SUMMARY

 

This summary highlights selected information from this joint proxy statement/prospectus. Because this is a summary, it does not contain all of the information that may be important to you. You should carefully read this entire document and the other documents we refer to in this joint proxy statement/prospectus before you decide how to vote. These references will give you a more complete description of the merger agreement and the merger and the other matters to be considered at the special meeting. We have included page references in this summary to direct you to more complete descriptions of the topics provided elsewhere in this joint proxy statement/prospectus.

 

Parties to the Merger Agreement (See page 70 to 122)

 

First Choice Bancorp is a California corporation headquartered in Cerritos, California, and is a registered bank holding company under federal banking laws. First Choice Bancorp is the holding company for First Choice Bank, a California state-chartered bank also headquartered in Cerritos. Founded in 2005, First Choice Bank is the only independent bank headquartered in the Cerritos, currently with five (5) full service branch offices and two (2) loan production offices. At December 31, 2017, First Choice had total assets of $903.8 million, total deposits of $772.7 million and total shareholders’ equity of $105.7 million.

 

First Choice’s principal executive offices are located at 17785 Center Court Drive N, Suite 750, Cerritos, California 90703, telephone: (562) 345-9092. Its website address is www.firstchoicebankca.com .

 

Pacific Commerce Bancorp is a California corporation headquartered in Los Angeles, California, and is a registered bank holding company under federal banking laws. Pacific Commerce Bancorp is the holding company for Pacific Commerce Bank, a California state-chartered bank also headquartered in Los Angeles. Pacific Commerce Bank operates six (6) branches (including its main office and corporate headquarters) in Los Angeles, West Los Angeles, Pasadena, San Diego, and Chula Vista. At December 31, 2017, PCB had total assets of $536.1 million, total deposits of $464.4 million and total shareholders’ equity of $64.1 million.

 

PCB’s principal executive offices are located at 420 East Third Street, Suite 100, Los Angeles, California 90013, telephone: (213) 617-0082. Its website address is www.pacificcommercebankbank.com .

 

PCB Special Meeting of Shareholders (See page 60 to 63)

 

PCB will hold a special meeting of shareholders at Pacific Commerce Bank, 888 W. 6 ^th Street, 2 ^nd Floor, Los Angeles, California 90017, on [MEETING DATE], at [MEETING TIME] (local time). The Pacific Commerce Bancorp board of directors has set the close of business on [RECORD DATE], as the record date for determining shareholders entitled to notice of, and to vote at, the special meeting. On that date, there were [_________] shares of PCB’s common stock outstanding.

 

At the special meeting, holders of PCB’s common stock will be asked to consider and vote on the following proposals:

 

	●	a proposal to approve the merger agreement and the merger of Pacific Commerce Bancorp with and into First Choice Bancorp with First Choice Bancorp surviving the merger; and of the merger of Pacific Commerce Bank with and into First Choice Bank, with First Choice Bank surviving the merger and continuing the commercial bank operations of the combined bank under its California charter and as the wholly-owned bank subsidiary of First Choice Bancorp; as more fully described in this joint proxy statement/prospectus;
	●	a proposal to approve any adjournment or postponement of the special meeting if necessary, to solicit additional proxies if there are not sufficient votes in favor of the merger agreement or for any other legally permissible purpose.

 

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First Choice Annual Meeting of Shareholders (See pages 64-69)

 

First Choice will hold an annual meeting of shareholders at the Cerritos Library located at 18025 Bloomfield Avenue, Cerritos, California, 90703, on [MEETING DATE], at [MEETING TIME] (local time). The First Choice Bancorp board of directors has set the close of business on [RECORD DATE], as the record date for determining shareholders entitled to notice of, and to vote at, the special meeting. On that date, there were [___________] shares of First Choice’s common stock outstanding.

 

At the annual meeting, holders of First Choice’s common stock will be asked to consider and vote on the following proposals:

 

	●	a proposal to approve the merger agreement and the merger of Pacific Commerce Bancorp with and into First Choice Bancorp with First Choice Bancorp surviving the merger; and of the merger of Pacific Commerce Bank with and into First Choice Bank, with First Choice Bank surviving the merger and continuing the commercial bank operations of the combined bank under its California charter and as the wholly-owned bank subsidiary of First Choice Bancorp; as more fully described in this joint proxy statement/prospectus;
	●	a proposal to approve any adjournment or postponement of the special meeting if necessary, to solicit additional proxies if there are not sufficient votes in favor of the merger agreement or for any other legally permissible purpose; to elect nine (9) nominees as directors named in this joint proxy statement/prospectus to the First Choice board of directors to serve until the 2019 annual meeting of shareholders and until their successors are elected and have qualified;
	●	to ratify the appointment of Vavrinek as First Choice’s independent registered public accounting firm for the 2018 fiscal year; and
	●	to transact such other business as may properly be brought before the meeting or any adjournments or postponements of the meeting.

