Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated financial information and accompanying notes show the impact on the historical financial conditions and results of operations of Ameris and Prosperity and have been prepared to illustrate the effects of the merger under the acquisition method of accounting.
The unaudited pro forma combined consolidated balance sheet as of September 30, 2013 is presented as if the merger had occurred on September 30, 2013. The unaudited pro forma combined consolidated income statements for the twelve months ended December 31, 2012 and the nine months ended September 30, 2013 are presented as if the merger had occurred on January 1, 2012. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.
The unaudited pro forma combined consolidated financial statements are provided for informational purposes only. The unaudited pro forma combined consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined consolidated financial statements should be read together with:
• | the accompanying notes to the unaudited pro forma combined consolidated financial statements; |
• | Ameris’s audited consolidated financial statements and accompanying notes as of and for the twelve months ended December 31, 2012, included in Ameris’s Annual Report on Form 10-K for the twelve months ended December 31, 2012; |
• | Prosperity’s audited consolidated financial statements and accompanying notes as of and for the twelve months ended December 31, 2012; |
• | Ameris’s unaudited consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2013, included in Ameris’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013; |
• | Prosperity’s unaudited consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2013. |
Unaudited Pro Forma Combined Consolidated Balance Sheet
September 30, 2013
(In thousands, except per share data and ratios)
Ameris | Prosperity | Pro Forma | ||||||||||||||||||||||
September 30, | September 30, | Pro | September 30, | |||||||||||||||||||||
2013 | 2013 | Conforming | Forma | Pro Forma | 2013 | |||||||||||||||||||
(as Reported) | (as Reported) | Reclassifications | Adjustments | Prosperity | Combined | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and due from banks | $ | 53,516 | $ | 6,550 | $ | — | $ | — | $ | 6,550 | $ | 60,066 | ||||||||||||
Federal funds sold and interest bearing balances | 73,899 | 26,801 | — | — | 26,801 | 100,700 | ||||||||||||||||||
Investment securities available for sale, at fair value | 312,248 | 159,497 | — | — | 159,497 | 471,745 | ||||||||||||||||||
Other investments | 7,764 | 8,309 | — | — | 8,309 | 16,073 | ||||||||||||||||||
Mortgage loans held for sale | 69,634 | — | — | — | — | 69,634 | ||||||||||||||||||
Loans, net of unearned income | 1,589,267 | 489,542 | — | (37,662 | ) A | 451,880 | 2,041,147 | |||||||||||||||||
Covered loans | 417,649 | — | — | — | — | 417,649 | ||||||||||||||||||
Less allowance for loan losses | 23,854 | 8,204 | — | 8,204 | B | — | 23,854 | |||||||||||||||||
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Loans, net | 1,983,062 | 481,338 | — | (29,458 | ) | 451,880 | 2,434,942 | |||||||||||||||||
Foreclosed assets | 37,978 | 7,400 | — | (2,471 | ) C | 4,929 | 42,907 | |||||||||||||||||
Covered foreclosed assets | 52,552 | — | — | — | — | 52,552 | ||||||||||||||||||
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Total foreclosed assets | 90,530 | 7,400 | — | (2,471 | ) | 4,929 | 95,459 | |||||||||||||||||
Premises and equipment, net | 65,661 | 36,601 | — | — | 36,601 | 102,262 | ||||||||||||||||||
Intangible assets, net | 1,972 | — | 19 | 0 a | 4,383 | D | 4,573 | 6,545 | ||||||||||||||||
Goodwill | 956 | — | — | 35,396 | E | 35,396 | 36,352 | |||||||||||||||||
FDIC loss sharing receivable | 81,763 | — | — | — | — | 81,763 | ||||||||||||||||||
Cash value of bank owned life insurance | 49,095 | — | — | — | — | 49,095 | ||||||||||||||||||
Other assets | 28,402 | 26,609 | (19,342 | ) b | — | 7,267 | 35,669 | |||||||||||||||||
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Total assets | $ | 2,818,502 | $ | 753,105 | $ | (19,152 | ) | $ | 7,850 | $ | 741,803 | $ | 3,560,305 | |||||||||||
