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Banc of California is swooping in to buy Beverly Hills-based PacWest Bancorp.
Post-merger, the combined bank will have about $36B of assets — less than what PacWest alone had at the end of March, Bloomberg reported. It will also have $25.3B in total loans and $30.5B in total deposits, the companies said. Although the Banc of California was the smaller of the two institutions, the new entity will operate under the Banc of California name.
The deal includes a $400M investment from private equity firms Warburg Pincus and Centerbridge Partners, which will give the firms a 19% stake in the combined bank, The Wall Street Journal reported.
“This transformational merger will create a robust, well-capitalized and highly liquid institution poised to deliver exceptional service to even more California businesses and communities,” Banc of California CEO and President Jared Wolff said in a statement about the merger.
Wolff will hold both roles at the bank post-merger.
“Out of the gate, the combined company will have the strength and market position to support the banking needs of small and medium-size businesses in California and to capitalize on the opportunities created for stronger financial institutions in the wake of the recent banking industry turmoil,” Wolff said in the statement.
PacWest had been mulling a possible sale since at least May, following the downfall of a handful of regional banks, including Silicon Valley Bank, Signature Bank and First Republic, and concerns about the health of regional lending institutions.
“The combined company will focus on serving small and medium-sized businesses in its footprint through exceptional treasury management services and commercial and real estate lending that leverage Banc of California’s and PacWest’s mutual strengths in core community banking,” the announcement said.
As of the second quarter of this year, commercial lending — including to commercial real estate, warehouse projects and multifamily — made up 73.4% of Banc of California’s loans. April filings with the Securities and Exchange Commission show that of PacWest's $25.7B in total loans, commercial real estate accounts for about $3.8B. Within that category, 3%, or $803M, is for office properties.
Banc of California and PacWest reported their second-quarter earnings on the same day as they announced the merger. PacWest sustained a loss of $197M, and Banc of California’s profits declined by one-third, according to the WSJ.
Regional banks had stepped up to fill the void left by big banks pulling back on commercial real estate lending at the end of last year, in part because they don’t have to contend with as many regulations over their lending to the sector, Bisnow previously reported.
That could soon change. Following the bank failures of earlier this year, President Joe Biden called on legislators to tighten bank regulations.
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