The consolidation wave many have predicted for California's bank-crowded capital appears to be building.
Relatively healthy economically compared with the rest of the state, Sacramento - population 330,000 - has 10 independent banks or thrifts and dozens of thrift and regional bank offices.
The community bank ranks were thinned last week when Professional and Business Bank bought Sacramento First National Bank for $7.5 million. The merger of banks approximately equal in size creates a $241 million-asset company that hopes to play a significant role in the market.
The deal follows last month's agreement by First Interstate Bancorp to buy $3 billion-asset Sacramento Savings Bank - Sacramento's largest and oldest independent thrift - for 1.6 times book value, or $331 million.
"It should be a good consolidation," Sacramento First chief executive John McGrath said of the latest deal. "The institutions are very similar. We can achieve significant economies of scale and it will be good for our customers."
The primary reason for the Sacramento First sale was the need of the bank's holding company, West Coast Bancorp, to raise capital for its Orange County affiliate, Sunwest Bank.
"They needed to raise some capital and selling us was one of the options they had," Mr. McGrath said. "But the fact that there should be some consolidation in the Sacramento market, given the large number of independent banks here, we felt that the timing was right."
Sacramento First lost $265,000 in 1993 but is well-capitalized. Organized by Mr. McGrath in 1983, it bought another Sacramento bank in 1985 and has three branches.
Michael Burkart, chief executive, said $121 million-asset Business and Professional Bank did need to raise some capital to complete the deal, which included $4 million in cash.
"The period of consolidation is catching up in Sacramento now," Mr. Burkart said. "There's been a lot of conversations to the effect that Sacramento is overbanked."
Professional and Business Bank was rounded in 1982 by a group of Sacramento businesspeople. The Sacramento First purchase is part of an expansion drive - begun in 1992 - to make the company a major middle-market presence in the Sacramento Valley.