UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Since January 1, 2018, Ameris Bancorp (“Ameris” or the “Company”) completed four acquisitions: US Premium Finance Holding Company, Atlantic Coast Financial Corporation, Hamilton State Bancshares, Inc. and Fidelity Southern Corporation.
US Premium Finance Holding Company (“USPF”)
On January 31, 2018, the Company purchased the final 70% of the outstanding shares of common stock of USPF, completing its acquisition of USPF and making USPF a wholly owned subsidiary of the Company. Through a series of three acquisition transactions that closed on January 18, 2017, January 3, 2018 and January 31, 2018, the Company issued a total of 1,073,158 shares of Ameris common stock at a fair value of $55.9 million and paid $21.4 million in cash to the former shareholders of USPF. Pursuant to the terms of the stock purchase agreement under which the Company purchased the final 70% of the outstanding shares of common stock of USPF, the selling shareholders of USPF could receive additional cash payments aggregating up to $5.8 million based on the achievement by the Company's premium finance division of certain income targets, between January 1, 2018 and June 30, 2019. The total contingent consideration paid was $1.2 million based on results achieved through the applicable measurement dates. As of the January 31, 2018 acquisition date, the present value of the contingent earn-out consideration expected to be paid was $5.7 million, and including the fair value of the Ameris common stock issued, cash paid and the present value of the contingent earn-out consideration expected to be paid, the aggregate purchase price of USPF amounted to $83.0 million. The acquisition of USPF did not constitute a business acquisition at a significance level requiring the filing of financial statements as contemplated by Rule 3-05 of Regulation S-X.
Atlantic Coast Financial Corporation (“Atlantic”)
On May 25, 2018, the Company acquired Atlantic through the merger of Atlantic with and into the Company, with Ameris as the surviving entity in the merger. At that time, Atlantic's wholly owned banking subsidiary, Atlantic Coast Bank, also merged with and into Ameris’s wholly owned banking subsidiary, Ameris Bank. The acquisition expanded the Company's existing market presence, as Atlantic Coast Bank had a total of 12 full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida, Waycross, Georgia and Douglas, Georgia. Under the terms of the merger agreement, Atlantic's shareholders received 0.17 shares of Ameris common stock and $1.39 in cash for each share of Atlantic common stock they previously held. As a result, the Company issued 2,631,520 common shares at a fair value of $147.8 million and paid $21.5 million in cash to Atlantic's shareholders as merger consideration. The merger with Atlantic did not constitute a business acquisition at a significance level requiring the filing of financial statements as contemplated by Rule 3-05 of Regulation S-X.
Hamilton State Bancshares, Inc. (“Hamilton”)
On June 29, 2018, the Company acquired Hamilton through the merger of Hamilton with and into the Company, with Ameris as the surviving entity in the merger. At that time, Hamilton's wholly owned banking subsidiary, Hamilton State Bank, also merged with and into Ameris Bank. The acquisition expanded the Company's existing market presence, as Hamilton State Bank had a total of 28 full-service branches located in Atlanta, Georgia and the surrounding area as well as in Gainesville, Georgia. Under the terms of the merger agreement, Hamilton's shareholders received 0.16 shares of Ameris common stock and $0.93 in cash for each share of Hamilton voting common stock or nonvoting common stock they previously held. As a result, the Company issued 6,548,385 common shares at a fair value of $349.4 million and paid $47.8 million in cash to Hamilton's shareholders as merger consideration.
Fidelity Southern Corporation (“Fidelity”)
On July 1, 2019, the Company acquired Fidelity through the merger of Fidelity with and into the Company, with Ameris as the surviving entity in the merger. At that time, Fidelity's wholly owned banking subsidiary, Fidelity Bank, also merged with and into Ameris Bank. The acquisition expanded the Company's existing market presence in Georgia and Florida, as Fidelity Bank had a total of 62 branches, 46 of which were located in Georgia and 16 of which were located in Florida. Under the terms of the merger agreement, Fidelity's shareholders received 0.80 shares of Ameris common stock for each share of Fidelity common stock they previously held. As a result, the Company issued 22,181,522 common shares at a fair value of $869.3 million to Fidelity's shareholders as merger consideration.
The following unaudited pro forma combined condensed financial information and accompanying notes have been prepared to illustrate the effects of the merger of Fidelity with and into Ameris under the acquisition method of accounting and show the impact on the historical financial condition and results of operations of Ameris and Fidelity.
The unaudited pro forma combined condensed balance sheet as of June 30, 2019, is presented as if the Fidelity acquisition had occurred on June 30, 2019. The unaudited pro forma combined condensed income statements for the six months ended June 30, 2019 and for the year ended December 31, 2018, are presented as if the USPF, Atlantic, Hamilton and Fidelity acquisitions had occurred on January 1, 2018. The historical combined condensed financial information has been adjusted to reflect factually supportable items that are directly attributable to the USPF, Atlantic, Hamilton and Fidelity acquisitions and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.
