SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒
Filed by a party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement | |||||
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||||
☒ Definitive Proxy Statement | |||||
☐ Definitive Additional Materials | |||||
☐ Soliciting Material under §240.14a-12 | |||||
BANC OF CALIFORNIA, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
☒ No fee required
☐ Fee paid previously with preliminary materials
☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
CE MATTERS
March 31, 2023
Dear Fellow Stockholder:
Over the past four years, as we have built Banc of California into the go-to bank for small- and medium-sized businesses in California, we have consistently delivered on our vision for the Company and on our strategies for generating profitable growth and enhancing franchise value. Importantly, we have achieved our objectives and grown our franchise while maintaining prudent risk management. As a result, we have a well-diversified, deposit base and a high quality loan portfolio, and we do not have the concentration and liquidity risks that led to the recent troubles at other banks.
Our performance in 2022 represents another year of doing what we say we are going to do and delivering on the expectations that we set. Thanks to the outstanding efforts of our talented team and strong execution on our strategic initiatives, we generated a record level of net income in 2022. The strength of the franchise and high quality balance sheet we have built enabled us to effectively manage through the numerous macroeconomic headwinds that created a challenging operating environment.
In 2022, our accomplishments included:
•Fully realizing the synergies we projected for the acquisition of Pacific Mercantile Bancorp, including more than 40% in cost savings;
•Continuing to leverage the robust deposit gathering engine we have built to consistently develop new low-cost commercial deposit relationships, which resulted in the Company reaching a key milestone during the year with noninterest-bearing deposits increasing to 40% of our total deposits;
•Generating strong loan production and growing our core commercial loan portfolio;
•Capitalizing on the asset sensitivity created by our high percentage of noninterest-bearing deposits to drive expansion in our net interest margin;
•Continuing to attract new talent and further building our expertise in attractive vertical markets;
•Further optimizing our use of capital including redeeming our Series E Preferred Stock and completing a $75 million stock repurchase program;
•Entering the payments processing business through our acquisition of Deepstack Technologies, which provides us with a highly differentiated payments solution that we believe will generate a source of stable, high margin fee income, further diversify our revenue mix, and provide another competitive advantage in gathering low-cost deposits; and
•Our strong financial performance and prudent balance sheet management enabled us to increase our tangible book value per share during a year in which many banks saw a decline.
We have built a strong franchise with a high level of noninterest-bearing deposits, a well-diversified, conservatively underwritten loan portfolio, and a high level of capital. In fact, the Company and its wholly-owned banking subsidiary, Banc of California, National Association (the Bank), have robust levels of capital significantly in excess of “well capitalized” levels as defined by our regulators. As of December 31, 2022, the Bank had a 16.02% total capital ratio, a 14.94% Tier 1 capital ratio, a 14.94% common equity Tier 1 capital ratio, and a 12.25% Tier 1 leverage ratio, all of which were at least 1.5 times over the “well capitalized” level of 10.00%, 8.00%, 6.50% and 5.00%, respectively. As a result, we believe we are well-positioned to effectively manage through the current environment and continue to focus on prudent risk management and generating strong financial performance. At the same time, we will continue to execute on the strategic initiatives that we believe will enhance our ability to create long-term franchise value, which include scaling our new payments processing business and further investing in technology to elevate the client experience and enhance efficiencies, with a priority being placed on investments that will further enhance our ability to gather low-cost deposits.
Banc of California | Annual Proxy Statement | 2023 | |||||||||||||||||||||
While there is a great deal of macroeconomic uncertainty regarding 2023, we are determined to capitalize on opportunities to enhance the long-term value of our franchise. Operating in the heart of the fifth largest economy in the world, we’ve built a strong core commercial banking franchise serving clients with our customized solutions and providing expertise in a number of attractive verticals, including commercial real estate, healthcare, entertainment and education. With the reputation we have developed for exceptional service, we are consistently attracting new high quality commercial relationships and growing our client base. To this foundation, we are now adding a full suite of payment solutions to our commercial banking platform that is a differentiator among our regional bank competitors. With the vision and roadmap that we have developed, along with our proven track record of delivering on the expectations that we set, we are confident in our ability to continue generating strong results for our stockholders and enhancing the value of our franchise in the future.
2023 Annual Meeting of Stockholders Information
On behalf of the Board of Directors (Board) and management of Banc of California, Inc. (the Company), we invite you to attend the Company’s 2023 Annual Meeting of Stockholders (the Annual Meeting). The Annual Meeting will be held at 8:00 A.M., Pacific Daylight Time, on May 11, 2023 at the Company's Headquarters in Santa Ana, California. You will find information in the enclosed proxy statement on how to attend the Annual Meeting.
Your vote is important, regardless of the number of shares you hold. We will begin mailing a Notice of Internet Availability of Proxy Materials and voting instructions to our stockholders on or about March 31, 2023, informing them of the availability online of our proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2022. You may choose to access these materials online, or you may request paper or e-mail copies. By making these materials available online to all stockholders, we are able to provide a more environment-friendly process as well as reduce our printing and distribution costs.
Even if you do not plan to attend the Annual Meeting, please read the enclosed proxy statement and vote your shares as promptly as possible by internet, telephone or mail. Voting promptly will save the Company additional expense in soliciting proxies and will ensure that your shares are represented at the Annual Meeting.
Our Board and management are committed to the success of the Company. Thank you for your continued confidence and support.
/s/ Robert D. Sznewajs ROBERT D. SZNEWAJS Chair of the Board | /s/ Jared M. Wolff JARED M. WOLFF President and Chief Executive Officer | |||||||
Banc of California | Annual Proxy Statement | 2023 | |||||||||||||||||||||
Notice of Annual Meeting of Stockholders
May 11, 2023
NOTICE IS HEREBY GIVEN that the 2023 Annual Meeting of Stockholders (the Annual Meeting) of Banc of California, Inc. (the Company) will be held:
| Date | May 11, 2023 | |||||||
| Time | 8:00 A.M. Pacific Daylight Time | |||||||
| Location | Banc of California: 3 MacArthur Place, Santa Ana, CA 92707 | |||||||
| Items of Business | No. | Proposal | ||||||
| I. | Election of the twelve director nominees named in this proxy statement, each for a term of one year. | |||||||
| II. | Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. | |||||||
| III. | Approval, on an advisory and non-binding basis, of the compensation paid to our named executive officers as disclosed in this proxy statement. | |||||||
| Record Date | Holders of record of the Company’s voting common stock at the close of business on March 15, 2023 (the Record Date) will be entitled to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting. | |||||||
| Annual Report | The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 27, 2023 (the Annual Report), accompanies this proxy statement. | |||||||
| Proxy Voting | It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares by completing the enclosed proxy card and returning it by mail. Registered stockholders, that is, stockholders who hold stock in their own names, can also vote their shares by telephone or via the internet. If your shares are held through a bank, broker or other nominee, you will receive instructions from them on how to vote your shares. Regardless of the number of shares you own, your vote is very important. Please vote today. If you plan to attend the Annual Meeting, please note that admission will be on a first come, first served basis. You may obtain directions to the Company's offices at 3 MacArthur Place, Santa Ana, CA 92707, by calling Banc of California directly at (855) 361-2262. | |||||||
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 11, 2023:
The Company's proxy statement and the Annual Report are publicly available under the "Financials and Filings" section on the Company’s Investor Relations website at https://investors.bancofcal.com by selecting Documents.
March 31, 2023
By Order of the Board of Directors,
| /s/ Ido Dotan | ||
| Ido Dotan | ||
| General Counsel, Chief Administrative Officer, and Corporate Secretary | ||
| Santa Ana, California | ||
Banc of California | Annual Proxy Statement | 2023 | |||||||||||||||||||||
CE MATTERS
Table of Contents 
Proxy Statement
Annual Meeting of Stockholders
May 11, 2023
May 11, 2023
TOC i | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
74 Ratification of the Selection of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for the Year Ending December 31. 2023
75 Fees Paid to Independent Registered Public Accounting Firm During the Years Ended December 31, 2022 and 2021
83 Stockholder Proposals and Other Information Regarding the Annual Meeting of Stockholders to be Held in 2023
TOC ii | Banc of California | Annual Proxy Statement | 2022 | ||||||||||||||||||||
Proxy Statement Summary
| Our Annual Meeting Logistics | |||||
Date and Time May 11, 2023 8:00 A.M. Pacific Daylight Time | Location Banc of California 3 MacArthur Place, Santa Ana, CA 92707 | ||||
Record Date March 15, 2023 | Who Can Vote Holders of the Company’s Voting Common Stock as of the Record Date | ||||
BANC OF CALIFORNIA, INC.
3 MacArthur Place
Santa Ana, California 92707
(949) 236-5211
Our Annual Meeting Agenda
The Board of Directors of Banc of California, Inc. (Banc of California, the Company, we, us and our) is using this proxy statement to solicit proxies from the holders of the Company’s voting common stock, par value $0.01 per share, for use at the upcoming 2023 Annual Meeting of Stockholders (the Annual Meeting) and any adjournments or postponements of the Annual Meeting. Stockholders are being asked to vote on the following matters:
| No. | Proposal | Board Vote Recommendation: | Page | ||||||||
| I. | Election of the twelve director nominees named in this proxy statement, each for a term of one year. | FOR each director nominee | |||||||||
| II. | Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. | FOR | |||||||||
| III. | Approval, on an advisory and non-binding basis, of the compensation paid to our named executive officers, as disclosed in this proxy statement (Say-on-Pay). | FOR | |||||||||
These proposals are described in more detail elsewhere in this proxy statement. In addition to these proposals, stockholders will also consider any other matters that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting, although the Company’s Board of Directors (the Board) knows of no other business to be presented.
By submitting your proxy, you authorize the persons named in this proxy statement to represent you and vote your shares at the Annual Meeting in accordance with your instructions. Those persons also may vote your shares to adjourn the Annual Meeting from time to time and will be authorized to vote your shares at any adjournments or postponements of the Annual Meeting.
For more information about who can vote, voting mechanics and other general Annual Meeting matters, see Information About the 2023 Annual Meeting of Stockholders beginning on page 79. The accompanying Notice of Annual Meeting of Stockholders and this proxy statement are first being made available to stockholders on or about March 31, 2023.
1 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proxy Statement Summary | ||
The Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the SEC) on February 27, 2023 (the Annual Report), which includes the Company’s audited financial statements, accompanies this proxy statement. The Annual Report does not constitute a part of the proxy solicitation materials and is not incorporated into this proxy statement by reference.
Additionally, some of the information in this proxy statement and the Annual Report relates to the Company’s wholly owned banking subsidiary, Banc of California, National Association (the Bank).
As of the Record Date, there were 58,663,788 shares of voting common stock issued and outstanding.
Your vote is important. Whether or not you plan to attend the Annual Meeting, please promptly submit your proxy.
2 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Stock Ownership
Stock Ownership of Greater than Five Percent Stockholders
The following table shows the beneficial ownership of our voting common stock by those persons or entities known by management to beneficially own more than five percent of the outstanding shares of our voting common stock as of the March 15, 2023 record date (the Record Date) for the Annual Meeting.
| Name and Address of Greater than 5% Stockholders | Amount and Nature of Beneficial Ownership(1) | Percent of Voting Common Stock Outstanding(1) | ||||||
BlackRock, Inc. 55 East 52nd Street New York, New York 10055 (2) | 8,787,798 | 14.98% | ||||||
Wellington Management Group LLP et al. 280 Congress Street Boston, Massachusetts 02210 (3) | 4,137,374 | 7.05% | ||||||
Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, Texas 78746 (4) | 3,867,399 | 6.59% | ||||||
The Vanguard Group 100 Vanguard Boulevard Malvern, Pennsylvania 19355 (5) | 3,753,697 | 6.40% | ||||||
PL Capital Advisors, LLC et al. 750 Eleventh Street South, Suite 202 Naples, Florida 34102 (6) | 3,457,386 | 5.89% | ||||||
(1) Based on 58,663,788 shares of voting common stock of the Company issued and outstanding as of the Record Date. For purposes of computing the percentage of outstanding shares of voting common stock held by each person or group of persons named above, any shares which such person or persons has the right to acquire within 60 days of the Record Date are deemed to be outstanding for such person or persons, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
(2) As reported in Amendment No. 8 to Schedule 13G filed with the SEC on January 26, 2023 by BlackRock, Inc. (BlackRock). The amended Schedule 13G reports that BlackRock has (i) sole voting power over 8,664,350 shares and (ii) sole dispositive power over 8,787,798 shares.
(3) As reported in Amendment No. 6 to Schedule 13G filed with the SEC on February 6, 2023 by Wellington Management Group LLP (Wellington); Wellington Group Holdings LLP (Wellington Group); Wellington Investment Advisors Holdings LLP (Wellington Advisors); and Wellington Management Company LLP (Wellington Company). The amended Schedule 13G reports as follows:
a. Wellington , Wellington Group, and Wellington Advisors each has shared voting power over 3,761,739 shares and shared dispositive power over 4,137,374 shares;
b. Wellington Company has shared voting power over 3,699,004 shares and shared dispositive power over 4,058,110 shares.
(4) As reported in Amendment No. 4 to Schedule 13G filed with the SEC on February 10, 2023 by Dimensional Fund Advisors LP (Dimensional). The amended Schedule 13G reports that Dimensional has (i) sole voting power over 3,802,780 shares and (ii) sole dispositive power over 3,867,399 shares.
(5) As reported in Amendment No. 4 to Schedule 13G filed with the SEC on February 9, 2023 by The Vanguard Group (Vanguard). The amended Schedule 13G reports that Vanguard has (i) sole voting power over zero shares, (ii) sole dispositive power over 3,646,179 shares, (iii) shared voting power over 62,511 shares and (iv) shared dispositive power over 107,518 shares.
(6) Includes shares reported in Amendment No. 3 to Schedule 13D filed with the SEC on November 18, 2022 by PL Capital Advisors, LLC (PL Capital Advisors); John W. Palmer; Richard J. Lashley and Beth Lashley. The amended Schedule 13D reports as follows:
a. PL Capital Advisors has shared voting and dispositive powers over 3,457,386 shares;
b. Mr. Lashley has sole voting and dispositive powers over 20,000 shares and shared voting and dispositive powers over 3,431,823 shares;
c. Mr. Palmer has sole voting and dispositive powers over 5,563 shares and shared voting and dispositive powers over 3,401,719 shares;
d. Ms. Lashley has shared voting and dispositive powers over 30,104 shares.
In addition to the shares reported in the amended Schedule 13D, beneficial ownership also includes 4,114 shares subject to restricted stock units held by Mr. Lashley that are scheduled to vest within 60 days of the Record Date.
3 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Stock Ownership | ||
Stock Ownership of Directors and Executive Officers
The following table shows the beneficial ownership of our voting common stock on the Record Date for:
(i)each director and additional nominee of the Company;
(ii)each Named Executive Officer (as defined under Compensation Discussion and Analysis—Overview section in this proxy statement) (NEO) ; and
(iii)all executive officers, directors, and additional nominees of the Company, as a group.
The address of each of these beneficial owners is the same main address as that of the Company. As used in the following table, RSAs refer to restricted stock awards, RSUs refer to restricted stock units, and PSU's refer to performance stock units, each of which is defined in our 2018 Omnibus Stock Incentive Plan (the 2018 Omnibus Plan).
| Name | Voting Common Stock | Total Number of Shares Subject to PSUs/RSUs that will Vest Within 60 Days | Total Number of Shares Subject to Exercisable Options that will Vest Within 60 Days | Total Number of Shares Beneficially Owned (1) | Percent of Voting Common Stock Outstanding(2) | |||||||||||||||
| Directors Who Are Not Executive Officers | ||||||||||||||||||||
| James A. “Conan” Barker | 157,038 | 3,900 | — | 160,938 | * | |||||||||||||||
| Mary A. Curran | 41,995 | 3,988 | — | 45,983 | * | |||||||||||||||
| Shannon F. Eusey | 4,177 | 3,837 | — | 8,014 | * | |||||||||||||||
| Bonnie G. Hill | 29,311 | 3,988 | — | 33,299 | * | |||||||||||||||
| Denis P. Kalscheur | 10,670 | (3) | 3,900 | — | 14,570 | * | ||||||||||||||
| Richard J. Lashley | 3,451,823 | (4) | 4,114 | — | 3,455,937 | 5.89 | % | |||||||||||||
| Vania E. Schlogel | 2,283 | 3,900 | — | 6,183 | * | |||||||||||||||
| Jonah F. Schnel | 68,071 | (5) | 3,837 | 7,452 | 79,360 | * | ||||||||||||||
| Robert D. Sznewajs, Chair | 77,185 | (6) | 5,793 | 7,452 | 90,430 | * | ||||||||||||||
| Andrew Thau | 16,092 | 3,837 | — | 19,929 | * | |||||||||||||||
| Additional Nominee | ||||||||||||||||||||
| Joseph J. Rice | 2,000 | (7) | — | — | — | * | ||||||||||||||
| Named Executive Officers | ||||||||||||||||||||
| Jared M. Wolff | 293,888 | (8) | — | 293,888 | * | |||||||||||||||
| President, Chief Executive Officer and Director | ||||||||||||||||||||
| Lynn M. Hopkins | 28,825 | (9) | — | — | 28,825 | * | ||||||||||||||
| Former Executive Vice President and Chief Financial Officer | ||||||||||||||||||||
| Ido Dotan | 17,491 | — | — | 17,491 | * | |||||||||||||||
| Executive Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary | ||||||||||||||||||||
| Robert G. Dyck | 13,453 | — | — | 13,453 | * | |||||||||||||||
| Senior Executive Vice President and Chief Credit Officer | ||||||||||||||||||||
| Lynn A. Sullivan | 30,104 | (10) | — | — | 30,104 | * | ||||||||||||||
| Former Executive Vice President and Chief Risk Officer | ||||||||||||||||||||
| All Executive Officers, Directors and Additional Nominee, as a group (18 persons) | 4,269,237 | 41,094 | 14,904 | 4,325,235 | 7.37 | % | ||||||||||||||
4 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Stock Ownership | ||
* Represents less than 1% of the outstanding shares of the Company's voting common stock calculated in accordance with 13d-3 of the Securities Exchange Act of 1934, as amended (Exchange Act).
(1)Unless otherwise indicated, the nature of the beneficial ownership is sole voting and dispositive powers over the shares indicated.
(2)For purposes of this table, "beneficial ownership" is determined in accordance with Rule 13d-3 of the Exchange Act, pursuant to which a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock that such person has the right to acquire within 60 days of the Record Date. This would include any RSUs, RSAs, and PSUs which vest within 60 days of the Record Date. For purposes of this table, "percent of voting common stock outstanding" is based on 58,663,788 shares of voting common stock of the Company issued and outstanding as of the Record Date. In addition, in computing the percentage of outstanding shares of voting common stock held by each person or group of persons named above, any shares which such person or persons has the right to acquire within 60 days of the Record Date are deemed to be outstanding for such person or persons, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person.
(3)Includes 8,389 shares owned by the DGK Trust; as a trustee of the DGK Trust, Mr. Kalscheur may be deemed to beneficially own these shares.
(4)Includes 3,401,719 shares owned by PL Capital Advisors (as defined in footnote seven to the Stock Ownership of Greater than Five Percent Stockholders table above); Mr. Lashley is a managing member of PL Capital Advisors and therefore may be deemed to beneficially own these shares. Also includes 10,000 shares held directly by Mr. Lashley, 10,000 shares held indirectly by the Richard Lashley Roth IRA, and 30,104 shares held jointly by Mr. Richard Lashley and Ms. Beth Lashley.
(5)Includes 63,582 shares owned by the Schnel Family Trust; as a trustee of the Schnel Family Trust, Mr. Schnel may be deemed to beneficially own these shares as well as the 500 shares owned by Mr. Schnel's spouse.
(6)The shares are owned by the Robert D. Sznewajs Revocable Trust; as a trustee of the Robert D. Sznewajs Revocable Trust, Mr. Sznewajs may be deemed to beneficially own these shares.
(7)The shares are owned by the Joseph & Monica Rice Revocable Trust; as a trustee of the Joseph & Monica Rice Revocable Trust, Mr. Rice may be deemed to beneficially own these shares.
(8)Includes 33,898 shares underlying unvested RSAs over which Mr. Wolff has voting power. Also includes 50,115 shares owned by the Wolff Family Trust; as a trustee of the Wolff Family Trust, Mr. Wolff may be deemed to beneficially own these shares.
(9)Ms. Hopkins transitioned from the Company and stepped down from her role as Executive Vice President and Chief Financial Officer effective March 31, 2023.
(10)Ms. Sullivan retired from her role as Executive Vice President and Chief Risk Officer effective December 31, 2022.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act, requires the Company’s directors, certain of its officers, and persons who beneficially own more than 10 percent of the Company’s voting common stock, to report to the SEC their initial ownership of the Company’s equity securities and any subsequent changes in that ownership. Specific due dates for these reports have been established by the SEC and the Company is required to disclose in this report any late filings or known failures to file.
To the Company’s knowledge, based solely on our review of such reports filed with the SEC and written representations that no other reports were required during the fiscal year ended December 31, 2022, all Section 16(a) filing requirements applicable to the Company’s officers and directors during 2022 were met, except for the inadvertent failure to timely file a Form 4 to report one transaction by Mr. Lashley due to technical difficulties.
5 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
PROPOSAL I
Election of Directors | Board Overview
The Company’s Board of Directors currently consists of eleven directors, which will be increased to twelve directors if all the nominees are elected at the Annual Meeting. At the recommendation of the Compensation, Nominating and Corporate Governance Committee (CNG Committee), the Board has nominated for election all the current directors of the Company, as well as Joseph J. Rice, each for a one-year term that will expire at the 2024 annual meeting of stockholders. See Nominees for Director at the Annual Meeting section in this proxy statement.
Current Board of Directors
Details about the current Board of Directors, including committee memberships, are reflected in the following table.
| Name | Age(1) | Director Since | Committee Memberships | ||||||||||||||||||||
| Principal Occupation | A | CNG | ALC | ER | |||||||||||||||||||
| Barker, James A. “Conan” | 57 | 2019 | Co-President, Velocity Vehicle Group | M | M | ||||||||||||||||||
| Curran, Mary A. | 66 | 2017 | Former Executive Vice President and Corporate Banking Chief Risk Officer, MUFG Union Bank | M | C | ||||||||||||||||||
| Eusey, Shannon F. | 53 | 2021 | Chief Executive Officer, Beacon Pointe Advisors | M | M | ||||||||||||||||||
| Hill, Bonnie G. | 81 | 2017 | President, B. Hill Enterprises, LLC | C | M | ||||||||||||||||||
| Kalscheur, Denis P. | 72 | 2021 | Corporate Director; Former Chairman of Pacific Mercantile Bancorp | M | M | ||||||||||||||||||
| Lashley, Richard J. | 64 | 2017 | Principal and Managing Member, PL Capital Advisors, LLC | C | M | ||||||||||||||||||
| Schlogel, Vania E. | 39 | 2021 | Managing Partner and Founder, Atwater Capital LLC | M | M | ||||||||||||||||||
| Schnel, Jonah F. | 50 | 2013 | Executive Vice President, Chief Operating Officer, Cartiga | M | M | ||||||||||||||||||
| Sznewajs, Robert D. | 76 | 2013 | Former President and Chief Executive Officer, West Coast Bancorp | M | M | ||||||||||||||||||
| Thau, Andrew | 57 | 2019 | Chief Operating Officer and General Counsel, United Talent Agency | M | M | ||||||||||||||||||
| Wolff, Jared M. | 53 | 2019 | President and Chief Executive Officer, Banc of California, Inc. and Banc of California, N. A. | C | M | ||||||||||||||||||
(1) As of March 31, 2023 | |||||||||||||||||||||||
| A – Audit Committee | |||||||||||||||||||||||
| ALC – Asset Liability Committee (ALCO) | |||||||||||||||||||||||
| CNG – Compensation, Nominating and Corporate Governance Committee | |||||||||||||||||||||||
| ER – Enterprise Risk Committee (Risk) | |||||||||||||||||||||||
| C – Chair | |||||||||||||||||||||||
| M – Member | |||||||||||||||||||||||
6 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
Summary of Director Nominees' Qualifications and Experience
The chart below summarizes the key qualifications and skills each of our director nominees possesses that were most relevant to the decision to nominate him or her to serve on the Board.
The lack of a mark does not mean the director does not possess that qualification or skill; rather, a mark indicates a specific area of focus or expertise on which the Board relies most heavily. Each director’s biography describes these qualifications and relevant experience in more detail.
7 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
Board Tenure and Diversity
Our Board is composed of directors who actively contribute to the evolving needs of the Company with a diversity of perspectives, while maintaining the invaluable institutional knowledge brought by more tenured directors. The charts below illustrate the composition of our Board following the Annual Meeting, assuming the election of all of our director nominees.
4.6 years Average Director Tenure | ||
61 years old Average Age of Directors | ||
11 out of 12 Directors are Independent | ||
8 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
Director Nominations and Proposals by Stockholders
Director nominations by stockholders and stockholder proposals must be made pursuant to timely notice in writing to the Corporate Secretary, as set forth in and in accordance with Section 1.09 of the Company’s bylaws. A stockholder’s notice must be received by the Company not less than 90 days, nor more than 120 days, prior to the first anniversary of the preceding year’s annual meeting to be considered timely. If, however, the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the prior year’s date, notice by the stockholder must be delivered not earlier than 120 days prior to the date of the meeting and not later than the close of business on the later of the 90th day prior to the date of the meeting or the 10th day following the day on which notice of the date of the meeting was mailed or public announcement of the date of the meeting was first made. The stockholder’s notice must also include the information set forth in Section 1.09 of the Company’s bylaws.
Nominees for Director at the Annual Meeting
At the recommendation of the CNG Committee, the Board has nominated James A. “Conan” Barker, Mary A. Curran, Shannon F. Eusey, Bonnie G. Hill, Denis P. Kalscheur, Richard J. Lashley, Joseph J. Rice, Vania E. Schlogel, Jonah F. Schnel, Robert D. Sznewajs, Andrew Thau, and Jared M. Wolff for election, each for a one-year term.
Each nominee has consented to being named as a director nominee in this proxy statement and agreed to serve if elected. Further, except for Mr. Wolff, each qualifies as an independent director under the Corporate Governance Listing standards of the New York Stock Exchange (NYSE), as applied in accordance with the Company’s Corporate Governance Guidelines.
