Reliant Bancorp, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

Attached files

file	filename
EX-23.1 - EXHIBIT 23.1 - Reliant Bancorp, Inc.	ex_95770.htm
8-K - FORM 8-K - Reliant Bancorp, Inc.	cubn20170920_8k.htm

Exhibit 99.1

Unaudited Proforma Consolidated Balance Sheet

June 30, 2017

(in thousands)

	Commerce Union Bancshares, Inc. Historical			Community First, Inc. Historical			Stock Issuance			Pro Forma Adjustments				Pro Forma Combined
ASSETS
Cash and due from banks	$	26,551		$	39,161		$	23,213	a	$	(4,500	)	b	$	84,425
Time deposits in other financial institutions		-			23,558			-			-				23,558
Securities available for sale		184,789			72,726			-			-				257,515
Loans, net of unearned income		719,834			308,195			-			(6,934	)	c		1,021,095
Allowance for loan losses		(9,385	)		(3,708	)		-			3,708		d		(9,385	)
Loans, net		710,449			304,487			-			(3,226	)			1,011,710
Mortgage loans held for sale, net		12,031			84			-			-				12,115
Accrued interest receivable		4,298			974			-			-				5,272
Premises and equipment, net		9,721			10,630			-			-				20,351
Restricted equity securities, at cost		7,155			1,727			-			-				8,882
Other real estate, net		-			2,788			-			(1,072	)	e		1,716
Cash surrender value of life insurance contracts		29,203			10,523			-			-				39,726
Deferred tax assets, net		2,498			10,178			-			(2,965	)	f		9,711
Goodwill		11,404			-			-			28,954		g		40,358
Core deposit intangibles		1,404			733			-			3,390		h		5,527
Other assets		4,447			2,068			-			-				6,515

TOTAL ASSETS	$	1,003,950		$	479,637		$	23,213		$	20,581			$	1,527,381

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits	$	840,014		$	426,278		$	-		$	921		i	$	1,267,213
Accrued interest payable		167			395			-			-				562
Borrowings		44,910			16,841			-			(4,469	)	j		57,282
Dividends payable		941			-			-			-				941
Other liabilities		5,329			3,516			-			-				8,845

TOTAL LIABILITIES		891,361			447,030			-			(3,548	)			1,334,843

STOCKHOLDERS’ EQUITY
Common stock		7,840			43,186			1,137	a		(40,769	)	k		11,394
Additional paid-in capital		89,746			-			22,076	a		56,569		k		168,391
Retained earnings (deficit)		15,516			(8,678	)		-			6,428		l		13,266
Accumulated other comprehensive loss		(513	)		(1,901	)		-			1,901		m		(513	)

TOTAL STOCKHOLDERS’ EQUITY		112,589			32,607			23,213			24,129				192,538

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,003,950		$	479,637		$	23,213		$	20,581			$	1,527,381

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Combined Financial Information

Unaudited Proforma Consolidated Income Statement

For the Six Months ended June 30, 2017

(in thousands)

	Commerce Union Bancshares, Inc. Historical		Community First, Inc. Historical		Pro Forma Adjustments				Pro Forma Combined
INTEREST INCOME
Interest and fees on loans	$	16,324	$	7,630	$	314		c	$	24,268
Interest on investment securities, taxable		335		874		-				1,209
Interest on investment securities, nontaxable		1,774		4		-				1,778
Federal funds sold and other		244		328		-				572

TOTAL INTEREST INCOME		18,677		8,836		314				27,827

INTEREST EXPENSE
Deposits		1,985		1,027		(307	)	i		2,705
Borrowings		218		315		118		j		651

TOTAL INTEREST EXPENSE		2,203		1,342		(189	)			3,356

NET INTEREST INCOME		16,474		7,494		503				24,471

PROVISION FOR LOAN LOSSES		655		55		-				710

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		15,819		7,439		503				23,761

NONINTEREST INCOME
Service charges on deposit accounts		627		872		-				1,499
Gains on mortgage loans sold, net		1,180		100		-				1,280
Other		563		242		-				805

TOTAL NONINTEREST INCOME		2,370		1,214		-				3,584

NONINTEREST EXPENSE
Salaries and employee benefits		8,754		3,532		-				12,286
Occupancy		1,632		695		-				2,327
Information technology		1,192		808		-				2,000
Other noninterest expense		2,559		1,725		135		h		4,419

