CommerceBank Parent Talking Major Merger : Acquisitions: If completed, purchase of Torrance-based Republic Bank would make CommerceBank county’s largest.

CommerceBancorp, one of Orange County’s larger bank holding companies, has begun negotiating for the purchase of a Torrance-based bank, company officials said Thursday.

CommerceBancorp, which owns CommerceBank in Newport Beach, started talks in January with Republic Bank and its holding company, American Republic Bancorp, said William B. Oberholzer, president of the Torrance bank.

Certain financial and other information has been exchanged but no agreements have yet been reached.

The acquisition, if completed, would make CommerceBank the largest in Orange County, with nearly $500 million in assets. At the end of 1990, CommerceBank had $291 million in assets and Republic Bank had $205 million in assets.

One industry consultant expressed skepticism about the deal, however, pointing out that Republic Bank has been a troubled institution and that other healthy banks as well as failed thrifts run by the government might be more attractive.

“Why take on somebody else’s problems when you can go through regulators or get one with cleaner assets?” said Gerry Findley, a Brea consultant.

But Oberholzer said Republic is no longer in trouble. The bank is profitable and has more capital than regulators require, he said.

The Torrance bank, however, is operating under a cease-and-desist order it signed with the Federal Deposit Insurance Corp. After a routine audit last summer, the bank was ordered to change its mix of assets and deposits.

“We will have no problem complying with the order,” Oberholzer said.

Regulators classified 6.5% of American Republic’s loans as substandard because of possible credit problems, but Oberholzer said many of those borrowers are current in their payments. At the end of the year, he said, its slow-paying or non-paying loans amounted to less than 2% of total loans.

Republic Bank is a 17-year-old institution with offices in Torrance, Gardena and Fullerton. Last year, the holding company added $1.9 million to its reserve for possible future loan losses, reducing its annual income to $190,000.

CommerceBank is a 12-year-old business bank that has enjoyed continued profitability and steady growth. It has branches in Newport Beach, Costa Mesa, Orange and Long Beach. The company acquired the Orange branch last February when it bought California City Bank. Last year, the holding company earned $3.6 million.