Set forth below is information about the director nominees, including their principal occupation, business experience and qualifications to serve on the Board of Directors. Mr. Rice was identified as a potential director candidate by a non-management director of the Company.
 | The Board of Directors unanimously recommends that you vote "FOR" each of the director nominees. | |||||||
9 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
Director Nominees
 Independent Director Age: 55 | James A. “Conan” Barker — Mr. Barker has over 30 years of experience in corporate strategy, private equity, and management of large corporate enterprises. Since 1998, Mr. Barker has served as Co-President, owner, and director of Velocity Vehicle Group, a privately owned group of companies that serve the truck, bus and capital equipment finance markets in the US, Mexico and Australia with revenues in excess of $2 billion. Mr. Barker is also a board member and 50% owner of Velocity SBA, one of 14 non-bank small business lending companies in the United States licensed to originate loans under the Small Business Administration’s 7(a) program. From 1994 through 1997, Mr. Barker worked in Palo Alto, California for HAL Investments Inc., a private equity investment firm with holdings in real estate, maritime and industrial interests. From 1991 to 1994, Mr. Barker worked in the corporate strategy department of Sea Containers, Inc. in London, England setting business strategies for the multi-national transportation and hotel conglomerate. In addition, from 1988 to 1991 Mr. Barker worked for the Boston Consulting Group in the San Francisco and Chicago offices, assisting Fortune 500 firms on corporate strategy initiatives. Mr. Barker received his Bachelor’s in Economics and Master’s in East Asian Studies from Stanford University and has lived in Southern California for 24 years. Mr. Barker’s extensive experience in managing large corporate enterprises and his proficiency in corporate strategy and finance make him a valuable contributor to the Board. Mr. Barker is one of the Company’s Board-designated “audit committee financial experts.” | |||||||
Independent Director Age: 57 Director Since: 2019 | ||||||||
 | Mary A. Curran — Ms. Curran spent 25 years at MUFG Union Bank, N.A., during which time she held several executive level positions, including Executive Vice President, Corporate Banking Chief Risk Officer from 2011 to 2014, and Executive Vice President, Head of The Private Bank at Union Bank from 2006 to 2011. During her time with Union Bank, Ms. Curran worked closely with its board and management to build an infrastructure focused on a strong, proactive, integrated and effective risk management. Ms. Curran was also tasked with improving the performance of Union Bank’s Wealth Management practice, a business unit with offices throughout California, Washington and Oregon. Prior to 2006, she spent 17 years in leadership roles in commercial banking. Ms. Curran currently serves on the Board of Directors, Audit and Nominating and Corporate Governance Committees of Innovative Industrial Properties, Inc. (NYSE: IIPR). She also serves on the Board of Directors, chairs the Audit Committee and serves on the Compensation Committee for Hunter Industries Inc., a privately held global irrigation, landscape lighting, custom manufacturing and dispensing solutions company. Ms. Curran recently served as Chair of San Diego State University’s Campanile Foundation Board and Executive Committee, and currently serves on its Nominating and Governance Committee. Previous board service also includes: Chair of the California Bankers Association where she remains involved on the Banker Benefits Board. Ms. Curran is a member of NACD, Women Corporate Directors, and Corporate Directors Roundtable of Orange County. She holds a Bachelor of Science degree in Journalism from the University of Colorado, Boulder and a Master’s degree in Business from San Diego State University. Ms. Curran’s broad range of experience in the financial services industry and community involvement, especially in California, as well as her prior business and leadership positions, have enhanced the Board’s perspective. Her leadership and knowledge, specifically in credit and risk management as Chair of the Enterprise Risk Committee, have been vital to the Company’s risk framework and objectives. | |||||||
Independent Director Age: 66 Director Since: 2017 | ||||||||
10 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
 | Shannon F. Eusey — Ms. Eusey is the Chief Executive Officer and President of Beacon Pointe Advisors, which she co-founded in 2002. Beacon Pointe Advisors is one of the largest Registered Investment Advisors (RIA) specializing in full service financial planning, research driven investments that partners with institutions, retirement-sponsored plans and private clients. From 1994 to 2002, Ms. Eusey served as Managing Director and Portfolio Manager at Roxbury Capital Management, LLC, where she was responsible for socially responsible investments, asset allocation, as well as equity strategy for Roxbury’s Private Client Group. Ms. Eusey currently serves or has served on numerous boards, including the Charles Schwab Advisory Council, the TD Ameritrade Advisory Council, CNBC’s Advisory Council, as well as Scratchworks, a FinTech accelerator that connects innovative tech companies with investment and wealth management luminaries to advance the digital transformation of the financial services industry. She served as Vice Chairman on the Board of Directors for the National Network to End Domestic Violence, as a Trustee for the Friends of the Girl Scouts Council of Orange County, and as a board member of the UCI Athletic Fund. Ms. Eusey is a graduate of University of California, Irvine where she played Division I volleyball. She received her MBA from the University of California, Los Angeles, Anderson School of Business. Ms. Eusey's leadership experience in building Beacon Pointe Advisors into a $26+ billion registered investment advisory firm, and her keen insights into talent management, operations, marketing, risk and technology, make her a valued member that considerably strengthens our Board. | |||||||
Independent Director Age: 53 Director Since: 2021 | ||||||||
 | Bonnie G. Hill — Dr. Hill has over 30 years of experience serving on numerous corporate boards with a wide-ranging career in business, government, education, and philanthropy. Dr. Hill has served as the President of B. Hill Enterprises, LLC, a consulting firm focusing on corporate governance, board organizational and public policy issues since 2001. She is also co-founder of Icon Blue, a brand marketing company founded in 1998 and based in Los Angeles. Currently, Dr. Hill is an adjunct faculty member of the NACD Board Advisory Services Program, a founding member of the Lead Directors Network, and serves on the boards of Providence SoCal, and Providence St. Joseph's Hospital Foundation. Dr. Hill has also served on numerous public company boards, including the California Water Service Group (NYSE: CWT), The Home Depot, Inc. (NYSE: HD), Yum! Brands, Inc. (NYSE: YUM) and AK Steel Holding Corp. (NYSE: AKS). Dr. Hill also co-chaired the 2016 NACD Blue Ribbon Commission Report on Building the Strategic-Asset Board, served on the board of Financial Industry Regulatory Authority Investor Education Foundation and is a former member of Public Company Accounting Oversight Board Investor Advisory Group. From 1997 to 2001, Dr. Hill served as President and Chief Executive Officer of The Times Mirror Foundation and as Senior Vice President, Communications and Public Affairs, for the Los Angeles Times. From 1992 to 1997 she served as Dean of the McIntire School of Commerce at the University of Virginia, and prior to that, Secretary of the State and Consumer Services Agency for the State of California. Dr. Hill has held a variety of presidential appointments, including Vice Chair of the Postal Rate Commission and Assistant Secretary in the U.S. Department of Education under President Reagan, and as Special Adviser to President George H. W. Bush for Consumer Affairs. She has chaired the SEC’s Consumer Affairs Advisory Committee and served on the board of directors of NASD Regulation, Inc. Dr. Hill also served as Vice President with Kaiser Aluminum and Chemical Corporation, and recently was honored with the Lifetime Achievement Award by the Forum for Corporate Directors. Dr. Hill has a Bachelor of Arts degree from Mills College, a Master of Science degree from California State University, Hayward, and a Doctorate of Education from the University of California at Berkeley. Dr. Hill’s extensive background in board leadership and corporate governance has significantly supported the Company’s efforts to improve its corporate governance practices and broaden the Board’s perspective. She serves as the Chair of the CNG Committee. | |||||||
Independent Director Age: 81 Director Since: 2017 | ||||||||
11 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
 | Denis P. Kalscheur — Mr. Kalscheur has served for over 39 years in various senior executive and directorship roles in the financial services, insurance and aviation industries. From 2015 until its acquisition by Banc of California in 2021, Mr. Kalscheur served on the Board of Directors of Pacific Mercantile Bancorp, the parent holding company of Orange County, California based Pacific Mercantile Bank, including as its Chairman of the Board and Chair of the Audit Committee. Mr. Kalscheur currently serves on the board of ORIX Corporation USA and also serves as Chair of its Audit Committee. From January 2017 to November 2018, Mr. Kalscheur served as a member of the Board of Directors for Avolon Holdings Limited, the third largest commercial jet aircraft leasing company in the world. From 2013 to 2017, Mr. Kalscheur was the Chief Executive Officer and then Vice Chairman of Aviation Capital Group (“ACG”), a global commercial jet aircraft leasing firm and wholly-owned subsidiary of Pacific Life, a leading U.S. Life Insurance company. From 2010 through 2012, Mr. Kalscheur served as Senior Vice President and Treasurer of Pacific Life. Mr. Kalscheur also had significant board roles with College Savings Bank, a New Jersey chartered savings bank and wholly owned subsidiary of Pacific Life, including serving as a Director (2002-2012), Audit Committee Chairman (2003-2007) and Chairman of the Board (2010-2012). From 1993 to 1997, he served as President and Chief Executive Officer of Elsinore Aerospace, a global aviation engineering and certification, maintenance, modification and quality management company. Prior to that, he also served as Chief Financial Officer of U.S. passenger airline AirCal and its parent, ACI Holdings. Mr. Kalscheur graduated with an MBA and BBA in finance, investment and banking from the University of Wisconsin-Madison School of Business where he is an emeritus member of the External Advisory Board. Mr. Kalscheur is one of the Company’s Board-designated “audit committee financial experts.” His broad and deep experience in finance as an executive and director of banking and financial institutions and corporations in other industries, including serving as Chairman of the Board and Chair of the Audit Committee of such institutions, make Mr. Kalscheur a valued member of the Board. | |||||||
Independent Director Age: 72 Director Since: 2021 | ||||||||
 | Richard J. Lashley — Mr. Lashley is the Managing Member of PL Capital Advisors, LLC, a SEC-registered investment advisory firm, and co-founder of PL Capital, LLC, a firm founded in 1996. PL Capital Advisors specializes in the banking industry and was named by the American Banker as one of the top community bank investors in the country. PL Capital is also one of the Company’s largest stockholders. Mr. Lashley’s primary responsibilities at PL Capital Advisors include portfolio management and research. Mr. Lashley has extensive experience serving on the boards of directors of numerous publicly-held and privately-held banks throughout the United States, including prior service on the boards of directors of MutualFirst Financial, Inc., Metro Bancorp, Inc. State Bancorp, Inc. and BCSB Bancorp, Inc. Mr. Lashley also has diverse experience as Chairman and/or member of numerous board committees. From 1994 to 1996, he was a Director in KPMG LLP’s corporate finance group, where he led a team providing merger and acquisition advisory services to banks throughout the country. From 1984 to 1993 he worked for KPMG LLP as a Certified Public Accountant, providing professional accounting services to banks and other financial services companies in New York and New Jersey. From 1992 to 1993 he served as the Assistant to the Chairman of the AICPA Savings Institution Committee in Washington D.C. Mr. Lashley received his Master’s degree from Rutgers University and a Bachelor of Science degree from Oswego State University. He is licensed as a Certified Public Accountant in New Jersey (status inactive). Mr. Lashley’s extensive experience at KPMG LLP providing professional accounting and advisory services, as well as his service on numerous bank boards and his experience at PL Capital managing investments in the banking industry enables him to be a significant contributor to the Board as well as provides the perspective of a significant investor in the Company. Mr. Lashley is one of the Company’s Board-designated “audit committee financial experts” and serves as Chair of the Audit Committee. | |||||||
Independent Director Age: 64 Director Since: 2017 | ||||||||
12 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
 | Joseph J. Rice — Mr. Rice spent 30 years at Wells Fargo & Co., during which time he held executive leadership positions, including 14 years in senior credit risk management roles. Mr. Rice currently serves as the Executive Vice President of Operations for Nammi Therapeutics, Inc., a private biotechnology company headquartered in Los Angeles, California. Prior to joining Nammi Therapeutics in 2022, Mr. Rice retired from Wells Fargo following a 30-year career where he served in numerous senior leadership roles, including as Chief Credit Officer and Chief Operational Risk Officer, and oversaw credit risk management for a number of Wells Fargo's commercial lending business units. During his tenure at Wells Fargo, Mr. Rice also led a series of special project teams, directing a variety of risk management, regulatory, and customer remediation efforts. Most recently, Mr. Rice led Wells Fargo’s commercial real estate and small business loan workout units. Mr. Rice also serves on the boards of nonprofit organizations, including The Music Center of Los Angeles County, and the Painted Turtle, a camp for children with serious medical conditions. A lifelong resident of California, Mr. Rice received his Bachelor’s of Science in Civil Engineering from the University of California, Los Angeles, and his Master’s of Business Administration from the University of California, Berkeley. Mr. Rice’s extensive background in commercial credit, operational risk management and banking, combined with his leadership roles, would make him a valuable addition to the Board. | |||||||
Independent Director Nominee Age: 58 | ||||||||
 | Vania E. Schlogel — Ms. Schlogel is Managing Partner and Founder of Atwater Capital, a media and entertainment sector-focused investment firm headquartered in Los Angeles. Prior to founding Atwater in 2017, Ms. Schlogel served as a senior executive at several leading companies, including as Chief Investment Officer of Roc Nation, and was a member of KKR's Private Equity team, where she specialized in the media sector and launched the Growth Equity division. Ms Schlogel began her career in the Leveraged Finance and Capital Markets groups at Goldman Sachs in London and Los Angeles. Ms. Schlogel serves as a director on a number of boards, including as Chairperson of LEONINE Studios, Germany's leading film and TV studio, and of Mediawan US, the holding company of Brad Pitt's Plan B Entertainment. She is also on the Boards of Hipgnosis Songs Fund, the music IP company; wiip Productions, a Los Angeles-based film and TV studio; and Freepik, the digital content platform. She was formerly the Chairperson of Epidemic Sound, a provider of royalty-free music; as well as formerly on the Boards of BMG, the world's largest independent music publisher; and Pets at Home, the large U.K. retailer. Ms. Schlogel is a graduate of UCLA, summa cum laude, with a degree in Business Economics and Minor in Accounting. Ms. Schlogel is one of the Company’s Board-designated “audit committee financial experts.” Ms. Schlogel’s extensive expertise in finance, growth equity and private equity, along with her significant experience in media, entertainment and technology, make her a valuable contributor that greatly enhances the Board’s perspective. | |||||||
Independent Director Age: 39 Director Since: 2021 | ||||||||
13 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
 | Jonah F. Schnel — Mr. Schnel is an entrepreneur who led and sold companies that focus on lending to small businesses throughout the United States. Mr. Schnel is Executive Vice President and Chief Operating Officer of Cartiga, a company that provides financial products for plaintiff and attorney funding, as well as data-driven, profitability-enhancing solutions for law firms. Prior to joining Cartiga, Mr. Schnel led and then sold in 2019 Fast A/R Funding, a private company focused on lending to small businesses throughout the United States and Timco CNG, a private company operating public-access, compressed natural gas stations in Southern California. Previously, Mr. Schnel led the recapitalization of National Capital Management, an acquirer and servicer of distressed consumer debt, and assisted management during that company’s significant growth and through its acquisition by Portfolio Recovery Group, Inc. in 2012. Prior to that, Mr. Schnel was a Partner at ITU Ventures for seven years, a venture capital firm making early-stage investments in technology companies associated with innovation emerging from leading research universities in the United States. Earlier in his career, Mr. Schnel worked as a manager at SunAmerica Investments, Inc. in the real estate investment division with a primary focus on first lien lending in a diversified range of commercial real estate assets. Mr. Schnel currently serves as the Chair and President of the Southern California Chapter of the Tourette Association of America. Mr. Schnel completed the director training and certification program at the UCLA Anderson School of Management. He also received training and completed the cybersecurity certification program with respect to Managing Risk in the Information Age through Harvard’s Office of the Vice Provost for Advances in Learning in association with HarvardX. Mr. Schnel received his Bachelor’s degree, summa cum laude, from Tulane University. Mr. Schnel’s diverse experience in founding and managing numerous privately-held companies, and investments in various industries such as specialty finance and lending, alternative energy, gaming and technology, as well as his proficiency in commercial real estate and managerial oversight of a diverse set of finance-related businesses, has considerably strengthened the Board. | |||||||
Independent Director Age: 50 Director Since: 2013 | ||||||||
 | Robert D. Sznewajs, Chair — Mr. Sznewajs was the President and Chief Executive Officer of West Coast Bancorp from 2000 to 2013, an Oregon-based bank holding company which was sold in 2013 with $2.5 billion in assets. Mr. Sznewajs has held a variety of executive level roles in large financial services institutions, including Vice Chair of U.S. Bancorp; President and Chief Operating Officer of BankAmericard; Executive Vice President and Manager of Valley National Bancorp; and President and Chief Executive Officer of Michigan National Bank. In addition to nearly 40 years of experience in the areas of regulatory matters, operations and technology, consumer and commercial banking, sales and marketing, management of investment portfolios and mergers and acquisitions, Mr. Sznewajs has also served on several boards and executive committees, namely Outerwall, Inc. (formerly Coinstar); the Portland Branch Board of the Federal Reserve Bank of San Francisco; the Oregon’s Bankers Association; the United Way; the Association for Corporate Growth; and the Bates Group, LLC. Mr. Sznewajs received both his Master’s and Bachelor’s degrees from the University of Detroit and is a licensed CPA (status inactive). In addition to Mr. Sznewajs’ responsibilities as the Board Chair, he is one of the Company’s Board-designated “audit committee financial experts.” His broad and deep experience in the banking industry, including having been the Chief Executive Officer of a publicly-held bank holding company, makes him a particularly valued member of the Board. | |||||||
Independent Director Age: 76 Director Since: 2013 | ||||||||
14 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Proposal I | ||
 | Andrew Thau — Mr. Thau is Chief Operating Officer of global talent and entertainment company United Talent Agency (UTA). Since 2007, Mr. Thau has been central to UTA’s operations, M&A and business expansion strategies amid a sea change across the entertainment, media and technology landscape. Mr. Thau was the first non-agent to be named to the UTA partnership in 2016 and its board of directors in 2018. Mr. Thau also serves on UTA’s Audit Committee and as one of four managing directors responsible for overseeing UTA’s day-to-day business. Mr. Thau began his career at the Zalkin, Rodin and Goodman law firm in New York City, specializing in bankruptcy and corporate restructuring. Mr. Thau then moved to 20th Century Fox where he served as an attorney in the licensing/merchandising and filmed entertainment groups before taking on executive roles overseeing domestic and international cable television networks and businesses. Mr. Thau later led the content and technology venture Be Here as its Chief Executive Officer and subsequently helped launch and served as Chief Operating Officer of Network LIVE, a joint venture of AOL, XM Satellite Radio and AEG that broadcasted live music and entertainment events across all platforms. Mr. Thau is a graduate of George Washington University and the Benjamin N. Cardozo School of Law, and has served on the boards of multiple charitable organizations. He has lived in Southern California for 26 years. Mr. Thau’s extensive operational, legal and strategic experience from his senior leadership roles at UTA and various entertainment and technology ventures has considerably strengthened the Board. | |||||||
Independent Director Age: 57 Director Since: 2019 | ||||||||
 | Jared M. Wolff — Mr. Wolff was appointed as President and Chief Executive Officer of the Company and the Bank and as a director of the Company and Chair of the Board of the Bank effective March 18, 2019. Mr. Wolff is a veteran California banking executive with deep expertise in finance, law and risk management. Mr. Wolff joined Banc of California from City National Bank, a Los Angeles-based $80 billion regional bank and wholly owned subsidiary of Royal Bank of Canada, where he was Executive Vice President and General Counsel, and served on the bank’s executive committee. Prior to City National, Mr. Wolff was President and a member of the Board of Directors of Pacific Western Bank, a leading California-based commercial bank and wholly owned subsidiary of PacWest Bancorp (NASDAQ: PACW), and previously served as Executive Vice President and General Counsel of PacWest Bancorp. During his tenure, Mr. Wolff oversaw more than 20 acquisitions including PacWest’s $2.3 billion acquisition of CapitalSource, Inc. (NYSE: CSE). Mr. Wolff joined PacWest from the law firm Sullivan & Cromwell LLP. Mr. Wolff is involved in numerous professional and nonprofit organizations, including the WSJ CEO Council, the CEO Council of Los Angeles, the Executive Committee of the Mid-Size Bank Coalition of America, the FTV Capital Strategic Advisory Board, the Board of Trustees of de Toledo High School, and the Young Presidents’ Organization (YPO). Mr. Wolff received his B.A. from Duke University, his M.A. in French Language and Literature from Middlebury College, and his J.D. from the University of Michigan Law School. | |||||||
Director Age: 53 Director Since: 2019 | ||||||||
15 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Corporate Governance Matters
Director Independence
In accordance with the NYSE Corporate Governance Listing Standards and the Company’s Corporate Governance Guidelines, the Board conducted its review of all relationships between the Company and each director and the additional nominee (Mr. Rice), and has affirmatively determined that, with the exception of Mr. Wolff, none of them has a material relationship with the Company or any other relationship that would preclude his or her independence under the NYSE Corporate Governance Listing Standards. Based on this review, the Board has determined that each of our current directors, other than Mr. Wolff, is an independent director, and that Mr. Rice will be, if elected at the Annual Meeting, an independent director, under the NYSE Corporate Governance Listing Standards, as applied in accordance with the Company’s Corporate Governance Guidelines. The Board also determined that W. Kirk Wycoff, who ceased to be a director on May 12, 2022, was an independent director under these standards; the Board made this determination after considering certain business relationships between the Bank and third parties of which Mr. Wycoff is a director and in which a private equity fund with which Mr. Wycoff is affiliated owns minority equity interests. Additionally, the Board has affirmatively determined that each member of the Audit Committee meets the independence and financial literacy requirements for audit committee membership under the NYSE Corporate Governance Listing Standards and SEC Rule 10A-3(b)(1), and each member of the CNG Committee meets the independence and other requirements for compensation committee membership as set forth in the NYSE Corporate Governance Listing Standards. See Role and Composition of the Audit Committee and Role and Composition of the CNG Committee sections in this proxy statement for specific independence requirements.
Board Leadership Structure
The roles of Chair of the Board and Chief Executive Officer are currently separated. The Board periodically reviews and discusses the continued appropriateness of this structure. Our Corporate Governance Guidelines provide that in the event that the Chair of the Board is not an independent director, the Board would elect a 'lead independent director.'
The Chair of the Board presides at meetings of the Board of Directors and exercises leadership of Board operations, or if the Chair of the Board is not independent, a lead independent director would preside at executive sessions of independent (non-employee) directors.
Risk Oversight
The Board of Directors of the Company oversees the risk profile of the Company and its subsidiaries and management’s process for assessing and managing risks, both as a whole as well as through its committees.
The Board has two primary methods for overseeing risk. The first method is oversight by the Board as a whole, and the second method is through the committees of the Board. All Board committees may address risks directly with management, or, where appropriate, may elevate a risk for consideration by the full Board.
The Asset Liability Committee (ALCO Committee) assists the Board in its monitoring and oversight of asset and liability strategies, liquidity and capital management to maintain compliance with applicable regulatory requirements and appropriate balance sheet and earnings risk management. The CNG Committee assists the Board with discharging its responsibility and authority with respect to nominating, corporate governance, and executive compensation matters, including for example, the independence determination of Board members, the assessment of the Board’s performance, the oversight of related party transactions, the recommendation of Board candidates, and the design of the executive compensation program. The Audit Committee is primarily responsible for monitoring and oversight of the accounting and financial reporting process of the Company, the audits of the Company's financial statements, and the effectiveness of the Company's internal control over financial reporting. The Enterprise Risk Committee (Risk Committee) is primarily focused on assisting the Board in discharging its oversight duties with respect to risk management activities, including the establishment of the Company’s enterprise risk management framework and associated policies and practices. The Risk Committee is also focused on assisting the Board in its monitoring and oversight of credit processes and asset quality, and compliance with applicable regulatory requirements. In accordance with its charter, the Risk Committee is responsible for ensuring that the Company has in place an appropriate enterprise-wide framework and processes to identify, prioritize, measure and monitor significant risks, including for example, operational, technology, information security, compliance, legal, reputational, strategic, credit, interest rate and liquidity risks, with the management of interest rate and liquidity risks primarily being overseen by the ALCO Committee.
16 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Corporate Governance Matters | ||
During 2022, the Board and each of its committees received reports from executive management and employees who oversee day-to-day risk management duties on the most critical strategic issues and risks facing the Company. In addition, each of these committees and the Board received reports from the Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Credit Officer, Chief Compliance Officer, Chief Operating Officer, General Counsel, Chief Human Resources Officer, Chief Information Security Officer, Chief Internal Audit Officer, the Company’s independent auditors, third-party advisors, and other executive management regarding compliance with applicable laws and regulations, risk-related policies, procedures and limits in order to evaluate the effectiveness of the Company’s risk controls.
Information Security and Data Privacy
The Board maintains oversight of our security program through its Risk Committee, which oversees our information technology management program and reviews risks related to information security and cybersecurity as well as the steps taken by management to control for such risks. The Risk Committee oversees and reviews quarterly reports on significant matters of corporate security, including cybersecurity and data privacy. We maintain a formal information security management program under the direction of our Chief Information Security Officer and corporate cyber insurance, which are subject to review and oversight by the Risk Committee and the Board, respectively. For more information, please see the Joint Enterprise Risk Committee Charter, which is publicly available under the "Corporate Overview" section on the Company’s Investor Relations website at https://investors.bancofcal.com by selecting Governance Documents and Privacy Policy available at www.bancofcal.com/privacy-policy.
Board Composition and Meetings
During 2022, each director attended at least 75 percent of the aggregate of (i) the total number of meetings of the Company’s Board of Directors held during the portion of the year he or she was a director and (ii) the total number of meetings held by all Board committees on which he or she served during the periods in which he or she served.
The Board Chair and the other members of the Board of Directors are encouraged to attend the Company’s annual meeting of stockholders. The 2022 annual meeting of stockholders was attended by all directors serving at that time.
The current composition of the Company Board is reflected below. All members of the Company Board also currently serve as directors of the Bank, each for a one-year term, with Mr. Wolff serving as Chair of the Board of Directors of the Bank.
Robert D. Sznewajs, Chair | |||||||||||
| James A. “Conan” Barker | Richard J. Lashley | ||||||||||
| Mary A. Curran | Vania E. Schlogel | ||||||||||
| Shannon F. Eusey | Jonah F. Schnel | ||||||||||
| Bonnie G. Hill | Andrew Thau | ||||||||||
| Denis P. Kalscheur | Jared M. Wolff | ||||||||||
Regular meetings of the Company’s Board of Directors were held on a quarterly basis during 2022, with additional, special meetings held as needed. Currently, all members of the Company Board serve as directors of the Bank and therefore each Board meeting is normally a joint Board meeting of the Board of Directors of the Company and the Bank. During 2022, the Board of Directors held a total of nine meetings. Separate sessions of only independent directors were held regularly or when determined by the independent directors to be necessary.
Committee Structure of the Board of Directors and Meeting Attendance
The Board of Directors of the Company currently has four standing committees: ALCO, Audit, CNG, and Risk. Since all current members of the Company Board also serve as directors of the Bank, each of these committees is a joint committee of the Board of Directors of the Company and the Bank.
During 2022, the ALCO Committee held five meetings, the Audit Committee held eleven meetings, the CNG Committee held ten meetings, and the Risk Committee held eight meetings.
