Cascade Bancorp, the holding company for Bank of the Cascades, and Home Federal Bancorp, Inc., the holding company for Home Federal Bank, announced a $265.7 million merger plan Wednesday.
The transaction will be payable in a mix of cash and Cascade common stock to Home Federal's stockholders. The combined company will have approximately $2.4 billion in assets, serving communities across Oregon and Idaho.
Meanwhile, Banner Corp., the parent firm of Banner Bank and Islanders Bank, announced that its deal with Home Federal, reached Sept. 24, has been terminated due to the latter bank's acceptance of the "superior proposal" from Cascade Bancorp. Banner had the right to match Cascade's offer through Tuesday. Banner said Home Federal paid a termination fee of about $3 million to Banner.
The rest of the joint announcement from Cascades Bancorp and Home Federal:
The transaction is expected to create a premier Pacific Northwest bank with scale in high growth markets while simultaneously unlocking earnings and efficiency improvements.
A hallmark of the combination between Cascade and Home Federal is expected to be its strong core deposit base, which will likely rank among the top banks in the nation.
Importantly, the transaction provides the opportunity to right-size the branch distribution networks and infrastructure of the combined bank.
The boards of directors of Cascade and Home Federal unanimously approved the transaction, which is subject to regulatory approval, approval by the shareholders of Cascade and Home Federal, and other customary conditions of closing.
The transaction provides for the payment to Home Federal shareholders and option holders of $120.8 million in cash (subject to adjustment based on closing capital and other adjustments described in the definitive merger agreement) and 24,309,066 shares of Cascade common stock, subject to adjustment described in the definitive merger agreement.
Based on the closing price of $5.96 for Cascade shares on October 22, 2013, the transaction would have an aggregate value of $265.7 million. Cascade expects the transaction to be immediately accretive to its earnings per share, excluding one-time transaction expenses.
Upon closing of the Transaction, which is anticipated to take place in the first quarter of 2014, Home Federal will be merged into Cascade and Home Federal Bank will be merged into Bank of the Cascades. As of June 30, 2013, Home Federal had tangible common equity of $168.1 million.
Terry E. Zink, Cascade Bancorp President & CEO, commented "We are truly pleased to join forces with Home Federal and to provide an opportunity of unique and compelling value to both organizations. The combination of our two outstanding franchises will result in a strong balance sheet and capital base, attractive margins and good earnings potential.
"For our customers, we believe the banks are culturally compatible and the combined institution will deliver an expanded product offering and stronger lending capacity. For shareholders, we believe the increased scale of the combined company will position our bank to grow organically while also providing additional strength to pursue future acquisition opportunities. Finally, for our communities, we believe our combined organization will provide increased opportunity to deliver the advantages of community banking and to contribute to regional economic vitality."
On a pro-forma basis, Bank of the Cascades would be the #4 largest NW community bank(1) after completing the merger. In addition, the combination represents an opportunity for Cascade to enter the attractive Eugene, Oregon market to expand its footprint and services in its home state of Oregon.
Len E. Williams, Home Federal President and CEO, commented, "We are very excited about the Transaction. Home Federal and Cascade have similar cultures, complementary geographies, and service strengths that make this Transaction a natural fit. Cascade shares our commitment to customers and community, and this Transaction is a terrific result for our shareholders. We see great opportunity in combining to create a bank with enormous potential for future success."
Cascade's management believes this transaction represents an opportunity to realize significant cost savings and, in doing so, allows Cascade to pursue efficiencies in infrastructure. The annualized combined synergies are estimated at 24% of the combined core non-interest expense. Deposit cost reductions and scale efficiencies are currently expected to create opportunity for the Transaction to result in favorable revenue synergies.
The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.
Cascade was advised in this transaction by Macquarie Capital, as financial advisor, and Hunton & Williams LLP, as legal counsel. Home Federal was advised by Keefe, Bruyette & Woods, as financial advisor, and Vorys, Sater, Seymour and Pease LLP, as legal counsel.