Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events

Subsequent Events

Note 10 — Subsequent Events

On October 15, 2012, the Company issued a press release announcing that it had entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) to acquire First Associations, a Texas-chartered bank (“FAB”).  FAB is a specialized bank headquartered in Dallas, Texas, that focuses exclusively on serving homeowners associations (“HOAs”) and HOA management companies nationwide.  At September 30, 2012, FAB had $356.2 million in total assets and $305.5 million in total deposits.  If the acquisition of FAB is consummated, it will provide the Bank with a valuable source of low-cost core deposits that are expected to strengthen the Bank’s existing deposit base and lower its overall funding cost.

On the date of the Merger Agreement, the transaction was valued at $53.7 million, which includes approximately $50.2 million in deal consideration for FAB shareholders and approximately $3.5 million in cash consideration for FAB option holders and FAB warrant holders.  The $50.2 million of deal consideration for FAB shareholders includes $37.6 million in cash consideration, which is subject to adjustment, and 1,279,228 shares of Company common stock to be issued to FAB shareholders, which shares had a value of approximately $12.5 million based on the Company’s five-day average closing price immediately prior to announcement of the transaction.  The cash portion of the consideration payable to FAB shareholders may increase or decrease based on the changes in value of FAB’s mortgage-related securities portfolio prior to closing.  In addition, the cash consideration payable to FAB shareholders may be reduced if FAB’s transaction-related expenses exceed $3.9 million.

The transaction is expected to close late in the fourth quarter of 2012 or in the first quarter of 2013, subject to satisfaction of the closing conditions described in the Merger Agreement and other customary closing conditions, including regulatory approvals and approval of FAB shareholders.  For additional information about the proposed acquisition of FAB, see the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2012 and the Merger Agreement which is filed as an exhibit to the Current Report on Form 8-K.