REPUBLIC FIRST BANCORP INC - FORM 8-K/A - EX-99.3 - EXHIBIT 99.3 - October 7, 2016

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Exhibit 99.3
 
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 and the unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2016 and for the year ended December 31, 2015 are based on the historical financial statements of Republic First Bancorp, Inc. ("RFB") and Oak Mortgage Company, LLC ("OAK") after giving effect to the acquisition in which Republic First Bancorp, Inc.'s wholly owned subsidiary, Republic First Bank d/b/a Republic Bank, will acquire Oak Mortgage Company, LLC. The acquisition will be accounted for using the acquisition method of accounting in accordance with Financial Accounting Standards Board ("FASB") ASC 805, "Business Combinations" ("ASC 805)".
The unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2016 and for the year ended December 31, 2015 give effect to the acquisition as of the beginning of all periods presented. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 assumed the transaction took place on June 30, 2016.
The unaudited condensed consolidated balance sheet and statement of income as of and for the six months ended June 30, 2016 were derived from Republic First Bancorp, Inc.'s unaudited condensed financial statements, and Oak Mortgage Company, LLC's unaudited condensed financial statements as of and for the six months ended June 30, 2016. The unaudited condensed statement of income for the year ended December 31, 2015 was derived from Republic First Bancorp, Inc. and Oak Mortgage LLC's audited statements of income for the year ended December 31, 2015.
The pro forma condensed consolidated financial statements reflect management's best estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As final valuations are performed, increases or decreases in the fair value of assets acquired and liabilities assumed will result in adjustments, which may be material, to the balance sheet and/or statement of income.
As required, the unaudited pro forma condensed consolidated financial data includes adjustments which give effect to the events that are directly attributable to the acquisition, expected to have a continuing impact and are factually supportable.
The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what the companies' actual performance or financial position would have been had the acquisition occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any date or for any future period. Please refer to the following information in conjunction with the accompanying notes to these pro forma financial statements and the historical financial statements.
 
 
 

 

Republic First Bancorp, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2016
(Dollars in thousands, except per share data)
 
   
Historical
              
   
RFB
    
OAK
    
Pro Forma
Acquisition Adjustments
        
Consolidated Pro Forma
  
ASSETS
                    
Cash and due from banks
  
$
18,561
    
$
4,087
    
$
(4,072
)
  
A
  
$
18,576
  
Interest bearing deposits with banks
    
93,211
      
-
      
(7,136
)
  
B
    
86,075
  
    Cash and cash equivalents
    
111,772
      
4,087
      
(11,208
)
        
104,651
  
 
                                    
Investment securities available for sale, at fair value
    
253,289
      
-
      
-
          
253,289
  
Investment securities held to maturity, at amortized cost (fair value of $203,186)
    
199,074
      
-
      
-
          
199,074
  
Restricted stock, at cost
    
1,367
      
-
      
-
          
1,367
  
Loans held for sale
    
5,487
      
28,336
      
(583
 )  
C
    
33,240
  
Loans receivable (net of allowance for loan losses of $8,761)
    
920,993
      
-
      
1,017
     C     
922,010
  
Premises and equipment, net
    
53,617
      
129
      
-
          
53,746
  
Goodwill
    
-
      
-
      
5,629
    
D
    
5,629
  
Other real estate owned, net
    
11,974
      
-
      
-
          
11,974
  
Accrued interest receivable
    
4,367
      
-
      
-
          
4,367
  
Other assets
    
20,307
      
54
      
-
          
20,361
  
    Total Assets
  
$
1,582,247
    
$
32,606
    
$
(5,145
)
      
$
1,609,708
  
 
                                    
LIABILITIES AND SHAREHOLDERS' EQUITY
                                    
Liabilities
                                    
Deposits
                                    
   Demand – non-interest bearing
  
$
281,496
    
$
-
    
$
-
        
$
281,496
  
   Demand – interest bearing
    
472,575
      
-
      
-
          
472,575
  
   Money market and savings
    
574,051
      
-
      
-
          
574,051
  
   Time deposits
    
106,129
      
-
      
-
          
106,129
  
       Total Deposits
    
1,434,251
      
-
      
-
          
1,434,251
  
Warehouse lines of credit
    
-
      
26,433
      
-
          
26,433
  
Accrued interest payable
    
313
      
-
      
-
          
313
  
Other liabilities
    
6,637
      
326
      
500
    
E
    
7,463
  
Subordinated debt
    
22,476
      
-
      
-
          
22,476
  
    Total Liabilities
    
1,463,677
      
26,759
      
500
        
1,490,936
  
                                     
Shareholders' Equity
                                    
Preferred stock, par value $0.01 per share: 10,000,000 shares  authorized; no shares issued and outstanding
    