 

The Merger Agreement (See pages 70 to 122)

 

The merger agreement is the legal document that contains the terms that govern the merger process, including the issuance of the merger consideration as a result of the merger. Please read the entire merger agreement which is attached to this joint proxy statement/prospectus as Appendix A.

 

The Merger (See pages 70 to 122)

 

Under the terms of the merger agreement: (a) First Choice Bancorp will acquire Pacific Commerce Bancorp by merging PCB with and into First Choice, with First Choice surviving the merger; (b) immediately after, Pacific Commerce Bank will be merged with and into First Choice Bank, and First Choice Bank will continue the commercial bank operations of the combined banks under its California charter and as the wholly-owned bank subsidiary of First Choice; and (c) First Choice will issue shares of its common stock and cash in lieu of fractional share interests to PCB shareholders pursuant to the terms of the merger agreement. A copy of the merger agreement between First Choice Bancorp and Pacific Commerce Bancorp is attached to this joint proxy statement/prospectus as Appendix A .

 

Consideration to be Paid to the Holders of PCB’s common stock (See pages 70 to 71)

 

Under the terms of the merger agreement, each share of PCB’s common stock will be entitled to receive a specified number of shares of First Choice’s common stock, which we refer to as the per share merger consideration, as specified in the merger agreement. The exchange ratio is based on a price of $11.40 per share for each share of PCB, and $24.50 for each share of First Choice. Details concerning the exchange ratio used to calculate these per share merger consideration figures, as well as all applicable adjustments to the merger consideration, are described in detail in “PROPOSAL NO. 1 – THE MERGER AGREEMENT AND THE MERGER – Merger Consideration, and – Adjustments to the Merger Consideration” on pages 70 and 71.

 

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The value of the per share merger consideration is subject to adjustment in the event that (a) PCB’s defined transaction expenses are less than or greater than $5.640 million and/or (b) PCB’s adjusted shareholders’ equity as of the end of the month immediately preceding the closing date is less than or greater than $64.1 million, plus eighty-five percent (85%) of PCB’s budgeted net income for 2018,and/or (c) PCB’s Allowance for Loan Losses shall be not less than the greater of (A) $4,000,000, or (B) 1.30% of the total of (i) PCB’s total gross loans, (ii) less purchased credit impaired loans, and (iii) less CalCap loans, then subtracting from the resulting product the unamortized discounts on PCB’s purchased non-impaired loan portfolios as of the end of the month prior to the closing date. As of December 31, 2017, Pacific Commerce Bancorp’s adjusted shareholders’ equity was approximately $64.1 million. Adjusted shareholders’ equity for this purpose is defined as total shareholders’ equity calculated in accordance with GAAP, but excluding: all changes in accumulated other comprehensive income or loss from the amount of adjusted shareholder’s equity shown in the December 31, 2017 financial reports of Pacific Commerce Bancorp; the accrual or payment of company transaction expenses; any purchase accounting adjustments to the assets and liabilities of Pacific Commerce Bancorp; and without giving effect to the debt issued by Pacific Commerce Bancorp. Defined transaction expenses are described in detail in “PROPOSAL NO. 1 – THE MERGER AGREEMENT AND THE MERGER – Adjustments to the Merger Consideration” on page 71 . The per share merger consideration is not subject to adjustment related to the PCB or First Choice trading prices.

