Seeking to become the dominant player along California's affluent central coast, two of the state's best-performing community bank companies have announced plans to merge.
Santa Barbara Bancorp, with $1.6 billion of assets, said late Monday that it would buy Pacific Capital Bancorp, Salinas, in a deal valued at nearly $288 million.
Billed as a merger of equals, the pooling of interest would create a $2.4 billion-asset community bank company with branches stretching from the northern Los Angeles suburbs to beyond the Monterey Peninsula.
"It has been a vision of ours for the last four or five years to build a multibank company along the central coast, where we see tremendous opportunity," said William S. Thomas Jr., president and chief executive officer of Santa Barbara Bank and Trust.
Pacific Capital has two bank subsidiaries - First National Bank of Central California, Monterey, and South Valley National Bank, Morgan Hill. Mr. Thomas said the combined company's three banks would operate independently under a single holding company, which would keep the Pacific Capital name.
"Santa Barbara Bank and Trust would not have the same brand identity in Monterey as it does in Santa Barbara or Goleta or Ventura," explained Mr. Thomas, who would become chief operating officer of the combined company. Donald M. Anderson, chairman of Santa Barbara Bancorp, and its president, Donald W. Spainhour, would have the same positions at the combined company.
In late trading Tuesday, Santa Barbara stock was down $2.75, to $30.25, while Pacific Capital stock was up $1, to $54.
The deal, which equals about 3.8 times Pacific Capital's book value and roughly 24.7 times earnings, would combine two of the strongest community bank companies in California.
Santa Barbara's average annual return on equity was 25.84% in the first quarter, according to the Federal Deposit Insurance Corp., compared with 13.57% for similar-sized institutions in the Golden State.
And Pacific Capital returned 18.86% on equity, compared with 13.28% for other California banks its size. Pacific Capital also was recently named the top-performing midsize bank in Northern California by U.S. Banker magazine.
"Santa Barbara is acquiring its equal, if not its superior," said Kirstin Gard, a bank analyst at Bear, Stearns & Co. in New York.
Ms. Gard said the deal - expected to close in the fourth quarter - is difficult to judge because the companies have not released specifics about possible cost savings or revenue enhancements. But given the markets in which the combined company will operate, she said, the opportunities to build revenue through cross-selling appear significant.
Murray Bodine, managing director at Van Kasper & Co. in San Francisco, agreed. He noted, for example, that the merger with Santa Barbara would allow Pacific Capital to sell trust services to its customers "in a marketplace that will be very receptive to that kind of product."
And Pacific Capital's Small Business Administration lending program could let Santa Barbara expand its commercial lending activity.