Farmers & Merchants Bank of Long Beach, which acquired insolvent Capistrano National Bank last April, has gained control of an ailing Seal Beach bank by picking up nearly 70% of the stock in a friendly takeover, F&M; President Kenneth Walker said Wednesday.
The $1.5-million merger agreement with Town & Country Bank, he said, has been signed and presented to the state Department of Banking, which must approve the transaction before F&M; can operate the Seal Beach bank.
The takeover will give F&M; a total of seven branches in Orange County. It has maintained an office in Garden Grove since 1955, added two branches in 1981 and gained three with the Capistrano takeover. Farmers & Merchants has nine offices in Long Beach and Lakewood.
F&M; had set Wednesday as the deadline for Town & Country shareholders to turn in their stock, but Walker said the deadline will be extended indefinitely while the banks await state approval of the takeover.
Walker said he expects approval and a completed transaction within 45 days.
Until the transaction is completed, Town & Country will continue to operate its lone office on Seal Beach Boulevard but will make its management decisions available to F&M; for review, Walker said.
"Town & Country has very stable depositors and is in a good community, so we don't expect any run-off (withdrawals of deposits) on them," he said. "It was just some liberal credit extensions that caused their difficulty, and those are pretty much all cleared up now."
F&M; offered $5 a share in cash in a last-minute bid four weeks ago, exceeding a bid by Pacific Inland Bank in Anaheim, which had offered $3 a share in cash plus the possibility of an additional cash payment of $5.25 per share within two years, depending on the extent of Town & Country's loan losses. Town & Country had 283 shareholders holding 304,545 shares as of Dec. 31.
"I think it is very good for our stockholders," Town & Country President Larry Clark said of F&M;'s offer at the time. Town & Country needed to raise money because it had only $500,000 in capital and about $33 million in assets, leaving its capital-to-asset ratio far below the 7% standard required by government regulators.
Walker said F&M; will probably retain the officers and employees of Town & Country.
The Seal Beach bank, which opened in March, 1980, will be operated as the Town & Country branch of Farmers & Merchants Bank, he said, although the "Town & Country" logo will be minimized.
F&M; is ready to launch a marketing effort to increase its customer base in Orange County.
After the 78-year-old institution acquired Capistrano National's assets, about $10 million in deposits--nearly a third of Capistrano's total--was withdrawn from the bank, a run Walker said was expected.
"A lot of it was unstable deposits from out of town--broker-type funds," he said. "We're not looking for those kinds of deposits. The Orange County deposits have stayed with us, and that's what we want."
F&M; closed Capistrano National's temporary Irvine branch but kept open the main branches in San Juan Capistrano, Fullerton and Santa Ana.