EXHIBIT 99.2
Exhibit 99.2 UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
VALLEY FINANCIAL CORP. AND SUBSIDIARIES
The unaudited pro forma combined consolidated financial statements presented on
the following pages are based on the historical financial statements of North
Central and reflect the pro forma effects of the acquisition of Valley Financial
(the "Acquisition"). The Acquisition was accounted for under the purchase method
of accounting.
For purposes of the pro forma statements, the purchase price of Valley Financial
has been allocated to the acquired net assets based on information currently
available with regard to the values of such net assets. Pro forma adjustments
have been made only for those assets and liabilities which, based solely on
preliminary estimates, may have fair values significantly different from
historical amounts. As such, final adjustments to recorded amounts may differ
significantly from the pro forma adjustments presented herein.
The unaudited pro forma consolidated statements of income for the nine months
ended September 30, 1997 and the year ended December 31, 1996 were prepared as
if the Acquisition had occurred as of the beginning of the respective periods
for the purposes of the combined consolidated statements of income and as if
such an acquisition had occurred at the end of the period for purposes of the
combined consolidated balance sheet.
These pro forma financial statements are not necessarily indicative of the
results of operations that might have occurred had the acquisition taken place
at the beginning of the period, or to project the Company's results of
operations at any future date or for any future period. The pro forma statements
should be read in connection with the notes thereto.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
VALLEY FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
at September 30, 1997
North Valley Pro Forma
Central Financial Adjustments Combined
-------------- -------------- --------------- ---------------
ASSETS
Cash and cash equivalents $ 4,520,553 $ 3,364,164 $ -- $ 7,884,717
Securities available for sale 22,241,637 45,675,255 (3,417,490)(1) 64,499,402
Securities held to maturity -- -- -- --
Loans receivable, net 181,119,869 60,039,484 706,781 (2) 241,866,134
Accrued interest receivable 1,328,799 991,964 -- 2,320,763
Foreclosed real estate 231,814 67,605 -- 299,419
Premises and equipment, net 2,015,152 1,102,634 -- 3,117,786
Rental real estate 2,083,625 -- -- 2,083,625
Title plant 925,256 -- -- 925,256
Deferred taxes 74,000 -- (74,000)(3) --
Goodwill -- -- 6,821,989 (4) 6,821,989
Prepaid expenses and other assets 592,683 144,325 -- 737,008
------------- ------------- ----------- -------------
Total Assets $ 215,133,388 $ 111,385,431 $ 4,037,280 $ 330,556,099
============= ============= =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 139,254,875 $ 101,734,158 $ 410,165 (2) $ 241,399,198
Other borrowed funds 25,550,000 500,000 11,308,760 (1) 37,358,760
Advances from borrowers for taxes
and insurance 364,994 97,996 -- 444,990
Dividend payable 203,624 -- -- 203,624
Income taxes payable 118,930 -- -- 118,930
Deferred taxes -- 108,156 (17,100)(3),(5) 91,056
Accrued expenses and other liabilities 356,169 773,576 507,000 (5) 1,636,745
------------- ------------- ----------- -------------
Total Liabilities 165,830,592 103,213,886 12,208,825 281,253,303
------------- ------------- ----------- -------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock 40,111 31,900 (31,900)(1) 40,111
Additional paid-in-capital 37,895,518 2,979,900 (2,979,900)(1) 37,895,518
Retained earnings, substantially restricted 22,760,386 6,133,445 (6,133,445)(1) 22,760,386
Unrealized gain on securities available
for sale, net of income taxes 364,532 155,000 (155,000)(1) 364,532
Treasury stock at cost (10,496,411) (1,128,700) 1,128,700 (1) (10,496,411)
Unearned shares, employee stock
ownership plan (1,261,340) -- -- (1,261,340)
------------- ------------- ----------- -------------
Total stockholders' equity 49,302,796 8,171,545 (8,171,545) 49,302,796
------------- ------------- ----------- -------------
Total Liabilities and Stockholders' Equity $ 215,133,388 $ 111,385,431 $ 4,037,280 $ 330,556,099
============= ============= =========== =============
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
VALLEY FINANCIAL CORP AND SUBSIDIARIES
NOTES TO UNAUDITED PROFORMA COMBINED CONSOLIDATED BALANCE SHEET
Pursuant to the Merger and consistent with generally accepted accounting
principles ("GAAP"), certain purchase method accounting adjustments relating to
Valley Financial will be recorded. The purchase method accounting adjustments
are preliminary estimates and are subject to revision as economic conditions
change or as more information becomes available. The purchase price was $14.7
million, consisting of 28,050 outstanding shares of Valley Financial stock, at
$525 per share. The following notes further explain the adjustments.