17 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Corporate Governance Matters | ||
Role and Composition of the Audit Committee
The following table reflects further information regarding the principal roles and responsibilities of the Audit Committee. For a more comprehensive description, please see the Joint Audit Committee Charter, which is publicly available under the "Corporate Overview" section on the Company’s Investor Relations website at https://investors.bancofcal.com by selecting Governance Documents. The Report of the Audit Committee is included on page 73 of this proxy statement.
| Name, Composition and Board Determinations | Responsibilities | ||||||||||
| Audit Committee | •Hiring, terminating and/or reappointing the Company’s independent registered public accounting firm. •Monitoring and oversight of the qualifications, independence and performance of the Company’s internal auditors and independent registered public accounting firm. •Approving non-audit and audit services to be performed by the independent registered public accounting firm. •Reviewing the annual audit report prepared by the Company’s independent registered public accounting firm. •Monitoring and oversight of the integrity of the Company’s financial statements and financial accounting practices. •Monitoring and oversight of the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. •Monitoring and oversight of the effectiveness of the Company’s internal control over financial reporting and, together with the Risk Committee, compliance with legal and regulatory requirements. •Reviewing and assessing the adequacy of the Audit Committee Charter on an annual basis. | ||||||||||
Richard J. Lashley, Chair James A. “Conan” Barker Denis P. Kalscheur Vania E. Schlogel Robert D. Sznewajs The Board has determined that each member of the Audit Committee meets the independence and financial literacy requirements for audit committee membership under the NYSE Listed Company Manual as well as the regulations of the Federal Deposit Insurance Corporation, and any additional requirements specific to audit committee membership. The Board has further determined that each of Mr. Barker, Mr. Kalscheur, Mr. Lashley, Ms. Schlogel and Mr. Sznewajs qualifies as an “audit committee financial expert," as defined in Item 407(d)(5) of SEC Regulation S-K. | |||||||||||
The Board made qualitative assessments of the levels of knowledge and experience of the members of the Audit Committee based on a variety of factors. In the case of Mr. Lashley, the Board considered his extensive experience in providing professional accounting and advisory services, as well as his service on numerous bank boards and audit committees and his experience at PL Capital managing investments in the banking industry for more than 25 years. Mr. Lashley is a certified public accountant (status inactive). In the case of Mr. Barker, the Board considered his proficiency in corporate finance stemming from over 30 years of managing large corporate enterprises, as well as his extensive investment experience at a private equity investment firm. In the case of Mr. Kalscheur, the Board considered his broad expertise in finance as an executive and director (including as board chair and audit committee chair) of banking and financial institutions and corporations in other industries. In the case of Ms. Schlogel, the Board considered her extensive experience in finance, growth equity and private equity, along with her significant experience (including as board chair) in media, entertainment, and technology companies. In the case of Mr. Sznewajs, the Board considered his formal education, extensive finance background, expertise in the areas of management, operations and technology, consumer and commercial banking, sales and marketing, investment portfolios and regulatory matters in addition to mergers and acquisitions. With more than 39 years in banking, Mr. Sznewajs has held a variety of executive level positions in financial services organizations across the United States in community and large banks and was the Chief Executive Officer of a publicly held bank holding company. Mr. Sznewajs is a certified public accountant (status inactive). | |||||||||||
18 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Corporate Governance Matters | ||
Role and Composition of the Compensation, Nominating and Corporate Governance Committee
The following table reflects further information regarding the principal roles and responsibilities of the CNG Committee. For a more comprehensive description, please see the CNG Committee’s Charter, which is publicly available under the "Corporate Overview" section on the Company’s Investor Relations website at https://investors.bancofcal.com by selecting Governance Documents. The Report of the CNG Committee is included on page 55 of this proxy statement.
| Name, Composition and Board Determinations | Responsibilities | |||||||
Compensation, Nominating and Corporate Governance Committee Bonnie G. Hill, Chair Mary A. Curran Shannon F. Eusey Jonah F. Schnel Robert D. Sznewajs Andrew Thau After review of each member’s experience and other relevant factors, the Board has determined that: •each member is independent, as defined in the NYSE Listed Company Manual, including the additional independence requirements specific to compensation committee membership set forth in the NYSE Listed Company Manual; and •at least two members are “non-employee directors” as defined in Rule 16b-3(b)(3)(i) promulgated under the Exchange Act. | Compensation •Reviewing and approving director and officer compensation plans, policies and programs. •Determining or recommending to the Board for its determination, the compensation of the Company’s Chief Executive Officer and other executive officers of the Company, as well as other officers (if any) with total compensation of $1,000,000 or more. •Recommending to the Board the appropriate level of compensation and the suitable mix of cash and equity compensation for directors. •Reviewing and recommending to the Board for approval, subject to necessary or appropriate stockholder approval, stock option plans and other equity-based compensation plans that permit payment in or based upon the Company’s stock. •Overseeing the talent planning and executive recruiting processes. •Producing a report on executive compensation for inclusion in the Company’s annual proxy statement and/or annual report on Form 10-K. Nominating •Annually assessing the independence of the Board members. •Identifying, screening and recommending to the Board candidates for membership on the Board, including director nominees proposed by stockholders, in accordance with the Company’s bylaws and applicable law. Nominations from stockholders will be considered and evaluated using the same criteria as all other nominations. Final approval of any candidate shall be determined by the full Board. •As set forth in the Company’s Corporate Governance Guidelines, the following are the minimum requirements for Board membership: (a) the director must possess a breadth and depth of management, business, governmental, nonprofit or professional experience, preferably in a leadership or policymaking role, that indicates the ability to make a meaningful contribution to the Board’s discussion of and decision making on the array of complex issues which the Company faces and expects to face in the future; (b) the director must possess sufficient financial literacy or other professional business experience relevant to an understanding of the Company and its business that will enable such individual to provide effective oversight as a director; (c) the director must possess the ability to think and act independently, as well as the ability to work constructively in a collegial environment; (d) the director must demonstrate behavior that indicates that he or she is committed to the highest ethical standards; (e) the director must possess the ability to devote sufficient time and energy to the performance of his or her duties as a director; and (f) the director may not simultaneously serve on the board of directors or equivalent body of an organization that the Board reasonably determines (i) is a significant competitor or potential significant competitor of the Company or of a key vendor of the Company; or (ii) would otherwise benefit from access to the Company’s intellectual property, strategic or other confidential or proprietary information. It is also desired that individual directors possess special skills, expertise and background that would complement the attributes of the other directors and promote diversity and the collective ability of the Board to function effectively. While the Board does not have a specific diversity policy, our Corporate Governance Guidelines provide that the CNG Committee should seek to promote diversity on the Board and the CNG Committee considers among other factors, age, gender, sexual orientation, race, ethnicity, and cultural background when considering and recommending candidates to the Board. | |||||||
19 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Corporate Governance Matters | ||
Corporate Governance •Developing and recommending to the Board a set of corporate governance guidelines and other policies and guidelines which the CNG Committee determines necessary and appropriate for adoption by the Company. •Reviewing and approving any insider or related party transactions (as defined in Item 404 of Regulation S-K), in accordance with the Company’s Related Party Transaction Policy. •Leading the Board in its annual review of the Board’s performance, and the performance of various Committees of the Board. •Recommending to the Board the membership and chair of each Board committee. •Overseeing the areas of director orientation, continuing education and professional development. •Assisting the Board with senior management succession planning. | ||||||||
CNG Committee Delegation of Authorities
The charter of the CNG Committee does not specifically provide for delegation of any of the authorities or responsibilities of the committee as it relates to compensation, other than the ability of the committee to form and delegate authority to subcommittees when appropriate. This includes the delegation of approval of award grants and other transactions and other responsibilities regarding the administration of compensatory programs to a subcommittee consisting solely of members of the Committee who are “non-employee directors” as defined in Rule 16b-3(b)(3)(i) under the Exchange Act. For information about the role of the Chief Executive Officer with respect to the CNG Committee, see Compensation Discussion and Analysis—Elements of our Compensation Decision Making sections in this proxy statement. None of the Company’s executive officers, including the Chief Executive Officer, has any role in determining the amount of director compensation. Director compensation is determined by the full Board after considering the recommendations of the CNG Committee.
Additionally, the charter of the CNG Committee authorizes the committee to select and retain compensation consultants, legal counsel or other consultants to advise the committee in carrying out its duties. See Compensation Discussion and Analysis—Elements of our Compensation Decision Making sections in this proxy statement.
Compensation Committee Interlocks and Insider Participation
None of the members of the CNG Committee is a current or former officer or employee of the Company or any of its subsidiaries. No executive officer has served as a member of the compensation committee (or other board committee performing equivalent functions) or as a director of any other entity that has an executive officer serving as a member of the CNG Committee or the Company’s Board of Directors.
For information regarding certain indemnification costs paid by the Company on behalf of Mr. Schnel and Mr. Sznewajs, each of whom is a member of the CNG Committee, see Transactions with Related Persons—Certain Transactions with Related Persons sections in this proxy statement.
Communications with the Board
Stockholders and other interested parties who wish to communicate with the Board or any specific director, including any committee of the Board, or with the Chair of any committee, may do so by writing to the address or e-mail below to the attention of the Corporate Secretary who will then sort the correspondence to ensure receipt by the appropriate director(s).
Banc of California, Inc.
Attn: Corporate Secretary
3 MacArthur Place
Santa Ana, California 92707
IR@bancofcal.com
20 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Director Compensation
Overview
The CNG Committee is responsible for the periodic review of compensation paid to directors of the Company and the Bank and recommending changes to the Board, when the CNG Committee deems appropriate.
The existing elements of the Company’s director compensation program are a combination of cash and stock-based incentives to attract and retain qualified candidates to serve on the Board of the Company or the Bank. In determining the components of non-employee director compensation, the CNG Committee considers the significant amount of time directors expend to fulfill their duties, the skill level required of Board members and the nature of the Company’s business objectives.
The current components of our director compensation program are summarized below. We do not provide non-equity incentive plan awards, deferred compensation, retirement or health plans for non-employee directors.
Current Non-Employee Director Compensation Program
The elements of the current compensation program for non-employee directors of the Company and the Bank, which the Board approved on June 6, 2022, are set forth in the table below, alongside the elements of the program in effect prior to that date. Under the current program, no additional fees are payable for serving as a non-chair committee member; the Board believes such fees are no longer necessary because each director currently serves on two committees.
| Schedule of Current Director Fees | |||||||||||
| Compensation Element | Previous(1)(3)(4) | Current(2)(3)(4) | |||||||||
| Annual Retainer | $ | 126,000 | $ | 140,000 | |||||||
| Additional Compensation | |||||||||||
| Chair of the Board | $ | 67,500 | $ | 67,500 | |||||||
| Committee Chair | |||||||||||
| Audit | $ | 15,300 | $ | 20,000 | |||||||
ALCO (5) | N/A | N/A | |||||||||
| Compensation, Nominating and Corporate Governance | $ | 10,800 | $ | 15,000 | |||||||
| Enterprise Risk | $ | 10,800 | $ | 15,000 | |||||||
| Non-Chair Committee Member | |||||||||||
| Audit | $ | 7,650 | $ | — | |||||||
| ALCO | $ | 5,400 | $ | — | |||||||
| Compensation, Nominating and Corporate Governance | $ | 5,400 | $ | — | |||||||
| Enterprise Risk | $ | 5,400 | $ | — | |||||||
(1) In effect prior to June 6, 2022. One-half of each compensation element was payable in cash and one-half was payable in equity awards.
(2) Effective June 6, 2022. The annual retainer is payable one-half in cash and one-half in equity awards. All other compensation elements are payable in cash.
(3) Cash compensation is payable in equal quarterly installments, in advance of each quarter, up to the maximum amount of the specified annual retainer; provided, however, that management is authorized to adjust the amount and timing of cash compensation payments on a case-by-case basis and in management’s sole discretion if the circumstances so warrant (for example, in the event a director’s anticipated term of service remaining is less than a quarter or to ensure each director receives appropriate cash compensation to reflect his or her term of service). No cash retainer is paid after any termination of service. Additionally, cash compensation is payable with respect to the entire month of service if one day is served by a director during that month, except that a director will receive pro-rata fees during the first month of service based on the actual date he or she is first appointed or elected as a director.
(4) Equity awards are payable in the form of RSUs that fully vest on the one-year anniversary of the grant date, subject to acceleration upon a change in control, termination of service due to death or disability or other qualifying termination of service. Equity awards are granted annually, following the Company’s annual meeting of stockholders.
(5) Mr. Wolff serves as ALCO Chair; accordingly, no fee was previously paid or is currently paid for that position.
21 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Director Compensation | ||
Employee Directors
Directors who are also employees of the Company and/or the Bank receive no compensation for their service as directors. As such, Mr. Wolff, who is President and Chief Executive Officer of the Company and the Bank and a director of the Company and Chair of the Board of Directors of the Bank, did not receive compensation for his Board service in 2022.
2022 Summary Table of Director Compensation
The following table provides information regarding compensation paid to the non-employee directors of the Company during the year ended December 31, 2022 for their service on the Company Board, Bank Board and all applicable committee assignments. See Summary Compensation Table on page 56 in this proxy statement for information regarding compensation paid to Mr. Wolff in 2022.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | All Other Compensation ($)(3) | Total ($) | |||||||||||||||||||
| James A. “Conan” Barker | $ | 70,000 | $ | 69,537 | $ | 973 | $ | 140,510 | |||||||||||||||
| Mary A. Curran | $ | 78,063 | $ | 71,106 | $ | 1,011 | $ | 150,180 | |||||||||||||||
| Shannon F. Eusey | $ | 63,994 | $ | 68,414 | $ | 266 | $ | 132,674 | |||||||||||||||
| Bonnie G. Hill | $ | 77,500 | $ | 71,106 | $ | 995 | $ | 149,601 | |||||||||||||||
| Denis P. Kalscheur | $ | 63,895 | $ | 69,537 | $ | 271 | $ | 133,703 | |||||||||||||||
| Richard J. Lashley | $ | 80,000 | $ | 73,353 | $ | 1,026 | $ | 154,379 | |||||||||||||||
| Vania E. Schlogel | $ | 63,895 | $ | 69,537 | $ | 264 | $ | 133,696 | |||||||||||||||
| Jonah F. Schnel | $ | 70,000 | $ | 68,414 | $ | 957 | $ | 139,371 | |||||||||||||||
| Robert D. Sznewajs | $ | 103,750 | $ | 103,289 | $ | 1,445 | $ | 208,484 | |||||||||||||||
| Andrew Thau | $ | 70,000 | $ | 68,414 | $ | 957 | $ | 139,371 | |||||||||||||||
W. Kirk Wycoff (4) | $ | 34,200 | $ | — | $ | 957 | $ | 35,157 | |||||||||||||||
(1)Represents the grant date fair value of the stock awards issued during fiscal 2022, determined in accordance with ASC Topic 718. Awards issued during 2022 reflect the equity portion of the annual retainer and the equity portion of additional compensation for service on Board committees, as applicable. The assumptions used in the fair value calculations are included in Note 16 to the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023. The grant date fair value is calculated using the closing market price of the Company’s voting common stock on the business day preceding the grant date, which is then recognized as an expense over the scheduled vesting period of the award.
(2)See the table that immediately follows for the number of stock awards granted to each non-employee director during 2022 and the aggregate number of unvested RSAs, unvested RSUs and options held by each non-employee director as of December 31, 2022.
(3)Amounts reflect cash dividends on RSAs and RSUs granted during 2022.
(4)Mr. Wycoff ceased to be a director of the Company and the Bank on May 12, 2022.
22 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Director Compensation | ||
The following table presents: (a) the number of stock awards granted to each non-employee director during 2022 (all of which were in the form of RSUs), the grant date fair values of which are reflected in the table above; (b) the aggregate number of outstanding unvested RSAs and RSUs held by each non-employee director as of December 31, 2022; and (c) the aggregate number of outstanding options (both vested and unvested) held by each non-employee director at December 31, 2022. The RSUs granted to the non-employee directors during 2022 will vest in full on May 12, 2023.
Stock Awards in the 2022 Summary Table of Director Compensation Above | Aggregate Awards Outstanding as of December 31, 2022 | |||||||||||||
| Name | Number of Stock Awards | Aggregate Number of Unvested RSAs and RSUs Outstanding | Aggregate Number of Options Outstanding | |||||||||||
| James A. “Conan” Barker | 3,900 | 3,900 | — | |||||||||||
| Mary A. Curran | 3,988 | 3,988 | — | |||||||||||
| Shannon F. Eusey | 3,837 | 3,837 | — | |||||||||||
| Bonnie G. Hill | 3,988 | 3,988 | — | |||||||||||
| Denis P. Kalscheur | 3,900 | 3,900 | — | |||||||||||
| Richard J. Lashley | 4,114 | 4,114 | — | |||||||||||
| Vania E. Schlogel | 3,900 | 3,900 | — | |||||||||||
| Jonah F. Schnel | 3,837 | 3,837 | 7,452 | |||||||||||
| Robert D. Sznewajs | 5,793 | 5,793 | 7,452 | |||||||||||
| Andrew Thau | 3,837 | 3,837 | — | |||||||||||
W. Kirk Wycoff (1) | — | — | — | |||||||||||
(1) Mr. Wycoff ceased to be a director of the Company and the Bank on May 12, 2022.
23 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Our Commitment to Corporate Sustainability
The Board and executive team recognize that solid governance, environmental stewardship, and social responsibility are critical to building a healthy and valuable franchise and creating long-term business success.
We are committed to sustainable business practices and have, over time, implemented oversight and processes throughout our operations designed to effectively manage Environmental, Social, and Governance (ESG) matters relevant to our business. Our ESG focus aligns with the principles of the Sustainability Accounting Standards Board (SASB) framework for commercial banks and the areas that we believe matter most to our stakeholders. Through various initiatives, we aim to make a positive impact in our communities, embrace diversity, provide a supportive and inclusive workplace environment, and act in environmentally-conscious ways. For more information, please see the Corporate Social Responsibility Report in the "About Us" section on our website at www.bancofcal.com.
 Governance |  Environmental Stewardship |  Social Responsibility | ||||||
24 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Our Commitment to Corporate Sustainability | ||
Governance of ESG
Our business functions drive management accountability for a range of ESG issues and programs designed to strengthen our financial sustainability, drive better business performance, and create long-term value for our stakeholders.
As an overseer of risk and a steward of long-term stockholder value, the Board has the ultimate responsibility for the oversight of the ESG-related risks and opportunities that impact our business.
The CNG Committee provides primary oversight of our ESG initiatives and programs. Our executive team is accountable for our overall ESG strategic performance and manages ESG across our business. Additionally, we launched an ESG Working Group in the fall of 2020 that is comprised of leaders representing a broad cross-section of our business, including risk, finance, legal, credit, human resources, community reinvestment, marketing, facilities and information security teams. This cross-functional group, led by our Legal Department, reports to the CNG Committee and is responsible for our overall ESG program’s strategic development and implementation. Our ESG Working Group meets at least quarterly, and through our General Counsel, provides periodic updates to our CNG Committee.
ESG WORKING GROUP — Comprised of cross-functional leaders across our business | ||||||||
 Risk |  Finance |  Legal | ||||||
 Credit |  Human Resources |  Community Reinvestment | ||||||
 Marketing |  Facilities |  Information Security | ||||||
25 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Our Commitment to Corporate Sustainability | ||
To oversee ESG matters across the Company, the Board works closely with each Board committee, the executive team and various management committees with dedicated ESG-related functions associated with their respective areas of responsibility. |  | ||||
| CNG COMMITTEE | ||||||||
| Oversees executive compensation programs and policies, including oversight of our ESG program and our human capital management, including corporate culture, diversity initiatives and talent management. | ESG Working Group Develops and drives the implementation of ESG initiatives to advance sustainability strategies across our business operations. IDEA Council Aims to ensure our workforce represents the diversity of the communities we serve and fosters a culture of Inclusion, Diversity, Engagement and Awareness (IDEA) for team members and clients across our business operations. | |||||||
| AUDIT COMMITTEE | ||
| Oversees and monitors internal controls around the accounting and financial reporting process of the Company, the audits of the Company's financial statements, and the effectiveness of corporate governance, including business ethics, the Code of Business Conduct and Ethics, and the Whistleblower Policy. | ||
| ENTERPRISE RISK COMMITTEE | ||||||||
| Oversees risk management activities, including Enterprise Risk Management framework and associated policies and practices associated with our key ESG-related risks, including systemic risk, business continuity, information security, and data management and privacy. | CRA Program Reviews the current Community Reinvestment Act (CRA) investment, lending, and service goals and performance, and oversees community development & engagement opportunities. Enterprise Risk Management Committee Oversees management's framework to assess, monitor and mitigate risks associated with our business strategy. | |||||||
| ALCO COMMITTEE | ||
| Assists the Board in their monitoring and oversight of asset and liability strategies, liquidity, and capital management to maintain compliance with applicable regulatory requirements, as well as manage financial sustainability factors and appropriate balance sheet and earnings risk management. | ||
ESG Linked to Executive Incentive Compensation
In 2022, among other qualitative considerations, the CNG Committee evaluated management’s advancement of ESG goals and initiatives within our business strategy and operations as one factor (among others) in the achievement of 10% of the annual short term incentive plan (STIP) eligible for the executive team. It is the intention of our Board to hold the executive team responsible for the execution of our ESG initiatives and commitments to our employees, clients, stockholders and communities. For more information, please see the Compensation Discussion and Analysis section in this proxy statement.
26 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Our Commitment to Corporate Sustainability | ||
Responsible Business Practices
We believe that governance and responsible business practices strengthen our long-term success through our commitment to ethics, integrity, and accountability, contributing to a strong foundation for our ESG program. We implement these core values into action through our policies and procedures.
| CORE VALUES OF BANC OF CALIFORNIA | ||||||||
Ethics | Integrity | Accountability | ||||||
| ESG PROGRAM | ||||||||
Ethics, Integrity and Accountability
The CNG Committee develops, maintains, and recommends to the Board our Corporate Governance Guidelines to provide a framework for effective governance of the Company and its subsidiaries. We have adopted a Code of Business Conduct and Ethics (Ethics Code) that applies to our Board, officers, and employees. Our Audit Committee has oversight responsibility for monitoring the behavior of our employees in relation to the Ethics Code, as well as the integrity of our financial reporting and the independence and performance of our external auditors. Our Risk Committee oversees different risk categories including credit risk, liquidity risk, market risk, operational risk, compliance risk, legal risk, reputational risk, and strategic risk on a company-wide basis. We are not a politically active organization, and we do not contribute to political campaigns or participate in lobbying efforts.
Our Whistleblower Policy affirms our commitment to being proactive in detecting and preventing violations of law, regulations, and policies and procedures, including but not limited to the principles in our Ethics Code.
For more information on our Ethics Code and Whistleblower Hotline, please see the “Corporate Overview" section on the Company's Investor Relations website at https://investors.bancofcal.com by selecting Governance Documents.
Systemic Risk Management and Business Continuity
The Board, as a whole and through its standing committees, works with the executive team to oversee the Bank’s enterprise risk management framework, incorporating governance and preparedness in areas material to our business operations and financial results such as systemic risk management, business continuity, cybersecurity, and climate-related risks. For more information, please see the Risk Oversight section in this proxy statement.
In order to maintain adequate levels of capital, we continuously assess projected sources and uses of capital to support projected asset growth, operating needs, and credit risk. We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on our capital base. For more information, please see our 2022 Annual Report on Form 10-K.
Incorporation of ESG within Credit Analysis
We aim to manage the risks within our business by incorporating ESG considerations, including climate-related risks, into our processes for managing and governing risk across our financial services and investments. For example, as part of our normal course due diligence, the credit team reviews wildfire and flood zone reports and continues to develop ongoing climate-related risk analysis for environmental events throughout its credit and underwriting processes. The credit team reports its credit risk analysis across our loan portfolio at least quarterly to the management and Risk Committees. For more information, please see our 2022 Annual Report on Form 10-K.
27 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Our Commitment to Corporate Sustainability | ||
Corporate Governance Framework
Our Board of Directors and management are committed to sound and effective corporate governance practices. We established and utilize a comprehensive corporate governance framework that consists of policies and programs that not only satisfy applicable regulatory requirements but also are intended to build value for the Company’s stockholders.
The key components of our corporate governance framework are reviewed and approved by the Board on a regular basis and are set forth below:
28 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Our Commitment to Corporate Sustainability | ||
Corporate Governance Documents
The full texts of the Corporate Governance Guidelines, the Code of Business Conduct and Ethics, and the charters of the Board’s standing committees are publicly available under the "Corporate Overview" section on the Company’s Investor Relations website at https://investors.bancofcal.com by selecting Governance Documents. You may also obtain free copies by contacting the Company at:
Banc of California, Inc.,
Attn: Corporate Secretary
3 MacArthur Place
Santa Ana, California 92707
(855) 361-2262 | IR@bancofcal.com
Evaluating the Board's Effectiveness
The Board and each of its committees (ALCO, Audit, CNG, and Risk) conduct an annual self-assessment aimed at enhancing their effectiveness. As part of the self-assessment process, the Board and committee members provide feedback on a range of topics relevant to the performance and effectiveness of the Board and the applicable committee. In addition, members of the Board participate in a peer evaluation of their fellow directors and provide comments on their own skills and qualifications. The Chair of the Company Board then meets separately with each director to discuss the results of the peer evaluations and individual self-assessments.
The results of the self-assessment process are aggregated and summarized for the Board and for each of the principal standing committees. Comments in the summaries are not attributed to individual Board or committee members to promote candor. The aggregated results and summary of the Board’s self-assessment are presented to each of the principal standing committees and the Board for review and discussion at a full Board meeting, at which time the Board considers what, if any, actions might be implemented to enhance future performance of the Board.
The CNG Committee considers the results of the self-assessment process when it periodically evaluates the size, structure and composition of the Board, as well as the role, composition and allocation of responsibilities among Board committees.
Consideration of Board Diversity
Throughout the director nomination process, the CNG Committee seeks to achieve diversity among the members of Board by selecting director nominees with diverse opinions and perspectives that are representative of our industry. The CNG Committee seeks to include members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to the business of the Company. While not a formal policy, the Company’s director nomination processes calls for the consideration of a range of types of diversity, including but not limited to race, gender, sexual orientation, ethnicity and geography.
The CNG Committee is committed to actively seeking highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experience, to include in the pool from which Board nominees are chosen.
Director Education
In accordance with the Company’s Corporate Governance Guidelines, all directors are expected to comply with the necessary continuing educational requirements which include, but are not limited to: (i) a component covering professional development in corporate governance; and (ii) a component which covers educational development in subject matter areas that are deemed relevant to the Company’s business. In support of continuing education, the Company incurs reasonable expenses to facilitate any mandatory educational and professional development programs or any voluntary programs which the CNG Committee may deem appropriate.
Additionally, our directors participate in compliance training administered by members of our senior management on a variety of subject matters, including but not limited to, industry, regulatory, legal, and governance related topics.
29 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Our Commitment to Corporate Sustainability | ||
Human Capital and Social Impact
Attracting, Developing and Retaining Talent
We believe that our employees are vital to our success in the banking industry. As a relationship-focused business, the long-term success of our Company is tied to our people.
At Banc of California, our human capital strategy is aligned to our business objectives and focuses on recruiting and retaining talent, encouraging internal mobility, promoting inclusion and diversity, recognizing and rewarding performance, and supporting the health and wellness of our team members. We aim to empower the strengths of our team members and support a high performing culture, always striving to find the right solutions for our clients. Our Board governs our human capital management through its CNG Committee’s quarterly reviews and discussions with our executive team. For more information, please see our 2022 Annual Report on Form 10-K.
Inclusion, Diversity, Engagement, and Awareness (IDEA) Council
In our recruiting efforts, we strive to have a diverse group of candidates to consider for our roles that reflect the diversity of the communities where we live and work. To that end, we post our open positions to dozens of minority-specific recruiting websites. In addition, our employee-led IDEA Council brings together voices and ideas to help fuel and foster a culture of openness and inclusion in all that we do. For more information, please see our Corporate Social Responsibility Report available online under the "About Us" section on the Bank's website at www.bancofcal.com.
Supporting Our Communities
We are focused on supporting the communities in which we live and work. Our community support is primarily provided within the framework of our CRA Program. The Risk Committee reviews: the reports of examination of the Bank by regulatory authorities concerning CRA compliance; our annual Community Development/CRA Plan; and CRA-related community relationships and special initiatives, as appropriate. To this end, during 2022, as part of our commitment to CRA, our investments and activities in four key areas have reached:
Our Community Support (2020-2022)
 |  |  |  | ||||||||
| $106m+ | $906m+ | $438m+ | 6,600+ hrs | ||||||||
| Community Development Investments | Community Development Loans | Small Business CRA Loans in California | Employee Volunteer & Service | ||||||||
No Incorporation by Reference
This proxy statement includes several website addresses or references to additional company reports or resources found on our corporate website. These website addresses are intended to provide inactive, textual references only. The information on these websites, including the information contained in those reports or resources, is not part of this proxy statement and is not incorporated by reference in this proxy statement.
30 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Executive Officers
Designation of Executive Officers
The Board periodically evaluates the persons who are designated as executive officers of the Company. The Company’s executive officers include its Chief Executive Officer and Chief Financial Officer as well as other individuals whom the Board has determined perform a policy-making function or are in charge of a principal business unit, division or function. The Company’s current executive officers are listed below.
