Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - HERITAGE COMMERCE CORP | a15-1359_18ka.htm |
| EX-99.1 - EX-99.1 - HERITAGE COMMERCE CORP | a15-1359_1ex99d1.htm |
| EX-99.2 - EX-99.2 - HERITAGE COMMERCE CORP | a15-1359_1ex99d2.htm |
Exhibit 99.3
HERITITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
Unaudited Pro Forma Condensed Combined Financial Information
As of and for the six months ended June 30, 2014 and the year ended December 31, 2013
On October 9, 2014, Heritage Commerce Corp (“the Company”) announced that the Registrant’s bank subsidiary, Heritage Bank of Commerce (“HBC”), entered into a Stock Purchase Agreement (“Purchase Agreement”) with BVF/CSNK Acquisition Corp., a Delaware corporation (“Bay View Funding” or “BVF”) and its stockholders, pursuant to which HBC agreed to acquire all of the outstanding common stock from the stockholders of BVF for an aggregate purchase price of $22,520,000. The acquisition was completed on November 1, 2014 and BVF became a wholly-owned subsidiary of HBC. At the Closing HBC delivered as payment on account of the purchase price $20,268,000 of the total purchase price, and $2,252,000, or 10%, was deposited into an escrow account with an independent escrow agent to support the payment of indemnification claims, if any, of HBC against BVF stockholders pursuant to the Purchase Agreement. The escrow account will be released to the stockholders 18 months from the closing date, net of any payments made to HBC or amounts received for unresolved claims submitted by HBC. Based in Santa Clara, California, BVF is the parent company of CSNK Working Capital Finance Corp. dba Bay View Funding, which provides business-essential working capital factoring financing to various industries throughout the United States.
On November 5, 2014 HBC contributed $1,000,000 to BVF as an equity investment. Subsequently, BVF paid off its related party line of credit of $1,000,000 and accrued interest of $1,000.
On November 7, 2014, BVF obtained a subordinated loan in the amount of $2,500,000 from HBC, with an interest rate equal to the Prime Rate as published in The Wall Street Journal and a maturity date of April 30, 2015.
HBC invested an additional $40,000,000 in the Company to pay off the outstanding balance on the $32,500,000 revolving bank line of credit and to provide working capital for future growth as follows: (1) on December 16, 2014, HBC contributed to BVF $16,000,000 as an equity investment, which was used to pay down the $32,500,000 revolving bank line of credit; and (2) on December 17, 2014, BVF obtained a $24,000,000 revolving line of credit from HBC, with an interest rate equal to the Prime Rate as published in The Wall Street Journal and a maturity date of December 16, 2015. Subsequently, BVF closed out its $32,500,000 revolving bank line of credit, paying off the remaining unpaid principal outstanding of $14,002,000. HBC paid the prepayment penalty of $325,000 on the BVF $32,500,000 revolving bank line of credit. BVF also paid off the $2,500,000 subordinated loan from HBC.
In April 2013, BVF’s wholly-owned subsidiary CSNK Working Capital Finance Corp. leased approximately 7,440 square feet of a two-story multi-tenant office building located at 2933 Bunker Hill Lane, Santa Clara, CA 95054. The current monthly rent payment is $16,476 and is subject to annual increases of 3% until the lease expires in April 2017. On November 1, 2014, the lease was estimated to be $109,000 below fair market value, which is being amortized over three years.
Customer relationship and brokered relationship intangible assets of $1,900,000 resulted from the Bay View Funding acquisition. The assets are initially measured at fair value and then are amortized on the straight-line method over their estimated useful lives. The customer relationship and brokered relationship intangible assets from the Bay View Funding acquisition are being amortized over 10 years.
The Chief Executive Officer of BVF entered into a three-year non-compete agreement with HBC. On November 1, 2014 the estimated fair value of the non-compete agreement was $250,000, which is being amortized over three years.
Estimated goodwill of $13,347,000 on November 1, 2014 resulted from the acquisition Bay View Funding, which represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets.
Goodwill is assessed at least annually for impairment and any such impairment is recognized in the period identified.
