DEFM14A 1 nt10022949x6_defm14a.htm DEFM14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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
PACIFIC MERCANTILE BANCORP
(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 the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(4)
Proposed maximum aggregate value of transaction:
 
 
 
 
(5)
Total fee paid:
 
 
 
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
(3)
Filing Party:
 
 
 
 
(4)
Date Filed:
 
 
 

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JOINT PROXY STATEMENT/PROSPECTUS


Dear Stockholders of Banc of California, Inc. and Shareholders of Pacific Mercantile Bancorp:
Banc of California, Inc., a Maryland corporation, which we refer to as BOC, and Pacific Mercantile Bancorp, a California corporation, which we refer to as PMB, have entered into a definitive merger agreement, which we refer to as the merger agreement, pursuant to which PMB will merge with and into BOC, with BOC as the surviving corporation, which we refer to as the merger. Promptly following the merger, Pacific Mercantile Bank, a wholly-owned subsidiary of PMB, which we refer to as PM Bank, will merge with and into Banc of California, National Association, a wholly-owned subsidiary of BOC, which we refer to as BOC Bank, with BOC Bank as the surviving bank, which we refer to as the bank merger, and collectively with the merger, the mergers.
Before we complete the mergers, each of BOC and PMB will hold a special meeting of its stockholders and shareholders, respectively.
The special meeting of stockholders of BOC will be held virtually via the Internet on Wednesday, June 23, 2021, which we refer to as the BOC special meeting, to vote on the following proposals:
to approve the merger, which we refer to as the BOC merger proposal;
to approve the issuance of BOC common stock in connection with the merger, which we refer to as the BOC stock issuance proposal; and
to approve one or more adjournments of the BOC special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the BOC special meeting to approve the BOC merger proposal or BOC stock issuance proposal, which we refer to as the BOC adjournment proposal.
The special meeting of shareholders of PMB will be held in the first floor Training Room at PMB’s offices at 949 South Coast Drive, Costa Mesa, California 92626 on Wednesday, June 23, 2021, which we refer to as the PMB special meeting, to approve the following proposals:
to approve the principal terms of the merger agreement, which we refer to as the PMB merger proposal;
to approve, on a non-binding, advisory basis, the compensation to be paid in connection with the merger to the named executive officers, or NEOs, of PMB, which we refer to as the PMB NEO compensation proposal; and
to approve one or more adjournments of the PMB special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the PMB special meeting to approve the PMB merger proposal or PMB NEO compensation proposal, which we refer to as the PMB adjournment proposal.
At the effective time of the merger, each PMB common share, other than excluded shares, will be converted into the right to receive 0.50 of a share of BOC common stock, with cash paid in lieu of a fractional share of BOC common stock.
The market value of the merger consideration will fluctuate with the price of BOC common stock. Based on the closing price of BOC common stock on March 22, 2021, the last trading day before the public announcement of the signing of the merger agreement, the value of the per share merger consideration payable to holders of PMB common shares was $9.77. Based on the closing price of BOC common stock on May 10, 2021, the last practicable date before the date of this joint proxy statement/prospectus, the value of the per share merger consideration payable to holders of PMB common shares was $8.86. You should obtain current price quotations for PMB common shares and BOC common stock. BOC common stock is traded on the New York Stock Exchange under the symbol “BANC,” and PMB common shares are traded on the Nasdaq Global Select Market under the symbol “PMBC.” The New York Stock Exchange is referred to herein as the NYSE and the Nasdaq Global Select Market is referred to herein as Nasdaq.
The proposed merger is expected to be accretive to the combined company’s earnings per share in 2022, and BOC believes that PMB is a strong strategic fit with similar management and culture. The board of directors of BOC has approved the merger and the issuance of BOC common stock in connection with the merger, and determined that the merger and the issuance of BOC common stock in connection with the merger are advisable and fair to and in the best interests of BOC and its stockholders. The BOC board of directors recommends that the BOC stockholders vote “FOR” the BOC merger proposal, “FOR” the BOC stock issuance proposal and “FOR” the BOC adjournment proposal. The board of directors of PMB has approved the merger agreement and the transactions contemplated thereby, and determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of PMB and its shareholders. The PMB board of directors recommends that the PMB shareholders vote “FOR” the PMB merger proposal, “FOR” the PMB NEO compensation proposal and “FOR” the PMB adjournment proposal.
Your vote is very important. To ensure your representation at the BOC special meeting or the PMB special meeting, as applicable, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Whether or not you expect to attend the respective special meeting, please vote promptly. Submitting a proxy now will not prevent you from being able to vote your shares via the Internet during the BOC special meeting or in person at the PMB special meeting.
If you hold your shares of BOC common stock in “street name” through a bank, broker or other nominee, you should follow the directions provided by your bank, broker or other nominee regarding how to instruct your bank, broker or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting against the BOC merger proposal.
If you hold your PMB common shares in “street name” through a bank, broker or other nominee, you should follow the directions provided by your bank, broker or other nominee regarding how to instruct your bank, broker or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting against the PMB merger proposal.
This joint proxy statement/prospectus provides you with detailed information about the proposed merger. You are encouraged to read the entire joint proxy statement/prospectus, including the appendices and the documents incorporated by reference, carefully. In particular, you should read the “Risk Factors” section beginning on page 21 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you.
We thank you for your continued support.
Sincerely,
/S/ Jared Wolff
/S/ Brad Dinsmore
 
 
Jared Wolff
President and Chief Executive Officer
Banc of California, Inc.
Brad Dinsmore
Chief Executive Officer
Pacific Mercantile Bancorp
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of the BOC common stock in connection with the merger or the other transactions described in this document, or passed upon the adequacy or accuracy of the disclosures in this document.
The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
This document is dated Thursday, May 13, 2021 and is first being mailed to BOC stockholders and PMB shareholders on or about Friday, May 14, 2021.

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WHERE YOU CAN FIND MORE INFORMATION
Both Banc of California, Inc. and Pacific Mercantile Bancorp, which we refer to as BOC and PMB, respectively, file annual, quarterly and current reports, proxy statements and other business and financial information with the Securities and Exchange Commission, referred to as the SEC. You can read the SEC filings of BOC and PMB over the Internet at the SEC’s website at www.sec.gov. You may also obtain these documents, free of charge, from BOC at www.bancofcal.com under the “Investor Relations” link and then under the “Financials and Filings” tab or from PMB at www.pmbank.com under the heading “Investors Relations” and then under the tab “SEC Filings.”
BOC has filed a registration statement on Form S-4 of which this document forms a part. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits, at the addresses set forth below. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This document incorporates by reference documents that BOC and PMB have previously filed with the SEC. They contain important information about the companies and their financial condition. For more information, please see the section entitled “Incorporation of Certain Documents by Reference.” These documents are available without charge to you upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below.
Banc of California, Inc.
3 MacArthur Place
Santa Ana, California 92707
Attention: Investor Relations
(855) 361-2262
Pacific Mercantile Bancorp
949 South Coast Drive, Suite 300
Costa Mesa, California 92626
Attention: Investor Relations
(714) 438-2531
To obtain timely delivery of these documents, BOC stockholders must request the information no later than Wednesday, June 16, 2021 in order to receive it before the BOC special meeting and PMB shareholders must request the information no later than Wednesday, June 16, 2021 in order to receive it before the PMB special meeting.
BOC common stock is traded on the NYSE under the symbol “BANC,” and PMB common shares are traded on Nasdaq under the symbol “PMBC.”

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BANC OF CALIFORNIA, INC.
3 MACARTHUR PLACE
SANTA ANA, CALIFORNIA 92707
NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 23, 2021
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Banc of California, Inc., referred to as BOC, will be held virtually, solely by means of remote communication, at http://www.virtualshareholdermeeting.com/BANC2021SM, on Wednesday, June 23, 2021, at 8:00 a.m., local time for the purpose of considering and voting upon the following proposals:
1.
BOC Merger Proposal. To approve the merger pursuant to the terms of the Agreement and Plan of Merger, dated as of March 22, 2021, by and between BOC and Pacific Mercantile Bancorp, as such agreement may be amended from time to time, a copy of which is attached as Appendix A to this joint proxy statement/prospectus.
2.
BOC Stock Issuance Proposal. To approve the issuance of common stock of BOC in connection with the merger.
3.
BOC Adjournment Proposal. To approve one or more adjournments of the BOC special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the BOC special meeting to approve the BOC merger proposal or the BOC stock issuance proposal.
BOC will transact no other business at the BOC special meeting other than as listed above.
The BOC board of directors has set Monday, May 10, 2021 as the record date for the BOC special meeting. Only holders of record of BOC voting common stock at the close of business on Monday, May 10, 2021 will be entitled to notice of and to vote at the BOC special meeting and any adjournments or postponements thereof.
Stockholder approval of the BOC merger proposal by the affirmative vote of a majority of the outstanding stock entitled to vote and of the BOC stock issuance proposal by the affirmative vote of a majority of the votes cast at a duly held meeting at which there is a quorum is required to complete the merger.
The BOC board of directors has approved the merger and the issuance of BOC common stock in connection with the merger and recommends that you vote “FOR” the BOC merger proposal, “FOR” the BOC stock issuance proposal and “FOR” the BOC adjournment proposal.
Your vote is very important. To ensure your representation at the BOC special meeting, please (1) complete, sign, date and return the enclosed proxy card in the envelope provided or (2) follow the instructions provided on the proxy card to submit your proxy by telephone or through the Internet. If you hold your shares of BOC common stock through a bank, broker or other nominee, you should direct the vote of your shares in accordance with the voting instructions received from your bank, broker or other nominee. Please vote promptly whether or not you expect to attend the BOC special meeting.
Due to the continuing public health impact of the COVID-19 pandemic and to support the well-being of our stockholders and employees, we are holding the BOC special meeting virtually via webcast. No physical meeting will be held. Stockholders of record as of the record date who have a control number may attend the BOC special meeting and may vote during, and participate in, the BOC special meeting by visiting http://www.virtualshareholdermeeting.com/BANC2021SM. Online access to the BOC special meeting, which will be an audio-only webcast, will begin at 7:45 a.m., local time, on Wednesday, June 23, 2021. For registered stockholders, the control number can be found on your proxy card. Stockholders who hold shares through a bank, broker or other nominee must obtain a legal proxy from their bank, broker or other nominee and register in advance to be able to attend the BOC special meeting and vote during, and participate in, the BOC special meeting. Stockholders should follow the instructions provided by their respective bank, broker or other nominee to participate in the BOC special meeting.
Please read carefully the sections in the joint proxy statement/prospectus regarding attending and voting at the BOC special meeting to ensure that you comply with these requirements. You are encouraged to read the entire joint proxy statement/prospectus, including the appendices and the documents incorporated by reference, carefully. If you have any questions about the proposals or need assistance in voting your shares, please call BOC Investor Relations at (855) 361-2262.

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BY ORDER OF THE BOARD OF DIRECTORS
/S/ Ido Dotan
 
 
 
Ido Dotan
 
Executive Vice President, General Counsel and Corporate Secretary
 
 
Santa Ana, California
May 13, 2021
 

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PACIFIC MERCANTILE BANCORP
949 SOUTH COAST DRIVE, SUITE 300
COSTA MESA, CALIFORNIA 92626
NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 23, 2021
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of Pacific Mercantile Bancorp, referred to as PMB, will be held in the first floor Training Room at PMB’s offices at 949 South Coast Drive, Costa Mesa, California 92626, on Wednesday, June 23, 2021, at 9:00 a.m., local time for the purpose of considering and voting upon the following proposals:
1.
PMB Merger Proposal. To approve the principal terms of the Agreement and Plan of Merger, dated as of March 22, 2021, by and between Banc of California, Inc. and PMB, as such agreement may be amended from time to time, a copy of which is attached as Appendix A to this joint proxy statement/prospectus;
2.
PMB NEO Compensation Proposal: To approve, on an advisory (non-binding) basis, the compensation to be paid to the named executive officers of PMB in connection with the merger; and
3.
PMB Adjournment Proposal. To approve one or more adjournments of the PMB special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the PMB special meeting to approve the PMB merger proposal or the PMB NEO compensation proposal.
PMB will transact no other business at the PMB special meeting other than as listed above.
The PMB board of directors has set Monday, May 10, 2021 as the record date for the PMB special meeting. Only holders of record of PMB voting common shares at the close of business on Monday, May 10, 2021 will be entitled to notice of and to vote at the PMB special meeting and any adjournments or postponements thereof.
Shareholder approval of the PMB merger proposal by the affirmative vote of a majority of the outstanding shares entitled to vote is required to complete the merger.
The PMB board of directors has approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the PMB merger proposal, “FOR” the PMB NEO compensation proposal and “FOR” the PMB adjournment proposal.
Your vote is very important. To ensure your representation at the PMB special meeting, please (1) complete, sign, date and return the enclosed proxy card in the envelope provided or (2) follow the instructions provided on the proxy card to submit your proxy by telephone or through the Internet. If you hold your shares through a bank, broker or other nominee, you should direct the vote of your shares in accordance with the voting instructions received from your bank, broker or other nominee. Please vote promptly whether or not you expect to attend the PMB special meeting.
We expect to hold the PMB special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the PMB special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only PMB shareholders will be admitted to the PMB special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the PMB special meeting in person. To do so, please make your request by mail to PMB at 949 South Coast Drive, Costa Mesa, CA 92626, Attention: Chief Financial Officer, by email at Curt.Christianssen@pmbank.com or by phone at (714) 438-2500. PMB must receive your request for pre-authorization on or before Tuesday, June 15, 2021.
Please read carefully the sections in the joint proxy statement/prospectus regarding attending and voting at the PMB special meeting to ensure that you comply with these requirements. You are encouraged to read the entire joint proxy statement/prospectus, including the appendices and the documents incorporated by reference, carefully. If you have any questions about the proposals or need assistance in voting your shares, please call PMB Investor Relations at (714) 438-2531.

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BY ORDER OF THE BOARD OF DIRECTORS
/S/ Curt Christianssen
 
 
 
Curt Christianssen
 
Executive Vice President, Chief Financial Officer,
 
 
 