The unaudited pro forma combined condensed financial information is provided for informational purposes only. The unaudited pro forma combined condensed financial information is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transactions been completed as of the dates indicated above or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed financial information and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed financial information should be read together with:
• | the accompanying notes to the unaudited pro forma combined condensed financial information; |
• | Ameris’s audited consolidated financial statements and accompanying notes, included in Ameris’s Annual Report on Form 10-K for the year ended December 31, 2018; |
• | Fidelity’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2018 and 2017, attached as Exhibit 99.2 to this Current Report on Form 8-K/A; |
• | Ameris’s unaudited consolidated financial statements and accompanying notes as of and for the three and six months ended June 30, 2019, included in Ameris’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019; and |
• | Fidelity’s unaudited consolidated financial statements and accompanying notes as of and for the three and six months ended June 30, 2019, attached as Exhibit 99.3 to this Current Report on Form 8-K/A. |
Unaudited Pro Forma Combined Condensed Balance Sheet | ||||||||||||||||
As of June 30, 2019 | ||||||||||||||||
(In thousands) | ||||||||||||||||
Ameris As Reported | Fidelity As Reported | Fidelity Pro Forma Adjustments | Ameris Pro Forma Total Consolidated | |||||||||||||
Assets | ||||||||||||||||
Cash and due from banks | $ | 151,186 | $ | 26,264 | $ | (19 | ) | A | $ | 177,431 | ||||||
Federal funds sold and interest-bearing deposits in banks | 186,969 | 217,936 | — | 404,905 | ||||||||||||
Time deposits in other banks | 748 | — | — | 748 | ||||||||||||
Investment securities available for sale, at fair value | 1,273,244 | 279,746 | 19,703 | B | 1,572,693 | |||||||||||
Investment securities held to maturity, at amortized cost | — | 19,595 | (19,595 | ) | C | — | ||||||||||
Other investments | 32,481 | 7,449 | — | 39,930 | ||||||||||||
Loans held for sale | 261,073 | 328,657 | — | 589,730 | ||||||||||||
— | ||||||||||||||||
Loans held for investment | 9,049,870 | 3,587,412 | (67,396 | ) | D | 12,569,886 | ||||||||||
Less allowance for loan losses | (31,793 | ) | (31,245 | ) | 31,245 | E | (31,793 | ) | ||||||||
Loans held for investment, net | 9,018,077 | 3,556,167 | (36,151 | ) | 12,538,093 | |||||||||||
Other real estate owned, net | 14,675 | 7,605 | (1,191 | ) | F | 21,089 | ||||||||||
Premises and equipment, net | 141,378 | 93,662 | 30,900 | G | 265,940 | |||||||||||
Goodwill | 501,140 | 5,164 | 399,217 | H | 905,521 | |||||||||||
Other intangible assets, net | 52,437 | 5,506 | 45,104 | I | 103,047 | |||||||||||
Cash value of bank owned life insurance | 105,064 | 72,328 | — | 177,392 | ||||||||||||
Deferred income taxes, net | 30,812 | 104 | (23,000 | ) | J | 7,916 | ||||||||||
Other assets | 120,052 | 157,863 | — | 277,915 | ||||||||||||
Total assets | $ | 11,889,336 | $ | 4,778,046 | $ | 414,968 | $ | 17,082,350 | ||||||||
Liabilities | ||||||||||||||||
Deposits: | ||||||||||||||||
Noninterest-bearing | $ | 2,771,443 | $ | 1,301,829 | $ | — | $ | 4,073,272 | ||||||||
Interest-bearing | 6,810,927 | 2,740,552 | (699 | ) | K | 9,550,780 | ||||||||||
Total deposits | 9,582,370 | 4,042,381 | (699 | ) | 13,624,052 | |||||||||||
Securities sold under agreements to repurchase | 3,307 | 22,345 | — | 25,652 | ||||||||||||
Other borrowings | 564,636 | 149,367 | 1,333 | L | 715,336 | |||||||||||
Subordinated deferrable interest debentures | 89,871 | 46,393 | (9,675 | ) | M | 126,589 | ||||||||||
FDIC loss-share payable, net | 20,596 | — | — | 20,596 | ||||||||||||
Deferred tax liability, net | — | 12,222 | (12,222 | ) | N | — | ||||||||||
Other liabilities | 91,435 | 65,027 | 156,462 | |||||||||||||
Total liabilities | 10,352,215 | 4,337,735 | (21,263 | ) | 14,668,687 | |||||||||||
Shareholders’ Equity | ||||||||||||||||
Preferred stock | — | — | — | — | ||||||||||||
Common stock | 49,099 | 209,852 | (187,670 | ) | O | 71,281 | ||||||||||
Capital surplus | 1,053,500 | 35,089 | 819,271 | P | 1,907,860 | |||||||||||
Retained earnings | 446,182 | 188,144 | (188,144 | ) | Q | 446,182 | ||||||||||
Accumulated other comprehensive income, net of tax | 16,462 | 7,226 | (7,226 | ) | R | 16,462 | ||||||||||
Treasury stock, at cost | (28,122 | ) | — | — | (28,122 | ) | ||||||||||
Total shareholders’ equity | 1,537,121 | 440,311 | 436,231 | 2,413,663 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 11,889,336 | $ | 4,778,046 | $ | 414,968 | $ | 17,082,350 |
Unaudited Pro Forma Combined Condensed Income Statement | ||||||||||||||||
For the six months ended June 30, 2019 | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
