IRVINE, Calif.--(BUSINESS WIRE)--Banc of California Inc. (NASDAQ: BANC) today announced that its wholly owned subsidiary, Banc of California N.A. (“Banc of California”), has entered into an agreement to acquire select assets and assume certain liabilities comprising the California branch network of Popular Community Bank. The transaction accelerates the Company’s growth strategy and deepens its presence in the important Los Angeles and Orange County markets. The acquisition will bring 20 retail branches, $1.1 billion in deposits, $1.1 billion in performing loans, more than 60,000 account holders and certain other assets, real estate and liabilities to Banc of California.
Banc of California will pay approximately $5.4 million for the deposits assumed and loans acquired. This equates to an effective deposit premium of 0.5% as of March 31, 2014. The transaction includes a loss share provision that provides indemnification of up to 1.5% of credit losses on loans acquired in the transaction during the two-year period following the close of the transaction.
The acquisition will expand Banc of California’s branch network to include Popular Community Bank’s branches in Downtown Los Angeles, Whittier, Hacienda Heights, La Mirada, Commerce, Rowland Heights, Paramount, Wilmington, Montebello, Downey, and Santa Fe Springs, all located in Los Angeles County. Banc of California will also enter the Orange County communities of La Habra, Brea, Fullerton, Anaheim, Placentia, and Garden Grove.
“Latinos represent thirty-seven percent of deposits being acquired by Banc of California, and several branches are located in diverse communities that lack banking alternatives and access to financing for their businesses,” said former Los Angeles Mayor Antonio Villaraigosa, Senior Advisor to Banc of California. “We believe that this customer base, including California’s fast-growing Latino market, which accounts for nearly 17 percent of California businesses, represents some of our State’s greatest entrepreneurs and business owners and we intend to help them further realize their dreams. Banc of California is firmly committed to serving these communities.” Villaraigosa was the 41st Mayor of Los Angeles, serving two terms from 2005 to 2013 and previously served as the Speaker of the California State Assembly.
Steven Sugarman, President and Chief Executive Officer of Banc of California, stated, “We are extremely excited to expand our footprint throughout Los Angeles and Orange County, and to strengthen our capabilities to serve California’s fast-growing Latino community. Latinos, who represent approximately 37% of the deposits acquired, are the most rapidly growing segment of new small business owners and entrepreneurs in California and are central to our mission of building California’s Bank.”
“I am pleased with Banc of California’s commitment to continuing to operate Popular, Inc.’s Downtown Los Angeles branch,” said Nelson Rising, Chief Executive Officer of Rising Realty Partners and managing partner of the PacMutual Campus, the site of Banc of California’s future Downtown Los Angeles branch. “Their bold vision to help Californians reach their dreams and build their futures is part and parcel of Downtown Los Angeles’ renaissance. Downtown Los Angeles is home to entrepreneurs and big businesses alike and I’m happy to host the future Banc of California branch in our PacMutual Campus.” Rising is the former Chairman of the Federal Reserve Bank of San Francisco and has also served as Chairman of the Real Estate Roundtable, a group of leaders of the nation’s top publicly-held and privately-owned real estate organizations, with combined properties valued at more than $1 trillion.
Sugarman added: “Banc of California is committed to the regions it serves and demonstrates that commitment through various philanthropic partnerships and strategic investments, including our recent investment in Clearinghouse CDFI, a mission-based lending institution serving California’s low to moderate income communities. In 2012, Clearinghouse CDFI funded a record-level of community development loans totaling over $70 million. These loans included affordable housing, special needs housing, economic opportunity projects and community facilities. Banc of California holds a seat on Clearinghouse CDFI’s Board of Directors.”
Villaraigosa added: “Banc of California continues to establish and expand partnerships with organizations seeking to positively transform lives throughout California including the Cesar E Chavez Foundation, Los Angeles Team Mentoring, Chicano Federation of San Diego County, the LA Conservation Corps, JVS Los Angeles, Foster Care Counts, the Watts Century Latino Organization as well as charter schools and other charities. Banc of California is also a member of the Los Angeles Area Chamber of Commerce and the Orange County Business Council.”
At closing, Banc of California – which provides banking services to private businesses, entrepreneurs and homeowners throughout California – expects to have in excess of $5 billion in total assets with over 100 locations and 38 branches. The enhanced liquidity from this transaction will be used to fund future loan growth through the Company’s existing asset generation platform.
The transaction is expected to result in increased pre-tax income of approximately $25 million in the first year. Management expects that the transaction will be more than 20% accretive to earnings per share in the first year, and have a tangible book value payback period of less than one year.
Sugarman continued, “With this acquisition, shareholders will benefit from Banc of California’s scalable platform and capabilities. This transaction will expand our net interest margin, reduce our efficiency ratio, and meaningfully increase our per share profitability. We look forward to welcoming all our new employees and continuing to work with Popular for the successful completion of the transaction.”
There will be no changes to customer accounts or branches until after the transaction is completed.
An entity owned by investment funds managed by Oaktree Capital Management, L.P. and funds affiliated with Patriot Financial Partners have entered into separate equity purchase agreements as part of this transaction. Oaktree’s aggregate commitment will represent 9.9% of the Company’s outstanding shares as of the closing. Patriot will increase their strategic position by $10 million. Oaktree and Patriot will be acquiring common stock priced at $11.50 each subject to certain closing conditions.
The acquisition is expected to close during the fourth quarter of 2014 and is subject to certain closing conditions, including Banc of California’s receipt of sufficient financing, receipt of regulatory approvals, and other customary conditions.
Bank of America Merrill Lynch is serving as financial advisor to Banc of California, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor.
Management hosted a conference call to discuss this transaction on Wednesday, April 23, 2014 at 8:30 a.m. ET / 5:30 a.m. PT. Presentation materials and audio playback of the conference call are available on the Company’s website at www.bancofcal.com.
About Banc of California, Inc.
Banc of California, Inc. (NASDAQ: BANC) provides banking services to California’s diverse private businesses, entrepreneurs and homeowners. Today, Banc of California has over $4 billion in consolidated assets and over 80 banking and lending locations.
This press release includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are necessarily subject to risk and uncertainty and actual results could differ materially from those anticipated due to various factors, including those set forth from time to time in the documents filed or furnished by Banc of California, Inc. with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements and Banc of California, Inc. undertakes no obligation to update any such statements to reflect circumstances or events that occur after the date on which the forward-looking statement is made.