Buyout fever sweeps across Southland banking scene.

Cleaned-up banks, thrifts look to expand via acquisitions

An explosion of mergers and acquisitions has hit L.A. County financial institutions, with at least eight Southland banks and thrifts announcing plans to consolidate in recent months.

And local bank consultants say more marriages are in the offing, as banks and thrifts with newly cleaned-up balance sheets look to grow in the future.

Several factors are driving the mergers, including shareholders' pressure to achieve economies of scale, and therefore bigger profits, according to Edward E. Schmidt, co-director of the Findley Group, an Anaheim-based banking management consultant firm.

Also, many banks and thrifts have expanded management in recent years to work on complying with increased financial safety and soundness regulations and fair lending laws, he noted.

"An institution in the $200 million (in assets) range has in place a management team that can drive a $500 million in assets institution," Schmidt said.

Recent mergers and acquisitions include:

* Rolling Hills Estates-based Peninsula National Bank, a $50 million in assets institution, signed a letter of intent to acquire $100 million in assets Frontier Bank, according to a July 5 announcement by Frontier's parent, Ventura County National Bancorp. Frontier bank has two branches which are located in Wilmington and La Palma.

* Long Beach Bank announced July 1 it had entered into a definitive agreement to sell $565 million worth of its deposits and its six bank branches to Irwindale-based $50 billion-in-assets Home Savings of America. Orange-based Long Beach Bank stated it would keep its $647 million in assets and operate as a mortgage banking company after the sale.

* California United Bank, a $270 million-in-assets bank, announced in June it had signed a letter of intent to acquire Redondo Beach-based Bay Cities Bank, a two-branch, $65 million in assets institution. Dave Rainer, president of Encino-based CUB, said told the Business Journal last month that acquisition may be the first of a series.

* Pasadena-based CenFed Bank announced in April it had agreed to purchase Anaheim-based United California Savings Bank, an eight-branch, $458 million-in-assets institution.

* Ontario-based Chino Valley Bank, a $700 million-in-assets institution, announced June 24 it had completed a merger with $50 million-in-assets, two-branch South El Monte-based Western Industrial National Bank.

In addition to Southland institutions acquiring other Southland institutions, L.A. County's biggest bank, First Interstate Bancorp, has been snapping up banks and thrifts throughout California as well as in Arizona and Texas.

Since the beginning of 1994, that downtown L.A.-based bank has completed deals to acquire six banks and thrifts and announced signed deals to buy four more in Texas, Arizona and California.

Notably, First Interstate announced May 18 it had signed a deal to acquire $3 billion-in-assets Sacramento Savings Bank.

"There are more and more of these consolidations that have taken place this year," said Barry Rubens, chief executive officer of California Research Corp., a Santa Monica-based bank and thrift consulting firm.

Rubens said his phone has been ringing off the hook lately with calls from bankers seeking merger partners. "The tidal wave (of mergers and acquisitions) has started, in my opinion," he said.

"The wave of acquisitions and mergers has not crested and is in fact gaining momentum," said consultant Schmidt.

He noted that the mergers and acquisition phenomena is occurring statewide.

Currently there are at least 10 merger deals which have been announced but have not closed involving California banks or savings and loans, Schmidt noted. At least half of those were announced just in the last month, he said.

In addition, out-of-state banks are sniffing out merger opportunities, Schmidt said. "I would venture to say that in the next six to nine months there will be new (bank and thrift) names that will be appearing on local financial pages," he said.

Stan Cardenas, chief deputy, superintendent of banks for the state Banking Department, said, "I think there will be continue to be additional mergers."

Merger fever "is not uncommon for a recovery phase of a recession," he said.

"Now that the recession is by and large over, people are starting to evaluate other institutions and make decisions for future strategy," Cardenas said.