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Plan Would Merge Torrey Pines, Sister Banks

The parent company of San Diego- based Torrey Pines Bank plans to consolidate its three subsidiary banks into a single charter, a move intended to improve efficiencies and reduce costs.

Although parent Western Alliance Bancorporation of Phoenix has yet to file the necessary regulatory documents, WAB top executives discussed the plan in recent conference calls, said Gary Cady, CEO of Torrey Pines Bank.

“It’s been discussed publicly and something that we’re contemplating,” Cady said. The filings could be done in the fourth quarter of this year or early next year, he said.

Following the consolidation, WAB’s three banks would be merged into Western Alliance Bank, which is based in Phoenix. The bank would have about $8.5 billion in assets and one board of directors instead of four — three banks plus the holding company. And it would be required to make one financial report to regulators.

At the same time, each of the three current subsidiary banks would retain its name and authority to make lending decisions, Cady said.

‘… Not a Fundamental Change’

“This will eliminate duplication of effort and allows us to continue our expansionary plans,” he said. “It’s a legal change but not a fundamental change in how we do business.”

The consolidation follows closely on the heels of a similar merger in August, Grandpoint Capital merging San Diego’s Regents Bank and two other subsidiary banks in Arizona and Los Angeles into Grandpoint Bank.

Because of the single charter, banks can be more efficient in doing things such as sharing or participating in loans with sister banks, said Rick Levenson, president of Western Financial Corp., a San Diego investment firm specializing in community banks.

“From an efficiency standpoint and from a cost-savings standpoint, it would make sense to consolidate the entities,” Levenson said about WAB’s plans.

To do participation loans with sister banks requires layers of regulatory approval, but that isn’t needed if there’s only a single bank, he said.

Earlier this year, Torrey Pines sold several construction and land development loans it made to the Bank of Nevada. Cady said the transactions allowed Torrey Pines to move loans that require higher capital reserves to BON, which has lots of capital but little loan demand.

Continued Aggressive Growth

Because of the change, Torrey Pines, with about $2 billion in total assets and 11 branches in California, won’t report separate financial results and technically will cease to exist as a locally based community bank. Its financials will be rolled into that of Western Alliance Bank, and its board of directors will be disbanded.

For the second quarter, WAB reported net income of $34 million, up from $14 million in the like quarter of 2012. It had total assets of $8.6 billion, an increase of $1.4 billion from the like quarter of last year.

Cady, who has been at the helm at Torrey Pines since its launch in 2003, said despite the change, customers won’t see anything different about the bank, which he expects will continue its aggressive growth trend.

“While this is a legal change for us, it’s not a strategic change at all,” he said. “We’re one of the few community banks in the country that have grown organically since the economic recession.”

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