Olympic National Bancorp, a Westside bank holding company, and Encino-based Valley State Bank announced Sunday that they expect to sign a preliminary agreement today to combine into a financial-services company with more than $220 million in assets.
The proposed agreement would team two young, fast-growing banking organizations that both lost money in 1983 and 1984 but have posted profits this year.
Plans call for Olympic, which owns a mortgage brokerage and a one-branch bank with $101 million in assets, to acquire Valley State, a five-branch bank with $119 million in assets, through an exchange of stock. The value of the proposed transaction was estimated at $7 million.
Olympic and Valley State are set this morning to sign a non-binding letter of intent to merge and are scheduled to reach a definitive agreement by Aug. 30. The transaction, which would require the approval of both companies' boards and state and federal regulators, is not expected to be completed for six to eight months.
The letter of intent provides for the board of the new company to consist of five directors from Olympic and four directors from Valley State. David C. Pierson, the current chairman of the Olympic bank holding company, would become chairman of the merged organization.
Jules Huppert, president and chief executive of Valley State, would carry the same titles with the new holding company. Olympic's current president and chief executive, M. Dale Lyon, would relinquish his current positions and become a consultant to the company.
Spokesmen said the acquisition would match banks with complementary strengths and market areas and also would help them achieve economies of scale. Valley State, all of whose branches are in the San Fernando Valley, specializes in precious metals loans and has been trying to shift from being primarily a lender to individuals into a primarily a business lender.
Olympic's one-branch Westside bank, Olympic National Bank, specializes in real estate and the entertainment industry.
Founded in 1979, Valley State lost $976,035 in 1983 and 1984 but turned a profit of $618,270 during the first six months of this year. Two-year-old Olympic lost $1.55 million in 1983 and 1984 but earned about $400,000 in the first half of 1985.
Officials of the companies said their organizations both have ample capital and were not pushed into a merger by regulators.