First Community Bancorp in Rancho Santa Fe, Calif., has been expanding mainly through bite-size acquisitions since it was founded in 2000, but on Thursday its struck its biggest deal ever.
The $3.1 billion-asset First Community said it plans to buy the $794 million-asset Foothill Independent Bancorp in Glendora for $238 million in stock. Foothill is headquartered on the eastern edge of Los Angeles County, but most of its 12 branches are in the adjacent counties of Riverside and San Bernardino, which are known collectively as the Inland Empire.
Matt Wagner, First Community's president and chief executive, said the deal would give his company deeper penetration "in an important, fast-growing region and provide an even greater platform for organic growth."
First Community, a two-bank holding company, has 41 branches, including eight in the Inland Empire. Todd Hagerman, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton Inc., said expanding there would be a smart move, because the market is now the "hottest" in southern California. In fact, it is the nation's fastest-growing metropolitan market, according to the Census Bureau.
The price is equal to about 3.25 times Foothill's book value, well above the 2.23 average price-to-book multiple for deals announced this quarter, according to Highline Banking Data Services.
The acquisition would be First Community's 14th since 2000. It ended that year with $358 million of assets; after its deals for Foothill and the $501 million-asset Cedars Bank in Los Angeles close, it would have more than $4.6 billion. (The Cedars deal is expected to close next quarter, and the Foothill one is scheduled to close in the second.)
Mr. Hagerman said Foothill, "one of the last remaining crown jewels" in southern California, has long been targeted by would-be suitors. In addition to its attractive market, Foothill has enjoyed strong loan growth, good credit quality, and one of the highest core deposit bases in the region, he said.
Foothill's high percentage of core deposits would help First Community preserve its net interest margin. As of Sept. 30 the margin was 6.4%, far above the industry average.
Mr. Hagerman said that Foothill has also has a top-notch management team, headed by CEO George Langley. First Community is expected to appoint Mr. Langley to its board.
Foothill shareholders would receive about $26.14 in First Community stock for each of their shares. Foothill would be merged into First Community's Pacific Western National Bank in Santa Monica.
First Community was founded by John M. Eggemeyer 3d, the well-known bank investor who created Western Bancorp in Los Angeles in 1994. By the time U.S. Bancorp bought it for $958 million in 1999, Western had bought six banks and reached $2.5 billion of assets.
Christopher Marinac, an analyst at FIG Partners LP in Atlanta, said that Mr. Eggemeyer appears to be building First Community "for the long term." Still, "if the right opportunity [to sell] comes along, they'll look at it."
