted common share. For continuing operations, earnings per diluted common share were $0.06. These results include a number of items that we want to call to your attention.

The Company's third quarter reported financial results included 8 million of net non-recurring expenses this included 7.6 million legal and indemnification expenses, a 1.5 million write-off of software and 553,000 of severance -related costs closely associated with the prior quarter's reduction in force.

These costs were offset by $1.7 million insurance recovery related to ongoing legal and indemnification expenses. The legal expense associated with indemnification of past and current directors and officers is eligible for insurance reimbursement and the reimbursement is recorded as a contra expense as it is received.

We expect to continue to incur legal and indemnification expenses for the next several quarters with the insurance reimbursement actually lagging. Eventually, in future quarters, we expect the level insurance reimbursements to exceed the legal and indemnification expenses.

After adjusting for these non-recurring items, along with the amortization expense associated with our solid tax equity program, our operating expenses for the third quarter were 50.4 million for which we have provided a reconciliation on Page 8 of our slide deck.

As Doug noted, we expect to continue investing our frontline business units which will offset some of the current and expected expense savings associated with the previously announced reduction in force. On September 17th, the Company redeemed the $40 million Series C preferred equity which carried an 8% dividend.

The carrying value of the Series C preferred equity was net of the original issuance cost for the preferred or approximately 2.3 million less than the liquidation amount of the preferred equity.

When the preferred was redeeming, this issuance cost was effectively treated as an additional preferred dividend by reducing net income available to common stockholders and amounted to $0.04 per diluted common share.

The result of excluding the non-recurring items for the third quarter normalizing our tax rate to 20% and removing the impact preferred equity redemption puts us closer to an adjusted operating earnings figure for continuing operations of $0.27 per diluted common share, which we have detailed on Page 9 of today's deck.

This compares to the prior quarter adjusted operating earnings of $0.23 per diluted common share computed on a consistent basis and shown in the prior quarter's earnings release presentation.

Average interest-earning assets for the quarter were relatively unchanged from the prior quarter at 9.7 billion both the mix of assets from securities into loans and growth of earning assets are key to our plan to drive revenues higher over time.

The net interest margin decreased by 8 basis points for the quarter to 2.93%, which was slightly below our expectations, but not surprising given the increasing competition for deposits that we're seeing in our markets.

The average yield on interest-earning assets increased 8 basis points for the quarter driven by a 7 basis point increase in average loan yields to 4.70%. The securities portfolio average yield was unchanged at 3.78 with a flat portfolio reflecting of the static 3 month LIBOR indexed during the quarter.

As a reminder, the CLO investments reset quarterly in our indexed to the 3 month LIBOR. The cost of interest-bearing liabilities increased 21 basis points to 1.81% primarily due to a 24 basis point increase in interest-bearing deposit cost and a 24 basis point increase in FHLB borrowing costs.

The increased FHLB borrowing costs were driven by higher short-term rates on overnight advances, which totaled 735 million in the third quarter.

Approximately 40% of our assets are variable rate with the rate reset occurring at least quarterly with nearly all the variable rate assets linked to LIBOR in the short end of the LIBOR curve holding flat for the quarter, the asset yield likewise remained relatively flat.

Conversely, the cost of funds continue to increase during the quarter due to renewing CDs and the increased cost of overnight FHLB advances with the latter largely reflective of the June fed funds rate increase.

As we communicated last quarter, we expect the NIM to be under pressure through the end of the year and until we deepen our traction gathering lower cost in deposits.

Looking forward, if we maintain loan production yields at higher levels in our average portfolios yields and continue executing our lower cost deposit strategy, the NIM should subsequently begin to trend toward and then above 3%. Net interest income decreased by 1.6 million from the prior quarter to 71.2 million.

For the third quarter, loan interest income increased by 3.5 million due to 111 million increase in average balances and 7 basis point increase in the average yield. This was partially offset by a decline of 856,000 in interest income on securities as the average balances declined by 116, with the average yield holding steady.