Jared M. Wolff, President and Chief Executive Officer
Raymond Rindone Executive Vice President, Interim Chief Financial Officer and Chief Accounting Officer | Robert G. Dyck Senior Executive Vice President, Chief Credit Officer | ||||||||||||||||
Ido Dotan Executive Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary | John Sotoodeh Chief Operating Officer | ||||||||||||||||
31 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Executive Officers | ||
Executive Officer Biographies
| Jared M. Wolff — See Proposal I—Election of Directors for Mr. Wolff’s biography. | |||||||
President and Chief Executive Officer Age: 53 | ||||||||
 | Raymond Rindone — Mr. Rindone was appointed Executive Vice President, Interim Chief Financial Officer of the Company and the Bank effective March 31, 2023. Mr. Rindone has more than 25 years of experience in the financial services and banking industry. He joined the Company from City National Bank, a $90 billion asset bank headquartered in Los Angeles, and a division of Royal Bank of Canada. Mr. Rindone had been with City National since 2006, where he served in a number of important finance roles, most recently as Deputy Chief Financial Officer. Previously he served as SVP of Financial Management. Prior to that, Mr. Rindone was employed by IndyMac Bancorp and certain of its subsidiaries, in a number of finance and accounting leadership roles, including Division CFO, Division Controller, and First Vice President, Financial Management. Mr. Rindone also served as CFO of Platinum Capital Group, Inc. He began his career as a Senior Consultant with Coopers & Lybrand, LLP (now PricewaterhouseCoopers LLP). Mr. Rindone holds a B.S. in Accounting from University of Southern California and is a Certified Public Accountant (inactive). | |||||||
Interim Chief Financial Officer and Chief Accounting Officer Age: 52 | ||||||||
32 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Executive Officers | ||
 | Ido Dotan — Mr. Dotan was appointed Executive Vice President, General Counsel and Corporate Secretary of the Company and the Bank effective May 28, 2019. He was further appointed Chief Administrative Officer of the Company and the Bank effective January 1, 2023. Mr. Dotan is a proven leader with extensive experience in the management of in-house legal departments, supporting multiple business lines and advising on transactional, regulatory, and corporate governance matters. In his role as Chief Administrative Officer, Mr. Dotan is responsible for implementing and facilitating organizational efficiency and coordination across all administrative areas of the Bank. Prior to joining Banc of California, Mr. Dotan served as Executive Vice President, Assistant General Counsel and Corporate Secretary of Carrington Mortgage Holdings, LLC, a holding company whose primary businesses include mortgage servicing and origination, real estate logistics and real estate services. Mr. Dotan also served as Chief Legal Officer of Arch Bay Capital, LLC, an investment management firm specializing in real estate and mortgage services. Before joining Arch Bay, Mr. Dotan served as Associate General Counsel and then Chief Legal Officer of Thompson National Properties, LLC, a commercial real estate firm and sponsor of a public real estate investment trust. Prior to going in-house, Mr. Dotan was an associate with the law firms of Sullivan & Cromwell LLP and Fried, Frank, Harris, Shriver & Jacobson LLP from 2004 to 2010, where he represented public and private companies and financial institutions in connection with mergers and acquisitions, capital markets, structured finance transactions and corporate governance matters. Mr. Dotan currently serves on the Board of Directors of Orange County United Way and is engaged in community activities focused on education, homelessness and veterans. Mr. Dotan received his bachelor’s degree in business administration from the University of Southern California, Marshall School of Business and his juris doctorate from the University of Southern California, Gould School of Law. Mr. Dotan is admitted to practice law in California. | |||||||
General Counsel, Chief Administrative Officer, and Corporate Secretary Age: 43 | ||||||||
33 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Executive Officers | ||
 | Robert G. Dyck — Mr. Dyck was appointed Executive Vice President, Chief Credit Officer of the Company and the Bank effective January 1, 2020. Thereafter, Mr. Dyck was appointed Senior Executive Vice President, Chief Credit Officer of the Company and the Bank effective February 1, 2023. Mr. Dyck is responsible for all credit oversight, including portfolio review/maintenance, approval of credits, ongoing portfolio analysis, for the Bank. Mr. Dyck is a highly skilled credit executive with over 40 years of banking experience in the California market. Prior to joining Banc of California, Mr. Dyck spent four years providing consulting services to community banks in the areas of credit training, credit policy, credit culture and portfolio management. Previously, Mr. Dyck spent 14 years with PacWest Bancorp (NASDAQ: PACW) most recently serving as Executive Vice President, Chief Credit Officer for the Community Banking Division. During his tenure with PacWest, Mr. Dyck oversaw credit diligence for 14 bank acquisitions. In addition, Mr. Dyck has served as senior credit executive for several community and regional banks where he managed credit training programs and directed loan review departments. Mr. Dyck received his undergraduate degree in Accounting and Finance and MS in Finance from California State University, Northridge. | |||||||
Chief Credit Officer Age: 66 | ||||||||
34 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Executive Officers | ||
 | John Sotoodeh — Mr. Sotoodeh was appointed President, Community and Business Banking of the Bank in August 2019 and served as Chief Operating Officer of the Bank since May 2021. Mr. Sotoodeh was further appointed Chief Operating Officer of the Company effective January 1, 2023. Mr. Sotoodeh oversees a broad range of services across the Company, including operations, technology and payments platforms, along with strategic initiatives. Mr. Sotoodeh is an inspirational, strategic leader with over 30 years of experience leading complex businesses in the financial services industry. As an executive who has led retail and business banking operations across 15 states and over 16,000 team members, he has a proven track record of cultivating a talented and diverse team. He has extensive expertise in spearheading change in an ever-evolving environment, including leading multiple innovative strategies while prioritizing a strong and clear culture. Prior to joining Banc of California, Mr. Sotoodeh held several key executive positions at Wells Fargo Bank, where he enjoyed an almost 30 year tenure. Most recently, Mr. Sotoodeh held the position of EVP and Regional Banking Executive for the Southwest Region. In this strategic leadership role he managed all aspects of the Consumer and Small Business Banking divisions and played a significant role developing and implementing key business strategies for the company. He also served as the chair of the Community Banking reputation committee. Mr. Sotoodeh cares deeply about social causes focused on education, homelessness and ending hunger. He has served on numerous boards including United Way Los Angeles, Bankwork$, Greater Houston Partnership, Texas Business Leaders Council, KCET Television and San Diego Food Bank. Mr. Sotoodeh is an active member of Young Presidents Organization. He has also participated in an Executive Program at Harvard Business School and is a graduate of the Pacific Coast Banking School at the University of Washington. Mr. Sotoodeh earned his BS in Finance at San Jose State University. | |||||||
Chief Operating Officer Age: 52 | ||||||||
35 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Compensation Discussion and Analysis
Overview
In this section, we describe the material components of our executive compensation program, the material compensation policy decisions made under those programs in 2022, and the measurable factors we took into consideration in making compensation decisions for our "Named Executive Officers" set forth below, whose compensation earned or paid for in 2022 is set forth in a series of tables following this section.
Our Named Executive Officers for Fiscal Year 2022: | |||||||||||
| Jared M. Wolff | President and Chief Executive Officer | ||||||||||
Lynn M. Hopkins(1) | Former Executive Vice President, Chief Financial Officer | ||||||||||
| Ido Dotan | Executive Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary | ||||||||||
| Robert G. Dyck | Senior Executive Vice President, Chief Credit Officer | ||||||||||
Lynn A. Sullivan(2) | Former Executive Vice President, Chief Risk Officer | ||||||||||
(1) Ms. Hopkins transitioned from the Company and stepped down from her role as Executive Vice President and Chief Financial Officer effective March 31, 2023.
(2) Ms. Sullivan retired from her role as Executive Vice President and Chief Risk Officer effective December 31, 2022.
The discussion below is intended to put into context, within the framework of our overall compensation program, the information detailed in the tables following this section.
2022: Executive Summary | Further Enhancing Franchise Value
Since early 2019, with the appointment of Jared Wolff as our President and Chief Executive Officer, Banc of California has executed on a strategic plan to transform the Company into California’s premier relationship-focused business bank and substantially enhance the value of the franchise in the process.
During 2019 and 2020, while managing through the impact of the COVID-19 pandemic, we successfully attracted senior executives and commercial bankers with strong experience and expertise in relationship-oriented business banking, developed a robust deposit gathering engine that consistently generates low-cost deposits, reduced expenses, added operating leverage, and rightsized the balance sheet and strengthened our capital ratios by shedding non-core assets.
With a strong foundation in place, over the past two years, we shifted more of our focus to generating profitable growth as we continued to add full banking relationships with small- and middle-market companies and real estate entrepreneurs that provide high quality lending opportunities that we fund with low-cost deposits. We also completed and integrated a highly accretive acquisition of $1.5 billion asset Pacific Mercantile Bancorp in 2021 and closed on the acquisition of Deepstack Technologies in September 2022, which further advances our goal to be the hub of the financial services ecosystem for our clients.
36 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Our success in executing on our strategic plan is reflected in the improvement we have seen across our key performance indicators since the first quarter of 2019, notwithstanding a much higher average Federal Funds rate in 2022:
| Key Performance Indicator | 4Q22 | 1Q19 | Improvement | ||||||||
| Net Interest Margin | 3.69% | 2.81% | 31% | ||||||||
| Average Cost of Deposits / Average Fed Funds Rate | 0.79% / 3.65% | 1.67% / 2.40% | 53% (2) | ||||||||
| Average Noninterest Bearing Deposits as a % of Average Total Deposits | 40.6% | 13.4% | 203% | ||||||||
Adjusted Efficiency Ratio(1) | 56.0% | 73.2% | 23% | ||||||||
Tangible Book Value Per Share(1) | $14.19 | $13.28 | 7% | ||||||||
| CET1 Capital Ratio | 11.8% | 9.7% | 21% | ||||||||
(1)See Appendix A for Non-GAAP Reconciliation.
(2)Improvement percentage represents change in percent in the average cost of deposits relative to the change in the average Fed Funds rate.
The improvement in our key performance indicators and transformation of our franchise has had the positive impact on stockholder value that we targeted. At the end of the first quarter of 2019, Banc of California had a market capitalization of $697 million. As of December 31, 2022, the Company had a market capitalization of $940 million. Over this time period, despite the challenging environment created by the COVID-19 pandemic, then the higher inflationary and interest rate environment in 2022, more than $243 million of stockholder value has been created, while we also returned $48 million of capital to stockholders through our quarterly common stock dividend and another $87 million through our common stock repurchase program. Moreover, we simplified and rightsized our balance sheet through the redemption of approximately $200 million of preferred stock.
2022 was a tremendous year for Banc of California, in which we substantially grew core earnings, generated significant organic balance sheet growth, completed a highly accretive acquisition to accelerate our growth, and made investments that have further strengthened our franchise and positioned the Company for continued profitable growth in the future.
In 2022, our accomplishments included:
•Fully realizing the synergies we projected for the acquisition of Pacific Mercantile Bancorp, including more than 40% in cost savings.
•Continuing to leverage the robust deposit gathering engine we have built to consistently develop new low-cost commercial deposit relationships, which resulted in the Company reaching a key milestone during the year with noninterest-bearing deposits increasing to 40.6% of our total deposits.
•Generating strong loan production and growing our core commercial loan portfolio by 13%.
•Capitalizing on the asset sensitivity created by our high percentage of noninterest-bearing deposits to generate significant expansion in our net interest margin.
•Continuing to attract new talent and further building our expertise in attractive vertical markets.
•Further optimizing our use of capital, including redeeming all $98.7 million of our outstanding Series E Preferred Stock, implementing and completing a $75 million stock repurchase program, and paying common stock cash dividends of $14.4 million.
•Entering the payments processing business through our acquisition of Deepstack Technologies, which provides us with a highly differentiated payments solution that we believe will generate a significant source of stable, high margin fee income, further diversify our revenue mix, and provide another competitive advantage in gathering low-cost deposits.
37 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
•Despite the significant capital actions we took during the year, including the stock repurchase program and acquisition of Deepstack Technologies, our strong financial performance and prudent balance sheet management enabled us to increase our tangible book value per share during a year in which many banks saw a decline.
Given our strong financial performance and balance sheet, early in 2023, we increased our quarterly common stock dividend by 67% to $0.10 and announced the authorization of a new $35 million stock repurchase program.
Key Performance Metric Trends in 2022
The following charts demonstrate the consistent progress we made in improving key performance metrics throughout 2022(1):
(1) Change in percent for dollar denominated metrics and basis points for percentage denominated metrics.
(2) In 2022, net income and adjusted net income include a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan. Adjusted net income is the numerator for computing Adjusted Earnings Per Share (Adjusted EPS) and Adjusted Return on Average Assets (Adjusted ROAA) as described below.
(3) Adjusted EPS is computed as adjusted net income divided by the weighted average diluted common shares outstanding. Adjusted net income is calculated by adjusting net income for tax-effected noninterest income and noninterest expense adjustments.
(4) Adjusted ROAA is computed by dividing adjusted net income by average assets.
(5) Tangible Book Value Per Share (TBVPS) is computed by dividing tangible common equity by the weighted average diluted common shares. Tangible common equity is calculated by subtracting goodwill, other intangible assets and preferred stock from total equity.
(6) Common Equity Tier 1 (CET1) Capital Ratio is computed by dividing the Company's Tier 1 capital by total risk-weighted assets.
(7) Adjusted Efficiency Ratio is computed by dividing adjusted noninterest expense by adjusted total revenue.
(8) Average Noninterest-Bearing Deposits to Average Total Deposits (Average NIB Deposits / Average Total Deposits) is computed based on the average noninterest-bearing and total deposit balance for the years indicated.
(9) Core Commercial Loan Growth includes: CRE, MF and C&I excluding warehouse. Pacific Mercantile Bancorp acquisition is excluded to calculate 2021 growth.
(10) See Appendix A for Non-GAAP Reconciliation.
38 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Industry Leading Improvements in Key Performance Metrics
From the first quarter of 2019 through the fourth quarter of 2022, the change in our relative performance in several key metrics was near the top of the industry as compared to major exchange-traded banks nationwide with $5-$50 billion in assets.
(1) In 2019, Net Income and Adjusted Net Income include a $35.1 million pre-tax provision for credit losses due to the charge-off of a single loan. In 2022, Net Income and Adjusted Net Income include a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of such loan. Adjusted Net Income is the numerator for computing Adjusted Earnings Per Share and Adjusted Return on Average Assets.
(2) Peers include all publicly traded U.S. banks between $5B and $50B in assets. Peer data reflects median FY2022 information reported as of March 15, 2023. Data for peers per S&P Global Market Intelligence.
(3) Tangible Common Equity (TCE) Ratio is computed by dividing tangible equity by tangible assets. Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity.
(4) See Appendix A for Non-GAAP Reconciliation.
39 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Advanced ESG Initiatives
Along with enhancing franchise value and improving our financial performance, we have placed a high priority on developing a corporate culture that is committed to making a positive impact on all of our stakeholders – employees, clients, stockholders, and the communities in which we live and work. Our ESG focus areas align with the principles of the SASB framework for commercial banks and the areas that we believe matter most to our stakeholders. In 2022, we continued to advance our ESG initiatives, including by:
•Linking management's advancement of ESG initiatives, among other qualitative considerations, as a factor in the achievement of the STIP criteria.
•Aligning our human capital strategy to our business objectives to focus on recruiting and retaining talent, encouraging internal mobility, promoting inclusion and diversity, recognizing and rewarding performance, and supporting the health and wellness of our team members.
•Launching a Corporate Social Responsibility webpage to showcase the Company's commitment to making a difference in our communities.
•Publishing our Health and Safety Statement and Supplier Diversity Statement.
•Enhancing our Environmental Statement, Supplier Code of Conduct Statement, and Human Rights Statement.
•Augmenting our Credit Approval Memorandum to better record and track ESG elements.
•Continuing to support the communities in which we live and work.
40 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Strong Alignment with Stockholders — What We Do and What We Don't Do
The CNG Committee has implemented the following compensation strategies, which the CNG Committee considers to be key elements of our compensation program and reflects best practice:
| Strong Alignment with Stockholders—What We Do | |||||
| ü | Compensation Principles. Our compensation program is guided by our goals to align the interests of our executive officers with our long term strategy and the interests of stockholders in a manner that appropriately considers the safety and soundness of the Bank. | ||||
| ü | Performance-Based Awards. Our executive compensation practice focuses on performance-based awards that are tied to our strategic initiatives and overall stockholder objectives. Nearly two-thirds of our Chief Executive Officer's pay is at-risk or performance-based pay and 50% of our equity awards are based on three-year performance goals. | ||||
| ü | Risk Events Are Considered in Pay Decisions. Our CNG Committee annually assesses our executive and broad-based compensation programs to ensure prudent risk management. | ||||
| ü | Formula-based and objective annual non-equity incentives. Our annual non-equity incentive plan is comprised primarily of formula-based objective measures with payout caps that are focused on improving key franchise metrics such as demand deposit growth and earnings per share. | ||||
| ü | Recoupment Policy. We have a recoupment policy that provides the Board with the ability to recover or cancel cash incentive compensation and equity awards granted to certain officers if, among other things, the Company is required to restate its financial statements or correct a material error. | ||||
| ü | Share Ownership Guidelines. We require that our Chief Executive Officer own shares with a market value equal to at least 300% of his after-tax base salary and that the other NEOs own shares equal to at least 100% of their after-tax base salary. Our executives are expected to achieve the minimum equity investment within three years from the date they first become subject to these guidelines. | ||||
| ü | Anti-Hedging/Pledging Policy. We have “anti-hedging” and “anti-pledging” policies on Company shares. | ||||
| Strong Alignment with Stockholders—What We Don’t Do | |||||
| X | No Tax Gross Ups. Our employment agreements and severance plan do not provide for tax gross-ups in the event of a change in control event. | ||||
| X | No Repricing or Repurchase of Underwater Equity Awards. We do not permit the repricing or repurchase of underwater stock options or stock appreciation rights without stockholder approval. | ||||
| X | No Multi-Year Guaranteed Bonuses. | ||||
| X | No “Single Trigger” Cash Severance Payments on Change in Control in Employment Agreements. Our executive employment agreements do not have “single-trigger” cash severance payments resulting solely from the occurrence of a change in control. | ||||
| X | No “Single Trigger” Vesting of Equity Awards Granted under 2018 Omnibus Stock Incentive Plan. All equity awards under the 2018 Omnibus Plan made to employees generally require a “double trigger” (i.e., a termination of employment other than by the Company for cause or by the participant without good reason) before vesting can accelerate following a change in control. For performance-based awards, the 2018 Omnibus Plan provides that, unless the performance award is replaced by a similar award, it will be deemed earned and payable in an amount equal to at least the target level of performance in the event the award vests on an accelerated basis following a change in control. | ||||
| X | No Dividends on Unvested Shares. Under the 2018 Omnibus Plan, we do not pay any dividends on unvested equity awards, including performance-based equity awards. Dividends may be accumulated and deferred and are only payable at the time such awards vest. | ||||
41 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Compensation Program and Philosophy
Our vision and priorities guide our compensation programs. Our compensation programs are designed to accomplish the following:
•Allow the Company to compete for, hire and retain skilled and talented executives critical to our success, with the capabilities required by the pursuit of our mission, vision, and priorities.
•Incentivize executives to strike the ideal balance of driving optimal business performance without undue risk-taking by aligning performance with ethical standards, regulatory compliance, budgets, risk management processes and internal controls.
•Reward long-term growth and profitability.
•Encourage and reward performance aligned with our strategic plan (pay for performance) while striving to ensure that the quality and risk performance is consistent with the risk appetite of the Company.
•Recognize and reward the success of the management team as a whole in managing the Company, and use that overall performance as the basis for determining overall compensation, taking into consideration pertinent economic conditions, interest rate trends and the competitive market environment.
•Recognize and reward individual achievement and contributions consistent with our long-term objectives and core values.
•Align executive compensation with the interests of stockholders. We seek to have the long-term performance of our stock reflected in executive compensation through our equity incentive programs. Our approach to compensating management includes a review of all incentive programs to avoid imprudent risk-taking and to promote safety and soundness. We believe that compensation should not be based on the short-term performance of our stock, whether favorable or unfavorable, as we believe that the value of our stock will, in the long-term, reflect our operating performance, and ultimately, the management of the Company by our executives.
•Use performance-based compensation where appropriate to link the success of the executive with the success of the Company.
42 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
The charts below illustrate the pay mix for our Chief Executive Officer and other NEOs. A significant portion of executive pay is at-risk and based on performance:
The principal components of our current executive compensation program include the following:
| Base Salary | We pay base salaries commensurate with an executive’s position and experience. Subject to the terms of any employment agreement in place, base salaries for our executive officers are generally reviewed annually by the CNG Committee. | ||||
| Performance-Based Annual Incentive Plan | We award annual incentives that reward achievement of pre-defined performance goals and align with our strategic plan and Board approved budget. Executive officers are given the opportunity to earn a target annual cash incentive as a percent of their salary. The CNG Committee has adopted a performance-based annual incentive program, intended to provide payment for achieving key annual performance objectives set by the CNG Committee. | ||||
| Equity Performance-Based Incentive Awards | We award performance-based equity incentives that reward long-term performance and stock price appreciation and align our executives' interests with those of our stockholders. We provide performance-based equity to reward executives for achieving our long-term goals intended to increase stockholder value. Half of the annual long-term incentive awards granted to our NEOs are based on three-year performance goals. The CNG Committee also considers executive officer performance and recommends equity incentive awards for our Chief Executive Officer based on a variety of factors, in its discretion, and for our other executive officers based on recommendations from the Chief Executive Officer. The CNG Committee’s recommendation and approval by the Board, as applicable, reflect the belief that equity incentives encourage executives to focus on long-term stockholder value creation and foster alignment with our stockholders. | ||||
| Other Compensation | We provide 401(k) plan, and health, disability, life insurance benefits, change in control severance benefits, as well as other modest benefits. | ||||
The foregoing components fit into our overall compensation objectives by allocating between long-term and short-term compensation to ensure adequate base compensation to attract and retain personnel, while providing incentives with an appropriate level of risk to maximize long-term value for our Company and our stockholders. We believe our overall compensation package, including benefits and equity-related awards, is competitive within the marketplace and consistent with the philosophy and objectives of our compensation program.
43 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Elements of our Compensation Decision Making
The CNG Committee considers information from a variety of sources when reviewing and designing the Company’s compensation program and pay levels. These sources include, but are not limited to, publicly available compensation data regarding executive officers within the industry, the Company’s understanding of compensation arrangements at other financial institutions, Board and management perspectives, feedback from key stakeholders (including common stockholders, holders of our other securities and regulators), and advice from the CNG Committee’s consultants.
CNG Committee's Response to 2022 "Say-on-Pay" Vote. Our last “say-on-pay” vote was held at our 2022 annual meeting of stockholders, during which the stockholders were presented with an opportunity to vote on an advisory, non-binding basis with respect to compensation paid to our NEOs for the year ended December 31, 2021. Approximately 87% of the votes cast voted in favor of the say-on-pay proposal at our 2022 annual meeting of stockholders. During 2022, we continued to review our NEO compensation plan design with the CNG Committee and its independent compensation consulting firm, Meridian Compensation Partners LLC (Meridian). We also continued to encourage engagement from our investors on topics related to long-term stockholder value, including our ESG initiatives and executive compensation matters. For information regarding the say-on-pay vote to be held at this year’s Annual Meeting, see Proposal III - Approval, on an Advisory and Non-Binding Basis, of the Compensation Paid to our NEOs section in this proxy statement.
Role of the Chief Executive Officer. Our Chief Executive Officer typically makes compensation recommendations to the CNG Committee for all executive officers who report to him, who are not present during the deliberations. The CNG Committee makes compensation recommendations to our Board with respect to the Chief Executive Officer, who is not present during the deliberations. The CNG Committee and the Board may accept or adjust such recommendations.
Role of Compensation Consultants. The CNG Committee retains the services of independent consultants to assist the committee with its consideration of the Company’s compensation policies, programs and practices.
The CNG Committee has engaged Meridian to serve as the CNG Committee's independent advisor. During 2022, Meridian reviewed and assisted with incentive compensation program design, Chief Executive Officer pay, and director pay, and provided ongoing information on market trends related to executive and board compensation matters. Meridian attended certain CNG Committee meetings and met with the CNG Committee in executive session. Meridian does not provide any other services to the Company. The CNG Committee evaluated Meridian's independence relative to the standards adopted by the NYSE with regard to compensation advisor independence and determined Meridian was independent and had no conflicts of interest.
Role of Peer Group for 2022 Compensation Decisions
During late 2020, the CNG Committee approved a compensation peer group with the assistance of Meridian. The peer group was used to benchmark market practices related to executive and board compensation programs and pay levels and to provide guidance in setting 2022 pay opportunities. Meridian used an objective methodology to select commercial banks in the western region of the United States with assets ranging from approximately 1/2 to 2 1/2 times the Company's assets. This methodology resulted in 17 banks with the Company positioned at the 63rd percentile for assets at the time the peer group was approved by the CNG Committee.
Axos Financial, Inc. | Luther Burbank Corporation | ||||||||||
Banner Corporation | National Bank Holdings Corporation | ||||||||||
Columbia Banking System, Inc. | Pacific Premier Bancorp, Inc. | ||||||||||
CVB Financial Corp. | Preferred Bank | ||||||||||
First Foundation Inc. | RBB Bancorp | ||||||||||
Heritage Commerce Corp. | Sierra Bancorp | ||||||||||
Heritage Financial Corporation | TriCo Bancshares | ||||||||||
HomeStreet, Inc. | Westamerica Bancorporation | ||||||||||
Hope Bancorp, Inc. | |||||||||||
44 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
2022 Compensation Components and Pay Decisions
In light of the accomplishments and financial performance achieved by management in 2022, the CNG Committee approved payouts that rewarded the executive team for achieving the strategic and financial objectives set by the Board at the beginning of the year.
The following sections highlight the key components with respect to our NEO compensation program for 2022.
Base Salary
The base salaries of our NEOs are determined by the CNG Committee, subject in certain cases to terms set forth in employment agreements or other arrangements, including offers of employment. During the 2022 fiscal year, two of our NEOs were employed for specified terms pursuant to employment agreements (Mr. Wolff and Ms. Hopkins). Subject to the terms of employment agreements or other arrangements, salaries are reviewed and adjusted at the discretion of the CNG Committee or the Board of Directors. As it relates to the remainder of the NEOs, we follow our standard practice of documenting the duties and responsibilities of the role, and reviewing a market compensation survey periodically, including data and analysis provided by Meridian. The survey report is reviewed by the Chief Executive Officer and the compensation is recommended to the CNG Committee for review and approval for positions other than himself.
The chart below shows the annual rate of base salary for each NEO as of December 31, 2022, 2021, and 2020. The Company does not seek to increase salaries annually but as appropriate and in line with market movement. In 2022, NEO salaries remained flat, other than the CEO, whose salary was increased (in coordination with a review of his employment contract) and market data. The CNG Committee determined an increase of 8% was appropriate to recognize Mr. Wolff’s performance and align with market practice.
| Annual Rate of Base Salary | |||||||||||||||||||||||
As of December 31, 2020 | As of December 31, 2021 | As of December 31, 2022 | '21 vs '22 % Change | ||||||||||||||||||||
| Jared Wolff | $ | 750,000 | $ | 810,000 | $ | 875,000 | 8% | ||||||||||||||||
| President and Chief Executive Officer | |||||||||||||||||||||||
| Lynn Hopkins | $ | 425,000 | $ | 446,250 | $ | 446,250 | — | ||||||||||||||||
| Former Executive Vice President, Chief Financial Officer | |||||||||||||||||||||||
| Ido Dotan | $ | 395,000 | $ | 410,800 | $ | 410,800 | — | ||||||||||||||||
| Executive Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary | |||||||||||||||||||||||
| Robert Dyck | $ | 360,000 | $ | 372,600 | $ | 372,600 | — | ||||||||||||||||
| Senior Executive Vice President, Chief Credit Officer | |||||||||||||||||||||||
| Lynn Sullivan | $ | 400,000 | $ | 412,000 | $ | 412,000 | — | ||||||||||||||||
| Former Executive Vice President, Chief Risk Officer | |||||||||||||||||||||||
45 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Incentive (Performance) Based Compensation (Annual and Long-Term)
Executive Incentive Compensation Plan. The Company's Executive Incentive Compensation Plan (Executive Incentive Plan) is an annual (cash-based) incentive plan that is designed to motivate and reward pre-defined annual performance goals and objectives. The Executive Incentive Plan defines target incentive opportunities and specific performance goals for the fiscal year that are approved by the CNG Committee at the start of each year.
