Palm Springs Savings Bank in Southern California said it had signed a definitive agreement to be acquired by HF Bancorp.
The announcement Friday came three days after Palm Springs Savings issued a press release confirming that it was involved in merger talks, although it wouldn't name the suitor. Chief executive Stephen G. Hoffmann said the release was a response to a run-up in the stock's price.
The cash deal is valued at $16.3 million and is expected to close by October. The price sets Palm Springs Savings stock at $14.38 a share. Three weeks ago it was trading at $8.50, but in the past week it had shot up to $13.
The bank, based in an affluent resort community, has $192 million in assets and four offices.
The purchase would make HF Bancorp, parent of Hemet (Calif.) Federal Savings and Loan Association, the largest depository institution in Riverside County, with more than $1 billion in assets.
J. Robert Eichinger, chief executive of Hemet Federal, said he was extremely happy with the deal.
"I think this is a win-win situation all the way around," he said. "It's a good marriage."
The purchase would let HF Bancorp enter the Coachella Valley, east of Hemet.
Hemet Federal converted from a mutual savings bank to stock form last summer with the intention of expanding its holdings. Earlier this year HF Bancorp signed a deal to acquire three San Diego County branches from Hawthorne Savings and Loan Association, El Segundo.
Mr. Hoffmann said Palm Springs Savings and HF Bancorp had been involved in talks for some time.
He added that with HF Bancorp's backing, Palm Springs Savings would be able to pursue more business.
The bank is to retain its name and operate as a division of Hemet Federal. Mr. Hoffmann is to join Hemet Federal as president and managing officer.
Jerry Jones, managing director with Duff & Phelps Capital Markets Co., Los Angeles, said Palm Springs Savings is an attractive franchise. He added, though, that the presence of many banks in the area had limited its opportunities for internal growth.
The bank has been a steady performer over the past few years. It made a profit of just over $1.2 million last year and earned a little less than that in 1994 and just over $1 million in 1993.
"We've been around for 15 years, and during the past eight we've done pretty well," Mr. Hoffmann said. "Especially for being in Southern California."
