Commercial Bank of California is eyeing doubling its assets to $5 billion, thanks in part to the recent sale of the Arizona Coyotes hockey franchise.
It took a big step toward that goal on May 20 when its parent company, CBC Bancorp, announced it would add $1 billion in assets by acquiring Oakland-based Bay Community Bancorp (OTC Pink: CBOBA), the holding company for Community Bank of the Bay.
CBC, as it’s commonly known, is paying $120 million in cash, about an 80% premium.
“It’s about growth,” Chairman and Chief Executive Ash Patel told the Business Journal.
“Having a franchise in Northern California will complete our definition of a California bank.”
The bank, which will grow to $3.4 billion in assets once the deal is completed, is on the lookout for even bigger prizes, Patel added.
“Our next target is to become a bank with about $5 billion in assets,” he said. “We’re more opportunistic driven in this marketplace. We’ll keep growing.”
Patel said the bank has deep pockets for future acquisitions because majority owner Alex Meruelo in April sold his Arizona Coyotes hockey league franchise. According to media reports, Meruelo sold the franchise for about $1.2 billion; he had purchased the team in 2019 for as low as $300 million, according to the Forbes website.
“Alex will inject capital into the bank” to fund future acquisitions, Patel said. “He recently entered into agreement to sell the Coyotes—he wants to deploy some of that capital into the banking world.”
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Meruelo co-founded CBC in 2003 along with others, including legendary entrepreneurs Paul Folino and Gen. William Lyon. The latter two have since died and Meruelo is now majority owner of CBC. When Patel became CEO in 2013, the bank had about $190 million in assets.
In the year ended June 30, CBC’s assets jumped 18% to $2.3 billion, ranking it No. 4 on the Business Journal’s annual list of banks headquartered in Orange County. It now has six offices in Los Angeles and Orange County.
CBC Bancorp is buying Bay Community Bancorp in an all-cash transaction valued at $14 per common share, which is about an 80% premium to May 20 closing price of $7.80 and a $68 million market cap. The stock on May 21 jumped 68% to $13.10 and a $114 million market cap, an indication that the market believes the deal will happen.
“This transaction brings together two complementary institutions with long-standing ties to their communities, similar cultures and a relationship-based approach to banking,” William Keller, CEO of Community Bank of the Bay, said in a statement.
“One of the many benefits of this combination is that the combined bank’s greater scale will allow for increased investments in products and services that will directly benefit our clients and enhance productivity. This is the right move for the future of both institutions, and we’re excited to work together.”
The Community Bank of the Bay will retain its name and become a unit of CBC.
“We see the culture that they have built,” Patel said. “Once we combine our two reputable banking platforms, it will create a transformative business bank with expanded product offerings driven by the purpose to serve our communities across California.”
The combination will help CBC derisk its balance sheet that is currently tilted toward commercial real estate, particularly hotels and owner-occupied buildings, Patel said. He added that the bank doesn’t have exposure to the troubled commercial office space.
It will also improve its net interest margins because Bank of the Bay has lower deposit costs, he said.
The transaction is expected to close in late 2024 or early 2025 after required regulatory and shareholder approvals.
“We’re officially on our purposeful journey to building a $5 billion bank,” Patel said.
