Business Context and Reporting Period
This Form 8-K, dated July 1, 2013, reports on First PacTrust Bancorp, Inc. (the "Company"). The filing details the completion of the acquisition of The Private Bank of California ("PBOC") and the assumption of PBOC's obligations under the U.S. Treasury's Small Business Lending Fund (SBLF) Program.
Key Financial Metrics and Transaction Details
- Merger Consideration: PBOC shareholders received a pro rata share of $24,887,513 in cash and 2,083,333 shares of Company common stock. This equates to $6.47 in cash and 0.5416 shares of Company common stock per PBOC share.
- Preferred Stock Assumption: The Company assumed 10,000 shares of PBOC Senior Non-Cumulative Perpetual Preferred Stock, Series C, with a liquidation preference of $1,000 per share (total $10,000,000).
- New Capital Issuance: The assumed shares were converted into 10,000 shares of the Company's Non-Cumulative Perpetual Preferred Stock, Series B ("Series B Preferred Stock"), qualifying as Tier 1 capital.
- Existing Capital Structure: The Company currently has 32,000 shares of Series A Preferred Stock and 35,000 shares of Series C Preferred Stock outstanding.
Material Changes and Terms
The primary material change is the consolidation of PBOC into Beach Business Bank, a wholly-owned subsidiary of the Company. Concurrently, the Company entered into an Assignment Agreement to assume the SBLF obligations previously held by PBOC.
Series B Preferred Stock Terms:
- Dividend Rate: Variable based on Qualified Small Business Lending (QSBL).
- July 1, 2013 – Jan 1, 2014: 1% to 5%.
- Jan 1, 2014 – Mar 1, 2016: 1% to 7% (fixed based on Oct 1, 2013 levels, subject to increases if thresholds are not met).
- After Mar 1, 2016: Fixed at 9%.
- Redemption: Redeemable at the Company's option at 100% of liquidation amount plus unpaid dividends, subject to regulatory approval and potential additional fees if QSBL thresholds are not met.
- Dividend Restrictions: If Series B dividends are not paid in full, the Company is restricted from paying dividends on common or junior stock and from repurchasing equity securities for three subsequent dividend periods.
Guidance, Risks, and Contingencies
Financial Reporting: Financial statements of the acquired business and pro forma financial information are not included in this filing. They will be filed by amendment within 71 days of the report date.
Risks and Contingencies:
- Lending Thresholds: The dividend rate and redemption fees for the Series B Preferred Stock are contingent on the Company meeting specific QSBL lending thresholds. Failure to meet these thresholds could increase the cost of capital.
- Dividend Covenants: The terms of the Series B Preferred Stock impose strict limitations on the Company's ability to pay dividends on common stock or repurchase shares if preferred dividends are missed.
- Board Observer Rights: If the Company misses five dividend payments (consecutive or otherwise), the holder of the Series B Preferred Stock gains the right to appoint a non-voting observer to the Board of Directors.
Key Facts for Investor Verification
- Verify the pro forma financial impact of the PBOC merger once the 71-day amendment is filed.
- Monitor the Company's Qualified Small Business Lending (QSBL) levels to determine the actual dividend rate on the new Series B Preferred Stock.
- Confirm the total outstanding preferred stock count, noting the potential increase in Series C shares if the underwriters' overallotment option is exercised.
- Review the specific QSBL lending thresholds required to avoid increased dividend rates or redemption fees.