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Liabilities | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Noninterest-bearing | $ | 475,505 | $ | 153,905 | $ | — | $ | — | $ | 153,905 | $ | 629,410 | ||||||||||||
Interest-bearing | 1,967,916 | 333,350 | — | — | 333,350 | 2,301,266 | ||||||||||||||||||
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Total deposits | 2,443,421 | 487,255 | — | — | 487,255 | 2,930,676 | ||||||||||||||||||
Federal funds purchased & securities sold under agreements to repurchase | 20,255 | 23,011 | — | — | 23,011 | 43,266 | ||||||||||||||||||
Other borrowings | 5,000 | 185,000 | — | 12,313 | F | 197,313 | 202,313 | |||||||||||||||||
Other liabilities | 17,201 | 12,601 | (19,152 | ) c | 4,453 | G | (2,098 | ) | 15,103 | |||||||||||||||
Subordinated deferrable interest debentures | 42,269 | 30,415 | — | (15,802 | ) H | 14,613 | 56,882 | |||||||||||||||||
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Total liabilities | 2,528,146 | 738,282 | (19,152 | ) | 964 | 720,094 | 3,248,240 | |||||||||||||||||
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Stockholders’ equity | ||||||||||||||||||||||||
Preferred stock | $ | 27,938 | $ | — | $ | — | $ | — | $ | — | $ | 27,938 | ||||||||||||
Common stock | 25,271 | 4 | — | 1,177 | I | 1,181 | 26,452 | |||||||||||||||||
Capital surplus | 165,835 | 16,463 | — | 4,065 | J | 20,528 | 186,363 | |||||||||||||||||
Retained earnings | 83,025 | 2,386 | — | (2,386 | ) K | — | 83,025 | |||||||||||||||||
Accumulated other comprehensive income/(loss) | (531 | ) | (4,030 | ) | — | 4,030 | L | — | (531 | ) | ||||||||||||||
Less treasury stock | (11,182 | ) | — | — | — | — | (11,182 | ) | ||||||||||||||||
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Total stockholders’ equity | 290,356 | 14,823 | — | 6,886 | 21,709 | 312,065 | ||||||||||||||||||
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Total liabilities and stockholders’ equity | $ | 2,818,502 | $ | 753,105 | $ | (19,152 | ) | $ | 7,850 | $ | 741,803 | $ | 3,560,305 | |||||||||||
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a) | Represents core deposit intangible recorded in other assets reclassified to intangible assets for the combined proforma company. |
b) | Represents deferred tax asset position recorded in other assets reclassified to deferred tax liabilities and core deposit intangible recorded in other assets reclassified to intangible assets for the combined proforma company. |
c) | Represents deferred tax asset position recorded in other assets reclassified to deferred tax liabilities for the combined proforma company. |
See accompanying notes to Unaudited Pro Forma Combined Consolidated Financial Information.
Unaudited Pro Forma Combined Consolidated Statement of Income
Nine Months Ended September 30, 2013
(In thousands, except per share data and ratios)
Ameris | Prosperity | Pro Forma | ||||||||||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||||||||||
2013 | 2013 | Conforming | Proforma | Proforma | 2013 | |||||||||||||||||||
(as Reported) | (as Reported) | Reclassifications | Adjustments | Prosperity | Combined | |||||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||||||
Interest Income | ||||||||||||||||||||||||
Interest and fees on loans | $ | 88,208 | $ | 18,489 | $ | — | $ | — | $ | 18,489 | $ | 106,697 | ||||||||||||
Interest on taxable securities | 5,136 | 2,483 | — | — | 2,483 | 7,619 | ||||||||||||||||||
Interest on nontaxable securities | 1,071 | — | — | — | — | 1,071 | ||||||||||||||||||
Interest on deposits in other banks | 158 | 26 | — | — | 26 | 184 | ||||||||||||||||||
Interest on federal funds sold | — | — | — | — | — | — | ||||||||||||||||||
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Total interest income | 94,573 | 20,998 | — | — | 20,998 | 115,571 | ||||||||||||||||||
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Interest expense | ||||||||||||||||||||||||
Interest on deposits | $ | 6,334 | $ | 821 | $ | — | $ | — | $ | 821 | $ | 7,155 | ||||||||||||
