Wells Fargo Has Crush on California

Wells Fargo Community Banking Group, which includes regional banking, wealth management, mortgage banking and retail Internet, delivered a strong third quarter with 12% revenue growth and 8% earnings growth over the same period last year.

So if Wells Fargo is looking to buy more regional banks in California, which ones may prove too attractive to be ignored? Well, Downey Financial(DSL Quote) has been mentioned many times before. So I wanted to identify four others that have price-to-book ratios under 2.5 and that haven't been hurt too badly. Heck, even if Wells Fargo isn't interested, other acquisitive banks out there might be.

First up is City National(CYN Quote), which has been called the Bank of the Stars. Its price-to-book is about 2 and its market cap is $3.2 billion. City shares have taken a tumble since the beginning of October.

This Los Angeles-based company on Oct. 17 reported net income of $60.1 million, or $1.22 a share, up from $59 million, or $1.20 a share, a year ago. Analysts, however, were looking for $1.23 a share.

City National has two housing-related loan portfolios: its $3.1 billion residential mortgage portfolio contains no subprime credits or option-adjustable rate mortgage loans. The company makes mortgage loans as an accommodation to its private banking clients (told you -- "Stars"). These loans have an average loan-to-value ratio of 51% at origination.

City National has 62 offices in Southern California, the San Francisco Bay Area, Nevada and New York City. New York City -- what would Wells Fargo do?

Next is First Community Bancorp(FCBP Quote), which has a price-to-book of 1.2 and a market cap of $1.5 billion. It also has taken a tumble since the beginning of October.

On Oct. 18, First Community reported earnings of $22.2 million, or 77 cents a share, compared with net earnings of $21.4 million, or 88 cents a share, last year. The bank has 61 full-service community banking branches under the name Pacific Western, located in Los Angeles, Orange, Riverside, San Diego and San Bernardino counties. San Diego is its home base.

So now that I've given you two Southern California banks, let's move up the coast to Pacific Capital Bancorp(PCBC Quote), a Santa Barbara-based bank with a price-to-book of 1.7 and a market cap of $1.1 billion. On Aug. 1, the company beat second-quarter numbers primarily due to the sale of its auto-finance and commercial-equipment leasing portfolios. It reported net income of $33.2 million, or 70 cents a share, up from $11.5 million, or 24 cents a share, during the same quarter in 2006.

The bank, headquartered on the central coast of California, has 50 branches under the local brand names of Santa Barbara Bank & Trust, First National Bank of Central California, South Valley National Bank, San Benito Bank, Pacific Capital Bank and First Bank of San Luis Obispo.