QuickLinks -- Click here to rapidly navigate through this document
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information and explanatory notes present how the combined financial statements of Eagle Bancorp, Inc. ("Eagle") and Virginia Heritage Bank ("Virginia Heritage") may have appeared had the businesses actually been combined as of the dates indicated. We provide an unaudited pro forma combined balance sheet at June 30, 2014, based upon the actual exchange ratio of 0.6632 and the closing price of Eagle common stock on October 31, 2014 of $35.93. We also provide unaudited pro forma combined income statements for the six months ended June 30, 2014 and the year ended December 31, 2013 based on the actual exchange ratio. The unaudited pro forma combined income statement for the year ended December 31, 2013, and the unaudited pro forma combined income statement for the six months ended June 30, 2014 give effect to the merger as if the merger had been completed on January 1, 2013.
The unaudited pro forma combined financial information shows the impact of the merger on the combined financial position and the results of operations of Eagle and Virginia Heritage under the acquisition method of accounting with Eagle treated as the acquirer. Under this method of accounting, Eagle will record the assets and liabilities of Virginia Heritage at their estimated fair values as of October 31, 2014, the date the merger was completed.
The unaudited pro forma combined financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of Eagle that are included in its Annual Report on Form 10-K for the year ended December 31, 2014 and its Quarterly Report on Form 10-Q for the period ended June 30, 2014, and the historical consolidated financial statements and the related notes of Virginia Heritage that are included in this Current Report on Form 8-K.
The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had Eagle and Virginia Heritage the companies actually been combined at the beginning of the periods presented and had the impact of possible revenue enhancements and expense efficiencies, among other factors, been considered. In addition, as explained in more detail in the accompanying notes to unaudited pro forma combined financial information, the allocation of the purchase price reflected in the unaudited pro forma combined financial information is subject to adjustment and will vary from the actual purchase price allocation that will be recorded.
1
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of June 30, 2014
(dollars in thousands)
| Eagle | Virginia Heritage | Pro Forma Adjustments | | Pro Forma Combined | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||||
Cash and due from banks | $ | 8,602 | $ | 39,475 | $ | (153 | ) | $ | 47,924 | ||||||
Federal funds sold | 9,480 | — | — | 9,480 | |||||||||||
Interest bearing deposits with banks and other short-term investments | 97,400 | — | 25,000 | 122,400 | |||||||||||
Investment securities available for sale, at fair value | 378,990 | 114,256 | — | 493,246 | |||||||||||
Federal Reserve and Federal Home Loan Bank stock | 10,626 | 6,380 | — | 17,006 | |||||||||||
Loans held for sale | 35,411 | 21,471 | — | 56,882 | |||||||||||
Loans | 3,279,429 | 755,137 | (11,871 | ) | Note 3 | 4,022,695 | |||||||||
Less allowance for credit losses | (43,552 | ) | (10,372 | ) | 10,372 | Note 3 | (43,552 | ) | |||||||
| | | | | | | | | | | | | | | |
Loans, net | 3,235,877 | 744,765 | (1,499 | ) | 3,979,143 | ||||||||||
Premises and equipment, net | 17,797 | 1,778 | — | 19,575 | |||||||||||
Deferred income taxes | 25,586 | 4,675 | (283 | ) | 29,978 | ||||||||||
Bank owned life insurance | 40,361 | 15,640 | — | 56,001 | |||||||||||
