BANC

Business Context and Reporting Period

Company: Banc of California, Inc.
Filing Type: Form 8-K (Current Report)
Date: July 25, 2023
Event: Announcement of a proposed merger with PacWest Bancorp and a concurrent $400 million equity investment.

Key Financial Metrics and Transaction Terms

This filing details a strategic transaction rather than periodic financial results. Key financial terms include:

• Investment Amount: $400 million aggregate investment by Warburg Pincus and Centerbridge Partners.
• Issuance Price: $12.30 per share for common stock and non-voting common-equivalent stock.
• Shares Issued: Approximately 21.8 million shares of common stock and 10.8 million shares of non-voting common-equivalent stock.
• Warrants Issued:
  • Warburg Investors: Warrants to purchase ~15.9 million shares of non-voting stock.
  • Centerbridge Investors: Warrants to purchase ~3.0 million shares of common stock.
  • Exercise Price: $15.375 per share.
  • Term: Seven years, with mandatory exercise if the market price reaches $24.60 (100% premium to issuance price).

Note: The filing text does not provide current revenue, profit, cash flow, or debt metrics for Banc of California or PacWest.

Material Changes and Transaction Structure

The filing outlines a multi-step merger structure:

1. Merger Sub: A subsidiary of Banc of California will merge with PacWest, with PacWest surviving.
2. Second-Step Merger: PacWest will immediately merge into Banc of California, with Banc of California surviving.
3. Bank Merger: Pacific Western Bank (PacWest's subsidiary) will become a Federal Reserve member and merge with Banc of California, National Association. The surviving bank will operate under the "Banc of California" name.

Guidance, Risks, and Contingencies

Outlook and Conditions: The transaction is subject to customary closing conditions, including regulatory approvals and stockholder votes from both Banc of California and PacWest. A Form S-4 registration statement will be filed to solicit proxies.

Key Risks Disclosed:

• Failure to obtain stockholder or regulatory approval.
• Inability to secure alternative capital if required.
• Disruption to business operations, customer retention, and employee retention.
• Adverse effects of rising interest rates, inflation, and real estate market deterioration.
• Systemic risks related to bank failures and liquidity withdrawals.
• Volatility in trading prices of securities.

Investor Verification Checklist

• Verify the terms of the Merger Agreement and Investment Agreements in the attached exhibits (99.1 and 99.2).
• Monitor the upcoming Form S-4 filing for the definitive joint proxy statement/prospectus.
• Confirm the status of regulatory approvals required for the Federal Reserve membership and bank merger.
• Review the specific conditions for the mandatory exercise of warrants at the $24.60 price threshold.
• Assess the impact of the $400 million capital raise on existing shareholder dilution.