Ailing Bank in Seal Beach Accepts Offer : Farmers & Merchants Bids $5 a Share Cash for Town & Country

Town & Country Bank shareholders have rejected a takeover offer by Pacific Inland Bank, as a second bidder made a sweeter cash offer for the troubled Seal Beach-based bank at the 11th hour.

Farmers & Merchants Bank of Long Beach offered $5 a share in cash for all outstanding Town & Country stock, just two days before bank shareholders were scheduled to give their final approval to the Pacific Inland acquisition.

“You don’t win ‘em all . . . ,” said Bob Hilton, senior vice president of Anaheim-based Pacific Inland. “Somebody beat us out. Well, that’s how you play the game.”

Pacific Inland of Anaheim had signed a definitive agreement in January to acquire the ailing institution for $3 a share up front and the possibility of $5.25 more within two years depending on the extent of Town & Country’s loan losses.

‘Very Good’ Offer

But the last-minute offer of $5 a share in cash from Farmers & Merchants was too good to refuse.

“I think it is very good for our stockholders,” said Town & Country President Larry Clark. “In today’s market it would be hard to go to the general public with a sale of stock, which is why we entered into the agreement with Pacific Inland. . . . We had to raise capital.”

As of June 30, Town & Country had less than $500,000 in capital and about $33 million in assets, putting its capital-to-assets ratio --a measure of a bank’s financial health--far below the 7% standard required by government regulators. The bank had been hit hard by loan losses last year and posted a net loss of $212,000 for the first six months of 1984. The first six months of this year were somewhat better, but the bank still reported a loss of $160,191.

Town & Country was given a June 30, 1985, deadline to raise additional capital but Clark said that state and federal banking regulators have been patient while the bank attempts to find a merger partner.

Disappointed but Understanding

Pacific Inland officials expressed disappointment that it lost the bid, but Hilton said it was understandable why Town & Country shareholders turned them down Thursday.

“Two bucks more in your pocket now is better than five bucks down the road,” he said.

Town & Country’s approximately 250 shareholders have until Oct. 16 to tender about 304,000 shares of stock to Farmers & Merchants. During that time, Clark said, a merger agreement will be put together, and the shareholders will subsequently vote on the offer.

Kenneth Walker, president of Farmers & Merchants, said Friday that Town & Country offered his bank “an outstanding location” and market area filled with longtime customers who have moved from Long Beach. Town & Country has one office with about $33 million in deposits, in part from residents of adjacent Leisure World.

If Farmer’s offer is ultimately approved by Town & Country, it will be the bank’s second acquisition foray into Orange County in less than a year. Earlier this year, Farmer’s and Merchants bought the three offices of insolvent Capistrano National Bank.

Won’t Make New Offer

Farmers & Merchants opened its first branch in Long Beach in 1907 and currently has 15 branches throughout Southern California. As of June 30, the bank reported assets of $758 million and deposits of $621 million.

Pacific Inland officials said the bank would not make a counter offer but would continue to look for institutions to acquire.