Zions Bancorp is the latest out-of-state institution seeking a slice of Southern California's rebounding retail market. The Salt Lake City-based bank late Monday said it had agreed to acquire $720 million-asset GB Bancorp, the parent of Grossmont Bank of San Diego, in a stock swap valued at $173 million. Zions, with $7.2 billion of assets, recently bought a public finance firm in Oakland, Calif. - a deal that closed Monday - but the San Diego acquisition would represent Zion's first retail presence in California. "We don't have any intention to blanket the state of California," said Harris H. Simmons, president and chief executive of Zions. "I view this as not so much a California strategy, but as a San Diego strategy. We would like to grow and have a more significant presence in that area." Mr. Simmons cited the region's strengthening economy, which has attracted other out-of-state institutions to the market recently, as a reason for the move. Pacific Century Financial Corp. of Honolulu, for example, recently agreed to buy CU Bancorp of Los Angeles, and Seattle-based Washington Mutual Inc. has quadrupled its size in the last year with two large acquisitions there. Analysts said the proposed price - 3.3 times book value and 16.8 times expected 1997 earnings - is a tad high, but reasonable. The deal, which is subject to regulatory and shareholder approval, is expected to add to earnings by yearend, Mr. Simmons said. Zions expects to incur a $2 million merger-related charge in the fourth quarter, when the deal is scheduled to close, the bank said. "There's potential in San Diego for above-average returns, so being well- positioned there now makes a lot of sense," said Norman Jaffe, an analyst with Fox Pitt Kelton. "This is consistent with Zions' approach, which is to seek out community- oriented banks," Mr. Jaffe added. "I expect these acquisitions to continue."
Mr. Simmons said he expects to keep the Grossmont name and management. Allan W. Severson, Grossmont's CEO, would remain in that position and join Zions' executive management team, Mr. Simmons said. The deal would be Zions' fourth since March. It has agreed to buy small banks in Nevada and Idaho and 32 branches from Wells Fargo & Co. Zions has held a 4.5% stake in Grossmont, the oldest and largest independent in San Diego County, since October 1995.