PYMNTS-MonitorEdge-May-2024

Banc of California to Sell $1.8 Billion Worth of Residential Loans

Banc of California is reportedly selling $1.8 billion worth of single-family residential home loans at a discount to JPMorgan Chase as part of an agreement to facilitate the former’s acquisition of PacWest Bancorp.

In a presentation Tuesday, Banc of California said it had entered into a “contingent forward asset sale agreement” for its residential mortgage portfolio, but didn’t specify who the buyer was, Bloomberg reported Wednesday (July 26).

The media outlet learned from unnamed sources that the buyer was JPMorgan, according to the report.

JPMorgan Chase did not immediately reply to PYMNTS’ request for comment.

The move is part of a plan by Banc of California and PacWest to sell $7 billion worth of loans, mortgage bonds and other assets in their securities portfolios as a way to pay down expensive borrowings, according to the Bloomberg report.

The assets are yielding less than 4%, and the lenders will use the cash flow from these sales as well as other resources to pay off their $13 billion worth of borrowings, which cost around 5%, the report said.

Banc of California and PacWest announced their plan to merge on Tuesday (July 26).

The Wall Street Journal (WSJ) reported earlier Tuesday that the two financial institutions were in advanced negotiations to combine, and that the deal could aid the regional banking sector in overcoming fears of financial soundness that were prominent earlier this year, after the failure of three lenders.

In the Tuesday press release announcing their plans to merge, Banc of California and PacWest said the merger will create a premiere California banking franchise that will be positioned to capitalize on market opportunities and reach more customers via its increased scale and expanded product offerings.

“We believe both Banc of California and PacWest stockholders will benefit from the compelling economics of the combined company and its enhanced ability to deliver profitable and sustainable growth,” Banc of California President and CEO Jared Wolff said in the release.

“Out of the gate, the combined company will have the strength and market position to support the banking needs of small and medium-sized businesses in California and to capitalize on the opportunities created for stronger financial institutions in the wake of the recent banking industry turmoil.”

PYMNTS-MonitorEdge-May-2024