Interest on other borrowings | 1,105 | 4,969 | — | — | 4,969 | 6,074 | ||||||||||||||||||
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Total interest expense | 7,439 | 5,790 | — | — | 5,790 | 13,229 | ||||||||||||||||||
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Net interest income | 87,134 | 15,208 | — | — | 15,208 | 102,342 | ||||||||||||||||||
Provision for loan losses | 10,008 | 2,131 | — | — | 2,131 | 12,139 | ||||||||||||||||||
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Net interest income/(loss) after provision for loan losses | $ | 77,126 | $ | 13,077 | $ | — | $ | — | $ | 13,077 | $ | 90,203 | ||||||||||||
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Noninterest income | ||||||||||||||||||||||||
Service charges on deposit accounts | $ | 14,480 | $ | 4,539 | $ | — | $ | — | $ | 4,539 | $ | 19,019 | ||||||||||||
Mortgage banking activity | 14,697 | — | — | — | — | 14,697 | ||||||||||||||||||
Other service charges, commissions and fees | 1,539 | — | — | — | — | 1,539 | ||||||||||||||||||
Gain(loss) on sale of securities | 171 | (101 | ) | — | — | (101 | ) | 70 | ||||||||||||||||
Other non-interest income | 4,145 | (1,700 | ) | 2,155 | a | — | 455 | 4,600 | ||||||||||||||||
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Total noninterest income | 35,032 | 2,738 | 2,155 | — | 4,893 | 39,925 | ||||||||||||||||||
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Noninterest expense | ||||||||||||||||||||||||
Salaries and employee benefits | $ | 41,599 | $ | 6,944 | — | — | $ | 6,944 | $ | 48,543 | ||||||||||||||
Occupancy and equipment expenses | 9,058 | 2,222 | — | — | 2,222 | 11,280 | ||||||||||||||||||
Data processing and telecommunications expenses | 8,478 | 1,666 | — | — | 1,666 | 10,144 | ||||||||||||||||||
Credit related expenses(1) | 10,164 | 75 | 2,294 | a,b | — | 2,369 | 12,533 | |||||||||||||||||
Advertising and marketing expenses | 1,016 | — | 125 | c | — | 125 | 1,141 | |||||||||||||||||
Amortization of intangible assets | 1,068 | — | 47 | d | 822 | A | 869 | 1,937 | ||||||||||||||||
Goodwill impairment | — | — | — | — | — | — | ||||||||||||||||||
Other non-interest expenses | 12,938 | 4,803 | (311 | )b,c,d | — | 4,492 | 17,430 | |||||||||||||||||
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Total noninterest expense | 84,321 | 15,710 | 2,155 | 822 | 18,687 | 103,008 | ||||||||||||||||||
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Operating profit (loss) | $ | 27,837 | $ | 105 | $ | — | $ | (822 | ) | $ | (717 | ) | $ | 27,120 | ||||||||||
Income tax (benefit) expense | 9,197 | 16 | — | (288 | )B | (272 | ) | 8,925 | ||||||||||||||||
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Net income (loss) | $ | 18,640 | $ | 89 | $ | — | $ | (534 | ) | $ | (445 | ) | $ | 18,195 | ||||||||||
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Preferred stock dividends | 1,326 | — | — | — | — | 1,326 | ||||||||||||||||||
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Net income (loss) available to common shareholders | $ | 17,314 | $ | 89 | $ | — | $ | (534 | ) | $ | (445 | ) | $ | 16,869 | ||||||||||
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Basic earnings available to common shareholders per share | 0.72 | 0.24 | — | — | — | 0.67 | ||||||||||||||||||
Diluted earnings available to common shareholders per share | 0.71 | 0.24 | — | — | — | 0.66 |
Weighted average common shares outstanding | ||||||||||||||||||||||||
Basic | 23,883 | 378 | — | — | — | 25,064 | ||||||||||||||||||
Diluted | 24,298 | 378 | — | — | — | 25,479 |
(1) | Includes expenses associated with problem loans and OREO, as well as OREO losses and writedowns. |
a) | Reclassification of loss on sale ($1,422) and write-down ($733) of foreclosed assets. |
b) | Reclassification of problem loan expense ($139). |
c) | Reclassification of advertising and marketing expenses ($125). |
d) | Reclassification of amortization of intangible assets ($47). |
See accompanying notes to Unaudited Pro Forma Combined Consolidated Financial Information.