On the liability side, interest expense on deposits increased by 4.8 million as the average balance increased by 227 million and the average rate increased by 24 basis points. Interest expense on FHLB advances decreased by 543,000 due to 299 million lower average balances, partially offset by 24 basis points of average higher rate.

The composition of interest income continues to improve as commercial loan interest income now represents 56% of total interest income, compared to 50% a year ago. Loan interest income now comprises 79% of total interest income, up from 73% a year ago.

For the quarter, we recorded a $1.4 million provision for loan losses, which is mostly reflected growth in the loan portfolio. The AAA balance coverage ratio of non-performing loans is 226%, while the overall AAA ratio is 80 basis points.

Loan growth for the quarter was primarily multi-family and single-family categories, both of which are historically low lost products. Total non-interest expenses for the quarter were 61 million and included 8 million one-time expenses and 2.5 million expense from solar investments.

Our current solar tax investment commitment is completed, but we may see some volatility in both the HLBV depreciation expense and the tax credit line until we receive the final equity fund details from the program sponsor. As noted non-interest expenses included a number of items that we do not consider to be core operating expenses.

These items totaled 8 million and adjusted for these items and the depreciation of solar investments, core operating expenses came in at 50.4 million. Our efforts to simplify the business model and implement a more efficient operating structure has proven to be more beneficial than our original expectations.

We continue to see opportunities to make our back office more efficient and plan to translate those cost savings into growth be of further investment into building out our client facing teams.

Our adjusted efficiency ratio came in at 78% for the quarter and continues to reflect more of a revenue opportunity for us to the extent that we can improve our net interest margin, grow the earning asset base and begin to generate fee income from our expanded deposit and treasury management initiatives.

Non-interest expenses to average assets came in at 1.99% from continuing operations for the third quarter after adjusting for the non-recurring expense items. Our capital position remains strong as the common equity Tier 1 capital ratio was 9.80% and Tier 1 risk-based capital totaled 13.15%.

The quarter-over-quarter decline in the risk-based and leverage capital ratios is primarily due to the $40 million preferred equity redemption executed during the third quarter.

Moving on to credit and asset quality metrics for the third quarter, our non-performing asset ratio for the quarter was 25 basis points, up 3 basis points in the prior quarter. This absolute low level of non-performers reflects the disciplined credit culture of the bank and remains very strong compared to peers and industry broadly.

Non-performing assets to equity continued to remain strong at 2.7%. Delinquent loan metrics are strong despite the ratio of delinquent loans to total loans increasing to 49 basis points compared to 38 basis points at the end of the prior quarter.

The prior quarter ratio represented an unusually low level and the current quarter is more reflective of the level of experienced in the fourth quarter of 2017 and the first quarter 2018. Net charge-offs for the quarter were 306,000 or 2 basis points.

With that summary of our third quarter financial, I would now like to turn the call back over to Doug..

Thank you, John. As mentioned in my opening remarks, we continue to see the considerable potential for Banc of California, while our near-term performance might jot around a bit relative to our long-term mentors we continue to execute on our three-year plan and expect ultimately to achieve or exceed our targeted metrics.

The progress for building a more efficient operating platform is clearly evident in our expense results and we believe will lead to our highly scalable and efficient platform. Each of business unit leaders remained confident that they will achieve our annual goals, and we are well underway with setting new annual targets for 2019.

Banc of California has a talented group of employees that I'm proud to partner with and represent. That concludes my prepared remarks. Operator, now let’s open the line for questions..

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jackie Bohlen of KBW. Please go ahead..

I wanted to start about with the comment about remix and if I heard it right in the prepared remarks, it sounded like you said you wanted to work on moving CLOs into loans over the next two quarters.

Does that imply that we could see the net balance sheet growth in 2Q '19?.

