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8-K/A - FORM 8-K/A - BRYN MAWR BANK CORPd894142d8ka.htm
EX-23.1 - EX-23.1 - BRYN MAWR BANK CORPd894142dex231.htm
EX-23.2 - EX-23.2 - BRYN MAWR BANK CORPd894142dex232.htm
EX-99.2 - EX-99.2 - BRYN MAWR BANK CORPd894142dex992.htm

EXHIBIT 99.3

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma combined consolidated financial statements for Bryn Mawr Bank Corporation (“BMBC” or the “Corporation”) and Continental Bank Holdings, Inc. (“CBHI”) give effect to the merger of CBHI with and into BMBC (the “merger”). The unaudited pro forma combined consolidated balance sheet as of December 31, 2014 gives effect to the merger as if it occurred on December 31, 2014. The unaudited pro forma combined consolidated statement of income for the twelve months ending December 31, 2014 gives effect to the merger as if it had occurred on January 1, 2014. The actual completion date of the merger was January 1, 2015.

Pursuant to the Agreement and Plan of Merger, by and between CBHI and the Corporation, dated as of May 5, 2014 (as amended by the Amendment to Agreement and Plan of Merger, dated as of October 23, 2014), shares of CBHI common stock outstanding immediately prior to the merger were converted into stock merger consideration at an exchange rate of 0.45 shares of BMBC common stock for each share of CBHI common stock. The unaudited pro forma combined consolidated balance sheet assumes that the merger occurred on December 31, 2014. Based on 8,618,629 shares of CBHI common stock outstanding as of December 31, 2014, the aggregate merger consideration comprised of BMBC common stock consists of 3,878,383 shares of BMBC common stock. BMBC also assumed 402,790 options to purchase CBHI common stock, which converted into 181,256 options to purchase BMBC common stock. The fair value of the options is $2.343 million. In addition, $1.323 million was paid to CBHI Series B warrant holders to cash-out 450,000 warrants.

The Corporation expects that it will incur merger and integration charges as a result of the merger. The unaudited pro forma combined consolidated financial statements, while helpful in illustrating the financial characteristics of the combined entity, do not reflect these anticipated merger and integration expenses; nor do they reflect any possible financial benefits through anticipated cost savings, and, hence, do not attempt to predict or suggest future results. Furthermore, the unaudited pro forma combined consolidated financial statements do not necessarily reflect what the historical results of the combined entity would have been, had the companies been combined during the period presented.

In addition, the unaudited pro forma combined consolidated financial statements reflect estimates of the fair values of assets acquired and liabilities assumed in the merger. These estimates are preliminary and, as such, their final values may vary from their initial estimates.

THIS PRO FORMA DATA IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS THAT BMBC WOULD HAVE ACHIEVED HAD IT COMPLETED THE MERGER AS OF THE BEGINNING OF THE PERIOD PRESENTED AND SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE OPERATIONS.

The unaudited pro forma combined consolidated financial statements and related notes contain statements which, to the extent that they are not recitations of historical fact, may constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include financial and other projections as well as statements regarding BMBC that may include future plans, objectives, performance, revenues, growth, profits, operating expenses of BMBC’s underlying assumptions. The words “may”, “would”, “should”, “could”, “will”, “likely”, “possibly”, “expect”, “anticipate”, “intend”, “estimate”, “target”, “potentially”,


“probably”, “outlook”, “predict”, “contemplate”, “continue”, “plan”, “forecast”, “project’’ and “believe” or other similar words and phrases may identify forward-looking statements. Persons reading the unaudited pro forma combined consolidated financial statements and related notes are cautioned that such statements are only predictions, and that BMBC’s actual future results or performance may be materially different. All forward-looking information and statements made herein are based on management’s current beliefs and assumptions as of the date hereof and speak only as of the date they are made. BMBC does not undertake to update forward-looking statements.

For a complete discussion of the assumptions, risks and uncertainties that could cause future events to vary materially from the results anticipated, you are encouraged to review our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, as well as any changes in risk factors that we may identify our quarterly or other reports filed with the SEC.


