On June 9, 2014, Eagle Bancorp, Inc. ("Eagle") (Nasdaq:EGBN), the
parent company of EagleBank ("EagleBank"), and Virginia Heritage
Bank ("VHB") (OTCQB:VGBK) announced that they have entered into a
definitive agreement (the "Agreement") pursuant to which VHB will
be merged into EagleBank, with EagleBank being the surviving
institution. The merger will accelerate Eagle's growth with the
addition of VHB's 6 branches, which are all located in the
attractive Northern Virginia market. At March 31, 2014, VHB had
approximately $917.4 million in assets, $715.8 million in net loans
and $737.1 million in deposits.
Under the Agreement, as illustrated in the table below, each VHB
shareholder will be entitled to receive a combination of Eagle
common stock and cash for each share of VHB common stock they own.
So long as the average closing price of a share of Eagle common
stock over a 20 trading day period ending five trading days prior
to closing (the "Eagle Average Price") is at least $29.00 and not
more than $35.50, then each share of VHB common stock would be
converted into the right to receive shares of Eagle common stock
having a value, based on the Eagle Average Price, of $21.50 per
share, and cash of $7.50 per share, for aggregate consideration of
$29.00 per share. If the Eagle Average Price is higher than $35.50,
then each share of VHB common stock would be converted into 0.6056
shares of Eagle common stock, and the cash consideration per share
would increase above $7.50 as illustrated in the table below. If
the Eagle Average Price is less than $29.00, then, generally, each
share of VHB common stock would be converted into the right to
receive $7.50 in cash and shares of Eagle common stock having a
value equal to the Eagle Average Price less $7.50.
Options to acquire VHB common stock will be assumed by Eagle and
converted into options to acquire shares of Eagle common stock.
Based on the closing price of Eagle common stock on June 6, 2014
of $32.92, the Exchange Ratio would be 0.6531, and the aggregate
value of the transaction would be approximately $182.9 million,
including the value of outstanding options to acquire VHB common
stock, but excluding the value of VHB's preferred stock, or
approximately 205.7% of VHB's book value and tangible book value
per common share and 18.1x VHB's trailing twelve month earnings
available to common shareholders, each as of March 31, 2014.
Approximately $45.1 million of the aggregate consideration would be
payable in cash. The Exchange Ratio and the value of the
transaction at closing may be higher or lower, depending on the
change in the value of Eagle common stock. Eagle expects that the
transaction will be accretive to Eagle's earnings within twelve
months following the closing of the merger, and will result in
modest dilution to tangible book value, which is expected to be
earned back within four years.
The following table sets forth, for illustrative purposes only,
the consideration to be received in exchange for each share of VHB
common stock, and the approximate aggregate transaction value
(including the value attributable to in the money options) and
shares issuable, at a range of Eagle Average Prices.
Eagle Average Price |
Exchange Ratio |
Total Consideration Per VHB
Share |
Value of Eagle Common Stock Per VHB
Share |
Cash Consideration Per VHB Share |
Aggregate Transaction Value
(including options)1 |
Eagle Shares Issuable (excluding
options)1 |
$25.00 |
0.7000 |
$25.00 |
$17.50 |
$7.50 |
$156.9 million |
4,211,755 |
$26.00 |
0.7115 |
$26.00 |
$18.50 |
$7.50 |
$163.4 million |
4,280,954 |
$27.00 |
0.7222 |
$27.00 |
$19.50 |
$7.50 |
$169.9 million |
4,345,334 |
$28.00 |
0.7321 |
$28.00 |
$20.50 |
$7.50 |
$176.4 million |
4,404,900 |
$29.00 |
0.7414 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
4,460,856 |
$30.00 |
0.7167 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
4,312,241 |
$31.00 |
0.6936 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
4,173,253 |
$32.00 |
0.6719 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
4,042,689 |
$32.92 |
0.6531 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
3,929,573 |
$33.00 |
0.6515 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
3,919,946 |
$34.00 |
0.6324 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
3,805,025 |
$35.00 |
0.6143 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
3,696,121 |
$35.50 |
0.6056 |
$29.00 |
$21.50 |
$7.50 |
$182.9 million |
3,643,775 |
$36.00 |
0.6056 |
$29.41 |
$21.80 |
$7.61 |
$185.6 million |
3,643,775 |
$37.00 |
0.6056 |
$30.23 |
$22.41 |
$7.82 |
$190.9 million |
3,643,775 |
$38.00 |
0.6056 |
$31.04 |
$23.01 |
$8.03 |
$196.2 million |
3,643,775 |
$39.00 |
0.6056 |
$31.86 |
$23.62 |
$8.24 |
$201.5 million |
3,643,775 |
$40.00 |
0.6056 |
$32.68 |
$24.23 |
$8.45 |
$206.8 million |
3,643,775 |
|
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Eagle would also assume the 15,300 shares of VHB's preferred
stock which has an aggregate liquidation preference of $15.3
million and was issued in connection with the U.S. Treasury's Small
Business Lending Fund Program.