Goodwill | 2,163 | — | 100,181 | Notes 1, 3 | 102,344 | ||||||||||
Core deposit and other intangibles, net | 955 | — | 5,180 | Notes 1, 3 | 6,135 | ||||||||||
Other real estate owned | 8,843 | 136 | — | 8,979 | |||||||||||
Other assets | 42,353 | 7,109 | (2,117 | ) | 47,345 | ||||||||||
| | | | | | | | | | | | | | | |
TOTAL ASSETS | $ | 3,914,444 | $ | 955,685 | $ | 126,309 | $ | 4,996,438 | |||||||
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
LIABILITIES | |||||||||||||||
Deposits: | |||||||||||||||
Noninterest bearing demand | $ | 945,485 | $ | 193,349 | $ | — | $ | 1,138,834 | |||||||
Interest bearing transaction | 128,415 | 19,941 | — | 148,356 | |||||||||||
Savings and money market | 1,899,430 | 130,598 | — | 2,030,028 | |||||||||||
Time, $100,000 or more | 186,063 | 267,121 | 166 | Note 3 | 453,350 | ||||||||||
Other time | 208,534 | 165,107 | 701 | Note 3 | 374,342 | ||||||||||
| | | | | | | | | | | | | | | |
Total deposits | 3,367,927 | 776,116 | 867 | 4,144,910 | |||||||||||
Customer repurchase agreements | 60,646 | 3,040 | — | 63,686 | |||||||||||
Long-term borrowings | 30,000 | 70,000 | (10 | ) | Note 3 | 99,990 | |||||||||
Subordinated debt | 9,300 | — | 70,000 | Note 5 | 79,300 | ||||||||||
Other liabilities | 19,750 | 3,225 | — | 22,975 | |||||||||||
| | | | | | | | | | | | | | | |
Total liabilities | 3,487,623 | 852,381 | 70,857 | 4,410,861 | |||||||||||
| | | | | | | | | | | | | | | |
SHAREHOLDERS' EQUITY | |||||||||||||||
Preferred stock, par value $0.01 per share, shares authorized 1,000,000; Series B non-cumulative, $1,000 liquidation amount, shares issued and outstanding 56,600 | 56,600 | — | — | 56,600 | |||||||||||
Preferred stock, par value $4.00 per share, shares authorized 5,000,000; Series A non-cumulative, $1,000 liquidation amount, shares issued and outstanding 15,300 | — | 15,300 | — | 15,300 | |||||||||||
Common stock, $0.01 par value; 50,000,000 shares authorized, 25,975,186 shares issued and outstanding, 29,978,323 shares issued and outstanding pro forma combined | 255 | — | 40 | Note 2 | 295 | ||||||||||
Common stock, $4.00 par value; shares authorized 15,000,000, 6,020,301 shares issued and outstanding | — | 24,081 | (24,081 | ) | Note 2 | — | |||||||||
Warrant | 946 | — | — | 946 | |||||||||||
Additional paid in capital | 245,629 | 41,517 | 101,899 | Note 2 | 389,045 | ||||||||||
Retained earnings | 121,553 | 23,984 | (23,984 | ) | Note 2 | 121,553 | |||||||||
Accumulated other comprehensive loss | 1,838 | (1,578 | ) | 1,578 | Note 2 | 1,838 | |||||||||
| | | | | | | | | | | | | | | |
Total shareholders' equity | 426,821 | 103,304 | 55,452 | 585,577 | |||||||||||
| | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 3,914,444 | $ | 955,685 | $ | 126,309 | $ | 4,996,438 | |||||||
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
2
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
For the Six Months Ended June 30, 2014
(dollars in thousands)
| Eagle | Virginia Heritage | Pro Forma Adjustments | | Pro Forma Combined | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest Income | |||||||||||||||
Interest and fees on loans | $ | 82,679 | $ | 17,170 | $ | 187 | Note 3 | $ | 100,036 | ||||||
Interest and dividends on investment securities | 4,656 | 1,379 | — | 6,035 | |||||||||||
Interest on balances with other banks and depository institutions | 254 | 30 | — | 284 | |||||||||||
Interest on federal funds sold | 7 | — | — | 7 | |||||||||||
| | | | | | | | | | | | | | | |
Total interest income | 87,596 | 18,579 | 187 | 106,362 | |||||||||||
| | | | | | | | | | | | | | | |
Interest Expense | |||||||||||||||
Interest on deposits | 4,736 | 2,375 | (325 | ) | Note 3 | 6,786 | |||||||||
