Southern California's Western Bancorp announced its fourth acquisition deal since February 1996, positioning itself to become the eighth-largest bank based in the state. The Laguna Niguel-based company would pay $198.6 million in cash and stock for $672 million-asset Santa Monica Bank. The price is about 2.5 times book value and 20 times earnings. The deal, expected to close in January, would give Western the dominant market share in Santa Monica, a ritzy suburb west of Los Angeles. Santa Monica Bank and Western Bank would be merged to form a $1.1 billion-asset state-chartered bank; the new entity would retain the Santa Monica name and have the third-largest share in all its markets. Western Bancorp would have $2.1 billion of assets and 34 branches in Los Angeles and Orange counties. "The combination with Santa Monica Bank is a continuation of Western's evolution as the premier community bank in California," said Western's chairman and chief executive officer, Hugh S. Smith. Western Bancorp, which has rapidly evolved into a bank-eating machine, earlier announced plans to buy Anaheim-based SC Bancorp, the $500 million- asset parent of Southern California Bank. That acquisition, which received regulatory approval last week, is slated to close in early October. Southern California Bank would be merged into Newport Beach-based National Bank of Southern California, which Western acquired when its purchase of California Commercial Bankshares closed in June. The merged bank, to be called Southern California Bank, would have $1 billion of assets in Orange County. The Santa Monica Bank and SC Bancorp deals mark the latest stage in the rise of Western Bancorp since Castle Creek Capital, a La Jolla-based investment partnership, purchased a majority stake two years ago. At the time Western, then called Monarch Bancorp, had only one subsidiary, $50 million-asset Monarch Bank. Castle Creek injected about $10 million into struggling Monarch in March and September 1995, and then set off on an acquisition binge. It made its first purchase, of Western Bank, last September. "Our acquisition strategy is somewhat opportunistic," said Western president Matthew P. Wagner, who is slated to take over as chief executive officer in January, when Mr. Smith steps down. "If there are good properties that are out there that fit our philosophy, we'll do them." But growth also has its costs, said Randall Kinoshita, bank analyst with Burford Capital in La Crescenta, Calif. Western reported a second-quarter loss of $834,000, after taking about $3.4 million in merger charges. And should the Santa Monica deal be completed entirely in cash, Mr. Kinoshita said, it would put about $120 million of goodwill, about $17 per share, on the books. "I don't question where they're going to buy people," he said. "I just question the price that they're paying. These guys are stepping up big to build assets." u

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