Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - Ottawa Savings Bancorp, Inc. | ottw20150319_8ka.htm |
| EX-99.1 - EXHIBIT 99.1 - Ottawa Savings Bancorp, Inc. | ex99-1.htm |
Exhibit 99.2
Ottawa Savings Bancorp, Inc.
and Twin Oaks Savings Bank
Unaudited Pro Forma Consolidated Condensed
Combined Balance Sheet as of September 30, 2014
(In thousands)
|
Historical |
||||||||||||||||
|
Ottawa |
Twin Oaks |
Pro Forma Adjustments |
Pro Forma Combined |
|||||||||||||
|
ASSETS: |
||||||||||||||||
|
Cash and cash equivalents |
$ | 3,439,545 | $ | 1,759,324 | $ | (450,000 | ) | $ | 4,748,869 | |||||||
|
Securities |
31,335,731 | 27,854,778 | (276,061 | ) | 58,914,448 | |||||||||||
|
Loans, net |
112,272,071 | 30,463,576 | (532,836 | ) | 142,202,811 | |||||||||||
|
Accrued interest receivable |
621,020 | — | — | 621,020 | ||||||||||||
|
Premises and equipment, net |
6,325,481 | 1,007,476 | (170,716 | ) | 7,162,241 | |||||||||||
|
Core deposit intangible |
— | — | 567,000 | 567,000 | ||||||||||||
|
Goodwill |
— | — | 514,732 | 514,732 | ||||||||||||
|
Other assets |
6,775,562 | 1,473,069 | 495,404 | 8,744,035 | ||||||||||||
|
Total assets |
$ | 160,769,410 | $ | 62,558,223 | $ | 147,523 | $ | 223,475,156 | ||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
||||||||||||||||
|
Deposits |
$ | 135,110,890 | $ | 51,118,106 | $ | 183,000 | $ | 186,411,996 | ||||||||
|
FHLB advances |
— | 4,497,624 | (3,636 | ) | 4,493,988 | |||||||||||
|
Advance payments by borrowers for taxes and insurance |
— | 44,451 | — | 44,451 | ||||||||||||
|
Other liabilities |
2,860,835 | 191,201 | — | 3,052,036 | ||||||||||||
|
Total liabilities |
$ | 137,971,725 | $ | 55,851,382 | $ | 179,364 | $ | 194,002,471 | ||||||||
| Commitments and contingencies: | ||||||||||||||||
|
Redeemable common stock held by ESOP |
$ | 395,530 | $ | — | $ | — | $ | 395,530 | ||||||||
| Stockholders’ Equity | ||||||||||||||||
|
Common stock |
$ | 22,249 | $ | — | 7,762 | 30,011 | ||||||||||
|
Additional paid-in capital |
8,710,853 | — | 7,117,239 | 15,828,092 | ||||||||||||
|
Retained earnings |
15,287,133 | 6,340,409 | (6,790,409 | ) | 14,837,133 | |||||||||||
|
Bargain purchase gain |
— | — | — | — | ||||||||||||
|
Unallocated ESOP shares |
(267,099 | ) | — | — | (267,099 | ) | ||||||||||
|
Unearned management recognition plan shares |
(14,612 | ) | — | — | (14,612 | ) | ||||||||||
|
Accumulated other comprehensive income |
271,279 | 366,432 | (366,432 | ) | 271,279 | |||||||||||
| 24,009,803 | 6,706,841 | (31,841 | ) | 30,684,804 | ||||||||||||
| Less: | ||||||||||||||||
|
Treasury stock, at cost |
(1,212,118 | ) | — | — | (1,212,118 | ) | ||||||||||
|
Maximum cash obligation related to ESOP shares |
(395,530 | ) | — | — | (395,530 | ) | ||||||||||
|
Total stockholders’ equity |
$ | 22,402,155 | $ | 6,706,841 | $ | (31,841 | ) | $ | 29,077,156 | |||||||
|
Total liabilities and stockholders’ equity |
$ | 160,796,410 | $ | 62,558,223 | $ | 147,523 | $ | 223,475,156 | ||||||||
See Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements.
