First California Chief Holds Cards Close on Odds of Sale

By Matthew Monks October 25, 2012, 4:42 p.m. EDT 2 Min Read

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First California Financial Group (FCAL) — a small bank north of Los Angeles under pressure from investors to sell — is still in the "strategic review" it started three months ago, executives said Thursday.

Investors and analysts for weeks have been expecting a deal announcement from the $2 billion-asset company, which spurned an unsolicited offer from a rival this spring.

First California, in Westlake Village, is still weighing options after hiring Keefe, Bruyette & Woods (KBW) on Aug. 1 to explore whether to sell or stay independent, C.G. Kum, First California's chief executive officer, said during a conference call Thursday discussing its third-quarter results.

"I'm not in a position to provide any more color," Kum said in response to one of several analyst questions about the company's strategic future. "The fact that we have not [said anything on the matter] indicates there is nothing to report at this time."

As a public company it has "an obligation" to "maximize shareholder" value by determining whether investors can make more money from the company selling itself or staying independent, he said.

"Frankly I can't tell you the answer today but maybe one of these days you'll get a better sense of that," he said.

Kum alluded multiple times to the stress the 15-branch company has been under this year.

PacWest Bancorp (PACW) in May made public that First California had rejected an all-stock bid to buy the company for $7.25 per share, or about $212 million. In January the Pohlad family was the first of several major investors to publicly urge the board to seek a buyer.

Kum gave a "heartfelt thank you" to "dedicated" employees for staying the course in the face of the company's "unique challenges."

That has included fending off rival banks that have tried to "poach" its bankers, Kum said.

Quarterly profits of $3.2 million rose 8% from the prior quarter and 38% from a year ago.

First California's bottom line improved on lower operating expenses and gains from unloading foreclosed properties. Its margin narrowed because of higher borrowing costs and falling yields on loans and securities.

Its net interest margin of 3.91% fell 21 basis points from the previous quarter and 14 basis points from a year earlier.

Return on average assets of 0.7% rose 4 basis points from the prior quarter while tangible shareholder equity increased 5%, to $137.6 million. An analyst asked Kum if its gains in the quarter increased its chances of staying independent.

"I applaud you for your creativity," he said, later adding that "I do appreciate your recognition of the improvement" of the company.

Matthew Monks

Reporter, American Banker