Placer Sierra's New Chief Exec Plans Changes

Fighting a sagging stock price and disappointing earnings, Placer Sierra Bancshares abruptly changed chief executives Tuesday, announcing the immediate retirement of Ronald W. Bachli and the promotion of Frank Mercardante.

In an interview Tuesday, Mr. Mercardante, the president of one of the $2.7 billion-asset Sacramento company's banks, would not explain what happened, but analysts said they suspect the board pushed Mr. Bachli, 65, to resign to pacify investors. Placer, which late last year predicted that it would earn $2.10 to $2.20 a share this year, has lowered its forecast three times since then and now is predicting earnings of $1.49 to $1.51 a share.

"There was obvious investor frustration with lowering guidance three times," said Matthew T. Clark, a vice president at Keefe, Bruyette & Woods Inc. in New York. "Bachli's overall roll-up strategy cosmetically raised returns over time, but it clouded any organic growth. It made it hard for investors to really put a finger on how much value they added over time."

"There's been a pattern of overpromising and underdelivering," said James Abbott, a Friedman, Billings, Ramsey Group Inc. analyst. "Placer has been inconsistent in both its strategy and its execution, and that's created volatile earnings."

With Mr. Mercardante, 58, at the helm, "this is an opportunity to take a fresh look at things, and I would expect that there will ultimately be an improvement on performance," Mr. Abbott said.

Attempts to reach Mr. Bachli were unsuccessful.

Mr. Mercardante said in the interview that his company would announce within the next two months how it plans to improve its performance and make it more consistent.

However, one thing is already certain - Placer Sierra Bank's name will change. It now operates under five separate brands. After the company bought banks in both northern and southern California, it consolidated their charters into Placer but kept using their brands.

"We're going to start working on a statewide brand as quickly as possible, so everybody knows who we are, and all of our employees are on the same page," Mr. Mercardante said.

He had been the president and CEO of the $657 million-asset Southwest Community Bancorp in Carlsbad, Calif., before Placer bought it in June.

Mr. Mercardante said the company would also try to cut costs by more than the announced goal of 30% from the $175 million acquisition - at 21 times earnings and 3.5 times book value - so it would be more accretive to earnings.

Placer also plans to hire more loan officers and develop a new employee compensation plan to bring in more loans, he said.

Mr. Abbott said the company's strategy has changed several times since its formation in 1999.

When it went public in 2004, Placer said its main goal was to increase annual earnings per share at least 20%. When that did not happen, the company said it would focus mainly on loan growth, particularly in commercial real estate.

But as interest rates rose and more commercial real estate borrowers sold their properties and repaid their loans, Placer changed its focus again, to commercial and industrial lending.

In a conference call Aug. 3, a day after it said second-quarter income edged up just 1.7%, to $6.2 million, Placer said it would share more of its commercial real estate loans with other banks and focus on making commercial and industrial loans.

Mr. Abbott and Mr. Clark both cited Mr. Bachli's dealmaking skills, noting that Placer was formed by the merger of two community banks after Belvedere Capital Partners Inc. in San Francisco had acquired them.

Mr. Bachli, a Belvedere executive at the time, was dispatched to lead Placer, and expand it, mainly through acquisitions. (Belvedere has since sold most of its stake in Placer.)

"They've done a good job at getting cost saves out of these deals, but sometimes they went too far," Mr. Clark said. For example, after buying the $324 million-asset First Financial Bancorp in Lodi in 2004, Placer cut more than 60% of First Financial's work force.

"They've been having to play catch-up since then" and hire more employees, he said.

Over the past year Placer hired 12 people to work on increasing C&I loans and gathering more deposits from middle-market customers.

Investors reacted favorably to the management shake-up. Placer's stock rose 3.89%, to $22.43 a share, in light trading Tuesday. It had tumbled to a 52-week low of $21.03 on Aug. 3 after the company released its earnings report and lowered its guidance.

The stock was trading at $22.59 late Wednesday.

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