WashingtonFirst Bankshares to acquire 1st Portfolio Holding Corp.

Reston-based WashingtonFirst Bankshares Inc. plans to take over 1st Portfolio Holding Corp. in a $7.7 million stock merger.

Fairfax-based 1st Portfolio is the holding company for 1st Portfolio Lending Corp. and 1st Portfolio Wealth Advisors.

The deal is expected to close early in the third quarter of 2015.

WashingtonFirst, the parent company of WashingtonFirst Bank, believes the deal will significantly expand its mortgage lending business while adding a new line of business — wealth management — to its financial services.

In the 12 months ended April 30, 1st Portfolio Lending originated about $500 million in residential mortgage loans.  On the same date, 1st Portfolio Wealth Advisors managed client assets worth about $238 million.

Under the terms of the merger agreement, accredited shareholders of 1st Portfolio will receive $7.7 million in WashingtonFirst common stock valued at $16 per share.

Ten percent of the merger consideration will be held in escrow for one year to secure 1st Portfolio’s indemnification obligations under the merger agreement.

WashingtonFirst will issue shares of its common stock in exchange for up to $7 million in new capital, representing 1st Portfolio’s tangible equity capital in excess of $2.5 million. As of March 31, the amount of such excess capital was approximately $5.1 million.

Non-accredited 1st Portfolio shareholders of 1st Portfolio, who hold approximately 2 percent of its  common stock, will receive cash consideration in lieu of shares of WashingtonFirst common stock.

After the merger, 1st Portfolio Wealth Advisors will be a subsidiary of WashingtonFirst,  while 1st Portfolio Lending Corp. will be a division of WashingtonFirst Bank.

Michael Rebibo, 1st Portfolio’s CEO, will join WashingtonFirst as an executive in charge of those two lines of business.

Founded in 2004, WashingtonFirst has completed three other acquisitions in the past nine years: First Liberty National Bank in 2006, Alliance Bankshares Corp. in 2012, and Millennium Bank N.A. last year.

In this transaction, Sandler O'Neill + Partners, LP served as financial advisor to WashingtonFirst and Troutman Sanders LLP served as legal counsel. Cooley LLP served as legal counsel to 1st Portfolio.

WashingtonFirst has $1.4 billion in total assets and 17 branches in the Washington, D.C., metro area.