8-K - BANC - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 15, 2022

BANC OF CALIFORNIA, INC.

(Exact name of registrant as specified in its charter)

Maryland	001-35522	04-3639825
(State or other jurisdiction<br>of incorporation)	(Commission File Number)	(IRS Employer<br>Identification No.)
3 MacArthur Place, Santa Ana, California	92707
---	---
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (855) 361-2262

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BANC	New York Stock Exchange

Item 7.01. Regulation FD Disclosure.

On September 15, 2022, Banc of California, Inc. (the “Company”), the parent holding company of Banc of California, N.A. (the “Bank”), announced that the Bank has acquired the payments platform and technology of Global Payroll Gateway, Inc. and its wholly-owned subsidiary, Deepstack Technologies, LLC (collectively, “Deepstack”) for $24 million in cash and stock. Headquartered in Jupiter, Florida with a team located in Southern California, Deepstack is a differentiated software-led and e-commerce payments platform that provides clients with payment solutions, including merchant processing, payments acceptance and disbursements, tokenization, virtual accounts, fraud protection tools, chargeback management, and reconciliation and reporting services.

A copy of the press release is attached to this report as Exhibit 99.1 and is incorporated by reference herein.

The Company will host a conference call at 7:00 AM Pacific Time on Friday, September 16, 2022 to discuss the transaction. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 3120438. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor, in addition to the slide presentation for investor review prior to the call. A copy of the presentation materials is attached to this report as Exhibit 99.2 and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

99.1 Banc of California, Inc. Press Release dated September 15, 2022

99.2 Banc of California, Inc. Acquisition of Deepstack Presentation Materials

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

BANC OF CALIFORNIA, INC.

Date: September 16, 2022

/s/ Ido Dotan
Ido Dotan
Executive Vice President, General Counsel and<br>Corporate Secretary

Document

Banc of California Enters Payment Processing Business with Acquisition of Deepstack Technologies

SANTA ANA, Calif., (September 15, 2022) – Banc of California, Inc. (NYSE: BANC) (the “Company”), the parent holding company of Banc of California, N.A. (the “Bank”), today announced that the Bank has acquired the payments platform and technology of Global Payroll Gateway, Inc. and its wholly-owned subsidiary, Deepstack Technologies, LLC (collectively, “Deepstack”) for $24 million in cash and stock. Headquartered in Jupiter, Florida with a team located in Southern California, Deepstack is a differentiated software-led and e-commerce payments platform that provides clients with payment solutions, including merchant processing, payments acceptance and disbursements, tokenization, virtual accounts, fraud protection tools, chargeback management, and reconciliation and reporting services.

The Company will host a conference call to discuss the transaction at 7:00 AM Pacific Time (PT) on Friday, September 16, 2022. Please see below for further conference call details.

Key strategic and financial benefits of the transaction and the development of the payments vertical:

•Enables Banc of California to offer a best-in-class, one-stop-shop payments solution and significantly expands the Bank’s addressable market

•Adds a high margin source of stable, predictable fee income with the end-to-end solution enabling Banc of California to capture a much larger share of the revenue per transaction than the typical merchant processing of regional banks

•Diversifies the Company’s revenue mix while increasing non-interest income as a percentage of revenue

•Provides another source of noninterest-bearing deposits

•Further differentiates Banc of California from regional bank competitors, enhances business development capabilities in attractive vertical markets, and provides opportunities for expanding relationships with existing clients

•Creates another driver of profitable long-term growth and franchise value

The acquisition provides the Bank with a proprietary technology platform for payment processing, offering the full stack of payment services to its clients as a payment gateway, payment provider, and an ISO 8583 payment switch. Through its Deepstack subsidiary, the Bank will market payment processing services to a wide range of business clients, including existing clients, integrated software vendors (“ISVs”), e-commerce marketplaces, fintechs and other merchants who are seeking a convenient and tech-oriented solution to embed payments into their software and websites.

Jared Wolff, President and Chief Executive Officer of the Company, said, “The acquisition of Deepstack expands our business into payment processing and furthers our strategy to grow fee-based income in a scalable and meaningful way. Deepstack’s client-centric technology platform will enable us to offer existing and new clients a best-in-class transaction processing solution. Combined with our existing, leading-edge deposit and treasury management solutions and tailored lending services, we continue to execute on our strategy to be the hub of the financial services ecosystem for our clients and enhance the value of our franchise.”

