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8-K - FORM 8-K - PROSPERITY BANCSHARES INCd476781d8k.htm
EX-99.1 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN STATE - PROSPERITY BANCSHARES INCd476781dex991.htm

Exhibit 99.2

UNAUDITED PRO FORMA CONSOLIDATED COMBINED FINANCIAL

INFORMATION OF PROSPERITY

The following unaudited pro forma consolidated combined financial information of Prosperity for the nine months ended September 30, 2012 is presented to show the impact on Prosperity’s historical results of operations of:

 

  the completion by Prosperity of The Bank Arlington acquisition, which was consummated on April 1, 2012;

 

  the completion by Prosperity of the American State Financial Corporation acquisition, which was consummated on July 1, 2012;

 

  the completion by Prosperity of the Community National Bank acquisition, which was consummated on October 1, 2012; and

 

  the completion by Prosperity of the East Texas Financial Services, Inc. acquisition, which was consummated on January 1, 2013.

The Unaudited Pro Forma Consolidated Combined Statement of Income assumes that each of the Bank Arlington, American State Financial Corporation and Community National Bank acquisitions was completed on January 1, 2011 and that the East Texas Financial Services acquisition was completed on January 1, 2012. The pro forma adjustments are based on information available and certain assumptions that Prosperity believes are reasonable.

The following information should be read in conjunction with and is qualified in its entirety by Prosperity’s consolidated financial statements.

The unaudited pro forma consolidated combined financial information is intended for informational purposes and is not necessarily indicative of the future financial position or future operating results of the combined company or of the financial position or operating results of the combined company that would have actually occurred had the aforementioned acquisitions been in effect as of the date or for the periods presented.

 

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Unaudited Pro Forma Consolidated

Combined Statement of Income

For the Nine Months Ended September 30, 2012(a)

 

    Prosperity
Bancshares,
Inc.
    The Bank
Arlington
    American
State
Financial
Corporation
    Community
National
Bank
    East Texas
Financial
Services, Inc.
    Adjusted
Prosperity
Pro Forma
    Pro Forma     Pro Forma  
    Historical     Historical     Historical     Historical     Historical (b)     Subtotal     Adjustments     Combined  
    (In thousands, except per share data)  

Interest income:

               

Loans, including fees

  $ 188,597      $ 340      $ 32,216      $ 3,251      $ 7,721      $ 232,125      $ 27,230 (c)    $ 259,355   

Securities

    113,418        22        22,351        1,342        472        137,605        (6,628 )(d)      130,977   
                (245 )(d)   

Federal funds sold and other temporary investments

    108        5        136        36        18        303        —          303   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

    302,123        367        54,703        4,629        8,211        370,033        20,357        390,634   

Interest expense:

               

Deposits

    26,269        44        4,295        588        1,372        32,568        —          32,568   

Federal funds purchased, other borrowings and securities sold under repurchase agreements

    1,487        —          622        2        1,976        4,087        —          4,087   

Junior subordinated debentures

    1,962        —          —          —          —          1,962        —          1,962   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

    29,718        44        4,917        590        3,348        38,617        —          38,617   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    272,405        323        49,786        4,039        4,863        331,416        20,357        352,017   

Provision for credit losses

    2,550        —          1,576        880        (69     4,937          4,937   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for credit losses

    269,855        323        48,210        3,159        4,932        326,479        20,357        347,080   

Noninterest income:

               

Customer service fees

    42,430        24        9,563        357        175        52,549        —          52,549   

Other

    8,999        26        8,168        106        587        17,886        —          17,886   

Gain on sale of loans

    —          —          2,052        —          —          2,052        —          2,052   

Gain on sale of securities

    —          56        45,889        —          —          45,945        —          45,945   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

    51,429        106        65,672        463        762        118,432        —          118,432   

Noninterest expense:

               

Salaries and employee benefits

    83,525        196        31,148        2,280        2,870        120,019        (3,511 )(e)      116,508   

Net occupancy expense and depreciation

    18,095        56        13,392        642        516        32,701        —          32,701   

Data processing

    6,339        —          1,136        —          485        7,960        (682 )(e)      7,278   

Core deposit intangible amortization

    5,297        —          25        —          —          5,322        883 (f)      6,205   

Other

    28,233        1,114        20,443        2,299        1,090        53,179        (2,530 )(e)      50,649   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

    141,489        1,366        66,144        5,221        4,961        219,181        (5,840     213,341   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before federal income taxes

    179,795        (937     47,738        (1,599     733        225,730        26,197        252,171   

