Rancho Santa Fe Bank May Be Sold to Costa Mesa Firm

Rancho Santa Fe National Bank has signed a letter of intent to be acquired by Costa Mesa-based Citizens Holdings for $12 million in cash, Rancho Santa Fe president James A. Boyce said Wednesday.

Rancho Santa Fe shareholders would receive $21.70 per share if the deal is completed. The bank has a book value of about $7 million, Boyce said. In recent trading, Rancho Santa Fe stock has sold for about $14. Rancho Santa Fe National has branches in San Diego, Escondido and in Rancho Santa Fe.

The letter of intent, which is subject to a definitive agreement, must also be approved by state and federal regulators and Rancho Santa Fe National shareholders.

Citizens, a private holding company with $114.6 million in assets, last month agreed to pay $17.5 million for Anaheim-based El Camino Bank with $110.2 million in assets. The proposed acquisition of Rancho Santa Fe, which had $103 million in assets as of March 31, would further Citizen Holdings’ plan to forge a coastal banking system that would stretch from Long Beach to the Mexican border.

“We’d like to have five or six banks with a total of about $1 billion in assets,” said Citizens Holdings president Paige V. Simpson. “With Rancho Santa Fe National, we’d be about a third of the way there with a total of $350 million in assets.”

Citizen’s bid for Rancho Santa Fe National Bank marked the third time in three years that the Rancho Santa Fe-based institution has signed a letter of intent to complete a merger or acquisition.

In 1985, Rancho Santa Fe abandoned a proposed acquisition of Hidden Valley National Bank of Escondido. Both institutions determined that “it would be better to go on” as independents, Boyce said Wednesday. A year later, Rancho Santa Fe opened its own branch office in Escondido.

In November, 1986, Rancho Santa Fe agreed to join three other independent banks that planned a merger which would have resulted in San Diego County’s second largest independent bank. But Rancho Santa Fe eventually backed away from the deal. First National Corp., National Bank of Fairbanks Ranch and National Bankshares of La Jolla completed the so-called “merger of equals” in 1987.

Praises Citizen Bid

Boyce on Wednesday described Citizen’s bid as “generous and fair, and the best part of the deal is that it will keep our little community here intact. No one’s leaving,” Boyce said. “It seems absolutely perfect.”

For Rancho Santa Fe shareholders, the deal would mean “an immediate pay-out of cash, and for many of the shareholders who have been with us since the beginning in March, 1982, it will be a good return on their investment,” Boyce said.

According to terms of the agreement announced Wednesday, Rancho Santa Fe’s management would remain intact. “That’s part of (Citizen’s) concept,” Boyce said. “The name, management and board will remain intact and there will be continuity in the local areas that we served.”

Citizens Holdings plans to operate El Camino Bank in Anaheim and Rancho Santa Fe National as separate entities. Australian industrialist Richard Pratt established Citizens Holdings in 1986 to acquire Citizens Bank of Costa Mesa.

Simpson, Citizens Bank’s president since its creation in 1972, was initially skeptical of Pratt’s promise to keep his management team in place. However, there have been “no changes” during the past two years, Simpson said. “Now bankers are calling me asking if we want to buy their banks.”

Boyce compared Citizens’ concept to San Diego-based BSD Bancorp, a holding company that owns all or part of nine banking businesses. However, BSD owns controlling interests in some of its subsidiaries, while Citizens plans to be the sole owner of its banks.

Blanket Liability Policy

Citizens Holdings also has acquired a blanket liability policy for its directors and officers, a move that could cut individual insurance premiums by about 30%.

Boyce met Simpson during the 1960s, when the two worked at what is now California First Bank. Discussions leading to the acquisition bid began about a month ago, Boyce said.

Rancho Santa Fe National, like Citizens Bank, caters to small businesses and professionals. El Camino’s four branches--in Anaheim, Fullerton and Tustin--have concentrated on the retail market.

Citizens Bank has two branches in Costa Mesa and one in Brea. It is seeking regulatory approval to sell its Brea branch to Mid City Bank of Los Angeles. With the sale of the branch and the acquisition of Rancho Santa Fe National, Citizens Holdings would operate nine banking offices.

Rancho Santa Fe reported that net income rose by 115% to $245,000 for the first quarter ended March 31, up from $114,000 during the previous first quarter. Total assets increased by 12.5% to $103 million from $91.9 million. Deposits rose by 11.7% to $94.6 million, compared to $84.6 million during the same quarter a year ago. Loans rose by 20% to $76.6 million, up from $63.5 million.