Interest on customer repurchase agreements and federal funds purchased | 69 | 5 | — | 74 | |||||||||||
Interest on long-term borrowings | 764 | 270 | 2 | Note 3 | 1,036 | ||||||||||
| | | | | | | | | | | | | | | |
Total interest expense | 5,569 | 2,650 | (323 | ) | 7,896 | ||||||||||
| | | | | | | | | | | | | | | |
Net Interest Income | 82,027 | 15,929 | 510 | 98,466 | |||||||||||
Provision for Credit Losses | 5,068 | 760 | — | 5,828 | |||||||||||
| | | | | | | | | | | | | | | |
Net Interest Income After Provision For Credit Losses | 76,959 | 15,169 | 510 | 92,638 | |||||||||||
| | | | | | | | | | | | | | | |
Noninterest Income | |||||||||||||||
Service charges on deposits | 2,411 | 334 | — | 2,745 | |||||||||||
Gain on sale of loans | 2,864 | 2,560 | — | 5,424 | |||||||||||
Gain (loss) on sale of investment securities | 10 | (189 | ) | — | (179 | ) | |||||||||
Increase in surrender value of bank owned life insurance | 624 | — | — | 624 | |||||||||||
Other income | 2,365 | 796 | — | 3,161 | |||||||||||
| | | | | | | | | | | | | | | |
Total noninterest income | 8,274 | 3,501 | — | 11,775 | |||||||||||
| | | | | | | | | | | | | | | |
Noninterest Expense | |||||||||||||||
Salaries and employee benefits | 26,623 | 6,741 | — | 33,364 | |||||||||||
Premises and equipment expenses | 6,196 | 1,257 | — | 7,453 | |||||||||||
Marketing and advertising | 877 | 97 | — | 974 | |||||||||||
Data processing | 3,020 | 762 | — | 3,782 | |||||||||||
Legal, accounting and professional fees | 1,773 | 754 | — | 2,527 | |||||||||||
FDIC Insurance | 1,107 | 241 | — | 1,348 | |||||||||||
Other expenses | 5,637 | 2,130 | — | 7,767 | |||||||||||
Amortization of intangible | — | — | 539 | Note 3 | 539 | ||||||||||
| | | | | | | | | | | | | | | |
Total noninterest expense | 45,233 | 11,982 | 539 | 57,754 | |||||||||||
| | | | | | | | | | | | | | | |
Income Before Income Tax Expense | 40,000 | 6,688 | (29 | ) | 46,659 | ||||||||||
Income Tax Expense | 14,557 | 2,402 | (12 | ) | 16,947 | ||||||||||
| | | | | | | | | | | | | | | |
Net Income | 25,443 | 4,286 | (17 | ) | 29,712 | ||||||||||
Preferred Stock Dividends | 283 | 76 | — | 359 | |||||||||||
| | | | | | | | | | | | | | | |
Net Income Available to Common Shareholders | $ | 25,160 | $ | 4,210 | $ | (17 | ) | $ | 29,353 | ||||||
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Earnings Per Share | |||||||||||||||
Basic | $ | 0.97 | $ | 0.70 | — | $ | 0.98 | ||||||||
Diluted | $ | 0.95 | $ | 0.68 | — | $ | 0.95 | ||||||||
Weighted Average Shares Outstanding—Basic | 25,954,912 | 6,016,572 | (2,023,908 | ) | 29,947,576 | ||||||||||
Weighted Average Shares Outstanding—Diluted | 26,599,594 | 6,231,350 | (2,000,159 | ) | 30,830,785 |
3
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
For the Year Ended December 31, 2013
(dollars in thousands)
| Eagle | Virginia Heritage | Pro Forma Adjustments | | Pro Forma Combined | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest Income | |||||||||||||||
Interest and fees on loans | $ | 148,801 | $ | 31,453 | $ | 375 | Note 3 | $ | 180,629 | ||||||
Interest and dividends on investment securities | 7,792 | 2,430 | — | 10,222 | |||||||||||
Interest on balances with other banks and other depository institutions | 689 | 54 | — | 743 | |||||||||||
Interest on federal funds sold | 12 | — | — | 12 | |||||||||||
| | | | | | | | | | | | | | | |
Total interest income | 157,294 | 33,937 | 375 | 191,606 | |||||||||||
| | | | | | | | | | | | | | | |
Interest Expense | |||||||||||||||
Interest on deposits | 10,614 | 4,906 | (650 | ) | Note 3 | 14,870 | |||||||||
Interest on customer repurchase agreements and federal funds purchased | 254 | 12 | — | 266 | |||||||||||
Interest on long-term borrowings | 1,636 | 322 | 3 | Note 3 | 1,961 | ||||||||||
