CVB Financial Strikes a Deal to Boost Bay Area Presence
CVB Financial Corp. has announced an $811 million stock deal to acquire Heritage Commerce Corp., a move that is set to significantly expand CVB’s presence in the Bay Area. This acquisition is the largest in terms of asset value in CVB’s history and is a part of a strategic plan to extend its reach within California.
CVB’s Growth Strategy
With this acquisition, CVB aims to build a banking powerhouse capable of competing with larger banks. David Brager, CVB’s Chief Executive, expressed his excitement about the expansion into the Bay Area, citing it as a “key strategic objective.” Brager said that the deal resulted from a series of discussions with Heritage’s CEO, Clay Jones, and was framed around the idea of creating an entity that was larger and stronger than either individual bank.
CVB, based in Ontario, California, currently boasts over $15 billion in assets. The addition of the $5.6 billion-asset Heritage, which holds $4.6 billion in deposits, predominantly from the Bay Area, will significantly bolster CVB’s financial standing.
The Potential Benefits
This acquisition not only aligns with CVB’s growth strategy but also offers several potential benefits. The two institutions share a business banking focus, with loan portfolios primarily geared towards commercial and industrial and commercial real estate lending. Following the merger, these types of loans are expected to make up nearly 90% of the combined portfolio.
Heritage also sees value in the merger, viewing it as a route to benefiting from the larger combined entity’s scale and reach. Jones expressed enthusiasm about the expanded product offerings and inherent synergies that the combined company will bring.
Financial Implications and Future Prospects
Regarding the financial implications, the merged company expects to start with a Common Equity Tier 1 Capital ratio of 14.6%. CVB’s Chief Financial Officer, Allen Nicholson, stated during a call with analysts that this robust capital level should enable the company to continue returning capital to shareholders through dividends and share buybacks.
Further, the combined entity will hold assets of $21.7 billion and deposits of $17.2 billion, giving it a presence across all of California’s major employment centers. The deal is expected to close in the second quarter of 2026, with an expected earnings-per-share accretion of 13% in 2027.
Leadership and Integration
In terms of leadership, Jones has agreed to stay on as president of the merged company, while Brager will continue as CEO. The focus initially will be on ensuring the seamless integration of Heritage.
CVB has indicated plans to sell a $400 million portfolio of mortgages purchased from Heritage after the deal’s closing date. However, apart from this, CVB has expressed satisfaction with the composition and quality of Heritage’s assets, indicating a smooth integration process.
In conclusion, this strategic acquisition is expected to bring significant benefits to CVB, its shareholders, and customers. It is a testament to CVB’s growth strategy and commitment to expanding their footprint in California’s banking sector.
For more details about the deal, click here.