UNAUDITED PRO FORMA COMBINED

CONSOLIDATED BALANCE SHEET

 

December 31, 2014

 
(dollars in thousands, except per share data)   Bryn Mawr Bank
Corporation
    Continental Bank
Holdings Inc.
    Combined     Purchase
Accounting
Adjustments
    Pro Forma
Combined
 

Assets

         

Cash and due from banks

  $ 16,717      $ 7,194      $ 23,911      $ (1,325 )(b)(c)    $ 22,586   

Interest bearing deposits with banks

    202,552        10,791        213,343        —          213,343   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents

  219,269      17,985      237,254      (1,325   235,929   

Investment securities available for sale

  229,577      164,414      393,991      17,424 (d)    411,415   

Investment securities held to maturity

  —        17,461      17,461      (17,461 )(d)    —     

Investment securities, trading

  3,896      —        3,896      3,896   

Loans held for sale

  3,882      507      4,389      4,389   

Portfolio loans and leases

  1,652,257      440,586      2,092,843      (13,761 )(e)    2,079,082   

Less: Allowance for loan and lease losses

  (14,586   (5,563   (20,149   5,563 (f)    (14,586
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net portfolio loans and leases

  1,637,671      435,023      2,072,694      (8,198   2,064,496   

Premises and equipment, net

  33,748      8,846      42,594      2,031 (g)    44,625   

Accrued interest receivable

  5,560      2,094      7,654      —        7,654   

Deferred income taxes

  7,209      2,669      9,878      3,081 (h)    12,959   

Mortgage servicing rights

  4,765      —        4,765      —        4,765   

Non-mortgage servicing rights

  —        569      569      246 (i)    815   

Bank owned life insurance

  20,535      12,054      32,589      —        32,589   

Federal Home Loan Bank stock

  11,523      4,981      16,504      —        16,504   

Goodwill

  35,781      —        35,781      61,555 (a)    97,336   

Intangible assets

  22,521      —        22,521      4,191 (j)    26,712   

Other investments

  5,226      50      5,276      —        5,276   

Other assets

  5,343      10,336      15,679      (234 )(k)    15,445   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

$ 2,246,506    $ 676,989    $ 2,923,495    $ 61,310    $ 2,984,805   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

Deposits:

Non-interest-bearing

$ 446,903    $ 93,852    $ 540,755    $ —      $ 540,755   

Interest-bearing

  1,241,125      386,721      1,627,846      1,101 (l)    1,628,947   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

  1,688,028      480,573      2,168,601      1,101      2,169,702   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Short-term borrowings

  23,824      108,460      132,284      149 (m)    132,433   

FHLB advances and other borrowings

  260,146      19,540      279,686      186 (n)    279,872   

Accrued interest payable

  1,040      295      1,335      —        1,335   

Other liabilities

  27,994      2,849      30,843      1,412 (o)(p)    32,255   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  2,001,032      611,717      2,612,749      2,848      2,615,597   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity

Common stock

  16,742      862      17,604      3,016 (q)(r)    20,620   

Paid-in capital in excess of par value

  100,486      68,214      168,700      51,642 (s)(t)(u)    220,342   

Common stock held in treasury

  (31,642   —        (31,642   —        (31,642

Accumulated other comprehensive loss, net of tax benefit

  (11,704   (1,364   (13,068   1,364 (v)    (11,704

Retained earnings (deficit)

  171,592      (2,440   169,152      2,440 (w)    171,592   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

  245,474      65,272      310,746      58,462      369,208   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

$ 2,246,506    $ 676,989    $ 2,923,495    $ 61,310    $ 2,984,805   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common shares outstanding

  13,769,336      8,618,629      3,878,304      17,647,640   

Book value per common share

$ 17.83    $ 7.57    $ 20.92   

Tangible book value per common share

$ 13.59    $ 7.57    $ 13.89   


UNAUDITED PRO FORMA COMBINED

CONSOLIDATED STATEMENT OF INCOME

 

For the Twelve Months Ending December 31, 2014

 
(dollars in thousands, except per share data)   Bryn Mawr
Bank
Corporation
    Continental
Bank Holdings
Inc.
    Combined     Purchase
Accounting
Adjustments
    Pro Forma
Combined
 

Interest income:

         

Interest and fees on loans and leases

  $ 78,541      $ 18,099      $ 96,640      $ 923 (x)    $ 97,563   

Interest on cash and cash equivalents

    193        42        235        —          235   

Interest on investment securities:

          —       

Taxable

    3,596        4,499        8,095        60 (y)      8,155   

Non-taxable

    399        571        970        160 (y)      1,130   

Dividends

    177        247        424        —          424   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

  82,906      23,458      106,364      1,143      107,507   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense on:

