Security Pacific Acquires Bank in N. California : $62-Million Deal Involves 44 Branches in Bay Area

Security Pacific National Bank said Thursday that it will continue its expansion in Northern California with the acquisition of Central Bank for $62.7 million in stock.

Central Bank, with assets of $1.2 billion, has 44 branches in San Francisco’s East Bay area. Its branches are scattered among more than 30 towns and cities, many of them places where Security Pacific does not have a branch.

Central Bank is the 17th-largest bank in California. After several years of small but steadily growing earnings, the bank is suffering substantial losses this year from problem loans. It lost $13.9 million in the first nine months of 1988, contrasted with total earnings of $10 million last year.

The price represents only slightly more than Central’s book value, which is basically assets minus liabilities. Most small banks being sold in California recently are commanding a higher premium, and the price Security Pacific has agreed to pay for Central was depressed because of the 1988 losses.

Approvals Needed

“Security Pacific is getting a lot of branch outlets,” said Jerry Fingley, an analyst in Brea who specializes in smaller banks. “Central Bank is a composite of many smaller banks that were merged over the years, so it has branches in lots of small towns.”

Security Pacific, which is based in Los Angeles, is strongest in Southern California. But the state’s second-largest bank has been trying to expand its presence in the northern part of California. Last year, Security Pacific paid $160 million for San Francisco-based Hibernia Bank.

“The acquisition of Central Banking System further emphasizes our commitment to expand our presence in the very important Northern California market,” Jerry A. Grundhofer, vice chairman of Security Pacific, said.

Central Bank is the principal subsidiary of Central Banking System, a holding company with its headquarters in Walnut Creek.

The $62.7 million will be paid in Security Pacific stock once the deal is approved by regulators and the shareholders of Central Banking System. The deal is expected to be completed in the second quarter of next year, the banks said.

Central is contemplating the sale of one of its divisions, and the price Security Pacific would pay would drop to $59.4 million if the unit is sold.