Banking on Eggemeyer: FCBP
We've been hard at work all week trying to figure out how we were going to give back to our readers this Christmas.After all, our readership is what's transformed this niche, 3 employee startup into what we consider a modest success.
Our readership is a small but dedicated group comprised of Wall Street analysts, portfolio managers, and small investors.
We know who you are, so we wish you a safe and Merry Christmas.
Now, let's get down to business.
The special situation stock we're recommending for the holidays is First Community Bancorp (FCBP).
First Community Bank is a regional, San Diego bank with over $3 billion in assets -- it also pays a 2% dividend.
Just 3 analysts follow the stock - not one sell recommendation.
The industry rule of thumb is for banks to trade at 2.5 X book value -- FCBP trades at just 2 times book, meaning it's still cheap.
But that's not why we like it.
We are absolutely convinced FCBP will be acquired in 2006.
On Tuesday, FCBP was up 5% on zero news.
That's typically a sign that someone knows something -- where there's smoke, there's fire.
So we did some digging around.
Say hello to Mr. John Eggemeyer.
If his name doesn't ring a bell, his accomplishments certainly will.
In the 80s, Eggemeyer ran the leveraged buyout desk at Drexel Burnham Lambert - remember them?
At Drexel, Eggemeyer closed more than 45 massive buyout deals. After that, he ran Heine Securities with fellow banking stalwart Michael Price. In 1996, Eggemeyer and Price closed one of the biggest banking deals in all of history - Chemical Bank's takeover of Chase Manhattan.
It gets better.
In 1996, Eggemeyer decided he wanted to go solo so he opened his own boutique LBO shop - it's called Castle Creek Capital.
Castle Creek' s modus operandi is to invest in US banks that operate in regions characterized by favorable demographics and economic growth. After Eggemeyer finds an underbanked region he likes, he amasses huge positions in its local banks.
Then he gives those banks scale and market presence by way of aggressive roll-up acquisitions -- he's all over those banks like a bad rash.
Guess where Eggemeyer's got his money wrapped up, now?
Bingo: First Community Bank, the largest regional bank in San Diego. FCBP operates 13 branches through the San Diego area and close to 71 branches in the L.A area.
San Diego's one of the fastest growing cities in the US, so it makes perfect sense for Eggemeyer to be there.
Since John Eggemeyer took a seat on FCBP's Board, FCBP has acquired 13 smaller banks.
If a big bank wants to penetrate the San Diego market, in other words, they're going to have to go through John Eggemeyer first.
Bottom line: Unless you actually think he's there for the free checking, Eggemeyer is on FCBP's Board of Directors for one reason and one reason only: he's there to flip the bank to a hungry, expansion-driven-powerhouse.
We never claim to know everything, but what we do know we know inside out: Never bet against Eggemeyer - it's a losing trade.
(We'd like to thank Sean Michael Murphy in NY for his insights, without which this report would never exist).
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