Costa Mesa, California
 
May 13, 2021
 

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QUESTIONS AND ANSWERS
The following questions and answers briefly address certain commonly asked questions about the merger and the respective special meetings of stockholders of Banc of California, Inc. and shareholders of Pacific Mercantile Bancorp. You should carefully read the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this document.
Q:
WHAT IS THE MERGER?
A.
Banc of California, Inc., a Maryland corporation, referred to as BOC, and Pacific Mercantile Bancorp, a California corporation, referred to as PMB, have entered into an agreement and plan of merger, which we refer to as the merger agreement, pursuant to which and subject to the terms and conditions of the merger agreement, PMB will merge with and into BOC, with BOC continuing as the surviving corporation, which transaction is referred to as the merger. A copy of the merger agreement is attached as Appendix A to this document. Promptly following the merger, Pacific Mercantile Bank, a wholly owned subsidiary of PMB, which we refer to as PM Bank, will merge with and into Banc of California, National Association, a national banking association and wholly owned subsidiary of BOC, which we refer to as BOC Bank, with BOC Bank continuing as the surviving bank, which transaction is referred to as the bank merger. In order to complete these transactions, BOC stockholders must approve the merger and the issuance of BOC common stock in connection therewith, the PMB shareholders must approve the principal terms of the merger agreement, and the applicable banking regulators must approve both the merger and the bank merger.
Q:
WHY AM I RECEIVING THIS JOINT PROXY STATEMENT/PROSPECTUS?
A.
Each of BOC and PMB is sending these materials to its stockholders and its shareholders, respectively, to help them decide how to vote their BOC common stock or PMB common shares with respect to the merger, merger agreement and other matters to be considered at the respective special meetings.
The merger cannot be completed unless BOC stockholders approve the merger and the issuance of BOC common stock in connection with the merger and PMB shareholders approve the principal terms of the merger agreement. Each of BOC and PMB is holding a special meeting of its stockholders or shareholders, respectively, to vote on the proposals necessary to complete the merger as well as other related matters. Information about the special meetings, the merger and the other business to be considered at the special meetings is contained in this document.
This document constitutes both a joint proxy statement of BOC and PMB and a prospectus of BOC. It is a joint proxy statement because each of the board of directors of BOC and PMB is soliciting proxies from their respective stockholders and shareholders. It is a prospectus because BOC, in connection with the merger, is offering shares of its common stock in exchange for outstanding PMB common shares in the merger.
Q:
WHAT WILL PMB SHAREHOLDERS RECEIVE IN THE MERGER?
A:
In the merger, each PMB common share owned by a PMB shareholder, other than excluded shares, will be converted into the right to receive 0.50 of a share of common stock, par value $0.01 per share, of BOC, referred to as BOC common stock, which ratio is referred to as the exchange ratio. The BOC common stock to be exchanged for each PMB common share is referred to as the merger consideration. For each fractional share that would otherwise be issued, BOC will pay cash in an amount equal to the fraction of a share of BOC common stock which the holder would otherwise be entitled to receive multiplied by the volume weighted average price of BOC common stock as quoted on the NYSE over the 20 consecutive trading days ending on the fifth business day immediately prior to the closing date. No interest will be paid or accrue on cash payable to holders in lieu of fractional shares.
This 20 consecutive trading day average price is referred to as the BOC average closing price; the fifth business day immediately prior to the closing date is referred to as the determination date; and the 20 consecutive trading day period ending on the determination date is referred to as the determination period.
Based on the closing price of BOC common stock on March 22, 2021, the last trading day before the public announcement of the merger agreement, the value of the per share merger consideration payable to holders
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of PMB common shares was $9.77. Based on the closing price of BOC common stock on May 10, 2021, the last practicable date before the date of this document, the value of the per share merger consideration payable to holders of PMB common shares was $8.86.
Q:
WILL THE VALUE OF THE MERGER CONSIDERATION CHANGE BETWEEN THE DATE OF THIS DOCUMENT AND THE TIME THE MERGER IS COMPLETED?
A:
Yes. Although the number of shares of BOC common stock that PMB shareholders will receive in the merger is fixed, the value of the merger consideration will fluctuate between the date of this document and the completion of the merger based upon the market value of BOC common stock. Any fluctuation in the market price of BOC common stock after the date of this document will change the value of the shares of BOC common stock that PMB shareholders will receive.
Q:
WHAT HAPPENS TO PMB EQUITY AWARDS IN THE MERGER?
A:
PMB Stock Options. At the effective time of the merger, referred to as the effective time, each outstanding option to acquire PMB common shares under PMB’s equity incentive plans, referred to as a PMB stock option, whether vested or unvested, will be cancelled and will entitle the holder of such option to receive an amount in cash equal to the product of (i) the total number of PMB common shares subject to such option and (ii) the excess, if any, of (A) an amount equal to the product of the BOC average closing price and 0.50 over (B) the exercise price per PMB common share underlying such option, less any applicable taxes required to be withheld with respect to such payment. Any PMB stock options which have an exercise price per share that is greater than or equal to the product of the BOC average closing price and 0.50 will be cancelled at the effective time of the merger for no consideration or payment.
PMB Restricted Shares and RSUs. At the effective time of the merger, each outstanding award of PMB restricted stock, referred to as the PMB restricted shares, and each outstanding award of PMB restricted stock units, referred to as PMB RSUs, will, automatically and without any action on the part of the holder of such PMB restricted shares or PMB RSUs, accelerate in full, be cancelled and will only entitle the holder of such PMB restricted shares or PMB RSUs to receive, on the first regular payroll date following the closing date of the merger, an amount in cash equal to the product of (i) such holder’s total number of PMB restricted shares or RSUs, as applicable, and (ii) an amount equal to the product of the BOC average closing price and 0.50, less any applicable taxes required to be withheld with respect to such vesting, which tax withholding may, at the election of the holder, be effected by deduction from such cash amount equal to the amount of taxes to be withheld.
Q:
WHEN WILL THE MERGER BE COMPLETED?
A:
BOC and PMB are working to complete the merger as soon as practicable. The parties are seeking to have regulatory approval during the third quarter of 2021, with the consummation of the merger to occur as soon as practicable thereafter. Neither BOC nor PMB know, however, the actual date on which the merger will be completed because it is subject to factors beyond each company’s control, including whether or when the required regulatory approvals, BOC stockholder approval and PMB shareholder approval will be received. For more information, please see the section entitled “The Merger Agreement—Conditions to Consummation of the Merger.”
Q:
WHO IS ENTITLED TO VOTE?
A:
BOC Special Meeting: Holders of record of BOC voting common stock at the close of business on Monday, May 10, 2021, which is the date that the BOC board of directors has fixed as the record date for the BOC special meeting, are entitled to vote at the BOC special meeting.
PMB Special Meeting: Holders of record of PMB voting common shares at the close of business on Monday, May 10, 2021, which is the date that the PMB board of directors has fixed as the record date for the PMB special meeting, are entitled to vote at the PMB special meeting.
Q:
WHAT CONSTITUTES A QUORUM?
A:
BOC Special Meeting: One-third of all votes entitled to be cast at the meeting, represented in person or by proxy, constitutes a quorum for transacting business at the BOC special meeting. Proxies marked as abstaining on any matter to be acted upon by stockholders will be treated as present at the meeting for purposes of determining the presence or absence of a quorum.
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PMB Special Meeting: A majority of the shares entitled to vote, represented in person or by proxy, constitutes a quorum for transacting business at the PMB special meeting. Proxies marked as abstaining on any matter to be acted upon by shareholders will be treated as present at the meeting for purposes of determining the presence or absence of a quorum.
Q:
WHAT AM I BEING ASKED TO VOTE ON AND WHY IS THIS APPROVAL NECESSARY?
A:
BOC Special Meeting: BOC stockholders are being asked to vote on the following proposals:
1.
Approval of the merger pursuant to the terms of the Agreement and Plan of Merger, dated as of March 22, 2021, by and between BOC and PMB, as such agreement may be amended from time to time, a copy of which is attached as Appendix A, referred to as the BOC merger proposal;
2.
Approval of the issuance of BOC common stock in the merger, referred to as the BOC stock issuance proposal; and
3.
Approval of one or more adjournments of the BOC special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the BOC special meeting to approve the BOC merger proposal or BOC stock issuance proposal, referred to as the BOC adjournment proposal.
Stockholder approval of the BOC merger proposal and the BOC stock issuance proposal, referred to as the BOC stockholder approval, is required to complete the merger. BOC will transact no business at the BOC special meeting other than as listed above.
PMB Special Meeting: PMB shareholders are being asked to vote on the following proposals:
1.
Approval of the principal terms of the Agreement and Plan of Merger, dated as of March 22, 2021, by and between PMB and BOC, as such agreement may be amended from time to time, a copy of which is attached as Appendix A, referred to as the PMB merger proposal;
2.
Approval, on an advisory (non-binding) basis, of the compensation to be paid to the named executive officers of PMB in connection with the merger, referred to as the PMB NEO compensation proposal; and
2.
Approval of one or more adjournments of the PMB special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the PMB special meeting to approve the PMB merger proposal or PMB NEO compensation proposal, referred to as the PMB adjournment proposal.
Shareholder approval of the PMB merger proposal, referred to as the PMB shareholder approval, is required to complete the merger. PMB will transact no business at the PMB special meeting other than as listed above.
Q:
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE BOC SPECIAL MEETING?
A:
BOC Merger Proposal: The affirmative vote of a majority of the outstanding shares of BOC common stock entitled to vote on the proposal is required to approve the BOC merger proposal.
BOC Stock Issuance Proposal: The number of votes cast for the BOC stock issuance proposal must exceed the number of votes cast against the BOC stock issuance proposal.
BOC Adjournment Proposal: The number of votes cast for the BOC adjournment proposal must exceed the number of votes cast against the BOC adjournment proposal.
Q:
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE PMB SPECIAL MEETING?
A:
PMB Merger Proposal: The affirmative vote of a majority of the outstanding shares entitled to vote is required to approve the PMB merger proposal.
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PMB NEO Compensation Proposal: The PMB NEO compensation proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum.
PMB Adjournment Proposal: The PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum.
Q:
ARE THERE ANY VOTING AGREEMENTS WITH EXISTING SHAREHOLDERS?
A:
Yes. Each of the directors and certain shareholders of PMB have entered into a voting agreement with BOC in which such director or shareholder has agreed to vote all PMB common shares that he or she owns and has the power to vote in favor of the PMB merger proposal and any other matter that is required to be approved by the shareholders of PMB to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the principal terms of the merger agreement or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PMB’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 2,754,062 PMB common shares, allowing them to exercise approximately 12.3% of the voting power of PMB common shares (which does not include shares issuable upon the exercise of stock options or upon the vesting of PMB RSUs that were not outstanding as of the close of business on the record date).
In addition, each of the directors and certain stockholders of BOC have entered into a voting agreement with PMB in which such director or stockholder has agreed to vote all BOC common stock that he or she owns and has the power to vote in favor of the BOC merger proposal, the BOC stock issuance proposal and any other matter that is required to be approved by the stockholders of BOC to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the merger or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to BOC’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 5,205,334 shares of BOC common stock, allowing them to exercise approximately 10.4% of the voting power of BOC common stock (which does not include shares issuable upon the exercise of stock options or upon the vesting of BOC RSUs that were not outstanding as of the close of business on the record date).
Q:
WHAT DOES THE BOC BOARD OF DIRECTORS RECOMMEND?
A:
The BOC board of directors recommends that BOC stockholders vote “FOR” the proposals to be voted on by the BOC stockholders described in this joint proxy statement/prospectus.
Q:
WHAT DOES THE PMB BOARD OF DIRECTORS RECOMMEND?
A:
The PMB board of directors recommends that PMB shareholders vote “FOR” the proposals to be voted on by the PMB shareholders described in this joint proxy statement/prospectus.
Q:
WHAT DO I NEED TO DO NOW?
A:
After carefully reading and considering the information contained in this joint proxy statement/prospectus, please vote your shares as soon as possible so that such shares will be represented at the applicable special meeting.
Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your BOC stock or PMB shares are held in the name of your bank, broker or other nominee.
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Q:
HOW DO I VOTE?
A:
If you are a BOC common stockholder of record or a PMB common shareholder of record as of the close of business on the applicable record date, you may submit your proxy before the applicable special meeting in one of the following ways:
use the telephone number shown on your proxy card;
visit the website shown on your proxy card to vote via the Internet; or
complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.
You may also cast your vote online during the BOC special meeting or in person at the PMB special meeting.
If your stock or shares are held in “street name,” through a bank, broker or other nominee, that institution will send you separate instructions describing the procedure for voting such shares. “Street name” stockholders or shareholders who wish to vote online during the applicable special meeting will need to obtain a legal proxy form from their bank, broker or other nominee.
Q:
HOW MANY VOTES DO I HAVE?
A:
Each PMB common shareholder is entitled to one vote for each PMB voting common share owned as of the close of business on the record date. As of the close of business on the record date, there were approximately 22,322,184 outstanding PMB common shares entitled to vote. As of that date, approximately 14.2% of such outstanding PMB common shares were beneficially owned by the directors and executive officers of PMB and their affiliates.
Each BOC common stockholder is entitled to one vote for each share of BOC voting common stock owned as of the close of business on the record date, provided that under BOC’s charter, no beneficial owner of more than 10% of the outstanding shares of BOC common stock may vote shares in excess of this limit. As of the close of business on the record date, there were approximately 50,174,678 outstanding shares of BOC common stock entitled to vote. As of that date, approximately 10.9% of such outstanding BOC common stock were beneficially owned by the directors and executive officers of BOC and their affiliates.
Q:
HOW DO I ATTEND THE APPLICABLE SPECIAL MEETING?
A:
The BOC special meeting will be held virtually at http://www.virtualshareholdermeeting.com/BANC2021SM at 8:00 a.m., local time, on Wednesday, June 23, 2021. All holders of BOC voting common stock as of the close of business on the record date, or their duly appointed proxies, may attend the BOC special meeting online, vote shares electronically and submit questions during the BOC special meeting, by visiting http://www.virtualshareholdermeeting.com/BANC2021SM. You will need to have your 16-digit control number included on your proxy card to join the BOC special meeting. Online access to the BOC special meeting, which will be an audio-only webcast, will begin at 7:45 a.m., local time, on Wednesday, June 23, 2021.
The PMB special meeting will be held in the first floor Training Room at PMB’s offices at 949 South Coast Drive, Costa Mesa, California 92626 at 9:00 a.m., local time, on Wednesday, June 23, 2021. We expect to hold the PMB special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the PMB special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only PMB shareholders will be admitted to the PMB special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the PMB special meeting in person. To do so, please make your request by mail to PMB at 949 South Coast Drive, Costa Mesa, CA 92626, Attention: Chief Financial Officer, by email at Curt.Christianssen@pmbank.com or by phone at (714) 438-2500. PMB must receive your request for pre-authorization on or before Tuesday, June 15, 2021.
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Q:
IF MY SHARES ARE HELD IN “STREET NAME” BY A BANK, BROKER OR OTHER NOMINEE, WILL MY BANK, BROKER OR OTHER NOMINEE VOTE MY SHARES FOR ME?
A:
If your shares are held in “street name” by a bank, broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker or other nominee. Please note that you may not vote BOC or PMB shares held in “street name” by returning a proxy card directly to BOC or PMB, as applicable, or by voting online or in person during the applicable special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.
Brokers who hold shares in “street name” for the beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from the beneficial owner. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters that are “non-routine” without specific instructions from the beneficial owner. All proposals to be voted on at the respective special meetings will be “non-routine” matters.
If you are a BOC common stockholder and you do not instruct your bank, broker or other nominee on how to vote your shares, then your bank, broker or other nominee may not vote your shares on the BOC merger proposal, the BOC stock issuance proposal or the BOC adjournment proposal. The effect of such failure to instruct your bank, broker or nominee differs for each proposal:
For the BOC merger proposal, shares not represented at the BOC special meeting are still considered outstanding and, therefore, will have the same effect as a vote “AGAINST” the proposal. The BOC merger proposal requires the affirmative vote of a majority of the outstanding shares of stock entitled to vote. Therefore, the failure of a holder of BOC common stock to provide its bank, broker or other nominee with voting instructions will have the same effect as a vote “AGAINST” the BOC merger proposal.
The BOC stock issuance proposal requires the affirmative vote of a majority of the votes cast on the matter. Therefore, the failure of a holder of BOC common stock to provide its bank, broker or other nominee with voting instructions will have no effect on the BOC stock issuance proposal.
The BOC adjournment proposal requires the affirmative vote of a majority of the votes cast on the matter. Therefore, the failure of a holder of BOC common stock to provide its bank, broker or other nominee with voting instructions will have no effect on the BOC adjournment proposal.
If you are a PMB common shareholder and you do not instruct your bank, broker or other nominee on how to vote your shares, then your bank, broker or other nominee may not vote your shares on the PMB merger proposal, the PMB NEO compensation proposal or the PMB adjournment proposal. The effect of such failure to instruct your bank, broker or nominee differs for each proposal:
For the PMB merger proposal, shares not represented at the PMB special meeting are still considered outstanding and, therefore, will have the same effect as a vote “AGAINST” the proposal. The PMB merger proposal requires the affirmative vote of a majority of the outstanding shares of stock entitled to vote. Therefore, the failure of a holder of PMB common stock to provide its bank, broker or other nominee with voting instructions will have the same effect as a vote “AGAINST” the PMB merger proposal.
The PMB NEO compensation proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Your bank, broker or other nominee does not have discretionary authority to vote your shares on the special meeting proposals without your instructions. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being represented at the PMB special meeting. Accordingly, for purposes of the PMB NEO compensation proposal, failure to provide instructions to vote your shares will not affect the outcome under clause (i), which recognizes only actual votes cast. However, failure to provide instructions to vote your shares will affect the outcome under clause (ii) if the number of shares voting affirmatively at the PMB special meeting, though a majority of the shares represented and voted, does not constitute a majority of the required quorum.
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The PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Your bank, broker or other nominee does not have discretionary authority to vote your shares on the special meeting proposals without your instructions. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being represented at the special PMB meeting. Accordingly, for purposes of the PMB adjournment proposal, failure to provide instructions to vote your shares will not affect the outcome under clause (i), which recognizes only actual votes cast. However, failure to provide instructions to vote your shares will affect the outcome under clause (ii) if the number of shares voting affirmatively at the PMB special meeting, though a majority of the shares represented and voted, does not constitute a majority of the required quorum.
Q:
WHAT IF I ABSTAIN OR DO NOT VOTE?
A:
For purposes of the BOC special meeting and the PMB special meeting, an abstention occurs when a stockholder or shareholder is present at the special meeting, either virtually or represented by proxy, but abstains from voting.
For purposes of the BOC merger proposal, if a BOC common stockholder responds by proxy with an “abstain” vote or attends the BOC special meeting virtually and abstains from voting, it will have the same effect as a vote cast “AGAINST” the proposal. If a BOC common stockholder does not attend the BOC special meeting virtually and does not respond by proxy, it will also have the same effect as a vote cast “AGAINST” the proposal.
For purposes of the BOC stock issuance proposal and the BOC adjournment proposal, if a BOC common stockholder responds by proxy with an “abstain” vote or attends the BOC special meeting virtually and abstains from voting, it will have no effect on the BOC stock issuance proposal or the BOC adjournment proposal. If a BOC common stockholder does not attend the BOC special meeting virtually and does not respond by proxy, it will also have no effect on the BOC stock issuance proposal or the BOC adjournment proposal.
For the purposes of the PMB merger proposal, if a PMB shareholder responds by proxy with an “abstain” vote or is present in person at the PMB special meeting and abstains from voting, it will have the same effect as a vote cast “AGAINST” the proposal. If a PMB common shareholder is not present at the PMB special meeting and does not respond by proxy, it will also have the same effect as a vote cast “AGAINST” the proposal.
The PMB NEO compensation proposal and the PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Accordingly, for purposes of the PMB NEO compensation proposal and the PMB adjournment proposal, abstentions will not affect the outcome under clause (i), which recognizes only actual votes cast. However, abstentions will affect the outcome under clause (ii) if the number of shares voting affirmatively, though a majority of the shares represented and voting, does not constitute a majority of the required quorum.
Q:
WHAT WILL HAPPEN IF I RETURN MY PROXY OR VOTING INSTRUCTION CARD WITHOUT INDICATING HOW TO VOTE?
A:
If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the BOC common stock or PMB common shares represented by your proxy will be voted as recommended by the BOC board of directors or the PMB board of directors, as applicable, with respect to each proposal. Unless a BOC stockholder or PMB shareholder checks the box on its proxy card to withhold discretionary authority, the proxyholders may use their discretion to vote on other matters relating to the applicable special meeting.
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Q:
MAY I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY OR VOTING INSTRUCTION CARD?
A:
Yes. You may change your vote at any time before your proxy is voted at the applicable special meeting. You may do so in one of four ways:
first, by sending a notice of revocation to the corporate secretary of BOC or PMB, as applicable;
second, by sending a duly executed proxy card bearing a later date than your original proxy card;
third, by logging onto the Internet website specified on your proxy card in the same manner you would submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you were eligible to do so and following the instructions on the proxy card; or
fourth, by virtually attending and voting at the BOC special meeting at http://www.virtualshareholdermeeting.com/BANC2021SM or by attending and voting in person at the PMB special meeting. To attend the BOC special meeting and vote, you will need the 16-digit control number included in your proxy card, and if you hold in “street name” you will need a signed legal proxy from your bank, broker or other nominee giving you the right to vote the shares at the applicable stockholder meeting. Simply attending the meeting will not, by itself, revoke your proxy.
If you choose any of the first three methods, you must take the described action (or, with respect to the second method, your subsequent proxy card must be received) no later than June 22, 2021, at 5:00 p.m. local time, which is the business day immediately prior to the applicable special meeting. If you choose to send a completed proxy card bearing a later date than your original proxy card or a notice of revocation, the new proxy card or notice of revocation must be received before the beginning of the applicable special meeting.
If you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you receive from your bank, broker or other nominee in order to change or revoke your vote.
Q:
ARE PMB SHAREHOLDERS ENTITLED TO DISSENTERS’ RIGHTS?
A:
Under the California General Corporation Law, referred to as the CGCL, PMB common shareholders are not entitled to exercise dissenters’ rights in connection with the merger.
Q:
WHAT ARE THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO U.S. HOLDERS OF PMB COMMON SHARES?
A:
The merger is intended to qualify, and the obligation of BOC and PMB to complete the merger is conditioned upon the receipt of legal opinions from their respective counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Assuming the merger qualifies as a reorganization, PMB shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their PMB common shares for BOC common stock in the merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of BOC common stock.
For a more detailed discussion of the material U.S. federal income tax consequences of the transaction, please see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”
The tax consequences of the merger to any particular PMB shareholder will depend on that shareholder’s particular facts and circumstances. In addition, a PMB shareholder may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. Accordingly, if you are a PMB shareholder, you are urged to consult your tax advisor to determine your tax consequences from the merger.
Q:
WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?
A:
If the merger is not completed, PMB common shareholders will not receive any consideration for their PMB common shares that otherwise would have been received in connection with the merger. Instead, PMB will remain an independent public company and its common stock will continue to be listed and traded on Nasdaq.
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Q:
WHAT HAPPENS IF I SELL MY BOC COMMON STOCK OR PMB COMMON SHARES AFTER THE RECORD DATE BUT BEFORE THE APPLICABLE SPECIAL MEETING?
A:
The record date of the special meetings is earlier than the date of the special meetings. If you sell or otherwise transfer your PMB common shares or BOC common stock after the record date but before the date of the applicable special meeting, you will retain your right to vote at the applicable special meeting (provided that such shares remain outstanding on the date of the applicable special meeting.
Q:
WHAT HAPPENS IF I SELL MY PMB COMMON SHARES AFTER THE RECORD DATE AND SPECIAL MEETING DATE BUT BEFORE THE CLOSING OF THE MERGER?
A:
The record date of the special meetings is earlier than the date of the special meetings and the date that the merger is expected to be completed. If you sell or otherwise transfer your PMB common shares after the record date but prior to the date the merger is expected to be completed, you will not have the right to receive the merger consideration to be received by PMB shareholders in the merger. In order to receive the merger consideration, a PMB shareholder must hold his or her PMB common shares through completion of the merger.
Q:
WILL PMB SHAREHOLDERS BE ABLE TO SELL THE SHARES OF BOC COMMON STOCK THAT THEY RECEIVE IN THE MERGER?
A:
Yes. PMB shareholders may freely trade the shares of BOC common stock issued in the merger.
Q:
ARE THERE RISKS INVOLVED IN UNDERTAKING THE MERGER?
A:
Yes. In evaluating the merger, both BOC stockholders and PMB shareholders should carefully consider the factors discussed in “Risk Factors” beginning on page 21 and other information about PMB and BOC included in the documents incorporated by reference into this joint proxy statement/prospectus.
Q:
SHOULD PMB SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A:
No. PMB shareholders SHOULD NOT send in any stock certificates now. If the merger is completed, transmittal materials with instructions for their completion will be provided to PMB shareholders under separate cover and the stock certificates should be sent at that time.
Q:
WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?
A:
BOC common stockholders or PMB common shareholders may receive more than one set of voting materials, including multiple copies of this document and multiple proxy cards or voting instruction cards. For example, if you hold BOC common stock or PMB common shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a BOC common stockholder or a PMB common shareholder and your respective shares are registered in more than one name, you will receive one or more separate proxy cards or voting instruction cards. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this document to ensure that you vote every share of BOC common stock or every PMB common share that you own.
Q:
WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS ABOUT THE PROXY MATERIALS OR VOTING?
A:
If you are a BOC common stockholder and have any questions about the proxy materials or if you need assistance submitting your proxy or voting your stock or need additional copies of this document or the enclosed proxy card, you should contact BOC Investor Relations at (855) 361-2262.
If you are a PMB common shareholder and have any questions about the proxy materials or if you need assistance submitting your proxy or voting your shares or need additional copies of this document or the enclosed proxy card, you should contact PMB Investor Relations at (714) 438-2531.
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SUMMARY
This summary highlights selected information included in this document and does not contain all of the information that may be important to you. You should read this entire document and its appendices and the other documents to which the parties refer before you decide how to vote with respect to the proposals. In addition, the parties incorporate by reference important business and financial information about PMB and BOC into this document. For a description of this information, please see the section entitled “Incorporation of Certain Documents by Reference.” You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” in the forepart of this document. Each item in this summary includes a page reference directing you to a more complete description of that item.
The Merger and the Merger Agreement (pages 45 and 82)
The terms and conditions of the merger are contained in the merger agreement, which is attached to this document as Appendix A. The parties encourage you to read the merger agreement carefully, as it is the legal document that governs the merger.
Under the terms of the merger agreement, PMB will merge with and into BOC, with BOC being the surviving corporation.
Merger Consideration (page 83)
In the merger, each PMB common share owned by a PMB shareholder, other than excluded shares, will be converted into the right to receive a number of shares of BOC common stock equal to the exchange ratio. For each fractional share that would otherwise be issued, BOC will pay cash in an amount equal to the fraction of a share of BOC common stock which the holder would otherwise be entitled to receive multiplied by the volume weighted average price of BOC common stock as quoted on the NYSE over the determination period. No interest will be paid or accrue on cash payable to holders in lieu of fractional shares.
Recommendation of the BOC Board of Directors (page 49)
After careful consideration, the BOC board of directors recommends that BOC stockholders vote “FOR” the BOC merger proposal, “FOR” the BOC stock issuance proposal and “FOR” the BOC adjournment proposal.
For a more complete description of BOC’s reasons for the merger and the recommendations of the BOC board of directors, please see the sections entitled “The Merger—Recommendation of the BOC Board of Directors and Reasons for the Merger.”
Recommendation of the PMB Board of Directors (page 50)
After careful consideration, the PMB board of directors recommends that PMB shareholders vote “FOR” the PMB merger proposal, “FOR” the PMB NEO compensation proposal and “FOR” the PMB adjournment proposal.