HBC expects to incur pre-tax acquisition and integration costs of approximately $1,000,000, as reflected in the following table:
|
Legal |
|
$ |
276,000 |
|
|
Accounting and Tax |
|
103,000 |
| |
|
Prepayment penalty on bank line of credit |
|
325,000 |
| |
|
Other acquisition related fees |
|
164,000 |
| |
|
Estimated future integration costs & other |
|
132,000 |
| |
|
Total acquisition costs, pre-tax |
|
$ |
1,000,000 |
|
There are minimal expected cost savings from the transaction, other than funding costs, fees related to the Senior Debt revolving bank line of credit, and elimination of BVF Directors’ expense. BVF incurred funding costs of $919,000 for the year ended December 31, 2013. BVF incurred fees related to the Senior Debt revolving bank line of credit of $59,000 for the year ended December 31, 2013. BVF incurred $355,000 of Directors’ expense for the year ended December 31, 2013.
The following unaudited pro forma combined consolidated financial information and accompanying notes showing the impact on the historical financial conditions and results of operations of the Company, and HBC’s, acquisition of BVF on November 1, 2014, have been prepared to illustrate the effects of the acquisition under the acquisition method of accounting. Under the acquisition method of accounting, the Company records the assets acquired and liabilities assumed from BVF at their fair values. The fair values assigned to the respective assets and liabilities are preliminary and subject to change. The following methodologies were used to estimate the fair value of the following assets and liabilities:
· Premises and Equipment, net. With the exception of BVF’s operating lease for office space, the book value of such assets approximates fair value. A discounted cash flow model was used to compare actual lease payments to market rates for similar properties and terms to determine the fair value adjustment for the operating lease.
· Factoring receivables. The fair value of factoring receivables is based on estimated rates of return expected by market participants discounted over the expected duration of the portfolio which is less than 60 days. BVF’s allowance for loan losses is eliminated under the acquisition method because the fair value of factoring receivables already includes a component for credit losses.
· Other borrowings. The carrying value of other borrowings approximates its fair value based on the current pricing of the borrowings in relation to market rates and terms for similar arrangements.
· Customer relationship intangibles - clients and brokers. The fair value of these intangibles is based on a discounted cash flow model that considers the retention rate of business from existing customers and the amount and duration of such cash flows.
· Non-compete agreement intangible. The fair value of this intangible is based on a discounted cash flow model that is based on the amounts to be paid over the period of the agreement.
In addition to these fair value adjustments, the Company has estimated the need for a reserve for income taxes of $250,000 for uncertain tax positions of BVF and for a reserve of $50,000 for certain expenses.
The unaudited pro forma combined consolidated balance sheet as of June 30, 2014 is presented as if the HBC acquisition of BVF had occurred on June 30, 2014. The unaudited pro forma condensed combined income statement for the six months ended June 30, 2014 is presented as if the acquisition had occurred on January 1, 2014. The unaudited pro forma condensed combined income statement for the year ended December 31, 2013 is presented as if the acquisition had occurred on January 1, 2013. The historical consolidated financial information has been adjusted to reflect supportable items that are directly attributable to the acquisition and, with respect to the income statement only, expected to have a continuing impact on consolidated results of operations, as such, one-time acquisition costs are not included. The unaudited pro forma condensed combined financial statements are provided for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the acquisition been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma condensed combined consolidated financial statements should be read together with:
· the accompanying notes to the unaudited pro forma condensed combined consolidated financial statements;
· the Company’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2013 and 2012, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013;
· BVF’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2013 and 2012, included elsewhere in this Current Report on Form 8-K/A;
· BVF’s unaudited consolidated financial statements and accompanying notes as of June 30, 2014 and for the six months ended June 30, 2014 and 2013, included elsewhere in this Current Report on Form 8-K/A; and
· other information pertaining to the Company, HBC and BVF incorporated by reference into, or included in, this Current Report on Form 8-K/A.
HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 2014
|
|
|
Heritage |
|
BVF/CSNK |
|
|
|
|
| ||||
|
|
|
Commerce |
|
Acquisition |
|
|
|
Pro Forma |
| ||||
|
|
|
Corp |
|
Corp. |
|
Adjustments |
|
Combined |
| ||||
|
|
|
(Dollars in thousands) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Cash and due from banks |
|
$ |
32,162 |
|
$ |
3,472 |
|
$ |
(20,268 |
)(a) |
$ |
15,366 |
|
|
Interest-bearing deposits in other financial institutions |
|
17,256 |
|
— |
|
— |
|
17,256 |
| ||||
|
Total cash and cash equivalents |
|
49,418 |
|
3,472 |
|
(20,268 |
) |
32,622 |
| ||||
|
Securities available-for-sale, at fair value |
|
261,489 |
|
— |
|
— |
|
261,489 |
| ||||
|
Securities held-to-maturity, at amortized cost |
|
95,972 |
|
— |
|
— |
|
95,972 |
| ||||
|
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs |
|
2,269 |
|
— |
|
— |
|
2,269 |
| ||||
|
Loans, net of deferred fees |
|
990,341 |
|
38,313 |
|
(100 |
)(b) |
1,028,554 |
| ||||
|
Allowance for loan losses |
|
(18,592 |
) |
(786 |
) |
786 |
(c) |
(18,592 |
) | ||||
|
Loans, net |
|
971,749 |
|
37,527 |
|
686 |
|
1,009,962 |
| ||||
|
Federal Home Loan Bank and Federal Reserve Bank stock, at cost |
|
10,314 |
|
— |
|
— |
|
10,314 |
| ||||
|
Company owned life insurance |
|
50,452 |
|
— |
|
— |
|
50,452 |
| ||||
|
Premises and equipment, net |
|
7,237 |
|
200 |
|
109 |
(d) |
7,546 |
| ||||
|
Goodwill |
|
— |
|
1,214 |
|
11,501 |
(e) |
12,715 |
| ||||
|
Other intangible assets |
|
1,297 |
|
— |
|
2,150 |
(f) |
3,447 |
| ||||
|
Accrued interest receivable and other assets |
|
30,422 |
|
1,316 |
|
(1,158 |
)(g) |
30,580 |
| ||||
|
Total assets |
|
$ |
1,480,619 |
|
$ |
43,729 |
|
$ |
(6,980 |
) |
$ |
1,517,368 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
| ||||
|
Liabilities: |
|
|
|
|
|
|
|
|
| ||||
|
Deposits: |
|
|
|
|
|
|
|
|
| ||||
|
Demand, noninterest-bearing |
|
$ |
456,235 |
|
$ |
— |
|
$ |
— |
|
$ |
456,235 |
|
|
Demand, interest-bearing |
|
193,041 |
|
— |
|
— |
|
193,041 |
| ||||
|
Savings and money market |
|
354,175 |
|
— |
|
— |
|
354,175 |
| ||||
|
Time deposits-under $100 |
|
20,379 |
|
— |
|
— |
|
20,379 |
| ||||
|
Time deposits-$100 and over |
|
195,619 |
|
— |
|
— |
|
195,619 |
| ||||
|
Time deposits-brokered |
|
33,614 |
|
— |
|
— |
|
33,614 |
| ||||
|
CDARS - money market and time deposits |
|
14,785 |
|
— |
|
— |
|
14,785 |
| ||||
|
Total deposits |
|
1,267,848 |
|
— |
|
— |
|
1,267,848 |
| ||||
|
Other borrowings |
|
— |
|
30,355 |
|
— |
|
30,355 |
| ||||
|
Accrued interest payable and other liabilities |
|
31,246 |
|
3,842 |
|
2,552 |
(h) |
37,640 |
| ||||
|
Total liabilities |
|
1,299,094 |
|
34,197 |
|
2,552 |
|
1,335,843 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
| ||||
|
Preferred stock |
|
19,519 |
|
— |
|
|
|
19,519 |
| ||||
|
Common stock |
|
132,911 |
|
3,261 |
|
(3,261 |
)(i) |
132,911 |
| ||||
|
Retained earnings |
|
29,187 |
|
6,271 |
|
(6,271 |
)(j) |
29,187 |
| ||||
|
Accumulated other comprehensive loss |
|
(92 |
) |
— |
|
— |
|
(92 |
) | ||||
|
Total shareholders’ equity |
|
181,525 |
|
9,532 |
|
(9,532 |
) |
181,525 |
| ||||
|
Total liabilities and shareholders’ equity |
|
$ |
1,480,619 |
|
$ |
43,729 |
|
$ |
(6,980 |
) |
$ |
1,517,368 |
|
See accompanying notes
HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 2014
HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Six Months Ended June 30, 2014
|
|
|
Heritage |
|
BVF/CSNK |
|
|
|
|
| ||||
|
|
|
Commerce |
|
Acquisition |
|
|
|
Pro Forma |
| ||||
|
|
|
Corp |
|
Corp. |
|
Adjustments |
|
Combined |
| ||||
|
|
|
(Dollars in thousands) |
| ||||||||||
|
Interest income: |
|
|
|
|
|
|
|
|
| ||||
|
Loans, including fees |
|
$ |
22,756 |
|
$ |
5,577 |
|
$ |
— |
|
$ |
28,333 |
|
|
Securities, taxable |
|
4,217 |
|
— |
|
— |
|
4,217 |
| ||||
|
Securities, non-taxable |
|
1,012 |
|
— |
|
— |
|
1,012 |
| ||||
|
Interest-bearing deposits in other financial institutions |
|
62 |
|
— |
|
— |
|
62 |
| ||||
|
Total interest income |
|
28,047 |
|
5,577 |
|
— |
|
33,624 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
|
Deposits |
|
1,027 |
|
— |
|
— |
|
1,027 |
| ||||
|
Other borrowings |
|
1 |
|
464 |
|
— |
|
465 |
| ||||
|
Total interest expense |
|
1,028 |
|
464 |
|
— |
|
1,492 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net interest income before provision for loan losses |
|
27,019 |
|
5,113 |
|
— |
|
32,132 |
| ||||
|
Provision (credit) for loan losses |
|
(208 |
) |
74 |
|
— |
|
(134 |
) | ||||
|
Net interest income after provision for loan losses |
|
27,227 |
|
5,039 |
|
— |
|
32,266 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Noninterest income: |
|
|
|
|
|
|
|
|
| ||||
|
Service charges and fees on deposit accounts |
|
1,266 |
|
— |
|
— |
|
1,266 |
| ||||
|
Gain on sales of SBA loans |
|
599 |
|
— |
|
— |
|
599 |
| ||||
|
Increase in cash surrender value of life insurance |
|
795 |
|
— |
|
— |
|
795 |
| ||||
|
Servicing income |
|
661 |
|
— |
|
— |
|
661 |
| ||||
|
Gain on sales of securities |
|
50 |
|
— |
|
— |
|
50 |
| ||||
|
Other |
|
693 |
|
334 |
|
— |
|
1,027 |
| ||||
|
Total noninterest income |
|
4,064 |
|
334 |
|
— |
|
4,398 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Noninterest expense: |
|
|
|
|
|
|
|
|
| ||||
|
Salaries and employee benefits |
|
13,062 |
|
2,065 |
|
— |
|
15,127 |
| ||||
|
Occupancy and equipment |
|
1,932 |
|
255 |
|
18 |
(a) |
2,205 |
| ||||
|
Data processing |
|
502 |
|
— |
|
— |
|
502 |
| ||||
|
Insurance expense |
|
538 |
|
6 |
|
— |
|
544 |
| ||||
|
FDIC deposit insurance premiums |
|
454 |
|
— |
|
— |
|
454 |
| ||||
|
Software subscriptions |
|
438 |
|
29 |
|
— |
|
467 |
| ||||
|
Correspondent bank charges |
|
365 |
|
6 |
|
— |
|
371 |
| ||||
|
Low income housing investment losses |
|
353 |
|
— |
|
— |
|
353 |
| ||||
|
Professional fees |
|
712 |
|
341 |
|
— |
|
1,053 |
| ||||
|
Foreclosed assets, net |
|
(19 |
) |
— |
|
— |
|
(19 |
) | ||||
|
Other |
|
3,331 |
|
763 |
|
137 |
(b) |
4,231 |
| ||||
|
Total noninterest expense |
|
21,668 |
|
3,465 |
|
155 |
|
25,288 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before income taxes |
|
9,623 |
|
1,908 |
|
(155 |
) |
11,376 |
| ||||
|
Income tax expense |
|
3,223 |
|
788 |
|
(62 |
)(c) |
3,949 |
| ||||
|
Net income |
|
6,400 |
|
1,120 |
|
(93 |
) |
7,427 |
| ||||
|
Dividends on preferred stock |
|
(448 |
) |
— |
|
— |
|
(448 |
) | ||||
|
Net income available to common shareholders |
|
$ |
5,952 |
|
$ |
1,120 |
|
$ |
(93 |
) |
$ |
6,979 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings per common share: |
|
|
|
|
|
|
|
|
| ||||
|
Basic |
|
$ |
0.20 |
|
$ |
— |
|
$ |
0.03 |
(d) |
$ |
0.23 |
|
|
Diluted |
|
$ |
0.20 |
|
$ |
— |
|
$ |
0.03 |
(d) |
