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Pacific Trust, Torrey Pines Bank Gain From $700B Bailout Fund

Assuming approval from its board, Pacific Trust Bank in Chula Vista is poised to increase its lending capacity by $100 million, thanks to a $19.3 million capital infusion from the U.S. Treasury.

Pacific Trust is receiving funds from the federal Troubled Asset Relief Program, the heart of the $700 billion distributed by the Treasury officials to stabilize the nation’s ailing banking system.

Pacific Trust is the first local bank to receive approval for money from the fund.

Hans Ganz, chief executive at Pacific Trust and parent First PacTrust Bancorp, said the injection will benefit shareholders, customers, and depositors because it provides additional capital, permitting the bank to make more loans, and increase earnings.

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But it also gives the bank a clear sign that Washington thinks it’s doing a pretty good job, Ganz said.

“They’re not giving the money out to any bank, only to healthy ones, and by getting it, the government has said, ‘You’re going to be around for awhile,'” he said.

Pacific Trust, with nine offices, is a savings bank, which means it makes mortgages on single-family homes and apartments. The bulk of its portfolio is in jumbo mortgages of more than $650,000.

The bank avoided the mortgage meltdown because it didn’t make subprime loans and retains most loans it makes.

Ganz said the only downside to the cash infusion is a slight dilution of company stock because the bank has to issue new preferred shares.

But with the bank making more loans, the added earnings should more than offset the dilution, he said.

Torrey Pines Bank, based in Carmel Valley with $790 million in assets, is a second regional bank receiving funds through a $140 million investment from parent firm, Western Alliance Bancorp.

Chief Executive Gary Cady said while the exact amount his bank will receive hasn’t been determined, the funds will be available by year end. The boost in capital would allow the bank to grow its loan portfolio, he said.

“Contrary to the term many people are using, a government bailout, the government isn’t giving anything away. It’s an investment,” Cady said.

In exchange for the cash, the Treasury Department will be paid an annual dividend of 5 percent. After five years, if the money hasn’t been paid back, the dividend rises to 9 percent, Cady said.

Not all banks are enthralled with TARP.

Larry Hartwig, chief executive at California Community Bank in Escondido, said the capital comes with onerous requirements, including having to adopt reporting standards similar to large public companies.

He said his bank didn’t really need the capital; it’s growing well with what it already has.

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