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Saturday, March 23, 2013 - Page updated at 01:30 p.m.
Puget Sound Bank buying Eastside rival in deal worth $8.4M
By Drew DeSilver
Seattle Times business reporter
Bellevue’s Puget Sound Bank (PSB), a business-oriented lender that came through the financial crisis with barely a scratch, is buying smaller Eastside rival Core Business Bank for $8.4 million in stock and cash.
The deal, the first for PSB since its founding in 2005, is a recognition that with local bank consolidation showing no signs of abating, “size does matter,” Chief Executive Jim Mitchell said.
The combined bank, which will have about $330 million in assets, will be able to go after larger deals in the small- and midsize-business market, Mitchell said. Its legal lending limit to any one customer, now $7 million, should rise to about $9 million, he said.
The merged institution also should have an easier time complying with a raft of new post-crisis regulations, he added, and may attract more favorable attention from investors.
“Our investment bankers tell us that with a little bit larger size, a little bit larger shareholder base and a little bit higher income, the market tends to favor (banks) with a little bit higher multiple of earnings and multiple of book value,” he said.
Although 17 Washington state banks have failed since 2009, PSB has avoided bulking up by acquiring any of them. Mitchell said that’s mainly because PSB lacked the size, expertise — and desire — to work through all a problem bank’s issues.
Core Business Bank, by contrast, is among the strongest local banks, with no problem loans on its books. Its Tier 1 risk-based capital ratio, a key regulatory test of a bank’s core capital, stands at 24.2 percent. The Federal Deposit Insurance Corp. considers a ratio at 6 percent or above to be well-capitalized.
The deal should contribute to earnings in the first full year of joint operation, Mitchell said.
The acquisition is expected to close in the second quarter, pending regulatory and shareholder approval.
Core, founded in 2008, employs 12 people in its downtown Bellevue office, less than half a mile from PSB’s headquarters. Mitchell said no decisions have been made yet on which Core employees will be retained after the deal is completed.
PSB shares, which are quoted on the OTC Bulletin Board under the symbol PUGB, were unchanged Friday at $11.80. The Core deal was announced after the close of regular trading.
Despite recurrent speculation that PSB eventually will seek to be listed on the Nasdaq Stock Market, which would bring its stock wider attention, Mitchell said the bank probably would need assets of at least $500 million to make a Nasdaq listing feasible.
“It might take one more acquisition,” he said.
Drew DeSilver: 206-464-3145 or firstname.lastname@example.org
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