Ameris as Reported | Fidelity as Reported | Fidelity Pro Forma Adjustments | Ameris Pro Forma Total Consolidated | |||||||||||||
Interest income | ||||||||||||||||
Interest and fees on loans | $ | 229,411 | $ | 88,495 | $ | 2,886 | S | $ | 320,792 | |||||||
Interest on taxable securities | 18,426 | 4,769 | — | 23,195 | ||||||||||||
Interest on nontaxable securities | 258 | 161 | — | 419 | ||||||||||||
Interest on deposits in other banks | 5,426 | 1,477 | — | 6,903 | ||||||||||||
Interest on federal funds sold | 436 | 69 | — | 505 | ||||||||||||
Total interest income | 253,957 | 94,971 | 2,886 | 351,814 | ||||||||||||
Interest expense | ||||||||||||||||
Interest on deposits | 45,138 | 13,168 | (116 | ) | T | 58,190 | ||||||||||
Interest on other borrowings | 7,773 | 5,008 | 225 | U | 13,006 | |||||||||||
Total interest expense | 52,911 | 18,176 | 109 | 71,196 | ||||||||||||
Net interest income | 201,046 | 76,795 | 2,777 | 280,618 | ||||||||||||
Provision for loan losses | 8,076 | 3,078 | — | 11,154 | ||||||||||||
Net interest income after provision for loan losses | 192,970 | 73,717 | 2,777 | 269,464 | ||||||||||||
Noninterest income | ||||||||||||||||
Service charges on deposit accounts | 23,814 | 3,610 | — | 27,424 | ||||||||||||
Mortgage banking activity | 33,200 | 38,470 | — | 71,670 | ||||||||||||
Other service charges, commissions and fees | 1,561 | 4,853 | — | 6,414 | ||||||||||||
Net gain (loss) on securities | 135 | — | — | 135 | ||||||||||||
Gain on sale of SBA loans | 2,476 | 1,996 | — | 4,472 | ||||||||||||
Other noninterest income | 4,821 | (391 | ) | — | 4,430 | |||||||||||
Total noninterest income | 66,007 | 48,538 | — | 114,545 | ||||||||||||
Noninterest expense | ||||||||||||||||
Salaries and employee benefits | 76,811 | 71,067 | — | 147,878 | ||||||||||||
Occupancy and equipment | 16,038 | 6,824 | 432 | V | 23,294 | |||||||||||
Data processing and communications expenses | 16,779 | 10,552 | — | 27,331 | ||||||||||||
Legal and other professional fees | 4,008 | 2,066 | — | 6,074 | ||||||||||||
Credit resolution-related expenses | 1,890 | 837 | — | 2,727 | ||||||||||||
Advertising and marketing | 3,728 | 1,305 | — | 5,033 | ||||||||||||
Amortization of intangible assets | 6,253 | 527 | 2,004 | W | 8,784 | |||||||||||
FDIC insurance | 1,631 | 2,238 | — | 3,869 | ||||||||||||
Merger and conversion charges | 5,532 | 31,661 | — | 37,193 | ||||||||||||
Other noninterest expenses | 24,006 | 15,604 | — | 39,610 | ||||||||||||
Total noninterest expense | 156,676 | 142,681 | 2,436 | 301,793 | ||||||||||||
Income before income tax expense | 102,301 | (20,426 | ) | 341 | 82,216 | |||||||||||
Income tax expense | 23,492 | (5,271 | ) | 72 | X | 18,293 | ||||||||||
Net income | 78,809 | (15,155 | ) | 269 | 63,923 | |||||||||||
Basic earnings per common share | $ | 1.66 | $ | (0.55 | ) | $ | 0.92 | |||||||||
Diluted earnings per common share | $ | 1.66 | $ | (0.55 | ) | $ | 0.92 | |||||||||
Weighted average common shares outstanding (in thousands) | ||||||||||||||||
Basic | 47,354 | 27,584 | 69,536 | |||||||||||||
Diluted | 47,395 | 27,584 | 69,737 |
Unaudited Pro Forma Combined Condensed Income Statement | |||||||||||||||||||||||||||||||||||||||
For the year ended December 31, 2018 | |||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||||||||||||||||||||||||||
Ameris as Reported | USPF Pro Forma Adjustments | Atlantic As Reported | Atlantic Pro Forma Adjustments | Hamilton as Reported | Hamilton Pro Forma Adjustments | Fidelity as Reported | Fidelity Pro Forma Adjustments | Ameris Pro Forma Total Consolidated | |||||||||||||||||||||||||||||||
Interest income | |||||||||||||||||||||||||||||||||||||||
Interest and fees on loans | $ | 378,209 | $ | — | $ | 8,846 | $ | 445 | BB | $ | 17,657 | $ | 690 | EE | $ | 172,673 | $ | 5,771 | S | $ | 584,291 | ||||||||||||||||||
Interest on taxable securities | 29,006 | — | 265 | — | 1,488 | — | 5,991 | — | 36,750 | ||||||||||||||||||||||||||||||
Interest on nontaxable securities | 900 | — | 29 | — | 40 | — | 326 | — | 1,295 | ||||||||||||||||||||||||||||||
Interest on deposits in other banks | 4,984 | — | 114 | — | 426 | — | 1,945 | — | 7,469 | ||||||||||||||||||||||||||||||
Interest on federal funds sold | 227 | — | — | — | 11 | — | 510 | — | 748 | ||||||||||||||||||||||||||||||
Total interest income | 413,326 | — | 9,254 | 445 | 19,622 | 690 | 181,445 | 5,771 | 630,553 | ||||||||||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||||||||||||||||||
Interest on deposits | 49,054 | — | 1,438 | — | 1,513 | 242 | FF | 20,849 | (182 | ) | T | 72,914 | |||||||||||||||||||||||||||
Interest on other borrowings | 20,880 | — | 688 | — | 102 | 41 | GG | 11,051 | 451 | U | 33,213 | ||||||||||||||||||||||||||||
Total interest expense | 69,934 | — | 2,126 | — | 1,615 | 283 | 31,900 | 269 | 106,127 | ||||||||||||||||||||||||||||||
