Landmark Set to Buy Bank of Orange County : Acquisition: The deal, subject to resolution of a lawsuit against the target bank, would give Landmark a key branch in Fountain Valley.

Landmark Bancorp said Monday it is close to agreement on terms for the acquisition of Bank of Orange County in Fountain Valley.

But no firm price has been set, and the purchase is subject to resolution of a lawsuit pending in San Jose against Bank of Orange County and some of its current and former directors.

Craig Collette, Landmark’s president, said he believes that the suit--brought by federal regulators acting as receiver for the failed Bank of Northern California--should be resolved in three to six months, clearing the way for the acquisition.

Bank of Orange County is involved in the suit because its holding company, Orange Bancorp, was a major shareholder in Bank of Northern California and its former president, Lawrence Holmes, was a co-founder of the San Jose bank.

Roger Pratt, Bank of Orange County’s president since early 1988, said settlement talks with federal regulators are stepping up as an April trial date for a $53-million negligence suit approaches. He said any settlement figure should be “manageable” and should not significantly hurt his bank, which has regained financial stability after several troubled years.

Pratt said he and Collette are longtime friends who have developed similar business plans. He said his bank would be “an excellent addition” to Landmark’s operations. Landmark was the highest of five bidders who recently sought to acquire the small Bank of Orange County, Pratt said. He wouldn’t say what that bid was.

The acquisition would give Landmark--holding company for Landmark Bank--a strategic branch in an area where it has been picking up a number of business customers. Landmark also would try to keep the doctors and other medical professionals who currently bank with the Bank of Orange County.

Pratt said key people at his bank already have been offered jobs in the merged operation.

A consolidation would create one of the county’s larger banks, with nearly $208 million in assets, based on results from the banks at the end of December.

Landmark, with offices in La Habra, Anaheim, Lake Forest and Santa Fe Springs, had $173 million in assets at the end of the year. Neither bank has yet released earnings for the year.

The 10-year-old Bank of Orange County, a money-losing operation through most of the 1980s, earned $210,000 through the first nine months last year. It has turned in modest profits in recent years and has wiped out the problem loans it had in the mid-1980s.

Landmark, an 11-year-old bank, earned more than $1.4 million in the first three quarters of 1989.

Bank of Orange County, once touted as a model for aggressive independent banks in California, began losing money in 1984, a year after Holmes, its founding president, tried to expand by investing heavily through Orange Bancorp in Bank of Northern California. Orange Bancorp owned 51% of the San Jose bank, which Holmes co-founded with a group of Northern California investors.

In mid-1984, Holmes abruptly resigned his $300,000-a-year post and left the area, defaulting on $275,000 in personal loans that he had obtained from three other area banks. Shortly after his May departure, Orange Bancorp reported a $1.4-million loss for the first half of the year.

In August, 1985, with Holmes gone and losses mounting at both banks, Orange Bancorp sold its interest in Bank of Northern California to a group of Santa Rosa investors.

In 1986, Bank of Northern California was declared insolvent and seized by regulators. A suit filed by the bank and its minority shareholders alleges that the investors who bought Orange Bancorp’s controlling block of shares ran Bank of Northern California into the ground with bad loans.

The lawsuit was cited in mid-1987 by the holding company for Pacific National Bank as a reason that it was withdrawing its offer to acquire Bank of Orange County.