For a more complete description of PMB’s reasons for the merger and the recommendations of the PMB board of directors, please see the section entitled “The Merger—Recommendation of the PMB Board of Directors and Reasons for the Merger.”
Opinion of BOC’s Financial Advisor (page 52)
In connection with the merger, BOC’s financial advisor, Piper Sandler & Co., which we refer to as Piper Sandler, delivered a written opinion, dated March 19, 2021, to the BOC board of directors to the effect that, as of the date thereof and subject to the procedures followed, assumptions made, matters considered and the qualifications and limitations on the review undertaken by Piper Sandler as set forth therein, the merger consideration was fair, from a financial point of view, to BOC. Piper Sandler’s opinion was directed to the BOC board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any BOC stockholder as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the BOC merger proposal or the BOC stock issuance proposal. Piper Sandler’s opinion speaks only as of the date thereof. The full text of Piper Sandler’s opinion is attached
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as Appendix E to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler in rendering its opinion. Piper Sandler’s opinion was directed only to the fairness, from a financial point of view, of the merger consideration to BOC and did not address the underlying business decision of BOC to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any alternative transactions or business strategies that might exist for BOC or the effect of any other transaction in which BOC might engage.
Opinion of PMB’s Financial Advisor (page 63)
In connection with the merger, PMB’s financial advisor, Keefe, Bruyette & Woods, Inc., which we refer to as KBW, delivered a written opinion, dated March 22, 2021, to the PMB board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of PMB common shares of the exchange ratio in the proposed merger. The full text of the opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached as Appendix D to this document. The opinion was for the information of, and was directed to, the PMB board of directors in connection with its consideration of the financial terms of the merger. The opinion does not address the underlying business decision of PMB to engage in the merger or enter into the merger agreement or constitute a recommendation to the PMB board of directors in connection with the merger, and it does not constitute a recommendation to any holder of PMB common stock or any shareholder or stockholder of any other entity as to how to vote or act in connection with the merger or any other matter.
BOC Special Meeting (page 29)
The BOC special meeting will be held virtually at http://www.virtualshareholdermeeting.com/BANC2021SM at 8:00 a.m., local time, on Wednesday, June 23, 2021. At the BOC special meeting, holders of BOC common stock will be asked to approve the BOC merger proposal, the BOC stock issuance proposal and the BOC adjournment proposal.
The BOC board of directors has fixed the close of business on Monday, May 10, 2021 as the record date for determining the holders of BOC common stock entitled to receive notice of and to vote at the BOC special meeting. As of the close of business on the record date, there were 50,174,678 shares of BOC common stock outstanding and entitled to vote at the BOC special meeting held by 1,274 stockholders of record. Each share of BOC voting common stock entitles the holder to one vote on each proposal to be considered at the BOC special meeting, provided that under BOC’s charter, no beneficial owner of more than 10% of the outstanding shares of BOC common stock may vote shares in excess of this limit.
As of the close of business on the record date, directors and executive officers of BOC and their affiliates owned and were entitled to vote 5,460,783 shares of BOC common stock, representing approximately 10.9% of the BOC common stock outstanding on that date. As of the close of business on the record date, PMB beneficially held no BOC common stock.
Each of the directors and certain stockholders of BOC have entered into a voting agreement with PMB in which such director or stockholder has agreed to vote all BOC common stock that he or she owns and has the power to vote in favor of the BOC merger proposal, the BOC stock issuance proposal and any other matter that is required to be approved by the stockholders of BOC to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the merger or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to BOC’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 5,205,334 shares of BOC common stock, allowing them to exercise approximately 10.4% of the voting power of BOC common stock (which does not include shares issuable upon the exercise of stock options or upon the vesting of BOC RSUs that were not outstanding as of the close of business on the record date).
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Approval of the BOC merger proposal requires the affirmative vote of a majority of the outstanding shares of BOC common stock entitled to vote on the BOC merger proposal. Approval of the BOC stock issuance proposal and the BOC adjournment proposal requires the number of votes cast for the proposal to exceed the number of votes cast against the proposal.
PMB Special Meeting (page 35)
The PMB special meeting will be held in the first floor Training Room at PMB’s offices at 949 South Coast Drive, Costa Mesa, California 92626 at 9:00 a.m., local time, on Wednesday, June 23, 2021. At the PMB special meeting, holders of PMB common shares will be asked to approve the PMB merger proposal, the PMB NEO compensation proposal and the PMB adjournment proposal.
The PMB board of directors has fixed the close of business on Monday, May 10, 2021 as the record date for determining the holders of PMB common shares entitled to receive notice of and to vote at the PMB special meeting. As of the close of business on the record date, there were 22,322,184 PMB common shares outstanding and entitled to vote at the PMB special meeting held by 84 shareholders of record. Each PMB voting common share entitles the holder to one vote on each proposal to be considered at the PMB special meeting.
As of the close of business on the record date, directors and executive officers of PMB and their affiliates owned and were entitled to vote 3,166,347 PMB common shares, representing approximately 14.2% of the PMB common shares outstanding on that date. As of the close of business on the record date, BOC beneficially held no PMB common shares.
Each of the directors and certain shareholders of PMB have entered into a voting agreement with BOC in which such director or shareholder has agreed to vote all PMB common shares that he or she owns and has the power to vote in favor of the PMB merger proposal and any other matter that is required to be approved by the shareholders of PMB to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the principal terms of the merger agreement or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PMB’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 2,754,062 PMB common shares, allowing them to exercise approximately 12.3% of the voting power of PMB common shares (which does not include shares issuable upon the exercise of stock options or upon the vesting of PMB RSUs that were not outstanding as of the close of business on the record date).
Approval of the PMB merger proposal requires the affirmative vote of a majority of the outstanding shares entitled to vote on such proposal. Approval of the PMB NEO compensation proposal and the PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum.
PMB’s Directors and Executive Officers Have Certain Interests in the Merger (page 74)
In considering the recommendations of the PMB board of directors, PMB shareholders should be aware that certain directors and executive officers of PMB have interests in the merger that may differ from, or be in addition to, the interests of PMB shareholders generally. The PMB board of directors was aware of these interests and considered them, among other matters, when it approved the merger and in making its recommendation that the PMB shareholders approve the principal terms of the merger agreement. These interests include:
In accordance with the merger agreement, two directors of PMB will be recommended by BOC’s Compensation, Nominating and Corporate Governance Committee, which we refer to as the CNG Committee, to serve on BOC’s board of directors upon the effective time;
Three named executive officers and six other executive officers of PMB are each party to an agreement that provides for severance and other benefits following a change in control of PMB in connection with a qualifying termination of employment;
Certain of PMB’s executive officers and directors may have equity awards that, under the merger agreement, become fully vested upon completion of the merger and paid out in cash; and
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PMB directors and officers are entitled to continued indemnification and insurance coverage under the merger agreement.
For a more complete description of the interests of PMB’s directors and executive officers in the merger, see “The Mergers—Interests of PMB Directors and Executive Officers in the Merger.”
Treatment of PMB Stock Options (page 45)
At the effective time of the merger, each PMB stock option that is outstanding immediately prior to the effective time, whether vested or unvested, will be cancelled and will entitle the holder thereof to receive an amount in cash equal to the product of (i) the total number of PMB common shares subject to such option and (ii) the excess, if any, of (A) an amount equal to the product of the BOC average closing price and 0.50 over (B) the exercise price per PMB common share underlying such option, less any applicable taxes required to be withheld with respect to such payment. Any PMB stock options which have an exercise price per share that is greater than or equal to the product of the BOC average closing price and 0.50 will be cancelled at the effective time of the merger for no consideration or payment.
Treatment of PMB Restricted Shares and PMB RSUs (page 45)
At the effective time of the merger, each PMB restricted share and each PMB RSU will, automatically and without any action on the part of the holder of such PMB restricted shares or PMB RSUs, accelerate in full, be cancelled and will only entitle the holder of such PMB restricted shares or PMB RSUs to receive, on the first regular payroll date following the closing date of the merger, an amount in cash equal to the product of (i) such holder’s total number of PMB restricted shares or RSUs, as applicable, and (ii) an amount equal to the product of the BOC average closing price and 0.50, less any applicable taxes required to be withheld with respect to such vesting, which tax withholding may, at the election of the holder, be effected by deduction from such cash amount equal to the amount of taxes to be withheld.
Board of Directors and Officers of BOC After the Merger (page 95)
The directors and officers of BOC immediately prior to the effective time, together with two directors from the PMB board prior to the effective time selected by the BOC CNG Committee, will be the directors and officers of the surviving corporation after the consummation of the merger, and will serve until such time as their successors are duly elected and qualified. BOC has agreed that it will, through the BOC board and subject to its fiduciary duties to its stockholders, take all necessary action to nominate such PMB directors for election to the BOC board in the proxy statement relating to the first annual meeting of stockholders of BOC following the effective time.
Regulatory Approvals Required for the Merger (page 78)
BOC and PMB have each agreed to use reasonable best efforts to obtain all regulatory approvals required to complete the merger and the bank merger and the other transactions contemplated by the merger agreement. Regulatory approvals are required from the Federal Reserve Board, referred to as the FRB, and the Office of the Comptroller of Currency, referred to as the OCC. As of the date of this joint proxy statement/prospectus, BOC and PMB have not submitted applications and notifications to obtain the required regulatory approvals. There can be no assurances that such approvals will be received on a timely basis, or as to the ability of BOC or PMB to obtain the approvals on satisfactory terms or the absence of litigation challenging such approvals. The regulatory approvals to which completion of the merger and bank merger are subject are described in more detail under the section entitled “The Merger—Regulatory Approvals Required for the Merger.”
Conditions to the Merger (page 95)
The respective obligation of each party to effect the merger is subject to the satisfaction or written waiver at or prior to the effective time of each of the following conditions:
PMB having obtained the PMB shareholder approval and BOC having obtained the BOC stockholder approval;
no governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the merger, the bank merger or the other transactions contemplated by the merger agreement; and
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the S-4 registration statement, of which this document is a part, having become effective under the Securities Act of 1933, as amended, which is referred to as the Securities Act, no stop order suspending the effectiveness of the S-4 registration statement having been issued, and no proceedings for that purpose having been initiated or been threatened, by the SEC.
PMB’s obligation to effect the merger is also subject to the fulfillment or waiver of the following conditions:
the accuracy of the representations and warranties of BOC set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger as though made at and as of the closing date (except that representations and warranties that by their terms speak as of the date of the merger agreement or some other date need only be true and correct as of such date), and PMB’s receipt of a certificate signed on behalf of BOC by an executive officer of BOC, dated as of the closing date, to such effect;
performance by BOC in all material respects of all obligations required to be performed by it under the merger agreement at or prior to the effective time, and receipt by PMB of a certificate signed by an executive officer of BOC, dated as of the closing date, to such effect;
all consents, registrations, approvals, permits and authorizations required to be obtained prior to the effective time by either party or any of its respective subsidiaries from the FRB and the OCC which are necessary to consummate the merger and the bank merger, and any other consents, registrations, approvals, permits and authorizations from or with any governmental authority the failure of which to be obtained is reasonably likely to have, individually or in the aggregate, a material adverse effect on PMB or BOC (measured on a scale relative to PMB), having been made or obtained (as the case may be) and remaining in full force and effect and all statutory waiting periods in respect thereof having expired;
since March 22, 2021, no event having occurred or circumstance arisen that, individually or taken together with all other facts, circumstances or events, has had or is reasonably likely to have a material adverse effect with respect to BOC; and
receipt by PMB of the opinion of its counsel, dated the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.
BOC’s obligation to complete the merger is also subject to the satisfaction or waiver of the following conditions:
the accuracy of the representations and warranties of PMB set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger as though made at and as of the closing date (except that representations and warranties that by their terms speak as of the date of the merger agreement or some other date need only be true and correct as of such date), and BOC’s receipt of a certificate signed on behalf of PMB by an executive officer of PMB, dated as of the closing date, to such effect;
performance by PMB in all material respects of all obligations required to be performed by it under the merger agreement at or prior to the effective time, and receipt by BOC of a certificate signed by an executive officer of PMB, dated as of the closing date, to such effect;
all consents, registrations, approvals, permits and authorizations required to be obtained prior to the effective time by either party or any of its respective subsidiaries from the FRB and the OCC which are necessary to consummate the merger and the bank merger, and any other consents, registrations, approvals, permits and authorizations from or with any governmental authority the failure of which to be obtained is reasonably likely to have, individually or in the aggregate, a material adverse effect on PMB or BOC (measured on a scale relative to PMB), having been made or obtained (as the case may be) and remaining in full force and effect and all statutory waiting periods in respect thereof having expired, and none of such consents, registrations, approvals, permits and authorizations containing any materially burdensome regulatory condition;
as of the last business day of the month reflected in the closing financial statements, the sum of the adjusted PMB shareholders’ equity and PMB’s allowance for loan losses will not be less than the sum
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of (i) PMB’s allowance for loan losses as of December 31, 2020, (ii) the greater of (A) the adjusted PMB shareholders’ equity as of December 31, 2020 or (B) the adjusted PMB shareholders’ equity as of March 31, 2021 less $1,525,000 and (iii) any recoveries collected by PMB between March 22, 2021 and the last business day of the month reflected in the closing financial statements, in each case as determined in accordance with generally accepted accounting principles, which we refer to as GAAP;
since March 22, 2021, no event having occurred or circumstance arisen that, individually or taken together with all other facts, has had or is reasonably likely to have a material adverse effect with respect to PMB;
receipt by BOC of the opinion of its counsel, dated the closing date, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the merger will qualify for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.
For more information, please see the section entitled “The Merger Agreement—Conditions to Consummation of the Merger.”
Acquisition Proposals (page 93)
Under the terms of the merger agreement, PMB has agreed not to, directly or indirectly:
initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to any acquisition proposal (as defined in the section entitled “The Merger Agreement—Acquisition Proposals”); or
engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with any person relating to an acquisition proposal or otherwise facilitate any effort or attempt to make or implement an acquisition proposal.
However, the above restriction would not prevent PMB or its board of directors from:
complying with Rule 14d-9 and 14d-2 under the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act;
at any time before, but not after the PMB shareholder approval is obtained, providing information in response to a request therefor by a person who has made an unsolicited bona fide written acquisition proposal if PMB receives from the person so requesting such information, an executed confidentiality agreement on terms not less restrictive to the other party than those contained in the confidentiality agreement between BOC and PMB; or
engaging in any negotiations or discussions with any person who has made an unsolicited bona fide written acquisition proposal;
only if, however, in the cases referred to in the second and third bullet points above, the PMB board of directors determines in good faith (after consultation with outside legal counsel) that the failure to take such action would reasonably be expected to violate the directors’ fiduciary duties under applicable law.
Further, the merger agreement provides that, subject to certain exceptions, the PMB board of directors and each committee thereof will not:
except as expressly permitted by the merger agreement, withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to BOC, the recommendation of its board of directors that its shareholders approve the principal terms of the merger agreement; or
cause or permit PMB to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement (other than a confidentiality agreement referred to above) relating to any acquisition proposal.
For more information, please see the section entitled “The Merger Agreement—Acquisition Proposals.”
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Termination of the Merger Agreement (page 96)
The merger agreement may be terminated and the merger may be abandoned:
at any time prior to the effective time, whether before or after the PMB shareholder approval or the BOC stockholder approval, by action of the board of directors of either party, in the event that both parties mutually consent in writing to terminate the merger agreement;
at any time prior to the effective time, whether before or after the PMB shareholder approval or the BOC stockholder approval, by action of the board of directors of either party, in the event that the merger is not consummated by December 31, 2021, referred to as the end date (which end date may be extended to March 31, 2022 by either party if all conditions to closing have been met except for the receipt of the required regulatory approvals), except to the extent that the failure of the merger to be consummated results from the knowing action or inaction of the party seeking to terminate, which action or inaction is in violation of its obligations under the merger agreement;
at any time prior to the effective time, whether before or after the PMB shareholder approval or the BOC stockholder approval, by action of the board of directors of either party if:
the approval of any governmental authority required for consummation of the merger, the bank merger or the other transactions contemplated by the merger agreement has been denied by final and nonappealable action of such governmental authority, or an application therefor has been permanently withdrawn by mutual agreement of the parties at the request or suggestion of a governmental authority, or
either the PMB shareholder approval or the BOC stockholder approval is not obtained at the duly convened special meeting, as applicable;
at any time prior to the effective time, whether before or after the PMB shareholder approval or the BOC stockholder approval, by action of either party’s board of directors if there has been a breach of any representation, warranty, covenant or agreement made by the other party, such that if continuing on the closing date of the merger, the condition as to the accuracy of the representations and warranties or the compliance with covenants by the other party would not be satisfied and such breach or condition is not curable or, if curable, is not cured within 30 calendar days after written notice thereof is given by the terminating party (or such shorter period as remaining prior to the end date); provided, that the terminating party is not then in material breach of any representation, warranty, covenant or agreement;
by action of BOC’s board of directors at any time prior to the PMB shareholder approval, in the event:
PMB has breached in any material respect the prohibitions in the merger agreement relating to acquisition proposals;
the PMB board of directors has effected a change to its recommendation that PMB shareholders approve the principal terms of the merger agreement;
at any time after the end of 10 business days following receipt of an acquisition proposal, the PMB board of directors has failed to reaffirm its recommendation that the PMB shareholders approve the principal terms of the merger agreement as promptly as practicable (but in any event within five business days) after receipt of any written request to do so by BOC; or
a tender offer or exchange offer for outstanding PMB common shares has been publicly disclosed (other than by BOC or an affiliate of BOC) and the PMB board of directors recommends that PMB shareholders tender their shares in such tender or exchange offer or, within 10 business days after the commencement of such tender or exchange offer, the PMB board of directors fails to recommend unequivocally against acceptance of such offer.
For more information, please see the section entitled “The Merger Agreement—Termination of the Merger Agreement.”
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Termination Fee (page 97)
PMB must pay BOC a termination fee of $8,500,000 in the following circumstances:
BOC terminates the merger agreement because PMB (i) has breached in any material respect its obligations relating to acquisition proposals under the merger agreement, (ii) the PMB board of directors has changed its recommendation to shareholders, (iii) any time after the end of 10 business days following receipt of an acquisition proposal, the PMB board of directors has failed to reaffirm its recommendation to shareholders after receipt of a written request from BOC, or (iv) a tender offer or exchange offer for outstanding PMB common shares has been publicly disclosed (other than by BOC or an affiliate of BOC) and the PMB board of directors recommends that the PMB shareholders tender their shares or, within 10 business days after the commencement of such tender or exchange offer, the PMB board of directors fails to recommend unequivocally against acceptance of such an offer; or
(i) a bona fide acquisition proposal has been made to PMB or its shareholders generally or any person has publicly announced an intention (whether or not conditional) to make an acquisition proposal with respect to PMB; (ii) thereafter the merger agreement is terminated by either party because (A) the merger was not consummated on or before the end date or (B) the PMB shareholder approval was not obtained at the PMB special meeting or the BOC stockholder approval was not obtained at the BOC special meeting and, in the case of either (A) or (B), the PMB shareholder approval has not been obtained; and (iii) within 12 months after the termination of the merger agreement, PMB enters into a definitive agreement with respect to or consummates an acquisition proposal (except that for purposes of the foregoing, references to “15%” in the definition of the term “acquisition proposal” will instead refer to “50%”).
For more information, please see the section entitled “The Merger Agreement—Termination Fee.”
Voting Agreements (page 98)
Each of the directors and certain shareholders of PMB have entered into a voting agreement with BOC in which such director or shareholder has agreed to vote all PMB common shares that he or she owns and has the power to vote in favor of the PMB merger proposal and any other matter that is required to be approved by the shareholders of PMB to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the principal terms of the merger agreement or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PMB’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 2,754,062 PMB common shares, allowing them to exercise approximately 12.3% of the voting power of PMB common shares (which does not include shares issuable upon the exercise of stock options or upon the vesting of PMB RSUs that were not outstanding as of the close of business on the record date).
Each of the directors and certain stockholders of BOC have entered into a voting agreement with PMB in which such director or stockholder has agreed to vote all BOC common stock that he or she owns and has the power to vote in favor of the BOC merger proposal, the BOC stock issuance proposal and any other matter that is required to be approved by the stockholders of BOC to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the merger or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to BOC’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 5,205,334 shares of BOC common stock, allowing them to exercise approximately 10.4% of the voting power of BOC common stock (which does not include shares issuable upon the exercise of stock options or upon the vesting of BOC RSUs that were not outstanding as of the close of business on the record date).
The voting agreements terminate in certain circumstances, including in the event that the merger agreement is terminated in accordance with its terms.
For more information, please see the section entitled “The Merger Agreement—Voting Agreements.”
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Material U.S. Federal Income Tax Consequences of the Merger (page 100)
The merger is intended to qualify as a tax-deferred reorganization within the meaning of Section 368(a) of the Code. Assuming the merger qualifies as a reorganization, PMB common shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their PMB common shares for BOC common stock in the merger, except for any gain or loss that may result from the receipt of cash instead of a fractional share of BOC common stock. It is a condition to the completion of the merger that BOC and PMB receive written opinions from their respective counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
Tax matters are complicated and the tax consequences of the merger to each PMB shareholder may depend on such shareholder’s particular facts and circumstances. PMB shareholders are urged to consult their tax advisors to understand fully the tax consequences to them of the merger. For more information, please see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”
Comparison of Shareholders’ Rights (page 111)
The rights of PMB shareholders who continue as BOC stockholders after the merger will be governed by the charter and bylaws of BOC and Maryland law rather than by the articles of incorporation and bylaws of PMB and California law. For more information, please see the section entitled “Comparison of Shareholders’ Rights.”
The Parties (page 43)
Banc of California, Inc.
3 MacArthur Place
Santa Ana, California 92707
Phone: (855) 361-2262
Banc of California, Inc., a Maryland corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, referred to as the BHC Act, with corporate headquarters in Santa Ana, California. BOC’s principal business is to serve as the holding company for BOC’s wholly owned subsidiary, Banc of California, National Association. References to BOC refer to BOC together with BOC Bank and its other subsidiaries on a consolidated basis.
BOC is a relationship-focused business bank that delivers comprehensive products and solutions for businesses, business owners and individuals. It offers a full array of competitively priced and client-tailored loan and deposit products and services through 29 full service branches extending from San Diego to Santa Barbara. It also offers commercial loan products, including commercial and industrial loans, commercial real estate loans and multifamily loans, SBA loans, construction loans and other consumer loans. In addition, BOC has a single family residential, or SFR, mortgage loan portfolio that it services.
As of March 31, 2021, on a consolidated basis, BOC had total assets of $7.9 billion, total loans of $5.8 billion, total deposits of $6.1 billion, and stockholders’ equity of $804.7 million.
Pacific Mercantile Bancorp
949 South Coast Drive, Suite 300
Costa Mesa, California 92626
Phone: (714) 438-2531
Pacific Mercantile Bancorp is the parent holding company of Pacific Mercantile Bank, which opened for business March 1, 1999. PM Bank, which is an FDIC insured, California state-chartered bank and a member of the Federal Reserve System, provides a wide range of commercial banking services to businesses, business professionals and individual clients. PM Bank is headquartered in Orange County and operates a total of seven offices in Southern California, located in Orange, Los Angeles, San Diego, and San Bernardino counties. PM Bank offers tailored flexible solutions for its clients including an array of loan and deposit products, sophisticated cash management services, and comprehensive online banking services.
PM Bank’s commercial lending solutions include working capital lines of credit and asset based lending, 7(a) and 504 Small Business Administration loans, commercial real estate loans, growth capital loans, equipment financing, letters of credit and corporate credit cards. PM Bank’s depository and corporate banking services include cash and treasury management solutions, interest-bearing term deposit accounts, checking accounts,
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automated clearinghouse payment and wire solutions, fraud protection, remote deposit capture, courier services and online banking. PM Bank serves clients operating in a global marketplace through services including letters of credit and import/export financing. PMB has developed its Horizon Analytics tool which provides financial modeling and analysis to help its customers succeed.
As of March 31, 2021, on a consolidated basis, PMB had total assets of $1.6 billion, total loans of $1.2 billion, total deposits of $1.4 billion and total shareholders’ equity of $161.3 million.
Risk Factors (page 21)
Before voting at the applicable special meeting, you should carefully consider all of the information contained in or incorporated by reference into this document, including the risk factors set forth in the section entitled “Risk Factors” or described in BOC’s and PMB’s respective Annual Reports on Form 10-K for the year ended on December 31, 2020 and other reports filed with the SEC, which are incorporated by reference into this document. Please see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference.”
Litigation Related to the Merger (page 81)
PMB, PMB’s board of directors and BOC are parties to three claims and litigation related to the merger. All three of these claims have been filed by purported shareholders of PMB, each of whom seeks to enjoin the merger and other relief. The complaints assert claims against PMB, the members of PMB’s board of directors, and in one case, BOC, under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by filing this joint proxy statement/prospectus that allegedly contains false statements and omits material information. One complaint also asserts claims under Section 20(a) of the Exchange Act against BOC and PMB’s board of directors due to their positions as controlling persons over the parties that allegedly knowingly violated Section 14(a).
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UNAUDITED COMPARABLE PER SHARE DATA
The following table presents basic and diluted per common share data, cash dividends and book value for BOC and PMB on a historical basis, pro forma combined consolidated basis, and the combined entity on a pro forma equivalent basis. The pro forma basic and diluted earnings per share information was computed as if the merger had been completed on January 1, 2020. The pro forma book value per share information was computed as if the merger had been completed on March 31, 2021.
The following pro forma information has been derived from and should be read in conjunction with the audited consolidated financial statements for the quarter ended March 31, 2021 and the year ended December 31, 2020 for BOC and PMB, each of which are incorporated by reference in this joint proxy statement/prospectus. This information is presented for illustrative purposes only and you should not rely on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the consolidated operating results or consolidated financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future consolidated operating results or consolidated financial position of the combined company.
 
