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Banc of California (BANC)-Pacific Mercantile Ink Merger Deal

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With an aim to solidify its position in the California market, Banc of California, Inc. (BANC - Free Report) announced a merger deal with Costa Mesa, CA-based Pacific Mercantile Bancorp. The all-stock transaction, expected to close in the third quarter of 2021, is valued at approximately $235 million.

Pacific Mercantile Bancorp has seven banking offices, including three full-service branches, which are located across Southern California. The deal has been already approved by the board of directors of the companies. It still requires consents from regulators and both companies’ shareholders.

Jared Wolff, president and CEO of Banc of California, said, “Pacific Mercantile is a strong strategic fit for Banc of California. Their size, business focus, and deposit profile perfectly align with our existing operations, and will accelerate our growth and operating scale in key markets.”

Pacific Mercantile Bancorp’s president and CEO, Brad R. Dinsmore, commented, “Banc of California is a great merger partner for Pacific Mercantile given our shared focus on business and relationship banking. Like Pacific Mercantile, Banc of California has become an attractive choice for small- and middle-market operating companies with a strong emphasis on service and solutions.”

Transaction Details

Under the terms of the deal, shareholders of Pacific Mercantile Bancorp will get 0.50 of share of Banc of California common stock for each share of Pacific Mercantile Bancorp. This will result in approximately 19% ownership of Pacific Mercantile Bancorp shareholders in the combined company.

Following the closure of the deal, two Pacific Mercantile Bancorp board of directors will join the Banc of California board.

Synergies & Other Financial Benefits

Banc of California expects the acquisition of Pacific Mercantile Bancorp to be 12.9% accretive to earnings (excluding the restructuring costs) in 2022. Further, the deal will likely add more than $5 million in non-interest income to Banc of California’s total revenues annually.

Moreover, the transaction will result in restructuring charges of $18.1 million. Also, Banc of California projects nearly 35% of cost savings, with 75% to be realized by 2021-end and 100% in 2022.

As of Dec 31, 2020, Pacific Mercantile Bancorp had $1.6 billion in total assets, $1.2 billion in loans and $1.4 billion in total deposits. Following the completion of the transaction, Banc of California will have nearly $9.5 billion in total assets. Further, the company’s non-interest-bearing deposits will rise to 30% from 26% of total deposits.

Over Take

Banc of California is well poised for growth on the back of solid loan balance and steady rise in fee income. This deal is likely to further support the company’s financials amid low interest rates and soft loan demand.

Shares of Banc of California have surged 102.9% in the past six months compared with the industry’s rally of 75.7%.

Currently, Banc of California sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Similar Moves by Other Banks

Shore Bancshares, Inc. (SHBI - Free Report) signed a merger agreement with Annapolis, MD-based Severn Bancorp, Inc. The stock and cash deal, worth $146 million, is expected to close in the third quarter of 2021, subject to necessary approvals. Post completion, the company’s total assets will increase to nearly $2.9 billion on a pro forma basis as of Dec 31, 2020. Also, the acquisition will mark its entry into Anne Arundel County, MD.

With an aim to further solidify its position in the Greater Philadelphia and Delaware regions, WSFS Financial Corporation (WSFS - Free Report) inked a deal to acquire Bryn Mawr Bank Corporation (BMTC - Free Report) . The all-stock deal, expected to close early in the fourth quarter of 2021, is valued at $976.4 million. The deal will strengthen WSFS Financial’s market share and is likely to improve balance sheet position.

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