Shares in PacWest Bancorp have been very active.
For the week ending May 31, the share price had dropped by 75 cents to $6.45, putting the stock at No. 10 on the Business Journal’s top decliners list.
But the following week — ending June 7 — the Beverly Hills-based holding company that is the parent of Pacific Western Bank ended up in the top spot of gainers, increasing 42 percent increase to close at $9.15.
In fact, out of the top 10 gainers for that week, six were local banks. In addition to PacWest, there were also RBB Bancorp at No. 3, Hanmi Financial Corp. at No. 4, Cathay General Bancorp at No. 5, Hope Bancorp at No. 8 and Preferred Bank at No. 10.
But then PacWest stock fell again, to $8.53, or a loss of nearly 7% from the June 7 closing price, after it was announced on June 9 that Kennedy-Wilson Holdings Inc., a real estate investment company also based in Beverly Hills, had acquired from PacWest its first tranche of construction loans for $1.6 billion.
The loan portfolio consists of loans located in Kennedy-Wilson’s key Western U.S. markets and expands the company’s footprint into new regions across the southern and eastern United States, according to a release from the company.
An additional 12 loans totaling $800 million in commitments are expected to close on a rolling basis by no later than the end of July, the release said.
Eighty percent of the portfolio is secured by high-quality multifamily and student housing properties; the remainder are comprised mainly of industrial, hotel, and life science assets.
For the week ending June 14, PacWest was back in the top decliners category, coming in at No. 5, with an 11 percent drop from the previous week.
The share price of the lender to small, middle-market and venture-backed businesses has been knocked around since the start of the year; it closed at $22.42 on Jan. 3 and finished at $8.21 on June 15, a loss in value of 63%. In the 52-week period since reaching an adjusted closing price of $26.60 on June 15 of last year, shares have lost nearly 69% of their value.
Gary Tenner, a senior analyst with D.A. Davidson & Co., noted in a research report published on May 22 that the initial Kennedy-Wilson acquisition comprised of 74 loans with an additional six loans totaling about $363 million in principal balance to be added to the transaction upon receipt of consent by PacWest from the borrowers.
“The transaction furthers PacWest’s progress in refocusing on its core, relationship- based community bank segment, and away from non-core, non-deposit national transactions,” Tenner wrote in the report.
Matthew Clark, a managing director at Piper Sandler & Co., in New York City, said in a report also from May 22 that the firm had expected another sale of assets, but was not certain of the size or type of sale.
“Recall, (PacWest) sold $300 million of Civic loans at 101% and transferred its $2.7 billion Lender Finance portfolio to HFS (held for sale) during 1Q,” Clark wrote in the report. “It also transferred $384 million of loans to HFS during 2Q at (about) a 3% loss and subsequently sold $431 million of loans at a negligible gain.”
Paul Taylor, the chief executive of PacWest, said the bank was pleased to partner with Kennedy-Wilson to execute the asset sale.
“This transaction will improve our liquidity and capital as we continue to implement our announced strategy to return our focus to relationship-based community banking,” Taylor said.
