Garnet Capital Advisors Blog

As the financial sector regains its footing following the turmoil of bank failures earlier this year, more banks are likely to position themselves for further strengthening through mergers. Banks will focus on selling assets to better position themselves for these mergers. 

2023 has been a slow year for banking mergers through the first half. Only 34 deals were announced through June 14 compared to 81 during the same period in 2022. Janney Montgomery Scott analyst Brian Martin reported to The American Banker. But merger activity is likely to pick up during the second half of the year. Stronger banks look to strengthen their hand by acquiring shakier competitors. 

Two mergers announced on the same day in late July point to the likely uptick in activity and detail how the sale of loan portfolios will play an important role in many mergers.

Banc of California Acquires PacWest

Banc of California, based in Santa Ana, purchased the larger but troubled PacWest Bancorp of Los Angeles in a deal valued at $1 billion. PacWest reported losing $6 billion in deposits in the first quarter in the wake of the failure of Silicon Valley Bank in March. 

Banc of California reported $9.4 billion in assets at the end of the second quarter. On the other hand, PacWest had about $44 billion in assets in the first quarter. The merged company, if approved by regulators, would carry assets of $36 billion. PacWest had begun selling assets prior to the merger announcement. This includes the sale of a $3.5 billion loan portfolio in May.

They also expect the merged company to pay off $13 billion in wholesale borrowing through the sale of assets and excess cash.

In a statement announcing the proposed merger, Banc of California CEO Jared Wolff said the merger was intended to "capitalize on the opportunities for stronger financial institutions in the wake of the recent banking industry turmoil".

Banks looking to increase their loan portfolios should heed these types of deals. They will create opportunities with banks on both sides looking to sell assets to create a stronger position before the merger. Also, to balance their loan-to-deposit ratios after the merger. 

Virginia 'Cousins' Merge

Virginia-based Atlantic Union Bankshares announced it would purchase American National Bankshares, a deal valued at $417 million. American National's board decided to sell after the business stagnated in the wake of the pandemic.

In addition to boosting its Virginia base, the merger would strengthen Atlantic Union's presence in North Carolina. This is where American National holds seven branches in the Piedmont Triangle Region. Atlantic Union has four branches in eastern North Carolina along with a loan production office in Charlotte. 

The acquisition of the $3.1 billion asset American National would strengthen Atlantic Union's position as the largest bank in Virginia. It currently holds $20.6 billion in assets. The merger would give Atlantic Union $17.8 billion in deposits in Virginia. This would be 8 percent of the state's deposits, plus $1.1 billion in deposits in North Carolina. 

Jeff Haley, chairman, president, and CEO of American National, said that though it's a sad time, it's also an opportunity to join with "dear, dear friends" in the banking industry. "It's like cousins going into business together," he said. 

Loan Portfolio Transactions

As the merger market heats up, banks will be looking to buy and sell loan portfolios to better position themselves. Whether they are looking in from the outside or involved in the merger. 

Selling and purchasing loans in today's regulatory environment require experience in handling these sales properly to maintain compliance for both parties. Garnet Capital Advisors can help broker loan portfolio sales to ensure they meet regulatory requirements. Contact our experts if you are looking to sell or buy loans as the banking industry regains its footing.