(1) Represents the planned sale of $3.4 million of securities available for
sale and borrowings of $11.3 million to fund the purchase and the
elimination of the stockholders' equity of Valley Financial under the
purchase method of accounting.
(2) Represents the mark-to-market adjustments to reflect the fair market value
of the Valley Financial assets acquired and liabilities assumed under the
purchase method of accounting. The following summarizes the net mark-to-
market premium or (discounts) established for the following asset and
liability categories:
Loans $ 706,781
Deposits (410,165)
--------------
Total $ 296,616
==============
(3) Represents the reclassification of deferred income taxes.
(4) Represents the excess of the purchase price paid for Valley Financial over
the fair market value of the tangible and identifiable assets acquired and
the fair value of the liabilities (goodwill) assumed under the purchase
method of accounting. Goodwill is assumed to amortize on a straight-line
basis over 15 years.
The merger consideration of $14.7 million was allocated as follows:
Net assets at fair value (note 1 & 2) $ 8,468,161
Professional fees (note 5) (363,000)
Other accrued liabilities (note 5) (144,000)
Goodwill 6,821,989
Net deferred tax liabilities (note 5) (56,900)
---------------
Purchase Price $ 14,726,250
===============
(5) Represents accruals for other Merger related costs such as professional
fees including investment banker, accountants and attorneys fees
($363,000), accruals for other liabilities ($144,000) and net deferred tax
liabilities of ($56,900).
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
VALLEY FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 1997
North Valley Pro Forma
Central Financial Adjustment Combined
------------- ------------- ------------ -------------
INTEREST INCOME:
Loans receivable:
First mortgage loans $ 9,111,895 $ 3,600,780 $ (166,831)(1) $ 12,545,844
Consumer and other loans 1,623,475 452,833 -- 2,076,308
Securities and cash deposits 1,200,805 2,059,580 (279,334)(2) 2,981,051
------------- ------------- ----------- -------------
Total interest income 11,936,175 6,113,193 (446,165) 17,603,203
------------- ------------- ----------- -------------
INTEREST EXPENSE:
Deposits 4,795,481 3,663,083 (265,956)(3) 8,192,608
Borrowed funds 980,208 41,255 508,895 (4) 1,530,358
------------- ------------- ----------- -------------
Total interest expense 5,775,689 3,704,338 242,939 9,722,966
------------- ------------- ----------- -------------
Net interest income 6,160,486 2,408,855 (689,104) 7,880,237
Provision for loan losses 180,000 (100,000) -- 80,000
------------- ------------- ----------- -------------
Net interest income after loan losses 5,980,486 2,508,855 (689,104) 7,800,237
------------- ------------- ----------- -------------
NONINTEREST INCOME:
Fees and service charges 472,074 344,853 -- 816,927
Loan origination and commitment
fees -- 228,121 -- 228,121
Abstract fees 886,981 -- -- 886,981
Gain on sale of securities available
for sale -- 9,404 -- 9,404
Other income 317,371 17,240 -- 334,611
------------- ------------- ----------- -------------
Total noninterest income 1,676,426 599,618 -- 2,276,044
------------- ------------- ----------- -------------
NONINTEREST EXPENSE:
Salaries and employee benefits 1,607,769 877,192 -- 2,484,961
Premises and equipment 316,908 171,155 -- 488,063
Data processing 191,224 129,896 -- 321,120
SAIF deposit insurance premiums 63,181 34,453 -- 97,634
Other expenses 1,160,676 529,715 341,100 (5) 2,031,491
------------- ------------- ----------- -------------
Total noninterest expense 3,339,758 1,742,411 341,100 5,423,269
------------- ------------- ----------- -------------
Income before income taxes 4,317,154 1,366,062 (1,030,204) 4,653,012
Provision for income taxes 1,495,563 453,218 (257,036) 1,691,745
------------- ------------- ----------- -------------
Net Income $ 2,821,591 $ 912,844 $ (773,168) $ 2,961,267
============= ============= =========== =============
Basic earnings per common share $ 0.88 $ 0.92
============= =============
Earnings per common share -
assuming dilution $ 0.87 $ 0.91
============= =============
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
