Banc of California wins timely Fed approval of PacWest acquisition

Banc of California in Santa Ana said it secured all regulatory approvals needed for its acquisition of PacWest Bancorp in Los Angeles.

The $9.4 billion-asset buyer said it expects to close the all-stock transaction, valued at $1 billion when it was announced in July, by the end of 2023 as originally targeted. The Federal Reserve Board approved the combination last week, shortly after the California Department of Financial Protection and Innovation signed off on the deal at the state level.

No further regulatory approvals are needed to complete the proposed transaction, Banc of California said. The combined company would have about $36 billion of assets, $25 billion of loans, $30 billion of deposits and more than 70 branches in California, along with offices in North Carolina and Colorado.

The acquisition is expected to "unlock the strength of our combined platform to create a robust, well-capitalized and highly liquid institution," Jared Wolff, chairman, president and CEO of Banc of California, said in a release. "As a leading relationship-focused business bank, we will continue to serve a wide range of clients and deliver exceptional service, increased scale, and expanded product offerings."

Notably, PacWest was among a group of Western banks hampered by deposit runoff early this year after the failure of Silicon Valley Bank in March. In April, PacWest reported losing nearly $6 billion of deposits during the first quarter.

The timely approvals were notable against a backdrop of elevated regulatory scrutiny that has delayed or scuttled several transactions over the past couple years. A case in point: TD Bank and First Horizon called off their long-delayed merger earlier this year due to challenges securing regulatory approvals. 

Bank merger-and-acquisition activity has been slow through most of this year, in part because of concerns about deal delays, said Jacob Thompson, managing director at Samco Capital Markets. He also noted market volatility that has pressured bank stocks and, by extension, buyers' ability to use their shares as currency to pay for deals. Lofty interest rates and related recession fears have also stalled some deal talks, he said.

Only seven bank M&A deals were announced in September, according to S&P Global Market Intelligence data. That brought the year-to-date tally through the first nine months of 2023 to 79 transactions, which was down notably from 122 in the same period last year. Aggregate deal value during that same time span declined to $3.39 billion from $6.36 billion a year earlier.

That noted, there have been recent signs of momentum. A total of 34 deals were announced in the third quarter, up notably from the first and second-quarter totals of 20 and 25, respectively, according to S&P Global. The aggregate deal value surged to $2.76 billion in the third quarter, compared to the first and second quarter's combined aggregate deal value of $630 million, the firm said.

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One of the largest acquisitions of the year was announced in the third quarter — Boston-based Eastern Bankshares' September deal to acquire Cambridge, Massachusetts.-based Cambridge Bancorp. That all-stock acquisition was valued at about $528 million.

Mark Fitzgibbon, head of research at Piper Sandler, said in a recent interview that, while activity overall this year has proven light, more banks are anticipating that interest rates will level off late this year or early next. At the same time, most banks have maintained solid credit quality through 2023. That combination may make it more feasible for buyers to assess sellers' health with confidence and, as such, "open the door" for more deals, he said.