FNB BANCORP/CA/ - FORM 8-K/A - EX-99.2 - EXHIBIT 99.2 - September 11, 2015

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8-K/A - FORM 8-K/A - FNB BANCORP/CA/fnb_8ka.htm
EX-99.1 - EXHIBIT 99.1 - FNB BANCORP/CA/ex99_1.htm
EX-23.1 - EXHIBIT 23.1 - FNB BANCORP/CA/ex23_1.htm
 

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined balance sheet set forth below reflects consummation of the merger between FNB Bancorp and America California Bank as if the merger had been consummated on June 30, 2015. The unaudited pro forma condensed combined statements of earnings for FNB Bancorp and America California Bank for the six months ended June 30, 2015 and for the year ended December 31, 2014 were prepared as if the merger had been consummated as of the beginning of January 1, 2014. The unaudited pro forma condensed combined financial statements and notes thereto reflect the application of the acquisition method of accounting. Under the acquisition method of accounting, the assets and liabilities of America California Bank are recorded on the books of FNB Bancorp at their fair value as of the effective time of the merger. The difference between the cost of America California Bank and the fair value of its identifiable assets, less the fair value of its liabilities, is recognized as goodwill. The unaudited pro forma condensed combined financial statements included herein are not necessarily indicative of the future results of operations or the future financial position of the combined entities or the results of operations and financial position of the combined entities that would have actually occurred had the transactions been in effect as of the dates or for the periods presented. Such information does not include any pro forma adjustments relating to any future revenue enhancements and reductions in expenses that may be realized.

 
 

FNB Bancorp and Subsidiary

Unaudited Proforma Condensed Combined Balance Sheet

June 30, 2015

       America         
   FNB   California   Pro Forma   Pro Forma 
   Bancorp   Bank   Adjustments   Combined 
       (Dollars in thousands)     
ASSETS                    
Cash and due from banks  $91,662   $2,491   $(21,850)(2) $72,303 
Interest-bearing time deposits with financial institutions   2,138    26,319    —    28,457 
Investment securities, available for sale   295,171    243    —    295,414 
Other equity securities   6,069    679    —    6,748 
Loans   581,501    95,048    (465)(3)  676,084 
Allowance for loan losses   (9,836)   (2,636)   2,636(3)  (9,836)
Premises and equipment, net   10,527    78    —    10,605 
Bank owned life insurance   12,681    2,960    —    15,641 
Accrued interest receivable   3,909    285    —    4,194 
Other real estate owned, net   806    —    —    806 
Goodwill   1,841    —    2,989    4,830 
Core deposit intangible, net   81    —    727(3)  808 
Prepaid assets   922    101    —    1,023 
Other assets   12,356    1,697    —    14,053 
Total assets  $1,009,828   $127,265   $(15,963)  $1,121,130 
                     
LIABILITIES                    
Deposits:                    
Demand deposits, noninterest bearing  $249,420   $14,116   $—   $263,536 
Negotiable order of withdrawal deposits   101,693    4,854    —    106,547 
Savings and money market deposits   437,092    46,490    —    483,582 
Time deposits   104,935    27,197    243(3)  132,375 
Total deposits   893,140    92,657    243    986,040 
Other borrowings   5,250    15,300    81(3)  20,631 
Accrued interest payable and other liabilities   11,001    1,229    2,142(3)  14,372 
Total liabilities   909,391    109,186    2,466    1.021,043 
                     
Shareholder’s Equity                    
Preferred Stock   —    3,884    (3,884)(4)  — 
Common Stock   67,597    10,096    (10,096)(4)  67,597 
Retained earnings   31,452    4,393    (4,393)(4)  31,102 
Escrow and closing costs   —    —    (350)(2)  — 
Accumulated other comprehensive income   1,388    (294)   294(4)  1,388 
Total shareholder’s equity   100,437    18,079    (18,429)   100,087 
                     
Total liabilities and shareholder’s equity  $1,009,828   $127,265   $(15,963)  $1,121,130 