-
      
-
      
-
          
-
  
Common stock, par value $0.01 per share: 100,000,000 shares authorized; shares issued 38,442,473 as of June 30, 2016; shares outstanding 37,913,628 as of June 30, 2016
    
384
      
-
      
-
          
384
  
Additional paid in capital
    
153,476
      
-
      
202
    
F
    
153,678
  
Members' equity
    
-
      
5,847
      
(5,847
)
  
G
    
-
  
Accumulated deficit
    
(30,725
)
    
-
      
-
          
(30,725
)
Treasury stock at cost (503,408 shares as of June 30, 2016)
    
(3,725
)
    
-
      
-
          
(3,725
)
Stock held by deferred compensation plan (25,437 shares as of June 30, 2016)
    
(183
)
    
-
      
-
          
(183
)
Accumulated other comprehensive loss
    
(657
)
    
-
      
-
          
(657
)
    Total Shareholders' Equity
    
118,570
      
5,847
      
(5,645
)
        
118,772
  
    Total Liabilities and Shareholders' Equity
  
$
1,582,247
    
$
32,606
    
$
(5,145
)
      
$
1,609,708
  

(See notes to consolidated financial statements)
 
 
 

 
Republic First Bancorp, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
For the Six Months Ended June 30, 2016
 
   
Historical
      
 
 
(dollars in thousands, except per share data)
  
RFB
    
OAK
    
Pro Forma Acquisition Adjustments
    
Consolidated
Pro Forma
  
                 
Interest income
  
$
25,971
    
$
264
    
$
-
    
$
26,235
  
Interest expense
    
3,083
      
213
      
-
      
3,296
  
Net interest income
    
22,888
      
51
      
-
      
22,939
  
Provision for loan losses
    
950
      
-
      
-
      
950
  
Net interest income after provision for loan losses
    
21,938
      
51
      
-
      
21,989
  
                                 
Noninterest income
    
5,443
      
5,177
      
-
      
10,620
  
Noninterest expense
    
25,310
      
4,133
      
-
      
29,443
  
Income before income taxes
    
2,071
      
1,095
      
-
      
3,166
  
Income tax expense
    
(37
)
    
-
      
-
      
(37
)
Net income
  
$
2,108
    
$
1,095
    
$
-
    
$
3,203
  
                                 
Basic earnings per common share
  
$
0.06
      
 
 
  
 
 
    
$
0.08
  
Diluted earnings per common share
  
$
0.05
      
 
 
  
 
 
    
$
0.08
  
Basic weighted average shares outstanding
    
37,860
      
 
 
    
 
      
37,860
  
Diluted weighted average share outstanding
    
38,344
      
 
 
    
 
      
38,344
  

(See notes to consolidated financial statements)





 
Republic First Bancorp, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
For the Year Ended December 31, 2015
 
   
Historical
      
 
 
(dollars in thousands, except per share data)
  
RFB
    
OAK
    
Pro Forma Acquisition Adjustments
    
Consolidated
Pro Forma
  
                 
Interest income
  
$
45,436
    
$
775
    
$
-
    
$
46,211
  
Interest expense
    
5,381
      
600
      
-
      
5,981
  
Net interest income
    
40,055
      
175
      
-
      
40,230
  
Provision for loan losses
    
500
      
-
      
-
      
500
  
Net interest income after provision for loan losses
    
39,555
      
175
      
-
      
39,730
  
                                 
Noninterest income
    
9,943
      
12,174
      
-
      
22,117
  
Noninterest expense
    
47,091
      
9,992
      
-
      
57,083
  
Income before income taxes
    
2,407
      
2,357
      
-
      
4,764
  
Income tax expense
    
(26
)
    
-
      
-
      
(26
)
Net income
  
$
2,433
    
$
2,357
    
$
-
    
$
4,790
  
                                 
Basic earnings per common share
  
$
0.06
      
 
 
  
 
 
    
$
0.13
  
Diluted earnings per common share
  
$
0.06
      
 
 
  
 
 
    
