First PacTrust to acquire Beach Business Bank of Manhattan Beach
First PacTrust Bancorp, the parent of Chula Vista's Pacific Trust Bank, has agreed to acquire Beach Business Bank, a Manhattan Beach community bank with a specialty sideline of lending to physicians across the country.
The deal, expected to close early next year, continues an expansion into Los Angeles and Orange counties for First PacTrust, which raised $28 million in fresh capital this summer by selling stock.
First PacTrust also is acquiring Gateway Business Bank, a three-branch bank based in Cerritos that operates home-lending offices across California, Oregon and Arizona through its Mission Hills Mortgage Bankers arm.
In a joint statement Wednesday morning, First PacTrust and Beach Business Bank said their boards had OK'd the deal, which also requires approval by Beach shareholders and regulators.
Assuming that goes as planned, Beach shareholders are to receive combinations of cash and stock or cash and stock warrants with a total value of $37.2 million, the statement said.
They had been changing hands at about $6 in recent over-the-counter trading and shot up to $8.60 after the deal was announced, a 45% gain.
Besides its Manhattan Beach headquarters, Beach has full-service branches in Long Beach and Costa Mesa and a lending office in Torrance.
It is to continue operating under its own name, with its chief executive, Robert M. Franko, becoming president of First PacTrust Bancorp. Franko said the merger would "result in a stronger bank with the capital strength and scale to continue to expand into new markets."
As part of the deal, First PacTrust will repay the remaining $4.5 million that Beach owes to the federal government under the Troubled Asset Relief Program, or TARP, which aimed at providing extra resources to banks during the financial crisis. The U.S. Treasury had invested $6 million in TARP funds into Beach, which recently repaid $1.5 million itself.
First PacTrust's chief executive is Gregory A. Mitchell, former CEO of California National Bank, a unit of Chicago's FBOP Corp., which regulators closed two years ago amid much controversy.
In an interview, Mitchell said he expected to continue acquiring community banks with less than $500 million in assets.
Many of these small banks are continuing to wrestle with portfolios of stressed commercial mortgages, which makes it hard for them to do much new business, and they may have difficulty complying with the tighter bank regulations Congress imposed after the financial crisis, he said.
If Mitchell's plans stay on track, "by the end of five years we'll be $5 billion or more in total assets," he said.
-- E. Scott Reckard
Photo: Manhattan Beach, home to Beach Business Bank. Credit: City of Manhattan Beach