QCR HOLDINGS INC - FORM 8-K/A - EX-99.3 - EXHIBIT 99.3 - November 9, 2016

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EX-99.2 - EXHIBIT 99.2 - QCR HOLDINGS INCexh_992.htm
EX-99.1 - EXHIBIT 99.1 - QCR HOLDINGS INCexh_991.htm
EX-23.1 - EXHIBIT 23.1 - QCR HOLDINGS INCexh_231.htm
EX-15.1 - EXHIBIT 15.1 - QCR HOLDINGS INCexh_151.htm
8-K/A - FORM 8-K/A - QCR HOLDINGS INCf8ka_110916.htm

EXHIBIT 99.3

  

 

Selected Unaudited Pro Forma Condensed Financial Information

 

The following tables show selected unaudited pro forma condensed combined financial information about the financial condition and results of operations of QCR Holdings, Inc. (QCRH), including per share data, after giving effect to the merger with Community State Bank (CSB) and other pro forma adjustments. The selected unaudited pro forma condensed combined financial information assumes that the merger is accounted for under the acquisition method of accounting for business combinations in accordance with GAAP, and that the assets and liabilities of CSB will be recorded by QCRH at their respective fair values as of the date the merger is completed. The unaudited pro forma condensed combined balance sheet gives effect to the transaction as if the transaction had occurred on June 30, 2016. The unaudited pro forma condensed combined income statements for the six months ended June 30, 2016, and the year ended December 31, 2015, give effect to the transaction as if the transaction had become effective at January 1, 2015.

 

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of each period presented. The unaudited pro forma condensed combined financial information also does not consider any expense efficiencies, increased revenue or other potential financial benefits of the merger. The fair values are estimates as of the date hereof and actual amounts are still in the process of being finalized.  Fair values are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.

 

 

 

 

Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2016

(in thousands, except per share data)

 

  QCR  Community  Pro Forma    Pro Forma
Assets  Holdings, Inc.  State Bank  Adjustments    Combined
Cash and due from banks  $49,581     $11,096   $(47,400) (2)(3)(4)  $13,277 
Federal funds sold   20,825      -    -      20,825 
Interest-bearing deposits at financial institutions   47,607      2,176    -      49,783 
                         
Securities held to maturity, at amortized cost   280,345      -    -      280,345 
Securities available for sale, at fair value   230,614      106,862    -      337,476 
Total securities   510,959      106,862    -      617,821 
                         
Loans receivable, held for sale   1,558      -    -      1,558 
Loans/leases receivable, held for investment   1,921,215      433,407    (12,350) (5)   2,342,272 
Gross loans/leases receivable   1,922,773      433,407    (12,350)     2,343,830 
Less allowance for estimated losses on loans/leases   (28,097)     (8,017)   8,017   (6)   (28,097)
Net loans/leases receivable   1,894,676      425,390    (4,333)     2,315,733 
                         
Bank-owned life insurance   56,360      -    -      56,360 
Premises and equipment, net   38,751      12,209    8,334   (7)   59,294 
Restricted investment securities   16,693      -    -      16,693 
Other real estate owned, net   6,179      844    -      7,023 
Goodwill   3,223      4,666    6,307   (13)(14)   14,196 
Core deposit intangible   1,372      -    6,353   (8)   7,725 
Other assets   37,208      7,129    2,209   (4)(9)   46,546 
Total Assets  $2,683,434     $570,372   $(28,530)    $3,225,276 
                         
Liabilities and Stockholders' Equity                        
Liabilities:                        
Deposits:                        
Noninterest-bearing  $615,764     $116,988   $-     $732,752 
Interest-bearing   1,357,830      364,414    257   (10)   1,722,501 
Total Deposits   1,973,594      481,402    257      2,455,253 
                         