| | | | | | | | | | | | | | | |
Total interest expense | 12,504 | 5,240 | (647 | ) | 17,097 | ||||||||||
| | | | | | | | | | | | | | | |
Net Interest Income | 144,790 | 28,697 | 1,022 | 174,509 | |||||||||||
Provision for Credit Losses | 9,602 | 1,764 | — | 11,366 | |||||||||||
| | | | | | | | | | | | | | | |
Net Interest Income After Provision For Credit Losses | 135,188 | 26,933 | 1,022 | 163,143 | |||||||||||
| | | | | | | | | | | | | | | |
Noninterest Income | |||||||||||||||
Service charges on deposits | 4,607 | 652 | — | 5,259 | |||||||||||
Gain on sale of loans | 14,578 | 7,919 | — | 22,497 | |||||||||||
Gain on sale of investment securities | 19 | 557 | — | 576 | |||||||||||
Increase in surrender value of bank owned life insurance | 720 | 229 | — | 949 | |||||||||||
Other income | 4,792 | 1,319 | — | 6,111 | |||||||||||
| | | | | | | | | | | | | | | |
Total noninterest income | 24,716 | 10,676 | — | 35,392 | |||||||||||
| | | | | | | | | | | | | | | |
Noninterest Expense | |||||||||||||||
Salaries and employee benefits | 47,481 | 14,277 | — | 61,758 | |||||||||||
Premises and equipment expenses | 11,923 | 2,414 | — | 14,337 | |||||||||||
Marketing and advertising | 1,686 | 259 | — | 1,945 | |||||||||||
Data processing | 5,903 | 1,403 | — | 7,306 | |||||||||||
Legal, accounting and professional fees | 3,449 | 615 | — | 4,064 | |||||||||||
FDIC Insurance | 2,263 | 514 | — | 2,777 | |||||||||||
Other expenses | 11,874 | 4,781 | — | 16,655 | |||||||||||
Amortization of intangible | — | — | 1,078 | Note 3 | 1,078 | ||||||||||
| | | | | | | | | | | | | | | |
Total noninterest expense | 84,579 | 24,263 | 1,078 | 109,920 | |||||||||||
| | | | | | | | | | | | | | | |
Income Before Income Tax Expense | 75,325 | 13,346 | (56 | ) | 88,615 | ||||||||||
Income Tax Expense | 28,318 | 4,346 | (22 | ) | 32,642 | ||||||||||
| | | | | | | | | | | | | | | |
Net Income | 47,007 | 9,000 | (34 | ) | 55,973 | ||||||||||
Preferred Stock Dividends | 566 | 153 | — | 719 | |||||||||||
| | | | | | | | | | | | | | | |
Net Income Available to Common Shareholders | $ | 46,441 | $ | 8,847 | $ | (34 | ) | $ | 55,254 | ||||||
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Earnings Per Share | |||||||||||||||
Basic | $ | 1.81 | $ | 1.70 | — | $ | 1.86 | ||||||||
Diluted | $ | 1.76 | $ | 1.65 | — | $ | 1.81 | ||||||||
Weighted Average Shares Outstanding—Basic | 25,726,062 | 5,217,531 | (1,224,867 | ) | 29,718,726 | ||||||||||
Weighted Average Shares Outstanding—Diluted | 26,358,611 | 5,359,521 | (1,128,330 | ) | 30,589,802 |
4
EAGLE BANCORP, INC. ("Eagle") AND VIRGINIA HERITAGE BANK ("Virginia Heritage")
Notes to Unaudited Pro Forma Combined Consolidated Financial Statements
Note 1. Basis of Presentation:
The merger will be accounted for as an acquisition by Eagle of Virginia Heritage using the acquisition accounting method under ASC 805 and, accordingly, the assets and liabilities of Virginia Heritage will be recorded at their respective fair values on the date the merger is completed.
The merger will be effected by the issuance of 0.6632 shares of Eagle common stock, $.01 par value, and $7.50 in cash to Virginia Heritage shareholders for each share of Virginia Heritage common stock. This pro forma analysis values the shares of Eagle common stock issued in the merger at $35.93 per share, the closing price of Eagle common stock on October 31, 2014, the date of consummation of the merger, and the actual exchange ratio of 0.6632 shares of Eagle common stock. The aggregate purchase price of Virginia Heritage's common stock is $188.6 million, based on the number of shares of Virginia Heritage common stock outstanding on June 30, 2014, excluding options with an inherent value of $9.1 million.
