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Financial Institutions Seize Opportunity for Bank Buying Spree

Private equity funds and opportunistic investors are taking advantage of the still fragile economy and depressed balance sheet of many lenders, pumping funds into banks that are making inroads in San Diego and other parts of California.

Earlier this month, AmericanWest Bank, a Spokane, Wash., bank that was acquired out of bankruptcy by SKBHC Holdings LLC, announced its intention to buy San Diego-based Sunrise Bank, with $232 million in assets, for below book value price of $18.5 million.

Also this month, First PacTrust Bancorp, parent of Chula Vista-based Pacific Trust Bank, announced the purchase of Gateway Business Bank, based in Cerritos and with $187 million in assets, for $17 million, another below book value deal that is expected to close later this year. First PacTrust raised $60 million last year from a variety of private equity funds.

In another similar private equity-backed deal, Opus Bank, an Irvine institution that conducted a recapitalization and name change after acquiring Bay Cities National Bank last year, is buying banks both in Southern California and Washington state.

Opus said its acquisition of Cascade Bank in Everett, Wash., with $1.5 billion in assets and 22 branches in the Seattle and Everett areas, should close by the end of this month.

Opus announced this month a proposed purchase of Fullerton Community Bank, with nearly $700 million in assets and eight branches in Orange County, for $50 million in cash.

By the end of this year, assuming both transactions are approved by regulators, Opus would be nearly $3 billion in assets and have 42 offices, said Jeff Leonard, senior vice president of communications.

At least one of those branches will be in La Jolla, but Leonard said there are plans to add another two in the San Diego area as part of an 11-branch expansion planned for the state that was announced at the end of May.

When Opus conducted a $460 million capital raise in October, CEO Stephen Gordon, former chief executive at Commercial Capital Bancorp, said he intended to grow Opus to about 75 branches in California, and in Arizona, Oregon, Nevada and Washington states. The goal is to build a “super regional bank” that would have a presence in major metropolitan areas along the West Coast, Leonard said.

The money backing this rollout comes from 25 different groups and individuals and led by three major private equity funds: Elliott Management Corp., Fortress Investment Group, both based in New York, and Starwood Capital Group of Greenwich, Conn.

In the case of AmericanWest Bank, the money sources for its expansion in California also are major private investment entities. Its parent firm, SKBHC Holdings LLC, raised about $750 million with the lead investors identified as Friedman Fleischer & Lowe, Goldman Sachs Capital Partners and Oaktree Capital Management.

Scott Kisting, chairman of SKBHC and AmericanWest, said the bank has deployed about $230 million and has some $500 million remaining at the holding company.

AmericanWest, Opus, and locally, First PacTrust, have ample opportunities to invest their capital. As of March 31, there were 888 problem banks identified by the Federal Deposit Insurance Corp., up from 884 problem banks at the end of 2010.

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Chase Is SBA Lending Leader: Chase Bank, the nation’s second largest bank, said through March 31, which is the first half of the U.S. Small Business Administration’s 2011 fiscal year, it’s the biggest lender of SBA loans with 2,373 loans and the second largest SBA lender based on dollar amount at $448 million.

Chase noted it was among the top three lenders of SBA products in several major markets, including San Diego’s district where it ranked third in both volume (49) and approved dollars ($8.5 million) as of May 31.

Chase said that through the first half of the fiscal year it’s already exceeded the total SBA lending it did in the prior fiscal year, which was $434 million.

In 2011, Chase said it intends to boost its lending to small businesses by 20 percent to $12 billion.

Of course that takes into account all variety of lending programs, not just SBA which accounts for a miniscule portion of its portfolio.

To encourage additional SBA lending, Chase is offering a promotion of waiving the origination fees on new SBA loans or lines of credit to up to $10,000.

As of the end of May, the SBA’s San Diego district office reported banks made 461 loans for a total $224 million, compared with 435 loans for $184.7 million for the like period of 2009.

Send any news about locally based financial institutions to Mike Allen via email at mallen@sdbj.com. He can be reached at 858-277-6359.

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