BOC
PMB
Pro forma
Combined
Pro forma
PMB
Equivalent
Share(1)
Three months ended March 31, 2021:
 
 
 
 
Net income per share:
 
 
 
 
Basic
$0.16
$ 0.14
$0.19
$0.10
Diluted
$0.15
$ 0.14
$0.19
$0.10
Cash dividends declared
$0.06
$
$0.06
$0.03
Year ended December 31, 2020:
 
 
 
 
Net income (loss) per share:
 
 
 
 
Basic
$(0.02)
$0.35
$(0.04)
$(0.02)
Diluted
$(0.02)
$0.35
$(0.04)
$(0.02)
Cash dividends declared
$0.24
$
$0.24
$0.12
 
 
 
 
 
March 31, 2021:
 
 
 
 
Book value per common share
$14.02
$6.78
$14.72
$7.36
(1)
Pro forma equivalent per share amount is calculated by multiplying the pro forma combined per share amount by the exchange ratio of 0.5 as outlined in Note 1 - Basis of Presentation to the unaudited pro forma combined condensed financial information. See “Unaudited Pro Forma Combined Condensed Consolidated Financial Information.”
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RISK FACTORS
In addition to the other information contained in or incorporated by reference into this document, including the matters addressed under the caption entitled “Cautionary Statement Regarding Forward-Looking Statements,” BOC stockholders and PMB shareholders should carefully consider the following factors in deciding whether to vote for BOC’s proposals or PMB’s proposals, respectively. Please see the sections entitled “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference.”
Risk Factors Related to the Merger
Because the market price of BOC common stock will fluctuate, the value of the merger consideration to be received by PMB shareholders may change.
Upon completion of the merger, each PMB common share (other than excluded shares) will be converted into the right to receive merger consideration consisting of the number of shares of BOC common stock equal to the exchange ratio, pursuant to the terms of the merger agreement. The number of shares of BOC common stock to be received by a PMB shareholder will be determined based on a fixed exchange ratio of 0.50 of a share of BOC common stock for each PMB common share (other than excluded shares). Accordingly, the value of the merger consideration to be received by PMB shareholders will be based on the value of BOC common stock at closing. The value of the BOC common stock to be received by PMB shareholders in the merger may vary from the value as of the date the merger was announced, the date that this document was mailed to PMB shareholders and the date of the PMB special meeting. Any change in the market price of BOC common stock prior to completion of the merger will affect the value of the merger consideration that PMB shareholders will receive upon completion of the merger. Accordingly, at the time of the PMB special meeting, PMB shareholders will not know or be able to calculate the value of the per share consideration they would receive upon completion of the merger. Share price changes may result from a variety of factors, including general market and economic conditions, changes in BOC’s or PMB’s businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of BOC and PMB. PMB shareholders should obtain current market quotations for BOC common stock before voting their shares at the PMB special meeting.
BOC stockholders and PMB shareholders will have a reduced ownership and voting interest in BOC after the merger and will exercise less influence over BOC’s management.
BOC stockholders currently have the right to vote in the election of the BOC board of directors and on other matters affecting BOC. PMB shareholders currently have the right to vote in the election of the PMB board of directors and on other matters affecting PMB. Upon the completion of the merger, except for shareholders who own common shares in both BOC and PMB, BOC stockholders and PMB shareholders will be stockholders of BOC with a percentage ownership of BOC that is smaller than their current percentage ownership of BOC or PMB, as applicable. It is currently expected that former shareholders of PMB as a group will receive shares in the merger constituting approximately 19% of the outstanding shares of BOC’s common stock immediately after the merger. Because of this, both BOC stockholders and PMB shareholders will have less influence on the management and policies of BOC than they now have on the management and policies of BOC or PMB, as applicable.
Sales of substantial amounts of BOC’s common stock in the open market by former PMB shareholders could depress BOC’s stock price.
Shares of BOC common stock that are issued to PMB shareholders in the merger will be freely tradable without restrictions or further registration under the Securities Act. As of the close of business on the record date, BOC had approximately 50,174,678 shares of common stock outstanding and 3,192,230 shares of BOC common stock were reserved for issuance under BOC’s equity incentive plans. Based on the PMB common shares currently outstanding, BOC currently expects to issue approximately 11,893,692 shares of its common stock in connection with the merger.
Because of the significantly enhanced liquidity of BOC common stock as compared to PMB common shares due to the greater public float and trading volume of BOC common stock relative to PMB common shares, if the merger is completed, PMB’s former shareholders may sell substantial amounts of BOC common stock in the public market following completion of the merger. Any such sales may cause the market price of BOC common stock to decrease. These sales might also make it more difficult for BOC to sell equity or equity-related securities at a time and price that it otherwise would deem appropriate.
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BOC may fail to realize the anticipated benefits of the merger.
The success of the merger will depend on, among other things, BOC’s ability to combine and integrate the business of PMB into BOC’s business. If BOC is not able to successfully achieve this objective, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.
BOC and PMB have operated and, until the consummation of the merger, will continue to operate independently. It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of BOC or PMB or inconsistencies in standards, controls, procedures and policies. It is also possible that clients, customers, depositors and counterparties of PMB could choose to discontinue their relationships with BOC post-merger because they prefer doing business with a different financial institution, which would adversely affect the future anticipated performance of BOC. These transition matters could have an adverse effect on BOC and PMB during the pre-merger period and the combined company for an undetermined amount of time after the consummation of the merger.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.
Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on BOC following the merger. The regulatory approvals may not be received in a timely fashion, may contain conditions on the completion of the merger that are not anticipated or cannot be met, or may not be received at all. If the consummation of the merger is delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.
Failure of the merger to be completed, the termination of the merger agreement or a significant delay in the consummation of the merger could negatively impact BOC and PMB.
The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: (i) approval of the principal terms of the merger agreement by PMB shareholders, (ii) approval of the merger and the issuance of BOC common stock in connection with the merger by BOC stockholders, (iii) absence of any governmental order or law prohibiting completion of the merger, and (iv) effectiveness of the registration statement of which this document is a part.
The obligation of each party to consummate the merger is also conditioned upon (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) performance in all material respects by the other party of its obligations under the merger agreement, (iii) receipt by such party of a tax opinion to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, and (iv) the absence of a material adverse effect with respect to the other party since the date of the merger agreement. The obligation of BOC to consummate the merger is also conditioned upon (i) the sum of the adjusted shareholders’ equity and allowance for loan losses of PMB being outside of specified levels and (ii) the receipt of certain required regulatory approvals and such approvals not containing materially burdensome regulatory conditions. The obligation of PMB to consummate the merger is also conditioned upon the receipt of certain required regulatory approvals.
These conditions to the consummation of the merger may not be fulfilled and, accordingly, the merger may not be completed. In addition, if the merger is not completed by the end date, either BOC or PMB may choose not to proceed with the merger, and the parties can mutually decide to terminate the merger agreement at any time, before or after the PMB shareholder approval or the BOC stockholder approval.
Furthermore, prior to the PMB shareholder approval, BOC may terminate the merger agreement and require payment of an $8.5 million termination fee if PMB materially breaches the restriction against soliciting alternative acquisition proposals, if PMB’s board of directors recommends against the merger, if PMB’s board of directors fails to reaffirm its recommendation in response to an alternative acquisition proposal after receiving a written request to do so from BOC, or if PMB’s board of directors recommends that PMB shareholders tender (or fails to recommend against tendering) their shares in a competing tender offer. PMB must also pay the
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$8.5 million termination fee if (i) an alternative acquisition proposal has been made or announced, (ii) the merger agreement is terminated because (x) the merger was not consummated by the end date or (y) either the PMB shareholder approval has not been obtained or the BOC stockholder approval has not been obtained at the respective special meetings, and in the case of each of clauses (x) and (y), the PMB shareholder approval has not been obtained, and (iii) within 12 months after the termination of the merger agreement, PMB enters into a definitive agreement with respect to or consummates a proposal by a third party to acquire 50% or more of the assets or voting power of PMB.
If the merger is not consummated, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market price of each party’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be consummated. If the consummation of the merger is delayed, including by the receipt of a competing acquisition proposal, the business, financial condition and results of operations of each company may be materially adversely affected.
In addition, each party has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement. If the merger is not completed, the parties would have to recognize these expenses, including, in the case of PMB under certain circumstances, a termination fee, without realizing the expected benefits of the transaction. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the merger, including the diversion of management attention from pursuing other opportunities and the constraints in the merger agreement on each party’s ongoing business during the pendency of the merger, could have a material adverse effect on each party’s business, financial condition and results of operations.
If the merger agreement is terminated and a party’s board of directors seeks another merger or business combination, such party’s shareholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the merger.
PMB will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees, customers, suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of PMB and, consequently, BOC. These uncertainties and contemplated changes may impair PMB’s ability to attract, retain and motivate key personnel and customers pending the consummation of the merger, as such personnel and customers may experience uncertainty about their future roles following the consummation of the merger. Additionally, these uncertainties and contemplated changes could cause customers, suppliers, vendors and others who deal with PMB to seek to change existing business relationships with PMB or fail to extend an existing relationship with PMB. In addition, competitors may target PMB’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger.
PMB has a small number of key personnel. The pursuit of the merger and the preparation for the integration may place a burden on PMB’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on PMB’s business, financial condition and results of operations.
In addition, the merger agreement restricts PMB and BOC from taking certain actions without the other party’s consent while the merger is pending. These restrictions may, among other matters, and subject to certain exceptions, prevent PMB from pursuing otherwise attractive business opportunities, selling assets, incurring indebtedness, engaging in significant capital expenditures, entering into other transactions or making other changes to PMB’s business prior to consummation of the merger or termination of the merger agreement. These restrictions could have a material adverse effect on PMB’s business, financial condition and results of operations. Please see the section entitled “The Merger Agreement—Conduct of Business Prior to the Completion of the Merger” for a description of the restrictive covenants applicable to PMB and BOC.
PMB directors and officers have interests in the merger different from the interests of other PMB shareholders.
In considering the recommendations of the PMB board of directors, PMB shareholders should be aware that certain directors and executive officers of PMB have interests in the merger that may differ from, or be in
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addition to, the interests of PMB shareholders generally. The PMB board of directors was aware of these interests and considered them, among other matters, when it approved the merger and in making its recommendation that the PMB shareholders approve the principal terms of the merger agreement. These interests include:
In accordance with the merger agreement, two directors of PMB will be recommended by BOC’s CNG Committee to serve on BOC’s board of directors upon the effective time;
Three named executive officers and six other executive officers of PMB are each party to an agreement that provides for severance and other benefits following a change in control of PMB in connection with a qualifying termination of employment;
Certain of PMB’s executive officers and directors may have equity awards that, under the merger agreement, become fully vested upon completion of the merger and paid out in cash; and
PMB directors and officers are entitled to continued indemnification and insurance coverage under the merger agreement.
For a more complete description of the interests of PMB’s directors and executive officers in the merger, see “The Mergers—Interests of PMB Directors and Executive Officers in the Merger.”
Shares of BOC common stock to be received by PMB shareholders as a result of the merger will have rights different from PMB common shares.
Upon completion of the merger, the rights of former PMB shareholders will be governed by the charter and bylaws of BOC. The rights associated with PMB common shares are different from the rights associated with BOC common stock. In addition, the rights of stockholders under Maryland law, where BOC is incorporated, may differ from the rights of shareholders under California law, where PMB is incorporated. Please see the section entitled “Comparison of Shareholders’ Rights” for a discussion of the different rights associated with BOC common stock.
The merger agreement contains provisions that may discourage other companies from trying to acquire PMB.
The merger agreement contains provisions that may discourage a third party from submitting a business combination proposal to PMB that might result in greater value to PMB shareholders than the merger. These provisions include a general prohibition on PMB soliciting, or, subject to certain exceptions, entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions. In addition, in some circumstances upon termination of the merger agreement, PMB may be required to pay BOC an $8.5 million termination fee. However, the failure of PMB shareholders to approve the merger agreement will not in and of itself trigger PMB’s obligation to pay a termination fee, unless other factors also exist, including a third-party proposal to acquire PMB and entry into a definitive agreement with respect to an acquisition of PMB, or consummation of an acquisition of PMB, in each case within 12 months following termination.
Each of the directors and certain shareholders of PMB have entered into a voting agreement with BOC in which such director or shareholder has agreed to vote all PMB common shares that he or she owns and has the power to vote in favor of the PMB merger proposal and any other matter that is required to be approved by the shareholders of PMB to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the principal terms of the merger agreement or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PMB’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 2,754,062 PMB common shares, allowing them to exercise approximately 12.3% of the voting power of PMB common shares (which does not include shares issuable upon the exercise of stock options or upon the vesting of PMB RSUs that were not outstanding as of the close of business on the record date). For more information, please see the section entitled “The Merger Agreement—Voting Agreements.” PMB also has an unqualified obligation to submit the PMB merger proposal to a vote of PMB shareholders, even if PMB receives a proposal that its board of directors believes is superior to the merger.
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BOC’s charter includes provisions that could impede a takeover of BOC.
BOC’s charter provides for, among other things, the issuance of preferred stock without further stockholder approval, super majority stockholder approval of certain business transactions, restrictions on voting of BOC equity securities above certain ownership levels and consideration of non-monetary factors in evaluating a takeover offer. Although these provisions were not adopted for the express purpose of preventing or impeding a takeover of BOC without the approval of the BOC board of directors, such provisions may have that effect. Such provisions may prevent former PMB shareholders who receive shares of BOC common stock in the merger from taking part in a transaction in which such shareholders could realize a premium over the current market price of BOC common stock. See “Comparison of Shareholders’ Rights” for a discussion of the different rights associated with BOC common stock.
BOC expects to incur substantial expenses related to the merger.
BOC expects to incur substantial expenses in connection with consummation of the merger and integrating the business, operations, networks, systems, technologies, policies and procedures of PMB into that of BOC. Although BOC and PMB have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result of these expenses, both BOC and PMB expect to take charges against their earnings before completion of the merger and BOC expects to take charges against its earnings after completion of the merger. The charges taken in connection with the merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
The opinions of BOC’s and PMB’s respective financial advisors delivered to BOC’s and PMB’s respective boards of directors prior to the execution of the merger agreement will not reflect changes in circumstances since the respective dates of such opinions.
BOC’s board of directors received an opinion from BOC’s financial advisor on March 19, 2021 and PMB’s board of directors received an opinion from PMB’s financial advisor on March 22, 2021 regarding the fairness, from a financial point of view and as of that date, of the merger consideration to BOC (in the case of BOC’s financial advisor) and the fairness, from a financial point of view and as of that date, of the exchange ratio to the holders of PMB common stock (in the case of PMB’s financial advisor). Changes in the operations and prospects of BOC or PMB, general market and economic conditions and other factors which may be beyond the control of BOC or PMB may have altered the value of BOC or PMB or the market prices of shares of BOC or PMB common stock as of the date of this document, or may alter such values and market prices by the time the merger is completed. The opinions did not speak as of the time the merger is completed or as of any date other than the date of the applicable opinion. However, PMB’s board of directors’ recommendation that PMB shareholders vote “FOR” the PMB merger proposal is made as of the date of this document, and BOC’s board of directors’ recommendation that BOC stockholders vote “FOR” the BOC merger proposal and the BOC stock issuance proposal is made as of the date of this document. For a description of the opinions of BOC’s and PMB’s respective financial advisors, see “The Mergers—Opinion of BOC’s Financial Advisor” and “The Mergers—Opinion of PMB’s Financial Advisor” included elsewhere in this joint proxy statement/prospectus.
The unaudited pro forma combined condensed consolidated financial information included in this document is illustrative only and the actual financial condition and results of operations after the mergers may differ materially.
The unaudited pro forma combined condensed consolidated financial information in this document is presented for illustrative purposes only and is not necessarily indicative of what BOC’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the PMB identifiable tangible and intangible assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this document is preliminary and final allocation of the purchase price and goodwill recognized will be based upon the actual purchase price and the estimated fair value of the assets acquired and liabilities assumed of PMB as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, please see the section entitled “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 103.
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Risk Factors Related to BOC and BOC’s Business
BOC is, and will continue to be, subject to the risks described in BOC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Documents Incorporated by Reference” and “Where You Can Find More Information” included elsewhere in this joint proxy statement/prospectus.
Risk Factors Related to PMB and PMB’s Business
PMB is, and will continue to be, subject to the risks described in PMB’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Documents Incorporated by Reference” and “Where You Can Find More Information” included elsewhere in this joint proxy statement/prospectus.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains certain forward-looking information about BOC, PMB, and the combined company after the close of the merger and the bank merger that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks, uncertainties and contingencies, many of which are difficult to predict and are generally beyond the control of BOC, PMB and the combined company. Readers are cautioned that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. In addition to factors previously disclosed in reports filed by BOC and PMB with the SEC, risks and uncertainties for each institution and the combined institution include, but are not limited to:
the effect of the COVID-19 pandemic and steps taken by governmental and other authorities to contain, mitigate and combat the pandemic on the business, operations, financial performance and prospects of BOC and PMB;
increased competitive pressures among financial services companies;
changes in consumer spending, borrowing and saving habits;
the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including but not limited to, the effectiveness of BOC’s and PMB’s underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and nonperforming assets in BOC’s and PMB’s loan portfolios, and may result in BOC’s and PMB’s allowances for credit losses not being adequate and require BOC and PMB to materially increase their credit loss reserves;
the quality and composition of BOC’s and PMB’s securities portfolios;
continuation of, or changes in, the short-term interest rate environment, changes in the levels of general interest rates, volatility in the interest rate environment, the relative differences between short- and long-term interest rates, deposit interest rates, net interest margin, and funding sources;
lower than expected revenues;
fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in BOC’s and PMB’s market areas;
the ability to complete the merger and the bank merger, including by obtaining regulatory approvals and approval by the shareholders of PMB and the stockholders of BOC, or any future transaction, or to integrate such acquired entities successfully, or to achieve expected beneficial synergies and/or operating efficiencies, in each case within expected time-frames or at all;
the reaction by PMB’s or BOC’s customers, employees and counterparties to the merger;
changes in the stock price of either BOC or PMB prior to the completion of the merger;
the possibility that personnel changes/retention will not proceed as planned;
BOC’s and PMB’s ability to attract and retain key members of their senior management teams;
the ability of key third-party providers to perform their obligations;
higher than anticipated operating expenses;
the risk that BOC’s and PMB’s enterprise risk management frameworks may not be effective in mitigating risk and reducing the potential for losses;
the ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund BOC’s and PMB’s activities;
failures or security breaches with respect to the network and computer systems on which BOC or PMB depend, including, but not limited to, due to cybersecurity threats;
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legislative or regulatory changes that adversely affect BOC’s or PMB’s business, including, without limitation, changes in tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;
errors in estimates of the fair values of certain of BOC’s or PMB’s assets and liabilities, which may result in significant changes in valuation;
changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to BOC’s or PMB’s business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting standards;
continuing impact of the Financial Accounting Standards Board’s credit loss accounting standard, referred to as Current Expected Credit Loss, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;
the effects of severe weather, natural disasters, pandemics, acts of war or terrorism and other external events on BOC’s or PMB’s business;
the costs and effects of legal, compliance, and regulatory actions, changes and developments, including the impact of adverse judgments or settlements in litigation;
share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting BOC common stock or PMB common shares and attempting to generate negative publicity about BOC or PMB;
the initiation and resolution of regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews;
general economic conditions, either nationally or in the market areas in which the entities operate or anticipate doing business, which may be less favorable than expected; and
other risk factors described in documents filed by BOC and PMB with the SEC.
All forward-looking statements included in this joint proxy statement/prospectus are based on information available at the time of the joint proxy statement/prospectus. Pro forma, projected and estimated numbers are used for illustrative purposes only and are not forecasts, and actual results may differ materially.
BOC and PMB are under no obligation to (and expressly disclaim any such obligation to) update or alter these forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.
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BOC SPECIAL MEETING OF STOCKHOLDERS
Date, Time and Place
The BOC special meeting will be held virtually at http://www.virtualshareholdermeeting.com/BANC2021SM, on Wednesday, June 23, 2021, at 8:00 a.m., local time. On or about Friday, May 14, 2021, BOC commenced mailing of this joint proxy statement/prospectus and the enclosed form of proxy to its stockholders entitled to vote at the BOC special meeting. Holders of record of BOC voting common stock can vote their shares electronically by the Internet and submit questions online during the BOC special meeting by logging in to the website listed above using the 16-digit control number included in their proxy card.
Purpose of the BOC Special Meeting
At the BOC special meeting, BOC common stockholders will be asked to consider and vote upon the following proposals:
BOC Merger Proposal. Approval of the merger pursuant to the terms of the Agreement and Plan of Merger, dated as of March 22, 2021, by and between BOC and PMB, as such agreement may be amended from time to time, a copy of which is attached as Appendix A;
BOC Stock Issuance Proposal. Approval of the issuance of BOC common stock in the merger; and
BOC Adjournment Proposal. Approval of one or more adjournments of the BOC special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the BOC special meeting to approve the BOC merger proposal or the BOC stock issuance proposal, referred to as the BOC adjournment proposal.
BOC will transact no other business at the BOC special meeting other than as listed above.
Recommendation of the BOC Board of Directors
After careful consideration, the BOC board of directors has approved the merger and the issuance of BOC common stock in connection with the merger, and determined that the merger and the issuance of BOC common stock in connection with the merger are advisable and fair to and in the best interests of BOC and its stockholders.
The BOC board of directors recommends that you vote “FOR” the merger proposal, “FOR” the BOC stock issuance proposal and “FOR” the BOC adjournment proposal. Please see the section entitled “The Merger—Recommendation of the BOC Board of Directors and Reasons for the Merger.”
Record Date and Quorum
The BOC board of directors has fixed the close of business on Monday, May 10, 2021 as the record date for determining the holders of BOC common stock entitled to receive notice of and to vote at the BOC special meeting.
As of the close of business on the record date, there were 50,174,678 shares of BOC common stock outstanding and entitled to vote at the BOC special meeting held by 1,274 shareholders of record. Each share of BOC voting common stock entitles the holder to one vote on each proposal to be considered at the BOC special meeting; provided, however, that under Section F of Article 6 of BOC’s charter, no stockholder who beneficially owns more than 10% of the shares of BOC common stock outstanding as of the record date may vote shares held in excess of this limit.
One-third of the stock entitled to vote, represented in person or by proxy, constitutes a quorum for transacting business at the BOC special meeting. Abstentions will be counted as represented at the BOC special meeting for purposes of determining the presence or absence of a quorum for all matters voted on at the BOC special meeting.
Since none of the proposals to be voted on at the BOC special meeting are routine matters for which brokers may have discretionary authority to vote, there can be no broker non-votes at the BOC special meeting. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being counted as represented for purposes of establishing a quorum at the BOC special meeting. Please see “—Shares Held in ‘Street Name”’ below for further information.