The unaudited pro forma combined financial statements include estimated adjustments to record assets and liabilities of Virginia Heritage at their respective fair values. The pro forma adjustments included herein are subject to change as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and additional analyses are performed to determine the fair values of Virginia Heritage's tangible and identifiable intangible assets and liabilities as of the closing date of the merger. Changes in the fair value of the net assets of Virginia Heritage as of the closing date of the merger will likely change the amount of purchase price allocable to goodwill. The further refinement of transaction costs, changes in Virginia Heritage's shareholders' equity, including net income, asset valuations and other items identified in the merger agreement, between June 30, 2014 and October 31, 2014 will further impact the amount of the purchase price and any excess purchase price recorded, as compared to this pro forma analysis. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein.
The unaudited pro forma combined balance sheet assumes that the merger occurred on that date. The unaudited pro forma combined income statements for the six months ended June 30, 2014 and the twelve months ended December 31, 2013 assume the transaction occurred at the beginning of each period.
The unaudited pro forma combined information is not necessarily indicative of the results of operations or the combined financial position that would have resulted had the merger been completed at the beginning of the applicable periods presented, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined company.
Note 2. Adjustments to Equity:
The unaudited pro forma combined financial information reflects the issuance of 3,992,664 shares of Eagle common stock. The actual number of shares issuable is subject to change as a result of the elimination of fractional shares and the exercise of options to acquire shares of Virginia Heritage
5
EAGLE BANCORP, INC. ("Eagle") AND VIRGINIA HERITAGE BANK ("Virginia Heritage")
Notes to Unaudited Pro Forma Combined Consolidated Financial Statements (Continued)
Note 2. Adjustments to Equity: (Continued)
common stock prior to the effectiveness of the merger. The table below provides the calculation of the number of shares issued:
Shares of Virginia Heritage common stock outstanding | 6,020,3010 | |||
Exchange ratio | 0.6632 | |||
| | | | |
Eagle Bancorp common stock issued | 3,992,664 | |||
| | | | |
| | | | |
The unaudited pro forma combined financial statements include adjustments to shareholders' equity for the elimination of Virginia Heritage's common stock of $24.1 million, accumulated other comprehensive loss of $1.6 million and retained earnings of $24.0 million. All of these amounts have been reclassified into additional paid in capital.
The following table provides the calculation of the number of shares issued and unaudited pro forma adjustments to shareholders' equity.
Pro Forma Adjustments to Shareholders' Equity | |||||||
Purchase Price: | |||||||
Shares of Eagle common stock issued | 3,992,664 | ||||||
Eagle par value | $ | 0.01 | 39,927 | ||||
| | | | | | | |
Less Virginia Heritage's common stock | (24,081,000 | ) | |||||
| | | | | | | |
Common stock adjustment | (24,041,073 | ) | |||||
| | | | | | | |
Additional paid in capital adjustment | |||||||
Purchase price—Virginia Heritage's common stock (Note 3) | 188,608,676 | ||||||
Less: Cash consideration | (45,152,258 | ) | |||||
Less: Eagle common stock issued | (39,927 | ) | |||||
Purchase price—estimated fair value of Virginia Heritage's additional paid in capital | (41,517,000 | ) | |||||
| | | | | | | |
Additional paid in capital adjustment | 101,899,491 | ||||||
| | | | | | | |
Retained earnings adjustment—Virginia Heritage | (23,984,000 | ) | |||||
Elimination of Virginia Heritage's accumulated other comprehensive loss | 1,578,000 | ||||||
| | | | | | | |
Total shareholders' equity adjustment | 55,452,417 | ||||||
| | | | | | | |
| | | | | | | |
6
EAGLE BANCORP, INC. ("Eagle") AND VIRGINIA HERITAGE BANK ("Virginia Heritage")
Notes to Unaudited Pro Forma Combined Consolidated Financial Statements (Continued)
Note 3. Acquisition Accounting Adjustments:
The acquisition accounting adjustments included in the unaudited pro forma balance sheet include the following.
Loan premiums (yield adjustment) | $ | 111,901 | (average life of 48 months) | ||
Credit quality fair value adjustment on loans | $ | (11,983,295 | ) | ||
Eliminate existing allowance for credit losses | $ | 10,372,000 | |||
Eliminate exiting dealer reserve for indirect auto loans | $ | (2,117,137 | ) | ||
Core deposit intangible | $ | 5,180,468 | (average life of 46 months) | ||
Long-term borrowings premiums (yield adjustment) | $ | 10,000 | (average life of 48 months) | ||
Total time deposits discounts (yield adjustment) | $ | (867,000 | ) | (average life of 18 months) | |
Deferred income tax liability (at 40% rate) | $ | (282,830 | ) |
The adjustments recorded for these assets and liabilities on the closing date of the merger could vary significantly from the unaudited pro forma adjustments included herein depending on changes in interest rates and the components of the assets and liabilities, including credit quality. Virginia Heritage had no previous unamortized purchase or acquisition adjustments.
