SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 2001
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MOUNTAINBANK FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
NORTH CAROLINA 000-32547 56-2237240
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
201 Wren Drive
Hendersonville, North Carolina 28792
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (828) 693-7376
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[This Amendment to Form 8-K is being filed to include the pro forma
condensed combined financial information described in Item 7(b) below that was
omitted from the original filing as permitted by Item 7(b)(2) of Form 8-K.]
Item 2. Acquisition or Disposition of Assets.
Effective at 5:01 P.M. on December 31, 2001, First Western Bank ("FWB")
was merged into Registrant's wholly-owned banking subsidiary, MountainBank. FWB
was an insured, North Carolina-chartered bank located in Burnsville, North
Carolina, that first began banking operations on December 15, 1997. On
September 30, 2001, First Western's unaudited interim financial statements
reflected total assets of approximately $97.1 million, total loans of
approximately $78.1, total deposits of approximately $67.6 million, and total
shareholders' equity of approximately $13.4 million.
FWB's principal executive offices were located in Burnsville (Yancey
County), North Carolina. In addition to its main banking office, it operated
two branch offices in Spruce Pine (Mitchell County), North Carolina, and one
branch office in Weaverville (Buncombe County), North Carolina. FWB's principal
banking market consisted of the area immediately surrounding its banking
offices, including portions of Yancey, Mitchell, and Buncombe Counties, and is
located in the mountains of North Carolina north of the City of Asheville.
The merger was effected pursuant to an Agreement and Plan of Reorganization
and Merger dated September 17, 2001, between Registrant, FWB and MountainBank
(the "Agreement"). Under the Agreement, each of the outstanding shares of FWB's
common stock held by its shareholders (other than shareholders who exercised
their statutory dissenters' rights under North Carolina law) were converted into
0.50 shares of Registrant's common stock. The merger was approved by FWB's
shareholders at a special meeting on December 20, 2001.
In connection with the merger, William A. Banks and Van F. Phillips, former
directors of FWB, have been appointed to serve as directors of Registrant and
MountainBank. Additionally, two other former FWB directors have been appointed
to serve as directors of MountainBank.
The merger is being treated as a "purchase" under generally accepted
accounting principles.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired. The following audited financial
statements and unaudited interim financial statements of FWB were
previously filed with Amendment No. 1 to Registrant's Registration
Statement on Form S-4 (Reg. No. 333-71516) and are not being refiled with
this Report:
(1) Audited Financial Statements of FWB:
(i) Independent Auditors' Report
(ii) Balance Sheets -- December 31, 2000 and 1999
(iii) Statements of Operations and Comprehensive Income (Loss) --
Years ended December 31, 2000, 1999 and 1998
(iv) Statements of Changes in Shareholders' Equity -- Years ended
December 31, 2000, 1999 and 1998
(v) Statements of Cash Flows -- Years ended December 31, 2000,
1999 and 1998
(vi) Notes to Financial Statements -- Years ended December 31, 2000,
1999 and 1998
(2) Unaudited Interim Financial Statements of FWB:
(i) Balance sheets -- September 30, 2001 (unaudited) and December 31,
2000
(ii) Statements of operations and comprehensive income (loss)
(unaudited) -- Three- and nine-month periods ended September 30,
2001 and 2000
(iii) Statements of cash flows (unaudited) -- Nine months ended
September 30, 2001 and 2000
(iv) Notes to financial statements (unaudited) -- Three- and nine-
month periods ended September 30, 2001 and 2000
(b) Pro forma Condensed Combined Financial Statements. The following pro
forma condensed combined financial statements are included in this Report:
(1) Pro forma condensed combined balance sheet (unaudited) -- September 30,
2001
(2) Pro forma condensed combined income statements -- For the nine months
ended September 30, 2001
(3) Pro Forma Condensed Combined Income Statements -- For the year ended
December 31, 2000
(4) Notes to pro forma condensed combined financial statements
(c) Exhibits. The following exhibit was previously filed with Amendment No. 1
to Registrant's Registration Statement on Form S-4 (Reg. No. 333-71516) and
is not being refiled with this Report:
Exhibit No. Exhibit Description
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2 Agreement and Plan of Reorganization and Merger dated
September 17, 2001
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MountainBank Financial Corporation and First Western Bank
Unaudited Pro forma Condensed Combined Financial Statements
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We are providing the following unaudited pro forma condensed combined financial
statements to aid you in your analysis of the financial aspects of the merger of
First Western Bank into MountainBank which is being accounted for as a purchase
transaction. The unaudited pro forma condensed combined balance sheet gives
effect to the purchase transaction as if it had occurred on September 30, 2001.