The Executive Incentive Plan also provides that, unless otherwise determined by the CNG Committee, an award will be forfeited if the applicable executive’s employment does not continue through the date the award is paid. Awards under the Executive Incentive Plan may be paid in cash or the Company's common stock issued under the Company’s 2018 Omnibus Plan (or any successor plan).
For the performance period of January 1, 2022 to December 31, 2022, each NEO had the opportunity to earn an incentive award between a threshold and maximum amount based on the degree of achievement of the performance goals, or forfeited if threshold performance was not achieved, as reflected in the table below.
| Annual Incentive Opportunity as a % of Salary | Annual Incentive Opportunity in $ | ||||||||||||||||||||||
| Name | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||
| Jared Wolff | 50% | 100% | 150% | $ | 437,500 | $ | 875,000 | $ | 1,312,500 | ||||||||||||||
| Lynn Hopkins | 38% | 75% | 113% | $ | 167,344 | $ | 334,688 | $ | 502,032 | ||||||||||||||
| Ido Dotan | 25% | 50% | 75% | $ | 102,700 | $ | 205,400 | $ | 308,100 | ||||||||||||||
| Robert Dyck | 25% | 50% | 75% | $ | 93,150 | $ | 186,300 | $ | 279,450 | ||||||||||||||
| Lynn Sullivan | 38% | 75% | 113% | $ | 154,500 | $ | 309,000 | $ | 463,500 | ||||||||||||||
The CNG Committee recognized the importance of rewarding and incentivizing the executive team for performance that supports our Board approved strategic plan and focuses on financial metrics that drive long-term stockholder value while also being within management's control. The 2022 incentive award was based on the following performance metrics and corresponding weights, which were defined and set in early 2022:
•[30%] Diluted Core Earnings Per Share (Diluted Core EPS) (net income available to common stockholders, excluding the following: (i) gains/losses on investments in alternative energy partnerships using the hypothetical liquidation at book value (HLBV) method, (ii) a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan, (iii) certain indemnified legal costs, and (iv) other items at the discretion of the CNG Committee, divided by total average diluted outstanding common shares;
•[20%] Demand Deposit Growth (growth in net demand deposit balances during the year ended December 31, 2022);
•[20%] Adjusted Net Loan Growth (growth in net loans during the year ended December 31, 2022);
•[10%] Non-Performing Assets to Total Loans and Other Real Estate Owned Ratio (NPA/Loans + OREO) (ratio of non-performing assets to total loans and other real estate owned at December 31, 2022);
•[10%] Adjusted Efficiency Ratio (total noninterest expense less HLBV gains or losses, certain indemnified legal costs and other items at the discretion of the CNG Committee divided by the sum of net interest income and adjusted noninterest income); and
•[10%] Qualitative Considerations (represents CNG Committee discretion relative to other, qualitative and financial considerations not reflected in the foregoing performance metrics, including, but not limited to, a holistic performance view, successful preferred stock redemption, forward progress in regulatory matters, strategic initiatives, and ESG initiatives).
These metrics were selected by the CNG Committee to reward executives for executing on specific strategic initiatives that the CNG Committee and Board believe drive our profitability and long-term stockholder value. In addition to utilizing the performance criteria described above, in order to mitigate risk, the 2022 incentive awards included a gating measure requiring that the Company and the Bank be “well-capitalized” under all regulatory definitions, which if not met, would result in executive management not being eligible to receive incentive compensation.
46 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
The Executive Incentive Plan provides the CNG Committee the authority to adjust incentive compensation up or down in its sole discretion based on any factors it deems relevant in consideration of measuring the performance of the Company’s executives. In addition, the CNG Committee can also exercise negative discretion with respect to any adverse risk or regulatory matters.
After the end of 2022, the CNG Committee calculated the incentive payouts based on the performance goals as defined at the beginning of the year. The CNG Committee determined the gating measure had been met for the 2022 incentive awards and reviewed performance as calculated below. The CNG Committee also evaluated performance relative to the Qualitative Considerations component. Below is a summary of the performance goals at threshold, target and maximum compared to actual achievement (dollars in millions, except per share data):
| Performance Achieved | ||||||||||||||||||||||||||||||||
| Performance Objective | Performance Weight | Threshold Performance (Payout at 50% of Target) | Target Performance | Maximum Performance (Payout at 150% of Target) | Actual Achieved | Percentage Achieved | Payout (Weight x Percentage Achieved) | |||||||||||||||||||||||||
Diluted Core EPS (1) | 30 | % | $1.43 | $1.68 | $1.93 | $1.74 | 112 | % | 33 | % | ||||||||||||||||||||||
Demand Deposit Growth(2) | 20 | % | $349 | $465 | $581 | $70 | — | % | 0 | % | ||||||||||||||||||||||
Adjusted Net Loan Growth (3) | 20 | % | $402 | $536 | $670 | $870 | 125 | % | 25 | % | ||||||||||||||||||||||
| NPA/Loans + OREO | 10 | % | 0.87% | 0.72% | 0.52% | 0.78% | 80 | % | 8 | % | ||||||||||||||||||||||
Adjusted Efficiency Ratio (1) | 10 | % | 59.0% | 56.0% | 53.0% | 55.8% | 106 | % | 11 | % | ||||||||||||||||||||||
| Qualitative Considerations | 10 | % | 130 | % | 13 | % | ||||||||||||||||||||||||||
| Total payout | 100 | % | 90 | % | ||||||||||||||||||||||||||||
(1)Diluted Core EPS excludes HLBV gains or losses, certain indemnified legal costs and other items at the discretion of the CNG Committee. In 2022, Diluted Core EPS also include adjustments made related to a $31.3 million pre-tax reversal of credit losses due to the recovery of a single loan previously charged off in 2019.
(2)Demand deposits include noninterest-bearing checking and interest-bearing checking.
(3)Actual achievement based on the Adjusted Net Loan Growth warranted a 150% payout (i.e. above stretch performance); however, the CNG Committee exercised its negative discretion in lowering the percentage achieved to 125%.
(4)See Appendix A for Non-GAAP Reconciliation.
As a result of the calculation presented above and described below, the aggregate payout percentage earned under the performance metrics for 2022 was 90%.
•The Company’s performance in Diluted Core EPS exceeded the target level of performance, which had a target weighting of 30%. Accordingly, a payout of 112% of the target weighting, or 33%, was earned with respect to that performance objective.
•The Company's Demand Deposit Growth, which had a target weighting of 20%, was below the threshold level of performance due to the macroeconomic environment and rapidly rising interest rates that resulted in outflow of excess deposits. Accordingly, no payout was earned with respect to that performance objective.
•The Company exceeded the target maximum level of performance in Adjusted Net Loan Growth, which had a target weighting of 20% and was measured excluding warehouse loans because this type of lending was heavily impacted during 2022 by the higher interest rate environment. The CNG Committee recognized management's achievement of approximately $1.9 billion of loan production during 2022; however, the Committee decided to moderate this achievement and use its negative discretion to lower the payout from 150% of the target weighting to 125%. Accordingly, a payout of 125% of the target weighting, or 25%, was earned with respect to this performance objective.
•The Company did not exceed the target level of performance in NPA/Loans + OREO, which had a target weighting of 10%. The NPA/Loans + OREO ratio was higher than the pre-determined target. Accordingly, a payout of 80% of the target weighting, or 8%, was earned with respect to that performance objective.
•The Company's performance in the Adjusted Efficiency Ratio was just above the target level of performance, which had a target weighting of 10%. Accordingly, a payout of 106% of the target weighting, or 11%, was earned with respect to that performance objective.
47 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
•For the Qualitative Consideration component, which had a target weighting of 10%, the CNG Committee determined, based on the Company’s overall level of performance during 2022, that a payout of 130% of the target weighting, or 13%, was earned with respect to that component. In making this determination, the CNG Committee considered the following achievements by the Company: the $31.3 million recovery from the settlement of a loan previously charged off in 2019; completion of the acquisition of Deepstack Technologies and entrance into the payment processing space; growth in tangible book value (excluding the acquisition of Deepstack Technologies); forward progress in regulatory matters, strategic technology investments and ESG initiatives; and effective use of capital to redeem all of our preferred stock and completion of a $75 million common stock repurchase program.
The CNG Committee, after consultation with the Chief Executive Officer, determined to adjust the 90% payout level to certain of the NEOs in order to better reflect their respective contributions to the Company's overall performance in 2022. Accordingly, the cash incentive amounts awarded for 2022 to the NEOs were as follows:
| Officer | Target Cash Incentives | Cash Incentives at 90% Payout Level | Adjustments | Total Cash Incentives Earned | Actual Bonus Paid as Percent of Target | ||||||||||||
| Jared Wolff | $ | 875,000 | $ | 787,500 | $ | — | $ | 787,500 | 90 | % | |||||||
| Lynn Hopkins | $ | 334,688 | $ | 301,219 | $ | (26,775) | $ | 274,444 | 82 | % | |||||||
| Ido Dotan | $ | 205,400 | $ | 184,860 | $ | 20,540 | $ | 205,400 | 100 | % | |||||||
| Robert Dyck | $ | 186,300 | $ | 167,670 | $ | 9,315 | $ | 176,985 | 95 | % | |||||||
| Lynn Sullivan | $ | 309,000 | $ | 278,100 | $ | (15,450) | $ | 262,650 | 85 | % | |||||||
Long-Term Incentives. The CNG Committee believes that a significant portion of the NEOs’ target compensation should be in the form of equity-based incentives, which motivates our executives and key employees to drive and create the long-term performance of the Company. These awards are intended to reward performance over a multi-year period, align the interests of our executives with those of stockholders, instill an ownership culture, enhance the personal stake of executive officers in the growth and success of the Company, and support retention of top performers. Long-term incentive awards are granted under the 2018 Omnibus Plan.
Fiscal Year 2022 Annual Equity Grants. The CNG Committee’s philosophy regarding long-term incentive awards includes our practice that 50% of the annual equity award issued to each NEO, other than the Chief Risk Officer, consists of PSUs that cliff vest based on three-year performance. The remaining 50% of the award to each NEO other than the Chief Risk Officer consists of RSUs that vest over three years. The annual equity award issued in 2022 to the Chief Risk Officer consisted entirely of RSUs scheduled to vest over three years; the CNG Committee believed this was appropriate based on the nature of her position, which was focused primarily on risk management rather than financial performance. Annual equity grants for the other NEOs were made on March 1, 2022 as follows:
Of the 2022 annual PSU awards:
•One-half is contingent on the Company’s Core Return on Average Tangible Common Equity (Core ROATCE) for the year ending December 31, 2024 relative to a pre-established target. Core ROATCE is computed by dividing core net
48 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Core net income (loss) available to common stockholders is net income (loss) available to common stockholders excluding gains/losses on investments in alternative energy partnerships using the HLBV method, certain indemnified legal costs and other items at the discretion of the CNG Committee. Tangible common equity is calculated by subtracting goodwill, other intangible assets and preferred stock from total equity.
•One-half is contingent on the Company’s Total Shareholder Return (TSR) over the three-year period ending December 31, 2024 relative to the Keefe, Bruyette & Woods (KBW) NASDAQ Regional Banking Index to a pre-established percentile.
| Performance Period 2022-2024 | ||||||||||||||
| Performance Weight | Threshold Performance (Payout at 50% of Target) | Target Performance | Maximum Performance (Payout at 150% of Target) | |||||||||||
| Core ROATCE | 50% | 50% | 100% | 150% | ||||||||||
| Relative TSR | 50% | 50% | 100% | 150% | ||||||||||
Since the 2022 annual PSU awards are not earned until the end of the three-year period in 2024, the specific goals for each of the performance measures are not provided at this time but will be disclosed in detail when performance is determined. The CNG Committee approved the goals to ensure that the performance metrics align with the Company's strategic plan and have been set at a target level which is expected to enhance the franchise value of the Company and at a level viewed by the CNG Committee as challenging.
Similar to the 2022 incentive awards under the Executive Incentive Plan, in order to mitigate risk, the 2022 annual PSUs also contain a gating measure requiring that the Company and the Bank be “well-capitalized” under all regulatory definitions in order for grants to vest.
The following table shows the performance and time-based annual equity awards that were granted to the NEOs in 2022. The RSUs are scheduled to vest in one-third annual increments beginning on the first anniversary of the grant date. Each PSU award in the following table is scheduled to vest at the end of the three-year period, assuming the performance conditions have been met and subject to the NEO's satisfaction of the employment condition.
| Name | Grant Date | RSU Shares Granted | PSU Shares Granted | ||||||||
| Jared Wolff | 3/1/2022 | 24,491 | 24,491 | ||||||||
Lynn Hopkins (1) | 3/1/2022 | 8,516 | 8,516 | ||||||||
| Ido Dotan | 3/1/2022 | 6,272 | 6,272 | ||||||||
| Robert Dyck | 3/1/2022 | 4,741 | 4,740 | ||||||||
Lynn Sullivan (2) | 3/1/2022 | 8,387 | — | ||||||||
(1) As a result of Ms. Hopkins' transition from the Company, all of her PSUs and unvested RSUs are forfeited as of her last day of employment with the Company on March 31, 2023.
(2) As a result of Ms. Sullivan's retirement, all of her unvested RSUs are forfeited as of her last day of employment with the Company on June 30, 2023.
Stockholder Value Creation Award Equity Grant. On June 6, 2022, the CNG Committee awarded a one-time performance-based equity grant to several members of the Bank's leadership team, including the NEOs. This was intended to incentivize and reward the creation of significant stockholder value, well beyond the performance expectations of our ongoing LTI program. This equity grant was in the form of 100% PSUs that will vest on the fourth anniversary of the grant date if the following two conditions are met:
•within four years after the grant date, the Company’s voting common stock reaches a price of $35.00 per share and maintains that price, based on the volume-weighted average price, for 20 consecutive trading days; and
•the executive remains in the service of the Company through the fourth anniversary of the grant date.
If both conditions are met, the PSUs will vest in full on the fourth anniversary of the grant date.
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| Compensation Discussion and Analysis | ||
If either condition is not met, the PSUs will be forfeited.
The CNG Committee believes the Stockholder Value Creation Award equity grant is a highly cost-effective means of further aligning the interests of management with the interests of the Company’s stockholders by incentivizing the creation of significant stockholder value and enabling management to share in that value creation. The CNG Committee also believes that by both rewarding management for creating that value and including a four-year service requirement as a vesting condition, this performance-based equity grant greatly enhances the Company’s ability to retain top talent.
Achieving the target price of $35.00 would represent an approximately 85% increase from the grant date closing price of $18.96 and create nearly $1 billion in additional stockholder value, based on the approximately 61.1 million shares of the Company’s common stock outstanding on the grant date. The aggregate grant date fair value of the PSUs awarded as part of the Stockholder Value Creation Award equity grant was $6.0 million, ($3.9 million to NEOs), representing an after-tax expense of $4.2 million, or less than one percent of the nearly $1 billion in additional stockholder value that would be created if the performance goal is achieved.
The total number of shares underlying the PSUs awarded as part of the Stockholder Value Creation Award equity grant is 713,326 shares, which at the target price of $35.00 and assuming approximately 61.1 million shares of the Company’s common stock outstanding, would represent approximately 1.2% of the Company’s pro forma market capitalization. The net number of shares expected to be issued (on an after-tax basis) upon the vesting of the PSUs is approximately 380,949 shares, which would represent less than one percent of total outstanding voting common shares on a pro forma basis.
The following table shows the grant date fair values of the PSUs awarded to the NEOs as part of the Stockholder Value Creation Award equity grant which will vest only upon achievement of an 85% increase in share value in four years.
| Name | Grant Date | Type of Award Granted | Grant Date Fair Value | |||||||||||
| Jared Wolff | 6/6/2022 | PSU | $3,074,069 | |||||||||||
Lynn Hopkins (1) | 6/6/2022 | PSU | $1,068,939 | |||||||||||
| Ido Dotan | 6/6/2022 | PSU | $500,955 | |||||||||||
| Robert Dyck | 6/6/2022 | PSU | $324,553 | |||||||||||
Lynn Sullivan (2) | 6/6/2022 | PSU | $287,097 | |||||||||||
(1) As a result of Ms. Hopkins' transition from the Company effective March 31, 2023, she will not vest in her equity grant PSUs.
(2) As a result of Ms. Sullivan's retirement, she will not vest in her equity grant PSUs.
2020-2022 PSU Awards. In 2020, as part of their equity awards granted for that year, each NEO, other than the Chief Risk Officer, was awarded PSUs that could be earned over a performance period that ended on December 31, 2022 (the 2020 PSUs). The 2020 PSUs awarded to Mr. Wolff, Ms. Hopkins, Mr. Dotan and Mr. Dyck had grant date fair values of approximately $386,989, $219,296, $101,912 and $92,879, respectively. Effective February 27, 2023, the CNG Committee certified the achievement of the performance goals of the 2020 PSUs as described below, which vested for each executive at the end of the required service period, i.e., on March 2, 2023, the third anniversary of the grant date of the 2020 PSUs.
Performance goals for the 2020 PSUs were as follows:
•one-third was contingent on the Company’s Diluted Core EPS (diluted earnings per share excluding or including items at the discretion of the CNG Committee) for the year ending December 31, 2022 relative to a pre-established target;
•one-third was contingent on the Company’s Core Return on Average Assets (Core ROAA) (net income excluding items at the discretion of the CNG Committee/average assets) for the year ending December 31, 2022 relative to a pre-established target; and
•one-third was contingent on the Company’s TSR over the three-year period ending December 31, 2022 relative to the KBW Nasdaq Regional Banking Index to a pre-established percentile.
In addition, in order to mitigate risk, the 2020 PSUs also contained a gating measure requiring that the Company and the Bank be “well-capitalized” under all regulatory definitions.
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| Compensation Discussion and Analysis | ||
After the end of 2022, the CNG Committee determined that the gating condition had been met and that Mr. Wolff, Ms. Hopkins, Mr. Dotan and Mr. Dyck were eligible to earn the 2020 PSUs to the extent indicated in the table below. These awards vested on March 2, 2023.
| Performance Achieved | |||||||||||||||||||||||
| Performance Objective | Performance Weight | Threshold Performance (Payout at 50% of Target) | Target Performance | Maximum Performance (Payout at 150% of Target) | Actual Achieved | Percentage Achieved | Payout (Weight x Percentage Achieved) | ||||||||||||||||
| Diluted Core EPS | 33.3% | $1.24 | $1.65 | $2.06 | $1.74 | 111% | 37% | ||||||||||||||||
| Core ROAA | 33.3% | 0.78% | 1.04% | 1.31% | 1.15% | 122% | 40% | ||||||||||||||||
| Relative TSR | 33.3% | 30th Percentile | 50th Percentile | 80th Percentile | 31st Percentile | 52% | 17% | ||||||||||||||||
| Total payout | 100% | 94% | |||||||||||||||||||||
With respect to Diluted Core EPS and Core ROAA, actual performance was between the target and maximum levels of performance, resulting in weighted payout percentages of 37% and 40%, respectively, for these two performance measures. On Relative TSR, actual performance was between the threshold and target levels of performance, resulting in a weighted payout percentage of 17% for this performance measure. Based on the sum total of the three payout percentages, Mr. Wolff, Ms. Hopkins, Mr. Dotan and Mr. Dyck each earned 94% of their 2020 PSUs.
2019-2021 PSU Awards. In 2019, as part of their equity awards granted for that year, each of Mr. Wolff, Mr. Dotan and Mr. Dyck were awarded PSUs that could be earned in one-third annual increments over a three-year period that ended on December 31, 2021 (the 2019 PSUs). The 2019 PSUs earned for Mr. Wolff, Mr. Dotan and Mr. Dyck had grant date fair values of approximately $250,000, $75,000 and $50,000, respectively. On March 1, 2022, the CNG Committee certified the achievement of a portion of the performance goals of the 2019 PSUs as described below, which vested for each executive during 2022 at the end of his required service period, i.e., on the third anniversary of the grant date of his 2019 PSUs (April 29, 2022 for Mr. Wolff, June 12, 2022 for Mr. Dotan and September 10, 2022 for Mr. Dyck). None of the other NEOs were awarded 2019 PSUs.
Performance goals for the 2019 PSU grants were as follows:
•50% was contingent on specified reductions in the gap between the Company’s cost of deposits and the median cost of deposits of the Index Group (all U.S. banks and thrifts with total assets of between $5 billion and $15 billion excluding Puerto Rico as of December 31, 2018), for the fourth quarter of each fiscal year of a three-year period that began on January 1, 2019 and ended on December 31, 2021; and
•50% was contingent on the Company’s core return on average assets relative to a pre-established target for each year of a three-year period that began on January 1, 2019 and ended on December 31, 2021.
In addition, the 2019 PSUs contained two gating criteria for each year of the three-year performance period to mitigate risk: (i) a requirement that the Company’s ratio of non-performing assets to total loans and other real estate owned be better than the 50th percentile of the Index Group, measured at the end of each year; and (ii) a requirement that the Company and the Bank be “well-capitalized” under all regulatory definitions.
After the end of 2021, the third year of the three-year performance period for the 2019 PSUs, the CNG Committee determined that both gating criteria had been met. Accordingly, as and to the extent indicated in the table below, the CNG Committee determined after the end of 2021 that each of Mr. Wolff, Mr. Dotan and Mr. Dyck was eligible to earn the last one-third portion of the 2019 PSUs, based on the level of achievement of performance goals for 2021, and such awards vested in 2022 at the end of their respective three-year service periods.
51 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
| Performance Achieved | |||||||||||||||||||||||
| Performance Objective | Performance Weight | Threshold Performance (Payout at 50% of Target) | Target Performance | Maximum Performance (Payout at 150% of Target) | Actual Achieved | Percentage Achieved | Payout (Weight x Percentage Achieved) | ||||||||||||||||
Cost of Deposits Relative to Peer Median(1) | 50% | 0.14% | 0.04% | 0% | (0.04)% | 150% | 75% | ||||||||||||||||
Core Return on Average Assets(2) | 50% | 0.99% | 1.05% | 1.15% | 0.97% | 0% | 0% | ||||||||||||||||
| Total payout | 100% | 75% | |||||||||||||||||||||
(1)Performance levels represent the amount by which the Company’s cost of deposits exceed the Index Group median.
(2)Core Return on Average Assets is defined as Return on Average Assets excluding certain one-time or other non-core income and expense items at the discretion of the CNG committee. See Appendix A in this proxy statement for Non-GAAP Reconciliation.
For 2021, actual performance of 50% of the grant allocated to the cost of deposits metric relative to the Index Group median, was earned at the maximum level of performance (i.e., 150% of Target) for 2021. With respect to core return on average assets, the actual performance was below the threshold performance for 2021, and as a result, none of this portion of the award was earned for 2021. These performance results have been certified by the CNG Committee. Accordingly, Mr. Wolff, Mr. Dotan and Mr. Dyck each earned 75% of the 2019 PSU award eligible to be earned for 2021. Actual vesting of each executive's award occurred in 2022 on the third anniversary of his grant date.
Other Benefits; Compensation Policies and Practices
Equity Grant Policy. The CNG Committee, pursuant to delegation from the Board of Directors, administers the 2018 Omnibus Plan and establishes the rules for all awards granted under the plan, including grant guidelines, vesting schedules, and other provisions. The CNG Committee reviews these rules periodically and considers, among other things, the interests of our stockholders, market conditions, information provided by independent advisors, performance objectives, and recommendations made by the Chief Executive Officer.
The CNG Committee reviews the awards granted for all employees. For annual awards granted in 2022, the CNG Committee reviewed the recommendations of the Chief Executive Officer for other executive officers and employees, revised the proposed grants in certain circumstances, and authorized the awards effective as of the date of its approval.
401(k) Plan. We offer a qualified, tax-exempt savings plan to our employees with a cash or deferred feature qualifying under Section 401(k) of the Internal Revenue Code (the 401(k) Plan). All employees who participate in the 401(k) Plan receive matching contributions up to a certain cap, including the NEOs, who receive matching contributions on the same terms and using the same formulas as other participating employees. Participants are also permitted to borrow against their account balance in the 401(k) Plan.
Perquisites and Other Benefits. Our executives are entitled to few benefits that are not otherwise available to all of our employees. During 2022, the limited perquisites that we provided to our NEOs included certain transportation expenses, car allowances, club memberships and life insurance benefits.
Officer Stock Ownership Guidelines. The Board of Directors has adopted Stock Ownership Guidelines (Guidelines) for certain senior officers of the Company. The Guidelines require our Chief Executive Officer to own shares equal to at least 300% of his after-tax base salary and that the other NEOs beneficially own shares equal to at least 100% of their after-tax base salary. Compliance with the Guidelines is required to be achieved within three years from the date each officer first becomes subject to the Guidelines, provided that the CNG Committee, in its sole discretion, may adjust or modify such achievement date. Annually, on the last day of our fiscal year, we evaluate stock ownership of our executive officers and directors based on the market value of the shares on the vesting date. As of December 31, 2022, each of our NEOs complied with the Guidelines, giving allowance for the fact that they had been executive officers for less than three years. For stock ownership guidelines of non-employee directors, see the Our Commitment to Corporate Sustainability – Corporate Governance Framework – Director Stock Ownership Guidelines section in this proxy statement.
Recoupment Policy. Under Section 304 of the Sarbanes-Oxley Act of 2002, if the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirements as a result of misconduct, the Chief Executive Officer and Chief Financial Officer may be required to reimburse the Company for: (i) any bonus or other incentive-
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| Compensation Discussion and Analysis | ||
based or equity-based compensation received during the 12 months following the first public issuance of the non-complying document; and (ii) any profits realized from the sale of the Company's securities during that 12-month period.
The Company's Corporate Governance Guidelines include a recoupment policy that provides the Board with the ability to recover or cancel cash incentive compensation and equity awards granted to certain officers, including the NEOs. The Board is committed to strong corporate governance and the integrity of the Company’s financial statements. Under the recoupment policy, if we are required to restate the Company’s financial statements to correct a material error, or if the Board determines that a financial, operational or other performance metric used to determine the grant, vesting, payment or issuance of incentive compensation was calculated incorrectly, the Board will, if it determines in its sole discretion that it is appropriate, feasible and in the best interests of the Company and its stockholders, cause the forfeiture of outstanding incentive compensation awards and/or require reimbursement of all or part of the incentive compensation previously granted, vested, paid or issued, in each case, in the amount by which the incentive compensation exceeded the amount that would have been granted, vested, paid or issued based on the restated financial statements or correctly calculated metric. If an officer has sold or otherwise disposed of any shares received pursuant to an incentive compensation award, to the extent the shares would have been subject to recoupment as described above, the Board may recoup from the officer any pre-tax gain realized from the sale or disposition of the shares.
The policy also provides for recoupment of any pre-tax gain realized from the sale of shares received under an incentive compensation award to the extent the shares would have been subject to recoupment, and for recoupment or forfeiture of awards in such amount as the Board determines from any officer who engages in illegal, fraudulent, or dishonest conduct that has or could materially adversely affect us, or that contributed to the grant, vesting, payment or issuance of incentive compensation to the officer that was greater than what would have been granted, vested, paid or issued in the absence of the misconduct. The Company expects to update the policy to reflect new listing requirements as they become effective.