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As of the close of business on the record date, directors and executive officers of BOC and their affiliates owned and were entitled to vote 5,460,783 shares of BOC common stock, representing approximately 10.9% of the BOC common stock outstanding on that date. As of the close of business on the record date, PMB beneficially held no BOC common stock.
In connection with the merger agreement, each of the directors and certain stockholders of BOC have entered into a voting agreement with PMB in which such director or stockholder has agreed to vote all BOC common stock that he or she owns and has the power to vote in favor of the BOC merger proposal, the BOC stock issuance proposal and any other matter that is required to be approved by the stockholders of BOC to facilitate the transactions contemplated by the merger agreement. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 5,205,334 shares of BOC common stock, allowing them to exercise approximately 10.4% of the voting power of BOC common stock (which does not include shares issuable upon the exercise of stock options or upon the vesting of BOC RSUs that were not outstanding as of the close of business on the record date).
Required Vote
Approval of each of the proposals to be voted on at the BOC special meeting by the BOC common stockholders will require the following votes:
BOC Merger Proposal: The affirmative vote of a majority of outstanding shares of BOC common stock entitled to vote on the proposal is required to approve the BOC merger proposal.
BOC Stock Issuance Proposal: The number of votes cast for the BOC stock issuance proposal must exceed the number of votes cast against the BOC stock issuance proposal.
BOC Adjournment Proposal: The number of votes cast for the BOC adjournment proposal must exceed the number of votes cast against the BOC adjournment proposal.
Treatment of Abstentions
For purposes of the BOC special meeting, an abstention occurs when a BOC common stockholder is present at the BOC special meeting, either virtually or represented by proxy, but abstains from voting.
Abstentions will be counted as represented at the BOC special meeting for purposes of determining the presence or absence of a quorum for all matters voted on at the BOC special meeting.
For purposes of the BOC merger proposal, if a BOC common stockholder responds by proxy with an “abstain” vote or attends the BOC special meeting virtually and abstains from voting, it will have the same effect as a vote cast “AGAINST” the proposal. If a BOC common stockholder does not attend the BOC special meeting virtually and does not respond by proxy, it will also have the same effect as a vote cast “AGAINST” the proposal.
For purposes of the BOC stock issuance proposal and the BOC adjournment proposal, if a BOC common stockholder responds by proxy with an “abstain” vote or is attends the BOC special meeting virtually and abstains from voting, it will have no effect on the BOC stock issuance proposal or the BOC adjournment proposal. If a BOC common stockholder does not attend the BOC special meeting virtually and does not respond by proxy, it will also have no effect on the BOC stock issuance proposal or the BOC adjournment proposal.
Voting on Proxies; Incomplete Proxies
Giving a proxy means that a stockholder authorizes the persons named in the proxy to vote such holder’s shares at the BOC special meeting in the manner such holder directs. A BOC common stockholder may vote by proxy or may vote online during the BOC special meeting.
The method of voting by proxy differs for shares held by stockholders of record and shares held in “street name.”
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Stockholders of Record
If your shares of BOC common stock are registered directly in your name, you are considered the stockholder of record with respect to these shares. If you hold your shares in your name as a stockholder of record, you may submit your proxy before the BOC special meeting in one of the following ways:
By telephone: Use the telephone number shown on your proxy card. Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week. Have your proxy card handy when you call. You will be prompted to enter your control number(s), which is located on your proxy card, and then follow the directions given.
Through the Internet: Visit the website shown on your proxy card to vote via the Internet. Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your proxy card handy when you access the website. You will be prompted to enter your control number(s), which is located on your proxy card, to create and submit an electronic ballot.
By mail: Complete, sign, date and return the proxy card in the enclosed envelope. The envelope requires no additional postage if mailed in the United States.
You may also cast your vote online during the BOC special meeting. Please see “—Attending the BOC Special Meeting” below for further information.
BOC requests that BOC common stockholders vote by telephone, over the Internet or by completing, dating and signing the accompanying proxy and returning it to BOC as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy is returned properly executed, the shares of BOC common stock represented by it will be voted at the BOC special meeting in accordance with the instructions contained on the proxy card. Applicable deadlines for voting by telephone or through the Internet are set forth in your proxy card.
If you hold your BOC common stock in your name as a stockholder of record, and you sign and return your proxy card without indicating how to vote on any particular proposal, the shares of BOC common stock represented by the proxy will be voted “FOR” the merger proposal, “FOR” the BOC stock issuance proposal and “FOR” the BOC adjournment proposal.
Shares Held in “Street Name”
If your BOC common stock is held in an account with a bank, broker or other nominee, which are referred to as shares held in “street name,” the bank, broker or other nominee is considered the stockholder of record with respect to these shares and you are the beneficial owner of these “street name” shares.
If your shares are held in “street name” through a bank, broker or other nominee, you will receive instructions from your bank, broker or other nominee that you must follow in order to vote your stock. You should refer to the voting form used by that firm to determine whether you may vote by telephone, Internet or mail.
If your shares are held in “street name,” BOC recommends that you mark, date, sign and promptly mail the voting instruction form provided by your bank, broker or other nominee in accordance with the instructions provided by such nominee. If you do not give your bank, broker or other nominees instructions on how to vote your BOC common stock, your bank, broker or other nominees will not be able to vote your stock on any of the proposals at the BOC special meeting and your shares will not be counted as represented at the BOC special meeting for the purposes of establishing a quorum.
If your shares are held in “street name” through a bank, broker or other nominee you must either direct your nominee on how to vote your stock or obtain a proxy from such nominee to vote online during the BOC special meeting. If your stock is held in “street name,” you may only vote online during the BOC special meeting if you have proof of ownership of your BOC common stock as of the record date and obtain a valid legal proxy from your bank, broker or other nominee that is the stockholder of record of such shares and present such items at the BOC special meeting. Please see “—Attending the BOC Special Meeting” below for further information.
Every stockholder’s vote is important. Accordingly, each BOC common stockholder should promptly submit a proxy, whether or not the stockholder plans to attend the BOC special meeting.
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If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. If you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold stock. In each case, please complete, sign, date and return each proxy card and voting instruction form that you receive.
Stock Held in “Street Name”
If your BOC common stock is held in “street name” through a bank, broker or other nominee, you must provide the bank, broker or other nominee, as the stockholder of record of your shares, with instructions on how to vote your shares. Please follow the instructions provided by your bank, broker or other nominee. You may not vote shares held in “street name” by returning a proxy card directly to BOC or by voting online during the BOC special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.
Brokers, banks or other nominees who hold shares in “street name” for the beneficial owner are not allowed to vote with respect to the approval of matters that are “non-routine” without specific instructions from the beneficial owner. All proposals to be voted on at the BOC special meeting are considered “non-routine” matters and, therefore, brokers, banks and other nominees do not have discretionary voting powers on these matters. A “broker non-vote” occurs on an item when (i) a bank, broker or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of stockholders, but is not permitted to vote on other proposals without instructions from the beneficial owner of the stock and (ii) the beneficial owner fails to provide the bank, broker or other nominee with such instructions. Because none of the proposals to be voted on at the BOC special meeting are routine matters for which brokers may have discretionary authority to vote, there can be no broker non-votes at the BOC special meeting.
Accordingly, if your BOC common stock is held in “street name,” your bank, broker or other nominee will NOT be able to vote your BOC common stock on the BOC merger proposal, the BOC stock issuance proposal or the BOC adjournment proposal unless you have properly instructed your bank, broker or other nominee on how to vote. If you fail to properly instruct your bank, broker or other nominee on how to vote, your shares will not be counted as represented for purposes of establishing a quorum at the BOC special meeting.
The BOC merger proposal requires the affirmative vote of a majority of the outstanding shares of stock entitled to vote. Therefore, the failure of a holder of BOC common stock to provide its bank, broker or other nominee with voting instructions will have the same effect as a vote “AGAINST” the BOC merger proposal.
The BOC stock issuance proposal requires the affirmative vote of a majority of the votes cast on the matter. Therefore, the failure of a holder of BOC common stock to provide its bank, broker or other nominee with voting instructions will have no effect on the BOC stock issuance proposal.
The BOC adjournment proposal requires the affirmative vote of a majority of the votes cast on the matter. Therefore, the failure of a holder of BOC common stock to provide its bank, broker or other nominee with voting instructions will have no effect on the BOC adjournment proposal.
Revocability of Proxies and Changes to a Stockholder’s Vote
If you hold your BOC common stock in your name as a stockholder of record, you may change your vote at any time before your proxy is voted at the BOC special meeting. You may do this in one of four ways:
first, by sending a notice of revocation stating that you would like to revoke your proxy;
second, by sending a completed proxy card bearing a later date than your original proxy card;
third, by logging onto the Internet website specified on your proxy card in the same manner you would submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you were eligible to do so and following the instructions on the proxy card; or
fourth, by attending and voting online during the BOC special meeting. Attendance at the BOC special meeting will not in itself constitute the revocation of a proxy.
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If you are a BOC stockholder of record and you choose to send a written notice of revocation or to mail a new proxy card, you must submit your notice of revocation or your new proxy to BOC’s corporate secretary at 3 MacArthur Place, Santa Ana, California 92707. The notice of revocation or new proxy card, or electronic proxy submitted via the Internet or by telephone, must be received no later than Tuesday, June 22, 2021, at 5:00 p.m. local time, which is the business day immediately prior to the BOC special meeting.
If your shares are held in “street name” through a bank, broker or other nominee and you have instructed your nominee how to vote your BOC common stock, you must submit new voting instructions to your nominee. You should follow the instructions you receive from your bank, broker or other nominee on how to change or revoke your vote.
Attending the BOC Special Meeting
The BOC special meeting will be held virtually at http://www.virtualshareholdermeeting.com/BANC2021SM, on Wednesday, June 23, 2021, at 8:00 a.m., local time.
BOC common stockholders as of the close of business on the record date may attend the BOC special meeting online, vote shares electronically and submit questions during the BOC special meeting, by following the instructions on the BOC special meeting website, http://www.virtualshareholdermeeting.com/BANC2021SM. You will need to have your 16-digit control number included on your proxy card to join the BOC special meeting. Online access to the BOC special meeting, which will be an audio-only webcast, will begin at 7:45 a.m., local time, on Wednesday, June 23, 2021.
If your shares are held in “street name” through a bank, broker or other nominee, you may only vote online during the BOC special meeting if you have proof of ownership of your BOC common stock as of the record date and obtain a valid legal proxy from your bank, broker or other nominee that is the stockholder of record of such shares.
Should you need technical support on the day of the BOC special meeting, please call the phone number listed on the virtual meeting landing page on the website, http://www.virtualshareholdermeeting.com/BANC2021SM.
Householding
The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy proxy statement delivery requirements for two or more stockholders sharing an address by delivering one proxy statement to those stockholders. This procedure, known as “householding,” reduces the amount of duplicate information that stockholders receive and lowers printing and mailing costs.
If you share an address with another stockholder, you may receive only one set of proxy materials. If you wish to receive a separate copy of proxy materials now or in the future, please request the additional copies by contacting BOC at:
Banc of California, Inc.
ATTN: Corporate Secretary
3 MacArthur Place
Santa Ana, California 92707
(855) 361-2262
IR@bankofcal.com.
The joint proxy statement/prospectus is also available on the Internet at http://www.proxyvote.com. Similarly, if you are receiving multiple copies of the proxy materials and would like to receive only one copy for your household, you should contact your bank, broker or other nominee, or you may contact BOC in the same manner as set forth above.
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Solicitation of Proxies
BOC is soliciting proxies for the BOC special meeting from BOC common stockholders on behalf of its board of directors. BOC will bear all of the costs of the proxy solicitation for the BOC special meeting, including the costs of preparing, printing and mailing this joint proxy statement/prospectus to its stockholders. In addition to solicitations by mail, BOC’s directors, officers and employees may solicit proxies in person or by telephone, email, facsimile or other electronic methods without additional compensation.
BOC will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses incurred by them in forwarding proxy materials to the beneficial owners of BOC common stock held in “street name” by such persons.
Questions and Additional Information
If you have any questions or need assistance in voting your shares, please call BOC Investor Relations at (855) 361-2262.
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PMB SPECIAL MEETING OF SHAREHOLDERS
Date, Time and Place
The PMB special meeting will be held in the first floor Training Room at PMB’s offices at 949 South Coast Drive, Costa Mesa, California 92626, on Wednesday, June 23, 2021, at 9:00 a.m., local time. On or about Friday, May 14, 2021, PMB commenced mailing of this joint proxy statement/prospectus and the enclosed form of proxy to its shareholders entitled to vote at the PMB special meeting.
We expect to hold the PMB special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the PMB special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only PMB shareholders will be admitted to the PMB special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the PMB special meeting in person. To do so, please make your request by mail to PMB at 949 South Coast Drive, Costa Mesa, CA 92626, Attention: Chief Financial Officer, by email at Curt.Christianssen@pmbank.com or by phone at (714) 438-2500. PMB must receive your request for pre-authorization on or before Tuesday, June 15, 2021.
Purpose of the PMB Special Meeting
At the PMB special meeting, PMB common shareholders will be asked to consider and vote upon the following proposals:
PMB Merger Proposal. Approval of the principal terms of the Agreement and Plan of Merger, dated as of March 22, 2021, by and between PMB and BOC, as such agreement may be amended from time to time, a copy of which is attached as Appendix A;
PMB NEO Compensation Proposal. Approval, on an advisory (non-binding) basis, of the compensation to be paid to the named executive officers of PMB in connection with the merger; and
PMB Adjournment Proposal. Approval of one or more adjournments of the PMB special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies if there are insufficient votes at the time of the PMB special meeting to approve the PMB merger proposal or PMB NEO compensation proposal, referred to as the PMB adjournment proposal.
PMB will transact no other business at the PMB special meeting other than as listed above.
Recommendation of the PMB Board of Directors
After careful consideration, the PMB board of directors has approved the merger agreement and the transactions contemplated thereby, and determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of PMB and its shareholders.
The PMB board of directors recommends that you vote “FOR” the PMB merger proposal, “FOR” the PMB NEO compensation proposal and “FOR” the PMB adjournment proposal. Please see the section entitled “The Merger—Recommendation of the PMB Board of Directors and Reasons for the Merger.”
Record Date and Quorum
The PMB board of directors has fixed the close of business on Monday, May 10, 2021 as the record date for determining the holders of PMB common shares entitled to receive notice of and to vote at the PMB special meeting.
As of the close of business on the record date, there were 22,322,184 PMB common shares outstanding and entitled to vote at the PMB special meeting held by 84 shareholders of record. Each PMB voting common share entitles the holder to one vote on each proposal to be considered at the PMB special meeting.
A majority of shares entitled to vote, represented in person or by proxy, constitutes a quorum for transacting business at the PMB special meeting. Abstentions will be counted as represented at the PMB special meeting for purposes of determining the presence or absence of a quorum for all matters voted on at the PMB special meeting.
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Since none of the proposals to be voted on at the PMB special meeting are routine matters for which brokers may have discretionary authority to vote, there can be no broker non-votes at the PMB special meeting. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being counted as represented for purposes of establishing a quorum at the PMB special meeting. Please see “—Shares Held in ‘Street Name”’ below for further information.
As of the close of business on the record date, directors and executive officers of PMB and their affiliates owned and were entitled to vote 3,166,347 PMB common shares, representing approximately 14.2% of the PMB common shares outstanding on that date. As of the close of business on the record date, BOC beneficially held no PMB common shares.
In connection with the merger agreement, each of the directors and certain shareholders of PMB have entered into a voting agreement with BOC in which such director or shareholder has agreed to vote all PMB common shares that he or she owns and has the power to vote in favor of the PMB merger proposal and any other matter that is required to be approved by the shareholders of PMB to facilitate the transactions contemplated by the merger agreement. Such persons also agreed to vote against any proposal made in opposition to the approval of the principal terms of the merger agreement or in competition with the merger agreement, against any acquisition proposal and against any proposal, transaction, agreement or amendment to PMB’s organizational documents that is intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage consummation of the merger. As of the close of business on the record date, such persons beneficially owned, in the aggregate, 2,754,062 PMB common shares, allowing them to exercise approximately 12.3% of the voting power of PMB common shares (which does not include shares issuable upon the exercise of stock options or upon the vesting of PMB RSUs that were not outstanding as of the close of business on the record date).
Required Vote
Approval of each of the proposals to be voted on at the PMB special meeting by the PMB common shareholders will require the following votes:
PMB Merger Proposal: The affirmative vote of a majority of the outstanding shares entitled to vote is required to approve the PMB merger proposal.
PMB NEO Compensation Proposal: The PMB NEO compensation proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum.
PMB Adjournment Proposal: The PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum.
Treatment of Abstentions
For purposes of the PMB special meeting, an abstention occurs when a PMB common shareholder attends the PMB special meeting, either in person or represented by proxy, but abstains from voting.
Abstentions will be counted as represented at the PMB special meeting for purposes of determining the presence or absence of a quorum for all matters voted on at the PMB special meeting.
For the PMB merger proposal, shares not represented at the PMB special meeting are still considered outstanding and, therefore, will have the same effect as a vote “AGAINST” the proposal. The PMB merger proposal requires the affirmative vote of a majority of the outstanding share of stock entitled to vote. Therefore, the failure of a holder of PMB common shares to provide its bank, broker or other nominee with voting instructions will have the same effect as a vote “AGAINST” the PMB merger proposal.
The PMB NEO compensation proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Your bank, broker or other nominee does not have discretionary authority to vote your shares on the
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PMB special meeting proposals without your instructions. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being represented at the PMB special meeting. Accordingly, for purposes of the PMB NEO compensation proposal, failure to provide instructions to vote your shares will not affect the outcome under clause (i), which recognizes only actual votes cast. However, failure to provide instructions to vote your shares will affect the outcome under clause (ii) if the number of shares voting affirmatively at the PMB special meeting, though a majority of the shares represented and voted, does not constitute a majority of the required quorum.
The PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Your bank, broker or other nominee does not have discretionary authority to vote your shares on the PMB special meeting proposals without your instructions. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being represented at the PMB special meeting. Accordingly, for purposes of the PMB adjournment proposal, failure to provide instructions to vote your shares will not affect the outcome under clause (i), which recognizes only actual votes cast. However, failure to provide instructions to vote your shares will affect the outcome under clause (ii) if the number of shares voting affirmatively at the PMB special meeting, though a majority of the shares represented and voted, does not constitute a majority of the required quorum.
Voting on Proxies; Incomplete Proxies
Giving a proxy means that a shareholder authorizes the persons named in the proxy to vote such holder’s shares at the PMB special meeting in the manner such holder directs. A PMB common shareholder may vote by proxy or may vote in person during the PMB special meeting.
The method of voting by proxy differs for shares held by shareholders of record and shares held in “street name.”
Shareholders of Record:
If your PMB common shares are registered directly in your name, you are considered the shareholder of record with respect to these shares. If you hold your shares in your name as a shareholder of record, you may submit your proxy before the PMB special meeting in one of the following ways:
By telephone: Use the telephone number shown on your proxy card. Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week. Have your proxy card handy when you call. You will be prompted to enter your control number(s), which is located on your proxy card, and then follow the directions given.
Through the Internet: Visit the website shown on your proxy card to vote via the Internet. Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your proxy card handy when you access the website. You will be prompted to enter your control number(s), which is located on your proxy card, to create and submit an electronic ballot.
By mail: Complete, sign, date and return the proxy card in the enclosed envelope. The envelope requires no additional postage if mailed in the United States.
You may also cast your vote in person during the PMB special meeting. Please see “—Attending the PMB Special Meeting” below for further information.
PMB requests that PMB common shareholders vote by telephone, over the Internet or by completing, dating and signing the accompanying proxy and returning it to PMB as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy is returned properly executed, the PMB common shares represented by it will be voted at the PMB special meeting in accordance with the instructions contained on the proxy card. Applicable deadlines for voting by telephone or through the Internet are set forth in your proxy card.
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If you hold your PMB common shares in your name as a shareholder of record, and you sign and return your proxy card without indicating how to vote on any particular proposal, the PMB common shares represented by the proxy will be voted “FOR” the PMB merger proposal, “FOR” the PMB NEO compensation proposal and “FOR” the PMB adjournment proposal.
Shares Held in “Street Name”
If your PMB common shares are held in an account with a bank, broker or other nominee, which are referred to as shares held in “street name,” the bank, broker or other nominee is considered the shareholder of record with respect to these shares and you are the beneficial owner of these “street name” shares.
If your shares are held in “street name” through a bank, broker or other nominee, you will receive instructions from your bank, broker or other nominee that you must follow in order to vote your shares. You should refer to the voting form used by that firm to determine whether you may vote by telephone, Internet or mail.
If your shares are held in “street name,” PMB recommends that you mark, date, sign and promptly mail the voting instruction form provided by your bank, broker or other nominee in accordance with the instructions provided by such nominee. If you do not give your bank, broker or other nominees instructions on how to vote your PMB common shares, your bank, broker or other nominees will not be able to vote your shares on any of the proposals at the PMB special meeting and your shares will not be represented at the PMB special meeting.
If your shares are held in “street name” through a bank, broker or other nominee you must either direct your nominee on how to vote your shares or obtain a proxy from such nominee to vote in person during the PMB special meeting. If your shares are held in “street name,” you may only vote in person during the PMB special meeting if you have proof of ownership of your PMB common shares as of the record date and obtain a valid legal proxy from your bank, broker or other nominee that is the shareholder of record of such shares and present such items at the PMB special meeting. Please see “—Attending the PMB Special Meeting” below for further information.
Every shareholder’s vote is important. Accordingly, each PMB common shareholder should promptly submit a proxy, whether or not the shareholder plans to attend the PMB special meeting.
If you are a shareholder of record and your shares are registered in more than one name, you will receive more than one proxy card. If you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. In each case, please complete, sign, date and return each proxy card and voting instruction form that you receive.
Shares Held in “Street Name”
If your PMB common shares are held in “street name” through a bank, broker or other nominee, you must provide the bank, broker or other nominee, as the shareholder of record of your shares, with instructions on how to vote your shares. Please follow the instructions provided by your bank, broker or other nominee. You may not vote shares held in “street name” by returning a proxy card directly to PMB or by voting in person during the PMB special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.
Brokers, banks or other nominees who hold shares in “street name” for the beneficial owner are not allowed to vote with respect to the approval of matters that are “non-routine” without specific instructions from the beneficial owner. All proposals to be voted on at the PMB special meeting are considered “non-routine” matters and, therefore, brokers, banks and other nominees do not have discretionary voting powers on these matters. A “broker non-vote” occurs on an item when (i) a bank, broker or other nominee has discretionary authority to vote on one or more proposals to be voted on at a meeting of shareholders, but is not permitted to vote on other proposals without instructions from the beneficial owner of the shares and (ii) the beneficial owner fails to provide the bank, broker or other nominee with such instructions. Because none of the proposals to be voted on at the PMB special meeting are routine matters for which brokers may have discretionary authority to vote, there can be no broker non-votes at the PMB special meeting.
Accordingly, if your PMB common shares are held in “street name,” your bank, broker or other nominee will NOT be able to vote your PMB common shares on the PMB merger proposal, the PMB NEO compensation proposal or the PMB adjournment proposal, and your shares will not be counted as
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represented for purposes of establishing a quorum at the PMB special meeting unless you have properly instructed your bank, broker or other nominee on how to vote.
For the PMB merger proposal, shares not represented at the PMB special meeting are still considered outstanding and, therefore, will have the same effect as a vote “AGAINST” the proposal. The PMB merger proposal requires the affirmative vote of a majority of the outstanding share of stock entitled to vote. Therefore, the failure of a holder of PMB common shares to provide its bank, broker or other nominee with voting instructions will have the same effect as a vote “AGAINST” the PMB merger proposal.