VALLEY FINANCIAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 1996
North Valley Pro Forma
Central Financial Adjustment Combined
----------- ---------- ----------- -----------
INTEREST INCOME:
Loans receivable:
First mortgage loans $11,173,567 $4,787,517 $ (222,442)(1) $15,738,642
Consumer and other loans 2,007,185 676,537 -- 2,683,722
Securities and cash deposits 1,909,267 2,030,456 (372,445)(2) 3,567,278
----------- ---------- ----------- -----------
Total interest income 15,090,019 7,494,510 (594,887) 21,989,642
----------- ---------- ----------- -----------
INTEREST EXPENSE:
Deposits 6,217,234 4,401,078 (354,608)(3) 10,263,704
Borrowed funds 711,418 70,087 678,526 (4) 1,460,031
----------- ---------- ----------- -----------
Total interest expense 6,928,652 4,471,165 323,918 11,723,735
----------- ---------- ----------- -----------
Net interest income 8,161,367 3,023,345 (918,805) 10,265,907
Provision for loan losses 240,000 6,000 -- 246,000
----------- ---------- ----------- -----------
Net interest income after loan losses 7,921,367 3,017,345 (918,805) 10,019,907
----------- ---------- ----------- -----------
NONINTEREST INCOME:
Fees and service charges 579,999 443,973 -- 1,023,972
Loan origination and commitment
fees -- 391,088 -- 391,088
Abstract fees 931,031 -- -- 931,031
Gain on sale of securities available
for sale 13,774 15,970 -- 29,744
Other income 368,691 219,446 -- 588,137
----------- ---------- ----------- -----------
Total noninterest income 1,893,495 1,070,477 -- 2,963,972
----------- ---------- ----------- -----------
NONINTEREST EXPENSE:
Salaries and employee benefits 2,003,701 1,252,330 -- 3,256,031
Premises and equipment 420,633 300,079 -- 720,712
Data processing 243,762 172,836 -- 416,598
SAIF deposit insurance premiums 1,095,838 754,180 -- 1,850,018
Other expenses 1,174,450 608,370 454,800 (5) 2,237,620
----------- ---------- ----------- -----------
Total noninterest expense 4,938,384 3,087,795 454,800 8,480,979
----------- ---------- ----------- -----------
Income before income taxes 4,876,478 1,000,027 (1,373,605) 4,502,900
Provision for income taxes 1,743,557 333,746 (342,714) 1,734,589
----------- ---------- ----------- -----------
Net Income $ 3,132,921 $ 666,281 $(1,030,891) $ 2,768,311
=========== ========== =========== ===========
Basic earnings per common share $ 0.82 $ 0.72
=========== ===========
Earnings per common share -
assuming dilution $ 0.82 $ 0.72
=========== ===========
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
VALLEY FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
Pursuant to the Merger and consistent with GAAP, certain adjustments will
be recorded, primarily to accrue for specific, identified costs related to the
merger of Valley Financial. The amounts of the Merger related costs are
preliminary estimates and are subject to revisions as economic conditions change
or as more information become available.
North Central expects to achieve operating cost savings primarily through
the consolidation of back office functions, elimination of redundant
professional fees and elimination of some employee benefits. The operating cost
savings are expected to be achieved in various amounts at various times during
the years subsequent to the acquisition of Valley Financial and not ratably
over, or at the beginning or end of, such periods. No adjustment has been
reflected in the Unaudited Pro Forma Combined Consolidated Statement of Income
for the year ended December 31, 1996, or for the nine months ended September 30,
1997 for the anticipated cost savings.
(1) Represents amortization of Valley Financial mark-to-market adjustments
under the purchase method of accounting for loans.
(2) Represents amortization of Valley Financial mark-to-market adjustments
under the purchase method of accounting for securities, and the forgone
interest income resulting from the planned sale of $3.4 million of
securities, at a rate of 6.0%.
(3) Represents amortization of Valley Financial mark-to-market adjustments
under the purchase method of accounting for deposits.
(4) Represents the cost of borrowing $11.3 million to fund the Valley
Financial acquisition, at a rate of 6.0%.
(5) Represents amortization of goodwill.