Banc of California (BANC) Closes Buyout of PacWest Bancorp
The all-stock merger deal between Banc of California, Inc. BANC and PacWest Bancorp wrapped up late last week. Per the terms of the agreement, PacWest merged into Banc of California, and Banc of California, N.A. merged into Pacific Western Bank.
Following the completion of the deal, shares of BANC jumped 7.5%.
The deal received shareholder approvals in late November. All necessary regulatory approvals for the merger (announced in July) were received in October.
The combined company is the third-largest bank based in California. Jared Wolff, CEO and president of BANC said, “By combining the best of two well-respected banks, we have created one of the nation’s premier, relationship-focused business banks. We look forward to sharing our expanded capabilities with clients and all the communities we serve.”
Following the completion, the total assets of Banc of California quadrupled to almost $36 million after the previously disclosed balance sheet repositioning. Also, the total loan balance is approximately $25 billion and the total deposits are $30 billion. Further, the total number of branches is now more than 70 from the prior 26.
Balance Sheet Repositioning
As part of the balance sheet repositioning, Banc of California, N.A. and Pacific Western Bank sold roughly $1.9 billion in assets. The strategy includes additional asset sales, which are expected to be completed by the end of the first quarter of 2024.
Specifically, Pacific Western Bank sold $1.5 billion of its securities portfolio, which included agency commercial mortgage-backed securities, agency collateralized mortgage obligations (CMO), treasury bonds, municipal bonds and corporate bonds. Likewise, Banc of California, N.A. divested $447.4 million of its securities portfolio, which consisted of agency mortgage-backed securities, CMOs and municipal bonds.
Further, BANC sold a $1.8 billion single-family residential mortgage portfolio ("SFR Portfolio").
The proceeds from the above-mentioned and future balance sheet repositioning strategy are likely to be largely used for “the repayment of the combined bank’s wholesale borrowings and higher cost funding.”
Financial Benefits
At the time of the deal announcement, it was stated that the merger is expected to deliver earnings per share accretion of more than 20% next year. Also, the pro forma combined company is expected to achieve compelling operating and return metrics, including a loan-to-deposit ratio of nearly 85%, wholesale funding asset ratio of roughly 8% and Common Equity Tier 1 capital ratio of almost 10%.
Conclusion
The merger between Banc of California and PacWest has created a robust, well-capitalized and highly liquid banking institution. The combined company will serve the banking needs of small and medium-sized businesses in California while capitalizing on market opportunities and delivering profitable and sustainable growth.
Since the announcement of the deal on Jul 25, shares of Banc of California have declined 15% compared with the industry’s fall of 6.5%.
Image Source: Zacks Investment Research
At present, BANC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Expansion Efforts by Other Banks
LCNB Corp. LCNB, the holding company for LCNB National Bank, has signed a definitive agreement to acquire Eagle Financial Bancorp, Inc. (”EFBI”) in a stock-and-cash transaction. The closing of the deal, subject to the approval of EFBI shareholders and regulators and other customary conditions, is expected in the second quarter of 2024. The approval of LCNB shareholders is not required.
Per the terms of the agreement, approved by LCNB and EFBI board of directors, EFBI shareholders can choose to receive either 1.1401 shares of the LCNB stock or $19.10 per share in cash for each share of the EFBI common stock owned, subject to at least 60% but not more than 70% of EFBI shares being exchanged for an LCNB common stock.
First Busey Corporation BUSE, the holding company for Busey Bank, announced the signing of a definitive agreement to acquire Merchants and Manufacturers Bank Corporation (”M&M”), wherein M&M Bank will merge with and into Busey Bank. The closing of the deal, subject to the approval of M&M’s shareholders, customary closing conditions and regulatory approvals, is expected in the second quarter of 2024.
This transaction will strengthen First Busey’s growing presence in the Chicago suburban markets by expanding its deposit market share in DuPage and Will counties. This will also fortify its commercial banking and wealth management businesses.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Banc of California, Inc. (BANC) : Free Stock Analysis Report
First Busey Corporation (BUSE) : Free Stock Analysis Report
LCNB Corporation (LCNB) : Free Stock Analysis Report