The PMB NEO compensation proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Your bank, broker or other nominee does not have discretionary authority to vote your shares on the special meeting proposals without your instructions. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being represented at the PMB special meeting. Accordingly, for purposes of the PMB NEO compensation proposal, failure to provide instructions to vote your shares will not affect the outcome under clause (i), which recognizes only actual votes cast. However, failure to provide instructions to vote your shares will affect the outcome under clause (ii) if the number of shares voting affirmatively at the PMB special meeting, though a majority of the shares represented and voted, does not constitute a majority of the required quorum.
The PMB adjournment proposal requires a vote that satisfies two criteria: (i) the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, and (ii) the shares voting affirmatively must also constitute at least a majority of the required quorum. Your bank, broker or other nominee does not have discretionary authority to vote your shares on the special meeting proposals without your instructions. Consequently, failure to provide instructions to your bank, broker or other nominee on how to vote will result in your shares not being represented at the PMB special meeting. Accordingly, for purposes of the PMB adjournment proposal, failure to provide instructions to vote your shares will not affect the outcome under clause (i), which recognizes only actual votes cast. However, failure to provide instructions to vote your shares will affect the outcome under clause (ii) if the number of shares voting affirmatively at the PMB special meeting, though a majority of the shares represented and voted, does not constitute a majority of the required quorum.
Revocability of Proxies and Changes to a Shareholder’s Vote
If you hold your PMB common shares in your name as a shareholder of record, you may change your vote at any time before your proxy is voted at the PMB special meeting. You may do this in one of four ways:
first, by sending a notice of revocation stating that you would like to revoke your proxy;
second, by sending a completed proxy card bearing a later date than your original proxy card;
third, by logging onto the Internet website specified on your proxy card in the same manner you would submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you were eligible to do so and following the instructions on the proxy card; or
fourth, by attending and voting in person during the PMB special meeting. Attendance at the PMB special meeting will not in itself constitute the revocation of a proxy.
If you are a PMB shareholder of record and you choose to send a written notice of revocation or to mail a new proxy card, you must submit your notice of revocation or your new proxy to PMB’s corporate secretary at 949 South Coast Drive, Suite 300, Costa Mesa, California 92626. The notice of revocation or new proxy card, or electronic proxy submitted via the Internet or by telephone, must be received no later than Tuesday, June 22, 2021, at 5:00 p.m. local time, which is the business day immediately prior to the PMB special meeting.
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If your shares are held in “street name” through a bank, broker or other nominee and you have instructed your nominee how to vote your PMB common shares, you must submit new voting instructions to your nominee. You should follow the instructions you receive from your bank, broker or other nominee on how to change or revoke your vote.
Attending the PMB Special Meeting
The PMB special meeting will be held in the first floor Training Room at PMB’s offices at 949 South Coast Drive, Costa Mesa, California 92626, on Wednesday, June 23, 2021, at 9:00 a.m., local time. We expect to hold the PMB special meeting in person, but we continue to monitor the situation regarding COVID-19 closely. Accordingly, we are planning for the possibility that the PMB special meeting may be subject to special precautions, including limitations on the number of participants in one room or other limitations. In that regard, only PMB shareholders will be admitted to the PMB special meeting. No guests will be permitted. For safety and security purposes, you will need to obtain authorization in advance to attend the PMB special meeting in person. To do so, please make your request by mail to PMB at 949 South Coast Drive, Costa Mesa, CA 92626, Attention: Chief Financial Officer, by email at Curt.Christianssen@pmbank.com or by phone at (714) 438-2500. PMB must receive your request for pre-authorization on or before Tuesday, June 15, 2021.
If your shares are held in “street name” through a bank, broker or other nominee, you may only vote in person during the PMB special meeting if you have proof of ownership of your PMB common shares as of the record date and obtain a valid legal proxy from your bank, broker or other nominee that is the shareholder of record of such shares.
Dissenters’ Rights
In connection with the merger, under the CGCL, PMB shareholders are not entitled to exercise dissenters’ rights.
Householding
The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy proxy statement delivery requirements for two or more shareholders sharing an address by delivering one proxy statement to those shareholders. This procedure, known as “householding,” reduces the amount of duplicate information that shareholders receive and lowers printing and mailing costs.
If you share an address with another shareholder, you may receive only one set of proxy materials. If you wish to receive a separate copy of proxy materials now or in the future, please request the additional copies by sending a request to Computershare Investor Services, P.O. Box 505005, Louisville, KY 40233-5005 or Computershare Investor Services, 462 South 4th Street, Suite 1600, Louisville, KY 40202. The joint proxy statement/prospectus is also available on the Internet at http://www.edocumentview.com/PMBC. Similarly, if you are receiving multiple copies of the proxy materials and would like to receive only one copy for your household, you should contact your bank, broker or other nominee, or you may contact Computershare in the same manner as set forth above.
Solicitation of Proxies
PMB is soliciting proxies for the PMB special meeting from PMB common shareholders on behalf of its board of directors. PMB will bear all of the costs of the proxy solicitation for the PMB special meeting, including the costs of preparing, printing and mailing this joint proxy statement/prospectus to its shareholders. In addition to solicitations by mail, PMB’s directors, officers and employees may solicit proxies in person or by telephone, email, facsimile or other electronic methods without additional compensation.
PMB will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses incurred by them in forwarding proxy materials to the beneficial owners of PMB common shares held in “street name” by such persons.
Questions and Additional Information
If you have any questions or need assistance in voting your shares, please call PMB Investor Relations at (714) 438-2531.
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BOC PROPOSALS
BOC Merger Proposal
As discussed throughout this joint proxy statement/prospectus, BOC is asking its common stockholders to approve the BOC merger proposal. Holders of BOC common stock should read carefully this document in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. In particular, holders of BOC common stock are directed to the merger agreement, a copy of which is attached as Appendix A to this joint proxy statement/prospectus.
The BOC board of directors recommends a vote FOR” the BOC merger proposal.
BOC Stock Issuance Proposal
As discussed throughout this joint proxy statement/prospectus, BOC is asking its stockholders to approve the issuance of BOC common stock in connection with the merger.
The BOC board of directors recommends a vote “FOR the BOC stock issuance proposal.
BOC Adjournment Proposal
The BOC special meeting may be adjourned to another time and place, if necessary or appropriate, to permit, among other things, the further solicitation of proxies if there are insufficient votes at the time of the BOC special meeting to approve the BOC merger proposal or the BOC stock issuance proposal.
If, at the special meeting, BOC does not have sufficient votes to approve the BOC merger proposal or the BOC stock issuance proposal, BOC intends to move to adjourn the BOC special meeting in order to enable the board of directors to solicit additional proxies. If the common stockholders approve the BOC adjournment proposal, BOC could adjourn the BOC special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from common stockholders who have previously voted.
The BOC board of directors recommends a vote “FOR the BOC adjournment proposal.
No Other Matters
Pursuant to Section 2-502 of the Maryland General Corporation Law, referred to as the MGCL, BOC may not transact any other business at the BOC special meeting other than as listed above.
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PMB PROPOSALS
PMB Merger Proposal
As discussed throughout this joint proxy statement/prospectus, PMB is asking its common shareholders to approve the PMB merger proposal. Holders of PMB common shares should read carefully this document in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. In particular, holders of PMB common shares are directed to the merger agreement, a copy of which is attached as Appendix A to this joint proxy statement/prospectus.
The PMB board of directors recommends a vote “FOR” the PMB merger proposal.
PMB NEO Compensation Proposal
Pursuant to Section 14A of the Exchange Act, and Rule 14a-21(c) promulgated thereunder, PMB is seeking a non-binding, advisory shareholder approval of the compensation to be paid to the named executive officers of PMB in connection with the merger. The proposal gives PMB’s common shareholders the opportunity to express their views on the merger-related compensation of the named executive officers of PMB.
Accordingly, PMB is asking PMB’s common shareholders to vote “FOR” the adoption of the following resolution, on a non-binding, advisory basis:
RESOLVED, that the compensation that may be paid or become payable to PMB’s named executive officers, in connection with the merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in ‘The Merger—Interests of PMB’s Directors and Executive Officers in the Merger and ‘The Merger—Merger-Related Compensation for PMB’s Named Executive Officers’ are hereby APPROVED.
The advisory vote on the PMB NEO compensation proposal is a vote separate and apart from the votes on the PMB merger proposal and the PMB adjournment proposal. Accordingly, PMB common shareholders may vote to approve the PMB merger proposal and/or the PMB adjournment proposal and vote not to approve the PMB NEO compensation proposal, and vice versa. The approval of the PMB NEO compensation proposal is not a condition to the consummation of the merger. If the merger is completed, the merger-related compensation will be paid to the named executive officers of PMB to the extent payable in accordance with the terms of the compensation agreements or arrangements even if PMB’s common shareholders fail to approve the advisory vote regarding merger-related compensation.
The PMB board of directors recommends a vote “FOR” the PMB NEO compensation proposal.
PMB Adjournment Proposal
The PMB special meeting may be adjourned to another time and place, if necessary or appropriate, to permit, among other things, the further solicitation of proxies if there are insufficient votes at the time of the PMB special meeting to approve the PMB merger proposal.
If, at the PMB special meeting, PMB does not have the affirmative vote of a majority of the outstanding shares entitled to vote to approve the PMB merger proposal or the PMB NEO compensation proposal, PMB intends to move to adjourn the PMB special meeting in order to enable the board of directors to solicit additional proxies for approval of the PMB merger proposal or the PMB NEO compensation proposal. If the common shareholders approve the PMB adjournment proposal, PMB could adjourn the PMB special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from common shareholders who have previously voted.
The PMB board of directors recommends a vote “FOR the PMB adjournment proposal.
No Other Matters
Under Section 601(a) of the CGCL, PMB may not transact any other business at the PMB special meeting other than as listed above.
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INFORMATION ABOUT THE COMPANIES
Banc of California, Inc.
3 MacArthur Place
Santa Ana, California 92707
Phone: (855) 361-2262
Banc of California, Inc., a Maryland corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, referred to as the BHC Act, with corporate headquarters in Santa Ana, California. BOC’s principal business is to serve as the holding company for BOC’s wholly owned subsidiary, Banc of California, National Association, a national banking association. References to BOC refer to BOC together with BOC Bank and its other subsidiaries on a consolidated basis.
BOC is a relationship-focused business bank that delivers comprehensive products and solutions for businesses, business owners and individuals. It offers a full array of competitively priced and client-tailored loan and deposit products and services through 29 full service branches extending from San Diego to Santa Barbara. It also offers commercial loan products, including commercial and industrial loans, commercial real estate loans and multifamily loans, SBA loans, construction loans and other consumer loans. In addition, BOC has a SFR mortgage loan portfolio that it services.
As of March 31, 2021, on a consolidated basis, BOC had total assets of $7.9 billion, total loans of $5.8 billion, total deposits of $6.1 billion, and stockholders’ equity of $804.7 million.
BOC’s common stock is traded on the NYSE under the symbol “BANC.”
Additional information about BOC and its subsidiaries may be found in the documents incorporated by reference into this document. Please also see the section entitled “Where You Can Find More Information.”
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Pacific Mercantile Bancorp
949 South Coast Drive, Suite 300
Costa Mesa, California 92626
Phone: (714) 438-2531
Pacific Mercantile Bancorp is the parent holding company of Pacific Mercantile Bank, which opened for business March 1, 1999. PM Bank, which is an FDIC insured, California state-chartered bank and a member of the Federal Reserve System, provides a wide range of commercial banking services to businesses, business professionals and individual clients. PM Bank is headquartered in Orange County and operates a total of seven offices in Southern California, located in Orange, Los Angeles, San Diego, and San Bernardino counties. PM Bank offers tailored flexible solutions for its clients including an array of loan and deposit products, sophisticated cash management services, and comprehensive online banking services.
PM Bank’s commercial lending solutions include working capital lines of credit and asset based lending, 7(a) and 504 Small Business Administration loans, commercial real estate loans, growth capital loans, equipment financing, letters of credit and corporate credit cards. PM Bank’s depository and corporate banking services include cash and treasury management solutions, interest-bearing term deposit accounts, checking accounts, automated clearinghouse payment and wire solutions, fraud protection, remote deposit capture, courier services and online banking. PM Bank serves clients operating in a global marketplace through services including letters of credit and import/export financing. PMB has developed its Horizon Analytics tool which provides financial modeling and analysis to help its customers succeed.
As of March 31, 2021, on a consolidated basis, PMB had total assets of $1.6 billion, total loans of $1.2 billion, total deposits of $1.4 billion and total shareholders’ equity of $161.3 million.
PMB’s common stock is traded on Nasdaq under the symbol “PMBC.”
Additional information about PMB and its subsidiaries may be found in the documents incorporated by reference into this document. Please see the section entitled “Where You Can Find More Information.”
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THE MERGER
The following is a discussion of the merger and the material terms of the merger agreement between BOC and PMB. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Appendix A to this document and incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. In addition, important business and financial information about each of BOC and PMB can be found elsewhere in this document and in the public filings BOC and PMB make with the SEC, as described in the section entitled “Where You Can Find More Information.”
Terms of the Merger
Transaction Structure
BOC’s board of directors has approved the merger and PMB’s board of directors has approved the principal terms of the merger agreement. The merger agreement provides for the merger of PMB with and into BOC, with BOC continuing as the surviving corporation. Promptly after the merger, PM Bank will merge with and into BOC Bank, with BOC Bank as the surviving bank.
Merger Consideration
In the merger, each PMB common share, other than specified excluded shares described under “The Merger Agreement—Merger Consideration—Cancellation of Excluded Shares,” will be converted into the right to receive 0.50 of a share of BOC common stock. For each fractional share that would otherwise be issued, BOC will pay cash in an amount equal to the fraction of a share of BOC common stock which the holder would otherwise be entitled to receive multiplied by the BOC average closing price (determined as the volume weighted average price of shares of BOC common stock quoted on the NYSE on each of the last 20 trading days ending on the day which is the fifth trading day immediately preceding the date that the effective time occurs).
The market value of the merger consideration will fluctuate with the price of BOC common stock, and the value of the shares of BOC common stock that holders of PMB common shares will receive upon consummation of the merger may be different than the value of the shares of BOC common stock that holders of PMB common shares would receive if calculated on the date BOC and PMB announced the merger agreement, on the date that this document is being mailed to PMB shareholders and to BOC stockholders, and on the date of the BOC special meeting or PMB special meeting. Based on the closing price of BOC common stock on March 22, 2021, the value of the per share merger consideration payable to holders of PMB common shares was $9.77. Based on the closing price of BOC common stock on May 10, 2021, the last practicable date before the date of this document, the value of the per share merger consideration payable to holders of PMB common shares was $8.86.
Treatment of PMB Stock Options, Restricted Shares and RSUs
PMB Stock Options. At the effective time, each PMB stock option that is outstanding immediately prior to the effective time, whether vested or unvested, will be cancelled and will entitle the holder thereof to receive an amount in cash equal to the product of (i) the total number of PMB common shares subject to such option and (ii) the excess, if any, of (A) an amount equal to the product of the BOC average closing price and 0.50 over (B) the exercise price per PMB common share underlying such option, less any applicable taxes required to be withheld with respect to such payment. Any PMB stock options which have an exercise price per share that is greater than or equal to the product of the BOC average closing price and 0.50 will be cancelled at the effective time of the merger for no consideration or payment.
PMB Restricted Shares and RSUs. At the effective time of the merger, each PMB restricted share and each PMB RSU will, automatically and without any action on the part of the holder of such PMB restricted shares or PMB RSUs, accelerate in full, be cancelled and will only entitle the holder of such PMB restricted shares or PMB RSUs to receive, on the first regular payroll date following the closing date of the merger, an amount in cash equal to the product of (i) such holder’s total number of PMB restricted shares or RSUs, as applicable, and (ii) an amount equal to the product of the BOC average closing price and 0.50, less any applicable taxes required to be withheld with respect to such vesting, which tax withholding may, at the election of the holder, be effected by deduction from such cash amount equal to the amount of taxes to be withheld.
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Background of the Merger
The PMB board of directors regularly reviews its business strategies, opportunities and challenges as a part of its consideration and evaluation of its long-term prospects, with the goal of enhancing shareholder value. The considerations have focused on, among other things, the competitive landscape as well as the business and regulatory environment facing financial institutions generally and PMB in particular. The PMB board of directors has also considered, from time to time, various potential strategic alternatives, including transactions with other financial institutions, such as potential acquisitions of smaller financial institutions, mergers with financial institutions of similar size, or combinations with larger financial institutions. BOC’s management and board of directors also regularly reviews its business strategies and opportunities. Over the last two years, BOC’s strategy has focused on transforming the institution into a relationship-focused business bank, with a longer-term view of further enhancing the value of the BOC franchise through acquisitions.
Over time and in response to informal inquiries regarding PMB’s willingness to engage in a strategic business combination, Denis Kalscheur, PMB’s chairman, and Brad Dinsmore, PMB’s chief executive officer, each met or held discussions with representatives of a number of financial institutions regarding potential interest in a business combination, including representatives of BOC.
In December 2020 and the first half of January 2021, Mr. Kalscheur held informal discussions with the chief executive officers of BOC and another potential acquirer of PMB, which we refer to as Party B, regarding the potential benefits of a business combination. No specific terms of a potential combination were discussed at these meetings. Mr. Kalscheur provided the PMB board of directors with an update on these initial discussions at a board meeting on January 20, 2021. This meeting was attended by representatives of KBW, a nationally recognized investment banking firm with substantial expertise in transactions involving financial institutions similar to PMB, and Sheppard, Mullin, Richter & Hampton LLP, which we refer to as Sheppard Mullin, counsel to PMB. KBW discussed, among other things, the franchise characteristics, financial performance and financial ability to pay in a potential acquisition of PMB of both BOC and Party B based on publicly available information, and Sheppard Mullin reviewed the fiduciary duties of the PMB board of directors in connection with its consideration of a proposed business combination. At this meeting, the PMB board of directors was advised that Patriot Financial Partners, L.P., referred to as Patriot Financial, of which PMB director James Deutsch is a partner, has one or more affiliated investment funds that own non-controlling interests in each of BOC and Party B. As a result, it was determined that Mr. Deutsch would abstain from any vote on a potential business combination involving either party. Also at this meeting, the PMB board of directors formed a special committee comprised entirely of independent directors to review and assess one or more potential business combinations in the context of PMB’s strategic alternatives and to make recommendations to the full board. The PMB special committee was composed of directors Kalscheur, Hoopis and Miyakawa.
On January 25, 2021, the BOC board of directors held a meeting at which Jared Wolff, BOC’s chief executive officer, presented to the board on certain strategic matters, including a potential business combination with PMB. The BOC board of directors determined to establish a committee of the board, consisting of Mr. Wolff, Conan Barker, Mary Curran, Richard Lashley and Robert Sznewajs, in respect of certain matters related to the proposed combination. In addition, Mr. Wolff discussed the fact that Patriot Financial, of which BOC director W. Kirk Wycoff is a managing partner, has an affiliated investment fund that owns a non-controlling interest in PMB. As a result, it was determined that Mr. Wycoff would abstain from any vote on a potential business combination involving PMB.
On January 28, 2021 and January 29, 2021, the PMB special committee met to review and consider several preliminary discussions with BOC and Party B that had occurred since the last PMB board meeting, as well as the advisability of reaching out to other potential merger partners. Representatives from KBW attended both meetings and again discussed a potential merger between PMB and each of BOC and Party B.
On January 29, 2021, at the direction of the PMB special committee, KBW contacted BOC and Party B and sent each party a proposed non-disclosure agreement. Each of BOC and PMB negotiated and executed a non-disclosure agreement on January 30, 2021. Between January 30, 2021 and February 1, 2021, representatives of BOC and PMB management as well as representatives of KBW discussed various matters, including valuation and the exchange ratio at which PMB would consider a potential transaction with BOC. On February 1, 2021, BOC’s chief executive officer sent a non-binding indication of interest which included a requirement for exclusivity should PMB be interested in pursuing a potential transaction. The BOC indication of interest contemplated a merger of PMB into BOC in which PMB shareholders would receive shares of BOC at a fixed
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exchange ratio of 0.5 of a share of BOC common stock per share of PMB common stock, which implied a value of $8.64 per PMB share based on BOC’s closing stock price on February 1, 2021. On that date, PMB’s closing stock price was $5.89 per share.
On February 2, 2021, the PMB special committee met to consider the indication of interest from BOC. Representatives of both KBW and Sheppard Mullin also attended this meeting. A representative of KBW reviewed BOC’s proposal with the PMB special committee, including financial aspects of BOC’s proposal. After review of the indication and its components, the PMB special committee determined it was in the best interest of all shareholders to pursue BOC’s proposed transaction because of the initial premium it placed on PMB and the potential upside in value in the combined company. The PMB special committee instructed KBW and Sheppard Mullin to identify and discuss with BOC several points in the indication of interest and to communicate to BOC that, if the PMB special committee and BOC could reach a mutually acceptable agreement on the indication of interest, the PMB special committee would recommend to the full board of directors that PMB enter into exclusivity with BOC. On February 2, 2021 and February 3, 2021, representatives of Sheppard Mullin and KBW identified and discussed with BOC the points raised by the PMB special committee regarding the indication of interest from BOC, which BOC agreed to revise. The points included, among others, the nature of the post-closing restrictive covenants to be required of certain PMB executives, the number of PMB directors to be invited to join the BOC board upon closing, and a BOC proposed closing condition related to the level of PMB’s allowance for loan and lease losses at closing.
On February 4, 2021, the PMB board of directors convened a special meeting. At this meeting, a representative of KBW reviewed (i) the terms of the BOC indication of interest, (ii) publicly available information regarding other, larger financial institutions potentially having an interest in PMB, including Party B, and (iii) a comparison of the BOC indication of interest to other transactions. The PMB board of directors also discussed with the KBW representative the alternative of PMB continuing operations on a standalone basis. After extensive discussion regarding the strategic options available to PMB, the other financial institutions that were believed to potentially have an interest in a business combination with PMB, and the benefits of a transaction with BOC, the PMB Board determined that it would be inadvisable to solicit additional offers from other institutions and agreed (with Mr. Deutsch abstaining) with the PMB special committee’s recommendation to pursue a potential transaction with BOC on an exclusive basis. Later that day, PMB entered into an exclusivity agreement with BOC pursuant to which it would allow the parties to complete due diligence and negotiate exclusively for a period of 45 days. At the direction of the PMB board of directors, KBW informed Party B that PMB was moving in a different strategic direction and would reach out to Party B if PMB decided to continue exploring a potential transaction with Party B.
On February 4, 2021, at a regularly scheduled meeting of the BOC board of directors, Mr. Wolff updated the BOC board of directors on the potential transaction with PMB, including that the parties had entered into a 45-day exclusivity period.
On February 23, 2021, representatives of Sullivan & Cromwell LLP, which we refer to as Sullivan & Cromwell, counsel to BOC, provided representatives of Sheppard Mullin with an initial draft of the merger agreement. On February 24, 2021, the PMB special committee convened a meeting to review the draft merger agreement. Mr. Dinsmore updated the special committee on the status of discussions with BOC, and representatives of Sheppard Mullin outlined for the special committee the material terms of the agreement, including the merger consideration, transaction structure, conditions to closing, operating and restrictive covenants and execution risks. This meeting was also attended by representatives of KBW.
Between February 23, 2021 and March 22, 2021, representatives of PMB and BOC, together with representatives of Sheppard Mullin and Sullivan & Cromwell, negotiated the specific terms and exchanged drafts of the merger agreement and related ancillary documents, which were finalized on or shortly before March 22, 2021. Certain key items negotiated included, among others, the representations and warranties to be provided by BOC to PMB in the merger agreement, the restrictive covenants applicable to each of PMB and BOC between signing and closing, the condition to BOC’s obligation to close related to PMB’s allowance for lease losses and shareholders’ equity at closing, and the duration of the post-closing restrictive covenants to be provided by certain members of PMB executive management. Also during that time and the time from the date of the exclusivity agreement, members of BOC management continued and finalized their due diligence review of PMB and members of PMB management conducted a due diligence review of BOC.
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On March 16, 2021, Mr. Wolff and the BOC special committee held a meeting to discuss the status of the proposed merger, the negotiations concerning the draft definitive agreements, and certain due diligence matters, including in respect of certain PMB credit matters. Between March 16, 2021 and March 22, 2021, representatives of BOC and PMB continued to discuss these diligence matters and negotiate the final terms of the definitive agreement, including the condition to BOC’s obligation to close related to PMB’s allowance for loan and lease losses and shareholders’ equity at closing, and the duration of the post-closing restrictive covenants to be provided by certain members of PMB executive management.