Deposits

  2,898      2,188      5,086      (761 )(z)    4,325   

Short-term borrowings

  17      156      173      (138 )(aa)    35   

FHLB advances and other borrowings

  3,163      586      3,749      (55 )(ab)    3,694   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

  6,078      2,930      9,008      (954   8,054   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

  76,828      20,528      97,356      2,097      99,453   

Provision for loan and lease losses

  884      1,157      2,041      —        2,041   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan and lease losses

  75,944      19,371      95,315      2,097      97,412   

Non-interest income:

Fees for wealth management services

  36,774      —        36,774      —        36,774   

Service charges on deposits

  2,578      754      3,332      —        3,332   

Loan servicing and other fees

  1,755      544      2,299      —        2,299   

Net gain on sale of residential mortgage loans

  1,772      (107   1,665      —        1,665   

Net gain on sale of nonmortgage loans

  —        903      903      —        903   

Net gain (loss) on sale of investment securities available for sale

  471      236      707      —        707   

Net gain (loss) on sale of other real estate owned (“OREO”)

  175      —        175      —        175   

Bank owned life insurance (“BOLI”) income

  315      375      690      —        690   

Insurance commisions

  1,210      —        1,210      —        1,210   

Other operating income

  3,272      188      3,460      —        3,460   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

  48,322      2,893      51,215      —        51,215   

Non-interest expenses:

Salaries and wages

  37,113      6,070      43,183      —        43,183   

Employee benefits

  7,340      1,282      8,622      —        8,622   

Net gain on curtailment of nonqualified pension plan

  —        —        —        —        —     

Occupancy and bank premises

  7,305      2,401      9,706      220 (ac)    9,926   

Furniture, fixtures, and equipment

  4,508      1,151      5,659      (64 )(ad)    5,595   

Advertising

  1,504      152      1,656      —        1,656   

Amortization of mortgage servicing rights

  476      —        476      —        476   

Net impairment of mortgage servicing rights

  56      —        56      —        56   

Amortization of other intangible assets

  2,659      —        2,659      679 (ae)    3,338   

FDIC insurance

  1,046      —        1,046      —        1,046   

Due diligence and merger-related expenses

  2,373      200      2,573      —        2,573   

Early extinguishment of debt - costs and premiums

  —        —        —        —        —     

Professional fees

  3,017      2,372      5,389      —        5,389   

Pennsylvania bank shares tax

  1,256      —        1,256      —        1,256   

Other operating expenses

  12,765      4,168      16,933      —        16,933   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expenses

  81,418      17,796      99,214      835      100,049   

Income before income taxes

  42,848      4,468      47,316      1,262      48,578   

Income tax expense

  15,005      1,591      16,596      442 (af)    17,038   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 27,843    $ 2,877    $ 30,720    $ 820    $ 31,540   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

$ 2.05    $ 0.33    $ 1.81   

Diluted earnings per common share

$ 2.01    $ 0.33    $ 1.77   

Weighted-average basic shares outstanding

  13,566,239      8,618,629      22,184,868      (4,740,325 )(ag)    17,444,543   

Dilutive shares

  294,801      174,579      469,380      (95,996 )(ah)    373,384   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted weighted-average diluted shares

  13,861,040      8,793,208      22,654,248      (4,836,321   17,817,927   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


NOTES TO UNAUDITED PRO FORMA COMBINED

CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The unaudited pro forma combined consolidated financial statements have been prepared using the acquisition method of accounting. The unaudited pro forma combined consolidated statements of income for the twelve months ending December 31, 2014 are presented assuming the merger occurred on January 1, 2014. The unaudited pro forma combined consolidated balance sheet as of December 31, 2014 assumes the merger occurred as of that date. This information is not intended to reflect the actual results that would have been achieved had the merger actually occurred on those dates and should not be taken as representing the future consolidated results of operations of BMBC. No consideration was given in the unaudited pro forma combined consolidated financial statements to potential cost savings, fee enhancements or merger integration costs for the combined organization.