3 MacArthur Place Santa Ana, CA 92707 (949) 236-5250 www.bancofcal.com

Jayme Amirie, President of Deepstack, said, “We are excited to join Banc of California and provide a full stack payment solution to clients that very few banks and payment processors are able to offer. ISVs and tech-enabled businesses are tired of piecemeal embedded payments and finance solutions and limited interactions with the underlying bank. By combining with Banc of California, we can offer clients cutting-edge payments technology solutions to enable them to seamlessly integrate and monetize their platforms, while giving clients faster access to funds from credit card receivables, same-day account visibility, and better reporting and account reconciliation.”

Transaction Details

Under the terms of the transaction, the Bank acquired the assets of Deepstack, including but not limited to, the intellectual property and certain clients of Deepstack. The consideration was paid 70% in cash and 30% in the Company’s common stock using the 20 trading-day volume weighted average closing price of $17.46 per share. All of Deepstack’s employees have joined the Bank and its three executives have entered into three-year employment agreements with the Bank. Eight of the eleven employees are based in Southern California. Deepstack Technologies is an operating subsidiary of the Bank and Jayme Amirie will continue as the President of Deepstack.

The transaction is expected to be neutral to consensus earnings per share estimates in 2023 and expected to be accretive thereafter. The transaction is expected to be approximately 2.7% dilutive to tangible book value per share. The transaction includes a three year earn out beginning in 2023 to be paid from operating profits of the new subsidiary.

MJC Partners, LLC served as financial advisor to Banc of California in the transaction, and Paul Hastings LLP served as legal counsel to Banc of California. MAPP Advisors acted as advisor to Deepstack and Global Legal LLP served as legal counsel to Deepstack.

Conference Call and Webcast

The Company will host a conference call at 7:00 a.m. PT on September 16, 2022 to discuss the transaction. Interested parties are welcome to attend the conference call by dialing 888-317-6003, and referencing event code 3120438. A live audio webcast will also be available and the webcast link will be posted on the Company’s Investor Relations website at www.bancofcal.com/investor. The slide presentation for the call will also be available on the Company's Investor Relations website prior to the call. A replay of the call will be made available shortly after the call has ended on the Company’s Investor Relations website at www.bancofcal.com/investor or by dialing 877-344-7529 and providing the access code 1960441.

About Banc of California, Inc.

Banc of California, Inc. (NYSE: BANC) is a bank holding company with $9.5 billion in assets at June 30, 2022 and one wholly-owned banking subsidiary, Banc of California, N.A. (the Bank). The Bank has 35 offices including 30 full-service branches located throughout Southern California. Through our dedicated professionals, we provide customized and innovative banking and lending solutions to businesses, entrepreneurs and individuals throughout California, and full stack payment processing solutions through our subsidiary Deepstack Technologies. We help to improve the communities where we live and work, by supporting organizations that provide financial literacy and job training, small business support and affordable housing. With a commitment to service and to building enduring relationships, we provide a higher standard of banking. We look forward to helping you achieve your goals. For more information, please visit us at www.bancofcal.com.

About Deepstack Technologies

Deepstack Technologies, LLC, a wholly-owned subsidiary of Banc of California, N.A., is a leading-edge full stack payments platform for integrated software vendors, e-commerce marketplaces, fintechs and other businesses who are seeking a convenient and tech-oriented solution to collect payments via their software and websites. Deepstack is a one-stop shop for merchant processing, providing a payment gateway, payments acceptance and disbursements,