See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

 
 

FNB Bancorp and Subsidiary

Proforma Condensed Combined Statement of Earnings

For the Six Months Ended June 30, 2015

 

       America         
   FNB   California   Proforma   Proforma 
   Bancorp   Bank   Adjustments   Combined 
                 
Interest income:                    
                     
Interest and fees on loans  $15,565   $2,535   $181 (5) $18,281 
Interest and dividends on cash and securities   2,803    100    —    2,903 
Total interest income   18,368    2,635    181    21,184 
                     
Interest expense:                    
Interest on deposits   992    363    (112)(5)  1,243 
Interest on FHLB Advances   1    123    (36) (5) (5)  88 
Interest on note payable   116    —    —    116 
Total interest expense   1,109    486    (148)   1,447 
Net interest income   17,259    2,149    329    19,737 
Provision for loan losses   150    —    —    150 
Net interest income after provision for loan losses   17,109    2,149    329    19,587 
Noninterest income:                    
Service charges   1,238    39    —    1,277 
Other income   1,107    73    —    1,180 
Total noninterest income   2,345    112    —    2,457 
Noninterest expense:                    
Salaries and employee benefits   8,413    1,087    —    9,500 
Occupancy and equipment expense   2,129    239    —    2,368 
Other expense   3,190    534    93 (6)  3,817 
Total noninterest expense   13,732    1,860    93    15,685 
Earnings before provision for income tax expense   5,722    401    236    6,359 
Provision for income tax expense   1,852    178    97 (7)  2,127 
Net earnings available to common shareholders  $3,870   $223   $139   $4,232 
Earnings per share:                    
Basic  $0.90             $0.99 
Diluted  $0.88             $0.96 
Weighted average shares – basic   4,285              4,285 
Weighted average shares – diluted   4,409              4,409 

See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

 
 

FNB Bancorp and Subsidiary

Proforma Condensed Combined Statement of Earnings

For the Year Ended December 31, 2014

 

       America         
       California   Proforma   Proforma 
   FNB Bancorp   Bank   Adjustments   Combined 
                 
Interest income:                    
Interest and fees on loans  $31,355   $5,254   $324(5) $36,933 
Interest and dividends on cash and securities   5,504    158    —    5,662 
Total interest income   36,859    5,412    324    42,595 
                     
Interest expense:                    
Interest on deposits   1,884    792    (199)(5)  2,477 
Interest on FHLB Advances   17    247    (64)(5)  200 
Interest on note payable   192    —         192 
Total interest expense   2,093    1,039    (263)   2,869 
Net interest income   34,766    4,373    587    39,726 
Recovery of loan losses   (1,020)   —    —    (1,020)
Net interest income after recovery of loan losses   35,786    4,373    587    40,746 
Noninterest income:                    
Service charges   2,548    80    —    2,628 
Gain on sale of premises   2,085    —    —    2,085 
Break-up fee from terminated definitive agreement   500    —    —    500 
Other income   1,456    169    —    1,625 
Total noninterest income   6,589    249    —    6,838 
Noninterest expense:                    
Salaries and employee benefits   16,731    2,005    —    18,736 
Occupancy and equipment expense   4,397    480    —    4,877 
Other expense   6,740    1,111    186(6)  8,037 
Total noninterest expense   27,868    3,596    186    31,650 
Earnings before provision for income tax expense   14,507    1,026    401    15,934 
Provision for income tax expense   5,098    437    164(7)  5,699 
Net earnings   9,409    589    237    10,235 
Dividends and discount accretion on preferred stock   170    —    —    170 
Net earnings available to common shareholders  $9,239   $589   $237   $10,065 
Earnings per share:                    
Basic  $2.18             $2.38 
Diluted  $2.12             $2.30 
Weighted average shares – basic   4,232              4,232 
Weighted average shares – diluted   4,367              4,367 

See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

 
 

Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

(1) Basis of Presentation. The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2015 has been prepared as if the merger had been consummated on that date. The Unaudited Pro Forma Condensed Statements of Earnings for the six months ended June 30, 2015 and for the year ended December 31, 2014 have been prepared as if the merger had been consummated at January 1, 2014.

