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8-K/A - 8-K/A - EVANS BANCORP INC | d937042d8ka.htm |
Exhibit 99.1
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements are based on the separate historical financial statements of Evans Bancorp, Inc., or Evans, and FSB Bancorp, Inc., or FSB, and give effect to the mergers of (i) Merger Sub, Inc., a Maryland corporation and wholly-owned subsidiary of Evans, or Merger Sub, with and into FSB, which we refer to as the merger, with FSB continuing as the surviving corporation, (ii) FSB with and into Evans, which we refer to as the second merger and, together with the merger, the holdco mergers, with Evans continuing as the surviving corporation, and (iii) Fairport Savings Bank, a New York-chartered savings bank and wholly owned subsidiary of FSB, which we refer to as FSB Bank, with and into Evans Bank, N.A., a national banking association and a wholly owned subsidiary of Evans, which we refer to as Evans Bank, with Evans Bank being the surviving bank, which we refer to as the bank merger and, together with the holdco mergers, the mergers, including pro forma assumptions and adjustments related to the mergers, as described in the accompanying notes to the unaudited pro forma combined condensed financial statements. The unaudited pro forma combined condensed balance sheet as of December 31, 2019 is presented as if the mergers occurred on December 31, 2019. The unaudited pro forma combined condensed statement of income for the year ended December 31, 2019 is presented as if the mergers occurred on January 1, 2019. The historical consolidated financial information has been adjusted on a pro forma basis to reflect factually supportable items that are directly attributable to the mergers and, with respect to the statements of earnings only, expected to have a continuing impact on consolidated results of operations.
The unaudited pro forma combined condensed financial statements have been prepared using the acquisition method of accounting for business combinations under U.S. Generally Accepted Accounting Principles. Evans is the acquirer for accounting purposes. Certain reclassifications have been made to the historical financial statements of FSB to conform to the presentation in Evans financial statements.
The unaudited pro forma combined condensed financial statements are presented for illustrative purposes only. The unaudited pro forma combined condensed financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the mergers been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed financial statements should be read together with:
| the accompanying notes to the unaudited pro forma combined condensed financial statements; |
| Evans separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2019, included in Evans Annual Report on Form 10-K for the year ended December 31, 2019; |
| FSBs consolidated financial statements and related notes as of and for the years ended December 31, 2019 included in Exhibit 13 in FSBs Annual Report on Form 10-K for the year ended December 31, 2019; and |
| other information pertaining to Evans and FSB contained in or incorporated by reference into this document. |
II-1
EVANS BANCORP, INC./FSB BANCORP, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 2019
(Dollars in thousands, except per share amounts)
EVBN 12/31/2019 (as reported) |
FSB 12/31/2019 (as reported) |
Pro Forma Adj |
Notes | Pro Forma 12/31/2019 Combined |
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ASSETS |
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Cash and cash equivalents |
$ | 38,857 | $ | 7,933 | ($ | 22,367 | ) | (a) | $ | 24,423 | ||||||||||
Investment securities |
133,852 | 23,292 | (89 | ) | (b) | 157,055 | ||||||||||||||
Loans, net of allowance for loan losses |
1,211,356 | 276,702 | 1,014 | (c) | 1,489,072 | |||||||||||||||
Premises and equipment |
13,754 | 2,439 | | 16,193 | ||||||||||||||||
Goodwill |
10,746 | | 1,996 | (d) | 12,724 | |||||||||||||||
Intangible assets |
1,799 | | 1,494 | (e) | 3,293 | |||||||||||||||
Other assets |
49,866 | 12,944 | | 62,810 | ||||||||||||||||
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Total Assets |
$ | 1,460,230 | $ | 323,310 | ($ | 17,952 | ) | $ | 1,765,588 | |||||||||||
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LIABILITIES |
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Deposits |
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Noninterest-bearing |
263,717 | 12,886 | | 276,603 | ||||||||||||||||
Interest-bearing |
1,003,723 | 222,674 | 1,047 | (f) | 1,227,444 | |||||||||||||||
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Total deposits |
1,267,440 | 235,560 | 1,047 | 1,504,047 | ||||||||||||||||
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Other Liabilities |
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Borrowed funds |
12,425 | 51,735 | 549 | (g) | 64,709 | |||||||||||||||
Other liabilities |
31,912 | 4,471 | | 36,383 | ||||||||||||||||
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Total other liabilities |
44,337 | 56,206 | 549 | 101,092 | ||||||||||||||||
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Total liabilities |
1,311,777 | 291,766 | 1,596 | 1,605,139 | ||||||||||||||||
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STOCKHOLDERS EQUITY |
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Preferred stock |
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Common Stock |
2,467 | 19 | (19 | ) | (h) | 2,467 | ||||||||||||||
Capital surplus |
