Eldorado Bancshares Will Sell or Close Commerce Security

Reacting to rising interest rates and growing competition, Orange County’s largest independent bank said Monday that it plans to sell or close its wholesale mortgage division.

The decision by Eldorado Bancshares Inc. will affect about 100 jobs, mostly in Sacramento, and cause the Laguna Hills-based operator of Eldorado Bank to report a $3.4-million loss for the year ended Dec. 31, 1999.

Eldorado officials said recent interest rate hikes have drastically reduced the number of homeowners refinancing their mortgages, causing loan production at the bank’s wholesale unit, Commerce Security Mortgage, to plummet 50% over the past year.

“Last year, we originated $1 billion,” said Robert Keller, Eldorado Bancshares president and chief executive. “The year before it was $2 billion. That’s the problem.”

Keller said Eldorado currently is negotiating to sell Commerce Security, which is based in Sacramento and has seven offices. But if a buyer cannot be found, the unit will be closed and employees laid off.

Though the company’s decision was not announced until after the market closed, the company’s stock rose sharply Monday. Shares were up more than 13%, closing at $7.50 in Nasdaq trading, up 88 cents.

The company said it will continue to originate retail mortgages through its two banks, Eldorado Bank and Antelope Valley Bank, based in Lancaster.

As part of the move out of wholesale lending, the parent company will report $7.5 million in one-time expenses for such things as goodwill, employee severance and other disposal-related costs.

The expenses will cause the company to report a loss of $3.4 million for 1999, compared with a $5.4-million profit in 1998. Excluding the one-time charges, earnings at the company’s two bank units would have increased by more than 19% last year, officials said. Total assets at the bank dropped about 2% over the past year to $1.4 billion as of Dec. 31.