_______________________
1 Based on 6,018,801 shares of VHB common stock issued
and outstanding as of May 31, 2014, and options outstanding as of
May 31, 2014 to purchase 481,861 shares of VHB common stock at an
average weighted exercise price of approximately $11.64 per
share. Excludes the value of VHB preferred stock.
In connection with the merger, David P. Summers, Chairman and
CEO of VHB, will be invited to join the Board of Directors of Eagle
and EagleBank.
The merger is expected to close as early as the fourth quarter
of 2014. The Agreement has been unanimously approved by the boards
of directors of both Eagle and VHB and is subject to the approval
by common shareholders of VHB, the approval of the applicable bank
regulatory authorities, and the satisfaction or waiver of the
conditions to closing and covenants of each party contained in the
Agreement.
The merger is not contingent on the raising of any additional
capital. However, in order to maintain the levels of capital which
Eagle desires to maintain as of the closing of the merger, which is
expected to coincide with the effectiveness of the new regulatory
capital rules, and to support continued operations, Eagle expects
that it will seek to supplement its capital prior to the closing of
the merger through the sale of up to $55 million of subordinated
debt.
Ronald D. Paul, Chairman and CEO of Eagle and EagleBank said,
"We are extremely excited about the proposed acquisition of VHB and
the transformative opportunities the combination creates for us in
Northern Virginia. Both banks are similar in that we share a
culture of providing outstanding customer service and putting
customer relationships first, while never taking the eye off the
ball in terms of credit quality or enhancing shareholder value. We
look forward to serving VHB's customers with our portfolio of
deposit, cash management, and loan products tailored for small and
medium-sized businesses, real estate investors, law firms and other
professional organizations. The addition of VHB's team, combined
with our own organic growth, gives EagleBank the ability to be a
major factor in this dynamic market, long one of our principal
objectives. We feel that VHB's customers will value our vision of
providing superior customer service, making credit available to
eligible borrowers, providing access to local leadership and
decision makers, and our commitment to the community which have
resulted in Eagle becoming the premier community banking
organization in the D.C. metropolitan area."
David P. Summers, Chairman and CEO of VHB noted, "In 16 years
EagleBank has established itself as the leading community banking
company serving the Washington, D.C. metropolitan area. For our
customers, partnership with Eagle means access to additional
products and services, greater convenience, a significantly higher
lending capacity, and an expanding, well-positioned branch network.
For our shareholders, taking the currency of a high performing
company translates into enhanced shareholder value. The alliance of
our two companies should prove a winning combination all around. I
look forward to working with Ron to continue the expansion of the
combined franchise."
VHB was advised by Sandler O'Neill + Partners, L.P. as financial
advisor, and Holland & Knight LLP as legal counsel. Houlihan
Lokey Capital, Inc. served as financial advisor, and BuckleySandler
LLP served as legal counsel, to Eagle. Keefe, Bruyette & Woods,
Inc. provided a fairness opinion to the Board of Directors of
Eagle.
Conference Call: Eagle Bancorp will host a
conference call to discuss the merger on Tuesday, June 10, 2014 at
11:00 a.m., eastern daylight time. The public is invited to listen
to this conference call by dialing 1.877.303.6220, conference ID
Code is 57975795, or by accessing the call on the Company's
website, www.eaglebankcorp.com. A replay of the conference call
will be available on the Company's website through June 25, 2014.
An investor presentation relating to the merger will be available
in the Current Report on Form 8-K to be filed with the Securities
and Exchange Commission (the "SEC"), and will also be posted on
Eagle's website prior to the call.
About the Companies: Eagle Bancorp, Inc. is the
holding company for EagleBank, which commenced operations in 1998.
