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Heritage Oaks Bank’s Parent Company Being Acquired by Pacific Premier Bancorp

Stock-transaction deal is valued at more than $405 million, expected to close in Q2 of 2017

Heritage Oaks Bank has 12 branches in Santa Barbara and San Luis Obispo counties, including this one on State Street in downtown Santa Barbara. Heritage Oaks Bank’s parent company is being acquired by Irvine-based Pacific Premier Bancorp Inc. in a deal valued at more than $405 million. Click to view larger
Heritage Oaks Bank has 12 branches in Santa Barbara and San Luis Obispo counties, including this one on State Street in downtown Santa Barbara. Heritage Oaks Bank’s parent company is being acquired by Irvine-based Pacific Premier Bancorp Inc. in a deal valued at more than $405 million. (Tom Bolton / Noozhawk photo)

The parent company of Heritage Oaks Bank is being acquired by Irvine-based Pacific Premier Bancorp Inc. in a deal valued at more than $405 million, it was announced Tuesday.

Pacific Premier’s stock-transaction price for Paso Robles-based Heritage Oaks Bancorp is $11.68 per share, based on Tuesday’s closing prices, according to a release from Heritage Oaks.

Heritage Oaks, with $2 billion in total assets, has 12 branches in San Luis Obispo and Santa Barbara counties, and a loan-production facility in Ventura County.

Pacific Premier is the holding company for Pacific Premier Bank, one of the largest banks headquartered in Southern California, with $3.8 billion in assets.

It is a business bank primarily focused on serving small- and middle-market businesses in the Los Angeles, Riverside, San Bernardino and San Diego counties.

“Heritage Oaks has built a highly attractive franchise with a strong team of relationship managers and a commitment to superior customer service,” said Steve R. Gardner, chairman and CEO of Pacific Premier, in a press release. “We have known the executive management team at Heritage Oaks for many years, and we believe their bank will be an excellent fit with our existing franchise. 

“As the largest bank headquartered in California’s Central Coast, Heritage Oaks has built a leading market share and a high quality, low-cost core deposit base. We believe this combination and our entrance into the California Central Coast market will strengthen the Pacific Premier franchise and provide us with improved growth opportunities, greater earnings power, and meaningful operational scale as a $6.0 billion asset bank.”

Under terms of the acquisition, holders of Heritage Oaks common stock (NASDAQ: HEOP) will have the right to receive 0.3471 shares of Pacific Premier common stock (NASDAQ: PPBI) for each share of Heritage Oaks common stock they own.

Pacific Premier’s stock closed at $33.65 per share on Monday.

Existing Pacific Premier shareholders will own approximately 69.9 percent of the outstanding shares of the combined company while Heritage Oaks shareholders will own approximately 30.1 percent, the company reported.

“We believe the combination with Pacific Premier will create one of the most attractive commercial banks in California, with a footprint that extends from Paso Robles to San Diego,” said Simone F. Lagomarsino, president and CEO of Heritage Oaks, in a statement. “Our customers will become part of a larger banking franchise that can offer an expanded array of products and services.”

Pacific Premier listed several benefits is expects from the merger:

» Higher levels of profitability driven by earnings accretion and increasing operating scale.

» Broader base of low-cost core deposits.

» Opportunities to redeploy Heritage Oaks’ excess liquidity into higher-yielding assets.

» Increased diversification from both a geographic and loan mix perspective.

» Broader market presence provides greater opportunities for future in-market acquisitions.

» Unique opportunity to expand franchise without diluting tangible book value per share.

The merger agreement provides for three directors from Heritage Oaks to be added to the board of directors of Pacific Premier, including Lagomarsino; Michael J. Morris, chairman of Heritage Oaks; and Michael E. Pfau, vice-chairman of Heritage Oaks.

Pacific Premier said it plans to retain Heritage Oaks’ relationship bankers and key members of the Heritage Oaks leadership team, including Rob Osterbauer and Brooks Wise.

Heritage Oaks stock closed Tuesday at $11.54 per share, up 68 cents, while Pacific Premier was down 5 cents to $33.60.

Noozhawk executive editor Tom Bolton can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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