Citizens Business Bank’s latest growth deal is its biggest acquisition yet, sending the Ontario-based lender’s total assets above $20 billion.
Last month, the regional bank closed a merger with the Bay Area’s Heritage Bank of Commerce, extending its reach into the last Californian market it hadn’t touched since its founding more than five decades ago.
“(Heritage) fills out the last missing piece of the puzzle for our bank,” said Citizens Chief Executive Dave Brager.
Launched by Inland Empire businessmen in 1974 to serve small and medium-sized firms, Citizens – operated by parent CVB Financial Corp. – had long stayed true to its Southern California roots.
By folding in Heritage, the bank will take over 16 branches in Northern California, bringing it to a total of 79 statewide, including 21 in Los Angeles County. The merger added roughly $6 billion in assets to Citizens’ balance sheet, placing it among the top 10 largest banks headquartered in California.
Value-add
Over the past few years, Brager had built a relationship with Heritage’s former Chief Executive Clay Jones, who now serves as Citizens’ president. Brager offered an opportunity for the two banks to come together, boost their scale and bring back the clients that had outgrown Heritage’s lending abilities.
“Heritage was a smaller bank, and they would lose relationships just because they could not legally lend the amount that some of their relationships needed,” Brager said. “We’re going to be three or four times what (Heritage was) able to do as a combined organization.”
Citizens brought to the table a wider product array and advanced online banking technology, the banker said, and a history of profitability. The publicly traded bank has been in the green for 196 consecutive quarters, or 49 years, and reported a first-quarter net income of $51 million.
Second time’s a charm
Despite the deal’s promise, the road to closing wasn’t linear.
Their first round of discussions two years ago hit an obstacle when Heritage’s board decided that “certain terms proposed by CVBF created an unreasonable level of closing risk due to an uncertain and potentially protracted timeline for regulatory approval,” per a filing.
The volatile regulatory environment following the 2023 regional banking crisis played a dampening role.
“We just couldn’t agree on a number of different financial metrics. Markets changed, valuations changed,” Brager said.
In the rubble, Heritage entered acquisition talks with another undisclosed bank that didn’t pan out, regulatory filings show. The San Jose-based bank then reconnected with Citizens last fall and brought the agreement to the finish line.
Enthused about combining forces in a consolidating banking sector, Brager said the merger delivers a sharper competitive edge while keeping the two banks’ “customer focus.”
“There is a scale thing that is important,” he said, “but we want to make sure we deliver the services in the same way we’ve always done, face-to-face, in person, and build those long-term relationships.”
