Confirming its commitment to expansion, Zions Bancorp announced that it has agreed to buy Eldorado Bancshares of Laguna Hills, Calif., for $190 million.
The acquisition deal is the Salt Lake City banking companys second since its merger with First Security Corp. fell through this year.
Zions has been trying to beef up since Wells Fargo & Co. bought First Security a deal that pushed Wells to No. 2 in the Utah market. Zions merger with First Security fell apart after First Security made unexpected profit warnings.
Since then Zions has been scouting acquisition opportunities in markets where it does not have a big presence, such as California, Texas, and the Pacific Northwest. Just a month ago Zions agreed to buy Draper Bancorp, also based in Salt Lake County, which increased Zions share of deposits there by $213 million, to about $1.7 billion.
In buying Eldorado, Zions would make its entry into Southern Californias coveted Orange County market. Eldorados two subsidiaries Eldorado Bank and Antelope Valley Bank are to merge into Zions California Bank & Trust, the sixth-largest bank in the state, with assets of $6.9 billion.
Each share of Eldorado stock will be exchanged for 0.23 shares of Zions.
The combined entity will have 5% market share of commercial bank deposits in the Orange County, and the deal would bring Zions deposits in the county to $1 billion, Robert Sarver, president and chief executive officer of CB&T, said in an interview.
CB&T plans to reduce costs by 20% in the deal; that would bring Eldorados cash efficiency ratio to the same level as CB&Ts.
Zions announcement of the deal said the merger is expected to increase its earnings per share immediately, exclusive of any cost savings.
Analysts and investors applauded the deal, which was announced late Thursday and is to close in the second quarter upon approval from bank regulators and Eldorado shareholders.
The economics penciled out well, said Joe Morford of Dain Rauscher Wessels. Given the price they are paying and the cost-saving opportunities, the deal should be accretive to earnings.
Zions expects to continue making similar purchases. The bank is focusing its efforts in and around Los Angeles, Orange County, and the San Francisco Bay Area, Mr. Sarver said.
Zions shares closed Friday at $57, down 2%. Eldorado closed at $12.75, up 47.8%.