Net interest income | 343,392 | — | 7,128 | 445 | 18,007 | 407 | 149,545 | 5,502 | 524,426 | ||||||||||||||||||||||||||||||
Provision for loan losses | 16,667 | — | 168 | — | (87 | ) | — | 5,521 | — | 22,269 | |||||||||||||||||||||||||||||
Net interest income after provision for loan losses | 326,725 | — | 6,960 | 445 | 18,094 | 407 | 144,024 | 5,502 | 502,157 | ||||||||||||||||||||||||||||||
Noninterest income | |||||||||||||||||||||||||||||||||||||||
Service charges on deposit accounts | 46,128 | — | 727 | — | 952 | — | 6,427 | — | 54,234 | ||||||||||||||||||||||||||||||
Mortgage banking activity | 51,292 | — | — | — | 164 | — | 103,077 | — | 154,533 | ||||||||||||||||||||||||||||||
Other service charges, commissions and fees | 3,003 | — | 19 | — | 729 | — | 9,522 | — | 13,273 | ||||||||||||||||||||||||||||||
Net gain (loss) on securities | (37 | ) | — | — | — | (3 | ) | — | — | — | (40 | ) | |||||||||||||||||||||||||||
Gain on sale of SBA loans | 2,728 | — | — | — | — | — | 6,728 | — | 9,456 | ||||||||||||||||||||||||||||||
Other noninterest income | 15,298 | — | 490 | — | 39 | — | 13,097 | — | 28,924 | ||||||||||||||||||||||||||||||
Total noninterest income | 118,412 | — | 1,236 | — | 1,881 | — | 138,851 | — | 260,380 | ||||||||||||||||||||||||||||||
Unaudited Pro Forma Combined Condensed Income Statement | |||||||||||||||||||||||||||||||||||||||
For the year ended December 31, 2018 | |||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||||||||||||||||||||||||||
Ameris as Reported | USPF Pro Forma Adjustments | Atlantic As Reported | Atlantic Pro Forma Adjustments | Hamilton as Reported | Hamilton Pro Forma Adjustments | Fidelity as Reported | Fidelity Pro Forma Adjustments | Ameris Pro Forma Total Consolidated | |||||||||||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits | 149,293 | — | 3,600 | — | 6,914 | — | 149,651 | — | 309,458 | ||||||||||||||||||||||||||||||
Occupancy and equipment | 29,131 | — | 585 | — | 1,759 | — | 13,584 | 863 | V | 45,922 | |||||||||||||||||||||||||||||
Data processing and communications expenses | 30,385 | — | 582 | — | 969 | — | 22,390 | — | 54,326 | ||||||||||||||||||||||||||||||
Legal and other professional fees | 6,386 | (274 | ) | Y | 513 | — | 445 | — | 4,233 | — | 11,303 | ||||||||||||||||||||||||||||
Credit resolution-related expenses | 4,016 | — | 9 | — | 367 | — | 1,649 | — | 6,041 | ||||||||||||||||||||||||||||||
Advertising and marketing | 5,571 | — | 16 | — | 20 | — | 2,853 | — | 8,460 | ||||||||||||||||||||||||||||||
Amortization of intangible assets | 9,512 | 250 | Z | — | 148 | CC | 282 | 119 | HH | 1,109 | 3,952 | W | 15,372 | ||||||||||||||||||||||||||
FDIC insurance | 3,408 | — | 83 | — | 125 | — | 3,613 | — | 7,229 | ||||||||||||||||||||||||||||||
Merger and conversion charges | 20,499 | — | 233 | — | 1,509 | — | 1,176 | — | 23,417 | ||||||||||||||||||||||||||||||
Other noninterest expenses | 35,446 | — | 729 | — | 1,815 | — | 25,034 | — | 63,024 | ||||||||||||||||||||||||||||||
Total noninterest expense | 293,647 | (24 | ) | 6,350 | 148 | 14,205 | 119 | 225,292 | 4,815 | 544,552 | |||||||||||||||||||||||||||||
Income before income tax expense | 151,490 | 24 | 1,846 | 297 | 5,770 | 288 | 57,583 | 687 | 217,985 | ||||||||||||||||||||||||||||||
Income tax expense | 30,463 | 5 | AA | 430 | 62 | DD | 1,370 | 60 | II | 13,760 | 144 | X | 46,294 | ||||||||||||||||||||||||||
Net income | $ | 121,027 | $ | 19 | $ | 1,416 | $ | 235 | $ | 4,400 | $ | 228 | $ | 43,823 | $ | 543 | $ | 171,691 | |||||||||||||||||||||
Basic earnings per common share | $ | 2.81 | $ | 0.09 | $ | 0.11 | $ | 1.61 | $ | 2.47 | |||||||||||||||||||||||||||||
Diluted earnings per common share | $ | 2.80 | $ | 0.09 | $ | 0.10 | $ | 1.61 | $ | 2.45 | |||||||||||||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||||||||||||||||||
Basic | 43,142 | 15,438 | 40,411 | 27,155 | 69.642 | ||||||||||||||||||||||||||||||||||
Diluted | 43,248 | 15,449 | 42,478 | 27,259 | 70.016 |
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Note 1 - Basis of Pro Forma Presentation
The unaudited pro forma combined condensed balance sheet as of June 30, 2019, and the unaudited pro forma combined condensed income statement for the six months ended June 30, 2019 and the year ended December 31, 2018, are based on the historical financial statements of Ameris, USPF, Atlantic, Hamilton and Fidelity after giving effect to the completion of the acquisitions and the assumptions and adjustments described in the accompanying notes. Such financial statements do not reflect cost savings or operating synergies expected to result from the acquisitions, or the costs to achieve these cost savings or operating synergies, or any anticipated disposition of assets that may result from the integration of the operations of the five companies.