63,302 | 16,081 | 1,215 | (i) | 80,598 | |||||||||||||||
Accumulated other comprehensive income |
(2,583 | ) | (9 | ) | 9 | (j) | (2,583 | ) | ||||||||||||
Retained earnings |
85,267 | 15,699 | (20,999 | ) | (k) | 79,967 | ||||||||||||||
Treasury stock |
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Unearned ESOP shares, at cost |
| (246 | ) | 246 | (l) | | ||||||||||||||
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Total stockholders equity |
148,453 | 31,544 | (19,548 | ) | 160,449 | |||||||||||||||
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Total liabilities and equity |
1,460,230 | 323,310 | (17,952 | ) | 1,765,588 | |||||||||||||||
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Balance Sheet Pro Forma Accounting Adjustments Notes as of December 31, 2019 |
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(a) |
Adjustments to cash and cash equivalents: |
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To reflect the total anticipated after tax merger related costs borne by both Evans and FSB |
$ | (5,300 | ) | |||
To reflect estimated cash consideration |
(17,067 | ) | ||||
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$ | (22,367 | ) | ||||
(b) |
Adjustment to investment securities: |
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To reflect estimated fair value of FSBs held to maturity investment securities |
$ | (89 | ) | |||
(c) |
Adjustments to loans, net: |
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To eliminate FSBs allowance for loan and lease losses |
$ | 1,641 | ||||
To reflect estimated fair value of loan portfolio comprised of a credit mark of $3.6 million and an interest rate mark of $2.4 million |
(1,219 | ) | ||||
To eliminate FSBs deferred loan and lease fees |
592 | |||||
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$ | 1,014 | |||||
(d) |
Adjustment to goodwill: |
To reflect goodwill for amount of consideration paid in excess of fair value of assets received and liabilities assumed |
$ | 1,996 | ||||
(e) |
Adjustment to intangible assets, net: |
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To record fair value estimate of intangible assets specifically identified Core Deposit Intangibles |
$ | 1,494 | ||||
(f) |
Adjustment to interest-bearing deposits: |
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To reflect estimated fair value of FSBs deposits |
$ | 1,047 | ||||
(g) |
Adjustment to borrowed funds: |
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To reflect estimated fair value of FSBs borrowed funds |
$ | 549 | ||||
(h) |
Adjustment to common stock: |
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To eliminate FSB common stock |
$ | (19 | ) | |||
(i) |
Adjustments to additional paid in capital: |
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To eliminate FSBs additional paid in capital |
$ | (16,081 | ) | |||
To reflect issuance of shares of Evans common stock in the merger |
17,122 | |||||
To reflect payment of the stock option awards that fully vest upon closing of the merger |
174 | |||||
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$ | 1,215 | |||||
(j) |
Adjustment to accumulated other comprehensive income: |
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To eliminate FSBs accumulated other comprehensive income |
$ | 9 | ||||
(k) |
Adjustments to retained earnings: |
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To eliminate FSBs retained earnings |
$ | (15,699 | ) | |||
To reflect the total anticipated after tax merger related costs borne by both Evans and FSB |
(5,300 | ) | ||||
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$ | (20,999 | ) | ||||
(l) |
Adjustments to unearned ESOP shares: |
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To reflect the liquidation of the remaining unallocated shares in the ESOP |
$ | 246 |
Preliminary purchase price allocation (in thousands, except per share data) | ||||
Pro forma stock consideration: |
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Shares of FSB common stock outstanding of 1,940,661 as of December 31, 2019 at exchange ratio of 0.4394 |
421 | |||
Price per share, based upon Evans closing price as of December 18, 2019 |
$ | 40.64 | ||
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Total pro forma stock consideration |
17,122 | |||
Cash consideration: |
17,067 | |||
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Total consideration to holders of FSB common stock |
34,190 | |||
Economic value of FSB options (172,080 at weighted average exercise price of $16.79) |
174 | |||
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Total pro forma purchase price |
$ | 34,363 |
12/31/2019 (as reported) |
Pro Forma Adj |
12/31/2019 (as adjusted) |
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ASSETS OF ACQUIRED BANK (FSB) |
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Cash and cash equivalents |
$ | 7,933 | | $ | 7,933 | |||||||
Investment securities |
23,292 | (89 | ) | 23,203 | ||||||||
Loans, net of allowance for loan losses |
276,702 | 1,014 | 277,716 | |||||||||
Premises and equipment |
2,439 | | 2,439 | |||||||||
Goodwill |
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Intangible assets |
| 1,494 | 1,494 | |||||||||
Other assets |
12,944 | | 12,944 | |||||||||
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Total Assets |
$ | 323,310 | $ | 2,419 | $ | 325,729 | ||||||
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LIABILITIES OF ACQUIRED BANK (FSB) |
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Deposits |
