Security Pacific said Monday that it has agreed to pay $160 million cash for Hibernia Bank in a transaction that will give the Los Angeles banking company 35 more branches in Northern California.
Hibernia, headquartered in San Francisco, was put up for sale last June by its parent, Hong Kong-based First Pacific Holdings. The deal was offered to several Japanese banks, but they indicated that they were more interested in Southern California, according to an executive close to Hibernia.
Hibernia is the state's 13th-largest bank, with assets of $1.57 billion. Twenty-eight of its 35 branches are in the San Francisco Bay Area. The other seven, which are farther north, were bought from Wells Fargo in 1986 and account for less than a fifth of its business.
While Japanese investors may be focusing on Los Angeles, the distribution of Hibernia's branches would allow Security Pacific to roughly double its consumer business in an area where it has only about 4% of the market.
Security Pacific National Bank, Security Pacific Corp.'s principal subsidiary and California's second-largest bank, has assets of $47 billion and 595 offices. Although 125 of the offices are in Northern California, they tend to be smaller than those in the south.
"It is obviously an excellent opportunity to increase our market share in the northern part of the state, where we are under-represented," said Jerry A. Grundhofer, vice chairman and head of Security Pacific National Bank's retail division.
Dan B. Williams, an analyst with the San Francisco brokerage firm of Sutro & Co., said the purchase makes sense for Security Pacific and that the price was about right. "Hibernia is a good retail bank and it gives Security Pacific a more intensive presence up here than they had," he said.
California banks are concentrating on improving their share of the consumer business in preparation for 1991, when the state is opened to competition from out-of-state banks.
The Hibernia purchase is similar to Wells Fargo's purchase of Barclays Bank of California from its British owners in January for $125 million. Barclays has 50 branches almost evenly divided between Northern California, where Wells is strongest, and Southern California, where Wells wants to increase its share of the market.
The price for Barclays, with assets of $1.3 billion, was roughly 1.6 times "book," which is basically an institution's equity after liabilities are subtracted from assets. Security Pacific is paying 1.58 times book for Hibernia.
The transaction is expected to close by the end of June, following approval by regulators and directors of both companies. Hibernia's branches will be renamed Security Pacific once the deal is completed.
Security Pacific is the nation's seventh-largest bank holding company, with $72 billion in assets and banks in four states. The company also maintains a large international merchant bank and extensive Asian operations.
Hibernia is one of the state's oldest banks. It was founded in 1859 by Irish businessmen and was California's biggest bank at the turn of the century. Hibernia grew little during most of this century until it acquired a bank with branches in the East Bay in 1980.
But Hibernia lost money in 1982 and was put up for sale by its shareholders, including the Tobin family, who were among its founders.
The bank was sold to First Pacific Holdings in December, 1982, for an undisclosed price. First Pacific is a publicly held company controlled by the Liems, an Indonesian-Chinese family. First Pacific also operates a merchant bank, a small retail bank in Hong Kong and United Savings Bank, a San Francisco thrift.
Hibernia lost $15 million in 1982 but rebounded the following year with net income of $4.1 million. The bank has since doubled its assets, and earnings rose to $11.2 million by 1987.
Thomas Y. Yasuda, a director of First Pacific, said Hibernia was sold to raise cash for ventures concentrating on the Pacific Rim. He said specific investments had not yet been decided, but he said the company plans to retain United Savings Bank.
An official close to Hibernia said the company's Hong Kong owners were never comfortable with the extensive restrictions imposed by U.S. regulators.
"It wasn't that they were trying to do anything funny," said the official, who asked that his name be withheld. "They just weren't able to do all the things they had expected to be able to do."