Ocean Shore Holding Co. - FORM 8-K/A - EX-99.3

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8-K/A - Ocean Shore Holding Co.	v236989_8ka.htm
EX-23.1 - Ocean Shore Holding Co.	v236989_ex23-1.htm
EX-99.1 - Ocean Shore Holding Co.	v236989_ex99-1.htm
EX-99.2 - Ocean Shore Holding Co.	v236989_ex99-2.htm

UNAUDITED COMBINED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA

(AMOUNTS IN THOUSANDS)

The following unaudited combined condensed consolidated pro forma financial data and explanatory footnotes show information about the financial position and operations, including per share data and financial ratios, of Ocean Shore Holding Co. (“OSHC”) after giving effect to the merger with CBHC Financialcorp, Inc. (“CBHC”). The unaudited combined condensed consolidated pro forma financial data sets forth the information as if the merger had become effective on June 30, 2011, with respect to financial condition data, and at the beginning of the periods presented, with respect to operations data. The pro forma financial data in the tables reflect application of the acquisition method of accounting. Upon consummation of the merger on August 1, 2011, management of OSHC determined the fair market value of assets and liabilities based on appraisals and estimates. This table should be read in conjunction with, and is qualified in its entirety by, the historical financial statements, including the notes thereto, of OSHC and CBHC.

The acquisition method of accounting requires that all of CBHC’s assets and liabilities be adjusted to their fair market values as of the date of acquisition. For purposes of the unaudited pro forma financial statements, the fair market value of assets and liabilities at June 30, 2011 is based upon the calculations completed after the consummation of the merger on August 1, 2011. The pro forma information is not necessarily indicative of the combined financial position or the results of operations in the future or of the combined financial position or the results of operations that would have been realized had the merger been consummated during the periods or as of the dates for which the pro forma information is presented.

Unaudited Condensed Consolidated Statement of Financial Condition

As of June 30, 2011 (1)

(In Thousands)

	OCHC Historical			CBHC Historical		Pro Forma Adjustments			Pro Forma Combined
ASSETS

Cash and cash equivalents	$	105,045		$	35,953	$	(12,459	)	$	128,539
Investment securities		47,474			7,021		(1,070	)(2)		53,425
Loans, net		662,841			84,755		945	(3)		748,541
Accrued interest receivable		2,684			333		-			3,017
Federal Home Loan Bank stock		6,251			184		-			6,435
Office properties and equipment, net		12,706			1,908		(569	)(4)		14,045
Prepaid expenses and other assets		4,676			604		-			5,280
Real estate owned		98			-		-			98
Cash surrender value of life insurance		15,150			-		-			15,150
Core deposit intangible		-			-		667	(5)		667
Goodwill		-			-		2,812	(6)		2,812
Deferred tax asset, net		3,344			267		94	(7)		3,705

Total assets	$	860,269		$	131,025	$	(9,580	)	$	981,714

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits	$	621,189		$	119,094	$	207	(8)	$	740,490
Advances from Federal Home Loan Bank		110,000			-		-			110,000
Junior subordinated debentures		15,464			-		-			15,464
Accrued expenses and other liabilities		10,794			2,144		-			12,938
Total liabilities		757,447		$	121,238	$	207			878,892

Stockholders’ equity:
Preferred stock		-			-		-			-
Common stock	$	73		$	8	$	(8	)(6)	$	73
Additional paid-in capital		64,214			8,330		(8,330	)(6)		64,214
Retained earnings		43,223			1,449		(1,449	)(6)		43,223
Treasury stock, at cost		(115	)		-		-			(115	)
Common stock acquired by employee benefit plans		(3,836	)		-		-			(3,836	)
Deferred compensation plans trust		(521	)		-		-			(521	)
Accumulated other comprehensive loss		(216	)		-		-			(216	)
Total stockholders’ equity	$	102,822		$	9,787	$	(9,787	)	$	102,822

Total liabilities and stockholders’ equity	$	860,269		$	131,025	$	(9,580	)	$	981,714

(1)

Assumes that the acquisition of CBHC was completed at June 30, 2011. The pro forma financial data reflect acquisition accounting adjustments calculated after the consummation of the merger on August 1, 2011. Management of OSHC determined the fair value adjustments for investment securities, loans, premises and equipment, core deposit intangible, time deposits, borrowed funds and operating leases using estimates and appraisals. The resulting premiums and discounts for purposes of the unaudited combined condensed consolidated pro forma financial data, where appropriate, are being amortized and accreted into income as more fully described in the notes below.