Ottawa Savings Bancorp, Inc.
and Twin Oaks Savings Bank
Unaudited Pro Forma Consolidated Condensed
Combined Statement of Operations
For the Nine Months Ended September 30, 2014
(In thousands)
|
Historical |
||||||||||||||||
|
Ottawa |
Twin Oaks |
Pro Forma Adjustments |
Pro Forma Combined |
|||||||||||||
|
Interest and dividend income: |
||||||||||||||||
|
Interest and fees on loans |
$ | 4,310,573 | $ | 1,118,942 | $ | (30,000 | ) | $ | 5,399,515 | |||||||
|
Investment and mortgage-backed securities |
629,696 | 603,307 | — | 1,233,003 | ||||||||||||
|
Other |
5,683 | 23,611 | — | 29,294 | ||||||||||||
|
Total interest and dividend income |
4,945,952 | 1,745,860 | (30,000 | ) | 6,661,812 | |||||||||||
|
Interest expense: |
||||||||||||||||
|
Deposits and advanced payments by borrowers for taxes and insurance |
741,065 | 272,288 | (132,000 | ) | 881,353 | |||||||||||
|
Federal Home Loan Bank advances |
179 | 114,739 | (52,000 | ) | 62,918 | |||||||||||
|
Total interest expense |
741,244 | 387,027 | (184,000 | ) | 944,271 | |||||||||||
|
Net interest and dividend income |
4,204,708 | 1,358,833 | 154,000 | 5,717,541 | ||||||||||||
|
Provision for loan losses |
695,000 | 882,000 | — | 1,577,010 | ||||||||||||
|
Net interest and dividend income after provision for loan losses |
3,509,708 | 476,833 | 154,000 | 4,140,541 | ||||||||||||
|
Noninterest income: |
||||||||||||||||
|
Service charges on deposit accounts |
223,523 | 75,308 | — | 298,831 | ||||||||||||
|
Gain on sales of securities |
24,820 | 35,254 | — | 60,074 | ||||||||||||
|
Gain on sales of loans |
25,442 | 24,520 | — | 49,962 | ||||||||||||
|
Other income |
197,807 | 27,922 | — | 225,729 | ||||||||||||
|
Total noninterest income |
471,592 | 163,004 | — | 634,596 | ||||||||||||
|
Noninterest expense: |
||||||||||||||||
|
Compensation and benefits |
1,300,716 | 625,650 | — | 1,926,366 | ||||||||||||
|
Occupancy |
385,204 | 161,857 | — | 547,061 | ||||||||||||
|
Deposit insurance premium |
103,772 | 75,090 | — | 178,862 | ||||||||||||
|
Legal and professional services |
405,294 | 255,771 | — | 661,065 | ||||||||||||
|
Data processing |
219,274 | 145,836 | — | 365,110 | ||||||||||||
|
Valuation adjustments and expenses on foreclosed real estate |
55,710 | 8,839 | — | 64,549 | ||||||||||||
|
Loss on sale of OREO |
— | — | — | — | ||||||||||||
|
Loss on sale of repossessed assets |
— | — | — | — | ||||||||||||
|
Amortization of core deposit intangible |
— | — | 75,000 | 75,000 | ||||||||||||
|
Other |
548,746 | 333,127 | — | 881,873 | ||||||||||||
|
Total noninterest expense |
3,018,716 | 1,606,170 | 75,000 | 4,699,886 | ||||||||||||
|
Income before income tax expense |
962,584 | (966,333 | ) | 78,000 | 75,151 | |||||||||||
|
Income tax expense |
294,546 | (470,321 | ) | 30,000 | (145,775 | ) | ||||||||||
|
Net income |
$ | 668,038 | $ | (496,012 | ) | $ | 49,000 | $ | 221,026 | |||||||
See Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements.
Ottawa Savings Bancorp, Inc.
