Community organizations in California are urging regulators to postpone approval of PacWest Bancorp's (PACW) acquisition of CapitalSource (CSE), arguing that PacWest lacks CapitalSource's commitment to serving community needs and economically disadvantaged groups.
The $6.7 billion-asset PacWest agreed to purchase CapitalSource for about $2.3 billion in cash and stock in July. The agreement between the two Los Angeles companies would give PacWest more than $15 billion in assets, making it the eight-largest commercial bank in California.
But community advocates voiced a number of concerns over PacWest's dedication to the Community Reinvestment Act during September comment periods with the Federal Deposit Insurance Corp. and the Federal Reserve System, according to a press release Friday from the California Reinvestment Coalition and its member organizations.
PacWest received a "low satisfactory" rating for each of the lending, investment and service tests in its CRA evaluation, according to the FDIC report quoted in the release. The CRC also faults PacWest for lacking a lending program targeted at businesses owned by women, minorities and people with disabilities.
"It appears that CRA activities aren't a priority for PacWest, which is why we're urging the FDIC and Federal Reserve to seek community input and make their approval contingent on a plan for the bank to improve its CRA activities," Sharon Kinlaw, interim director of the Fair Housing Council of San Fernando Valley, said in the release.
The $7.8 billion-asset CapitalSource received an "outstanding" rating in its CRA evaluation.
"CapitalSource is a consistent community partner, with staff members serving on boards of local nonprofits, providing grants to local organizations and being a CRA leader at the local level. Unless the regulators require PacWest to strengthen its CRA activities, we're deeply concerned the bank may end the strong partnerships that CapitalSource worked to create in our communities," Glenn Hayes, president and CEO of NeighborWorks Orange County, said in the release.
PacWest's willingness to lend to businesses with less than $1 million in revenue and the possibility of branch closures were also mentioned as potential concerns in the release.
Representatives at PacWest and CapitalSource did not immediately respond to calls seeking comment.