Better than triple based on $15.75 cost at time of recommendation! Up over 60% today
RBB Bancorp (RBB) and its subsidiaries, Royal Business Bank and RBB Asset Management Company (collectively referred to herein as "RBB") and First American International Corp. (FAIT) and its subsidiary First American International Bank (collectively referred to herein as "First American"), today announced the signing of a definitive agreement in a cash and stock transaction valued at $116.8 million, or $52.32 per share.
First American International Corp. is the holding company for First American International Bank, a community development financial institution and a minority depository institution with total assets of $873 million, total gross loans of $715 million, and total deposits of $630 million as of December 31, 2017. Principally serving the Chinese-American communities in the boroughs of Manhattan, Queens and Brooklyn, New York, First American has eight full-service branches, offering consumer and business banking and loan products and services, as well as non-deposit insured investment products and services, and one satellite mortgage origination office.
"We are very pleased to announce this transaction with First American, which enables us to expand the RBB franchise to the New York market and serve its large community of Asian-Americans," said Mr. Alan Thian, Chairman, President and CEO of RBB Bancorp. "First American is an excellent cultural fit with RBB, as we have complementary business models, strong residential mortgage loan production platforms, and a focus on the Chinese-American market. On a pro forma basis, the addition of First American will enable RBB to surpass $2.5 billion in total assets and provide additional scale that we believe will enhance our overall efficiencies and improve our level of profitability. We believe that the combined company will be well positioned to continue growing the RBB franchise and creating value for our shareholders in the years ahead."
"We believe the combination of First American and RBB will create an impressive bi-coastal banking franchise and add to the RBB family the leading New York Chinese-American community bank," said Mr. Raymond Yu, Chairman of First American. "Our current depositors and customers will benefit immediately from RBB's additional loan products and service offerings. RBB's focus on shareholder value, professional client service, employee development and community service and support aligns well with First American's core principles. We will work together to ensure a smooth transition and we expect to continue expanding in NYC and other regions."
Under the terms of the definitive agreement, upon consummation of the transaction, all of First American common shares will be exchanged for approximately 3.0 million shares of RBB common stock and $33.7 million in cash. Based on a closing price for RBB Bancorp's common stock of $27.48 as of April 20, 2018, the aggregate transaction value is approximately $116.8 million.
Existing RBB shareholders will own approximately 84.6% of the outstanding shares of the combined company and First American shareholders will own approximately 15.4%.
RBB expects the transaction to be accretive to earnings per share in 2019 in the mid-teens. RBB also expects to incur tangible book value per share dilution of approximately 4.1% upon closing of the transaction, with a tangible book value dilution payback period of approximately 1.9 years. The earnings per share accretion estimates are based on estimated cost savings of approximately 30% of First American's non-interest expense, with 25% of the cost savings phased in during 2018 and 100% phased in during 2019. The earnings per share accretion estimates do not include any assumption of revenue synergies.
Pursuant to the terms of the definitive agreement, upon closing of the transaction, First American will designate two individuals, one of whom is First American's Chairman, Mr. Raymond Yu, to serve on the Board of Directors of RBB, which will be expanded to 15 members. Mr. Yu will be appointed Vice Chairman of the Board of Directors of RBB.