For three years, downtown L.A. bank holding company Grandpoint Capital Inc. has been on a feeding frenzy, acquiring nine banks and rolling up $2.1 billion in assets.
But now there’s been a hiccup. Grandpoint and Brentwood’s NCAL Bancorp announced last week that they are walking away from a June deal that called for Grandpoint to acquire NCAL. The deal was supposed to have closed by the end of the year and had been approved by NCAL shareholders.
Don Griffith, chief executive of Grandpoint, and Henry Homsher, chief executive of NCAL, declined to speak with the Business Journal about the aborted deal. But in an interview with American Banker magazine, Homsher said both banks had reasons for canceling.
“They couldn’t close it by year end, and we had credit issues that popped up,” Homsher told the magazine.
More specifically, he said two business loans went bad – a blow to his bank, which had been steadily improving its loan portfolio.
Based on the terms of the deal, Grandpoint was likely concerned about NCAL’s credit quality from the start. In its announcement in June, Grandpoint said that it would pay NCAL shareholders about $1.45 a share, at the time a nearly 50 percent discount, plus make an additional payment two years after the deal closed. The additional payment would depend on loan recoveries.
While such deals are not uncommon, Grandpoint included similar language in the announcement of only one other acquisition agreement.
While the breakup was said to be mutual and the banks said in a joint statement that they “continue to explore opportunities for a future partnership,” NCAL likely stands to lose more.
While Grandpoint has been growing, NCAL, the parent of National Bank of California, has been shrinking and hasn’t been profitable since 2008. It reported a loss of $15 million in 2011 and $2.6 million for the first nine months of last year. Its stock, which trades over the counter, has fallen from highs above $25 per share to less than $2. It closed Wednesday at $1.85.
It has also been shedding branches. Early last year, NCAL sold its Westlake Village branch to California Republic Bank of Newport Beach. In November, just a month before the Grandpoint deal was expected to close, NCAL sold its Glendale branch to downtown L.A.’s Manufacturers Bank.
The Grandpoint-NCAL deal wasn’t the only deal that went bust last week. First California Financial Group Inc. of Westlake Village and Premier Service Bank of Riverside said they have dropped their planned merger, first announced last February.
In November, First California announced it had reached a deal to be acquired by Century City’s PacWest Bancorp.
