Firstfed Financial Corp. of Santa Monica, Calif., did not have to look far to find a bank to help build its fledgling commercial lending business.
The $3.8 billion-asset thrift company said this week that it would pay $47.5 million in cash for Professional Bancorp, a 17-year-old banking company that specializes in lending to doctors, dentists, and medical billing companies. Professional, the $250 million-asset parent of First Professional Bank, also is based in Santa Monica.
"We're real excited," said Babette Heimbuch, president of Firstfed. "We were looking for a small bank with a good lending niche. We didn't think we would find a deal so close to home."
Firstfed began lending to small businesses in 1996, and last year it established a 15-employee business lending division.
Ms. Heimbuch did not disclose the amount of commercial loans outstanding but said the company knew "it was too slow to build from scratch."
Firstfed's foray into health-care lending will be led by Melinda McIntyre-Kolpin, president and chief executive officer of Professional, and the brainchild behind the bank's health-care efforts.
But even with an established niche, Professional could not escape the pressure from institutional shareholders, who had pushed for the company's sale for nearly a year.
In conferences with disgruntled investors and analysts, Ms. McIntyre- Kolpin had insisted that for a sale to occur, the buyer would have to preserve its health-care lending mission.
Firstfed said it would eliminate only a few jobs and would not close any of Professional's branches. Moreover, five of Firstfed's directors serve on the boards of Los Angeles-area hospitals, an indication, Firstfed said, that it understands the health-care business.
"We couldn't have written a better deal for everybody-our shareholders, our customers, our employees, and Firstfed," said Ms. McIntyre-Kolpin, who has a three-year contract.
One analyst who tracks Firstfed remains skeptical.
Charlotte Chamberlain of Jeffries & Co. in Los Angeles, said Professional's returns on assets and equity are well below those of its peers. She also said nonperforming assets are increasing.
"They're taking a step in a new direction with a subperforming bank," she said.