Talks End, Clouding 3-Way Bank Merger

A three-way merger that would have created a $300-million banking institution in Orange County was canceled Tuesday when talks between the holding companies for Santa Ana-based National Bank of Southern California and El Camino Bank in Anaheim were broken off.

It was unclear late Tuesday whether similar talks between the holding companies for National Bank of Southern California and Corporate National Bank, also in Santa Ana, were canceled as well.

None of the principals in the three-way deal could be reached for comment, and the brief written announcement that was hand-delivered at 6 p.m. Tuesday contained no explanation for the cancellation.

When the proposed merger was announced March 3, it was termed “a very friendly merger” by El Camino Bancorp Chairman Stanley Pawlowski. He said the deal was “very prudent for positioning ourselves” for the 1991 inauguration of interstate banking in California.

Tuesday’s terse announcement, written on El Camino stationery, said simply that Pawlowski and William Jacoby, chairman of California Commercial Bankshares--the holding company for National Bank of Southern California--had terminated negotiations.

Nothing was said about the third player, 4-year-old Corporate National Bank.

Under the original plan, Jacoby’s 4-year-old bank would have acquired Corporate National and 17-year-old El Camino in an all-stock transaction.

El Camino’s shareholders would have wound up with 17% of the surviving California Commercial Bankshares, while Corporate National’s shareholders would have owned 33% of the newly merged company.

The deal initially was envisioned as a means of creating a larger, stronger bank that would be able to compete in the area market after 1991, when state law will allow out-of-state banks, including East Coast giants like Citibank and Manufacturers Hanover, to acquire California banks.

Independent banking consultant Gerry Findley said Tuesday that he was not aware that the merger had collapsed but that he wasn’t surprised, either.

In addition to the difficulties of meshing personnel and personalities, a three-way merger is difficult because each of the parties is looking for the best deal for its own shareholders, generally at the expense of the other players’ investors, he said.

Findley said he did not believe the cancellation had anything to do with the relative financial health of the two banks.

When the merger plans first were announced, National Bank’s holding company had reported Dec. 31 assets of $130.2 million, deposits of $118.2 million and shareholder equity of $8.3 million. On Tuesday, the bank reported March 31 assets of $126.5 million, deposits of $114.9 million and shareholder equity of $8.65 million. The holding company, whose major asset is the bank, reported first-quarter earnings of $320,000, contrasted with net income of $177,000 a year earlier.

El Camino had reported Dec. 31 assets of $105.3 million, deposits of $94.7 million and shareholder equity of $8.5 million. For March 31, the bank holding company reported $109.1 million in assets, $98.2 million in deposits and shareholder equity of $9 million. First quarter earnings for the company were $384,000, compared to $339,000 a year earlier.