Citizens to buy Community Bank

Ontario’s Citizens Business Bank is buying Pasadena lender Community Bank, a deal that will create a $12-billion institution that lends to small and mid-size businesses in Southern and Central California.

The deal, announced Tuesday, will make Citizens the eighth-largest independent bank based in California, leapfrogging Santa Ana lender Banc of California. Citizens will buy Community, which is privately held, for $878 million in cash and stock.

The deal still must be approved by shareholders of both banks, as well as by regulators. Executives said they expect the acquisition to close in this year’s third quarter, though analysts suggested that regulators could delay the deal.

Because the combination would create an institution with more than $10 billion in assets, it is subject to stricter scrutiny. Also, analysts noted that Community Bank was given a rating of “needs to improve” on its compliance with the Community Reinvestment Act, a federal law that requires banks to lend in low-income communities.

A poor CRA rating can hold up bank mergers and acquisitions, but David Misch, Community Bank’s chief executive, said in a call with analysts that the bank has been working to improve its rating.

Christopher Myers, chief executive of Citizens’ parent, CVB Financial Corp., said during the call he thinks the deal will be approved on time.

Citizens Business Bank, founded in 1974 as Chino Valley Bank, started out serving the Inland Empire and since has grown to cover much of Los Angeles and Orange counties.

Unlike Citizens’ last few acquisitions, this one will lead to the closure of several bank branches.