$
0.13
  
Basic weighted average shares outstanding
    
37,818
      
 
 
    
 
      
37,818
  
Diluted weighted average share outstanding
    
38,094
      
 
 
    
 
      
38,094
  

(See notes to consolidated financial statements)



 

Notes to Unaudited Condensed Pro Forma Financial Statements
1) Description of the Acquisition and Basis of Preparation
The Acquisition
On July 26, 2016, Republic First Bank d/b/a Republic Bank (the "Bank"), the wholly owned subsidiary of Republic First Bancorp, Inc. (the "Company"), entered into a Limited Liability Company Interest Purchase Agreement ("Purchase Agreement") with the three equity owners of Oak Mortgage Company LLC ("Sellers"), pursuant to which the Sellers agreed to sell to the Bank all of the issued and outstanding limited liability interests of Oak Mortgage Company, LLC ("Oak Mortgage").
On July 28, 2016, the Bank completed the acquisition of all of the outstanding limited liability company interests of Oak Mortgage held by the Sellers, pursuant to the terms of the Purchase Agreement. As a result of the completion of the transaction, Oak Mortgage became a wholly owned subsidiary of the Bank on July 28, 2016. The aggregate purchase price paid to the Sellers for their limited liability company interests at closing was $7.8 million, $1.0 million of which was deposited in an escrow account to be disbursed one year from closing subject to adjustment for any covered indemnity claims under the Purchase Agreement. The purchase price is subject to certain post-closing adjustments.
Basis of Presentation
The unaudited pro forma condensed consolidated financial statements have been prepared based on Republic Bank and Oak Mortgage Company, LLC's historical financial information. Certain disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted as permitted by SEC rules and regulations.
These unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results of operations that would have been achieved had the acquisition actually taken place at the dates indicated and do not purport to be indicative of future financial condition or operating results.
The tax impact of converting Oak Mortgage from a pass-through entity as a limited liability corporation to the Bank's corporate tax structure was calculated for purposes of the pro-forma financial statements. An offsetting adjustment of an equal amount was calculated when taking into consideration the effect to the Bank's deferred tax asset valuation allowance.
2) Acquisition Method
The pro forma condensed consolidated financial statements reflect the accounting for the transaction under the acquisition method, where the purchase is allocated to the assets and liabilities assumed based on their estimated fair values, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. Goodwill of $5.6 million arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies and is deductible for tax purposes.




 
The purchase price allocation for Oak Mortgage Company, LLC is summarized as follows (in thousands):
Consideration
    
Cash
  
$
7,136
  
Equity Instruments
    
202
  
Deferred Additional Purchase Price
    
500
  
         
Fair Value of Total Consideration Transferred
  
$
7,838
  
         
Fair value of identifiable assets acquired and liabilities assumed
        
         
Cash and cash equivalents
  
$
15
  
Loans held for sale
    
27,753
  
Loans receivable
    
1,017
  
Premises and equipment
    
129
  
Other assets
    
54
  
Total assets acquired
  
$
28,968
  
         
Warehouse lines of credit
  
$
26,433
  
Other liabilities
    
326
  
Total liabilities assumed
  
 
26,759
  
         
Total net assets at fair value
    
2,209
  
 
        
Goodwill
   $ 
5,629
  
         
         

 
3) Pro Forma Adjustments and Assumptions
A Reflects the one-time dividend made to the Oak Mortgage members at closing in accordance with the terms of the purchase agreement.
B Reflects cash consideration paid to Oak Mortgage members in accordance with the terms of the purchase agreement.
C Reflects a purchase accounting adjustment in the amount of $0.8 million to adjust loans held for sale to fair value, using recent historical sales data, and the reversal of the historical deferred loan cost balance in the amount of $0.4 million and a reclassification in the amount of $1.0 million from loans held for sale to loans receivable.
D Recognition of goodwill associated with the acquisition.
E Reflects additional non-contingent consideration due in future periods under the terms of the purchase agreement.
F Represents the fair value of stock options in accordance with the terms of the purchase agreement, valued via a Black Scholes Model with a strike price of $4.39, dividend yield of 0.0%, expected volatility of 46.38%, risk-free interest rate of 1.29%, expected life of 6.0 years, and an assumed forfeiture rate of 10.0%.
G Reflects the elimination of the remaining historical net equity of Oak Mortgage as a result of the acquisition.
 
 

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