Item 1.01 Entry into a Material Definitive Agreement
Agreement and Plan of Reorganization and Merger
On July 27, 2021, CVB Financial Corp., a California corporation (the "Company"),
Citizens Business Bank, a California state-chartered bank and wholly-owned
subsidiary of the Company ("Citizens"), and Suncrest Bank, a California
state-chartered bank ("Suncrest"), entered into an Agreement and Plan of
Reorganization and Merger (the "Reorganization Agreement"), pursuant to which
Suncrest will merge with and into Citizens, with Citizens as the surviving bank
(the "Merger").
Upon consummation of the Merger, the Articles of Incorporation and Bylaws of
Citizens as in effect immediately prior to the effective time of the Merger (the
"Effective Time") will be those of the surviving bank. The directors and
officers of the Company and Citizens immediately prior to the Effective Time
will be the directors and officers of the Company and Citizens following the
Merger.
Subject to the terms and conditions of the Reorganization Agreement, upon
consummation of the Merger, each share of Suncrest's common stock outstanding
immediately prior to the Effective Time will be cancelled and converted into the
right to receive 0.6970 shares of the Company's common stock and $2.69 per share
in cash, subject to any adjustments set forth in the Reorganization Agreement
(the "Merger Consideration"). At the Effective Time, each Suncrest option award
will be cashed out and receive the difference between the per share merger
consideration and their strike price.
The cash consideration will be reduced, on a per share basis, by the sum of the
following, if any: (i) a common equity tier 1 capital adjustment (i.e., the
amount, if any, by which the adjusted common equity tier 1 capital of Suncrest
at the closing measurement date is below the greater of (a) Suncrest's tier 1
capital as of June 30, 2021 and (b) $118,163,000 (the "tier 1 benchmark"), and
multiplying such difference, if any, by 1.5; plus (ii) a transaction costs
adjustment (i.e., the amount, if any, by which certain specified transaction
costs of Suncrest exceed $5.8 million).
Based on the closing price of the Company's common stock on July 26, 2021 and
assuming no adjustments to the merger consideration, the aggregate Merger
Consideration would be approximately $204 million, or approximately $16.18 per
outstanding share of Suncrest.
Suncrest, the Company and Citizens have made representations, warranties and
covenants in the Reorganization Agreement customary for transactions of this
type. Subject to certain exceptions, each of the Company, Citizens and Suncrest
has agreed, among other things, to covenants relating to (i) the conduct of its
business during the interim period between the execution of the Reorganization
Agreement and the consummation of the Merger, and (ii) the use of reasonable
best efforts to obtain regulatory approvals. In addition, Suncrest has agreed,
among other things, to covenants relating to (i) obligations to facilitate the
Suncrest shareholders' consideration of, and voting upon, the approval of the
principal terms of the Reorganization Agreement, (ii) the recommendation by the
Suncrest board in favor of the approval by the Suncrest shareholders of the
principal terms of the Reorganization Agreement, and (iii) non-solicitation
obligations relating to alternative acquisition proposals.
The consummation of the Merger is subject to customary conditions, including
(i) the receipt of regulatory approvals without the imposition of any materially
burdensome regulatory condition, (ii) the receipt of the requisite approval of
the shareholders of Suncrest, (iii) the absence of any law or order prohibiting
the closing, and (iv) the effectiveness of the registration statement to be
filed by the Company with respect to the shares of Company common stock to be
issued to the shareholders of Suncrest.
The obligation of each party to consummate the Merger is also conditioned upon
(i) subject to certain exceptions, the accuracy of the representations and
warranties of the other party, (ii) performance in all material respects by the
other party of its obligations under the Reorganization Agreement, (iii) receipt
by such party of a tax opinion to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and (iv) the absence of a material adverse effect with
respect to the other party since the date of the Reorganization Agreement.
