Heritage Commerce bulks up in San Francisco with Presidio purchase

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Heritage Commerce in San Jose, Calif., has agreed to buy Presidio Bank in San Francisco.

The $3.1 billion-asset Heritage Commerce said in a press release Thursday that it will pay $200.3 million in stock for the $906 million-asset Presidio. The deal, which is expected to close in the fourth quarter, priced Presidio at 205.7% of its tangible book value.

Heritage also plans to redeem $10 million in Presidio subordinated debt at 103% of par value.

Heritage will have 17 branches in the San Francisco area when the deal closes.

Three Presidio directors will join Heritage’s board, including CEO Steve Heitel. Clay Jones, Presidio’s president, will become president of Heritage’s community business banking group.

Presidio “is a perfect fit for Heritage, as both of our values are aligned with fostering client relationships,” Walter Kaczmarek, Heritage’s president and CEO, said in the release.

The merger “provides the ability to create revenue and cost synergies while offering Presidio’s client base a broader product offering, increased lending limits, and an expanded branch delivery system that now surrounds the San Francisco Bay Area,” Kaczmarek added.

Heritage said it expects the deal to be 5% accretive to its 2020 earnings per share. It should take a little more than four years for Heritage to earn back any dilution to its tangible book value.

Heritage said it plans to cut about half of Presidio's annual noninterest expenses, or about $12.1 million. Heritage expects to incur $17.8 million in merger-related charges.

D.A. Davidson and Buchalter advised Heritage. Sandler O’Neill and Manatt, Phelps & Phillips advised Presidio.

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