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Heritage Bank of Commerce, Presidio Bank Announce Merger Agreement

May 20, 2019, 08:30 AM

Heritage Commerce Corp., the parent company of Heritage Bank of Commerce and Presidio Bank announced that they have entered into an agreement and plan of merger and reorganization, pursuant to which Presidio will merge with and into Heritage Bank of Commerce in an all-stock transaction valued at approximately $200.3 million, or $30.18 per Presidio common share, based on Heritage’s closing stock price of $12.22 on May 16, 2019. The merger will increase Heritage’s total assets to approximately $4.0 billion on a pro forma basis, and total branches to 17 in the San Francisco Bay Area, after branch consolidation.

Presidio is a full-service commercial bank headquartered in San Francisco with additional branches in Palo Alto, San Mateo, San Rafael and Walnut Creek, California. Presidio Bank serves small to mid-size businesses and their owners. As of March 31, 2019, Presidio had approximately $906 million in total assets and a return on average assets of 1.44% for the first quarter of 2019.

At closing, three members of Presidio’s board will join the board of directors of Heritage and HBC, including Steve Heitel, Chief Executive Officer of Presidio. Clay Jones, President of Presidio, will join HBC as Executive Vice President and President of the Community Business Banking Group. Additionally, Todd Allen, Executive Vice President, North Bay Market President of Presidio, will join HBC in a similar capacity.

Under the terms of the Agreement, shareholders of Presidio will receive a fixed exchange ratio of 2.470 shares of Heritage common stock in exchange for each share of Presidio common stock. The exchange ratio is fixed, and the value of the merger consideration will fluctuate based on Heritage’s stock price. On a pro forma basis, the holders of Presidio common shares will own approximately 26.5% of the issued and outstanding Heritage common stock.

“Presidio Bank is a perfect fit for Heritage, as both of our values are aligned with fostering client relationships. The combination of our two high quality banking organizations provides the ability to create revenue and cost synergies while offering Presidio’s client base a broader product offering, increased lending limits, and an expanded branch delivery system that now surrounds the San Francisco Bay Area,” said Walter Kaczmarek, President and Chief Executive Officer of Heritage. Keith Wilton, President of Heritage Bank of Commerce added “Once transaction costs have been recognized, we expect the merger to be accretive to earnings. We welcome Presidio’s customers, shareholders and employees to Heritage as we continue to strengthen our banking franchise.”

“We have been impressed for some time by Heritage and how their culture and focus on serving their community are so similar to ours,” remarked Steve Heitel, Chief Executive Officer of Presidio Bank. “We believe this transaction represents the best path toward long-term value creation for our shareholders,” said Presidio Bank Chairman and Founder Jim Woolwine. “Our clients and employees will benefit from becoming part of a larger banking franchise with an expanded range of products and services throughout the San Francisco Bay Area.”

The board of directors of Heritage and Presidio have approved the transaction, which is subject to customary closing conditions, including the approvals of state and federal bank regulatory agencies and the shareholders of both Presidio and Heritage and other conditions specified in the Agreement. The transaction is expected to close in the fourth quarter of 2019.

D.A. Davidson & Co. was the financial advisor to Heritage in the transaction. Buchalter, a professional corporation, Los Angeles, California, was legal counsel to Heritage. Sandler O’Neill + Partners, L.P. acted as financial advisor to Presidio. Manatt, Phelps & Phillips, LLP was legal counsel to Presidio.

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