 

The following hypothetical example illustrates the calculation to determine an adjustment to the exchange ratio as though the transaction were to close May 15, 2018, which would result in an April 30, 2018, as of date for all measurements, and assumes: (a) PCB’s defined transaction expenses equal $5.740 million (PCB management’s estimate of expenses as of the signing of the definitive agreement plus $100 thousand), (b) adjusted shareholder’s equity as of April 30, 2018 of $65.5 million, including $1.4 million in net income through April 30, 2018, and budgeted net income through such date of $1.5 million, (c) an allowance for loan losses of $3.9 million, and the relevant allowance for loan loss threshold equal to $4.0 million, and (d) PCB outstanding share count of 8,951,285:

 

Metric

Threshold

Assumed

Adjustment

PCB Transaction Expenses

$5.640 million

$5.740 million

Decrease of $100,000 or ($0.011) per PCB share

Shareholder’s Equity

$64.100 million plus $1.275 million (85% of $1.500 million), or $65.275 aggregate

$65.500 million ($1.400 million equals 93.3% of $1.500 million)

Increase of $225,000, or $0.025 per PCB share

Allowance for loss losses

$4.000 million

$3.900 million

Decrease of $100,000, or ($0.011) per PCB share

Adjustment to assigned PCB share value:

Beginning assigned PCB share value:

$

11.40

Adjustment for PCB Transaction Expenses:

$

(0.011

)

Adjustment for Shareholder’s Equity

$

0.025

Adjustment for Allowance for Loan Losses

$

(0.011

)

Adjusted assigned PCB share value:

$

11.403

Adjusted Exchange Ratio/Per share merger consideration:

0.46543

 

The above example is for illustrative purposes only, and does not reflect what the final calculation of any adjustments to the assigned PCB share value and resulting per share merger consideration will be. Presently, both the PCB management and the First Choice management do not believe a merger consideration adjustment in excess of either a one percent (1%) increase or decrease is likely.

 

The precise value of the per share merger consideration will not be known until shortly before the closing of the merger.

 

United States Federal Income Tax Consequences (Page 122)

 

First Choice Bancorp and Pacific Commerce Bancorp intend that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we will refer to as the Internal Revenue Code. Based on the qualification of the merger as a “reorganization” under the Internal Revenue Code, U.S. holders (as defined in the section entitled “MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER” beginning at page 122) of PCB’s common stock generally will not recognize gain or loss for U.S. federal income tax purposes upon the exchange of their shares of PCB common stock for First Choice common stock. U.S. holders will recognize gain or loss attributable to cash received in lieu of a fractional share of PCB’s common stock, or as will U.S. holders who dissent and receive cash for their PCB shares. For a description of the material U.S. federal income tax consequences of the merger, see “MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER” beginning at page 122. Pacific Commerce Bancorp shareholders are strongly urged to consult with their tax advisors concerning the U.S. federal income tax consequences of the merger to them, as well as the effects of state and local, foreign and other tax laws.

 

Conditions that Must Be Satisfied Prior to Closing the Merger (See pages to 118 for First Choice Bancorp and page 119 for Pacific Commerce Bancorp)

 

In addition to obtaining the necessary approval of the shareholders of Pacific Commerce Bancorp and First Choice Bancorp, the parties’ obligations to close the merger depend on other conditions being met prior to the completion of the merger, including but not limited to:

 

	●	All required regulatory approvals and consents must be obtained, including approvals from the Federal Reserve, the FDIC and the California Department of Business Oversight, or the CDBO, and no materially burdensome regulatory conditions may be imposed on First Choice Bancorp or First Choice Bank.
	●	There must not be any law or order by a court or regulatory authority that would prohibit, restrict or make illegal the merger.
	●	The number of shares of PCB’s common stock for which dissenters’ rights of Pacific Commerce Bancorp have been properly asserted shall not be more than 12% of PCB’s total issued and outstanding shares
	●	Pacific Commerce Bancorp’s allowance for loan losses, determined in accordance with GAAP, shall be not less than the greater of (A) $4,000,000, or (B) 1.30% of the total of (i) PCB’s total gross loans, (ii) less purchased credit impaired loans, and (iii) less CalCap loans, then subtracting from the resulting product the unamortized discounts on PCB’s purchased non-impaired loan portfolios as of the end of the month prior to the closing date.

 

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	●	PCB’s adjusted shareholders’ equity as of the end of the month immediately preceding the closing date shall not be less than $64.1 million plus sixty five percent (65%) of PCB’s budgeted net income for 2018.
	●	First Choice Bancorp must have received an opinion dated as of the date of the closing of the merger to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code;
	●	All holders of Pacific Commerce Bancorp stock options shall have agreed that their options, to the extent not otherwise exercised, and to the extent not otherwise received the option consideration in cash for the value of the option, shall have received a rollover option in order to preserve the economic value of their Pacific Commerce Bancorp options.
	●	The shares issued to holders of Pacific Commerce Bancorp common stock shall have been approved for listing on the Nasdaq Capital Markets.

