CU Bancorp's lengthy search for a partner came to an end Wednesday when it announced plans for a merger of equals with Home Interstate Bancorp.
The combination would create the ninth-largest independent bank in Southern California, with assets in excess of $810 million.
"CU will be better able to compete with the other independents," said Campbell Chaney, an analyst with Rodman & Renshaw in San Francisco. "This gives them more muscle and financial strength than they had before."
CU Bancorp is the $311 million-asset, Encino-based holding company for California United Bank, and Home Interstate Bancorp, which has assets of $425 million, is the Signal Hill-based parent company for Home Bank.
The deal comes just a day after CU Bancorp announced it was nearing completion of its acquisition of $69 million-asset Corporate Bank, another move designed to expand CU's influence.
The new entity does not yet have a name, but current CU Bancorp chairman and chief executive Stephen G. Carpenter would hold those same titles for the new company, and current Home Interstate Bancorp president and chief executive James P. Staes would serve as vice chairman. David Rainer, president and chief operating officer of CU Bancorp, would become president.
"This is something we've been working on for several months," said Mr. Rainer. "This deal allows us to make the next step in terms of growth. We bring a strong credit side and a strong loan production side, while Home Bank brings a strong retail side. This is a tremendous match in terms of strengths and weaknesses."
The combined company, with 22 locations serving Ventura, Los Angeles, and Orange counties, would have equity of about $85 million.
"CU Bancorp has been looking to expand for a couple of years, but they had been having trouble because they didn't want to overpay," said Mr. Chaney, the analyst. "CU has had a rock-solid balance sheet, but it was actually too strong. They were looking to leverage the balance sheet."
The exchange of stock is expected to result in Home Interstate Bancorp shareholders owning a majority of the new company -approximately 52% to the 48% to be owned by CU Bancorp shareholders.
Mr. Rainer said Home Bank's 45-year history was especially attractive.
"They've survived through lots of different economic situations, and are a very highly regarded bank in Southern California," he said.
CU Bancorp has also had its share of problems. In 1992, for example, it suffered an $8.2 million loss as a result of the real estate crisis. It brought in new management, led by Mr. Carpenter, in June of that year, and the next year the bank was back in the black. The institution has since dramatically changed its focus from a real estate lender to a commercial bank.
CU Bancorp had year-to-date net income at Sept. 30, 1995, of $2.1 million, or 44 cents a share. Shareholders' equity totaled $32.1 million, or $6.92 a share.
For the same period, Home Interstate Bancorp reported year-to-date net income of $2.6 million, or 65 cents per share. Shareholders' equity totaled $50 million, or $12.44 per share.
