Merger-and-acquisition activity may be slow in most regions of the country, but it is picking up steam in California.
At least six deals involving small California banks have been announced since mid-May, including four in Southern California. The latest was announced late Wednesday, when First Foundation Bank in Irvine said that it would buy the $153 million-asset Desert Commercial Bank in Palm Desert for $16 million in stock. The deal, expected to close later this year, would be the first ever for the four-year-old First Foundation and create a company with $456 million of assets and five branches spread throughout Southern California.
Rick Levenson, the president of Western Financial Corp., a San Diego investment bank, said it makes sense that the pace of dealmaking is picking up in California because the state is home to so many community banks and there is simply not enough business to go around for all of them. With loan demand still weak, about the only way for banks to grow these days through acquisitions, he said.
He pointed out, too, that several of the buyers are formerly troubled institutions that recently received large infusions of capital and are anxious to put the funds to use.
Opus Bank in Irvine, for example, raised $460 million last year from private-equity groups and in the last four months has announced two acquisitions and laid out plans to open as many as 17 branches. In its most recent deal announced in early June, Opus said that it would acquire the parent of Fullerton Community Bank for roughly $50 million.
And earlier this week, Mission Community Bancorp, which received a $15 million capital infusion last year, announced that it would acquire the struggling Santa Lucia Bancorp in Atascadero, Calif. It's hard to say, though, if M&A activity in California will increase or slow down in the coming months.
Levenson said that with industry facing an onslaught of new regulations, there's a recognition among community bankers that they need to team up to become more efficient and better compete against larger banks. But, he added, "there are probably not that many good acquisition opportunities out there, so there's a sense [among buyers] that they need to be making deals now."