Short-term borrowings   51,562      -    -      51,562 
Federal Home Loan Bank advances   196,900      20,000    369   (11)   217,269 
Other borrowings   100,000      -    35,000   (2)   135,000 
Junior subordinated debentures   33,412      -    -      33,412 
Other liabilities   52,849      2,455    4,059   (12)   59,363 
Total Liabilities   2,408,317      503,857    39,685        2,951,859 
                         
Commitments and Contingencies                        
                         
Stockholders' Equity                        
Common stock   13,057      600    (600 ) (3)   13,057 
Additional paid-in capital   155,454      37,903    (37,903) (3)   155,454 
Retained earnings   105,024      26,246    (27,946 ) (3)(4)   103,324 
Accumulated other comprehensive loss:                        
Securities available for sale   2,730      1,766    (1,766)  (3)   2,730 
Interest rate cap derivatives   (1,148)     -    -      (1,148)
Total Stockholders' Equity   275,117  (1)   66,515    (68,215)     273,417 
Total Liabilities and Stockholders' Equity  $2,683,434     $570,372   $(28,530)    $3,225,276 
                         
Common shares outstanding   13,057  (1)              13,057 
Book value per common share  $21.07               $20.94 

 

 

 

 

 

Unaudited Pro Forma Condensed Combined Statement of Income for the

Six Months Ended June 30, 2016

(in thousands, except per share data)

 

   QCR  Community    Pro Forma    Pro Forma
   Holdings, Inc.  State Bank    Adjustments    Combined
             
Total interest income  $47,415   $11,176   $1,913   (15)(18)  $60,504 
Total interest expense   5,809    1,215    339   (16)(17)(21)   7,363 
Net interest income   41,606    9,961    1,574      53,141 
Provision for loan losses   3,271    -    -      3,271 
Net interest income after provision for loan losses   38,335    9,961    1,574      49,870 
Non-interest income   13,585    2,744    -      16,329 
Non-interest expense   34,698    8,761    472   (19)(20)   43,931 
Income before income taxes   17,222    3,944    1,102      22,268 
Income taxes   4,172    1,196    386   (22)   5,754 
Net income  $13,050   $2,748   $716     $16,514 
                       
Earnings per share:                      
Basic  $1.08               $1.32 
Diluted  $1.07               $1.30 
Average shares for earnings per share:                      
Basic   12,064,349         478,033      12,542,382 
Diluted   12,235,212         478,033      12,713,245 

 

 

 

 

 

Unaudited Pro Forma Condensed Combined Statement of Income for the

Year Ended December 31, 2015

(in thousands, except per share data)

 

   QCR  Community  Pro Forma  Pro Forma
   Holdings, Inc.  State Bank  Adjustments  Combined
             
Total interest income  $90,003   $21,805   $3,825   (15)(18)  $115,633 
Total interest expense   13,706    2,763    677   (16)(17)(21)   17,146 
Net interest income   76,297    19,042    3,148      98,487 
Provision for loan losses   6,871    -    -      6,871 
Net interest income after provision for loan losses   69,426    19,042    -      91,616 
Non-interest income   24,530    6,688    -      31,218 
Non-interest expense   73,359    17,999    944   (19)(20)   92,302 
Income before income taxes   20,597    7,731    2,204      30,532 
Income taxes   3,669    2,252    771   (22)   6,692 
Net income  $16,928   $5,479   $1,433     $23,840 
                       
Earnings per share:                      
Basic  $1.64               $2.06 
Diluted  $1.61               $2.03 
Average shares for earnings per share:                      
Basic   10,345,286         1,215,000      11,560,286 
Diluted   10,499,841         1,215,000      11,714,841 

 

 

 

 

Notes to Unaudited Pro Forma Condensed Combined Balance Sheet and Statement of Income

 

Note 1—Basis of Presentation

 

QCRH acquired 100% of the common stock of CSB on August 31, 2016 for $80 million in cash. The acquisition is accounted for under the acquisition method of accounting and, accordingly, the assets and liabilities of CSB presented in these pro forma condensed combined financial statements have been adjusted to their estimated fair values based upon conditions as of the acquisition date and as if the transaction had been effective on January 1, 2015 for statement of income data. Since these are pro forma statements, we cannot assure that the amounts reflected in these financial statements would have been representative of the actual amounts earned had the companies been combined at that time. The fair values are preliminary as of the date hereof and actual amounts are still in the process of being finalized. Fair values are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.

