CommerceBank in Newport Beach has agreed to acquire California City Bank in Orange for about $8.7 million cash in a deal that will boost CommerceBank's assets to more than $300 million.
Clyde Gossert, president of 10-year-old CommerceBank, said California City's two offices--both in Orange--will become CommerceBank branches if the deal is completed.
Both banks are profitable and considered well run, industry consultants said.
CommerceBank, one of the county's largest independent banks, earned $1.76 million for the six months ended June 30 and posted a $2.54-million profit for 1988, Gossert said.
Harvey Ferguson, president of California City, said the bank's parent company reported a profit of $255,000 for the first six months of the year. For 1988, it posted a $629,000 profit after a $504,000 loss in 1987. The bank is the parent company's primary asset.
CommerceBank concentrates on commercial and industrial lending, while California City divides its attention almost equally between business and consumer lending.
Gossert said CommerceBank sees the planned acquisition as an opportunity not only to increase its size but to expand its county customer base. To that end, he said, the combined banks would continue to give consumer banking as much weight as business banking.
Ferguson said that California City Bank, founded in 1983, had not been actively seeking a buyer but that the offer made by CommerceBank "seemed to make sense from the standpoint of the size of the combined banks and from the profits it would mean to our shareholders."
Ferguson said the price called for in the letter of intent signed by officials of the two banks Wednesday is about 1 1/2 times his bank's current book value per share.
Industry analysts said the price represents an average payment for a small but healthy community bank.
California City had total assets on June 30 of about $65 million. CommerceBank, the wholly owned subsidiary of CommerceBancorp, had assets of about $239 million and has a loan office in Long Beach and full-service offices in Newport Beach and Costa Mesa.
The deal is subject to execution of a final negotiated acquisition agreement and approval by government regulators and California City Bank's 310 shareholders.
Gossert said the merger is not expected to be completed until early 1990.