Note 2 – Purchase Consideration

Pursuant to the Agreement and Plan of Merger, by and between CBHI and the Corporation, dated as of May 5, 2014 (as amended by the Amendment to Agreement and Plan of Merger, dated as of October 23, 2014), shares of CBHI common stock outstanding immediately prior to the merger were converted into stock merger consideration at an exchange rate of 0.45 shares of BMBC common stock for each share of CBHI common stock. The unaudited pro forma combined consolidated balance sheet assumes that the merger occurred on December 31, 2014. Based on 8,618,629 shares of CBHI common stock outstanding as of December 31, 2014, the aggregate merger consideration comprised of BMBC common stock consists of 3,878,383 shares of BMBC common stock. BMBC also assumed 402,790 options to purchase CBHI common stock, which converted into 181,256 options to purchase BMBC common stock. The fair value of the options is $2.343 million. In addition, $1.323 million was paid to CBHI Series B warrant holders to cash-out 450,000 warrants.


NOTES TO UNAUDITED PRO FORMA COMBINED

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2014

Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are adjusted to their fair value as of the date of acquisition. The following items are pro forma adjustments referenced in the Pro Forma Combined Consolidated Balance Sheet to indicate the consideration paid and to adjust the CBHI assets and liabilities to their fair values as of December 31, 2014.

 

(a) Calculation of Goodwill Resulting from Merger

(dollars in thousands, except per share data)

 

Purchase Consideration

CBHI Common Stock:

CBHI Common Stock outstanding

  8,618,629   

Exchange ratio

  0.45   

BMBC Common Stock (includes fractional shares)

  3,878,383   

BMBC closing price

$ 31.30   

Purchase consideration assigned to CBHI shares exchanged for BMBC Common Stock

$ 121,393   

CBHI Series B Warrants:

CBHI Series B warrants exchanged for cash

  450,000   

Cash-out rate paid for CBHI Series B warrants

$ 2.94   

Purchase consideration for CBHI Series B warrants exchanged for cash

  1,323   

CBHI Options:

CBHI stock options

  402,790   

Exchange ratio

  0.45   

BMBC stock options issued

  181,256   

Purchase consideration assigned to CBHI options exchanged for BMBC options

  2,343   
    

 

 

 

Total purchase consideration

$ 125,059   

Net Assets Acquired

CBHI shareholders’ equity

$ 65,272   

Core deposit intangible asset

  4,191   

Estimated adjustments to reflect assets acquired at fair value:

Investment securities

  (37

Portfolio loans

  (13,761

Allowance for loan and lease losses

  5,563   

Non-mortgage servicing rights

  246   

Deferred tax asset

  3,081   

Other assets

  (234
  

 

 

   

Total fair value adjustments to assets acquired

$ (3,111

Estimated adjustments to reflect liabilities assumed at fair value:

Time deposits

$ 1,101   

Borrowings

  335   

Change-in-control payment liabilities

  2,315   

Other liabilities

  (903
  

 

 

   

Total fair value adjustments to liabilities assumed

  2,848   

Total net assets acquired

$ 63,504   
    

 

 

 

Goodwill resulting from merger

$ 61,555   
    

 

 

 


(b) $1.323 million cash paid to holders of 450,000 CBHI Series B warrants at a rate of $2.94 per warrant

 

(c) $0.002 million cash paid to CBHI shareholders in lieu of fractional shares

 

(d) Estimated purchase accounting adjustment to reclassify CBHI investment securities classified by CBHI as held-to-maturity to available-for-sale. Includes reclassification of $937 thousand unrealized loss on available-for-sale investment securities and held-to-maturity investment securities that had previously been classified as available-for-sale to amortizing fair value adjustments. Also includes $37 thousand unrealized loss on held-to-maturity investment securities.

 

(e) Estimated purchase accounting adjustment on acquired loan portfolio to mark it to its fair value. Fair value mark includes an interest rate component and a credit component equivalent to estimated lifetime losses on the acquired loan portfolio.

 

(f) Estimated purchase accounting adjustment to eliminate the allowance for loan and lease losses. The acquired balance of allowance for loan and lease losses represents the losses present in the acquired portfolio as of the acquisition date. As part of the purchase accounting adjustment to the loan portfolio, a credit-related component equivalent to the expected lifetime credit losses in the acquired portfolio was recorded.

 

(g) Estimated purchase accounting adjustment to leasehold improvements and, to a lesser extent, furniture and fixtures in the acquired brances and offices.

 

(h) Estimated purchase accounting adjustments include a $4.626 million net deferred tax asset associated with fair value adjustments of acquired assets and liabilities and a $1.467 million deferred tax liability associated with the creation of a $4.191 million core deposit intangible asset. The Corporation utilizes a 35% tax rate for all calculations of deferred tax items. In addition, a $0.078 million deferred tax asset associated with CBHI’s deferred rent liability was eliminated through purchase accounting.


