U.S. Bancorp said Monday it has agreed to buy California Bancshares of San Ramon for stock valued at $327 million.
The deal, at a hefty 2.5 times book value, would nearly double U.S. Bancorp's California banking assets, currently about $2 billion.
Portland, Ore.-based U.S. Bancorp, hard on the heels of its $1.6 billion acquisition of West One Bancorp of Idaho, agreed to exchange 0.95 share of its stock for each common share of the California company. The companies expect to complete their pooling-of-interests transaction in the second half of this year.
California Bancshares, which owns 10 banks in the San Francisco Bay Area counties of Contra Costa, Alameda, and Santa Clara, as well as in the adjacent counties of San Joaquin and Stanislaus, is a strong performer.
Its stock has risen 52% in the past year, and closed last week at 2.13 times book value. Last year, it reported a 1.23% return on assets and 14.57% return on equity, well above the 0.5% ROA and 7.5% ROE of U.S. Bancorp's California unit.
California Bancshares president and chief executive Joseph P. Colmery, who would become an executive vice president of U.S. Bank of California, said several institutions had been interested in buying his $1.6 billion- asset company.
Mr. Colmery said U.S. Bancorp's advantages included the strong currency of its stock, the fact that none of the California company's 36 branches are slated to be closed, and his belief that U.S. Bancorp treats employees well.
U.S. Bancorp expects the deal to be accretive to earnings within 15 months. The company expects $15 million of after-tax merger expenses, including a $5 million pretax charge for increasing loan-loss reserves.
"If we wanted to do business, it was a price we had to pay," said U.S. Bancorp chairman and chief executive Gerry B. Cameron.
U.S. Bancorp has assets of $31.8 billion, deposits of $23.3 billion, and 656 branches. It owns the largest bank in Oregon and, by virtue of its Dec. 27 acquisition of $9.1 billion-asset West One, the biggest in Idaho and the second-largest in Washington.
U.S. Bank of California, which consists primarily of thrifts acquired since the late 1980s, doesn't rank among its state's top 10. California Bancshares' office network would augment U.S. Bancorp's 57 in 22 Northern California counties.
U.S. Bancorp officials have long expressed an interest in improving the California unit's profitability and growing through acquisitions. California Bancshares satisfies both aims.
The deal also points to remarkably quick-moving management at U.S. Bancorp, which announced its West One acquisition before it had finished a tough cost-cutting effort called Focus 59. Now it is making a California acquisition before it has finished consolidating West One.
"We've been very attracted to what is going on" in Northern California, Mr. Cameron said. "The demographics, population, economy, (and) income all give us an opportunity to participate in what we think are some excellent lending opportunities."
Mr. Cameron added that U.S. Bancorp continues to be interested in acquisitions outside of Oregon, Idaho, and Washington.
California Bancshares' noninterest expenses are expected to be cut by 16% to 18%. Almost all of the savings are to come from administrative, back-office, and data processing areas after California Bancshares converts to U.S. Bancorp's systems.
U.S. Bank of California has 500 full-time employees, and California Bancshares has 685. Bank officials declined to estimate how many jobs would be lost.
