Monarch Bancorp of Laguna Niguel, Calif., is using the backing of several well-heeled investors to buy an institution nearly six times its size.

Executives of Monarch and Los Angeles-based Western Bank announced a definitive agreement March 21 for $70 million-asset Monarch to acquire $400 million-asset Western.

Monarch owns 16-year-old, one-branch Monarch Bank. The deal with Western, according to its president, Joseph J. Digange, is the first in a series of acquisitions planned by Monarch.

Mr. Digange said Monarch, which made a $4.3 million profit in 1995, has the backing of several big investors, including Mutual Series Fund, controlled by the well-known activist shareholder Michael F. Price; and the New York investment firm Keefe Partners.

"Western Bank is going to be the centerpiece for planned expansion by the investors involved with Monarch," he said.

Regulatory filings show Monarch Bank lost much of its capital to losses in 1993 and 1994 but was recapitalized in the first quarter of 1995.

"Western Bank is an extremely well-run organization and has consistently been one of the most profitable banks in California," said E. Lynn Caswell, president and CEO of Monarch. "We believe that Western Bank will provide the foundation for our goal of building a large community banking organization in Southern California."

The definitive agreement would give Western Bank stockholders $17.25 per share if the merger closes by Sept. 30 or $17.50 if the deal closes between Sept. 30 and yearend.

Mr. Digange said Western would continue to concentrate on its niche market.

"Our bank is still a community bank, and it's still dedicated to serving our community," he said.

If the deal gets stockholder and regulatory approvals, Western Bank's current chairman and chief executive, Hugh S. Smith Jr., would be elected chairman and chief executive of Monarch Bancorp, and Mr. Digange would assume the duties of CEO at Western in addition to being president.

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