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average common shares outstanding - basic |
|
26,365,167 |
|
— |
|
— |
|
26,365,167 |
| ||||
|
Weighted average common shares outstanding - diluted |
|
26,493,466 |
|
— |
|
— |
|
26,493,466 |
| ||||
See accompanying notes
HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Six Months Ended June 30, 2014
|
|
|
(Dollars in thousands) |
| ||
|
(a) |
Occupancy and equipment expense adjustment: |
|
|
| |
|
|
Property lease below fair market value |
|
$ |
109 |
|
|
|
Amortized over 3 years (36 months) |
/ |
36 |
| |
|
|
Monthly amortization expense |
|
3 |
| |
|
|
Six months amortization from January 1, 2014 through June 30, 2014 |
X |
6 |
| |
|
|
Occupancy and equipment expense adjustment |
|
$ |
18 |
|
|
|
|
|
|
| |
|
(b) |
Other noninterest expense adjustments: |
|
|
| |
|
|
Customer relationship intangibles - clients & brokers |
|
$ |
1,900 |
|
|
|
Amortized over 10 years (120 months) |
/ |
120 |
| |
|
|
Monthly amortization expense |
|
16 |
| |
|
|
Six months amortization from January 1, 2014 through June 30, 2014 |
X |
6 |
| |
|
|
Customer relationship intangibles - clients & brokers amortization expense |
|
$ |
95 |
|
|
|
|
|
|
| |
|
|
Non-compete agreement intangible |
|
$ |
250 |
|
|
|
Amortized over 3 years (36 months) |
/ |
36 |
| |
|
|
Monthly amortization expense |
|
7 |
| |
|
|
Six months amortization from January 1, 2014 through June 30, 2014 |
X |
6 |
| |
|
|
Non-compete agreement intangible amortization expense |
|
$ |
42 |
|
|
|
|
|
|
| |
|
|
Customer relationship intangibles - clients & brokers amortization expense |
|
95 |
| |
|
|
Non-compete agreement intangible amortization expense |
|
42 |
| |
|
|
Other noninterest expense adjustment |
|
$ |
137 |
|
|
|
|
|
|
| |
|
(c) |
Income tax expense (benefit) on pre-tax adjustments |
|
$ |
(62 |
) |
|
|
|
|
|
| |
|
(d) |
Earnings per share adjustments: |
|
|
| |
|
|
Heritage Commerce Corp net income |
|
$ |
6,400 |
|
|
|
BVF net income |
|
1,120 |
| |
|
|
Adjustments to net income |
|
(93 |
) | |
|
|
Pro Forma Combined net income |
|
7,427 |
| |
|
|
Dividends on preferred stock |
|
(448 |
) | |
|
|
Pro Forma Combined net income available to common shareholders |
|
$ |
6,979 |
|
|
|
|
|
|
| |
|
|
Pro Forma Combined net income available to common shareholders |
|
$ |
6,979 |
|
|
|
Less Pro Forma Combined undistributed earnings allocated to Series C Preferred Stock |
|
853 |
| |
|
|
Pro Forma Combined distributed and undistributed earnings allocated to common shareholders |
|
$ |
6,126 |
|
|
|
|
|
|
| |
|
|
Weighted average common shares outstanding for basic earnings per common share |
|
26,365,167 |
| |
|
|
Dilutive effect of stock options outstanding, using the the treasury stock method |
|
128,299 |
| |
|
|
Shares used in computing diluted earnings per common share |
|
26,493,466 |
| |
|
|
|
|
|
| |
|
|
Pro Forma Combined basic earnings per share |
|
$ |
0.23 |
|
|
|
Less Heritage Commerce Corp basic earnings per share |
|
0.20 |
| |
|
|
Adjustment to basic earnings per share |
|
$ |
0.03 |
|
|
|
|
|
|
| |
|
|
Pro Forma Combined diluted earnings per share |
|
$ |
0.23 |
|
|
|
Less Heritage Commerce Corp diluted earnings per share |
|
0.20 |
| |
|
|
Adjustment to diluted earnings per share |
|
$ |
0.03 |
|
HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 2013
|
|
|