(i) Estimated purchase accounting adjustment to acquired loan servicing rights on SBA loans.

 

(j) Estimated core deposit intangible asset created related to $296.3 million core deposits acquired

 

(k) Estimate of unrecorded federal income tax liability

 

(l) Estimated purchase accounting adjustment to time deposits. Fair value mark is related to market rates of interest present at the time of acquisition.

 

(m) Estimated purchase accounting adjustment to short-term borrowings. Fair value mark is related to market rates of interest present at the time of acquisition.

 

(n) Estimated purchase accounting adjustment to long-term FHLB borrowings. Fair value mark is related to market rates of interest present at the time of acquisition.

 

(o) Eliminate $903 thousand deferred rent liability

 

(p) $2.135 million change-in-control payment liability related to certain executives of CBHI.

 

(q) Elimination of 8,618,629 shares of CBHI common stock ($0.10 par value)

 

(r) Issuance of 3,878,304 shares of BMBC Common Stock ($1.00 par value)

 

(s) Issuance of 3,878,304 shares of BMBC Common Stock (at $31.30 per share)

 

(t) Fair value of 181,256 options to purchase BMBC Common Stock, converted from CBHI options

 

(u) Elimination of $68.2 million of CBHI additional paid in capital in excess of par

 

(v) Elimination of other comprehensive loss related to acquired investment securities

 

(w) Elimination of retained earnings of CBHI


NOTES TO UNAUDITED PRO FORMA COMBINED

CONSOLIDATED STATEMENT OF INCOME

FOR THE TWELVE MONTHS ENDING DECEMBER 31, 2014

Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are adjusted to their fair value as of the date of acquisition. The following items are pro forma adjustments to record the accretion and amortization of these fair value adjustments for the twelve months ended December 31, 2014.

 

(x) Recognition of twelve months of accretion of fair value mark applied to acquired loan portfolio. The assumed accretion period is the weighted average contractual maturity of the underlying loans.

 

(y) Recognition of twelve months of accretion of net fair value discount applied to acquired investment portfolio. The assumed accretion period is the weighted average maturity of the underlying investment securities.

 

(z) Recognition of twelve months of accretion of fair value adjustment applied to assumed time deposits. The assumed accretion period is the weighted average remaining maturity of the underlying time deposits.

 

(aa) Recognition of twelve months of accretion of fair value adjustment applied to assumed short-term borrowings. The assumed accretion period is the weighted average remaining maturity of the underlying short-term borrowings.

 

(ab) Recognition of twelve months of accretion of fair value adjustment applied to assumed FHLB advances and other long-term borrowings. The assumed accretion period is the weighted average remaining maturity of the underlying FHLB advances and other long-term borrowings.

 

(ac) Recognition of twelve months of increased depreciation expense resulting from the fair value adjustment of acquired leasehold improvements. The assumed depreciation periods are the remaining terms of the underlying branch leases.

 

(ad) Recognition of twelve months of reduced depreciation expense resulting from the fair value adjustment of acquired furniture, fixtures and equipment. The assumed depreciation periods are the remaining useful lives of the underlying fixed assets.

 

(ae) Recognition of twelve months amortization of the core deposit intangible asset (“CDI”) recorded as a result of the assumption of $296.3 million of core deposits. The amortization method used for the CDI is a ten year, declining balance method.

 

(af) The tax rate used is 35%. No adjustment has been recorded in recognition of tax-free investment interest.

 

(ag) Assumes December 31, 2014 common shares outstanding for CBHI were outstanding for full year and equal the weighted average common shares outstanding for the twelve months ended December 31, 2014. The merger conversion of 8,618,629 CBHI common shares equals 3,878,304 BMBC common shares (8,618,629 times 0.45 minus 79 fractional shares paid in cash).

 

(ah) Assumes December 31, 2014 options to purchase CBHI common stock were outstanding for full year and equal the weighted average options outstanding for the twelve months ended December 31, 2014. Dilutive effect of options outstanding is determined using the treasury method. The weighted average CBHI options outstanding for the twelve months ended December 31, 2014 was assumed to be 402,775 with a weighted average strike price of $7.98. When converted to BMBC options, there are 181,256 BMBC options (402,775 times 0.45 plus 7 shares for rounding).