Bank to offload a portion of its mortgage portfolio
PacWest Bancorp and the Banc of California have signed an agreement for an all-stock merger deal that will see Banc of California sell off a chunk of its mortgage portfolio at a loss.
If successful, the merger would create a combined holding company and bank that will receive a capital infusion of $400 million from Warburg Pincus and Centerbridge Partners. The money from the capital raise will be used to reposition the combined entity’s balance sheet and generate material savings. The combined company will repay roughly $13 billion in wholesale borrowings, funded by asset sales, including a portion of its single-family loan portfolio.
As of June 30, Banc of California’s single-family mortgage assets stood at $1.82 billion. The bank expects the sale to be completed at a loss. PacWest, the parent company of private lender CIVIC, currently has $5.35 billion of residential loans in its portfolio. Their combined portfolio is projected to amount to $2.7 billion.
Read more: Civic Financial Services acquired by PacWest Bancorp
“This transformational merger will create a robust, well-capitalized and highly liquid institution poised to deliver exceptional service to even more California businesses and communities,” Jared Wolff, president and CEO of Banc of California, said in a press release. “Out of the gate, the combined company will have the strength and market position to support the banking needs of small- and medium-sized businesses in California and to capitalize on the opportunities created for stronger financial institutions in the wake of the recent banking industry turmoil.”
Following the sales, the combined entity is expected to have about $36.1 billion in assets, $25.3 billion in total loans, $30.5 billion in total deposits, and more than 70 branches in California. PacWest stockholders will represent 47% of the outstanding shares, Banc of California will represent 34%, while Warburg and Centerbridge investors will represent 19% of the outstanding shares.
PacWest president and CEO Paul Taylor commented: “This merger is a tremendous opportunity for PacWest’s stockholders, customers, communities and employees, representing significant immediate and long-term value beyond PacWest’s standalone strategic plan. I am honored and extremely proud of the PacWest team’s fortitude over the past several months amidst industry-wide volatility. With the combined strength of both institutions, new capital from investors that are committed to the strategic vision and value creation of this merger, and a proven track record of successful integrations, the combined company will be well-positioned to provide significant value for the long-term to all of our constituents.”
Also keen to move the merger forward is Todd Schell, who will join the board from Warburg Pincus.
“We are excited to back the strategic combination of two institutions we know well and respect,” Schell said. “The transaction provides an opportunity to execute a highly accretive balance sheet repositioning which generates substantial incremental earnings and positions the combined company for the next leg of profitable growth.”
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