The Unaudited Pro Forma condensed Combined Balance Sheet is based on historical information from financial statements of FNB Bancorp and America California Bank after giving effect to the merger under the acquisition method of accounting and the assumptions and adjustments in the notes that follow. The estimates of fair value are preliminary and subject to adjustment.

Assumptions relating to the pro forma adjustments set forth in the Unaudited Pro Forma Condensed Combined Financial Statements are based, in part, upon estimated fair values. Estimated fair values for securities, loans deposits and borrowings were obtained from appropriate valuation methodologies and market information in accordance with Statement of Financial Accounting Standards Board ASC 820, “Fair Values Measurements.” The resulting discounts on loans and deposits for purposes of these pro forma financial statements are being amortized to interest income and interest expense over their estimated remaining term to maturity of up to 9 years for loans and 1 year for time deposits. The discounts and premiums will be amortized to interest income and expense to produce a constant yield to maturity. Core deposit intangibles created as a result of the transaction are for non-maturity deposits and in the pro forma financial statements are being amortized to non-interest expense using straight line amortization over a period of 15 years.

(2) Adjustments to cash and due from banks recorded for the merger were as follows:

 

Contractual purchase price  $21,500 
Escrow and closing costs   350 
Total cash paid  $21,850 

Escrow and closing costs consist primarily of legal, accounting and investment banking fees incurred on behalf of FNB Bancorp

(3) Preliminary accrued expenses and fair value adjustments to the net book value of assets acquired and liabilities assumed for the merger are as follows:

 

   Fair Value 
   Adjustment 
Loans receivable  $(465)
Allowance for loan losses   2,636 
Core deposit intangible   727 
Certificates of Deposit   (243)
Accrued expenses   (1,842)
Other borrowings   (81)
Subtotal net fair value adjustments   732 
Deferred tax liability related to purchase   (300)
Total fair value adjustments  $432 

(4) Adjustments to eliminate shareholders’ equity and to record goodwill are as follows:

 

Elimination of preferred stock  $(3,884)
Elimination of common stock   (10,096)
Elimination of retained earnings   (4,393)
Cash consideration paid to sellers   21,500 
Elimination of accumulated other comprehensive income   294 
Fair value adjustments (see Note 3)   (432)
Goodwill  $2,989 
 
 

(5) Pro forma adjustments to interest income and interest expense were calculated for the transaction as follows:

 

       For the Twelve 
   For the Six   Months Ended 
   Months Ended   December 31, 
   June 30, 2015   2014 
Accretion of discount on loans (9 years)  $181   $324 
Total adjustments to interest income  $181   $324 
           
Amortization of premium on time certificates of deposit (1 years)  $(112)  $(199)
Amortization of premium on FHLB advances (2 years)   (36)   (64)
Total adjustments to interest expense  $(148)  $(263)

(6) The preliminary estimated fair value of core deposit intangible was $727,000. The core deposit intangible is amortized based on a estimated remaining life of the non-maturity deposit portfolio over 15 years. The Pro forma adjustment to non-interest expense for the amortization of the core deposit intangible is $93,000 for the six months ended June 30, 2015 and $186,000 for twelve months ended December 31, 2014.

(7) Pro forma income tax expense was calculated using a statutory tax rate of 41%.

 

(8) Pro forma basic earnings per common share is calculated by dividing net earnings by the average number of common shares outstanding. Diluted earnings per common share is calculated using the same method as basic earnings per common share, but reflects potential dilution of common share equivalents. The basic and diluted weighted average number of common stock and common stock equivalents utilized for the calculation of earnings per share for the periods presented were calculated using FNB Bancorp’s historical weighted average common stock and common stock equivalents.

 

FNB BANCORP/CA/ Reports