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8-K - FORM 8-K - PROSPERITY BANCSHARES INC | d476781d8k.htm |
EX-99.1 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN STATE - PROSPERITY BANCSHARES INC | d476781dex991.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 Prosperitys 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 Prosperitys 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.
1
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: |
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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 | ||||||||||||||||||||||||
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Total interest income |
302,123 | 367 | 54,703 | 4,629 | 8,211 | 370,033 | 20,357 | 390,634 | ||||||||||||||||||||||||
Interest expense: |
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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 | ||||||||||||||||||||||||
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Total interest expense |
29,718 | 44 | 4,917 | 590 | 3,348 | 38,617 | | 38,617 | ||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||
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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: |
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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 | ||||||||||||||||||||||||
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Total noninterest income |
51,429 | 106 | 65,672 | 463 | 762 | 118,432 | | 118,432 | ||||||||||||||||||||||||
Noninterest expense: |
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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 | |||||||||||||||||||||||
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Total noninterest expense |
141,489 | 1,366 | 66,144 | 5,221 | 4,961 | 219,181 | (5,840 | ) | 213,341 | |||||||||||||||||||||||
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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 | ||||||||||||||||||||||
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Net income |
$ | 119,635 | $ | (937 | ) | $ | 31,623 | $ | (994 | ) | $ | 126 | $ | 149,453 | $ | 17,028 | $ | 166,725 | ||||||||||||||
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Basic earnings per share: |
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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: |
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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.
2
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 Prosperitys 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 Financials and American States 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 Prosperitys 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 | % | ||
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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 | % | ||
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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 Prosperitys historical information |
$ | 245 | ||
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(e) This adjustment represents the reversal of one-time merger related expenses which are included in Prosperitys historical numbers.
(f) This adjustment represents the full nine month effect of amortization not already included in Prosperitys 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 Prosperitys statutory tax rate of 35.0%.
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