The unaudited pro forma condensed combined statements of income for the nine
months ended September 30, 2001 and the year ended December 31, 2000 give effect
to the merger of MountainBank and First Western, as if the purchase transaction
had occurred January 1, 2000. The statements include pro forma adjustments as
described in the notes accompanying the financial statements.
We derived this information from the unaudited consolidated financial statements
for the nine months ended September 30, 2001 and the audited consolidated
financial statements for the year ended December 31, 2000 of MFC and First
Western. The unaudited pro forma condensed combined financial statements should
be read in conjunction with the unaudited and audited historical consolidated
financial statements and related notes of First Western which are included in
this report.
The unaudited pro forma condensed combined financial information is presented
for illustrative purposes only and does not purport to be indicative of the
operating results or financial position that would have actually occurred if the
consolidation had been in effect on the dates indicated, nor is it indicative of
the future operating results of financial position of the consolidated company.
The pro forma adjustments are based on the information and assumptions available
as of September 30, 2001.
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MountainBank Financial Corporation and First Western Bank
Unaudited Pro forma Condensed Combined Balance Sheet
September 30, 2001 (in thousands - unaudited)
MountainBank
Financial Corp. First Western Pro forma
& Subsidiary Bank Adjustments Combined
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Assets
Cash and cash equivalents $ 11,220 $ 2,911 $ - $ 14,131
Interest-bearing deposits with banks 177 35 - 212
Investment securities 38,614 8,760 5 /D/ 47,379
Federal funds sold 7,530 2,575 - 10,105
Loans receivable, net 360,032 77,022 1,054 /D/ 438,108
Bank premises and equipment, net 3,018 3,642 424 /D/ 7,084
Restricted equity securities 1,421 638 - 2,059
Core deposit intangibles - - 2,202 /D/ 2,202
Goodwill - 1,088 (1,088)/C/ -
Other assets 4,453 439 - 4,892
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Total assets $ 426,465 $ 97,110 $ 2,597 $ 526,172
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Liabilities and Stockholders' Equity
Liabilities
Deposits $ 363,977 $ 67,634 $ 336 /D/ $ 431,947
Borrowings 36,348 15,179 - 51,527
Other liabilities 6,058 911 1,500 /E/ 8,859
390 /D/
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Total liabilities 406,383 83,724 2,226 492,333
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Stockholders' equity
Common stock, $4, par value,
10,000,000 shares authorized,
pro forma 2,561,596 shares issued 7,495 6,878 (6,878)/B/ 10,246
2,751 /A/
Surplus 9,403 6,814 (6,814)/B/ 20,409
11,006 /A/
Retained earnings (accumulated deficit) 3,069 (460) 460 /B/ 3,069
Accumulated other
comprehensive income 115 154 (154)/B/ 115
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Total stockholders' equity 20,082 13,386 371 33,839
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Total liabilities and
stockholders' equity $ 426,465 $ 97,110 $ 2,597 $ 526,172
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MountainBank Financial Corporation and First Western Bank
Unaudited Pro forma Condensed Combined Income Statements
For the nine months ended September 30, 2001 (in thousands - unaudited)
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MountainBank
Financial Corp. First Western Pro forma
& Subsidiary Bank Adjustments Combined
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Interest income
Loans and fees on loans $ 19,942 $ 3,892 $ 205 /H/ $ 24,039
Investment securities 1,660 495 5 /I/ 2,160
Federal funds sold 212 48 - 260
Deposits with banks 225 5 - 230
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Total interest income 22,039 4,440 210 26,689
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Interest expense
Deposits 11,361 1,914 - 13,275
Short-term debt 1,247 46 - 1,293
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Total interest expense 12,608 1,960 - 14,568
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Net interest income 9,431 2,480 210 12,121
Provision for loan losses 2,197 390 - 2,587
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Net interest income after provision
for loan losses 7,234 2,090 210 9,534
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Noninterest income
Service charges on deposit accounts 589 199 - 788
Other service charges and fees 361 293 - 654
Security gains (losses) 64 60 - 124
Other 639 20 - 659
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Total other income 1,653 572 - 2,225
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Noninterest expense
Salaries 3,179 1,190 - 4,369
Occupancy 876 389 - 1,265
Other 1,896 1,000 (86)/G/ 2,996
186 /F/
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Total other expense 5,951 2,579 100 8,630
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Income before income taxes 2,936 83 110 3,129