Well, there we've a couple of things. So in general, we have said we want to remix the securities portfolio, continue to move the overall securities mix down which now at 20%, which is considerable progress from where we started it nearly 30%. And a portion of that represents CLOs which we also intend to move down.

So our target for securities is in the mid teens, which we're working toward and may well get there in the next quarter or two, a portion of that which will be CLOs. And indeed, we intend to replace all that with loans given obviously the higher margin content, that's contained there..

Jackie, maybe another way to think about that is, as we experienced loan growth, you'll see the securities portfolio come down. And so as we drive the securities mix down as a percent of assets down to our targeted range then you start to see loan growth that drives balance sheet growth..

Understood, so it sounds like with that 15% to 20% target it's not a factor of just achieving the 20% it's more getting much more towards the middle of that range.

Is that fair?.

That’s the fair way to look at it yes..

And I think I would add to that, that we want to continue to work the CLOs down to a more normalized portion as we go..

And once we get to net balance sheet growth even as you continue to remix the CLO, would you potentially be adding to the portfolio with more traditional securities to keep that mix where you wanted?.

We will so you'll see that securities book of business begin to change as we get down to that targeted level to be much more traditional, and so we still want to hold a lower level of CLO balances in terms of the entire portfolio, and so you see the CLO balances continue to move down and will move into more traditional securities..

And then just one more for me and I then I will step back. You mentioned that growth was rather balanced in terms of origination volume in the quarter but we saw the contraction in the C&I book.

What droves that?.

We had an opportunity with some indirect leverage loans that were up for renewal and we chose not to renew into those that loan product and so just to eliminating risk from loan portfolio..

And I would like to add to that risk and complexity, our intent is to have and we're well on our way. Our intent is to have a more balanced traditional C&I portfolio and we have the team fielded largely and underway..

And when you look at that remaining portfolio, are there more loans or structures in there that are similar to what you eliminated in the quarter might we see more of this going forward?.

There is little bit left in and as we have the opportunities to exit out of those positions we will..

Okay but it sounds like it's perhaps a smaller portion of the portfolio now..

It is, yes, it is..

The next question comes from Matthew Clark with Piper Jaffray. Please go ahead..

Just on the deposits, you talked about migrating to lower cost deposits overtime and you also mentioned that you're assessing certain deposit accounts, as it relates to BSA that might be higher risk.

Can you just quantify how much of that there is on the balance sheet? And what the cost of deposits is in total on weighted average basis?.

Yes, let's do a couple of things. With respect to the higher risk accounts, we've had some of that that we have been working on throughout the year, but more will be evidenced in the fourth quarter. The numbers are relatively modest, but we wanted to call it out to like many banks working through that issue.

We can't put a precise finger on it but I would put it out relatively modest..

And then when you think about just the pace of deposit re-pricing up 24 basis points linked quarter here, obviously, you had a fed rate hike recently too.

I mean do you think with the pipeline of new business coming in, do you think you can slow the rate of change? Or you can [indiscernible] until the feds stop raising rates?.

Well, look a couple things, I'm really happy with the progress we have made to-date in terms of the process we been through, right. So, we eliminated the institutional deposit base, which we thought was too volatile and certainly significantly higher price, and then we went into Phase 2 which has been also executed on very well.

But that is higher price and that's that where you saw much of not all, but much of the core base increase. The third phase we had beginning success with we were happy with the $57 million in non-interest-bearing, but that piece of it is going to take longer..

And then on the tax rate going forward and the losses on alternative investments, and we expect that line item to get a lot closure to zero here and the tax rate maybe to get into that 20% to 25% range maybe the midpoint.

I guess just wanted to get the sense for the two items?.

Yes, so on both of those. So with respect to the programs that we’re invested in, we'll get some potentially some final true up numbers that will flow through in the fourth quarter. We don’t expect those to be significant either direction, but then as we go forward, I would expect that effective tax rate to be within our range of 20% to 25%..