Unaudited Pro Forma Combined Consolidated Statement of Income
Year Ended December 31, 2012
(In thousands, except per share data and ratios)
Ameris | Prosperity | Pro Forma | ||||||||||||||||||||||
December 31, 2012 (as Reported) | December 31, 2012 (as Reported) | Conforming Reclassifications | Proforma Adjustments | Proforma Prosperity | December 31, 2012 Combined | |||||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||||||
Interest income | ||||||||||||||||||||||||
Interest and fees on loans | $ | 119,310 | $ | 26,731 | $ | — | $ | — | $ | 26,731 | $ | 146,041 | ||||||||||||
Interest on taxable securities | 8,250 | 4,222 | — | — | 4,222 | 12,472 | ||||||||||||||||||
Interest on nontaxable securities | 1,475 | — | — | — | — | 1,475 | ||||||||||||||||||
Interest on deposits in other banks | 434 | 54 | — | — | 54 | 488 | ||||||||||||||||||
Interest on federal funds sold | 10 | — | — | — | — | 10 | ||||||||||||||||||
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Total interest income | 129,479 | 31,007 | — | — | 31,007 | 160,486 | ||||||||||||||||||
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Interest expense | ||||||||||||||||||||||||
Interest on deposits | $ | 13,327 | $ | 1,660 | $ | — | $ | — | $ | 1,660 | $ | 14,987 | ||||||||||||
Interest on other borrowings | 1,747 | 7,350 | — | — | 7,350 | 9,097 | ||||||||||||||||||
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Total interest expense | 15,074 | 9,010 | — | — | 9,010 | 24,084 | ||||||||||||||||||
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Net interest income | 114,405 | 21,997 | — | — | 21,997 | 136,402 | ||||||||||||||||||
Provision for loan losses | 31,089 | 3,583 | — | — | 3,583 | 34,672 | ||||||||||||||||||
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Net interest income/(loss) after provision for loan losses | $ | 83,316 | $ | 18,414 | $ | — | $ | — | $ | 18,414 | $ | 101,730 | ||||||||||||
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Noninterest income | ||||||||||||||||||||||||
Service charges on deposit accounts | $ | 19,576 | $ | 6,936 | $ | — | $ | — | $ | 6,936 | $ | 26,512 | ||||||||||||
Mortgage banking activity | 12,989 | — | — | — | — | 12,989 | ||||||||||||||||||
Other service charges, commissions and fees | 1,431 | — | — | — | — | 1,431 | ||||||||||||||||||
Gain(loss) on sale of securities | 322 | 587 | — | — | 587 | 1,123 | ||||||||||||||||||
Gains from acquisitions | 20,037 | — | — | — | — | 20,037 | ||||||||||||||||||
Other non-interest income | 3,519 | (2,710 | ) | 3,528 | a | — | 818 | 4,123 | ||||||||||||||||
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Total noninterest income | 57,874 | 4,813 | 3,528 | — | 8,341 | 66,215 | ||||||||||||||||||
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Noninterest expense | ||||||||||||||||||||||||
Salaries and employee benefits | $ | 53,122 | $ | 10,415 | — | — | $ | 10,415 | $ | 63,537 | ||||||||||||||
Occupancy and equipment expenses | 13,208 | 3,682 | — | — | 3,682 | 16,890 | ||||||||||||||||||
Data processing and telecommunications expenses | 10,683 | 1,359 | — | — | 1,359 | 12,042 | ||||||||||||||||||
Credit related expenses(1) | 22,416 | 371 | 3,528 | a | — | 3,899 | 26,315 | |||||||||||||||||
Advertising and marketing expenses | 1,622 | — | — | — | — | 1,622 | ||||||||||||||||||
Amortization of intangible assets | 1,359 | — | 63 | b | 1,016 | A | 1,079 | 2,438 | ||||||||||||||||
Goodwill impairment | — | — | — | — | — | — | ||||||||||||||||||
Other non-interest expenses | 17,060 | 6,964 | (63 | )b | — | 6,901 | 23,961 | |||||||||||||||||
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Total noninterest expense | 119,470 | 22,791 | 3,528 | 1,016 | 27,335 | 146,805 | ||||||||||||||||||
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Operating profit/(loss) | $ | 21,720 | $ | 436 | $ | — | $ | (1,016 | ) | $ | (580 | ) | $ | 21,140 | ||||||||||
Income tax (benefit)/expense | 7,285 | (732 | ) | (356 | )B | (1,088 | ) | 6,197 | ||||||||||||||||
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Net income/(loss) | $ | 14,435 | $ | 1,168 | $ | — | $ | (660 | ) | $ | 508 | $ | 14,943 | |||||||||||
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Preferred stock dividends | 3,577 | — | — | — | — | 3,577 | ||||||||||||||||||
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Net income/(loss) available to common shareholders | $ | 10,858 | $ | 1,168 | $ | — | $ | (660 | ) | $ | 508 | $ | 11,366 | |||||||||||
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Basic earnings available to common shareholders per share | 0.46 | 3.09 | — | — | — | 0.45 | ||||||||||||||||||
Diluted earnings available to common shareholders per share | 0.46 | 3.09 | — | — | — | 0.45 | ||||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||||
Basic | 23,816 | 378 | — | — | — | 24,997 | ||||||||||||||||||
Diluted | 23,857 | 378 | — | — | — | 25,038 |
(1) | Includes expenses associated with problem loans and OREO, as well as OREO losses and writedowns. |
a) | Reclassification of loss on sale ($1,488) and write-down ($2,040) of foreclosed assets. |
b) | Reclassification of amortization of intangible assets. |
See accompanying notes to Unaudited Pro Forma Combined Consolidated Financial Information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 - Basis of Pro Forma Presentation
The unaudited pro forma condensed combined balance sheet as of September 30, 2013 and the unaudited pro forma condensed combined income statements for the nine months ended September 30, 2013 and the year ended December 31, 2012 are based on the historical financial statements of Ameris and Prosperity after giving effect to the completion of the merger and the assumptions and adjustments described in the accompanying notes. It does not reflect cost savings or operating synergies expected to result from the merger, 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 two companies.
