Feisty Bank in Southern California Wraps Up Another Buyout Deal

A Southern California community bank has a deal that would make it the largest independent in wealthy Orange County.

Laguna Niguel-based Monarch Bancorp has agreed to buy California Commercial Bankshares, Newport Beach, for more than $35 million in stock. That's about 1.6 times California Commercial's estimated yearend adjusted book value.

The deal would boost Monarch's asset size to about $840 million, including about $425 million in Orange County. That would propel the two- bank holding company past $389 million-asset Eldorado Bancorp, Tustin, making it the largest independent in the county.

"It will give us a substantial presence in Southern California," said Monarch chairman Hugh S. Smith Jr. "We can build on that and fill a void created by the major banks merging."

The Monarch deal, together with several other recent announcements, appears to signal the start of the long-awaited consolidation in Southern California. With the local economy finally on the upswing and banks less focused on asset quality, potential acquirers both in and out of the market are taking a fresh look at the region.

"There's a substantial amount of discussions going on right now, and this will shape the framework of future actual transactions, from a competitive standpoint," said Jerry Jones, managing director of Duff & Phelps in Los Angeles.

In fact, Eldorado itself has been rumored as a buyout target for quite some time, Mr. Jones said. The company's price has soared almost 30% since July, to about $20. And he said the takeout price for Eldorado will probably set the standard for the coming consolidation in Southern California.

"I think it'll be pretty busy in the first half of next year," Mr. Jones said. "These deals are going to keep rolling in pretty fast now."

Eldorado was trading at $22.25 at midday Friday.

California Commercial's five-branch National Bank of Southern California would absorb two-branch Monarch Bank, Mr. Smith said. But Monarch Bancorp would remain a distant also-ran in Orange County market share - 15th, with only 1.1%. BankAmerica Corp. would have 18.1%, Wells Fargo & Co. 14.1%, and H.F. Ahmanson & Co. 11.4%.

Shareholders of $349 million-asset California Commercial would receive eight Monarch shares for each of their shares. The sale, which is still subject to shareholder and regulatory approval, is expected to close in the second quarter, possibly by May 31.

The deal, which would nearly double Monarch's size, would not be its first big gulp. Monarch had only $75 million of assets earlier this year, but on Sept. 30 it swallowed $410 million-asset Western Bank, after raising more than $45 million through a private placement. The $63 million price was about 1.7 times book value - and almost equal to the buyer's assets.

Monarch has also announced plans to seek a listing on Nasdaq's national market before the California Commercial purchase closes. The post-purchase company would have about 1,200 shareholders, Monarch said in a press release, and a "more active market" in the stock is expected to develop.

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