Anti-Hedging/Pledging Policy. The Company considers it inappropriate for any director or officer to enter into speculative transactions in the Company’s securities. The Company’s insider trading policy prohibits the purchase or sale, by any director, officer or employee, of puts, calls or other derivative securities based on the Company’s securities or short-selling of the Company’s securities. The policy also prohibits directors, officers and employees from entering into hedging or monetization transactions or similar arrangements with respect to the Company's securities.
Directors, officers, and other employees also may not purchase the Company’s securities on margin, or borrow against any account in which Company securities are held. This prohibition does not apply to a broker-assisted cashless exercise of stock options granted as part of a Company incentive plan. The Company’s Board of Directors granted Patriot Financial Partners II, L.P. and Patriot Financial Partners Parallel II, L.P. (collectively, “Patriot Fund II”), which former Company director W. Kirk Wycoff controls as managing partner of Patriot Fund II’s general partner, a waiver from this prohibition in order to enable Patriot Fund II to pledge shares of the Company’s common stock it owns, along with other securities it owns, as collateral for a line of credit facility. Mr. Wycoff ceased to be a director of the Company on May 12, 2022, upon expiration of his term.
Employment Agreements. Our Chief Executive Officer, Mr. Wolff, has an employment agreement and our former Chief Financial Officer, Ms. Hopkins, had an employment agreement. No other NEO has an employment agreement. Each employment agreement was reviewed by the CNG Committee, who determined that the compensation packages provided under these agreements were fair and reasonable on the basis of the committee’s assessment of comparable compensation opportunities available to the individuals. The specifics of these agreements are described in detail below under Employment Agreements.
Potential Payments Due Upon Termination or a Change in Control. The employment agreement with Mr. Wolff provides, and the employment agreement with Ms. Hopkins provided, for severance payments and other benefits following certain termination and/or change in control events. Each of Mr. Dotan and Mr. Dyck participates in the Banc of California, Inc. Executive Change in Control Severance Plan (Severance Plan), which will provide them with severance payments and other benefits if their employment is terminated under specified circumstances following a change in control. Ms. Sullivan participated in the Severance Plan until the time she retired from her role as Executive Vice President, Chief Risk Officer effective December 31, 2022. Under the terms of respective equity award agreements with our NEOs, the executives are entitled to accelerated vesting of equity awards upon termination of employment under certain circumstances. The specific terms of these arrangements, as well as estimates of the compensation that would have been payable had they been triggered as of December 31, 2022, are described in detail below under the Potential Payments Upon Termination of Employment or Change in Control section in this proxy statement.
53 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Compensation Discussion and Analysis | ||
Tax Impact. Section 162(m) of the Internal Revenue Code generally limits the deductibility of compensation paid to certain executive officers in excess of $1.0 million per officer in any taxable year, including our Chief Executive Officer, Chief Financial Officer and other NEOs. While the Company’s ability to deduct compensation paid to our NEOs has been limited, our CNG Committee has—consistent with its past practice—continued to retain flexibility to design compensation programs that are in the best long-term interests of the Company and our stockholders, with deductibility of compensation being one of many considerations taken into account.
54 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Report of the CNG Committee
The CNG Committee of the Company’s Board of Directors is comprised of the undersigned directors, each of whom is independent as independence is defined for compensation committee members under the NYSE Listed Company Manual. The CNG Committee’s responsibilities are defined in a written charter adopted by the Board of Directors.
The CNG Committee has reviewed and discussed the above Compensation Discussion and Analysis with management. Based on such review and discussions, the CNG Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION, NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Bonnie G. Hill, Chair
Mary A. Curran
Shannon F. Eusey
Jonah F. Schnel
Robert D. Sznewajs
Andrew Thau
55 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Summary Compensation Table
The following table sets forth information regarding the compensation paid to or earned by our NEOs for the years ended December 31, 2022, 2021 and 2020. For information regarding the employment agreements between the Company and certain of the NEOs, see Employment Agreements section in this proxy statement.
| Name and Principal Position | Year | Salary ($) | Stock Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | All Other(4) ($) | Total ($) | ||||||||||||||
| Jared Wolff | 2022 | 864,167 | 4,017,585 | 787,500 | 77,057 | 5,746,309 | ||||||||||||||
| President and Chief Executive Officer | 2021 | 800,000 | 810,036 | 1,012,500 | 81,354 | 2,703,890 | ||||||||||||||
| 2020 | 750,000 | 761,991 | 562,500 | 41,511 | 2,116,002 | |||||||||||||||
Lynn Hopkins (1) | 2022 | 446,250 | 1,397,018 | 274,444 | 36,439 | 2,154,151 | ||||||||||||||
| Former Executive Vice President, Chief Financial Officer | 2021 | 442,708 | 334,714 | 418,359 | 33,763 | 1,229,544 | ||||||||||||||
| 2020 | 425,000 | 431,800 | 239,063 | 17,920 | 1,113,783 | |||||||||||||||
| Ido Dotan | 2022 | 410,800 | 742,584 | 205,400 | 17,981 | 1,376,765 | ||||||||||||||
| Executive Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary | 2021 | 408,167 | 246,480 | 256,750 | 9,851 | 921,248 | ||||||||||||||
| 2020 | 391,667 | 200,668 | 148,125 | 10,255 | 750,715 | |||||||||||||||
| Robert Dyck | 2022 | 372,600 | 507,182 | 176,985 | 7,955 | 1,064,722 | ||||||||||||||
| Senior Executive Vice President, Chief Credit Officer | 2021 | 370,500 | 186,326 | 214,245 | 2,600 | 773,671 | ||||||||||||||
| 2020 | 360,000 | 182,882 | 135,000 | 1,846 | 679,728 | |||||||||||||||
Lynn Sullivan (1) | 2022 | 412,000 | 451,902 | 262,650 | 22,341 | 1,148,893 | ||||||||||||||
| Former Executive Vice President, Chief Risk Officer | 2021 | 410,000 | 164,819 | 355,350 | 12,954 | 943,123 | ||||||||||||||
| 2020 | 400,000 | 200,011 | 225,000 | 15,405 | 840,416 | |||||||||||||||
(1)Ms. Hopkins transitioned from the Company and stepped down from her role as Executive Vice President and Chief Financial Officer effective March 31, 2023. Ms. Sullivan retired from her role as Executive Vice President and Chief Risk Officer effective December 31, 2022.
(2)Represents the grant date fair values of the stock awards granted in that year, calculated under ASC Topic 718. Fair values of stock awards were valued at the closing price of the Company’s voting common stock on the trading day immediately preceding the grant date of the award. For PSUs, the grant date fair value is calculated assuming achievement of the most probable outcome of the performance conditions. The amounts shown do not represent the actual value realized by each NEO. See the PSU and RSU award grant date fair value table on the following page for a detailed description.
(3)Represents payouts of short-term incentive awards earned under the Executive Incentive Plan for 2022, 2021, and 2020, and paid in 2023, 2022, and 2021, respectively.
(4)See the All Other Compensation table for the years ended December 31, 2022, 2021 and 2020 below.
56 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Summary Compensation Table | ||
The following table sets forth the grant date fair value of stock units granted to the NEOs during the year ended December 31, 2022. For PSUs, both the grant date fair value assuming achievement of the most probable outcome of the performance conditions (which is the amount set forth in column of the Summary Compensation Table titled Stock Awards), and the grant date fair value assuming the maximum award amount is achieved are presented. See 2022 Grants of Plan Based Awards table and the Compensation Discussion and Analysis sections in this proxy statement for details regarding the awards.
| Grant Date Fair Value | ||||||||||||||||||||
| Name | Grant Date | Type of Award Granted | Assuming Most Probable Outcome is Achieved | Assuming Maximum Value is Achieved | ||||||||||||||||
| Jared Wolff | 3/1/2022 | RSU | $ | 481,248 | $ | 481,248 | ||||||||||||||
| 3/1/2022 | PSU (1) | $ | 462,268 | $ | 582,585 | |||||||||||||||
| 6/6/2022 | PSU (2) | $ | 3,074,069 | $ | 3,074,069 | |||||||||||||||
| Lynn Hopkins | 3/1/2022 | RSU | $ | 167,339 | $ | 167,339 | ||||||||||||||
| 3/1/2022 | PSU (1)(3) | $ | 160,740 | $ | 202,574 | |||||||||||||||
| 6/6/2022 | PSU (2)(3) | $ | 1,068,939 | $ | 1,068,939 | |||||||||||||||
| Ido Dotan | 3/1/2022 | RSU | $ | 123,245 | $ | 123,245 | ||||||||||||||
| 3/1/2022 | PSU (1) | $ | 118,384 | $ | 149,195 | |||||||||||||||
| 6/6/2022 | PSU (2) | $ | 500,955 | $ | 500,955 | |||||||||||||||
| Robert Dyck | 3/1/2022 | RSU | $ | 93,161 | $ | 93,161 | ||||||||||||||
| 3/1/2022 | PSU (1) | $ | 89,468 | $ | 112,753 | |||||||||||||||
| 6/6/2022 | PSU (2) | $ | 324,553 | $ | 324,553 | |||||||||||||||
| Lynn Sullivan | 3/1/2022 | RSU | $ | 164,805 | $ | 164,805 | ||||||||||||||
| 6/6/2022 | PSU (2)(4) | $ | 287,097 | $ | 287,097 | |||||||||||||||
(1)These PSUs refer to stock units subject to performance measures based on the Company’s core return on average tangible common equity and the Company's total shareholder return relative to the KBW Nasdaq Regional Banking Index over a predetermined measurement period. See Compensation Discussion and Analysis – Long-Term Incentives – Fiscal Year 2022 Annual Equity Awards section in this proxy statement for more information regarding the performance measures associated with these awards.
(2)Represents Stockholder Value Creation Award equity grant described in the Compensation Discussion and Analysis - Incentive (Performance) Based Compensation (Annual and Long-Term) section in this proxy statement.
(3)As a result of Ms. Hopkins' transition from the Company, she will not vest in her Stockholder Value Creation Award equity grant PSUs or the PSUs granted to her as part of her 2022 annual equity award. She also will not vest in two-thirds of the RSUs granted to her as part of her 2022 annual equity award.
(4) As a result of Ms. Sullivan's retirement, she will not vest in her Stockholder Value Creation Award equity grant PSUs. She also will not vest in two-thirds of the RSUs granted to her as part of her 2022 annual equity award.
57 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Summary Compensation Table | ||
The following table summarizes “All Other Compensation” paid to or earned by the NEOs for the years ended December 31, 2022, 2021 and 2020 as included in the Summary Compensation Table.
| Name | Year | 401(k) Match | Dividends on Stock Awards | Other Fringe Benefit(1) | Total | |||||||||||||||
| Jared Wolff | 2022 | $ | 12,200 | $ | 42,032 | $ | 22,825 | (2) | $ | 77,057 | ||||||||||
| 2021 | $ | 11,600 | $ | 46,765 | $ | 22,989 | (2) | $ | 81,354 | |||||||||||
| 2020 | $ | 11,400 | $ | 9,518 | $ | 20,593 | (2) | $ | 41,511 | |||||||||||
| Lynn Hopkins | 2022 | $ | 12,200 | $ | 6,573 | $ | 17,666 | (3) | $ | 36,439 | ||||||||||
| 2021 | $ | 11,600 | $ | 3,583 | $ | 18,580 | (3) | $ | 33,763 | |||||||||||
| 2020 | $ | 1,132 | $ | 1,237 | $ | 15,552 | (3) | $ | 17,920 | |||||||||||
| Ido Dotan | 2022 | $ | 12,200 | $ | 5,348 | $ | 433 | $ | 17,981 | |||||||||||
| 2021 | $ | 9,217 | $ | 387 | $ | 248 | $ | 9,851 | ||||||||||||
| 2020 | $ | 9,583 | $ | 432 | $ | 240 | $ | 10,255 | ||||||||||||
| Robert Dyck | 2022 | $ | — | $ | 3,032 | $ | 4,923 | $ | 7,955 | |||||||||||
| 2021 | $ | — | $ | 877 | $ | 1,723 | $ | 2,600 | ||||||||||||
| 2020 | $ | — | $ | 262 | $ | 1,584 | $ | 1,846 | ||||||||||||
| Lynn Sullivan | 2022 | $ | 12,200 | $ | 9,106 | $ | 1,035 | $ | 22,341 | |||||||||||
| 2021 | $ | 11,600 | $ | 783 | $ | 571 | $ | 12,954 | ||||||||||||
| 2020 | $ | 11,400 | $ | 3,453 | $ | 552 | $ | 15,405 | ||||||||||||
(1)Represents certain amounts paid by the Company for life insurance premiums, transportation, club memberships, and consulting fees.
(2)Includes life insurance premiums, transportation and club memberships of $1,242, $1,283, and $20,300 paid during 2022, $581, $1,283, and $21,125 paid during 2021 and $552, $2,166, and $17,875 paid during 2020, respectively.
(3)Includes life insurance premiums and car allowance of $1,096 and $16,570 paid during 2022, $575 and $18,005 paid during 2021 and $552 and $15,000 paid during 2020, respectively.
58 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
2022 Grants of Plan-Based Awards
The following table sets forth certain information with respect to grants of incentive plan-based awards to the NEOs for 2022.
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Stock Option Awards (2) | |||||||||||||||||||||||||||||||||||
| Grant | Grant | Thres-hold | Target | Maxi-mum | Thres-hold | Target | Maxi-mum | |||||||||||||||||||||||||||||||
| Name | Type | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) | ||||||||||||||||||||||||||||
| Jared Wolff | — | — | $ | 437,500 | $ | 875,000 | $ | 1,312,500 | — | — | — | — | $ | — | ||||||||||||||||||||||||
| PSU | 3/1/2022 | (3) | $ | — | $ | — | $ | — | 12,246 | 24,491 | 36,737 | — | $ | 462,268 | ||||||||||||||||||||||||
| RSU | 3/1/2022 | (4) | $ | — | $ | — | $ | — | — | — | — | 24,491 | $ | 481,248 | ||||||||||||||||||||||||
| PSU | 6/6/2022 | (5) | $ | — | $ | — | $ | — | — | 279,207 | — | — | $ | 3,074,069 | ||||||||||||||||||||||||
| Lynn Hopkins | — | — | $ | 167,344 | $ | 334,688 | $ | 502,032 | — | — | — | — | $ | — | ||||||||||||||||||||||||
| PSU | 3/1/2022 | (3) | $ | — | $ | — | $ | — | 4,258 | 8,516 | 12,774 | — | $ | 160,740 | ||||||||||||||||||||||||
| RSU | 3/1/2022 | (4) | $ | — | $ | — | $ | — | — | — | — | 8,516 | $ | 167,339 | ||||||||||||||||||||||||
| PSU | 6/6/2022 | (5) | $ | — | $ | — | $ | — | — | 97,088 | — | $ | 1,068,939 | |||||||||||||||||||||||||
| Ido Dotan | — | — | $ | 102,700 | $ | 205,400 | $ | 308,100 | — | — | — | — | $ | — | ||||||||||||||||||||||||
| PSU | 3/1/2022 | (3) | $ | — | $ | — | $ | — | 3,136 | 6,272 | 9,408 | — | $ | 118,384 | ||||||||||||||||||||||||
| RSU | 3/1/2022 | (4) | $ | — | $ | — | $ | — | — | — | — | 6,272 | $ | 123,245 | ||||||||||||||||||||||||
| PSU | 6/6/2022 | (5) | $ | — | $ | — | $ | — | — | 45,500 | — | $ | 500,955 | |||||||||||||||||||||||||
| Robert Dyck | — | — | $ | 93,150 | $ | 186,300 | $ | 279,450 | — | — | — | — | $ | — | ||||||||||||||||||||||||
| PSU | 3/1/2022 | (3) | $ | — | $ | — | $ | — | 2,370 | 4,740 | 7,110 | — | $ | 89,468 | ||||||||||||||||||||||||
| RSU | 3/1/2022 | (4) | $ | — | $ | — | $ | — | — | — | — | 4,741 | $ | 93,161 | ||||||||||||||||||||||||
| PSU | 6/6/2022 | (5) | $ | — | $ | — | $ | — | — | 29,478 | — | — | $ | 324,553 | ||||||||||||||||||||||||
| Lynn Sullivan | — | — | $ | 154,500 | $ | 309,000 | $ | 463,500 | — | — | — | — | $ | — | ||||||||||||||||||||||||
| RSU | 3/1/2022 | (4) | $ | — | $ | — | $ | — | — | — | — | 8,387 | $ | 164,805 | ||||||||||||||||||||||||
| PSU | 6/6/2022 | (5) | $ | — | $ | — | $ | — | — | 26,076 | — | — | $ | 287,097 | ||||||||||||||||||||||||
(1) Represents the threshold, target and maximum amounts payable pursuant to each respective NEO’s non-equity incentive award opportunity for 2022 under the Company’s Executive Incentive Plan.
(2) Represents the grant date fair values of the awards under ASC Topic 718. The assumptions used in the calculation of these amounts are included in Note 16 of the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 27, 2023. For PSUs, the grant date fair value is calculated assuming achievement of the most probable outcome of the performance conditions.
(3) Represents PSUs that will vest over a three-year period subject to satisfaction of performance criteria based on the Company’s Core ROATCE and the Company's TSR relative to the KBW Nasdaq Regional Banking Index. See the discussion within the Compensation Discussion and Analysis section of this proxy statement for further detail. As a result of Ms. Hopkins' transition from the Company, she will not vest in these PSUs.
(4) Represents RSUs that will vest in one-third annual increments beginning March 1, 2023. As a result of Ms. Hopkins' transition from the Company and Ms. Sullivan's retirement, they will not vest in two-thirds of these RSUs.
(5) Represents the Stockholder Value Creation Award equity grant. Shares will be issued upon achievement of both (a) Company's common stock achieving a twenty-day volume-weighted average price of $35 per share within four years from the date of grant and (b) the executive's continued service through the fourth anniversary of the grant date. As a result of Ms. Hopkins' transition from the Company and Ms. Sullivan's retirement, they will not vest in their Stockholder Value Creation Award equity grants.
59 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Outstanding Equity Awards at December 31, 2022
The following table provides information regarding unvested RSAs, unvested RSUs and unvested PSUs held by the NEOs as of December 31, 2022. For the PSUs, the number of shares reported in the table below assumes achievement of the target level performance conditions for each NEO.
| Stock Awards | Equity Incentive Plan Awards | ||||||||||||||||||||||||||||
| Name | Grant Date | Vesting Period(1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | |||||||||||||||||||||||
| Jared Wolff | 3/19/2019 | 4 Years | 33,898 | 539,995 | |||||||||||||||||||||||||
| 3/2/2020 | 4 Years | 12,231 | 194,840 | ||||||||||||||||||||||||||
| 3/2/2020 | (4) | 3 Years | 23,239 | 370,198 | |||||||||||||||||||||||||
| 3/9/2021 | 3 Years | 12,982 | 206,803 | ||||||||||||||||||||||||||
| 3/9/2021 | (5) | 3 Years | 19,472 | 310,189 | |||||||||||||||||||||||||
| 3/1/2022 | 3 Years | 24,491 | 390,142 | ||||||||||||||||||||||||||
| 3/1/2022 | (5) | 3 Years | 24,491 | 390,142 | |||||||||||||||||||||||||
| 6/6/2022 | (6) | 4 Years | 279,207 | 4,447,768 | |||||||||||||||||||||||||
Lynn Hopkins (7) | 3/2/2020 | 3 Years | 4,621 | 73,613 | |||||||||||||||||||||||||
| 3/2/2020 | (4) | 3 Years | 13,169 | 209,782 | |||||||||||||||||||||||||
| 3/9/2021 | 3 Years | 5,364 | 85,449 | ||||||||||||||||||||||||||
| 3/9/2021 | (5) | 3 Years | 8,046 | 128,173 | |||||||||||||||||||||||||
| 3/1/2022 | 3 Years | 8,516 | 135,660 | ||||||||||||||||||||||||||
| 3/1/2022 | (5) | 3 Years | 8,516 | 135,660 | |||||||||||||||||||||||||
| 6/6/2022 | (6) | 4 Years | 97,088 | 1,546,612 | |||||||||||||||||||||||||
| Ido Dotan | 3/2/2020 | 4 Years | 3,221 | 51,311 | |||||||||||||||||||||||||
| 3/2/2020 | (4) | 3 Years | 6,120 | 97,492 | |||||||||||||||||||||||||
| 3/9/2021 | 3 Years | 3,950 | 62,924 | ||||||||||||||||||||||||||
| 3/9/2021 | (5) | 3 Years | 5,925 | 94,385 | |||||||||||||||||||||||||
| 3/1/2022 | 3 Years | 6,272 | 99,913 | ||||||||||||||||||||||||||
| 3/1/2022 | (5) | 3 Years | 6,272 | 99,913 | |||||||||||||||||||||||||
| 6/6/2022 | (6) | 4 Years | 45,500 | 724,815 | |||||||||||||||||||||||||
| Robert Dyck | 3/2/2020 | 4 Years | 2,935 | 46,755 | |||||||||||||||||||||||||
| 3/2/2020 | (4) | 3 Years | 5,578 | 88,858 | |||||||||||||||||||||||||
| 3/9/2021 | 3 Years | 2,986 | 47,567 | ||||||||||||||||||||||||||
| 3/9/2021 | (5) | 3 Years | 4,479 | 71,350 | |||||||||||||||||||||||||
| 3/1/2022 | 3 Years | 4,741 | 75,524 | ||||||||||||||||||||||||||
| 3/1/2022 | (5) | 3 Years | 4,740 | 75,508 | |||||||||||||||||||||||||
| 6/6/2022 | (6) | 4 Years | 29,478 | 469,585 | |||||||||||||||||||||||||
Lynn Sullivan (8) | 3/2/2020 | 4 Years | 6,523 | 103,911 | |||||||||||||||||||||||||
| 3/9/2021 | 3 Years | 5,283 | 84,158 | ||||||||||||||||||||||||||
| 3/1/2022 | 3 Years | 8,387 | 133,605 | ||||||||||||||||||||||||||
| 6/6/2022 | (6) | 4 Years | 26,076 | 415,391 | |||||||||||||||||||||||||
(1) RSA and RSU awards begin to vest one year after the grant date, and vest in substantially equal annual installments over the vesting period.
(2) Market value is based on the December 31, 2022 closing price of our voting common stock on the NYSE of $15.93.
60 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Outstanding Equity Awards | ||
(3) Represents the number of shares issuable, assuming achievement of the target level performance conditions associated with each PSU.
(4) The CNG Committee determined that the gating condition had been met in 2022 and that Mr. Wolff, Ms. Hopkins, Mr. Dotan and Mr. Dyck were eligible to each earn 94% of their 2020 PSUs; these awards vested on March 2, 2023.
(5) Represents PSUs that will vest over a three-year period to the extent gating and performance criteria are met.
(6) Represents the Stockholder Value Creation Award equity grant that will be issued upon achievement of both (a) Company's common stock achieving a twenty-day volume-weighted average price of $35 per share within four years from the date of grant and (b) the executive's continued service through the fourth anniversary of the grant date.
(7) As a result of Ms. Hopkins' transition from the Company effective March 31, 2023, all of her equity awards that have not vested by that date are forfeited.
(8) As a result of Ms. Sullivan’s retirement, all of her equity awards that have not vested by her last day of employment with the Company (June 30, 2023) are forfeited.
61 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Stock Awards Vested
The following table provides information regarding RSAs, RSUs and PSUs held by the NEOs that vested during the year ended December 31, 2022. No stock options were exercised by the NEOs during the year ended December 31, 2022, and no NEO has been awarded stock options.
| Stock Awards | ||||||||||||||
| Name | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | ||||||||||||
| Jared Wolff | 65,223 | $ | 1,255,632 | |||||||||||
| Lynn Hopkins | 12,457 | $ | 219,396 | |||||||||||
| Ido Dotan | 9,432 | $ | 170,594 | |||||||||||
| Robert Dyck | 6,518 | $ | 118,154 | |||||||||||
| Lynn Sullivan | 5,903 | $ | 110,781 | |||||||||||
(1) Amounts do not take into account any shares withheld by the Company to satisfy employee income taxes.
(2) Represents the value realized upon vesting of the RSAs, RSUs and PSUs during 2022 for each NEO, based on the market value of the shares on the applicable vesting date.
62 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Employment Agreements
Our Chief Executive Officer, Mr. Wolff, has an employment agreement with us and our former Chief Financial Officer, Ms. Hopkins, had an employment agreement with us. These agreements are described below. For information regarding potential payments to the NEOs upon termination of employment or a change in control, see Potential Payments Upon Termination of Employment or Change in Control section in this proxy statement.
Employment Agreement with Mr. Wolff. On February 7, 2022, we entered into an amended and restated employment agreement with Mr. Wolff, pursuant to which Mr. Wolff serves as President and Chief Executive Officer of the Company and the Bank. The material terms of Mr. Wolff’s amended and restated employment agreement are described in the table below:
| Wolff Employment Agreement | |||||||||||||||||||||||
| Name | Annual Base Salary | Term of Agreement | Bonus | Long-Term Equity Incentive Awards | |||||||||||||||||||
| Effective Date | End Date | Renewal Option | Annual Bonus | ||||||||||||||||||||
| Jared Wolff | $875,000 through February 28, 2023 (increased from $810,000 prior to Effective Date); After February 28, 2023, salary will be determined by the CNG Committee but may not be reduced without Mr. Wolff's written consent. | 3/1/22 | 2/28/25 | Automatic renewal for one-year period beginning March 1, 2025 and on each anniversary of that date, unless notice of non-renewal is provided by either party. Agreement may not be extended beyond February 28, 2027 except by written agreement of the parties. | Eligible for annual cash bonus, targeted at 100% of annual base salary. The actual bonus earned may be between 0% and 150% of target bonus. | Long-term equity incentive awards expected to be based on annual target grant amount equal to 110% of annual base salary (increased from 100% of annual base salary prior to Effective Date). Original employment agreement (entered into on March 4, 2019) also provided for inducement awards consisting of (i) $2 million of RSAs vesting ratably over a four-year period beginning one year after the grant date, subject to continued employment, and (ii) $1 million of PSUs, which have vested in full. | |||||||||||||||||
| Hopkins Employment Agreement | |||||||||||||||||||||||
| Name | Annual Base Salary | Term of Agreement | Bonus | Long-Term Equity Incentive Awards | |||||||||||||||||||
| Effective Date | End Date | Renewal Option | Annual Bonus | ||||||||||||||||||||
Lynn Hopkins (1) | $425,000 through February 28, 2021; After February 28, 2021, salary will be determined by the CNG Committee. | 12/9/2019 | 12/31/22 | Automatic renewal for one-year period beginning December 31, 2022 and on each anniversary of that date, unless notice of non-renewal is provided by either party. Agreement may not be extended beyond December 31, 2026. | Eligible for annual bonus, targeted at 75% of base salary. The actual bonus may be higher or lower, depending on achievement of short-term incentive goals. Cash sign-on bonus of up to $155,000, subject to continuous employment for 30 consecutive calendar days after Effective Date. | $250,000 of RSUs that vest ratably over a three-year period beginning on the first anniversary of the Effective Date, subject to continued employment. Upon 2020 budget approval, $212,500 of RSUs that vest ratably over a three-year period and $212,500 of PSUs with a three-year cliff vesting. | |||||||||||||||||
(1) Ms. Hopkins transitioned from the Company and stepped down from her role of Executive Vice President and Chief Financial Officer effective March 31, 2023.
63 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Summary of Benefits and Potential Payments Upon Termination of Employment or Change in Control
As discussed above, we have an employment agreement with Mr. Wolff and had an employment agreement with Ms. Hopkins. The employment agreement with Mr. Wolff provides, and the employment agreement with Ms. Hopkins provided, for severance payments and other benefits following certain termination and/or change in control events. Payment of any such benefits is contingent upon a variety of factors, including the circumstances under which employment is terminated and approval of certain payments by the CNG Committee.
