Academic journal article Federal Reserve Bulletin

Order Approving the Merger of Bank Holding Companies and Acquisition of Nonbanking Subsidiaries FRB Order No. 2015-26 (September 21, 2015)

Academic journal article Federal Reserve Bulletin

Order Approving the Merger of Bank Holding Companies and Acquisition of Nonbanking Subsidiaries FRB Order No. 2015-26 (September 21, 2015)

Article excerpt

PacWest Bancorp

Los Angeles, California

PacWest Bancorp ("PacWest"), Los Angeles, California, has requested the Board's approval under section 3 of the Bank Holding Company Act of 1956, as amended ("BHC Act"), (1) to merge with Square 1 Financial, Inc., and thereby acquire its subsidiary bank, Square 1 Bank, both of Durham, North Carolina. Immediately following the proposed merger, Square 1 Bank would be merged into PacWest's subsidiary bank, Pacific Western Bank ("PWB"), Los Angeles, California. (2) PacWest has also requested the Board's approval under sections 4(c)(8) and 4(j) of the BHC Act and section 225.24 of the Board's Regulation Y to acquire nonbanking subsidiaries of Square 1 Financial that are engaged in financial and investment advisory activities. (3)

Notice of the proposals, affording interested persons an opportunity to submit comments, has been published in the Federal Register (80 Federal Register 18404 (April 6, 2015); 80 Federal Register 22189 (April 21, 2015)). (4) The time for submitting comments has expired, and the Board has considered the proposals and all comments received in light of the factors set forth in the BHC Act.

PacWest, with consolidated assets of approximately $16.7 billion, is the 84th largest depository organization in the United States. (5) PacWest controls PWB, which operates branches only in California. PWB is the 14th largest insured depository institution in California, controlling approximately $12.0 billion in deposits, which represent 1.1 percent of the total deposits of insured depository institutions in California. (6)

Square 1 Financial, with consolidated assets of approximately $3.9 billion, is the 265th largest depository organization in the United States. Square 1 Financial controls Square 1 Bank, which operates one branch located in Durham, North Carolina. Square 1 Bank is the 9th largest insured depository institution in North Carolina with approximately $2.4 billion in deposits, which represent less than 1 percent of the total deposits of insured depository institutions in that state.

Upon consummation, PacWest would become the 76th largest depository organization in the United States, with consolidated assets of approximately $21.3 billion, which represent less than 1 percent of the total assets of insured depository institutions in the United States. PacWest would control approximately $14.4 billion in deposits, which represent less than 1 percent of the total amount of deposits of insured depository institutions in the United States.

Because this transaction involves the acquisition by a bank holding company of a bank and nonbank companies, the Board has reviewed the transaction under both section 3 and section 4 of the BHC Act. Section 3 governs the acquisition of a bank; section 4 establishes the standards governing the acquisition of nonbank companies.

Interstate and Deposit Cap Analyses

Section 3(d) of the BHC Act generally provides that, if certain conditions are met, the Board may approve an application by a bank holding company to acquire control of a bank in a state other than the home state of the bank holding company without regard to whether the transaction is prohibited under state law. (7) Under this section, the Board may not approve an application that would permit an out-of-state bank holding company to acquire a bank in a host state if the bank has not been in existence for the lesser of the state statutory minimum period of time or five years. (8) In addition, the Board may not approve an interstate acquisition if the bank holding company controls or would control more than 10 percent of the total deposits of insured depository institutions in the United States or 30 percent or more of the total deposits of insured depository institutions in the target bank's home state or in any state in which the acquirer and target have overlapping banking operations. (9)

For purposes of the BHC Act, the home state of PacWest is California, and the home state of Square 1 Financial is North Carolina. …

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