2
--------------------------------------------------------------------------------
The obligation of the Company and Citizens to consummate the Merger is also
conditioned upon, among other things, (i) the adjusted tier 1 capital of
Suncrest being equal to or greater than the tier 1 benchmark as of the
measurement date; (ii) the total non-interest bearing deposits of Suncrest being
equal to or greater than $470 million as of the measurement date, (iii) the
adjusted total loans of Suncrest being equal to or greater than $745 million as
of the measurement date; (iv) the allowance for loan and lease losses of
Suncrest not being less than $8,504,000 (or such greater amount filed with
Suncrest's call report for the period ended June 30, 2021) as of the measurement
date; and (v) holders of not more than 10% of the outstanding shares of Suncrest
common stock shall have exercised their dissenters rights.
The Reorganization Agreement contains customary termination rights for the
Company, Citizens and Suncrest, including if (i) the Merger is not consummated
by April 30, 2022 (the "Outside Date"), which Outside Date may be extended by
the Company or Suncrest to June 30, 2022 if additional time is needed to obtain
regulatory approvals, (ii) the necessary regulatory approvals are denied,
(iii) the approval of the Suncrest shareholders is not obtained, or (iv) there
has been a breach by the other party that is not cured such that the applicable
closing conditions are not satisfied.
Suncrest may also terminate the Reorganization Agreement prior to obtaining the
Suncrest shareholders' approval in order to enter into a definitive agreement
providing for a superior proposal obtained by Suncrest without breaching the
Reorganization Agreement. In addition, in certain circumstances, the Company may
terminate the Reorganization Agreement prior to the Suncrest shareholders'
approval of the Merger in the event that (i) Suncrest materially breaches its
non-solicitation obligations relating to alternative acquisition proposals,
(ii) the Suncrest board withdraws or adversely modifies its recommendation to
its shareholders or fails to affirm its recommendation within the required time
period after an acquisition proposal is made, or (iii) the Suncrest board
recommends a tender offer or fails to recommend against such tender offer within
10 business days after commencement thereof. The Reorganization Agreement also
provides that Suncrest will be obligated to pay a termination fee of $8,325,000
to the Company (i) if the Reorganization Agreement is terminated by the Company
in the circumstances described in the preceding sentence, (ii) as a condition to
any termination of the Reorganization Agreement by Suncrest to enter into a
definitive agreement for a superior proposal or (iii) (A) if an acquisition
proposal is made to Suncrest or to its shareholders publicly, (B) the
Reorganization Agreement is terminated for failure to consummate the Merger by
the Outside Date without the approval of the Suncrest shareholders being
obtained or for failure to obtain the approval of the Suncrest shareholders and
(C) Suncrest enters into a definitive agreement with respect to or consummates
an acquisition proposal within 18 months of such termination of the
Reorganization Agreement.
The Merger is expected to close in the fourth quarter of 2021 or early in the
first quarter of 2022.
The foregoing description of the Reorganization Agreement is qualified in its
entirety by reference to the full text of the Reorganization Agreement, a copy
of which is attached as Exhibit 2.1 to this Current Report on Form 8-K and is
incorporated by reference herein. The Reorganization Agreement has been attached
as an exhibit to provide investors and security holders with information
regarding its terms. It is not intended to provide any other financial
information about the Company, Citizens, Suncrest or their respective
subsidiaries or affiliates. The representations, warranties and covenants
contained in the Reorganization Agreement were made only for purposes of that
agreement and as of specific dates, are solely for the benefit of the parties to
the Reorganization Agreement, may be subject to limitations agreed upon by the
parties, including being qualified by confidential disclosures made for the
purposes of allocating contractual risk between the parties to the
Reorganization Agreement instead of establishing these matters as facts, and may
be subject to standards of materiality applicable to the parties that differ
from those applicable to investors. Investors should not rely on the
representations, warranties, or covenants or any description thereof as
characterizations of the actual state of facts or condition of the Company,
Citizens, Suncrest or any of their respective subsidiaries or affiliates.
Moreover, information concerning the subject matter of the representations,
warranties, and covenants may change after the date of the Reorganization
Agreement, which subsequent information may or may not be fully reflected in
public disclosures by the Company.
Voting and Support Agreements; Non-Competition, Non-Solicitation and
Non-Disclosure Agreements
. . .
