In a rare move in banking, Pacific Western (PACW) launched a hostile bid for rival First California Bank (FCAL) of Westlake Village earlier this month with a stock offer valued at $212 million or a 32% premium to to the value of FCAL at the close of business on May 3rd. Both bank stocks took a beating over the last five years as a result of the Great Recession. When analyzed comparatively over the last two years, PACW stock is flat while FCAL stock was up nearly 100%. It is no wonder that FCAL shareholders rejected the unsolicited offer last week.

Year-end 2011 bank rankings are finally in. In general, the majority of banks are reasonably healthy, increasing capital while reducing problem loan levels. Low interest rates paid to depositors and relatively strong loan pricing levels have strengthened most. The greatest improvement year-over-year goes to California Bank and Trust having risen from a C- mark to A+ with Bank of Southern California and Pacific Western exiting the “problematic” designation. The oddity among top performers is Ally Bank as only this week their mortgage unit declared bankruptcy. While the bank is held as a separate entity, it is a rarity to have a very strong bank alongside deeply troubled sister companies. The improvement at Chase was more related to a technical issue on how they capitalize California operations. The deposits of failed banks Palm Desert National and Canyon National were both acquired by Pacific Premier Bank which continues to increase their presence in the Coachella Valley.

Megabanks Wells Fargo and Bank of America continue to struggle under the weight of mortgage loan problems. Of the banks with the designation of “problematic” or worse, Spanish banking giant, BBVA/Compass, continues to underperform. New concerns related to the Spanish banking system are rising as unemployment in their country is over 20% with a growing crisis of confidence toward the government and banks. Insurance giant MetLife appears to be in the process of exiting the banking business as they recently sold their reverse mortgage servicing portfolio while shedding banking assets with the hope of ending their bank holding company status and reducing regulations currently imposed on them. Local bank Desert Commercial waits for the consummation of their acquisition by First Foundation in a transaction announced last June and approved by shareholders earlier this year. Last in the rankings is the last of the locally managed banks, El Paseo Bank. At March 31st, the bank had capital levels that caused them to be designated as an undercapitalized bank.


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