Stock Deal Would Create County’s Largest Banking Firm : Landmark Agrees to Merger With Eldorado

Landmark Bancorp of La Habra has agreed in principle to be merged into Eldorado Bancorp of Laguna Hills in a stock swap that would create Orange County’s largest banking concern, the presidents of both banks said Thursday.

Eldorado Bancorp, which has acquired one bank this year and then was almost acquired itself, would wind up with nearly $400 million in assets if the two companies can reach a definitive agreement in 2 months and if regulators approve the deal.

Under the agreement, Landmark shareholders would get one share of newly issued Eldorado stock for every share of Landmark stock they own. Eldorado stock closed Thursday at $13 a share, up 75 cents a share. Landmark stock is not publicly traded.

The swap would give Landmark shareholders a 36.6% stake in the expanded Eldorado.

Both Firms Profitable

Both companies have long been profitable, healthy firms with banks that produced combined net income of $3.2 million in the first 9 months of 1988. A merger would create a community banking operation with 310 employees spread through 12 branches in four counties.

J.B. Crowell, president and chief executive of Eldorado, and Craig D. Collette, who holds the same positions at Landmark, said the two banking operations complement each other.

“They cater to essentially different markets, so they should fit well,” said Gerry Findley, an industry consultant. “Eldorado is more oriented to consumer-type services, and Landmark is in mortgage banking and commercial lending.”

Findley said both managements are “excellent.”

Crowell and Collette said some executives would be laid off as operations are consolidated in certain areas. All branch employees are expected to remain in place.

Once merged, Crowell would become chief executive and Collette would become president of Eldorado.

Still to be resolved, they said, is who would become chairman of the company and which Landmark directors would give up their board seats. The new board would consist of Eldorado’s eight directors and five from Landmark’s nine-member board.

Ability to Compete

Both companies said they look at the merger as a way to strengthen operations and to meet additional competition once full interstate banking in 1991 allows Eastern banks to set up shop in California.

“We’ll have geographic penetration, and that means our advertising dollar will go further,” Collette said. “We can have a more effective marketing program. We can look at a little larger businesses to lend to because we’ll be able to make bigger loans. And we can expand our product line.”

A merged institution would also balance the combined loan portfolio. About half of Landmark’s portfolio consists of commercial business loans while about 40% of Eldorado’s portfolio consists of real estate construction loans. A merged bank would have about 40% commercial loans, 35% real estate loans and 25% consumer loans, Crowell said.

More important, a merger would give Landmark shareholders the ability to buy and sell their stock freely. Landmark’s stock is not listed on any exchange.

Eldorado is the only county-based bank listed on the American Stock Exchange, which gives shareholders almost instant ability to buy and sell stock. The listing also attracts institutional investors. Those investors, Findley said, have been recent buyers of the stock, which has boosted the stock price about $2 a share.

“The merger would give shareholders comfort in knowing that in case of emergencies, they can pick up the phone and sell,” Collette said. “Or they can pick up the phone and buy.”

Collette said he owns about 1.5% of Landmark stock but will exercise stock options to give him a 5.5% stake in the firm.

Growth Plan

The merger is part of Eldorado’s plan to grow by acquisition, Crowell said.

Eldorado Bank, which opened in 1972, acquired American Security Bank in San Bernardino in a $1.7-million cash purchase in 1980. Two years later, after the holding company was created, it acquired the Bank of Indio in a stock swap valued at $2.5 million.

In May, the company acquired American Merchant Bank in a stock-and-cash buyout valued at $4 million.

During the summer, Eldorado agreed to be acquired by Citizens Holdings in Newport Beach. But the deal fell through when new regulatory policies increased capital requirements and made the deal uneconomic.

HOW THE COMPANIES COMPARE

Eldorado Bancorp Landmark Bancorp Headquarters Tustin La Habra Employees 190 120 Branches 8 3 Assets (Sept. 30) $242.8 million $148.5 million Net income (9 months) $2.4 million $846,000 Common shares outstanding 2.2 million 1.4 million Thursday’s closing $13, up75cents $12, off25cents stock price (Amex) (OTC) Market value of stock $28.6 million $10.2 million Chief executive J.B. Crowell Craig D. Collette