Item 8.01 Other Events
On July 27, 2021, the Company and Suncrest issued a joint press release
announcing the execution of the Reorganization Agreement. On July 28, 2021, the
Company will hold an investor conference call to provide supplemental
information regarding the Merger. Copies of the press release and the slide
presentation to be used on the conference call are attached hereto as Exhibits
99.5 and 99.6, respectively, and are incorporated by reference herein.
Forward-Looking Statements
This Current Report on Form 8-K contains statements regarding the proposed
transaction between the Company, Citizens and Suncrest, and statements about the
future expectations, beliefs, goals, plans or prospects of the management of
each of Company, Citizens and Suncrest. These statements are based on current
expectations, estimates, forecasts and projections and management assumptions
about the future performance of each of Company, Citizens, Suncrest and the
surviving bank, as well as the businesses and markets in which they do and are
expected to operate. These statements constitute forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Words such as "expects," "believes," "estimates," "anticipates," "targets,"
"goals," "projects," "intends," "plans, "seeks," and variations of such words
and similar expressions are intended to identify such forward-looking statements
which are not statements of historical fact. These forward-looking statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to assess. Actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. The closing of the proposed Merger is subject to
regulatory approvals, the approval of the shareholders of Suncrest, and other
customary closing conditions. There is no assurance that such conditions will be
met or that the proposed Merger will be consummated within the expected time
frame, or at all. If the Merger is consummated, factors that may cause actual
outcomes to differ from what is expressed or forecasted in these forward-looking
statements include, among things: difficulties and delays in integrating
Citizens and Suncrest and achieving anticipated synergies, cost savings and
other benefits from the transaction; higher than anticipated transaction costs;
deposit attrition, operating costs, customer loss and business disruption
following the Merger, including difficulties in maintaining relationships with
employees, may be greater than expected; local, regional, national and
international economic and market conditions, political events and public health
developments and the impact they may have on Citizens, its customers and its
assets and liabilities; Citizens' ability to attract deposits and other sources
of funding or liquidity; supply and demand for commercial or residential real
estate and periodic deterioration in real estate prices and/or values in
4
--------------------------------------------------------------------------------
California or other states where Citizens lends; a sharp or prolonged slowdown
or decline in real estate construction, sales or leasing activities; changes in
the financial performance and/or condition of Citizens' borrowers, depositors,
key vendors or counterparties; changes in Citizens' levels of delinquent loans,
nonperforming assets, allowance for credit losses and charge-offs; the costs or
effects of mergers, acquisitions or dispositions the Company may make, whether
the Company is able to obtain any required governmental approvals in connection
with any such mergers, acquisitions or dispositions, and/or Citizens' ability to
realize the contemplated financial or business benefits associated with any such
mergers, acquisitions or dispositions; the effects of new laws, regulations
and/or government programs, including those laws, regulations and programs
enacted by federal, state or local governments in the geographic jurisdictions
in which Citizens does business in response to the current national emergency
declared in connection with the COVID-19 pandemic; the impact of the federal
CARES Act and the significant additional lending activities undertaken by the
Company in connection with the Small Business Administration's Paycheck
Protection Program enacted thereunder, including risks to the Company with
respect to the uncertain application by the Small Business Administration of new
borrower and loan eligibility, forgiveness and audit criteria; the effects of
the Company's participation in one or more of the new lending programs recently
established by the Federal Reserve, including the Main Street New Loan Facility,
the Main Street Priority Loan Facility and the Nonprofit Organization New Loan
Facility, and the impact of any related actions or decisions by the Federal
Reserve Bank of Boston and its special purpose vehicle established pursuant to
such lending programs; the effect of changes in other pertinent laws,
regulations and applicable judicial decisions (including laws, regulations and
judicial decisions concerning financial reforms, taxes, bank capital levels,
allowance for credit losses, consumer, commercial or secured lending, securities
and securities trading and hedging, bank operations, compliance, fair lending,
the Community Reinvestment Act, employment, executive compensation, insurance,
cybersecurity, vendor management and information security technology) with which
the Company and its subsidiaries must comply or believe the Company should
comply or which may otherwise impact the Company; changes in estimates of future
