Texas' Temple-Inland Financial Services Group Inc. is the latest out- of-state company to take an interest in the California thrift market, with a $150 million agreement to buy California Financial Holding Co. of Stockton.
California Financial is the parent company of $1.3 billion-asset Stockton Savings Bank, which has been rumored to be up for sale for some time, analysts said. Those rumors appeared to be even more prevalent during the weeks before the agreement, when the company's stock price jumped from $24 to $29.
Under the agreement, California Financial shareholders would receive $30 per share in stock and cash, or 165% of tangible book value.
California Financial was trading at $28.75 late Wednesday.
Temple-Inland already owns $9 billion-asset Guaranty Federal Bank, a Dallas-based thrift it bought in 1988.
Under the agreement, Stockton Savings would be merged into Guaranty Federal, forming one single unit, though its branches would retain the Stockton name. The newly merged unit would have $11 billion in assets.
Temple-Inland Financial's parent company, the Diboll, Tex.-based paper manufacturer Temple-Inland Inc., pursued California Financial because it wanted "a platform" in California, said chief executive Clifford J. Grum.
Mr. Grum said Temple-Inland found California Financial appealing not only for its presence in a strengthening market, but also because of its high number of deposits linked to the cost of funds index.
With the new deposits from California Financial, Temple-Inland would be better hedged against a downturn in Guaranty Federal's large portfolio of adjustable-rate mortgages, which are also linked to the cost of funds index.
"People appear to be warming up to the prospect that California is in recovery," said Caren Mayer, analyst with Montgomery Securities in San Francisco. "This is another indication that acquisition activity will accelerate and that the state doesn't look so scary anymore to out-of-state entrants."
In July, Seattle-based Washington Mutual Inc. agreed to purchase American Savings Bank, Irvine. Other out-of-staters, most notably NationsBank Corp., have also expressed interest in California expansion.
Temple-Inland purchased its first thrift in 1986 and two years later bought the insolvent Guaranty Federal. It purchased a series of failed S&Ls in subsequent years.