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Cascade Bancorp inks $17.1M deal for Wash.-based Prime Pacific Financial Services


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Cascade Bancorp inks $17.1M deal for Wash.-based Prime Pacific Financial Services

Bend, Ore.-based CascadeBancorp ($2.47 billion as of Dec. 31, 2015) said late April 26 thatit agreed to purchase Lynnwood, Wash.-based PrimePacific Financial Services ($119.4 million as of Dec. 31, 2015) in adeal valued at $17.1 million. The transaction should close in the third quarter, subject toapplicable regulatory and shareholder approvals.

Prime Pacific Bank had $119.4 million in assets, $94.7 millionin net loans, and $104.8 million in total deposits at Dec. 31, 2015.

Cascade expects the transaction will result in modest earningsaccretion in 2016, excluding one-time costs, and expects approximately 5% accretionto earnings in 2017. The transaction is projected to be immediately accretive totangible book value and capital, with a "solid" internal rate of return,according to the deal announcement.

Following completion, Prime Pacific Financial Services unit will be mergedwith and into Cascade Bancorp's unit, Bankof the Cascades.

In this deal, holders of Prime Pacific common stock can opt toreceive 0.3050 shares of Cascade common stock for each share of Prime Pacific commonstock they own, subject to certain adjustments, including a possible preclosingspecial dividend in the event adjusted equity at closing exceeds a minimum equitytarget. Based on Cascade's $5.86 closing share price April 22, the total mergerconsideration is roughly $17.1 million, or $1.79 per share of Prime Pacific commonstock. Holders of Prime Pacific's stock options will get stock options for Cascadestock at the exchange ratio. The exchange ratio reflecting the number of sharesof Cascade's common stock to be issued in exchange for each share of Prime Pacificcommon stock is fixed so long as Cascade's stock price remains between $5.10 and$6.90, as measured by the 20-day average volume weighted average price up to andincluding the fifth trading day before closing of the transaction. The value ofthe stock consideration will fluctuate based on the value of Cascade's common stockwithin this range. In the event the said volume weighted average price of Cascade'scommon stock is outside this range, then the exchange ratio will be adjusted.

Giving effect to the transaction, and based upon an exchangeratio of 0.3050, Prime Pacific common shareholders will own approximately 3.8% ofthe outstanding shares of the combined company.

On a per-share basis, SNL calculates the deal value to be 119.2%of book and tangible book and 14.5x last-12-months earnings. The price is 16.30%of deposits and 14.30% of assets, and the tangible book premium to core depositsratio is 4.83%.

SNL valuations for bank and thrift targets in the West regionbetween April 26, 2015, and April 26, 2016, averaged 138.92% of book, 143.02% oftangible book and had a median of 25.61x LTM earnings, on a per-share basis.

In addition, data compiled by SNL shows that Cascade Bancorpwill enter Snohomish County, Wash., with two branches to be ranked No. 22 with a0.90% share of approximately $9.73 billion in total market deposits and will enterKing Country, Wash., with one branch to be ranked No. 40 with a 0.03% share of approximately$70.85 billion in total market deposits.

Piper Jaffray & Co. was financial adviser and Hunton &Williams LLP was legal counsel to Cascade Bancorp. D.A. Davidson & Co., ledby Tom Hayes, was financial adviser and Miller Nash Graham & Dunn LLP, led byDavid Post and Steve Klein, was legal counsel to Prime Pacific Financial Services.

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