The transaction 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 asset (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.
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 merger, Ameris and Prosperity will finalize an integration plan, 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 plan.
The unaudited pro forma 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 - Preliminary Estimated Acquisition Consideration
On May 2, 2013, Ameris entered into a definitive agreement and plan of merger with Prosperity, pursuant to which Prosperity will merge with and into Ameris. Under the terms of the merger agreement, Prosperity shareholders will have the option to elect to receive either 3.125 shares of Ameris common stock or $41.50 in cash for each share of Prosperity common stock, subject to the requirement that no more than 50% of the overall consideration will be in the form of cash.
Based on Prosperity’s estimated shares of common stock outstanding as of September 30, 2013, the preliminary estimated acquisition consideration is as follows (in thousands):
Preliminary Estimated Acquisition Consideration
Number of shares of Prosperity common stock outstanding at September 30, 2013 | 377,960 | |||
Per share exchange ratio | 3.125 | |||
Number of shares of Ameris common stock – as exchanged | 1,181,125 | |||
Multiplied by Ameris common stock price on September 30, 2013 | $ | 18.38 | ||
Estimated fair value of Ameris common stock issued | $ | 21,709 | ||
Total Preliminary Estimated Acquisition Consideration | $ | 21,709 |
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 Prosperity based on their estimated fair values as of the closing of the merger. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.
The allocation of the estimated acquisition consideration is preliminary because the proposed merger has not yet been completed. The preliminary allocation is 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 will remain preliminary until Ameris 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 merger and will be based on the value of the Ameris share price at the closing of the transaction. 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 total preliminary estimated acquisition consideration as shown in the table above is allocated to Prosperity’s tangible and intangible assets and liabilities as of September 30, 2013 based on their preliminary estimated fair values as follows (in thousands):
Preliminary Estimated Acquisition Consideration Allocation
Cash and due from banks | $ | 6,550 | ||
Federal funds sold and interest bearing balances | 26,801 | |||
Investment securities available for sale | 159,497 | |||
Other investments | 8,309 | |||
Loans, net of unearned income | 451,880 | |||
Foreclosed assets | 4,929 | |||
Premises and equipment | 36,601 | |||
Other assets | 7,267 | |||
Deposits | (487,255 | ) | ||
Federal funds purchased & securities sold under agreements to repurchase | (23,011 | ) | ||
Other borrowings | (197,313 | ) | ||
Subordinated deferrable interest debentures | (14,613 | ) | ||
Other liabilities | 2,098 | |||
Intangible assets | 4,573 | |||
Goodwill | 35,396 | |||
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Total Preliminary Estimated Acquisition Consideration | $ | 21,709 | ||
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Approximately $4.4 million has been preliminarily allocated to amortizable intangible assets acquired. The amortization related to the preliminary 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 preliminary 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, or “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. The preliminary allocation to intangible assets is allocated to core deposit intangibles.
Goodwill. Goodwill represents the excess of the preliminary estimated acquisition consideration over the preliminary 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 financial information is not necessarily indicative of what the financial position actually would have been had the merger been completed at the date indicated, and 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-merger periods. The unaudited pro forma 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 merger.