 

Regulatory Approvals Must Be Obtained Before the Merger Will Be Completed (See pages 109 to 110)

 

First Choice has agreed to use its best efforts to obtain all regulatory approvals and waivers required to complete the transactions contemplated by the merger agreement, including the approvals from the Federal Reserve Board, which we refer to as the Federal Reserve; the Federal Deposit Insurance Corporation, which we refer to as the FDIC; and the California Department of Business Oversight, which we refer to as the CDBO. First Choice Bancorp and First Choice Bank have filed the requisite applications to obtain the required regulatory approvals. In obtaining the required regulatory approvals, neither entity is required to agree to any condition that (i) requires First Choice Bancorp or First Choice Bank to pay any amounts (other than customary filing fees), or divest any banking office, line of business or operations, or (ii) imposes any condition, requirement or restriction upon First Choice Bancorp or First Choice Bank, that individually or in the aggregate would reasonably be expected to impose a materially burdensome condition on First Choice Bancorp or First Choice Bank, as applicable, or otherwise would materially alter the economics of the merger for First Choice Bancorp. On March 20, 2018, the Board of Governors of the Federal Reserve issued a waiver from the application requirements under the Bank Holding Company Act of 1965, as amended. The applications with the FDIC and the CBDO are currently under review, and approvals are expected to be issued in the near future.

 

Approval of a Majority of All Shares of Pacific Commerce Bancorp Stock Entitled to Vote at the PCB Special Meeting, and a Majority of All Shares of First Choice Bancorp Stock Entitled to Vote at the First Choice Annual Meeting, is Required for the Merger to be Consummated (See pages 61 and 65)

 

The affirmative vote of at least a majority of the shares of PCB’s common stock outstanding as of the record date for the PCB special meeting, and at least a majority of the shares of First Choice’s common stock outstanding as of the record date for the First Choice annual meeting, is required to approve the merger agreement and the merger.

 

Each share of Pacific Commerce Bancorp stock outstanding on the record date for the PCB special meeting will be entitled to one vote for each share held. As of [RECORD DATE], which is the record date for the PCB special meeting, there were [_____________] shares (including [_________] shares of unvested restricted stock) of PCB’s common stock outstanding. Therefore, at least [____________] shares of PCB’s common stock must be affirmatively voted in favor of the merger agreement in order for Pacific Commerce Bancorp shareholders to approve the merger agreement and the transactions contemplated therein. Abstentions, failures to vote and broker non-votes will have the same effect as votes “ AGAINST” approval of the merger agreement. As of the record date, Pacific Commerce Bancorp’s directors and executive officers owned approximately [__________] voting shares (not including vested option shares), or approximately [_______] , of Pacific Commerce Bancorp’s outstanding shares of common stock and have committed to vote these shares “ FOR ” the approval of the merger agreement and merger.

 

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Each share of First Choice Bancorp stock outstanding on the record date for the First Choice annual meeting will be entitled to one vote for each share held. As of [RECORD DATE], which is the record date for the First Choice annual meeting, there were [_____________] shares (including [_________] shares of unvested restricted stock) of First Choice’s common stock outstanding. Therefore, at least [____________] shares of First Choice’s common stock must be affirmatively voted in favor of the merger agreement in order for First Choice Bancorp shareholders to approve the merger agreement and the transactions contemplated therein. Abstentions, failures to vote and broker non-votes will have the same effect as votes “ AGAINST” approval of the merger agreement. As of the record date, First Choice Bancorp’s directors and executive officers owned approximately [__________] voting shares (not including vested option shares), or approximately [_______] , of First Choice Bancorp’s outstanding shares of common stock, and the directors of First Choice Bancorp have committed to vote these shares “ FOR ” the approval of the merger agreement and merger.

 

Recommendation of Pacific Commerce Bancorp’s Board of Directors (See page 75)

 

On February 22, 2018, Pacific Commerce Bancorp’s directors unanimously approved the merger agreement and the merger. Moreover, the directors believe that the merger agreement’s terms are fair and in the best interests of Pacific Commerce Bancorp’s shareholders. Accordingly, they unanimously recommend a vote “FOR” the proposal to approve the principal terms of the merger agreement and the merger. The conclusions of Pacific Commerce Bancorp’s board of directors regarding the merger agreement are based upon a number of factors which are discussed more fully under the section entitled “PROPOSAL NO. 1 – THE MERGER AGREEMENT AND THE MERGER – Pacific Commerce Bancorp’s Reasons for the Merger; Recommendation of PCB’s Board of Directors” beginning on page 75.