Provision for federal income taxes

    60,160        —          16,115        (605     607        76,277        9,169 (g)      85,446   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 119,635      $ (937   $ 31,623      $ (994   $ 126      $ 149,453      $ 17,028      $ 166,725   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share:

               

Earnings (loss) per share

  $ 2.38        (1.45   $ 12.65        (0.16     0.10      $ 2.94        $ 2.93   

Weighted average shares outstanding

    50,239        646        2,499        6,029        1,308        50,770          56,881   

Diluted earnings per share:

               

Earnings (loss) per share

  $ 2.37        (1.45   $ 12.65        (0.16     0.10      $ 2.93        $ 2.92   

Weighted average shares outstanding

    50,393        646        2,499        6,029        1,308        50,924          57,035   

See accompanying notes to unaudited pro forma consolidated combined financial data.

 

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Notes to Unaudited Pro Forma Consolidated Combined Financial Data

(dollars in thousands)

Note 1. Estimated Operational Cost Savings

Prosperity anticipates operational cost savings in connection with the acquisitions of Bank Arlington, American State, Community National and East Texas Finacial. Prosperity anticipates that these savings will occur through the combination of back office operations and elimination of duplicate general operations, administrative and salary and benefits expense. Estimated cost savings are not presented as part of the pro forma adjustments and there can be no assurance they will be achieved in the amount or manner currently contemplated.

Note 2. Anticipated Reduction in Fee Income

Prosperity anticipates loss of income related to reduced NSF fee income and debit and ATM card income. The combined company will be subject to the Durbin Act which imposes limits on debit and ATM card income. Such amounts are not presented as part of the pro forma adjustments.

Note 3. Pro forma Adjustments and Assumptions:

The following pro forma adjustments have been reflected in the unaudited pro forma consolidated combined income statement. All adjustments are based on current assumptions and valuations, which are subject to change.

(a) Closing dates of the included transactions are as follows, and the historical data is reported through the respective closing date or September 30, 2012, whichever is earlier:

 

  (i) The Bank Arlington-April 1, 2012

 

  (ii) American State Financial Corporation-July 1, 2012

 

  (iii) Community National Bank-October 1, 2012

 

  (iv) East Texas Financial Corporation-January 1, 2013

(b) The fiscal year end of East Texas Financial is September 30. In accordance with SEC regulations, the historical statement of income information for East Texas Financial is for the nine months ended September 30, 2012.

(c) Loans are evaluated for fair value adjustment in accordance with the acquisition method of accounting under accounting principles generally accepted in the United States of America. This adjustment represents the full nine month effect of estimated accretion related to the write-down of loans acquired in the Bank Arlington, American State and Community National acquisitions not already included in Prosperity’s historical information. At the time of preparation of the pro forma income statement, Prosperity had not completed its fair value analysis of the loans to be acquired in the East Texas Financial acquisition. As a result, there could be adjustments to the carrying value of such assets acquired after the merger is completed which would affect the total amount of accretion recorded.

(d) This adjustment represents the estimated full nine month effect of amortization of $6.6 million related to the write-up of East Texas Financial’s and American State’s securities to market value as part of the purchase accounting transactions and the estimated full nine month effect of loss of investment income related to the cash portion of the merger consideration in the American State and Community National acquisitions not already included in Prosperity’s historical information, using an assumed reinvestment rate of 0.25% and calculated as follows:

 

Cash portion of American State merger consideration

   $  178,500   

Assumed annual federal funds reinvestment rate

     0.25
  

 

 

 

Total annual adjustment to interest income

   $ 446   

Adjustment for the full nine month effect

   $ 223   

Cash portion of Community National merger consideration

   $ 11,400   

Assumed annual federal funds reinvestment rate

     0.25
  

 

 

 

Total annual adjustment to interest income

   $ 29   

Adjustment for the full nine month effect

   $ 21   

Total loss of investment income for the nine months ended September 30, 2012 not already included in Prosperity’s historical information

   $ 245   
  

 

 

 

(e) This adjustment represents the reversal of one-time merger related expenses which are included in Prosperity’s historical numbers.

(f) This adjustment represents the full nine month effect of amortization not already included in Prosperity’s historical information on core deposit intangibles of $12.4 million that were acquired in the acquisitions of Bank Arlington, American State and Community National and expected to be acquired in the acquisition of East Texas Financial, which will be amortized on an accelerated basis over ten years.

(g) This adjustment represents the net federal income tax effect of the pro forma adjustments using Prosperity’s statutory tax rate of 35.0%.

 

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