reserve requirements and minimum capital requirements, based upon the periodic
review thereof under relevant regulatory and accounting standards, including
changes in the Basel Committee framework establishing capital standards for bank
credit, operations and market risks; the accuracy of the assumptions and
estimates and the absence of technical error in implementation or calibration of
models used to estimate the fair value of financial instruments or currently
expected credit losses or delinquencies; inflation, changes in market interest
rates, securities market and monetary fluctuations; changes in
government-established interest rates, reference rates or monetary policies,
including the possible imposition of negative interest rates on bank reserves;
the impact of the anticipated phase-out of the London Interbank Offered Rate
(LIBOR) on interest rate indexes specified in certain of our customer loan
agreements and in Citizens' interest rate swap arrangements, including any
economic and compliance effects related to the expected change from LIBOR to an
alternative reference rate; changes in the amount, cost and availability of
deposit insurance; disruptions in the infrastructure that supports the Company's
business and the communities where the Company is located, which are
concentrated in California, involving or related to public health, physical site
access and/or communication facilities; cyber incidents, attacks, infiltrations,
exfiltrations, or theft or loss of Company, customer or employee data or money;
political developments, uncertainties or instability, catastrophic events, acts
of war or terrorism, or natural disasters, such as earthquakes, drought, the
effects of pandemic diseases, climate change or extreme weather events, that may
affect electrical, environmental and communications or other services, computer
services or facilities the Company may use, or that may affect the Company's
assets, customers, employees or third parties with whom the Company conducts
business; the Company's timely development and implementation of new banking
products and services and the perceived overall value of these products and
services by customers and potential customers; the Company's relationships with
and reliance upon outside vendors with respect to certain of the Company's key
internal and external systems, applications and controls; changes in commercial
or consumer spending, borrowing and savings patterns, preferences or behaviors;
technological changes and the expanding use of technology in banking and
financial services (including the adoption of mobile banking, funds transfer
applications, electronic marketplaces for loans, block-chain technology and
other financial products, systems or services); the Company's ability to retain
and increase market share, to retain and grow customers and to control expenses;
changes in the competitive environment among banks and other financial services
and technology providers; competition and innovation with respect to financial
products and services by banks, financial institutions and non-traditional
providers including retail businesses and technology companies; volatility in
the credit and equity markets and its effect on the general economy or local or
regional business conditions or on the Company's capital, deposits, assets or
customers; fluctuations in the price of the Company's common stock or other
securities, and the resulting impact on the Company's ability to raise capital
or to make acquisitions; the effect of changes in accounting policies and
practices, as may be adopted from time-to-time by the principal regulatory
agencies with jurisdiction over the Company, as well as by the Public Company
Accounting Oversight Board, the Financial Accounting Standards Board and other
accounting standard-setters; changes in the Company's organization, management,
compensation and benefit plans, and the Company's ability to recruit and retain
or
5
--------------------------------------------------------------------------------
. . .
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Reorganization and Merger, dated July 27,
2021, by and among CVB Financial Corp, Citizens Business Bank and
Suncrest Bank*
99.1 Form of Voting and Support Agreement - Suncrest (incorporated
by reference to Exhibit A of the Reorganization Agreement filed
as Exhibit 2.1 hereto)
99.2 Form of Non-Competition, Non-Solicitation and Non-Disclosure
Agreement - Suncrest non-employee directors (incorporated by
reference to Exhibit B-1 of the Reorganization Agreement filed as
Exhibit 2.1 hereto)
99.3 Form of Non-Competition, Non-Solicitation and Non-Disclosure
Agreement and Release -Suncrest Chief Executive Officer
(incorporated by reference to Exhibit B-2 of the Reorganization
Agreement filed as Exhibit 2.1 hereto)
99.4 Form of Non-Solicitation and Non-Disclosure Agreement and
Release -Suncrest executive officers (incorporated by reference
to Exhibit B-3 of the Reorganization Agreement filed as Exhibit
2.1 hereto)
99.5 Joint Press Release dated July 27, 2021.
99.6 Investor Presentation dated July 27, 2021
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Confidential disclosure schedules omitted pursuant to Item 601(b)(2) of
Regulation S-K promulgated by the SEC. The Company undertakes to furnish
supplemental copies of any omitted schedules to the SEC upon request.
7
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses
CVB FINANCIAL CORP. 
