In a move that would expand its presence in California’s affluent Orange County, BayCom Corp. in Walnut Creek, California, is acquiring Pacific Enterprise Bancorp in Irvine.
A 14-year-old, single-branch institution, the $ 647 million-asset Pacific Enterprise holds $ 424 million of deposits in Orange County, according to the Federal Deposit Insurance Corp. The $ 2.3 billion-asset BayCom, the holding company for United Business Bank , operates two branches with $ 118.4 million of deposits in Orange County.
The all-stock deal was announced late Monday and is valued at $ 53.1 million, or $ 17.78 per Pacific Enterprise share. It is expected to close in the first quarter of 2022.
According to Timothy Coffey, who covers BayCom for Janney Montgomery Scott, the purchase price is about 10 times Pacific Enterprise’s trailing 12-month earnings and 88% of tangible book value.
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BayCom has completed nine whole-bank acquisitions since 2010. In its most recent deal, which closed in February 2020, BayCom paid $ 13.9 million in cash for the $ 131 million-asset Grand Mountain Bancshares in Granby, Colorado. It operates 34 branches in California, New Mexico, Colorado and Washington.
BayCom said the deal for Pacific Enterprise would be accretive to earnings in the first year of combined operations. It is projecting cost savings equal to 30% of Pacific Enterprise’s noninterest expense base, which totaled $ 8.4 million for the first six months of 2021 and $ 17.6 million in 2020.
Through June 30, BayCom’s net income was $ 11.5 million, while Pacific Enterprise reported earnings of $ 3.3 million, according to the FDIC. The combined company would have assets of $ 2.9 billion, deposits of $ 2.4 billion and loans of $ 2.2 billion.
“We are very excited to have the opportunity to expand our branch network in Orange County while setting the stage for taking advantage of additional partner opportunities available in the future,” George Guarini, BayCom’s president and CEO, said in a press release. “The transaction will expand both our presence in Southern California and the breadth of our resources in the area of SBA and other government guaranteed lending products.”
Both BayCom and Pacific Enterprise are active Small Business Administration 7 (a) lenders. Between Oct. 1, 2020, and June 30, the first nine months of the SBA’s 2021 fiscal year, BayCom reported $ 43.1 million in 7 (a) originations, versus $ 30.1 million for Pacific Enterprise. The combined institution would rank among the agency’s top 100 7 (a) lenders.
“We are blessed with a solid, experienced employee base that have expertise in low-risk, high-margin loan programs,” Pacific Enterprise President and CEO Brian Halle said in the press release. “Couple that with a much lower, diversified cost of funds and we are optimistic that the combined company’s profitability will improve.”
Pacific Enterprise shareholders would own about 22% of the combined company. Pacific Enterprise Chairman Dennis Guida is expected to join United Business Bank’s board of directors.
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