And then one more if I can sneak one in. I think you mentioned on the loan growth outlook, but you expect to meet or exceed the mid teens guidance that would suggest a step up here, a meaningful step up here in the fourth quarter. You just speak to the pipeline and whether by size or..

Well, I’m not going to give a precise number on the pipeline, but I can tell you that we're still experiencing very much a robust economy, plenty of inquiry and more feet on the street. So when you put the combination together, the momentum is growing from a loan perspective. So, yes, we're pretty optimistic..

The next question comes from Gary Tenner of DA Davidson. Please go ahead..

Can you follow up on the question on loan growth outlook? I appreciate that your pipeline is strong and you think you'll fit the numbering and I think you expect strong growth next year as well.

As we're going through earnings season and really over the last few months, a lot of banks in your footprint generally have kind of talked down their expected pace of loan growth among other reasons because of pricing in their credit box, now I'm just curious what given that the pace of growth that you expect to continue work.

Where do you think you're getting incremental growth from that still fit your credit box with good pricing?.

Well, first of all, we have a very, very good history from a credit performance perspective overall. So charge-offs were less than $400,000, non-performers that 25 basis points barely up. So with that track record and then as we have continued to evaluate the markets across our footprint. Look, it's in the world is ever more competitive.

So we're being as sharp on all of that as we think makes sense, but we continue to see Gary plenty of opportunity here..

And then just secondly, as you think about the margin I know you talked about similar pressure potentially here in the fourth quarter. There was a lag LIBOR that you pointed out that maybe should little bit in the fourth quarter.

So as you think of the ingredients that stabilizing margin, you know, it seems to me it's mix, it's deposit shift and it's some higher rates.

So which of those do you think is the best opportunity to stabilize margin in call it for the first quarter?.

Well, I think in terms of the margins a little bit on each side, as we continue to gain traction again on implementing various positive gathering strategies and again we had some success here in the third quarter with 57 million of non-interest-bearing deposits.

To the extent we continue to have success in that arena that will begin to slow the pace of overall cost of funds increasing. And then certainly with the LIBOR with nearly 40% of our assets tied to LIBOR in the short end points of it in one fashion and another, and to extent that increases, we will see some benefits there.

So, at least at this point, I would say here in the fourth quarter, I wouldn’t expect any sort of the same degree of compression that we saw in the third and hopefully little bit more of balanced results as we get to the end of fourth quarter..

The next question comes from Steve Moss of B. Riley FBR. Please go ahead..

Just wanted to dig little further maybe on the deposit pricing here in particular in the CD portfolio, just wondering how much will re-price this quarter and kind of do you know what the rate is on that bucket?.

Yes, the reasonable sized bucket might put at probably less than 400 million that will re-price across the entire CD portfolio and that increase is going to be on average probably around 35 to 40 basis points..

What is the weighted average cost of the CD you're putting on these days?.

It really depends upon the duration, but as you said weighted average, so we're probably somewhere in 225 to 240 range..

And on the expense just wondering about compensation expense here down quite a bit. I know you had to the reduction in force in second quarter.

Wondering, if there is any reversal occurred or any other noise that impact the number?.

There was. There was a little bit of a bonus reversal that occurred in the third quarter that pushed that down a little bit lower.

At the end of the second quarter, we indicated that approximately two thirds of the expense phase which start to be realized in the third quarter with the remaining one third of those expense savings realized in the fourth quarter.

So, we would expect to continue to see some expense savings from the reduction in force plus the reduction in the level of contractors that were being utilized..

Excluding the alternative energy and litigation probably 52 million or so is a reasonable expense run for the fourth quarter?.

Yes, I am not going to a necessary put exact number on it, but I would expect a little bit of tick up from here..

The next question comes from Andrew Liesch of Sandler O'Neill. Please go ahead..

Just some more questions around the expenses here just with the planned hires or the hopeful hires.

