The consortium of California community banks trying to acquire 61 branches being divested by Wells Fargo & Co. is facing an uphill battle.

The group, which had to work fast to formulate a joint bid against some larger competitors, now must overcome Justice Department misgivings and divergent computer systems, among other obstacles.

But the consortium, put together by Hovde Financial Inc., sees the same opportunity as its rivals - a rare chance to increase California market presence in a single, clean transaction.

The divestitures must be completed by next Monday, the scheduled completion date for Wells Fargo's merger with First Interstate Bancorp. Initial bids for the branches were received March 11, and final bids were due Monday. The final selection from at least nine candidates could be made as early as today.

Sources say the community bank consortium is made up of Westamerica Bank, San Rafael; Bank of Stockton; Tri Counties Bank, Chico; Vallicorp, Fresno; and Grossmont Bank, San Diego. Several other banks could be in the group when the bidding is complete.

The consortium has one group of banks based in the northern half of the state and another in the southern half, which may indicate that any acquired branches would be distributed along regional lines.

The greatest concentration of branches to be divested is San Diego. Wells will sell off nine branches in the city, another six outside it in San Diego County, five in Riverside County to the north, and one in Imperial County, to the east.

Many say the Department of Justice prefers that the branches, with $2.54 billion of deposits, be taken over by a large bank, to ensure competitiveness with Wells. But with none of the other finalists viewed as having a lock, the consortium isn't necessarily out of the running.

"It depends on how the consortium's bid is constructed," said Joe Morford, an analyst in San Francisco with Alex. Brown & Sons. "If it's done so that within the various markets the community banks have a competitive presence, it has a better chance.

The Justice Department "wants to preserve the competitive landscape in the particular markets," he added. "It wants another competitive player there."

Meanwhile, from a practical standpoint, a multibank group would probably have more trouble than a single buyer in making the conversion from First Interstate's computer systems.

Wells has said speed is essential - and distributing data among multiple institutions, each with a different system, would be highly complex.

The group could overcome part of the problem by first shifting the information to a single bank's system or to an outside agent or processing company, deferring completion of the conversion to a later date.

One factor in the Hovde group's favor is that the Washington-based firm has pulled off that feat before.

Hovde Financial put together a consortium last year that acquired 27 branches of Metropolitan Financial Corp. in four states after it was bought by First Bank System Inc.

Those competing in the Wells bidding include Zions Bancorp. of Salt Lake City (a 4.9% owner of Grossmont Bank); H.F. Ahmanson & Co., Irwindale, Calif.; Great Western Financial Corp., Chatsworth, Calif.; Glendale Federal Bank, Glendale, Calif.; Union Bank, San Francisco; Bank of the West, San Francisco; U.S. Bancorp, Portland, Ore.; and SDN Bancorp, Encinitas, Calif.

SDN Bancorp is run by Robert P. Keller, who sold New Dartmouth Bank in New Hampshire to Shawmut National Corp. in 1993. He has said his goal is to build a network of community banks throughout California.

SDN is said to be backed by investors who could afford the entire package. It owns $58 million-asset San Dieguito National Bank in Encinitas and $146 million Liberty National Bank, Huntington Beach. It is in the process of acquiring $219 million Commerce Security Bank, Sacramento.

A knowledgeable source said Mr. Keller has committments from 25 institutional investors to supply up to $300 million for SDN's bid, in a package put together by the investment banking firm Friedman Billings Ramsey & Co. The investors were said to include Fidelity Investments, the Janus mutual fund family, Wellington Management Co., and T. Rowe Price.

Barton Crockett contributed to this article.

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