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Santa Cruz County Bank and Lighthouse Bank merge

May 30, 2019

SANTA CRUZ — Santa Cruz County Bank and Lighthouse Bank announced Wednesday evening they will merge.

The two will be Santa Cruz County Bank with an all-stock transaction valued at approximately $68.9 million. The merger will increase Santa Cruz County Bank’s total assets to nearly $1 billion on an estimated basis with seven full service banking offices in Santa Cruz and Santa Clara counties.

William Hansen, chairman of Santa Cruz County Bank, said the conversation about merging started about seven months ago. He explained that one of the opportunities of merging is expanding their legal lending limit, which means, as a larger organization, the bank can serve larger borrowers the banks may have had to turn away as separate entities.

David Heald, Santa Cruz County Bank president and CEO, said it’s not a matter of timing, but both banks “feel like they can do better together than on an individual basis.”

“We’re better as one than separated,” he said.

Lighthouse Bank, founded in 2007, is a full-service community bank headquartered in Santa Cruz with a branch in Cupertino. As of March 31, Lighthouse Bank had approximately $314 million in total assets and a return on average assets of 1.73% for the first quarter of 2019.

Santa Cruz County Bank, founded in 2004, is a locally owned and operated full-service community bank headquartered in Santa Cruz. The bank operates five branches in Aptos, Capitola, Santa Cruz, Scotts Valley and Watsonville.

As of March 31, on an estimated basis, the combined company of Santa Cruz County Bank and Lighthouse Bank would have approximately $982 million in total assets, $706 million in total loans, and $854 million in total deposits. The banks expect to expand into Silicon Valley and Santa Clara and San Mateo counties, according to Heald.

At closing, four directors from Lighthouse Bank, John Burroughs, Stephen Pahl, James Weisenstein and Craig French, will join the Santa Cruz County Bank Board of Directors. Jon Sisk, president of Lighthouse Bank, will join Santa Cruz County Bank as a regional president.

After 12 years, Lane Lawson, CEO, director and one of the original executive level employees at the inception of Lighthouse Bank, will retire at closing. Heald said there will be no layoffs at the branch locations. He added that staff was alerted to the merge Tuesday and were excited.

“We have tremendous respect for the leadership at Santa Cruz County Bank, many of whom are former colleagues,” said Jon Sisk, president of Lighthouse Bank. “We’re thrilled to come together with their team, and to expand the breadth and depth of service and resources for our customers. The blending of two of the nation’s top-performing banks, each of them founded and headquartered in Santa Cruz, will deliver a premier banking experience for our community.”

The Santa Cruz community welcomed the merge.

“I think the integration of the two local banks increases the potential for greater community investment and growth opportunities for Santa Cruz County businesses and residents by combining local decision making with an increased capacity to serve larger borrowers,” said Andy Constable, Economic Development manager for the County of Santa Cruz, in a prepared statement.

Santa Cruz County Bank and Lighthouse Bank are two highly respected and admired business organizations that give back to the community and are also involved in chamber events, according to CEO of the Santa Cruz area Chamber of Commerce Casey Beyer.

“They’re family to the chamber,” he said. “I think there’s strength in numbers.”

He added that it is an “ideal marriage between two companies.”

Under the terms of the two banks’ agreement, shareholders of Lighthouse Bank will receive a fixed exchange ratio of 0.5204 shares of Santa Cruz County Bank common stock in exchange for each share of Lighthouse Bank common stock. The exchange ratio is fixed, and the value of the merger consideration will fluctuate based on Santa Cruz County Bank’s stock price. On a pro forma basis, the holders of Lighthouse Bank common shares will own approximately 36% of the issued and outstanding Santa Cruz County Bank common stock.

“We are very pleased to welcome Lighthouse Bank’s board members, executives and employees to our team and look forward to their contributions to our combined premier performing institution,” Heald said in a press release. “Together, we will achieve even greater milestones. We have all worked together in our community for many years and have tremendous mutual respect. Individuals who choose to bank with community driven institutions over the major banks recognize our shared values of community reinvestment, high-touch customer service, and local decision-making. These fundamentals will not change.”

The boards of Santa Cruz County Bank and Lighthouse Bank unanimously approved the transaction, but it is subject to closing conditions including the approvals of state and federal bank regulatory agencies and the shareholders of both Lighthouse and Santa Cruz and other conditions specified in their agreement. The transaction is expected to close in the third quarter of 2019.

FIG Partners acted as financial adviser to Santa Cruz County Bank in the transaction. Gary Steven Findley & Associates is legal counsel to Santa Cruz County Bank. Sandler O’Neill + Partners, L.P. acted as financial adviser to Lighthouse Bank. Stuart Moore Staub is legal counsel to Lighthouse Bank.

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