Two Santa Cruz-based community banks to merge into $1B institutionMay 28, 2019
Santa Cruz County Bank and Lighthouse Bank, both based in Santa Cruz, said Tuesday afternoon that they plan to merge in a deal that will create a combined South Bay institution with nearly $1 billion in assets and seven banking branches in the region.
Lighthouse Bank, the smaller of the two lenders, will merge into Santa Cruz County Bank in an all-stock deal valued at about $68.87 million, or $25.50 per Lighthouse share. Shares of Lighthouse, which trade on the over-the-counter markets, closed at $23.70 on Tuesday, ahead of the announcement.
Lighthouse Bank President Jon Sisk will join Santa Cruz County Bank as a regional president and Lighthouse CEO Lane Lawson, one of the original executives who helped found the bank in 2007, will retire after 12 years with the company, the two banks said.
Santa Cruz County Bank, led by CEO David Heald, already has five branches — in Santa Cruz, Aptos, Capitola, Scotts Valley and Watsonville. The deal, which is expected to close in the third quarter, will add Lighthouse’s two outposts in Santa Cruz and Cupertino.
The merger is part of a consolidation trend among community banks in the Bay Area and around the country in which smaller players are increasingly combining forces to cut costs and boost margins. Earlier this month, the San Jose-based parent of Heritage Bank of Commerce said it will acquire San Francisco-based rival Presidio Bank for about $200 million, marking the latest and biggest deal in a shopping spree for Heritage that has included acquisitions of several smaller Bay Area banks in recent years.
Santa Cruz County Bank was founded in 2004 and focuses on small-business loans, lines of credit, commercial real estate financing and agricultural loans. The bank earned record net income of $11.4 million in 2018, up 68 percent compared to the year before, and had $668 million in assets as of the end of March. It was recently ranked 12th in American Banker’s list of the 200 best-performing community banks in the United States.
By comparison, Lighthouse is about half that size, with $314 million in assets as of the end of the first quarter. It earned $4.93 million in 2018, up 33 percent compared to the year before.
"The merger offers all shareholders both immediate value and the opportunity to participate in potential upside as the bank generates momentous growth from its market-focused community banking strategy. Planning for the integration of these two banks is in progress and we expect to expeditiously realize the full value of the cost synergies we have identified," William Hansen, chairman of Santa Cruz County Bank, said in a statement.
Four directors from Lighthouse — bank Chairman John Burroughs, as well as Stephen Pahl, James Weisenstein and Craig French — will join the Santa Cruz County Bank board at deal closing. "Lighthouse has long regarded Santa Cruz County Bank and shares similar values, celebrating community and a commitment to excellent customer service and shareholder returns," Burroughs said in a statement.