Exhibit 99.2
Pro Forma Financial Information
Croghan Bancshares, Inc. and Indebancorp
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
The following unaudited pro forma condensed combined consolidated balance sheet as of September 30, 2013, and the unaudited pro forma condensed combined consolidated statement of income for the nine months ended September 30, 2013, have been prepared to reflect the merger of Indebancorp with and into Croghan as if the merger had occurred on September 30, 2013. The pro forma adjustments are based on estimates made for the purpose of preparing these pro forma financial statements and are described in the accompanying Notes. Croghan’s management believes that the estimates used in these pro form financial statements are reasonable under the circumstances.
The unaudited pro forma condensed combined consolidated financial information has been prepared based on the purchase method of accounting reflecting the issuance of 592,272 Croghan common shares in the merger.
The unaudited pro forma condensed combined consolidated financial statements included herein are presented for information purposes only. The unaudited pro forma condensed combined consolidated balance sheet as of September 30, 2013 is not necessarily indicative of the combined financial position had the merger been effective at that date. The unaudited pro forma condensed combined consolidated statements of income are not necessarily indicative of the results of operations that would have occurred had the merger been effective at the beginning of the periods indicated, or of the future results of operations of Croghan.
These pro forma financial statements do not include the effects of any potential cost savings which management believes will result from operating the banking business of Indebancorp and its subsidiary, National Bank of Ohio, as branches and combining certain operating procedures. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during these periods.
Exhibit 99.2
Croghan Bancshares, Inc.
Indebancorp
Pro Forma Condensed Combined Consolidated Balance Sheet
September 30, 2013
| Historical Croghan | Historical Indebancorp | Pro Forma Adjustments Debit/(Credit) | Footnote Reference | Pro Forma Combined | ||||||||||||||
(Unaudited) (in thousands except per share data) | ||||||||||||||||||
ASSETS: | ||||||||||||||||||
Cash and due from banks | $ | 19,986 | $ | 17,501 | $ | (9,334 | ) | (1) | $ | 28,153 | ||||||||
Fed Funds sold | 723 | — | 723 | |||||||||||||||
Securities available for sale | 230,824 | 24,233 | — | 255,057 | ||||||||||||||
Loans, gross | 326,862 | 177,176 | (5,315 | ) | (2) | 498,723 | ||||||||||||
Allowance for loan losses | (4,121 | ) | (2,355 | ) | 2,355 | (3) | (4,121 | ) | ||||||||||
Premises and equipment | 7,218 | 2,838 | — | 10,056 | ||||||||||||||
Real estate owned | 919 | 222 | — | 1,141 | ||||||||||||||
Federal Home Loan Bank stock | 4,177 | 952 | — | 5,129 | ||||||||||||||
Bank owned life insurance | 11,174 | 5,570 | — | 16,744 | ||||||||||||||
Loan servicing rights | 175 | 944 | — | 1,119 | ||||||||||||||
Core Deposit Premium | 723 | — | 1,685 | (4) | 2,408 | |||||||||||||
Goodwill | 14,629 | — | 8,179 | (5) | 22,808 | |||||||||||||
Accrued interest and other assets | 4,484 | 1,928 | 637 | (6) | 7,049 | |||||||||||||
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Total Assets | $ | 617,050 | $ | 229,732 | $ | (1,793 | ) | $ | 844,989 | |||||||||
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LIABILITIES: | ||||||||||||||||||
Deposits | $ | 521,087 | $ | 196,815 | $ | 500 | (7) | $ | 718,402 | |||||||||
Repurchase agreements | 13,743 | — | 13,743 | |||||||||||||||
Other borrowings | 14,357 | 8,217 | 100 | (8) | 22,674 | |||||||||||||
Accrued expenses and other liabilities | 2,692 | 2,672 | 5,364 | |||||||||||||||
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Total Liabilities | 551,879 | 207,704 | 600 | 760,183 | ||||||||||||||
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EQUITY: | ||||||||||||||||||
Common stock | 23,926 | 1,282 | 6,122 | (9) | 31,330 | |||||||||||||
Additional paid-in capital | 185 | — | 13,000 | (9) | 13,185 | |||||||||||||
Retained earnings | 47,412 | 20,811 | (21,580 | ) | (10) | 46,643 | ||||||||||||
Treasury stock | (8,084 | ) | — | (8,084 | ) | |||||||||||||
Accumulated other comprehensive income (loss) | 1,732 | (65 | ) | 65 | (11) | 1,732 | ||||||||||||
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Total Stockholders’ Equity | 65,171 | 22,028 | (2,393 | ) | 84,806 | |||||||||||||
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Total Liabilities & Stockholders’ Equity | $ | 617,050 | $ | 229,732 | $ | (1,793 | ) | $ | 844,989 | |||||||||
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Exhibit 99.2
Croghan Bancshares, Inc.