Income taxes 1,049 59 71 /J/ 1,179
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Net income $ 1,887 $ 24 $ 39 $ 1,950
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Basic earnings per share $ 1.01 $ 0.02 $ 0.76
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Weighted average shares outstanding 1,873,167 1,380,080 2,563,207
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MountainBank Financial Corporation and First Western Bank
Unaudited Pro forma Condensed Combined Income Statements
For the year ended December 31, 2000 (in thousands - unaudited)
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MountainBank
Financial Corp. First Western Pro forma
& Subsidiary Bank Adjustments Combined
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Interest income
Loans and fees on loans $ 13,210 $ 4,017 $ 274 /H/ $ 17,501
Investment securities 1,865 680 7 /I/ 2,552
Federal funds sold 241 193 - 434
Deposits with banks 505 78 - 583
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Total interest income 15,821 4,968 281 21,070
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Interest expense
Deposits 8,796 2,242 - 11,038
Short-term debt 220 - - 220
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Total interest expense 9,016 2,242 - 11,258
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Net interest income 6,805 2,726 281 9,812
Provision for loan losses 1,905 199 - 2,104
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Net interest income after
provision for loan losses 4,900 2,527 281 7,708
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Noninterest income
Service charges on deposit accounts 461 228 - 689
Other service charges and fees 60 293 353
Security gains (losses) - - - -
Other 797 91 - 888
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Total other income 1,318 612 - 1,930
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Noninterest expenses
Salaries 2,417 1,374 - 3,791
Occupancy 316 245 - 561
Other 1,846 1,430 (115)/G/ 3,409
248 /F/
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Total other expense 4,579 3,049 133 7,761
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Income before income taxes 1,639 90 148 1,877
Income taxes (benefit) 583 (349) 419 /J/ 748
95 /J/
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Net income $ 1,056 $ 439 $ (366) $ 1,129
================= ================= ================== ==================
Basic earnings per share $ 0.62 $ 0.30 $ 0.46
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Weighted average shares outstanding 1,701,426 1,464,821 2,433,836
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MountainBank Financial Corporation and First Western Bank
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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Note 1. Basis of Presentation and First Western Acquisition
Basis of presentation:
The unaudited Pro Forma Condensed Combined Financial Statements give effect to
the merger in a business combination accounted for as a purchase. As a result of
the merger, First Western was merged into MFC's wholly owned subsidiary,
MountainBank, on December 31, 2001.
First Western acquisition:
Each of the outstanding 1,375,682 shares of First Western Common Stock, other
than shares held by dissenting shareholders, was exchanged for .50 shares of MFC
Common Stock ($4 par value). The pro forma balance sheet reflects the proposed
exchange as if it had occurred on September 30, 2001, based on a market value
estimated by MFC's financial advisor of $20 per share at that date. This
estimate was updated and reconfirmed as of the date of the exchange. Described
below is the pro forma estimate of the total purchase price of the transaction
as well as the adjustments to allocate the purchase price based on estimates of
the fair values of the assets and liabilities of First Western.
(in thousands)
Estimated fair value of shares to be issued to First Western shareholders $ 13,757
Estimated transaction costs 1,500
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Total 15,257
Fair value of tangible assets acquired less
fair value of liabilities assumed 13,055
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Core deposit intangible assets $ 2,202
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Except as discussed in Note 2, there are no adjustments to other asset or
liability groups as the fair market values and book values are the same.
Note 2. The purchase accounting and pro forma adjustments related to the
unaudited pro forma condensed combined balance sheet and income
statements are described below:
A Issuance of 687,841 (1,375,682 X .50) shares, with a par value of
$4.00 per share of MFC's common stock with a measurement date
value of $20.00.
B Elimination of First Western's equity accounts.
C Elimination goodwill carried by First Western prior to this
transaction. Generally accepted accounting principles require that
an acquiring entity not recognize the goodwill previously recorded
by an acquired entity (SFAS No. 141 Para 38).