Each of Mr. Dotan and Mr. Dyck participates in the Severance Plan, and Ms. Sullivan participated in the Severance Plan before she retired from her role as Executive Vice President and Chief Risk Officer. The Severance Plan provides that if, within 12 months following a change in control, the executive’s employment is terminated by us, other than for cause, or by the executive for good reason (as such terms are defined in the Severance Plan), the executive will receive a cash severance payment and continuation of health benefits as indicated in the chart below.
Under the terms of respective equity award agreements with our NEOs, the executives are entitled to accelerated vesting of equity awards after termination of employment following a change in control, with PSUs vesting based on the greater of target performance or actual performance (if measurable), and subject to a pro-rata calculation, as applicable.
The following chart summarizes the payments and other benefits that the NEOs could have received in connection with certain employment termination scenarios based on the applicable employment agreements, Severance Plan and/or award agreements.
Summary of Benefits and Payments Upon Involuntary Termination of Employment without Cause or Voluntary Termination of Employment for Good Reason(1) | |||||||||||||||||||||||
| Severance Payments | Acceleration of Equity Awards | ||||||||||||||||||||||
| Name and Triggering Event | Base Salary Multiple | Bonus Multiple | RSA or RSU | PSU | Health Benefits | Non-Solicitation Restrictions | |||||||||||||||||
| Jared Wolff | |||||||||||||||||||||||
| Termination | X 1 | X 0.5 | (2) | (2) | 12 months | 24 months | |||||||||||||||||
| Termination - Change in Control | X 3 | X 3 | 18 months | 24 months | |||||||||||||||||||
| Death or Disability | |||||||||||||||||||||||
Lynn Hopkins (3) | |||||||||||||||||||||||
| Termination | X 1 | X 0.5 | (2) | (2) | — | 24 months | |||||||||||||||||
| Termination - Change in Control | X 2 | X 2 | 18 months | 24 months | |||||||||||||||||||
| Death or Disability | |||||||||||||||||||||||
| Ido Dotan | |||||||||||||||||||||||
| Termination | — | — | — | — | — | — | |||||||||||||||||
| Termination - Change in Control | X 1.5 | X 1.5 | 18 months | — | |||||||||||||||||||
| Death or Disability | |||||||||||||||||||||||
| Robert Dyck | |||||||||||||||||||||||
| Termination | — | — | — | — | — | — | |||||||||||||||||
| Termination - Change in Control | X 1.5 | X 1.5 | 18 months | — | |||||||||||||||||||
| Death or Disability | |||||||||||||||||||||||
Lynn Sullivan (4) | |||||||||||||||||||||||
| Retirement | — | — | — | — | — | — | |||||||||||||||||
(1) Includes normal or early retirement and voluntary or involuntary (other than for misconduct) termination, including termination following a change in control.
64 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Summary of Benefits | ||
(2) Per the terms of Mr. Wolff’s and Ms. Hopkins’ employment agreements, acceleration of vesting under this scenario is limited to their inducement equity awards.
(3) Ms. Hopkins transitioned from the Company and stepped down from her role as Executive Vice President and Chief Financial Officer effective March 31, 2023. In connection with her transition, subject to entering into a General Release Agreement, Ms. Hopkins will receive severance payments equal to 1X annual base salary and 0.5X her target bonus.
(4) Ms. Sullivan retired from her role as Executive Vice President and Chief Risk Officer effective December 31, 2022. Effective January 1, 2023, pursuant to a transition agreement with us, Ms. Sullivan assumed the position of Advisor, Enterprise Risk, for a term that will end on June 30, 2023. During this term, Ms. Sullivan’s transition agreement entitles her to a salary of $10,000 per month, continuation of health benefits and continuation of vesting in previously awarded RSUs scheduled to vest during the term (which occurred in March 2023).
Potential Payments Upon Termination of Employment or Change in Control as of December 31, 2022
The following table shows the approximate value of the payments and benefits our NEOs would have been entitled to receive had their employment been terminated or had a change in control occurred on December 31, 2022. In the case of Ms. Sullivan, the following table shows the payments and benefits she was entitled to receive upon her retirement from her role as Executive Vice President and Chief Risk Officer effective December 31, 2022. The table excludes: (i) amounts accrued through December 31, 2022 that would be paid in the normal course of continued employment, such as accrued but unpaid salary and bonus amounts; (ii) vested account balances under the Company’s 401(k) plan; and (iii) already vested equity awards. The table also excludes the effect of any cutback required under the executive’s employment agreement, if any, to avoid having any portion of the executive’s payments or benefits being non-deductible by the Company under Section 280G of the Internal Revenue Code and the imposition of an excise tax on the executive under Section 4999 of the Internal Revenue Code. Accordingly, the amounts presented in the table have not been reduced by an amount necessary to avoid the payment of such excise taxes and, therefore, the actual payout amounts may be lower than the amounts presented in the table. In addition, the amounts in the table below assume that, for PSUs held by each NEO, such PSUs vest based on target payouts after termination of employment relating to (i) a change in control or (ii) due to death or disability. The amounts shown are merely estimates of the amounts that would be paid upon termination, each in accordance with the respective employment agreements or other compensation arrangements for each NEO (or the awards that would vest based on the equity agreements). The actual amounts to be paid (or the value of the awards that will vest) can only be determined at the time of termination of employment.
65 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Summary of Benefits | ||
| Severance Payments | Acceleration of | ||||||||||||||||||||||||||||
| Name/Triggering Event | Base Salary Multiple | Bonus Equivalent | RSAs and RSUs(1) | PSUs(2)(3) | Health Benefits | Total | |||||||||||||||||||||||
| Jared Wolff | |||||||||||||||||||||||||||||
| Termination for cause/voluntary termination without good reason | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| Involuntary termination without cause/voluntary termination with good reason | 875,000 | (4) | 437,500 | (4) | 539,995 | — | 37,481 | (6) | 1,889,976 | ||||||||||||||||||||
| After change in control, involuntary termination without cause/voluntary termination with good reason | 2,625,000 | (4) | 2,625,000 | (4) | 1,331,780 | 1,433,868 | 56,222 | (6) | 8,071,870 | ||||||||||||||||||||
| Change in control, but no termination of employment occurs | — | — | — | — | — | — | |||||||||||||||||||||||
| Death or Disability | — | — | 1,331,780 | 1,433,868 | 250,000 | (7) | 3,015,648 | ||||||||||||||||||||||
| Lynn Hopkins | |||||||||||||||||||||||||||||
| Termination for cause/voluntary termination without good reason | — | — | — | — | — | — | |||||||||||||||||||||||
| Involuntary termination without cause/voluntary termination with good reason | 446,250 | (5) | 167,344 | (5) | — | — | — | 613,594 | |||||||||||||||||||||
| After change in control, involuntary termination without cause/voluntary termination with good reason | 892,500 | (5) | 669,376 | (5) | 294,721 | 604,223 | 56,222 | (6) | 2,517,042 | ||||||||||||||||||||
| Change in control, but no termination of employment occurs | — | — | — | — | — | — | |||||||||||||||||||||||
| Death or Disability | — | 294,721 | 604,223 | 250,000 | (7) | 1,148,944 | |||||||||||||||||||||||
| Ido Dotan | |||||||||||||||||||||||||||||
| Termination for cause/voluntary termination without good reason | — | — | — | — | — | — | |||||||||||||||||||||||
| Involuntary termination without cause/voluntary termination with good reason | — | — | — | — | — | — | |||||||||||||||||||||||
| After change in control, involuntary termination without cause/voluntary termination with good reason | 616,201 | 308,100 | 214,147 | 352,955 | 56,222 | (6) | 1,547,625 | ||||||||||||||||||||||
| Change in control, but no termination of employment occurs | — | — | — | — | — | — | |||||||||||||||||||||||
| Death or Disability | — | — | 214,147 | 352,955 | 250,000 | (7) | 817,102 | ||||||||||||||||||||||
| Robert Dyck | |||||||||||||||||||||||||||||
| Termination for cause/voluntary termination without good reason | — | — | — | — | — | — | |||||||||||||||||||||||
| Involuntary termination without cause/voluntary termination with good reason | — | — | — | — | — | — | |||||||||||||||||||||||
| After change in control, involuntary termination without cause/voluntary termination with good reason | 558,900 | 279,450 | 169,846 | 276,687 | — | 1,284,883 | |||||||||||||||||||||||
| Change in control, but no termination of employment occurs | — | — | — | — | — | — | |||||||||||||||||||||||
| Death or Disability | — | — | 169,846 | 276,687 | 250,000 | (7) | 696,533 | ||||||||||||||||||||||
| Lynn Sullivan | |||||||||||||||||||||||||||||
Retirement (8) | — | — | — | — | — | — | |||||||||||||||||||||||
(1)For RSAs and RSUs, the amount shown represents the fair market value of the acceleration of vesting of the unvested awards based on the closing price per share of the Company’s voting common stock on December 31, 2022 of $15.93. For information about the unvested awards, see Outstanding Equity Awards at December 31, 2022 section in this proxy statement.
66 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Summary of Benefits | ||
(2)For PSUs, the acceleration of unvested shares assumes PSUs vest pro-rata based on target payouts after termination of employment relating to a change in control and in the event of death or disability. For information about the unvested awards, see Outstanding Equity Awards at December 31, 2022 section in this proxy statement.
(3)For PSUs awarded under the Stockholder Value Creation equity grant, the acceleration of unvested shares assumes PSUs vest pro-rata based on the portion of the award expensed as of the date of the change in control and in the event of death or disability.
(4)Represents the amount that would be paid to Mr. Wolff in cash pursuant to his employment agreement following the termination of his employment in a lump sum on the first payroll date after 60 calendar days have passed from the termination event.
(5)Represents the amount that would be paid to Ms. Hopkins in cash pursuant to her employment agreement following the termination of her employment in a lump sum on the first payroll period after 60 calendar days have passed from the termination event.
(6)Represents the COBRA premium amount that would be paid to NEO's with the exception of Mr. Dyck, who was not a health plan participant as of December 31, 2022, therefore no amount would be paid under the Severance Plan.
(7)Death benefit paid by the carrier.
(8)Ms. Sullivan retired from her role as Executive Vice President and Chief Risk Officer effective December 31, 2022. Effective January 1, 2023, pursuant to a transition agreement with us, Ms. Sullivan assumed the position of Advisor, Enterprise Risk, for a term that will end on June 30, 2023. During this term, Ms. Sullivan’s transition agreement entitles her to a salary of $10,000 per month, continuation of health benefits and continuation of vesting in previously awarded RSUs scheduled to vest during the term (which occurred in March 2023).
67 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Chief Executive Officer Pay Ratio
The Company believes executive pay should be aligned with our employees to create stockholder value. Annually, the CNG Committee reviews the amounts paid to our Chief Executive Officer (CEO) as compared to amounts paid to all employees. Set forth below is the annual total compensation of our median employee, the annual total compensation of our CEO, Mr. Wolff, and the ratio of those two amounts:
•The 2022 annual total compensation of the median employee of the Company (other than our CEO) was $100,149;
•The 2022 annual total compensation of Mr. Wolff was $5,746,309; and
•For 2022, the ratio of the annual total compensation of Mr. Wolff to the median annual total compensation of all our employees was 57:1.
Our CEO-to-median employee pay ratio is calculated in accordance with Item 402(u) of Regulation S-K promulgated by the SEC. The rules for determining the pay ratio based on the median employee's annual total compensation allow companies to utilize different methodologies that reflect their employment and compensation practices. As such, the pay ratio reported by other companies may not be comparable to our pay ratio. To determine the median employee, we:
•examined actual 2022 earnings from payroll records;
•annualized the regular pay to equal a twelve-month period for employees who joined the Company during 2022;
•excluded employees who separated in 2022 such that only active employees at December 31, 2022 were considered; and
•excluded the CEO and employees with no 2022 regular earnings.
The results were sorted from lowest total compensation to highest total compensation to determine the median employee. The Company calculated the 2022 annual total compensation for both our median employee and our CEO using the same methodology that the Company used to calculate the CEO's annual total compensation for the Summary Compensation Table in this proxy statement and as further described below as applicable:
•we annualized regular pay to equal a twelve-month period; and
•we annualized all other compensation to equal a twelve-month period.
The CEO's total compensation is divided by the total compensation of the median employee to determine the CEO pay ratio.
68 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Pay-Versus-Performance
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and the SEC’s implementing rules, we are providing the following information about the relationship between the compensation paid to our principal executive officer (PEO, also known as our CEO) and other NEOs and certain measures of financial performance. Further information about how we seek to align executive compensation with our performance is contained under Compensation Discussion and Analysis.
| Value of Initial Fixed $100 Investment Based On: | Net Income (in millions) | Diluted Core EPS | ||||||||||||||||||||||||||||||
| Year | Summary Compensation Table Total for CEO | Compensation Actually Paid to CEO | Average Summary Compensation Table Total for Non-CEO | Average Compensation Actually Paid to Non-CEO NEOs | TSR | Peer Group TSR | ||||||||||||||||||||||||||
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | |||||||||||||||||||||||||
| 2022 | $ | 5,746,309 | $ | 3,804,793 | $ | 1,436,133 | $ | 1,102,974 | $ | 97.23 | $ | 116.10 | $ | 120.9 | $ | 1.74 | ||||||||||||||||
| 2021 | $ | 2,703,890 | $ | 3,743,340 | $ | 966,897 | $ | 1,064,836 | $ | 118.09 | $ | 124.74 | $ | 62.3 | $ | 1.30 | ||||||||||||||||
| 2020 | $ | 2,116,002 | $ | 1,266,695 | $ | 846,161 | $ | 808,650 | $ | 87.43 | $ | 91.29 | $ | 12.6 | $ | 0.38 | ||||||||||||||||
(1) The amounts reported represent the total compensation for our CEO, Mr. Wolff, for each corresponding year in the "Total" column of the Summary Compensation Table in this proxy statement.
(2) The amounts reported represent the "compensation actually paid" to Mr. Wolff, as computed in accordance with Item 402(v) of Regulation S-K. The table below includes adjustments made to Mr. Wolff's total compensation for each year to determine the compensation actually paid.
| Year | Summary Compensation Table Total for CEO | Value of Equity Awards Reported in Summary Compensation Table | Equity Award Adjustments | Compensation Actually Paid to CEO | ||||||||||||||||||||||
| (a) | (b) | |||||||||||||||||||||||||
| 2022 | $ | 5,746,309 | $ | (4,017,585) | $ | 2,076,069 | $ | 3,804,793 | ||||||||||||||||||
| 2021 | $ | 2,703,890 | $ | (810,035) | $ | 1,849,485 | $ | 3,743,340 | ||||||||||||||||||
| 2020 | $ | 2,116,002 | $ | (761,991) | $ | (87,316) | $ | 1,266,695 | ||||||||||||||||||
(a) The amounts reported represent the total grant date fair value of equity awards granted to Mr. Wolff for each corresponding year in the "Stock Awards" column of the Summary Compensation Table in this proxy statement.
(b) The equity award adjustments for each applicable year are calculated as follows*:
| Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Applicable Year | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Applicable Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Applicable Year | Equity Award Adjustments | ||||||||||||
| 2022 | $ | 2,850,192 | $ | (702,054) | $ | (15,583) | $ | (56,486) | $ | 2,076,069 | |||||||
| 2021 | $ | 761,745 | $ | 641,256 | $ | 488,849 | $ | (42,365) | $ | 1,849,485 | |||||||
| 2020 | $ | 721,874 | $ | (460,206) | $ | (348,984) | $ | — | $ | (87,316) | |||||||
* The following columns have been omitted as they do not apply: (1) fair value as of vesting date of equity awards granted and vested in the applicable year, and (2) dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise included in the total compensation for the covered year.
(3) The amounts reported represent the average of the total compensation reported for our non-CEO NEOs, which consisted of Ms. Hopkins, Mr. Dotan, Mr. Dyck and Ms. Sullivan, as a group for each corresponding year in the "Total" column of the Summary Compensation Table in this proxy statement.
69 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Pay-Versus-Performance | ||
(4) The amounts reported represent the average of "compensation actually paid" to our non-CEO NEOs as a group as computed in accordance with Item 402(v) of Regulation S-K. The table below includes adjustments made to the non-CEO NEOs' total compensation for each year to determine the compensation actually paid.
| Year | Average Summary Compensation Table Total for Non-CEO NEOs | Average Value of Equity Awards Reported in Summary Compensation Table | Average Equity Award Adjustments | Average Compensation Actually Paid to Non-CEO NEOs | ||||||||||||||||||||||
| (a) | (b) | |||||||||||||||||||||||||
| 2022 | $ | 1,436,133 | $ | (774,672) | $ | 441,513 | $ | 1,102,974 | ||||||||||||||||||
| 2021 | $ | 966,897 | $ | (233,085) | $ | 331,024 | $ | 1,064,836 | ||||||||||||||||||
| 2020 | $ | 846,161 | $ | (253,840) | $ | 216,329 | $ | 808,650 | ||||||||||||||||||
(a) The amounts reported represent the average of the total grant date fair value of equity awards granted to our non-CEO NEOs for each corresponding year in the "Stock Awards" column of the Summary Compensation Table in this proxy statement.
(b) The equity award adjustments for each applicable year are calculated as follows*:
| Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Applicable Year | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Applicable Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Applicable Year | Equity Award Adjustments | ||||||||||||
| 2022 | $ | 612,823 | $ | (154,555) | $ | (9,662) | $ | (7,093) | $ | 441,513 | |||||||
| 2021 | $ | 219,308 | $ | 85,160 | $ | 31,874 | $ | (5,318) | $ | 331,024 | |||||||
| 2020 | $ | 241,086 | $ | (21,872) | $ | (2,885) | $ | — | $ | 216,329 | |||||||
* The following columns have been omitted as they do not apply: (1) fair value as of vesting date of equity awards granted and vested in the applicable year, and (2) dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise included in the total compensation for the covered year.
(5) TSR assumes an initial investment of $100 on December 31, 2019, in our common stock and that the subsequent dividends are reinvested. Information presented is historical only and may not be indicative of possible future performance.
(6) Peer Group TSR is calculated using the same method described in footnote (5). The peer group used is the following published industry index: KBW Nasdaq Regional Banking Index.
(7) The amounts represent net income as reported in our audited financial statements for the applicable year. For the years ended December 31, 2022, 2021 and 2020, net income (loss) available to common stockholders as reported in our audited financial statements was $115.8 million, $50.6 million and ($1.1) million, or $1.89, $0.95 and ($0.02) per diluted common share.
(8) Diluted Core Earnings Per Share (EPS) is computed by dividing net income (loss) available to common stockholders, excluding gains/losses on investments in alternative energy partnerships using the hypothetical liquidation at book value (HLBV) method, certain indemnified legal costs (net of recoveries) and other items at the discretion of the CNG Committee, by total average diluted common shares outstanding. See Appendix A for Non-GAAP Reconciliation.
70 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Pay-Versus-Performance | ||
Relationship Analysis Between "Compensation Actually Paid" and Performance Measures
The following chart sets forth the relationship between the compensation actually paid to our CEO, the average compensation actually paid to our non-CEO NEOs, our cumulative TSR and that of the KBW Nasdaq Regional Banking Index over the three most recently completed fiscal years.
The following chart sets forth the relationship between compensation actually paid to our CEO, the average compensation actually paid to our non-CEO NEOs and our net income for the three most recently completed fiscal years.
71 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Pay-Versus-Performance | ||
The following chart sets forth the relationship between compensation actually paid to our CEO, the average compensation actually paid to our non-CEO NEOs and our Diluted Core EPS(1) for the three most recently completed fiscal years.
Financial Performance Measures
We consider the following to be the most important financial performance measures that we used to link compensation actually paid to the NEOs for 2022 to the Company’s performance:
•Diluted Core EPS(1)
•Core Return on Average Assets(1)
•Core Return on Average Tangible Common Equity(1)
•Adjusted Efficiency Ratio(1)
•Demand Deposit Growth
•Net Loan Growth
•Credit Quality, as measured by the Non-Performing Assets to Total Loans and Other Real Estate Owned Ratio
(1) 1See Appendix A for Non-GAAP Reconciliation.
72 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
Report of the Audit Committee
The following Report of the Audit Committee (Report) of the Board of Directors shall not be deemed to be soliciting material or to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates this Report therein, and shall not otherwise be deemed filed under such Acts.
The Audit Committee of the Company’s Board of Directors is comprised of the undersigned directors, each of whom is independent as independence is defined for audit committee members under the NYSE Listed Company Manual. The Audit Committee’s responsibilities are defined in a written charter adopted by the Board of Directors.
Management is responsible for the Company’s internal controls, financial reporting process and compliance with applicable laws and regulations. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon, and annually attesting to management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The members of the Audit Committee are responsible for monitoring and overseeing these processes.
The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31, 2022, with management and with Ernst & Young LLP, the Company’s independent registered public accounting firm for the year ended December 31, 2022. The Audit Committee also has discussed with Ernst & Young LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. Finally, the Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence and discussed with Ernst & Young LLP their independence. Based upon the review and discussions described in this report, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for filing with the SEC.
AUDIT COMMITTEE
Richard J. Lashley, Chair
James A. “Conan” Barker
Denis P. Kalscheur
Vania E. Schlogel
Robert D. Sznewajs
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Proposal II
Ratification of the Selection of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for the Year Ending December 31, 2023
The Audit Committee has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023, subject to ratification by the Company’s stockholders at the Annual Meeting. Ernst & Young LLP has served as the Company’s independent registered public accounting firm since 2019. Representatives of Ernst & Young LLP have been invited to be present at the Annual Meeting, and it is expected that they will attend. If present, the representatives from Ernst & Young LLP will have an opportunity to make a statement if they so choose, and will be available to respond to appropriate questions from stockholders.
Although stockholder ratification of the selection of Ernst & Young LLP is not required by the Company's bylaws or otherwise, the Company is submitting this selection to stockholders for their ratification at the Annual Meeting as a matter of good corporate practice. If the stockholders do not ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023, the Audit Committee will reconsider whether to engage Ernst & Young LLP, but may ultimately determine to continue the engagement of Ernst & Young LLP or engage another audit firm without resubmitting the matter to stockholders.
Even if the selection of Ernst & Young LLP is ratified by the stockholders at the Annual Meeting, the Audit Committee, in its discretion, may direct the selection of a different independent registered public accounting firm at any time during the year, although it has no current intention to do so.
| The Board of Directors recommends that stockholders vote “FOR” Proposal II to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. | |||||||
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| Proposal II | ||
Fees Paid to Independent Registered Public Accounting Firm During the Years Ended December 31, 2022 and 2021
Pursuant to the terms of its charter, the Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of the Company’s independent registered public accounting firm. The Audit Committee must pre-approve the engagement letters and the fees to be paid to the independent registered public accounting firm for all audit and permissible non-audit services to be provided by the independent registered public accounting firm and consider the possible effect that any non-audit services could have on the independence of the auditors. The Audit Committee may establish pre-approval policies and procedures, as permitted by applicable law and SEC regulations and consistent with its charter for the engagement of the independent registered public accounting firm to render permissible non-audit services to the Company, provided that any pre-approvals delegated to one or more members of the committee are reported to the committee at its next scheduled meeting. At this time, the Audit Committee has not adopted any pre-approval policies. During the years ended December 31, 2022 and 2021, the Audit Committee pre-approved all the services provided by Ernst & Young LLP. The Audit Committee considered the provision of these services by Ernst & Young LLP and determined that such services are compatible with maintaining Ernst & Young LLP’s independence.
For the years ended December 31, 2022 and 2021, Ernst & Young LLP provided services to the Company, as follows:
| Year Ended December 31, | ||||||||
2022 | 2021 | |||||||
Audit Fees (1) | $ | 1,928,015 | $ | 1,979,978 | ||||
Audit Related Fees (2) | $ | — | $ | 25,000 | ||||
Tax Fees (3) | $ | 235,308 | $ | 185,216 | ||||
| TOTAL | $ | 2,163,323 | $ | 2,190,194 | ||||
(1) For the audit of the Company’s consolidated annual financial statements and internal control over financial reporting and for the reviews of the Company’s consolidated interim financial statements. Also includes certain reports related to compliance audits.
(2) For services relating to due diligence in connection with the Pacific Mercantile Bancorp acquisition in 2021.
(3) Tax fees include corporate tax compliance, planning and advisory services. Tax compliance and preparation fees totaled $115,360 and $87,215, for 2022 and 2021, respectively.
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Proposal III
Approval, on an Advisory and Non-Binding Basis, of the Compensation Paid to our NEOs
Pursuant to the Dodd-Frank Act and the SEC’s implementing rules, we are including in this proxy statement and will present at the Annual Meeting an advisory (non-binding) proposal on executive compensation, commonly known as a “Say-on-Pay” proposal. This proposal gives stockholders the opportunity to endorse or not endorse the compensation paid to our NEOs during the year ended December 31, 2022, as disclosed in this proxy statement.
The Dodd-Frank Act and the SEC's implementing rules require that we include a Say-on-Pay vote in our annual meeting proxy statement at least once every three years, and that at least once every six years we hold a non-binding, advisory vote on the frequency of future Say-on-Pay votes (commonly referred to as a “Say-on-Frequency" vote), with stockholders having the choice of every year, every two years or every three years. We last held a Say-on-Frequency vote at our 2019 annual meeting of stockholders, and the most votes were received for a frequency of every year. Our Board of Directors determined, in light of those results, that we will include a Say-on-Pay vote in our annual meeting proxy materials every year until the next required Say-on-Frequency vote is held (in 2025).
The Say-on-Pay proposal at our 2022 annual meeting of stockholders gave stockholders an opportunity to vote on an advisory, non-binding basis with respect to compensation paid to our NEOs for the year ended December 31, 2021. Approximately 87% of the votes cast voted in favor of the Say-on-Pay proposal at our 2022 annual meeting.
For the Annual Meeting, the advisory non-binding Say-on-Pay vote will be presented as a resolution in substantially the following form:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed in the Company’s proxy statement for the Annual Meeting pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.
We believe that our executive compensation is strongly aligned with the long-term interests of our stockholders and is focused on long term strategies to build stockholder value.
Since your vote is advisory, it will not be binding on our Board. However, the CNG Committee and the Board values your opinion and may take into account the outcome of the vote when considering future executive compensation arrangements.
| The Board of Directors recommends that stockholders vote "FOR" Proposal III. | |||||||
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Transactions with Related Persons
General
The Company and the Bank may engage in transactions with the Company’s directors and executive officers, beneficial owners of more than five percent of the outstanding shares of the Company’s voting common stock and certain persons related to them. Except for loans by the Bank, which are governed by a separate policy, those transactions that constitute transactions with related persons under Item 404 of the SEC’s Regulation S-K are subject to the review, oversight and approval by a Board committee comprised solely of independent directors pursuant to the Company’s and the Bank’s Related Party Transactions Policy. The Related Party Transactions Policy seeks to ensure that any such transactions entered into by the Company are in, or not inconsistent with, the best interests of the Company and its stockholders. Additionally, the Company and the Bank have an Outside Business Activity Policy, which tightens controls on outside business activities of officers and employees and requires non-employee directors to refrain from engaging in outside business activities that create an actual or apparent conflict of interest. These two policies are further described below.
Related Party Transaction Policy
All related party transactions, as defined under the policy and other than certain pre-approved transactions, must be approved in advance by the CNG Committee. Related party transactions are broadly construed under the policy to include any transaction in which a related party or a family member of a related party has a direct or indirect material interest.
The policy provides that in reviewing related party transactions, the CNG Committee should consider the following factors:
•Are the terms of the related party transaction arm’s length and no more favorable to the related party or the related party’s family member than terms generally available to an unaffiliated third party?
