Heritage Commerce in San Jose, Calif., has agreed to buy United American Bank in San Mateo, Calif.

The $2.8 billion-asset Heritage said in a press release Thursday that it will pay $44.2 million in stock for the $336.4 million-asset United American. Heritage will also pay $9.1 million in cash for United American’s preferred stock.

The deal, which prices United American at 206% of its tangible book value, is expected to close in the second quarter.

ATBancorp in Dubuque, Iowa, which owns about 83% of United American’s common stock and all of its preferred stock, has agreed to vote its shares in support of the sale. ATBancorp would own about 5.4% of Heritage after the deal closes.

The acquisition “provides the ability to create revenue and cost synergies while offering United American customers a broader product offering, increased lending limits, and an expanded branch delivery system that stretches throughout the San Francisco Bay Area,” Walter Kaczmarek, Heritage’s president and CEO, said in the release.

Heritage said the deal should be accretive to its earnings once $7.5 million in merger-related costs have been recorded. The company plans to cut about $3.7 million in noninterest expenses.

It should take about three years to earn back any dilution to Heritage's tangible book value.

Keefe, Bruyette & Woods and Buchalter advised Heritage. Sandler O’Neill and Sheppard Mullin Richter & Hampton advised United American. Barack Ferrazzano Kirschbaum & Nagelberg advised ATBancorp.

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