 

Recommendation of First Choice Bancorp’s Board of Directors (See page 77)

 

On February 22, 2018, First Choice Bancorp’s directors unanimously approved the merger agreement and the merger. Moreover, the directors believe that the merger agreement’s terms are fair and in the best interests of First Choice Bancorp’s shareholders. Accordingly, they unanimously recommend a vote “FOR” the proposal to approve the principal terms of the merger agreement and the merger, “FOR” the election of the nine (9) nominee directors, and “FOR” the ratification of the appointment of Vavrinek as First Choice’s independent registered public accounting firm for the 2018 fiscal year. The conclusions of First Choice Bancorp’s board of directors regarding the merger agreement are based upon a number of factors which are discussed more fully under the section entitled “PROPOSAL NO. 1 – THE MERGER AGREEMENT AND THE MERGER – First Choice Bancorp’s Reasons for the Merger; Recommendation of First Choice’s Board of Directors” beginning on page 77.

 

Directors and Executive Officers of Pacific Commerce Bancorp Have Entered into Voting Agreements (See page 61 ).

 

As of the record date, Pacific Commerce Bancorp’s directors and executive officers owned approximately [__________] voting shares (not including vested option shares), or approximately [ ____________] , of Pacific Commerce Bancorp’s outstanding shares of common stock. Pacific Commerce Bancorp’s directors and executive officers have entered into separate written agreements in which they have agreed, among other things, to vote their shares “ FOR ” the approval of the merger agreement and the transactions contemplated therein. A copy of the form of voting agreement separately executed by each of the Pacific Commerce Bancorp directors is attached as Exhibit A and a copy of the form of voting agreement separately executed by each of the executive officers is attached as Exhibit B to the merger agreement which is attached to this joint proxy statement/prospectus Appendix A and is incorporated herein by reference.

 

Opinion of Pacific Commerce Bancorp’s Financial Advisor (See page 79)

 

In deciding to approve the merger, Pacific Commerce Bancorp’s board of directors considered, among other things, the opinion of Piper Jaffray & Co., Pacific Commerce Bancorp’s financial advisor, regarding the fairness, from a financial point of view, of the per share merger consideration to be received by Pacific Commerce Bancorp’s shareholders as a result of the merger agreement and the transactions contemplated therein. The written opinion of Piper Jaffray & Co., which we refer to as Piper, is attached as Appendix C . You should read it carefully to understand the assumptions made, matters considered and limitations of the review undertaken by Piper in providing its opinion. Piper’s written opinion is addressed to Pacific Commerce Bancorp’s board of directors and does not constitute a recommendation as to how any holder of PCB’s common stock should vote with respect to the merger agreement and the transactions contemplated therein.

 

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Opinion of First Choice Bancorp’s Financial Advisor (See page 91)

 

In deciding to approve the merger, First Choice Bancorp’s board of directors considered, among other things, the opinion of Hovde Group, LLC, First Choice Bancorp’s financial advisor, regarding the fairness, from a financial point of view, of the merger consideration to the First Choice Bancorp’s shareholders as a result of the merger agreement and the transactions contemplated therein. The written opinion of Hovde Group, LLC, which we refer to as Hovde, is attached as Appendix D . You should read it carefully to understand the assumptions made, matters considered and limitations of the review undertaken by Hovde in providing its opinion. Hovde’s written opinion is addressed to First Choice Bancorp’s board of directors and does not constitute a recommendation as to how any holder of First Choice’s common stock should vote with respect to the merger agreement and the transactions contemplated therein.