•What is the financial risk to the Company of the related party transaction?
•What is the reputational risk to the Company from public disclosure of the related party transaction?
•Would participation in the related party transaction materially impair the ability of the related party to faithfully discharge his or her duties to the Company?
•Is the related party transaction in (or not inconsistent with) the best interests of the Company and its stockholders?
The policy further provides that in reviewing proposed loans to related parties, their family members and any entity in which the related party or their family members have a material interest, the CNG Committee should consider the following criteria:
•Will the loan be made in the ordinary course of the Bank’s business?
•Does the loan involve a material risk of collectability or other unfavorable features?
•Loans to directors and certain officers must comply with Regulation O of the Board of Governors of the Federal Reserve System.
•The loan must not violate the Sarbanes-Oxley Act of 2002 or any other applicable laws.
The policy states that the CNG Committee will prohibit a related party transaction if it determines it to be inconsistent with the interests of the Company and its stockholders.
Outside Business Activity Policy
The Board recognizes that outside business activities may create conflicts of interest and may interfere with an individual’s responsibilities to the Company. The Outside Business Activity Policy is intended to control the participation of employees in outside activities in order to mitigate such risks. As in the past, the Company continues to encourage active participation on the part of directors, officers and employees in service clubs and organizations fostering the betterment of the community, and the active use of various social memberships in maintaining a proper image of the Company’s organization within the community.
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| Transactions with Related Persons | ||
Under the policy:
•All officers and employees of the Company and its subsidiaries may not engage in outside business activities, as defined in the policy, without prior written permission;
•Non-employee directors shall refrain from engaging in outside business activities which create an actual or apparent conflict of interest between the director and the Company unless they receive a written waiver; and
•The policy is administered by the CNG Committee.
Certain Transactions with Related Persons
Ordinary Course Banking Transactions. Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with, the Bank in the ordinary course of business, including deposits, loans and other financial services-related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. As of December 31, 2022, no such related party loans were categorized as nonaccrual, past due, restructured or potential problem loans.
Indemnification for Costs of Counsel in Connection with Certain Legal Proceedings. As previously disclosed, the Company’s Board of Directors has authorized and directed the Company to provide indemnification, advancement and/or reimbursement for the costs of separate, independent counsel retained by certain directors, in their individual capacity, in connection with certain legal proceedings (Indemnified Matters). During the year ended December 31, 2022, indemnification costs were paid or reimbursed by the Company or its insurance carriers on behalf of certain current directors in connection with the Indemnified Matters, in the aggregate amount of $397 thousand.
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Information About the 2023 Annual Meeting of Stockholders
General
Notice and Access (Electronic Proxy). Under what are commonly referred to as the “e-proxy” or “Notice and Access” rules of the SEC, companies may send stockholders a notice that proxy materials are available online instead of mailing a full printed package containing a proxy card, annual report and proxy statement.
The Company is using Notice and Access for the Annual Meeting. As a result, beginning on or about March 31, 2023, the Company sent to most of its stockholders a Notice of Internet Availability of its Proxy Materials (the Notice). If you receive the Notice, you have the option of (i) accessing the proxy materials, including instructions on how to vote online, or (ii) requesting that those materials be sent to you in paper form or by e-mail. The Company may still choose to mail hard copies of proxy materials to all or some stockholders that have not elected to have the Company send hard copies to them.
Copies of Materials. SEC rules allow a single copy of the proxy materials to be delivered to multiple stockholders sharing the same address and last name, or who the Company reasonably believes are members of the same family and who consent to receive a single copy of these materials in a manner provided by these rules. This practice is referred to as “householding” and can result in significant savings of paper and mailing costs.
The Company may household its proxy card, notices (including the Notice), Annual Report and proxy statement to stockholders of record that share an address. This means that stockholders of record sharing an address may not each receive a separate copy of these materials. The Company also understands that certain brokerage firms, banks, or other similar entities holding the Company’s voting common stock for their customers may household proxy materials. Stockholders sharing an address whose shares of voting common stock are held by such an entity should contact such entity if they now receive: (a) multiple copies of the Company’s proxy materials and wish to receive only one copy of these materials per household in the future; or (b) a single copy of the Company’s proxy materials and wish to receive separate copies of these materials in the future. Additional copies of proxy materials are available upon request by contacting the Company at:
Banc of California, Inc.
ATTN: Corporate Secretary
3 MacArthur Place
Santa Ana, California, 92707
(855) 361-2262
IR@bancofcal.com
Who Can Vote. The record date for the Annual Meeting is March 15, 2023. Only holders of record of the Company’s voting common stock as of the close of business on the Record Date are entitled to notice of and to vote at the Annual Meeting. Each stockholder is entitled to one vote for each share of voting common stock held as of the Record Date; provided, however, that under Section F of Article 6 of the Company’s charter, no stockholder who beneficially owns more than 10 percent of the shares of voting common stock outstanding as of that date may vote shares held in excess of that amount. At the close of business on the Record Date, there were 58,663,788 outstanding shares of voting common stock.
Voting Shares Held in "Street Name" by a Broker. If your shares are held in “street name” by a broker, your broker is required to vote your shares in accordance with your instructions. If you do not give instructions to your broker, your broker will nevertheless be entitled to vote your shares with respect to any “discretionary” items, but will not be permitted to vote your shares with respect to “non-discretionary” items. In the case of non-discretionary items, your shares will be treated as “broker non-votes”. Whether or not an item is discretionary is determined by the exchange rules governing your broker.
Proposal II, the ratification of the selection of Ernst & Young, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023, is expected to be a discretionary item. The remaining proposals are expected to be non-discretionary items. See Information about the 2023 Annual Meeting of Stockholders—How Shares are Treated when No Voting Instructions are Provided.
Number of Shares Required to be Present to Hold the Annual Meeting. A quorum must be present at the Annual Meeting for any business to be conducted. The presence at the Annual Meeting, in person or by proxy, of the holders of at least one-third of
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| Information About the 2023 Annual Meeting of Stockholders | ||
the shares of voting common stock outstanding on the Record Date or 19,554,596 shares - will constitute a quorum. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the Annual Meeting.
If a quorum is not present at the scheduled time of the Annual Meeting, the chair of the Annual Meeting or the holders of a majority of the shares of voting common stock entitled to vote who are present, in person or by proxy, may adjourn the Annual Meeting to another date, place or time. The time and place of the adjourned Meeting will be announced at the time the adjournment is taken. An adjournment will have no effect on the business that may be conducted at the Annual Meeting.
How to Vote Your Shares
1.You can vote your proxy by mail. If you properly complete, sign and return the proxy card, it will be voted in accordance with your instructions.
2.You can vote your proxy by telephone. If you are a registered stockholder, that is, if your shares are held in your own name, you can vote by telephone by following the instructions included on the proxy card. If you vote by telephone, you do not have to mail in your proxy card. If your shares are held through a bank, broker or other nominee (i.e., in "street name"), check your proxy card to see if you can vote by telephone.
3.You can vote your proxy via the internet. If you are a registered stockholder, you can vote via the internet by following the instructions included on the proxy card. If your shares of common stock are held by a broker, bank or other nominee, you will receive instructions from them on how to vote your shares.
4.You can vote in person at the Annual Meeting. If you plan to attend the Annual Meeting and wish to vote in person, we will give you a ballot at the Annual Meeting. Note, however, that if your shares are held in the name of your broker, bank or other nominee, you will need to obtain a legal proxy from the holder of your shares indicating that you were the beneficial owner of those shares on March 15, 2023, the record date for voting at the Annual Meeting, and that you are authorized to vote such shares. You are encouraged to vote by proxy prior to the Annual Meeting even if you plan to attend the Annual Meeting in person.
Revoking Your Proxy
If you are a registered stockholder, you can revoke your proxy and change your vote at any time before the polls close at the Annual Meeting by:
•submitting another proxy with a later date;
•giving written notice of the revocation of your proxy to the Company’s Corporate Secretary prior to the Annual Meeting; or
•voting during the Annual Meeting. Your proxy will not be automatically revoked by your attendance at the Annual Meeting; you must actually vote during the Annual Meeting to revoke a prior proxy.
If your shares are held in street name, you should follow the instructions provided by your bank, broker or other holder of record to be able to participate in the Annual Meeting.
Board of Directors Voting Recommendations
The voting recommendations from the Board of Directors are as follows:
| No. | Proposal | Board Vote Recommendation: | ||||||
| I. | Election of the twelve director nominees named in this proxy statement, each for a term of one year. | FOR each director nominee | ||||||
| II. | Ratification of the selection of Ernst & Young, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. | FOR | ||||||
| III. | Approval, on an advisory and non-binding basis, of the compensation paid to our named executive officers as disclosed in this proxy statement (Say-on-Pay). | FOR | ||||||
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| Information About the 2023 Annual Meeting of Stockholders | ||
How Shares are Treated when No Voting Instructions are Provided
Registered Stockholders. If you are a registered stockholder and you submit a proxy but do not indicate any voting instructions, your shares will be voted according to the Board of Directors’ recommendations as reflected in the chart above under Information About the 2023 Annual Meeting of Stockholders—Board of Directors Voting Recommendations.
Holders of Shares in “Street” Name. If you hold your shares in street name through a broker and do not provide your broker with voting instructions, it is expected that your broker will be able to vote your shares on Proposal II, the ratification of the selection of the independent registered public accounting firm, but will be unable to vote your shares on any of the other proposals. See Information About the 2023 Annual Meeting of Stockholders—Voting Shares Held in “Street Name” by a Broker.
Vote Required for Each Proposal and Treatment and Effect of Abstentions and Broker Non-Votes
The vote required for each proposal and the treatment and effect of abstentions and broker non-votes with respect to each proposal is as follows:
| No. | Proposal | Vote Required | ||||||
| I. | Election of the twelve director nominees named in this proxy statement, each for a term of one year. | For each director, the number of votes cast for the director’s election must exceed the number of votes cast against the director’s election. Abstentions and broker non-votes do not count as votes cast and will not have an effect on a director's election. | ||||||
| II. | Ratification of the selection of Ernst and Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. | Affirmative vote of a majority of the votes cast. Abstentions and broker non-votes do not count as votes cast and will not have an effect on Proposal II. | ||||||
| III. | Approve, on an advisory and non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement (Say-on-Pay). | Affirmative vote of a majority of the votes cast. Abstentions and broker non-votes do not count as votes cast and will not have an effect on Proposal III. | ||||||
For quorum purposes, proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the Annual Meeting.
Actions Required if any Director Nominee Does Not Receive Required Majority Vote. If a nominee for director who is an incumbent director is not elected by a majority of the votes cast at the Annual Meeting, then the Company’s bylaws provide that the following sequence of events shall occur:
•the director shall promptly tender his or her resignation to the Board of Directors;
•the CNG Committee shall make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken; and
•the Board of Directors shall act on the tendered resignation, taking into account the CNG Committee’s recommendation, and publicly disclose (by a press release, a filing with the SEC or other broadly disseminated means of communication) its decision regarding the tendered resignation within 90 days from the date of the certification of the election results.
The CNG Committee, in making its recommendation, and the Board of Directors, in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation may not participate in the recommendation of the CNG Committee or the decision of the Board of Directors with respect to his or her resignation.
If an incumbent director’s resignation is not accepted by the Board of Directors and/or the director is re-appointed by the Board, the director will continue to serve until his or her successor is duly elected or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board of Directors, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy or eliminate the vacancy by reducing the size of the Board.
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Inspector of Election
The Board of Directors has appointed Broadridge Financial Solutions to act as Inspector of Election at the Annual Meeting to tabulate the votes cast.
Proxy Solicitation Costs
We will pay the costs of soliciting proxies, and we will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of the Company’s voting common stock. In addition, our directors, officers or employees may solicit proxies for us in person or by telephone, facsimile, internet or other electronic means for which they will not receive any compensation other than their regular compensation as directors, officers and employees.
Attending the Annual Meeting
Only stockholders and their spouses are entitled to attend the Annual Meeting, and each stockholder and his or her spouse must present a valid, government issued form of identification in order to be admitted to the Annual Meeting. Each stockholder also must provide proof of ownership of shares of the Company’s voting common stock as of the Record Date. If you are a registered stockholder, proof of ownership will be established by our verification of your name against our list of registered stockholders as of the Record Date. If you hold your shares through a bank, broker or other nominee, any one of the following will suffice as proof of ownership:
•Account Statement. Account statement showing share ownership as of the record date.
•Notice of Internet Availability of Proxy Materials. The notice of internet availability of proxy materials that you received in the mail containing a valid control number.
•E-mail with Voting Instructions. A copy of an e-mail that you received with instructions containing a link to the website where the Company’s proxy materials are available and a valid control number.
•Legal Proxy. A valid legal proxy containing a valid control number or a letter from a registered stockholder naming you as proxy. The Inspector of Election for the Annual Meeting will have final authority to determine the validity of any proxy.
•Letter from Intermediary. A letter from the bank, broker or other nominee through which you hold your shares confirming your ownership as of the Record Date.
The Company may, in its sole discretion, permit other individuals to attend the Annual Meeting.
Director Nominees Unable to Stand for Election
If a director nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute director nominee. If a substitute director nominee is selected, the persons named in the proxy will vote your shares for the substitute director nominee.
Other Matters
The Board of Directors knows of no other business that will be presented at the Annual Meeting. If any other matter properly comes before the stockholders for a vote at the Annual Meeting, the persons named in the proxy will vote the shares represented thereby in accordance with their best judgment.
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Stockholder Proposals and Other Information Regarding the Annual Meeting of Stockholders to be Held in 2024
If you intend to present a stockholder proposal at next year’s annual meeting of stockholders, your proposal must be received by the Company at its executive offices, located at 3 MacArthur Place, Santa Ana, California 92707, no later than December 2, 2023 to be eligible for inclusion in the Company’s proxy statement and form of proxy for that meeting, provided that if the date for next year’s annual meeting is changed by more than 30 days from the anniversary date of the Annual Meeting, then such proposal must be received by the Company at its executive offices at a reasonable time before the Company begins to print and send its proxy materials for next year’s annual meeting. Your proposal will be subject to the requirements of the proxy rules adopted under the Exchange Act and the Company’s charter and bylaws and Maryland law.
The Company’s bylaws contain additional notification requirements for stockholder proposals, regardless of whether they are submitted for inclusion in the Company’s proxy materials. For a stockholder proposal to be considered for presentation at next year’s annual meeting, written notice of the proposal containing the information set forth in Section 1.09 of the Company’s bylaws must be received by the Company no later than February 11, 2024 and no earlier than January 12, 2024. If, however, the date of the next annual meeting of stockholders is before April 11, 2024 or after July 10, 2024, notice of the stockholder proposal must be delivered no earlier than the 120th day prior to the date of the next annual meeting of stockholders and not later than the close of business on the later of the 90th day prior to the day of the meeting or the 10th day following the day on which notice of the date of meeting is mailed or public announcement of the date of the meeting is first made. These notification requirements also apply to director nominations by stockholders.
In addition to satisfying the foregoing requirements, to comply with the SEC's universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company's nominees must provide notice to the Company that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 12, 2024, provided that if the date for next year’s annual meeting is changed by more than 30 days from the anniversary date of the Annual Meeting, then such notice must be provided by the later of 60 days prior to the date of next year's annual meeting or the 10th day following the day on which public announcement of the date of next year's annual meeting is first made by the Company.
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Appendix
| Appendix A | NON-GAAP RECONCILIATION | ||||
Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company’s management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company’s financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company’s management uses the non-GAAP financial measure.
Adjusted net income, adjusted net income (loss) available to common stockholders, adjusted diluted EPS, adjusted ROAA, diluted core EPS, core ROAA, PTPP income, adjusted PTPP income, PTPP income ROAA, adjusted PTPP income ROAA, efficiency ratio, adjusted efficiency ratio, tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per share, return on average tangible common equity, adjusted noninterest income, adjusted noninterest expense, adjusted noninterest income to adjusted total revenue, and adjusted noninterest expense to average total assets constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in our analysis of our performance.
Adjusted net income is calculated by adjusting net income for tax-effected noninterest income and noninterest expense adjustments and the tax impact from the exercise of stock appreciation rights for the periods indicated. Adjusted net income (loss) available to common stockholders is computed by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted EPS is computed by dividing adjusted net income available to common stockholders by the weighted average diluted common shares outstanding. Adjusted ROAA is computed by dividing adjusted net income by average assets. Adjusted net income, adjusted net income (loss) available to common stockholders, adjusted diluted EPS and adjusted ROAA are non-GAAP measures used by management to evaluate key performance metric trends.
Diluted core EPS is computed as net income available to common stockholders, excluding gains or losses on investments in alternative energy partnerships using the hypothetical liquidation value (HLBV) method, certain indemnified legal costs and other items at the discretion of the CNG Committee, (adjusted core net income available to stockholders) divided by the weighted average diluted common shares outstanding. Core ROAA is computed as net income, excluding gains or losses on investments in alternative energy partnerships using the hypothetical liquidation value (HLBV) method, certain indemnified legal costs and other items at the discretion of the CNG Committee, (adjusted core net income) divided by average assets. Diluted core EPS and core ROAA are non-GAAP measures used by the CNG Committee to evaluate scorecard performance when calculating incentive payouts and are adjusted for one-time or other non-core income and expense items at the discretion of the CNG Committee.
PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding net interest income and adjusted noninterest income (adjusted total revenue) and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by adjusted total revenue.
Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.
Management believes the presentation of these financial measures and adjusting for the impact of these items provides useful supplemental information that is essential to a proper understanding of our financial results and operating performance. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.
The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.
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| Appendix A | ||
Non-GAAP Reconciliation: Adjusted Return on Average Assets and Adjusted Diluted EPS
| Year Ended | |||||||||||||||||
| December 31, 2022 | December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||
| Adjusted Net Income | |||||||||||||||||
Net income (1) | $ | 120,939 | $ | 62,346 | $ | 12,574 | $ | 23,759 | |||||||||
Total noninterest income adjustments (2) | 5,417 | — | (1,417) | 2,408 | |||||||||||||
Total noninterest expense adjustments (2) | 3,445 | 9,574 | 19,896 | (1,712) | |||||||||||||
| Tax impact from exercise of stock appreciation rights | — | (2,093) | — | — | |||||||||||||
| Adjustments to net income | 8,862 | 7,481 | 18,478 | 696 | |||||||||||||
Adjusted net income (3) | 129,801 | 69,827 | 31,052 | 24,455 | |||||||||||||
| Average Assets | 9,350,054 | 8,294,004 | 7,689,016 | 9,132,980 | |||||||||||||
| Return on Average Assets | 1.29 | % | 0.75 | % | 0.16 | % | 0.26 | % | |||||||||
Adjusted Return on Average Assets (3) | 1.39 | % | 0.84 | % | 0.40 | % | 0.27 | % | |||||||||
| Adjusted net income available to common stockholders | |||||||||||||||||
| Net income available to common stockholders | $ | 115,772 | $ | 50,563 | $ | (1,103) | $ | 2,624 | |||||||||
| Adjustments to net income available to common stockholders | 8,862 | 7,481 | 18,478 | 696 | |||||||||||||
| Adjustments for impact of preferred stock redemption | 3,747 | 3,347 | (568) | 5,093 | |||||||||||||
Adjusted net income available to stockholders (3) | $ | 128,381 | $ | 61,391 | $ | 16,807 | $ | 8,413 | |||||||||
| Average diluted common shares | 61,175,108 | 53,302,926 | 50,182,096 | 50,851,594 | |||||||||||||
| Diluted EPS | $ | 1.89 | $ | 0.95 | $ | (0.02) | $ | 0.05 | |||||||||
Adjusted Diluted EPS (3)(4) | $ | 2.10 | $ | 1.15 | $ | 0.33 | $ | 0.17 | |||||||||
(1)In 2019, net income and adjusted net income includes a $35.1 million pre-tax provision for credit losses due to the charge-off of a single loan. In 2022, Net income and adjusted net income includes a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of such loan.
(2)Presented net of tax impact.
(3)Non-GAAP measure.
(4)Represents adjusted net income available to common stockholders divided by average diluted common shares.
85 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Appendix A | ||
Non-GAAP Reconciliation: Core Return on Average Assets and Diluted Core Earnings Per Share
| Year Ended | ||||||||||||||
| December 31, 2022 | December 31, 2021 | December 31, 2020 | ||||||||||||
| Adjusted Core Net Income | ||||||||||||||
| Net income | $ | 120,939 | $ | 62,346 | $ | 12,574 | ||||||||
Total noninterest income adjustments (2) | (16,618) | 10,194 | 21,185 | |||||||||||
Total noninterest expense adjustments (2) | 3,445 | (155) | (587) | |||||||||||
| Tax impact from exercise of stock appreciation rights | — | (2,093) | — | |||||||||||
Adjustments to net income (1) | (13,173) | 7,946 | 20,598 | |||||||||||
Adjusted core net income (3) | 107,766 | 70,292 | 33,172 | |||||||||||
| Average Assets | 9,350,054 | 8,294,004 | 7,689,016 | |||||||||||
| Return on Average Assets | 1.29 | % | 0.75 | % | 0.16 | % | ||||||||
Core Return on Average Assets (3) | 1.15 | % | 0.85 | % | 0.43 | % | ||||||||
| Adjusted Core Net Income Available to Common Stockholders | ||||||||||||||
| Net income available to common stockholders | $ | 115,772 | $ | 50,563 | $ | (1,103) | ||||||||
| Adjustments to net income available to common stockholders | (13,174) | 15,054 | 20,599 | |||||||||||
| Adjustments for impact of preferred stock redemption | 3,747 | 3,347 | (568) | |||||||||||
| Adjusted core net income available to stockholders | $ | 106,345 | $ | 68,964 | $ | 18,928 | ||||||||
| Average diluted common shares | 61,175,108 | 53,302,926 | 50,182,096 | |||||||||||
| Diluted EPS | $ | 1.89 | $ | 0.95 | $ | (0.02) | ||||||||
Diluted Core EPS (3) | $ | 1.74 | $ | 1.30 | $ | 0.38 | ||||||||
(1)Adjustments to net income exclude HLBV gains or losses, certain indemnified legal costs and other items at the discretion of the CNG Committee. In 2022, adjustments to net income exclude a $31.1 million pre-tax reversal of credit losses due to the recovery of a single loan previously charged off in 2019.
(2)Presented net of tax impact.
(3)Non-GAAP measure.
86 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Appendix A | ||
Non-GAAP Reconciliation: Adjusted Efficiency Ratio
| Three Months Ended | Year Ended | |||||||||||||||||||||||||
| December 31, 2022 | March 31, 2019 | December 31, 2022 | December 31, 2021 | December 31, 2019 | ||||||||||||||||||||||
| Net interest income | 80,217 | 67,808 | 314,365 | 253,778 | 248,163 | |||||||||||||||||||||
| Non-interest income | (1,427) | 6,295 | 17,350 | 19,376 | 12,116 | |||||||||||||||||||||
| Total revenue | 78,790 | 74,103 | 331,715 | 273,154 | 260,279 | |||||||||||||||||||||
| Noninterest expense | 48,203 | 61,835 | 194,373 | 183,678 | 196,472 | |||||||||||||||||||||
Pre-tax, pre-provision income (1) | 30,587 | 12,268 | 137,342 | 89,476 | 63,807 | |||||||||||||||||||||
| Total revenue | 78,790 | 74,103 | 331,715 | 273,154 | 260,279 | |||||||||||||||||||||
| Total noninterest income adjustments | 7,708 | (209) | 7,692 | — | 4,852 | |||||||||||||||||||||
Adjusted total revenue (1) | 86,498 | 73,894 | 339,407 | 273,154 | 265,131 | |||||||||||||||||||||
| Noninterest expense | 48,203 | 61,835 | 194,373 | 183,678 | 196,472 | |||||||||||||||||||||
| Total adjustment - noninterest expense | 261 | (7,724) | (4,890) | (13,592) | 3,450 | |||||||||||||||||||||
Adjusted noninterest expense (1) | 48,464 | 54,111 | 189,483 | 170,086 | 199,922 | |||||||||||||||||||||
Adjusted pre-tax, pre-provision income (1) | 38,034 | 19,783 | 149,924 | 103,068 | 65,209 | |||||||||||||||||||||
| Average assets | 9,257,311 | 10,301,717 | 9,350,054 | 8,294,004 | 9,132,980 | |||||||||||||||||||||
Pre-tax pre-provision ROAA (1) | 1.3 | % | 0.5 | % | 1.5 | % | 1.1 | % | 0.7 | % | ||||||||||||||||
Adjusted pre-tax pre-provision ROAA (1) | 1.6 | % | 0.8 | % | 1.6 | % | 1.2 | % | 0.7 | % | ||||||||||||||||
Efficiency ratio (1) | 61.2 | % | 83.4 | % | 58.6 | % | 67.2 | % | 75.5 | % | ||||||||||||||||
Adjusted efficiency ratio (1) | 56.0 | % | 73.2 | % | 55.8 | % | 62.3 | % | 75.4 | % | ||||||||||||||||
(1)Non-GAAP measure.
87 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
| Appendix A | ||
Non-GAAP Reconciliation: Tangible Common Equity Per Share
| Three Months Ended | Year Ended | |||||||||||||||||||||||||
| December 31, 2022 | March 31, 2019 | December 31, 2022 | December 31, 2021 | December 31, 2019 | ||||||||||||||||||||||
| Tangible common equity, and tangible common equity to tangible assets ratio | ||||||||||||||||||||||||||
| Total assets | 9,197,016 | 9,886,525 | 9,197,016 | 9,393,743 | 7,828,410 | |||||||||||||||||||||
| Less goodwill | (114,312) | (37,144) | (114,312) | (94,301) | (37,144) | |||||||||||||||||||||
| Less other intangible assets | (7,526) | (5,726) | (7,526) | (6,411) | (4,151) | |||||||||||||||||||||
Tangible assets (1) | 9,075,178 | 9,843,655 | 9,075,178 | 9,293,031 | 7,787,115 | |||||||||||||||||||||
| Total stockholders' equity | 959,618 | 948,325 | 959,618 | 1,065,290 | 907,245 | |||||||||||||||||||||
| Less preferred stock | — | (231,128) | — | (94,956) | (189,825) | |||||||||||||||||||||
| Total common stockholders' equity | 959,618 | 674,327 | 959,618 | 970,334 | 717,420 | |||||||||||||||||||||
| Total stockholders' equity | 959,618 | 948,325 | 959,618 | 1,065,290 | 907,245 | |||||||||||||||||||||
| Less goodwill | (114,312) | (37,144) | (114,312) | (94,301) | (37,144) | |||||||||||||||||||||
| Less other intangible assets | (7,526) | (5,726) | (7,526) | (6,411) | (4,151) | |||||||||||||||||||||
Tangible equity (1) | 837,780 | 905,455 | 837,780 | 964,578 | 865,950 | |||||||||||||||||||||
| Less preferred stock | — | (231,128) | — | (94,956) | (189,825) | |||||||||||||||||||||
Tangible common equity (1) | 837,780 | 674,327 | 837,780 | 869,622 | 676,125 | |||||||||||||||||||||
Tangible common equity ratio (1) | 9.23 | % | 6.85 | % | 9.23 | % | 9.36 | % | 8.68 | % | ||||||||||||||||
| Total common shares outstanding | 59,021,855 | 50,792,811 | 59,021,855 | 62,665,527 | 50,413,681 | |||||||||||||||||||||
| Book value per common share | $16.26 | $14.12 | $16.26 | $15.48 | $14.10 | |||||||||||||||||||||
Tangible common equity per share (1) | $14.19 | $13.28 | $14.19 | $13.88 | $13.29 | |||||||||||||||||||||
(1)Non-GAAP measure.
88 | Banc of California | Annual Proxy Statement | 2023 | ||||||||||||||||||||