On March 19, 2021, the PMB special committee held a meeting at which representatives from Sheppard Mullin and KBW were present. At that meeting, the PMB special committee reviewed the material terms of the merger agreement and related ancillary documents with a representative of Sheppard Mullin and a representative of KBW reviewed the financial aspects of the proposed transaction, which included a review of the financial analyses it would perform in connection with delivery of an opinion. The PMB special committee concluded at that meeting to recommend to the PMB board of directors that it proceed with the transaction with BOC.
Also on March 19, 2021, the BOC board of directors met to review the proposed merger agreement and related ancillary documents, copies of which were provided to the directors in advance of the meeting. Representatives of Sullivan & Cromwell and Piper Sandler also attended the meeting. Among other things, Mr. Wolff discussed with the BOC board members the terms of the proposed combination, the negotiations to date, and the due diligence undertaken by BOC and its advisors in respect of PMB. Representatives of Piper Sandler then reviewed the financial aspects of the proposed merger, including discussing the various financial methodologies used in the Piper Sandler analysis, following which Piper Sandler rendered to the BOC board of directors its opinion, which was subsequently confirmed in writing on March 19, 2021, to the effect that, as of such date, the merger consideration was fair to BOC from a financial point of view. At this meeting, a representative of Sullivan & Cromwell also reminded the BOC board of directors of the discussion of fiduciary duties they had held in December 2020, and then reviewed with the BOC board of directors the material terms of the proposed draft definitive agreements. After extensive discussion regarding the terms of the merger agreement and the related ancillary agreements, and taking into consideration the matters described under “The Merger—Recommendation of the BOC Board of Directors and Reasons for the Merger” among others, Mr. Wycoff left the meeting and the remaining members of the BOC board of directors unanimously approved the merger agreement and the merger and determined to recommend that BOC stockholders approve the merger agreement and the issuance of shares to PMB shareholders in the merger.
On March 22, 2021, the PMB board of directors met to review the proposed merger agreement and related ancillary documents, copies of which were provided to the directors in advance of the meeting. Representatives from Sheppard Mullin also attended the meeting and reviewed with the board its fiduciary duties and reviewed in detail the terms of the proposed merger agreement and related ancillary documents. Mr. Dinsmore summarized the results of management’s due diligence review of BOC and reviewed the strategic rationale and anticipated benefits of the proposed merger. Also at this meeting, KBW reviewed the financial aspects of the proposed merger, including discussing the financial analyses performed in connection with its opinion and rendered to the PMB board of directors its opinion (which was initially rendered verbally and subsequently confirmed in a written opinion dated March 22, 2021) to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW as set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of PMB common stock. After extensive discussion regarding the terms of the merger agreement and the related ancillary agreements, a full analysis of PMB’s reasons for the engaging in the proposed business combination with BOC, including those set forth below under “The Merger—Recommendation of the PMB Board of Directors and Reasons for the Merger,” and consideration of other relevant issues, including a variety of business, financial and market factors, the PMB board of directors unanimously (with Mr. Deutsch abstaining) adopted and approved the merger agreement and the merger and determined to recommend that PMB shareholders approve the principal terms of the merger agreement.
Following the BOC board meeting on March 19, 2021 and the PMB board meeting on March 22, 2021, PMB and BOC entered into the merger agreement and announced the merger on March 22, 2021.
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Recommendation of the BOC Board of Directors and Reasons for the Merger
In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the BOC board of directors evaluated the merger agreement in consultation with BOC senior management, as well as BOC’s legal counsel and financial advisor, and considered a number of factors, including the following:
each of BOC’s, PMB’s and the combined company’s business, operations, financial condition, asset quality, earnings and prospects;
the ability of the transaction to accelerate the combined company’s shift towards a lower-cost deposit mix, increasing BOC’s ratio of noninterest bearing deposits to total deposits from 26% to 30% (based on information as of December 31, 2020);
the opportunity to grow BOC’s presence in Southern California and complement BOC’s existing franchise by adding PMB’s commercially-focused client base and banking business;
conservative and achievable cost savings available in the proposed transaction, as well as the potential for revenue enhancement, which create the opportunity for BOC to have greater future earnings and prospects compared to BOC’s earnings and prospects on a stand-alone basis;
the expected pro forma financial impact of the transaction, taking into account anticipated cost savings and other factors, is expected to be accretive to the combined company in terms of earnings per share in 2022, and augment the combined company’s recurring noninterest income;
the complementary business models and compatible management cultures with a shared focus on relationship-based business banking;
compatible management teams with a shared focus on conservative underwriting, including two PMB directors who will be joining the BOC board and key PMB management supporting BOC in ensuring a successful integration;
its review and discussions with BOC’s management and advisors concerning the due diligence examination of PMB;
management’s expectation that BOC will continue to have a strong capital position upon completion of the transaction;
its review with BOC’s legal advisor, Sullivan & Cromwell, of the merger agreement and other agreements, including the provisions of the merger agreement designed to enhance the probability that the transaction will be completed;
the financial presentation, dated March 19, 2021 of Piper Sandler to the BOC board of directors and the written opinion, dated March 19, 2021, of Piper Sandler to the BOC board of directors, as to the fairness, from a financial point of view and as of the date of the opinion, to BOC of the merger consideration, as more fully described below under “— Opinion of BOC’s Financial Advisor.”
The BOC board of directors also considered the potential adverse consequences of, and risks associated with, the proposed merger, including:
the potential risks associated with successfully integrating PMB’s business, operations and workforce with those of BOC;
the interests of BOC’s officers and directors with respect to the merger apart from their interests as holders of BOC common stock, the risk that these interests might influence their decision with respect to the merger and the fact that one of BOC’s directors (Mr. Wycoff) is a managing partner of Patriot Financial, funds managed by Patriot Financial are investors in PMB and BOC and one of PMB’s directors (Mr. Deutsch) is a partner of Patriot Financial;
the potential risk of diverting management attention and resources from the operation of BOC’s business and towards the completion of the merger and the integration of PMB;
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the regulatory and other approvals required in connection with the merger and the possibility that such approvals may not be received in a timely manner and may include the imposition of burdensome conditions;
the transaction costs and expenses that will be incurred in connection with the merger, including the costs of integrating the businesses of BOC and PMB;
the possibility of litigation challenging the merger agreement or the transactions contemplated thereby; and
the other risks described under “Risk Factors” beginning on page 21.
The foregoing discussion of the information and factors considered by the BOC board of directors is not intended to be exhaustive, but includes the material factors considered by the BOC board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the BOC board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The BOC board of directors considered all these factors as a whole, including discussions with, and questioning of, BOC’s senior management and BOC’s advisors, and overall considered the factors to be favorable to, and to support its determination to approve entering into the merger agreement.
This explanation of BOC’s reasons for the merger and other information presented in this section is forward-looking in nature and should be read in light of the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”
BOC’s board of directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above, such as assumptions regarding enhanced business prospects, anticipated cost savings and earnings accretion/dilution. The BOC board of directors concluded, however, that the potential positive factors outweighed the potential risks of completing the transaction.
For the reasons set forth above, the BOC board of directors determined that the merger, the merger agreement and the transaction contemplated thereby are advisable and fair to and in the best interests of BOC and its stockholders, and has approved the merger. The BOC board of directors recommends that BOC stockholders vote “FOR” the BOC merger proposal, “FOR” the BOC stock issuance proposal and “FOR the BOC adjournment proposal.
Recommendation of the PMB Board of Directors and Reasons for the Merger
In reaching its decision to approve the merger agreement and the transactions contemplated thereby, the PMB board of directors evaluated the merger agreement in consultation with PMB executive management, as well as PMB’s legal counsel and financial advisor, and considered numerous factors, including the following:
the PMB special committee’s unanimous recommendation that the PMB board of directors approve the merger agreement and the transactions contemplated thereby;
a review of alternatives available to PMB, including: (i) the strategic options available to PMB; (ii) the other financial institutions that might have had an interest in a business combination with PMB; and (iii) the benefits of a transaction with BOC;
BOC’s business, financial condition, results of operations, asset quality, earnings and prospects, and the performance of BOC’s common stock on both a historical and prospective basis;
the risks and prospects of PMB remaining independent, including (i) the challenges of the current and prospective economic, regulatory and competitive environment facing the financial services industry generally, and PMB in particular; (ii) the increasing costs associated with banking regulation, compliance and technology, generally; and (iii) the anticipated costs of continuing to develop and enhance PMB’s business capabilities;
the PMB board of directors’ belief that combining the two companies would create a larger and more diversified financial institution that is both better equipped to respond to economic and industry developments and better positioned to develop and build on its existing market position in California;
the exchange ratio and other financial terms of the merger and the merger agreement;
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the structure of the merger consideration payable in shares of BOC common stock, which will allow PMB shareholders to participate in the future performance of the combined company’s business and synergies resulting from the merger and from improved conditions for financial institutions or in the general economy;
that the exchange ratio represented an implied stock price premium of 24.5%, based on the closing prices of PMB common stock and BOC common stock on March 19, 2021, the last trading day before the public announcement of the execution of the merger agreement;
the expected pro forma financial impact of the transaction, taking into account anticipated cost savings and other factors, and the fact that the transaction is expected to be accretive to the combined company in terms of earnings per share in 2022, with modest tangible book value dilution;
the advantages of being part of a larger financial institution, such as BOC, including the potential for operating efficiencies, the ability to leverage overhead costs, and the generally higher trading multiples of larger financial institutions;
the greater market capitalization and anticipated trading liquidity of BOC common stock after the merger in the event PMB shareholders desire to sell the BOC common stock to be received by them upon completion of the merger;
the terms of the merger agreement, including the representations, covenants, deal protection and termination provisions and the size of the termination fee payable by PMB in certain circumstances in relation to the overall transaction size;
the fact that the merger agreement does not include any unrealistic closing conditions based on the financial performance of PMB between signing and closing of the transaction;
the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals in a timely manner;
the fact that the merger agreement does not preclude a third party from making an unsolicited acquisition proposal to PMB and that, under certain circumstances more fully described under “The Merger Agreement—Acquisition Proposals, PMB may furnish non-public information to, and enter into discussions with, such a third party regarding a qualifying acquisition proposal;
the ability of the PMB board of directors to change its recommendation that PMB shareholders vote to approve the principal terms of the merger agreement, subject to the terms and conditions set forth in the merger agreement (including the right of BOC to match any competing bid and the payment of a termination fee);
the tax free nature of the shares of BOC common stock being offered as merger consideration;
the prices paid and the terms of other recent comparable combinations of banks and bank holding companies;
the financial presentation, dated March 22, 2021, of KBW to the PMB board and the written opinion, dated March 22, 2021, of KBW to the PMB board, as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of PMB common stock of the exchange ratio in the merger, as more fully described below under “—Opinion of PMB’s Financial Advisor;” and
the PMB board’s review and discussions with PMB’s management concerning PMB’s due diligence examination of the operations, financial condition and regulatory compliance programs and prospects of BOC.
The PMB board of directors also considered the potential adverse consequences of, and risks associated with, the proposed merger, including:
the stock consideration being based on a fixed exchange ratio and the resulting risk that the consideration to be paid to PMB shareholders could be adversely affected by a decrease in the trading price of BOC common stock prior to the closing of the merger;
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the potential for diversion of management and employee attention, and for employee attrition, during the period following the announcement of the merger and prior to the completion of the merger, and the potential effect on PMB’s business and relations with customers, service providers and other stakeholders, whether or not the merger is completed;
the potential that certain provisions of the merger agreement prohibiting PMB from soliciting, and limiting its ability to respond to, proposals for alternative transactions, and requiring the payment of a termination fee could have the effect of discouraging an alternative proposal;
the interests of PMB’s officers and directors with respect to the merger apart from their interests as holders of PMB common stock, and the risk that these interests might influence their decision with respect to the merger, and the fact that one of PMB’s directors (Mr. Deutsch) is a partner of Patriot Financial, funds of Patriot Financial are investors in BOC and PMB and one of BOC’s directors (Mr. Wycoff) is a managing partner of Patriot Financial;
the requirement that PMB conduct its business in the ordinary course and the other restrictions on the conduct of PMB’s business prior to completion of the merger, which may delay or prevent PMB from undertaking business opportunities that may arise pending completion of the merger;
the regulatory and other approvals required in connection with the merger and the possibility that such approvals may not be received in a timely manner and may include the imposition of burdensome conditions;
the transaction costs and expenses that will be incurred in connection with the merger, including the costs of integrating the businesses of PMB and BOC;
the possible effects on PMB should the parties fail to complete the merger, including the increased difficulty of resuming operations with a standalone strategy, the possible effects on the price of PMB common stock, and the business and opportunity costs;
the risk of litigation in respect of the merger agreement or transactions contemplated thereby; and
the other risks described under “Risk Factors” beginning on page 21, and the risks of investing in BOC common stock identified in the “Risk Factors” sections of BOC’s periodic reports filed with the SEC and incorporated by reference herein.
The foregoing discussion of information and factors considered by the PMB board of directors is not intended to be exhaustive. In light of the variety of factors considered in connection with its evaluation of the merger agreement and the transactions contemplated thereby, the PMB board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the PMB board of directors applied his or her own personal business judgment to the process and may have given different weight to different factors than other members gave to such factors.
For the reasons set forth above, the PMB board of directors determined that the merger is advisable and in the best interests of PMB shareholders and approved the merger agreement and the transactions contemplated by the merger agreement, including the merger. The PMB board of directors recommends that the PMB shareholders vote “FOR” the PMB merger proposal, “FOR” the PMB NEO compensation proposal, and “FOR” the PMB adjournment proposal.
Opinion of BOC’s Financial Advisor
BOC retained Piper Sandler to act as financial advisor to the BOC board of directors in connection with BOC’s consideration of a possible business combination with PMB. BOC selected Piper Sandler to act as its financial advisor because Piper Sandler is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Piper Sandler is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Piper Sandler acted as an independent financial advisor to the BOC board of directors in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the March 19, 2021, meeting at which the BOC board of directors considered the merger agreement, Piper
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Sandler delivered to the BOC board of directors its oral opinion, which was subsequently confirmed in writing on March 19, 2021, to the effect that, as of such date, the merger consideration was fair to BOC from a financial point of view. The full text of Piper Sandler’s opinion is attached as Appendix E to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of BOC common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.
Piper Sandler’s opinion was directed to the board of directors of BOC in connection with the board’s consideration of the merger agreement and the merger and does not constitute a recommendation to any stockholder of BOC as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the approval of the merger agreement and the merger. Piper Sandler’s opinion was directed only to the fairness, from a financial point of view, of the merger consideration to BOC and did not address the underlying business decision of BOC to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for BOC, or the effect of any other transaction in which BOC might engage. Piper Sandler also did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of BOC or PMB, or any class of such persons, if any, relative to the compensation to be received by any other stockholder. Piper Sandler’s opinion was approved by Piper Sandler’s fairness opinion committee.
In connection with its opinion, Piper Sandler reviewed and considered, among other things:
a draft of the merger agreement, dated March 18, 2021;
certain publicly available financial statements and other historical financial information of BOC that Piper Sandler deemed relevant;
certain publicly available financial statements and other historical financial information of PMB that Piper Sandler deemed relevant;
publicly available mean analyst earnings per share estimates for BOC for the years ending December 31, 2021 and December 31, 2022 with an estimated long-term annual asset and earnings per share growth rate for BOC for the years ending December 31, 2023, December 31, 2024 and December 31, 2025, as well as estimated dividends per share for BOC for the years ending December 31, 2021 through December 31, 2025, as provided by the senior management of BOC;
publicly available mean analyst net income estimates for PMB for the years ending December 31, 2021 and December 31, 2022, as well as an estimated long-term annual asset and earnings per share growth rate for the years ending December 31, 2023, December 31, 2024 and December 31, 2025 and estimated dividends per share for PMB for the years ending December 31, 2021 through December 31, 2025, as provided by the senior management of BOC;
the pro forma financial impact of the merger on BOC based on certain assumptions related to transaction expenses, purchase accounting adjustments, and cost savings, as provided by the senior management of BOC;
the publicly reported historical price and trading activity for BOC common stock and PMB common stock, including a comparison of certain stock trading information for BOC common stock and PMB common stock and certain stock indices, as well as similar publicly available information for certain other companies, the securities of which are publicly traded;
a comparison of certain financial information and market information for BOC and PMB with similar financial institutions for which information is publicly available;
the financial terms of certain recent business combinations in the bank and thrift industry (on a nationwide basis), to the extent publicly available;
the current market environment generally and the banking environment in particular; and
such other information, financial studies, analyses and investigations, and financial, economic and market criteria as Piper Sandler considered relevant.
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Piper Sandler also discussed with certain members of the senior management of BOC and its representatives the business, financial condition, results of operations and prospects of BOC and held similar discussions with certain members of the management of PMB and its representatives regarding the business, financial condition, results of operations and prospects of PMB.
In performing its review, Piper Sandler relied upon the accuracy and completeness of all of the financial and other information that was available to Piper Sandler from public sources, that was provided to Piper Sandler by BOC or its representatives, or that was otherwise reviewed by Piper Sandler, and Piper Sandler assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Piper Sandler further relied on the assurances of the senior management of BOC that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading in any respect to Piper Sandler’s analysis. Piper Sandler was not asked to and did not undertake, an independent verification of any of such information and Piper Sandler did not assume any responsibility or liability for the accuracy or completeness thereof. Piper Sandler did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of BOC or PMB. Piper Sandler rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of BOC or PMB. Piper Sandler did not make an independent evaluation of the adequacy of the allowance for loan losses of BOC or PMB, or the combined entity after the merger, and Piper Sandler did not review any individual credit files related to BOC or PMB. Piper Sandler assumed, with BOC’s consent, that the respective allowances for loan losses for both BOC and PMB were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.
In preparing its analyses, Piper Sandler used publicly available mean analyst earnings per share estimates for BOC for the years ending December 31, 2021 and December 31, 2022 with an estimated long-term annual asset and earnings per share growth rate for BOC for the years ending December 31, 2023, December 31, 2024 and December 31, 2025, as well as estimated dividends per share for BOC for the years ending December 31, 2021 through December 31, 2025, as provided by the senior management of BOC. In addition, Piper Sandler used publicly available mean analyst net income estimates for PMB for the years ending December 31, 2021 and December 31, 2022, as well as an estimated long-term annual asset and earnings per share growth rate for the years ending December 31, 2023, December 31, 2024 and December 31, 2025 and estimated dividends per share for PMB for the years ending December 31, 2021 through December 31, 2025, as provided by the senior management of BOC. Piper Sandler also received and used in its pro forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as provided by the senior management of BOC. With respect to the foregoing information, the senior management of BOC confirmed to Piper Sandler that such information reflected (or, in the case of the analyst estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of senior management as to the future financial performance of BOC and PMB, respectively, and Piper Sandler assumed that the financial results reflected in such information would be achieved. Piper Sandler expressed no opinion as to such estimates or judgements, or the assumptions on which such information was based. Piper Sandler also assumed that there had been no material change in BOC’s or PMB’s assets, financial condition, results of operations, business or prospects since the date of the most recent publicly available financial statements provided to Piper Sandler. Piper Sandler assumed in all respects material to its analyses that BOC and PMB would remain as going concerns for all periods relevant to its analyses.
Piper Sandler also assumed, with BOC’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements required to effect the merger, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on BOC, PMB, the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws
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and other requirements. Finally, with BOC’s consent, Piper Sandler relied upon the advice that BOC received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Piper Sandler expressed no opinion as to any such matters.
Piper Sandler’s opinion was necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Piper Sandler as of, the date thereof. Events occurring after the date thereof could materially affect Piper Sandler’s opinion. Piper Sandler has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Piper Sandler expressed no opinion as to the trading value of BOC common stock or PMB common stock at any time or what the value of BOC common stock would be once it is actually received by the holders of PMB common stock.
In rendering its opinion, Piper Sandler performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Piper Sandler’s opinion or the presentation made by Piper Sandler to the BOC board of directors, but is a summary of the material analyses performed and presented by Piper Sandler. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Piper Sandler believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Piper Sandler’s comparative analyses described below is identical to BOC or PMB and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or transaction values, as the case may be, of BOC and PMB and the companies to which they were compared. In arriving at its opinion, Piper Sandler did not attribute any particular weight to any analysis or factor that it considered. Rather, Piper Sandler made qualitative judgments as to the significance and relevance of each analysis and factor. Piper Sandler did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Piper Sandler made its determination as to the fairness of the merger consideration to BOC from a financial point of view on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.
In performing its analyses, Piper Sandler also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of BOC, PMB, and Piper Sandler. The analyses performed by Piper Sandler are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Piper Sandler prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the BOC board of directors at its March 19, 2021 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Piper Sandler’s analyses do not necessarily reflect the value of BOC common stock or PMB common stock or the prices at which BOC or PMB common stock may be sold at any time. The analyses of Piper Sandler and its opinion were among a number of factors taken into consideration by the BOC board of directors in making its determination to approve the merger and the merger agreement and the analyses described below should not be viewed as determinative of the decision of the BOC board of directors with respect to the fairness of the merger consideration.
Summary of Proposed Merger Consideration and Implied Transaction Metrics.
Piper Sandler reviewed the financial terms of the proposed merger. Pursuant to the terms of the merger agreement, at the effective time, each share of PMB common stock and non-voting common stock issued and outstanding immediately prior to the effective time, except for certain shares of PMB common stock as specified in the merger agreement, shall be converted into the right to receive 0.5 of a share of common stock of BOC.
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Piper Sandler calculated an aggregate implied transaction value of approximately $245.5 million consisting of the implied value of 23,592,138 shares of PMB common stock outstanding, 574,587 PMB options outstanding with a weighted average strike price of $7.08, 75,000 restricted stock units, and 194,247 unvested restricted stock awards, based on an implied purchase price per share of $10.22, the closing price of BOC common stock on March 18, 2021. Based upon financial information for PMB as of or for the last twelve months (“LTM”) ended December 31, 2020 and the closing price of PMB’s common stock on March 18, 2021, Piper Sandler calculated the following implied transaction metrics:
Transaction Price / Tangible Book Value per Share
153%
Transaction Price / LTM Earnings per Share
29.2x
Transaction Price / 2021E Mean Consensus EPS
17.9x
Tangible Book Premium / Core Deposits3
6.7%
Premium to PMB Market Price
27.2%
Stock Trading History.
Piper Sandler reviewed the publicly available historical reported trading prices of BOC common stock and PMB common stock for the one-year and three-year periods ended March 18, 2021. Piper Sandler then compared the relationship between the movements in the price of BOC common stock and PMB common stock, respectively, to movements in their respective peer groups4 (each as described below) as well as certain stock indices.
BOC’s One-Year Stock Performance
 
