A local consumer advocacy group is opposing Pacific West Bank’s pending $849 million acquisition of Durham-based Square 1 Bank and is asking regulators to delay approval of the deal.
The action announced Thursday by Reinvestment Partners of Durham questions whether California-based Pacific West will meet its obligations under the Community Reinvestment Act to meet the needs of Durham borrowers, including those in low-income neighborhoods.
Peter Skillern, executive director of Reinvestment Partners, said his organization has met with Pacific West officials, but they declined to make any commitments until the deal is completed.
“It seems to be a fair request,” Skillern said. “If you’re going to buy (Square 1), tell us how you’re going to lend to the community. ... If you want to get all these deposits, you’ve got to give to the community.”
Officials at Pacific West and Square 1 Bank couldn’t immediately be reached for comment Thursday afternoon. When their deal was unveiled in March, the banks said they expected it to be completed in the fourth quarter.
Skillern said he is pleased that, after his organization notified federal regulators of its opposition to the merger, the Federal Reserve requested additional details about its plans from Pacific West. Among other things, the July 9 letter from the Federal Reserve asked the bank to outline its plans for “community development-related lending, investment and service goals” in the areas Square 1 operates.
Reinvestment Partners is concerned that Pacific West plans to shift Square 1’s deposits to California to fund its banking operations there. A byproduct of such a move would be to circumvent the bank’s obligation to address the needs of borrowers in Durham.
At the heart of the issue is Square 1’s status as a specialty bank and its large deposit base in Durham — $2.45 billion as of June 30, more than any other bank in the Durham-Chapel Hill metropolitan area, according to the Federal Deposit Insurance Corp.
Square 1 is labeled a specialty bank because it provides loans and other banking services to venture capital firms and the businesses they invest in nationwide and has 13 offices across the nation. But although the bank has a relatively low profile locally, its deposits from customers across the country are situated in Durham.
Thanks to its classification as a specialty bank, Skillern said, Square 1 has been able to meet its obligations under the Community Reinvestment Act, or CRA, without being required to make loans in Durham. But the rules would change for Pacific West, he said, because it is a more traditional bank catering to small and mid-sized businesses and therefore faces more stringent requirement under CRA.
Pacific West has 80 branches, mostly in southern and central California, that cater to small and mid-sized business. It has more than $16 billion in assets.
Skillern’s organization also has raised questions about whether a wholesale shift of deposits would violate the Interstate Commerce Act. The Federal Reserve is seeking information that would enable it to determine whether it would be a violation, Skillern said.