Heritage |
|
BVF/CSNK |
|
|
|
|
| ||||
|
|
|
Commerce |
|
Acquisition |
|
|
|
Pro Forma |
| ||||
|
|
|
Corp |
|
Corp. |
|
Adjustments |
|
Combined |
| ||||
|
|
|
(Dollars in thousands) |
| ||||||||||
|
Interest income: |
|
|
|
|
|
|
|
|
| ||||
|
Loans, including fees |
|
$ |
41,570 |
|
$ |
10,731 |
|
$ |
— |
|
$ |
52,301 |
|
|
Securities, taxable |
|
9,472 |
|
— |
|
— |
|
9,472 |
| ||||
|
Securities, non-taxable |
|
1,530 |
|
— |
|
— |
|
1,530 |
| ||||
|
Interest-bearing deposits in other financial institutions |
|
214 |
|
— |
|
— |
|
214 |
| ||||
|
Total interest income |
|
52,786 |
|
10,731 |
|
— |
|
63,517 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
|
Deposits |
|
2,369 |
|
— |
|
— |
|
2,369 |
| ||||
|
Subordinated debt |
|
229 |
|
— |
|
— |
|
229 |
| ||||
|
Other borrowings |
|
2 |
|
919 |
|
— |
|
921 |
| ||||
|
Total interest expense |
|
2,600 |
|
919 |
|
— |
|
3,519 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net interest income before provision for loan losses |
|
50,186 |
|
9,812 |
|
— |
|
59,998 |
| ||||
|
Provision (credit) for loan losses |
|
(816 |
) |
105 |
|
— |
|
(711 |
) | ||||
|
Net interest income after provision for loan losses |
|
51,002 |
|
9,707 |
|
— |
|
60,709 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Noninterest income: |
|
|
|
|
|
|
|
|
| ||||
|
Service charges and fees on deposit accounts |
|
2,457 |
|
— |
|
— |
|
2,457 |
| ||||
|
Increase in cash surrender value of life insurance |
|
1,654 |
|
— |
|
— |
|
1,654 |
| ||||
|
Servicing income |
|
1,446 |
|
— |
|
— |
|
1,446 |
| ||||
|
Gain on sales of SBA loans |
|
449 |
|
— |
|
— |
|
449 |
| ||||
|
Gain on sales of securities |
|
38 |
|
— |
|
— |
|
38 |
| ||||
|
Other |
|
1,170 |
|
866 |
|
— |
|
2,036 |
| ||||
|
Total noninterest income |
|
7,214 |
|
866 |
|
— |
|
8,080 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Noninterest expense: |
|
|
|
|
|
|
|
|
| ||||
|
Salaries and employee benefits |
|
23,450 |
|
4,184 |
|
— |
|
27,634 |
| ||||
|
Occupancy and equipment |
|
4,043 |
|
551 |
|
36 |
(a) |
4,630 |
| ||||
|
Professional fees |
|
2,588 |
|
749 |
|
— |
|
3,337 |
| ||||
|
Software subscriptions |
|
1,289 |
|
51 |
|
— |
|
1,340 |
| ||||
|
Low income housing investment losses |
|
1,252 |
|
— |
|
— |
|
1,252 |
| ||||
|
Data processing |
|
1,078 |
|
— |
|
— |
|
1,078 |
| ||||
|
Insurance expense |
|
1,032 |
|
12 |
|
— |
|
1,044 |
| ||||
|
FDIC deposit insurance premiums |
|
894 |
|
— |
|
— |
|
894 |
| ||||
|
Correspondent bank charges |
|
684 |
|
41 |
|
— |
|
725 |
| ||||
|
Foreclosed assets |
|
(251 |
) |
— |
|
— |
|
(251 |
) | ||||
|
Other |
|
5,663 |
|
1,503 |
|
273 |
(b) |
7,439 |
| ||||
|
Total noninterest expense |
|
41,722 |
|
7,091 |
|
310 |
|
49,123 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before income taxes |
|
16,494 |
|
3,482 |
|
(310 |
) |
19,666 |
| ||||
|
Income tax expense |
|
4,954 |
|
1,439 |
|
(124 |
)(c) |
6,269 |
| ||||
|
Net income |
|
11,540 |
|
2,043 |
|
(186 |
) |
13,397 |
| ||||
|
Dividends and discount accretion on preferred stock |
|
(336 |
) |
— |
|
— |
|
(336 |
) | ||||
|
Net income available to common shareholders |
|
$ |
11,204 |
|
$ |
2,043 |
|
$ |
(186 |
) |
$ |
13,061 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings per common share: |
|
|
|
|
|
|
|
|
| ||||
|
Basic |
|
$ |
0.36 |
|
$ |
— |
|
$ |
0.06 |
(d) |
$ |
