Cerritos, Calif.-based First Choice Bancorp is acquiring Los Angeles-based Pacific Commerce Bancorp in an all-stock deal valued at around $110.4 million, or $11.54 per share, based on a 30-day trading volume weighted average price of $24.83 for First Choice's common stock as of Feb. 23.
Under the deal terms, each Pacific Commerce share will be exchanged for 0.46531 of a First Choice common share at a fixed rate and 100% stock consideration, subject to adjustment.
SNL calculates the deal value to be 164.5% of book and 23.5x earnings, on a per share basis. It is also 20.59% of assets and 23.77% of deposits and carries a one-day premium of 15.40%, based on Pacific Commerce's closing stock price of $10.00 on Feb. 23, and a one-month premium of 14.83%, based on its closing stock price of $10.05 on Jan. 26.
For comparison, SNL valuations for bank and thrift targets in the West between Feb. 26, 2017, and Feb. 26, 2018, averaged 173.35% of book and 179.53% of tangible book and had a median of 24.34x last-12-months earnings, on a per-share basis.
First Choice will acquire more than $387 million of core deposits that include noninterest-bearing demand deposits of $231 million. The transaction is approximately 8.1% accretive to 2018 EPS and about 14.8% accretive to 2019 EPS. The deal has a tangible book value earnback of approximately 3.3 years.
Cost savings are estimated to reach 35% of Pacific Commerce's noninterest expense. One-time, merger-related expenses are estimated at $7.2 million, pretax.
The deal is subject to approvals from regulators and shareholders of both companies. It is expected to close in the third quarter.
Upon completion, existing First Choice shareholders will own around 63.5% of the combined company, while Pacific Commerce shareholders will own around 36.5%. First Choice and Pacific Commerce will appoint four current Pacific Commerce directors to the combined company's board.
The deal is expected to increase First Choice's total assets to around $1.5 billion, on a pro forma basis.
As of Dec. 31, 2017, First Choice, the parent company of First Choice Bank, had $903.8 million in assets. Pacific Commerce, the parent company of Pacific Commerce Bank, had $536.1 million in assets, $425.1 million in loans and $464.4 million in deposits. It has six branches in Los Angeles and San Diego counties.
First Choice will expand Los Angeles County by four branches, where it will rank No. 32 with a 0.23% share of approximately $404.03 billion in total market deposits, and expand in San Diego County by two branches, to be ranked No. 28 with a 0.18% share of approximately $86.38 billion in total market deposits.
Hovde Group LLC served as financial adviser to First Choice and delivered a fairness opinion with Daniel Pake as its lead banker. Loren P. Hansen APC served as the company's legal adviser. For Pacific Commerce, Piper Jaffray & Co. served as financial adviser and delivered a fairness opinion, while Stuart Moore Staub served as legal adviser.
SNL is an offering of S&P Global Market Intelligence.