Disagreement about whether their negotiations should be publicly disclosed has transformed merger talks between neighboring Southern California banks into what one is characterizing as a hostile takeover attempt.

After a weeklong public relations campaign, a small community bank in the tony suburb of Fallbrook has flatly rejected a pricey buyout offer from San Diego-based Bank of Commerce.

The proposed acquisition of Fallbrook National Bank, which involved an exchange of two Bank of Commerce shares for every five Fallbrook shares, would have paid about three times book value. But Fallbrook officials say that such a merger would hurt their employees and community, and that Bank of Commerce's stock is overvalued.

But Peter Q. Davis, chairman and chief executive officer at $376 million-asset Bank of Commerce, says he isn't satisfied with the decision by Fallbrook's management and plans to appeal to the $90 million-asset bank's shareholders for support.

"We think this'll go through and we will pursue this thing vigorously," he said. "The shareholders will see the tremendous value here. The board has misjudged the shareholders' desires, and if we go to the shareholders, we'll get overwhelming approval."

The determined effort by Bank of Commerce, coming on the heels of the battle for Chatsworth-based Great Western Financial Corp. and last year's struggle for First Interstate Bancorp, illustrates the degree to which hostile takeovers have finally arrived in banking.

And observers say such actions are likely to become more frequent as buyers grow impatient with sellers' demands.

"Banking has been more immune to hostile attempts, but it's going to be more prevalent than it has been in the past," said Jerry Jones, managing director of Duff & Phelps in Los Angeles. "Sellers feel pressured, and buyers feel like time is ticking away."

In the Fallbrook case, Bank of Commerce, the nation's leading bank lender of Small Business Administration-backed loans, coveted Fallbrook's attractive deposit base as a means of funding its active loan growth.

The public battle started after Bank of Commerce privately offered to buy Fallbrook for stock now worth about $26.4 million.

Fallbrook wanted to keep negotiations private, but Bank of Commerce officials became worried after trading activity in Fallbrook stock suddenly picked up. They proposed issuing a press release disclosing the talks, but Fallbrook officials preempted that with their own announcement, portraying the offer as hostile.

Bank of Commerce came back with its own statement, threatening to ask for an advisory vote of shareholders if Fallbrook refused to recommend the offer to shareholders at the annual meeting in April. Fallbrook did refuse, and Mr. Davis said Bank of Commerce is now considering its next step.

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