and Twin Oaks Savings Bank
Unaudited Pro Forma Consolidated Condensed
Combined Statement of Operations
For the Year Ended December 31, 2013
(In thousands)
|
Historical |
||||||||||||||||
|
Ottawa |
Twin Oaks |
Pro Forma Adjustments |
Pro Forma Combined |
|||||||||||||
|
Interest and dividend income: |
||||||||||||||||
|
Interest and fees on loans |
$ | 6,206 | $ | 1,576 | $ | (38 | ) | $ | 7,744 | |||||||
|
Investment and mortgage-backed securities |
746 | 719 | — | 1,465 | ||||||||||||
|
Other |
— | — | — | — | ||||||||||||
|
Total interest and dividend income |
$ | 6,952 | $ | 2,295 | $ | (38 | ) | $ | 9,209 | |||||||
|
Interest expense: |
||||||||||||||||
|
Deposits and advanced payments by borrowers for taxes and insurance |
$ | 1,452 | $ | 427 | $ | (141 | ) | $ | 1,738 | |||||||
|
Federal Home Loan Bank advances |
— | 200 | (51 | ) | 149 | |||||||||||
|
Total interest expense |
$ | 1,452 | $ | 627 | $ | (192 | ) | $ | 1,887 | |||||||
|
Net interest and dividend income |
$ | 5,500 | $ | 1,668 | $ | 154 | $ | 7,322 | ||||||||
|
Provision for loan losses |
875 | 355 | — | 1,230 | ||||||||||||
|
Net interest and dividend income after provision for loan losses |
$ | 4,625 | $ | 1,313 | $ | 154 | $ | 6,092 | ||||||||
|
Noninterest income: |
||||||||||||||||
|
Service charges on deposit accounts |
$ | 299 | $ | 103 | $ | — | $ | 402 | ||||||||
|
Gain on sales of securities |
— | 9 | — | 9 | ||||||||||||
|
Gain on sales of loans |
66 | 92 | — | 158 | ||||||||||||
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Other income |
294 | (11 | ) | — | 283 | |||||||||||
|
Total noninterest income |
$ | 659 | $ | 193 | $ | — | $ | 852 | ||||||||
|
Noninterest expense: |
||||||||||||||||
|
Compensation and benefits |
$ | 1,730 | $ | 922 | $ | — | $ | 2,652 | ||||||||
|
Occupancy |
455 | 215 | — | 670 | ||||||||||||
|
Deposit insurance premium |
189 | 5 | — | 194 | ||||||||||||
|
Legal and professional services |
275 | 68 | — | 343 | ||||||||||||
|
Data processing |
290 | 179 | — | 469 | ||||||||||||
|
Valuation adjustments and expenses on foreclosed real estate |
335 | 5 | — | 340 | ||||||||||||
|
Loss on sale of OREO |
4 | — | — | 4 | ||||||||||||
|
Loss on sale of repossessed assets |
7 | — | — | 7 | ||||||||||||
|
Amortization of core deposit intangible |
— | — | 100 | 100 | ||||||||||||
|
Other |
530 | 234 | — | 764 | ||||||||||||
|
Total noninterest expense |
$ | 3,815 | $ | 1,628 | $ | 100 | $ | 5,543 | ||||||||
|
Income before income tax expense |
$ | 1,470 | $ | (122 | ) | $ | 54 | $ | 1,401 | |||||||
|
Income tax expense |
540 | (162 | ) | 21 | 399 | |||||||||||
|
Net income |
$ | 929 | $ | 40 | $ | 33 | $ | 1,003 | ||||||||
See Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements.
Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements
A. Basis of Presentation
The pro forma information presented is not necessarily indicative of the results of operations or the combined financial position or results of operation that would have resulted had the merger been consummated as of or for the periods indicated, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined company. The merger was completed in the fourth quarter of calendar year 2014.
The unaudited pro forma consolidated financial information reflects the application of the acquisition method of accounting. Under this method, the assets and liabilities of Twin Oaks will be recorded at their estimated fair values at the effective time. As described in the accompanying notes, the estimated fair values of the assets and liabilities of Twin Oaks have been combined with the historical carrying amounts of the assets and liabilities of Ottawa. However, changes to pro forma adjustments reflected herein are expected as valuations of assets and liabilities are completed and additional information becomes available. Accordingly, the final combined amounts will differ from the pro forma combined amounts presented herein.
The unaudited pro forma consolidated condensed combined statement of operations for the nine months ended September 30, 2014 gives effect to the merger as if the merger had been consummated on January 1, 2014. The unaudited pro forma consolidated condensed combined statement of operations for the year ended December 31, 2013 gives effect to the merger as if the merger occurred on January 1, 2013. The unaudited pro forma consolidated condensed combined balance sheet assumes the merger was consummated on September 30, 2014. Certain reclassifications have been included in the unaudited pro forma consolidated condensed combined balance sheet and unaudited pro forma consolidated condensed combined statements of operations to conform the presentation.
Assumptions relating to the pro forma adjustments set forth in the unaudited pro forma consolidated condensed combined financial statements are summarized below.
Estimated fair values for the assets and liabilities of Twin Oaks were obtained as follows:
Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value.
Investment and Mortgage-Backed Securities. Securities classified as available for sale are recorded at fair value on a recurring basis using pricing obtained from an independent pricing service. Where quoted market prices are available in an active market such pricing is used. If quoted market prices are not available, the pricing service estimates the fair values by using pricing models or quoted prices of securities with similar characteristics. For these securities, the inputs used by the pricing service to determine fair value consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and bonds’ terms and conditions.
