Continuing the aggressive southern California expansion it has pursued almost without letup since it was founded, First Community Bancorp of Rancho Santa Fe, Calif., is buying Cedars Bank in Los Angeles.
The $120 million deal, announced late Tuesday, is First Community’s third for a southern California bank since April and its 13th since the well-known bank investor John M. Eggemeyer 3d created the holding company in 2000.
First Community, which had roughly $200 million of assets after its first deal, would have more than $3.2 billion after the Cedars deal closes in the first quarter. (Its deal for the $151 million-asset Pacific Liberty Bank in Huntington Beach is expected to close next quarter.)
William A. Hanna, Cedars’ chairman and chief executive officer, said he had not intended to sell the privately held $486 million-asset bank he founded in 1987, but after meeting with executives from First Community, he determined it was a good fit.
“We established a very professional working relationship, and that was kind of nice,” he said. “I guess you could say it was a case of love at first sight.”
Cedars, which has five branches in Los Angeles and Orange Counties and one in San Francisco, would be merged into one of First Community’s two subsidiaries, Pacific Western National Bank in Santa Monica.
After the deal closes Mr. Hanna would become the $1.5 billion-asset Pacific Western’s Los Angeles regional head.
Matt Wagner, First Community’s president and CEO, did not return calls seeking comment. In a press release he said, “Cedars’ size, business focus, and loan portfolio align with our existing operations and enhance our footprint in southern California.”
Christopher Marinac, who covers First Community for FIG Partners LP in Atlanta, said he expected the Cedars acquisition to be accretive to First Community’s earnings “within a year, if not sooner.”
Cedars reported net income of $3.2 million and a return on equity of 14.73% for the first half of the year, and Mr. Marinac said being part of a larger organization with a bigger lending limit should make its bankers more productive.
“That’s not to say they’re going to go out and start making $15 million loans,” he said. “But being able to book $3 million or $4 million loans instead of $1 million or $2 million will definitely help spur more growth. It’s a nuance a lot of people overlook in a deal like this.”
Todd Hagerman, an analyst at Swiss Reinsurance Co.’s Fox-Pitt, Kelton Inc., said the deal’s $120 million price tag works out to a core deposit premium of 38%. The premium is somewhat higher than those of other recent acquisitions, but Mr. Hagerman called it fair, given Cedars’ location and the quality of its management.
“It’s what you’d expect for an well-run institution in a fast-growing market,” he said.
James Abbott, who covers First Community for Friedman, Billings, Ramsey & Co. Inc. of Arlington, Va., said the only problem he saw arising from the deal was Cedars’ reliance on jumbo certificates of deposit, which he said make up about 52% of its $400 million deposit base.
Historically, Mr. Abbott said, First Community has funded its operations with low-cost demand deposits, but he and other analysts said it should have little trouble converting Cedars’ CDs to core deposits.
Mr. Marinac said First Community’s two banks — Pacific Western and the $1.2 billion-asset First National Bank in Rancho Santa Fe — are among the best in the country at attracting core deposits.
First Community did not announce any deals last year, but it has resumed its buying spree this year. In April said it would pay $62.3 million for the $239 million-asset First American Bank in Rosemead, Calif. That closed last month. The $42 million deal for Pacific Liberty was announced in June.
Mr. Eggemeyer has a history of rolling up California community banks. A holding company he created in 1994 went on to acquire six banks in five years and by 1999 had $2.5 billion of assets. The company, Western Bancorp in Los Angeles, sold itself that year to U.S. Bancorp for $958 million.