EagleBank is headquartered in Bethesda, Maryland, and conducts full
service commercial banking through eighteen offices, located in
Montgomery County, Maryland, Washington, D.C. and Northern
Virginia. EagleBank focuses on building relationships with
businesses, professionals and individuals in its marketplace.
Virginia Heritage Bank is headquartered in Tysons Corner,
Virginia. The Bank has six full service offices in Arlington,
Fairfax, Chantilly, Gainesville, Tysons Corner and Sterling,
Virginia. The Bank also has a mortgage division located in
Chantilly, Virginia.
Forward-looking Statements: This press release
contains forward-looking statements within the meaning of the
Securities and Exchange Act of 1934, as amended, including
statements of goals, intentions, and expectations as to future
trends, plans, events or results of Eagle's operations and policies
and regarding general economic conditions. These forward-looking
statements include, but are not limited to, statements about (i)
the benefits of the merger between EagleBank and VHB and (ii)
Eagle's and VHB's plans, obligations, expectations and intentions.
In some cases, forward-looking statements can be identified by use
of words such as "may," "will," "anticipates," "believes,"
"expects," "plans," "estimates," "potential," "continue," "should,"
and similar words or phrases. These statements are based upon the
beliefs of the respective managements of Eagle and VHB as to the
expected outcome of future events, current and anticipated economic
conditions, nationally and in the parties' market, and their impact
on the operations and assets of the parties, interest rates and
interest rate policy, competitive factors, judgments about the
ability of the parties to successfully consummate the merger and to
integrate the operations of the two companies, the expected growth
opportunities or cost savings resulting from the merger, which may
not be fully realized or take longer than expected to realize; the
ability of the two companies to avoid customer dislocation or
runoff, and employee attrition, during the period leading up to and
following the merger, the timing of and any conditions to required
regulatory approvals, the demand for and pricing of subordinated
debt or other securities, and other conditions which by their
nature, are not susceptible to accurate forecast and are subject to
significant uncertainty. Factors that could cause results and
outcomes to differ materially include, among others, the ability to
obtain required regulatory and shareholder approvals; the ability
to complete the merger as expected and within the expected
timeframe; and the possibility that one or more of the conditions
to the completion of the merger may not be satisfied. Because of
these uncertainties and the assumptions on which this discussion
and the forward-looking statements are based, actual future
operations and results in the future may differ materially from
those indicated herein. Readers are cautioned against placing undue
reliance on such forward-looking statements. Past results are not
necessarily indicative of future performance. Eagle and VHB assume
no obligation to revise, update, or clarify forward-looking
statements to reflect events or conditions after the date of this
release.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO
FIND IT
Eagle will file with the SEC, a registration statement
on Form S-4 which will include a prospectus regarding the shares of
Eagle common stock to be issued in the merger, and proxy statement
for the meeting of VHB shareholders at which approval of the
Agreement will be voted upon. The combined proxy
statement/prospectus will be mailed to the shareholders of VHB.
Investors and security holders of Eagle and VHB are urged to read
the proxy statement/prospectus, the documents incorporated by
reference in the proxy statement/prospectus, the other documents
filed with the SEC and the other relevant materials when they
become available, because they will contain important information
about Eagle, VHB, the merger and the transactions contemplated by
the merger. Investors will be able to obtain these documents free
of charge at the SEC's web site (http://www.sec.gov). In addition,
documents filed with the SEC by Eagle will be available free of
charge from Eagle's Investor Relations at (301) 986-1800, or on
Eagle's website at www.eaglebankcorp.com under the tab "Investor
Relations" and then under the heading "SEC Filings." Certain
information regarding VHB may also be found on VHB's website at
www.vhbank.com.
Eagle, VHB and their respective directors, executive
officers, and certain other members of management and employees of
Eagle, EagleBank and VHB may be deemed to be participants in the
solicitation of proxies from shareholders of VHB in connection with
the proposed merger. Information concerning the interests of the
persons who may be considered "participants" in the solicitation
will be set forth in the combined proxy statement/prospectus
relating to the merger and the other relevant documents filed with
the SEC when they become available. Information about the directors
and executive officers of Eagle is also set forth in Eagle's proxy
statement for its 2014 annual meeting of shareholders filed with
the SEC.
CONTACT: EAGLE BANCORP, INC.
Ronald D. Paul
301.986.1800
VIRGINIA HERITAGE BANK
David P. Summers
703.277.2200