The transactions will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). In business combination transactions in which the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement of the acquisition consideration is based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.
Under ASC 805, all of the assets acquired and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. Subsequent to the completion of the acquisition of USPF and the mergers with Atlantic, Hamilton and Fidelity, Ameris will finalize integration plans, which may affect how the assets acquired, including intangible assets, will be utilized by the combined company. For those assets in the combined company that will be phased out or will no longer be used, additional amortization, depreciation and possibly impairment charges will be recorded after management completes the integration plans.
The unaudited pro forma combined condensed financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company.
Note 2 - Acquisition Consideration
US Premium Finance Holding Company Acquisition
The acquisition consideration for USPF is summarized as follows (in thousands):
Acquisition Consideration - USPF
Number of shares of Ameris common stock – as exchanged | 1,073 | ||
Fair value of Ameris common stock issued (weighted average of $52.047 per share) | $ | 55,855 | |
Cash paid to former shareholders of USPF | $ | 21,421 | |
Present value of contingent earn-out consideration expected to be paid out | $ | 5,705 | |
Total Acquisition Consideration – USPF | $ | 82,981 |
Atlantic Coast Financial Corporation Acquisition
Under the terms of the merger agreement with Atlantic, Atlantic’s shareholders received 0.17 shares of Ameris common stock plus $1.39 in cash for each share of Atlantic common stock. Based on the number of shares of Atlantic common stock outstanding as of the acquisition date of May 25, 2018, the acquisition consideration is as follows (in thousands):
Acquisition Consideration - Atlantic
Total number of shares of Atlantic common stock outstanding at May 25, 2018 | 15,541 | ||
Less: Unallocated shares of Atlantic common stock held by ESOP and benefit plans | (61 | ) | |
Total number of shares of Atlantic common stock to be converted | 15,480 | ||
Per share exchange ratio | 0.17 | ||
Number of shares of Ameris common stock – as exchanged | 2,632 | ||
Multiplied by Ameris common stock price on May 25, 2018 | $ | 56.15 | |
Fair value of Ameris common stock issued | $ | 147,760 | |
Per share cash exchange price | $ | 1.39 | |
Cash paid at acquisition to Atlantic’s shareholders | $ | 21,527 | |
Total Acquisition Consideration – Atlantic | $ | 169,287 |
Hamilton State Bancshares, Inc. Acquisition
Under the terms of the merger agreement with Hamilton, Hamilton’s shareholders received 0.16 shares of Ameris common stock plus $0.93 in cash for each share of Hamilton common stock. Based on the number of shares of Hamilton common stock outstanding as of the acquisition date of June 29, 2018, the acquisition consideration is as follows (in thousands):
Acquisition Consideration - Hamilton
Total number of shares of Hamilton common stock outstanding at June 29, 2018 including restricted share units that automatically vest under a change in control | 40,927 | ||
Per share exchange ratio | 0.16 | ||
Number of shares of Ameris common stock – as exchanged | 6,548 | ||
Multiplied by Ameris common stock price on June 29, 2018 | $ | 53.35 | |
Fair value of Ameris common stock issued | $ | 349,356 | |
Per share cash exchange price | $ | 0.93 | |
Cash paid at acquisition to Hamilton’s shareholders | $ | 38,068 | |
Cash paid at acquisition to holders of Hamilton stock warrants | $ | 9,711 | |
Total Acquisition Consideration - Hamilton | $ | 397,135 |
Fidelity Southern Corporation Acquisition
Under the terms of the merger agreement with Fidelity, Fidelity’s shareholders received 0.80 shares of Ameris common stock for each share of Fidelity common stock. Outstanding Fidelity options were converted into options to purchase shares of Ameris common stock, with the exercise price and the number of shares underlying each option adjusted to reflect the exchange ratio of 0.80. Based on the number of shares of Fidelity common stock outstanding and the number of Fidelity options outstanding as of the acquisition date of July 1, 2019, the acquisition consideration is as follows (in thousands):
Acquisition Consideration - Fidelity
Total number of shares of Fidelity common stock outstanding at July 1, 2019, including restricted shares that immediately vest on the merger date | 27,728 | ||
Per share exchange ratio | 0.80 | ||
Number of shares of Ameris common stock - as exchanged | 22,182 | ||
Multiplied by Ameris common stock price on June 28, 2019 | $ | 39.19 | |
Fair value of Ameris common stock issued | $ | 869,294 | |
Total number of Fidelity options outstanding at July 1, 2019 | 721 | ||
Per option exchange ratio | 0.80 | ||
Number of Ameris options - as exchanged | 577 | ||
Weighted average fair value per option | $ | 12.57 | |
Fair value of rolled over stock options | $ | 7,248 | |
Cash payment for fractional shares | $ | 19 | |
Total Acquisition Consideration - Fidelity | $ | 876,561 |
Note 3 - Preliminary Estimated Acquisition Consideration Allocation
Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of USPF, Atlantic, Hamilton, and Fidelity based on their estimated fair values as of the closing dates of the acquisitions. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.
