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Partner Buying Control of Pacific National Bank : Takeover: A Santa Ana attorney hopes to introduce the small institution to the European market. Ireland has picked it as one of about 125 financial concerns to be housed in a Dublin business zone.


Santa Ana lawyer Terry M. Giles is taking control of Pacific National Bank, infusing more cash into the already-healthy institution and introducing the small Santa Ana-based bank into the European market.

Giles will have a majority interest in the bank once regulators approve his deal to buy out his partner and friend, former Computerland owner William H. Millard. Giles said he expects federal regulators to approve the plan sometime next month.

Giles, who also bought out Millard's interests in other investments the two made, hopes to attract $8 million in investments to bolster the bank's business in Ireland, where it has won a spot in a special business zone for international financial service firms.

The Irish government selected Pacific National as one of about 125 financial institutions that will be housed in a Dublin business zone.

"I'm really excited," Giles said. "I don't know if other California banks have been approved, but we're surely the only independent bank in the world in there."

Other banks approved for space in the Irish project include Citicorp and Chase Manhattan in New York, West Germany's Dresdner Bank and Japan's Sumitomo Bank.

Giles, 41, traveled to Ireland eight times last year to seal the deal. He attracted investments from two European banks and a West German builder-banker in Pacific National.

His effort to put Pacific National into international play came as he agreed to buy out Millard and gain majority control of the bank's holding company, PNB Financial Corp.

Millard and Giles, who already owned small amounts of PNB stock and had been directors, formed their Merchant House partnership a year ago and paid $4.7 million for new PNB stock, acquiring a 50.3% stake in the holding company.

Millard, who lives in Saipan, had provided most of that money but remained a passive investor. Giles took over as bank chairman last March. Giles had been the bank's chairman in 1985 and 1986, before resigning to handle a trial for Millard and then engineering the sale of Millard's Computerland stock.

The bank, which has branches in Newport Beach and Irvine, had $116 million in assets at the end of 1989. It expects to report its first $1-million annual profit since opening eight years ago.

Giles said his goal when Merchant House invested in PNB was to raise the bank's capital from $6 million to $30 million by the end of this year. That should enable the bank to grow five times larger.

The bank's growth plans have included attempts to acquire other financial institu tions, but Giles said he was frustrated in his purchase attempts last year because would-be deals have fallen apart quickly.

As soon as regulators approve changing control of PNB and the bank to Giles, the lawyer said, the three European investors will put $8 million into Merchant House for a minority stake in the company, and that money will go directly into the bank's capital base, its final reserve against losses, he said.

He would not reveal the investors' names.

"I'm not looking to make money out of Merchant House, but to pump up capital," Giles said. "Then I'll make my money off dividends later."

Stocking the bank with capital, Giles said, meant that he would have to create cash flow for himself elsewhere. So he also bought out Millard's interest in all other investments the lawyer had advised Millard to make in the last few years.

A financially strong bank will be important to take advantage of business opportunities in Europe. From the Dublin financial center, Pacific Financial and other financial service firms can take advantage of the unified economic market that will be created in 199, when trade barriers begin to fall among the 12-nation European Community.

Giles said Computerland may do some business with Pacific National. But the bank will take advantage of its Irish base to try to gain business from Orange County companies doing business in Europe.

The bank will also use its European bank investors to help make loans and provide other services that Pacific National would be too small to do on its own.

The Dublin site offers financial institutions a modern telecommunications systems, a skilled population and a low, 10% corporate tax rate, in contrast with the regular 50% corporate rate.

Overseas companies can keep their accounts in currencies of their choice for tax purposes, and they can take advantage of special interest rates on loans.

Giles said the financial services zone, approved by the European Community for economically distressed Ireland, will allow banks to offer loans at rates 20% lower than the going rates. Like other banks, he said, PNB's new subsidiary there will offer rates probably 10% lower to provide a good profit margin.

"We're still a small grain on a large pile of sand," he said. "But we're going to be able to service U.S. companies doing business in Europe--and Europe is the place to do business in the 1990s."

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