PacWest Eyes Simplification After M&A Spree

PacWest Bancorp is shifting its corporate strategy to focus on community banking and other core businesses, following a period of acquisitive activity.

The $41 billion banking group said in a statement that it intended to exit several “non-core products and services” while also improving “operational efficiency”.

It has already begun winding down its premium finance and multi-family lending businesses. It also plans to restructure Civic Financial Services, a specialist provider of residential business-purpose loans that it acquired in 2021, to “improve its profitability and risk profile”.

PacWest Bancorp — parent to Pacific Western Bank — said it sold approximately $1 billion worth of securities at a loss during the last three months of 2022 in order to pay down loans from the Federal Home Loan Bank.

The company stated: “These actions align with our strategy to focus on relationship-based community banking and to improve capital, liquidity, and operational efficiency.”

PacWest has acquired seven banks and financial services entities over the past decade, and 20 since 2001. As well as Civic, in 2021 it also acquired the Homeowners Association Services Division of MUFG Union Bank for approximately $250 million.

It previously acquired several smaller Californian banks, including California United Bank in 2017, Square 1 Bank in 2015, CapitalSource Bank in 2014, and First California Bank in 2013.

“PacWest has a long history of acquisitions that brought us great customers, talented employees but also varied processes and different cultures,” said Paul Taylor, president and CEO of the bank since January 1.

He explained that the new strategy would see the introduction of a “One Team” operational approach, with the aim of being more cohesive and efficient “regardless of business line or corporate function”.

“Our plan is to build on the strengths of our deposit-focused, relationship-based community bank businesses, operating as one team,” Taylor added. “We are committed to simplifying and improving our processes to deliver an even higher level of service to our customers and more value to our shareholders while meeting or exceeding our regulators’ requirements for safety and soundness.

“There are real challenges ahead with rising interest rates and a slowing economy. But there is also a significant opportunity for PacWest to improve our performance and return to shareholders given our strong team, a great customer base, and a plan to unlock additional value for our shareholders and employees.”

PacWest’s share price is up 17.6% in 2023 to January 23, but has declined by more than 41% over the past 12 months.