Saturday, June 24, 2006

Screw Cheerios: We Talk Banks for Breakfast

We've been fans of California regional bank First Community Bank (FCBP) since it was trading at $28 (initiated coverage on May 12, 2003). When the stock was featured in an Investor's Business Daily article early Friday morning, we suddenly found ourselves in a middle of a fervid Blackberry exchange with a colleague. Excerpts from that email (and later, phone) exchange follow.

8: 13 AM Wall Street buddy [WS]: Dude, did you see page 8 of IBD? It's your bank...FCBP got a plug. Stock should pop at the open...

8:16 AM editor [CC]: Yeah, we saw it alright. Don't know if the stock will "pop" but we won't bitch if it does.

8:17 AM WS Are you still pumping that takeover idea you're always yapping about?

8:19 AM CC F**k yeah we are; the FCBP game plan is set in stone, dude: roll up more babies and then sell daddy to a behemoth like BAC (Bank of America) or WB (Wachovia); you know they're hungry. Consolidation is the future of commercial banking...Hey, look at Regions Bank (RF) when you get to work -- I wouldn't be surprised to see an 800 pound gorilla snap it up just so it can gain that southeast footprint...the Florida banking area is red hot; if CITI opts for a bank, it'll be either RF or STI (Suntrust Bank)... Buffett owns a ton of STI shares...

8: 20 AM WS Buffett?

8: 21 AM CC Yup -- he like likes the bank for deposit growth + consolidation appeal. Still, our baby is FCBP -- the merchant bank Castle Creek Capital runs the show there and trust us, they're after a fat payout -- that's what they (Castle Creek) do -- roll up smaller banks in geographically attractive regions, then sell 3-4 years out. It's a layup....Buy Buy Buy...

For a more formal take on FCBP, make sure to check out the official report we published earlier this year.

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