 

Pacific Commerce Bancorp Directors and Executive Officers may have interests in the merger that differ from interests of Pacific Commerce Bancorp Shareholders (See page 103 to 106)

 

Pacific Commerce Bancorp’s directors and executive officers may have economic interests in the merger that are different from, or in addition to, their interests as Pacific Commerce Bancorp shareholders. The Pacific Commerce Bancorp board of directors considered these interests in its decision to adopt and approve the merger agreement and to recommend approval of the merger agreement and the merger to Pacific Commerce Bancorp shareholders. Some of the interests of Pacific Commerce Bancorp’s directors and executive officers include:

 

	●	Frank J. Mercardante, Chief Executive Officer; John Nerland, President and Chief Operating Officer; Gail Jensen-Bigknife, Executive Vice President & Chief Credit Officer; and Long T. Huynh, Executive Vice President & Chief Financial Officer; have each executed employment agreements with Pacific Commerce Bank pursuant to which upon consummation of the merger, they will be entitled to receive payments upon termination, unless they are retained by First Choice or First Choice Bank in their same positions. Mr. Mercardante’s payments will equa1 24 months of his salary plus 24 months of COBRA coverage; and Mr. Nerland, Ms. Jensen-Bigknife, and Mr. Huynh’s payments will equal 12 months of their salaries plus 12 months of COBRA coverage. These change in control severance payments would be $661,031, $285,290, $226,519, and $211,316 for Mr. Mercardante, Mr. Nerland, Ms. Jensen-Bigknife and Mr. Huynh, respectively. At the close of the merger all of these employment agreements with Pacific Commerce Bank will be terminated upon payment of such amounts.
	●	Pacific Commerce Bancorp has previously granted stock options to certain executive officers and directors under its 2013 Equity Based Compensation Plan and its 2002 Stock Option Plan. Under the terms of the merger agreement and the plan, all such options will become 100% vested and fully exercisable for a designated period of time prior to and contingent upon the closing of the merger. Any option holder electing to exercise outstanding stock options prior to the merger will receive the same merger consideration as any other Pacific Commerce Bancorp shareholder. Holders of in-the-money PCB stock options who do not exercise their options and do not elect to receive a rollover option exercisable into First Choice Bancorp stock and instead execute option cancellation agreements will receive specified cash payments. For a breakdown of Pacific Commerce Bancorp options held by each Pacific Commerce Bancorp director and executive officer and the cash consideration each will receive in connection with the merger, please see “PROPOSAL NO. 1 – THE MERGER AGREEMENT AND THE MERGER – Interests of Directors and Executive Officers in the Merger – Stock Options” beginning on page 105.
	●	Pursuant to the terms of the merger agreement, First Choice has agreed to maintain and preserve the indemnification rights of Pacific Commerce Bancorp directors and officers after the completion of the merger and has also agreed to allow Pacific Commerce Bancorp to purchase “tail coverage,” for a period of six years, in order to continue providing liability insurance to the officers and directors of Pacific Commerce Bancorp, subject to certain cost limits. See “PROPOSAL NO. 1 – THE MERGER AGREEMENT AND THE MERGER – Interests of Directors and Executive Officers in the Merger – Protection of Directors, Officers and Employees” beginning on page 105.

 

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Closing the Merger (See page 122)

 

If shareholder approval is received as planned, and if the conditions to the merger have either been met or waived, we anticipate that the merger will close in the third quarter of 2018. However, we cannot assure you whether or when the merger will actually close.

 

Termination of the Merger Agreement (See pages 120 to 121)

 

The obligations of the parties to consummate the merger are subject to certain closing conditions, some of which may not be waived by a party, including but not limited to the receipt of all required shareholder and regulatory approvals and other governmental consents, and some conditions which may be waived by a party in its discretion. The failure of a condition to the closing of the merger, to the extent not waived, may result in a termination of the merger agreement and the merger.

 

In addition, the parties can mutually agree to terminate or extend the merger agreement. Either party can terminate the merger agreement in the event of a material breach or the occurrence of certain other events.

 

PCB has agreed to pay a termination fee of $4,000,000 to First Choice if PCB breaches its covenants relating to alternative acquisition proposals or PCB consummates an alternative acquisition proposal within 12 months following a termination of the merger agreement due to the failure of PCB’s shareholders to approve the merger agreement following any action taken by PCB’s board constituting a change of its recommendation.

 

First Choice has agreed to pay a termination fee of $4,000,000 to PCB if PCB terminates the merger agreement and merger if First Choice does not receive the required shareholder vote and one or more First Choice directors that is a party to an First Choice voting agreement shall have voted their shares against approval of the merger or the merger agreement, or if First Choice fails to hold its shareholders’ meeting before August 31, 2018, unless the delay is due to regulatory action or inaction.

 

Accounting Treatment of the Merger (See page 106)

 

First Choice Bancorp will account for the merger using the acquisition method of accounting. Under this method of accounting, the assets and liabilities of Pacific Commerce Bancorp and Pacific Commerce Bank acquired are recorded at their respective fair value as of the completion of the merger, and are added to those of First Choice Bancorp and Pacific Commerce Bancorp.

