Mechanics Bank of Richmond (MCHB)

[Enterprising Investor]

FNB Bancorp CEO could have 'Godfather' moment if bank gets 'generous' buyout offer (10/09/14)

As Bay Area bank mergers accelerate, CEOs are more talkative about who might be on their dance cards.

Bank of Marin CEO Russell Colombo recently told the San Francisco Business Times that the $1.8 billion bank is on the prowl for acquisitions. He sees half the nation's banks disappearing by 2020 due to industry consolidation.

Mechanics Bank's soon-to-be new private equity owner, Ford Financial Fund, says the $3.3 billion Richmond bank— which is moving its headquarters to Walnut Creek— will be the platform for additional acquisitions. A wide-ranging interview with Carl Webb, co-managing member of Ford Financial, and Mechanics Bank President and CEO Christa Steele is the focus of the San Francisco Business Times cover story in the Oct. 10 print edition.

All that merger talk from two of the Bay Area's strongest banks prompted me to turn to another strong bank, the parent of First National Bank of Northern California, to see whether the $905 million bank might join forces with a rival.

South San Francisco-based FNB Bancorp's CEO Tom McGraw says he'd consider joining forces with Bank of Marin or Mechanics Bank at the right price.

"Our board’s vision is to remain independent, with gradual steady growth," McGraw said. "That said, every bank is always for sale if the price is right."

He notes that when he joined the board of what was then the First National Bank of Daly City in 1988, there were about 14,000 commercial banks nationwide. Today, that number is about half that.

"Consolidation within the industry is a reality and I see no signs of that abating. To loosely paraphrase 'The Godfather,' if somebody makes us an offer we can’t refuse, that would generously reward our shareholders, then yeah, we would give that kind of offer very serious consideration," McGraw said.

That's the posture any public company takes, given a board's fiduciary duty to shareholders. But it's important to remember the powerful efficiencies gained in combining banks, which could support a compelling price from the right buyer.

FNB is currently working on its own acquisition. The bank, which purchased Oceanic Bank in 2012, plans to buy Pleasanton-based Valley Community Bank.

Regulators plan to hold a "fairness hearing" on the FNB-Valley deal in San Francisco on Oct. 23. One Valley shareholder, Stephen Taylor Jr., has proposed to purchase up to 40 percent of Valley's shares he doesn't already own at a higher price than FNB plans to pay, according to a notice for the public hearing.

"We are very confident that a blending of Valley Community Bank into First National Bank of Northern California will serve the interests of shareholders of both companies and equally important, the customers of both companies," McGraw said.

He sees Valley Community Bank as a natural fit with FNB's existing franchise.

"Valley has a great market in the East Bay and the South Bay — Livermore, Pleasanton and San Jose," McGraw said. "We have customers in the East Bay and South Bay, but no retail facilities to serve all their banking needs.

"We do offer electronic banking and remote-deposit capture, but community banking is about relationships and those relationships are created, maintained and strengthened through person-to-person contact," McGraw said.

And Valley might not be FNB's (OTC BB: FNBG) last acquisition.

"Finding a way to grow our banking business in these challenging times requires ongoing review of the Bay Area community banking landscape," McGraw said. "With heightened regulatory pressure in an ultra-competitive lending environment, we believe there may be more opportunities to broaden our markets as smaller banks reassess their ongoing viability."

http://www.bizjournals.com/sanfrancisco/blog/2014/10/fnb-bancorp-ceo-bank-mergers-mechanics-bank-marin.html?page=all