First Alliance Corp. Adds Coast Security to Corporate Family

First Alliance Corp. said Thursday it paid $4 million for an Orange-based mortgage banking company that is owned by the sons of its chairman and was recently the target of two state investigations into questionable lending practices.

Irvine-based First Alliance said the acquisition of Coast Security Mortgage Corp.--which is chiefly owned by Mark and Brad Chisick--will boost the company’s loan volume by about $100 million a year.

“It’s a good move for both parties,” said Francisco Nebot, chief financial officer at First Alliance. “This will hopefully help First Alliance with its strategy for growing.”

First Alliance is run by Brian Chisick, father of Mark and Brad Chisick and holder of about 68% of First Alliance’s outstanding stock.

Both First Alliance and Coast Security specialize in making high-cost loans to borrowers with poor credit, and both have suffered from the recent downturn in that lending niche.

Despite the close relationship between the two companies and their owners, First Alliance officials stressed that the price and other terms of the deal were subject to an independent third-party evaluation. However, they declined to identify the investment banker that reviewed the deal.

Last year, regulators in Oregon and Washington said they were investigating Coast’s lending practices. In Oregon, Coast agreed to pay $150,000 to settle complaints that it failed to disclose certain loan terms, though the company admitted no wrongdoing. A similar investigation in Washington appears to have been dropped after Coast agreed to withdraw from the state, Nebot said.

First Alliance is facing similar charges in several states and has been sued by the American Assn. of Retired Persons for allegedly preying on seniors. First Alliance denies any wrongdoing.

The purchase of Coast by First Alliance follows years of close ties between the companies. First Alliance has been a major purchaser of Coast’s loans, buying about $37 million in loans last year, financial statements show.

Nebot said Mark Chisick will continue to serve as president of Coast, which will retain its name and Orange headquarters. The company has about 60 employees and does business in eight states.

Mark Chisick, who owned about 70% of Coast’s stock, said the sale will allow Coast to tap into First Alliance’s marketing and advertising resources, fueling further growth.

“This was an opportunity to be part of a bigger company,” Mark Chisick said.

His brother, Brad Chisick, owned about 20% of Coast’s stock. The remaining 10% was owned by a third partner, Mark Reynolds, who is the company’s vice president of sales.

First Alliance’s stock closed Thursday at $3, down 13 cents.

Times staff writer Edmund Sanders can be reached at edmund.sanders@latimes.com.