Oct 16 - Pacific Premier Bancorp Inc. (NASDAQ: PPBI) has announced that Pacific Premier Bank in Costa Mesa, Calif., has entered into a definitive agreement to acquire First Associations Bank, a Dallas-based, state-chartered bank with $356.2 million in total assets and $305.5 million in total deposits at Sept. 30, 2012. FAB is a specialized bank exclusively focused on serving homeowners associations and HOA management companies nationwide. This acquisition will provide 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.
Steven R. Gardner, president CEO of Pacific Premier, commented, "This acquisition is a unique opportunity for us to acquire a highly efficient, consistently profitable and niche-focused business that will complement our existing banking franchise. At Sept. 30, 2012, FAB's loans to deposit ratio was 6.2 percent and included no delinquent loans or nonperforming assets. At the same quarter end, Pacific Premier's loans to deposit ratio had grown to 96.5 percent due to strong net loan portfolio growth of $64.1 million, or 32 percent annualized. Since it started business in 2007, FAB has generated most of its operating revenue from its investment securities portfolio and as such we see substantial revenue synergies between FAB's deposit funding model and our commercial banking business model as we deploy FAB's funds into higher yielding loans over time. Additionally, this partnership will improve Pacific Premier's deposit base, lower our cost of deposits and provide us the platform to accelerate future core deposit growth."
Gardner continued, "This is an exciting opportunity for both companies, our shareholders, customers and employees. FAB's existing customers will continue to receive the same excellent customer service and products without disruption. Pacific Premier's financial strength and resources will enable FAB to develop additional technological solutions to further benefit existing and future HOA management company clients. Additionally, the acquisition of FAB will allow Pacific Premier to deploy a portion of its current capital base into a compelling investment."
"The management team and employees are looking forward to joining the Pacific Premier team and continuing our tradition of providing exceptional service to all of our customers. The combination with Pacific Premier will provide greater capital resources and operational scale which will allow us to expand and continue to grow the business," said Michael A. Kowalski, chairman, president and CEO of FAB.
The transaction is currently valued at $53.7 million, which includes approximately $50.2 million in deal consideration for FAB shareholders, $3.5 million in cash consideration for FAB option holders and warrant holders. The $50.2 million of deal consideration for FAB shareholders will include $37.6 million in cash consideration, which is subject to adjustment, and 1,279,419 shares of Pacific Premier common stock to be issued to FAB shareholders, which shares had a value of approximately $12.5 million based on Pacific Premier's five-day average closing price immediately prior to announcement of the transaction. The cash portion of the consideration payable to FAB shareholders may increase or decrease based on the changes in value of FAB's mortgage related securities portfolio prior to closing.
In addition, the cash consideration payable to FAB shareholders may be reduced if FAB's transaction-related expenses exceed $3.9 million. As of Sept. 30, 2012, the transaction value represents a multiple of approximately 117 percent of FAB's tangible book value and a tangible book value premium of approximately 2.55 percent of FAB's core deposits. Pacific Premier anticipates the acquisition will be accretive to earnings per share beginning in 2013 and the payback period for initial tangible book value dilution is approximately two years.
FAB has 13 full-time equivalent employees. FAB does not accept retail or consumer deposits, which allows FAB's employees to focus 100 percent of their efforts on serving the HOA industry. It is anticipated that all of the current FAB employees will be retained in the combined company. In connection with the signing of the definitive agreement, Pacific Premier Bank entered into employment agreements with the key executive officers of FAB, which will become effective on consummation of the acquisition. Following consummation of the acquisition, FAB will be operated as a division of Pacific Premier Bank.
As of Sept. 30, 2012, FAB had total loans outstanding of $18.8 million, total investment securities portfolio of $313.9 million and total deposits of $305.5 million. The deposit base includes approximately $283.8 million non-CDs, or 92.9 percent of total deposits. For the quarter ended Sept. 30, 2012, FAB's cost of deposits was 0.23 percent and its efficiency ratio was 52.4 percent. For the last 12 months ended Sept. 30, 2012, FAB's pre-tax income was $4.7 million and its pre-tax return on average assets was 1.37 percent. Since inception in 2007, FAB has reported 21 consecutive quarters of profitability and no loan charge-offs. On a combined basis with FAB as of Sept. 30, 2012, Pacific Premier would have total assets of $1.4 billion, total loans outstanding of $882.5 million and total deposits of $1.2 billion.
A majority of FAB's HOA customers are also customers of the HOA management companies controlled by Associations Inc., which is the largest management company in the United States. Pacific Premier will continue to rely on the relationship with Associa following the consummation of the FAB acquisition to solicit HOA deposits. Under the terms of the definitive agreement, Pacific Premier Bank and Associa will enter into an amendment to FAB's current Depository Services Agreement with Associa to extend the term of this agreement for a period of five years. The CEO and majority owner of Associa, John Carona, is a FAB director and FAB's largest shareholder. Carona is expected to join the board of firectors of Pacific Premier on completion of the transaction.
The transaction is expected to close late in the fourth quarter of 2012 or in the first quarter of 2013, subject to satisfaction of the closing conditions and other customary closing conditions, including regulatory approvals and approval of FAB shareholders. Shareholders of FAB that own or control approximately 36 percent in the aggregate of the outstanding shares of FAB common stock have entered into agreements with Pacific Premier and FAB whereby they committed to vote their shares of FAB common stock in favor of the acquisition.
Pacific Premier was advised in this transaction by D.A. Davidson & Co., as financial adviser and Patton Boggs LLP, as legal counsel. FAB was advised by SAMCO Capital Markets, as financial adviser and Haynie Rake & Repass, P.C., as legal counsel.