Two southern California community banks that have wanted to expand but could not afford meaningful acquisitions are merging as equals.
The $480 million-asset National Mercantile Bancorp in Los Angeles and the $481 million-asset FCB Bancorp in Camarillo announced the agreement Thursday. The combination would create First California Financial Group Inc.
C.G. Kum, FCB's president and chief executive, would have those titles at First California, which is to be headquartered in Los Angeles.
The two companies decided to become one because "size does matter," Mr. Kum said in an interview.
"We need to get to $1 billion in assets to obtain the necessary scale to enable us to be as efficient as possible," he said. "I'm not so sure that either one of us would have been able to buy the other, and neither board wanted to sell, so combining the two organizations was the perfect solution."
First California would look to expand in the San Fernando Valley north of Los Angeles, Los Angeles proper, and in Orange County, Mr. Kum said.
"In California, midsized banks are disappearing after being acquired by larger institutions, and we wanted to take advantage of that void," he said. "Now we'll have the size and the currency necessary to become an acquirer of smaller institutions, and we'll also continue with our de novo branching strategy."
Scott Montgomery, National Mercantile's president and CEO, said, "There's an excellent potential that the new company could be $2 billion to $3 billion in assets over the next three to five years, both through acquisitions and organic growth."
National Mercantile's two bank subsidiaries, Mercantile National Bank and South Bay Bank, have four branches between them. The branches are to be merged into FCB's First California Bank, which is in Camarillo. The bank would then have 12 branches, from Ventura north of Los Angeles, south to Orange County.
Mr. Montgomery, who plans to retire after the deal closes, said that no money would change hands and that shareholders would receive stock in First California. FCB shareholders would receive 1.79 shares for each share owned and National Mercantile shareholders one share for each owned.
The merger is expected to be completed in the fourth quarter. Current National Mercantile shareholders would own about 50.5% of the shares in the new company and current FCB shareholders about 49.5%.
First California's board would have five directors from National Mercantile and five from FCB. Robert E. Gipson, National Mercantile's chairman, would be the new company's chairman and FSB chairman John W. Birchfield its vice chairman.
FCB's stock soared on news of the deal. In late trading it was up 14.2% from Wednesday's close, to $22.90. National Mercantile's stock was down 7.4%, to $13.75.