The allocations of the acquisition consideration for Fidelity are considered preliminary because the allocations for Fidelity are based on estimates, assumptions, valuations, and other studies which have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the acquisition consideration allocation unaudited pro forma adjustments for Fidelity will remain preliminary until Ameris's management determines the final acquisition consideration and the fair values of assets acquired and liabilities assumed. The final determination of the acquisition consideration allocation is anticipated to be completed as soon as practicable after the completion of the acquisition of Fidelity and will be based on the value of the Ameris common stock at the closing date of such acquisition. The final amounts allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the unaudited pro forma condensed combined financial statements.
The allocations of the acquisition consideration for USPF, Atlantic and Hamilton are considered final as of the date of this filing, having crossed the one-year anniversary of the respective acquisition dates.
The total acquisition consideration as shown in the tables above is allocated to USPF’s, Atlantic’s, Hamilton’s and Fidelity's tangible and intangible assets and liabilities as of June 30, 2019, based on their fair values (which are preliminary estimates as to Fidelity) as follows (in thousands):
Preliminary Estimated Acquisition Consideration Allocation
USPF | Atlantic | Hamilton | Fidelity | ||||||||||||
Cash and due from banks | $ | — | $ | 3,990 | $ | 13,927 | $ | 26,264 | |||||||
Federal funds sold and interest-bearing deposits in banks | — | 22,149 | 102,156 | 217,936 | |||||||||||
Time deposits in other banks | — | — | 11,558 | — | |||||||||||
Investment securities | — | 35,126 | 285,830 | 299,449 | |||||||||||
Other investments | — | 9,576 | 2,094 | 7,449 | |||||||||||
Loans held for sale | — | 358 | — | 328,657 | |||||||||||
Loans | — | 755,704 | 1,293,186 | 3,520,016 | |||||||||||
Other real estate owned, net | — | 1,041 | 847 | 6,414 | |||||||||||
Premises and equipment, net | — | 10,735 | 28,971 | 124,562 | |||||||||||
Goodwill | 64,498 | 90,342 | 220,768 | 404,381 | |||||||||||
Other intangible assets, net | 23,607 | 7,488 | 23,610 | 50,610 | |||||||||||
Cash value of bank owned life insurance | — | 18,182 | 4,454 | 72,328 | |||||||||||
Deferred income taxes, net | (5,124 | ) | 7,711 | 10,079 | (22,896 | ) | |||||||||
Other assets | — | 2,959 | 10,955 | 157,863 | |||||||||||
Deposits | — | (585,167 | ) | (1,585,250 | ) | (4,041,682 | ) | ||||||||
Securities sold under agreements to repurchase | — | — | — | (22,345 | ) | ||||||||||
Other borrowings | — | (204,475 | ) | (10,907 | ) | (150,700 | ) | ||||||||
Subordinated deferrable interest debentures | — | — | (2,292 | ) | (36,718 | ) | |||||||||
Other liabilities | — | (6,432 | ) | (12,851 | ) | (65,027 | ) | ||||||||
Total Acquisition Consideration | $ | 82,981 | $ | 169,287 | $ | 397,135 | $ | 876,561 |
Approximately $23.6 million, $7.5 million, $23.6 million and $50.6 million has been allocated to amortizable intangible assets acquired in the USPF, Atlantic, Hamilton and Fidelity acquisitions, respectively. The amortization related to the fair value of net amortizable intangible assets is reflected as a pro forma adjustment to the unaudited pro forma condensed combined financial statements.
Identifiable Intangible Assets. The fair values of intangible assets were determined based on the provisions of ASC 805, which defines fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. For the USPF acquisition, the allocation to intangible assets is allocated to insurance agent relationships, trade name, and non-compete agreement intangibles. For the Atlantic, Hamilton and Fidelity acquisitions, the allocation to intangible assets is allocated to core deposit intangibles.
Goodwill. Goodwill represents the excess of the acquisition consideration over the fair value of the underlying net tangible and intangible assets. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets are the skill sets, operations, customer base and organizational cultures that can be leveraged to enable the combined company to build an enterprise greater than the sum of its parts. In accordance with ASC Topic 350, Intangibles ― Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of the impairment during the period in which the determination is made.
Note 4 - Preliminary Unaudited Pro Forma and Acquisition Accounting Adjustments
The unaudited pro forma combined condensed financial information is not necessarily indicative of what the financial position actually would have been had the acquisitions been completed at the date indicated. Such information includes adjustments which are preliminary and may be revised. Such revisions may result in material changes. The financial position shown herein is
not necessarily indicative of what the past financial position of the combined companies would have been, nor necessarily indicative of the financial position of the post-acquisition periods. The unaudited pro forma combined condensed financial information does not give consideration to the impact of possible expense efficiencies, synergies, strategy modifications, asset dispositions or other actions that may result from the acquisitions.