7
EAGLE BANCORP, INC. ("Eagle") AND VIRGINIA HERITAGE BANK ("Virginia Heritage")
Notes to Unaudited Pro Forma Combined Consolidated Financial Statements (Continued)
Note 3. Acquisition Accounting Adjustments: (Continued)
The table below identifies all unaudited pro forma adjustments as well as the unidentified intangible recorded as Goodwill.
Purchase Price: | |||||||
Virginia Heritage common shares outstanding | 6,020,301 | ||||||
Exchange ratio | 0.6632 | ||||||
| | | | | | | |
Eagle Bancorp common shares issued excluding options | 3,992,664 | ||||||
Total consideration per Virginia Heritage common share | $ | 31.33 | |||||
Stock portion of purchase price of Virginia Heritage common shares (3,992,664 shares of Eagle common stock X $35.93 per share) | 143,456,418 | ||||||
Cash Consideration | 45,152,258 | ||||||
| | | | | | | |
Purchase price | 188,608,676 | ||||||
Net Assets Acquired: | |||||||
Virginia Heritage common shareholders' equity | 88,004,000 | ||||||
| | | | | | | |
Excess of purchase price over carrying value of net assets acquired | $ | 100,604,676 | |||||
Estimated (debit) credit adjustments to reflect fair value of assets acquired and liabilities assumed: | |||||||
Estimated core deposit intangible | |||||||
Virginia Heritage's core deposits | 508,996,041 | ||||||
Premium rate | 1.02 | % | |||||
| | | | | | | |
(5,180,468 | ) | ||||||
Fair value adjustment on loan yields | (111,901 | ) | |||||
Credit quality fair value adjustment on loans | 11,983,295 | ||||||
Eliminate existing allowance for credit losses | (10,372,000 | ) | |||||
Eliminate existing dealer reserve for indirect auto loans | 2,117,137 | ||||||
Fair value adjustment on total time deposits | 867,000 | ||||||
Fair value adjustment on long-term borrowings | (10,000 | ) | |||||
Deferred income tax liability (at 40% rate) | 282,830 | ||||||
| | | | | | | |
Goodwill | $ | 100,180,569 | |||||
| | | | | | | |
| | | | | | | |
Note 4. Direct Transaction Costs:
The plan to integrate Eagle and Virginia Heritage is in the process of implementation and is being refined. Eagle and Virginia Heritage have incurred merger related expenses, and Eagle expects to continue to incur merger related expenses, including system conversion costs, employee retention and severance agreements, communications to customers and others. To the extent these are costs associated with these actions, the costs will be recorded based on the nature and timing of these actions. Most acquisition and restructuring costs are recognized separately and generally expensed as incurred. We estimate the pre-tax merger related costs to be approximately 5.7% of the purchase price, or $10.4 million, and expect these costs to be incurred in 2014. These estimated costs are not included in the accompanying unaudited pro forma combined financial statements.
8
EAGLE BANCORP, INC. ("Eagle") AND VIRGINIA HERITAGE BANK ("Virginia Heritage")
Notes to Unaudited Pro Forma Combined Consolidated Financial Statements (Continued)
Note 5. Subordinated Debt:
The unaudited pro forma presentation at June 30, 2014 reflects the sale on August 5, 2014 of $70.0 million of Eagle's noncallable 5.75% subordinated notes, due September 1, 2024. The notes qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the currently applicable capital regulations. It is anticipated that the notes will continue to qualify for Tier 2 capital treatment upon implementation of recently adopted Basel III capital requirements.
9
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET As of June 30, 2014 (dollars in thousands)
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT For the Six Months Ended June 30, 2014 (dollars in thousands)
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT For the Year Ended December 31, 2013 (dollars in thousands)
EAGLE BANCORP, INC. ("Eagle") AND VIRGINIA HERITAGE BANK ("Virginia Heritage") Notes to Unaudited Pro Forma Combined Consolidated Financial Statements