Crown Bancorp OKs Merger of Firm’s 2 Units

Directors of Crown Bancorp on Wednesday approved the merger of the company’s two subsidiaries, Bank of Coronado and Capital Bank of Carlsbad. Meanwhile, the prospects of a proxy fight among various board factions seem to have quieted, sources close to Crown said.

The merger--under which Capital Bank will become a branch of Bank of Coronado--will mean a “stronger real estate loan outlet” in the expanding North County, “which we currently don’t find in Coronado,” according to a letter mailed to Crown shareholders by Chairman Dustin Rose.

The letter also revealed that Mike Justice has been named interim president of Bank of Coronado. Justice most recently was president and chief executive of First Charter Bank in Los Angeles, but he left the company last month without elaborating publicly on his reasons.

Justice replaces James G. Klingensmith, who abruptly resigned last week after the board voted against selling Capital Bank to an unidentified group of buyers. Klingensmith, who had met with a broker representing the group before the meeting, voted in favor of the sale.

Klingensmith’s resignation and the subsequent withdrawal of more than $1 million from the bank by former Chairman Richard Maitland sparked rumors that a proxy battle was looming for control of Crown and its subsidiaries.

In fact, two weeks ago, Maitland wrote a letter to Crown directors threatening to call a special shareholders meeting if Rose weren’t removed as chairman.

Maitland and several Mexican business executives with whom he is associated control as much as 26% of Crown’s common shares, and that group could muster as much as 39% of the shares in a proxy fight, according to Crown sources.

(About one-third of Crown’s stock is owned by non-resident aliens, primarily from Mexico.)

At issue was whether to sell Crown to outsiders, thereby giving up local control of Coronado’s only locally based financial institution. Maitland wanted to sell the company, contrary to the wishes of a majority of Crown directors.

This week’s press coverage of the possible corporate battle for control of Crown has served to quash that possibility, sources said Wednesday.

Crown has been plagued for a year with controversies, starting with Maitland’s resignation last summer and continuing with the company’s first quarterly loss--$261,000 in the first quarter--and the arrest and indictment in the spring of a San Ysidro bank branch manager on charges that she laundered money.