The following unaudited pro forma adjustments result from accounting for the acquisitions, including the determination of fair value of the assets, liabilities, and commitments which Ameris, as the acquirer for accounting purposes, acquired from USPF, Atlantic, Hamilton and Fidelity. The descriptions related to these adjustments (which are preliminary as to Fidelity) are as follows (in thousands):
Balance Sheet - Fidelity
As of June 30, 2019 | ||||
A | Adjustment to cash and due from banks to reflect cash paid at closing to Fidelity's shareholders | $ | (19 | ) |
B | Adjustment to investment securities available for sale | |||
To reclass at amortized cost investment securities designated as held to maturity by Fidelity to investment securities available for sale | $ | 19,595 | ||
To reflect fair value at acquisition date for investment securities designated as held to maturity by Fidelity but will be designated as available for sale by Ameris | $ | 108 | ||
Total adjustment to investment securities available for sale | $ | 19,703 | ||
C | Adjustment to investment securities held to maturity to reclass at amortized cost investment securities designated as held to maturity by Fidelity to investment securities available for sale | $ | (19,595 | ) |
D | Adjustment to loans | |||
To reflect the reversal of Fidelity’s June 30, 2019 unamortized accounting adjustments for its prior acquisitions, loan premiums, loan discounts, deferred loan origination costs, and deferred loan origination fees | $ | (16,642 | ) | |
To reflect the estimated fair value at acquisition date of loans | $ | (50,754 | ) | |
Total adjustment to loans | $ | (67,396 | ) | |
E | Adjustment to allowance for loan losses to reflect the reversal of Fidelity’s June 30, 2019 allowance for loan losses | $ | 31,245 | |
F | Adjustment to other real estate owned to reflect the estimated fair value at acquisition date based on Ameris’s more aggressive liquidation strategy | $ | (1,191 | ) |
G | Adjustment to premises and equipment to reflect the estimated fair value at acquisition date | $ | 30,900 | |
H | Adjustment to goodwill | |||
To reflect reversal of Fidelity's June 30, 2019 goodwill recorded from its prior acquisitions | $ | (5,164 | ) | |
Adjustment to goodwill to reflect the estimated goodwill generated as a result of consideration paid being greater than the net assets acquired | $ | 404,381 | ||
Total adjustment to goodwill | $ | 399,217 | ||
I | Adjustment to intangible assets | |||
To reflect reversal of Fidelity’s June 30, 2019 unamortized intangible assets | $ | (5,506 | ) | |
To reflect the recording of the estimated core deposit intangible | $ | 50,610 | ||
Total adjustment to intangible assets | $ | 45,104 | ||
J | Adjustment to deferred tax asset, net | |||
To reclass Fidelity's June 30, 2019 net deferred tax liability position against Ameris's net deferred tax asset position | $ | (12,222 | ) | |
To reflect the deferred tax impact resulting from the net fair value adjustments based on assumed effective tax rate of 21% | $ | (10,778 | ) | |
Total adjustment to deferred tax asset, net | $ | (23,000 | ) | |
K | Adjustment to interest-bearing deposits | |||
To reflect reversal of Fidelity’s June 30, 2019 unamortized fair value adjustment on certificates of deposit from its prior acquisitions | $ | (176 | ) | |
To reflect the estimated fair value at acquisition date of certificate of deposits | $ | (523 | ) | |
Total adjustment to interest-bearing deposits | $ | (699 | ) | |
L | Adjustment to other borrowings to reflect the estimated fair value at acquisition | $ | 1,333 | |
M | Adjustment to subordinated deferrable interest debentures to reflect the estimated fair value at acquisition | $ | (9,675 | ) |
As of June 30, 2019 | ||||
N | Adjustment to deferred tax liability, net to reflect reclass of Fidelity's June 30, 2019 net deferred tax liability position against Ameris's net deferred tax asset position | $ | (12,222 | ) |
O | Adjustment to common stock | |||
To reflect the reversal of Fidelity’s June 30, 2019 common stock | $ | (209,852 | ) | |
To reflect the value of Ameris common stock issued to Fidelity’s shareholders | $ | 22,182 | ||
Total adjustment to common stock | $ | (187,670 | ) | |
P | Adjustment to capital surplus | |||
To reflect the reversal of Fidelity's June 30, 2019 capital surplus | $ | (35,089 | ) | |
To reflect the value of Ameris common stock issued to Fidelity’s shareholders | $ | 847,112 | ||
To reflect the value of Ameris options issued to Fidelity optionholders | $ | 7,248 | ||
Total adjustment to capital surplus | $ | 819,271 | ||
Q | Adjustment to retained earnings to reflect the reversal of Fidelity's June 30, 2019 retained earnings | $ | (188,144 | ) |
R | Adjustment to accumulated other comprehensive income to reflect the reversal of Fidelity's June 30, 2019 accumulated other comprehensive income | $ | (7,226 | ) |
Income Statement – Fidelity
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | |||||||
S | Adjustment to interest income and fees on loans to reflect estimated additional accretion on loan portfolio | $ | 2,886 | $ | 5,771 | |||
T | Adjustment to interest expense on deposits | |||||||
To reflect the reversal of Fidelity’s amortization of fair value adjustment on certificates of deposits resulting from its prior acquisitions | $ | 59 | $ | 167 | ||||
To reflect the estimated amortization of the fair value adjustment on certificates of deposit | $ | (175 | ) | $ | (349 | ) | ||
Total adjustment to interest expense on deposits | $ | (116 | ) | $ | (182 | ) | ||
U | Adjustment to interest expense on other borrowings and subordinated deferrable interest debentures | $ | 225 | $ | 451 | |||