Beginning Value
March 18, 2020
Ending Value
March 18, 2021
BOC
100%
261.6%
BOC Peer Group
100%
149.6%
S&P 500 Index
100%
163.3%
NASDAQ Bank Index
100%
205.4%
BOC’s Three-Year Stock Performance1
 
Beginning Value
March 18, 2018
Ending Value
March 18, 2021
BOC
100%
100.4%
BOC Peer Group
100%
91.3%
S&P 500 Index
100%
142.3%
NASDAQ Bank Index
100%
111.2%
PMB’s One-Year Stock Performance
 
Beginning Value
March 18, 2020
Ending Value
March 18, 2021
PMB
100%
187.2%
PMB Peer Group
100%
154.0%
S&P 500 Index
100%
163.3%
NASDAQ Bank Index
100%
205.4%
3
Core deposits equal to total deposits less time deposits greater than $250,000.
4
Excludes Origin Bancorp, Inc. which became publicly traded during the measurement period.
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PMB’s Three-Year Stock Performance
 
Beginning Value
March 18, 2018
Ending Value
March 18, 2021
PMB
100%
85.0%
PMB Peer Group
100%
91.5%
S&P 500 Index
100%
142.3%
NASDAQ Bank Index
100%
111.2%
Comparable Company Analyses.
Piper Sandler used publicly available information to compare selected financial information for BOC with a group of financial institutions selected by Piper Sandler. The BOC peer group included nationwide major exchange-traded (NASDAQ and NYSE) banks and thrifts with total assets between $6.5 billion and $10.0 billion and LTM net income as a percentage of average assets between 0.00% to 0.75%, but excluded targets of announced merger transactions (the “BOC Peer Group”). The BOC Peer Group consisted of the following companies:
Brookline Bancorp, Inc.
Luther Burbank Corporation
Capitol Federal Financial, Inc.
Midland States Bancorp, Inc.
Central Pacific Financial Corp.
Origin Bancorp, Inc.
Flushing Financial Corporation
S&T Bancorp, Inc.
Heritage Financial Corporation
TriState Capital Holdings, Inc.
Kearny Financial Corp.
 
The analysis compared publicly available financial information for BOC with corresponding data for the BOC Peer Group as of or for the year ended December 31, 2020 (unless otherwise noted) with pricing data as of March 18, 2021. The table below sets forth the financial information for BOC and the median, mean, low and high data for the BOC Peer Group.
BOC Comparable Company Analysis
 
BOC
BOC
Peer Group
Median
BOC
Peer Group
Mean
BOC
Peer Group
Low
BOC
Peer Group
High
Total assets ($mm)
7,877
7,940
7,940
6,595
9,897
Market value ($mm)
1,034
1,003
1,007
608
1,851
Price/Tangible book value (%)
153
151
147
100
187
Price/ LTM Earnings per share (x)5
NM
21.9
23.4
15.5
31.1
Price/ 2021E Mean Earnings per share (x)
18.7
16.4
16.1
9.1
28.2
Current Dividend Yield (%)
1.2
2.8
2.5
0.0
4.0
One Year Price Change (%)
161.6
49.6
76.5
15.5
210.8
LTM Efficiency ratio (%)
70
59
57
45
63
LTM Net interest margin (%)
3.13
3.17
2.82
1.58
3.60
LTM Return on average assets (%)
0.16
0.56
0.54
0.23
0.74
LTM Return on average equity (%)
1.4
5.8
5.3
1.8
7.1
Tangible common equity/Tangible assets (%)
8.6
8.8
8.8
5.2
13.2
Loans / Deposits (%)
97
103
100
80
115
Non-performing assets / Total assets (%)
0.52
0.42
0.69
0.11
1.86
5
Price / LTM Earnings per share considered not meaningful “NM” if greater than 50.0x or less than 0.0x
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Piper Sandler used publicly available information to perform a similar analysis for PMB by comparing selected financial information for PMB with a group of financial institutions selected by Piper Sandler. The PMB peer group included publicly-traded (NASDAQ, NYSE, and OTC) banks and thrifts headquartered in California with total assets between $1.0 billion and $2.5 billion, but excluded (1) targets of announced merger transactions and (2) companies traded on the OTC Pink Open Market (the “PMB Peer Group”). The PMB Peer Group consisted of the following companies:
Bank of Commerce Holdings
OP Bancorp
BayCom Corp
PCB Bancorp
California BanCorp
Private Bancorp of America, Inc.
CBB Bancorp, Inc.
Provident Financial Holdings, Inc.
Central Valley Community Bancorp
Suncrest Bank
First Choice Bancorp
United Security Bancshares
First Northern Community Bancorp
Valley Republic Bancorp
Oak Valley Bancorp
 
The analysis compared publicly available financial information for PMB with corresponding data for the PMB Peer Group as of or for the year ended December 31, 2020 (unless otherwise noted) with pricing data as of March 18, 2021. The table below sets forth the financial information for PMB and the median, mean, low and high data for the PMB Peer Group.
PMB Comparable Company Analysis
 
PMB
PMB
Peer Group
Median
PMB
Peer Group
Mean
PMB
Peer Group
Low
PMB
Peer Group
High
Total assets ($mm)
1,588
1,511
1,604
1,093
2,283
Market value ($mm)
179
152
170
99
284
Price/Tangible book value (%)
120
121
114
62
139
Price/ LTM Earnings per share (x)
22.9
12.1
14.7
9.0
34.9
Current Dividend Yield (%)
0.0
1.5
1.6
0.0
5.3
One Year Price Change (%)
87.2
54.0
54.0
16.2
85.0
LTM Efficiency ratio (%)
63
60
60
48
75
LTM Net interest margin (%)
3.29
3.59
3.54
2.76
4.29
LTM Return on average assets (%)
0.51
0.86
0.87
0.25
1.38
LTM Return on average equity (%)
5.5
8.3
8.3
3.2
14.5
Tangible common equity/Tangible assets (%)
10.0
9.6
9.6
6.8
12.1
Loans / Deposits (%)
89
89
85
61
116
Non-performing assets / Total assets (%)
2.95
0.35
0.46
0.00
1.56
Analysis of Precedent Transactions.
Piper Sandler reviewed recent merger and acquisition transactions. The group consisted of nationwide bank and thrift transactions announced between January 1, 2020 and March 18, 2021 with target assets between $1.0 billion and $2.5 billion (the “Nationwide Precedent Transactions”).
The Nationwide Precedent Transactions group was composed of the following transactions:
Acquiror
Target
Stock Yards Bancorp, Inc.
Kentucky Bancshares, Inc.
First Busey Corporation
Cummins-American Corp.
First Mid Bancshares, Inc.
LINCO Bancshares, Inc.
Dollar Mutual Bancorp
Standard AVB Financial Corp.
Enterprise Financial Services Corp
Seacoast Commerce Banc Holdings
Blue Ridge Bankshares, Inc.
Bay Banks of Virginia, Inc.
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Acquiror
Target
Provident Financial Services, Inc.
SB One Bancorp
United Community Banks, Inc.
Three Shores Bancorporation, Inc.
LendingClub Corporation
Radius Bancorp, Inc.
Heartland Financial USA, Inc.
AIM Bancshares, Inc.
Business First Bancshares, Inc.
Pedestal Bancshares, Inc.
Using the latest publicly available information prior to the announcement of the relevant transaction, Piper Sandler reviewed the following transaction metrics: transaction price to last-twelve-months earnings per share, transaction price to estimated earnings per share, transaction price to tangible book value per share, core deposit premium, and 1-day market premium. Piper Sandler compared the indicated transaction metrics for the merger to the median, mean, low and high metrics of the Nationwide Precedent Transactions group.
 
 
Nationwide Precedent Transactions
 
BMBC/
PMB
Median
Mean
Low
High
Transaction Price / LTM Earnings Per Share (x)
29.2
17.9
18.3
10.5
35.4
Transaction Price / Estimated Earnings Per Share (x)
17.9
13.4
13.4
8.8
18.1
Transaction Price / Tangible Book Value Per Share (%)
153
133
138
81
210
Tangible Book Value Premium to Core Deposits (%)
6.7
5.5
5.5
(2.8)
12.3
1-Day Market Premium (%)
27.2
27.3
33.9
(17.1)
75.9
Net Present Value Analyses.
Piper Sandler performed an analysis that estimated the net present value of BOC common stock assuming BOC performed in accordance with publicly available mean analyst earnings per share estimates for BOC for the years ending December 31, 2021 and December 31, 2022 with an estimated long-term annual asset and earnings per share growth rate for BOC for the years ending December 31, 2023, December 31, 2024 and December 31, 2025, as well as estimated dividends per share for BOC for the years ending December 31, 2021 through December 31, 2025, as provided by the senior management of BOC. To approximate the terminal value of a share of BOC common stock at December 31, 2025, Piper Sandler applied price to 2025 earnings per share multiples ranging from 15.0x to 25.0x and price to 2025 tangible book value per share multiples ranging from 120% to 170%. The terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of BOC common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of BOC common stock of $12.28 to $25.57 when applying multiples of earnings and $12.38 to $22.07 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
15.0x
17.0x
19.0x
21.0x
23.0x
25.0x
9.0%
$15.72
$17.69
$19.66
$21.63
$23.60
$25.57
10.0%
15.07
16.96
18.84
20.73
22.61
24.50
11.0%
14.45
16.26
18.07
19.87
21.68
23.48
12.0%
13.87
15.60
17.33
19.06
20.79
22.52
13.0%
13.31
14.97
16.63
18.29
19.95
21.61
14.0%
12.78
14.37
15.96
17.55
19.14
20.74
15.0%
12.28
13.80
15.33
16.86
18.38
19.91
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Tangible Book Value Per Share Multiples
Discount
Rate
120%
130%
140%
150%
160%
170%
9.0%
$15.86
$17.10
$18.34
$19.58
$20.82
$22.07
10.0%
15.20
16.39
17.58
18.77
19.96
21.15
11.0%
14.58
15.72
16.86
18.00
19.13
20.27
12.0%
13.99
15.08
16.17
17.26
18.35
19.44
13.0%
13.42
14.47
15.52
16.56
17.61
18.66
14.0%
12.89
13.89
14.90
15.90
16.90
17.91
15.0%
12.38
13.34
14.31
15.27
16.23
17.19
Piper Sandler also considered and discussed with the BOC board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to earnings. To illustrate this impact, Piper Sandler performed a similar analysis, assuming BOC’s earnings varied from 15.0% above estimates to 15% below estimates. This analysis resulted in the following range of per share values for BOC’s common stock, applying the price to 2025 earnings multiples range of 15.0x to 25.0x referred to above and a discount rate of 13.43%.
Earnings Per Share Multiples
Annual
Estimate
Variance
15.0x
17.0x
19.0x
21.0x
23.0x
25.0x
15.0%
$14.91
$16.78
$18.66
$20.53
$22.40
$24.28
10.0%
14.30
16.09
17.88
19.68
21.47
23.26
5.0%
13.69
15.40
17.11
18.82
20.53
22.24
0.0%
13.08
14.71
16.34
17.97
19.59
21.22
(5.0%)
12.47
14.01
15.56
17.11
18.66
20.21
(10.0%)
11.86
13.32
14.79
16.25
17.72
19.19
(15.0%)
11.25
12.63
14.01
15.40
16.78
18.17
Piper Sandler also performed an analysis that estimated the net present value per share of PMB common stock, assuming PMB performed in accordance with publicly available mean analyst net income estimates for PMB for the years ending December 31, 2021 and December 31, 2022, as well as an estimated long-term annual asset and earnings per share growth rate for the years ending December 31, 2023, December 31, 2024 and December 31, 2025 and estimated dividends per share for PMB for the years ending December 31, 2021 through December 31, 2025, as provided by the senior management of BOC. To approximate the terminal value of a share of PMB common stock at December 31, 2025, Piper Sandler applied price to 2025 earnings per share multiples ranging from 10.0x to 20.0x and price to 2025 tangible book value per share multiples ranging from 95% to 135%. The terminal values were then discounted to present values using different discount rates ranging from 11.5% to 14.5%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of PMB common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of PMB common stock of $3.87 to $8.78 when applying multiples of earnings and $5.04 to $8.13 when applying multiples of tangible book value.
Earnings Per Share Multiples
Discount
Rate
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
11.5%
$4.39
$5.27
$6.14
$7.02
$7.90
$8.78
12.0%
4.30
5.16
6.02
6.87
7.73
8.59
12.5%
4.21
5.05
5.89
6.73
7.57
8.41
13.0%
4.12
4.94
5.77
6.59
7.41
8.24
13.5%
4.03
4.84
5.65
6.45
7.26
8.07
14.0%
3.95
4.74
5.53
6.32
7.11
7.90
14.5%
3.87
4.64
5.42
6.19
6.96
7.74
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Tangible Book Value Per Share Multiples
Discount
Rate
95%
105%
115%
125%
135%
11.5%
$5.72
$6.32
$6.93
$7.53
$8.13
12.0%
5.60
6.19
6.78
7.37
7.96
12.5%
5.48
6.06
6.64
7.22
7.79
13.0%
5.37
5.93
6.50
7.07