On Dec. 30, First CaliforniaFinancial Group Inc., the holding company for First CaliforniaBank, announced that it had agreed to buy the Electronic BankingSolutions division of Palm Desert National Bank for an undisclosedsum.As part of the deal, First California got James Tingey, PalmDesert’s division president. The Palm Desert division produces $3million in annual revenues, and $55 million in core deposits.
The deal will take First Californiainto the prepaid card issuing business. Palm Desert was an activeprepaid card issuer, providing services for program managers suchas nFinanse and PR1MACard. On its Web site, the company offeredissuing services across a variety of segments, including gift,travel, teen, and general purpose reloadable cards.
The deal should not be seen asbanks looking to escape the business, however. Palm Desert appearsto be reorganizing itself, and has had financial trouble in therecent past. According to the FDIC, it lost $19.54 million in 2009,and suffered continuing losses through the third quarter of 2010(final numbers are not yet available). The company sold two of itsthree branches to Southern California Bank in November.
Additionally, the retention ofJames Tingey by First California shows that the buyer thinks thebusiness is reasonably well-run. The real question is what does theprice paid say about First California’s expectations for theprepaid business.
Although this is unknowable, itseems fair to say that banks still look at the prepaid business asone worth building or buying their way into.