 

First Choice Bancorp’s and First Choice Bank’s Management and Operations After the Merger (See page 101 to 102)

 

The directors and executive officers of First Choice Bancorp and First Choice immediately prior to the merger will continue to be the directors and executive officers First Choice Bancorp and First Choice Bank, respectively, after the merger, plus four additional mutually agreed directors from Pacific Commerce Bancorp and Pacific Commerce Bank.

 

Differences in the Rights as a Shareholder of Pacific Commerce Bancorp (See page 193 to 196)

 

As a Pacific Commerce Bancorp shareholder, your rights are currently governed by PCB’s Articles of Incorporation and Bylaws and by the CGCL. If you do not exercise your dissenters’ rights, the shares of PCB’s common stock you hold at the closing of the merger will be converted into a specified number of shares of First Choice’s common stock, and the rights of a Pacific Commerce Bancorp shareholder as a First Choice Bancorp shareholder will be thereafter governed by First Choice’s Articles of Incorporation and Bylaws and by the CGCL. The rights of First Choice Bancorp shareholders differ from those of Pacific Commerce Bancorp shareholders in certain respects. Most of these differences will result from the provisions in First Choice’s Articles of Incorporation and Bylaws that differ from those of PCB.

 

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Pacific Commerce Bancorp and First Choice Bancorp Dissenters’ Rights (See pages 63 and 67)

 

Shares of PCB’s and First Choice’s common stock may qualify as “dissenting shares” under Chapter 13 of the CGCL, and holders of shares of PCB’s and First Choice’s common stock may perfect their dissenters’ rights by doing the following:

 

	●	not voting “FOR” the merger agreement and the merger;
	●	making a timely written demand upon Pacific Commerce Bancorp or First Choice Bancorp, as appropriate, for purchase in cash of his or her shares at their fair market value as of February 26, 2018 before the market opened , which demand includes: (i) the number and class of the shares held of record by him or her that he or she demands upon Pacific Commerce Bancorp or First Choice Bancorp, and (ii) what he or she claims to be the fair market value of his or her shares as of February 26, 2018 before the market opened, which is the day of, and immediately prior to, the first public announcement of the merger;
	●	having his or her demand received by Pacific Commerce Bancorp or First Choice Bancorp, as appropriate, within 30 days after the date on which the notice of the approval by the outstanding shares is mailed to the shareholder;
	●	submitting certificates representing his or her shares for endorsement, or written notice of the number of shares which the shareholder demands that the corporation purchase, in the case of uncertificated shares, in accordance with Section 1302 of the CGCL; and
	●	complying with such other procedures as are required by the CGCL.

 

If dissenters’ rights are properly perfected, such dissenter has the right to receive cash in the amount equal to the fair market value, as determined by Pacific Commerce Bancorp or First Choice Bancorp, as appropriate, or, if required, by a court of law, of their shares of PCB’s or First Choice’s common stock, as appropriate, as of the day of, and immediately prior to, the first public announcement of the merger, excluding any change in such value as a consequence of the proposed merger.

 

If dissenters’ rights are perfected and exercised with respect to more than twelve percent (12%) of Pacific Commerce Bancorp’s common stock outstanding, then First Choice has the option to terminate the merger agreement. The text of the applicable sections of Chapter 13 of the CGCL governing dissenters’ rights is attached to this joint proxy statement/prospectus as Appendix B . We urge you to carefully read the procedures set forth in Appendix B , as failure to comply with these procedures will result in the loss of dissenters’ rights under the CGCL.

 

SELECTED HISTORICAL FINANCIAL DATA

 

The following tables present selected consolidated historical financial data of First Choice and selected consolidated historical financial data of Pacific Commerce Bancorp.

 

Selected Consolidated Historical Financial Data of First Choice Bancorp

 

The following table sets forth First Choice’s summary historical consolidated financial data as of the dates and for the periods shown. The summary consolidated balance sheet data as of December 31, 2017 and 2016 and the summary consolidated income statement data for the years ended December 31, 2017 and 2016 have been derived from our audited consolidated financial statements included elsewhere in this document.

