U.S. Bancorp has once again chosen to expand in the growing markets of Southern California, announcing late Tuesday that it would buy all 20 branches from Pacific Century Bank of Encino, Calif.
The all-cash transaction would bring Minneapolis-based U.S. Bancorp $640 million of deposits and $570 million of loans in the populous San Fernando Valley. Terms of the deal were not disclosed, but analysts estimated that the operations would be worth about $150 million. Though U.S. Bancorp is buying all branches of the commercial bank, it is not buying the company, which is a subsidiary of Pacific Century Financial Corp. of Honolulu.
The acquisition would be the first in the state by the new U.S. Bancorp, formed in February when Milwaukee-based Firstar Corp. bought U.S. Bancorp and took its name. Even before that merger, U.S. Bancorp was picking up smaller banking companies in the region, particularly in the San Diego and Los Angeles markets. Pacific Centurys network of business-oriented branches would fill in U.S. Banks presence in the Los Angeles area, particularly in South Bay, between Long Beach and Orange County.
U.S. Bancorp would have 164 branches in California when the sale closes, which is expected late in the third quarter.
The deal is also something of a homecoming for David Rainer. Now the president of $6 billion-asset U.S. Bank in California, Mr. Rainer was at one time president of CU Bancorp, which became Californias Pacific Century Bank after management sold it to Pacific Century Financial in 1997.
Tracked down during his tour of the Pacific Century branches Wednesday morning, Mr. Rainer said, I see a lot of familiar faces the response has been very warm.
Pacific Century Financial said in late April that it planned to sell its banking operations on the U.S. mainland to focus on the Hawaiian Islands. Since then, U.S. Bancorp has been high on the list of expected bidders. Before the Firstar merger, U.S. Bancorp, run by John Jack Grundhofer, had a longstanding, highly publicized interest in increasing his companys presence in California, particularly in commercial banking.
The new, $160 billion-asset U.S. Bancorp, with Jack as chairman and his brother Jerry as president and chief executive, has shied away from specifically identifying regions where it wants to expand. Instead it is trying to persuade Wall Street that it is focusing on making the Firstar/U.S. Bancorp combination work.
Still, that has not stopped California bankers from speculating on when the next deal would be struck. I dont think its any secret that U.S. Bancorp would like to increase its presence in California, said David George, an analyst at A.G. Edwards. This is a decent addition, he said.
U.S. Bancorp, however coy it might have been about its intentions, fought to win these branches. More than a dozen companies submitted bids, according to Pacific Century Financials chief financial officer, Allan Landon.
Zions Bancorp, which owns California Bank and Trust and bought Pacific Centurys nine Arizona branches this year, was among those interested in the branches, though it is not known whether Zions was a bidder.
Despite Mr. Rainers familiarity with the branches, Pacific Century did not start talking to U.S. Bancorp until the bidding process had begun, Mr. Landon said.
After the sale, Pacific Century Financial would convert its remaining assets, which made up the banks own investment portfolio, to cash. The sale is expected to free up $250 million of capital for the parent company.
The 300 branch employees will be notified of their status by the end of July, said Mr. Rainer, who declined to discuss possible cuts. Pacific Century used investment bank Credit Suisse First Boston to handle the sale.
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