Four months after PacWest Bancorp and Banc of California Inc. announced their intent to merge under the Banc of California banner, the transaction officially closed on Nov. 30 following both shareholder and regulatory approval.
Banc of California also completed a $400 million equity raise from affiliates of funds managed by private equity firms Warburg Pincus LLC and Centerbridge Partners LP. Both firms now have about 19% of the combined business. This capital raise will help the new bank repay more than $13 billion in wholesale borrowings.
The merger received over 98% shareholder approval when members from both companies voted on Nov. 22. Jared Wolff retains his role as chief executive and president of Banc of California.
“California has experienced a void of business banks that we intend to fill, and we look forward to helping our clients grow and delivering for our clients, communities and shareholders.”
The merger’s impact is significant, creating one of the largest local banking operations in California. The combined company is poised to have approximately $36 billion in assets, $25 billion in loans, and $30 billion in deposits. It will operate over 70 branches in California, along with branches in North Carolina and Colorado.
The merger was a lifeline for PacWest following a swift deposit run when it lost $1.7 billion in just two days following the spring’s regional banking crisis. Its final earnings report before the merger, released on Oct. 24, displayed a downward spiral partly due to a slump in the property market and increased credit risks, exacerbated by escalating mortgage rates. It’s third-quarter revenue was nearly $175 million, a 53% year-over-year decline, while Banc of California’s revenue was up 52% over the same year period, reporting third quarter revenue of $120 million.
PacWest had initially banked on an internal strategy of selling off billions from its loan portfolio to rebuild investor confidence in May, but after failing to shore up assets the bank agreed to the merger in late July.
As part of closing the merger, Banc of California and PacWest sold a combined $1.9 billion in assets as part of a strategy to reposition the merged balance sheet. According to the merger’s announcement, the bank will continue to sell off assets through the end of the first quarter next year.
