Pacific Premier Bancorp (PPBI) in Costa Mesa, Calif., has agreed to pay roughly $53.7 million to acquire a niche bank to help fund future loan growth.
The target, First Associations Bank in Dallas, does not accept retail or consumer deposits and instead works exclusively with homeowner associations and HOA management companies nationwide.
The deal would provide the $1.1 billion-asset Pacific Premier "with a valuable source of low-cost core deposits that are expected to strengthen Pacific Premier's existing deposit base and lower its overall funding cost," the company said Monday in a news release.
Since the $356 million-asset First Associations opened in 2007, it has generated most of its operating revenue from its investment securities portfolio, Steven R. Gardner, the chief executive of Pacific Premier, said in a news release. Pacific Premier would be able to deploy First Associations' funds into higher yielding loans over time. The deal would improve Pacific Premier's deposit base, lower its cost of deposits and provide a platform for future core deposit growth, Gardner said.
At Sept. 30, First Associations' loans to deposit ratio was 6.2% while Pacific Premier's was 96.5%, Gardner said.
Pacific Premier has acquired two failed banks, Canyon National Bank in Palm Springs, Calif., and Palm Desert National Bank in California, since 2011. In July it filed a shelf registration with the Securities and Exchange Commission that allows it raise as much as $50 million in fresh capital over the next three years. It said in a news release at that time that it could use the funds for failed or open bank acquisitions.
Under the agreement, First Associations shareholders would receive roughly $50.2 million and the company's option holders and warrant holders would receive $3.5 million in cash.
The shareholders' portion includes $37.6 million in cash and almost 1.3 million shares of Pacific Premier common stock valued at about $12.5 million. The cash portion may be adjusted based on changes in the value of First Associations' mortgage-related securities portfolio or reduced if First Associations' transaction-related expenses exceed $3.9 million.
Shareholders that control roughly 36% of First Associations' shares have already agreed to vote in favor of the acquisition, Pacific Premier said.
At Sept. 30, the deal represented 117% of First Associations' tangible book value, Pacific Premier said. Pacific Premier expects the deal to be accretive to earnings per share beginning in 2013, and the payback period for initial tangible book value dilution to be roughly two years.
Once the deal closes, First Associations would operate as a division of Pacific Premier Bank. Pacific Premier expects to retain First Associations' 13 full-time employees and has reached employment agreements with key officers at the bank.
A majority of First Associations' HOA customers are also customers of the HOA management companies controlled by the management company Associations Inc. Pacific Premier and Association would enter into an amendment to First Associations' current depository services agreement with Association to extend it for five years. John Carona, the CEO of Association, is currently a director of First Associations and would join the board of Pacific Premier once the deal closes.
The deal is expected to close late in the fourth quarter or in the first quarter of 2013.
Pacific Premier was advised by D.A. Davidson as financial advisor and Patton Boggs as legal counsel. First Associations was advised by SAMCO Capital Markets as financial advisor and Haynie Rake & Repass as legal counsel.