Doug, what's the pace of conversation you have with the perspective bankers coming over? And then, what sort of timeframe do you think would take to get to the team fully ramped up to where you like it?.

Well, we're in a very good place in our suite of real estate capabilities. So, the amount of ads on that arena which is of course a big part of our lending book will be relatively modest, very modest. So, where we are looking at ads comes in the private bank to an extent, although it to is well built out, so that will be incremental.

The rest is on the commercial banking side. Most of that commercial banking side C&I has been brought on board here in the beginning of the fourth quarter or late third quarter. So, you'll see that more fully in the fourth quarter a lot.

As we look out, we will continue to add incrementally most importantly again to the private bank on into the C&I world, we're in a good leverage point with all the rest of our capabilities..

And then just from back office technology standpoint, how you are you guys there? Any investments that you need to make or are you in a pretty good place?.

We'll continue to invest and you will see that in some of the expense base. But it is -- the market we're looking at our depository platform and improving that and we're looking at other key areas. But again, that's relatively modest..

The next question comes from Tim Coffey with FIG Partners. Please go ahead..

Most of my questions have been answered, but I do want to follow up on some mentioned in the prepared comments about balance sheet management and potential loan sales.

And I’m wondering, what types of products would you be looking to potentially move off the balance sheet and at the loan sale?.

In our single-family book of business, we would have all doc so we just try to just manage the concentration of all doc within the single-family book. And in the multifamily, it's primarily around where we have concentrations in a single borrower where we continue to see opportunities to build a relationship with the borrower.

We would look to off load some of those positions in order to create additional capacity..

And the fact that you mentioned that during the call is that something we should be looking for this next quarter?.

No, we just talked in general about that we intend to continue to build out the loan portfolio and I just want to call out that that we will have sales in time to time. We did sell approximate 200 million in the second quarter. We sold about 20 million here in the third quarter.

So I’m just pointing out that we may continue to have loan sales in time to time..

The next question comes from Timur Braziler of Wells Fargo. Please go ahead..

Wanted to follow up on Jackie's question regarding the leverage loan runoff this quarter, can you provide a number in the reduction of the portfolio just to get a sense of what kind of core C&I growth rate look like?.

We had about -- I think it was up 55 million in that indirect leverage lending book..

And then as we start thinking about what should be an accelerating level of loan growth from here.

Can you talk through with that compensation should look like as they are going to be fairly consistent across all the different this client of C&I kind of single-family, multi-family? Or is there any particular class do you think is going be really driving the growth?.

Look, I think it will -- the C&I will ramp, but may move around a little bit, but our real estate businesses across CRE single-family are very well developed. So I think it will move around a little, but no significant shifts at the state of the game..

And just last one for me, looking at the DDA growth this quarter fairly encouraging, any one group driving the majority of that growth? And then as you look at kind of inflows and outflows, any major chunk inflows there or was it fairly granular?.

Fairly granular the Community Bank, our retail bank had considerable success. Private bank had good success. We saw continued upticks in success out of our suite of real estate businesses, so in terms of overwhelmingly chunky, no, so..

One think I would add to that is, our focus of latest has been much more on relationship based and much less on transactional. So, the growth that we are seeing is primarily classified as tenant relationship based and avoiding the transactional growth..

And I guess to that point just looking at the growth and time deposits.

Are you able to get relationship from some of those balances as well?.

Sure, yes, we see that underway, and as we said that is the third phase that’s the harder part. And we're underway with it and seen good early success, but we got a ways to go..

This concludes our question and answer session. I would like to turn the conference back over to Doug Bowers, President and CEO of Banc of California for closing remarks..

Alright, thank you Drew, and thank you everybody. Our loan growth plus 12% for the first nine months, deposit growth plus 14% for the first nine months and our securities mix now down to 20%. So lots of progress made across the franchise and certainly work to do. We appreciate everybody’s participation. Thank you very much..

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect..