Cascade Bancorp and Prime Pacific Financial Services announced they have entered into a definitive agreement and plan of merger for Cascade to acquire Prime Pacific Financial Services, the holding company of Prime Pacific Bank, a Snohomish County, national banking association with $119.4 million in assets, $94.7 million in net loans, $104.8 million in total deposits at December 31, 2015.
Cascade Bancorp expects the transaction will result in modest earnings buildup in 2016 (excluding one-time costs) and expects approximately 5 percent accretion to earnings in 2017. The transaction is projected to be immediately accretive to tangible book value and capital, with a solid internal rate of return.
Terry Zink, president and chief executive officer of Cascade, remarked, “This opportunity expands our commercial banking footprint in the strong Seattle market. Prime Pacific’s solid commercial and SBA lending expertise is consistent with our strategy to increase our market share of commercial loans in fast-growing Northwest metropolitan markets. We look forward to welcoming Prime Pacific’s banking professionals, customers and shareholders to our Cascade team.”
Glenn Deutsch, president and chief executive officer of Prime Pacific, stated, “Bank of the Cascades is a strong and growing Pacific Northwest community bank that is focused on expanding its presence in the Seattle area. Our bankers are excited to be part of that expansion which will enable us to better serve existing customers and attract new clients as well. Like us, they value high quality customer service and commitment to community. Our customers and employees will benefit greatly from the merger of our two organizations.”
The board of directors of each company has approved this transaction. The acquisition of Prime Pacific by Cascade is subject to customary conditions, including the approval of Prime Pacific’s shareholders and bank regulatory authorities, and is expected to close in the third quarter of 2016. Immediately following the completion of the acquisition, it is anticipated that Prime Pacific Bank will be merged with and into Bank of the Cascades. Directors, select shareholders and executive officers of Prime Pacific have entered into agreements with Cascade and Prime Pacific pursuant to which they have committed to vote their shares of Prime Pacific common stock in favor of the acquisition.
Under the terms of the definitive agreement and upon consummation of the acquisition, holders of Prime Pacific common stock will have the right to receive 0.3050 shares of Cascade common stock for each share of Prime Pacific common stock they own, subject to certain adjustments, including a possible pre-closing special dividend in the event adjusted equity at closing exceeds a minimum equity target. Based on a $5.86 closing price of Cascade’s common stock on April 22, 2016, the aggregate merger consideration is approximately $17.1 million, or $1.79 per share of Prime Pacific common stock. Holders of Prime Pacific’s stock options will receive stock options for Cascade stock at the exchange ratio. The exchange ratio reflecting the number of shares of Cascade’s common stock to be issued in exchange for each share of Prime Pacific common 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 (“VWAP”) up to and including the fifth trading day prior to closing of the transaction. The value of the stock consideration will fluctuate based on the value of Cascade’s common stock within this range. In the event the VWAP of Cascade’s common stock is outside this range, then the exchange ratio will be adjusted. Giving effect to the transaction, and based upon an exchange ratio of 0.3050, Prime Pacific common shareholders will own approximately 3.8% of the outstanding shares of the combined company.
Piper Jaffray & Co. served as financial advisor and Hunton & Williams LLP served as legal counsel to Cascade Bancorp. D.A. Davidson & Co. served as financial advisor and Miller Nash Graham & Dunn LLP served as legal counsel to Prime Pacific Financial Services, Inc.