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5/6/2024
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BANC and PACW are small banks. I’m all for saving the small and regional banks. I am catching slack from some who believe that there was a small fortune to be made in pac west.
If you get in the way back machine to the early 90’s Bank of New England was failing. The WSJ had a stock picking contest going. A broker vs a monkey. Well the monkey picked…..Bank of NE at 50 cents a share. (I believe it had already been seized). By the next week it was $1.50. Tripled in size. The monkey WINS!!
But did it win? Week after that the issue stopped trading. Not worth 1 penny. There’s a lesson on buying -HIT on a shingle……
My cost basis on PACWP is under $13. I didn’t think it would rebound this fast and hadn’t planned on selling the shares.
That Bank portfolio just jumped 2% on this…/s
I wonder how the portfolio (and Tex) are doing?
This deal stinks to high heavens. IMO. A black eye to the industry. The fdic. And to…… Janet ‘I’m monitoring the situation closely’ yellen
It’s most likely going to be a win-win for PACW and BANC. What’s your gripe with it?
Last 3 weekend shotgun marriages ended with everyone from common to bond walking away with zero. Seems to be an improvement.
They are getting a private equity capital infusion into the deal also. So that also helps solidify the mergers finances.
I have an account with TIAA Bank which is being bought out with equity from Warburg Pincus along with Stone Point Capital, Reverence Capital Partners, Sixth Street and Bayview Asset Management. It’s been a long, drawn out procedure that’s been going on since Nov 3 and it’s still not completed . Supposedly, they’re going to return to being Everbank…. I wonder if it’ll end up eventually being Bank of California? Overall, I agree with TnTowanda – I’m hesitant about PE ownership but hopefully the most drastic part for me as a bank customer might be having to get new checks with new bank names twice. However, it is interesting to see old line firm Warburg Pincus involved in both these transaction
I hesitate when PE firms have new ownership and according to news regulators were not involved. Good luck to all.
I wish I had owned it 2 days ago, but other than that am not invested here. Did used to own some Banc of Ca preferreds back in the day. Hit pieces on the bank made good buying trades back in the day. And then at the end they gave guidance to when their then high yielding preferreds were being redeemed. So they also made good short duration high yield plays. Havent really followed them since they redeemed those preferreds.
That stock has been whip sawed. There was little to be made. After the fed abandoning shareholders in previous deals there was little interest in getting burned again. I seem to recall a 1 billion dollar market cap. With our screens here saying 38 billion in total assets that means it had a 2.65% equity ratio. Below 6 means you could be closed at any time w/o notice. Under 3 is NOT GOOD.
ADD IN how the fdic ran the 30 billion dollar industry ‘loan’ for FRC then screwed investors all the way to zero? I’m sorry most have lost all respect for the current regulators.
I don’t care if it could triple overnight I lived thru enough banking crisis to not play with fire on purpose. I’m VERY happy it worked out. And as a side bar Everbank (WP) has a great reputation. I hope those invested ‘make bank’. Just doesn’t work for me…..
TNT:
Looks like Warburg is getting in on BANC at a 15%+ discount to tangible book value, so it is a good deal for them. But these were two dinky little banks that had to do something to survive. Still will have only $35B of combined assets.
But what I can’t understand is this statement from BANC’s EPS release today…..how long are folks going to remain irrational and let banks pay them zero when you can get 5.25% risk-free?
“Noninterest-bearing deposit growth from new clients, which contributed inflows of $74.8 million in the quarter, consistent with the prior quarter’s growth and up 13% over the same period last year.”
“Our team did an exceptional job to bring in nearly $75 million of noninterest-bearing deposits from new relationships, maintaining ending and average noninterest-bearing deposits at 36%, in line with noninterest-bearing deposits at the end of first quarter. “
KT,
I don’t think these are mom and pop depositors, but business accounts that use their money for operations, payroll, vendor accounts etc. I would be more concerned about how much of the percentage of deposits is beyond the threshold for FDIC coverage.
Tim was right when he said back around March that there id going to be consolidation in the banking business.
PACW-P does it now have a 11% current yield with an attached free Fed Put?
What do you mean, AW – “attached free Fed Put? Just that it’s to become a Bank of California preferred?
Well yes these are going to be BANC preferred issue (my assumption at least).
The logic would be now that it has been merged there is a certain stake that the Federal regulators might have in making the combined entity work.
OK….thanks for your clarification…. From presser – Each outstanding share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, of PacWest will be converted into the right to receive one share of a newly created series of substantially identical preferred stock of Banc of California with the same terms and conditions.
So the idea is that these particular issues might have a measure of implicit protection that other issues in other institutions might not have. As you will you know, “Fed Put” was/is a common euphemism that was commonly used during QE to describe the notion that the Fed is propping up stocks with monetary policy – thus reducing the risk of stock ownership.
One might also say that common stock in OXY (or the bonds for that matter) have a Buffet Put because Buffet has been an aggressive buyer (25%) of the common.
So maybe these issues have an implicit (free) Fed Put? I am inclined to think that they do.
After how the fed treated SVB SIVB SI and FRC investors….. there is no fed put for bank shareholders
Hi If You Prefer,
I understand your point. In those cases, the banks that purchased the assets from the failed institutions were given very attractive terms. My point was not meant to include failed banks, but it is intended to include the acquiring bank(s).
Price action yesterday in the common and preferred would tend to support this theory.
I don’t think regulators have any interest at all in letting banks *post restructuring* fail. Anyway yesterday I did some selling of the common stock in a software firm and put in an order for PACW-P.