(2)	Reflects the difference between fair values and net carrying values of held to maturity investment securities.

(3)	Calculated to reflect the fair value adjustments on loans of $19 thousand, net of elimination of CBHC’s allowance for loan losses of $926 thousand.

(4)	Reflects the difference between fair values and net carrying values of premises and equipment acquired in the acquisition.

(5)

Core deposit intangible is an identifiable asset representing the economic value of the acquired deposit base, calculated as the present value benefit of funding operations with the acquired deposit base versus using an alternative wholesale funding source as determined by an independent appraisal. The core deposit intangible asset is amortized into expense using an accelerated method over 15 years.

(6)	The consideration paid to acquire CBHC consisted of $12.459 million in cash. All amounts are reported in thousands.

	Note

Cash consideration		$	12,459

CBHC Net Assets at Fair Value:
CBHC stockholders’ equity		$	9,787

Fair value adjustments:
Investment securities	2		(1,070	)
Loans	3		945
Premises and equipment	4		(569	)
Core deposit intangible	5		667
Time deposits	8		(207	)
Fair value adjustments			(234	)
Tax effect of fair value adjustments (*)	7		94

Total adjustment to net assets acquired			(140	)

Adjusted net assets acquired			9,647

Goodwill		$	2,812

(*) Assumed effective tax rate of 39.94%

(7)	Using an assumed tax rate of 39.94%, deferred tax assets amounted to $94 thousand for the acquisition accounting adjustments.

(8)

Fair value adjustment to reflect the difference between portfolio yields and market rates as of August 1, 2011 for time deposits acquired in the acquisition using present value analysis. Cash flow was discounted to present value using market rates for similar deposits. The yield adjustment of ($207) is the aggregate present value of the difference.

Unaudited combined Condensed Consolidated Pro Forma Income Statement

For the Year Ended December 31, 2010 (1)

(In Thousands Except Per Share Amounts)

	OSHC Historical		CBHC Historical			Pro Forma Adjustments			Pro Forma Combined
Interest and dividend income:
Loans	$	35,890	$	5,463			(307	)(2)	$	41,046
Investments		1,826		787			268	(2)		2,881
Total interest and dividend income		37,716		6,250			(39	)		43,927

Interest expense:
Deposits		7,775		1,648			(152	)(2)		9,271
Borrowings		6,054		80			-			6,134
Total interest expense		13,829		1,728			(152	)		15,405

Net interest income		23,887		4,522			113			28,522

Provision for loan losses		892		60			-			952

Net interest income after provision for loan losses		22,995		4,462			113			27,570

Other income:
Service charges		1,700		82			-			1,782
Increase in cash surrender value of life insurance		553		-			-			553
Gain on sale of securities		-		167			-			167
Other-than-temporary impairment losses		-		(98	)		-			(98	)
Other		1,150		68			-			1,218
Total other income		3,403		219			-			3,622

Other expense:
Salaries and employee benefits		9,805		1,528			-			11,333
Occupancy and equipment		3,952		713			(28	)(2)		4,637
Federal insurance premiums		670		150			-			820
Advertising		433		33			-			466
Professional services		806		190			-			996
Real estate owned activity		5		-			-			5
Charitable contributions		137		-			-			137
Core deposit intangible amortization		-		-			(12	)(2)		(12	)
Other operating expenses		1,715		194			-			1,909
Total other expense		17,523		2,808			(40	)		20,291

Income before income taxes		8,875		1,873			153			10,901
Income taxes		3,431		748			61			4,240
Net income	$	5,444	$	1,125			92		$	6,661

Earnings per share basic	$	0.80	$	1.50					$	0.98
Earnings per share diluted	$	0.80	$	1.48					$	0.98

Weighted average shares outstanding:
Basic		6,798,317		750,000			(750,000	)		6,798,317
Diluted		6,798,317		758,514			(758,514	)		6,798,317

Unaudited Combined Condensed Consolidated Pro Forma Income Statement

For the Six Months Ended June 30, 2011 (1)

(In Thousands Except Per Share Amounts)