 

On February 5, 2018, First Choice announced that the Audit Committee of the Boards of Directors of First Choice, after consultation with management and its independent registered accounting firm, determined that First Choice’s consolidated financial statements for the fiscal years ended December 31, 2014, 2015 and 2016, and for each of the three quarters of 2017, were not in compliance with generally accepted accounting principles and would be restated.

 

The decision to restate these consolidated financial statements is based on First Choice’s conclusion that it had been overly conservative in its earnings calculations, primarily as a result of the complex accounting treatment for First Choice’s equity compensation plan. In addition, First Choice had provided accruals for expenses in years 2014, 2015 and 2016 in anticipation of incurring certain expenses, which expenses, for a number of different reasons, were never incurred. The result was that First Choice had over-accrued for expenses. The net result of the restatement was that First Choice earned approximately $1.06 million more in income after taxes than was reported in the financial statements for the years ended December 31, 2014 through 2016. The restatement is reflected as an increase in shareholders’ equity account “retained earnings” for the opening consolidated balance sheet for First Choice as of January 1, 2016, and the 2016 consolidated income statement is also restated. Refer to Note 2 – Restatement of Previously Issued Financial Statements in the accompanying Consolidated Financial Statements of First Choice Bancorp.

 

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		Year ended December 31,
		2017				2016 (restated(1))
		(in thousands, except share data)
Statements of Income:
Interest income		$	40,819			$	37,511
Interest expense			6,041				6,047
Net interest income			34,778				31,464
Provision for loan losses			642				1,740
Net interest income after provision for loan losses			34,136				29,724
Noninterest income			5,061				4,406
Noninterest expense			23,754				19,913
Net income before provision income taxes			15,443				14,217
Income taxes			8,089				5,868
Net income		$	7,354			$	8,349
Per Share and Other Data:
Basic earnings per common share		$	1.04			$	1.19
Diluted earnings per common share		$	1.02			$	1.18
Cash dividends declared per common share		$	0.80			$	-
Stock dividends declared per common share			N/A				4.00	%
Book value per common share outstanding		$	14.56			$	14.41
Shares outstanding at period end			7,260,119				7,112,954
Weighted average shares outstanding - Basic			7,098,554				7,006,214
Weighted average shares outstanding - Diluted			7,183,498				7,079,613
Performance Metrics:
Return on average assets			0.83	%			1.02	%
Return on average equity			6.96	%			8.57	%
Yield on average earning assets			4.66	%			4.63	%
Cost of interest-bearing liabilities			1.05	%			0.99	%
Net interest margin			3.97	%			3.88	%
Dividend payout ratio			78.35	%			0.00	%
Equity to assets ratio			11.69	%			11.88	%
Loans to deposits ratio(1)			96.13	%			91.79	%
Efficiency ratio(2)			59.62	%			55.51	%
			December 31,
			2017				2016
Balance Sheet Data:
Investment securities, available-for-sale			35,002				35,790
Investment securities, held-to-maturity			5,300				5,675
Loans held for sale			10,599				8,260
Loans held for investment, gross			742,808				694,460
Loans held for investment, net			731,216				684,486
Total assets			903,795				862,691
Noninterest-bearing deposits			235,584				150,764
Total deposits			772,679				756,561
Federal Home Loan Bank borrowings			20,000				-
Total shareholders’ equity			105,694				102,507
Credit Quality:
Loans 30-89 days past due			1,079				504
Loans 30-89 days past due to gross loans			0.15	%			0.07	%
Non-performing loans			1,834				3,349
Non-performing loans to gross loans			0.25	%			0.48	%
Non-performing assets			1,834				3,349
Non-performing assets to total assets			0.20	%			0.39	%
Allowance for loan losses			10,497				11,599
Allowance for loan losses to gross loans			1.41	%			1.67	%
Allowance for loan losses to non-performing loans			572.36	%			346.34	%
Net charge-offs (recoveries)			1,744				1,556
Net charge-offs/(recoveries) to average loans			0.24	%			0.23	%
Regulatory Capital Ratios (First Choice Bank):
Tier 1 leverage ratio			11.75	%			12.55	%
Common equity Tier 1 capital			13.46	%			14.24	%
Tier 1 risk-based capital ratio			13.46	%			14.24	%
Total risk-based capital ratio			14.72	%			15.50	%

 

(1) Loans to deposits ratio represents gross loans held for investment divided by total deposits.

 

(2) Efficiency ratio is a non-GAAP financial measure. Refer to “Information About First Choice Bancorp – Non-GAAP Financial Measures” for more information.

 

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