First Interstate Buys 53-Branch San Diego Trust : Banking: The $340-million stock swap with parent San Diego Financial Corp. quadruples First Interstate’s presence in that county.
SAN DIEGO — In a deal that illustrates the accelerating consolidation in California’s banking industry, First Interstate Bancorp said Monday that it will acquire the parent company of San Diego Trust & Savings Bank in a stock swap valued at $340 million.
The acquisition of San Diego Financial Corp. will quadruple First Interstate’s presence in a county where it has been badly outgunned by Wells Fargo and Bank of America. The deal is expected to be final by year’s end.
The bank’s sale stunned local observers, who saw the bank as the last major survivor of a once mighty cast of locally owned banks and S&Ls; that included the now defunct Great American Bank and Imperial Savings.
The acquisition of the 53-branch bank is the fourth statewide transaction this year by First Interstate, whose return to profitability and strengthening capital position have put it in a deal-making mode. San Diego Trust is a healthy, well-established bank that has remained in the control of the Sefton family since its founding in 1889.
Branch closings and layoffs are certain to result from the consolidation of the two bank networks, but the numbers of staff and locations to be cut have yet to be determined, said Bruce G. Willison, chairman of First Interstate Bank of California, at a press conference here after the deal was announced.
Most at risk among San Diego Trust’s 1,500 full-time employees are 100 managers, San Diego Trust and Savings President Dan Herde said.
Adding San Diego Trust’s 52 local branches--the bank also has a branch in Riverside County--to First Interstate’s 15 offices will give the Los Angeles-based bank the third-largest San Diego County branch network after Bank of America and Wells Fargo.
First Interstate is also acquiring deposits of $1.85 billion, which will increase First Interstate’s San Diego share of deposits to 11% from 2%, or third-highest.
The big banks increasingly see healthy deposit bases as profit centers from which to generate fee income on accounts, investments and mortgages, Dakin Securities analyst Campbell Chaney said.
Nevertheless, Chaney said First Interstate is paying a high price. At 2.5 times book value, the purchase price is far above the 1.5 times to 2 times book value banks normally fetch.
“It’s a very high price,†Chaney said. “First Interstate wants to expand in San Diego County and it’s one of the few opportunities remaining to them.â€
Wells Fargo grew through its acquisition of local Great American Bank branches, BofA through its merger with Security Pacific National Bank.
In February, First Interstate acquired five HomeFed branches in Fresno. Then in May, it bought the 12-branch California Republic Bank in Bakersfield. And last week, First Interstate said it was buying First State Bank of the Oaks, a Thousand Oaks bank with five offices.
The consolidation trend has left its mark in San Diego County. Of the 38 independent banks that operated here in 1984, 22 remain, San Diego Trust’s Herde said. Independent banks statewide have shrunk to 403 from 452 in 1987, according to the California Bankers Assn.
As recently as 1990, retiring Chairman Thomas Sefton, whose grandfather Joseph Sefton founded the bank and whose family controls 52% of the bank’s shares, insisted that the bank was not for sale.
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