	OSHC Historical		CBHC Historical		Pro Forma Adjustments			Pro Forma Combined
Interest and dividend income:
Loans	$	17,184	$	2,500	$	(142	)(2)	$	19,542
Investments		1,021		248		134	(2)		1,403
Total interest and dividend income		18,205		2,748		(8	)		20,945

Interest expense:
Deposits		3,061		682		(27	)(2)		3,716
Borrowings		3,007		40		-			3,047
Total interest expense		6,068		722		(27	)		6,763

Net interest income before provision for loan losses		12,137		2,026		19			14,182

Provision for loan losses		203		-		-			203

Net interest income after provision for loan losses		11,934		2,026		19			13,979

Other income:
Service charges		754		26		-			780
Increase in cash surrender value of life insurance		259		-		-			259
Gain (loss) on sale of securities		10		-		-			10
Other		641		20		-			661
Total other income		1,664		46					1,710

Other expense:
Salaries and employee benefits		5,181		789		-			5,970
Occupancy and equipment		2,118		350		(123	)(2)(3)		2,345
Federal insurance premiums		373		80		-			453
Advertising		251		12		-			263
Professional services		605		110		(179	)(3)		536
Real estate owned activity		2		-		-			2
Charitable contributions		72		-		-			72
Core Deposit intangible amortization		-		-		6	(2)		6
Other operating expenses		864		197		(200	)		861
Total other expense		9,466		1,538		(496	)		10,508

Income before income taxes		4,132		534		515			5,181
Income taxes		1,770		235		206	(2)		2,211
Net income	$	2,362	$	299		309		$	2,970

Earnings per share basic	$	0.35	$	0.40				$	0.44
Earnings per share diluted	$	0.35	$	0.37				$	0.44

Weighted average shares outstanding:
Basic		6,738,827		750,000		(750,000	)		6,738,827
Diluted		6,809,077		803,800		(803,800	)		6,809,077

(1)

Assumes that the acquisition of CBHC was completed as of the beginning of the period presented utilizing the acquisition method of accounting. Fair value adjustments for investment securities, loans, premises and equipment, core deposit intangible, time deposits, borrowed funds, and operating leases were determined by the management of OSHC and CBHC as of the merger completion date of August 1, 2011. The resulting premiums and discounts for purposes of the unaudited combined condensed consolidated pro forma financial data, where appropriate, are being amortized and accreted into income as more fully described in the notes below.

(2)	The following table summarizes the estimated full year impact of the amortization (accretion) of the accretable acquisition accounting adjustments on the pro-forma income statement (in thousands).

							Amortization (Accretion)
Category	Premium/ (Discount)			Life in Years			Year Ended December 31, 2010			Six Months Ended June 30, 2011
Investment securities	$	(1,070	)		4		$	(268	)	$	(134	)
Loans		1,432			7	(a)		307			142
Premises and equipment		(569	)		20			(28	)		(14	)
Core deposit intangible		667			15	(a)		12			(6	)
Time deposits		207			3			152			27

(a) Based upon contractual payments.

The straight line method was utilized in preparing the pro forma statement of income for amortizing and/or accreting the related acquisition accounting adjustments for all categories except loans and core deposit intangible. Loan accretion was determined using the effective interest method and the contractual lives, and core deposit intangible amortization was determined using the sum of the years digits method.

The following table summarizes the estimated impact of the amortization/(accretion) of the acquisition accounting adjustments made in connection with the merger on OSHC’s results of operations for the following years assuming such transaction was effected on January 1, 2011 (in thousands).

Projected Future Amounts for the Years Ended December 31,	Amortization of Intangibles			Net Amortization (Accretion)			Net Increase (Decrease) in Income Before Taxes
2011	$	(5	)	$	(75	)	$	(80	)
2012		(3	)		(74	)		(77	)
2013		50			(84	)		(34	)
2014		85			(118	)		(33	)
2015		96			(47	)		49
thereafter		444			(17	)		427

(3)	Pursuant to the Business Combinations Topic of FASB ASC, transaction costs are expensed as incurred. Transaction costs associated with the merger are estimated to be $689 thousand, net of taxes. A summary of these costs is as follows (in thousands):

Professional fees	$	436
Merger related compensation and benefits		140
Systems		235
Other merger related expenses		46
Estimated pre-tax transaction costs		857
Less related tax benefit		168
Estimated transaction costs, net of taxes	$	689

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