TOTAL NONINTEREST EXPENSE		14,137		6,760		135				21,032

INCOME BEFORE PROVISION FOR INCOME TAXES		4,052		1,893		368				6,313

INCOME TAX EXPENSE		699		665		141		n		1,505

CONSOLIDATED NET INCOME		3,353		1,228		227				4,808

NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY		892		-		-				892

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	4,245	$	1,228	$	227			$	5,700

Basic net income attributable to common shareholders, per share	$	0.55	$	0.25					$	0.50
Diluted net income attributable to common shareholders, per share	$	0.54	$	0.25					$	0.50

Weighted average common shares outstanding
Basic		7,758,408		4,995,755						11,298,366
Diluted		7,854,841		4,995,755						11,394,799

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Combined Financial Information

Unaudited Proforma Consolidated Statement of Income

For the Year Ended December 31, 2016

(in thousands, except for per share amounts)

	Commerce Union Bancshares, Inc. Historical		Community First, Inc. Historical			Pro Forma Adjustments				Pro Forma Combined
INTEREST INCOME
Interest and fees on loans	$	32,678	$	14,968		$	782		c	$	48,428
Interest on investment securities, taxable		724		1,921		$	-				2,645
Interest on investment securities, nontaxable		2,211		22		$	-				2,233
Federal funds sold and other		402		461		$	-				863

TOTAL INTEREST INCOME		36,015		17,372		$	782				54,169

INTEREST EXPENSE
Deposits		2,649		1,981		$	(614	)	i		4,016
Borrowings		714		785		$	235		j		1,734

TOTAL INTEREST EXPENSE		3,363		2,766		$	(379	)			5,750

NET INTEREST INCOME		32,652		14,606		$	1,161				48,419

PROVISION FOR LOAN LOSSES		968		(632	)	$	-				336

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		31,684		15,238		$	1,161				48,083

NONINTEREST INCOME
Service charges on deposit accounts		1,239		1,897			-				3,136
Gains on mortgage loans sold, net		6,317		195			-				6,512
Gain on acquisition of subordinated debentures		-		2,500			-				2,500
Other		1,244		768			-				2,012

TOTAL NONINTEREST INCOME		8,800		5,360			-				14,160

NONINTEREST EXPENSE
Salaries and employee benefits		18,256		7,450			-				25,706
Occupancy		3,174		1,373			-				4,547
Information technology		2,486		2,023			-				4,509
Other operating		6,458		3,413			275		h		10,146

TOTAL NONINTEREST EXPENSE		30,374		14,259			275				44,908

INCOME BEFORE PROVISION FOR INCOME TAXES		10,110		6,339			886				17,335

INCOME TAX EXPENSE		2,213		2,347			339		n		4,899

CONSOLIDATED NET INCOME		7,897		3,992			547				12,436

Noncontrolling interest in net (income) loss of subsidiary		1,039		-			-				1,039
Preferred stock dividends		-		4,168			-				4,168

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	8,936	$	8,160		$	547			$	17,643

Basic net income attributable to common shareholders, per share	$	1.18	$	1.97						$	1.65
Diluted net income attributable to common shareholders, per share	$	1.16	$	1.97						$	1.63

Weighted average common shares outstanding
Basic		7,586,993		4,137,656							10,714,206
Diluted		7,691,493		4,137,656							10,818,706

See accompanying notes to Unaudited Pro Forma Condensed Consolidated Combined Financial Information

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(all amounts are in thousands, except per share data, unless otherwise indicated)

NOTE 1 – BASIS OF PRESENTATION

The unaudited pro forma condensed combined financial statements and explanatory notes have been prepared to illustrate the effects of the merger involving Commerce Union and Community First under the acquisition method of accounting with Commerce Union treated as the acquirer and a private offering of Commerce Union common stock. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented, nor do they necessarily indicate the results of operations in future periods or the future financial position of the combined entities. Under the acquisition method of accounting, the assets and liabilities of Community First, as of the effective date of the merger, will be recorded by Commerce Union at their respective fair values and the excess of the merger consideration over the fair value of Community First’s net assets will be allocated to goodwill.

The merger, which is currently expected to be completed in the first quarter of 2018, provides for Community First common shareholders to receive 0.481 shares of Commerce Union common stock for each share of Community First common stock they hold immediately prior to the merger. Based on the closing sale price of shares of Commerce Union common stock on the Nasdaq Capital Market on August 22, 2017 of $24.40, the last trading day before the public announcement of the signing of the merger agreement, the value of the merger consideration per share of Community First common stock was $11.74.