0.42 |
|
|
Diluted |
|
$ |
0.36 |
|
$ |
— |
|
$ |
0.06 |
(d) |
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average common shares outstanding - basic |
|
26,338,161 |
|
— |
|
— |
|
26,338,161 |
| ||||
|
Weighted average common shares outstanding - diluted |
|
26,386,452 |
|
— |
|
— |
|
26,386,452 |
| ||||
See accompanying notes
HERITAGE COMMERCE CORP AND BVF/CSNK ACQUISITION CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 2013
|
|
|
(Dollars in thousands) |
| ||
|
(a) |
Occupancy and equipment expense adjustment: |
|
|
| |
|
|
Property lease below fair market value |
|
$ |
109 |
|
|
|
Amortized over 3 years (36 months) |
/ |
36 |
| |
|
|
Monthly amortization expense |
|
3 |
| |
|
|
12 months amortization from January 1, 2013 through December 31, 2013 |
X |
12 |
| |
|
|
Occupancy and equipment expense adjustment |
|
$ |
36 |
|
|
|
|
|
|
| |
|
(b) |
Other noninterest expense adjustments: |
|
|
| |
|
|
Customer relationship intangibles - clients & brokers |
|
$ |
1,900 |
|
|
|
Amortized over 10 years (120 months) |
/ |
120 |
| |
|
|
Monthly amortization expense |
|
16 |
| |
|
|
12 months amortization from January 1, 2013 through December 31, 2013 |
X |
12 |
| |
|
|
Customer relationship intangibles - clients & brokers amortization expense |
|
$ |
190 |
|
|
|
|
|
|
| |
|
|
Non-compete agreement intangible |
|
$ |
250 |
|
|
|
Amortized over 3 years (36 months) |
/ |
36 |
| |
|
|
Monthly amortization expense |
|
7 |
| |
|
|
12 months amortization from January 1, 2013 through December 31, 2013 |
X |
12 |
| |
|
|
Non-compete agreement intangible amortization expense |
|
$ |
83 |
|
|
|
|
|
|
| |
|
|
Customer relationship intangibles - clients & brokers amortization expense |
|
190 |
| |
|
|
Non-compete agreement intangible amortization expense |
|
83 |
| |
|
|
Other noninterest expense adjustment |
|
$ |
273 |
|
|
|
|
|
|
| |
|
(c) |
Income tax expense (benefit) on pre-tax adjustments |
|
$ |
(124 |
) |
|
|
|
|
|
| |
|
(d) |
Heritage Commerce Corp net income |
|
$ |
11,540 |
|
|
|
BVF net income |
|
2,043 |
| |
|
|
Adjustments to net income |
|
(186 |
) | |
|
|
Pro Forma Combined net income |
|
13,397 |
| |
|
|
Dividends on preferred stock |
|
(336 |
) | |
|
|
Pro Forma Combined net income available to common shareholders |
|
$ |
13,061 |
|
|
|
|
|
|
| |
|
|
Pro Forma Combined net income available to common shareholders |
|
$ |
13,061 |
|
|
|
Less Pro Forma Combined undistributed earnings allocated to Series C Preferred Stock |
|
2,013 |
| |
|
|
Pro Forma Combined distributed and undistributed earnings allocated to common shareholders |
|
$ |
11,048 |
|
|
|
|
|
|
| |
|
|
Weighted average common shares outstanding for basic earnings per common share |
|
26,338,161 |
| |
|
|
Dilutive effect of stock options outstanding, using the the treasury stock method |
|
48,291 |
| |
|
|
Shares used in computing diluted earnings per common share |
|
26,386,452 |
| |
|
|
|
|
|
| |
|
|
Pro Forma Combined basic earnings per share |
|
$ |
0.42 |
|
|
|
Less Heritage Commerce Corp basic earnings per share |
|
0.36 |
| |
|
|
Adjustment to basic earnings per share |
|
$ |
0.06 |
|
|
|
|
|
|
| |
|
|
Pro Forma Combined diluted earnings per share |
|
$ |
0.42 |
|
|
|
Less Heritage Commerce Corp diluted earnings per share |
|
0.36 |
| |
|
|
Adjustment to diluted earnings per share |
|
$ |
0.06 |
|