3 MacArthur Place Santa Ana, CA 92707 (949) 236-5250 www.bancofcal.com

tokenization of credit cards, enhanced fraud protection, chargeback management and reconciliation and reporting services. For more information, please visit https://www.deepstack.io.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, with respect to the Company’s acquisition of the technology and payments platform of Global Payroll Gateway and Deepstack Technologies. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by the Company with the Securities and Exchange Commission (SEC). Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “pending,” “plan,” “preliminary,” “should,” “will,” “would” or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. Factors that may cause such differences include, among others: the risk that the revenue synergies and other anticipated benefits of the proposed transaction may take longer than anticipated to be realized or may not be realized at all; disruption to the parties’ businesses as a result of the acquisition and diversion of management’s attention from ongoing business operations and opportunities; the risk that we will not be successful in the implementation of our new lines of business, new products and services, or other strategic project initiatives; the risk that the integration of the parties’ operations will be materially delayed or will be more costly or difficult than expected; reputational risk, regulatory risk and potential adverse reactions of the Company’s or Deepstack’s customers, suppliers, vendors, employees or other business partners; other risks that are described in the Company’s public filings with the SEC; and the impact of the ongoing global COVID-19 pandemic on the Company’s or Deepstack’s businesses, and/or any of the other foregoing risks. You should not place undue reliance on forward-looking statements and the Company undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

Source: Banc of California, Inc.
Investor Relations Inquiries:
Banc of California, Inc.
(855) 361-2262
Jared Wolff, (949) 385-8700
Lynn Hopkins, (949) 265-6599

3 MacArthur Place Santa Ana, CA 92707 (949) 236-5250 www.bancofcal.com

exhibit992bancacquisitio

Acquisition of Deepstack Technologies, LLC September 15, 2022

1 Forward Looking Statements This investor presentation may contain forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, with respect to the Company’s acquisition of the technology and payments platform of Global Payroll Gateway and Deepstack Technologies. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by the Company with the Securities and Exchange Commission (SEC). Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “pending,” “plan,” “preliminary,” “should,” “will,” “would” or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. Factors that may cause such differences include, among others: the risk that the revenue synergies and other anticipated benefits of the proposed transaction may take longer than anticipated to be realized or may not be realized at all; disruption to the parties’ businesses as a result of the acquisition and diversion of management’s attention from ongoing business operations and opportunities; the risk that we will not be successful in the implementation of our new lines of business, new products and services, or other strategic project initiatives; the risk that the integration of the parties’ operations will be materially delayed or will be more costly or difficult than expected; reputational risk, regulatory risk and potential adverse reactions of the Company’s or Deepstack’s customers, suppliers, vendors, employees or other business partners; other risks that are described in the Company’s public filings with the SEC; and the impact of the ongoing global COVID-19 pandemic on the Company’s or Deepstack’s businesses, and/or any of the other foregoing risks. You should not place undue reliance on forward-looking statements and the Company undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made. Forward Looking Statements

2 Overview of Transaction & Deepstack Technologies  Provides Banc of California with proprietary payments software solution and entrance into payment processing space for business customers  Provides opportunity to offer payment processing services to current Banc of California clients as well as integrated software vendors (“ISVs”), e-commerce marketplaces, fintechs and other merchants serving business clients. Opening deposit accounts at Banc of California will give businesses same day visibility into merchant transactions and faster funding  Provides a meaningful opportunity to grow fee income and core deposits  Further differentiates the Banc of California experience and provides commercial banking teams with another tool for developing relationships with commercial clients in California  Advances Banc of California’s goal to be the hub of the financial services ecosystem for clients while creating another driver of profitable long-term growth and franchise value  Advanced Technology: Built to ISO 8583 standards, with ability to accurately process transactions at a speed and volume capable of connecting directly to card brands. Eventually can reduce processing costs while also having the ability to build data warehouse necessary to provide real-time insights for clients Banc of California has acquired the assets of Global Payroll Gateway and its subsidiary Deepstack Technologies LLC (“Deepstack”) for $24 million in cash and stock ➢ Software-led and e-commerce payments platform that provides clients with payment solutions, including merchant processing, payments acceptance and disbursements, tokenization, virtual accounts, fraud protection tools, chargeback management, and reconciliation and reporting services CEO: Jayme Amirie Offices: Southern, CA and Jupiter, FL Overview ➢ Founded: 2010 ➢ 11 Employees, with 8 located in Southern CA and 3 in FL ➢ All employees joined BANC ➢ www.deepstack.io