The pro forma allocation of the purchase price reflected in the unaudited pro forma condensed combined financial statements are subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments may include, but not be limited to, changes in (i) Community First’s balance sheet through the effective time of the merger; (ii) the aggregate value of merger consideration paid if the price of shares of Commerce Union common stock varies from the assumed $24.40 per share, which represents the closing share price of Commerce Union common stock on August 22, 2017; (iii) total merger-related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market conditions differ from current assumptions.

The accounting policies of both Commerce Union and Community First are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined.

NOTE 2 – PRO FORMA ADJUSTMENTS

The following estimated adjustments were made to the pro forma financial statements:

Confidentially marketed private offering of 1,137,000 shares of Commerce Union common stock, par value $1.00 per share, at a price of $22 per share, shown net of a 6% placement agent fee and $300,000 in other offering related expenses.

Represents estimated future merger related expenses. The total is assumed to be shared equally by Commerce Union and Community First.

To adjust Community First’s loan portfolio to estimated fair value which is composed of two components, the expected credit loss component, which amounts to an estimated $4,623, and the component that considers current interest rates and liquidity, which amounts to an estimated $2,311 and is accretable in income over five years using the sum of the digits method. The estimated fair value adjustment aggregates an estimated adjustment of 2.25% of the outstanding loan balance of Community First.

Elimination of Community First’s allowance for loan losses. Estimated credit losses in the Community First loan portfolio are included in the loan valuation adjustment described in note c.

To adjust Community First’s other real estate to estimated fair value.

To recognize estimated deferred tax liabilities of $1,018 related to fair value adjustments and the core deposit intangible based on Commerce Union’s blended federal and state statutory tax rate of 38.29% and to reduce the existing Community First net deferred tax asset by $1,954 representing the estimated portion of state net operating loss carryforwards that will not be available to Commerce Union.

To recognize goodwill equal to the excess of consideration paid by Commerce Union over the net fair value of Community First assets and liabilities acquired. Goodwill will not be amortized for accounting purposes but will be tested for impairment at least annually, which may result in impairment losses in future periods.

To recognize a core deposit intangible asset related to deposit customer relationships acquired of $4,123, estimated based on 1.5% of Community First’s transaction accounts as of June 30, 2017, and remove the existing Community First core deposit intangible asset of $733. The amortization expense of the newly created core deposit intangible asset is based on the straight line method over a 10 year period.

To adjust Community First’s time deposits to estimated fair value and accrete the adjustment as a reduction of interest expense based on the straight line method over the estimated remaining life of 1.5 years.

To adjust Community First’s trust preferred securities to estimated fair value and amortize the adjustment to interest expense on borrowings based on the straight line method over the estimated remaining life of 19 years.

To remove Community First common stock and record Commerce Union common stock issued as merger consideration at par value of $2,417 and additional paid in capital of $56,569.

To remove the deficit of Community First and reduce retained earnings for Commerce Union’s share of estimated future merger expenses of $2,250.

To remove the accumulated other comprehensive loss of Community First.

To recognize income tax expense related to the effect of pro forma adjustments on pre-tax income using Commerce Union’s blended federal and state statutory income tax rate of 38.29%.

NOTE 3 – PRELIMINARY PURCHASE PRICE ALLOCATION

Measurement of the acquisition consideration is based on the market price of Commerce Union common stock as of August 22, 2017 multiplied by the number of common shares to be issued in the merger. The consideration is allocated to the estimated fair values of assets acquired and liabilities assumed, with any remaining excess recorded as goodwill. Estimated fair value adjustments included in the pro forma financial statements are based upon available information and certain assumptions considered reasonable, and may be revised as additional information becomes available. The preliminary purchase price allocation is as follows:

Community First's outstanding shares August 22, 2017		5,025,884
Exchange ratio		0.481
Shares of common stock to be issued		2,417,450
Market price of common stock on August 22, 2017	$	24.40
Estimated fair value of common stock issued		58,986
Estimated fair value of stock options issued		-
Total consideration		58,986


Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents		60,469
Investment securities available for sale		72,726
Loans		301,261
Premises and equipment		10,630
Deferred tax asset, net		7,213
Cash surrender value of life insurance		10,523
Other real estate		1,716
Core deposit intangible		4,123
Other assets		4,853
Deposits		(427,199	)
Borrowings		(12,372	)
Other liabilities		(3,911	)
Total fair value of net assets acquired		30,032
Preliminary Pro Forma Goodwill	$	28,954

Reliant Bancorp, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - September 21, 2017

Attached files

Reliant Bancorp, Inc. Reports