Western Bancorp Agrees to Purchase Bank of Los Angeles
Western Bancorp on Friday said it agreed to buy Bank of Los Angeles for about $92.5 million in stock, expanding its reach in the Los Angeles area.
Western, the Newport Beach-based parent of Santa Monica Bank and Southern California Bank, has $2.1 billion in assets and 29 branches in Los Angeles, Orange and San Diego counties. Bank of Los Angeles will add $275 million in assets and six branches.
The deal is the latest in an ongoing wave of California bank takeovers that has accelerated since 1995.
Western has been particularly acquisitive. It has cobbled together five community banks in recent years. The bank’s leadership includes two former executives from Minneapolis-based First Bank Systems Inc., now called U.S. Bancorp: Matthew Wagner, Western’s president and chief executive, and Arnold Hahn, the chief financial officer.
Western’s takeovers have brought in a range of specialties, including asset-based lending from SC Bancorp, real estate lending from National Bank of California, and Santa Monica Bank’s trust business.
Western will pay 0.422 share for each Bank of Los Angeles share. That values Bank of Los Angeles at $19.32 a share, based on Western’s closing price Friday. Western fell $1.88 to $46 on Nasdaq, while Bank of Los Angeles surged $2.13 to $18.63 on Nasdaq.
Western said the transaction will add to per-share earnings after its completion, which is expected in the third quarter.
This latest transaction should provide opportunities for significant cost-cutting, said David Winton, analyst at bank stock research firm Keefe, Bruyette & Woods.
West Hollywood-based Bank of Los Angeles last year completed acquisitions that hadn’t yet been integrated. As a result its operating costs have been high, Winton said.
Consolidation is sweeping the U.S. banking industry as companies acquire rivals to cut costs and gain customers. California, one of the fastest-growing markets, in particular has been a hotbed of mergers.
In the last year, Los Angeles has seen Great Western Financial Corp. and H.F. Ahmanson & Co. snapped up by Seattle-based Washington Mutual Inc. In 1996, San Francisco-based Wells Fargo & Co. took over First Interstate Bancorp. And pending is the just-announced proposed merger of San Francisco-based BankAmerica and NationsBank of Charlotte, N.C.
The largest publicly traded commercial bank headquartered in Southern California now is City National, with $5.2 billion in assets.
To be sure, merger mania has been a boon to community banks, which can attract new customers alienated by branch closings and firings at the big banks.
“It’s a positive for smaller banks, which aren’t geared to serve the mass market,” Winton said. “It’s still a relationship business. The majority of business clients want more full service.”
Winton rates Western Bancorp’s stock a “market performer,” if only because the price has already surged 40% this year. “It’s a top-notch team. They’ll continue to be acquisitive.”
