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Banc of California charting path to a cleaner balance sheet

Only 11 weeks in as CEO of embattled Banc of California Inc., Douglas Bowers says the bank is already on the path to becoming a cleaner and more efficient company.

Speaking at the KBW Community Bank Investor Conference on Aug. 1, Bowers said the Irvine, Calif.-based bank has since derisked its securities portfolio by reclassing held-to-maturity securities into available-for-sale securities. On the deposit side, Bowers said the company needs to lower the cost of funds, beginning with a reduction in brokered deposits. Prior to Bowers' arrival, the company overhauled its loan book by selling its residential mortgage banking division to Caliber Home Loans Inc.

"Banc of California is a considerable transformation project and that is true both in terms of the balance sheet as well as reorienting the company itself," Bowers said. "And to all of that I would say we are in very early days."

Bowers said the strategy broadly works to shrink the balance sheet, reducing high-cost funding held against low-priced securities. But Bowers said the company, which fell from $11.1 billion in total assets in the first quarter of 2017 to $10.4 billion in total assets in the second quarter of 2017, is not seriously thinking about falling below the key $10 billion threshold, which carries increased regulatory requirements. Bowers said that although the company is slimming slightly, he hopes to soon continue building the company's scale and to further expand its footprint in California.

Bowers helms a company suffering from a tumultuous chain of events that began in October 2016, when an anonymous blogger accused the bank of having ties to a fraudster. A lawsuit and a Securities and Exchange Commission investigation led to the resignation of then-chairman and CEO Steven Sugarman. Bowers, who previously served as president of Square 1 Financial in North Carolina, became Banc of California's CEO effective May 8.

Bowers said he's trying to ignite a "transformation" at the company, shifting the company from a transaction-based firm to a spread-oriented bank.

To do that, Bowers says Banc of California will need to continue overhauling governance by hiring personnel. The company still needs to fill its CFO position, left vacant after interim CFO J. Francisco Turner resigned June 12.

"Our issues are not capital, our issues are not credit performance, they are not market, they are not strategy," Bowers said. "They are all about execution from here."