3 Company Needs Current BANC Platform BANC + Deepstack Credit Lines P P Business Loans P P Deposit Accounts P P Treasury Management P P ACH Processing P P Payment Processing P Card Acceptance P Payout Management P Fraud & Chargeback Management P Tailored Payments / Reporting Products P T ra d it io n a l B a n k in g S e rv ic e s N e w C li e n t S e rv ic e s Differentiated Tech & Full Suite of Payment Products Scalable, Meaningful Fee-Based Income • Provides BANC with growing source of recurring fee income New Clients in Verticals Attractive to BANC • Mid-size ISVs targeting businesses need customized payment solutions that help them overcome payment and banking system barriers that processors and banks don’t offer today Generates Noninterest-Bearing (NIB) Deposits • Same day visibility into merchant transactions will be available to merchants who open their settlement account at Banc of California – a service few other merchant processors currently provide Customer Solutions Via Technology Focus • Banc of California is providing all the solutions business clients need under one roof Strategic Rationale Franchise Enhancing • A proprietary, software-based payments platform that can be customized for clients Owning the technology that powers payment processing offers clients same day visibility into their receivables when they have their merchant settlement account at BANC, providing BANC with another source of NIB deposits The transaction provides a full suite of payments capabilities few other banks have

4 Financially Compelling • $24 million purchase price • Asset purchase structure results in tax deductible intangibles, including goodwill • Approximately 2.7% dilutive to TBVPS, including estimated closing costs of ~$1.5M(1) • 70% cash and 30% stock consideration using the 20 trading-day volume weighted average closing price of $17.46 per share • Three year earn out beginning in 2023 to be paid from operating profits of the new operating subsidiary • Expect the transaction to be neutral to earnings in 2023 and increasingly accretive to EPS thereafter • Internal rate of return expected to exceed 25% Experienced Deepstack Leadership • The payments vertical will continue to operate under the Deepstack Technologies name as an operating subsidiary of Banc of California, N.A and Jayme Amirie continues as the President of Deepstack • A veteran technology entrepreneur, Jayme Amirie founded the company in 2010 • Three year employment agreements with the key principals: • Jayme Amirie, President • Jason Kafer, CTO • Software engineer; 20 Years Card Processing and ACH Experience, PCI Security Expert • Taylor Lilley, CIO • Military veteran; Long track record of architecting and delivering custom software solutions across multiple industries • Deepstack leadership team has been working together for over 15 years at Deepstack and previous companies Transaction Details (1) Calculated using a 29.6% tax rate

5 Owning the Payment Tech Stack and a Direct to Merchant Software Solution Provides BANC with Compelling Economics Note: Illustrative card transaction economics. Illustrative: $100 Transaction Value with a 250 bps Credit Card Transaction Fee Transaction has the potential to generate fees of up to 91 bps in front-end and back-end fee income At scale, payments is increasingly profitable as transaction volumes increase Bank Sponsor Card Networks (V, MC) Interchange rate (Issuer) 10 bps 78 bps 7 bps 149 bps 4 bpsGateway (NMI, etc.) Processor (TSYS, First Data, etc.) ISO Typical Bank Sponsoring ISOs (Low/Mid Risk Merchants) Card Networks (V, MC) Interchange rate (Issuer) 10 bps 7 bps 149 bps Processor (TSYS, First Data, etc.) Current State: BANC – Deepstack Handling the Front-end Card Networks (V, MC) Interchange rate (Issuer) 10 bps 149 bps Future State: BANC – Deepstack Handling the Front-end & the Back-end 2 bps 84 bps 91 bps BANC may pay a referral fee of up to 39 bps or 50% of the ISO fee (39 bps) BANC Earns: 45 bps to 84 bps (39 bps) Bank Only Sponsoring ISOs Earns: 2 bps BANC / Deepstack: • Processor: 7 bps • Gateway: 4 bps • No ISO: 78 bps • Bank Sponsor: 2 bps Total: 91 bps BANC / Deepstack: • Gateway: 4 bps • No ISO: 78 bps • Bank Sponsor: 2 bps Total: 84 bps 52 bps to 91 bpsBANC Earns: BANC may pay a referral fee of up to 39 bps or 50% of the ISO fee