Indebancorp
Pro Forma Condensed Combined Consolidated Statement of Income
For the Nine months Ended September 30, 2013
| Pro Forma | ||||||||||||||||||
| Historical | Historical | Adjustments | Footnote | Pro Forma | ||||||||||||||
| Croghan | Indebancorp | Debit/(Credit) | Reference | Combined | ||||||||||||||
(Unaudited) (in thousands except per share data) | ||||||||||||||||||
Interest income | $ | 15,567 | $ | 7,509 | $ | 464 | (12) | $ | 23,540 | |||||||||
Interest expense | 1,634 | 1,187 | (218 | ) | (7)(8) | 2,603 | ||||||||||||
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Net interest income | 13,933 | 6,322 | 682 | 20,937 | ||||||||||||||
Provision for loan losses | 275 | 475 | — | 750 | ||||||||||||||
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Net interest income after provision for loan losses | 13,658 | 5,847 | 682 | 20,187 | ||||||||||||||
Non-interest income | 3,610 | 1,538 | — | 5,148 | ||||||||||||||
Non-interest expense | 12,935 | 5,856 | 230 | (4) | 19,021 | |||||||||||||
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Income before income taxes | 4,333 | 1,529 | 452 | 6,314 | ||||||||||||||
Income tax provision | 671 | 374 | 154 | (13) | 1,199 | |||||||||||||
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Net Income | $ | 3,662 | $ | 1,155 | $ | 298 | $ | 5,115 | ||||||||||
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Earnings per share | ||||||||||||||||||
Basic | $ | 2.18 | $ | 2.23 | ||||||||||||||
Diluted | $ | 2.17 | $ | 2.23 | ||||||||||||||
Pro Forma earnings per share | ||||||||||||||||||
Basic | (14) | $ | 2.25 | |||||||||||||||
Diluted | (14) | $ | 2.25 | |||||||||||||||
Exhibit 99.2
A. PRELIMINARY PURCHASE ACCOUNTING ALLOCATIONS
The unaudited pro forma condensed combined consolidated financial information for the merger includes an unaudited pro forma condensed combined balance sheet as of September 30, 2013 assuming the merger was completed on September 30, 2013. The unaudited pro forma condensed combined consolidated statements of income is for the nine months ended September 30, 2013.
Preliminary Purchase Accounting Allocations
September 30, 2013 | ||||||||
(Dollars in thousands) | ||||||||
Indebancorp shareholders’ equity – September 30, 2013 | $ | 22,028 | ||||||
Less estimated fair value adjustments: | ||||||||
Loan fair value | $ | (5,315 | )(2) | |||||
Allowance for loan losses | 2,355 | (3) | ||||||
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Loans, net | (2,960 | ) | ||||||
Core deposit intangible | 1,685 | (4) | ||||||
Deferred tax asset, net | 637 | (6) | ||||||
Deposits fair value | (500 | )(7) | ||||||
Other Borrowings fair value | (100 | )(8) | ||||||
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Total fair value adjustments | (1,238 | ) | ||||||
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Estimated fair value of Indebancorp net assets at September 30, 2013 |
| 20,790 | ||||||
Total consideration paid to Indebancorp shareholders (**) | 28,969 | |||||||
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Goodwill | $ | 8,179 | ||||||
| ** | The purchase price is based on estimated total consideration of $28,969, including $8,565 cash and issuance of 592,272 (Note 9) shares of Croghan common stock at a price of approximately $34.45 per common share for a value of $20,404. The $34.45 per common shares value for Croghan’s common stock is the 20 day average closing price ending September 30, 2013 for Croghan common stock. |
B. Notes:
| (1) | Cash consideration of $8,565 paid to Indebancorp’s shareholders plus estimated transaction costs of ($825), less tax benefit of ($56) for a total of $769, net of tax. |
| (2) | Estimated fair value of Indebancorp’s loan portfolio acquired is estimated by Croghan to be less than book value. Based on management’s judgment, Croghan applied a discount to the loan portfolio to estimate the fair value adjustment as of September 30, 2013. The adjustment reflects Croghan’s estimates of both market interest rate differential and credit considerations on pools of loans and the potential adjustments required by ASC 310-30, “Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality” for applicable individual loans. The portion of the fair market value adjustment that is accretable is assumed to amortize into interest income on a level yield basis over the estimated remaining life of the loans. |
| (3) | Elimination of Indebancorp’s allowance for loan losses. |
| (4) | Represents the establishment of the estimated core deposit intangible. The core deposit intangible is assumed to amortize into non-interest expense over 10 years, using accelerated methods. |
| (5) | Goodwill estimate based on the excess of the purchase price over the estimated fair value of the net assets acquired. |
| (6) | Tax effect of estimated fair market value adjustments. |
| (7) | Estimated fair market value adjustment related to deposits and is assumed to amortize into interest expense on a level yield basis over the estimated remaining maturity of the deposits. |
| (8) | Estimated fair market value adjustment related to FHLB borrowings and is assumed to amortize into interest expense on a level basis over the estimated life of the borrowings. |
Exhibit 99.2
| (9) | Reflects the elimination of Indebancorp’s common stock ($1,282) and the additional par value from the issuance of 592,272 Croghan shares to Indebancorp’s shareholders ($7,404), as well as the additional paid-in capital ($13,000) representing the excess capital over the par value for the shares issued. |
| (10) | Reflects the elimination of Indebancorp’s retained earnings and after-tax transaction costs of $769. |
| (11) | Reflects the elimination of Indebancorp’s unrealized securities gains, net of tax. |
| (12) | Interest income impact of lost earnings on merger expenses and cash consideration. |
| (13) | Represents the income tax effect of the estimated purchase accounting adjustments using a tax rate of 34%. |
| (14) | Basic and diluted pro forma earnings per share for the nine months ended September 30, 2013 have been computed based on 1,678,630 (Croghan basic), 1,685,983 (Croghan diluted), 519,082 (Indebancorp basic and diluted) and 2,270,902 (pro forma basic) and 2,278,255 (pro forma diluted) shares, respectively. |