 

Note 2—Pro Forma Adjustments Footnotes

 

(1)Total stockholders’ equity and common shares outstanding at June 30, 2016 including the issuance of 1,215,000 shares of QCRH common stock at a price of $24.75, net of issuance costs of $242 thousand. This common equity transaction associated with the acquisition of CSB was completed in May 2016.
   
 (2)To record the debt financing for the transaction consisting of a $30.0 million five-year term facility and a $5.0 million draw on the Company’s revolving line of credit.

 

(3)To record the payment of the total purchase price of $80.0 million and the elimination of CSB’s historical equity accounts of $66.5 million.

 

(4)To record estimated transaction costs to be incurred totaling $2.4 million, or $1.7 million (after-tax).

 

(5)To adjust loans of CSB to approximate fair value. The loan fair value adjustment includes a $8.9 million discount to adjust for credit deterioration of the acquired portfolio and a $4.3 million discount for the impact of changes in market interest rates. In addition, $835 thousand of deferred non-accrual interest was reversed.

 

(6)To eliminate CSB's allowance for loan losses of $8.0 million.

 

(7)To record the fair value adjustment to increase premises by $8.3 million. This amount will be depreciated using a straight-line method over 39 years.

 

(8)To record a core deposit intangible asset of $6.3 million. Amount to be amortized over a 10-year useful life using an accelerated method.

 

(9)To record the fair value adjustment to increase the value of CSB Insurance other intangibles by $1.5 million.

 

(10)To record the fair value adjustment to increase time deposits by $257 thousand. Amount to be accreted over five years, consistent with the maturity dates of the underlying time deposits.

 

(11)To record the fair value adjustment to increase FHLB advances by $369 thousand. Amount to be accreted over 14 months using a straight-line method.

 

(12)To record the fair value adjustment to increase deferred tax liabilities by $4.1 million.

 

 

 

 

(13)To record goodwill of $11.0 million resulting from the difference between the purchase price and identifiable adjustments to net assets as follows:

 

(dollars in thousands)

 

Total purchase price      $80,000 
Historical book value of CSB's assets and liabilities       66,515 
Total net equity adjustments required      $13,485 
          
Adjustments to record assets and liabilities at fair value:         
Elimination of CSB's allowance for loan losses  $8,017      
Loans, fair value adjustment   (13,185)     
Premises and equipment, fair value adjustment   8,334      
Core deposit intangible asset   6,353      
CSB Insurance subsidiary, fair value adjustment   1,509      
Elimination of CSB's deferred non-accrual interest   835      
Deposits, fair value rate adjustment   (257)     
Borrowings, fair value rate adjustment   (369)     
Reversal of deferred tax liability on historical Securities Mark-to-Market   1,051      
Record newly created deferred tax liability on fair value adjustments   (5,110)     
Reversal of CSB's existing goodwill   (4,666)     
Net adjustments to fair value of assets and liabilities       2,512 
Resulting goodwill      $10,973 

 

(14)To eliminate CSB's existing goodwill of $4.7 million.

 

(15)To record accretion on the credit adjustment and interest rate adjustment on the loan portfolio.

 

(16)To record accretion on interest rate adjustment on time deposits.

 

(17)To record accretion on interest rate adjustment on FHLB advances.

 

(18)To record amortization of securities premium for interest rate adjustment.

 

(19)To record amortization of core deposit intangible.

 

(20)To record increased depreciation expense on fair market value increase in premises and equipment.

 

(21)To record interest expense on term facility and line of credit.

 

(22)To record tax effect at an effective rate of 35%.

 

 

 

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