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MountainBank Financial Corporation and First Western Bank
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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D To record the differences at September 30, 2001 in fair values of
acquired assets and liabilities assumed as follows:
Fair Book
Value Value Adjustments
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Cash and cash equivalents $ 2,911 $ 2,911 $ -
Interest and bearing deposits with banks 35 35 -
Investment securities 8,765 8,760 5
Federal funds sold 2,575 2,575 -
Loans receivable 78,076 77,022 1,054
Bank premises and equipment 4,066 3,642 424
Restricted equity securities 638 638 -
Core deposit intangibles 2,202 - 2,202
Other assets 439 439 -
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Subtotal assets 99,707 96,022 3,685
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Deposits 67,970 67,634 336
Borrowings 15,179 15,179 -
Other liabilities 1,301 911 390
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Subtotal liabilities 84,450 83,724 726
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Total $ 15,257 $ 12,298 $ 2,959
================= ================== ==================
The transaction premium as computed under "First Western
acquisition" in Note 1 above is recorded as the core deposit
intangible asset. The valuation of the core deposit intangible is
not considered excessive based on the opinion of MFC's financial
advisor. For pro forma purposes, no goodwill is being estimated as
a result of this transaction.
E To record the estimated acquisition costs, net of taxes, as
follows:
Employment costs, change of control $ 1,000
Investment advisors 300
Legal and accounting 250
Data contract termination and other merger costs 400
Less estimated tax benefits (450)
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Acquisition costs $ 1,500
=================
F Amortization of core deposit intangible. MFC estimates that a core
deposit intangible (assuming an acquisition date of January 1,
2000) of $3,714,000 would be amortized on a straight line basis
over 15 years. The core deposit intangible of $3,714,000
represents the excess of cost over fair value of First Western's
net tangible assets (equity) at January 1, 2000. The difference in
the core deposit intangible of $2,202,000 at September 30, 2001,
as reflected in the pro forma condensed combined balance sheet and
the core deposit intangible of $3,714,000 at January 1, 2000, is
reflective of the changes in the fair value of First Western's
equity between those two dates.
G Elimination of goodwill amortization recorded by First Western
relating to its historical goodwill balances.
H The pro forma adjustment reflects the accretion to income of a
$1,505,000 loan discount (relating to the fair value of loans less
than carrying value at January 1, 2000) over the average life of
the portfolio of 5 1/2 years.
I The pro forma adjustment reflects the accretion to income of a
$41,000 investment security discount (relating to the fair value
of investment securities less than carrying value at January 1,
2000) over the average life of the portfolio of 6 years.
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MountainBank Financial Corporation and First Western Bank
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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J There is no income tax effect of the pro forma adjustments F and G
since i) the prior transaction goodwill eliminated and ii) core
deposit intangible amortization in the proposed transaction are
not tax deductible. The $419 tax expense increase in the year
ended December 31, 2000 pro forma income statement results from
First Western's individual net operating loss not being available
for tax purposes in that pro forma period. The pro forma
adjustments to tax expense of $71 and $95 in the periods ended
September 30, 2001 and December 31, 2000, respectively, result
from the income increases noted in pro forma adjustments H and I
above.
K The First Western allowance for loan and lease losses acquired
was allocated by MFC to its loan portfolio acquired from First
Western in the same manner as First Western historically has
allocated such allowance to its loan portfolio. The pro forma
condensed combined income statements contain no adjustment to the
provision for loan and lease losses for the year ended December
31, 2000 or for the nine months ended September 30, 2001. However,
the determination of the appropriate level of any bank's allowance
for loan and lease losses is a subjective process that involves
both quantitative and qualitative factors. MFC's preliminary
analysis performed during due diligence revealed that there
are certain differences in the methodologies employed by First
Western and MFC in determining the levels of their respective
allowances for loan and lease losses. MFC has selected its
methodology for the combined company. In connection with combining
First Western and MFC, MFC completed its analysis of their
allowances for loan and lease losses and further analyzed the
attributes of the combined loan portfolio. Based on its analysis,
First Western recorded additional provision for loan and lease
losses in its results of operations prior to completion of the
Merger. The actual addition to the allowance was determined and
recorded prior to the Merger and was based on a comprehensive
analysis of the loan portfolio taking into account credit
conditions existing at that time. The increase in First Western's
allowance for loan and lease losses was approximately $350,000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
MOUNTAINBANK FINANCIAL CORPORATION
(Registrant)
Date: March 12, 2002 By: /s/ Gregory L. Gibson
------------------------
Gregory L. Gibson
Chief Financial Officer
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