6 BANC can immediately provide a full stack of payments solutions to all existing client verticals About Current ISV client is a property management SAAS company that provides property management interface to over 300 property managers and landlords, that includes online rent collections via card and ACH all in one platform, and with other property management tools. The Issue The client needed a payments processing partner that could solve challenges with mismatched payment data, faster access to funds and better data and reporting The Solution Deepstack implemented a customized solution that not only solved the client’s issues, but can now be used to support other ISVs or merchants with similar challenges and needs. Real-Time Payments Visibility Opening an account with BANC can provide property management clients with faster visibility into payments/rent collection and a source of stable noninterest-bearing deposits for BANC. Case Study ISV Case Study: Property Management Saas Client Prompt Customer Support Quick Onboarding in Days, not Weeks or Months Tailored PayoutsCard Processing and ACH Processing Customized Reporting Same day settlement / real- time visibility for payments and deposits Real Estate & Restaurant Verticals Tech & MediaHealthcare & Education • Government / Municipalities • Subscription boxes • Marketplace platforms

7 Payments Glossary Issuers Financial Institutions that issue debit or credit cards to consumers or businesses on behalf of the Card Networks. Like Acquiring Banks/Sponsor Banks, Issuers must be members of and/or otherwise approved by the Card Network to engage in issuing activities. ISOs / MSPs Independent Sales Organizations (ISOs) / Merchant Service Providers (MSPs) are the intermediaries between merchants and the Processor and/or the Acquiring Bank/Sponsor Bank. ISOs/MSPs solicit merchants to receive payment processing services of the Acquiring Bank/Sponsor Bank. ISOs/MSPs may provide point-of- sale terminals or other equipment to merchants, but ISOs/MSPs are not generally in the transaction funds flow and generally do not physically manage merchants’ money. Card Networks The Card Networks (American Express, Discover, Mastercard, Visa) are a critical piece of the payments puzzle, providing the infrastructure needed to clear and settle transactions between Issuers and Acquiring Banks/Sponsor Banks (each of which are members of or otherwise authorized to submit transactions into the Card Networks). Gateways A gateway sits between the merchant and the Processor, and its function is to collect, package, and encrypt transaction data, including the card account details, for routing to the Card Network. The gateway then translates the response back to the cardholder at the point of interaction (i.e., whether the transaction is approved or declined). Processors Entities that handle the movement and verification of transaction data between the merchant and the other parties (Acquiring Banks/Sponsor Banks, Card Networks, Issuing Banks) involved in the execution and settlement of payment card transactions. Processors provide the technical capabilities and connectivity to the Card Networks for transaction authorization, clearing, and settlement. Payment Facilitator A company that provides the infrastructure necessary for their sub-merchants to begin accepting payment card payments. Payment Facilitators (i) contract with an Acquiring Bank/Sponsor Bank to provide payment services on the Bank’s behalf, (ii) underwrite and onboard the sub-merchants, (iii) enter into a direct contract with the sub-merchants in order to provide payment services, and (iv) may provide the sub-merchants with the technology they need to process electronic payments and receive the funds from those payments. Acquiring Banks/Sponsor Banks deposit settlement funds to the Payment Facilitator’s account, and the Payment Facilitator subsequently settles those funds to the relevant sub-merchants. Acquiring Bank / Sponsor Bank The bank that sponsors the merchant into the card payments ecosystem, underwrites the risk of the merchants and holds the merchant’s account, and accepts the settlement funds arising from the merchant’s transactions. Acquiring Banks/Sponsor Banks must be members of the Card Networks. An Acquiring Bank/Sponsor Bank may directly solicit merchants to receive the Bank’s payment services, or the Bank may engage ISOs/MSPs to solicit merchants on the Bank’s behalf. ISVs An independent software vendor (“ISV”) is an organization specializing in making and selling software products that run on one or more computer hardware or operating systems. ISVs are aggregants of other merchants who typically operate within a specific industry such as real estate, technology, media, entertainment, and healthcare. ISVs may incorporate an Acquiring Bank/Sponsor Bank’s payment card processing services in the ISV’s software products. ISO8583 Connectivity ISO 8583 is an international standard for financial transaction card originated interchange messaging so that different systems can exchange transaction requests and responses. The vast majority of transactions made when a customer uses a payment card use ISO 8583 at some point in the communication chain. In particular, the Mastercard and Visa networks base their authorization communications on the ISO 8583 standard and require this capability for direct connection.