A battle for Orange County bragging rights is raging as consolidation heats up among Southern California community banks.
Twice within a week's time, two significant players in a county containing some of Los Angeles' toniest suburbs agreed to a combination that would create the largest independent banking company there. In the more recent deal, announced Dec. 24, Huntington Beach-based Commerce Security Bancorp agreed to buy Eldorado Bancorp, Tustin, for about $91 million in cash. The acquisition would create an $850 million-asset company, with separate subsidiaries in Orange County and Sacramento.
That upstages Eldorado's rival, Laguna Niguel-based Monarch Bancorp, which five days earlier had gleefully revealed it would buy California Commercial Bankshares in Newport Beach to create an $840 million-asset institution with operations in Orange County and Los Angeles.
"We are committed to the Southern California market," said Commerce Security chairman and chief executive Robert P. Keller. "The addition of Eldorado will enhance Commerce Security's local presence and its management expertise."
Commerce Security has two subsidiaries in Southern California and one in Sacramento. The three banks had been purchased in 1995 and early 1996 by Dartmouth Capital, an investor group from Gilford, N.H., that later formed Commerce Security.
"It makes sense," said Jerry Jones, managing director with Duff & Phelps in Los Angeles. Commerce Security "has been looking for a long time to expand their operations in Orange County and Southern California."
Analysts say such deals aren't likely to be the last in the Southern California market, which has been slow to consolidate. Many of the area's banks were among the hardest hit in the state during the recent recession. Now that they are healthy again and flush with newly infused capital, many are looking to sell out.
"Feeding frenzy," said Scott Burford, principal of La Crescenta-based Burford Capital, an institutional brokerage, describing the activity. "It's the tip of the iceberg. There's still way too many banks here."
But although the dual acquisitions may encourage other small banks in the California marketplace to consider a combination in order to stay competitive, the deals aren't likely to spur much in Orange County itself, Mr. Burford said. That's because there aren't many institutions of size left in that smaller market to buy.
However, he said, the deals might prompt the formation of several new banks in the next 18 months. "I think some people are going to start some banks down there," he said. "Anytime you put a bunch of bankers out of work, there's going to be new banks starting."
At the time they announced their deal, Monarch officials had specifically noted that they would surpass Eldorado as the largest Orange County-based banking company.