The following unaudited pro forma adjustments result from accounting for the merger, including the determination of fair value of the assets, liabilities, and commitments which Ameris, as the acquirer for accounting purposes, will acquire from Prosperity. The descriptions related to these preliminary adjustments are as follows (in thousands):
Balance Sheet
A | Adjustment to loans to reflect estimated fair value at acquisition date | $ | (37,662 | ) | ||
B | Adjustment to Allowance for loan losses to reflect the reversal of Prosperity’s ALLL | $ | 8,204 |
C | Adjustment to Foreclosed assets to reflect the fair value at acquisition date | $ | (2,471 | ) | ||
D | Adjustment to intangible assets to reflect the recording of core deposit intangible | $ | 4,383 | |||
E | Adjustment to goodwill to reflect the goodwill generated as a result of consideration paid being greater than the net assets acquired | $ | 35,396 | |||
F | Adjustment to other borrowings reflect the estimated fair value at acquisition | $ | 12,313 | |||
G | Adjustment to other liabilities | |||||
To reflect the fair value adjustment of the non-realizable portion of Prosperity’s deferred tax asset | $ | 11,815 | ||||
To reflect the deferred tax asset generated by the net fair value adjustments (rate = 35%) | (10,862 | ) | ||||
To reflect the deferred tax asset generated by Prosperity’s after-tax merger charges | 3,500 | |||||
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Total adjustment to other liabilities | $ | 4,453 | ||||
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H | Adjustment to subordinated deferrable interest debentures | |||||
To reflect the fair value adjustment to the trust preferred securities | $ | (11,552 | ) | |||
To reflect the discount obtained by Ameris for purchasing a portion of the debt at a discount | (4,250 | ) | ||||
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Total adjustment to subordinated deferrable interest debentures | $ | (15,802 | ) | |||
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I | Adjustment to common stock | |||||
To reflect the reversal of Prosperity’s September 30, 2013 common stock | $ | (4 | ) | |||
To reflect the value of Ameris stock issued to Prosperity shareholders | 1,181 | |||||
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Total adjustment to common stock | $ | 1,177 | ||||
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J | Adjustment to capital surplus | |||||
To reflect the reversal of Prosperity’s September 30, 2013 capital surplus | $ | (16,463 | ) | |||
To reflect the value of Ameris stock issued to Prosperity shareholders | 20,528 | |||||
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Total adjustment to capital surplus | $ | 4,065 | ||||
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K | Adjustment to retained earnings reflects the reversal of Prosperity’s September 30, 2013 retained earnings | $ | (2,386 | ) | ||
L | Adjustment to accumulated other comprehensive income reflects the reversal of Prosperity’s September 30, 2013 accumulated other comprehensive (income) loss | $ | 4,030 |
Pursuant to the acquisition method of accounting, the final acquisition consideration will be based on the price of Ameris’ common stock immediately prior to the effective time of the merger. A 20% difference in per share price at the closing of the merger compared to the amount used in these unaudited pro forma condensed combined financial statements would increase or decrease total acquisition consideration and goodwill by approximately $3.9 million.
Income Statements
Note that the estimated transaction costs included as part of the unaudited pro forma condensed combined balance sheet as of September 30, 2013, have not been included in the above unaudited pro forma condensed combined income statements.
Note 5 - Earnings per Common Share
Unaudited pro forma earnings per common share for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have been calculated using Ameris’ historic weighted average common shares outstanding plus the common shares assumed to be issued to Prosperity shareholders per the merger agreement.
The following table sets forth the calculation of basic and diluted unaudited pro forma earnings per common share for the nine months ended September 30, 2013 and the year ended December 31, 2012 (in thousands, except per share data).
Nine Months Ended September 30, 2013 | Year Ended December 31, 2012 | |||||||||||||||
Basic | Diluted | Basic | Diluted | |||||||||||||
Pro forma net income available to common shareholders | $ | 16,869 | $ | 16,869 | $ | 11,366 | $ | 11,366 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Ameris | 23,883 | 24,298 | 23,816 | 23,857 | ||||||||||||
Common shares issued to Prosperity shareholders | 1,181 | 1,181 | 1,181 | 1,181 | ||||||||||||
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Pro forma | 25,064 | 25,479 | 24,997 | 25,038 | ||||||||||||
Pro forma net income per common share | $ | 0.67 | $ | 0.66 | $ | 0.45 | $ | 0.45 | ||||||||
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