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:
a. | 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. |
b. | Represents estimated future merger related expenses. The total is assumed to be shared equally by Commerce Union and Community First. |
c. | 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. |
d. | 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. |
e. | To adjust Community First’s other real estate to estimated fair value. |
f. | 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. |
g. | 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. |
h. | 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. |
i. | 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. |
j. | 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. |
k. | 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. |
l. | To remove the deficit of Community First and reduce retained earnings for Commerce Union’s share of estimated future merger expenses of $2,250. |
m. | To remove the accumulated other comprehensive loss of Community First. |
n. | 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 |