Stock in Federal Home Loan Bank and Other Restricted Equity Securities. No ready market exists for these stocks and they have no quoted market value; however, redemption of these stocks has historically been at par value. Accordingly, the carrying amount is deemed to be a reasonable estimate of fair value.
Loans. Fair values for loans held for investment and other loans are estimated by segregating the portfolio by type of loan and discounting scheduled cash flows using interest rates currently being offered for loans with similar terms. A prepayment assumption is used as an estimate of the portion of loans that will be repaid prior to their scheduled maturity. The allowance for loan losses as recorded is deemed to be a reasonable estimate of the credit adjustment.
Office Properties and Equipment. The fair value of office properties is estimated based on an independent appraisal. The book value of equipment is deemed to be a reasonable estimate of fair value.
Deposits. The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts.
Other Assets and Other Liabilities. Because these financial instruments will typically be received or paid within three months, the carrying amounts of such instruments are deemed to be a reasonable estimate of fair value. The discount on investments will be accreted to interest income over five years so as to approximate the interest method; the premium on loans will be amortized to interest income over three to ten years so as to approximate a constant yield to maturity. The fair market value adjustment for deposits will be accreted to interest expense over three years so as to approximate a constant yield to maturity. The decrease in premises to fair value will be accreted over a one-year period as a reduction to expense.
B. Acquisition Accounting Adjustments
Acquisition accounting adjustments are estimated as follows (in thousands):
|
Fair value adjustment on loans: |
||||
|
Decrease in value of loans relative to historical cost |
$ | (2,036 | ) | |
|
Elimination of Twin Oaks’ allowance for loan and lease loss |
1,594 | |||
|
Increase in value of loans (net) |
(442 | ) | ||
|
Core deposit intangible recorded |
567 | |||
|
Goodwill |
515 | |||
|
Land & Buildings |
(171 | ) | ||
|
Increase liability for term deposits |
(183 | ) | ||
|
Increase liability for FHLB advances |
3 | |||
|
Deferred tax liability |
129 | |||
|
Total |
418 | |||
|
Equity of Twin Oaks |
6,707 | |||
|
Total value of net assets acquired |
$ | 7,125 |
C. Calculation of Goodwill
Excess of cost over the fair value of net assets acquired for the merger was calculated as follows (in thousands):
|
Cost |
$ | 7,125 | ||
|
Anticipated costs after filing (1) |
97 | |||
|
Fair value of net assets acquired |
(6,707 | ) | ||
| Goodwill (bargain purchase price) | $ | 515 |
(1) Twin Oaks anticipated costs not included above are estimated as follows:
|
Miscellaneous |
$ | 165 | ||
|
Tax benefit of expenses based on a 38.4% combined state and and federal tax rate |
( 68 | ) | ||
|
After tax impact of transaction to Twin Oaks |
$ | 97 |
These anticipated costs between the date of the filing and the anticipated closing date will reduce the capital position.
D. Pro Forma Income Statement Adjustments
Pro forma income statement adjustments that were calculated for the merger are as follows (in thousands):
|
For the Year Ended December 31, Income (Expense) |
For the Nine Months Ended September 30, 2014 Income (Expense) |
|||||||
|
Amortization of premium on loans receivable |
$ | (38 | ) | $ | (30 | ) | ||
|
Accretion of fair value adjustment for term deposits |
141 | 132 | ||||||
|
Accretion of fair value adjustment for FHLB advances |
51 | 52 | ||||||
|
Amortization of core deposit intangible |
(100 | ) | (75 | ) | ||||
|
Income tax expense |
(21 | ) | (30 | ) | ||||
| $ | 33 | 49 | ||||||
|
Net Increase (Decrease) In Net Income of Amortized Amounts |
||||
| Future impact of recognition of acquisition accounting adjustments: | ||||
|
Fiscal 2015 |
$ | 11 | ||
|
Fiscal 2016 |
(13 | ) | ||
|
Fiscal 2017 |
(31 | ) | ||
|
Fiscal 2018 |
(35 | ) | ||
|
Fiscal 2019 |
(32 | ) | ||
|
Fiscal 2020 and thereafter |
(98 | ) | ||
E. Transfer of Capital
Amounts release from retained earnings and accumulated other comprehensive income represent the recognized value of Twin Oaks.
F. Issuance of Shares to Ottawa Savings Bancorp MHC
Based on the stock valuation of Ottawa Savings Bancorp common stock equal to $9.18 per share, the issuance of 776,143 shares of common stock to Ottawa Savings Bancorp MHC is reflected by an increase of $7,117,238 to additional paid-in capital and $7,762 to common stock.