2nd of 3 Banks Withdraws From Merger Proposal : Corporate National President Informs Stockholders by Letter

The other shoe has finally dropped in the proposed three-way merger that would have created Orange County’s largest bank.

Corporate National Bank in Santa Ana pulled out of the deal as of April 30, according to Gary M. Wrigley, the bank’s president, who notified shareholders in a letter Wednesday about the board’s decision to withdraw.

“We rethought the merger and decided it was not good for us,” Wrigley said in an interview.

Earlier last month, El Camino Bank in Anaheim also decided to bow out of the merger being put together by National Bank of Southern California, the Santa Ana institution that has been outperforming many older banks in its four-year existence.

William Jacoby, chairman of National Bank, could not be reached yesterday. But in an earlier interview he said he expected Corporate National to pull out of the merger after El Camino was no longer part of the deal.

The proposed merger would have folded El Camino and Corporate National into National Bank’s operation in separate deals that would have produced a bank with combined assets of more than $288 million.

One of the unique aspects of the proposed merger was that it would have involved three healthy banks, each with solid managements. But it was that unique aspect that played a part in El Camino’s decision to pull out. The bank was dissatisfied with the role its top management and directors would have had in the new company.

It was the older, established El Camino with its four branches and its retail activities that would have provided the broader market that the other two banks were looking for, Wrigley said. Both Corporate National and National Bank are single-branch operations that cater primarily to a business clientele.

The 17-year-old El Camino was getting a premium price for its shares while the 4-year-old Corporate National was willing to sell out below its value to be part of the bigger and probably more valuable combination, Wrigley said.

But without El Camino, a two-way merger did not justify taking such a hefty discount in price, he said. Under the proposed merger, Corporate National would have been sold to National Bank in an all-stock deal that would have given Corporate National shareholders .66 times book value, or shareholder’s equity, when current sales are going at 1.5 or more times book value.

Corporate National is the smallest of the three banks, with $52.6 million in assets. El Camino has $105.3 million in assets and National Bank has $130.2 million in assets.

Following El Camino’s lead, Corporate National is looking at other merger or acquisition possibilities but does not plan to get involved in another three-way merger.