Revitalizing Confidence: Regional Banks Unite to Create Pacific Western Bank

Last Tuesday, July 25, representatives of PacWest and Banc of California jointly announced their intention to merge, reports PaySpace. In a published statement, they also expressed their desire to raise $400 million in capital. This announcement came just before the release of the second-quarter 2023 activity results.

According to the terms of the future merger deal, the financial institutions will combine under the name Pacific Western Bank. The aim of this consolidation is to restore confidence in the regional banking sector, which suffered a setback due to the collapse of three organizations within the system.

Jared Wolff, the current President and CEO of Banc of California, believes that the merged entity, Pacific Western Bank, will possess the strength and market position to effectively cater to the banking needs of small and medium-sized businesses in California. Furthermore, he sees the merger as an opportunity to capitalize on the possibilities that arose in the banking industry following the turbulence earlier in the year. Jared Wolff is set to continue his role as the President and CEO of the newly united bank.

PacWest reported a net profit loss of $197.4 million in the last quarter, alongside a reduction in deposits by $290 million, down to $27.9 billion during the same period. Similarly, Banc of California experienced a decrease in net profit of $2.4 million in the last quarter, as well as a reduction in total deposits from $7 billion to $6.9 billion. PacWest faced significant external pressure after the March collapse of the Silicon Valley Bank, which had a profound impact on American regional lenders.

In the last quarter, most regional financial institutions in the USA managed to recover the positions they lost after the March shock. To retain customers and prevent fund transfers to other banks, many lenders began offering higher interest rates on deposits, impacting their profits. These details can be found in the reports of regional lenders for the second quarter of 2023. The merger between Banc of California and PacWest is expected to be completed by early 2024.

Upon the initial announcement of the bank merger, PacWest's share value declined by 27%, but during off-hours, it rebounded, increasing by 30%. After the completion of the merger, shareholders of PacWest will receive 0.66% of the shares of the second financial institution for each share they own. As a result of the news about the merger, Banc of California's securities experienced an 11% increase in value.