PacWest Acquisition of CapitalSource: California Community Groups Urge Federal Reserve and FDIC to Hold Hearings
California- October 4, 2013–A group of community organizations, led by the California Reinvestment Coalition(CRC), has requested that the Federal Deposition Insurance Corporation (FDIC) and Federal Reserve postpone Pacific Western Bank’s (PacWest) acquisition of CapitalSource Bank. Citing a long list of concerns, the organizations are pressing regulators to hold hearings about the acquisition, extend the public comment period,and impose CRA conditions before the merger can move forward. If the acquisition is approved, the new bank would be the 9th largest in the state, with over $15 billion in assets, and 96 branches in 14 counties stretching from San Francisco to San Diego.
However, community leaders cited a number of concerns to regulators during the comment period which ended on September 24 (FDIC) and September 30 (Federal Reserve).
PacWest’s Poor Community Reinvestment Act (CRA) Evaluations: PacWest’s CRA activities are well below CRC benchmarks for what constitutes good CRA performance. While it is rare for regulators to give a “Low Satisfactory rating,” PacWest received a “Low Satisfactory” rating for each of the Lending, Investment and Service tests in its most recent CRA evaluation. In contrast to other large California banks, the bank does not have Minority-Owned, Women-Owned, or Disability-Owned Business Enterprise program that would create opportunities for these businesses.
Sharon Kinlaw, Interim Director of the Fair Housing Council of San Fernando Valley, urged regulators to give their full attention to the merger: “It appears that CRA activities aren’t a priority for PacWest, which is why we’re urging the FDIC and Federal Reserve to seek community input and make their approval contingent on a plan for the bank to improve its CRA activities.”
In comparison to PacWest, CapitalSource (the bank potentially being acquired) has received “Outstanding” CRA evaluations. Community leaders are concerned that CapitalSource’s strong tradition of investing in communities could be stopped if the bank acquisition is approved.
Glenn Hayes, President and CEO of NeighborWorks Orange County, explained that CapitalSource has been a leader in the communities where the bank is located: “CapitalSource is a consistent community partner, with staff members serving on boards of local nonprofits, providing grants to local organizations, and being a CRA leader at the local level. Unless the regulators require PacWest to strengthen its CRA activities, we’re deeply concerned the bank may end the strong partnerships that CapitalSource worked to create in our communities.”
Allen Baldwin, Executive Director of the Orange County Community Housing Corporation, suggested that regulators consider the impact of the new, larger bank on communities. “For me, this is a no-brainer. If you want to do business in our communities, then it’s important that you reinvest in neighborhoods, for example by providing capital for affordable housing, or lending to small businesses. Based on what we’ve seen from other banks, PacWest has a ways to go before we’d consider them a strong community partner, which is why we’re asking regulators to hold hearings. PacWest has seen value in CapitalSource and some of that value has been created by its very strong CRA programs; programs that should be cloned by PacWest.”
Pac West Bank either doesn’t have plans to improve its CRA performance or won’t disclose it: The California Reinvestment Coalition and ten of its member organizations met with bank leaders in September 2013to discuss the bank’s plans to meet requirements under the CRA. However, PacWest representatives balked at offering any public plans on how the newly merged bank would meet CRA requirements.
Kevin Stein, Associate Director at the California Reinvestment Coalition, explained: “Instead of rubber-stamping this deal, we think federal regulators should put CRA conditions on this merger so that the newly merged bank doesn’t leave low and middle income communities behind.”
CRC’s additional concerns about the merger include:
• Overlapping branches: PacWest has identified 15 “overlapping” branches, which could lead to bank closures.
• Fresno, Kern, Kings and Tulare counties would be included in the new bank’s assessment area, yet it remains unclear how and if the bank would serve these rural areas.
• PacWest has traditionally relied on making small business loans to businesses with over $1 million in revenue,leaving smaller businesses without access to these loans.
Additional Materials:PacWest 2010 CRA Community Reinvestment Act Performance: LINK
Letter submitted by CRC to Regulators: LINK
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