235,560 | 1,047 | 236,607 | |||||||||
Other borrowed funds |
51,735 | 549 | 52,284 | |||||||||
Other liabilities |
4,471 | | 4,471 | |||||||||
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Total liabilities assumed |
291,766 | 1,596 | 293,362 | |||||||||
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Net assets acquired |
32,367 | |||||||||||
Preliminary pro forma goodwill |
1,996 |
EVANS BANCORP, INC./FSB BANCORP, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019
(Dollars in thousands, except per share amounts)
EVBN 12/31/2019 (as reported) |
FSB 12/31/2019 (as reported) |
Pro Forma Adj |
Notes | Pro Forma 12/31/2019 Combined |
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INTEREST INCOME |
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Interest and fees on loans |
$ | 60,193 | $ | 12,248 | 813 | (a | ) | $ | 73,254 | |||||||||||
Interest on investment securities |
3,850 | 693 | (13 | ) | (b | ) | 4,530 | |||||||||||||
Other interest income |
697 | 106 | | 803 | ||||||||||||||||
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Total interest income |
$ | 64,760 | $ | 13,047 | $ | 800 | $ | 78,587 | ||||||||||||
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INTEREST EXPENSE |
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Interest on deposits |
11,939 | 3,469 | 209 | (c | ) | 15,617 | ||||||||||||||
Interest on borrowed funds |
746 | 1,468 | 275 | (d | ) | 2,489 | ||||||||||||||
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Total interest expense |
12,685 | 4,937 | 484 | 18,106 | ||||||||||||||||
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Net interest income |
52,055 | 8,110 | 316 | 60,481 | ||||||||||||||||
Provision for loan losses |
75 | 295 | | 370 | ||||||||||||||||
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Net interest income after provision for loan losses |
51,980 | 7,815 | 316 | 60,111 | ||||||||||||||||
NONINTEREST INCOME |
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Service fees |
2,569 | 141 | | 2,710 | ||||||||||||||||
Fee income |
10,688 | 19 | | 10,707 | ||||||||||||||||
Bank owned life insurance |
656 | 58 | | 714 | ||||||||||||||||
Realized gain on sale of loans |
154 | 931 | | 1,085 | ||||||||||||||||
Mortgage fee income |
| 612 | | 612 | ||||||||||||||||
Other |
4,015 | 176 | | 4,191 | ||||||||||||||||
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Total noninterest income |
18,082 | 1,937 | | 20,019 | ||||||||||||||||
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NONINTEREST EXPENSE |
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Salaries, benefits and other compensation |
29,628 | 6,137 | | 35,765 | ||||||||||||||||
Occupancy expense |
3,429 | 1,056 | | 4,485 | ||||||||||||||||
Other operating expense |
14,763 | 3,173 | 149 | (e | ) | 18,085 | ||||||||||||||
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Total noninterest expense |
47,820 | 10,366 | 149 | 58,335 | ||||||||||||||||
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Income before taxes |
22,242 | (614 | ) | 167 | 21,795 | |||||||||||||||
Income tax provision |
5,228 | (101 | ) | 43 | (f | ) | 5,170 | |||||||||||||
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Net income |
17,014 | (513 | ) | 123 | 16,624 | |||||||||||||||
Basic earnings per share |
3.47 | 3.13 | ||||||||||||||||||
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Diluted earnings per share |
3.42 | 3.08 | ||||||||||||||||||
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Weighted average shares outstanding for basic EPS |
4,897,803 | 421,303 | (g | ) | 5,319,106 | |||||||||||||||
Adjusted weighted average shares outstanding for diluted EPS |
4,968,172 | 421,303 | (g | ) | 5,389,475 |
Income Statement Pro Forma Accounting Adjustments Notes for the Twelve Months Ended December 31, 2019 |
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(a) |
Adjustments to interest and fees on loans: |
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To reflect the interest income for accretion on purchased performing acquired loans based on estimated fair market value adjustment |
$ | 813 | ||||
(b) |
Adjustment to interest on investment securities: |
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To reflect the interest income for accretion on purchased performing acquired investments based on estimated fair market value adjustment |
$ | (13 | ) | |||
(c) |
Adjustment to interest on deposit accounts: |
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To reflect amortization of the discount based on estimated fair market value adjustment |
$ | 209 | ||||
(d) |
Adjustment to interest on borrowed funds: |
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To reflect amortization of the discount based on estimated fair market value adjustment |
$ | 275 | ||||
(e) |
Adjustment to amortization of intangible assets: |
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To reflect estimated amortization of core deposit intangibles based on 10 year useful life |
$ | 149 | ||||
(f) |
Adjustment to income taxes: |
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To reflect the tax adjustment related to pro forma adjustments calculated at a 26% rate |
$ | 43 | ||||
(g) |
Adjustment to weighted average shares: |
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To reflect the increase in the weighted average shares in connection with the issuance of shares of Evans common stock in the merger (comprised of 1.94 million shares of FSB at a conversion rate of 0.4394) |
421,303 |