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Wednesday, Sep 28, 2022

First PacTrust Bancorp Finds Gateway to More Real Estate Business


CEO: Greg Mitchell.

Assets: $835 million.

Net income: $693,000 in first quarter of 2011; $625,000 in first quarter of 2010.

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No. of local branches: Nine.

No. of local employees: 130.

Headquarters: Chula Vista.

Year founded: 1941.

Company description: Holding company for Pacific Trust Bank, a savings bank.

Buoyed by a capital infusion of $60 million last year, First PacTrust Bancorp Inc. put part of it to work last week when it agreed to purchase Gateway Bancorp, a Cerritos lender with $187 million in assets.

The Chula Vista-based parent of Pacific Trust Bank said June 6 that it is paying $17 million for a company that owns Gateway Business Bank and a mortgage unit called Mission Hills Mortgage Bankers with 22 offices in three states.

First PacTrust Chief Executive Officer Greg Mitchell said the mortgage unit is the main prize.

“Right now, we receive most of the mortgages we make through a network of third party brokers, and do only a limited number of originations ourselves,” Mitchell said.

“This gives us the ability to acquire a platform that is currently generating between $900 million to $1 billion in new mortgages a year.”

Home Loan Generator

Actually, Mission Hills Mortgage Bankers generated $879 million in mortgages last year, down from $983 million in 2009. Since 2006, it’s generated about $4.2 billion in home loans, and following the housing bubble bursting in 2008, nearly all of those loans are prime, and sold off to investors, according to data provided by First PacTrust.

Mitchell said thanks to the bank’s strong capital position, it could select the best deal from a group of banks looking for buyers. Gateway Business Bank reported nearly $8 million in nonaccrual loans in the first quarter, up from nearly $6 million for the first quarter of 2010. Gateway lost $873,000 in the past quarter, compared with a net loss of $432,000 for the like period of last year.

It also has been operating under a consent order requiring it to take corrective steps to address weaknesses in its operations, according to the order issued in December 2009 from the Federal Deposit Insurance Corp. and the California Department of Financial Institutions.

Given those factors, First PacTrust negotiated a deep discount on the deal, paying 0.61 percent of Gateway Bancorp’s tangible equity, or in another way, paying about 61 cents on the dollar.

“This transaction will be immediately accretive to the tangible book value for the shareholders of First PacTrust,” said Mitchell.

Though it appeared to be a lopsided deal, Mitchell said Gateway’s owners, the Tarbell family, liked what his bank outlined for the company, and prefers to focus on its real estate business.

He said First PacTrust will retain Gateway’s 300 employees and its 24 offices.

Unusual Sale

The sale is unusual in that Pacific Trust Bank, which is a savings bank regulated by the federal Office of Thrift Supervision, is buying a commercial bank with a state banking charter.

According to the state DFI, the last time a savings bank purchased a commercial bank was in 2001.

“The dividing line between traditional S&Ls and commercial banks has been fading in recent years,” said Alan Lane, chief executive at Silvergate Bank in La Jolla, which converted from a thrift and loan to a commercial bank. “Many S&Ls have converted to banks or are trying to become more banklike.”

Mitchell said after the merger is completed, expected in July, the bank plans to apply for a charter change that would convert Pacific Trust from a savings bank to a national commercial bank.

As a commercial bank, it would have the ability to make and hold a greater amount of commercial business loans rather than maintaining at least 65 percent of its portfolio in housing-related assets, Mitchell said.

The Gateway deal coincides with First PacTrust’s stated goal of expanding into other Southern California markets, particularly Los Angeles, where the bank will open two retail offices, it said last month. Following regulatory approvals, Pacific Trust Bank would have 14 branches in four counties, 22 loan production offices, and total assets of about $1 billion.

That would rank the bank fourth among locally based banks, trailing California Bank & Trust, Torrey Pines Bank and Bank of Internet USA.

Mitchell said First PacTrust will continue to seek bank acquisitions for the next few years and grow the bank to about $5 billion in assets in the next five years.


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