V | Adjustment to occupancy and equipment expense to reflect estimated additional depreciation resulting from fair value adjustments on premises and equipment | $ | 432 | $ | 863 | |||
W | Adjustment to amortization of intangible assets | |||||||
To reflect the reversal of Fidelity’s amortization expense on its existing core deposit intangible resulting from its prior acquisitions | $ | (527 | ) | $ | (1,109 | ) | ||
To reflect the estimated amortization expense on the core deposit intangible | $ | 2,531 | $ | 5,061 | ||||
Total adjustment to amortization of intangible assets | $ | 2,004 | $ | 3,952 | ||||
X | Adjustment to income tax expense to reflect the tax effect of the Fidelity income statement pro forma adjustments using an assumed effective tax rate of 21% | $ | 72 | $ | 144 |
Income Statement – USPF
Year Ended December 31, 2018 | ||||
Y | Adjustment to amortization of intangible assets to reflect estimated amortization expense on the insurance agent relationships, trade name, and non-compete intangible assets | $ | 250 | |
Z | Adjustment to legal and other professional fees to reflect elimination of fees previously paid under the USPF Management and License Agreement that are no longer incurred after acquisition of the final 70% investment in USPF | $ | (274 | ) |
AA | Adjustment to income tax expense to reflect the tax effect of the USPF income statement pro forma adjustments using an assumed effective tax rate of 21% | $ | 5 |
Income Statement – Atlantic
Year Ended December 31, 2018 | ||||
BB | Adjustment to interest income and fees on loans to reflect estimated additional accretion on loan portfolio | $ | 445 | |
CC | Adjustment to amortization of intangible assets to reflect the estimated amortization of the core deposit intangible | $ | 148 | |
DD | Adjustment to income tax expense to reflect the tax effect of the Atlantic income statement pro forma adjustments using an assumed effective tax rate of 21% | $ | 62 |
Income Statement – Hamilton
Year Ended December 31, 2018 | ||||
EE | Adjustment to interest income and fees on loans to reflect estimated additional accretion on loan portfolio | $ | 690 | |
FF | Adjustment to interest expense on deposits | |||
To reflect the reversal of Hamilton’s amortization of fair value adjustment on certificates of deposits resulting from its prior acquisitions | $ | 6 | ||
To reflect the estimated amortization of the fair value adjustment on certificates of deposit | $ | 236 | ||
Total adjustment to interest expense on deposits | $ | 242 | ||
GG | Adjustment to interest expense on other borrowings and subordinated deferrable interest debentures | |||
To reflect the reversal of Hamilton’s amortization of fair value adjustment in other borrowings from its prior acquisitions | $ | 32 | ||
To reflect the estimated amortization of the fair value adjustment on subordinated deferrable interest debentures | $ | 9 | ||
Total adjustment to interest expense on other borrowings and subordinated deferrable interest debentures | $ | 41 | ||
HH | Adjustment to amortization of intangible assets | |||
To reflect the reversal of Hamilton’s amortization expense on its existing core deposit intangible resulting from its prior acquisitions | $ | (281 | ) | |
To reflect the estimated amortization expense on the core deposit intangible | $ | 400 | ||
Total adjustment to amortization of intangible assets | $ | 119 | ||
II | Adjustment to income tax expense to reflect the tax effect of the Hamilton income statement pro forma adjustments using an assumed effective tax rate of 21% | $ | 60 |
The estimated transaction costs included as part of the unaudited pro forma condensed balance sheet as of June 30, 2019, have not been included in the above unaudited pro forma condensed income statements.
Pursuant to the acquisition method of accounting, the final acquisition consideration was based on the price of the Ameris common stock immediately prior to the effective time of the applicable transactions.
Note 5 - Earnings Per Common Share
Unaudited total combined pro forma earnings per common share for Ameris including USPF, Atlantic, Hamilton and Fidelity for the six months ended June 30, 2019 and the year ended December 31, 2018 have been calculated using Ameris’s historic weighted average common shares outstanding plus the common shares issued to USPF’s shareholders, Atlantic’s shareholders, Hamilton’s shareholders and Fidelity's shareholders in the respective acquisitions.
The following table sets forth the calculation of basic and diluted unaudited total combined pro forma earnings per common share for Ameris including USPF, Atlantic, Hamilton and Fidelity for the six months ended June 30, 2019 and the year ended December 31, 2018 (in thousands, except per share data).
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | ||||||||||||||
Basic | Diluted | Basic | Diluted | ||||||||||||
Pro forma net income available to common shareholders | $ | 63,923 | $ | 63,923 | $ | 171,691 | $ | 171,691 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Ameris | 47,354 | 47,395 | 43,142 | 43,248 | |||||||||||
Common shares issued to USPF’s shareholders | — | — | 69 | 69 | |||||||||||
Common shares issued to Atlantic’s shareholders | ��� | — | 1,038 | 1,038 | |||||||||||
Common shares issued to Hamilton’s shareholders | — | — | 3,211 | 3,211 | |||||||||||
Common shares issued to Fidelity’s shareholders | 22,182 | 22,342 | 22,182 | 22,450 | |||||||||||
Pro forma | 69,536 | 69,737 | 69,642 | 70,016 | |||||||||||
Pro forma earnings per common share | $ | 0.92 | $ | 0.92 | $ | 2.47 | $ | 2.45 |